DYCOM INDUSTRIES INC

Dycom Industries, Inc. is a leading provider of specialty contracting services focused on the digital infrastructure, telecommunications and utilities industries throughout the United States. The Company is made up of 38 operating companies that serve a diverse customer base across all 50 states from hundreds of field offices. Demand for high-speed and low-latency connectivity is expanding, driven by data-intensive applications and mobile usage, necessitating extensive wireline network upgrades and extensions, new and expanding fiber and electrical infrastructure for data centers to meet the current and future needs of cloud compute and artificial intelligence, and advanced wireless network deployments.

The specialty contracting services industry in which Dycom operates is highly fragmented and includes a large number of participants. The Company competes with several large multinational corporations and numerous regional and privately owned companies, and a portion of its customers directly perform many of the same services. Principal competitive factors include geographic presence, quality of service, worker and general public safety, price, breadth of service offerings, and industry reputation. Dycom believes it compares favorably to its competitors when evaluated against these factors. During fiscal 2026, the Company derived approximately 25.4% ¹ of its total contract revenues from AT&T Inc., 14.0% ² from Verizon Communications, Inc., and 10.8% ³ from Lumen Technologies Inc.

Dycom generates revenue by providing specialty contracting services under master service agreements and other contracts that contain customer-specified service requirements with discrete pricing for individual tasks. Contract revenue is recognized over time as services are performed and customers simultaneously receive and consume the benefits provided. Output measures, such as units delivered, are utilized to assess progress against specific contractual performance obligations for the majority of services. For certain contracts, representing less than 5% ⁴ of contract revenues during fiscal 2026, fiscal 2025, and fiscal 2024, the Company uses the cost-to-cost measure of progress. The Company supplies the labor, tools, and equipment necessary to provide these services to its customers.

The Communications segment provides a range of construction, maintenance, and installation services, including the placement and splicing of fiber, copper, and coaxial cables; excavating trenches; placing related structures such as poles, anchors, conduits, manholes, cabinets, and closures; placing drop lines; and maintaining and removing these facilities. It also provides tower construction, lines and antenna installation, foundation and equipment pad construction, small cell site placement for wireless carriers, equipment installation and material fabrication and site testing services, underground facility locating services for various utility companies, and construction and maintenance services for electric and gas utilities. Additionally, the Communications segment provides engineering services to telecommunications providers, including the planning and design of aerial, underground, and buried fiber optic, copper, and coaxial cable systems, and plans and designs wireless networks. For fiscal 2026, Communications segment contract revenues were $5,450.1 million ⁵.

The Building Systems segment, added following the acquisition of Power Solutions, LLC in the fourth quarter of fiscal 2026, specializes in providing comprehensive building infrastructure solutions, including electrical, energy management, security, and fire safety systems for data centers and other critical facilities. For fiscal 2026, Building Systems segment contract revenues were $95.8 million ⁶. The segment reported a loss before income taxes of $9.6 million ⁷ for fiscal 2026, attributable to $20.4 million ⁸ of amortization expense associated with finite-lived intangible assets related to customer relationships, backlog and trade names identified during the preliminary purchase price allocation.

During the fourth quarter of fiscal 2026, Dycom acquired Power Solutions, LLC, a company that provides comprehensive building infrastructure solutions. The purchase price was valued at $1.95 billion ⁹ as of the signing on a cash-free, debt-free basis. At the closing date, the funding included a cash payment of $1,644.9 million ¹⁰ ($1,628.6 million ¹¹ net of cash acquired of $16.3 million ¹²), the issuance of 1,011,069 ¹³ shares of Dycom common stock to the sellers valued at $351.0 million ¹⁴, and the assumption of seller indebtedness of $64.8 million ¹⁵, for total consideration of $1,995.9 million ¹⁶. During fiscal 2026, the Company repurchased 200,000 ¹⁷ shares of common stock, at an average price of $150.93 ¹⁸, for $30.2 million ¹⁹. As of January 31, 2026, $119.8 million ²⁰ of the authorization remained available for repurchases. The Company also amended its credit agreement to, among other things, establish a $600.0 million ²¹ 364 day secured bridge loan facility, increase the term loan A facility from $440.0 million ²² to $1,540.0 million ²³, and increase the revolving credit facility from $650.0 million ²⁴ to $800.0 million ²⁵.

For fiscal 2026, total contract revenues were $5,545.9 million ²⁶, compared to $4,702.0 million ²⁷ in fiscal 2025. Net income was $281.2 million ²⁸ for fiscal 2026, compared to $233.4 million ²⁹ in fiscal 2025. Diluted earnings per common share were $9.56 ³⁰ for fiscal 2026, compared to $7.92 ³¹ in fiscal 2025. Non-GAAP Adjusted EBITDA was $737.7 million ³², or 13.3% ³³ of contract revenues, for fiscal 2026, compared to $576.3 million ³⁴, or 12.3% ³⁵ of contract revenues, in fiscal 2025.

Dycom is well-positioned to capitalize on long-term growth drivers including the increased demand for network telecommunications bandwidth necessary for reliable video, voice, and data services. Demand for high-speed and low-latency connectivity is expanding, driven by data-intensive applications and mobile usage, necessitating extensive wireline network upgrades and extensions, new and expanding fiber and electrical infrastructure for data centers to meet the current and future needs of cloud compute and AI, and advanced wireless network deployments. The Company believes its customers will benefit from expanded capabilities to support data center development by combining the Communications segment's expertise in fiber and the Building Systems segment's leadership in electrical. The Company's strategy also includes capitalizing on multi-year fiber-to-the-home deployments throughout the United States, increasing fiber and electrical infrastructure builds to support hyperscaler data center growth, continued state and federal program spending to bridge the digital divide, and wireless network modernization programs.

Dycom plans to selectively increase market share by leveraging its expertise, breadth of service offerings, reputation for providing high quality services, and ability to provide those services nationally. The Company's operating structure and multiple points of contact within customer organizations positions it favorably to win new opportunities and maintain strong relationships. Dycom is able to address larger customer opportunities due to its significant financial resources that some comparatively more capital-constrained competitors may be unable to take on. The Company also pursues selective acquisitions that are operationally and financially beneficial, providing incremental revenue, geographic and service offering diversification, and complementing existing operations, generally targeting companies with defensible leadership positions in their market niches.

Costs of earned revenues as a percentage of contract revenues decreased 0.7% ³⁶ during fiscal 2026 compared to fiscal 2025, with labor and subcontracted labor costs decreasing 1.0% ³⁷ as a percentage of contract revenues. The Company expects non-cash charges from amortization of finite-lived intangible assets from the Power Solutions acquisition to continue to impact segment operating results in future periods as the economic value of the acquired intangibles is realized.

Dycom expects capital expenditures, net of disposals, to range from $210.0 million ³⁸ to $220.0 million ³⁹ during fiscal 2027 to support growth opportunities and the replacement of certain fleet assets. The Company is in the process of implementing an Enterprise Resource Planning (ERP) system to upgrade and standardize its information technology systems, expected to occur in phases over the next several years. As of January 31, 2026, Dycom employed approximately 19,556 ⁴⁰ persons.

Dycom's capital allocation strategy includes investment in acquisitions and share repurchases. The Company does not anticipate paying any cash dividends on its common stock in the foreseeable future. As of January 31, 2026, $119.8 million ⁴¹ of the share repurchase authorization remained available. The Company had $709.2 million ⁴² in cash and equivalents as of January 31, 2026.

The cyclical nature of the industries Dycom serves affects demand for its services, and its contract revenues and results of operations exhibit seasonality as a significant portion of Communications segment work is performed outdoors. Adverse weather, which is more likely to occur with greater frequency, severity, and duration during the winter, as well as reduced daylight hours, impact operations during the fiscal quarters ending in January and April. Additionally, extreme weather conditions such as major or extended winter storms, droughts and tornados, wildfires, and natural disasters could impact demand for services or the ability to perform services. Several holidays fall within the fiscal quarter ending in January, decreasing the number of available workdays.

Macroeconomic conditions, including inflation, slower growth or recessionary conditions, changes to fiscal and monetary policy, wars or other geopolitical tensions, availability of credit, and fluctuations in interest rates could adversely affect demand for Dycom's services and the availability and cost of materials and equipment. The Company's customers operate in regulated industries and are subject to laws and regulations that can change frequently, and considerable uncertainty exists regarding how future budget and program decisions will unfold and future funding for certain government programs may be reduced, delayed or cancelled. The incoming administration announced a planned advisory commission to reform federal government processes and reduce expenditures, which could adversely affect funding for infrastructure programs.

Dycom's customer base is highly concentrated, with AT&T Inc., Verizon Communications, Inc., and Lumen Technologies Inc. accounting for approximately 25.4% ⁴³, 14.0% ⁴⁴, and 10.8% ⁴⁵ of total contract revenues, respectively, in fiscal 2026, and the loss of one or more of these customers could adversely affect revenues and liquidity. The Company retains significant self-insured risk for automobile liability, general liability, and workers' compensation claims, with per-occurrence retentions of up to $2.0 million ⁴⁶ for automobile and general liability in fiscal 2026, and total accrued insurance claims of $105.6 million ⁴⁷ as of January 31, 2026, which could be insufficient if actual claims exceed estimates. The Company has substantial debt obligations, including $1,540.0 million ⁴⁸ under the Term Loan A Facility and $800.0 million ⁴⁹ under the Term Loan B Facility, and the credit agreement contains financial covenants requiring a consolidated net leverage ratio of not greater than 4.50 to 1.00 ⁵⁰ and a consolidated interest coverage ratio of not less than 2.50 to 1.00 ⁵¹, and a failure to comply could result in acceleration of debt. The Company's backlog of $9,542.0 million ⁵² as of January 31, 2026 is subject to reduction or cancellation as customers are not contractually committed to specific volumes and may cancel contracts at any time, which could adversely affect future revenues.

Management's message emphasizes the Company's position as a leading provider of specialty contracting services focused on digital infrastructure, telecommunications, and utilities, and its confidence in its ability to capitalize on industry opportunities driven by expanding demand for high-speed and low-latency connectivity. The strategic priorities emphasized for the period ahead include capitalizing on long-term growth drivers such as fiber-to-the-home deployments, fiber and electrical infrastructure for data center growth, state and federal program spending, and wireless network modernization; selectively increasing market share through expertise, breadth of service offerings, and national presence; pursuing disciplined financial and operating strategies by centralizing certain activities to leverage scale while decentralizing operational decisions; and pursuing selective acquisitions that are operationally and financially beneficial.