Yahoo Finance MasTec Inc (MTZ) Q1 2024 Earnings Call Transcript Highlights: Robust Revenue Growth and ...
Revenue: $2.687 billion, up 4% organically year-over-year.
Adjusted EBITDA: $157 million, a 54% increase year-over-year.
Adjusted EPS: Negative $0.13, $0.35 better than consensus.
Backlog: $12.8 billion, a $430 million sequential increase.
Cash Flow from Operations: Approximately $110 million this quarter.
Net Debt Reduction: Reduced by $70 million in Q1.
Net Leverage: Declined to 2.7x.
Segment Performance: Communications revenue $733 million with adjusted EBITDA margin of 6.7%; Pipeline segment revenue $634 million with adjusted EBITDA of $93 million or 14.6%; Power Delivery segment revenue $571 million, adjusted EBITDA margin 4.8%; Clean Energy and Infrastructure segment revenue $753 million, adjusted EBITDA margins of 2.7%.
Full Year Outlook: Revenue expected to be $12.55 billion with adjusted EBITDA of $975 million; adjusted EPS forecasted at $2.95.
Release Date: May 03, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
MasTec Inc (NYSE:MTZ) reported a record revenue of $2.7 billion for Q1, surpassing guidance by approximately $60 million.
Adjusted EBITDA of $157 million exceeded expectations by $27 million, with margins 90 basis points ahead of forecasts.
Backlog increased by $430 million from year-end to $12.8 billion, despite significant revenue earned on MVP in Q1.
Clean energy backlog grew by almost $400 million in the quarter, while Communications backlog increased by $170 million to a new record level.
MasTec Inc (NYSE:MTZ) raised its full-year outlook, reflecting confidence in continued strong performance across its segments.
Negative Points
Adjusted earnings per share was negative $0.13, although it exceeded guidance by $0.35.
While year-over-year backlog decreased, it was impacted by the current pipeline project mix and reduced emphasis on industrial projects.
First quarter Clean Energy and Infrastructure segment revenue was slightly below guidance, with adjusted EBITDA margins of 2.7%.
Power Delivery revenue and adjusted EBITDA margins for the full year are now expected to be roughly in line with the prior year but slightly lower than previous forecasts.
The company anticipates some project deferrals from utility customers in Illinois, affecting revenue projections for Power Delivery.
Q & A Highlights
Q: Jose, just focusing on the $1 billion of infrastructure opportunities within data centers from $200 million you have in backlog. Did you begin to see an acceleration of this work in Q1? Will that accelerate from here? And then maybe backing up, MasTec has had big cycles before, move to 4 or 5G, big pipeline cycles. How would you characterize the data center opportunity for MasTec versus other cycles? And to your point on margin, I think data centers customers could drive a hard bargain. So how do you protect MasTec and deliver good margin on this work? A: Yes, Andy. So a couple of things. I think probably at some point last year, we had a lot of people within MasTec beginning to talk about what they were seeing in data centers. I don't think as an organization, we truly understood what was coming. I think it became a lot clearer earlier this year as we began to see and read about what all the hyperscalers were saying and a lot of the data centers builders were saying.
Q: Got it. And then maybe just focusing on Communications. I know you mentioned work for the new contracts starts in the first half and ramps up in the second half. But maybe talk about your visibility to the ramp in Q2 and into the second half. Do you need the markets themselves to continue to get better? Or do you kind of have enough of sort of your own contracts to sort of get to the numbers that you're giving us? A: And that's what we tried to really cover in the prepared remarks, right, is to say our customers, it's actually somewhat remarkable, right? Our customers actually want us to go faster. For us, our ability to hit our second half numbers are all about what we're able to engineer in the first half, right? So it's on us, right? To the extent that we can get stuff done, the work is going to be there for us in Q2 because we're almost self-generating the work based on the initial work that we're doing. That's what gives us so much confidence this year going into the second half.
Q: Jose, as it relates to EBITDA margins, can you remind us sort of what your internal targets are over the next few years on an aggregate basis? And then maybe highlight by segment where you see the greatest opportunities to see notable margin expansion. A: Yes. So let's start, I mean, with what we've historically said, some of what we're experiencing, right? I think let's start with Oil and Gas because it obviously outperformed in the quarter. I think our visibility around the revenue in Oil and Gas is actually really solidified for us, not just for the balance of 2024, but actually as we look at '25 and '26. A lot of conversations with customers about their plans. We feel really good that we're going to be in that mid-double-digit area. We've consistently been at 15% or better for a long time. And I think that we're going to be able to maintain that for a longer period of time, and that's great visibility to have versus where we've been in the last couple of years.
Q: So I had one on Communications. Jose, clearly, you're seeing momentum in both the wireless and the wireline side. Does your breakdown stay 50-50 as both of these ramp up? Or do you think that skews in either direction based on your conversations with your customers? A: Yes. I think what's changed in the last few years for MasTec is wireline became a much bigger percentage of our total telecom business. And if you look at telecom today, wireline is actually slightly bigger than our wireless business. I think wireline is going to continue to grow for sure. It's where a lot of the opportunity has been for the last few years, and we see so much more going forward. But I think the acceleration of the wireless business with the specific awards that we've gotten, not necessarily because the market is getting a lot bigger but because of our ability to win market share, I think it has a potential of getting close to a 50-50 share again.
Q: Nice quarter. Jose, I guess my first question, you've always been good at sort of being opportunistic on M&A and identifying adjacent growth markets pretty early. And it's just interesting your comments sort of on data centers. So I'm wondering with your balance sheet by the end of the year, getting back to your leverage ratio at 2x and you look at the opportunity in data, are there ways that you could improve your competitive positioning through inorganic opportunities? Or do you think like you can attack this market organically? And then just your thoughts there. A: Yes. So a couple of things. Let me kind of bifurcate the question. So I feel like the first part of your question was a little bit of a trap question, but I'll go ahead and answer it. I think we're really comfortable around where our leverage profile is. I think we've made drastic improvements. We feel great about our cash flow profile. We feel really good about where leverage ratios are going. So I mean, our balance sheet, we think, is in great shape. So to the earlier question, we think we have -- if we needed to or if we wanted to, we think we have the ability to do some things, although we're very committed to our capital structure and really keeping our investment-grade status and everything that we've been saying for quarters, right?
Q: Yes. Just curious your latest thoughts on need funding. When we -- when should we expect it to start impacting revenue? Are you still thinking this is a 2025 event? Or any concerns of delays there? A: No. We expect it to definitely hit '25. We expect to see awards in '24 relative to it. We have customers that have tremendous confidence in their ability to get certain things funded, and there are already -- many of those are already talking to us about specific projects that would kick off maybe as early as the latter, latter part of '24, but for sure in '25.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
