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Dycom (DY) Reports Q1 Loss, Misses on Revenues, Slips 15%

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Dycom Industries Inc. DY tanked 15.1% in yesterday’s trading session, after it reported first-quarter fiscal 2022 (ended May 1, 2021) results, wherein earnings and revenues missed the respective Zacks Consensus Estimate.

Earnings & Revenue Discussion

Dycom reported adjusted loss of 4 cents per share against the Zacks Consensus Estimate of earnings of 13 cents. In the year-ago quarter, the company reported earnings of 36 cents per share.

Contract revenues of $727.5 million declined 10.7% year over year and missed the consensus mark of $766 million by 5.1%. Organically, revenues (excluding $3.9 million of storm-restoration services) fell 11.1% year over year. Notably, the company witnessed higher demand from two of the top five customers. The company deployed 1 gigabit wireline networks, wireless/wireline converged networks and wireless networks in the reported quarter.

Its top five customers contributed 68.2% to total contract revenues, which decreased 23% organically. Nonetheless, revenues from all other customers grew 31.9% organically for the quarter, the highest growth rate in at least nine years. This marks the ninth consecutive quarter wherein all other customers (barring the top five customers) have grown organically.

Dycom’s largest customer AT&T (accounting for 21.4% of total revenues) advanced 0.9% on an organic basis. This marked its first quarterly organic growth with AT&T since July 2019 quarter. Comcast (the second-largest customer) added 18% to total revenues and grew 10.7% organically, while Verizon accounted for 12.6% of revenues. Lumen Technologies accounted for 11.8%, while Windstream Corporation represented 4.4% of total revenues.

Dycom’s backlog at the end of the reported quarter totaled $6.528 billion, comparing unfavorably with $6.81 billion at the end of fourth-quarter fiscal 2021. Of the backlog, $2.746 billion is projected to be completed in the next 12 months.

Dycom Industries, Inc. Price, Consensus and EPS Surprise

Dycom Industries, Inc. Price, Consensus and EPS Surprise
Dycom Industries, Inc. Price, Consensus and EPS Surprise

Dycom Industries, Inc. price-consensus-eps-surprise-chart | Dycom Industries, Inc. Quote

Operating Highlights

Adjusted EBITDA margin of 6.1% contracted 250 basis points (bps) from the year-ago level. Gross margins were 14.8% for the quarter, down 169 bps from a year ago. This downside was due to the impact of a large customer program and lower revenues from other large customers. Also, adverse winter weather conditions in many regions of the country during the first half of the quarter impacted margin.

General and administrative expenses increased 112 bps year over year for the quarter, reflecting higher stock-based compensation and administrative costs.

Financials

As of May 1, 2021, Dycom had cash and cash equivalents worth $330.6 million compared with $11.8 million on Jan 30, 2021. Long-term debt was $835.2 million at the end of the reported quarter compared with $501.6 million at fiscal 2021-end.

Fiscal Q2 Outlook

For second-quarter fiscal 2022, the company expects contract revenues to be in line to modestly lower year over year. Non-GAAP Adjusted EBITDA, as a percentage of contract revenues, is anticipated to decrease from the year-ago quarter. The company expects gross margin to be impacted by approximately 200 basis points year over year. The tepid expectation is due to the impact of a large customer program and lower revenues from other large customers that are expected to have reduced spending in the first half of this calendar year.

Zacks Rank

Dycom — which shares space with EMCOR Group, Inc. EME, MasTec, Inc. MTZ and North American Construction Group Ltd. NOA in the Zacks Building Products - Heavy Construction industry — currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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