MasTec, Inc. (MTZ)

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MasTec, Inc. (MTZ)

Q4 2009 Earnings Call Transcript

February 25, 2010 9:00 am ET

Executives

Marc Lewis – VP of IR

Jose Mas – President & CEO

Bob Campbell – EVP and CFO

Analysts

Alex Rygiel – FBR Capital Markets

Vance Edelson – Morgan Stanley

Tahira Afzal – KeyBanc

Liam Burke – Janney Montgomery Scott

Adam Thalhimer – BB&T Capital Markets

Mickey Schleien – Ladenburg

John Rogers – D.A. Davidson

Presentation

Operator

Welcome to MasTec's fourth quarter 2009 earnings conference call initially broadcast on February 25, 2010. Let me remind participants that today's call is being recorded.

At this time, I'd like to turn the call over to Marc Lewis, MasTec's Vice President of Investor Relations. Marc?

Marc Lewis

Thank you. Good morning, everyone. Welcome to MasTec's fourth quarter earnings conference 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 expectations on the day of the initial broadcast of this conference call and the company will make no effort 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 Securities and Exchange Commission. 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.

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 from yesterday or in the investor presentation PDF files located on the ‘Presentations and Webcast’ page in the Investor Relation section of our Web site located at mastec.com.

With us today, we have Jose Mas, our Chief Executive Officer; and Bob Campbell, our Executive Vice President and Chief Financial Officer. The format of the call will be opening remarks and analysis by Jose followed by a financial review from Bob. These discussions will be followed by a Q&A period, and we expect the call to last approximately 45 minutes to an hour. Jose?

Jose Mas

Thank you, Mark. Good morning and welcome to MasTec’s end of year conference call. Today, I will be reviewing both our 2009 fourth quarter and year-end financial results, and will share my outlook for the different markets we serve.

First, some fourth quarter highlights. Revenue was $496 million, a 20% increase over the prior year’s quarter. Gross margins improved 70 basis points to 15%. EBITDA increased more than 50% to $50.3 million for the quarter versus $32.5 million last year. Cash flow from operating activities was $38 million, more than doubled that of the previous fourth quarter.

For the year, revenue was $1,623 million, up 18%. Gross margins also improved over 70 basis points to 15.2%. EBITDA for the year increased 39% to a $153 million from $111 million a year ago, and cash flow from operating activities was $124 million. That’s $66 million more than the previous year. All in all a very good year considering the difficult economic environment in 2009.

Before I discuss the individual industry’s recover, I would like to reflect on some of our accomplishments over the past three years. Since 2007, we have increased revenues 56%, improved margins and roughly doubled EBITDA and cash flow from operations despite a depressed economic environment. By the end of 2010, we expect our revenues to have doubled and our EBITDA to have tripled our 2007 results.

We have also repositioned MasTec for further growth and even greater financial success. Our entry and expansion into the transmission, renewable energy, wireless, and pipeline construction industries has diversified our customer base and revenue stream and has positioned MasTec as a key participant in some of the fastest growing segments within our economy.

And finally, during a period of economic difficulties for many, we’ve created jobs and have grown our family to more than 9,800 members as of year-end. While our nation’s economic recovery will take time and may be bumpy, we are certain that MasTec is in better strategic position today than at any other time in our company’s history. And we are confident that the industry’s reserve will help lead our country’s economic recovery.

Now I would like to discuss the industry’s reserve. First, I would like to comment on our communications business which accounted for 52% of the company’s revenue for the fourth quarter of 2009. Within communications, our install to the home business had a good quarter and a good year. Quarterly revenue from our biggest customer, DirecTV, was $120 million and for the year we posted record revenues.

Despite a very difficult environment for television programming providers, we were able to grow this account by about 3% in 2009. In 2010, we expect revenues to be relatively flat to slightly down on a year-over-year basis. The remainder of our communications business is experiencing a shift in revenue mix. During the fourth quarter, wireless revenue exceeded wireline revenue for the first time in our history.

During 2009, we saw significant decline in our wireline customers’ activity with business down almost 30% with some of our largest customers. Fortunately, during the second half of the year spending by some of these customers had stabilized. While we expect wireline activity to be flat or down in 2010, we are encouraged by the potential of the proposed broadband stimulus spending. While only a small amount of the stimulus has been awarded to date, we are seeing increased activity from many of our customers, including our rural customers.

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