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

Okay. Good afternoon, everyone. Welcome to the session with Quanta Services. I'm Steve Fisher, UBS Machinery, Engineering & Construction and U.S. Building Materials analyst. We are really thrilled to have with us Duke Austin, CEO of Quanta and we have Jayshree Desai, the CFO. We have Kip Rupp and Sean Eastman from Investor Relations. We're going to run this as a fireside chat. If you have any questions, we will try and leave a little time or you can just raise your hand and we'll bring the mic around.

But maybe just to kick it off here, Duke can you talk a little bit about the evolution of Quanta in recent years? And where we are in that evolution. I think back to the last handful of years in 2019, I remember we had that in the sell side day and you talked about the change to the utility model. And that was a pretty important move. And then '22, you had the Investor Day, we were talking about sort of the multiyear attractive growth opportunities, and you hadn't even included a lot for these big megatrends. You've done a lot of interesting M&A in recent years. So this portfolio approach solution. So can you just talk a little bit about this evolution, how you see it? And what the next steps are and where you want to take Quanta from here?

Yes. Thanks, Steve. Thanks for having us here. When we look at Quanta, you roll it back, I've been in the role a little over 8 years. And I think a lot about where we started, we were international. We felt like we were going to divest of international and get out of the international and focus back on U.S.-based utilities. It's my background for generations and know the utility business quite well. I felt like -- we continue to have large project risk that would show up and the more resilient the company could get and back it against utility capital spend was where we needed to go as a company and not be so project-based. And saying that, I think we've done a nice job with the customer in a collaborative manner to get there and to get the company more resilient even through COVID and all the other things we've been able to really -- I feel like follow a 5-year program to a T or better it which is, for us, was something that was really important to me and the management team to be able to do that. And saying that, as you move forward, you start with the customers and you start to collaborate. They're asking you to do other things. And that's been that way for my career as we move from one area to another, whether it be a storm or anything else, they've asked, can you stay. And we started listening to the customer and moving the company in the manner that we have, where I think you become more of a solution provider. We negotiate a lot of our work with our clients. We're in early now to where I believe on a total cost basis, we can certainly provide value that others can't. And so if we can provide the value to the client and to their ultimate customer, which decreases rates. It's more business for us, more business for them. Everybody wins in those scenarios. And as the company has evolved, really, it's the management teams in the field and our ability to take free cash and invest it like we have in the past on a go-forward basis and make sure that we acquire the very best in the service lines that we have and the growth of the company that we stay paced with a good balance sheet that's investment grade and something people can look at and invest in and feel comfortable in our ability to execute. At the core, it's 85% self-perform and it hasn't changed a bit. I don't feel it's grown quite a bit. I look at it, we're well over 60,000 employees. And I think about it, it feels like it was 8 years ago. I don't feel any different about it. We manage it the same exact way that we have in the past, it's just bigger. The numbers are bigger. The things that we look at are bigger. So I just -- the opportunities -- as we look at it today, you said you go, okay, you have your 5 initiatives you're working on. You have 5 that are incubating and you have 10 on the wall. So that's how much opportunity you see in the business. We just have to go back and execute on it on a go-forward basis. It's been a fun ride for sure.

That's great. And you mentioned you're being bigger now. When we think about some of the competitive advantages that you do have, scale is maybe one of the first things that comes to mind. There are sort of a number of distinct advantages that you have. Can you talk a little bit about more broadly some of these competitive advantages and how you're leveraging them in your work today?

Think utilization becomes -- a big scale item here is to keep your people moving from job to job to stay fully utilized with fleet and equipment. I think the solution-based approach with the client allows us to see upcoming work. It allows us to stay in a programmatic way on systems that we've been on 30 years and look at all the disciplines, whether it be from engineering or supply chain, that holistic approach to infrastructure and chains and transition and being around the edges from technology, you just see it differently, and we go coast to coast in North America and Australia and able to really see different environments that make a lot of sense for us and take that and put practical approaches back to the client that I think ultimately make it both better. So everything that we do has a strategy around it. We stay true to the -- even though we're decentralized, the regional structure and the strategy matter. And I think that our ability to execute on that is why you see where we're at today.

I was just going to ask you about that. I mean, I don't know how many dozens of subsidiaries you have, like how do you actually practically harness that decentralized model in providing a holistic solution to the client.

Yes. I mean, I love to fill the operations. And so the company was getting bigger when we made Redgie as COO, I felt like we needed to put a regional structure in and we did. We have 6 regions. So those 6 regions are really key to creating the operating units underneath and making sure that we're getting the synergies out of the company, whether it be from service lines, to supply chain, to anything we're doing, to where we can build that out throughout the organization. And then we run service lines across like engineering right away, telecom, gas distribution. Those run across. So each person is pushing on the other one, I'll call it healthy tension. It's not a bad thing, and they're pushing. And so I do -- you can get yourself complacent in these markets. And then it's really meant to create that angst amongst the groups to push each other to see the capital spend and not be satisfied with 10% growth when the client is growing at 50%. I just think we have to think differently here in this environment and stay connected. I heard somebody -- I can't remember where I was at. But they were talking about being connected. It allows us to be connected at the top. And if you go to the strategy and you say, these people are connected at the top and they know where we're going and we just execute against it. So we have to stay with good strategy and execute against it at the very top, whether it's from Jayshree with financials to all the way through the company.

One of the things that stands out today, relative to the history, is as we think about the whole value chain of what's happening on the customer opportunities, historically, we were very focused just on the grid piece of it and the sort of the power generation perhaps. But now you have the whole chain that goes all the way through to the end user of say, a data center or wherever that power is going. And to Quanta it's really kind of in the middle of this whole value chain. So as that plays out and you were in the middle of it, how is that changing the conversations you're having with your customers? And what are you learning along the way as you have those conversations?

I mean, I think we hear east to west and from anywhere on the East Coast. I think it started when you think about data centers started in kind of Virginia and Dominion, and you start to see like their ability to serve. And our head started going around that. Well, you have a duty to serve, how is this all going to work and where should we think about it as a company. And so -- I think for us, we were able to go kind of in the Midwest and all across really Arizona and just think about where you can cite data, where we should play in that whole environment where you have constrained load growth. And that led to, well, renewables -- technology wants renewables, technology spends about $200 billion on capital all over the world. I'm not sure what the number is in North America. But $200 billion is significantly bigger than our utility market. And we better know where our technology is going. We better understand it if we're going to understand where our customers are going too. I think that led us then to, okay, well, we acquired Blattner. We had a long-term relationship with Cupertino with probably an 8-year conversation that led to an acquisition there against what we think is a $200 billion market, which, like I said, we won't be going everywhere international. But whatever is in the U.S., it's significant, let's just say, $20 billion. Like I do think that our ability to see that end market and really focus on what they're trying to accomplish and then go back to the utilities and say, okay, where can we help each other here and help everyone get to the same spot because it's very fragmented, and there's no real rhyme or reason where to site. And I think we can do it in a prudent way, in a better solution than it is today. And we'll see if it proves out, but I like our chances. I love the acquisitions that we made. They're great companies, great management teams that just overlay on our culture nicely. And it's not just about data centers. It will be onshoring and everything else that we see coming at us. But we're able to really take something from east to west and also go through these customer bases to figure out the solutions, which I think matters when you walk it back. You're no longer a commodity if you can provide a solution.

So you mentioned M&A may be a good place to go now because you've done some really interesting things recently in the last couple of years. We'd love to hear how those are going and what might be ahead. Maybe one place to start on that would be to understand your M&A process a little bit. What's kind of unique about it? It seems like targets are often choosing to be part of Quanta. So how do you find targets? How do you differentiate amongst them? And kind of we've heard talking to people in the industry, you have a really unique integration process. So maybe start with the process of M&A.

I mean, I think you have to have a strategy. And so really, you're filling gaps in strategy or you have initiatives that you're trying to fill gaps with. I mean, data centers was an initiative that ended up with Cupertino. We also had premanufacturing capabilities. That was also an initiative. So we've got a couple of things going there with that one acquisition. We sourced it from a long time. I mean, we sourced everything internally for the most part, word-of-mouth, knowing the industry, staying to the ground, seeing people in the field, who is that company or they're coming to inbound at us from people saying, hey, we want to sell our business to you because we know you'll take care of it. We have to take care of these businesses as much as they want to come take care of us. If we continue to do that, that's why people want to sell their business here because they know we'll take care of the family name. Their name is still on the truck. They still very much care about their people. And that's the companies that we want culturally is those types of companies that aren't worried so much about ultimately the valuation. They're more worried about their people and what we can do with the business together. So it's a long process that we've had a long time and how we integrate the decentralized nature, trying to get all the value you can and leaving the autonomy and the entrepreneurialism intact. And there's huge difference between entrepreneurialism and a hobby. Those 2 things aren't very good. So my job is to kind of squash the hobbies and make sure we're entrepreneurial because you can find yourself down rabbit holes we don't need to be down, and we're trying to execute. But -- and then overarching on all that, we'll have initiatives that we have internally that trying to make sure that we get the synergies. So with the deals, we do not build synergies into our models. We never have. We find it -- like you can find yourself making any number if you do it. So we're just real disciplined against how we look at acquiring companies. We don't want them all and that's fine. There's plenty of inbound people that value other things. So I think we'll continue down that path to look at -- we have more verticals now. So every time we move into a different market, there's 3 more verticals that come up where there's possibilities of acquisition or it may make sense to us from a solution. I know -- I hear all the time, well, your ability to deploy capital, we worry about it. I do think when you invest in us, you invest in us for 3 reasons. One, we're known to execute, you love our macro markets or like our macro markets and our ability that we have to deploy free cash. The last one is what I want like everyone to focus on. We've got to continue to deploy free cash properly. If we don't do it, then the valuation is not where it should be because I believe we'll be able to deploy free cash meaningfully because we see the inbounds coming our way in this acquisition strategy that I believe is tried and true and has worked since inception. And it's gotten better and better as we get bigger and bigger. And people say, well, the acquisitions are getting bigger. Everything is getting bigger in the industry, a small company is now $20 million, not $10 million. So a big one is $1 billion, not $500 million. So I think everything kind of has risen in the family businesses. But when they cap out at some point, you don't want to risk your hundred years of hard work at some point because your customers leaving you, and they're going bigger. So I think that's where we come in and say, okay, how do we work this together? How do we partner together? How do we get everyone comfortable and we've been able to do that.

That's great. You mentioned you're seeing the inbound. So I'm curious how active the pipeline is today? And how should we think about kind of what types of things are in there? You mentioned when you do an acquisition, then it opens up to new doors to other things. Are you thinking about still broadening your solutions? Is it more scaling up the ones you have right now? Is it more density to your core business? How should we think about how active the pipeline is and kind of what you want to do with it?

I mean, first and foremost, management team. It doesn't matter what discipline it is. Management team matters so much. And I think how we look at it, I mean, I usually have conversations and figure out where we're at here, no matter whether it's vertically a new service line or some geographic expansion or something like that. But look, we don't need to acquire for labor. We don't need to acquire for excess. We're acquiring for strategy, where 1 plus 1 equals 3, 4, whatever you want to say. But -- that's how we're acquiring against either the customer asking us, can you do this, will you do this? By the way, we like that company. So please go do that, scale them up. So we get some of that. And then the other ones, I think with the regional structure of service lines, they're all talking to people. So they start building list of people that have talked to them about selling the Quanta or maybe and you just start really building a good platform of companies that are out there that have the possibility to acquire. And then addressing that against the macro markets that we see and the growth thereof, I want them to fight for capital, honestly. Like I want you to say, I want this in my business, and then I'm going to see I like it. I think it's great. And the more that our operators get involved in it, the better off we are because they own it and us being decentralized, they need to own anything that they look at. But the bigger ones, look, I've been doing this a bit and I get involved in all of them and have been involved in the industry a long time. So we kind of know who's good and who's bad out there and we'll lean in when we see great operators.

That's great. So maybe, Jayshree, you can kind of weigh in on some of the next element of the whole M&A discussion, which is the balance sheet and cash flow opportunity for it. So cash version conversion, it's been really strong. Is there a path to continuing to improve that conversion on a sustainable basis? And then maybe on the balance sheet, can you talk about the visibility and the flexibility you have to continue to support M&A going forward?

Yes. I think it's been a strategy of Quanta from the beginning, even with my predecessor, Derek, as you know, like keeping that balance sheet as flexible as possible to allow us to lean in around organic growth opportunities, of course. But then when we do see these great opportunities, put free cash flow -- deploy free cash flow we want to and we find the right strategic initiative and the right management team behind it. So for us, we think keeping that flexible balance sheet is an important part of that strategy to be able to -- when a Blattner comes or when a Cupertino comes or when all of these bolt-ons that we do, we can do it in a way that doesn't stress us too much or force us to walk away from something because we just didn't have that flexibility. So we're going to be -- that's going to continue to be a critical part of our strategy. So you'll see us at a leverage profile around 2x, and sometimes we lean in and it's a little bit higher than that with the right opportunity in front of us. But then you'll see us rapidly delevering to below that. We think staying investment grade is important for lots of reasons. One, of course, that flexible balance sheet, but also when you think about all the growth opportunities in front of us, the work we do and our bonding capabilities that is actually a competitive advantage to be able to offer those bonding capabilities, you want to keep the balance sheet that allows us to do so. So that sort of profile, we think, is what makes sense for us given the growth in front of us. And then on our free cash flow profile, yes, we have been increasing our free cash flow. We are pleased with how we've been pushing that. But I always want to remind folks that where the growth comes from has a strong bearing on what the free cash flow profile can do. That range of 45% to 55% is just really dependent on where the growth is coming from. But given the renewable growth, given Cupertino, that acquisition was ROIC accretive, free cash flow accretive, the ability to be in that 50%, north of 50%, even higher than that, as you've seen in the last couple of years, yes, we do think there's opportunity to do so. So that just gives us a lot of dry powder to do what we hope are very smart capital deployment opportunities.

Excellent. So maybe that's a good transition to talk about, the sources of growth there. But maybe before we do that and leave the M&A topic, just one last one. Just to touch upon Cupertino since it was a larger deal. Anything you want to talk about there, Duke, in terms of how that's going and what we might kind of listen out for in the next handful of quarters?

I think Cupertino gave us a platform for low-voltage electricians and technology is a customer base. And from a culture standpoint and how we've integrated and the synergies that we see, it couldn't have gone better. The synergies will show up. I'm confident as we move forward, we're already seeing them. So we like the markets. Their ability to execute has been top-notch and it's very much for us, you look at them and you know it's the right thing. But once you have it and its yours, you get a new car and you get it and then is it what you thought it was? And look, that -- the Cupertino is just -- I can't say enough good things about who they are and how they operate and how well they've integrated with us, they fit in all along. And then we've got some great synergies. The fab capabilities they have, many, many things that they do, they are ahead of their time. With our balance sheet, our ability to bond, how we are able to discuss things with technology and our utility customers on both sides of this, very synergistic in a customer base too on the renewable side of the business that they had. And I think it's important that we don't just look at the technology piece. It was about -- I mean that assumes about 40% of the business. The onshoring business, pharma, they're just really, really good and have a long track record of clean [indiscernible] in many, many difficult environments. So we're excited about the company.

Fantastic. So on to the growth, you've given some directional level on 2025. It sounds like you feel comfortable with mid-teens growth. Can you just talk about some of the factors that give you the confidence in that? And is that still how you're thinking about it now? I mean, it's only a handful of weeks since you talked about it, but checking in on that.

Yes. I mean, I think I'll try to explain it like I did it in the call. And what we see today and even with the election and where we're going, quite a bit of noise around IRA and things like that, even with the noise and everything that we know today, what we said is we can grow the company at 10% growth. I mean, let's just take -- we're going to use all levers of the balance sheet so just take that as a fact. And then say, okay, we can floor it at 10% EPS growth. We had the ability to be 15% for the next 5 years growth on a CAGR basis. And then we've grown 20-plus for the last 8. So all those things are opportunity, but I'm real comfortable with 10% and 20% is not out of the realm of possibility since we've done it for 8 years. The numbers are big. It's early. We're not giving guidance. So I don't want to go there yet because I'd be doing you a disservice. So I do think as we move forward and the things that we see, certainly, expectations are high for us, and we need to deliver and execute against the markets that we see. But that's kind of how we see it playing out for the foreseeable future.

Great. Maybe thinking a little bit big picture here about just power needs in general. There's so much that's talked about in terms of the power generation needs over the next several years and the numbers just get so big. And with that, I think there's some concern that we hear from investors about, okay, well, what if the spending kind of slows down? I'm just sort of wondering how you think about that. Were the expectations that people talk about these massive numbers, maybe we're just slowing down to something that's now actually something possible as opposed to we couldn't even do what was possible within any sort of reasonable time frame for. How do you think about that?

Yes. I mean, you would have to think like AI is not going to happen. Because it's driving a lot of what you would consider some of the load growth onshoring. It's just the supply and demand. And I think that the decisions that are getting made today are really like 2028 decisions. '25, '26, '27 is probably baked in many ways. I mean, we're seeing our utility customers move their capital up. And all the things you see from data, the larger ones that we saw out of Ohio and then the ones in Louisiana, both are like 2028, '29 type in-service dates. So that's how far they have to go out just to make sure they have generation capacity. What I see is -- just the fact is we don't have enough generation and transmission to move it. And under any scenario, your reserves are tighter. We just have a scenario in the North America, primarily in the States that, that dynamic is superseding anything else. So I think for the security of the country, for all the things that we need to be doing, generation and transmission, all the RTOs are long-term builds. Their planning is already being done on billions of dollars within MISO and PJM and ERCOT on large transmission and the utility budgets continue to grow upward. So these are not things that stop and start. And I think they're long term. And what we see going forward, it's that same demand that's increasing. It's not decreasing. Not to say -- I do believe our portfolio and our ability to be nimble across it will matter. But because all things won't rise at the same time. But the overall demand of it, I can't see a path. We see EV, but we've said this all along, it slowed a little bit, but then you had fires in other parts of the states that now you have fire hardening going on or storm came in Houston, now you have a larger storm profile of hardening in that region. Like we're very opportunistic. And no matter what I say today, by February, it will be better. And so I don't want to sit here and say anything because I think it's going to be better by February, and it won't be what I think today. It's just -- because the company evolves, this thing moves really fast. This transition moves fast and our ability to stay on top of it and make sure that we're in the right place at the right time matter so much. But our markets are great, and I continue to see them rising.

One question that struck me about coming back to data center opportunities. We're talking to another company today in the value chain as well. And they made the point that working on studies and planning for some of these big data centers, there's a lot of different power generation elements to it that are complicated. It might give an opportunity while that's playing out for the grid to actually be addressed. Do you see that kind of being an opportunity that kind of work on grid stuff to enable then the power generation elements of these big data center projects going forward?

Yes. I do think it's simultaneous. I do think its studies and your engineering capabilities, your sourcing goes on while you're building generation, honestly. And I do think you're going to see more gas generation build here. We're not going to participate in kind of combined cycle, single cycle unless at risk, we'll do it for programmatic way, but at risk is just not us. All the things around it, yes, I do think you back the grid with natural gas. It will help renewables. It won't hurt it. It absolutely helps. Batteries get a chance of technology to move up there. So that's incremental. Our battery business is going very nicely. So I think it's just -- you need everything. You need to be thinking like 20 years out, and maybe it's sooner. I don't know -- we're not involved in it. So I don't want to say too much there, but it will be a part of it somewhere. And that just the generation demand of what we need in the states is -- it's a global market, too, and you have people competing for equipment, people competing for things in a global way in Europe. So we were somewhere and I was discussing earlier on a DC station, I mean, they were like 2032 before you could actually put a transformer on the ground, on a DC station, if you hadn't already ordered it. So I just -- that's the demand that's out there, and it's a global demand that we're seeing. And so we have to, as a country, really work here to plan better and more of it because you're going to continue to see electrification of Lower 48 or everywhere.

[indiscernible] a couple of combined questions here. In terms of large projects, how important do you think it is to maintain a mix of sort of MSA-type work, recurring small project work versus large projects? And do you think we're going to see a cycle of large electric grid projects from here in the next few years.

I would say in the past, the company has made mistakes on chasing large projects and forgetting about underneath the client on the day-to-day. And about 80%, 85% is just day-to-day. And we're highly focused on growing that upper single to mid kind of double digits, but really upper single is kind of the goal of the company to continue that 85% there and that kind of growth rate. And we're highly focused at a customer level to make sure that happens and everything else just stacks. The bigger projects stack, whether it's data centers or pipelines or whatever, they stack on top, and we start to build on top of that. I think [indiscernible] is a great example where it's stacked. We had LUMA, it comes in, stacks. So just -- the earnings power of the company continues to move forward as you stack projects while your base continues to move up. As you get more verticals, the base gets bigger. So we have to have the verticals that come in, the service lines that come in that create the base, and we do both and stay highly focused on that base business because you can lose your way on that. You can go chase a named project and I've seen it happen and that base is where you'll see us focus heavily on. And we will -- we're around the edges on the larger projects. I like our chances on every one of them. And by no means are we at capacity or will be at capacity. If manufacturing ever catches how fast we can move, I'll be shocked. I won't be here.

Okay. Great. Maybe before we move on to some of the segment level growth and opportunities, maybe I'll just pause to see if anyone in the audience would like to ask a question. If you do, you can raise your hand and we can bring a microphone around. Anyone like to ask a question. And if not, we can just keep rolling along here. So maybe coming back to some of the segment level discussion. In terms of renewables, it's been a very important business for you. Maybe you can talk a little bit about the renewables cycle. How much runway do you think you have to work with customers that have these multiyear programs? I know that's been important for you. How much of your revenue base is that sort of multiyear plan type of opportunity?

I mean renewables, if you just look at battery, wind, solar and straight there and we just stay in the 3 things. I mean, we grew rapidly. So that growth rate is not sustainable. Can we grow double digits on a CAGR basis plus on what we see and then the LNTPs that are coming in and how we sit in that value chain, yes. We're very comfortable in that market. There's a lot of talk around nat gas, and that will certainly be there as well. But it just balances the grid, I believe. And we see no short -- it's the fastest thing you can build, batteries actually, you can cite batteries very, very quickly and shave some peak. Even though peak is way up there, you still can shave some off. And then between wind, onshore wind and then solar, it's right there behind them. So it really is how quickly and where can you get into the interconnection queues because that's the key to this is like where can you hook to the grid with that generation and where can you take it? So that will be real important on -- we've always said, at some point, the grid queue becomes the bottleneck of renewables. And the more robust the transmission system is, if you start building 765 corridors, bigger transmission, you can certainly do some dynamic things with this grid that is not being done today, whether you're moving across RTOs or from ERCOT into SPP or vice versa. I mean, there's lots of things that you can do when you get that capacity. I mean, CREZ was similar. It was like we built CREZ and it's full. And everyone was worried that it wouldn't be full. And so they were like, well, we got to build generation first and then build CREZ, I mean, I'm a firm believer. If you don't build a bridge, you can't cross the river. So you've got to build an infrastructure first and then you can build the generation against it. And right now, it needs to be simultaneous, which I think we're getting. We're starting to see utilities or their ability to go to the markets and get equity and all of their -- what I would consider the earnings power and capital spends are moving up. And we want them to continue to do well here, too, because I do think there are growth engines right now against this grid and they need to be treated as such. They're going to grow nicely as well as everyone else in transition because we need that infrastructure in order to secure what we're trying to accomplish as a country.

Terrific. When you think about renewables versus transmission versus distribution versus, say, underground, do you see any material. I know you run the business as a portfolio, but do you see any particular differences in the growth rates in those different segments over the next few years?

I mean, I think they're all different. I do think -- the underground probably moves up some in our gas business, our LDC business will move up some in this environment. Your pipe, you'll have more projects, more activity out there. It's still going to be hard to permit. It's still going to be hard to get built under any scenario, especially if it's natural gas back. We've got to do a better job there to try to get that permitting through in a meaningful way and the court is not getting in the way, again, like they have in the past. So that will be something to watch on the pipeline side. And how do we -- even though you're going to get gas generation, I mean, how do you service it? Where is it at? Can you build the laterals? Can you get the midstream infrastructure in place? So that all have to be done simultaneously, and a lot of it's being talked about. So I think we just have to stay in the center of it all and be nimble to flex. If it's telecom, fine, we can move assets to telecom and grow that business nicely. If it's LDC business, move it that way, just have the ability as a company to look at it as a portfolio and to move across. It's like type equipment in many cases. So we're able to do that out of one office, out of one region and I think that's the key to this is to be able to self-perform capabilities against the macro markets that we see, no matter if it's telecom, gas, data centers, it doesn't matter really honestly. We're in the middle of it all. So we just have to figure out how to execute.

And on that point, maybe we can talk a little bit about operationally and margins. I think you've kind of made reference in the past occasionally that while a lot is going right, maybe you're not always firing on all cylinders. Where do you see the opportunities to improve and how that could play out through margins?

Okay. I have high expectations. And so we're never operating where I think we should operate, number one. So there's always something. But like the Renewables segment can operate in double digits. It's moving the right direction. I see all the right things happening in the field. So there's opportunities in that segment for us to get in those kind of ranges. And I feel like we're taking all the right steps to do so. Canada is coming back a bit in the East. So I think -- I like Canada moving up. It helps margins expand a bit as well. So we're doing the right things internally from an operational standpoint to execute, and I think it's across the company. We won't get it all right. We'll have a little blips along the way. We always do. But when you have humans involved in this thing, it just always will have a little bit. But I do like where we put ourselves and how we've mitigated risk and how we see the markets play out in the future. And so look, I like our chances to move margins up. Our return on invested capital is the biggest correlation of the stock. And if you go back 8 years and you look at it 8 years to now, I think you'll see kind of a great line upward. And I continue to believe that will grow faster than margins. So that metric.

All right. Well, I think we're out of time, and that's a great place to end. Looking forward to that margin and return on invested capital improvement. And lots of exciting things ahead. Thank you very much, Duke. Thanks, Jayshree, Sean, Kip, appreciate it, and we'll talk to you guys soon.

Thanks for having us. Appreciate it.

Thank you.