Dycom Industries Inc at New Street Fiber to the Future Conference (Virtual) Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Jonathan Chaplin - New Street Research - Analyst : Let's start with '22. We sort of went in thinking we were going to do $8 million to $9 million, at least that was our estimate at New Street. Came in a couple of million below that. What changed during the course of the year from your perspective?

Question: Jonathan Chaplin - New Street Research - Analyst : Yeah. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 28, 2023 / 8:15PM, DY.N - Dycom Industries Inc at New Street Fiber to the Future Conference (Virtual)

Question: Jonathan Chaplin - New Street Research - Analyst : Yeah, yeah. So, look, I mean, that's entirely valid, right? So a lot of the guys building this fiber are relatively new to this business. It's easy that -- before you started building fiber to sort of sketch out a plan and say you're going to get to X million per year or X hundred thousand per year and accelerate every year. But the reality of it is different. But I think the biggest drawdown in expectations was AT&T. Has already built 15 million of these and ought to know the process. And it looks like their build actually slows from '23 to -- from '22 to '23. So it's -- yeah, I'm wondering how much of that is bringing in the pace of the build to adjust for a higher cost environment versus constraints in the labor pool, the ability to get resources out of guys like you, just to sort of to go at the pace that they had initially hoped versus other things?

Question: Jonathan Chaplin - New Street Research - Analyst : Yeah, yeah. I got to be very careful in these comments to distinguish about impacts the carrier businesses versus impacts to your businesses -- to your business. As you mentioned, carriers might have disappointed on the magnitude of the build in '22, but you grew 20%. A slower build because it costs more. It doesn't necessarily negative impact your business at all. The aggregate trend for Dycom is obviously very compelling. I should also say, Steve, at this conference last year, I said, you know, we're totally up everybody's expectations and they're saying they're going to do $8 million to $9 million. Can the industry -- is there enough capacity in the industry to do $8 million to $9 million in 2022? And you are skeptical. I think your comment back then was, look, the industry will get there, but maybe not in '22. So maybe that was prophetic actually.

Question: Jonathan Chaplin - New Street Research - Analyst : So I guess the big question that everybody is wrestling with: is the endpoint still the same? Are we getting to the same endpoint at a slightly slower pace? What are your thoughts on that?

Question: Jonathan Chaplin - New Street Research - Analyst : Yes. So I think that's an excellent point, which is public market-focused people, we can often lose sight of. These are 40- to 50-year assets. You've got to think about the return profile over a long period of time. And so hiccups in supply chain and access to labor in a given year doesn't really have an impact on what the end point is. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 28, 2023 / 8:15PM, DY.N - Dycom Industries Inc at New Street Fiber to the Future Conference (Virtual)

Question: Jonathan Chaplin - New Street Research - Analyst : Yeah. So we think it's a big deal as well. And we've been very focused on it over the course of this event. And what I'd love to get your perspective on is: is the capacity to go out and sort of do the build -- the BEAD builds in addition to everything else that's going on at the moment? So it looks like the BEAD unserved/underserved markets are going to come out at about $14 million and the regulators are going to want those built at somewhere between four and six years. If we think of that being another 2.5-plus million homes that have to get built a year, does your industry have the capacity to add that 2.5 million to the builds that are already going on?

Question: Jonathan Chaplin - New Street Research - Analyst : Got it. That makes a lot of sense. With growth coming in a little bit slower than expected in '22, did the industry end up with -- your industry end up with excess capacity?

Question: Jonathan Chaplin - New Street Research - Analyst : Yeah.

Question: Jonathan Chaplin - New Street Research - Analyst : Yeah. We heard from one of the panels really early in the day, and this is more of a global comment than a US-specific comment. But the deployment costs are up 10% to 20% is a function of higher labor and higher input costs. Is that consistent with what you're seeing in the US?

Question: Jonathan Chaplin - New Street Research - Analyst : Yeah. That makes sense. So what's been interesting over the course of today is the reasons that each carrier has given for slowing down have been slightly different from carrier to carrier. One of the themes we've heard from a couple of, though, is they can go plenty fast on homes passed thanks to you guys. Having a hard time scaling up in-store resources at the same pace, though. How are those sort of two functions or those two markets different?

Question: Jonathan Chaplin - New Street Research - Analyst : And last year, certainly in the beginning of last year, the industry was still struggling with supply chain constraints. Have those more or less gone away at this point?

Question: Jonathan Chaplin - New Street Research - Analyst : Got it. And the other thing you mentioned a minute ago, Steve, was the -- just challenges around the permitting process. That's been a huge bottleneck for the industry as well. Is that also -- is the -- at the sort of state and local authorities worked through that bottleneck at this point?

Question: Jonathan Chaplin - New Street Research - Analyst : So one of the really interesting perspectives we had this morning was that ability to keep costs under control and hit deployment targets hinged in large part on scale really as a function of the relationships they have with companies like Dycom, the length of the contracts that they would -- that they might have with you. Does that sort of scale advantage in dealing with the Dycoms of the world makes sense? Are you seeing more of your customers try to extend the length of contracts to get certainty around deployment resources? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 28, 2023 / 8:15PM, DY.N - Dycom Industries Inc at New Street Fiber to the Future Conference (Virtual)

Question: Jonathan Chaplin - New Street Research - Analyst : Yeah, that's a really good point. The more longer-term contracts you get from them, the more confidence it gives you to invest in growth.

Question: Jonathan Chaplin - New Street Research - Analyst : Yeah. And apologies if this is an ignorant question, I don't know your business as well as I know the carriers. But when your costs go up because we're in the environment at the moment we are, is there a flexibility in the contracts that you have with the carriers to accommodate that?

Question: Jonathan Chaplin - New Street Research - Analyst : Got it. So going back to BEAD and the $2.5 million additional locations a year that could come on over the course of the next sort of six years or so. Is that going to be another driver of inflation in deployment costs?

Question: Jonathan Chaplin - New Street Research - Analyst : Yeah.

Question: Jonathan Chaplin - New Street Research - Analyst : And the other customer vertical where there's just a ton of activity going on at the moment is cable. All of the cable operators are going through sort of a two-step upgrade process. Is that the same pool of labor? Is the cable industry and the fiber guys sort of competing for the same set of resources?

Question: Jonathan Chaplin - New Street Research - Analyst : Steve, is there a way to get from the 2.5 million additional homes that we think will come from BEAD to sort of what portion of that goes to Dycom?

Question: Jonathan Chaplin - New Street Research - Analyst : Right. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 28, 2023 / 8:15PM, DY.N - Dycom Industries Inc at New Street Fiber to the Future Conference (Virtual)

Question: Jonathan Chaplin - New Street Research - Analyst : Got it. Last question is: assuming you get a fair share of that opportunity, whatever that fair share is, do you think it's reflected in expectations for Dycom at the moment?

Question: Jonathan Chaplin - New Street Research - Analyst : Steve, thanks so much for joining us this afternoon. We really appreciate it, your insights and (multiple speakers) --

Question: Jonathan Chaplin - New Street Research - Analyst : Great. Thanks for being here.