MasTec, Inc.

Welcome to Mass Tech's first quarter 2021 earnings conference call, initially broadcast on Friday, May 7, 2021. Let me remind participants that today's call is being recorded. At this time, I'd like to turn the call over to Mark Lewis, Mass Tech's Vice President of Investor Relations. Mark?

Thanks, Lauren. Good morning, everyone, and welcome to Mass Tech's first quarter call. The following statement is made pursuant to the safe harbor for forward-looking statements describing the Private Securities Litigation Reform Act of 1995. In these communications, we may make certain statements that are forward-looking, such as statements regarding MOSFET's future results, plans, and anticipated trends in the industry before 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 uncertainties, risks, and assumptions are detailed in our press releases and filings with 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 applied in these communications. In today's Marked by Management, we will be discussing adjusted financial metrics reconciled in yesterday's press release and supporting schedules. In addition, we may use certain non-GAAP financial measures on this conference call. A reconciliation of the non-GAAP financial measures not reconciled in these comments to the most comparable GAAP measure can be found in our earnings press release, our 10Q, or posted in the PowerPoint presentation located in the Investors in News section of our website at mostech.com. With us today, we have Jose Mas, our CEO, and George Pita, our Executive Vice President and CFO. The format of the call will be opening 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 have another beat and raise quarter. We have a lot of important things to talk about today. So I'll now turn it over to Jose. Jose?

Thanks, Mark. Good morning, and welcome to MOSTECH's 2021 first quarter call. Today I'll be reviewing our first quarter results, as well as providing my outlook for the markets we serve. 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. I'd like to start today by highlighting how proud I am of the men and women of MOSTECH. Their sacrifices, resilience, creativity, and commitment during this pandemic have been inspiring. Millions of families throughout the U.S. relied on the power, communications, entertainment, and other services we help our customers provide. Our team has again safely delivered, and I'd like to thank the men and women of Maastricht for their sacrifices and their hard work. Before getting to quarterly results, This week we announced the acquisition of Intran. Intran is one of the largest private electrical utility contractors in the United States. We believe the changes in electrical distribution needs, led by grid modernizations and hardening, coupled with the transition towards increased electrical vehicle usage, will have an enormous impact on the last mile distribution of electricity. With over 2,000 team members, Intran significantly expands our electric distribution and transmission capabilities and footprint. With a strong presence in both the Midwest and the West Coast, areas traditionally underserved by MOSTEC, this combination will enhance Intran's capabilities as it continues to expand and allows MOSTECH to sell its full suite of services, including renewable power generation, substation construction, and gas distribution, to a relatively new customer base. With trailing 12-month revenues of approximately $550 million and strong opportunities for future growth, we are very excited about our future opportunities. The purchase price of approximately $420 million represent a purchase price multiple of roughly seven times without taking into account tax benefits that on a net present value basis represent over a full multiple turn. We believe, based on their prospects, the potential synergies, and the cross-sell opportunities, that while it's on the higher end of historical multiples for MOSTECH, we got very good value. On our year on call, we announced two other acquisitions that closed during the first quarter. In addition to Intran, we've acquired two other companies during the second quarter. The first, Phoenix Industrial, is a heavy industrial contractor that enhances our concrete, piping, and electrical capabilities with a strong West Coast presence. And the other is Byers Engineering, one of the largest outside plant telecommunication engineering firms in the country. With approximately 900 employees across 31 states, Byers brings new capabilities to MassTech that we've typically outsourced. With significant investments in fiber construction, supported by both private and public investments, including the Rural Digital Opportunity Fund, Smart City Funds, the 5G Fund for Rural America, and potential further telecom infrastructure spend, we expect engineering services to be a critical path to success. Being able to control schedule and resources will not only allow us to enjoy the engineering growth opportunities, but it will also allow us to bundle construction services along with engineering and hopefully significantly expand our market share. On behalf of our team members, board of directors, and shareholders, I'd like to welcome all of these new team members to the MOSTEC family. Now, some first quarter highlights. Revenue for the quarter was $1,775,000. Adjusted EBITDA was $204,000. Adjusted earnings per share was $1.10. Cash flow from operations was $257 million, and backlog at quarter end was $7.9 billion. In summary, we had another excellent quarter and are on track for another great year. Over the last few quarters, we've talked about our strategic long-term goals and our future business mix. Considering the pandemic challenges on the oil and gas industries, we laid out a path to achieving an annual revenue target of $10 billion with double-digit margins. One of our key highlights of 2020 was our ability to grow non-oil and gas revenues and EBITDA. Our guidance that we provided today, including our most recent acquisition, reflects continued diversification. as we expect our non-oil and gas business to grow approximately 27% in revenues and over 40% in EBITDA in 2021, with significant acceleration in the second half of 2021. We are encouraged by the size and scale of the growth opportunities in front of us. Now I'd like to cover some industry specifics. Our communication revenue for the quarter was $568 million, and margins improved 70 basis points year over year. Highlights for the quarter include our growth with T-Mobile, whose revenues increased fourfold over last year's first quarter and, for the first time, broke into our top 10 customer list. Comcast revenues were also very strong in the quarter, increasing 61% from last year's first quarter. That growth was offset with expected declines in both our Verizon and AT&T business, which were both down approximately 35%. Both AT&T and Verizon were vocal about the importance of the 5G spectrum auctions in their business. We expect revenues for these two customers, especially AT&T, to accelerate in the second half of the year with significant growth opportunities heading into 2022. We're also very excited with recent developments around the planned increase investments in the telecommunications wireline networks. The Rural Digital Opportunity Fund, or RDOF, which is a follow-up to the Connect America Fund, will provide $20 billion of funding over the next 10 years to build and connect gigabit broadband speeds in underserved rural areas. Additionally, in October of 2020, the FCC established the 5G Fund for Rural America, which will provide up to an additional $9 billion in funding over the next decade to bring 5G wireless broadband connectivity to rural America. In addition, the early drafts of the infrastructure bill included additional direct investments in enhancing telecommunications networks, including 5G. 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 $134 million versus $128 million in last year's first quarter. We have now begun one of the larger projects we had been previously awarded and expect a much better margin profile for the balance of 2021. We also expect backlog to improve as we've been awarded new MSA agreements and are in late stages of negotiations on a number of larger projects. We believe we are 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 oil and gas pipeline segment, revenue was $726 million. We had a strong start to the year as we were working on projects that had been delayed in 2020. Based on our current backlog levels, we expect a strong 2021, and our guidance assumes some project activity will be pushed into 2022 because of regulatory delays. Last year, we forecasted a longer-term recurring revenue target of $1.5 to $2 billion a year, assuming a continued depressed oil and gas market. 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 service, gas distribution, and line replacement activity. We are focused on continuing to diversify our revenues in this segment. Moving to our clean energy and infrastructure segment, Revenue was $350 million for the first quarter versus $286 million in the prior year, a 22% year-over-year increase. We expect full year's revenues to approximate $2.1 billion, a 37% increase over 2020. Backlog was up sequentially by nearly $360 million. And more importantly, subsequent to quarter end, we've already been awarded approximately $550 million of new projects. While backlog was already at record levels in Q1 in this segment, we expect backlog to continue to increase over the coming quarters. We have made significant investments in this segment to profitably grow our business through organic opportunities in addition to our smaller tuck-in acquisitions. We continue to add talent and resources to meet the increasing demand for our services. we added nearly 2,000 new team members in this segment from the end of the first quarter in 2020 to the end of the first quarter in 2021. With a new administration and a clear focus on clean energy, we have seen a significant increase in planned clean energy investments from both traditional customers as well as oil and gas companies that are trying to improve their carbon footprint. As a leading clean energy contractor and partner, MOSTECH is uniquely positioned to benefit from these investments. I'd like to highlight the diversification within our clean energy and infrastructure segment. While we got our start and win, today we are capable of meeting any of our customers' demands. We are actively working on baseload gas generation projects, renewable biofuel projects, and are seeing significant demand as we continue to quickly expand our solar capabilities and footprint. To recap, we had an excellent first quarter and are very excited about the opportunities in the markets we served. We are encouraged with the recent developments related to an infrastructure bill. With a significant presence in the telecommunications market, which includes significant 5G build-out capabilities, coupled with our exposure to the clean energy market, including wind, solar, biofuels, hydrogen, and storage, and our recent expansion into heavy infrastructure, including road and heavy civil, we feel we are uniquely positioned to benefit from this anticipated infrastructure spend. We are confident we can hit our growth targets with solely private investments in infrastructure, but do recognize the potential acceleration in our markets with significant government spend. I'd like to, again, congratulate and thank the men and women of MOSTEC for their fantastic performance. I'm honored and privileged to lead such a great group. The men and women of MOSTEC are committed to the values of safety, environmental stewardship, integrity, honesty, and in providing our customers a great quality project at the best value. These traits have been recognized by our customers, and it's because of our people's great work that we've been able to deliver these outstanding financial results in a challenging environment and position ourselves for continued growth and success. I'll now turn the call over to George for our financial review. George?