Good morning and welcome to MasTec's Second Quarter 2022 Earnings Conference Call initially broadcast on Friday, August 5, 2022. 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?

Thanks, Christina, and good morning everyone. Welcome to MasTec's second quarter 2022 earnings 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 today's communications, we may make certain statements that are forward-looking, such as statements regarding MasTec's future results, plans and anticipated trends in the industry 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 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 today's call. In today's remarks by management, we'll 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. With us today, we have Jose Mas, our Chief Executive Officer; and George Pita, our EVP and Chief Financial Officer. The format of the call will be opening remarks by Jose followed by a financial review from George. These discussions will be followed by a Q&A period, and we expect the call to last about an hour. We had another in-line quarter and have a lot of important things to talk about today. So I'll now turn the call over to Jose to get going. Jose?

Thanks Marc. Good morning and welcome to MasTec's 2022 second quarter call. Today I'll be reviewing our second quarter results as well as providing my outlook for the markets we serve. First, some second quarter highlights. Revenue for the quarter was $2.3 billion, adjusted EBITDA was $179 million, adjusted earnings per share was $0.73, and backlog at quarter-end was $11 billion, a record level. On our IEA acquisition call last week, we announced that we were experiencing higher levels of cost for the balance of the year, with limited ability to mitigate or generally pass on increases to our customers and talked about our challenges with getting pricing adjustments outside of the typical annual escalators. While second quarter guidance was in line, the quarter was negatively impacted by inflationary cost pressures. Increases in fuel prices and labor, coupled with material delays, have impacted margins in every MasTec segment. In addition to the inflationary pressure, we have had some select execution issues that have also impacted earnings. To understand our future potential and our confidence in being able to see a significant improvement in 2023 and beyond, it's important to understand the areas where we've underperformed. To be clear, I'm not trying to make excuses, and I take full responsibility for the execution issues we've had. But to understand how earnings can quickly improve, we need to break down our business in more detail. I'd like to start by focusing on our Clean Energy and Infrastructure segment. It's a segment where we are making a significant investment with the addition of IEA, and it's a segment that for the second quarter of 2022, we showed an EBITDA loss for the quarter. The segment has now underperformed for a number of quarters, so it's important to understand why we are confident in our ability to meaningfully improve the margin profile of the segment. While some of the issues have been market-driven and outside of our direct control, like the solar circumvention investigation, which has negatively impacted our solar revenue expectations for 2022, others have been purely execution-driven. Unfortunately, it's been the same projects we've previously discussed that continue to get worse financially. As we get to the end of these projects, which in some cases have required us to rework certain portions, we're dealing with the same cost escalations we see across our business, which further exacerbates the losses. As we think about the Clean Energy and Infrastructure segment, we break it down into three divisions: renewables, civil, and industrial. Our problem projects have been in our industrial business. Removing the industrial revenue and losses, our renewables and civil business is performing at a 5% EBITDA margin rate year-to-date and is expected to be 6% for the full year. We expect these levels to significantly improve as these margins have been negatively impacted by the solar investigation, overhead absorption, material delays, and the cost pressures we've experienced. With cost pressures built into go-forward pricing and the expected growth of both the renewable and the civil market, we expect this margin profile to improve in 2023 and get back to previous levels of high single-digit performance. So our focus and efforts have been in fixing and improving the Industrial business. The first question is, why are we in the business? I'd first like to define what we mean by industrial. Our focus on this industry is to empower sustainable solutions where we think there is considerable overlap with other MasTec services. For example, advanced-class turbine installations with the ability of burning both natural gas and hydrogen, industrial components of the carbon capture projects, and sustainability projects. Our industrial revenue in our Clean Energy and Infrastructure segment will be approximately $425 million in 2022, with the majority of the problems in two projects, which were both bid over two years ago. The projects will be completed by year-end. And outside of those projects, the balance of our project mix has performed well. Despite our financial performance, we've built a great resume and developed excellent relationships. As we look forward to 2023, we have mitigated our risk on industrial projects by shifting to more cost-plus contracts, having already booked over $300 million in cost-plus industrial contracts for next year. One of these projects, a first of its kind, is a lithium battery recycling facility that will take in end-of-life batteries and battery manufacturing scrap to produce black mass, an intermediate product containing valuable metals, such as nickel, cobalt, and lithium. The facility will transform that black mass into critical battery-grade materials to be returned back to the lithium-ion battery supply chain. This facility will be able to process battery material that is equivalent to approximately 225,000 electric vehicles per year. While we'd obviously like to have performed better out of the gate within the industrial segment, the mostly organic growth we've achieved, despite the financial losses we've endured to date, have positioned us very well in the market to take advantage of a number of new opportunities. Going forward, as we think about our C&I segment, our Renewable and Civil business, coupled with the expected acquisition of IEA and the improvements in both projects and contract structures going forward in the industrial market, gives us great confidence in being able to achieve the performance in our Clean Energy and Infrastructure segment that we previously discussed and hope that our target of $5 billion in revenue for 2023 at mid to high single-digit EBITDA margins proves to be conservative in light of the new potential energy legislation. Moving on to other parts of our business. One of the highlights of the second quarter was our revenue growth in Communications. Communications segment revenue of $822 million was up 30% year-over-year and 24% sequentially, and margins in our Communications segment were up 420 basis points from the first quarter. While we've covered all of the communication opportunities at length, it's great to finally see the impact of the infrastructure growth associated with both 5G and the Rural Opportunity Digital Fund or RDOF finally start to show up in our financials. Our growth in the quarter was driven by sequential growth of 28% with AT&T, 26% with Comcast, 36% with Verizon, 34% with T-Mobile, and strong increases with a number of RDOF-funded customers. In our Power Delivery segment, revenue was $647 million, and our performance was driven by both INTREN and Henkels & McCoy, who exceeded internal expectations that were somewhat offset by legacy MasTec business, which was down about $50 million in revenues in the quarter due to project and material delays impacting our absorption of costs. We expect strong third and fourth quarter performance in this segment, with year-over-year improvements in EBITDA, despite the inflationary challenges we are experiencing. In our Oil and Gas segment, margins were better than expected at 18.8% of EBITDA, despite revenues being down from $621 million in the second quarter of 2021 to $341 million this year. Revenue for the year is expected to be down over $1 billion from 2021, but we're excited to announce that post-quarter-end, we signed our largest pipeline contract in over three years, a 300-mile 42-inch pipeline that starts construction in 2023. While activity remains slow for 2022, the level of recent discussions for new projects has considerably increased, and we expect this segment to have considerable opportunities over the next few years. Also of note for the quarter, backlog at quarter-end exceeded $11 billion, a record level with the sequential increase in every segment, except Power Delivery, which was virtually flat, demonstrating strong demand for all of our service offerings. Strategically, as we previously communicated, MasTec is and has been transitioning our business as we focused on growing and diversifying our portfolio. Our second quarter results continue to reflect the opportunity we have in growing our Communications, Power Delivery, and Clean Energy and Infrastructure segments. I'm extremely proud of how we've developed a portfolio of service offerings in these three major sectors that will position MasTec to take advantage of the significant infrastructure spending growth that we expect over the next decade. First, with the transition to a new carbon-neutral economy fueled by green power, massive investments will be required in order to harness the nation's best wind and solar resources, which are often located in remote locations of the agricultural Midwest and Southwestern desert. This will include installing thousands of miles of transmission lines necessary to bring green power from these remote regions to population and industrial centers, as well as upgrading last-mile electrical distribution networks for home, office, and highway charging stations, where very few exist today. Our recent announcement of the intent to acquire IEA is an important step in meeting that objective. In addition to our Power business, the 5G revolution will bring a transformation of the communications ecosystem requiring the entire network to be upgraded and expanded to meet the ever-increasing demand for smart cities, smart homes, and factories, the Internet of Things, and autonomous vehicles. Not only must new equipment be added to existing cell towers, but millions of new small and microcells must also be built and connected, including fiber and power. All of these new points of presence will require ongoing maintenance and service. Additionally, we have been involved in the expansion of the clean-burning natural gas pipeline network that will help bridge the gap to clean energy. As a leading pipeline construction company, this also positions MasTec to be a major force in the development of thousands of miles of expected carbon capture and sequestration pipelines and facilities, and ultimately, hydrogen pipelines. Our emphasis over the past few years has been to grow capacity organically and make certain acquisitions that best position MasTec to address all of these needs. With our portfolio now in place, our focus turns to the deployment and execution of what we believe will be a significant opportunity for steady sustainable growth over the decades to come. While George will cover our 2022 expectations in detail, I'd like to reiterate the direction we gave during the IEA Acquisition Call of our future expectations. Included in the slide deck we provided, we laid out a path for 2023 of revenues of approximately $13 billion with EBITDA of $1.2 billion. One of the things I'm proudest of during my tenure as CEO over the last 15 years has been our consistency and our ability over many years to meet and exceed guidance. I'm not pleased that we've had to adjust our guidance over the last few quarters. And in planning for 2023 and the early outlook we provided, we were cautious to create targets we felt we could achieve with a high degree of confidence. I understand that today these are just words, but we, as an organization, are motivated and excited to show what MasTec can do and achieve. I'd like to take this opportunity to thank the men and women of MasTec for their performance and hard work. I'm honored and privileged to lead such a great group. The men and women of MasTec are committed to the values of safety, environmental stewardship, integrity, honesty, and in providing our customers with a great-quality project at the best value. These traits have been recognized by our customers, and it's because of our people's great work that we've been able to deliver these financial results in a challenging environment and position ourselves for continued growth and success. I'll now turn the call over to George for our financial review. George?

Thanks, Jose, and good morning everyone. Today I'll review our second quarter 2022 financial results and provide some additional color on our guidance expectation for the balance of the year. For the sake of clarity, discussion of 2022 guidance will not include any contribution from the recently announced IEA acquisition, which is expected to close late in the fourth quarter. If any effect from the proposed IEA acquisition is assumed, any future expectation discussed in my remarks will be clearly indicated. As Marc indicated at the beginning of the call, our discussion of financial results and guidance will include non-GAAP adjusted earnings and adjusted EBITDA. Reconciliation and details of non-GAAP measures can be found in our press release, SEC filings, or on our website. Second quarter results were generally in line with our guidance expectation communicated during our first quarter earnings, with revenue at $2.3 billion and adjusted EBITDA of $179 million. Second quarter revenue grew approximately $300 million, a 17% year-over-year increase comprised of approximately $600 million in revenue growth in our non-oil and gas segments, namely our communications, power delivery, and clean energy and infrastructure segments. This revenue growth was partially offset by an expected year-over-year decrease in our oil and gas segment of approximately $300 million. Second quarter revenue trends reflect the strategic shift we have made to expand our operations and capacity in areas where end market demand is growing. To put the significance of this shift in perspective, for the full year 2022, we expect to generate slightly over $8 million of revenue from our non-oil and gas segments, representing almost 90% of our annual $9.2 billion revenue estimate. As a comparison, less than two years ago, our annual 2020 non-oil and gas segment revenue was only $4.5 billion. In summary, we are in the midst of a significant transition in our end market business mix while also completing integration efforts on 2021 power delivery segment acquisitions. This, coupled with inflationary cost pressures, have made this year disappointing from an earnings perspective. That said, we strongly believe that we have well-positioned the company for long-term opportunities in both revenue growth and operating profit expansion. Now I will cover some more detail regarding our segment results and expectations. Second quarter communications revenue was $822 million, a 30% increase when compared to the same period last year and a 24% sequential increase when compared to the first quarter reflecting expanded wireless/wireline services as telecommunications partners begin to accelerate the deployment of spectrum and fiber for transformational 5G network enhancement. We expect second half 2022 revenue levels to accelerate from first half levels and approximate $1.7 billion, with third quarter revenue approaching $900 million. Second quarter communications segment adjusted EBITDA margin rate was 10.4%, a 420 basis point improvement over first quarter levels, primarily due to overhead leverage from increased revenue levels, coupled with sequentially lower levels of new RDOF wireline market start-up costs. That said, second quarter communications segment adjusted EBITDA margin rate was still impacted by some new RDOF market start-up costs, as well as inflationary cost pressures on labor, fuel, and materials. We expect second half 2022 adjusted EBITDA margin rate will range between 11.5% to 12% of revenue, with this improvement due to additional overhead leverage from higher second half revenue levels and the elimination of new RDOF market start-up costs as operations ramp. Within the second half of 2022, we expect higher adjusted EBITDA margin rate performance in the third quarter, based on normal seasonality. Our annual 2022 communications segment revenue expectation continues at approximately $3.2 billion, a 25-plus percent annual growth rate, with annual 2022 adjusted EBITDA margin rate in the low to mid-10% range. We expect the accelerated run rate of second half 2022 performance to continue and accelerate in 2023, giving us significant growth opportunities. Second quarter clean energy segment revenue was $494 million, a 3% increase when compared to the same period last year. Second quarter adjusted EBITDA was a loss of $5 million. As Jose already discussed, our second quarter clean energy segment adjusted EBITDA was negatively impacted by lower overhead absorption, due to solar renewable power generation revenue disruptions, inflationary cost pressures on existing projects, and the impact of two select industrial projects where we incurred project losses as we move towards project closeout. As we look forward, we expect second half clean energy segment revenue levels to accelerate from first half levels and approximate $1.2 billion. Based on expected overhead leverage from higher second half revenue, coupled with the nonrecurrence of select industrial project inefficiencies and projected fourth quarter closeout benefits similar to last year, we expect second half clean energy segment adjusted EBITDA margin rate will improve and approximate 6% to 6.5%, with fourth quarter adjusted EBITDA margin rate slightly higher than third quarter levels. This equates to an annual 2022 clean energy segment revenue expectation of approximately $2.1 billion, a 13-plus percent year-over-year growth rate, and adjusted annual EBITDA margin rate approximating 4%. We believe the clean energy segment will benefit from the energy transition megatrend with significant growth in both future revenue and adjusted EBITDA margin rate in 2023 and beyond. This includes the expectation of higher levels of 2023 solar power generation project activity as 2022 activity was disrupted and deferred due to supply chain impacts of the now resolved solar panel anti-circumvention investigation. For the sake of clarity, comments regarding 2023 segment expectations exclude the impact of the proposed IEA acquisition, which would significantly enhance our capabilities in renewable energy construction and maintenance, including the addition of a new union-based renewables platform providing expansion in both new geographies and customers. As a reminder, during the fourth quarter of 2021, we renamed our Electrical Transmission segment to Power Delivery to better reflect our expanded service offerings and capacities in the utility services market from 2021 acquisitions. These expanded our electrical and gas distribution capabilities. We firmly believe that our expanded geographic operations, customer reach, and scale provide a compelling suite of services to support our customers' needs as they work to support grid hardening and prepare for the grid impacts of the transition to renewable power generation sources. Regarding our 2021 Power Delivery acquisitions, we have made substantial progress in the integration of acquired operations and expect to complete these activities during 2022. Second quarter Power Delivery segment revenue was $647 million, and adjusted EBITDA margin rate was 7.5%. Second quarter segment revenue grew approximately $400 million over the same period last year and was essentially flat compared to first quarter 2022 levels. Within the Power Delivery segment, our electrical and gas distribution services, including the operations of INTREN and Henkels & McCoy, performed well while our legacy transmission operation underperformed our expectation due to project start-up delays with this activity pushing to the third quarter and a $5 million project closeout charge. Looking forward, we expect second half Power Delivery segment revenue to approximate $1.4 billion, with second half adjusted EBITDA margin rate approximating 9.5%. This equates to an annual 2022 segment revenue view approximating $2.6 billion, with adjusted EBITDA margin rate in the high 8% to low 9% range. Second quarter Oil and Gas segment revenue was $341 million, and adjusted EBITDA margin rate was 18.8%. While we expected lower levels of revenue during the quarter, second quarter adjusted EBITDA margin rate exceeded our expectation, primarily due to project efficiencies and closeouts during the quarter. As we look forward, we expect second half Oil and Gas segment revenue to approximate $750 million, with adjusted EBITDA margin rate approaching 13%. This equates to an annual 2022 Oil and Gas segment revenue view of approximately $1.3 billion, with adjusted EBITDA margin rate approximating 14%. While our annual 2022 Oil and Gas segment expectation reflects a significant decline when compared to 2021, as Jose mentioned, we expect increased levels of revenue and adjusted EBITDA in 2023 as we are seeing increased demand and bidding activity. This is evidenced by Jose's comment where he indicated that during the third quarter, we were awarded the largest natural gas pipeline project we have seen in several years. Second quarter adjusted Corporate segment costs were approximately $21 million, or 90 basis points of consolidated second quarter revenue. Second quarter adjusted Corporate segment costs improved from first quarter levels due to lower levels of Henkels' corporate costs as we work through the back-office integration, coupled with the timing of some settlements and other costs. As we look forward to the second half, we expect adjusted Corporate segment costs to approximate 1.1% of consolidated second half revenue. Turning to our business mix. Based on the strategic diversification of our revenue stream, during the second quarter, no customer represented more than 10% of our total revenue. Second quarter revenue derived from master service agreements reached 54% of our total revenue, a significant increase when compared to a year ago, and this is primarily derived from recurring utility services spend, greatly increasing the repeatable nature of our revenue profile. As of June 30, 2022, we had a record total backlog of approximately $11 billion, sequentially up approximately $360 million and up approximately $1.8 billion when compared to the same period last year. Importantly, this represented record second quarter backlog levels across Communications, Clean Energy and Power Delivery segments, demonstrating the end market revenue shift that is occurring within our operations. That said, as we've indicated for years, backlog can be lumpy, as large contracts burn off each quarter and new large contract awards only come into backlog at a single point in time as a result of actual contract signings. Now, I'll discuss our cash flow, liquidity, working capital usage, and capital investments. During the second quarter, the combination of working capital associated with $300 million in sequential revenue growth, coupled with the acceleration of our 2022 capital expenditures, inventory, and material purchases to address supply chain and inflationary concerns led to a temporary increase in our net debt of approximately $400 million to $2.1 billion. In summary, we anticipate that annual 2022 cash flow from operations will approximate $550 million and expect year-end 2022 net debt levels will approximate $1.7 billion, essentially flat compared to 2021. This expectation excludes any impact associated with the potential closing of IEA. Strong second half cash flows are expected from a combination of improved earnings, cash conversion of front-loaded inventory and material purchases into second half project activity and billing, and lower levels of second half capital expenditures and other strategic investments. Within this expectation, we anticipate a slight reduction in third quarter net debt levels, with continued reduction in the fourth quarter based on lower working capital from seasonally lower revenue levels. On a year-to-date basis, we've repurchased 1.1 million MasTec shares at an average price of $72.28 per share, with a total cost of $81 million. While we still have $77 million in open share repurchase authorization from our Board, given the anticipated year-end 2022 IEA acquisition closing, we do not anticipate additional MasTec share repurchases during the second half of 2022. With regard to our working capital profile during the second quarter, second quarter DSOs were 88 days compared to 89 days at the end of the first quarter of 2022. As we look forward towards the balance of 2022 and work towards acquisition integration, we anticipate by year-end 2022 DSOs will slightly improve to the mid-80s. As previously mentioned, we accelerated capital expenditure purchases during the first half of 2022, incurring approximately $172 million in net cash CapEx as we secured supply chain-constrained equipment. We anticipate that second half net cash CapEx will significantly moderate and approach $50 million for a total annual 2022 net cash CapEx expenditure estimate of approximately $220 million. In summary, our long-term capital structure is solid, and we continue to be committed to our investment-grade rating. We are mindful that if the IEA acquisition is completed during the fourth quarter, it will impact our near-term post-transaction leverage ratio. We have communicated our plan to normalize our post-transaction leverage profile during 2023 with our credit rating agencies that have maintained our investment-grade rating. Moving to our recently updated 2022 guidance view, we expect annual revenue of approximately $9.2 billion, with adjusted EBITDA approximating $750 million and adjusted net income of $235 million, which leads to adjusted diluted earnings of approximately $3.09 per share. For the third quarter, we expect revenue of $2.55 billion, with adjusted EBITDA of $245 million or 9.6% of revenue and adjusted diluted earnings per share of $1.29. This concludes our prepared remarks. We'll turn the call back over to the operator for Q&A.

Thank you. And we'll take our first question from Alex Rygiel with B. Riley.

Good morning, gentlemen. Nice quarter.

Good morning, Alex.

A couple of quick questions here, obviously the notable significant mix shift here is definitely occurring away from your Oil and Gas business towards the other businesses. Do you feel like this platform is established now? Have you talked to some of the IEA customers and your customers? And how are they responding to MasTec becoming much, much bigger in the Clean Energy markets?

Sure. So a couple of things, look, we laid out a strategy a couple of years ago during the pandemic to really move away from our Oil and Gas business, which was obviously struggling. There was a significant shrinkage in the demand because of the pandemic, so it forced us to really look at our business differently, like we've spoken about a lot. I think one of the things we kind of got to take a step back and acknowledge is just the remarkable change and transition that we've seen at MasTec, right? George alluded to it in his prepared remarks. But our non-Oil and Gas business was a $4.5 billion business in 2020. This year it's going to be above $8 billion. Next year it will be north of $10 billion. So we think we've built an incredible business around the opportunities that exist in the marketplace. So I would say that, at this point, we think we've got a great portfolio. We think we've built an amazing business with so much upside going forward. I think we're going to really take the time now to integrate, to execute, to really focus on execution. That's not that it hasn't been our focus, but that's what we're fully focused on today. To your question on IEA, we haven't— obviously, we're very early on. And we're managing the companies as two separate companies today. But I think that just from the customer interaction we've had with our own customers has been tremendous, right? I think there's an enormous amount of excitement in the industry. Obviously, shortly after our announcement of IEA, the discussion about the new energy build really somewhat caught us all by surprise in a very positive manner. It will make a big difference to our business, so we're really excited about that.

And then, turning over to the Communications segment, obviously revenue growth of 30% is fantastic, a strong step higher sequentially in year-over-year. And your margin guidance looks solid as well. It feels like we've been kind of waiting for 5G to develop, but yet it seemed like 5G has been here for three or four years. Can you talk to us about where you think we are in the deployment of 5G equipment into the network? And therefore, is this step-up in revenue here sustainable for the long-term?

Sure. So I'd say a couple of things. One, a lot of the work that we've seen to date has still been a lot of the pre-work that we expect to go into the network, right? So it's been a lot of the fiber-based work. I still believe while obviously the wireless side of this has picked up substantially, it's nowhere near to the levels that it's ultimately going to be. If you look at all of the carriers separately, obviously T-Mobile with its spectrum issues was able to get off to a faster start. I think AT&T and Verizon are really just starting. So I do expect a much greater acceleration in revenue growth on the wireless side going into 2023 and throughout '23. I think on the fiber side, a lot of the growth that you've seen in our business has been driven by the wireline side of the business. And I also think it's just getting started. One of the big differences that I see in the business today versus probably at any other time I've been in the business— and this is the business I've been in the longest— has been the customers' realization that they need to do things differently, right? The labor is not there to meet the demands of their workforce. I think we're working with our customers really creatively to put ourselves in a position for a lot of long-term success with them. I think our customers are open to it, and quite frankly, they're concerned about the resources, and that's— it's a good place for our industry to be, and I expect it to significantly increase further from where it's at.

Good morning, team. Jose, I want to start off on the Mountain Valley Pipeline. And one of the pieces— the moving pieces around the legislation is it feels like there's a higher probability of that moving forward. So, can you quantify what the opportunity set is around MVP? And how do you think about that for '23 from a financial perspective?

Sure, Neil. So in everything that we've kind of laid out to date, we haven't really included the full constructability of MVP. We currently generate a certain amount of revenue that we generate for maintaining the right of way and maintaining the project and the status that it's at today. We agree with your sentiment. I think there is a much higher likelihood of MVP happening probably faster than we had originally anticipated. It will obviously have a meaningful impact on our Oil and Gas business segment if and when it gets built. And in the numbers that we've kind of laid out in the charts that we provided during our IEA acquisition call, I don't think we took into account MVP being built in 2023. With that said, the upside of the completion of that project for us is probably somewhere between $0.5 billion to $1 billion, depending on how the ultimate permit shakes out, so there's a substantial amount of work left on that project for us. And I think the likelihood of that happening in '23 increases by the day.

Thanks. Sticking with the Oil and Gas business, you mentioned in the prepared remarks about some additional awards post quarter close. How big is that? And was that contemplated in the '23 guide that we got with the IEA announcement?

So, Marc, we did talk about it a little bit on the acquisition cost, so it was contemplated in what we did there. It's a 300-mile 42-inch pipeline. We're not going to— we don't necessarily give out project values. It's the largest pipeline we've been awarded in over three years. It's an incredibly exciting project for us. And I think more importantly than that is just the level of activity that exists in that market today. I mean it is a completely different market than it was a year ago. It's a different market than it was six months ago. I think the commodity prices came back. I still think people held off building new capacity. I think today there's a lot of discussion about lack of capacity, especially in the Southern shales again. So I think we're going to see a significant uptick in that industry and that market. I think we'll be a big beneficiary of it. So we're hoping that this is just the start of many projects we'll get to build over the next few years.

Hi, thanks. Jose. Good morning.

Good morning, Noelle.

So I wanted to— in conjunction with the IEA announcement in the call, you talked a lot about some of your contracts not opening up yet to adjust for costs. So I was curious, one, if you could talk about if the current environment— the current inflationary environment is, one, changing how you're structuring some of these newer contracts. And two, if as these contracts open up, you're able to sort of alter or change some of the language around inflation, just how you're dealing with basically structuring your longer-term MSA contracts? Thanks.

Sure, Noelle. So, I think it's— maybe taking a step back, right? On many of our contracts, we do have annual escalators, by right, right? So it's not that we don't get escalations; it's that we get escalations on the anniversary dates of those contracts. So what we've kind of said is our customers have been unwilling mid-cycle to readjust rates, but as those anniversary dates come up, we are seeing increases, right? And those increases are working their way through the year. So between now and the end of the year, there will be a number of contracts and customer relationships where we do get increases across our entire book of business. We had significant rapid cost escalations in the second quarter, and it just happened that a lot of those annual escalators weren't up in the second quarter. So as the third quarter plays out, as the fourth quarter plays out, we will begin to get those escalators. We got some in the first quarter, right? The problem is, in the first quarter, the cost hadn't escalated to the extent that they did in the second. So next first quarter, those will be adjusted to reflect some of the pressure that we saw in 2023— 2022. So it's really a rolling exercise. You're just not able to do it as soon as the costs go up. So there's a period of time that you're absorbing higher costs while you're waiting for some of these annual escalators to take effect. Are there things in the contract based on these— on some of the rapid cost escalations that we've seen that we're going to try to adjust for in the future? The answer is, yes. But I'd also say, historically, outside of labor, there haven't been any singular issues that have dramatically moved on us like we saw this year. We keep talking about fuel because I think it's an obvious one that in our daily lives we're all impacted by. And even if you go back to last year, right, last year fuel as a percentage of revenue versus this second quarter fuel as a percentage of revenue, it's up over 120 basis points. And when you start adding that up to our revenue, it's a $25 million to $30 million comparison issue from Q2 of 2021 to Q2 of 2022. We're going to have a similar issue in the third quarter. We had a similar issue in the fourth quarter. So just on a pure rate, right? On a pure percentage basis, that's a big swing in less than a year where we historically haven't seen that. So it's not something that has caught our attention historically. I don't think we've done a good enough job of tracking expenses to the detail like we're probably going to have to do going forward as these prices change. And all of that will allow us to go into our contract negotiations with just learning and knowing a lot more than we previously did.

Good morning, everyone.

Good morning, Andy.

Jose, so how do you think about normalized margin in Communications going forward? We know what you've guided to for the second half of the year and what's embedded in 2023. But Communication margins, as you know, have been kind of stuck in the 10% to 11% range for quite a while now, and you've got Henkels in there you're obviously hiring a ton of people. So, maybe give us a little more color on how you're thinking about normalized margins in that segment and ultimate margin potential?

Sure. I think it's really important to focus on the growth that we've had, right? 30% year-over-year growth, 24% sequential growth. The reason I say it is— it's expensive, right? A lot of our growth is in new markets, new offices that were open, people that we're hiring— you don't get the same level of productivity. So our margins are not where they should be or where we think they can be. We've talked about margin profile going into 2023 in the 11% to 12% range, which is an improvement over 2022. We think that really starts to demonstrate itself as these offices have a little bit of time under their belt and as a lot of the new hires begin to become more active, you see it in margin. But the truth is that even at that level, we expect further growth in 2023, which also impacts margins. So I still don't— our long-term range on the margin profile of— I think we've laid out 12% to 13% for a long time hasn't changed from what we think is achievable in Communications. But it's going to take an environment where we don't have significant growth, where it's a little bit more stable, and we're able to really enjoy the fruits of what we build to get there. And I think we're going to get there. But I think until we stabilize a little bit from a growth perspective, we're going to continually see margin improvement, right? So margins should be better. They will be better in 2023, but I don't think we get to optimal levels probably until 2024.

Thanks. Good morning. Just to round out that discussion on the industrial piece. You mentioned the $425 million of revenues in 2022 and the $300 million of cost-plus awards. Do you have a preliminary sense of what the industrial revenues could look like in 2023? And how much of that do you think could be cost reimbursable?

So we'll probably do somewhere around $500 million, I'd call it today, with $300 million of that being cost plus.

Yeah. Good morning, guys. So most of my questions have been answered here. I guess I had one question still to circle back on the cash flow. And just— so George, I appreciate all the comments about why second half should look better with the CapEx being weighted to the first half and some of the AR receivable issues. But are there any— I guess what really I asked this is, there's been a big uptick in like your unbilled AR and your retainage balances and also just the unapproved change orders. And so I'm curious if there's anything that's like milestone-driven that could push out to 2023 from some of these contract disputes that would challenge the cash flow, or is it really just kind of mechanically AR collections to get there?

Hey, Justin, yeah, this is George. No, there's nothing structural or of a major change regarding the components of unbilled and retainage, etc. I would characterize all the activity, including UCO, as really ordinary course and in the process of moving forward. Clearly, we had a pretty sizable growth here in the second quarter, so in some cases, you hit some milestones, but we expect those milestones to happen during the second half of the year. And within a picture where we ended up having our DSOs for the quarter were 88, I think we'll be in the mid-80s. So there will be a little bit of an improvement here as we close out the year, but not a meaningful change. That picture altogether leads to the cash flow that we're talking about. Certainly, we'll have more in the fourth quarter, because our revenue levels will dissipate some. So we'll see improved cash flow in the third and in the fourth. Second quarter on the cash flow from ops side— it's not just the receivables or the unbilled; it's also the investments we've made on materials and inventory that are also dragging down the cash flow from ops. And again, those are expected to convert into cash here as we move out through the balance of 2022.

Thank you. That concludes today's question-and-answer session. I'll turn it back for any additional or closing remarks.

So I just want to thank everybody for joining us today, and we look forward to updating you on our third quarter call in a couple of months. Thank you for joining us.

This concludes today's call. Thank you for your participation. You may now disconnect.