Q4 2021 MasTec Inc Earnings Call
Welcome to Mastec fourth quarter 2021 earnings conference call initially broadcast on Friday February 25th 2022.
Let me remind participants that today's call is being recorded.
At this time I would like to turn the call over to our host Marc Lewis <unk>, Vice President of Investor Relations Mark <unk>.
Thank you Christina and good morning, everyone welcome to <unk> fourth quarter earnings call.
The following statement is made pursuant to the safe Harbor for forward looking statements describe 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 <unk> future results plans and anticipated credits in the industries, where we operate these forward looking statements of the company's expectations on the day of initial broadcast of this conference call and the company does not undertake to update these expectations based on subsequent events or knowledge.
Risks uncertainties and assumptions are detailed in our press release.
Filings with the SEC.
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 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 on this call a reconciliation of any non-GAAP financial measures not reconciled in these comments is most comparable GAAP measure.
<unk> measure can be found in yesterday's Q4 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 about how is this all about accurate review from George These discussions will be followed by Q&A period, and we expect to call to last about 60 minutes, we haven't.
Great quarter.
Having more things to talk about today, so I'll turn it over to Jose.
Thanks, Mark Good morning, and welcome to <unk> 2021, fourth quarter and year end call.
Today, I'll be reviewing our fourth quarter and full year results as well as providing my outlook for 2022 and the markets we serve.
Like to start today by thanking the men and women of mostek their sacrifices and hard work helped us achieve another record year of revenue and EBITDA.
I'm honored and privileged to lead such a great group.
The men and women of Mostek 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 outstanding financial results in a challenging environment and position ourselves for continued growth and success now.
Now some fourth quarter highlights revenue was $1 8 billion.
Fourth quarter, adjusted EBITDA was $219 million in fourth quarter, adjusted EPS was $1 35.
For the full year 2021 revenue was $8 billion.
2021, adjusted EBITDA was $931 million to.
2021 for the full year adjusted earnings per share was $5.58.
And cash flow from operations for the year was approximately $800 million.
In summary, we had a good quarter and another great year.
While quarterly results were generally in line, we enjoyed solid quarterly year over year growth in our non oil and gas segments with revenues, increasing 43% and non oil and gas EBITDA, increasing 75% during this year's fourth quarter compared to last year's fourth quarter.
With that said, we were impacted by both inflation and supply chain issues in our business rare.
Revenue would have been higher and was impacted by delayed material availability, causing project delays, primarily in our communications and clean energy segments.
I'd also like to point out that our fourth quarter EBITDA was achieved despite a year over year oil and gas EBITDA reduction of nearly $115 million.
As we've discussed over the last year, our priority and focus in master has been to diversify our business and grow our non oil and gas segments and really transform our earnings mix.
Our true success in 2021 irrespective of our financial performance was our ability to position our company for significant long term growth and earnings potential.
For 2022, we expect our non oil and gas segment, we expect our oil and gas segment to be our smallest revenue generating segment and comprise no more than 20% of revenue.
We expect our communications power delivery and clean energy segments to collectively grow revenue by approximately 50% compared to 2021 and EBITDA by almost 85%.
While we would obviously like to see the transition happen faster and quite frankly with less hiccups along the way. We are convinced that domestic up tomorrow is much better positioned to enjoy growth opportunities and margin expansion opportunities than we've ever been.
Before getting into segment specifics I'd like to touch on 2022 guidance for a moment.
Just over a year ago towards the end of 2020 and still in the middle of the pandemic and in the midst of a changing and challenging oil and gas environment, we laid out a path and a goal to ultimately achieving a $10 billion revenue run rate.
While the goal is longer term in nature in 2021, we made a number of acquisitions that we think position us very differently and have significantly improved our growth potential.
Today, we are excited and proud that our 2022 revenue guidance is approximately $10 billion in revenue.
I can guarantee you that when we laid out that goal in 2020, we didn't think we'd be here 15 months later.
More importantly, as we dissect the revenue guide we are confident and optimistic that every segment will enjoy further growth in 2023 and beyond.
The size and number of opportunities continues to grow and expand we are responding to this opportunity and continue to invest in our business.
Full year EBITDA guidance is approximately $950 million.
Assumptions in the guidance include oil and gas revenue, reducing by approximately $600 million and an.
<unk> $275 million reduction in EBITDA.
The reduction in revenue was offset by approximately $1 5 billion in revenue associated from the <unk> acquisition that we announced in December and over 20% growth in each of the other non oil and gas segments.
The EBITDA offset is comprised by the acquired Henkel EBITDA and margin improvements in each segment that George will cover later.
Our revenue guidance today assumes low double digit year over year growth in the first half of the year, mostly the impact of the acquisitions and then over 35% year over year growth in the second half of 2022.
Our first quarter on a year over year basis is impacted by a reduction of $508 million in revenue in oil and gas and a $143 million EBITDA reduction in the segment.
This reduction was caused by a delay on the mountain Valley pipeline, which was supposed to originally start in February our guidance now assumes activity late in the year.
As 2022 progresses I am confident we will be able to demonstrate the improved growth opportunities and margin in our business as we prepare for significant growth during the year, we will exit 2022 at a very strong run rate, which will set us up for a very strong 2023, now I'd like to cover some industry specific.
<unk>.
Our communications revenue for the quarter was 682 million, a 20% year over year increase and a sequential increase over the third quarter, which is atypical during the fourth quarter and early in the first we have expanded into 18, new geographic wireline fiber markets, which will represent over $125 million.
Of our 2022 segment growth in addition to strong expansion in our current markets.
We have also continued to diversify and grow our wireless operations and experienced solid growth in 2021 with T mobile Verizon and dish network, just yesterday dish network announced their intent to launch markets by June of 2022 today.
Today, we are working in 17 of those markets as.
As AT&T increases its build plan towards the second half of 2022, we will have a much broader and diversified service offering with all of the major carriers and are very active build cycle.
We expect 2022 communication revenues to grow nearly 25% year over year back.
Backlog is up over 20% year over year to a record level of $4 5 billion and while we have seen some impact from the rule opportunity fund the vast majority of infrastructure and rural dollars available for broadband expansion have yet to be awarded weak.
We continue to enjoy significant growth opportunities in the segment and are working with a number of customers as they work through their future build plans.
Moving to our oil and gas pipeline segment.
Revenue for the quarter was $335 million versus $600 million last year margins were again strong for the quarter as mix was favorable looking ahead at 2022 guidance is $1 eight to $1 9 billion, which includes a couple of hundred million dollars from the <unk> acquisition.
We expect 2022 to be a trough year in this segment.
While commodity prices have significantly increased and we believe the need and demand for infrastructure will increase reactivating projects as time consuming making 2022 projects.
Starts difficult.
For example customers are facing challenges with tight delivery schedules based on supply chain issues with that said we are in a number of discussions with customers about projects. We believe will be built in 'twenty three and beyond.
We expect award activity to pick up significantly in the second half of 2022.
Awards, 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.
Moving to our power delivery segment revenue was $285 million versus $126 million in last year's fourth quarter. The growth was largely driven by the <unk> acquisition at.
At year end, we announced the acquisition of Henkels <unk> Mccoy one of the largest private electrical power transmission and distribution utility contractors in the United States with the combined acquisitions. During 2021, we are transforming this segment into a significant growth engine for master with significant margin expansion opportunities in 2020.
This segment generated just over $500 million of revenue in.
In 2022, we expect revenue for this segment of over $2 5 billion. This segment.
Will represent over 25% of <unk> revenue more importantly, 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.
Your hardening renewable connectivity, including both wind and solar and growth in electrical vehicle usage, our combined service offerings allow us to provide our customers with cost effective solutions at scale to meet their demands while early in our integration efforts feedback from our customers have been excellent and we look forward to providing a.
<unk> solution in the market.
I'd also like to take this opportunity to again welcome all of the Henkels <unk> Mccoy team members to the Master family, while it's only been two months I believe the energy and collaboration have been very motivating and I can say with confidence after having spent time with their members that the benefits and potential of this transaction are far greater than we expected.
Moving to our clean energy and infrastructure segment revenue was $515 million for the fourth quarter versus $346 million in last year's fourth quarter.
EBITDA margins improved to six 8% in the fourth quarter versus last year's fourth quarter of three 2% and sequentially from two 7% while.
While margins were much improved we did have a couple of projects slip due to material deliveries in 2022, we expect another strong year of growth with growth approaching 25% and full year margins approaching 7%.
While backlog is up nearly 50% year over year. The reality is backlog doesn't reflect the true strength of the market.
We are working under a number of <unk> limited notice to proceeds while we finalized pricing and schedules and the value captured in backlog is only a fraction of the total contract value.
Outstanding Verbal awards and negotiations actually exceed the total backlog for the segment.
This level of activity is without infrastructure related data.
That had not yet been allocated we expect that to be yet another catalyst for our infrastructure business. We believe our diversification is our strength in this segment and we are capable of meeting any of our customers demands. We are actively working on renewable projects, including wind solar and biomass base load gas generation.
<unk>, 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 Mostek as <unk>.
<unk> positioned to benefit from these investments.
To recap we had another great year.
While times can be challenging and uncertain opportunities always arise from these challenges our customers are looking for ways to change and improve their business models and are looking for strong partners to help them in that lies our opportunity our greatest strength has been to understand the trends in our industry and our customers needs our ability to provide services, whether existing or new is.
Always been a strength I am excited for what the future holds for master.
To again, thank the men and women of Mastec for their commitment to safety their hard work and their sacrifices keep up the good work I'll now turn the call over to George for our financial review George.
Thanks, Jose and good morning, everyone.
Today I'll cover our 2021 fourth quarter and annual financial results as well as our updated 2022 guidance.
As Marc indicated at the beginning of the call our discussion of financial results and guidance will include non-GAAP adjusted earnings and adjusted EBITDA.
Reconciliation and details of non-GAAP measures can be found on our press release.
Fourth quarter results were generally in line with our guidance with a 10, 5% increase in revenue to $1 8 billion.
Adjusted EBITDA of approximately $219 million and.
And adjusted EBITDA margin rate at 12, 1% of revenue.
Fourth quarter 2008, one diluted earnings were $1 35 per adjusted diluted share <unk> <unk> per share above our guidance.
These results capped a strong year with record annual 2021 revenue, increasing 26% and approximating $8 billion.
And record adjusted EBITDA at $931 million or 11, 7% of revenue.
As expected fourth quarter 2021, non oil and gas segment results showed significant improvement with revenue growing 43% or $440 million over the prior year.
And adjusted EBITDA, growing 75% or $56 million.
On a rate basis year over year, non oil and gas segment results improved 170 basis points to eight 9% of revenue.
On a sequential basis non oil and gas segment adjusted EBITDA margin rate results improved approximately 120 basis points over the third quarter, despite slightly lower revenue levels.
As we've indicated in the past Mega trends and telecom wireline and wireless as well as in power generation and delivery as a nation moves towards carbon neutrality provide significant growth opportunities across our non oil and gas segments and we expect continued improvement in these segments.
During 2022 and beyond.
We continued our strong cash flow from operations performance during the fourth quarter and generated $793 million in cash flow from operations for the annual 2021 period.
Importantly, despite approximately $1 $5 billion in 2021 acquisition investments.
We ended the year with ample liquidity over $1 billion.
And comfortable leverage metrics.
And a testament to the strength of <unk> cash flow profile and working capital management.
We are proud that Moody's.
S&P and Fitch have all recently granted us an investment grade credit rating. Despite the significant 2021 cash outflows for M&A.
Now I will cover some more detail regarding our segment results and expectations.
Fourth quarter Communications revenue was $682 million.
With an adjusted EBITDA margin rate of 11, 2% of revenue a slight improvement over the same period last year and a sequential improvement of 50 basis points when compared to the third quarter.
Annual Communications segment revenue was $2 $5 5 billion and adjusted EBITDA margin rate was 10, 6% of revenue.
As we look forward, we expect that annual 2022 communications segment revenue will range between $3 one to $3 2 billion.
A 20% to 25% growth over 2021.
Annual 2022, adjusted EBITDA margin rate is expected in the low to mid 11% range.
We expect slower first half 2022 year over year Communications segment revenue growth somewhere in the high teens to low 20% range.
With accelerating second half 2022 year over year revenue growth in the mid to high 20% range.
First half 2022 communications segment adjusted EBITDA margin rate is expected in the high single digit to low double digit range.
With second half 2022, adjusted EBITDA margin rate expected to accelerate in the mid to high 12% range.
With an expected first half 'twenty two results.
We expect meaningfully lower revenue and adjusted EBITDA margin rate performance in the first quarter.
Due to the combination of wireless revenue pushing out of the quarter.
New market startup costs, as we initiate new Argos wireline market operations and the impact of low margin acquired Henkels <unk> Mccoy revenue.
We also expect ramping revenue growth and adjusted EBITDA margin rate performance thereafter, as the year progresses.
Fourth quarter clean energy and infrastructure segment or clean energy revenue was $515 million and adjusted EBITDA was approximately $34 7 million or six 8% of revenue.
Annual clean energy segment revenue was approximately $1 9 billion in.
And adjusted EBITDA margin rate was 4% of revenue.
Fourth quarter clean energy revenue grew 49% over last year and.
And adjusted EBITDA margin rate grew 360 basis points to a 2021 high of six 8% of revenue.
Sequentially clean energy segment, adjusted EBITDA margin rate improved 410 basis points over the third quarter.
As we look forward, we expect that annual 2020 to clean energy segment revenue will range between $2 three to $2 4 billion based on our updated view of project timing.
Annual 2022, adjusted EBITDA margin rate is expected in the mid six to low 7% range, a substantial improvement compared to 2021.
We expect stronger year over year, 2022 revenue growth and adjusted EBITDA margin rate performance in the second and third quarters based on project timing and seasonality.
Fourth quarter oil and gas segment revenue was $335 million and adjusted EBITDA was approximately $81 3 million.
As expected this was a substantial year over year decrease with fourth quarter, adjusted EBITDA decreasing $115 million when compared to the fourth quarter last year.
Annual 2021 oil and gas segment revenue was approximately $2 5 billion with adjusted EBITDA margin rate or 21, 9% of revenue.
As we look forward, we expect that annual 2022 oil and gas segment revenue will decrease and range between $1 eight to $1 9 billion.
Annual 2022, adjusted EBITDA margin rate is expected in the mid teens.
Based on currently expected project timing, we expect a meaningful shift in first half 2022 revenue when compared to the same period last year.
First half 2022 revenue segment revenue is expected to range between $500 million to $600 million.
And first half 2022, adjusted EBITDA margin rate is expected in the low double digit range.
We expect significant revenue and adjusted EBITDA margin rate ramp up during the second half of 2022.
With second half 2022 revenue ranging between one two to $1 3 billion.
And based on this revenue expansion second half 2022 oil and gas segment adjusted EBITDA margin rate in the mid to high teens.
As noted in our prior calls we believe that a number of green shoots exist for this segment with future opportunities for both hydrocarbon and carbon capture pipeline services expected to develop and be awarded during 2022.
Giving this segment significant growth opportunity in 2023.
During the fourth quarter, we renamed our electrical transmissions segment to power delivery to better reflect our expanded service offerings and capacity and the utility service market, including electrical and gas distribution as a result of recent acquisition activity.
We believe that our recently expanded operations, coupled with our existing operations provide a compelling suite of service offerings to support our customers' needs as they work to transition to renewable power generation.
For the sake of clarity based on the timing of acquisition closings fourth quarter acquisition activity had no impact on fourth quarter power delivery segment operating results.
Fourth quarter power delivery segment revenue was $285 million and adjusted EBITDA margin rate was seven 1% of revenue.
This represented a 650 basis point improvement over last year's fourth quarter results.
Annual 2021 power delivery segment revenue was approximately $1 billion with annual adjusted EBITDA margin rate at six 7% of revenue.
It is worth noting that second half 2021, adjusted EBITDA margin rate for this segment was eight 5% of revenue.
A 460 basis point improvement over last year's second half.
And meaningfully higher than the annual 2021, adjusted EBITDA margin rate of six 7%.
As we look forward, we expect that annual 2022 power delivery segment revenue inclusive of fourth quarter 2021 acquisition activity.
Will range between $2 5 million to $2 6 billion.
Annual 2022, adjusted EBITDA margin rate is expected in the high single to low double digit percent range, a substantial improvement compared to 2021.
Fourth quarter corporate segment results were a cost of approximately $4 million as we benefited from expected legal and earn out settlements.
Annual 2021, corporate segment results were cost of $72 million or <unk> 91 basis points.
When combined with income from investments as shown in our other segment.
The combined annual 2021, corporate and other segment impact was a net cost of 48 basis points.
In line with our expectation.
As we indicated during the henkels acquisition call.
We will integrate corporate functions over the course of 2022.
And expect higher annual 2022 corporate costs, while this process is underway.
Annual 2022 corporate segment costs are expected to approximate 120 to 125 basis points.
On a combined basis 2022, corporate segment costs and income from investments as reported in our other segment is expected to approximate a net cost of 90% to 95 basis points, which equates to approximately 50 basis point increase over annual.
2021 levels.
We expect that these costs will eventually normalize back to 2021 levels as cost rationalization efforts occur during the year.
While we are early in this process. Our initial estimate is that we will incur acquisition integration costs of approximately $40 million over the course of 2022.
Now I will discuss a summary of our top 10 largest customers for the annual 2021 period as a percentage of revenue.
Enbridge was 16% of revenue.
Newly defined AT&T services totaled 9% of revenue.
As previously indicated in our third quarter filings reported at AT&T revenue amounts have been reclassified to exclude Directv services for all periods. As this entity has been spun off into a separate third party entity.
Revenue performed for AT&T includes wireless wireline and other services, including Smart city deployment projects.
Nextera energy was 7% of revenue comprising service services across multiple segments, including clean energy communications and power delivery.
Comcast <unk>.
<unk> midstream and Duke energy were each 4% of revenue.
Directv was 3% and T mobile Verizon Communications and Exelon Corporation were each 2% of revenue.
Individual construction projects comprised 62% of our annual 2021 revenue with Master service agreements comprising 38%.
With the combination of expected resurgence and wireless MSA work.
With intron and henkels acquisitions, whose revenues are primarily MSA driven.
We expect annual 2022 revenue from recurring type MSA work will substantially increase and approached 50% of our total revenue.
Lastly, as we've indicated for years backlog can be lumpy as large contracts burn off each quarter and new large contract awards only come into backlog at a single point in time.
As of December 31, 2021, we had record total backlog of approximately $9 9 billion.
Sequentially up $1 4 billion and up approximately.
<unk> 2 billion when compared to the same period last year.
Importantly, communications and clean energy segment's backlog, both represented record fourth quarter levels, reflecting the continued strength in these growing end markets.
Fourth quarter 'twenty, one power delivery segment backlog was approximately $2 9 billion a sequential growth of approximately $1 $5 billion with this.
Increase primarily due to our fourth quarter acquisition of angles.
Now I'll discuss cash flow liquidity, working capital usage and capital investments.
We ended 2021 with $1 1 billion in liquidity and net debt defined as total debt less cash and cash equivalents at $1 $65 billion.
Which equates to a $1 eight times leverage metric on a standalone basic basis and this metric is even lower if the pro forma benefit of fourth quarter acquisition EBITDA is considered.
By any measure.
Year end 2021 liquidity and leverage metrics are very comfortable as reflected by our recent investment grade ratings.
It is worth noting that our strong cash flow metrics as of year end 2021 include over $600 million.
And fourth quarter cash acquisition outflow.
Annual 2021 cash provided by operating activities was approximately $793 million.
We ended the fourth quarter of 2021 with Dsos at 77 days, excluding the impact of fourth quarter acquisitions compared to 86 days last year.
As we look forward to 2022, we continue with the anticipation that our DSO target range will continue in the mid to high Eighty's.
We are proud of the strength resilience and consistency of <unk> cash flow profile.
In summary, our long term capital structure is extremely solid with low interest rates no significant near term maturities and ample liquidity, giving us full flexibility to take advantage of any potential growth opportunities.
Maximize shareholder value.
Moving to our 2022 guidance view, we project annual 2020 through revenue of approximately $9 95 billion.
With adjusted EBITDA of $950 million or nine 6% of revenue.
And diluted earnings of $5 32 per adjusted diluted share.
These measures are essentially unchanged from our 2022 expectation communicated with the henkels acquisition in December .
For the first quarter, we expect revenue of $1 8 billion.
With adjusted EBITDA of $90 million or 5% of revenue and adjusted diluted loss of <unk> 12 per share.
This represents a $114 million decrease in first quarter adjusted EBITDA when compared to the same period last year.
This decline is due to the combination of the seasonally slow quarter.
A meaningful shift in oil and gas project activity, including the delayed start of the MVP pipeline project.
Timing of other project shifts and the impact of selected low margin revenue from fourth quarter 2021 acquisitions.
More specifically.
Due to the project timing shifts first quarter 2022 oil and gas segment revenue is expected to approximate $200 million.
With adjusted EBITDA in the low double digit range.
This creates a significant first quarter 2022 year over year decline in both revenue and adjusted EBITDA.
First quarter results are embedded in our annual 'twenty two guidance view for this segment of one eight to $1 $9 billion in annual revenue at a mid teens adjusted EBITDA margin rate.
First quarter 2022 communications segment results will be impacted by the negative impact of wireless revenue pushing out of the quarter.
New art off wireline market startup costs as well as the impact of acquired Henkels Telecom revenue with low project margins and a high overhead.
Accordingly, first quarter 2022 Communications segment adjusted EBITDA is uniquely expected to decrease on a year over year basis, when compared to the first quarter of 2021.
All of these factors are expected to subside beginning in the second quarter.
And consequently, we expect sequential improvement during the second quarter with a strong second half of 2022.
Again first quarter results are embedded in our 2022 guidance view of three one to $3 $2 billion in annual revenue.
And an adjusted EBITDA margin rate in the low to mid <unk>.
As we have previously provided color regarding our annual 2022 segment expectations I will briefly cover some other annual guidance expectations for modeling purposes.
We anticipate net cash capex spending in 2022 at approximately $100 million with an.
<unk> $200 million to $220 million to be incurred under finance leases and this level includes some initial capex investments for recent fourth quarter acquisitions.
We expect annual 2022 interest expense levels to approximate 60 $67 million.
For modeling purposes, we estimate our 'twenty two 2022 share count at $76 1 million shares and this includes shares issued in connection with the fourth quarter Henkels acquisition.
We expect annual 2022 depreciation expense to approximate three 5% of revenue.
And lastly, we expect annual 2022 adjusted income tax rate will approximate 24%.
This concludes our remarks and now I will turn the call back to the operator for our Q&A operator.
Thank you if you would like to ask a question. Please signal by pressing star one on your telephone keypad.
You are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment. As a reminder, please limit yourself to one question and one follow up question you may rejoin the queue for additional questions again press star one to ask a question.
And we will take our first question from Steven Fisher with UBS.
Thanks, Good morning, so it sounds like.
Theres a variety of issues weighing on the first quarter here Im wondering just how much visibility do you actually have to to some of these challenges moderating and then normalizing.
The time, we get into the second quarter.
Yeah sure Steve So.
When we think about early 2022, and we kind of compare it to historical especially 'twenty one right. The biggest the biggest challenge that we're facing in Q1 on a year over year basis.
Our oil and gas business right I mean, if you look at last year's EBITDA, we did $203 million of EBITDA in the first quarter of 168 million came from our oil and gas business. So if you look at our non oil and gas business on a year over year basis from 'twenty, one to 'twenty two it's almost doubling right with that said it should have been better and we get that so there are some <unk>.
<unk> clean energy and communications that we thought would have made that number slightly better in Q1, but the biggest issue. We have in Q1 on a year over year basis is what's happening in the oil and gas business and really the push out of MVP, which was a big part of our original expectations in Q1.
So.
As we think about the full year it doesn't really change our view on the full year, we've got excellent visibility until on the full year plans of our customers.
And all of our non oil and gas segment. So if we talk about communications in them and the things that are impacting it and the opportunities that exist with our customers. We talked about in the prepared remarks, we have 35, new markets that we've opened in that business between the fourth quarter and the first quarter. Obviously, there is some financial challenges with opening that many offices early but the rep.
The new opportunities that are going to flow through for the balance of the year are quite clear and visible to us when we look at clean energy and the projects that we've signed with our customers that we're working on with our customers. The reality is the amount of activity there.
We think we've got a conservative guide for the year based on we have concerns around supply chain and some of those things we've built that into our forecast. So the reality is if everything went our way in our revenues in that segment would be substantially higher for the full year, what we've kind of embedded that through the year. So I think if we knew 'twenty two is going to be a difficult year in oil and gas we knew it was going to be.
Transition year, and I think it obviously demonstrates in a big way in Q1, but.
But I feel really confident as the year progresses that the rest of the businesses will perform.
So that's helpful. And then just a follow up there on the oil and gas I.
I guess, how much confidence do you have that that MVP is actually going to start on schedule again, what needs to really happened there.
And what are these other award this year as expected the second half in that segment of the confidence of the customer is actually going to move forward.
Yes, so a couple of things right. When we talk about the second half awards, which which were actually a lot more bullish about today than we've been we haven't included any of those revenues within our expectations for 2022 right. So our 22 year is really based on work that we have on hand.
Some small obviously, there's always small work that pops in that you kind of anticipate but that's kind of how we've guided 22 now within that guidance. There is there is a lot for MVP, obviously, because we're planning the completed so we're hopeful that if MVP doesn't kick off some of these other projects that were expecting might have early starts that might make up for us with that said right.
If you listen to Echo trends I mean, they're working really hard to figure out how to get that project restarted.
We've got a lot of work to do that really isn't impacted by some of the things that have happened.
But again.
There's been a lot of recent developments on that debt.
<unk>.
And we'll defer to them as they talked publicly about it but we're still very confident that that project will ultimately get built. The question is how much of it happens in 'twenty, two and how much pushes out into 'twenty three.
Thanks Jose.
Steve.
We will take our next question from Marc Bianchi with Cowen.
Hey, Thanks, sorry about that.
I guess the.
Back to the second half.
Vacation here, yes.
Yes, Theres, a theres a lot of weight in the in the second half for you guys. Here you just went through and a lot of detail on oil and gas.
Just maybe.
Talk through some of the risk factors if you could so.
We're sitting here in 90 days from now.
And guidance as being either upgraded or downgraded.
The kind of the top one two or three variables that.
Will contribute to a change.
Sure So mark we think about.
Not just the second half of the year, but really the.
How revenue goes into the second quarter and so if you look at our communications business, we've got a pretty significant ramp from Q1 to Q2.
Which we feel comfortable about we've got revenues, increasing almost $200 million between that timeframe and then another $100 million into Q3, so even if even if you split it and you said $1 50, a quarter thats really not completely atypical from where we've been historically the good part about that is we've got the work we've got the work orders.
Obviously, we've got to work through the material deliveries to make sure all of that is there, but we feel very confident that.
We've made the right decisions and we've hired the people and put the plans in place to be able to execute on that and if you look at clean energy. It's similar right. We've got a ramp from Q1 to Q2 of almost $150 million. A further ramp in Q3 to about 100 per month up to about $100 million. All of that is identified with customers that are awarded work.
We've gone through those project and assessed where they are from a permitting perspective material perspective, and we've made our best estimates relative to that today.
Like I said to Steve one of the things that we're pretty excited about is.
If you look at clean energy if everything went our way there is substantially more revenue that we could accomplish in 'twenty two and I think we've been very conservative in how we've looked at it looking at the second third and fourth quarter.
On a year over year comparison, our first quarter is actually almost double from an earnings perspective from a non oil and gas environment I know, it's not enough, it's not where we want to be but I do think it's important to note that.
Great.
And then the second half.
And I know this isn't.
There is a fair amount of seasonality that the business has and maybe the second half is generally higher than the first half because of the seasonality effects.
If I just kind of annualize, where you are here, where youre sort of pointing us for the second half it looks like revenues.
A lot of information from George that I still need to unpack, but it looks like revenues may be $11 5 billion on an annualized basis and ebitdas maybe in the in the one three range.
As you.
Step into 'twenty three.
What would you sort of point to as moving those numbers up or down.
And also curious if you kind of agree with that quick math on the second half.
I'll, let George address the second half when we when we talk about 'twenty three I think.
If you look at our full year 'twenty two when you look at what's happening right.
Our oil and gas business will be down about $900 million organically. So if you take where we finished 21 and we've guided to 'twenty two or 'twenty. Two guidance includes about $200 million of oil and gas work from ankles. So if you back that out on a pure organic basis were down $900 million. If you look at our non oil and gas segments organically right there.
They are growing about $900 million and the balances are acquisition revenue that that gets us to where we need to get to right. So.
We feel really comfortable that thats going to play out right and again, we've kind of done this on a project by project basis working ourselves all the way up I think the important part of that story. When you look beyond 'twenty. Two is the fact that we think our business has the ability to grow by over $1 billion as we will demonstrate in 'twenty. Two I think we'll demonstrated again in.
'twenty, three which gives us significant confidence as to the profile that we laid out.
Just taking a step back a few months ago, we laid out a longer term range of.
$3 to $3 5 billion and our power delivery business three to three and a half dozen or clean energy segment $3 five to foreign comms and one five to two and pipeline and I think that.
The reality is at the lower end of those ranges. We think are very achievable in 2003, just based on the growth rates that we expect in 2022 on a non all on a non oil and gas businesses, George and I'll talk about second half yes.
Really happens and this is not unusual as typically our second half of the year has a higher revenue component than our first half and say for 2022 that might be a little bit more pronounced because of the shift that's happening in oil and gas, but across most of our businesses. When you look at communications are all the other ones really really that's not an unusual fact.
Factor in typically leads to more than.
If we're looking at the year I'd say somewhere in the high 50% to low 60% range of the revenue was done in the second half of the year and it's closer to the 40 something percent in the first half.
And Thats the expectation again this year and when you look at some of the things we've talked about ex oil and gas right on the communication side, we've talked about.
Certain things that are really going to be ramping up here as we move out throughout the year. Both in terms of new markets that are starting up and also wireless wireless spending thats really ramping in the second starting in the second quarter into the second half. They are all they are all really in our minds very clear and evident right in terms of the trends that are happening and that's what's baked into our guidance view, which we feel very.
Comfortable with for second half of the year.
Got it thanks, so much guys.
Thank you.
And we will take our next question from Fahad Nadeem with Goldman Sachs.
Hey, good morning, guys.
Yeah.
So first I wanted to ask about the timing on some of the delays related to materials availability in communications and clean energy. So can you provide some details on what parts of the businesses are being most affected like in clean energy that centered more on solar or really across wind biomass in the construction piece as well and then communications is there kind of a difference between.
The wireless and wireline or is it also more broad base.
I guess the easy answer is it's pretty broad base to give certain examples if we think about our communications businesses.
Z part about it is it's not the it's not the big items right wireless it's not the radios.
It's not the fiber and wireline, but its the miscellaneous type supplies that are becoming harder to get the jumpers and wireless the pedestals and hand holes on the wireline side. So it's stuff that.
I don't I think theyre going to be easier to fix right I think they are.
There are supply chain issues that are more transitory in nature, when when usually you worry about the major supplies.
And some of the smaller stuff that I think has been having a bigger impact when we think about clean energy.
Obviously the biggest.
Biggest concern and that business is probably the panels on the solar side.
But a lot of the same issues rollout of the miner.
Minor material might be missing and obviously delays a project makes you jump around a little bit some of those things our customers are responsible for so we've got obviously ways too to offset that but from a schedule perspective. It delays you and it doesn't allow you to capture revenues of the way that we can so look I think everybody is really mindful.
More of it and I think what's happening in the market as everybody is waiting to start to make sure that they don't want to start with things that are missing, which I think is the right thing to do.
But what that does is it puts some pushing projects starts back a little bit, but I think the good thing is once you start on these projects you don't have the starts and stops and I do think thats really important from a from an earnings perspective.
We're encouraging our clients and our customers to do that as well and I think that's currently what's happening and it's part of the reason for some of the push.
Into Q2 and in the second half of the year.
Got it. Thanks, Thanks for that color and then just as a follow up on the guidance for power delivery in light of the Asian acquisitions can you talk to some of the assumptions that are baked in to the AGM piece of the margin guide specifically.
And relatively lower.
Our margins last year and you have more since the acquisition have you all learned more on kind of what drove the margin difference between <unk> and legacy MOSFET side, maybe some some specific troubled projects.
It's a great question right. So when when when we announced the <unk> acquisition, we talked about roughly 4% to 5% EBITDA margins.
If we talk about think about using the $70 million number on a full year basis.
They have multiple businesses right. So we've kind of split them within our business, there's going to be a component that falls in communication of components. It falls in oil and gas and a component that falls in power delivery I mean, the reality is that their best margin component of the three is power delivery. So it's it's having more of an impact on our communications margins quite frankly in our oil and gas.
<unk> on our power delivery side.
They're not at the same level that we were but there are a lot closer.
And then they have a very high corporate cost.
This is also reflected I think George spoke about that in the comments. So as we look at it it's probably.
The strongest of the three and probably the most important because it's where we think we'll end up growing the most.
From a <unk>.
Integration perspective, maybe just to touch on that.
We couldnt be more excited we've learned a lot more about the company in two months, we think the opportunities far outweigh anything we could have imagine going into this.
Again, we almost feel like.
What we've included in our annual guide is somewhat conservative we think that.
Overtime, and Theyre not too distant future, we will be able to get them to 8% to 10% EBITDA margins, which is a substantial increase from where they've been.
It's going to be hard to get there in 2022, because we got a lot of things, we need to clean up and work on but when we look at 'twenty three and beyond we are super excited about what we think we can accomplish there and quite frankly, we're hopeful to some of the earlier questions about what could what could positively impact our year right. It's outperforming what we are guiding there.
And being able to.
Take advantage of some of the synergies and some of the things that we see there in terms of improving the business faster than we expected.
Thanks, a lot I'll turn it over.
And we'll take our next question from Jamie Cook with Credit Suisse.
Hi, excuse me hi, good morning, I guess two questions one.
Jose or or or George I'm, just trying to understand better the EBITDA ramp for 2022. So can you just help me I think the second quarter is critical.
EBITDA to be up year over year flat any color on the second quarter just given.
The weak start to 2022, and then I'll ask my follow up after that thanks.
So if you look at Q2, we're expecting to be slightly under where we were in the previous year. A lot of that is also going to be driven by oil and gas rate oil and gas, we probably think we'll be down about $100 million and we should be down somewhere between 25 to 50 in the second quarter on a year over year basis. So a lot closer to where we were last year offset.
A lot of the oil and gas.
Drop off with the rest of the business, Yes, Jamie we'll certainly see some improvement on the communications side.
With more dollars versus last year for sure improve rate certainly in.
And then I think that what we're seeing is again.
Our non oil and gas segments that those items in the second half of the year continue to ramp and express themselves more fully right. So we have a couple of things going on in the first half of the year, we have a bigger much bigger drop happening in the oil and gas space year over year, which is impacting our total numbers that is that's less pronounced much less pronounced than the second.
Half of the year, and then you add to that that the non oil and gas segments are improving each quarter and they continue to improve from Q2 to three to four and the combination is where you end up with the the mixed guide that we have in the second half.
Okay. Thank you and then I guess the other thing that sort of struck me about your guide is the communication margins in the back half of the year.
Finally coming in at a very healthy rate. So I guess my question is will you probably don't want to talk to 2023, given the revenue trajectory.
Yes, better utilization and projects ramping to what degree of those margins and communication sort of structurally at a higher level as we think about going into 2023. Thank you.
It's a good question and it's something we should achieve right. So if you look at the second half of the year, we should we should be north of 12, and both of those quarters and I think thats a.
A proper estimate to take into 'twenty three on a full year basis.
Okay. Thank you thanks.
Thanks, Jamie.
We'll take our next question from Noelle Dilts with Stifel.
Hi, yes, thanks for taking my question.
I had a question on communications.
So on an 18 on At&t's call they talked a bit about that.
This idea that they would ramp on fiber deployments in late spring early summer.
<unk> became available for this recently awarded option when 10 spectrum and then they could do a single tower climb for the C. Band Spectrum Award last year is that really what we should think about as kind of key factor in at&t's timing.
Being the availability of these radios any thoughts on that would be great. Thanks.
So I think it's both of the things that you mentioned Noelle.
I'm not we're not actually very worried about the radio supply chain.
I think that.
It's been somewhat delayed so I think there's plenty of time for that to work its way through the system. The bigger issue is their desire to do.
The double spectrum on the one tower climb and I think thats, where theyre going to end up in <unk>.
Once they start we think.
It's going to have a huge impact on our business because we've obviously been waiting for them to get going for a long time and I think once they get going it is going to be a meaningful shift of our business and it's going to last for a really long time. So we're excited that at least we have clear direction. Obviously, we would've loved for it to started faster and is part of what's going on with our first half of the year, but.
They have been.
I don't think there could be any more specific than the comments that he made yesterday and I think thats, what we expect and again once it starts so we're pretty excited about what that means for us.
Okay, Great and then could you just expand upon the type of work you have remaining for MVP is it.
It's still just mostly water crossings that has to get done.
Obviously, the difficulty with MVP is a couple of miles that are that are really causing a lot of the angst and issues. There is a lot more to do than that.
Don't want to publicly get into because I don't know what our customer has said publicly so I'm going to refrain from talking specifics, but there's and there's a lot of work that we can do that isn't really impacted by the decisions of some work that we can't do that is impacted by the decisions.
What they ultimately decide to do relative to the full route is going to depend on when we start and how quickly we finish in again.
There's been a lot of change in that here in the last few weeks.
So we've kind of really push that way deep into the year and.
I think we've got to make up for it we've got opportunities to do that and we'll be really forthright as we know more but right now we're going to defer to them to make comments on on the construct ability and where they are.
Okay. Thank you.
Thanks, Paul.
And we will take our next question from Andy Kaplowitz with Citigroup.
Good morning, everyone.
Good morning, Andy.
Could you give us a little more color on what's happening in clean energy you did seem to improve margin in bidding Q4, I think you gave that 7% margin guidance for 2002. So would you say that you've gotten over the hump in terms of margin performance in the segment and then obviously, there's been a fair amount of consternation and wind markets given the PTC uncertainty. So I know you're still forecasting almost 25.
Revenue growth for the segment, but what's embedded in your outlook for wind.
Yeah, So Andy I guess to start with margins right I mean, it's not.
The challenge with the businesses margins arent constant right. So we're not going to even though we say 7% for the year. It is seasonal right first quarter is going to be lower because there was a number.
They do a lot of work in the north that's impacted by weather. So margins will be lower in Q1 will pick up in Q2, there will be strongest in Q3, there should be strong in Q4 and the blend of that we think will be seven right for the year or close to it.
And we are.
We've worked it up on a project by project basis to get there.
Our view on wind is when we'll be down in 'twenty two versus 21. It was down in 'twenty, one versus 'twenty solar is going to be way up for us.
And the reality is like I said earlier, we've taken very conservative views on the revenue.
Attain ability so if things went our way revenues are going to be substantially higher in this business and what we forecasted 23 should be an incredible year relative to bookings and what we're seeing from customers.
And long term our view Hasnt changed right. We think this we don't think 7% is the right margin profile for the business, where we're growing it.
A considerable rates and that growth is coming out of cost we're doing it predominantly organically which is expensive.
But we think when we look at the outer years, it's going to be a business thats going to approach double digit margins with very very strong revenue. So I think the earnings potential in the business over the next few years is fantastic.
And I think the problem projects that probably depressed margins.
Through 'twenty, one that we've talked about.
For all intents and purposes are behind US right, we might have a little bit of bleed into Q1, and we had some in Q4, but outside of that those projects will be done.
Quite frankly the.
The project mix right now is really good we're performing at really high levels across our full book of business and we're pretty excited about that and if we can continue on that.
Again, I think the second half of the year going into 'twenty three is going to be fantastic.
And Jose maybe you could give us some more color sorry go ahead.
No it's <unk> here.
Got it.
So maybe you can give us more color on the new Ida setup that you have how much is it costing you in Q1 and then all this extra fiber activity. I mean, you were bullish on fiber of a floor, but that seems like a new level of activity does any of that has to deal with sort of infrastructure money coming in later this year 23.
Yes, what we're gearing for a today is based on money that's already been awarded it was part of the original our Doctor Islands.
The truth is that and this is our challenge right that the opportunity subset only continues to increase.
We're in discussions for certain things.
That are really meaningful that could have a very meaningful impact to our business and the reality is we don't have that embedded so we've taken we've taken our full year guidance and we're talking about low to mid elevens and thats, probably lower than what we've talked about in the past and the reason for that is we're investing in the business because we expect a lot more growth in what we'll even see in 'twenty two and.
Offices, obviously when you started office. It's expensive you don't have a lot of revenue coming in Europe Youre gearing up in your first few months are tough and that's kind of what we're seeing we saw some of that in Q4, we're going to see more of that in Q1, I think it begins to subside in Q2, as you actually ramping and running on those projects. So.
We think we're making the right decisions for the long term of the business in the long term opportunities in the business, but it obviously comes at a short term cost.
And we understand the frustration that exists in the market relative to margins right. Both in communications and clean energy, but again, we think that the.
Market affords the opportunity right now to invest in these businesses in a meaningful way, we think we're going to get a great return on that investment we've decided to do this predominantly organically, which is a lot more expensive, but over time, a lot more valuable and that's kind of what youre seeing in both of those segments.
I appreciate it.
Thanks, Andy.
And we'll take our next question from Justin Hauke with Robert Baird.
Yes, hi, good morning.
So most of my questions are answered.
The question I guess I had was relative to the guidance framework.
Gains back in late December .
Where the EBITDA was on the higher end as can be closer to $1 billion I'm just trying to understand.
Including the incremental weakness in oil and gas and.
Communications is that.
More a reflection of both your organic portfolio, Ian Nicholson Mccoy or is it a function of just getting closer to what was already known as kind of the challenges of vehicles.
Portfolio that you were bringing in in those specific verticals I am just trying to understand if it's a general.
Maybe just where the source of that.
The moderation is.
Look in communications that probably has a little bit more of an impact because.
Although the revenues arent that big it's from a margin perspective. It has a slight impact I think volume is really what's driving the early.
Issues right with the margin profile in that segment.
<unk>, obviously is in helping relative to that from an oil and gas perspective, I think it's a more macro issue right as we as we look at 'twenty. Two we just we know it's going to be difficult.
Yeah.
It's almost scary to say, but.
There is an enormous amount of demand and interest in <unk>.
And gas projects that we haven't seen in a long time.
And we're very bullish that a lot of these projects are going to come to fruition and theyre pretty exciting, but the reality is we think the likelihood of that happening in any meaningful way in 'twenty two is pretty low because of all of the issues that exist in the market and in the supply chain issues that exist, we think it bodes incredibly well for 'twenty three but.
'twenty two is challenging and quite frankly as MVP moves there's not a lot of opportunities to make up that revenue.
With the level of work that exists out there. So it is having a bigger impact on us than than we probably would've would've wanted.
But that's all embedded in the numbers that we've laid out today.
Okay.
And then maybe just asking one one other question on MVP to the extent you can answer it. This way maybe just because it is a discrete project and something you are calling out maybe just how much revenue is embedded in your 2002 outlook specific to that project. So that we kind of have something to add.
No.
Faces further delay.
How sensitive is your guidance to it.
Yes, it's a tough question to answer because we think theres opportunities to offset some of that revenue in the back end of the year, which we didn't include in guidance, we have I'd say about $500 million and anticipated MVP revenues that either we would have to do some work on them or fill that with something else.
The reality is that the revenues will never be zero, because they've got an active pipeline. That's under construction that they have to maintain so theres a level of service that we will always provide on that job, but those are that's kind of what's baked in at this point.
Okay. That's helpful. Thank you.
Thank you.
We will take our next question from Adam <unk> with Thompson Davis.
Hey, Good morning, guys just one question.
On five G. Jose you talked about AT&T can you round out the discussion and just kind of give us a little insight into <unk>.
Verizon and T mobile and dish.
Yes, Thanks Adam.
Look I think AT&T, obviously, we've talked about it's going to be a second half builds.
I think T mobile.
I'm not 100% certain but I think this was the first time that T mobile hit our top 10 customer list I think.
That our growth with T. Mobile in 2021 was exceptional I think our business with them going into 'twenty. Two is going to be really strong. We're super excited about what they mean to us as a customer and what it's going to be long term I think Verizon is in a similar boat I think we've now won more Verizon wireless work than we probably ever had.
There'll be there similar to AT&T and that they had all the spectrum issues at the end of 'twenty, but I think there'll be more active in the first half of 'twenty. Two and then this is really getting started right. So I think this is call yesterday they talked about.
The challenges that they've had ramping up but.
The commitment that they have to ramp it up they laid out a number of initiatives.
To hit some targets in <unk> by June of 'twenty, two but then quite frankly, what theyre going to do going forward I think we've.
Again, we talked about being in 2017 of their markets currently which is pretty good market share I think the opportunity with them, they're building a whole new network right. There's a whole new wireless carriers being invented so the opportunity is significant I think will be a major player for them.
Partner in.
So when you when you add up what we've been able to accomplish with T. Mobile the success, we're having with Verizon the success and potential we have with dish and AT&T finally getting back rolling the reality is that it should bode for an incredible second half of the year for us in that market.
Perfect. Thanks Jose.
Adam.
And we'll go to our final question from Sean Eastman with Keybanc capital markets.
Hi, Dan Thanks for squeezing me in here.
The power delivery guidance for 2022 actually it looks like it was increased pretty meaningfully on both the top line and margins relative to what was framed back in December . So just curious what's moved there what's going better in that segment.
Well first the acquisition that we made early in 'twenty one of entrant in our in our legacy business. I think are both performed really well have won a lot of work. So we're very bullish on both of those.
Again, as we've kind of dissected henkels.
Our power delivery businesses is actually we think the best component of that.
When you take out a lot of the corporate costs that that they had that was dragging down their margins. We've moved it into our corporate cost as well right, which is increasing our total corporate costs, but from a segment perspective.
Their margins are a little bit better than maybe we had originally anticipated.
What we haven't embedded in this quite frankly is the growth opportunities that they have.
So we feel good about hitting this margin profile and more importantly, we think that as we look forward and we get some wins and some opportunities we're going to be able to meaningfully grow their business and over time continue to improve their margins.
They are still they still lag.
The balance of our business margins within that segment right. So they are still dilutive to the segment, but I think over time this should be accretive to the segments. So I think there's a real big swing, we can create with their assets.
Okay got it that's helpful and then just in light of.
Are you mentioning the carbon pipeline opportunities potentially going this year, obviously, we're tracking a few very large pipelines in that space.
But one thing I've noticed is that the diameter of those pipelines is a big range right. It seems like some sections are.
Quite small diameter, so does that suggest.
Maybe <unk> is only going to be looking at a portion of those pipes, maybe there's more competition on some portions of those sites how should we think about that.
So two things right I think when we think about the pipeline business. There is there is lots of different areas of the business right. We have what we've historically done on the especially on the gas side, we've always been predominantly gas.
Think I think that business will show a lot of strength in 'twenty three I think there's a lot of projects that will be awarded in the second half of this year.
That are going to be quite exciting when we think about the newer technologies, whether whether their carbon based on hydrogen.
It's a new market right, it's a market where the.
Customers are different.
Work is slightly different although it's very similar.
And I think it's going to draw.
Current players I think from from.
From a national perspective, I don't think anybody has the resume that we do regardless of size of pipe or what needs to be done and I think we can be competitive at any type of job. So.
We would hope to participate in those as the years go on we want to do it right. There is no. There's no reason to buy jobs, but quite frankly, we.
There's a lot of there's a lot of opportunity related to those and theres going to be a lot of opportunities in the future related to those so it's a very exciting dynamic of what's happening in the market.
Got it thanks for the time Jose.
Thank you Sean.
That concludes today's question and answer session.
I'll turn the call back to Jose Mas at this time for any additional or closing remarks.
So again just want to thank everybody for their interest and their participation today, we look forward to.
Updating everybody as to our progress throughout 2022.
In the coming months, thank you for joining.
This concludes today's call. Thank you for your participation you may now disconnect.
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