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Dycom Industries, Inc. Announces Fiscal 2019 Second Quarter Results and Affirms Updated Guidance for Fiscal 2019 and Fiscal 2019 Third Quarter

PALM BEACH GARDENS, Fla., Aug. 29, 2018 /PRNewswire/ -- Dycom Industries, Inc. (NYSE: DY) announced today its results for the second quarter and six months ended July 28, 2018. The Company also affirmed its financial guidance for the 2019 fiscal year ending January 26, 2019 and outlook for the quarter ending October 27, 2018 that was previously provided by the Company on August 13, 2018. The Company reported:

  • Contract revenues of $799.5 million for the quarter ended July 28, 2018, compared to $780.2 million for the quarter ended July 29, 2017. Contract revenues for the quarter ended July 28, 2018 increased 0.8% on an organic basis after excluding $3.8 million of contract revenues from storm restoration services in the current period and $9.1 million of contract revenues from an acquired business that was not owned during the comparable prior period.
  • Non-GAAP Adjusted EBITDA of $97.8 million, or 12.2% of contract revenues, for the quarter ended July 28, 2018, compared to $118.0 million, or 15.1% of contract revenues, for the quarter ended July 29, 2017.
  • On a GAAP basis, net income was $29.9 million, or $0.94 per common share diluted, for the quarter ended July 28, 2018, compared to net income of $43.7 million, or $1.38 per common share diluted, for the quarter ended July 29, 2017. Non-GAAP Adjusted Net Income was $33.3 million, or $1.05 per Non-GAAP Adjusted Diluted Share, for the quarter ended July 28, 2018, compared to Non-GAAP Adjusted Net Income of $46.5 million, or $1.47 per common share diluted, for the quarter ended July 29, 2017.

Non-GAAP Adjusted Net Income for the quarters ended July 28, 2018 and July 29, 2017 excludes $4.8 million and $4.5 million, respectively, of pre-tax interest expense for the non-cash amortization of the debt discount associated with the Company's 0.75% convertible senior notes due September 2021 (the "Notes"). Shares used in computing Non-GAAP Adjusted Diluted Earnings per Common Share for the quarter ended July 28, 2018 exclude the GAAP dilutive effect of approximately 0.1 million weighted shares from the Notes, as the Company has a note hedge in effect to offset the economic dilution of additional shares up to an average quarterly share price of $130.43 per share.

The Company also reported:

  • Contract revenues of $1.531 billion for the six months ended July 28, 2018, compared to $1.567 billion for the six months ended July 29, 2017. Contract revenues for the six months ended July 28, 2018 decreased 4.8% on an organic basis after excluding $18.6 million of contract revenues from storm restoration services in the current period and contract revenues from acquired businesses that were not owned for the entire period in both the current and comparable prior periods. Total contract revenues from acquired businesses were $35.9 million for the six months ended July 28, 2018, compared to $15.3 million for the six months ended July 29, 2017.
  • Non-GAAP Adjusted EBITDA of $171.5 million, or 11.2% of contract revenues, for the six months ended July 28, 2018, compared to $226.2 million, or 14.4% of contract revenues, for the six months ended July 29, 2017.
  • On a GAAP basis, net income was $47.1 million, or $1.46 per common share diluted, for the six months ended July 28, 2018, compared to net income of $82.5 million, or $2.60 per common share diluted, for the six months ended July 29, 2017. Non-GAAP Adjusted Net Income was $54.0 million, or $1.70 per Non-GAAP Adjusted Diluted Share, for the six months ended July 28, 2018, compared to Non-GAAP Adjusted Net Income of $88.1 million, or $2.77 per common share diluted, for the six months ended July 29, 2017.

Non-GAAP Adjusted Net Income for the six months ended July 28, 2018 and July 29, 2017 excludes $9.4 million and $8.9 million, respectively, of pre-tax interest expense for the non-cash amortization of the debt discount associated with the Notes. Shares used in computing Non-GAAP Adjusted Diluted Earnings per Common Share for the six months ended July 28, 2018 exclude the GAAP dilutive effect of approximately 0.4 million weighted shares from the Notes, as the Company has a note hedge in effect to offset the economic dilution of additional shares up to an average quarterly share price of $130.43 per share.

Outlook

For the 2019 fiscal year ending January 26, 2019 and for the quarter ending October 27, 2018, the Company currently expects the following:


Fiscal 2019


Quarter Ending
October 27, 2018

Contract revenues

$3.01 - $3.11 billion


$785 - $835 million

Diluted Earnings per Common Share - GAAP

$2.17 - $2.62


$0.69 - $0.93

Non-GAAP Adjusted Diluted Earnings per Common Share

$2.62 - $3.07


$0.80 - $1.04

Non-GAAP Adjusted EBITDA % of contract revenues

10.7% - 11.1%


11.6% - 12.2%

Use of Non-GAAP Financial Measures

The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). In quarterly results releases, trend schedules, conference calls, slide presentations, and webcasts, the Company may use or discuss Non-GAAP financial measures, as defined by Regulation G of the Securities and Exchange Commission. See Reconciliation of Non-GAAP Financial Measures to Comparable GAAP Financial Measures directly following the press release tables.

Conference Call Information and Other Selected Data

A conference call to review the Company's results will be hosted at 9:00 a.m. (ET), Wednesday, August 29, 2018; call (800) 230-1059 (United States) or (612) 234-9959 (International) ten minutes before the conference call begins and ask for the "Dycom Results" conference call. A live webcast of the conference call and related materials will be available on the Company's Investor Center website at https://ir.dycomind.com. If you are unable to attend the conference call at the scheduled time, a replay of the live webcast and related materials will be available shortly after the call at https://ir.dycomind.com until Friday, September 28, 2018.

About Dycom Industries, Inc.

Dycom is a leading provider of specialty contracting services throughout the United States and in Canada. These services include program management, engineering, construction, maintenance and installation services for telecommunications providers, underground facility locating services for various utilities, including telecommunications providers, and other construction and maintenance services for electric and gas utilities.

Forward Looking Information

This press release contains forward-looking statements as contemplated by the 1995 Private Securities Litigation Reform Act. These statements include statements related to the outlook for fiscal 2019 and the quarter ending October 27, 2018 found under the "Outlook" and "Reconciliation of Non-GAAP Financial Measures to Comparable GAAP Financial Measures" sections of this release. Forward looking statements are based on management's current expectations, estimates and projections. These statements are subject to risks and uncertainties that may cause actual results for completed periods and periods in the future to differ materially from the results projected or implied in any forward-looking statements contained in this press release. The most significant of these risks and uncertainties are described in the Company's Transition Report on Form 10-K, Form 10-Q and Form 8-K reports (including all amendments to those reports) and include business and economic conditions and trends in the telecommunications industry affecting the Company's customers, customer capital budgets and spending priorities, the adequacy of the Company's insurance and other reserves and allowances for doubtful accounts, whether the carrying value of the Company's assets may be impaired, preliminary purchase price allocations of acquired businesses, expected benefits and synergies of acquisitions, the future impact of any acquisitions or dispositions, adjustments and cancellations related to the Company's backlog, weather conditions, the anticipated outcome of other contingent events, including litigation, liquidity and other financial needs, the availability of financing, and the other risks and uncertainties detailed from time to time in the Company's filings with the Securities and Exchange Commission. The Company does not undertake to update forward-looking statements.

---Tables Follow---

 

DYCOM INDUSTRIES, INC. AND SUBSIDIARIES


CONDENSED CONSOLIDATED BALANCE SHEETS


(Dollars in thousands)


Unaudited







  July 28, 2018 


January 27, 2018

ASSETS




Current assets:




Cash and equivalents

$

23,906


$

84,029

Accounts receivable, net (a)

684,862


318,684

Contract assets (a)

169,931


369,472

Inventories

87,785


79,039

Income tax receivable

7,662


13,852

Other current assets

31,116


39,710

Total current assets

1,005,262


904,786





Property and equipment, net

423,680


414,768

Goodwill and other intangible assets, net

498,054


493,212

Other

25,389


28,190

Total non-current assets

947,123


936,170

Total assets

$

1,952,385


$

1,840,956





LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:






Accounts payable

$

125,720


$

92,361

Current portion of debt

31,281


26,469

Contract liabilities

8,152


6,480

Accrued insurance claims

39,010


53,890

Income taxes payable

1,530


755

Other accrued liabilities

104,626


79,657

Total current liabilities

310,319


259,612





Long-term debt

727,318


733,843

Accrued insurance claims

61,100


59,385

Deferred tax liabilities, net non-current

64,489


57,428

Other liabilities

5,954


5,692

Total liabilities

1,169,180


1,115,960





Total stockholders' equity

783,205


724,996

Total liabilities and stockholders' equity

$

1,952,385


$

1,840,956






(a) The Company adopted Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09") effective January 28, 2018, the first day of fiscal 2019. The adoption of ASU 2014-09 resulted in balance sheet classification changes for amounts that have not been invoiced to customers but for which the Company has satisfied the performance obligation and has an unconditional right to receive payment. Prior to adoption, amounts not invoiced to customers were included in the Company's contract asset, historically referred to as Costs and Estimated Earnings in Excess of Billings, regardless of rights to payment. Under ASU 2014-09, these amounts of unbilled receivables are included in accounts receivable, net. As of January 28, 2018, the date of adoption, the Company reclassified $311.7 million of unbilled receivables from contract assets to accounts receivable, net. Upon reclassification, accounts receivable, net and contract assets were $630.4 million and $57.8 million, respectively, as of January 28, 2018.

 

 

DYCOM INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except share amounts)

Unaudited










Quarter


Quarter


Six Months


Six Months


Ended


Ended


Ended


Ended


July 28, 2018


July 29, 2017


July 28, 2018


July 29, 2017

Contract revenues

$

799,470


$

780,188


$

1,530,844


$

1,566,526









Costs of earned revenues, excluding depreciation and
amortization

642,376


606,898


1,241,949


1,228,373

General and administrative expenses (a)

64,555


59,519


126,838


120,836

Depreciation and amortization

44,805


40,244


88,160


77,655

Total

751,736


706,661


1,456,947


1,426,864









Interest expense, net (b)

(10,446)


(9,735)


(20,612)


(19,117)

Other income, net

4,156


6,043


11,868


10,836

Income before income taxes

41,444


69,835


65,153


131,381











Provision for income taxes

11,544


26,127


18,022


48,877









Net income

$

29,900


$

43,708


$

47,131


$

82,504









Earnings per common share:



















Basic earnings per common share

$

0.96


$

1.41


$

1.51


$

2.64









Diluted earnings per common share

$

0.94


$

1.38


$

1.46


$

2.60




















Shares used in computing earnings per common share:





Basic

31,206,340


31,084,019


31,198,349


31,220,719









Diluted (c)

31,954,013


31,664,148


32,180,960


31,787,185









(a) Includes stock-based compensation expense of $6.0 million and $4.9 million for the quarters ended July 28, 2018 and July 29, 2017, respectively, and $10.9 million and $9.8 million for the six months ended July 28, 2018 and July 29, 2017, respectively.

(b) Includes pre-tax interest expense for non-cash amortization of the debt discount associated with the Notes of approximately $4.8 million and $4.5 million for the quarters ended July 28, 2018 and July 29, 2017, respectively, and $9.4 million and $8.9 million for the six months ended July 28, 2018 and July 29, 2017, respectively.

(c) During the quarter and six months ended July 28, 2018, the Company's average stock price exceeded the conversion price of its Notes of $96.89. As a result, diluted shares used in computing diluted earnings per common share for the quarter and six months ended July 28, 2018 include approximately 0.1 million and 0.4 million weighted shares, respectively, of potential dilution from the embedded conversion feature in the Notes.

 

 

DYCOM INDUSTRIES, INC. AND SUBSIDIARIES


RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

TO COMPARABLE GAAP FINANCIAL MEASURES


(Dollars in thousands)


Unaudited




CONTRACT REVENUES, NON-GAAP ORGANIC CONTRACT REVENUES, AND GROWTH (DECLINE) %'s



















Contract
Revenues -
GAAP


Revenues
from
acquired
businesses (a)


Revenues
from storm
restoration
services


Non-GAAP

- Organic
Contract
Revenues


GAAP

- Growth
(Decline) %


 

Non-GAAP 
- Organic
Growth
(Decline) %

Quarter Ended July 28, 2018

$

799,470


$

(9,074)


$

(3,760)


$

786,636


2.5%


 

0.8%














Quarter Ended July 29, 2017

$

780,188


$


$


$

780,188



















Six Months Ended July 28, 2018

$

1,530,844


$

(35,863)


$

(18,609)


$

1,476,372


(2.3)%



(4.8)%
















Six Months Ended July 29, 2017

$

1,566,526


$

(15,306)


$


$

1,551,220



















(a) Amounts for the quarters and six months ended July 28, 2018 and July 29, 2017 represent contract revenues from acquired businesses that were not owned for the full period in both the current and comparable prior periods.

 

 

NON-GAAP ADJUSTED EBITDA

















Quarter


Quarter


Six Months


Six Months


Ended


Ended


Ended


Ended


July 28, 2018


July 29, 2017


July 28, 2018


July 29, 2017

Reconciliation of net income to Non-GAAP Adjusted EBITDA:








Net income

$

29,900


$

43,708


$

47,131


$

82,504

Interest expense, net

10,446


9,735


20,612


19,117

Provision for income taxes

11,544


26,127


18,022


48,877

Depreciation and amortization expense

44,805


40,244


88,160


77,655

Earnings Before Interest, Taxes, Depreciation & Amortization
("EBITDA")

96,695


119,814


173,925


228,153

Gain on sale of fixed assets

(4,909)


(6,645)


(13,324)


(11,694)

Stock-based compensation expense

6,048


4,874


10,911


9,789

Non-GAAP Adjusted EBITDA

$

97,834


$

118,043


$

171,512


$

226,248













Contract revenues

$

799,470


$

780,188


$

1,530,844


$

1,566,526

Non-GAAP Adjusted EBITDA % of contract revenues

12.2%


15.1%


11.2%


14.4%

 

 

DYCOM INDUSTRIES, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
TO COMPARABLE GAAP FINANCIAL MEASURES (CONTINUED)

(Dollars in thousands, except share amounts)

Unaudited









NET INCOME, NON-GAAP ADJUSTED NET INCOME, DILUTED EARNINGS PER COMMON SHARE, NON-GAAP ADJUSTED DILUTED EARNINGS PER COMMON SHARE, AND NON-GAAP ADJUSTED DILUTED SHARES










Quarter


Quarter


Six Months


Six Months


Ended


Ended


Ended


Ended


July 28, 2018


July 29, 2017


July 28, 2018


July 29, 2017

Reconciliation of Non-GAAP Adjusted Net Income:








Net income

$

29,900


$

43,708


$

47,131


$

82,504









Adjustments:








Pre-tax non-cash amortization of debt discount on Notes

4,750


4,499


9,422


8,924

Tax impact of non-cash amortization of debt discount on Notes

(1,314)


(1,675)


(2,589)


(3,319)

Total adjustments, net of tax

3,436


2,824


6,833


5,605









Non-GAAP Adjusted Net Income

$

33,336


$

46,532


$

53,964


$

88,109









Reconciliation of Non-GAAP Adjusted Diluted Earnings
per Common Share:








Diluted earnings per common share - GAAP

$

0.94


$

1.38


$

1.46


$

2.60

Total adjustments, net of tax and dilutive share effect of
Notes (a)

0.11


0.09


0.23


0.18

Non-GAAP Adjusted Diluted Earnings per Common Share

$

1.05


$

1.47


$

1.70


$

2.77









Shares used in computing Non-GAAP Adjusted Diluted Earnings
per Common Share:












Diluted shares - GAAP

31,954,013


31,664,148


32,180,960


31,787,185

Adjustment for economic benefit of note hedge related to

Notes (a)

(120,196)



(367,597)


Non-GAAP Adjusted Diluted Shares (a)

31,833,817


31,664,148


31,813,363


31,787,185









(a) The Company has a note hedge in effect to offset the economic dilution of additional shares from the Notes up to an average quarterly share price of $130.43 per share. Non-GAAP Adjusted Diluted Shares excludes the GAAP dilutive share effect of the Notes.


Amounts in table above may not add due to rounding.

 

 

DYCOM INDUSTRIES, INC. AND SUBSIDIARIES




RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

TO COMPARABLE GAAP FINANCIAL MEASURES (CONTINUED)




Unaudited








OUTLOOK - DILUTED EARNINGS PER COMMON SHARE AND NON-GAAP ADJUSTED DILUTED EARNINGS PER COMMON SHARE










Quarter Ending



   Fiscal 2019 (a)   


October 27, 2018 (a)








Diluted earnings per common share - GAAP

$2.17 - $2.62


$0.69 - $0.93









Adjustment







Addback of after-tax non-cash amortization of debt discount and dilutive share
effect of Notes (b)(c)

0.45


0.11









Non-GAAP Adjusted Diluted Earnings per Common Share

  $2.62 - $3.07


  $0.80 - $1.04








Diluted shares (in millions) (c)

32.0


31.8


Adjustment for economic benefit of note hedge related to Notes (in millions) (c)

(0.2)



Non-GAAP Adjusted Diluted Shares (in millions) (c)

31.8


31.8








(a) The tax effects of future vestings and exercises of share-based awards are excluded from both Diluted earnings per common share - GAAP and Non-GAAP Adjusted Diluted Earnings per Common Share.

(b) The Company expects to recognize approximately $19.1 million and $4.8 million in pre-tax interest expense during fiscal 2019 and the quarter ending October 27, 2018, respectively, for the non-cash amortization of the debt discount associated with the Notes. The addback for fiscal 2019 also includes approximately $0.01 per share for the Non-GAAP impact of the dilutive share effect of the Notes.

(c) Actual GAAP diluted shares will include any dilutive effect of the Notes based on the average share price during the respective period. The Company has a note hedge in effect to offset the economic dilution of additional shares from the Notes up to an average quarterly price of $130.43 per share. Accordingly, for Non-GAAP Adjusted Diluted Earnings per Common Share calculations, the Company expects to present results per share that exclude the dilutive effect of the Notes, if any, based on the expected effect of the note hedge.


Amounts in table above may not add due to rounding.

 

DYCOM INDUSTRIES, INC. AND SUBSIDIARIES


RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

TO COMPARABLE GAAP FINANCIAL MEASURES (CONTINUED)


(Dollars in millions)


Unaudited




RECONCILIATION OF NET INCOME TO NON-GAAP ADJUSTED EBITDA BASED ON THE MIDPOINT OF EARNINGS PER COMMON SHARE ("EPS") GUIDANCE







Quarter Ending



    Fiscal 2019   


October 27, 2018








(at midpoint of EPS guidance)


Net income

$

77


$

26


Interest expense, net

43


11


Provision for income taxes

29


10


Depreciation and amortization

179


45


Earnings Before Interest, Taxes, Depreciation & Amortization ("EBITDA")

327


92


Gain on sale of fixed assets

(17)


(3)


Stock-based compensation expense

24


7


Non-GAAP Adjusted EBITDA

$

334


$

96









Contract revenues (at midpoint of guidance)

$

3,060


$

810


Non-GAAP Adjusted EBITDA % of contract revenues (at midpoint of guidance)

10.9%


11.9%







Amounts in table above may not add due to rounding.





 

 

DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
TO COMPARABLE GAAP FINANCIAL MEASURES (CONTINUED)

Explanation of Non-GAAP Financial 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 used in this release as follows:

  • Non-GAAP Organic Contract Revenues - contract revenues from businesses that are included for the entire period in both the current and comparable prior periods, excluding contract revenues from storm restoration services. Non-GAAP Organic Contract Revenue growth (decline) is calculated as the percentage change in Non-GAAP Organic Contract Revenues over those of the comparable prior year periods. Management believes organic growth (decline) 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, 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 the non-cash amortization of the debt discount and the related tax impact and certain non-recurring items.
  • Non-GAAP Adjusted Diluted Earnings per Common Share and Non-GAAP Adjusted Diluted Shares - Non-GAAP Adjusted Net Income divided by Non-GAAP Adjusted Diluted Shares outstanding. The Company has a note hedge in effect to offset the economic dilution of additional shares from the Notes up to an average quarterly share price of $130.43. The measure of Non-GAAP Adjusted Diluted shares used in computing Non-GAAP Adjusted Diluted Earnings per Common Share excludes dilution from the Notes. Management believes that the calculation of Non-GAAP Adjusted Diluted shares to reflect the note hedge will be useful to investors because it provides insight into the offsetting economic effect of the hedge against potential conversion of the Notes.

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 Notes were allocated between debt and equity components. The difference between the principal amount and the carrying amount of the liability component of the Notes represents a debt discount. The debt discount is being amortized over the term of the 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 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.
  • Tax impact of adjusted results - The tax impact of adjusted results reflects the Company's effective tax rate used for financial planning for the applicable period.

 

SOURCE Dycom Industries, Inc.

For further information: Steven E. Nielsen, President and CEO, H. Andrew DeFerrari, Senior Vice President and CFO, (561) 627-7171

News Releases