Q3 2023 Dycom Industries Inc Earnings Call
Good day and thank you for standing by welcome to the Dotcom Industries, Inc. Third quarter 2023 results conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one one on your.
Telephone please be advised today's conference is being recorded I would like to hand, the conference over to your host today.
Mr. Steven Nielsen, President and Chief Executive Officer. Please go ahead.
Thank you operator, good morning, everyone. Thank you for attending this conference call to review, our third quarter fiscal 2023 results.
Going to slide two during this call we will be referring to a slide presentation, which can be found on our website's Investor Center main beige relative.
Relevant slides will be identified by number throughout our presentation.
Today, we have on the call grew that Ferrari, our Chief Financial Officer, and Ryan Urness, Our General Counsel now I will turn the call over to Ryan for Dash.
Steve All forward looking statements made during this conference call are provided pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1095.
Forward looking statements include all comments, reflecting expectations assumptions or beliefs about future events or performance that do not relate solely to historical periods.
These forward looking statements are subject to risks and uncertainties, which may cause actual results to differ materially from current projections, including those risks described in our annual report on Form 10-K filed March four 2022, together with our other filings with the U S Securities and Exchange Commission.
Forward looking statements are made solely as of the original broadcast date of this conference call and we assume no obligation to update any forward looking statements Steve.
Thanks, Ryan now moving to slide four and a review of our third quarter results.
As we review our results. Please note that in our comments today and in the accompanying slides we reference certain non-GAAP measures. We refer you to the quarterly report section of our website for a reconciliation of these non-GAAP measures to their corresponding GAAP measures now.
Now for the quarter.
Revenue was one that <unk> four 2 billion, an organic increase of 22, 1%.
As we deploy gigabit wireline networks wireless wireline converged networks and wireless networks. This quarter reflected an increase in demand from four of our top five customers.
Gross margin was 18, 4% of revenue and increased 103 basis points compared to Q3 2022.
Improved operating performance of 123 basis points in Q2 was partially offset by 20 basis points of higher fuel costs.
General and administrative expenses were seven 6% of revenue at all of these factors produced adjusted EBITDA of $114 6 million or 11% of revenue.
Earnings per share of $1 <unk> compared to <unk> 94 in the year ago quarter.
Liquidity was ample at $444 3 million improving sequentially.
Going to slide five.
Major industry participants are constructing or upgrading significant wireline networks across broad sections of the country.
These wireline networks are generally designed to provision gigabit network speeds to individual consumers and businesses either directly or wirelessly using <unk> technologies industry.
Industry participants have stated their belief that the single high capacity fiber network.
Cost effectively deliver services to both consumers and businesses, enabling multiple revenue streams from a single investment.
This view is increasing the appetite for fiber deployments and we believe that the industry effort to deploy high capacity fiber networks continues to meaningfully broaden the set of opportunities for our industry.
Increasing access to high capacity telecommunications continues to be crucial to society, especially in Rural America.
Infrastructure investment and job Jack concludes over $40 billion for the construction of rural Communications networks, and Unserved and underserved areas across the country.
This represents an unprecedented level of support in addition surpassed all states are commencing programs that will provide funding for telecommunications networks, even prior to the initiation of funding under the infrastructure Act.
We are providing program management planning engineering and design aerial underground and wireless construction and fulfillment services for gigabit deployments. These services are being provided across the country and numerous geographic areas to multiple customers.
These deployments include networks, consisting entirely of wired network elements and converged wireless wireline multi use networks.
For network deployment opportunities are increasing in rural America, as new industry participants respond to emerging societal initiatives.
We continue to provide integrated planning engineering and design procurement and construction and maintenance services to several industry participants.
Macroeconomic conditions, including those impacting the cost of capital may influence the execution of some industry players. In addition, the market for labor remains tight in many regions around the country.
Automotive and equipment supply change remained challenged particularly for the large truck chassis is required for specialty equipment.
Prices for capital equipment continue to increase.
It remains to be seen how long these conditions may persist.
Looking ahead. These factors will increase the likelihood that demand could fluctuate amongst customers. These fluctuations may result in a wider range of potential outcomes moving into next year.
Within this context, we remain confident that our scale and financial strength position us well to deliver valuable service to our customers.
Moving to slide six.
During the quarter organic revenue increased 22, 1% our top five customers combined produced 66, 5% of revenue increasing 27, 4% organically.
Demand increased from four of our top five customers all other customers increased 13, 3% organically.
AT&T was our largest customer at 24, 8% of total revenue or $258 2 million Atms.
AT&T grew 29, 4% organically.
This was our seventh consecutive quarter of organic growth with AT&T.
Lumen was our second largest customer at 13, 7% of revenue or $142 9 million.
Lumen grew organically 64, 5% excluding from both periods operation sold the right speed.
This was our third consecutive quarter of organic growth with lumen.
Revenue from Comcast was $108 8 million or 10, 4% of revenue Comcast was <unk> third largest customer.
Verizon was our fourth largest customer at $94 9 million or nine 1% of revenue.
Ryzen grew one 7% organically.
And finally revenue from frontier was $88 9 million or eight 5% of revenue.
Frontier grew a 115, 4% organically.
This is the second consecutive quarter, where our top five customers grew organically in excess of 25%.
And the 15th consecutive quarter, where all of our other customers in aggregate, excluding the top five customers have grown organically.
Of note fiber construction revenue from the electric utilities was $82 4 million in the quarter and increased organically 53, 6% year over year.
We have extended our geographic reach and expanded our program management and network planning services.
In fact over the last several years, we believe we have meaningfully increased the long term value of our maintenance and operations business, a trend, which we believe will parallel our deployment of gigabit wireline direct and wireless wireline converged networks as those deployments dramatically increase the amount of outside plant network that must be <unk>.
<unk> and maintained.
Now going to slide seven.
Backlog at the end of the third quarter was $6, one $1 6 billion versus $6 8 billion at the end of the July 2022 quarter, an increase of $88 million.
Of this backlog approximately three to $7 6 billion is expected to be completed in the next 12 months.
Backlog activity during the third quarter reflect solid performance as we booked new work and renewed existing work, we continue to anticipate substantial future opportunities across a broad array of our customers.
During the quarter, we received for Bluebird construction and maintenance agreements in Washington, Oregon, Nevada, Utah, Wyoming, Colorado, South Dakota.
Nebraska, Minnesota, Iowa in Florida.
For AT&T, a utility line locating agreement in Florida from charter construction and maintenance agreements in Texas, Michigan, Ohio, New York and Florida.
Windstream at construction agreement in Georgia, and various rural fiber construction agreements in Oregon, Wisconsin, and Missouri head.
Head count was 15167.
Now I will turn the call over to drew for his financial review and outlook.
Thanks, Steve and good morning, everyone going to slide eight contract revenues were 1.042 billion and organic revenue increased 22, 1%.
Adjusted EBITDA was $114 6 million or 11% of revenue compared to $83 1 million or nine 7% of revenue.
This reflects an improvement of 126 basis points compared to Q3 dollars 22.
Gross margin was 18, 4% of revenue and increased 103 basis points improve.
Improved operating performance of 123 basis points of gross margin was partially offset by 20 basis points of higher fuel costs.
G&A expense of seven 6% decreased from seven 8% of revenue in Q3, 'twenty two from improved operating leverage at the higher level of revenue and tight management of costs.
Net income was $1 80 per share compared to <unk> 94 per share in Q3 last year the.
The results for Q3 23 included tax benefits of $3 2 million or <unk> 11 per share compared to tax benefits of $3 million or <unk> 10 per share in Q3 dollars 22.
Investing in exercise of share based awards and credits related to tax filings for prior years.
The increase in earnings reflects higher adjusted EBITDA, lower depreciation and amortization and higher gains on asset sales, partially offset by higher stock based compensation and interest expense.
Going to slide nine.
Our financial position and balance sheet remains strong we ended Q3 with $500 million of senior notes 336 $875 million of term loan and no revolver borrowings cash and equivalents were $65 3 million and liquidity was ample at 444.
$3 million or.
Our capital allocation prioritizing organic growth followed by opportunistic share repurchases and M&A within the context of our historical range of net leverage.
Going to slide 10 cash flow used for operating activities was $4 5 million in Q3 to fund the sequential growth in operations.
Capital expenditures were $49 2 million net of disposal proceeds and gross Capex was $54 8 million.
The automotive and equipment supply chains remain challenged and we now expect fiscal 2023 full year capital expenditures net of disposals to range from $165 million to $175 million. This is a decrease compared to the low end of $180 million from our outlook previously provided.
The combined Dsos of accounts receivable and net contract assets was 112 days an increase of five days sequentially as we grew with several large customers during the quarter.
Going to slide 11.
Each year, our January quarterly results are impacted by seasonality, including in climate weather fewer available work days due to the holidays reduced daylight work hours as well as the restart of calendar payroll taxes.
These and other factors may have a pronounced impact on our actual results for the January quarter.
As we look ahead to the quarter ending January 28, 2023, we expect contract revenues to increase mid to high single digit as a percentage of contract revenues as compared to the quarter ended January 29 2022.
And we expect non-GAAP adjusted EBITDA percentage of contract revenues to increase modestly compared to Q4 of last year.
We also expect 11 8 million of net interest expense, reflecting higher market interest rates, a 27% effective income tax rate and $30 1 million diluted shares now I will turn the call back to Steve.
Thanks drew moving to slide 12, this quarter, we experienced solid activity and capitalized on our significant strengths first and foremost we maintained significant customer presence throughout our markets.
We are encouraged by the breadth in our business.
Our extensive market presence has allowed us to be at the forefront of evolving industry opportunities telephone companies are deploying fiber to the home to enable gigabit high speed connections increasingly rural electric utilities are doing the same.
Dramatically increased speeds to consumers are being provisioned and consumer data usage is growing particularly upstream.
Wireless construction activity in support of newly available spectrum bands is increasing this year.
Federal and state support for rural deployments of Communications networks has dramatically increased increasing in scale and duration.
Cable operators are deploying fiber to small and medium businesses and enterprises a portion of those deployments are in anticipation of the customer sales process.
Deployments to expand capacity as well as new build opportunities are underway.
Customers are consolidating supply chains, creating opportunities for market share growth and increasing the long term value of our maintenance and operations business.
As our nation and industry navigate increased economic uncertainty, we remain encouraged that a growing number of our customers are committed to multiyear capital spending initiatives.
We are confident in our strategies the prospects for our company the capabilities of our dedicated employees and the experience of our management team.
Now operator, we will open the call for questions.
Thank you ladies and gentlemen, if you have a question at this time. Please press star one on your telephone.
Operator, good morning, everyone. Thank you for attending this conference call.
Our first question comes from the line of Sean Eastman with Keybanc. Your line is open. Please go ahead.
Good morning, guys. Thanks for taking my questions.
Sean.
So I just wanted to start on the on the revenue guidance for the fourth quarter I think last quarter, you guys had highlighted normal seasonal moderation going into the fourth quarter. Obviously now that the third quarter revenue came in higher and it seems like a bit of a more pronounced seasonal moderation into <unk>. So.
Was there some pull forward there maybe just what's happening under the Hood.
And what what should we take away from the step down from the.
The low 20% growth too.
Sort of the mid to high single digit growth in the guidance for the fourth quarter as we think about growth prospects into next year.
Yes, so Sean and I think we commented on this on the last call that when you have a really strong year and we've had a really strong first three quarters its not unusual for the fourth quarter to be somewhat weaker.
With respect to growth rate and we talked about this last time.
We have a quarter, that's disproportionately impacted by weather by holidays by daylight hours.
And so.
I think that that is certainly a factor I think the other thing that we highlighted.
In the in the comments in the slide is as we're looking ahead, we're taking a prudent view towards the kind of the macroeconomic effects of an increase cost of capital.
And Thats just something at this point, we're not giving guidance for next year, but we're just thinking about kind of what the consequences of that are.
On the overall economy.
Okay. Thanks for that Steven and then just drilling in on that comment specifically around cost of capital and the potential for a wider range of outcomes moving into next year.
I mean is that comment sort of in advance of.
Some potential squishy and ask just given the developments since we heard from you last quarter or are you starting to see evidence that some work is going on the shelves around the kind of macro uncertainty.
Well with respect to kind of that macro uncertainty Sean I mean, we look at our short cycle businesses. We continue to have signals that the economy is growing it's a little slow.
But but it's continuing.
<unk> going to grow.
I think we were encouraged we've had a number of customers in the last month.
That have reiterated long term plans are add large fiber deployments.
But that being said with the with the increase in the cost of capital. If you look at where interest rates are.
We think it's just prudent to remember a couple of three things.
When we've been through periods of higher cost of capital that does pressure.
Short term investment cases on the other hand, what we hear from our customers.
Is that what where many of the programs that we are our strategic more strategic a better more.
More strategic and more durable.
And so you balance that against as things as interest rates have gone up that.
If they go up further cost of capital goes up further or theirs.
A pronounced impact on the consumer that there could be an impact on the business.
So just trying to take a prudent outlook as we look ahead.
Okay Fair enough, Steve I'll turn it over there. Thank you.
Thank you and one moment for our next question.
Our next question comes from the line of Alex Rygiel with B Riley. Your line is open. Please go ahead.
Thanks, Good morning, Steve.
Hey, Alex.
Couple of quick questions here first your comment about anticipating substantial future opportunities does this suggest you expect your backlog to increase substantially in the near term.
Alex as we've talked about before with backlog.
It's calculated looking backwards, we've had strong growth.
So that's not necessarily reflected in the backlog.
We were encouraged with the awards that we had this quarter I mean, we have a.
A broad set of renewals as well as a little bit of new work with lumina.
Nice new locate agreement with AT&T as well as other renewals with other customers.
So we feel we feel good about the opportunity set in the business again.
Hard to not be encouraged when you have a customer last week.
Outlined their fiber plans and in 30 markets across the country.
And then you lowered your Capex budget this year.
Is this to do.
A difficult supply chain or a softer demand outlook.
Now, we have $80 million of equipment on order and we're looking at an order.
One particular type of equipment that would be the largest I think probably in the company's history. So we have lots of appetite for equipment, yes.
Just a little bit slow to arrive, but we'll be happy when it gets here.
Thank you I'll get back in the queue.
Thank you and one moment for our next question.
Our next question comes from the line of Adam Palmer with.
Thompson Davis your line is open. Please go ahead.
Hey, good morning, guys nice quarter.
Steve in terms of the wider range of outcomes next year are you are you trying to say that you see a scenario where revenues.
Or it's just hard to tell how much it could be up.
Adam we're not giving guidance again, I guess, what I would say is if you think about when we had this call a year ago.
Fed was still buying mortgage and government securities and hadn't raised the rate the rate was effective fed funds rate was effectively zero and so if you think about the cumulative effect of all of those increases since then at one probably coming up on that.
Fed watch here, but probably another one coming soon we just want to make sure that people say understand that theres a little more uncertainty as we go ahead, we got lots of opportunity.
But we've also been rounded up to know that when the cost of capital goes up.
Can have an affect economic activity, which.
May affect our customers, but we're encouraged we work for big customers that have long term programs.
We are.
We are working on a program now thats coming on two decades of continuous employment on that fiber program and they're actually that customers accelerating right now.
But we just want to make sure we have.
<unk>.
Expectation for next year.
And then.
Related to that customer you just mentioned.
Are you.
That the large program from them that was yes.
Outside of their traditional footprint or is there still a negative impact from that in your third quarter.
Yes, there was there was still an impact it will be less in this quarter and we think it will be immaterial next year.
The year over year growth was really driven.
Bye.
Increased activity around fiber deployments in their footprint as well as the addition of another state that we started during the quarter.
So so happy with with the progress there.
Okay, Great and then last one for me can you comment at all on.
Bright speed I don't see any awards.
From them in Q3, there were some in Q2 and I'm just curious if that over time could become a top 10 customer.
Well one way to think about it Adam is we had just call it $8 million of revenue in the quarter because the deal closed at the beginning of October . So there was only a month of activity for <unk>.
Modeling purposes, if you look backwards about 20% to 25%.
Of our historic alumina revenue is associated with whats gone to bright speed.
I think if you can do the math.
Definitely be a top 10 will hope they get even bigger.
Sure.
Ramping up activities with them right now.
Great I'll turn it over.
Thank you and one moment for our next question.
Our next question comes from the line of <unk> <unk> with Wells Fargo. Your line is open. Please go ahead.
Great. Thanks, Thanks for taking the question so Steve your margins have been moving up nicely. This year I know the strong revenue growth and operating leverage has certainly been a big driver of that but just wondering if you feel like youre getting.
Economics are terms on newer contracts, you're signing or renewed based on a fairly tight labor market. It's still a very high level of demand or has there been any pushback from customers on kind of new contract pricing, reflecting the new economic realities.
Yes.
Yes.
I don't know that we have much to add from what we said last quarter Eric.
Eric I mean, we're encouraged with the dialogue that we're having with customers.
And really don't have a whole lot to add on that topic.
Okay fair enough.
And just curious any update you're seeing from the cable companies I know that they've been embarking on these mid split upgrades in.
One of the largest hoping to launch DOCSIS vornado.
As soon as next year, just wondering if you kind of see a path to <unk>.
Turning to growth with cable, particularly with your largest cable company that's been a little bit softer over the last couple of years.
Yes, we actually did have growth in the quarter with charter so that was encouraging.
Year over year.
And I think what we generally said for all the cable operators as they are aggressive competitors, they've got big plans for their network their primarily.
Addressing increased capacity through technical upgrades, we're happy to participate.
Participate in those.
But as I've also said they will do that within their normal capital intensity.
Range so.
So some good opportunities there.
And working hard.
Great. Thanks, and I'll just squeeze one more in Steve just on the cost of capital discussion. Just wondering if you think may be private capital could provide help provide a boost.
Some of the fiber builders, we've heard about two large carriers potentially assessing jbs.
And it seems like that could become another avenue for them to source capital maybe at more attractive terms in the public market. So just wondering when you get your thoughts on that.
Yes, I think we're encouraged anytime we read press reports that that our industry or our customers are attracting interest from outside capital.
I think fiber has clearly become an asset class that infrastructure funds want to invest in.
And so we're following the reports dislike like everybody else.
And we think they are encouraging I think the other source of capital.
Coming in next calendar year of course is the federal capital.
But we're already seeing from the Beach plan, but we're also seeing states invest in broadband.
We saw good activity with our ROI.
Royal fiber deployments for.
For the electric the rural electric utilities that was up 53% almost 8% of revenue. So what there is lots of sources of capital, but interest rates are higher and you have to consider that as you look ahead.
Fair enough thanks, Steve.
Thank you and one moment for our next question.
And our next question comes from the line of Brent Thielman with D. A Davidson. Your line is open. Please go ahead.
Hey, Thanks, Good morning, Steve.
Thanks Brent.
It is still experiencing substantial growth despite the issues of labor availability or access to specialty equipment I'm, just curious how youre sort of finding ways to navigate around some of these issues.
Are these sort of lack sufficient temporary measures that might be weighing on otherwise great margins that you put out today.
Well, Brett I mean look it has been our folks in the field have worked really hard if you.
Do you think about this quarter it was up a $188 million year over year.
I think through three quarters organic revenue growth was in excess of $500 million. So we're working really hard there are cost to growth.
And certainly those are things that we're working with I think the good news is.
With the breadth of our footprint and the experience of our <unk>.
Yield management.
These are organizations that have been through growth before and.
We can always do better we're always learning and as I always say Bret half the businesses.
Worse than average so there's always something to work out.
Okay.
I appreciate that and then Steve I mean, it looks like.
Good operating leverage here, maybe if you could just speak to yes.
Some of the upward pressures youre seeing on G&A, just beyond the need to support the growth and can we still kind of thinking about high single digit percentages in the right long term range.
So look I think again, we've had a number of initiatives that we have been working at for years, because with G&A Youre never done right. There is always something else to work on.
We don't see real pressures in G&A.
But actually streamline the organization and a lot of ways because of the pandemic and the way we think about back office functions.
And.
So there are certainly pressures there, but but all of the things that we had been all the projects we are working on to take.
Those cost out.
<unk> by their progress.
Okay, and then Steve I guess, if you do see the reversion to mid to high single digits. This quarter I know any number of things could play out but.
Would you expect it to be more benefits to cash flow.
Oh, yes, absolutely and drew why don't you just talk that through yes, Brent clearly we've grown sequentially in the quarter and then for the for the full year as well so far.
We're going to use some working capital as we have grown the revenue.
We're working at it.
Every day and working hard on collecting the working capital in the fourth quarter.
Yeah, I think Brian as you know you follow the company a long time fourth quarter tends to be a seasonally strong quarter for operating cash flow.
And.
Based on seasonality and we're working hard to make that happen this year or two.
Yes, okay, Thanks, Scott and good luck.
Thank you and one moment for our next question.
Our next question comes from the line of Noelle Dilts with Stifel. Your line is open. Please go ahead.
Hi, Thank you first I just had a housekeeping question I was wondering if you had wireless as a percentage of revenues.
Yes, it was just less than 6% Noel grew over 30%.
So it was a nice quarter for wireless.
Perfect.
And then AT&T on its call.
And its release you don't look like home passing has declined.
Pretty substantially in the third quarter and they talked about their capex being weighted toward the first half of the year.
It doesn't seem like you're seeing any of that in your revenue with AT&T. So I was curious if you could expand upon how we should think about the type of work that youre doing for AT&T is that should we be focused on.
Home pass things or are there other buckets of capex that it becomes important.
And to what extent that potential.
Maybe moderation in AT&T spending is embedded in your fourth quarter guidance.
Yes, so we do provide a wide range of services to AT&T Noel as I as I mentioned.
As we had in our comments we are starting a large locating agreement with them, we're going to hire two to 300 people for that for that contract in the fourth quarter. So we see that as a growth area. We have the wireless and then of course, we have the maintenance msas as well as the <unk>.
Well as the fiber program.
I guess I guess, what I would say is last week.
At an Investor Conference.
<unk> reiterated a long term plan through 2025 talks about the components of those fiber <unk>.
And certainly that is a.
A significant factor in our business.
But it's not the only thing we do for them.
And we still see.
Some good opportunities there.
Yes.
Okay.
And then thanks, and then just on you mentioned the federal capital coming into the market.
It looks like they're moving through the mapping process.
Any thoughts on how youre thinking about the timing of the federal capital.
Flowing in as that kind of a late calendar 2023 2024 event.
Any thoughts there would be appreciated.
Yes. So the map was I think published November 18th or sometime last week and that starts a challenge process to refine.
The addresses that are truly unserved or underserved.
Concludes in January and then the NTIA announced that they'd like to have final decisions made by the end of June .
I thought it was interesting noelle.
The approach that they're taking around the challenges is that you can both challenge on actual.
Our capability to an address or also whats advertise to that address.
And so we may find out that there are more underserved addresses and people think so.
I think it's encouraging but I don't want to diminish the.
Impact that we've seen is a rural fiber with art off with state funds.
And actually cares Act and ARPA, there's just a number of programs that are already underway.
Providing.
Public capital.
Okay. Thank you very much.
Okay.
Thank you and again if you have a question at this time. Please press star 111 moment for our next question.
And our next question comes from the line of Avi Horserace with UBS. Your line is open. Please go ahead.
Thanks, guys Avi dropped puts on for Steve Fisher.
So it looks like head count is continuing to grow at about 2% year over year.
Wondering if you could have hired more people would you have done so or.
How much of a screen on group has labor Ben.
Yes, I think what we'd say it will be about.
It's still a tight labor market.
We're sub 4% unemployment.
A little bit easier to hire than six months ago, but that just means a little bit. They are still that's still something that we're working hard at we continue to improve on our ability to recruit and onboard.
And so I do think that there.
It's a little bit better.
It is.
We always get the work done that we get done had we got more people, we probably would have got more work done, but it's always hard to quantify that exactly.
Makes sense.
And I guess also so you booked a few three year contract.
Are you getting more comfortable booking multiyear deals how are you managing the cost base in these contracts compared to earlier in the year or a year ago.
Well I think clearly.
We as well as everybody else in our industry is aware of the effects of inflation. So we have to be thinking about when we make those commitments what the cost curve is going to be not only now but next year in the year there.
Years after.
I think we continue to.
Be comfortable in doing that as long as we make sure that we get it right because we don't want to make commitments that.
That we can't keep.
That's always our first objective, particularly at a time of uncertainty and where you still have pretty significant inflation cost inflation, particularly on the capital equipment side labor, it's still there.
Got it thank you.
Thank you and one moment for our next question.
Our next question comes from the line of.
Alan <unk> with Sylvan Lake asset management. Your line is open. Please go ahead.
Hi, Thank you.
The story here has been a recovery from really what was the worst margins in your history last year and Youre comping against probably the worst quarter this coming quarter.
And you Havent made it back anywhere close to where margins were years ago, and just 567 years ago. We know there is the Verizon impact on the industry has hurt you as well, which should be finished as you said basically by the end of the year, but can you talk about the prospect of margin expansion, regardless of where revenues are.
Well clearly al and we have talked about the impact of this large.
Customer program, and so getting that out of the way certainly is helpful.
I think the.
The other thing is we've always said is to continue to get a broad distribution of growth.
Public capital coming into the market.
This year or next calendar year certainly is helpful.
I think it's also helpful. When we see customers that have large announced growth plans, where we are in.
Where we've already got existing facility. So that we can get operating leverage.
Initially rather than having to go through the startup phase from a facilities perspective.
So so I think as we as we said earlier there is always work to do.
But we are encouraged.
But some of the headwinds that we've had to deal with are dissipating.
Offset in part by what's going on in the overall economy with respect to inflation.
Right. Thank you start comping, a lot easier comps on gas prices this coming year, so that should <unk>.
With me here in the October quarter. It was about a 20 basis point headwind.
Headwind, so that gets better but labor cost more equipment costs more.
So there are certainly there are certainly other cost elements, where we're still working hard to manage.
Their effect.
Are you finding that industry capacity is constrained in general given you're one of the larger players and its costing you more it's clearly costing some of the smaller players a lot more without access to capital and I'm, assuming that the customers understand that as well and youre getting some pricing to offset that.
It's still going to have any Delaware.
Think about customers other than to say as we are.
We are encouraged with the continued dialogue that we're having that.
That we make sure that we identify those opportunities where we can perform best for the customer and if we perform well for them then they will have opportunities to have good returns for investors.
Great. Thank you.
Thank you and I'm showing no further questions at this time I would like to turn the conference back over to Steven Nielsen for any further remarks.
Well, we thank everybody for your time and attendance wish Yue.
Good holiday and we will talk to you at the end of February . Thank you.
This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
Okay.
Okay.
Okay.
Okay.
Okay.