MasTec, Inc. — FY 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual report, not a standalone fourth-quarter report. MasTec provides infrastructure construction, installation and maintenance services across communications, clean energy and infrastructure, oil and gas, and power delivery markets, primarily in North America.
Financial performance and liquidity
| Metric | FY 2021 | FY 2020 |
|---|---|---|
| Revenue | $7.952 billion | $6.321 billion |
| Income before taxes | $430.1 million | $425.2 million |
| Net income attributable to MasTec | $328.8 million | $322.8 million |
| Diluted EPS | $4.45 | $4.38 |
| EBITDA (non-GAAP) | $906.3 million; 11.4% margin | $782.5 million; 12.4% margin |
| Adjusted EBITDA (non-GAAP) | $931.3 million; 11.7% margin | $810.0 million; 12.8% margin |
| Cash provided by operating activities | $793.1 million | $937.3 million |
Revenue grew 26%; management attributed approximately $1.022 billion of the increase to acquisitions and approximately $609 million to organic growth. Costs of revenue rose to 85.6% of revenue from 83.4%, reflecting lower productivity, project close-outs and mix, start-up delays, and COVID-related supply-chain and crew effects. Despite higher EBITDA, both reported and adjusted EBITDA margins declined.
Segment results were mixed. Oil and Gas revenue increased 42% to $2.541 billion, while its EBITDA margin fell to 21.9% from 28.5%. Power Delivery revenue doubled to $1.017 billion and its EBITDA margin improved to 6.7% from 2.9%. Communications revenue increased 2% to $2.551 billion, with EBITDA margin roughly flat at 10.6%. Clean Energy and Infrastructure revenue rose 22% to $1.865 billion, but EBITDA margin declined to 4.0% from 5.3%.
At year-end, cash was $360.7 million, working capital was approximately $1.089 billion, and management reported total liquidity of approximately $1.1 billion, including $0.7 billion of revolving availability. Total debt obligations, including finance leases, were $2.033 billion, up from $1.319 billion in 2020, largely reflecting acquisition funding. The company reported compliance with debt covenants. Net cash used in investing activities was $1.357 billion, including $1.245 billion for acquisitions. No shares were repurchased under the company’s repurchase programs in 2021.
Material changes and business developments
- Completed 14 acquisitions during 2021, for total consideration of approximately $1.567 billion, including $1.284 billion cash net of cash acquired, $181.7 million in shares, and estimated contingent consideration. Acquisitions contributed approximately $1.0 billion of 2021 revenue.
- Replaced its secured credit facility in November with a $2.0 billion unsecured facility maturing in 2026. It had $772 million of revolving loans and a $350 million term loan outstanding at year-end, with approximately $0.7 billion of revolving availability.
- Year-end 18-month estimated backlog was $9.939 billion, up from $7.874 billion a year earlier. Approximately 63% related to service agreements that do not require customers to purchase minimum volumes and can generally be canceled on short or no notice.
- Enbridge represented 16% of consolidated revenue in 2021, compared with 4% in 2020. AT&T represented 9%, compared with 15% in 2020. The top ten customers collectively represented 54% of revenue.
Outlook, risks and unusual items
Management said it was well-positioned to pursue opportunities in 5G and broadband, renewable energy, grid upgrades, and infrastructure investment. It expects approximately 75% of year-end 2021 backlog to be realized in 2022. Remaining performance obligations were $4.9 billion, with approximately $3.9 billion expected to be recognized in 2022. These measures are not equivalent: backlog includes substantial estimated work under cancelable service agreements. The filing does not provide a clear numerical full-year 2022 revenue or earnings forecast.
Management estimated 2022 capital expenditures of approximately $200 million, or $100 million net of asset disposals, and $200–$220 million of equipment purchases under finance leases. It stated that operating cash flow, credit availability and cash balances should be adequate for anticipated needs over the next 12 months and foreseeable future.
- Key operating risks include fixed-price project cost overruns, execution and productivity shortfalls, labor availability and wage inflation, supply-chain disruption, adverse weather, permitting delays, and customer cancellations or reduced spending.
- COVID-19 effects had partly subsided but continued to affect productivity, project timing and costs; management also cited inflation, supply constraints and rising interest rates.
- Approximately $104 million of change orders and claims were included in contract transaction prices while awaiting resolution; actual recoveries could be higher or lower, and unfavorable outcomes could reduce or reverse revenue.
- Performance and payment bonds outstanding rose to approximately $2.155 billion from $764.8 million; estimated costs to complete the bonded projects were $768.8 million. Self-insurance liabilities were approximately $189.8 million.
- Other income included approximately $28 million from changes in estimated earn-out liabilities, a $3.5 million bargain-purchase gain, and approximately $7 million of legal-settlement income. A settlement finalized in 2021 was approximately $25 million, with $19 million due in 2022; net income recorded for it was $5 million after legal and other costs.
- Management and the auditor reported effective internal control over financial reporting. However, controls at 12 of the 14 2021 acquisitions were excluded from the year-end assessment; those entities represented approximately 29% of year-end assets and 11% of annual revenue.
Important facts for investors to verify
- Whether acquired businesses are integrated effectively and generate the expected revenue, margins and cash flows; acquisition purchase-price allocations and contingent earn-out estimates remain subject to uncertainty.
- Whether backlog converts to revenue on schedule, particularly given that most of it is not a firm minimum commitment, and whether the $104 million of pending claims and change orders is collected.
- Whether margins recover from 2021 levels, especially in Oil and Gas and Clean Energy and Infrastructure, and whether inflation, labor and supply-chain costs continue to pressure project execution.
- How acquisition-related borrowing, debt covenants, interest-rate exposure and required debt and lease payments affect liquidity and financial flexibility.
- Whether exposure from customer concentration, bonding obligations, self-insurance and underfunded multiemployer pension plans creates material cash costs or losses.