MasTec, Inc.

Welcome to Maztec's Third Quarter 2020 Earnings Conference Call, initially broadcast on October 30th, 2020. Let me remind participants that today's call is being recorded. At this time, I'd like to turn the call over to Mr. Mark Lewis, Maztec's Vice President of Investor Relations. Mark?

Thanks, Kevin. Good morning, everyone. Welcome to Maztec's Third Quarter Call. The following statement is made pursuant to the safe harbor for four looking statements described and the Private Securities Litigation Reform Act of 1995. In these communications, we may make certain statements that are forward-looking, such as statements regarding my state's future results, plans, and anticipated trends in the industries where we operate. These forward-looking statements are the company's expectations on the day of the initial broadcast of this conference call, and the company does not undertake to update these expectations based on subsequent events or knowledge. Various risks, uncertainties, and assumptions are detailed in our press releases and our filing for the SEC. Should one or more of these risks or uncertainties materialize, or should any of our underlying assumptions prove incorrect, actual results may differ significantly from results expressed or implied in these communications. In today's Remarks by Management, we will be discussing adjusted financial metrics as discussed and reconciling yesterday's press release and supporting schedules. In addition, we may use certain non-GAAP financial measures in this conference call. A reconciliation of any non-GAAP financial measures Not reconciling these comments to the most comparable gap financial measure can be found in our earnings release or our 10-Q located in the investor section of our website located at mosstech.com. With us today, we have Jose Mas, our Chief Executive Officer, and George Pita, our Executive VP and Chief Financial Officer. The format of the call will be remarks and analysis by Jose, followed by a financial review from George. These discussions will be followed by a Q&A period, and we expect the call to last about 60 minutes. We had another great quarter and I have a lot of things to talk about today, so I'll now turn it over to Jose. Jose?

Thanks, Mark. Good morning and welcome to MOSTECH's 2020 third quarter call. I'd like to thank you for joining us today and I hope and pray that you and your loved ones are healthy and safe. MOSTECH continues to excel during these challenging and unprecedented times as we manage through the COVID-19 pandemic. During this time, The safety of our team members has been our top priority. I have to say, I'm so proud of the men and women of Moss Tech. Their sacrifices, resilience, creativity, and commitment have been inspiring. Millions of families throughout the United States rely on the power, communications, entertainment, and other services we help our customers provide. Our team has delivered. And I'd like to thank the men and women of Maastricht for their sacrifices and hard work. First, some third quarter highlights. Revenue for the quarter was $1,700,000,000. Adjusted EBITDA was $265,000,000. Adjusted earnings per share was $1.83. Year-to-date cash flow from operations is $712,000,000. And backlog at quarter end was $7.7 billion. In summary, we had another excellent quarter and are on track for another great year. I believe the third quarter demonstrated the strength of MOSTEC's business diversification. To me, the highlight of the quarter was the growth of our non-oil and gas segments. Revenue for these segments grew at 19% and EBITDA for these segments grew at 83% on a year-over-year basis. We expect continued growth of these segments in both revenue and earnings driven by a number of growth catalysts in both communication and clean energy. Catalysts in communication include the continued rollout of 5G and the ever-increasing fiber opportunities tied to it. The growing focus on increasing consumer broadband speed by both the telecom and cable TV carriers and the launch and growth of a 5G home product. Clean energy catalysts include the continued focus on carbon neutrality. As one of the largest clean energy contractors in the country, our expertise in constructing wind farms, solar farms, biomass facilities, high voltage transmission lines, substations, battery storage, and hydrogen enabled solutions uniquely position us to take advantage of growth in this market. Now I'd like to cover some industry specifics. Our communications revenue for the quarter was $645 million. More importantly, margins came in strong at 12.3% and were up 390 basis points year-over-year and up sequentially. The pandemic has helped highlight the importance of our nation's telecommunication networks, and our customers are working hard at providing their customers with reliable and high-speed connectivity. We expect this trend to continue and believe there will be a renewed focus on continuing fiber expansions in the residential markets. To illustrate, on an earnings call earlier this week, the CEO of Verizon said, and I quote, fiber richness of our network is a core element. The CEO of Corning on their call this week said, The density of fiber necessary to deliver its promise is yet another example, illustrating that up to 100 times more fiber is required to deploy 5G in a city than 4G. And at a conference in September, the CEO of AT&T made two statements. First, he stated, and I quote, anything we can do to put more fiber out into the network, serve both our consumer and business segments, and use that to power what over time is going to become a much more dense and distributed wireless network, that's first of all one of our key focus areas and something we see as very important to us. He followed that up and reiterated that priority number one is to make sure that we're investing in our core business. And that includes fiber and making sure we have broadband connectivity on 5G. And when you think about it, those two are not dissimilar. When you have a great 5G network, you're deploying a lot of fiber. Based on those comments, I think it's important to note that MOSTECH's wireline business has grown 180% over the last five years. 57% over the last three years, and about 13% over the third quarter of last year. Couple this with the continued opportunities around 5G deployment, and this provides us with significant opportunities to grow our business. In September, Samsung announced a $6.6 billion deal with Verizon to provide network equipment and 5G radios through 2025. Deals like these are very important to Maastricht as they need to be in place for the next phase of network expansion to take place. The analytics firm IHS Markit estimates that over the next 15 years, the 5G investment in the U.S. will approach $1 trillion. Over the coming months, we expect two important government initiatives that will be catalysts to our business. The first is the award of funds from the Rural Digital Opportunity Fund to help bring high-speed Internet to rural communities. The second is the mid-band wireless spectrum options expected later this year. Both of those should lead to significant opportunities for MOSTECH. I believe we are entering one of the most exciting periods in the history of telecommunications and that the deployment of 5G wireless technologies and the associated networks is truly a game changer for the consumer, our customers, and for MOSTECH. Moving to our electrical transmission segment, revenue was $129 million versus $103 million in last year's third quarter. Margins improved sequentially and we expect further improvement in the fourth quarter Backlog remains strong and improved year over year. We are confident that we can deliver strong revenue growth next year as we have a number of new projects starting. Scale in this segment is important for us as we strive to achieve double-digit margins. We believe we are very well positioned for 2021 and beyond as the drivers for this segment remain intact, which include aging infrastructure, reliability, renewable integration, and system hardening. Moving to our clean energy and infrastructure segment, revenue was $469 million for the third quarter versus $262 million in the prior year, a 79% year-over-year increase. Margins for the segment were strong at 7.3%, and we continue to expect full-year margins to improve over 2019 by over 100 basis points. The size and scope of the opportunities we are seeing in this segment continues to grow. Between verbal awards and projects we are competing on, we expect backlog to hit record levels over the coming quarters and expect revenues in 2001 to approximate $2 billion. We have made significant investments in this segment to profitably grow our business through organic opportunities. We continue to add talent and resources to meet the increasing demand for our services. While we've highlighted this segment more over the last few quarters, I still think it's an underappreciated part of MOSFET's portfolio. Over the course of the last few months, the focus on clean energy has been palpable. We have seen companies like Shell, Nextera, Duke Energy, and many others highlight their significant planned investments in lower carbon technologies. As a leading clean energy contractor and partner, MOSTIC is uniquely positioned to benefit from these investments. Moving to our oil and gas pipeline segment, revenue was $463 million compared to revenue of $973 million in last year's third quarter. Revenue was impacted by the effects of COVID and its impact on demand for both oil and gas. While this was already factored into our guidance, we also had two major projects that have been impacted by regulatory delays. Those projects, whose construction was expected to begin in the third quarter, have now started in the fourth quarter with the majority of work slipping into 2021. Looking at third quarter results, large project activity represented a very small portion of revenue. We believe that third quarter revenue levels are representative of what levels would look like without large project activity. Margins for the quarter were very strong and positively impacted by the reimbursement of delayed project EIDL equipment costs. Without associated revenue, these reimbursements had a significant impact on margin. We expect a more normalized margin level as project revenues increase. We ended the third quarter with backlog just over $2.4 billion, and we expect oil and gas revenues to increase in 2021. Subsequent to quarter end, we have been awarded one large project and a number of smaller recurring type projects. As a reminder, over the last three years, only 6% of our revenues have come from oil pipelines, with the majority of our business being tied to natural gas. We continue to see strong demand for integrity services, gas distribution, and line replacement activity. We are focused on continuing to diversify our revenues in this segment. I'd like to take a minute to cover 2020 guidance. Today, we increased our EBITDA guidance to a range of $800 to $811 million versus our previous guidance of $800 million. We lowered our revenue guidance to $6.4 to $6.6 billion versus our previous guidance of $7 billion. The change in guidance is directly attributable to the two oil and gas projects I covered earlier. Our initial expectation was the projects would start in the third quarter. Our range takes into account the possibility of further delays. I'd also like to note our guidance at the midpoint of the range assumes an almost $1.2 billion reduction in oil and gas revenues, while our total revenue will only be down about half that, meaning that we'll grow our other segments by nearly $600 million in 2020, again showing the strength of our diversified model. I'd also like to comment on our longer-term goals. As I think about our future business mix, I think we have a solid path to becoming a $10 billion plus revenue company, even in a depressed oil and gas backdrop. Based on market opportunities, we believe our communications business should grow to $3.5 to $4 billion in annual revenue, clean energy should exceed $3 billion, transmission over a billion, and oil and gas on a recurring level to be about $1.5 to $2 billion. To recap, We had a good third quarter and are confident that we are mitigating the effects and impacts of the COVID-19 virus. While times are challenging and uncertain, opportunities always arise from these challenges. Our customers are looking for ways to change and improve their business models and are looking for strong partners to help them. In that lies our opportunity. Our greatest strength has been to understand the trends in the industry and our customers' needs. Our ability to provide services, whether existing or new, has always been a strength. I'm excited for what the future holds for Maastricht. I'd again like to thank the men and women of Maastricht for their commitment to safety, their hard work, and their sacrifices. Keep up the good work. I'll now turn the call over to George for our financial review. George?