MasTec, Inc. (MTZ)

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MasTec, Inc. (MTZ)

Q4 2013 Results Earnings Conference Call

February 28, 2014, 09:00 AM ET

Executives

J. Marc Lewis - Vice President of Investor Relations

Jose Ramon Mas - Chief Executive Officer and Director

George Pita - Executive Vice President and Chief Financial Officer

Analysts

Alexander Rygiel - FBR Capital Markets

Saagar Parikh - KeyBanc Capital Markets

Daniel Mannes - Avondale Partners

Michael Novak - Frontier Capital

Noelle C. Dilts - Stifel, Nicolaus & Co.

William D. Bremer - Maxim Group LLC

Jason A. Wangler - Wunderlich Securities Inc.

Veny Aleksandrov - FIG Partners

Adam R. Thalhimer - BB&T Capital Markets

Will Gabrielski - Stephens

Liam D. Burke - Janney Capital Markets

Presentation

Operator

Welcome to the MasTec's Fourth Quarter 2013 Earnings Conference Call, initially broadcast on February 28, 2014. Let me remind participants that today's call is being recorded.

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

J. Marc Lewis

Thank you, Lisa. Good morning, everyone. Welcome to MasTec's fourth quarter and 2013 year-end conference call. The following statement is made pursuant to the Safe Harbor for forward-looking statements pursuant to 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 reflect the company's expectations on the day of the initial broadcast of this call, and the company undertakes no obligation 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.

In today's remarks by management, we will be discussing continuing operations adjusted financial metrics as discussed and 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 measure can be found in our earnings press release, our 10-K, or in the Investor and News sections of our website located at mastec.com.

With us today, we have Jose Mas, our CEO; and George Pita, our new Executive VP and Chief Financial Officer. The format of call will be opening remarks and analysis by Jose, followed by financial review from George. These discussions will be followed by a Q&A period, and we expect the call to last about 60 minutes.

We had another great quarter and year, and have a lot of good things to talk about today. So I'll turn it over to Jose. Jose?

Jose Ramon Mas

Thanks, Marc. Good morning, and welcome to MasTec's 2013 year-end call. Today, I will be reviewing our fourth quarter and full-year results, as well as providing my outlook for 2014 and the markets we serve.

Before getting into details, I'd like to take a step back and make some observations. A few years ago we publicly said out to diversify our business and put ourselves in a position to have greater growth opportunities with improved margins. Since 2007 we've grown revenue from under $1 billion to over $4.3 billion. And during that same period adjusted EBITDA has grown from approximately $60 million to $449 million in 2013.

While these are impressive financial results, and we are very proud of them, our greatest accomplishment is how we positioned ourselves across a number of growth industries that offer us expanding opportunities for both continued growth and better margins.

I know I've said it before, but I truly believe that we have never been in a better position to take advantage of the opportunities our different markets are affording us. We are blessed to be in incredibly healthy markets and opportunities for long-term growth are as good as we've ever seen.

Now, for some full-year highlights. 2013 revenue was up 16% to $4.3 billion. 2013 continuing operations adjusted EBITDA was up 34% to $449 million from $336 million in 2012. Full-year cash flow from operations was $200 million and 2013 full-year continuing operations adjusted diluted EPS was up 24% to $1.90.

And for the fourth quarter revenue was up 24% to $1.2 billion, fourth quarter continuing operations adjusted EBITDA was up 23% to $123 million and fourth quarter continuing operations adjusted diluted EPS was up 13% to $0.53.

In summary, we had an excellent quarter and a great year. With the exception of our Power Generation business all of our segments had double-digit revenue growth for the year. Our Oil and Gas business was up 70% year-over-year, our Transmission business was up 37% and our Wireless business was up 38% year-over-year. Again, we had a great year.

More importantly, the prospects for our business are actually getting better. While the Oil and Gas Transmission and Wireless markets have been our main growth drivers and we expect it to continue, we are seeing an improving landscape for the balance of our business. Our Power Generation group is experiencing a solid uptick in wind related business.

Our Installation business is beginning to see increased activity around our security initiatives, and there has been a significant amount of dialogue and announcements related to 1 gigabit high-speed connectivity for residential customers. The fiber deployment required for that initiative is a significant opportunity for MasTec.

Now, I would like to cover some industry specifics. Our communication revenue for 2013 was $1.96 billion, a 10.7% increase over 2012. In addition, EBITDA margins in this segment improved 180 basis points year-over-year.

Our install-to-the-home revenue was flat versus 2012. DIRECTV revenues were down about 3%, offset by our entry into the security market. We now perform security installation in 28 markets across the country.

We believe security is a natural extension of our capabilities, and we are bullish on its long term prospects. Security coupled with in-home automation and energy efficiency is a fragmented market. Our national reach and scale gives us a strong competitive advantage.

While we haven't commented on our wireline business in a number of quarters, future prospects for that business are as good as we've seen in the long time. As a reminder, the wireline business is where MasTec actually began.

Recent announcement from multiple carriers about 1 gigabit speeds to residential customers will require a significant fiber expansion. Our history, experience and geographic coverage make this a sizable opportunity for us.

Our wireless revenue was up 38% from 2013 versus 2012. This growth was driven by continued growth with our largest customer, as well as our ability to diversify our customer base. We are benefiting from significant investments in our customers' networks. Technology enhancements like LTE, DAS and small cells coupled with net -- coupled with network densification creates growing opportunities for our business both for short and long term growth.

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