Dycom Industries, Inc. Announces Fiscal 2019 Third Quarter Results And Provides Guidance For The Next Fiscal Quarter
PALM BEACH GARDENS, Fla., Nov. 20, 2018 /PRNewswire/ -- Dycom Industries, Inc. (NYSE: DY) announced today its results for the third quarter and nine months ended October 27, 2018. The Company reported:
-- Contract revenues of $848.2 million for the quarter ended October 27,
2018, compared to $756.2 million for the quarter ended October 28, 2017.
Contract revenues for the quarter ended October 27, 2018 increased 12.9%
on an organic basis after excluding contract revenues of $8.8 million
from an acquired business that was not owned during the comparable prior
period and contract revenues from storm restoration services. Contract
revenues from storm restoration services were $3.9 million for the
quarter ended October 27, 2018 compared to $15.9 million for the quarter
ended October 28, 2017.
-- Non-GAAP Adjusted EBITDA of $98.6 million, or 11.6% of contract
revenues, for the quarter ended October 27, 2018, compared to Non-GAAP
Adjusted EBITDA of $97.6 million, or 12.9% of contract revenues, for the
quarter ended October 28, 2017.
-- On a GAAP basis, net income was $27.8 million, or $0.87 per common share
diluted, for the quarter ended October 27, 2018, compared to net income
of $28.8 million, or $0.90 per common share diluted, for the quarter
ended October 28, 2017. Non-GAAP Adjusted Net Income was $31.3 million,
or $0.98 per common share diluted, for the quarter ended October 27,
2018, compared to Non-GAAP Adjusted Net Income of $31.6 million, or
$0.99 per common share diluted, for the quarter ended October 28,
2017.Non-GAAP Adjusted Net Income for the quarters ended October 27,
2018 and October 28, 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").
The Company also reported:
-- Contract revenues of $2.379 billion for the nine months ended October
27, 2018, compared to $2.323 billion for the nine months ended October
28, 2017. Contract revenues for the nine months ended October 27, 2018
increased 0.8% on an organic basis after excluding contract revenues
from acquired businesses that were not owned for the entire period in
both the current and comparable prior periods and contract revenues from
storm restoration services. Total contract revenues from acquired
businesses were $54.3 million for the nine months ended October 27, 2018
compared to $23.9 million for the nine months ended October 28, 2017.
Contract revenues from storm restoration services were $22.5 million for
the nine months ended October 27, 2018 compared to $15.5 million for the
nine months ended October 28, 2017, excluding amounts from acquired
businesses.
-- Non-GAAP Adjusted EBITDA of $270.1 million, or 11.4% of contract
revenues, for the nine months ended October 27, 2018, compared to
Non-GAAP Adjusted EBITDA of $323.9 million, or 13.9% of contract
revenues, for the nine months ended October 28, 2017.
-- On a GAAP basis, net income was $75.0 million, or $2.34 per common share
diluted, for the nine months ended October 27, 2018, compared to net
income of $111.3 million, or $3.50 per common share diluted, for the
nine months ended October 28, 2017. Non-GAAP Adjusted Net Income was
$85.3 million, or $2.68 per Non-GAAP Adjusted Diluted Share, for the
nine months ended October 27, 2018, compared to Non-GAAP Adjusted Net
Income of $119.7 million, or $3.76 per common share diluted, for the
nine months ended October 28, 2017. Non-GAAP Adjusted Net Income for the
nine months ended October 27, 2018 and October 28, 2017 excludes $14.2
million and $13.5 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 nine months ended October 27, 2018 exclude the GAAP
dilutive effect of approximately 0.2 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 quarter ending January 26, 2019 and fiscal 2019, the Company currently expects the following:
Quarter Ending Fiscal 2019
January 26, 2019
Contract
revenues
$695 - $745 million
$3.074 - $3.124 billion
GAAP Diluted
Earnings
(Loss) per
Common Share
$(0.09) - $0.13
$2.25 - $2.47
Non-GAAP
Adjusted
Diluted
Earnings per
Common Share
$0.02 - $0.24
$2.70 - $2.92
Non-GAAP
Adjusted
EBITDA % of
contract
revenues 8.4% - 9.2% 10.7% - 10.8%
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), Tuesday, November 20, 2018; call (800) 230-1074 (United States) or (612) 234-9960 (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 the related materials will be available at https://ir.dycomind.com until Thursday, December 20, 2018.
About Dycom Industries, Inc.
Dycom is a leading provider of specialty contracting services throughout the United States. 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 the quarter ending January 26, 2019 and fiscal 2019 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-Qs 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
October 27, January 27,
2018 2018
---
ASSETS
Current assets:
Cash and equivalents $
21,513 $
84,029
Accounts receivable, net (a) 849,769 318,684
Contract assets (a) 147,320 369,472
Inventories 90,819 79,039
Income tax receivable 5,496 13,852
Other current assets 34,010 39,710
---
Total current assets 1,148,927 904,786
---
Property and equipment, net 428,305 414,768
Goodwill and other intangible
assets, net 492,299 493,212
Other 63,681 28,190
---
Total non-current assets 984,285 936,170
---
Total assets $
2,133,212 $
1,840,956
===
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $
134,702 $
92,361
Current portion of debt - 26,469
Contract liabilities 7,631 6,480
Accrued insurance claims 41,579 53,890
Income taxes payable 668 755
Other accrued liabilities 119,464 79,657
---
Total current liabilities 304,044 259,612
Long-term debt 867,835 733,843
Accrued insurance claims 65,981 59,385
Deferred tax liabilities, net
non-current 72,580 57,428
Other liabilities 5,914 5,692
---
Total liabilities 1,316,354 1,115,960
Total stockholders' equity 816,858 724,996
---
Total liabilities and
stockholders' equity $
2,133,212 $
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 Nine Months Nine Months
Ended Ended Ended Ended
October 27, 2018 October 28, 2017 October 27, 2018 October 28, 2017
---
Contract revenues $
848,237 $
756,215 $
2,379,081 $
2,322,741
---
Costs of earned revenues, excluding 687,164 600,847 1,929,113 1,829,220
depreciation and amortization
General and administrative expenses (a) 68,763 64,562 195,601 185,398
Depreciation and amortization 45,533 42,651 133,694 120,306
---
Total 801,460 708,060 2,258,408 2,134,924
---
Interest expense, net (b) (11,310) (9,707) (31,922) (28,824)
Other income, net 2,817 5,931 14,686 16,767
---
Income before income taxes 38,284 44,379 103,437 175,760
Provision for income taxes 10,454 15,603 28,476 64,480
Net income $
27,830 $
28,776 $
74,961 $
111,280
===
Earnings per common share:
Basic earnings per common share $
0.89 $
0.93 $
2.40 $
3.57
===
Diluted earnings per common share $
0.87 $
0.90 $
2.34 $
3.50
===
Shares used in computing earnings per common share:
Basic 31,246,591 31,061,448 31,214,172 31,167,753
===
Diluted (c) 31,834,542 31,891,574 32,065,229 31,822,106
===
(a) Includes stock-based compensation expense of $7.4 million for each of the quarters ended October 27, 2018 and October 28, 2017 and $18.3 million and $17.2 million for the nine months ended October 27, 2018 and October 28, 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 October 27, 2018 and October 28, 2017, respectively, and approximately $14.2 million and
$13.5 million for the nine months ended October 27, 2018 and October 28, 2017, respectively.
(c) During the first and second quarters of fiscal 2019, the Company's average stock price exceeded the $96.89 conversion price of its Notes. As a result, diluted shares used in computing diluted earnings per common share for the nine months ended October 27, 2018 include
approximately 0.2 million weighted shares 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 %'s
Contract Revenues Revenues Non-GAAP GAAP Non-GAAP -
Revenues from from storm Organic
- GAAP acquired restoration -Organic - Growth % Growth %
businesses (a) services Contract
Revenues
---
Quarter Ended October 27, 2018 $
848,237 $
(8,754) $
(3,870) $
835,613 12.2% 12.9%
Quarter Ended October 28, 2017 $
756,215
$ $
(15,939) $
740,276
Nine Months Ended October 27, 2018 $
2,379,081 $
(54,253) $
(22,478) $
2,302,350 2.4% 0.8%
Nine Months Ended October 28, 2017 $
2,322,741 $
(23,886) $
(15,484) $
2,283,371
(a) Amounts for the quarters and nine months ended October 27, 2018 and October 28, 2017 represent contract revenues from acquired businesses that were not owned for the full period in both the current and comparable prior periods, including any contract revenues from storm restoration services for these acquired businesses.
NON-GAAP ADJUSTED EBITDA
Quarter Quarter Nine Months Nine Months
Ended Ended Ended Ended
October 27, 2018 October 28, 2017 October 27, 2018 October 28, 2017
Reconciliation of net income to Non-GAAP
Adjusted EBITDA:
Net income $
27,830 $
28,776 $
74,961 $
111,280
Interest expense, net 11,310 9,707 31,922 28,824
Provision for income taxes 10,454 15,603 28,476 64,480
Depreciation and amortization 45,533 42,651 133,694 120,306
Earnings Before Interest, Taxes, 95,127 96,737 269,053 324,890
Depreciation & Amortization ("EBITDA")
Gain on sale of fixed assets (3,874) (6,495) (17,198) (18,189)
Stock-based compensation expense 7,366 7,380 18,277 17,169
Non-GAAP Adjusted EBITDA $
98,619 $
97,622 $
270,132 $
323,870
Contract revenues $
848,237 $
756,215 $
2,379,081 $
2,322,741
Non-GAAP Adjusted EBITDA % of contract revenues 11.6% 12.9% 11.4% 13.9%
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 Nine Months Nine Months
Ended Ended Ended Ended
October 27, 2018 October 28, 2017 October 27, 2018 October 28, 2017
---
Reconciliation of Non-GAAP Adjusted Net Income:
Net income $
27,830 $
28,776 $
74,961 $
111,280
---
Adjustments:
Pre-tax non-cash amortization of debt 4,800 4,547 14,223 13,471
discount on Notes
Tax impact of non-cash amortization of debt (1,321) (1,728) (3,911) (5,047)
discount on Notes
Total adjustments, net of tax 3,479 2,819 10,312 8,424
Non-GAAP Adjusted Net Income $
31,309 $
31,595 $
85,273 $
119,704
===
Reconciliation of Non-GAAP Adjusted
Diluted Earnings per Common Share:
Diluted earnings per common share - GAAP $
0.87 $
0.90 $
2.34 $
3.50
Total adjustments, net of tax and dilutive 0.11 0.09 0.34 0.26
share effect of Notes (a)
---
Non-GAAP Adjusted Diluted Earnings per $
0.98 $
0.99 $
2.68 $
3.76
Common Share
===
Shares used in computing Non-GAAP
Adjusted Diluted Earnings per Common
Share:
Diluted shares - GAAP 31,834,542 31,891,574 32,065,229 31,822,106
Adjustment for economic benefit of note - (245,065)
hedge related to Notes (a)
---
Non-GAAP Adjusted Diluted Shares (a) 31,834,542 31,891,574 31,820,164 31,822,106
===
(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 exclude 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
January 26, 2019 (a) Fiscal 2019 (a)
---
GAAP Diluted Earnings (Loss) per common share (b)
$(0.09) - $0.13
$2.25 - $2.47
---
Adjustment
Addback of after-tax non-cash amortization of debt discount and dilutive share 0.11 0.45
effect of Notes (c)(d)
Non-GAAP Adjusted Diluted Earnings per Common Share
$0.02 - $0.24
$2.70 - $2.92
===
Diluted shares (in millions) (b)(d) 31.8 32.0
Adjustment for economic benefit of note hedge related to Notes (in millions) (d) (0.2)
-
Non-GAAP Adjusted Diluted Shares (in millions) (d) 31.8 31.8
===
(a) The tax effects of future vestings and exercises of share-based awards are excluded from both GAAP Diluted Earnings (Loss) per common share and Non-GAAP Adjusted Diluted Earnings per Common Share in the outlook table above.
(b) GAAP Loss per common share at the low end of the outlook range for the quarter ending January 26, 2019 is calculated using 31.3 million shares, which excludes common stock equivalents related to share-based awards as their effect would be anti-
dilutive.
(c) The Company expects to recognize approximately $4.9 million and $19.1 million in pre-tax interest expense during the quarter ending January 26, 2019 and fiscal 2019, 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.
(d) 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
January 26, 2019 Fiscal 2019
(at midpoint of EPS guidance)
Net income $
1 $
76
Interest expense, net 13 44
Provision for income taxes 0.2 29
Depreciation and amortization 46 180
Earnings Before Interest, Taxes, Depreciation & Amortization ("EBITDA") 59 328
Gain on sale of fixed assets (1) (18)
Stock-based compensation expense 5 24
Non-GAAP Adjusted EBITDA $
63 $
334
===
Contract revenues (at midpoint of guidance) $
720 $
3,099
Non-GAAP Adjusted EBITDA % of contract revenues (at midpoint of guidance) 8.8% 10.8%
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 is
calculated as the percentage change in Non-GAAP Organic Contract
Revenues over those of the comparable prior year periods. Management
believes organic growth 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, certain
tax impacts resulting from vesting and exercise of share-based awards,
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 excess tax benefits or deficiencies - The Company excludes
certain tax impacts resulting from 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 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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SOURCE Dycom Industries, Inc.
