Greetings and welcome to the Quanta Services First Quarter 2024 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. You may begin.

Thank you and welcome, everyone, to the Quanta Services First Quarter 2024 Earnings Conference Call. This morning, we issued a press release announcing our first quarter 2024 results, which can be found in the Investor Relations section of our website at quantaservices.com. As highlighted in our earnings release this morning, we've recently updated our earnings call format and supplemental materials. Shortly after the release of our financial results this morning, we posted our first quarter 2024 operational and financial commentary and our 2024 outlook expectation summary on Quanta's Investor Relations website. While management will make brief introductory remarks during this morning's call, the operational and financial commentary is intended to largely replace management's prepared remarks, allowing additional time for questions from the institutional investment community. Additionally, we no longer have a slide presentation to accompany this call as the information that has historically been included in the presentation can now be found in our operational and financial commentary. Please remember that information reported on this call speaks only as of today, May 2, 2024. 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, including all statements reflecting expectations, intentions, assumptions or beliefs about future events or performance or that do not solely relate to historical or current facts. You should not place undue reliance on these statements as they involve certain risks, uncertainties and assumptions that are difficult to predict or beyond Quanta's control, and actual results may differ materially from those expressed or implied. We will also present certain historical and forecasted non-GAAP financial measures. Reconciliations of these financial measures to their most directly comparable GAAP financial measures are included in our earnings release and operational and financial commentary. Please refer to these documents for additional information regarding our forward-looking statements and non-GAAP financial measures. Lastly, 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. With that, I'd like to now turn the call over to Mr. Duke Austin, Quanta's President and CEO. Duke?

Thanks, Kip. Good morning, everyone, and welcome to Quanta Services First Quarter 2024 Earnings Conference Call. This morning, we reported our first quarter 2024 results, which included double-digit growth in revenue, adjusted EBITDA, adjusted earnings per share and strong cash flow, demonstrating an overall good start to the year. Total backlog at quarter end was $29.9 billion, which we believe reflects the value of our collaborative client relationships and evidences the momentum we see for 2024. Utilities across the United States are experiencing and forecasting meaningful increases in power demand for the first time in many years driven by the adoption of new technologies and related infrastructure, including artificial intelligence and data centers as well as federal and state policies designed to accelerate the energy transition and policies intended to strategically reinforce domestic manufacturing and supply chain resources. With the complexities of the power grid and the significant upgrades and enhancements required to facilitate load growth, our collaborative solution-based approach is valued by our clients more than ever. We continue to look forward to the realization of our multiyear strategic initiatives and the goals we expect to achieve in this and the coming years. We are positioning Quanta for decades of expected necessary infrastructure investment and believe our service line diversity creates platforms for growth that expand our total addressable market. Our portfolio approach and focus on craft skilled labor is strategic -- a strategic advantage that we believe provides us the ability to manage risk and shift resources across service lines and geographies, which is increasingly important as the energy transition accelerates. We believe our diversity and portfolio approach has also improved our cash flow profile and positions us well to allocate resources to the opportunities we find most economically attractive and to achieve operating efficiencies and consistent financial results. I will now turn the call over to Jayshree Desai, Quanta's CFO, to provide a few remarks about our results and 2024 guidance. And then we will take your questions. Thanks. Jayshree?

Thanks, Duke, and good morning, everyone. This morning, we reported first quarter revenues of $5 billion, net income attributable to common stock of $118.4 million or $0.79 per diluted share and adjusted diluted earnings per share of $1.41. Adjusted EBITDA was $387.3 million or 7.7% of revenue. Of note, we generated healthy cash flows in the first quarter with cash flow from operations of $238 million and free cash flow of $181.2 million, both setting first quarter records. This earnings and cash flow performance allowed us to end the first quarter with ample liquidity and a balance sheet that supports both our organic growth expectations and the opportunistic deployment of capital to generate incremental returns for our stockholders. To that end, year-to-date, we've acquired 4 companies for aggregate consideration of approximately $500 million. This morning, we also provided an update to our full year 2024 financial expectations, which calls for another year of profitable growth with record revenues and opportunity for double-digit growth in adjusted EBITDA, adjusted earnings per share and free cash flow. We believe our expectation demonstrates the strength of our portfolio approach to the business, our commitment to our long-term strategy, favorable end-market trends and our competitive position in the marketplace. Additional details and commentary about our 2024 financial guidance can be found in our operational and financial commentary and outlook expectation summary, both of which are posted on our IR website. With that, we are happy to answer your questions. Operator?

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

Congrats on the quarter. I guess just 2 questions, one shorter term, one longer term. Jayshree, could you just talk a little bit about the renewable margins? I think they fell a little short relative to expectations. And how -- any color, I guess, behind that? And then I guess the second question would be for Duke, just a longer-term question. Obviously, lots of talk throughout the past couple of months on AI, data centers, et cetera. If you could just talk to just because you're so close with -- and how that impacts, I guess, grid load growth. If you could just talk to what you're hearing from your customers in terms of how they're going to approach this, how you think about CapEx trends accelerating. Just any color around how Quanta would be positioned there?

Thanks, Jamie. Welcome back. I'll take the margin question. I think from our standpoint, when we look at the segment -- renewables segment, we had some series of projects there that -- a series of work, call it, 5% of the portfolio on the solar/wind side. They just didn't perform, didn't execute to where we should have executed that and what we expect from ourselves and what our customers expect. So yes -- look, it's a small piece. We grew the business, I can make tons of excuses, I am not. We own it. We didn't execute like we should. And the rest of the portfolio really is -- the majority -- the vast majority of the jobs, of the projects, of everything we're doing there is exceeding our expectations. We expect that to continue. Growth creates some inefficiencies, and we've showed up. So we got to fix it. And it's not something that -- it's later stage in the projects. And so I'm not concerned. It's just part of it in the first quarter, seasonality and everything else, a little bit of noise shows up. But all in all, I think the segment is performing nicely. What we see in the future looks great. The backlog is certainly accelerating in the renewables segment. So we're excited about what we see going forward. We are executing for how many people we put in the field and what we've added to this segment. I feel real good about it. We do invest in growth. It has some inefficiencies as you move forward and showed up. So I think all in all, we like what we see. As far as data centers I think the macro demand of electricity is obviously moving up. At any time you have demand, it's great for…

Our next question comes from the line of Andy Kaplowitz with Citi.

Duke or Jayshree, can you give us a little more color into electric power? What happened in the quarter going forward? Revenue was, as you know, down just a little bit, but margin was quite a bit higher than you forecast and I think quite good for a seasonally weak Q1. You didn't change your expectation for the segment for the year, but maybe you could talk about your confidence that distribution-focused revenue does improve in the second half. And does the higher margin Q1 signal potential for margin upside in the segment?

Sure. So a little bit, I think this is something we've talked about the portfolio and combining electric power and renewables together, and so I want to go through that a little bit. If you look at the electric business, which is transmission, substation and distribution and you look across the segments, so the segments are delineated today, which is causing some -- when you print the numbers, it doesn't look like what the business is from those 3 things. So an electric work type, it's up over 5% in the quarter. That's because pieces of the business is over in renewable segment, and pieces of it are in the electric segment. But the business itself together is up 5.3%. So it's just the way the segments look. You've got to combine them. It's got to look like a portfolio. The delineations are causing some number print. It doesn't look like with where the business is at. So I wanted to explain work type, which is electric, substation, distribution and transmission are up 5.3% in the quarter. And our backlog is almost flat. Yes, I think the backlog of the business and what we see is timing, there's MSA timing. It's early. It's the first quarter. We fully expect to be at record levels. The bigger projects, the renewal prices are complicated. It takes a long time to negotiate. We're not going to press negotiations against a 90-day print. It just doesn't make sense for us. So we'll be patient. We're not concerned. We see an outstanding -- we were just talking about load growth. Any time you got more load, you got more business. It's simple when you think about it. So more demand, more business. We see more demand than we've ever seen. And so I just -- I feel good about it. As far as margins, the electric print, we operated great, even a little down. So we've always said that you can operate in double digits. It doesn't matter what the revenue is. That's what we're really trying to drive is the EPS and those margins. So in that -- in the segment, I thought we had a nice -- performed well in this segment. And liked where we're going. I think there is opportunity. We -- it's early. We're not going to change guidance in 90 days. So it looks good. We have lots of opportunity. I would say we have more upside than we do downside on a go-forward basis in the segment.

Very helpful. And maybe just to follow up on your commentary, last quarter, you mentioned sort of the better visibility around large transmission projects. You just talked about MSAs in answering my question. So just the conviction level in sort of the backlog increase again, I know it doesn't happen in the quarters over the year. But is it more base business you think that grows or larger project business that grows in '24? Is it both?

I think the back half of '24, your distribution business starts to become increasingly -- I would say, you'd start booking more work, you start to see your MSAs, your crude counts move up again. There is some shift in the transmission versus distribution in certain areas, the Southeast and places where -- what's happening is you're seeing the data centers show up, you're seeing the demand show up on the transmission side. And you've already got your capital out if your utility customers -- so you have to build the transmission and you're going to pull capital off the distribution systems a bit and move it into the transmission systems. It's fine that was -- that's why we're diversified. That's why the company sits where it sits. We're able to be nimble and move. It's not an issue, but it does show up. And your MSA work on the distribution side is softer than normal. And that's -- we talked about that in the fourth quarter where we're working 40, 50 hours versus 70. I think that's still the case. I do believe as you move into the later part of the year, you're going to start seeing us work more -- I'm not inclined to say more 60-, 70-hour weeks. And our head count is still almost 54,000, which is up 4,000 year-over-year. I feel highly confident that as EV starts to penetrate to the West, that's moving up already. And the EV kind of moves across, there's -- we've got to build infrastructure. And certainly, we see it showing up in certain areas.

Our next question comes from the line of Neil Mehta with Goldman Sachs.

I wanted to take a few moments to talk about some of the M&A activity in the quarter, both as an active quarter from bolt-on acquisitions and also some divestitures. So talk to us a little bit about what excites you about what you added to your portfolio. And how does this all fit into the strategy?

We acquired Sherman+Reilly, which was blocks and pullers. If you're in the business, you're in the craft, you grew up with Sherman+Reilly as part of the ecosystem, it's been in business since 1927. It's something that I think from our standpoint, our people in the field, they deserve the product that's safe, the training that they have, what they do with the pullers and tensioners and the things that they have, the R&Ds they put into it, coupled with what we're trying to accomplish. It was compelling for us. There's a lot of wire talk about being pulled. There's new conductors out. There's lots of technology that we believe we can bring to market here. And lastly, concerned with the capacity. We're always concerned with supply chain capacity. It was -- it's something that I believe is very specialized, it needs to be safe. We need to protect our people a bit, make sure it's in good hands and a lot of our clients use the pullers as well and our internal resources. It's certainly something that we value and really proud to have that piece of business. As far as the divestiture, the divestiture is basically an oil and gas legacy business we've had since 2015 or before, and certainly something that we've looked at for a long time to say this is not something that we're going to invest in. It's better off in other people's hands. It's international. The company has made the decision not to go into international -- not to go international at this point. So it's something that need to be divested and someone it will do great. The management team is fantastic. The new owners will be happy with the business.

And then the follow-up is just on the SunZia project. Obviously, it's a very important project for the company. Just give us the latest temperature or latest progress report there. And anything we should be watching out for, whether it's some of the litigation stuff or just in terms of managing through execution challenges that inevitably happen with big projects?

No, SunZia is doing great. We're doing well. I think the team had a great plan. We put it together. All I see is good things coming out of that. We're progressing nicely. No issues on [ permanent ]. I don't think there would be, but there's no issues there. Did the long line. It could be noisy here or there, but I've not seen anything on that but really good production. Safety is great. Working hand in hand with the client. So I continue to like that project. We're early in opportunities to release contingencies as we go through it. So I really believe that it's going to be a nice one, actually, wish I was running it. So it's a [ long one ].

And our next question comes from the line of Brian Brophy with Stifel.

Just continuing the conversation on the low growth discussion around data centers. We've seen some pretty eye-popping estimates in terms of what that may mean. You alluded to some of that earlier in your comments. Just curious how you're thinking about the industry's capacity to meet some of these demands and what that might mean ultimately for your pricing and margins?

Yes. Again, it's more utilization and returns for us when you start looking at pricing. When we think about it, we need to execute. We need to execute double-digit platforms that we've talked about over time. And I think it's more of that than it is some kind of pricing pressure. But I do think what we see it's so unique and tech really, really wants it now, they got money, they want to pay for it. It's just regulatory, the -- how do you set rates that are fair for everyone else. And it's starting to get -- you can see, it's starting to get figured out across the country of how to accommodate loads that we're seeing. But it's not going to happen overnight. If you want renewable resources as well, it's another complication when you start to talk about it. We were already fuel switching. Now we're fuel switching and doubling loads in 90 days, it seems like. But in general, I would say that load is real. It's coming and people are paying for it. It creates demand across renewables and our electric segment. We need a robust grid, the cheapest one in generation is transmission, it always will be. So I like where we sit in. We can help. We -- certainly, we talk about a solution-based approach. If there's ever been a solution-based approach that it's going to work, it will be within this because it's complicated on how to get renewables to load sources. And you're seeing power plants, nuclear power plants get bought really with the whole power plant going towards data centers. So I never thought we would see that in my lifetime, and now we're seeing it show up. And I just -- it's creating some unique circumstances across the country. And it's not only in Virginia. It's across every single customer we have that 3 megs, 4 megs show up. And it's tomorrow. They want tomorrow and they want it in a renewable state. So I like where we sit. We can certainly help. We can certainly sit on both sides of that. And I like what we can accomplish. Just got to plan more, plan better both on distribution and on transmission and collaborate with the client. The better we serve the customer, the better the company will do.

That's great. And I guess one other one. I think the DOE announced some permitting reform to some grid capacity transmission lines, streamlining some of the environmental reviews here a few days ago. Curious how impactful you think that might be?

It's incrementally helpful, especially out west. But still state policies, state regulations, PUCs, commissions, we've got to get around the fact that load is significantly higher. And we've got an investment grid. It's -- we're late already, we're behind, I believe. And so we need to catch up and we need to make sure that this transition doesn't -- it's like sitting on a track and the train come at you. You've got to invest in infrastructure. The more modern your infrastructure is, rates go down on an NPV basis when you look on a go-forward. So investment now pays off for the next generation. So you just have to invest in it. And I think that's the case today, and we need to keep going.

Our next question comes from the line of Marc Bianchi with TD Cowen.

The first one I wanted to ask was on -- related to this load growth outlook with the data center stuff that everybody has been talking about. What role do you see for gas-fired generation? And how is your business exposed to that, if perhaps some of that occurs behind the meter at the customer site?

I mean I do think gas generation is going to play a role in that and to some degree here in this transition. They still want renewables. Data centers want renewables. You're going to have to balance the load. Values aren't coming fast enough -- so you're going to have to balance a little of natural gas. The problem I see is a lot of gas-fired is coming into play. If you talk about 1 gig, 2 gigs, 3 gigs, 4 gigs of gas-fired generation, you're still off 96 gigs. So you can't build enough generation -- enough renewable generation for what we see coming. So I do believe that you need to balance the load and it will help. Batteries are coming along. But I still -- if you try to build a piece of pipe in this country to feed the natural gas systems, therein lies the problem. I hear it -- I mean I see it, I see 10 12 gas-fired generation plants being proposed. I still don't know how we're going to get the piece of pipe to it to feed them.

Yes, yes. Sorry, Duke, go ahead.

That's it.

Okay. The other question I had was on the renewable margin progression. So if I look at where -- for the second quarter is discussed to be maybe just below 8%, and then you're going to be double digits in the back half. Can you talk about what's driving the conviction in that improvement? And then also, I think in the past, you talked about some contingency release that would come later on in the project time line. I'm curious where you are with that in the back half of this year?

Yes. Thanks for the question. Yes, we are seeing that progression. We do believe that as these projects progress across some various risks and contingencies, we'll be able to release some of that in the back half. You got to -- the segment is more than just solar/wind. There's a lot of transmission substation work. All of that is going to see a big acceleration, we believe, in the back half. And so that will fall in the margins as better cost absorption, and contingency releases can be obtained.

And I do think the conviction is history. And the history of both companies, both segments, we've operated in double digits, we're well below that. Growth is pressing a bit. We went through the jobs. Most of -- when we talk about what we had -- some degradation of margins, the degradation, it's new people and new roles, and so some of that shows up. And we've got to do a better job making sure that we educate and train our field leadership at times. And so that said, we went through the projects. We feel good we're 50, 60 type -- renewable-type jobs that are out there today and they're bread-and-butter. So for us, we're looking at it, we're looking at backlog. We see a nice runway, decade runway here. So I really feel comfortable that we've invested in the right spots and that years intact, in fact, with opportunities still in it. And yes, we're not pleased with the quarter by any measures. And I can promise you the leadership in the field is not pleased. So we expect a lot out of ourselves. Our customers expect a lot out of us. And even in the good times, we're running it pretty hard. So we've made the necessary changes to make sure that not only that we perform at the double-digit-type level but also that we don't let it drag on or we don't -- it doesn't catch us by surprise or anything like that. We see it. And we saw this early. And we made some adjustments. We won't be able to operate [ contingencies ] on a few projects. And we're talking about 5% out of the whole thing and probably like, I don't know, I think it was like $15 million or something like that as maybe within the operations. So -- and have opportunities to do -- operate through at a very, very high level on the rest of them. So I feel really good about it. I feel good about the year and next year and the next and on and on.

Our next question comes from the line of Justin Hauke with Baird.

So that -- the renewables margin progression is what I was going to ask about, too, and I think we've covered some of the thematic questions here. So I had a couple of numeric ones. I guess, first, just on the M&A, given that there's a lot of moving pieces here, both new additions and divestitures, can you give us some context of what the net kind of revenue contribution from that is for the year in terms of your guidance? And then also is the $500 million that you talked about, is that inclusive of the proceeds from the divestitures you announced?

Yes. Justin, so I would say the revenue -- inorganic revenue contribution from the deals we did in the second half of last year as well as the announcements this year contributes around $500 million to $600 million. I'd tell you the 2 recent acquisitions, the revenue contribution there pretty much is offset by the divestiture of the oil and gas business. So we're still around $500 million to $600 million and EPS contribution around $0.15 to $0.20.

Okay. Great. So that's not changed in net versus what you had before. Okay. And I guess the second question, again, sorry, it's a numeric one, but we've covered some of the other grounds. Just on the other income line, it was $25 million seemed a little high. What was that?

Well, that is, we had the sale of an investment in a pipeline, the gain on that. So which we did adjust out of EBITDA and adjusted EPS. So that's the biggest factor in that $25 million. We also had some gains on our deferred comp, but that gets offset in SG&A. So the real impact is around that gain around the pipeline investment, which we backed out in adjusted EPS and EBITDA.

Our next question comes from the line of Gus Richard with Northland Capital.

When I think about the data centers, typically, chip companies run their road map until they hit wall. Typically, the scale of the infrastructure or a power constraint in the chip. And AI is about to have a huge shift from training, which is very power-intensive to inference, which basically reduces the power consumption by 10%. I've seen this over the last 30 years where these guys changed their minds like they change their stocks. And I'm just kind of wondering, maybe I'm wrong, but if all of a sudden, the load demand from AI drops significantly and these guys change their plans, what happens?

I mean we had a great business prior to the AI coming in that we see fuel switching, we see EV penetration, we see renewables, fuel switching from coal. This is additive. And look, I -- you can't -- you're 24 months out, 36 months out today, if you say go. So no one is going to go, and that's why you're seeing exactly what you're seeing. Everyone is saying, why are we going to build this infrastructure, why are we going to build a generation unless someone guarantees the load. So yes, I agree with you. That's why every utility -- every customer we have is making sure that the other side -- the party on the other side is signing up for load growth that's sustainable to pay the investment or if not, the rate payer pays. I mean that's your dilemma. And I agree with you. That's why you're stalling again instead of going forward as fast as you can because everyone's got to get that right, including tech.

Okay. Got it. I appreciate it. And then the second question I've got, I've been reading about reconduction of transmission lines, particularly in Europe. And I was wondering, is that a way to at least mitigate some of the construction on the grid and reduce the need for new routes? Is that something people are considering? And sort of how would that impact your business?

Yes. I mean look, we've reconductored my career. And the new high-density wires, they run hot. They work in certain areas. It's helpful. But what I would say is -- what makes it easier, better, you're still -- it's still a rebuild, basically. You're just in the corridors that exists today. So yes, we can. We can even do it in energized state. We're doing 250 miles now energized while the line is hot and reconducting, which is -- we're specializing in it, we're training in it. So it's certainly an advantage to the company. We've spent tons of R&D here. We like the conductor. We certainly have installed plenty of the other high-density conductor, and we like it. So I think in general, yes, it makes sense. Technology will be a piece of this. It will -- and I -- when you look at [ learning ] machines and you look at everything we see from a power demand, AI is a piece of it. But the onshoring, the chips, the Amazon centers that are fully electric, you can imagine all the things that are drawing load right now. And it's, in my mind -- we talked about data centers, I don't know, 4 years ago, and said it would be a big push. We had no idea that AI would come in as well. And I just think as you move forward, if you haven't used [ Autopilot ] or ChatGPT, try it, that ain't going anywhere. That's fantastic. I love it. It's great. I think the country is moving in that direction, and it's certainly demand there and the chips and everything else we do on any given day, even if you reduce power. It's kind of like appliances. We're going to get great things out of appliances what we did for about 3, 4, 5 years, and it helped us with load growth. You had negative load growth for a long time. You got positive load growth throughout the country for the most part, just in general. And so now when data shows up, it's more significant than anyone thought, myself included.

Our next question comes from the line of Alex Rygiel with B. Riley Securities.

Very nice quarter. First question here, cash flow in the quarter was very strong, yet I don't believe you changed your full year guide. Are you incrementally more confident with the high end of your range now? And has your view on uses of free cash flow changed at all? And I have a follow-up.

Yes. So free cash flow, I think just sitting here in the quarter, we did have a good free cash flow quarter. Pleased with that. But it's early. We think it's prudent given that our typical profile as of the first half of the year tends to be cash flow-neutral or slightly negative with most of the free cash flow coming in, in the fourth quarter. We still think that's where we need to sit right now. There is opportunity to be at the high end of that range. But I think the range where we are today is where we should be.

Alex, too, I would say the business itself we set out to change some of the cash flow profiles of the business. I think we've done a nice job from an internal-invested capital. When you look at the returns, the way we calculate them, certainly moving up in the business. Even when the margins are a little softer, the returns are fantastic. It's certainly generating -- in the first quarter, typically, what we've been talking about was free cash was bad. And we had growth in the business, we had growth in head count and free cash generation. So I really like where we sit. I know everyone is hesitant to say that the business has fundamentally changed, DSO has fundamentally changed. I think they have. I think it gives us more flexibility. We've always talked about the free cash and how we deploy it is something that we, as the team, have to make sure that we continue to deploy capital in the proper way that we have in the past to create the outcomes that we have in the past. So I think our ability to look at M&A, to look at buybacks, to look at everything that we do and be opportunistic, certainly, the free cash generation gives us more opportunity.

And then secondly, I don't think we've touched on telecom or industrial on the call here. Any notable movements there either in the quarter or for the remainder of the year?

We even bought the environmental solutions, it's sitting in really nicely. We really like the synergies we're picking up there on the industrial side. In fact the business is performing well. Telecom had a nice quarter. We got parity to the electric segment a little better. I mean we also added some backlog there. I like the business long term. Certainly, data centers -- the other part of the data centers is you're still going to have to put fiber into -- when I say fiber, data center to data center. And they can't really say, I want to go to this hub or that hub at this point because they're everywhere. So you're going to start building on all fiber to feed it at some point.

Our next question comes from the line of Sangita Jain with KeyBanc Capital Markets.

I know we've discussed data center dynamics a lot on this call, but I was just wondering, Duke, if there is a way for you to engage directly with data center companies, whether it's for substation build-out or some behind-the-meter solutions, something aside from your leverage to the grid.

Yes. I mean we talk to them all the time. I do think there's opportunities to help and collaborate with them. Look, our job, we support our clients and our clients are talking to them as well. So it's just a -- it's something that we balance between the grid, what their demands are, try to help on both sides of that. I do believe that as we move forward, as you see the company move forward, the demand of tech on the grid and how they deploy -- where they deploy it, where they build, what they build certainly want to be right in the middle of it. And we want to sit with them and understand what they're trying to accomplish. It allows us to facilitate it. So I -- look, it's something that the company -- we've talked to them a lot. Our PTT business, the transformer business is certainly something that they value a lot. They want the transformers. They want them now. So I think those things are -- bode well for us. And our ability to communicate and talk about power consumption with tech is something that we can help our clients with and ourselves.

Great. And if I can follow up with one on MSAs. Is there anything particularly different this time around on MSA timing than in past years that's causing the exceptionally slow start to the year?

I don't feel like it's slow. I feel like we're doing great. It's a little bouncy on the distribution system, as we said in the past. Like I said, we're up 5.3% on transmission, distribution and substations, if you look at still look at the delineations of the segments as a whole. So I feel like we're starting nicely. Our backlog is down in the UI on big pipe, which is fine with me. If you take out big pipe and you add renewables and you add electric, you're up, your backlog is up. So yes, there's a lot of opportunities. The negotiations are taking longer in some cases. MSAs, you're looking at, you're trying to see how many people you have on the system today and the way we calculate it. But I continue to see our MSAs get renewed. There is some timing, there always will be. They're 5 years, 3 years, 2 years, and they cycle in and out. And you could be in year 4 of $2 billion MSA, that's going to renew for 5 years. When it renews, you [ got ] $2 billion in the backlog. So it just takes -- it gets a little lumpy in some of the MSA work, and it's going to continue that way. But the overarching business and the way that we stack on the larger projects, programs, build, when that stack starts, it just continues to move on. But the industry stalled a bit trying to make sure that the demand for data centers and the demand for what we're talking about is real. And that -- so it did stall a bit on some of these larger projects because they're not big enough. So what you're doing is go, uh-oh, I was going to build this. Now we've got to double the size of what we're trying to accomplish. And so yes, it's taken a little bit longer. And I do think the industry is going to have to think a little bigger and a little faster.

Our next question comes from the line of Michael Dudas with Vertical Research Partners.

So you mentioned in your comments during the call in your prepared remarks the importance of investing into the business. I just want to get a check on relative to the growth you're seeing, we've been talking about so much demand growth here in this call but over the next 3 to 5 years and where you are today on staffing. Are there -- what are the challenges to kind of meet -- get the bodies and get the capacity to meet the, it seems like a sustainable and extraordinary growth, over the next several years? Where do you -- are you in fairly good shape? Or is there a lot more work to do?

Yes. Mike, I think the company has done a nice job investing in craft certainly, which is what we're known for and core to us. I do think when you -- we saw some of it show up in the solar business in the quarter, where we had some growth and significant growth. And so it does, at times, that growth, you're investing in growth, you want to make sure that you can maintain the productivities and if you move geographies that you can maintain the type of productivities that we expect. And we expect high levels, and we've got to make sure we're looking back in the operations and helping make the young ones and the young people that are in the business go forward as far as -- and we are, and we have great programs and we get them to the field. And there's not -- replacing your footprints in the field with something on a piece of paper is a fallacy. It doesn't work. So that footprint in the field, the people that mentor our management teams are paramount. And so we work hard on that. We work hard on that execution, and it continues to get better and better. So as far as getting people in the business, look, we haven't had the problem yet from a standpoint of craft, and we've done a good job. I think the down -- kind of the slowdown in distribution allows us to take a breath and actually gain market share. So I like it. I like where we sit. And sometimes what I call hard 12 months, it makes -- you hone your skills. And I like it a little tough. It separates us. And I think we've done -- whatever is showing up today, we did 12 months ago. Whatever shows up next year, we did 12 months ago. So I think in general, our ability to look forward and see the business allows us to really invest in craft long term, in our people long term. And we're doing that, we're hiring people for the future now. We're skating where the puck is going. I like it. And so I think we have no issues in craft at this point, being able to hire, train, maintain. We just got to do it at the production levels we expect.

Our next question comes from the line of Chad Dillard with Bernstein.

So Duke, you were talking about how utilities are shifting CapEx from distribution to transmission. Just trying to get a better sense for how that impacts Quanta's business. I think you have talked about better market share on transmission, but any sense on just like how to think about it from a margin standpoint, from a utilization standpoint? And then secondly, based on your conversations with utilities, is the case like some of the work that was pushed out to '24, is that actually going to expect on the '25 because you'll be a little bit more able to change your CapEx plan a little bit further out?

Yes. I mean, I think we've heard most of our customers -- I'll go backwards on that. Most of our customers maintain their capital guides and some increase. I still -- you got a backdrop of anything we're saying. You can look at the capital spend and what the customer is saying. I think honestly, you'll start to see them raise capital again, I don't see any way around it. I think capital is going up, not down over the next -- whenever they talk about their next 5 years, you can see capital plans go up, has to, to meet the demand. And so we're talking about getting more usage out of the grid. Even if you get more usage out grid, capital is going up. So I do think there's some things you can do from technology, but it's incidental compared to what you see from the demand side. So both of those things are going to happen. As far as distribution, I think it's just we kind of -- it's status quo, which we expected more growth out of it. And not all customers, I want to be clear on this, not all customers are going down on distribution. Some in the Southeast, a few here or there, to shift capital over into transmission. So in some areas, that's the case. Some areas, distributions the same or moving up. You got storm hardening, you got fire hardening, you got a hundred different things also going on. And the everyday grid depreciates every given day. Poles rot, things -- it's always been that way, and that's still ongoing with everything else that's going on. So the maintenance of the grid stays in place. And so that -- but the capital is required to maintain the capital required, the necessary infrastructure, electric vehicles. I mean, I think the pause and -- somewhat pause and delay a bit in the electric vehicle penetration, although it's penetrating nicely, it's certainly something that we're watching. And I think that -- we've always said that would be a 3, 4 decade-type penetration versus overnight. I mean it was not going to happen by 2030. We thought 2050, 2040. I mean, I think that's the case. And the distribution just a longer build, but it's much, much bigger even in transmission, just longer. And so I like them both. It's going to show up over time. It just because the company time -- it's technical. It gives the company time to rethink about those resources and how do we resource these things as they come about.

Got it. That's helpful. And I want to go back to the 2 comments you made. So earlier in the Q&A, you talked about it seems to have a really strong uptick on the data center side in January through March. And then you just talked about what you do today began 12 months ago. So just trying to think through like when we start seeing a lot of the work tied to data centers, to kind of work through -- do you think you can provide us with like an expected cadence on that?

I mean, I think we see a lot of plans today on large-scale, hyperscale basis. And that loads got to go to them. And that planning process -- we do a lot of system planning. And that system planning process is probably robust today as it's ever been on the transmission load side of the business. We've got to get the distribution business a little better. And we've got to talk to the regulators and talk to them about what we're seeing and making sure that the consumer is not paying for the data center demand. So I think that's the bigger thing, the affordability. Natural gas is down, and it just kind of flat, so it's helping the consumer at the bill level. And so that's a good thing. If natural gas stays down and we get some interest kind of where it's at or even less, it bodes well. And I think you'll see the capital plans and everyone get their head around. I'm looking at the calls as well. I mean everyone's got equity plans now. And if we didn't see that show up until this quarter, where you're starting to see people issue equity and debt against the bills that are coming. It's necessary, and we start to see that show up. And I think the business -- you can see where the planning is coming into place and how quickly things move against equity and data at the utility level. So we see a lot. We're excited about it. And I do believe it's not just something that -- you can't go, "oh, we're going to build this." And they're going to not pay for it. I think this is real. I do. I think the demand is real. Even If it's half what everyone is saying, it's more than we're talking about now. So that's the bet of it. You hedge it down, and it's still huge. So I like it. And I think we're sitting in a really good spot here, and we're starting to see those investments show up. It will be like what we see today, a little better. But the 24-month planning cycle is ongoing. And utilities today are planning for the future. So I think every single quarter, you'll see the progression, and it just stacks. And we always thought that these bigger programs, these bigger things would stack on the business long term, and your base would continue to move up on kind of double digits, and that's what we see.

[Operator Instructions] Our next question will come from the line of Brett Castelli with Morningstar.

I just wanted to ask within renewables. Can you parse out your expectations for new orders between wind and solar for the full year 2024? And any thoughts relative to 2023 between the technologies there?

I mean I would just say like we've talked about growing double digits, and we're growing double digits plus EV and wind and solar as well beyond that. But obviously, we're comfortable with double-digit growth in those businesses.

Our next question comes from the line of Avi Jaroslawicz with UBS.

I'm on for Steve Fisher. So recently, we've seen some more federal support coming out for permitting but also some lower capital intensity type of opportunities within transmission. Just how are you guys thinking about which is going to be the bigger driver for that over the next 1 to 2 years? And also, what kind of visibility to bookings you have within those transmission projects?

I want to make sure I understand the question, and it's a little spotty on my side here. As far as permitting, I mean, I think state permitting, in general, is fine. It's more about the regulatory process is a permit, in my mind. I don't think I caught the rest of the question here. Did you hear it?

He was asking about the innovation around...

Yes, I was just asking like...

We've seen some innovation -- sorry about that. Yes. My apologies. We've seen some innovation throughout the year. I think you'll continue to see it. There's things going on. But it's incidental really. I mean it's good, it will help, but the demand is such that we'll continue to see do that. We always go back and look at Europe and what's going on there, a lot of innovation in Europe. It's 3x [ cooler ] what we have here. And the cheapest form of moving generation is transmission. You still need -- still the cheapest form today, and it will be tomorrow and the next day. So I do think that the builds -- the multiyear builds are there. You have to balance the load, so you're seeing some equipment come in, synchrophasor, things like that, that are coming into the business that allows some balance. You're starting to see that show up from an equipment standpoint. We'll install it. There's software out there that's helping some on a distribution level, transmission level. But it's -- I still think even with innovation, we got a long way to go on infrastructure.

Our next question comes from the line of Kevin Gainey with Thompson Davis & Company.

I just wanted to maybe touch on the equity income at electric power and the guidance raise there. How should we think about that? What's driving that? And then maybe the cadence as we go throughout the year?

Yes. The increase there was primarily driven by our Puerto Rican entity, our JV with LUMA. There was a favorable tax ruling that allowed for us to be able to -- the tax rate has dropped significantly. And so you're seeing around a $6 million improvement over the year as a result of that ruling.

And our next question comes from the line of Jean Ramirez with D.A. Davidson.

This is Jean for Brent Thielman. I wanted to ask a question about the underground gas utility portion of the segment. Are you guys seeing any utilities pull back at all on network investments and reliability upgrades?

No. I think to the contrary, the investments necessary there in methane releases, things of that nature. When you start looking at natural gas systems, they're more valuable today because we're not building as much new system. I mean there's a considerable amount of new systems being built, but in certain areas where you're replacing [ caster ] and other lines with polyethylene and more, you're building a modern network. That's certainly there and will continue to be there. We see an uptick in the business, not a downtick.

We have reached the end of our question-and-answer session. I would now like to turn the floor back over to management for any closing comments.

Yes. I want to thank the 52,800 people out in the field that pay our paychecks and do what they do everyday in inclement weather. We can't say enough about their performance and the safety and the things that they do on a daily basis. Our field leadership is the best in the world. The management team that we have here is certainly something that we're extremely proud of. We're proud of where the company is going, and thank you for participating in the call today.

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