Marc Lewis - VP, IR José Mas - CEO George Pita - EVP & CFO.

Jamie Cook - Credit Suisse Alex Rygiel - FBR & Company Noelle Dilts - Stifel Tahira Afzal - KeyBanc Capital Markets Matt Duncan - Stephens Adam Thalhimer - Thompson Davis Robert Burleson - Canaccord Genuity Alan Fleming - Citigroup Chad Dillard - Deutsche Bank Andrew Wittmann - Robert W. Baird.

Thank you for standing by. You're currently on hold for today's MasTec's Second Quarter 2017 Earnings Conference Call. [Operator Instructions] Please standby, we're about to begin. Welcome to MasTec's Second Quarter 2017 Earnings Conference Call, initially broadcast on August 4, 2017. Let me remind participants that today's call is being recorded.

At this time, I'd like to turn the call over to Marc Lewis, MasTec's Vice President of Investor Relations.

Marc?.

Thanks, Lauren and good morning, everyone. Welcome to MasTec's second quarter 2017 earnings conference call. The following statement was made pursuant to the Safe Harbor for forward-looking statements described in the Private Securities Litigation Reform Act of 1995.

In these communications, we will 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 the initial broadcast of this conference call and the Company does not undertake to update these expectations based on the subsequent events or knowledge. Various risks, uncertainties and assumptions are detailed in our press releases 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 these communications.

In today's remarks by management, we will be discussing adjusted financial metrics as discussed and reconciled in yesterday's press release and supporting schedules. In addition, we may use certain non-GAAP financial measures in this conference call.

A reconciliation of any non-GAAP financial measures not reconciled in these comments to the most comparable GAAP financial measure can be found in our earnings press release, our 10-Q, our 10-K or in the Investors and News sections of our website located at mastec.com.

With us today, we have José Mas, our Chief Executive Officer; and George Pita, our Executive Vice President and Chief Financial Officer. The format of the call will be opening remarks and analysis by José, followed by a financial review from George. These discussions will be followed by a Q&A period and we expect the call to last about 60 minutes.

We had another great quarter and have a lots of important things to talk about today. So, I'll turn the call over to José.

José?.

Thanks, Marc. Good morning and welcome to MasTec's 2017 second quarter call. Today, I will be reviewing our second quarter results, as well as providing my outlook for the markets we serve. First, some second quarter highlights. Revenue for the quarter was $1.890 billion, an increase of 53% over last year's second quarter, and up 63% sequentially.

Adjusted EBITDA was $210 million, an increase of 94% over the prior year second quarter. Adjusted EBITDA margins were 10.7%, a 220 point improvement from last year's second quarter and adjusted earnings per share were $1.03. In summary, we had a fantastic quarter that significantly exceeded our expectations.

Our performance was driven by the strength of our oil and gas segment where revenues exceeded a $1 billion for the quarter. We were encouraged and surprised by the amount of production we were able to achieve in our oil and gas segment during the quarter despite considerable weather that impacted some of our projects.

We believe this quarter demonstrates the true potential of the segment based on our existing team, resources and equipment base. This also gives us tremendous confidence as we plan out into future years when you would see a significant increase in oil and gas activity in 2017, and we've handled it better than expected.

And we actually now have some available capacity in the fourth quarter that we have a chance to place which we didn't expect before. In addition to our oil and gas performance our other gas -- our other segments performed well and as expected.

Our communications business is seeing significant opportunity growth driven by fiber expansion and wireless densification, we saw solid backlog growth in our transmission segment with more expected through the balance of the year, and we've seen solid operational and margin improvements in our power generation business.

To summarize, we are proud of our second quarter performance but we're more excited about our future and the growing opportunities across all of our segments. Now I'd like to cover some industry specifics. Our communications revenue for the quarter was $592 million, flat with last year.

Revenue was up 26% in our wireline business; including the effect of the acquisition we made last quarter; wireless revenues were up slightly and installation revenues were down 20% compared to last year as expected.

The decline in installation revenues was driven by the slowdown in our security business, the exit of our cellular delivery business and some softness in the DIRECTV installation business. Our wireless business was up about 4% for the first half of the year compared to last year.

More importantly, we are more optimistic and have better visibility to the long-term investments that will be made in the coming years.

Every major carrier has publicly disclosed plans and initiatives for 5G; while we don't expect to see a large additional investment in 2017, we are now more confident of the impact that 5G investments will have on our business going forward. Also AT&T was recently awarded FirstNet, a nationwide public safety wireless broadband network.

We are confident that FirstNet will have a multi-year positive impact on our business going into 2018. Wireline revenue for the quarter was up 26% year-over-year and we continue to see strong demand in everything from electric distribution to fiber rollout and expansion.

On our last earnings call we talked about Verizon's unprecedented deal with Corning to secure over 37 million miles of fiber cable over the next three years.

We continue to see strong nationwide fiber deployment projects from both, telephone companies and cable TV companies, and I'm confident this will provide us with significant opportunities for years to come. Backlog was up about $300 million sequentially in our communications segment driven by the fiber projects growth.

In fact, in just the last four months we've been awarded approximately $750 million of fiber projects, most of which is not in backlog and all of which we expect to perform in the coming years. The pace of opportunities continues to grow and we expect future awards to continue to be a driver of long-term growth for us.

Moving to our Power Generation and Industrial segment, revenue was $61 million for the quarter versus $120 million the prior year and $47 million sequentially. While revenue is down year-over-year, we're encouraged by the operational and financial improvements we've made.

As volume picks back up, we're hopeful to be able to continue to grow on an improving margin trend. While backlog was up slightly sequentially, post quarter end we signed a large contract with a customer that is expecting to close on its financing later this month. We look forward to discussing this project on our third quarter call.

Subsequent to quarter end, we also acquired Cash [ph] construction; Cash is a Texas based infrastructure construction company that gives us exposure to the growing water market. We would like to welcome the Cash family to MasTec. Revenue in our electrical distribution business was $97 million versus $96 million in last year's second quarter.

More importantly, margins were much improved and we continue to build up of our recent momentum. While we're not satisfied with our margins in transmission, we've now had two consistent quarters and what we expect to be a transition year as we build backlog into the future.

During the quarter we were awarded approximately $200 million of new awards and we're optimistic that we will continue to grow backlog in the second half of the year. We are confident we will enter 2018 in a solid position and we continue to believe that 2018 will be an excellent year for this segment.

Our oil and gas pipeline segment at revenue of $1.140 billion for the second quarter compared to revenues of $426 million in last year's second quarter; or a 168% year-over-year increase. Our oil and gas business had a great quarter.

I'd like to add some color to something I said before, we're approaching the future with more confidence based on our current performance.

Let me elaborate; we came into 2017 knowing that we were going to experience substantial growth and we were careful not to overcommit and that we wanted to make sure we delivered our projects safely and on-time for our customers.

But not having historically performed at these levels made us somewhat cautious in terms of committing to additional work earlier this year, thus there were a number of projects we could have been involved with that we passed on. As we plan into the future, we are now more confident in our abilities and our resume supports that.

We're proud of the team we've built and believe we have significant opportunities to continue to grow our business. We're seeing a very high demand for large project work for multiple years out and we're confident that the Federal Energy Regulatory Committee will quickly approve these projects now the quorum [ph] has been reached.

We have also seen growing demand in the shale market coupled with significant increase in opportunities in Canada. While Canada has been a drag to earnings for the first half of the year, we're beginning to see a substantial increase in the number of RFPs and opportunities. 2018 is shaping up to be another great year.

To recap, we're off to a great start; we've increased 2017 revenue guidance to $6 billion, 2017 adjusted EBITDA to $620 million and adjusted EPS to $2.73, all record levels. More importantly, our future outlook is excellent as we are enjoying growth opportunities across all of our segments.

I like to take this opportunity to thank the men and women of MasTec for their commitment to safety, their hard work, and their sacrifices. Our people are our most important assets and it's because of their performance that we can produce numbers like the ones that we've talked about today.

I'll now turn the call over to George for our financial review.

George?.

Thanks, José and good morning everyone. Today, I'll cover second quarter financial results, including cash flow, liquidity and capital structure, as well as our increased full year 2017 guidance expectations. As Mark indicated at the beginning of the call, our discussion of financial metrics will include non-GAAP adjusted earnings and adjusted EBITDA.

Reconciliation and details of all non-GAAP measures can be found on our press release on our website and in our SEC filings. Here is some summary comments regarding second quarter 2017 performance, which by virtually all financial measures represented the best quarterly performance in MasTec history.

Second quarter 2017 revenue grew 53% to a record $1.89 billion, and this performance was significantly above our second quarter 2017 revenue expectation of $1.5 billion. The revenue growth over both last year's level and our quarterly expectation was driven by increased project activity in our oil and gas segment.

Second quarter 2017 GAAP net income was $83.3 million or $0.99 per diluted share with both metrics representing record second quarter performance levels. Second quarter 2017 adjusted EBITDA was approximately $202 million, substantially above our guidance expectation.

This level compares to $104 million for the second quarter of 2016 representing a 94% increase. On a rate basis, second quarter 2017 adjusted EBITDA was 10.7% of revenue. Second quarter 2017 adjusted EBITDA represented a record level of quarterly performance for MasTec.

Second quarter 2017 adjusted diluted earnings were $1.03 per share, $0.38 per share above our guidance expectation. This record level compares to $0.36 per adjusted diluted share for the second quarter of 2016, an increase of $0.67 per share.

The key driver for our second quarter results exceeding our guidance expectation was stronger oil and gas segment results. Additionally, we are pleased to see sequential improvement in our communications segment adjusted EBITDA margin rate during the quarter.

Because of our strong second quarter performance, as well as our improved outlook, we are increasing our full year 2017 revenue guidance expectation to $6 billion.

We are also increasing our full year 2017 adjusted EBITDA guidance expectation to $620 million or 10.3% of revenue, and increasing our full year 2017 adjusted diluted earnings guidance expectation to $2.73 per share. Now I will cover some segment detail regarding second quarter 2017 results.

Oil and gas segment revenue increased approximately $715 million or 168% compared to the same period last year to approximately $1.14 billion.

This level was significantly higher than our quarterly expectation due to both increased project activity and scope coupled with some acceleration of the expected second half 2017 project activity into the second quarter.

Second quarter 2017 oil and gas segment adjusted EBITDA margin was 13.5% of revenue compared to 13.3% of revenue in the same period the prior year, and with this improvement coming from improved overhead utilization due to higher levels of revenue. Communications segment revenue was $592 million essentially flat when compared to last year's level.

Second quarter 2017 communications segment adjusted EBITDA margin was 10.1% of revenue compared to 11.2% last year. On a sequential basis, adjusted EBITDA margin rate improved as expected by 140 basis points compared to the first quarter of 2017.

As we indicated last quarter, we have been experiencing production and efficiencies in our installed home operations, as well as the negative leverage effect of reduced home security customer fulfillment activity and the exit of the customer phone delivery drop.

As a result, first half 2017 adjusted EBITDA margin rates for this segment have been below last year's levels. We anticipate second half 2017 communications segment adjusted EBITDA margin rate comparisons versus 2016 will improve and approximate last year's second half rate levels.

Electrical transmission segment results continue to perform as expected with second quarter 2017 adjusted EBITDA of approximately $4 million or 3.7% of revenue.

As we have previously indicated, simply eliminating 2016 loss levels in this segment will drive sizeable improvement in our overall 2017 adjusted EBITDA when compared to 2016 and our first half 2017 results reflect a $38 million year-over-year adjusted EBITDA improvement over the same period into 2016.

Year-to-date improvement aside, we continue to see 2017 as a transitional year for this segment with expected improvement in end market large project opportunities in 2018 and beyond.

We are excited to report a 46% sequential increase in second quarter 2017 backlog for this segment and believe that backlog will increase further during the last half of 2017 setting this segment up for a strong 2018.

Power generation and industrial segment revenue was $61 million, and while this was in-line with our guidance the expectation it was a $59 million decrease when compared to the same period last year.

Adjusted EBITDA was approximately $5 million or 7.8% of revenue with strong project performance and execution offsetting the impact of lower revenue levels on overhead utilization.

While we are seeing a good amount of renewable bidding activity that should benefit 2018, uncertainty regarding the potential value of production tax credits due to potential corporate tax reform has slowed 2017 in this segment.

In our other segment during the second quarter of 2017 we recorded approximately $6 million in earnings related to our proportionate equity ownership in the two [indiscernible] pipelines which are now both in service and generating income.

This income is included in the equity and earnings of unconsolidated affiliates line item on our income statement. On a go forward basis, we anticipate that this equity investment will generate approximately $20 million of annual income.

Lastly, during the second quarter of 2017 our corporate segment reflected adjusted EBITDA costs of approximately $26 million or 1.4% of revenue.

This includes a net expense of approximately $3 million related to reduced recovery expectations on both, a non-operating entity and the process of liquidation, as well as a long-term note receivable partially offset by reduced earn out obligation.

To summarize, we had record second quarter 2017 performance with revenue increasing 53% and adjusted EBITDA increasing 94% over the same period last year.

Our Top 10 largest customers in the second quarter as a percentage of revenue were; energy transfer affiliates was 47% reflecting the record level of second quarter oil and gas project activity on multiple projects.

AT&T revenue derived from wireless and wireline services was approximately 14%, and installed to home and customer fulfillment security services were proximately 8%. On a combined basis, these four separate service offerings were approximately 22% of our total revenue.

It is important to note that these offerings were falling under the AT&T corporate umbrella, are managed and budgeted independently within that organization giving us diversification within that corporate universe.

Trans-Pecos pipeline was 5%, enterprise product partners, Comcast and Diamond pipeline were all 2%, and Duke Energy, American Electric Power, [indiscernible] and Next Hour Energy were all 1%.

Individual construction projects comprised 69% of our second quarter 2017 revenue with master service agreements comprising 31% and this mix reflects the higher level of current large oil and gas project activity.

We ended the quarter with backlog at approximately $5.3 billion, essentially flat when compared to the same period last year and as expected, sequentially lower due to the burn-off of the large oil and gas project activity. As we have previously indicated, we believe we are in the midst of a multi-year cycle of long haul project activity in the U.S.

that will drive significant demand for future oil and gas services for several years, and we anticipate year end 2017 oil and gas backlog will once again approach or exceed our year end 2016 levels.

Backlog highlights during the second quarter included sequential $300 million increase in the communication segments backlog; and lastly, but importantly, we also reported a 46% sequential increase in electrical transmission segment backlog during the quarter and we believe market conditions in this segment are favorable for continued backlog growth during the last half of the year.

As we have said for years, it is important to consider that quarterly backlog amounts tend to be lumpy as large contracts burn-off each quarter and new large contract awards only come into backlog at a single point in time.

Thus in a cycle with significant large project activity fluctuations in both quarterly backlog levels and historical quarterly revenue levels may occur simply due to timing shifts in the startup or production of large project activity.

Regarding other areas of the income statement below the EBITDA line, second quarter 2017 depreciation amortization expense was approximately $45 million or 2.4% of revenue compared to 3.3% of revenue for the same period last year, with this decrease primarily due to higher revenue levels.

Interest expense for the second quarter of 2017 was $14.8 million or 0.8% of revenue compared to 1% of revenue for the same period last year. This level was slightly higher than our quarterly expectation, primarily due to working capital usage related to financing our record level of second quarter revenue.

Finally, second quarter 2017 adjusted diluted earnings were $1.03 per share, well above our adjusted diluted earnings of $0.36 per share for the same period last year. Now I will cover cash flow, liquidity and capital structure.

As we have previously noted our long-term capital structure is solid with low interest rates and no significant near-term maturities, and we have an excellent and supportive bank group. We enter the third quarter with ample liquidity defined as cash possibility under our senior secured credit facility of approximately $400 million.

During the second quarter we incurred increased revolver borrowing levels to fund the working capital requirements associated with approximately $730 million in sequential revenue growth.

Our second quarter 2017 accounts receivable day sales outstanding or DSOs remain in excellent shape at 71 days, equal to the same period last year and remain slightly below our previously communicated expected DSO target range in the mid to high 70s.

During the second quarter we also accelerated certain equipment purchases and on a year-to-date basis, we incurred approximately $110 million in new capital leases to support our equipment fleet needs.

Thus our second quarter debt levels are elevated due to the acceleration of CapEx and the working capital requirements associated it with financing record levels of second quarter revenue.

Inclusive of these investments our second quarter 2017 book leverage ratio defined as gross debt levels divided by trailing twelve month adjusted EBITDA was 2.1 times affording us sizeable financial flexibility and well within our stated leverage target range.

That said, inclusive of the impact of third quarter acquisitions announced yesterday we anticipate that revenue seasonality coupled with lower levels of second half 2017 CapEx will reduce our current second quarter debt levels and year end 2017 debt levels will approximate our 2016 year end level with our 2017 year end book leverage ratio under two times.

Regarding our outlook for full year 2017 spending on capital equipment, we dissipate cash CapEx defined as CapEx net of assets disposals to approximate $90 million and $155 million of equipment procured under capital leases.

As of the second quarter of 2017, we have incurred approximately two-thirds of this annual expectation as we accelerated purchases during the second quarter to better support our operations. This capital level reflects our confidence based on our visibility of a continued multi-year cycle of large oil and gas project activity.

With regard to our full year 2017 guidance expectation we're increasing our annual revenue expectation by $300 million to $6 billion largely based on expected increased levels of oil and gas long haul project activity.

We are also increasing our annual adjusted EBITDA expectation by $45 million to $620 million or $10.3 million of annual revenue, and our expectation of adjusted diluted earnings per share by $0.28 to $2.73.

In summary, our current second half 2017 revenue and adjusted EBITDA guidance expectation is very similar to our prior expectations after adjusting for the third quarter acquisitions announced yesterday and for the transfer of some oil and gas project activity out of the second half of 2017.

We currently estimated that 2017 annual interest expense will approximate $60 million or 1% of annual revenue and that depreciation and amortization expense will approximate $186 million or 3.1% of annual revenue and these expectations incorporate both, accelerated levels of second quarter 2017 capital expenditure financing, as well as the impact of third quarter acquisitions.

We currently estimate that our 2017 net income attributable to non-controlling interest will approximate $3 million.

We also anticipate that our 2017 GAAP income tax rate will approximate 40% and our full year 2017 adjusted income tax rate will approximate 39%, with this difference due to the estimated tax effect of all adjusted items including the impact of share-based compensation.

This expectation does not reflect any potential actions that may be taken by the U.S. government related to corporate tax reform, although depending on the nature and timing of such changes they could afford us with a significant cash flow and net income opportunity.

Lastly, our share count for diluted earnings per share is about 82.5 million shares for both the third quarter and annual 2017 period, and this guidance expectations assumes no 2017 share repurchase activity. During the third quarter 2017 guidance we currently estimate that third quarter 2017 revenue will approximate $1.65 billion.

Third quarter adjusted EBITDA is estimated to approximate $167 million or 10.1% of revenue. Lastly, adjusted diluted earnings per share estimated to be approximate $0.73 per share.

Third quarter guidance includes the impact of the acceleration of some oil and gas segment project activity from the third quarter into the second quarter; and consistent with our prior guidance, continues to prudently assume moderated oil and gas segment adjusted EBITDA margin rates versus 2016 levels until we have better clarity of weather and other conditions associated with the expected significant level of project activity.

In summary, we are proud of our record second quarter 2017 results and pleased to increase our full year 2017 guidance expectation to yet another record level.

We have strong and visible opportunities across our end markets that support optimism for multiple years and our capital structure is in excellent shape leaving us well positioned to take advantage of the various opportunities our markets afford us. That concludes our prepared remarks, now we'll turn it back to the operator for questions and answers.

Operator?.

Thank you. [Operator Instructions] We'll go first to Jamie Cook with Credit Suisse..

Nice quarter. José, I guess two questions.

Obviously your performance in 2017 has been above expectations, in particular on the oil and gas side, but the barricades on your name is -- while the longer term trends are positive, you know, the first part of '18 or in '18 in total, it's going to be really hard to replace the oil and gas business that you had in 2017 because of the lack of a fork corm [ph] or the other businesses kicking in.

So can you talk about the risks there whether things get worse in oil and gas before it gets better and where the potential offsets are? And then my second question when I think about your 2017 guide, we've had nice two quarters but again, you're really only raising by the beat again; so if there is upside in 2017 where do you see that coming from? Thanks..

Okay, I'd sure be happy to answer that. In 2018 as we look forward, we're -- again, really, really excited; couple of reasons.

If I look at 2017, the one business that we had that's performing really, really well obviously is our oil and gas business but across from that our businesses have been relatively flat, we've talked about it, we've given the reasons why.

When we look at 2018 across our entire book of business, every single segment at MasTec for 2018 has an opportunity to grow and we didn't have that in 2017, our communications business has tremendous tailwinds behind it with both of what's happening with 5G, what's happening with FirstNet, what's happening on the fiber side with fiber expansion, we've got tremendous opportunities in our transmission business to continue to grow backlog and grow the business, our PowerGen business is having a soft year, a lot of that has to do with really the uncertainty around tax equity; we've -- again, we want a really big project post-quarter end and then we're going to talk about next quarter that we're really excited about and we're hoping that financing is expected to close here in August.

And as we look at oil and gas, you know -- and I don't know how to say it, I know that we've been saying it for a year and a half or so; we're really, really confident about the future.

We expect our oil and gas business to grow in 2018 versus 2017, we've got commitments in place with customers, we've got a lot of projects that are obviously on the board, some projects are pending approval, you know [indiscernible] did reach quorum last night, we had two commissioners who got appointed; we think that's a big deal, we think approvals are going to come out shortly.

So I can't tell you how excited we are as a Company, I think that when we look at 2017, we're proud of the accomplishments, we think it's only the beginning, we think we're very early on in cycles across all of our segments.

So I understand the concerns that are out there, I think the concerns were out there last year as people looked at our numbers for 2017 and all we can do is continue to beat, all we can do is continue to perform which I think we've now done consistently for a long period of time.

If I look at the balance of 2017, we've said this all along, we've been saying this for over a year; we're trying to take guidance as conservatively, as realistic as we possibly can at any given point in time. We're working on a number of very large and complex projects.

Again, we're performing well, we've been holding a lot of our projects at bid margins to the extent that we can do better and beat them, it's obviously going to flow through the numbers.

Today we talked about having extra capacity in the fourth quarter that we didn't expect to have, obviously if we can fill that capacity and we're working really hard to fill it, that will be additive for 2017; so we're excited about 2017 and we're more excited about 2018 and quite frankly, we've got good visibility already in the projects for 2019 and 2020, we're in a great spot..

Okay, thanks. I'll get back in queue..

Our next question comes from Alex Rygiel with FBR & Company..

Thank you and just tremendous quarter José..

Thank you Alex..

Our Washington Policy team has done a ton of work on the FERC and clearly with quorum last night, they agree with you that projects could start to get passed and processed through there within days if not weeks.

And obviously, there is a tremendous amount of backlog; clearly, I suspect that bodes well for you being able to fill that kind of fourth quarter gap but if that fourth quarter gap develops does it also turn into a 1Q gap, is that a possibility? And then more broadly on the bullish side, can you talk a little bit about the revenue capacity that you have within your oil and gas segment? And I have a follow-up..

Sure.

So when we look at our business for 2018 and again, if you go back a couple of years, we had a great quarter where we had $500 million of revenue at one time in the pipeline business, at the time we started saying, "hey, we actually think we have the capacity to do $2 billion", we hit the $2 billion, we hit $750 million in a quarter, we said, "hey, we think we can potentially do $3 billion in our oil and gas business", we've now done $3 billion.

So we did a $1.1 billion in a quarter, you can't just multiply it by four but quite frankly, we obviously have the capacity in place in terms of our teams, our people, our equipment to do over $1 billion a quarter, you annualize that; we're at a $ billion, $4.5 billion capacity in our pipeline business and what we've got to do is win and secure the work on a consistent basis to try to get there as close to that as we can.

We're not really worried about early 2018, we've got a good idea of what projects we're going to be on. Early in 2018; obviously, FERC approval was important, we haven't really been concerned about it because we've thought all along that these projects would get approved and these projects would go forward at some point.

The fourth quarter -- I know we talked a little bit about the fourth quarter gap, you know, for us it's all upside and again, if we can -- irrespective of what happens in the fourth quarter, we don't think that the fourth quarter gap kind of fully goes into Q1 because there is other stuff that we anticipate starting in Q1 that has nothing to do with the fourth quarter..

And as it relates to backlog; obviously, backlog came down a little bit because you had so much revenue burn in this quarter.

But it clearly sounded like you have a lot of projects that are -- have been awarded to you post the quarter or sort of captured in shadow backlog; right now you mentioned $750 million of fiber work won over the last four months, you mentioned a large power generation project; anyway we could take a stab at quantifying what that shadow backlog looks like?.

Well, couple of things.

We've been saying for a while that we expect -- we started 2017 with a record backlog on our oil and gas business, we've continued to say and continue to say today that we expect it to be very similar going into 2018; so we're going to be at or above -- going into 2017 we expect to be at or above those levels going into 2018 in our pipeline business, we've always said that the pipeline business is going to be lumpy, you win big contracts, you work them off and you get them in big slugs; we've got our share of big slugs that we expect to win and add in backlog, and we're very hopeful and believe strongly that a lot happened before year end.

Our business is going well right now Alex and again, I don't -- we've been doing this a long time, I don't ever remember where we've got such great visibility across all businesses at the same time. Obviously, some of those businesses have tremendous momentum right now, we think that momentum is going to continue to build.

We've got a lot of backlog that we consider work that we're going to be working on that isn't actually reflected in our backlog numbers, we understand that, we're not going to provide a number on that today but I think it's because of that that we can talk with such excitement about not only the next year but the multiple years out..

Very helpful, thank you..

Thanks, Alex..

Our next question comes from Noelle Dilts with Stifel..

All right, thanks and again congratulations on a great quarter. So I wanted to start with telecom; going back to that $750 million of wins in the last four months, it's obviously really impressive.

Can you give us a feel for sort of where that's coming from; is this more on the telco side or on the cable side? And then, yesterday Comscope [ph] kind of talked about choppy telecom spending due to consolidation, changes in competitive landscape; are you seeing this at all or how are you kind of thinking about just near-term trends versus the longer term trends that we had into '18?.

Sure, Noelle, couple of things. So first on our wins, it's predominantly coming from telcos, tremendous opportunity in the cable TV MSO market, we think that business is going to do really well and grow into the future, so it's definitely an area of focus for us, we obviously made an acquisition there last quarter.

The company is performing very well, we think they have tremendous upside, so we're going to continue to mind that, we're very excited about what that means for our future. I saw some of the releases that came out yesterday, obviously, Comscope and Corning, very different reports, Corning was a lot more upbeat.

We've said a couple of things, one is that we expected the second half of 2017 to be flattish, we've been saying that all year, we saw that coming; so nothing's really changed in our expectations relative to what we see in the second half of 2017 versus our thinking three months ago or six months ago.

But I don't think there is any question if you read through every single report of every major carrier that exists.

There is tremendous tailwinds coming, right; you start with 5G and what that means for the wireless industry, every carrier is going to have to spend significantly to densify their network, you've got a tremendous amount of fiber expansions being planned and rolled out, you're seeing consolidation in that space today.

The MSOs are going to fall right behind, so it's just -- it's an extremely attractive market, we've been growing our resources and our capabilities around that market now for -- the last couple of years we think we're sitting in a great spot and there is going to be noise quarter to quarter but I think the long-term outlook is fantastic and we're really bullish about what that means, both in 2018 and beyond that..

Okay. And then sticking with telecom; you talked about FirstNet being a major opportunity and you said you're really confident that you will participate there.

Is this work that you're expecting to be bid independently or is it coming with sort of turf 4.0 and how are you thinking about the timing of when that work will start?.

So we expect activity to really kick in 2018, there might be some smaller activity in 2017, our outlook really hasn't changed there; we expect to be a significant player in that business and I think that's all we'll say to that right now..

Okay, thank you..

Our next question comes from Tahira Afzal with KeyBanc Capital Markets..

Congrats on the great quarter.

I guess first question, given all the backdrop you've provided which is very in-depth on your core segment and how they are improving really across the board, wouldn't $1 in earnings power that you just saw be more of a norm next year versus an outlier?.

Say that again, Tahira, I didn't understand; $1 in earnings power?.

Yes, for the quarter that you just saw. I assume that could be more often a norm next year versus an outlier like it is here [ph]..

Well, we had a great quarter.

Obviously, our goal is to continue to grow and excel; we're not -- I don't think we're in a position to start guiding into future quarters but we've obviously achieved that and accomplished that and I think historically what you've seen from us is, we're always driving to improve on the levels that we reached, nothing's going to change.

To the extent that the work is out there, we obviously have the ability to generate not that in earnings power but we actually think we have the ability to generate more..

Got it, José. And José, I don't know if anyone has really talked about your civil infrastructure move; would love to get a sense of what prompted you to do that, clearly a new vertical for you in a sense..

Well, couple of things. One, we really like that market especially when you think about Texas and what's going on in a lot of their water needs and a lot of the large water projects that are being built.

We're very active in the M&A front, we look at a lot of deals, we've passed on a lot of deals, this was a company that we really like; we thought it made a lot of sense, it was -- for us it's all opportunistic, we think we've got an excellent valuation on a company that's performed very consistently and well for a long period of time.

We think it adds a lot of dimensions to that PowerGen and industrial business for us and we think we can expand that offering into other areas.

So again, pretty excited about it, small deal but kind of what we've been good at historically, right; buying small to mid-sized companies and really injecting them with capital and the ability to help them grow and I think this will be no different..

Okay, thanks a lot, José..

Thank you..

Our next question comes from Matt Duncan with Stephens..

Good morning guys, and I'll add my congratulations on a great quarter. So José, if I heard you correctly, you said the oil and gas business if you just sort of annualize what you did this quarter, has the capacity of $4 billion to $4.5 billion.

And as you look out the next year, I mean we've heard a lot of people talking about how industry capacity next year is reaching the point where it's sort of fully committed; is it possible for you to do that kind of revenue number based on what you're seeing in the marketplace, obviously, not asking for guidance because timing of projects can move things around; but is that really a potential revenue number you can achieve? And how big really is the removal of this FERC hurdle? I mean it seems like we've now got plenty of time to get projects approved and well-staged into next year -- potentially giving you the ability to reach that number; so is that doable?.

A couple of things; one, there is some seasonality to the business, so it does depend where your projects are located, you do have weather issues related to the oil and gas business, especially on large projects so there are certain months of the year where you probably can hit those production levels.

Q2 and Q3 I think are always going to be the strongest quarters in the businesses, just -- because of national weather patterns. So I don't know that you can just take the quarter and multiply it by four, obviously, if the work was there and the conditions were there it's an easy answer; the answer is yes, right, we were able to do that in a quarter.

For all intents and purposes you can continue to do that but to hit those kind of numbers you actually have to build a little bit more in resources, have bigger Q2s and Q3s because your Q1s and Q4s are going to be slightly smaller, now that's -- we're not guiding for next year, we're obviously out there trying to win and execute on as much work as you can, and as we can and as we look at 2018 we're confident in our ability to grow off of our 2017 base.

As it relates to FERC, again, maybe -- maybe wrongly so, we haven't been that concerned about it; we knew at some point the members would get appointed and we thought these would all be favorable members to what's happening from a project related basis, it's now happened which is great news; we think it will come out quickly and we think -- A) it's very important for the industry and it bodes really well for a lot of the projects that have been held up; so we expect demand for services to dramatically increase just based on these projects becoming real and actionable immediately..

Okay. And then second question on communications; you said that the wireline growth was 26%, obviously that included an acquisition.

I'm curious if you could tell us what the organic growth was there? And then on the wireless side, as you think about 5G and the timing of how that's going to kick-in -- take everything into consideration with wireline, getting a boost from that too because of all the fiber, what type of revenue potential do you have in that communication segment as we look forward, it seems like the double digit growth is very possible, if not -- low double digit not even maybe conservative given the way that industry is setting up?.

Yes, we came into the year with a couple of headwinds that we talked a lot about, obviously some of them in our installed business as we kind of are getting out of the security business and the cellular business and that's impacted that business which came off of a great 2016, it's obviously struggled a little bit in 2017, we think that that's going to kind of normalize.

As we look forward here it will be down versus last year but we think at a very consistent rate. We look at our wireline business and the acquisition obviously did have an impact, we had the headwinds related to Google from last year where that was about a $75 million annual headwind that I think we've overcome.

So it had some slight growth outside of the acquisition, probably closer to flat without the acquisition in the quarter but a lot of heating up and a lot happening in that market that we think is going to bode well for the future; the wireless business with both, FirstNet and 5G starting next year, we expect some really good things for us.

So our communications business coming off of what's going to be a flat 2017 versus 2016, we expect solid growth in 2018 and again, we think it's a long cycle that we're going to be able to build-off of -- for a number of years off of that..

Got it, thanks, congrats again..

Thanks..

We'll go next to Adam Thalhimer with Thompson Davis..

Good morning.

José, continuing on that same point; I'm just curious with the $300 million of communications backlog growth this quarter, the $750 million is not in backlog and then what you know about FirstNet today; how does this get layered in 2018? I mean does it all kind of -- hit in Q1 or does it kind of starting Q1 and ramp for the year?.

I think it ramps. A lot of these are programs that are going to start slower and build, both on the fiber side and on the wireless side. I think a lots being talked about 5G, I think 5G is definitely hitting in 2018, I think it's obviously bigger in the second half of 2018 than it is in the first.

I think some of the fiber work might even start late in 2017 but it's going to ramp as anything goes long and the same can be said for FirstNet.

So I expect a much better 2018 than we're having in 2017 from a revenue growth perspective, I do think historically our second half of the years in communications have been a lot stronger than the first half; we've kind of bucked that trend here recently but I expect to get back to that in 2018 where the second half of the year is a lot stronger than the first half of the year..

Okay. And then secondly on transmission, can you give a little bit more color on the bidding environment? And also just a little bit more on your expectations for that segment in 2018 will be helpful..

Yes, we're super excited. One, we're coming off of a couple of tough years, we knew that 2017 will be a transition year.

I think over the last couple quarters we've performed well there based on the projects that we had were very consistent, starting to build backlog, really strong awards; in the second quarter we expect that to continue, we were actually really bullish in our belief that we're going to be able to significantly grow backlog between now and the end of the year going into 2018 in a very different manner than we entered 2017, so we expect 2018 to be a really good year in that business, there is tremendous prospects here, there is lots of activity.

In my opinion on a go-forward basis that business is as good as it's ever been for us..

Great, thank you..

Thanks..

We'll go next to Bobby Burleson with Canaccord Genuity..

Good morning, congratulations.

So just curious in terms of the capacity that you want to sell in oil and gas in Q4, is there a certain kind of range or project size that you're kind of restricting yourself to there in terms of not wanting to take too much on as kind of stop-gap before again working start next year? And then is there also kind of duration maybe -- maybe you're looking at maybe smaller projects or are there no constraints there?.

Well, we don't feel we have constraints. We are looking at it in a way in which we did move some -- some work has moved from the second half of the year into Q2, so it does give us a little capacity in Q4 that we would love to fill.

The reality is that some of the bigger longer term projects are kind of committed to which bodes well for us and others in the industry, so that's not really where you build capacity in the shorter term measure, it's going to be more in the mid-sized jobs which -- by the way there is a lot out there, so a lot of things that we haven't been looking at are passed on over the course of the year; we're now getting back reengaged in, we've got some opportunity to fill, it's not in our numbers but quite frankly, we're going to work hard and I'm confident we'll be able to get some.

So I don't think it's going to have a dramatic effect on a full year basis but it's nice to be in that position..

Great.

And then it sounds like you have nice driver product on fiber and on wireless next year in your communications; can you give us a sense for kind of what the mix might start to look like between the two capacity, it's much more wireless centric but you've got starting to maybe balance that a little bit more with the fiber track you're getting?.

The short answer is yes. We feel really good about our opportunities to grow wireless business but quite frankly, the wireline business is -- just has so many opportunities in front of it, so we do think that we'll have a more balancing out effect of revenues as we look at those two businesses with great opportunities to grow both..

Thanks..

We'll go next to Bill Newby [ph] with D.A. Davidson..

Thanks for taking my question guys and again, congrats on a great quarter.

One that's oil and gas, as you look at that business growing again in 2018, I mean what does that assume for the Canadian market, we've seen a couple of those larger projects move to the award phase and I'm just wondering if you guys are getting more optimistic up there?.

Well, we're definitely more optimistic.

Traditionally, we haven't really done really large project work in Canada, we've done a lot more mid-stream which has been obviously a market that's been hit hard just like all the others; we alluded to it a little bit in our comments but we're seeing more activity there than we have in years which is a great sign.

So we do expect Canada to grow in 2018 versus where it's been both in 2017 and then the last couple of years; so definitely a driver for us as we look at 2018..

Okay.

And then kind of switching gears; I guess a little bit ahead of our expectations at least on contributions from the WAHA [ph] JVs, I guess, maybe George -- what's the expectation going forward and contributions from that?.

Well, as we talked about, they are both in service, right; this is the first quarter they are both in service, so we generate about six. I cleared in my preferred remarks, I think it's about $20 million annually, we'll get a little bit more clarity to that as things continue to ramp up and we get further along on operations.

But what we talked about today was from that investment and our proportionate share of that we're expecting on an annual basis in the range of $20 million a year..

Okay, perfect, thanks..

We'll go next to Alan Fleming with Citi..

Good morning guys, nice quarter. José, maybe you can talk a little bit more about that the margin and communications; it was nice to see the sequential improvement there.

Do you feel like you've worked through all of these growth and efficiencies and maybe those are behind you and that you should be able to get more leverage here in the second half and into 2018, maybe just talk about the productivity you're getting from some of that new headcount you've added over the last few quarters?.

Sure. I think you look at 2017 and we're going to be flat on a year-over-year basis.

There is no -- we've got a couple of issues related to that right because I think we are seeing tremendous opportunities for growth, I think when we look at -- especially going into Q4, we are going to be opening new play, opening new shops in the new territories and really starting to take advantage of the opportunities that have presented themselves for us.

So I don't think we get a lot of margin upside as in the second half, I do think we start seeing that as 2018; I think the biggest driver of that is going to be volume utilization which I think is coming but I think we're in the process now of actually having some expenses associated with some of that growth that's come in and I think that's built into our numbers..

Okay, helpful.

And then maybe a follow-up on WAHA [ph], I mean what's next for that? Are you guys happy kind of holding that for the interest in those projects or is there an opportunity to maybe sell that and redeploy that capital either to a similar type of opportunity or M&A? I don't know, maybe just talk about kind of how you're thinking about that going forward, José..

It's a great project, the returns are fantastic.

George said if we did fix this quarter, the reality is that there is a lot of -- the majority of that is fixed so we have a guaranteed rate of return based on what the customer is taking but we have a tremendous amount of opportunities to upsell and actually make additional revenues with a lot of different drivers, especially with some of the customers that are adding on to that system.

So it could get a lot better and I think we're kind of trying to weigh that; we obviously think we've created an enormous amount of value relative to our initial investment in that project.

At some point it may make sense moving, we haven't made a decision yet but we have -- there is no question we've got a lot of stranded value there and could move that asset at a significant premium to what we have in it..

Okay, thank you..

We'll go next to Chad Dillard with Deutsche Bank..

Good morning, congratulations on a nice quarter.

So you guys had a fantastic utilization in oil and gas so far this year but what's your confidence level, you can execute at the same level when you have more projects focused on -- I guess what I'm really trying to understand is, does having one project in oil and gas -- your only utilization advantage is it may not be repeatable?.

So first we had many projects in our oil and gas segment, we obviously -- we had a large project last year and the could access; we have a large project this year in rover [ph], we expect to have large projects in 2018 and 2019.

So we don't really think that trend is going to change much but it is a portion of our oil and gas business, we've got a very robust business with lots of customers and lots of different projects.

And you know the way we break out our crews -- we don't really view that very differently, so whether you're on two projects or one projects; if they are the right-size and capacity, we think we're able to execute at similar levels and I think based on the book of business that we have today we're very comfortable in saying that..

That's helpful.

And then there has been a lot of talk of convergence instead of fiber and 5G analysis; I want to get your view on what that means from our tackling other efficiency that you can realize and have a fixed [indiscernible] to change the market share dynamic in the industry and maybe saving a more traditional wireless contractor?.

Sure.

I think a couple things; I think that there is still two separate types of work, right; you've got densification of the network, the reality is that the way that a lot of the carriers are going to densify their network is going to require fiber; so historically you've had less number of sites, they all require fiber but you don't have that many touch points on fiber, now you're going to have this massive densification with millions of touch points that all have to be connected via fiber.

So the wireless business is creating tremendous wireline opportunities but there is still a significant wireless component to that that has to happen for it all to work.

So we actually think it's -- for us it's been like a double whammy, we get tremendous opportunities in our wireless business and it comes with tremendous opportunities in our wireline business. There are some things that we can do to obviously offer as much of a turnkey approach as we can there, I think we're in a fairly unique position to do that.

But all in all, I think it bodes well for both sides of the business and for both industries in total..

Great, thanks. I'll jump back in the queue..

We'll go next to Andy Wittmann with Robert W. Baird..

Great, thanks. I guess my first question is on the fiber; I think you guys said in the script that there was -- I think you said that you announced or you had $750 million of fiber awards; I think I heard that correctly, but you said most of that wasn't in backlog.

I guess my question is what's holding it back? And when do you expect that you will be able to put that in the backlog?.

A couple of things; one, some of it was awarded subsequent to quarter end.

Two, its multi-year awards, we only include 18 months of backlog in our backlog schedules; so I think as we get a true understanding of how much of that's going to be done in 18 months a lot more of that will come in because we don't expect some of that to start until 2018, so even on some of those awards we've taken a very small percentage of that in the backlog.

So I think it's going to play out in the backlog over the coming quarters..

Great.

And then I guess my follow-up question is on the rover; obviously you guys are doing a great job executing on this, there has also been some news headlines about some portions of the line that have been slowed down because of various concerns, I was just wondering how that -- are those portions that were slowed down or shut down temporarily, back up and running; I guess there were some in West Virginia, in Ohio.

And if you could just give us a status update on how those portions in-line are progressing and how they could be -- if they are still -- and certainly they are factored in your guidance but what the risk factors are, how that could vary from here?.

Every year we work on large complex projects, so I think last year obviously I think Apple [ph] was probably one of the most complicated projects that we've ever worked on.

I know there was a lot of questions, there was news article after news article that we would get asked about relative to that project and I think in a very general sense we felt comfortable about what we were saying, what we were guiding to and I think we said that all along.

You know, rover [ph] is no different, rover is a large complex project, it has its sets of issues, all of them which will work through, all of them which are confident will resolve themselves; we had those issues as the project started, we had those issues quite frankly before the project even started as it related to the clearing issues and a lot of questions as to whether that project was even going to go, and once it did whether we'd ever make the dates that we needed to have to be able to start the project.

I'm not going to get into specifics on the job because we've got a customer who is obviously dealing with that and answering their own questions on their earnings falls relative to those projects so we'll defer to them.

But we're confident that everybody is working really hard, everybody is working to complete that project in a safe manner, respecting the environment and respecting all of the issues that exist; no different, we expect that project to ultimately come to conclusion as all projects do, and we're pretty excited about what it means for us and our performance on it to date..

Okay, thank you for those perspectives..

Thanks..

It appears there are no further questions at this time. I'd like to turn the conference back to management for any additional or closing remarks..

Again, just would like to thank everybody for participating on our call today. We look forward to updating everybody again on our third quarter call in a couple of months. So thanks for -- thank you for participating..

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