Quanta Services Q3 2021 Earnings Call Transcript

Quartr
Provided by Quartr
November 3, 2021

Key Takeaways

  • Quanta delivered **record Q3 2021 results**, with revenues of $3.4 billion, all‐time high adjusted EBITDA and EPS, and a record $17 billion backlog supported by strong customer collaboration and favorable market dynamics.
  • The company closed the $2.7 billion acquisition of Blattner, gaining premier utility‐scale renewable generation capabilities and positioning Quanta as a leading enabler of North America’s energy transition.
  • Electric Power Solutions achieved **record revenues and robust margins**, driven by grid modernization and system hardening projects, multiyear utility MSAs, and ~$230 million in high‐margin emergency restoration work following Hurricane Ida.
  • Underground Utility & Infrastructure Solutions saw strong demand for gas distribution and pipeline integrity services, and is expanding into hydrogen blending pilots, carbon sequestration pipelines, and renewable biofuel processing facilities.
  • Quanta raised its 2021 guidance to $12.55–12.85 billion in consolidated revenues and $4.62–4.87 in adjusted EPS, while preserving investment-grade ratings and maintaining disciplined capital allocation.
AI Generated. May Contain Errors.
Earnings Conference Call
Quanta Services Q3 2021
00:00 / 00:00

There are 14 speakers on the call.

Operator

Hello, and welcome to the Quanta Services Third Quarter 2021 Earnings Call and Webcast. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Kip Rupp, Investor Relations for Quanta Services.

Operator

Please go ahead.

Speaker 1

Thank you, and welcome, everyone, to the Quanta Services Third Quarter 2021 Earnings Conference Call. This morning, we issued a press release announcing our 3rd quarter results, which can be found in the Investor Relations section of our website at quantaservices.com, along with a summary of our 2021 outlook and commentary we will discuss this morning. Additionally, we will use a slide presentation this morning to accompany our prepared remarks, which is viewable through the call's webcast and is also available on the Investor Relations section of Please remember that information reported on this call speaks only as of today, November 4, 2021, And therefore, you are advised that any time sensitive information may no longer be accurate as of any replay of this call. This call will include forward looking statements intended to qualify under the Safe Harbor from liability established by the Private Securities Litigation Reform Act of 1995. These include all statements reflecting Quanta's Expectations, intentions or beliefs about future events or performance that do not solely relate to historical or current facts.

Speaker 1

Forward looking statements involve certain risks, uncertainties and assumptions that are difficult to predict or beyond Quanta's control, and actual results may differ materially from those expressed or implied. For additional information concerning some of these risks, uncertainties and assumptions, please refer to the cautionary language included in today's press release, Along with the company's periodic reports and other documents filed with the Securities and Exchange Commission, which are available on Quanta's or the SEC's website. You should not place undue reliance on forward looking statements, and Quanta does not undertake any obligation to update such statements and disclaims any written or oral statements made by any third party regarding the subject matter of this call. Please also note that we will present certain historical and forecasted Non GAAP financial measures in today's call, including adjusted diluted EPS, backlog, EBITDA and free cash flow. Reconciliations of these measures to their most directly comparable GAAP financial measures are included in our earnings release.

Speaker 1

Lastly, if you would like to be notified when Quanta publishes news releases and other information, please sign up for e mail alerts through the Investor Relations section of quantaservices.com. We also encourage investors and others interested in our company to follow Quanta IR and Quanta Services on the social media With that, I would like to now turn the call over to Mr. Duke Austin, Quanta's President and CEO.

Speaker 2

Duke? Thanks, Kipp. Good morning, everyone, and welcome to the Quanta Services Third Quarter 2021 Earnings Conference Call. On the call today, I will provide operational and strategic commentary and will then turn it over to Derek Jensen, Kona's Chief Financial Officer, We will provide a review of our Q3 results and full year 2021 financial expectations. Following Derek's comments, we welcome your questions.

Speaker 2

This morning, we reported solid third quarter results, which included a number of record financial metrics, including revenues, Adjusted EBITDA and earnings per share. Additionally, total backlog of $17,000,000,000 at the end The quarter was also a record, which we believe reflects the benefits of our collaborative approach with the customers, Favorable end market dynamics and continued advancement of our long term growth strategies. As many of you are aware, several weeks ago, we completed the previously announced acquisition of Blattner, Which is a premier utility scale renewable energy infrastructure solutions provider in North America with decades of experience and a strong safety culture. We believe the energy transition in North America is on the cuff of a significant acceleration and that moving to a carbon neutral economy We will require sizable and decades long investment in renewable generation and related infrastructure. We believe this transaction puts Quanta in a unique position to enable the energy infrastructure for North America's energy transition.

Speaker 2

Since announcing our intention to acquire Glatner in early September, customer reactions and conversations across our customer base Have been overwhelmingly positive and supportive. Further, we previously commented about how remarkably Similar, Quanta and Blattner are operationally and culturally, which has become increasingly apparent through working with the Blattner management team on integration. We were all excited about our combined growth opportunities when we first announced the transaction. And I can tell you that today, We're even more excited and increasingly confident in the value proposition, innovative solutions and growth synergy opportunities Aquana and Plattner are positioned to provide existing and new customers. Now turning the call to our operating results.

Speaker 2

Our Electric Power Solutions operations continued to perform well with record revenues and strong margins, Driven by robust demand for our services, solid and safe execution, high utilization of our resources and operational excellence. We are proud of our execution and confident that our strong market position will allow us to capitalize on future opportunities created by favorable long term trends driving utility investment and demand for our comprehensive solutions. Demand for grid modernization, system hardening and renewable energy interconnection services remain active and discussions around opportunities For our electric vehicle infrastructure installation and program management capabilities continue to advance. Our electric power backlog remains strong, driven primarily by significant multiyear master service agreements with utilities, which adds to the substantial MSA backlog growth we generated in the first half of this year. During the quarter, Hurricane Ida made landfall over Louisiana, which ultimately left 1,200,000 customers across 8 states without power, including 1,000,000 outages in Louisiana alone.

Speaker 2

Quanta deployed significant resources to support Utility customers whose electric power infrastructure was damaged or destroyed by the hurricane, including more than 2,500 line workers And front end support services and engineering staff. Our comprehensive response resulted in record emergency restoration revenue And highlights our ability to quickly mobilize substantial resources to support our customers in times of need. Our customers continue to advance their efforts to achieve carbon neutrality over the coming decades, which is planned to be achieved In large part through increasing renewable generation investment, we believe public policy and the positive general sentiment Supporting a greener environment will drive North America's power generation mix increasingly towards renewables over the near and longer term. Flatir's utility scale renewable generation solutions coupled with Quanta's complementary and holistic grid solutions creates a unique value proposition and opportunity to collaborate with our customers to shape their energy transition initiatives. For example, Bladger is currently constructing more than 30 utility scale renewable energy projects across the country And another Quanta company is currently working on the largest solar powered battery storage project in North America.

Speaker 2

Additionally, we are seeing accelerated demand for our services that enable renewable generation, including transmission interconnections And substations. We continue to scale our communication operations and progress our strategy. For example, we have developed our wireless capabilities and are expanding our wireless services into certain markets. Communications revenues grew significantly in the Q3 as compared to last year. And though we incurred higher costs on certain jobs Due to descoping of certain contracts and project closeouts, which impacted profitability for these operations, These issues were not meaningful to the overall electric power segment or Aquana as a whole.

Speaker 2

Nevertheless, Demand for our communication services remains high and the majority of our communication operations are performing at or near our double digit margin targets. Our underground utility and infrastructure solutions segment generally performed well in the quarter Despite being impacted by work disruptions along the Gulf Coast due to Hurricane Ida and work inefficiencies associated with the recent surge of the COVID-nineteen delta variant in certain areas. We continue to experience solid demand for our gas and pipeline integrity services, which are driven by regulated spend to modernize systems, reduce methane emissions, Ensure environmental compliance and improve safety and reliability. We expect our industrial services To strengthen through next year along with the continued recovery of the global economy and demand for refined products As well as the return of our customer maintenance and capital spending that was previously deferred due to the effects of COVID-nineteen on the downstream market. Looking to the coming years, we believe the opportunity Quanta has with customers in this segment as they increasingly pursue strategies to reduce their carbon footprint and diversify their operations and assets towards greener business opportunities may be underestimated.

Speaker 2

There are several examples of such initiatives and project opportunities. Gas utilities are implementing system modernization initiatives That position them to blend hydrogen into their natural gas flow. To that end, Quanta is working with several gas utility customers on hydrogen pilot programs. Certain refiners are building renewable and biofuel processing facilities, which could create opportunities for our industrial services. Natural gas power plants are also exploring blending hydrogen with natural gas as a fuel source to power their turbines, which could create opportunities for our pipeline infrastructure Lastly, we are actively pursuing carbon sequestration projects in the United States, which could utilize our engineering and pipeline construction services.

Speaker 2

In Canada, Pembina Pipeline and TC Energy I propose a plan to jointly develop a carbon transportation and sequestration system called the Alberta Carbon Grid, which is envisioned to serve as the backbone of Alberta's carbon capture utilization and storage industry and could include participation by other pipeline companies. The initiative would leverage existing pipelines, requires new pipeline and facility investment, which when fully constructed would be capable of transporting more than 20,000,000 tons of carbon dioxide annually. The North American energy transition is just that, a transition process. The role our electric power infrastructure solutions play in the energy transition is clear. However, we believe Quanta's underground utility and infrastructure solutions operations could play an evolving and increasing role And this transition in support of our customers' carbon reduction initiatives.

Speaker 2

Progress continues in Washington D. C. Towards enacting the bipartisan infrastructure build and the Build Back Better plan. As commented on prior calls, our positive multiyear outlook and strategic plan are not reliant on either of these packages. But if either or both enacted, they could provide incremental opportunity for Quanta over both the near and longer term.

Speaker 2

These packages include funding and policies to encourage new infrastructure development and modernization in several of our core markets. In particular, the Build Back Better plan currently contains policy and incentives representing the largest clean energy legislative package While additional political steps are still required, we are encouraged by what we've seen recently. We have profitably grown the company and executed well this year and expect to continue to do so. We are confident in the strategic initiatives we are executing on, the competitive position we have in the marketplace and our positive multiyear outlook. We also believe that our business and opportunities for profitable growth in 2022 are gaining momentum, driven by our solution based approach, The growth of programmatic spending with existing and new customers, opportunities for larger electric transmission projects, The addition of Blattner's renewable generation solutions and the opportunity for recovery of certain portions of our business that have been affected by the global pandemic.

Speaker 2

Looking to the medium and longer term, as energy transition and carbon reduction initiatives are increasingly implemented, In addition to the primary drivers of our business currently, we believe our visibility could increase and our growth opportunities could expand and accelerate. We believe the infrastructure investment and renewable generation necessary to support these initiatives are still in the early stages of deployment And that this is arguably the most exciting time in Quanta's history. We are focused on operating the business for the long term and expect to continue to distinguish ourselves through safe execution and best in class field leadership. We will pursue opportunities to Enhance Quanta's base business and leadership position in the industry and provide innovative solutions to our customers. We believe Quanta's diversity, Unique operating model and entrepreneurial mindset form the foundation that will allow us to continue to generate long term value for our stakeholders.

Speaker 2

I I will now turn the call over to Derek Jensen, our CFO, for his review of our Q3 results and 2021 expectations. Derek? Thanks, Duke, and

Speaker 1

good morning, everyone. Today, we announced record Q3 2021 revenues of $3,400,000,000 Net income attributable to common stock was $174,000,000 or $1.21 per diluted share And adjusted diluted earnings per share, a non GAAP measure was $1.48 Our electric power revenues were $2,300,000,000 A quarterly record and a 10% increase when compared to the Q3 of 2020. This increase was driven by continued favorable dynamics across our core utility and communications markets and associated demand for our services. Also contributing to the increase were revenues from acquired businesses Electric segment operating income margins in 3Q 2021 were 12.4%, Slightly lower than 12.7% in 3Q 'twenty, but better than our initial expectations. Operating margins benefited from record emergency restoration revenues of approximately $230,000,000 which typically present opportunities for higher margins than our normal base business activities due to higher utilization as well as overall solid execution across our electric operations.

Speaker 1

Additionally, segment margins benefited from approximately $10,000,000 of income associated with our Luma joint venture. Otherwise, the slight reduction in operating margin versus prior year was attributable to normal job variability and mix of work And our communications operations, which delivered mid single digit margins during the quarter. As a reminder, last year's Q3 Electric Power results also included what Structures segment revenues were $1,020,000,000 for the quarter, 12% higher than 3Q 'twenty due primarily to increased Revenues from Gas Distribution and Industrial Services. Though our operations experienced increased activity year over year, Current quarter revenues and margins in our industrial operations were negatively impacted by disruptions along the Gulf Coast attributable to Hurricane Ida and both our industrial and non U. S.

Speaker 1

Markets within this segment remain pressured by COVID-nineteen dynamics. 3rd quarter operating income margins for the segment were 6.7%, a 170 basis points lower than 3Q 'twenty, But generally in line with our expectations, margins for the year, margins for the Q3 of 2020 benefited from favorable adjustments on certain pipeline projects with both scope changes and favorable closeouts in the quarter. Was $17,000,000,000 at the end of the 3rd quarter, the 5th consecutive quarter we have posted record total backlog. Additionally, 12 month backlog of $9,800,000,000 also represents a quarterly record. Our backlog growth continues to be driven primarily by multiyear MSA programs With North American Utilities, which we believe reinforces the repeatable and sustainable nature of the largest portion of our revenues and earnings.

Speaker 1

The Blattner acquisition occurred after September 30 and accordingly their backlog is not included in our current reported levels. However, the total backlog from Blattner and the other 4Q acquisitions is approximately $1,800,000,000 For the Q3 of 2021, we generated negative free cash flow, a non GAAP measure of $40,000,000 compared to $70,000,000 of positive free cash Net cash provided by operating activities during the Q3 of 2021, Although largely in line with our expectations, it was down due to higher revenues and corresponding increases in working capital demands compared to prior year, which benefited from lower revenues and a corresponding lower use of working capital. Also, 3Q 'twenty benefited from the deferral of $41,000,000 payroll taxes in accordance with the CARES Act, 50% of which are due by December 31, 2021, with the remainder due by December 31, 2022. Partially offsetting these dynamics was the favorable impact of increased earnings as compared to 3Q 'twenty. Days sales outstanding or DSO measured 89 days for the Q3 of 2021, an increase of 7 days compared to the Q3 of 2020 And an increase of 6 days compared to December 31, 2020.

Speaker 1

The increase was primarily due to elevated working capital requirements associated with 2 large Canadian transmission projects driving an increase in contract assets. Specific to the Canadian projects, both continue to encounter work stoppage protocols in Canada associated with COVID mitigation as well as delays attributable to among other things wildfires impacting access to worksites. These dynamics created substantial inefficiencies and production delays resulting in increased project costs. We are in active discussions with both customers regarding change orders associated with these increased costs, some of which have already been approved with the remaining amounts being pursued in the normal course. In addition, normal variability in work production and associated payment cycles across our operations contributed to slightly higher DSO in the quarter.

Speaker 1

As Duke discussed and as we previously announced, we closed on the acquisition on October 13. Prior to the closing, in September 2021, we issued $1,500,000,000 aggregate principal amount of senior notes With a weighted average interest rate of 2.12 percent, receiving net proceeds of $1,480,000,000 Accordingly, as of quarter end, we had approximately $1,700,000,000 of cash. Subsequent to the quarter, we amended our credit agreement to among other things Provide a term loan facility of $750,000,000 which was fully drawn and combined with the net proceeds from the senior notes offering to fund a substantial majority of the cash consideration payable to the Blatner's shareholders at closing. I'll highlight that our financial strategy and consistent performance Have allowed us to maintain investment grade ratings subsequent to these financing transactions. From a capital allocation perspective, Blatner represents the largest acquisition in Quanda's history and a strategic opportunity to expand the solutions we deliver to support North America's transition to carbon neutral energy infrastructure.

Speaker 1

Capital deployment for strategic acquisitions has always been a key part of our strategy. But as we have discussed in the past, our first priority for capital allocation remains supporting the working capital and equipment needs of our existing operations. While the debt issued to support the Blattner acquisition moved our leverage profile above our target range, it remains well below the financial covenant requirements in our credit facility and we believe we can efficiently delever while continuing to create shareholder value through our dividend and repurchase programs as well as strategic acquisitions. Through the date of this earnings release, we've acquired approximately $64,000,000 worth of stock Since the beginning of the year, it's part of our repurchase program and we continue to evaluate potential acquisitions that fit our strategic objectives. To that end, during the Q3 and through the date of the earnings release, in addition to Blattner, we acquired 3 additional businesses and made a minority investment in another For total combined consideration of approximately $110,000,000 These incremental transactions further enhance our ability to deliver comprehensive solutions to our North American utility and communications customers.

Speaker 1

Turning to our guidance. Our outlook for the remainder of the year reflects the strength of our core utility backed operations, which continue to deliver solid results with robust year over year growth. However, the results of companies acquired during and subsequent to the Q3, including Blatner's operations, will be included in our consolidated financial statements, which makes comparability to our previous expectations challenging. It should be noted that we are in the very early stages of establishing Blattner's The results of those ongoing efforts will have a meaningful impact on Glatner's 4th quarter contribution, which we've attempted to address in the range of our Q4 expectations for the acquired businesses. That said, excluding the expected contributions from the recently acquired companies, We now expect full year revenues from our legacy operations to range between $12,150,000,000 $12,350,000,000 Due to the strength of our consolidated performance for the 1st 9 months of the year, we are increasing our expectations for the contribution of our legacy to adjusted EBITDA to range between $1,170,000,000 $1,200,000,000 with the midpoint of the range Representing an increase over our previous guidance and 13% growth when compared to 2020's record adjusted EBITDA.

Speaker 1

As it relates to our current reportable segments, while we continue to evaluate how these change may change with the addition of Blattner, I wanted to provide some color on our current expectations compared to our previous commentary, again, excluding contributions from the recently acquired businesses. We continue to expect full year revenues to range between $8,700,000,000 $8,800,000,000 for our legacy electric segment operations. However, based on the strong performance through the 1st 9 months of the year and continued confidence in our ability to execute on the opportunities across the segment, We've increased our full year margin range for the segment with 2021 operating margins expected to come in slightly above 11%. Our full year expectations for the underground utility and infrastructure solutions segment, however, have slightly moderated due primarily to lower 3rd quarter revenue levels than previously expected. Accordingly, we are reducing our full year expectations for the segment, where revenue is now expected to range between 3 point $4,500,000,000 $3,550,000,000 while segment margins are now expected to range between 4.5% 5%, which includes the $23,600,000 provision for credit loss recognized in the 2nd quarter, a nearly 70 basis point negative impact on a full year basis.

Speaker 1

With regard to the recently acquired company's operations I spoke of earlier, including Blattner, we expect post closing revenue for the year to range between $400,000,000 $500,000,000 and adjusted EBITDA, a non GAAP measure, Ranging between $40,000,000 $60,000,000 Accordingly, including the expected contributions from the recently acquired companies, We now expect our consolidated full year revenues to range between $12,550,000,000 $12,850,000,000 and adjusted EBITDA, a non GAAP measure of between $1.21 $1,201,000,000 $1,260,000,000 Corporate non allocated costs will increase significantly primarily due to the acquired companies. We currently estimate amortization expense for the full year will be between $149,000,000 $159,000,000 With $60,000,000 to $70,000,000 attributable to the recently acquired companies. Stock compensation expense for the full year is now expected to be approximately 89 with approximately $2,000,000,000 attributable to restricted stock units issued to employees of the acquired company. Acquisition and integration costs are expected to be approximately $26,000,000 for the Q4, resulting in approximately $36,000,000 for the year. This includes approximately $10,500,000 of expenses associated with change of control payments awarded to certain employees of Blattner By the selling shareholders, which require expense accounting as they have a 1 year service period requirement.

Speaker 1

We expect a comparable dollar amount will be accrued each quarter post closing until the 1 year anniversary of the transaction, at which time the payments will be made to the employee. We intend to include this amount as an adjustment to arrive at our adjusted EPS and adjusted EBITDA, both non GAAP measures. Below the line, we expect interest expense for the year to be around $67,000,000 which includes approximately $16,000,000 of incremental Interest expense associated with debt financing used to fund the cash portion of the Blattner acquisition. Additionally, we now expect Full year tax rate to be around 24%, reflecting a slight reduction from our prior expectations due primarily to a favorable shift in the mix of earnings between various taxing jurisdictions. As a result, our expectation for full year diluted earnings per share attributable to common stock is now between $3.20 and $3.40 and our increased expectation for adjusted diluted earnings per share attributable to common stock, A non GAAP measure is now between $4.62 $4.87 On a consolidated basis, we now expect free cash flow for the year to range between $350,000,000 $500,000,000 This slight decrease is primarily due to potential timing of payments associated with emergency restoration efforts as well as the likelihood that the dynamics impacting the larger Canadian projects Continue to press for DSO in the Q4.

Speaker 1

Additionally, while we expect Blattner will be meaningfully accretive to our cash flow profile on an annual basis, We expect certain favorable billing positions at the time of acquisition could unwind as Blattner incurs costs in the Q4 to finish projects for which they have already received payments. This dynamic could minimize Blattner's cash contribution during the quarter, which we factored into our range of expectations. As we have stated in prior quarters, our quarterly free cash flow is subject to sizable movements due to various customer and project dynamics that can occur in the normal course of operations. For additional information, please refer to our outlook summary, which can be found in the Financial Info section of our IR website at quantaservices.com. Overall, we continue to believe we are in the early stages of a significant infrastructure investment cycle and the acquisition of Blattner further differentiates us in the markets and expands our ability to deliver solutions to support North America's transition to carbon neutral energy infrastructure.

Speaker 1

We remain confident in our ability to execute against the opportunities in front of us, while maintaining the financial flexibility to opportunistically deploy capital to deliver long term shareholder value. This concludes our formal presentation and we'll now open the line for Q and A. Operator?

Operator

Thank you. We will now be conducting a question and answer session. Our first question today is coming from Chad Dillard from Bernstein. Your line is now live.

Speaker 3

Hi, good morning guys.

Speaker 1

Good morning. Good morning.

Speaker 3

So I just want to zero in on some of the areas of business that underperformed expectations for the quarter. So Yes. First of all, like on the communication side, you guys talked about some higher costing jobs impacting margins. So first of all, can you quantify that? And then do you see that coming back on track as we go into the Q4 of 2022?

Speaker 3

And then on the Industrial Services side, I think you talked about Some storm issues impacting results. Is that business still profitable or was that business profitable in the 3rd quarter? And just lastly on the Canadian projects that you called out, just want to confirm whether there were charges taken or was this just A working capital swing and when those DSOs normalize.

Speaker 2

Good morning. So I think when we look at the telecom business, we did call it out a bit. We're kind of operating commenced single digits instead of upper single to double digits when we looked at it. So it's not performing terrible. It's not where we want it to be.

Speaker 2

The macro market is very good and robust. The closeouts on a few projects are very difficult, but the large Majority of the business is performing in those double digit margins and offsetting anything there is minimal, as we said on the call from a charge standpoint or Really just cost standpoint when we close things out. So, we'll go from there. But I do think we added backlog. We continue to build backlog in the segment.

Speaker 2

We see a long runway there and we did start up some wireless capabilities that had some cost in it. So in general, Incidental to the company, incidental to the segment. We like the market long term. We will get into double digits there over time. Canada, when we look to Canada, I think in general, the projects are performing well.

Speaker 2

We still see some COVID effects there to the delta variant On some of those projects, so there is some delays in getting billing cycles, billing Points there as we run through a project. I think so that it's more of a billing issue of when can we get things billed versus Any problems with the project or charges, we did not take charges on Canadian projects. We performed very well. And the storm, yes, it did have a positive effect to the electric segment. It does.

Speaker 2

It does when we get storms like that. It was A little bit bigger than last year from a standpoint, so fairly large loan for us. I think it shows our collaborative effect with the client, How we've got in and worked our front end services, we're still working the storm for our client. So it just shows the longevity of the company And what we've done on the front side of the business to collaborate with the client to get things up faster to do a nice job there for them and I think We performed very well there, offset by it did have some impact on some of our underground segments as it always does When it comes in, so you get some offset and you also come off some larger work to go pick up storms. So those things offset some in the quarter.

Speaker 3

That's helpful. And then just my second question is a little bit longer term and has to do with labor. So clearly, there's a lot of work coming down the pipe to de carbonize the U. S. And I know you guys have the Northwest Lyman College.

Speaker 3

But just trying to And just your strategy for scaling labor, maybe you could start off with how much throughput do you have into your ranks From Northwest Simons College. And then how can you scale that program to meet the future labor needs? And then lastly, Maybe you can talk about whatever innovations or technology you have to minimize or actually improve labor productivity of your workers in your business?

Speaker 2

Thanks, Chad. I think if you're just now trying to scale labor, you're a long ways behind. We've spent about $150,000,000 over the last 5 years and we're way ahead of that. So, in my mind, we've done that. We've proven that.

Speaker 2

We've proven that we can grow the company. That's who we are as this crop skilled labor and that labor. So, In my mind, we self perform about 85% to 90% of our business for a reason. And it's this reason, when you get tight labor markets, we can perform, we can perform on time, on budget, Give our client what they're asking for, which is certainty. And we're doing that on a daily basis.

Speaker 2

That's why we're collaborating. That's why you're seeing expansion. As far as productivity, I'll put our margins up against it and show the growth of the company, the growth of our internal labor force, The 3000 to 5000 that we add every year to that labor force is proof that we can do it, we can Scale it. We are scaling it and the productivity speaks for itself in the margins.

Speaker 4

Thanks. I'll hop back in.

Operator

Thank you. Our next question today is coming from Alex Rygiel from B. Riley. Your line is now live.

Speaker 1

Thank you, gentlemen. As it relates to higher DSOs due

Speaker 5

to cost and delays on the 2 Canadian electrical transmission projects, Can you address your confidence in collecting on these and what the likely timing of that will be?

Speaker 2

Yes. So on the DSOs there in Canada and our likelihood, Canada has traditionally had larger DSOs. The projects are bigger. Some of the time frames in the way that milestone billings go in, so it's typically been this way. We have a high degree of confidence Probability in collecting, I'll let Derek comment on the DSOs.

Speaker 1

Yes, exactly. I would comment only that from a timing perspective right now. I think Post year end, which is reflected in our cash flow commentary, I think that it's probably going to be more in the Q1 and Q2 of next year.

Speaker 2

Both projects with long standing clients we have great relationships with that I believe ultimately we're in very good shape.

Speaker 1

Yeah, quite confident.

Operator

Thank you. Our next question is coming from Sean Eastman from KeyBanc. Your line is now live.

Speaker 4

Hi, gentlemen. Thanks for taking my questions. I feel like coming through earnings here, just a lot of concerns around the renewables supply chain. You guys obviously Completed a big acquisition tied to renewables development into next year. So I guess just in light of What you're seeing in the supply chain, could you maybe update us on how much cushion you think you have in that 2022 Blattner outlook that you framed back in September?

Speaker 4

Do you think that outlook is biased to the upside? Or is that looking increasingly sort of realistic at this point?

Speaker 2

If you said 25 to 27, we stand by it. We stand by it today. We stand by it. We know more about the company today than we did. And when we talked about it before, We feel highly confident in those numbers.

Speaker 2

And I would just say in general, yes, there is some supply chain Noise is what I would call it. And I think us having the breadth of Quanta, the breadth of Blattner is only From my standpoint, it helps us. It adds to who we are. It adds to how we can go execute. And I want to also say like when we think about Bladner and we think about this long term, we're looking 20 years And we've given guidance out.

Speaker 2

So not only do we stand by the $2,600,000 $2,700,000 that we've given, we also gave a 2025 guidance 3.6. We stand by that even more today.

Speaker 4

Okay. Fair enough, Duke. Thanks for that. And maybe you could comment on how Luma is trending relative to what they need to be doing to capture those performance incentives. Could that be upside in the Q4?

Speaker 4

I'm just not exactly sure how that works and obviously a lot of noise in the headlines still. So Great to get an update there.

Speaker 2

Yes. So, Luma, we expect the noise in the headlines. I think we said that from the start. And As you transition into these large term large transitions on an island, it It does have some noise to it. We're performing very well underneath the governor.

Speaker 2

The government is very much behind it. What we're doing is the right thing. We will transition that out into a modern system. We're doing so every single day. You can't get the payments on the upside of those payments until we get into a full contract, which doesn't go into a full contract Until bankruptcy is declared out of bankruptcy and then it goes into a 15 year contract.

Speaker 2

But as we stand today, We're in a contract. It just not has not started on the 15 years until they come out of bankruptcy. There were some favorable rulings on the bankruptcy proceedings this In the last week or so, I believe. So really good stuff going on underneath, little noisy on the top, primarily around the generation, which we don't control. So I feel Confident in our ability to perform there and what we're doing for the people of that island.

Speaker 4

Okay. Thanks a lot, Duke. I'll turn it over.

Operator

Thank Our next question today is coming from Neil Mehta from Goldman Sachs. Your line is now live.

Speaker 6

Good morning, team. I want to spend A little time on transmission. And there was recent news of the whole thing of the NEC, EC transmission project. And Do you foresee some risk to electric power top line growth in the future due to regulatory concerns around large project activity and transmission? And Any of the current projects that you're working on facing similar risks that we should be aware of?

Speaker 2

I kind of look at it like this. I saw most of our clients either add to their $20,000,000,000 of backlog over time What they're going to build on their CapEx and OpEx over the quarter, almost every single one of them added to what they're trying to do from the energy transition. The large projects make good headlines and people want to talk about them. We're right around the edges on every one of them. They're additive to anything we said.

Speaker 2

85% of our business that still exists today is the MSA work, those capital spends, those undergrounding, what Energy said yesterday on storm hardening, those kind of things and with the tight labor supply. So any headline you're reading or what you read into something On large projects, it's not affecting underlying business in our growth trajectories. We've given good Guidance on that. The 85% mid to upper single digits, you can look at our track record over the last 5 to 6 years and see what it looks like. I expect that going forward.

Speaker 6

Yes. That's really clear, and thank you for saying that. So the follow-up is Around the budget reconciliation package, would spending from both the budget reconciliation package, depending on what form it takes And the bipartisan infrastructure bill directly drive project activity that Quanta could be involved in and that's over and above the base case growth that you talk about?

Speaker 2

I mean, I think you're going through an energy transition as we said. And I think the sentiment around North America and around what we're hearing even in Canada, You're seeing more and more transition. And as you go into EVs, as you go into your renewables coming on and you're also Doubling load over time and I think that's the unknown is people don't understand that you're doubling load and you're going to a carbon free Fuel source, so as you do those things, you're going to need hydrogen, you're going to need tons of renewables. And I think in order to do that, you got to have transmission and we're sitting in very, very good spaces in all these areas and it allows us through policy or without policy You'll continue to see that sentiment move forward. That's what we see.

Speaker 2

I do think when both the The plans that we've seen are additive to anything we've said.

Operator

Thanks, Steve.

Speaker 2

Absolutely.

Operator

Thank you. Our next question is coming from Jamie Cook from Credit Suisse. Your line is now live.

Speaker 7

Hi, good morning. I guess two questions, one sort of short term, one sort of longer term. First, Derek, can you help us understand the industrial business or stronghold business. What is implied for the revenue and sort of EBIT, if any, contribution in your 2021 guidance and Just the opportunity for that business to be more accretive to margins and earnings as we look to 2022. And then my second question, Duke, just longer term is, as we think about the long term secular trends, you have Blattner, Infrastructure, etcetera.

Speaker 7

Could you sort of help us reframe how you're thinking about sort of the electric power margins over the longer term? And is there sort of more of an upward bias versus how you thought about margins historically? Thank you.

Speaker 2

Yes. Good morning, Jamie. I'll take a little bit on Inspire, and I'll let Derek comment on the numbers. But in general, what we see is we see an increase And that business in the Q4 a bit. I would say you have a higher oil price, so they'll be reluctant to do much in this environment.

Speaker 2

But as we go into next year, we see a real strong turnaround here. We believe that the business is coming back meaningfully. So I feel confident in the next year on the business, but I'll let Derek comment on the Q4.

Speaker 1

Yes. I mean as it relates to your debt Go ahead, Jamie.

Speaker 7

Yes. Sorry, go ahead. Go ahead, Derek.

Speaker 1

I was just going to say relative to the Q4, I mean, I think it would be slightly profitable, which is kind of what we've said that they would be back There's a degree of profitability overall. That group is slightly north of $500,000,000 for 2021 going Into 'twenty two, I think we see it having the ability to start to return to the degree of normalcy that we've talked about. In the past, those numbers have been north of Like a $700,000,000 number, I don't know quite yet. It's too early to comment as to whether we'll get into those type levels, but I think you definitely see an increase. And We would see that it would be largely returning to some of that historical profitability.

Speaker 1

Again, want to see how this Q4 plays out though.

Speaker 7

I'm sorry, can you remind me how you're thinking about historic profitability for Stronghold?

Speaker 1

Yes. Historically, they were a double digit EBITDA.

Speaker 7

Okay. So there's potential for that in 2022?

Speaker 1

I do believe there's potential for that, yes. Fluorally still. Okay. We will

Speaker 2

be prudent in our guidance. So, we'll see how it starts to perform. But yes, I think in the range of the guidance, you could see that. As far as the Electric Power segment, I think when we put Stronghold in or when we put Stronghold in, I mean we see they're kind of double digit margin company. And As we look at it going forward, we believe that the segment will perform in those areas.

Speaker 2

Obviously, As we go into 2022, we'll be prudent about how we guide as we always are. We've got to get through weather. We have a lot of men and women And I think in general, when we think about it, the business is healthy. It's in a good secular Macro environment. So, we really like where we sit.

Speaker 2

We think we're doing great things collaboratively. And anything that Blattner has is additive to us. And again, their culture And what we're doing internally as far as melding together and looking for opportunity, I can only say that I feel stronger about it today than I did October 3rd.

Speaker 7

But I guess my question is, do you see longer term and upward buys? Is it more profit dollar Growth versus margin, is that the way to think about it?

Speaker 2

I think it's more from my standpoint, we're trying to deliver cash The bottom line and the returns as far as capital those kind of things will operate in the same kind of profile we have in the past on the electric Segment flatteners is additive from a standpoint, from a CapEx standpoint on a return basis. So I they're accretive.

Operator

Thank you. Our next question is coming from Marc Bianchi from Cowen. Your line is now live.

Speaker 8

Hey, thanks. I wanted to talk about the acquired businesses and what's implied for Q4 and try to Understand that in the context of the Blattner guidance for 'twenty one or 'twenty two, excuse me. So, I think the if I take this 4th quarter revenue from the acquired businesses, it's like a run rate of $1,800,000,000 annually. And the Blattner guide, I think you said earlier, it's $2,500,000,000 to 2 7 for 2022. So is there just a lot of seasonality in that business?

Speaker 8

Are there some projects moving around? Or perhaps it's just conservatism. I'm curious if you could help us understand that progression a little better.

Speaker 1

Yes, sure. So partly, it's only a partial Quarter contribution, we did not acquire the company exactly at the quarter. So there's only a part of October. So that's a component of it. 2, Exactly.

Speaker 1

It's unfair to annualize a given quarter much like it is on Quota. I mean, we have a degree of seasonality. You can't take any given quarter and annualize that. There are movements Projects and seasonality, that is still yet the case as well for Blattner and any of the companies that we acquire. So, we still yet feel very comfortable with the 2.5 to 7 original guidance for Blatt and Area, respectively, of this quarter contribution.

Speaker 1

And then lastly, yes, there is a bit of just timing start to Starts and stops of projects affecting the number. And then probably the last point that you raised is that we have been trying to be a bit prudent with the contribution because As of the fact that we have just now closed the transaction, we've got opening balance sheet work to do, looking at how some of that opening balance sheet will lay out to the rest of those contracts. So 4 or 5 different factors there, but net net, we feel very comfortable still with the 2527 annual 2022 contribution.

Speaker 8

Okay. Okay, super. Thanks for that. Maybe looking longer term, Duke, you mentioned CO2 and hydrogen Pipeline opportunity work down the road. How big could that business be for you, maybe on a percentage of What you do today or maybe what the dollar addressable market might look like?

Speaker 8

And how does that differ from the you do today, right, on a maybe per mile basis or however you want to talk about it? Is it much larger in terms of total dollars per mile of pipeline or whatever the scope of the work is?

Speaker 2

No, I don't think so. When we look at it, I mean, we're really just we're thinking about it As part of the segment, much like you would think about LNG when you're moving to LNG or you're doing things really what you're seeing is a transition of infrastructure where our role is In this infrastructure transition, as we move into the future, I mean, I think we just sit right in the middle of it. On anything you can think about, it's that transition. So Whether they need they're going to need pipe to move it and they're also going to need pipe to move hydrogen and to blend into natural gas. And I think when you start blending that, You have different infrastructure.

Speaker 2

So all these different things that we're bringing into the markets, batteries, EV, Renewables, technology with 5 gs, all those things are certainly where we sit. And as we sit in the nucleus of that and we think about it, as we think about Bladner and where they sit in all this, that transition is something that Wanna is really focused on from a labor standpoint, a technology standpoint and how we help and collaborate with Not only from where they're at today, but how they transition. So at the very front end of that is where we're playing and it's early in hydrogen. I do think there's going to be A significant amount of opportunity going forward. We're already seeing where turbines and power plants on gas are starting to blend and even spec Hydrogen to some degree.

Speaker 2

So it's going to be a piece of the nucleus of how you regulate and Keep the grid balanced. The bigger issue with the grid is to balance it, sun, wind and then the balance thereof. So hydrogen will play a part in it.

Speaker 8

Okay. Thanks very much.

Speaker 1

Sure.

Operator

Thank you. Next question today is coming from Noelle Dilts from Stifel. Your line is now live.

Speaker 9

Hi, guys. Good morning. Good morning. Good morning. Good morning.

Speaker 9

I just wanted to touch on From a very high level, maybe how we should think about the timing or cadence of work in 2022. So I have two questions related to that. The first is if higher steel or raw material costs are impacting timing at all, are you seeing kind of any projects really pushed to the right? And then second, if you could touch on how we should think about Wlattner kind of typical seasonality would be helpful. Thanks.

Speaker 2

Yes. I'll comment on the as far as the commodities, we are seeing some escalation in commodity pricing. It has not affected the business. It's not material. I think our Scale our ability to move from project to project, while one may delay, others are coming in.

Speaker 2

I just The amount of the macro environment there, that's part of the reason you want scale in a renewable business or any business that we're in, we want scale. Scale allows us flexibility. It allows us flexibility with the client and also our buying power. I mean, when you look at fleet and how we manage through fleet, There's constraints to others with Fleet and our ability to really work with the client, work with our customers And our suppliers on that has given us really what I think the competitive advantage going forward. I'll let Derek comment on the rest.

Speaker 1

Yes. And one other point, I guess, To the extent that anything for fluctuations in the timing of Blattner, I mean, any of that would be from a supply perspective could lead to projects pushing to the right at any given point in time, Not necessarily in our minds impacting our profitability type dynamic, but could push things around. But having said that, from overall seasonality, I think I'd probably say it's Reasonably similar to our overall electric power operations, probably related a little bit lower in the first, rising in the second, stronger in the third and then the 4th being either Comparable to or having a slight decline depending upon the timing of any of the supply type dynamics. But largely, I think I'd say similar to our historical electric Okay.

Speaker 2

I would say our commentary on Bylchner and the numbers that we've given you based upon And where we're going into next year on that, on any supply chain issue, we're highly confident in those numbers.

Speaker 9

Okay. Okay, great. That's really helpful. And then second, I just wanted to kind of clarify one point within On the LDC business, I know you said you're still seeing strong demand there. When you mentioned the COVID impact to margins, Was that mostly at Stronghold or did you also see that in the LDC business?

Speaker 9

And if you could comment Where margins are kind of running today or this year versus where you expect them to be over the next couple of years? Thanks.

Speaker 1

Yes. Actually, some of the other COVID dynamics were a little bit in Canada, a little bit in Australia and then, yes, in some of the industrial side, Pressuring it not really so much on the LDC side. I think we're seeing normal operations for the most part on the LDC side. And then from the margins perspective, yes, we are continuing to see that comparable to what we have been speaking to, trending towards getting into that upper single digits Overall, as we go forward, we feel confident in our ability to do that with that LDC operation.

Speaker 2

Yes. No, I would say, too, our Canadian operations, I think, were probably the most affected with COVID, certainly. And when we look at it, we look at it going forward. We've started some nice projects up there, and I think we're in a good shape on the gas side. And as far as on the electric side, we had commentary around that.

Speaker 2

And Obviously, we've got the health and safety of these employees are what we're really focused on to make sure they're safe every day and we've given them great mitigation Great plans to be safe. So we've done that through the company and have not missed work yet, for 2 years. And I fully expect us to Operator right through it, and we're going to do we're going to work with our client on any kind of mandate there may be geographically or holistically.

Speaker 9

Thank you.

Operator

Thank you. Our next question is coming from Brent Thielman from D. A. Davidson. Your line is now live.

Speaker 5

Hey, thank you. Thanks for taking the questions. I just want to follow-up on the gas utility portion of underground, maybe just get your latest and greatest in terms of what you're seeing among customers for Modernization programs going forward, do you still think that portion of the business can achieve the sort of growth rates you've seen over the last Several years kind of going forward.

Speaker 2

Yes. I mean, we like the business long term. There's mandates around methane gas release, cast iron replacements. We've seen some great stuff with hydrogen coming along. And so we really like the business on the underground.

Speaker 2

But I want to go back again and say it's a portfolio. If we can build underground electric with gas crews, that's what we're going to do. We're going to go and really consolidate offices, leverage our capabilities in the field. Some gas operations will be performing underground electric. So I'm not really worried about it from a segmentation standpoint.

Speaker 2

In my mind, We're going to fully utilize our people with the highest impact on the profitability of the company. And that's what we're focused on, whether it be telecom, gas, electric. So the equipment is like type. The people for the most part are very much like type. So we can operate throughout our portfolio of our service lines If we do it properly and leverage our capabilities at the fill level, which is that's what this company is focused on is driving the margin as a whole.

Speaker 1

Thank you.

Operator

Our next question is coming from Adam Thalhimer from Thompson Davis. Your line is now live.

Speaker 1

Hey, good morning, guys. Duke, do you think that with the hydrogen and CO2 lines, there's actually less industry pushback?

Speaker 2

It's a complicated dynamic whether you go green hydrogen. It's just hard. I would say it's corrosive. It burns hot. There's just a difference.

Speaker 2

And I think when we think about it, we're working with the client. I mean, you're early stages. It is a part of the solution and everybody we're going to have to regulate the grid, the load. We get curves in the load. That load regulation is Big deal and especially without interconnections and the difficulty building transmission.

Speaker 2

So while we talk about it a lot, it's still difficult to build large projects and The underlying underneath has to be very, very robust. And so you get a lot of smaller projects and you get a lot of Other things that you can do. So I do think hydrogen is just a piece of what we're trying to accomplish as utilities go into There are transitions in this renewable state and you're going to build big transmission as well. It's going to stock on top. It's just a timing thing.

Operator

Thank you. Our next question is coming from Ian Macpherson from Piper Sandler. Your line is now live.

Speaker 10

Good morning. Thanks For squeezing me in. Duke, I heard, I think $110,000,000 of quarter to date bolt ons following Blatner, I had sort of imagined that inorganic strategy might you might tap the brakes a little bit as we integrate Blatner, not the case Short term and I know that's a big part of your DNA and what Quanta does really, really well.

Speaker 2

But just curious

Speaker 10

on your thoughts on the merits versus risks of Investing more pro cyclically, now that things are hotter, valuations are probably hotter, maybe there's more embedded backlog risk and So just your thoughts on what the go forward cadence might look like for additional acquisitions? Thanks.

Speaker 2

I think when we looked at it, we had some ongoing M and A and I think that remains to some degree. We've never been out looking for acquisitions. When companies come, they have a strong need for them in a region. And I think we've made very good ones and very good acquisitions. So again, we're not looking for it.

Speaker 2

We just made a $2,700,000,000 acquisition. We're going to be prudent about how we manage this balance sheet. And I've said that all along, we will generate Cash and pay down debt and that's part of who we are, but we're not going to walk away from Great companies. We don't feel at all like we've stretched this balance sheet given the fact of the macro market and what we see. So While we are well, I would say, yes, we'll probably tap the brakes a bit.

Speaker 2

Certainly, we're not going to pass on companies that we believe add value to the shareholders.

Operator

Thank you. Our next question today is coming from Andy Kaplowitz from Citigroup. Your line is now live.

Speaker 11

Hey, good morning, guys. Duke, I know even a few years ago, you deemphasized large oil and gas pipelines. But Last quarter, I think you talked about winning some larger projects in that space and obviously oil prices are higher now. It seems like there are a couple of projects out there that you could bid on. So how do you sort of view the more Traditional projects these days, is there an at the pipeline?

Speaker 11

Could there be significant growth in that world?

Speaker 2

I mean, I think when we talked about that last quarter and we're in construction on some in Canada today. So we're opportunistic there. We can operate that business quite profitably. We're just not In my mind, we decided not to invest in it and not to continue to invest. So it's a little bit different.

Speaker 2

We can still do $1,000,000,000 in In the business, we can do $2,000,000,000 in the business from what we have today. So we don't have to invest more in capital. We have the people. We have The things that we can do is, as you look at carbon sequestration and all the lines there and all the things that are coming up on hydrogen, it certainly plays into the business We'll look at it. We have the capabilities internally.

Speaker 2

We'll continue to take the opportunities. It'll stack on to anything we're doing, whether it be Canada or the U. S. But There is some nice projects out there and certainly we're around the edges on every one of them. But we're not going to take the risk That it's not something that we have to have.

Speaker 2

And when we guide, it will be $300,000,000 to $500,000,000 I can almost tell you right now. And that's what it will look like if we do a $2,000,000,000 great. We'll let you know.

Operator

Thank you. Our next question today comes from Michael Dudas from Vertical Research. Your line is now live.

Speaker 1

Yes, thanks. Regarding, Duke, the capital budgets that your utility clients are putting forth for 2022, I'm certainly beyond, Has there been a significant mix? I'm talking more from the T and D side on hardening resilience relative to New investment replacement, is that shifting? Are they focusing more on the former? And I'm assuming there's Not a major difference in margin or utilization depending on what you guys do for them, but just wanted to see

Speaker 12

if you could share your thoughts on that.

Speaker 2

It's kind of all of the above. So I think when we look at it, it depends on where you're at geographically, but certainly all of the above. We've seen storm hardening Escalate, we've seen undergrounding certainly come about in a significant way. Those two things are there. I think what's underappreciated is the amount of infrastructure and the modernization necessary on the distribution system to handle the load of EV.

Speaker 2

When you start putting these cars' batteries on at night and on the distribution load of what it does to the system, I think it's underestimated on the cost And the amount of work that's out there of capital that's necessary to get these systems ready for electric vehicles, I just In my mind, it's just under appreciated.

Operator

Thank you. Our next question is coming from Justin Hauck from Baird. Your line is now live.

Speaker 13

Hi, good morning, everyone. So I guess my question and thanks for all the questions you've answered. But on Blattner, just the award activity in 3Q Q and sense, given that you talked about a lot of solar mix shift for next year relative to the wind projects, I guess, Maybe just an update on kind of how things are trending there and if that mix shift is coming through. And then also, it seems like there's been a lot of approvals for Sure, wind projects and I think that's kind of outside of the wheelhouse that you're looking at, but are there opportunities for you to participate on any of those?

Speaker 2

When we look at Bletner, I reiterated guidance pretty firmly into 2022 and talked about 3 point $3,600,000,000 in $25,000,000 So the commitment there, we're really looking at megawatts and not projects. The projects are certainly there. If we decide to start or say the reward we got, I just think it's not valuable to the shareholder nor is it productive. So what we're saying is 2.6, 2.7% next year and 3.6% in 2025% of top line of platinum. So that's how we see it.

Speaker 2

That's how robust it is. So it should give you a good idea of what we're seeing as a company and how we sit in the pendulum of The future in the renewable business. So in my mind, that shows where we're at. And I think, Again, the words are there. We're certainly with the client talking to them on a multiyear basis, not just one job.

Speaker 2

So that's fair. Offshore, It's expensive. I think we have clients that are certainly have their plans around offshore and Certainly in there as far as interconnections, things that we're good at, we'll do. But Primarily as it comes onshore. I've said this before, but we have had bad luck with boats and I'm just not a boat fan.

Operator

Thank you. Our next question is coming from Steven Fisher from UBS. Your line is now live.

Speaker 12

Thanks a lot. So it sounds like, Duke, there's a learning curve on telecom that you're experiencing now. And I want to Make sure we understand how to set our expectations on that from here as it relates to the margins. What are the different elements of the learning You have to get up and when can we expect that to normalize such that we can have sort of a more consistent Margin expectation here on the telecom side within that the electric segment. And then just maybe a quick Follow-up on just to clarify on the Blattner deal, you've been extremely clear about the confidence that you have in the guidance numbers, but You've talked about the revenue numbers, not the EBITDA contribution.

Speaker 12

I just want to make sure there's no difference in your confidence in between the revenues and EBITDA. Thank you.

Speaker 2

Double digit EBITDA on Blattner. As far as the telecom, We've talked about it in length. I think in general, what I would say is the closeouts on the end as far as Engineering closeouts and things like that and then some descoping of certain clients on their builds Created some effects in projects and we're still working with the client. We will do our best to claw stuff back. But If you think about it, if we get $200,000,000 and we get 6% instead of $10,000,000 it's 6 $1,000,000 something like that.

Speaker 2

It's not big numbers for us long term and I think we're not seeing big effects to that As far as margins, and we will get them in the double digit ranges. We're operating for primarily in those ranges. We had some Projects early on are complicated. It's an industry issue. It's not just us.

Speaker 2

So it's something that we're all faced with and some closeouts. And I think we're in the late

Operator

Thank you. We've reached the end of our question and answer session. Like to turn the floor back over to management for any further or closing comments.

Speaker 2

Yes. First, we really want to welcome The people of Blattner and certainly have the culture there and the people in the field, the people that pay our paychecks, thank them for what they do every day. And Storms were tough. Our people performed extremely well through tough environments down in the Gulf Coast and certainly the families who lost lives and Tried to stay there. It's tough.

Speaker 2

So, our guys did really well. And I'd like to thank all of you for participating in the conference call. We appreciate your questions and your ongoing interest in Quanta Services. Thank you. This concludes our call.

Operator

Thank you. That does

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