MasTec, Inc.

Welcome to Moss Tech's second quarter 2024 earnings conference call, initially broadcast on Friday, August 2nd, 2024. 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, Moss Tech's Vice President of Investor Relations. Mark?

Thanks, Samara, and good morning, everyone. Welcome to Moss Tech's 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 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, by management, we will 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 call today. The 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. Please note that we have two additional documents associated with today's webcast, which, along with the earnings press release, can be found on the investors' events and presentations page of our website at mostech.com. There is a companion presentation with information and analytics on the quarter just ended and a summary for Q3 and the balance of the year. This should help you with your models. Both PDF files are available for download. With us 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 opening remarks and analysis by Jose, followed by a financial review from Paul. These discussions will be followed by a Q&A period, and we expect the call to last about 60 minutes. We have a nice court and a lot of important things to talk about today, so I'll turn the call over to Jose now. Jose?

Thanks, Mark. Good morning and welcome to MOSTECH's 2024 second quarter call. Today, I'll be reviewing our second quarter results as well as providing my outlook for the markets we serve. First, some second quarter highlights. Revenue for the quarter was $3 billion. Adjusted EBITDA was $268 million. Adjusted earnings per share was $0.96. and backlog at quarter end was $13.3 billion, a $500 million sequential increase. In summary, we had another good and clean quarter. While revenues were slightly below expectations, margins were about 65 basis points better than expected. Solid margin performance in our communication and pipeline segments, coupled with solid improvements in our clean energy segment, were partially offset by some pressure in our power delivery segment. Our second quarter results, coupled with our full-year guidance, which is essentially unchanged, demonstrate both the improvements in our business over the last year and our confidence in the future. As a reminder, on our 2023 year-end call in February, we talked extensively about the signs of weakness we were seeing in electrical distribution spending. While some of the pressure continues, we're pleased that our diversification strategy and strength in other markets have allowed us to perform above expectations. Despite the short-term pressure in our power delivery segment, the longer-term outlook continues to get significantly better. The projected energy load growth in the U.S. will have a substantial impact on our business as our customers take advantage of this growth opportunity resulting in meaningful increases in investment in both generation and grid expansion. We are incredibly well positioned to take advantage of this opportunity. These opportunities, coupled with increased federal funding impacting our communications and infrastructure segments, along with an increased expectation that natural grass will play a larger role in energy generation going forward, provide us with unprecedented opportunities across our entire portfolio. I'd like to walk through a number of positive developments that I believe will have a significant impact on our ability to grow both revenues and earnings. First, in our power delivery segment. During the second quarter, MOSTEC was awarded a 700-mile high-voltage transmission and substation project. The project is expected to start in early 2025 and complete in 2028, with annual revenues projected to be in the $300 million to $500 million range. This project, one of the largest in the United States, represents a significant win for MOSTEC as a pursuit of large transmission project has been an important part of our strategy. We've made significant investments over the last few years to better position us to compete and win large projects, and this award is a great start. While there continues to be a number of large transmission opportunities in the near term, the reality is that to meet load growth expectations, transmission spending is going to have to meaningfully increase. While a major challenge has been the time involved in the development cycle for transmission projects, we are encouraged by recent proposed legislation in Washington. On Wednesday of this week, the Senate Energy and Natural Resources Committee, in a bipartisan 15-4 vote, passed the Energy Permitting Reform Act of 2024. The purpose of this bill is to accelerate the expansion and upgrade of the U.S. electricity grid. While the bill needs to make it through Congress and there will be challenges in an election year, it demonstrates the bipartisan awareness of the importance of this issue. We believe this is a great sign. In our communications segment, margins outperformed and we expect that trend to continue. Our second half growth is largely intact and we're encouraged by our progress in both the wireless and wireline markets. Our market share expansion with AT&T, coupled with the Nokia Ericsson swap-out, is on track for our second-half expectations, and we continue to experience strong growth opportunities in our wireline business. We expect second-half revenues in 2024 to grow organically by nearly 20% compared to last year. Looking ahead, BEDS funding is becoming clear as to both size and timing, and we expect it to have an impact on our business in 2025. There has been a number of new customer entrants to the market. Many are backed by private equity and very interested in our end-to-end solutions approach, which we believe gives them a competitive edge, thus providing a great opportunity for us. In our oil and gas pipeline segment, Revenues were slightly lower than expected as some projects shifted to the second half but margins outperformed. While backlog is down, demand is strong. We expect this segment to return to a more book and burn cadence as it relies less on larger projects. We are confident in the visibility we have in this segment for the next few years and we now believe that gas-fired generation will play a much larger role in helping meet load growth needs. Having good visibility over a multi-year timeframe is very different than where we've been in the last few years, and that gives us a lot of confidence about our business. Finally, in our clean energy and infrastructure segment, revenue was up 25% sequentially, and margins were in line with expectations. We had about a 1.2 times booked a bill in backlog for the segment, and most importantly, we have excellent visibility going forward. We're in great shape on project activity, and while we have a big ramp projected for the second half of the year, we're confident in our ability to hit it. We also expect continued backlog growth through the balance of the year and beyond. We continue to see really strong demand in both renewables and infrastructure projects, and based on expected wins in bookings, believe we're in great shape to show really strong growth in 2025. In infrastructure, the need for our nation and our states to invest in deferred infrastructure spending has never been greater. Infrastructure bill investments in highways, bridges, seaports, airports, and rail, coupled with significant increases in private spending related to site development, manufacturing, and data centers, is providing MOSFET's infrastructure business with exciting growth opportunities. Bid activity is very high, and on many opportunities, competition is limited. As it relates to renewables, we had a solid quarter of bookings, and we expect that trend to continue. On Nextera's recent earnings call, they stated that demand for renewables is expected to triple over the next seven years versus the prior seven. Let me repeat that, triple over the next seven years. While I believe we need to embrace all forms of electricity generation to meet the growing demands of both manufacturing and artificial intelligence, There is no faster alternative than deploying renewables with storage. During the last quarter, we have seen virtually all of our renewable customers, utilities as well as independent developers, position themselves to meet the growing demand of load growth through the deployment of renewables. We strongly believe that irrespective of the election and political dynamics, renewables are going to play a leading role in meeting our country's future energy needs. We at MOSTEC are incredibly well positioned to benefit from that for many years to come. In summary, we delivered another solid quarter and are off to a good start to the year. Our recent transmission project win is an important milestone for us and hopefully the beginning of many more future awards. This win coupled with the industry's need to meet the load growth demands, positions our power delivery segment to outperform for the foreseeable future. Our clean energy and infrastructure segment will also be a big beneficiary of the increased investments in power generation. Couple that with both the demand in telecom and the stability within our oil and gas pipeline segment, and I believe Maastricht has never been so well positioned. I'd like to take this opportunity 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?

Thank you, Jose, and good morning, everyone. To begin, a few second quarter highlights. We generated adjusted EBITDA of $268 million, exceeding guidance by $8 million, with margins 65 basis points ahead of expectations. This, despite revenue coming in about 4% below guidance. Our pipeline segment had a very strong quarter, and we were in line with our margin expectations in the other segments. Adjusted earnings per share was 96 cents, exceeding guidance by 8 cents, driven primarily by the adjusted EBITDA beat. We generated approximately $265 million of cash flow from operations in the quarter, despite 10% sequential revenue growth. Our improving margin profile and lower DSOs were the key drivers to the strong cash flow. Accordingly, we reduced net debt by approximately $200 million, with net leverage under 2.5 times. Eighteen-month backlog at Q2 totaled $13.3 billion, an increase of $500 million from the first quarter. This reflects an increase to record levels for each segment, except for pipeline, which continues the transition towards more book-and-burn activity with less reliance on larger projects. The main drivers of the overall increase in backlog were the large power delivery award, as they discussed earlier, and good bookings at CE&I. We also continue to see improving visibility towards higher volume next year in our communications segment. Now, I'd like to cover our segment's performance and expectations. Second quarter pipeline segment revenue was $572 million, with adjusted EBITDA of $135 million, or 23.6%. Revenue was slightly below forecast due to timing of project burn, but we continue to have strong performance across the broad mix of service offerings. MVP is now online with only right-of-way restoration activities remaining. We continue to see improving demand in this segment and now expect 2024 pipeline segment revenue to reach $2.1 billion, a $100 million increase from our prior guidance. Adjusted EBITDA margins for the full year are now expected to be in the high teens, improving 300 to 400 basis points versus 2023. For the third quarter, we expect revenue to be approximately $540 million with adjusted EBITDA margins also in the high teens. Second quarter communications revenue was $825 million with adjusted EBITDA margin of 9.9% ahead of our guidance. As we gain visibility towards the second half of 2024, we are reducing full-year segment revenue guidance by $50 million to $3.45 billion, but keeping our adjusted EBITDA forecast unchanged, with margins in the high single digits. For the third quarter, we anticipate revenue will be approximately $950 million, up 15% year-over-year, with adjusted EBITDA margins in the low double digits. We continue to see strong demand for both wireless and wireline services that are expected to continue to ramp in the second half of 2024 and be fully ramped in 2025. Communication segment backlog of $5.9 billion once again represents a new record. Second quarter power delivery segment revenue was $637 million and adjusted EBITDA margin was 8.1%. Revenue was slightly lower than expectations as we saw continued softness for distribution services with certain customers. We are excited to announce the signing of the significant transmission and substation contract, which provides excellent visibility and resource utilization for the next few years. The 18-month backlog for power delivery is about $3 billion, representing a record for this segment as well. Please note, our backlog only includes a portion of the new transmission award. For the full year, we are revising our forecast to reflect a slower recovery in demand for distribution services as certain customers continue to defer spending in the near term. We now expect segment revenue to be $2.5 billion, with adjusted EBITDA margins in the high single digits, or about 100 basis points lower than 2023. Our 2024 forecast does not include a significant contribution from emergency restoration services or the large transmission award noted earlier. While we are taking the temporary slowdown as an opportunity to evaluate our overall cost structure, we are highly confident these deferrals will alleviate, so we are being cautious to preserve capacity. Third quarter revenue is forecasted at $650 million, with adjusted EBITDA margins in line with the full year estimate. Second quarter clean energy and infrastructure segment revenue was $942 million, about $80 million below guidance, driven by timing of project starts, primarily in our civil infrastructure group. We expect to make up this revenue in the back half of 2024. Adjusted EBITDA margin was 5% for the quarter, in line with our forecasts. Backlog increased $160 million to approximately $3.7 billion, reflecting strong bookings for clean energy projects in the quarter. In addition to these awards, we are still working under limited notices to proceed on contracts with total value greater than $2 billion, the vast majority of which will be performed in 2025. Our full-year clean energy segment guidance remains unchanged at $4.4 billion of revenue with mid-single-digit adjusted EBITDA margins. Third quarter segment revenue is forecasted to be $1.3 billion, up 20% year-over-year, with adjusted EBITDA margins in the mid-single digits, improving approximately 100 basis points from Q2. On a consolidated basis, full-year revenue is now expected to be $12.4 billion, with adjusted EBITDA unchanged from our prior guidance at $975 million. Our consolidated second half outlook remains largely unchanged, with $6.75 billion of revenue and adjusted EBITDA margins of approximately 8%. We expect third quarter revenue to be $3.45 billion, with adjusted EBITDA of $295 million, or 8.6%. We are also raising our adjusted EPS estimates to $3.03 for the full year and $1.24 for the third quarter. We had very strong cash flow performance in Q2, generating $265 million of cash flow from operations, despite 10% sequential revenue growth. Our improved earnings and strong working capital management, with DSOs at 69 days, were key drivers. Liquidity stands at $1.8 billion, and net leverage is under 2.5 times. The expected second half of revenue growth will drive additional working capital investment, particularly in the third quarter, and our outlook assumes DSO in the mid-70s for the second half, an increase from the 69 days achieved during the second quarter. We now expect full-year cash flow from operations to be in the low $600 million range, exceeding our prior forecast of $550 million. In regards to our capital structure, in Q2, we completed a $550 million inaugural investment grade notes offering. to refinance our term loan maturing in 2025 and certain bonds we assumed with the acquisition of IEA. The financing was very well received by investors with a peak order book seven times oversubscribed. The new notes reduce interest rates by approximately 80 basis points versus the refinanced debt. Finally, as a reminder, you can find a guidance summary on our investment relations section of our website that summarizes our outlook and provides additional data points for modeling purposes. I'll now turn the call over to the operator for Q&A.

Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Please limit yourself to one question and one follow-up question. If you do have additional questions, you can rejoin the queue by pressing star 1. And we'll pause for just a moment to allow everyone an opportunity to signal for questions. We'll take our first question from Jamie Cook with Truist Securities. Please go ahead.

Hi, good morning and congrats on a nice quarter, considering the noise out there from some of your peers. But Jose, I guess my first question, congratulations on the large transmission win. If you could help us just understand the competitive environment with that project, sort of the comfort level with risk? And do we assume that's a margin that would be above segment level? Because I'm assuming there's probably a little more risk in there. And then just sort of what else is out there in 2024 that you could potentially book, which secures your visibility for 2025? And then my second question, cash flow guide is very strong this quarter. You're going to be under two times levered. Lots of growth opportunities, Jose, and you're always first. to sort of capitalize on that historically. Just wondering your appetite for M&A and where that would be. Would it be data center? Are you interested in PowerGen as that market could be coming back? Just trying to understand your thoughts there because you're usually, again, the first to go to market and get in front of people. Thank you.

Yeah, good morning, Jamie, and thanks for the question. I think a couple things. We've obviously been talking about our pursuit of large transmission projects for a long time. I think we feel great about this project. We're super excited. We're a little bit limited in what we're saying. We obviously haven't announced the name of the project, and we'll be making a joint announcement with the customer in the coming months as they finalize, really, the start date. So we're really excited. We think that... You know, we've gone after a number of these. We're really comfortable with the risk profile that we've taken. We think we understand the project really well. It's been a long pursuit for us and one that we're excited to get behind us. And I think it bodes incredibly well for us in the market, right? I think that, you know, obviously this is the largest transmission project we've ever won, and our ability to execute on it is going to really open a lot of doors for us. And, again, we're super excited. As it relates to our leverage project, You know, we're in great shape. You know, we've been talking about paying down debt over the course of the last year. I think we've made great strides. I think we're in a position, quite frankly, to do anything we want as it respects to M&A. With that said, I think we're really focused on organic growth. I think the organic opportunities in front of us are unbelievable, and I think that's our primary focus. I think we'll look at M&A maybe more for tuck-ins, for

um really opportunities to open markets that maybe we're not in but i don't think you should expect anything major from us on the m a side but but just to follow up the on the the transmission project is there anything else out there that you could book for 2024 or do we need to sort of get through this project before you know what i mean before we see incremental bookings on large transmission thanks

Well, no, there are a number of projects that are out there currently that we're chasing. Obviously, this is a project that's going to be built from 25 through 28. So, you know, this project by itself is going to give our group really nice growth opportunities. But we're not out of the market. There are a number of projects we're still competing. We hope to win more projects, and we hope this is just the start. of really what we've kind of been building up for. I mean, we made a number of acquisitions in 2022 to really position us to be in the space in a more meaningful way, and I think this is really the culmination and the beginning of starting that, of getting a first big win and really positioning ourselves in the marketplace as somebody that can and will do these on an ongoing basis.

Thank you, and congrats.

Thanks, Jamie.

We'll take our next question from Neil Mehta with Goldman Sachs. Please go ahead.

Yeah, good morning, Jose and team. Congrats on a strong quarter here. But my first question was just around the outlook for the communication segment. 2025 is going to be an important year in terms of that business. And so just curious about some of the moving pieces as we think about 25 versus 24 and then Anything about the multi-year outlook for that segment?

Yeah, good morning, Neil. I think we feel great about it. You know, we've talked about really double-digit growth in that business in 25. We're coming off in 24, just based on what's happened in the business over the last year with the awards that we got at the end of 23. We're still comfortable with that. Obviously, we're super excited about what BEADS funding is going to bring to the market. There's no question that, you know, with federal funding, sometimes there's delays, so there's, you know, we – We never expected beads to really impact our business in 24. We think it impacts our business in 25, but that's not the peak year, right? We think we begin to see it in 25. In our prepared remarks, we talked a little bit about the types of customers that are entering the market. We've got a lot of private equity-backed customers that are starting to overbuild and build their own fiber-to-the-home systems. Uh, we think we're incredibly well positioned to offer them services that others can't. So we're really bullish on the business. We think 25 is going to be a great year, much better than 24, both from a revenue and a margin perspective. And we think that only builds in 26 and beyond.

Okay. That's helpful. And then, uh, follow up as you had mentioned, uh, on the distribution side, some deferral of spend. And we've seen that with some of your, your peers as well. Um, and, uh, It's just difficult to reconcile with the fact that we need to spend so much to keep our grid in good shape here with the oncoming growth and power demand. So what's driving that? Is that a function of regulatory outcomes or timing and just your perspective on how this evolves here as we go into 2025? Yeah.

Look, I think that so much is around rate cases, and there's a lot of rate cases that either started this year are going to start next year. Utilities have been impacted by both inflation and supply chain increases over the course of the last couple of years. They're looking for recovery. We're seeing a concerted effort on transmission and generation, so I do think we're going to see massive increases in both on the utility side and on the distribution side. I think it all catches up right at the end of the day as these rate cases get defined. I think they're going to get what they need, and we're going to see it get back to the levels that we were expecting. In the meantime, we haven't seen a heavy storm season yet. We're expected to be a really strong storm season, and I think the challenge is And restoring those systems are going to create a lot of pressure on the utilities, especially if they begin to underspend in distribution. So I think this is a momentary issue that we will get through. It doesn't make sense when you think about what's happening at the macro level with the load growth demands that are coming. And I think the utilities are going to feel that pressure and eventually be forced to not only invest in distribution, but more importantly, invest in both generation and transmission.

Yeah, common sense should prevail.

Thanks, Jose. Thanks, Neil.

We'll take our next question from Sanjita Jain with KeyBank. Please go ahead.

Hi, good morning. Thank you for taking my questions. So, Jose, if I can ask you one more on the transmission project. Do you feel like you have all the necessary state and federal permits to start construction in early 2025, or are they still being lined up?

Well, I think all these projects, you know, they kind of start when the permits are all ready. So there are still a handful of permits that are being secured. We expect them to be secured by the end of the year and the project to start at the beginning of the year. And I think as we make progress there, that's when you'll see us do a joint announcement with our customer.

Great. And on clean energy, I just kind of wanted to see how you're positioned for the rest of the year, given all the policy headwinds. Do you feel like you have to book more work to meet your guidance, or are you comfortable with what you have in backlog to meet your guidance for the rest of the year?

It's a great question. We obviously have a big ramp in the second half versus the first half. We feel that at this point, all of the projects that we need to meet that ramp, we have. So we do not feel that we need to book any new work or unidentified work to meet our projections for 2024. Obviously, we're still super bullish, and I think Paul alluded to, you know, what we're seeing in the bidding market there. We expect backlog to continue to increase, which is going to position us incredibly well for 2025. So I know there's a lot of noise out there. I know there's a lot of concerns. But, you know, quite frankly, we don't see it. We think the demand is off the charts. We think there's tremendous opportunities out there. And we're really bullish, not just for the balance of 24, but quite frankly, going into 25, what we're seeing in that market.

Thank you so much.

Thank you.

And we'll take our next question from Alex Regal with B. Riley. Please go ahead.

Thank you. Good morning, Jose. Nice quarter. Morning, Alex. Hey, as you think about the communications segment, there's a bit of a mix shift here as we enter 2025 from kind of traditional tower construction and mature telco and cable company kind of wireline work to equipment change out, bead projects with a lot of new entrants. So if that's the case, how might we think about the margin profile in communications over the next couple of years?

We're really proud of the margins that we delivered in Q2 relative to the expectations. We were slightly better. We've talked a lot in the past about when our comms margins were at 12% to 13%. We think that that's doable again. We're obviously in a growth cycle right now. It's going to take a little bit of time to get to a steady state, but I do think that margin profile is available, and I do think that across the industry, not just in Maastricht, but across the industry, you're going to see continued margin appreciation in telecom.

And congratulations on that power delivery project. Super exciting to see it start in 2025. Margins historically in power delivery have been in the high single digits. As we look out into 2025 and beyond, Do you think the volume of work you could be capturing now might allow you to raise your sort of margin profile to that double-digit level longer term?

I mean, I think the short answer is absolutely. When you look at the evolution of our power delivery segment, again, it kind of started – Through a number of acquisitions a few years ago, you know, we were very public about the margin profile of those acquisitions. We think we've done a really good job at improving those margins. But at the end of the day, it's about scale, right? And I think we're getting to that point where we're building the scale that we need. to deliver double-digit margins, which we think is quite custom throughout the peer group. We think we'll achieve that. We think we're getting close. We were hopeful that margins would do better than they have in 24. Obviously, the challenges in the distribution market have impacted our margins for 24, but we're really bullish about what our positioning is in the market and our ability to continue to improve those margins as the next couple years roll along.

Thank you. Thanks, Alex.

And we'll take our next question from Andy Kaplowitz with Citigroup. Please go ahead.

Good morning, everyone.

Good morning, Andy.

Good morning, Andy. Jose, you raised your oil and gas revenue and margin forecast for 24, and we know you have a number of Permian projects that can move forward over the next few quarters. Obviously, there's a focus on natural gas, as you talked about. You know, the election's out there. Maybe it changes the landscape. But Could you actually maintain your 24 revenue level moving forward even without an MVP-type project? And can you sustain margins at these higher levels that you're now doing moving forward?

Yeah, so look, we think it's a really active market. I think on our last call we talked about our belief that we can maintain this $2 billion-ish level for the foreseeable future without any really large projects. We continue to believe that, so we think 25 is going to be a very stable year. We also think that there's some things that could potentially improve that, right? There are some larger type projects being talked about. We have some of these, you know, alternative type projects, like some of these CO2 and hydrogen projects that we think could meaningfully move that industry as well. So we're really bullish, a lot more bullish than we've been about the future of that business. You know, I don't know that a lot of that hits in 25. I think 25 is a stable year. But I do think beyond 25, there's some really good opportunities to significantly expand on that market.

Thanks for that, Jose. And then, you know, we're about 10 questions in and we still haven't had a question on data centers yet. So let's move into the state of the market, but maybe you can update us on what's going on for you guys there. I think last quarter you told us you completed 150 million of work. You know, there's about a billion dollars of RFPs out there. So how has the market developed for you? Is this, you know, a 25 opportunity for you? How should we think about it for you guys?

So I think it's developing as we expected, right? We expect to do a couple hundred million dollars in 24 still on data center work. We're hoping that that number significantly increases in 25. The opportunities are there. We're in the middle of what we think is a pretty hefty bid cycle right now, so we'll know more in the coming months. But look, I know we didn't use the words data center, but the reality is that data centers is driving so many pieces of our business, right? We think that You know, what we've learned, and I think it continues to evolve, but what we're learning is it's all about power, right? It's all about the ability to power these data centers. That's going to be, you know, ultimately, you know, how fast this moves ahead is all going to be centered around power. And that significantly impacts our business, right, from all the way from generation to power delivery. And, you know, on both sides of it, we think we're incredibly well positioned. We think it's going to add tremendous growth opportunities to our customer base. which then forces them to spend a lot more capital on the types of projects that we do. And I feel like so much of what we do every day is really around having those conversations, talking to people on both sides, both on the data center or hyperscaler side versus the utility side, understanding how everybody's attacking it and then trying to position ourselves in the best manner to win. So I feel great. I think there's going to be a lot more opportunities than we've even talked about to date. and we've really got to position ourselves to take advantage of that. But I think it's going to be a huge opportunity for companies in our space.

Appreciate it, Jose.

Thanks, Andy.

We'll take our next question from Justin Hockey with Robert W. Baird. Please go ahead.

Great. Yeah, no, I just wanted to ask a couple more on the transmission project as well, given that that is new. I mean, something you guys have talked about wanting to be in for a while. I was just curious, I mean, is that fully, you know, sole sourced from you or some of that being subcontracted out? And I guess if it is, I mean, just the, you know, I guess just the visibility you have on that and even just the labor capacity you have to do some of that work, given that it's a little bit different on the high-voltage side versus maybe some of the work that you guys have generally done in that segment?

Well, I want to clarify a couple things. One is we've done a lot of high-voltage transmission work. It's been an important part of our business for a long time. We've just come off of a handful of really successful projects in the last couple years that I think gave our customers the confidence in our ability to perform and do these kind of projects. So we feel we're you know, extremely qualified to do this, and we've done a lot of it. So I don't want anybody to believe that this is something new or something different than what we've done. Obviously, the size and scale is different, but we've been, you know, we think we're really good at doing this type of business, and we've proven that, you know, time and time again. This project is a sole source project, and again, it's one that, you know, we think we've got the labor and the equipment to perform. So we're, again, we're super excited. We think we're super ready and can't wait to to execute on the project and show what we can do.

Okay, great. Yeah, looking forward to seeing that start and learning a little bit more about what it actually is. I guess the second one, I guess staying in this general topic, but on the regulatory challenges in distribution, is that still really just confined to Illinois for you, or are you seeing it in other geographies and customers kind of beyond what you talked about before? And then just one last little just I guess addendum to that, but on the storm work, did you guys do anything storm restoration for Hurricane Beryl last month? Thanks.

Yeah, so a couple things. If you look at rate cases around the country, they're not just in Illinois, right? There's rate cases everywhere. I think that the challenges have been more widespread than Illinois. I think we've got a number of peers that have announced earnings in the last two weeks that have, I think, talked about that ad nauseum. So there is weaknesses in other places outside of Illinois for different reasons. And in some places, we haven't seen as much weakness. So it is geographical. But I do think, you know, it's... And I think it's three big issues, right? It's rate cases, it's inflation, it's been the cost creep of the supply chain over time, and ultimately how our utility is going to be reimbursed by that within their state. So everybody's working on that a little bit different. Again, I think it all gets resolved, and we're going to see a significant increase to spending again, but that's kind of the world that we're living in right now. And the second part of the question? Yeah. On the hurricane, you know, we didn't, you know, in the southern Texas area, which is where it really impacted on the Centerpoint side, we didn't really do much with Centerpoint.

So we were not very active on that storm, no.

Okay, great. Thank you very much. Thanks, Justin.

And we'll take our next question from Stephen Fisher with UBS. Please go ahead.

Patrick Corbett- Thanks good morning, I just wanted to follow up on the outlook for clean energy bookings and particularly renewables curious how far out your solar backlog. Patrick Corbett- extends at this point, because I think part of what you had visibility on into 2025 before was maybe contributing to your expectation for for double digit growth there and. Are you expecting to book anything notable in clean energy in the second half of this year?

Sure. I'd say a few things.

Unlike a lot of the equipment suppliers, when we book something, it's a lot closer to the actual start time of construction. There's a big difference between what we include in backlog and the visibility that we have as a company. We have a number of customers where we've talked about multi-year outlooks, where we have really good visibility into what we think we will build for them, not only in 25, but actually in 26 and beyond. The reality is that none of that shows up in backlog. So a lot of the commentary and the confidence that we have in our business has nothing to do with the backlog numbers. It has to do with the conversations that we're having with key customers about multi-year outlooks. Unfortunately, that just doesn't show up in backlog. It only shows up in backlog when a project's about to start. So our backlog today doesn't really include any work that goes beyond 2025. First, because it's only for 18 months, so as a matter of fact, it won't include anything. But second, we wouldn't we wouldn't call backlog a lot of these projects so what we have in backlog is short-term we do expect to win a considerable amount of work in the second half of this year that will solidify our 2025 pipeline and give I think really good color into what 25 will look like for us so we don't really again we don't need to win a lot or anything to complete our 24 year and So that we've kind of booked. We've got it in backlog. We're working off that. Now it's all about building for 25, and I think we'll be able to demonstrate that over the next couple quarters. And, again, just on the dialogue that we're having with our customers, it's why we're so confident for a much longer period than just the 18-month backlog.

That's great. And then just my follow-up is it's nice to see that you're getting to the point of really starting to deliver these clean energy projects for the second half of this year. So as you move into that, kind of what steps are you taking to ensure, you know, that good delivery is going to be as expected? And, you know, how should we think about the supply chain and kind of the preparation of your teams to be able to deliver as expected?

it's a great question and it's one that you know obviously we've been focused on since the day we bought IEA This is what it's been all about. We've really been in a position, we think, to execute at this level for a long period of time. Unfortunately, last year, we didn't have the work to deliver on it. This year, we've got the backlog and the work to deliver. Our teams are ready. We're operationally focused. That's where all of our focus goes into today. We're very confident in our ability to execute. We can't wait to demonstrate it over the course of the next six months, but that's what our business is all about today. We think that on the front end, on the business development side and the booking side, we're in a very different place than we were a year ago. We've held on to the right resources to be able to execute on the work, and that's the stage that we're in today. And, again, we're super excited about getting there versus where we were at last year.

Great. Thanks, Jose.

Thanks, Steve.

And we'll take our next question from Adam Tallhammer with Thompson Davis. Please go ahead.

Morning, guys. Great quarter. Jose, you mentioned looking at infrastructure jobs with limited competition, and I'm curious what you're seeing there and what sized project you'd be comfortable with.

Yeah, Adam, look, our infrastructure business is now approaching $2 billion. It's a combination of both our legacy Mossack infrastructure business with the infrastructure business that we picked up with IEA. I think we've been surprised at the performance of the business since we acquired it. It's actually outperformed segment margins since the acquisition. I think we've been really surprised by the opportunity set and the fact of how rapidly it's expanding. You know, we're seeing very limited competition across a number of different geographies on large projects, and I think we've gained a lot of confidence on our ability to execute. So, you know, it's outperforming what I expected. I think we're gaining a lot more confidence in our ability to invest in that business and grow that business, and I think it's going to be a much bigger part of Moss Tech's future than maybe what we originally anticipated. So... I still think it's early. I think that, you know, hopefully over the coming quarters we'll be able to get deeper into the question that you just asked, which is the types and size of projects that we're willing to go after. There's actually a lot going on there, but we'd rather talk about it when we think we've had some wins and feel good about being able to publicly talk about it.

Okay. And the $2 billion of limited notice to proceed and clean energy, has that been stable? Are those – Are those projects delayed, or are they just moving through the normal course, moving towards construction?

Yeah, the $2 billion that we have today is very different than the $2 billion that we had six months ago, right? So the projects are converting to backlog, so they start with a limited notice to proceed. It eventually books into backlog, and then new projects are coming in to limited notice to proceed. So the $2 billion that we have today is actually completely different than the $2 billion that we had before. you know, six months ago. I don't remember specifically all of those projects from a quarter ago, but it's an ever-transitioning list. So, you know, it's really the list that it hits before it hits backlog, and I think it's been very active, very healthy, and we continue to see that trend.

Good. Thanks, Heather. Thanks, Adam.

And our last question comes from Brian Brophy with Stifel. Please go ahead.

Thanks. Good morning, everybody. Appreciate you taking the question. I guess, could you remind us, just to get on the large transmission project one here, historically what kind of margins have you had on these large transmission projects? And is there any reason to assume this one is going to be materially different?

Yeah, so we believe that all of the large transmission projects, the ones that we've completed to date and the ones that, you know, either we're contracted to do or hopefully will do, all have the ability to hit double-digit margins. You know, at different points in time, you know, a project may not meet its objectives, but for the most part, we think that they're very healthy projects, they have very healthy margin potential, and it's all about our ability to execute it. So our expectation on that project would be that, you know, when it's all said and done that we've delivered you know, hopefully at or above double-digit margins.

Okay, that's helpful. And then you also called out some civil project starts getting delayed a little bit here in the second quarter. Is there anything specific to call out there? And I assume those projects are starting here in the second half. How should we be thinking about those? Thanks.

Yeah, some of it is, you know, is government work. You know, we picked up, you know, a significant... civil business that has some, you know, highway and projects associated with it and stuff. And it's just normal delays. So it's just projects that started a little bit behind schedule. We've said we're going to make it up in the second half. So those projects will just accelerate a little bit as it relates to construction. So really just tweaking, nothing, you know, nothing meaningful.

Appreciate it. Thank you. Thanks, Brian.

And at this time, I'll turn the conference back to Jose Mas for any additional or closing remarks.

Just want to thank everybody for their interest in MOSTEC, and we look forward to updating you on our performance on our next quarterly call.

Thank you.

And this concludes today's call. Thank you for your participation. You may now disconnect.