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Edited Transcript of DY earnings conference call or presentation 27-Feb-19 2:00pm GMT

Q4 2019 Dycom Industries Inc Earnings Call

PALM BEACH GARDENS Mar 19, 2019 (Thomson StreetEvents) -- Edited Transcript of Dycom Industries Inc earnings conference call or presentation Wednesday, February 27, 2019 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* H. Andrew DeFerrari

Dycom Industries, Inc. - Senior VP, CFO & Treasurer

* Richard B. Vilsoet

Dycom Industries, Inc. - Senior VP, Chief Legal Officer & Corporate Secretary

* Steven E. Nielsen

Dycom Industries, Inc. - Chairman, President & CEO

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Conference Call Participants

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* Adam Robert Thalhimer

Thompson, Davis & Company, Inc., Research Division - Director of Research

* Alexander John Rygiel

B. Riley FBR, Inc., Research Division - Analyst

* Brent Edward Thielman

D.A. Davidson & Co., Research Division - Senior VP & Senior Research Analyst

* Christian David Schwab

Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst

* Eric Thomas Luebchow

Wells Fargo Securities, LLC, Research Division - Associate Analyst

* George Stephen Kasiaras

Deutsche Bank AG, Research Division - Research Associate

* Noelle Christine Dilts

Stifel, Nicolaus & Company, Incorporated, Research Division - VP & Analyst

* Tahira Afzal

KeyBanc Capital Markets Inc., Research Division - MD, Associate Director of Equity Research, and Equity Research Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by, and welcome to the Dycom Results Conference Call. (Operator Instructions) As a reminder, today's call is being recorded. I'll turn the conference over to your host, Mr. Steven Nielsen. Please go ahead, sir.

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Steven E. Nielsen, Dycom Industries, Inc. - Chairman, President & CEO [2]

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Thank you, John. Good morning, everyone. I'd like to thank you for attending this conference call to review our fourth quarter 2019 results.

Going to Slide 3. 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.

Today, we have on the call Tim Estes, our Chief Operating Officer; Drew DeFerrari, our Chief Financial Officer; and Rick Vilsoet, our Chief Legal Officer.

Now I will turn the call over to Rick Vilsoet.

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Richard B. Vilsoet, Dycom Industries, Inc. - Senior VP, Chief Legal Officer & Corporate Secretary [3]

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Thank you, Steve. Except for historical information, the statements made by company management during this call may be forward-looking and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements, including those related to the company's outlook, are based on management's current expectations, estimates and projections and involve known and unknown risks and uncertainties, which may cause the company's actual results in future periods to differ materially from forecasted results. These risks and uncertainties are more fully described in the company's transition report on Form 10-K for the 6 months ended January 27, 2018, and other periodic filings with the Securities and Exchange Commission. The company assumes no obligation to update forward-looking statements. Steve?

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Steven E. Nielsen, Dycom Industries, Inc. - Chairman, President & CEO [4]

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Thanks, Rick. Now moving to Slide 4 and a review of our fourth quarter results.

As you review our results, please note that we have presented in our release and comments certain revenue amounts that exclude revenues from storm restoration services during the quarter and the prior year quarter and from a business acquired during the April 2018 quarter. We will also reference adjusted G&A, adjusted EBITDA, adjusted net income and adjusted diluted earnings per share. All of these measures are non-GAAP financial measures. See Slides 14 through 19 for a reconciliation of non-GAAP measures to GAAP measures.

Before I begin my detailed overview of the quarter, I will provide general comments on the fourth quarter of fiscal 2019 and full year fiscal 2020, highlight one recent development and discuss our approach to guidance for fiscal 2020.

First, fourth quarter results were disappointing. Compared to our expectations, revenue, excluding storm restoration services, was at the upper end of guidance but earnings were near the low end. Gross margin, in particular, underperformed. This margin outcome primarily resulted from a large customer program whose revenue continue to grow but whose costs were more than we had expected. These costs reflected in part the customers' evolving objectives, processes and priorities as well as the introduction of new initiatives and the effects of the significant scale of the program.

Likewise, as we go forward on this program, we expect that these factors and their associated complexity will result in margins lower than our overall company margins, and may impact the timing of revenues. We are working hard in a number of areas to improve our performance. But given the current size and complexity of this program, we are unable at this time to provide specific estimates as to the pace and impact of these improvements during fiscal 2020.

Second, as many are aware, on February 25, our fifth-largest customer filed a voluntary petition for reorganization. At the end of the January quarter, this customer owed us approximately $45 million for accounts receivable and contract assets. We look forward to working with this customer and collecting this balance but have taken a charge of $17.2 million, reflecting our current evaluation of recoverability as of January, the end of our fiscal year. We continue providing services to this customer on a business-as-usual basis.

Finally, in September 2017, we changed our fiscal year-end from July to January. We made this change to better align our fiscal year with the budget and planning cycles of our calendar-year customers. In addition, we anticipated that this better alignment would facilitate our provision of annual guidance. As a result, we provided annual guidance for fiscal 2019, our first fiscal year-end, in January. For a number of reasons, we are modifying this approach for fiscal 2020.

Changes to plans or activity levels that occur after the beginning of the calendar year by individual customers have been more than we anticipated when we initiated the annual guidance a year ago. Given that our top 5 customers typically represent almost 80% of total revenue, guidance for us is particularly sensitive to these types of changes. For example, recent unplanned developments at our fifth-largest customer make it difficult to predict revenue for that customer for fiscal 2020. Accordingly, for fiscal 2020, we have reverted to our prior practice of providing investors detailed quantitative guidance for the current quarter and directional guidance for the subsequent quarter.

Going to Slide 5 and a review of the fourth quarter. Revenue was $748.6 million, an increase of 14.3%. Organic revenue, excluding $20.4 million of storm restoration services in the quarter and $19.8 million in the year-ago quarter, increased 13.7%. As we deployed 1-gigabit wireless -- wireline networks, wireless/wireline converged networks and wireless networks, this quarter reflected an increase in demand from all of our top 5 customers. Gross margins were 15.41% of revenue, and adjusted general and administrative expenses were 7.8%. All of these factors produced adjusted EBITDA of $59.8 million or 8% of revenue and adjusted diluted earnings per share of $0.10 compared to $0.12 in the year-ago quarter. Operating cash flow was strong at $142.8 million in the quarter, and liquidity was ample as cash and availability under our credit facility was $463 million.

Now moving to Slide 6. Today, a number of major industry participants are deploying significant wireline networks across broad sections of the country. These networks are generally designed to provision bandwidth enabling 1-gigabit speeds to individual consumers. In addition, emerging wireless technologies are driving significant wireline deployments. These wireline deployments are necessary to facilitate what is expected to be decades-long deployment of fully converged wireless/wireline networks that will enable high-bandwidth, low-latency applications. The industry effort required to deploy these converged networks continues to meaningfully broaden our set of opportunities. Total industry opportunities in aggregate are robust.

We are providing program management, planning, engineering and design, aerial and underground construction and fulfillment services for 1-gigabit deployments. These services are being provided across the country in more than a dozen metropolitan areas to several customers. In addition, we have secured a number of converged wireless/wireline multiuse network deployments. Customers are pursuing multiyear initiatives that are being planned and managed on a market-by-market basis.

Our ability to provide integrated planning, engineering and design, procurement and construction and maintenance services is of particular value to several industry participants. In addition to the timing challenges presented by a large customer program earlier discussed, we also expect some normal timing volatility and customer spending modulations as network deployment strategies and technologies evolve on other large-scale network deployments. Tactical considerations may also impact timing. We remain confident that our competitively unparalleled scale and our financial strength position us well to deliver valuable service to our customers.

Going to Slide 7. We continued to experience the effects of a strong overall industry environment during the quarter with increases in demand from our top 5 customers. Organic revenue, excluding storm restoration services, increased 13.7%. Our top 5 customers combined produced 79.7% of revenue, increasing 19.4% organically, while all other customers decreased 3.6% organically.

AT&T was our largest customer at 21% of total revenue or $157.4 million. AT&T grew 12.5% organically. Revenue from Verizon was $156.3 million or 20.9% of revenue. Verizon was Dycom's second-largest customer and grew 77.2% organically. Comcast was our third-largest customer at $143.6 million or 19.2% of revenue and grew organically 0.9%. Revenue from CenturyLink was $109.6 million or 14.6% of revenue. CenturyLink was our fourth-largest customer and grew organically 2.5%. And finally, revenue from Windstream was $29.5 million or 3.9% of revenue. Windstream was our fifth-largest customer. Of note, this quarter is the first since April 2017 quarter where all of our top 5 customers have grown organically. We are encouraged with our second consecutive quarter of double-digit organic growth despite the challenges we have described recording a large customer program and its impact on margins.

We have continued to extend our geographic reach and expand our program management and network planning services. In fact, over the last several years, we have meaningfully increased the long-term value of our maintenance and operations business, a trend which we believe will parallel our deployment of 1 gigabit and wireless/wireline converged networks as those deployments dramatically increase the amount of outside plant network that must be extended and maintained.

Now moving to Slide 8. Backlog at the end of the fourth quarter was $7.33 billion versus $7.313 billion at the end of October 2018, an increase of over $17 million. Of this backlog, approximately $2.739 billion is expected to be completed in the next 12 months. The total backlog calculation 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. For AT&T, we were awarded construction services agreements in Wisconsin, Texas, South Carolina and Florida; with CenturyLink, construction services in South Dakota, Minnesota, Wisconsin and Nebraska; from Comcast, fulfillment services in Michigan and Illinois; for various customers, locating services in California, Virginia, Tennessee and Georgia; and finally, we secured rural fiber services agreements in Washington, Maine and West Virginia.

Headcount increased during the quarter to 14,920.

Now I will turn the call over to Drew for his financial review and outlook.

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H. Andrew DeFerrari, Dycom Industries, Inc. - Senior VP, CFO & Treasurer [5]

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Thanks, Steve, and good morning, everyone. Going to Slide 9. Contract revenues for Q4 '19 were $748.6 million, and organic revenue growth was at 13.7%, reflecting increases from our top 5 customers.

Storm restoration services contributed $20.4 million of revenue in Q4 '19 compared to $19.8 million in the year-ago period. Also, revenue from an acquired business contributed $5.9 million of revenue in Q4 '19.

Adjusted EBITDA was $59.8 million or 8% of revenue. Gross margins were at 15.4% and were below our expectations. Margins in the quarter were impacted by costs of a large customer program.

On February 25, 2019, our fifth-largest customer filed a voluntary petition for reorganization. As of January 26, 2019, the company had approximately $45 million of total contract -- of total accounts receivable and contract assets related to this customer. Against this amount, we have taken a pretax noncash charge of $17.2 million as a component of G&A expense during Q4 '19 as required to account for our current evaluation of the recoverability of the accounts receivable and contract assets. We look forward to working with this customer on collecting the balances owed to us.

Excluding the noncash charge and the related impact on stock compensation, G&A expense decreased approximately 140 basis points compared to the January quarter last year. Our lower financial performance this year resulted in a reduction of performance-based incentive compensation and share-based compensation during the quarter. Our non-GAAP adjusted diluted EPS in Q4 '19 was $0.10 per share.

Now going to Slide 10. Our balance sheet and financial position remain strong. We ended the quarter with $450 million of term loans outstanding and no revolver borrowings. Liquidity is ample at $463 million at the end of the quarter, consisting of availability from our credit facility and cash on hand. Cash flow from operations was substantial at $142.8 million during the current quarter. For Q4 '19, the combined DSOs of accounts receivable and net contract assets were 103 days, including accounts receivable net of allowance classified as noncurrent that are owed from a customer that recently filed a voluntary petition for reorganization.

Capital expenditures were $33.8 million during Q4 '19 net of disposal proceeds, and gross CapEx was $37.2 million.

For fiscal 2020, we anticipate capital expenditures net of disposal proceeds to range from $150 million to $160 million. In summary, we continue to maintain ample liquidity and a strong balance sheet.

Going to Slide 11. For the quarter ended -- ending April 2019, we currently expect total revenue to range from $750 million to $800 million, non-GAAP adjusted diluted EPS to range from $0.34 to $0.56 per share, and adjusted EBITDA percent of contract revenue which decreases from the Q1 '19 result. Other expectations include depreciation of $40.6 million to $41.4 million and amortization of $5.3 million, share-based compensation included in G&A of $5 million to $5.5 million, adjusted interest expense of approximately $7.3 million, excluding $4.9 million of interest from a noncash debt discount amortization of our notes. Other income net is expected to range from $3.4 million to $4 million. The effective tax rate is expected at 27.5% before any tax effects of the settlement of share-based awards.

Now going to Slide 12. Looking ahead to the July 2019 quarter, we currently expect revenue growth of mid-single digit as a percentage of revenue compared to the Q2 '19 result and adjusted EBITDA margin percent of contract revenue which decreases from the Q2 '19 result.

Now I will turn the call back to Steve.

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Steven E. Nielsen, Dycom Industries, Inc. - Chairman, President & CEO [6]

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Thanks, Drew. Moving to Slide 13. Within a growing economy, we experienced the effects of a strong industry environment and capitalized on our significant strengths. First and foremost, we maintained strong customer presence throughout our markets. Second, our extensive market presence has allowed us to be at the forefront of evolving industry opportunities. The end-market drivers of these opportunities remain firm and are strengthening. Fiber deployments in and contemplation of emerging wireless technologies are underway in many regions of the country. Wireless construction activity in support of expanded coverage and capacity has begun to accelerate due to deployment of enhanced macro cells and new small cells.

Telephone companies are deploying fiber-to-the-home to enable 1-gigabit high-speed connections. Cable operators are deploying fiber to small and medium businesses and enterprises. A portion of these deployments are in anticipation of the customer sales process. Fiber-deep deployments to expand capacity as well as newbuild opportunities are underway. Dramatically increased speeds to consumers are being provisioned. Customers are consolidating supply chains, creating opportunities for market share growth and increasing the long-term value of our maintenance and operations business.

In addition, we are increasingly providing integrated planning, engineering and design, procurement and construction and maintenance services. We remain encouraged that our major customers are committed to multiyear capital spending initiatives, and we are confident in our strategies, the prospects for our company, the capabilities of our dedicated employees and the experience of our management team as we grow our business.

Now, John, we will open the call for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) First in the line, we have Alex Rygiel with B. Riley FBR.

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Alexander John Rygiel, B. Riley FBR, Inc., Research Division - Analyst [2]

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Steve, obviously, there's not a revenue issue here. Your backlog's strong. Your revenues were pretty solid in the quarter. Guidance is pretty firm. But the costs are absolutely an issue here. Could you add a little bit more color as to how we should think about the cost challenge as it relates to pricing in the industry and your product versus productivity and efficiency versus cost inflation from labor, et cetera?

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Steven E. Nielsen, Dycom Industries, Inc. - Chairman, President & CEO [3]

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Yes. I think, Alex, as we highlighted in our comments, the issues on the costs that we highlighted are really around the complexity that's developed around a large customer program for a number of reasons. I mean, there's been evolving initiatives and priorities and objectives, and that's really where the issue is as we look at it; it's complexity. I mean, clearly, we're in a -- have a 4% unemployment world, which we've been there before, but it's really the complexity that's created the cost, particularly in this fourth quarter.

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Alexander John Rygiel, B. Riley FBR, Inc., Research Division - Analyst [4]

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And what is your view on sort of market share and pricing in the industry in a more broader sense?

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Steven E. Nielsen, Dycom Industries, Inc. - Chairman, President & CEO [5]

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So I think what was encouraging in some of the disclosures we made around backlog is that we were able to extend our master contract business into other portions of a very large customer outside the Southeast. That's a first for us. And not only was it in one part of the country, but it was in several parts of the country. So I think that was helpful. We had other extensions that we highlighted there of new business in different parts of the country for existing customers. We've had some renewals after the end of the quarter and actually picked up some new -- fairly significant new business with an existing customer. So we feel good about the competitive positioning. We're working hard to get ahead of the complexity on this large program, but we've got work to do.

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Alexander John Rygiel, B. Riley FBR, Inc., Research Division - Analyst [6]

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And lastly, you've got plenty of liquidity. Can you prioritize M&A and share buyback and talk about opportunities in M&A?

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Steven E. Nielsen, Dycom Industries, Inc. - Chairman, President & CEO [7]

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Yes. So as always, Alex, our capital allocation always runs to taking care of the organic growth that's in the business. I mean, we're going to be making some investments to start these -- or have made some investments to start some of these new master service agreements, and so we always want to make sure we have enough liquidity there. We had this unfortunate situation with one customer, so you always want to make sure that you have a cushion there, although we are encouraged with that customer with some of their first-day motions. So I think we're going to take care of our customers and the growth opportunities, and then we'll look at M&A versus share repurchases. I would not tell you that M&A right now is as big a focus in the business as we are working hard in a number of areas.

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Operator [8]

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Next question is from Brent Thielman with D.A. Davidson.

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Brent Edward Thielman, D.A. Davidson & Co., Research Division - Senior VP & Senior Research Analyst [9]

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Steve, I guess, given what you're seeing in this particular large program, does that change at all how you're thinking about preparing the business for kind of this next wave of spend? I mean, it looks like you continue to add people. But are there other things that you can do or you think you can do to optimize profitability just given how the demands seem to be evolving? And I guess, second, Steve, is do you feel like you still have the appropriate suite of services to fully address these changing strategies?

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Steven E. Nielsen, Dycom Industries, Inc. - Chairman, President & CEO [10]

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So I think, Brent, as we've mentioned to Alex, I mean, we're working ahead to get -- hard to get ahead of the increasing complexity. We're putting new processes in place on our side of the business. We're implementing new IT systems. I mean, we're doing things that ultimately make us a better business. They have a cost impact today that we didn't expect, but we're not spending money on things that won't have a long-term benefit. So it's a tough time, but we're optimistic that what we're working on makes us a better business. And then I think in terms of the suite of services, I think we're very comfortable with our -- with the portfolio of services that we provide. I mean, increasingly on these large programs for all of our customers, there's a significant IT element to the deployment, both remotely in the field and then in the back office. And I think we're investing substantially in that area because I think that's where the future is.

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Brent Edward Thielman, D.A. Davidson & Co., Research Division - Senior VP & Senior Research Analyst [11]

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Okay. And I guess as you're having sort of ongoing customer dialogue elsewhere beyond this single large customer, are you getting any sense that maybe some of these other programs are going to follow a similar path?

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Steven E. Nielsen, Dycom Industries, Inc. - Chairman, President & CEO [12]

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So I think the complexity here is unique. I think there's an increasing openness to us being involved in more of the engineering, planning and the procurement and managing of the materials, and that's across all of our customers. So I think that's a factor. I think the other thing is with the rest of the business, there's always issues, but it's nothing like this program, and that's part of our frustration and, I'm sure, investors'. We had top 5 organic growth, good quarter in wireless, which is continuing to grow. And we've got a good business. And in fact, if you looked at the rest of the business, it really exceeded our Q4 expectations.

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Brent Edward Thielman, D.A. Davidson & Co., Research Division - Senior VP & Senior Research Analyst [13]

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Okay. And then I guess maybe just one for probably Drew. But the $45 million in total AR you mentioned, I guess you're still evaluating that remaining $28 million you didn't write off. What's the status there?

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H. Andrew DeFerrari, Dycom Industries, Inc. - Senior VP, CFO & Treasurer [14]

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Yes. Thanks, Brent. So we took a look at the total receivables and contract assets. We've made our estimate of the recoverability that's there. As Steve mentioned before, there were some first-day motions that were encouraging and so we'll continue to evaluate that. And as Steve said, we continue to work with the customer.

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Steven E. Nielsen, Dycom Industries, Inc. - Chairman, President & CEO [15]

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Yes. I think, Brent, just to add to that, we had to look at it as of the end of January because the lawsuit existed at the end of January. We're working with the customer and we've had some experience in this area before, and we'll work our way through it.

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Operator [16]

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Next question is from Tahira Afzal with KeyBanc Capital Markets.

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Tahira Afzal, KeyBanc Capital Markets Inc., Research Division - MD, Associate Director of Equity Research, and Equity Research Analyst [17]

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Steve, I guess my question is, as we look at this big program and really the terms and embedded contractual risk ownership and you look at other -- the rollout of 5G and what have you going forward, product lines, is there any risks that you could end up with a similar contract in terms of glitches in a sense with any of the others as they start to build out their programs? Or are you pretty confident this is dodged due to the terms of this one particular program?

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Steven E. Nielsen, Dycom Industries, Inc. - Chairman, President & CEO [18]

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So I think, Tahira, as we said earlier, it's really that the processes and objectives and the priorities have evolved. That somewhat accelerated in the last quarter. So it's really not -- from our perspective, it's really that complexity that we have to manage, and we're not seeing that with other customers. And as I said before, we're working hard to get ahead of it. So we think we can manage it going forward, but it's something that we're going to continue to work at hard to get ahead of.

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Tahira Afzal, KeyBanc Capital Markets Inc., Research Division - MD, Associate Director of Equity Research, and Equity Research Analyst [19]

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And then, Steve, I guess the reason I'm asking is you guys are pretty good once you have a problem, trying to fix it. But if it spreads, I guess, what's the risk -- or how confident are you that this is something that you can box in 2019 -- calendar 2019 and your fiscal year '20 and doesn't really trickle into the next year?

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Steven E. Nielsen, Dycom Industries, Inc. - Chairman, President & CEO [20]

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Well, with respect to the rest of the business, Tahira, the contract forms are all different. Our customers have different approaches. There are big themes, as we've talked about, in terms of planning and engineering and procurement. But the contract terms, as we've said before, are often fixed for many years. I mean, so the backlog that we booked last quarter was on the same contract forms that those customers have used for a long period of time. So I think that's the issue.

In terms of the large program, as -- what we've said is, we've called it out. We wanted investors to understand that we've reset our perspective there based on the costs. Those are going to extend at this point through fiscal 2020. We're working hard to change that. That won't be a happy outcome, but that's something that we're working hard to change.

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Operator [21]

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Our next question is from Adam Thalhimer with Thompson, Davis.

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Adam Robert Thalhimer, Thompson, Davis & Company, Inc., Research Division - Director of Research [22]

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You referenced some customer modulations ahead of other large deployments. Is that incremental weakness that you expect to see in the first half of '20? Or were you seeing some of that in Q4 as well?

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Steven E. Nielsen, Dycom Industries, Inc. - Chairman, President & CEO [23]

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I think that's a general statement that we've had in our comments, Adam, for a period of time. There's always going to be things with the customer where you get some modulations. We have customers that are rolling out a number of new technologies. But we consider that different and more part of the backdrop of the business than what we've talked about in this large program. So I don't think that's a particularly new disclosure for us.

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Adam Robert Thalhimer, Thompson, Davis & Company, Inc., Research Division - Director of Research [24]

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Okay, that's helpful. And then, Steve, you have one large customer who's talking about a fiber-to-the-home program coming to the end in the middle of this year. What are your high-level thoughts on that?

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Steven E. Nielsen, Dycom Industries, Inc. - Chairman, President & CEO [25]

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So clearly, they've stated publicly that they're going to wind it down through the middle of the year. We also have a good wireless business with that customer that actually is growing faster than the wireline business. So we think that there's some opportunity to have some rotation. And I think that customer has also said that they're -- that when they have deployed fiber, they have lower churn in the customer base, they're higher-value customers, and we'll just see as they assess our priorities going into calendar 2020 what their perspectives are. But clearly, with that customer, they've got a lot on their plate, and that's how they've prioritized it this year, particularly given the large wireless ramp.

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Adam Robert Thalhimer, Thompson, Davis & Company, Inc., Research Division - Director of Research [26]

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I've got it. And the last one for me, just curious. I mean, how do you think Dycom plays in 5G? What are the big opportunities for you around 5G?

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Steven E. Nielsen, Dycom Industries, Inc. - Chairman, President & CEO [27]

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Well, I think as we've said before, 5G rests on getting wireless signals into fiber as quick as possible, right? So the old saying is that the core of a wireless network is fiber. And so I think we play there. I think we have a growing wireless business. It was 8.3% of revenue in the quarter. So at a $250 million run rate roughly, I think that will be more as we go through the rest of the year. We're able to gain some share there. So I think we can play really across the board there.

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Operator [28]

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Next question is from Chad Dillard of Deutsche Bank.

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George Stephen Kasiaras, Deutsche Bank AG, Research Division - Research Associate [29]

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This is George Kasiaras on for Chad. I just wanted to get some commentary on, I guess, basically the cadence of both the EBITDA margins and revenues in the next year in terms of kind of first half, second half weighting. And also longer term, whether mid-teens EBITDA margins are still possible, like, I guess, maybe pushed out perhaps a year in light of this recent cost change.

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Steven E. Nielsen, Dycom Industries, Inc. - Chairman, President & CEO [30]

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Sure, George. Let me take the second question, and I'll let Drew address your first. So look, in a good environment, we have achieved double-digit EBITDA. Given the challenges that we've highlighted here and that we've discussed, it's not expected for fiscal 2020. That doesn't mean that we've given up. That doesn't mean that we're not working hard to take costs out of the business and deploy new ways of managing the business. But I think right now, that's our best expectation for this year. And then Drew, in terms of kind of the EBITDA.

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H. Andrew DeFerrari, Dycom Industries, Inc. - Senior VP, CFO & Treasurer [31]

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Yes. And then for -- George, for the first 2 quarters, we've provided that, that we believe it's down some versus the prior year quarter that we provided in the outlook.

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Steven E. Nielsen, Dycom Industries, Inc. - Chairman, President & CEO [32]

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Yes. And I mean, we haven't -- as we've talked about in our comments, we're not doing annual guidance, but we think that's enough to kind of give you at least a trajectory for the -- through the first half of the year.

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Operator [33]

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Next question is from Eric Luebchow with Wells Fargo.

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Eric Thomas Luebchow, Wells Fargo Securities, LLC, Research Division - Associate Analyst [34]

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Just a question on the kind of uncertainty around timing. Just curious if it's still a little bit more of a permitting issue or if those issues have been largely resolved. Or is it kind of more specific to the customers themselves and how they're choosing to deploy capital?

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Steven E. Nielsen, Dycom Industries, Inc. - Chairman, President & CEO [35]

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I'm not sure that it's either one, Eric. I mean, what we've really talked about is that the complexity of the project has evolved and accelerated, and that's really where the costs are coming from. The constraints on actually getting work done as you look at the numbers, I mean, have diminished. We got -- on a seasonally adjusted basis, we grew revenue sequentially. So it's really a different set of issues other than those -- other than any constraints.

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Eric Thomas Luebchow, Wells Fargo Securities, LLC, Research Division - Associate Analyst [36]

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Got it. And just a quick question on the guidance. For the first -- the next 2 quarters, it looks like your revenue growth kind of decelerated into the single digits. So I'm just curious if that's more related to the complexity of some of these large customer deals and uncertainty around the timing or anything else to call out there.

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Steven E. Nielsen, Dycom Industries, Inc. - Chairman, President & CEO [37]

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Yes. I don't think -- I think what we talked about as one, for everybody on the call, February hadn't been a sterling month for weather, right, so we're calling out that impact. And clearly, we have this -- as we've discussed earlier, we have this customer that will accelerate early in the year and then probably decelerate through the middle of the year as they complete this project, and we just wanted to reflect that and not get ahead of ourselves.

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Operator [38]

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Next question is from Noelle Dilts with Stifel.

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Noelle Christine Dilts, Stifel, Nicolaus & Company, Incorporated, Research Division - VP & Analyst [39]

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First, just to start with a housekeeping question. Could you just give us -- provide us with the facilities locating and utility revenues? And then also if you could give us the wireless outlook percentages, that would be helpful.

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H. Andrew DeFerrari, Dycom Industries, Inc. - Senior VP, CFO & Treasurer [40]

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So I'll give the split first and then the rest of the top 10. So telco was at 69.8%, cable was at 22.2%, facility locating was at 5.3%, electrical and other was at 2.7%. Charter was our #6 customer at 3.2% of revenue. Frontier was #7 at 1.7%. Crown Castle was #8 at 1.3%. Edison International was #9 at 1.2%, and Southwest Gas was #10 at 1%.

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Noelle Christine Dilts, Stifel, Nicolaus & Company, Incorporated, Research Division - VP & Analyst [41]

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Okay. And then I know we've talked a lot about this program with evolving complexity. I think what I'm struggling to understand here is as a large valued partner for your customers, typically when things like complexity evolve and accelerate, you're able to work with the customer to some extent on -- with sort of a contract and how you're getting compensated. Are you seeing some of that here? Or is the market just kind of competitive and that makes that sort of contract evolution and negotiation challenging?

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Steven E. Nielsen, Dycom Industries, Inc. - Chairman, President & CEO [42]

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Noelle, I don't think we're going to get into the specifics of any communications with any customer. I think we've given you what we can in terms of how we feel the programs evolved and the cost impacts associated with that. But I don't think we have anything to add.

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Operator [43]

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Next question is from Christian Schwab with Craig-Hallum Capital.

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Christian David Schwab, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [44]

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Steve, I just want to make sure I heard it correctly that the large customer program will be running at lower than overall company margins through fiscal year 2020 and then you would expect to renegotiate that contract, potentially. Did I hear that correctly?

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Steven E. Nielsen, Dycom Industries, Inc. - Chairman, President & CEO [45]

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Well, you heard the first half correctly, Christian. I mean, that -- it's going to run where it is. We're working hard to make it better. We're not commenting beyond fiscal 2020 other than we are working hard to make it -- to improve our performance in a number of areas and get ahead of this complexity.

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Christian David Schwab, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [46]

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Okay. Can you just give us like a simple real-life example of the -- one of the biggest complexities that you're facing that was unanticipated?

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Steven E. Nielsen, Dycom Industries, Inc. - Chairman, President & CEO [47]

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Christian, we are -- once again, we're careful to describe these kind of situations. And these are large, complex programs. It's in a number of geographies across the country. There are things that come up that have created complexity that we didn't expect. We've applied costs to get ahead of that, and I don't think we have anything more to add than that.

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Operator [48]

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And Mr. Nielsen, there are no further questions in queue.

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Steven E. Nielsen, Dycom Industries, Inc. - Chairman, President & CEO [49]

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Okay. Well, we thank everybody for your attendance on the call, and we look forward to speaking to you at the end of May after our first quarter. Thank you.

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Operator [50]

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Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation. You may now disconnect.