pwr-20230930

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


(Mark One)
☑						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023.


or
☐						TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
						For the transition period from to .


Commission File Number:			001-13831

Quanta Services, Inc.

(Exact name of registrant as specified in its charter)


Delaware			74-2851603
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

2727 North Loop West

Houston, Texas 77008

(Address of principal executive offices, including zip code)

(713) 629-7600

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.00001 par value

PWR

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of October 27, 2023, the number of outstanding shares of Common Stock of the registrant was 145,284,890.

QUANTA SERVICES, INC. AND SUBSIDIARIES

TABLE OF CONTENTS


		Page
	PART I. FINANCIAL INFORMATION
ITEM 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Operations	6
	Condensed Consolidated Statements of Comprehensive Income (Loss)	7
	Condensed Consolidated Statements of Cash Flows	8
	Condensed Consolidated Statements of Equity	9
	Notes to Condensed Consolidated Financial Statements	11
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	49
ITEM 4.	Controls and Procedures	49

	PART II. OTHER INFORMATION
ITEM 1.	Legal Proceedings	50
ITEM 1A.	Risk Factors	50
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	51
ITEM 3.	Defaults Upon Senior Securities	51
ITEM 4.	Mine Safety Disclosures	51
ITEM 5.	Other Information	52
ITEM 6.	Exhibits	53
Signature		54

Cautionary Statement About Forward-Looking Statements and Information

This Quarterly Report on Form 10-Q (Quarterly Report) of Quanta Services, Inc. (together with its subsidiaries, Quanta, we, us or our) includes forward-looking statements reflecting assumptions, expectations, projections, intentions or beliefs about future events that are intended to qualify for the “safe harbor” from liability established by the Private Securities Litigation Reform Act of 1995. You can identify these statements by the fact that they do not relate strictly to historical or current facts. They use words such as “anticipate,” “estimate,” “project,” “forecast,” “may,” “will,” “should,” “could,” “expect,” “believe,” “plan,” “intend” and other words of similar meaning. In particular, these include, but are not limited to, statements relating to the following:

•Projected revenues, net income, earnings per share, margins, cash flows, liquidity, weighted average shares outstanding, capital expenditures, interest rates and tax rates, as well as other projections of operating results and GAAP (as defined herein) and non-GAAP financial results, including EBITDA (as defined herein), adjusted EBITDA (as defined herein) and backlog;

•Expectations regarding our business or financial outlook;

•Expectations regarding opportunities, technological developments, competitive positioning, future economic and regulatory conditions and other trends in particular markets or industries, including with respect to our increased operations in the renewable energy market and the transition to a reduced-carbon economy;

•Expectations regarding our plans and strategies;

•The business plans or financial condition of our customers, including with respect to the transition to a reduced-carbon economy;

•The potential benefits from, and future financial and operational performance of, acquired businesses and our investments;

•Beliefs and assumptions about the collectability of receivables;

•The expected value of contracts or intended contracts with customers, as well as the expected timing, scope, services, term or results of any awarded or expected projects;

•Possible recovery of pending or contemplated insurance claims, change orders and claims asserted against customers or third parties;

•The development of and opportunities with respect to future projects, including renewable energy projects and other projects designed to support transition to a reduced-carbon economy, electrical grid modernization, upgrade and hardening projects and larger transmission and pipeline projects;

•Expectations regarding the future availability and price of materials and equipment necessary for the performance of our business, as well as our ability to implement strategies designed to manage the availability or price of such materials and equipment;

•The expected impact of global and domestic economic conditions on our business, financial condition, results of operations, cash flows, liquidity and demand for our services, including inflation, interest rates, recessionary economic conditions and commodity prices and production volumes;

•The expected impact of changes and potential changes in climate and the physical and transition risks associated with climate change and the transition to a reduced-carbon economy;

•Future capital allocation initiatives, including the amount and timing of, and strategies with respect to, any future acquisitions, investments, cash dividends, repurchases of our equity or debt securities or repayments of other outstanding debt;

•The expected impact of existing or potential legislation or regulation;

•Potential opportunities that may be indicated by bidding activity or similar discussions with customers;

•The future demand for, availability of and costs related to labor resources in the industries we serve;

•The expected recognition and realization of our remaining performance obligations or backlog;

•Expectations regarding the outcome of pending or threatened legal proceedings, as well as the collection of amounts awarded in legal proceedings; and

•Expectations with respect to our ability to reduce our debt and maintain our current credit ratings.

These forward-looking statements are not guarantees of future performance; rather they involve or rely on a number of risks, uncertainties, and assumptions that are difficult to predict or are beyond our control and reflect management’s beliefs and assumptions based on information available at the time the statements are made. We caution you that actual outcomes and results may differ materially from what is expressed, implied or forecasted by our forward-looking statements and that any or

all of our forward-looking statements may turn out to be inaccurate or incorrect. These statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties, including the following:

•Market, industry, economic, financial or political conditions that are outside of our control, including economic, energy, infrastructure and environmental policies and plans that are adopted or proposed by the U.S. federal and state governments or other governments in territories or countries in which we operate, inflation, interest rates, recessionary economic conditions, deterioration of global or specific trade relationships, and geopolitical conflicts and political unrest;

•Quarterly variations in our operating and financial results, liquidity, financial condition, cash flows, capital requirements, and reinvestment opportunities;

•Trends and growth opportunities in relevant markets, including our ability to obtain future project awards;

•Delays, deferrals, reductions in scope or cancellations of anticipated, pending or existing projects as a result of, among other things, supply chain or production disruptions and other logistical challenges, weather, regulatory or permitting issues, environmental processes, project performance issues, claimed force majeure events, protests or other political activity, legal challenges, inflationary pressure, reductions or eliminations in governmental funding or customer capital constraints;

•The effect of commodity prices and commodity production volumes, which have been and may continue to be affected by inflationary pressure, on our operations and growth opportunities and on our customers’ capital programs and demand for our services;

•The successful negotiation, execution, performance and completion of anticipated, pending and existing contracts;

•Events arising from operational hazards, including, among others, wildfires and explosions, that can arise due to the nature of the services we provide and the conditions in which we operate and can be due to failure of infrastructure on which we have performed services and result in significant liabilities that may be exacerbated in certain geographies and locations;

•Unexpected costs, liabilities, fines or penalties that may arise from legal proceedings, indemnity obligations, reimbursement obligations associated with letters of credit or bonds, multiemployer pension plans or other claims or actions asserted against us, including amounts that are not covered by, or are in excess of the coverage under, our third-party insurance;

•Potential unavailability or cancellation of third-party insurance coverage, as well as the exclusion of coverage for certain losses, potential increases in premiums for coverage deemed beneficial to us, or the unavailability of coverage deemed beneficial to us at reasonable and competitive rates (e.g., coverage for wildfire events);

•Damage to our brands or reputation, as well as potential costs, liabilities, fines or penalties, arising as a result of cyber-security breaches, environmental and occupational health and safety matters, corporate scandal, failure to successfully perform or negative publicity regarding a high-profile project, involvement in a catastrophic event (e.g., fire, explosion) or other negative incidents;

•Disruptions in, or failure to adequately protect, our information technology systems;

•Our dependence on suppliers, subcontractors, equipment manufacturers and other third parties and the impact of, among other things, inflationary pressure and regulatory, supply chain and logistical challenges on these third parties;

•Estimates and assumptions related to our financial results, remaining performance obligations and backlog;

•Our inability to attract, the potential shortage of, and increased costs with respect to skilled employees, as well as our ability to retain and attract key personnel and qualified employees;

•Our dependence on fixed price contracts and the potential that we incur losses with respect to these contracts;

•Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are replaced on less favorable terms;

•Our inability or failure to comply with the terms of our contracts, which may result in additional costs, unexcused delays, warranty claims, failure to meet performance guarantees, damages or contract terminations;

•Adverse weather conditions, natural disasters and other emergencies, including wildfires, pandemics, hurricanes, tropical storms, floods, debris flows, earthquakes and other geological- and weather-related hazards, as well as the impact of climate change;

•Our ability to generate internal growth;

•Competition in our business, including our ability to effectively compete for new projects and market share, as well as technological advancements and market developments that could reduce demand for our services;

•The failure of existing or potential legislative actions and initiatives to result in increased demand for our services or budgetary or other constraints that may reduce or eliminate tax incentives or government funding for projects, including renewable energy projects, which may result in project delays or cancellations;

•The unavailability of, or increased prices for, materials, equipment and consumables (such as fuel) used in our and our customers’ businesses, including as a result of inflation; supply chain or production disruptions; governmental regulations on sourcing; the imposition of tariffs, duties, taxes or other assessments; and other changes in U.S. trade relationships with foreign countries;

•Loss of customers with whom we have long-standing or significant relationships;

•The potential that our participation in joint ventures or similar structures exposes us to liability or harm to our reputation as a result of acts or omissions by our partners;

•The inability or refusal of our customers or third-party contractors to pay for services, which could result in our inability to collect our outstanding receivables, failure to recover amounts billed to, or avoidance of certain payments received from, customers in bankruptcy or failure to recover on change orders or contract claims;

•Risks associated with operating in international markets and U.S. territories, including instability of governments, significant currency exchange fluctuations, and compliance with unfamiliar legal and labor systems and cultural practices, the U.S. Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws, and complex U.S. and foreign tax regulations and international treaties;

•Our inability to successfully identify, complete, integrate and realize synergies from acquisitions, including the inability to retain key personnel from acquired businesses;

•The potential adverse impact of acquisitions and investments, including the potential increase in risks already existing in our operations, poor performance or decline in value of acquired businesses or investments and unexpected costs or liabilities that may arise from acquisitions or investments;

•The adverse impact of impairments of goodwill, other intangible assets, receivables, long-lived assets or investments;

•Difficulties arising from our decentralized management structure;

•The impact of the unionized portion of our workforce on our operations;

•An inability to access sufficient funding to finance desired growth and operations, including our ability to access capital markets on favorable terms, as well as fluctuations in the price and trading volume of our common stock, debt covenant compliance, interest rate fluctuations, a downgrade in our credit ratings and other factors affecting our financing and investing activities;

•Our ability to obtain bonds, letters of credit and other project security;

•Risks related to the implementation of new information technology systems;

•New or changed tax laws, treaties or regulations or the inability to realize deferred tax assets; and

•The other risks and uncertainties described elsewhere herein, including in Item 1A. Risk Factors of Part I of our Annual Report on Form 10-K for the year ended December 31, 2022 (2022 Annual Report), and as may be detailed from time to time in our other public filings with the U.S. Securities and Exchange Commission (SEC).

All of our forward-looking statements, whether written or oral, are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this report. Although forward-looking statements reflect our good faith beliefs at the time they are made, reliance should not be placed on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance or achievements to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements. In addition, we do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this report or otherwise.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

QUANTA SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share information)

(Unaudited)


	September 30, 2023		December 31, 2022
ASSETS
Current Assets:
Cash and cash equivalents	$	305,355	$	428,505
Accounts receivable, net	4,332,499		3,674,525
Contract assets	1,584,623		1,080,206
Inventories	163,879		103,265
Prepaid expenses and other current assets	349,011		249,569

Total current assets	6,735,367		5,536,070
Property and equipment, net	2,290,327		2,030,464
Operating lease right-of-use assets	249,592		229,691
Other assets, net	650,586		622,736
Other intangible assets, net	1,362,078		1,458,631
Goodwill	3,900,499		3,586,745

Total assets	$	15,188,449	$	13,464,337
LIABILITIES AND EQUITY
Current Liabilities:
Current maturities of long-term debt	$	44,570	$	37,495
Current portion of operating lease liabilities	77,648		74,052
Accounts payable and accrued expenses	2,969,093		2,153,129
Contract liabilities	1,100,928		1,141,518

Total current liabilities	4,192,239		3,406,194
Long-term debt, net of current maturities	3,937,348		3,692,432
Operating lease liabilities, net of current portion	188,137		171,512
Deferred income taxes	264,378		227,861
Insurance and other non-current liabilities	610,496		567,519

Total liabilities	9,192,598		8,065,518
Commitments and Contingencies
Equity:
Common stock, $0.00001 par value, 600,000,000 shares authorized, 173,670,350 and 170,638,525 shares issued, and 145,268,038 and 142,930,598 shares outstanding	2		2
Additional paid-in capital	2,944,208		2,718,988
Retained earnings	4,660,570		4,163,212
Accumulated other comprehensive loss	(317,655)		(310,677)
Treasury stock, 28,402,312 and 27,707,927 common shares	(1,299,814)		(1,188,061)
Total stockholders’ equity	5,987,311		5,383,464
Non-controlling interests	8,540		15,355
Total equity	5,995,851		5,398,819
Total liabilities and equity	$	15,188,449	$	13,464,337

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,
	2023		2022		2023		2022
Revenues	$	5,620,822	$	4,459,757	$	15,098,258	$	12,657,285
Cost of services	4,773,498		3,770,927		12,953,640		10,795,694
Gross profit	847,324		688,830		2,144,618		1,861,591
Equity in earnings of integral unconsolidated affiliates	11,707		10,633		30,697		44,350
Selling, general and administrative expenses	(386,538)		(347,449)		(1,155,261)		(995,581)
Amortization of intangible assets	(71,361)		(67,147)		(213,789)		(290,843)
Asset impairment charges	—		—		—		(2,800)
Change in fair value of contingent consideration liabilities	(803)		1,924		(803)		(4,054)
Operating income	400,329		286,791		805,462		612,663
Interest and other financing expenses	(47,531)		(33,566)		(137,413)		(86,933)
Interest income	1,993		436		4,957		727
Other (expense) income, net	(3,744)		(24,455)		7,541		(68,255)
Income before income taxes	351,047		229,206		680,547		458,202
Provision for income taxes	77,522		72,890		143,468		120,698


Net income	273,525		156,316		537,079		337,504
Less: Net income attributable to non-controlling interests	689		360		3,298		8,887
Net income attributable to common stock	$	272,836	$	155,956	$	533,781	$	328,617

Earnings per share attributable to common stock:
Basic	$	1.88	$	1.09	$	3.68	$	2.29
Diluted	$	1.83	$	1.06	$	3.59	$	2.22

Shares used in computing earnings per share:
Weighted average basic shares outstanding	145,455		143,353		145,118		143,581
Weighted average diluted shares outstanding	148,792		147,678		148,749		148,096

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,
	2023		2022		2023		2022
Net income	$	273,525	$	156,316	$	537,079	$	337,504
Other comprehensive income (loss), net of taxes:
Foreign currency translation adjustment gain (loss)	(31,995)		(79,841)		(7,769)		(97,400)
Other income (loss)	—		(27)		791		(88)
Other comprehensive income (loss), net of taxes	(31,995)		(79,868)		(6,978)		(97,488)
Comprehensive income	241,530		76,448		530,101		240,016
Less: Comprehensive income attributable to non-controlling interests	689		360		3,298		8,887
Comprehensive income attributable to common stock	$	240,841	$	76,088	$	526,803	$	231,129

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,
		2023		2022
Cash Flows from Operating Activities:
Net income		$	537,079	$	337,504
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation		239,746		218,420
Amortization of intangible assets		213,789		290,843

Equity in earnings of unconsolidated affiliates, net of distributions		24,579		(28,732)
Loss from mark-to-market adjustment on investment		—		76,509
Deferred income tax expense		14,302		39,610
Non-cash stock-based compensation		94,658		77,730
Other non-cash adjustments, net		(10,620)		(343)
Changes in assets and liabilities, net of non-cash transactions:
Accounts and notes receivable		(666,786)		(316,253)
Contract assets		(508,457)		(369,958)
Prepaid expenses and other current assets		(104,956)		(73,899)
Accounts payable and accrued expenses and other non-current liabilities		776,496		287,890
Contract liabilities		(38,764)		27,278
Other assets and liabilities, net		1,348		(19,416)
Net cash provided by operating activities		572,414		547,183
Cash Flows from Investing Activities:
Capital expenditures		(325,397)		(337,469)
Proceeds from sale of and insurance settlements related to property and equipment		47,983		43,603
Cash paid for acquisitions, net of cash, cash equivalents and restricted cash acquired		(472,643)		(177,766)

Investments in unconsolidated affiliates and other		(6,505)		(20,622)
Proceeds from the sale or settlement of certain investments		42,277		16,905
Other, net		(8,039)		(397)
Net cash used in investing activities		(722,324)		(475,746)
Cash Flows from Financing Activities:
Borrowings under credit facility and commercial paper program		14,339,958		5,412,107
Payments under credit facility and commercial paper program		(14,136,313)		(5,239,330)


Payments related to tax withholding for share-based compensation		(113,409)		(78,639)
Payments of dividends		(36,059)		(30,998)
Repurchase of common stock		—		(115,115)
Other, net		(23,126)		(31,747)
Net cash provided by (used in) financing activities		31,051		(83,722)






Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash		(4,466)		(1,264)

Net decrease in cash, cash equivalents and restricted cash		(123,325)		(13,549)
Cash, cash equivalents and restricted cash, beginning of period		433,214		231,887
Cash, cash equivalents and restricted cash, end of period		$	309,889	$	218,338

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

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, 2021	142,633,934	$	2	$	2,615,410	$	3,714,843	$	(237,689)	$	(980,265)	$	5,112,301	$	4,620	$	5,116,921
Other comprehensive income	—	—		—		—		13,275		—		13,275		—		13,275
Stock-based compensation activity	1,216,468	—		21,830		—		—		(73,643)		(51,813)		—		(51,813)
Common stock repurchases	(84,798)	—		—		—		—		(10,426)		(10,426)		—		(10,426)
Dividends declared ($0.07 per share)	—	—		—		(10,459)		—		—		(10,459)		—		(10,459)
Distributions to non-controlling interests	—	—		—		—		—		—		—		(538)		(538)
Net income	—	—		—		84,641		—		—		84,641		387		85,028
Balance, March 31, 2022	143,765,604	$	2	$	2,637,240	$	3,789,025	$	(224,414)	$	(1,064,334)	$	5,137,519	$	4,469	$	5,141,988
Other comprehensive loss	—	—		—		—		(30,895)		—		(30,895)		—		(30,895)
Stock-based compensation activity	46,105	—		28,046		—		—		(504)		27,542		—		27,542
Common stock repurchases	(731,381)	—		—		—		—		(84,884)		(84,884)		—		(84,884)
Dividends declared ($0.07 per share)	—	—		—		(10,283)		—		—		(10,283)		—		(10,283)
Distributions to non-controlling interests	—	—		—		—		—		—		—		(80)		(80)
Other	—	—		—		—		—		—		—		227		227
Net income	—	—		—		88,020		—		—		88,020		8,140		96,160
Balance, June 30, 2022	143,080,328	$	2	$	2,665,286	$	3,866,762	$	(255,309)	$	(1,149,722)	$	5,127,019	$	12,756	$	5,139,775
Other comprehensive loss	—	—		—		—		(79,868)		—		(79,868)		—		(79,868)

Stock-based compensation activity	41,278	—		26,624		—		—		(2,323)		24,301		—		24,301
Common stock repurchases	(158,499)	—		—		—		—		(21,033)		(21,033)		—		(21,033)
Dividends declared ($0.07 per share)	—	—		—		(10,322)		—		—		(10,322)		—		(10,322)
Distributions to non-controlling interests	—	—		—		—		—		—		—		(7,601)		(7,601)

Net income	—	—		—		155,956		—		—		155,956		360		156,316
Balance, September 30, 2022	142,963,107	$	2	$	2,691,910	$	4,012,396	$	(335,177)	$	(1,173,078)	$	5,196,053	$	5,515	$	5,201,568

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	12
4.	Segment Information	16
5.	Acquisitions	17
6.	Investments in Affiliates and Other Entities	21
7.	Per Share Information	22
8.	Debt Obligations	22
9.	Leases	24
10.	Income Taxes	25
11.	Equity	26
12.	Stock-Based Compensation	27
13.	Employee Benefit Plans	28
14.	Commitments and Contingencies	28
15.	Detail of Certain Accounts	33
16.	Supplemental Cash Flow Information	34

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, communications, pipeline and energy industries in the United States, Canada, Australia and select other international markets.

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, 2022. 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 operations and comprehensive income for the interim periods are not necessarily indicative of the results for the entire fiscal year. The results of Quanta have historically been subject to significant seasonal fluctuations.

2. NEW ACCOUNTING PRONOUNCEMENTS:

Recently Adopted Guidance

In October 2021, the Financial Accounting Standards Board (FASB) issued an update that requires recognition and measurement of contract assets and contract liabilities acquired in a business combination in accordance with FASB ASC 606 (Revenue from Contracts with Customers). At the acquisition date, an acquirer should account for the related contract revenue in accordance with FASB ASC 606. This update is effective for interim and annual periods beginning after December 15, 2022, with amendments generally applied prospectively. Quanta adopted this update effective January 1, 2023, and it did not have a material impact on Quanta’s consolidated financial statements.

New Accounting Pronouncement Not Yet Adopted

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. Early adoption is permitted. 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 will adopt this update by January 1, 2024, and it is not expected to have a material impact on Quanta’s consolidated financial statements.

3. REVENUE RECOGNITION AND RELATED BALANCE SHEET ACCOUNTS:

Contracts

Certain of 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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

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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,
	2023				2022				2023				2022
By contract type:
Fixed price contracts	$	2,718,921	48.4	%	$	1,875,855	42.1	%	6,950,697		46.0	%	$	5,370,646	42.4	%
Unit-price contracts	1,803,764		32.1		1,597,640		35.8		4,998,787		33.1		$	4,407,147	34.8
Cost-plus contracts	1,098,137		19.5		986,262		22.1		3,148,774		20.9		2,879,492		22.8
Total revenues	$	5,620,822	100.0	%	$	4,459,757	100.0	%	$	15,098,258	100.0	%	$	12,657,285	100.0	%


	Three Months Ended September 30,								Nine Months Ended September 30,
	2023				2022				2023				2022
By primary geographic location:
United States	$	4,816,825	85.8	%	$	3,760,019	84.3	%	$	12,766,092	84.6	%	$	10,751,325	84.9	%
Canada	574,536		10.2		512,803		11.5		1,640,154		10.9		1,503,174		11.9
Australia	148,499		2.6		130,851		2.9		459,901		3.0		275,421		2.2
Others	80,962		1.4		56,084		1.3		232,111		1.5		127,365		1.0
Total revenues	$	5,620,822	100.0	%	$	4,459,757	100.0	%	$	15,098,258	100.0	%	$	12,657,285	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 completion generally measured as the percentage of costs incurred to total estimated costs for such performance obligation. Approximately 58.3% and 52.4% of Quanta’s revenues recognized during the three months ended September 30, 2023 and 2022 were associated with this revenue recognition method, and 58.3% and 51.5% of Quanta’s revenues recognized during the nine months ended September 30, 2023 and 2022 were associated with this revenue recognition method.

Performance Obligations

As of September 30, 2023 and December 31, 2022, the aggregate transaction price allocated to unsatisfied or partially satisfied performance obligations was approximately $13.56 billion and $8.80 billion, with 70.4% and 72.1% 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 non-fixed price contracts expected to be completed within one year.

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. 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 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.

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(Unaudited)

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, 2023 and December 31, 2022, Quanta had recognized revenues of $799.5 million and $549.3 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, 2023 and of the increase relative to December 31, 2022 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 the nine months ended September 30, 2023, additional costs arose from residual impacts associated with the aforementioned items, work resequencing and acceleration, access delays, and logistical challenges along with other issues outside of Quanta’s control.

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% and 1.7% during the three months ended September 30, 2023 and 2022 as a result of changes in estimates associated with performance obligations on fixed price contracts partially satisfied prior to June 30, 2023 and 2022. Revenues were positively impacted by 0.3% and 0.9% during the nine months ended September 30, 2023 and 2022 as a result of changes in estimates associated with performance obligations on fixed price contracts partially satisfied prior to December 31, 2022 and 2021.

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. There were no material changes in estimates on any individual project.

Operating results for the three months ended September 30, 2022 were favorably impacted by $70.6 million, or 10.2%, of gross profit as a result of aggregate changes in contract estimates related to projects that were in progress as of June 30, 2022. The overall favorable impact resulted from net positive changes in estimates across a large number of projects, primarily as a result of favorable performance and successful mitigation of risks and contingencies as the projects progressed to completion.

Operating results for the nine months ended September 30, 2022 were favorably impacted by $108.1 million, or 5.8% of gross profit as a result of aggregate changes in contract estimates related to projects that were in progress at December 31, 2021. The overall favorable impact resulted from net positive changes in estimates across a large number of projects, primarily as a result of favorable performance and successful mitigation of risks and contingencies as the projects progressed to completion. Partially offsetting the aggregate net favorable impact to gross profit was a negative change in estimate of $21.8 million for the nine months ended September 30, 2022, associated with the large renewable transmission project in Canada discussed above.

Contract Assets and Liabilities

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


	September 30, 2023		December 31, 2022
Contract assets	$	1,584,623	$	1,080,206
Contract liabilities	$	1,100,928	$	1,141,518

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 increase in contract assets from December 31, 2022 to September 30, 2023 was primarily due to additional unapproved change

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

orders and claims related to the large renewable transmission project in Canada described above, as well as progress on other projects on which the timing of billings lagged behind the completion of work.

During the nine months ended September 30, 2023, Quanta recognized revenue of approximately $991.3 million related to contract liabilities outstanding as of the end of the 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 in historical write-off experience and applying historical loss ratios to pools of financial assets with similar risk characteristics.

Quanta’s historical loss ratio and its determination of its 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, its 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 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, which currently include 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,
	2023		2022		2023		2022
Balance at beginning of period	$	13,908	$	49,707	$	15,644	$	49,749
Increase in provision for credit losses	181		2,343		5,428		2,048
Write-offs charged against the allowance net of recoveries of amounts previously written off	(146)		(33,030)		(7,129)		(32,777)
Balance at end of period	$	13,943	$	19,020	$	13,943	$	19,020

Provision for credit losses is included in “Selling, general and administrative expenses” in the consolidated statements of operations. During the three months ended September 30, 2022, Quanta determined that $31.7 million of receivables that were fully reserved in previous periods were uncollectible, and as such wrote-off the receivables against their related allowances. The receivables were from Limetree Bay Refining, LLC (Limetree Refining), which filed for bankruptcy in July 2021, and an affiliate, customers within Quanta’s Underground Utility and Infrastructure Solutions segment. Provisions for such receivables were recognized during 2021.

Quanta is subject to concentrations of credit risk related primarily to its receivable position with customers, which includes amounts related to billed and unbilled accounts receivable and contract assets for services Quanta has performed for customers. Quanta grants credit under normal payment terms, generally without collateral. One customer within the Renewable Energy Infrastructure Solutions segment associated with the large renewable transmission project in Canada described above represented 14% and 13% of Quanta’s consolidated receivable position as of September 30, 2023 and December 31, 2022. No customer represented 10% or more of Quanta’s consolidated revenues for the three or nine months ended September 30, 2023 or 2022.

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

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, 2023 and December 31, 2022 were $544.8 million and $397.6 million, which are included in “Accounts receivable.” Retainage balances with expected settlement dates beyond one year were $173.4 million and $136.2 million as of September 30, 2023 and December 31, 2022 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, 2023 and December 31, 2022, unbilled receivables included in “Accounts receivable” were $957.9 million and $823.9 million. The increase in unbilled receivables was primarily due to significant increases in work and certain delays in billing related to certain large customers. 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 $57.1 million and $59.6 million as of September 30, 2023 and December 31, 2022.

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 services for the electric power 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.

The following table sets forth segment revenues and segment operating income (loss) and operating margins for the three and nine months ended September 30, 2023 and 2022. Operating margin is calculated by dividing operating income (loss) by

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

revenues. The following table shows dollars in thousands:


	Three Months Ended September 30,								Nine Months Ended September 30,
	2023				2022				2023				2022
Revenues:
Electric Power	$	2,489,547	44.3	%	$	2,282,332	51.2	%	$	7,240,838	48.0	%	$	6,620,459	52.3	%
Renewable Energy	1,746,636		31.1		978,779		21.9		4,144,304		27.4		2,778,647		22.0
Underground and Infrastructure	1,384,639		24.6		1,198,646		26.9		3,713,116		24.6		3,258,179		25.7
Consolidated revenues	$	5,620,822	100.0	%	$	4,459,757	100.0	%	$	15,098,258	100.0	%	$	12,657,285	100.0	%
Operating income (loss):
Electric Power(1)	$	296,176	11.9	%	$	255,457	11.2	%	$	755,342	10.4	%	$	691,026	10.4	%
Renewable Energy	151,389		8.7	%	88,885		9.1	%	297,532		7.2	%	240,514		8.7	%
Underground and Infrastructure	123,764		8.9	%	101,351		8.5	%	292,544		7.9	%	239,469		7.3	%
Corporate and Non-Allocated Costs (2)	(171,000)		(3.0)	%	(158,902)		(3.6)	%	(539,956)		(3.6)	%	(558,346)		(4.4)	%
Consolidated operating income	$	400,329	7.1	%	$	286,791	6.4	%	$	805,462	5.3	%	$	612,663	4.8	%

(1) Includes equity in earnings of integral unconsolidated affiliates of $11.7 million and $10.6 million for the three months ended September 30, 2023 and 2022 and $30.7 million and $44.4 million for the nine months ended September 30, 2023 and 2022, primarily related to Quanta’s equity interest in LUMA Energy, LLC (LUMA).

(2) Includes amortization expense of $71.4 million and $67.1 million and non-cash stock-based compensation of $32.5 million and $26.6 million for the three months ended September 30, 2023 and 2022. Includes amortization expense of $213.8 million and $290.8 million and non-cash stock-based compensation of $94.6 million and $77.7 million for the nine months ended September 30, 2023 and 2022.

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, 2023 and 2022. The table shows dollars in thousands:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Depreciation:
Electric Power	$	38,228	$	35,896	$	121,670	$	109,456
Renewable Energy	15,812		11,214		37,351		29,625
Underground and Infrastructure	23,940		20,311		63,575		61,916
Corporate and Non-Allocated Costs	3,508		6,086		17,150		17,423
Consolidated depreciation	$	81,488	$	73,507	$	239,746	$	218,420

5. ACQUISITIONS:

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

During the nine months ended September 30, 2023, Quanta acquired four 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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

services (primarily included in the Electric Power and Renewable Energy segments); and a business specializing in power studies, maintenance testing and commissioning primarily for utility and commercial customers (included in the Electric Power segment). The consideration for these transactions consisted of approximately $484.1 million paid or payable in cash (subject to certain adjustments) and 1,062,408 shares of Quanta common stock, which had a fair value of $131.5 million as of the dates of the acquisitions.

In July 2022, Quanta acquired a business located in the United States that provides construction contracting services to utilities, specializing in trenching and underground pipeline and electrical conduit installation, primarily included in the Electric Power segment.

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 related to businesses acquired in 2023, and further adjustments to the purchase price allocations may occur, with possible updates primarily related to tax estimates and the finalization of closing working capital adjustments. The aggregate consideration paid or payable for businesses acquired between September 30, 2022 and September 30, 2023 was allocated to acquired assets and assumed liabilities, which resulted in an allocation of $189.8 million to net tangible assets, $115.5 million to identifiable intangible assets and $317.2 million 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, 2023 for acquisitions completed in the nine months ended September 30, 2023 (in thousands):


	Nine Months Ended
	September 30, 2023
Consideration:
Cash paid or payable	$	484,103
Value of Quanta common stock issued	131,521
Contingent consideration	6,850
Fair value of total consideration transferred or estimated to be transferred	$	622,474

Cash and cash equivalents	$	14,924
Accounts receivable	51,289
Contract assets	195
Inventories	56,960
Prepaid expenses and other current assets	4,417
Property and equipment	147,012
Operating lease assets	16,264
Other assets	4,553
Identifiable intangible assets	115,515

Accounts payable and accrued liabilities	(64,923)
Contract liabilities	(3,071)
Operating lease liabilities, current	(3,080)
Deferred tax liabilities, net	(20,556)
Operating lease liabilities, non-current	(13,790)
Other long-term liabilities	(398)

Total identifiable net assets	305,311
Goodwill	317,163
Fair value of net assets acquired	$	622,474

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

As of September 30, 2023, approximately $261.3 million of goodwill is expected to be deductible for income tax purposes related to acquisitions completed in the nine months ended September 30, 2023.

The following table summarizes the estimated fair values of identifiable intangible assets for the acquisitions completed in the nine months ended September 30, 2023 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, 2023
	Estimated Fair Value		Weighted Average Amortization Period in Years
Customer relationships	$	83,180	4.6
Backlog	11,564		0.8
Trade names	13,797		15.0
Non-compete agreements	6,974		5.0

Total intangible assets subject to amortization	$	115,515	5.5

The significant estimates used by management in determining the fair values of customer relationship intangible assets include future revenues, 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, 2023 as of the respective acquisition dates:

Nine Months Ended

September 30, 2023

Range

Weighted Average

Discount rates

15% to 19%

17%

Customer attrition rates

10% to 30%

18%

Contingent Consideration

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


	September 30, 2023		December 31, 2022
Accounts payable and accrued expenses	$	—	$	5,000
Insurance and other non-current liabilities	151,156		143,517
Total contingent consideration liabilities	$	151,156	$	148,517

The fair value determinations of contingent consideration liabilities incorporate significant inputs not observable in the market, including revenue forecasts, operating margins, discount rates and the probability of achieving certain performance targets during designated post-acquisition periods. The final amount of certain contingent consideration payments could also be subject to Quanta management discretion. Accordingly, the level of inputs used for these fair value measurements is Level 3.

Quanta’s outstanding contingent consideration liabilities are subject to a maximum payment amount, and the aggregate maximum payment amount of these liabilities totaled $336.6 million as of September 30, 2023. During the nine months ended September 30, 2023 and 2022, Quanta settled certain contingent consideration liabilities with cash payments of $5.0 million and $1.6 million.

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

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, 2023 and the year ended December 31, 2022, 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,
	2023		2022		2023		2022
Revenues	$	5,624,274	$	4,585,187	$	15,112,066