Dycom Industries, Inc. Announces Fiscal 2021 Third Quarter Results
PALM BEACH GARDENS, Fla., Nov. 24, 2020 /PRNewswire/ -- Dycom Industries, Inc. (NYSE: DY) announced today its results for the third quarter and nine months ended October 24, 2020.
Third Quarter Fiscal 2021 Highlights
-- Contract revenues of $810.3 million for the quarter ended October 24,
2020, compared to $884.1 million for the quarter ended October 26, 2019.
Contract revenues decreased 9.4% on an organic basis after excluding
$8.9 million in contract revenues from storm restoration services for
the quarter ended October 24, 2020.
-- Non-GAAP Adjusted EBITDA of $92.8 million, or 11.5% of contract
revenues, for the quarter ended October 24, 2020, compared to $91.7
million, or 10.4% of contract revenues, for the quarter ended October
26, 2019.
-- On a GAAP basis, net income was $33.9 million, or $1.05 per common share
diluted, for the quarter ended October 24, 2020, compared to $24.2
million, or $0.76 per common share diluted, for the quarter ended
October 26, 2019. Non-GAAP Adjusted Net Income was $34.4 million, or
$1.06 per common share diluted, for the quarter ended October 24, 2020,
compared to $28.1 million, or $0.88 per common share diluted for the
quarter ended October 26, 2019.
-- Notional net debt was reduced by $110.1 million during the quarter. As
of October 24, 2020, the Company had cash and equivalents of $12.0
million, borrowings on its revolving line of credit of $85.0 million,
$427.5 million of term loans outstanding and $58.3 million aggregate
principal amount of 0.75% convertible senior notes due September 2021
(the "Notes") outstanding.
Year-to-Date Fiscal 2021 Highlights
-- Contract revenues of $2.449 billion for the nine months ended October
24, 2020, compared to $2.602 billion for the nine months ended October
26, 2019. Contract revenues for the nine months ended October 24, 2020
decreased 6.1% on an organic basis after excluding $8.9 million and $4.7
million in contract revenues from storm restoration services for the
nine months ended October 24, 2020 and October 26, 2019, respectively.
-- Non-GAAP Adjusted EBITDA of $265.3 million, or 10.8% of contract
revenues, for the nine months ended October 24, 2020, compared to $254.6
million, or 9.8% of contract revenues, for the nine months ended October
26, 2019. Non-GAAP Adjusted EBITDA for the nine months ended October 26,
2019 excludes $11.0 million of income before taxes reflecting the net
benefit of a contract modification.
-- On a GAAP basis, net income was $38.5 million, or $1.20 per common share
diluted, for the nine months ended October 24, 2020, compared to $68.4
million, or $2.15 per common share diluted, for the nine months ended
October 26, 2019. Non-GAAP Adjusted Net Income was $83.7 million, or
$2.61 per common share diluted, for the nine months ended October 24,
2020, compared to $72.4 million, or $2.28 per common share diluted, for
the nine months ended October 26, 2019. Non-GAAP Adjusted Net Income for
the nine months ended October 26, 2019 excludes net income of $7.3
million, or $0.23 per common share diluted, reflecting the after-tax net
benefit of a contract modification.Net income on a GAAP basis for the
nine months ended October 24, 2020 includes a pre-tax goodwill
impairment charge of $53.3 million recognized during the first quarter
for a reporting unit that generated revenue of less than 4% of Dycom's
consolidated revenue and did not incur losses in fiscal 2020.
-- During the nine months ended October 24, 2020, the Company purchased
$401.7 million aggregate principal amount of Notes for $371.4 million,
including interest and fees. As a result, net income on a GAAP basis for
the nine months ended October 24, 2020 includes a pre-tax gain of
approximately $12.0 million.
Outlook
For the quarter ending January 30, 2021 (which includes an additional week of operations as a result of the Company's 52/53 week fiscal year), the Company expects modestly lower contract revenues with margins that range from in-line to modestly higher, as compared to the quarter ended January 25, 2020. The Company believes the impact of the COVID-19 pandemic on its operating results, cash flows and financial condition is uncertain, unpredictable and could affect its ability to achieve these expected financial results.
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
The Company will host a conference call to discuss fiscal 2021 third quarter results on Tuesday, November 24, 2020 at 9:00 a.m. Eastern time. 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. Parties interested in participating via telephone should dial (833) 519-1313 (United States) or (914) 800-3879 (International) with the conference ID 1388665, ten minutes before the conference call begins. For those who cannot participate 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 24, 2020.
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 30, 2021 found under the "Outlook" section of this release. These statements are subject to change. Forward looking statements are based on management's current expectations, estimates and projections. These statements are subject to risks and uncertainties that may cause actual results for completed periods and periods in the future to differ materially from the results projected or implied in any forward-looking statements contained in this 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 the projected impact of COVID-19 on the Company's business operating results, cash flows and/or financial condition and the impacts of the measures the Company has taken in response to COVID-19, the Company's ability to effectively execute its business and capital plans, 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 of the Company's projects, the related impact to the Company's backlog from project cancellations, weather conditions, the anticipated outcome of other contingent events, including litigation, liquidity and other financial needs, the availability of financing, the Company's ability to generate sufficient cash to service its indebtedness, restrictions imposed by the Company's credit agreement, and the other risks and uncertainties detailed from time to time in the Company's filings with the Securities and Exchange Commission. The Company does not undertake any obligation to update forward-looking statements.
---Tables Follow---
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
Unaudited
October 24, 2020 January 25, 2020
---
ASSETS
Current assets:
Cash and equivalents $
12,036 $
54,560
Accounts receivable, net 938,941 817,245
Contract assets 204,516 253,005
Inventories 70,827 98,324
Income tax receivable 724 3,168
Other current assets 38,462 31,991
Total current assets 1,265,506 1,258,293
Property and equipment, net 288,292 376,610
Operating lease right-of-use
assets 65,912 69,596
Goodwill and other intangible
assets, net 396,976 465,694
Other 48,378 47,438
Total non-current assets 799,558 959,338
Total assets $
2,065,064 $
2,217,631
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $
183,679 $
119,612
Current portion of debt 78,121 22,500
Contract liabilities 16,412 16,332
Accrued insurance claims 43,623 38,881
Operating lease liabilities 26,075 26,581
Income taxes payable 8,413 344
Other accrued liabilities 107,392 98,775
Total current liabilities 463,715 323,025
Long-term debt 490,000 844,401
Accrued insurance claims -
non-current 67,195 56,026
Operating lease liabilities -
non-current 40,327 43,606
Deferred tax liabilities, net
- non-current 55,360 75,527
Other liabilities 35,343 6,442
Total liabilities 1,151,940 1,349,027
Total stockholders' equity 913,124 868,604
Total liabilities and
stockholders' equity $
2,065,064 $
2,217,631
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 24, October 26, October 24, October 26,
2020 2019 2020 2019
---
Contract revenues $
810,256 $
884,115 $
2,448,500 $
2,602,079
---
Costs of earned revenues, excluding depreciation and amortization(1) 658,355 724,378 1,996,514 2,146,527
General and administrative2,3 62,628 69,875 195,871 193,613
Depreciation and amortization 42,313 47,356 132,313 140,941
Goodwill impairment charge4 - 53,264
---
Total 763,296 841,609 2,377,962 2,481,081
---
Interest expense, net5 (4,710) (13,128) (25,020) (38,239)
Gain on debt extinguishment6 - 12,046
Other income, net 3,708 1,407 7,921 11,111
---
Income before income taxes 45,958 30,785 65,485 93,870
Provision for income taxes7 12,032 6,556 26,953 25,466
---
Net income $
33,926 $
24,229 $
38,532 $
68,404
===
Earnings per common share:
Basic earnings per common share $
1.06 $
0.77 $
1.21 $
2.17
===
Diluted earnings per common share $
1.05 $
0.76 $
1.20 $
2.15
===
Shares used in computing earnings per common share:
Basic 31,878,583 31,502,543 31,744,199 31,480,759
===
Diluted 32,425,300 31,826,845 32,106,661 31,811,505
===
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 DECLINE %'s
Contract Revenues Non-GAAP GAAP -
Decline Non-GAAP -
Revenues - from storm
restoration
- Organic % Organic
GAAP services Contract Decline %
Revenues
Quarter Ended October 24, 2020 $
810,256 $
(8,894) $
801,362 (8.4)% (9.4)%
Quarter Ended October 26, 2019 $
884,115
$ $
884,115
Nine Months Ended October 24, 2020 $
2,448,500 $
(8,894) $
2,439,606 (5.9)% (6.1)%
Nine Months Ended October 26, 2019 $
2,602,079 $
(4,716) $
2,597,363
NET INCOME AND NON-GAAP ADJUSTED EBITDA
Quarter Quarter Nine Months Nine Months
Ended Ended Ended Ended
October 24, October 26, October 24, October 26,
2020 2019 2020 2019
Reconciliation of net income to Non-GAAP Adjusted EBITDA:
Net income $
33,926 $
24,229 $
38,532 $
68,404
Interest expense, net 4,710 13,128 25,020 38,239
Provision for income taxes 12,032 6,556 26,953 25,466
Depreciation and amortization 42,313 47,356 132,313 140,941
Earnings Before Interest, Taxes, Depreciation & Amortization ("EBITDA") 92,981 91,269 222,818 273,050
Gain on sale of fixed assets (4,001) (2,241) (9,207) (13,785)
Stock-based compensation expense 3,796 2,694 10,490 8,450
Goodwill impairment charge4 53,264
Gain on debt extinguishment6 (12,046)
Charge for warranty costs(1) 8,200
Recovery of previously reserved accounts receivable and contract assets(3) (10,345)
Non-GAAP Adjusted EBITDA $
92,776 $
91,722 $
265,319 $
265,570
Non-GAAP Adjusted EBITDA % of contract revenues 11.5 10.4 % 10.8 10.2
%
%
%
Non-GAAP Adjusted EBITDA, excluding contract modification8 $
254,610
Non-GAAP Adjusted EBITDA, excluding contract modification % of contract revenues8 9.8
%
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, AND
NON-GAAP ADJUSTED DILUTED EARNINGS PER COMMON SHARE
Quarter Quarter Nine Months Nine Months
Ended Ended Ended Ended
October 24, October 26, October 24, October 26,
2020 2019 2020 2019
---
Reconciliation of net income to Non-GAAP Adjusted Net Income:
Net income $
33,926 $
24,229 $
38,532 $
68,404
---
Pre-Tax Adjustments:
Non-cash amortization of debt discount on Notes 643 5,068 6,732 15,016
Gain on debt extinguishment6 - (12,046)
Goodwill impairment charge4 - 53,264
Charge for warranty costs(1) - 8,200
Recovery of previously reserved accounts receivable and contract - (10,345)
assets(3)
Tax Adjustments:
Tax impact of the vesting and exercise of share-based awards (33) 163 (241) 801
Tax effect from net operating loss carryback under enacted CARES - (2,631)
Act7
Tax impact related to previous tax year filing - 1,092
Tax impact of pre-tax adjustments (177) (1,394) 113 (3,540)
---
Total adjustments, net of tax 433 3,837 45,191 11,224
Non-GAAP Adjusted Net Income $
34,359 $
28,066 $
83,723 $
79,628
===
Non-GAAP Adjusted Net Income, excluding contract modification8 $
72,378
Reconciliation of diluted earnings per common share to Non-GAAP
Adjusted Diluted Earnings per Common Share:
GAAP diluted earnings per common share $
1.05 $
0.76 $
1.20 $
2.15
Total adjustments, net of tax 0.01 0.12 1.41 0.35
---
Non-GAAP Adjusted Diluted Earnings per Common Share $
1.06 $
0.88 $
2.61 $
2.50
===
Non-GAAP Adjusted Diluted Earnings per Common Share, $
2.28
excluding contract modification8
Shares used in computing Non-GAAP Adjusted Diluted Earnings per 32,425,300 31,826,845 32,106,661 31,811,505
Common Share
===
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 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 (decline) growth is
calculated as the percentage change in Non-GAAP Organic Contract
Revenues over those of the comparable prior year periods. Management
believes organic (decline) 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. Management believes Non-GAAP Adjusted
Net Income is a helpful measure for comparing the Company's operating
performance with prior periods.
-- Non-GAAP Adjusted Diluted Earnings per Common Share - Non-GAAP Adjusted
Net Income divided by weighted average diluted shares outstanding.
-- Notional Net Debt - Notional net debt is a Non-GAAP financial measure
that is calculated by subtracting cash and equivalents from the
aggregate face amount of outstanding long-term debt. Management believes
notional net debt is a helpful measure to assess the Company's
liquidity.
Management excludes or adjusts each of the items identified below from Non-GAAP Adjusted Net Income 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 excludes the non-cash
amortization of the debt discount from its Non-GAAP financial measures
because it believes it is useful to analyze the component of interest
expense for the 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.
-- Goodwill impairment charge - The Company incurred a goodwill impairment
charge of $53.3 million for a reporting unit that performs installation
services inside third party premises. Management believes excluding the
goodwill impairment charge from the Company's Non-GAAP financial
measures assists investors' overall understanding of the Company's
current financial performance and provides management with a consistent
measure for assessing the current and historical financial results.
-- Gain on debt extinguishment - During the nine months ended October 24,
2020, the Company recognized a gain on debt extinguishment of $12.0
million in connection with its purchase of $401.7 million aggregate
principal amount of Notes for $371.4 million, including interest and
fees. Management believes excluding the gain on debt extinguishment from
the Company's Non-GAAP financial measures assists investors' overall
understanding of the Company's current financial performance and
provides management with a consistent measure for assessing the current
and historical financial results.
-- Charge for warranty costs - During the nine month 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.
-- 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.
-- 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 effect from a net operating loss carryback under enacted CARES Act -
For the nine months ended October 24, 2020, the Company recognized an
income tax benefit of $2.6 million during the first quarter from a net
operating loss carryback under the enacted U.S. Coronavirus Aid, Relief,
and Economic Security ("CARES") Act. The Company excludes this impact
because the Company believes it is not indicative of the Company's
underlying results or ongoing operations.
-- Tax impact of previous tax year filing - During the nine months ended
October 26, 2019, the Company recognized an income tax expense of $1.1
million on a previous tax year filing. The Company excludes this impact
because the Company believes it is not indicative of the Company's
underlying results or ongoing operations.
-- Tax impact of pre-tax adjustments - The tax impact of pre-tax
adjustments reflects the Company's estimated tax impact of specific
adjustments and the effective tax rate used for financial planning for
the applicable period.
Notes
(1 )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.
(2) Includes stock-based compensation expense of $3.8 million and $2.7 million for the quarters ended October 24, 2020 and October 26, 2019, respectively, and $10.5 million and $8.5 million for the nine months ended October 24, 2020 and October 26, 2019, respectively.
(3) 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.
(4) The Company incurred a goodwill impairment charge of $53.3 million during the nine months ended October 24, 2020 for a reporting unit that performs installation services inside third party premises.
(5) Includes pre-tax interest expense for non-cash amortization of the debt discount associated with the Notes of $0.6 million and $5.1 million for the quarters ended October 24, 2020 and October 26, 2019, respectively, and $6.7 million and $15.0 million for the nine months ended October 24, 2020 and October 26, 2019, respectively.
(6) During the nine months ended October 24, 2020, the Company purchased $401.7 million aggregate principal amount of its Notes for $371.4 million, including interest and fees. The purchase price was allocated between the debt and equity components of the Notes. Based on the net carrying amount of the Notes, the Company recognized a net gain on debt extinguishment of $12.0 million after the write-off of associated debt issuance costs. The Company also recognized the equity component of the settlement of the Notes.
(7) For the quarter and nine months ended October 24, 2020, the provision for income taxes includes less than $0.1 million and $0.2 million, respectively, of income tax benefit for the vesting and exercise of share-based awards. Additionally, for the nine months ended October 24, 2020, the Company recognized an income tax benefit of $2.6 million during the first quarter from a net operating loss carryback under the enacted CARES Act. For the quarter and nine months ended October 26, 2019, the provision for income taxes includes $0.2 million and $0.8 million, respectively, of income tax expense for the vesting and exercise of share-based awards. Additionally, for the nine months ended October 26, 2019, the provision for income taxes includes $1.1 million of income tax expense related to a previous tax year filing.
(8) During the nine months ended October 26, 2019, the Company entered into a contract modification in the second quarter that increased 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, $0.8 million of related performance-based compensation expense, and $1.0 million of stock-based compensation. On an after-tax basis, these items contributed approximately $7.3 million to net income, or $0.23 per common share diluted, for the nine months ended October 26, 2019. These amounts are excluded from the calculations of Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted Net Income and Non-GAAP Adjusted Diluted Earnings per Common Share for the nine months ended October 26, 2019.
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