mtz-20230630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________________________

Form 10-Q

_____________________________________________

(Mark One)

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __ to __

Commission File Number 001-08106

_____________________________________________

MasTec, Inc.

(Exact name of registrant as specified in its charter)


Florida		65-0829355
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

800 S. Douglas Road, 12th Floor
Coral Gables,	Florida	33134
(Address of principal executive offices)		(Zip Code)

(305) 599-1800

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $0.10 Par Value	MTZ	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.) Yes ☐ No ☑

As of July 31, 2023, MasTec, Inc. had 78,860,414 shares of common stock outstanding.

MASTEC, INC.

FORM 10-Q

QUARTER ENDED JUNE 30, 2023

TABLE OF CONTENTS


		Page
Part I. FINANCIAL INFORMATION		3
Item 1	Financial Statements (Unaudited)	3
	Consolidated Statements of Operations	3
	Consolidated Statements of Comprehensive Income (Loss)	4
	Consolidated Balance Sheets	5
	Consolidated Statements of Equity	6
	Consolidated Statements of Cash Flows	8
	Notes to Consolidated Financial Statements (Unaudited)	9
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3	Quantitative and Qualitative Disclosures About Market Risk	41
Item 4	Controls and Procedures	42
Part II. OTHER INFORMATION		44
Item 1	Legal Proceedings	44
Item 1A	Risk Factors	44
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 4	Mine Safety Disclosures	44
Item 5	Other Information	44
Item 6	Exhibits	45
SIGNATURES		46

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MASTEC, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited - in thousands, except per share amounts)


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2023		2022		2023		2022
Revenue	$	2,874,115	$	2,301,792	$	5,458,774	$	4,256,192
Costs of revenue, excluding depreciation and amortization	2,484,780		2,028,111		4,844,274		3,761,427
Depreciation	103,038		87,001		210,285		172,195
Amortization of intangible assets	42,043		27,673		83,987		53,263
General and administrative expenses	176,155		133,785		340,069		279,175
Interest expense, net	59,415		19,387		112,108		35,428
Equity in earnings of unconsolidated affiliates, net	(7,496)		(6,587)		(16,648)		(13,364)

Other income, net	(3,508)		(5,825)		(9,709)		(2,071)
Income (loss) before income taxes	$	19,688	$	18,247	$	(105,592)	$	(29,861)
(Provision for) benefit from income taxes	(2,934)		(1,992)		41,800		11,157
Net income (loss)	$	16,754	$	16,255	$	(63,792)	$	(18,704)
Net income attributable to non-controlling interests	1,212		43		1,206		62
Net income (loss) attributable to MasTec, Inc.	$	15,542	$	16,212	$	(64,998)	$	(18,766)

Earnings (loss) per share (Note 2):
Basic earnings (loss) per share	$	0.20	$	0.22	$	(0.84)	$	(0.25)
Basic weighted average common shares outstanding	77,635		74,445		77,306		74,615

Diluted earnings (loss) per share	$	0.20	$	0.20	$	(0.84)	$	(0.27)
Diluted weighted average common shares outstanding	78,372		75,537		77,306		74,647

The accompanying notes are an integral part of these consolidated financial statements.

MASTEC, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited - in thousands)


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2023		2022		2023		2022
Net income (loss)	$	16,754	$	16,255	$	(63,792)	$	(18,704)
Other comprehensive income:
Foreign currency translation gains (losses), net of tax	1,007		(1,743)		1,679		(830)
Unrealized gains on investment activity, net of tax	4,576		7,843		399		21,597
Comprehensive income (loss)	$	22,337	$	22,355	$	(61,714)	$	2,063
Comprehensive income attributable to non-controlling interests	1,212		43		1,206		62
Comprehensive income (loss) attributable to MasTec, Inc.	$	21,125	$	22,312	$	(62,920)	$	2,001

The accompanying notes are an integral part of these consolidated financial statements.

MASTEC, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited - in thousands, except share information)


	June 30, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	119,905	$	370,592
Accounts receivable, net of allowance	1,485,199		1,399,732
Contract assets	1,850,748		1,729,886
Inventories, net	152,845		117,969
Prepaid expenses	101,103		122,308
Other current assets	119,204		118,640
Total current assets	$	3,829,004	$	3,859,127
Property and equipment, net	1,753,667		1,754,101
Operating lease right-of-use assets	347,060		279,534
Goodwill, net	2,079,522		2,045,041
Other intangible assets, net	862,775		946,299
Other long-term assets	415,792		409,157
Total assets	$	9,287,820	$	9,293,259
Liabilities and equity
Current liabilities:
Current portion of long-term debt, including finance leases	$	169,253	$	171,916
Current portion of operating lease liabilities	117,633		96,516
Accounts payable	930,270		1,109,867
Accrued salaries and wages	179,847		181,888
Other accrued expenses	351,274		365,971
Contract liabilities	487,198		406,232
Other current liabilities	205,360		163,647
Total current liabilities	$	2,440,835	$	2,496,037
Long-term debt, including finance leases	3,154,576		3,052,193
Long-term operating lease liabilities	235,977		194,050
Deferred income taxes	520,820		571,401
Other long-term liabilities	247,192		238,391
Total liabilities	$	6,599,400	$	6,552,072
Commitments and contingencies (Note 14)
Equity
Preferred stock, $1.00 par value: authorized shares - 5,000,000; issued and outstanding shares – none	$	—	$	—
Common stock, $0.10 par value: authorized shares - 145,000,000; issued shares - 98,674,249 and 98,615,105 (including 1,367,227 and 2,047,130 of unvested stock awards) as of June 30, 2023 and December 31, 2022, respectively	9,867		9,862
Capital surplus	1,247,231		1,246,590
Retained earnings	2,130,744		2,195,742
Accumulated other comprehensive loss	(48,877)		(50,955)
Treasury stock, at cost: 19,813,055 and 19,933,055 shares as of June 30, 2023 and December 31, 2022, respectively	(659,913)		(663,910)
Total MasTec, Inc. shareholders’ equity	$	2,679,052	$	2,737,329
Non-controlling interests	$	9,368	$	3,858
Total equity	$	2,688,420	$	2,741,187
Total liabilities and equity	$	9,287,820	$	9,293,259

The accompanying notes are an integral part of these consolidated financial statements.

MASTEC, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(unaudited - in thousands, except shares)


	Common Stock			Treasury Stock			Capital Surplus		Retained Earnings		Accumulated Other Comprehensive Loss		Total MasTec, Inc. Shareholders’ Equity		Non-Controlling Interests		Total Equity
	Shares	Amount		Shares	Amount
For the Three Months Ended June 30, 2023
Balance as of March 31, 2023	98,674,997	$	9,867	(19,813,055)	$	(659,913)	$	1,235,608	$	2,115,202	$	(54,460)	$	2,646,304	$	1,328	$	2,647,632
Net income									15,542				15,542		1,212		16,754
Other comprehensive income											5,583		5,583				5,583
Non-cash stock-based compensation							8,575						8,575				8,575
Forfeiture of restricted shares, net	(2,244)	—					—						—				—
Shares withheld for taxes, net of other stock issuances	(381)	—					2,851						2,851				2,851


Issuance of shares in connection with acquisition	1,877	—					197						197				197

Acquisition-related assumption of non-controlling interest													—		6,828		6,828
Balance as of June 30, 2023	98,674,249	$	9,867	(19,813,055)	$	(659,913)	$	1,247,231	$	2,130,744	$	(48,877)	$	2,679,052	$	9,368	$	2,688,420

For the Three Months Ended June 30, 2022
Balance as of March 31, 2022	95,488,017	$	9,549	(19,129,904)	$	(600,746)	$	1,035,902	$	2,127,410	$	(64,109)	$	2,508,006	$	4,071	$	2,512,077
Net income									16,212				16,212		43		16,255
Other comprehensive income											6,100		6,100				6,100
Non-cash stock-based compensation							6,836						6,836				6,836
Issuance of restricted shares, net	3,752	—					—						—				—
Shares withheld for taxes, net of other stock issuances	(364)	—					(48)						(48)				(48)
Issuance of shares in connection with acquisition				133,157	4,336		6,886						11,222				11,222
Acquisition of treasury stock, at cost				(936,308)	(67,500)								(67,500)				(67,500)


Balance as of June 30, 2022	95,491,405	$	9,549	(19,933,055)	$	(663,910)	$	1,049,576	$	2,143,622	$	(58,009)	$	2,480,828	$	4,114	$	2,484,942

The accompanying notes are an integral part of these consolidated financial statements.

MASTEC, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(unaudited - in thousands, except shares)


	Common Stock			Treasury Stock			Capital Surplus		Retained Earnings		Accumulated Other Comprehensive Loss		Total MasTec, Inc. Shareholders’ Equity		Non-Controlling Interests		Total Equity
	Shares	Amount		Shares	Amount
For the Six Months Ended June 30, 2023
Balance as of December 31, 2022	98,615,105	$	9,862	(19,933,055)	$	(663,910)	$	1,246,590	$	2,195,742	$	(50,955)	$	2,737,329	$	3,858	$	2,741,187
Net (loss) income									(64,998)				(64,998)		1,206		(63,792)
Other comprehensive income											2,078		2,078				2,078
Non-cash stock-based compensation							17,090						17,090				17,090
Issuance of restricted shares, net	172,589	17					(17)						—				—
Shares withheld for taxes, net of other stock issuances	(117,557)	(12)					(5,362)						(5,374)				(5,374)


Issuance of shares in connection with acquisition	4,112	—					403						403				403
Purchase of non-controlling interests				120,000	3,997		(11,473)						(7,476)		(2,524)		(10,000)
Acquisition-related assumption of non-controlling interest													—		6,828		6,828
Balance as of June 30, 2023	98,674,249	$	9,867	(19,813,055)	$	(659,913)	$	1,247,231	$	2,130,744	$	(48,877)	$	2,679,052	$	9,368	$	2,688,420

For the Six Months Ended June 30, 2022
Balance as of December 31, 2021	95,371,211	$	9,537	(18,941,926)	$	(586,955)	$	1,033,615	$	2,162,388	$	(78,776)	$	2,539,809	$	4,052	$	2,543,861
Net (loss) income									(18,766)				(18,766)		62		(18,704)
Other comprehensive income											20,767		20,767				20,767
Non-cash stock-based compensation							13,172						13,172				13,172
Issuance of restricted shares, net	168,762	17					(17)						—				—
Shares withheld for taxes, net of other stock issuances	(48,568)	(5)					(4,080)						(4,085)				(4,085)
Issuance of shares in connection with acquisition				133,157	4,336		6,886						11,222				11,222
Acquisition of treasury stock, at cost				(1,124,286)	(81,291)								(81,291)				(81,291)


Balance as of June 30, 2022	95,491,405	$	9,549	(19,933,055)	$	(663,910)	$	1,049,576	$	2,143,622	$	(58,009)	$	2,480,828	$	4,114	$	2,484,942

The accompanying notes are an integral part of these consolidated financial statements.

MASTEC, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited - in thousands)


	For the Six Months Ended June 30,
	2023		2022
Cash flows from operating activities:
Net loss	$	(63,792)	$	(18,704)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation	210,285		172,195
Amortization of intangible assets	83,987		53,263
Non-cash stock-based compensation expense	17,090		13,172
(Benefit from) provision for deferred income taxes	(42,548)		6,190


Equity in earnings of unconsolidated affiliates, net	(16,648)		(13,364)
Gains on sales of assets, net	(13,598)		(8,662)
Non-cash interest expense, net	2,864		1,709
Other non-cash items, net	389		301
Changes in assets and liabilities, net of acquisitions:
Accounts receivable	(61,606)		18,575
Contract assets	(97,689)		(289,018)
Inventories	3,693		(19,844)
Other assets, current and long-term portion	38,324		521
Accounts payable and accrued expenses	(204,453)		99,796
Contract liabilities	65,404		(11,915)
Other liabilities, current and long-term portion	(19,612)		(2,674)
Net cash (used in) provided by operating activities	$	(97,910)	$	1,541
Cash flows from investing activities:
Cash paid for acquisitions, net of cash acquired	(63,880)		(44,908)
Capital expenditures	(119,067)		(189,870)
Proceeds from sales of property and equipment	42,570		17,722
Payments for other investments	(1,627)		(2,965)
Proceeds from other investments	425		—
Other investing activities, net	119		—
Net cash used in investing activities	$	(141,460)	$	(220,021)
Cash flows from financing activities:
Proceeds from credit facilities	1,687,400		1,954,650
Repayments of credit facilities	(1,580,775)		(1,741,083)


Payments of finance lease obligations	(85,223)		(83,375)
Repurchases of common stock	—		(81,291)
Payments of acquisition-related contingent consideration	(8,955)		(26,779)
Payments for acquisition-related contingent assets	—		(17,636)
Payments to non-controlling interests, including acquisition of interests and distributions	(11,660)		—

Payments for stock-based awards	(10,256)		(4,024)


Other financing activities, net	(2,686)		(3,446)
Net cash used in financing activities	$	(12,155)	$	(2,984)
Effect of currency translation on cash	838		(343)
Net decrease in cash and cash equivalents	$	(250,687)	$	(221,807)
Cash and cash equivalents - beginning of period	$	370,592	$	360,736
Cash and cash equivalents - end of period	$	119,905	$	138,929


Supplemental cash flow information:
Interest paid	$	111,969	$	34,507
Income taxes paid, net of refunds	$	13,947	$	1,304
Supplemental disclosure of non-cash information:
Additions to property and equipment from finance leases	$	70,464	$	126,669

The accompanying notes are an integral part of these consolidated financial statements.

MASTEC, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 – Business, Basis of Presentation and Significant Accounting Policies

Nature of the Business

MasTec, Inc. (collectively with its subsidiaries, “MasTec” or the “Company”) is a leading infrastructure construction company operating mainly throughout North America across a range of industries. The Company’s primary activities include the engineering, building, installation, maintenance and upgrade of communications, energy, utility and other infrastructure, such as: power delivery services, including transmission, distribution, environmental planning and compliance; wireless, wireline/fiber and customer fulfillment activities; power generation, primarily from clean energy and renewable sources; pipeline distribution infrastructure, including natural gas, carbon capture sequestration, water and pipeline integrity services; heavy civil; industrial infrastructure; and environmental remediation services. MasTec’s customers are primarily in these industries. MasTec reports its results under five reportable segments: (1) Communications; (2) Clean Energy and Infrastructure; (3) Oil and Gas; (4) Power Delivery and (5) Other.

Basis of Presentation

The accompanying consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and with the instructions for Form 10-Q and Rule 10-01 of Regulation S-X. Pursuant to these rules and regulations, certain information and footnote disclosures normally included in the annual audited consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The accompanying consolidated balance sheet as of December 31, 2022 is derived from the Company’s audited financial statements as of that date. Because certain information and footnote disclosures have been condensed or omitted, these consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2022 contained in the Company’s 2022 Annual Report on Form 10-K (the “2022 Form 10-K”). In management’s opinion, all normal and recurring adjustments considered necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented have been included. When appropriate, prior year amounts are reclassified to conform with the current period presentation. Interim period operating results do not necessarily indicate the results that may be expected for any other interim period or for the full fiscal year. The Company believes that the disclosures made in these consolidated financial statements are adequate to make the information not misleading.

Principles of Consolidation

The accompanying consolidated financial statements include MasTec, Inc. and its subsidiaries and include the accounts of all majority owned subsidiaries over which the Company exercises control and, when applicable, entities in which the Company has a controlling financial interest. All significant intercompany balances and transactions have been eliminated in consolidation. Other parties’ interests in entities that MasTec consolidates are reported as non-controlling interests within equity, except for mandatorily redeemable non-controlling interests, which are recorded within other liabilities. Net income or loss attributable to non-controlling interests is reported as a separate line item below net income or loss. Investments in entities for which the Company does not have a controlling financial interest, but over which it has the ability to exert significant influence, are accounted for under the equity method of accounting. For equity investees in which the Company has an undivided interest in the assets, liabilities and profits or losses of an unincorporated entity, but does not exercise control over the entity, the Company consolidates its proportional interest in the accounts of the entity.

Translation of Foreign Currencies

The assets and liabilities of foreign subsidiaries with a functional currency other than the U.S. dollar are translated into U.S. dollars at period-end exchange rates, with resulting translation gains or losses included within other comprehensive income or loss. Revenue and expenses are translated into U.S. dollars at average rates of exchange during the applicable period. Substantially all of the Company’s foreign operations use their local currency as their functional currency. For foreign operations for which the local currency is not the functional currency, the operation’s non-monetary assets are remeasured into U.S. dollars at historical exchange rates. All other accounts are remeasured at current exchange rates. Gains or losses from remeasurement are included in other income or expense, net. Currency gains or losses resulting from transactions executed in currencies other than the functional currency are included in other income or expense, net.

In these consolidated financial statements, “$” means U.S. dollars unless otherwise noted.

Management Estimates

The preparation of consolidated financial statements in accordance with U.S. GAAP requires the use of estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates are based on historical experience and various other assumptions that management believes to be reasonable under the circumstances, including the potential future effects of macroeconomic trends and events, such as inflation and interest rate levels; uncertainty from potential market volatility; supply chain disruptions; climate-related matters; other market, industry and regulatory factors, including permitting issues; global events, such as military conflicts; and public health matters. These estimates form the basis for making judgments about the Company’s operating results and the carrying values of assets and liabilities that are not readily apparent from other sources. While management believes that such estimates are reasonable when considered in conjunction with the Company’s consolidated financial position and results of operations taken as a whole, actual results could differ materially from these estimates.

Key estimates include: the recognition of revenue and project profit or loss, which the Company defines as project revenue less project costs of revenue, including project-related depreciation, in particular, on construction contracts accounted for under the cost-to-cost method, for which the recorded amounts require estimates of costs to complete and the amount and probability of variable consideration included in the contract

transaction price; fair value estimates, including acquisition-related assets, such as goodwill and intangible assets, equity investments, long-lived and other assets; acquisition-related liabilities, including contingent consideration, other liabilities and debt obligations; allowances for credit losses; asset lives used in computing depreciation and amortization; fair values of financial instruments; self-insurance liabilities; certain other accruals and allowances; income taxes; and the estimated effects of litigation and other contingencies.

General Economic, Market and Regulatory Conditions

The Company has experienced, and may continue to experience, direct and indirect negative effects on its business and operations from negative economic, market, and regulatory conditions, including permitting issues, market interest rates, inflationary effects on fuel prices, labor and materials costs, supply chain disruptions, and uncertainty from potential market volatility that could negatively affect demand for future projects and/or delay existing project timing or cause increased project costs. The extent to which general economic, market and regulatory conditions could affect the Company’s business, operations and financial results is uncertain as it will depend upon numerous evolving factors that management may not be able to accurately predict, and, therefore, any future impacts on the Company’s business, financial condition and/or results of operations cannot be quantified or predicted with specificity.

Significant Accounting Policies

Revenue Recognition

The Company recognizes revenue from contracts with customers when, or as, control of promised services and goods is transferred to customers. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled in exchange for the services and goods transferred. The Company primarily recognizes revenue over time utilizing the cost-to-cost measure of progress, which best depicts the continuous transfer of control of goods or services to the customer, and correspondingly, when performance obligations are satisfied for the related contracts.

Contracts. The Company derives revenue primarily from construction projects performed under: (i) master service and other service agreements, which generally provide a menu of available services in a specific geographic territory that are utilized on an as-needed basis, and are typically priced using either a time and materials or a fixed price per unit basis; and (ii) contracts for specific projects requiring the construction and installation of an entire infrastructure system, or specified units within an infrastructure system, which are subject to multiple pricing options, including fixed price, unit price, time and materials, or cost plus a markup. Revenue derived from projects performed under master service and other service agreements totaled 43% and 54% of consolidated revenue for the three month periods ended June 30, 2023 and 2022, respectively, and totaled 45% and 56% for the six month periods ended June 30, 2023 and 2022, respectively.

For certain master service and other service agreements, revenue is recognized at a point in time, primarily for install-to-the-home and certain other wireless services in the Company’s Communications segment, and to a lesser extent, certain revenue in the Company’s Clean Energy and Infrastructure and Oil and Gas segments. Point in time revenue is recognized when the work order has been fulfilled, which, for the majority of the Company’s point in time revenue, is the same day it is initiated. Point in time revenue accounted for approximately 3% of consolidated revenue for both the three and six month periods ended June 30, 2023, and totaled approximately 4% for both the three and six month periods ended June 30, 2022.

The total contract transaction price and cost estimation processes used for recognizing revenue over time under the cost-to-cost method is based on the professional knowledge and experience of the Company’s project managers, engineers, operational and financial professionals. Management reviews estimates of total contract transaction price and total project costs on an ongoing basis. Changes in job performance, job conditions and management’s assessment of expected variable consideration are factors that influence estimates of the total contract transaction price, total costs to complete those contracts and the Company’s profit recognition. Changes in these factors could result in revisions to revenue in the period in which the revisions are determined, which revisions could materially affect the Company’s consolidated results of operations for that period. Provisions for losses on uncompleted contracts are recorded in the period in which such losses are determined. For the six month periods ended June 30, 2023 and 2022, project profit was affected by less than 5% as a result of changes in contract estimates included in projects that were in process as of December 31, 2022 and 2021. Changes in recognized revenue, net, as a result of changes in total contract transaction price estimates, including from variable consideration, and/or changes in cost estimates, related to performance obligations satisfied or partially satisfied in prior periods, for the three month period ended June 30, 2023 positively affected revenue by approximately 1.5%, and for the three month period ended June 30, 2022, there was no net effect. For the six month periods ended June 30, 2023 and 2022, such net changes positively affected revenue by approximately 0.6% and 0.2%, respectively.

Performance Obligations. A performance obligation is a contractual promise to transfer a distinct good or service to a customer. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as the performance obligation is satisfied. The majority of the Company’s performance obligations are completed within one year.

Remaining performance obligations represent the amount of unearned transaction prices under contracts for which work is wholly or partially unperformed, including the Company’s share of unearned transaction prices from its proportionately consolidated non-controlled joint ventures. As of June 30, 2023, the amount of the Company’s remaining performance obligations was $8.0 billion. Based on current expectations, the Company anticipates it will recognize approximately $4.6 billion of its remaining performance obligations as revenue during 2023, with the majority of the remaining balance expected to be recognized in 2024.

Variable Consideration. Transaction prices for the Company’s contracts may include variable consideration, which comprises items such as change orders, claims and incentives. Management estimates variable consideration for a performance obligation utilizing estimation methods that it believes best predict the amount of consideration to which the Company will be entitled. Management’s estimates of variable consideration and the determination of whether to include estimated amounts in transaction prices are based largely on specific discussions, correspondence or preliminary negotiations and past practices with the customer, engineering studies and legal advice and all other relevant information that is reasonably available at the time of the estimate. To the extent unapproved change orders, claims and other variable consideration reflected in transaction prices are not

resolved in the Company’s favor, or to the extent incentives reflected in transaction prices are not earned, there could be reductions in, or reversals of, previously recognized revenue.

As of June 30, 2023 and December 31, 2022, the Company included in its contract transaction prices approximately $317 million and $271 million, respectively, of change orders and/or claims for certain contracts that were in the process of being resolved in the ordinary course of business, including through negotiation, arbitration and other proceedings. These transaction price adjustments, when earned, are included within contract assets or accounts receivable, net of allowance, as appropriate. As of both June 30, 2023 and December 31, 2022, these change orders and/or claims primarily related to certain projects in the Company’s Clean Energy and Infrastructure and Power Delivery segments and include amounts related to recently acquired businesses. The Company actively engages with its customers to complete the final approval process and generally expects these processes to be completed within one year. Amounts ultimately realized upon final agreement by customers could be higher or lower than such estimated amounts.

Recent Accounting Pronouncements

The discussion below describes the effects of recent accounting pronouncements, as updated from the discussion in the Company’s 2022 Form 10-K.

Accounting Pronouncements Adopted in 2023

In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”) to improve consistency for revenue recognition in the post-acquisition period for acquired contracts as compared to contracts entered into subsequent to acquisition. ASU 2021-08 requires an acquirer to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, Revenue from Contracts with Customers, rather than at fair value. ASU 2021-08, which the Company adopted in the first quarter of 2023, did not have a material effect on the Company’s consolidated financial statements.

Recently Issued Accounting Pronouncements

In March 2023, the FASB issued ASU 2023-01, Leases (Topic 842): Common Control Arrangements (“ASU 2023-01”) to improve the guidance for applying Topic 842, Leases, to arrangements between entities under common control. ASU 2023-01 improves current GAAP by clarifying the accounting for leasehold improvements associated with common control leases, thereby reducing diversity in practice. The provisions of this ASU that apply to public companies include a requirement for entities to amortize leasehold improvements associated with common control leases over the useful life of the common control group. ASU 2023-01 is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2023, with early adoption permitted. The Company is currently evaluating the effects of this ASU, however, this ASU is not expected to have a material effect on the Company’s consolidated financial statements.

Note 2 – Earnings Per Share

Basic earnings or loss per share is computed by dividing net income or loss attributable to MasTec by the weighted average number of common shares outstanding for the period, which excludes non-participating unvested restricted share awards. Diluted earnings per share is computed by dividing net income attributable to MasTec by the weighted average number of fully diluted shares, as calculated primarily under the treasury stock method, which includes the potential effect of dilutive common stock equivalents, such as issued but unvested restricted shares. If the Company reports a loss, rather than income, the computation of diluted loss per share excludes the effect of dilutive common stock equivalents, if their effect would be anti-dilutive.

The following table provides details underlying the Company’s earnings per share calculations for the periods indicated (in thousands):


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2023		2022		2023		2022
Net income (loss) attributable to MasTec:
Net income (loss) - basic (a)	$	15,542	$	16,212	$	(64,998)	$	(18,766)
Fair value gain related to resolved contingent payments (b)	$	—	$	1,025	$	—	$	1,025
Net income (loss) - diluted (a)	$	15,542	$	15,187	$	(64,998)	$	(19,791)
Weighted average shares outstanding:
Weighted average shares outstanding - basic(c)	77,635		74,445		77,306		74,615
Dilutive common stock equivalents (d)(e)	737		1,092		—		32
Weighted average shares outstanding - diluted	78,372		75,537		77,306		74,647

(a)Basic net income or loss is calculated as total net income or loss, less amounts attributable to non-controlling interests. Diluted net income or loss is calculated as total net income or loss, less amounts attributable to non-controlling interests, adjusted for the fair value gain or loss, if any, related to additional contingent payments to the former owners of an acquired business for which the contingency has been resolved as of the respective period. See Note 3 - Acquisitions, Goodwill and Other Intangible Assets, Net, for additional information.

(b)For the three and six month periods ended June 30, 2022, represents the fair value gain related to additional contingent payments for which the contingency had been resolved as of June 30, 2022. See Note 3 – Acquisitions, Goodwill and Other Intangible Assets, Net for additional information.

(c)For the three month periods ended June 30, 2023 and 2022, basic shares include approximately 88,000 and 132,000 weighted average shares, respectively, related to additional contingent payments, and for the six month periods ended June 30, 2023 and 2022, basic shares include approximately 88,000 and 101,000 of such weighted average shares, respectively.

(d)For the three month periods ended June 30, 2023, and 2022, weighted average anti-dilutive common stock equivalents totaled approximately 2,000 and 178,000 shares, respectively, and for the six month periods ended June 30, 2023 and 2022, such shares totaled approximately 1,147,000 and 1,273,000, respectively.

(e)For the three and six month periods ended June 30, 2023, weighted average common stock equivalents related to additional contingent payments to the former owners of an acquired business, which shares were anti-dilutive, were de minimis, and for the three and six month periods ended June 30, 2022, weighted average common stock equivalents related to such additional contingent payments, which shares were dilutive, totaled approximately 1,000 and 32,000, respectively.

Share repurchases. There were no share repurchases under the Company’s share repurchase programs in either of the three or six month periods ended June 30, 2023. For the three and six month periods ended June 30, 2022, the Company repurchased approximately 936,000 and 1,124,000 shares of its common stock, respectively, the effect of which on the Company’s weighted average shares outstanding for the respective periods was a reduction of approximately 554,000 and 330,000 shares. See Note 11 - Equity for details of the Company’s share repurchase transactions.

Shares issued for acquisitions. In the fourth quarter of 2022, the Company issued approximately 2,758,000 shares of its common stock in conjunction with the October 2022 acquisition of Infrastructure and Energy Alternatives, Inc. (“IEA”). In the second quarter of 2022, the Company issued 133,000 shares in connection with the December 2021 acquisition of Henkels & McCoy Holdings, Inc., formerly known as Henkels & McCoy Group, Inc. (“HMG”). See Note 3 - Acquisitions, Goodwill and Other Intangible Assets, Net for additional information.

Note 3 – Acquisitions, Goodwill and Other Intangible Assets, Net

The following table provides a reconciliation of changes in goodwill by reportable segment for the six month period ended June 30, 2023 (in millions):


	Communications		Clean Energy and Infrastructure		Oil and Gas		Power Delivery		Total Goodwill
Goodwill, gross, as of December 31, 2022	$	606.1	$	703.3	$	582.2	$	270.1	$	2,161.7
Accumulated impairment loss (a)	—		—		(116.7)		—		(116.7)
Goodwill, net, as of December 31, 2022	$	606.1	$	703.3	$	465.5	$	270.1	$	2,045.0
Additions from new business combinations	9.5		—		—		—		9.5
Measurement period adjustments (b)	(0.6)		23.8		0.9		0.6		24.7
Currency translation adjustments	—		—		0.3		—		0.3
Goodwill, net as of June 30, 2023	$	615.0	$	727.1	$	466.7	$	270.7	$	2,079.5

(a) Accumulated impairment losses include the effects of currency translation gains and/or losses.

(b) Measurement period adjustments represent adjustments, net, to preliminary estimates of fair value within the measurement period of up to one year from the date of acquisition. Measurement period adjustments, net, for the six month period ended June 30, 2023 were primarily the result of updated valuations of certain fixed assets and updated estimates of certain assets and liabilities, including contract assets and liabilities. As a result of certain of these adjustments, depreciation expense decreased by approximately $6 million, revenue increased by approximately $13 million and costs of revenue, excluding depreciation and amortization decreased by approximately $3 million.

The following table provides a reconciliation of changes in other intangible assets, net, for the period indicated (in millions):


	Other Intangible Assets, Net
	Customer Relationships and Backlog		Trade Names (a)		Other (b)		Total
Other intangible assets, gross, as of December 31, 2022	$	1,089.4	$	228.9	$	86.6	$	1,404.9
Accumulated amortization	(388.8)		(28.9)		(40.9)		(458.6)
Other intangible assets, net, as of December 31, 2022	$	700.6	$	200.0	$	45.7	$	946.3


Currency translation adjustments	—		—		0.5		0.5
Amortization expense	(69.7)		(10.1)		(4.2)		(84.0)
Other intangible assets, net, as of June 30, 2023	$	630.9	$	189.9	$	42.0	$	862.8

(a)Includes approximately $34.5 million of non-amortizing trade names as of both June 30, 2023 and December 31, 2022.

(b)Consists principally of pre-qualifications and non-compete agreements.

Quarterly Assessment for Indicators of Impairment. During the second quarter of 2023, the Company performed a quarterly review for indicators of impairment, which considered its results for the six month period ended June 30, 2023, together with its expectations of future results, including consideration of the potential effects of shifts in timing for projects and macroeconomic factors. In conjunction with this quarterly review, management performed a quantitative assessment of the goodwill associated with one reporting unit within the Clean Energy and Infrastructure segment. Based on the results of this assessment, management determined that the estimated fair value of this reporting unit substantially exceeded its carrying value as of June 30, 2023. Significant changes in the assumptions or estimates used in management’s assessment, such as a reduction in profitability and/or cash flows, changes in market or other conditions, including decreases in project activity levels and/or the effects of elevated levels of inflation or market interest rates, could result in non-cash impairment charges to goodwill and indefinite-lived intangible assets in the future.

Recent Acquisitions

The Company seeks to grow and diversify its business both organically and through acquisitions and/or strategic arrangements in order to deepen its market presence and customer base, broaden its geographic reach and expand its service offerings. In 2021, the Company initiated a significant transformation of its end-market business operations to focus on the nation’s transition to low-carbon energy sources and position the Company for expected future opportunities. This transformation has included significant business combination activity, including expansion of the Company’s scale and capacity in renewable energy, power delivery, heavy civil and telecommunications services, which activity has resulted in significant acquisition and integration costs, both in the Company’s existing and recently acquired operations. Acquisitions are funded with cash on hand, borrowings under the Company’s senior unsecured credit facility and other debt financing and, for certain recent acquisitions, with shares of the Company’s common stock, and are generally subject to customary purchase price adjustments.

2023 Acquisitions. For the six month period ended June 30, 2023, MasTec acquired certain of the assets of a telecommunications company specializing in wireless services that is included within the Company’s Communications segment, which acquisition was effective in January and has been accounted for as a business combination under ASC 805, “Business Combinations” (“ASC 805”). Determination of the estimated fair values of the net assets acquired and consideration transferred for this acquisition was preliminary as of June 30, 2023; as a result, further adjustments to these estimates may occur. Additionally, MasTec acquired 68% and 42% of the equity interests of two equipment companies, both of which are accounted for as asset acquisitions under ASC 805, and were effective in May and included within the Company’s Oil and Gas segment. Based on an evaluation of the respective entities’ operating agreements, under which the Company has voting control with respect to the entities’ operating management, the Company determined that it has control over these entities, and, therefore, has consolidated these entities within the Company’s results of operations, with the other parties’ interests accounted for as non-controlling interests. The aggregate purchase price of the Company’s 2023 acquisitions was composed of approximately $62 million in cash, net of cash acquired.

2022 Acquisitions. During 2022, MasTec completed five acquisitions, which included all of the equity interests of the following: (i) within the Company’s Clean Energy and Infrastructure segment: IEA, a leading utility-scale infrastructure solutions provider in North America, with expertise in renewable energy and heavy civil projects, as well as rail and environmental remediation services, which acquisition was effective in October; and a company specializing in the production of concrete and aggregate products, which acquisition was effective in August; (ii) within the Company’s Oil and Gas segment: an infrastructure construction company focusing on water, sewer and utility projects and with expertise in excavation and site work, which acquisition was effective in January; (iii) within the Company’s Communications segment: a telecommunications company specializing in wireline services, which acquisition was effective as of the end of May; and (iv) within the Company’s Power Delivery segment: a company specializing in the construction of overhead high voltage transmission lines, which acquisition was effective in July.

Determination of the estimated fair values of the net assets acquired and the estimated earn-out liabilities and consideration transferred for three of the Company’s 2022 acquisitions was preliminary as of June 30, 2023 while the Company finalizes certain working capital and other valuation and contingency-related estimates; as a result, further adjustments to such estimates may occur. The following table summarizes, as of June 30, 2023, the estimated fair values of the consideration paid and net assets acquired, as adjusted, for the Company’s 2022 acquisitions (in millions):


Acquisition consideration:	IEA		All other		Total
Cash, net of cash acquired	$	564.5	$	48.4	$	612.9
Shares transferred	173.7		—		173.7
Estimated fair value of warrants	10.3		—		10.3
Estimated fair value of contingent consideration	—		2.8		2.8
Total consideration	$	748.5	$	51.2	$	799.7
Identifiable assets acquired and liabilities assumed:
Accounts receivable and contract assets	$	585.7	$	6.1	$	591.8
Current assets	36.1		1.5		37.6
Property and equipment	213.0		30.1		243.1
Long-term assets, primarily operating lease right-of-use assets	40.6		0.3		40.9
Amortizing intangible assets	362.2		5.9		368.1
Accounts payable	(136.5)		(4.6)		(141.1)
Current liabilities, including current portion of operating lease liabilities	(444.6)		(2.9)		(447.5)
Long-term debt, including finance lease obligations	(330.8)		(0.2)		(331.0)
Long-term liabilities, primarily operating lease liabilities and deferred income taxes	(131.4)		(0.2)		(131.6)
Total identifiable net assets	$	194.3	$	36.0	$	230.3
Goodwill	554.2		15.2		569.4
Total net assets acquired, including goodwill	$	748.5	$	51.2	$	799.7

Amortizing intangible assets related to the IEA acquisition are primarily composed of customer relationships, and to a lesser extent, trade names and backlog. Customer relationship and trade name intangible assets for IEA, in the aggregate, totaled approximately $321 million, which each had a weighted average life of approximately 14 years based on IEA’s operational history and established relationships with, and the nature of, its customers, which are primarily in the renewable energy and specialty civil industries. Backlog intangible assets for IEA totaled approximately

$42 million with a weighted average life of approximately 1 year based on estimated cash flows expected to be derived from future work on acquired contracts with customers. The weighted average life of amortizing intangible assets in the aggregate for the IEA acquisition was 13 years. Amortizing intangible assets related to “All other” acquisitions are primarily composed of customer relationships with an aggregate weighted average life of 9 years. Amortizing intangible assets are amortized in a manner consistent with the pattern in which the related benefits are expected to be consumed.

The goodwill balances for each of the respective acquisitions represent the estimated values of each acquired company’s geographic presence in key markets, assembled workforce, management team’s industry-specific project management expertise and synergies expected to be achieved from the combined operations of each of the acquired companies and MasTec. Approximately $38 million of the goodwill balance related to the 2022 acquisitions is expected to be tax deductible as of June 30, 2023.

The shares of MasTec common stock included in consideration transferred for IEA in the table above consist of approximately 2.7 million shares, valued at approximately $174 million based on the market price of MasTec common stock on the date of closing. Total cash paid for acquisitions, net, includes approximately $44 million of cash acquired. Long-term debt in the table above includes $300 million aggregate principal balance of 6.625% senior unsecured notes that were assumed in connection with the acquisition of IEA. See Note 7 - Debt for additional information.

Consideration transferred for IEA includes the value of certain warrants that were originally issued by IEA, for which the remaining outstanding warrants as of December 31, 2022 had an estimated fair value of $3.1 million. Under the terms of the IEA merger agreement, holders of the IEA warrants became entitled to receive an amount in cash and shares of MasTec common stock upon exercise of the IEA warrants. The number of MasTec shares issued in connection with exercises of such IEA warrants in the first quarter of 2023 was de minimis. All remaining IEA warrants expired unexercised on March 26, 2023. Fair value gains related primarily to the expired warrants totaled approximately $2.6 million for the six month period ended June 30, 2023, which amount is reflected in other income.

Contingent consideration included in the table above is composed of earn-out liabilities, which generally equal a portion of the acquired companies’ earnings before interest, taxes, depreciation and amortization (“EBITDA”) in excess of thresholds agreed upon with the sellers, if applicable. The earn-out arrangements for the 2022 acquisitions are payable annually and have five-year terms, as set forth in the respective purchase agreements, and were valued at approximately $3 million in the aggregate. Earn-outs are recorded within other current and other long-term liabilities, as appropriate, in the consolidated balance sheets. See Note 4 - Fair Value of Financial Instruments for details pertaining to fair value estimates for the Company’s earn-out arrangements. As of June 30, 2023, the range of remaining potential undiscounted earn-out liabilities for the 2022 acquisitions was estimated to be up to $4 million; however, there is no maximum payment amount. Current liabilities reflected in the table above include contingent liabilities for insurance and other matters.

HMG Additional Payments. The HMG purchase agreement, for which the subject acquisition was effective in December 2021, provides for certain additional payments to be made to the sellers if certain acquired receivables are collected by the Company (the “Additional Payments”). Pursuant to the terms of the purchase agreement, a portion of the Additional Payments will be made in cash, with the remainder due in shares of MasTec common stock. The estimated number of potential shares that could be issued related to such Additional Payments will be based on the amounts ultimately collected and the share price as defined within the purchase agreement. Changes in the estimated fair value of potential shares that could be issued, which result from changes in MasTec’s share price as compared with the share price as defined within the purchase agreement, are reflected within other income or expense, as appropriate. For the three and six month periods ended June 30, 2023, unrealized fair value measurement activity related to the contingent shares totaled losses of approximately $3.8 million and $5.4 million, respectively. For both the three and six month periods ended June 30, 2022, unrealized fair value measurement activity related to the contingent shares totaled a gain of approximately $3.2 million. An Additional Payment of approximately $29.4 million was made in May 2022, which payment was composed of approximately $18 million in cash and 133,157 shares of MasTec common stock.

As of June 30, 2023 and December 31, 2022, the estimated fair value of remaining Additional Payments totaled approximately $40 million and $37 million, respectively, which amounts are included within other current liabilities in the consolidated balance sheet. For the six month period ended June 30, 2023, the estimated fair value of remaining Additional Payments included the effect of unrealized fair value losses related to the contingent shares of approximately $5.4 million and a reduction of approximately $2.4 million from changes in collections attributed to acquired balances. The estimated number of shares that would be paid in connection with the remaining Additional Payment liability totaled approximately 160,000 and 170,000 shares as of June 30, 2023 and December 31, 2022, respectively. Of the total remaining Additional Payments as of June 30, 2023, the amount due to the sellers, based on amounts collected as of June 30, 2023, totaled approximately $19.4 million, of which the amount due in shares totaled approximately $10.4 million, or 87,900 shares. See Note 2 - Earnings Per Share for the effect of the above referenced shares on the Company’s earnings per share calculations.

Pro forma results. For the three month periods ended June 30, 2023 and 2022, unaudited supplemental pro forma revenue totaled approximately $2.9 billion and $3.0 billion, respectively, and unaudited supplemental pro forma net income totaled approximately $14.5 million and $27.2 million, respectively. For the six month periods ended June 30, 2023 and 2022, unaudited supplemental pro forma revenue totaled approximately $5.4 billion and $5.3 billion, respectively, and unaudited supplemental pro forma net loss totaled approximately $68.7 million and $47.4 million, respectively. Supplemental pro forma information for the Company’s first quarter 2023 acquisition has not been presented for the pre-acquisition periods due to the impracticability of obtaining accurate or reliable historical financial information for the assets of the entity that was acquired.

Acquisition-related results. For the three and six month periods ended June 30, 2023, the Company’s consolidated results of operations included acquisition-related revenue of approximately $569.7 million and $970.3 million, respectively, including a total of approximately $520.6 million and $890.6 million, respectively, for IEA. For the three and six month periods ended June 30, 2022, the Company’s consolidated results of operations included acquisition-related revenue of approximately $602.3 million and $1,307.0 million, respectively, including a total of approximately $480.4 million and $1,028.5 million, respectively, for HMG and INTREN in the aggregate. For the three and six month periods ended June 30, 2023, the Company’s consolidated results of operations included acquisition-related net losses of approximately $13.3 million and $41.5

million, respectively, based on the Company’s consolidated effective tax rates, and for the three and six month periods ended June 30, 2022, the Company’s consolidated results of operations included acquisition-related net income of approximately $18.7 million and $9.4 million, respectively, based on the Company’s consolidated effective tax rates. These acquisition-related results include amortization of acquired intangible assets and certain acquisition integration costs, and exclude the effects of interest expense associated with consideration paid for the related acquisitions.

Acquisition and integration costs. The Company has incurred certain acquisition and integration costs in connection with its recent acquisitions, which costs are included within general and administrative expenses, costs of revenue, excluding depreciation and amortization, and other expense, as appropriate. Acquisition and integration costs include: i) the costs of integrating acquired entities, such as: employee termination expenses, including employee compensation relating to the elimination of certain positions that were determined to be redundant, and other integration-type costs, including operating cost redundancies, facility consolidation expenses, lease termination expenses, losses on disposal of identified assets, system migration expenses, training and other integration costs; and ii) legal, professional and other fees associated with the consummation of these acquisitions, including fees paid in connection with certain transaction-related financing commitments, including, in the second half of 2022, bridge financing related to the IEA acquisition. The Company is currently in the process of integrating these acquisitions and expects to incur additional acquisition and integration expenses. For the three and six month periods ended June 30, 2023, such acquisition and integration costs totaled approximately $22.7 million and $39.8 million, respectively, of which $20.4 million and $35.0 million, respectively, was included within general and administrative expenses, and $2.3 million and $4.8 million, respectively, was included within costs of revenue, excluding depreciation and amortization, for the respective periods. Acquisition and integration costs for the three and six month periods ended June 30, 2022 totaled approximately $12.5 million and $26.1 million, respectively, which amounts were included within general and administrative expenses. As of June 30, 2023 and December 31, 2022, approximately $7.0 million and $5.5 million, respectively, was included within current liabilities within the consolidated balance sheets related to such costs.

Note 4 – Fair Value of Financial Instruments

The Company’s financial instruments are primarily composed of cash and cash equivalents, accounts and notes receivable, cash collateral deposited with insurance carriers, life insurance assets, equity investments, certain other assets and investments, deferred compensation plan assets and liabilities, accounts payable and other current liabilities, acquisition-related contingent consideration and other liabilities, mandatorily redeemable non-controlling interests and debt obligations.

Fair value is the price that would be received to sell an asset or the amount paid to transfer a liability, also referred to as the “exit price,” in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value guidance establishes a valuation hierarchy, which requires maximizing the use of observable inputs when measuring fair value. The three levels of inputs that may be used are: (i) Level 1 - quoted market prices in active markets for identical assets or liabilities; (ii) Level 2 - observable market-based inputs or other observable inputs; and (iii) Level 3 - significant unobservable inputs that cannot be corroborated by observable market data, which are generally determined using valuation models incorporating management estimates of market participant assumptions.

Acquisition-Related Contingent Consideration and Other Liabilities

Acquisition-related contingent consideration and other liabilities is composed of earn-outs, which represent the estimated fair value of future amounts payable for businesses, including for mandatorily redeemable non-controlling interests (together, “Earn-outs”), that are contingent upon the acquired business achieving certain levels of earnings in the future. As of June 30, 2023 and December 31, 2022, the estimated fair value of the Company’s Earn-out liabilities totaled $99.2 million and $127.4 million, respectively, of which $0.7 million and $13.9 million, respectively, related to mandatorily redeemable non-controlling interests. Earn-out liabilities included within other current liabilities totaled approximately $31.5 million and $37.7 million as of June 30, 2023 and December 31, 2022, respectively. The fair values of the Company’s Earn-out liabilities are estimated using income approaches such as discounted cash flows or option pricing models, both of which incorporate significant inputs not observable in the market (Level 3 inputs), including management’s estimates and entity-specific assumptions, and are evaluated on an ongoing basis. Key assumptions include the discount rate, which was 12.0% as of June 30, 2023, and probability-weighted projections of earnings before interest, taxes, depreciation and amortization (“EBITDA”). Significant changes in any of these assumptions could result in significantly higher or lower potential Earn-out liabilities. The ultimate payment amounts for the Company’s Earn-out liabilities will be determined based on the actual results achieved by the acquired businesses. As of June 30, 2023, the range of potential undiscounted Earn-out liabilities was estimated to be between $16 million and $121 million; however, there is no maximum payment amount.

Earn-out activity consists primarily of additions from new business combinations; changes in the expected fair value of future payment obligations; and payments. For both the three and six month periods ended June 30, 2023, there were no additions from new business combinations. For the three month period ended June 30, 2022, there were no additions from new business combinations, and additions for the six month period ended June 30, 2022 totaled approximately $1.7 million. There were no measurement period adjustments in either of the three or six month periods ended June 30, 2023. Measurement period adjustments totaled an increase of approximately $3.4 million for the three month period ended June 30, 2022 and related to the Company’s Oil and Gas segment, and for the six month period ended June 30, 2022, totaled an increase, net, of approximately $1.5 million and related to a net increase in the Company’s Oil and Gas segment, partially offset by a decrease in its Communications segment. For the three and six month periods ended June 30, 2023, fair value adjustments totaled a decrease, net, of approximately $1.8 million and $2.1 million, respectively, and related to a net decrease in the Company’s Communications segment, partially offset by a net increase, primarily within the Company’s Clean Energy and Infrastructure and Oil and Gas segments. The decrease in the Communications segment included a reduction of approximately $11.6 million related to mandatorily redeemable non-controlling interests for both periods. For both the three and six month periods ended June 30, 2022, fair value adjustments totaled a decrease, net, of approximately $1.3 million and related primarily to the Company’s Communications segment. For the three and six month periods ended June 30, 2023, Earn-out payments totaled approximately $24.5 million and $26.1 million, respectively, including approximately $1.7 million related to mandatorily redeemable non-controlling interests for the six month period ended June 30, 2023. For both the three and six month periods ended June 30, 2022, Earn-out payments totaled $26.8 million.

Equity Investments

The Company’s equity investments as of June 30, 2023 include: (i) the Company’s 33% equity interests in Trans-Pecos Pipeline, LLC (“TPP”) and Comanche Trail Pipeline, LLC (“CTP,” and together with TPP, the “Waha JVs”); (ii) a 15% equity interest in Cross Country Infrastructure Services, Inc. (“CCI”); (iii) the Company’s 50% equity interests in each of FM Technology Holdings, LLC, FM USA Holdings, LLC and All Communications Solutions Holdings, LLC, collectively “FM Tech”; (iv) the Company’s interests in certain proportionately consolidated non-controlled contractual joint ventures; and (v) certain other equity investments.

Investment Arrangements. From time to time, the Company may participate in selected investment or strategic arrangements, including equity interests in various business entities and participation in contractual joint ventures, some of which may involve the extension of loans or other types of financing arrangements. The Company has determined that certain of its investment arrangements are variable interest entities (“VIEs”). As of June 30, 2023, except for one individually insignificant VIE, the Company does not have the power to direct the primary activities that most significantly impact the economic performance of its VIEs, nor is it the primary beneficiary. Accordingly, except for the previously mentioned VIE, the Company’s VIEs are not consolidated. The carrying values of the Company’s VIEs totaled approximately $26 million and $24 million as of June 30, 2023 and December 31, 2022, respectively, which amounts are recorded within other long-term assets in the consolidated balance sheets, and management believes that the Company’s maximum exposure to loss for its VIEs, inclusive of additional financing commitments, approximated $37 million for both periods.

Equity investments, other than those accounted for as equity method investments or those that are proportionately consolidated, are measured at fair value if their fair values are readily determinable. Equity investments that do not have readily determinable fair values are measured at cost, adjusted for changes from observable market transactions, if any, less impairment, which is referred to as the “adjusted cost basis.” As of June 30, 2023 and December 31, 2022, the aggregate carrying value of the Company’s equity investments, including equity investments measured on an adjusted cost basis, totaled approximately $321 million and $306 million, respectively. As of both June 30, 2023 and December 31, 2022, equity investments measured on an adjusted cost basis, including the Company’s $15 million investment in CCI, totaled approximately $20 million. There were no impairments related to these investments in any of the three or six month periods ended June 30, 2023 or 2022.

The Waha JVs. The Waha JVs own and operate certain pipeline infrastructure that transports natural gas to the Mexican border for export. The Company’s investments in the Waha JVs are accounted for as equity method investments. Equity in earnings related to the Company’s proportionate share of income from the Waha JVs, which is included within the Company’s Other segment, totaled approximately $7.5 million and $15.4 million for the three and six month periods ended June 30, 2023, respectively, and totaled approximately $7.6 million and $15.0 million for the three and six month periods ended June 30, 2022, respectively. Distributions of earnings from the Waha JVs, which are included within operating cash flows, totaled approximately $1.5 million and $5.8 million for the three and six month periods ended June 30, 2023, respectively, and totaled approximately $4.6 million and $7.6 million for the three and six month periods ended June 30, 2022, respectively. Cumulative undistributed earnings from the Waha JVs, which represents cumulative equity in earnings for the Waha JVs less distributions of earnings, totaled $120.2 million as of June 30, 2023. The Company’s net investment in the Waha JVs, which differs from its proportionate share of the net assets of the Waha JVs due primarily to equity method goodwill associated with capitalized investment costs, totaled approximately $273 million and $263 million as of June 30, 2023 and December 31, 2022, respectively.

The Waha JVs are party to separate non-recourse financing facilities, each of which are secured by pledges of the equity interests in the respective entities, as well as a first lien security interest over virtually all of their assets. The Waha JVs are also party to certain interest rate swaps (the “Waha JV swaps”), which are accounted for as qualifying cash flow hedges. The Company reflects its proportionate share of any unrealized fair market value gains or losses from fluctuations in interest rates associated with these swaps within other comprehensive income or loss, as appropriate. For the three and six month periods ended June 30, 2023, the Company’s proportionate share of unrecognized unrealized activity on the Waha JV swaps totaled gains of approximately $6.1 million and $0.5 million, respectively, or $4.6 million and $0.4 million, net of tax, respectively. For the three and six month periods ended June 30, 2022, unrecognized unrealized activity related to the Waha JV swaps totaled gains of approximately $10.4 million and $28.7 million, respectively, or $7.8 million and $21.6 million, net of tax, respectively.

Other Investments. The Company has equity interests in certain telecommunications entities that are accounted for as equity method investments. As of June 30, 2023 and December 31, 2022, the Company had an aggregate investment of approximately $22 million and $21 million, respectively, in these entities, including $18 million for FM Tech as of both periods. The Company made no equity contributions related to its investments in these telecommunications entities in either of the three or six month periods ended June 30, 2023. For the three and six month periods ended June 30, 2022, the Company made equity contributions related to its investments in these telecommunications entities totaling approximately $0.6 million and $1.1 million, respectively. Equity in losses, net, related to the Company’s proportionate share of losses from these telecommunications entities totaled approximately $0.1 million for the three month period ended June 30, 2023, and for the six month period ended June 30, 2023, equity in earnings, net, related to the Company’s proportionate share of income from these entities totaled approximately $1.0 million. For the three and six month periods ended June 30, 2022, equity in losses, net, related to the Company’s proportionate share of losses from these entities totaled approximately $0.5 million and $0.9 million, respectively.

Certain of these telecommunications entities provide services to MasTec. Expense recognized in connection with services provided by these entities totaled approximately $0.5 million and $1.0 million for the three and six month periods ended June 30, 2023, respectively, and totaled approximately $1.6 million and $2.5 million for the three and six month periods ended June 30, 2022, respectively. As of both June 30, 2023 and December 31, 2022, related amounts payable to these entities totaled approximately $0.2 million. In addition, the Company had an employee leasing arrangement with one of these entities and has advanced certain amounts to these entities. For both the three and six month periods ended June 30, 2023, employee lease expenses and advances to these entities totaled approximately $0.4 million. For the three and six month periods ended June 30, 2022, there were no employee lease expenses or advances to these entities. As of June 30, 2023 and December 31, 2022, receivables related to these arrangements totaled approximately $4.1 million and $3.8 million, respectively.

The Company has 49% equity interests in certain entities included within its Communications and Power Delivery segments that are accounted for as equity method investments, for which its aggregate investment as of both June 30, 2023 and December 31, 2022 totaled

approximately $3 million. For the three and six month periods ended June 30, 2023, equity in earnings, net, related to these entities totaled approximately $0.2 million and $0.1 million, respectively, and for the three and six month periods ended June 30, 2022, equity in losses, net, totaled approximately $0.2 million and $0.3 million, respectively. Certain of these entities provide construction services to MasTec. Expense recognized in connection with construction services provided by these entities totaled approximately $0.2 million and $0.6 million for the three and six month periods ended June 30, 2023, respectively, and for the three and six month periods ended June 30, 2022, expenses recognized totaled approximately $1.4 million and $5.0 million, respectively. As of both June 30, 2023 and December 31, 2022, related amounts payable were de minimis. In addition, the Company has line of credit arrangements with these entities, which, as of June 30, 2023 and December 31, 2022, provide for up to $3.0 million and $4.5 million, respectively, of borrowing availability. There were no borrowings as of June 30, 2023, and as of December 31, 2022, $0.6 million was drawn, which amount was included within other current assets in the consolidated balance sheets.

The Company has a 75% equity interest in Confluence Networks, LLC (“Confluence”), an undersea fiber-optic communications systems developer and VIE, which is accounted for as an equity method investment. As of June 30, 2023, a total of $2.1 million of the $2.5 million initial commitment had been funded, of which $0.2 million was funded in both the six month periods ended June 30, 2023 and 2022. Equity in losses related to the Company’s proportionate share of losses from this investment was de minimis for the three month period ended June 30, 2023, and totaled approximately $0.1 million for the six month period ended June 30, 2023. For the three and six month periods ended June 30, 2022, equity in losses related to this entity totaled approximately $0.1 million and $0.3 million, respectively.

The Company also has certain equity investments in American Virtual Cloud Technologies, Inc. (“AVCT”), in which the Company has no active involvement. AVCT filed for bankruptcy in the first quarter of 2023, during which period the Company wrote-off its remaining $0.2 million investment.

Senior Notes

As of both June 30, 2023 and December 31, 2022, the gross carrying amount of the Company’s 4.50% senior notes due August 15, 2028 (the “4.50% Senior Notes”) totaled $600.0 million, and their estimated fair value totaled approximately $552.9 million and $534.0 million for the respective periods. As of June 30, 2023 and December 31, 2022, the gross carrying amount of the Company’s 6.625% senior notes due August 15, 2029 totaled $282.8 million and $281.2 million, respectively, which notes are composed of $225.1 million aggregate principal amount of 6.625% IEA senior notes (the “6.625% IEA Senior Notes”) and $74.9 million aggregate principal amount of 6.625% MasTec senior notes (the “6.625% MasTec Senior Notes”), collectively, the “6.625% Senior Notes”). The estimated fair value of the 6.625% Senior Notes totaled approximately $285.0 million and $280.5 million as of June 30, 2023 and December 31, 2022, respectively. The estimated fair values of the Company’s 4.50% Senior Notes and 6.625% Senior Notes were determined based on an exit price approach using Level 1 inputs.

Note 5 – Accounts Receivable, Net of Allowance, and Contract Assets and Liabilities

The following table provides details of accounts receivable, net of allowance, and contract assets (together, “accounts receivable, net”) as of the dates indicated (in millions):


	June 30, 2023		December 31, 2022
Contract billings	$	1,492.2	$	1,408.1
Less allowance	(7.0)		(8.4)
Accounts receivable, net of allowance	$	1,485.2	$	1,399.7

Retainage	353.9		401.9
Unbilled receivables	1,496.8		1,328.0
Contract assets	$	1,850.7	$	1,729.9

Contract billings represent the amount of performance obligations that have been billed but not yet collected, whereas contract assets consist of unbilled receivables and retainage. Unbilled receivables represent the estimated value of unbilled work for projects with performance obligations recognized over time. Retainage represents a portion of the contract amount that has been billed, but for which the contract allows the customer to retain a portion of the billed amount until final contract settlement (generally, from 5% to 10% of contract billings). For the six month period ended June 30, 2023, provisions for credit losses totaled a recovery of approximately $0.7 million, and for the six month period ended June 30, 2022, provisions for credit losses totaled approximately $0.5 million. Impairment losses on contract assets were not material in either period.

Contract liabilities consist primarily of deferred revenue. Under certain contracts, the Company may be entitled to invoice the customer and receive payments in advance of performing the related contract work. In those instances, the Company recognizes a liability for advance billings in excess of revenue recognized, which is referred to as deferred revenue. Contract liabilities also include the amount of any accrued project losses. Total contract liabilities, including accrued project losses, totaled approximately $487.2 million and $406.2 million as of June 30, 2023 and December 31, 2022, respectively, of which deferred revenue comprised approximately $476.7 million and $390.3 million, respectively. The increase in contract liabilities as of June 30, 2023 was driven primarily by ordinary course project activity related to new project starts within the Company’s Clean Energy and Infrastructure segment. For the six month period ended June 30, 2023, the Company recognized revenue of approximately $342.2 million related to amounts that were included in deferred revenue as of December 31, 2022, resulting primarily from the advancement of physical progress on the related projects during the period, including amounts from recently acquired businesses.

The Company is party to non-recourse financing arrangements in the ordinary course of business, under which certain receivables are settled with the customer’s bank, in return for a nominal fee. Discount charges related to these arrangements, which are included within interest

expense, net, totaled approximately $4.2 million and $1.5 million for the three month periods ended June 30, 2023 and 2022, respectively, and totaled $8.0 million and $2.5 million, respectively, for the six month periods ended June 30, 2023 and 2022. The Company also has financing arrangements with certain customers, which arrangements were not considered significant as of June 30, 2023.

Note 6 – Property and Equipment, Net

The following table provides details of property and equipment, net, including property and equipment held under finance leases as of the dates indicated (in millions):


	June 30, 2023		December 31, 2022
Land	$	73.6	$	73.5
Buildings and leasehold improvements	91.0		86.7
Machinery, equipment and vehicles	2,957.5		2,797.0
Office equipment, furniture and internal-use software	315.4		286.8
Construction in progress	52.9		67.4
Total property and equipment	$	3,490.4	$	3,311.4
Less accumulated depreciation and amortization	(1,736.7)		(1,557.3)
Property and equipment, net	$	1,753.7	$	1,754.1

As of June 30, 2023 and December 31, 2022, the gross amount of capitalized internal-use software totaled $202.9 million and $186.6 million, respectively, and, net of accumulated amortization, totaled $48.1 million and $39.9 million, respectively. Beginning in the second quarter of 2023, the depreciable lives of certain assets were updated on a prospective basis to better align the respective assets’ lives with their expected useful lives, based on our current assessment of the physical and economic factors of the related assets, which resulted in a $2 million decrease in depreciation expense for the three and six month periods ended June 30, 2023.

Note 7 – Debt

The following table provides details of the carrying values of debt as of the dates indicated (in millions):


Description	Maturity Date	June 30, 2023		December 31, 2022
Senior credit facility:	November 1, 2026
Revolving loans		$	1,007.0	$	896.0
Term loan		345.6		350.0
4.50% Senior Notes	August 15, 2028	600.0		600.0
6.625% Senior Notes	August 15, 2029	282.8		281.2
2022 Term Loan Facility	October 7, 2025 and October 7, 2027	700.0		700.0
Finance lease and other obligations		404.1		414.5
Total debt obligations		$	3,339.5	$	3,241.7
Less unamortized deferred financing costs		(15.6)		(17.6)
Total debt, net of deferred financing costs		$	3,323.9	$	3,224.1
Current portion of long-term debt		169.3		171.9
Long-term debt		$	3,154.6	$	3,052.2

Senior Credit Facility

As of June 30, 2023, the Company’s senior unsecured credit facility (the “Credit Facility”) had aggregate borrowing commitments totaling approximately $2.25 billion, which amount is composed of