MASTEC INC

Previous wording

We are a leading infrastructure construction company operating mainly throughout North America across a range of industries. Our primary activities include the engineering, building, installation, maintenance and upgrade of communications, energy, utility and other infrastructure, such as: wireless, wireline/fiber and customer fulfillment activities; power delivery infrastructure, including transmission, distribution, environmental planning and compliance; power generation infrastructure, primarily from clean energy and renewable sources; pipeline infrastructure, including for natural gas, water and carbon capture sequestration pipelines and pipeline integrity services; heavy civil and industrial infrastructure, including roads, bridges and rail; and environmental remediation services. Our customers are primarily in these industries. Including our predecessor companies, we have been in business for almost 95 years. For the twelve month period ended March 31, 2024, we had an average of approxi mately 34,000 employees and 840 locations, respectively, and as of March 31, 2024, we had approximately 32,000 employees and 820 locations, respectively. Weoffer our services under the MasTec®and other service marks and we are ranked among the top five contractors within Engineering News-Record’s Top 400 Contractors.

Current wording

We are a leading infrastructure construction company operating mainly throughout North America across a range of industries. Our primary activities include the engineering, building, installation, maintenance and upgrade of communications, energy, utility and other infrastructure, such as: wireless, wireline/fiber and customer fulfillment activities; power delivery infrastructure, including transmission, distribution, environmental planning and compliance; power generation infrastructure, primarily from clean energy and renewable sources; pipeline infrastructure, including for natural gas, water and carbon capture sequestration pipelines and pipeline integrity services; heavy civil and industrial infrastructure, including roads, bridges and rail; and environmental remediation services. Our customers are primarily in these industries. Including our predecessor companies, we have been in business for approximately 95 years. For the twelve month period ended June 30, 2024, we had an average of approxi mately 34,000 employees and 820 locations. Weoffer our services under the MasTec®and other service marks and we are ranked among the top five contractors within Engineering News-Record’s Top 400 Contractors.

Previous wording

Estimated backlog represents the amount of revenue we expect to realize over the next 18 months from future work on uncompleted construction contracts, including new contracts under which work has not begun, as well as revenue from change orders and renewal options. Our estimated backlog also includes amounts under master service and other service agreements and our proportionate share of estimated revenue from proportionately consolidated non-controlled contractual joint ventures. Estimated backlog for work under master service and other service agreements is determined based on historical trends, anticipated seasonal impacts, experience from similar projects and estimates of customer demand based on communications with our customers. Based on current expectations of our customers’ requirements, we anticipate that we will realize approximately 60% of our estimated March 31, 2024 backlog in 2024. The following table presents 18-month estimated backlog by reportable segment as of the dates indicated:

Current wording

Estimated backlog represents the amount of revenue we expect to realize over the next 18 months from future work on uncompleted construction contracts, including new contracts under which work has not begun, as well as revenue from change orders and renewal options. Our estimated backlog also includes amounts under master service and other service agreements and our proportionate share of estimated revenue from proportionately consolidated non-controlled contractual joint ventures. Estimated backlog for work under master service and other service agreements is determined based on historical trends, anticipated seasonal impacts, experience from similar projects and estimates of customer demand based on communications with our customers. Based on current expectations of our customers’ requirements, we anticipate that we will realize approximately 45% of our estimated June 30, 2024 backlog in 2024. The following table presents 18-month estimated backlog by reportable segment as of the dates indicated:

Previous wording

As of March 31, 2024, 55% of our backlog is estimated to be attributable to amounts under master service or other service agreements, pursuant to which our customers are not contractually committed to purchase a minimum amount of services. Most of these agreements can be canceled on short or no advance notice. Timing of revenue for construction and installation projects included in our backlog can be subject to change as a result of customer, regulatory or other delays or cancellations, including from factors relative to “General Economic, Market and Regulatory Conditions” mentioned above. These effects, among others, could cause estimated revenue to be realized in periods later than originally expected, or not at all. We occasionally experience postponements, cancellations and reductions in expected future work due to these effects and/or other factors. There can be no assurance as to our customers’ requirements or that actual results will be consistent with the estimates included in our forecasts. As a result, our backlog as of any particular date is an uncertain indicator of future revenue and earnings.

Current wording

As of June 30, 2024, 54% of our backlog is estimated to be attributable to amounts under master service or other service agreements, pursuant to which our customers are not contractually committed to purchase a minimum amount of services. Most of these agreements can be canceled on short or no advance notice. Timing of revenue for construction and installation projects included in our backlog can be subject to change as a result of customer, regulatory or other delays or cancellations, including from factors relative to “General Economic, Market and Regulatory Conditions” mentioned above. These effects, among others, could cause estimated revenue to be realized in periods later than originally expected, or not at all. We occasionally experience postponements, cancellations and reductions in expected future work due to these effects and/or other factors. There can be no assurance as to our customers’ requirements or that actual results will be consistent with the estimates included in our forecasts. As a result, our backlog as of any particular date is an uncertain indicator of future revenue and earnings.

Previous wording

Backlog is a common measurement used in our industry. Our methodology for determining backlog may not, however, be comparable to the methodologies used by others. Backlog differs from the amount of our remaining performance obligations, which are described in Note 1 - Business, Basis of Presentation and Significant Accounting Policies in the notes to the consolidated financial statements, which is incorporated by reference. As of March 31, 2024, total 18-month backlog differed from the amount of our remaining performance obligations due primarily to the inclusion of $6.9 billion of estimated future revenue under master service and other service agreements within our backlog estimates, as described above, and the exclusion of approximately $2.1 billion of remaining performance obligations and estimated future revenue under master service and other service agreements in excess of 18 months, which amount is not included in the backlog estimates above. Backlog expected to be realized in 2024 differs from the amount of remaining performance obligations expected to be recognized for the same period due primarily to the inclusion of approximately $2.7 billion of estimated future revenue under master service and other service agreements included within our backlog estimate, which is not included within our remaining performance obligations for the same period.

Current wording

Backlog is a common measurement used in our industry. Our methodology for determining backlog may not, however, be comparable to the methodologies used by others. Backlog differs from the amount of our remaining performance obligations, which are described in Note 1 – Business, Basis of Presentation and Significant Accounting Policies in the notes to the consolidated financial statements, which is incorporated by reference. As of June 30, 2024, total 18-month backlog differed from the amount of our remaining performance obligations due primarily to the inclusion of $7.2 billion of estimated future revenue under master service and other service agreements within our backlog estimates, as described above, and the exclusion of approximately $3.2 billion of remaining performance obligations and estimated future revenue under master service and other service agreements in excess of 18 months, which amount is not included in the backlog estimates above. Backlog expected to be realized in 2024 differs from the amount of remaining performance obligations expected to be recognized for the same period due primarily to the inclusion of approximately $1.8 billion of estimated future revenue under master service and other service agreements included within our backlog estimate, which is not included within our remaining performance obligations for the same period.

Previous wording

During the first quarter of 2024, management assessed the reporting unit structure of the Power Delivery operating segment. As a result of this assessment, the reporting units within the Power Delivery operating segment were restructured to more closely align with the segment’s end markets and to better correspond with the operational management reporting structure of the segment, including from the effects of our recent transformative acquisition efforts. Under the new reporting unit structure, each of the components within the Power Delivery operating segment is a reporting unit, whereas under its previous reporting unit structure, three of the operating segments’ components were combined into one reporting unit. In connection with this assessment, management performed a quantitative assessment of the goodwill associated with each of the five reporting units of the Power Delivery operating segment under its new reporting unit structure. For details of our first quarter 2024 quarterly review for indicators of impairment, refer to Note 3 - Acquisitions, Goodwill and Other Intangible Assets, Net, in the notes to the consolidated financial statements, which is incorporated by reference.

Current wording

In connection with the restructuring in the first quarter of 2024 of the reporting units in the Power Delivery segment, management performed a quantitative assessment of the goodwill associated with each of the five reporting units of the Power Delivery operating segment. For additional details of the restructuring and the related assessment, refer to Note 3 – Acquisitions, Goodwill and Other Intangible Assets, Net, in the notes to the consolidated financial statements, which is incorporated by reference.

Previous wording

Other than the update to the reporting unit structure of the Power Delivery operating segment as described above, there were no material changes in our critical accounting estimates or policies during the three month period ended March 31, 2024.

Current wording

There were no material changes in our critical accounting estimates or policies during the three month period ended June 30, 2024, and other than the update to the reporting unit structure of the Power Delivery operating segment as described above, there were no material changes during the six month period ended June 30, 2024.

Previous wording

(a)For the three month period ended March 31, 2023, Communications, Clean Energy and Infrastructure and Power Delivery EBITDA included$8.9 million, $5.2 million and $1.7 million, respectively, of acquisition and integration costs related to certain acquisitions, as described in “Non-U.S. GAAP Financial Measures” discussion below, and Corporate EBITDA included $1.3 million of such costs. These acquisition and integration activities were completed in the fourth quarter of 2023.

Current wording

(a) For thethree month period ended June 30, 2023, Communications, Clean Energy and Infrastructure and Power Delivery EBITDA included$4.6 million,$16.4 million and$0.3 million, respectively, of acquisition and integration costs related to certain acquisitions, and Corporate EBITDA included$1.4 million of such costs, and, for the six month period ended June 30, 2023,$13.5 million,$21.7 million,$1.9 million and$2.7 million, of such costs were included in EBITDA of the segments and Corporate, respectively. These acquisition and integration activities were completed in the fourth quarter of 2023.

Previous wording

Revenue. For the three month period ended March 31, 2024, consolidated revenue totaled $2,687 million as compared with $2,585 million for the same period in 2023, an increase of approximately $102 million, or 4%. Revenue in our Oil and Gas segment increased by approximately $377 million, or 147%, whereas revenue decreased in our Power Delivery segment by approximately $138 million, or 20%, in our Communications segment by approximately $74 million, or 9%, and in our Clean Energy and Infrastructure segment by approximately$71 million, or 9%. See below for details of revenue by segment.

Current wording

Revenue. For the three month period ended June 30, 2024, consolidated revenue totaled $2,961 million as compared with $2,874 million for the same period in 2023, an increase of approximately $87 million, or 3%. Revenue in our Oil and Gas segment increased by approximately $231 million, or 67%, whereas revenue decreased in our Power Delivery segment by approximately $66 million, or 9%, in our Communications segment by approximately $44 million, or 5%, and in our Clean Energy and Infrastructure segment by approximately$27 million, or 3%. See below for details of revenue by segment.

Previous wording

Clean Energy and Infrastructure Segment. Clean Energy and Infrastructure revenue was $754 million for the three month period ended March 31, 2024, as compared with $825 million for the same period in 2023, a decrease of $71 million, or 9%, due primarily to lower levels of renewable and certain industrial and other infrastructure project work, offset, in part, by higher levels of heavy civil project activity, due to various factors affecting timing of project work.

Current wording

Clean Energy and Infrastructure Segment. Clean Energy and Infrastructure revenue was $942 million for the three month period ended June 30, 2024, as compared with $970 million for the same period in 2023, a decrease of $27 million, or 3%, due primarily to lower levels of renewable and certain industrial and other infrastructure project work, offset, in part, by higher levels of heavy civil project activity, due to various factors affecting timing of project work.

Previous wording

Power Delivery Segment. Power Delivery revenue was $571 million for the three month period ended March 31, 2024, as compared with $709 million for the same period in 2023, a decrease of $138 million, or 20%. The decrease in revenue was primarily due to lower levels of project activity, including timing-related decreases in transmission and distribution-related project work, primarily due to regulatory effects, and emergency restoration services, offset, in part, by an increase in substation-related project activity.

Current wording

Power Delivery Segment. Power Delivery revenue was $637 million for the three month period ended June 30, 2024, as compared with $703 million for the same period in 2023, a decrease of $66 million, or 9%. The decrease in revenue was primarily due to lower levels of project activity, including timing-related decreases in transmission and distribution-related project work, primarily due to regulatory effects, offset, in part, by an increase in substation-related project activity.

Previous wording

Oil and Gas Segment. Oil and Gas revenue was $634 million for the three month period ended March 31, 2024, as compared with $257 million for the same period in 2023, an increase of approximately $377 million, or 147%, due primarily to higher levels of project activity, including project timing-related increases in large-diameter and midstream project activity due to improved market and regulatory conditions, partially offset by a reduction in pipeline integrity services.

Current wording

Oil and Gas Segment. Oil and Gas revenue was $572 million for the three month period ended June 30, 2024, as compared with $342 million for the same period in 2023, an increase of $231 million, or 67%, due primarily to higher levels of project activity, including from increased demand and project timing-related increases in large-diameter and midstream project activity due to improved market and regulatory conditions, partially offset by a reduction in pipeline integrity services.

Previous wording

Costs of revenue, excluding depreciation and amortization. Costs of revenue, excluding depreciation and amortization, increased by approximately $20 million, or 1% to $2,380 million for the three month period ended March 31, 2024 from $2,359 million for the same period in 2023. Higher levels of revenue contributed an increase of $93 million in costs of revenue, excluding depreciation and amortization, whereas improved productivity resulted in a decrease of approximately $73 million. Costs of revenue, excluding depreciation and amortization, as a percentage of revenue decreased by approximately 270 basis points to 88.6% of revenue for the three month period ended March 31, 2024 from 91.3% of revenue for the same period in 2023. The basis point decrease was due to a combination of improved project efficiencies and project mix, primarily within our Oil and Gas and Clean Energy and Infrastructure segments, the positive effects of certain project close-outs, and a $3 million decrease in certain acquisition and integration costs, offset, in part, by reduced productivity from the effects of certain overhead costs incurred to maintain operating capacity in support of expected future project work. See “Analysis of EBITDA by Segment” below for discussion of operating capacity effects by segment.

Current wording

Costs of revenue, excluding depreciation and amortization. Costs of revenue, excluding depreciation and amortization, increased by approximately $56 million, or 2%, to $2,540 million for the three month period ended June 30, 2024 from $2,485 million for the same period in 2023. Higher levels of revenue contributed an increase of $75 million in costs of revenue, excluding depreciation and amortization, whereas improved productivity resulted in a decrease of approximately $20 million. Costs of revenue, excluding depreciation and amortization, as a percentage of revenue decreased by approximately 70 basis points to 85.8% of revenue for the three month period ended June 30, 2024 from 86.5% of revenue for the same period in 2023. The basis point decrease was due to a combination of improved project efficiencies and project mix, primarily within our Oil and Gas and Clean Energy and Infrastructure segments, and the positive effects of certain project close-outs, offset, in part, by reduced productivity from the effects of certain overhead costs incurred to maintain operating capacity in support of expected future project work. See “Analysis of EBITDA by Segment” below for discussion of operating capacity effects by segment.

Previous wording

Depreciation. Depreciation was $107 million, or 4.0% of revenue, for the three month period ended March 31, 2024, as compared with $107 million, or 4.1% of revenue, for the same period in 2023. As a percentage of revenue, depreciation decreased by approximately 20 basis points, due primarily to higher levels of revenue.

Current wording

Depreciation. Depreciation was $102 million, or 3.4% of revenue, for the three month period ended June 30, 2024, as compared with $103 million, or 3.6% of revenue, for the same period in 2023. As a percentage of revenue, depreciation decreased by approximately 10 basis points, due primarily to higher levels of revenue.

Previous wording

Amortization of intangible assets. Amortization of intangible assets was $34 million, or 1.3% of revenue, for the three month period ended March 31, 2024, as compared with $42 million, or 1.6% of revenue, for the same period in 2023, a decrease of approximately $8 million, or 20%, due to a combination of the effects of timing of amortization for certain assets and the completion of amortization for certain intangible assets associated with prior year acquisitions. As a percentage of revenue, amortization of intangible assets decreased by approximately 40 basis points as compared with the same period in 2023 due, in part, to higher levels of revenue.

Current wording

Amortization of intangible assets. Amortization of intangible assets was $34 million, or 1.1% of revenue, for the three month period ended June 30, 2024, as compared with $42 million, or 1.5% of revenue, for the same period in 2023, a decrease of approximately $8 million, or 20%, due to a combination of the effects of timing of amortization for certain assets and the completion of amortization for certain intangible assets associated with prior year acquisitions. As a percentage of revenue, amortization of intangible assets decreased by approximately 30 basis points as compared with the same period in 2023.

Previous wording

Interest expense, net. Interest expense, net of interest income, was approximately $52 million, or 1.9% of revenue, for the three month period ended March 31, 2024, as compared with approximately $53 million, or 2.0% of revenue, for the same period in 2023, a decrease of approximately $1 million, or 1%. The decrease in interest expense, net, was due to a reduction in interest expense from credit facility activity, term loans and finance leases, as well as an increase in interest income, totaling approximately $2 million in the aggregate. These effects were offset, in part, by an increase in interest expense from accounts receivable financing arrangements. See Note 5 - Accounts Receivable, Net of Allowance, and Contract Assets and Liabilities, which is incorporated by reference, for details of our financing arrangements.

Current wording

Interest expense, net. Interest expense, net of interest income, was approximately $51 million, or 1.7% of revenue, for the three month period ended June 30, 2024, as compared with approximately $59 million, or 2.1% of revenue, for the same period in 2023, a decrease of approximately $9 million, or 15%. The decrease in interest expense, net, was primarily due to a reduction in our variable rate debt outstanding under our credit facility and term loans, offset, in part, by an increase in interest expense from our 5.900% Senior Notes and accounts receivable financing arrangements.

Previous wording

Equity in earnings of unconsolidated affiliates, net. Equity in earnings or losses of unconsolidated affiliates includes our share of income or losses from equity investees. For both the three month periods ended March 31, 2024 and 2023, equity in earnings from unconsolidated affiliates, net, totaled approximately $9 million, and related primarily to our investments in the Waha JVs, and, to a lesser extent, our investments in certain other entities.

Current wording

Equity in earnings of unconsolidated affiliates, net. Equity in earnings or losses of unconsolidated affiliates includes our share of income or losses from equity method investments. For the three month periods ended June 30, 2024 and 2023, equity in earnings from unconsolidated affiliates, net, totaled approximately $6 million and $7 million, respectively, and related primarily to our investments in the Waha JVs.

Previous wording

Benefit from income taxes. Income tax benefit was $11 million for the three month period ended March 31, 2024, as compared with $45 million for the same period in 2023. Pre-tax losses totaled $46 million for the three month period ended March 31, 2024, as compared with $125 million for the same period in 2023. For the three month period ended March 31, 2024, our effective tax rate was 24.3% as compared with 35.7% for the same period in 2023. Our effective tax rate in the first quarter of 2024 included the effect of an increase in non-deductible expenses as compared with the same period in 2023, whereas in the first quarter of 2023, our effective tax rate included a net tax benefit of approximately $9 million from share-based payment awards and an increase in non-deductible expenses as compared with the same period in the prior year.

Current wording

Provision for income taxes. Income tax expense was $19 million for the three month period ended June 30, 2024, as compared with $3 million for the same period in 2023. Pre-tax income totaled $63 million for the three month period ended June 30, 2024, as compared with $20 million for the same period in 2023. For the three month period ended June 30, 2024, our effective tax rate was 30.7% as compared with 14.9% for the same period in 2023. Our effective tax rate in the second quarter of 2024 included the effect of an increase in non-deductible expenses whereas the same period in 2023 included the benefit from certain prior period tax return adjustments.

Previous wording

Clean Energy and Infrastructure Segment. EBITDA for our Clean Energy and Infrastructure segment was $20 million, or 2.7% of revenue, for the three month period ended March 31, 2024, as compared with $5 million, or 0.6% of revenue for the same period in 2023, an increase in EBITDA of approximately $15 million, or 287%. As a percentage of revenue, EBITDA increased by approximately 210 basis points, or $16 million, due to a combination of improved productivity and a reduction of approximately $5 million in certain acquisition and integration costs, offset, in part, by the effects of certain overhead costs incurred to maintain operating capacity in support of expected future project work.

Current wording

Clean Energy and Infrastructure Segment. EBITDA for our Clean Energy and Infrastructure segment was $47 million, or 5.0% of revenue, for the three month period ended June 30, 2024, as compared with $33 million, or 3.4% of revenue for the same period in 2023, an increase in EBITDA of approximately $14 million, or 43%. As a percentage of revenue, EBITDA increased by approximately 160 basis points, or $15 million, due to a combination of improved productivity and a reduction of approximately $16 million in certain acquisition and integration costs, offset, in part, by the effects of certain overhead costs incurred to maintain operating capacity in support of expected future project work. Lower levels of revenue resulted in a decrease in EBITDA of approximately $1 million.

Previous wording

Oil and Gas Segment. EBITDA for our Oil and Gas segment was $93 million, or 14.6% of revenue for the three month period ended March 31, 2024, as compared with $15 million, or 5.7% of revenue for the same period in 2023, an increase in EBITDA of $78 million, or 539%. As a percentage of revenue, EBITDA margins increased by approximately 900 basis points, or approximately $57 million, due primarily to improved productivity, including as a result of improved operating leverage from higher levels of revenue and project efficiencies, as well as the effects of project mix. Higher levels of revenue contributed an increase in EBITDA of $21 million.

Current wording

Oil and Gas Segment. EBITDA for our Oil and Gas segment was $135 million, or 23.6% of revenue for the three month period ended June 30, 2024, as compared with $77 million, or 22.5% of revenue for the same period in 2023, an increase in EBITDA of $58 million, or 75%. As a percentage of revenue, EBITDA increased by approximately 110 basis points, or $6 million, due primarily to improved productivity, including as a result of improved operating leverage from higher levels of revenue and project efficiencies, as well as the effects of project mix. Higher levels of revenue contributed an increase in EBITDA of approximately $52 million.

Previous wording

Other Segment. EBITDA from Other businesses totaled approximately $7 million for both the three month periods ended March 31, 2024 and 2023. EBITDA from Other businesses relates primarily to equity in earnings from our investments in the Waha JVs, offset, in part, by losses from certain other businesses and investments.

Current wording

Other Segment. EBITDA from Other businesses totaled approximately $3 million and $7 million for the three month periods ended June 30, 2024 and 2023, respectively. EBITDA from Other businesses relates primarily to equity in earnings from our investments in the Waha JVs, offset, in part, by losses from other businesses and investments.

Previous wording

Communications Segment. Communications revenue was $733 million for the three month period ended March 31, 2024 as compared with $807 million for the same period in 2023, a decrease of $74 million, or 9%. The decrease in revenue was driven primarily by lower levels of wireless, wireline and install-to-the-home project activity due, in part, to customer project timing in our wireless and wireline businesses and, for our install-to-the-home activities, changes in consumer behavior resulting in lower demand. These decreases were offset, in part, by an increase in utility project work.

Current wording

Communications Segment. Communications revenue was $1,558 million for the six month period ended June 30, 2024, as compared with $1,675 million for the same period in 2023, a decrease of $118 million, or 7%. The decrease in revenue was driven primarily by lower levels of wireless, wireline and install-to-the-home project activity due, in part, to customer project timing in our wireless and wireline businesses and, for our install-to-the-home activities, changes in consumer behavior resulting in lower demand. These decreases were offset, in part, by an increase in utility project work.

Previous wording

General and administrative expenses. General and administrative expenses totaled $166 million, or 6.2% of revenue, for the three month period ended March 31, 2024, as compared with $164 million, or 6.3% of revenue, for the same period in 2023, an increase of $2 million, or 1%. The increase in general and administrative expenses includes the effects of an increase in the provision for credit losses and other administrative costs, which increases were largely offset by reductions in compensation and information technology expenses, the effects of timing of ordinary course legal and other settlement matters and a $15 million reduction in acquisition and integration costs. Overall, general and administrative expenses decreased by approximately 20 basis points as a percentage of revenue for the three month period ended March 31, 2024 as compared with the same period in 2023 due primarily to higher levels of revenue.

Current wording

General and administrative expenses. General and administrative expenses totaled $333 million, or 5.9% of revenue, for the six month period ended June 30, 2024, as compared with $340 million, or 6.2% of revenue, for the same period in 2023, a decrease of approximately $7 million, or 2%. The decrease in general and administrative expenses was primarily due to a $35 million reduction in acquisition and integration costs, an increase in gains on sales of assets, net, and a decrease in various administrative costs, including information technology expenses, offset, in part, by an increase in the provision for credit losses, increases in compensation and the effects of timing of ordinary course legal and other settlement matters. Overall, general and administrative expenses decreased by approximately 30 basis points as a percentage of revenue for the six month period ended June 30, 2024 as compared with the same period in 2023.

Previous wording

Other expense (income), net. Other expense, net, was $3 million for the three month period ended March 31, 2024, as compared with $6 million of other income, net for the same period in 2023. For the three month period ended March 31, 2024, other expense, net, included approximately $6 million of income, net, from changes to estimated Earn-out accruals, approximately $9 million of asset impairment and other valuation adjustments related to certain fixed assets and notes receivable, approximately $1 million of other miscellaneous income, net and approximately $2 million of expense from changes in the fair value of additional contingent payments to the former owners of an acquired business. For the three month period ended March 31, 2023, other income, net, included approximately $3 million of income from the final settlement and expiration of certain warrants related to the acquisition of IEA and approximately $6 million of other miscellaneous income, net, including from insurance and other settlements, offset, in part, by $2 million of expense from changes in the fair value of additional contingent payments to the former owners of an acquired business.

Current wording

Other expense (income), net. Other expense, net, was $2 million for the six month period ended June 30, 2024, as compared with $10 million of other income, net, for the same period in 2023. For the six month period ended June 30, 2024, other expense, net, included approximately $2 million of income, net, from changes to estimated Earn-out accruals, approximately$10 million of asset impairment and other valuation adjustments related to certain fixed assets and approximately $6 million of other miscellaneous income, net, including from legal and other settlements. For the six month period ended June 30, 2023, other income, net, included approximately $2 million of income, net, from changes to estimated Earn-out accruals, approximately $3 million of income from the final settlement and expiration of certain warrants related to the acquisition of IEA and approximately $5 million of other miscellaneous income, including from legal and other settlements.

Previous wording

Communications Segment. EBITDA for our Communications segment was $49 million, or 6.7% of revenue, for the three month period ended March 31, 2024, as compared with $53 million, or 6.5% of revenue, for the same period in 2023, a decrease in EBITDA of approximately $4 million, or 8%. As a percentage of revenue, EBITDA increased by approximately 10 basis points, or $1 million, due to improved efficiencies, including from a reduction of approximately $9 million in certain acquisition and integration costs and the positive effects of certain project close-outs, offset, in part, by reduced operating leverage from lower levels of revenue. Lower levels of revenue resulted in a decrease in EBITDA of approximately $5 million.

Current wording

Communications Segment. EBITDA for our Communications segment was $131 million, or 8.4% of revenue, for the six month period ended June 30, 2024, as compared with $142 million, or 8.5% of revenue, for the same period in 2023, a decrease in EBITDA of approximately $12 million, or 8%. As a percentage of revenue, EBITDA decreased by approximately 10 basis points, or $2 million, due to reduced efficiencies and operating leverage from lower levels of revenue, offset, in part, by a reduction of approximately $13 million in certain acquisition and integration costs and the positive effects of certain project close-outs. Lower levels of revenue resulted in a decrease in EBITDA of approximately $10 million.

Previous wording

Power Delivery Segment. EBITDA for our Power Delivery segment was approximately $27 million, or 4.8% of revenue, for the three month period ended March 31, 2024, as compared with EBITDA of $47 million, or 6.7% of revenue for the same period in 2023, a decrease in EBITDA of approximately $20 million, or 42%. As a percentage of revenue, EBITDA decreased by approximately 190 basis points, or $11 million, due to a combination of reduced project efficiencies, including from the effects of certain overhead costs incurred to maintain operating capacity in support of expected future project work, project mix and a reduction in emergency restoration services, offset, in part, by a reduction of approximately $2 million in certain acquisition and integration costs. Lower levels of revenue resulted in a decrease in EBITDA of approximately $9 million.

Current wording

Power Delivery Segment. EBITDA for our Power Delivery segment was $79 million, or 6.5% of revenue, for the six month period ended June 30, 2024, as compared with EBITDA of $105 million, or 7.4% of revenue, for the same period in 2023, a decrease in EBITDA of approximately $26 million, or 25%. As a percentage of revenue, EBITDA decreased by approximately 90 basis points, or $11 million, due to a combination of reduced project efficiencies, including from the effects of certain overhead costs incurred to maintain operating capacity in support of expected future project work, project mix and a reduction in emergency restoration services, offset, in part, by a reduction of approximately $2 million in certain acquisition and integration costs. Lower levels of revenue resulted in a decrease in EBITDA of approximately $15 million.

Previous wording

Corporate. Corporate EBITDA was negative $49 million for the three month period ended March 31, 2024, as compared with EBITDA of negative $51 million for the same period in 2023, for an increase in EBITDA of approximately $2 million. For the three month period ended March 31, 2024, Corporate EBITDA included approximately $6 million of income, net, from changes to estimated Earn-out accruals, $2 million of expense from changes in the fair value of additional contingent payments to the former owners of an acquired business and the negative effect of a $2 million other valuation adjustment. For the three month period ended March 31, 2023, Corporate EBITDA included approximately $2 million of expense from changes in the fair value of additional contingent payments to the former owners of an acquired business, $3 million of income from the final settlement and expiration of certain warrants related to the acquisition of IEA and $1 million of acquisition and integration costs. Corporate expenses for the three month period ended March 31, 2024 not related to the above-described items, which were generally flat as compared with the same period in 2023, included the positive effects of timing of ordinary course legal and other settlement matters, offset, in part, by an increase in information technology and other administrative expenses, as well as a reduction in other miscellaneous income, net.

Current wording

Corporate. Corporate EBITDA was negative $118 million for the six month period ended June 30, 2024, as compared with EBITDA of negative $90 million for the same period in 2023, for a decrease in EBITDA of approximately $28 million. For the six month period ended June 30, 2024, Corporate EBITDA included approximately $11 million of a loss on debt extinguishment and $2 million of income, net, from changes to estimated Earn-out accruals. For thesix month period ended June 30, 2023, Corporate EBITDA included approximately $2 million of income, net, from changes to estimated Earn-out accruals and$3 million of income from the final settlement and expiration of certain warrants related to the acquisition of IEA. Corporate expenses for the six month period ended June 30, 2024 not related to the above-described items increased by approximately $14 million as compared with the same period in 2023, due primarily to increases in information technology and other administrative expenses as well as the effects of timing of ordinary course legal and other settlement matters.

Previous wording

(“Adjusted Net Income”) and adjusted diluted earnings per share (“Adjusted Diluted Earnings Per Share”). These “adjusted” non-U.S. GAAP measures exclude, as applicable to the respective periods, non-cash stock-based compensation expense; acquisition and integration costs related to certain acquisition activity; and fair value gains or losses, net, on an investment; and, for Adjusted Net Income and Adjusted Diluted Earnings Per Share, amortization of intangible assets and the tax effects of the adjusted items. These definitions of EBITDA and Adjusted EBITDA are not the same as in our Credit Facility or in the indenture governing our senior notes; therefore, EBITDA and Adjusted EBITDA as presented in this discussion should not be used for purposes of determining our compliance with the covenants contained in our debt instruments.

Current wording

As appropriate, we supplement our reported U.S. GAAP financial information with certain non-U.S. GAAP financial measures, including earnings before interest, income taxes, depreciation and amortization (“EBITDA”), adjusted EBITDA (“Adjusted EBITDA”), adjusted net income (“Adjusted Net Income”) and adjusted diluted earnings per share (“Adjusted Diluted Earnings Per Share”). These “adjusted” non-U.S. GAAP measures exclude, as applicable to the respective periods, non-cash stock-based compensation expense; the loss on debt extinguishment; acquisition and integration costs related to certain acquisition activity; and fair value gains or losses, net, on an investment; and, for Adjusted Net Income and Adjusted Diluted Earnings Per Share, amortization of intangible assets and the tax effects of the adjusted items. These definitions of EBITDA and Adjusted EBITDA are not the same as in our Credit Facility or in the indenture governing our senior notes; therefore, EBITDA and Adjusted EBITDA as presented in this discussion should not be used for purposes of determining our compliance with the covenants contained in our debt instruments.

Previous wording

We use EBITDA and Adjusted EBITDA, as well as Adjusted Net Income and Adjusted Diluted Earnings Per Share, to evaluate our performance, both internally and as compared with our peers, because these measures exclude certain items that may not be indicative of our core, or underlying, operating results, as well as items that can vary widely across different industries or among companies within the same industry. We believe that these adjusted measures provide a baseline for analyzing trends in our underlying business. We also use these adjusted measures to allocate resources. Non-cash stock-based compensation expense can be subject to volatility from changes in the market price per share of our common stock or variations in the value and number of shares granted, and amortization of intangible assets is subject to acquisition activity, which varies from period to period. In 2021, we initiated a significant transformation of our end-market business operations to focus on the nation’s transition to low-carbon energy sources and position the Company for expected future opportunities. This transformation included significant acquisition activity to expand our scale and capacity in renewable energy, power delivery, heavy civil and telecommunications services, and resulted in significant acquisition and integration costs. Due to the extent of the acquisition costs related to this acquisition activity and the extent of the efforts that were required to integrate these acquisitions, we have excluded acquisition and integration costs related to this acquisition activity in our computation of Adjusted EBITDA and Adjusted Net Income. These acquisition and integration activities were completed in the fourth quarter of 2023.

Current wording

We use EBITDA and Adjusted EBITDA, as well as Adjusted Net Income and Adjusted Diluted Earnings Per Share, to evaluate our performance, both internally and as compared with our peers, because these measures exclude certain items that may not be indicative of our core, or underlying, operating results, as well as items that can vary widely across different industries or among companies within the same industry. We believe that these adjusted measures provide a baseline for analyzing trends in our underlying business. We also use these adjusted measures to allocate resources. Non-cash stock-based compensation expense can be subject to volatility from changes in the market price per share of our common stock or variations in the value and number of shares granted, and amortization of intangible assets is subject to acquisition activity, which varies from period to period. In 2021, we initiated a significant transformation of our end-market business operations to focus on the nation’s transition to low-carbon energy sources and position the Company for expected future opportunities. This transformation included significant acquisition activity to expand our scale and capacity in renewable energy, power delivery, heavy civil and telecommunications services, and resulted in significant acquisition and integration costs. Due to the extent of the acquisition costs related to this acquisition activity and the extent of the efforts that were required to integrate these acquisitions, we have excluded acquisition and integration costs related to this acquisition activity in our computation of Adjusted EBITDA, Adjusted Net Income and Adjusted Diluted Earnings Per Share. These acquisition and integration activities were completed in the fourth quarter of 2023.

Previous wording

We exclude intangible asset amortization from our adjusted measures due to its non-operational nature and inherent volatility, as acquisition activity varies from period to period. We believe that this presentation is common practice within our industry and improves comparability of our results with those of our peers. Note that while intangible asset amortization related to the assets of acquired entities is excluded from our non-U.S. GAAP financial measures, our non-U.S. GAAP financial measures include the revenue and all other expenses of the acquired entities, unless otherwise stated.

Current wording

We exclude intangible asset amortization from our non-U.S. GAAP financial measures due to its non-operational nature and inherent volatility, as acquisition activity varies from period to period. We believe that this presentation is common practice within our industry and improves comparability of our results with those of our peers. Note that while intangible asset amortization related to the assets of acquired entities is excluded from our non-U.S. GAAP financial measures, the revenue and all other expenses of the acquired entities are included within our non-U.S. GAAP financial measures, unless otherwise stated.

Previous wording

(a) Non-cash stock-based compensation expense and losses on the fair value of an investment are included within Corporate EBITDA.

Current wording

(a) Non-cash stock-based compensation expense, loss on extinguishment of debt and losses on the fair value of an investment are included within Corporate EBITDA.

Previous wording

(b)For the three month period ended March 31, 2023, Communications, Clean Energy and Infrastructure and Power Delivery EBITDA included$8.9 million, $5.2 million and $1.7 million, respectively, of acquisition and integration costs related to certain acquisitions, as described above, and Corporate EBITDA included $1.3 million of such costs. These acquisition and integration activities were completed in the fourth quarter of 2023.

Current wording

(b)For the three month period ended June 30, 2023, Communications, Clean Energy and Infrastructure and Power Delivery EBITDA included $4.6 million, $16.4 million and $0.3 million, respectively, of acquisition and integration costs related to certain acquisitions, as described above, and Corporate EBITDA included $1.4 million of such costs, and for thesix month period ended June 30, 2023, $13.5 million, $21.7 million, $1.9 million and $2.7 million of such costs were included in EBITDA of the segments and Corporate, respectively.

Previous wording

(a) Represents the tax effects of the adjusted items that are subject to tax, including the tax effects of non-cash stock-based compensation expense, including from share-based payment awards. Tax effects are determined based on the tax treatment of the related item, the incremental statutory tax rate of the jurisdictions pertaining to the adjustment, and their effects on pre-tax income. For the three month periods ended March 31, 2024 and 2023, our consolidated tax amounts were benefits, with effective tax rates, as reported, of 24.3% and 35.7%, respectively. As adjusted, for the three month periods ended March 31, 2024 and 2023, our consolidated tax amounts were an expense and a benefit, with effective tax rates of 52.4% and 27.0%, respectively.

Current wording

(a) Represents the tax effects of the adjusted items that are subject to tax, including the tax effects of non-cash stock-based compensation expense, including from share-based payment awards. Tax effects are determined based on the tax treatment of the related item, the incremental statutory tax rate of the jurisdictions pertaining to the adjustment, and their effects on pre-tax income. For the three and six month periods ended June 30, 2024, our consolidated tax amounts were expenses, with effective tax rates, as reported, of 30.7% and 47.0%, respectively, and as adjusted, were expenses with effective tax rates of 25.6% and 27.1%. respectively. For the three and six month periods ended June 30, 2023, our consolidated effective tax amounts were an expense and a benefit, with effective tax rates, as reported, of 14.9% and 39.6%, respectively, and as adjusted, were expenses with effective tax rates of 23.9% and 18.9%. respectively.

Previous wording

Our primary sources of liquidity are cash flows from operations, availability under our Credit Facility and our cash balances. Our primary liquidity needs are for working capital, capital expenditures, insurance and performance collateral in the form of cash and letters of credit, debt service, income taxes, earn-out obligations and equity and other investment funding requirements. We also evaluate opportunities for strategic acquisitions, investments and other arrangements from time to time, and we may consider opportunities to refinance, extend the terms of our existing indebtedness, retire outstanding debt, borrow additional funds, which may include borrowings under our Credit Facility or debt issuances, or repurchase additional shares of our outstanding common stock under share repurchase authorizations, any of which may require our use of cash.

Current wording

Our primary sources of liquidity are cash flows from operations, availability under our Credit Facility and our cash balances. Our primary liquidity needs are for working capital, capital expenditures, insurance and performance collateral in the form of cash and letters of credit, debt service, income taxes, earn-out obligations and equity and other investment funding requirements. We also evaluate opportunities for strategic acquisitions, investments and other arrangements from time to time, and we may consider opportunities to refinance, extend the terms of our existing indebtedness, retire outstanding debt, borrow additional funds, which may include borrowings under our Credit Facility or debt issuances, or repurchase additional shares of our outstanding common stock under share repurchase authorizations, any of which may require our use of cash. See Note 6 – Debt in the notes to the consolidated financial statements in this Form 10-Q, which is incorporated by reference, for details of our $550 million offering of 5.900% Senior Notes and the repayments of our 6.625% Senior Notes and Three-Year Term Loan during the second quarter of 2024.

Previous wording

Capital Expenditures. For the three month period ended March 31, 2024, we spent approximately $25 million on capital expenditures, or $15 million, net of asset disposals, and incurred approximately $21 million of equipment purchases under finance leases and other financing arrangements. We estimate that we will spend approximately $175 million on capital expenditures, or approximately $125 million, net of asset disposals, in 2024, and we expect to incur approximately $150 million of equipment purchases under finance leases and other financing arrangements. Actual capital expenditures may increase or decrease in the future depending upon business activity levels, as well as ongoing assessments of equipment lease and other financing arrangements versus purchase decisions based on management’s evaluation of short and long-term equipment requirements.

Current wording

Capital Expenditures. For the six month period ended June 30, 2024, we spent approximately $57 million on capital expenditures, or $26 million, net of asset disposals, and incurred approximately $53 million of equipment purchases under finance leases and other financing arrangements. We estimate that we will spend approximately $175 million on capital expenditures, or approximately $125 million, net of asset disposals, in 2024, and we expect to incur approximately $150 million of equipment purchases under finance leases and other financing arrangements. Actual capital expenditures may increase or decrease in the future depending upon business activity levels, as well as ongoing assessments of equipment lease and other financing arrangements versus purchase decisions based on management’s evaluation of short and long-term equipment requirements.

Previous wording

Acquisitions and Earn-Out Liabilities. We typically utilize cash for business acquisitions and other strategic arrangements. In addition, in most of our acquisitions, we have agreed to make future payments to the sellers that are contingent upon the future earnings performance of the acquired businesses, which we also refer to as “Earn-out” payments. Additionally, from time to time, our acquisitions may contain certain additional payments based upon specified conditions. Earn-out payments may be paid in cash or, under specific circumstances, MasTec common stock, or a combination thereof, generally at our option. The estimated total value of future Earn-out liabilities as of March 31, 2024 was approximately $71 million. Of this amount, approximately $23 million represents the liability for earned amounts. The remainder is management’s estimate of Earn-out liabilities that are contingent upon future performance. For the three month period ended March 31, 2024, we made no payments related to our Earn-out liabilities, and for the three month period ended March 31, 2023, payments totaled $2 million. See Note 3 - Acquisitions, Goodwill and Other Intangible Assets, Net in the notes to the consolidated financial statements in this Form 10-Q, which is incorporated by reference, for additional information pertaining to certain Additional Payments related to the acquisition of HMG, under which certain cash and share amounts will be paid upon HMG’s collection of specified receivables.

Current wording

Acquisitions and Earn-Out Liabilities. We typically utilize cash for business acquisitions and other strategic arrangements. In addition, in most of our acquisitions, we have agreed to make future payments to the sellers that are contingent upon the future earnings performance of the acquired businesses, which we also refer to as “Earn-out” payments. Additionally, from time to time, our acquisitions may contain certain additional payments based upon specified conditions. Earn-out payments may be paid in cash or, under specific circumstances, MasTec common stock, or a combination thereof, generally at our option. The estimated total value of future Earn-out liabilities as of June 30, 2024 was approximately $71 million. Of this amount, approximately $24 million represents the liability for earned amounts. The remainder is management’s estimate of Earn-out liabilities that are contingent upon future performance. For the six month periods ended June 30, 2024 and 2023, we made $5 million and $26 million, respectively, of payments related to our Earn-out liabilities.

Previous wording

Income Taxes. For the three month periods ended March 31, 2024 and 2023, tax refunds, net of tax payments totaled approximately $4 million and $1 million, respectively. Our tax payments vary with changes in taxable income and earnings based on estimates of full year taxable income activity and estimated tax rates.

Current wording

Income Taxes. For the six month periods ended June 30, 2024 and 2023, tax payments, net of tax refunds totaled approximately $45 million and $14 million, respectively. Our tax payments vary with changes in taxable income and earnings based on estimates of full year taxable income activity and estimated tax rates.

Previous wording

Working capital requirements also tend to increase when we commence multiple projects or particularly large projects because labor, including subcontractor costs, and certain other costs, including inventory and materials requirements, typically become payable before the receivables resulting from work performed are collected. The timing of billings and project close-outs can also contribute to changes in billed and unbilled revenue. As of March 31, 2024, we expect that substantially all of our unbilled receivables will be billed to customers in the normal course of business within the next twelve months. Total accounts receivable, which consists of contract billings, unbilled receivables and retainage, net of allowance, totaled approximately $2.9 billion as of March 31, 2024 as compared with $3.1 billion as of December 31, 2023, due primarily to a reduction in quarterly revenue, offset, in part, by an increase in DSO. See below for discussion of our days sales outstanding, net of contract liabilities, which we refer to as days sales outstanding, or “DSO.”

Current wording

Working capital requirements also tend to increase when we commence multiple projects or particularly large projects because labor, including subcontractor costs, and certain other costs, including inventory and materials requirements, typically become payable before the receivables resulting from work performed are collected. The timing of billings and project close-outs can also contribute to changes in billed and unbilled revenue. As of June 30, 2024, we expect that substantially all of our unbilled receivables will be billed to customers in the normal course of business within the next twelve months. Total accounts receivable, which consists of contract billings, unbilled receivables and retainage, net of allowance, totaled approximately $2.9 billion as of June 30, 2024 as compared with $3.1 billion as of December 31, 2023, due primarily to a decrease in quarterly revenue.

Previous wording

Our payment billing terms are generally net 30 days, and some of our contracts allow our customers to retain a portion of the contract amount (generally, from 5% to 10% of billings) until the job is completed, which amounts are referred to as “retainage.” As part of our ongoing working capital management practices, we evaluate opportunities to improve our working capital cycle time through contractual provisions and certain financing arrangements. For certain customers, we maintain inventory to meet the materials requirements of the contracts. Occasionally, certain of our customers pay us in advance for a portion of the materials we purchase for their projects or allow us to pre-bill them for materials purchases up to specified amounts. Vendor terms are generally 30 days. Our agreements with subcontractors often contain a “pay-if-paid” provision, whereby our payments are contractually due to subcontractors only after we are paid by our customers.

Current wording

Our payment billing terms are generally net 30 days, and some of our contracts allow our customers to retain a portion of the contract amount until the job is completed, which amounts are referred to as “retainage.” As part of our ongoing working capital management practices, we evaluate opportunities to improve our working capital cycle time through contractual provisions and certain financing arrangements. For certain customers, we maintain inventory to meet the materials requirements of the contracts. Occasionally, certain of our customers pay us in advance for a portion of the materials we purchase for their projects or allow us to pre-bill them for materials purchases up to specified amounts. Vendor terms are generally 30 days. Our agreements with subcontractors often contain a “pay-if-paid” provision, whereby our payments are contractually due to subcontractors only after we are paid by our customers.

Previous wording

As of March 31, 2024, we had approximately $812 million in working capital, defined as current assets less current liabilities, as compared with $1,137 million as of December 31, 2023, a decrease of approximately $325 million. Cash and cash equivalents totaled approximately $249 million and $530 million as of March 31, 2024 and December 31, 2023, respectively, for a decrease of $280 million. See discussion below for further detail regarding our cash flows and related activity.

Current wording

As of June 30, 2024, we had approximately $729 million in working capital, defined as current assets less current liabilities, as compared with $1,137 million as of December 31, 2023, a decrease of approximately $408 million. Cash and cash equivalents totaled approximately $298 million and $530 million as of June 30, 2024 and December 31, 2023, respectively, for a decrease of approximately $232 million. See discussion below for further detail regarding our cash flows and related activity.

Previous wording

Operating Activities. Cash flow from operations is primarily influenced by changes in the timing of demand for our services and operating margins, but can also be affected by working capital needs associated with the various types of services we provide. Working capital is affected by changes in total accounts receivable, prepaid expenses and other current assets, accounts payable and payroll tax payments, accrued expenses and contract liabilities, all of which tend to be related. These working capital items are affected by changes in revenue resulting from the timing and volume of work performed, variability in the timing of customer billings and collections of receivables, as well as settlement of payables and other obligations. Net cash provided by operating activities for the three month period ended March 31, 2024 was $108 million, as compared with $86 million of net cash used in operating activities for the same period in 2023, for an increase in net cash provided by operating activities of approximately $194 million, due primarily to (i) the effect of timing-related changes in working capital-related assets and liabilities, net, including from the positive effect of timing-related changes in accounts receivable, offset, in part, by the negative effect of timing-related changes in accounts payable and accrued expenses; and (ii) a decrease in net loss as compared with the prior period.

Current wording

Operating Activities. Cash flow from operations is primarily influenced by changes in the timing of demand for our services and operating margins, but can also be affected by working capital needs associated with the various types of services we provide. Working capital is affected by changes in total accounts receivable, prepaid expenses and other current assets, accounts payable and payroll tax payments, accrued expenses and contract liabilities, all of which tend to be related. These working capital items are affected by changes in revenue resulting from the timing and volume of work performed, variability in the timing of customer billings and collections of receivables, as well as settlement of payables and other obligations. Net cash provided by operating activities for the six month period ended June 30, 2024 was $372 million, as compared with $98 million of net cash used in operating activities for the same period in 2023, for an increase in net cash provided by operating activities of approximately $470 million, due primarily to (i) changes in working capital compared with the prior period, including from the positive effect of timing-related changes in accounts receivable, offset, in part, by the negative effect of timing-related changes in accounts payable and accrued expenses; and (ii) an increase in net income as compared with the prior period.