MasTec, Inc.

Welcome to MassTech's third quarter 2022 earnings conference call, initially broadcast on Friday, November 4th, 2022. Let me remind participants that today's call is being recorded. At this time, I'd like to turn the call over to our host, Mark Lewis, MassTech's Vice President of Investor Relations. Mark?

Thanks, Elena, and good morning, everyone. Welcome to MassTech's third 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. 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 results expressed or implied in today's call. In today's remarks about management, we'll be discussing adjusted financial metrics, reconciling 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. 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 good quarter and a lot of important things to talk about today, so I'll turn the call over to Jose so we can get going. Jose?

Thanks, Mark. Good morning, and welcome to MOSTECH's 2022 third quarter call. Today, I'll 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 before getting into the quarterly details, I'd like to offer my perspective on where I think MOSTECH stands today. Just two short years ago on MOSTEC's 2020 third quarter call, we laid out a long-term goal of achieving annual revenue of $10 billion plus. It's important to remember, at that time, MOSTEC was on pace to generate just over $6 billion of revenue in 2020, with 28% of that coming from our oil and gas business. 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 outlook for pipeline projects entering 2021. Our ability to provide our $10 billion outlook was dependent on the strength we were seeing across our non-oil and gas businesses and our ability to expand our footprint and capabilities to capitalize on those markets. Considering 56% of our operational EBITDA in 2020 came from oil and gas, the growth of these other markets needed to happen not only quickly, but profitably. As a result, we focused heavily on growing our communications, power delivery, and clean energy businesses. Combined with investing heavily in growing our resources and capabilities organically, we made a number of acquisitions that have effectively transformed Maastricht into a leader in the energy space. With the acquisitions of Intran and Henkels & McCoy in 2021, And with the recent addition of IEA, we've positioned ourselves at the forefront of markets that have significant demand and growth opportunities. While we faced a number of challenges during this transformation, I truly believe that our third quarter results begin to show the potential of MOSTEC's long-term earnings power. I'd like to highlight some key financial accomplishments during the quarter. We now expect revenue to approach $9.7 billion in 2022, a 22% year-over-year increase, and are confident 2023 revenues will approach or exceed $13 billion, far exceeding our ambitious $10 billion goal set just two years ago. Our non-oil and gas segment revenues were up 38% year-over-year and represented 85% of revenue and 80% of operational EBITDA for the third quarter, significantly diversifying both our revenue and earnings mix. Our non-oil and gas segments achieved double-digit EBITDA margins, improving 250 basis points year over year and 370 basis points sequentially. Communication and power delivery EBITDA margins both exceeded 12%. While clean energy and infrastructure EBITDA margins were below our expectations, they did improve 170 basis points year over year and 550 basis points sequentially. And finally, backlog, not including IEA, is at record levels, and our second to third quarter backlog increased sequentially for the first time since 2018. In summary, while the quarter was not perfect, and quite frankly, we could have and should have done better, I do believe it properly reflects the cadence of improvements we had previously laid out. More importantly, we expect our non-oil and gas segments to perform very well in the fourth quarter and are very confident we will deliver solid fourth quarter improvements in our clean energy and infrastructure segment. Embedded in our results, we continue to make significant investments in growth. Demand for our services is incredibly high. and our prospects to deliver long-term revenue and earnings growth are, I believe, better than at any time in our history. I'd also like to take this opportunity to welcome the IEA team members to the MOSTEC family. The transaction, which is the largest in MOSTEC's history, closed a few weeks ago, and we look forward to playing a critical role in our country's energy transition. I'd like to highlight key points that I believe make this an excellent strategic fit for MOSTEC. First, it continues to grow our presence in the energy market and enhances our ESG profile in what we believe is an ongoing energy transformation related to both power generation and delivery as the country transitions to a carbon-neutral economy. Second, IEA's roots are those of a union renewable contractor. While Mostek had been an exclusively non-union renewables construction company, this transaction expands our renewable business into union markets. More importantly, it allows us to cross-sell complementary service to these same customers with the investments we made last year in growing our union transmission and distribution presence. Third, IEA adds nearly 6,000 team members in a market where skilled labor to serve a growing market is so scarce. In a challenging procurement and labor market, this added scale gives us the ability to more efficiently serve our customers with consistency at scale. Fourth, IEA is led by an excellent management team with deep generational roots in the business and a strong family-type culture with an emphasis on safety. Our cultures are similar and complementary. We believe with Maastricht's support, there are great opportunities for future growth and margin improvement. And fifth, IEA's civil and infrastructure business combined with Maastricht's civil and infrastructure business creates an improved competitor of size and added scale in yet another market that's undergoing strong growth with the benefit investments from the infrastructure bill. It's also important to note that we announced MOSFET's intention to acquire IEA on July 25th, and just two days later, on July 27th, the Inflation Reduction Act was announced. This piece of legislation contains nearly $370 billion in incentives that will directly impact the markets that MOSTEC serves. The acquisition of IEA significantly enhances the number of opportunities available to MOSTEC as a result of the Inflation Reduction Act. Now I'd like to cover some industry specifics. Our communications revenue for the quarter was $889 million, a 33% year-over-year increase, and we expect full-year revenues to grow by over 25%. EBITDA margins in this segment was 12.4%, 170 basis point improvement year over year, and a 200 basis point improvement sequentially. It's good to finally see the impact of the infrastructure growth associated with both 5G and the Rural Digital Opportunity Fund finally start to show up in our financials. Our growth in the quarter was driven by year over year growth of 33% with AT&T, 21% with Comcast, 50% with T-Mobile, 42% with Verizon, and strong increases with the number of RDoF-funded customers. In addition to the significant demand related to fiber opportunities, the 5G revolution continues to transform the communications ecosystem, requiring networks to be upgraded and expanded to meet the ever-increasing demand for data and Internet usage. Not only must new equipment be added to existing cell towers, millions of new small and micro cells must also be built and connected, including fiber and power. All of these new points of presence not only need to be built, but they will require ongoing maintenance and service, creating a significant long-term maintenance opportunity. Moving to our power delivery segment, revenue was $688 million versus $365 million in last year's third quarter. margins were up 460 basis points sequentially, and our outlook remained strong. We are in the midst of an energy transition in the United States, and our customers' focus on reliability, hardening, renewable connectivity, and meeting the challenges of providing power to customers for electric vehicle charging demand usage are transforming the grid. We believe the scale we have been able to achieve, along with our history of performance and safety, uniquely position us to play a significant role in helping meet the needs of utilities and energy developers. Moving to our clean energy and infrastructure segment, revenue was $563 million for the third quarter. Results for this segment do not include IEA, although a partial quarter for IEA will be included in our fourth quarter results. Backlog in this segment was at record levels and also did not include IEA backlog, which will be added in the fourth quarter. Despite the challenges we face this year in the renewable energy market with the Commerce Department solar panel investigation, demand is incredibly strong heading into 2023. We expect activity to further increase as the Inflation Reduction Act benefits begin to impact our business in the second half of 2023. We are in the very early innings of a dynamic market that will offer us tremendous opportunities for growth. We look forward, with a combination of IEA, to providing our customers with solutions at scale. The acquisition has been very well received by both existing and new customers and we believe that our cross-selling opportunities uniquely position us in this segment. Moving to our oil and gas segment, revenue was $376 million versus $858 million last year. Margins remained solid despite the significant revenue drop. Backlog was up year-over-year and sequentially. Last quarter, we announced our largest award in over three years. We have seen a significant uptick in project activity for 2023, 2024, and 2025 and expect backlog to materially build by year-end. We expect significant growth in this segment in 2023 with or without the completion of the Mountain Valley Pipeline. To recap, I'm incredibly proud of how we've transformed and transitioned Mostek over the last two years. I truly believe this quarter offers a glimpse of our potential as a company. Today, we enjoy a significant presence in some of the most resilient growth markets in our economy. We are honored to work with our customers supporting the need for bandwidth and communications and helping our energy customers as we transition to our carbon neutral economy. I'd like to take this opportunity to thank the men and women of MOSTEC for their performance and hard work. 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 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?