Greetings and welcome to the Quanta Services Second Quarter 2021 Earnings Conference Call. 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 Quanta 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 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, August 5, 2021. 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, 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 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 or 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 like now to turn the call over to Mr. Duke Austin, Quanta's President and CEO.

Thanks, Kip. Good morning, everyone, and welcome to the Quanta Services Second Quarter 2021 Earnings Conference Call. On the call today, I will provide operational and strategic commentary, and I will then turn it over to Derrick Jensen, Quanta's Chief Financial Officer, who will provide a review of our second quarter results and full year 2021 financial expectations. Following Derrick'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 multiyear 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 end market conditions, and continued momentum as a result of ongoing grade modernization, system hardening, and renewable energy interconnections. Our Electric Power backlog continues to increase, driven primarily by significant multiyear 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 the 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 multiyear program to underground approximately 10,000 miles of electric distribution power lines and 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, soon will 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 large-scale multiyear system hardening programs, which provide meaningful opportunities for Quanta. 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 investments. For example, we have begun work on what will become the largest solar power battery storage center in the world for a long-standing 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 generation, 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 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. More importantly, 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 Quanta and its joint venture partner, ATCO, 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-skilled 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, Quanta is serving as the program manager for a large-scale deployment 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 our 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 Solutions 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 Derrick 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 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 in 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. While 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 spend. 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 is 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 Quanta'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. Quanta 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 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 our second quarter results and 2021 expectations.

Thanks, Duke, and good morning, everyone. Today, we announced record second quarter 2021 revenues of $3 billion. Net income attributable to common stock was $117 million or $0.81 per diluted share. And adjusted diluted earnings per share, a non-GAAP measure, was $1.06. Our electric power revenues were $2.1 billion, a record for the second quarter and a 20% increase when compared to the second quarter of 2020. This increase was driven by continued growth in base business activities as well as contributions from larger transmission projects and revenues from acquired businesses of approximately $70 million. Electric segment operating income margins in 2Q '21 were 11% versus 10.3% in 2Q '20, led by continued execution strength, coupled with increased revenues, which contributed to improved equipment utilization and fixed cost absorption. Operating margins also benefited from approximately $7 million of income associated with our LUMA joint venture. Our communications operations, included within the electric segment, delivered mid-single-digit margins during the quarter. Due to some of the subcontractor and quality issues we identified in the first quarter, we transitioned field leadership on several projects, which led to more normalized margins during the quarter. Those transition activities have been completed, and we expect our communications operations will return to margins at or near double digits for the remainder of the year, similar to the second half of 2020. Underground utility and infrastructure segment revenues were $852 million for the quarter, 19% higher than 2Q '20, due primarily to increased revenues from gas distribution and industrial services, partially offset by reduced revenues from larger pipeline projects. Our industrial operations and non-U.S. markets within this segment remain pressured by COVID-19 dynamics, impacting core quarter revenues and margins. However, last year's second quarter results were more adversely impacted by pandemic-related disruptions. Second quarter operating income margins for the segment were 2.8%, 20 basis points lower than 2Q '20. Negatively impacting second quarter margins was the recognition of a $23.6 million provision for credit loss related to receivables from Limetree Refining, which declared bankruptcy in July 2021, an approximately 280 basis point impact on segment margins. Regarding the provision, our industrial operations had been providing regular turnaround and maintenance services to Limetree Refining's operations at its St. Croix, U.S. Virgin Islands refinery for several years. Following operational difficulties experienced at the St. Croix refinery, the refinery shut down operations during the second quarter. And shortly thereafter, Limetree Refining filed for Chapter 11 bankruptcy protection. The bankruptcy process is in its early stages. However, given the uncertainty around the proceedings and the future operations at the St. Croix refinery, we've reserved a substantial portion of our outstanding receivables. We will continue to monitor the bankruptcy process and assess the likelihood of recovery as the facts and circumstances develop. This project began in 2018 and, even after the charge, remains nicely profitable. Excluding the impact of this provision, segment results were otherwise in line with our Q2 expectations. Our total backlog was a record $17 billion at the end of the second quarter, with 12-month backlog at $9 billion, both of which represent solid increases when compared to year-end and the second quarter of 2020. This marks the fourth consecutive quarter where we posted record backlog, a trend that continues to be driven primarily by multiyear MSA programs with North American utilities, which we believe continues to validate the repeatable and sustainable nature of the largest portion of our revenues and earnings. For the second quarter of 2021, we generated free cash flow, a non-GAAP measure, of $126 million, $331 million lower than 2Q '20. Net cash provided by operating activities during the second quarter of 2021, although largely in line with our expectations, was negatively impacted by increased working capital requirements related to the continued ramp-up of 2 larger electric transmission projects in Canada and the timing that's associated with billings. The various work stoppage protocols in Canada associated with COVID mitigation have created substantial inefficiencies and production delays. These have led to increased project costs, some of which have already been approved, with the remaining amounts being pursued in normal course. Partially offsetting this was the favorable impact of increased earnings as compared to 2Q '20. The free cash flow generated in the second quarter of 2020 resulted from substantially reduced revenues and the corresponding reduction in working capital. Also, during 2Q '20, we deferred the payment of both $58 million of federal and state income taxes and $30.7 million of payroll taxes. The federal and state income taxes were subsequently paid in July 2020, while 50% of the deferred payroll taxes are due by December 31, '21, with the remainder due by December 31, '22. Days sales outstanding, or DSO, measured 83 days for the second quarter of 2021, an increase of 1 day compared to the second quarter of 2020 and comparable to December 31, 2020. We had approximately $212 million of cash at the end of the quarter, with total liquidity of approximately $2.1 billion and a debt-to-EBITDA ratio, as calculated under our credit agreement, of approximately 1.2x. As we've discussed in the past, our first priority for capital allocation remains supporting the working capital and equipment needs of our operations. However, we remain committed to delivering shareholder value through our dividend and repurchase programs as well as strategic acquisitions. Through the date of this earnings release, we've acquired approximately $58 million worth of stock since the beginning of the year as part of our repurchase program, and we continue to evaluate potential acquisitions that fit our strategic objectives. Turning to guidance. Based on the electric segment's strong performance through the first 6 months of the year and continued confidence in our ability to execute on the opportunities across the segment, we've increased our full year expectations for segment revenues, resulting in a range between $8.7 billion and $8.8 billion for 2021. Similarly, we are increasing our full year margin range for this segment, with 2021 operating margins now expected to range between 10.5% and 11%. Our full year expectations for the Underground Utility and Infrastructure Solutions segment, however, have slightly moderated due primarily to a lack of visibility into new project awards that could contribute to the back half of 2021 from our Canadian and Australian operations. Accordingly, we are reducing our full year expectations for this segment, with revenues now expected to range between $3.5 billion and $3.65 billion, and segment margins ranging between 4.6% and 5.1%, which includes the $23.6 million or nearly 70 basis point negative impact on a full year basis associated with the provision for credit loss recognized in the second quarter. These segment operating ranges support our increased expectations for 2021 annual revenues of between $12.2 billion and $12.45 billion and adjusted EBITDA, a non-GAAP measure, of between $1.13 billion and $1.21 billion. The midpoint of the range represents 11% growth when compared to 2020's record adjusted EBITDA. We now expect our full year tax rate to range between 24.25% and 24.75%, a slight reduction from our prior expectations due to favorable tax dynamics in the second quarter associated with certain deferred compensation items. As a result, our increased expectation for full year diluted earnings per share attributable to common stock is now between $3.40 and $3.76, and our increased expectation for adjusted diluted earnings per share attributable to common stock, a non-GAAP measure, is now between $4.32 and $4.68. We expect cash generation associated with our increased expectations for our revenue and earnings will be slightly offset by higher working capital requirements in the second half of the year. And accordingly, we are maintaining our free cash flow guidance for the year, expecting it to range between $400 million and $600 million. As we stated in prior quarters, our quarterly free cash flow is subject to sizable movements due to various customer and project dynamics that can occur in the normal course of operations. For additional information, please refer to our outlook summary, which can be found in the Financial Info section of our IR website at quantaservices.com. Overall, our core utility-based operations continue to execute at a high level, and we are well positioned to deliver solutions to meet the expanding capital and maintenance programs of our North American utility partners. We firmly believe we are in the early stages of a significant infrastructure investment cycle, and our ability to train and deploy world-class craft-skilled labor differentiates us in the markets we serve. This craft skill foundation, coupled with our balance sheet strength, gives us the ability to deliver industry-leading solutions to our customers while maintaining the ability to opportunistically deploy capital to deliver long-term shareholder value. This concludes our formal presentation, and we'll now open the line for Q&A.

Our first question this morning is coming from Chad Dillard of Bernstein.

My first question is regarding the MSA aspect of your business. How much are your customers entering these agreements to secure labor? Is this the main factor driving momentum, or are there other influences at play? Additionally, what is the structure of the labor rates you're negotiating? Are they passed through, specifically for the nonunion portion of your labor?

Yes. Chad, thanks. When we look at our MSA work going forward, I think when we're working with the customers in a collaborative manner, we're looking at their capital spend, they're working with us, and we're looking at that body of work or that body of capital over time and providing solutions to them through an MSA form. So it allows us to work with them in a strategic manner on a go-forward basis. And yes, somewhat to lock up resources, but also to make sure from a constructability and a prudency manner that we can go out and deliver it. I think when you look at labor and look at what we've done with labor and our ability to perform and perform at a cost and on time, we've been able to do that. And so the clients are recognizing that, and that's why we're having these conversations in a long-term manner and also independent services. As far as how we look at escalations in labor, we do pricing and escalations on all of our labor as we move forward. So that's something that we do and have done for the past 50 years.

That's helpful. And then just a second question, more on some of the newer parts of your business, grid storage, and charging station work that you're starting to do. So how transferable are the competitive advantages that you have on some of your large transmission work to those areas? How much of the business is comprised of revenue from those sources? And then I guess can you just talk about just like the contract structure, fixed versus reimbursable?

Yes. There's two parts to most of these projects when you're thinking about renewables or anything really for that matter, battery storage. Your interconnections or substations and your collector systems that allow you to push the generation or storage onto the grid, so we're certainly involved in that on a daily basis. It's fairly technical and that's part of this. And the risk on the battery is big battery. So both of those things are something that we do quite often and very transferable from our standpoint on a go-forward basis, so something that we believe is right down the fairway for us. And when we look at pricing, it's both fixed, both unit-based, both lump sum either way, but we're very comfortable in those type of projects. And we're not taking output risk or we're not taking product risk either on any of that.

Our next question is coming from Sean Eastman of KeyBanc Capital Markets.

Nice quarter. It'd be great to get a little more color on the market share opportunity surrounding the front-end capabilities, engineering, permitting. It seems like you've already been capturing share there. How significant is that? And why exactly are those front-end capabilities helping you capture more programmatic spend?

I believe that around six or seven years ago, the company aimed to collaborate directly with clients at the customer level to foster relationship-based discussions and offer them resources for capital. When customers face challenges in securing their capital spending due to issues like permitting or engineering, we thought we could make a significant impact by eliminating intermediaries between us and the client. We believed that from a constructability perspective, we could provide better service to assist clients in their building efforts. This approach allows us to offer resources, engage with clients early in the business process, and deliver capital projects at the most favorable cost for the rate payer. Our focus is always on the rate payer, and we strive to work closely with clients to provide the best possible product in a responsible way.

Okay. That's really interesting. And maybe shifting over to underground. Just as you guys are tracking the business here year-to-date, I mean, are you seeing anything structural in terms of change in those business lines that would preclude us from kind of getting back to a prepandemic run rate? Or should we still think about this business as kind of marching back up to that prepandemic EBIT run rate as the economy continues to reopen?

Yes. Sean, I think when you look at the company, you look at the portfolio, we are getting operating leverage out of these larger operating units within our company. And when you look at the quarter, the second quarter, if you look at adjusted EBITDA in the second quarter, it's double digits. We set out to produce double-digit EBITDA, we're doing it. And yes, there's opportunities in our industrial segment on a go-forward basis to pick those up into higher upper single digits like we talked about before and also that piece of the segment. But in general, we're still looking at this in a portfolio. And we don't care if it's underground gas or underground electric, we are there to make sure that we fully utilize our resources and fully utilize equipment to produce the highest margin we can, no matter what the segment is.

Our next question is coming from Jamie Cook of Credit Suisse.

I have two questions. First, can you clarify what the margins were in the communications business this quarter? I'm trying to compare that with your electric power business, which has shown strong margin performance. Second, Duke, more from a strategic perspective, your balance sheet looks solid, and there are many organic growth opportunities ahead. Are there any underappreciated opportunities related to M&A in adjacent markets or within underground utilities that could help boost margin improvement in that area?

Thank you, Jamie. In the telecom sector, we're experiencing mid-single-digit growth for the quarter, and we expect to reach parity with electric services in our future forecasts. We're approaching that point. Regarding our balance sheet, we assess everything in relation to our stock and recognize that there are ample opportunities in the market. We've made significant transformations within the company that we're proud of, and we intend to proceed with caution. We see potential in various regions and structural areas within our service lines that we will explore. Our planning for the next decade involves strategic considerations, and we will position the company for success moving forward. Currently, we're capable of organic growth, as evidenced by our progress in Puerto Rico, which remains an overlooked and undervalued opportunity with impressive service accomplishments this quarter. The potential there is significant, and we take pride in it. Additionally, we have a substantial underground presence in the West, likely one of the largest in that region, allowing us to effectively operate within those segments. If we can improve our margins, we will certainly consider acquisitions as we advance.

Nice quarter.

Our next question is coming from Ian MacPherson of Piper Sandler.

What stands out to me with your results is the ongoing momentum in the backlog for electric power. Duke, you've consistently emphasized that your multiyear growth outlook is not specifically dependent on the infrastructure bill. However, anecdotally, do you see your growing MSA backlog reflecting the utilities' expectations, not just in relation to the overall business trends, but also in anticipation of that bill? Or do you view the bill as an additional layer of commitments from your customers that would only become significant once it is finalized?

When we examine the infrastructure bill, I believe that everything we've discussed moving forward cannot be achieved without it. The bill includes significant transmission projects aimed at 2030 that are not utility-based, and they are quite challenging. If there were some support from the Department of Energy, it would certainly advance those initiatives, which would benefit the industry and enhance the sentiment around renewables. That being said, the current atmosphere regarding renewables, interconnections, and necessary infrastructure is crucial. I mentioned redundancy earlier; it often goes unnoticed how technology, electric vehicles, and intermittency impact infrastructure, and reliable throughput is essential. Whether it's data or electricity, redundancy is vital. We haven't adequately prepared for the transition to electric vehicles, and modernizing the distribution system to accommodate them has just begun and will take time. I believe that along with the strong interconnections and benefits outlined in the infrastructure bill, we will see continued growth in alignment with what we've discussed for the future.

That's great. Derrick, I wanted to ask you about the guidance, and I apologize for asking a somewhat typical question. When we examine your prompt year backlog in relation to your total revenues for the second half of this year, that ratio appears more conservative than it has in several years, likely going back about five years or so, and by a significant margin. So, I wanted to know if there is a longer duration in that prompt backlog that accounts for this or if there are other factors at play.

We have a portion of larger projects that will extend into 2022 compared to the latter half of this year. Some of this was mentioned in my prepared comments, which contributes to a higher ratio. Additionally, we are still evaluating the electric power sector. There are opportunities within the guidance range, but some aspects may continue to drift into 2022, given our current situation.

I think it's important to note that the amount of storms we experienced last year compared to this year is significant. Derrick can provide the specific numbers, but essentially, we do not include storm impacts in any of our forecasts. So we are managing this without considering storm effects.

Yes. As a reminder, in 2020, we had $442 million in storm work, but our current forecast is only about $200 million. This results in a year-over-year headwind in overall revenue. Specifically, when discussing our guidance for double-digit revenue growth in electric power, last year in the third quarter, we completed $207 million in emergency restoration work. Looking ahead for the rest of this year, we are projecting only about $80 million or $90 million more. Achieving significant growth in the latter part of the year on top of that storm work is something we are quite proud of.

Our next question is coming from Noelle Dilts of Stifel.

Congratulations on a strong quarter. I was wondering if you could address a concern raised by one of your competitors regarding the impact of rising steel and other raw material costs, as well as potential increases in labor costs. They suggested that this might lead utilities to reassess the financial viability of their projects and possibly delay them. What feedback are you receiving from your customers regarding this issue, and how are you approaching this type of risk?

Yes. We are closely monitoring the situation. There is some impact from steel prices and labor costs, but we are not seeing any major effects that would disrupt our work moving forward. Everything we are doing is essential, especially as we aim towards goals for 2030 and 2050 with an increase in electric vehicles and reliance on renewable energy. We are not observing significant concerns in this area.

Could you discuss your plans for Stronghold as you move into 2022? Specifically, what is your assessment of the backlog of work that has accumulated in the system, and do you see any potential for new work as you begin to engage with these facilities more significantly?

Yes. I think we talked about this before. We need to go back in kind of the '08, '09 time frame. They had some kind of demand that went into '11, '12 and beyond. I think we're going to see the same thing starting in '22. Back half of this year has got some pickup in it. But as we start to see traffic, and we're seeing some of it now. But again, I predicated on some sort of a normalized economy and pandemic-related effects as we move forward. That being said, I think '22, either way, is going to be the start of a multiyear, tight maintenance and nice margins into more of a normal basis for Stronghold.

Our next question is coming from Steven Fisher of UBS.

So this is the highest Q2 electric margin in possibly 8 years, and that's even with a mid-single-digit telecom margin. So I'm wondering if you're thinking about any structurally higher level of margin here as the grid and telecom opportunities really take shape. It was encouraging to hear you talk about the benefits of utilization because I would think that would only improve as the volume ramps up. Or is there that trade-off that's going to come in about investments that you need to make to support the growth that might be somewhat mitigating of that? Just curious how we think about sort of the structural margin direction from here.

When we examine the offices, we are beginning to see an increase in structural issues. Year-over-year, we have added approximately 3,500 employees in North America, despite the downturn in Latin America. We believe we can allocate these resources to the electric segment, which is mature, without significantly affecting margins. This allows us to also leverage our offices to work on gas and telecom sectors to maximize operating leverage across our portfolio. Additionally, the situation in Puerto Rico is affecting our margin profile positively, which Derrick can elaborate on. We are effectively utilizing our resources, and our funding capabilities are making us more efficient. The investment in training through our line schools has enabled us to get personnel into the field more quickly, which is helping to mitigate some of the typical delayed costs we experience by addressing them upfront. Ultimately, the effects of actions we took five to six years ago are beginning to manifest today.

Okay. Great. And then on the credit loss, not terribly concerned about this as a bigger picture item, but I should ask, what's the risk of others like this? Do you have any other customers that have a profile like Limetree in any part of your business? Are you taking any actions to strengthen your credit protection going forward? I'm just thinking that it might become more relevant depending on who your partners are on this EV charging infrastructure plan. Or were there some newer companies out there?

Yes. There's always lessons learned on something that goes the wrong way from any kind of standpoint. So sure, I mean, we'll learn. But I think, for the most part, the credit risk of the company and the people that we work for are very solid. And this was kind of a long process that the EPA came in, and we couldn't see it coming. And I think, in general, the job itself is profitable, and we ended up with this write-off. And certainly, I don't think we'll be talking about it again. Yes. And structurally, the company doesn't have these kind of things with it. But I'll let Derrick comment.

Yes. I mean, Steve, as you look at over the years, I mean, our allowance for credit losses is generally below $10 million against a very large net position. A credit situation is very, very rare in our situation. We have a high-quality customer base, some of the largest, best companies in the U.S. market. So this is an anomaly. It's a very unusual type of event. We have very few times that we end up finding ourselves in an LP or some other structure like that versus the primary operating company. So we're not really concerned about, on a go-forward basis, this being something of indication. But yes, to your point and Duke's point, we'll continue to monitor that as we take on any new customers.

Our next question is coming from Marc Bianchi of Cowen.

I wanted to start by asking about the power line undergrounding in California and the initiative that's announced by the customer there. Maybe if you could help put into context what that could mean for revenue. I think they've talked about getting up to 1,000 miles a year kind of run rate there. Help us think about what that means for your business and also, once all that's installed, if there's sort of a loss of revenue that might come from maintenance work that revolves around handling the stuff that would have previously been overhead.

Yes, the opportunity we’ve discussed is significant and still in the early stages. We are collaborating with one of our larger clients, with California being a key state for us. I see this as a unique opportunity. At this point, it’s challenging to assess its long-term implications, particularly in California, so we’ll be cautious in our discussions until we gather more information. Our ongoing partnership with the client is important, and I believe it will benefit us both in the short and long term. The undergrounding process does not eliminate the need for maintenance; while it aids fire prevention and has certain advantages, maintenance work will still be necessary. We already manage underground systems on a daily basis, performing maintenance, rehabilitation, and various tasks related to that segment. Given the current situation, where we see significant losses and expenditures due to fire, I now believe undergrounding makes a lot of sense. It’s an ambitious project, but considering the risks involved with fire-related incidents, it’s a wise long-term strategy. We will continue to work closely with the client on this initiative.

Yes. Okay. Super. The other one I had relates to the EV charging opportunities that you've mentioned in your prepared remarks. I think we all kind of know maybe what those look like, but the revenue opportunity is maybe a bit harder for us to get our hands around. Could you maybe talk to sort of the range of revenue opportunity per project? And are you potentially going to be partnering with a company that's building out EV charging? Or are you going to be kind of serving everybody? How do we think about your strategy to participate in that market?

I believe we are in a unique position to prudently and cost-effectively install battery charging systems, particularly high-voltage battery chargers. We will collaborate with utilities, original equipment manufacturers, and vehicle manufacturers. We are eager to facilitate that development. However, I can't quantify how significant that aspect will be. What I can say is that a distribution system is essential to support this initiative. From our perspective, over the next 15 to 20 years, there is a substantial amount of work required to modernize these distribution systems to enable the installation of these charging systems.

Our next question is coming from Michael Dudas of Vertical Research.

Duke, could you share some of your initial thoughts on the transition in Puerto Rico since June 1? It's been a couple of months now, and there’s been a lot of press and discussion about the changes, which is to be expected. How has that process been? You've mentioned opportunities in Puerto Rico and the potential for larger projects in the future. Is there any visibility on the timing for those that we could anticipate for 2022 and beyond?

I think the funding from the infrastructure bill also includes provisions for Puerto Rico, which is definitely beneficial. There is already some funding allocated to the island that should begin next year. In terms of our perspective, the grid was in poor condition, but from Quanta's viewpoint and our partner ATCO's, we have done quite well under very challenging circumstances. Each day, we are making progress and modernizing the system. Despite the noise on social media, we have already made a positive impact, and we will continue to do so. In 3 to 4 years, I believe we will look back with pride at what we have achieved as a company, and the people of the island will see the benefits of our efforts. We are confident in our position and are engaging in fruitful conversations across the island with the local economy and community. The opportunities here are significant, and we are excited about the future. I want to commend our team for their hard work and dedication, especially in navigating the challenges while delivering results.

Our next question is coming from Adam Thalhimer of Thompson, Davis.

Nice quarter. I wanted to ask a quick question about 2022. You had a couple of positive comments just in your prepared remarks. What kind of growth do you think you can generate next year?

I think we've discussed the potential for double-digit growth in 85% of the business. We continue to see growth in the high single-digit range. There is an increase in larger projects. We have stated multiple times, and I will reiterate, we believe we can achieve double-digit EPS growth as long as we utilize our balance sheet effectively. We maintain that belief and expect to see year-over-year growth. That is our perspective on the matter.

And then quickly, on inflation and materials availability, Duke, are those issues today? And is it a risk going forward?

We're not seeing the impacts of that at this point. There's certainly some, I would say, noise in the system, but we're not seeing those impacts with material deliveries and things of that nature. It makes some of the work a little difficult. It gets out of sequence here or there, but we're typically able to overcome that and move around. Some of the projects are larger. We're moving on to something different and able to overcome any kind of material delay. We're working with the client way upfront. And when we talk about front end and things we can do, if we're working with the client way upfront, it allows us to work with them. We know the delays coming so we can move with our resources around and stay productive, stay prudent, and it helps both us and the client long term. And that's the beauty of a collaboration. So we're not seeing those impacts.

Our next question is coming from Andy Kaplowitz of Citigroup.

Duke or Derrick, can you give us a little more color into how big your Canadian and Australian businesses are these days within underground utility? And then how much are you projecting them to decline this year? And then alternatively, it seems like refining and petrochemical customers, at least in the U.S., have increased their maintenance spend already and are executing more turnarounds, and the catalyst companies are seeing more activities. So can you give us more color regarding the levels of improvement you've seen already within the industrial services business?

I'll focus on the industrial service business. Derrick can discuss the numbers. We believe the industrial service business is recovering. We're observing trends similar to 2022. We anticipate a return to a more normal state, possibly even an improvement. Although it's still early, we can see the demand for 2022 and beyond. We're having discussions with clients regarding catalyst replacements and related projects that are resuming. We expect that by later this year and into 2022, the business will perform well and return to a more normalized state as we continue our conversations with clients.

Yes. And as a percentage, it's still running pretty consistent, between the 10% and 15% range of total revenues for the underground group.

And now turning the call back over to management for any closing remarks.

I want to thank the people of LUMA in Puerto Rico. June 1 was a tough day, and from our perspective, it's monumental. We managed to maintain a strong focus on safety throughout the effort, and I commend everyone working in the field. Their hard work does not go unnoticed. I want to extend my gratitude to them first. Thank you for participating in our conference call. We appreciate your questions and continued interest in Quanta Services. This concludes the call.

Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines at this time and have a wonderful day.