Dycom Industries, Inc. Announces Fiscal 2020 Third Quarter Results And Provides Guidance For The Next Fiscal Quarter
PALM BEACH GARDENS, Fla., Nov. 26, 2019 /PRNewswire/ -- Dycom Industries, Inc. (NYSE: DY) announced today its results for the third quarter and nine months ended October 26, 2019. The Company reported:
-- Contract revenues of $884.1 million for the quarter ended October 26,
2019, compared to $848.2 million for the quarter ended October 27, 2018.
Contract revenues for the quarter ended October 26, 2019 increased 4.7%
on an organic basis after excluding $3.9 million in contract revenues
from storm restoration services for the quarter ended October 27, 2018.
-- Non-GAAP Adjusted EBITDA of $91.7 million, or 10.4% of contract
revenues, for the quarter ended October 26, 2019, compared to Non-GAAP
Adjusted EBITDA of $98.6 million, or 11.6% of contract revenues, for the
quarter ended October 27, 2018.
-- On a GAAP basis, net income was $24.2 million, or $0.76 per common share
diluted, for the quarter ended October 26, 2019, compared to net income
of $27.8 million, or $0.87 per common share diluted, for the quarter
ended October 27, 2018. Non-GAAP Adjusted Net Income was $28.1 million,
or $0.88 per common share diluted, for the quarter ended October 26,
2019, compared to Non-GAAP Adjusted Net Income of $31.3 million, or
$0.98 per common share diluted, for the quarter ended October 27, 2018.
The Company also reported:
-- Contract revenues of $2.602 billion for the nine months ended October
26, 2019, compared to $2.379 billion for the nine months ended October
27, 2018. Contract revenues for the nine months ended October 26, 2019
increased 10.4% 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
$20.9 million for the nine months ended October 26, 2019, compared to
$23.7 million for the nine months ended October 27, 2018. Contract
revenues from storm restoration services were $4.7 million for the nine
months ended October 26, 2019, compared to $22.5 million for the nine
months ended October 27, 2018.
-- Non-GAAP Adjusted EBITDA of $265.6 million, or 10.2% of contract
revenues, for the nine months ended October 26, 2019, compared to
Non-GAAP Adjusted EBITDA of $270.1 million, or 11.4% of contract
revenues, for the nine months ended October 27, 2018.
-- On a GAAP basis, net income was $68.4 million, or $2.15 per common share
diluted, for the nine months ended October 26, 2019, compared to net
income of $75.0 million, or $2.34 per common share diluted, for the nine
months ended October 27, 2018. Non-GAAP Adjusted Net Income was $79.6
million, or $2.50 per common share diluted, for the nine months ended
October 26, 2019, compared to Non-GAAP Adjusted Net Income of $85.3
million, or $2.68 per Non-GAAP Adjusted Diluted Share, for the nine
months ended October 27, 2018.
Outlook
The Company also announced its outlook for the fiscal quarter ending January 25, 2020. The Company currently expects total contract revenues for the fiscal quarter ending January 25, 2020 to range from $700 million to $740 million. On a GAAP basis, diluted loss per common share for the fiscal quarter ending January 25, 2020 is expected to range from $(0.27) to $(0.10) and Non-GAAP Adjusted Diluted Earnings (Loss) per Common Share is expected to range from $(0.15) to $0.02. Non-GAAP Adjusted Diluted Earnings (Loss) per Common Share guidance excludes $5.2 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 (Loss) per Common Share guidance provided for the fiscal quarter ending January 25, 2020, 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), Tuesday, November 26, 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 Thursday, December 26, 2019.
About Dycom Industries, Inc.
Dycom is a leading provider of specialty contracting services throughout the United States. These services include program management; planning; engineering and design; aerial, underground, and wireless construction; maintenance; and fulfillment services for telecommunications providers. Additionally, Dycom provides 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 January 25, 2020 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
October 26, 2019 January 26, 2019
---
ASSETS
Current assets:
Cash and equivalents $
11,837 $
128,342
Accounts receivable, net 919,496 625,258
Contract assets 343,191 215,849
Inventories 104,923 94,385
Income tax receivable - 3,461
Other current assets 32,483 29,145
Total current assets 1,411,930 1,096,440
Property and equipment, net 394,516 424,751
Operating lease right-of-use
assets (a) 68,468
Goodwill and other intangible
assets, net 470,942 486,874
Other 49,720 89,438
Total non-current assets 983,646 1,001,063
Total assets $
2,395,576 $
2,097,503
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $
129,531 $
119,485
Current portion of debt 22,500 5,625
Contract liabilities 19,893 15,125
Accrued insurance claims 41,884 39,961
Operating lease liabilities
(a) 25,739
Income taxes payable 9,516 721
Other accrued liabilities 115,724 104,074
Total current liabilities 364,787 284,991
Long-term debt 970,243 867,574
Accrued insurance claims -
non-current 58,352 68,315
Operating lease liabilities -
non-current (a) 43,217
Deferred tax liabilities, net
- non-current 73,158 65,963
Other liabilities 5,669 6,492
Total liabilities 1,515,426 1,293,335
Total stockholders' equity 880,150 804,168
Total liabilities and
stockholders' equity $
2,395,576 $
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 Nine Months Nine Months
Ended Ended Ended Ended
October 26, 2019 October 27, 2018 October 26, 2019 October 27, 2018
---
Contract revenues $
884,115 $
848,237 $
2,602,079 $
2,379,081
Costs of earned
revenues, excluding
depreciation and
amortization (a) 724,378 687,164 2,146,527 1,929,113
General and
administrative (b)
(c) 69,875 68,763 193,613 195,601
Depreciation and
amortization 47,356 45,533 140,941 133,694
Total 841,609 801,460 2,481,081 2,258,408
Interest expense,
net (d) (13,128) (11,310) (38,239) (31,922)
Other income, net 1,407 2,817 11,111 14,686
Income before income
taxes 30,785 38,284 93,870 103,437
Provision for income
taxes (e) 6,556 10,454 25,466 28,476
Net income $
24,229 $
27,830 $
68,404 $
74,961
Earnings per common share:
Basic earnings per
common share $
0.77 $
0.89 $
2.17 $
2.40
Diluted earnings per
common share $
0.76 $
0.87 $
2.15 $
2.34
Shares used in computing earnings per common share:
Basic 31,502,543 31,246,591 31,480,759 31,214,172
Diluted (f) 31,826,845 31,834,542 31,811,505 32,065,229
(a) During the nine months ended October 26, 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 nine months ended October 26, 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 $2.7 million and $7.4 million for the quarters ended October 26, 2019 and October 27, 2018, respectively, and $8.5 million and $18.3 million for the nine months ended October 26,
2019 and October 27, 2018, respectively.
(d) Includes pre-tax interest expense for non-cash amortization of the debt discount associated with the Notes of $5.1 million and $4.8 million for the quarters ended October 26, 2019 and October 27, 2018, respectively, and $15.0
million and $14.2 million for the nine months ended October 26, 2019 and October 27, 2018, respectively.
(e) For the nine months ended October 26, 2019, the provision for income taxes included $1.1 million recognized in the second quarter related to a previous tax year filing. For the three and nine months ended October 26, 2019, the
provision for income taxes also included $0.2 million and $0.8 million, respectively, of income tax expense for the vesting and exercise of share-based awards.
(f) 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-
Revenues - from from storm GAAP -
GAAP acquired restoration -Organic -Growth Organic
businesses (a) services Contract Growth %
Revenues %
---
Quarter
Ended
October % %
26,
2019 $
884,115
$
$ $
884,115 4.2 4.7
Quarter
Ended
October
27,
2018 $
848,237
$ $
(3,870) $
844,367
Nine
Months
Ended % %
October
26,
2019 $
2,602,079 $
(20,935) $
(4,716) $
2,576,428 9.4 10.4
Nine
Months
Ended
October
27,
2018 $
2,379,081 $
(23,670) $
(22,478) $
2,332,933
(a) Amounts for the nine months ended October 26, 2019 and October 27, 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 Nine Months Nine Months
Ended Ended Ended Ended
October 26, 2019 October 27, 2018 October 26, 2019 October 27, 2018
Reconciliation of net income to Non-GAAP Adjusted
EBITDA:
Net income $
24,229 $
27,830 $
68,404 $
74,961
Interest expense, net 13,128 11,310 38,239 31,922
Provision for income taxes 6,556 10,454 25,466 28,476
Depreciation and amortization 47,356 45,533 140,941 133,694
Earnings Before Interest, Taxes, Depreciation &
Amortization ("EBITDA") 91,269 95,127 273,050 269,053
Gain on sale of fixed assets (2,241) (3,874) (13,785) (17,198)
Stock-based compensation expense 2,694 7,366 8,450 18,277
Recovery of previously reserved accounts receivable and
contract assets (10,345)
Q1-20 charge for warranty costs 8,200
Non-GAAP Adjusted EBITDA $
91,722 $
98,619 $
265,570 $
270,132
Contract revenues $
884,115 $
848,237 $
2,602,079 $
2,379,081
Non-GAAP Adjusted EBITDA % of contract revenues 10.4 11.6 10.2 11.4
%
%
%
%
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 Nine Months Nine Months
Ended Ended Ended Ended
October 26, 2019 October 27, 2018 October 26, 2019 October 27, 2018
---
Reconciliation of net income to Non-
GAAP Adjusted Net Income:
Net income $
24,229 $
27,830 $
68,404 $
74,961
Pre-Tax Adjustments:
Non-cash
amortization of
debt discount on
Notes 5,068 4,800 15,016 14,223
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 163 801
Tax expense related
to previous tax
year filing - 1,092
Tax effect of pre-
tax adjustments (1,394) (1,321) (3,540) (3,911)
Total adjustments,
net of tax 3,837 3,479 11,224 10,312
Non-GAAP Adjusted
Net Income $
28,066 $
31,309 $
79,628 $
85,273
Reconciliation of diluted earnings
per common share to Non-GAAP
Adjusted Diluted Earnings per Common
Share:
GAAP diluted
earnings per common
share $
0.76 $
0.87 $
2.15 $
2.34
Total adjustments,
net of tax and
dilutive share
effect of Notes (c) 0.12 0.11 0.35 0.34
Non-GAAP Adjusted
Diluted Earnings
per Common Share $
0.88 $
0.98 $
2.50 $
2.68
Shares used in computing Non-GAAP
Adjusted Diluted Earnings per Common
Share:
GAAP diluted shares 31,826,845 31,834,542 31,811,505 32,065,229
Adjustment for
economic benefit of
note hedge related
to Notes (c) - (245,065)
Non-GAAP Adjusted
Diluted Shares (c) 31,826,845 31,834,542 31,811,505 31,820,164
(a) During the nine months ended October 26, 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 nine months ended October 26, 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 (LOSS)
PER COMMON SHARE AND NON-GAAP
ADJUSTED DILUTED EARNINGS (LOSS)
PER COMMON SHARE
Quarter
Ending
January
25, 2020
GAAP
diluted
loss
per
common
share
(a)
$(0.27) - $(0.10)
Adjustment
Addback
of
after-
tax
non-
cash
amortization
of debt
discount
(b) 0.12
Non-
GAAP
Adjusted
Diluted
Earnings
(Loss)
per
Common
Share
(a)
$(0.15) - $0.02
(a) GAAP diluted loss per common
share and Non-GAAP Adjusted
Diluted Loss per Common Share for
the quarter ending January 25,
2020 is calculated using 31.5
million shares, which excludes
common stock equivalents related
to share-based awards as their
effect would be anti-dilutive.
Non-GAAP Adjusted Diluted
Earnings per Common Share for the
quarter ending January 25, 2020
is calculated using 31.8 million
shares.
(b) The Company expects to
recognize approximately $5.2
million in pre-tax interest
expense during the quarter ending
January 25, 2020 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 nine months ended October 26, 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 nine months ended October
26, 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. 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 nine months ended
October 26, 2019, the Company recognized an income tax expense of $1.1
million in the second quarter 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.
