Good morning, and welcome to the Quanta Services Second Quarter 2025 Earnings Call. This conference is being recorded. I will now turn the call over to Kip Rupp, Vice President of Investor Relations, for introductory remarks.

Thank you, and welcome, everyone, to the Quanta Services Second Quarter 2025 Earnings Conference Call. This morning, we issued a press release announcing our second quarter 2025 results, which can be found in the Investor Relations section of our website at quantaservices.com. This morning, we also posted our second quarter 2025 operational and financial commentary and our 2025 outlook expectation summary on Quanta's Investor Relations website. While management will make brief introductory remarks during this morning's call, the operational and financial commentary is intended to largely replace management's prepared remarks, allowing additional time for questions from the institutional investment community. Please remember that information reported on this call speaks only as of today, July 31, 2025, 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 and information intended to qualify under the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995, including statements reflecting expectations, intentions, assumptions or beliefs about future events or financial performance that do not solely relate to historical or current facts. You should not place undue reliance on these statements as they 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. We will also present certain historical and forecasted non-GAAP financial measures. Reconciliations of these financial measures to their most directly comparable GAAP financial measures are included in our earnings release and operational and financial commentary. Please refer to these documents for additional information regarding our forward-looking statements and non-GAAP financial measures. Lastly, please sign up for e-mail alerts through the Investor Relations section of quantaservices.com to receive notifications of news releases and other information following 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.

Thanks, Kip. Good morning, everyone, and welcome to the Quanta Services Second Quarter 2025 Earnings Conference Call. This morning, we reported our second quarter 2025 results, which included strong double-digit growth in revenue, adjusted EBITDA and adjusted earnings per share, along with record backlog of $35.8 billion and a number of other record financial metrics. This morning, we also announced the acquisition of Dynamic Systems, a premier turnkey mechanical, plumbing and process infrastructure solutions provider with a diversified customer base that strengthens Quanta's craft-skilled led critical path capabilities to provide certainty for growing technology, manufacturing and other load center markets. Dynamic Systems, highly synergistic mechanical workforce adds to Quanta's growth platform and expands our total addressable market across several strategic verticals. Additionally, Dynamic Systems brings an exceptional management team and a premier craft-skilled workforce that complement Quanta's culture. As a result of our solid second quarter results and the addition of Dynamic Systems, we are increasing our full year 2025 financial expectations for revenue, adjusted EBITDA and adjusted EPS. Additionally, in the second quarter, we made a strategic investment in Bell Lumber and Pole Company, which is the largest private producer of round wooden poles and other mass timber products, primarily serving the utility, telecom and construction industries. Quanta's investment and Bell expands Quanta's portfolio of core utility infrastructure equipment and enhances Quanta's ability to offer critical path supply chain solutions to our customers. Quanta's core strategy is built on the foundation of craft-skilled labor, execution certainty, investment discipline and clear strategic rationale. At the heart of Quanta's success is our unmatched craft workforce. We deliver essential infrastructure solutions with dedication to safety, quality and performance. Our execution certainty, combined with strategic investments in talent, technology and complementary business strengths strengthens Quanta's leadership position across our expanding addressable markets. Our investment decisions are guided by a disciplined strategic rationale aimed at reinforcing Quanta's differentiated platform, growing customer partnerships and driving long-term sustainable value creation. Quanta differentiates itself through a unique solution-based approach that integrates craft labor with engineering, technology and program management expertise to deliver comprehensive self-perform infrastructure solutions. Rather than providing isolated services, Quanta partners with customers to solve complex challenges across the full project life cycle, which creates deeper strategic relationships. Our collaborative model drives higher value for our customers and positions Quanta as a trusted partner and solutions provider, not just a contractor. As demand accelerates for resilient electric grids, power generation, technology expansion and energy infrastructure, Quanta's large addressable market continues to grow. Quanta has a proven track record of consistent profitable growth across both favorable and challenging conditions, demonstrating the resilience and sustainability of our business model, which is a testament to the strength of our portfolio approach, a diversified solutions-based strategy that enables us to adapt to evolving industry dynamics while delivering mission-critical infrastructure. The energy and infrastructure landscape is undergoing a fundamental transformation, and Quanta has positioned itself at its center. Utilities across the United States are experiencing and forecasting meaningful increases in power demand, which is being driven by the adoption of new technologies and related infrastructure, including data centers and artificial intelligence, policies intended to reinforce domestic manufacturing and supply chain resources, and the need for all forms of energy generation. We continue to believe these drivers are leading to a potential historic investment in and an expansion of high-voltage transmission infrastructure. And at Quanta's self-performed platform, execution track record and solution-based mindset enable us to capitalize on these expanding opportunities, positioning Quanta for sustained leadership and long-term growth. I will now turn the call over to Jayshree Desai, Quanta's CFO, to provide a few remarks about our results and 2025 guidance, and then we will take your questions.

Thanks, Duke, and good morning, everyone. This morning, we reported strong second quarter results, including revenues of $6.8 billion, net income attributable to common stock of $229 million or $1.52 per diluted share, adjusted diluted earnings per share of $2.48 and adjusted EBITDA of $669 million. Additionally, we generated healthy cash flows in the second quarter, with cash flow from operations of $296 million and free cash flow of $170 million. Our second quarter performance was ahead of our expectations across most financial metrics and similar to the first quarter, is allowing us to increase our full year expectations before considering the contribution from acquisitions. Regarding our acquisition program, we take great pride in our ability to attract exceptional management teams and industry-leading solution providers into the Quanta family. And the acquisitions and investments we announced this morning are great examples of that core competency. As Duke mentioned, these strategic deployments of capital expand both our portfolio of solutions and our addressable markets. And we believe acquiring great businesses while maintaining a prudent leverage profile adds significant value to our customers and our stockholders. We are currently evaluating refinancing alternatives to increase our post-transaction liquidity profile, ensuring we can continue to support operations and opportunistically invest capital. As a result of the solid performance in the second quarter and the expected contributions from the acquisitions and the investment made subsequent to our first quarter release, we are raising our financial expectations for the year. Revenues are now expected to range between $27.4 billion and $27.9 billion, adjusted EBITDA between $2.76 billion and $2.89 billion, and adjusted EPS between $10.28 and $10.88. While we recognize the variability in the regulatory environment, demand for Quanta's differentiated portfolio of self-performed craft labor solutions remains strong. As our strategy continues to advance, we are deepening customer relationships and establishing new platforms for growth. As evidenced by another quarter of record backlog, we remain confident in our ability to continue growing revenues and earnings over the years ahead. We believe our increased 2025 financial expectations demonstrate the strength of our portfolio approach to the business, our commitment to our long-term strategy, favorable end market trends and our partnership approach with our customers. Additional details and commentary about our 2025 financial guidance can be found in our operational and financial commentary and outlook expectation summary, both of which are posted on our IR website. With that, we are happy to answer your questions.

Your first question comes from the line of Andrew Kaplowitz from Citi Research.

Duke, obviously, this quarter, there's been, let's call it, some noise with the big beautiful bill and some increased politics out there. But of course, AI-related CapEx continues to ramp up. So maybe you can help us parse the noise. Would you say even with the bill and its impact that you're more confident in sequential backlog growth for Quanta, as you did again in Q2, really on the strength of the incremental transmission bookings you're seeing? And then at your last Investor Day, you talked about megatrends and capital deployment giving 15% plus EPS CAGR sort of an upside? Should we start thinking about that kind of growth for 2026?

Yes. Thanks, Andy. I think when you look at the company, it's 20-plus growth in actuality. What we're talking about is the ability to do that. And at the midpoint and tend to derisk everyone. So I want to be clear on that, the company over the 9-year, 10-year period that we've seen, it's 20-plus. So yes, I do believe the things that we're doing today set us up for the future, '26, '27, '28 and '29. What we've done is, we basically built platforms against TAMs that compound. And when we make acquisitions, it starts day one and compounds for the future. And I think it's our ability to acquire companies, great companies, great family businesses. And into the TAMs that we're addressing certainly is a strategic rationale around the company, and it's something that I believe goes unnoticed about how we compound free cash into earning streams. And we've done it. We've done it over and over again. And when we talk about TAMs of technology, the $300 billion or so of capital, you see it going up. The calls that I'm listening to on the utilities, such as AEP, others, every one of them basically have gone up in their CapEx as well. And I don't see anything other than the upper trend of the business. The demand on power is exponential. It continues to come in. AI continues to prove out, both economically as well as what we see from power demand under any scenario. And if we're going to lead the country in the world, you have to have power, and we're right in the middle of the infrastructures on both the largest TAMs that create the AI of the future.

Your next question comes from Jamie Cook with Truist Securities.

All right, Jamie. We can't hear you. We'll come back to you.

Your next question comes from Sherif El-Sabbahy with Bank of America.

I guess I just wanted to touch on your backlog has continued to build fairly consistently. And just with the obviously large amount of work out there, has this changed the bidding process at all? Are terms becoming more favorable? And are you able to increasingly be selective on your projects?

Man, when we're looking at it, we're really trying to provide solutions. And so I think the strategic rationale around the solutions is something different where it's longer term in nature. It's programmatic in nature, and there are constraints in certain areas of craft. And our self-perform capabilities are what separates is 80%, 85% of what we're doing is self-perform. So our ability to have certainty, if you think about quantity, you should think about certainty. And that certainty in the marketplace to be able to deliver on time, on budget is something that allows us to have a different discussion. And I would say, yes, it's longer in nature. We're talking about '26, '27, '28 type time frames of growth and CAGR growth and EPS growth and EBITDA growth and our ability to continue to compound. So you can't do that without having longer-term discussions. And I would say it's better and better as we move forward, those discussions.

Understood. With those discussions in mind, and as you mentioned in your opening comments, we've observed a noticeable shift in utility capital expenditures toward larger transmission projects. There is clearly a multiyear demand for this type of work, which is likely adding to your backlog. Can you provide some insights regarding your conversations with customers about how they anticipate the pipeline for this work will evolve in the coming years?

I believe that the business is still largely stable, with 80% to 85% considered base business. Larger projects and programs are accumulating, and I'm confident that our LNTPs are at record levels. Although we don't discuss LNTPs or book them, we convert them into contracts. Everything we're observing in terms of large TAMs shows record levels of inbounds, discussions, and long-term opportunities. Our relationships and collaboration are improving daily. We're in the early stages of a significant transmission build that is progressing and we feel good about the company's position in that area.

Your next question comes from the line of Atidrip Modak with Goldman Sachs.

Duke, I just wanted to ask on what prompted the acquisition of Dynamic Systems, because it seems like it has a broader end market exposure. And how that fits into your strategy for the segment. It also seems like it will open up the door to other EPC domains? And then is it reasonable to expect more M&A in that direction?

I think when we looked at Dynamic Systems, we've said all along, we're not looking for M&A, but we are addressing the strategic rationale around the markets that we serve. And when we looked at technology, it's really the customer asking us to do more. It's a customer saying, 'Can you build more? Can you give us certainty across their addressable markets? And what does it take to go faster? What does it take to be certain.' And when we're looking at it, and we see a company like Dynamic Systems that culturally fits us, that the craft is really the key to the company. They have advanced technology solutions on it when you think about their digital solutions upfront and that advancement what they do on the pre-engineering and things of that nature. It really complements Cupertino, it complements all the other companies that we have and surrounded by craft. So I believe that the craft concentric nature of Dynamic and the TAMs that we're addressing, why wouldn't we look at that? And why wouldn't we lean into that market with a great company? And yes, we will continue to look at great family businesses that add value to our strategy and our shareholders, and I believe we've done that here, and you've seen the numbers, and we've talked about it a little bit, but what you haven't seen is the synergies that we believe we will get. We don't talk about synergies in these deals. And certainly, we believe it will cross both utility and technology, addressable markets and give us something that we don't have today that we can grow exponentially with a solution-based approach.

Your next question comes from Philip Shen with ROTH Capital.

With the ITC winding down by year-end '27, to what degree can you pull forward renewables work? A lot of it depends on labor. And so just wondering to what degree you guys are trying to accelerate that as much as you can. And then if you can, can you share what your outlook for renewables might be for 2028 and beyond after the credits wind down?

I will let Jayshree address some of the points you're noticing. However, I believe that when we examine our renewable energy sources and consider the low cost of energy, incorporating solar, wind in certain locations, and batteries supported by natural gas leads to the lowest prices for consumers. I maintain that the focus is on achieving the lowest cost and leveraging the speed to market that renewables offer. We're observing increased demand for LNTPs. I expect our customer base is in a good position, and we can see our growth over the coming years. Long-term, I'm not worried about the trajectory of renewables. There will be fluctuations, but that's been a consistent reality for the past two decades. I believe our capability to navigate these challenges with our customers and collaborate presents a significant opportunity for us. I view it purely as an opportunity, and I'll now turn it over to Jayshree to discuss the overall market.

I fully agree with everything Duke is saying. Collaborating with Tier 1 customers who have experienced regulatory changes over the past 20 years gives us an advantage, as they understand how PTC and ITC cliffs can impact their projects. We are seeing increasing strength in the demand from these customers. Although there may be some effects from the incoming executive order and tariffs regarding price visibility, the demand from our customers remains strong. Many of them are well positioned with safe harbors extending into 2028 and 2029, and they are already planning for their future projects. The need for power, whether from solar, battery, or wind sources, continues to grow alongside the demand for data centers and technology. We believe the market will remain positive for us. We entered the renewable market ahead of the IRA because we fully understand these dynamics and our customers' needs. Our historical experience in this area is a key advantage, allowing us to help our customers navigate these challenges. We see continued positive momentum ahead.

Great. One follow-up here. Can you give us some more color on the core growth in Q2? And then share any expectations for inside electrical growth and the outlook there.

The company is experiencing organic EPS growth that is approaching double digits, while the top line is showing mid-single digit growth. Although the top line growth may not be immediately evident, we are seeing improvements in ROIC and EPS. We are focusing on the quality of our earnings and do not perceive any risks on the earnings front related to top line performance; instead, we are working on optimizing our portfolio. We are always vigilant about degrading margins and believe we are making overall progress as a company, which is reflected in our margin profile and earnings quality. We trust that the top line will eventually improve on its own, and we are concentrating on what matters most: generating cash and driving EPS.

Your next question comes from the line of Jamie Cook with Truist Securities.

I'm sorry, but I have two questions, Duke. I know you have many growth opportunities and are optimistic about marketing and adapting your strategy. However, are you taking any measures internally to prepare for a possible short-term slowdown, such as reallocating resources or focusing on other projects, like prioritizing transmission? I want to understand how you plan to handle any potential short-term issues in the business. That’s my first question. My second question is about dynamics—assuming revenue synergies aren’t included in your targets, can you discuss any potential revenue synergies? Do you believe this business has the chance to enhance margins compared to its current state? Thank you for your patience today.

Thanks, Jamie. I'm also having a bit of trouble with the mute button. At this stage, we are not worried about the developments in renewables. One of the reasons we decided not to separate wind and solar when we acquired Blattner was because we can utilize the same workforce across both areas. Those employees are capable of building transmission substations and handling various tasks on the operational side of the business. We have flexibility in our labor allocation across different segments and total addressable markets. It's crucial to understand that this versatility allows us to operate effectively in diverse markets, including health care and agriculture. They are involved in those sectors, as well as in technology and power plants. Overall, we have the capability to transfer our skilled workers among these markets, which has been our practice for the last decade as we have strategically reduced risks company-wide. We never aimed to operate at full capacity; our goal has always been around 80%. If we reach 90%, it would have a substantial impact on our margins. Operating at this 80% capacity is better than we anticipated. While we experience downturns and inefficiencies from time to time, like you've seen in Canada, we can navigate through those challenges effectively due to our diversified portfolio and risk management strategies. You are correct in your observations. When we assess market conditions, we are already prepared. Our acquisitions are not merely driven by trends like the data center surge but are made with a focus on acquiring established, reputable companies. Dynamic plays a significant role for us, and when we consider projects involving Cupertino and Dynamic, they are indeed working with the same customers and addressing high voltage needs. As we analyze these relationships, it is clear that being recognized as Quanta by large customers will set us apart over time. Our strategic plans are robust, and I'm actually contemplating our objectives for 2030. We will share more details about that soon. Currently, I'm very optimistic about our markets and our ability to continue progressing positively. We have successfully diversified and reduced risks throughout the organization without a doubt.

Your next question comes from the line of Brian Brophy with Stifel, Nicolaus.

Yes. Looks like you've made a couple of acquisitions in the civil space here recently. Obviously, that's a very fragmented industry and continues to be. Just curious how you're thinking about opportunity to continue to deploy capital here from an M&A perspective? And just thoughts around doing a larger platform-like acquisition in the space.

I see Dynamic as a vital platform for us, and we will continue to expand upon it, similar to our experiences with Cupertino and Blattner. In my view, this represents a platform acquisition with significant growth potential. While we haven’t discussed the synergies publicly, I can tell you that we have exceeded the deal model for Cupertino. Although we won't classify this as organic growth, it's clear that if organic growth means surpassing the deal model, we are excelling. Overall, we recognize the synergies from these platform-style acquisitions and our capacity for exponential growth. Regarding the civil sector, in every project we're involved in, we have self-performance capabilities, which enhances what we can achieve within our industrial business. The company we acquired was excellent, a great family-run business, with a fantastic management team and noteworthy qualities that contribute to our overall solution. We're following strategies aligned with the total addressable markets and effectively responding to our customers' needs, working with outstanding companies that approach us rather than us seeking them out. We will engage with them when it makes sense. To clarify, when I mention organic growth, I mean it in the context we've discussed previously, but we aren't receiving credit for exceeding the deal model. This is important to note, as we want to ensure clear communication about our performance without credit for that aspect of organic growth, even though I believe the synergies exist that we haven't publicly discussed.

Your next question comes from the line of Chad Dillard with Bernstein.

So I was hoping you could talk about the cross-sell opportunities with Dynamic. So how much customer overlap is there worth Cupertino is MEP usually an integrated service? And like what sort of white space do you see to actually make that so within your customers? And then lastly, are there programmatic contracts in the space? Or is this like a potential expansion opportunity that you see ahead for Quanta?

Yes, when considering Dynamic and Cupertino, particularly in relation to data centers, Dynamic's business historically derived about 30% from data centers while the remaining 50% came from technology and similar areas. Their expertise began with chips, and they have a strong history as a supplier for Texas Instruments. The chip clean room processes they utilize are highly technical and advanced, which we highly value. We are still early in these projects, and Cupertino is also at the initial stages. They assess these projects independently. The critical question is whether we can deliver the necessary solutions and high voltage supplies, including transformers, and identify how we can enhance our efficiency for the client. Looking ahead five years, we want to determine what they need and how we can provide them with certainty and an impressive self-performance capability of 85%. Both Dynamic and Cupertino have opportunities for cross-selling, and I believe there are significant customer synergies that we haven’t fully explored yet. There are numerous possibilities for collaboration and cross-selling. We are very enthusiastic about this acquisition and the capabilities it brings to us, along with the exceptional team involved. We are thrilled about the potential ahead and what we can achieve together.

That's super helpful. And then secondly, how are your renewable customers navigating the safe harbor executive order? I know we're supposed to get some, I guess, some final clarity in later in August. Are they taking like a wait-and-see approach before taking FIDs? Or are they like going to the ground like as soon as possible? And then also, like what sort of opportunity from an engineering or procurement standpoint does this Quanta have to help customers given the situation?

We can definitely assist them with safe harboring and ensuring that projects are completed within the necessary timeframe. There are a lot of inquiries and opportunities for us to help them with the bill. The tariffs and other factors can be challenging, but we focus on collaboration and proactively identifying issues to support our clients. Our Transformer acquisition and our current work with poles are key parts of that solution. We aim to provide certainty through our skilled labor and project completion, and our customers rely on us to deliver results. I feel very positive about our position, as we can engage across various segments and offer solutions that we can promote to our customer base. We’re seeing many incoming requests and discussions. I anticipate our backlog will keep growing. It's also worth noting that while we might secure large projects, there can be fluctuations in backlog on a quarter-over-quarter basis, though I don't foresee significant changes. Overall, we're expecting a steady increase in backlog over the year, and we are seeing positive signs already.

Your next question comes from Justin Hauke with Robert W. Baird.

Great. Duke, I wanted to ask about the 85% of your work that remains focused on the base business. You have also secured larger projects, such as the Boardman-Hemingway job last quarter, and there’s the Grain Belt Express, which you didn't mention, but there's been a press release indicating that you and Kiewit have taken on work there. My question revolves around the considerations related to the start and completion of these projects, especially in relation to SunZia, and how the transitions between these larger jobs might affect operations.

Yes, we have completed the transmission line at SunZia, and everything is progressing well. Our transmission business continues to grow. We haven't specifically mentioned Grain Belt, but it's a significant project. All transmission at this stage is financially beneficial to North America and our stakeholders. Overall, it's a promising project, although it is facing some political challenges. We are collaborating with the client, who is a valued customer, and we are eager to move forward with the project. I believe it will eventually be built. We are cautious about what we include in our backlog and prefer not to remove items, reflecting our conservative approach as a company. We strive to share our perspectives transparently. In general, we are observing a growing market for large transmission projects, which are still in their early phases. Our recent acquisitions have enhanced our capabilities, and we are looking forward to larger 765 builds across the country. We are enthusiastic about our position in this early stage, and we will align our progress with our clients' capital budgets as they advance.

I appreciate that. And then just one more quick one maybe for Jayshree here on the free cash flow outlook is unchanged. Your adjusted EBITDA is a little bit higher. You still have, I guess, some bigger collections here in the second half on that. But can you just maybe talk about the dynamics of why the free cash flow outlook is unchanged with the higher EBITDA?

Yes, we are satisfied with the results from the first half of free cash flow. Our teams are effectively managing days sales outstanding and working capital. However, as I previously mentioned, we aim to ensure the best possible resolution regarding our significant Canadian receivable, which is within our anticipated range. We believe it will be resolved positively this year, though predicting the timing of cash can sometimes be challenging. Therefore, we want to provide a cautious estimate. I think the appropriate range is between $1.2 billion and $1.7 billion. I do believe we can reach the higher end of that range, especially as we observe positive trends in the type of work as we approach the latter half of the year. Nevertheless, we think it's best to maintain our current position for now.

Your next question comes from the line of Drew Chamberlain with JPMorgan.

Yes. Just one quick one for me and kind of following up on that last line of questioning there. How do you think about the balance sheet leverage exiting the year now with this deal being done? And then what type of flexibility does that give you for deals throughout the rest of the year? And maybe what cadence we can expect there? I'll leave it at that.

Yes. We aim to maintain a leverage ratio between 1.5 and 2x, and we've managed to do that even after major acquisitions that pushed our ratio above 2x. We acquire companies that we believe will enable us to quickly reduce our leverage, and this situation is no exception. Currently, our ratio is slightly above 2x, having been below 2 at the end of the second quarter, but we expect to be below 2x by the end of the year. We are exploring various financing options to ensure we have a flexible balance sheet that provides the necessary liquidity for organic growth and capital deployment opportunities. Our approach regarding the companies we acquire and our capital allocation strategy remains unchanged. We prioritize maintaining a prudent balance sheet and staying within the 1.5 to 2x range while delivering strategic value for our shareholders.

Just to comment, we intend to remain investment grade.

Your next question comes from the line of Sangita Jain with KeyBanc.

So one, I don't know if you guys quantified the backlog for Boardman to Hemingway, if you did, I apologize if you didn't, could you help us size that?

It's meaningful.

All right. That was quick. And another one, I would say, is on the safe harbor treasury guidance that is pending, how are you safeguarding Quanta's backlog in case that changes to, let's say, more than a 5% safe harbor rule or they pull that 4-year window to complete a project down to, let's say, 2 or 3 years?

Anything that increases speed or provides certainty would be beneficial for us. We're not currently seeing that, but if changes occur that help things move along more quickly and offer more predictability, that would be advantageous. It's not going to bother us. The way we see it, we frequently hear concerns in the market about Quanta possibly having too much work. We approach this from numerous angles, unlike other companies that might take a single perspective. Would you prefer to mitigate risks from multiple sources, whether unionized or non-unionized, or rely on just one? We believe our unique approach allows us to scale effectively, and we take pride in the dedicated individuals who make it happen every day. We are confident in our position and our prospects.

Your next question comes from the line of Liam Burke with B. Riley.

Yes. Duke, Bell Lumber, is that a platform you can grow organically? Or is that purchase just to serve your regional needs?

I believe this is a viable solution, as we have a 40% stake in the business. We have a strong relationship with the family that has been involved for a long time. I have gained extensive knowledge about timber and pole solutions. I strongly believe that poles, wires, and transformers are crucial components of our supply chain. We are engaging with the client about a long-term comprehensive solution. This is essential for us as we advance in our projects with one of the largest buyers of high-voltage equipment. Our transformer capabilities change the conversation with clients, especially when we control the asset, allowing us to manage our logistics and sourcing effectively. I appreciate this collaboration with the client, as it certainly supports our overall supply chain initiatives.

Your next question comes from the line of Adam Thalhimer from Thompson, Davis & Co.

Duke, has the one big beautiful bill come up at all in conversations with your customers? Just curious if there are provisions in there that could cause them to go faster.

Yes, we discuss this every day, so it's impossible to overlook it. It's an integral part of our business and our ongoing discussions about how to tackle these issues. We focus on how we can support them politically and provide the general solutions that are crucial. Our efforts in supply chain management, particularly those based in the U.S., are intentional. This strategy has been in place for a long time, even before recent legislation. The initiatives we've implemented set us apart from our clients, and if we can assist them, we will. We're at the early stages of this process, and our efforts are recognized by our clients. The conversations about securing long-term projects and developing sourcing capabilities are just beginning. What we plan to achieve in terms of solutions over the next decade is still in its infancy. As I mentioned in the last call, five years ago we operated as independent companies, whereas now we are Quanta. Quanta offers solutions, and we are consistently engaged in discussions around Quanta.

Your next question comes from Ameet Thakkar with BMO Capital Markets.

I have a couple of quick questions. It seems that the portion of your backlog from MSAs has decreased by about $900 million quarter-over-quarter and is now relatively flat compared to last year. I'm curious if this aligns with your previous comments about customers focusing more on long-term solutions. Additionally, could you provide some insight on how much backlog you expect to come from Dynamic when you update us next quarter?

Yes, I'm not concerned with the timing of MSAs. Maybe Jayshree, you can comment on, I didn't even look at it. What it...

No, we're not concerned at all. These are just timing issues. We continue to see a growing backlog in electric. There might be a slight pullback in the underground sector, but we believe it's just a matter of timing. Regarding Dynamic, that isn't included in our backlog yet because we acquired the company after the second quarter. They brought in approximately $1.8 billion of backlog, and we'll provide an update on that in the third quarter as we collaborate with them.

Yes. And that's a multiyear backlog to you there. They can see out '26, '27 and even into '28. So same scenario with them. So I think it's really important that the scale that they're having the same kind of conversations that we're having with the client. This is not a small company with no scale; it has a lot of scalability to it.

Your next question comes from the line of Mike Dudas with Vertical Research Partners.

Given the news we saw on the 765 build-out expectations in Texas. Is that jarred some other RTOs in to kind of get moving forward. And are utilities continuing to underestimate transmission and the ability to have to solve a lot of their problems.

I think that 765 is present in both MISO and PJM, with some lines existing in both regions. I believe that constructing 765 AC will be easier than trying to build DC lines these days. It is significantly easier to manage load in areas where state rights are involved in an RTO. Consequently, I anticipate an increase in 765 lines due to load growth, with plenty of 500 lines also available. When a major line is constructed, there tend to be ten additional lines stemming from it. We are observing incoming projects, which are often not included in the capital budgets of utilities or the RTOs, highlighting the ongoing demand. Utilities are definitely aware of this need, and we are actively engaged with them. There are observable instances of debt and equity offerings, underscoring that the requirement for transmission and generation is more pressing than ever in this country.

Your next question comes from Chris Young with Wolfe Research.

Just wanted to just ask, I think you noted large multiyear build programs in the data center market that's expanding your addressable market. And I know it's an acquisition while accretive, do you view these sort of acquisitions like Dynamic as necessary to compete for that type of work? Or could you have addressed these opportunities organically?

Yes, we have a history of growing organically, and we continue to do so. Given the rapid pace of our large market, it became clear that we needed a platform company to drive exponential growth. This approach allows us to pursue capital and expand from a platform standpoint. While we have successfully grown in markets like telecom organically, we are also exploring other opportunities that have not yet been revealed. I am optimistic about these prospects and believe they will come to fruition. Furthermore, we see potential in building a platform supported by skilled labor, which enhances our market reach and enables us to offer effective solutions. Our assessment is thorough, and we always align our strategy with the optimal use of free cash flow to benefit our shareholders.

Your next question comes from the line of Steven Fisher with UBS ask your questions.

Just a follow-up actually on that last question. I mean you clearly made the case, Duke, for the solution angle on the Dynamic deal, and it sounds like it's blending with everything else, that's a 1 plus 1 equals 3. I'm just curious how you compare that with the electrical side of things and wondering as you make it a platform and build it out to something bigger over time. Can you get the same returns on mechanical that you can from electrical? And if not, is that sort of reflected in the upfront purchase price that you paid?

I mean we're always looking at returns. So your return on invested capital, your returns on the company are certainly every bit as good or better than our electric use of capital. I think when you look at these acquisitions, what goes unnoticed is our fabrication capabilities at Quanta are well above 3 million square feet. So you're also adding significant fabrication, which is an initiative of the company along with the mechanical processing and plumbing capabilities here, it goes unmatched. So I like what we're doing. We'll speed to market is so important in their advanced front-end services on technical capabilities or as good as anyone I've seen and will help the whole company be much better. So we're definitely leaning into all the things that are great about these companies for a lot of different reasons. And it's not just what you see on paper is what you don't see that shows up 3 years from now or 4 or 5. So we certainly have strategies that we follow, and this is one of them that provides access to 3 or 4 markets as well as gives us more capabilities internally.

Your next question comes from the line of Spark Li with Jefferies.

Just quickly come back to the IRA driven renewable pull-forward dynamic here. So is there really opportunity to increase near-term targets just by pulling forward renewable projects?

Yes, we are seeing LNTPs coming in. While it's too early to provide specific insights on renewable performance for '26, '27, '28, I do expect growth during those years. However, I cannot quantify it yet without risking misrepresentation. As long as power demand remains consistent, renewables will play a critical role. The benefits of batteries, especially in Texas during peak heat, often go unnoticed, but they significantly contribute to the grid and consumer affordability. Integrating batteries and solar into new lines enhances efficiency and increases demand. Canada also shows strong promise in the renewable sector, offering many opportunities. Overall, I anticipate growth for the company in the foreseeable future.

There are no questions at this time. I'd now like to turn the call back over to management for closing remarks.

Yes, thank you. I want to take a moment to mention the situation in Texas regarding the floods. Our team has shown remarkable bravery in saving lives during this crisis. The dedication of our 64,000 employees, both men and women, is truly amazing. They consistently act from their hearts and perform extraordinary work every day. It’s important to recognize our support for the families affected by these losses, as our efforts go beyond just business; we are committed to helping and guiding those in need. I'm very proud of our team and their actions during this time. Thank you for participating in our call, for your questions, and for your ongoing interest in Quanta Services. Thank you. This concludes our call.