Quanta Services, Inc. (PWR)
Q3 2008 Earnings Call
November 5, 2008 9:30 am ET
Kip Rupp - DRG&E
John R. Colson - President and Chief Executive Officer
John R. Wilson - President, Electric Power and Gas Operations
James F. O’Neil - President and Chief Operating Officer
Kenneth W. Trawick - President of Telecommunications and Cable Television Division
James H. Haddox - Chief Financial Officer
Jamie Cook - Credit Suisse First Boston
Tahira Afzal - KeyBanc Capital Markets
Sanjay Shrestha - Lazard Capital Markets
Kurt Woodward - JP Morgan
Jeffrey Beach - Stifel Nicolaus
Alex Rygiel - Friedman, Billings, Ramsey
Steve Gambuzza - Longbow Capital
Previous Statements by PWR
» Quanta Services, Inc. Q4 2008 Earnings Call Transcript
» Quanta Services, Inc. Q2 2008 Earnings Call Transcript
» Quanta Services, Inc. Q1 2008 Earnings Call Transcript
I’d like to turn the conference over to Mr. Kip Rupp, with DRG&E. Please go ahead, sir.
Kip Rupp - DRG&E
Alright, thank you, Vince and welcome everyone to Quanta Services’ conference call to review 2008 third quarter results. Before I turn the call over to management, I have the normal housekeeping details to run through. If you’d like to be on the e-mail or fax distribution list to receive future press releases for Quanta, or if you had any technical difficulty this morning and did not receive your e-mail or fax, please call our offices at DRG&E, at 713-529-6600.
Also, if you’d like to listen to a replay of today’s call, it will be available via webcast by going to Quanta’s website, at quantaservices.com. In addition, there is a telephonic recorded instant replay that will be available for the next seven days, 24 hours a day that can be accessed as set forth in the press release, by dialing 303-590-3000, and using the pass code 11122061#.
Please remember that information reported on this call speaks only as of today, November 05, 2008 and therefore you’re advised that any time-sensitive information may no longer be accurate as of the time of any replay of this call.
Also this conference 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 forward-looking statements include, but are not limited to, projected revenues, earnings per share, tax rates, capital expenditures, and other projections of financial and operating results and information, growth in particular markets, Quanta’s strategies and plans, anticipated future projects, impact of current market conditions, expected benefits from the merger with InfraSource Services, and any other statements reflecting Quanta’s expectations, intentions, assumptions or beliefs about future events or performance or 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 are beyond Quanta’s control and actual results may differ materially from those expected or implied as forward-looking statements.
For additional information concerning some of the risks, uncertainties and assumptions that could affect our forward-looking statements, please refer to the company’s annual report on Form 10-K for the year ended December 31, 2007, its quarterly report on Form 10-Q for the quarter ended, March 31, 2008 and June 30, 2008 and its other documents filed with Securities and Exchange Commission, which may be obtained through the SEC’s website at www.SEC.gov. All forward-looking statements, whether written or oral, are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements.
Management cautions that you should not place undue reliance on Quanta’s forward-looking statements and Quanta does not undertake any obligation to update any forward-looking statements to reflect events or circumstances after this call.
With that, I’d like to now turn the call over to Mr. John Colson, Quanta’s Chairman and CEO. John?
John R. Colson - President and Chief Executive Officer
Good morning everyone and welcome to Quanta Services third quarter 2008 conference call. To start call this morning I will provide a general overview of the quarter, insight on developments in the industries we serve and perspectives on emerging opportunities.
Our comments will be followed by an operational review by John Wilson, President of our Electric Power and Gas Operations and a review of financial results by James Haddox, our Chief Financial Officer. Jim O’Neil, Quanta’s newly appointed President and Chief Operating Officer along with Ken Trawick, President of Quanta’s Telecommunications and Cable Operations are also present. After our prepared remarks we will open the call for questions.
The executive team is proud of Quanta’s third quarter results for many reasons. First, despite an incredibly challenge economic environment, our operations remained strong and operating margins were 10% and are inline with our operational objectives. It appears that the impact of the current economic condition on our top customer has been minimal to date. We believe our customers remain financially secure and committed to the maintenance and build up of their infrastructure. We recognized that some large utilities have recently announced reductions in capital spending. We believe that most of these reductions are related to generation and other areas and will not materially affect the transmission build out.
Second, we continue to achieve internal revenue growth. Third, our capabilities are unique in the market place and continue to be on high demand in the industries we serve. And lastly, one of the most destructive hurricanes in US history Hurricane Ike devastated the Golf Coast region and directly impacted our corporate headquarters. Our emergency response plan operated seamlessly. Our customers received the services they required and we were able to focus on the immediate task at hand ensuring the safety of our employees and getting the power back on.
The third quarter of 2008 continued the strong trend of revenue growth and margin expansion for Quanta. We continue to perform well and recent strategic announcements further position the company to leverage emerging opportunities including wind and silver.
Revenues for the quarter were approximately $1.05 billion compared to $655.9 million in the third quarter of 2007. Pro forma internal revenue growth was approximately 27% compared to the third quarter of 2007 including revenue from all acquisitions since 2007 in both periods.
In the third quarter operating income as a percentage of revenue was in our target range of 9% to 12%. Operating income was 10% with amortization added back and 9.1% of amortization deducted. Quanta’s customer base remains diverse which plans strength to the ongoing growth of our revenue base. For the first nine months of 2008, our largest customer made up only 4% of our revenues. Our top 10 customers for the first nine months represented 30% of our total revenues and our top 20 customers made up approximately 43% of revenues.
The breakdown of revenues by the type of work also shows diversity. When divided by type of work our 2008 third quarter revenues were approximately 57% from electric power services, 23% from natural gas services including pipeline integrity. 12% of revenues from Telecommunications and cable services, 7% from ancillary services such as horizontal directional drilling and commercial and industrial wiring, and 1% from Dark Fiber leasing services.