Dycom Industries Inc Q2 2025 Earnings Call Transcript

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

Question: Alex Rygiel - B. Riley Securities - Analyst : Good morning, Steve and Dan. And Dan, welcome to the call here and look forward to hearing from you over the next few quarters and many years to come.

Question: Alex Rygiel - B. Riley Securities - Analyst : A couple of quick questions here. First, Steve, your commentary on AI seemed very bullish, particularly about intercity networks. However, more recently, Dycom's opportunity has been intercity. So can you talk about how Dycom is positioned in the intercity opportunity? Or I think -- are you like highlighting this sort of as the leading demand driver to intercity works?

Question: Alex Rygiel - B. Riley Securities - Analyst : Very helpful. And then secondly, total backlog increased nearly $500 million sequentially in the quarter. Historically, fiscal 2Q is sort of a weaker quarter for backlog growth and generally declines from the first quarter. So I guess the question here is what was the catalyst to the sequential increase in backlog log in you starting to see upbeat awards built into your backlog? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 21, 2024 / 1:00PM, DY.N - Q2 2025 Dycom Industries Inc Earnings Call

Question: Alex Rygiel - B. Riley Securities - Analyst : And just a quick follow up on that. Do you see any risk to BEAD awards given the pending presidential election?

Question: Alex Rygiel - B. Riley Securities - Analyst : Very helpful. Thank you.

Question: Adam Thalhimer - Thompson Davis & Co. - Analyst : Hey, good morning, guys. Nice quarter. Steve, congrats on your retirement and Dan, congrats on your promotion. So the question I've probably gotten the most this morning is and maybe I'm reading this wrong. There's a lot of moving pieces, but it looks like organic revenue growth decelerates from, call it, 9% in Q2 to maybe half of that in Q3. And the question would be, is that analysis correct? And then if so, are there specific customers that take a step back in Q3 versus Q2?

Question: Adam Thalhimer - Thompson Davis & Co. - Analyst : Okay, all that makes sense. And then wanted to ask about Black & Veatch, $1 billion backlog seems high and I'm curious how diversified it is from a customer standpoint. And the other thing I'm curious about is their model is different than years, right? They don't they practically don't have any self-performed construction. I'm curious how you're going to change that model?

Question: Adam Thalhimer - Thompson Davis & Co. - Analyst : Great. I'll turn it over. Thank you.

Question: Sangita Jain - Keybanc Capital Markets Inc - Analyst : Yes, good morning. Thanks for taking my question. If I can ask a follow up on the Black & Veatch acquisition, Steve, maybe from a strategic point of view you're seeing so much growth on the wireline side. Can you tell us what made you think about making acquisition on the wireless side here?

Question: Sangita Jain - Keybanc Capital Markets Inc - Analyst : Great. And if I can ask a follow up on the acquired revenue in your F 3Q guide seems a little bit higher than what we would have expected. So I was wondering if there's a specific call-out on the acquisition is outperforming because it seems like Black & Veatch is going to be a modest contributor in the next couple of quarters?

Question: Sangita Jain - Keybanc Capital Markets Inc - Analyst : Thank you.

Question: Alex Waters - BofA Global Research - Analyst : Hey, good morning, guys. Thanks so much for taking my questions. Steve, congrats on the retirement and Dan, congratulations to you as well. Maybe just first off here, kind of going back to Alex's first question, Steve, in the past, you've noted kind of that data center opportunity has been modest to revenues heavier. Have your thoughts evolved much more than that to what it could be a contributor for Dycom? And then maybe just secondly, so really strong growth from customer number for this quarter. I know you spoke to it a little bit in the prepared remarks, but can you discuss a little bit more about what's really driving that growth and your expectations for them going forward? Thanks.

Question: Alex Waters - BofA Global Research - Analyst : Thank you, guys.

Question: Steven Fisher - UBS Securities - Analyst : Thanks. Good morning and best wishes, Steve and Dan, maybe just to start off with some follow-ups on Black & Veatch. Just curious what the growth rate embedded in that $250 million to $275 million of revenues is for 2020 for your fiscal '26. So what's the trailing right now? Or what's the calendar '24 expected to be? And how much of that $250 million to $275 million is in backlog. And then I guess I'm just curious on sort of the bigger picture of how you see the shape of the cyclical curve and investment for things like O-RAN and other wireless investments relative to the fiber curve?

Question: Steven Fisher - UBS Securities - Analyst : Okay. That's helpful. And then just maybe to follow up on Adam's question earlier about the growth in the third quarter. I agree that it was slower than we would have expected and you gave some color there. I guess I'm just kind of curious about the bigger picture on organic growth here with so much private investment and all the public funding, it seems like there should be potential for double digit organic growth here. Should we assume that we should be kind of building on this kind of mid to upper-single digit growth from here? Or is there something that's still kind of restraining it when we think about the next kind of handful of quarters.

Question: Steven Fisher - UBS Securities - Analyst : Perfect. Thanks very much.

Question: Rob Palmisano - Raymond James Financial Services Inc - Analyst : Hey, guys, this is Rob on for Frank. Steve, congratulations on your retirement and Dan, congratulations on your new opportunity. I'm curious, do you expect to get a decent amount of business from the Lumen AI fiber build. How much do you guys do more generally with blowing fiber? How profitable is that business versus putting a shovel in the ground. Have you talked with these guys and do you expect to be a part of that process? Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 21, 2024 / 1:00PM, DY.N - Q2 2025 Dycom Industries Inc Earnings Call

Question: Rob Palmisano - Raymond James Financial Services Inc - Analyst : Got it. Thanks, guys.

Question: Brent Thielman - D.A. Davidson & Company - Analyst : Yeah, thanks. Good morning. Steve, I guess curious what actions you need to take at Black & Veatch just to get the margins up to the corporate average? Are there big investments to make their legacy agreements, anything like that?

Question: Brent Thielman - D.A. Davidson & Company - Analyst : Okay. And I guess in context of the revenue contributions you're talking about from fiscal 2026, would you also expect the margins for that business to reach that line sort of guidance you provided, but by that?

Question: Brent Thielman - D.A. Davidson & Company - Analyst : Okay. And then in the context of the third quarter outlook, speed and using the 12.9% EBITDA margin as the base here, I guess, meaning is there anything that's restraining your ability to expand margins faster. Seems to me still in an environment that should be in your favor in that regard. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 21, 2024 / 1:00PM, DY.N - Q2 2025 Dycom Industries Inc Earnings Call

Question: Brent Thielman - D.A. Davidson & Company - Analyst : Got it. Thank you.

Question: Eric Luebchow - Wells Fargo Securities LLC - Analyst : Thanks. Best of luck, Steve in retirement, Dan, great to have you on board. So I wanted to touch on the BEAD opportunity brought this up in your prepared remarks. Steve, a lot of recent states that have recently been approved for the application process. I think you mentioned kind of second half of calendar year '25 is when you think we'll see more contribution from the BEAD program, but I just wanted to get confirmation there on when do you think construction timing can be? And as you look at your current labor force, is there any incremental investments you need to make either direct labor or potential subcontractors to get ready for a bigger wave of rural builds that's coming in the next year or so?

Question: Eric Luebchow - Wells Fargo Securities LLC - Analyst : Yeah, now, understood. And I guess just one follow up on the data center, AI, fiber conversations. It seems like a lot of these may be dark fiber IRUs or in some cases selling empty conduit in the ground. How do you view these over time, are they more one-off project-based type of revenues or REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 21, 2024 / 1:00PM, DY.N - Q2 2025 Dycom Industries Inc Earnings Call something that you think could be more reoccurring over time for these types of routes in terms of maintenance opportunity here on other activity that could come after the initial builds?

Question: Eric Luebchow - Wells Fargo Securities LLC - Analyst : Okay. Makes sense.

Question: Alan Mitrani - Sylvan Lake Asset Management - Analyst : Hi, thank you. Just a couple of quick ones. What were the right wireless revenues this quarter?

Question: Alan Mitrani - Sylvan Lake Asset Management - Analyst : Okay. And were they up in line with the sort of the overall revenue growth this quarter?

Question: Alan Mitrani - Sylvan Lake Asset Management - Analyst : Okay, thank you. And also, Drew, maybe can you update us on the CapEx guide for the year and the cadence of that in the next second half? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 21, 2024 / 1:00PM, DY.N - Q2 2025 Dycom Industries Inc Earnings Call

Question: Alan Mitrani - Sylvan Lake Asset Management - Analyst : Okay, but there's no issue anymore in terms of deliveries.

Question: Alan Mitrani - Sylvan Lake Asset Management - Analyst : And then with regard to the BEAD, Steve maybe I misheard you, but I want to understand 35 states and territories are all finished and 21 other, as you said, adding up to about 56 states and territories. Is that it's 50 states and six other territories that we're talking to?

Question: Alan Mitrani - Sylvan Lake Asset Management - Analyst : Okay. And just to understand understanding it will obviously there's been a lot of talk about the cost of this and whether it could be done sort of by satellite for a cheaper people are worried. But nevertheless, I never discount the ability of the government to spend a lot of money. They don't need at least in some people's views or at least to spend that, you know the way they've always spent that, which is through the traditional providers. If they end up spending, it just seems like there's a lot of preparatory work going. You said you think you see revenues in the third quarter of calendar '25. Is that correct?

Question: Alan Mitrani - Sylvan Lake Asset Management - Analyst : Right. So you guys went out I mean, this next year, let's call it before this comes. Just seems like you have a lot of things going on between the three, four acquisitions you've made on over this last year, counting this latest one in terms of the timing of integrating all of them and getting everything ready with all the permissions and speaking to customers, it just seems like, as you said, we're set up for a step function in the business starting at some point in the next 12 months, which once these programs get started. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 21, 2024 / 1:00PM, DY.N - Q2 2025 Dycom Industries Inc Earnings Call Last, can you from my experience decades typically with fits and starts in between but meaningful step-ups in the business? I know you built this business over the last, let's call it 25 to 30 years. Dan is taking over a business that in essence is already a completed business in the sense that you're operating now in all 50 states. You have scale in wireless and wireline with room to grow, obviously with different customers and different regions, you're not as concentrated as you were. So my thought process and just question for well for you, Steve, but also for Dan, is where do you see the next phase of Dycom going in terms of if Steve built the business and set up the table as this next gigantic billions of dollars comes in potentially starting the next 12, 24, 36 months when, however, long it lasts, how do you see Dycom playing out over the next few years?

Question: Alan Mitrani - Sylvan Lake Asset Management - Analyst : Thank you.