Good morning and welcome to MasTec's Second Quarter 2022 Earnings Conference Call initially broadcast on Friday, August 5, 2022. Let me remind participants that today's call is being recorded. At this time, I'd like to turn the call over to our host, Marc Lewis, MasTec's, Vice President of Investor Relations. Marc?

Thanks Christina and good morning everyone. Welcome to MasTec's second quarter 2022 earnings call. The following statement is made pursuant to the safe harbor for forward-looking statements described in the Private Securities Litigation Reform Act of 1995. In today's communications we may make certain statements that are forward-looking such as statements regarding MasTec's future results, plans and anticipated trends in the industry 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 today's call. In today's remarks by management we'll be discussing adjusted financial metrics 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 measure can be found in our earnings press release. With us today, we have Jose Mas, our Chief Executive Officer; and George Pita, our EVP and Chief Financial Officer. The format of the call will be opening remarks by Jose followed by a financial review from George. These discussions will be followed by a Q&A period and we expect the call to last about an hour. We had another in-line quarter and have a lot of important things to talk about today. So I'll now turn the call over to Jose to get going. Jose?

Thanks Marc. Good morning and welcome to MasTec's 2022 second quarter call. Today I'll be reviewing our second quarter results as well as providing my outlook for the markets we serve. First, some second quarter highlights. Revenue for the quarter was $2.3 billion, adjusted EBITDA was $179 million, adjusted earnings per share was $0.73, and backlog at quarter end was $11 billion a record level. On our IEA acquisition call last week, we announced that we were experiencing higher levels of cost for the balance of the year with limited ability to mitigate or generally pass on increases to our customers and talked about our challenges with getting pricing adjustments outside of the typical annual escalators. While second quarter guidance was in line, the quarter was negatively impacted by inflationary cost pressures. Increases in fuel prices and labor coupled with material delays have impacted margins in every MasTec segment. In addition to the inflationary pressure, we have had some select execution issues that have also impacted earnings. To understand our future potential and our confidence in being able to see a significant improvement in 2023 and beyond, it's important to understand the areas where we've underperformed. To be clear, I'm not trying to make excuses and I take full responsibility for the execution issues we've had. But to understand how earnings can quickly improve, we need to break down our business in more detail. I'd like to start by focusing on our Clean Energy and Infrastructure segment. It's a segment where we are making a significant investment with the addition of IEA and it's a segment that for the second quarter of 2022, we're showing an EBITDA loss for the quarter. The segment has now underperformed for a number of quarters, so it's important to understand why we are confident…

Thanks Jose and good morning everyone. Today I'll review our second quarter 2022 financial results and provide some additional color on our guidance expectation for the balance of the year. For the sake of clarity, discussion of 2022 guidance will not include any contribution from the recently announced IEA acquisition which is expected to close late in the fourth quarter. If any effect from the proposed IEA acquisition is assumed that any future expectation discussed in my remarks, that assumption will be clearly indicated. 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. Reconciliation and details of non-GAAP measures can be found in our press release, SEC filings, or on our website. Second quarter results were generally in line with our guidance expectation communicated during our first quarter earnings with revenue at $2.3 billion and adjusted EBITDA of $179 million. Second quarter revenue grew approximately $300 million, a 17% year-over-year increase comprised of approximately $600 million in revenue growth in our non-oil and gas segments, namely our communications, power delivery, and clean energy and infrastructure or clean energy segments. This revenue growth was partially offset by an expected year-over-year decrease in our oil and gas segment of approximately $300 million. Second quarter revenue trends reflect the strategic shift we have made to expand our operations and capacity in areas where end market demand is growing. To put the significance of this shift in perspective, full year 2022, we expect to generate slightly over $8 million of revenue from our non-oil and gas segments representing almost 90% of our annual $9.2 billion revenue estimate. As a comparison, less than two years ago, our annual 2020 non-gas oil and segment -- oil and gas segment revenue was…

Thank you. [Operator Instructions] And we'll take our first question from Alex Rygiel with B. Riley.

Good morning, gentlemen. Nice quarter.

Good morning, Alex.

A couple of quick questions here, obviously the notable significant mix shift here is definitely occurring away from your Oil and Gas business towards the other businesses. Do you feel like this platform is established now? Have you talked to some of the IEA customers and your customers? And how are they responding to MasTec becoming much, much bigger in the Clean Energy markets?

Sure. So a couple of things, look, we laid out a strategy a couple of years ago during the pandemic to really move away from our Oil and Gas business was obviously struggling. There was a significant shrinkage in the demand because of the pandemic. So it forces us to really look at our business differently like we've spoken about a lot. And I think one of the things that we kind of got to take a step back and acknowledge is just the remarkable change in transition that we've seen at MasTec right, George alluded to it in his prepared remarks. But our non-Oil and Gas business was a $4.5 billion business in 2020. This year is going to be above $8 billion. Next year it will be north of $10 billion. So we just -- we think we've built an incredible business around the opportunities that exist in the marketplace. So I would say that, at this point we think we've got a great portfolio. We think we've built an amazing business with so much upside going forward. I think we're going to really take the time now to integrate, to execute, to really focus on execution. That's -- not that it hasn't been our focus, but that's what we're fully focused on today. To your question on IEA we haven't -- obviously we're very early on. And we're managing the companies as two separate companies today. But I think that just from the customer interaction we've had with our own customers has been tremendous, right? I think there's an enormous amount of excitement in the industry. Obviously, shortly after our announcement of IEA, the discussion about the new energy build really somewhat caught us all by surprise in a very positive manner. It's -- it will make a big, big difference to our business. So we're really excited about that.

And then, turning over to the Communications segment, obviously revenue growth of 30% is fantastic, a strong step higher sequentially in year-over-year. And your margin guidance looks solid as well. It feels like, we've been kind of waiting for 5G to develop, but yet it seemed like 5G has been here for three or four years. Can you talk to us about where you think we are in the deployment of 5G equipment into the network? And therefore is this step-up in revenue here is that sustainable for the long-term?

Sure. So I'd say a couple of things. One, a lot of the work that we've seen to date has still been a lot of the pre-work that we expect to go into the network, right? So it's been a lot of the fiber-based work. I still believe while obviously the wireless side of this has picked up substantially, it's nowhere near to the levels that it's ultimately going to be. If you look at all of the carriers separately obviously T-Mobile with its spectrum issues was able to get off to a faster start. I think AT&T and Verizon are really just starting. So I do expect a much greater acceleration in revenue growth on the wireless side going into 2023 and throughout '23. I think on the fiber side a lot of the growth that you've seen in our business has been driven by the wireline side of the business. And I also think it's just getting started. One of the big differences that I see in the business today versus probably at any other time I've been in the business and this is the business I've been in the longest has been the customers' realization that they need to do things differently right that the labor is not there to meet the demands of their workforce. I think we're working with our customers really creatively to put ourselves in a position for a lot of long-term success with them. I think our customers are open to it and quite frankly they're concerned about the resources and that's -- it's a good place for our industry to be and I expect it to significantly increase further from where it's at. Q – Alex Rygiel: Thank you very much.

Thanks, Alex.

And we'll take our next question from Neil Mehta with Goldman Sachs.

Good morning, team. Jose, I want to start off on the Mountain Valley Pipeline. And one of the pieces -- the moving pieces around the legislation is it feels like there's a higher probability of that moving forward. So, can you quantify what the opportunity set is around MVP? And how do you think about that for '23 from a financial perspective?

Sure Neil. So, in everything that we've kind of laid out to-date we haven't really included the full constructability of MVP. We currently have a certain amount of revenue that we generate for maintaining the right of way and maintaining the project and the status that it's at today. We agree with your sentiment. I think there is a much higher likelihood of MVP happening at -- probably faster than we had originally anticipated. It will obviously have a meaningful impact to our Oil and Gas business segment, if and when it gets built. And in the numbers that we've kind of laid out in the charts that we provided during our IEA acquisition call, I don't think we took into account MVP being built in 2023. With that said the upside the completion of that project for us is probably somewhere between $0.5 billion to $1 billion, depending on how the ultimate permit shake out. So, there's a substantial amount of work left on that project for us. And I think the likelihood of that happening in '23 increases by the day.

And just to clarify that -- so that's great color. That's $0.5 billion to $1 billion of incremental revenue that you have the potential to recognize if MVP does go through that's not in the '23 guidance. And is it fair to think low teens type of EBITDA margin for that type of work?

So Neil, for sure on the low end that would be accurate, right? It's going to depend somewhat on what the final permitting is and some of the constructive -- the means of construction that they'll have to use. But I think at the low end of that range it would be additive to what we're currently seeing from a maintenance perspective. And I think, it will be the same margin profile that we deliver on that project overtime. That project has not been at the higher end of our margin expectations for the segment, but it's been in good margins. And it obviously dramatically helps with absorption costs for the whole segment.

Perfect.

Thanks, Neil.

We'll take our next question from Marc Bianchi with Cowen.

Thanks. Sticking with the Oil and Gas business, you mentioned in the prepared remarks about some additional awards post quarter close. How big is that? And was that contemplated in the '23 guide that we got with the IEA announcement?

So Marc we did talk about it a little bit on the acquisition cost. So, it was contemplated in what we did there. It's a 300-mile 42-inch pipeline. We're not going to -- we don't necessarily give out project values. It's the largest pipeline, we've been awarded in over three years. It's an incredibly exciting project for us. And I think more importantly than that is just the level of activity that exists in that market today. I mean it is a completely different market than it was a year ago. It's a different market than it was six months ago, I think the commodity prices came back. I still think people held off building new capacity. I think today there's a lot of discussion about lack of capacity especially in the Southern shales again. So, I think we're going to see a significant uptick in that industry, in that market and I think will be a big beneficiary of it. So, we're hoping that this is just the start of many projects we'll get to build over the next few years.

Okay. Great. And then on the Clean Energy guide for the back half of the year, a significant uplift in margin which is understandable given the points that you made earlier. But I'm just curious how much progress you anticipate making on that in the third quarter versus the fourth quarter?

Sure. So, we do expect the fourth quarter to be better from a margin profile than the third quarter because we'll still be working through some of the issues in the third quarter. So, I do think we'll see a nice improvement from second quarter to third quarter. Obviously, I think margins will close to double last year's levels in the third quarter. And then I think we'll have the best quarter of the year in the fourth quarter as some of the new work kicks in and some of the pricing scenarios that we've talked about start to kick in. So, I'd call it roughly a 5% margin in the third quarter growing to somewhere between 7% and 8% in the fourth quarter.

Great. Thanks so much for that. I will turn it back.

Thanks.

And we'll take our next question from Noelle Dilts with Stifel.

Hi, thanks. Jose. Good morning.

Good morning, Noelle.

So I wanted to -- on the in conjunction with the IEA announcement in the call you talked a lot about some of your contracts not opening up yet to adjust for costs. So I was curious, one, if you could talk about if the current environment -- the current inflationary environment is, one, changing how you're structuring some of these newer contracts. And two, if as these contracts open up you're able to sort of alter or change some of the language around inflation just how you're dealing with basically structuring your longer-term MSA contracts? Thanks.

Sure, Noelle. So, I think, it's -- maybe taking a step back, right? On many of our contracts we do have annual escalators by right, right? So it's not that we don't get escalations, it's that we get escalations on the anniversary dates of those contracts. So what we've kind of said is our customers have been unwilling mid-cycle to readjust rates, but as those anniversary dates come up, we are seeing increases, right? And those increases are working their way through the year. So between now and the end of the year, there will be a number of contracts and customer relationships where we do get increases across our entire book of business. We had significant rapid cost escalations in the second quarter, and it just happened that a lot of those annual escalators weren't up in the second quarter. So as the third quarter plays out, as the fourth quarter plays out, we will begin to get those escalators. We got some in the first quarter, right? The problem is in the first quarter, the cost hadn't escalated to the extent that they did in the second. So next first quarter, those will be adjusted to reflect some of the pressure that we saw in 2023 -- 2022. So, it's really a rolling exercise. You're just not able to do it as soon as the costs go up. So there's a period of time that you're absorbing higher costs, while you're waiting for some of these annual escalators to take effect. Are there things in the contract based on these -- on some of the rapid cost escalations that we've seen that we're going to try to adjust for in the future? The answer is, yes. But I'd also say, historically, outside of labor, there haven't been any…

Okay. Got it. Thanks. And then on power delivery and kind of I guess more broadly just your electric business overall. I just wanted to dig a little bit more into kind of the decline in the core business versus what looks like growth at some of the acquired operations? And then also I think your electric work within communications was up quite a bit. So two questions there. One, when you look at that distribution work within communications is that sort of a different set of drivers than what you would characterize as kind of the more utility fuel T&D? And second, could you sort of talk about like when we look at these -- when we look at INTREN, H&M and kind of legacy MasTec, are these entities kind of going for different projects or competing, or might we see say a project that legacy MasTec would have targeted now going to H&M. How do we think about that dynamic?

So, a couple of things on that. Well, first, if you think about legacy MasTec business within what we used to call our Electrical Transmission and Distribution segment, which we now call Power Delivery, it was predominantly a transmission-based business, right? Whether it was big projects or whether it was smaller projects working with utilities, we were much more scaled to transmission there within our -- as you've mentioned in our comm business we did have some exposure to the distribution business, which was separate. So our issues from a revenue perspective in the second quarter are about transmission jobs that have been delayed and there's a couple of larger ones that we're hoping to start here in the third quarter that pushed out from the second quarter start that were impacted by material deliveries. Some of them have been impacted by permitting. So we've seen some impact to that which we called out, right? When you look at INTREN and Henkels & McCoy, they're -- they -- first of all, they're heavily skewed to distribution across the country. They also have transmission-related assets, but they've really focused within their core markets in their local markets versus MasTec that was more of a traveling business relative to transmission lines. So when we think about the segment, we've done a really good job of really integrating pieces putting pieces together. There's not a lot of overlap. We don't have business units that compete against each other for the same projects. We've kind of delineated not just geographically, but even from project size and project mix. So I think there's a very clear direction from the different groups as to what their business opportunities are, what their areas of responsibility are, what the geographical areas are. We've shifted some of that for sure, right? Some of that has changed, as we've looked at trying to make the best of the companies that we bought. I think we're building a much better platform on a go-forward basis than any of the businesses were individually. So that's definitely part of what we're doing, but I think there's very clear delineation. And as we keep performing and laying out our results, I think, we'll lay it out in that fashion, right? Because I do think it's important to understand, the different components of our business as we go forward and what's working and what's doing better than that.

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

Hi. Good morning. I guess two questions. First, understanding the working capital in the second quarter to fund growth, but – just can you help us with – I mean, there is a big ramp to get to your cash flow guide, so how we think about third quarter versus fourth quarter and what's driving that? And then a follow-up with Henkels and IEA sort of how does that change the cash flow conversion of the company on a go-forward basis? And then my second question Jose one of the questions, I'm getting a lot from investors is, obviously, MasTec has a lot of great organic growth opportunities ahead. Couple of pretty big deals, which historically haven't really done two big deals so close together. So, what are you doing to sort of mitigate risk associated with integrating two big acquisitions with the organic growth opportunities you see ahead? Thanks.

Yeah. So, I'll answer the second part first and then I'll let George cover cash flow. We talked a little bit about this on our previous call. I think one of the things that gave us a lot of confidence in our ability to really go after IEA was the success that we feel we're having with both INTREN and Henkels. And I think that, one of the things that we've obviously built the business over a long period of time buying smaller companies doing different type of M&A than what we're doing today, but one of the realizations out of those deals that were a little larger for us where the synergy opportunity is not just from a cost perspective, but more importantly from a revenue and customer perspective. And the response that, we saw from customers of us building scale and being able to provide, a lot more services to them, and the growth opportunities we saw from those customers because of that, really opened our eyes to what we could do at larger scale. So I think much of what we're trying to do with INTREN and Henkels is by the end of this year, we think we're going to have made so much progress that is really going to give us the time necessary to really focus on IEA and integrating that correctly. So part of the reason that we did what we did was quite frankly the success and the findings that we had in the previous acquisitions that make it – that made us excited about IEA. Again, I've said for a long time, I think in this business scale matters. Our customers are looking for partners that can help them reduce costs meet their schedules or even expedite their schedules. And I think the things that, we've done have really positioned us differently than we've ever been positioned in the marketplace before. I'll let George cover the cash flow question.

Jamie, in terms of the cash flow for second quarter, obviously, we had a negative cash flow from ops. We talked about the sequential revenue increase. But I think also it's important to note the comment that we've made regarding, what we've done in terms of inventory deposits on materials and materials, right? And that's been a drag during the quarter – that was a drag during the quarter in our working capital for sure. So when we look at the second half of the year, combination of improved earnings that turning that drag of front-loaded, if you will inventory materials and converting them into billing material – into billing activity will generate more cash flow for the back half of the year. So our view would be that, the second half of the year, we should be slightly better than last year's second half in each quarter, right? And third quarter, we'll start seeing some of that. So we should have a good cash flow from a third quarter perspective. And in part that will be driven by the fact that, we're starting to convert some of the materials and inventory, which is probably close to about $100 million, when we're all said, and done that we've invested in here in the first half of this year that will start converting into project activity and billing. We're very comfortable with the view that we have – that we laid out for the year. And another – when you talk about net debt, outside of the working capital profile, which from our perspective in the first half of the year has been about steady. It stayed in that high 80 range. We expect that to get a little bit better in the second half as we move through a couple of things. But between the combination of the things, I just talked about on working capital receivables and inventory and then couple that with lower levels of CapEx, because we – when you look at our CapEx, we front-loaded. We've doubled our net cash CapEx spend in the first half of 2022 at about $170 million, I think we were close to 90 last year. So we significantly front-loaded our CapEx. All those factors come together and put us back to what – where we should be which is a debt level at the end of the year it's about the same as where we started and we're very comfortable with that view.

Thank you.

Thanks, Jamie.

And we'll take our next question from Andy Kaplowitz with Citigroup.

Good morning, everyone.

Good morning, Andy.

Jose, so how do you think about normalized margin in Communications going forward? We know what you've guided to for the second half of the year and what's embedded in 2023. But Communication margins as you know have been kind of stuck in the 10% to 11% range for quite a while now, and you've got Henkels in there you're obviously hiring a ton of people. So, maybe give us a little more color on how you're thinking about normalized margins in that segment and ultimate margin potential?

Sure. I think, it's really important to focus on the growth that we've had right 30% year-over-year growth, 24% sequential growth. The reason I say it is -- it's expensive, right? A lot of our growth is in new markets offices that were open people that we're hiring you don't get the same level of productivity. So our margins are not where they should be or where we think they can be. We've talked about margin profile going into 2023 in the 11% to 12% range, which is an improvement over 2022. We think that really starts to demonstrate itself as these offices have a little bit of time under their belt as a lot of the new hires begin to become more active you see it in margin. But the truth is that even at that level we expect further growth in 2023 which also impacts margins. So I still don't -- our long-term range on the margin profile of -- I think we've laid out 12% to 13% for a long time hasn't changed from what we think is achievable in Communications. But it's going to take an environment where we don't have significant growth where it's a little bit more stable and we're able to really enjoy the fruits of what we build to get there. And I think we're going to get there. But I think until we stabilize a little bit from a growth perspective we're going to continually see margin improvement, right? So margins should be better. They will be better in 2023, but I don't think we get to optimal levels probably until 2024.

It's helpful, Jose. And you mentioned that your problem projects will be done within your Industrial business and Clean Energy by the end of the year. But as you know you've had some slip-ups over a long period of time in that Clean Energy business. So how do you do things differently moving forward in terms of bidding or selectivity of projects? I know you talked about cost reimbursable that's where you're shifting. But why would you take fixed price projects going forward in that industrial business? What would be the conditions that you do so?

Well, first of all, we had to break into the business. I think if you look at MasTec's history and you look at our acquisition of Wanzek, I don't know 12 years ago whatever it was they were always in the industrial business. It was a smaller component for them. We made the decision over the last few years what was happening in the marketplace that it was an interesting market to really step into. We made some really significant new hires around that. And I think we're really happy with the business we've built, right? Unfortunately, we've learned this lesson part too many times. You get into a business you end up having to learn through a couple of bad projects and spending some money to really build the platform. But I actually think that we've achieved that, right? So the reason we're getting cost plus work isn't because customers want to derisk the business for us. It's because we've proven that we can do something and we have the ability to meet their needs that they're willing to pay us cost plus to do. We would never have been able to do that without making the investment in that business to get there. So I think for us to break into the business we had to take some of that risk. Unfortunately, we thought we could better mitigate them. It is what it is, but it's put us in the position to build a quite frankly less risky business on a go-forward basis. I think there are certain projects that we're really comfortable with that we think we fully understand that we think you -- the risk profile is very different where we would still be comfortable doing fixed price. When you get into projects that are a…

Appreciate the color, Jose.

Thanks, Andy.

We'll go to our next question from Steven Fisher with UBS.

Thanks. Good morning. Just to round out that discussion on the industrial piece. You mentioned the $425 million of revenues in 2022 and the $300 million of cost plus awards. Do you have a preliminary sense of what the industrial revenues could look like in 2023? And how much of that do you think could be cost reimbursable?

So we'll probably do somewhere around $500 million, I'd call it today with $300 million of that being cost plus.

Okay. And the balance of the -- that will be fixed price is with either existing customers like you said deeper relationships like just why you think those, the remaining fixed price will be more confident?

Well, I can tell you that at least probably north of 100 of that are projects that we're currently working on that will flow through into 2023. So I think we've got a really good feel for the financials of those projects as we've been working on them. So some of that is just bleed through from 2022 into 2023. And look they're -- we actually have a lot of that in backlog already, right? So the question is going to be what does the business look like for 2024 quite frankly. And what do we start working on in 2023 that's going to play into 2024 which will probably some of it start in 2023. Some of the work that we're doing today is going to lead on to additional projects. So to the extent that we've successfully built projects for one customer and they've got multiple projects behind it, if we're comfortable with them, we'll focus on fixed price. For those that we think there's more risk, we're going to push the cost plus. But I think a lot of it is just going to drive from the existing customer relationships that we've built and the opportunities that they're going to have for us in the future.

Okay. If I could just ask you quickly on Communications. How have you factored in any other material delays or absorption issues in the second half of the year within your improving margin framework and expectations? Thank you.

Yeah. Steve, the biggest -- we're not really concerned about that because there is just so much work, right? So the reality is that as we think about the second half of the year, it's more -- it's really all about labor. If there's a job that's missing materials there's five jobs behind it that need to get built. There's a significant demand for the services that we offer in that business today and really the entire focus of our team, especially in the last quarter last -- probably the first half this year was really focusing on getting the scale to be able to meet the demand that's out there. As an industry, demand is much higher than the supply of labor at this point. And I think it's something that we're trying to figure out how to best serve and best take advantage of. So we're not worried about individual projects being delayed because there's more than enough work behind that in case there is a project that is ultimately delayed.

Thank you.

Thanks, Steve.

We'll take our next question from Justin Hauke with Robert W. Baird.

Yeah. Good morning, guys. So most of my questions have been answered here. I guess I had one question still to circle back on the cash flow. And just -- so George, I appreciate all the comments about why second half should look better with the CapEx being weighted to the first half and some of the AR receivable issues. But are there any -- I guess what really I asked this is there's been a big uptick in like your unbilled AR and your retainage balances and also just the unapproved change orders. And so I'm curious is there anything that's like milestone-driven that could push out to 2023 from some of these contract disputes that would challenge the cash flow, or is it really just kind of mechanically AR collections to get there?

Hey, Justin, yeah, this is George. No there's nothing structural or of a major change regarding the components of unbilled and retainage et cetera. I would characterize all the activity including UCO is really ordinary course and in the process of moving forward. Clearly, we had a pretty sizable growth here in the second quarter. So in some cases, you hit some milestones but we expect those milestones to happen during the second half of the year. And within a picture where we ended up having our DSOs for the quarter were 88, I think we'll be in the mid-80s. So there'll be a little bit of an improvement here as we close out the year, but not a meaningful change. That picture altogether leads to the cash flow that we're talking about. Certainly, we'll have more in the fourth quarter, because our revenue levels will dissipate some. So we'll see improved cash flow in the third and in the fourth. Second quarter on the cash flow from ops side, it's not just the receivables or the unbilled, it's also the investments we've made on materials and inventory that are also dragging down the cash flow from ops. And again, those are expected to convert into cash here as we move out through the balance of the 2022.

Okay. And I guess my next one, I don't -- to the extent you can comment on it because it hasn't closed, but since you guys have a -- there's a cash component of the IEA acquisition where your leverage is. I'm just curious, if you have any thoughts about what the interest expense might look like next year or the rate given that the leverage is just a little bit higher than it normally is and where rates have gone. Just any commentary on that to kind of think about it?

Well, we talked -- we obviously talked about during the IEA call and it hasn't really changed, right? We expect that our stand-alone debt to be in that $1.7 billion range then we added -- we would add in the acquisition financing, which we're in the midst of discussing -- in the midst of determining what we're going to do. So I'm not going to make public comments about how that would play out. But I would -- certainly, as you look at next year on a pro forma basis, as we start the year we would have a higher level of debt. We would expect that we would deleverage during the year pretty sizably and get down to low to mid-2s by the end of the year in terms of a leverage profile. And interest accordingly obviously these are higher these days, but somewhere in that mid single-digit range 4% to 5%. If you want to model out an interest expense guess, I'd say 5% is certainly safe to add in as far as incremental costs associated with the financing of IEA. And that's the way I would look at it. From here to us to guesstimate what the additional short-term rates are going to be, it's hard to do, but obviously we've all seen that that has been moving northward so far this year and that's certainly increasing the level of interest cost from a total company basis because rates are moving up.

That’s helpful. Appreciate that. Thank you. Thank you, guys.

Thanks, Justin.

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

Hey. Thanks. Good morning. I just had one left, and I was wondering -- and sorry, if I missed this, but the solar guidance, I think sort of was adjusted last quarter. I'm wondering if you think you'll claw that back now that the tariffs have been sort of push to the rate.

Yes, not in 2022. So, our real expectation hasn't changed for 2022. If you look at our Renewable business, which we expected to be up pretty sizably in 2022 versus 2021, is actually down because of some of the solar projects that are getting pushed out in 2023. The good thing is they're pushed out. So we know that those projects are going to go. There'll probably be some activity late in the year, but we haven't really changed our view as to what that could be as of today.

Okay, great. Thanks guys. Best of luck.

Thanks.

And we'll take our last question from Sean Eastman with KeyBanc Capital Markets.

Hi, guys. Thanks for squeezing me, and I know we're running long here but I appreciate it. High level one for me. If we look at the big acquisitions announced over the past couple of quarters, H&M, INTREN now IEA, how would you frame the operational leadership that will be retained there and how that factors into your decision-making around these deals? And perhaps, just in light of all the growth avenues in front of you guys, how would you frame sort of the operational leadership, strategic hires that you've added to really capture this opportunity?

Sean, it's a great question. And when we think about our business at the end of the day, regardless of all the financial metrics we've talked about today and the opportunities that exist, at the end of the day our business is all about people. And this is an environment where attracting talent, keeping talent is incredibly challenging. So, when you look at -- when we think about the transition of MasTec and quite frankly, the transformation of MasTec over the last couple of years as much as it is about revenues and earnings, it's about the people that you bring on to the team and the responsibility and ability that they have to continue to help grow the business. So I think, when starting with INTREN, working its way through Henkels the people that we were able to pick up in those acquisitions the people that have been there 20, 30, 40 years within those organizations, they've added a tremendous amount of capacity, knowledge, commitment to MasTec. When we think about IEA, we think it's going to be the same thing. We always have said that our acquisitions aren't about people synergies. They're not about walking in the door and trying to cut costs. People are the most valuable asset in this business. When you look at the growth opportunities that exist out there, our challenge, our mission, is how do we use the people that we pick up and the efficiencies that we're going to gain by scale to ultimately use those excess people to continue to grow the business, right? So, how do we take advantage of the growth by being able to do more with the joint combination of the people and that's what it's all about. So I think when you -- when we look at INTREN and Henkels and our ability to retain the talent that we acquired, the same holds true of IEA. We're super excited about the 6,000 or so people that we're going to add into the MasTec family. Again, we're hopeful that we can challenge them and push them along their career and allow them to have hopefully a place where they can retire from and make whatever is left to their career, whether they're starting or whether towards the tail end really valuable. And that's why we do these deals, right? It's not necessarily about a customer or a relationship it's about the people that come with it. And in all three instances, whether it's INTREN, whether it's Henkels & McCoy or now IEA, we've been incredibly impressed with the level of talent and the level of people and the loyalty that the people have had to those businesses, which is what makes us really excited about those acquisitions. So quite frankly, it's the most important part of these deals. And it's probably what I'm most excited about, and the ones that we've done and honestly, in IEA joining the MasTec team.

Very insightful, Jose. And [indiscernible] that three questions, I’m going to leave it there.

Thanks, Sean.

That concludes today's question-and-answer session. I'll turn it back for any additional or closing remarks.

So, I just want to thank everybody for joining us today, and we look forward to updating you on our third quarter call in a couple of months. Thank you for joining us.

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