Quanta Services (PWR) Earnings Call Transcript & Summary

Okay. I think we're good to go here. Good morning. Thanks, everybody, for joining. I'm Steve Fisher, UBS Machinery, Engineering Construction and U.S. Building Materials analyst. Really thrilled to have the management of Quanta Services with us here today. We have CEO, Duke Austin; CFO, Jayshree Desai. We have Kip and Sean here and a couple of other members of management. Just before we get started, one disclosure here. As a research analyst, I am required to provide certain disclosures relating to the nature of my own relationships and that of UBS with any company, which we express a view during this discussion today. You can find those disclosures at ubs.com/disclosures or you can reach out to me after the session, I can get them to you.

So with that, Duke, Jayshree, thanks for being here. Duke, maybe to start off here, when I think about Quanta, I think your solutions provider, leveraging a skilled, fungible workforce that's been developed at scale now that allows you to do things and do things in a way that others really can't. Would you agree with that sort of framing of Quanta? And is there anything that you think investors really just don't appreciate about what you're trying to do with the company at this point?

Yes, I've been trying to get you to say that for a long time. So yes, I agree with you. So yes, look, I think when you think about our addressable markets, we have a great utility business, the moat around the company as well as now an addressable market with technology. And the technology piece is pressing on the utility piece for generation as well as labor, which are labor is fungible, which I think is at the core is that labor piece. But those 2 -- the pressure points are really around generation and labor certainty. And as that comes together, that's where the solutions are. And so I think our ability to be certain with capital to be certain with when generation comes online, whether it be a combined cycle or a single cycle, however you want to look at it, renewables, batteries, everything that all-encompassing and provide that total solution to a client on both sides. It's not only technology, it's also utility and how we play in the middle of that really is where I believe is what's the unknown is NiSource shows up this year but that's been -- we've been working on those relationships for decades. And you see the announcement on some of the other things that we're doing. So I just think as the company has built a great labor strategy, it's allowed us to really provide solutions that others can't and somewhat -- it goes unnoticed the fungibility of the labor, how we can move from market to market.

Makes sense. Now I imagine your strategy kind of gets tweaked and refined every year based on how the world changes. How would you describe the tweaks that you've made to your strategy in this past year? And then somewhat related but as you make moves strategically, they open up new paths for going forward. So how would the changes -- how would you say the changes you've made this year will alter your strategy going forward?

Yes. I mean I think if you take a step back, you look at what we've done with supply chain, we went vertical. We bought transformer facilities. We bought poles. I mean we've invested in things that we believe that we're going to be short in supply that allowed us to have flexibility with our ability to provide solutions. So as we've done that, I mean, I think every year, that creates opportunities. And as we've invested in that, we take advantage of the opportunities that we see. Really, the client has always driven us whether early years, I mean, you would go on a storm and you would do a good job for a customer and you'd stay. So I think much of it is us listening to the customer and then understanding the global markets of how things really, whether it be tariffs, whether it be short supply of transformers or listen to the customer base and understanding what's giving the industry an issue and trying to solve it. So I think that collaboratory back and forth as we sit with each other allows us to move every year or really any time and be much more nimble because I think you have to be nimble in the business today because it moves so fast. And you have technology that wants it tomorrow and the utilities are slower. And so there's just once 5 seconds and once 5 years. And that we play in the middle of that whole pendulum and trying to go from that fast pace to somewhat of a slower pace. And I think that's what the fungibility of labor allows us to do. And I don't think the strategies change as much as the solutions do. And so when I -- it's really craft skill, craft skill, craft skill, focus, focus, focus, add engineering, add great companies that I think when we make acquisitions, we make acquisitions on companies that aren't necessarily in a market that you see. I mean we didn't buy Dynamic Systems around AI. We bought Dynamic Systems because it was a 50-year-old company that was providing -- they started with Texas Instruments and chips and semiconductors. They were mainly a semiconductor or clean room in hospitals. So I thought the synergy with it when we looked at it was AI, data center type colocators, whatever it may be, and their fabrication ability on mechanical. So that's kind of how we move across the market because we need to be flexible, but that doesn't mean that they can't go right back if there's a cliff or there's something in the market that gets dysfunctional, we can move right back into hospitals and will and stay there, clean rooms, chips, whatever it may be. So the fungibility of labor in their markets, I think, are really important for us. And we really want to be a compounder of earnings. And we -- in order to be a compounder of earnings, you have to look out multi-years, decades to see and to stay in front of that compounding nature of the business.

So building off of that, as a solutions provider with an objective to be a compounder, with what you envision for the next, let's say, 3 to 5 years, how much white space do you think is left on the page in terms of the solutions that you're not providing yet to your customers today that you see a need for?

It's a great question. Look, there's more white space than the management team can attack. When I say that, like we can see out a decade and see opportunities all along the way to create the next decade. Look, we'll pace the company and the balance sheet around that. But there's a lot of white space right now. And I think in general, I mean, the markets are good, and we're attacking some of them faster than others. Not to say that -- I mean, if we see something that there's a disconnect and that we're not like -- because internally, I think the biggest thing that we face is internally you have to get up every morning and reinvent yourself and not get complacent. And so our ability to make sure that we motivate this management team to win. And if you want to be on this team, you want to win. And like we want to win every day, we want to win every year and every decade. In order to do that, you have to drive yourself and drive the company culturally to go out and attack the markets that you can't see. So I do think we're doing a good job there but like there's a lot of white space out there.

Okay. We'll stay tuned on that. So now as a -- obviously, we've talked about the fungible workforce and that, I think, is key to your growth. So how would you say that how fast you can actually grow that workforce every year and how is that different from what the industry can grow?

And I think when you look at it, part of the growth internally, if you just look at our business without acquisition, traditional business, we're growing probably 8%, between 5% to 8%, something like that. The acquisitions are growing much faster than that. So in general, normally, when you make an acquisition, we can grow those exponentially in the first 12 months. And so you can grow -- I mean, the latest acquisitions, we've grown 50% for the most part, at least, probably much more. This, I have CEO [indiscernible]. So I won't even try it but it's at least that. I'll stay there. And so that -- in that first 12 months and then all of a sudden in the third quarter, as you saw this last quarter, you see, well, double-digit growth. That's because we have 12 months' worth of Cupertino, and we have been growing Cupertino exponentially, and then it shows up in the third quarter is organic growth. But that doesn't mean we haven't been growing that exponentially. So I do think part of it is how we acquire, part of it is internally that we're growing around 6,000 employees, give or take, every year on an organic basis and whether it be through acquisition growth or internally. But we have the ability, the colleges, the campuses, the framework, curriculum to grow substantially. I mean, I'm not seeing us inhibited by labor at this point.

And in terms of being able -- that notion of being able to grow the headcount at your acquisitions by so much when you take them on, is that a reflection of the fact that you have your training resources and your trade schools, et cetera, that others in the industry just don't have, and that's how you populate it?

Yes. I mean I also think the families of the businesses, they're also -- their money, it's -- they're investing. They're growing as fast as they can. There's bonding. There's all kinds of different things that come into play with growth. But underneath, I mean, I think when you sell to Quanta, it's a bigger -- it's much bigger because they're selling to us, they see the market, and they want to perpetuate their business in the market. So we're able to really take the underlying management teams and put them in with training and curriculum and things that they haven't had in the past or really give opportunities to employees that maybe they didn't have enough space or they're heavy in this area and not this area. So I just -- our ability to expand of what a company has already. And usually, you're buying a 50-, 100-year-old company that has a lot of -- I mean, my company, our family business, it was a $10 million company and now doing $1.5 billion. I mean it's just -- you're able to really kind of take it and say, okay, here's the synergies and the synergies are your addressable markets. And so as you go into these addressable markets, you can see it. We have the customer bases, and we can take that same employee base very -- I mean, you can take Indiana for an example, and you can be building solar one day, combined cycle with the same people, go over and do a battery job, go over and do some industrial job. I mean you can take that fungibility and really move companies throughout the organization. And I think Carl and the team underneath has done a really nice job of staying flat and then expanding those markets for incoming acquisitions.

Great. I want to talk a little bit about Dynamic, and you mentioned before about how they've done other things and now it's data centers, AI and can do other things in the future. But just curious, any other thoughts you have on that deal? Any points you want to make? And I know it's only been a few months but any doors that you've seen it sort of opening yet?

Well, I mean, look, we see the mechanical businesses to be a great business long term. The margins are good, and they do a lot of -- they're more advanced in prefabrication, a lot of them, a lot of technology more so than we were on other pieces of the business. So we're able to take some of that technology and really helps us develop on the electrical side on our prefabrication as well. So I think there's a lot of commonality in the prefabric. We're about 3 million square feet under roof now. And I do believe that business is a great business. It's accretive to the profile of the segment. For sure. And I really like the business. I mean, you can -- we have peers in that part of the business that are doing better in margins than we are certainly in that segment. So you can expect us to be in that framework on that piece of business and really expand it.

Great. One of the things as a solutions provider, you can fill many different roles for your customer and different contracting types. Can you talk about how that is evolving and the different contracting roles that you can use, be it general contractor or subcontractor? Is that as a GC, a role that you've not had in the past that you're seeing increasing more? And how important is vertical integration as you're a general contractor bringing other subs in? Is that sort of a margin enhancement? what do you see on Vertical integration there?

Yes. I mean look, there's all kinds of models, all kinds of clients want different models. But in general, what I would say is we still self-perform about 85% of the business, between 80% and 85% of the business. I don't think that changes. I think we continue that. Now in saying that, there's a lot more equipment involved with our vertical supply chain, such as transformers. And I would say on the solar side, there's our trackers and NEXTracker and array and all the customers there that you're pulling through all that supply chain. So the better we are in our supply chain, I think it helps us increase returns. And -- we can also provide supply chain type arrangements to other customers, which I like a lot. And I do think we're growing nicely in that business. We've done a good job internally of expanding that market. So it does give us some flexibility as we look at the addressable markets that we serve. And on the high-voltage side, I mean, like transformers, our ability to have that facility and the things that we can do with it are substantial, and that will continue.

Great. Shifting over to Cupertino. It's been about a year now. Can you talk about what some of the successes have been there, kind of what's going right and what's still ahead? And I guess from a kind of a pace of bookings, what should we expect there? Anything big there on the horizon?

Yes. I mean we're booking work. I would say we still do a lot of colocations, $100 million jobs that are cloud-based stuff that's not these mega projects but we also are involved in the bigger projects. But I see like in that market, you'll start on 1 building of 10 and you really -- incrementally, you'll do 5 or 6. And -- but your contract may say it starts with 1 and it ends up being 5 or 6 buildings on the data center side. So I do think it's a weird booking mechanism because you're not booking as one large project. And I think it's really more sustainable. It's been that way for a long time. And the -- like as we've gotten deeper and deeper into the technology market, I think the company has done a good job with them of they realize that we are craft. I don't know if anyone -- I'm sure everyone's been involved in some sort of homebuilding or some building where you had a general contractor locally that doesn't show up with labor, and it's very irritating, don't build a home. So like if you've done that, like it's very much like a general contractor, if you don't like self-perform. So I think our ability to do that and what the customer really wants is that certainty, whether it's utilities or technology, they want labor certainty. They want generation, too. But labor certainty is so important now. And I think our -- where we sit in that dynamic has put us in a different position. So we have all different types of arrangements. And -- but typically, whether we're working with a GC, through a GC, we're at the end user. ultimately because we're talking to them first and they may marry us up or we may do it ourselves or other ways. We certainly have all the capabilities a general contractor would have. The model is used typically because you have smaller companies regionally that they -- for bonding capabilities, cash, whatever it may be, that's why the model has been used in the past. But for us, I mean, I think we can play a different role if we need to. But as it stands, I mean, we do a lot with some of the larger GCs all the time but the end users are the clients telling us who we're going with and where we're going. So it's really kind of a dual model.

Great. Shifting gears a little bit. You brought up NiSource before. Can we talk a little bit about this opportunity set? How did this agreement come about in the sense that it may shed some light on how you're actually running your business at the moment. And obviously, investors have a lot of questions about the underlying nature of the contract and some of the risk terms and conditions. And I think you've been pretty clear that the risk is very manageable. So maybe you can just talk about that, what comfort you can give investors around this opportunity set.

Yes. I mean, look, I think the company has had a history with fixed price combined cycles. It wasn't good, like I was there. So we were very hesitant in the market to get in the generation space on the combined cycles. We were doing some single cycle work doing nicely in the business but on a combined cycle is very complicated on the engineering and commissioning. So we felt like if we were going to do that, we needed to derisk it contractually or through some project or both. And so really, from our standpoint, we believe we've derisked ourselves and give the client what they ask for and also the large load low customer on the other side of that. And so we work with both really to help develop the project to help to make sure that we derisk it in a way that Quanta is happy, and I can talk to our investor base with certainty and say we've derisked it. And so I think in general, that was from our standpoint, long-standing customer too that we've had decades of relationship with on the other side. And so we're comfortable with the relationship, comfortable with Indiana. I mean I think Indiana is a state where for us, we have a good concentration of labor. I mean we're building solar in Indiana. We're building batteries. We're building line T&D. We're building battery, I mean, all kinds of generation. And so it's not a state that we're not comfortable with. So we're comfortable with labor there but we have offices in Indiana, quite a bit of critical mass. So I feel like, we listen to the client, both sides and where we come in is, again, I mean, the 2 things that you hear the most is generation and labor, and we could provide both for the client and provide that whole solution. It's big. I mean there's a battery component in there that's not part of that. There's some line in there that's not part of that JV. The JV is just one piece of a broad, broad -- I think it's going to be a multiyear, multi-project type situation with us and the client because we've done a nice job together to develop something that the large load customer wanted. It's -- what's great about it, which is phenomenal, which is the way it should be is that the ratepayer, it's about $7 for their customer deduction a month in Indiana. I think it's a great model. And I think it can be -- you can do it over and over again because the large load customer is more than willing to pay their fair share, and it should create economic benefit for the ratepayer, which is what happened in Indiana.

And you mentioned just now that it's a multiyear, multi-project kind of company, can you talk about the timing of this? What are the next steps and how that's going to play out?

Yes. I mean we started some of the engineering. I think late '26, it will start to ramp in '27, '28 will be the big build. And it will go further along and probably longer than that when we really look at it. That whole program, I believe we will go to 2030, and there will be a multitude of things that happen there. It's one of many. I mean, we're involved in these kind of solutions across the board. And then this happens to be one that we're able to talk about if we've brought it to fruition. But I do think the company -- what you don't know is like these things are out there and they show up. And it's because we have the labor certainty on the backside, the scalability of the company, and we put the work in long ago, and I think that's what we keep trying to say is like when you said earlier, why are you a total solution? That's why. Because you can't see it until like we put it out there. I'm not going to sit up here and say, this is where I'm fishing, and I caught a lot of fish today because guess what, everybody is going to be fishing where I'm fishing, and I don't want that. So like we're not going to sit and say like everything that we're doing, what we're trying to say is we're providing these solutions off that very craft skilled labor that the scarcity that we've invested for a decade, and it's our background.

Great. Maybe shifting gears again in terms of growth, you've given some directional framework for 2026, sounds like you continue to bank the growth on earnings between 10% to 20%. Can you talk about some of the factors that give you confidence in that? And sort of a mid-teens a good base case starting assumption for next year?

Yes. I mean I don't want to give guidance, Steve. I wouldn't discount it, but I would be doing a disservice if I said that, and it's really 20%. So I don't -- I haven't -- we haven't got that far yet. But what I would say I'm comfortable in the kind of the mid-teens to even past in the 20s. Like it's going to be in that framework on a compounded basis for what I see in the next 5 to 10 years is like we're able to compound those earnings in that framework, the 10% to 20% of adjusted EPS as long as we get all the balance sheet. We have great markets. I feel comfortable. I'm super excited about in '26, '27, '28 and beyond. We're really looking out into 2030. So I feel really good about our markets. We can see them. You can see the capital budgets of our utility customers moving up. We've got to do a good job on affordability issues that you may hear as an industry. We've got to continue to say all the infrastructure that we're building really reduces the rates over time because of generation, it allows flexibility in generation. So we've got to do a good job there or you get backlash. But I think as we see it, the need for generation has not deviated, demand from technology, we're in the early stages of the company in that addressable market. So I like the white space there that we can really grow the business. And so yes, it's big numbers, but the company is much broader than it's ever been, and our addressable markets are much bigger than they've ever been. So super excited about it. And like I said, I don't really want to give earnings yet in '26 but I expect them to be good. I mean I expect us to have good visibility in it, and I think our investor base will be pleased.

And you said that you expect to achieve record backlog in 2026. Is that specifically tied to this NiSource opportunity? Or is it more broadly?

We have broad-based backlog growth. I mean it's across the board. I feel like we haven't seen really any our 765 projects that I believe that we'll be successful with in backlog. I don't think you'll see them probably until mid-'26 and maybe earlier. But in general, I just -- we just see a lot of backlog growth here. It's a culmination of just the work that's been put in from the team over the last 24 months and then the people in the field, it's just -- it's starting to show up and the solutions are starting to resonate. The companies that we work with are starting to see where labor is coming from, and we're in a good place. I really like what we see.

Great. Well, that's a good transition to you mentioned the 765. So I want to talk about the AEP partnership. Can you talk about this a little bit more, the significance of it, how you see it playing out? Is this going to start with specifically Texas high-voltage lines? Or could it be other parts of the country? How should we see this sort of playing out?

Yes. I mean Texas is easier to build. So I suspect that will probably go first. Some of the Texas projects will probably go first. As far as AEP, the largest utility in the country, 40,000 miles of transmission, 2,000 miles of 765 have a lot of technology there. We felt like it was a great collaboration between us to build transformers together. They have a great engineering platform and great -- what I think will really benefit us that we didn't have. And so we could really do some things together. as peers and work hard at it. And so I think we've really done something substantial for the industry, not just AEP and us. I mean we've really proliferated the ability to build 765 together. It's not just AEP. I mean that's one example of a customer, but it's a multitude of all those builds that are really supporting these -- our clients across the IOUs in these builds. So we have to be extremely cognizant of how we support this. And I think the company -- as companies in these RTOs and things like that are in there, we really have worked with AEP to make sure that we can deliver those capabilities across the board, not just for AEP. But that -- the contract itself and what we said, I mean, they have a $70 billion capital budget that they need certainty in. And I feel like that collaboration between us both was substantial to not only derisk them but to help us plan and it's the right answer for the ratepayer. And so I really like the whole thing. It allowed us to do a lot of things that benefits the ratepayer and AEP and Quanta. So it's just a win-win for us all. And I think it's not just 765, it's a broad against the capital budget that you see agreement.

Great. And when we think about some of the growth drivers of the company, if we think about maybe the last 5, 10 years, it seems to me that we've had a big driver in terms of renewables, sort of generation via renewables. And I'm sort of thinking that maybe we're now going to be shifting into a transmission cycle, not that you haven't had transmission projects in the last several years, you have but maybe it's more of a transmission cycle, data centers, natural gas, kind of shifting from renewables or maybe renewables sort of plateaus a little bit. Is that the right way to think about kind of market growth drivers?

Look, I think we'll grow renewables double digits. I'll let Jayshree comment a little bit. She's closer on the renewable side, but I don't see any reason why we won't grow our renewable business double digits.

Yes, I agree. I mean the renewable business, we continue to see customer demand, especially with the load growth that's happening and the speed to power that only renewables can answer. So at this point, we're not seeing plateauing on the renewable side of things. And I would agree with the premise that at the same time, you're going to see more growth on the T&D side, the data center side, generation as a whole with labor being the critical component for all of those things. And so as we sit here thinking through our next 5 to 10 years, whatever form that may take, with labor certainty as a big driver and load growth continue to be the biggest market driver, we're flexible as to how we're going to meet those client needs. Those 2 things being the fundamental drivers of growth gives us longer-term visibility than worrying about any sort of maybe 1-year issue around a renewable tariff policy or a PTC/ITC issue. This is a much longer infrastructure build-out that takes all of this with labor being in the middle of it.

And from a size of project perspective in light of larger transmission projects and some of the natural gas now data centers, is there an increasing mix that we're going to start to see in terms of bigger projects in your overall mix?

I mean you're going to see some stocking. I mean, like you're going to see bigger projects start stocking. But I don't -- the underlying business, if you build a 765 line, like this 10:1, like the lines coming underneath, there'll be 10 lines to 1, 765 line. So there's still -- we did this in the past where we built a lot of projects and part of the whole dynamic of building the base business back over the last decade was we left it in kind of '11 and '12, we just left the business somewhat underneath and the clients were pushing work to others. And this time, I mean, we take a real strategic approach to this where we want to keep the base and then stack the larger projects. So it's been staying at the same kind of 80% to 85% base business. I don't see that changing much as we move forward. The top side will grow but the base is going to grow.

Great. I'll ask one more question here, and then I'll turn it over to the audience if anyone has any questions. We get a lot of questions often about your margin expansion potential. And just curious how -- we've identified some of the margin opportunities. But if you want to maybe just talk a little bit about how you guys see the margin expansion opportunities from here.

Yes. I mean, look, I think the fabrication that we can do on technologies allowing us -- will allow some expansion on that side of the business to expand. But our traditional utility business will be in the same framework that it's always been in. It's regulated. I mean, I think from our standpoint, that's the framework of that business. So it's there. I do think as we get better at our supply chain, as we get pull-through, returns will move on up. There is some ability to move margins. But the training cost and the things that we do with labor to continue to train drags it down some when you think through it. So I just think if we're growing at the pace we're growing at, you pressure margins because of training. But I think it's the right answer for the investor and there's some incremental margin you may get, you wouldn't be able to take advantage of the organic growth that you're going to have. So I think that continuing training will be there. There's places that we can expand, and I expect us to. But I don't -- I just don't -- we want to compound the earnings at the pace we're compounding them at over decades. And so I think if we can do that, we'll be happy. I mean I think we're well -- we're above 20% on a compound basis on adjusted EPS for the past decade. I'm not saying we're going to do that going forward. I'm hedging, trust me. But I do think it's in the 10% to the 20s, and it may be 20%. So I just -- we give ourselves that ability to do that as long as we can continue to be certain to the clients and collaborate like we have, which is key to the markets that we serve.

Great. Anyone in the room have any questions? No? Okay. If not, then I will continue on here. In terms of perhaps cash flow, capital allocation, maybe for you, Jayshree, what are some of the key accomplishments over the last year on cash flow? And what do you have planned further in 2026?

Yes. I mean I think we've done a really good job of keeping a fortress balance sheet. That's very important to us. It allows us to give certainty to the investor base around why we feel we are a durable story around long-term earnings growth. You've seen us put capital to work in really good, strong family-owned businesses that give us a comfort level that it's not a flavor of the day in which that those businesses grown. They've grown through cycles. They have management teams that have lived through good and bad times. They have created a culture that fits our company very, very -- our Quanta company very well. So we want to keep that flexibility in the balance sheet to ensure that when those opportunities come up, we can take advantage of those things. So I think you've seen -- I think it's one of the things we're very proud of what we've worked through over the last decade plus to ensure that balance sheet strength. You've seen us reach investment grade. We've also been -- the rating agencies has -- we've increased a notch on that. Our operators are doing an excellent job of converting faster our AR, and you're going to see more of that as we work through those things. But having said that, we're much more focused on ensuring long-term durability with that customer. That utility base is driven by self-performed work -- it's our labor, our equipment working on these systems for multiple years, that can be a drag on working capital. And so depending on where the growth of our company is coming from, if it's that utility MSA self-perform work, you'll see some of that cash flow pressures continue. But as we're doing more work on the EPC side with the nonutility customer base like Blattner, Cupertino, Dynamic have done, you're going to see a cash flow profile that's more accretive. And that allows us to give a good balance around why we think our conversion ratio continues to be in that 45% to 55% range. Absolutely opportunities to be above that as we've shown in the last few years, depending on where that growth is coming from. But there will be times when we're going to use that free cash flow to invest in our growth. You'll see that in our manufacturing side as we continue to expand our vertical supply chain. That may pressure a little bit of cash flow profile in the near term. But if we're doing that right, you're going to see that translate into more base business work and more certainty over the next several years. So as long as we continue to focus on keeping that balance sheet as flexible as possible, I think you're going to be -- you're going to -- you're going to see us continue to say that durability of our earnings growth will continue.

Yes. And I think as far as capital allocation, there's great businesses out there that 50-, 100-year-old businesses that's not in a trend. I mean we're not buying companies because of a trend. I think that's a fallacy. Like we have a strategy. We know the companies that we would acquire. we're not out looking as companies for whatever reason, want to divest or generationally for whatever reason, there's all kinds of reasons out there. We know who they are. And when we see them, we'll lean into them. And I expect us to do that. I do. I think the market -- I've said that we see a great pipeline of companies out there that we believe that will come to market at some point. And when they do, we will lean into them. And I want flexibility of the balance sheet to be able to lean into them. If our stock gets disconnected, we'll buy our stock back. We have no issues with that either, and we try to stay agnostic to our compensation plan. So in general, I think those are the ways that we will continue to allocate capital. But I don't -- our ability to invest free cash and the way we've done it in the past with the growth of the companies that we've acquired, I mean, we would do them all day. And so I think it makes a lot of sense for us as we look at the markets. But I think it's also important to know that the companies we've acquired weren't data center driven. I mean, both Dynamic and Cupertino, I mean it was a little bit of the business but it was not 50% of the business. So if there is some sort of cliff or there is some sort of movement in the market, we're fine. I mean we'll still grow the businesses nicely. It was the synergies that we see today and what's driving some of the outward growth, but it doesn't mean the companies won't grow and be great businesses long term. That's the companies that we're looking for.

Great. Maybe in the last minute here, you have an Investor Day coming up in March.

So I can't talk about it, but I will anyway.

Okay. I mean it seems like you've talked about double-digit earnings growth rate, the solutions provider strategy, major growth opportunities. Anything I'm missing that you'd want to preview that Kip won't let you talk about?

Look, I think we're excited about the business, and I think we're different. And one of the reasons we're excited about having an Investor Day because I think the company is so different. And we've got to explain it. We've got to do a good job of laying it out on a 5-year plan, and we will. But our ability to really of where we're going over the next decade is substantial to me and I think our investor base what we see in like today, yes, big numbers but also way more opportunity. We're in a different space than we've ever been in. Technology will play a huge role in it. So I think our ability to lay that out to our investor base and stakeholders and talk about it. I'm excited about it. I know Jayshree, I kind of -- we were talking about last night. So it's not something that I take lightly. And when we lean into it, we're going to lean into it and do a good job, and we're excited to do that in March.

Fantastic. Jayshree, thank you so much. Really appreciate it, and best of luck.

Thank you.

Yes. Great questions.