MasTec, Inc. (NYSE:MTZ) Q4 2023 Earnings Call Transcript

MasTec, Inc. (NYSE:MTZ) Q4 2023 Earnings Call Transcript March 1, 2024

MasTec, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Welcome to MasTec’s Fourth Quarter 2023 Earnings Conference Call. Initially, broadcast on Friday, March 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, MasTec’s Vice President of Investor Relations. Marc?

Marc Lewis: Thanks, Maddie, and good morning, everyone. Welcome to MasTec’s Fourth Quarter Call. 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 expectation on the day of initial broadcast of the 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 our press releases 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 will be discussing adjusted financial metrics reconciled in yesterday’s press release and supporting schedules. In addition, we may use certain non-GAAP financial measures in this conference call. A reconciliation of any non-GAAP financial measures not reconciled in these comments to the most comparable GAAP financial measure can be found in our earnings press release. Please note that today we have two documents, associated with the webcast on the Events and Presentations page of our website at www.mastec.com.

There is a companion document with information analytics about the quarter and year just ended and a guidance summary for 2024 to assist you in developing your financial models going forward. Both PDF files are available for download. With us today we have Jose Mas, Our Chief Executive Officer, and Paul DiMarco, EVP and Chief Financial Officer. The format of the call will be opening remarks analysis by Jose, followed by a financial review from Paul. These discussions will be followed by Q&A period. We expect the call to last about 60 minutes. We had a nice quarter and a lot of important things to talk about today. So I am going ahead and turn it over to Jose. Jose?

Jose Mas: Thanks, Marc. Good morning, and welcome to MasTec’s 2023 fourth quarter and year-end call. Today, I’ll be reviewing our fourth quarter and full year results as well as providing my outlook for 2024 and the markets we serve. First, some fourth quarter highlights. Revenue was $3.3 billion by 9% year-over-year increase. Fourth quarter adjusted EBITDA was $231 million and fourth quarter adjusted EPS was $0.66. For the full year, 2023 revenue was $12 billion, a 23% year-over-year increase. 2023 adjusted EBITDA was $860 million, a 10% year-over-year increase. 2023 full year adjusted earnings per share was $1.97, and full year cash flow from operations was $687 million and net debt was reduced by $535 million since the first quarter.

In summary, our fourth quarter performance was slightly better than our guidance with strong performance in our pipeline business and strong cash collections across the entire business. While we enjoyed year-over-year growth in both revenue and EBITDA, our performance was significantly below our original expectations. As we discussed in detail on our last call, we had a number of challenges related to the acquisition of IEA coupled with moderated spending by customers in the second half of the year. While we expect some continued pressure in the early part of 2024, I’d like to walk through a number of positive developments that I believe will have a significant impact on our ability to grow both revenue and earnings and get back to our long-term targeted revenue goals.

During the fourth quarter, in our Communications segment, we significantly expanded our relationship with our biggest wireless customer AT&T. In addition to the maintenance contract we announced on our third quarter call, AT&T expanded both our scope and geographic territory on our core wireless work. This expansion, coupled with their recent announcement of a complete swap out of Nokia equipment to Ericsson equipment over a five-year period is expected to significantly increase our wireless business over the next few years. While we won’t see the impact of this new award until the second half of 2024, this award alone should increase our 2025 segment revenues by double-digits. This coupled with the continued demand for our wireline services, where we saw double-digit growth in 2023 and the expected impact of BEAD’s funding gives us great visibility for future years.

We’ve invested heavily in our Communications segment and we believe starting in the second half of 2024 and beyond, the benefit of these investments will be materialized with solid revenue growth and more importantly, improve margins. Our Oil and Gas pipeline segment overperformed as revenue and EBITDA both came in higher than estimates. On our third quarter call, we guided pipeline revenues down with the same EBITDA dollars for 2024, resulting in higher-margin expectations. This is due to the expected completion of the MVP project during the secondquarter of 2024. While we’re holding that guidance. We are very encouraged about the strength in this market. While backlog is down, demand is actually up considerably. We expect this segment to return to a more book-and-burn cadence as it relies less on larger projects.

We’re also really encouraged about 2025 and beyond. Based on verbal awards and obviously based on project timings, we expect this business to grow in 2025. We had previously talked about a longer-term expectation of annual revenues in the range of $1.5 billion to $2 billion. We now expect long-term annual revenue to consistently be at or above the higher end of the range. Our Power Delivery business performed slightly above our expectations in the fourth quarter and secured long-term extensions and expansions during the quarter, with current key customers. Post-quarter end, a negative rate-case ruling in Illinois has impacted our customers in the state. Having a large presence in the area, we’ve moderated 2024 revenue expectations to be roughly flat to 2023.

We’re hopeful that this will be conservative, but feel it’s prudent as we think about 2024 segment revenues. Exelon who owns one of the utilities in the state has significantly cut capital expenditures for distribution spend in Illinois, but has also announced increases in transmission spending in the state and increased CapEx outside of Illinois. We believe we are well-positioned to participate in that growth, but again, have taken a conservative view until we have better clarity. While we’ve experienced some fluctuation in capital spending by different utilities in different geographic areas in the second half of 2023, some of which we continue to expect in early ’24, there is no question about the need and commitment for a significant capital spending on our nation’s electrical infrastructure.

Expectations for load growth is increasing across the country and a number of utilities this quarter announced increases to their expected capital spending. It’s important to remember that in 2021, just two short years ago, MasTec’s Power Delivery business generated a $1 billion of revenue for the year. We closed out 2023, generating over $2.7 billion or nearly a three-fold increase in revenue in just two years. With the integration efforts of the acquisitions and Power Delivery behind us, we believe we are better positioned than ever, while the majority of our business is recurring MSA-driven, our project business has the greatest opportunity for growth, we are currently bidding on a number of very large projects, any one of which individually could grow this segment by double-digits annually.

After spending the last few years, building out our platform geographically, we are really excited about this segment’s future revenue. Finally, in our Clean Energy and Infrastructure segment, margins were in line with our expectations for the fourth quarter. We spent a lot of time on our last call talking about the issues and challenges we faced in 2023. I’d like to spend time today on 2024 and beyond and what we’re seeing in the market. Today, we’ve guided segment revenues of $4.4 billion for 2024. This compares to about $4 billion in 2023. To add some color, our renewable revenue was budgeted by performing a bottoms-up project review. For example, we’ve built an estimate of every project we’ve won or believe we will win and estimated a cadence of quarterly revenue.

We took into account potential challenges and risks projects may face and took a conservative view. All this to say that our process for 2024 is significantly different and more conservative than last year. While short-term challenges still exist, we strongly believe in the long-term fundamentals of this segment. The undeniable shift towards renewables and the cost competitiveness they offer create significant opportunities for the market. We continue to believe that we have significant opportunities to grow revenue and 2024 does not reflect the growth potential we expect to achieve. For example between what we’ve been awarded and expect to be awarded over the next two quarters, not only does it solidify 2024 revenue, but actually carries over a similar amount of revenue into 2025.

With continued strong demand, our growth potential in 2025 and beyond should help us achieve our original annual revenue goals for this segment. In summary, while we know we’ve had our challenges, we are incredibly bullish about our ability to grow our business and build scale to deliver to our customers, safe and cost-competitive solutions to help them meet their infrastructure needs. I strongly believe that the investments we’ve made in the last few years to build scale along our vertical offerings and position ourselves as a leader in the businesses we operate in will translate to not only strong levels of revenue growth, but the ability to meaningfully improve margins. I want to make sure I emphasize that part. I truly 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 and scope and there is no question that our customers want to simplify and work with less 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 is viewed throughout our industry as a partner whose size and scale affords it the capabilities to take on any project. While I’m proud of that accomplishment, I also understand the need for this advantageous positioning to be reflected in our financial results. I’m optimistic that our results will show continued improvement throughout 2024. As we expect revenue to be more predictable and consistent, we are working and focusing on improving margins. While incremental revenue has a very positive impact on margins, as we reach our desired scale across our segments, it allows us to focus on maximizing efficiency.

Again, I’m looking forward to the opportunities that 2024 and beyond bring and providing our stakeholders with better consistency in our performance. I’d like to take this opportunity to thank the men and women of MasTec. 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. I also know how competitive our people are and the desire they have to perform at a very high level. I know they’re up for the task. I’ll now turn the call over to Paul for our financial review. Paul?

Paul DiMarco: Thanks, Jose, and good morning, everyone. Before I turn to the financial review, I wanted to provide color on some key developments for 2023, and financial initiatives going forward. Despite the disappointing financial performance and visibility, we provided last year, we made significant progress on key areas of our integration in Power Delivery and Clean Energy. In power delivery, we are deploying our regional operating model, consolidating leadership over various companies in common geographies to drive efficiency and enhanced customer support. In Clean Energy, we are organizing this segment in the market sectors, namely renewables, infrastructure, and industrial. With the various components of our legacy business and IEA integrated to effectively deliver the full breadth of our operating capabilities to our customers.

We are now focused on fully deploying consistent tools and processes across each segment to put all our teams in a position to excel. We are confident these strategic changes will enable us to capitalize on the robust long-term demand afforded by our end markets. From a financial perspective, we are keenly focused on capital allocation to ensure we are generating appropriate returns on the capital we deploy. As we look at investments for organic growth, we have enhanced our evaluation of capital expenditure allocations to drive higher utilization of owned equipment and operating profit. Coupled with our ongoing working capital initiatives, we expect to drive higher returns on invested capital and improve our strategic flexibility. Now, I will turn to our 2023 financial review.

Fourth quarter revenue was $3.3 billion, in line with our guidance and adjusted EBITDA was $231 million or 7.1%, exceeding guidance by approximately $10 million. Adjusted earnings per share was $0.66, exceeding guidance by $0.22, driven primarily by the adjusted EBITDA beat. Accordingly, annual 2023 results followed suit. Revenue of $12 billion was in line with our guidance. While adjusted EBITDA of $860 million and adjusted earnings per share of $1.97, both exceeded our annual guidance expectations. We generated almost $500 million of cash flow from operations in the fourth quarter, bringing the total for 2023 to $687 million. This exceeded guidance by almost $300 million, driven by a significant improvement in DSO, which had 74 days was down 11 days sequentially from the third quarter.

Our liquidity remains very strong at $1.6 billion. Cash flow generation has been a key area of focus for MasTec and we are very pleased with the efforts displayed across the company to achieve these results. Our strong cash-flow performance resulted in net debt at year-end of $2.5 billion, a $350 million reduction year-over-year and puts net leverage at 2.9 times. 18-month backlog at year-end, totaled $12.4 billion, with sequential growth in each segment excluding oil and gas pipeline due to the significant work performed on MVP in Q4. I’ll cover more details on the individual segments shortly. Turning now to the segment performance and expectations. Fourth quarter communications revenue was $760 million, with an adjusted EBITDA margin of 7.6%, both in line with guidance.

Annual 2023 Communications segment revenue was $3.26 billion, flat year-over-year, with adjusted EBITDA margins declining 140 basis points to 8.9%. As we discussed last quarter, the reduction in second half volume had a negative impact on operating leverage and margins. Our outlook for this segment continues to improve, particularly on the wireless front where AT&T has revised its long-term build plan and is consolidating its vendor base to drive efficiency. We expect to begin realizing the benefits of these consolidations in the second half of 2024 and be fully ramped in 2025. Based on preliminary estimates, these developments should drive 10% plus revenue growth in this segment. You can see these benefits begin to come through in the segment backlog, which grew by approximately $325 million versus Q3.

We anticipate that Communications segment annual 2024 revenue will approximate $3.5 billion with adjusted EBITDA margin improving 50 to 60 basis points year-over-year. Q1 revenue is expected to be $700 million, with adjusted EBITDA margins in the mid-single-digit range. Q1 guidance reflects historical trends of a modest decline in volumes sequentially from the fourth quarter as well as potential short-term disruption from the realignment in our wireless business. We expect year-over-year growth in this segment for each subsequent quarter of 2024. Fourth quarter Clean Energy and Infrastructure segment revenue was $1.1 billion, slightly below our guidance, with adjusted EBITDA margin of 4.8%. Full year segment revenue was approximately $4 billion with adjusted EBITDA margin of 4.3%.

Backlog for the segment was up slightly from Q3 to $3.1 billion. Of note, the year-end backlog includes a reduction in our industrial sector of $200 million due to the previously discussed indefinite pause of construction on the Rochester Hub project. For 2024, we expect Clean Energy segment revenue to approximate $4.4 billion representing low-double-digit growth. Adjusted EBITDA margins are expected to be in the mid-single-digits with at least 100 basis-point improvement versus 2023. Q1 revenue is expected to be $775 million, showing a slight contraction versus 2023 due to timing of project burn. We currently expect adjusted EBITDA margins to remain in the low-single digits with modest margin expansion versus last year. Fourth quarter pipeline segment revenue was $800 million, with adjusted EBITDA margins of 11.9%.

We had good production on a number of fronts, leading to higher adjusted EBITDA margins than anticipated. Annual segment revenue was just shy of $2.1 billion with adjusted EBITDA margins of 13.7%. We anticipate 2024 pipeline segment revenue will decline to $1.9 billion. We expect adjusted EBITDA to be flat year-over-year at $285 million with the anticipated margin expansion due to a lower contribution of cost plus work. First quarter revenue will be approximately $600 million, with adjusted EBITDA margin in the low-double-digits. Q1 will likely be the highest revenue quarter for this segment in 2024. Fourth quarter Power Delivery segment revenue was $658 million and adjusted EBITDA margin was 8%, both in line with our expectations. Annual 2023 Power Delivery segment revenue was approximately $2.7 billion with annual adjusted EBITDA margin of 7.9%.

2024 began with some challenges in parts of our Power Delivery segment as certain customers in Illinois received unfavorable rate case decisions. We are optimistic this will be resolved in the coming months, but feel it is prudent to factor in a prolonged appeal process in our outlook. Accordingly, 2024 annual revenue is expected to approximate $2.8 billion with annual adjusted EBITDA margins similar to 2023. First quarter revenue is forecasted at $550 million seeing the biggest quarterly impact from this deferred spending and lower levels of transmission activity versus ’23 as we transition from certain completed projects to new work expected to start in Q2. The reduced operating leverage will weigh on earnings in Q1 with adjusted EBITDA margins in the mid-single-digits.

Annual 2024 Corporate segment costs are expected to approximate 125 basis points of consolidated revenue and investments reported in our other segment are expected to generate approximately $30 million of adjusted EBITDA. Turning to our consolidated guidance announced yesterday, we are projecting 2024 annual revenue of approximately $12.5 billion with adjusted EBITDA approximating $955 million. Adjusted earnings per share is expected to approximate $2.69, this represents double-digit adjusted EBITDA growth and approximately 30% adjusted EPS growth versus 2023. We expect Q1 revenue of $2.625 billion, adjusted EBITDA of $130 million or 5%, and an adjusted diluted loss of $0.48 per share. This expectation includes the combination of a normal seasonally slow first quarter and the Q1 impact we noted earlier in our Communications and Power Delivery segments.

In terms of the cadence for 2024, we expect majority of our revenue growth to come in the second and third quarters with Q4 roughly flat last year without any contribution from MVP. Our guidance indicates a 50 basis-point improvement in full-year adjusted EBITDA margins and we expect the majority of this expansion to also come during Q2 and Q3. We expect to generate approximately $550 million of cash flow from operations in 2024, assuming DSOs are in the high 70s over the course of the year. Coupled with the anticipated growth and adjusted EBITDA, we expect to reduce leverage to the low 2s by the end of 2024. We remain committed to maintaining our investment-grade rating and have proactively communicated our outlook to the various rating agencies.

In closing, I’ve enjoyed the first year of engagement with our analysts and our investor community. I look forward to continuing to build relationships with you and improve our communication and your confidence in our performance and outlook. That concludes our prepared remarks, I’ll now turn the call over to the operator for Q&A.

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Q&A Session

Operator: Thank you. [Operator Instructions] We will take our first question from Sangita Jain with KeyBanc.

Sangita Jain: Hi. Thanks so much for taking my question. Jose and Paul, if I can ask you on your Power Delivery booking, you expressed a lot of optimism on the bookings momentum. Can you share with us how close we may be to some of those translating into backlog? Is it like a first half event or later? And also given that you’re working through these large projects, what gives you the confidence in the high-single-digit margins in this segment? Thanks.

Jose Mas: Yeah, so a couple of things. I think that on the project side of our Power Delivery business, we’re — we’ve been really excited for a period of time. We think we’ve been really close on a number of projects that we haven’t won over the last couple of years. We’ve obviously been doing a lot of integration as we integrated all the acquisitions that we’ve made and I think our — where we stand in the market today versus where we were a year or two ago is a very different place and I think customers recognize that and I think customers are excited about giving us an opportunity to work on large projects and I think we’re going to be very successful this year on being able to attain that. So I do think that over the coming quarters, hopefully, we’ll have at least something to announce and talk about and add to backlog, which I think could have an impact as early as 2024.

With that said, for margins for the year, we’re basically guiding relatively flat margins on a year-over-year basis. So there’s not a big change in the margin profile for 2024 as it was in 2023.

Sangita Jain: Great and if I can follow up with one on communications, you talked about the AT&T Ericsson contract, can you help us understand what your scope may be on the AT&T’s FirstNet program maybe.

Jose Mas: So. Our contract with AT&T is what they call it turf contract, right. So in certain geographic areas we have, exclusivity on specific types of work and that isn’t really changing. So, whether — whatever initiatives they’ll be doing in the geographies that we’ve been awarded, we’re going to be the ones that perform those services.

Sangita Jain: Great, thank you so much.

Jose Mas: Thank you.

Paul DiMarco: Thank you.

Operator: We will take our next question from Brian Brophy with Stifel.

Brian Brophy: Yeah, good morning. Thanks for taking my question. Been hearing a lot about the ramp and the tax credit transferability market on the Clean Energy side in recent months. Curious what you guys are seeing here. How impactful it is for your customer base and how important is it to the Clean Energy outlook overall. Thanks.

Jose Mas: There’s no question that the sentiment has been improving, transferability is having significant impact but I think more importantly, what we’ve done as a company is we really went through every project that we see potential on in terms of stuff that we expect to happen in 2024. I think we significantly de-risked our expectations relative to understanding where every project stands from a financing perspective, from an interconnect perspective and I think that while we talked a lot about this last year is something that, quite frankly, we don’t have to hope to talk a lot about this year. There are a number of other projects that could hit quite frankly that we probably underestimated their ability to be performed in ’24, but anything that has significant risk to it, we’ve kind of moved it aside and not counted it for ’24, but there’s no question that the sentiment is improving, the opportunity to use different methods to finance projects has improved considerably since the latter part of next year and I think as a total industry, we’re going to see a significant increase in what comes out in the second half of 2024.

Brian Brophy: Okay, that’s great. And then another one on Power Delivery. Obviously, low-single-digit guidance on the top line, probably a little bit lower than some expected. It sounds like some of it kind of a customer mix issue in Illinois, but just curious what you guys are embedding on the emergency restoration side in 2024 relative to 2023 given the easier comp there. Thanks.

Jose Mas: So, we didn’t we haven’t assumed that it’s going to be any better than 2023. 2023 was a really low storm year, it’s very difficult to model that. So we have a very — we have a baseline budget that you got to include something for. So, it’s not much different than what ’23 was, so I think there’s opportunity there. To be clear on the previous part, I mean, Exelon did announce a significant reduction, right. They’ve announced $1.25 billion reduction over three years in distribution spend. It is a big area for us, so that is what’s having the impact where we slightly moderated our revenue target for 2024 in our Power Delivery business.

Brian Brophy: That’s really helpful. Thanks, I’ll pass it on.

Jose Mas: Thank you.

Paul DiMarco: Thanks, Brian.

Operator: We will take our next question from Andy Kaplowitz with Citigroup.

Andy Kaplowitz: Hey, good morning, everyone.

Jose Mas: Good morning, Andy.

Paul DiMarco: Good morning, Andy.

Andy Kaplowitz: Jose, I just wanted to go back to your comments on Communications for a second. You did see a significant uptick in sequential bookings, as you guys mentioned, you already talked about the higher scope of work with AT&T and Nokia, there’s Ericsson also transition later this year, but could you breakdown what you’re thinking in terms of core wireless and wireline for 2024, could you tell us how much larger your contract is with AT&T now maybe versus what it was and did you actually see a positive inflection in your core markets, excluding this new work that you have?

Jose Mas: Well, when we look at ’23 — let’s start with ’23, right. What we’ve said is our wireless business was down versus ’22, our wireline business was up double-digits, right. So, we had another strong wireline year. We’ve talked a lot about this on our third-quarter call. So, that was really unchanged through the balance of the year. As we think about 2024, we expect our Wireline business to be up again, because it’s a very strong market. There’s changes in cadence as we did see a slowdown in the second half of ’23 versus the first half of ’23, but again the demand in that business is extremely high. And when you add-on BEAD’s funding which will start impacting the business from ’25, it’s a very positive development. On the wireless side, it’s different, right.

On the wireless side, I think this particular award coupled with the change that AT&T is doing in their network will have a significant impact on MasTec and today our wireline, wireless company used to be — we were bigger on wireless, quite frankly today, we’re bigger in wireline. So it’s about a 60-40 split. This contract will probably get a closer to 50-50 over the course of the next couple of years and it’s going to have a meaningful impact to our Wireless business, our Wireless business has the ability to grow probably 30% to 50% from where it was in ’23. So, it’s a significant award, it has a significant impact on the total revenues for the segment.

Andy Kaplowitz: Very helpful, Jose, and then kind of a similar question for Clean Energy side. Could you tell us what you’re assuming for IEA in ’24? Maybe differences between wind, solar, and Infrastructure. Obviously, you’ve seen there is still a fair amount of noise in the developer world. I think you said you’re only assuming sort of what you can tell was already going forward. So how did you sort of discount like the noise that’s out there in the developer world, especially in the IEA side for ’24?

Jose Mas: Yes, so the first, I think the first thing that’s really important to kind of focus on is as we looked at ’24 even in late ’23, right, we’re not viewing it as MasTec legacy versus IEA, we’ve gone to market with one business. So, we’ve got a MasTec renewables business. We do have different operating groups that might perform the work but in market — we’re in market as MasTec Renewables with one leadership team. And when we think about the industry as a whole, it ends up being very focused on customers, right. Each customer is in a different place. Each customer has different challenges. So, it’s really about understanding where every customer sits on a particular project, irrespective of what’s happening across the entire marketplace.

The entire marketplace, there is definitely some that have more challenges than others. I think it’s going to get better for everybody as the year goes on, but we’ve really focused on those developers, and projects that we think are primed to-be-built in ’24 or going to have less issues and that’s kind of how we’ve built our model. Surprisingly, when we think about ’24, the growth in wind and solar has been somewhat equal, we’re seeing a lot of strength in the wind market, especially on the repowering side. We’ve had a lot of bookings there. We think that’s what we like about that is the predictability of it, those projects have a lot less potential issues as you think about the constructability during a year. So wind has been — and quite frankly, it was pretty strong for us in 35, our split — in ’23 our split last year was about 60-40; 40% being wins and I think it’s going to be somewhat similar this year in ’24, so that the market held.

And we feel good about how we built our plan from a bottoms-up perspective. There’s opportunity, we know there’s going to be challenge in certain projects. So, we took some overall contingencies, but I do think as the year goes on, things will get better and there might be some projects that you get to add on in the second half of ’24.

Andy Kaplowitz: I appreciate all the color, Jose.

Jose Mas: Thanks, Andy. Thank you.

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

Steven Fisher: Thanks. Good morning. Wanted to just follow up on that last question, wondering if you can maybe bridge for us the $4.4 billion of expected revenues in Clean Energy versus the $3.1 billion of year-end backlog, how much of that incremental $1.3 billion is discrete renewable projects that maybe in like limited notice to proceed, that you expect to put into backlog and then burn versus how much is maintenance or small capital projects, just kind of flow work or maybe there is something specific in civil infrastructure or industrial that you have expected to bridge that backlog versus revenue gap.

Jose Mas: Yeah. So, I guess, generally, right, when you think about industrial and civil to get it out of the way, backlog is pretty much set in those. We’ve — we believe that in our backlog numbers, we have most of the burn required in 2024. There is some work that you’re going to book and burn, but for the most part, we think we’re sitting in a really good place relative to backlog versus revenue expectations. On the renewable side of the business, the reality is that, in our minds, right, the business is much better than what backlog shows. I think you’re going to see considerable backlog build in Q1, I think you’ll see considerable backlog build again in Q2, and that will give, in my opinion, at least the outside world that doesn’t see our numbers day to day, the comfort that our ’24 solidified.

In our prepared remarks, we talked about that actually having a really positive impact for ’25 because these projects actually have a similar, if not a little bit greater amount of volume activity in ’25 than they do in ’24 which I think positions us incredibly well for a really strong growth year in ’25, but the good thing is we’ve identified them right. So even though they may not be in backlog, we know every project, we’ve identified it. We know when they’re supposed to sign, most of it is under LNTP, if not all of it, but it’s really about at the end of the day, getting into a signed contract and being able to work on it and that’s what we hope to be able to deliver in the first and second quarter from a backlog perspective.

Steven Fisher: Okay. That’s helpful. And then just a little bit of near-term cadencing. I guess in terms of your Q1 numbers, we’re already starting March here. So two-thirds of the quarter is done. I guess to what extent are there still any notable things that have to happen in order to hit your Q1 numbers. I’ve seen you factor in all of the January and February weather and timing of solar projects. And then do you have an overall kind of first-half versus second-half EBITDA mix, just to kind of get an early framing of what you’re thinking about Q2? Thank you.

Jose Mas: Yes, so look, on the first quarter, obviously, we’re cheap in the first quarter. So, I think we’ve taken into account everything that we know as of today. Whether it was a little bit of an issue in certain geographic parts that impact — that are impacting our first quarter, but it’s really not much different than quite frankly what our expectation was coming out of our third quarter call. Maybe with the exception of the Illinois rate case and the impact that that’s had on our Power Delivery business in Q1. Outside of that, I think everything is pretty consistent with our expectations. When we think about the second quarter and third quarter, and we do year-over-year comps. We have a pretty similar ramp to what we had last year from an earnings perspective, right.

We expect earnings in the second, third, and fourth quarters to be above where they were in ’23, but we don’t expect any particular quarter to be dramatically above. So, I think margin profiles are going to be consistent with where they were generally last year and it’s going to really be driven by the revenue expectations. Paul stated the second and third quarter are going to be our two biggest quarters and I think that we’ll be able to show and it has moderate growth, right. So we’re going to have a nice growth between the second and third quarters, very similar to last year. So, if you take last year’s cadence, I think we’re going to have a similar cadence in 2024.

Steven Fisher: Thanks, Jose.

Jose Mas: Thank you.

Operator: We will take our next question from Marc Bianchi with TD Cowen.

Marc Bianchi: Hey, thanks. Jose, I think I heard you say that you had some optimism about the oil and gas business in ’25 and beyond because the roll-off of this MVP does create a tough comp when you get to ’25. So can you talk about where that — those opportunities are and when we might get some visibility on that as sort of external spectators?

Jose Mas: Well. I think it’s multiple things, one, I actually think that the gas side of the pipeline business is incredibly active, especially in certain geographic areas. I think you’re going to see that materialize as the year goes on, just from — some of that will be book and burn but I think we’ll have a really strong year outside of MVP. And then when we think about ’25, we see that continuing just based on the conversations we’re having with customers. And then more importantly, we’re starting to see real jobs on some of the other alternative types of pipeline builds, right, whether that be carbon capture, hydrogen, we think that becomes real in ’25, we think that becomes meaningful. It probably changes the business, right, because it’s — I think that’s going to be very consistent in nature for a long period of time.

So I think the mix of our business, what we would call — we view it more as a pipeline business, right. So, I think there’s going to be more diversity in our business in ’25, which is going to lead to some of that growth that we talked about. It’s not specifically what we used to do, but it’s a mix of what we’re seeing in the future.

Marc Bianchi: And the margin composition of that opportunity, would it be similar to sort of what’s implied here in the back -half of the year?

Jose Mas: It is.

Marc Bianchi: Great. Thank you. I’ll turn it back.

Jose Mas: Thank you.

Operator: We will take our next question from Neil Mehta with Goldman Sachs.

Neil Mehta: Yeah, thank you. It’s Neil Mehta here. I guess, Jose, I had some industry questions on the utility side which is, there’s been a lot of talk about this load growth transition from a market that has flattened power demand inflecting for a variety of reasons including datacenters and electric vehicles and onshoring. Just would love your perspective as you talk to your utility customers about what that means for the CapEx profile of the industry and what does the industry need to do in order to meet growing load.

Jose Mas: I think we’re seeing it, right. If you look at, not to plug you, Neil, but you actually put out a note yesterday that listed a number of different utilities that had raised our CapEx here in the first quarter, I thought it was a thoughtful note, I thought it was important and reflective of what’s really happening in the industry. And that’s what we’re seeing, right. Our customers are talking about it, our customers aren’t just talking about it, but they’re raising their CapEx dollars to deal with it. We don’t think this is a short-term initiative. We think this is going to last for a really long time and we think we’re just starting to see the beginning of it. So this is an incredibly exciting market to be in. Again, there has been some issues with the cadence of that spend over the course of the last year, but there’s no question in my mind where the direction of that is going.

From our perspective, we think we sit in a really good place. We’ve added an enormous amount of scale in that business and we think that’s really going to start to pay off for us here and the next year or so. So we’re really excited about what’s happening in the industry and I think that generally, I think, people underestimate the capital requirements to meet the growing demand of energy use, that we’re going to have over the coming years.

Neil Mehta: Yeah, thanks, Jose. There is a related question which is, there’s been a lot of talk about the impacts of wildfires across the utility system and certainly unfortunately, we’ve seen a lot of incidents here over the last year or two. Just, again, your perspective on this, does this represent a challenge that you see yourself as well-positioned to help utilities mitigate and as you think about specifically in the utility system, what are different things that they can do as they think about trying to head off this problem.