MasTec, Inc.

Welcome to Mass Tech's second quarter 2021 earnings conference call initially broadcast on Friday, August 6, 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?

Thank you, Jennifer, and good morning, everyone. Welcome to Mass Tech's 2021 second quarter call. The following statement is made pursuant to the safe harbor for forward-looking statements described in 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 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 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 the results expressed or applied in these communications. In today's remarks by management, we will be discussing adjusted financial metrics, reconciling ESPE's press release and supporting schedules. In addition, we may use certain non-GAAP financial measures in this call. A reconciliation of any non-GAAP financial measures not reconciled in these comments to the most comparable GAAP financial measure can be found in our earnings press release, our 10Q, or the posted PowerPoint presentations located at the investor news section of our website located at maastech.com. With us today, we have Jose Mas, our CEO, and George Pita, our 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 great quarter and a lot of good things to talk about, so I'll go ahead and turn it over to Jose. Jose?

Thanks, Mark. Good morning, and welcome to MOSTECH's 2021 second quarter call. Today, I will be reviewing our second 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 MOSTEC. Their sacrifices, resilience, creativity, and commitment continue to inspire me. Millions of families throughout the U.S. rely 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 MOSTEC for their sacrifices and their hard work. Now some second quarter highlights. Revenue for the quarter was $1,963,000,000. Adjusted EBITDA was $230,000,000. Adjusted earnings per share was $1.30. And backlog of quarter end was $9.2 billion, a sequential increase of nearly $1.4 billion. In summary, we had another excellent quarter and are on track for another great year. The highlight of our quarter was the continued acceleration of customer demands and opportunities as evidenced by our growing backlog. We truly believe we are at the beginning of what we think will be transformational changes across our segments. We see several different catalysts that could have a significant impact on our growth. Within our communications segment, catalysts include a ramp-up of 5G-related activity and spend, continued focus on expanding fiber networks both in rural communities and in major cities to support broadband services as well as wireless backhaul. An increased focus on smart city initiatives with increased availability of capital from both the public and private sector. In our electrical transmission and distribution segment, catalysts include Grid modernization, including significant investments for improved grid reliability and system hardening to better prepare for storms and fires. The growing need for new lines to tap into renewable rich geographies. And the focus on grid architecture related to growing electrical vehicle charging demand. In our clean energy and infrastructure segment, catalysts include growing focus on sustainability and climate initiatives, including zero carbon emission goals, significant investments in renewable power generation, including wind and solar, a focus on other clean energy generating fuels, including biomass, geothermal, and hydrogen, opportunities around carbon capture and the potential benefits, and finally the role of battery storage and its improving economics. We believe we are very well positioned to benefit from the growing and accelerating trends in our business segments. Changes in both the communication and power markets are accelerating, and so many of these changes directly impact the services we provide. The opportunities to be innovative and involved in this evolution in very early stages represents how far we've come as a business and the value that our customers know we can provide. For example, we've continued to make significant investments in increasing our capabilities to meet customer demand. Our team member count increased year over year from 18,000 to 26,500 team members at quarter end and was up sequentially by nearly 6,000 team members. Over the last few quarters, we've talked about our strategic longer-term goals and our future business mix. Considering the challenges in the oil and gas industries, we led 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 significantly grow non-oil and gas revenues and EBITDA. Our full-year guidance that we provided today reflects continued diversification as we expect our non-oil and gas business to grow over 20% in revenue and over 30% in EBITDA in 2021, with significant acceleration in the second half of 2021. While this is good progress, we know we can do better. While our communications segment is performing as expected financially, our transmission and clean energy segment have underperformed our margins. This underperformance in both segments has been limited to a small number of projects. More importantly, we are nearing completion on these projects and excluding these projects, the rest of the book of business is performing well. We expect sequential margin improvement in both segments in the third quarter with further improvements in the fourth quarter We expect to exit the year in both segments with strong momentum, improved margins, and significant opportunities for further growth in 2022. Now I'd like to cover some industry specifics. Our communications revenue for the quarter was $630 million, and margins improved 290 basis points sequentially. Highlights for the quarter included our growth with T-Mobile, whose revenues again increased fourfold over last year's second quarter and was Moss Tech's seventh largest customer for the quarter. Comcast's revenue was also very strong in the quarter, increasing over 30% from last year's second quarter. That growth was offset with expected declines in both our Verizon and AT&T business, which were both down over 25%. Both AT&T and Verizon were very 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. Over the last few quarters, we've talked about the opportunities related to the Rural Digital Opportunity Fund, or RDOF. which will provide $20 billion of funding over the next 10 years to build and connect gigabit broadband speeds in underserved rural areas. And the 5G Fund for Rural America, which will provide up to $9 billion in funding over the next decade to bring 5G wireless broadband connectivity to rural America. Today, we are pleased to report the largest quarterly sequential segment backlog increase in the company's history. Communication segment backlog increased sequentially by $489 million and was driven by bookings across all segment end markets, including wireless, fiber deployments, and fulfillment work. We are in early stages of what we expect to be a very robust and growing telecom infrastructure market and feel we are very well positioned. Moving to our electrical transmission segment, revenue was $232 million versus $128 million in last year's second quarter. The increase was mostly due to the Intran acquisition, which contributed two months' worth of revenue. Intran performed well in the quarter and we're excited about their growing opportunities. Customer reaction to the acquisition has been very good, and we are seeing a growing number of opportunities for them for 2022 and beyond. We believe the changes in electrical distribution and transmission needs, led by grid modernizations and hardening, reliability, and renewable integration, coupled with the transition towards increased electrical vehicle usage, will have an enormous impact on the last mile distribution of electricity. Moving to our oil and gas pipeline segment, revenue was $621 million and margins remain strong. Our guidance assumed project activity will be pushed into 2022 because of regulatory delays. As a reminder, last year we forecasted a long-term recurring revenue target of $1.5 to $2 billion a year, assuming a continued depressed oil and gas market. As commodity prices have increased and maintained, At strong levels, we have seen an increase in customer requests as we are working with a number of customers repricing previous projects and are optimistic that we will see an uptick in opportunities heading into 2022. We continue to see strong demand for integrity services, gas distribution, and line replacement activity. We've also seen a number of developments around pipelines for both carbon capture and hydrogen. we are focused on continuing to diversify our revenues in this segment. Moving to our clean energy and infrastructure segment, revenue was $482 million for the second quarter. While we're focused on margin improvement, as I discussed earlier, opportunities continue to expand. Segment backlog at quarter end was at record levels, with a sequential increase of $320 million and a year-to-date increase of $680 million. With a new administration and a clear focus on sustainability and clean energy, we have seen a significant increase in planned clean energy investments from our customers as they improve their carbon footprint. As a leading clean energy contractor and partner, MOSTIC is uniquely positioned to benefit from these investments. We believe our diversification is our strength in this market, as we're capable of meeting any of our customers' demands. We are actively working on renewable projects, including wind, solar, and biomass, baseload gas generation projects, including dual-source hydrogen-capable projects, as well as our growing presence in the infrastructure market. To recap, we've had a solid first half of 2021 and are very excited about the opportunities in the markets we serve. Finally, I'd like to highlight the potential opportunities of an infrastructure bill. With a significant presence in the telecommunications market, which include 5G build-out capabilities, our involvement in maintaining and building the electrical grid, 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 potential 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 will now turn the call over to George for our financial review. George?