Manish Somaiya

Manish Somaiya asked Jose Mas about the key metrics and dashboards used daily/weekly by segment to ensure margin outlooks are on track. He also asked Paul DiMarco to bridge the operating cash flow from 2025 to 2026. Finally, he questioned Jose Mas on MasTec's capital allocation strategy, given leverage in the low 1s, specifically regarding tuck-in acquisitions and share buybacks, and if there are specific segments targeted for tuck-ins.

Answer

Jose Mas, Chief Executive Officer, explained that MasTec's focus is on field-level productivity and enhancing 'widget' installation, supported by technological advancements for real-time information. Paul DiMarco, Chief Financial Officer, stated that operating cash flow will follow revenue growth cadence, with no major changes in DSO, aiming for 70% EBITDA conversion. Mr. Mas emphasized prioritizing organic growth, but also indicated that MasTec plans to be more acquisitive than in recent years, viewing M&A as a key part of its strategy to meet industry demand. He noted that while all segments offer M&A opportunities, high valuations require a balanced approach.

Manish Somaiya of Cantor Fitzgerald asked Jose Mas about the key metrics on his daily/weekly dashboard used to ensure segment-level margin outlooks are on track. He also asked Paul DiMarco to bridge the operating cash flow from 2025 to 2026 and inquired about MasTec's capital allocation strategy, including tuck-in acquisitions and share buybacks, given the projected low 1s leverage.

Answer

CEO Jose Mas stated that the business focuses on field-level widget installation, with productivity enhancements driving profitability, supported by technological advancements for real-time information. CFO Paul DiMarco explained that operating cash flow will follow revenue growth cadence, with no major change in DSO, aiming for 70% EBITDA conversion. Jose Mas outlined a capital allocation strategy prioritizing organic growth, followed by opportunistic and additive M&A (expecting to be more acquisitive than in recent years), and then share repurchases, while acknowledging high valuation expectations.

Manish Somaiya asked about the current bid environment, including pricing trends by geography and end market, and MYR Group's criteria for declining unattractive business. He also sought details on data center customers and the diversification of the C&I backlog, and finally, the high-level risks and opportunities for 2026.

Answer

President and CEO Rick Swartz explained that MYR Group focuses on a select client list and long-term relationships, avoiding projects with numerous bidders. He noted that while some markets are tighter, overall activity is good, leveraging local expertise from 65+ offices. SVP and COO of Commercial and Industrial Don Egan confirmed the C&I backlog is highly diversified, with ongoing conversations with hyperscalers, general contractors, and end users. Mr. Swartz added that retrofit work in existing data centers is also a significant, long-term opportunity. For 2026, Mr. Swartz identified weather as the biggest T&D impact, with project timing and permitting as other risks, but emphasized that projects are a matter of 'when,' not 'if.'

Manish Somaiya asked about the bid environment, specifically pricing trends across geographies and end markets, and MYR Group's strategy for walking away from unattractively priced business. He also sought clarification on the diversification of the C&I backlog, particularly regarding data center customers (hyperscalers, GCs, developers), and asked for high-level insights into the puts and takes, risks, and opportunities for 2026.

Answer

Rick Swartz, President and CEO, explained that MYR Group focuses on a select client list and long-term relationships, avoiding projects with numerous bidders, and leveraging local expertise from its 65+ offices. Don Egan, SVP and COO of Commercial and Industrial, confirmed the C&I backlog is very diversified, with ongoing conversations across hyperscalers, GCs, and developers, adding that retrofit work in existing data centers is also a significant, long-term opportunity. Rick Swartz identified weather and project timing/permitting as the main risks for 2026, but reiterated confidence that projects will be built.

Manish Somaiya asked about the $1 billion of high-probability future phase work, seeking clarification on whether it's tied to existing customers or new programs and its expected conversion window. He also questioned investments in working capital and free cash flow conversion as the E-Infrastructure business scales. Finally, Mr. Somaiya inquired about capital allocation priorities, M&A strategy, and the perceived abundance of quality acquisition targets.

Answer

CEO Joseph Cutillo clarified that the $1 billion is tied to active projects with existing hyperscaler customers, representing solid work for capacity planning with no expected slowdown. CFO Nicholas Grindstaff stated that strong free cash flow conversion, conservatively in the 80% range to EBITDA, is expected to continue. Mr. Cutillo explained that the focus for capital allocation is on growing and expanding within infrastructure (geographic and service footprint), not necessarily a fourth leg. He attributed the increase in quality M&A targets to high multiples and owners needing capital and scale to participate in the significant infrastructure spend.

Manish Somaiya asked for clarification on the $1 billion of high-probability future phase work, specifically if it's tied to existing customers or programs and its expected conversion window. He also questioned the investments in working capital and free cash flow conversion as the E-Infrastructure business scales. Finally, he inquired about Sterling's capital allocation priorities, the potential for a fourth business leg, and the abundance of quality acquisition targets.

Answer

CEO Joseph Cutillo confirmed the $1 billion+ is tied to active projects with existing hyperscaler customers, representing minimum work to finish, and is considered internal backlog with no slowdown anticipated over the next 3-5 years. CFO Nicholas Grindstaff expects continued strong free cash flow conversion, conservatively estimating it in the 80% range to EBITDA. Mr. Cutillo stated the focus remains on expanding services and geographic footprint within infrastructure, not necessarily a fourth leg, and attributed the increase in quality acquisition targets to higher multiples and owners needing capital to fund growth in the face of massive infrastructure spending.

Manish Somaiya asked about how Everus Construction Group's E&M and T&D segment margins might perform through a cycle. He also inquired about the specific composition of data center and semiconductor exposure within the company's backlog. Lastly, he asked about the strategy for reaching the target leverage of 1.5x-2x (via tuck-ins or a blockbuster transaction) and the outlook for free cash flow in 2026.

Answer

CFO Max Marcy explained that margins are less about cycles and more about growth and fixed cost leverage, noting that cost-plus contracts (half of their work) tend to maintain margins. CEO Jeff Thiede added that they deliberately pursue a mix of cost-plus (large, complex) and fixed-price work, with T&D having 55%-60% MSA work for stability and fixed-price uplift. Jeff Thiede did not provide specific backlog breakdowns for data center and semiconductor but confirmed they are increasing, with data center being the largest market and semiconductor growing. Max Marcy stated that reaching target leverage depends on finding the 'right deal,' which could be multiple tuck-ins or a larger transaction, considering risk and management time. For 2026 free cash flow, he expects it to be consistent with 2025, as less working capital will be used compared to 2025's strong revenue growth, despite increased CapEx.

Manish Somaiya asked for insights into the margin dynamics of the E&M and T&D segments through a business cycle. He also inquired about the specific composition of data center and semiconductor exposure within the current backlog. Finally, he sought clarification on the strategy for reaching the target leverage of 1.5x-2x (via tuck-ins or a blockbuster transaction) and the free cash flow expectations for 2026.

Answer

CFO Max Marcy explained that margin dynamics are more influenced by growth and fixed cost leverage than by cycles, noting that cost-plus contracts help stabilize margins. CEO Jeff Thiede added that their deliberate pursuit of work, including cost-plus for complex projects and MSA work for stability, supports their margin goals. Regarding backlog composition, CEO Jeff Thiede stated they don't provide that level of detail but confirmed increases in data centers, hospitality, high tech, transportation, substation, and transmission, with CFO Max Marcy adding that data center is the largest market and semiconductor is growing. CFO Max Marcy reiterated that reaching target leverage depends on finding the "right deal," which could be multiple smaller or a larger one, considering risk and management time. He also projected 2026 free cash flow to be consistent with 2025, with less working capital usage offsetting increased CapEx.

Manish Somaiya sought clarification on Centuri's gross margin guidance, specifically requesting an apples-to-apples comparison that includes the impact of storm restoration services. He also asked for insight into how the $13 billion opportunity pipeline and near-term opportunities are factored into the full-year guidance.

Answer

Gregory Izenstark, CFO, clarified that including the assumed storm revenue and gross profit, the gross profit margin at the midpoint would be approximately 8.8%. Chris Brown, President and CEO, explained that $3.2 billion of secure backlog (including anticipated MSA renewals) forms the predictable base for the year, with upside potential coming from winning new bids, including those currently tendered in Q1 and future opportunities.

Manish Somaiya sought clarification on the full-year 2026 gross margin, including storm revenue, for an apples-to-apples comparison with base guidance. He also asked how to interpret the $13 billion opportunity pipeline and $2 billion-$3 billion near-term opportunities in the context of the full-year guidance.

Answer

Gregory Izenstark, Chief Financial Officer, Centuri, confirmed that including storm revenue, the gross profit margin at the midpoint would be about 8.8%. Chris Brown, President and CEO, Centuri, explained that guidance is based on secure backlog, with upside potential coming from winning new bids beyond what's already in the Q1 histogram.

Manish Somaiya asked if the working capital pulled forward from Q1 2026 into Q4 2025 would create a headwind for 2026 cash flows, and sought Koti Vadlamudi's thoughts on M&A versus organic growth, including acquisition size and alignment with the 1.5x debt target.

Answer

Ken Dodgen, CFO, expects 2026 to be another solid year for cash flow, trending towards 4%-5% of revenue, with free cash flow at least 50% of adjusted EBITDA, not anticipating a headwind from the Q4 pull-forward. Koti Vadlamudi, President and CEO, stated that M&A must align with strategy (sustainable growth, cultural fit) and can accelerate growth in subscale markets, noting a wide appetite for acquisitions given organic growth, with a focus on extreme diligence.

Manish Somaiya asked about the pricing discipline holding in the marketplace and potential supply chain dynamics that might act as headwinds given the growth opportunities.

Answer

Duke Austin, President and CEO, explained that Quanta's $300-$700 million investment in power transformer manufacturing facilities and vertical supply chain strategy is aimed at de-risking the supply chain and addressing affordability for clients. He noted a shift from 1-2 year bids to 5-10 year programmatic negotiations, emphasizing longevity, risk-adjusted solutions, and improved return on invested capital (ROIC) in these environments. He also highlighted that a tight craft labor market generally benefits Quanta.

Manish Somaiya raised concerns about the shortage of skilled labor in the country and whether it could become a constraint on Powell Industries' growth ambitions.

Answer

Brett Cope, Chairman, President, and CEO, acknowledged skilled labor as an ongoing concern, routinely discussed by management. He stated they are performing well on the variable labor side but face challenging needs on the fixed side, particularly in engineering for the commercial segment's growth. He expressed confidence in addressing these needs within the next 90 days.

Manish Somaiya inquired about the current pricing environment across Powell's end markets, the intensity of competition, and how the company manages raw material price volatility, particularly for commodities like copper and engineered components. He also asked about lead times for specific components like switchgear and potential component-side constraints that could impact future revenues, given the significant backlog.

Answer

Brett Cope, Chairman, President, and CEO, stated that the pricing environment remains steady across all verticals, with potential upside in data center jobs due to anticipated efficiencies from repetitive product builds. Mike Metcalf, EVP, CFO, Secretary, and Treasurer, explained that Powell hedges copper and incorporates drastic increases into pricing models, while engineered components are locked in at contract signing. Cope noted that Powell is well-positioned regarding component lead times, particularly for higher power levels (38 kV) in data centers, and still has good capacity for other designs (5 and 15 kV gear at 35-40 weeks lead time). He also provided the next 12 months convertible backlog figure.