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 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 today's call.
Today's remarks by management will be discussing adjusted financial metrics reconciled in yesterday's press release and supporting schedules. In addition, we may use certain non-GAAP financial measures in this 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.
With us today, we have José Mas, our CEO, and George Pita, our Executive Vice President and CFO. 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 good quarter and a lot of important things to talk about today, so I'll turn the call over to José so we can get going. José?
Thanks, Marc. Good morning, and welcome to MasTec's 2022 third quarter call. Today, I'll be reviewing our third quarter results as well as providing my outlook for the markets we serve. I'd like to thank you for joining us today, and before getting into the quarterly details, I'd like to offer my perspective on where I think MasTec stands today. Just two short years ago, on MasTec's 2020 third quarter call, we laid out a long-term goal of achieving annual revenue of $10 billion+. It's important to remember, at that time, MasTec was on pace to generate just over $6 billion of revenue in 2020, with 28% of that coming from our oil and gas business.
Still somewhat unsure of where the COVID pandemic would take us, we had seen a significant impact to our oil and gas business and the demand outlook for pipeline projects entering 2021. Our ability to provide our $10 billion outlook was dependent on the strength we were seeing across our non-oil and gas businesses and our ability to expand our footprint and capabilities to capitalize on those markets. Considering 56% of our operational EBITDA in 2020 came from oil and gas, the growth of these other markets needed to happen not only quickly, but profitably. As a result, we focused heavily on growing our communications, power delivery, and clean energy businesses. Combined with investing heavily in growing our resources and capabilities organically, we made a number of acquisitions that have effectively transformed MasTec into a leader in the energy space.
With the acquisitions of Intren and Henkels & McCoy in 2021, and with the recent addition of IEA, we've positioned ourselves at the forefront of markets that have significant demand and growth opportunities. While we faced a number of challenges during this transformation, I truly believe that our third quarter results begin to show the potential of MasTec's long-term earnings power. I'd like to highlight some key financial accomplishments during the quarter. We now expect revenue to approach $9.7 billion in 2022, a 22% year-over-year increase, and are confident 2023 revenues will approach or exceed $13 billion, far exceeding our ambitious $10 billion goal set just two years ago.
Our non-oil and gas segment revenues were up 38% year-over-year and represented 85% of revenue and 80% of operational EBITDA for the third quarter, significantly diversifying both our revenue and earnings mix. Our non-oil and gas segments achieved double-digit EBITDA margins, improving 250 basis points year-over-year and 370 basis points sequentially. Communication and power delivery EBITDA margins both exceeded 12%. While clean energy and infrastructure EBITDA margins were below our expectations, they did improve 170 basis points year-over-year and 550 basis points sequentially. Finally, backlog, not including IEA, is at record levels, and our second-to-third quarter backlog increased sequentially for the first time since 2018.
In summary, while the quarter was not perfect, and quite frankly, we could have and should have done better, I do believe it properly reflects the cadence of improvements we had previously laid out. More importantly, we expect our non-oil and gas segments to perform very well in the fourth quarter and are very confident we will deliver solid fourth quarter improvements in our clean energy and infrastructure segment. Embedded in our results, we continue to make significant investments in growth. Demand for our services is incredibly high and our prospects to deliver long-term revenue and earnings growth are, I believe, better than at any time in our history. I'd also like to take this opportunity to welcome the IEA team members to the MasTec family.
The transaction, which is the largest in MasTec's history, closed a few weeks ago, and we look forward to playing a critical role in our country's energy transition. I'd like to highlight key points that I believe make this an excellent strategic fit for MasTec. First, it continues to grow our presence in the energy market and enhances our ESG profile in what we believe is an ongoing energy transformation related to both power generation and delivery as the country transitions to a carbon neutral economy. Second, IEA's roots are those of a union renewable contractor. While MasTec had been an exclusively non-union renewables construction company, this transaction expands our renewable business into union markets. More importantly, it allows us to cross-sell complementary service to these same customers with the investments we made last year in growing our union transmission and distribution presence.
Third, IEA adds nearly 6,000 team members in a market where skilled labor to serve a growing market is so scarce. In a challenging procurement and labor market, this added scale gives us the ability to more efficiently serve our customers with consistency at scale. Fourth, IEA is led by an excellent management team with deep generational roots in the business and a strong family-type culture with an emphasis on safety. Our cultures are similar and complementary. We believe with MasTec's support, there are great opportunities for future growth and margin improvement. Fifth, IEA civil and infrastructure business, combined with MasTec civil and infrastructure business, creates an improved competitor of size and added scale in yet another market that's undergoing strong growth with the benefit investments from the infrastructure bill.
It's also important to note that we announced MasTec's intention to acquire IEA on July 25, and just two days later, on July 27, the Inflation Reduction Act was announced. This piece of legislation contains nearly $370 billion in incentives that will directly impact the markets that MasTec serves. The acquisition of IEA significantly enhances the number of opportunities available to MasTec as a result of the Inflation Reduction Act. Now I'd like to cover some industry specifics. Our communications revenue for the quarter was $889 million, a 33% year-over-year increase, and we expect full year revenues to grow by over 25%. EBITDA margins in this segment was 12.4%, a 170 basis point improvement year-over-year, and a 200 basis point improvement sequentially.
It's good to finally see the impact of the infrastructure growth associated with both 5G and the Rural Digital Opportunity Fund finally start to show up in our financials. Our growth in the quarter was driven by year-over-year growth of 33% with AT&T, 21% with Comcast, 50% with T-Mobile, 42% with Verizon, and strong increases with a number of RDOF-funded customers. In addition to the significant demand related to fiber opportunities, the 5G revolution continues to transform the communications ecosystem, requiring networks to be upgraded and expanded to meet the ever-increasing demand for data and internet usage. Not only must new equipment be added to existing cell towers, millions of new small and micro cells must also be built and connected, including fiber and power.
All of these new points of presence not only need to be built, but they will require ongoing maintenance and service, creating a significant long-term maintenance opportunity. Moving to our power delivery segment, revenue was $688 million versus $365 million in last year's third quarter. Margins were up 460 basis points sequentially, and our outlook remains strong. We are in the midst of an energy transition in the United States, and our customers' focus on reliability, hardening, renewable connectivity, and meeting the challenges of providing power to customers for electric vehicle charging demand usage are transforming the grid. We believe the scale we have been able to achieve, along with our history of performance and safety, uniquely position us to play a significant role in helping meet the needs of utilities and energy developers.
Moving to our clean energy and infrastructure segment, revenue was $563 million for the third quarter. Results for this segment do not include IEA, although a partial quarter for IEA will be included in our fourth quarter results. Backlog in this segment was at record levels and also did not include IEA backlog, which will be added in the fourth quarter. Despite the challenges we face this year in the renewable energy market with the Department of Commerce solar panel investigation, demand is incredibly strong heading into 2023. We expect activity to further increase as the Inflation Reduction Act benefits begin to impact our business in the second half of 2023. We are in the very early innings of a dynamic market that will offer us tremendous opportunities for growth.
We look forward, with the combination of IEA, to providing our customers with solutions at scale. The acquisition has been very well-received by both existing and new customers, and we believe that our cross-selling opportunities uniquely position us in this segment. Moving to our oil and gas segment, revenue was $376 million versus $858 million last year. Margins remain solid despite the significant revenue drop. Backlog was up year-over-year and sequentially. Last quarter, we announced our largest award in over 3 years. We have seen a significant uptick in project activity for 2023, 2024, and 2025, and expect backlog to materially build by year-end. We expect significant growth in this segment in 2023, with or without the completion of the Mountain Valley Pipeline. To recap, I'm incredibly proud of how we've transformed and transitioned MasTec over the last two years.
I truly believe this quarter offers a glimpse of our potential as a company. Today, we enjoy a significant presence in some of the most resilient growth markets in our economy. We are honored to work with our customers, supporting the need for bandwidth and communications, and helping our energy customers as we transition to a carbon neutral economy. I'd like to take this opportunity to thank the men and women of MasTec for their performance and hard work. I'm honored and privileged to lead such a great group. The men and women of MasTec are committed to the values of safety, environmental stewardship, integrity, honesty, and in providing our customers a great quality project at the best value.
These traits have been recognized by our customers, and it's because of our people's great work that we've been able to deliver these financial results in a challenging environment and position ourselves for continued growth and success. I will now turn the call over to George for our financial review. George?
Thanks, José, and good morning, everyone. Today, I'll review our third quarter 2022 financial results and provide additional color on our guidance expectation for the balance of the year, which now includes partial quarter operations for the IEA acquisition completed in early October. As Marc indicated at the beginning of the call, our discussion of financial results and guidance will include non-GAAP adjusted earnings and adjusted EBITDA. Reconciliations and details of non-GAAP measures can be found on our press release, our website, or our SEC filings. Third quarter results were generally in line with our guidance expectation, with revenue at $2.5 billion and with a slight beat in adjusted EBITDA at $246 million. Third quarter adjusted diluted earnings were $1.34 per share compared to our expectation of $1.29 per share.
This was driven by about one cent per share beat in adjusted EBITDA, with the balance due to lower income tax expense in the quarter resulting from tax true-ups, partially offset by higher interest costs. Third quarter consolidated adjusted EBITDA margin rate showed a 200 basis point improvement over second quarter levels and approached 10% of revenue. Importantly, this performance level was achieved despite an approximate $500 million year-over-year decline in oil and gas segment revenue. In summary, third quarter performance was driven by approximately $600 million of year-over-year non-oil and gas segment revenue growth and with strong adjusted EBITDA margin rate performance of 10.2% of revenue.
While we feel we can further improve on these results in the future, this performance begins to demonstrate the potential of MasTec's future earnings profile, driven primarily by expanded and improved non-oil and gas segment operations. Third quarter revenue growth in non-oil and gas segment operations was driven by approximately $300 million or 88% in our power delivery segment, approximately $200 million or 33% in our communications segment, and approximately $50 million or 9% in our clean energy and infrastructure segment, or clean energy. We continue to expect strong revenue growth in these areas in the future, and this belief is supported by record third quarter backlog levels for all our non-oil and gas segments. During the third quarter, we substantially completed our integration efforts for the Henkels & McCoy acquisition and incurred initial acquisition-related expenses for the IEA acquisition completed in October.
During the third quarter, despite the working capital requirements associated with a sequential revenue increase of over $200 million, we generated $118 million in cash flow from operations, and our net debt level was unchanged. We continue to expect strong cash flow from operations during the fourth quarter as legacy operations seasonality and project timing typically utilize lower levels of working capital during the fourth quarter. We remain committed to maintaining a strong balance sheet supportive of our investment grade rating and expect that the combination of improved 2023 adjusted EBITDA performance and moderated levels of 2023 capital expenditures and strategic investments will reduce overall net debt levels and significantly improve our leverage metrics in 2023.
We have ample liquidity of approximately $950 million at the end of the third quarter, and this level was not impacted with the fourth quarter IEA acquisition. In summary, while 2022 has had its challenges, we are encouraged by our third quarter results and strongly believe that we are well-positioned for long-term growth opportunities in both revenue and operating margin expansion. Now we'll cover some detail regarding our segment results and expectations. Third quarter communications segment revenue was $889 million, a 33% increase when compared to the same period last year, and 8% sequential growth when compared to the second quarter, reflecting expanded wireless wireline services as telecommunications partners accelerate the deployment of spectrum and fiber for transformational 5G network enhancement.
Third quarter communication segment adjusted EBITDA margin rate was 12.4%, a 200 basis point improvement over second quarter levels. Primarily due to overhead leverage from increased wireless revenue levels and improved wireline results as new RDOF wireline markets transition from startup mode to operations mode. Based on normal year-end seasonality, we expect fourth quarter communication segment revenue to moderate from third quarter levels and slightly exceed $800 million with adjusted EBITDA margin rate approximating last year's fourth quarter. This equates to a continued expectation that annual 2022 communications segment revenue will approximate $3.2 billion, and annual 2022 adjusted EBITDA margin rate will be in the low- to mid-10% range.
If you do the math, you will note that our annual 2022 expectation includes strong and accelerating second half 2022 trends, which we believe will continue to 2023, giving a significant near-term growth opportunity in this segment. Third quarter clean energy segment revenue was $563 million, a 9% increase when compared to the same period last year. Third quarter adjusted EBITDA margin rate was 4.4% of revenue, up 170 basis points from a year ago, and a 550 basis point sequential improvement compared to the second quarter. While performance improved, third quarter adjusted EBITDA margin rate performance in this segment was still negatively impacted by select industrial projects discussed during the second quarter call.
As we look forward with fourth quarter 2022 clean energy segment results will include partial quarter operations of IEA, which we estimate will add approximately $500 million in revenue at a mid-single-digit adjusted EBITDA margin rate. Inclusive of IEA, we expect fourth quarter clean energy segment revenue to approach $1.1 billion at a mid- to high-single-digit adjusted EBITDA margin rate that exceeds last year's fourth quarter level, and this represents the highest clean energy segment quarterly adjusted EBITDA margin rate performance in over two years. This equates to an annual 2022 clean energy segment revenue expectation of approximately $2.6 billion with an annual adjusted EBITDA margin rate expectation in the mid-4% range.
As we have previously stated, the combination of IEA and MasTec scale, capacity and resources, coupled with lower levels of solar panel supply chain disruptions and increased levels of governmental funding support for our customers from the recently enacted Inflation Reduction Act, are expected to accelerate renewable power energy transition and civil project activity for years to come. Accordingly, we expect that this segment can approximate $5 billion in revenue in 2023, with an improved annual adjusted EBITDA margin rate performance in the mid to high single-digit range. Third quarter power delivery segment revenue was $666 million, an 88% increase when compared to the same period last year, and a 6% sequential growth when compared to the second quarter. During the quarter, we substantially completed inter-integration efforts for the Henkels & McCoy acquisition.
Adjusted EBITDA margin rate was 12.1% of revenue, a 260 basis point improvement over last year's third quarter, and a 460 basis point improvement sequentially from the second quarter. Within the third quarter performance for the power delivery segment, our electrical and gas distribution services continued to perform well, and we had strong sequential improvement in our legacy transmission operations, driven by the non-recurrence of second quarter project startup delays and project closeout costs. Looking forward, we expect fourth quarter power delivery segment revenue will approximate $700 million with adjusted EBITDA margin rate in the high single-digit range. This equates to an annual 2022 power delivery segment revenue expectation of approximately $2.7 billion, with an adjusted EBITDA margin rate in the 9%-mid 9% range.
Third quarter oil and gas segment revenue was $376 million, and adjusted EBITDA margin rate was 13.4% of revenue. As expected, this represented a significant revenue and adjusted EBITDA quarterly decline when compared to last year, and that has been largely offset during the third quarter by non-oil and gas segment operations. We anticipate that fourth quarter oil and gas segment revenue and adjusted EBITDA margin rate levels will decline from third quarter levels as lower overhead absorption impacts a seasonally slow quarter. This equates to an annual 2022 oil and gas segment view of approximately $1.2 billion in revenue, with adjusted EBITDA margin rate in the mid- to high-13% range.
As José mentioned, we have strong visibility into higher levels of bidding and awards for 2023 pipeline services and believe that the oil and gas segment will show sizable growth in 2023. This expectation is not dependent on a restart of construction activities for the MVP pipeline, which continues to be delayed due to permitting and judicial actions. Third quarter adjusted corporate segment net costs were approximately $29 million or 115 basis points of consolidated third quarter revenue, and we expect a similar cost level in the fourth quarter. Turning to our business mix.
Based on the strategic diversification of our revenue stream during the third quarter, no customer represented more than 10% of our total revenue. Third quarter 2022 revenue derived from master service agreements reached 52% of our total revenue compared to 37% for the same period last year, a significant increase. This is primarily derived from recurring utility services spend greatly increasing the repeatable nature of our revenue profile. As of September 30, 2022, we had a record total backlog of approximately $11.2 billion, sequentially up approximately $220 million and up approximately $2.7 billion when compared to the same period last year. It should be noted that we closed the IEA acquisition on October 7, and thus no IEA amounts are included in our record third quarter backlog levels.
Importantly, September 30, 2022 backlog represented record third quarter levels across all non -oil and gas segments, demonstrating the end market revenue shift that is occurring in our operations. That said, as we've indicated for years, backlog can be lumpy as large contracts burn off each quarter and new large contract awards only come into backlog at a single point in time as a result of actual contract signings. Now I will discuss our cash flow, liquidity, working capital usage, and capital investments. During the third quarter, despite the working capital requirements associated with a sequential revenue increase of over $200 million, we generated $118 million in cash flow from operations, and our net debt level was unchanged.
We continue to expect strong cash flow from operations during the fourth quarter as legacy operations, seasonality, and project timing typically utilize lower levels of working capital. This equates to an annual 2022 cash flow from operations expectation in the low- to mid-$500 million range. Including approximately $1 billion in issued and assumed debt during the fourth quarter from the IEA acquisition, we expect year-end net debt levels will approximate $2.8 billion. Based on the combination of the IEA acquisition debt and higher levels of floating interest rates, we have updated our fourth quarter interest expense estimate.
We remain committed to maintaining a strong balance sheet supportive of our investment-grade rating, and expect that the combination of improved 2023 adjusted EBITDA performance and continued moderated levels of 2023 capital expenditures and strategic investments will reduce overall net debt levels and significantly improve our leverage metrics. We have ample liquidity of approximately $950 million at the end of the third quarter, and this level was not impacted by the fourth quarter IEA acquisition. With regard to our working capital profile during the third quarter, DSOs were 89 days compared to 88 days at the end of the second quarter. As we look forward, we anticipate that year-end 2022 DSOs will slightly improve to the mid-80s range.
As discussed during our second quarter earnings call, we accelerated capital expenditure purchases during the first half of 2022 as we ensured delivery of supply chain constrained equipment. During the third quarter, we moderated our level of capital expenditures with only $23 million in gross cash CapEx, which was fully offset by CapEx disposals. We anticipate a continuation of a moderated capital expenditure program during the fourth quarter as we focus on deleveraging. In summary, our long-term capital structure is solid with ample liquidity, and we continue to be committed to our investment-grade rating. We are mindful that the IEA acquisition will impact near-term leverage ratios, and we've communicated our plan to normalize our post-transaction leverage profile during 2023 with credit rating agencies who have maintained our investment-grade rating.
Moving to our recently updated 2022 guidance, inclusive of the partial quarter results of the IEA acquisition, we expect fourth quarter revenue of $2.9 billion with adjusted EBITDA of $257 million or 8.8% of revenue, and adjusted diluted earnings of $1 per share. This equates to an annual 2022 expectation of approximately $9.7 billion in revenue, with adjusted EBITDA approximating $780 million and adjusted net income of $232 million, with adjusted diluted earnings per share at $3.02. This concludes our prepared remarks, and we'll now turn the call back to the operator for Q&A. Operator?
Thank you. If you would like to ask a question at this time, please press star one on your telephone keypad. That's star one to ask a question, and we ask you to limit your questions to one with a related follow-up. Our first question comes from Justin Hauke with Robert W. Baird & Co.
Hi, good morning, everyone. Nice to see the non-oil and gas contribution coming through on the earnings results. I guess I had a question just thinking about the debt structure and kind of the interest rate for next year. I guess maybe two questions that I would put in that would be first on the two tranches of debt that you have now with the notes not getting fully redeemed from the IEA bondholders. Just, you know, what costs do you have to carry that next year? And is there any expectation of being able to refinance those?
I guess the second question is, the $45 million of interest expense that you're assuming in 4Q, is that a good run rate to think about quarterly for next year, kind of fully baked in.
Thanks, Justin. This is George. I'll take that. I'll take your second part first. In terms of the $45 million run rate, I would say this, I mean, we talked about that we expect to delever in 2023. I would think 45 is more of a high mark, in terms of an expectation, as we would expect to delever during 2023. That said, it's hard to predict how interest rates would change, over the course of time and into 2023. The combination of factors. Those are two factors to consider in terms of modeling going forward. If you look at our capital structure today at the end of, you know, Q4, we'll have about 45% of our capital structure on a floating rate basis.
Obviously, that's costing us more than it did a year ago as that's moved. I mean, we have ultimate flexibility in our capital structure. Even the additions that we did with IEA and the term loans are pre-payable, and we're constantly looking at monitoring what is the best mix of our future capital structure going forward. That said, you know, relative to the IEA bonds, I mean, you know, we have assumed all $300 million of those bonds as we close the transaction here on October seventh. You know, per the terms of the indenture, it did not trigger a change of control put option.
At this point, $75 million of those amounts have been converted into MasTec notes as a result of our exchange offer, and that puts them at terms consistent with our existing bonds. The remaining $225 million that's out there remains debt of IEA. Both tranches are now rated investment grade. At this point, the IEA bonds coupon rate is comparable to what a new issue rate might be, relative to pricing, and therefore, we intend to keep these bonds in place.
Okay. Okay, that's helpful. I guess the second question I had was just, you know, previously you guys had given, you know, an EBITDA guidance, I guess, or, you know, at least a framework of $1.17 billion for 2023. I just was curious if there's been any change in that outlook. It sounded like the revenue outlook that you gave is unchanged.
Nothing's really changed. We talked about $13 billion in revenue for next year. I think that that's becoming more and more clear. Obviously, the market is supportive of that. We laid out the margin profile that early. I still think it's very attainable. I think we've laid out 150-120, and I think somewhere in that range. While we're not providing guidance for 2023 yet, 'cause there's a lot of work to do, I think that it's reasonable.
Thank you very much.
Thanks, Justin.
Thank you. Next question comes from Alex Rygiel in B. Riley. Please go ahead.
Good morning, José. Nice quarter here.
Thank you.
José, a couple of quick questions. First, obviously, with the macro concerns of an economic slowdown in front of us, how do you think your business may be affected by that, understanding that some of your activities are kind of in the last mile, but yet there's a lot of government funding out there and other stimulus activities out there that are driving the clean energy marketplace. Just broadly speaking, how do you think a mild recession is gonna affect your business?
First, I think we have an incredibly resilient portfolio, and I think you laid out some of it. If you think about telecom, so much government funding has gone into RDOF. There's no question about the need for bandwidth and speed. 5G is here, 5G is being pushed. Fiber activity is probably at the highest levels that I've ever seen in my career and actually significantly expanding. As we look into 2023 and beyond, I think that the truth is there's more work there than we can currently do, so we're aggressively trying to grow into that as fast as we can. When you think about our energy market and the conversion to renewables, I think that's gonna be unaffected.
When you think about the hardening of the grid that's been approved by so many public services across the country, I think that's unaffected. When you think about transmission lines being built to connect renewables, that's not gonna be impacted. When you think about different utilities and how they're meeting the challenges of electric vehicle usage, that won't be impacted. When you think about pipelines and the commodity prices where they've been, and gas is a transitional fuel with the needs that exist today in moving it, I think that's unaffected. When you think about the infrastructure build relative to our civil business, I think that's unaffected. The reality is that there's a very, very small piece of our portfolio that you could even equate to something like housing that might be mildly affected.
I would argue the opposite, Alex, which is, you know, a somewhat of a decline in the economy will probably actually help us because it will deflate the inflationary pressures that we see in our business today. I think that the revenue outlook for our business is incredibly resilient, and anything that might happen could actually, you know, help us from a cost perspective.
Secondly, the IEA acquisition, you've only owned it for a couple of weeks, but can you talk about sort of the quality of backlog that you've discovered and the opportunity for synergies, both either revenue or cost?
Sure. Again, we're super excited. I think the market is incredibly robust. The demand for the services is off the charts. I think you're gonna see, you know, in the coming quarters, both, you know, MasTec's legacy business and IEA's have tremendous backlog growth just based on the conversations and awards we're seeing from customers. You know, IEA did, you know, report backlog a little bit differently than we did. You know, we think the IEA add to backlog will be somewhere in the $2 billion range in the fourth quarter. You know, as the quarters mount, we think they're gonna be considerable additions to that.
You think about solar, you know, even wind, even a lot of these transitional fuels that we're thinking about, whether it's hydrogen or carbon sequestration, you know, that market is incredibly active. Again, I think it's gonna be very resilient over the course of the next couple of years, regardless of what happens with the economy.
Nice quarter. Good luck.
Thanks, Alex.
The next question comes from Andy Kaplowitz in Citigroup.
Good morning, guys.
Morning, Andy.
José, you had a nice step-up in communications margins that you talked about to 12.4%. I know supply chain has been very difficult, so maybe you could talk about what went right in the quarter. Was this better utilization of your people? Were you able to renegotiate any of your significant contracts? Maybe fuel costs have been coming down a little. Any more color there would be helpful.
Well, first, I'd say, Andy, we expected it, right? If you thought about the way we guided to Q3, we expected a step up. You know, I know that there's been concern out there relative to our ability to hit that, but, you know, we felt comfortable. We've seen it in our business. We've been growing, and the volumes finally came in. You know, 33% revenue growth in the quarter is fantastic. You know, and I'd also say there's pressure in that, right? You know, while the results are good and, you know, they'll moderate a little bit in Q4 because it's just, you know, timing and the seasonality of it, you know, the reality is that we can achieve more than that, right?
Once we get on a run rate, once we're, you know, fully utilized, once we've got the right number of people on board, you know, we actually think those are margins that, you know, over the long term, could be improved. Solid performance. Again, I, you know, it was good to see us deliver and, you know, nothing special about the quarter. There was no, you know, individual areas where we had any big significant pickups, just solid performance throughout.
Thanks for that, José. Can you talk a little bit more about your clean energy business? You mentioned the mid- to high-single-digit margin in clean energy for Q4. Could you give us what the EBITDA is that's coming in from IEA in Q4? Are you thinking that your industrial problem project drag is getting behind you? How much improvement, if any, are you seeing in solar markets to help with utilization in the segment?
Yeah, sure. We, you know, we still had some drag in Q3 with some of the industrial projects we talked about in Q2. I think George alluded to that in his prepared remarks. When we think about, you know, Q4 and beyond, you know, IEA, you know, the last quarter that IEA reported was about, I think it was about 560 at 6 points in Q2. Their third quarter was a little bit weaker than they originally anticipated for a lot of the same reasons that have been talked about in the industry, the solar panel investigation and the renewable issues. You know, when we think about Q4 for them, we're kinda thinking about it in the way that they delivered Q2. It's probably a conservative view.
Again, we've only owned it a few weeks, but I think it's better to be conservative at this point. You know, we laid out a longer term outlook for them for 2023 of $160-$170 million of EBITDA when we did it, $40-$50 million in net income for 2023. Quite frankly, we think that's unchanged, and if anything conservative, our job is gonna be, you know, to see how much we can improve that and the synergies we can build out of the business to ultimately make that a much better number. Our customers' real reaction to the acquisition has been fantastic. Again, you know, there is an incredible amount of demand for the services that we offer.
You know, our job is gonna be to, you know, pick the right projects, the right customers, find the right utilization levels, make sure that, you know, the projects stack on each other, and we don't have, you know, any holes or any significant starts and stops. That's gonna be through, you know, the management of the project acquisition process as we think about it throughout 2023. I think we're gonna do a great job at that, and I'm very, very optimistic and confident that we're gonna be able to do a lot of great things there, but, you know, we're just getting started.
As we talk about our next call, on our year-end call, you know, we'll hopefully be able to highlight that a lot more with, you know, a lot of new awards and a lot of expectations going into 2023, but we still got some work to do there.
Appreciate all the color.
Thanks, Andy.
Next question is from Neel Mehta at Goldman Sachs.
Yeah. Good morning, team, and congrats on a good quarter here. The first question is just about managing inflationary pressures that exist in the market, ranging from diesel to labor. How are you guys working through those? Are you able to push some of these costs on through pricing, and do you feel like you've sufficiently built this into the way you're thinking about 2023?
Yeah, Neil, I think couple things, right? We talked a lot about it on our second quarter call, even as far back as Q1. You know, obviously, fuel was a huge difference for us in the first half of 2022 versus where it was in 2021. I think we modeled that correctly through the balance of the year. You know, we did see some of that. We saw some improvements in fuel costs in the third quarter. It obviously ebbs and flows all the time. I think we've been very vocal about the inflationary pressures on labor. We've seen it. We think it still exists. It's probably moderated just a little bit, but it's something that we gotta keep an eye on.
Again, there's so much demand for our services that, you know, I think the inflationary wage pressures will continue for a little bit. You know, to some of the earlier points, as the housing market does cool off a little bit, and we think it will open up a significant pool of labor that we can draw from that will hopefully, you know, counteract some of the wage inflationary pressures that we've historically seen. We're working hard at it. You know, team member acquisition is one of the most important things that we do here at MasTec because we're all about our people, and we think we've got a good process in place. As we think about 2023, you know, obviously we have some tremendous opportunities.
We expect, you know, a lot of further revenue growth across all of our markets and, you know, labor is gonna be a key component of that. There's no question that, you know, we're seeing and we've seen inflationary pressures. We've had a lot of discussions with our customers since early this year. You know, we've gotten a lot of relief from our customers. In many cases, we've talked at length about being able to do it on anniversary dates of contracts on the annual escalators. You know, those have come in as we've expected in due process and in due negotiation. We expect that to continue through 2023. You know, we think it's something that, you know, obviously impacted us in the first half of the year. We think we're managing it well.
We were very vocal about the issues that it caused and our intent on how we were gonna manage it. Again, I think in the third quarter, you'll see some of the results of that execution.
Thanks, José. Backlog was very significant this quarter. Where are you seeing it surprise to the upside? Where do you think the backlog translates quickest into revenue recognition?
No, it's a great question. It's actually, and we said it in our prepared remarks, but it's the first time since 2018 that our second -to -third quarter backlog increases. It's relatively rare because our third quarter is normally such a high revenue quarter that it's hard to book-to-bill at the same level. Historically, you know, we've had large pipeline awards that have really impacted that number. The beauty of this backlog print was it didn't come from any particular project, right? It was really broad-based. It was across every segment, a lot of strength, a lot of book-to-bill. We're, you know, we're super proud of that accomplishment. I think we're gonna see it across all of our segment.
I think it's very supportive of the dialogue that we've laid out for 2023 relative to the growth in each segment. If you were to ask me what could potentially surprise me most to the upside in 2023, it's probably our oil and gas business because we've been expecting it to be down for such a long time, and we're seeing a lot more strength in that market than we've seen in previous quarters and are pretty excited about what that means. You know, we think it's pretty broad-based. You know, obviously, we think the Inflation Reduction Act is gonna have a massive impact on our backlog over time. You know, some of the rules are still being written, so we don't expect to see significant impact from that until the second half of 2023.
But you know, quite frankly, all things are trending in a fantastic direction, and we're really excited about what we think we can accomplish.
Thank you, sir.
Thanks, Neil.
Next question is from Jamie Cook at Credit Suisse.
Hi, good morning, and congratulations on a nice quarter. I guess, José, my first question, obviously, we've done a lot with the portfolio and you have some debt right now, so you can't do M&A. Given how you've transitioned the portfolio, as we think over the medium term, is there anything else you think you need, or is the portfolio right-sized for the growth opportunities that you see ahead? And as we're pitching this to sort of the investment community, do you think as we exit 2023 on a more consistent basis, is this a portfolio that can generate, you know, low-teens-type margins, you know, on a normalized basis? That's my first question.
Second question, George, just try to think about how we think about the free cash flow conversion of this, of the company, you know, just with the addition of Henkels & McCoy in IEA. Thank you.
Sure, Jamie. A couple of things, right? As we think about the future, you know, obviously the margin profile is gonna continue to improve. As you think about total company margins, obviously our clean energy and infrastructure business, especially, you know, near to midterm, is going to have, you know, more challenges achieving, you know, teen type margins. We think it's a high single to low double-digit margin business. We think we'll achieve that, and it'll obviously drive the EBITDA profile of our business up. We think we can get our EBITDA margins in time to double digits. That won't be our, you know, that's not our guidance for 2023. Our guidance for 2023 will come in lower than that for sure. But there's no doubt in my mind that that's achievable.
You know, depending on the strength of the market and where we can take the portfolio, I think that's only gonna improve over time. Relative to, you know, what happens to the portfolio, I think we're in a great position today. I think we've got, you know, so many growth markets in front of us that we've got to execute on. I think, you know, organically, we're gonna be capable of doing a lot. You know, with that said, we're always looking for opportunities. We think in these, you know, these levels of higher debt, it's gonna put a lot of pressures on companies that are levered, and I think we'll, you know, have a competitive advantage relative to that in the markets that we serve. We'll see what happens over the course of the next couple of years.
You know, we think our portfolio is in a better position than it's ever been. We think our growth opportunities are better than they've ever been. Again, we're just super excited about what the future holds.
Jamie, relative to free cash flow, we've said before, you know, as we've transitioned, as we move in this transition and the business morphs, you know, less more away from being centered on oil and gas pipelines, which historically has been the most capital-intensive business that we operate in, that our free cash flow profile over time, I think is a better profile because our capital intensity has lessened as we've moved into the electric distribution business, as we move now into larger way into the renewables business, as those businesses are just generally a less.
Capital intensive. That will be our expectation going forward. I mean, obviously we started to moderate our capital expenditures here in the third quarter, and we'll do so into 2023. I think we certainly accelerated some spends in the first half of the year because we were trying to make sure that we were able to secure deliveries of some things that have been supply chain constrained and did that. You know, our free cash flow profile as an entity, as we go through this transition, is a stronger profile because I think we have a similar working capital profile with an improved CapEx or capital intensity.
Okay. Congrats. Thank you.
Thanks, Jamie.
Thank you. Next question is from Steven Fisher at UBS.
Great. Thanks. Good morning. Wondering if you could just give a little more color on the margin buildup in the clean energy segment in Q3 and then into Q4. Just maybe should we assume that the civil piece and renewables including IEA, I guess, in Q4 are gonna be more at similar levels, but the industrials piece more of like a break-even or low single digits? How do you see that kind of the buildup within the segment and then trending into next year?
Sure. I think that's accurate, right? I do think that our civil business is performing well. I think over time, our renewables markets will be the highest margin profile of that group. I think that the industrial business, based on the project profile that we expect to have in 2023, will be significantly better than it was in 2022, and it'll probably be at similar levels to at least our civil business. I do think that, you know, the margins will be tighter, if we think about the three pieces of that business in 2023. I do think the fourth quarter of 2022, you know, we'll see a little bit of improvement in the industrial segment, but it won't. We do expect civil and renewables to outperform the industrial business in the fourth quarter.
Okay, that's very helpful. Just, I apologize if you covered this earlier, I missed part of the call, but can you talk a little bit about the visibility you have to renewables projects in, say, you know, through the first half of 2023? Do you have, you know, good knowledge of what the slotting is gonna be for your customers and how is their kind of panel accessibility and availability in the solar side of things?
Sure. I think we've talked about, you know, our clean energy and infrastructure delivering, you know, at or above $5 billion for 2023, which we think, you know, we're highly confident we can achieve. A significant portion of that will be renewables, you know, probably 60%+ of that is our renewables business. I think when we look today at, you know, what's in backlog, what's been verbally awarded, what we're chasing, we feel really good that, you know, we've got, you know, most, if not all of that currently identified, which is an incredible place to be, you know, in October of a previous year. That, you know, leads me to believe that, you know, we could do a lot better.
Quite frankly, we'll have the ability to move projects in or out, depending on, you know, really slotting and when they're ready. A lot of the solar work that we'll be working on, and we've been talking about this for a long time, are newer projects where solar, you know, a lot of some people are at the end of their projects where they're requiring solar panel installations, so they're waiting on solar panels. But for those that are starting new solar plants, you know, they'll start to build without the solar panels 'cause they don't need the solar panels for six, nine months. So it depends where you are in that cycle. We feel good about where our year's lying out.
Obviously, it's early, we got a lot of work to do, and we'll give a lot more updates on our future calls. You know, obviously spending the level of detail as to, you know, understanding how each project lays out, what month it lays out in, where can you put your resources, how do you make sure you don't have gaps in your resource schedule? You know, that's exactly what we're building for 2023. We're hyper-focused on it. We're hyper-focused in making that as efficient as we possibly can and having the highest utilization rates that we can. I think we'll have a lot more clarity over the course of the next couple of months of how that's gonna lay out on a quarter-by-quarter basis for 2023.
Thanks, José.
Thanks, Steve.
Next question is from Brent Thielman at D.A. Davidson.
Hey, great. Thanks. Hey, José, the acquisition and integration expenses and power delivery were up quite a bit from last quarter. Can you just talk about what's embedded in that, what you're sort of doing internally in the integration process of, I guess, Henkels & McCoy and Intren deals? And then I guess the follow-up to that, just sort of how all that, all this sort of internal work you're doing informs your view of segment margin potential in power delivery going forward.
Hey, Brent Thielman, this is George Pita. I'll take that. You know, the power delivery number was up this quarter. We've made the point. That's why I kind of indicated we really finished or substantially completed the integration of Henkels & McCoy. What you're seeing there is the finalization of, you know, a lot of the cost changes that we've made in terms of indirects, overheads, changing insurance programs, a lot of different things that have been, you know, in the process of being evaluated. We've completed that. That number will significantly drop here in the fourth quarter.
You know, we have a view that our power delivery segment margin should certainly improve in 2023, as we continue to start realizing more benefits in the program as we move forward and as we continue to grow. We anticipate improvements here in that segment going forward and you know, that's where we're headed. We're happy to have completed the integration for Henkels & McCoy. We started to incur some costs in the third quarter relative to IEA, but a lot of those were acquisition costs. Right? In terms of investment advisor fees, bridge fees, et cetera, et cetera. We'll have some more of that in the fourth quarter, and we'll evaluate from there.
That's a little bit of a different lift than the Henkels & McCoy acquisition, which had some more structural changes.
Okay, great. Thanks, George.
To your second question on that, Brent Thielman, in terms of margins, I think the integration's gone really well. We've talked previously about the strength of the business and the upside and the growth that we think we can achieve in that business. We're more optimistic today than we were at the time of acquisition about our ability to not only help make them better, but I think we've achieved a lot of that, and I think the growth profile of that business will hopefully outpace what we originally expected going into the deal.
Yep. Exciting times in business. Thank you.
Thank you.
Next question is from Noelle Dilts at Jefferies.
Hi, guys. Thanks for taking my question. I think this is geared more for George. George, just given you know that a fair amount of the capital structure, I think about 45% is floating rate debt, how are you thinking about just the risk of higher rates at the moment? Would you think about interest rate caps or swaps to mitigate potential additional increases? Just curious sort of how you're thinking about that at the moment. Thank you.
Yeah, look, we're constantly evaluating it. The reality is, obviously, we have a more elevated level right now post the IEA acquisition. We did the financing on that in a way to maximize flexibility for us going forward. We have term loans and whatnot, and they are floating rate, but they're also prepayable at times. We're constantly looking at what we think, depending on where the market is or what we think is the right mix of our capital structure, and I guess the answer to that is TBD, right? We don't know yet, depending on what market conditions are, when we might be able to evaluate whether we should be moving and changing the structure.
We certainly have the flexibility to do so, and have put the current capital structure in a way where that's the case. I also point out that, you know, while obviously while floating rate debt is more expensive than it was a year ago, it's still cheaper than fixed rate debt, right, in terms of most cases. So based on that, it's a, you know, it's certainly a fair question and it's one that we're evaluating, you know, constantly and will do so in this environment.
Okay, great. I think you addressed this to some extent with Andy's question. Is there any? You know, can you provide us with any more detail on sort of how IEA performed in third quarter and sort of what you're expecting, overall for the company's results in 2022? I know you reiterated your expectations for EBITDA in 2023, but any additional detail there would be helpful.
Yeah. Noelle, I mean, their third quarter was below their original expectations, whatever. They had some public expectations out there, to be honest. We haven't spent an enormous amount of time on the trailing 2022 'cause it's somewhat indifferent for us other than understanding the deal dynamics. I think we're starting to get our arms around Q4 with them. We've taken, again, a very conservative position relative to their forecast. I think they're definitely helping to do better than what we've laid out here today. You know, it's we own the numbers now, so we're gonna be more cautious. Our view on 2023 is unchanged, if not improving.
You know, we laid out an earnings capability that, you know, we thought was achievable at the time, quite frankly, you know. I'll say it again, we, you know, we did this deal two days before the Inflation Reduction Act got announced. The Inflation Reduction Act got announced, and in my mind, it significantly enhances the prospects of that company for a long, long time, including in 2023. I'm very bullish that we'll be able to do better than what our original anticipation was in 2023. We got a lot of work to do, and I think there's lots of opportunities, you know, between the combined entity to take out costs and to be more efficient and to grow faster. You know, that's stuff that, you know, we can't bake in today.
We have to execute to that, but that's what we'll be working on. I'm incredibly bullish in terms of their long-term capabilities. You know, the second half of 2023, as everybody's talked about in the industry, was challenging for renewables. You see it in our numbers, you see it in other people's numbers. I don't think it was any different for IEA, but it doesn't change the long-term outlook for their business. We expect them to have you know, a good fourth quarter, right? We're conservative with our numbers. We're hoping they beat them, but it's still you know, a good fourth quarter relative to the market.
Got it. Okay, thank you. That makes sense.
Thank you. Next question is from Adam Thalhimer at Thompson Davis & Co.
Hey, good morning, guys.
Hey, good morning, Adam. How you doing?
Great. Good to see the stock up so much this morning. José, on the oil and gas, can you just flesh that out a little bit? You said, you or George said, I think something like sizable growth next year. Then, José, you talked about the projects you were looking at between 2023 and 2025. I'd just be curious if that's kind of traditional oil and gas work or if the opportunities have kind of expanded there.
Yeah. A couple things. First, I'd say 2022 is a lot softer than we originally anticipated, right? We laid out a longer-term outlook of $1.5 billion-$2 billion in the business. We're gonna deliver, you know, closer to $1.2 billion this year. I think that when we think about 2023, when we say outsized growth, you know, we think the $1.5-$2 billion is achievable without the Mountain Valley Pipeline. Obviously, with the Mountain Valley Pipeline, it's dramatically bigger. You know, despite the comments that we made today, we still feel comfortable that Mountain Valley Pipeline is gonna move forward and it's gonna be built, and we think there's a high likelihood it gets built in 2023, but we're probably not gonna count on it. With that said, we're seeing, you know, significant strength across all markets, right?
There's a significant number of gas pipelines that are being planned, you know, in all different stages. Some are very imminent, you know, some are more 2024, 2025 projects. You know, a lot of work is going into them. You know, pipe is being bought, a lot of commitments are being made relative to those projects, so we feel really good they're gonna happen. Obviously, we've been talking about, you know, the carbon sequestration lines. We've been talking about hydrogen. We think those projects are closer to fruition than they've been. I think we'll, you know, hopefully, we'll be talking a lot more about those in the coming quarters.
Again, I think our pipeline business, right, generally defined, not just oil and gas, but pipeline in general, is gonna have a really good run for the next few years, and that's somewhat surprising, you know, vis-a-vis where we were just two short years ago.
Thanks, José.
Thanks, Adam.
We'll take our last question from Sean Eastman at KeyBanc Capital Markets.
Hi, guys. Nice update here, and thanks for taking my questions. José, you alluded to the oil and gas segment being kind of the one, you know, kind of core upside risk driver to the preliminary expectation for next year. I wondered if we could round out that discussion a little bit just in terms of how you're thinking about, you know, kind of the major kinda upside drivers or, you know, risk factors to the downside relative to this preliminary look we have in place here.
Yeah, let me be clear, right? I think that my commentary was more around what most surprised me from an expectations basis, right? I just, you know, we've been so negative on oil and gas for a long time that I actually think it's getting better, and I think that's somewhat surprising. You know, the truth is that, you know, when you look at the balance of our business, what's happening in the energy space is unprecedented. You know, I'm more bullish on power delivery and clean energy than I am on oil and gas long term. I'm more surprised by oil and gas. I wanna be clear on that 'cause I don't, you know, wanna rank them.
The truth is that, you know, what we're seeing in the energy industry today with, you know, it's for the first time in my lifetime, everything's changing and we're in the middle of that, and I think it's gonna, you know, position us incredibly well for many years of growth. Unbelievably bullish there. It's nice to have a full portfolio of businesses that all have, you know, in our minds, tremendous upside, including communication. I think, you know, we've had to manage through ups and downs in different businesses. We've had cycles where some businesses are doing well and others are struggling, and I think we're gonna enter a period here for, you know, the foreseeable future, where all of our businesses are gonna have tremendous upside.
As we think about the way we've laid out 2023, you know, I'm highly confident that, you know, we're gonna achieve that, if not better. You know, I think the risks become macro risks, right?
Mm-hmm.
I think very little can change in the short term because of all the government spending involved in the different industries that we're in. You know, obviously, inflationary pressure is one that dictates margins. I think we've got, you know, probably. Well, I'm less concerned about the revenue variations because I think the market is so strong. You know, we obviously have to keep an eye on what's happening with inflationary pressures. We've got to keep an eye on, you know, what we can do relative to passing those costs on that we see, and how do we ultimately reduce the level of cost that we experience? How do we more efficiently, you know, bring on new team members? How do we train them?
How do we make sure our people are the most efficient, safe, workers in the industry and pass along, you know, that with our customers? That's what we're focused on. I'm actually incredibly bullish about 2023 at this point.
Okay, got it. If I rewind to the fourth quarter reporting season, this past year, when you guys rolled out the first quarter guidance, it was just kind of jarring for some folks in terms of kind of the starting point for the year. You know, I realize it's early here, but I thought, you know, maybe we could get ahead of that a little bit in terms of, you know, just how pronounced sort of that first half, back half could be, as we get those numbers in place, ahead of 4Q 2022 earnings.
Yeah. Sean, obviously, it started. We can give directional color, right? I mean, I think-
Yep.
It's fair to say that the first quarter is typically a very slow quarter. I think you know a seasonality cadence generally speaking you know roughly you know maybe a little bit better than last year but that similar kind of cadence is probably in the cards. I think when you look at the different components we'll see how the timing of clean energy comes together. It's obviously a different cadence for us now in 2023 with the addition of IEA but I think clean energy generally has a slower first quarter right?
I think communication should be better in general terms because we should see some more continuation of maybe not the same rate, but certainly a higher rate of spend than what we saw in the first half of last year on 5G. Those are just some factors to consider. You know, we'll obviously give more color when we go through the guidance components. You know, I think the first quarter typically is a slow start for us, and it's not necessarily. I don't think there's a big significant change in that as we think of 2023, given what we know today.
Thanks.
I would add a couple things to that which I think are really important. When you compare historically our first quarter, especially in 2022, the comps were really difficult because oil and gas was so big. Just take a step back. In the first quarter of 2021, we did $725 million in our oil and gas business. In the first quarter of 2022, this year, we did $211 million. We had a $500 million drop off in the first quarter of the year. When you look at the second quarter, we had almost a $280 million drop off in that same oil and gas business, 2022 to 2021.
The reason I say that is our 2023 comps will be dramatically better than our 2022 comps were looking back to 2021. While in 2022, it was very pronounced, the growth we had to have to offset the oil and gas decline, that will not be the case in 2023. I think that phenomenon that we had to live through at the beginning of 2022, which was so challenging for us, which I think created a lot of the issues that we had in the first half of 2022, should not exist in the first half of 2023, making the comps dramatically better and the year being a lot more consistent relative to, you know, the look back. Obviously, we made the acquisition of IEA.
It's gonna have, you know, a huge benefit to us in the first half of the year without anything working against us. I think that's a big distinction between 2023 and 2022.
José Mas, George Pita, thanks very much. I appreciate it.
Thanks, Sean. Appreciate it.
Thank you. As there are no further questions at this time, I'd like to hand the call back to José Mas.
Yeah. Again, I just wanna thank everybody for your interest. We're, you know, happy to print the quarter that we did. We look forward to updating you again on our year-end call and laying out our guidance for 2023. Be safe and talk soon. Thank you.
Thank you. This will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.