Dycom Industries Inc at TD Cowen Fiber to the Home Symposium (Virtual) Transcript

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

Question: Marc Bianchi - TD Cowen - Analyst : Maybe to kick it off, why don't you just tell us what Dycom does? Give us a little overview of your business and where you're exposed.

Question: Marc Bianchi - TD Cowen - Analyst : Great. And just I forgot to mention earlier, we do have a portal where you can put questions in. If you'd like me to try and work them in, I've got several questions that I'm sure will fill the time with anything pique your interest. Please put it in the portal, and I'll tried to get to it. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 04, 2023 / 7:00PM, DY.N - Dycom Industries Inc at TD Cowen Fiber to the Home Symposium (Virtual) So Steve, within the business, how much fiber work are you doing? So we think about -- this event that we're hosting today is really all around fiber to the home and the growth there. Maybe you could distill it down to how much exposure the business has to that service?

Question: Marc Bianchi - TD Cowen - Analyst : And maybe the role that you play in that deployment, has that changed much over the past 10, 20 years? Has it gone from being larger infrastructure type work to more last mile? Or just help us understand any kind of dynamic around the nature of the work you're doing versus where it might have been several years ago?

Question: Marc Bianchi - TD Cowen - Analyst : Great. Maybe you could talk to us a little bit about the competitive landscape. And I know you're probably sensitive to revealing what your market share is. But help us just understand the competitive dynamic a bit. How many large player, competitors are you up against? Is it mostly smaller regional outfits that you're dealing with? Just unpack that a little bit, if you could. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 04, 2023 / 7:00PM, DY.N - Dycom Industries Inc at TD Cowen Fiber to the Home Symposium (Virtual)

Question: Marc Bianchi - TD Cowen - Analyst : Have the allocations from those customers gravitated towards wanting to have a single provider that can help them in multiple markets? Has that been changing in the last several years as all these companies have merged and gotten larger and have these larger programs?

Question: Marc Bianchi - TD Cowen - Analyst : That investment -- I was going to get to this later but since brought up, I think some people were a bit surprised by the amount of CapEx growth relative to revenue growth that you're talking about. I think the idea is that what you're spending today is for revenue a year or two away. It is the implication that if you're growing CapEx by 20% now, that breadth, that's the revenue growth outlook beyond this year. I'm not asking to pin you down unlike 2020 for revenue. But just like, thematically, is that the way we should be thinking about it?

Question: Marc Bianchi - TD Cowen - Analyst : Okay. What's the right capital intensity for your business maybe through cycle? There's a little bit of pandemic catch-up that's going on or maybe ordering ahead for first safety stock, I guess, is the way to describe it. But absent that, if you normalize that through cycle, what should that looked like?

Question: Marc Bianchi - TD Cowen - Analyst : Yeah. Makes sense. Maybe let's shift over a little bit and talk about market growth. There's some pretty significant support. If I look at like RDOF in rural America and what was in the bipartisan infrastructure law, a lot of support for fiber. Can you maybe talk about where we are in the disbursement of those funds and how you see that playing out over the next couple of years?

Question: Marc Bianchi - TD Cowen - Analyst : And if -- maybe to put it in context or maybe help for people like me that want to put stuff in a spreadsheet for modeling purposes, like if underlying growth because of broadband adoption is some percentage, maybe you could talk about that percentage. And then how much does this increase in that growth rate? And is it -- is the increase occurring in '23, or have we already seen it and it's just continuing? Like when does that actually drive maybe an inflection in the growth rate versus what we've been seeing?

Question: Marc Bianchi - TD Cowen - Analyst : I guess along those lines, there are some non-traditional participants. I'm thinking primarily utilities that are participating in this, they've already got conduit, they've got a wire going into somebody's home. So why not just expand the services that they're offering? Can you talk to that uptake? Where has it come from? Where is it now? And where do you see that growing? And if there's other non-traditional that you would also throw into that category.

Question: Marc Bianchi - TD Cowen - Analyst : Absolutely. When you're talking to your utility prospects, are you at any disadvantage to the couple of public peers that you have that have a lot of electric work with perhaps with those customers?

Question: Marc Bianchi - TD Cowen - Analyst : Yeah, that makes sense. And how big is a rural business for you? Or could you help us get a sense of that relative size in whatever --?

Question: Marc Bianchi - TD Cowen - Analyst : But that's just with the utilities, what about overall rural?

Question: Marc Bianchi - TD Cowen - Analyst : When companies are entering new regions or new areas of business, sometimes there's a level of start-up costs or a level of early fix costs before the revenue comes in. And then there's some unabsorbed costs that ultimately get absorbed, and you have some very nice incremental margins on that. I mean, is that an aspect of your rural deployment? We've seen this with one of your public competitors where -- that they use that as a reason for some margin weakness? Just what's that experience been like for you guys?

Question: Marc Bianchi - TD Cowen - Analyst : Okay. But maybe sticking with costs, I think there's just a lot of general question around supply chain and bottlenecks and cost inflation. And it seems like maybe this is now -- several quarters ago, but I think everybody would appreciate an update on what you're seeing in that regard and as it relates to your business. But also, for people on the line that might be wondering about any deployment bottlenecks for some of the communications providers. Like, is that something to be concerned about? Or how are you seeing the state of the industry?

Question: Marc Bianchi - TD Cowen - Analyst : How about some of the other materials? So like fiber and copper and all that stuff is all -- you're not exposed to that, I'll suspect. But it is something that if it's not available, maybe it delays your ability to do the work.

Question: Marc Bianchi - TD Cowen - Analyst : Maybe just like overall supply chain bottlenecks, labor, all that stuff, where do you feel we are today? Is it -- are things better today than they were 90 days ago? Do you see them getting better 90 days ahead? Just try to give us a sense of the rate of change.

Question: Marc Bianchi - TD Cowen - Analyst : Yeah.

Question: Marc Bianchi - TD Cowen - Analyst : Okay. One of the questions the last few weeks, with everybody in every market and every quarter, the market has been exposed to regional banks. I'm curious -- talk about Dycom's exposure if there is any, but probably more importantly, customer exposure and how that -- anything there might affect growth rates if there were customers that maybe their access to borrowing capacity is lessened or anything like that that might be worth talking about. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 04, 2023 / 7:00PM, DY.N - Dycom Industries Inc at TD Cowen Fiber to the Home Symposium (Virtual)

Question: Marc Bianchi - TD Cowen - Analyst : Okay, great. One of the things back on the growth side that has come up is we've got these -- we've got the rural programs and the build-out of fiber. And that's going to run its course, and maybe that takes a handful of years. I'm curious as to how much runway you think there is. But if you talk to the carriers, they're going to say, well, we're not going to spend this level of CapEx forever. Like at some point in '24, '25, '26, it rolls off to a more of a sustainable level. I'm curious what you think that profile looks like, and how that ultimately flows through to your revenue growth opportunity?

Question: Marc Bianchi - TD Cowen - Analyst : Yeah, I guess that's (inaudible). So I think you cited some research on your last earnings call that there's projection that like you expect 7.5 million up homes in '23, calendar '23. And if so, if that's the number, and we're maybe looking at 50 million plus opportunity, it gives you over 10 years of runway (multiple speakers). Yeah, or almost 10 years. The only other one I had -- and if anybody has got any questions, please put them in the portal here. But you've talked about, or I think you've either talked about or you've had a bit -- had a high EBITDA margin watermark of like 15%. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 04, 2023 / 7:00PM, DY.N - Dycom Industries Inc at TD Cowen Fiber to the Home Symposium (Virtual) And now we're sitting in the high-single digits, low-double digits based on what part of the year you're in. Can you talk about the opportunity to get margins up to that level of 15%? Is it the aspiration or -- and what would be the path to getting there?

Question: Marc Bianchi - TD Cowen - Analyst : Is there an operating leverage you talk to? If I think about the dollar of additional revenue, how much flows through to the EBITDA line?

Question: Marc Bianchi - TD Cowen - Analyst : Great. I actually did have one more, and it's just -- it's around the fixed cost or fixed price nature of some of the work you might do, and you've got these master service agreements. I think with any companies that are involved in engineering and construction work, investors are always concerned about cost overruns. Maybe just talk to how protected you are on that. How concentrated the work is? Because I know there was a one customer contract that was not at an attractive level. And I think that's rolled off, or it's in the process of rolling off. Maybe you could just have refresh us on all that stuff. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 04, 2023 / 7:00PM, DY.N - Dycom Industries Inc at TD Cowen Fiber to the Home Symposium (Virtual)

Question: Marc Bianchi - TD Cowen - Analyst : Okay. Well, that's probably a good place to leave it, Steve. Are there any final words you want to leave us, or send off that you have? Otherwise, we can wrap it up.

Question: Marc Bianchi - TD Cowen - Analyst : Super. Well, thanks so much for participating. It's a great chat.

Question: Marc Bianchi - TD Cowen - Analyst : And look forward to chat again soon.