Greetings and welcome to the Quanta Services Fourth Quarter and Full Year 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Mr. Kip Rupp, Vice President and Investor Relations. Thank you, sir. Please, go ahead.

Great, thank you and welcome everyone to the Quanta Services fourth quarter and full year 2020 earnings conference call. This morning we issued a press release announcing our fourth quarter and full year results, which can be found in the Investor Relations section of our website at quantaservices.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 remarks, which is viewable through the call's webcast and is also available on the Investor Relations section of the Quanta Services website. Please remember that information reported on this call speaks only as of today, February 25, 2021, 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 Quanta's 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 Quanta'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 Quanta's or the SEC's website. You should not place undue reliance on forward-looking statements and Quanta 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 e-mail 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 now like to turn the call over to Mr. Duke Austin, Quanta's President and CEO. Duke?

Thanks Kip. Good morning everyone and welcome to the Quanta Services fourth quarter and full year 2020 earnings conference call. On the call today I will provide operational and strategic commentary and will then turn it over to Derrick Jensen, Quanta’s Chief Financial Officer, who will provide a review of our fourth quarter and full year results and full year 2021 financial expectations. Following Derrick's comments, we welcome your questions. As noted in our earnings release this morning, we have renamed both of our segments to include solutions which we believe is an accurate word to describe the value creating and collaborative approach we take to working with our customers. Additionally, we renamed our pipeline and industrial segment to Underground Utility and Infrastructure Solutions, which we believe is more reflective of the strategic changes we have made over the past five years to reposition this segment towards a greater level of resilient business services to our gas utility, pipeline integrity, and industrial customers. These services tend to be more visible and recurring in nature and are driven by safety, reliability, and environmental regulations. We continue to expand our capabilities in both segments to provide comprehensive end-to-end solutions with cross-skilled labor at the core. We're proud of our successful focus on base business activity over the last five years, which now accounts for more than 90% of our revenues. We continue to view large projects as upside opportunities and are well positioned to safely execute them when they occur. Quanta performed well and delivered a solid year in 2020, which includes numerous accomplishments. This was due to the performance of our field leadership and the people of this organization, who continue to be exceptional. There are so many accomplishments in 2020. Electric power segment revenues achieved record levels and we earned our best operating margin performance in six years, driven by strong execution across our operations. Included in these results were record storm response revenues from supporting our customers’ efforts to restore power to millions of people adversely impacted by numerous severe weather events during the year. Our ability to quickly mobilize this level of resources to support our customers in times of need, even during a pandemic is unmatched in our industry. After an 18-month competitive process, LUMA Energy, our joint venture with ATCO, was selected for a 15-year operation and maintenance agreement to operate, maintain, and modernize PREPA’s more than 18,000 mile electric transmission and distribution system in Puerto Rico. LUMA and PREPA are making good progress towards transitioning operations of this system this year, and we continue to believe this opportunity is transformative for Quanta. We grew our communication services revenues by more than 40%, meaningfully improved profit margins and ended the year with a total backlog of approximately $900 million. We substantially completed the exit of our Latin American operations, despite the significant challenges and impact to these wind down activities from the effects of COVID-19. We continue to lead the industry in safety, which we believe starts with training. We continue to incrementally invest in our training efforts through our Northwest Line College and Quanta Advanced Training Center. Additionally, last year we began site preparation for a new line worker training campus in Puerto Rico that will be operated by Northwest Line College. The facility will provide world-class training to LUMA’s employees and develop Puerto Rico's future cross-skilled workforce. Our industry-leading training and recruiting initiatives are driving improved productivity in the field and ensuring that we have the very best craft-skilled labor. This enhances our ability to collaborate with customers and labor affiliations on future workforce needs and further differentiates us in the marketplace as a strategic solutions provider. We invested approximately $400 million in the strategic acquisition of seven high-quality companies with great management teams that expand or enhance our ability to provide solutions to our customers or are additive to our base business and advance our strategic initiatives. These companies add to our self-perform capabilities, which typically accounts for approximately 85% of our work and are key to providing cost certainty to our customers. We believe our approach to acquisitions and our operating model helps de-risk our work portfolio through improved execution, and results in more consistent earnings. We strengthened our financial position with the closing of our $1 billion investment-grade senior notes offering, which we believe points to the resiliency and sustainability of our business model and positive multi-year outlook. We demonstrated our commitment to stockholder value and confidence in Quanta’s financial strength and continued growth opportunities through the acquisition of approximately $250 million of common stock and a 25% increase in our dividend. Finally, the diversity of our services, proactive cost management, and execution through significant uncertainty caused by the pandemic and challenged energy markets allowed our underground utility and infrastructure solutions operations to perform well under the circumstances. We are optimistic that the most challenging market conditions are behind us, and we see opportunity for revenue and margin improvement in 2021, and continue to believe this segment can achieve upper single-digit operating income margin as operating conditions further normalize over time. We believe our strategic position in the marketplace remains strong, and we are well positioned for continued profitable growth over the near and longer-term. Despite unprecedented operating conditions and uncertainties caused by the global pandemic, portions of our business, the strong performance of our electric power and communications operations resulted in record adjusted EPS, adjusted EBITDA, cash flow, and backlog in 2020. While we are proud of the achievements last year, we remain focused on getting better to ensure that Quanta continues to evolve to effectively collaborate with our customers and business partners and help them achieve their goals and capitalize on the opportunities ahead of us. The recent severe weather conditions that impacted living conditions in Texas and other parts of the country show how critical infrastructure that we design, build, and maintain is to our everyday well-being. The solutions Quanta provides supports our customers’ efforts to increase reliability, safety, efficiency, and connectivity, all of which have a favorable environmental and social impact on both the markets that we serve and society. Additionally, our solutions facilitate policies and goals aimed at the adoption of new technologies and transitioning towards a carbon-neutral economy. As a result, we believe our business is leveraged to favorable and sustainable long-term goals. Our utility customers, who account for more than 70% of our 2020 revenues, are leaders in the effort to reduce carbon emissions with aggressive efforts to modernize and harden their systems, expand their renewable generation portfolios, and implement new technologies for current and future needs. A number of utilities have committed to providing 100% of their power by clean energy or achieving net-zero carbon emissions by 2050. Achieving these goals requires substantial incremental investment in transmission, substation, and distribution infrastructure to interconnect new renewable generation facilities to the power grid and ensure grid reliability due to the significant increase of intermittent power added to the system. Further developed economies are expected to be increasingly driven by electricity to meet carbon reduction goals over time. Vehicle electrification offers a large carbon reduction opportunity, in addition to residential and commercial space, water heating, and industrial and agriculture electrification. According to a report from the Wire's Group, increased electrification and electric vehicle adoption in the United States could require 70 to 200 gigawatts of new power generation by 2030, the majority of which is expected to be renewables and could require incremental transmission investment of $30 billion to $90 billion by 2030. We believe these investment requirements associated with electrification are in addition to the significant multi-year investment programs already in place for the coming years to modernize the existing power grid to ensure reliable power delivery under current market conditions. The outlook for our communications operations, which is within the electric power segment, remains bright. We expect to generate approximately $700 million in revenue this year, which would represent approximately 30% growth over 2020. Our communication services support the technology we use every day for work, education, entertainment, connecting with friends and family, all of which are critically important. To that end, the effects of COVID-19 have caused communication providers to increase investment in the fiber networks to ensure adequate speed, capacity, and reliability to meet these needs. Additionally, we believe Quanta is well positioned to leverage our electric power and communication solutions capabilities to assist many of our rural and municipal electric customers who are expected to participate in the rural digital opportunity fund. This fund provides more than $20 billion to bridge the digital divide that exists for millions of people living in rural America without access to adequate broadband connectivity. Further, we expect 5G deployments to accelerate in 2021, positioning us to continue participating in this growth. Our underground utility and infrastructure solutions segment experienced meaningful challenges during the year due to the effects of COVID-19, such as shutdowns in certain cities that had short-term impacts on our gas utility services and the significant reduction in demand for refined products that materially impacted our industrial service customers. As discussed previously, we believe the greatest impacts from these dynamics are behind us. Going forward, we expect to continue our focus on our gas utility, pipeline integrity, and industrial services businesses, consistent with our strategy over the last five years due to the favorable long-term trends driven by safety, reliability, and environmental regulations. Our gas utility services support regulated programs to replace and modernize aging infrastructure, which can be hazardous and pose potential safety concerns. They also support customer efforts to reduce methane emissions and position the gas distribution systems to potentially deliver hydrogen to users in the future. Our pipeline integrity services seek to ensure that existing pipelines operate safely and in an environmentally friendly manner. Many of our industrial services support customers’ compliance with regulations aimed at minimizing environmental impacts caused by methane gas release and increase operational efficiency and safety. We believe these favorable safety, reliability, and environmental initiatives and long-term industry trends such as electrifications and technology implementations will continue to drive growth opportunities for Quanta for the foreseeable future. Quanta is actively engaged in collaborative conversations with many of our customers about their multi-year, multi-billion dollar programs extending as far as 10 years, regarding how Quanta can provide solutions throughout our customer's value chain to meet their strategic infrastructure investment goals in support of these initiatives. In our earnings release this morning, we provided our 2021 guidance, which we believe demonstrates the strength and sustainability of our business and long-term strategy, favorable end-market trends, and our ability to safely execute in a strong competitive position in the marketplace. Our expectations call for growth in revenues, adjusted EBITDA, and earnings per share and improved profit margins. Additionally, we see opportunity to achieve new record levels of backlog in 2021. In summary, we generated solid results in 2020 that we believe reflect the resiliency and sustainability of our business, the benefit of our strong financial position, the successful execution of our strategic initiatives, and the excellence of our people. The challenges we faced and the way we continue to support and collaborate with our customers last year, particularly as it relates to the pandemic, brought out the best of this organization, and I believe made Quanta stronger. Overall, our end markets and multi-year visibility are solid, and we have built a strong platform that positions us well to capitalize on favorable long-term trends, particularly the transition towards a carbon-neutral economy and the adoption of new technologies. Considering our organic growth opportunities and the levers available to us to allocate future cash flow generation and to create opportunities such as stock repurchases, acquisitions, and strategic investments in dividends, we believe Quanta will continue to generate meaningful stockholder value going forward. Quanta is a portfolio of exceptional businesses with geographic and service line diversity. We are anchored by our commitment to craft skilled labor and our self-perform capabilities. 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 skilled leadership. We will pursue opportunities to enhance Quanta’s base business and leadership position in the industry and provide innovative solutions to our customers. We believe Quanta's 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 Derrick Jensen, our CFO, for his review of the fourth quarter and full year results and 2021 expectations.

Thanks Duke and good morning, everyone. Today we announced fourth quarter 2020 revenues of $2.9 billion. Net income attributable to common stock was $170.1 million or $1.17 per diluted share and adjusted diluted earnings per share, our non-GAAP measure was $1.22. Overall the fourth quarter closed out another exceptional year of operational performance for Quanta, a year in which we delivered record results across multiple metrics despite headwinds faced related to the pandemic. Our electric power revenues excluding Latin America were $2.11 billion, a 15.7% increase when compared to the fourth quarter of 2019. This increase was driven by mid-single-digit growth in our base business, increased contributions from the timing of certain larger projects, and $75 million in revenues from acquired businesses. Contributing to the base business growth was approximately 13% growth from our communications operations and record fourth quarter demand for our emergency restoration services of approximately $150 million primarily associated with efforts to restore infrastructure in the Southeastern and Midwestern United States, although it came at the expense of certain other work in progress. Partially offsetting these increases was the expected reduction in fire hardening work in the Western United States during 4Q 2020 compared to 4Q 2019. Electric segment margins in 4Q 2020 were 11.6%, and excluding our Latin American operations, segment margins were 12.9% versus 9% in 4Q 2019. The robust operating margins were driven by increased profit contributions from the elevated emergency restoration services, which typically present opportunities for higher margins due to higher equipment utilization and fixed cost absorption as well as improved margins in our Canadian operations, primarily associated with certain larger transmission projects. However, although difficult to calculate the direct incremental effects, excluding revenues and profit from storm response efforts, our margins were still comfortably in double digits reflecting continued strong execution across all of our electric power operations. Of note, our communications margins continue to improve against the prior year with a margin of 9% during the quarter. Regarding our Latin American operations included within the electric segment, we have substantially completed the wind-down activities required to exit those markets. Our year-long effort to shut down our operations across the region was significantly impacted by COVID-19 dynamics, as well as political and regulatory uncertainties and customer challenges, all of which contributed meaningfully higher losses than anticipated. In the fourth quarter, we took the additional step of reserving remaining property, equipment, and inventory assets as the uncertain market conditions minimized likely recoveries upon disposition. As a reminder, we currently received no tax benefit for losses in Latin America, so the $27 million in losses impacted the quarter by approximately $0.19. With minimal contractual obligations remaining, we feel comfortable that, other than arbitration updates on the terminated Peruvian communications network project, we will no longer provide commentary on Latin America. Revenues from our underground utility and infrastructure solution segment were $806 million, 36% lower than 4Q 2019. Similar to prior quarters, expected reduced contributions from larger-diameter pipeline projects contributed to the decline. The variability attributable to larger pipeline projects is why we've taken strategic steps to reposition our service offerings around more predictable utility-backed revenue streams. While we remain well positioned to opportunistically deploy resources for larger pipeline projects, we expect most future work will consist of smaller pipeline transmission and integrity-oriented projects. Additionally, the lingering negative impacts of COVID-19 have reduced some level of demand for broader services across the segment, with a reduction in demand for refined products, substantially contributing to reduced quarter-over-quarter revenues from our industrial operations. Operating margins for this segment were 5.1%. These margins were 190 basis points lower than 4Q 2019, primarily due to reduced revenues, as well as some degree of execution challenges during the quarter and costs associated with the exit of certain ancillary pipeline operations. These negative impacts were partially offset by net positive project closeouts, primarily driven by the recognition of previously deferred suspension and milestone payments and the reduction of remaining contingency balances associated with the Atlantic Coast Pipeline project, which was officially terminated on December 31, 2020. Our total backlog was $15.1 billion at the end of the fourth quarter, slightly higher than 4Q 2019 and comparable to the third quarter of 2020, yet remains at record levels. 12 months backlog of $8.3 billion is an increase from both the fourth quarter of 2019 and the third quarter of 2020. As a reminder, the LUMA joint venture is accounted for as an equity method investment, and therefore does not contribute to revenue and is not included in backlog. However, assuming an operating margin profile consistent with our electric power operations, LUMA's contribution over the 15-year operation and maintenance agreement would imply a backlog equivalent of more than $6 billion for Quanta. For the fourth quarter of 2020, we generated free cash flow, a non-GAAP measure of $200 million, and although $381 million lower than 4Q 2019, it was higher than we anticipated driven by stronger profits in the quarter and the cash cycle consistent with our third quarter results. For the year we generated record free cash flow of $892 million. Day sales outstanding, or DSO, measured 83 days for the quarter, which was comparable to the third quarter of 2020 and fourth quarter of 2019. Cash flows in the fourth quarter and full year 2020 did partially benefit from the deferral of $37 million and $109 million of employer payroll tax payments permitted by the CARES Act, with the payments due in equal installments at the end of 2021 and 2022. We had $185 million of cash at the end of the year with total liquidity of $2.2 billion and a debt-to-EBITDA ratio as calculated under our credit agreement of approximately 1.2 times. Turning to guidance, we continue to deal with some level of COVID-19 uncertainty as we assess the near-term prospects of our operations, primarily in our underground utility and infrastructure solution segment, and we've remained prudent with our expectations for 2021. However, as we look ahead to 2021 and beyond, we see the base business propelling multi-year growth opportunities for both segments. Electric segment revenues grew to $7.8 billion at the end of 2020, and we continue to see our base business providing mid-single to double-digit growth opportunities, coupled with some degree of increased contributions from larger projects, primarily associated with previously announced projects in Canada. In the aggregate, we expect electric power revenues to range between $8.3 billion and $8.5 billion, which includes expected revenues from our communications operations of around $700 million. As it relates to electric power segment revenue seasonality, we expect revenue growth in each quarter of 2021 compared to 2020, with quarter-over-quarter growth in the first and second quarters, potentially exceeding 10%. We expect first quarter revenues to be the lowest of the year due to normal seasonal weather dynamics impacting certain construction activities. We expect the high end of our revenue range to represent greater revenue growth opportunities in the third and fourth quarters relative to 2020. We expect 2021 operating margins for the electric power segment to range between 10.1% and 10.9%, which includes contributions of approximately $29 million or $0.20 per share from the LUMA joint venture and earnings from other integral unconsolidated affiliates. LUMA is expected to contribute around $9 million in the first half of the year, then increasing in the back half of the year as we exit the front-end transition services period. Although we are proud of our overall electric power performance in 2020, our 11.6% margins excluding Latin America are above historical averages and are the highest since 2013 due in part to record annual emergency restoration service revenues of $450 million. As outlined in our accompanying slides, our 2021 expectations for margins for this segment are consistent with historical averages and are also based on expectations for more normalized emergency restoration service revenues of approximately $200 million, also in line with historical averages. As is typically the case, we expect that first quarter operating margins will be the lowest for the year, possibly slightly below 10%. However, we expect margins to increase into the second and third quarters and then slightly decline in the fourth quarter. We believe communications operating income margins, which have been dilutive to segment margins in prior periods, could be at parity with electric operations on a full year basis. The underground utility and infrastructure solutions segment continues to be impacted by COVID-19 and the challenging energy market conditions. However, we are anticipating upper single-digit to double-digit revenue growth off of 2020 with full-year revenues expected to range between $3.65 billion and $3.85 billion. Over 90% of our revenue expectations for 2021 represent base business with larger projects representing their lowest level of contributions in the last seven years. From a seasonality perspective, we see first quarter revenues being our lowest for the year, likely more than 20% lower than the first quarter of 2020. This decline is primarily due to significantly reduced industrial service revenues compared to the record results in 1Q 2020, as industrial customers are still dealing with lower demand stemming from decreased global travel activity associated with the pandemic, as well as reduced contributions from larger pipeline projects. Revenues should increase sequentially into the third quarter and then seasonally decline in the fourth quarter. Quarterly revenues for the second through the fourth quarters are expected to be higher on a quarter-over-quarter basis as compared to 2020, with double-digit growth expected for each quarter. Operating margin improvement for this segment continues to be a focus for us. We see segment margins ranging between 5.5% and 6% led primarily by continued execution within our gas LVC operations. Our full-year margin expectations include a breakeven contribution from our industrial services operations in 2021, due to the continued challenging environment. However, to put our current segment margin guidance in context, if our industrial operations contributed at historical pre-COVID margin levels, our segment margin guidance would increase by over 100 basis points. Consistent with years past and similar to electric power, our first quarter traditionally has lower activity in this segment due to weather seasonality, which impacts our revenues and pressures margin. With current inclement weather across much of the U.S. further pressuring those operations, we expect first quarter margins between breakeven and a small loss. However, we expect solid improvement into the second and third quarters, with a seasonal decline in the fourth quarter. These segment operating ranges support our expectation for 2021 annual revenues of $11.95 billion to $12.35 billion and adjusted EBITDA, a non-GAAP measure of between $1.09 billion and $1.19 billion. This represents 8% growth at the midpoint of the range when compared to 2020’s record adjusted EBITDA. With these operating results, we estimate our range of GAAP diluted earnings per share attributable to common stock for the year to be between $3.16 and $3.66 and anticipate non-GAAP adjusted diluted earnings per share to be between $4.02 and $4.52. Turning to cash flow, we expect free cash flow for 2021 to range between $400 million and $600 million with the standard disclaimer that quarterly free cash flow is subject to sizable movements due to various customer and project dynamics that occur in the normal course of operations. Included in our free cash flow expectation is the anticipated payment of $54 million in the fourth quarter related to payroll taxes that were deferred in 2020. As we have discussed during prior investor events, our cash flow generation moves counter to our revenue growth rates. For instance, a large driver of our significant free cash flow in 2020 was reduced revenues of approximately $900 million compared to 2019, decreasing working capital needs. However, higher revenue growth, like we're guiding for 2021, will likely require a meaningful investment in working capital to support the growth. While our 2021 free cash flow may be negatively impacted by increased working capital required to support our return to 2019 revenue levels, we believe that consistent, sustainable growth profile and solid margins of our base business provides for repeatable levels of free cash flow generation in line with our 2021 guidance in future periods. For additional information, please refer to our outlook summary which can be found on the IR website at quantaservices.com. Looking back on our 2020 performance, although there were headwinds to the year, we ended the year with $11.2 billion in revenues, which represents an 8.1% revenue CAGR since 2015. More importantly, we ended the year with slightly over $1 billion of adjusted EBITDA, a record for Quanta and equal to our goal established five years ago, which represents a nearly 15% CAGR since 2015. Lastly, our record adjusted EPS of $3.82 represents a 28% CAGR since 2015, with our adjusted EPS growing faster than profits, which are growing faster than revenues. Over the last five years, we have deployed approximately $1.4 billion in cash for M&A and strategic investments, and $760 million for stock repurchases. While we acquired $250 million of common stock in 2020 and $7 million of common stock through February 24, 2021, we have approximately $530 million of availability remaining on our current stock repurchase program. Our first capital priority remains supporting the growth of our business through working capital and capital expenditures; however, we remain committed to the deployment of remaining available capital to stockholders through our stock repurchase and dividend programs, and we continue to expect opportunistic acquisitions. Our $1 billion bond offering in 2020 established a fixed level of debt that nicely complements our current EBITDA profile, which we believe is a repeatable, sustainable baseline of earnings. Simultaneously, we secured an expanded credit facility further enhancing our ability to meet incremental capital needs. Overall, we remain confident in the strength of our operations, our prospects for profitable growth, and the repeatable and sustainable nature of our core markets. We've developed a platform for Quanta to capitalize on the trends driving the spend in our markets, and we firmly believe delivering base business solutions to world-class craft skilled labor, optimistic larger project deployments, and continued balance sheet strength will be the key to delivering long-term shareholder value. This concludes our formal presentation and we will now open the line for Q&A.

Our first question is coming from Noelle Dilts of Stifel. Please go ahead.

Hi guys, good morning and congrats on a great quarter. Could you just expand a little bit on how things are progressing in Puerto Rico, how we're looking at the transition over to full-scale operations there and any change in how you're thinking about some of the opportunities around construction projects in the region? Thanks.

In Puerto Rico, we're making progress. We are staying on task on the timeline that we set forth within our bid process. I think we're making great strides there. We're continuing to transition the labor force as well as everything that comes with that from remediation plans and capital plans on the PREPA side of the business. From my standpoint, I think the third quarter is when we expect to fully transition over into commencement. If not, we will have a supplemental agreement that will continue, and we will stay in the supplemental agreement. But the numbers and what we put forth does not change. We continue to be optimistic about the progress we're making as well as what we're doing for the island and the people. We've got our training facility very close to opening, so we're seeing a lot of progress there and momentum around what we can do for the island, both for the people as well as the economics. Everything's on track and going well.

Okay, great. There are definitely several positive factors influencing the electric transmission and distribution sector. I have a couple of questions regarding this. First, could you provide an update on the grid hardening efforts that were initially planned for 2020 but postponed? How are you approaching this for 2021? Also, what are your thoughts on the Biden administration's objectives related to renewable energy and the potential for an infrastructure bill? Specifically, do you foresee any grid-related initiatives arising from this administration's agenda? Thanks.

So I'll take the wildfire question to the West first. When we looked at it last year, we knew that one of our larger utilities out there was coming out of bankruptcy, as well as putting a management team in. They are still putting that management team in place. We said all along that if we weren't working on that, we would be working somewhere in the West, and that's still the case. The demand for our services and what we're doing there from a solutions provider to the wildfire assessment, as well as the construction afterward, still remains. I think it's a long-term build in the West around hardening, modernization, and all the things that are necessary when you want to move to a more carbon-free environment. When we look at the situation to the West, I think they are somewhat farther along in their anticipation of being there. We are still backed up by quite a bit of gas in the region. I continue to believe that we'll continue to see modernization of that infrastructure as well as hardening for wildfires to the west. The way we looked at it this year is, we took the normal approach, the same one we've taken in years past, and if we're not busy on the wildfire piece of it, we will be busy doing other things in the West. I think all that's anticipated. If we start to move and expedite that, it would be in the latter half of the year, and we will comment on it as we move forward. As for the Biden administration, we've done well under both administrations. It doesn't matter, whether it be Republican or Democrat, we're really agnostic to that. When we look at it, I think if they follow the energy plan of the 2030-2050 type timeframe regarding moving to more of a carbon-free footprint, it certainly drives our business, and I don't think that sentiment is going away. We continue to see momentum around renewables and carbon-free types of environment—whether it be hydrogen, batteries, or whatever it may be—that sentiment is there. The administration is certainly pushing that, and I think it's beneficial for Quanta on all fronts.

Thank you.

Thank you. Our next question is coming from Sean Eastman of KeyBanc Capital Markets. Please go ahead.

Hi, gentlemen. Nice work all around, great job. I wanted to start on the underground utility margins. So they're set at 5.5% to 6% for 2021. I think you said it would be 100 basis points better if we had a normalized contribution from industrial services. So, I guess firstly, does that just mean we’d be 100 basis points higher if demand for refined products was normalized around the reopening? And second, I mean what is the sort of longer-term trajectory in this segment, maybe you could just refresh us on beyond just a normalization and reopening of the economy, what the longer-term target is for this business?

I think when we look at the segment and what we're trying to accomplish there, we’ve shifted it away from large projects into more of a base business. When we look at the industrial business, we see it flat for the year. However, we do see signs of life there. If the economy comes back, we will enter a more normalized industrial sector and see more of the same type of work we've seen historically. If you look back to 2008 and 2009, after those years, we had very busy years in the industrial space. I expect the same will happen. Nothing has changed there; I really like that business unit and believe we will grow out of it. We have opportunities where others have left the space. We continue to see the greatest opportunity we've ever had there on a go-forward basis. We like it and we'll continue to stay in it. So again, as Derrick commented, we do believe if and when that gets back and you see upper single digits there like it historically operated, it will move the whole segment up. That's what we see, so we’re committed to operating this segment in upper single digits.

Okay, got it. That’s helpful Duke and maybe just continuing on the margin discussion with electric power. I guess firstly, is the trajectory from the 11.6% excluding LATAM in 2020 to the 10.1% to 10.9% in the guidance for 2021 or just a normalization in storm revenue run rates? And second, relative to the 10.1% to 10.9%, it seems like LUMA in the out year, a full transition contribution in the out year is a tailwind, it seems like telecom is going to exit 2021 at a higher run rate in terms of margin. So, is there potential for expansion beyond this 2021 guidance range for electric power margins around those factors?

When we look at the margins and see it on a CAGR basis, our historical operating margins have fluctuated in the kind of double-digits range. For us, that's where we operate historically. We have operated above that. We've mentioned that before. I think when we look at our guidance, we take a prudent approach to it. It's very early, we have seasonality, we have all kinds of events. We did pull back to $200 million of storm guidance. If that's more, it would obviously benefit the segment. We're operating really well there, and I think certainly there's an opportunity, but as far as where we sit, the guidance we provided is prudent. If you look at this over time, that's where we will sit on a CAGR basis. So yes, there's always opportunity for us, and we're going to do everything we can to operate above that.

No, it's not really right to look at 2020 to 2021 being all about the storm pullback. Clearly, that is a component of it, but that's what Duke is saying—the broader aspect of the operating model would average into that 10%. We've got a slide in there trying to illustrate that in the slide deck. Relative to going forward though, yes, as it relates to the back half of the year performance for 2021 going into 2022 to the extent that you saw more run rate type dynamics for LUMA in the back half of the year, then yes, that would be accretive when thinking about the model going into 2022.

Okay, terrific. Thanks for the color and again, nice work. Thanks, guys.

Thank you. Our next question is coming from Andy Kaplowitz of Citigroup. Please go ahead.

Hey, good morning, guys.

Good morning, Andy.

Duke, can you update us on where you are in terms of your focus on capturing more of your customers' programming—programmatic spend, it looks like your estimated orders under MSA are up dramatically, which is a major reason for the positive move in your electric power backlog in 2020. So would you expect that to continue to move up in 2021, and are you generally seeing customers more willing to outsource more of their operations to you given labor scarcity and job complexity?

We pride ourselves in self-performance and craft skilled labor. I think right now, that is tight in the marketplace. The things we've done allow us to collaborate with our customers there. It’s really driving the front side of the business and our ability to capture in a more holistic manner, the full value chain that we see in end-to-end solutions on utility base. Yes, I think we're making great progress there. I think it's something that we said we were going to do and take pride in going forward, and it will drive the business. The capital spends are also getting longer; when we're talking to customers, our MSAs are lengthening, not getting shorter. So we're seeing more multi-year type MSAs versus one year just to ensure they have the craft skill labor and the ability to perform that CAPEX and OPEX. I like our position. I think we're doing well on the utility side of the business as far as capturing more from the front side.

Duke, that's helpful. And then you mentioned large projects in Canada in electric power contributing a little more in terms of revenue in 2021. So could you talk about the duration of these projects? I think they'll burn revenue in 2022, and then, given all the focus on energy transition and renewables, are you at least having more conversations at this point regarding larger transmission work, so when your bigger Canadian projects, should you be able to replace them and/or further grow in large transmission?

When we look at North America, if the sentiment stays with renewables and we continue down that path, there’s no doubt we need to invest in large transmission to move load-to-load centers. Whether it be Canada or North America, we will continue to see those types of dynamics stack onto the base business as we move forward. The projects that are in Canada are performing well. Some will end in 2022, and parts will end in 2023. So it's a good base for us in Canada. We still see opportunities beyond that and in other areas as well. We continue to see a range of larger projects, well above the $3 billion type framework. I think that continues on, and it's well above that. Just to note, communicate that it’s not just that, but it’s above that as we move forward.

Good color, appreciate it, Duke.

Our next question is coming from Alex Rygiel of B. Riley FBR. Please go ahead.

Thank you and good morning, gentlemen. With regard to the revenue guidance for 2021 of 7% to 10%, what’s the anticipated contribution from acquisitions completed in 2020 as well as ones completed early in 2021?

I would say that the incremental is probably around $200 million for the full complement of acquisitions in 2020.

And then, as you think about capital allocation in 2021, can you quantify or bracket sort of what you're targeting for acquisitions in the coming year either from a revenue contribution basis or capital to purchase those businesses?

Yeah, Alex, I think the strategy remains the same. You'll see us continuing to evaluate everything against the stock and what we can do with it and our organic growth. We'll continue to make sure that we invest back in the business, as far as working capital, where we still see plenty of acquisition type targets out there that come through. We're not hard pressed to make acquisitions, but if we see the right company and management teams, we will certainly lean into them as we have in the past. That will also be additive to anything we're trying to accomplish from a strategy standpoint. I do think when we look at the way the company is running and the way that the capital allocation happens going forward, it does allow us to start thinking really about the opportunity for double-digit EPS growth year-over-year. We've seen much more than that, and going back on a five-year CAGR basis, it's much more than that. You see our guidance this year being more than that, so I do think the company's ability to lean in and pull all levers of the balance sheet to move us forward is certainly there, and you'll see us do that. Another way to look at it is to go back and see our averages. Over the last four or five years, we’ve averaged around $400 million or more in deployment of capital and acquisitions.

Thank you.

Thank you.

Thank you. Our next question is coming from Steven Fisher of UBS. Please go ahead.

Thanks and good morning. Just on the cash flow, your guidance of about 45% conversion of EBITDA seems a little bit higher than you were previously talking about when you get growth going into sort of the upper single digits on a revenue basis. So I guess, is there anything in particular that's taking that cash flow above that maybe 35% to 40% conversion on a kind of a low single-digit, low to mid-single-digit basis or is this now sort of a new normal cash conversion at a better level?

Thanks for the question, Steve. Actually, what I'd say is it is a little bit higher. We ended the year with probably around a little over 12% working capital as a percentage of trailing four-month revenues. Historically, we were really running probably about 13%. So I think we've done a good job of continuing to get some of that pressure down on the working capital side. I think we can maintain that throughout this year, and that will give us a little bit higher conversion rate. As Alex has asked, there is a little bit of M&A driving the revenue side, so that would factor into the revenue growth a little bit. We've commented multiple times that with a moderated growth rate, like that mid-single-digit, that we could be in that 40% to 50% type conversion, which is largely what you're seeing, with a little bit of an uptick based on expectations of maybe a little bit better cash conversion than what we've seen in recent periods.

And then just on the telecom business, just curious what the bookings potential looks like there? Are there any opportunities out there to maybe drive a step function increase in that $900 million backlog it has today or should we now expect that as this business gets a little bit bigger, the growth rate starts to have a moderating trend, both on the revenues and the backlog sides?

When we look at the telecom business we see the macro market; it's very good. Our ability to book is strong; we continue to book effectively. We've taken a measured, disciplined approach to make sure that we kept our double-digit margins and hit those targets. I think we've done that and we've grown it nicely. As long as we can hit those double-digit target margins that we're after, then we'll continue to see that growth, but it will moderate at some point above big numbers as we get there. In general, the market is there for us to continue to grow that business above the growth rate of the electric segment, for sure. I think we see that going forward. The work we’re doing is complementary, as the telecom work is also woven into our municipal electric customers. This provides us even more opportunities to grow the business further with our electrics not inside the established business. As 5G becomes prevalent, it’s also lifting our telecom capabilities even higher. I'm optimistic, the market's good and we're doing well there.

Perfect, thank you.

Thank you. Our next question is coming from Jamie Cook of Credit Suisse. Please go ahead.

Hi, good morning, a nice quarter. I guess my first question back to underground utility infrastructure. Are there any sort of inorganic opportunities that you could pursue and acquisitions that we could consider in 2021 to somewhat accelerate the margin improvement in this business? I know before, or historically, Duke, you talked about scale and perhaps not enough geographic diversification, sort of weighing down on the margins in this business and wondering how opportunistic we can be there versus just waiting for the industrial services business to come back.

To be clear, our goal is to operate that segment, and we’re doing what is necessary to operate that segment in upper single digits. Our crews aren’t sitting; many times they’ll go perform electric work and do other types of work, too. So, you’re seeing the overall margins of the company move up. No matter what class of work they do, for example, a bore rig can bore electric one day, gas the next, and telecom the day after. We are making sure our offices are fully utilized, so it's driving the overall margins of the company up, and we do anticipate that as we continue to grow our utility side of the LDC business with integrity and pipe replacement, that will continue as the largest segment, as well as raise our margin profile and resiliency of the business going forward. Those are 30-year builds. We like that business. Looking back, while it had some issues last year, it's just now starting to come back to full scale on the eastern seaboard. When all that comes together, you're going to start to see it move up fairly rapidly.

A couple of quick points there: relative to the differential revenue Duke commented on, it's about like a couple $100 million. Another important point is that 2021 expectations are exacerbated by kind of a first quarter effect. Industrial is counter-seasonal and typically contributes a little bit more into the first quarter than the normal aspect of our business. When you analyze the modeling, for you to achieve a 5.5% to 6% margin profile for underground, based upon breakeven to small loss in the first quarter, you’re going to have to see second, third, and fourth quarters operate effectively at around 7%. The first quarter dynamic creates the majority of the dilution; otherwise, you're seeing margin execution of that remaining portion of business ex-industrial in the back half of the year still at around that 7% plus performance.

Okay, thank you. I appreciate it.

Thank you. Our next question is coming from Michael Dudas of Vertical Research. Please go ahead.

Good morning, all. You had some rough weather down your neck in the woods last week to 10 days. Just share with us how you guys work through that and do you get the sense, certainly in touch with your utility customers, just in general and plus the news and the flow that's happened, is this going to accelerate some of the decisions regarding the problems that became highlighted in some other parts of the country? Do you think you're going to get a sense of that here in the next couple of months, especially from a regulatory standpoint, not only just in Texas but now some of the other regulators around the U.S.?

Yeah, thanks, Mike. Thanks for the question. Yes, we experienced some weather here for sure. I want to say that our employees, both at the corporate level and in the field, did a remarkable job of being safe in the field and getting the lights back on. That being said, when we look at it, I think you're going to need redundancy. No matter what you do, there's intermittency. Whether you’re still backed by gas or your pipe that froze out in West Texas, you will need to see some redundancy to back up the grid. The way you do it—batteries, new pipe—all adds complexity. Given the sentiment about going to more renewable energy, the amount of transmission that's required to create a robust, redundant system to mitigate intermittency is larger than can be anticipated. Our utility customers’ Capex and Opex will continue to focus on those areas going forward.

I appreciate that color. Thanks, Duke.

Thank you. Our next question is coming from Adam Thalhimer of Thompson Davis. Please go ahead.

Hey, good morning guys. Congrats on a strong Q4.

Thank you.

Duke, on the transmission side in the U.S. and Canada, just at a high level, what are you seeing in the bidding environment out there?

No, we're really busy. Most of the work we have are multi-year agreements across the board. We're engaged in multi-type year agreements on the base business, and then for larger work, we continue to see a robust bidding environment on the transmission side. From our standpoint, we are certainly well-positioned for those larger projects, both in Canada and the lower 48. It's a robust environment.

And then, I guess, sort of the same question on the gas side. Where are you in your plans to grow the base business on the gas side with gas utilities adding MSAs?

We're adding MSAs pretty much every year, probably every quarter for that matter. It's really about having the qualified personnel and continuing our training programs to get the folks in the field, remain productive, and ensure we keep our margin profile intact. It's more of a margin issue than a lack of work. We'll be prudent about how we step into the gas piece of the LVC market, but it's certainly there and growing. I think we've grown it from upper single-digits to double-digits year-over-year, and you’ll continue to see that.

Another way to interpret that is that aggregate MSAs now account for just over 50% of revenues, which has definitely grown from what you've typically seen three or four years ago.

Yeah, good stat. Thanks, Derrick.

Thank you. Our next question is coming from Chad Dillard of Bernstein. Please go ahead.

Alright, good morning guys. So my question is on the telecom margins, and you guys are guiding to, I guess, kind of in line with the segment levels through this year, and on the revenue side, you are guiding about $700 million. I am just trying to understand what sort of incremental leverage do you have going from this $700 million this year to your eventual $1 billion run rate? Is there a potential upside beyond the second average for telecoms?

Again, when you see a portfolio approach, using electric crews not only for electric work but also telecom work gives you synergies that could increase the margins on the telecom side. As we begin to see 5G penetrate rural areas, I think you'll notice margins rising as we progress. It's all about utilization—PP utilizations and scale with offices from a managerial standpoint as well as fleet standpoint. Returns improve as well.

It's helpful and just a bigger picture question. How much will gas transportation and distribution infrastructure need to change, and how do you get introduced as a bigger part of the energy mix? What infrastructure is on the pipe side, and are there parallels you can draw versus what we saw in the shale gas revolution about a decade ago? In terms of the capabilities that Quanta offers, is there anything you can highlight in terms of natural skillset, geographic focus or customer coverage to realize opportunities ahead?

When you look at the segment, you see gas distribution and hydrogen and how it will mix in; it’s certainly more corrosive. When you start to blend it, we're working on those blends and things of that nature today. So we see that going forward; it's early in my mind, and we're still working on how that interacts with what's going on today, but we continue to see gas being utilized in new areas, as well as replacements in our older areas to reduce methane emissions. That's been somewhat unnoticed—the methane emissions caused today from leak-prone pipe, which is no longer there. We're doing a good job from the environmental angle by replacing it. The existing systems are valuable, as it's hard to build a new system today. So the ones that are in place, the integrity piece of our business continues to flourish going forward due to the usage of older pipe. So we’ll also continue to see our integrity piece strengthen over time.

Thank you.

Thank you. Our next question is coming from Brent Thielman of D.A. Davidson. Please go ahead.

Great. Thank you, and congrats on a great quarter and great year. Maybe similar to the last question, these themes of clean energy, electrical vehicles, and the infrastructure needed for that are meaningful for your business over the long term. Are there other capabilities or services that you don't have today that could be interesting to leverage those themes more—whether that's direct engagement in renewables development or things around the EV infrastructure arena? I'm just wondering if you're looking at any of those sorts of things as supplemental growth opportunities to the core business?

When you consider everything you've highlighted—electric vehicles, automated vehicles, technology, renewables, hydrogen—our company is actively engaged in those conversations and collaborations, helping to build the modern infrastructure necessary to enable each of these developments. Quanta is in a unique position to enable all those things to happen, whether it be electric vehicles on the distribution systems that ensure that we can install charging stations, or establishing the grid behind it to handle the number of electric vehicles that will charge daily. The intermittency that it causes is a critical aspect we analyze in distribution systems today on the electric side. Technology on the telecom side, particularly as we move into 5G, positions our company advantageously to activate those resources. I think any way you look at it—the sentiment towards becoming more sustainable moving forward as well as being environmentally friendly—our company is enabling all those things.

Okay, appreciate that. And then on communications, sorry if you touched on this earlier, but I guess I'm wondering with the completion of the C Band action, whether that's leading to much more meaningful dialogue with customers just around the build-out of infrastructure. What are you hearing from them now that that's completed?

I think we still see the same. We have robust conversation about what's going to happen. There's been some delay in plants due to the pandemic, so we're starting to see more fiber being pushed into the suburbs. I see that in the background. The capital spends there are present, and I think we're well-positioned to capitalize on that moving forward.

Okay, thank you.

I want to congratulate the company and the management teams that we have. They're exceptional. We've performed very, very well in tough conditions, pushing out earnings in tough times. I commend everyone in the organization. I want to thank you for participating in the call. We appreciate your questions and ongoing interest in Quanta Services. Thank you. This concludes the call.

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