MasTec, Inc. (MTZ) Earnings Call Transcript & Summary

Good afternoon, everyone. Welcome back to Citi's Annual AppsEconomy Conference. I'm Andy Kaplowitz. I cover U.S. multi-industry and engineering and construction for Citigroup. We're really, really excited and happy to have MasTec with us today, the CEO of MasTec, Jose Mas; and the CFO, EVP and CFO, George Pita. It's great talking to you guys again. Just for the investor base, you can through the chat board ask questions and I'll look to see sort of what questions you have, and we'll get your questions in later. Also, if you need any disclosures, please let us know, and we can send them to you.

But again, I want to, Jose, thanks again for joining us. Maybe for, this is going to be more of a telecom community that we're talking to today, so maybe if you can give a little bit more of a history on MasTec, where you started, where you are now, what do you think your competitive advantage is and how it's evolved over time, I think that would be helpful to the audience.

Yes. Sure. So first, Andy, thank you for having us today. We're thrilled to be here with you. My name is Jose Mas. I'm the CEO of MasTec. Just for a little bit of history, MasTec was actually founded by my father in a predecessor company that ultimately became MasTec and it really started as a telephony services firm. So based in South Florida, he was an immigrant from Cuba, came to the U.S., didn't really have, didn't really speak the language, any money, so he kind of got an opportunity to start in the construction industry and started building this company. And back in our early days, we supported AT&T building out their local network, building their conduit systems, putting up their telephone poles, running their cabling. Back then, it was all copper and really have grown with the industry since then. So have been working for them and with customers like them for the last 50, 60 years. We specialize in 2 areas in MasTec, where we consider ourselves to be an infrastructure construction company. And we've got our telephony, our communications business, which is about $2.6 billion. We'll do just over $8 billion this year. And the balance is in energy infrastructure, which we'll just cover so you're familiar with the company. But again, we got our roots and our foundation in telecom. We grew with the different regional Bell operating companies over the years. Back in the late 2000s got involved in the wireless business. Today, we think we're the largest wireless contractor in the country. We support all of the different carriers, be it T-Mobile, Verizon, AT&T and the smaller ones, building out their network. So if you think about negotiating on a tower site, negotiating the lease on a tower site, finding the right towers or finding the right space for them to build their own sites, building the sites, doing all of the work on the sites in terms of doing the cabling, the antennas, maintenance, integration and optimization after the fact, it's kind of where we built our telecom business. Very excited about what's happening in the industry. Obviously, there's tremendous momentum and tremendous dollars plowing into the industry today that we think we'll benefit from. That's our telecom business. On the power side, we're very diversified. We've significantly grown our distribution and transmission resources over the years. It's a business that MasTec got into in the 2009, 2010 time frame, built it mostly organically since then. And then in 2021 made 2 major acquisitions, one of a company called INTREN, which is a Midwest union-based electrical contractor. And here at the end of the year, we closed on Henkels & McCoy, which is a company that has a tremendous reputation, 100 years in the industry, predominantly a distribution and transmission electrical contractor, but they've also had their roots and a lot of their history in the communications business. They do a couple of hundred million dollars in communications today, but a long history within it that we'll talk about here as the call goes on. We also have a very large clean energy and infrastructure business, where we do everything from renewable construction, and that includes wind, solar, biomass, very large across those. We've got a little bit more of a conventional power business where today we're doing a lot of the advanced class turbines where they can burn both gas and hydrogen. We've got a civil business that goes with that. We do a little bit of road work and construction in a couple of states. And that we've got a fairly large substation group as well that supports the electric business. And then we've got an oil and gas pipeline business, where we built a lot of the oil and gas pipelines across the country for the last few years, been a big business for us. We've done everything from gathering lines, although very small, and then we do a lot in the midstream and the long-haul side. The business has obviously been impacted by what's happened with the pandemic and with ESG. Today, we're seeing lots of opportunities around carbon capture and hydrogen pipelines for future build. So we're actually quite excited about where we think that business is headed. 2022 will be a challenging year in that market. So we've guided that business to be down but are pretty encouraged about the new technologies in '23 and beyond and the requirements for pipeline. MasTec, again, we started as a small family business. Today, we expect to do close to $10 billion in revenue in 2022. We've got approximately 30,000 team members across the country and are very excited about the opportunities that our businesses and segments afford us.

Jose, so obviously, extremely diversified now, lots of focus on lots of different businesses, but a core strength that you guys have is your people, as you just talked about. And as you know, it's a more difficult environment nowadays, supply chain, inflation, lots of sort of pressures on all the industrial companies that I cover. Maybe from your seat, how is the inflation and supply chain, how is it manifesting for MasTec and what you're seeing out there? Are projects slower to develop? Are you still seeing sort of strong demand? Maybe talk about the environment given the pandemic and supply chain issues that we've seen.

Yes. So it's a great question, Andy. And when I think about MasTec and really the competitive advantages that we have and really what we've been trying to build, our most important asset isn't our trucks, it isn't even the relationships we might have with customers at any given point in time, it's really about our people. We're a services business. It's our people that are out there working day in, day out in very difficult jobs, very dangerous jobs, very stressful jobs. So being able to provide a safe work environment for our people and have the right people in place to provide our customers with an excellent level of service is by far the most important thing that MasTec offers. And it's because of that, that we're so excited about the Henkels & McCoy acquisition that we closed here at the end of the year. We added 5,000 team members with that transaction in a time where adding resources is incredibly difficult, right? We've done an amazing job of organically growing our business for years, of adding resources on training, but truly we're a people-centric business. So it's at the forefront of everything we think about. We truly believe that what we're trying to create at MasTec is really a place where you can come and build a career. It's not just about a job. People may join MasTec for a job, but we want them to have the ability to improve their lifestyle, improve their careers. We offer a lot of training, a lot of ways to individually give people the tools that they need to be able to excel in their jobs and really move forward. I think there's one universal thing that all of us, regardless of what business we're in, regardless of where we came from or what we're about, I think we all want to provide a better future for our families. I think that's why people work, that's why people are so dedicated to what they do is to be able to provide that better day for their kids or their grandkids to have a better future. And I think that we try to be a conduit of that at MasTec. That's really what our culture is about. So how do we give our people the best opportunity to excel and to grow and to be able to accomplish that goal that I think is universal across everyone. So by far, the most important aspect of our business and what we most focus on. The other things that you talked about, I think they're transitory in nature, right? Are there supply chain issues today? Of course, there are, right? We're dealing with a pandemic that's somewhat unprecedented. We know that the new variant is extremely contagious. We have more people with COVID today than we probably had at any other point during the pandemic. And again, we'll manage through that. And we've had to manage through that for the last 1.5 years. We've had jobs at times we've had to shut down. We've worked really hard at trying to always be able to be active and at least move people around to keep all of our jobs ongoing, but it's been a mission. Again, I think that transitory in nature, I think people become the one thing that are the constant. And to the extent that the people love the company, care for the company, I think they help you manage through a lot of those other issues. Luckily, we haven't seen a lot of project cancellations. We're seeing project delays. We're seeing customers try to get as much work done as is available as they're waiting for a particular product that may be stuck in supply chain. We're also blessed that we've got a great customer base where we work with a lot of really big companies that have great procurement departments that had been working on the supply chain issues throughout the entire pandemic. They understand it. They know where the chokepoints are. Quite frankly, they have the size and the scale to ultimately get things that others may not. So we focus a lot on that on our project selection. As we think about 2022 and the projects that we think we'll be working on, we take a lot of time in trying to understand where the project stands, what are the risks, how are our customers mitigating those risks, what are the things that we can do to help our customers mitigate those risks and then fully understand and then try to manage them as best as we can.

So this is a really exciting time to talk to you, Jose, because you literally, a week ago, closed one of your largest deals ever in Henkels & McCoy. You mentioned it. So you just added a ton more people. Maybe talk about the transformation that's needed in Henkels. I mean, again, great brand, good company, margins about half of what you guys have. How long? You've done a lot of deals in your time. What's the time line for transformation here? What should we expect over the next couple of years? And how long does it take, you think, to get Henkels to kind of where you guys are?

I think, first and foremost, we bought an amazing brand, right? The Henkels brand is 100 years old. I think it's known in every quadrant of our customer base. They've heard of Henkels. They've either worked with Henkels in the past. So very rarely do you get an opportunity to buy a company that's had such an impact on an industry, that's been such an industry leader for such a long period of time. So we're, quite frankly, blessed to be able to do it and honored to be able to continue the legacy of the Henkels family. I started my career really during Hurricane Andrew in 1992. I was going to school at the time and that we were a family-owned business. And my father was like, look, all hands on deck. And my job was actually managing the Henkels crews that had come to support. So I've been and I've known that company ever since the beginning of my career. I have a ton of respect for what they've done and what they've accomplished and I think what we're ultimately going to be able to do with them. Look, I think Henkels is a company that underwent their own issues and their own troubles, right? If you think about some of the recent projects that they did in the last couple of years, they've always been very good in the gas distribution business, but they got into some larger gas pipeline projects that I think they really struggled on. They had a difficult time with the Verizon Fios project, both from a profitability perspective and more importantly from a cash flow perspective. As a private business, they were cash constrained. They found themselves not being able to invest in their core business at a time where their core business was growing very rapidly. So I think they were forced to make some bad decisions that impacted both their opportunity to grow and more importantly, their profit over the last couple of years. If you go back 3, 4, 5 years, Henkels was a company that produced high single-digit margins and it came into problems. There are a lot of levers that we're very confident that we're going to be able to pull and really work on to improve their margin profile. We've laid a couple of them out publicly. We've talked about their SG&A. Their SG&A is almost 6 points higher than MasTec's, which is a pretty staggering number. So if we were able just to get that under control, quite frankly, you can probably get their margins in line. We've got revenue growth opportunities that I don't think they were able to take advantage of because of the cash constraint issues that they have. So we think revenue and revenue growth is going to be an angle where we're going to ultimately be able to develop higher margins because of it. And then I think just as importantly, they didn't have the cash to invest in their business, right? So I don't think they made the right investments to ultimately put themselves in a position to be as profitable as they can. When you look at all of the industry comparables and all of the different companies that are in the industry, most are at double-digit EBITDA margins. So I think that the opportunity in the market is definitely there and there's nothing structurally different with Henkels from a workforce perspective. When you look at their organizational charts at the field level, they're solid. They perform good work. I think we're just going to have to focus on the way the company has been managed and the struggles that they've had to really try to turn it around. One of the things that we're going to, a lot of times, you buy a company and you talk about synergies. We're not in this to cut a bunch of heads or to get rid of a bunch of people. There's so much growth in the market. There's such a demand for people that our hope is that whatever excess people that Henkels has today, we're going to be able to put them on the right seats on the bus to be able to put them in growth environments, in areas where they can help grow businesses, help improve businesses. So it's going to take a little bit of time. We just closed, as you said, a week ago. So over the next few months, we're going to learn a lot more. We're going to take our time on truly understanding the business. And then we're going to make a lot of decisions that we think hopefully improve both their short-term and long-term ability. For guidance purposes in '22, we've kind of just included what their budgeted numbers are. Numbers that we hope are going to significantly improve over time. So again, it's a very exciting time for us as we embark on this endeavor. As you said, it is the largest deal that we've ever done, adding significant resources, and we think we're ready for the challenge and up to the challenge and very exciting times at MasTec.

Jose, let me just ask you about the communications piece of Henkels given this is a communications conference. So like what did they bring to you that you don't already have? Is there some extra regionality or is there overlap there, just out of curiosity. I know it's only $100 million, $150 million of revenue, so it's pretty small in the context of your business, but just out of curiosity.

Yes. So it's interesting because in the last couple of years, it was a lot bigger with the Verizon build, right? So they've been challenged. And again, when you have a difficult account that isn't profitable, that isn't generating cash flow, it ends up sucking the life out of so much of the rest of your business, right? You spend so much time dealing with one thing that everything seems to begin to struggle. The most important thing that we gain with them in communications, quite frankly, is scale. I mean, we've been blessed, our third quarter backlog was way up. We had a lot of nice wins in the fourth quarter. There's more work today in the market than there's been in a long time. So it's all about your ability to perform and execute on it. It's about putting people on the right jobs with the right customers, with the right prices, with the right potential to excel and to earn margins. So we're going to take a good hard look at those customers that they're working for. We're going to rationalize their business model, and then we're going to hopefully take advantage of the capacity that we're gaining and putting them on what we think are going to be ultimately the best jobs that we can provide value to the customers and ultimately make a fair return doing.

Great. So I want to ask you a couple of more questions about H&M later, but let's go more into communications in the sense that, look, we've been talking about a wireless ramp up for some time. And at the same time, wireline, as you know, has been strong. But if I sort of step back and look at MasTec, its communication business over the last few years, it's been relatively flattish. So maybe you can walk us through sort of what's happened over the last few years and why you think really '22 is an inflection year. I mean, because if I look at your guidance, you're talking about mid-teens or greater growth in '22.

So a lot of issues, right, and lots of different points in time that we can go back to. As you can remember, it wasn't that long ago that DIRECTV was a huge portion of our business, right? It was a $700 million-plus account. Today, that business is down into the $200 million. So we've lost about $500 million in just with DIRECTV's contraction over the years. But we didn't have down years, right? So every year, we were kind of making up for some of the shortfalls that we were seeing in that business. I think '21 was an interesting year in that you had the spectrum auctions at the end of '20 for both Verizon and AT&T that significantly impacted their build plans in '21. We're super excited about '22 because we think it's the first year in a long, long time where lots of the different players are going to be super active. You've got all the RDOF money that's been awarded through '21. So you've got so many different companies starting significant fiber plans in '22. You've got T-Mobile that really started an active plan in '21 and is going to continue for the foreseeable future. You've got AT&T and Verizon really starting to kick up their plans in a pretty significant way in '22. So by mid to late 2022, this is going to be an industry where all of the players are spending significant capital, whether it's those companies that are doing it on the fiber side or those companies that are doing it on the wireless side or those that are doing it on both. But it's going to be the first time in many, many years that we're going to have our customer base spending with all of our customers simultaneously. And that's incredibly challenging as it is exciting, right? So there's going to be the need for labor. Labor is going to get tighter as the year goes on. We've been doing everything we possibly can to prepare for that over the last 1.5 years. But we're looking forward to being in that position where the market is really active and we really get to show what we're made of and why we can bring value to our customers by supporting them in times where the market becomes very difficult.

So Jose, there are so many different questions that I could sort of do from that commentary. So let me start actually with rural development with RDOF. Like if I could think about that as a cycle, where are we in the cycle of laying fiber in terms of the rural development program? Are we, well, let me just ask it like that in your opinion.

We're just starting, right? So I think in '21, you had design. You had a lot of companies that were in design. But in terms of physical construction, very little bit of activity in the third and fourth quarter of '21. But by mid-'22, a lot of those programs are going to be in full effect. We're still during the first quarter of '22 opening lots of new offices, opening a lot of new locations where we've been successful enough to win work. But I think by mid-'22, you're going to have 6, 7 customers that are actively building out fiber plans all over the country, and it's going to be a very, again, exciting and challenging environment. So I think literally, we're stepping into the first inning, right? And this is going to be a long race. This is going to take a really long time. Remarkably, only the first half of the RDOF funding has been awarded to date and it's already having a massive impact on the industry. There's still another $10 billion of award in RDOF. There's still billions more to award under the 5G funds. And then you've got another $50-plus billion in the infrastructure bill that hasn't even really been talked about that's coming, right? So the amount of dollars that the federal government is putting in for connectivity is mind-blowing. It's going to lead to levels of activity that we've never seen in this industry before. And again, our job at MasTec is to prepare for that, is to gear up our personnel and be ready to support our customers as they deploy.

And you mentioned on the last earnings call that Q3 had, not mentioned, you recorded strong bookings and you talked about potential strong bookings in Q4. Is that more RDOF? Is that more sort of balanced between wireline and wireless? Like where has the near-term momentum come from?

Well, there's no, I think there's no question the near-term momentum is coming from the wireline side. And the reason is, right, that a lot of the wireless work that we do is based off of MSAs. And the way we count for MSAs and backlog is really using trajectory, right? So it's based on where we are today, and we kind of take an 18-month view of that, irrespective of where we think the growth might be in those projects. So I think it takes a little time for that to work its way in backlog. You have account-driven work as well. So as Verizon gets busier, as T-Mobile, we have more opportunities. I think we'll see nice backlog growth in our wireless business. But really, a lot of the growth that we've had to date has been purely on new wireline wins on customers that either we've worked for or quite frankly, a lot of them that we haven't done a lot of work for in the past where we've been very successful in this cycle. And I think that's what's going to drive our backlog for at least the next couple of quarters. I do think that as '22 develops, wireless will begin to grow as a percentage of backlog versus wireline. But at the end of '21, even probably the first few quarters of '22, our backlog growth will be driven by our wireline business.

And Jose, a lot of investors ask me about the back and forth between AT&T and Verizon and the FAA. Like does that have any impact on you guys or from what you can see in the industry? Are we talking a few weeks and kind of we move on from what you can tell?

Yes. Look, from what we understand, a lot of it has to do with proximity to airports, right? So to the extent that, there's an enormous amount of work to get done that has nothing to do with the FAA initiatives. We think that whether it's the power that they're using close to the airports or trying to slice different spectrums close to the airports, I think they're going to come up with a solution. I think it's a, from a network build perspective, of course, it impacts it. Of course, they need to get it behind them. But I don't think it impacts network builds at the level that we're talking about. There's so much work to do everywhere that it's a small component of what ultimately needs to be done. It's an important component. Obviously, airports are important places with lots of people that want to communicate, but it's very small from a geographical perspective, it's a very small percentage of what ultimately needs to get done.

And then I had a question, so I'll just do it now. Like you mentioned the $50 billion from the infrastructure bill. And then, of course, there's more than $50 billion on the electric power side that can help that business that MasTec has as well. I know it's too early, Jose, because I can't tell either. But at the same time, is there any sort of, are your customers recognizing that extra pot of money? Is there any sort of new projects? Does it just extend the RDOF cycle? Is that how to think about on the communication side? Or like anything that your people are telling you about how that money is going to be spent and when it's going to be spent?

I think every one of our customers is trying to figure out ways to get their hands on some of it, right? And I think that's the challenge. Everybody is, the rules haven't been written. There's not a clear understanding of how those dollars are going to be allocated. So everybody is trying to help write the rules, right? So every customer is engaged in Washington. Everybody is trying to see what they can help fund relative to what they want to build. I think the beauty of it is, the dollars are going to be deployed. It's an enormous amount of money. And it will be, I truly believe it will be additive to what we've historically seen, right? So I think it's going to significantly strengthen the market. I don't know that we know exactly where those dollars are going to go. We don't expect them in '22, quite frankly, right? Maybe we start seeing some activity level around it in '23. But it's, just to have that kind of government support, right, just to have those dollars available, the big issues for our customers is ultimately there's only a limited amount that consumers are ultimately going to pay. So if the government is willing to invest in things that help offset the cost for the consumers, it's going to lead to a lot more build-out of infrastructure, and I think that's where we'll benefit from it. In the rest of our business, especially as you think about the power side, the dollars are critically important but so is the permitting cycle, right? So we think that just as important of the dollars is the states and the Feds being in the same, having the same goals and objectives, understanding what the needs are and then ultimately making it easy for companies to ultimately be able to execute on whatever their infrastructure plans are because I think the dollars will be there. I don't think this is going to be an issue of dollars. I think it's going to be a question about speed to market and how quickly can you build things and how quickly can you get the support that you need to get those projects up and running as quickly as you can.

So I think there's a related question here on the chat. So like I'll just read it now. So it says, there's been excitement on your telecom business for a number of years now with FTTH and 5G. When do you think we really see the acceleration come to fruition in that business on an organic basis? Is this going to ramp through the year or be more evenly weighted?

Well, again, I think we're starting now, right? So I think for '22, it will definitely be a year in which it ramps, right? First quarter will be slower. The second quarter will pick up. The third quarter will be bigger. And the fourth quarter will probably be somewhere between the second and the third because you have the holiday season. And then I think '23's first quarter, I think first quarter of '22 from a revenue perspective is bigger than first quarter of '21, first quarter of '23 is bigger than first quarter of '22. So I see a nice ramp. I do think the middle of '22 is going to have a nice jump step. And then I think it will be somewhat gradual, and I think there'll probably be another jump step in '23. So I think those will be 2 of the bigger jump steps that we see and then just gradual build beyond that.

And just from out of curiosity, you bought a relatively small engineering business on the wireless side a couple of years ago. Maybe update us on that business and sort of what do you see for the future in MasTec in engineering because I would imagine there's a huge amount of money, good margin on that side, too, if you can sort of rev that side of the business.

Business has done really well. Quite frankly, we're trying to do everything we can to continue to grow that business as quickly as possible because the demand has significantly exceeded what our capabilities have been historically. So we went out, we started doing a lot of outsourcing in that business as well. So we're getting a lot of help from different countries that can work during our nighttime. They're doing some sketching and some work to help our local engineers and our U.S. engineers because the work demand has been that high. Again, the company has done incredibly well, had a really strong second half of '21. I think the demands on their business in '22 are going to be even greater. So again, we were fortunate to get them. Our philosophy at the time was, we wanted to have more control over the total process. We wanted to be able to go into our customers and sell a full turnkey product. I think that's part of the success that we've had in the second half of '21 in terms of winning work is our ability to offer turnkey products to our customer where we can really control the life cycle and the timing. So the execution is going to be key. I think the proof is going to be in the pudding throughout '22 as we execute, but there's no question that, that's given us tremendous ability to maximize really our pitch to our customers and our ability to help our customers accomplish what they need.

And then maybe a related question to the chat question that I've just asked. Like you've talked about, at least over the last couple of years in wireless, I mean, you have a ton of maintenance work. Most years, it's more maintenance than deployment. Is '22 still more maintenance than deployment in wireless or you think by the end of the year you'll be doing more deployment than maintenance in wireless?

I think if we're able to do what we expect with C-band, and then it will be more construction than maintenance, right? I think C-band is really the factor that's going to, there's so much work around C-band that needs to get done, that needs to start. Obviously, there's permitting and municipal issues around it that I think for the most part have dramatically improved. So our expectation is the second half of '21 we're going to start seeing a considerable amount of new construction work. Maintenance is always going to be a key part of our business. It's always going to be something that's there. It's really one of the things that longer term we're really, really excited about, right? You're going to have a wireless network in 4 or 5 years that's going to have multiples of the network elements that it has today, right? So historically, you had the big towers and the macro towers tied work. You had rooftops and some small cells. But the reality is, 5 years from now, the amount of network elements that are going to be tied to that network in terms of all the small cells that are going to be out there, all the in-building systems that are going to be out there, the amount of maintenance required on those systems is going to be exponentially greater than what we've had in the past. So we're very excited about just the core piece of our maintenance business, the growth rate that, that's going to see just based on, again, the sheer size of the network. So we're excited about being part of that build out of the network and obviously what comes with that. And just as importantly, we're super excited about being on the back end of that and we also grew our resources on the implementation and optimization side, which we think are as critical as engineering on the back end. It's such an important component of the service end of the back end of the wireless network and one that, from engineering, all the way to integration and optimization today, we offer that service. And I think we're fairly unique in being able to do that.

So let me shift to margin, Jose, and ask you just in this way. Like you do have a guide out there for '22 now. And since you talked about 9.5% to 10% EBITDA margins for the company. What do you see, if you look at the segments and look, I'll focus on communications again. If I think about '21, it's kind of 2 steps forward, 1 step back in that business and margin. Utilization may be not as good as you thought. And I would say tough supply chain environment, too. But you had originally guided to high 11, you're going to come in high 10, and you're guiding kind of around mid to high 11 for '22. So confidence level in sort of reaching that result in '22, does it rely on the revenue ramping up? Can you do it without that revenue ramp? How do you think about margin in '22?

So let's start talking about '21 because I think it's important to kind of put it in context, right? We're going to end the year at high 10s. It's not horrible margins, right? When you compare it to the peer group, we actually performed quite nicely from a margin perspective. It's not where we want it to be by any stretch of the imagination and it's not where we think we can achieve. With that said, '21 had its challenges, right? There's no question that Verizon and AT&T with the spectrum issues that existed at the end of '20, they were probably more severe than our expectations were. Our revenues on our wireless business were less than we anticipated in '21. We obviously had the full year of COVID that we had to deal with that created all kinds of complexities at the field level, whether it was testing requirements or whether it was people being out and having to fill in those labor components. And again, those aren't excuses, those are just the realities of the things that we faced in '21. They're probably not going to be much different in '22. And quite frankly, it could be worse in '22. But I think we've learned a lot from it. I think our customers are more educated on it. Our customers are more educated at the implications of those things. When we look at '22, what we see as the big driver of margin potential and margin improvement is the fact that the Verizons and the AT&Ts are going to spend more on their wireless build, right? They have their plans. We know exactly what their plans are. We've been contracted for it. So we expect a nice jump in revenues. We're expecting 15% growth in revenues in '22 versus '21. That alone, right, should drive our margin levels very nicely. We have, some of the Henkels work that's coming in is quite frankly a little bit less than what we've traditionally done. So that's having a little bit of a margin drag on our communications business. So where we probably originally guided in the high 11s for 2022, we're probably in the low 11s post-Henkels, right? So I think you've seen a little bit of a change from us on that. But longer term, look, we've always said that our margin expectation in this business is to be 13 or 13-plus. We think that's achievable in this cycle. We think there's going to be more than enough work that gives us the opportunity to accomplish that. Again, it's going to, we're managing through the issues that exist out there. It's obviously this work coming to fruition has taken longer than any of us would have anticipated. But I don't think there's a question of if it's coming, right? It's just a matter of when and I think we're so much closer to it than we've ever been. And again, it's a very exciting time to finally be able to try to execute on it and deliver on the results.

So it's a good way for me to transition into some of the other segments briefly. And I'll just focus on clean energy for a second. Again, on the margin side, right, it's been challenging for you there. I think you've characterized and certainly, I'd characterize it as growing pains. What gives you confidence in that sort of '22 estimate there which would be, I think you said in the 7s, right, versus kind of in the 3s, which you've been in the last few quarters in that business?

So we're encouraged by the momentum that we're seeing in Q4, right? We expect an uplift in Q4 to where we've been in the previous quarters in '21. Look, there's no question we've had a lot of growing pains in that business. Again, we're trying to transition our business, and I think it's important to talk about, right, in 2020, we were coming off of a great '19. We had a lot of work scheduled for 2020. The pandemic hits, the oil and gas markets get hit the way they did. ESG takes off the way it did in late 2020. And we found ourselves being a business where the majority of our profits were coming from oil and gas, and we kind of really needed to diversify and reinvent ourselves to some extent in late 2020. We laid out in September of 2020 a plan to get to $10 billion of revenue in a depressed oil and gas environment with growth in our clean energy, communications and distribution and transmission group. We laid it out as a mid to long-term goal. Remarkably, that was only 15 months ago, and yet here we are today talking about being able to achieve a $10 billion year in 2022 in a depressed oil and gas market, at the lower end of what our longer-term outlook is in that business. Oil and gas is going to end up being less than 20% of our business in 2022. So I think we've done a remarkable job of really shifting our business and putting ourselves in a position to have significant long-term growth in the markets that we're in. With that, right, we've grown a solar business almost organically, right? Our solar business should double from where it was in 2021. It's probably one of the brightest spots in our entire company. It's a business that in the first couple of projects we really struggled. We had a lot of negative financial impacts. Since then, a lot of our solar projects are performing very well, which is part of what drives our confidence in believing that change is coming in '22. These businesses as you enter them and the conceptions that you have going in versus the realities of finally working through them. A lot of people think the solar business is very easy to get into. It's actually a very difficult business with its own set of complexities that unfortunately, we learned some of that the hard way. Today, I think we've built some great solar teams. Customers are extremely happy with the performance that we've had and the margin profile has completely changed for us in that business. So those are the kinds of things that give us confidence in our clean energy business. It's a significant piece of our business going forward. We expect to do $2.5 billion, $2.6 billion in 2022 off of a $2 billion year of '21. And more importantly, if you go back 4, 5 years, it was a $200 million business. So we've been able to grow that business from about $200 million in revenue to what we think will be close to $2.5 billion this year. Again, some of that has come with its own margin challenges. That growth has been predominantly organic, which I think is very capital efficient, although it's not margin efficient. And as we get to maturity in those businesses, I think margins really have an opportunity to improve and grow. You haven't let George talk. George, you want to add anything to that on the margin side of clean energy?

I mean, I think we've seen plenty of peers that traded that are operating in the double-digit margin profile. And we've looked at plenty, every transaction that's come across in 2021 and have analyzed those businesses. And in many cases, see businesses and see a business that's very similar to ours and has gone through in prior years some of the growing pains we went through on the solar side this year. So I think that gives us a lot of confidence about having a double-digit margin profile and it's pretty common. It's not like we're trying to reinvent the wheel here. It's a matter of us having grown into a business in a very short period of time and therefore, I think, getting learning or going through the learning curve that we have. I also will say that, Jose mentioned it earlier, we've gone into this business in an organic fashion, right? And effectively, we've invested a few points of margin to do that, right? And when we look at the multiples that folks are paying for solar businesses today, which are in the high double digits to teens, I think that net-net, the way we've entered into this business is very capital efficient and we're highly confident it will get better, and we're in the right spot and we've done it, I think, in a very capital efficient way.

George or Jose, you guys are still forecasting. I think Jose mentioned, you're forecasting tons of growth in clean energy in '22. And like I always get the question, well, wind, lots of uncertainty. Wind is down probably in '22. So where is it coming from? Is it all solar, biomass? Like where is all the growth coming from in '22 that bring that?

Yes. So probably more than half of the growth is coming from the solar side, right? So our solar business is going to double based on what we've got. The reality is, as crazy as it sounds, if it's not for the supply chain issues then it would probably triple, right? So the opportunity on solar is far greater than even what we're laying out. A lot of the work that we're booking today is work that we're booking for '23. The reality is that those customers would love to start those jobs in 2022 but are having issues getting panels or even some racking materials. So to the extent that any of that opens up or improves as '22 develops, there's a chance that some of that does pick up towards the tail end of '22. '23 is shaping out to be an unbelievable year. I think we're going to have the opportunity or potential to even potentially double the business again off of current '22 numbers. So no question that solar is driving a lot of the growth in our clean energy business. The other thing that I think we've really specialized in and we're seeing a ton of growth in is these advanced class turbines, right? So it's these turbines that, we've talked so much about renewables in the last year. We've talked so much about ESG. But I think what we've learned across the world, and we've seen so many issues across the world, is there's still a massive need for baseload generation and how do you drive that baseload generation. And ultimately, how do you try to drive that baseload generation in a lower emission setting because you can still do that, right? So they've invented these advanced class turbines that burn gas, but ultimately can convert to hydrogen. There are newer turbines that have been developed in the market. We installed one of the first ones early in 2021, learned a lot from that project, have subsequently won some other projects that are going to lead to some nice growth for us in 2022. They're not huge projects, but they're important. It's a niche market. It's a market that we think we've really developed ourselves well into. We've seen some really nice growth on some of the civil side of what we're doing. There's a lot of infrastructure projects that are out there, industrial projects that are out there that are also helping drive that business. So many of our industrial customers are trying to figure out also how to lower their carbon footprint, which leads to a lot of energy tied projects within what they do. So when we talk about biomass and we talk about generating electricity, a lot of these industrial plants are trying to find ways to generate their own electricity in lower emission setting. So all of those things are helping drive our business. We've talked about really trying to be a very diversified business within clean energy. Wind and solar are going to carry the business because they're so large. But the reality is, there's so many other technologies out there. Battery storage is a technology where we're going to see a lot of growth in '22 versus what we've historically done. The substations associated with all of those projects are also very important. So it's driven by solar, for sure, the growth, but we've got other pockets within that business that are going to have really nice growth in '22 versus '21. And again, on those solar projects, we worked really hard to understand the procurement cycle, what are the issues that are outstanding, what could potentially hold those projects up and get a very good plan of work around the projects that we believe are going to happen in 2022 and our ability to execute them. So from the supply chain side, we've done our homework and we feel really comfortable we'll be able to execute those projects we need to attain our goals and objectives.

That's good to hear, Jose. So we have an oil and gas chat-related question. Before I ask that, let me just ask you about oil and gas just in this one sentence. Do you think '22, I think you're guiding to about $1.8 billion. Do you think that's kind of a bottom? When I look at, I know you've talked about $1.5 billion to $2 billion. I definitely see some very large carbon capture projects out there, carbon capture pipeline. I think you said in the past they don't start until '23 kind of the earliest and I would agree. But do you see sort of this $1.8 billion potentially as a bottom in '22?

Yes. So on the $1.8 billion, right, the $1.8 billion includes about $200 million for Henkels. So on legacy MasTec, it's about $1.6 billion. So it's really at almost the lower end of that range that we put out, and we do see it as a bottoming, right? And part of the reason because we are seeing a lot of activity. We have a lot of customers that are actually talking about trying to reinvigorate projects that were around a couple of years ago. Commodity prices have been great, right? A lot of the traditional E&P producers haven't been able to benefit from new growth because of the ESG initiatives, but a lot of private equity has stepped in and really invested a lot of money because the returns are high. So pipeline usage and pipeline requirements still exist. There are a number of pipelines that we've been asked to rebid, requote, start talking about again, which is very encouraging. The challenge today for those projects is pipe, right? If you don't have the pipe today, the supply chain constraints around pipe almost push your project all the way into '23. We're seeing a lot of people buying old pipe. So you think about the Keystones of the world that didn't get built that had pipe. We're now seeing people try to buy those pipes from those projects that had been abandoned. To the extent that they can execute on that and buy some of those, we will see more activity in '22. So I think this is somewhat of a lower view that hopefully we'll see. But a lot of those things, we do expect to come back in '23. So we do view '23 between not just the conventional stuff that we've historically done, but more importantly, between the carbon capture and some of the hydrogen projects that we're seeing, we think '23 could be a really, quite frankly, a nice year of growth for us again on the pipeline side.

So I haven't been asked an MVP question in a long time, but got this question in here. It just says, how material is that project in '22? What's the prognosis in terms of completing that going forward?

It feels like it's the project that never goes away, right? But we really feel that in '22 that project is going to get complete. We'll be back on that project right at springtime. There's a bunch of work that we've got left that we've got to complete. There's a permit or 2 that still need to happen for that project to ultimately going to complete. We believe that right now the company is going to go out and do what's still left that's been permitted and then there'll be a couple of permits that they've tried to work through the summer. And hopefully, those come in, in time to get that project built by the end of the year. If they don't, we'll reassess, but it's built into our plans for 2022. And again, it's an important project, but it's not by any stretch of the imagination, it's not the majority of our oil and gas work for '22.

So we're pretty much out of time. Let me ask you maybe one more question related to Henkels. We talked about this a little bit, Jose. Like you've got a strong #1 out there. And then you guys are a strong #2, I think, after buying Henkels and INTREN. When does the business sort of get to scale where we can start talking about you guys in electric power like we talk about Quanta in the sense that mid to high single-digit growth, double-digit margin? Like do you, I know it's only been a week, so it's hard to sort of answer the question. But I think that's a big deal for you guys when you get there. Let's put it that way.

Well, look, there's no reason we would have done the acquisition if we didn't believe we could ultimately achieve that. And I think that's, I truly think that's one of the most exciting parts of the MasTec story today, right, is the potential of what that can become. We don't want to hype it. There's a lot of work to do. We're not where we need to be and we know that. So it's going to take hard work and effort. But today, we have great brand recognition. The truth is, today, we have the scale to be able to compete with anybody on any given project, and I think customers know that. I think customers have been clamoring to have a strong #2 across the country. And I think we're going to do our best to fill that role and then hopefully, once we're there, we're going to try to compete for the #1 spot, right? And we wouldn't say that if we weren't competitive. So that's our goal, but it's going to take us a little bit of time. I wish we could just shake the magic wand, then it would all work out perfectly, but it's going to take hard work and time. But I think we've got a great plan. I think we understand what the issues are. I think we understand what the customers are looking for. And our intent is really to put together a great offering that our customers are going to enjoy and our customers are going to see as a great value add.

And Andy, as you know, we put together a presentation deck on the Henkels & McCoy acquisition, highlighting a lot of the strategic benefits of the deal and geographic expansion, scale, MSA, et cetera, all the components of that. So investors should be aware that's available on our website at www.mastec.com and obviously, take good notice of the forward-looking statement commentary that covers all those comments. But there's a lot of good information on there, including Henkels as well as our view for guidance for 2022 and our near-term view of being a $12 billion enterprise.

Great guys. Any sort of closing comments you want to make, just anything.

We're super excited about 2022. We think we've obviously really transitioned the company over the last couple of years, and we're looking forward to start executing on the goals that we've set out. So again, Andy, thank you for having us today.

Thank you.

Awesome. Jose, George, Marc, thanks again for joining us, very much appreciate and stay well. It's the most important thing. We'll talk to you soon.

Appreciate it. Thank you.

Okay. See you guys.