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 642,376 606,898 1,241,949 1,228,373
amortization
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 Revenues Non-GAAP GAAP
Revenues - from from storm
GAAP acquired restoration - Organic - Growth Non-GAAP
businesses (a) services Contract (Decline) % - Organic
Revenues 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 96,695 119,814 173,925 228,153
("EBITDA")
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 0.11 0.09 0.23 0.18
Notes (a)
---
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 (120,196) - (367,597) -
Notes (a)
---
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 0.45 0.11
effect of Notes (b)(c)
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.
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