Q3 2025 Dycom Industries Inc Earnings Call
Good day, and thank you for standing by. Welcome to the DICOM Industries, Inc. 3rd Quarter 2025 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 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again.
Please be advised that today's conference is being recorded.
Speaker Change: I would now like to hand the conference over to Mr. Steven Nielsen, Chief Executive Officer. Please go ahead, sir.
Speaker Change: Thank you, Operator. Good morning, everyone. Thank you for attending this conference call to review our third quarter fiscal 2025 results.
Going to slide two.
Speaker Change: 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.
Speaker Change: Today we have on the call Dan Payovich, our President and incoming Chief Executive Officer.
Speaker Change: Drew DeFerrari, our Chief Financial Officer, and Ryan Urness, our General Counsel.
Now I will turn the call over to Ryan Urness.
Ryan 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 Urness: Forward-looking statements include all comments reflecting our expectations, assumptions, or beliefs about future events.
Ryan Urness: 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.
Ryan Urness: 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.
Steve: As announced last June, I am retiring at the end of this month from DICOM, after over 30 years of service, 25 as CEO. This earnings call is my last.
Steve: Accordingly, I will review this past quarter, Dan will review industry opportunities and operational highlights, while Drew will cover our financial performance and outlook.
Steve: Dan and Drew will handle Q&A. After the Q&A, I will have a few final remarks.
Steve: Before I review our third quarter results, I would like to thank my fellow employees for their hard work and dedication.
Steve: Your efforts make DICOM the special place it is, and I am so proud of what we have built together.
Steve: To our directors, thanks for your wisdom, guidance and oversight over these last 25 years. I leave Dycom a much better leader because of you.
Steve: To my fellow shareholders, your support as I have led our company has been invaluable. Thanks for the opportunity to benefit from your counsel in the markets discipline.
Steve: And finally, Dan, I'm so excited for you and DICOM as you and your strong team lead our company to a bright future.
Steve: I firmly believe DICOM's opportunities have never been greater, and I leave DICOM well assured that you and your team will take full advantage of those opportunities to the great benefit of customers, employees, and shareholders.
Steve: You have my full confidence and the support of the entire company.
Speaker Change: Now moving to slide four and a review of our third quarter results.
Speaker Change: As we review our results, please note that in our comments today and in the accompanying slides, we reference certain non-GAAP measures.
Speaker Change: We refer you to slides 12-18 for a reconciliation of these non-GAAP measures to their corresponding GAAP measures.
Turning to the quarter.
Revenue increased year-over-year to $1.272 billion, an increase of 12%.
Speaker Change: Organic revenue increased 7.6% as we deployed gigabit wireline networks, wireless wireline converged networks, and wireless networks. This quarter reflected an increase in demand from three of our top five customers.
Speaker Change: Non-GAAP gross margin was 20.8% of revenue and increased 45 basis points compared to Q3 of fiscal 24.
Non-GAAP general and administrative expenses were 7.8% of revenue.
Speaker Change: And all of these factors generated adjusted EBITDA of $170.7 million, or 13.4% of revenue, and adjusted earnings per share of $2.68.
Speaker Change: Liquidity was strong at 462.8 million and during the quarter we completed the acquisition of Black & Veatch's public carrier wireless telecommunications infrastructure business.
Speaker Change: Now I will turn the call over to Dan for a business update.
Thank you, Steve, and good morning, everyone.
Dan Payovich: I'd like to start by expressing my gratitude for the support and partnership Steve has provided throughout this transition.
Dan Payovich: His guidance has firmly established our company as an industry leader.
Dan Payovich: On behalf of the Board of Directors and all our employees across the country, I want to extend our deepest thanks to Steve for his dedication over the past 25 years.
Dan Payovich: I'd like to welcome Kevin Weatherington, who joined as our new Chief Operating Officer in October. Kevin brings over 25 years of experience in leading national operations with large, distributed workforces across the country.
Dan Payovich: Kevin has already been out in the field with a number of our subsidiaries and met with customers as he steps in to lead operations across DICOM.
We're delighted to have him join our executive team.
Dan Payovich: Moving to our results, we delivered another strong quarter with year-over-year growth in both revenue and EBITDA.
Dan Payovich: We're encouraged to see continued and additional strategic transactions, including refinancings, and commitments to increase capital expenditures by many of our customers, with some customers also increasing homes past expectations.
Dan Payovich: We work hard to deliver quality every day, and we believe we are well positioned to capitalize on these opportunities.
Dan Payovich: Fiber to the homework and our maintenance and operations services are a core part of our business and we secure both extensions and new awards in a number of markets for these services from AT&T during the quarter.
Dan Payovich: We're excited about the increasing opportunities we see related to AI, including expansive new national deployments of high-capacity, low-latency inter- and intracity networks.
Dan Payovich: We believe we are in the early stages of a broad set of significant opportunities with a number of customers as hyperscalers look to connect their data centers with long-haul, private, redundant fiber networks.
Dan Payovich: During the quarter, we received an award from Lumen for the expansion of their inter- and intracity fiber network to provide additional capacity for hyperscalers.
Dan Payovich: The integration of our recent wireless acquisition is going well, and we are seeing a participated ramp in wireless network modernization and deployment services.
Dan Payovich: We remain comfortable with our initial revenue expectations for this acquisition, and we continue to integrate and execute on anticipated synergies.
Dan Payovich: Lastly, we continue to see unprecedented levels of federal and state support for rural broadband deployment programs.
Dan Payovich: We believe the magnitude and importance of these programs should not be underappreciated as they address some of the more difficult locations to deploy in America and represent a generational deployment opportunity.
Dan Payovich: In summary, we executed well during the quarter and continue to capitalize on opportunities across our industry.
Dan Payovich: We believe that the long-term value of our maintenance and operations business will continue to increase relative to our deployment of wireline and converged networks, as those deployments dramatically increase the amount of outside plant that must be extended and maintained.
Dan Payovich: As customer projects increase in scope and complexity, our industry focus, scale, and financial strength position us well to deliver valuable services and anticipate and meet the demands for our customers.
Dan Payovich: We believe that we are building momentum in the markets we serve as we pursue our vision to connect America.
Dan Payovich: I would like to acknowledge our 16,000 employees for their dedication to delivering for our customers safely every day.
Dan Payovich: We've grown significantly over the past several years and have unprecedented opportunities ahead of us. Our results and continued success are because of you. Thank you.
Dan Payovich: I'll pass the call to Drew for his financial review and outlook. Drew?
Thanks, Dan, and good morning, everyone.
Dan Payovich: Going to slide 6, contract revenues were $1.272 billion, an increase of 12% compared to Q3-24.
Dan Payovich: Organic revenue increased 7.6% after excluding revenue from acquired businesses each period, storm work for the current quarter, and revenue from a change order and project closeout in the prior year quarter.
Dan Payovich: A presentation of these amounts can be found in our press release and materials for today's call.
Dan Payovich: Adjusted EBITDA was $170.7 million or 13.4% of contract revenues, an increase of 52 basis points compared to $143.2 million or 12.9% in Q3-24.
Dan Payovich: Gross margin improved 45 basis points to 20.8 percent of revenue compared to 20.4 percent.
Dan Payovich: For comparative purposes, the prior year adjusted EBITDA and gross margin exclude the impacts of a change order and closeout of several projects reported in Q3-24.
Dan Payovich: G&A this quarter included incremental stock-based compensation of $7.1 million related to the CEO transition and acquisition integration costs of $4.2 million related to the Q3 25 acquisition.
Dan Payovich: Excluding these amounts, non-GAAP G&A expenses were 7.8% of revenue compared to 7.7% in Q3-24.
Dan Payovich: Non-GAAP net income increased to $2.68 per share compared to $2.23 per share in Q3 last year after excluding $0.59 for the change order and project closeout benefit last year in Q3.
going to slide 7.
Dan Payovich: During the quarter, our top five customers combined produced 55.7% of revenue and grew organically 16.7%.
Dan Payovich: AT&T was our largest customer at $265.6 million or 20.9% of revenue and grew organically 58.4%.
Dan Payovich: Lumen was our second largest customer at 146.4 million or 11.5% of revenue.
Dan Payovich: Our third largest customer was $104.9 million, or 8.2% of revenue, and grew 50.2% organically.
Dan Payovich: Comcast was at $102.7 million or 8.1% of revenue and finally Brightspeed was our fifth largest customer at $88.6 million or 7% of revenue and grew 43.3% organically.
All other customers decreased slightly on an organic basis.
Dan Payovich: Going to slide 8. Backlog at the end of the third quarter was $7.856 billion versus $6.834 billion at July 2024, an increase of over $1 billion.
Dan Payovich: Of this backlog, approximately $4.467 billion is expected to be completed in the next 12 months.
Head count was 15,980.
Dan Payovich: Going to slide 9. Our financial position and balance sheet remains strong.
Dan Payovich: Cash and equivalents were $15.3 million, and liquidity was $462.8 million.
Dan Payovich: At the end of Q3, we had $450 million of term loan and $155 million of drawn revolving credit facility borrowings, which was used for acquisition funding during the quarter. Additionally, we had $500 million of senior notes outstanding.
Dan Payovich: Our capital allocation continues to prioritize organic growth, followed by M&A and opportunistic share repurchases within the context of a historical range of net leverage.
Going to slide 10.
Dan Payovich: Cash flows from operating activities were $65.8 million in Q3. The combined DSOs of accounts receivable and net contract assets were 119 days.
Dan Payovich: Capital expenditures were $66.4 million, net of disposal proceeds and gross capex was $74.6 million.
Dan Payovich: During Q3, we acquired a wireless telecommunications infrastructure business for $150 million in cash.
Dan Payovich: On slide 11, as we look ahead to the fourth quarter, we expect total contract revenues to increase mid to high single digit as a percentage of contract revenues compared to $952.5 million in Q4-24.
Dan Payovich: Included in the expectation for Q4-25 is approximately $35 million of revenues from acquired businesses not owned for the entirety of both the current and prior year quarters.
Dan Payovich: For comparison purposes, there were no acquired revenues from these businesses in Q4-24.
Dan Payovich: As a result, organic revenues are expected to increase low to mid-single digit as a percentage of contract revenues.
Dan Payovich: Our outlook for Q4 reflects normal seasonal factors such as fewer available workdays due to the holidays, reduced daylight work hours, and inclement winter weather conditions.
Dan Payovich: These seasonal factors, as well as additional operating costs to initiate work on a number of new awards, are also expected to impact earnings.
Dan Payovich: For Q4-25, we expect non-GAAP-adjusted EBITDA percentage of contract revenues to increase approximately 25 basis points compared to 9.8% in Q4-24.
Dan Payovich: Other expectations about the Q4 outlook include $9.9 million of amortization expense, $9.3 million of stock-based compensation, which includes $2.1 million of incremental expense related to the CEO succession transition,
$16.5 million of net interest expense.
Dan Payovich: A 26% non-GAAP effective income tax rate and 29.5 million diluted shares.
Speaker Change: As I wrap up, I would like to personally say thank you to Steve for your leadership and dedicated service to the company over the past three decades.
I wish you well in your retirement.
Speaker Change: I'm excited to work alongside Dan and our dedicated team as we continue to grow the business and focus on delivering long-term value for our shareholders.
Speaker Change: Operator, this concludes our prepared remarks. You may now open the call for questions.
Speaker Change: Thank you. As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. Please stand by while we compile the Q&A roster.
Speaker Change: And our first question will come from Adam Tallheimer from Thompson Davis. Your line is open.
Speaker Change: Hey, good morning guys. Nice quarter. And Steve, congrats on your last conference call.
Very heartfelt, Adam, I'm sure.
Speaker Change: Hey, Drew, can you actually just pick up where you left off? You talked about startup incremental costs in Q4 related to the startup of large programs. Can you just flesh that out a little bit for us?
Speaker Change: Yeah, Adam, thanks for the question. So, you know, as we've done in the past, we've announced new awards. We're pleased to have a number of new awards and extensions and as Dan called out on the Lumen Award as well. And so we've got some costs that we've been, you know, these are a number of new areas for us. So there are some costs expected in the quarter.
Speaker Change: As we ramp up in the next year, the other thing I would add there is we continue to ramp on the on the recent acquisition. And so we've got a little bit of cost there as well.
And then can you talk about the
What you got from Lumen in the quarter,
Speaker Change: Because the backlog went up basically by the Black & Veatch acquisition, I think.
Yeah, hey, good morning, Adam. This is Dan.
Speaker Change: So, you know, first, we're not going to size the revenue, you know, of our backlog opportunities, including the Lumen AI deal. We're very excited to continue our partnership there, certainly believe that we got our fair share. And really, I want to point out that
Speaker Change: connect and extend their data centers across the country in this, you know, new surge of long-haul activity. You know, we really see this as being a significant potential opportunity and excited to have the partnership with Lumen to get this started, but having a lot of conversations with other customers, having a lot of conversations with hyperscalers.
Speaker Change: and believe this could be significant in the years to come.
I'll turn it over. Thanks, guys.
Speaker Change: Thank you. Our next question will come from Alex Waters from B of A. Your line is open.
Hey, good morning.
Speaker Change: Thanks so much for taking my questions. Maybe just first off here, Dan, I think in your
Speaker Change: It seems like it's changed a little bit from last quarter when I think it was noted 2Q. Maybe if you could just...
Describe that a little bit more.
Speaker Change: Yeah, good morning. Thanks, Alex. Last quarter, what we talked about was being in the second half, the third quarter of 2025. We still believe that we can see revenue in that time frame. We're just talking about probably the significant ramp being in 2026.
Speaker Change: You know, I'm sure everybody saw Louisiana made some announcements yesterday. Certainly excited to see that 95% of that ended up being fiber. You know, we'll see how it all plays out, but certainly a good start.
Speaker Change: And collectively, with what the amounts that would be contributed from the sub-grantees there, that's over a billion dollars in fiber construction for Louisiana alone. So excited to see how it plays out, and we'll see on timing, but we still believe, yeah, back out to 2025, ramp in to 2025.
Executive, Ryan Urness, Steven Nielsen
Speaker Change: Okay, perfect. Thanks. And then maybe just on kind of the all other customers bucket, it seems like that was down 9% year on year, maybe just could you talk about what you're seeing from these customers and kind of what the expectations are going forward?
Speaker Change: Yeah, it's a good question. So, the way we look at it, and we understand that's how we show it on the slide there. The way we look at it, we have a lot of customers that are moving in and out of the top five. We're very pleased with the breadth of our customers, and we have a number of customers now.
Speaker Change: 6, 7, and 8 are all in the $80 million range. So as those folks move in and out, it does affect the overall numbers. So we really like to look at, if you look at the top 10 customers, which represents about 75% of our revenue, they increased 17% this quarter. So we feel that's a better guide.
Perfect. Thanks so much Steve. Congratulations again. Thank you.
Speaker Change: Thank you. Our next question will come from Alex Regal from B Reilly Securities. Your line is open.
Speaker Change: Hi there. Good morning. This is actually Min. On for Alex. Steve, first I want to thank you for this great and long run. Just wishing you the best in retirement. So my first question has to do with...
Speaker Change: In terms of the BEAD funding, obviously it looks like, you know, you're not really expecting much change in terms of funding support, but can you just provide any update on your thoughts just under this Trump administration, under a new Trump administration?
Speaker Change: Yeah, good morning, Mint. You know, the first thing I'd say is, you know, we are seeing some things coming out, you know, the likelihood stance from the new administration around net neutrality, digital discrimination, those would be good for our customers, good for our industry.
Speaker Change: on the bulk of it of course you know for all of it still still too early for us to speculate that you know what would we would continue to say
Speaker Change: bipartisan support when Bede was passed, you know, both the current and previous administration.
Speaker Change: supported getting broadband to rural homes and we believe that will continue.
Speaker Change: There's no doubt that coming out of COVID that high-speed internet is a priority. Getting that out to rural homes and every home in America, really we look at it the same way as power was 90 years ago.
Speaker Change: So, you know, strongly believe that that's going to happen. Some questions around timing and exactly how it's going to play out, but again, some of these early awards, you know, what we're seeing in Colorado and the participation there, we believe those are all good signs.
Speaker Change: Excellent. Also, can you just provide any kind of detail around how the integration of Black & Veatch is going so far and what were your wireless revenues in the quarters?
Speaker Change: Sure. The integration is going well. The work that they're doing for the equipment replacement is ramping up a little bit quicker than we expected, so we'd like to see that.
and overall, you know, it's been great.
Speaker Change: It's been a good acquisition for us and the team is doing well.
Getting ramped up for next year.
Speaker Change: Yeah, and man, this is Drew, I'll jump in here as well. So we had about 4.2 million of integration costs in the quarter there. We expect some modest costs coming up in Q4 as well. But we're seeing a nice ramp there.
Speaker Change: Okay, and what were your total wireless revenues? Oh, and wireless revenues, right around just over 4.5% revenue for the quarter.
Thank you.
Thank you.
Thank you.
Speaker Change: And our next question will come from Frank Laughton from Raymond James. Your line is open.
Speaker Change: Great. All right. Thank you, Steve. Congratulations on the career and finishing the last earnings call here. I appreciate all the help over the years. So I just wanted to check on, as far as the guide, I assume any potential storm cleanup revenue is not in the guide, but can you give us an idea of what you think that impact will be on the fourth quarter? Will it be more or less, do you think, from Q3?
Speaker Change: and any impact to the regular business related to the storms. Thanks.
Speaker Change: Yeah, Frank, this is Drew. Thanks for the question. So, you know, certainly our first focus on the storm work is helping our customers get service restored in these areas. We had about 46 million in Q3 and that number has tapered off.
quite a bit as we roll into Q4, so...
Speaker Change: You know, not reflecting that, you know, not calling out specific storm work in the guide at this point.
Speaker Change: and then as far as, you know, disruption, you know, in Q3, I would tell you we had four storms affecting our areas. So there is a little bit of trade-off of work there that normally, the normally scheduled work that would have gotten done.
Speaker Change: But as we're, you know, moving into Q4, you know, there's not really that displacement in the period.
Speaker Change: Okay, thank you. And as far as as some of these AI builds that you're seeing, it is relative to, you know, maybe a few months ago, are you seeing these be more substantially related to larger long-haul projects versus, you know, short spurs off of networks that we maybe have seen previously?
Speaker Change: Good morning, Frank. You know, quarter over quarter, we've just seen certainly more and more information, more and more of the hyperscalers talking about the need, certainly committing CapEx and future CapEx towards the endeavor. You know, I think exactly how the shape of the curve plays out remains to be seen.
Speaker Change: But, you know, the conversations that we're having certainly have to do with long haul. You know, ultimately they're trying to increase their capacity.
Speaker Change: They're looking for redundancy. You know, when we think about redundancy, if that's redundancy of routes, that could be significant from a long-haul perspective.
Speaker Change: And then, you know, you have connection of the existing data centers, but, you know, they kind of get the power side figured out and start building new data centers. We've got extensions to the new data centers as well. So, all combined, all combined, we believe that, you know,
Speaker Change: not only is it gonna be a significant opportunity in the shorter term, we still think that there's gonna continue as they fill those out, that it could be there for a number of years.
All right, great. Thank you very much.
Speaker Change: Thank you. Our next question comes from Sangeeta Jain from KeyBank Capital Markets. Your line is open.
Sangeeta Jain: Thank you so much for taking my question. So if I can ask one on Gigapower. I think you showed up for the first time as your top 10 customers. Can you talk a little bit more about how you see that growing in the near term?
Speaker Change: Yeah, so we've been working with Giga Power for a couple of years now. Very much enjoy our relationship there. The project's going well. As I mentioned before, some of these customers move in and out, you know, with the breadth of our business now. It just so happened that this quarter they moved into the top 10. So, you know, pleased with that.
will continue with those builds.
Speaker Change: Great, and on your Lumen work and any other data center type work that you're looking at, is there a difference in how you price them or a margin profile for those versus your standard fiber to the home type work?
Yeah, thanks. Thank you, Dan.
Speaker Change: You know, the first thing I would say is, you know, we're certainly not going to talk about pricing, you know, pricing kind of theory on a call. What I would tell you is, you know, we look at the opportunities, we look at the risk, you know, we look at the size of the opportunities as we're putting all those things together. You know, again, I do want to just reinforce that we're excited about the Lumen Award, but the opportunity that's out in front of us in the data center space is significant.
Speaker Change: And in addition to that, you know, we still have, you know, as everybody noted, this quarter, you know, Verizon and Frontier, the transaction got approved by the shareholders.
Speaker Change: What they've talked about now is adding an incremental seven to 12 million passings from what we saw before. So if you look prior to third quarter, there's already over 9 million passings added incremental this year, you have another seven to 12. We'll see what AT&T says in their upcoming call on December 3rd. That could be another 10 to 15 million.
Speaker Change: So, significant opportunities still there, you know, we're very much excited about, you know, the opportunity to continue these fiber to home passings, and it's just great to see our customers continue to add CapEx and increase some of these homes pass.
Speaker Change: significant opportunities. And then, of course, you know, we got asked about BEAD before, not just BEAD, you know, all of the funding to go to rural, whether that's the state programs, whether it's BEAD, and whether it's everything else, we still see that that is going to continue to shape.
Speaker Change: well as we look towards next year. And when we combine all three of those opportunities, you know, again, we look forward at the business and just see tons of growth potential. And we're going to work hard to see if we can capitalize on that.
Great. Thank you so much for taking my questions.
Speaker Change: Thank you. And our next question comes from Eric Lubko from Wells Fargo. Your line is open.
Thank you. Bye.
Speaker Change: Great, thanks for taking the question and, you know, Steve, best of luck on the next stage into retirement. So just to...
Speaker Change: Just to kind of talk about some of the large opportunities you have, the AI data center build, the BEAD program potentially picking up. Dan, maybe you could talk about whether you'll kind of have to ramp up your labor force to meet all this demand, you know, into the next, you know, year or so. And any color on what the environment is like for hiring new employees, whether they're, you know, direct ICON employees or subcontractors.
Hey, good morning.
Appreciate the question.
Speaker Change: You know, the first thing I'd say, we're strategic and disciplined in the way that we look at talent. You know, we're making investments on training programs, we're making investments.
Speaker Change: in facilities and something we're always trying to stay ahead of. We don't stock up a ton of labor ahead of opportunities. We really want to wait to see how the opportunities develop. You know, what I would point out a couple years ago, we grew almost 22% in one year. You know, really proud of the job that our teams did to stay ahead of that from a labor perspective. We'll see how everything shapes out. To your point, you know, we have a lot of factors that are coming together. And we got to see what that shape looks like. But you know, we feel confident that our teams can stay ahead of it. You know, certainly take significant effort, but we feel good about a position there.
And then sorry it's adding and.
Speaker Change: Sorry, on your second question, you asked about mix for subcontractors. That depends on, you know, project by project, geography by geography, and sometimes during the time of the project, we might start with more subcontractors to begin, and we might work in towards our labor forces. So, you know, always foresee a mix there.
Gotcha.
Speaker Change: And, you know, I think the last earnings call, you mentioned that some of your smaller customers, you expect that they may slow a little bit near term as they were kind of assessing opportunities under the BEAD program in their core market. So just wanted to see if you think that's still the case over the next couple of quarters, as we get more clarity on state awards from BEAD and any, you know, how that has tracked so far versus the expectations you laid out last quarter.
Sure.
Speaker Change: Yeah, so this quarter we did see, you know, just a little bit come down from our co-ops when we look at it sequentially quarter over quarter. And we really do believe that that has to do with them waiting to see how VEED is going to shake out and where that funding lies. You know, again, looking at the Louisiana results, good to see some of our co-op customers in that mix. You know, as they pick up some of that work, we think that that revenue is going to continue to move forward.
Great. Thank you, Dan.
Speaker Change: Thank you and as a reminder to ask a question please press star 1 1
And our next question.
We'll come from Jean Ramirez.
From D.A. Davidson, your line is now open.
Thank you. I just want to clarify
Speaker Change: Your cost of revenue and SG&A for the next quarter, is it in line with 3Q or is there going to be a bit of a step up like you mentioned earlier?
Speaker Change: Thanks Gene, this is Drew. So Q4 is going, you know, certainly from a margin, gross margin perspective, be impacted by the Q4 conditions around available workdays, available work hours, weather, winter weather conditions as well. And so typically we see some sequential impacts associated with that.
Speaker Change: and then from a G&A perspective there are certain seasonal costs that come through there as well as the as the business you know seasonally comes in there are certain costs there that that come down but it's something that we that we tightly manage
Thank you. And regarding the BEATS program,
Speaker Change: Can you clarify whether you, when will you actually start? Well, I guess the better question is.
Speaker Change: From your talks with your clients, when do you expect the actual building of fiber deployment? Will it be more towards the end of next fiscal year and going into 2026?
Speaker Change: or are you seeing more immediate turnarounds given how fast the B-Program is expected to accelerate now that we've passed the second phase?
Yeah, I think, yeah, any color in that.
For sure. Thanks, Jane. This is Dan.
Speaker Change: So again, I think Louisiana is kind of first out of the gate. So those are preliminary awards. So we've got to see when they get to the actual awards. This is something we're tracking both with our customers. You know, we're talking to the different state broadband programs as well. There's a lot of engineering to be done. There's a lot of permitting to be done. So there is some time, even from when we get to start talking to our customers about potential opportunities and awards, there's time after that.
Speaker Change: Thank you, and just again, going back to the backlog question.
Speaker Change: I guess you're not parsing out what would be organic backlog, but if you're taking that 12th month.
number
Speaker Change: What is the cadence of the backlog decimation or the burn rate next year? Will it be more second half weighted or do you see some similarities compared to this year?
Speaker Change: Yeah, I'll jump in there. So, you know, pleased with the awards that we announced, you know, the benefits that we see there both in the next 12 months, as well as the total backlog. You know, we're not going to disaggregate the timing of that. We're just, I would just reiterate that we're happy to see that increase.
Speaker Change: And then the other thing I would add is that, as we've talked about in the past, it's not always tightly correlated to the revenue growth.
Speaker Change: That being said, I think the higher overall number, as well as the next 12-month number, is a nice starting point as we're looking ahead.
Speaker Change: All right, well, I appreciate your time. Thank you so much and Steve, congratulations and best of luck on your next chapter.
Thank you.
Thank you.
Speaker Change: Our next question comes from Avi Jaroslawicz from UBS. Your line is open.
Avi Jaroslawicz: Hi, good morning guys. Thanks for taking the question. Just wanted to unpack what's driving the organic growth slowdown, you know, slight deceleration into Q4 here.
Avi Jaroslawicz: This is Drew. I'll jump in on that. So, you know, one, we had a strong Q3, as we've provided in our outlook, we see mid to high.
Avi Jaroslawicz: a single digit total growth and then low to mid organic growth. You know, we've had some customers, we called this out on the last call that had a stronger front half of the year that are a bit slower in the back half of the year.
Avi Jaroslawicz: And then certainly as we work into our Q4, as I mentioned, with the available days, hours, et cetera, and weather, there's just certain amounts of constraints of how much you can grow during that period of time. We're pleased with where we're heading. We're just not going to get ahead of ourselves in the outlook.
Got it. That makes sense. Enjoy retirement, Steve.
Thank you.
Speaker Change: And our next question will come from Alan Matroni from Sylvan Lake Asset Management. Your line is open.
Speaker Change: Hi, thank you and congratulations. Steve, this is, I think, my longest CEO relationship given how long you've been CEO. It's like separation anxiety you're going to have to maybe... I think, Alan, it's my longest investor relationship, too, and I may not have as much separation anxiety.
Speaker Change: Douglas Goldstein, CFP®, is the director of Profile Investment Services and the host of the Goldstein on Gelt radio show. He is a licensed financial professional both in the U.S. and Israel. Securities offered through Portfolio Resources Group, Inc., Member FINRA, SIPC, MSRB, NFA, SIFMA. Accounts carried by National Financial Services LLC. Member NYSE & SIPC, a Fidelity Investments company. His book Building Wealth in Israel is available in bookstores, on the web, or can be ordered at www.profile-financial.com. All information on this website is purely information and should not be used as the sole basis for making financial decisions. The opinions rendered herein are those of the guests, and not necessarily those of Douglas Goldstein, Profile Investment Services, Ltd., or Israel National News.
Speaker Change: I realize there's been some transition, there's been multiple acquisitions, and I'm talking about taking out some of these excess costs that you're talking about. Do you foresee over the next year or two years, obviously, revenue starting to ramp up faster than SG&A?
Yeah, Alan, I'll jump in on that. This is Drew.
Speaker Change: So, as I think you'd highlight there, we did have some incremental costs in the period that we called out.
Speaker Change: and that would be something that I would expect to continue.
Speaker Change: happy with what we see and the outlook and the opportunities that are there.
and we'll just continue to tightly manage it.
Speaker Change: Yeah, it seems like in the past you've had these situations where you're spending a little more to anticipate the next big revenue jump given that Bede is coming and also these acquisitions and new opportunities with AI. Is that the setup that we're looking at over the next couple years the way you envision it? I'm not talking about as a percent of revenue SG&A has always been fairly contained and you guys have done a nice job in talking about more just the next step up in terms of growing the ability to handle five to six billion dollars plus in revenues instead of where you've been in the last few years.
Hey Alan, this is Dan.
Thanks for the question.
Speaker Change: You know, we talked about the customers, you know, have been very active strategically some of the combinations they've been increasing their homes past. Again, we think that's
Ryan Urness, Steven Nielsen
Great. And then... Great.
Speaker Change: Lastly, there's been a lot of talk, obviously, with the new administration, Elon Musk and Starlink, and you guys, people talking about the potential, always the fear of B being canceled or some sort of spending clawbacks.
Speaker Change: Can you talk about, I realize you're further down on the totem pole, but can you just talk a little bit about how that works in terms of the allocation funding coming through the state, the matching with the government, and the ability to delay or push that off, just what your view is on that.
Speaker Change: I think the first thing on the alternative technology, that's always been part of the conversation that predates the spending administration change, so we've always thought that would play a part because for some homes it just is what's going to make the most sense from an economic standpoint.
Speaker Change: We'll see how that plays out state over state again with Louisiana coming out and showing a very small percentage for satellite We think that both well, you know over 95% is going to be fiber and we talked about over a billion dollars when you include
The money brought in by the subgrantee, so
Speaker Change: A lot remains to be scripted. You know, obviously we can't call the ball on everything that's gonna come out of the new administration, but the states are pretty far along. All 50 states have gotten through phase two now. You know, they're all working. We have many of them now working on their subgrantee process, so I think we're all gonna learn a lot here in the coming months.
Thank you. Best of luck.
Thank you.
Speaker Change: Thank you. And our next question comes from Adam Thalheimer from Thompson Davis. Your line is open.
Speaker Change: Hey guys, thanks for taking the follow-up. AT&T, the awards in the quarter, were those wireless or wireline and were there any new states in there?
Speaker Change: Yeah, thanks Adam and Suzanne. Those were wireline, and yes, we were fortunate to pick up some new markets as well.
Speaker Change: Yeah, Adam, we did not list out the wireless in that. This was just rewards and extensions.
Speaker Change: Got it. And then Verizon was down sequentially more than I expected in Q3.
Speaker Change: What drove the sequential decline considering they want to do more FIOS builds?
Speaker Change: Yeah, not related to storm work. You know, as you know, these builds, you know, sometimes they go a little bit faster, sometimes they go a little bit slower. Certainly excited about our relationship and the work that we continue to do for Verizon. And like I talked about before, we see them getting through and getting the nod for the Frontier combination. We believe that's going to be a positive for us.
Okay, and then just lastly, I think...
Speaker Change: I had a note there were 2.5 million of BNV integration costs in Q4 but I didn't see any in the guidance. So are those not?
Speaker Change: No, Adam, so originally we had guided a little bit higher than we thought was going to come through. The actual integration cost in Q3 was $4.2 million.
Speaker Change: We've got some modest costs that we would expect in this quarter, and we'll call them out if they're meaningful, but it wasn't notable for purposes of calling out ahead of time.
Got it. Okay. Thank you.
Thank you.
Speaker Change: Thank you and I am showing no further questions from our phone lines and I'd like to turn the conference back to management for closing remarks.
Speaker Change: Thanks, Operator. To conclude this, my final call, I have a special word for all of the DICOM team.
Speaker Change: Since last June, I have traveled across the country to thank hundreds of you in person for all you have done for me.
Speaker Change: I left each visit in awe of your dedication to our customers, your strong desire to excel, your commitment to the well-being of your fellow employees, and most importantly, your integrity, doing the right thing, even when no one is watching.
Speaker Change: In leaving DICOM, I have always tried to live up to an ancient Chinese proverb. It says,
Speaker Change: A leader is best when the people barely know he exists. When his work is done, his aim fulfilled, they will say, we did it ourselves.
Speaker Change: And you really did. Today, my work for DICOM is done. My aim for the company fulfilled. Remember in everything, serve customers skillfully, deliver results with discipline, accountable in all you do. Thanks so much. It's been great.
Speaker Change: Thank you and best wishes, Steve. We thank everybody for joining this morning and look forward to updating you on our annual results the last week of February.
Take care.
Speaker Change: Thank you. This does conclude today's conference call. Thank you for your participation. You may now disconnect. Everyone have a wonderful day.