Image source: The Motley Fool.
DATE
Thursday, July 31, 2025 at 1:00 p.m. ET
CALL PARTICIPANTS
President and Chief Executive Officer — Duke Austin
Chief Financial Officer — Jayshree Desai
Vice President, Investor Relations — Kip Rupp
Need a quote from an analyst? Email [email protected]
TAKEAWAYS
Revenue: $6.8 billion in GAAP revenue reported for Q2 2025.
Net income: GAAP net income attributable to common stock was $229 million for Q2 2025.
Diluted EPS: GAAP diluted EPS was $1.52 for Q2 2025.
Adjusted diluted EPS: Adjusted diluted EPS was $2.48 for Q2 2025.
Adjusted EBITDA: Adjusted EBITDA totaled $669 million for Q2 2025.
Free cash flow: Free cash flow totaled $170 million in Q2 2025.
Operating cash flow: Operating cash flow was $296 million for Q2 2025.
Record backlog: Backlog reached $35.8 billion at the end of Q2 2025.
2025 financial guidance raised: Revenue is now expected to range between $27.4 billion and $27.9 billion, adjusted EBITDA between $2.76 billion and $2.89 billion, and adjusted EPS between $10.28 and $10.88 for full-year 2025.
Dynamic Systems acquisition: Announced acquisition of Dynamic Systems, providing mechanical, plumbing, and process infrastructure capabilities, expanding addressable markets, and offering integration synergies.
Bell Lumber and Pole investment: Strategic investment completed in Bell Lumber and Pole Company to strengthen supply chain solutions for utility customers.
Leverage ratio: The stated leverage profile rose slightly above 2x post-acquisition as of Q2 2025, with expectations to end below 2x by year-end 2025.
Backlog growth drivers: CEO Austin said, "incremental transmission bookings" and multiyear customer commitments are contributing to backlog expansion.
Self-perform capability: Management stated 80%-85% of work is self-performed, driving execution certainty and longer-term contracts.
Segment backlogs: Dynamic Systems adds approximately $1.8 billion in multiyear backlog, which will be reported in Q3 2025.
SUMMARY
Quanta Services(PWR -0.49%) attributed quarterly outperformance to adjusted EPS of $2.48, supported by a record backlog. Addressable market expansion was highlighted through both the acquisition of Dynamic Systems and a strategic investment in Bell Lumber and Pole Company, which are positioned to provide complementary capabilities and strengthen customer partnerships. Updated 2025 financial guidance was raised for revenue, adjusted EBITDA (non-GAAP), and adjusted EPS (non-GAAP), with leadership emphasizing strategic discipline, ongoing M&A opportunities, and effective capital allocation as central to the business model.
Management plans to maintain investment-grade status while targeting a leverage ratio between 1.5x-2x, enabling continued flexibility for future acquisitions.
CEO Austin said the Dynamic Systems platform acquisition provides cross-selling, "exponential growth," and integration value across both utility and technology verticals, and complements prior platform deals.
Management noted that "record levels" of limited notice to proceed (LNTP) work indicate early-stage participation in a multiyear U.S. transmission build cycle, as discussed during the Q2 2025 earnings call.
CFO Desai confirmed that free cash flow forecasts for fiscal 2025 remain unchanged despite higher adjusted EBITDA, citing "timing of cash" and outstanding Canadian receivables as factors impacting the prudence of the current guidance range.
INDUSTRY GLOSSARY
Self-perform capability: The practice of executing a project’s critical construction or technical elements using a company’s in-house workforce rather than sub-contracting to third parties, improving quality control and execution certainty.
LNTP (Limited Notice to Proceed): Early-stage project authorizations permitting preparatory work on major contracts before full contract execution, often signaling backlog conversion potential.
MSA (Master Service Agreement): A long-term, overarching contract covering multiple individual jobs or projects between a service provider and a customer, offering efficiency and predictability in project access.
TAM (Total Addressable Market): The entire revenue opportunity available for a product or service, serving as a key metric for market potential in capital allocation decisions.
Full Conference Call Transcript
Kip Rupp: Thank you, and welcome, everyone, to the Quanta Services Second Quarter 2025 Earnings Conference Call. This morning, we issued a press release announcing our second quarter 2025 results, which can be found in the Investor Relations section of our website at quantaservices.com. This morning, we also posted our second quarter 2025 operational and financial commentary and our 2025 outlook summary on Quanta's Investor Relations website. While management will make brief introductory remarks during this morning's call, the operational and financial commentary is intended to largely replace management's prepared remarks, allowing additional time for questions from the institutional investment community.
Please remember that information reported on this call speaks only as of today, 07/31/2025, 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 and information intended to qualify under the Safe Harbor from liability established by the Private Securities Litigation Reform Act of 1995, including statements reflecting expectations, intentions, assumptions, or beliefs about future events or financial performance that do not solely relate to historical or current facts.
You should not place undue reliance on these statements as they 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. We will also present certain historical and forecasted non-GAAP financial measures. Reconciliations of these financial measures to their most directly comparable GAAP financial measures are included in our earnings release and operational and financial commentary. Please refer to these documents for additional information regarding our forward-looking statements and non-GAAP financial measures. Lastly, please sign up for email alerts through the Investor Relations section of quantaservices.com to receive notifications of news releases and other information.
Follow Quanta IR and Quanta Services on the social media channels listed on our website. With that, I would now like to turn the call over to Mr. Duke Austin, Quanta's President and CEO. Duke?
Duke Austin: Good morning, everyone, and welcome to the Quanta Services Second Quarter 2025 Earnings Conference Call. This morning, we reported our second quarter 2025 results, which included strong double-digit growth in revenue, adjusted EBITDA, and adjusted earnings per share, along with a record backlog of $35.8 billion and a number of other record financial metrics. This morning, we also announced the acquisition of Dynamic Systems, a premier turnkey mechanical, plumbing, and process infrastructure solutions provider with a diversified customer base that strengthens Quanta's craft skill-led critical path capabilities to provide certainty for growing technology, manufacturing, and other load center markets. Dynamic Systems' highly synergistic mechanical workforce adds to Quanta's growth platform and expands our total addressable market across several strategic verticals.
Additionally, Dynamic Systems brings an exceptional management team and a premier craft-skilled workforce that complement Quanta's culture. As a result of our solid second quarter results and the addition of Dynamic Systems, we are increasing our full-year 2025 financial expectations for revenue, adjusted EBITDA, and adjusted EPS. Additionally, in the second quarter, we made a strategic investment in Bell Lumber and Pole Company, which is the largest private producer of round wooden poles and other mass timber products, primarily serving the utility, telecom, and construction industries. Quanta's investment in Bell expands Quanta's portfolio of core utility infrastructure equipment and enhances Quanta's ability to offer critical path supply chain solutions to our customers.
Quanta's core strategy is built on the foundation of craft-skilled labor, execution certainty, investment discipline, and clear strategic rationale. At the heart of Quanta's success is our unmatched craft workforce. We deliver essential infrastructure solutions with dedication to safety, quality, and performance. Our execution certainty, combined with strategic investments in talent, technology, and complementary business strengths, strengthens Quanta's leadership position across our expanding addressable markets. Our investment decisions are guided by a disciplined strategic rationale aimed at reinforcing Quanta's differentiated platform, growing customer partnerships, and driving long-term sustainable value creation. Quanta differentiates itself through a unique solution-based approach that integrates craft labor with engineering, technology, and program management expertise to deliver comprehensive self-perform infrastructure solutions.
Rather than providing isolated services, Quanta partners with customers to solve complex challenges across the full project life cycle, which creates deeper strategic relationships. Our collaborative model drives higher value for our customers and positions Quanta as a trusted partner and solutions provider, not a contractor. As demand accelerates for resilient electric grids, power generation, technology expansion, and energy infrastructure, Quanta's large addressable market continues to grow. Quanta has a proven track record of consistent profitable growth across both favorable and challenging conditions, demonstrating the resilience and sustainability of our business model, which is a testament to the strength of our portfolio approach, a diversified solutions-based strategy that enables us to adapt to evolving industry dynamics while delivering mission-critical infrastructure.
The energy and infrastructure landscape is undergoing a fundamental transformation, and Quanta is positioned at its center. Utilities across the United States are experiencing and forecasting meaningful increases in power demand, which is being driven by the adoption of new technologies, related infrastructure including data centers, artificial intelligence, policies intended to reinforce domestic manufacturing and supply chain resources, and the need for all forms of energy generation. We continue to believe these drivers are leading to a potential historic investment in and an expansion of high-voltage transmission infrastructure, and that Quanta's self-perform platform, execution track record, and solution-based mindset enable us to capitalize on these expanding opportunities, positioning Quanta for sustained leadership and long-term growth.
I will now turn the call over to Jayshree Desai, Quanta's CFO, to provide a few remarks about our results and 2025 guidance, and then we will take your questions. Jayshree?
Jayshree Desai: Thanks, Duke, and good morning, everyone. This morning, we reported strong second quarter results, including revenues of $6.8 billion, net income attributable to common stock of $229 million, or $1.52 per diluted share, adjusted diluted earnings per share of $2.48, and adjusted EBITDA of $669 million. Additionally, we generated healthy cash flows in the second quarter, with cash flow from operations of $296 million and free cash flow of $170 million. Our second quarter performance was ahead of our expectations across most financial metrics, and, similar to the first quarter, is allowing us to increase our full-year expectations before considering the contributions from acquisitions.
Regarding our acquisition program, we take great pride in our ability to attract exceptional management teams and industry-leading solution providers into the Quanta family, and the acquisitions and investment we announced this morning are great examples of that core competency. As Duke mentioned, these strategic deployments of capital expand both our portfolio of solutions and our addressable markets. We believe acquiring great businesses while maintaining a prudent leverage profile adds significant value to our customers and our stockholders. We are currently evaluating refinancing alternatives to increase our post-transaction liquidity profile, ensuring we can continue to support operations and opportunistically invest capital.
As a result of the solid performance in the second quarter and the expected contributions from the acquisitions and the investment made subsequent to our first quarter release, we are raising our financial expectations for the year. Revenues are now expected to range between $27.4 billion and $27.9 billion, adjusted EBITDA between $2.76 billion and $2.89 billion, and adjusted EPS between $10.28 and $10.88. While we recognize the variability in the regulatory environment, demand for Quanta's differentiated portfolio of self-performed craft labor solutions remains strong. As our strategy continues to advance, we are deepening customer relationships and establishing new platforms for growth.
As evidenced by another quarter of record backlog, we remain confident in our ability to continue growing revenues and earnings over the years ahead. We believe our increased 2025 financial expectations demonstrate the strength of our portfolio approach to the business, our commitment to our long-term strategy, favorable end-market trends, and our partnership approach with our customers. Additional details and commentary about our 2025 financial guidance can be found in our operational and financial commentary and outlook expectation summary, both of which are posted on our IR website. With that, we are happy to answer your questions. Operator?
Operator: Thank you. We will now move to our question and answer session. We ask that all participants limit themselves to one question. If you have additional questions, you may requeue, and those questions will be addressed time permitting. If you have joined via the webinar, please use the raise hand icon, which can be found at the bottom of your webinar application. When you are called on, please unmute your line and ask your question. We will now pause a moment to assemble the queue. Your first question comes from the line of Andrew Kaplowitz from Citi Research. Please unmute and ask your question.
Andrew Kaplowitz: Hey. Good morning, everyone. Can you hear me okay?
Duke Austin: Yes. Good morning.
Andrew Kaplowitz: Duke, obviously, this quarter, there's been, let's call it, you know, some noise with the big, beautiful bill and, you know, some increased politics out there. But, of course, AI-related kept continues to ramp up. So maybe you can help us parse through the noise. Would you say even with the bill and its impact that you're more confident in sequential backlog growth for Quanta as you did again in Q2? Really on the strength of the incremental transmission bookings you're seeing. And then at your last Investor Day, you talked about megatrends and capital deployment giving 15% plus EPS. CAGR, you know, sort of an upside. Should we start thinking about that kind of growth for '26?
Duke Austin: Yeah. Thanks, Andy. I think when you look at the company, it's 20 plus growth. In actuality, what we're talking about is the ability to do that. And in fifteen, at the midpoint, tend to derisk everyone. So I want to be clear on that. The company over the on-year tenure that we've seen, it's 20 plus. So yes, I do believe the things that we're doing today set us up for the future '26, '27, '28, and '29. I you know, what we've done is we basically built platforms that against TAMs that compound. And when we make acquisitions, it starts day one and compounds for the future.
And I think it's our ability to acquire companies, great companies, great family businesses, and into the TAMs that we're addressing certainly is the strategic rationale around the company, and it's something that I believe goes unnoticed about how we compound free cash into earning streams. And we've done it. We've done it over and over again. And when we talk about TAMs of you know, of technology, you the $300 billion or so of capital, you see it going up. The calls that I'm listening to on the utilities such as AEP, others, every one of them basically have gone up in their CapEx as well. And I don't see anything other than an upper trend of the business.
The demand on power is exponential. It continues to come in. AI continues to prove out. Both economically as well as what we see from power demand under any scenario. And if we're going to lead the country and the world, you have to have power, and we're right in the middle of the infrastructures on both the largest TAMs that create the AI of the future.
Operator: Appreciate it, Duke. Your next question comes from Jamie Cook with Truist Securities. Please unmute and ask your question.
Duke Austin: Good question.
Operator: If you are with called in by phone, please try 6 to unmute, Jamie. Thank you.
Jayshree Desai: Sorry, Jamie. We can't hear you. Come back to you. How about that?
Operator: Your next question comes from Sheriff Al Sabe with Bank of America. Please unmute and ask your question.
Sheriff Al Sabe: Hi. Good morning. Morning. Morning. Thank you for taking the question.
Kip Rupp: I guess I just wanted to touch on...
Ati Modak: your backlog has continued to build fairly consistently. Just with the obviously large amount of work out there, has this changed the bidding process at all? Are terms becoming more favorable, and are you able to increasingly be selective on your projects?
Duke Austin: I mean, when we're looking at it, we're really trying to provide solutions. And so I think the strategic rationale around the solutions is something different where it's longer term in nature. It's programmatic in nature, and you know, there are constraints in certain areas of craft. And our self-perform capabilities are what separates us 80, 85% of 85% of what we're doing is self-perform. So our ability to have certainty, if you think about quantity, you should think about certainty. And that certainty in the marketplace to be able to deliver on time, on budget, is something that allows us to have a different discussion. And I would say, yes. It's longer in nature.
We're, you know, we're talking about 26, 27, '28. Type time frames of growth and CAGR growth and EPS growth and EBITDA growth and our ability to continue to compound. So you can't do that without having longer-term discussions, and I would say it's better and better as we move forward. Those discussions.
Ati Modak: And with those discussions, the longer-term work and you touched on this a bit in your opening comments, just the we've seen increased signs of utility CapEx pivoting towards transmission projects, larger projects. You know, there's clearly multiyear demand for this type of work. That's likely contributing to your backlog. Can you give us some color on what indication you've received from conversations with your customers on how they see the pipeline for this work evolving over the coming years?
Duke Austin: I mean, I look. I still think the business is 85% is, you know, what I would consider base business. We're still 80 to 85. It's still that way. The larger projects, the larger programs are stacking. Our LNTPs are probably at I'm I'm sure I'm confident they're at record levels. We convert the LNTPs into contracts. We can look at them. We don't book we don't talk about LNTPs, and we're not gonna start it. So but I would say everything that we're seeing on both TAMs, large TAMs are at record levels of you know, what inbounds or LNTPs or verbal or what we're over the long term.
And so I think those relationships and our collaboration are showing up daily. We're at the very early stages of a large transmission build that's coming. It continues to compound, and we really like you know, where the company sits in that build. Thank you.
Operator: Your next question comes from the line of Ati Modak with Goldman Sachs. Please unmute and ask your question.
Ati Modak: Hey. Good morning, guys.
Andrew Kaplowitz: Hey. Morning. Duke, I guess,
Ati Modak: wanted to ask on...
Jayshree Desai: what prompted the acquisition of Dynamic Systems because it seems like it a broader end market exposure. And how that fits into your strategy for the segment. It also seems like it will open up the door to other EPC domains. And then is it reasonable to expect more M&A in that direction?
Duke Austin: I think, you know, when we looked at dynamic systems, you know, we've we've said all along, we're not looking for M&A, but we are addressing the strategic rationale around the markets that we serve. And when we looked at technology, it's really the customer asking us to do more. It's the customer saying, can you build more? Can you give us certainty across you know, their addressable markets? And what does it take to go faster? What does it take to be certain? When we're looking at it and we see a company like Dynamic Systems that culturally fits us,
Brian Brophy: that...
Duke Austin: you know, the craft is really the key to the company. They have advanced technology. You know, solutions on it when you think about their digital solutions upfront. And that advancement, what they do on the pre on the pre-engineering and things of that nature. It really you know, complements Cupertino. It complements all the other companies that we have and surrounded by craft. So I believe that the craft concentric nature of dynamic and the TAMs that we're addressing why wouldn't we look at that, and why wouldn't we lean into that market with a great company? And, yes, we will continue to look at great family businesses that add value to our strategy and our shareholders.
And I believe we've done that here, and you've seen the numbers, and we've talked about it a little bit. But what you haven't seen is synergies that we believe we will get. We don't talk about synergies in these deals, and certainly, we believe it will cross both utility and technology addressable markets, and give us something that we don't have today with we can grow exponentially with a solution-based approach.
Ati Modak: Got it. Appreciate that. Thank you.
Operator: Your next question comes from Philip Shen with Roth Capital. Please unmute yourself and ask your question.
Philip Shen: Hi, everyone. Can you hear me okay?
Jayshree Desai: Yep. Hey. Morning. Can you guys hear me? Okay.
Philip Shen: Great. Yes. Yes. Hey. So thank you. With the ITC winding down by year-end 'twenty seven, to what degree can you pull forward renewables work? Lot of it depends on labor. And so just wondering to what degree you guys are trying to accelerate that as much as you can. And then if you can, can you share what your outlook for renewables might be for 2028 and beyond? After the credits wind down? Thank you.
Duke Austin: Yeah. I mean, I'll let Jayshree comment on some of the things that she's saying, but I do think when we look at our renewables, and you look at really the low cost of energy, if you add solar wind in some places and batteries into a backstop of natural gas on a line, you know, you get the lowest cost to the consumer. So I still believe it's really about the lowest cost, the speed to market that we that the renewables provide. We are seeing pull-ins on LNTPs. So I would expect us to you know, our customer base has safe harbored nicely.
We can see out multi-years here, and I don't think when you look at it long term, we're not concerned with where renewables are going. There will be noise in it. But that's nothing new. It's been that way for two decades. And I think our ability to work through that with our customers or collaborate is an opportunity for us. It's nothing but an opportunity, but I'll let Jayshree comment on the overall market.
Jayshree Desai: Yeah. I echo everything Duke's saying firmly. I think the working with tier one customers who've lived through regulatory dynamics over twenty plus years who understand how PTC, ITC cliffs can manifest and then being able to get price discovery as they're working through their projects on the demand side. We just see more and more strength as especially with the customers we're working with. No doubt there's gonna be some effects as the executive order comes in, as the tariffs come in terms of just getting that price visibility. But the demand side from every one of our customers, we keep hearing, is as strong as ever.
And a lot of them are safe harbored well into '28 and even into '29. And beyond that, what they're already starting to think through about their pipelines and how with the speed to market that's necessary, the fact that data centers and technology continues to want power, capacity, solar, battery, and even wind, provide value for both on the energy side as well as the capacity side. And so we just believe that it's gonna be continue to be a good market for us. If you recall, we actually entered the renewable market prior to the IRA. And because we understand these dynamics very well, we understand those customers, and we understand how to manage these things.
I do believe that strength of being through this historically is going to be an advantage for us. And we can be helpful to our customers as they as well navigate through these dynamics. Just continued positive momentum is what we see.
Philip Shen: Great. Thanks. One follow-up here. Can you give us some more color on the core growth in Q2? And then share any expectations for inside electrical growth and the outlook there? Thanks.
Duke Austin: I mean, I think the company itself organically is growing EPS very close to double digits. And on the top line, I would tell you mid-single digits. And what the things that we're doing from you know, supply chain and all the things that we're able to do is accomplishing can't see the top line growth, but you can sure see it on the ROIC accretion. The EPS accretion. And so we're really looking at quality of earnings where we're we don't believe that the risk is there on earning from a top line. We'll shrink it and figure out how to put it in the portfolio and expand it. So those things are always something we're looking at.
Never happy with margins that are degrading. We continue to believe that we're getting better as a company overall, and you can see it in the margin profile and the quality of earnings. The top line will take care of itself. And so we're really focused on where it counts, and that's driving cash and EPS.
Operator: Your next question comes from the line of Jamie Cook with Truist Securities. Please press 6 to unmute and ask your question.
Duke Austin: This modern technology...
Jayshree Desai: Jamie, I'm sorry.
Operator: Hi, Jamie. Please unmute your line. Ask your question.
Jamie Cook: Can you hear me?
Operator: Yay. Yes. You can.
Jamie Cook: Yes. You for bear me. I'm so sorry. So two questions. Do you under have a lot of growth opportunities ahead of you? And you're very bullish on the marketing. You can pivot to different directions. But are you doing it? I understand you're still bullish on renewables. Are you doing anything internally to prepare for potential short-term slowdown in terms of allocating resources or people to other projects maybe prioritizing transmission, you know, projects. I'm just trying to think about you know, what you can do to manage for any sort of short-term hiccup in this business. So I guess that's my first question.
And then my second question, and if this was asked tell me to get I can read the transcript later. But my second question is, just as it relates to, Dynamic, have you used I assume revenue synergies aren't in your targets. Can you talk to potential revenue synergies, and do you think this is a business that has an opportunity to improve margins relative to where it is today? Thank you again for bearing with me today.
Duke Austin: And thanks, Jamie. I struggle with that mute button too. So what I think I think we're we're not concerned, you know, what we see with renewables. At this point. But our we've talked about, you know, one of the reasons we separate wind and solar when we bought Bladder is because we were fungible across wind and solar. Those same people can build transmission substations, all kinds of things on the front side of the business. So we do move labor quite a bit across segments, across TAMs, and I think it's really important to realize that it's fungible, and we're able to move in these different markets. And even with dynamic systems, they can move across markets.
If you go, well, what about health care? What about farm? Yes. They're in it. But what about technology? Yes. They're in it. What about power plants? Yes. They can do that. So I think in general, we're able to move that craft across these markets. And it's what we've done. We didn't do this today. We've been doing this for the last decade where we've derisked this company in a portfolio way. So everything you're saying never intended to operate at a 100%. We've always intended to operate at 80. If we get to 90, we'll blow the margins out the out the window. So 80% of our work is, you know, better than expected.
We do have, you know, downturns. We do have inefficiencies. We have this all the time. You've seen them with Canada. You've seen it across. We're able to operate through that because of the portfolio and because of the derisk. So what you're saying is absolutely right. And when we hear a market, we've already moved past that. We've already thought about that. You know, when we're looking at acquiring these companies, we're not acquiring them because of the data center boom, but we're acquiring them because they're a great company that a long-standing, well before data centers.
And when you think about what dynamic does for us, yes, I mean, we're on this same job and the revenue opportunity is the 30, 40% of the solution-based. That comes with it. And when you start thinking about our Cupertino and Dynamic on the same projects, yes. Are they talking to the same customer? Yes. And are we on the high voltage side? Yes. So mean, when you start to when you start to look at it and you have a large customer and they say, well, that's Quanta. Well, that's Quanta. It's just something that I believe will separate us over time. I think our strategies are sound. Actually, I'm thinking about 2030.
Truthfully, and what we're doing in 2030, we'll let you know soon. But I think that's where we're at, and I continue to really you know, like the markets that we're in today. Continue to earn. We'll continue to, you know, work through this nicely. But we've derisked the company with a portfolio. No question.
Operator: Your next question comes from the line of Brian Brophy with Stifel Nicholas. Please unmute and ask your question.
Brian Brophy: Yeah. Thanks. Good morning, everybody. Appreciate you. Looks like you've made a couple of acquisitions in the civil space here recently. Obviously, that's a very fragmented industry and continues to be curious how you're thinking about opportunity to continue to deploy capital here from an M&A perspective. And just thoughts around doing a larger platform like acquisition in the space? Thanks.
Duke Austin: I mean, I would consider Dynamic a platform for us, and we'll continue to grow off of it much we've done with Cupertino and Blattner. So that to me, is a platform acquisition that has exponential growth to it. The synergies we don't put in, we've not talked about it. I would tell you that the deal model on Cupertino we've blown it away. And, you know, we call it you can't see it because we won't talk about it as organic growth. But if you say organic growth is beating the deal model, we're killing it. So I think in general, we see the synergies.
We see what we're doing there on these platform-type acquisitions and our ability to exponentially grow. When we look at the civil piece of it, you know, it's something that on every site we're in, on all the things that we do internally, that we're able to self-perform have self-perform capabilities. What you know, we can do in the industrial space with our industrial business. It's something that was a great company, a great family company that the management team is fantastic. And all the characteristics that we want and provides to the overall solution.
So following the strategies, of the TAMs and really addressing what the customer's asking us to do with great companies that they're not you know, we're not out looking. I'll say this again. You they're coming inbound, and we're really able to you know, discuss the longer term. If they fit, they fit. And so we'll lean into them when it makes sense.
Brian Brophy: Thanks, Duke. I'll pass it on.
Duke Austin: I do want to clarify. When I'm talking organic growth organic growth, when I'm saying that the organic growth is what we stated in the past, but we don't get credit for the beating the deal model. So that was to clarify that so I can keep accounting and legal off me. That I want to clarify that we beat the deal model and we don't get credit for that piece of the organic. But I consider synergies. That we don't talk about.
Operator: Your next question comes from Chad Dillard with Bernstein. Please unmute and ask your question.
Chad Dillard: Hey. Good morning, guys. So I was hoping you could talk about the cross-sell opportunities with Dynamic. So, you know, how much customer overlap is there with Cupertino? Is MEP usually an integrated service? And, like, what's of white space do you see to actually make that so, you know, within your customers? And then lastly, you know, are there are there programmatic contracts in the space, or is this a potential expansion opportunity that you see ahead for Quanta?
Duke Austin: Yeah. I mean, I think when you think about Dynamic and Cupertino and really data centers, Dynamics business in the past, about 30% was call it, data centers. The rest you know, 50 was technology or better. So it really got their Mechanical type, processing type technology that they have upfront is Cupertino's early in these projects. We don't they don't really look at it. They look at them independent. Are we providing the high voltage? You know, I think are we providing the transformers? Are we at the civil? What can we do to really expedite this to the client, and how does that look you know, in the next five years? Who are they asking?
What we give them is certainty and self-perform capabilities of 85%. The markets that show up with both dynamic, you can cross-sell from Dynamics customers back over into Cupertino. Quanta, I just think there's a lot of customer synergies here that we're not discussing. There's a lot of things that we can do with Kraft. And know, cross-selling, many, many things. So we really like the acquisition, and we really like the craft piece of it and the family that is there. They're top-notch. Best in class, and we're super excited about having them on board and what we can do with the company.
Chad Dillard: That's super helpful. And then secondly, how are your renewable customers navigating this safe harbor executive order? I know we're supposed to get some, I guess, some final clarity in later in August. Yeah. Are they taking, like, a wait and see approach before taking FIDs? Are they just, like, going to the ground, like, as soon as possible? And then also, it's like, what sort of opportunities from an engineering or procurement standpoint does this Quanta have to help customers, you know, given the situation?
Duke Austin: Okay. I mean, that's we can certainly help them with safe harbor and things of that nature and then, you know, certainty to get the projects done in the time frame that's necessary. So yeah, a lot of inbounds there, a lot of opportunity. There, and many, many things that we can do from the standpoint of you know, helping them with the bill. It's noisy, tariffs, and everything's noisy. But we put our head down. We operate. We really try to collaborate on that. And, you know, our job is to see the issues before they before they happen and help the client. I think our transformer acquisitions, what we're doing with poles now, it's part of that solution.
Having certainty to these things in our craft skilled labor and our completion. You know, our customers lean on us to finish, and I really, really like discussions there. I expect, you know, our backlog to continue to increase. I want to say too, like, you can have periods of where you where you may sign large, large projects. And, you know, on a CAGR basis, we continue to see upward movement. You could some quarter over quarter of fluctuate. I don't expect it, but we could. But you know, on a year basis, you're gonna continue to see backlog of our eyes for sure. I just we see it coming in at this point.
Operator: Your next question comes from Justin Hawk with Robert W. Baird. Please unmute and ask your question.
Justin Hawk: Oh, great. For taking my question here. Duke, I guess I just wanted to ask. I mean, you talked about you know, the 85% of your work that's still that base business. But you do have these bigger jobs. You booked this the Boardman Hemingway job here. You get a big one last quarter. Another one that's been out there is the Grain Belt. So you didn't comment on it here, but I guess, you know, that's been press release that you and Kiwi picked up work there.
And guess I was just you know, I guess the question is just thinking about, you know, the and takes on you know, the start of those and the wind down with SunZia and status of kinda all those and anything we should think about from don't know, a start-up or shutdown noise thing up between those as you can have a gate between those bigger jobs.
Duke Austin: Yeah. No. I look. We're complete on the transmission line out in SunZilla, and we haven't missed a beat yet and then continue to rise. Our transmission business is growing. We you know, we didn't talk about Grain Belt. It's not in our backlog. It's a great project. All transmission at this point is NPV positive to North America and to the to the shareholders. I mean, to your stakeholders. So, look, I think in general, great project. It certainly facing some political ramifications there, and we're working with the client and vendor. They're a great customer, and great line. We'd love to build it.
So we'll work together to try to get it across the finish line, and we really like the project. So I do believe at some point, it'll get built and, you know, we're but in general, we watch this and watch what we put in our backlog, and I think we want to be certain when in there. I don't like to pull things out of it. That's for sure. So you know, it's part of our conservatism as a company that we really, you know, try to give you the stories and make sure that we're transparent on how we look at work.
So that said, I think you're gonna see compounding markets in large transmission that's just in early stages. I know, some of the things that we've done as a company to create markets to create our markets with larger transmission, I like it. I like the acquisitions that we've made there to help us and front-end capabilities that we have as we collaborate with the client. Gonna see larger seven sixty-five builds across the country. We're excited about it. We're excited where we said early stages, but as you start to see these things come along and you're seeing the capital budgets of the clients, so we'll follow those capital budgets.
And as they move forward, we'll move forward with them.
Justin Hawk: I appreciate that. And then just one more quick one maybe for Jayshree here on the free cash flow outlook is unchanged. Your adjusted EBITDA's a little bit higher. You still have some, I guess, some bigger collections here in the second half, on that. But can you just maybe talk about the dynamics of why the free cash flow outlook is unchanged with the higher EBITDA?
Jayshree Desai: Yeah. I mean, we're pleased with what happened in the first half of free cash flow. Our operators are continuing to do a great job on DSOs and working capital. But as I mentioned before, we want to give ourselves the best possible outcome around our large Canadian receivable. As you know, that's part of our it's within our range. We do believe that's gonna be settled favorably this year. Timing of cash, though, can sometimes be a little hard to predict. So, you know, we want to give you guys a prudent range. I think it's the right number where we are from $1.01 to $1.07. Do I believe we can be at the high end of that? Yes.
I do. We're seeing some things on the type of work mix as we move into the back half of the year that also gives us some confidence in that higher end. But right now, we think the right thing to do is stay where we are.
Operator: Okay. Thank you very much. As a reminder, we ask that all participants limit themselves to one question. If you have additional questions, you may requeue, and those questions will be addressed time permitting. Your next question comes from the line of Drew Chamberlain with JPMorgan. Please unmute and ask your question.
Drew Chamberlain: Yeah. Thank you for taking the questions. Just one quick one for me and kind of following up on that last line of questioning there. How do you think about the balance sheet leverage exiting the year now with this deal being done? And then what type of flexibility does that give you for deals throughout the rest of the year? And maybe, you know, what cadence we can we can expect there? I'll leave it at that. Yeah.
Jayshree Desai: Yeah. You know, as we tend to want to stay between a leverage ratio profile of a one and a half to two times. And you've seen us do that even after significant acquisitions where we can push up above two times, but buy companies that we believe will allow us to rapidly delever and this one is no different. We're right now a little bit above 2x. We ended the second quarter below two. We're a little bit higher than that. But going towards the end of the year, we fully expect to be below two times. You'll see, you know, you'll see I made the comment that we're evaluating various financing alternatives.
To continue to ensure that have the most flexible balance sheet and give us the liquidity we need to ensure we can invest in organic growth as well as if there are opportunities to deploy capital in various ways, we want to be able to do so. So we're gonna continue doing that, but you can expect that the types of companies we acquire, our capital allocations strategy, there isn't there's no change going forward. We still want to remain prudent in our balance sheet. We want to stay within that one and a half to two times and do so in a way that continues to give great strategic value for our shareholders.
Duke Austin: No. Just a comment. We intend to remain investment grade.
Jayshree Desai: That's right.
Drew Chamberlain: Great. Thank you.
Operator: Your next question comes from Sanjeeta Jain with KeyBanc. Please unmute and ask your question.
Sanjeeta Jain: Hi. Thanks for taking my questions. So, Juan, I don't know if you guys quantified the backlog for Boardman to Hemingway. If you did, I apologize if you didn't, could you help us frame size that?
Duke Austin: It's meaningful.
Sanjeeta Jain: Alright. That was quick. And another one I would say is, on the safe harbor treasury guidance that is pending, how are you safeguarding Quanta's backlog in case that changes to, let's say, more than a 5% safe harbor rule or the pull that a four-year window to complete a project down to, let's say, two or three years?
Duke Austin: I mean, any of those would be better for us or as good for us. I look. We're not seeing that, but anything that makes things go faster people want certainty. So I don't know what does it do for us. It just moves it forward. And we're not like I said, we're not seeing that right now. But if it happens, anything that people want to go faster and be more certain, they should follow Quanta.
Sanjeeta Jain: For one of the projects sequencing changes as a result of that?
Duke Austin: It's not gonna bother us. I feel like look. The way that we look at this and I've heard this a lot. We hear it on in the street a lot that you know, the risk of Quanta is they have too much work. We come at it from 20 different ways. If you go to another company, they come at it from one. Would you rather derisk from 20 different avenues 20 different sources of labor, union, nonunion, or would you rather go to one person? So I just feel like we have a different way to deliver on a and we're proud of it. Proud of the men and women in the field that build it every day.
So we like our chances on all of it.
Operator: Your next question comes from the line of Liam Burke with B. Riley. Please unmute and ask your question.
Liam Burke: Yes. Thank you. Good morning. Duke, Bell Lumber, is that a platform you can grow organic or is that purchased just to serve your regional needs?
Duke Austin: Look. I think it's a solution. It's 40% ownership in the business. And so we really like the family. Longstanding family in the business. They I know more about timber and pole solutions than I've ever known in my life. And I truly believe poles, wires, transformer, are critical supply chain items as we look at this. And what they do for us with certainty we're talking to the client about an overall solution, long term. I think it's necessary for us as we move forward in our projects you know, with our third largest fourth largest buyer of HV equipment. And our ability to I mean, the transformer capabilities, it's just a different with the client.
When we had the asset and able to really sway, you know, where we can logistically source and how we source. So like, I like it. It's a collaboration with the client, and what it does for us is certainly something that provides an overall solution to our supply chain initiatives.
Liam Burke: Great. Thank you, Duke.
Operator: Your next question comes from the line of Adam Thalhimer from Thompson Davis and Co. Please unmute and ask your question.
Adam Thalhimer: Morning, guys.
Duke Austin: Morning.
Adam Thalhimer: Duke, has the one big beautiful bill come up at all in conversations with your customers? Just curious if...
Duke Austin: Yeah. I mean, we talk about it every day. So you can't ignore that. I mean, I think it's part of the business and part of the discussions we have with them constantly. You know, how do we get in front of it? How do we help them politically? How do we get in, you know, get in front and provide the overall solution that matters? If you see tariffs and if you look at what we've done in supply chain, all the things that we've done in supply chain are US-based on purpose. Not because of the big beautiful bill because we thought we were gonna move this way. Like, ten years ago.
So you know, the things that we've done really separate us with the client. And we can if we can help them, yes. And, you know, it's early stages in this and what they see and how we deliver, but you know, it doesn't go unnoticed at the client level in those conversations to pull work in to go long term in different areas, to have sourcing capabilities is you know, we're just scratching the surface. And what we're gonna do for solutions over the next decade, you know, we're in early stages of that. It's certainly the difference. I said it in the last call, and I'll say it again. You know, five years ago, we were independent.
We were a Cupertino and a Bladner and Dynamic Systems. Today, we're Quanta. And Quanta provides a solution, and we're having the Quanta discussion constantly.
Adam Thalhimer: Thanks, Duke.
Duke Austin: You're welcome.
Operator: Your next question comes from the line of Amit Thacker with BMO Capital Markets. Please unmute and ask your question.
Amit Thacker: Thanks for squeezing me in, guys. Just two. Looks like the portion of your backlog from MSAs is down, I think, of $900 million, like, quarter over quarter, and it's kind of flattish versus. Long term. So it's and just I was wondering if you give a bit of a sense of irrigation on how much backlog will come from dynamic when you guys update this next quarter?
Duke Austin: Yeah. I'm not concerned with time and MSA. Maybe Jayshree can come on and not even look at it. What No. No. We're not at all. I mean, these are just...
Jayshree Desai: timing issues and electric we continue to see growing backlog. You see a little bit of pullback maybe on the underground, but, again, we just think it's timing. And as for dynamic, we that's not in our backlog. Because we bought in the second quarter, we bought the company after the second quarter. But they came in with about a billion 8 of backlog, and we'll update that in the third quarter as we work through it with them.
Duke Austin: Yeah. And that's multiyear backlog too. They can see how 2027, and even into '28. So same scenario with them. So I think it's really important that they're of scale that they're having the same kind of conversations that we're having with the client. This is not a small company with no scale. It has a lot of scalability to it. Thank you.
Operator: Your next question comes from the line of Mike Dudas with Vertical Research Partners. Please unmute and ask your question.
Mike Dudas: Morning, Jayshree, Kip, Duke.
Duke Austin: Good morning.
Mike Dudas: Do you keep with the, you know, the news we saw on the July build-out expectations in Texas, is that jarred some other RTOs in do you kinda get moving forward in our utilities continue to underestimate transmission and the ability can have to solve all their problems.
Duke Austin: I mean, I think yes. Mean, 765 is in MISO as well as PJM. I mean, there's some lines in both. So I do believe 765 is gonna be easier to build AC than trying to build DC these days. It's always easier to drop load in, you know, territories, states, where states' rights come in and RTOs. So I do believe you'll see more July due to load growth. Lots of 500 out there as well. And then every it's probably a 10 to one when you build a big line. There's 10 more lines coming off of it. So I just we continue to see those inbound.
You can see it at you know, outside the capital budgets of utilities. See it in the RTOs as well. And lots of those projects are not in their budgeting. So it's prevalent. I do believe utilities are seeing it. We're certainly in the middle of it with them. There's you can see debt offerings. You can see equity offerings. There's no question that it's on everybody's radar that the need transmission and generation has never been more prevalent in this country.
Mike Dudas: Excellent. Thank you.
Operator: Your next question comes from Chris Young with Wolfe Research. Please unmute and ask your question.
Chris Young: Hey. Hey. Good morning, Do you guys hear me?
Operator: Hey. Yes. Thanks. Good morning.
Chris Young: Oh, great. Hey. Hey. Thanks, Thanks, Just wanted to just ask, like, I think you noted large multiyear build programs in a data center market that's expanding your addressable market? I know this acquisition, while accretive, do you view these sorts of acquisitions, like Dynamic, as necessary to compete for that type of work? Or you have addressed these opportunities organically? Thanks.
Duke Austin: Yeah. You know, certainly, we can we've done things organically and do things organically all the time. I felt like this fast as this is moving the large market that we're in, and the things that we see this was a market that we needed a platform company to exponentially grow. It was the right way to pursue capital and grow it from a standpoint you know, exponentially off a platform. So some things we'll look at platforms like telecom, we grew organically. Market's different market. So some things we're always growing things organically as well. I don't want to you know, there's things that we're doing that we're going to address different markets that you haven't seen yet organically.
That I really like that I think will show up. And there's things that we believe that you can build a platform off of with great craft skilled labor. And this is something that we leaned into from a platform standpoint that provides a greater adjustable market, allows us to provide a solution. So we look at them all. We look at it differently, but it's all following a strategy and best use of free cash flow for the shareholder.
Chris Young: K. Thanks, Duke. I'll turn it over.
Operator: Your next question comes from the line of Steven Fisher with UBS. Please unmute your line. And ask your question.
Steven Fisher: Thanks.
Duke Austin: Yes, sir.
Steven Fisher: Just to follow-up, actually, on that last question. I mean, you clearly made the case, Duke, for the solution angle on this dynamic deal. And it sounds like it, you know, blending with everything else. It's a one plus one equals three, I'm just curious, how you compare that with the electrical side of things. And wondering as you make it a platform and build it out to something bigger over time. Can you get the same returns on Mechanical that you can from electrical? And if not, is that sort of reflected in the upfront purchase price that you paid?
Duke Austin: I mean, we're always looking at returns. So your return invested capital or your returns on the company are certainly every bit as good or better than our electrical use of capital. I you know, I think when you look at these acquisitions, what goes unnoticed is our fabrication capabilities at Quanta are well above three million square feet. So, you know, you're also adding significant fabrication, which is an initiative of the company along with, you know, the mechanical processing and plumbing capabilities here, it goes unmatched. So you know, I like what we're doing.
We'll speed the market so important in their advanced, you know, front-end services on technical capabilities or as good as anyone I've seen and will help the whole company. Be much better. So we're definitely leaning into all the things that are great about these companies for a lot of different reasons, and it's not just what you see on paper. It's what you don't see that shows up three years from now or four or five. So we certainly have strategies that we follow, and this is one of them that you know, provides access to three or four markets as well as gives us more capabilities internally.
Steven Fisher: Sounds good. Thank you.
Chris Young: Sure.
Operator: Your next question comes from the line of Spark Lee with Jefferies. Please unmute and ask your question.
Chris Young: Guys, can you hear me okay? Hey, guys. Can you hear me okay?
Jayshree Desai: Yes. We can.
Chris Young: Yeah. Just quickly come back thank you. Just quickly come back to the IRA driven renewable pull forward dynamic here. So is there really opportunity to increase near-term target just by pulling forward renewable projects?
Duke Austin: Yeah. I mean, look. I LNTPs are we're not seeing we gave you guidance for the rest of the year. You know, '25, '26, '27, '28. I know, it's too early to tell you what renewables are doing. '26, '27. I believe we'll have growth. I don't know how much. Anything I'd tell you would be a disservice at this point. So you we see growth in renewables in '26, '27, '28, and beyond. As long as the power demand stays where it's at, it'll be a part of the solution. Batteries are you go look at the Texas curves and how much batteries are helping out during these in the heat.
It's something that's, to me, goes unnoticed about how renewables play into this. And I know the rhetoric. I understand it. But also the consumer, there's affordability issues that renewables absolutely help that. And, you know, you're gonna build a line. You add batteries and solar on there. It's going to be better, and you're going to get pull in. You're gonna get stacking. Canada looks good from a renewable standpoint. So lots of opportunities there. I would see you'll have growth in the company for the foreseeable future.
Chris Young: Got it. Thank you.
Operator: There are no questions at this time. I'd now like to turn the call back over to management for closing remarks.
Duke Austin: Yes. Thank you. I do want to say a little bit about people in Texas on the floods. We had some heroic acts from our people here and saved lives and the call you know, at the one step of a call, they went out and saved lives. And the things that we do, the heroism of our people, the 4,000 people that are out there, men and women, they're incredible. They're incredible what they do from their heart, and they're incredible what they do every day. So I would be remiss not saying, you know, we stand behind the families of lost lives, and what we did to help that. It's more than just an earnings call.
It's something that I believe culturally we're there to help and guide and do some great things. So real proud of our people and proud of what they did there, and I want to thank you for participating in our call. We appreciate the questions, ongoing interest of Quanta Services, and thank you. This concludes our call.