Item 1. Financial Statements.

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Item 1. Financial Statements.

QUANTA SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share information)

(Unaudited)


	September 30, 2024		December 31, 2023
ASSETS
Current Assets:
Cash and cash equivalents	$	764,067	$	1,290,248
Accounts receivable, net	5,149,915		4,410,829
Contract assets	1,328,833		1,413,057
Inventories	275,852		175,658
Prepaid expenses and other current assets	527,382		387,105

Total current assets	8,046,049		7,676,897
Property and equipment, net	2,649,467		2,336,943
Operating lease right-of-use assets	302,786		249,443
Other assets, net	619,139		565,625
Other intangible assets, net	1,966,689		1,362,412
Goodwill	5,282,170		4,045,905

Total assets	$	18,866,300	$	16,237,225
LIABILITIES AND EQUITY
Current Liabilities:
Current maturities of long-term debt	$	556,238	$	535,202
Current portion of operating lease liabilities	94,685		77,995
Accounts payable and accrued expenses	3,999,027		3,061,242
Contract liabilities	1,875,388		1,538,677

Total current liabilities	6,525,338		5,213,116
Long-term debt, net of current maturities	4,131,843		3,663,504
Operating lease liabilities, net of current portion	224,282		186,996
Deferred income taxes	337,025		254,004
Insurance and other non-current liabilities	558,787		636,250

Total liabilities	11,777,275		9,953,870
Commitments and Contingencies
Equity:
Common stock, $0.00001 par value, 600,000,000 shares authorized, 176,593,875 and 173,949,011 shares issued, and 147,601,543 and 145,508,549 shares outstanding	2		2
Additional paid-in capital	3,405,112		3,002,652
Retained earnings	5,417,240		4,858,066
Accumulated other comprehensive loss	(305,049)		(282,945)
Treasury stock, 28,992,332 and 28,440,462 common shares	(1,446,688)		(1,305,534)
Total stockholders’ equity	7,070,617		6,272,241
Non-controlling interests	18,408		11,114
Total equity	7,089,025		6,283,355
Total liabilities and equity	$	18,866,300	$	16,237,225

The accompanying notes are an integral part of these condensed consolidated financial statements.

QUANTA SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share information)

(Unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Revenues	$	6,493,167	$	5,620,822	$	17,119,373	$	15,098,258
Cost of services	5,480,597		4,773,498		14,671,978		12,953,640
Gross profit	1,012,570		847,324		2,447,395		2,144,618
Equity in earnings of integral unconsolidated affiliates	14,015		11,707		34,935		30,697
Selling, general and administrative expenses	(483,878)		(386,538)		(1,318,574)		(1,155,261)
Amortization of intangible assets	(110,422)		(71,361)		(267,147)		(213,789)

Change in fair value of contingent consideration liabilities	(1,124)		(803)		(2,864)		(803)
Operating income	431,161		400,329		893,745		805,462
Interest and other financing expenses	(59,950)		(47,531)		(146,343)		(137,413)
Interest income	7,237		1,993		18,817		4,957
Other income (expense), net	2,994		(3,744)		29,493		7,541
Income before income taxes	381,442		351,047		795,712		680,547
Provision for income taxes	82,421		77,522		178,716		143,468


Net income	299,021		273,525		616,996		537,079
Less: Net income attributable to non-controlling interests	5,836		689		17,292		3,298
Net income attributable to common stock	$	293,185	$	272,836	$	599,704	$	533,781

Earnings per share attributable to common stock:
Basic	$	1.99	$	1.88	$	4.09	$	3.68
Diluted	$	1.95	$	1.83	$	4.00	$	3.59

Shares used in computing earnings per share:
Weighted average basic shares outstanding	147,394		145,455		146,639		145,118
Weighted average diluted shares outstanding	150,556		148,792		149,911		148,749

The accompanying notes are an integral part of these condensed consolidated financial statements.

QUANTA SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Net income	$	299,021	$	273,525	$	616,996	$	537,079
Other comprehensive income (loss), net of taxes:
Foreign currency translation adjustment income (loss)	17,694		(31,995)		(22,104)		(7,769)
Other comprehensive income	—		—		—		791
Other comprehensive income (loss), net of taxes	17,694		(31,995)		(22,104)		(6,978)
Comprehensive income	316,715		241,530		594,892		530,101
Less: Comprehensive income attributable to non-controlling interests	5,836		689		17,292		3,298
Comprehensive income attributable to common stock	$	310,879	$	240,841	$	577,600	$	526,803

The accompanying notes are an integral part of these condensed consolidated financial statements.

QUANTA SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Nine Months Ended
	September 30,
		2024		2023
Cash Flows from Operating Activities:
Net income		$	616,996	$	537,079
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation		262,525		239,746
Amortization of intangible assets		267,147		213,789

Distributions, net of equity in earnings of unconsolidated affiliates		6,002		24,579

Deferred income tax (benefit) expense		(1,847)		14,302
Non-cash stock-based compensation		110,815		94,658
Other non-cash adjustments, net		(2,430)		(10,620)
Changes in assets and liabilities, net of non-cash transactions:
Accounts and notes receivable		(399,501)		(666,786)
Contract assets		154,425		(508,457)
Inventories		(50,732)		(3,759)
Prepaid expenses and other current assets		3,091		(104,956)
Accounts payable and accrued expenses and other non-current liabilities		331,260		776,496
Contract liabilities		77,205		(38,764)
Other assets and liabilities, net		(5,775)		5,107
Net cash provided by operating activities		1,369,181		572,414
Cash Flows from Investing Activities:
Capital expenditures		(457,093)		(325,397)
Proceeds from sale of and insurance settlements related to property and equipment		67,230		47,983
Cash paid for acquisitions, net of cash, cash equivalents and restricted cash acquired		(1,724,440)		(472,643)
Investments in unconsolidated affiliates and other		(72,609)		(6,505)
Proceeds from the sale or settlement of certain investments		29,239		42,277
Other, net		30,525		(8,039)
Net cash used in investing activities		(2,127,148)		(722,324)
Cash Flows from Financing Activities:
Borrowings under credit facility and commercial paper program		11,905,853		14,339,958
Payments under credit facility and commercial paper program		(12,696,895)		(14,136,313)
Net proceeds from notes offering		1,238,741		—
Payments related to tax withholding for share-based compensation		(140,625)		(113,409)
Payments of dividends		(40,769)		(36,059)

Other, net		(38,878)		(23,126)
Net cash provided by financing activities		227,427		31,051






Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash		4,267		(4,466)

Net decrease in cash, cash equivalents and restricted cash		(526,273)		(123,325)
Cash, cash equivalents and restricted cash, beginning of period		1,295,041		433,214
Cash, cash equivalents and restricted cash, end of period		$	768,768	$	309,889

The accompanying notes are an integral part of these condensed consolidated financial statements.

QUANTA SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(In thousands, except share data)

(Unaudited)


								Accumulated
				Additional				Other				Total		Non-
	Common Stock			Paid-In		Retained		Comprehensive		Treasury		Stockholders’		Controlling		Total
	Shares	Amount		Capital		Earnings		Income (Loss)		Stock		Equity		Interests		Equity
Balance, December 31, 2023	145,508,549	$	2	$	3,002,652	$	4,858,066	$	(282,945)	$	(1,305,534)	$	6,272,241	$	11,114	$	6,283,355
Other comprehensive loss	—	—		—		—		(30,740)		—		(30,740)		—		(30,740)
Acquisitions	250,539	—		51,768		—		—		—		51,768		—		51,768
Stock-based compensation activity	625,122	—		35,822		—		—		(77,351)		(41,529)		—		(41,529)

Dividends declared ($0.09 per share)	—	—		—		(13,477)		—		—		(13,477)		—		(13,477)
Distributions to non-controlling interests	—	—		—		—		—		—		—		(8,199)		(8,199)

Net income	—	—		—		118,360		—		—		118,360		7,731		126,091
Balance, March 31, 2024	146,384,210	$	2	$	3,090,242	$	4,962,949	$	(313,685)	$	(1,382,885)	$	6,356,623	$	10,646	$	6,367,269
Other comprehensive loss	—	—		—		—		(9,058)		—		(9,058)		—		(9,058)
Acquisitions	35,886	—		9,054		—		—		—		9,054		—		9,054
Stock-based compensation activity	23,935	—		37,119		—		—		(739)		36,380		—		36,380

Dividends declared ($0.09 per share)	—	—		—		(13,521)		—		—		(13,521)		—		(13,521)
Distributions to non-controlling interests	—	—		—		—		—		—		—		(934)		(934)

Net income	—	—		—		188,159		—		—		188,159		3,725		191,884
Balance, June 30, 2024	146,444,031	$	2	$	3,136,415	$	5,137,587	$	(322,743)	$	(1,383,624)	$	6,567,637	$	13,437	$	6,581,074
Other comprehensive income	—	—		—		—		17,694		—		17,694		—		17,694
Acquisitions	930,973	—		230,240		—		—		—		230,240		—		230,240
Stock-based compensation activity	226,539	—		38,457		—		—		(63,064)		(24,607)		—		(24,607)

Dividends declared ($0.09 per share)	—	—		—		(13,532)		—		—		(13,532)		—		(13,532)
Distributions to non-controlling interests	—	—		—		—		—		—		—		(865)		(865)

Net income	—	—		—		293,185		—		—		293,185		5,836		299,021
Balance, September 30, 2024	147,601,543	$	2	$	3,405,112	$	5,417,240	$	(305,049)	$	(1,446,688)	$	7,070,617	$	18,408	$	7,089,025

The accompanying notes are an integral part of these condensed consolidated financial statements.

QUANTA SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(In thousands, except share data)

(Unaudited)


								Accumulated
				Additional				Other				Total		Non-
	Common Stock			Paid-In		Retained		Comprehensive		Treasury		Stockholders’		Controlling		Total
	Shares	Amount		Capital		Earnings		Income (Loss)		Stock		Equity		Interests		Equity
Balance, December 31, 2022	142,930,598	$	2	$	2,718,988	$	4,163,212	$	(310,677)	$	(1,188,061)	$	5,383,464	$	15,355	$	5,398,819
Other comprehensive income	—	—		—		—		1,100		—		1,100		—		1,100
Acquisitions	1,018,946	—		123,503		—		—		—		123,503		—		123,503
Stock-based compensation activity	1,210,615	—		26,650		—		—		(104,247)		(77,597)		—		(77,597)

Dividends declared ($0.08 per share)	—	—		—		(12,100)		—		—		(12,100)		—		(12,100)
Distributions to non-controlling interests	—	—		—		—		—		—		—		(8,741)		(8,741)
Net income	—	—		—		95,046		—		—		95,046		1,924		96,970
Balance, March 31, 2023	145,160,159	$	2	$	2,869,141	$	4,246,158	$	(309,577)	$	(1,292,308)	$	5,513,416	$	8,538	$	5,521,954
Other comprehensive income	—	—		—		—		23,917		—		23,917		—		23,917
Stock-based compensation activity	36,299	—		34,487		—		—		(4,893)		29,594		—		29,594

Dividends declared ($0.08 per share)	—	—		—		(11,893)		—		—		(11,893)		—		(11,893)
Distributions to non-controlling interests	—	—		—		—		—		—		—		(1,177)		(1,177)

Net income	—	—		—		165,899		—		—		165,899		685		166,584
Balance, June 30, 2023	145,196,458	$	2	$	2,903,628	$	4,400,164	$	(285,660)	$	(1,297,201)	$	5,720,933	$	8,046	$	5,728,979
Other comprehensive loss	—	—		—		—		(31,995)		—		(31,995)		—		(31,995)
Acquisitions	43,462	—		8,018		—		—		—		8,018		—		8,018
Stock-based compensation activity	28,118	—		32,562		—		—		(2,613)		29,949		—		29,949

Dividends declared ($0.08 per share)	—	—		—		(12,430)		—		—		(12,430)		—		(12,430)
Distributions to non-controlling interests	—	—		—		—		—		—		—		(195)		(195)

Net income	—	—		—		272,836		—		—		272,836		689		273,525
Balance, September 30, 2023	145,268,038	$	2	$	2,944,208	$	4,660,570	$	(317,655)	$	(1,299,814)	$	5,987,311	$	8,540	$	5,995,851

The accompanying notes are an integral part of these condensed consolidated financial statements.

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

TABLE OF CONTENTS


		Page
1.	Business and Organization, Basis of Presentation and Accounting Policies	12
2.	New Accounting Pronouncements	12
3.	Revenue Recognition and Related Balance Sheet Accounts	13
4.	Segment Information	16
5.	Acquisitions	18
6.	Investments in Affiliates and Other Entities	22
7.	Per Share Information	23
8.	Debt Obligations	23
9.	Leases	26
10.	Income Taxes	27
11.	Equity	28
12.	Stock-Based Compensation	29
13.	Employee Benefit Plans	30
14.	Commitments and Contingencies	30
15.	Detail of Certain Accounts	34
16.	Supplemental Cash Flow Information	35

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

1. BUSINESS AND ORGANIZATION, BASIS OF PRESENTATION AND ACCOUNTING POLICIES:

Quanta Services, Inc. (together with its subsidiaries, Quanta) is a leading provider of comprehensive infrastructure solutions for the electric and gas utility, renewable energy, technology, communications, pipeline and energy industries in the United States, Canada, Australia and select other international markets. We provide engineering, procurement, construction, upgrade and repair and maintenance services for infrastructure within each of these industries, including electric power transmission and distribution networks; substation facilities; wind and solar generation and transmission and battery storage facilities; electrical systems for data center, commercial and industrial facilities; communications and cable multi-system operator networks; gas utility systems; pipeline transmission systems and facilities; and downstream industrial facilities.

These unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X for interim financial information. Certain information and footnote disclosures, normally included in annual financial statements prepared in accordance with generally accepted accounting principles in the United States (GAAP), have been condensed or omitted pursuant to those rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto of Quanta’s Annual Report on Form 10-K for the year ended December 31, 2023. Quanta believes that the disclosures made are adequate to make the information presented not misleading. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to fairly state the financial position, results of operations, comprehensive income and cash flows with respect to the interim condensed consolidated financial statements have been included.

The results of Quanta have historically been subject to seasonal fluctuations. The results of operations, comprehensive income and operating cash flows for the interim periods are not necessarily indicative of the results for the entire fiscal year.

2. NEW ACCOUNTING PRONOUNCEMENTS:

Recently Adopted Guidance

In June 2022, the FASB issued an update that clarifies the guidance in FASB ASC 820 (Fair Value Measurement) for equity securities subject to contractual sale restrictions. The update prohibits entities from taking into account contractual restrictions on the sale of equity securities when estimating fair value and introduces required disclosures for such transactions. This update is effective for interim and annual periods beginning after December 15, 2023. This guidance will increase the fair market value of the consideration paid in equity securities in a business combination, and therefore it may increase the amount allocated to goodwill. Quanta adopted this update effective January 1, 2024, and it did not have a material impact on Quanta’s consolidated financial statements.

New Accounting Pronouncements and Disclosure Rules Not Yet Adopted

In March 2024, the U.S. Securities and Exchange Commission (SEC) issued its final climate disclosure rule (the Final Rule) that requires public entities to disclose certain material climate-related information in annual reports and registration statements, including disclosure of material impacts as a result of severe weather events and other natural conditions and material Scope 1 and Scope 2 greenhouse gas emissions. The Final Rule requires disclosures to be made prospectively, with information for prior periods required only to the extent the information was disclosed in a prior SEC filing. Certain requirements of the Final Rule are effective for fiscal years beginning on or after January 1, 2025, with phase-in periods for additional requirements. However, on April 4, 2024, the SEC issued a stay pending judicial review of the Final Rule in U.S. federal court. Quanta is currently assessing the effect of the Final Rule.

In December 2023, the FASB issued an update that expands disclosures for tax rate reconciliation tables, primarily by requiring disaggregation of income taxes paid by jurisdiction, as well as greater disaggregation within the rate reconciliation. This update is effective for fiscal years beginning after December 15, 2024 and interim periods within fiscal years beginning after December 15, 2025. Early adoption and retrospective application are permitted. Quanta is currently assessing the effect of this update.

In November 2023, the FASB issued an update that, among other things, requires public entities to disclose significant segment expenses that are regularly provided to the chief operating decision maker (CODM) and included within each reported measure of segment profit or loss, provide an amount for other segment items by reportable segment and provide all segment disclosures required on an annual basis in interim periods. Additionally, the update requires entities to disclose the title and position of the CODM and an explanation of how the CODM uses the reported measures(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. This update is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted,

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

and retrospective application is required. Quanta expects that the adoption of this update will not significantly impact its segment disclosures.

3. REVENUE RECOGNITION AND RELATED BALANCE SHEET ACCOUNTS:

Contracts

Quanta’s services are generally provided pursuant to master service agreements (MSAs), repair and maintenance contracts and fixed price and non-fixed price construction contracts. These contracts are classified into three categories: unit-price contracts, cost-plus contracts and fixed price contracts.

The following tables present Quanta’s revenue disaggregated by contract type and by geographic location, as determined by the job location (in thousands):


	Three Months Ended September 30,								Nine Months Ended September 30,
	2024				2023				2024				2023
By contract type:
Fixed price contracts	$	3,725,174	57.4	%	$	2,718,921	48.4	%	$	9,489,949	55.4	%	$	6,950,697	46.0	%
Unit-price contracts	1,769,369		27.2		1,803,764		32.1		4,830,577		28.2		4,998,787		33.1
Cost-plus contracts	998,624		15.4		1,098,137		19.5		2,798,847		16.4		3,148,774		20.9
Total revenues	$	6,493,167	100.0	%	$	5,620,822	100.0	%	$	17,119,373	100.0	%	$	15,098,258	100.0	%


	Three Months Ended September 30,								Nine Months Ended September 30,
	2024				2023				2024				2023
By primary geographic location:
United States	$	5,871,453	90.4	%	$	4,816,825	85.8	%	$	15,573,776	91.1	%	$	12,766,092	84.6	%
Canada	329,066		5.1		574,536		10.2		778,578		4.5		1,640,154		10.9
Australia	195,815		3.0		148,499		2.6		503,095		2.9		459,901		3.0
Others	96,833		1.5		80,962		1.4		263,924		1.5		232,111		1.5
Total revenues	$	6,493,167	100.0	%	$	5,620,822	100.0	%	$	17,119,373	100.0	%	$	15,098,258	100.0	%

Under fixed-price contracts, as well as unit-price contracts with more than an insignificant amount of partially completed units, revenue is recognized as performance obligations are satisfied over time, with the percentage of completion generally measured as the percentage of costs incurred to total estimated costs for such performance obligation. Approximately 61.4% and 58.3% of Quanta’s revenues recognized during the three months ended September 30, 2024 and 2023 were associated with this revenue recognition method, and 59.3% and 58.3% of Quanta’s revenues recognized during the nine months ended September 30, 2024 and 2023 were associated with this revenue recognition method.

Performance Obligations

As of September 30, 2024 and December 31, 2023, the aggregate transaction price allocated to unsatisfied or partially satisfied performance obligations was approximately $15.61 billion and $13.89 billion, with 68.4% and 66.9% expected to be recognized in the subsequent twelve months. These amounts represent management’s estimates of the consolidated revenues that are expected to be realized from the remaining portion of firm orders under fixed price contracts not yet completed or for which work had not yet begun as of such dates. For purposes of calculating remaining performance obligations, Quanta includes all estimated revenues attributable to consolidated joint ventures and variable interest entities, revenues from funded and unfunded portions of government contracts to the extent they are reasonably expected to be realized, and revenues from change orders and claims to the extent management believes additional contract revenues will be earned and are deemed probable of collection. Excluded from remaining performance obligations are potential orders under MSAs and expected revenues under certain non-fixed price contracts.

Contract Estimates and Changes in Estimates

Actual revenues and project costs can vary, sometimes substantially, from previous estimates due to changes in a variety of factors, including unforeseen or changed circumstances not included in Quanta’s cost estimates or covered by its contracts.

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Some of the factors that can result in positive changes in estimates on projects include successful execution through project risks, reduction of estimated project costs or increases of estimated revenues. Some of the factors that can result in negative changes in estimates include concealed or unknown site conditions; changes to or disputes with customers regarding the scope of services; changes in estimates related to the length of time to complete a performance obligation; changes or delays with respect to permitting and regulatory requirements and materials; changes in the cost of equipment, commodities, materials or skilled labor; unanticipated costs or claims due to delays or failure to perform by customers or third parties; customer failure to provide, or supply chain and logistical challenges related to, required materials or equipment; errors in engineering, specifications or designs; project modifications; adverse weather conditions, natural disasters, and other emergencies; and performance and quality issues causing delay (including payment of liquidated damages) or requiring rework or replacement. Any changes in estimates could result in changes to profitability or losses associated with the related performance obligations.

Additionally, changes in cost estimates on certain contracts may result in the issuance of change orders, which can be approved or unapproved by the customer, or the assertion of contract claims. Quanta recognizes amounts associated with change orders and claims as revenue if it is probable that the contract price will be adjusted and the amount of any such adjustment can be reasonably estimated.

As of September 30, 2024 and December 31, 2023, Quanta had recognized revenues of $738.2 million and $778.9 million related to unapproved change orders and claims included as contract price adjustments primarily in “Contract assets” in the accompanying consolidated balance sheets. These change orders and claims were in the process of being negotiated in the normal course of business and represent management’s estimates of additional contract revenues that have been earned and are probable of collection.

The largest component of the revenues recognized related to unapproved change orders and claims as of September 30, 2024 and December 31, 2023 is associated with a large renewable transmission project in Canada. During 2021 and 2022, decreased productivity and additional costs arose from delays, administrative requirements and labor issues due to the COVID-19 pandemic, including incremental governmental requirements and worksite restrictions. During 2023, additional costs arose from residual impacts associated with the aforementioned items, as well as work resequencing and acceleration, access delays, and logistical challenges and other issues outside of Quanta’s control. As of March 31, 2024, the project was substantially completed.

Changes in estimates can result in the recognition of revenue in a current period for performance obligations that were satisfied or partially satisfied in prior periods or the reversal of previously recognized revenue if the currently estimated revenue is less than the previous estimate. The impact of a change in contract estimate is measured as the difference between the revenue or gross profit recognized in the prior period as compared to the revenue or gross profit which would have been recognized had the revised estimate been used as the basis of recognition in the prior period. Changes in estimates can also result in contract losses, which are recognized in full when they are determined to be probable and can be reasonably estimated.

Revenues were positively impacted by 0.7% during both the three months ended September 30, 2024 and 2023 as a result of changes in estimates associated with performance obligations on fixed price contracts partially satisfied prior to June 30, 2024 and 2023. Revenues were positively impacted by 0.3% during both the nine months ended September 30, 2024 and 2023 as a result of changes in estimates associated with performance obligations on fixed price contracts partially satisfied prior to December 31, 2023 and 2022.

Operating results for the three months ended September 30, 2024 were impacted by less than 5% of gross profit as a result of aggregate changes in contract estimates related to projects that were in progress as of June 30, 2024.

Operating results for the nine months ended September 30, 2024 were impacted by less than 5% of gross profit as a result of aggregate changes in contract estimates related to projects that were in progress as of December 31, 2023. However, gross profit was negatively impacted by $38.8 million as a result of increased costs related to a large solar facility project in the United States and by $22.8 million as a result of decreased productivity associated with a large solar facility project in the United States (substantially incurred in the three months ended March 31, 2024).

Operating results for the three and nine months ended September 30, 2023 were impacted by less than 5% of gross profit as a result of aggregate changes in contract estimates related to projects that were in progress as of June 30, 2023 and December 31, 2022.

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Contract Assets and Liabilities

Contract assets and liabilities consisted of the following (in thousands):


	September 30, 2024		December 31, 2023
Contract assets	$	1,328,833	$	1,413,057
Contract liabilities	$	1,875,388	$	1,538,677

Contract assets and liabilities fluctuate period to period based on various factors, including, among others, changes in the number and size of projects in progress at period end; variability in billing and payment terms, such as up-front or advance billings, interim or milestone billings, or deferred billings; and recognized unapproved change orders and contract claims. The decrease in contract assets from December 31, 2023 to September 30, 2024 was primarily due to the completion of certain large projects and the corresponding billing of amounts previously recorded as contract assets, while the increase in contract liabilities was primarily due to recent acquisitions.

During the nine months ended September 30, 2024 and 2023, Quanta recognized revenue of approximately $1.35 billion and $991.3 million related to contract liabilities outstanding as of the end of each respective prior year.

Accounts Receivable, Allowance for Credit Losses and Concentrations of Credit Risk

Quanta determines its allowance for credit losses based on an estimate of expected credit losses for financial instruments, primarily accounts receivable and contract assets. The assessment of the allowance for credit losses involves certain judgments and estimates. Management estimates the allowance balance using relevant available information from internal and external sources relating to past events, current conditions and reasonable and supportable forecasts. Expected credit losses are estimated by evaluating trends with respect to Quanta’s historical write-off experience and applying historical loss ratios to pools of financial assets with similar risk characteristics. Quanta has determined that it has two risk pools for the purpose of calculating its historical credit loss experience.

Quanta’s historical loss ratio and its determination of risk pools, which are used to calculate expected credit losses, may be adjusted for changes in customer credit concentrations within its portfolio of financial assets, changes in customers’ ability to pay, and other considerations, such as economic and market changes, changes to regulatory or technological environments affecting customers and the consistency between current and forecasted economic conditions and the historical economic conditions used to derive historical loss ratios. At the end of each quarter, management reassesses these and other relevant factors, including the impact of uncertainty and challenges in the overall economy and in Quanta’s industries and markets, (e.g., inflationary pressure, supply chain and other logistical challenges and increased interest rates).

Additional allowance for credit losses is established for financial asset balances with specific customers where collectability has been determined to be improbable based on customer specific facts and circumstances. Quanta considers accounts receivable delinquent after 30 days but, absent certain specific considerations, generally does not consider such amounts delinquent in its credit loss analysis unless the accounts receivable are at least 120 days outstanding. In addition, management monitors the credit quality of its receivables by, among other things, obtaining credit ratings for significant customers, assessing economic and market conditions and evaluating material changes to a customer’s business, cash flows and financial condition. Should anticipated recoveries relating to receivables fail to materialize, including anticipated recoveries relating to bankruptcies or other workout situations, Quanta could experience reduced cash flows and losses in excess of current allowances provided.

Accounts receivable are written-off against the allowance for credit losses if they are deemed uncollectible.

Activity in Quanta’s allowance for credit losses consisted of the following (in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Balance at beginning of period	$	13,955	$	13,908	$	13,962	$	15,644
Increase in provision for credit losses	1,588		181		1,859		5,428
Write-offs charged against the allowance net of recoveries of amounts previously written off	(1,962)		(146)		(2,240)		(7,129)
Balance at end of period	$	13,581	$	13,943	$	13,581	$	13,943

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The above activity relates to the largest risk pool Quanta utilizes for assessing credit loss. The second risk pool represents approximately 14% of Quanta’s consolidated financial instruments as of September 30, 2024 and did not have any allowance for credit loss or experience any credit loss during the periods presented. Quanta’s customers generally have high credit ratings. In addition, the customers in the second risk pool typically pre-approve invoices and often receive project financing.

Provision for credit losses is included in “Selling, general and administrative expenses” in the consolidated statements of operations.

Quanta is subject to concentrations of credit risk related primarily to its receivable position for services Quanta has performed for customers. Quanta grants credit under normal payment terms, generally without collateral. As of December 31, 2023, one customer within the Renewable Energy Infrastructure Solutions segment associated with the large renewable transmission project in Canada described above represented 10% of Quanta’s consolidated receivable position, which includes amounts related to contracts assets. No customer represented 10% or more of Quanta’s consolidated revenues for the three or nine months ended September 30, 2024 or 2023, and no customer represented 10% or more of Quanta’s consolidated receivable position as of September 30, 2024.

Certain contracts allow customers to withhold a small percentage of billings pursuant to retainage provisions, and such amounts are generally due upon completion of the contract and acceptance of the project by the customer. Based on Quanta’s experience in recent years, the majority of these retainage balances are expected to be collected within one year. Retainage balances with expected settlement dates within one year of September 30, 2024 and December 31, 2023 were $758.8 million and $610.0 million, which are included in “Accounts receivable.” Retainage balances with expected settlement dates beyond one year were $144.3 million and $78.7 million as of September 30, 2024 and December 31, 2023 and are included in “Other assets, net.”

Quanta recognizes unbilled receivables for non-fixed price contracts within “Accounts receivable” in certain circumstances, such as when revenues have been earned and recorded but the amount cannot be billed under the terms of the contract until a later date or when amounts arise from routine lags in billing. These balances do not include revenues recognized for work performed under fixed-price contracts and unit-price contracts with more than an insignificant amount of partially completed units, as these amounts are recorded as “Contract assets.” As of September 30, 2024 and December 31, 2023, unbilled receivables included in “Accounts receivable” were $993.3 million and $743.6 million. Quanta also recognizes unearned revenues for non-fixed price contracts when cash is received prior to recognizing revenues for the related performance obligation. Unearned revenues, which are included in “Accounts payable and accrued expenses,” were $68.7 million and $58.6 million as of September 30, 2024 and December 31, 2023.

4. SEGMENT INFORMATION:

Quanta reports its results under three reportable segments described below:

Electric Power Infrastructure Solutions (Electric Power). Quanta’s Electric Power segment provides comprehensive infrastructure solutions to customers in the electric power, technology and communications markets.

*•*Renewable Energy Infrastructure Solutions (Renewable Energy). Quanta’s Renewable Energy segment provides comprehensive infrastructure solutions to customers that are involved in the renewable energy industry.

Underground Utility and Infrastructure Solutions (Underground and Infrastructure). Quanta’s Underground and Infrastructure segment provides comprehensive infrastructure solutions to customers involved in the transportation, distribution, storage, development and processing of natural gas, oil and other products.

Corporate and Non-allocated Costs include corporate facility costs; non-allocated corporate salaries, benefits and incentive compensation; acquisition and integration costs; non-cash stock-based compensation; amortization related to intangible assets; asset impairment related to goodwill and intangible assets; and change in fair value of contingent consideration liabilities.

Quanta’s segment results are derived from the types of services provided across its operating companies in each of its end user markets. Quanta’s entrepreneurial business model allows multiple operating companies to serve the same or similar customers and to provide a range of services across end user markets. Reportable segment information, including revenues and operating income by type of work, is gathered from each operating company. Classification of operating company revenues by type of work for segment reporting purposes can require judgment on the part of management.

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In addition, integrated operations and common administrative support for Quanta’s operating companies require that allocations be made to determine segment profitability, including allocations of certain corporate shared and indirect operating costs as well as general and administrative costs.

The following table sets forth segment revenues and segment operating income (loss) for the three and nine months ended September 30, 2024 and 2023. Operating margin is calculated by dividing operating income (loss) by revenues. The following table shows dollars in thousands:


	Three Months Ended September 30,								Nine Months Ended September 30,
	2024				2023				2024				2023
Revenues:
Electric Power	$	2,982,032	45.9	%	$	2,489,547	44.3	%	$	7,761,480	45.3	%	$	7,240,838	48.0	%
Renewable Energy	2,251,855		34.7		1,746,636		31.1		5,870,411		34.3		4,144,304		27.4
Underground and Infrastructure	1,259,280		19.4		1,384,639		24.6		3,487,482		20.4		3,713,116		24.6
Consolidated revenues	$	6,493,167	100.0	%	$	5,620,822	100.0	%	$	17,119,373	100.0	%	$	15,098,258	100.0	%
Operating income (loss):
Electric Power (1)	$	354,505	11.9	%	$	296,176	11.9	%	$	846,390	10.9	%	$	755,342	10.4	%
Renewable Energy	221,509		9.8	%	151,389		8.7	%	459,076		7.8	%	297,532		7.2	%
Underground and Infrastructure	93,956		7.5	%	123,764		8.9	%	222,437		6.4	%	292,544		7.9	%
Corporate and Non-Allocated Costs (2)	(238,809)		(3.7)	%	(171,000)		(3.0)	%	(634,158)		(3.7)	%	(539,956)		(3.6)	%
Consolidated operating income	$	431,161	6.6	%	$	400,329	7.1	%	$	893,745	5.2	%	$	805,462	5.3	%

(1) Includes equity in earnings of integral unconsolidated affiliates of $14.0 million and $11.7 million for the three months ended September 30, 2024 and 2023 and $34.9 million and $30.7 million for the nine months ended September 30, 2024 and 2023, primarily related to Quanta’s equity interest in LUMA Energy, LLC (LUMA).

(2) Includes amortization expense of $110.4 million and $71.4 million and non-cash stock-based compensation of $38.2 million and $32.5 million for the three months ended September 30, 2024 and 2023. Includes amortization expense of $267.1 million and $213.8 million and non-cash stock-based compensation of $110.8 million and $94.6 million for the nine months ended September 30, 2024 and 2023.

Depreciation Expense

Separate measures of Quanta’s assets and cash flows by reportable segment, including capital expenditures, are not produced or utilized by management to evaluate segment performance. Certain of Quanta’s fixed assets are used on an interchangeable basis across its reportable segments. The following table sets forth depreciation expense by segment for the three and nine months ended September 30, 2024 and 2023. The table shows dollars in thousands:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Depreciation:
Electric Power	$	42,120	$	38,228	$	122,775	$	121,670
Renewable Energy	20,619		15,812		58,298		37,351
Underground and Infrastructure	21,414		23,940		64,144		63,575
Corporate and Non-Allocated Costs	5,826		3,508		17,308		17,150
Consolidated depreciation	$	89,979	$	81,488	$	262,525	$	239,746

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5. ACQUISITIONS:

The results of operations of acquired businesses have been included in Quanta’s consolidated financial statements since their respective acquisition dates.

On July 17, 2024, Quanta completed the acquisition of Cupertino Electric, Inc. (CEI), which provides electrical infrastructure solutions, including engineering, procurement, project management, construction and modularization services, to the technology, renewable energy and infrastructure and commercial industries. CEI is located in the United States, and its results have been included in the Electric Power and Renewable Energy segments since the acquisition date. The consideration for the acquisition was approximately $1.66 billion paid or payable in cash (subject to certain adjustments and including payment for cash held by CEI as of the acquisition date) and 882,926 shares of Quanta common stock, which had a fair value of $216.3 million as of the acquisition date. The cash consideration paid or payable by Quanta, net of cash received from CEI, was $1.24 billion. Additionally, the former equity holders and award holders of CEI are eligible for a potential contingent consideration payment of up to $200.0 million based on exceeding certain financial performance targets during the three-year post-acquisition period beginning in January 2025. To the extent payable, Quanta, at its sole discretion, can pay up to 10% of any such contingent consideration amount in Quanta common stock. The final amount of consideration for the acquisition remains subject to certain post-closing adjustments, including with respect to net working capital (inclusive of cash) and certain assumed liabilities. As of July 17, 2024, the fair value of the contingent consideration liability was $96.1 million.

During the nine months ended September 30, 2024, Quanta also acquired seven additional businesses located in the United States, including: a business that provides specialty environmental solutions to industrial and petrochemical companies (primarily included in the Underground and Infrastructure segment); a business that specializes in testing, manufacturing and distributing safety equipment and supplies (primarily included in the Electric Power and Renewable Energy segments); a business that specializes in electrical infrastructure services for substations, data centers and governmental entities (primarily included in the Electric Power segment); a business that manufactures transmission and distribution equipment for the electric utility industry (primarily included in the Electric Power and Renewable Energy segments); a business that provides services and equipment related to aerial telecommunications infrastructure and networks (primarily included in the Electric Power segment); a business that provides services related to fiber optic networks (primarily included in the Electric Power segment); and a business that specializes in designing, manufacturing, and distributing liquid-filled power transformers for industrial and electrical companies and utilities (primarily included in the Electric Power and Renewable Energy segments). The consideration for these businesses consisted of approximately $537.8 million paid or payable in cash on the acquisition dates and 334,472 shares of Quanta common stock, which had a fair value of $74.8 million as of the acquisition dates. The final amount of consideration for these acquisitions remains subject to certain post-closing adjustments, including with respect to net working capital. As of the dates of the respective acquisitions, the fair value of the contingent consideration liabilities related to certain of these acquisitions was $29.2 million.

During the year ended December 31, 2023, Quanta acquired five businesses located in the United States, including: a business that provides services related to high-voltage transmission lines, overhead and underground distribution, emergency restoration and industrial and commercial wiring and lighting (primarily included in the Electric Power segment); a business that procures parts, assembles kits for sale, manages logistics and installs solar tracking equipment for utility and development customers (primarily included in the Renewable Energy segment); a business that provides concrete construction services (primarily included in the Electric Power and Renewable Energy segments); a business specializing in power studies, maintenance testing and commissioning primarily for utility and commercial customers (included in the Electric Power segment); and a business that manufactures power transformers for the electric utility, renewable energy, municipal power and industrial markets (included in the Electric Power and Renewable Energy segments). The consideration for certain of these transactions consisted of approximately $777.6 million paid or payable in cash (subject to certain adjustments) and 1,238,576 shares of Quanta common stock, which had a fair value of $158.9 million as of the dates of the acquisitions.

Additionally, the former owners of certain acquired businesses are eligible to receive potential payments of contingent consideration to the extent the acquired businesses achieve certain financial performance targets over specified post-acquisition periods.

Purchase Price Allocation

Quanta is finalizing its purchase price allocations, including the assignment of goodwill to its reporting units, related to certain businesses acquired subsequent to September 30, 2023, and further adjustments to the purchase price allocations may occur, with possible updates primarily related to intangible asset values, property and equipment values, certain contingent liabilities, tax estimates, and the finalization of closing working capital adjustments and other contractually agreed-upon adjustments to consideration. The aggregate consideration paid or payable for businesses acquired between September 30, 2023

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(Unaudited)

and September 30, 2024 was allocated to acquired assets and assumed liabilities, which resulted in an allocation of $593.3 million to net tangible assets, $947.0 million to identifiable intangible assets and $1.38 billion to goodwill.

The following table summarizes the estimated fair value of total consideration transferred or estimated to be transferred and the fair value of assets acquired and liabilities assumed as of their respective acquisition dates as of September 30, 2024 for acquisitions completed in the nine months ended September 30, 2024 (in thousands):



	September 30, 2024
	CEI		All Others
Consideration:
Cash paid or payable	$	1,655,373	$	537,795
Value of Quanta common stock issued	216,264		74,797
Contingent consideration	96,086		29,166
Fair value of total consideration transferred or estimated to be transferred	$	1,967,723	$	641,758

Cash and cash equivalents	$	414,705	$	30,797
Accounts receivable	339,254		74,188
Contract assets	89,090		162
Inventories	—		49,806
Prepaid expenses and other current assets	29,997		12,432
Property and equipment	32,338		90,535
Operating lease right-of-use assets	33,032		25,429
Other assets	38,785		617
Identifiable intangible assets	656,000		213,573
Current maturities of long-term debt	(1,880)		(4,534)
Current portion of operating lease liabilities	(11,752)		(4,908)
Accounts payable and accrued liabilities	(311,469)		(68,832)
Contract liabilities	(222,538)		(34,454)
Long-term debt, net of current maturities	(3,719)		(4,436)
Operating lease liabilities, net of current portion	(21,101)		(20,522)
Deferred income taxes	(15,606)		(48,869)
Insurance and other non-current liabilities	(6,740)		(397)

Total identifiable net assets	1,038,396		310,587
Goodwill	929,327		331,171
Fair value of net assets acquired	$	1,967,723	$	641,758

Goodwill represents the amount by which the purchase price for an acquired business exceeds the net fair value of the assets acquired and liabilities assumed. The acquisitions completed during the nine months ended September 30, 2024 strategically expanded Quanta’s domestic renewable energy infrastructure solutions and electric power infrastructure solutions and communications service offerings, including electrical systems for data center, commercial and industrial facilities as well as Quanta’s domestic underground utility and infrastructure solutions, which Quanta believes contributes to the recognition of the goodwill. As of September 30, 2024, approximately $49.0 million of goodwill is expected to be deductible for income tax purposes related to acquisitions completed in the nine months ended September 30, 2024.

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The fair value of customer relationships is estimated as of the date a business is acquired based on the value-in-use concept utilizing the income approach, specifically the multi-period excess earnings method. This method discounts to present value the projected cash flows attributable to the customer relationships, with consideration given to customer contract renewals and estimated customer attrition rates. The fair value of backlog is estimated as of the acquisition date based upon the contractual nature of the backlog, discounted to present value. The fair value of trade names is estimated using the relief-from-royalty method of the income approach, which is based on the assumption that in lieu of ownership, a company would be willing to pay a royalty for use of the trade name.

The following table summarizes the estimated fair values of identifiable intangible assets for the acquisitions completed in the nine months ended September 30, 2024 as of the acquisition dates and the related weighted average amortization periods by type (in thousands, except for weighted average amortization periods, which are in years).


	Nine Months Ended September 30, 2024
	CEI			All Others
	Estimated Fair Value		Amortization Period in Years	Estimated Fair Value		Weighted Average Amortization Period in Years
Customer relationships	$	396,000	8.0	$	167,486	7.0
Backlog	90,000		3.3	20,125		2.8
Trade names	170,000		15.0	20,242		14.9
Non-compete agreements	—		N/A	3,444		5.0
Patented rights, developed technology, process certifications and other	—		N/A	2,276		15.0
Total intangible assets subject to amortization	$	656,000	9.2	$	213,573	7.4

The significant estimates used by management in determining the fair values of customer relationship intangible assets include future revenues, margins, discount rates and customer attrition rates. The following table includes the discount rates and customer attrition rates used to determine the fair value of customer relationship intangible assets for businesses acquired during the nine months ended September 30, 2024 as of the respective acquisition dates:


	Nine Months Ended
	September 30, 2024
	Range	Weighted Average
Discount rates	15% to 24%	15%
Customer attrition rates	10% to 25%	11%

Contingent Consideration

As described above, certain business acquisitions have contingent consideration liabilities associated with the transactions. The aggregate fair value of outstanding contingent consideration liabilities for acquisitions completed prior to September 30, 2024 and their classification in the accompanying consolidated balance sheets is as follows (in thousands):


	September 30, 2024		December 31, 2023
Accounts payable and accrued expenses	$	157,843	$	—
Insurance and other non-current liabilities	120,427		157,073
Total contingent consideration liabilities	$	278,270	$	157,073

Quanta’s aggregate contingent consideration liabilities can change due to additional business acquisitions, settlement of outstanding liabilities, accretion in present value, changes in estimated fair value, the performance of acquired businesses in post-acquisition periods, the incremental impact on Quanta’s performance attributable to an acquired business and in certain cases, management discretion. These changes are reflected in “Change in fair value of contingent consideration liabilities” in the accompanying consolidated statements of operations.

The fair value determinations for contingent consideration liabilities incorporate significant inputs not observable in the market, including revenue forecasts, operating margins, discount rates and the probability of acquired businesses achieving

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certain performance targets during designated post-acquisition periods. Accordingly, the level of inputs used for these fair value measurements is Level 3.

All of Quanta’s outstanding contingent consideration liabilities are subject to a maximum payment amount, and the aggregate maximum payment amount of these liabilities for acquisitions completed prior to September 30, 2024 totaled $580.7 million as of September 30, 2024. During the nine months ended September 30, 2023, Quanta settled certain contingent consideration liabilities with cash payments of $5.0 million.

Pro Forma Results of Operations

The following unaudited supplemental pro forma results of operations for Quanta, which incorporate the acquisitions completed in the nine months ended September 30, 2024 and the year ended December 31, 2023, have been provided for illustrative purposes only and may not be indicative of the actual results that would have been achieved by the combined companies for the periods presented or that may be achieved by the combined companies in the future (in thousands).


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Revenues	$	6,595,666	$	6,255,046	$	18,310,917	$	17,004,381
Net (loss) income attributable to common stock (1)	$	(45,595)	$	249,828	$	221,476	$	447,407

(1) The pro forma combined results of operations for the three and nine months ended September 30, 2024 include one-time acquisition-related expenses of $453.8 million ($335.8 million net of tax) for pre-acquisition transaction costs incurred by CEI, primarily related to the vesting and increase in value of stock appreciation rights as a result of the acquisition.

The pro forma combined results of operations for the three and nine months ended September 30, 2024 and 2023 were prepared by adjusting the historical results of Quanta to include the historical results of the businesses acquired in 2024 as if such acquisitions had occurred January 1, 2023. The pro forma combined results of operations for the three and nine months ended September 30, 2023 were prepared by further adjusting the historical results of Quanta to include the historical results of the business acquired in 2023 as if such acquisition had occurred January 1, 2022. These pro forma combined historical results were adjusted for the following: a reduction of interest and other financing expenses as a result of the repayment of outstanding indebtedness of the acquired businesses; an increase in interest and other financing expenses as a result of the cash consideration paid; an increase in amortization expense due to the intangible assets recorded; elimination of inter-company sales; and changes in depreciation expense to adjust acquired property and equipment to the acquisition date fair value and to conform with Quanta’s accounting policies. The pro forma combined results of operations do not include any adjustments to eliminate the impact of acquisition-related costs incurred by Quanta or acquired businesses or any cost savings or other synergies that resulted or may result from the acquisitions.

Impact on Consolidated Results of Operations Related to Acquisitions

Included in Quanta’s condensed consolidated results of operations for the three months ended September 30, 2024 were revenues of $613.2 million and income before income taxes of $4.1 million, which included $40.3 million of amortization expense and $6.6 million of acquisition-related costs, related to the acquisitions completed in 2024. Included in Quanta’s condensed consolidated results of operations for the nine months ended September 30, 2024 were revenues of $757.5 million and a loss before income taxes of $9.7 million, which includes $52.1 million of amortization expense and $16.8 million of acquisition-related costs, related to the acquisitions completed in 2024. Included in Quanta’s condensed consolidated results of operations for the three months ended September 30, 2023 were revenues of $117.4 million and income before income taxes of $3.5 million, which included $7.3 million of amortization expense and $1.8 million of acquisition-related costs, related to the acquisitions completed in 2023. Included in Quanta’s condensed consolidated results of operations for the nine months ended September 30, 2023 were revenues of $354.0 million and income before income taxes of $0.3 million, which includes $22.3 million of amortization expense and $19.6 million of acquisition-related costs, related to the acquisitions completed in 2023.

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(Unaudited)

6. INVESTMENTS IN AFFILIATES AND OTHER ENTITIES:

Equity Investments

The following table presents Quanta’s equity investments by type (in thousands):


	September 30, 2024		December 31, 2023
Equity method investments - integral unconsolidated affiliates	$	98,823	$	96,124
Equity method investments - non-integral unconsolidated affiliates	72,184		28,105
Non-marketable equity securities	64,015		53,868
Total equity investments	$	235,022	$	178,097

Equity Method Investments

During the three months ended September 30, 2024, Quanta acquired a 20.8% equity interest in a company building a scrap metal recycling steel rebar mill in the United States, which is expected to begin operating in 2025, for a purchase price of $60.0 million. Quanta’s investment is accounted for as an equity method investment and is considered to be a non-integral unconsolidated affiliate.

During the nine months ended September 30, 2024, Quanta sold a non-integral equity method investment and recognized a $12.6 million gain, $5.0 million of which was attributable to non-controlling interests. Also during the nine months ended September 30, 2024, Quanta received $35.4 million in cash related to the sale of this investment, $5.0 million of which was distributed to non-controlling interests.

During the three months ended December 31, 2022, Quanta entered into an agreement to sell a non-integral equity method investment. The transaction was subject to certain customary closing conditions that were satisfied in early 2023. As a result, a $25.9 million gain was recognized in the fourth quarter of 2022, $10.4 million of which was attributable to non-controlling interests. During the nine months ended September 30, 2023, Quanta received $58.5 million in cash related to the sale of this investment, $9.8 million of which was distributed to non-controlling interests.

As of September 30, 2024 and December 31, 2023, Quanta had receivables of $109.0 million and $96.4 million from its integral unconsolidated affiliates and payables of $25.8 million and $24.5 million to its integral unconsolidated affiliates. Quanta recognized revenues of $58.5 million and $54.4 million during the three months ended September 30, 2024 and 2023 and $175.2 million and $152.9 million during the nine months ended September 30, 2024 and 2023 from services provided to its integral unconsolidated affiliates, primarily related to services provided to LUMA at cost. In addition, during the three months ended September 30, 2024 and 2023, Quanta recognized costs of services of $114.2 million and $72.4 million for services provided to Quanta by other integral unconsolidated affiliates. During the nine months ended September 30, 2024 and 2023, Quanta recognized costs of services of $303.4 million and $107.3 million for services provided by other integral affiliates.

Total equity in earnings from integral unconsolidated affiliates was $14.0 million and $11.7 million for the three months ended September 30, 2024 and 2023 and $34.9 million and $30.7 million for the nine months ended September 30, 2024 and 2023. Total equity in losses from non-integral unconsolidated affiliates was $1.7 million and $1.0 million for the three months ended September 30, 2024 and 2023. Total equity in earnings from non-integral unconsolidated affiliates was $1.4 million and $1.1 million for the nine months ended September 30, 2024 and 2023. As of September 30, 2024, Quanta had $48.7 million of undistributed earnings related to unconsolidated affiliates.

The difference between Quanta’s carrying value and the underlying equity in the net assets of its equity investments is assigned to the assets and liabilities of the investment, giving rise to a basis difference, which was $27.8 million and $31.4 million as of September 30, 2024 and December 31, 2023. The amortization of the basis difference included in “Equity in earnings of integral unconsolidated affiliates” in the accompanying condensed consolidated statements of operations was $0.9 million and $1.5 million for the three months ended September 30, 2024 and 2023 and $3.6 million and $4.7 million for the nine months ended September 30, 2024 and 2023.

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

7. PER SHARE INFORMATION:

The amounts used to compute basic and diluted earnings per share attributable to common stock consisted of the following (in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Amounts attributable to common stock:
Net income attributable to common stock	$	293,185	$	272,836	$	599,704	$	533,781

Weighted average shares:
Weighted average shares outstanding for basic earnings per share attributable to common stock	147,394		145,455		146,639		145,118
Effect of dilutive unvested non-participating stock-based awards	3,162		3,337		3,272		3,631
Weighted average shares outstanding for diluted earnings per share attributable to common stock	150,556		148,792		149,911		148,749

8. DEBT OBLIGATIONS:

Quanta’s long-term debt obligations consisted of the following (in thousands):


	September 30, 2024		December 31, 2023
0.950% Senior Notes due October 2024	$	500,000	$	500,000
4.750% Senior Notes due August 2027	600,000		—
2.900% Senior Notes due October 2030	1,000,000		1,000,000
2.350% Senior Notes due January 2032	500,000		500,000
5.250% Senior Notes due August 2034	650,000		—
3.050% Senior Notes due October 2041	500,000		500,000
Borrowings under senior credit facility (including Term Loan)	776,174		867,137
Borrowings under commercial paper program	—		705,900
Lease financing transactions	144,083		102,955
Other long-term debt	5,277		6,279
Finance leases	45,321		39,577
Unamortized discount and financing costs	(32,774)		(23,142)
Total long-term debt obligations	4,688,081		4,198,706
Less — Current maturities of long-term debt	556,238		535,202
Total long-term debt obligations, net of current maturities	$	4,131,843	$	3,663,504

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Senior Notes

Recent Issuance of Senior Notes**.** In August 2024, Quanta issued $1.25 billion aggregate principal amount of senior notes consisting of $600.0 million aggregate principal amount of 4.750% senior notes due August 2027 (the 2027 notes) and $650.0 million aggregate principal amount of 5.250% senior notes due August 2034 (the 2034 notes). The cumulative proceeds from the public offering of the 2027 notes and 2034 notes were $1.24 billion, net of the original issue discount, underwriting discounts and deferred financing costs, which were used to repay certain short-term and commercial paper borrowings that were utilized to acquire CEI.

As further specified by the terms of the senior notes and the indenture and supplemental indentures governing the senior notes (collectively, the Indenture), Quanta may redeem (i) all or a portion of the 2027 notes before the date that is one month prior to their maturity date, or (ii) all or a portion of the 2034 notes before the date that is three months prior to their maturity date, at a redemption price equal to the greater of (a) 100% of the principal amount of the senior notes to be redeemed or (b) the sum of the present values of the remaining scheduled payments of principal and interest (as discounted to the redemption date), on the senior notes to be redeemed that would be due if such senior notes matured on the applicable date described above less interest accrued to the date of redemption plus, in either case, accrued and unpaid interest thereon to (but excluding) the redemption date. Quanta may redeem (i) all or a portion of the 2027 notes within one month of the maturity date, or (ii) all or a portion of 2034 notes within three months of the maturity date, at a redemption price equal to 100% of the principal amount of the senior notes being redeemed plus accrued and unpaid interest thereon to (but excluding) the redemption date.

Upon the occurrence of a Change of Control Triggering Event (as defined in the Indenture), unless Quanta has exercised its right to redeem the applicable series of 2027 notes and 2034 notes in full by giving irrevocable notice to the trustee, each holder of such 2027 notes and 2034 notes will have the right to require Quanta to purchase all or a portion of such holder’s 2027 notes and 2034 notes at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest.

The Indenture contains covenants that, among other things, limit Quanta’s ability to incur liens securing certain indebtedness, to engage in certain sale and leaseback transactions with respect to certain properties and to sell all or substantially all of Quanta’s assets or merge or consolidate with or into other companies. The Indenture also contains customary events of default.

All Senior Notes. The interest amounts due on Quanta’s senior notes on each payment date are set forth below (dollars in thousands):


Title of the Notes	Interest Amount		Payment Dates	Commencement Date
0.950% Senior Notes due October 2024 (1)	$	2,375	April 1 and October 1	April 1, 2022
4.750% Senior Notes due August 2027	$	14,250	February 9 and August 9	February 9, 2025
2.900% Senior Notes due October 2030	$	14,500	April 1 and October 1	April 1, 2021
2.350% Senior Notes due January 2032	$	5,875	January 15 and July 15	July 15, 2022
5.250% Senior Notes due August 2034	$	17,063	February 9 and August 9	February 9, 2025
3.050% Senior Notes due October 2041	$	7,625	April 1 and October 1	April 1, 2022

(1) Quanta repaid the $500.0 million aggregate principal amount of the 0.950% senior notes due October 2024 on October 1, 2024, and therefore no interest payments will be made after such date with respect to such notes.

The fair value of Quanta’s senior notes was $3.50 billion as of September 30, 2024, compared to a carrying value of $3.72 billion net of unamortized bond discount, underwriting discounts and deferred financing costs of $31.8 million. The fair value of the senior notes is based on the quoted market prices for the same issue, and the senior notes are categorized as Level 1 liabilities.

Senior Credit Facility

As of September 30, 2024, the credit agreement for Quanta’s senior credit facility provided for a $750.0 million term loan facility with a maturity date of October 8, 2026 and aggregate revolving commitments of $2.80 billion, with a maturity date of July 31, 2029. Borrowings under the senior credit facility and the applicable interest rates were as follows (dollars in

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

thousands):


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2024			2023			2024			2023
Maximum amount outstanding	$	1,262,736		$	1,004,677		$	1,262,736		$	1,004,677
Average daily amount outstanding	$	978,939		$	965,022		$	897,753		$	928,318
Weighted-average interest rate	6.71		%	6.70		%	6.75		%	6.39		%

As of September 30, 2024, Quanta was in compliance with all of the financial covenants under the credit agreement.

On July 31, 2024, Quanta entered into an amendment to the credit agreement for its senior credit facility (the Amended Credit Agreement) that, among other things, (i) increased the aggregate commitments for revolving loans from $2.64 billion to $2.80 billion and (ii) extended the maturity date for revolving loans from October 8, 2026 to July 31, 2029. The amendment also (i) increased the limit on surety-backed letters of credit issued separate from the senior credit facility to $500.0 million at any one time outstanding and (ii) increased the cross-default threshold for other debt instruments to those exceeding $400.0 million in borrowings or availability. Additionally, on June 10, 2024, the senior credit facility was amended to establish Term CORRA (as defined in the Amended Credit Agreement) as the benchmark rate for borrowings denominated in Canadian dollars, in replacement of the CDOR Rate (as defined therein prior to giving effect to the amendment).

Term Loan. As of September 30, 2024, Quanta had $717.2 million outstanding under its term loan facility. The carrying amount of the term loan under Quanta’s senior credit facility approximates fair value due to its variable interest rate.

Revolving Loans. As of September 30, 2024, Quanta had $59.0 million of outstanding revolving loans under the senior credit facility, $30.3 million of which were denominated in Canadian dollars and $28.7 million of which were denominated in U.S. Dollars. The carrying amounts of the revolving borrowings under Quanta’s senior credit facility approximate fair value, as all revolving borrowings have a variable interest rate.

As of September 30, 2024, Quanta also had $226.1 million of letters of credit issued under the senior credit facility, of which $79.2 million were denominated in U.S. dollars and $146.9 million were denominated in currencies other than the U.S. dollar, primarily Australian and Canadian dollars. Additionally, available commitments for revolving loans under the senior credit facility must be maintained in order to provide credit support for notes issued under Quanta’s commercial paper program, and therefore such notes effectively reduce the available borrowing capacity under the senior credit facility.

As of September 30, 2024, $2.51 billion remained available under the senior credit facility for new revolving loans, letters of credit and support of the commercial paper program.

Commercial Paper Program

As of September 30, 2024, Quanta had no outstanding unsecured notes under its commercial paper program.

Borrowings under the commercial paper program and the applicable interest rates were as follows (dollars in thousands):


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2024			2023			2024			2023
Maximum amount outstanding	$	1,415,000		$	810,500		$	1,415,000		$	841,400
Average daily amount outstanding	$	456,212		$	627,877		$	325,171		$	624,476
Weighted-average interest rate	5.15		%	5.95		%	5.50		%	5.79		%

On July 17, 2024, Quanta utilized approximately $1.20 billion of borrowings under its commercial paper program, $400.0 million of borrowings under an additional term loan described below, and cash on hand, primarily to finance the cash portion of the acquisition of CEI and pay certain related costs and expenses and working capital requirements. As described above, the proceeds from the issuance of the 2027 notes and the 2034 notes were utilized to repay the $400.0 million additional term loan and certain commercial paper borrowings.

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Additional Term Loan

In July 2024, Quanta entered into, and borrowed the full amount available under, a $400.0 million 90-day term loan facility outside of the senior credit facility for the purpose of financing a portion of the acquisition of CEI.

Quanta voluntarily prepaid the term loan borrowings, in whole without premium or penalty, in August 2024 with proceeds from the issuance of the 2027 notes and 2034 notes. The term loan facility bore interest at a rate equal to the Term SOFR (as defined in the credit agreement) plus 1.375%.

Additional Letters of Credit

As of September 30, 2024, Quanta had $572.3 million of letters of credit issued outside of its senior credit facility, which were denominated in U.S. dollars.

9. LEASES:

Quanta primarily leases land, buildings, vehicles, construction equipment and office equipment. The components of lease costs in the accompanying condensed consolidated statements of operations are as follows (in thousands):


		Three Months Ended				Nine Months Ended
		September 30,				September 30,
Lease cost	Classification	2024		2023		2024		2023
Finance lease cost:
Amortization of lease assets	Depreciation (1)	$	2,915	$	1,168	$	8,709	$	3,181
Interest on lease liabilities	Interest and other financing expenses	699		674		2,109		1,181
Lease financing transactions: (2)
Depreciation	Depreciation (1)	2,686		1,950		7,281		5,835
Interest	Interest and other financing expenses	4,645		3,171		12,437		10,029
Operating lease cost	Cost of services and Selling, general and administrative expenses	28,704		23,379		80,274		69,742
Short-term and variable lease cost (3)	Cost of services and Selling, general and administrative expenses	322,287		302,134		894,388		790,080
Total lease cost		$	361,936	$	332,476	$	1,005,198	$	880,048

(1) Depreciation is included within “Cost of services” and “Selling, general and administrative expenses” in the accompanying condensed consolidated statements of operations.

(2) Certain of Quanta’s equipment rental agreements contain purchase options pursuant to which the purchase price is offset by a portion of the rental payments. When these purchase options are exercised by a third-party lessor on behalf of Quanta, the transaction is deemed to be a financing transaction for accounting purposes, which results in the recognition of an asset equal to the purchase price and a corresponding liability.

(3) Short-term lease cost includes both leases and rentals with initial terms of one year or less. Variable lease cost is insignificant.

Related party lease expense was $4.5 million for each the three months ended September 30, 2024 and 2023 and $14.0 million and $12.3 million for the nine months ended September 30, 2024 and 2023.

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Future minimum lease payments for operating leases and finance leases were as follows (in thousands):


	As of September 30, 2024
	Operating Leases		Finance Leases		Total
Remainder of 2024	$	29,144	$	3,091	$	32,235
2025	103,215		11,525		114,740
2026	81,722		10,566		92,288
2027	56,822		9,116		65,938
2028	36,266		7,717		43,983
Thereafter	47,790		6,688		54,478
Total future minimum payments related to operating leases and finance leases	354,959		48,703		403,662
Less imputed interest	(35,992)		(3,382)		(39,374)
Total	$	318,967	$	45,321	$	364,288

Future minimum lease payments for short-term leases were $20.3 million as of September 30, 2024. As of September 30, 2024, Quanta also had minimum lease payments related to operating lease obligations of $20.9 million for leases that had not yet commenced as of such date, are expected to commence in 2024 and have lease terms of one to ten years. Additionally, as described above, certain of Quanta’s equipment rental agreements contain purchase options pursuant to which the purchase price is offset by a portion of the rental payments. The future payments related to these lease financing transactions totaled $106.4 million and comprise principal and interest payments.

The weighted average remaining lease terms (other than for short-term leases) and discount rates were as follows:


	As of September 30, 2024
Weighted average remaining lease term (in years):
Operating leases	4.35
Finance leases	4.63
Weighted average discount rate:
Operating leases	5.0	%
Finance leases	6.1	%

Quanta has also guaranteed the residual value under certain of its equipment operating leases and real estate finance leases, agreeing to pay any difference between the residual value and the fair market value of the underlying asset at the date of lease termination. Historically, the fair value of the assets at the time of lease termination generally has approximated or exceeded the residual value guarantees, and therefore such guarantees are not expected to result in significant payments.

10. INCOME TAXES:

Quanta’s effective tax rates for the three months ended September 30, 2024 and 2023 were 21.6% and 22.1%. The effective tax rate for the three months ended September 30, 2024 was favorably impacted by the recognition of a $25.3 million tax benefit that resulted from equity incentive awards vesting at a higher fair market value than their grant date fair value as compared to the recognition of $1.6 million associated with this tax benefit for the three months ended September 30, 2023. Quanta’s effective tax rates for the nine months ended September 30, 2024 and 2023 were 22.5% and 21.1%. The tax rates for the nine months ended September 30, 2024 and 2023 were favorably impacted by the recognition of $47.8 million and $34.0 million of benefits that resulted from equity incentive awards vesting at a higher fair market value than their grant date fair value. Additionally, the tax rates for the three and nine months ended September 30, 2023 were favorably impacted by a $22.7 million change in valuation allowance as described below.

Quanta regularly evaluates valuation allowances established for deferred tax assets (DTAs) for which future realization is uncertain, including in connection with changes in tax laws. The estimation of required valuation allowances includes estimates of future taxable income. The ultimate realization of DTAs is dependent upon the generation of future taxable income in the jurisdiction of the DTAs during the periods in which those temporary differences become deductible. Quanta considers projected future taxable income and tax planning strategies in making this assessment. If actual future taxable income differs

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

from these estimates, Quanta may not realize DTAs to the extent estimated. During the year ended December 31, 2022, Quanta recognized $91.5 million of unrealized losses on its investment in Starry Group Holdings, Inc. (Starry) and recorded a valuation allowance against such unrealized losses. On August 31, 2023, the equity securities of Starry held by Quanta were cancelled pursuant to an approved plan of reorganization pursuant to a bankruptcy proceeding. As a result, Quanta’s $91.5 million loss was realized, and the related $22.7 million valuation allowance was released during the three months ended September 30, 2023. This realized loss can be utilized to offset gains from tax years 2020 through 2023, and can be carried forward to offset future capital gains realized in tax years 2024 through 2028.

As of September 30, 2024, the total amount of unrecognized tax benefits relating to uncertain tax positions was $57.0 million, a net increase of $11.9 million from December 31, 2023, of which $7.4 million relates to positions expected to be taken in 2024 and $5.5 million resulted from positions taken by an acquired company in periods prior to the acquisition. These increases were partially offset by reductions due to the lapse in statute of limitations. Quanta’s consolidated federal income tax returns for tax years 2017, 2018, and 2021 through 2023 remain open to examination by the IRS, as the applicable statute of limitations periods have not yet expired. Additionally, various state and foreign tax returns filed by Quanta and certain subsidiaries for multiple periods remain under examination by various U.S. state and foreign tax authorities. Quanta does not consider any U.S. state in which it does business to be a major tax jurisdiction. Quanta believes it is reasonably possible that within the next 12 months unrecognized tax benefits may decrease by up to $11.3 million as a result of settlement of these examinations or as a result of the expiration of certain statute of limitations periods.

11. EQUITY:

Stock Repurchases

On May 23, 2023, Quanta’s Board of Directors approved a stock repurchase program that authorizes Quanta to purchase, from time to time through June 30, 2026, up to $500 million of its outstanding common stock. As of September 30, 2024, $499.7 million remained available under this repurchase program.

Repurchases may be implemented through open market repurchases or privately negotiated transactions, at management’s discretion, based on market and business conditions, applicable contractual and legal requirements and other factors. Quanta is not obligated to acquire any specific amount of common stock, and the repurchase program may be modified or terminated by Quanta’s Board of Directors at any time at its sole discretion and without notice.

Dividends

Quanta declared and paid the following cash dividends and cash dividend equivalents during 2023 and the first nine months of 2024 (in thousands, except per share amounts):


Declaration	Record	Payment	Dividend		Dividends
Date	Date	Date	Per Share		Declared

August 28, 2024	October 1, 2024	October 11, 2024	$	0.09	$	13,532
May 23, 2024	July 1, 2024	July 12, 2024	$	0.09	$	13,521
March 28, 2024	April 9, 2024	April 17, 2024	$	0.09	$	13,477
December 5, 2023	January 2, 2024	January 12, 2024	$	0.09	$	13,412
August 30, 2023	October 2, 2023	October 13, 2023	$	0.08	$	12,430
May 23, 2023	July 3, 2023	July 14, 2023	$	0.08	$	11,893
March 29, 2023	April 10, 2023	April 18, 2023	$	0.08	$	12,100

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

12. STOCK-BASED COMPENSATION:

Restricted Stock Units (RSUs) to be Settled in Common Stock

A summary of the activity for RSUs to be settled in common stock for the nine months ended September 30, 2024 and 2023 is as follows (RSUs in thousands):


	2024		2023
	RSUs	Weighted Average Grant Date Fair Value (Per Unit)	RSUs	Weighted Average Grant Date Fair Value (Per Unit)
Unvested at January 1	2,548	$104.76	3,263	$78.74
Granted	812	$241.38	667	$161.42
Vested	(1,107)	$82.61	(1,199)	$66.14
Forfeited	(126)	$158.16	(119)	$114.47
Unvested at September 30	2,127	$165.61	2,612	$104.39

The approximate fair value of RSUs that vested during the nine months ended September 30, 2024 and 2023 was $282.2 million and $194.6 million.

During the nine months ended September 30, 2024 and 2023, Quanta recognized $83.6 million and $70.5 million of non-cash stock compensation expense related to RSUs to be settled in common stock. As of September 30, 2024, there was $232.7 million of total unrecognized compensation expense related to unvested RSUs to be settled in common stock granted to both employees and non-employees. This cost is expected to be recognized over a weighted average period of 2.91 years.

Performance Stock Units (PSUs) to be Settled in Common Stock

A summary of the activity for PSUs to be settled in common stock for the nine months ended September 30, 2024 and 2023 is as follows (PSUs in thousands):


	2024		2023
	PSUs	Weighted Average Grant Date Fair Value (Per Unit)	PSUs	Weighted Average Grant Date Fair Value (Per Unit)
Unvested at January 1	491	$129.70	733	$65.39
Granted	109	$263.34	177	$174.50
Vested	(175)	$96.45	(413)	$35.12
Forfeited	—	N/A	(6)	$101.66
Unvested at September 30	425	$177.69	491	$129.70

The Monte Carlo simulation valuation methodology applied the following key inputs:


	2024		2023
Valuation date price based on March 4, 2024 and March 9, 2023 closing stock prices of Quanta common stock	$243.34		$160.55
Expected volatility	33	%	35	%
Risk-free interest rate	4.43	%	4.62	%
Term in years	2.83		2.81

During the nine months ended September 30, 2024 and 2023, Quanta recognized $27.2 million and $24.2 million of non-cash stock compensation expense related to PSUs to be settled in common stock. As of September 30, 2024, there was an estimated $40.5 million of total unrecognized compensation expense related to unearned and unvested PSUs. This amount is based on forecasted attainment of performance metrics and estimated forfeitures of unearned and unvested PSUs. The compensation expense related to outstanding PSUs can vary from period to period based on changes in forecasted achievement of established performance goals and the total number of shares of common stock that Quanta anticipates will be issued upon vesting of such PSUs. This cost is expected to be recognized over a weighted average period of 1.80 years.

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

During the nine months ended September 30, 2024 and 2023, 0.3 million and 0.7 million shares of common stock were issued in connection with earned and vested PSUs. The approximate fair values of PSUs earned and vested during the nine months ended September 30, 2024 and 2023 were $75.4 million and $115.5 million, respectively.

13. EMPLOYEE BENEFIT PLANS:

Deferred Compensation Plans

Quanta maintains non-qualified deferred compensation plans under which eligible directors and key employees may defer their receipt of certain cash compensation and/or the settlement of certain stock-based awards. As of September 30, 2024 and December 31, 2023, the liability related to deferred cash compensation under these plans, including amounts contributed by Quanta, was $110.3 million and $88.9 million, the majority of which was included in “Insurance and other non-current liabilities” in the accompanying condensed consolidated balance sheets. Additionally, as of September 30, 2024 and December 31, 2023, the settlement and issuance of 170,990 and 174,079 shares of common stock underlying certain stock-based awards had been deferred under these plans, and such issuances are scheduled to occur in future periods.

To provide for future obligations related to deferred cash compensation under these plans, Quanta has invested in corporate-owned life insurance (COLI) policies covering certain participants in the deferred compensation plans, the underlying investments of which are intended to be aligned with the investment alternatives elected by plan participants. The COLI assets are recorded at their cash surrender value, which is considered their fair market value, and as of September 30, 2024 and December 31, 2023, the fair market values were $103.5 million and $83.4 million and were included in “Other assets, net” in the accompanying condensed consolidated balance sheets. The level of inputs for these fair value measurements is Level 2.

Changes in the fair market value of Quanta’s COLI assets and deferred compensation liabilities largely offset and are recorded in the accompanying statements of operations as follows (in thousands):


		Three Months Ended				Nine Months Ended
		September 30,				September 30,
Classification	Change in fair market value of	2024		2023		2024		2023
(Loss) gain included in Selling, general and administrative expenses	Deferred compensation liabilities	$	(5,539)	$	2,262	$	(14,087)	$	(5,646)
Other income (expense), net	COLI assets	$	5,175	$	(3,106)	$	13,026	$	3,774

14. COMMITMENTS AND CONTINGENCIES:

Legal Proceedings

Quanta is from time to time party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. These actions typically seek, among other things, compensation for alleged personal injury, property damage, breach of contract, negligence or gross negligence, environmental liabilities, wage and hour and other employment-related damages, punitive damages, consequential damages, civil penalties or other losses, or injunctive or declaratory relief. With respect to all such lawsuits, claims and proceedings, Quanta records a reserve when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. In addition, Quanta discloses matters for which management believes a material loss is at least reasonably possible.

The assessment of whether a loss is probable or reasonably possible, and whether the loss or a range of loss is estimable, often involves a series of complex judgments about future events. In all instances, management has assessed the matter based on current information and made a judgment concerning its potential outcome, giving due consideration to the nature of the claim, the amount and nature of damages sought and the probability of success and taking into account, among other things, negotiations with claimants, discovery, settlements and payments, judicial rulings, arbitration and mediation decisions, advice of internal and external legal counsel, and other information and events pertaining to a particular matter. Costs incurred for litigation are expensed as incurred. Except as otherwise stated below, none of these proceedings are expected to have a material adverse effect on Quanta’s consolidated financial position, results of operations or cash flows. However, management’s judgment may prove materially inaccurate, and such judgment is made subject to the known uncertainties of litigation.

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Peru Project Dispute

In 2015, Redes Andinas de Comunicaciones S.R.L. (Redes), a majority-owned subsidiary of Quanta, entered into two separate contracts with an agency of the Peruvian Ministry of Transportation and Communications (MTC), currently Programa Nacional de Telecomunicaciones (PRONATEL), as successor to Fondo de Inversion en Telecomunicaciones (FITEL), pursuant to which Redes would design, construct and operate certain telecommunication networks in rural regions of Peru. The aggregate consideration provided for in the contracts was approximately $248 million, consisting of approximately $151 million to be paid during the construction period and approximately $97 million to be paid during a 10-year post-construction operation and maintenance period. At the beginning of the project, FITEL made advance payments totaling approximately $87 million to Redes, which were secured by two on-demand advance payment bonds posted by Redes to guarantee proper use of the payments in the execution of the project. Redes also provided two on-demand performance bonds in the aggregate amount of $25 million to secure performance of its obligations under the contracts.

During the construction phase, the project experienced numerous challenges and delays, primarily related to issues which Quanta believes were outside of the control of and not attributable to Redes, including, among others, weather-related issues, local opposition to the project, permitting delays, the inability to acquire clear title to certain required parcels of land and other delays which Quanta believes were attributable to FITEL/PRONATEL. In response to various of these challenges and delays, Redes requested and received multiple extensions to certain contractual deadlines and relief from related liquidated damages. However, in April 2019, PRONATEL provided notice to Redes claiming that Redes was in default under the contracts due to the delays and that PRONATEL would terminate the contracts if the alleged defaults were not cured. Redes responded by claiming that it was not in default, as the delays were due to events not attributable to Redes, and therefore PRONATEL was not entitled to terminate the contracts. PRONATEL subsequently terminated the contracts for alleged cause prior to completion of Redes’ scope of work, exercised the on-demand performance bonds and advance payment bonds against Redes, and indicated its intention to claim damages, including liquidated damages under the contracts. As of the date of the contract terminations, Redes had incurred costs of approximately $157 million related to the design and construction of the project and had received approximately $100 million of payments (inclusive of the approximately $87 million advance payments).

In May 2019, Redes filed for arbitration before the Court of International Arbitration of the International Chamber of Commerce (ICC) against PRONATEL and the MTC. In the arbitration, Redes claimed that PRONATEL: breached and wrongfully terminated the contracts; wrongfully executed the advance payment bonds and the performance bonds; and was not entitled to the alleged amount of liquidated damages. In August 2022, Redes received the decision of the arbitration tribunal, which unanimously found in favor of Redes in connection with its claims and ordered, among other things, (i) repayment of the amounts collected by PRONATEL under the advance payment bonds and the performance bonds; (ii) payment of amounts owed for work completed by Redes under the contracts; (iii) payment of lost income in connection with Redes’ future operation and maintenance of the networks; and (iv) payment of other related costs and damages to Redes as a result of the breach and improper termination of the contracts (including costs related to the execution of the bonds, costs related to the transfer of the networks and legal and expert fees). Accordingly, the arbitration tribunal awarded Redes approximately $177 million. In addition, per the terms of the arbitration decision, interest will accrue on any amount owed pursuant to this award up to the date of payment.

The decision of the arbitration tribunal is final, with limited grounds on which PRONATEL and the MTC may seek to annul the decision in Peruvian courts. In December 2022, Redes filed an enforcement proceeding with respect to each project contract to secure recovery of the arbitration award, and PRONATEL and the MTC filed an annulment proceeding with respect to each project contract. The enforcement and annulment proceedings were filed with different commercial courts in Lima, Peru. During 2023 and 2024, Redes received favorable rulings in each of the enforcement proceedings and each of the annulment proceedings, and the grounds for annulment were rejected; however, PRONATEL and the MTC are pursuing, and are expected to continue to pursue, certain remaining legal challenges to such rulings. We expect these remaining legal challenges will be resolved in 2025 or 2026.

In December 2022 and January 2023, following the favorable arbitration ruling, Quanta received $107 million pursuant to coverage under insurance policies for the improper collection by PRONATEL and the MTC of the advance payment and performance bonds and for nonpayment by PRONATEL and the MTC of amounts owed for work completed by Redes. Additionally, while PRONATEL and the MTC are continuing to pursue their remaining legal challenges, in October 2024, in compliance with the ICC arbitration award, Quanta received approximately $112 million, previously held in escrow by a Peruvian bank, in connection with repayment for amounts collected by PRONATEL for the advance payment and performance bonds. Per the terms of the insurance policies mentioned above, Quanta is required to remit $107 million to the insurers as amounts are collected. Quanta is continuing to pursue collection of the remaining amount owed under the ICC arbitration award.

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Quanta also reserves the right to seek full compensation for the loss of its investment under applicable legal regimes, including investment treaties and customary international law, as well as to seek resolution through direct discussions with PRONATEL or the MTC. In connection with these rights, in May 2020 Quanta’s Dutch subsidiary delivered to the Peruvian government an official notice of dispute arising from the termination of the contracts and related acts by PRONATEL (which are attributable to Peru) under the Agreement on the Encouragement and Reciprocal Protection of Investments between the Kingdom of the Netherlands and the Republic of Peru (Investment Treaty). The Investment Treaty protects Quanta’s subsidiary’s indirect ownership stake in Redes and the project, and provides for rights and remedies distinct from the ICC arbitration. In December 2020, Quanta’s Dutch subsidiary filed a request for the institution of an arbitration proceeding against Peru with the International Centre for Settlement of Investment Disputes (ICSID) related to Peru’s breach of the Investment Treaty, which was registered by ICSID in January 2021. In the ICSID arbitration, Quanta’s Dutch subsidiary claims, without limitation, that Peru: (i) treated the subsidiary’s investment in Redes and the project unfairly and inequitably; and (ii) effectively expropriated the subsidiary’s investment in Redes and the project. In addition, Quanta’s Dutch subsidiary is seeking full compensation for all damages arising from Peru’s actions, including but not limited to (i) the fair market value of the investment and/or lost profits; (ii) attorneys’ fees and arbitration costs; (iii) other related costs and damages and (iv) pre- and post-award interest. The ICSID arbitration hearing on the merits occurred in the second quarter of 2023 and a decision is currently expected in the first half of 2025.

Quanta believes Redes is entitled to all amounts awarded by the ICC arbitration tribunal, and that its Dutch subsidiary is entitled to other amounts associated with the pending ICSID arbitration proceeding. Quanta and Redes intend to vigorously pursue recovery of the remaining amounts awarded by the ICC arbitration tribunal and take additional legal actions deemed necessary to enforce the ICC arbitration decision. However, due to the inherent uncertainty involved with, among other things, the challenges to the annulment decisions, enforcement and related proceedings, the ultimate timing and conclusion with respect to collection of the remaining amounts of the ICC arbitration award remains unknown.

As a result of the contract terminations and the inherent uncertainty involved in arbitration proceedings and recovery of amounts owed, during the three months ended June 30, 2019, Quanta recorded a charge to earnings of $79.2 million, which included a reduction of previously recognized earnings on the project, a reserve against a portion of the project costs incurred through the project termination date, an accrual for a portion of the alleged liquidated damages, and the estimated costs to complete the project turnover and close out the project. Quanta also initially recorded a contract receivable of approximately $120 million related to the project during the three months ended June 30, 2019, which includes the amounts collected by PRONATEL through exercise of the advance payment bonds and performance bonds. As of September 30, 2024, the total amount of the receivable was not changed, however approximately $112 million of such receivable was reclassified to a current asset during the three months ended September 30, 2024, and is included in “Prepaid expenses and other current assets” in the accompanying condensed consolidated balance sheet as of September 30, 2024. The remaining approximately $8 million of the receivable is included in “Other assets, net” in the accompanying consolidated balance sheet as of September 30, 2024. Additionally, with respect to the amounts received pursuant to coverage under the insurance policies described above, the $107 million owed pursuant to the insurance policies was reclassified to a current liability during the three months ended September 30, 2024 and is included in “Accounts payable and accrued expenses” in the accompanying condensed consolidated balance sheet as of September 30, 2024.

After considering, as discussed above, that the ultimate timing and conclusion with respect to collection of the full amounts associated with the ICC arbitration award remains unknown, Quanta has not recognized a gain in the current period. To the extent amounts in excess of the current receivable are determined to be realizable, a gain would be recorded in the period such determination is made. However, if Quanta is ultimately not successful with respect to collection of the ICC arbitration award or with respect to its claims in the pending ICSID arbitration proceeding, this matter could result in an additional significant loss that could have a material adverse effect on Quanta’s consolidated results of operations and cash flows.

Silverado Wildfire Matter

During 2022 and 2023, two of Quanta’s subsidiaries received tenders of defense and demands for preservation of evidence from Southern California Edison Company (SCE) related to lawsuits filed from April 2021 through September 2024 against SCE and T-Mobile USA, Inc. (T-Mobile) in the Superior Court of California, County of Orange. The lawsuits generally assert property damage and related claims on behalf of certain individuals and subrogation claims on behalf of insurers relating to damages caused by a wildfire that began in October 2020 in Orange County, California (the Silverado Fire) and that is purported to have damaged approximately 13,000 acres. The lawsuits allege the Silverado Fire originated from utility poles in the area, generally claiming that each defendant failed to adequately maintain, inspect, repair or replace its overhead facilities, equipment and utility poles and remove vegetation in the vicinity; that the utility poles were overloaded with equipment from shared usage; and that SCE failed to de-energize its facilities during red flag warnings for a Santa Ana wind event. The lawsuits

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allege the Silverado Fire started when SCE and T-Mobile equipment contacted each other and note the Orange County Fire Department is investigating whether a T-Mobile lashing wire contacted an SCE overhead primary conductor in high winds. T-Mobile has filed cross-complaints against SCE alleging, among other things, that the ignition site of the Silverado Fire encompassed two utility poles replaced by SCE or a third party engaged by SCE, and that certain equipment, including T-Mobile’s lashing wire, was not sufficiently re-secured after the utility pole replacements. One of Quanta’s subsidiaries performed planning and other services related to the two utility poles, and another Quanta subsidiary replaced the utility poles and reattached the electrical and telecommunication equipment to the new utility poles in March 2019, approximately 19 months before the Silverado Fire. Pursuant to the general terms of a master services agreement and a master consulting services agreement between the Quanta subsidiaries and SCE, the subsidiaries agreed to defend and indemnify SCE against certain claims arising with respect to performance or nonperformance under the agreements. The SCE tender letters seek contractual indemnification and defense from Quanta’s subsidiaries for the claims asserted against SCE in the lawsuits and the T-Mobile cross-complaints.

Quanta’s subsidiaries intend to vigorously defend against the lawsuits, the T-Mobile cross-complaints and any other claims asserted in connection with the Silverado Fire. Quanta will continue to review additional information in connection with this matter as litigation and resolution efforts progress, and any such information may potentially allow Quanta to determine an estimate of potential loss, if any. As of September 30, 2024, Quanta had not recorded an accrual with respect to this matter, and Quanta is currently unable to reasonably estimate a range of reasonably possible loss, if any, because there are a number of unknown facts and legal considerations that may impact the amount of any potential liability. Quanta also believes that to the extent its subsidiaries are determined to be liable for any damages resulting from this matter, its insurance would be applied to any such liabilities over its deductible amount and its insurance coverage would be adequate to cover such potential liabilities. However, the ultimate amount of any potential liability and insurance coverage in connection with this matter remains subject to uncertainties associated with pending and potential future litigation.

Insurance

Quanta is insured for, among other things, employer’s liability, workers’ compensation, auto liability, aviation and general liability claims. Quanta manages and maintains a portion of its casualty risk indirectly through its wholly-owned captive insurance company, which insures all claims up to the amount of the applicable deductible of its third-party insurance programs, as well as with respect to certain other amounts.

As of September 30, 2024 and December 31, 2023, the gross amount accrued for employer’s liability, workers’ compensation, auto liability, general liability, and group health claims totaled $413.6 million and $351.7 million, of which $265.7 million and $229.2 million are included in “Insurance and other non-current liabilities,” and the remainder is included in “Accounts payables and accrued expenses.” Related insurance recoveries/receivables as of September 30, 2024 and December 31, 2023 were $5.3 million and $4.9 million, of which $0.8 million and $0.3 million are included in “Prepaid expenses and other current assets” and $4.5 million and $4.6 million are included in “Other assets, net.”

Bonds

As of September 30, 2024, the total amount of the outstanding performance bonds was estimated to be approximately $8.6 billion. Quanta’s estimated maximum exposure related to the value of the performance bonds outstanding is lowered on each bonded project as the cost to complete is reduced, and each commitment under a performance bond generally extinguishes concurrently with the expiration of its related contractual obligation.

Capital Commitments and Other Committed Expenditures

As of September 30, 2024, Quanta had $74.0 million of outstanding capital commitments associated with investments in unconsolidated affiliates, the majority of which relates to a limited partnership interest in a fund that targets investments in certain portfolio companies that operate businesses related to the transition to a reduced-carbon economy.

As of September 30, 2024, Quanta had $93.4 million of unfilled production orders primarily related to its fleet of vehicles, which have expected delivery dates during the remainder of 2024 and $31.7 million which have expected delivery dates during 2025, in order to accommodate manufacturer lead times on certain types of vehicles. Although Quanta has committed to purchase these vehicles at the time of their delivery, Quanta anticipates that the majority of these orders will be assigned to third party leasing companies and made available under certain master equipment lease agreements, thereby releasing Quanta from its capital commitments.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

15. DETAIL OF CERTAIN ACCOUNTS:

Cash and Cash Equivalents

As of September 30, 2024 and December 31, 2023, cash equivalents were $540.4 million and $610.8 million and consisted primarily of money market investments, money market mutual funds and short-term deposits.

Cash and cash equivalents held by joint ventures, which are either consolidated or proportionately consolidated, are available to support joint venture operations, but Quanta cannot utilize those assets to support its other operations. Quanta generally has no right to cash and cash equivalents held by a joint venture other than participating in distributions, to the extent made, and in the event of dissolution. Cash and cash equivalents held by Quanta’s wholly-owned captive insurance company are generally not available for use in support of its other operations. Amounts related to cash and cash equivalents held by consolidated or proportionately consolidated joint ventures and the captive insurance company, which are included in Quanta’s total cash and cash equivalents balances, were as follows (in thousands):


	September 30, 2024		December 31, 2023
Cash and cash equivalents held by domestic joint ventures	$	67,784	$	41,427
Cash and cash equivalents held by foreign joint ventures	10,687		10,968
Total cash and cash equivalents held by joint ventures	78,471		52,395
Cash and cash equivalents held by captive insurance company	19,319		19,088
Cash and cash equivalents not held by joint ventures or captive insurance company	666,277		1,218,765
Total cash and cash equivalents	$	764,067	$	1,290,248

Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consisted of the following (in thousands):


	September 30, 2024		December 31, 2023
Accounts payable, trade	$	2,317,040	$	2,027,588
Accrued compensation and related expenses	725,114		526,221
Other accrued expenses	956,873		507,433
Accounts payable and accrued expenses	$	3,999,027	$	3,061,242

Other accrued expenses primarily include accrued insurance liabilities as well as income and franchise taxes payable as of December 31, 2023. The amount as of September 30, 2024 also includes the current portion of contingent consideration as further described in Note 5 and the $107 million liability related to the Peru project dispute as further described in Note 14.

Property and Equipment

Accumulated depreciation related to property and equipment was $1.93 billion and $1.82 billion as of September 30, 2024 and December 31, 2023. In addition, Quanta held property and equipment, net of $196.3 million and $245.7 million in foreign countries, primarily Canada, as of September 30, 2024 and December 31, 2023.

Other Intangible Assets

Accumulated amortization related to other intangible assets was $1.57 billion and $1.31 billion as of September 30, 2024 and December 31, 2023.

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16. SUPPLEMENTAL CASH FLOW INFORMATION:

Reconciliations of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets that sum to the total of such amounts shown in the statements of cash flows are as follows (in thousands):


	September 30,
	2024		2023
Cash and cash equivalents	$	764,067	$	305,355
Restricted cash included in “Prepaid expenses and other current assets” (1)	3,337		3,393
Restricted cash included in “Other assets, net” (1)	1,364		1,141
Total cash, cash equivalents, and restricted cash reported in the statements of cash flows	$	768,768	$	309,889

(1) Restricted cash includes any cash that is legally restricted as to withdrawal or usage.


	December 31,
	2023		2022
Cash and cash equivalents	$	1,290,248	$	428,505
Restricted cash included in “Prepaid expenses and other current assets” (1)	3,652		3,759
Restricted cash included in “Other assets, net” (1)	1,141		950
Total cash, cash equivalents, and restricted cash reported in the statements of cash flows	$	1,295,041	$	433,214

(1) Restricted cash includes any cash that is legally restricted as to withdrawal or usage.

Supplemental cash flow information related to leases is as follows (in thousands):


	Nine Months Ended
	September 30,
		2024		2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used by operating leases		$	(81,625)	$	(71,504)
Operating cash flows used by finance leases		$	(2,109)	$	(1,181)
Financing cash flows used by finance leases		$	(7,542)	$	(1,680)
Lease assets obtained in exchange for lease liabilities:
Operating leases		$	78,594	$	81,101
Finance leases		$	3,447	$	27,801
Lease financing transaction assets obtained in exchange for lease financing transaction liabilities		$	48,478	$	27,584

Additional supplemental cash flow information is as follows (in thousands):


	Nine Months Ended
	September 30,
		2024		2023
Cash (paid) received during the period for:
Interest paid		$	(118,955)	$	(113,440)
Income taxes paid		$	(119,421)	$	(171,210)
Income tax refunds		$	3,359	$	5,244

Accrued capital expenditures were $26.7 million and $21.3 million as of September 30, 2024 and 2023. The impact of these items has been excluded from Quanta’s capital expenditures in the accompanying condensed consolidated statements of cash flows due to their non-cash nature.

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