Drew Chamberlain

Drew Chamberlain of JPMorgan Chase & Co. questioned the risk from potential tariffs on solar and battery components and asked about the drivers of the Q1 bookings beat and the outlook for second-half bookings.

Answer

Chairman and Interim CEO David King stated that tariffs are not significantly impacting the business, as customers are planning to 'build around' delayed battery components. He attributed the Q1 bookings beat to strength in the industrial sector, particularly data centers. CFO Ken Dodgen added that he expects a strong second-half booking cadence with a book-to-bill ratio comfortably above 1.0.

Drew Chamberlain asked for details on the revenue and backlog contribution from auxiliary services within the renewables segment. He also requested an update on the company's progress toward its 2026 Analyst Day targets.

Answer

CFO Ken Dodgen estimated that auxiliary services will constitute about 10% of renewables revenue in 2025. CEO Tom McCormick commented that the company is on track or slightly ahead of its 2026 strategic plan and is already beginning to plan for 2027, indicating confidence in meeting or exceeding the existing targets.

Drew Chamberlain questioned the implied sequential margin reduction for the Utilities segment in Q4, asking if it was purely due to normal seasonality. He also asked for an update on capital allocation priorities, given the company's rapidly decreasing leverage.

Answer

CFO Ken Dodgen confirmed the expected Q4 margin decline is due to normal seasonality, as winter weather causes work shutdowns, making Q1 and Q4 seasonally weaker. Regarding capital allocation, Dodgen outlined the priorities as 1) supporting organic growth, 2) debt paydown, noting a recent $50 million payment with another planned, and 3) the recent dividend increase. CEO Tom McCormick added that while M&A deal flow is active, they remain highly selective and have not yet found the right target.

Drew Chamberlain of JP Morgan Chase & Co followed up on Pipeline margins, asking about the extent of further investment needed in 2025 and whether any structural changes might prevent a return to historical high-teen or 20%+ margin levels. He also asked for drivers of confidence in the strong second-half cash flow forecast.

Answer

CEO José R. Mas responded that there are no long-term structural changes preventing a return to historical margin profiles, which is dependent on execution as volume ramps. He noted the second-half 2025 margin guidance is already back to the mid-teens. CFO Paul DiMarco explained that the second-half cash flow ramp is driven by the timing of working capital investment moderating after strong sequential revenue growth in Q2.

Drew Chamberlain inquired about MasTec's ability to backfill work if renewable projects face delays due to tariffs or policy changes. He also asked for more detail on the Greenlink project's startup and revenue cadence.

Answer

CEO Jose Mas highlighted that alliance and framework agreements provide a portfolio view of customer projects, mitigating the risk of individual project delays. He expressed high confidence in the 2025 plan, stating the backlog consists of projects that are ready to go. On Greenlink, he confirmed the project has started well, is on plan, and its revenue contribution is expected to grow considerably in the coming years.

Drew Chamberlain of JPMorgan asked if MasTec is seeing any project pull-forwards from customers concerned about potential IRA changes. He also sought clarification on whether the 2025 data center revenue target is concentrated in civil work or includes power, generation, and fiber build-outs.

Answer

CEO Jose Mas stated there are no project pull-forwards into 2025-2026, though a change in law could shift projects from the 2030s into the late 2020s. He clarified that the data center revenue target includes on-site civil and power work, but does not fully capture the broader impact of network builds, like the Lumen contract, which are also driven by data center demand and affect all of MasTec's business segments.

Drew Chamberlain of JPMorgan Chase & Co. requested an update on the large transmission project pipeline and asked for a ranking of the business segments with the most potential for improvement.

Answer

CEO Jose Mas reported that the transmission market is strengthening with more projects becoming available, and while no new awards are expected by year-end, he is confident in winning more work in early 2025. Instead of ranking segments, he highlighted the powerful dynamic of expecting simultaneous double-digit revenue growth and margin improvement across the Communications, Power Delivery, and Clean Energy segments in 2025, which he sees as the primary value driver.

Drew Chamberlain from JPMorgan Chase & Co. asked about the company's expected balance sheet leverage by year-end following the Dynamic Systems acquisition and the resulting flexibility for future M&A.

Answer

CFO Jayshree Desai stated that while leverage is currently slightly above 2x, she fully expects it to be below 2x by year-end, consistent with their target range of 1.5x to 2.0x. She mentioned Quanta is evaluating financing alternatives to enhance liquidity, ensuring flexibility for both organic growth and opportunistic capital deployment. President & CEO Duke Austin added that the company intends to remain investment grade.

Drew Chamberlain asked for a breakdown of what is driving backlog in power generation (solar, storage, wind) and about customer concerns regarding tariffs on projects for 2026-2027, especially for battery storage.

Answer

President and CEO Duke Austin responded that renewables are essential to meet power demand, providing good visibility past 2026. He noted that Quanta is booking all types of projects, with solar being 'robust' and battery storage being 'even more robust.' He emphasized that a blended resource portfolio offers the lowest cost of energy to consumers.

Drew Chamberlain asked for a breakdown of the strong renewable energy bookings by technology and project profile. He also requested more detail on the impact of safe harbor provisions on the current backlog and future opportunities.

Answer

President & CEO Earl Austin stated that despite market noise, demand for renewables is increasing, not pulling back. He explained that Quanta's sophisticated customer base effectively uses safe harbor provisions to secure long-term projects, giving the company confidence in its pipeline. He emphasized that speed-to-market is a critical driver, making solar, the fastest generation to build, a key part of the demand picture.

Drew Chamberlain of JPMorgan asked about the lighter-than-expected bookings in the renewables segment and what might be delaying conversions to backlog. He also questioned if the updated, higher data center market growth forecast reflects Quanta's internal expectations.

Answer

President and CEO Earl "Duke" Austin expressed high confidence that renewables backlog would grow substantially by the next earnings call, citing robust negotiations. He believes the underlying business drivers are strong regardless of any election-related noise. CFO Jayshree Desai noted the data center forecast was from a third-party report, which CEO Duke Austin added is indicative of the strong growth they are seeing in the market.

Drew Chamberlain asked about the trajectory for 2025 revenue guidance, questioning how Centuri will reach the upper end despite a weak Q1 in U.S. Gas, and also inquired about the key findings from the company's strategic review.

Answer

President and CEO Christian Brown explained that the U.S. Gas business was impacted by weather in January and February but recovered strongly in March and April. He affirmed that existing contracts and backlog support the upper end of the revenue guidance across all business units. Regarding the strategic review, Brown highlighted four key outcomes: creating a unified sales pipeline, enhancing cross-selling by marketing as one company, fostering a growth-oriented culture, and aligning KPIs with growth and profitability targets.

Drew Chamberlain from JPMorgan Chase & Co. asked about the decline in backlog, how current bookings position the company for 2025, and what early signals indicate for customer spending levels next year. He also inquired if any material storm restoration work was still ongoing beyond the amounts already disclosed for Q4.

Answer

Jim Connell, Chief Commercial and Strategy Officer, explained that backlog fluctuates with the timing of multiyear MSA renewals, noting a historically high renewal rate. He conveyed that the spending environment with existing customers appears stable for 2025, and new customers are signaling they have more work than resources. CFO Greg Izenstark confirmed there was no material ongoing storm work beyond what had already been announced.

Drew Chamberlain, on behalf of Mark Strouse, asked for the source of confidence in 2025 project realization and for details on the STI goodwill impairment charge.

Answer

CEO Kevin Hostetler explained that confidence for 2025 stems from the growth being already secured in the existing backlog, unlike in 2024 which required converting new business. Chief Accounting Officer James Zhu attributed the STI impairment to the sustained decline in Array's stock price and a revised long-term outlook for the Brazilian market, which was impacted by the devaluation of the Brazilian real.

Drew Chamberlain, on behalf of Mark Strouse at JPMorgan Chase & Co., asked for an update on the idle Iowa facility, including potential timing for a restart with GE and the required ramp-up period. He also sought more detail on the cadence of cash flow generation in the second half of 2024.

Answer

President and CEO William Siwek estimated a potential restart for the Iowa facility in early 2025 at the earliest, noting it would be a six-month process to hire staff and ramp up. CFO Ryan Miller stated that Q4 would see stronger cash generation than Q3, with cash levels likely remaining near the current bottom in Q3 due to CapEx, advance payment liquidations, and interest payments.

Inquired about the status and ramp-up timeline for the Iowa facility and asked for more detail on the cash flow trajectory for the second half of the year.

Answer

The Iowa facility's restart is still targeted for early 2025 at the earliest, with a 6-month ramp-up period. Regarding cash, Q2/Q3 are expected to be the low point, with Q3 being relatively flat and most of the positive cash flow for the second half expected in Q4.