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| 8-K - 8-K Q2-17 EARNINGS RELEASE - DYCOM INDUSTRIES INC | dycomfy2017q28k-earningsre.htm |
| EX-99.1 - EXHIBIT 99.1 - DYCOM INDUSTRIES INC | dyfy2017q2earningsreleasee.htm |
2nd Quarter Fiscal 2017
Results Conference Call
March 1, 2017
Exhibit 99.2
2
Forward Looking Statements and
Non-GAAP Financial Measures
Information
This presentation contains “forward-looking statements”. Other than statements of historical facts, all statements contained in
this presentation, including statements regarding the Company’s future financial position, future revenue, prospects, plans and
objectives of management, are forward-looking statements. Words such as “outlook,” “believe,” “expect,” “anticipate,”
“estimate,” “intend,” “should,” “could,” “project,” and similar expressions, as well as statements in future tense, identify
forward-looking statements. You should not consider forward-looking statements as a guarantee of future performance or
results. Forward-looking statements are based on information available at the time those statements are made and/or
management’s good faith belief at that time with respect to future events. Such statements are subject to risks and
uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the
forward-looking statements. Important factors, assumptions, uncertainties, and risks that could cause such differences are
discussed in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on
August 31, 2016 and other filings with the SEC. The forward-looking statements in this presentation are expressly qualified in
their entirety by this cautionary statement. The Company undertakes no obligation to update these forward-looking statements
to reflect new information, or events or circumstances arising after such date.
This presentation includes certain “Non-GAAP” financial measures as defined by Regulation G of the SEC. As required by the
SEC, we have provided a reconciliation of those measures to the most directly comparable GAAP measures on the Regulation G
slides included as slides 13 through 20 of this presentation. Non-GAAP financial measures should be considered in addition to,
but not as a substitute for, our reported GAAP results.
3
Participants and Agenda
Participants
Steven E. Nielsen
President & Chief Executive Officer
Timothy R. Estes
Chief Operating Officer
H. Andrew DeFerrari
Chief Financial Officer
Richard B. Vilsoet
General Counsel
Agenda
Introduction and Q2-17 Overview
Industry Update
Financial & Operational Highlights
Outlook
Conclusion
Q&A
4
Strong demand and revenue growth
Contract revenues of $701.1 million in Q2-17
compared to $559.5 million in Q2-16
Organic growth of 22.9% excluding contract
revenues of acquired businesses not included for
the entire period of Q2-17 and Q2-16
Strong operating performance
Non-GAAP Adjusted EBITDA of $86.2 million, or
12.3% of revenues in Q2-17, compared to
$66.4 million, or 11.9% in Q2-16
Non-GAAP Adjusted Diluted EPS increased to $0.82
in Q2-17 compared to $0.54 per share in Q2-16
Repurchased 313,000 common shares for
$25.0 million at an average price of $79.87 per share
Currently authorized to repurchase up to $150 million
through August 2018
Financial charts - $ in millions, except earnings per share amounts
Q2-17 Overview and Highlights
See “Regulation G Disclosure” slides 13-20 for a reconciliation of GAAP to Non-GAAP financial measures.
5
Industry increasing network bandwidth dramatically
Major industry participants deploying significant wireline networks
Networks provisioning 1 gigabit speeds; multi-gigabit speeds planned by
several industry participants
Industry developments have produced opportunities which in aggregate
are without precedent
Delivering valuable service to customers
Currently providing services for 1 gigabit full deployments across the
country in dozens of metropolitan areas to a number of customers
Revenues and opportunities driven by this industry standard continue to
grow meaningfully
Customers are revealing with more specificity multi-year initiatives that are
being implemented and managed locally. Calendar 2016 performance
clearly demonstrates a massive investment cycle in wireline networks
Increasingly encouraged that newly emerging wireless technologies
will drive significant wireline growth opportunities in the near to
intermediate term
Dycom’s scale, market position and financial strength position it well
as opportunities continue to expand
Industry Update
6
Revenue Highlights
Q2-17 organic growth of 22.9%, nine
straight quarters of double digit organic
growth
Revenues from Q2-17 Top 5 customers
increased 37.1% organically. All other
customers decreased 7.5% organically.
Top 5 customers in each period
represented 76.2% of revenues in Q2-17
compared to 68.9% in Q2-16
Strong organic growth in Q2-17 with
significant customers:
See “Regulation G Disclosure” slides 13-20 for a reconciliation of GAAP to Non-GAAP financial measures.
Organic growth over the last 9 quarters reflects Dycom’s continued ability to gain share and expand
geographic reach, meaningfully increasing the long-term value of our maintenance business
AT&T 48.7%
Comcast 55.2%
CenturyLink 38.3%
Windstream 37.4%
*Q4-16 organic % growth adjusted for additional week in Q4-16
13.4%
18.2%
21.9%
19.4%
28.7%
20.0%
18.0%
22.9%
0%
5%
10%
15%
20%
25%
30%
Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17
Non-GAAP Organic Growth % Revenue % of Top 5 Customers
*
7
Customers Description Area
Approximate
Term (in years)
AT&T Construction & Maintenance Services Mississippi, Alabama 3
Comcast Construction Services Colorado 2
Construction & Maintenance Services Massachusetts, New Jersey, Pennsylvania, Virginia 1-2
CenturyLink Construction & Maintenance Services North Carolina, South Carolina, Georgia 3
Construction & Engineering Services Washington, Utah, Colorado, Florida 1
Windstream Construction & Maintenance Services New Mexico, West Virginia 1
Backlog and Awards
Notes: Our backlog estimates represent amounts under master service agreements and other contractual agreements for services projected to be performed over the terms of the contracts and are based on contract terms, our
historical experience with customers and, more generally, our experience in similar procurements. Backlog is not a measure defined by United States generally accepted accounting principles; however, it is a common measurement
used in our industry. Our methodology for determining backlog may not be comparable to the methodologies used by others.
Selected Current Awards and Extensions
Financial charts - $ in millions
8
As a % of Revenues
11.9% 12.3%
Revenues of $701.1 million and organic growth of 22.9%. Revenues from acquired businesses contributed $13.4 million
in Q2-17. There were no acquired revenues in Q2-16 for comparative purposes.
Non-GAAP Adjusted EBITDA increased to 12.3% of revenue in Q2-17 compared to 11.9% in Q2-16
Gross margin expanded 42 basis points as we grew our operations in Q2-17. G&A improved to 8.3% of revenue
from 8.4% in Q2-16
Non-GAAP Adjusted Diluted EPS of $0.82 in Q2-17 compared to $0.54 diluted EPS in Q2-16, an increase of 52%
Financial Highlights
See “Regulation G Disclosure” slides 13-20 for a reconciliation of GAAP to Non-GAAP financial measures
Financial charts - $ in millions, except earnings per share amounts
9
Strong balance sheet and liquidity
Liquidity Overview
(a) Availability on Revolver presented net of $57.6 million for outstanding L/C’s under the Senior Credit
Agreement at each of Q1-17 and Q2-17.
Financial tables - $ in millions
Solid operating cash flows
* Amounts may not add due to rounding. Total days sales outstanding (“DSO”) is calculated as the summation of
current accounts receivable, plus costs and estimated earnings in excess of billings, less billings in excess of costs
and estimated earnings, (“CIEB, net”) divided by average revenue per day during the respective quarter.
No revolver borrowings outstanding at the end of Q2-17
Entered into incremental term loan of $35.0 million under our
Senior Credit Facility during Q2-17
Liquidity of $421.9 million at the end of Q2-17 consisting of
availability under our Credit Facility and cash on hand
Strong operating cash flows of $105.8 million during Q2-17
Repurchased 313,000 common shares for $25.0 million at
an average price of $79.87 per share during Q2-17
Total DSO of 89 days as of Q2-17
10
Q3-2016
Included for
comparison
Q3-2017 Outlook and Commentary
Contract Revenues $ 664.6 $715 - $745 Broad range of demand from several large customers
Robust 1 gigabit deployments, fiber deep cable capacity projects
accelerating, CAF II underway and core market share growth
Total Q3-17 revenue expected to include approximately $10.0 million from
businesses acquired in Q4-16. For organic growth calculations, there were
no acquired revenues in Q3-16
Gross Margin % 21.7% Gross Margin % which
increases from Q3-16
Solid mix of customer growth opportunities
Expectation of normal winter weather
G&A Expense % 8.5% G&A as a % of revenue
in line with Q3-16
G&A as a % of revenue supports our increased scale
Outlook for G&A expense % includes share-based compensation Share-based compensation $ 3.9 $ 5.0
Depreciation & Amortization $ 31.6 $36.4 - $37.1
Depreciation reflects cap-ex supporting growth and maintenance
Includes amortization of approximately $6.1 million in Q3-17 compared to
$4.5 million in Q3-16
Non-GAAP Adjusted Interest
Expense
$ 3.8 Approximately $ 4.8 Non-GAAP Adjusted Interest Expense excludes non-cash amortization of
debt discount of $4.4 million in Q3-17 compared to $4.2 million in Q3-16
Other Income, net $ 4.3 $ 2.6 - $ 3.2 Other income, net primarily includes gain (loss) on sales of fixed assets and
discount charges related to non-recourse sales of accounts receivable in
connection with a customer’s supplier payment program
Non-GAAP Adjusted EBITDA % 13.8% Non-GAAP Adjusted
EBITDA % which
increases from Q3-16
Non-GAAP Adjusted EBITDA amount increases from revenue growth and strong
operating performance
Non-GAAP Adjusted Diluted
Earnings per Share $ 1.08 $ 1.11 - $ 1.24
Non-GAAP Adjusted Diluted EPS excludes non-cash amortization of debt
discount on Senior Convertible Notes. See slide 19 for reconciliation of
guidance for Non-GAAP Adjusted Diluted Earnings per Common Share
Diluted Shares 33.1 million 32.0 million
Q3-2017 Outlook
See “Regulation G Disclosure” slides 13-20 for a reconciliation of GAAP to Non-GAAP financial measures.
Financial table- $ in millions, except earnings per share amounts (% as a percent of contract revenues)
11
Looking Ahead to Q4-2017
Q4-2016
Included for comparison
Q4-2017 Outlook and Commentary
# of Weeks in Fiscal
Quarter
14 Weeks 13 Weeks 13 weeks in Q4-17 compared to 14 weeks in Q4-16 as a result of 52/53
week fiscal year
Contract Revenues $ 789.2 (GAAP)
$ 727.6 (Non-GAAP
organic revenue)
(See “Regulation G
Disclosure” slide 20 for a
reconciliation of GAAP to
Non-GAAP contract
revenues)
Organic revenue growth %
of mid- teens as a % of
revenue compared to
Non-GAAP Q4-16 organic
revenues
Broad range of demand from several large customers
Robust 1 gigabit deployments, fiber deep cable capacity projects
accelerating, CAF II underway, fiber deployments for newly emerging
wireless technologies and core market share growth
In addition to organic revenue, total Q4-17 revenue expected to include
approximately $15.0 million from businesses acquired in Q4-16
Gross Margin %
23.2% Gross Margin % which
increases from Q4-16
Solid mix of customer growth opportunities
Non-GAAP
G&A Expense %
7.8% G&A as a % of revenue
which decreases
from Q4-16
G&A as a % of revenue supports our increased scale
Outlook for G&A expense % includes share-based compensation Share-based compensation $ 4.2 $ 5.0
Depreciation &
Amortization
$ 36.0 $37.5 - $38.2
Depreciation reflects cap-ex supporting growth and maintenance
Includes amortization of approximately $6.0 million in Q4-17 compared to
$5.4 million in Q4-16
Non-GAAP Adjusted
Interest Expense
$ 5.1 Approximately $ 4.9 Non-GAAP Adjusted Interest Expense excludes non-cash amortization of
debt discount of $4.5 million in Q4-17 compared to $4.6 million in Q4-16
Other Income, net $ 3.6 $ 0.7 - $ 1.3 Other income, net primarily includes gain (loss) on sales of fixed assets
and discount charges related to non-recourse sales of accounts receivable
in connection with a customer’s supplier payment program
Non-GAAP Adjusted
EBITDA %
16.0% Non-GAAP Adjusted
EBITDA % which
increases from Q4-16
Non-GAAP Adjusted EBITDA amount increases from revenue growth and
strong operating performance
See “Regulation G Disclosure” slides 13-20 for a reconciliation of GAAP to Non-GAAP financial measures.
Financial table- $ in millions (% as a percent of contract revenues)
12
Conclusion
Firm and strengthening end market opportunities
Telephone companies deploying FTTX to enable video offerings and 1 gigabit
connections
Cable operators continuing to deploy fiber to small and medium businesses with
increasing urgency. Overall, cable capital expenditures, new build opportunities, and
capacity expansion projects through fiber deep deployments are increasing
Connect America Fund (“CAF”) II projects in planning, engineering, and construction,
with deployment activity well underway. These projects are deploying fiber deeper
into rural networks. We are executing meaningful assignments from one recipient
for fixed wireless deployments.
Fiber deployments in contemplation of newly emerging wireless technologies are
being considered in many regions of the country
Customers are consolidating supply chains creating opportunities for market share
growth and increasing the long-term value of our maintenance business. We are
increasingly undertaking planning and program management responsibilities for our
customers.
Encouraged that industry participants are committed to multi-year capital
spending initiatives which in most cases are meaningfully accelerating and
expanding in scope
13
Explanation of Non-GAAP Measures
The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). In the Company’s quarterly results releases, trend schedules, conference
calls, slide presentations, and webcasts, it may use or discuss Non-GAAP financial measures, as defined by Regulation G of the Securities and Exchange Commission. The Company believes
that the presentation of certain Non-GAAP financial measures in these materials provides information that is useful to investors because it allows for a more direct comparison of the
Company’s performance for the period reported with the Company’s performance in prior periods. The Company cautions that Non-GAAP financial measures should be considered in
addition to, but not as a substitute for, the Company’s reported GAAP results. Management defines the Non-GAAP financial measures as follows:
• Non-GAAP Organic Contract Revenues - contract revenues from businesses that are included for the entire period in both the current and prior year periods and adjusted for the
additional week in Q4-16 as a result of our 52/53 week fiscal year. Non-GAAP Organic Revenue growth (decline) is calculated as the percentage change in Non-GAAP Organic Contract
Revenues over those of the comparable prior year period. Management believes organic growth (decline) is a helpful measure for comparing the Company’s revenue performance with
prior periods.
• Non-GAAP Adjusted EBITDA - net income before interest, taxes, depreciation and amortization, gain on sale of fixed assets, stock-based compensation expense, loss on debt
extinguishment, and certain non-recurring items. Management believes Non-GAAP Adjusted EBITDA is a helpful measure for comparing the Company’s operating performance with prior
periods as well as with the performance of other companies with different capital structures or tax rates.
• Non-GAAP Adjusted Net Income - GAAP net income before loss on debt extinguishment, non-cash amortization of the debt discount, certain non-recurring items and any tax impact
related to these items. Non-GAAP Adjusted Diluted Earnings per Common Share - Non-GAAP Adjusted Net Income divided by weighted average diluted shares outstanding.
Management excludes or adjusts each of the items identified below from Non-GAAP Adjusted Net Income and Non-GAAP Adjusted Diluted Earnings per Common Share:
• Non-cash amortization of the debt discount - The Company’s 0.75% convertible senior notes due 2021 (the "Notes") were allocated between debt and equity components. The
difference between the principal amount and the carrying amount of the liability component of the Notes represents a debt discount. The debt discount is being amortized
over the term of the Notes but does not result in periodic cash interest payments. The Company has excluded the non-cash amortization of the debt discount from its
Non-GAAP financial measures because it believes it is useful to analyze the component of interest expense for the Notes that will be paid in cash. The exclusion of the non-cash
amortization from the Company’s Non-GAAP financial measures provides management with a consistent measure for assessing financial results.
• Acquisition transaction related costs – The Company incurred costs of approximately $0.7 million in connection with an acquisition during the fourth quarter of fiscal 2016. The
exclusion of the acquisition transaction related costs from the Company’s Non-GAAP financial measures provides management with a consistent measure for assessing
financial results.
• Tax impact of adjusted results - The tax impact of the adjusted results was calculated utilizing a Non-GAAP effective tax rate which approximates the Company’s effective tax
rate used for financial planning. The tax impact included in the Company’s guidance for the quarter ending April 29, 2017 was calculated using an effective tax rate used for
financial planning and forecasting future results.
Appendix: Regulation G Disclosure
14
Appendix: Regulation G Disclosure
(a) Q4-16 contained 14 weeks as a result of our 52/53 week fiscal year as compared to 13 weeks in all other quarterly periods presented herein. The Q4-16 Non-GAAP
adjustment is calculated as (i) contract revenues less, (ii) revenues from acquired businesses in each applicable period, (iii) divided by 14 weeks.
Use of Non-GAAP Financial Measures
The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). In our quarterly results releases, trend schedules,
conference calls, slide presentations, and webcasts, we may use or discuss Non-GAAP financial measures, as defined by Regulation G of the SEC. See Explanation of Non-GAAP
Measures on slide 13.
Reconciliation of Non-GAAP Financial Measures to Comparable GAAP Financial Measures
Non-GAAP Organic Contract Revenue
Unaudited
($ in millions)
15
Notes: Amounts above may not add due to rounding.
Reconciliation of Non-GAAP Financial Measures to Comparable GAAP Financial Measures
Non-GAAP Adjusted EBITDA
Unaudited
($ in 000's)
Use of Non-GAAP Financial Measures
The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). In our quarterly results releases, trend schedules,
conference calls, slide presentations, and webcasts, we may use or discuss Non-GAAP financial measures, as defined by Regulation G of the SEC. See Explanation of
Non-GAAP Measures on slide 13.
Appendix: Regulation G Disclosure
16
Note: Amounts above may not add due to rounding.
Reconciliation of Non-GAAP Financial Measures to Comparable GAAP Financial Measures
Non-GAAP Organic Contract Revenue – certain customers
Unaudited
($ in millions)
Use of Non-GAAP Financial Measures
The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). In our quarterly results releases, trend schedules,
conference calls, slide presentations, and webcasts, we may use or discuss Non-GAAP financial measures, as defined by Regulation G of the SEC. See Explanation of
Non-GAAP Measures on slide 13.
Appendix: Regulation G Disclosure
Total
Contract
Revenue
Top 5
Customers
combined*
All customers
(excluding
Top 5
Customers) AT&T Comcast CenturyLink Windstream
GAAP Contract Revenue
Q2-17 701.1$ 534.4$ 166.7$ 198.2$ 116.8$ 115.4$ 42.2$
Q2-16 559.5$ 381.0$ 178.4$ 125.3$ 75.3$ 83.4$ 30.7$
GAAP Contract Revenue - % Changes 25.3% 40.3% (6.6)% 58.1% 55.2% 38.3% 37.4%
Non-GAAP Adjustments
Q2-17 - Revenue from businesses acquired in Q4-16 (13.4)$ (11.9)$ (1.6)$ (11.9)$ (0.0)$ -$ -$
Q2-16 - Revenue from businesses acquired in Q4-16 -$ -$ -$ -$ -$ -$ -$
Non-GAAP Organic Contract Revenue
Q2-17 687.7$ 522.6$ 165.1$ 186.3$ 116.8$ 115.4$ 42.2$
Q2-16 559.5$ 381.0$ 178.4$ 125.3$ 75.3$ 83.4$ 30.7$
Non-GAAP Organic Contract Revenue - % Changes
Organic Contract Revenue % Change 22.9% 37.1% (7.5)% 48.7% 55.2% 38.3% 37.4%
* Includes AT&T, Comcast, CenturyLink, Verizon, and Windstream in both Q2-17 and Q2-16.
17
Note: Amounts above may not add due to rounding.
Reconciliation of Non-GAAP Financial Measures to Comparable GAAP Financial Measures
Non-GAAP Adjusted Net Income and Non-GAAP Adjusted Diluted Earnings Per Share
Unaudited
($ in 000's, except per share amounts)
Use of Non-GAAP Financial Measures
The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). In our quarterly results releases, trend schedules,
conference calls, slide presentations, and webcasts, we may use or discuss Non-GAAP financial measures, as defined by Regulation G of the SEC. See Explanation of
Non-GAAP Measures on slide 13.
Appendix: Regulation G Disclosure
18
Note: Amounts above may not add due to rounding.
Reconciliation of Non-GAAP Financial Measures to Comparable GAAP Financial Measures
Non-GAAP Adjusted Net Income and Non-GAAP Adjusted Diluted Earnings Per Share
Unaudited
($ in 000's, except per share amounts)
For comparison purposes for slides 10 and 11
Use of Non-GAAP Financial Measures
The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). In our quarterly results releases, trend schedules,
conference calls, slide presentations, and webcasts, we may use or discuss Non-GAAP financial measures, as defined by Regulation G of the SEC. See Explanation of
Non-GAAP Measures on slide 13.
Appendix: Regulation G Disclosure
19
Reconciliation of Non-GAAP Financial Measures to Comparable GAAP Financial Measures
Outlook – Diluted Earnings per Common Share
Unaudited
Use of Non-GAAP Financial Measures
The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). In our quarterly results releases, trend schedules,
conference calls, slide presentations, and webcasts, we may use or discuss Non-GAAP financial measures, as defined by Regulation G of the SEC. See Explanation of
Non-GAAP Measures on slide 13.
(a) Guidance for diluted earnings per common share and Non-GAAP Adjusted Diluted Earnings per Common Share for the three months ending April 29, 2017 were
computed using approximately 32.0 million in diluted weighted average shares outstanding.
(b) The Company expects to recognize approximately $4.4 million in pre-tax interest expense during the three months ending April 29, 2017 for non-cash amortization
of the debt discount associated with its 0.75% Convertible Senior Notes. The Company excludes the effect of this non-cash amortization in its Non-GAAP financial
measures.
Outlook for the
Three Months Ending
April 29, 2017(a)
Diluted earnings per common share $1.02 - $1.15
Adjustment
After-tax non-cash amortization of debt discount (b) $ 0.09
Non-GAAP Adjusted Diluted Earnings per Common Share $1.11 - $1.24
Appendix: Regulation G Disclosure
Note: Amounts above may not add due to rounding.
20
Appendix: Regulation G Disclosure
(a) Q4-16 included an incremental week required by our 52/53 week fiscal calendar. The Q4-16 Non-GAAP adjustment is calculated as (i) contract revenues less,
(ii) revenues from acquired businesses in each applicable period, (iii) divided by 14 weeks.
Use of Non-GAAP Financial Measures
The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). In our quarterly results releases, trend schedules,
conference calls, slide presentations, and webcasts, we may use or discuss Non-GAAP financial measures, as defined by Regulation G of the SEC. See Explanation of Non-GAAP
Measures on slide 13.
Reconciliation of Non-GAAP Financial Measures to Comparable GAAP Financial Measures
Non-GAAP Organic Contract Revenue
Unaudited
($ in millions)
Q3-16 and Q4-16 Non-GAAP Organic Revenues are provided for comparison to Q3-17 and Q4-17 Non-GAAP Organic Revenue Outlook
(see slides 10 and 11)
Revenues from
Q4-16 acquired
businesses
Additional week as
a result of our
52/53 week fiscal
year (a)
Q4-16 789.2$ (5.6)$ (56.0)$ 727.6$
Q3-16 664.6$ -$ -$ 664.6$
Co tract Revenues NON-GAAP ADJUSTMENTS
Non-GAAP Organic
Contract Revenues
2nd Quarter Fiscal 2017
Results Conference Call
March 1, 2017