QUANTA SERVICES INC

Previous wording

With respect to our Electric Power Infrastructure Solutions (Electric Power) segment, utilities are continuing to invest significant capital in their electric power delivery systems through multi-year grid modernization and reliability programs, as well as system upgrades and hardening programs in response to recurring severe weather events. We have also experienced high demand for new and expanded transmission, substation and distribution infrastructure needed to reliably transport power.

Current wording

With respect to our Electric Power segment, utilities are continuing to invest significant capital in their electric power delivery systems through multi-year grid modernization and reliability programs, as well as system upgrades and hardening programs in response to recurring severe weather events. We have also experienced high demand for new and expanded transmission, substation and distribution infrastructure needed to reliably transport power. In particular, we continue to experience strong demand from our utility customers, which we believe is driven by increasing demand for electricity associated with, among other things, data centers and other technology-related dynamics, domestic manufacturing reshoring initiatives and overall electrification trends. Our acquisition of Cupertino Electric, Inc. (CEI) during 2024 also resulted in increased services for our critical path electrical design and installation solutions from the technology and data center industry.

Previous wording

With respect to our Renewable Energy Infrastructure Solutions (Renewable Energy) segment, the transition to a reduced-carbon economy is continuing to drive demand for renewable generation and related infrastructure (e.g., high-voltage electric transmission and substation infrastructure), as well as interconnection services necessary to connect and transmit renewable-generated electricity to existing electric power delivery systems. Despite these positive longer-term trends, during 2022 and into 2023, the timing of certain projects within this segment were negatively impacted by supply chain challenges that resulted in delays and shortages of, and increased costs for, materials necessary for certain projects, particularly sourcing restrictions related to solar panels necessary for the utility-scale solar industry and delays in availability of power transformers impacting the electric power and renewable energy industries. While certain challenges associated with solar panel sourcing improved during 2023, there could be other potential supply chain challenges for renewable infrastructure project components.

Current wording

With respect to our Renewable Energy segment, the cost-effectiveness of solar, wind energy and battery storage, combined with a meaningful increase in current and forecasted electricity demand, is continuing to drive demand for renewable generation and related infrastructure (e.g., high-voltage electric transmission, substation infrastructure and battery storage), as well as interconnection services necessary to connect and transmit renewable-generated electricity to existing electric power delivery systems. Despite these positive longer-term trends, in prior periods supply chain challenges, policy and regulatory uncertainty and other factors have resulted in project delays. For example, shortages of, and increased costs for, materials necessary for certain projects, particularly sourcing restrictions related to solar panels necessary for the utility-scale solar industry and delays in availability of power transformers impacting the electric power and renewable energy industries impacted certain prior periods.

Previous wording

During 2023, increased revenues and operating income across all our segments contributed to $1.58 billion of net cash provided by operating activities, a 39.4% increase relative to 2022, which allowed us to execute our business plan, including the strategic acquisition of several businesses, for which we utilized $651.6 million of cash, net of cash acquired, and the payment of $47.8 million in dividends associated with our common stock. Additionally, as of December 31, 2023, available commitments under our senior credit facility, combined with our cash and cash equivalents, totaled $2.81 billion.

Current wording

During 2024, increased revenues and operating income contributed to $2.08 billion of net cash provided by operating activities, a 32.1% increase compared to 2023, which allowed us to execute our business plan, including the strategic acquisition of certain businesses, for which we utilized $1.75 billion of cash, net of cash acquired, and the payment of $54.2 million in dividends associated with our common stock. Additionally, as of December 31, 2024, available commitments under our senior credit facility, combined with our cash and cash equivalents, totaled $3.35 billion.

Previous wording

We expect the strong demand for our services will continue. Our remaining performance obligations and backlog were $13.89 billion and $30.11 billion as of December 31, 2023, representing increases of 57.9%, and 25.0% relative to December 31, 2022. For a reconciliation of backlog to remaining performance obligations, the most comparable financial measure prepared in conformity with generally accepted accounting principles in the United States (GAAP), see Non-GAAP Financial Measures below.

Current wording

We expect the strong demand for our services will continue. Our remaining performance obligations and backlog were $16.76 billion and $34.54 billion as of December 31, 2024, representing increases of 20.6%, and 14.7% relative to December 31, 2023. For a reconciliation of backlog to remaining performance obligations, the most comparable financial measure prepared in conformity with generally accepted accounting principles in the United States (GAAP), see Non-GAAP Financial Measures below.

Previous wording

Our revenues, profit, margins and other results of operations can be influenced by a variety of factors in any given period, including those described in Item 1. Businessand Item 1A. Risk Factorsin Part I of this Annual Report, and those factors have caused fluctuations in our results in the past and are expected to cause fluctuations in our results in the future. Additional information with respect to certain of those factors is provided below.

Current wording

Our revenues, profit, margins and other results of operations can be influenced by a variety of factors in any given period, including those described in Item 1. Businessand Item 1A. Risk Factorsof Part I of this Annual Report, and those factors have caused fluctuations in our results in the past and are expected to cause fluctuations in our results in the future. Additional information with respect to certain of those factors is provided below.

Previous wording

Seasonality. Typically, our revenues are lowest in the first quarter of the year because cold, snowy or wet conditions can create challenging working environments that are more costly for our customers or cause delays on projects. In addition, infrastructure projects often do not begin in a meaningful way until our customers finalize their capital budgets, which typically occurs during the first quarter. Second quarter revenues are typically higher than those in the first quarter, as some projects begin, but continued cold and wet weather can often impact productivity. Third quarter revenues are typically the highest of the year, as a greater number of projects are underway and operating conditions, including weather, are normally more accommodating. Generally, revenues during the fourth quarter are lower than the third quarter but higher than the second quarter, as many projects are completed and customers often seek to spend their capital budgets before year end. However, the holiday season and inclement weather can sometimes cause delays during the fourth quarter, reducing revenues and increasing costs. These seasonal impacts are typical for our U.S. operations, but seasonality for our international operations may differ. For example, revenues for certain projects in Canada are typically higher in the first quarter because projects are often accelerated in order to complete work while the ground is frozen and prior to the break up, or seasonal thaw, as productivity is adversely affected by wet ground conditions during warmer months.

Current wording

Seasonality. Typically, our revenues are lowest in the first quarter of the year because cold, snowy or wet conditions can create challenging working environments that are more costly for our customers or cause delays on projects. In addition, infrastructure projects often do not begin in a meaningful way until our customers finalize their capital budgets, which typically occurs during the first quarter. Second quarter revenues are typically higher than those in the first quarter, as some projects begin, but continued cold and wet weather can often impact productivity. Third quarter and fourth quarter revenues are typically the highest of the year, as a greater number of projects are underway and operating conditions, including weather, are normally more accommodating. During the fourth quarter, projects are often completed and customers often seek to spend their capital budgets before year end. However, the holiday season and inclement weather can sometimes cause delays during the fourth quarter, reducing revenues and increasing costs. These seasonal impacts are typical for our U.S. operations, but seasonality for our international operations may differ. For example, revenues for certain projects in Canada are typically higher in the first quarter because projects are often accelerated in order to complete work while the ground is frozen and prior to the break up, or seasonal thaw, as productivity is adversely affected by wet ground conditions during warmer months.

Previous wording

Demand for services. We perform the majority of our services under existing contracts, including MSAs and similar agreements pursuant to which our customers are not committed to specific volumes of our services. Therefore our volume of business can be positively or negatively affected by fluctuations in the amount of work our customers assign us in a given period, which may vary by geographic region. Examples of items that may cause demand for our services to fluctuate materially from quarter to quarter include: the financial condition of our customers, their capital spending and their access to and cost of capital; acceleration of any projects or programs by customers (e.g., modernization or hardening programs); economic and political conditions on a regional, national or global scale, including availability of renewable energy tax credits; interest rates; governmental regulations affecting the sourcing and costs of materials and equipment; other changes in U.S. and global trade relationships; and project deferrals and cancellations.

Current wording

Demand for services. We perform the majority of our services under existing contracts, including MSAs and similar agreements pursuant to which our customers are not committed to specific volumes of our services. Therefore our volume of business can be positively or negatively affected by fluctuations in the amount of work our customers assign us in a given period, which may vary by geographic region. Examples of items that may cause demand for our services to fluctuate materially from quarter to quarter include: the financial condition of our customers, their capital spending and their access to and cost of capital; acceleration of any projects or programs by customers (e.g., modernization or hardening programs); economic and political conditions on a regional, national or global scale, including availability of renewable energy tax credits; interest rates; governmental regulations affecting the sourcing and costs of materials and equipment; other changes in U.S. and global trade relationships (e.g., tariffs, taxes); and project deferrals and cancellations.

Previous wording

Revenue mix and impact on margins. The mix of revenues based on the types of services we provide in a given period will impact margins, as certain industries and services provide higher-margin opportunities. Our larger or more complex projects typically include, among others, transmission projects with higher voltage capacities; pipeline projects with larger-diameter throughput capacities; large-scale renewable generation projects; and projects with increased engineering, design or construction complexities, more difficult terrain or geographical requirements, or longer distance requirements. These projects typically yield opportunities for higher margins than our recurring services under MSAs described above, as we assume a greater degree of performance risk and there is greater utilization of our resources for longer construction timeframes. However, larger projects are subject to additional risk of regulatory delay and cyclicality. Project schedules also fluctuate, particularly in connection with larger, more complex or longer-term projects, which can affect the amount of work performed in a given period. Furthermore, smaller or less complex projects typically have a greater number of companies competing for them, and competitors at times may more aggressively pursue available work. A greater percentage of smaller scale or less complex work also could negatively impact margins due to the inefficiency of transitioning between a greater number of smaller projects versus continuous production on fewer larger projects. As a result, at times we may choose to maintain a portion of our workforce and equipment in an underutilized capacity to ensure we are strategically positioned to deliver on larger projects when they move forward.

Current wording

Revenue mix and impact on margins. The mix of revenues based on the types of services we provide in a given period will impact margins, as certain industries and services provide higher-margin opportunities. Our larger or more complex projects typically include, among others, transmission projects with higher voltage capacities; pipeline projects with larger-diameter throughput capacities; large-scale renewable generation projects; complex data center projects; and projects with increased engineering, design or construction complexities, more difficult terrain or geographical requirements, or longer distance requirements. These projects typically yield opportunities for higher margins than our recurring services under MSAs described above, as we assume a greater degree of performance risk and there is greater utilization of our resources for longer construction timeframes. However, larger projects are subject to additional risk of regulatory delay and cyclicality. Project schedules also fluctuate, particularly in connection with larger, more complex or longer-term projects, which can affect the amount of work performed in a given period. Furthermore, smaller or less complex projects typically have a greater number of companies competing for them, and competitors at times may more aggressively pursue available work. A greater percentage of smaller scale or less complex work also could negatively impact margins due to the inefficiency of transitioning between a greater number of smaller projects versus continuous production on fewer larger projects. As a result, at times we may choose to maintain a portion of our workforce and equipment in an underutilized capacity to ensure we are strategically positioned to deliver on larger projects when they move forward.

Previous wording

Subcontract work and provision of materials. Work that is subcontracted to other service providers generally yields lower margins, and therefore an increase in subcontract work in a given period can decrease operating margins. In recent years, we have subcontracted approximately 20% of our work to other service providers. Our customers are usually responsible for supplying the materials for their projects. However, under some contracts, we agree to procure all or part of the required materials. While we attempt to structure our agreements with customers and suppliers to account for the impact of increased materials procurement requirements or fluctuations in the cost of materials we procure, our margins may be lower on projects where we furnish a significant amount of materials, as our markup on materials is generally lower than our markup on labor costs, and in a given period an increase in the percentage of work with greater materials procurement requirements may decrease our overall margins, including in some cases our assuming price risk. Furthermore, fluctuations in the price or availability of materials, equipment and consumables that we or our customers utilize could impact costs to complete projects.

Current wording

Subcontract work and provision of materials. Work that is subcontracted to other service providers generally yields lower margins, and therefore an increase in subcontract work in a given period can decrease operating margins. In recent years, we have subcontracted approximately 20% of our work to other service providers. Additionally, under certain contracts, including contracts for engineering, procurement and construction services, we agree to procure all or part of the required materials. While we attempt to structure our agreements with customers and suppliers to account for the impact of increased materials procurement requirements or fluctuations in the cost of materials we procure, our margins may be lower on projects where we furnish a significant amount of materials, as our markup on materials is generally lower than our markup on labor costs, and in a given period an increase in the percentage of work with greater materials procurement requirements may decrease our overall margins, including in some cases our assuming price risk. Furthermore, fluctuations in the price or availability of materials, equipment and consumables that we or our customers utilize could impact costs to complete projects.

Previous wording

Revenues. Revenues increased due to a $2.39 billion increase in revenues from our Renewable Energy segment, a $756.6 million increase in revenues from our Electric Power segment, and a $659.9 million increase in revenues from our Underground and Infrastructure segment. See Segment Results below for additional information and discussion related to segment revenues.

Current wording

Revenues. Revenues increased due to a $1.68 billion increase in revenues from our Renewable Energy segment and a $1.47 billion increase in revenues from our Electric Power segment, partially offset by a $354.6 million decrease in revenues from our Underground and Infrastructure segment. See Segment Results below for additional information and discussion related to segment revenues.

Previous wording

Operating income. Operating income was positively impacted by a $172.9 million increase in operating income for our Renewable Energy segment, a $54.6 million increase in operating income for our Electric Power segment and a $60.4 million increase in operating income for our Underground and Infrastructure segment, partially offset by a $32.0 million increase in corporate and non-allocated costs, which includes amortization expense. Results for each of our business segments and corporate and non-allocated costs are discussed in Segment Results below.

Current wording

Operating income. Operating income was positively impacted by a $278.2 million increase in operating income for our Electric Power segment and a $189.9 million increase in operating income for our Renewable Energy segment, partially offset by a $112.9 million decrease in operating income for our Underground and Infrastructure segment and a $136.7 million increase in corporate and non-allocated costs, which includes amortization expense. Results for each of our business segments and corporate and non-allocated costs are discussed in Segment Results below.

Previous wording

Provision for income taxes. The effective income tax rates were 22.6% and 27.3% for the years ending December 31, 2023 and 2022. The decrease in our effective income tax rate in 2023 was primarily due to changes in the valuation allowance on deferred tax assets, predominantly from the realization of the loss on our investment in Starry, as well as changes in the fair market value of our company-owned life insurance investments and a tax benefit related to the vesting of equity incentive awards at a higher fair market value than their grant date fair market value. These decreases in the effective tax rate were partly offset by higher non-deductible per diem expenses related to the expiration, as of December 31, 2022, of a temporary provision that allowed for the full deduction of certain meal and entertainment costs. The components of our provision for income taxes including changes in our valuation allowance are quantified and described in more detail in Note 12 of the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data in Part II of this Annual Report.

Current wording

Provision for income taxes. The effective income tax rates for the years ended December 31, 2024 and 2023 were 23.5% and 22.6%, respectively. The tax rate for the year ended December 31, 2024 benefited from a $55.1 million benefit due to equity incentive awards vesting at a higher fair market value than their grant date fair market value, compared to a $35.0 million benefit in the year ended December 31, 2023. Additionally, the 2024 tax rate was positively impacted by ongoing entity rationalization and restructuring efforts. These efforts resulted in a $10.2 million deferred tax benefit and the release of a $4.6 million valuation allowance during the year ended December 31, 2024. The tax rate for the year ended December 31, 2023 was favorably impacted by the realization of the loss on our investment in Starry Group Holdings, Inc. for tax purposes, and the corresponding release of the valuation allowance initially recorded during the year ended December 31, 2022. The components of our provision for income taxes including changes in our valuation allowance are quantified and described in more detail in Note 12 of the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data in Part II of this Annual Report.

Previous wording

Net income attributable to non-controlling interests. The decrease in net income attributable to non-controlling interests is primarily related to the $10.4 million gain on sale of the investment in a non-integral equity unconsolidated affiliate recorded during the year ended December 31, 2022 as further described in Note 8 of the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data in Part II of this Annual Report.

Current wording

Net income attributable to non-controlling interests. The increase in net income attributable to non-controlling interests is primarily related to increased activity on certain joint ventures and the $5.0 million gain on the sale of the investment in a non-integral equity unconsolidated affiliate recorded during the year ended December 31, 2024 as described above.

Previous wording

Comprehensive income. See Statements of Comprehensive Income in Item 8. Financial Statements and Supplementary Datain Part II of this Annual Report. Comprehensive income increased by $354.2 million in 2023 as compared to 2022, primarily due to a $239.0 million increase in net income and a $99.3 million increase related to foreign currency translation adjustments. The predominant functional currencies for our operations outside the U.S. are Canadian and Australian dollars. Foreign currency translation adjustment income in the year ended December 31, 2023 primarily resulted from the strengthening of the Canadian dollar against the U.S. dollar as of December 31, 2023 when compared to December 31, 2022. Foreign currency translation loss in the year ended December 31, 2022 primarily resulted from the strengthening of the U.S. dollar against both the Australian and Canadian dollars as of December 31, 2022 when compared to December 31, 2021.

Current wording

Comprehensive income. See Statements of Comprehensive Income in Item 8. Financial Statements and Supplementary Datain Part II of this Annual Report. Comprehensive income increased by $42.6 million in 2024 as compared to 2023, primarily due to a $176.6 million increase in net income and $18.5 million of foreign currency translation losses recognized to net income in connection with our substantial liquidation from Latin American operations. These increases in comprehensive income were partially offset by a $134.7 million foreign currency translation adjustment loss and the $16.5 million increase in comprehensive income attributable to non-controlling interests described above. The predominant functional currencies for our operations outside the U.S. are Canadian and Australian dollars. Foreign currency translation adjustment loss in the year ended December 31, 2024 primarily resulted from the strengthening of the U.S. dollar against both the Canadian and Australian dollars as of December 31, 2024 when compared to December 31, 2023.

Previous wording

We report our results under three reportable segments: Electric Power, Renewable Energy and Underground and Infrastructure. Reportable segment information, including revenues and operating income by type of work, is gathered from each of our operating companies. Classification of our operating company revenues by type of work for segment reporting purposes can at times require judgment on the part of management. Our operating companies may perform joint projects for customers in multiple industries, deliver multiple types of services under a single customer contract or provide service offerings to various industries. For example, we perform joint trenching projects to install distribution lines for electric power and natural gas customers. Integrated operations and common administrative support for operating companies require that certain allocations be made to determine segment profitability, including allocations of corporate shared and indirect operating costs, as well as general and administrative costs. Certain corporate costs are not allocated, including corporate facility costs; non-allocated corporate salaries, benefits and incentive compensation; acquisition and integration costs; non-cash stock-based compensation; amortization related to intangible assets; asset impairments related to goodwill and intangible assets; and change in fair value of contingent consideration liabilities.

Current wording

Through December 31, 2024, we reported our results under three reportable segments: Electric Power, Renewable Energy and Underground and Infrastructure. Reportable segment information, including revenues and operating income by type of work, is gathered from each of our operating companies. Classification of our operating company revenues by type of work for segment reporting purposes can at times require judgment on the part of management. Integrated operations and common administrative support for operating companies require that certain allocations be made to determine segment profitability, including allocations of corporate shared and indirect operating costs, as well as general and administrative costs. Certain corporate costs are not allocated, including corporate facility costs; non-allocated corporate salaries, benefits and incentive compensation; acquisition and integration costs; non-cash stock-based compensation; amortization related to intangible assets; asset impairments related to goodwill and intangible assets; and change in fair value of contingent consideration liabilities.

Previous wording

Revenues. The increase in revenues for the year ended December 31, 2023 was primarily due to increased spending by our utility customers and approximately $270 million in revenues attributable to acquired businesses. These increases were partially offset by approximately $60 million in lower emergency restoration services revenues.

Current wording

Revenues. The increase in revenues for the year ended December 31, 2024 was primarily due to approximately $1.22 billion in revenues attributable to acquired businesses in 2024 and the rising demand for our services.

Previous wording

Operating Income. Operating income and operating margin increased for the year ended December 31, 2023 primarily due to the increase in revenues, which contributed to higher levels of fixed cost absorption.

Current wording

Operating Income. The increase in operating income and operating margin for the year ended December 31, 2024 was primarily due to the increase in revenues and change in the overall mix of work, including an increase in higher margin emergency restoration services.

Previous wording

Revenues. The increase in revenues for the year ended December 31, 2023 was primarily due to increased demand and improved supply chain dynamics associated with certain components for renewable generation projects, as well as approximately $225 million in revenues attributable to acquired businesses. These increases were partially offset by approximately $35 million as a result of unfavorable foreign currency exchange rates.

Current wording

Revenues. The increase in revenues for the year ended December 31, 2024 was primarily due to increased demand for generation and transmission services for renewable generation projects, as well as approximately $320 million in revenues attributable to acquired businesses.

Previous wording

The increase in corporate and non-allocated costs during the year ended December 31, 2023 was primarily due to an aggregate increase of $75.0 million in costs primarily related to compensation expense, which was primarily attributable to non-cash stock compensation expense and salaries in support of business growth, and consulting fees. Also contributing to the increase was a $26.5 million increase in expense related to deferred compensation liabilities. Partially offsetting these increases was a $65.0 million decrease in intangible asset amortization primarily associated with backlog for Blattner, which was fully amortized by the third quarter of 2022.

Current wording

The increase in corporate and non-allocated costs during the year ended December 31, 2024 was primarily due to a $93.9 million increase in intangible asset amortization expense associated with recent acquisitions, including CEI, and a $36.0 million increase in compensation expense, which was primarily attributable to increased non-cash stock compensation and salary expense in support of business growth and associated with acquisitions.

Previous wording

As to certain of the items below, (i) non-cash stock-based compensation expense varies from period to period due to acquisition activity, changes in the estimated fair value of performance-based awards, forfeiture rates, accelerated vesting and amounts granted; (ii) acquisition and integration costs vary from period to period depending on the level and complexity of our acquisition activity; (iii) equity in (earnings) losses of non-integral unconsolidated affiliates varies from period to period depending on the activity and financial performance of such affiliates, the operations of which are not operationally integral to us; (iv) mark-to-market adjustments on investments vary from period to period based on fluctuations in the market price of such company’s common stock; (v) gains and losses on the sale of investments vary from period to period depending on activity; (vi) asset impairment charges vary from period to period depending on economic and other factors; and (vii) change in fair value of contingent consideration liabilities varies from period to period depending on the performance in post-acquisition periods of certain acquired businesses and the effect of present value accretion on fair value calculations. Because EBITDA and adjusted EBITDA, as defined, exclude some, but not all, items that affect net income attributable to common stock, such measures may not be comparable to similarly titled measures of other companies. The most comparable GAAP financial measure, net income attributable to common stock, and information reconciling the GAAP and non-GAAP financial measures, are included below. The following table shows dollars in thousands.

Current wording

As to certain of the items below, (i) non-cash stock-based compensation expense varies from period to period due to acquisition activity, changes in the estimated fair value of performance-based awards, forfeiture rates, accelerated vesting and amounts granted; (ii) acquisition and integration costs vary from period to period depending on the level and complexity of our acquisition activity; (iii) equity in (earnings) losses of non-integral unconsolidated affiliates varies from period to period depending on the activity and financial performance of such affiliates, the operations of which are not operationally integral to us; (iv) gains and losses on the sale of investments and businesses, and foreign currency translation losses recognized from substantial liquidation of certain foreign operations vary from period to period depending on activity; and (v) change in fair value of contingent consideration liabilities varies from period to period depending on the performance in post-acquisition periods of certain acquired businesses and the effect of present value accretion on fair value calculations. Because EBITDA and adjusted EBITDA, as defined, exclude some, but not all, items that affect net income attributable to common stock, such measures may not be comparable to similarly titled measures of other companies. The most comparable GAAP financial measure, net income attributable to common stock, and information reconciling the GAAP and non-GAAP financial measures, are included below. The following table shows dollars in thousands.

Previous wording

We have also historically disclosed our backlog, a measure commonly used in our industry but not recognized under GAAP. We believe this measure enables management to more effectively forecast our future capital needs and results and better identify future operating trends that may not otherwise be apparent. We believe this measure is also useful for investors in forecasting our future results and comparing us to our competitors. Our remaining performance obligations are a component of backlog, which also includes estimated orders under MSAs, including estimated renewals, and non-fixed price contracts expected to be completed within one year. Our methodology for determining backlog may not be comparable to the methodologies used by other companies.

Current wording

We have also historically disclosed our backlog, a measure commonly used in our industry but not recognized under GAAP. We believe this measure enables management to more effectively forecast our future capital needs and results and better identify future operating trends that may not otherwise be apparent. We believe this measure is also useful for investors in forecasting our future results and comparing us to our competitors. Our remaining performance obligations are a component of backlog, which also includes estimated orders under MSAs, including estimated renewals, and certain non-fixed price contracts. Our methodology for determining backlog may not be comparable to the methodologies used by other companies.

Previous wording

As of December 31, 2023 and 2022, MSAs accounted for 45% and 52% of our estimated 12-month backlog and 55% and 65% of our total backlog. Generally, our customers are not contractually committed to specific volumes of services under our MSAs, and most of our contracts can be terminated on short notice even if we are not in default. We determine the estimated backlog for these MSAs using recurring historical trends, factoring in seasonal demand and projected customer needs based upon ongoing communications. In addition, many of our MSAs are subject to renewal, and these potential renewals are considered in determining estimated backlog. As a result, estimates for remaining performance obligations and backlog are subject to change based on, among other things, project accelerations; project cancellations or delays, including but not limited to those caused by commercial issues, regulatory requirements, natural disasters, emergencies and adverse weather conditions; and final acceptance of change orders by customers. These factors can cause revenues to be realized in periods and at levels that are different than originally projected.

Current wording

As of December 31, 2024 and 2023, MSAs accounted for 38% and 45% of our estimated 12-month backlog and 48% and 55% of our total backlog. Generally, our customers are not contractually committed to specific volumes of services under our MSAs, and most of our contracts can be terminated on short notice even if we are not in default. We determine the estimated backlog for these MSAs using recurring historical trends, factoring in seasonal demand and projected customer needs based upon ongoing communications. In addition, many of our MSAs are subject to renewal, and these potential renewals are considered in determining estimated backlog. As a result, estimates for remaining performance obligations and backlog are subject to change based on, among other things, project accelerations; project cancellations or delays, including but not limited to those caused by commercial issues, regulatory requirements, natural disasters, emergencies and adverse weather conditions; and final acceptance of change orders by customers. These factors can cause revenues to be realized in periods and at levels that are different than originally projected.

Previous wording

The increases in remaining performance obligations and backlog from December 31, 2022 to December 31, 2023 were primarily attributable to multiple new project awards.

Current wording

The increases in both remaining performance obligations and backlog from December 31, 2023 to December 31, 2024 were partially due to the impact of acquisitions that occurred in the year ended December 31, 2024, as well as increased new project awards with existing customers.

Previous wording

(1) Amounts represent cash interest and other financing expenses associated primarily with our senior notes. Interest payments related to our senior credit facility and notes issued under our commercial paper program are not included due to their variable interest rates, and as it relates to the commercial paper program, the short-term nature of the borrowings. With respect to this variable rate debt, assuming the principal amount outstanding and interest rate in effect as of December 31, 2023 remained the same, the annual cash interest expense would be approximately $100.2 million, payable until October 8, 2026, the maturity date of our senior credit facility.

Current wording

(1) Amounts represent cash interest and other financing expenses associated primarily with our senior notes. Interest payments related to our senior credit facility and commercial paper program are not included due to their variable interest rates. With respect to this variable rate debt, assuming the principal amount outstanding and interest rate in effect as of December 31, 2024 remained the same, the annual cash interest expense would be approximately$42.1 million related to the term loan payable until October 8, 2026, the maturity date of the term loan, and$1.1 million related to the revolving loans payable until July 31, 2029, the maturity date of our senior credit facility.

Previous wording

(4) Amount primarily represents capital committed for the expansion of our vehicle fleet. Although we have committed to the purchase of these vehicles/equipment, at the time of their delivery, we expect that the majority of these orders will be assigned to third-party leasing companies and made available to us under certain of our master equipment lease agreements.

Current wording

(3)Amounts represent capital committed for the purchase of equipment. We expect that some of these orders will be assigned to third-party leasing companies and made available to us under certain of our master equipment lease agreements.

Previous wording

(5) Amounts represent capital committed for investments in unconsolidated affiliates, including $50.0 million related to a limited partnership interest in afund that targets investments in certain portfolio companies that operate businesses related to the transition to a reduced-carbon economy. Because we are unable to determine the timing of any such investments, we have included the entire amount of our capital commitment in the “Due Thereafter” column in the above cash requirements table.

Current wording

(5)Amounts represent estimates of capital commitments for investments in unconsolidated affiliates, including $45.0 million related to a limited partnership interest in afund that targets investments in certain portfolio companies that operate businesses related to the transition to a reduced-carbon economy.

Previous wording

Capital Allocation. Our capital deployment priorities that require the use of cash include: (i) working capital to fund ongoing operating needs, (ii) capital expenditures to meet anticipated demand for our services, (iii) acquisitions and investments to facilitate the long-term growth and sustainability of our business, and (iv) return of capital to stockholders, including through the payment of dividends and repurchases of our outstanding common stock. Our industry is capital intensive, and we expect substantial capital expenditures and commitments for equipment purchases and equipment lease and rental arrangements to be needed into the foreseeable future in order to meet anticipated demand for our services. We expect capital expenditures for property and equipment purchases for the year ended December 31, 2024 to be approximately $450 million. We also expect to continue to allocate significant capital to strategic acquisitions and investments, as well as to pay dividends and to repurchase our outstanding common stock and/or debt securities. During 2023, we completed the acquisition of five businesses in which a portion of the consideration, net of cash acquired, consisted of $651.6 million in cash funded with a combination of cash and cash equivalents and borrowings from our commercial paper program. In January of 2024, we completed the acquisition of two businesses in which a portion of the consideration consisted of $378.7 million in cash paid on the acquisition dates funded with a combination of cash and cash equivalents and borrowings from our commercial paper program. For additional information regarding these acquisitions, refer to Note 6 of the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data in Part II of this Annual Report.

Current wording

Capital Allocation. Our capital deployment priorities that require the use of cash include: (i) working capital to fund ongoing operating needs, (ii) capital expenditures to meet anticipated demand for our services, (iii) acquisitions and investments to facilitate the long-term growth and sustainability of our business, and (iv) return of capital to stockholders, including through the payment of dividends and repurchases of our outstanding common stock. Our industry is capital intensive, and we expect substantial capital expenditures and commitments for equipment purchases and equipment lease and rental arrangements to be needed into the foreseeable future in order to meet anticipated demand for our services. We expect capital expenditures for property and equipment purchases for the year ended December 31, 2025 to be approximately $500 million to $550 million. We also expect to continue to allocate significant capital to strategic acquisitions and investments, as well as to pay dividends and to repurchase our outstanding common stock and/or debt securities.

Previous wording

We anticipate that our future cash flows from operating activities, cash and cash equivalents on hand, existing borrowing capacity under our senior credit facility and ability to access capital markets for additional capital will provide sufficient funds to enable us to meet our cash requirements described above for the next twelve months and over the longer term.

Current wording

We anticipate that our future cash flows from operating activities, cash and cash equivalents on hand, existing borrowing capacity under our senior credit facility and commercial paper program and ability to access capital markets for additional capital will provide sufficient funds to enable us to meet our cash requirements for the next twelve months and over the longer term.

Previous wording

Cash flow from operating activities is primarily influenced by demand for our services and operating margins but is also influenced by the timing of working capital needs associated with the various types of services that we provide. Our working capital needs may increase when we commence large volumes of work under circumstances where project costs are required to be paid before the associated receivables are billed and collected. Additionally, operating cash flows may be negatively impacted as a result of unpaid and delayed change orders and claims. Changes in project timing due to delays or accelerations and other economic, regulatory, market and political factors that may affect customer spending could also impact cash flow from operating activities. Further information with respect to our cash flow from operating activities is set forth below and in Note 18 of the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data in Part II of this Annual Report.

Current wording

Cash flow from operating activities is primarily influenced by demand for our services and operating margins but is also influenced by the timing of working capital needs associated with the various types of services that we provide. Our working capital needs may increase when we commence large volumes of work under circumstances where project costs are required to be paid before the associated receivables are billed and collected. Working capital needs are generally higher during the summer and fall due to increased demand for our services when favorable weather conditions exist in many of our operating regions. Conversely, working capital assets are typically converted to cash during the winter. These seasonal trends can be offset by changes in project timing due to delays or accelerations and other economic factors that may affect customer spending, including market conditions or the impact of certain unforeseen events (e.g., regulatory and other actions that impact the supply chain for certain materials). Additionally, operating cash flows may be negatively impacted as a result of unpaid and delayed change orders and claims. Changes in project timing due to delays or accelerations and other economic, regulatory, market and political factors that may affect customer spending could also impact cash flow from operating activities. Further information with respect to our cash flow from operating activities is set forth below and in Note 18 of the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data in Part II of this Annual Report.

Previous wording

(2) Further information with respect to our cash and cash equivalents is set forth below and in Note 17 of the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data in Part II of this Annual Report. This amount includes $256.5 million in jurisdictions outside of the U.S., principally in Canada and Australia. There are currently no legal or economic restrictions that would materially impede our ability to repatriate such cash.

Current wording

(1)Further information with respect to our cash and cash equivalents is set forth below and in Note 17 of the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data in Part II of this Annual Report. This amount includes $259.8 million in jurisdictions outside of the U.S., principally in Australia. There are currently no legal or economic restrictions that would materially impede our ability to repatriate such cash.

Previous wording

We may also seek to access the capital markets from time to time to raise additional capital, increase liquidity as necessary, refinance or extend the term of our existing indebtedness, fund acquisitions or otherwise fund our capital needs. While our financial strategy and consistent performance have allowed us to maintain investment grade ratings, our ability to access capital markets in the future depends on a number of factors, including our financial performance and financial position, our credit ratings, industry conditions, general economic conditions, our backlog, capital expenditure commitments, market conditions and market perceptions of us and our industry.

Current wording

We may seek to access the capital markets from time to time to raise additional capital, increase liquidity as we deem necessary, refinance or extend the term of our existing indebtedness, fund acquisitions or otherwise fund our capital needs. While our financial strategy and consistent performance have allowed us to maintain investment grade ratings, our ability to access capital markets in the future depends on a number of factors, including our financial performance and financial position, our credit ratings, industry conditions, general economic conditions, our backlog, capital expenditure commitments, market conditions and market perceptions of us and our industry.

Previous wording

Net cash provided by operating activities of $1.58 billion and $1.13 billion in 2023 and 2022 primarily reflected earnings adjusted for non-cash items and cash used by the main components of working capital: “Accounts and notes receivable,” “Contract assets,” “Prepaid expenses and other current assets,” “Accounts payable and accrued expenses,” and “Contract liabilities.” Net cash provided by operating activities during the years ended December 31, 2023 and 2022 was negatively impacted by incremental working capital requirements and the timing of the associated billings related to the large renewable transmission project in Canada as discussed further in Note 4 of the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data in Part II of this Annual Report.

Current wording

Net cash provided by operating activities of $2.08 billion and $1.58 billion in 2024 and 2023 primarily reflected earnings adjusted for non-cash items and cash provided and used by the main components of working capital: “Accounts and notes receivable,” “Contract assets,” “Accounts payable and accrued expenses,” and “Contract liabilities.” Net cash provided by operating activities during the year ended December 31, 2023 was negatively impacted by incremental working capital requirements and the timing of the associated billings related to the large renewable transmission project in Canada as discussed further in Note 4 of the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data in Part II of this Annual Report.

Previous wording

Days sales outstanding (DSO) represents the average number of days it takes revenues to be converted into cash, which management believes is an important metric for assessing liquidity. A decrease in DSO has a favorable impact on cash flow from operating activities, while an increase in DSO has a negative impact on cash flow from operating activities. DSO is calculated by using the sum of current accounts receivable, net of allowance (which includes retainage and unbilled balances), plus contract assets less contract liabilities, and divided by average revenues per day during the quarter. DSO at December 31, 2023 was 68 days, which was lower than DSO of 75 days at December 31, 2022 and our five-year historical average DSO of 84 days. This decrease in DSO as compared to December 31, 2022 was partially due to an increase in contract liabilities related to favorable billing terms on certain large projects, increased revenues and improved collection of receivables in the fourth quarter of 2023. Although the decrease in DSO had a positive impact on cash flow from operating activities, increased unapproved change orders included in contract assets from the aforementioned large renewable transmission project in Canada continue to have a negative impact on DSO and cash flow from operating activities. Also negatively impacting cash flow from operating activities for 2023 was our prepayment of amounts to suppliers for certain project materials that require a long lead time.

Current wording

Days sales outstanding (DSO) represents the average number of days it takes revenues to be converted into cash, which management believes is an important metric for assessing liquidity. A decrease in DSO has a favorable impact on cash flow from operating activities, while an increase in DSO has a negative impact on cash flow from operating activities. DSO is calculated by using the sum of current accounts receivable, net of allowance (which includes retainage and unbilled balances), plus contract assets less contract liabilities, and divided by average revenues per day during the quarter. DSO at December 31, 2024 was 59 days, which was lower than DSO of 68 days at December 31, 2023 and lower than our five-year historical average DSO of 79 days. This decrease in DSO as compared to December 31, 2023 was partially due to increased revenues, an increase in contract liabilities and a decrease in contract assets related to favorable billing terms on certain large projects. Negatively impacting DSO and cash flow from operating activities for both the years ended December 31, 2024 and 2023 were unapproved change orders and claims included in contract assets from the aforementioned large renewable transmission project in Canada. Also negatively impacting cash flow from operating activities for 2023 was our prepayment of amounts to suppliers for certain project materials that require a long lead time.

Previous wording

Net cash used in investing activities in 2022 included $427.6 million of capital expenditures; $195.1 million related to acquisitions, primarily associated with a net working capital adjustment in connection with our acquisition of Blattner; and $78.1 million of cash paid primarily for equity method and non-marketable securities. Partially offsetting these items were $64.1 million of proceeds from the sale of, and insurance settlements related to, property and equipment and $20.6 million of cash received from the sale of investments.

Current wording

Net cash used in investing activities in the year ended 2024 included $1.75 billion related to acquisitions, $604.1 million of capital expenditures and $81.9 million cash paid primarily for non-integral equity method investments. Partially offsetting these items were $77.6 million of proceeds from the sale of, and insurance settlements related to, property and equipment; $31.4 million of proceeds from the disposition of a non-core business; and $29.2 million of proceeds from the sale of a non-integral equity investment.

Previous wording

Net cash used in investing activities in the year ended 2023 included $651.6 million related to acquisitions and $434.8 million of capital expenditures. Partially offsetting these items were $69.3 million of proceeds from the sale of, and insurance settlements related to, property and equipment and $42.3 million of cash received from the sale of investments.

Current wording

Net cash used in investing activities in 2023 included $651.6 million related to acquisitions and $434.8 million of capital expenditures. Partially offsetting these items were $69.3 million of proceeds from the sale of, and insurance settlements related to, property and equipment and $42.3 million of proceeds from the sale of certain non-integral equity investments.

Previous wording

Net cash used in financing activities in the year ended December 31, 2022 included $127.8 million of common stock repurchases, $82.6 million of payments to satisfy tax withholding obligations associated with stock-based compensation; $41.1 million of dividends; and $23.4 million of net payments under our senior credit facility and commercial paper program.

Current wording

In July 2024, we entered into, and borrowed the full amount available under, a $400.0 million 90-day term loan facility outside of our senior credit facility and utilized these borrowings, together with $1.20 billion of borrowings under our commercial paper program and cash on hand, to finance the acquisition of CEI, as well as pay certain related costs and expenses and fund certain working capital requirements. On August 9, 2024, we received net proceeds from the issuance of senior notes of $1.24 billion, net of the original issue discount and underwriting discounts, and used the proceeds to repay certain borrowings utilized to acquire CEI, including the full amount of the short-term term loan. Net cash provided by financing activities in the year ended December 31, 2024 included $830.8 million of net repayments under our senior credit facility and commercial paper program. Additionally, on October 1, 2024, we repaid the $500.0 million aggregate principal amount of 0.95% senior notes due October 2024. Financing costs paid directly by us during the year ended December 31, 2024 were $7.6 million, which related to the August 2024 issuance of senior notes, the short-term term loan and the amendment of our senior credit facility. Net cash used in financing activities in the year ended December 31, 2024 also included $155.6 million of payments to satisfy tax withholding obligations associated with stock-based compensation and the payment of $54.2 million of dividends.

Previous wording

The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities known to exist as of the date the consolidated financial statements are published and the reported amounts of revenues and expenses recognized during the periods presented. We review all significant estimates affecting our consolidated financial statements on a recurring basis and record the effect of any necessary adjustments prior to their publication. Judgments and estimates are based on our beliefs and assumptions derived from information available at the time such judgments and estimates are made. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of financial statements. There can be no assurance that actual results will not differ from those estimates. Management has reviewed its development and selection of critical accounting estimates with the audit committee of our Board of Directors. Our accounting policies are primarily described in Notes 2 and 4 of the Notes to Consolidated Financial

Current wording

The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities known to exist as of the date the consolidated financial statements are published and the reported amounts of revenues and expenses recognized during the periods presented. We review all significant estimates affecting our consolidated financial statements on a recurring basis and record the effect of any necessary adjustments prior to their publication. Judgments and estimates are based on our beliefs and assumptions derived from information available at the time such judgments and estimates are made. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of financial statements. There can be no assurance that actual results will not differ from those estimates. Management has reviewed its development and selection of critical accounting estimates with the Audit Committee of our Board of Directors. Our accounting policies are primarily described in Notes 2 and 4 of the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data in Part II of this Annual Report and should be read in conjunction with the accounting policies identified below that we believe affect our more significant estimates used in the preparation of our consolidated financial statements.

Previous wording

Refer to Contract Estimates and Changes in Estimates in Note 4 of the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data in Part II of this Annual Report for a description of a variety of factors that can cause changes in estimates and how changes in estimates on certain contracts may result in the issuance of change orders or claims under contracts for our projects. The quantitative impacts of changes in estimates and change orders and claims are also included therein.

Current wording

Refer to Contract Estimates and Changes in Estimates in Note 4 of the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data in Part II of this Annual Report for a description of a variety of factors that can cause changes in estimates and how changes in estimates on certain contracts may result in the issuance of change orders or claims under contracts for our projects. The quantitative impacts of changes in change orders and claims are also included therein.

Previous wording

Due to the significant judgments utilized in the revenue and cost estimation process, if subsequent actual results and/or updated assumptions or estimates were to change from those utilized as of December 31, 2023, it could result in a material impact to our results of operations. As described in Note 4 of the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data in Part II of this Annual Report, under fixed price contracts, as well as unit-price contracts with more than an insignificant amount of partially completed units, revenue is recognized as performance obligations are satisfied over time. Approximately 56.5% of our revenues recognized during the year ended December 31, 2023 were associated with this revenue recognition method. There were no material changes in estimates impacting revenues or gross profit during the years ended December 31, 2023, 2022 and 2021 other than a 5.7% favorable impact to gross profit that resulted from net positive changes in estimates across a large number of projects in the year ended December 31, 2021, primarily as a result of favorable performance and successful mitigation of risks and contingencies as the projects progressed to completion.

Current wording

Due to the significant judgments utilized in the revenue and cost estimation process, if subsequent actual results and/or updated assumptions or estimates were to change from those utilized as of December 31, 2024, it could result in a material impact to our results of operations. As described in Note 4 of the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data in Part II of this Annual Report, under fixed price contracts, as well as unit-price contracts with more than an insignificant amount of partially completed units, revenue is recognized as performance obligations are satisfied over time, with the percentage of completion generally measured as the percentage of costs incurred to total estimated costs for such performance obligation. Approximately 60.0% of our revenues recognized during the year ended December 31, 2024 were associated with this revenue recognition method. Refer to Contract Estimates and Changes in Estimates in Note 4 of the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data in Part II of this Annual Report for a description of the impacts in changes in estimates on revenue and gross profit during the years ended December 31, 2024, 2023 and 2022.

Previous wording

Collectibility of Accounts Receivable and Contract Assets

Current wording

Collectability of Accounts Receivable and Contract Assets