Q3 2024 MasTec Inc Earnings Call
Welcome to Mastec third quarter 'twenty 'twenty four earnings conference call. Initially broadcast on Friday November 1st 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 Marc Lewis mass tick bites.
Speaker Change: President of Investor Relations Mark <unk>.
Marc Lewis: Good morning, everyone.
Speaker Change: The following statement is made pursuant to the safe Harbor for forward looking statements described in the private Securities Litigation Reform Act of 1995 in these communications, we may make certain statements that are forward looking such as statements regarding <unk> future results plans and anticipated trends in the industries, where we operate these forward looking statements are the companys expectations.
Speaker Change: So on the day of initial broadcast of this call and the company does not undertake to update update these expectations based on subsequent events or knowledge.
Speaker Change: Various risks uncertainties and assumptions are detailed in the press release and filings with the SEC should one or more of these risks or uncertainties materialize or should any of our underlying assumptions prove incorrect.
Speaker Change: Actual results may differ significantly from results expressed or implied in these communications today.
In today's remarks by management, we'll be discussing adjusted financial metrics reconciled in yesterday's press release and supporting schedules.
Speaker Change: In addition, we may we may use certain non-GAAP financial measures in today's call.
Speaker Change: Conciliation of any non-GAAP financial measure not reconciled in these comments to the most comparable GAAP measure can be found in our press release.
Speaker Change: Please note that we have two additional documents associated with todays webcast along with our earnings release.
Speaker Change: Which can be found on the investor page in the events and presentations section at Mastec Dot com.
Speaker Change: There was a comparison presentation with information about analytics all of Florida, just ended in a guy that salary to exist to assist.
Speaker Change: Assist you in the financial models for Q4 and the year.
Speaker Change: Yes.
Speaker Change: For download immediately with US today, we have Jose Mas, our CEO and Paul <unk>, our EVP and Chief Financial Officer.
Speaker Change: Format called the opening remarks and analysis by Jose followed by financial review from Paul and we expect the call to last about 60 minutes.
Speaker Change: Last quarter and a lot of important things to say today, so I'd like to turn it over to Jose.
Jose Mas: Thanks, Mark Good morning, and welcome to <unk> 2024 third quarter call.
Jose Mas: Today I'll be reviewing our third quarter results as well as providing my outlook for the markets we serve.
Jose Mas: First some third quarter highlights red.
Jose Mas: Revenue for the quarter was $3 3 billion.
Jose Mas: Adjusted EBITDA was $306 million adjusted.
Jose Mas: Adjusted earnings per share was $1 63.
Jose Mas: And backlog at quarter end was $13 9 billion, a $520 million sequential increase.
In summary, we had another good and clean quarter.
Jose Mas: While revenues were slightly below expectations EBITDA margins were about 85 basis points better than expected.
For me the <unk>.
Jose Mas: Highlight of the quarter was that every segment outperformed our margins compared to the guidance.
This demonstrates the significant improvement in our business and with record backlog, we entered 2025 with great momentum and confidence.
Jose Mas: I'd like to point out some further highlights about our quarter.
Jose Mas: Our communications segment.
Jose Mas: Revenue grew over 12% both year over year and sequentially.
Jose Mas: Which resulted in record quarterly revenues for this segment.
Jose Mas: Our communications segment EBITDA margin of 11, 5% was its highest performance in two years.
Jose Mas: Our clean energy and infrastructure segment also had record quarterly revenue and EBITDA.
Jose Mas: Our clean energy and infrastructure EBITA margin of seven 5% was its best performance since 2019.
Jose Mas: And revenue in our power delivery segment was up year over year for the first time in 2024 and was up about 10% versus both guidance and sequentially and begins to reflect an improving environment on distribution spending.
Jose Mas: I'd also like to point out that our total company non oil and gas revenue was up over 15% sequentially and non oil and gas EBITDA improved 36% sequentially, which was the primary driver of our earnings beat.
We made significant investments post pandemic to diversify our business and position us to participate and benefit from the changing landscape of both power generation and delivery.
Jose Mas: We believed we had made great progress in our ability to compete and win today.
Jose Mas: Today's earnings begin to demonstrate our success.
Jose Mas: To be clear.
Jose Mas: While we're happy with today's results, we have room for significant improvement across all of our segments.
Jose Mas: That opportunity for improvement is actually what I'm most excited about.
Jose Mas: We are seeing incredibly strong demand for our services with.
Jose Mas: We participate in great end markets and our prospects for strong organic growth.
Jose Mas: As good as they've ever been.
Jose Mas: We also have the ability to meaningfully improve margins.
Jose Mas: While we have made progress this year.
Jose Mas: That margin improvement.
Jose Mas: With strong revenue growth should lead to significant value creation for our stakeholders.
Jose Mas: I am excited about that opportunity and then confident that the master team will deliver.
Jose Mas: Now I'd like to cover some segment highlights.
Jose Mas: And our communication segments third quarter revenues were up double digits year over year and sequentially.
Jose Mas: And represented the segments highest revenue in our history.
Jose Mas: Margins at 11, 5%, we're at a two year high.
Jose Mas: On the wireless side, our market share expansion with AT&T, coupled with the Nokia Ericsson swap out is on track and playing out as we expected.
Jose Mas: On the wireline side demand remains incredibly strong.
Jose Mas: While there have been some short term delays the impact of beads funding will be a catalyst for our business as rule the growing demand for fiber associated with artificial intelligence and data centers.
Jose Mas: As an example.
Jose Mas: We are excited to announce that.
Jose Mas: Post quarter end and not included in backlog.
We were awarded a major fiber program build from luminous technologies.
Jose Mas: This multi state award represents over 8000 miles of fiber and supported their efforts to provide capacity for Hyperscale and.
Jose Mas: And expand their high capacity network infrastructure enhanced connectivity.
Jose Mas: And address the demand for reliable advanced digital networks.
Jose Mas: And our power delivery segment.
Jose Mas: During the quarter revenue was above our expectations as we began to see some improving trends from our distribution customers, who had cut back earlier in the year.
Jose Mas: The third quarter represented our first year over year revenue increase in 2024.
Jose Mas: We made good progress on our large 700 mile transmission award that we announced last quarter and we are on schedule to fully mobilize in early 2025.
Jose Mas: Despite the revenue be backlog was up nearly $200 million sequentially and book to Bill was strong at 129 times.
Jose Mas: Projected energy load growth in the U S will have a substantial impact on our business as our customers meaningfully increase their investment in both generation and grid expansion.
Jose Mas: We are incredibly well positioned to take advantage of this opportunity.
Jose Mas: In our oil and gas pipeline segment.
Jose Mas: Revenues were slightly lower than expected, but margins outperformed.
Jose Mas: While backlog is down demand is better than backlog suggests we have a number of verbally awarded projects that will convert to backlog.
Jose Mas: We currently have strong multiyear visibility and are excited about the raw gas fire generation is going to play in helping meet our country's load growth needs.
Jose Mas: Finally in our clean energy and infrastructure segment.
Jose Mas: Revenues were up over 20% sequentially and EBITDA was up 80% sequentially.
Jose Mas: Both revenue and EBITDA were at record levels for the segment.
Jose Mas: Margins of seven 5%, we're well ahead of expectations.
Jose Mas: I'd like to congratulate our clean energy and infrastructure team for their performance.
Jose Mas: 2023 was a difficult year in this segment and we made a number of changes to both maximize our competitive positioning and improve our operational performance.
Jose Mas: The third quarter results begin to reflect their progress.
Jose Mas: In addition to the financial progress backlog for this segment is at record levels and increased nearly $500 million sequentially for a book to bill of over one four times.
Jose Mas: Backlog is up over $1 billion from this time last year and that positions us well for 2025 and beyond.
Jose Mas: In addition to the growth opportunity, we are focused on continuing to improve margins.
Jose Mas: While the third quarter showed great progress, we expect to keep improving.
Jose Mas: In summary, this was a good quarter with solid performance across all of our segments.
Jose Mas: The investments we've made in the last few years to build scale along our vertical offerings are beginning to translate to financial success.
I want to highlight again that what excites me. The most today is our opportunity to not only grow revenues, but to do it while simultaneously improving margins.
Jose Mas: That combination provides tremendous upside for mastec.
Jose Mas: We are pleased with our market position.
Jose Mas: Our diversified business model and our ability to offer our customers integrated solutions at scale.
Jose Mas: I believe that the most successful companies in our space are those that have the scale to meet our customers' demands.
Jose Mas: Our customers' projects have significantly increased in size scope and complexity and there is no question that our customers need strong partners.
Jose Mas: I believe that over the last few years, our biggest accomplishment has been to position ourselves as one of only a few partners that skewed throughout our industry as a partner, whose workforce size and scale affords us the capabilities to take on any project.
Jose Mas: I'd like to take this opportunity to thank the men and women of Master.
Jose Mas: <unk> hundred improvements to lead such a great group the men and women of Mostek are committed to the values of safety environmental stewardship integrity.
Jose Mas: Honesty and in providing our customers a great quality project at the best value.
Jose Mas: 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.
Jose Mas: I will now turn the call over to Paul for our financial review, Paul. Thank you Jose and good morning, everyone.
To begin a few third quarter highlights.
Paul: Third quarter, adjusted EBITDA was $306 million exceeding guidance by $11 million and a quarterly record.
Paul: Adjusted EBITDA margin of nine 4% exceeded our guidance by 85 basis points.
Paul: We met or exceeded our adjusted EBITDA guidance for each segment, despite the lower than expected revenue in the quarter as certain projects saw slower burn than anticipated.
Adjusted earnings per share was $1 63.
Paul: Exceeding guidance by 39, driven by the adjusted EBITDA lower depreciation and interest.
Paul: 18 month backlog of Q3 totaled $13 9 billion, an increase of $520 million in the second quarter and $1 $4 billion year over year.
Paul: Growth was driven by continued strong bookings of renewable energy projects, where backlog has more than doubled from last year's third quarter.
Paul: Lastly, we continue to improve our balance sheet in the third quarter with cash flow from operations of approximately $280 million, despite 10% sequential revenue growth.
Paul: Accordingly, we reduced net debt by approximately $120 million in Q3 with net leverage of two three times.
Paul: Turning now to our segment performance and expectations.
Paul: Third quarter Communications revenue was $927 million with an adjusted EBITDA margin of 11, 5% generally in line with our expectations.
Paul: Modestly lower revenue in the quarter versus guidance was driven by delayed construction starts on certain wireline projects.
Paul: Overall demand remains very strong. So this represents a delay in timing of revenue recognition.
Our updated outlook incorporates these delays with full year segment revenue guidance reduced by 50 million to $3 4 billion, but maintaining our adjusted EBITDA forecast unchanged with margins in the high single digits.
Paul: For the fourth quarter, we anticipate revenue will be approximately $915 million up 20% year over year with adjusted EBITDA margins in the low double digits.
Paul: Third quarter power delivery segment revenue was $713 million and adjusted EBITDA was $54 million or seven 6%.
Paul: Revenue was higher than expectations as we saw some rebound in distribution services and a modest impact of emergency restoration services in the southeast U S.
Paul: 18 months backlog for power delivery increased by approximately $185 million from Q2 to $3 2 billion a record level.
Paul: For the full year, we are revising our forecast reflects third quarter performance and continued emergency restoration in the fourth quarter.
Paul: We now expect segment revenue to be $2 65 billion with adjusted EBITDA margins in the high single digits.
Paul: <unk> fourth quarter revenue is anticipated to be $730 million with adjusted EBITDA margin in line with our full year estimate.
Paul: In the third quarter, our clean energy and infrastructure segment generated adjusted EBITDA of $85 million.
Paul: Our seven 5% of revenue ahead of our expectations by 150 basis points.
Paul: The strong margin performance was driven by improved project execution across all three verticals renewables infrastructure and industrial all of which achieved our best margin quarter of the year.
Paul: Revenue of $1, one 4 billion was $187 million below guidance of certain project activity, some near term delays pushing revenue into future quarters.
These delays are driven by a combination of factors, including timing of material deliveries and the impacts of adverse weather.
Paul: Backlog conversion remained very strong growing over $470 million sequentially and $1 $1 billion year over year to approximately $4 1 billion a new record.
Paul: For the full year, we now expect to clean energy segment revenue to be $4 1 billion with mid single digit adjusted EBITDA margins trending 100 to 150 basis points higher year over year.
Paul: Fourth quarter revenue guidance of $1 3 billion reflects 11% sequential revenue growth and 19% year over year.
Paul: Fourth quarter margins are expected to be in the mid single digits approaching Q3's level.
Paul: Third quarter pipeline segment revenue was $498 million with adjusted EBITDA of $103 million or 27%.
Revenue was slightly below expectations due to the timing of project burn.
Paul: We expect to make up in Q4.
Paul: Our full year pipeline segment outlook remains unchanged with revenues of $2 1 billion and adjusted EBITDA margins in the high teens.
Paul: This equates to fourth quarter revenue of $425 million and adjusted EBITDA margins in the mid teens.
On a consolidated basis full year revenue is now expected to be $12 billion $225 million with adjusted EBITDA of $990 million.
Paul: Reflecting the Q3 beat.
Paul: Our consolidated fourth quarter outlook remains largely unchanged with three $3 $5 billion of revenue and adjusted EBITDA margins of approximately 8%.
Paul: We are also raising our adjusted EPS estimates to $3 75 for the full year and $1 29 for the fourth quarter.
Paul: As part of our continued efforts to improve fixed asset utilization and return on invested capital.
Paul: We completed a comprehensive review of <unk> to create depreciation policy in the third quarter.
Paul: The overall size and diversity of asset categories and usage patterns of our capital fleet have changed significantly in recent years. So we launched this initiative to ensure we are more accurately capturing the cost of our capital expenditures to enable proper evaluation of the associated return on investment.
Paul: We found our operations were consistently utilizing assets beyond the useful lives of stated in the prior policy further evidenced by our relatively low capex as a percentage of revenue in recent years.
Paul: The revised policy was implemented prospectively in the third quarter of these depreciation levels are comparable to future expectations.
Paul: Shifting to the balance sheet.
Paul: We committed to deleveraging following our strategic strategic acquisition in 2022 and through the third quarter of 2024, we have now repaid over $900 million of debt our.
Paul: Our cash flow conversion over that same timeframe equates to approximately 85% of adjusted EBITDA.
I am proud of the focus and discipline Mastec has exhibited to drive these solid results.
Paul: Q3 year to date cash flow from operations totaled almost $650 million exceeding our prior full year estimate.
Paul: DSO at Q3 came in at 68 days slightly better than Q2 and liquidity stands at $1 9 billion.
Paul: We expect some working capital investment in Q4, and now expect full year cash flow from operations to be approximately $700 million.
As a reminder, we have posted a guidance number on the Investor Relations section of our website that summarizes our outlook and provides additional data points for modeling purposes will now turn the call back over to the operator for Q&A.
Speaker Change: Thank you if you would like to ask a question. Please signal by pressing star one on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment. Please ask only one question and one follow up question. If you have further questions. Please richa.
Speaker Change: And into the queue again that is star one to ask a question we will pause for just a moment to allow everyone an opportunity to signal for a question.
Speaker Change: We will take our first question from Andy Kaplowitz with Citigroup.
Andy Kaplowitz: Good morning, everyone nice quarter.
Andy.
Andy Kaplowitz: Obviously strong margin performance across the company, but it seems like rarely do you have essentially all of your segments operating better than you expected together. So could you give us a little more color into what's going on are you running the company at all differently. This year. After the year last year or is this just a function of improved price versus cost given labor and equipment supply chains are better.
Andy Kaplowitz: As well as obviously, good blocking and tackling from the team.
Speaker Change: So Andy I think this should be the expectation of ourselves and even in the market of Australia I think that we've made significant investments in the company over the course of the last few years to take advantage of the market opportunities that we had in front of us and I think what you are seeing today is kind of.
Speaker Change: The beginning of that translate into financial success. We think we've had great operational success over the course of the last nine months or so in terms of how the business was trending how we were doing our customers wins our reputation in the industry. The types of projects we were winning.
Speaker Change: And I think it was just going to be a matter of time before that demonstrated itself in the financial performance of the company and I think we started to see that in Q3.
Speaker Change: Okay, and then I know, it's a bit early to talk too much about 25, but you did mention the confidence going into 25, given your sequential backlog growth you've got that aluminum award, which curious if how big that is but I think the street is forecasting close to mid teens EBITDA growth for mats taken 25, maybe any puts and takes you see it.
Speaker Change: Cross the businesses and your confidence level in meeting or beating that and forecast that you're comfortable with it.
Speaker Change: Sure. So if you look at if you look at 2024 versus 23, EBITDA with our new guidance is going to be up about 15%.
Speaker Change: If you look at we haven't provided guidance for 'twenty five, but if you look at consensus estimates out there. It's just under that growth for 25 versus 24, we believe that to be achievable. When we think about our businesses at a high end rate when we think about our comms business, our power delivery business, our clean energy and infrastructure business, we expect all of those businesses.
Speaker Change: This is to be up double digits from a revenue perspective on a year over year basis organically.
Speaker Change: Again, we have tremendous momentum across all of those we would expect our oil and gas business to be flattish to potentially slightly down it's going to be really dependent on project timing starts.
Speaker Change: But we feel great about revenues, we feel great. We think again, we think we've got the opportunity to improve margins.
Speaker Change: Across all of our segments, maybe with the exception of oil and gas and we.
Speaker Change: We think we've got a great chance to delivering that so that's how we would that's our early thoughts around 25%.
Speaker Change: As we sit here today.
Speaker Change: And just is it it seems like a very large job anymore color on that.
Speaker Change: Yes look they haven't historically been a big customer that had been.
Speaker Change: $50 million customer for us for the last two years.
It's a big win for us with the customer that we typically haven't had.
Speaker Change: <unk> done a lot of business with so it's it's I.
Speaker Change: I think a great.
Speaker Change: Advancement of our relationship.
Speaker Change: And we're super excited about helping them they've got they've got a ton to do they've been very successful as it as it comes to hyper scaler and their ability to sell their networking. So we hope to keep growing with them and keeps supporting them to hopefully keep one and awards overtime.
Speaker Change: Appreciate the color.
Andy Kaplowitz: Thanks, Andy.
Speaker Change: We will take our next question from Steven Fisher with UBS.
Steven Fisher: Thanks, Good morning, and congratulations on the nice margin trajectory here just to start off on the slower clean energy revenue ramps.
Steven Fisher: Was that specifically solar projects it sounded like maybe there is some material delivery delays and weather can you talk about how many projects.
Steven Fisher: Was it was driven by it.
So what's the path to improvement there and is there any risk to that in Q4 and into 2025.
Speaker Change: Yes, good morning, Steve So I'd say a couple of things I would say if you look at our clean energy business from from second quarter to third quarter, we were up roughly $200 million or just over 20% on a sequential basis I think that's a big number.
Speaker Change: When we look at what we expect to do in Q4, it actually ramps faster than that.
Speaker Change: So these are big projects these are projects that.
Slip a week or two it has a significant impact to revenue there were no major changes in project outlook or what we expected to do there were just some projects that slipped by a couple of weeks it could be delivery of materials. It could've been particular permit but we don't we don't see anything, especially within the backlog that we have today, we don't see anything.
Speaker Change: Where we're uncomfortable about hitting our fourth quarter numbers, we actually think most of the all of the jobs that we need to do that have all been started so we're pretty excited about where we are again with big projects.
Speaker Change: Slips of a couple of weeks have an impact to revenue and I think thats. What you saw in Q3, which I think was more than made up for the outperformance in earnings which has a lot to do with the fact that a lot of the older projects are burning off and we're starting a lot of the newer projects that we've been much more successful.
Speaker Change: Sounds good and then just a follow up on the the good cash flow and as it relates to capital allocation. I mean can you just talk about some of the underlying cash flow drivers. There that are maybe kind of separate from.
Speaker Change: The non recourse financing and I'm just kind of curious if there's any connection to.
Speaker Change: The increase in those receivables sales this year to M&A strategy I'm wondering if the market that youre seeing for M&A as perhaps.
Speaker Change: Active enough that it makes you want to have sort of lower leverage sooner to be able to kind of pursue some of those deals that you might be seeing out there. Thank you.
Speaker Change: Yes, Dave this is Paul so yes.
Speaker Change: <unk>, where we're using.
Speaker Change: Facilities.
Speaker Change: The accounts receivables with customers frankly.
Speaker Change: Frankly pretty small.
Speaker Change: The driver is from related contract assets.
Speaker Change: We're billing quicker or 1 billion more accurately and thats really from the focus that all of our teams have on that effort.
Speaker Change: Some of it's mix generally renewable and infrastructure projects have better working capital profile.
Speaker Change: That segment grows we're going to have just a better mix of.
Speaker Change: Building parameters in the contracts, but where we are today is achievable.
Speaker Change: We're very comfortable.
Speaker Change: With leverage as it stands now and the flexibility gives us to deploy capital in the manner that we think is best for.
Speaker Change: Our shareholder value so.
Speaker Change: So we think we're in a position now where we'll support the organic needs of the business and if the right M&A opportunities come up then we have the flexibility to look at that as well.
Speaker Change: And Steve maybe just to add to that I think I think that is a big change right.
Speaker Change: What a difference a year makes ray we were sitting here last year.
Speaker Change: Very focused on reducing debt we put out.
Speaker Change: A target of approximately two times leverage I think we're well on our way of beating that this year. So.
I think we have great financial flexibility, we do see a very active M&A market today I think we've.
Speaker Change: <unk> been very successful in M&A in the past, especially in the type of deals.
Speaker Change: We historically did so I think it could be reasonable for you expect for you to ask US expect us that we're engaged we're looking and there are some things that we would potentially do in the future.
Speaker Change: That's great. Thank you very much thank.
Speaker Change: Thank you.
Speaker Change: We will take our next question from <unk> <unk> with Goldman Sachs.
Speaker Change: Hey, good morning beam.
Speaker Change: I think you mentioned a few verbally awarded contracts in the oil and gas business I'm wondering if you can provide any color there and then for the <unk> business in general or the exposure in general is what does that opportunity look like for you any any color you can provide.
Speaker Change: Yes. So good morning, I think that the message we're trying to get across is were.
Speaker Change: Again, we've got what we think is excellent visibility and really not just for 'twenty five but even into 'twenty six 'twenty seven so we've got a number of customers that have projects that are planned over the course of the next three years.
Speaker Change: We have a really good understanding of <unk>.
Speaker Change: Which of those projects our customers want us to work on unexpected us to do for them.
Speaker Change: So thats incredible visibility much better than we've had in years as it relates to our oil and gas business I think that part of what's going to be dependent on where our revenue levels are as project starts.
Speaker Change: We have a very.
Speaker Change: Busy second half of 'twenty five planned in a very very busy 'twenty six plans. So if those projects get to start a little bit earlier, if they could push it will have some impact on 25 revenues, but I think again.
The contrast in the difference of where we were a couple of years ago in this business, where we were concerned about.
Speaker Change: Where that business was heading I think today, it's a very healthy business. It's a business that has tremendous upside for US I think 2023 is turning out to be a very good year in that segment, but our 2024 is turning out to be a very good year in that segment, but I think that as we look at some of the outer years, we think it could be even better rate again 25 might be more challenging because.
Speaker Change: We've got the replacement of MVP that we've got to do but when we look at 26 and 27 were feeling really really strong about those years and there is tremendous upside. So we're very excited from a power generation perspective look we're we just believe that gas fire generation is going to play a role in that a much bigger role than we previously anticipated and thats going to lead.
Speaker Change: Two.
Speaker Change: Business not just for our pipeline group, but for some of our infrastructure groups as well and again, we're super excited about the long term opportunities there.
Speaker Change: That's great. Thank you for all that and then.
Speaker Change: Clean energy side your backlog increase was pretty strong this quarter can you give us any color on the nature of project maybe size.
Speaker Change: Dave If you want to and then anything you can provide on what the impact on margins should be next year.
Speaker Change: Sure. So I'd say a couple of things I'd say.
Speaker Change: We had a really strong booking quarter, we hope that that trend will continue in Q4.
I think one of the real changes over the course of the last year has been our ability.
Speaker Change: To really have some large anchor tenants that are giving us.
Speaker Change: Sort of agreements to build a considerable amount of their work.
Speaker Change: That's been very important for us because I think that's something that we haven't necessarily had in that business over the course of the last few years.
With that said.
Again, we're just we're excited demand is really strong.
Speaker Change: I missed the last part of your what was the second part of your question.
Speaker Change: I just wanted to understand what the impact on margins could be given the backlog strength. This quarter. So again strong strong margin quarter. We're when we look at Q4, we're expecting margins approaching that same level. Obviously Q4 has all the holidays built in so I think if we can approach that level would be a huge win.
Speaker Change: As we think about next year, we probably need a little bit of time.
Speaker Change: To properly assess what our margin progression is going to be again in the last two.
Speaker Change: Q3, and we expect Q4 to be really good.
Speaker Change: And as we get a better understanding of what these projects can ultimately execute that I think will give more inside of that as we as we provide 25 guidance. There is no question that getting rid of some of our older projects some of our troubled projects and the performance of our newer business. The business that we've won within the last year has been a lot higher and I think that's a great trend for us.
Speaker Change: I'll just add.
One of the biggest benefits of the visibility we have with those contractual bookings as well.
Speaker Change: We started the year in a hole.
Speaker Change: Really like Q1s, both in 'twenty, three and 'twenty four and you always have the seasonality of the first quarter, but we have significantly more work that will continue through year end into the first quarter and.
Speaker Change: We don't expect to have that hole that we started that from a margin perspective in that segment going into 'twenty five.
Speaker Change: Got it I appreciate that thank you.
Speaker Change: We will take our next question from Brian <unk> with Stifel.
Brian <unk>: Thanks, Good morning, everybody congrats on the nice quarter, just wanted to follow up on that large lumen award can you give us a sense on when that project is supposed to start in how many years do you guys expect that build to me.
Speaker Change: Yes so.
Speaker Change: We're hopeful that we can actually start some projects prior to yearend, although the bulk of that will start in 'twenty five.
Speaker Change: We expect it to be a multi year project and we're hopeful that over time as they continue to have success that project will continue to grow.
Speaker Change: Okay. That's helpful. And then just one on power delivery can you give us a sense for the emergency restoration contribution from some of the recent storm activity you guys are expecting in the back half of this year.
Speaker Change: Yes, the truth is that for Q3 it was it.
Speaker Change: It was relatively small it was minimal we really didn't have a lot of involvement in the Texas storm. So our involvement really started more in the southeast which was a very late quarter event. It only it was really only a couple of days at the end of the quarter.
Speaker Change: Revenues for the segment, where we're less than $15 million. So it didn't really have a meaningful impact it will have a bigger impact in Q4, we still got some people deployed.
Speaker Change: Doing some work so we don't know the exact extent of what that will be but it is part of the reason that we did increase the revenue guidance for Q4 in that in that business.
Speaker Change: Appreciate it thanks I'll pass it on.
Thanks, Brian.
Speaker Change: We will take our next question from Sanjay Jain with Keybanc capital markets.
Sanjay Jain: Hi, Good morning. Appreciate you taking my question. So I had one on power delivery.
Sanjay Jain: This year distribution spending has been more muted.
Sanjay Jain: Some type of catch up in 2025, along with the more normalized spending.
Sanjay Jain: I have to figure out if there'll be less of the normal seasonality starting to anything.
Speaker Change: Sure So look I think.
Speaker Change: We're pretty encouraged because we expect it to get back to a normalized level I don't know that there will be a catch up.
Speaker Change: But just to get to a normalized revenue base I mean, if you think about 2023 for us right.
Speaker Change: We did considerably better in 2023 than we did in 'twenty for a lot of that was driven by distribution. So if we can get back to those levels and you kind of look at what we've been able to accomplish in the transmission side of the business. If we're able to get both of those humming were going to do really really well in 25, I don't know that.
Speaker Change: That's our full expectation today, obviously the transmission win that we had is going to have a meaningful increase the revenues for the segment and 25.
Speaker Change: Again, we are becoming more and more bullish about distribution spending I think we need a little bit more time to figure that out but I do think there's a good probability of both of those really being catalysts for our business and 25.
Speaker Change: Alright, and Thats, great and my follow up is.
Speaker Change: Is your backlog and revenue base.
Speaker Change: Where do you think the biggest pinch points could be in 2025 and at.
Speaker Change: Skilled labor availability or is it equipment availability for the clean energy can.
Speaker Change: Can you talk about how youre thinking about this for next year.
Speaker Change: Sure I think that the biggest constraint in our industry as a whole over time is going to be labor and I think those companies that invest in labor invest in training have had long term programs and can convince our customers that we have really solid programs and the ability to scale up is what's going to drive the business I think.
Speaker Change: We're one of a very few number of companies across the country that can say that and I can say that with confidence and the customers believe and I think that will give us a great advantage in the marketplace.
Speaker Change: I appreciate that thank you.
Speaker Change: Thank you.
Speaker Change: We will take our next question from Brent Thielman with D. A Davidson.
Speaker Change: <unk>.
Brent Thielman: Hey, great. Thanks, good morning.
Brent Thielman: Jose or Paul I mean, really healthy year of cash flow and I'm wondering how do we think about cash conversion on a go forward basis through Mastec I understand in this conversion.
Brent Thielman: May not be sustainable in Florida, the future what is something we can think about is sustainable after five quarters of really really good cash flow here.
Paul: Yes. This is Paul related obviously depend on on revenue growth.
Brent Thielman: But we think.
Paul: Yes, 60% to 65% is achievable for us over the longer term of EBITDA.
Andy Kaplowitz: Okay I appreciate that Paul and then Jose in communications.
Paul: I think a few quarters ago.
Speaker Change: Talked about something in the future, where we could see more balance in terms of wireless versus wireline exposure I guess I'm wondering if this woman win as a precursor to that and then also I mean, obviously the wireless business seems to be picking up for you. Soon is that still something you see in the future in China.
Speaker Change: It's kind of more of a balanced communications statements between those two areas.
Speaker Change: So Brian I think if you go back to 2000.
Speaker Change: 'twenty one ish right. We finished that year doing about just over $2 5 billion in our communications business and this year, we'll do three four right. So were up nearly $1 billion in three years.
Speaker Change: Corresponds to almost 35% growth in that segment over a three year period. The bulk of that growth has been on the wireline side. So if you think about our wireless business, it's up a little bit, but its relatively flat compared to our wireline business, which has been the primary driver of that business.
Speaker Change: So we're pretty excited about the way, we kind of we kind of forget about that level of growth over a three year period. When we think about the next three year period, we actually think that growth can be accelerated versus where we've been in the past again, probably primarily driven by wireline versus wireless, but it's a very exciting market. It's one where we do X.
Speaker Change: Specced wireless spending to continue to grow I think.
Speaker Change: <unk> had a lot of excitement early I think it slowed down I think it's coming back.
Speaker Change: And.
Speaker Change: And future technologies are going to be a driver in that growth as well.
Speaker Change: Combination of the two obviously, we're being benefited by what's happening at AT&T with their conversion program.
But we expect the others to pick up over time, and we think again, both markets will be great drivers of our business over the long term.
Speaker Change: Okay, great. Thank you.
Speaker Change: We will take our next question from Jamie Cook with true security.
Speaker Change: Congratulations Paul on the nice quarter and Mark.
Jamie Cook: I guess two questions Jose back yet.
Jamie Cook: M&A discussion.
Jamie Cook: I believe you said you've been very good at identifying adjacent growth opportunities early and successful in acquisitions, but as you think about acquisitions going forward how much of it is about getting into an adjacent market versus the other thing you mentioned in your prepared remarks at scale, it's going to be important. So I'm wondering if given the growth that you see ahead of you whether we need bodies.
We need to acquire more for scale versus.
Jamie Cook: Going into an adjacent market and then my second question. Obviously, congrats on the margin performance is performance in the businesses outside of oil and gas, but still your oil and gas margins have probably been better than what most of that most of us would have.
So just trying to understand with MVP coming your way.
Jamie Cook: How to think about.
Jamie Cook: The profitability of that segment.
Jamie Cook: And is there risk.
Jamie Cook: That is the other.
Jamie Cook: Oil and gas goes down more so before the other businesses kidney.
Jamie Cook: Ram Thank you.
Jamie Cook: And then bill can rapidly thanks.
Yeah, Thanks, Jamie So I'd say on M&A.
Speaker Change: Look it's pretty exciting to be back in a position, where we think we can we can do it and it doesn't really impact our balance sheet right relative to our capabilities of doing something I think one of the things that we're most excited about are mostek as our organic revenue growth opportunities, we have tremendous opportunities for growth that we've been scaling forward that we have been.
Speaker Change: Training for so that is our primary objective I think we have more opportunity there than probably anything else.
Speaker Change: We could imagine with that said, we are seeing a robust market on the M&A side. We think there are opportunities for us to build scale across our existing businesses and do so.
Speaker Change: In a manner that makes sense, we will continue to evaluate that but the truth is we kind of warning that position over the course of the last 12 months. So it's nice to be back in a position where we can actively pursue that so you should expect some of that over the course of the next year.
Speaker Change: When I think to your second question on oil and gas.
Speaker Change: I'm going to remind everybody again, I mean MVP were dilutive has been dilutive to margins. This year. So MVP is not what's driving margins in that business. It's the balance of the business.
Speaker Change: When we start the year.
Speaker Change: Long as I can remember, we talked about hitting mid teen margins roughly in the 15% range I think as we think about 25 guidance, we'd probably start there we have the ability to beat that we don't think there's any reason why we shouldnt continue to perform at the levels, we've been performing but we'd start a little bit more conservatively.
As we book work, but we're while revenue is going to be a little bit more cyclical because you have so much revenue associated with MVP. The reality is that margin shouldn't be right as MVP goes away, which is part of what you're seeing here in the second half of the year margins have actually improved in that business.
Speaker Change: So we don't we don't think that changes overtime.
Speaker Change: Thank you and congrats.
Speaker Change: Thanks Amy.
Speaker Change: Yeah.
Speaker Change: We will take our next question from Justin Hockey with Robert W. Baird.
Justin Hockey: Great Good morning, guys.
Justin Hockey: I just I wanted to go back to the large transmission project and just to clarify is that fully booked in backlog yet or does that come in when you are kind of fully mobilized to beginning of next year I know you've got 18 months backlog.
And just.
Justin Hockey: Yes.
Justin Hockey: Patients with that project.
Justin Hockey: <unk> able to accommodate any more on the specific scope of the work.
Justin Hockey: Your risk terms.
Justin Hockey: Alright.
Speaker Change: Sure Justin So what I can say is that as of the second quarter that was a fully signed project so that project.
There is no risk to that project per se from a backlog perspective, we only book what we think are the 18 month revenue levels. So at any given point in time, although the projects much bigger we are only taking 18 months of that project into backlog because it's how we do our backlog calculations. So a very small part of that project is currently in backlog.
Justin Hockey: Sure.
Justin Hockey: We were not in a position yet to fully announced the project we expect the customer to do so shortly.
And once they do then we'll talk about it more.
Speaker Change: Okay, Great no that's helpful.
Speaker Change: And then my second question is just on the clean energy margin and obviously, they've been moving higher and they are really good this quarter.
Speaker Change: Youre guiding for kind of that mid single digit for <unk>, which was the guidance.
Speaker Change: Yes.
Speaker Change: Were there any kind of favorable closeouts or anything else in the quarter.
Speaker Change: Now just for thinking about modeling it for next year. It looks like the 10-Q talked about maybe some margin increases on a couple of projects in there that it.
Speaker Change: It may be benefited.
Speaker Change: Yes, so there was no outsized projects that benefited.
Speaker Change: The business, obviously, we had we had less troubled projects in.
Speaker Change: In the quarter, which is what drove that I think that some of that commentary is associated with just bad projects not being there are doing better when I think and Paul's prepared remarks, he talked about fourth quarter level of margins for that business approaching third quarter levels. So I don't think we're not expecting a significant drop in revenues in Q4.
Speaker Change: Versus Q3, we do expect some drop in its.
Speaker Change: That's largely attributed to the fact that you have so many holidays in the fourth quarter.
Speaker Change: Look it's.
Speaker Change: We've got one quarter under our belt of solid performance.
For the fourth quarter does well again, and we can talk about it and I think we can provide better clarity as to what that looks like in 2025. There is no question that on a full year basis and 25, we expect margins to be better than they were then they are going to be for full year 'twenty four in that business. The question for us is going to be how much better and I think we'll give more.
Speaker Change: On that on our next call.
Speaker Change: Okay. Thank you very much for all of that I. Appreciate the time guys. Thank you. Thanks I appreciate it.
Speaker Change: We will take our next question from drew Chamberlain with J P. Morgan.
Speaker Change: Yes, good morning, and thank you for thank you for taking the question.
Drew Chamberlain: First just on the large transmission side I think you said.
Drew Chamberlain: In recent quarters that there are a series of large transmission projects out there that you are that you are actively pursuing and chasing just any update there I mean, what's the competitive landscape look like and when can we.
Drew Chamberlain: Spec.
Drew Chamberlain: Hospira announcement or anything.
Speaker Change: So what I would say is the market is getting even better right. We're seeing even more projects. There is no question that transmission spend is going to dramatically increase.
Speaker Change: For all of the things that we see relative to the load growth.
Speaker Change: <unk> that we're seeing.
Speaker Change: We feel good about our competitive positioning we feel we'll win more projects.
Speaker Change: There are a lot of active projects currently in some form of bidding cycle that we're engaged in and we're hopeful when some of those and be able to talk about them.
Speaker Change: I don't know off the top of my head anything that we would expect to happen before year end.
Speaker Change: But we think shortly thereafter there'll be some projects that start making towards overtime.
Speaker Change: Okay great.
Speaker Change: Just just more generally I think you said in the prepared remarks. So there is that yes.
Speaker Change: I've got you. Most excited is that you feel like you have room for significant improvement across each segment right now and I just wonder if you could kind of rank order or.
<unk> on some of the most prevalent.
Speaker Change: Areas, where you think improvements coming.
Speaker Change: Yes, we can cover them all right I think it's.
Speaker Change: Again, we're pretty excited across all the segments.
Speaker Change: When we look at clean energy and infrastructure to start start there right backlog growth has been phenomenal we expect strong revenue growth in 2025.
Margins have outpaced where we expected it to be we are hoping that that can continue so when youre looking at an environment, where you should have strong revenue growth with improved proving margin that creates an enormous amount of upside right relative to where we've been and power delivery as we really get started on this large transmission project, we're going to have.
Strong top topline revenue, we expect margins to improve their year over year as well.
Speaker Change: <unk>, it's the same thing right, we expect strong double digit growth.
Speaker Change: And we expect margins to improve so in all of those businesses right communications power delivery clean energy, we expect double digit revenue growth. This year with improved margins and 25 versus 24. Those are great trends, we expect that to continue not just in the 25 and beyond.
Speaker Change: We think our oil and gas margins and revenue will hold over time. So that's just a great combination right.
Speaker Change: I think in.
Speaker Change: A very unique position for so many around mostek in their careers to be in a position where our business is doing as well as it is from an industry perspective, and our ability to not just take advantage of the revenue opportunity, but to also continually improve margins and I think that combination is what's really going to drive the upside in mastec for years to come.
Speaker Change: Great. Thank you.
Speaker Change: Thanks drew.
Speaker Change: We will take our next question from Adam <unk> with Thompson Davis.
Speaker Change: Hey, good morning, guys great quarter.
Speaker Change: Good morning.
Speaker Change: Can you talk at all about seasonality in 2025 I'm curious.
Speaker Change: If you could actually have a stronger start to the year.
Speaker Change: Particularly in segments like clean energy based on project timing.
Speaker Change: Yes look I think it's a little early obviously, we expect.
Speaker Change: The same business as we just talked about to start the year strong in oil and gas.
Speaker Change: Probably be down in the first quarter, because it was highly impacted by MVP.
Speaker Change: So I think as we release results in our fourth quarter, we will get into a lot of specifics around that but again I mean generally we're feeling really good about the year, we're feeling really good about the progress.
Speaker Change: As we look at year over year comps, we're feeling we're feeling comfortable that there's nothing to really have to call out today.
Speaker Change: Sure.
Speaker Change: Great and then.
Speaker Change: Can you update us on direct direct work Youre doing for data centers and any discussions you might be having with potential future clients.
Speaker Change: We have tremendous opportunity last quarter, we talked about $1 billion of outstanding bids I would say today that number sits at about $1 five of bids that we currently have outstanding or are getting ready to bid.
Speaker Change: Over the course of the last six months or so we've gone from being approved or unapproved vendor for one hyper scaler, where we sit today, we're approved by four of the major hyperscale or to do direct work.
Speaker Change: That in combination with the whole ecosystem of people that are working for them creates tremendous opportunity very new market for us one that we're still learning I think we've made tremendous inroads we've got a team thats specific.
Speaker Change: Focused only on data center work across all of the different segments at Mostek operates in.
Speaker Change: There's tremendous synergies and opportunities and actually solutions that we can bring to the customer base. So we would expect that to become a much larger piece of our business on a go forward basis.
Speaker Change: Whether when it happens and how long it takes time will tell but theres no question that the capex, that's flowing into that industry and the capital that's going to be spent is going to be massive and I think we will get a share of it and it will be.
Speaker Change: And it's a big part of what could potentially be a really good growth strategy for us.
Speaker Change: Thanks, guys.
Adam: Thanks, Adam.
Speaker Change: We do not have any further questions I would like to turn the call back to Jose for closing remark.
Jose Mas: I just want to thank everybody for participating today, we look forward to updating everybody on our year end call and until then be safe. Thank you.
This concludes today's call. Thank you for your participation you may now disconnect.
Jose Mas: Okay.
Jose Mas: [music].
Jose Mas: Yes.
Jose Mas: Okay.
Jose Mas: Yes.
Jose Mas: Hum.
Jose Mas: [music].