Quanta Services FY 2021 Earnings Call Transcript

Participants

Corporate Executives

• Earl C. Austin, Jr., President, Chief Executive Officer and Chief Operating Officer
• Greg Henderson, Senior Vice President, Automotive, Communications, and Aerospace

Analysts

• Brian Singer, The Goldman Sachs Group, Inc.

Presentation

[Brian Singer, Managing Director at Quanta Services]

Good morning, good afternoon, good evening, everyone, and thank you for tuning into our next panel. This is one I'm very excited about, Enabling Net Zero and Infrastructure Solutions: Challenges & Opportunities. We're really happy to have two companies that are really on the front lines of enabling these solutions. From Analog Devices, Greg Henderson, Senior Vice President of Automotive and Energy, Communications and Aerospace Group; and from Quanta Services Duke Austin, Jr., President and Chief Executive Officer. Thank you both for joining us today.

The importance of the broader supply chain to meet net zero infrastructure and clean water goals is really, really essential and we think, in fact, under-appreciated by ESG investors and investors more broadly. We've coined the term green-abler or green enabler for some of the sectors that are early on in the supply chain critical towards ultimately achieving electrification, automation, net zero infrastructure and broader clean water goals and the semiconductors, electricity transmission are two areas of focus where we think investments are going to be needed sooner, rather than later, to avoid supply chain bottlenecks in the medium-term. And I think that's why having Analog Devices with us today and having Quanta Services with us today is so important. So, Greg and Duke, welcome and thank you very much for participating in today's conversation.

[Earl C. Austin, Jr., President, Chief Executive Officer and Chief Operating Officer at Quanta Services]

Thanks for having us.

Questions and Answers

[Brian Singer, Managing Director at Quanta Services]

We're going to kick it off with some opening comments and we'll go to each of our panelists on this one and maybe Duke, we'll lead with you first. What do you see as the key areas of differentiation for your company heading into 2022 and what are the key initiatives your company is taking to attract and retain ESG-focused investors?

[Earl C. Austin, Jr., President, Chief Executive Officer and Chief Operating Officer at Quanta Services]

Yeah, I think when we look at the transition -- the energy transition, we're right in the middle of it when we look at the infrastructure necessary to go to a carbon-free footprint and those solutions and the things that we need to do from the electric grid to the communication grid, really for all infrastructure and make this transition is substantial. And I think where we sit, we self-perform about 85% of our business. We've really worked on cross-skilled labor and the solutions around that and when we look out and talk to our customer bases, it's really to make sure that the labor force is there, what we've invested in technologies and we've done some great things around craft and I think the company is set and we've made a Blattner acquisition, which builds -- we're on 30 [Phonetic] large-scale renewable projects today, wind and solar. So, we're really not only are we in the infrastructure transition, but also building the balance of plant that I believe is really the investor sentiment around ESG.

[Brian Singer, Managing Director at Quanta Services]

Great. Thank you. And Greg, let's turn to you with similar questions. What do you see for Analog Devices as the key areas of differentiation heading into 2022 and the initiatives that ADI is taking to attract and retain ESG and ESG-focused investors?

[Greg Henderson, Senior Vice President, Automotive, Communications, and Aerospace at Quanta Services]

Yeah, thanks, Brian. I mean just as an introduction, maybe many of your investment [Indecipherable] they know, but as a company that we really kind of known as semiconductor innovator and we talk about connecting the physical and the digital world and our business model, with our latest acquisition of Maxim about $9 billion company, our business model is built around innovation and that shows in our financial performance. So, we're operating at a 70% gross margin, so we're a profit company. And so, we've always been known as an innovation company, but more and more of that innovation for us now is connected to our sustainability initiatives. So we are innovating in sectors that are needed for driving this transition into a sustainable future.

So industrial automation in the overall business that 50% of business is in industrial and large percent of our business is making is factories more efficient, making that transition for electrification. In our automotive business, which is about 20% of our company, half of our automotive business is actually around electrification and sustainable energy and we're actually part of the transition to electric vehicles. And also, we have a big business in communication which is about 15% to 20% of our -- and in that case, we are enabling 5G networks. A lot of people don't know that 5G networks are much more sustainable form of communication. So, many parts of our business are actually connected to the sustainability I look forward to talking to about that more.

[Brian Singer, Managing Director at Quanta Services]

Great, thank you. Thank you to you both. Let's start with topics on the electrification -- electrification front and just kind of thinking about both near-term and long-term challenges and opportunities and, Greg, we'll start with you on this. We've seen, as you highlighted, accelerated investment into vehicle electrification. How do you think the pandemic has impacted your outlook for the transition from internal combustion engines to electric vehicles? And can you speak to the dynamics that this has created with your customers and partners shorter-term and medium term, regarding product supply and availability?

[Greg Henderson, Senior Vice President, Automotive, Communications, and Aerospace at Quanta Services]

I mean, I think, the transition to EVs was actually probably on the S-curve ahead of the pandemic. And -- so that transition was already happening. If you go back a couple of years ago, EVs were a little bit more of a technology novelty. They have this benefit of being sustainable, people have range anxiety and they were a little bit expensive. But we saw through the pandemic this [Indecipherable]. We do believe the pandemic accelerated it. Partly that was more of a focus on kind of sustainability of the environment, but also the vehicles have really crossed that threshold from being a technology novelty to being actually the best driving experience. And actually if you look at a EV as a total cost of ownership, it actually now has a lower total cost of ownership than if you have a traditional car.

And our role in that is that we play in the battery management system. So Analog Devices, we're the market leader in the management system for how do you manage the charging and discharging of the battery and those systems have a lot to do with how much mileage you can get out of the car and most of them -- everybody knows the most expensive part of an EV versus the combustion engine is the battery. And so, it's optimizing the performance and the range which you got on that battery. And so, batteries have been growing down this exponential cost curve, they crossed that threshold now and so we're excited about that because EVs are now the car that everybody wants and it's actually now will ultimately better cost alternative. And the other thing that people don't understand which is also related to the semiconductor industry is, an EV is the best car from digitized driving experience. So now basically an EV, I'd say is basically a battery, motors and a computer. And so, it's the best for that digitized driving experience. So there's a lot of sensors, audio, in-cabin experience that's driving semiconductor content as well. So, the semiconductor content in the EV is multiple times higher than we would have in a standard car. And so, maybe in some ways, you would say that's driving the supply chain challenges. On the other hand, that's driving growth in the industry. Our automobile business grew double digits last year. Our BMS business nearly doubled in the year. So, we see this as a secular driver that's in the early innings and will certainly continue to drive in the five years to 10 years.

[Brian Singer, Managing Director at Quanta Services]

Greg, to follow up on that, ESG focus and this is an area that's been highlighted in some of our panels earlier today. The focus on impact and product impact is rising. You highlighted the diverse ways in which semiconductor products and Analog Devices products support the electric vehicle and the broader automotive segment. Can you kind of characterize within those classifications you mentioned where you're seeing the growth in demand coming from or to what degree are you seeing greater or less demand growth coming from the battery side of the equation versus safety systems versus the in-cabin experience as you mentioned? And the reason that we ask is that there may be different views on kind of the importance on impact and essential nature depending on which one.

[Greg Henderson, Senior Vice President, Automotive, Communications, and Aerospace at Quanta Services]

Yeah. So, I think overall our automotive business grew double digits in third quarter [Phonetic] and is growing rapidly overall. The fastest growing segment in our automotive business is in electrification which grew double digits year-over-year. And so, by far the fastest growing segment is around electrification and for us it's around that battery management system, both the EVs and some in Gridstore electrification. We should probably talk about it a bit later. But that's the fastest growing segment for us. And actually it's our largest investment area is in that electrification side.

[Brian Singer, Managing Director at Quanta Services]

Great. Duke, switching to you as Quanta is a company as you highlighted on the front lines of making grid investments and telecom expansion and now with the Blattner acquisition, renewables infrastructure and making all of that happen. Can you discuss any bottlenecks that you see from either a supply chain or labor perspective that maybe could be a risk to execution and how you see that evolving over the coming years?

[Earl C. Austin, Jr., President, Chief Executive Officer and Chief Operating Officer at Quanta Services]

We're not seeing the supply chain issues that -- they're there. There are some constraints. But I think we've got in front of that for the most part. The utility industry has done a nice job to get in front of most of the supply chain issues. We do see some solar panel type tariffs and things of that nature obviously that are out there. But that's not affected our business at this point and our customers are larger in nature and really work through that. And I agree with Greg. I mean I think the transition is going and where we sit in it is really how do we deliver the infrastructure that enables it along with our customer base and in that collaboration, if you think about, well, I am going to put an EV on all these houses, there -- that sometimes there's two cars, sometimes there are three cars and that stress on the grid on the back side is really a 25 to 1 from a charging station standpoint.

So if you look at charging stations or whatever it may be, our ability to modernize the grid on the backside of these distribution systems is something that we're looking at on a daily basis and how do we put the resources out as our manufacturers deliver EV and these systems and not overload the transformer. So it's a major task that I think is the long in nature and really enables us to get in front of it to develop these systems and programs and programmatic spends that back up the whole infrastructure necessary.

[Brian Singer, Managing Director at Quanta Services]

Duke, could I follow up on the point on the difference between charging stations and charging in your home as it would relate to grid reliability and grid constraints. Can -- as you build these networks out, can you talk about what you see is kind of the optimal -- the optimal development of electrification, electric -- and electric vehicles from an ability to -- for the supply chain to execute?

[Earl C. Austin, Jr., President, Chief Executive Officer and Chief Operating Officer at Quanta Services]

Yeah, I mean you're starting to see the measurement. I mean our largest fleet in North America, so we're starting to see it ourselves and investing in it with them, the technology. So I think in general what we see is that's coming very quickly, probably faster than most think and as it hits the grid, it's in your house. If you have breakers in your house and you plug too many things in, the breaker flips. Very similar to putting through EVs on your house and the transformer on the backside overloads, it flips. So that's really -- we're really getting the grid design on the backside of the charging station at your house is something that everyone is working towards and I -- we're early, early stages other than the impacts, there are other incrementals, you move forward on the modernization of that system.

So all that labor force, it takes to rebuild the grid that we built over the last -- forever, it's going to be done exponentially. You can't do it overnight. And I think we've got to get in front of it and as an industry, I think you're seeing that now. Technology helps and some of those things [Technical Issues] the player. But in general, these systems behind need to be designed for the grid of the future.

[Brian Singer, Managing Director at Quanta Services]

Duke, what you mentioned can't happen overnight. What are the lead times? In other words, as you see demand coming, when do you or your customers have to actually commit the -- commit the capital to make sure that we're on track to not have any issues with the grid?

[Earl C. Austin, Jr., President, Chief Executive Officer and Chief Operating Officer at Quanta Services]

Yeah, I mean, I think you're starting to see where you start to see analytics start playing your grid and you're planning and things like that based on manufacturer curves and all those things as they hit the grid. And I -- it depends on where you're at. I mean California is a little bit ahead of Texas, for example. So, those kind of things will come into play, but there is not -- I'd say, every municipality and investor on utility is putting significant dollars and whether it be going from coal, gas to solar, wind and then moving that to load centers or back on the other side on the distribution system, getting ready for significant electric vehicle deployment in the system. So we see it on both side of our business, whether it be [Indecipherable].

[Brian Singer, Managing Director at Quanta Services]

Great, thanks. Greg, let's turn to you and we're going to shift the topic a bit more to innovation and impact. The semiconductor sector overall has been able to expand while still maintaining strong corporate level returns and part of this is the innovation benefits that customers have gotten by buying newer products and you highlight some of the ones that you're pioneering in the auto -- on the automotive side. What are the key areas of innovation that you see over the next five years and how should we think about the quantifiable impacts that they can have on costs, on efficiency to customers, and/or on emissions avoidance?

[Greg Henderson, Senior Vice President, Automotive, Communications, and Aerospace at Quanta Services]

Yeah. Thanks. Like I said at the intro, I think we've always taken a -- kind of a core tenet of our company is innovation and we've built the company around that model. And I think what we are really excited about now though is a significant percentage of our innovation is targeted toward these sustainable initiatives and there's some example -- well, I gave some examples before already, but about 20% of our business is in power management and all of that is about efficient power delivery and that could be efficient power delivery from the grid to a data center. What Duke talked about the challenges in the grid, we actually have a big role in the power conversion basically from the grid, into the car and once it's in a car as well, the conversion from the battery to systems and systems to batteries and also the possibility of using batteries are backup to the grid. So that whole area of our power conversion is a big investment area for us and that's a big area of investment in innovation. There are a lot of other areas of investment as well that we really have a big impact in our industrial business. We do a lot of work in industrial automation and that's all about making batteries more efficient whether that's robotics or power conversion is another example. And then I already talked about our electrification business. So, a significant percentage of our investments today are towards these initiatives that have a big impact and just to give a -- kind of a quantification to that, I like your term of greenabler. We actually talk about our technology enabling a sustainable future.

If you look at the framework of carbon emissions today, I mean, [Indecipherable] of carbon. The two big sectors are what we call powering things, it's always electrification we talk about and then getting around, which is electrification and we can materially point to our technologies having a significant role and enabling that transition to powering things and getting around being fully sustainable and that's roughly half of that [Indecipherable] we can point to how our products play in that.

[Brian Singer, Managing Director at Quanta Services]

Are there specific -- are there products to highlight or outlook for where efficiencies can go from here? One of the questions we get, and I'm sure you get a lot is looking back at the history of efficiency gains in the semiconductor space including on the power side and looking how power intensity has really fallen for customers as a result of more efficient chips and products. There is -- I think there's a potential for a healthy debate over whether that pace can continue, whether it will accelerate/decelerate. What's your outlook either from a Moore's Law perspective or otherwise on the pace of efficiency gains from here and then are there specific products that you could highlight that you think that should be on investors' radar screens?

[Greg Henderson, Senior Vice President, Automotive, Communications, and Aerospace at Quanta Services]

I think there's two ways -- when people talk about semiconductor and efficiency and Moore's Law, they're usually talking about big digital, right? So processing in a data center and that's on our space. So although people that are doing that are able to continue to drive, I guess, I would call it performance improvements. And the way we look at as -- those big processors -- [Indecipherable] for example. And so we have to power these big processes and these big processors, by the way, could -- a single processor it's kind of -- can be hundreds of amps that -- by two holes and that's actually a very, very complicated problem for how do you supply that power efficiently and so there's actually still a lot of really interesting problems to solve. We are active there and so that's an example of an area where we are providing part of that overall efficient solution.

So in the analog space, it's not really about Moore's Law. It's about can we provide the solutions that are enabling the outcomes. And I would say, we see that our technology is core to this transition to sustainable energy that -- the one that we [Indecipherable] solution for electrification, we talked a lot about EVs, it's also actually important to electrification and backup storage. And so -- and those technologies aren't really driven by Moore's Law. So, we think there is still a lot of innovation to come here because of the problems that we're solving on different kinds of problems. Now the problem is solving how we define to net zero and that's a different kind of problem than we were maybe solving years ago.

[Brian Singer, Managing Director at Quanta Services]

Thanks, Greg. On the topic of innovation, Duke, among the technologies across electrification, grid modernization and renewables expansion that Quanta supports where, if at all, do you see innovation occurring that could be most transformative and should be on investors' radar screens?

[Earl C. Austin, Jr., President, Chief Executive Officer and Chief Operating Officer at Quanta Services]

I mean, we look at it a -- we're always looking for ways to collaborate with our client and look for things that will make a significant difference. But from us, from an R&D and how we look at it and it's really how we facilitate is still in a manner that's more efficient. So we're looking for efficiency gains through R&D or technology, but I agree on the technology piece, it's very similar, like -- Greg mentioned 5G. If you think about how we are in 5G and how that takes place, your technology is driving infrastructure. We used to have a fiber glut. Now, we can get enough fiber. And I think those kinds of things that technology drives those innovations. I mean Squid Games in Taiwan that sued the cable -- I mean it's Netflix. The cable company sued Netflix. You were one video game away from that -- whatever it may be 3D, AI, however you want to look at it away from an infrastructure problem and that technology can only go as fast as infrastructure can get built behind in that.

So in my mind, what we try to collaborate with the R&D and the technology, but I'll give you an example. We used to use -- to cycle and gas and everything we had from small tools and we've 51,000 employees. You can imagine the small tools you have out there. Today, it's all batteries. And it is batteries because it is the right decision. It's way more efficient and it's also something that I believe we can point our finger at and say we've got -- we're doing it for the environment and ourselves. So things like that, as batteries innovate, we're helping innovate with tool companies, OEMs, technology and how we play in there, but also using it -- our energized lifeline capabilities and things like that on the R&D side. Certainly, we're in the middle of that on how to build faster, quicker from that standpoint.

[Brian Singer, Managing Director at Quanta Services]

Duke, as you and your customers deploy these technologies, do you see your end customer costs moving higher or lower or both? Is there a higher and then ultimately lower, how do you see kind of the cost of the transition, the cost of expansion and bringing this innovation into execution?

[Earl C. Austin, Jr., President, Chief Executive Officer and Chief Operating Officer at Quanta Services]

I think with innovation, you have some upfront costs there, but most -- you can look at solar panels, for example, and the solar process how far that's come down on anything that we do, we do it in a repetitive way and the technology in there. If we're collaborating together, we'll certainly bring cost down from where you see it today you're parity -- renewables in certain areas, batteries are early, hydrogen's early, but as that technology comes into play, it always advances from a cost standpoint, and I think that will happen in all those things. The sentiment's going, it's -- we're going that way. And I think everyone is investing in, from my standpoint, all of our customers are investing in ESG and how do we get there in a sustainable way is really best investment. Let's get there sustainable.

[Brian Singer, Managing Director at Quanta Services]

That's a -- I think that's a good transition to talking about customers and markets and returns and Duke, I'll speak to you -- I'll pose this question to you since you were just kind of talking about making that transition happen. There is a question of whether we're on track or not and a lot of the -- some of that focus, it goes particularly to grid expansion and the willingness of public utilities commissions in utilities among your customers to make the requisite investments. What do you see as the lever of -- the level of customer willingness to grow investments when you think about grid modernization, grid hardening and renewables and to what degree are those public utility commissions willing to accelerate needed spending and how does that impact your view on medium or longer term growth?

[Earl C. Austin, Jr., President, Chief Executive Officer and Chief Operating Officer at Quanta Services]

I just -- when you look out from here and you've really been operating in negative load growth, I do -- God, I would tell you that you're going to get -- you're going to double load over through 2040. So you're going to scale from where you're at today, you're about 20% renewables on systems, it's going to 70% and double load growth. So all those things, if you want environment -- if you want to go towards an ESG environment, which I believe that sentiments there and we're gone, it's done. We're moving that direction. You can't get there without investments in infrastructure and you have low interest at this point, lots of investment, but the people wanting to invest in infrastructure. And the sentiment around the public that everyone is going to move -- or for the most part is moving towards more batteries, more sustainability. I mean you want to get in your car, and it drives itself at some point, it won't get there without the infrastructure behind it. I think it's also the customers -- our customers. Customer wants this and as a regulator, it's a great time to invest, it's a great time to invest in R&D because that's where the future is. If they want -- as North America, we want to go and stay sustainable and lead the world, we've got to get there.

[Brian Singer, Managing Director at Quanta Services]

Do policy measures like the infrastructure bill help to accelerate the level of investment or will acceleration from here likely need to be reflected in abnormally higher customer rates?

[Earl C. Austin, Jr., President, Chief Executive Officer and Chief Operating Officer at Quanta Services]

I think in general, yes, it helps. But I would tell you that the people that are involved in this on a daily basis have already started the investment, whether the infrastructure bill is there or not, it's moving forward. We're going to move forward with it. It does help. It does help innovation and certainly around the edges, policy around moving transmission, ability to move renewables and permitting and those kind of things are always difficult. But in general, the money hasn't been the issue, it's been more of siting and permitting.

[Brian Singer, Managing Director at Quanta Services]

Great. Greg, the shift towards renewable energy sources requires, as have been said here, a smart grid, it requires energy storage systems, can you talk about the role that Analog Devices' -- Analog Devices solutions have in addressing distribution, transmission and stability in these technologies?

[Greg Henderson, Senior Vice President, Automotive, Communications, and Aerospace at Quanta Services]

Sure, yeah. We actually have a lot of firm up. We have in -- kind of a generation transition and distribution space. We have a lot of precision measurement solutions. Duke talked about challenges on knowing how much supplies are in the grid and have announced that you got to get electrification. So we have solutions that relate to monitoring and measuring of that grid and also I would say that -- Duke talked about 5G. We actually are a big part of the infrastructure solutions for 5G. Also, we're part of that solutions as well. I think the biggest area where we have an impact and actually we see one of the biggest challenges in getting to this kind of this fully sustainable electrified grid storage and you actually have two problems in storage. There are short-term storage and long-term storage.

And I would say that the battery technology that's used in EVs are becoming a leading candidate for short-term storage, [Indecipherable] going up on long-term storage and it's becoming -- and interestingly in our electrification battery management business, about 15% of our business today is actually for grid storage and that is actually growing quickly and there's a lot of people, if they do five years, grid storage battery will be 10 times the size of the EV market then, not just to any market now and we're not sure. But we are playing and our battery management solutions are working and EV working grid storage. Another area that we're investing in is in hydrogen. So we actually believe that green hydrogen might be part of the solution for long-term grid storage and a big solution of that is about additional electrolysis. So we're marking investments in metrology solutions to improve the efficiency and reliability of electrolysis because that long term grid storage is a challenge that batteries may not be well suited to and hydrogen might be better suited to. So, all of those areas that we play in are big, but we actually would say that the storage for us is the biggest driver and we think will be one of the largest market for us.

[Brian Singer, Managing Director at Quanta Services]

Do you -- as you think about that growth and that aggressive growth that you talked about in some of these verticals to help grid energy storage, how would you assess whether the investments across the semiconductor supply chain are sufficient versus not to meet the demand that you see coming? In other words, are the investments that yourselves and others making, are they happening at the right time to be able to meet demand down the road or do you see areas where you think there should be greater investment?

[Greg Henderson, Senior Vice President, Automotive, Communications, and Aerospace at Quanta Services]

So we think they are happening at the right time. I mean the whole industry read about it. We're making massive capital investments in our operations and actually many of our partners we work with as well are making investments in their kind of operations to make sure that we have these technologies. And I think the thing to understand here is that -- I think the good news about this is that this electrification -- this electrification sustainable energy is in the early, right? EVs are still about 5%, but it's growing very fast. So I think all of this focus on semiconductor investment right now is the right time to make sure that we're positioned. And as I mentioned, our battery management business basically doubled over the last year. We expect that kind of pace to continue for the next few years. And so I would say that the investments we're making now are at the right time and we believe that the industry will be ready.

[Brian Singer, Managing Director at Quanta Services]

Great. But staying on the topic of the right level of investing and what to do with that with capital coming in, Duke, as CEO, how do you evaluate the right rate of reinvestment of operating cash flow back into capex and R&D and what are you looking for to recommend or make the decision to reinvest additional capital for the purposes of organic growth?

[Earl C. Austin, Jr., President, Chief Executive Officer and Chief Operating Officer at Quanta Services]

Yeah, I mean I think to meet customer demand, there is somewhat -- we gained, call it, 3,000 employees organically a year [Indecipherable] and then investment in training, the things that we're doing there as well as fleet, it's running us, call it, 2% to 4%. And so of top-end growth. So in my mind, that capital it's the -- as we look at allocations, we always think the return of organic growth that we measure against is something that we should invest in. M&A is certainly a piece of it as well as a little dividend. So all the things that we've done in the past, we'll continue to do going forward, but it's necessary and we also are trying to have the fleet we have looking out and working with the OEMs on -- as light duty trucks to come, batteries, how do we sufficiently work with the suppliers to move our trucks towards more battery supplied trucks because that's going to happen. And we don't want to have a fleet that's all combustion engine the day that all the battery start coming in. We want to get in front of that and lead the way not be on the other end.

So, as we look at our fleet [Technical Issues] as we look at the way self-driving and when we get [Indecipherable] 5,000 people with them, I believe at some point, those [Indecipherable] and our people apply. It's much more efficient, it would be much more efficient. And so, I think you'll see those kind of things and that's five years. It's moving that fast and it's really the infrastructure behind it and the technology, it's getting the advancement that's allowing this to happen. And so I just -- we see a lot of opportunity for technology to play overall in a big, meaningful role in that space.

[Brian Singer, Managing Director at Quanta Services]

Great. Our final topic for the panels is going to be emissions footprint and, Greg, let's start with you. Analog Devices has set a number of ESG-related goals, including net zero emissions by 2050 and carbon neutrality by 2030. Can you talk about the initiatives Analog Devices are taking to meet these goals and how should these be measured by investors? One of the focuses on some of the earlier panelists is really being able to establish to the investment community the milestones to hit a target, particularly those that are 2030 or beyond?

[Greg Henderson, Senior Vice President, Automotive, Communications, and Aerospace at Quanta Services]

Yeah. Again, it's a good point. We talk a lot about how our technologies are enabling this sustainable transition. But we as a company are very committed in our own operations as well. So as you said, we've committed to carbon-neutral by 2030. We committed to science-based targets for net zero by 2050. We are seeing a lot of science-based targets have been approved. One of the [Indecipherable] we have that we're going to increase our use of sustainable energy for our manufacturing operations, which is about 50% today to 100% by 2025. And so that's one of the key things to get us to that carbon neutral by 2030. And so, we're working through those kinds of key milestones, getting our science-based targets through making sure that we have 100% sustainable energy in our manufacturing operations by 2025 is one of the key things we're doing internally to make sure that we are -- and our ambitions that we are doing our part to make sure that the world gets to the right place.

[Brian Singer, Managing Director at Quanta Services]

Greg, on the 2025, increasing the use of sustainable energy to a 100%, is that via purchasing power agreements or how -- what is it that -- what are some of the measures being taken to achieve that?

[Greg Henderson, Senior Vice President, Automotive, Communications, and Aerospace at Quanta Services]

It's all a combination, but purchasing power agreements working -- I mean we are not -- we are not building grids and power companies, but we're making sure that we are purchasing power [Indecipherable]. It's a combination of those, I think, is together.

[Brian Singer, Managing Director at Quanta Services]

Great. Duke, Quanta has a large fleet of trucks, which you mentioned earlier. Can you talk about the measures that are being taken to mitigate emissions and improve safety, and how should investors measure performance in this regard and what role do safety measures and emissions have from a management compensation perspective.

[Earl C. Austin, Jr., President, Chief Executive Officer and Chief Operating Officer at Quanta Services]

Yeah, it's a good question. I've done a lot of -- being part of when we thought about our Blattner acquisition and to offset the solar and the wind that they build will really, if you look at it on a comparison basis, more than offset our fleet. But that being said, we put out an ESG report and we'll continue to refine that. We think it's important and something the investors are definitely in the middle of and we want to lead the way and I do think we get reports out. As it stands, our fleet today, it's all we have Analog Devices on our fleet. They tell us basically how much idle time we have and all those kind of things where it's just idling for example.

And our compensation -- even a piece of our compensation pool is on idle time on fleet and safety of fleet, do the analytics, whether it'd be driving, hard braking, all those kind of things as well as idle time and reducing idle times, obviously, the recent problem for us and we're trying to use that measure. But I think as we move forward, we'll have better data that will really allow us and also start to see us replace fleet with battery vehicles versus non-combustion engines as it moves forward -- as technology moves.

[Brian Singer, Managing Director at Quanta Services]

Great. Greg, you talked about the battery management systems. Regarding a product impact for electric vehicles, that piece of the pie, where do you come out on the debate over recycling versus reusing versus recycling and reusing the battery and whether battery should be leased or bought and what's the environmental impact that can have and the role that Analog Devices can play?

[Greg Henderson, Senior Vice President, Automotive, Communications, and Aerospace at Quanta Services]

Yeah. It's kind of a large debate right now about this kind of second life, right? So if you have an EV and you get through the end of its useful life, the battery maybe has, I don't know, 70% of capacity, is it worthwhile to take that out battery and repurpose and do some second life application with grid storage or is it makes sense that that's a 10-year-old battery and you should recycle it for the minerals and interestingly, the different automobile OEMs, for example, and power companies and battery companies, all have point of view on which way the technology -- we're not really sure what the right answer to that is, but our role is really about trying to make sure that we can help monitor the battery state of charge and actually it's getting help through the life cycle. So we're actually talking about the battery management system. We actually didn't talk about [Indecipherable] management solution.

So actually, we can put the monitoring right into the cells, and actually could be in the cells near manufacturing. And then as those cells go through their live from when they're manufactured, to when they're assembled in packs, to when they're in the car life -- in the life of the car and then possibly even to when they're reassembled into other packs, you can monitor them wirelessly through that life cycle. And monitor not just the state of charge, but also the state of health of that battery. So we'll be able to provide analytics and information through that life cycle. So we're not sure whether batteries at the end of cars that are re-purposed to the grid storage. We actually think it's a good idea or whether they'll just be recycled. But our goal, it was really to show the monitoring analytics and have that flexible way to measures through the cycle, provide the data and information for other customers and our customers to decide, okay, what's the right life. And no matter what, we believe that the longer you can extend the life of those batteries, the better off for your environment.

[Brian Singer, Managing Director at Quanta Services]

Great. I think with that, I will call an end to the panel, Greg, Duke. Thank you so much for participating and we look forward to further dialog on the topics of enabling these transitions.

[Earl C. Austin, Jr., President, Chief Executive Officer and Chief Operating Officer at Quanta Services]

Thanks, Brian.