Release Date: May 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue increased by 9.3% year-over-year to $1.142 billion, with organic revenue up by 2.5%.
- Gross margin improved by 95 basis points to 19.3% of revenue.
- Adjusted EBITDA rose to $130.9 million, representing 11.5% of revenue.
- Liquidity was solid at $573.6 million, with a pro forma liquidity of $707 million after a senior credit facility extension.
- Acquisitions expanded geographic footprint, including a recent acquisition extending operations to Alaska.
Negative Points
- General and administrative expenses increased to 8.3% of revenue, partly due to higher stock-based and performance-based compensation.
- Backlog decreased by $553 million to $6.364 billion compared to the previous quarter.
- Supply chain constraints persist, particularly in the availability of mid-duty chassis.
- Capital expenditures continue to rise, albeit at a moderating rate.
- Wireless construction revenue remains less than 4% of total revenue, with no significant growth expected in the near term.
Q & A Highlights
Dycom Industries Inc (DY, Financial) Q1 2025 Earnings Call Highlights
Q: On AI and data center demand, how does this megatrend impact your telecom business?
A: Steven Nielsen, CEO: The creation of more data center capacity requires sufficient grid power, leading to more data centers in areas lacking backbone fiber access. This trend increases demands on the network, which is beneficial for our business.
Q: Your adjusted EBITDA margin showed improvement. What are the long-term targets and tailwinds for this margin improvement?
A: Steven Nielsen, CEO: We see opportunities for better operating leverage with geographic and customer diversification. We are also rolling out technologies to simplify field administration and increase productivity.
Q: Can you unpack the cable capacity expansion projects mentioned in your remarks?
A: Steven Nielsen, CEO: The cable industry is focusing on moving to DOCSIS 4.0 through mid-split or high-split approaches and full duplex. This technology will create growth opportunities as it becomes more available.
Q: Regarding share repurchase activity, is this in line with your normal capital allocation, or do you see the shares as undervalued?
A: Steven Nielsen, CEO: We focus on a balanced approach, ensuring sufficient capacity to support customer and industry growth. We also look at acquisitions versus share repurchase and see value with the normalizing of interest rates.
Q: On the Alaska acquisition, is this related to the big opportunity from Bede funding, or are there other drivers?
A: Steven Nielsen, CEO: We like the team we acquired the business from and see opportunities with the $1 billion Bede funding and USDA money. This acquisition allows us to grow with people we know and respect.
Q: Can you discuss the impact of the Unity and Windstream merger on your business?
A: Steven Nielsen, CEO: We are encouraged by the merger, which aims to increase fiber to the home. This and other strategic activities in the industry are motivated by the desire to deploy more CapEx on fiber to the home, which is beneficial for us.
Q: Are we on the edge of much faster growth, and is the industry ready to handle it?
A: Steven Nielsen, CEO: The labor supply has been improving, and as the industry grows, its ability to add resources increases. We feel confident in our ability to grow with the right customers and opportunities.
Q: What is driving the 25 to 75 basis points of year-over-year margin improvement?
A: Steven Nielsen, CEO: Good organic growth and broad distributed growth across customers and geographies provide operating leverage. We also invest in technologies to improve productivity and ensure we commit resources where we can perform well.
Q: Will there be any margin differential in building fiber in rural areas versus urban areas?
A: Steven Nielsen, CEO: There is nothing inherent in rural or urban builds that affects margins. It depends on the capital required and the complexity of managing the program. We are pleased with our current rural work results.
Q: Can you provide an updated CapEx guide for the year?
A: Andrew DeFerrari, CFO: We still anticipate CapEx to be in the range of $220 to $230 million. The net number for the quarter was in line with our expectations.
Q: What was the $55 million revolving facility added in the quarter for?
A: Andrew DeFerrari, CFO: It was for seasonal working capital needs and to fund the business, including the acquisition with a $13 million purchase price.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
