Welcome to MasTec's Fourth Quarter 2018 Earnings Conference Call initially broadcast on March 1, 2019. Let me remind participants that today's call is being recorded. At this time, I'd like to turn the call over to Marc Lewis, MasTec's Vice President of Investor Relations. Marc?

Thanks, Patrick and good morning, everyone. Welcome to MasTec's fourth quarter 2018 earnings conference call. The following statement is made pursuant to the Safe Harbor for forward-looking statements described in the Private Securities Litigation Reform Act of 1995. In these communications, we may make certain statements that are forward-looking, such as statements regarding MasTec's future results, plans and anticipated trends in the industries where we operate. These forward-looking statements are the company's expectations on the day of the initial broadcast of this conference call and the company does not undertake to update these expectations based on subsequent events or knowledge. Various risks, uncertainties and assumptions are detailed in our press 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 the communication today. In today's remarks by management, we'll be discussing 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 measures not reconciled in these comments to the most comparable GAAP financial measures can be found in our earnings press release, our 10-K or posted in the PowerPoint Presentation located in the Investors and News sections of our website located at mastec.com. With us today, we have José 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 José, followed by a financial review from George. These discussions will be followed by a Q&A period and we expect the call to last about 60 minutes We had another great quarter and a year…

Thanks, José and good morning, everyone. Today, I'll cover fourth quarter and annual 2018 financial results, including cash flow, liquidity, working capital usage and capital structure as well as our initial guidance expectation for 2019. As Marc indicated at the beginning of the call, our discussion of financial results and guidance will include non-GAAP adjusted earnings and adjusted EBITDA. It is worth noting that fourth quarter 2018 GAAP results reflected a non-cash goodwill asset impairment charge of approximately $48 million related to Canadian oil and gas and oil sand facilities construction operations acquired in 2014, as part of our periodic fair valuation process. Reconciliation and details of non-GAAP measures can be found in our press release on our website or in our SEC filings. In summary, we had strong fourth quarter 2018 results that capped off a record 2018 year by virtually all adjusted financial measures. During the fourth quarter, as previously communicated, we generated record cash flow from operations, normalized our working capital investment levels and significantly improved our year end 2018 leverage profile. Fourth quarter 2018 leverage reduction and leverage ratio improvement were achieved despite approximately $120 million of investment associated with 2.9 million shares repurchased during the quarter. Lastly, and importantly, during the fourth quarter, our board also approved a new $100 million share repurchase authorization, reflecting our continued confidence and growing demand for our services, as well as our commitment to generate long term shareholder value through opportunistic share repurchases in periods when the company believes its share price represents a significant value. Here are some comments regarding our fourth quarter 2018 consolidated performance. Fourth quarter 2018 revenue of $1.9 billion grew 20% and represented the largest fourth quarter in MasTec history, primarily driven by strong increases across the oil and gas and power generation and…

[Operator Instructions] We'll take our first question from Alex Rygiel with B. Riley FBR.

Thank you and another fantastic quarter. Congratulations. José Mas: Thank you, Alex.

José, can you talk a little bit about the timing of FirstNet and how you expect that to ramp up and when it might peak and same with sort of 5G. I know you addressed it a little bit on the call. But can you dig a little bit deeper on those two items? José Mas: Sure. FirstNet is going well. Obviously last year was a ramp year for us in FirstNet. I think this year is a more consistent year on a full year basis. And I think we're going to continue to see a lot of FirstNet activity over the coming years. The real growth opportunity in the wireless business, because at the end of the day, FirstNet is only really an AT&T initiative. When you think about 5G, every carrier in the country is working extremely hard to figure out how they're going to deploy 5G and how can they deploy it faster. It's more complex, as I said earlier than any of the other deployments that we've done, because it's multifaceted with the tower and small cells. I think that what we've learned over the last year is we think that that opportunity is going to be significantly bigger than what we previously thought and probably last a lot longer. And we're really trying to prepare ourselves this year as that begins. I think we're going to see 5G activity in 2019, but quite frankly, we won't see the bulk of the activity until 2020.

And on that comment, you had a little surge in communications backlog a few quarters ago. It's kind of flattened out here. Would you anticipate sort of another surge in 2019, as you get into some of these 5G projects? José Mas: I think as we started getting orders, right, especially towards the second half of '19, I think that's probably our expectation. It's also important to note that a lot of the Puerto Rico work was distribution work that was in our communications backlog. So a lot of that drop came in communications. So while it looks flat, when you take in consideration the reduction of Puerto Rico, it's actually a lot better.

[Operator Instructions] We will take our next question from Adam Thalhimer.

Hey, José, what are your long term thoughts on communications margins once you get through this ramp up here? José Mas: Definitely better than what we did last year. I think we can - I think a lot of the investments we're making today is specifically around trying to improve margins long term. So I think we had a good margin year in 2018. We've always said that our goal is to beat 2018 by hopefully a couple of hundred basis points and our thought process around that hasn't changed.

And then on the oil and gas side, you guys have done a great job of benefiting from the Permian growth and all the projects down in Texas. Just curious, is there another kind of shale percolating that you see out there? José Mas: I think all the shales are having takeaway capacity issues, to a lesser extent, some more than others. I think you can track it based on cost differentials, it is not just a Permian problem. It's a multiple basin problem and we're seeing activity across a number of different basis. That's why we think this is going to last, the cycle is going to last a lot longer than people think, because it's not one thing that's driving this market, there's multiple initiatives that are driving the strength in our oil and gas markets.

We will take our next question from Noelle Dilts with Stifel Financial.

So just expanding a little bit on that shale comment, you mentioned in your remarks that you are seeing some geographic concentration of the work and I think you guys do have a really good position down in the Permian. So, one of the questions I often get is, folks are kind of looking out and saying, okay, we're going to have a lot of Permian build here in 2019, maybe into 2020, but then we'll be in an overbuilt position. How are you guys thinking about that? And how are you thinking about the multi-year opportunity around in the Gulf Coast? And then if you could combine that with kind of the rationale behind the Kingsley acquisition and how you see that fitting into your offering? José Mas: Sure. A couple of things. So it's not about geographic concentration. It's actually about geographic diversification, which is what [indiscernible] 2019, which we see as a huge benefit, right. I think for the last couple of years, obviously a couple of large projects have somewhat steered our oil and gas business. We're very bullish on large projects, it's in our wheelhouse. It's something that we do well, because of the complexities associated with those projects. We think we're the perfect fit to do those and I think we're going to continue to benefit from those and there are a number of those that are going to continue to happen for years to come. I think we're going to see a lot of activity across all the basins again. I think the Permian is going to be very healthy, well beyond 2020, because there's just a lot of activity and a lot of different things happening there, a lot of new wells being produced, a lot of different areas being produced. When I think about the Kingsley acquisition and they're predominantly in the Permian Basin. So when you think about the Permian Basin, E&P operators in the Permian Basin produce about seven barrels of water for every barrel of crude that they produce. So if you think about that in numbers, it's just mind boggling. There's about a 30% savings in pipelines over water hauling. What we know is a water hauling market and it's about a $13 billion a year market. And, very small portions of that have been converted to pipeline, although that activity has started in a pretty significant way. So we think we're coming into this industry at a perfect time and one in which we're going to see considerable growth and like a lot of the acquisitions that we've made in the past. We buy a relatively small company with what we think are great prospects for growth and hopefully we can execute on that.

And then shifting over just to the communication segment, any chance you could give us kind of the dollar where you end up in terms of dollar revenue for wireless, wireline and ITTH, so we're all kind of set there in terms of your growth expectations? And then in terms of the Puerto Rico contract around - some of the distribution work down there, are you thinking about that so potentially coming through, it's just higher risk at this point. Can you give us a feel for the options around that work? José Mas: Sure. So our wireline business is about $1 billion, our wireless business is about $1 billion and our installation fulfillment business is about 500 million. So if you think about our 2018, that's kind of how it played out. In our script, we talked about 20% growth in both wireline and wireless, with about a 10% decline in our fulfillment installation business. So I think that math works out pretty easily. When we think about Puerto Rico, I think it's an - it's still an awesome opportunity. There's billions of dollars that are going to be spent on the permanent fix of what they did during the storm. It's not a - it's not a work related issue. The work is there. We have great relationships, we think we're in an incredible position to win a sizable amount of work and to hopefully execute, not just on the amount of awards that we previously had, but on something much greater. The question all becomes about funding. And there's a lot of - you can actually Google Puerto Rico and FEMA and the governor and FEMA and there's a lot written about the issues that they've had and the funding issues that they've had and the things that they're currently doing to try to fix it. So we're hopeful that something's going to break there at some point in 2019. Again, we're well positioned, but at this point, we've taken it out of guidance, so whatever happens would be upside there.

We will take our next question from Andrew Kaplowitz with Citibank.

In terms of Q4, we saw a major margin pickup from your competitor in wireline and they're talking about significant additional complexity associated with a large customer, who we know you do work with as well. When you look at your communication margin, we did record the lowest margin in that segment, in the quarter since early '17. And while we know you're incurring extra costs from hiring and a general ramp up in the business, how should we think about the risk that communication margin could be disrupted and beat the low end, or even lower than that 9% to 11% guidance you gave us for '19? José Mas: Sure. So if you think about 2018 communications, we did 11.4% margins for the year. George talked about a 60 basis point impact related to storm and since we're back in storm out of guidance, if you take that out, you can kind of call a normalized communications rate for 2018 being 10.8%. We've guided next year between 9 to 11. So obviously that's somewhat of a wide range and for us, it's a really wide range from what we used to give in guidance and the differences, how fast and how hard are we going to ramp relative to the opportunities. If you take the fourth quarter, for example, we think we were probably impacted by somewhere around $6 million in ramp costs. So if you take some storm activity that happened in Q417 with the ramp costs, you probably have somewhere between 150 to 200 basis points of impact related to that. To kind of put it in numbers, right, we added in the fourth quarter and this is almost specific to wireless because we added about 250 tower technicians in the fourth quarter. We talked about that…

Just to be clear on that, you don't see any out of the blue new complexity issue, I mean, this ramp up, this, you've seen it coming, right. There's nothing new there. José Mas: There's nothing new. Right. It's - again, these projects require a lot more program management. So they're different, right? Historically, companies like ours did construction. Now, we're doing program management and construction. We've done that for a long time, right? That's how we've kind of built our wireless business. So we think we're well positioned for that. So, yes, there's unquestionably more complexities in what we do today than there's historically been, but again, we think we're uniquely positioned to benefit from that.

I just want to ask you about your oil and gas backlog. You mentioned it being down at 2.1 from 2.5 last year. You talked about oil and gas backlog, potentially exceeding '17 levels. Is this just timing. I mean, you mentioned $1 billion of work. Is it one project being a little slower to sort of develop and could you talk about 2019 end of the year backlog, could it be similar to '18 levels or higher in oil and gas? José Mas: So the difficulty with the question is timing of a month or two months, obviously makes a big difference relative to a quarter. It has no impact on us as a business. Right. So I would say that we expected to finish 2018 at higher levels than '17. We obviously didn't, but, we've won, in our minds, we have, because today we feel that we have more backlog going into 2019 than we did going into 2018. The work has been awarded, whether the contract is actually signed or what the issues are from a contract perspective. That's somewhat irrelevant to us, because we know what we're going to be doing. There is an enormous amount of activity in that business today. And we think that going into 2020, we're going to be as strong or stronger than we are today.

We will take our next question from Tahira Afzal with KeyBanc.

I guess my first question is on the electric transmission side, you've shown that you have really mastered and become the blue chip name in a lot of the businesses you've gotten into. Seems like this is still $1 billion plus revenue opportunity for you, making it maybe one of the more interesting ones. Do you still think that's the case and sort of changing the timeline there? José Mas: The short answer is yes. And, in our script, we talked about 2020 being at record revenue levels. We think that's achievable. Obviously, this was a market that we got into via somewhat small acquisition and it built that business somewhat organically. So we're pretty proud of what we've done in our transmission business. We think it's got great long term potential and opportunities. We think we're competitive and participating on some of the largest and more complex jobs in the country and we're in the race just about every time. So we feel good about it, we're going to win our fair share and we feel good about the future of that business and the potential to be $1 billion business like our other platforms.

And then José, just going back and belaboring the point on the whole telecom side, obviously, you and I and everyone listens to the commentary from the carriers and that they've been struggling somewhat in terms of the 5G logistics. You guys are at the heart of it. What gives you confidence that the pushouts you've seen are coming to an end? José Mas: Tahira, I don't think carriers are pushing out. I think if you talk to the carriers, every carrier wants to have a 5G system up and running. There is a race to be first, there's a race in the market. It will - there is no question that 5G is coming and that's where the wireless industry is heading in this country. I can't imagine that anybody would argue that point. The issue is the timing towards it. Right? Everybody's realized that it's become more complex and harder than what people originally anticipated. That creates incredible opportunity for companies like ours. And we're seeing, every day, we're seeing different types of opportunities related to that, that we couldn't have imagined six months ago, 12 months ago. So we're in a great spot. We've been saying all along that this wasn't a 2018 driver that this would be a partial impact in 2019, it's coming. It's going to be big and it's not here yet. And I think, like everything else, people get excited and to some extent, people anticipate things happening prior to when they're going to start, but there's no question it's coming. It's in the horizon - that's right on the other side there and it was tangible. We're feeling it in '19, but it's just going to be a lot bigger in 2020 and 2021 than it'll be in '19.

We will take our next question from Chad Dillard with Deutsche Bank.

Hi, this is [indiscernible] on for Chad. Wanted to see, in the last few months, you've seen some LNG projects to FID. I wanted to see what the associated pipeline opportunity could materialize in the next year and how big the opportunities could be there and also what your visibility is on fiber to the home spending in the back half of the year? José Mas: So the LNG projects are very large in size and scale. The pipelines associated with those projects are large in size and scale. Those are projects that we actually don't expect to see until 2021, 2022. They're out there, they're going to happen. So it's a very exciting opportunity for us. As we think about the ramping communications, I think our wireless business will ramp pretty consistently throughout the year. When you think about our wireline, it'll probably be more second half loaded, it is more of the fiber cities actually start into construction versus just being an engineering, some are in construction, but a lot of them will still be in engineering until mid-year.

We will take our next question from Jamie Cook with Credit Suisse.

I guess back to the communication side, understanding the investments that you're putting in and the growth that's to come, I'm just trying to understand how you're approaching the investment. One, how would you characterize the risk - what's on the horizon that the increased spend could sort of leak into the back half of the year. And then when you're thinking about spending, how much work are you sort of being guaranteed by your customers versus your view of sort of what's on the comp? And then my second question, can you just talk about, on the oil and gas side, just terms and conditions, whether you've seen any level of improvement and how sustainable do you think your market share is, given you've probably won more than most others out there. Thanks. José Mas: Sure. So, on the communication side, quite frankly, there are no guarantees, right? We see a huge market opportunity and we're trying to position ourselves to take advantage of it as best as we can. When we think about history, right, we've obviously - we went through a period of time where we added people and we went through a significant tower climbing initiative a few years back, which didn't go well for us. I think there's significant differences between that and where we are today. That was driven by one customer and one customer's needs. What we're doing today is driven by every single carrier's needs and our discussions with every single carrier. So we feel a lot more comfortable in what we're doing today than we've ever done relative to that. On the oil and gas side, we've been saying for a long time that we think, T's and C's are good. We think our customers are being fair with us. There's a very - there's really a partnership approach these days to projects because they're so complex, so difficult permitting challenges or significant environmental challenges are significant. So we think terms have been good, terms will continue to be good and we haven't seen any incremental change in those. And I think we've demonstrated that with our financial results in the business.

And then sorry, just a follow up question, longer term, as we think about your free cash flow conversion is the communication business, ramps, is there any change in terms of how we should think about free cash flow conversion? Maybe it's a better question for George, but any color would be appreciated?

There's no real change to the working capital profile or fixture with increased communications work and we indicated that we expect record cash flow to be generated in '19. We continue to expect to generate free cash flow well in excess of earnings or less capital intensive than most and communications frankly is a little bit less capital intensive than most - than some of the other businesses that we do. So, our cash flow profile is going to continue at a very strong basis and as I mentioned earlier, our performance in '18 is really not extraordinary. It's repeatable and typical of where we should be.

We will take our next question from Brent Thielman with D. A. Davidson.

José, in the power business, you guys seem pretty bullish there. How realistic is it to think that as kind of $1 billion revenue business in the next three years. And can you do that organically? José Mas: Well, I think we have, right? I think it did 665 million this year, we're talking about 30% to 40% growth next year at the higher end of that growth. It is $1 billion dollar business and we continue - and we expected to not just sustain there, but hopefully grow over time from that base.

Okay. And then the, I mean, the Permian activity looks pretty good for you. I mean, are you starting to use your resources outside of that region, I guess elsewhere in that oil and gas segment to address that demand, or is it still there if you need it? José Mas: It's probably still there if we needed, it's a little bit of both, but probably still there if we need it.

We will take our next question from Andrew Whitman with Baird.

I guess my question is for George. George, this year, you're financing more of your CapEx under capital leases rather than cash CapEx. Can you talk about the rationale behind that please?

Yeah. As we look forward, really, at the end of the day, one of the things we look at, there's very attractive rates on some of the leasing that we're seeing. And also, we look at some of the CapEx going forward, it's, we're always evaluating how much of our capital structure should be fixed versus floating to the extent that we move some CapEx into the capital leases, it puts it on a fixed basis. So, we think in a potentially rising environment over time, that that's a prudent move. So, we're adjusting our thoughts a little bit relative to the mix of our capital really to try to address that fixed floating percentage of our overall capital structure.

Okay, great. Just to dig a little bit more on that, when you - if you would have, how should I put this, if your CapEx would have been more cash driven like it has in the past, would you still be comfortable saying that your free cash flow would be in excess of net income this year? Or is that one of the drivers that gives you some of the confidence to make that comment? José Mas: So, Andy, it's José. If you look at our five year free cash flow, so not just 2018, but you take the last five years, we've done about 119% of free cash flow versus net income. So this is not a one year trend. This is what we've been able to deliver over five years. Over that five year period, we've had spent considerably higher rates on CapEx. So again, to George's point earlier, this should be a repeatable performance level for us for years to come.

We will take our next question from Blake Hirschman with Stephens.

Just a quick follow up and on the free cash flow commentary, I just wanted to get your thoughts on how we should be thinking about your kind of use of cash priorities versus, or I mean, if it's buybacks, acquisitions, because you've kind of been doing a little bit of both, so just your thoughts there. And that's it for me. José Mas: So last year, we bought 7.2 million shares for about $319 million. Obviously, that's the highest level of share buybacks we've ever done in the company's history. We're going to continue to look for opportunities to buy back shares over time depending on where the price is. That's kind of been our stated goal. We obviously made an acquisition here at the beginning of the year. We are seeing a somewhat more attractive M&A market than we've seen in the last couple of years. We think there are a lot of opportunities out there, so we're trying to balance what we're thinking about in stock buybacks relative to the opportunities that we can to position the business and those are probably our two drivers of cash use on a go forward basis.

It appears there are no further questions at this time. Mr. Marc, I turn the conference back to you for any additional or closing remarks.

All right. So this concludes our 2018 year end call. I'd like to thank everybody for participating and we look forward to updating you on our first quarter call. Thanks and have a great weekend.

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