MasTec, Inc. (MTZ)

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MasTec (MTZ)

Q3 2012 Earnings Call

November 02, 2012 9:00 am ET

Executives

J. Marc Lewis - Vice President of Investor Relations

Jose Ramon Mas - Chief Executive Officer and Director

C. Robert Campbell - Chief Financial Officer, Principal Accounting Officer and Executive Vice President

Analysts

Alexander J. Rygiel - FBR Capital Markets & Co., Research Division

Andy Kaplowitz - Barclays Capital, Research Division

William D. Bremer - Maxim Group LLC, Research Division

Tahira Afzal - KeyBanc Capital Markets Inc., Research Division

Noelle C. Dilts - Stifel, Nicolaus & Co., Inc., Research Division

Veny Aleksandrov - FIG Partners, LLC, Research Division

Adam R. Thalhimer - BB&T Capital Markets, Research Division

John Rogers - D.A. Davidson & Co., Research Division

Liam D. Burke - Janney Montgomery Scott LLC, Research Division

Presentation

Operator

Welcome to MasTec's Third Quarter 2012 Earnings Conference Call Initial Broadcast on November 2, 2012. 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, sir.

J. Marc Lewis

Thank you, Marquita. Good morning, everyone, and welcome to MasTec's third 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 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 call, we may also discuss certain adjusted financial metrics or use non-GAAP financial measures in our analyses. A reconciliation of any adjusted financial metrics or non-GAAP financial measures not reconciled in these comments to the most comparable GAAP financial measures can be found in our earnings press release, SEC filings 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. The discussions will be followed by a Q&A answer period, and we expect the call to last about 60 minutes.

We have a lot of good news today, and I'd like to turn it now over to Jose. Jose?

Jose Ramon Mas

Thank you, Marc. Good morning, and welcome to MasTec's 2012 third quarter call. Today, I will be reviewing our third quarter results, as well as providing my outlook for the markets we serve.

Before we get started, on behalf of MasTec, I would like to offer our thoughts and prayers to all of those affected by Hurricane Sandy, including our team members and partners in the area. We are praying for a speedy recovery.

Also, before getting into the numbers, I'd like to cover 2 topics. First, as discussed on our last quarterly call, we took a $9.6 million pre-tax charge for the settlement of litigation in Spain arising from a subsidiary we sold in 1998. And second, during the quarter, we also made a decision to sell our small water and sewer subsidiary that has been struggling in recent years due in large part to the lack of financial resources available to municipalities and state governments throughout the country. My discussion of our third quarter numbers will exclude both of these.

Now some third quarter highlights. Revenue for the quarter was $1,067,000,000, a 31% increase over the prior year's third quarter. Adjusted EBITDA from continuing operations was $101 million, an increase of 31% over last year's third quarter. Adjusted earnings per share from continuing operations was $0.53, an increase of 51% from last year's third quarter, and cash flow from operations for the quarter was $119 million.

In summary, we had another excellent quarter. I'm proud to say that revenues in this quarter exceeded the full year revenues of 2007, my first year as MasTec's CEO. We've come a long way in 5 short years. More importantly, during that same period, earnings growth has outpaced revenue growth. While we enjoyed strong growth during the quarter and our operational and financial performance continued to improve, the highlight of the quarter is the improving outlook for the markets that we serve and the long-term growth prospects for the company.

Our exposure to petroleum and natural gas pipelines and facilities, high-voltage electrical transmission, wireless infrastructure construction and construction of power generation sources should continue to be excellent sources of growth and opportunity for MasTec for years to come.

Now I'd like to cover some industry specifics, including recent trends and opportunities. Our communications revenue was $437 million, a slight increase over last year's third quarter. Our install-to-the-home revenue was up 21% sequentially and down slightly year-over-year.

With our expansion into the Northeast last year, we now have a significant presence in a number of states impacted by Hurricane Sandy. Though to date, the storm has been very disruptive to this business, we will be supporting DIRECTV in restoring service to their customers as quickly as possible. During the quarter, we also extended our contract with DIRECTV until October of 2016. We are proud of our relationship with this important customer and appreciate their continued confidence in MasTec.

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