Quanta Services (PWR) Acquires Cupertino Electric

Quanta Services, Inc. (NYSE: PWR) announced today that it completed the acquisition of Cupertino Electric, Inc. (CEI), a premier electrical infrastructure solutions provider to the technology, renewable energy and infrastructure and commercial industries. Founded in 1954 and headquartered in San Jose, California, CEI provides integrated turnkey solutions, including engineering, procurement, project management, construction and modularization services to a high-quality and diverse customer base across the United States. Through its diverse geographic, customer, end market and service line portfolio, CEI has grown to become the sixth largest electrical solutions provider in the country with a workforce of approximately 4,300 employees.

CEI's 70-year history includes more than 25 years of experience working with global leaders in the technology and data center industries. CEI performs the design and installation of critical electrical systems and is a premier custom manufacturer of modular electrical systems for large-scale data centers and has installed electrical systems in more than 20 million square feet of data centers. Additionally, CEI is a leading renewable infrastructure solutions provider to the mid-sized utility-scale solar and battery storage market, offering turnkey engineering, procurement, construction and commissioning capabilities. Finally, CEI has a long history of providing comprehensive solutions-based engineering, procurement and construction services of electrical systems for the infrastructure and commercial markets. For the four years ending December 31, 2023, CEI achieved a double-digit compound annual growth rate (CAGR) of both revenues and net income by leveraging its operational expertise, collaborative and long-term customer relationships and solutions-based approach. CEI is estimated to generate full-year 2024 revenues and adjusted EBITDA (a non-GAAP measure) of $2.1 billion to $2.2 billion and approximately $155 million to $175 million, respectively.⁽¹⁾ As described in further detail below, the consideration paid at closing for the transaction was approximately $1.5 billion.

Duke Austin, Quanta's President and Chief Executive Officer, commented, "We are excited to announce the acquisition of CEI, a company we have admired for more than a decade, and we welcome CEI's employees to the Quanta family. CEI brings an exceptional management team and a premier craft-skilled workforce that complements Quanta's culture and will create a comprehensive electrical infrastructure solution offering that we believe can facilitate innovative solutions between utilities and large power consumers – from electron generation to transmission to consumption. Further, CEI provides Quanta a low-voltage electrical platform to further diversify and expand our customer base and service offerings. CEI has vibrant end-markets, a strong and visible project backlog and an accretive contribution to Quanta's growth, cash flow conversion, returns and earnings per share."

Tom Schott, President and Chief Executive Officer of CEI said, "The opportunity to strategically partner with Quanta for the next phase of CEI's growth trajectory is incredibly exciting for our employees and our long-standing customers. The people-first culture and customer-centric mindset that Quanta and CEI share is truly unique and should allow our organizations to accomplish more together than we could alone. This transaction ensures that CEI's 70-year legacy of great people and projects remains intact, and that going forward CEI will be fueled by support from Quanta and its family of companies."

CEI's existing management team will remain in place, with Tom Schott continuing in his leadership role as President and Chief Executive Officer. With a skilled, dedicated and high-quality workforce of approximately 4,300 employees, CEI will serve as a platform operating company of Quanta.

Acquisition of CEI is Consistent with Quanta's Key Strategies for Sustainable Success and Provides Compelling Financial Contributions and Strong Cultural Fit

• Highly-Synergistic Low-Voltage Electrical Workforce – Quanta is uniquely positioned to scale CEI's highly technical low-voltage electric craft-skilled workforce, which provides Quanta a platform with opportunity to accelerate growth across several strategic verticals that are driving electricity demand and the energy transition. CEI can also strengthen Quanta's relationships with technology and industrial customers looking to accelerate complex multi-year infrastructure programs in an operating environment that faces constraints on power and craft-skilled labor capacity.
• A Leading, Data Center Solutions Platform – CEI provides a premier electric platform that significantly increases Quanta's exposure to the large and growing data center market, with industry experts estimating hyperscaler capital expenditures to grow at a double-digit CAGR over the next four years. CEI is an established leader in providing turnkey electrical solutions to global leaders in the technology industry, with an experienced and deep management team and a successful track record of designing and building electrical systems for some of the largest and most complex data centers in the United States. CEI represents a rare scale opportunity for Quanta in an otherwise fragmented market.
• Enhances Quanta's Renewable Energy Solutions Platform – CEI's solar and battery storage capabilities provide Quanta with an established mid-market utility-scale renewables platform with technical expertise that is complementary in scope to Quanta's existing large utility-scale renewables platform.
• Expect Meaningful Financial Contributions Without Synergy Assumptions⁽¹⁾ – Quanta expects CEI to contribute meaningfully to its financial profile in the near and longer term, including revenues, adjusted EBITDA, free cash flow conversion, returns and earnings per share. For the remainder of 2024, Quanta estimates CEI will contribute revenues of $1.0 billion to $1.1 billion and adjusted EBITDA of $80 million to $90 million. For the full-year of 2025, Quanta estimates CEI will contribute revenues of $2.325 billion to $2.425 billion, adjusted EBITDA of $175 million to $195 million and adjusted diluted earnings per share (EPS) (a non-GAAP measure) of $0.40 to $0.50. Management notes that these financial expectations are preliminary and, accordingly, has taken a prudent approach to its forecast.
• Enhances Revenue and Customer Diversity – Like Quanta, CEI has deep, longstanding, and collaborative customer relationships, which enhance Quanta's existing high-quality customer base. CEI's strong relationships with leading technology companies, renewable developers and infrastructure and commercial customers are expected to drive ongoing and repeat business, diversify Quanta's customer base and provide cross-selling opportunities.
• Strong Cultural Fit and History of Excellence – Like many of Quanta's other operating companies, CEI was a management- and family-owned business with an entrepreneurial history and has a multi-decade history of successful, profitable growth and leadership stability. Also, like Quanta, CEI has demonstrated a commitment to its employees through comprehensive training and safety programs and by providing a work environment that fosters prosperity and growth.

Transaction Consideration and Financing
The upfront transaction consideration was approximately $1.54 billion, consisting of approximately $1.3 billion in cash, subject to certain closing adjustments, as well as approximately 883,000 shares of Quanta common stock valued at approximately $225 million. Additionally, there is a potential earnout payment of up to $200 million to the extent certain financial performance targets are achieved during a post-acquisition period. Quanta funded the cash portion of the transaction with a combination of cash on hand, drawings under its existing credit facility and a short-term term loan facility. The transaction closed on July 17, 2024.

King & Spalding LLP is serving as legal advisor to Quanta Services. Lazard is serving as exclusive financial advisor to Cupertino Electric Inc., and Fenwick & West LLP is serving as legal advisor.

Conference Call Information
In conjunction with this announcement, Quanta has scheduled a conference call for this morning, July 18, 2024, at 9:00 a.m. Eastern Time, which will also be broadcast live over the Internet. Quanta management will provide brief opening remarks and will then provide an opportunity for the institutional investment community to ask questions about the CEI acquisition. Quanta has posted a slide presentation about the CEI acquisition on its Investor Relations website, which can be found at http://investors.quantaservices.com. To participate in the call, dial 1-201-689-8345 or 1-877-407-8291 at least 10 minutes before the conference call begins and ask for the Quanta Services Conference Call or visit the Investor Relations section of the Quanta Services website at http://investors.quantaservices.com to access the Internet broadcast. Please allow at least 15 minutes to register and download and install any necessary audio software. For those who cannot participate live, shortly following the call a digital recording will be available on the company's website and a telephonic replay will be available through July 25, 2024, by dialing 1-877-660-6853 and referencing the conference ID 13747847. For more information, please contact Kip Rupp, Vice President - Investor Relations at Quanta Services, at 713-341-7260 or [email protected].

About Quanta Services
Quanta Services is a leading specialized contracting services company, delivering comprehensive infrastructure solutions for the utility, renewable energy, communications, pipeline and energy industries. Quanta's comprehensive services include designing, installing, repairing and maintaining energy and communications infrastructure. With operations throughout the United States, Canada, Australia and select other international markets, Quanta has the manpower, resources and expertise to safely complete projects that are local, regional, national or international in scope. For more information, visit www.quantaservices.com.

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