Dycom Industries, Inc. (DY) on Q4 2022 Results - Earnings Call Transcript

Operator: Good day and thank you for standing by. Welcome to the Dycom Industries Fourth Quarter 2022 Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. . Please be advised that today's conference maybe recorded. I would now like to turn the conference over to your host today, Mr. Steven Nielsen, President and Chief Executive Officer. Please go ahead, sir. Steven Nielsen: Thank you, Operator. Good morning, everyone. I'd like to thank you for attending this conference call to review our fourth quarter fiscal 2022 results. Going to Slide 2, during this call we will be referring to a slide presentation which can be found on our website's Investor Center main page. Relevant slides will be identified by number throughout our presentation. Today we have on the call, Drew DeFerrari, our Chief Financial Officer; and Ryan Urness, our General Counsel. Now, I will turn the call over to Ryan Urness. Ryan Urness: Thank you, Steve. All forward-looking statements made during this call are provided pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all comments reflecting our expectations, assumptions or beliefs about future events or performance that do not relate solely to historical periods. Forward-looking statements are subject to risks and uncertainties which may cause actual results to differ materially from our current projections, including those risks described in our Annual Report on Form 10-K filed March 5, 2021, together with our other filings with the U.S. Securities and Exchange Commission. We assume no obligation to update any forward-looking statements. Steve? Steven Nielsen: Thanks, Ryan. Now moving to Slide 4 and a review of our fourth quarter results. As we review our results, please note that in our comments today, and in the accompanying slides, we reference certain non-GAAP measures. We refer you to the quarterly report section of our website for a reconciliation of these non-GAAP measures to their corresponding GAAP measures. To begin, I want to express my sincere thanks to our employees who have served our customers with real fortitude in difficult times. Now for the quarter, revenue was $761.5 million, an organic increase of 10.1%. As we deployed gigabit wireline networks, wireless/wireline converged networks, and wireless networks, this quarter reflected in increase in demand from two of our top five customers. Gross margins were 13.77% of revenue, reflecting the continued impacts of the complexity of a large customer program. Revenue declined year-over-year with other large customers, fuel costs and the heightened effects of COVID during the second half of the quarter. General and administrative expenses were 8.4% of revenue. And all of these factors produced adjusted EBITDA of $43.3 million or 5.7% of revenue and adjusted earnings per share of $0.02 compared to a loss per share of $0.07 in the year ago quarter. Included in adjusted earnings per share are incremental tax benefits of $0.13. Liquidity was solid at $351.5 million and operating cash flow was robust at $145.5 million, reflecting a sequential DSO decline of five days. During the quarter, we repurchased 600,000 shares for $56.1 million. Now going to Slide 5. Today major industry participants are constructing or upgrading significant wireline networks across broad sections of the country. These wireline networks are generally designed to provision gigabit network speeds to individual consumers and businesses either directly or wirelessly using 5G technologies. Industry participants have stated their belief that a single high capacity fiber network can most cost effectively deliver services to both consumers and businesses enabling multiple revenue streams from a single investment. This view is increasing the appetite for fiber deployments and we believe that the industry average to deploy high capacity fiber networks continues to meaningfully broaden the set of opportunities for our industry. Increasing access to high capacity telecommunications continues to be crucial to society, especially in rural America. The Infrastructure Investment and Jobs Act includes over $40 billion for the construction of rural communications networks in unserved and underserved areas across the country. This represents an unprecedented level of support. In addition, an increasing number of states are commencing programs that will provide funding for telecommunications networks, even prior initiation of funding under the Infrastructure Act. We are providing program management, planning, engineering and design, aerial underground and wireless construction and fulfillment services for gigabit deployments. These services are being provided across the country in numerous geographic areas to multiple customers. These deployments include networks consisting entirely of wired network elements, and converged wireless/wireline multi-use networks. Fiber network deployment opportunities are increasing in rural America as new industry participants respond to emerging societal initiatives. We continue to provide integrated planning, engineering and design, procurement and construction and maintenance services to several industry participants. Macroeconomic effects and supply constraints may influence the near-term execution of some customer plans. Broad increases in demand for fiber optic cable and related equipment may cause delivery volatility in the short to intermediate term. In addition, the market for labor remains tight in many regions around the country. It remains to be seen how long this condition persists. Furthermore, the automotive and equipment supply chain remains challenged, particularly for the large truck chassis required for specialty equipment. Prices for capital equipment are increasing. As we contend with these factors, we remain confident that our scale and financial strength position us well to deliver valuable services to our customers. Moving to Slide 6. During the quarter organic revenue increased 10.1% our top five customers combined produced 66.6% of revenue, increasing 5.4% organically. Demand increased from two of our top five customers. All other customers increased 20.8% organically. AT&T was our largest customer at 26.6% of total revenue, or $202.6 million. AT&T grew 73.6% organically. This was our fourth consecutive quarter of organic growth with AT&T. Revenue from Comcast was $100 million or 13.1% of revenue. Comcast was Dycom's second largest customer. Lumen was our third largest customer at 11.7% of revenue or $88.8 million. Verizon was our fourth largest customer at $76.9 million or 10.1% of revenue. And finally, revenue from Frontier was $38.6 million or 5.1% of revenue. Frontier grew 97.2% organically. This is the first quarter since October 2019, where our top five customers have grown organically and the 12th consecutive quarter where all of our other customers in aggregate excluding the top five customers have grown organically. Of note, fiber construction revenues from electric utilities was $57.4 million in the quarter and increased organically 37.2% year-over-year. We have extended our geographic reach and expanded our program management and network planning services. In fact, over the last several years, we believe, we have meaningfully increased the long-term value of our maintenance and operations business. A trend which we believe will parallel our deployment of gigabit wireline direct and wireline/wireless converged networks, as those deployments dramatically increase the amount of outside plant network that must be extended and maintained. Now going to Slide 7. Backlog at the end of the fourth quarter was $5.822 billion versus $5.896 billion at the end of the October 2021 quarter, essentially flat. Of this backlog, approximately $3.072 billion is completed in the next 12 months. Backlog activity during the fourth quarter reflects solid performance as we booked new work and renewed existing work. We continue to anticipate substantial future opportunities across a broad array of our customers. During the quarter we received from AT&T construction and maintenance agreements in California, Nevada, Texas, Missouri, Wisconsin, Indiana, and Ohio. For Lumen construction and maintenance agreements for Washington, Oregon, California, Arizona and Arkansas. From Comcast, an engineering agreement for Michigan, Pennsylvania, Massachusetts, Delaware, Maryland and Georgia. For Ziply Fiber, a fiber construction agreement in Washington, Oregon and Idaho, and various utility line locating agreements in California and Virginia. Headcount increased during the quarter to 15,024. Now I'll turn the call over to Drew for his financial review and outlook. Drew DeFerrari: Thanks, Steve, and good morning, everyone. Going to Slide 8. Contract revenues were $761.5 million and organic revenue increased 10.1% for the quarter. Q4 of the prior year included an additional week of operations due to the 52, 53 week fiscal year and $5.7 million of revenue from storm restoration services compared to none in Q4 of this year. Adjusted EBITDA in Q4 was $43.3 million or 5.7% of revenue compared to $45.7 million or 6.1% of revenue in Q4 of last year. Gross margin was 13.8% of revenue for Q4 2022 and declined approximately 50 basis points compared to the non-GAAP adjusted gross margin in Q4 2021. COVID-related absences increased significantly in the quarter and peaked at a level approximately 2.3x higher than in Q4 of last year. The rapid increase and higher overall levels compared to the prior year impacted productivity during the second half of the quarter. In the month of February COVID cases for the company have declined back down to historically low levels. Gross margins in the quarter were also impacted by adverse winter weather conditions. G&A expense of 8.4% improved approximately 10 basis points compared to Q4 2021 from improved operating leverage at the higher level of revenue in the quarter. Non-GAAP adjusted net income was $0.02 per share compared to a non-GAAP adjusted net loss of $0.07 per share in the year ago period. Q4 2022 included approximately $4.2 million or $0.13 per share of incremental tax benefits, including credits related to filings for prior periods. The total variance in net income reflects the after-tax decline in adjusted EBITDA, as well as benefits from lower depreciation, amortization, stock-based compensation and income taxes, offset by higher interest expense and lower gains on asset sales. Now going to Slide 9. Our financial position and balance sheet remain strong. We ended the quarter with $500 million of senior notes, $350 million of term loan, and no revolver borrowings. Cash and equivalents were $310.8 million and liquidity was solid at $351.5 million. Our capital allocation prioritizes organic growth, followed by opportunistic share repurchases and M&A within the context of our historical range of net leverage. Going to Slide 10. Operating cash flows were robust at $145.5 million in the quarter, bringing year-to-date operating cash flows to $308.7 million. Capital expenditures were $43.4 million net of disposal proceeds and gross CapEx was $43.6 million. Looking ahead to fiscal 2023, we expect net CapEx to range from $180 million to $190 million. During Q4 we repurchased 600,000 shares of our common stock at an average price of $93.55 per share for 56.1 million. Our Board of Directors has approved a new $150 million authorization for share repurchases through August 2023. This authorization replaces the remaining amount from our prior authorization. The combined DSOs of accounts receivable and net contract assets were at a 180 days an improvement of five days sequentially from Q3 2022 as we made substantial progress on a large customer program. Now going to Slide 11. As we look ahead to the quarter ending April 30, 2022, the company expects contract revenues to increase mid to high-single-digits as a percentage of contract revenues compared to Q1 of last year. And we expect non-GAAP adjusted EBITDA percentage of contract revenues to increase modestly as compared to Q1 of last year. We expect a non-GAAP effective income tax rate of approximately 27% and diluted shares of 30.2 million. Now I'll turn the call back to Steve. Steven Nielsen: Thanks Drew. Moving to Slide 12. This quarter we experienced solid activity and capitalized on our significant strengths. First and foremost, we maintained significant customer presence throughout our markets. We are encouraged by the breadth in our business. Our extensive market presence has allowed us to be at the forefront of evolving industry opportunities. Telephone companies are deploying fiber to the home to enable gigabit high speed connections. Increasingly, rural electric utilities are doing the same. Dramatically increase speeds to consumers are being provisioned and consumer data usage is growing particularly upstream. Wireless construction activity in support of newly available spectrum bands is expected to increase this year. Federal and state support for rural deployments of communications networks is dramatically increasing in scale and duration. Cable operators are deploying fiber to small and medium businesses and enterprises, a portion of these deployments are in anticipation of the customer sales process. Deployments to expand capacity as well as new build opportunities are underway. Customers are consolidating supply chains, creating opportunities for market share growth, and increasing the long-term value of our maintenance and operations business. As our nation and industry continue to contend with the COVID-19 pandemic, we remain encouraged that a growing number of our customers are committed to multi-year capital spending initiatives. We are confident in our strategies the prospects for company, the capabilities of our dedicated employees and the experience of our management team. Now operator we will open the call for questions. Operator: Thank you. . Our first question comes from Alex Rygiel with B. Riley. Your line is open. Alex Rygiel: Thank you. Good morning, Steve. Very nice quarter. Steven Nielsen: Hey, good morning, Alex. Alex Rygiel: Steve, when we look at backlog, total backlog is down 15% year-over-year 12-month backlog is up 10% year-over-year. Your commentaries appears to be very bullish. Many leading indicators out there suggest bullish environments for telco spending on fiber in 2022. Can you help us to reconcile sort of backlog versus fairly bullish commentary? Steven Nielsen: Sure Alex. So as you know about 90% of our business is under long-term contracts and master service agreements. And when we come up with a total backlog estimate for those we look back for a trailing 12-month period. Multiply that run rate times the number of months remaining. And so it's sensitive to duration. It's also sensitive to just kind of being a backward looking estimate. As opposed to next 12 months, right, that's forward-looking in the way that it's calculated. So I think part of it's just an estimate. The other thing that I would say is that on a number of the fiber programs and we've announced a couple of these, over the last couple quarters, the duration of those agreements has been a little bit shorter. And as we talked about in November, that's something that that we don't find troublesome. So there's lots of work out there. There is certainly some cost that are increasing and when costs are increasing we're comfortable with having slightly shorter duration in the backlog. We think that's just a prudent way to manage in the current economic climate. Alex Rygiel: Helpful. And a follow-up, coming off a year that witnessed historical low EBITDA margins of 7.8%. Can you address your expectations for margins over the next few years? Steven Nielsen: Again, Alex, we've talked about this before. We've had this -- the challenging large customer program, but it certainly had an effect in the year and in the quarter. Although as we said last quarter, we expect that to diminish each and every quarter as we go through the balance of this fiscal year. And then, we were also encouraged with the fourth quarter in that our top five customers grew by 5.4% organically, that's the first time since October 19, so nine quarters since we've done that. And historically, as we get broader growth across the top five customers as well as all other that gives us a good opportunity to generate operating leverage. It also gives us a good opportunity to be careful about where we commit resources given the significant number of opportunities in the marketplace to make sure that where we commit, we're committing to where we can best do the job for the customer. And if we're serving the customer, well, that typically works well for us. Operator: Thank you. Our next question comes from Steven Fisher with UBS. Your line is open. Steven Fisher: Thanks very much. So you included the same comments about the macro and supply chain this quarter, as you did last quarter. What was the actual impact that you're seeing there and is that having an incremental impact in the start of Q1 already, relative to what you saw in Q4? Steven Nielsen: Yes, Steve, look I think there are certain elements and sometimes they're odd elements in the network that are short, I think we've spoken -- in short supply, we've spoken about this before, things that are made out of black resin plastic has been an issue. I think the fiber optic cable, I think is generally for the larger customers that have allocation has become less of an issue, although there always can be a mismatch as to the exact size cable that you need for a particular project versus what's available. For smaller customers, those that don't have allocations, I think it has been a little bit more volatile. I would say, just like we've seen in our fleet purchases, it's not ideal, but it's become better than it was. And for example, in our own fleet purchases, we were able to acquire about $44 million worth of equipment in the quarter. I think, six months ago, even though we had it on order, we weren't able to spend that kind of money. So better, but not behind us or not behind the industry, not just us, it's everybody. Steven Fisher: Okay. And I wanted to just ask you about labor inflation as a potential as a factor in the margin calculations, wondering how much that labor inflation you're seeing is a headwind to margins? Are you perhaps kind of passing it through dollar for dollar? And that's being dilutive? Are you able to get a little bit of pricing ahead of that? And I guess, related to this, are you making investments now ahead of what you are anticipating seeing in the strong growth opportunity that may be way from a labor perspective, 5% hiring growth year-over-year in the quarter, are you making investments now that also might be a bit of a near-term drag on the margins that may moderate over the next couple of years? Steven Nielsen: Sure. So -- we -- look -- I think we're no different than everybody else in the industry, and probably more broadly, in the economy, particularly around new hires and semi-skilled positions, it costs more to bring people through the door. We're actively recruiting and training. During the quarter, we had weeks where we brought in 150, 200 new employees. So we're able to do it. We had nice, low double-digit organic growth. So we're able to create capacity, but it's a little more expensive than it was. And so typically, Steve, when we've been through this before, and I think you identified it, you want to be, you're always pushing productivity inside your existing workforce, to offset the impacts of wage inflation. So we got to get better at what we do and how we do it. And then probably as or more importantly, you've got to be very careful about where you commit to customers, to make sure that the arrangement that you agreed to is one that as you look forward into the future, that you'll have the ability to secure the capacity to meet their needs. And I call that in past; you need to be confident about the forward cost curve as you make commitments to customers. And we continue to spend lots of time on that. I think we're in a good position in the industry, working hard, but I think we're in a good position because we see so much of the opportunity across the country, that we have an ability to really get a -- an almost day-to-day view as to what the right price points are to make sure that we're reflecting current costs to provide the service. Operator: Thank you. Our next question comes from Sean Eastman with Keybanc Capital Markets. Your line is open. Sean Eastman: Good morning, Steve and Drew. I'd just like to hone in on the margin guidance for the first quarter. Firstly, could you put a finer point around what modest improvement means and then it'd be really helpful to understand what's in the year-over-year bridge on margins, just sort of what the underlying trend is versus other factors like fuel, or labor inefficiencies, things like that, that'd be great. Steven Nielsen: Well, Sean, with respect to kind of where -- what modestly means, I think from what I've seen this morning, I mean, I think it's in line with where people were thinking. So I don't think we have a definite -- a substantially different view that where folks are. And then Drew in terms of the bridge. Drew DeFerrari: Yes, Sean, year-over-year, just we talk about Q4, for example, to start and give you some indicator. Fuel, we thought it would be of about 50 basis points, it was slightly higher than that in the quarter. And so we're actively watching that as a line item. There's as Steve had mentioned, lessening effect of large customer program would be the other piece, and then Steve, I will turn it back to you. Steven Nielsen: Yes, I mean the other thing, Sean; this is a quarter when it comes to forecasting margin, where the best weather in the quarter is the last month of the quarter. So it's always a challenge to put a fine point on it. And then obviously, you folks are looking at some screens, I don't know where oil is trading this morning, but I know it's higher than it was yesterday. And so we wanted to take a proven view of where energy prices could go now, if it goes to $200 a barrel might be a factor, but right now, we feel comfortable with where we've -- where we struck our perspective on fuel. Sean Eastman: Okay, super helpful. And we've talked about how over the last 12 months margins are -- have been running at that historical average, I think, in the middle 11% ex the complex customer program. I mean is that where we're kind of running coming into fiscal 2023 or are there other -- are there some other puts and takes to consider there? I guess maybe if fuel stays where it is right now, how much of a drag would that be year-over-year? What other factors should we consider, as we think about the bridge back to that historical average? Steven Nielsen: Yes, I think Sean we just looked at the current quarter; I think it was modestly behind kind of an adjusted basis for the large customer program. Drew had mentioned in his comments, and this is a difficult concept to be put a fine point on. But clearly, when you have almost 600 employees in quarantine at the peak that that certainly had some impact on utilization, as well as efficiency. If you have five crews working somewhere and the folks that are in quarantine are the five foreman that certainly has an impact on how organized we could be during the period of time in which they were off. So I think that was also a factor. In terms of fuel, Sean, I mean obviously, we prefer it to go down and settle back. But I do think we're actively, as I mentioned earlier, as we're looking to where to commit capacity, we want to make sure we're committing it in those places where we have a good sustainable arrangement with the client, and where we can do a good job for them, both in the field and then for ourselves in terms of returns. That's a day by day art, not a science, but we've been here before and managed through it before. Sean Eastman: Okay, great. I appreciate the insights. I'll turn it over there. Operator: Thank you. Our next question comes from Adam Thalhimer with Thomas Davis. Your line is open. Adam Thalhimer: Actually, I wanted to ask my first question, something you said in response to Alex's question the shorter duration contracts, what did you mean by that, Steve? Steven Nielsen: And Adam, we talked about this before on prior calls. So there in periods of time where you have more certainty around the forward cost of inputs, right, where we have a good idea where costs are going to be. We're happy to have discussions with customers around lengthening perhaps what would be normal industry terms. In a less certain forward cost environment, if a customer's offering a two-year agreement we're happy with that, if they're offering a three-year agreement, we're happy with that. We're not likely to try to convince them to go longer, which would have been what we might have done in a different cost environment. And the analogy that I draw, Adam is, when you go through a recession, it's often tempting in a recession to try to book some backlog, because you don't have great earnings to talk about, or you don't have any growth to talk about. And we've always been careful in that situation that you don't take some temporary dislocation that you see in that economic cycle and extend it forward through your business. And so in this case, it's kind of a similar situation, we want to make sure that that the backlog that we're booking would contemplates what it will take to be successful, not only when we sign it, but a year or two later when we're doing the work. Adam Thalhimer: Okay. And now it's up in high-level, if you could talk about just a bidding environment in general, and also the pricing? Steven Nielsen: Well, as we've always said, Adam, we only talk about pricing two ways acceptable and attractive. I would say that we're in the attractive bucket. So that when we're committing, we feel good about what we're signing up for. There is a lot of opportunity out there. We talked last quarter, the number of customers that had announced fiber to the home programs, and just when you thought nobody else would announce an increase to their expectations of what they'd like to get done through 2025. We had two or three additional customers who took up their fiber to the home expectations through 2025. So there's a lot of opportunity. It's coming not only from traditional customers, but also infrastructure funds, and others who are interested in creating fiber networks that have not historically been in the industry. Adam Thalhimer: Good color. Thanks. Good luck in Q1. Steven Nielsen: Thanks, Adam. Operator: Thank you. Our next question comes from Brent Thielman with D.A. Davidson. Your line is open. Brent Thielman: Steve, the growth outlook for the first quarter is definitely encouraging. A guest question for me is embedded in that growth expectation? Is that entirely contingent on just a few kind of select big customers here? Are you seeing a scenario where that's broadening and we could see sort of a wider brand -- band of customers start to contribute here in the first quarter? Steven Nielsen: Well, I mean, certainly in the fourth quarter, and throughout last year, Brent, I mean, we had good growth below our top five customers. So even in the fourth quarter it was 20%. And so that's a whole bunch of customers. We had 37% with rural electric utility. So I think we continue to see broad opportunities. I would tell you that we've had lots of growth with our largest customer, they continue to be very aggressive in terms of how much they would like to get done this year, and probably for several years thereafter. So I think that's something where we had good momentum. I think it's been three-and-a-half, four years Brent since we actually had a January quarter larger than the October quarter for our top customer. So that's helpful. And then clearly, there are others where we do expect to see some turn in terms of growth expectations going forward. So, yes, there's a lots going on. And also in the wireless portion of our business, which is predominantly for our largest customer, but really has other drivers rather than fiber. We think this year with the C-band deployment and the 110 option deployment that we see good growth opportunities in wireless, not only for our largest customer, but for a couple others that are smaller, but we are seeing growth with them. Brent Thielman: And Steve, are you anticipating that turn happens within a few of those customers within the top five right now? Steven Nielsen: Well, we certainly had two of the top five that had pretty dramatic growth, not only in this quarter, but prior quarters. We expect them to continue and I think there's some opportunities with others Brent. When you have five and you disclose two, we're not going to get down to talking about specific opportunities with individual customers. I'm sure our competition would like us to, but we're not going to do that. Brent Thielman: Okay fair enough. Steve and then any insights you can offer into the pace of the RDOF debt funds, moving the contracts, and then moving to execution. Any sort of unique challenges to advancing that work or is it all kind of the typical engineering permitting pre-construction stuff? Steven Nielsen: Well, the first step, Brent, that we've been following, of course, is the original Phase 1 RDOF auction resulted in awards of about $9 billion. We keep track of this fairly carefully; there's been about $4 billion, that's been provisionally approved. The final step, which requires letters of credit or other forms of collateral, is in various stages. So it is moving, but it is not fully deployed. And as we've talked about before, because of the structure of RDOF, there was a substantial amount of recipient's capital that was going to be needed to build out the networks. And so we are working for customers, where they are highly confident, they're going to receive the RDOF. They've already started with engineering and some construction, but they have not been fully approved through the process. So that's working through. I would say, they're clearly the same kind of high-level factors that impact deployments in rural America although we've had great growth with this rural electric utility business. I mean, it's this year; it was north of $200 million. And probably five years ago, it was probably south of $20 million. So we've had some good growth there and good growth expected going forward. But nothing special about that type of work relative to other work that we do. Brent Thielman: Okay. Do you think that can pick up momentum as we move later into the year? Steven Nielsen: Yes, I would not limit it to RDOF. I think about RDOF, is just one subset of rural initiatives . There's a number of state programs, we're actually have received some small awards. I think in Virginia or one of the other state programs we expect to see more of those opportunities. As I mentioned, there are a number of smaller players, some investors owned, some private owned, that are stepping into the rural or Tier 3 market. And there's, and I know, I got the question earlier, there's as much activity in the industry in terms of either enhanced needs from existing customers or potential new business, as I've seen probably since the late 90s. I mean, there's a lot of activity going on. And of course, the Infrastructure Act, which is about $50 billion with a required match, isn't even in the marketplace yet. So there's a lot going on. Operator: Thank you. . Our next question comes from Noelle Dilts with Stifel. Your line is open. Noelle Dilts: Hi, good morning, and thanks for taking my question. A lot of what I was wondering about has been answered. But I was wondering if you could talk about the works you're doing for RDOF in rural markets? Are you having to make incremental investments there to support some of those deployments, or given your kind of historical presence in rural areas that's not too much of an issue? Thanks. Steven Nielsen: Yes, Noelle and I was confident you could come up with a question. So we've known each other a long time. So let me talk about it more broadly. So number one, there's nothing special about an RDOF market compared to an electric -- rural electric utility, where we've had a long presence in a good portion of the country for a number of years now. So there's nothing particularly special there. I think one of the things that's encouraging and we always got more work to do, we can always do better, but one of the things that's encouraging is, we're seeing opportunities with either new customers or existing customers, where as we spread out geographically we've been pretty disciplined about doing it in adjacent areas, or in areas where we've had historically a presence for another customer. So in our awards, I talked about one customer where we picked up some new work in seven states. And in those seven states we either had existing business with that customer in adjacent areas. In some cases, no facilities required, or we were wrapping up a program for another customer. And so we were able to redeploy the existing staff and facilities over to this new opportunity. And so I just think we're in a good place from a geographic perspective, given the breadth of the business, not only in rural America, but in this case in urban, suburban America also. Now, it doesn't mean that we're everywhere. But it does mean that we're in enough places that if we're careful about where we commit to go and do work, we can commit in those places, again, that increases the likelihood that we'll be successful. Noelle Dilts: Thanks, that's really helpful. And then just on the wireless side, given AT&T's comments on their call they mentioned really ramping in the back half of the year. Is that consistent with how you're thinking about the pace of wireless work during the year? Steven Nielsen: We're seeing wireless pickup with a number of customers, including AT&T that was down a little bit this quarter. But I think it was less down this quarter than it would have been six months or a year ago. So I think we're -- we've got good opportunities there, again, within our existing footprint, where we already have facilities. But there's a lot to get done in the wireless business, through 2023, 2024 for customers that all meet their objectives. Operator: We have a question from Alan Mitrani with Sylvan Lake Asset Management. Your line is open. Alan Mitrani: Hi, thank you. Steve, you talked about on the last call about a whole bunch of work that came in after the quarter, I think was 700 and plus million in backlog. And like you said the backlog didn't really expand. So just building on Alex's question is that because other things didn't come through? I'm just wondering -- I'm wondering when the list-off comes, how is it relates to that? Steven Nielsen: Well, Alan, number one, it was -- we had talked about $500 million. And I think you can probably figure out who that was with. We continue to have good booking activity. And it depends what you're thinking about, right. So the backlog over the next 12 months north of 3 billion is quite healthy. The total backlog, I mean, there's certainly plenty of opportunity out there. But again, depending on the area and the customer arrangement, it can be different. And we've talked about this before. In our rural electric utility business, oftentimes, projects are awarded in phases. So you might have a 3,000 mile project that they issued to you 300 miles at a time. We've completed a whole bunch of those over the last several years. I guess we could go back and try to negotiate the entire arrangement, or we could just go ahead and receive it 10% at a time. But particularly as I mentioned earlier, we're happy doing it the way the customer would like us to particularly in a period of time where forward costs are probably a little bit more uncertain than they have been in the past. So I'm -- I'm -- if you think about it, total backlog, if you look back two, three quarters ago was down. And yet we had double-digit organic growth this quarter. So it's correlated, but it's closely correlated over short periods of time. Alan Mitrani: Okay, that's helpful. I appreciate that. Also on the cable companies, we finally saw the announcements this quarter that some of the cable guys realize they have competition, and they're going to have to start spending on CapEx. Seeing it in your numbers, I mean, I haven't seen, I had to go back years and years to see how low Comcast was and others and Charter dropping out of the top five. I mean, are you expecting a cable ramp-up in the next year or two, given how fast the telcos are spending? And just maybe on Comcast specifically, was it something weather wise regionally Omicron wise that hit you in the quarter two? Steven Nielsen: I think if you think about and I won't talk about a specific customer, but if you think about the cable industry in general, they got hit with lots of demand in 2020, they all talked about it on their calls in terms of the network investment, they had to split nodes and increase capacity in the business. And I think so from a cost basis, year-over-year right that pandemic effect was certainly less of a factor in 2021. I think it sounds like you're following the news quite well. I mean clearly the cable industry reads what their competitors are saying and what they're seeing in the marketplace. I do think there will be reaction, there was one cable operator who named their competitors by name on their call and talked about making sure they had fiber to the home networks in front of those two competitors. So they're taking it seriously. There are different approaches to it. Some are more technical rather than construction oriented, we do that type of work. But as you make the transition from a more construction heavy program to a technical program, there may be some near to intermediate term impacts. But we're clearly from what I read and what they're saying, I think as always, they're fierce competitors. They competed for business for decades, and I'm sure they'll do what they need to do. Operator: Thank you. And I'm showing no other questions. At this time, I'd like to turn the call back over to Steven Nielsen for closing remarks. Steven Nielsen: Well, we thank everybody for your time and attention and we look forward to speaking to you on our next call at the end of May. Thank you. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone have a great day.
DY Ratings Summary
DY Quant Ranking
Related Analysis

Dycom Industries, Inc. (NYSE:DY) Showcases Strong Financial Performance in Fiscal Third-Quarter Earnings

  • Earnings Per Share (EPS) of $2.68, surpassing estimates and indicating a 14.04% earnings surprise.
  • Revenue reached approximately $1.01 billion, with a notable contribution from the top five customers enhancing margins.
  • The company's price-to-earnings (P/E) ratio stands at 23.9, reflecting investor confidence in its future earnings potential.

Dycom Industries, Inc. (NYSE:DY) is a prominent player in the specialty contracting services sector, providing a range of services to telecommunications providers, including engineering, construction, and maintenance. The company competes with other firms in the Zacks Building Products - Heavy Construction industry. On November 20, 2024, Dycom reported its fiscal third-quarter earnings, showcasing strong financial performance.

The company reported earnings per share (EPS) of $2.68, surpassing the estimated $2.35, marking a 14.04% earnings surprise. Despite this, the EPS was slightly lower than the $2.82 reported in the same quarter last year. Dycom's revenue for the period was approximately $1.01 billion, slightly below the estimated $1.04 billion. However, the company reported revenues of $1.27 billion for the quarter ending October 2024, exceeding the Zacks Consensus Estimate by 4.16%.

Dycom's performance was bolstered by significant contributions from its top five customers, which helped improve its margins year-over-year. This indicates a strong financial position and operational efficiency. The company's price-to-earnings (P/E) ratio is approximately 23.9, reflecting investor confidence in its earnings potential. The price-to-sales ratio stands at about 1.24, suggesting a favorable market value relative to sales.

The enterprise value to sales ratio is around 1.52, indicating the company's total value compared to its sales. With an enterprise value to operating cash flow ratio of approximately 18.9, Dycom's valuation in relation to its cash flow from operations is highlighted. The earnings yield is about 4.18%, providing insight into the return on investment for shareholders.

Dycom's debt-to-equity ratio is approximately 0.98, indicating a balanced approach to financing its assets with debt and equity. The current ratio is around 3.12, suggesting the company's strong ability to cover its short-term liabilities with its short-term assets. This financial stability is further emphasized by Dycom's consistent outperformance of consensus EPS estimates in three of the past four quarters.

Dycom Industries, Inc. Quarterly Earnings Preview

  • Dycom Industries, Inc. is set to release its quarterly earnings report on Wednesday, May 22, 2024, with Wall Street expecting an EPS of $1.39 and estimated revenue of $1.09 billion.
  • The company has a history of exceeding earnings expectations in three out of the last four quarters, with an average beat of 53.9%.
  • Despite challenges such as soft demand from top customers, analysts have revised their EPS estimates upwards, reflecting a mix of optimism and concerns about DY's financial health.

Dycom Industries, Inc. (NYSE:DY) is gearing up for its quarterly earnings report, set to be released on Wednesday, May 22, 2024, before the market opens. As a leading provider of specialty contracting services, DY operates within the construction and telecommunications sectors, offering engineering, construction, maintenance, and installation services for telecommunications providers. The company's upcoming earnings report is highly anticipated, especially considering Wall Street's expectations of an earnings per share (EPS) of $1.39 and estimated revenue of approximately $1.09 billion for the quarter.

In the previous quarter, DY's performance did not meet the Zacks Consensus Estimate, falling short by 13.2% and marking a decline of 4.8% from the previous year. This was despite a 3.8% year-over-year increase in contract revenues, which, however, also did not meet consensus expectations by 2%. Over the past four quarters, Dycom has managed to exceed earnings estimates three times, with an impressive average beat of 53.9%. This track record of exceeding earnings expectations in three out of four quarters highlights the company's potential to deliver strong financial results, despite occasional setbacks.

For the fiscal first quarter of 2024, analysts have revised their EPS estimates for DY upwards to $1.39 from $1.31 over the last 60 days, indicating a potential year-over-year decrease of 19.7%. This adjustment reflects analysts' optimism as well as concerns, considering the forecasted revenue of approximately $1.09 billion represents a 4.2% increase from the previous year. However, there are concerns about soft demand from Dycom's top five customers, which could potentially impact the company's financial results. This situation underscores the challenges DY faces in maintaining its revenue growth amidst fluctuating demand from key clients.

DY's financial health, as indicated by its price-to-earnings (P/E) ratio of approximately 20.35 and a price-to-sales (P/S) ratio of about 1.06, demonstrates the market's valuation of the company in relation to its earnings and sales, respectively. The enterprise value to sales (EV/Sales) ratio of roughly 1.25 and the enterprise value to operating cash flow (EV/OCF) ratio of around 20.10 further illustrate how the market values DY in terms of its sales and operating cash flow. Additionally, the company's earnings yield of approximately 4.91% provides insight into the potential return on investment for shareholders. The debt-to-equity (D/E) ratio of about 0.80 shows DY's reliance on debt financing relative to shareholder equity, while the current ratio of approximately 3.06 indicates the company's capability to cover its short-term liabilities with its short-term assets.

As DY prepares to release its quarterly earnings report, investors and analysts alike will be keenly watching how the company navigates the challenges of soft demand from its top customers and whether it can continue its trend of exceeding earnings expectations. The upcoming earnings call, scheduled for May 22, 2024, will offer further insights into DY's performance and strategic direction as it moves into the new fiscal year.