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MasTec is an infrastructure construction company operating primarily in the U.S. and Canada. The company builds infrastructure for wireless and wireline/fiber communications, clean energy, pipeline infrastructure, power delivery services such as electrical and gas transmission, industrial and heavy civil infrastructure, and water infrastructure. MasTec’s customers are in utilities, communications, and government.

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MasTec (MTZ): Company Profile, Stock Price, News, Rankings

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MasTec

mastec

Welcome to Mastech's Third Quarter 2024 Earnings Conference Call initially broadcast on Friday, November 1, 2024. Let me remind participants that today's call is being recorded. At this time, I'd like to turn the call over to our host, Mark Lewis, Mastech's Vice President of Investor Relations. Mark?

Thanks, Matti, and good morning, everyone.

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 MasTec's future results, plans and anticipated trends in the industries where we operate. These forward looking statements are the company's expectations on the day of the initial broadcast of this call, and the company does not undertake to update these expectations based on subsequent events or knowledge. Various risks, uncertainties and assumptions are detailed in 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, 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. In addition, we may use certain non GAAP financial measures in today's call. A reconciliation of any non GAAP financial measure not reconciled in these comments to the most comparable GAAP measure can be found in our press release. Please note that we have 2 additional documents associated with today's webcast along with our earnings release, which can be found on the Investor page in the Events and Presentations section at mystack.com. There is a comparison presentation with information about analytics on the quarter just ended and a guided summary to exist to assist you in financial models for Q4 and the year.

Both PDF files are available for download immediately. With us today, we have Jose Mas, our CEO and Paul DeMarco, our EVP and Chief Financial Officer. The format of the call will be opening remarks and announcements by Jose, followed by a financial review from Paul, and we expect the call to last about 60 minutes. We had a nice quarter and a lot of important things to say today. So I'd like to turn it over to Jose.

Thanks, Mark. Good morning, and welcome to MasTec's 2024 3rd quarter call. Today, I'll be reviewing our Q3 results as well as providing my outlook for the markets we serve. First, some 3rd quarter highlights. Revenue for the quarter was 3,300,000,000 dollars adjusted EBITDA was $306,000,000 adjusted earnings per share was $1.63 and backlog at quarter end was $13,900,000,000 a $520,000,000 sequential increase.

In summary, we had another good and clean quarter. While revenues were slightly below expectations, EBITDA margins were about 85 basis points better than expected. For me, the highlight of the quarter was that every segment outperformed our margins compared to guidance. This demonstrates the significant improvement in our business and with record backlog, we entered 2025 with great momentum and confidence. I'd like to point out some further highlights about our quarter.

Our communications segment revenue grew over 12% both year over year and sequentially, which resulted in record quarterly revenues for this segment. Our Communications segment EBITDA margin of 11.5% was its highest performance in 2 years. Our Clean Energy and Infrastructure segment also had record quarterly revenue and EBITDA. Our Clean Energy and Infrastructure EBITDA margin of 7.5% was its best performance since 2019. 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.

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. While we believed we had made great progress in our ability to compete and win, today's earnings begin to demonstrate our success. To be clear, while we're happy with today's results, we have room for significant improvement across all of our segments. That opportunity for improvement is actually what I'm most excited about.

We are seeing incredibly strong demand for our services. We participate in great end markets and our prospects for strong organic growth are as good as they've ever been. We also have the ability to meaningfully improve margins. While we have made progress this year, that margin improvement, coupled with strong revenue growth, should lead to significant value creation for our stakeholders. I'm excited about that opportunity and I'm confident that the MasTec team will deliver.

Now I'd like to cover some segment highlights. In our communications segments, 3rd quarter revenues were up double digits year over year and sequentially and represented the segment's highest revenue in our history. Margins at 11.5% were at a 2 year high. On the wireless side, our market share expansion with AT and T, coupled with the Nokia Ericsson swap out, is on track and playing out as we expected. On the wireline side, demand remains incredibly strong.

While there have been some short term delays, the impact of beads funding will be a catalyst for our business as will the growing demand for fiber associated with artificial intelligence and data centers. As an example, we are excited to announce that post quarter end and not included in backlog, we were awarded a major fiber program build from Lumin Technologies. This multistate award represents over 8,000 miles of fiber in support of their efforts to provide capacity for hyperscalers and expand their high capacity network infrastructure, enhance connectivity and address the demand for reliable advanced digital networks. In our Power Delivery segment, 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. The 3rd quarter represented our 1st year over year revenue increase in 2024.

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. Despite the revenue beat, backlog was up nearly $200,000,000 sequentially and book to bill was strong at 1.29x. 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.

We are incredibly well positioned to take advantage of this opportunity. In our Oil and Gas Pipeline segment, revenues were slightly lower than expected, but margins outperformed. While backlog is down, demand is better than backlog suggests. We have a number of verbally awarded projects that will convert to backlog. We currently have strong multiyear visibility and are excited about the role gas fired generation is going to play in helping meet our country's load growth needs.

Finally, in our Clean Energy and Infrastructure segment, revenues were up over 20% sequentially and EBITDA was up 80% sequentially. Both revenue and EBITDA were at record levels for the segment. Margins of 7.5% were well ahead of expectations. I'd like to congratulate our Clean Energy and Infrastructure team for their performance. 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.

The 3rd quarter results begin to reflect their progress. In addition to the financial progress, backlog for this segment is at record levels and increased nearly $500,000,000 sequentially or a book to bill of over 1.4 times. Backlog is up over $1,000,000,000 from this time last year and that positions us well for 2025 beyond. In addition to the growth opportunity, we are focused on continuing to improve margins. While the 3rd quarter showed great progress, we expect to keep improving.

In summary, this was a good quarter with solid performance across all of our segments. 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. That combination provides tremendous upside for MasTec. We are pleased with our market position, our diversified business model and our ability to offer our customers integrated solutions at scale.

I believe that the most successful companies in our space are those that have the scale to meet our customers' demand. Our customers' projects have significantly increased in size, scope and complexity, and there is no question that our customers need strong partners. I believe that over the last few years, our biggest accomplishment has been to position ourselves as one of only a few partners that's viewed throughout our industry as a partner whose workforce, size and scale affords it the capabilities to take on any project. I'd like to take this opportunity to thank the men and women of MasTec. I'm honored and privileged to lead such a great group.

The men and women of MasTec are committed to the values of safety, environmental stewardship, integrity, honesty and in providing our customers a great quality project at the best value. These traits have been recognized by our customers and it's because of our people's great work that we've been able to position ourselves for continued growth and success. I will now turn the call over to Paul for our financial review. Paul?

Thank you, Jose, and good morning, everyone. To begin, a few 3rd quarter highlights. 3rd quarter adjusted EBITDA was $306,000,000 exceeding guidance by $11,000,000 and a quarterly record. Adjusted EBITDA margin of 9.4 percent exceeded our guidance by 85 basis points. 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 exceeding guidance by $0.39 driven by the adjusted EBITDA beat, lower depreciation and interest. 18 month backlog at Q3 totaled $13,900,000,000 increase of $520,000,000 in the 2nd quarter and $1,400,000,000 year over year. Growth was driven by continued strong bookings of renewable energy projects where backlog has more than doubled from last year's Q3. Lastly, we continue to improve our balance sheet in the Q3 with cash flow from operations of approximately $280,000,000 despite 10% sequential revenue growth. Accordingly, we reduced net debt by approximately $120,000,000 in Q3 with net leverage of 2.2x.

Turning now to our segment performance and expectations. 3rd quarter communications revenue was $927,000,000 with an adjusted EBITDA margin of 11.5 percent, generally in line with our expectations. Mostly lower revenue in the quarter versus guidance was driven by delayed construction starts on certain wireline projects. 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 $50,000,000 to $3,400,000,000 but maintaining our adjusted EBITDA forecast unchanged with margins in the high single digits.

For the Q4, we anticipate revenue will be approximately $915,000,000 up 20% year over year with adjusted EBITDA margins in the low double digits. 3rd quarter Power Delivery segment revenue was $713,000,000 and adjusted EBITDA was $54,000,000 or 7.6%. 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. 18 month backlog for power delivery increased by approximately $185,000,000 from Q2 to $3,200,000,000 a record level.

For the full year, we are revising our forecast to reflect 3rd quarter performance and continued emergency restoration in the 4th quarter. We now expect segment revenue to be $2,650,000,000 with adjusted EBITDA margins in the high single digits. 4th quarter revenue is anticipated to be $730,000,000 with adjusted EBITDA margins in line with the full year estimate. In the 3rd quarter, our Clean Energy and Infrastructure segment generated adjusted EBITDA of $85,000,000 or 7.5 percent of revenue, ahead of our expectations by 150 basis points. The strong margin performance was driven by improved project execution across all three verticals: Renewables, Infrastructure and Industrial, all of which achieved their best margin quarter of the year.

Revenue of $1,140,000,000 was $187,000,000 below guidance as certain project activity saw near term delays pushing revenue into future quarters. These delays were driven by a combination of factors, including timing of material deliveries and the impacts of adverse weather. Backlog conversion remained very strong, growing over $470,000,000 sequentially and $1,100,000,000 year over year to approximately $4,100,000,000 a new record. For the full year, we now expect Clean Energy segment revenue to be $4,100,000,000 with mid single digit adjusted EBITDA margins trending 100 to 150 basis points higher year over year. 4th quarter revenue guidance of $1,300,000,000 reflects 11% sequential revenue growth and 19% year over year.

4th quarter margins are expected to be in the mid single digits, approaching Q3's level. 3rd quarter pipeline segment revenue was $498,000,000 with adjusted EBITDA of $103,000,000 or 20.7 percent. Revenue was slightly below expectations due to the timing of project burn, which we expect to make up in Q4. Our full year pipeline segment outlook remains unchanged with revenues of $2,100,000,000 and adjusted EBITDA margins in the high teens. This equates to 4th quarter revenue of $425,000,000 and adjusted EBITDA margins in the mid teens.

On a consolidated basis, full year revenue is now expected to be $12,225,000,000 with adjusted EBITDA of $990,000,000 reflecting the Q3 beat. Our consolidated 4th quarter outlook remains largely unchanged with $3,325,000,000 of revenue and adjusted EBITDA margins of approximately 8%. We are also raising our adjusted EPS estimates to $3.75 for the full year and $1.29 for the 4th quarter. As part of our continued efforts to improve fixed asset utilization and return on invested capital, we completed a comprehensive review of MasTec's depreciation policy in the 3rd quarter. The overall size, 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. We found our operations were consistently utilizing assets beyond the useful life stated in the prior policy, further evidenced by our relatively low CapEx as a percentage of revenue in recent years. The revised policy was implemented prospectively in the Q3, but these depreciation levels are comparable to future expectations. Shifting to the balance sheet. We committed to deleveraging following our strategic acquisition in 2022.

And through the Q3 of 2024, we have now repaid over $900,000,000 of debt. 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. Q3 year to date cash flow from operations totaled almost $650,000,000 exceeding our prior full year estimate. DSO at Q3 came in at 68 days, slightly better than Q2, and liquidity stands at $1,900,000,000 We expect some working capital investment in Q4 and now expect full year cash flow from operations to be approximately $700,000,000 As a reminder, we have posted a guidance summary on the Investor Relations section of our website that summarizes our outlook and provides additional data points for modeling purposes.

We'll now turn the call back over to the operator for Q and A.

Thank We will take our first question from Andy Kaplowitz with Citigroup.

Jose, 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 as well as obviously good blocking and tackling from the team?

So Andy, I think this should be the expectation of ourselves and even in the market of us, right? 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're seeing today is kind of the beginning of that translating to financial success. We think we've had great operational success over the course of the last 9 months or so in terms of how the business was trending, how we were doing with customers' wins, our reputation in the industry, the types of projects we were winning. 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.

Okay. And then I know it's a bit earlier to talk too much about 'twenty five, but you did mention the confidence going into 'twenty five given your sequential backlog growth. You've got that Lumin award, which curious how big that is. But like I think the Street is forecasting close to mid teens EBITDA growth for MasTec in 'twenty five. So maybe any puts and takes you see across the businesses and your confidence level in meeting or beating that forecast, are you comfortable with it?

Sure. So if you look at 2024 versus 'twenty three, EBITDA with our new guidance is going to be up about 15%. 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 'twenty five versus 'twenty four. We believe that to be achievable. When we think about our businesses at a high end, right, when we think about our comms business, our power delivery business, our clean energy and infrastructure business, we expect all of those businesses to be up double digits from a revenue perspective on a year over year basis organically.

Again, we have tremendous momentum across all 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. But we feel great about revenues. We feel great.

We think again, we think we've got the opportunity to improve margins across all of our segments, maybe with the exception of oil and gas. And we think we've got a great chance of delivering that. So that's how we would that's our early thoughts around 'twenty five as we sit here today.

And just Lumen, is it a it seems like a very large job, any more color on that?

Yes. Look, they haven't historically been a big customer. They've been a sub-fifty million dollars customer for us for the last 2 years. It's a big win for us with the customer that we typically haven't had done a lot of business with. So it's, I think, a great advancement of our relationship, and we're super excited about helping them.

They've got a ton to do. They've been very successful as it comes to hyperscalers and their ability to sell their network in. So we hope to keep growing with them and keep supporting them to hopefully keep winning awards over time.

We will take our next question from Steven Fisher with UBS.

and congratulations on the nice margin trajectory here. Just to start off on the slower clean energy revenue ramp, was that specifically solar projects? It sounded like maybe there was some material delivery delays and weather. Can you talk about how many projects that was driven by? And what's the path to improvement there?

Is there any risk to that in Q4 and into 2025?

Yes, good morning, Steve. So I'd say a couple of things. I'd say if you look at our clean energy business from Q2 to Q3, we were up roughly $200,000,000 or just over 20% on a sequential basis. I think that's a big number. When we look at what we expect to do in Q4, it actually ramps faster than that.

So these are big projects. These are projects that if you slip a week or 2, 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 have been a particular permit. But we don't see anything, especially within the backlog that we have today. We don't see anything. We're uncomfortable about hitting our 4th 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, slips of a couple of weeks have an impact to revenue and I think that's 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 at.

Sounds good. And then just a follow-up on 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 the non recourse financing. I'm just kind of curious if there's any connection to sort of the increase in those receivable sales this year to M and A strategy. I'm wondering if the market that you're seeing for M and A is perhaps 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?

Yes, Steve, this is Paul. So, I mean, the situations where we're using facilities to advance receivables with customers is frankly pretty small. The driver is from really the contract assets. We're billing quicker. We're billing more accurately.

And that's really from the focus that all of our teams have on that effort. Some of its mix, generally renewable and infrastructure projects have better working capital profiles. So as that segment grows, we're going to have just a better mix of billing parameters in the contracts. But where we are today is achievable and we're very comfortable with leverage as it stands now and the flexibility it gives us to deploy capital in the manner that we think is best for shareholder value. So we think we're in a position now where we'll support the organic needs of the business.

And if the right M and A opportunities come up, then we have the flexibility to look at that as well.

And Steve, maybe just to add to that, I think that is a big change, right? We what a difference a year makes, right? We were sitting here last year, very focused on reducing debt. We put out a target of approximately 2 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 and A market today. I think we've been very successful in M and A in the past, especially in the type of deals that we historically did. So I think it could be reasonable for you to expect us that we're engaged, we're looking and there are some things that we would potentially do in the future.

will take our next question from Ati Modak with Goldman Sachs.

Hey, good morning team. Jose, I think you mentioned a few verbally awarded contracts in the oil and gas business. So wondering if you can provide any color there. And then for the gas gen business in general or the exposure in general is, what does that opportunity set look like for you? Any color you can provide?

Yes. So good morning. I think that the message that we're trying to get across is we're, again, we've got what we think is excellent visibility and really not just for 'twenty five, but even into 'twenty six and 'twenty seven. So we've got a number of customers that have projects that are planned over the course of the next three years. We have a really good understanding of which of those projects our customers want us to work on and expect us to do for them.

So that's 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 is project starts. There's we have a very busy second half of 'twenty five planned and a very, very busy 'twenty six planned. So if those projects get to start a little bit earlier, if they get pushed, it will have some impact on 'twenty five revenues. But I think, again, the contrast and the difference of where we were a couple of years ago in this business, where we were concerned about 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 or 2024 is turning out to be a very good year in that segment. But I think that is we look at some of the outer years, we think it could be even better, right? Again, 'twenty five might be more challenging because we've got the replacement of MVP that we've got to do, but when we look at 'twenty six and 'twenty seven, we're feeling really, really strong about those years and there's tremendous upside.

So we're very excited. From a power generation perspective, look, we just believe that gas fired generation is going to play a role in that, a much bigger role than we previously anticipated. That's going to lead to 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.

That's great. Thank you for all that. And then on the clean energy side, your backlog increase was pretty strong this quarter. Can you give us any color on the nature of projects, maybe size, customer type, if you want to? And then anything you can provide on what the impact on margins should be next year?

Sure. So I'd say a couple of things. I'd say, A, 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 to really have some large anchor tenants that are giving us sort of agreements to build a considerable amount of their work.

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. I missed the last part of you. What was the second part of your question?

I just wanted to understand what the impact on margins could be given the backlog strength this quarter.

So again, strong margin quarter. 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, it would be a huge win. I think as we think about next year, we probably need a little bit of time to properly assess what our margin progression is going to be.

Again, the last Q3 and we expect Q4 to be really good. And as we get a better understanding of what these projects can ultimately execute at, I think we'll give more insight of that as we provide 'twenty five guidance. There's 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.

And Ati, I'll just add. One of the biggest benefits of the visibility we have with those contractual bookings is we started the year in a whole with really light Q1s both in 'twenty three and 'twenty four. And you're always going to have the seasonality of the Q1, but we have significantly more work that will continue through year end into the Q1. And we don't expect to have that hole that we started out from a margin perspective in that segment going into 'twenty five.

will take our next question from Brian Brophy with Stifel.

Thanks. Good morning, everybody. Congrats on the nice quarter. Just wanted to follow-up on that large Lumin award. Can you give us a sense on when that project is supposed to start and how many years do you guys expect that build to be?

Yes. So we're hopeful that we can actually start some projects prior to year ends, although the bulk of that will start in 2025. We expect it to be a multiyear project and we're hopeful that over time as they continue to have success that project will continue to grow.

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

Yes. The truth is that for Q3, 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. Revenues for the segment were less than $15,000,000 so it didn't really have a meaningful impact. It will have a bigger impact in Q4. We still got some people deployed, 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 revenue guidance for Q4 in that business.

We will take our next question from Sanjita Jain with KeyBanc Capital Markets.

Hi, good morning. Appreciate you taking my question. So I have one on power delivery. Since this year, distribution spending has been more muted. Should we expect some type of a catch up in 2025 along with the more normalized spending?

I'm trying to figure out if there'll be less of the normal seasonality starting 2025.

Sure. So look, I think 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. But just to get to a normalized revenue base, I mean, if you think about 2023 for us, right, we did considerably better in 2023 than we did in 2024, 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, we're going to do really, really well in 'twenty five.

I don't know that that's our full expectation today. Obviously, the transmission win that we had is going to have a meaningful increase to revenues for the segment in 'twenty five. Again, we're 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 in 'twenty five.

Got it. That's great. And my follow-up is, as your backlog and revenue base grows, where do you think the biggest pinch point could be in 2025? Is it skilled labor availability or is it equipment availability for comms or clean energy? Can you talk about how you're thinking about this for next year?

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 we're one of a very few number of companies across the country that can say that and that can say that with confidence and that customers believe and I think that will give us a great advantage in the marketplace.

We will take our next question from Brent Thielman with D. A. Davidson.

Hey, great. Thanks. Good morning. 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 for Mastech?

Understanding this conversion may not be sustainable far into the future, but what is something we can think about as sustainable after 5 quarters of really, really big cash flow here?

Yes, this is Paul. It really obviously depends on revenue growth, But we think 60%, 65% is achievable for us over the longer term of EBITDA.

Okay. I appreciate that, Paul. And then, Jose, in communications, I think a few quarters ago, you 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 Lumin win is a precursor to that. And then also, I mean, obviously, the wireless business seems to be picking up for you.

So is that still something you see in the future in terms of kind of more of a balanced communications business between those two areas?

So Brent, I think if you go back to 2021 ish, right, we finished that year doing about just over $2,500,000,000 in our communications business. And this year, we'll do $3,400,000,000 right? So we're up nearly $1,000,000,000 in 3 years, corresponds to almost 35% growth in that segment over a 3 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 it's relatively flat compared to our wireline business, which has been the primary driver of that business.

So we're pretty excited about that, Ray. We kind of forget about that level of growth over a 3 year period. When we think about the next 3 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 expect wireless spending to continue to grow.

I think 5 gs had a lot of excitement early. I think it slowed down. I think it's coming back And future technologies are going to be a driver in that growth as well. The combination of the 2, obviously, we're being benefited by what's happening at AT and T with their conversion program. But we expect the others to pick up over time.

MasTec (MTZ) Q3 2024 Earnings Call Transcript

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