Dycom Industries (NYSE: DY) provides telecom service providers and utilities one main product: skilled workers. The Palm Beach Gardens, FL-based company fields a contracted workforce of over 14,300 across the country.
Dycom is a leading provider of specialty contracting services throughout the U.S. The company offers a menu of services: program management, network planning, engineering and design, and aerial, underground, and wireless construction along with maintenance for wireline and wireless communications service providers.
The company provides fulfillment services for cable multiple systems operators installing set-top boxes and WiFi routers in customer homes. In addition, Dycom conducts underground facility locating services for various utilities including CSPs along with construction and maintenance services for electric and gas utilities.
For its fiscal year 2021 ending January 30, the company reported $3.2 billion in contract revenues, down 1 percent on a year-to-year basis from $3.3 billion in FY2020. Non-GAAP Adjusted EBITDA for FY2021 was essentially flat on a YoY basis at $311 million, roughly 10 percent of contracted revenues.
Through the calendar year 2020, Dycom felt the adverse effects of the pandemic and severe winter weather that hit the middle of the country. Outdoor work slowed, and the company reduced its headcount by over 950 workers by the end of FY2021.
Over 68 percent of the company’s contract revenues are concentrated among five major communications companies.
AT&T is the largest single customer at 21 percent of Q1FY2022 revenues. Dycom’s AT&T revenues dropped by 22 percent YoY in FY2021 as AT&T slowed its wireless network growth. Now as AT&T revamps its assets and operations and revises its capital expenditure program to focus on fiber-to-the-home and new C-band deployments, Dycom expects to garner a solid share of that new construction activity. As an early indicator, its Q1FY2022 AT&T revenues ticked up by 1 percent YoY to $157 million.
Comcast remains a top customer for Dycom with contract revenues growing 11 percent YoY to $131 million in the quarter. Dycom provides Comcast with both network installation and fulfillment activities.
Verizon was Dycom’s top customer a year ago, but business dropped 48 percent YoY in Q1FY21 to $92 million. The company indicates that it is working through various issues with Verizon regarding the volume of contracted work and related costs. Dycom suggests that Verizon has slowed some of its small cell deployment and wireless network extensions as it determines its C-band priorities.
Both Lumen and Windstream slowed their fiber optic installation activities as well through the end of CY2020 and into CY2021.
With slowdown among major customers, the Top 5 customer proportion of contract revenues declined to 68 percent of the total in Q1FY2022 from 79 percent in Q1FY2021. By contrast, Dycom’s contract revenues for all other customers grew 32 percent organically on a YoY basis.
Backlog at the end of Q1FY2022 was $6.5 billion versus $6.8 billion a year ago. Of this backlog, Dycom expects to complete approximately $2.7 billion in the next 12 months. The company says the backlog activity during the first quarter reflects solid performance in booking new work and renewing existing work.
Dycom anticipates substantial future opportunities across all of its customers. It has fiber construction agreements with various electric utilities across 10 southern states, construction and maintenance agreements with Ziply Fiber in the Pacific Northwest, and a fulfillment agreement with Charter covering 11 states. In addition, Dycom has a facility locating services agreement with Frontier in California, and a construction services agreement with Consolidated Communications in New Hampshire.
The company points out that its fiber construction revenue from electric utilities has increased organically 92 percent YoY as it has extended its geographic reach and expanded its utilities program management and network planning services.
Dycom further suggests that it has meaningfully increased the long-term value of its maintenance and operations business which it believes will parallel the deployment of one-gigabit wireline fiber-to-the-home and wireless/wireline converged networks as those deployments dramatically increase the amount of outside plant network that must be extended and maintained.
Dycom expects its FY2022 capex to be $105-125 million, mainly for construction equipment and vehicles.
Steve Nielsen, Dycom President & CEO comments, “Broad increases in demand for fiber optic cable and related equipment may impact delivery lead times in the short to intermediate-term. In addition, the market for labor is tightening in some regions of the country, particularly for unskilled/semi-skilled new hires. It remains to be seen how geographically broad these conditions will be and how long they will persist. Despite these factors, we remain confident that our scale and financial strength position us well to deliver valuable service to our customers.”
By John Celentano, Inside Towers Business Editor
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