UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 30, 2021
(Exact name of Registrant as specified in its charter)
| (State or other jurisdiction of incorporation) | (Commission file number) | (I.R.S. employer identification no.) | ||||||||||||||||||
| (Address of principal executive offices) (Zip Code) | ||||||||||||||||||||
Registrant’s telephone number, including area code: (561 ) 627-7171
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Item 7.01 Regulation FD Disclosure.
On November 30, 2021 Dycom Industries, Inc. (the “Company”) posted presentation materials under Events & Presentations on the Investor Center section of the Company’s website at https://ir.dycomind.com. Members of the Company’s management may use all or portions of these materials from time to time in meetings with or when making presentations to the investment community, current or potential stakeholders, and others. The presentation materials are furnished herewith as Exhibits 99.1 and 99.2 and will be available at https://ir.dycomind.com for approximately 30 days.
The information in the preceding paragraph, as well as Exhibits 99.1 and 99.2, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), or otherwise subject to the liabilities of that section. It may only be incorporated by reference into another filing under the Exchange Act or the Securities Act of 1933 if such subsequent filing specifically references this Current Report on Form 8-K.
Item 9.01 Financial Statements and Exhibits.
| (d) | Exhibits | ||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Dated: November 30, 2021
| DYCOM INDUSTRIES, INC. (Registrant) | |||||
| By: | /s/ Ryan F. Urness | ||||
| Name: | Ryan F. Urness | ||||
| Title: | Vice President, General Counsel and Corporate Secretary | ||||
November / December 2021Investor Presentation Exhibit 99.1
Important Information 2 Caution Concerning Forward-Looking Statements This presentation contains forward-looking statements as contemplated by the 1995 Private Securities Litigation Reform Act. These statements include those related to the outlook for the quarter ending January 29, 2022 found within this presentation. These statements are subject to change. 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 presentation. The most significant of these risks and uncertainties are described in the Company’s Form 10-K, Form 10-Q, and Form 8-K reports (including all amendments to those reports) and include the duration and severity of a pandemic caused by COVID-19, our ability to comply with various COVID-19 legal and contractual requirements and the impacts that those requirements may have on our workforce and our ability to perform our work, vaccination rates in the areas where we operate, any worsening of the pandemic caused by increasing infection rates triggered by new variants, future economic conditions and trends including the potential impacts of an inflationary economic environment, customer capital budgets and spending priorities, the availability and cost of materials, equipment and labor necessary to perform our work, 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, the future impact of any acquisitions or dispositions, adjustments and cancellations of the Company’s projects, the related impact to the Company’s backlog from project cancellations, weather conditions, the anticipated outcome of other contingent events, including litigation, liquidity and other financial needs, the availability of financing, the Company’s ability to generate sufficient cash to service its indebtedness, restrictions imposed by the Company’s credit agreement, 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 any obligation to update forward-looking statements. Non-GAAP Financial Measures This presentation includes certain “Non-GAAP” financial measures as defined by Regulation G of the SEC. As required by the SEC, an explanation of the Non- GAAP financial measures and a reconciliation of those measures to the most directly comparable GAAP financial measures are provided in the Company’s Form 8-K filed with the SEC on November 30, 2021 and on the Company’s Investor Center website at https://ir.dycomind.com. Non-GAAP financial measures should be considered in addition to, but not as a substitute for, the Company’s reported GAAP results.
3Dycom Overview Leading supplier of specialty contracting services to telecommunication providers throughout the US Intensely focused on the telecommunications market providing our customers with critical network infrastructure that is fundamental to economic progress Durable customer relationships with well established, leading telecommunication providers that span decades Anchored by Master Service Agreements (MSAs) and other long-term contracts Solid financial profile that positions us well to benefit from future growth opportunities
Fiscal 2021 Annual Operating Performance Contract Revenues of $3.199 billion Non-GAAP Adjusted EBITDA of $311.0 million, or 9.7% of contract revenues Backlog and Headcount as of October 30, 2021 (Q3 2022) Total Backlog of $5.896 billion Employee headcount of 14,900+ Liquidity as of October 30, 2021 (Q3 2022) Solid liquidity of $314.7 million Strong operating cash flow of $104.3 million in Q3 2022 reflecting a sequential DSO decline of 12 days Sound credit metrics and no near term debt maturities 4Financial Overview
5Strong Secular Trend Average Upload Consumption Per Subscriber Accelerating Bandwidth Usage and Speed Tier Growth The monthly weighted average data consumed by subscribers in 3Q-21 was 434.9 GB, up 13% from 3Q-20 82% of these subscribers are provisioned at speeds of 100+ Mbps The gigabit subscriber tier exceeded 11% of all subscribers for the first time in 3Q-21, more than doubling from 5% in 3Q-20 Source: OpenVault Broadband Industry Reports Demand for high-speed broadband is increasing at an accelerating pace. Between 2020 and 2025, usage is expected to triple, and fiber is the best product to meet this rising demand. Looking forward, fiber will continue to outpace alternatives, featuring symmetrical download and upload speeds and a clear, low-cost path to 10 gigabit service and beyond. Data usage and download/upload speeds continue to increase as consumer behavior moves to streaming, video conferencing, and connected devices ” “ - John Stratton, Executive Chairman Frontier Communications – November 2021
6Industry Update Major industry participants constructing or upgrading significant wireline networks across broad sections of the country generally designed to provision 1 gigabit network speeds directly to consumers or wirelessly using 5G technologies Industry participants have stated their belief that a single high-capacity fiber network can most cost effectively deliver services to both consumers and businesses, enabling multiple revenue streams from a single investment; this view is increasing the appetite for fiber deployments Increasing access to high capacity telecommunications continues to be crucial to society, especially in rural America The recently enacted Infrastructure Investment and Jobs Act includes over $40 billion for the construction of rural communications networks in unserved and underserved areas across the country, an unprecedented level of support An increasing number of states are commencing initiatives that will provide funding for telecommunications networks even prior to the initiation of funding under the Infrastructure act. Industry effort to deploy high capacity fiber networks continues to meaningfully broaden our industry’s set of opportunities Fiber network deployment opportunities are increasing Our scale and financial strength position us well to deliver valuable services to our customers despite macro-economic conditions We are providing services for 1 gigabit deployments and converged wireless/wireline multi-use network deployments across the country in numerous geographic areas to multiple customers Fiber network deployment opportunities are increasing in rural America as new industry participants respond to emerging societal incentives We continue to provide integrated planning, engineering and design, procurement, construction and maintenance services to several industry participants Macro-economic effects and potential supply constraints may influence the near-term execution of some customer plans Broad increases in demand for fiber optic cable and related equipment may impact delivery lead times in the short to intermediate term The market for labor continues to tighten in regions around the country; furthermore, the automotive supply chain is currently challenged, particularly for the large truck chassis required for specialty equipment
7Intensely Focused on Telecommunications Market Fiscal 2021 Revenue by Customer Type PROGRAM MANAGEMENT PLANNING ENGINEERING & DESIGN PROCUREMENT & CONSTRUCTION FULFILLMENT MAINTENANCE Telecommunications 89.1% Underground Locating 7.2% Electric/Gas Utilities & Other 3.7% Dycom’s extensive market presence and complete lifecycle services offering have allowed the Company to be at the forefront of evolving industry opportunities Telephone companies are deploying FTTH to enable 1 gigabit high speed connections and, increasingly, rural electric utilities are doing the same Dramatically increased speeds to consumers are being provisioned and consumer data usage is growing, particularly upstream Wireless construction activity in support of newly available spectrum bands is beginning and expected to increase next year Federal and state support for rural deployments of communications networks is dramatically increasing in scale and duration Cable operators are deploying fiber to small and medium businesses and enterprises, partly in anticipation of the customer sales process; deployments to expand capacity as well as new build opportunities are underway Customers are consolidating supply chains creating opportunities for market share growth and increasing the long-term value of our maintenance and operations business Our Complete Lifecycle Service Offerings
8Strong Tailwinds For Fiber Deployments Source: Wells Fargo Equity Research Estimates Collective strategic clarity around US telco fiber build plans Increasing consumer demand for bandwidth continues to drive fiber deployments Fiber passings with telcos are poised to materially accelerate, with an estimated +40 million premises to be connected to fiber through 2025; nearly doubling current passings By 2025, its estimated that almost 60% of US homes and businesses will have a direct fiber connection, vs. approximately 32% at the end of 2020 We’re on this march to get ourselves into a position where we can deploy fiber at scale and move from where we are right now, which is an objective of about 3 million passings a year, and we'll ultimately probably ramp that into 5. - John T. Stankey, CEO AT&T – October 2021 “ ” As we accelerate our investment in Quantum Fiber, in 2022, we expect to ramp that enablement pace to over 1 million new locations, on our way to hitting a run rate of 1.5 million to 2 million enablements per year as we exit 2022. - Jeffrey K. Storey, CEO Lumen – November 2021 “ ”
95G Deployment In terms of 5G build-out as of the end of the second quarter, we have coverage of around 200 million POPs. And so, we feel really good about that. And that's all before we're rolling out - we start our C-Band deployment later on this year with most of the deployment happening in 2022 and 2023. “ - Pascal Desroches, CFO AT&T – August 2021 Source: Cowen and Company Wireless carriers are increasing 4G capacity and augmenting 4G with new 5G technologies creating growth opportunities in the near to intermediate term Hundreds of thousands of small cells will need to be deployed in the next few years to meet growing demands Emerging wireless technologies driving significant wireline deployments Wireline deployments are the foundational element of what is expected to be a decades long deployment of fully converged wireless/wireline networks that will enable high bandwidth, low latency 5G applications ” Wireless construction activity in support of newly available spectrum beginning and expected to increase next year
Local Credibility, National Capability Nationwide footprint with more than 40 operating subsidiaries and 14,900+ employees Operating Subsidiaries 11
11Durable Customer Relationships
12Anchored by Long-Term Agreements Dycom is party to hundreds of MSA’s and other agreements with customers that extend for periods of one or more years Generally multiple agreements maintained with each customer Master Service Agreements (MSA’s) are multi-year, multi-million dollar arrangements covering thousands of individual work orders generally with exclusive requirements; majority of contracts are based on units of delivery Backlog at $5.896 billion as of Q3 2022 Q3 2022 Revenue by Contract Type Backlog2
1310+ Years of Robust Cash Flow Generation Fiscal 2011 – Fiscal 2021 Robust cash flow generation and prudent capital allocation provide strong foundation for returns Strong operating cash flow of $1.684 billion over 10+ years Prudent approach to capital allocation: $540 million invested in share repurchases $618 million invested in business acquisitions $1,053 million in cap-ex, net of disposals
15Capital Allocated to Maximize Returns Focus on organic growth opportunities through strategic capital investments in the business Dycom is committed to maximizing long term returns through prudent capital allocation Repurchased 25.8 million shares for approximately $808 million from fiscal 2006 through October 30, 2021 (Q3 2022) $100 million authorization available for share repurchases through August 2022 Invest in Organic Growth Shares Repurchases Pursue Complementary Acquisitions Selectively acquire businesses that further strengthen our customer relationships, geographic scope, and technical service offerings
15 FINANCIAL UPDATE
16Annual Trends 1 1 Contract Revenues Non-GAAP Adjusted EBITDA
17Quarterly Trends
18Debt and Liquidity Overview 2021 Convertible Notes repaid in full at maturity in September 2021; notional net debt reduced by $60.0 million during Q3 2022 Solid liquidity of $314.7 million at Q3 2022 Sound credit metrics and no near term debt maturities Capital allocation prioritizes organic growth, followed by opportunistic share repurchases and M&A, within the context of the Company’s historical range of net leverage Debt maturity profile and liquidity provide financial flexibility $ Millions Q2 2022 Q3 2022 Debt Summary 4.50% Senior Notes, mature April 2029: $ 500.0 $ 500.0 Senior Credit Facility, matures April 2026:4 Term Loan Facility 350.0 350.0 Revolving Facility - - 0.75% Convertible Notes, matured September 2021: 58.3 - Total Notional Amount of Debt $ 908.3 $ 850.0 Less: Cash and Equivalents 261.9 263.7 Notional Net Debt 646.3 586.3 Liquidity5 $ 299.1 $ 314.7
19Cash Flow Overview Strong operating cash flow of $104.3 million in Q3 2022 Capital expenditures, net of disposals, for fiscal 2022 expected to range from $135 million to $150 million, an increase of $10 million to $25 million compared to the high end of $125 million in the prior outlook provided in Q2 2022 Total DSOs of 113 days improved 12 days sequentially in Q3 2022 as we made substantial progress on a large customer program 4 Qtrs Ended Q3 2022 Operating Cash Flow 4 Qtrs Ended Jan 20181 $ Millions Q3 2021 Q3 2022 Cash Flow Summary Operating cash flow $ 111.9 $ 104.3 Capital expenditures, net of disposals $ (3.5) $ (44.1) Repayments on Senior Credit Facility $ (120.6) $ - Extinguishment of 2021 Convertible Notes $ - $ (58.3) Other financing & investing activities, net $ 1.6 $ (0.2) Days Sales Oustanding ("DSO") Q2 2022 Q3 2022 Total DSO6 125 113
20 QUESTIONS AND ANSWERS
Contract revenues Increase modestly from Non-GAAP Organic Contract Revenues of $691.8 million for the quarter ended January 30, 2021 Non-GAAP Organic Contract Revenues for the quarter ended January 30, 2021 excluded $5.7 million in contract revenues from storm restoration services and $53.2 million for the additional week of operations as a result of the Company’s 52/53 week fiscal year Non-GAAP Adjusted EBITDA % of contract revenues In-line to modestly higher compared to Q4 2021 Interest expense $8.8 million Total Interest Expense Interest on the 2029 Notes, Term Loan, letters of credit, bank fees for revolving credit facility capacity, amortization of debt issuance costs and other interest Non-GAAP Adjusted Effective Income Tax Rate (as a % of Non-GAAP Adjusted Income before Taxes) Approximately 27.0% 21Outlook for Quarter Ending January 29, 2022 (Q4 2022) Supplemental Q4 2022 Outlook Information: Q4 2022 Outlook: This slide was used on November 23, 2021 in connection with the Company’s conference call for its fiscal 2022 third quarter results. This information is provided for your reference only and should not be interpreted as a reiteration of these projections by the Company at any time after the date originally provided. Reference is made to slide 2 titled “Important Information” with respect to these slides. The information and statements contained in this slide that are forward-looking are based on information that was available at the time the slide was initially prepared and/or management’s good faith belief at that time with respect to future events. Except as required by law, the Company may not update forward-looking statements even though its situation may change in the future. For a full copy of the conference call materials, including the conference call transcript, see the Company’s Form 8-Ks filed with the Securities and Exchange Commission on November 23, 2021.
Notes 22 1) Due to the change in the Company’s fiscal year end, the Company’s fiscal 2018 six month transition period consisted of Q1 2018 and Q2 2018. Amounts provided for the Four Quarters Ended January 27, 2018 represent the aggregate of Q3 2017, Q4 2017, Q1 2018, and Q2 2018 for comparative purposes to other twelve month periods presented. 2) The Company’s backlog represents an estimate of services to be performed pursuant to master service agreements and other contractual agreements over the terms of those contracts. These estimates are based on contract terms and evaluations regarding the timing of the services to be provided. In the case of master service agreements, backlog is estimated based on the work performed in the preceding 12 month period, when available. When estimating backlog for newly initiated master service agreements and other long and short-term contracts, the Company also considers the anticipated scope of the contract and information received from the customer during the procurement process. A significant majority of the Company’s backlog comprises services under master service agreements and other long-term contracts. Backlog is not a measure defined by United States generally accepted accounting principles (“GAAP”) and should be considered in addition to, but not as a substitute for, GAAP results. Participants in the Company’s industry often disclose a calculation of their backlog; however, the Company’s methodology for determining backlog may not be comparable to the methodologies used by others. Dycom utilizes the calculation of backlog to assist in measuring aggregate awards under existing contractual relationships with its customers. The Company believes its backlog disclosures will assist investors in better understanding this estimate of the services to be performed pursuant to awards by its customers under existing contractual relationships. 3) Organic growth (decline) % adjusted for revenues from acquired businesses, storm restoration services, and for the additional week of operations during the fourth quarter as a result of the Company’s 52/53 week fiscal year, when applicable. 4) As of both Q2 2022 and Q3 2022, the Company had $46.3 million of standby letters of credit outstanding under the Senior Credit Facility. 5) Liquidity represents the sum of the Company’s availability on its revolving facility as defined by the Company’s Senior Credit Facility and available cash and equivalents. 6) DSO is calculated as the summation of current and non-current accounts receivable (including unbilled receivables), net of allowance for doubtful accounts, plus current contract assets, less contract liabilities, divided by average revenue per day during the respective quarter. Long-term contract assets are excluded from the calculation of DSO, as these amounts represent payments made to customers pursuant to long-term agreements and are recognized as a reduction of contract revenues over the period for which the related services are provided to the customers.
Exhibit 99.2
Dycom Industries, Inc.
Non-GAAP Reconciliations
Investor Presentation
November / December 2021
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 as follows:
•Non-GAAP Organic Contract Revenues - contract revenues from businesses that are included for the entire period in both the current and prior year periods, excluding contract revenues from storm restoration services, adjusted for the additional week in the fourth quarter of fiscal 2021, as a result of the Company’s 52/53 week fiscal year. Non-GAAP Organic Contract Revenue change percentage is calculated as the change in Non-GAAP Organic Contract Revenues from the comparable prior year period divided by the comparable prior year period Non-GAAP Organic Contract Revenues. Management believes Non-GAAP Organic Contract Revenues is a helpful measure for comparing the Company’s revenue performance with prior periods.
•Non-GAAP Adjusted EBITDA - net income (loss) 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 (Loss) - GAAP net income (loss) before the non-cash amortization of the debt discount and the related tax impact, certain tax impacts resulting from vesting and exercise of share-based awards, and certain non-recurring items. Management believes Non-GAAP Adjusted Net Income (Loss) is a helpful measure for comparing the Company’s operating performance with prior periods.
•Non-GAAP Adjusted Diluted Earnings (Loss) per Common Share and Non-GAAP Adjusted Diluted Shares- Non-GAAP Adjusted Net Income (Loss) divided by Non-GAAP Adjusted Diluted Shares outstanding. Non-GAAP Adjusted Diluted Shares used in the computation of Non-GAAP Adjusted Diluted Earnings (Loss) per Common share is adjusted for common stock equivalents related to share-based awards in where their effect would be anti-dilutive.
•Notional Net Debt - Notional net debt is a Non-GAAP financial measure that is calculated by subtracting cash and equivalents from the aggregate face amount of outstanding long-term debt. Management believes notional net debt is a helpful measure to assess the Company’s liquidity.
Management excludes or adjusts each of the items identified below from Non-GAAP Adjusted Net Income (Loss) and Non-GAAP Adjusted Diluted Earnings (Loss) per Common Share:
•Non-cash amortization of debt discount on 2021 Convertible Notes - The Company’s 0.75% convertible senior notes due September 2021 (the “2021 Convertible Notes”) were allocated between debt and equity components. The difference between the principal amount and the carrying amount of the liability component of the 2021 Convertible Notes represents a debt discount. The debt discount is amortized over the term of the 2021 Convertible Notes but does not result in periodic cash interest payments. The Company excludes 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 2021 Convertible 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.
•Charges for a wage and hour litigation settlement - During the fourth quarter of fiscal 2021, the Company incurred a $2.3 million pre-tax charge for a wage and hour litigation settlement. The Company excludes the impact of this charge from its Non-GAAP financial measures because the Company believes it is not indicative of its underlying results in the current period.
•Goodwill impairment charge - During the first quarter of fiscal 2021, the Company incurred a goodwill impairment charge of $53.3 million for a reporting unit that performs installation services inside third party premises. Management believes excluding the goodwill impairment charge from the Company’s Non-GAAP financial measures assists investors’ overall understanding of the Company’s current financial performance and provides management with a consistent measure for assessing the current and historical financial results.
2
•Loss (gain) on debt extinguishment - During the first quarter of fiscal 2022, the Company recognized a loss on debt extinguishment of $0.1 million in connection with the amendment and restatement of its credit agreement maturing in April 2026. During fiscal 2021, the Company recognized a gain on debt extinguishment of $12.0 million in connection with its purchase of $401.7 million aggregate principal amount of the Company’s 2021 Convertible Notes for $371.4 million, including interest and fees and, during fiscal 2020, the Company incurred a loss on debt extinguishment of $0.1 million in connection with the purchase of $25.0 million aggregate principal amount of 2021 Convertible Notes for $24.3 million, including interest and fees. Management believes excluding the loss (gain) on debt extinguishment from the Company’s Non-GAAP financial measures assists investors’ overall understanding of the Company’s current financial performance and provides management with a consistent measure for assessing the current and historical financial results.
•Charge for warranty costs - During the first quarter of fiscal 2020, the Company recorded an $8.2 million pre-tax charge for estimated warranty costs for work performed for a customer in prior periods. The Company excludes the impact of this charge from its Non-GAAP financial measures because the Company believes it is not indicative of its underlying results in the current period.
•Charge for (recovery of) previously reserved accounts receivable and contract assets - During the fourth quarter of fiscal 2019, the Company recognized a pre-tax non-cash charge for accounts receivable and contract assets of $17.2 million related to balances owed from a customer. On February 25, 2019, this customer filed a voluntary petition for reorganization. During the first quarter of fiscal 2020, the Company recognized $10.3 million of pre-tax income from the recovery of previously reserved accounts receivable and contract assets based on collections from a customer. The Company excludes the impact of this recovery from its Non-GAAP financial measures because the Company believes it is not indicative of its underlying results.
•Impact on stock-based compensation expense from non-cash charge for accounts receivable and contract assets - The Company excludes the impact on stock-based compensation expense from the non-cash charge for accounts receivable and contract assets from its Non-GAAP financial measures because the Company believes it is not indicative of its underlying results or ongoing operations.
•Tax effect from a net operating loss carryback under enacted CARES Act - During the first quarter of fiscal 2021, the Company recognized an income tax benefit of $2.6 million from a net operating loss carryback under the enacted U.S. Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. The Company excludes this impact because the Company believes it is not indicative of the Company’s underlying results or ongoing operations.
•Tax impact of the vesting and exercise of share-based awards - The Company excludes certain tax impacts resulting from the vesting and exercise of share-based awards as these amounts may vary significantly from period to period. Excluding these amounts from the Company’s Non-GAAP financial measures provides management with a more consistent measure for assessing financial results.
•Tax impact of pre-tax adjustments - The tax impact of pre-tax adjustments reflects the Company’s estimated tax impact of specific adjustments and the effective tax rate used for financial planning for the applicable period.
3
| Reconciliation of Non-GAAP Financial Measures to Comparable GAAP Financial Measures | ||||||||||||||||||||||||||||||||||||||
| Quarterly Non-GAAP Organic Contract Revenues | ||||||||||||||||||||||||||||||||||||||
| Unaudited | ||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | ||||||||||||||||||||||||||||||||||||||
| Contract Revenues - GAAP | Revenues from storm restoration services | Additional week of revenue as a result of the Company’s 52/53 week fiscal year1 | Non-GAAP - Organic Revenues | Growth (Decline)% | ||||||||||||||||||||||||||||||||||
| Quarter Ended | GAAP - Organic % | Non-GAAP - Organic % | ||||||||||||||||||||||||||||||||||||
| October 30, 2021 (Q3 2022) | $ | 854.0 | $ | — | $ | — | $ | 854.0 | 5.4 | % | 6.6 | % | ||||||||||||||||||||||||||
| October 24, 2020 (Q3 2021) | $ | 810.3 | $ | (8.9) | $ | — | $ | 801.4 | ||||||||||||||||||||||||||||||
| July 31, 2021 (Q2 2022) | $ | 787.6 | $ | — | $ | — | $ | 787.6 | (4.4) | % | (4.4) | % | ||||||||||||||||||||||||||
| July 25, 2020 (Q2 2021) | $ | 823.9 | $ | — | $ | — | $ | 823.9 | ||||||||||||||||||||||||||||||
| May 1, 2021 (Q1 2022) | $ | 727.5 | $ | (3.9) | $ | — | $ | 723.6 | (10.7) | % | (11.1) | % | ||||||||||||||||||||||||||
| April 25, 2020 (Q1 2021) | $ | 814.3 | $ | — | $ | — | $ | 814.3 | ||||||||||||||||||||||||||||||
| January 30, 2021 (Q4 2021) | $ | 750.7 | $ | (5.7) | $ | (53.2) | $ | 691.8 | 1.8 | % | (6.2) | % | ||||||||||||||||||||||||||
| January 25, 2020 (Q4 2020) | $ | 737.6 | $ | — | $ | — | $ | 737.6 | ||||||||||||||||||||||||||||||
| October 24, 2020 (Q3 2021) | $ | 810.3 | $ | (8.9) | $ | — | $ | 801.4 | (8.4) | % | (9.4) | % | ||||||||||||||||||||||||||
| October 26, 2019 (Q3 2020) | $ | 884.1 | $ | — | $ | — | $ | 884.1 | ||||||||||||||||||||||||||||||
| July 25, 2020 (Q2 2021) | $ | 823.9 | $ | — | $ | — | $ | 823.9 | (6.8) | % | (6.8) | % | ||||||||||||||||||||||||||
| July 27, 2019 (Q2 2020) | $ | 884.2 | $ | — | $ | — | $ | 884.2 | ||||||||||||||||||||||||||||||
| April 25, 2020 (Q1 2021) | $ | 814.3 | $ | — | $ | — | $ | 814.3 | (2.3) | % | (1.8) | % | ||||||||||||||||||||||||||
| April 27, 2019 (Q1 2020) | $ | 833.7 | $ | (4.7) | $ | — | $ | 829.0 | ||||||||||||||||||||||||||||||
| January 25, 2020 (Q4 2020) | $ | 737.6 | $ | — | $ | — | $ | 737.6 | (1.5) | % | 1.3 | % | ||||||||||||||||||||||||||
| January 26, 2019 (Q4 2019) | $ | 748.6 | $ | (20.4) | $ | — | $ | 728.2 | ||||||||||||||||||||||||||||||
Note: Amounts above may not add due to rounding.
4
| Reconciliation of Non-GAAP Financial Measures to Comparable GAAP Financial Measures | |||||||||||||||||||||||||||||||||||||||||||||||
| Quarterly Non-GAAP Adjusted EBITDA | |||||||||||||||||||||||||||||||||||||||||||||||
| Unaudited | |||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | |||||||||||||||||||||||||||||||||||||||||||||||
| Q4-20 | Q1-21 | Q2-21 | Q3-21 | Q4-21 | Q1-22 | Q2-22 | Q3-22 | ||||||||||||||||||||||||||||||||||||||||
| Ended | Ended | Ended | Ended | Ended | Ended | Ended | Ended | ||||||||||||||||||||||||||||||||||||||||
| 1/25/20 | 4/25/20 | 7/25/20 | 10/24/20 | 1/30/21 | 5/1/21 | 7/31/21 | 10/30/21 | ||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | $ | (11.2) | $ | (32.4) | $ | 37.0 | $ | 33.9 | $ | (4.2) | $ | 0.9 | $ | 18.2 | $ | 28.7 | |||||||||||||||||||||||||||||||
| Interest expense, net | 12.6 | 12.5 | 7.9 | 4.7 | 4.7 | 5.9 | 9.3 | 9.1 | |||||||||||||||||||||||||||||||||||||||
| Provision (benefit) for income taxes | (4.1) | 2.7 | 12.2 | 12.0 | (2.1) | (2.7) | 6.5 | 6.2 | |||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | 46.6 | 45.9 | 44.1 | 42.3 | 43.6 | 39.1 | 38.5 | 37.8 | |||||||||||||||||||||||||||||||||||||||
| Earnings Before Interest, Taxes, Depreciation & Amortization (“EBITDA”) | 43.9 | 28.6 | 101.3 | 93.0 | 42.0 | 43.1 | 72.5 | 81.8 | |||||||||||||||||||||||||||||||||||||||
| Gain on sale of fixed assets | (1.1) | (1.8) | (3.4) | (4.0) | (0.8) | (2.9) | (1.0) | (0.4) | |||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | 1.6 | 2.3 | 4.4 | 3.8 | 2.3 | 3.7 | 2.3 | 1.8 | |||||||||||||||||||||||||||||||||||||||
Loss (gain) on debt extinguishment2,3,4 | 0.1 | (12.5) | 0.5 | — | — | 0.1 | — | — | |||||||||||||||||||||||||||||||||||||||
Charges for a wage and hour litigation settlement5 | — | — | — | — | 2.3 | — | — | — | |||||||||||||||||||||||||||||||||||||||
Goodwill impairment charge6 | — | 53.3 | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Non-GAAP Adjusted EBITDA | $ | 44.5 | $ | 69.9 | $ | 102.7 | $ | 92.8 | $ | 45.7 | $ | 44.1 | $ | 73.8 | $ | 83.1 | |||||||||||||||||||||||||||||||
| Contract revenues | $ | 737.6 | $ | 814.3 | $ | 823.9 | $ | 810.3 | $ | 750.7 | $ | 727.5 | $ | 787.6 | $ | 854.0 | |||||||||||||||||||||||||||||||
| Non-GAAP Adjusted EBITDA % of contract revenues | 6.0 | % | 8.6 | % | 12.5 | % | 11.5 | % | 6.1 | % | 6.1 | % | 9.4 | % | 9.7 | % | |||||||||||||||||||||||||||||||
Note: Amounts above may not add due to rounding.
5
| Reconciliation of Non-GAAP Financial Measures to Comparable GAAP Financial Measures | |||||||||||||||||||||||||||||
| Annual Non-GAAP Adjusted EBITDA | |||||||||||||||||||||||||||||
| Unaudited | |||||||||||||||||||||||||||||
| (Dollars in millions) | |||||||||||||||||||||||||||||
| FY2017 | 4 Qtrs. | FY2019 | FY2020 | FY2021 | |||||||||||||||||||||||||
| Ended | Ended | Ended | Ended | Ended | |||||||||||||||||||||||||
| 7/29/17 | 1/27/189 | 1/26/19 | 1/25/20 | 1/30/21 | |||||||||||||||||||||||||
| Net income | $ | 157.2 | $ | 151.3 | $ | 62.9 | $ | 57.2 | $ | 34.3 | |||||||||||||||||||
| Interest expense, net | 37.4 | 38.7 | 44.4 | 50.9 | 29.7 | ||||||||||||||||||||||||
| Provision for income taxes | 93.2 | 26.6 | 25.1 | 21.3 | 24.9 | ||||||||||||||||||||||||
| Depreciation and amortization | 147.9 | 162.7 | 179.6 | 187.6 | 175.9 | ||||||||||||||||||||||||
| Earnings Before Interest, Taxes, Depreciation & Amortization (“EBITDA”) | 435.7 | 379.3 | 312.0 | 317.0 | 264.8 | ||||||||||||||||||||||||
| Gain on sale of fixed assets | (14.9) | (18.9) | (19.4) | (14.9) | (10.0) | ||||||||||||||||||||||||
| Stock-based compensation expense | 20.8 | 23.1 | 20.2 | 10.0 | 12.8 | ||||||||||||||||||||||||
Charges for a wage and hour litigation settlement5 | — | — | — | — | 2.3 | ||||||||||||||||||||||||
Goodwill impairment charge6 | — | — | — | — | 53.3 | ||||||||||||||||||||||||
Loss (gain) on debt extinguishment2,3 | — | — | — | 0.1 | (12.0) | ||||||||||||||||||||||||
Charge for warranty costs7 | — | — | — | 8.2 | — | ||||||||||||||||||||||||
Charge for (recovery of) accounts receivable and contract assets8 | — | — | 17.2 | (10.3) | — | ||||||||||||||||||||||||
| Non-GAAP Adjusted EBITDA | $ | 441.6 | $ | 383.5 | $ | 330.0 | $ | 310.0 | $ | 311.0 | |||||||||||||||||||
| Contract revenues | $ | 3,066.9 | $ | 2,977.9 | $ | 3,127.7 | $ | 3,339.7 | $ | 3,199.2 | |||||||||||||||||||
| Non-GAAP Adjusted EBITDA % of contract revenues | 14.4 | % | 12.9 | % | 10.5 | % | 9.3 | % | 9.7 | % | |||||||||||||||||||
Note: Amounts above may not add due to rounding.
6
| Reconciliation of Non-GAAP Financial Measures to Comparable GAAP Financial Measures | |||||||||||||||||||||||||||||||||||||||||||||||
| Quarterly Non-GAAP Adjusted Net Income (Loss), Non-GAAP Adjusted Diluted Earnings (Loss) Per Common Share, and Non-GAAP Adjusted Diluted Shares | |||||||||||||||||||||||||||||||||||||||||||||||
| Unaudited | |||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars and shares in millions, except per share amounts) | |||||||||||||||||||||||||||||||||||||||||||||||
| Q4-20 | Q1-21 | Q2-21 | Q3-21 | Q4-21 | Q1-22 | Q2-22 | Q3-22 | ||||||||||||||||||||||||||||||||||||||||
| Ended | Ended | Ended | Ended | Ended | Ended | Ended | Ended | ||||||||||||||||||||||||||||||||||||||||
| 1/25/20 | 4/25/20 | 7/25/20 | 10/24/20 | 1/30/21 | 5/1/21 | 7/31/21 | 10/30/21 | ||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | $ | (11.2) | $ | (32.4) | $ | 37.0 | $ | 33.9 | $ | (4.2) | $ | 0.9 | $ | 18.2 | $ | 28.7 | |||||||||||||||||||||||||||||||
| Adjustments: | |||||||||||||||||||||||||||||||||||||||||||||||
Cost of earned revenues, excluding depreciation and amortization5 | — | — | — | — | 2.1 | — | — | — | |||||||||||||||||||||||||||||||||||||||
General and administrative5 | — | — | — | — | 0.2 | — | — | — | |||||||||||||||||||||||||||||||||||||||
Goodwill impairment charge6 | — | 53.3 | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
Interest expense, net10 | 5.1 | 4.3 | 1.7 | 0.6 | 0.7 | 0.7 | 0.7 | 0.3 | |||||||||||||||||||||||||||||||||||||||
Loss (gain) on debt extinguishment3,4 | — | (12.5) | 0.5 | — | — | 0.1 | — | — | |||||||||||||||||||||||||||||||||||||||
| Income before income taxes | 5.1 | 45.1 | 2.2 | 0.6 | 3.0 | 0.7 | 0.7 | 0.3 | |||||||||||||||||||||||||||||||||||||||
Provision (benefit) for income taxes11 | 1.1 | 1.3 | 1.3 | 0.2 | 1.1 | 2.8 | 0.3 | 0.1 | |||||||||||||||||||||||||||||||||||||||
| Total adjustments, net of tax | 4.0 | 43.8 | 0.9 | 0.4 | 1.9 | (2.1) | 0.3 | 0.2 | |||||||||||||||||||||||||||||||||||||||
| Non-GAAP Adjusted Net Income (Loss) | (7.2) | 11.4 | 38.0 | 34.4 | (2.3) | (1.2) | 18.5 | 29.0 | |||||||||||||||||||||||||||||||||||||||
| Diluted earnings (loss) per common share | $ | (0.35) | $ | (1.03) | $ | 1.15 | $ | 1.05 | $ | (0.13) | $ | 0.03 | $ | 0.59 | $ | 0.94 | |||||||||||||||||||||||||||||||
| Total adjustments, net of tax | 0.13 | 1.39 | 0.03 | 0.01 | 0.06 | (0.07) | 0.01 | 0.01 | |||||||||||||||||||||||||||||||||||||||
| Non-GAAP Adjusted Diluted Earnings (Loss) per Common Share | $ | (0.23) | $ | 0.36 | $ | 1.18 | $ | 1.06 | $ | (0.07) | $ | (0.04) | $ | 0.60 | $ | 0.95 | |||||||||||||||||||||||||||||||
| Shares used in computing diluted earnings (loss) per common share | 31.5 | 31.6 | 32.1 | 32.4 | 31.4 | 31.3 | 30.9 | 30.6 | |||||||||||||||||||||||||||||||||||||||
Adjustment to Shares used in computing diluted earnings (loss) per common share12 | — | 0.2 | — | — | — | (0.6) | — | — | |||||||||||||||||||||||||||||||||||||||
| Shares used in computing Non-GAAP Adjusted Diluted Earnings (Loss) per Common Share | 31.5 | 31.8 | 32.1 | 32.4 | 31.4 | 30.7 | 30.9 | 30.6 | |||||||||||||||||||||||||||||||||||||||
Note: Amounts above may not add due to rounding.
7
| Reconciliation of Non-GAAP Financial Measures to Comparable GAAP Financial Measures | |||||||||||||||||||||||||||||||||||||||||
| Calculation of Cumulative Cash Flows Fiscal 2011 through Fiscal 2021 | |||||||||||||||||||||||||||||||||||||||||
| Unaudited | |||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | |||||||||||||||||||||||||||||||||||||||||
| Net Cash Provided by Operating Activities | Capital Expenditures, net of Proceeds from Assets Sales | Cash Paid for Acquisitions, net of Cash Acquired | Repurchases of Common Stock | Borrowings and Other Financing Activities13 | Other Investing Activities14 | Total Amount Provided by (Used in) Other Financing and Investing Activities | |||||||||||||||||||||||||||||||||||
| Fiscal 2021 | $ | 381.8 | $ | (44.6) | $ | — | $ | (100.0) | $ | (283.4) | $ | — | $ | (283.4) | |||||||||||||||||||||||||||
| Fiscal 2020 | 58.0 | (101.5) | — | — | (31.1) | 0.3 | (30.8) | ||||||||||||||||||||||||||||||||||
| Fiscal 2019 | 124.4 | (142.0) | (20.9) | — | 80.9 | 1.6 | 82.5 | ||||||||||||||||||||||||||||||||||
| Six months ended January 27, 2018 | 160.5 | (76.0) | — | (16.9) | (21.5) | (0.7) | (22.2) | ||||||||||||||||||||||||||||||||||
| Fiscal 2017 | 256.4 | (185.2) | (24.2) | (62.9) | 20.4 | 0.3 | 20.7 | ||||||||||||||||||||||||||||||||||
| Fiscal 2016 | 261.5 | (175.5) | (157.2) | (170.0) | 254.1 | (0.5) | 253.6 | ||||||||||||||||||||||||||||||||||
| Fiscal 2015 | 141.9 | (93.6) | (31.9) | (87.1) | 75.9 | (4.5) | 71.4 | ||||||||||||||||||||||||||||||||||
| Fiscal 2014 | 84.2 | (73.7) | (17.1) | (10.0) | 19.0 | (0.3) | 18.7 | ||||||||||||||||||||||||||||||||||
| Fiscal 2013 | 106.7 | (58.8) | (330.3) | (15.2) | 263.5 | 0.1 | 263.6 | ||||||||||||||||||||||||||||||||||
| Fiscal 2012 | 65.1 | (52.8) | — | (13.0) | 7.6 | 0.9 | 8.5 | ||||||||||||||||||||||||||||||||||
| Fiscal 2011 | 43.9 | (49.2) | (36.5) | (64.5) | 47.5 | 0.2 | 47.7 | ||||||||||||||||||||||||||||||||||
| Cumulative | $ | 1,684.4 | $ | (1,053.0) | $ | (618.1) | $ | (539.6) | $ | 432.9 | $ | (2.6) | $ | 430.3 | |||||||||||||||||||||||||||
| Cash and cash equivalents at January 30, 2021 | $ | 11.8 | |||||||||||||||||||||||||||||||||||||||
| Cash and cash equivalents at July 31, 2010 | 103.3 | ||||||||||||||||||||||||||||||||||||||||
| Net decrease in cash and cash equivalents | (91.6) | ||||||||||||||||||||||||||||||||||||||||
Net decrease in restricted cash15 | (4.3) | ||||||||||||||||||||||||||||||||||||||||
| Total decrease in cash, cash equivalents, and restricted cash | $ | (95.9) | |||||||||||||||||||||||||||||||||||||||
Note: Amounts above may not add due to rounding.
8
Notes to Reconciliation of Non-GAAP Financial Measures to Comparable GAAP Financial Measures
1 The Company has a 52/53 week fiscal year. All quarter periods presented contain 13 weeks except for the quarter ended January 30, 2021, which contained an additional week of operations.
The Non-GAAP adjustment for the additional week of operations for the quarter ended January 30, 2021 is calculated as (i) contract revenues less (ii) contract revenues from storm restoration services (iii) divided by 14 weeks.
2 During the quarter ended January 25, 2020, the Company purchased $25.0 million aggregate principal amount of its 0.75% convertible senior notes due September 2021 (the “2021 Convertible Notes”) for $24.3 million, including interest and fees. The purchase price was allocated between the debt and equity components of the 2021 Convertible Notes. Based on the net carrying amount of the 2021 Convertible Notes, the Company recognized a net loss on debt extinguishment of $0.1 million after the write-off of associated debt issuance costs. The Company also recognized the equity component of the settlement of the 2021 Convertible Notes.
3 During the quarter ended April 25, 2020, the Company purchased $167.0 million aggregate principal amount of its 2021 Convertible Notes for $147.0 million, including interest and fees. The purchase price was allocated between the debt and equity components of the 2021 Convertible Notes. Based on the net carrying amount of the 2021 Convertible Notes, the Company recognized a net gain on debt extinguishment of $12.5 million after the write-off of associated debt issuance costs. The Company also recognized the equity component of the settlement of the 2021 Convertible Notes.
During the quarter ended July 25, 2020, the Company purchased $234.7 million aggregate principal amount of its 2021 Convertible Notes for $224.4 million, including interest and fees. The purchase price was allocated between the debt and equity components of the 2021 Convertible Notes. Based on the net carrying amount of the 2021 Convertible Notes, the Company recognized a net loss on debt extinguishment of $0.5 million after the write-off of associated debt issuance costs. The Company also recognized the equity component of the settlement of the 2021 Convertible Notes.
4 During the quarter ended May 1, 2021 the Company recognized a loss on debt extinguishment of $0.1 million in connection with the amendment and restatement of its credit agreement maturing in April 2026.
5 During the quarter ended January 30, 2021 the Company incurred a $2.3 million pre-tax charge for a wage and hour litigation settlement. Of the $2.3 million pre-tax charge $2.1 million and $0.2 million were included in costs of earned revenues and general and administrative expenses, respectively.
6 The Company incurred a goodwill impairment charge of $53.3 million during the quarter ended April 25, 2020 for a reporting unit that performs installation services inside third party premises.
7 During the quarter ended April 27, 2019, the Company recorded an $8.2 million pre-tax charge for estimated warranty costs for work performed for a customer in prior periods.
8 During the quarter ended January 26, 2019, the Company recognized a pre-tax non-cash charge for accounts receivable and contract assets of $17.2 million related to balances owed from a customer. On February 25, 2019, this customer filed a voluntary petition for reorganization. Partially offsetting this charge, the Company’s stock-based compensation expense was reduced by approximately $1.9 million for the quarter ended January 26, 2019 as a result of the pre-tax non-cash charge for accounts receivable and contract assets. Excluding this reduction, Non-GAAP Stock-Based Compensation Expense was $3.8 million for the quarter ended January 26, 2019. During the quarter ended April 27, 2019, the Company recognized $10.3 million of pre-tax income from the recovery of these previously reserved accounts receivable and contract assets based on collections from the customer.
9 Due to the change in the Company’s fiscal year end, the Company’s fiscal 2018 six month transition period consisted of Q1 2018 and Q2 2018. Amounts provided for the four-quarters ended January 27, 2018 represent the aggregate of Q3 2017, Q4 2017, Q1 2018 and Q2 2018, and amounts provided for the four-quarters ended January 28, 2017 represent the aggregate of Q3 2016, Q4 2016, Q1 2017, and Q2 2017, for comparative purposes to other four-quarter periods presented.
10 Amounts represent the non-cash amortization of the debt discount associated with the Company’s 2021 Convertible Notes.
11 Amounts represent the tax related impact of all pre-tax adjustments as well as the tax effects of the vesting and exercise of share-based awards. For the quarter ended April 25, 2020, the Company recognized an income tax benefit of $2.6 million from a net operating loss carryback under the enacted CARES Act.
12 For the quarter ended April 25, 2020 shares used in the calculation of GAAP loss per common share, exclude common stock equivalents related to share-based awards as their effect would be anti-dilutive. Shares used in the calculation of Non-GAAP Adjusted Diluted Earnings per Common Share include the dilutive impact of common stock equivalents related to share-based awards.
For the quarter ended May 1, 2021, shares used in the calculation of GAAP diluted earnings per common share include the dilutive impact of common stock equivalents related to share-based awards. For the calculation of Non-GAAP Adjusted Loss per Common Share, common stock equivalents related to share-based awards are excluded as their effect would be anti-dilutive.
13 Other financing activities represents net cash provided by (used in) financing activities less repurchases of common stock.
14 Other investing activities represents net cash provided by (used in) investing activities less capital expenditure, net of proceeds from asset sales and less cash paid for acquisitions, net of cash acquired.
15 The Company adopted Accounting Standards Update No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash ("ASU 2016-18"), effective January 28, 2018. ASU 2016-18 requires that restricted cash be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. Prior to the adoption of this guidance, changes in restricted cash were presented within cash flows in other investing activities.
9