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| 8-K - 8-K - DYCOM INDUSTRIES INC | dycomfy2017q38k-earningsre.htm |
| EX-99.1 - EXHIBIT 99.1 - DYCOM INDUSTRIES INC | dyfy2017q3earningsreleasee.htm |
3rd Quarter Fiscal 2017
Results Conference Call
May 24, 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 Q3-17 Overview
Industry Update
Financial & Operational Highlights
Outlook
Conclusion
Q&A
4
Strong demand and revenue growth
Contract revenues of $786.3 million in Q3-17
compared to $664.6 million in Q3-16
Organic growth of 14.9% excluding contract
revenues of acquired businesses not included for
the entire period of Q3-17 and Q3-16
Strong operating performance
Non-GAAP Adjusted EBITDA of $108.2 million
compared to $91.9 million in Q3-16, or 13.8% of
revenues in each of Q3-17 and Q3-16
Non-GAAP Adjusted Diluted EPS increased to $1.30
in Q3-17 compared to $1.08 per share in Q3-16
Acquired Texstar Enterprises Inc. in March 2017 for
$26.4 million, net of cash acquired
Repurchased 400,000 common shares for
$37.9 million at an average price of $94.77 per share
Financial charts - $ in millions, except earnings per share amounts
Q3-17 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 1 gigabit wireline networks
Emerging wireless technologies require incremental wireline deployments
o A complementary wireline investment cycle is fundamental to applications
enabled by fully converged wireless/wireline networks
Industry developments are producing opportunities which in aggregate are without
precedent. Converged wireless/wireline network deployments only further broaden
our set of opportunities.
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
Have secured and are actively working on a number of converged wireless/wireline
multi-use networks
Customers are revealing with more specificity multi-year initiatives that are being
implemented and managed locally
Our ability to provide integrated planning, engineering and design, procurement and
construction and maintenance services provides value to industry participants with
projects outside their traditional geographic service territories
Dycom’s scale, market position and financial strength position it well as opportunities
continue to expand
Industry Update
6
Revenue Highlights
Q3-17 organic growth of 14.9%, 10 straight
quarters of double digit organic growth
Revenues from Q3-17 Top 5 customers
increased 25.2% organically. All other
customers decreased 10.6% organically.
Top 5 customers in each period
represented 77.5% of revenues in Q3-17
compared to 72.7% in Q3-16
Strong organic growth in Q3-17 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 10 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 10.3%
Comcast 58.7%
CenturyLink 52.4%
*Q4-16 organic % growth adjusted for additional week in Q4-16
*
7
Customers Description Area
Approximate
Term (in years)
Verizon
Engineering Services Massachusetts, Rhode Island, New York, Maryland, Virginia 2
Comcast Construction Services Pennsylvania, Maryland, Virginia, Georgia 1
Charter Construction & Maintenance Services California, Arizona, Florida 1-3
Columbia Gas Underground Facility Locating
& Mapping Services
Ohio 2-3
Various Rural and Municipal Broadband Oregon, Minnesota, New Hampshire, Kentucky, Tennessee,
North Carolina, Alabama, Georgia
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
11,159
12,193 11,980
12,472
12,777
13,204 13,236
14,163
5,000
6,000
7,000
8,000
9,000
10,000
11,000
12,000
13,000
14,000
15,000
Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17
Employees
$1,619 $1,622 $1,999 $2,212 $2,323 $2,208 $2,363 $2,410
$3,680
$3,967
$5,056
$5,649
$6,031
$5,203 $5,112
$5,470
$-
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17
Backlog
12 month backlog
8
As a % of Revenues
13.8% 13.8%
Revenues of $786.3 million and organic growth of 14.9%. Revenues from acquired businesses contributed $23.0 million
in Q3-17. There were no acquired revenues in Q3-16 for comparative purposes.
Non-GAAP Adjusted EBITDA in-line year-over-year at 13.8% in Q3-17 and Q3-16
Gross margin down 74 basis points offset by strong G&A improvement of 71 basis points. G&A as a % of revenue
was 7.8% compared to 8.5%
Non-GAAP Adjusted Diluted EPS of $1.30 in Q3-17 compared to $1.08 in Q3-16, an increase of 20%
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 Q2-17 and Q3-17.
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.
Balance sheet reflects the strength of our business
Liquidity of $340.8 million at the end of Q3-17 consisting of
availability under our Credit Facility and cash on hand
Operating cash flows of $42.3 million during Q3-17
Acquired Texstar Enterprises Inc. for $26.4 million, net of
cash acquired in March 2017
Repurchased 400,000 common shares for $37.9 million at
an average price of $94.77 per share during Q3-17
10
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
(See “Regulation G Disclosure”
slide 20 for a reconciliation of
GAAP to Non-GAAP contract
revenues)
$ 789.2 (GAAP)
$ 727.6 (Non-GAAP
organic revenue)
$ 780 - $ 810 Broad range of demand from several large customers
1 gigabit deployments, fiber deep cable capacity projects, and initial phases of fiber
deployments for newly emerging wireless technologies
Total Q4-17 revenue expected to include approximately $25.0 million from
businesses acquired in Q4-16 and Q3-17
Gross Margin % 23.2% Gross Margin %
decreases modestly
from Q4-16
Outlook reflects expected mix of work activity and near term margin impacts as we
prepare for larger programs
Non-GAAP G&A Expense % 7.8% G&A in-line as a % of
revenue compared to
Q4-16
G&A expense % includes share-based compensation of approximately $5.0 million in
Q4-17
Share-based compensation $ 4.2 $ 5.0
Depreciation & Amortization $ 36.0 $39.1 - $39.9
Depreciation reflects cap-ex supporting growth opportunities and maintenance
Includes amortization of approximately $6.3 million in Q4-17 compared to $5.4
million in Q4-16
Non-GAAP Adjusted Interest
Expense
$ 5.1 Approximately $ 5.2 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 $ 2.3 - $ 2.9 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 % decreases
modestly from Q4-16
Non-GAAP Adjusted EBITDA dollar amount decreases compared to Q4-16 result; Q4-17
will include 13 weeks of operations compared to 14 weeks in Q4-16
Non-GAAP Adjusted Diluted
Earnings per Share
$ 1.64
(14 Weeks in
Q4-16)
$ 1.35 - $ 1.50
(13 Weeks in
Q4-17)
Non-GAAP Adjusted Diluted EPS excludes non-cash amortization of debt discount
on Senior Convertible Notes (“Notes”). See slide 19 for reconciliation of guidance
for Non-GAAP Adjusted Diluted Earnings per Common Share.
Diluted Shares 32.1 million 31.7 million
Q4-2017 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 Q1-2018
Q1-2017
Included for
comparison
Q1-2018 Outlook and Commentary
Contract Revenues $ 799.2 Total revenue decline
of low single digits
compared to
Q1-17 revenues
Broad range of demand from several large customers
1 gigabit deployments, fiber deep cable capacity projects, and initial phases of
fiber deployments for newly emerging wireless technologies increasing
Total Q1-18 revenue expected to include approximately $5 million from a
business acquired in Q3-17. For organic growth calculations, there were no
acquired revenues in Q1-17.
Gross Margin %
23.1% Gross Margin %
decreases modestly
from Q1-17
Margin outlook reflects expected mix of work activity and near term margin
impacts as we initiate larger programs
G&A Expense % 7.5% G&A as a % of revenue
increases from Q1-17
G&A as a % of revenue supports growth opportunities and includes increased
share based compensation related to vesting schedule of awards
Share-based compensation $ 5.7 $ 7.2
Depreciation &
Amortization
$ 34.5 $39.4 - $40.2
Depreciation reflects cap-ex supporting growth opportunities and maintenance
Includes amortization of approximately $6.3 million in Q1-18 compared to
$6.2 million in Q1-17
Non-GAAP Adjusted
Interest Expense
$ 4.8 Approximately $ 5.0 Non-GAAP Adjusted Interest Expense excludes non-cash amortization of debt
discount of $4.5 million in Q1-18 compared to $4.3 million in Q1-17
Other Income, net $ 0.9 $ 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 %
16.2% Non-GAAP Adjusted EBITDA %
decreases modestly
from Q1-17
Non-GAAP Adjusted EBITDA dollar amount decreases compared to Q1-17 result
Diluted Shares 32.2 million 31.9 million
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 FTTH to enable video offerings and 1 gigabit
connections
Cable operators continuing to deploy fiber to small and medium businesses and
enterprises with increasing urgency. Overall, cable capital expenditures, new build
opportunities, and capacity expansion projects through fiber deep deployments are
increasing
Fiber deployments in contemplation of newly emerging wireless technologies have
begun in many regions of the country and more are expected
Customers are consolidating supply chains creating opportunities for market share
growth and increasing the long-term value of our maintenance business. We are
increasingly providing integrated planning, engineering and design, procurement
and construction and maintenance services for our customers.
Encouraged that industry participants are committed to multi-year capital spending
initiatives; these initiatives are increasing in numbers across a number of customers
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. In the fourth quarter of
fiscal 2016 Non-GAAP Organic Contract Revenues were also adjusted for the additional week as a result of the Company’s 52/53 week fiscal calendar. Non-GAAP Organic Contract
Revenue growth is calculated as the percentage change in Non-GAAP Organic Contract Revenues over those of the comparable prior year period. Management believes organic growth 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 convertible senior notes were allocated between debt and equity components. The difference between the
principal amount and the carrying amount of the liability component of the convertible senior notes represents a debt discount. The debt discount is being amortized over the
term of the convertible senior 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 convertible senior 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.
• Loss on debt extinguishment – The Company incurred a pre-tax charge of approximately $16.3 million for early extinguishment of debt in connection with the redemption of its
7.125% senior subordinated notes during the first quarter of fiscal 2016. Management believes excluding the loss on debt extinguishment from the Company’s Non-GAAP
financial measures assists investors’ overall understanding of the Company's current financial performance. The Company believes this type of charge is not indicative of its
core operating results. The exclusion of the loss on debt extinguishment from the Company’s Non-GAAP financial measures provides management with a consistent measure
for assessing the current and historical financial results.
• Tax impact of adjusted results - The tax impact of the adjusted results was calculated utilizing a Non-GAAP effective tax rate which approximates the Company’s effective tax
rate used for financial planning. The tax impact included in the Company’s guidance for the quarter ending July 29, 2017 was calculated using an effective tax rate used for
financial planning and forecasting future results.
Appendix: Regulation G Disclosure
14
Appendix: Regulation G Disclosure
(a) Q4-16 contained 14 weeks as a result of our 52/53 week fiscal year as compared to 13 weeks in all other quarterly periods presented herein. The Q4-16 Non-GAAP
adjustment is calculated as (i) contract revenues less, (ii) revenues from acquired businesses in each applicable period, (iii) divided by 14 weeks.
Use of Non-GAAP Financial Measures
The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). In our quarterly results releases, trend schedules,
conference calls, slide presentations, and webcasts, we may use or discuss Non-GAAP financial measures, as defined by Regulation G of the SEC. See Explanation of Non-GAAP
Measures on slide 13.
Reconciliation of Non-GAAP Financial Measures to Comparable GAAP Financial Measures
Non-GAAP Organic Contract Revenue
Unaudited
($ in millions)
15
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
16
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
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 – Non-GAAP Diluted Earnings per Common Share for the Three Months Ending July 29, 2017
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
July 29, 2017 were computed using approximately 31.7 million in diluted weighted average shares outstanding.
(b) The Company expects to recognize approximately $4.5 million in pre-tax interest expense during the three months ending July 29, 2017 for non-cash
amortization of the debt discount associated with its 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 July 29, 2017
Diluted earnings per common share – GAAP (a) $1.26 - $1.41
Adjustment for addback of after-tax non-cash amortization of debt discount on convertible senior notes (b) $ 0.09
Non-GAAP Adjusted Diluted Earnings per Common Share (a) $1.35 - $1.50
Appendix: Regulation G Disclosure
Note: Amounts above may not add due to rounding.
20
Appendix: Regulation G Disclosure
(a) Q4-16 included an incremental week required by our 52/53 week fiscal calendar. The Q4-16 Non-GAAP adjustment is calculated as (i) contract revenues less,
(ii) revenues from acquired businesses in each applicable period, (iii) divided by 14 weeks.
Use of Non-GAAP Financial Measures
The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). In our quarterly results releases, trend schedules,
conference calls, slide presentations, and webcasts, we may use or discuss Non-GAAP financial measures, as defined by Regulation G of the SEC. See Explanation of Non-GAAP
Measures on slide 13.
Reconciliation of Non-GAAP Financial Measures to Comparable GAAP Financial Measures
Non-GAAP Organic Contract Revenue
Unaudited
($ in millions)
Q4-16 and Q1-17 Non-GAAP Organic Revenues are provided for comparison to Q4-17 and Q1-18 Non-GAAP Organic Revenue Outlook
(see slides 10 and 11)
3rd Quarter Fiscal 2017
Results Conference Call
May 24, 2017