Q4 2024 Dycom Industries Inc Earnings Call
Operator: Good day, and thank you for standing by. Welcome to Dycom Industries' fourth quarter results conference call. At this time, all participants are in a listen-only mode.
Good day and thank you for standing by welcome to Die come Industries fourth quarter results Conference call.
At this time all participants are in a listen only mode.
Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised.
After the speaker's presentation, there will be a question and answer session.
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You will then hear an automated message advising your hand is raised.
Steven E. Nielsen: To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host today, Mr. Steven Nielsen, President and Chief Executive Officer. Please go ahead, sir.
To withdraw your question. Please press star one again.
Please be advised that today's conference is being recorded.
I would now like to hand, the conference over to your host today, Mr. Steven Nielsen President and Chief Executive Officer. Please go ahead Sir.
Steven E. Nielsen: Thank you, operator. Good morning, everyone. Thank you for attending this conference call to review our fourth quarter fiscal 2024 results. I'm 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 page. Relevant slides will be identified by numbers throughout our presentation. Today we have on the call Drew Deferrari, our Chief Financial Officer, and Ryan Urness, our General Counsel. Now, I will turn the call over to Ryan Urness.
Steven E. Nielsen: Thank you operator, good morning, everyone. Thank you for attending this conference call to review, our fourth quarter fiscal 2024 results going to slide two.
Steven E. Nielsen: During this call we will be referring to a slide presentation, which can be found on our website's Investor Center main page relevant slides will be identified by number throughout our presentation.
Steven E. Nielsen: Today, we have on the call drew that Ferrari, our Chief Financial Officer, and Ryan Urness, Our general counsel.
Steven E. Nielsen: I'll turn the call over to Ryan or at Ash.
Ryan F. Urness: Thank you, 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 1995. Forward-looking statements include all comments reflecting our expectations, assumptions, or beliefs about future events. These forward-looking statements are subject to risks and uncertainties, which may cause actual results to differ materially from current projections, including those risks discussed in the company's 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.
Ryan F. Urness: Thank you 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 1995.
Ryan F. Urness: Forward looking statements include all comments, reflecting our expectations assumptions or beliefs about future events.
Speaker Change: These forward looking statements are subject to risks and uncertainties, which may cause actual results to differ materially from current projections, including those risks discussed in the company's filings with the U S Securities and Exchange Commission.
Speaker Change: 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.
Steven E. Nielsen: Thanks, Ryan. Now moving to slide four and a review of our fourth 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.
Speaker Change: Steve.
Steve: Thanks, Ryan now moving to slide four and a review of our fourth quarter results as.
Speaker Change: As we review our results. Please note that 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.
Steven E. Nielsen: Now for the quarter. Revenue increased year-over-year to $952.5 million, an increase of 3.8%. However, organic revenue declined 2.5%.
Speaker Change: For the quarter.
Speaker Change: Revenue increased year over year to $952 5 million and.
Speaker Change: An increase of three 8%.
Speaker Change: Organic revenue declined two 5% as we deploy gigabit wireline networks wireless wireline converged networks and wireless networks. This quarter reflected an increase in demand for two of our top five customers.
Steven E. Nielsen: As we deployed gigabit wireline networks, wireless wireline converged networks, and wireless networks, this quarter reflected an increase in demand from two of our top five customers. However, organic revenue was slightly below the lower end of our expectations due to significant winter weather across broad sections of the country during the latter part of January. The year-over-year effect of the weather on our results was particularly pronounced as we did not experience significant winter weather last January.
Speaker Change: Organic revenue was slightly below the lower end of our expectations due to significant winter weather across broad sections of the country. During the latter part of January the year over year effect of the weather on our results was particularly pronounced as we did not experience significant winter weather last January.
Steven E. Nielsen: Gross margin was 16.9% of revenue and increased 37 basis points compared to the fourth quarter of fiscal 23. However, margins were also affected by January's weather as revenue per business day declined notably from December. General and administrative expenses were 7.7% of revenue, and all of these factors produced adjusted EBITDA of $93.7 million, or 9.8% of revenue compared to $83.1 million, or 9.1% of revenue in the year-ago quarter and earnings per share of $0.79. Operating cash flow was very strong in the quarter at $325.1 million. Liquidity was robust at $703.6 million. Our net leverage ratio was 1.41, the lowest since the October quarter of 2012.
Speaker Change: Gross margin was 16, 9% of revenue and increased 37 basis points compared to the fourth quarter of fiscal 'twenty. Three margins were also affected by january's weather as revenue per business day declined notably from December.
Speaker Change: General and administrative expenses were seven 7% of revenue at all of these factors produced adjusted EBITDA of $93 7 million or nine 8% of revenue compared to $83 1 billion or nine 1% of revenue in the year ago quarter and earnings per share of <unk> 79.
Speaker Change: Operating cash flow was very strong in the quarter at $325 1 million liquidity was robust at $703 6 million. Our net leverage ratio was 141, the lowest since the October quarter of 2012.
Steven E. Nielsen: During the quarter, we repurchased 260,000 shares of our common stock for $29.4 million. Now going to slide five. Today, major industry participants are constructing or upgrading significant wireline networks across broad sections of the country. These wireline networks are generally designed to provide gigabit network speeds to individual consumers and businesses, either directly or wirelessly, using 5G technology.
Speaker Change: During the quarter, we repurchased 260000 shares of our common stock for $29 4 million.
Speaker Change: Now going to slide five.
Speaker Change: Today major industry participants are constructing or upgrading significant wireline networks across broad sections of the country.
Speaker Change: These wireline networks are generally designed to provision gigabit network speeds to individual consumers and businesses either directly or wirelessly using <unk> technologies.
Steven E. Nielsen: Industry participants have stated their belief that a single high-capacity fiber network can most 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's 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 for rural America. The Infrastructure Investment and Jobs Act includes over $40 billion for the construction of rural communications networks in unserved and underserved areas across the country under the BEAD program. This represents an unprecedented level of support and meaningfully increases the rural market that we expect will ultimately be addressed. All states and territories have submitted their initial BEAD proposals.
Speaker Change: Industry participants have stated their belief that a single high capacity fiber network and most cost effectively deliver services to both consumers and businesses.
Speaker Change: Abeline multiple revenue streams from a single investment.
Speaker Change: This view is increasing the appetite for fiber deployments and we believe that the industry's effort to deploy high capacity fiber networks continues to meaningfully broaden our set of opportunities for our industry.
Speaker Change: Increasing access to high capacity telecommunications continues to be crucial to society, especially for rural America. The infrastructure investment and jobs Act includes over $40 billion for the construction of rural Communications networks, and Unserved and underserved areas across the country under the <unk> program.
Speaker Change: This represents an unprecedented level of support and meaningfully increases the rural market that we expect will ultimately be addressed.
Speaker Change: All states and territories have submitted their initial beat proposals as of early this week. One state has completed all 10 required steps while 15, others have completed nine of the tab. Once all 10 steps are completed a state can request, 20% or more of its allocated <unk> funding.
Steven E. Nielsen: As of early this week, one state has completed all 10 required steps, while 15 others have completed 9 of them. Once all 10 steps are completed, a state can request 20% or more of its allocated BEAD funding. In addition, substantially all states have commenced programs that will provide funding for telecommunications networks even prior to the initiation of funding under the Infrastructure Act. [inaudible] These services are being provided across the country in numerous geographic areas for multiple customers. These deployments include networks consisting entirely of wired network elements and converged wireless wireline multi-use networks.
Speaker Change: In addition, substantially all states have commenced programs that will provide funding for telecommunications networks, even prior to the initiation of funding under the infrastructure Act.
Speaker Change: 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 for multiple customers.
Speaker Change: These deployments include networks, consisting entirely of wired network elements and converged wireless wireline multi use networks fiber.
Steven E. Nielsen: Fiber 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. Stabilizing macroeconomic conditions may well influence the execution of some industry plans. In addition, the market for labor has improved in many regions around the country. Automotive and equipment supply chains are also improving, although the supply of mid-duty chassis is still somewhat constrained. However, prices for capital equipment continue to increase but at a moderating rate.
Speaker Change: Fiber network deployment opportunities are increasing in rural America, as new industry participants respond to emerging societal initiatives.
Speaker Change: We continue to provide integrated planning engineering and design procurement and construction and maintenance services to several industry participants.
Speaker Change: Stabilizing macroeconomic conditions may well influence the execution of some industry players. In addition, the market for labor has improved in many regions around the country.
Speaker Change: Automotive and equipment supply chains are also improving.
Speaker Change: Although the supply of mid duty chassis is still somewhat constrained.
Speaker Change: Rice's for capital equipment continue to increase but at a moderating rate.
Steven E. Nielsen: For several customers, we expect the pace of deployments to increase this year, including two significant customers whose capital expenditures were more heavily weighted toward the first half of calendar year 2023. We are encouraged that, despite winter seasonality, revenue from these two customers actually increased from our October quarter to our January quarter. We expect this trend to continue. More generally, we see organic growth resuming in our July quarter. Overall, we are encouraged by improving financial markets with long-term interest rates substantially lower than six months ago and expect these lower rates, if sustained, to support future industry investment. Within this context, we remain confident that our scale and financial strength position us well to deliver valuable services to our customers. Moving to slide six.
Speaker Change: For several customers, we expect the pace of deployments to increase this year, including two significant customers, whose capital expenditures were more heavily weighted towards the first half of calendar year 2023.
Speaker Change: We are encouraged that despite winter seasonality revenue from these two customers actually increased from our October quarter to our January quarter. We expect this trend to continue.
Speaker Change: More generally we see organic growth resuming in our July quarter.
Speaker Change: Overall, we are encouraged by improving financial markets with long term interest rate substantially lower than six months ago and expect these lower rates if sustained to support future industry investment.
Speaker Change: Within this context, we remain confident that our scale and financial strength position us well to deliver valuable service to our customers.
Speaker Change: Moving to slide six.
Steven E. Nielsen: During the quarter, revenue increased 3.8%. Our top five customers combined produced 58.6% of revenue, decreasing 13% organically. Demand increased from two of our top five customers. All other customers increased 17.8% organically. Lumen was our largest customer at 17.2% of revenue, or $164.2 million. Lumen grew organically 48.9%.
Speaker Change: During the quarter revenue increased three 8% our top five customers combined produced 58, 6% of revenue decreasing 13% organically demand increase from two of our top five customers all other customers increased 17, 8% organically.
Speaker Change: Lumen was our largest customer at 17, 2% of revenue or $164 2 million lumen grew organically 48, 9%. This was our eighth consecutive quarter of organic growth with <unk>.
Steven E. Nielsen: This was our eighth consecutive quarter of organic growth with Lumen. AT&T was our second largest customer at 17.1% of total revenue, or $162.7 million. In a seasonally weak quarter, AT&T grew sequentially for the first time in three quarters. Revenue from Comcast was $97.3 million, or 10.2% of revenue.
Speaker Change: AT&T was our second largest customer at 17, 1% of total revenue or $162 $7 million in a seasonally weak quarter AT&T grew sequentially for the first time in three quarters.
Speaker Change: Revenue from Comcast was $97 3 million or 10, 2% of revenue Comcast was <unk> third largest customer.
Steven E. Nielsen: Comcast was Dycom's third-largest customer, Charter was our fourth-largest customer at $70.3 million, or 7.4% of revenue. Charter grew 124.3% organically. And finally, Verizon was our fifth-largest customer at $64.1 million, or 6.7% of revenue.
Speaker Change: Charter was our fourth largest customer at $70 3 million or seven 4% of revenue charter grew a 124, 3% organically and finally, Verizon was our fifth largest customer at $64 1 million or six 7% of revenue.
Steven E. Nielsen: In addition, total revenue growth was 22.8% after excluding two customers whose spending was front-end loaded last year. This is the 20th consecutive quarter where all of our other customers, in aggregate, excluding the top five customers, have grown organically. Of note, fiber construction revenue from electric utilities was $83.7 million in the quarter.
Speaker Change: In addition, total revenue growth was 22, 8% after excluding two customers, who spending was front end loaded last year.
Speaker Change: This is the 20th consecutive quarter, where all of our other customers in aggregate, excluding the top five customers have grown organically.
Speaker Change: Of note fiber construction revenue from electric utilities was $83 7 million in the quarter.
Steven E. Nielsen: 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 extended and maintained. Now I'm going to slide 7.
Speaker Change: 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.
Speaker Change: A trend, which we believe will parallel our deployment of gigabit wireline direct in wireless wireline converged networks.
Speaker Change: As those deployments dramatically increase the amount of outside plant network that must be extended and maintained.
Speaker Change: Now going to slide seven.
Steven E. Nielsen: Backlog at the end of the fourth quarter was $6.917 billion versus $6.613 billion at the end of the October 2023 quarter, an increase of $304 million. Of this backlog, approximately $3.966 billion is expected to be completed in the next 12 months. Backlog activity during the fourth quarter reflects 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 from Frontier a construction and maintenance agreement in Florida. For Brightspeed, we received construction and maintenance agreements in Kansas, Ohio, Pennsylvania, New Jersey, Virginia, Tennessee, and North Carolina. Various rural fiber construction agreements in Washington, Missouri, Louisiana, Mississippi, Michigan, Indiana, Ohio, Kentucky, North and South Carolina; and various utility line locating agreements in California, New Jersey, Maryland, Virginia, and the District of Columbia. The head count was 15,611.
Speaker Change: Backlog at the end of the fourth quarter was $6 $91 7 billion versus 661 3 billion at the end of the October 2023 quarter, an increase of $304 million.
Speaker Change: Of this backlog of approximately $3 96, 6 billion is expected to be completed in the next 12 months.
Speaker Change: Backlog activity during the fourth quarter reflects 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 from frontier of construction and maintenance agreement and Florida for bright speed.
Speaker Change: Trucks at a maintenance agreements in Kansas, Ohio, Pennsylvania, New Jersey, Virginia, Tennessee, and North Carolina, various rural fiber construction agreements in Washington, Missouri, Louisiana, Mississippi, Michigan, Indiana, Ohio, Kentucky, North and South Carolina.
Speaker Change: Various utility line locating agreements in California, and New Jersey, Maryland, Virginia, and the district of Columbia.
Speaker Change: Head Count was 15611 now.
Drew Deferrari: Now I will turn the call over to Drew for his financial review and outlook. Thanks, Steve, and good morning, everyone. Going to slide 8. Contract revenues were $952.5 million, an increase of 3.8% compared to Q4 last year. However, organic revenue decreased 2.5% and was slightly below the lower end of our expectations due to significant winter weather across broad sections of the country during the latter part of January.
Speaker Change: Now I will turn the call over to drew for his financial review and outlook.
Drew Ferrari: Thanks, Steve and good morning, everyone going to slide eight contract revenues were $952 5 million, an increase of three 8% compared to Q4 last year.
Drew Ferrari: Organic revenue decreased two 5% and was slightly below the lower end of our expectations due to significant winter weather across broad sections of the country. During the latter part of January.
Drew Deferrari: Revenue from our recently acquired business was $57.5 million in Q4. Adjusted EBITDA was $93.7 million, or 9.8% of contract revenues, compared to 83.1 million or 9.1% in Q4'23. Adjusted EBITDA increased 78 basis points and reached the lower end of our expectation. Gross margins improved 37 basis points to 16.9% of revenue compared to 16.5% in Q4'23. We expected greater improvement in Q4, but results were impacted by the adverse winter weather experienced in January. G&A expense came in better than expected and was 7.7% of revenue compared to 7.8% in Q4'23. Net income was $0.79 per share compared to $0.83 per share in Q4 last year. The change in earnings reflects the $10.6 million increase in adjusted EBITDA plus higher gains on asset sales, offset by $8.6 million of higher depreciation and amortization, $3.4 million of higher interest expense, as well as higher stock-based compensation and income tax expense. Going to slide nine. Our financial position and balance sheet remain strong. We ended Q4 with $500 million of senior notes, $315 million of term loans, and no revolver borrowings outstanding.
Drew Ferrari: Revenue from our recently acquired business was $57 5 million in Q4.
Drew Ferrari: Adjusted EBITDA was $93 7 million or nine 8% of contract revenues compared to $83 1 million or nine 1% in Q4 'twenty three.
Drew Ferrari: Adjusted EBITDA increased 78 basis points and reached the lower end of our expectations.
Drew Ferrari: Gross margins improved 37 basis points.
Drew Ferrari: To 16, 9% of revenue compared to 16, 5% in Q4 23.
Drew Ferrari: We expect a greater improvement in Q4, but results were impacted by the adverse winter weather experienced in January.
Drew Ferrari: G&A expense came in better than expected and was seven 7% of revenue compared to seven 8% in Q4 23.
Drew Ferrari: Net income was <unk> 79 per share compared to <unk> 83 per share in Q4 last year.
Drew Ferrari: Change in earnings reflects the $10 $6 million increase in adjusted EBITDA, plus higher gains on asset sales offset by $8 6 million of higher depreciation and amortization $3 4 million of higher interest expense as well as higher stock based compensation and income tax expense.
Drew Ferrari: Going to slide nine our financial position and balance sheet remains strong. We ended Q4 with $500 million of senior notes $315 million of term loan and no revolver borrowings outstanding.
Drew Ferrari: Cash and equivalents were $101 1 million and liquidity was robust at $703 6 million.
Drew Ferrari: Our capital allocation prioritizes organic growth, followed by M&A and opportunistic share repurchases within the context of our historical range of net leverage.
Drew Deferrari: Cash and equivalents were $101.1 million, and liquidity was robust at $703.6 million. Our capital allocation prioritizes organic growth, followed by M&A, and opportunistic share repurchases within the context of our historical range of net leverage. Going to slide 10. Cash flows provided by operating activities were strong at $325.1 million in Q4. The combined DSOs of accounts receivable in that contract assets were 120 days. Capital expenditures were $52.7 million net of disposal proceeds, and gross capex was $57.4 million. Capital expenditures net for the full year of fiscal 2024 were $183.3 million.
Drew Ferrari: Going to slide 10.
Drew Ferrari: Cash flows provided by operating activities were strong at $325 1 million in Q4 the.
Drew Ferrari: The combined Dsos of accounts receivable and net contract assets were 120 days.
Drew Ferrari: Capital expenditures were $52 7 million net of disposal proceeds and gross Capex was $57 4 million cap.
Drew Ferrari: Capital expenditures net for the full year of fiscal 2024 were $183 3 million.
Drew Ferrari: Looking ahead to fiscal 2025, we expect net capex to range from $220 million to $230 million.
Drew Ferrari: During Q4, we repurchased 260000 shares of our common stock for $29 4 million.
Drew Ferrari: Going to slide 11 as.
Drew Ferrari: As we look ahead to the first quarter ending April 27, 2024, we expect organic revenues to range from in line to slightly lower as a percentage of contract revenues compared to Q1 'twenty for.
Drew Deferrari: Looking ahead to fiscal 2025, we expect net capex to range from $220 to $230 million. During Q4, we repurchased 260,000 shares of our common stock for $29.4 billion. Going to slide 11.
Drew Ferrari: This range reflects that Q1 of last year included revenue from certain customers as capital expenditures were more heavily weighted toward the first half of calendar 2023.
Drew Ferrari: In addition to the range of organic revenues, we expect approximately $60 million of acquired revenues.
Drew Deferrari: As we look ahead to the first quarter ending April 27, 2024, we expect organic revenues to range from in-line to slightly lower as a percentage of contract revenues compared to Q1-24. This range reflects that Q1 of last year included revenue from certain customers whose capital expenditures were more heavily weighted toward the first half of calendar 2023. In addition to the range of organic revenues, we expect approximately $60 million of acquired revenues. We also expect the non-GAAP adjusted EBITDA percentage of contract revenues to increase 25 to 75 basis points as compared to Q1 of last year. Additionally, we expect $5.5 million of amortization expense, $13.2 million of net interest expense, a 26% effective income tax rate, and 29.5 million diluted shares. As we look ahead to the quarter ending July 27, 2024, we expect organic revenue growth to resume. Now I will turn the call back to Steve. Thanks Drew.
Drew Ferrari: We also expect non-GAAP adjusted EBITDA percentage of contract revenues to increase 25% to 75 basis points as compared to Q1 of last year.
Drew Ferrari: Additionally, we expect $5 $5 million of amortization expense of $13 2 million of net interest expense of 26% effective income tax rate and $29 5 million diluted shares as.
Drew Ferrari: As we look ahead to the quarter ending July 27, 2024, we expect organic revenue growth to resume.
Drew Ferrari: Now I will turn the call back to Steve.
Steve: Thanks drew moving to slide 12, this quarter, we experienced solid activity and capitalized on our significant strengths.
Steve: First and foremost we maintained significant customer presence throughout our markets. We are encouraged by the breadth of 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.
Steve: Our all electric utilities are doing to say.
Steve: Dramatically increased speeds for consumers are being provisioned and consumer data usage is growing particularly upstream.
Steve: Wireless construction activity in support of newly available spectrum bands continues this year.
Steven E. Nielsen: Moving to slide 12, this quarter we experienced solid activity and capitalized on our significant strength. First and foremost, we maintain significant customer presence throughout our markets. We are encouraged by the breadth of our business. Our extensive market presence has allowed us to be at the forefront of evolving industry opportunities.
Steve: Federal and state support for roll deployments of communications networks is dramatically increasing in scale and duration.
Steve: Cable operators are increasing fiber deployments of rural America capacity expansion projects are underway.
Steve: Customers are consolidating supply change, creating opportunities for market share growth and increasing the long term value of our maintenance and operations business. We are pleased that many of our customers are committed to multiyear capital spending initiatives as our nation and industry experience improved economic conditions, we are confident in our.
Steven E. Nielsen: Rural electric utilities are doing the same. Dramatically increased speeds for consumers are being provided, and consumer data usage is growing, particularly upstream. Wireless construction activity in support of newly available spectrum bands continues this year. Federal and state support for rural deployments of communications networks is dramatically increasing in scale and duration. Cable operators are increasing fiber deployments in rural America.
Steve: Strategies the prospects for our company the capabilities of our dedicated employees and the experience of our management team now.
Speaker Change: Now operator, we will open the call for questions.
Speaker Change: Thank you.
Speaker Change: As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced.
Speaker Change: Withdraw your question. Please press star one again.
Speaker Change: Please standby, while we compile the Q&A roster.
Operator: Capacity expansion projects are underway, and customers are consolidating supply chains, creating opportunities for market share growth and increasing the long-term value of our maintenance and operations business. We are pleased that many of our customers are committed to multi-year capital spending initiatives as our nation and industry experience improved economic conditions. 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. As a reminder, to ask a question, please press star one on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.
Speaker Change: And our first question will come from Adam Tal Hammer from Thompson Davis Your line is open.
Speaker Change: Hey, good morning, guys, sorry about the January weather.
Speaker Change: While we wished we could have changed it but we could.
Speaker Change: I just want to make sure that I understand the Q1 revenue guide are you, saying.
Speaker Change: Organic is flat to slightly down year over year.
Thompson Davis: Yes, Thats correct Adam.
Steve: Hi.
Steve: The bright speed awards look significant I was curious if they could crack into the top five customers. This year.
Steve: Adam those who are a number of renewals of business as usual work that we have done in those territories for a long period of time, we're pleased with the with the commitment and the extension, we do see opportunities for right speed to accelerate they've got lots of work to get done.
Adam Robert Thalhimer: Please stand by while we compile the Q&A roster. And our first question will come from Adam Thalhimer from Thompson Davis. Your line is open. Hey, good morning guys.
Steve: Whether they crop top five.
Steven E. Nielsen: Sorry about the January weather. Well, we wished we could have changed it, but we couldn't. I just want to make sure that I understand the Q1 revenue guide. What are you saying? Organic is flat to slightly down year over year. Yes, that's correct, Adam. All right.
Speaker Change: Hard to say.
Steve: But certainly we have a good outlook for them this year.
Speaker Change: Okay, and then back of the envelope I'm getting to kind of high single digit.
Steve: Organic revenue growth in Q2, just curious if you'd comment on magnitude of that flipped back to positive.
Steven E. Nielsen: The Brightspeed Awards looked significant, and I was curious if they could crack the top five customers. Adam, those were a number of renewals of business as usual work that we have done in those territories for a long period of time. We're pleased with the commitment and the extension. We do see opportunities for Wrightspeed to accelerate. They've got lots of work to get done. Whether they crack the top five is hard to say, but certainly we have a good outlook for them this year.
Speaker Change: Yes, I think Adam what I would say is we're not guiding with that kind of specificity to the second quarter, but I would.
Speaker Change: And you're probably aware that we did have two significant customers from April to July last year that dropped about $115 million and so certainly not having that headwind is conducive to more on trend.
Speaker Change: Organic growth.
Speaker Change: Alright last one do you see both cable customers up this year.
Speaker Change: Again, they are both and in areas, where theyre trying to edge out their footprint into rural America Theyre doing capacity expansion.
Steven E. Nielsen: Okay, on the back of the envelope, I'm getting to kind of high single-digit Organic Revenue Growth in Q2, just curious if you would comment on the magnitude of that flip back to positive. Yeah, I think Adam, what I would say is we're not guiding with that kind of specificity to the second quarter, but I would, and you're probably aware that we did have two significant customers from April to July last year that dropped about 115 million. And so certainly not having that headwind is conducive to more on-trend organic growth. All right, last one.
Speaker Change: I think it really depends on.
Speaker Change: One relative to the other I'm not sure that is all that material, we're happy that both have great opportunities.
Speaker Change: Okay. Thanks, guys.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Sangeeta Jain from Keybanc capital markets. Your line is open.
Sangeeta Jain: Yes. Thank you for taking my question, Steve If I can ask you just to follow up on the guidance.
Sangeeta Jain: Usually don't give guidance two quarters out so I'm just trying to see what that may be a function of his digest elimination of the headwind that you just mentioned or is that more clarity in terms of customer spending that youre seeing.
Steven E. Nielsen: Do you see both cable customers up? Again, they're both in areas where they're trying to edge out their footprint into rural America. They're doing capacity expansion. I think it really depends on... One relative to the other, I'm not sure that is all that material. We're happy that both have great opportunities. Okay, thanks. Thank you.
Steve: Well I think one when you are calling inflection points, we like to help people. This is a business that does app cycles and so when we when we feel good about customer discussions of which we've had frequent and detailed discussions about this year's build plan.
Sangita Jain: Yes, thank you for taking my question. Steve, could I just ask you to follow up on the guidance? You usually don't give guidance two quarters out, so I'm just trying to see what that may be a function of. Is that just the elimination of the headwind that you just mentioned?
Steve: We thought it would be helpful to folks.
Sangeeta Jain: Given that we've had a couple of quarters that kind of flat organic growth.
Sangeeta Jain: So I think that was primarily.
Sangeeta Jain: What we were talking about why we provided the observation and the other thing is again.
Steven E. Nielsen: Or is that more clarity in terms of customer spending that you're seeing? Well, I think one thing when you're calling inflection points, we like to help people, you know, this is a business that does have cycles. And so when we when we feel good about customer discussions, of which we've had frequent and detailed discussions about this year's build plan, we thought it would be helpful to folks, given that we've had a couple quarters of kind of flat organic growth. So I think that was primarily what we were talking about or why we provided the observation.
Sangeeta Jain: Last year was a little bit unusual in that we did have a couple of customers that did slow down in the front half of the year and we're pleased that that we that they both grew.
Sangeeta Jain: In this quarter sequentially, we think that will happen in April and again in July.
Speaker Change: So I think that was the purpose.
Speaker Change: Okay.
Speaker Change: Great and if I can ask you one more on revenue contribution from acquisition. It looks like for Q was stronger than what you were anticipating.
Speaker Change: <unk> is also higher than what we were thinking so just trying to see if there's anything that you would like to point out in terms of the <unk> acquisition that may be outperforming versus your expectations.
Steven E. Nielsen: The other thing is, again, last year was a little bit unusual in that we did have a couple of customers that did slow down in the front half of the year. And we're pleased that they both grew sequentially this quarter. We think that'll happen again in April and again in July. So I think that was the purpose.
Speaker Change: The acquisition the <unk> acquisition that we closed last August is primarily in the southeast now the southeast had some difficult weather, but.
Speaker Change: Not as much perhaps as the rest of the country.
Speaker Change: And so I think that was helpful to.
Steven E. Nielsen: Great, and if I can ask you one more on revenue contribution from acquisition. It looks like 4Q was stronger than we were anticipating. Your F1Q guide is also higher than what we were thinking. So just trying to see if there's anything that you would like to point out in terms of the big M acquisition that may be outperforming versus expectations. The acquisition, the Bigham acquisition that we closed last August, is primarily in the southeast. Now the southeast had some difficult weather, but not as much perhaps as the rest of the country.
Speaker Change: The fourth quarter in the first quarter, we did close a small additional acquisition in February and so theres, probably at 20 or 30 basis point contribution from that acquisition. In addition to <unk>.
Speaker Change: And we all hope that as we acquire businesses that are there.
Speaker Change: We do a good job of finding the right ones and that they grow faster than trend because thats why we deploy capital.
Speaker Change: Got it and if I can squeeze in one more on capital allocation. Since you just mentioned the acquisition. It looks like you bought some shares back in the quarter not nearly as much as your authorization is you made a small acquisition just kind of wanted to see.
Steven E. Nielsen: And so I think that was helpful to the fourth quarter. In the first quarter, we did close a small additional acquisition in February. And so there's probably a 20 or 30 basis point contribution from that acquisition in addition to Bigham, and we'll hope that as we acquire businesses, we do a good job of finding the right ones and that they grow faster than trend because that's why we deploy CAPA.
Speaker Change: Do you think of capital allocation given your leverage is as comfortable as it is.
Speaker Change: Yes, I think sangeeta as we've always said, we first and foremost we want to allocate capital to be able to grow our business with customers organic growth.
Steven E. Nielsen: And if I can squeeze in one more on capital allocation, since you just mentioned the acquisition, it looks like you bought some shares back in the quarter, not nearly as much as your authorization. You made a small acquisition. I just kind of want to see where you think of capital allocation, given your leverage is as comfortable as it is. Yeah, I think Sangita, as we've always said, we want to allocate capital to be able to grow our business with customers. Organic growth is always the highest and best use of capital.
Speaker Change: It is always the highest and best use of capital and given our scale in the industry I think customers look to us to be able to grow with them.
Speaker Change: We are a significant part.
Speaker Change: Art of.
Speaker Change: Industry capacity, so that's always going to be number one and then number two.
Speaker Change: We're going to always evaluate.
Speaker Change: Share repurchases versus M&A.
Speaker Change: On a relative basis, it's an art not science I think what's interesting about the fiscal year. We just concluded is that we spent just under $50 million to repurchase shares we spent $122 million on an acquisition and at the end of the year net leverage was down.
Steven E. Nielsen: And given our scale in the industry, I think customers look to us to be able to grow with them. We are a significant part of industry capacity. So that's always going to be number one. And then, number two, we're going to always evaluate share repurchases versus M&A on a relative basis. It's an art, not a science.
Speaker Change: 25 basis points from where it ended the year before so I do think to your question, we certainly have the ability to invest.
Speaker Change: To create both growth and value.
Speaker Change: As we look ahead.
Speaker Change: Great. Thank you so much.
Steven E. Nielsen: I think what's interesting about the fiscal year we just concluded is that we spent just under $50 million to create both growth and value as we look ahead. Thank you so much. Thank you. Our next question will come from Alex Waters from B of A. Your line is open. Perfect. Thanks so much for taking my questions.
Speaker Change: Thank you.
Speaker Change: Our next question will come from Alex waters from Bofa. Your line is open.
Alex Rygiel: Perfect. Thanks, so much for taking my questions, maybe just first.
Alex Rygiel: Steve you noted the backlog.
Alex Rygiel: The total in the next 12 months backlog is there.
Alex Rygiel: The largest we've really seen in the last couple of years, maybe can you just talk a little bit more about.
Alexander John Waters: Maybe just first, Steve, you noted the backlog, both the total and the next 12-month backlog, the largest we've really seen in the last couple years. Maybe can you just talk a little bit more about the runway that that gives you in 2025 and then 2026, and then maybe just secondly, I know it's a smaller portion of your business, but just on the wireless segment, we heard a couple of the tower companies talking about. Potential, ramp in the second half of 2024, and construction work. So just wanted to get your thoughts there. Thanks.
Alex Rygiel: The runway that provides you in 2025, and then 2026 and then maybe just secondly, I know, it's a smaller portion of your business, but just on the wireless segment, we hired a couple of the tower companies talking about.
Alex Rygiel: A potential ramp in the second half of 2024 in terms of construction work. So just wanted to get your thoughts there. Thanks.
Alex Rygiel: Four.
Speaker Change: I think Alex in general with backlog the way, we think about it is in the near and intermediate term thought always tightly correlated with exactly how we performed for revenue growth, but as we've gotten bigger the numbers have gotten bigger and so I think thats whats supportive of our outlook for 25 and 26.
Steven E. Nielsen: So I think, Alex, in general, with backlog, the way we think about it in the near and intermediate term is that it's not always tightly correlated with exactly how we perform for revenue growth, but as we've gotten bigger, the numbers have gotten bigger, and so I think that's what's supportive of our outlook for 2025 and 2026, with the caveat that we don't have anything in backlog that's associated with And we do expect, as we get through the balance of this year, that as BEAD awards are finalized state by state, and as the states begin to issue grants, there will be an opportunity to reflect some of that activity in the backlog. As you mentioned, wireless accounted for less than 4% in the quarter. We don't see it growing any time soon.
Speaker Change: With the caveat that we don't have anything in backlog that's associated with the <unk> program and we do expect as we get through the balance of this year that as the bead awards are finalized state by state and as the states begin.
Speaker Change: Two issue grants that I think there will be an opportunity.
Speaker Change: To reflect some of that activity in the backlog.
Speaker Change: As you mentioned wireless less than 4% in the quarter.
Alex Rygiel: We don't see it growing.
Alex Rygiel: Anytime soon.
Alex Rygiel: With respect to what the tower companies are talking about they may see activity sooner than we do but right now we're not expecting any significant growth at least in the near to intermediate term.
Speaker Change: Thank you very much.
Steven E. Nielsen: With respect to what the tower companies are talking about, they may see activity sooner than we do. But right now, we're not expecting any significant growth, at least in the near to intermediate term. Thank you very much.
Speaker Change: Thank you.
Speaker Change: And our next question will come from Frank Louthan from Raymond James Your line is open.
Frank Louthan: Great. Thank you.
Frank Louthan: You mentioned.
Frank Louthan: Less of a headwind in the second half does that mean those two customers that you called out that had the decline last year are they going to see a similar pattern to last year with more front end weighted.
Frank Garrett Louthan: And our next question will come from Frank Louthan from Raymond James. Your line is open. Great, thank you.
Frank Louthan: Is it going to be more Eden, even through the year can you explain that a little bit and then the all other category from the smaller guys with the general trend from them, where they are more impacted by the weather that caused a bit of a decline expecting them to bounce back or were there any any of those that sort of pulled.
Steven E. Nielsen: Steve, you mentioned less of a headwind in the second half. Does that mean those two customers that you called out that had the decline last year, are they going to see a similar pattern to last year with more front-end weighted? Or is it going to be more even through the year? Can you explain that a little bit? And then in all the other categories, some of the smaller guys, what's the general trend from them?
Frank Louthan: Pulled back to build or anything like that thanks.
Speaker Change: Yes, Frank.
Speaker Change: With respect to the shape of the year.
Speaker Change: I think from a real activity perspective, I think we see things picking up throughout the year. So if you recall last year essentially we had very little weather I think I look back at last year's transcript, we talked about the word weather came up 15 times and that was all because it was much better than we had expected.
Steven E. Nielsen: Were they more impacted by the weather that caused a bit of a decline, expecting them to bounce back? Yeah, Frank, I think with respect to the shape of the year, I think from a real activity perspective, I think we see things picking up throughout the year. So, if you recall, last year, essentially, we had very little weather. I think I look back at last year's transcript, and we talked about the word weather came up 15 times, and that was all because it was much better than we had expected. And I think that caused front-end loading for some customers.
Speaker Change: And I think that caused the front end loading for some customers. They just got ahead based on lack of winter weather I think we see a more seasonal pattern here and.
Speaker Change: As I mentioned I think we will see.
Speaker Change: Growth.
Speaker Change: From from April into July.
Steven E. Nielsen: They just got ahead based on the lack of winter weather. I think we will see a more seasonal pattern here. And as I mentioned, I think we'll see growth from April into July, and we hope that continues in the second half of the year. So I think it will be a more normal year. And then, with respect to small customers, it's a very eclectic group of customers. So everything from the electric co-ops to small rural telephone companies. And I would say there are still good opportunities there. There is no way for us to say that they were over or under indexed on weather.
Speaker Change: And we hope that continues in the back half of the year. So I think a more normal.
Speaker Change: Year, and then with respect to small customers.
Speaker Change: It's a very eclectic group of customers. So everything from the electric co ops to small rural telephone companies and I would say.
Speaker Change: Still good opportunities there no way for us to say that they were over or under indexed on weather.
Speaker Change: I think again.
Speaker Change: They are really focused on.
Speaker Change: Taking advantage of all the state fund money that they can right now.
Steven E. Nielsen: I think again, they're really focused on taking advantage of all the state fund money that they can right now in anticipation of the BEAT program coming later. That will be great. Thank you. Our next question will come from Brent Thielman from D.A. Davidson.
Speaker Change: Dissipation of the beat program coming later.
Speaker Change: Okay.
Speaker Change: Okay, great. Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question will come from Brent Thielman from D. A Davidson your line is now open.
Brent Edward Thielman: Your line is now open. Hey, thanks. Morning, Steve, Drew.
Brent Thielman: Hey, Thanks, good morning feed through.
Steven E. Nielsen: Morning. Just on the margins, I thought it was interesting. Steve, I mean, you were within your outlook for the quarter, despite not getting the operating leverage you might have thought you had to weather in January. Could we infer you are outperforming those expectations for margins despite those issues toward the end of the quarter? Yeah, Brent, what I think I would say is that when we looked at the November-December time period, we were on or a little bit ahead of plan, and then January was more difficult than we expected. One way we thought about that was we looked back over the last 10 years for each of those years for the trajectory from December to January, and we looked at it per business day. And last year really stands out as being outstanding.
Brent Thielman: Good morning, just on that the margin, but then it was interesting even EUR within your outlook for the quarter. Despite not getting the operating leverage you might have gotten just given the weather in January and reinsurer, you are outperforming as expectations for margin that those issues towards the end of the quarter.
Speaker Change: Yes, Brent what I think I would say is that when we when we looked at the November December time period, we were on or a little bit ahead of plan.
Brent Thielman: And then January was more difficult than we expected.
Brent Thielman: One way, we thought about that was we look back over the last 10 years.
Brent Thielman: Each of those years for the trajectory.
Brent Thielman: From December to January we looked at it per business day.
Brent Thielman: And last year really stands out as being outstanding we only had about a 335% decline per day from December into January and this year was much more seasonal at 17%.
Steven E. Nielsen: We only had about a 3%, 3.5% decline per day from December to January, and this year was much more seasonal at 17%, a little bit, a little bit over. So, I think that's really what happened.
Brent Thielman: A little bit little bit over so so I think thats really.
Steven E. Nielsen: And so clearly, that had an effect year over year on revenue comps when you have, you know, somewhat of a normal pattern compared to a pattern last year that was very different. And then clearly, when you have that kind of trajectory, you've got some reduced utilization and productivity. And so to your point, there is a little bit less operating leverage. Okay, that's great color.
Brent Thielman: What happened and so clearly that had an effect year over year on revenue comps when you have.
Brent Thielman: Somewhat of a normal pattern compared to.
Brent Thielman: A pattern last year that was very different.
Brent Thielman: Then clearly when you have under when you have that kind of trajectory you've got some reduced utilization and productivity and so to your point there is a little bit less operating leverage.
Speaker Change: Yes, okay.
Steven E. Nielsen: Steve, it seems like you're seeing some really nice underlying trends across the country. I know you have a difficult comparison next quarter and in April, but could you just level set us on what drives the view that organic growth may just be flattening out in April? Because it sounds like things are moving a lot.
Speaker Change: Color Steve.
Speaker Change: Steve It seems like you've got some really where youre seeing some really nice under line trends across most of the customer base here in the quarter absent the weather issues I guess.
Speaker Change: I know you have a difficult comparison in next quarter ended April but could you just level set us on what drives the view that organic growth may just be flatter down in April because it sounds like things are moving along pretty well.
Steven E. Nielsen: Yeah, I think again, Brent, we just don't want to get ahead of ourselves. I mean, we've had a quarter here where we did not have organic growth, tough to compare. Actually, if you remember last year, I think we beat the January guidance by almost $100 million, so we had a tough compare. And if we put that behind us, I think we feel good about the quarter, but we don't want to get ahead of ourselves. Yeah, I understand.
Speaker Change: Yes, I think again.
Speaker Change: Brent we just don't want to get ahead of ourselves I mean, we've had a quarter here, where we were we did not have organic growth tough compare.
Speaker Change: Actually if you remember last year I think we'd be the January guidance by almost $100 million. So so we have a tough compare and if we put that behind us I think we feel good about the quarter.
Speaker Change: But we don't want to get ahead of ourselves.
Speaker Change: Yes understood.
Steven E. Nielsen: Last one, just I mean, it was a noticeable more decline, I guess, from Verizon here in the quarter. Could you just talk about to what degree you expected that versus what? sort of the impact of weather and maybe the regions you were operating in. Any other clarity?
Speaker Change: Last one just I mean.
Speaker Change: It is simple more decline I guess from Verizon here in the quarter I guess could you just talked about to what degree you expected that versus way.
Speaker Change: Which sort of impacted whether it may be the region viewer operating for them or any other declared kind of clarity there would be helpful.
Steven E. Nielsen: Yeah, I think, Brent, what we can say is we've been closing out this large customer program and are pleased to do it and pleased to get beyond the negative impact on margins. The balance of the work that we do for Verizon is in the Northeast, and so it's going to be a little more seasonally affected than the overall country. Okay, thank you.
Speaker Change: Yes, I think Brendan.
Speaker Change: What we can say is we've been closing out this large customer program.
Speaker Change: Pleased to do it and pleased to get beyond the negative impact on margins.
Speaker Change: The balance of the work.
Speaker Change: That we do for Verizon is in the northeast and so it's going to be a little more seasonally affected than the overall country.
Speaker Change: Very helpful. Okay. Thank you.
Speaker Change: Okay.
Steven Fisher: And our next question will come from Steven Fisher from UBS. Your line is now open. Thanks. Good morning.
Speaker Change: Thank you.
Speaker Change: And our next question will come from Steven Fisher from UBS. Your line is now open.
Steven E. Nielsen: Thanks, Good morning.
Steven E. Nielsen: I just wanted to try and gauge in some way your full year revenue expectations. Don't want to go out with too much specificity here, but you're expecting about 20 to 25% growth in CapEx. To what extent is the underlying volume there?
Steven E. Nielsen: Just wanted to try and gauge in some way your full year revenue expectations and I know you don't want to go out with too much specificity here, but you're expecting about 20% to 25% growth in capex.
Steven E. Nielsen: So, I'm just curious, you know, I know you've been very reflective of what your 25 revenue expectations might be. It seems like a double-digit growth setup. And I know you said to an earlier question that the backlog doesn't always perfectly correlate. But over the last three years, your actual full-year revenues were nearly 20% above your year-end 12-month backlog. Is there anything unusual in the book and burn that you see this year
Steven E. Nielsen: To what extent is the underlying volume, they're reflective of what you're 25 revenue expectations might be I mean, it seems like.
Steven E. Nielsen: Double digit growth setup.
Steven E. Nielsen: And I know you said to an earlier question that.
Speaker Change: The backlog doesn't always perfectly correlate but over the last three years. Your actual full year revenues were nearly 20% above your year end 12 month backlog so.
Speaker Change: Is there anything unusual in.
Speaker Change: In the book and burn that you see this year or is your year end.
Steven E. Nielsen: Or is your year-end... 12-month backlog, unusually high for some reason at the moment? Because when you add all that together, it seems like it would put you into a double-digit growth range for revenues for the full year. Well, I think first off, with respect to the full year. Recall that we're guiding flat for the first quarter. So when you have that in one quarter of the calculation, I think that may be a little aggressive, Steve, just by the math. Um, I think. In thinking about the balance of the year, which is why we provided the guidance for the resumption of organic growth in the second quarter, we do tend to see periods of time where when we have difficult comps, growth will slow as we get beyond those comps, then things pick up. And I think that, as a general principle, this is the way we're thinking about the balance of the year.
Speaker Change: 12 month backlog of unusually high for some reason at the moment because I mean.
Speaker Change: That all that together it seems like it would put you into a double digit growth range for for revenues for the full year.
Speaker Change: Well I think first off with respect to the full year recall that we're guiding to flat for the first quarter.
Speaker Change: When you have that in one quarter of the calculation I think that maybe a little aggressive Steve just by the math.
Speaker Change: I think.
Speaker Change: In thinking about the balance of the year, which is why we provided the guidance for the resumption of organic growth in the second quarter. We do tend to see periods of time, where when we have difficult comps growth will slow as we get beyond those comps then things pick up.
Speaker Change: And I think that as a general.
Speaker Change: Principal is the way, we're thinking about the balance of the year on the Capex recall that we did extend the useful lives of our assets because it had been tough during the pandemic to make sure that we could get enough of our equipment. So we held on to things that we might have sold sooner and so not all of that is <unk>.
Steven E. Nielsen: On the CapEx front, recall that we did extend the useful lives of our assets because it had been tough during the pandemic to make sure that we could get enough of our equipment, so we held on to things that we might have sold sooner, and so not all of that is growth CapEx. A portion of that increase is really going to be deferred maintenance CapEx, and we're pleased that, for the most part, we're having better access to equipment. And, in fact, we have $85 million of equipment on order right now. But I wouldn't tie as tight a correlation between CapEx and GDP as your question implies. Okay, that's helpful.
Speaker Change: Capex a portion of that increase is really going to be deferred.
Speaker Change: Maintenance Capex and we're pleased that for the most part we're having better access to equipment.
Speaker Change: And in fact, we have $85 million of equipment on order right now.
Speaker Change: But I.
Speaker Change: I wouldn't tie as tight a correlation between capex.
Speaker Change: As your question implies.
Speaker Change: Okay. That's helpful and then on cash flow.
Steven E. Nielsen: And then on the cash flow, I would call it a very nice quarter there, and the DSOs improved by a day, but they're still up about 12 days, I think, year over year.
Speaker Change: Very nice quarter there.
Speaker Change: Dsos improved by a day.
Speaker Change: But there is still up about 12 days I think year over year. So how do you see this fiscal year playing out from a DSO perspective should that trend back to sort of the 710 levels or is this kind of a more normalized level, where we are at the moment.
Steven E. Nielsen: So how do you see this fiscal year playing out from a DSO perspective? Should that trend back to sort of the sub 110 levels? Or is this... the more normalized level where we are? Yeah, I wouldn't call it normalized.
Speaker Change: Yes, I wouldn't call. It normalized we're working hard to make it lower we realized how much capital tied up to.
Steven E. Nielsen: We're working hard to make it lower. We realize how much capital is tied up with every day of DSO. When we're working on these large fiber programs, they're administratively complex.
Speaker Change: With every day of DSO.
Speaker Change: When we're working on these large fiber program, Sir administratively complex.
Steven E. Nielsen: We're working hard, both ourselves and with our customers, to simplify the administrative effort behind them, and I think as we get better at that, we have some real opportunities to bring in DSO. Different customers have different DSO profiles, and to the extent that we have growth resuming with some customers, I think that can also be helpful in terms of improvement in DSO. Okay, thank you very much. Thank you. And as a reminder, to ask a question, please press star 11. And our next question will come from Alex Riegel from B-Rally Securities. Your line is open. Good morning, Steve. Good morning.
Speaker Change: We're working hard both ourselves and with our customers to simplify the administrative effort behind them and I think as we get better at that we have some real opportunities to bring the DSO in different customers have different DSO profiles and to the extent that we have growth resuming.
Speaker Change: With some customers I think that can also be helpful of improvement on DSO.
Speaker Change: Okay. Thank you very much.
Speaker Change: Thank you and as a reminder to ask a question. Please press star one one.
Speaker Change: And our next question will come from Alex Rygiel from B Riley Securities. Your line is open.
Alex Rygiel: Good morning, Steve.
Alex Rygiel: Good morning.
Alexander John Rygiel: As it relates to the BEAD program, and assuming you win some work, when do you anticipate this funding to work its way into your account? I think at this point, the consensus in the industry is that as we get into the calendar 25th, we'll begin to see opportunities. I mean, we may see opportunities in the second half of the year, but not real opportunities for revenue growth in the 25. As we said in our comments, one state has gotten all the way through, so theoretically, they can request 20% of the money and begin making awards.
Alex Rygiel: As it relates to the <unk> program and assuming you win some work when do you anticipate this funding to work its way into your income statement.
Alex Rygiel: I think at this point the consensus in the industry is that as we get into calendar 'twenty five that will we'll begin to see opportunities I mean, we may see the opportunities in the second half of the year, but but not real opportunities for revenue growth.
Alex Rygiel: In the 25.
Alex Rygiel: As we said in our comments one state's gotten all the way through so theoretically they can request, 20% of the money and begin making awards there's another <unk>.
Steven E. Nielsen: There are another 14 or 15 that are queued up behind them that only have one step left, so I think that's certainly a reasonable expectation. And then margins are improving year over year, despite some top-line headwinds. Can you talk about why and provide a bit more color on your outlook for margin improvement? And even kind of take another look at how margins could be affected by the BEAD program. Yeah, so Alex, as I know you're aware and others, you know, we had a tough period of time on a large customer program that suppressed margins below where the company had traditionally performed. We're pleased that we've worked through that. That overhang is behind us.
Alex Rygiel: 14, or 15 that are queued up behind them that only have one step left Joe.
Joe: I think that certainly a reasonable expectation.
Joe: And then margins are improving year over year. Despite some top line headwinds can you talk about <unk>.
Joe: Why.
Joe: Can you provide a bit more color on your outlook for margin improvement and.
Joe: And even kind of taken another step.
Joe: And.
Joe: Discuss how margins could be affected by the bead program in 2026 or 2025.
Speaker Change: Yes, so Alex as I know Youre aware and in others. We had a tough period of time on a large customer program that suppressed margins below where the company had traditionally perform we're pleased that we've worked through that over hang is.
Steven E. Nielsen: We've had good organic growth. Yes, it slowed down last year, but I think the growth rate still was six or seven percent. Anytime we get broadly distributed organic growth, we get better operating leverage. We're always working on new ways to be more efficient in the field, so making improvements in operating the business, everything from dispatch to safety and quality. And so I think we're trying to build better margins into the book of business as we look forward to more growth. With respect to Bede, we had a pretty significant amount of experience working in the stimulus programs 15 years ago.
Speaker Change: Find us we've had good organic growth, yes, it slowed down last year, but I think the year is still was six or 7% anytime we get broadly distributed organic growth, we get better operating leverage were always working on new ways to be more efficient in the field.
Speaker Change: So working through it.
Speaker Change: Improvements in operating the business everything from dispatch to safety and quality and so I think we're trying to build better margins into the book of business as we look forward to more growth.
Speaker Change: With respect to beat.
Joe: We had a pretty significant.
Joe: Amount of experience on working in the stimulus programs 15 years ago.
Steven E. Nielsen: I think we saw margins in those programs that we did in rural America then that were at or better than what we saw in the rest of the business historically, and we see no reason at this time for that to be any different. Great, thank you. Thank you. And our next question will come from Alan Mitrani from Sylvan Lake Asset Management. Your line is now open.
Joe: I think we saw margins of those programs that we did in rural America than.
Joe: That were at or better than what we saw in the rest of the business historically and we see no reason at this time for that to be any different.
Speaker Change: Great. Thank you.
Speaker Change: Thank you.
Speaker Change: And our next question will come from.
Speaker Change: Alan <unk> from Sylvan Lake asset management. Your line is now open.
Alan Mitrani: Hi, thank you. I'm just following up on Alex's question. It seems to me that your SG&A, excluding stock-based comp, is about as low as a percent of revenues in about 18 years, I think since they even started breaking that out. Can you talk about the leverage you can get off of your fixed SG&A base as all these projects start coming in? Yeah, Alan, I think there's a couple things that have been driving that outcome.
Alan: Hi, Thank you just following up on Alex's question.
Alan: It seems to me that your.
Alan: SG&A, excluding stock based comp.
Alan: Is about as low as a percent of revenues in about 18 years I think since even started breaking that out can you talk about the leverage you can get off of your fixed SG&A base has all of these.
Alan: Projects start coming in.
Speaker Change: Yes, Alan I think Theres a couple a couple of things that have been driving that outcome. While we've been doing a number of projects to standardize back office processes across the company. We continue to do those theres more more coming that we think that we can take.
Steven E. Nielsen: One, we've been doing a number of projects to standardize back office processes across the company, and we will continue to do those. There's more coming where we think that we can take back office costs out of the business. I think, in addition, when we get broadly distributed growth, it's also broadly distributed across our subsidiaries. So not only are we getting operating or holding company level or corporate level G&A leverage while also getting it inside individual business units that are continuing to grow pretty significantly. So it sounds like it's something that's strategic and planned and that could continue going forward as your business starts to benefit from all these government programs and the recovery of growth. Yes, we see no reason that we can't maintain good tight controls over the G&A portion of expenses and we do have some pretty significant commitments as we look forward to making that even better.
Speaker Change: Back office cost out of the business.
Speaker Change: In addition, when we get broadly distributed growth. It's also broadly distributed across our subsidiary so not only are we getting operating.
Speaker Change: Or holding company level or corporate level.
Speaker Change: <unk>.
Speaker Change: G&A leverage we're also getting it inside individual business units that are continuing to grow pretty.
Alan: Pretty significantly.
Alan: So it sounds like its something Thats strategic and planned and that could continue going forward as your business starts to benefit from all these government programs and the recovery of growth.
Speaker Change: Yes, we see no reason that we can't.
Speaker Change: Maintain good tight controls over the G&A.
Alan: Portion of expense and we do have some pretty significant commitments as we look forward to make that even better.
Steven E. Nielsen: And then one more on backlog, you guys were somewhat strategic and not given the inflationary environment. We've seen a lot of other companies, you know, take on big projects going on for multiple years, and then they got forced to eat the inflation costs. You guys, seemingly, as someone pointed out, your backlog hadn't really been that, been that high over the last number of years, and now it's starting to pick up as I think some of the pricing has cycled through. Would you characterize it that way that you feel like the pricing in your backlog and what you're seeing now is more representative of where you want margins to go over the next couple of years? Well, it certainly took us some time to work through our existing portfolio of contracts and make sure that they adequately reflected the increased cost environment. So it took some time.
Speaker Change: Great and then one more on on backlog you guys were somewhat strategic in not given the inflationary environment. We've seen a lot of other companies took on big projects going to multiple years and then they got forced to eat the inflation cost you guys seemingly as someone pointed out you'll be backlog hadn't really been did that.
Speaker Change: Did that high over the last number of years and now it's starting to pick up as I think some of the pricing has cycled through would you characterize it that way that you feel like the pricing in your backlog and what you're seeing now is more representative of where you want margins to go over the next couple of years.
Alan: Well it certainly took us some time to work through our existing portfolio of contracts and make sure that they adequately reflected the the.
Alan: The increased cost environment. So it took some time I think we.
Steven E. Nielsen: There's always more to do there, but we've worked through a substantial portion of that, so I think that's been helpful. I think as we talked about in 21 and 22, where we saw that there were risks to inflation, we also worked with our customers to make sure that if we took on duration risk, we had some type of formulaic protection or some ability to revisit pricing to the extent that costs continued to escalate more than we expected. That meant, at times, we probably were more comfortable with shorter-term contracts than others, and I think that was the right strategy then to preserve our ability to get the right cost reflected in our pricing going forward.
Alan: Well there is always more to do there, but we've worked through a substantial portion of that so I think that's been helpful. I think as we've talked about in 'twenty, one and 'twenty, two where we where we saw that there were risks to inflation. We also work with our customers to make sure that if we took on duration risk that we had some type of <unk>.
Alan: Formulaic protection or some ability to revisit.
Alan: Pricing to the extent that costs continue to escalate more than we expected.
Alan: That meant at times we.
Alan: Probably we're more comfortable with shorter term contracts than others and I think that was the right strategy then too.
Alan: To preserve our ability to to get the right.
Alan: <unk> cost reflected in our pricing going forward.
Steven E. Nielsen: Great, thank you. Thank you, and I am showing no further questions from our phone lines, and I'd like to turn the conference back over to Steven Nielsen for any closing remarks. Well, we appreciate everybody's time and attention on the call, and we look forward to speaking with you in the month of May. Thank you. Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect.
Speaker Change: Great. Thank you.
Speaker Change: Thank you.
Alan: And I am showing no further questions from our phone lines I would now like to turn the conference back over to Steven Nielsen for any closing remarks.
Steven E. Nielsen: Well, we appreciate everybody's time and attention on the call and we look forward to speaking you.
Steven E. Nielsen: Month of May.
Steven E. Nielsen: Thank you.
Steven E. Nielsen: Thank you. This concludes today's conference call. Thank you for your participation you may now disconnect everyone have a wonderful day.
Operator: Everyone have a wonderful day. This is a story about a man who had a dream. He had a dream that he was going to become a doctor. He had a dream that he was going to become a doctor. He had a dream that he was going to become a doctor. He had a dream that he was going to become a doctor. He had a dream that he was going to become a doctor.
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