MasTec, Inc.

Please stand by, we're about to begin. Welcome to Mass Tech's first quarter 2023 earnings conference call. Initially broadcast on Friday, May 5th, 2023. 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, Mass Tech's Vice President of Investor Relations. Mark?

Thanks, Allie, and good morning, everyone. Welcome to MOSTEC's first quarter 2023 conference 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 MOSTEC'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 SEC filings. 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 these communications. In today's remarks by 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 the 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 release as well. Today we have Jose Mas, our Chief Executive Officer, and Paul DeMarco, our EVP and Chief Financial Officer. The format of the call will be open remarks and analysis by Jose followed by a financial review from Paul. We have posted a new guidance fact sheet and earnings presentation to the investor relations section of our website just below the webcast link. The earnings presentation is also embedded in our webcast audio page and can be downloaded there as well. These discussions will be followed by a Q&A session, and we expect the call to last about 60 minutes. We have another good quarter with a lot of important things to talk about, so I'm going to go ahead and hand it over to Jose. Jose? Thanks, Mark.

Good morning, and welcome to Moss Tech's 2023 first quarter call. Today, I will 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 $2,585,000,000. Adjusted EBITDA was $102,000,000. Adjusted earnings per share was negative $0.54. And backlog at quarter end was $13.9 billion, a record level. In summary, results were in line with revenue, EBITDA, and EPS slightly ahead of our expectations. Before getting into specifics, I'd like to offer my perspective on Maastricht's business today. Over the course of the last few years, we've talked extensively about our initiatives to diversify the business and reduce our exposure to the oil and gas markets. Since 2021, we've worked hard, both organically and acquisitively, to position MOSTEC to take advantage of the significant opportunities in the markets we serve, and I'd like to quickly highlight the progress we've made. Just 16 months ago, we ended 2021 with just over $5.4 billion of non-oil and gas revenues. This year, we expect non-oil and gas revenues to be just over $11.5 billion, more than double 2021. This is a significant transition in just two years, and I'd like to highlight the progress we've made in each of our segments. Our communications segments revenue is expected to grow to approximately $3.6 billion this year, compared to just under $2.6 billion in 2021. a nearly 40% increase over the last two years. Despite this aggressive, mostly organic growth rate, we expect to deliver continued margin improvements over both 2021 and 2022. Our power delivery segment generated just over a billion dollars of revenue in 2021. Early in 2021, we made our first large transmission and distribution acquisition. And this year, we expect the segment to generate approximately $3 billion in revenue. That's a threefold increase over the last two years, and margins are expected to grow year over year. We're now in the second year of operations of our acquired businesses, and while we're pleased with our performance, we know there are lots of areas for improvement. Our clean energy and infrastructure segment... which generated just under $2 billion of revenue in 2021, is expected to do $5 billion this year. The acquisition late last year of IEA doubled our market presence, and while we have a lot of work to do to improve efficiency and continue to make our offering more competitive, the opportunities that we've been able to cultivate post-transaction are significantly better than our original expectations. In the slide deck we provided today, we have a slide on near-term revenue opportunity levels by segment. Our clean energy and infrastructure segment shows our largest near-term potential. While our $6 billion target is unchanged from previous drafts, the potential for achieving that target as early as 2024 has significantly increased. While we're pleased with our progress across these segments, The best part of our story is the continued opportunities we have to continue to grow our business. While we continue to face some challenges around supply chain, permitting, and higher interest costs, the long-term demand of our services is incredibly strong. Across all of our segments, we are working with our customers on long-term plans and are engaged in a number of very large opportunities. We believe the transition we've made into diversifying our services, coupled with the macro trends, particularly in both broadband infrastructure and the energy markets, gives us excellent visibility into future revenue and earnings growth. Now I'd like to cover some industry specifics. Our communications revenue for the quarter was $807 million, a 21% year-over-year increase. Backlog for the segment at quarter end was $5.6 billion, a record level. We are experiencing a significant amount of demand related to fiber expansion opportunities from our customers, and we continue to invest in increasing our capabilities as we expect this demand to continue to increase over the coming years. While we are seeing the impact of current funding related to RDOF, the Rural Digital Opportunity Fund, the amount of federal grants available to the industry are going to exponentially increase with the Infrastructure Bill and Inflation Reduction Act. 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 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 $709 million versus $650 million in last year's first quarter. 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. With our integration efforts of our acquired assets over the last two years mostly complete, we are now focused on growth off of our current base and on driving margin improvements throughout the organization. We expect organic double-digit revenue growth in 2023 with slightly improved margins for the year and are confident in our ability to improve margins to the low double-digit range over the next few years. We have significant near and long-term opportunities related to growing our transmission business and have been investing heavily in resources and equipment. We recently began construction on a multi-hundred million dollar 500 kV transmission project. The project got off to a great start and we feel we are well positioned for future growth. Moving to our clean energy and infrastructure segment, Revenue was $825 million for the first quarter versus $436 million in the prior year. Most of the increase was due to the acquisition of IEA. EBITDA for the quarter was 1.3% and was below our expectations. It's important to note that on a pro forma basis, last year's first quarter EBITDA in this segment would have been negative 1% as IEA had reported a $17 million EBITDA loss. While margins showed nice pro forma year-over-year improvement, IEA still had a loss, and while it was much improved, it was below our original estimates leading into the year. Margins at IEA were impacted by delayed project starts and supply chain delays, which created project inefficiencies. As we think about the balance of the year in clean energy, we are confident about our ability to achieve $5 billion in annual revenue. This would compare to roughly $4.4 billion on a pro forma basis for full year 2022 and represent about 15% organic growth on a pro forma look. Backlog increased $319 million sequentially in this segment, and while at record levels, we expect significant backlog build over the coming quarters. While our margin guidance for this segment is mid to high 6%, we are confident margins will improve and approach double digits over the next year or two. We have the scale to flex considerably, and as I stated earlier, our visibility to reaching our stated $6 billion revenue goal is much clearer. With increased utilization, the overall demand of the market and our customers' desire to lock in resources earlier, we feel we are really well positioned to profitably serve the market. While early in our integration efforts, we are confident that we are mining tremendous synergies, both operationally and financially, and believe we are truly building a differentiated service and product for our customers. Moving to our oil and gas segment, revenue was $257 million versus $211 million last year. EBITDA was generally in line and was impacted by lower utilization as we ramp up for increased activity for the balance of the year. Backlog in this segment was up almost $300 million sequentially, and second quarter revenues are expected to increase by nearly 50% with further growth in the third quarter. As we've previously shared, future project activity is 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 2023 revenue level. While we expect revenue to grow by over 20% in 2023 versus 2022, We still believe this year's revenue continues to be a low watermark and are confident we have solid growth opportunities as newer fuel sources are transported by pipelines. To recap, we've started the year as planned, and I am confident our financial results this year will begin to demonstrate MOSTECH's potential. I truly believe that we are just beginning to see the impact of the significant transformation we've accomplished over the last few years, and I'm excited about what the future holds for MOSTEC. I'd like to thank the men and women of MOSTEC. 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. I'll now turn the call over to Paul for our financial review. Paul? Thanks, Jose, and good morning, everyone.