DYCOM INDUSTRIES INC Q3 FY2025 earnings call

• Steven Nielsen announced his retirement after 30 years with the company, 25 as CEO. - Dan Peyovich discussed industry opportunities including gigabit wireline networks, wireless, wireline converged networks, and wireless networks. He also mentioned the integration of the recent wireless acquisition is going well and the company's expectations regarding BEAD program revenue in the second half of 2025 ramping into 2026. - Drew DeFerrari covered financial performance, noting contract revenues increased 12% year-over-year, adjusted EBITDA was $170.7 million or 13.4% of contract revenues, and gross margin improved 45 basis points to 20.8% of revenue.

Revenue increased year-over-year to $1.272 billion, an increase of 12%. Organic revenue increased 7.6%. Top five customers combined produced 55.7% of revenue and grew organically 16.7%. AT&T was the largest customer at $265.6 million or 20.9% of revenue. Backlog at the end of the third quarter was $7.856 billion versus $6.834 billion at July 2024, an increase of over $1 billion. Of this backlog, approximately $4.467 billion is expected to be completed in the next 12 months.

• Expect total contract revenues to increase mid to high-single digits in Q4 2025 compared to $952.5 million in Q4 2024. - Organic revenues expected to increase low to mid-single digits. - Non-GAAP adjusted EBITDA percentage of contract revenues expected to increase approximately 25 basis points. - Seasonal factors like fewer workdays, reduced daylight, and winter weather expected to impact earnings. - Included in Q4 revenue expectations is approximately $35 million from acquired businesses not owned for the entirety of both current and prior year quarters.

• Forward-looking statements subject to risks and uncertainties that may cause actual results to differ from projections. - Potential impact of storms on work schedules and revenues. - Political/regulatory uncertainties related to funding programs like BEAD and their impact on rural broadband deployment.

Q: Can you flesh out the startup incremental costs in Q4 related to large programs?

A: Drew DeFerrari said there are costs expected as they ramp up into next year and also costs related to the recent acquisition ramp.

Q: What's the update on BEAD funding under a new Trump administration?

A: Dan Peyovich said bipartisan support for broadband to rural homes is likely to continue, but timing and details are still early.

Q: How is the integration of Black & Veatch going and what were wireless revenues?

A: Daniel Peyovich said integration is going well with equipment replacements ramping up quicker than expected. Andrew DeFerrari said wireless revenues were right around just over 4.5% of revenue.

Q: What's the impact of storms on the fourth quarter guide?

A: Drew DeFerrari said storm work tapered off, and there's no specific storm work reflected in the guide, with minimal disruption to regular business.

Q: Can you talk about the growth of Gigapower and margin profile of data center work?

A: Daniel Peyovich said Gigapower moved into the top 10 customers this quarter, and they look at opportunities, risk, and size when pricing, excited about the data center opportunity.

Q: Will labor force need to be ramped up for upcoming opportunities?

A: Daniel Peyovich said they are strategic and disciplined in talent, making investments in training and facilities, and feel confident their teams can stay ahead.

Q: How has the slowdown in organic growth into Q4 been driven?

A: Drew DeFerrari said it's due to some customers having a stronger front half of the year, and seasonal constraints like available days, hours, and weather.

Q: What about SG&A expense growth vs revenue?

A: Drew DeFerrari said incremental costs like stock comp and integration were factored in, and they expect operating leverage to continue.

Q: Thoughts on BEAD funding cancellation fears?

A: Daniel Peyovich said states are far along in the process, and Louisiana's results show positive signs for fiber deployment.

Q: Details on AT&T awards in the quarter and Verizon's sequential decline?

A: Daniel Peyovich said AT&T awards were wireline with new markets, and Verizon's sequential decline not related to storm work, excited about the relationship.

Q: Integration costs in Q4 guidance?

A: Andrew DeFerrari said modest costs are expected but not notable enough to call out ahead of time.