Greetings and welcome to the Quanta Services Third Quarter 2016 Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instruction] As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to your, Kip Rupp, Vice President, Investor Relations, thank you Rupp. You may begin.

Great. Thank you, and welcome to the Quanta Services conference call to review third quarter 2016 results. Before I turn the call over to management, I have the normal housekeeping details to run through. If you would like to have Quanta news releases and other information emailed to you when they occur, please sign up for email information alerts by going to the Investors and Media section of the Quanta Services website at quantaservices.com. You can also access Quanta's latest earnings release and other investor materials such as press releases, SEC filings, presentations, videos, audio cast conference calls and stock price information with the Quanta Services Investor Relations App, which is available for iPhone, iPad and Android mobile devices for free at Apple's App Store and at Google Play. Additionally, investors and others should note that while we announce material financial information and make other public disclosures of information regarding Quanta through SEC filings, press releases and public conference calls, we may also utilize social media to communicate this information. It is possible that the information we post on social media could be deemed material. Accordingly, we encourage investors, the media and others interested in our company to follow Quanta and review the information we post on the social media channels listed on our Web site in the Investors and Media section. A replay of today's call will be available on Quanta's Web site at quantaservices.com. Please note that in today's call, we will present certain non-GAAP financial measures. In the Investors and Media section of our Web site, we have posted the most directly comparable GAAP financial measures and a reconciliation of the differences between these non-GAAP financial measures and the corresponding GAAP financial measures. Please remember that information reported on this call speaks only as of today, November…

Thanks, Kip. Good morning, everyone, and welcome to the Quanta Services third quarter 2016 earnings conference call. On the call, I will provide an operational and strategic overview before turning it over to Derrick Jensen, Quanta's Chief Financial Officer, who will provide a detailed review of our third quarter results. Following Derrick's comments, we welcome your questions. We are pleased with the solid third quarter results we reported this morning, compared to the third quarter of last year revenues increased approximately 5%, operating income in our end margins improved significantly and diluted earnings per share from continuing operations doubled. We are committed to returning our operating margins to historical levels and our third quarter results demonstrates progress towards that goal and earnings potential of the company. We ended the quarter with record 12 month backlog, I would note that our backlog does not yet include a couple of large projects we have announced, primarily due to their ongoing permitting process. We are confidence that these projects will move forward and will include in the backlog when we get better visibility into mobilization. Electric Power segment revenues grew approximately 3% during the quarter as compared to the same quarter last year. In addition excluding a relatively small loss recognized on the Alaska power plant project in the quarter, our Electric Power segment operating income margins raised 10%. These results were driven sound execution of our base Electric Power business. Of note, we had a nominal contribution from the startup of two larger electric transmission projects we discussed previously on our second quarter earnings call. Regarding the Alaska power plant project, in early October we met the contractual performance guaranties required under the contract and have moved in the final punch list completion phase which is on schedule with the previous expectations.…

Thanks Duke and good morning everyone. Today we announced revenues of $2.04 billion for the third quarter of 2016 compared to $1.94 billion in the prior year third quarter. Net income from continuing operations attributable to common stock was $73.1 million or $0.47 per diluted share. These results compared to net income from continuing operations attributable to come stock of $43.2 million or $0.23 per diluted share in the third quarter 2015. Adjusted diluted earnings per share from continuing operations at presented in today's press release was $0.55 for the third quarter of 2016 as compared to $0.30 for the third quarter of 2015. We did have a few items impacting our results for the quarter. First, as Duke mentioned, we made the $2.3 million contribution to an endowment with same Huston State University. Also, we have a slight true up for cost associated with the power plant project in Alaska that impacted the electric power statement by around $3 million. Lastly, our tax rate is quite a bit higher, partially due to a lower proportion of income before taxes from international jurisdiction which are generally taxed at lower statutory rates, largely driven by delays in our Latin American concession woks pushing more of the low tax income into 2017. Also, as part of filling our 2015 Federal tax return. We had changes in estimate related to amount qualifying for the domestic manufacturing tax deduction. Against, our original estimates, these items added up to approximately $0.05 to $0.06 for the quarter. Turning to our broader results, the increase in consolidated revenues in the third quarter of 2016, as compared to the same quarter of last year was primarily associate with an increased in a number and size the oil and gas projects that moved into full constructing during 3Q '16…

At this we will be conduction a question-and-answer session. [Operator Instruction] Our first question comes from Dan Mannes with Avondale Partners. Please proceed with your question.

First of all, nice quarter, happy to see the margins, particularly in oil and gas segment. I did want to delve in a little deeper there. Would you consider the ramp particularly on large projects some of which started late in the quarter, can you maybe help us out with how those could trend over the next couple of quarters, assuming normal execution and also taking into account maybe the seasonality particularly with Canada?

Yes Dan, in general as we move into the fourth quarter obviously we are on those, we have taken seasonality into consideration with those projects. They are large, the risk profiles are different. So I think we’ve given prudent guidance as we move forward into the fourth quarter. I’ll let Derrick kind of talk through it.

Yes, I agree with everything that Duke said. As it relates to rolling fast the fourth quarter Dan, and think about seasonality, it's too soon for us to really think about how seasonal plays will play in '17. Some of these revenues pushing out of the fourth quarter definitely contributed to first half of '17, which in many ways would appears as though it bodes well for a quarter-over-quarter comparison in that regard. But I don’t know that we have yet made a determination how we think the back half of the year will play out for '17 otherwise, to be able to comment.

Got you, the second thing I want to ask also on the oil and gas segment is, we’re starting to hear some more positive trends particularly as it relates to drilling activity and certain activities in certain area, are you seeing any uplift in terms of the smaller work and gathering work which I know has been under a lot of pressure for much of this year?

Dan I think the micro environment on the gas side underpinning demand of the need for large pipe as you take away from the shale regions in the Marcellus and Utica, the need for mid-stream will come back and you'll see some smaller pipe. They’re all moving different product as well across and in to the Gulf Coast. So yes I think its coming back some. It's not prolific by any means, but the large pipe should overcome and any kind of short fall as you would see in that area and the outlook is good. We continue to bid a lot of work and see a lot of work in that areas, so we're optimistic.

Got it. Thanks for the color guys. Appreciate it.

Our next question is from Noelle Dilts with Stifel. Please proceed with your question.

I wanted to start on the transmission side of the business. Going back to last quarter in know there are few kind stripped out some of the charges and looked at the U.S. market you're margins were quite good. Looks like continued progress there this quarter. So could you speak the trends you're seeing from profitability stand point in the U.S. and Canada. And how you see that attracting through 2017?

The transmission business it looks good, there has been other larger projects or it’s the timing. So we’re always concerned with the timing on the larger projects of our larger transmission business on really both sides of the business. But the electric side we are started -- we did starts some projects. We are on three big projects now. So we are moving forward on some bigger ones. But the underpinnings underlying the base business as we’ll continue to talk about is good, there is demand there, we continue to grow that business we're excited about it as we stated we’re headcounts higher, we’ll continue to invest in our work forced. So we like we see the capital spend of our customers, we’re taking to them daily, so we're able to understand where they're going and you could look at what they say on their earnings calls and we believe the capital spends will increase over the next few years, especially that we can see. So the underlying business will continue to grow with some of the larger projects will come in on top of that. And Canada just a little bit on that. It's more depended on your energy on your oil and where oil pricing is. So it's really difficult for us to try to pin that down on where there larger projects are going. We have continued to get our cost structure in line with what the market is. We do that some nice projects in backlog that we believe will move forward in '17. So we're in pretty good shape for the foreseeable the future in Canada. [Multiple speakers]. Just a color on -- from a marks perspective, you've seen here in the third quarter that if we exclude the power plant, that we're posting a number effectively double-digits margins in the electric power segment. We talked about our ability to be back there. That is partly because of the cost control efforts in Canada, but it’s also because of the strong margins in U.S. The U.S. market as it stands here today for 2016, we are executing at the double-digits margin profile. The pressure for the year is partly coming from MLP obviously, but as well as some of the pressure associated with the Canadian market. But that's where our cost control efforts have predominantly been and as we look forward we see the opportunity working on couple of those larger projects in '17. So a combination of the cost control and those larger projects. We think bode well for Canadian margins. At least two lesson the dilution that’s currently being created by Canada. But the U.S. market is still operating well and we think we are very much focused on returning the Canadian margins to a greater benefit.

Thanks, it was very helpful. So my second question is just kind of broader question on the pipeline base, I think for anyone following the industry is sort of continue to see headwinds about projects just getting pushed, basic nine months from '17 into '18 or '18 into '19. My question for you is, have any of these delays changed how you are thinking about '17, or is it sort of par for the course and maybe we’re just looking at a more extended cycle?

Yes, I think we have talked about it in the past being broader and longer versus any peaks and that still holds true. We watched all these larger projects and our GAAP business and to make sure we give good guidance on when we think they are going to go. We see some pushes, we build that into kind of our system when we look at things. Some of it you can't tell when it's coming and it just happens. So -- but for the most part I think we have that under control and we understand when these projects are going to go. It won't allow us to give guidance on a three month interval, but we should be able to get some qualitative comments. It says the micro demand on large diameter pipe is there, there will be some permitting delays that we’ll build into any kind of guidance we give along with seasonality. But I do think the next few years on long diameter pipe especially look really good for us.

Okay thank you.

Our next question comes from Jamie Cook with Credit Suisse. Please proceed with your question.

I guess the couple questions Derrick, how dilutive was Canada to earnings this year? And then just a follow up on that, you talked about within oil and gas the one project being differed -- is getting pushed into 2017, can you quantify that? So that’s my nitpicky question. And my real question is Derrick or Duke, whoever wants to answer this, are either -- I understand you don’t want to give specific margin guidance for 2017. But are there any headwinds that we don’t -- we can make our own assumptions on the market, are there any headwinds that you know of today that would depress margins in '17. Because I am -- I mean I’m just thinking we have Alaska that’s gone, we have Canada which should be less of a headwind, you’ve restructured, I just don’t understand why margins shouldn’t be materially higher when we are thinking about '17 versus '16? You had the endowment, you are investing in technology, there just seems to be a whole bunch of negatives that go away in '16 that would imply a much higher EPS number for '17?

Jamie, on the first part of diluted Canada, I don’t know that I could comment to exactly what the operating income type levels of Canada, but I can tell you that overall Canada, for at least electric power, you are talking about is low single digital margins in comparison. The international revenues right now run about 15% of our consolidated revenues. That includes some Latin American, some Australia work, but from Canada that gives you, the state is probably running in that 10% to 15% range. So you can kind of do some backwards math looking at the relative dilution. Oil and gas pushed to '17 quantifications, I would tell you that the largest portion of our revenue adjustment for the year is associated with those individual oil and gas projects. And then for margin guidance for '17, I can color first and just simply say that I think your assessment is not unfair, mainly you've been if we just look at the elimination of MLP year-over-year. We don’t know that we're going to see any sizable moves from a cost structure perspective, from G&A perspective. So the rest is going to come down largely due to execution in the timing of the project, but I'll let Duke comment more on that.

Jamie, qualitatively I would say, everything said was accurate. We do see good markets in '17. I think we can -- if it comes down to execution, which I am confidently we can execute. So I like to market, I like where we are going. I think the company is positioned well, with boots on the ground. We can build linear construction very-very well. So I am confident in the company and I am confident in the markets in 2017. The thing that gives me pause would only be Canadian economy and oil pricing there concerns me a bit and then the permeating. So we'll be watching some of that as we move forward. But that's only on the large projects and I'll continue to say our best business continues to go. The right direction and we see that go into right direction in 2017.

Okay, thanks and we'll get back to you.

Our next question comes from the Tahira Afzal with KeyBanc Capital Markets. Please proceed with your question.

Duke, if you all look at your 12 month backlog, its showing sort of a 5% type of increase. But if you look the new work you could potentially book, does that seems to imply that directionally your revenue growth could be 5% plus, even in the high single-digits potentially?

Yes I don’t want to get into exactly where it’s coming from a percentage. What I do know is that, the base business is growing on both segments. What gives us pause on saying there's growth on top is the start of the larger projects. And so it gives -- we do, we are building our backlog, we continue to build our backlog. It’s just the starts and when we put this larger projects in backlog. So I’m saying that the larger projects complicates that whole scenario and we'll continue to be conservative about how we approach that.

Got it, okay, I get that. And Duke, as really a follow-up to that, when we look at some of these pipeline projects and how they're playing out or sizing up, it does seem that your normal seasonality will be somewhat different as we go into 2017. So with civil trade or the unmentionable project really trickling into the first half, would you say that first half is comparatively going to be strong as we see it right now?

Yes. It is. It should there is no reason why the first half won't be stronger than the first half of this year based on the work we have on going. The concern is the second half and what that looks like. So we'll be trying to provide better guidance there in February on that.

Thanks very much Derrick.

Our next question from the Andrew Kaplowitz with Citigroup. Please proceed with your question.

It’s Alan Fleming on for Andy this morning. Duke, can you provide an update on pricing in your major businesses? Have you seen any lessening in price competition within electric transmission as some of the large project activity has started to rebound here? Has there been any change in behavior from customers on the main line pipe side as capacity seems like it's gotten a little bit tighter here, especially in the second half of the year?

On the first part of your question from our standpoint, we’re pretty disciplined about how we did all the time. Our customers -- we continue to put the same profile, we look at risk its how we price, and so our risk profile has not changed. As we get busier, our utilization rates and things of that nature go up and it allows our margins to enhance. So as we get busier, as the larger projects are there, we get better utilization. As we talked about in the past, we had people that were on the side lines that are now going to work on some these larger projects, or we weren't as efficient on the smaller ones. And so you’ll start to see -- that’s why you are starting to see some of the margin enhancement as well as our base business continues to growth. So that will allow some utilization there. And our Canadian operations, we have right sized of some that and we’ll move forward there. It's really about Canada for us on the margins to make sure that we get that in line and some other projects there I would say are out of our pricing discipline and we’ll allow the others to win those and we’ll continue to stay discipline on how we did work. And on the GAAP side, we continue to bid the same way, it's no different.

Okay. And to follow up on Canada, I think in your prepared remarks you said you are starting to see some signs of a recovery. Can you give us a little more color on what you are seeing that gives you a little bit more optimism there?

I think our backlog, we have a large project in our backlog as everyone is aware of and that will go into construction. As we stand today in 2017. So it allows us to be better utilized there and gives us some flexibility on what we do in Canada. I would say the overall market is contingent on oil pricing in many ways and so as oil fluctuates, so does Canada. So we watched that as we move forward and we’ll continue to adjust with the markets that we see.

Okay. And Derrick, a question for you on cash flow. It seems like a lot of the weakness this quarter was timing-related in working capital, and obviously this delayed receivable. But how soon do you think we can see a return to more normalized cash conversion levels for you guys?

One of the thing that -- the primary thing I don’t have -- give guidance on historically has been cash flow because of very much of those timing thing. I’ll tell you that here in the fourth quarter even to the extent that I get better collections on historic kind of unbilled balances, I think I am going to have a level of production on that project such that I’m going to be probably flat this quarter versus yearend. So right now I think I am going to ahead and say that and it wouldn’t surprise me if my ending debt balance for the year is fairly comparable to my current debt balance. And I think you will see some of that maybe roll more into the first part of next year.

Okay. Thank you guys, good luck.

Our next question is from Chad Dillard with Deutsche Bank. Please proceed with your question.

In transmission, given that you are entering the plus 10% margin territory, and you are in the early stages of ramping up large transmission. I'm just trying to think through the upside scenario for margins over the next year or so. I look back to 2012 time frame and I see about 12% margins. How much of an analog with that time frame to where we are now? And has anything in your business or end-market changed which would either limit you to around 12% or allow you to suppress that previous peak?

Yes, again the market will be in the 10% to 12% range when things are good, as we talk about in the past to double-digits range. So what I would I say is we're taking incremental steps and it's not something -- it’s something that will be incremental to us sequentially as we move along into next year? The market is not -- we’re seeing where we are winning work, were bidding work, we’re also not winning work. So it's hard to say exactly where the margins will go. We’ll continue to try to get in our historical range.

Relative to 2012. One other thing to point out is that, you may recall that was our largest storm work year really in Quanta’s history and we did over $250 million worth of storm work, so that very much contributed to the margins begin over 12%. And at the same time in that timeframe we were working on a significant number of larger projects. So although we do have the opportunity to have larger projects contributing as we go forward. I don’t think we are seeing it at the level of that. So there are a couple of dynamics that kept us very much on the upper side of that range. That is we look forward we’d probably say that would be a little aggressive to be thinking that it would be that high in the near term.

That's helpful. And pivoting over to the pipeline side, can you speak to what you are seeing on distribution? What are your customers telling you about planning for 2017, and then how should we think about that?

The distribution business is a good business. It's a steady business we see the replacement with FENSA and some the regulation that you see, that’s a long turn replacement program across the country, it’s broad based. I think you'll continue to see that over the next 10 years to 15 years and you'll continue to see us grow in that business.

Great. Thank you very much.

Our next question comes from Andrew Wittmann with Robert W. Baird. Please proceed with your question.

I wanted to ask on the pipeline segment, and try to get some context around the opportunities that are out there by asking you if you can give us a sense of the dollar amount of projects that you believe you've won but have been unable to announce. These projects that are held up by permitting or other factors, and what the duration of those that you can best estimate the duration of time that's going to take to get those released?

Yes I think from our stand point, the larger projects, there is many of amount there. It's about which ones go and they give any sort of guidance on that. Is very difficult. What I would say is we can see out fairly long here in the macro piece of it is there -- the underpinning demand is there from a power side. So it's a robust environment, robust bidding environment. It’s the timing, the permitting and things like that. That's not our expertise and we can't get guidance on that. What we can say is we do see the company in a good position to win work and execute work and in the next few years.

Okay. An addendum to that last question, then. Can you give us some thoughts about -- have you been seeing more mainline projects coming your way over the last 18 months or so? Or is the body of work that you're looking at potentially doing, is it the same stuff that's been contemplated for many years? In other words, has the oil price declines, has that affected the amount of new work that is coming your way in terms of the opportunity set?

If you look at the pipeline business, it's much cheaper to move product through pipe than it is rail and if you look at what was railed in the past it becomes uneconomical. So you starting to see more people put pipelines on the drawing board for where rail lines may have been in the past. So I think the overall economics of the large pipeline in moving product is there, it continues to be a robust bidding environment and a multiyear bidding environment. So we are having contacts with our customers negotiating, looking at where we’re with them and we like the environment.

Our next question comes from Matt Duncan with Stephens. Please proceed with your question.

First question I've got is back on the oil and gas segment for a little bit. Trying to think through the project timing as we look out into next year, certainly not looking for guidance for the year, but really more the flow of what you see in backlog. So you've had some stuff that's pushed into the first half. Sounds like you are going to have a pretty good first half. Atlantic Coast isn't supposed to start until later in the year, so it sounds like there's the potential for a little bit of an abnormal flow to the year with an air pocket in the third quarter, which would normally be the high-water mark for the year. Should we be thinking that's the flow of the year unless you pick up a project in between Sabal Trail and other big stuff you're working on and when Atlantic Coast goes?

Yes, again there is a multitude of projects we were looking at. We have talked about Atlantic Coast, it’s one of them. We don’t necessarily -- we have our own timing in a way that we think about where I would say the second half is -- we are not started on it yet, so it will take till February that kind of figure that out when we give guidance and it's too early to say what the third quarter would look like there. Again, I see the same thing you see when you looking at it from your view point. So we will try to be transparent when we give guidance there in February, it's just too early today.

Yes, that helps. Then I want to come back to thinking about margins. So you've laid out targets of 10% to 11% for electrical and 9% to 12% for oil and gas. Electrical, you're now hitting the low end of that with Canada as a drag. And Fort Mac West is going to start up presumably relatively early next year. Is there any reason, going back to what Jamie was asking earlier, is there any reason why you can't get into the 10% to 11% range in electrical next year? And then with oil and gas, the large-diameter stuff is the best margin work that you do. I understand that there's probably drags from really low profit levels on more of the gathering work you're doing. But, Derrick, if you can help us think through the moving pieces of all these segments, and especially in electrical, I'm having a hard time understanding how you don't get into the 10% to 11% range.

Yes, so as it relates to this quarter, and again it’s a good power plant, you saw margins that were in the 10% range. But it's important to remember that that’s also our highest margin quarter typically from the seasonality perspective. And so when you model out how we think the fourth quarter is going to play, I think you going to model out you are going to see margin dropping below 10% in the electric power segment because of that seasonality. We think the seasonality will definitely be impacting the quarters of 2017. For the last few years you have seen a lot less of that seasonal dynamic because of the contribution of Canada. But as we stand here today, you see less that contribution of Canada both form volume perspective as well because the fact of the overall performance of Canada is contributing at a lower margin of level. So although it’s too soon to comment as to exactly how guidance will play out. I think those are important factors to think about. When you think about our ability to maintain double-digits margins in every quarter '17. I think seasonal impacts will exist and so, that will be putting some level of pressure on our ability be at that double-digits throughout the year. Relative to oil and gas, it is a big factor as to win the individual project starting stop in the individual quarters. Thinking about the second quarter commentary that we provided on the fourth quarter of this year. We talked about potential for the ability for the margin to see an uptick. As we stand here today, we are not seeing that because of the timing in those projects, some of those projects pushing out of the fourth quarter. So any those individuals stocks are stops a project and very much influence the mix of the work in the quarter and therefore for the year and that's the biggest portion of what drives our -- the level of margin being up in that double-digits range for oil and gas at the stage. Higher levels at given times in given quarters for the large-diameter pipe can definitely give us the ability to be in there, but as Duke’s commentary, he talked about seemed to be a comment as to how the back half of the year will play out. To be up a really feel how -- the ability to be a double-digits margins right now.

I want to be come back to what Derrick said on the gas side, the mix of work matters a lot. As our base work, the distribution and all the underlying businesses within that, that the seasonality does matter there. So you should be cognizant of that when you're looking at guidance.

Yes, very helpful guys. Thank you.

Our next question comes from John Rogers with D.A. Davidson. Please proceed with your question.

Just a couple of things. First of all, in terms of the Atlantic Coast Pipeline, getting an award before projects have permits seems somewhat unusual to what we've seen in the past. Is that something that we are going to see over the next couple of years, as people try to lock up capacity in this market? And have you got other projects out there where you're signed up, but just can't announce yet?

Yes John I mean I think in generally you could see that happen quite often, and it has happened quite often and does happen quite often. So the FERC permit is one piece of it. Traditionally the gas permit has been a process with FERC that’s been fairly easy. It is not today, so we’ll look at how we put things in backlog and talk about it to the investment community. And yes we are looking at large projects on a broad spectrum both in Canada, Australia, and in U.S. and always have on the front end of this project. The environment is as good as I’ve said, the undertaking demand there, there is a need for natural gas, all across the lower 48, Canada just from the power plant side so the coal to gas switching happens you start to see the LDC use more natural gas. We were bullish on the pipe business for the foreseeable future here.

Okay. And then as a follow-up, are you prepared to give us any thoughts or -- relative to telecom business, what you are thinking there?

What I would say about the telecom business is, as we’ve stated in the past that we plan on getting into the business. It's a linear construction, we like the business, we see a lot of demand there and I’ll leave with that.

Our next question comes from Alex Rygiel with FBR. Please proceed with your question.

Duke, can you comment on how a change in leadership in DC in week could affect the pace of permitting? If so, is that a catalyst in 2017 or later?

Yes Alex, I don’t want to say it can’t get any worst, because it always probably could. So what I would say is that, the environment is pretty tough today. The industry has always figured out a way to adapt on any kind of administration. So as the administrations go and come, it does change. It could be a better, it could be a worst. But the underpinning demand, the need for natural gas, the need for the infrastructure is great and I think under either administration you’re going to see infrastructure get built.

Could you spend a minute talking a little bit more about Australia? Is that a marketplace you are emphasizing more? Is it a marketplace that has good margin profile at this time? Or are you de-emphasize that?

No, we like Australia. Again we look at that a long term growth for Quanta. We’ll continue to grow our platform there. We actually made an electric acquisition, a smaller one within the quarter to grow our platform. So yes, it's suppressed a bit, but I like our operations there. We are doing well and this market is especially -- and I think you will see us grow that market out. And we’ve stated in the past, if it's not $1 billion, in $100 million of operating profit, we will exit that area. So I mean we are very optimistic about Australia, we like it.

Thank you very much.

There are no further questions. At this time I would like to turn the call back to Duke Austin for closing comments.

I would like to thank you all for participating in the third quarter 2016 conference call. We appreciate your questions and your ongoing interest in Quanta Services. Thank you. This concludes our call.

This concludes today's conference. Thank you for your participation. You may disconnect your lines at this time. And have a great day.