MasTec, Inc. Q2 2009 Earnings Call Transcript

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2009-07-30 11:05:31.0

Tags: Revenue, Call Transcript, Earnings, Natural Gas, MasTec Inc., Natural Gas Business, Telecom & Utilities, Operational Accounting, Finance, Seeking Alpha

Question-and-Answer Session

Operator

Thank you. (Operator instructions) And we will take our first question from Alex Rygiel with FBR Capital Markets.

Alex Rygiel – FBR Capital Markets

Thank you. Good morning, gentlemen.

Jose Mas

Good morning, Alex.

Alex Rygiel – FBR Capital Markets

Jose, I appreciate you given us that end market color in the very beginning of your conversation, what would also incrementally helpful is if you could breakout the percent of revenue from each one of those end markets wireline, wireless, natural gas and so on.

Jose Mas

Obviously, our utility revenues were about 36% of the overall total volume for the quarter and if you have listened over the course of last couple of years, our goal is to get that 50%. We think that’s achievable and obviously wind is going to play a big role on that. So when you look at where we are expecting that to be for the balance of the year, its probably within that range, couple of points up or down from that. Obviously, our guidance has been impacted more significantly by wind. So if you add to that backend, we would actually be pretty close to those numbers. Of that, obviously of the utilities when do these -- we have always said, we thought wind would be half of our utilities business. We kind of backup the portion that we are dropping from a revenue guidance perspective and the percentage is pretty much equal out on the communication side of the business. Again, about half of that is -- continues to be our DirecTV business and the other half is pretty evenly split between wireline and wireless.

Alex Rygiel – FBR Capital Markets

And in the second quarter, it appeared as if gross margins from the acquired businesses declined about 500 basis points from the first quarter of 2009. Can you talk a little bit about why the margins in those businesses eroded despite revenues increasing?

Jose Mas

So couple of things. I think it might been you, Alex, you asked a similar question in Q1 about the strength of those gross margins and our answer in Q1 was around the natural gas business and what we said was, going into Q1 of ’09, we actually had a lot of backlog in that business with good margins which obviously helped those acquired businesses from a gross margin perspective. And I think I went to the extent to say that it was probably overstated by the strength in the natural gas business, if you would have backed up the natural gas business, it would have been a lot worse. And since a lot of that natural gas business is kind of fallen into the organic revenue line because we made that acquisition in early Q2 last year, you are kind of seeing what the gross margins for those acquisitions were in Q2. So for those businesses, it wasn’t much different in Q1.

 

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