MasTec Inc

NYSE:MTZ

Earnings Call Transcript 2024-Q3

[Operator]

Welcome to MasTec's Third Quarter 2024 Earnings Conference Call initially broadcast on Friday, November 1, 2024. 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?

[J. Lewis, executive]

Thanks, Mandy, and good morning, everyone. 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 initial broadcast of this call, and the company does not undertake to update these expectations based on subsequent investor knowledge.

Various risks, uncertainties and assumptions are detailed in the press release and filings with the SEC. Should one or more of these risks or uncertainties materialize or should any of our underlying assumptions prove incorrect, actual results may differ significantly from results expressed or implied in this communications today.

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 made we may use certain non-GAAP financial measures in today's call. A reconciliation of any non-GAAP financial measure not reconciled in these comments to the most comparable GAAP measure can be found in our press release.

Please note that we have two additional documents associated with today's webcast, along with our earnings release, which can be found on the investor page in the Events and Presentations section at mastec.com. There is a comparison presentation with information about analytics on the quarter just ended and a guided summary to assist you in financial models for Q4 and the year. Both PDF files are available for download immediately.

With us today, we have Jose Mas, our CEO; and Paul Dimarco, our EVP and Chief Financial Officer. The format of the call will be opening remarks and analysis by Jose, followed by a financial review from Paul, and we expect the call to last about 60 minutes.

We had a nice quarter and a lot of important things to say today. So I'd like to turn it over to Jose. Jose?

[Jose Mas, executive]

Thanks, Marc. Good morning, and welcome to MasTec's 2024 Third Quarter Call. Today, I'll be reviewing our third quarter results as well as providing my outlook for the markets we serve.

First, some third quarter highlights. Revenue for the quarter was $3.3 billion. Adjusted EBITDA was $306 million. Adjusted earnings per share was $1.63 and backlog at quarter end was $13.9 billion, a $520 million sequential increase.

In summary, we had another good and clean quarter. While revenues were slightly below expectations, EBITDA margins were about 85 basis points better than expected. For me, the highlight of the quarter was that every segment outperformed our margins compared to guidance. This demonstrates the significant improvement in our business and with record backlog, we entered 2025 with great momentum and confidence.

I'd like to point out some further highlights about our quarter. Our Communications segment revenue grew over 12%, both year-over-year and sequentially, which resulted in record quarterly revenues for this segment. Our Communications segment EBITDA margin of 11.5% was its highest performance in 2 years. Our Clean Energy and Infrastructure segment also had record quarterly revenue and EBITDA.

Our Clean Energy and Infrastructure EBITDA margin of 7.5% was its best performance since 2019. And revenue in our Power Delivery segment was up year-over-year for the first time in 2024, and was up about 10% versus both guidance and sequentially and begins to reflect an improving environment on distribution spending.

I'd also like to point out that our total company non-oil and gas revenue was up over 15% sequentially and non-oil and gas EBITDA improved 36% sequentially, which was the primary driver of our earnings beat. We made significant investments post pandemic to diversify our business and position us to participate and benefit from the changing landscape of both power generation and delivery. While we believe we had made great progress in our ability to compete and win, today's earnings begin to demonstrate our success.

To be clear, while we're happy with today's results, we have room for significant improvement across all of our segments. That opportunity for improvement is actually what I'm most excited about. We are seeing incredibly strong demand for our services. We participate in great end markets, and our prospects for strong organic growth are as good as they've ever been.

We also have the ability to meaningfully improve margins. While we have made progress this year, that margin improvement, coupled with strong revenue growth, should lead to significant value creation for our stakeholders. I'm excited about that opportunity and I'm confident that the MasTec team will deliver.

Now I'd like to cover some segment highlights. In our Communications segment, third quarter revenues were up double digits year-over-year and sequentially and represented the segment's highest revenue in our history. Margins at 11.5% were at a 2-year high. On the wireless side, our market share expansion with AT&T coupled with the Nokia Ericsson swap out is on track and playing out as we expected. On the wireline side, demand remains incredibly strong. While there have been some short-term delays, the impact of BEAD's funding will be a catalyst for our business, as will the growing demand for fiber associated with artificial intelligence and data centers.

As an example, we are excited to announce that post quarter ends, and not included in backlog, we were awarded a major fiber program build from Lumen Technologies. This multistate award represents over 8,000 miles of fiber in support of their efforts to provide capacity for hyperscalers and expand their high-capacity network infrastructure, enhance connectivity and address the demand for reliable, advanced digital networks.

In our Power Delivery segment, during the quarter, revenue was above our expectations as we began to see some improving trends from our distribution customers who had cut back earlier in the year. The third quarter represented our first year-over-year revenue increase in 2024. We made good progress on our large 700-mile transmission award that we announced last quarter and we are on schedule to fully mobilize in early 2025.

Despite the revenue beat, backlog was up nearly $200 million sequentially, and book-to-bill was strong at 1.29x. Projected energy load growth in the U.S. will have a substantial impact on our business as our customers meaningfully increase their investment in both generation and grid expansion. We are incredibly well positioned to take advantage of this opportunity.

In our Oil and Gas Pipeline segment, revenues were slightly lower than expected, but margins outperformed. While backlog is down, demand is better than backlog suggests. We have a number of verbally awarded projects that will convert to backlog. We currently have strong multiyear visibility and are excited about the role gas-fired generation is going to play in helping meet our country's load growth needs.

Finally, in our Clean Energy and Infrastructure segment, revenues were up over 20% sequentially, and EBITDA was up 80% sequentially. Both revenue and EBITDA were at record levels for the segment. Margins of 7.5% were well ahead of expectations. I'd like to congratulate our Clean Energy and Infrastructure team for their performance. 2023 was a difficult year in this segment and we made a number of changes to both maximize our competitive positioning and improve our operational performance.

The third quarter results begin to reflect their progress. In addition to the financial progress, Backlog for this segment is at record levels and increased nearly $500 million sequentially or a book-to-bill of over 1.4x. Backlog is up over $1 billion from this time last year and that positions us well for 2025 and beyond.

In addition to the growth opportunity, we are focused on continuing to improve margins. While the third quarter showed great progress, we expect to keep improving.

In summary, this was a good quarter with solid performance across all of our segments. The investments we've made in the last few years to build scale along our vertical offerings are beginning to translate to financial success. I want to highlight again that what excites me the most today is our opportunity to not only grow revenues but to do it while simultaneously improving margins. That combination provides tremendous upside from MasTec.

We are pleased with our market position, our diversified business model and our ability to offer our customers integrated solutions at scale. I believe that the most successful companies in our space are those that have the scale to meet our customers' demand. Our customers' projects have significantly increased in size, scope and complexity, and there is no question that our customers need strong partners.

I believe that over the last few years, our biggest accomplishment has been to position ourselves as one of only a few partners that's viewed throughout our industry as a partner whose workforce, size and scale affords us the capabilities to take on any project.

I'd like to take this opportunity to thank the men and women of MasTec. I'm honored and privileged to lead such a great group. The men and women of MasTec are committed to the values of safety, environmental stewardship, integrity, honesty and in providing our customers a great-quality project at the best value.

These traits have been recognized by our customers, and it's because of our people's great work that we've been able to position ourselves for continued growth and success. I will now turn the call over to Paul for our financial review. Paul?

[Paul Dimarco, executive]

Thank you, Jose, and good morning, everyone. To begin, a few third quarter highlights.

Third quarter adjusted EBITDA was $306 million, exceeding guidance by $11 million and a quarterly record. Adjusted EBITDA margin of 9.4% exceeded our guidance by 85 basis points. We met or exceeded our adjusted EBITDA guidance for each segment despite the lower-than-expected revenue in the quarter as certain projects saw slower burn than anticipated. Adjusted earnings per share was $1.63, exceeding guidance by $0.39, driven by the adjusted EBITDA, lower depreciation and interest.

18-month backlog at Q3 totaled $13.9 billion, an increase of $520 million in the second quarter and $1.4 billion year-over-year. Growth was driven by continued strong bookings of renewable energy projects where backlog has more than doubled from last year's third quarter.

Lastly, we continue to improve our balance sheet in the third quarter, with cash flow from operations of approximately $280 million, despite 10% sequential revenue growth. Accordingly, we reduced net debt by approximately $120 million in Q3 with net leverage of 2.2x.

Turning now to our segment performance and expectations. Third quarter communications revenue was $927 million with an adjusted EBITDA margin of 11.5%, generally in line with our expectations. Modestly lower revenue in the quarter versus guidance was driven by delayed construction starts on certain wireline projects.

Overall demand remains very strong, so this represents a delay in timing of revenue recognition. Our updated outlook incorporates these delays with full year segment revenue guidance reduced by $50 million to $3.4 billion, but maintaining our adjusted EBITDA forecast unchanged with margins in the high single digits. For the fourth quarter, we anticipate revenue will be approximately $915 million, up 20% year-over-year, with adjusted EBITDA margins in the low double digits.

Third quarter Power Delivery segment revenue was $713 million, and adjusted EBITDA was $54 million, or 7.6%. Revenue was higher than expectations as we saw some rebound in distribution services and a modest impact of emergency restoration services in the Southeast U.S. 18-month backlog for Power Delivery increased by approximately $185 million from Q2, to $3.2 billion, a record level.

For the full year, we are revising our forecast to reflect third quarter performance and continued emergency restoration in the fourth quarter. We now expect segment revenue to be $2.65 billion with adjusted EBITDA margins in the high single digits.

Fourth quarter revenue is anticipated to be $730 million with adjusted EBITDA margins in line with the full year estimate. In the third quarter, our Clean Energy and Infrastructure segment generated adjusted EBITDA of $85 million or 7.5% of revenue, ahead of our expectations by 150 basis points. The strong margin performance was driven by improved project execution across all 3 verticals: renewables, infrastructure and industrial, all of which achieved their best margin quarter of the year.

Revenue of $1.14 billion was $187 million below guidance as certain project activity saw near-term delays pushing revenue into future quarters. These delays were driven by a combination of factors, including timing of material deliveries and the impact of adverse weather. Backlog conversion remained very strong, growing over $470 million sequentially and $1.1 billion year-over-year to approximately $4.1 billion, a new record.

For the full year, we now expect Clean Energy segment revenue to be $4.1 billion with mid-single-digit adjusted EBITDA margins trending 100 to 150 basis points higher year-over-year. Fourth quarter revenue guidance of $1.3 billion reflects 11% sequential revenue growth and 19% year-over-year. Fourth quarter margins are expected to be in the mid-single digits approaching Q3's level.

Third quarter pipeline segment revenue was $498 million with adjusted EBITDA of $103 million or 20.7%. Revenue was slightly below expectations due to the timing of product burn, which we expect to make up in Q4. Our full year pipeline segment outlook remains unchanged with revenues of $2.1 billion in adjusted EBITDA margins in the high teens. This equates to fourth quarter revenue of $425 million and adjusted EBITDA margins in the mid-teens.

On a consolidated basis, full year revenue is now expected to be $12.225 billion with adjusted EBITDA of $990 million, reflecting the Q3b. Our consolidated fourth quarter outlook remains largely unchanged with $3.325 billion of revenue and adjusted EBITDA margins of approximately 8%. We are also raising our adjusted EPS estimates to $3.75 for the full year and $1.29 for the fourth quarter.

As part of our continued efforts to improve fixed asset utilization and return on invested capital, we completed a comprehensive review of MasTec's depreciation policy in the third quarter. The overall size, diversity of asset categories and usage patterns of our capital fleet have changed significantly in recent years. So we launched this initiative to ensure we are more actively capturing the cost of our capital expenditures to enable proper valuation of the associated return on investment.

We found our operations were consistently utilizing assets beyond the useful lives stated in the prior policy, further evidenced by our relatively low CapEx as a percentage of revenue in recent years. The revised policy was implemented prospectively in the third quarter to these depreciation levels are comparable to future expectations.

Shifting to the balance sheet. We committed to deleveraging following our strategic acquisition in 2022. And through the third quarter of 2024, we have now repaid over $900 million of debt. Our cash flow conversion over that same time frame equates to approximately 85% of adjusted EBITDA. I am proud of the focus and discipline MasTec has exhibited to drive these solid results.

Q3 year-to-date cash flow from operations totaled almost $650 million, exceeding our prior full year estimate. DSO at Q3 came in at 68 days, slightly better than Q2 and liquidity stands at $1.9 billion. We expect some working capital investment in Q4 and now expect full year cash flow from operations to be approximately $700 million. As a reminder, we have posted a guidance summary on the Investor Relations section of our website that summarizes our outlook and provides additional data points for modeling purposes.

We'll now turn the call back over to the operator for Q&A.

[Operator]

[Operator Instructions] We will take our first question from Andy Kaplowitz with Citigroup.

[Andrew Kaplowitz, analyst]

Jose, obviously strong margin performance across the company, but it seems like rarely do you have essentially all of your segments operating better than you expected together. So could you give us a little more color to what's going on?

Are you running the company at all differently this year after the last year? Or is this just a function of improved price versus cost, given labor and equipment supply chains are better as well as obviously good blocking and tackling from the team?

[Jose Mas, executive]

So Andy, I think this should be the expectation of ourselves and even in the market of us, right? I think that we've made significant investments in the company over the course of the last few years to take advantage of the market opportunities that we had in front of us. And I think what you're seeing today is kind of the beginning of that translating to financial success.

We think we've had great operational success over the course of the last 9 months or so in terms of how the business was trending, how we were doing with customers wins, our reputation in the industry, the types of projects we were winning. And I think it was just going to be a matter of time before that demonstrated itself in the financial performance of the company, and I think we started to see that in Q3.

[Andrew Kaplowitz, analyst]

Okay. And then I know it's a bit earlier to talk too much about '25, but you did mention the confidence going into '25 given your sequential backlog growth. You've got that Lumen award, which curious if -- how big that is. But like I think the street is forecasting close to mid-teens EBITDA growth for MasTec in '25. So maybe any puts and takes you see across the businesses and your confidence level in meeting or beating that forecast, are you comfortable with it?

[Jose Mas, executive]

Sure. So if you look at 2024 versus '23, EBITDA with our new guidance is going to be up about 15%. If you look at -- we haven't provided guidance for '25, but if you look at consensus estimates out there, it's just under that growth for '25 versus '24. We believe that to be achievable.

When we think about our businesses at a high end, right, when we think about our comms business, our Power Delivery business, our Clean Energy and Infrastructure business, we expect all of those businesses to be up double digits from a revenue perspective on a year-over-year basis organically. Again, we have tremendous momentum across all those.

We would expect our Oil and Gas business to be flattish to potentially slightly down. It's going to be really dependent on project timing starts. But we feel great about revenues. We feel great. We think -- again, we think we've got the opportunity to improve margins across all of our segments, maybe with the exception of Oil and Gas. And we think we've got a great chance of delivering that. So that's how we would -- that's our early thoughts around '25 as we sit here today.

[Andrew Kaplowitz, analyst]

And just Lumen, is it -- it seems like a very large job. Any more color on that?

[Jose Mas, executive]

Yes. Look, they haven't historically been a big customer. They've been a sub-$50 million customer for us for the last 2 years. It's a big win for us with the customer that we typically haven't had done a lot of business with. So it's, I think, a great advancement of our relationship and we're super excited about helping them. They've got a ton to do. They've been very successful as it comes to hyperscalers and their ability to sell their network in. So we hope to keep growing with them and keep supporting them to hopefully keep winning awards over time.

[Operator]

We will take our next question from Steven Fisher with UBS.

[Steven Fisher, analyst]

Congratulations on the nice margin trajectory here. Just to start off on the slower Clean Energy revenue ramp. Was that specifically solar projects? It sounded like maybe there was some material delivery delays and weather. Can you talk about how many projects that was driven by and what's the path to improvement there? Is there any risk to that in Q4 and into 2025?

[Jose Mas, executive]

Steve. So I'd say a couple of things. I'd say if you look at our Clean Energy business from second quarter to third quarter, we were up roughly $200 million or just over 20% on a sequential basis, I think that's a big number.

When we look at what we expect to do in Q4, it actually ramps faster than that. So these are big projects. These are projects that if you slip a week or 2, it has a significant impact to revenue. There were no major changes in project outlook or what we expected to do. There were just some projects that slip by a couple of weeks. It could be delivery of materials. It could have been a particular permit.

But we don't see anything, especially within the backlog that we have today. We don't see anything we're uncomfortable about hitting our fourth quarter numbers. We actually think most of the -- all of the jobs that we need to do that have all been started. So we're pretty excited about where we are.

Again, with big projects slips of a couple of weeks have an impact to revenue, and I think that's what you saw in Q3, which I think was more than made up for the outperformance in earnings, which has a lot to do with the fact that a lot of the older projects are burning off, and we're starting a lot of the newer projects that we've been much more successful at.

[Steven Fisher, analyst]

Sounds good. And then just a follow-up on the good cash flow and as it relates to capital allocation. I mean, can you just talk about some of the underlying cash flow drivers there that are maybe kind of separate from the nonrecourse financing. I'm just kind of curious if there's any connection to sort of the increase in those receivables sales this year to M&A strategy.

I'm wondering if the market that you're seeing for M&A is perhaps active enough that it makes you want to have sort of lower leverage to be able to kind of pursue some of those deals that you might be seeing out there?

[Paul Dimarco, executive]

Yes, Steve, this is Paul. So I mean, the situations where we're using facilities to advanced receivables with customers is, frankly, pretty small. The driver is from really the contract assets. We're billing quicker. We're billing more accurately, and that's really from the focus that all of our teams have on that effort.

Some of it's mix. Generally renewable and infrastructure projects have better working capital profiles. So as that segment grows, we're going to have just a better mix of billing parameters in the contracts. But where we are today is achievable and we're very comfortable with leverage as it stands now and the flexibility gives us to deploy capital in a manner that we think is best for shareholder value.

So we think we're in a position now where will support the organic needs of the business. And if the right M&A opportunities come up, then we have the flexibility to look at that as well.

[Jose Mas, executive]

And Steve, maybe just to add to that, I think that is a big change, right? We -- if you what a difference a year makes, right? We were sitting here last year, very focused on reducing debt. We put out a target of approximately 2x leverage. I think we're well on our way of beating that this year.

So I think we have great financial flexibility. We do see a very active M&A market today. I think we've been very successful in M&A in the past, especially in the type of deals that we historically did. So I think it could be reasonable for you to expect us that we're engaged, we're looking, and there are some things that we would potentially do in the future.

[Operator]

We will take our next question from Ati Modak with Goldman Sachs.

[Ati Modak, analyst]

Jose, I think you mentioned a few verbally awarded contracts in the Oil and Gas business. So wondering if you can provide any color there. And then for the gas gen business in general or the exposure in general, what does that opportunity set look like for you? Any color you can provide?

[Jose Mas, executive]

Yes. So I think that the message that we're trying to get across is we're -- again, we've got what we think is excellent visibility and really not just for '25, but even into '26 and '27. So we've got a number of customers that have projects that are planned over the course of the next 3 years. We have a really good understanding of which of those projects our customers want us to work on and expect us to do for them. So that's incredible visibility, much better than we've had in years as it relates to our Oil and Gas business.

I think that part of what's going to be dependent on where our revenue levels are as project starts. There's -- we have a very busy second half of '25 planned and a very, very busy '26 plan. So if those projects get to start a little bit earlier, if they get pushed, it will have some impact on '25 revenues.

But I think, again, the contrast and the difference of where we were a couple of years ago in this business where we were concerned about where that business was heading. I think today, it's a very healthy business. It's a business that has tremendous upside for us. I think 2023 is turning out to be a very good year in that segment. But our 2024 is turning out to be a very good year in that segment. But I think that as we look at some of the outer years, we think it could be even better, right.

Again, '25 might be more challenging because we've got the replacement of MVP that we've got to do. But when we look at '26 and '27, we're feeling really, really strong about those years, and there's tremendous upside. So we're very excited.

From a power generation perspective, look, we're -- we just believe that gas-fired generation is going to play a role in that, a much bigger role than we previously anticipated. And that's going to lead to business not just for our pipeline group, but for some of our infrastructure groups as well. And again, we're super excited about the long-term opportunities there.

[Ati Modak, analyst]

That's great. And then on the Clean Energy side, your backlog increase was pretty strong this quarter. Can you give us any color on the nature of projects, maybe size, customer type, if you want to? And then anything you can provide on what the impact on margins should be next year?

[Jose Mas, executive]

Sure. So I'd say a couple of things. I'd say, A, we had a really strong booking quarter. We hope that, that trend will continue in Q4. I think one of the real changes over the course of the last year has been our ability to really have some large anchor tenants that are giving us sort of agreements to build a considerable amount of their work.

That's been very important for us because I think that's something that we haven't necessarily had in that business over the course of the last few years. With that said again, we're just -- we're excited. Demand is really strong. I missed the last part of your -- what was the second part of your question?

[Ati Modak, analyst]

I just wanted to understand what the impact on margins could be given the backlog strength this quarter.

[Jose Mas, executive]

Yes. So again, strong margin quarter. We're -- when we look at Q4, we're expecting margins approaching that same level. Obviously, Q4 has all the holidays built in. So I think if we can approach that level, it would be a huge win.

I think as we think about next year, we probably need a little bit of time to properly assess what our margin progression is going to be. Again the last Q3, and we expect Q4 to be really good. And as we get a better understanding of what these projects can ultimately execute at, I think we'll give more insight of that as we provide '25 guidance.

There's no question that getting rid of some of our older projects, some of our troubled projects, and the performance of our newer business, the business that we've won within the last year has been a lot higher, and I think that's a great trend for us.

[Paul Dimarco, executive]

And Ati, I'll just add one of the biggest benefits of the visibility we have with those contractual bookings is we started the year in a whole with really late Q1, both in '23 and '24. And we're always going to have the seasonality in the first quarter, but we have significantly more work that will continue through year-end into the first quarter, and we don't expect to have that whole -- that we started out from a margin perspective in that segment going into '25.

[Operator]

We will take our next question from Brian Brophy with Stifel.

[Brian Brophy, analyst]

Congrats on the nice quarter. I just wanted to follow up on that large Lumen award. Can you give us a sense on when that project is supposed to start? And how many years do you guys expect that build to be?

[Jose Mas, executive]

Yes. So we're hopeful that we can actually start some projects prior to year-end, although the bulk of that will start in '25. We expect it to be a multiyear project, and we're hopeful that over time as they continue to have success, that project will continue to grow.

[Brian Brophy, analyst]

Okay. That's helpful. And then just one on power delivery. Can you give us a sense for the emergency restoration contribution from some of the recent storm activity you guys are expecting in the back half of this year?

[Jose Mas, executive]

Yes. The truth is that for Q3, it was relatively small. It was minimal. We really didn't have a lot of involvement in the Texas storm. So our involvement really started more in the Southeast, which was a very late quarter event. It only -- it was really only a couple of days at the end of the quarter. Revenues for the segment were less than $15 million, so it didn't really have a meaningful impact.

It will have a bigger impact in Q4. We've still got some people deployed doing some work. So we don't know the exact extent of what that will be, but it is part of the reason that we did increase revenue guidance for Q4 in that business.

[Operator]

We will take our next question from Sangita Jain with KeyBanc Capital Markets.

[Sangita Jain, analyst]

So I had one on Power Delivery. Since this year, distribution spending has been more muted. Should we expect some type of a catch-up in 2025 along with the more normalized spending? I'm trying to figure out if there will be less of the normal seasonality starting 2025?

[Jose Mas, executive]

Sure. So look, I think we're pretty encouraged because we expect it to get back to a normalized level. I don't know that there will be a catch-up. But just to get to a normalized revenue base, I mean, if you think about 2023 for us, right, we did considerably better in 2023 than we did in '24.

A lot of that was driven by distribution. So if we can get back to those levels and you kind of look at what we've been able to accomplish in the transmission side of the business, if we're able to get both of those humming, we're going to do really, really well in '25. I don't know that that's our full expectation today.

Obviously, the transmission win that we had is going to have a meaningful increase to revenues for the segment in '25. Again, we're becoming more and more bullish about distribution spending. I think we need a little bit more time to figure that out. But I do think there's a good probability of both of those really being catalysts for our business in '25.

[Sangita Jain, analyst]

Got it. That's great. And my follow-up is, as your backlog and revenue base grows, where do you think the biggest pinch point could be in 2025? Is it skilled labor availability or is it equipment availability for comms or Clean Energy? Can you talk about how you're thinking about this for next year?

[Jose Mas, executive]

Sure. I think that the biggest constraint in our industry as a whole over time is going to be labor. And I think those companies that invest in labor, invest in training, have had long-term programs and can convince our customers that we have really solid programs and the ability to scale up is what's going to drive the business.

I think we're one of a very few number of companies across the country that can say that, and I can say that with confidence and the customers believe and I think that will give us a great advantage in the marketplace.

[Operator]

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

[Brent Thielman, analyst]

Jose or Paul, I mean really healthy year of cash flow, and I'm wondering how do we think about cash conversion on a go-forward basis for MasTec? Understanding this conversion may not be sustainable far into the future. But what is something we can think about as sustainable after 5 quarters of really big cash flow here?

[Paul Dimarco, executive]

Yes. This is Paul. It obviously depends on revenue growth. But we think 60%, 65% is achievable for us over the longer term of EBITDA.

[Brent Thielman, analyst]

Okay. I appreciate that, Paul. And then, Jose, in communications, I think a few quarters ago, you talked about something in the future where we could see more balance in terms of wireless versus wireline exposure. I guess I'm wondering if this Lumen win is a precursor to that.

And then also, I mean, obviously, the wireless business seems to be picking up for you. So is that still something you see in the future in terms of kind of more of a balanced communications business between those 2 areas?

[Jose Mas, executive]

So Brent, I think if you go back to 2021-ish, right, we finished that year doing about just over $2.5 billion in our communications business. And this year, we'll do $3.4 billion, right. So we're up nearly $1 billion in 3 years, corresponds to almost 35% growth in that segment over a 3-year period. The bulk of that growth has been on the wireline side.

So if you think about our wireless business, it's up a little bit, but it's relatively flat compared to our wireline business, which has been the primary driver of that business. So we're pretty excited about that, right. We kind of forget about that level of growth over a 3-year period.

When we think about the next 3-year period, we actually think that growth can be accelerated versus where we've been in the past. Again, probably primarily driven by wireline versus wireless, but it's a very exciting market. It's one where we do expect wireless spending to continue to grow. I think 5G had a lot of excitement early. I think it slowed down.

I think it's coming back and future technologies are going to be a driver in that growth as well. The combination of the two. Obviously, we're being benefited by what's happening AT&T with their conversion program. But we expect the others to pick up over time, and we think again, both markets will be great drivers of our business over the long term.

[Operator]

We will take our next question from Jamie Cook with Truist Securities.

[Jamie Cook, analyst]

Congratulations, Jose and Paul on a nice quarter. And Marc. I guess two questions, Jose. Back to the M&A discussion. I've always said you've been very good in identifying adjacent growth opportunities early and successful in acquisitions. But as you think about acquisitions going forward, how much of it is about getting into adjacent market versus the other thing you mentioned in your prepared remarks that scale is going to be important.

So I'm wondering if, given the growth that you see ahead of you, whether we need bodies so we need to acquire more for scale versus getting into an adjacent market? And then my second question, obviously, congrats on the margin performance in the businesses outside of Oil and Gas, but still your Oil and Gas margins have probably been better than what most of us would have thought.

So just trying to understand with MVP going away, how to think about the profitability of that segment? And is the risk -- you know what I mean, that as the other Oil and Gas goes down more so before the other businesses can ramp? The profits and the other businesses can ramp at the same time.

[Jose Mas, executive]

Yes. Thanks, Jamie. So I'd say on M&A, Look, it's pretty exciting to be back in a position where we think we can do it, and it doesn't really impact our balance sheet right, relative to our capabilities of doing something.

I think one of the things that we're most excited about at MasTec is our organic revenue growth opportunities. We have tremendous opportunities for growth that we've been scaling for, that we've been training for. So that is our primary objective. I think we have more opportunity there than probably anything else that we could imagine.

With that said, we are seeing a robust market on the M&A side. We think there are opportunities for us to build scale across our existing businesses and do so in a manner that makes sense. We'll continue to evaluate that. But the truth is we kind of weren't in that position over the course of the last 12 months. So it's nice to be back in a position where we can actively pursue that. So you should expect some of that over the course of the next year.

When I think to your second question on Oil and Gas, I'm going to remind everybody again, I mean, MVP were diluted -- has been dilutive to margins this year. So MVP is not what's driving margins in that business. It's the balance of the business. When we start a year, as long as I can remember, we talk about hitting mid-teen margins roughly in the 15% range.

I think as we think about '25 guidance, we'd probably start there. We have the ability to beat that. We don't think there's any reason why we shouldn't continue to perform at the levels we've been performing, but we'd start a little bit more conservatively as we book work.

But we're -- while revenue is going to be a little bit more cyclical because you had so much revenue associated with MVP, the reality is that margin shouldn't be, right? As MVP goes away, which is part of what you're seeing here in the second half of the year, margins have actually improved in that business. So we don't think that changes over time.

[Operator]

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

[Justin Hauke, analyst]

I just -- I wanted to go back to the large transmission project and just to clarify, is that fully booked in backlog yet? Or does that come in when you're kind of fully mobilized at the beginning of next year? And I know you've got 18-month backlog. And just -- I guess, there's been some speculation about what that project. Are you able to comment any more on the specific scope of the work and your risk terms and just on it?

[Jose Mas, executive]

Sure, Justin. So what I can say is that as of the second quarter, that was a fully signed project. So that project -- there is no risk to that project per se. From a backlog perspective, we only book what we think are the 18-month revenue levels. So at any given point in time, although the project is much bigger, we're only taking 18 months of that project into backlog because it's how we do our backlog calculations.

So a very small part of that project is currently in backlog. We we're not in a position yet to fully announce the project. We expect the customer to do so shortly. And once they do, then we'll talk about it more.

[Justin Hauke, analyst]

Okay. Great. That's helpful. And then my second question is just on the Clean Energy margin. I mean, obviously, they've been moving higher, and they were really good this quarter. You're guiding for kind of back to mid-single digit for 4Q, which was kind of the guidance -- were there any kind of favorable closeouts or anything else in the quarter that we should know just for thinking about modeling it for next year? It looked like the 10-Q, you talked about maybe some margin increases on a couple of projects in there that maybe benefited?

[Jose Mas, executive]

Yes. So there was no outsized projects that benefited the business. Obviously, we had less troubled projects in the quarter, which is what drove that. I think that some of that commentary is associated with just bad projects not being there or doing better. When -- I think in Paul's prepared remarks, he talked about fourth quarter level of margins for that business approaching third quarter levels. So I don't think -- we're not expecting a significant drop in revenues in Q4 versus Q3, we do expect some drop and it's largely attributed to the fact that you have so many holidays in the fourth quarter.

Look, it's -- we've got one quarter under our belt of solid performance. Hopefully, the fourth quarter does well again, and we can talk about it. And then I think we can provide better clarity as to what that looks like in 2025. There's no question that on a full year basis in '25, we expect margins to be better than they were -- than they're going to be for full year '24 in that business. The question for us is going to be how much better, and I think we'll give more clarity on that on our next call.

[Operator]

We will take our next question from Drew Chamberlain with JPMorgan.

[Drew Chamberlain, analyst]

First, the large transmission side, I think you said in some recent quarters that there are a series of large transmission projects out there that you are actively pursuing and chasing. I mean just any update there? I mean, what's the competitive landscape look like? And when can we expect to possibly hear an announcement of anything?

[Jose Mas, executive]

So what I would say is the market is getting even better, right? We're seeing even more projects. There's no question the transmission spend is going to dramatically increase for all of the things that we see relative to the load growth demand that we're seeing. We feel good about our competitive position.

We feel we'll win more projects. There are a lot of active projects currently in some form of bidding cycle that we're engaged in and we're hopeful we'll win some of those and be able to talk about them. I don't know off the top of my head, anything that we would expect to happen before year-end. But we think shortly thereafter, there'll be some projects that start making into awards over time.

[Drew Chamberlain, analyst]

Okay. Great. And then just more generally, I think you said in the prepared remarks today is that the thing that's got you most excited is that you feel like you have room for significant improvement across each segment right now. And I just wonder if you could kind of rank order or elaborate on some of the most prevalent areas where you think improvement is coming.

[Jose Mas, executive]

Yes, we can cover them all, right? I think it's -- again, we're pretty excited across all the segments. When we look at Clean Energy and Infrastructure to start there, right, backlog growth has been phenomenal. We expect strong revenue growth in 2025. Margins have outpaced where we expected it to be. We're hoping that, that can continue. So when you're looking at an environment where you should have strong revenue growth with improving margin, that creates an enormous amount of upside right relative to where we've been.

In Power Delivery, as we really get started on this large transmission project, we're going to have strong top line revenue. We expect margins to improve there year-over-year as well. And in comms, it's the same thing, right. We expect strong double-digit growth, and we expect margins to improve. So in all those businesses, right, Communications, Power Delivery, Clean Energy, we expect double-digit revenue growth this year with improved margins in '25 versus '24. Those are great trends. We expect that to continue, not just in the '25 but beyond. And we think our Oil and Gas margins and revenue will hold over time.

So that's just a great combination, right. We are, I think, in a very unique position for so many around MasTec and their careers to be in a position where our business is doing as well as it is from an industry perspective and our ability to not just take advantage of the revenue opportunity, but to also continually improve margins. And I think that combination is what's really going to drive the upside in MasTec for years to come.

[Operator]

We will take our next question from Adam Thalhimer with Thompson, Davis.

[Adam Thalhimer, analyst]

Great quarter. Can you talk at all about seasonality in 2025? I'm curious it could actually have a stronger start to the year, particularly in segments like Clean Energy based on project timing?

[Jose Mas, executive]

Yes. Look, I think it's a little early. Obviously, we expect the same business as we just talked about to start the year strong. Oil and Gas will probably be down in the first quarter because it was highly impacted by MVP. So I think as we release results in our fourth quarter, we'll get into a lot of specifics around that. But again, I mean, generally, we're feeling really good about the year. We're feeling really good about the progress. And as we look at year-over-year comps, we're feeling comfortable that there's nothing to really have to call out today.

[Adam Thalhimer, analyst]

Great. And then can you update us on direct work you're doing for data centers? And any discussions you might be having with potential future clients?

[Jose Mas, executive]

Yes. Tremendous opportunity. Last quarter, we talked about $1 billion of outstanding bids. I'd say today, that number sits at about $1.5 billion of bids that we currently have outstanding or are getting ready to bid. Over the course of the last 6 months or so, we've gone from being approved -- an approved vendor for one hyperscaler. Where we sit today, we're approved by 4 of the major hyperscalers to do direct work that in combination with the whole ecosystem of people that are working for them, creates tremendous opportunity.

Very new market for us, one that we're still learning. I think we've made tremendous inroads. We've got a team that's specifically focused only on data center work across all of the different segments that MasTec operates in. We think there's tremendous synergies and opportunities and actually solutions that we can bring to the customer base. So we would expect that to become a much larger piece of our business on a go-forward basis. Whether -- when it happens and how long it takes, time will tell. But there's no question that the CapEx is flowing into that industry and the capital that's going to be spent is going to be massive. And I think we'll get a share of it. And it will be -- and it's a big part of what could potentially be a really good growth strategy for us.

[Operator]

We do not have any further questions. I would like to turn the call back to Jose for closing remarks.

[Jose Mas, executive]

I just want to thank everybody for participating today. We look forward to updating everybody on our year-end call. And until then, be safe. Thank you.

[Operator]

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