Quanta Services, Inc.

Ladies and gentlemen, thank you so much for standing by today, and welcome to the Qantas Services Third Quarter Earnings Conference Call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If you would like to ask a question, you may press star 1 on your telephone keypad. If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Kip Roop, Vice President and Investor Relations. Thank you, sir. Please go ahead.

Thank you, and welcome, everyone, to the Quantum Services Third Quarter 2020 Earnings Conference Call. This morning, we issued a press release announcing our third quarter results, which can be found in the Investor Relations section of our website at quantumservices.com, along with a summary of our 2020 outlook and commentary that we will discuss this morning. Additionally, we'll use a slide presentation this morning to accompany our prepared remarks which is viewable through the call's webcast and also available on the Investor Relations section of the Quantum Services website. Please remember that information reported on this call speaks only as of today, October 29th, 2020, and therefore you're advised that any time-sensitive information may no longer be accurate as of any replay of this call. This call will include forward-looking statements intended to qualify under the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These include all statements reflecting QANAs expectations, intentions, assumptions, or beliefs about future events or performance that do not solely relate to historical or current facts. Forward-looking statements involve certain risks, uncertainties, and assumptions that are difficult to predict or beyond QANAs control, and actual results may differ materially from those expressed or implied. For additional information concerning some of these risks, uncertainties, and assumptions, please refer to the cautionary language included in today's press release along with the company's periodic reports and other documents filed with the Securities and Exchange Commission, which are available on QANAA's or the SEC's website. You should not place undue reliance on forward-looking statements. QANAA does not undertake any obligation to update such statements and disclaims any written or oral statements made by any third party regarding the subject matter of this call. Please also note that we will present certain historical and forecasted non-GAAP financial measures in today's call including adjusted diluted EPS, backlog, EBITDA, and free cash flow. Reconciliations of these measures to their most directly comparable GAAP financial measures are included in our earnings release. Lastly, if you would like to be notified when Quanta publishes news releases and other information, please sign up for email alerts through the investor relations sections of quantaservices.com. We also encourage investors and others interested in our company to follow Quanta IR and and Kiwana 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, Kiwana's President and CEO. Duke?

Thanks, Kip. Good morning, everyone, and welcome to the Kiwana Services Third Quarter 2020 Earnings Conference Call. On the call today, I will provide operational and strategic commentary, and will then turn it over to Derek Jensen, Kiwana's Chief Financial Officer, who will provide a review of our third quarter results and full year 2020 financial expectations. Following Derek's comments, we welcome your questions. This morning, we reported strong third quarter results, including profitability that meaningfully exceeded our expectations. The performance of our field leadership and the people of this organization continue to be nothing short of impressive. They have successfully adapted to working through a pandemic while continuing to restore critical infrastructure in extreme conditions. The strength of our performance was reflected in our electric power segment margins, including our communications operations and our pipeline and industrial segment margins. It is also reflected in our record earnings per share and backlog, which continues to demonstrate the resiliency of our business and the operational excellence of our people during extraordinary economic and operating conditions. In addition, We strengthened our financial position with the closing of our $1 billion senior notes offering, expansion of the capacity and extension of the term of our credit facility, and our receipt of an investment grade credit rating, all of which we believe points to the resiliency and sustainability of our business model and positive multi-year outlook. Derek and our finance and treasury team did an outstanding job managing the simultaneous and successful financing processes and we're able to secure capital at attractive rates and terms. And finally, an important part of our value proposition to all our stakeholders is Quanah's commitment to corporate responsibility and sustainability. To that end, during the third quarter, we published our first corporate responsibility report, which focuses on our commitment to people, planet, and principles. Quanah has a great ESG story to tell, and we are pleased with the progress we are making to provide increased transparency into our corporate responsibility and sustainability initiatives. Turning to our operating results. Our electric power operations produce record quarterly revenue and solid operating margins, driven by strong demand for our services, effective cost management, high utilizations, operational excellence, and record levels of emergency response activity. Utilities continue to actively deploy capital into their systems to modernize, harden, and expand them and to integrate renewable generation to transition towards a carbon neutral or carbon free environment. To that end, we are actively performing infrastructure work, including substations and transmission interconnects for onshore wind and solar projects, and are seeing additional opportunities associated with offshore wind, battery projects, and hydroelectric development. Large-scale deployment of renewable generation will require both upgrades to and expansion of the transmission backbone, and we are well positioned to perform these services. During the quarter, Quanta deployed significant resources to provide emergency response services to utilities in support of their efforts to restore power to millions of people that were impacted by severe weather events. These events included hurricanes Isaiah, Laura, Sally, and Delta, as well as a derecho storm in the Midwest. Quanta crews have worked more than 90 consecutive days restoring power and rebuilding damaged infrastructure in response to these events. With crews still out today in response to Hurricane Delta and now Hurricane Zeta, in the aggregate, we have deployed approximately 7,000 line workers and support staff from 20 different operating units in response to these severe weather events. Our ability to quickly mobilize this level of resources to support our customers in times of need is unmatched in our industry. These severe weather events and the devastating wildfires in the western region of the United States are examples of why many utilities are implementing system hardening initiatives to make the power grid more resilient and safer. We believe there are many years of storm hardening investments still to come. and that we are in very early stages of fire-hardening activity. These necessary investments in multi-year programs will cost tens of billions of dollars in the aggregate, and Quanta is actively involved in supporting our customers with these initiatives. To that end, in the third quarter, we acquired a family-run utility contractor based in North Carolina that provides electric power distribution, transmission, and substation maintenance and construction services, primarily in the southeastern and middle mid-Atlantic regions of the United States. This company increases our resources in the region and enhances our ability to serve our customers with our grid modernization, hardening, and renewable programs. Since announcing in June that LUMA Energy was selected to operate, maintain, and modernize the Puerto Rico Electric Power Authority, or PREPA's, electric transmission and distribution system in Puerto Rico, LUMA has made good progress towards satisfying the necessary steps to facilitate the full transition of preface T&D operations to LUMA in mid-2021. Additionally, we have begun site preparation for a new line worker training campus in Puerto Rico that will be operated by Northwest Line College. The LUMA College for Technical Training will use the facility to provide world-class training to its employees and to develop Puerto Rico's future craft skill workforce. The first on-island pre-apprentice class is scheduled to begin in the spring of 2021 and currently includes 32 Puerto Rican students. Quanna and ATCO also selected and sponsored several Puerto Rican students who are now in the pre-apprentice program at our Northwest Line College campus in Edgewater, Florida. Further, in September, the Trump administration announced that $12.8 billion had been allocated to Puerto Rico, primarily to rebuild the electric power grid through Federal Emergency Management Agency, or FEMA. Post commencement, LUMA will work with PREPA, FEMA, and other agencies to manage the deployment of these funds to modernize the Puerto Rico power grid over the coming years. Our communications infrastructure services operation, which are included in the electric power segment, perform extremely well in the third quarter with strong double-digit revenue growth and double-digit operating income margin. We continue to make progress in profitability scaling our operations. We believe our operations have the opportunity to achieve more than $500 million in revenue in 2020, reflecting double-digit revenue growth and upper single-digit operating margin. Total backlog at the end of the quarter for our communications operations was approximately $975 million, a record. Additionally, in our press releases this morning, we highlighted our recent acquisition of a Utah-based company that primarily serves the Mountain West region of the United States and specializes in the deployment of short and long haul fiber optic cable and utilities, and the engineering and design of small and large-scale projects. This company enhances our capabilities in the region, and we expect to expand and grow their presence into new areas over time. The effects of COVID-19 continue to cause communication providers to increase investment in their fiber networks to ensure adequate speed and capacity to meet work, education, and entertainment from home demands. We believe this incremental investment in their fiber network has shifted 5G deployment activity levels somewhat. However, we expect 5G deployments to accelerate in 2021. COVID-19 has also highlighted the importance of broadband connectivity and digital divide that exists for millions of people living in rural America without access to adequate broadband connectivity. To bridge the gap, the Federal Communications Commission has established the Rural Digital Opportunity Fund to provide more than $20 billion in federal funds to bring high-speed fixed broadband service to underserved rural homes and small businesses. There are several hundred service providers that have qualified to pursue the funding, many of whom are rural electric cooperatives and municipal entities. Quanta has strong relationships with many of these rural electric providers and is well positioned to provide turnkey solutions to help them deploy broadband services to their customers and rural markets. Turning to our pipeline and industrial segment. Our gas utility operations perform well during the quarter and are gradually returning to pre-COVID levels, executing on multi-decade modernization programs to replace aging gas distribution infrastructure in order to meet regulatory requirements that are aimed at improving reliability and safety. Demand for our pipeline integrity services is also solid, as regulatory requirements spur investment and the permitting challenges for new pipelines make existing pipeline infrastructure more valuable. increasing pipeline owners' desire to extend the useful life of existing pipeline assets through integrity initiatives. Perhaps the most challenging market in the segment is the industrial services, which has been heavily impacted by reduced demand for refined products. Our industrial services operations are performing well in the current environment and are expected to be profitable for the year, but we currently do not anticipate a return to normalcy until the second half of 2021. However, we have a world-class management team leading our operations, who have managed costs well and are using the current environment as an opportunity to strengthen our competitive positioning and emerge stronger as conditions improve. Although larger pipeline projects are a smaller portion of the segment, solid execution during the quarter led to early completion of some projects, which positively contributed to segment results. Going forward, We expect to continue our focus on growing the base gas utility pipeline integrity industrial services business consistent with our strategy over the last five years. We believe there's opportunity for revenue and profitability improvement next year for the entire segment and continue to believe a post-COVID operating environment will allow us to achieve upper single-digit operating margins and improve returns. We have increased our financial expectations for the year due to our strong third quarter results, healthy end market drivers, and the addition of recently announced acquisitions. Perhaps more importantly, we continue to believe we're in a multi-year up cycle with opportunity for continued profitable growth. While we provide our formal commentary and 2021 expectations on the fourth quarter earnings call next February, we currently expect growth in consolidated revenues, net income, adjusted EBITDA, and earnings per share in 2021. And as we have commented on prior earnings calls, we would expect our adjusted EPS expectations to include $4 in its range. Over the past five years, we have executed on our strategy and remain dedicated to growing and enhancing our portfolio of services, which strengthens our ability to capture more of the customer's large programmatic spending programs and to operate in a responsible and sustainable way. These efforts are designed to mitigate risk inherent in our business and prepare for unexpected events through diversification and by maintaining a strong financial profile. We believe Quanta has a long runway ahead of us for generating repeatable and sustainable earnings as we execute on our strategic initiatives. Considering our organic growth opportunities and the levers available to us to allocate future cash flow generation into value-creating opportunities such as stock repurchases, acquisitions, and strategic investments and dividends, we believe Kiwana can continue to generate meaningful stockholder value. We are focused on operating the business for the long term and expect to continue to distinguish ourselves through safe execution and best-in-class field leadership. We will pursue opportunities to enhance Kiwana's space business and leadership position in the industry and provide innovative solutions to our customers. We believe Qantas' diversity, unique operating model, and entrepreneurial mindset form the foundation that will allow us to continue to generate long-term value for all our stakeholders. I will now turn the call over to Derek Jensen, our CFO, for his review of the third quarter results and 2020 expectations. Derek?