Dycom Industries, Inc. Announces Fiscal 2020 Second Quarter Results And Provides Guidance For The Next Fiscal Quarter
PALM BEACH GARDENS, Fla., Aug. 28, 2019 /PRNewswire/ -- Dycom Industries, Inc. (NYSE: DY) announced today its results for the second quarter and six months ended July 27, 2019. The Company reported:
-- Contract revenues of $884.2 million for the quarter ended July 27, 2019,
compared to $799.5 million for the quarter ended July 28, 2018. Contract
revenues for the quarter ended July 27, 2019 increased 11.1% on an
organic basis after excluding $3.8 million in contract revenues from
storm restoration services for the quarter ended July 28, 2018.
-- Non-GAAP Adjusted EBITDA of $100.2 million, or 11.3% of contract
revenues, for the quarter ended July 27, 2019, compared to Non-GAAP
Adjusted EBITDA of $97.8 million, or 12.2% of contract revenues, for the
quarter ended July 28, 2018.
-- On a GAAP basis, net income was $29.9 million, or $0.94 per common share
diluted, for each of the quarters ended July 27, 2019 and July 28, 2018.
Non-GAAP Adjusted Net Income was $34.6 million, or $1.09 per common
share diluted, for the quarter ended July 27, 2019, compared to Non-GAAP
Adjusted Net Income of $33.3 million, or $1.05 per Non-GAAP Adjusted
Diluted Share, for the quarter ended July 28, 2018.
-- The Company entered into a contract modification that increases revenue
produced by a large customer program. As a result, the Company
recognized $11.8 million of contract revenues for services performed in
prior periods and $1.8 million of related performance-based compensation
expense. On an after-tax basis, these items contributed approximately
$7.3 million to net income, or $0.23 per common share diluted, for the
quarter ended July 27, 2019.
The Company also reported:
-- Contract revenues of $1.718 billion for the six months ended July 27,
2019, compared to $1.531 billion for the six months ended July 28, 2018.
Contract revenues for the six months ended July 27, 2019 increased 13.5%
on an organic basis after excluding contract revenues from an acquired
business that was not owned for the full period in both the current and
prior year periods and contract revenues from storm restoration
services. Contract revenues from that acquired business were $13.4
million for the six months ended July 27, 2019 compared to $14.9 million
for the six months ended July 28, 2018. Contract revenues from storm
restoration services were $4.7 million for the six months ended July 27,
2019 compared to $18.6 million for the six months ended July 28, 2018.
-- Non-GAAP Adjusted EBITDA of $173.8 million, or 10.1% of contract
revenues, for the six months ended July 27, 2019, compared to Non-GAAP
Adjusted EBITDA of $171.5 million, or 11.2% of contract revenues, for
the six months ended July 28, 2018.
-- On a GAAP basis, net income was $44.2 million, or $1.39 per common share
diluted, for the six months ended July 27, 2019, compared to net income
of $47.1 million, or $1.46 per common share diluted, for the six months
ended July 28, 2018. Non-GAAP Adjusted Net Income was $51.6 million, or
$1.62 per common share diluted, for the six months ended July 27, 2019,
compared to Non-GAAP Adjusted Net Income of $54.0 million, or $1.70 per
Non-GAAP Adjusted Diluted Share, for the six months ended July 28, 2018.
Outlook
The Company also announced its outlook for the fiscal quarter ending October 26, 2019. The Company currently expects total contract revenues for the fiscal quarter ending October 26, 2019 to range from $820 million to $870 million. On a GAAP basis, diluted earnings per common share for the fiscal quarter ending October 26, 2019 is expected to range from $0.48 to $0.68 and Non-GAAP Adjusted Diluted Earnings per Common Share is expected to range from $0.60 to $0.80. Non-GAAP Adjusted Diluted Earnings per Common Share guidance excludes $5.1 million of pre-tax interest expense, or $0.12 per common diluted share on an after-tax basis, for the non?cash amortization of the debt discount associated with the Company's 0.75% convertible senior notes due September 2021 (the "Notes"). A reconciliation of Non-GAAP Adjusted Diluted Earnings per Common Share guidance provided for the fiscal quarter ending October 26, 2019, along with reconciliations of other Non-GAAP measures, is included within the press release tables. For additional discussion regarding the Company's outlook, please see the presentation materials available on the Company's website posted in connection with the conference call discussed below.
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 in the press release tables that follow.
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 28, 2019; call (800) 230-1085 (United States) or (612) 288-0329 (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 Friday, September 27, 2019.
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 those related to the outlook for the quarter ending October 26, 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 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 any obligation to update forward-looking statements.
---Tables Follow---
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
Unaudited
July 27, 2019 January 26,
2019
---
ASSETS
Current assets:
Cash and equivalents $
12,583 $
128,342
Accounts receivable, net 796,908 625,258
Contract assets 357,615 215,849
Inventories 107,353 94,385
Income tax receivable 1,417 3,461
Other current assets 31,971 29,145
---
Total current assets 1,307,847 1,096,440
---
Property and equipment, net 422,264 424,751
Operating lease right-of-use
assets (a) 69,459
Goodwill and other intangible
assets, net 476,212 486,874
Other 52,589 89,438
---
Total non-current assets 1,020,524 1,001,063
---
Total assets $
2,328,371 $
2,097,503
===
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $
140,279 $
119,485
Current portion of debt 16,875 5,625
Contract liabilities 13,272 15,125
Accrued insurance claims 41,075 39,961
Operating lease liabilities
(a) 25,751
Income taxes payable 2,553 721
Other accrued liabilities 117,159 104,074
---
Total current liabilities 356,964 284,991
Long-term debt 932,277 867,574
Accrued insurance claims -
non-current 58,492 68,315
Operating lease liabilities -
non-current (a) 44,371
Deferred tax liabilities, net
- non-current 77,574 65,963
Other liabilities 5,260 6,492
---
Total liabilities 1,474,938 1,293,335
Total stockholders' equity 853,433 804,168
---
Total liabilities and
stockholders' equity $
2,328,371 $
2,097,503
===
(a) The Company adopted Accounting Standards Update No. 2016-02, Leases (Topic 842), effective January 27, 2019, the
first day of fiscal 2020. On adoption, the Company recognized approximately $71.0 million of operating lease right-
of-use assets and corresponding operating lease liabilities on its condensed consolidated balance sheet for its
operating leases with terms greater than twelve months.
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 27, 2019 July 28, 2018 July 27, 2019 July 28, 2018
---
Contract revenues $
884,221 $
799,470 $
1,717,964 $
1,530,844
---
Costs of earned
revenues, excluding
depreciation and
amortization (a) 720,382 642,376 1,422,150 1,241,949
General and
administrative (b)
(c) 65,117 64,555 123,738 126,838
Depreciation and
amortization 47,244 44,805 93,586 88,160
Total 832,743 751,736 1,639,474 1,456,947
---
Interest expense,
net (d) (12,878) (10,446) (25,111) (20,612)
Other income, net 4,006 4,156 9,705 11,868
---
Income before income
taxes 42,606 41,444 63,084 65,153
Provision for income
taxes (e) 12,710 11,544 18,909 18,022
Net income $
29,896 $
29,900 $
44,175 $
47,131
===
Earnings per common share:
Basic earnings per
common share $
0.95 $
0.96 $
1.40 $
1.51
===
Diluted earnings per
common share $
0.94 $
0.94 $
1.39 $
1.46
===
Shares used in computing earnings per common share:
Basic 31,487,011 31,206,340 31,469,401 31,198,349
===
Diluted (f) 31,820,296 31,954,013 31,803,368 32,180,960
===
(a) During the six months ended
July 27, 2019, the Company
recorded an $8.2 million pre-tax
charge in the first quarter for
estimated warranty costs for work
performed for a customer in prior
periods.
(b) During the six months ended
July 27, 2019, the Company
recognized $10.3 million of pre-
tax income from the recovery of
previously reserved accounts
receivable and contract assets in
the first quarter based on
collections from a customer.
(c) Includes stock-based
compensation expense of $2.3
million and $6.0 million for the
quarters ended July 27, 2019 and
July 28, 2018, respectively, and
$5.8 million and $10.9 million for
the six months ended July 27, 2019
and July 28, 2018, respectively.
(d) Includes pre-tax interest
expense for non-cash amortization
of the debt discount associated
with the Notes of $5.0 million and
$4.8 million for the quarters
ended July 27, 2019 and July 28,
2018, respectively, and $9.9
million and $9.4 million for the
six months ended July 27, 2019 and
July 28, 2018, respectively.
(e) For the three and six months
ended July 27, 2019, the provision
for income taxes included $1.1
million related to a previous tax
year filing. For the six months
ended July 27, 2019, the provision
for income taxes also included
$0.6 million of income tax expense
for the vesting and exercise of
share-based awards.
(f) During the quarter and six
months ended July 28, 2018, 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 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 %'s
Contract Revenues Revenues Non-GAAP GAAP Non-
Revenues - from from storm GAAP -
GAAP acquired restoration -Organic -Growth Organic
businesses (a) services Contract Growth %
Revenues %
Quarter
Ended
July
27,
2019 $
884,221
$
$ $
884,221
11.1%
10.6%
Quarter
Ended
July
28,
2018 $
799,470
$ $
(3,760) $
795,710
Six
Months
Ended
July
27,
2019 $
1,717,964 $
(13,401) $
(4,716) $
1,699,847
12.2% 13.5%
Six
Months
Ended
July
28,
2018 $
1,530,844 $
(14,915) $
(18,609) $
1,497,320
(a) Amounts for the six
months ended July 27,
2019 and July 28, 2018
represent contract
revenues from an
acquired business that
was not owned for the
full period in both the
current and prior year
periods.
NET INCOME AND NON-GAAP ADJUSTED EBITDA
Quarter Quarter Six Months Six Months
Ended Ended Ended Ended
July 27, 2019 July 28, 2018 July 27, 2019 July 28, 2018
Reconciliation of net income to Non-GAAP Adjusted EBITDA:
Net income $
29,896 $
29,900 $
44,175 $
47,131
Interest expense, net 12,878 10,446 25,111 20,612
Provision for income taxes 12,710 11,544 18,909 18,022
Depreciation and amortization 47,244 44,805 93,586 88,160
Earnings Before Interest, Taxes, Depreciation & Amortization ("EBITDA") 102,728 96,695 181,781 173,925
Gain on sale of fixed assets (4,806) (4,909) (11,544) (13,324)
Stock-based compensation expense 2,277 6,048 5,756 10,911
Recovery of previously reserved accounts receivable and contract assets (10,345)
Q1-20 charge for warranty costs 8,200
Non-GAAP Adjusted EBITDA $
100,199 $
97,834 $
173,848 $
171,512
Contract revenues $
884,221 $
799,470 $
1,717,964 $
1,530,844
Non-GAAP Adjusted EBITDA % of contract revenues
11.3%
10.1% 11.2%
12.2%
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 27, 2019 July 28, 2018 July 27, 2019 July 28, 2018
---
Reconciliation of net income to Non-
GAAP Adjusted Net Income:
Net income $
29,896 $
29,900 $
44,175 $
47,131
---
Pre-Tax Adjustments:
Non-cash
amortization of
debt discount on
Notes 5,015 4,750 9,947 9,422
Q1-20 charge for
warranty costs (a) - 8,200
Recovery of
previously reserved
accounts receivable
and contract assets
(b) - (10,345)
Tax Adjustments:
Tax expense for the
vesting and
exercise of share-
based awards - 638
Tax expense related
to previous tax
year filing 1,092 - 1,092
Tax effect of pre-
tax adjustments (1,379) (1,314) (2,145) (2,589)
---
Total adjustments,
net of tax 4,728 3,436 7,387 6,833
Non-GAAP Adjusted
Net Income $
34,624 $
33,336 $
51,562 $
53,964
===
Reconciliation of diluted earnings per
common share to Non-GAAP Adjusted
Diluted Earnings per Common Share:
GAAP diluted
earnings per common
share $
0.94 $
0.94 $
1.39 $
1.46
Total adjustments,
net of tax and
dilutive share
effect of Notes (c) 0.15 0.11 0.23 0.23
---
Non-GAAP Adjusted
Diluted Earnings
per Common Share $
1.09 $
1.05 $
1.62 $
1.70
===
Shares used in computing Non-GAAP
Adjusted Diluted Earnings per Common
Share:
GAAP diluted shares 31,820,296 31,954,013 31,803,368 32,180,960
Adjustment for
economic benefit of
note hedge related
to Notes (c) (120,196) (367,597)
Non-GAAP Adjusted
Diluted Shares (c) 31,820,296 31,833,817 31,803,368 31,813,363
===
(a) During the six months
ended July 27, 2019, the
Company recorded an $8.2
million pre-tax charge in
the first quarter for
estimated warranty costs for
work performed for a
customer in prior periods.
(b) During the six months
ended July 27, 2019, the
Company recognized $10.3
million of pre-tax income
from the recovery of
previously reserved accounts
receivable and contract
assets in the first quarter
based on collections from a
customer.
(c) 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
October
26, 2019
GAAP diluted
earnings per
common share
$0.48 - $0.68
Adjustment
Addback of after-
tax non-cash
amortization of
debt discount
(a) 0.12
Non-GAAP
Adjusted Diluted
Earnings per
Common Share
$0.60 - $0.80
Diluted shares
(in millions) 31.8
(a) The Company expects to recognize
approximately $5.1 million in pre-tax
interest expense during the quarter ending
October 26, 2019 for the non-cash
amortization of the debt discount associated
with the Notes.
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 prior
year 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 hedge in
effect to offset the economic dilution of additional shares that would
be issued in connection with the conversion of 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 debt discount on Notes - 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.
-- Recovery of previously reserved accounts receivable and contract assets
- During the six months ended July 27, 2019, the Company recognized
$10.3 million of pre-tax income from the recovery of previously reserved
accounts receivable and contract assets in the first quarter 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.
-- Q1-20 charge for warranty costs - During the six months ended July 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. 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.
-- 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 previous tax year filing - During the quarter and six
months ended July 27, 2019, the Company recognized an income tax expense
of $1.1 million on a previous tax year filing. The Company has excluded
this impact because the Company believes it is not indicative of the
Company's underlying results or ongoing operations.
-- Tax impact of pre-tax adjustments - The tax impact of pre-tax
adjustments reflects the Company's effective tax rate used for financial
planning for the applicable period.
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SOURCE Dycom Industries, Inc.
