MasTec, Inc. (MTZ)

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Mastec, Inc. (MTZ)

Q2 2010 Earnings Call Transcript

August 5, 2010 9:00 am ET

Executives

Marc Lewis – VP, IR

Jose Mas – President and CEO

Bob Campbell – EVP and CFO

Analysts

Alex Rygiel – FBR Capital Markets

Tahira Afzal – KeyBanc

Vance Edelson – Morgan Stanley

Liam Burke – Janney Montgomery Scott

Mickey Schleien – Ladenburg Thalmann

Adam Thalhimer – BB&T Capital Markets

William Bremer – Maxim Group

Veny Aleksandrov – Pritchard Capital Partners

Tristan Richardson – D.A. Davidson

Frank Bisk – Pilot

Presentation

Operator

Ladies and gentlemen, welcome to MasTec's second quarter 2010 earnings conference call initially broadcast on August 5th, 2010. Let me remind participants that today's call is being recorded.

At this time, I would like to turn the call over to Marc Lewis, MasTec's Vice President of Investor Relations. Please go ahead, Marc.

Marc Lewis

Thank you. Good morning, everyone. Welcome to MasTec's second 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 make certain – 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 release or on the Investor Relations section of our website 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 session, and we expect the call to last approximately one hour. Jose?

Jose Mas

Thank you, Marc. Good morning and welcome to MasTec’s second quarter call. Today, I will be reviewing our second quarter results and providing an outlook for the markets we serve.

First, some second quarter highlights. Revenue for the quarter was $495 million, a 28% increase over the prior-year quarter; EBITDA increased 29% to $46 million; earnings per share were $0.18 versus our guidance of $0.15; and we generated organic growth of 11% in a very difficult environment. In summary, we exceeded our expectations for both revenue and profitability in the second quarter.

Our diversity and expansion into a number of key end markets continues to drive our improved performance and growth profile. While we are very pleased with our financial performance, we are even more pleased with the success of our diversification and increased exposure to higher-growth markets. These markets include wireless, renewable, pipeline, high-voltage transmission line, and industrial construction.


While current economic and regulatory conditions continue to have a negative short-term impact, we believe the long-term growth profile on these markets will be significant. We have clearly demonstrated our ability to grow organically in these markets despite a challenging economic climate, and as the economy improves, we believe that our competitive position will allow us to expand that growth.

As we look at the balance of the year, we expect the second half to outperform the first half. We actually expect revenue growth in practically every one of our markets, led primarily by growth in wireless and pipeline construction.

A key project will be our participation in the construction of the Ruby Pipeline. The Ruby Pipeline is a 680-mile, 42-inch natural gas transmission pipeline with an initial capacity of up to 1.5 billion cubic feet per day that will traverse portions of four states; Wyoming, Utah, Nevada, and Oregon. Construction began on the pipeline July 31st and we are currently revising our work plan with our customer as we had expected to start this project in early July. While we do not believe the delay will affect our full-year guidance, we are obviously now expecting significantly more revenue from this project in the fourth quarter versus the third quarter.

For the full year, we are reaffirming our guidance. Based on our current work plans, we expect revenue to come in slightly above $2.1 billion and we are currently trending towards the lower end of our earnings guidance range. In these estimates, we are assuming that some of the construction on the Ruby Pipeline will slip into the first quarter of 2011.

Now, I would like to cover some industry specifics. Communications revenues were $280 million or 50% of revenue for the second quarter. Within communications, our installable home market performed very well. Revenue from our largest customer, DirecTV, was $127 million, up 10% from last year's second quarter. Second quarter revenues were higher than projected, activity remained strong, and we now expect double-digit growth from this customer for the balance of the year.

The telco wireline maintenance business remains challenged. Revenue was down almost 15% year-over-year. While we don't expect much improvement in 2010, we are beginning to see a number of opportunities coming from RFPs associated with broadband stimulus spending and we expect that 2011 will be a better year as it relates to this market.

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