Mastec Inc Q3 FY2025 Earnings Call

Hello, and thank you for being here. Welcome to MasTec's Third Quarter 2025 Earnings Conference Call. I will now pass the call over to Chris Mecray. You may start.

Good morning, and thank you for joining us for MasTec's Third Quarter 2025 Financial Results Conference Call. Joining me today are Jose Mas, Chief Executive Officer; and Paul Dimarco, Chief Financial Officer. We have prepared slides to supplement our remarks, which are posted on MasTec's website under the Investors tab and through the webcast link. There's also a companion document with information and analytics on the quarter and a guidance summary to assist in financial modeling. Please read the forward-looking statement disclaimer contained in the slides accompanying this call. During this call, we'll make forward-looking statements regarding our plans and expectations about the future as of the date of this call. Because these statements are based on current assumptions and factors that involve risks and uncertainties, our actual performance and results may differ materially from our forward-looking statements. Our Form 10-K, as updated by current and periodic reports, includes a detailed discussion of risks and uncertainties that may cause such differences. In today's remarks, we'll be discussing adjusted financial metrics reconciled in yesterday's press release and supporting schedules. We may also 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 measures can be found in our earnings press release, slides or companion documents. I'll now turn the call over to Jose.

Thanks, Chris. Good morning, and welcome to MasTec's 2025 Third Quarter Call. First, some third quarter highlights. Revenue for the quarter was just shy of $4 billion, a 22% year-over-year increase. Adjusted EBITDA was $374 million, a 20% year-over-year increase, and this growth performance was the highest level since the first quarter of 2024. Adjusted earnings per share was $2.48, ahead of consensus by nearly $0.20. And despite a revenue record quarter, backlog at quarter end was $16.8 billion, a roughly $325 million sequential increase with every segment delivering backlog growth. In summary, we exceeded guidance across each of our revenue, EBITDA, and EPS metrics, representing a strong period of execution for MasTec. This strong result is, in part, a testament to the scale and diversification we have achieved for MasTec over time, and we are excited about our outlook for the balance of the year and beyond, given clearly positive market conditions across all end markets we serve. I'd like to point out some further highlights about our quarter. Our Communications segment grew revenues 33% year-over-year. And EBITDA increased 38%, all organic. And EBITDA margins for the segment improved 40 basis points compared to last year's third quarter. Our Clean Energy and Infrastructure segment grew revenue by 20% year-over-year, and EBITDA improved 36%, virtually all organic. EBITDA margins for the segment improved 100 basis points compared to last year. Our Power Delivery segment grew revenue 17% year-over-year, and EBITDA increased 21%, all organic. EBITDA margins for the segment improved 30 basis points compared to last year despite a difficult year-over-year storm emergency response comparison that tends to be very profitable. These three segments make up our non-pipeline segments, which grew revenues by 22% for the third quarter compared to last year, EBITDA by 31% and achieved a 60 basis point improvement in EBITDA margins, again, virtually all organic. We highlight this because of the significant investments we've made to diversify our business and position us to participate and benefit from the changing landscape of both power generation and delivery. Our solid execution across these segments, coupled with the expectations of significantly improved pipeline market as natural gas plays a much larger role in future energy generation, position MasTec for continued growth and strong financial performance. MasTec's total backlog remained very healthy in the third quarter, reaching another record level despite significantly increased volumes burned experienced during the period. Third quarter backlog increased 21% year-over-year and was up slightly sequentially with a book-to-bill ratio of 1.1x. While the sequential backlog included a solid 8% increase from our Pipeline segment, our visibility in that segment is considerably better than backlog suggests. We continue to expect further backlog growth in the current quarter and to end the year at another record level. Turning to some segment highlights. In our Communications segment, the telecom infrastructure market remains dynamic. Our customers are making significant and growing capital investments to support broadband delivery across the country to replace older cable delivery systems, and more recently, to enable enhanced artificial intelligence applications. Third quarter revenue easily exceeded our planned contribution from nearly all of our top 10 customers, with higher capital spend seen in multiple regions across wireless and wireline construction, resulting in an impressive 33% growth rate versus the prior year in the quarter. As expected, margins reached double digits and increased 140 basis points sequentially as well as 40 basis points versus the prior year. Still, the 11.3% EBITDA margin leaves room for improvement as investment requirements for growth moderate. We believe we continue to have significant margin opportunities looking forward. MasTec's wireless business continues to see solid growth from both geographic expansion and providing new and broader services to existing customers. On the wireline side, demand strength continues to be supported by substantial broadband infrastructure build-out by legacy telecom players, cable operators, as well as newer entrant fiber overbuilders. This race to connect consumers to broadband fiber continues, and we are well-positioned to execute deployment nationally. Further, middle-mile broadband build-outs have emerged as an additional growth driver for years to come, and hyperscaler CapEx associated with the data center build-out is contributing to this additional growth for fiber deployment. Our contract with Lumen, which has begun to ramp up in recent months, is anticipated to drive solid and visible growth for our business in 2026. Turning to Power Delivery. While third-quarter financials were solid, profit and margin year-over-year comparisons were impacted in the period by a lack of storm-related restoration services against a more normal comparison in the prior year as well as lower than planned volume from our Greenlink project due to permitting-related delays as has been reported in the press in recent weeks. We have factored both changes into our full-year outlook as well. Despite these challenges, we expect our Power Delivery segment to achieve double-digit growth in both revenues and EBITDA for the full year 2025. Further, our bullish stance on overall grid investment demand remains undiminished, and feedback around load growth and capital spend projections by our power delivery customers remains very positive. Implied requirements for grid investments in the coming years are substantial. We see ongoing growth of anticipated power demand set against an aging infrastructure that does not meet either the capacity or the physical location of the sources of incremental supply and demand. We continue to expect large CapEx commitments across transmission, substation, distribution, as well as new generation capacity. Third quarter backlog for Power Delivery increased 11% versus the prior year quarter and increased slightly from the second quarter despite an increased burn rate. Post quarter end, I'm pleased to announce that our transmission and substation group within our Power Delivery segment was awarded its second largest project ever, trailing only the Greenlink project in size. We expect the project to start in mid-2026 and to be added to backlog by year-end. We will discuss this project in more detail on our year-end call. Turning to our Clean Energy and Infrastructure segment. While adjusted EBITDA increased 36% year-over-year, I'd also like to highlight that we have more than doubled our EBITDA from the segment versus the first quarter, demonstrating the considerable progress we've made during 2025. Renewables demand remained very healthy in the period, and we were pleased with execution for the business, which saw significant growth both year-over-year and sequentially, while meeting our margin target of high single-digit, consistent with the prior quarter and improved from the prior year as we continue to benefit from enhanced focus on execution and working closely with our trusted partners. Our Industrial and Infrastructure business continues to show collective growth with execution on key projects showing results and reflected in strong margin outcomes. We are excited about future growth here from both ongoing transportation and other infrastructure opportunities and from substantial growth potential related to data center build-outs, including both civil work as well as behind-the-meter power infrastructure. Overall, backlog for Clean Energy and Infrastructure of $5 billion increased 21% from the prior year and 2% sequentially with a book-to-bill of 1.1x. This included a 9 straight sequential increase in renewables backlog. It's important to note that reported backlog is only estimated 18-month backlog. A number of our recent wins have been for projects with late 2026 starts, where only a portion of the estimated revenue is included in backlog. While our renewable growth will be driven mostly by solar, we've been very successful in securing wind projects for 2026 and beyond. We believe we are well positioned at current backlog levels for strong continued growth in this segment. Turning to our Pipeline Infrastructure segment. We saw revenues increase 20% year-over-year as we returned to growth after lapping the challenging comparisons of the wind-down of the MVP project. The third quarter represented the best margin performance for the year for our Pipeline segment. While still down from the previous year, we expect continued margin improvements and expect our fourth quarter to be the highest margin quarter of the year in this segment, setting us up very well as we enter 2026. This margin improvement, coupled with expected revenue growth, creates significant opportunities for earnings growth in 2026 and beyond. Total Pipeline backlog increased 8% sequentially to $1.6 billion and more than doubled from the same period a year ago. We added more than $600 million of new bookings in the period and saw a book-to-bill ratio of 1.2x despite the higher level of burn. Third quarter backlog saw the inclusion of our activity on the Hugh Brinson project, which actually started in the third quarter. We don't normally call out specific projects on our calls, but this project is a good example of how pipeline work is being awarded today. While rumors of our involvement in this project started in the first quarter, we received final signed contract documents just this quarter and physically started work shortly thereafter. I say all this to highlight that while backlog is an important metric in this segment, our visibility into future work is far greater than just backlog. There are a number of projects that we will build starting in 2026 where final contract documents may not be completed and thus not reported in our backlog until close to project kickoff as all variables are included in final contractual documents. We remain optimistic and confident in both the short- and long-term growth outlook for our Pipeline segment. Gas-fired generation will be a critical source of incremental baseload power generation for decades to come. And our customers are getting ahead of the process to supply this important demand source while also meeting the needs of near-term LNG export demand growth and continued demand at the consumer level to replace fuel oil and other sources. In summary, we are pleased with our third quarter results and maintain strong confidence in expected growth based on drivers and powerful demand drivers across each of our businesses. In addition, we are continuously looking for ways to optimize our operating model to generate the best possible margin outcome, and we see multiple levers to achieve better margins as we look ahead. We remain very excited about the opportunity for MasTec and our investors over the coming years. As always, our enthusiasm for the outlook is grounded in execution and in the hard work of every person on the MasTec team. I'd like to thank all of our people for their continued commitment to our corporate values of safety, environmental stewardship, integrity, and honesty, all while serving our customers diligently and ensuring the delivery of a great work product. Thank you, all. I will now turn the call over to Paul for our financial review.

Thank you, Jose, and good morning. We are pleased with our strong third-quarter results, which were driven by ongoing improvements in volume and solid execution across our operating segments. Our customers continue to express a growing need for MasTec's wide range of services to support their infrastructure development goals, giving us confidence in the growth trajectory of our business across all four segments. Infrastructure investment needs across communications, energy, power, as well as civil and commercial infrastructure are at their highest level in recent memory, reinforcing our positive outlook for the years ahead. Looking at our third-quarter segment performance, our Communications segment achieved substantial growth with revenue of $915 million, surpassing our forecast and delivering a 33% year-over-year increase. The business is well-positioned to capitalize on strong demand for both our wireless and wireline services, catering to a diverse customer base seeking to enhance broadband telecom infrastructure for both residential and commercial users. The third-quarter EBITDA margin was 11.3%, reflecting a 40 basis-point increase compared to last year and a significant 140 basis-point increase from the second quarter. We have slightly lowered our full-year margin guidance to account for the investments made to sustain our robust organic growth rates. The overall telecommunications market remains strong, with a third-quarter backlog of $5.1 billion, which saw a small sequential increase despite the record revenue. The Power Delivery segment also exhibited significant growth with a 70% increase in the third quarter, following a similar year-on-year growth rate in Q2. We continue to identify strong opportunities for growth across the U.S. power grid through our diverse service offerings that allow our clients to invest in new capacity and upgrades. However, our updated guidance reflects a lower level of activity than initially expected on the Greenlink project in the fourth quarter due to permitting delays. We are actively working on other components of the project and expect this to continue. The EBITDA margin for the third quarter was 9.4%, which is a 30 basis-point increase from the prior year and a 70 basis-point sequential increase, although it fell short of our low double-digit forecast. In our Clean Energy and Infrastructure segment, total revenue for Q3 was $1.4 billion, showing a strong 20% increase from the prior year and a 21% sequential increase as our renewables business performed as planned. Overall, segment revenue met our third-quarter target, with renewables growing almost 50% year-over-year driven by record demand for new installations. The third-quarter CE&I EBITDA increased by 36% year-over-year, significantly outpacing the revenue growth, with margins rising 100 basis points to 8.5% and 110 basis points sequentially. CE&I backlog exceeded $5 billion, benefiting from solid new bookings across various business verticals, contributing to a 21% year-over-year increase. Turning to Pipeline Infrastructure, third-quarter revenue reached $598 million, achieving a growth rate of 20% year-over-year and an 11% sequential increase. This improvement includes a broad-based increase in gas pipeline work nationally, particularly driven by new projects in the Southern regions. The quarterly EBITDA of $92 million, with a margin of 15.4%, met our mid-teen guidance for the segment. The comparison to the previous year's margin remains influenced by the current ramp-up of new work. Our entire pipeline backlog, approximately $1.6 billion, has increased by 8% sequentially and 124% from last year, with new awards totaling over $600 million in the quarter. We have seen a mix of project awards, and we are optimistic about the strong demand and pipeline opportunities. We are encouraged by our overall margin expansion progress, achieving a consolidated result of 9.4% in the third quarter—an impressive improvement from 7.8% in the second quarter and a significant increase from 5.7% in Q1. This margin improvement is driven by our focus on operating productivity, cost management, and increased volume. We aim for a full-year double-digit margin as our midterm objective, acknowledging we still have work to do. Regarding our updated consolidated guidance, we are increasing our 2025 full-year revenue guidance to $14.075 billion with adjusted EBITDA of $1.135 billion. This revision reflects higher-than-anticipated levels of activity in Communications and Pipeline segments, slightly offset by lower expected Power Delivery revenue due to timing on Greenlink. Adjusted EPS is projected to be $6.40, marking a 62% increase compared to 2024. In the third quarter, we generated $89 million in cash flow from operations and free cash flow of $36 million, slightly below expectations due to higher working capital investment and capital expenditures. For 2025, we anticipate cash flow from operations of $700 million to $750 million. We ended the quarter with around $2 billion in total liquidity and a net leverage of 1.95x, with expectations for improvement as we approach year-end. Our strong balance sheet offers us significant financial flexibility to pursue disciplined, return-focused capital allocation. Our primary focus remains on supporting our organic growth opportunities through investments in equipment and capacity, along with evaluating accretive acquisitions. We also maintain a share repurchase authorization and will selectively engage in capital buybacks. This concludes our prepared remarks. I will now turn the call over to the operator for Q&A.

Our first question comes from Ati Modak with Goldman Sachs.

I guess, Jose, on the Pipeline backlog, thank you for all the color. Curious if you're able to directionally guide to the level of revenue that these projects and ongoing conversations could lead to for '26? And maybe you can give us a sense of what that backlog growth looks like in the near term given all these conversations.

One of the reasons we really tried to highlight a specific project on today's call was to kind of talk about the change that we're seeing in how pipeline work is being awarded. I remember years ago, when we would have these calls, we would talk a lot about book and burn. And the reality is that the business the way it is today, it's almost returning to that level. We've got commitments from customers on specific jobs. They want to leave the books open to kind of get all the details of the project done by the time they sign a contract. We're, quite frankly, ready to start construction, which is very favorable from a risk profile perspective, where it doesn't work because it doesn't give the Street great visibility into our backlog. But conversely, we do have that visibility, right? So when we talked about the strength of our pipeline market, we're more optimistic today than we've been. On our last call, we talked about reaching or exceeding historical high levels of revenue. I can tell you today, we're more confident about our ability to achieve that now than we were then. It's not for '26. This is not a '26 story. I think we'll grow the business double digits in '26, but really the growth is going to be substantial in '27 and beyond from what we're seeing from the projects that have been committed to us, and it's extremely exciting. Again, from a margin perspective, it's a business that we struggled with on a year-over-year comparison this year because of the closeout of MVP and the lower revenue levels. We're going to see that business get back to a strong margin profile in Q4. It obviously had significant improvements in Q3 at 15.4%. We expect to do a lot better than that in the fourth quarter. And that bodes really well entering '26 and beyond. So we're excited about our margin potential in the business, and we're more excited about the revenue opportunities for beyond '26 and into '26. So exciting times.

And then I know you gave the color on the capital allocation strategy. So I guess on the organic growth side, can you remind us what the CapEx level should be on a run rate basis as we consider the opportunities out there? And then also on M&A, I mean, I know you've spoken about a third transmission line capability down the road and need for M&A around that. But curious if given what's going on in the market, you would look at something on gas power generation as well.

This is Paul. I'll start with the CapEx question. So in the near term, with the outlook we have for Pipeline, which is our most capital-intensive end market, you can expect CapEx to run in front of depreciation a little bit, right? So depreciation is running about $300 million right now. You should expect it to be north of that, probably around $350 million going into '26, but it depends where the growth comes from. Obviously, we have other segments that are much less capital intensive. So that's kind of a near-term, maybe '26, '27 view.

On M&A strategy, I'd say a couple of things. I'd say our focus hasn't changed. We will be more active in the M&A space going forward. As it relates to power generation, I think we've historically had an Industrial business that we've done some projects. We haven't really done combined cycle. I don't know that that's an area that we would get into. At the same time, one of the fascinating things about our business today is I think everybody is being asked by customers to really look at different things and different opportunities, which creates new opportunity revenue streams for all of us in the space. And I think you'll see MasTec pick up its share of that as well.

Our next question comes from the line of Jamie Cook with Truist Securities.

Congratulations on a strong quarter. My first question is for you, Jose. Can you discuss the permitting issues related to Greenlink and how those have affected your guidance? Should I take that as a change in your Power Delivery revenues, along with the potential risks you anticipate for Greenlink in 2026 and any possibilities to mitigate that? My second question pertains to the considerable amount of large work available across various segments. You are involved with Greenlink, and Hugh Brinson has secured another pipeline job. Given the number of employees in your company and its overall size, how many large projects do you feel comfortable managing at one time? I'm curious about your thoughts on the risk associated with larger projects from an operational execution perspective.

Jamie, you asked a lot with that question, so let me address it from the beginning. Our fourth quarter change mostly relates to Greenlink. We are at the lower end of the Q4 range we initially provided. The difference between the low and high end of our range for Q4 was about $30 million in EBITDA, primarily attributed to our Power Delivery business, which represents the significant change. Historically, we've spoken positively about Greenlink; it's a tremendous win for our company, and we enjoy working with the customer. However, they are encountering some permitting challenges that are currently under review. We projected the annual run rate for that project to be between $300 million and $500 million over several years and provided more detailed guidance for 2025 of $375 million to $425 million. Realistically, for 2025, we anticipate it will be closer to $250 million, which is a considerable deviation from our earlier expectations for an increase in the latter half of the year. Nevertheless, this project will move forward, and we are enthusiastic about it. We hope the completion timeline remains unchanged, as it would maximize the project’s load in the coming years. Today, we announced another transmission substation project, which marks the second-largest award we've received in that area. This will contribute significantly in 2026, and we expect it to supplement our work with Greenlink, at the very least offsetting any shortfalls. We anticipate Greenlink activities will rise in 2026 compared to 2025 from current levels. Thus, the overall narrative remains strong and intact. On the topic of large projects, it's essential to consider the different segments. Our Communications division doesn't engage in large projects like others. In our Pipeline sector, most projects are smaller in scale, more akin to what we've traditionally established, which gives us considerable assurance, as should our investors. Our Clean Energy and Infrastructure business includes a solid maintenance operation alongside more projects, and we’re confident in its performance. We've doubled our profitability since the first quarter. When discussing Power Delivery, it's a $4 billion segment with 80% to 90% driven by maintenance work, MSAs, utility operations, distribution lines, and substations, making it a predictable business model. We've emphasized the project segment because it was previously our smallest focus area, and Greenlink was the first of many initiatives we believe can enhance our project orientation in this market. To recap, we experienced a 17% revenue growth in Power Delivery this quarter and 21% EBITDA growth. For the full year, we expect 13% growth in both revenue and EBITDA within that sector. This is noteworthy considering Greenlink's activity did not meet our projections; had it, those figures would be even higher. The project segment of our Power Delivery business harbors substantial growth potential for MasTec, which we aim to cultivate and develop. Although it represents a minor portion of MasTec's overall business, it's crucial for the growth of our Power Delivery division. Overall, we are very optimistic about Greenlink, confident in our execution capabilities for this project, and excited about our next potential win that we will elaborate on in our upcoming call, which may also lead to future opportunities for MasTec. Our investors should feel assured about how we've expanded the business, approached projects, and assessed the associated risks and advantages.

Our next question comes from the line of Philip Shen with ROTH Capital Partners.

I wanted to ask about next year. Do you believe that achieving $8 of EPS is still possible, or should we consider that this target may have increased after your recent successes?

Philip, thanks for the question. A couple of things, right? When you look at consensus out there, we haven't given guidance. Consensus today is 10% revenue growth on a year-over-year basis, 20% EBITDA growth on a year-over-year basis. We've said that consensus relates to north of $8 a share, which is 25% EPS growth from '25 to '26. I'd tell you today, we're really comfortable with where consensus sits. We're working really hard to obviously continue to grow and build our business. But I think just where consensus stands, right, 10% revenue growth, more than 20% EBITDA growth, those are fantastic statistics, right. And a company that's done most of its growth on an organic level, that's nothing to sneeze at. We're proud of that. We hope to do better. But yes, we're comfortable with where the numbers sit today.

Great. That's very helpful. Shifting to margins, it seems that next year the margin expansion narrative is very much a possibility. I wanted to specifically address Q4. Can you explain the impact of OpEx investments on basis points compared to gross margins? Is the gross margin percentage stable in Q4?

Yes. We believe that our significant growth has required various investments to support it. Not all of our growth comes from same-store sales, which tend to be easier to manage since we already have established offices and staff to incrementally boost revenues and improve margins over time. However, we have ventured into new regions, opened additional offices, and are engaging with new clients, all of which necessitate further investments. Looking at the margin profiles we've shared since the start of the year, there are some fluctuations—some segments are performing better than others, which we attribute to our growth investments. We are confident that these investments will yield positive results. As a company, we are particularly focused on improving our margins and believe there is potential for improvement across all our business areas. For the fourth quarter, we anticipate that the main changes will come from Power Delivery. We have received inquiries regarding Communication's margins, but if you analyze the EBITDA figures we provided compared to consensus, they are consistent; we just have slightly higher revenue, which is again related to our growth investments. We're comfortable with our current position, optimistic about our potential for improvement, and excited about the future opportunities for our business.

Our next question comes from the line of Steven Fisher with UBS.

Congrats. Just a follow-up on that last question, but maybe more specifically to the Communications segment. I mean it seems like there really is a broadening set of opportunities there, and you did call out some of the investments that you're making. Can you just talk about the shape of those investments? Kind of is there a lot more that you need to go? Or are you sort of at the peak point of that? And just how the margins can evolve there over the next year or 2?

Thank you, Steve. I want to emphasize a few points. Firstly, our margins have improved by 40 basis points year-over-year to 11.3%, marking one of the highest levels we've experienced in quite some time. Looking at the fourth quarter, we anticipate almost a 100 basis point improvement compared to the same quarter last year, which is promising. Overall, we're optimistic about our direction. Our business is projected to grow nearly 30% year-over-year, which is an impressive figure driven by organic growth. A significant part of this is due to our investments in new regions, although these endeavors can be challenging since they involve establishing new offices, relocating personnel, or hiring new staff, and it takes time for these investments to convert into earnings. However, we've been pursuing this strategy for a while, and the early results from those investments are reflected in our current performance. The challenges we're facing now stem largely from more recent initiatives that are currently exerting some downward pressure. We are actively navigating through this and anticipate opportunities for further growth by 2026. The market is very dynamic. With recent changes in government policies, I am now confident that the BEAD initiative will significantly impact our business and customers due to the shift in customer demographics it targets. I believe this will be an important growth driver as we look ahead to 2026. Additionally, the current developments regarding data centers, AI, and the increased need for fiber, particularly in the middle-mile sector, are presenting vast opportunities for us across the nation. As we expand, our growth needs will moderate since we're operating in many more locations. Overall, we are proud of the progress we've made this year in this area and look forward to how it will benefit us in the long run.

And if I could ask a follow-up on the Power Delivery side. I know you talked about not having as much revenue on Greenlink this year, and that's taking some of the profits down. But I guess on the bigger picture about the project itself, does this delay impact the overall expected profitability for the whole project? Or is it just a pushout in timing? And then the bigger picture question is, as this translates to sort of a thought on risk for overall transmission projects that you're going to be taking on over the next couple of years, how should we think about the risk approach that you're taking there? Is this sort of like a reminder that you should be kind of very prudent in the risks you're taking on in these transmission projects?

I believe we need to be cautious with the risks we take on in all our businesses. We've been effective stewards of MasTec by understanding the risk profiles we commit to and ensuring we have contractual protections in place. Regarding Greenlink, we are collaborating with our customer and have strong confidence in both our capabilities and theirs to complete the project safely and on time. We do not anticipate any impact on profitability from that project, aside from timing differences compared to our initial expectations. Our confidence and enthusiasm for Greenlink remain intact, and we expect it to be a successful project for both our customer and MasTec. We will share further updates as they become available, but we do not foresee any negative impacts in 2026, apart from a revenue difference that will compress the timeline.

Our next question comes from the line of Andrew Kaplowitz with Citi.

Jose, Quanta yesterday talked about a total solutions opportunity for hyperscalers. We know you don't have the same exact portfolio as them, and you talked about not being particularly excited to combine cycle, but you do have significant capability to help data center customers. So what's the probability that we'll see something like that, like a total solution set of projects for MasTec starting in '26? And could you update us on the journey to $1 billion that you originally discussed you could do with data center customers?

I would say that the probability is very high, and regarding the second part of your question, it's clear that data centers present an incredible opportunity for companies like MasTec in our industry. We're already engaged in various aspects, especially in power and fiber for data center builders. We've been focusing on the civil side for quite some time and have discussed our work on the infrastructure side. I believe we have the potential to take on a larger and more significant role in these projects moving forward, allowing us to capture a greater share of that revenue, which again, is extremely high.

Great. And then could you give a little more color into what's going on in Clean Energy? I think 8.5% EBITDA margin is a high watermark for MasTec. I understand Q3 is a seasonally good time of the year, but do you think margin on an annual basis can continue to push higher in that segment? And you did lower your revenue outlook slightly in the segment, though you're still going to do double-digit growth. So how are you thinking about growth across Clean Energy going into '26?

Again, great quarter, 20% revenue growth. More importantly, 36% EBITDA growth for the quarter. We pretty much beat our margins every quarter there relative to what we've guided. I think we're somewhat conservatively guided for Q4. Hopefully, we can do that again. Business is doing really well. Again, our Clean Energy and Infrastructure business is a combination of renewables and infrastructure. I think if you think about the Infrastructure business, it's obviously a slower grower. That's a business that if we're growing at 10% a year is really solid. So our renewable business is obviously growing much faster than that. We're sitting on the highest level of backlog we've ever had in the business. We expect backlog to again increase in Q4, incredible opportunities in front of us. A lot of backlog post the 18-month period where we don't even report. So we're feeling really comfortable about where that business is headed. I think it's going to continue to help drive significant growth in our Clean Energy business, and our margins have improved. We're hopeful we can sustain that and over time, improve on that. So all around, we're feeling really comfortable where we stand there and the opportunities for '26 and beyond.

Our next question comes from the line of Justin with Baird.

Great. I guess I've got 2. One is just a really quick one. I just wanted to confirm just on that Hugh Brinson project. Is the full value of that project in backlog? It looks like, I guess, supposed to complete at the end of '26. So I just wanted to ask that. And then my second question is just on the cash flow. Obviously, last year was a huge cash flow year. You've got pretty big guidance here for the fourth quarter ramp. And just curious what are the contributors to that moving pieces that drive the 4Q cash flow number?

So I'll cover the first part of the answer. The answer is yes regarding the mainline. There are aspects of that project that may not be included in backlog yet.

And then cash flow is just a function of the revenue cadence, right? So we're forecasting revenue to contract sequentially in the fourth quarter. I think expect a little bit of DSO improvement, we've got a little bit of degradation up to 69 days in Q3 that we expect to come back down to the mid-60s. So the combination of those two is really what drives the release of the working capital investment in Q4.

Our next question comes from the line of Julien Dumoulin-Smith with Jefferies.

Just wanted to follow up on my friend, Steve Fisher's question here a moment ago. Can we go back to the comms business? Can we talk about the bifurcation, what's grown in the wireline versus wireless? And what's being implied for 4Q '25 here? Just, what's the cadence? Should we expect that to continue here when you think about that 33%? Or how are you thinking about that persisting? I hear a little bit of mixed commentary. I would love to hear how you break it out, especially in light of this Lumen contract.

Sure. There's no doubt that our wireline business is currently larger than our wireless business, and this has been the case for some time. The wireline segment is experiencing more rapid growth compared to wireless. Our largest client in the wireless sector is AT&T, and their project involving the Nokia and Ericsson equipment swap has been a significant contributor to our growth. This project began in the fourth quarter of 2024, serving as a beneficial factor in our overall growth. The comparisons in the fourth quarter will be a bit more challenging, leading us to temper our revenue growth expectations compared to the strong performance of the first three quarters. Nonetheless, our wireline business continues to grow at a substantial rate. While I don’t have the exact figure, I understand that our revenue growth for the third quarter is projected to be in the mid-single digits, and we hope to exceed that. Overall, I remain optimistic about the direction of the business and its future prospects.

Got it. So let's hope we can surpass that number, perhaps quite comfortably. On the topic of backlog, it seems like there might be a shadow backlog forming for Pipeline. Can you provide some insight on how to assess that in relation to the approximately $1.5 billion backlog you have in the Pipeline business? Is there any way to gauge its magnitude? Also, with other projects like DSW on the horizon, is there anything specific you can highlight? Additionally, it appears that transmission project awards are increasing as well. Could you elaborate on that shadow backlog or any opportunities in that area?

I believe the best approach we've taken is to discuss the future revenue potential in our Pipeline segment. We've mentioned that we now anticipate the possibility of surpassing our historical high revenue levels in that area, which in the past were around $3.5 billion. For this year, we are guiding towards $2.2 billion, and we now have a strategy in place to meet or exceed those historical levels. This aligns with our long-term outlook, beyond just 2026. I feel more optimistic about this opportunity now compared to last quarter. Regarding transmission, we recently announced a significant win in that part of our business, which will be substantial and is expected to commence in mid-2026. We'll provide further details about this project during our next call. We also noted earlier that we anticipated another win in late 2025 or early 2026, which is now coming to fruition, and we'll discuss that further in our upcoming call.

Our next question comes from the line of Marc Bianchi with TD Cowen.

I wanted to ask about the backlog, similar to Julien's first question. If we look back 18 months, the backlog coverage for the revenue you delivered was around 64%. As I look ahead from today and consider the composition of the backlog, is there any reason to believe that this ratio of conversion or backlog coverage will be significantly different? You mentioned the Pipeline possibly shifting to a more book-and-burn approach. I'm curious if you have any comments regarding that comparison.

Marc, that's a great analysis. Historically, there have been periods when we've consistently increased our backlog quarter after quarter. Backlog can sometimes be inconsistent as we win awards, but the continuous growth we're seeing in our backlog is just as significant as any percentage figures. It clearly indicates the direction of our business. We are very optimistic about our current position and believe there is significant potential to further enhance our backlog. Over time, backlog serves as a reflection of our business trajectory, and we have consistently shown strong results that should lead to additional revenue growth. While I haven't calculated whether historical percentages will replicate exactly as before, there seems to be momentum in our business that's backed by our backlog growth and the opportunities we foresee.

Okay. Great. And I guess just the other one back on Communications. So the '24 was a down year, '25 was a recovery year. What do you think as a placeholder for '26 growth? Do you think this business could do double-digit growth, top-line growth in '26?

Yes.

Our next question comes from the line of Brian Brophy with Stifel.

Just following up on some prior discussion. In the past, you've talked about having the capacity for 2 large transmission projects at once. Obviously, it sounds like we're going to hit that here next year. But you've also made a lot of investments on the headcount side. Curious if you're still thinking 2 projects is kind of the limit? Or how you're thinking about potentially adding capacity on the transmission side to take on more?

We are committed to growing our business and taking on more projects simultaneously. We start with one project, then move to two, and eventually aim for three. It's important not to rush things. We're excited about our current position and the potential in this area. Additionally, there are other opportunities we are considering. Over time, we definitely expect to secure more projects.

Okay. And then also following up on some of the prior discussion. It sounds like combined cycle is a little bit less interesting. But how do you guys think about potential opportunities on the single cycle side in gas?

It's a significant opportunity. There's a lot happening in this area. We are currently involved, but on a smaller scale. We continually face the question of how much we are willing to invest. It is a very different business than what we have traditionally engaged in. Risk management is crucial in this sector because it involves risks that we don't usually encounter elsewhere in our operations. Understanding this and effectively managing it, in my opinion, is what distinguishes a successful project from an unsuccessful one. We are exploring opportunities and will definitely be involved, but we will proceed with caution in this area.

Our next question comes from the line of Brent Thielman with D.A. Davidson.

Great. Just one more for me, really, just on the Pipeline side. Jose, you mentioned this change in how some of these things are being awarded. Can you just talk a little bit about maybe relative to past cycles, the competitive environment, is it different? Are the potential economics on these projects different than past cycles, especially as you seem to pretty close to the customers talking about these long-term engagements?

I believe there hasn't been a change in our historical earnings potential. We've consistently performed at a high level, and while we're not indicating that there's a huge opportunity for improvement, we definitely see areas where we can reach that level again. This marks a notable shift from our performance over the last couple of years. What excites us most is not just the revenue opportunities but also our capability to operate at a higher margin in those businesses. We believe we can continue to deliver as we have in the past. We're committed to collaborating with our customers, emphasizing our long-term relationships rather than trying to maximize profits on individual jobs. Our goal is to obtain a substantial portion of their plans and capital expenditures while ensuring a fair margin. We aim to achieve historical margins, though we're not specifically targeting elevated margins.

Our next question comes from the line of Liam Burke with B. Riley Securities.

Jose, you're talking about specifically telecom, but I guess it can go across your businesses that you're moving into new geographies and opening new offices. Is that your existing customer pulling you into that market saying, "Hey, we need you?" Or are you just identifying the market, and that's where you decide to invest?

I believe we are seeing both new and existing customers involved. We've successfully increased our share of business with existing customers by taking a holistic approach across all our offerings. Many customers today can benefit from various MasTec services, and we've effectively cross-sold these services, enabling us to serve those customers in new ways compared to the past. Additionally, particularly in Power Delivery, we've recently entered this space and made significant strides since 2021, which has greatly enhanced our brand recognition and led to more opportunities with new customers. We plan to support these new clients as well. Overall, whether it’s for existing or new customers, the investment and payback are quite similar even when entering a new market. We’ve had to decide between organic growth or mergers and acquisitions, and for now, we've opted for organic growth, which I believe will yield better returns over time. Moving forward, I expect to see a mix of both approaches.

Great. And just quickly on renewables. You said that it was heavily weighted towards solar this year, but your order flow is looking towards wind in 2026. Is that new build? Or is it just upgrades and maintenance?

Yes, Liam, to clarify, we expect our renewable growth to be primarily driven by solar, as it is the fastest-growing segment. The majority of our current and future business will continue to focus on solar. We mentioned wind because there have been many inquiries about the performance and future of our wind operations. It remains a significant part of our portfolio. By the end of this quarter, we expect to have three of the four largest projects in MasTec's history related to wind, which is quite notable in today's market. This indicates a strong and lasting future for our wind business alongside our solar initiatives. We wanted to emphasize this since solar tends to dominate discussions, but we believe our wind sector is healthy and has been successfully developed and expanded. That was the main point of our comments.

Due to the interest of time, we have time for our final question. That question will come from Maheep with Mizuho.

This is Maheep from Mizuho. Just a follow-up on the previous question. Could you talk about like the battery storage business, talked about wind and solar, but any thoughts on the growth in that segment for you? And separately, just on the Pipeline side, any thoughts on labor constraints, if any, in any part of the business for you?

Battery storage is becoming an increasingly significant part of our portfolio, with most of our current projects incorporating some battery opportunities. This business has shown strong growth in 2025 and has been a key driver for us this year, a trend we anticipate will continue into next year. Regarding the second part of the question about pipeline constraints, there has been a notable shift in expectations for the pipeline market in 2025 compared to last year at this time. Our customers are making substantial investments, but these take time to materialize. This is why we've focused so much on the latter part of 2026, as it requires time for engineering, permitting, and materials to align for project execution. While we faced some early constraints this year, we believe we are overcoming these challenges and expect to see significant activity increase in the second half of 2026.

Thank you. That concludes today's call. Thank you for participating. And as a reminder, please visit our website for a replay and transcript of the call, which will be posted when available. Thank you.

Thank you for your participation. You may now disconnect.