Quanta Services, Inc.

Greetings and welcome to the Qantas Service's second quarter 2021 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, please 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 Rupp, Vice President, Investor Relations. Thank you, sir. Please go ahead.

Thank you, and welcome, everyone, to the Qantas Services second quarter 2021 earnings conference call. This morning, we issued a press release announcing our second quarter results, which can be found in the investor relations section of our website at QantasServices.com, along with a summary of our 2021 outlook and commentary that we will discuss this morning. Additionally, we'll use a slide presentation this morning to accompany our prepared marks, which is viewable through the call's webcast and is 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, August 5th, 2021. Therefore, you are 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 Quan's expectations, intentions, assumptions, or beliefs about future events or performance, but 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 Quan's 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 QANTA's or the SEC's website. You should not place undue reliance on forward-looking statements, and QANTA 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 or other information, please sign up for email alerts through the investor relations section of quantaservices.com. We also encourage investors and others interested in our company to follow Quanta IR and Quanta Services on the social media channels listed on our website. With that, I would like now to turn the call over to Mr. Duke Austin, Quanta's President and CEO. Duke?

Thanks, Skip. Good morning, everyone, and welcome to the Qantas Services second quarter 2021 earnings conference call. On the call today, I will provide operational and strategic commentary and will then turn it over to Derek Jensen, Qantas Chief Financial Officer, who will provide a review of our second quarter results and full year 2021 financial expectations. Following Derek's comments, we welcome your questions. This morning, we reported solid results. With record second quarter revenues and earnings per share, backlog of $17 billion at the end of the quarter was also a record, which we believe reflects the benefits of our collaborative approach with customers and the continued advancement of our long-term growth strategies. We continue to see opportunities for multi-year growth across our service lines, driven by our solution-based approach and the growth of programmatic spending with existing and new customers. Our electric power solutions operations had another strong quarter, with record revenues and better than expected margins, reflecting solid and safe execution, favorable in-market conditions, and continued momentum as a result of ongoing grid modernization, system hardening, and renewable energy interconnections. Our electric power backlog continues to increase, driven primarily by significant multi-year master service agreements with utilities, which adds to the substantial MSA backlog growth from the first quarter. We are proud of our execution and confident in our strong market position to capitalize on opportunities created by favorable long-term trends driving utility investment and demand for our comprehensive solutions. As an example, one of our largest electric customers in the western United States, recently announced a major new multi-year program to underground approximately 10,000 miles of electric distribution power lines in high fire threat districts in the utility service territory. This initiative is in the planning stages and is expected to incorporate input from numerous stakeholders and be implemented over a number of years. While it may seem like a bold endeavor and unprecedented in its scale, The imperative to mitigate the risk of wildfires and the economic and human costs caused by them, as evidenced over the last several years in the western United States, should outweigh the capital investment necessary to complete this kind of program. Electric utilities in other areas of the country are also pursuing initiatives to underground critical infrastructure. Examples include electric transmission projects in the northeast, distribution circuits along the coastlines, electric transmission line projects for offshore wind generation, and undergrounding transmission and distribution initiatives by other utilities in California. Many of these initiatives are part of a large-scale, multi-year system-partnering programs, which provide meaningful opportunities for Qantas. We continue to see accelerated renewable generation development and associated demand for our services. including transmission interconnects, substations, and energy storage. Our customers continue to advance their efforts to achieve carbon neutrality, in large part through increasing renewable generation investment. For example, we have begun work on what will become the largest solar power battery storage center in the world for a longstanding utility customer. We believe public policy and the positive general sentiment supporting a greener environment will drive North America's power generation mix increasingly towards renewables over the near and longer term, and as these dynamics continue to advance, demand for our services could accelerate. Related to these opportunities, we are actively pursuing larger high-voltage electric transmission projects associated with interconnecting renewable generations. which are scheduled to be awarded by the end of this year, with work expected to begin in 2022. We believe Quanta is the industry leader in performing larger scale high voltage electric transmission projects in North America, with an industry leading track record of safely executing for our customers on time and on budget. And we are well positioned for these opportunities. Additionally, we are experienced experiencing accelerating activity and opportunities for our electric vehicle infrastructure installation and program management capabilities. We are in active discussions with several industry participants about managing the deployment of thousands of charging stations, both regionally and nationally. These are exciting and meaningful prospects, but just part of the equation in our view. we feel the market is underestimating the significant investment needed to modernize and expand the capacity of the electric distribution system to accommodate the mass deployment of retail and commercial fleet electric vehicle charging infrastructure. And finally, in June, Luma Energy and its employees, as supported by Kiwana and its joint venture partner, ACCO, commenced the operations and maintenance of Puerto Rico's electric power transmission and distribution system under a supplemental terms agreement following nearly a year of preparation. In LUMA, we have created a purpose-built and effective operator for the Puerto Rico T&D system and the people of Puerto Rico. We remain steadfast in our commitment to continue to invest our time, expertise, and resources to help drive efficient operations at LUMA as it works to deliver a modern, secure, resilient, and affordable electric grid and to develop a highly trained craft skill workforce for the future of Puerto Rico. Our communications operations performed well in the second quarter, and we continue to profitably scale and grow the business. As we discussed in our last earnings call, the subcontractor challenges we experienced in the first quarter were an isolated issue and did not continue into the second quarter. We are on track to generate high single or double-digit operating income margins for the remainder of this year and remain confident in our ability to profitably grow our operations. Service providers continue to push fiber closer to the customer. Fiber backhaul justification is ongoing and 5G wireless infrastructure development is increasing. Further, in response to the meaningful federal funding being provided for broadband network expansion in underserved markets, we are seeing accelerated spending by our cooperative and municipal electric customers who also provide communication services, allowing us to leverage our relationships to provide turnkey telecom solutions to them. On our first quarter earnings call, we announced a strategic alliance with and minority investment in a broadband technology partner. Under our alliance agreement with them, Juana is serving as the program manager for a large-scale deployments of their fixed broadband technology. To that end, we recently began the large-scale installation of their technology in several cities with opportunities to expand their technology into additional cities in 2022. We believe that Quanta is uniquely positioned between the communications and the utility industries to provide solutions for broadband and 5G technology deployments by leveraging existing infrastructure and our relationship with this broadband technology provider is evidence of that. Our underground utility and infrastructure solution segment generally performed well in the quarter, with the exception of a provision for the credit loss taken related to a customer that recently declared bankruptcy, which Derek will discuss in his remarks. I will note, however, that this was not because of our performance, or execution on the project, and that even with the allowance, we were profitable on the work we performed. We continue to experience solid demand for our gas utility and pipeline integrity services, which are driven by regulated spend to modernize systems, reduce methane emissions, ensure environmental compliance, and improve safety and reliability. Our industrial services and are strengthening and should continue to do so through the balance of this year. Further, we expect continued recovery of our industrial services operations in 2022 due to the return of customer maintenance and capital spending that was previously deferred due to the effects of COVID-19 on the downstream market. Additionally, we were recently awarded more than $350 million of larger pipeline projects, primarily in Canada. We expect a portion of this revenue to be recognized this year, with the majority of the revenue to be realized in 2022. Somewhat restraining the segment's recovery are heightened restrictions and concerns in Australia and Canada due to the surge of the Delta COVID-19 variant and its effect on our operations in those countries. I hope that our comments this morning and from our prior calls convey our confidence and the strategic initiatives we are executing on, the competitive position we have in the marketplace, and our positive multiyear outlook. On our last earnings call, I commented that our positive outlook and strategic plan are not reliant on the infrastructure proposal being pursued in Washington, D.C., but that if the bill were enacted, it could provide incremental opportunity for Quanta over the near and longer term. As many of you know, significant progress has recently been made on a bipartisan infrastructure package that includes funding and policies to encourage new infrastructure development and modernization in several of our core markets. Additional political steps are still required. We are encouraged by what we see in the most recently proposed legislation. We believe our business is strong, and we continue to have a favorable outlook for the rest of this year. As a result, in our earnings release this morning, we raised our 2021 guidance. We believe this demonstrates the strength and sustainability of our business and long-term strategy, our ability to safely execute, and our strong competitive position in the marketplace. We also believe that our business and opportunities for profitable growth in 2022 are gaining momentum. driven by our solutions-based approach, the growth of programmatic spending with the existing and new customers, opportunities for larger electric transmission projects, and the opportunity for recovery of certain portions of our business that have been affected by the global pandemic. On prior calls, we have discussed our strategy of enhancing our front-end capabilities, such as engineering and permitting, to complement our world-class construction expertise which is designed to provide differentiated, comprehensive, and industry-leading solutions to our customers. I am pleased to report that our strategy has been well received by our customers across our service lines and is allowing us to better support them and capture more of their programmatic spin. Our markets continue to evolve and strengthen, driven by longer-term favorable trends, including modernization, system hardening, electrification, carbon neutrality initiatives, and the adoption of new technologies. Additionally, our customers and regulators increasingly understand that the rapid growth in renewable generation, electric vehicles, and data intensive technologies bring significant intermittency, which strains existing systems and creates challenges for planning the grids and networks of the future. For these advancements to be successful, Infrastructure requires redundancy to ensure reliability. We believe the infrastructure investment necessary to support these initiatives are still in the early stages of deployment, which provides us with years of visibility and growth opportunities. And finally, an important part of our value proposition to all of our stakeholders is QANU's commitment to corporate responsibility and sustainability. To that end, Earlier this week, we published our 2020 Corporate Responsibility Report, which discusses the company's accomplishments last year, as well as our commitments to people, planet, and principles. Tawana 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. We are focused on operating the business for the longer term and expect to continue to distinguish ourselves through safe execution and best-in-class field leadership. We will pursue opportunities to enhance Qantas' base 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 Henson, our CFO, for his review of our second quarter results and 2021 expectations. Derek.