MasTec Inc (MTZ) 2015 Q1 法說會逐字稿

Welcome to MasTec's first-quarter 2015 earnings conference call initially broadcast on May 12, 2015. Let me remind participants that today's call is being recorded.

At this time I would like to turn the conference over to Marc Lewis, MasTec's Vice President of Investor Relations. Please go ahead.

Thank you, Jessica and good morning everyone. Welcome to MasTec's first-quarter conference call.

The following statement is made pursuant to the Safe Harbor for forward-looking statements pursuant to 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 reflect the Company's expectations on the day of the initial broadcast of this conference call and the Company undertakes no obligation to update these expectations based on subsequent events or knowledge. Various risks, uncertainties and assumptions are detailed in our press releases and filings with the SEC. Should one or more of these risks or uncertainties materialize or should any of our underlying assumptions prove incorrect actual results may differ significantly from results expressed or implied in these communications.

In today's remarks by management we will be discussing continuing operations adjusted financial metrics as discussed and reconciled in yesterday's press release and supporting schedules.

In addition, we may use certain non-GAAP financial measures in this conference call. A reconciliation of any non-GAAP financial measure not reconciled in these comments to the most comparable GAAP financial measure can be found in our earnings press release or in the investors and news sections of our website located at MasTec.com.

As we have previously announced the independent accounting investigation by the audit committee of the Company's Board of Directors has delayed the filing of MasTec's 2014 annual report on Form 10-K and will also delay the filing of the Company's 2015 first-quarter 10-Q. The audit committee is working diligently to complete the investigation in order to permit the filing of the Company's 2014 10-K and first-quarter 10-Q as soon as possible. If this audit committee's independent review has not yet been completed and no conclusions have been established we will unfortunately not be able to provide any more information regarding the status, expected timing or outcome on this issue today.

In addition all financial results on this conference call should be considered preliminary as this information has not undergone the complete review by the Company's outside auditors that is customary for the release of interim results and filing of Form 10-Q. The preliminary information represents the Company's good faith belief as to the Company's results for the periods presented but is pending any potential impact from the investigation and investors are cautioned that such information is neither final nor complete and should not be relied upon as such.

With us today we have Jose Mas, our Chief Executive Officer, and George Pita, our Executive VP and Chief Financial Officer. The format of the call will be opening remarks and analysis by Jose followed by a financial review from George. These discussions will be followed by a question-and-answer period and we expect the call to last about 60 minutes.

I will now turn the call over to Jose. Jose?

Thanks, Marc. Good morning and welcome to MasTec's 2015 first-quarter call. Today I will be reviewing first-quarter results as well as providing my outlook for the markets we serve.

Before we get started as Marc mentioned we are limited in what can be said about the current audit committee investigation. While we understand and certainly share investors' frustration about when this issue will be brought to closure it is important to note that proper corporate governance requires that a complete investigation be conducted and it is not unusual for these investigations to take longer than investors or management would like. We hope investors take comfort in the fact that we are reporting first-quarter information in a detailed manner including segment performance.

Management has reviewed first-quarter results in detail and believes that results released today properly reflect the results for the quarter as presented. We will unfortunately not be able to provide any more information on this call on this issue.

As it relates to the first quarter, we expected a challenging quarter. The drop of commodity prices in the second half of 2014, the devaluation of the Canadian dollar and softness in wireless spending created headwinds entering 2015. These issues coupled with adverse weather, late project starts in oil and gas and a struggling windfarm project in Canada resulted in a very disappointing first quarter.

We have adjusted full-year guidance for the impact of our first-quarter results and some expected continued headwinds primarily related to revenue in our wireless and transmission segments and its associated margins. Despite that we expect EBITDA margins for the Company to improve in 2015 versus 2014. While we would have hoped for a better 2015 the outlook for our business in 2016 and beyond is excellent.

We are very well-positioned to take advantage of the increasing opportunities our markets and segments afford us. For example in our installation and fulfillment business we recently began providing a revolutionary service that we think will help change the way wireless phones are procured. Through the use of mobile experts MasTec employees deliver, set up and transfer data on a customer's new or upgraded device.

We launched the service this quarter and while we're not at liberty to disclose the customer yet we look forward to updating the market in the future of this developing opportunity.

We are also excited about the developing and growing opportunities related to 1 gigabit fiber. An increasing number of carriers are actively building or planning to build and increasing data speeds is becoming the key objective and norm for carriers.

In the wireless market during a recent earnings announcement one CEO of a major carrier spoke of and I quote massively densifying their network. We expect wireless spending and activity to increase as we approach 2016.

On yesterday's release we announced record oil and gas backlog. We also said we expected backlog to more than double in the coming quarters. We've been very bullish about expected levels of activity in 2016 and beyond and we are now seeing those opportunities materialize.

Now I would like to cover some industry specifics. Our communications revenue for the quarter was $469 million versus $447 million in last year's first quarter. The growth was driven by increases in both our fulfillment and wireline business offset by a decline in our wireless revenues.

Margins in our communications segment were up over 300 basis points, both sequentially and year over year. We expect continued improved margins on a year-over-year basis especially during the second half of the year when we compared against last year's significant disruptions.

Our install-to-the-home revenue was up 9% in the first quarter of 2015 versus 2014. Our revenues with DIRECTV were up slightly year over year and our diversification efforts into security have helped lead to both geographic and revenue growth.

As we have previously stated, we believe we are the largest third-party independent fulfillment Company in the United States with broad geographic coverage. We are excited about a number of different opportunities with multiple customers who are looking for nationwide fulfillment services.

As it relates to wireline projects we are very bullish on the growth of 1 gigabit opportunities. We are actively engaged in a number of projects and expect revenues related to this initiative to accelerate through the balance of 2015 and into 2016.

Our wireless business as expected was down year over year. However, we are in a very different position going into 2015 than what we faced in 2014.

As you may recall we entered 2014 expecting significant wireless growth with the award of a contract in late 2013. We aggressively ramped our resources and the revenues didn't materialize. We struggled from a margin perspective in this business in 2014 due to having to adjust resources during the year.

We started 2015 without these margin pressures and our results demonstrate that. We believe that our geographic capabilities offer us great opportunities for future growth. And while the growth hasn't materialized as quickly as we would have hoped we are very encouraged about our future prospects.

Revenue in our electrical transmission business was $115 million versus $80 million in last year's first quarter. While we had solid revenue growth we struggled in the first quarter. A number of our projects were negatively impacted by weather and we had some project closeout costs as well.

We are today much more geographically diverse in this segment. While we believe that's important for us to grow long-term, smaller, more spread out projects are affecting our margins as we build to scale in different markets. Many of these customers that we are currently growing with will be awarding much larger projects and our presence on their systems is important.

Moving to our power generation and industrial segment, revenue was $80 million for the first quarter versus $54 million in last year's first quarter. While revenue growth was good we had one project where we took a significant loss reserve. This project located on the north shores of Lake Superior in Canada has been very challenging for MasTec.

It was our first wind project in Canada. Excluding that project our power generation group would have had its best quarter in a long time. While we're disappointed with their results we are encouraged that the business is and will continue to improve in 2015.

Our oil and gas pipeline segment had revenues of $328 million for the first quarter compared to revenues of $380 million in last year's first quarter. In the first quarter of 2014 we were completing a very large pipeline project that accounted for a significant amount of last year's first quarter oil and gas revenue.

Lower utilization levels in the first quarter led to lower EBITDA margins in this year's first quarter compared to last year. We expect margins to improve in the second quarter and approach or surpass 2014 levels for the balance of the year.

As we look ahead for the balance of 2015 we are expecting a challenging environment in Canada and expect revenues in Canada to be down about 20% year over year. In the US we expect revenues to be down slightly but the outlook for 2016 and beyond is excellent. As I stated earlier, despite having record oil and gas backlog this quarter we are expecting backlog to more than double in this segment over the next few quarters.

This is based on significant levels of activities with customers on projects that are expected to start in early 2016. In addition we are beginning to see the fruits of our efforts relative to the opportunities in Mexico. On our last call we announced the award of two large US pipelines being built by CFE, the Federal Electricity Commission as a member of a consortium with Energy Transfer Partners and Carlos Slim's Grupo Carso.

The consortium signed both of these contracts during the first quarter. MasTec plays two significant roles on these projects. As a contractor MasTec will participate in the building of approximately 337 miles of 42 inch pipe.

As a member of the consortium MasTec will hold an equity interest in these projects for their useful life. The value of these projects are not included in our backlog. Construction will begin in either late 2015 or early 2016 and must be in service by 2017.

To recap we had a tough quarter. The bright spot was our communication segment where we saw strong margin performance across the group despite weaker wireless revenues. As wireless opportunities improve along with the continued growth of 1 gigabit we know this segment provides good long-term organic growth opportunities.

Our oil and gas business had a slow start as weather and project delays impacted margins. Utilization levels have improved, we've got solid backlog and great prospects. We expect significant improvements in this segment.

Finally, we expect power generation and transmission to return to profitability in the second quarter. I know that there's a lot of noise surrounding MasTec today between an investigation and first-quarter results that were below expectations. I take responsibility for that and I share in your frustration.

But I've also been doing this a long time and I feel I have a good sense of the market. Despite our challenges and the noise that surrounds us we have some excellent opportunities in front of us. The men and women of MasTec are delivering for their customers and our customers are rewarding us with more opportunities to grow our business.

I'm very excited about our future and I truly believe we have never had the prospects in front of us that we have today.

I will now turn the call over to George for our financial review. George?

Thanks, Jose, and good morning everyone. Today I will cover first-quarter preliminary financial results, second-quarter and full-year 2015 guidance along with our cash flow, liquidity and capital structure.

As in our previous calls when we discuss our financial results and guidance we are discussing non-GAAP continuing operations adjusted earnings and adjusted EBITDA. And as Marc already mentioned reconciliation of non-GAAP measures can be found in our press release or on our website.

As indicated in our press release continuing operations adjusted results exclude the impact of acquisition integration cost related to the WesTower acquisition. We incurred approximately $8.8 million of these costs during the first quarter as we made substantial progress in the integration of this business into our existing wireless operation. We anticipate we will substantially complete this integration by late second quarter or early third quarter of this year and we estimate we will incur an additional $6 million to complete the integration with these cost primarily composed of lease and equipment exit cost, employee separation and other one-time training efforts to implement our systems and processes.

We are also excluding audit committee investigation-related costs which totaled approximately $3 million during the quarter. Finally we are excluding $5.5 million of a project loss related to our minority interest in a Canadian joint venture which is constructing a bridge in Western Canada. That joint venture which is managed by a third-party and automatically terminates after completion of the project recorded a project loss primarily associated with significant delays in the delivery of key material from a manufacturer for the construction of the bridge.

We have had no substantive direct work involvement in the project which we acquired as part of the Pacer acquisition as Pacer's work, pile driving and foundation work, was substantially completed before our acquisition. Thus as this project loss doesn't relate to any current MasTec operations we have excluded it from our adjusted results.

Before I get into detailed remarks here are some comments on the quarter. Overall first-quarter results were below expectations and include approximately $16 million of a project loss related to a difficult Canadian wind farm project that we expect to complete in the fall of (technical difficulty). While we also had some challenges in other areas during the quarter absent that loss Q1 results would have been within our overall expectations.

Our cash flow from operations during the first quarter of 2015 was very strong at $117 million, a $138 million improvement over last year's results. We continue to expect that cash flow from operations for the full-year 2015 will be strong and we will exceed 2014 levels.

Because of the strong cash flow from operations we were able to repurchase over $90 million in MasTec shares during the quarter with no substantive change in our overall debt levels. We fully completed our $100 million stock repurchase plan in early April and repurchased a total of 5.2 million shares at an average purchase price of $19.17 per share.

Now let me go into more detail regarding preliminary first-quarter results. First-quarter 2015 continuing operations adjusted diluted earnings per share were $0.07 per share versus our guidance of $0.16 to $0.19 per share. And as I have mentioned previously during the quarter we recorded a project loss for Canadian wind farm project and this impacted our results by approximately $0.12 per share.

So thus while we had some challenges, other challenges during the quarter, this project loss clearly impacted our results and our performance versus our initial expectations.

2015 revenue was $1 billion, up approximately $38 million or 4% from last year. First-quarter 2015 communications segment revenue grew 5% versus last year and this was comprised of increased levels of wireline fiber and install-to-home services partially offset by decreased levels of wireless project activity.

A bright spot during the quarter was the strong improvement in communications segment continuing operations adjusted EBITDA margins which improved both sequentially and over last year by over 300 basis points to 12.8% of revenue. This margin improvement was driven primarily by our wireless projects which despite lower revenue levels improved over 2014 as a result of actions taken during the second half of 2014 to rightsize operations and the non-recurrence of start-up cost incurred last year related to tower crew initiatives.

First-quarter 2015 oil and gas segment revenue declined 14% versus last year as during the first quarter -- first half of last year we were in the midst of a long-haul pipeline project with no replacement project in this year's first quarter. We also experienced some project start-up slippage with starts moving to Q2 2015 due to weather and other factors which impacted our profitability. As Jose mentioned and as evidenced by our record backlog level in this segment we continue to see significant opportunities in our oil and gas segment as we move towards 2016.

First-quarter 2015 electric transmission segment revenue grew 43% over last year as we continued progress on a major transmission line project and completed another major transmission line project. We were challenged by margin pressure in this segment due to project inefficiencies primarily related to weather impacts and some unanticipated project closeout costs.

And lastly while first-quarter 2015 power generation and industrial segment revenue grew 55% this segment suffered a $16 million loss on a troubled wind project in Canada which significantly impacted the segment's profitability.

Our top 10 largest customers for the first quarter of 2015 as a percentage of revenue were AT&T at 19%; DIRECTV at 13%; Berkshire Hathaway Energy, Energy Transfer Company and Duke Energy were all 5%; Sprint was 3%; and TransCanada, Starwood Energy, Plains All-American Pipeline and Fluor Canada were each at 2%.

Individual construction projects comprised 48% of our first-quarter revenue with master service agreements comprising 52% and this mix is generally in line with recent trends. As far as major customer trends are concerned overall AT&T revenue levels during Q1 2015 decreased generally as expected when compared to last year primarily due to lower wireless project activity in 2015.

Also noteworthy is the addition of Sprint as a top 10 customer. And this is due to the combination of our existing wireless and WesTower operations. At quarter end our 18-month backlog from continuing operations was approximately $4.2 billion compared to approximately $4.2 billion in the first quarter of 2014 and $4.3 billion at year-end. Backlog growth occurred in our oil and gas segment which increased 12% sequentially and by over $90 million to a record level of $870 million.

As Jose mentioned earlier we continue to expect significant oil and gas project opportunities to materialize during 2015 and expect to see continued overall growth in oil and gas backlog during the balance of 2015.

Regarding first-quarter 2015 continuing operations adjusted EBITDA performance continuing operations adjusted EBITDA was $63 million compared with $75 million last year. On a rate basis first-quarter continuing operations adjusted EBITDA margin was 6.3% compared to 7.8% in the first quarter of last year.

Regarding other areas of the income statement below the EBITDA line first-quarter 2015 depreciation and amortization expense was in line with our expectation at 4.2% of revenue compared to 3.5% last year. And this reflects the impact of the Pacer and WesTower acquisitions completed during 2014.

First-quarter 2015 GAAP general and administrative expense as a percentage of revenue was 7.4% compared to 5.5% last year. First-quarter GAAP general and administrative expenses include approximately $9 million of acquisition integration cost related to WesTower as well as $3 million related to the current audit committee investigation.

Interest expense during the first quarter of 2015 was $11 million compared to $12 million last year. Even though we have higher borrowings compared to a year ago due to the capital deployed for 2014 acquisitions and 2015 stock repurchases, interest expense levels were lower as we have reduced our effective borrowing cost with the retirement of all our convertible notes. Finally, first-quarter 2015 continuing operations adjusted earnings per share were $0.07 per share compared to $0.21 per share last year and continuing operations diluted loss per share was $0.08 per share compared to continuing operations earnings per share of $0.19 last year.

Now let me talk about cash flow, liquidity and capital structure. We generated $117 million in first-quarter 2015 cash flow from operations, a $138 million improvement when compared to $20 million of cash used in operations last year. Strong cash flow from operations came from the seasonality of operations and working capital initiatives.

As I mentioned earlier because of this strong cash flow we were able to purchase over $90 million in MasTec shares during the quarter without any meaningful increase in our overall debt levels.

Our first-quarter 2015 accounts receivable days sales outstanding or DSOs were 90 days compared to 87 days at year-end, a three-day increase. As we have previously indicated DSOs can bounce around some based on the timing of project closeout and retention payments and the addition of WesTower operations which were at higher DSO levels than MasTec operations has also impacted our first-quarter DSOs. We typically expect our DSOs to range somewhere in the 80s as we continue to make progress in normalizing WesTower DSOs.

Regarding our spending on capital equipment, first-quarter 2015 cash CapEx net of disposals was approximately $18 million. We added approximately $13 million in capital leases and other financed equipment purchases for a total CapEx spend net of disposals of $31 million. We anticipate that 2015 cash CapEx levels net of disposals will approximate $80 million with an additional $80 million to $90 million in capital lease and equipment financing for a total CapEx net of disposals of $160 million to $170 million.

Liquidity at March 31 calculated as cash plus availability in our senior revolving credit facility was $572 million. Our overall net debt level at quarter-end was approximately $1.1 billion essentially flat when compared to our year-end level and reflecting the 2014 acquisitions of Pacer and WesTower as well as capital invested in our 2015 stock repurchase program. As previously disclosed in April we successfully completed a consent solicitation with holders of our senior notes extending certain reporting requirements until August 1.

We also received consent from our bank group under our senior secured credit facility to extend the deadline for financial reporting requirements to June 1. Should any extension of this date be required in connection with the audit committee investigation we fully expect the continued support of our bank group.

Moving on to 2015 full-year guidance we are projecting annual revenue of approximately $4.4 billion with continuing operations adjusted EBITDA of approximately $425 million and continuing operations adjusted diluted earnings per share of $1.45. This guidance level includes the impact of our Q1 results as well as the negative impact of approximately $0.05 per continuing operation diluted share of a higher expected 2015 income tax rate which currently is estimated at approximately 41% versus our previous estimate of 39%. And this increase is due to lower expected levels of 2015 Canadian income.

Our estimate for the full-year share count for diluted earnings per share is about 81 million shares and 80 million shares for the second quarter and these estimates reflect the repurchase of over 5 million shares during the first part of 2015. We expect to end 2015 with approximately 80 million shares outstanding.

We currently estimate that Q2 revenue will approximate $1 billion with continuing operations adjusted EBITDA in the range of $94 million to $99 million and continuing operations adjusted earnings in the range of $0.27 to $0.30 per share. If you do the math you will note that our guidance assumes that second-half 2015 revenue levels will decrease in the mid-single-digit range compared to last year. And this is primarily due to lower expected levels of Canadian oil and gas revenues resulting from the combination of expected lower levels of demand for services and the impact of foreign exchange rate changes.

Our guidance also assumes improved EBITDA margin performance in the second half of 2015 compared to last year. And this is primarily due to improved communication segment margins as we complete the WesTower integration and annualize against the severe disruptions that occurred last year in our wireless operations.

In summary, we had a challenging first quarter but we expect to see improved profit margin performance in the second half of 2015 and remain excited about our revenue and profit margin growth prospects in 2016 and beyond. And that concludes my remarks.

And now I will turn it back to the operator for Q&A. Operator?

(Operator Instructions) Noelle Dilts, Stifel.

Hi, thanks everyone good morning. I was hoping to start off with a pretty broad question. But maybe you could walk us through how you're thinking about 2016 at this point and discuss where you're incrementally more optimistic on the outlook relative to say three months ago and where you're a little bit more cautious?

Well I think we've been optimistic about 2016 for a while. No question that when we think about the oil and gas business we think 2016 is going to be an absolutely fantastic year. And going forward as well I think 2016, 2017 and 2018 are all shaping up to be really, really good years and that's a lot of visibility to be able to say that where we stand today.

While we felt great about 2016 three months ago we are finally seeing it start to take shape so we feel a lot better. Our confidence level is much higher today for 2016 than it has been. And I only say that because we're seeing contracts materialize and projects materialize and we've got a good feeling of when jobs are going to start.

So there's no question that in that business we expect significant growth in 2016 versus where we will be in 2015 and quite frankly where we've been in the past. You take into account the opportunities that we have in our fulfillment business, in our wireline business relative to gigabit opportunities. Some of the opportunities that we're seeing in transmission that we think are going to play out later this year you know it's shaping up to be a really, really good year.

Okay. And then just touching on the expected doubling or more of backlog in oil and gas can you talk about if more of these projects that you're seeing are coming from Mexico or if it's still a lot of US opportunity? And then how would you be looking at most of these projects moving forward in 2016 or do you think some of them could be 2016 and 2017 projects?

A couple of things. One we said on the call today that they Mexico projects that we won during the first quarter which was through the consortium those are not in backlog. So while those are Mexican projects they are actually in the US but that will obviously add a significant amount to backlog as we look forward.

In addition to that we expect significant awards in the US and also hopefully in Mexico that will further add to that backlog.

Okay. And then final question, in terms of the install-to-the-home business I think there has been a fair amount of investor concern around some of the cost synergies that AT&T has talked about with the DIRECTV business. Can you just talk about how you see that playing out and impacting MasTec over the next couple of years?

Sure. I think at the end of the day AT&T is paying a lot of money for DIRECTV.

I think they've got (technical difficulty) how to grow the business which I think is going to create opportunities for us. So where we stand today we're really excited about the opportunity and think we've got some opportunities to potentially grow that business.

Okay. Thanks.

Tahira Afzal, KeyBanc Capital Markets.

Good morning Jose and team. Jose clearly it seems like, well hopefully it seems like your backlog opportunities are ticking up, potentially you're seeing a trough on the communications spending side. So on the revenue side and in terms of backlog everything seems to be anniversarying and probably positively inflecting into the second half.

I guess my concern is around execution and consonance around you're taking on work from perhaps new clients going into new regions. Given the learning curve or the learning lessons you've had there over the last couple of quarters is there anything on the execution and operation side that you've changed perhaps in terms of how your management is incentivized or anything operationally or structurally that's different?

So my first reaction to your question is I think we understand the issue, we understand the concern, we accept it. We have struggled over the course of the last year with multiple issues. I think some of the issues have been within our control but quite frankly I think a lot of the issues have been outside of our control.

Maybe we've misread some things, I think in the wireless business we've obviously been bit a few times in terms of declining revenues. With that said I think we've now demonstrated operationally that we're able to manage at those levels and I think that we've demonstrated that with the margins that we were able to deliver in communications this quarter.

I think those margins will continue at those levels if not even slightly improved from here through the balance of the year. So when we get a good feel for what we've got I think we can manage well to it. If you look at our oil and gas business which obviously from a margin perspective didn't perform particularly well in the first quarter a lot of that was due to utilization levels.

For example just to give one example our biggest division in that group went from about $165 million in revenue in last year's first quarter to $58 million in this year's first quarter. And a lot of that had to do with projects that we were hoping that would start in Q1 and they kind of got pushed out into Q2. We're expecting that same unit to almost triple in revenues in the second quarter.

So when we have the work we think we're managing it well. Obviously we had our issues in transmission and power gen. I think they are very specific, I think we're dealing with them.

So for lots of reasons we're looking forward to 2016 because I think that the opportunities for revenue growth are going to be there. And I think we've demonstrated in the past with when those opportunities are there we're able to execute to them and deliver.

And again I understand the market's frustration and I understand the questions because we haven't over the last year. But I feel a lot today like I did a couple of years ago where things were about to break, so I'm excited and looking forward to moving forward.

Again Jose on the wireless side it seems you've gone into march on what you're doing in terms of with this customer in regards to new technologies but any more color you can provide in what you're doing? I know there are a lot of fluid new technologies coming out on the wireless side, would love to get a sense how you are leveraged to that.

Look, I think today on the wireless side of the business I think we've become a very well known commodity. I think our size and scale is unmatched in the industry. I think that's very important to carriers.

I think we're going to see that play out over the coming year in terms of opportunities that we get with different customers. When we made the WesTower acquisition last year we talked about it being a diversification play, a geographic diversification plate and we hope that the customer diversification (technical difficulty).

We think we're making really good inroads relative to that. And I think as time plays out we're going to see not only nice revenue growth from that business but really solid diversification which we think is important.

Got it. Thank you, Jose.

Dan Mannes, Avondale Partners.

Thanks, good morning everyone. First question on oil and gas, obviously a strong backlog in the quarter and you have a pretty positive outlook there.

Can you talk about any meaningful wins either in the first quarter or subsequent? And I'm kind of pointing at Lone Star here, any others? And to the extent that and the Tex-Mex jobs aren't in your backlog as of quarter end is that partially maybe giving you some of the confidence as it relates to the balance of the year?

Well we generally don't talk about any project in particular. Obviously we've talked about these Tex-Mex projects more because they were public. I can tell you that a lot of what we expect to come isn't really being talked about relative to MasTec so I think it's really new projects that people haven't been focused on.

And just to be clear the two projects that we won that are in the US relative to Mexico are not in backlog. The construction activity for those are not yet in backlog and over the next quarter or two they will be in backlog. Those projects are expected to start in either really early 2016 or potentially could start in late 2015.

Understood. And then secondarily can you help me a little bit more with the view for the back three quarters of 2015? Obviously you've been pretty clear on what happened in the first quarter and especially with the wind job but you did take a bit of a hack to the balance of the year.

Can you maybe break that up? We're looking at about a $27 million reduction of EBITDA. I don't know if you can maybe point to where that would be and whether it's electric or wireless, if you can help us out a little bit there.

Sure. So I think in the wireless business when we look at the revenue guidance that we've now given for 2015 we've moderated our view on wireless. I think the second quarter was a very difficult comp for us.

It was a very, very busy quarter last year. I think it was the height of wireless spend that we saw in the industry. It was after Q2 that the market really took a hit and it dropped significantly in Q3 and Q4 of last year.

So I think the second quarter is a tough comp for us. I don't think we're going to see the same level of increases in Q2 that we saw last year, so we're expecting a down year-over-year comparison in Q2. I think from that point on it begins to normalize a little bit.

I think from an oil and gas perspective it all depends on what starts in the fourth quarter and I think we've taken a very moderate view relative to that. So I think those are the big drivers.

Transmission we've probably reduced our expectations slightly although we expect 15%, 20% growth over last year so that business is still growing. We've probably moderated our views just a little bit.

Great. Thank you very much.

Jason Wangler, Wunderlich.

Good morning. I was curious maybe to get some color on your fiber comments. I know it's a little bit tough to talk about.

But as you go throughout this year and next year, are we seeing more I guess cities and more infrastructure being built within the ones that we've heard announced? Or are you expecting even some more cities to be brought out as that expands?

I think we're really excited about the fact that everybody is talking about it. Anybody that's involved in that industry is deploying 1 gigabit.

There is a lot of people that generally wouldn't be talking about it are talking about it so I think it's just a very active market. I think it's becoming the norm for everyone so we're seeing a very broad base push towards gigabit services and fiber services and I think it's great for the industry.

Okay. And then if I could obviously the buyback and completing that, as we go through the year and expect them to generate some pretty good cash flows is there an idea to put something else on under that? Would it be to look at paying down some debt or just kind of the thoughts there?

The challenge for us today is that we are without having filed our annual results from last year we're in a closed window right now so as a Company or as management we're really not allowed to do anything. The fact that we bought $100 million of shares at roughly $19 and change we thought that was great value. We continue to think that's great value and if it was up to me we'd do a lot more of that.

Okay. So we will just wait for the next one. Sounds great, thank you.

Vishal Shah, Deutsche Bank.

Hi, this is Chad online for Vishal. I just wanted to get back to your comments about the oil backlog doubling. Can you talk about the composition of the projects whether you're expecting a number of smaller projects versus larger projects, oil versus gas and does that include any M&A?

I will start with the last question first. It does not include M&A. It's a combination of both oil and gas projects.

It's going to be driven by larger projects although there will be a bunch of smaller projects as well. And again we're very confident in our ability to say that.

So we expect a more than doubling which is going to be very broad-based. So large projects, some smaller projects, geographic mix, customer mix. It's a very, very active market that we're currently in.

And then just on oil and gas still can you just talk about the bidding environment? I mean are you seeing any increased pricing pressure from competition? Are you seeing any cost reduction requests from customers, any color on that would be helpful?

I think that the people that are involved in these projects, the customers that are involved in these projects understand the amount of work that's coming which I think is unprecedented and they are trying to lock up resources, they are being fair on contract terms. They want to get their projects built on time within their budgets. So I don't think we're seeing -- I think we're seeing very fair pricing in the market as we would have expected six months ago, a year ago as we knew these opportunities were coming.

Okay. And just one lastly, so would you expect the margin and that backlog that you're expecting to be higher than where you are right now?

Yes.

That's it for me. Thank you.

William Bremer, Maxim Group.

Good morning, gentlemen. I just want to touch base a little bit on Mexico, the broader picture there longer-term. The government recently announced bidding for some oil and gas rights to some land application in areas down there.

I know that's way before you guys come in but can you give us a sense of how you are looking at that market specifically in Mexico? I know right now the projects that you do have are just US-based leading right to almost the border. But give us a sense of what you're seeing longer-term there and I'm sure that it's not just on the oil and gas side but it looks as though that many of your segments are quite needed there and have done some work down there in the past.

I think we're at the beginning of what's going to be an unbelievable run in Mexico. You currently have a number of pipeline projects that are either bidding or going to be bid. So there's probably over a dozen projects of very large-scale that are going to be built in Mexico, some through PEMEX, some through CFE.

We hope to participate, we hope to win, we think we're going to have a very successful Mexican operation that's building pipelines in Mexico. I think those projects will take that business for the next couple of years for sure all the projects that are currently announced. I think beyond that you've got Mexico importing a lot of gas from the US.

They have massive needs for expanding their pipeline network. You've got the potential for them drilling some of their own resources, so I think we're at the beginning of a very, very long-term significant buildout plan. I think it ties into what they are going to do with transmission, so I think from the electric and energy side it's a fantastic market.

You've got a very large player starting to pay attention. We've got a lot of our US customers know starting to -- their interest is piqued, we've got a lot of new entrants into the Mexican market, we think it's going to be a fantastic market for a long time.

In addition to all that you obviously have the wireless opportunities. AT&T closed on their acquisitions in Mexico.

There's going to be a significant ramp up in wireless spend we believe in Mexico as well. So the Mexican market in general is just a market of great potential for MasTec and one that we hope we're going to deliver on over the coming quarters and years.

Okay Jose, thank you.

John Rogers, D.A. Davidson.

Hi, good morning. Jose, I just wanted to follow-up on some end market exposure. In the oil and gas segment how much of your work in the quarter and on a go-forward basis is upstream versus traditional midstream or interstate pipeline work now?

I would still say the majority of our work is related to midstream. (multiple speakers)

But when you talk about the lower commodity price that's affecting the gathering side of it, is that what you were trying to say?

Well, we don't really, I mean the question, the commodity prices are affecting two areas of our business in a more meaningful way. One is the gathering but quite frankly we're not that big there so it's not that big of an impact. But two I think commodity pricing is affecting Canada much more than it's affected the US.

I think it will subside. I think there is a lot of projects on the board for Canada. I think a lot of the big customers in Canada a lot of their revenues and financials are associated with the price of oil.

So unfortunately as they have been hit harder financially they've cut their CapEx more aggressively than some of our other customers so I think we've just seen more of an impact there. I think that again will normalize and we'll see a lot more activity in 2016.

From the US side when we think about especially the southern shales with what's happening on the natural gas side it's extremely busy. And we don't see that subsiding anytime soon.

Okay. And then a follow-up, on the communication side can you give us a break down of how much of the business now is in-home wireline versus wireless?

When you say in-home wireline what do you mean?

Sorry, in-home, wireline and wireless, between those three end markets.

So I'd say on a full-year basis our wireless business is half of our communications revenue more or less.

And about 30% to 35% would be the install-to-home and the balance would be wireline. About 30%.

Okay. 30% on the wireline, George?

Roughly.

Perfect. Thank you.

Adam Thalhimer, BB&T Capital Markets.

Hey, good morning guys. Jose where we right now in terms of demand from AT&T? It just seems like they are spending at unsustainably low levels and I'm curious.

There are some people who think maybe that gets better once they close their DIRECTV deal. Do you have any thoughts on that?

What we can control is how we manage the business of the work that we have and I think we've done a good job at that. So relative to where we are as a business we're managing to the levels that we see. When we look at the industry and its whole we think there's going to be a significant increase and an uptick in wireless spending for lots of reasons.

Some of it is driven by our existing customers and some of it's driven by new customers. So while we've had to manage through some declining revenue trends here over the course of the last year we do think that turns. And we hope it turns in a big way and we think we're going to be well-positioned for it when it does.

Okay. And then I wanted to make sure I have this straight.

I think you said that in the back half of the year margins in communication up slightly from Q1 and margins in oil and gas are in the back half going to be at the levels of full-year 2014. Did I hear all that right?

I think in the back half of the year oil and gas margins are going to be close to where they were in the back half of last year, which is slightly better than on a full-year basis.

Got it. And then how about communications?

Communications should be up from where we are today in the first quarter. So they will be significantly higher than they were in 2014.

Okay, thank you.

Andy Wittmann, Robert W. Baird.

Hi guys, thanks for taking my question. I wanted to just dig into the wind project a little bit more Jose and just get your sense on where that one is. It doesn't sound like it's completed yet but can you give us some color on maybe the percent complete that it is and what items if any that you've changed operationally to get that one back on track?

Yes, so a couple of things. You know what we did on that project during the quarter we realized that the project was going to end up in a loss position. When you have a project that you believe is going to end up in a loss position you have to take a loss reserve for the balance of the project which is what we did.

A lot of the loss that we've taken on that project is prospective in nature, it hasn't all happened yet. We've got a significant ways to go; as George said, we're going to finish that project in the fall. We've probably got roughly 40% of that project to complete and there's been lots of issues on that project.

We've had some local partners that really didn't pan out a lot. There was a large local content required on that project. There's been significant weather issues based on where it was located.

We've had a lot of our own issues. So at the end of the day it's a very troubling project. We decided to highlight the project because it's meaningful enough that to really understand our results you need to understand what made up the results.

So if you backed that out our power gen group is actually doing much better and improving, no excuse for that project. We're not happy about it so we've taken a lot of actions relative to that project, in particular we've made significant management changes as well so we feel good about where it's headed. We don't feel good about that project in particular.

All right. Thanks for the color on that one.

Then just on the Mexico pipelines you said you signed the contract in 1Q. I'm just curious why didn't they go in backlog? Is there a permit that it's waiting on or something else that we should be aware of that's holding you back from putting in the numbers?

What we were awarded was we were part of a consortium. The consortium was made up of three partners. We were awarded -- we were basically build, own and operate those pipelines for their useful life.

MasTec will be the contractor for those pipelines. The contract will be between MasTec and the consortium. And quite frankly we've been a lot more focused on getting the contracts signed with the customer than we've been worried about getting the vendor contract signed of which we will be one of them.

So it just hasn't been high on our priority list. We said on our last call that we didn't think it would make Q1 backlog. It didn't.

We already working to begin construction on that whether it's late 2015 or early 2016 we're gearing up for it. We have no doubt in our minds that we will be the contractor on that. But we're not going to put it into backlog until that contract is actually signed with the consortium.

Okay. That makes sense. Thank you.

Noelle Dilts, Stifel.

Thanks. I just wanted to ask another question on the wind project. This is your first wind project in Canada. Are you anticipating pursuing more of these types of projects in Canada or was it sort of more of a one-off event?

Probably not.

Okay. And then also just I think you cited a 20% decline in Canadian revenue this year.

Can you talk a little bit about how much of that headwind is coming from FX and then what you're expecting on an organic basis? I think you're comparing against a stub year for Pacer in 2014, so can you just give us a better sense of what you're looking at on an organic basis?

Sure. So I'd say that FX represents about half of that, so currency exchange the balance is reduction in work.

If you annualize Pacer's revenue in 2014 it's obviously a much bigger drop. So again our Canadian business has been hit probably harder than anything else that we've got.

So it's a tough year. And a lot of it is customers that have put projects on hold based on their own economic circumstances. So a lot of those projects are going to come back and I think they come back as early as some of them come back as early as 2016.

Okay, thanks.

Thank you, Noelle.

Alex Rygiel, FBR Capital Markets.

Thanks. Jose, how are you today?

Just one quick question. Can you help us understand why you are not authorizing an additional buyback at this level with your stock trading $17, $18 and this fairly upbeat outlook that you anticipate in the second half of the year and into 2016?

Because we haven't filed our 10-K and thus we're in a closed period. So until we file our annual we're not allowed to do another authorization for a stock buyback.

All right. Thank you.

This does conclude our question-and-answer session. I will turn the conference back over to Jose for closing remarks.

I just want to thank everybody for participating today. And we look forward to updating you as the year rolls on and hopefully we can talk a lot more about the opportunities as they materialize. So thank you.

And this does conclude today's conference. Thank you for your participation.