Okay. All right. Good evening, everyone. Thank you for joining us as we wrap up day two of Baird 2026 Global Industrial Conference. My name is Justin Hauke. I am the Senior Analyst covering specialty contractors, engineering construction, facility services, along with Andy Wittmann. We are very pleased to have Quanta Services here, a name that we have covered for a very long time. You guys, in a lot of ways, you have never changed. In a lot of ways, you have changed a whole lot. We have Duke Austin, the company's CEO, and Jayshree Desai, the company's CFO. I am going to let Duke give us just two, three minutes, lay the land, and then we will go into Q&A. This is a big room, so if you do have a specific question that I do not otherwise get to, session1@rwbaird.com, and we will try to get you in.
There is a breakout next door, once we finish up here. Duke, take it away.
Yeah. Thanks for having us, and thanks for the interest. We do not take it for granted, so thank you for being here. We got to go last, so I guess we are not waiting on lunch anyway, so.
That is good.
Quanta, just for those of you not aware, we have built a company around craft skilled labor as a solution provider to the energy infrastructure business that you see today. Two large addressable markets, one of which is utilities, the other is your large load customers, technology. Each market is in the trillions on both sides of that. I think, and it converges in the middle. We play a unique role. We self-perform about 85% of our business, 95,000 employees, $41 billion top line, growing nicely. We have really put the strategies in place, I believe, to capitalize on what we see as great markets for a long period of time, and lots of opportunity for us to expand markets. Look, we look forward to talking about it today, and thanks for having us.
Yeah. We will get to the election and just kind of lay the land on that. Maybe just big picture, I want to start with the fact that you guys had an analyst day back in March. You laid out targets, I guess 7%-10% organic growth and 15%-20% EPS growth. Obviously, this first year has been way above that. I know, Duke Austin, you made some comments that we started off strong. We might have to look at those in the future. I am not asking you to revise the 2030 targets. Maybe just start with, from a high level, what is moving better than expected? It seems like the other thing probably maybe to emphasize more on that is the margins. I feel like your commentary has been a little bit more positive on kind of structural margin potential that you guys have exhibited.
Just maybe start there.
Yeah. Look, I think the analyst day, we did our best to lay out kind of a five-year plan on 15%-20% type adjusted EPS growth. When we looked at it, two addressable markets that I just said, and we walked through that. We are ahead, and I think by a considerable amount. We did say CAGR, it is not going to do me any good on anything I say because we are not going home and going to sleep. Basically, if you play that out, our CAGR, we could do probably not a lot over the next four years and still be fine. I do think structurally where what we changed, I think the technology TAM and how that came together, the strategy around it with the utility went much faster than I thought it would.
The demand's stronger, like how we're short power in the country much greater than I anticipated. The willingness to pay for power, the demand for AI is much bigger for compute, for cloud. When you have a supply and demand issue that's so imbalanced, it's going to create market expansion for us. We saw it. We continue to lean into it and expand it. I do think we're having a great year this year. We will grow next year. We've talked about in the upper side of that range, and then we believe the opportunity to grow in the 20% range next year. We look at two years, and you get a good look at it.
I think there's opportunities to grow faster than that as well, and we continue to see the inbounds today across both segments that, from our standpoint, fit right down the middle of what we're trying to accomplish in a strategy. We also leaned into the utility side of the business to take supply chain. We went vertical in our supply chain. We own transformer, we supply breakers, poles. We do a lot of things there. So that expanded nicely. Then we started our fossil generation business that has done very well early, and I think that'll do well late. So I like how we're stacking up. Renewables did not fall off. Jayshree told me they were going to, and they didn't. So, we're still doing well there and growing faster than we thought.
But I would tell you it's broad-based growth, faster than we thought, and the outward growth in the MEP business, it really has propelled the business in a much faster pace than we thought on investor day. As far as margin expansion, we have a $20 billion kind of utility business that's regulated and around regulated environments. That's not going to change. I think it grows just like it's been growing, double digits at organic growth there, and anything that we acquire leans into that. Our fossil generation business in the same, so it probably grows a little faster. Saying that, I just think that's the platform, that 10-12 is where we're going to be there. Then we are getting some leverage on training, and I think it's important to talk about, because our training was around just certain classifications.
As we looked at craft and from boilermakers to plumbers to electricians, inside electricians versus just linemen, and other things that we were doing, welders, things like that, it's allowed us to take someone from military that may not want to climb, or anywhere really, that may not want to climb, and they can be a plumber or pipe fitter. So we're getting a lot of leverage out of all that curriculum and all the emphasis that we put on craft skill. You can see it. We added 13,000 employees organically over a six-month period, nine-month period, and we also acquired 12,000, so 26,000—
Yeah, or it is just a—
—employees. So pretty remarkable growth on the employee count. So that has got some help for expansion to leverage.
Yeah. No, that actually went right into my next question, which is, it seemed like that was another thing that was really apparent this last quarter, but really all year, is that these new legs, you mentioned the concern about your renewables were going to fall off a cliff, and maybe you can talk about, obviously you have a data center exposure, but you have so many broad-based parts of it. But it feels like the company has moved to a position where every single project is integrated in so many different ways that maybe that is what is different about Quanta today than someone was looking at it 10 years ago, it feels like.
I think, look at, when we say solution provider, that is what that is really, it is moving across these segments. And that fungibility of labor that we have, the more that we are concentrated in an area, whether we are building power plants, solar, MEP, or the electric side of a data center, electrician can move across that whole spectrum and never leave home. So it is really, to me, it says a lot about how the company has expanded that solution to be much more than it was with the same craftsmen, sometimes with the same foreman and the same team, allow them to expand who they are, up-train in many ways. And it also gives us certainty in when we talk about where we are going, what happens if We are definitely, we get a question a day on, "There are no more data centers, and 2028 is the peak, and 2030 is done.
We're never going to build another one." We don't see that at all. We see long markets with our craft. I do think as we see that, we're also looking for other things that are coming, which AI is creating healthcare. It's curing things. You're building Pfizer facilities, Lilly facilities all over the place, and that's what we do. It doesn't matter whether we're building a Lilly facility or we're building a data center, it's the same electricians, and they can move. I do think we've done a nice job there from that standpoint, which has allowed the company a lot of breadth.
I can kind of anticipate the answer based on that, but the question would be, what are the kind of key bottlenecks of what could happen that would change the growth trajectory? Maybe, for example, you've talked about there's these big 765 kV lines that could start next year. There's still some regulatory steps they have to go through. The data center work, you tend to be more later stage in them, so it's hard to see that there would be cancellation risks. Just what are some of the puts and takes that would change the trajectory, maybe not even in 2027, but in 2028?
Yeah, look, I think it would be a fundamental change with some political, something extreme that we couldn't control, and you can't see it today. COVID, that didn't really slow us down, but just a little bit. I think you could have some pause on something, but everywhere we're started and the way that we're having conversations with our customers, or we talk about compounding earnings, our approach is, yeah, if you need help in 2027, 2028, we want to talk about 2032. Those discussions are ongoing, and I think we're having great long discuss-- We haven't started 765 kV at all in the field, and probably won't until sometime next year.
When we do that, yeah, look, it compounds and stacks, but it doesn't mean that our underlying business that we're doing today is not growing double digits plus, because I think you got to look at that as well. We have none of that going on, and the company's still growing at the rates it's growing at. As well as, I look back and I think about how much growth we've had internally, organically, our electricians, we've moved people out of the industrial base and over into our technology TAM and things like that. We've been, I think, taking great opportunities and really, really transferring that into EPS growth. If you look at the U&I segment, you see the expansion, civil capabilities on pipeline moving over into other things, not just sitting on iron or anything like that.
So, getting utilizations out of all our people and maximize what we can do and the solutions we can provide. The ask is, "We want more now." We can give you more now because we can be extremely fungible. We have a scale of 95,000 people, and that allows us a lot of flexibility. For that, we want longevity and the ability to compound earnings versus be very transactional, not transformational in the business, and some one-off margin profile that does not matter long term. We have to get it to think a bit larger, longer, the way I see it.
Maybe one of the other things that seems that it is changed in the business is, we have already talked, craft is obviously the core of what you do, but you guys have made some really strategic investments, it feels like, over the last several years in some of these manufacturing, not from manufacturing state, but as kind of a critical supply chain investment that maybe it has de-risked the way the business traditionally went to market. Is there more of that to come? Is that something where there are other areas that you think would be additive? Just how has that changed the way that you structure contracts now that you have got some of these supply chain certainties?
Yeah. Look, I think when we look at it, we want to keep our people busy. If we stop and start on things, it is just hard. It is hard on our people, it is hard on us, more training, more cost. So, when we started, transformers were short, especially domestic, so we leaned into transformers. We are now expanding that up to 765 kV. It has helped us a lot from a standpoint that I feel confident in our ability to go out and deliver a substation or transmission line. We do have some internal capabilities of 20% or so that we can move onto a project and make it go. The pull-through is significant on those type of things. Breakers were short, couldn't get breakers, so we were building breakers and then formed a JV with Hyosung HICO there on breakers. So, meaningful to me to have that capability on breakers.
In the quarter, we acquired a pole manufacturing business. Why are we acquiring a pole man? Because we are short on poles. We do not want to be Valmont. They do a great job. They are great partners in areas we work with. But there are places that others couldn't supply. We were on there, and we helped both our end user out, which is our utility customers, and keep our projects moving. For that, look, it is domestic. They want more. Can we build it up? Can we integrate it into these models? I think we can. We are. We are absolutely integrating that supply chain in our delivery capabilities. We have leaned into it. We are the third or fourth largest buyer of high voltage, medium voltage equipment. So, I think our ability to really flex that supply chain in the future is there, and we are continuing down a path.
I still think it's poles, wires, transformers. Whether we partner, use our balance sheet to partner, or build vertical, we will. We're expanding every facility we have, I believe, there. So that expansion's ongoing.
I mean, it's really different because there's just not really another contractor that's out there that has this degree of kind of vertical integration. I mean, you mentioned being a solutions provider, but it feels like you've moved away from what people would think of an EPC, where you bid a discrete project, and these are more like programs that have many years involved behind it. Maybe that segues to another area that's newer is the gas generation stuff that you've been talking about, and the partnership with NiSource. But in light of the potential for more regulatory push on data centers, I guess more behind-the-meter work could be a potential, which obviously necessitates a lot of on-site generation work. So, maybe just talk about your capabilities there and how you get comfortable with the risk profile of building those plants.
Yeah. I think the company was asked to look at how do we build fossil generation, combined cycles, single cycles. We're pretty comfortable with single cycles. Large frames are a little different, but it's okay. We can build them. I felt comfortable there. When we started talking combined cycles, we formed a joint venture, and went to NiSource with it. They asked us to look at this. What I think is unique about it is we did de-risk it to where we got comfortable with our risk profile that we could operate at parity to the segment, which, call it 10%-12%. As we went through it, we built the model with them. They talked to their customers on the backside of all the risk to go and build it. We're self-performing the majority of the craft on the project.
We needed some engineering help, so it was a single project, and we've done that. We built a nice group in Alabama. We had the capacity to do it. So, we're in the business, and we listen to the customer. We're willing to work with them, but the risk profile, I've been around a long time, and you can go off the rails in these things.
Yeah.
We do not want to be that. We have really told that to our clients to say, "We are not going off the rails on these things. This is the risk profile we are willing to take, and this is how we can build it, and the capacity that we have." Saying that, craft is short, other things are short, and our ability to self-perform, Enerfab acquisition was a really nice acquisition for us that did 50%, 60%, 70% of a power plant. We continue to add to that, add to the front end part of the business. On the backside, it is our job to de-risk that into a profile that we can go and be consistent with the investor base. That business every day gets better and better for us. The inbounds get better, and we will continue to stack that on.
It will not start, it starts some in 2027, but I think you will see NiSource was a program. Other customers have asked. I think we will continue to build that on out, and you will see a nice platform company that is growing along with. As all the generation assets, all the engines come in, that will be us on the backside building large. It will not be the biggest segment, but it will be a nice segment—
Yeah.
—for us.
Maybe one other thing that has changed from the expansion of what you are doing and everything else, but it also feels like your free cash flow has become more predictable. I am sure you guys increased your guidance this last quarter, and maybe it feels like the MEP work is maybe additive to working capital. You are more favorable cash advances and maybe less capital intensive. I am not asking you to increase. Your guidance this year is above your long-term target, but, I mean, how structural is that? Is it sustainable?
If the growth continues from our renewables business and the MEP business, and our EPC work—
Yeah.
—it is sustainable. These things, the growth rates make a difference because the working capital profiles around that type of work is more favorable than our typical MSA work, where great customers were part of the system. Because we self-perform, and we are on the system day-to-day, the working capital profile is just tougher. So, it really depends on where that utility work growth is coming from, which will drive that. The other thing we are leaning into is, as you guys talked about earlier, is our supply chain and our manufacturing expansion. We started some of that this year, for sure. We are also, as we mentioned, leaning into expanding our transformer facilities, our breaker facilities with our Hyosung HICO partnership. You are going to see these things that can pressure free cash flow a bit. We are also expanding our OSM capabilities, our offsite manufacturing capabilities as well.
So, over the next couple of years, that is why I still give you that range of 55%-60%. If the growth rate that we continue to see where it is coming from around these more favorable working profiles, yeah, the ability to be on the high end of that range or even higher is definitely doable. These things, I just want I am always He teases me—
Yes.
—I am just very careful of explaining what can happen in our business in a good way. I mean, it is all great. The utility business growing faster does not necessarily mean it is bad. It just means it is a different working capital profile, and we got to take that into account.
Yeah. Well, in light of, if it is the better free cash flow version and you do have that come in, the balance sheet remains in a really good position. With all the uncertainty that's out there, what is the best return on the incremental dollar invested? Is it in more of the supply chain stuff? Where do you want to be investing for the next couple of years that you're not already in today?
Look, I don't feel the uncertainty, number one. I just don't.
Okay. All right. Well, all right.
I'm not sure who's creating that, but like Twitter maybe. I don't know. Who knows? But I feel really good about the business on the imbalance because we're in it every day. I feel good about the economy. I feel good about where MEP is going. I feel good about demand. I feel good about combined cycles. I feel good about the utility business, and I feel good about MEP business. Great. It looks good. Yes, there's things that we can watch in how things go. We'll continue to lean into If our stock gets disconnected, if it goes down 15%-25% over a period of time, we're not going to let it sit there. We'll lean into it, and that'll be how we deploy capital. We're not scared to do that. We've done it, and we'll do it again.
I also think, I work for you, I work for our investors, and I want to use it. I work for myself too, because I own plenty. I have to look at it like, okay, then it's acquisitions, and how do we think through that? Or it could go either way, but we have to be able to take the acquisitions and follow the strategies. We like 100-year-old companies, 50-year-old companies, generational that have been through hard times. I think a company that's been through hard times can breeze through an easy time, makes them tougher, it makes them grittier, it makes everyone more accountable. I do think that accountability matters in this business. We like a certain profile of business along our verticals, along our TAMs that enhance it. We can get synergies out of it.
We've done some unique things and continue to advance the portfolio that de-risk everyone involved and our stakeholders while driving down total cost to the rate payer. I mean, that's key for us, and I think we're listening to the customer on that and really trying to lean into what they're asking us to do.
Yeah, I mean, your acquisitions have not been kind of Johnny-come-latelys to markets. That's very apparent that, like-
Thank you.
You guys have long history in a lot of these operating companies. Maybe on that, back to the MEP stuff, I guess how easy would it be to shift some of that internal craft labor that isn't a data center to some other high-load facility, whether it's semis or pharma or whatever? Also, I think you've talked about the content per megawatt on a lot of these data centers has increased, especially now that the ones that you're coming on now are more, not your run-of-the-mill data centers, but they're more these AI ones. I guess it's two questions. How fungible is the labor into other places, and then what do you see as kind of the content scope increase on the data center work that you are doing?
Yeah, when we look at that, I mean, I think it's extremely fungible for us. About, call it 15% of the business, 10%-15% of the business is data center, of which you have chips in that, some Tesla things in there, things like that that are also in there. So, electrician is electrician. We're journeymen. They can move across. They know how to do multiple things. I think that's not that difficult. Our OSM strategy, offsite manufacturing strategy, is fungible as well. It allows us to cross into all kinds of different ways that we can offsite manufacture. So, that engineering component on the front of that has been great. We've been able to do a lot of things there. Our mechanical business is early, but that has really grown nicely and give us a lot of flexibility.
When we start talking about civil business that we acquired, it's grown great. What we're really able to go to a client and say, "Look, we can talk to you about your generation, your substation, your medium voltage, your low voltage, your mechanical in and out, down to the TFO to rack to hack. If you want us to build the slab and the building, okay, we can do that." I do think there is our ability to really talk to the client about a one-stop shop, get it done quicker, use our offsite manufacturing capabilities. So that model is out there. We get some. I still think the general contract model will be there. We have great clients there as well. What's the customer asking us? Can we go faster? Can we use our vertical supply chain?
If you look at it, we were around $3 million-$5 million a meg or so of capture on, call it $15 million - $18 million. That's grown, call it $4 million - $6 million. I continue to see that expanding, because if we're on site and we're already doing so much of something, the client really is asking us to do more and more and more, and we would like to get concentrated where we're at. We can do a lot of things the more concentrated we get on these sites. So, if we're there, we have this labor, why not build everything we can?
I do think it's a benefit for us and scalability. You'll continue to see us have more and more of that total cost per megawatt on MEP.
On that offsite manufacturing, my understanding is it's mostly for your own self-consumption projects that you're doing. But if there was anything that shifted, not that there is, but if you had something, would you be able to maintain that capacity by would you have third-party sales on some of the things?
We do some now.
Do you? Okay.
Look, we're still. Sometimes we're on other areas and we can't meet that, but we can offsite. We have options. We'd prefer to do it all, but we'll do it. I do think our engineering capabilities there, the things that we can do, the way Cupertino led that probably 10 years ago, first mover in this. The industry was not ready because they weren't moving this fast. With the industry moving like this, it's more than ready.
That allowed us to really think broader about how we do this. I think we're up to 4.5 million sq ft, something like that. 4 million sq ft, expanding a bit on that. I do think we've got it in kind of from west to east with the Phalcon acquisition. That allows us to be more east-centric as well. I do think where we're at, how we deliver, how the logistic piece of it has put us in a unique position there, and we'll continue to expand it if we need to.
Maybe as a closing message in the last minute or two here, you said, "I don't think there's uncertainty." I get it. From the analyst perspective, it's obviously we look at the markets, but—
It was probably your note that did it.
There we go. Exactly. It sparked everything. What is the market missing or what would be your closing message that you would want to say that is misunderstood or that.
Yeah. I think when you look at the compute environment that we are in, you either have cloud-based or inference type, or you are learning. That cloud-based compute has been around for 15 years, been building a long, long time. I do not think cloud-based is going anywhere, and I think you are going to need more and more of it for a long period of time. There are lots of avenues. This business is very resilient. Yes, there are ebbs and flows to everything. Solar was going to solar, wind, renewables was all going to die—
Right.
—a year or two ago. I cannot remember. We will have a record year this year. I would just say the company is positioned nicely to take advantage of markets. We are fungible, flexible, and I think we have done a really nice job deploying capital. Super happy with where we sit, and we continue to see good growth as far as we can see it. We are looking at 2029 and beyond. I feel good about 2027, 2028, and even into 2029. It is good.
I think it is a good place to stop. Thank you guys for joining us. We always appreciate it. We will have the breakout session, as I mentioned, just next door over here to the left. Thank you all for joining us.
Thank you.
Appreciate you.