Earnings Call Transcript
MASTEC INC (MTZ)
Earnings Call Transcript - MTZ Q4 2021
Operator, Operator
Welcome to MasTec's Fourth Quarter 2021 Earnings Conference Call initially broadcast on Friday, February 25, 2022. Let me remind participants that today's call is being recorded. At this time, I would like to turn the call over to our host, Marc Lewis, MasTec's Vice President of Investor Relations. Marc?
Marc Lewis, Vice President of Investor Relations
Thank you, Christina, and good morning, everyone. Welcome to MasTec's fourth quarter earnings call. The following statement is made pursuant to the safe harbor for forward-looking statements described in the Private Securities Litigation Reform Act of 1995. In 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 events or knowledge. Various risks, uncertainties and assumptions are detailed in our press release and filings with the SEC. Should one or more of these risks or uncertainties materialize or should any of our underlying assumptions prove incorrect, actual results may differ significantly from results expressed or implied in these communications. In today's 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 on this call. A reconciliation of any non-GAAP financial measure not reconciled in these comments to the most comparable GAAP measure can be found in yesterday's Q4 earnings press release. With us today, we have Jose Mas, our CEO; and George Pita, our Executive Vice President and CFO. The format of the call will be opening remarks and announcements by Jose, followed by a financial review from George. These discussions will be followed by a Q&A period. And we expect the call to last about 60 minutes. We had another great quarter and have important things to talk about today, so I'll go ahead and turn it over to Jose. Jose?
Jose Mas, CEO
Thanks, Marc. Good morning, and welcome to MasTec's 2021 Fourth Quarter and Year-End Call. Today, I'll review our fourth quarter and full year results and provide my outlook for 2022 and the markets we serve. I want to begin by expressing my gratitude to the men and women of MasTec. Their dedication and hard work have enabled us to achieve another record year of revenue and EBITDA. It is a privilege to lead such an outstanding team. The commitment of MasTec's workforce to safety, environmental stewardship, integrity, and delivering quality projects at competitive prices has been acknowledged by our clients. Thanks to their efforts, we've achieved excellent financial results despite a challenging environment and positioned ourselves for ongoing growth and success. Now, let's discuss some highlights from the fourth quarter. Revenue reached $1.8 billion. Adjusted EBITDA for the fourth quarter was $219 million, and adjusted EPS was $1.35. For the entire year of 2021, our revenue stood at $8 billion, adjusted EBITDA was $931 million, adjusted earnings per share was $5.58, and cash flow from operations for the year was around $800 million. In summary, we had a strong quarter and another exceptional year. While our quarterly results aligned closely with expectations, we recorded remarkable growth in our non-Oil and Gas segments, with revenues increasing 43% and non-Oil and Gas EBITDA growing 75% in this year's fourth quarter compared to last year's. However, we faced challenges from inflation and supply chain issues that impacted our revenue, primarily causing project delays in our Communications and Clean Energy segments. It’s important to note that our fourth quarter EBITDA occurred despite a nearly $115 million year-over-year decrease in Oil and Gas EBITDA. Throughout the past year, we have prioritized diversifying our business and expanding our non-Oil and Gas segments to transform our earnings mix. Our true achievement in 2021, regardless of financial numbers, was positioning our company for significant long-term growth and earnings potential. For 2022, we anticipate our Oil and Gas segment to become our smallest revenue contributor, making up no more than 20% of our total revenue. We project our Communications, Power Delivery, and Clean Energy segments will collectively grow revenues by about 50% versus 2021, and EBITDA by nearly 85%. While we would prefer a quicker transition with fewer obstacles, we are confident that MasTec is in a much stronger position to capitalize on growth and margin expansion opportunities than ever before. Before diving into specifics about segments, I want to briefly discuss our guidance for 2022. Just over a year ago, at the end of 2020 during the pandemic and amidst a shifting oil and gas landscape, we outlined a path and aim for reaching a $10 billion revenue run rate. Although it's a long-term goal, in 2021 we made several acquisitions that have dramatically enhanced our growth capacity. Today, we are pleased to announce our 2022 revenue guidance of roughly $10 billion. I assure you that when we set this goal in 2020, we didn't expect to reach it just 15 months later. More importantly, as we break down the revenue guidance, we are optimistic that every segment will see further growth moving into 2023 and beyond. We see a growing number of opportunities and are actively investing in the business. Our full year EBITDA guidance stands at approximately $950 million. This guidance reflects a projected $600 million drop in Oil and Gas revenue and about a $275 million decline in EBITDA. This decrease in revenue is balanced by approximately $1.5 billion in revenue anticipated from the Henkels & McCoy acquisition we announced in December and over 20% growth in each of the other non-Oil and Gas segments. The EBITDA reduction will be mitigated by the acquired Henkel EBITDA and margin improvements in each segment, which George will elaborate on later. Our current revenue guidance predicts low double-digit year-over-year growth in the first half of 2022, primarily due to the acquisitions, and over 35% year-over-year growth in the second half. Our first quarter will experience a year-over-year revenue decline of $508 million in Oil and Gas and a $143 million drop in EBITDA for that segment. This reduction is partially due to delays related to the Mountain Valley Pipeline, which was initially scheduled to commence in February. Our guidance now reflects expectations for activity to ramp up later in the year. As we move through 2022, I am confident we will demonstrate improved growth and margins in our business. We expect to finish 2022 with a strong run rate, positioning us well for a successful 2023. Now, let's discuss some industry specifics. Our Communications revenue for the quarter amounted to $682 million, representing a 20% year-over-year increase and an increase from the third quarter, which is unusual. During the fourth quarter and early in the first, we expanded into 18 new geographic wireline fiber markets, which will account for over $125 million of our segment growth in 2022, along with robust growth in our current markets. We have also continued diversifying and expanding our wireless operations, experiencing solid growth in 2021 with T-Mobile, Verizon, and DISH Network. Just yesterday, DISH Network announced their intention to enter markets by June of 2022, and we are currently active in 17 of those markets. As AT&T ramps up its build plan in the latter half of 2022, we will offer a broader and more diverse range of services with all major carriers in an active build cycle. We anticipate Communications revenues in 2022 to grow nearly 25% year-over-year. Our backlog increased over 20% year-over-year, reaching a record level of $4.5 billion. While some impact from the Rural Opportunity Fund has been observed, the majority of infrastructure and rural funding for broadband expansion has yet to be allocated. We continue to see significant growth prospects in this segment and are collaborating with various clients on their future build plans. Turning to our Oil and Gas pipeline segment, revenue for the quarter was $335 million compared to $600 million last year. Margins remain strong as the mix was favorable. For 2022, we anticipate guidance in the range of $1.8 billion to $1.9 billion, which includes several hundred million from the Henkels acquisition. We expect 2022 to be a challenging year for this segment. Although commodity prices have risen significantly, the demand for infrastructure is expected to grow, reactivating projects will take time, making early 2022 project starts challenging. For instance, customers are encountering difficulties with pipe delivery schedules due to supply chain issues. Nonetheless, we are in active discussions with clients regarding projects we anticipate will commence in 2023 and later. We expect award activity to surge in the latter half of 2022. The potential for carbon capture, sequestration, and hydrogen development has enhanced our long-term outlook for our pipeline business. Now regarding our Power Delivery segment, revenue was $285 million compared to $126 million in the fourth quarter of last year. This growth was primarily driven by the INTREN acquisition. At the end of the year, we announced the acquisition of Henkels & McCoy, a leading private contractor in electrical power transmission and distribution in the U.S. With the combined acquisitions of 2021, we have transformed this segment into a significant growth engine for MasTec, presenting ample margin expansion opportunities. In 2020, this segment generated just over $500 million in revenue. In 2022, we expect this segment to surpass $2.5 billion in revenue, representing more than 25% of MasTec's overall revenue. The scale we have achieved positions us as a market leader with tremendous opportunities ahead. As our customers work to modernize the power grid with a focus on reliability, fire hardening, and renewable connections, including wind, solar, and an increase in electric vehicle usage, our combined services offer cost-effective solutions at scale to meet their requirements. While we are still in the early stages of integration, feedback from customers has been very positive. We welcome the Henkels & McCoy team to the MasTec family. Although it has only been two months, the energy and cooperation have been inspiring. I am confident that the benefits of this acquisition are greater than anticipated. Lastly, regarding our Clean Energy and Infrastructure segment, revenue for the fourth quarter was $515 million compared to $346 million in the same quarter last year. EBITDA margins improved to 6.8% in the fourth quarter compared to 3.2% last year and 2.7% sequentially. While margins showed significant improvement, some projects slipped due to material delivery delays. We expect strong growth in 2022, with overall growth nearing 25% and full year margins close to 7%. Although our backlog is up nearly 50% year-over-year, it doesn’t fully capture the market's strength. We are operating under several LNTPs while we finalize pricing, and the value represented in backlog is only a fraction of the total contract value. Verbal awards and ongoing negotiations actually exceed the total backlog for this segment. This level of activity does not yet include funding for infrastructure-related projects that have yet to be allocated. We expect this to be yet another driving force for our infrastructure business. Our diversification is a key strength in this segment, enabling us to fulfill our customers' diverse needs. We are actively engaged in renewable projects, including wind, solar, and biomass, as well as gas generation projects capable of dual-source hydrogen. With a national emphasis on sustainability and clean energy, we have observed a significant surge in planned clean energy investments from our clients as they strive to enhance their carbon footprint. As a prominent clean energy contractor and partner, MasTec is exceptionally positioned to capitalize on these investments. In conclusion, we had another great year. While challenges and uncertainties arise, they often lead to new opportunities. Our customers are seeking ways to innovate and enhance their business models and are looking for reliable partners to support them. This presents a significant opportunity for us. Our greatest asset has been our ability to understand industry trends and our customers' needs. Our capacity to offer existing and new services has consistently been a strength. I look forward to what lies ahead for MasTec. I want to again thank the men and women of MasTec for their dedication to safety, hard work, and sacrifices. Please keep up the great job. Now I will hand the call over to George for our financial review. George?
George Pita, Executive Vice President and CFO
Thank you, Jose, and good morning, everyone. Today, I'll discuss our fourth quarter and annual financial results for 2021, as well as our updated guidance for 2022. As Marc noted at the start of the call, we will reference non-GAAP adjusted earnings and adjusted EBITDA, with reconciliation details available in our press release. Our fourth quarter results aligned with our guidance, showing a 10.5% increase in revenue to $1.8 billion, an adjusted EBITDA of about $219 million, and an adjusted EBITDA margin of 12.1% of revenue. Diluted earnings for the fourth quarter of 2021 were $1.35 per adjusted diluted share, exceeding our guidance by $0.02 per share. This capped off a strong year, with record annual revenue of approximately $8 billion, a 26% increase year-over-year, and an adjusted EBITDA of $931 million, which is 11.7% of revenue. The fourth quarter saw significant improvements in our non-Oil and Gas segment, with revenue rising 43% or $440 million compared to the prior year and adjusted EBITDA increasing 75% or $56 million. Year-over-year, the adjusted EBITDA margin for this segment improved by 170 basis points to 8.9% of revenue. On a sequential basis, the adjusted EBITDA margin improved by approximately 120 basis points compared to the third quarter, despite slightly lower revenue levels. As we've mentioned before, the major trends in telecom, wireline, wireless, and power generation as the country moves toward carbon neutrality offer substantial growth opportunities in our non-Oil and Gas segments, which we expect to continue improving in 2022 and beyond. We maintained strong cash flow from operations in the fourth quarter, generating $793 million for the entire year of 2021. Notably, even after approximately $1.5 billion in acquisition investments, we finished the year with over $1 billion in liquidity and favorable leverage metrics. Our solid cash flow and working capital management have also been recognized by Moody's, S&P, and Fitch, who recently assigned us an investment-grade credit rating despite our considerable 2021 cash outflows for M&A. Now, I'll go into more detail on our segment results and expectations. Fourth quarter Communications revenue was $682 million with an adjusted EBITDA margin of 11.2%, showing slight improvements from the previous year and a sequential gain of 50 basis points compared to the third quarter. For the annual 2021 Communications segment, revenue reached $2.55 billion with an adjusted EBITDA margin of 10.6%. Looking ahead, we project that annual 2022 Communications segment revenue will be between $3.1 billion and $3.2 billion, reflecting a 20% to 25% growth over 2021. The adjusted EBITDA margin for 2022 is expected to be in the low to mid-11% range. We anticipate slower revenue growth for the first half of 2022, in the high teens to low 20% range, with growth accelerating in the second half to the mid to high 20% range. For the first half of 2022, we expect the adjusted EBITDA margin to be in the high single-digit to low double-digit range, improving to the mid to high 12% range in the second half. Specifically, we forecast lower revenue and adjusted EBITDA margin performance in the first quarter due to delayed wireless revenue, new market startup costs for RDOF wireline operations, and the impact of low-margin revenue from the Henkels & McCoy acquisition. However, we anticipate a ramp-up in revenue growth and adjusted EBITDA margin thereafter. Fourth quarter Clean Energy and Infrastructure segment revenue was $515 million, with an adjusted EBITDA of about $34.7 million or 6.8% of revenue. Annual revenue for the Clean Energy segment approached $1.9 billion, with an adjusted EBITDA margin of 4%. In the fourth quarter, Clean Energy revenue grew by 49% year-over-year, and the adjusted EBITDA margin rose by 360 basis points to a high of 6.8%. Sequentially, this segment's adjusted EBITDA margin improved by 410 basis points over the third quarter. For 2022, we expect Clean Energy segment revenue to be between $2.3 billion and $2.4 billion, along with an adjusted EBITDA margin in the mid-6% to low 7% range, representing a significant improvement over 2021. We anticipate stronger growth in the second and third quarters of 2022 based on project timing and seasonality. In the Oil and Gas segment, fourth quarter revenue was $335 million, with an adjusted EBITDA of approximately $81.3 million. This reflects a significant year-over-year decrease, with adjusted EBITDA dropping by $115 million compared to the previous year's fourth quarter. For the full year 2021, Oil and Gas segment revenue was around $2.5 billion, with a margin of 21.9%. Looking ahead, we expect a decline in 2022 Oil and Gas segment revenue, projected to be between $1.8 billion and $1.9 billion, with an adjusted EBITDA margin expected in the mid-teens range. We anticipate a notable shift in first half 2022 revenue compared to last year, with segment revenue expected between $500 million and $600 million and adjusted EBITDA margin in the low double-digit range. Significant revenue and adjusted EBITDA margin growth is expected in the second half of 2022, with revenue projected to be between $1.2 billion and $1.3 billion and an adjusted EBITDA margin in the mid to high teens. There are promising opportunities for growth in both hydrocarbon and carbon capture pipeline services expected to emerge in 2022, positioning this segment well for growth in 2023. In the fourth quarter, we rebranded our Electrical Transmission segment to Power Delivery to better reflect our expanded service offerings in the utility market, including electrical and gas distribution due to recent acquisitions. We believe our expanded operations provide a strong suite of services to support customer needs transitioning to renewable power generation. For clarity, fourth quarter acquisition activity had no impact on Power Delivery segment operating results. Power Delivery segment revenue for the fourth quarter was $285 million, with an adjusted EBITDA margin of 7.1%, a 650 basis point improvement year-over-year. Annual revenue for the Power Delivery segment was approximately $1 billion, with an adjusted EBITDA margin of 6.7%. It’s noteworthy that the adjusted EBITDA margin for the second half of 2021 improved to 8.5%, a 460 basis point increase over the previous year’s second half. Looking ahead, we expect annual revenue for the Power Delivery segment, including the impact of fourth quarter acquisition activity, to be between $2.5 billion and $2.6 billion, with an adjusted EBITDA margin expected in the high single-digit to low double-digit percent range, representing a significant improvement over 2021. The fourth quarter Corporate segment incurred costs of approximately $4 million due to benefits from expected legal and earn-out settlements, with annual Corporate segment results amounting to a cost of $72 million or 91 basis points. Combined with investment income from our Other segment, the net impact for the annual Corporate and Other segment was a net cost of 48 basis points, aligning with expectations. We plan to integrate corporate functions throughout 2022, anticipating higher corporate costs during this process. Annual costs for the Corporate segment in 2022 are projected to approximate 120 to 125 basis points. On a combined basis, we expect corporate segment costs and investment income to be a net cost of 90 to 95 basis points, representing about a 50 basis point increase over 2021. We believe these costs will normalize back to 2021 levels as we implement cost rationalization efforts. Currently, we estimate acquisition integration costs of around $40 million throughout 2022. Now, I’ll summarize our top 10 customers for the 2021 period as a percentage of revenue. Enbridge made up 16% of our revenue. The newly defined AT&T Services accounted for 9% of revenue, with amounts now reported exclude DIRECTV services that were spun off. NextEra Energy contributed 7% to revenue, spanning various segments, including Clean Energy, Communications, and Power Delivery. Comcast, Equitrans Midstream, and Duke Energy each represented 4% of revenue, followed by DIRECTV at 3%, and T-Mobile, Verizon Communications, and Exelon Corporation each at 2%. Individual construction projects constituted 62% of our annual revenue, while master service agreements accounted for 38%. With the expected resurgence in wireless MSA work and the revenue from INTREN and Henkels acquisitions largely driven by MSAs, we anticipate that recurring MSA revenue will significantly increase, nearing 50% of our total revenue for 2022. Lastly, we note that backlog can fluctuate due to large contracts being completed and new contracts entering backlog at specific times. As of December 31, 2021, we achieved a record backlog of approximately $9.9 billion, which is up $1.4 billion sequentially and approximately $2 billion from last year. Notably, both Communications and Clean Energy segments reached record fourth quarter backlogs, reflecting strong demand in these growing markets. The fourth quarter Power Delivery segment backlog was approximately $2.9 billion, sequentially growing by around $1.5 billion due to the acquisition of Henkels. Now, let’s discuss cash flow, liquidity, working capital use, and capital investments. We wrapped up 2021 with $1.1 billion in liquidity and a net debt of $1.65 billion, resulting in a leverage ratio of 1.8x on a stand-alone basis, which improves further when factoring in the benefits from fourth quarter acquisition EBITDA. Our year-end liquidity and leverage metrics are very solid, as highlighted by our recent investment-grade ratings. Our cash flow metrics at the end of the year included over $600 million in cash outflows for acquisitions in the fourth quarter. For 2021, cash provided by operating activities was around $793 million. We concluded the fourth quarter with days sales outstanding at 77 days, excluding the effects of fourth quarter acquisitions, compared to 86 days last year. Moving forward into 2022, we expect our DSO target to remain in the mid to high 80s. We take pride in the resilience and consistency of MasTec's cash flow profile. In summary, our long-term capital structure is robust, with low interest rates, no significant near-term maturities, and ample liquidity, providing us with the flexibility to capitalize on potential growth opportunities to enhance shareholder value. Regarding our guidance for 2022, we project annual revenue of about $9.95 billion, with adjusted EBITDA of $950 million or 9.6% of revenue and diluted earnings of $5.32 per adjusted diluted share. These figures remain largely unchanged from our expectations shared in December during the Henkels acquisition. For the first quarter, we anticipate revenue of $1.8 billion and adjusted EBITDA of $90 million, which represents 5% of revenue and corresponds to a $114 million decrease in adjusted EBITDA compared to the previous year. This decline is attributed to a combination of the seasonally slow quarter, shifts in oil and gas project activity, including the delayed initiation of the MVP pipeline project, and the timing of other projects along with lower-margin revenue from the fourth quarter acquisitions. Specifically, due to project timing alterations, we estimate Oil and Gas segment revenue for the first quarter of 2022 to be around $200 million, with adjusted EBITDA in the low double-digit range, resulting in a considerable year-over-year decline for both revenue and adjusted EBITDA. First quarter results have already been incorporated into our annual guidance for this segment, which anticipates revenue of $1.8 billion to $1.9 billion at a mid-teens adjusted EBITDA margin rate. First quarter 2022 Communications segment results will be affected by delayed wireless revenue, new RDOF wireline market startup costs, and the impact of lower-margin telecom revenue from the Henkels acquisition. As a result, we expect a decrease in first quarter adjusted EBITDA compared to the same period in 2021. These factors should diminish starting in the second quarter, leading to sequential improvement in performance during that time, setting the stage for a strong second half of 2022. Once again, first quarter results are embedded in our guidance for 2022, with projected annual revenue of $3.1 billion to $3.2 billion and an adjusted EBITDA margin rate in the low to mid-11% range. In terms of additional 2022 guidance expectations for modeling, we anticipate net cash capital expenditures of about $100 million and an additional $200 million to $220 million related to finance leases, which will include initial CapEx investments for any recent acquisitions from the fourth quarter. We expect annual interest expenses to be around $67 million. For your modeling purposes, our 2022 share count is estimated to be 76.1 million shares, accounting for shares issued in the Henkels acquisition. We project annual depreciation expense to be approximately 3.5% of revenue, and lastly, our annual adjusted income tax rate is expected to be around 24%. This wraps up our remarks, and now we'll hand the call back over to the operator for questions.
Operator, Operator
And we'll take our first question from Steven Fisher with UBS.
Steven Fisher, Analyst
So it sounds like there's a variety of issues weighing on the first quarter here. I'm wondering just how much visibility do you actually have to some of these challenges moderating and then normalizing by the time we get into the second quarter.
Jose Mas, CEO
Yes, sure, Steve. When we look at early 2022 and compare it to previous years, particularly 2021, the biggest challenge we face in Q1 year-over-year is our Oil and Gas business. Last year, we recorded $203 million in EBITDA for the first quarter, with $168 million coming from Oil and Gas. If we examine our non-Oil and Gas business from 2021 to 2022, it's almost doubled. That being said, we believe it could have performed better. There were some delays in Clean Energy and Communications that we expected would improve that Q1 figure. The primary issue in Q1 compared to last year stems from the Oil and Gas sector and the push-out of MVP, which was a significant factor in our initial Q1 expectations. Looking at the full year, our outlook remains unchanged. We have strong visibility on our full-year plans across all non-Oil and Gas segments. Regarding Communications, we've opened 35 new markets between the fourth quarter and the first quarter. While there are financial challenges with launching so many offices early, the revenue potential for the rest of the year is quite clear. In Clean Energy, we have signed projects with our customers, and while we've adopted a conservative guidance based on supply chain concerns, if everything goes smoothly, revenues in that segment could be much higher this year. We anticipated that 2022 would be a challenging year for Oil and Gas, recognizing it as a transition year, and this is clearly reflected in Q1. However, I am confident that as the year progresses, the other businesses will perform well.
Steven Fisher, Analyst
That's helpful. And then just a follow-up there on the Oil and Gas, I guess, how much confidence do you have that MVP is actually going to start on schedule again? What needs to really happen there? And what are these other awards that you expect in the second half in that segment that the confidence of the customers are actually going to move forward?
Jose Mas, CEO
Yes. So there are a few things to consider. We're actually feeling more optimistic about the second half awards than we have in the past, but we haven't factored those revenues into our expectations for 2022. Our projections for 2022 are primarily based on the work we currently have, with only minor additional projects that we anticipate. This is the basis of our guidance for 2022. A significant part of that guidance includes work for MVP, which we plan to complete. We hope that if MVP doesn't get underway, other projects we expect might start early and compensate for that. That said, Equitrans is making considerable efforts to get the MVP project back on track. We have numerous projects that aren't impacted by recent events, though there have been many developments surrounding MVP. We will defer to them for public updates, but we remain confident that the project will eventually proceed. The uncertainty lies in how much progress we will see in 2022 versus what will be postponed to 2023.
Operator, Operator
We'll take our next question from Marc Bianchi with Cowen.
Marc Bianchi, Analyst
I think there's a significant focus on the second half of the year for your team. You've provided a lot of details about Oil and Gas. Could you discuss some of the risk factors? If we were to revisit this conversation in 90 days and there was either an upgrade or downgrade in guidance, what would be the top one, two, or three variables influencing that change?
Jose Mas, CEO
Sure. Marc, when considering the second half of the year, we should also focus on how revenue transitions from the second quarter. In our Communications business, we anticipate a significant increase from Q1 to Q2, which gives us confidence. We're expecting revenues to rise nearly $200 million during that period, with an additional $100 million in Q3. If we average that, it's about $150 million per quarter, which aligns with our historical performance. The positive aspect is that we have the work orders in place. We need to manage material deliveries to ensure everything is ready, but we're confident in our decisions, staffing, and plans to execute effectively. Similarly, for Clean Energy, we're looking at a ramp from Q1 to Q2 of around $150 million, with a further increase in Q3 of about $100 million. We have identified customers who have awarded work, and we've assessed the projects regarding permitting and materials to provide our best estimates. As I mentioned to Steve, we're excited about the potential in Clean Energy; if things align perfectly, we could achieve significantly more revenue in '22 than we've projected. We've been conservative in our outlook for the second, third, and fourth quarters. On an annual basis, our first quarter earnings in non-Oil and Gas areas are almost double compared to previous years. While that's not where we want to be, it's an important point to acknowledge.
Marc Bianchi, Analyst
Great. For the second half, I understand there is a significant amount of seasonality in the business, and typically, the second half performs better than the first due to these seasonal effects. If I annualize your current performance and your projections for the second half, it looks like revenues could reach approximately $11.5 billion annually, with EBITDA around $1.3 billion. As we look ahead to 2023, what factors do you see that could impact these numbers? Also, do you agree with that quick estimate for the second half?
Jose Mas, CEO
I'll let George address the second half. When we talk about '23, I think if you look at our full year '22 and you look at what's happening, right, our Oil and Gas business will be down about $900 million organically. So if you take where we finish '21 and we've guided '22, our '22 guidance includes about $200 million of Oil and Gas work from Henkels, so if you back that out on a pure organic basis, we're down $900 million. If you look at our non-Oil and Gas segments organically, right? They're growing about $900 million. And the balance is our acquisition revenue that gets us to where we need to get to, right? So we feel really comfortable that, that's going to play out, right? And again, we've kind of done this on a project-by-project basis, working ourselves all the way up. I think the important part of that story, when you look beyond '22, is the fact that we think our business has the ability to grow by over $1 billion, as we'll demonstrate in '22, I think we'll demonstrate it again in '23, which gives us significant confidence as to the profile that we laid out. So I mean, just taking a step back, a few months ago, we laid out a longer-term range of $3 billion to $3.5 billion in our Power Delivery business, $3 billion to $3.5 billion in our Clean Energy segment, $3.5 billion to $4 billion in comms and $1.5 billion to $2 billion in pipeline. And I think that the reality is that the lower end of those ranges, we think, are very achievable in '23, just based on the growth rates that we expect in 2022 on our non-Oil and Gas businesses. George, do you want to talk about the second half?
George Pita, Executive Vice President and CFO
Typically, our second half of the year generates more revenue than the first half. In 2022, this pattern may be particularly notable due to changes in the Oil and Gas sector. However, this trend is common across many of our businesses, including Communications. Generally, we anticipate that around 55% to 60% of our annual revenue will come from the second half, with the first half accounting for around 40%. This expectation holds true for this year as well. On the Communications front, we foresee significant ramp-up as we progress through the year, with new markets emerging and increased wireless spending starting from the second quarter into the second half. We believe these trends are clear, and they are reflected in our guidance, which we feel confident about for the latter half of the year.
Operator, Operator
And we'll take our next question from Fahad Nadeem with Goldman Sachs.
Fahad Nadeem, Analyst
So first, I wanted to ask about the timing on some of the delays related to materials availability in Communications and Clean Energy. So can you provide some details on what parts of the businesses are being most affected? Like in Clean Energy, is it centered more on solar? Or is it really across wind, biomass and the construction piece as well? And then in Communications, is there kind of a difference between the wireless and wireline? Or is it also more broad-based?
Jose Mas, CEO
The situation is quite broad-based. For instance, in our Communications business, the issue isn't with the major items like radios in wireless or fiber in wireline, but rather with smaller supplies that are becoming harder to obtain, such as jumpers in wireless and pedestals and handholds in wireline. These issues are likely easier to resolve since they are more transitory supply chain challenges, which is unexpected as we usually worry about major supplies. In Clean Energy, the main concern is still the solar panels, but we are seeing similar issues where minor materials are missing as well. Project delays can cause shifts in scheduling, and some of the responsibility lies with our customers. We have strategies to manage this, but it does impact our ability to generate revenue as we would like. Everyone involved is aware of this situation, and the market seems to be cautious, avoiding starting projects without all necessary materials. This caution tends to delay project starts, but once they do begin, there should be fewer interruptions, which is crucial for our earnings. We are advising our clients to adopt this approach as well, which explains some of the pushbacks into the second quarter and the latter half of the year.
Fahad Nadeem, Analyst
Got it. As a follow-up on the guidance for Power Delivery regarding the H&M acquisition, can you discuss some of the assumptions included in the margin guidance for H&M, especially considering H&M's lower margins last year? Also, since the acquisition, have you gained more insight into what caused the margin differences between H&M and legacy MasTec, perhaps due to some specific troubled projects?
Jose Mas, CEO
Yes, that's a great question. When we announced the Henkels & McCoy acquisition, we indicated that we expected EBITDA margins to be around 4% to 5%. If we consider the $70 million figure annually, they operate multiple businesses, so we've categorized them within our company. There will be segments that pertain to Communications, Oil and Gas, and Power Delivery. The reality is that Power Delivery offers the best margins among these three. This has a notable impact on our Communication and Oil and Gas margins. While their Power Delivery margins aren’t at our level yet, they are significantly closer, though they do carry high corporate costs, which George mentioned earlier. Looking ahead, Power Delivery is likely the strongest sector and the most crucial for future growth. From an integration standpoint, we are thrilled with what we’ve learned about the company in just two months. The opportunities are far greater than we anticipated. We believe our annual forecast might be somewhat conservative. We expect that in the near future, we can elevate them to 8% to 10% EBITDA margins, which would be a significant improvement from their current status. Achieving this in 2022 may be challenging as we have substantial work to do, but we're very optimistic about what we can achieve in 2023 and beyond. We hope to outperform our guidance and leverage various synergies to improve the business more rapidly than we had expected.
Operator, Operator
And we'll take our next question from Jamie Cook with Credit Suisse.
Jamie Cook, Analyst
I guess, two questions. One, Jose or George, I'm just trying to understand better the EBITDA ramp for 2022. So can you just help me? I think the second quarter is critical. Do we expect EBITDA to be up year-over-year, flat? Just any color on the second quarter, just given the weak start to 2022. And then I'll ask my follow-up after that.
Jose Mas, CEO
So if you look at Q2, we're expecting to be slightly under where we were in the previous year. A lot of that is also going to be driven by Oil and Gas, right? Oil and Gas, we probably think will be down about $100 million. And we should be down somewhere between $25 million to $50 million in the second quarter on a year-over-year basis. So a lot closer to where we were last year, offsetting a lot of the Oil and Gas drop-off with the rest of the business.
George Pita, Executive Vice President and CFO
Yes, Jamie, we will definitely notice a sequential improvement in the Communications sector with increased revenue compared to last year. We are seeing better rates, for sure. Additionally, in our non-Oil and Gas segments, we expect those areas to continue to develop and show more impact in the second half of the year. In the first half of the year, there was a significant decline in the oil and gas sector compared to last year, which has affected our overall figures. This decline will be much less significant in the second half of the year. Furthermore, the non-Oil and Gas segments are improving each quarter, and we anticipate continued growth from the second to the third to the fourth quarter. This combination contributes to the outlook we have for the second half of the year.
Operator, Operator
And we'll take our next question from Noelle Dilts with Stifel.
Noelle Dilts, Analyst
I had a question on Communications. So on AT&T's call, they talked a bit about this idea that they would ramp on 5G deployments in late spring, early summer as the radios became available for this recently awarded Auction 110 spectrum and then they could do a single-tower climb for the C-band spectrum awarded last year. Is that really what we should think about as the kind of key factor in AT&T's timing, being the availability of these radios? Any thoughts on that would be great.
Jose Mas, CEO
I believe it's both factors you mentioned, Noelle. We're not particularly concerned about the radio supply chain. It may be a bit delayed, but there’s ample time for it to be resolved. The more significant issue is their intention to implement double spectrum on a single tower climb. That seems to be their direction. Once that process begins, we anticipate it will have a substantial positive effect on our business, as we have been waiting for them to start for quite some time. Once they begin, we expect it to create a significant and lasting change for us. We're pleased to have clear guidance, though we would have preferred a quicker start, which has influenced our performance in the first half of the year. Their comments yesterday were as specific as they could be, and that's our expectation. Again, we're quite optimistic about the implications once they begin.
Noelle Dilts, Analyst
Okay. Great. And then could you just expand upon the type of work you have remaining for MVP? Is it still just mostly water crossings that have to get done?
Jose Mas, CEO
The challenges with MVP stem from a few miles that are creating significant concerns and problems. There's much more to accomplish beyond that. I want to avoid discussing specifics publicly since I'm not aware of what our customer has disclosed, so I will hold off on details. There’s a lot of work we can pursue that isn't affected by the decisions made, but some work is indeed impacted. The decisions made regarding the full route will depend on when we begin and how swiftly we can complete the work. Recently, there have been many changes that have pushed our timeline deeper into the year. If we need to make up for delays, we have opportunities to do so, and we will communicate transparently as we learn more. For now, we will let them comment on the constructability and their current status.
Operator, Operator
And we'll take our next question from Andy Kaplowitz with Citigroup.
Andrew Kaplowitz, Analyst
Jose, could you give us a little more color on what's happening in Clean Energy? You did seem to improve margin a bit in Q4. I think you gave that 7% margin guidance for '22. So would you say that you've gotten over the hump in terms of margin performance in the segment? And then obviously, there's been a fair amount of consternation in wind markets, given the PTC uncertainty. So I know you're still forecasting almost 25% revenue growth for the segment. But what's embedded in your outlook for wind?
Jose Mas, CEO
Yes. To begin with margins, the challenge in this business is that margins are not constant. While we indicate a target of 7% for the year, it is seasonal. The first quarter will have lower margins due to significant work in northern regions affected by weather. Margins will increase in the second quarter, peak in the third quarter, and remain strong in the fourth quarter. Overall, we anticipate an annual margin close to 7%. We have evaluated this on a project-by-project basis to reach that figure. We expect wind to decline in 2022 compared to 2021, which was also down from 2020. However, we anticipate a substantial increase in solar. We have taken conservative views on revenue expectations, and if conditions favor us, revenues could be much higher than our forecasts. The year 2023 should bring impressive results in terms of bookings and customer engagement. Our long-term outlook remains unchanged; we believe 7% is not the ideal margin for the business, as we are experiencing significant growth. This growth comes at a cost, primarily through organic expansion, which can be expensive. Nevertheless, we expect that in the coming years, the business will approach double-digit margins alongside very strong revenue. Therefore, the earnings potential over the next two years looks outstanding. We believe we have moved past the troublesome projects that negatively impacted margins through 2021. We may see some residual effects in the first quarter, as we did in the fourth quarter, but those projects will be completed soon. Currently, our project mix is favorable, and we are performing exceptionally well across our business. We are optimistic about maintaining this momentum, and we believe the second half of the year leading into 2023 will be exceptional.
Andrew Kaplowitz, Analyst
And Jose, could you provide us with more details? Please, go ahead.
Jose Mas, CEO
No, it's a siren, sorry.
Andrew Kaplowitz, Analyst
Got it. Jose, so maybe give us more color on the new RDOF setup that you have, how much is it costing you in Q1? And then all this extra fiber activity, I mean, you're bullish on fiber before, but this seems like a new level of activity. Does any of it have to do with sort of the infrastructure money coming in later this year and '23?
Jose Mas, CEO
Yes. What we're focusing on today is based on funding that has already been allocated, which was part of the original RDOF rounds. The reality is that the opportunities continue to grow. We are in discussions about several significant prospects that could greatly benefit our business, but we do not yet have those reflected in our forecasts. As a result, we have adjusted our full-year guidance to low to mid-11s, which is likely lower than we have previously indicated. This adjustment is due to our increased investments in the business, as we anticipate more growth than we expect to see in 2022. Starting new offices comes with high costs and limited initial revenue, leading to challenging early months. We experienced some of this in Q4 and anticipate it will continue into Q1, although we expect improvements in Q2 as those projects ramp up. We believe we are making the right long-term decisions for the business, despite the short-term costs, and we recognize the market's concerns regarding margins in both Communications and Clean Energy. However, we see a significant opportunity to invest in these areas meaningfully at this time and expect to achieve strong returns on that investment. We have primarily chosen to pursue this growth organically, which is more costly upfront but ultimately more valuable, and that is reflected in both segments.
Operator, Operator
And we'll take our next question from Justin Hauke with Robert Baird.
Justin Hauke, Analyst
Most of my questions have been addressed. However, I would like to clarify the guidance framework provided in late December, which indicated that EBITDA would be closer to $1 billion. I'm trying to understand the recent decline in Oil and Gas and Communications. Is this decline primarily due to your organic portfolio in Henkels & McCoy, or is it related to the inherent challenges associated with the Henkels & McCoy portfolio in those specific areas? I'm seeking insight into the factors behind this moderation.
Jose Mas, CEO
In Communications, there seems to be a greater impact despite the revenues being relatively small, particularly from a margin standpoint. The early challenges in that segment are mainly driven by volume issues, and Henkels is not contributing positively to that situation. Regarding Oil and Gas, I believe we're facing broader macro challenges. Looking ahead to 2022, we anticipate significant difficulties; it's almost unsettling to admit, but there is a substantial surge in demand and interest in gas projects that we haven't experienced in a long time. We're optimistic that many of these projects will materialize and are quite exciting. However, we realistically expect that the chances of meaningful progress in 2022 are quite low due to various market and supply chain issues. While this situation looks promising for 2023, 2022 will remain tough. As MVP progresses, there are limited opportunities to recover revenue given the current workload. This is having a more profound impact on us than we might have hoped, but these factors are reflected in the numbers we've presented today.
Justin Hauke, Analyst
And then maybe just asking one other question on MVP, to the extent you can answer it this way maybe, just because it is a discrete project and it's something you're calling out, maybe just how much revenue is embedded in your '22 outlook specific to that project so that we kind of have something to know. If that faces further delay, how sensitive is your guidance to it?
Jose Mas, CEO
Yes. It's a tough question to answer because we believe there are opportunities to offset some of that revenue in the latter part of the year, which we didn’t include in our guidance. We have about $500 million in anticipated MVP revenues that we would need to either work on or find alternatives for. The reality is that the revenues will never be zero because there is an active pipeline currently under construction that needs to be maintained. Therefore, there will always be a level of service we provide for that job. That's essentially what's included at this point.
Operator, Operator
And we'll take our final question from Adam Thalhimer with Thompson, Davis.
Adam Thalhimer, Analyst
Just one question. On 5G, Jose, you talked about AT&T. Can you round out the discussion and just kind of give us a little insight into Verizon, T-Mobile and DISH?
Jose Mas, CEO
Thanks, Adam. AT&T is set for growth in the second half of the year. I believe this was the first time T-Mobile made our top 10 customer list, and our collaboration with them in 2021 has been impressive. We anticipate a strong partnership going into 2022, which excites us about the long-term relationship. Similarly, we are seeing significant progress with Verizon, having secured more wireless work with them than ever before. They faced some spectrum challenges at the end of 2020 but are expected to be more active in the first half of 2022. DISH is just beginning its journey, and while they've acknowledged some ramp-up challenges, they have committed to several initiatives to reach their targets by June 2022 and beyond. Currently, we operate in 17 of their markets, which shows good market presence. Since DISH is building a new network and entering the market as a fresh wireless carrier, the potential for collaboration is substantial. Overall, our achievements with T-Mobile, the traction we are gaining with Verizon, the opportunities with DISH, and AT&T's resurgence suggest a promising second half of the year in that market for us.
Operator, Operator
And we'll go to our final question from Sean Eastman with KeyBanc Capital Markets.
Sean Eastman, Analyst
The Power Delivery guidance for 2022 actually looks like it was increased pretty meaningfully on both the top line and margins relative to what was framed back in December. So just curious what's moved there, what's going better in that segment?
Jose Mas, CEO
The acquisition we made early in 2021 of INTREN, along with our legacy business, has performed exceptionally well and secured numerous projects. We're optimistic about both aspects. Upon analyzing Henkel's performance, we believe their power delivery business is indeed the strongest part. Although some corporate costs previously affected their margins negatively, we've integrated those costs into our overall corporate expenses, which has raised our total corporate costs. However, examining it from a segment viewpoint, their margins are slightly better than we expected. We have not fully considered the growth potential they possess. We are confident in achieving the margin targets and, importantly, we anticipate that, as we seize new opportunities, we will significantly expand their business and gradually enhance their margins. Currently, their margins are lower than the rest of our business segments, which impacts our overall segment negatively. Yet, we believe that in the long run, they should positively contribute to the segment. There's significant potential to enhance value with their assets.
Sean Eastman, Analyst
Okay, I understand. That’s helpful. In light of your mention of the carbon pipeline opportunities potentially emerging this year, we are indeed monitoring several large pipelines in that area. However, I’ve observed that the diameter of these pipelines varies significantly. It appears that some sections have a relatively small diameter. Does this indicate that MasTec might only be focusing on certain parts of those pipelines, potentially facing more competition in some areas? How should we approach this?
Jose Mas, CEO
So there are two key points to consider. When we look at the pipeline business, there are many different areas to focus on. Historically, we have been primarily involved in gas pipelines, and I believe that sector will be quite strong in 2023. There are several projects expected to be awarded in the latter half of this year that are promising. Concerning newer technologies, such as carbon and hydrogen, this is an emerging market with different customers and a slightly altered approach, though it remains similar in many ways. This shift is likely to attract various competitors. From a national standpoint, we have a unique track record that sets us apart, regardless of pipe size or requirements, and I believe we can compete effectively in any job. Our goal is to engage in these opportunities as they arise without compromising quality, as we see significant potential in this area moving forward. The dynamics currently unfolding in the market are genuinely exciting.
Operator, Operator
That concludes today's question-and-answer session. I'll turn the call back to Jose Mas at this time for any additional or closing remarks.
Jose Mas, CEO
So again, I just want to thank everybody for their interest and their participation today. We look forward to updating everybody as to our progress throughout 2022 in the coming months. Thank you for joining.
Operator, Operator
This concludes today's call. Thank you for your participation. You may now disconnect.