Greetings, and welcome to the Quanta Services Second Quarter 2022 Earnings Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kip Rupp, Vice President, Investor Relations. Thank you, Kip. You may begin.

Thank you, and welcome, everyone, to the Quanta Services Second Quarter 2022 Earnings Conference Call. This morning, we issued a press release announcing our second quarter 2022 results which can be found in the Investor Relations section of our website at quantaservices.com, along with a summary of our 2022 outlook and commentary that we will discuss this morning. Additionally, we will use a slide presentation this morning to accompany our prepared remarks, which is viewable through the call's webcast and is also available on the Investor Relations section of the Quanta Services website. Please remember that information reported on this call speaks only as of today, August 4, 2022. And therefore, you're advised that any time-sensitive information may no longer be accurate as of any replay of this call. This call will include forward-looking statements intended to qualify under the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These include all statements reflecting Quanta's expectations, intentions, assumptions or beliefs about future events or performance that do not solely relate to historical or current facts. Forward-looking statements involve certain risks, uncertainties and assumptions that are difficult to predict or beyond Quanta's control, and actual results may differ materially from those expressed or implied. For additional information concerning some of these risks, uncertainties and assumptions, please refer to the cautionary language included in today's press release and the presentation. Along with the company's periodic reports and other documents filed with the Securities and Exchange Commission, which are available on Quanta's or the SEC's website. You should not place undue reliance on forward-looking statements, and Quanta does not undertake any obligation to update such statements and disclaims any written or oral statements made by any third party regarding the subject matter of this call. Please also note that we will present certain historical and forecasted non-GAAP financial measures in today's call, including adjusted EPS, backlog, EBITDA and free cash flow. Reconciliations of these measures to their most directly comparable GAAP financial measures are included in our earnings release. If you would like to be notified when Quanta publishes news releases and other information, please sign up for e-mail alerts through the Investor Relations section of quantaservices.com. We also encourage investors and others interested in our company to follow Quanta IR and Quanta Services on the social media channels listed on our website. And lastly, 1 administrative note regarding today's call. Quanta's Chief Financial Officer, Jayshree Desai, is recovering well from a planned but slightly accelerated medical procedure last week and will not be participating in today's conference call. Derrick Jensen, Quanta's Executive Vice President of Business Operations and former CFO, will review and comment on the company's second quarter financial performance and full year guidance in here instead. With that, I would now like to turn the call over to Mr. Duke Austin, Quanta's President and CEO. Duke?

Thanks, Kip. Good morning, everyone, and welcome to the Quanta Services Second Quarter 2022 Earnings Conference Call. On the call today, I will provide operational and strategic commentary, and we'll then turn it over to Derrick Jensen, who as Kip said, is making a current call appearance, filling in for Jayshree today. He will provide a review of our second quarter results and full year 2022 financial expectations. Following Derrick's comments, we welcome your questions. Our second quarter results continue our solid start to the year. with record quarterly revenues exceeding $4 billion for the first time in our history as well as record quarterly adjusted EBITDA and adjusted earnings per share. We also believe momentum is building for a continued profitable growth next year, and we continue to see opportunities for multiyear expansion across our service lines, driven by our collaborative solutions-based approach. The growth of programmatic spending with existing and new customers and favorable megatrends. We are negotiating several large master service agreement or MSA renewals with utilities. As significant levels of limited notices to proceed for projects across our segments, and we are actively pursuing numerous larger transmission projects. As a result, we believe there is opportunity to achieve record backlog levels again in the coming quarters. Our Electric Power Infrastructure Solutions segment performed well overall during the quarter, despite some supply chain challenges causing delays and resource utilization and efficiencies. The impact on our business has been relatively limited, and these challenges are not causing meaningful delays in our overall utility capital spending. We also believe these are shorter-term conditions that have resulted in mostly short-term delays in the timing of certain electric transmission work. and we continue to collaborate and partner with our customers to manage through these dynamics and work on potential mitigation solutions,…

Thanks, Duke, and good morning, everyone. I'll start by saying that we've received so many phone calls and e-mails for an encore performance, and I'm doing 1 more quarter call, but after this call on dropping the mic. As Kip commented, see is doing fine and those who is not joining the call today, she has been overseeing the quarter and will be signed in the certification for our filing. She will be delivering next quarter's call notes as I wonder a round back stage. With that, I'll turn to our earnings release where today, we announced record second quarter revenues of $4.2 billion. Net income attributable to common stock was $88 million or $0.59 per diluted share and adjusted diluted earnings per share, a non-GAAP measure, was a record for the second quarter at $1.54. Our electric power revenues were $2.2 billion, a quarterly record and a 21% increase when compared to the second quarter of 2021. This increase was primarily due to growth in spending by our utility customers on grid modernization and hardening resulting in increased demand for our electric power services as well as approximately $80 million in revenues attributable to acquired businesses. Electric segment operating income margins in 2Q '22 were 10.6% compared to 11.4% in 2Q '21. The margin reduction is largely attributable to normal project variability. However, margins were pressured somewhat by inefficiencies attributable to supply chain disruptions impacting certain operations and elevated consumables costs. Despite those headwinds, we were able to deliver double-digit margins in line with our expectations for the quarter. Also included within our Electric segment are our communications operations, which delivered improved sequential and quarter-over-quarter margins, putting us on pace for upper single-digit to double-digit margins for the year. Renewable Energy Infrastructure segment revenues for 2Q '22 were $924…

[Operator Instructions]. Our first question comes from Jamie Cook with Credit Suisse.

Congrats on a nice quarter. I guess my first question, you -- the market has talked about and you sort of alluded to, to supply chain labor inflationary pressures. Can you talk to where that is most pronounced sort of how you're managing through that? And to what degree do you see that as a risk of project delays and/or to your guidance? And then my second question, Derrick, I guess I'll ask you because this will be the last time I get to ask you a question on a public call. Was pleasantly surprised by the underground margins in the quarter. So can you talk to how much of that was just the industrial business is picking up? Or is there anything structural going on there that you feel more confident that margins were closer to getting your margins to your targeted range?

Yes. Thank you, Jamie. I think when we look at supply chain, as we're building crew counts and things of that nature, there is some small impacts on mono material throughout the utility system. And it does create some inefficiencies with our crews especially when we're building. So those impacts, coupled with some inflationary pressures on consumables, it does pressure a bit. I do not think that's something that given the guidance, we took all that into account if it does levelize or if it does get better throughout the quarter by the end of the year, certainly, it will move upwards. It's utilization and the buildup for future years and working with the client in a collaborative manner, which is what the company has done in the past and we'll continue to do on a go-forward basis, all for really the outer years. And I think it's really important for us to make sure that we're building these crews while working with the client on these modern material issues throughout the system. So we don't really see the impact. It's not the solar we talked extensively about that last quarter and work through that and like I probably would. So really nothing there to speak of. So all in all, really good from our standpoint, macro markets are strong, not seeing large supply chain issues. And the ones that we are, I think it's opportunities for us to work with the client. And I'll just say a little bit on the margin, and I'll give it to Derrick. We've said all along that we view the company as a portfolio and that we get to double-digit EBITDA -- adjusted EBITDA margins and through the portfolio. And I think it's prevalent. It resonates. We continue to see the portfolio rise throughout. And it's really whether it's industrial, Canada or whatever, the whole portfolio continues to move forward and upward. But I'll let Derrick comment.

Yes, I would say that unique to the quarter, there wasn't anything individual, I'd call out is really kind of across the segment performance. Industrial led the way record revenues for them. solid margins. They're looking to be into a pre-COVID type of performance levels for the rest of this year. So -- but the entire segment is seeing improvements, better utilizations, good execution, utilizing some of those resources to it and the electric power side as well as a reminder. And then it's also towards our path to being able to execute on that group in that upper single-digit profile, and we're seeing that through this year and go as well as we go forward.

Our next question is from Steven Fisher with UBS.

Just looking at the decline in the backlog here a little bit, just focusing on renewables. To what extent was that decline a function of some of the tariff dynamics in the quarter and the uncertainties that, that brought with it? Because if that's the case, that's understandable. But I guess what is your expectation -- or is it your expectation that, that backlog in renewables will start growing again as soon as the third quarter? I know you've got some limited notice to proceed, but should we expect that backlog to start growing again in the near term?

Yes. Thanks, Steve. The renewable backlog when we look at it and the amount of inbound calls, it's probably one of the most robust times that we've had at the company from that standpoint. I believe the backlog will build substantially throughout the year in the renewable segment. Timing, the LNTPs are really more so when you say limited notice to proceed, we did not put those in backlog. And as that becomes contract, then we'll put them in. I just -- the amount of LNTPs to contract that time has elongated a bit through the cycle, just primarily around the solar impact as well as some of the land portfolio moving up. I just -- we see that growing throughout the year, timing of which it could be the fourth quarter, it could be the third quarter, maybe early next year. But again, we reiterated where we think the segment, where we thought flatting would be and continue to be more confident about where that renewable segment is going today than I've ever been.

I'll add to everything Duke said, I'll add that we've always talked about how backlog can be lumpy for Quanta as a whole. I'll emphasize that in previous calls, we've commented that it could be more so in this renewable segment, right? It is an aggregate of project type dynamics that manage a little bit less base business component to it. So you might see a little bit more ups and downs at any given point in time, and that doesn't necessarily indicate the trend. We continue to feel quite confident in the multiyear market.

Okay. Just a follow-up. Can you give us a sense of the size of that EV charging MSA? And I think you have -- you mentioned a bunch of other MSAs you have in the works. How many of those are completely new types of arrangements versus renewables -- renewals of what you already have?

Yes, Steve, it's meaningful. I would say it's more about for us, when it's going to get started, how it's looking on a go-forward basis. We're having the same discussions with multiple clients, multiple programs. But it's also the ancillary effect on the utility system, and I'll continue to say that is more important of what happens to the system. And really utility spend against EV charging and what's necessary to make that work on a consistent basis day to day, it's substantial and substantially more than the EV charging network itself. But we are seeing those projects come to fruition here.

Our next question is from Chad Dillard with Bernstein.

So I want to go back to your comment about electric power margins and bringing it down this quarter. So can you just break out the impact from headcount, the customer-driven material delays and I think you mentioned consumables? And then just like is there any opportunity to recover this? And just like how broad-based are these issues in your portfolio?

I don't think the issue is systemic. I don't think it's elongated. We're building crews. Normally, the company runs right through it. We did increase headcount around 1,000 in the quarter. it does create some pressure, the material -- mono-material delays with that with some inflationary pressure on consumables altogether. Look, it does impact still a little bit. I do not think it's we're going to work with our clients long term. We're a company that really collaborates. So I don't see us getting any recovery on it. We'll work through it. It will be a long term for us over the next 10 years. The gains today for the next -- the future. So in my mind, a little bit of margin pressure, not bad. We'll work through it. I'm not also when we look outward against what we've seen in the past, if you think about storm, our guidance is like $100-plus million and last year, we did $400 million in the last 2 quarters. So we're not baking any of that in. It will depend on utilization and we get prudent guidance, and I believe there's upside potential to the backside given where we sit, if we get supply chain coming through or any kind of major storm event.

Got it. That's helpful. And then it's almost been a year since you've acquired Blattner announced the acquisition. So just curious to get some update on progress on what you're seeing in terms of sell-through from legacy Quanta customers and later? And are you seeing an uptick in regulated utilities to appetite to shift the mix towards renewables?

I think the business itself, we continue to be pleased with what we said. We're making good progress on synergies. We constantly are in contact with our clients about both in solar, not only on utilities or developers, but also our UI segment. All of our customers are really looking towards the carbon-free footprint. And when we think through it, we thought that we could sit at the tip of the sphere on energy transition, we think we're at the tip of the sphere on energy transition with Blattner and certainly believe that every bit today as we did before and we're proving it out every day.

Our next question is from Justin Hauke with Baird.

Derrick, I guess last time we'll talk this way on these calls. But I guess I had a question on the guidance with the upside from the JV contribution from LUMA, I guess it implies the base segment margins are a little bit lower, but I was more interested in kind of where the upside is coming from that. I know there was opportunity for earnouts and some additional project pickup. So I guess I'm wondering if it's from that or is this the base contract expanded and there still is more opportunity from those other items?

Yes, it's really the latter. A lot of it was associated with us basically some carets cost management side of the equation on activities that we're doing. As of yet, we haven't started anything for the new project type dynamics, which would be incremental to the base project. Those things are still yet to come. They're imminent. But right now, the differential this quarter is basically kind of cumulative cost management type dynamics. And looking forward, you can see that we're still forecasting the contribution to be comparable to our previous forecast levels for the third and fourth quarter.

I do think we're seeing some fame funding coming through now on the island. And I do think there'll be opportunities for us in 2023 to actually perform some construction that's outside the contract.

Another plant there is that, that line item has multiple joint ventures, not just another joint venture. So we had a few joint ventures that actually executed quite well during the quarter. So not all of that variance is unique to LUMA. .

Okay. And I guess my second question is just going back to Blattner again. So the revenue contribution for the segment at least from M&A, $490 million, that's kind of comparable to what it was in 1Q. I guess we would have thought there would have been maybe a little bit more tick up. You guys have been pretty upfront about the challenges from the tariffs on the renewables business here in the first half. But I'm just curious with your outlook for that business, are you still thinking $2.5 billion of revenue contribution? Or is that a little bit different this year than maybe what was originally claimed?

No. We reiterated our guidance on the acquisition as well as the segments. So obviously, I mean, I think in my mind, it's every bit as good as what we have said. And I think the longer term, even '23, the build in '23 and beyond is greater than we thought.

Our next question is from Noelle Dilts with Stifel.

So I wanted to dig into the cost side a little bit more just because I think it's been tough from a cost perspective kind of across the industry. You've discussed before that fuel is a relatively small percentage of your total cost, I think, at about 2%. Could you speak to how you've dealt with fuel cost increases in the quarter and the extent to which you've been able to pass them on to customers? And also sort of with labor and equipment and components, have there been -- have you been able to pass that through reasonably well? Or have there been instances where you've had to go back to the customer and get some relief? I'm just kind of curious what the process has been like for some of those challenges in the quarter.

Thanks, Noelle. The costs certainly have increased, but typically, we're able to work through those, do scale through collaborating with the client. We are building crews. And I do think the build is really what's causing most of our issues as well as the inefficiencies of the supply chain. It's not necessarily the fuel or the inflation. We can usually work through those kind of pressures and have -- we work with the client on that. And I do think it's just the culmination of all 3 kind of in a quarter, you see a little bit of pressure. Actually, internally, we're on kind of where we thought we would be from a margin standpoint. If the guide going forward that we've prudent on and I believe in my mind, special the overall segment margin is not where we sit in the first 6 months. Can we operate through that in the latter half? Maybe. We certainly take a prudent approach to guidance. We thought we should at least acknowledge that there is some pressure, but we're not seeing the pressure that -- and we're not going to talk about fuel and crew counts and those things on a daily basis. We can work through those through on the way that we get cost recovery as well as get more efficient as a company in scale.

Okay. And then in the past, we've talked about your -- how to think about labor costs given that your union and you typically have some visibility as it relates to the electric workforce. Any updated thoughts on how we should think about coming labor cost increases and what the conversations with the unions are like and generally, how to think about overall, what that looks like as we're kind of ending this year and heading into '23?

No, I think when you look at the company, that's our core, is across scale labor and our ability to work with unions as well as all of our trade associations, I think, are really important. And the way that we set our apology is the way that we've done our training for the last 6, 7 years, the amount that we put into this in my mind, we're really helping and collaborating with the client and talking through any kind of escalations in the future. We've worked really nicely to collaborate on these things, even the inflationary bill that has some of the language in it. We've worked through all that. So we sit in a really good position there and all, and I think we've got those cover going forward.

Our next question is from Michael Dudas with Vertical Research.

Duke, can you maybe share some thoughts on the opportunities that you're seeing? I'm sure they're quite broad on the high-voltage transmission projects, the larger ones. And given your -- where your base businesses, how selective do you plan on being? What kind of room do you think you have on the EP side for those types of projects? And then even on the pipeline side, there's been quite a bit of news lately from Washington about certain pipelines and certain opportunities and changing some regulatory aspects. You just share your appetite on both sides has it changed much in the last 6, 12 months? Or given the cash flow issues at a you may be seeing out of Canada, how selective you might be given the base business seems to be doing quite well?

No, when we look at the large transmission, certainly, it's a robust environment. We're talking a lot. I do think the states have a lot of say even if it has good visibility and there is a large number of projects that get stated, it's still tough on those big projects. But that said, we are in the middle of quite a few, more so now than in the past. So we are looking at a lot of bigger products. I wouldn't say we're around the edges on the mall, try to collaborate with the client on these and certainly, for us, it's about planning and helping upfront. So we have success in the future. And I think that's our job is to work with the client to be successful on these larger projects. Canada, it's always we've been 5 or 6 projects, takes a little bit to get cash. We always work through those with the client. We worked through 1 successfully in the quarter, we'll work through the next one. The southern one did the remaining this year and the next. But we are executing well. We are known for northern camps. Our people in the field are world-class. And that project, it's remarkable what we've done through COVID. So I'm highly confident where we sit there and then our collectibility there as well as getting our cash flow a little better than it is today. Canada was certainly impacted more so than the Lower 48, when you look at COVID and things of that nature, especially with 12 camps on a job. So look, I think both Canada from the pipe side, even some in the Lower 48, there is some projects moving around. But our base business is robust. Those are all really additive in our thinking to the future versus where we sit, anything there would be additive the way I see it. We're really not going to chase shiny objects. We're really working on our base business. And if the shiny objects happen to come in, it will only increase our guidance going forward.

Our next question is from Adam Thalhimer with Thompson, Davis.

Nice quarter. First question, I wanted to ask about your MSAs. Did those have inflation protection baked into them coming into this year? Or is that something you need to work on as you renegotiate those going forward?

They're all different, but I would say we typically have some escalations, labor escalations for sure, which is typically around 60%, 70% of the project. So normally, that's in there and some of the consumables would be in there, again, feels about 2% of cost. And so it's really the buildup, your training, all the things that are necessary to put new people in the field, which we've done a nice job through the colleges and the pre-apprentices. But that, coupled with some of the inflationary pressures, certainly in the quarter, I would say we just took a prudent approach in the future on guidance. We're really on target the way I see it for the quarter.

I agree. Okay. And then I wanted to ask about the EV charging opportunity. Is the big opportunity for Quanta. Is it actually installing the bay? Or is there a substation and transformer work behind that, that's more meaningful for you guys?

I think it's both. But what I would tell you is it's 100x more meaningful on the back side than it is on the station itself or the bay itself. And the reason is the load is at really at the distribution level, particularly. And so as that happens, to get the low to the distribution level is substantial, both in -- from a generation standpoint through the sub down through into the distribution side of the business. It's like big -- I don't know I'll explain a big pipe going into a little fiat doesn't have any room. So you need bigger pipe all the way through. So in my mind, it's just a lot on the system that needs to be modernized, and we're in the early stages of starting that distribution bill across North America.

Our next question is from Alex Rygiel with B. Riley.

You've been through many different economic cycles. Can you talk to us a little bit about your experiences at the beginning or an inflection point of an economic cycle? And how many we might want to think about sort of the next 12 to 18 months as to how that kind of might impact your core electrical power business?

Yes. Thanks, Alex. Normally, in other cycles, typically, when you're looking at inflationary pressure, natural gas today, $8, it does impact the consumer. And the consumer in my mind, as you start increasing bills, that the regulators certainly look at this. The problem, I think, this time with -- it's not a problem that's what's -- what we're faced with as a country when we're going towards a carbon-free environment, and EV penetration has already left the building. There's no choice in my mind, other than to put capital into these systems in order to enhance and modernize them for those impacts. The only pressure you could do is just stop and I don't believe the country is going to stop the carbon-fee environment at this point. I'm not saying there is load growth now. And when you think about it, in the past, there was no load growth. We're getting 2%, 3%, 5% load growth in places, and that is offsetting some of the cost of capital going into the systems as well. So the ultimate impact of the consumer for the grid build is not showing up. But the fuel cost, I do think natural gas needs to regulate a bit, get down where it should be. And I do think that will help the bill and everything else. So I don't see the real impacts that I would have seen -- we would have seen in the past. But look, we're always cautionary about the inflationary pressures. They're really in place, and we should be prudent about how we think about it, but we're not seeing it show up at all yet.

And then sorry if I missed this, but what is your backlog within the Telecom segment? And what is this backlog telling you about organic growth kind of on a go-forward 12-month basis? Is it accelerating? Can we see double-digit organic growth out of that segment?

Yes, we're about $1 billion in backlog in telecom. We stay about $1 billion in backlog and telecom. We could build it, Alex. It's just something I find the carriers to be more cyclical and more spontaneous than our regulated utilities as well as our developers. And so we'll be cautious about that as we grow the business. We faced that growth on purpose. I do think the margins are upper single digits going to double digits, which is really what we're after. So I'm happy where we sit. We could grow. I feel comfortable that our platform will allow us. The company has really worked hard on the portfolio. You're seeing it show up in the UI margins. I know we've talked a lot about electric, we talked a lot about renewables. But that portfolio, the way that we're displacing G&A and the things that we've done internally and this management team has really bought into 1 single brand, 1 single location. You're seeing the impacts across the board at Quanta as we pick up the adjusted EBITDA.

Our next question comes from Andy Kaplowitz with Citi Group.

Maybe you could give us more color regarding your negotiations with utilities, regarding re-upping MSAs. Are MSAs of the existing customers continuing to increase given the amount of electric power work your customers have? Is there evidence of that moving to more outsourcing? And are you seeing evidence of new MSAs as your customers likely are quite tight with their own labor?

I think when we look at the customer collaborate quite a bit, Nothing's changed there. We continue to have a robust environment, good macro markets sit well in the marketplace and our ability to execute in the field safely, on time, on budget. It makes it an easy conversation and it always has. As long as we continue to execute in the field. And those conversations are pretty easy.

So Doug, maybe can you give us an update on what you're seeing in undergrounding, whether it's the PG&E project or anything else you're working on? Do you see undergrounding becoming a much more meaningful part of your business as you head into 2023?

It not only in the West, you're seeing undergrounding across the Gulf Coast for storm hardening. I do think undergrounding will be a big portion of the West going forward. But it is moving forward, all the capital budgets, if you look back and you see where per mile, what the utilities in the West are anticipating in '23 is substantially different than in '22. Early stages, the West is tough to work and the lot permitting, a lot of environmental planning. I do think our front-end business, we talked about it quite a bit that the engineering, permitting, all the things that we're doing on the front end is really helping us get prepared for those bills and helping us with the client the reduced cost on that. So I like what we said there. I think it is something that you'll see in '23 show up and off in the Gulf Coast.

Our next question is from Sean Eastman with KeyBanc Capital Markets.

I wanted to come back to the comment about wind projects being pulled forward. What does the sort of come back on the wind side? Tell us about the anticipated margin progression in the Renewables segment. Because I thought that -- and correct me if I'm wrong, but a lot of this year-over-year softness in the Blattner business that we're seeing in 2022 from a margin perspective, is that softer win dynamic? So I wanted to check in on that.

I don't know we are seeing any margin issues with Blattner. But that being said, it's down a little bit. I don't think it has anything to do with the Blattner or the platform whether it's on or solar. I think it had everything to do with us taking a prudent approach to it worry through inflationary pressures as well as guidance on not we did that on a go-forward basis to scale, I don't think the mix of work impacts the margins there in the segment. The segment does have large electric transmission as well as solar station interconnect. So those kind of things are in the segment. It's not just Blattner. And I do think as we move forward, certainly, the wind coming in helps and -- but wherever this happy with solar is low. I think when we see it, we thought we would have some delay in '22, we did. But we took that into account early even when we made the acquisition. And we also reiterated a long-term kind of $3.6 billion in '26. I do think that's pulled in. I think you'll see a significant amount of growth there in '23 as well as and beyond.

Yes. And maybe color as well, as we commented that we felt the latter would be able to exit the double-digit EBITDA levels and they continue to execute at those levels.

They do. Okay. Great. I didn't frame that question properly. I just -- I thought it was kind of exciting to see wind coming back in the mix. I guess, really, it's not a margin dynamic. It's more just additive to that stronger visibility around growth for renewables into the out years. And then...

So I'm not saying we can't increase margin on a go-forward basis in the segment. If you -- it's all scale. Look, if it's solar, wind doesn't matter. If you get more scale out of it and cover off G&A, we'll certainly increase the margins there.

Okay. That's really helpful, Duke. And then moving over to the cash flows, just this Canadian transmission project dynamic. Is this more an element of working through the bureaucracy with the client versus some sort of point of contention with the client? Is that a fair comment, Derrick?

This is Duke. I'll deal with them quite a bit. And we went through -- we had 2 large projects, 1 just completed. No one's ever been through COVID in Canada. So it's a justification of cost. against where you're at for one part. And then the way the milestone billing works on the second one, look, we didn't anticipate the delays in winter delays that we have today. And so those milestones, we have to escalate them off, work with the clients get paid earlier. I don't think there's -- we're working through those now. There's no contention and it's just it's really a matter of fact, going through it, justifying it and moving forward. A lot of paper, I would say, from my standpoint, a little more than normal. But look, it's -- we've been through this many times in Canada. We'll get through with good documentation. We know we've taken the same approach, we've taken to every other one there. I'm only confident that we'll work through this in the coming quarters.

I agree.

Our next question is from Neil Mehta with Goldman Sachs.

The first question was around the renewables legislation that's making its way through Congress right now. And I recognize it's an unbelievably dynamic environment to try to process it. But just any early observations of what that can mean for the opportunity set in your business? And clearly, it could be positive for renewable energy infrastructure solutions, but do you see a way it could also tie into the electric power infrastructure solutions as well?

For sure, anything renewable, I'll go backwards on the question, but anything renewable and the legislation affects the grid. No question. And so anything we're talking about impacts the backside of the grid. And so I think, yes, a substantial increase in utility spend either way, I don't think look, the legislation is great. It's all incrementally positive at 780 pages. I don't want to comment on it other than just to say it's positive for us in many ways. And if it does pass, as stated, we're extremely happy.

That makes sense. And I just wanted to follow up on the free cash flow question. I think you provided some clarity around the specific project in Canada. But can you help us bridge between the previous free cash flow guidance on this one? And how much was that specific project versus other items?

That's why Derrick came back, if you want to answer that.

All right. That's why Derrick is never going to do another one of these calls again.

Well, look, I mean, the biggest portion of what drives our cash flow is the working capital demands of the business. We've talked at length about the fact that higher levels of growth put pressure on working capital. At this stage, our organic revenue growth for the year will exceed double digits. And in the past, we've talked about when you see that, you can start to see free cash flow conversion against probably drifting down to like the 30% to 40% range. And I think if you look at the math, you're going to see the running about 35%. The uptick in the revenues for the year, about $400 million, running 10% to 11% trailing 12 months. Working capital is going to get you into about $40 million to $50 million of the uptick in the decrease in free cash flow is associated with the uptick in the revenue guidance. So I think it's all still running across the same formula. Having said that, yes, I think the remaining delta would largely be the individual timing of the project issues we were talking about.

Our next question is from Gus Richard with Northland.

Yes. Thanks for letting us ask a question on Derrick's second final farewell tour. High-power see kind of in limited supply. The largest supplier is in Germany. The OEMs that provide utilities with equipment are not high-volume customers typically don't get favorable allocation I'm seeing lead times as long as 50 weeks for IGBTs, et cetera. And I'm just wondering, my question is the supply chain issues that your customers are seeing, are they getting worse at it getting better? What are your customers saying about this? And is it going to continue to cause disruptions in your business?

Yes, we're seeing some of the spot really transformers, honestly, I think, are the bigger thing, distribution transformers are kind of what I see. A little stuff here or there, but that's what we're focused on, trying to collaborate with the client on those at this point. Some transmission items are -- we've seen some delay in those as well. But look, our workforce is pretty nimble. We can move through these kind of issues and work with the client on those supply chains. The utility industry is very resilient. We're coming out with solutions on a daily basis in a collaborative manner. They collaborate quite a bit. I don't think this is long term. We're working through all these issues. You can double shift factories. You can do a lot of different things to expedite all the modern equipment. So look, there's always a big lag on your big HVDC transformers and turbines and those kind of things. So I do think that is already in baked in the system, and we're working through these minor issues with the client. It is a place where I believe Quanta can collaborate and move forward the business on that end and certainly front side of our business. the planning and the things that we're doing there is helping us be successful to execute in the field.

There are no further questions at this time. I would like to turn the floor back over to management for any closing comments.

Yes. I want to -- first, I want to thank Derrick for stepping in here. It certainly eases the mine to have someone of his caller here at on the management team and shows a lot about the family aspect of the company. Jayshree is doing great, and she's listening to the call, Jayshree. And we know you've done a lot here in the quarter to make this successful. So thank you. And all of them and women in the field that make our job easy and make this call easy for us. as you execute so well, we truly appreciate you and everyone that participated in the call today. Thanks for your interest in Quanta.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.