Release Date: August 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue for the quarter was $3 billion, with adjusted EBITDA of $268 million and adjusted earnings per share of $0.96.
- Backlog at quarter end was $13.3 billion, a $500 million sequential increase.
- Margins were about 65 basis points better than expected, with solid performance in communication and pipeline segments.
- MasTec was awarded a 700-mile high-voltage transmission and substation project, expected to generate annual revenues of $300 million to $500 million.
- Strong demand and growth opportunities in the clean energy and infrastructure segment, with revenue up 25% sequentially and a 1.2 times book-to-bill ratio.
Negative Points
- Revenues were slightly below expectations, coming in about 4% below guidance.
- Continued pressure in the power delivery segment, with certain customers deferring spending.
- Oil and gas pipeline segment revenues were slightly lower than expected due to project shifts to the second half.
- Clean energy and infrastructure segment revenue was $80 million below guidance due to timing of project starts.
- Challenges in the distribution market impacted margins for the power delivery segment in 2024.
Q & A Highlights
Q: Congratulations on the large transmission win. Can you help us understand the competitive environment with that project and the comfort level with risk? Also, do we assume that the margin would be above segment level?
A: We've been pursuing large transmission projects for a long time and feel great about this one. We're comfortable with the risk profile and understand the project well. This is the largest transmission project we've ever won, and our ability to execute on it will open many doors for us. Regarding leverage, we're in great shape and focused on organic growth, though we may consider M&A for market expansion.
Q: What is the outlook for the communications segment in 2025 and beyond?
A: We feel great about it and expect double-digit growth in 2025. We're excited about the impact of BEAD funding, which we expect to start affecting our business in 2025. We see strong growth opportunities with new market entrants and private equity-backed customers. We believe 2025 will be much better than 2024 in terms of revenue and margin, with continued growth in 2026 and beyond.
Q: Can you elaborate on the deferral of spend in the distribution side and how it might evolve into 2025?
A: The deferrals are largely due to rate cases, inflation, and supply chain cost increases. Utilities are focusing on transmission and generation, but we expect distribution spending to catch up as rate cases are resolved. We anticipate significant increases in both distribution and generation investments to meet load growth demands.
Q: Do you have all the necessary permits to start the large transmission project in early 2025?
A: There are still a handful of permits being secured, but we expect them to be in place by the end of the year, allowing the project to start at the beginning of 2025. We will make a joint announcement with our customer once everything is finalized.
Q: How are you positioned for the rest of the year in the clean energy segment given the policy headwinds?
A: We have a big ramp in the second half of the year and feel confident that we have all the projects needed to meet our guidance. We expect backlog to continue growing, positioning us well for 2025. Despite the noise, we see tremendous demand and opportunities in the market.
Q: Can you discuss the margin profile for the communications segment as it evolves with new projects and market entrants?
A: We are proud of our margins in Q2 and believe that the 12-13% margin profile is achievable again. We are in a growth cycle, and as we reach steady-state, we expect continued margin appreciation in the telecom sector.
Q: Can you maintain your 2024 revenue level in the oil and gas segment moving forward, even without a major project like MVP?
A: We believe the market is very active and expect to maintain the $2 billion level for the foreseeable future without any large projects. We see stable demand in 2025 and potential for significant expansion beyond that with new opportunities in CO2 and hydrogen projects.
Q: What is the outlook for data centers, and how is it impacting your business?
A: We expect to do a couple of hundred million dollars in data center work in 2024, with significant growth in 2025. The demand for power to support data centers is driving many aspects of our business, from generation to power delivery. We see tremendous growth opportunities and are positioning ourselves to take advantage of them.
Q: How are you ensuring good delivery of clean energy projects in the second half of the year?
A: We have been focused on this since acquiring IEA and believe we are well-positioned to execute at this level. We have the right resources and are operationally focused, confident in our ability to deliver as expected.
Q: Can you discuss the large transmission project win and its impact on your business?
A: This project is a sole-source project, and we feel extremely qualified to execute it. We have the labor and equipment needed and are excited to demonstrate our capabilities. This win positions us well in the market and opens up further opportunities.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
