Quanta Services : 4Q23 and Full-Year 2023 Operational & Financial Commentary

February 22, 2024

Fourth Quarter and Full-Year 2023 Operational and Financial Commentary

This document is a supplement to our press release reporting fourth quarter and full-year 2023 results for Quanta Services, Inc. (Quanta, we, us or our). Our earnings release was previously distributed by Cision and can also be found in the Investor Relations section of our website at quantaservices.com, along with other related supplemental materials. Please see the Cautionary Statement About Forward-Looking Statements and Information, as well as further information and reconciliations with respect to non-GAAP financial measures, in the Appendix of this document.

Summary

We closed out the year delivering double-digit growth in revenues and earnings as compared to 2022 and achieved multiple financial metric records, which we believe is indicative of robust demand for our services and good execution. Of note, Quanta has produced record revenues six of the last seven years, six consecutive years of record adjusted EBITDA and seven consecutive years of record adjusted diluted earnings per share. These results were made possible by our more than 50,000 dedicated employees and our industry leading operational and financial platform.

We are positioning Quanta to provide solutions that enable decades of expected infrastructure investment driven by the energy transition, technology advancements and grid resilience and security initiatives. We believe our operational portfolio is a strategic advantage that helps us manage risks and shift resources across service lines and geographies. We believe our portfolio approach positions us well to allocate resources to pursue a broad set of opportunities that are economically attractive and create operating efficiencies, improved returns and consistent financial results.

4Q23 and Full-Year 2023 Financial Highlights

*Refer to the Appendix for a definition of this non-GAAP financial measure and a reconciliation of this measure to its most directly comparable GAAP measure, as define below.

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Select Full-Year 2023 Accomplishments

2023 was a significant year for Quanta, with strategic, operational and financial accomplishments throughout. We believe 2023 represents a transition year to an expected multi-decade infrastructure investment cycle, and we look forward with excitement at our multi-year strategic goals that we expect to achieve in 2024 and beyond. Our innovative approach to our infrastructure solutions and portfolio of services, coupled with our passion for working collaboratively with our clients to support their success, positions us to be a critical partner in enabling the energy transition for years to come.

Here are some of our accomplishments in 2023:

• Our Electric Power Infrastructure Solutions segment and our Renewable Energy Infrastructure Solutions segment both generated record revenues, with Renewable Energy Infrastructure Solutions growing more than 60% as compared to 2022, and both segments achieving record backlog during 2023, a testament to the quality of our customer base and the demand for our industry-leading solutions;
• We generated record levels of cash flow from operations and free cash flow and achieved another year of improved return on invested capital;
• We successfully advanced our strategic supply chain initiative, both organically and through the acquisition of Pennsylvania Transformer Technology (PTT). Demand for transformers is expected to continue to increase as grid modernization, electrification and energy-transition initiatives accelerate over the coming years and supply has not kept pace. We believe there is opportunity to expand PTT's production capacity and drive more synergies across Quanta;
• Quanta was selected by Pattern Energy for theSunZia Transmission and SunZia Wind projects, which together comprise the largest clean energy infrastructure project in United States history. We believe these awards validate the power of our combined high-voltage transmission and renewable generation solutions and demonstrate the value of our collaborative approach to providing comprehensive energy transition infrastructure solutions;
• We continue to deploy capital into value-creating opportunities, as evidenced by the acquisition of five businesses located in the United States, each of which is expected to enhance our services to our electric power and renewable energy customers and strengthen our competitive position in the marketplace;
• Our front-end solutions based approach continues to improve our ability to capture more of the programmatic and capital spend of our customers;
• LUMA Energy, LLC (LUMA), our joint venture in Puerto Rico, is improving the electric grid and revitalizing the utility workforce in Puerto Rico. During 2023, LUMA increased system reliability with the installation of 350 MW of new generation, launched an innovative Customer Battery Emergency sharing program that has been utilized four times to avoid blackouts, surpassed 80,000 net-metering customers, which places Puerto Rico within the top five distributed solar markets in the United States, and completed the LUMA upskill training program and certification for over 200 former PREPA workers, while also expanding the only U.S. Department of Labor certified line worker apprentice program in Puerto Rico; and
• Solar Power Worldnamed Quanta as the top solar infrastructure solutions provider in the United States and Engineering News Record awarded Quanta it's highest honor, the Award of Excellence, for our leadership in safety and training.

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4Q23 Financial Results and Commentary

Electric Power Infrastructure Solutions Segment (Electric Power)

* Operating Income Margins are calculated by dividing operating income by revenues

Our Electric Power segment operations performed well, with revenues of $2.5 billion, which resulted in full year 2023 revenues of $9.7 billion, in line with our expectations. Performance in this segment is driven by consistent volumes of base business activity from utility grid modernization, grid security and system hardening initiatives. Quarterly segment operating income margin exhibited normal seasonality, with operating income margin for the fourth quarter and full year of 10.5%, consistent with our expectations and within the range we expect from the Electric Power segment on a recurring full-year basis. Of note, our communications operations, which are included in the Electric Power segment, executed well, with double-digit revenue growth and double-digit operating income margin for the full year of 2023. We believe these results reflect our collaborative approach with our customers aimed at providing long-term value, as well as solid execution.

*Refer to the Appendix for a definition and reconciliation of this non-GAAP financial measure to its most directly comparable GAAP measure

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Demand for our electric power infrastructure solutions remains strong, as evidenced by backlog of $15.5 billion at year-end 2023. Accordingly, we continue to invest in resources to support the anticipated start-up of multiple, multi-year utility programs and projects. Utilities across the United States are experiencing and forecasting meaningful increases in power demand for the first time in many years, driven by various factors: adoption of new technologies, federal and state policies designed to accelerate the energy transition and policies intended to strategically reinforce domestic manufacturing and supply chain resources. Growing internet traffic and cloud computing have increased the development of data centers, which are power intensive and are straining grid capacity in some areas, and are also creating grid interconnection opportunities. Increasing adoption of artificial intelligence technologies, which add significantly more power and processing demands to data centers, is expected to further increase load and require grid upgrades and enhancements. A number of utilities have recently highlighted these dynamics as the rationale for increasing their multi-year load forecasts and multi-year capex plans.

Source: Grid Strategies - The Era of Flat Power Demand is Over, Dec. 2023

Electric vehicle (EV) penetration is beginning to pressure the electric distribution system in some areas, and we continue to believe EV adoption in North America is in the early stages of a long-term transition and that large capital investment in the electric power grid is required to accommodate growing EV load demand over time. We do not believe it is a question of if EV adoption increases but how fast the increase will be. We expect that the issue in the near to medium term in most regions will not be the ability of supply to meet overall EV load demand, but instead the inability to move supply to areas with accelerating EV-driven load demand through the current distribution system. We believe managing the pace of EV adoption will be one of the biggest challenges facing our industry and that we are uniquely positioned to work with our clients to address this challenge.

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Renewable Energy Infrastructure Solutions Segment (Renewable Energy)

* Operating Income Margins are calculated by dividing operating income by revenues

The Renewable Energy segment had a strong finish to the year, with revenues of $2.0 billion in the fourth quarter of 2023, which resulted in full-year 2023 revenues of $6.2 billion, higher than we expected. The strong performance was primarily due to the increase of renewable generation project activity, including solar, wind and battery storage projects. High-voltage electric transmission and substation services also remained active. Coming off the first quarter low that was negatively impacted by pronounced growth costs, exacerbated by solar panel delays and Canadian pressure, segment operating income margins continued their quarterly improvement through the year, closing out the year with operating income margin of 8.9% in the fourth quarter. Full-year 2023 operating income margins of 7.7% were slightly lower than our previous expectation due to project variability and higher than anticipated early-stage project activities. As discussed in previous quarters, early stage project activities typically have a lower margin profile as risk contingencies are included in the cost to complete, which can change based on project execution.

*Refer to the Appendix for a definition and reconciliation of this non-GAAP financial measure to its most directly comparable GAAP measure

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Renewable Energy segment total backlog reached $8.1 billion as of year-end 2023, driven by various renewable generation, transmission and substation projects, as well as the addition of the final portion of the SunZia wind contract. We believe the segment's rapid backlog growth reflects our strong client partnerships, our collaborative, solutions-based approach and our ability to scale our resources and safely execute our work.

We believe demand for the infrastructure solutions we provide to the renewable industry is gaining momentum as the energy transition accelerates. We are making necessary investments to scale our resources and increase our capacity to handle large-scale,multi-year renewable programs that we expect will yield record levels of revenues over the long term, driven by the acceleration of North America's energy transition and the expected favorable effect of the Inflation Reduction Act. Additionally, we are pursuing billions of dollars of high-voltage transmission projects that are designed to support the connectivity of current and future renewable generation capacity growth and overall system reliability. We believe our visibility into the timing of these transmission projects materializing is improving and that we are well positioned to compete for future awards.

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Underground Utility & Infrastructure Solutions Segment (Underground and Infrastructure)

* Operating Income Margins are calculated by dividing operating income by revenues

The Underground and Infrastructure segment delivered solid results, with revenues of $1.3 billion in the fourth quarter of 2023 and $5.0 billion for the full year 2023, which were greater than we expected and were driven by higher volumes of both base business and Canadian larger pipeline project activity. Segment operating income margins exhibited normal seasonal trends during the year, with operating income margin for the fourth quarter and full year of 6.6% and 7.5%, respectively, in line with our expectations. We believe these results demonstrate strong execution and demand for our industrial solutions and our gas utility and pipeline integrity operations, which are driven by recurring critical-path maintenance requirements and regulated spend dedicated to modernizing systems, reducing methane emissions, ensuring environmental compliance and improving safety and reliability. We see opportunities for growth in 2024 from our industrial services solutions, which are performing well and approached record revenue levels in 2023, as well as from our gas utility operations. Additionally, we continue to improve our resource utilization by leveraging our underground resources to perform underground electric work, which is recognized in our Electric Power segment, demonstrating the flexibility and versatility of our solutions portfolio.

In order to capitalize on the demand for our industrial operations and expand our suite of solutions, in January 2024, we acquired Evergreen North America Industrial Services (Evergreen), a business that provides specialty environmental solutions to a diverse cross section of industrial facilities. Because of minimal service line or customer overlap, we believe this historically margin accretive business complements our existing operations and provides us with cross-selling capabilities to new and existing clients. These growth synergies are not included in our 2024 expectations.

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*Refer to the Appendix for a definition and reconciliation of this non-GAAP financial measure to its most directly comparable GAAP measure

Total backlog for the Underground and Infrastructure segment was $6.5 billion, which was lower than the third quarter of 2023 due to progress on larger pipeline projects that are nearing completion, as well as normal seasonality. We believe there is opportunity for larger pipeline projects to materialize during 2024, as well as continued base business growth due to volumes from master service agreements (MSAs) and small project awards. Given seasonality and normal variability of project awards, we expect segment backlog to fluctuate during the course of 2024, but expect steady base business growth opportunities in the low to mid-single digits on a multi-year, compound annual growth rate (CAGR) basis, consistent with our April 2022 investor day commentary.

Consolidated Backlog

*Refer to the Appendix for a definition and reconciliation of this non-GAAP financial measure to its most directly comparable GAAP measure

At December 31, 2023, total backlog was $30.1 billion, a new high, despite normal fourth quarter seasonality and strong revenue growth during the quarter. Of note, roughly $500 million of our backlog is attributable to acquisitions in the fourth quarter of 2023. The slight reduction in total backlog from our existing operations was attributable to the normal burn of multi- year MSAs and the general timing of project awards. Our twelve-month backlog was $17.2 billion, also a record level, and is

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indicative of growth in demand for our solutions across our end markets. We expect to achieve record backlog again in 2024 based on the pipeline of activity we are actively pursuing and believe there are opportunities for record backlog in future years as we plan with our customers to provide complete solutions for their multi-year programs and projects.

Free Cash Flow & Days Sales Outstanding

Cash flow in the fourth quarter of 2023 was very strong, with net cash provided by operating activities of $1.0 billion and free cash flow of $915.5 million, both quarterly records, resulting in free cash flow for the year of $1.2 billion, $200 million greater than the previous high end of our expectations. This free cash flow performance was driven by improved collections during the fourth quarter and contractual payments received prior to year-end on several projects. As previously discussed, our Renewable Energy segment typically has a favorable working capital profile, and as volumes continue to increase, we expect improved cash flow dynamics.

*Refer to the Appendix for the definition of Free Cash Flow, a non-GAAP financial measure, and a reconciliation to Net Cash Provided by Operating Activities **Refer to the Appendix for the definition of Days Sales Outstanding

DSO measured 68 days in the fourth quarter of 2023, driven by the previously mentioned improved collections and certain contractual payments received prior to year-end. Regarding the Canadian renewable transmission project discussed in prior quarters, we continue to have favorable discussions with the customer regarding significant portions of the balance, which represented 7 to 8 days of DSO in the fourth quarter of 2023, and we remain confident in our position.

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Balance Sheet & Liquidity

As of December 31, 2023, we had total liquidity of approximately $2.8 billion and a debt-to-EBITDA ratio of 1.8 as calculated under our credit agreement. We measure capital deployment opportunities against return opportunities presented through stock repurchases, and we see an active pipeline of strategic opportunities that we believe have the ability to drive significant stockholder value. In January 2024, we acquired two businesses; the previously mentioned environmental solutions provider to the industrial and petrochemical markets and a supplier of specialty tools and supplies to the utility and renewable markets, for aggregate consideration of approximately $425 million.

*Net Debt to EBITDA Ratio, as calculated under the credit agreement for our senior credit facility.

*Refer to the Appendix for a definition and reconciliation of this non-GAAP financial measure to its most directly comparable GAAP measure

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