MasTec, Inc.

Welcome to MazTec's first quarter 2022 earnings conference call, initially broadcast on Friday, May 6, 2022. Let me remind participants that today's call is being recorded. At this time, I'd like to turn the call over to your host, Mark Lewis, MazTec's Vice President of Investor Relations. Mark.

Thanks, Kevin. Good morning, everyone, and welcome to MazTec's first 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 MOSTECH'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 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 about 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 in this conference 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. With us today, we have Jose Mas, our Chief Executive Officer, and George Pita, our EVP and Chief Financial Officer. The format of the call will be opening remarks and announcements by Jose, followed by a financial review from George. The discussions will be followed by a Q&A period, and we expect the call to last about 60 minutes. We have a lot of important things to talk about today, so I'll turn the call over to Jose so we can get started. Jose?

Thanks, Mark. Good morning, and welcome to MAS Tech's 2022 first quarter call. Today, I'll be reviewing our first quarter results as well as providing my outlook for the markets we serve. First, some first quarter highlights. Revenue for the quarter was $1,954,000,000. Adjusted EBITDA was $99,000,000. Adjusted earnings per share was negative $0.03. And backlog at quarter end was more than $10.6 billion, a record level and the first time we've exceeded $10 billion. In summary, results were generally in line with revenue, EBITDA, and EPS slightly ahead of our expectations. Before getting into specifics about our quarter or guidance, I'd like to offer my perspective on Maastricht's business today. Maastricht is currently in the midst of a significant transition as it relates to our business mix and earnings. Based on the anticipated weakness in the oil and gas segment that started around the time of the pandemic in 2020, we set course to invest in those areas of our business where we felt we had excellent long-term growth opportunities. In addition to our organic initiatives, we made a number of acquisitions in 2021 that repositioned MOSTIC and enhanced our service offerings. Based on these investments, we expect significant revenue growth and diversification in 2022 and beyond. As an example, non-oil and gas revenue totaled $4.5 billion for full year 2020. In 2022, we expect these revenues to approach $7.8 billion, an over 70% anticipated growth rate in 24 months. We're even further encouraged by the level of current and planned investments we are seeing from our customers. We are aggressively responding to our customers' needs and request a ramp to meet their long-term build plans. This gives us tremendous confidence that the decisions we've made over the last two years will drive significant shareholder appreciation. I believe our first quarter results begin to demonstrate our stated goals. First quarter, non-oil and gas revenues and earnings both grew over 65% compared to last year's first quarter. While we still have considerable work to do to reach the level of performance that we expect of ourselves, we are making progress. Yesterday, in our earnings release, we updated 2022 guidance. Our guidance was impacted by two primary factors. First, the delay of completion of the Mountain Valley Pipeline, which was announced earlier this week. And second, the impact we are seeing in our solar business from the Department of Commerce anti-circumvention investigation that is currently ongoing in the solar industry. We expected 2022 to be a challenging year for our oil and gas business as new project activity significantly declined during 2021. While recent world events and increased commodity prices should have a positive impact on the need for new pipelines, we don't expect a meaningful impact until 2023. In the meantime, we were expecting to complete the Mountain Valley Pipeline project in 2022. That project, however, has now been delayed until a second half of 2023 in-service date, and in our updated guidance release yesterday, we have removed that project from our current year guidance. In addition to the pipeline project, we reduced our guidance expectation for solar revenues within our clean energy segment. Solar has been a focused area of growth for us that we believe offers great long-term opportunities. Although we expected solar revenues in 2022 to nearly double 2021 levels, we are now moderating our view because of the Department of Commerce's anti-circumvention investigation into four countries, Cambodia, Malaysia, Thailand, and Vietnam. These four countries represent approximately 80% of all of the solar panels sold in the United States. The risk of the investigation would be added tariffs that could range anywhere from 50 to 250 percent of the total panel costs. Further complicating the issue is that these tariffs would be retroactive to February of this year. This investigation has made it nearly impossible to move forward with a project that was dependent on these panels. A preliminary decision on the investigation is due by August 26. A decision will provide clarity for developers who today have too much of an unknown risk. While we expect activity to quickly ramp following a decision, many of the panels that were slated to be shipped to the U.S. are now being sent to other countries, potentially delaying shipment to U.S. projects following a decision. Based on this, our guidance now assumes roughly $350 million in solar revenue, a reduction of $250 million from our previous guidance. based on projects that are either ongoing or using panels that are not affected by the investigation. We are hopeful that this guidance will prove to be conservative, but it's our best estimate today. Our quarter-end solar backlog is approximately the same as the $350 million revenue guidance number. To put this impact in perspective, aside from our stated backlog, we have been either verbally awarded or are in negotiations for another nearly $1.5 billion of solar work that was to be performed partly in 2022. Thus, regardless of the impact in 2022, expected resolution of this issue should not change our aggressive growth targets that we expect in our 2023 solar business. In addition to the long-term solar opportunities, we're also encouraged about the progress we've made in growing and expanding our power delivery business. We made two transformative acquisitions in that business last year, having acquired Intran exactly one year ago yesterday and Henkels & McCoy at the end of the year. Integration efforts are ongoing, and we're encouraged by both our progress and, more importantly, the long-term potential of the business. Customers have responded very well to our more robust service offerings, and we are encouraged by the potential opportunities that exist for our power delivery business today. More importantly, we're encouraged by our customers' desire to see us continue to grow and expand as we work to meet their needs. Collaborative efforts with our customers on reliability, grid hardening, renewable connectivity, and EV charging provides us with excellent opportunities for long-term revenue growth. Now, I'd like to cover some industry specifics. Our communications revenue for the quarter was $664 million, a 17% year-over-year increase, and we expect full-year revenue to grow by over 20%. Backlog at quarter end increased 31% year-over-year and by over $300 million sequentially. We are rapidly expanding both our geographic presence as well as adding resources to meet our customers' demands. We added over 2,000 team members to this segment year-over-year and nearly 800 sequentially. We have experienced a significant amount of demand related to fiber expansion opportunities both from existing customers as well as a number of RDOF-funded new entrants. As a reminder, the Rural Digital Opportunity Fund, or RDOF, will provide $20 billion of funding over the next 10 years to build and connect gigabot broadband speeds in underserved rural areas. Only about half of those funds have been awarded. Additionally, in October of 2020, the FCC established 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. Finally, the infrastructure bill included an additional $65 billion for broadband funding. These funds the majority of which will be spent in the future, in addition to the increased private spending by wireless companies, ILEX, and cable TV operators, are creating an environment for significant incremental spending in the years to come. As one of the leading turnkey contractors of choice, we are investing and expanding to meet this increased demand. We are also gearing up in our wireless markets as we expect significant project activity acceleration in the second half of 2022, as we've previously communicated. Moving to our power delivery segment, revenue was $650 million versus $134 million in last year's first quarter. First quarter of 2022 included results both for Entrant and Henkels & McCoy. The segment is on pace to generate approximately $2.6 billion in annual revenue with substantial growth opportunities for the future. We believe the scale we have been able to create positions us as a leader in the market with great opportunities ahead. With changes in electrical transmission and distribution needs, our customers have a clear goal of modernizing the power grid with a focus on reliability, fire hardening, renewable connectivity, and growth in electrical vehicle usage. Our combined service offering allows us to provide our customers with cost-effective solutions at scale to meet their demands. We're excited about our competitive position in the market, and this clearly is a segment that is reshaping how MOSTIC will look in the future. We are confident that margin performance will continue to improve and are becoming more optimistic on the long-term potential margin outlook for the segment. Moving to our oil and gas segment, revenue was $211 million versus $726 million last year. After the adjustment in guidance for the Mountain Valley pipeline, we expect revenue in this segment of approximately $1.4 billion versus nearly $2.6 billion last year. Our current 2022 revenue expectation does not include any large project construction activity and demonstrates what we believe will be the trough level for this segment. Discussion for future projects are very active, approaching levels we haven't seen in a few years. This, coupled with carbon sequestration and hydrogen projects, give us great opportunities to build off of our revenue base level. Moving to our clean energy and infrastructure segment, revenue was $436 million for the first quarter versus $350 million in the prior year, a 24% year-over-year increase. With our reduced solar guidance, we expect full-year revenue to approximate $2.2 billion, a roughly 15% increase over 2021. Backlog in this segment was up 22% year-over-year. We believe our diversification is our strength in this segment as we're capable of meeting any of our customers' demands. While renewable has been our focus, and we discussed our solar business earlier, we've made great strides in our civil infrastructure business along with base load generation projects we've built. For example, we're now in our second advanced class turbine installation project. These turbines are capable of burning both gas and hydrogen, and we believe our success on this project will lead to many more opportunities with this utility customer. To recap, We've had some curveballs thrown our way so far this year. While we've been managing through these challenges, I want to reiterate how strongly I believe that we position Maastricht in a way that will allow us to enjoy significant long-term opportunities with our customers. While 2022 will be more challenging than we originally expected, I think our second half of 2022 performance will demonstrate both Maastricht's margin and growth potential. In light of that, we started buying back shares at the end of the first quarter. It's important to note that our philosophy around buybacks has been to try to buy back shares opportunistically. As an example, our last three buyback programs were executed years ago at average prices of $19, $44, and $33 a share. I'd like to again thank the men and women of MOSTEC for their 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 position ourselves for continued growth and success. Before turning the call over to George, I'd also like to thank the investment community. Fifteen years ago this quarter, I had the opportunity to become CEO of Mostek. We've been fortunate to see and do a lot over the last 15 years, and while I'm extremely proud of what we've built over that time, I truly feel the best is yet to come, and I couldn't be more excited about what lies ahead in the next 15 years. I'll now turn the call over to George for our financial review. George?