MasTec, Inc.

Welcome to MOSTEC's third quarter 2021 earnings conference call initially broadcast on Friday, November 5th, 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, MOSTEC's Vice President of Investor Relations. Mark?

Thanks, David. And good morning, everyone. Welcome to MOSTEC's third quarter 2021 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 MOSDEC's future results, plans, and anticipated trends in the industry where we operate. These forward-looking statements are the company's expectation 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 results expressed or implied in today's call. In today's Remarks by Management, we'll be discussing adjusted financial metrics reconciled in yesterday'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 or our team queue in the investors and news section of our website located at mystate.com. With us today, we have Jose Mas, our chief executive officer, and George Pita, our executive VP and CFO. The format of the call will be open remarks and analysis by Jose, followed by a financial review from George. These discussions will be followed by a Q&A session, and we expect the call to last about 60 minutes. We had another good quarter and a lot of important things to talk about today, so I'm going to go ahead and hand it over to Jose. Jose?

Thanks, Mark. Good morning, and welcome to Moss Tech's 2021 third quarter call. Today, I will be reviewing our third 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. Before getting into the quarterly details, I'd like to offer my perspective on where I think MOSTIC stands today. At this time last year, during our 2020 third quarter call, we laid out a long-term goal of our pathway to achieving annual revenues of $10 billion plus. It's important to remember, at that time, MOSTIC was on a path to generate just over $6 billion of revenue in 2020. Still somewhat unsure of where the COVID pandemic would take us, we had seen a significant impact to our oil and gas business and the demand and pricing issues it had created. Our ability to provide that outlook was a testament to the strength we were seeing across our non-oil and gas business and the growing opportunities we were expecting. Fast forward 12 months. This year, we expect to generate $8 billion in revenue, and our long-term goal of reaching annual revenues exceeding $10 billion is now within reach in what we hope will be a much shorter timeframe. Opportunities in our communication, transmission, and clean energy segments continue to expand and give us great confidence we will be able to meaningfully grow revenue over the coming years. We believe we are in the midst of a very unique opportunity. Since becoming CEO in 2007, we've been able to grow Mostek from $900 million in revenue to $8 billion today. And while I've seen and experienced great cycles of growth during that time, I've never seen the number and scope of opportunities we are seeing across our business. Demand for our services is incredibly high, and again, our prospects to deliver long-term revenue growth are better than I've ever seen. While our business continues to expand and our mix continues to diversify away from oil and gas, our focus is on margin improvement and execution. Our margin execution across our non-oil and gas segments has been below our expectations in 2021. We've been challenged and impacted for multiple reasons, including COVID, labor availability, supply chain delays, and poor performance on projects. With that said, we are confident we can achieve the margin targets we previously disclosed as we continue to grow the business in the coming years. We understand and believe that our ability to create shareholder value is driven not only by our revenue growth opportunities, but more importantly, by our ability to achieve our targeted margins. While we'd like to see our results materialize sooner, We believe the longer-term outlook is not only fully intact, but actually improving. Now some third quarter highlights. Revenue for the quarter was $2,404,000,000. Adjusted EBITDA was $278,000,000. Adjusted earnings per share was $1.81. And backlog at quarter end was $8.5 billion, a year-over-year increase of $821,000,000. In summary, we had another excellent quarter and are on track for another great year. There are a number of catalysts that could have a significant impact on our growth. These include, within our communications segment, a ramp-up of 5G-related activity and the spend including in-building solutions. 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. Within 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 transmission 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 the 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 its potential benefits, And finally, the role of battery storage and its improving economics. We believe we are very well positioned to benefit from these growing and accelerating trends in our business segments. Now I'd like to cover some industry specifics. Our communications revenue for the quarter was $670 million. We expected revenues to be slightly higher, and we continued to experience delays and COVID impacts that affected the acceleration of AT&T's and Verizon's build plans related to last year's spectrum auctions. Highlights for the quarter included our growth with T-Mobile, whose revenue more than doubled over last year's third quarter. In addition, we had another quarter of strong backlog growth. The second quarter of this year represented the largest quarterly sequential segment backlog increase in the company's history. And in the third quarter, we were again able to sequentially grow segment backlog by over 200 million. We expect another similar increase during the fourth quarter. Margins for the segment were 10.7% in the third quarter and were impacted by both lower wireless revenues than expected along with project closeouts related to a large fiber build that is nearing completion. We expect sequential margin improvement in the communications segment in the fourth quarter and excellent momentum heading into 2022 based on our backlog build. 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. In addition to these programs, the current pending infrastructure bill has another $65 billion allocated for broadband infrastructure. While not built into any of our models, this amount of investment would likely have a significant impact on the potential opportunities for us in this segment. Moving to our electrical transmission segment, revenue was $365 million versus $129 million in last year's second quarter. The increase was driven by organic growth of nearly 50% in the quarter on a year-over-year basis and the first full quarter contribution of Intran, which we acquired during the second quarter. Margins for the segment were 9.5%, which exceeded our expectations. The integration of our Intran acquisition has gone very well, and we are seeing a number of cross-selling opportunities, which are positively impacting both MOSTEC and Intran. While backlog was flat sequentially, we have an increasing number of opportunities that should allow us to continue to grow this business at solid double-digit rates for years to come. 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 $858 million and margins remained strong. During the third quarter, we were able to accelerate project timing and complete some projects early. Our fourth quarter revenue guidance level is impacted by this acceleration. As a reminder, 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 commodity prices have increased and maintained 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 we will see an uptick in opportunities. A challenge our customers are facing has been the increased cost of steel pipe related to the supply chain issues. Pipe materials often account for nearly 50% of project costs. While we believe there will be an increasing number of large pipeline projects, we expect the opportunities to materialize in 2023 and beyond as the supply chain issues improve. That, coupled with the continued growth of carbon capture and sequestration and the potential of hydrogen, have improved our longer-term outlook of our pipeline business. While we still expect 2022 to be within our previously disclosed revenue targets, we are becoming a lot more bullish about our opportunities for 2023 and beyond in this segment. Moving to our clean energy and infrastructure segment, revenue was $518 million for the third quarter. As a reminder, segment revenue has grown nearly sevenfold since 2017. We expected a slight sequential improvement in margins that did not materialize. While I believe we have done an amazing job in growing and diversifying the segment, margins haven't materialized as quickly. With that said, we believe we are at the cusp of seeing significant improvements in margins. At MOSTECH, we take great pride in having been able to perform at high levels over a long period of time. Our conviction in improving margins in this segment are no different. We understand and are addressing the issues that have led to the underperformance, and we have tremendous confidence in the potential of this market and the associated margins we can generate. We believe our diversification is our strength in this segment, as we are capable of meeting any of our customers' demands. We are actively working on renewable projects, including wind, solar, and biomass, baseload generation projects, including dual-source hydrogen-capable projects, as well as our growing presence in the infrastructure market. With a clear national 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, MOSTEC is uniquely positioned to benefit from these investments. Backlog at quarter end in clean energy was $1,570,000,000 versus $891,000,000 at the end of last year's third quarter. a year-over-year increase of nearly $700 million, and a slight sequential reduction of over $100 million from the second quarter. Since quarter end, we've either signed or been verbally awarded another roughly $800 million in projects. In addition, the level of project proposal activity and negotiations has never been higher. To recap, we're having a solid 2021 and are very excited about the opportunities in the markets we serve. Finally, I'd like to highlight the potential opportunities of the pending infrastructure bill. With a significant presence in the telecommunications market, which include 5G build-out capabilities, Our involvement in maintaining and building the electric grid, coupled with our exposure to the clean energy market, including wind, solar, biofuels, hydrogen, and storage, and our recent expansion into the heavy infrastructure, including road and heavy civil, we believe we are uniquely positioned to benefit from the 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 financial outstanding 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?