Welcome to MasTec's Third Quarter 2023 Earnings Conference Call initially broadcast on November 1, 2023. Let me remind the participants that today's call is being recorded. At this time, I'd like to turn the conference over to Marc Lewis, MasTec's Vice President of Investor Relations. Marc?

Thanks, Elaine, and good morning, everyone. Welcome to MasTec's third quarter 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 does not undertake to update these expectations based on subsequent eventual 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 will 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 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. Please note that we have two documents associated with today's webcast on the Investors and Events and Presentations page of our website at mastec.com. There is a companion document with information and analytics on the quarter just ended and a guided summary to assist in developing your financial models going forward. Both PDF files are available for immediate download. With us today, we have Jose Mas, our CEO; and Paul DiMarco, our EVP and Chief Financial Officer. The format of the call will be opening remarks announced by Jose, followed by a financial review from Paul. These discussions will be followed by a Q&A period, and we expect the call to last about 60 minutes. We have a lot of important things to talk about today, so I'll now turn it over to Jose so we can get going. Jose?

Thanks, Marc. Good morning, and welcome to MasTec's 2023 third quarter call. Today, I'll be reviewing our third quarter results as well as providing my outlook for the markets we serve. As you all know, we moved up our earnings release in this call by two days from our normal cadence. As we went through our quarter close process, given the preliminary results we were seeing for the third quarter relative to our prior guidance and the forward information we are receiving from some of our segments, we determined that it was important to get our earnings release out to the market as soon as our procedures had reached the point that we had sufficient clarity on the data. We appreciate everyone adapting your schedules so that you could join us on this call today. Thank you. Now some third quarter highlights. Revenue for the quarter was $3.257 billion, a 30% year-over-year increase, organic growth of roughly 10% and a 13% sequential increase, but well below our previous guidance. Adjusted EBITDA was $271 million, a 10% increase over last year, but again, well below our previous estimate. Adjusted earnings per share was $0.95. Cash flow from operations generated during the quarter was $294 million, with a $213 million reduction of net debt during the quarter. We expect further cash flow strength during the fourth quarter and the first quarter of 2024, which Paul will cover later. And finally, backlog at quarter end was $12.5 billion. In summary, we continue to face challenges this year. We now expect full year revenue to be about $1 billion or 7% below our previous estimates. This revenue shortfall is primarily related to the continued challenges in our Clean Energy business, where full year revenues will be up about $900 million versus our initial expectations. The bulk of that shortfall occurred at IEA, which we acquired late last year. As a reminder, IEA generated approximately $2.4 billion in revenue in 2022. While we knew the wind market would be challenged this year, we expected the solar market to allow them to achieve revenue growth in 2023. We now expect revenues for IEA in 2023 to be approximately $1.7 billion. While there is no question we are disappointed in our ability to understand forecasting risk based on project timing, there have been a number of market factors that have had an outsized negative impact on IEA. IEA, to a greater degree than MasTec's legacy renewable business, had a customer base that was more dependent on using tax equity to help finance projects. While the Inflation Reduction Act has created significant tax incentives that are expected to have a materially positive impact on the solar industry and our business, the delay on clearly defining the specifics of the law, for example, domestic content, has created a significant delay to certain customers' ability to access tax equity. While this delay has impacted our ability to achieve our projected revenue, I'd like to make clear that these projects haven't been canceled, but rather delayed. And while there has been some negative commentary on the solar market in general lately, we continue to experience significant demand for our renewable services. While we have started a number of new projects in the second half of 2023, our fourth quarter guidance does not assume new project starts after October. So our fourth quarter guidance is made up of projects we are currently working on. We also believe this to be prudent. It’s taken us time to get to know the IEA customer base, and we believe we are bringing the right scrutiny to both our legacy and IEA projects as we fill our 2024 pipeline and believe we will be much more consistent in our ability to forecast this segment’s revenue. We are disappointed with the forecasting assumptions we made in 2023 and our understanding of project risks and our revenue assumptions. We have made significant changes in how we go-to-market and how we assess projects and risks. While we’re incredibly disappointed about our performance this year, we are still very bullish on our future. The level of interaction we are having with our customers around projects and timing today is as good as we’ve ever had in our business. We have a level of verbal and expected awards that gives us an opportunity to significantly grow our Clean Energy business. While we need to be prudent on timing and understand the risks associated with financing, interest rates, and interconnect agreements, our long-term outlook for this market is unchanged. We expect considerable backlog growth, both by year-end and into 2024. And while again, I’m very disappointed with our 2023 results, I truly believe that the combination of IEA and our legacy Clean Energy business will end up being a great acquisition for MasTec and our shareholders. We will appropriately manage expectations and risks going into 2024 and make conservative revenue assumptions until the market stabilizes. With that said, we expect strong double-digit growth revenue in 2024 in our Clean Energy segment. In our Oil and Gas segment, revenues were below our previous estimate as our ramp on the MVP project took longer than expected. Despite this, our full year revenue target of $2 billion is unchanged with more activity expected in the fourth quarter than we originally expected. We now expect the MVP project to extend through the first half of the year. We expect 2024 revenue new levels in our Oil and Gas segment to be slightly lower than 2023, but with slightly better margins as we expect there will be less cost-plus work versus this year. In our Communications segment, revenue fell short of expectations primarily related to a slowdown in wireless spend. For the full year, we expect revenue from our three primary wireless customers, AT&T, Verizon and T-Mobile to be down about 14% year-over-year. We expect this to be offset by strong growth from our wireline customers. As we look ahead to 2024, post quarter end, we won a significant maintenance contract for our largest communications customer for services we weren’t previously providing. This program should be fully ramped by the second quarter of next year, and we expect over $100 million a year in annual revenues. This award, combined with a number of large wireline program awards under which we are currently performing engineering services that we expect will convert into construction in the first half of next year gives us confidence in our ability to grow our communications revenue in the high single digits for 2024 despite some continued CapEx weakness as some of our customers manage through higher cost of capital. In our Power Delivery segment, revenue fell short of expectations as we had a significant year-over-year decline in storm revenue, which also impacted year-over-year margins, along with several utilities moderating their spending plans as they deal with the changing interest rate environment. Margins were up sequentially, and we expect similar performance in both revenues and margins in the fourth quarter. Over the course of the last few months, we have seen a number of utilities begin vendor consolidation efforts. We have had a very good quarter, increasing our market share, having been awarded increased scope for 2024. Post quarter award activity has been strong, and while we have seen some short-term fluctuations in capital spend, we believe the long-term fundamentals of the business have only improved. We expect some continued capital discipline on behalf of the utilities offset by growth associated with transmission and substation work, leading to expectations of single-digit revenue growth in 2024 with modest margin expansion. Before turning the call over to Paul, I would like to reflect on where we are today. Post-pandemic, we took steps to fundamentally transform MasTec. In the three to four years since, we’ve more than doubled the revenue of the business despite seeing a significant drop in our Oil and Gas pipeline revenues. We believe that our transformation, which has seen us significantly increase our presence in Power Delivery and Clean Energy, positions this company better than at any point in our history. But this transition has been much more difficult than we expected. The two Power Delivery acquisitions we made in 2021 are performing well and have strategically positioned us with significant expansion opportunities for future growth. However, they came with their sets of challenges and setbacks and took a lot of effort and time as we integrated them in 2022. Much more difficult has been the combination of IEA as our full year performance and revenue deterioration have been difficult to manage and put stress on the organization. While again, not pleased with our performance, I think we have created an optimal structure as we look to effectively grow and manage this business. Our market strategy has been well received by our customers and the relationships we’ve created, solidified, and grown over the last year gives us great confidence regarding our future in Clean Energy and the market-leading position we believe we can capture. Exiting 2023, we are keenly focused on growing and effectively managing our business for growth, strong margins, and cash flow. For the first time in a few years, we have no new acquisitions to integrate, which will allow us to fully focus on the areas that we need to improve. For those of you new to MasTec, this is my 16th year as CEO. Our revenue for my first year as CEO was around $900 million and EBITDA was less than $50 million. Those of you that know me know how competitive I am and how I always want to succeed and perform. This has been a challenging year, but understand I'm as motivated and determined as ever to make sure MasTec reaches its full potential. My family is the largest single shareholder in MasTec and our interests are aligned with all shareholders. I bear a great sense of responsibility and knowing that our shareholders have made an investment with their hard-earned dollars in MasTec. I do not take that for granted. I can also say, and I know actions speak a lot louder than words, that I believe we are better positioned today than at any point in our history. The long-term opportunities in our segments are better than I think people realize. Despite the short-term challenges, our long-term outlook is intact. Our communications, power delivery, and Clean Energy segments give us not only strong revenue growth opportunities, but each segment has the ability for margin improvement. Our long-term margin goals are unchanged and have been more impacted not by pricing, but by volume and our ability to absorb costs on higher revenue levels. We look forward to delivering on these expectations and regaining the confidence of the investment community. I'd like to take this opportunity to thank the men and women of MasTec. Men and women of MasTec are committed to the values of safety, environmental stewardship, integrity, honesty, and in providing our customers a great-quality project at the best value. I also know how competitive our people are and the desire they have to perform at a very high level. I know they're up for the task. I will now turn the call over to Paul for our financial review. Paul?

Thank you, Jose, and good morning, everyone. First off, I wanted to echo Jose's comments and thank you for the flexibility in accommodating the change to our earnings call schedule. We hope the earlier visibility into our results and outlook will provide some value. We are committed to providing clear and accurate visibility into our performance and strategy, and we'll continue to work towards that goal. Turning to our third quarter results. MasTec generated consolidated revenue of $3.26 billion, up 30% year-over-year and 13% sequentially, but below guidance by approximately 13%. We had lower-than-anticipated activity versus our expectations in each segment, which I will cover in more detail later. Adjusted EBITDA at $271 million missed our guidance by $90 million, driven by decreased operating leverage associated with lower volume, unabsorbed costs due to ongoing project delays, and execution challenges on certain legacy projects. Lower-than-expected adjusted EBITDA also drove performance and adjusted earnings per share of $0.95. Overall, it was a very disappointing quarter, where we faced a number of challenging developments. We took a hard look at the business and our prospects for the balance of the year, and we believe our outlook appropriately captures the closeout risks in projects that have challenged us this year and the anticipated lower activity with certain customers. Despite these challenges, we are pleased with the $294 million of cash flow generated by operations during the quarter and the corresponding $230 million of net debt reduction. Turning to some segment details. Third quarter Clean Energy revenue was $1.1 billion, and adjusted EBITDA was $58 million or 5.2% of revenue. While we did achieve 12% year-over-year organic revenue growth in the quarter, revenue and adjusted EBITDA were both well below expectations, driven by delays in execution of certain contracts and performance challenges on certain legacy projects. While margins held flat with the second quarter, margins were almost 100 basis points below expectations due to lower fixed cost absorption. We also incurred additional costs on the legacy industrial project that reduced margins by almost 100 basis points. This project has been challenging to close out for the past few quarters but we expect to be off-site in Q4 and believe that we have appropriately accounted for potential risks in our guidance. Our Oil and Gas segment generated revenue of $672 million in Q3, a year-over-year increase of 79%, but approximately 20% below our expectations, as we saw a slower ramp than anticipated on the Mountain Valley Pipeline. As a reminder, we had to mobilize almost 3,700 crew members to the site. We encountered some delays due to the ongoing legal challenges the project faced even after receiving approval under the debt ceiling relief bill passed over the summer. Adjusted EBITDA was $97 million, in line with our rate expectation at 14.5%, but lower than guidance, commensurate with the revenue shortfall. We are now fully ramped in the project and expect construction to be completed in the first half of 2024. Our Communications segment also had less activity than expected with revenue of $824 million, $76 million below forecast. We saw continued pullback from our wireless customers in excess of previous expectations, and we also experienced moderated fiber spending late in the quarter, which we expect to continue through year-end. Adjusted EBITDA was $78 million for Q3 or 9.5% of revenue. Lower volume in the quarter impacted absorption of our indirect expenses, lowering margins by approximately 200 basis points versus guidance. Lastly, our Power Delivery segment had Q3 revenue of $665 million, $85 million below guidance and adjusted EBITDA of $57 million or 8.6% of revenue. While margins were up 40 basis points from Q2, we fell short of our guidance due to lower utilization of our crews and equipment. Several of our utility customers have indicated their spending will slow down for the balance of the year as they manage annual capital budgets and this higher cost of capital. We began to see pullback late in the third quarter, but we expect this to be a short-term trend that will be alleviated as we move into 2024 and annual budgets are replenished. Emergency restoration services also trended below our expectations and very little activity is expected in the fourth quarter. Backlog as of the third quarter was $12.5 billion, reflecting a 7% decline versus the second quarter. The decline was driven by lower near-term activity expected in our communication and power delivery MSA work, the significant Q3 revenue burn in Oil and Gas, and timing of contract executions in our Clean Energy segment. For some additional color, we signed over $500 million of contracts in Clean Energy alone since September 30, that are not included in Q3 backlog. Additionally, after these contract signings, we continue to work on projects under a limited notice to proceed that have approximately $2 billion of contract value. Per our policy, these contracts will be included in backlog once fully executed. We have also signed or received verbal awards totaling over $300 million for both the Communication and Power Delivery segments. These awards are related to work for new customers, geographic expansion, or new services with existing clients. Q3 cash flow generated by operations was $294 million, reducing our net debt by $213 million to about $3 billion. The cash flow was driven by improved working capital metrics with DSO and DPO, both improving and now in line with historical levels. DSO improved to 85 days, down from 90 days at Q2 and we expect further improvement in subsequent quarters. For the third quarter, net debt leverage improved slightly to 3.4 times and liquidity also improved to approximately $1.2 billion. Factoring in the developments during Q3, we now expect 2023 revenue to approximate $12 billion with adjusted EBITDA of $850 million or 7.1% of revenue. This reflects a significant reduction from our prior guidance, driven by the near-term developments we are experiencing across the business. While we are disappointed in the 2023 expected results, we feel confident that the outlook is appropriately conservative in light of the current market. From a segment perspective, our Oil and Gas segment full-year revenue expectations remain unchanged for 2023 at $2 billion with adjusted EBITDA margins in the mid-teens. For the fourth quarter, we expect revenue of approximately $740 million and adjusted EBITDA margins in the low double digits. Full-year Clean Energy segment revenue is now expected to be approximately $4 billion with adjusted EBITDA margins in the low to mid-single digits. We have a very strong pipeline of projects and are pleased with the post-Q3 project signings but expect specific product start dates to produce some quarter-to-quarter variability. Margins are expected to trend lower than our previous expectations due to the continued costs we are carrying in preparation for significant volume growth. Fourth quarter expectations are $1.15 billion of revenue with adjusted EBITDA margins similar to the third quarter. For full-year 2023, we expect our Communications segment to generate $3.25 billion of revenue with adjusted EBITDA margins in the high-single digits. We anticipate some further margin pressure versus prior guidance due to reduced operating leverage from the lower revenue expectations. Fourth quarter revenue is forecasted at $750 million with adjusted EBITDA margins down slightly from the third quarter. Looking to 2024, we’re having good dialogue with customers on ways to drive further efficiency in their capital spend, something we are well-positioned to provide through our industry-leading scale. Finally, full-year 2023 Power Delivery segment revenue is now expected to be $2.7 billion with high-single digit EBITDA margins. Margins are expected to be lower than the previous forecast due to reduced operating leverage and the expectation of very little emergency restoration work. Fourth quarter expectations are roughly similar to Q3 performance for both revenue and adjusted EBITDA. We’ve also revised our full-year 2023 adjusted earnings per share guidance to $1.75, driven by lower anticipated earnings, partially offset by a lower expected effective tax rate. In light of the revised guidance, we now expect to generate cash flow from operations of approximately $500 million for the second half of 2023 and $400 million for the full year. This equates to approximately $200 million of cash flow from operations in Q4. Net debt leverage is expected to remain in the low 3 times at year-end, higher than our sustained target of 2.5 times but we are committed to return to this level next year, and we believe our 2024 outlook will readily support our leverage objectives. Recall that Q1 is generally our slowest quarter, so our lower working capital requirements should support continued cash flow generation. Finally, while we are still early in our 2024 planning process, we felt it was important to provide investors with some preliminary achievable guidance off the disappointing results for 2023. To recap the initial 2024 outlook provided in yesterday’s release and expanded on by Jose, we currently expect mid to high single-digit revenue growth for the company. We expect this growth to be driven by double-digit growth in Clean Energy, mid-single-digit growth in Power Delivery, high single-digit growth in Communications, and a mid-single-digit revenue decline in Oil and Gas. We expect each segment to improve margins in 2024, resulting in total company adjusted EBITDA margins of 7.5% to 8%. And I’ll now turn the call over to the operator for Q&A.

Thank you. We will take our first question from Alex Rygiel from B. Riley.

Good morning, Jose and Paul.

Good morning, Alex.

Clearly, this looks like a kitchen sink quarter and probably no surprise given the macro environment and how cloudy it has gotten out there. But how can we be reassured that the reset here sort of reflects your most conservative assumptions given sort of all the cross currents?

Well, look, there’s no question, Alex, that we struggled in forecasting this year in 2023. Quite frankly, we don’t want to miss. I think we spent years being and raising. We took a lot of pride in that. We’ve obviously struggled here in the last little bit. So we needed to set a base; this is very early for us providing outlooks for 2024, for sure. But coming off of the results that we were having, we wanted to give people an indication of what we thought would be a base set of earnings for 2024.

That’s helpful. And then can you talk a bit about your backlog and possibly quantify backlog that maybe at risk or cancellation? And also talk about sort of the base level of backlog that you have from MSAs and how stable that is in this economic environment?

Yes. It’s a good question, Alex. And I think it’s important when you think about our backlog, right, because we go through so much scrutiny in our backlog and what it actually takes to put in backlog that we – even in 2023, right, we didn’t experience a significant amount of – or any really cancellations or delays based on something once it was in backlog. To make it through backlog, we’ve got to have a signed contract. In our Clean Energy business, it means it needs to be a finance project. So backlog is generally not fully reflective of the work that we see in front of us. It’s usually understated. In our other businesses, it’s very heavy MSA driven. Obviously, there’s some impact as the MSA, if utilities start to come back a little bit, it impacts your go-forward rate, but it doesn’t put work at risk. So we feel really good about at least the initial targets that we set about 2024; we’ve vetted them with customers, we’ve vetted them backlog. Again, we think this is really the entry-level base for us as we think about 2024.

Thank you very much.

We will take our next question from Andy Kaplowitz from Citigroup. Please go ahead.

Good morning, everyone.

Good morning, Andy.

Can you give us some more color into your Power Delivery business? I know you said that several customers pushed CapEx into next year. But Power Delivery, I think, is supposed to be more long cycle. And if anything, higher rates would seemingly impact Q4 versus Q3. So was it more a couple of big projects moving to the right? Was it broad-based delays? And then how are you thinking about the longer-term growth profile in that business and your confidence level of reaching a growth target for 2024?

Yes. Andy. So I’d kind of break the business up in two, right? One is comparing to last year, on a full year-over-year comparison. One of the biggest challenges we had, especially from a margin perspective, was the lack of storm work in Q3. So we probably had a $50 million decline in storm work on a year-over-year basis, which impacted, again, not just margins, that impacted revenues as well. So I think when you’re comparing last year to this year, that was probably the biggest driver of what you see in Power Delivery. When you compare it sequentially with Q2, right, we were still down. We were down about $35 million in revenue from Q2 to Q3. Some of that was just the transition of projects. We finished some projects. We’re starting others. We probably didn’t get as quick of a start on some of those projects. Some of that comes back. And then I think that the balance of that, which is probably $10 million to $15 million or so, was really the beginning of what we saw with some pullbacks in utilities. So it wasn’t a huge number, but it was significant. It’ll continue into Q4 to some extent. And then we think that, again, we talked about these vendor consolidation efforts, which again, we think we’ve actually fared really well in and positioned us well going into next year. So as we think about it, right, we’ll grow revenue slightly in 2023 versus 2022. We’ve talked in previous calls about some of the contracts that we kind of got out of late last year, early this year that impacted revenue on a full year basis, especially from some of the acquisition activity that we had previously made. So I think it really sets up the year nicely for us in 2024. We’ve come out with an initial guide of mid-single-digits in growth. We’re hoping that tends to be conservative. There’s a ton of activity out there in transmission and substation, and it’s an area that we’ve really focused on, so lots of opportunities for us, but again, really early. We’re still in October, so we feel really comfortable that we can achieve that just based on the MSA contracts that we have, the awards that we’ve been given, and what we’re expecting from our client base predominantly in our distribution work.

Very helpful, Jose. And then maybe just can you give us a little more color into how you’re thinking about clean energy at this point and the quality of your customer base, particularly at IEA? What’s the risk that you announced in such as the recent announcement in front of one of your customers to pause their construction are not just one-off but are a function of some more challenging customers? And how do you scrub your backlog to make sure you aren’t surprised again by the type of announcement you disclosed from that customer?

Yes. So I mean one of the things I want to be really clear about because one of the questions we had to ask ourselves over the course of the last few months is, I mean, did we buy an inferior customer base with the acquisition of IEA? And I think the flat I’d answer to that is no, we did not, right? I think we have a great customer base at IEA; our customers have lots of history, lots of installed capacity. They know exactly what they’re doing; their customers in some cases were more dependent on different financing strategies. It doesn’t make them better or worse. It just made them different this year. So I think when we think about the challenges that we had in 2023, obviously, I do think we should have better understood the risk and positioned the opportunities in the business to be more broad-based with different types of clients, and that’s exactly what we’re doing for 2024. So we’ve spent months going through every possible project that exists, every project that we’re being asked to participate in. We’re prioritizing those that we think have a really high degree and level of confidence that are going to absolutely happen in 2024, and that’s how we’re building our 2024 plan. I mean, what really changes is if the market improves, right? If – once tax equity gets behind us, which we expect to happen by year-end, and people get to start financing projects in multiple ways, we think that’s going to create a huge catalyst of new projects of which many we’re going to be involved with. And we think that will be a big catalyst of the business. We’re not really including a lot of that as we think about 2024 because we’re not 100% sure of the timing. So again, we’re hoping that as the year starts, we’ve built our plan with a very solid customer base, and then we can grow that based on some of the opportunities that are going to come as the year progresses.

Appreciate the color, Jose.

We will take our next question from Steven Fisher from UBS. Please go ahead.

Thanks. Good morning. I wanted to focus on the cash flow a little bit, specifically in terms of the timing. I think you may have mentioned that the positive cash flow will continue into Q1 of next year? And I’m really just kind of curious about the cadence of how that cash flow will develop next year? Is it positive, you’re saying in Q1 and Q2 is maybe a little weaker than Q3, Q4, again, just kind of curious how the debt reduction might go over the course of the year?

Yes, Steven, this is Paul. So I think it should be a similar cadence to the year. We haven’t laid out each quarter yet. But we do expect Q1 because of weather and normal seasonal challenges to be a lower volume quarter, so that should facilitate less working capital requirement. And then you’re right, as we ramp through the middle of the year, we’d expect some investment there that hopefully can largely offset with stronger earnings, but we’d be less cash flow generation in the middle of the year and there’s some ability to reduce debt going into Q4.

Okay. That’s helpful. And then just on the communication side of things for next year. I think you said high-single-digits. Maybe you can just clarify that? And within that, I guess I’m curious – and that’s the growth. If there’s any color you can give on a breakout between wireless and fiber because it sounds like you are experiencing a bit of a slowdown in fiber as you go into Q4 here. What have you assumed on some of those trends for next year? Just to kind of gauge the comfort of getting to what looks like a pretty robust growth number and estimate given some of the overhangs of what we’re experiencing right now from some of these telecom companies?

Yes, Steve. So it’s Jose. I’d say a couple of things, right? I think this year, we were obviously impacted by the slowdown in wireless. I think our wireline business is up strong for the full year, will be strong for the full year as we close the year out. A little bit of a slowdown in the second half of the year that we were hoping wouldn’t happen, and I think that is some management of CapEx. And obviously, as the credit environment changes, we’ve had different customers do different pullbacks. With that said, we’ve got a bunch of awards during this year in 2023 that didn’t have a lot of volume, that had a lot of engineering associated with the projects that we knew the volume would kick in 2024, and these are a lot of the government RDOF-funded projects where that initial activity in engineering is really important, but it’s low dollar. And once it turns into construction, it has a meaningful impact. And we have a number of those that starting late Q1, early Q2 going to construction, which are going to have a significant amount of increased revenue in 2024 versus 2023. So as we planned out 2024, and again, we’re really early, we took a very conservative assumption on where wireless goes from here based on the conversations we’ve had with our customers. And we’ve kind of built the balance in that growth plan based on really project activity awards from 2023 without making much assumption for new things going into 2024, even though there are some opportunities. Again, it’s important to talk about bead funding, which we really don’t even see impacting the business until 2025 because a lot of that is going to be awarded in 2024. So we feel good about our ability to grow that business in 2024 just based on the awards that we’ve had here in the last few months; we think that’s important. We’ve taken a very conservative approach to how we think our customers will guide CapEx based on recent commentary. And again, any improvements to that should actually allow us to improve on the numbers that we’ve talked about today.

But just to clarify, so are you assuming the wireless business is actually up next year?

We are not. We are not making that assumption. We’re assuming that it’s flat.

Flat, okay. All right. Thank you very much.

Thank you, Steve.

We will now move to our next question from Justin Hauke from Baird. Please go ahead.

Hi good morning guys. A lot of my questions have been answered here. But I wanted to ask, I guess the risk profile of just cost overruns on some of the fixed-price contracts at IEA, you guys, at least as of the last 10-Q, we don’t have the one from the quarter but the revenue on unapproved change orders has kind of moved materially higher over the last year and a half. And just as we go into Q4 and kind of the annual close out the resolution on some of those unapproved change orders, you talked about a legacy industrial project. I mean just can you give us some context about what’s been driving that balance increasing?

Yes. So we do – we should see a slight reduction when the Q3 numbers come out, but a lot of it is with the legacy industrial projects that we had challenges on in 2022 and the early part of this year. Some of them were resolved in the ordinary course in Q4 and some we work with the customers on we think our contractual obligations that they’ve made under the contracts. And we obviously have a very robust process for reporting those. We have a very strong track record of realizing those change orders, and we really don’t expect any different in the environment today.

Okay. And then just because it is a high visibility project, can you quantify the MVP revenue contribution that you’re assuming in 4Q? And then how much will be there in the first half of 2024? I know they’ve disclosed that the cost estimate for the project is higher, just kind of giving some context to help us understand how much that’s contributing?

Yes. Look, I think it’s unchanged for the full year in 2023. It’s just – it’s heavier in the fourth quarter than it was in the third quarter because of the delays. Remember, we started ramping that project in September. We had to get roughly 3,700 people with some of the delays in early on in that project; there was a lot of delays just in terms of fully understanding what was going to be allowed and not allowed. We got to that full ramp towards the latter half of the quarter, so we moved some revenue into Q4. And I’d say we’re probably at this point – I don’t know what they’ve said publicly, so I don’t really want to give a revenue number for 2024. But for us, it will be in the hundreds of millions.

Okay. Fair enough. Thank you.

Thank you.

We will take our next question from Neil Mehta from Goldman Sachs. Please go ahead.

Good morning, Jose, Paul, I wanted to start off on tax equity has been a big driver of some – can you hear me okay, Jose? Sorry.

Yes. Go ahead, Neil. Good morning.

Okay. Good morning. I think some of the concerns to your point have been around tax equity and that's created a lot of the volatility in the Clean Energy segment. And you had made a comment that you expect to get a little bit more clarity by the end of this year around that. So can you talk about what gives you confidence on that? And do you think that's going to translate into greater activity from the customer base?

So the short answer is absolutely. I think there's been an enormous amount of work that's happened since guidance was released on some of the language in the summer. I think the industry customers are feeling really comfortable and better about the conversations that have been happening with everybody from treasury to energy to commerce. I think the final language will be out by the end of the year. And I think that will spur an enormous amount of activity because it will open up. It will give people the understanding of what it means to hit the bonus tax depreciation opportunities that exist within the bill, which makes tax equity clear, which then makes it sellable. And we have a lot of customers who – it significantly changes their capital profile and the return profile and they don't want to give it up, so they don't want to commit to the tax equity today until they fully understand what all their bonus opportunities are. And I think we're getting very close to that being finalized, which, again, I think adds a tremendous amount of activity to the market. And I think it's important to, again, we're trying to build our 2024 plan with projects that aren't super dependent on that and then really use that as potential upside as we think about the year.

Yes. And I would just add, Neil, that direct transfer is another provision of the IRA that's starting to become much more prevalent, right? I think there was some uncertainty on how those transactions would be effectuated early on. But what we're seeing is more and more developers and renewable power generators finding ways to monetize their tax equity through direct transfer, which as long as it becomes efficient from a cost perspective – from a value perspective, it's a much more efficient from an administrative perspective. So we are positive on developments.

Thanks Paul and that's helpful. And then Jose for the follow-up is just on margins. We spend a lot of time on this call talking about the top line, but margins have been a source of volatility over the last couple of years as well. So can you give the market confidence in the way that you're modeling out the margin profile, where do you think the biggest risks are? And where do you think the areas for upside surprise could be?

Sure. Again, as we thought about 2024 and then what we're seeing here, I think we took, again, a view as to where we are today and how we're thinking about that with where the revenue is going. We haven't changed our long-term margin profile expectations, which I also think is important. There's nothing that we're seeing in the business that we don't – that we think doesn't allow us to reach our previous targets. If anything, I think we've said, as we've talked about, the full company margins for the year, I think they're based on very reasonable and conservative assumptions with, quite frankly, upside across the board, right? We're starting the year at mid-teens in oil and gas in a year where there's a lot of new work coming on projects where they've traditionally beat those types of margin returns. We think there's upside there. On the communications side of the business, obviously, we started the year stronger than we had the previous year. We've had a – we've taken a step back here in the second half. But when we think about where they were for 2022, there's no reason we shouldn't get back to those levels very soon, which are significantly better than where we'll end the year this year. Our power delivery business, again, this was – this is really the first post year one after acquisition. So I think there's been some noise in and out of the margins, but I think that we're – our ability to hit double-digit margins there is completely unchanged. And I think Clean Energy, despite – even despite all the challenges that we've had, margins have improved on a year-over-year basis and held somewhat steady. And I think that with the volume that we're expecting, margins have an opportunity to really increase. So I feel good about where margins are going to go over time. And again, I think we’ve set a really conservative base level for 2024 that everybody should feel comfortable with.

Okay thank you both.

Thanks Neil.

We will take our next question from Marc Bianchi from TD Cowen. Please go ahead.

Thank you. The first question I had relates to the electric businesses, so Clean Energy and Power Delivery and you had mentioned, and I think, like the market has been generally concerned with the higher cost of capital that’s affecting those businesses. So, if you think about project development and higher cost of capital, that’s one thing for Clean Energy and then higher cost of capital in the utility sector, and you mentioned some customers slowing spending. So that systemic issue seems to be continuing into 2024 but you made the comment that you’ve got some of the utility customers picking spending back up once they renew their budget. So can you kind of talk about how much of that systemic risk do you think is continuing to overhang the business in 2024 and how much of it is getting cleared up and what the maybe mechanisms are for that?

Yes. So I think when we think about planning for 2024 and again, we’re very early in the cycle, the way we’ve thought about it is we’ve had a lot of success in growing our business. So, in basically either picking up territory or expansion within existing territories in the last few months. And we’ve done that with major customers, with major utilities on both the East Coast and the West Coast, and we feel really good about that margin expansion. And in a normal typical year where we wouldn’t have this overhang of concern relative to what’s happening with interest rates and costs, our growth projections just based on that would be dramatically higher than what we laid out today. So, I think we’re hedging the opportunities that we’re getting from a growth perspective with some of the challenges we think utilities will continue to face. We are hopeful that as the year develops, those utilities will actually perform better or have less issues than what we’re projecting, which will allow us the opportunity to grow at a faster rate. For us in our Power Delivery business to set a mid-single-digit growth rate going into next year is a really low number. It’s one that is lower than we would have suspected. And then when you throw on some projects that we’ve won that should help that. I think we’re being really conservative as we think about where they are from a capitalization perspective and what they need to do to fund projects. And I’d say it’s exactly the same answer on our Clean Energy business as well.

Okay. Thanks, Jose. The other one I had relates to Oil and Gas. So you’ve got MVP helping in the first half of 2024, but talked about overall revenue decline for the year. So, it would look like the second half is quite a bit below sort of the $2 billion run rate that I think you talked about as a steady state level for that business. So can you talk about, is it in fact that you do see the steady state run rate now quite a bit below $2 billion, or is that another maybe source of conservatism?

No. Look, I think we’ve said for a while that the right level for that business was $1.5 billion to $2 billion. We’ve been feeling more comfortable that it’s going to be closer to the higher end of that. We also knew that MVP would present its own set of challenges in that it would start, it would be a lot of revenue in particular periods, and it would go away. As I think about 2024, obviously, the first half of the year is going to be a little bit stronger because of MVP. We’ve got a lot of projects that we’ve previously talked about that are filling in 2024. So, we actually feel really good about 2024. I think the first half will be higher than it was in 2023; the second half will be slightly lower. Again, I think that’s based on the projects we know today; I think, there’s some opportunities for some potential pull-in. But there are also projects that we know about that are going to start in 2025. So, I think it’s going to be a much more consistent year versus the ebbs and flows that we’ve had this year or, quite frankly, that we had last year as well in that business.

Okay. Thank you very much.

Thank you.

We will take our next question from Brent Thielman from D.A. Davidson. Please go ahead.

Hey, thanks. Good morning. Jose, just one more on the Clean Energy margins. I guess the question is does the profile of the projects in the backlog or under LNP support the margins you are hoping to eventually achieve for that business once that work gets underway? Or do you need to work through that first before we start to think about something sort of nicely above the mid-single-digit range?

If we could hit the volume profiles that we're talking about, the margins associated with our pricing in bids definitely allows us to achieve that, and we actually think it potentially allows us to achieve more. So we don't believe we have a pricing issue. We – as we look at it on a project-by-project basis as we've been delivering projects this year, project performance at the job level has been good. It's been the absorption of costs that's been more of a problem. So as we get revenue levels to where they need to be, we start getting into the margin profile, not even that we're talking about today, but over time, what we've laid out previously on our longer-term outlook.

Okay. And I guess I'll ask this question on 2024 maybe another way. I mean the preliminary view, sort of mid- to high single-digit growth for next year. To what degree does that include executing on through the renewables projects inherited from IEA that you've seen sort of defer thus far this year?

Well, what we've done for 2024 in Clean Energy is we've kind of gone back to the start, right? And we took every project, regardless of where it came from, whether it was IEA or our legacy business, and we've risk-adjusted it, and we're focusing on projects where we think have a really high degree and level of confidence that are going to absolutely happen in 2024, and that's how we're building our plan. We're not abandoning any projects. We're not abandoning any customers to the extent that we can pull them in, we will obviously do that. But we're really trying to build the plan based on a combined work schedule of jobs that we think have the highest likelihood of going and are performing well.

Okay. Thanks, Jose.

We will take our next question from Adam Thalhimer from Thompson Davis.

Hey, good morning. Thanks guys.

Good morning, Adam.

Jose, to what extent are higher rates and macro uncertainty impacting bidding?

Well, I don't know that they're impacting bidding as much as they're impacting customers' ability to ultimately perform on projects as a concern in bidding, right? So I think – what it does to our bidding strategy is it really makes us get a very good understanding of where the customer is, what the potential of that job on a go-forward basis is and their ability to execute. And to the extent that they can meet that from a cost perspective, right, we're building in our current costs as we know them, we're building in whatever we think may change from a labor perspective or materials. A lot of that gets locked in a bid time. So from a pricing mechanism perspective, we're not overly concerned. We're more concerned with making sure that the projects that we're bidding and the time that we're spending bidding on projects is well served relative to the potential of that project moving forward.

Okay. So, I was kind of more thinking about just the pace of bidding or the flow of bidding or the amount of projects that people are giving to look at for 2024?

Yes. And that's the issue, right? It's – I mean the amount of work that is being presented, right, or people ask us to bid on is more than we could ever do. So the challenge isn't providing pricing to everybody; the challenge is making sure that you're down-selecting from that list to a list that you think is really doable. I want to reiterate this because we tried to say it in different ways; the market is incredibly healthy. There is an enormous amount of pent-up demand in the marketplace relative to projects. You can meet dozens and dozens of customers that have massive portfolios of build plants. The question is how many of those will go forward and when. And I think they will all go forward, quite frankly; or most of them will go forward, but the question is when, and that's what we're really spending a lot of time. So we're not in the same position that we were in 2023.

Okay. Great, good luck for Q4.

Thanks, Adam.

It appears there are no further questions at this time. I would like to turn the call back over to Jose Mas for any additional or closing remarks.

Yes. So I just want to take this opportunity to thank everybody again. Thank you for changing your schedules, and we look forward to updating you on our fourth quarter call. Thank you.

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