All right, good morning. Thank you very much for being here. My name's Frank Louthan. I'm the Senior Wireline Analyst here at Raymond James. And today we're very pleased to have Dycom back with us. We've got Dan Peyovich, the CEO of Dycom. So Dan, thanks for coming. Dan, why don't you start out, you know, give us your standard intro and give us a couple of minutes on Dycom, kind of tell us who you are, how you fit into the space, and what you guys do.
Appreciate it, Frank. Good morning, everybody. If I could just first start by pointing people to our SEC disclosures on our investor website for our safe harbor statement related to anything I might say today, and with that, Frank, great to be here. Very exciting time in our business, and I'm sure I'll talk a lot about as we get through the questions, so Dycom Industries, we're a large - and by large, I mean all 50 states across many, many customers, telecommunications and digital infrastructure services providers. So we're the ones that, as we say in our vision statement, we're the people connecting America, bringing wireline service, bringing wireless service to, again, people in all 50 states.
All right, great. So when you look at the space, you've got some public comps, some others in the sector, but you tend to over-index to the wireline communications industry. Talk to us about that. Why did you choose to focus more on that industry versus, say, other things, other network-type companies you could work with, electric utilities, oil and gas, that sort of thing?
Yeah, I appreciate it, Frank. So first I would say wireline and wireless. We've been in the wireless space for over 15 years. And again, we'll talk a little bit more about that later. From the perspective of why are we just in the telecommunications space as compared to a lot of other folks that are much more diversified, for us, it's about intense focus. So we believe that by going deep with our customer solution sets, by going deep in communities, and again, having an opportunity to specialize in what we do, that we create a different experience ultimately for the consumer at the very end of the line that our customers are providing to, but certainly along the way for both our customers and the communities themselves. So let me talk a little bit more about that.
More diversified companies, they've got to make capital allocation decisions about which market are they going to feed the innovation into. For us, we get to prioritize always first and foremost either the wireline or the wireless side of the business. So I'll give you an example around AI. We talk a lot about the hyperscalers. I'm sure Frank will ask me about that as we get through today. But on the AI side, that's something that we've been investing in in our business for four or five years. So we create massive amounts of data. We have almost 16,000 employees all across the country working every day on work orders that start very, very small and can expand into very, very big things. That creates huge, huge, huge amounts of data.
So we're constantly taking those data sets, building different large language models and figuring out how can we analyze that. But the end goal ultimately is how do we deliver value to the front lines, the people that we have out working with their tools every day? Because if we know if we deliver value there, we're going to deliver value to our customers. So as an example, we have image reading that occurs when we're doing any kind of buried work. We're reading every single picture that's taken every single day by every single crew. We're reading that with the language model, and it's checking depth and quality of the bury. This is something we've had to train for years to get it right. But it looks at that much quicker than any human could do.
And then it bubbles up anything that's out of norm or anything that doesn't meet the quality standard or needs to be double-checked. So we take tens of thousands of images a day, and we bubble that into just a handful that our actual quality teams need to go out and deal with. So that innovation side comes through all lines of the business. And not just with AI, it's about how can we innovate to make the experience better for our customers? How can we plug into their systems or augment their staff and really develop our solutions so that we're not trying to fit them into something, we're trying to fit our business into how they work?
Every one of our customers, and everybody can look at our top five or top ten or the multi-hundred customers that we have down the chain, every one of them operates a little bit differently. They might do some work in-house. They might not. They might contract it out a certain way. They might RFP it a certain way. They might actually day-to-day feed us to work a different way and have a different expectation for what we're providing back to them and the timing in which we do it. For each of those customers, we've built specific processes, and not just processes, software. We have a large technology group. They're constantly building and innovating software that connects to our customer systems. So we're trying to make it as seamless as possible, and the kind of entirety of that process is we're trying to change the experience with our customers.
We're leveling up the industry from a quality standpoint. When I talk about quality, or if you listen to our call, I talked about quality as a brand, which is a term we use to try and differentiate, you know, I talked before about quality in the field, that quality in that end product, which can seem really simple. Dig a trench, put some pipe in it, backfill the pipe, come back later, pull some fiber in and splice it, right? Climb a pole, place stranding cable, go through the system. Seems really, really simple in the end, but the process itself is incredibly complex. Start to finish, it's incredibly complex.
You know, whether you're dealing with the engineering side or the permitting side or just the flow or the ramp-up that a customer might need, all of those pieces and parts, we're taking those internally and figuring out how we can best provide a solution set and a quality expectation for our customers from that day one to day done. So how do we make sure that that experience is, one, predictable, two, repeatable, and most importantly, there's no surprises for our customers? And then I would just finish with the last part is that extends to communities too. We're going into people's neighborhoods. We're going into the streets of downtown Orlando, if you will. And we're going to dig them up. We're going to create some kind of nuisance, rerouting traffic, some kind of traffic control.
You know, we might be digging up somebody's front yard, ultimately to get them connected, to bring them high-speed internet access. But in that period from when you're going to start to when you're going to finish, there's a lot of concerns that people have. So when we talk about quality as a brand, the question is, how do we make that experience much better for the ultimate end user and for the communities that we're empowering with high-speed internet that maybe didn't have it prior? All of that comes back to the innovation side. By specializing in what we do, we get to hyper-focus on those things to make sure that we're delivering at a level that we believe exceeds the industry. Long answer to a short question, Frank.
No, that's great, and it got into my other question about how you win in the markets. Would you say these additional things that you offer rather than just simply digging a trench or some of the value proposition you get are these why you're able to take the market share that you have and that you win? What would you say when you're winning against your competitors or the internal, you know, the customer's choice of using an internal team, some of the main drivers of why you win?
Yeah, and I think, you know, from a customer, I'll hit the customer side first. Well, let me just kind of hit it over the top. The first statement would be that complexity favors Dycom. The more complexity these programs get, the quicker they want to go, the more space they cover, the more different geographies, it's complexity favors Dycom. And so our customers look to us when the complexity exceeds. And again, customers are different. Some have us do more of their work, some do parts of their work, some might just do splicing, some might do certain areas of the country and we do others. Some do none and we do all. It's really all over the space. But we want to create, and our goal is to create this symbiotic relationship with the customer.
So we're never competing directly with their workforces or the type of the work they're doing. Because again, with the focus that we have, we're building our business to augment them in the best way possible. Sometimes that's augmenting staff so they can not have as many people working on a project or on a build. Sometimes it's augmenting workforce in different ways. And that might even change over time. With some customers, we're doing different things today or more things today than we were doing two years ago. So it really depends on their solution set. In a broader market, you know, it goes to that complexity side. What we offer, again, and I'll come back to this, it seems simple what we do, and there's lots of competitors out there that do the simple part of the business. They can go dig a trench, right?
They can go climb poles. What we're offering, again, is that end-to-end certainty, right? That they know if we tell them we're going to pass 10,000 homes in a given market in a given market in a given month, we're going to pass 10,000 homes in a given market in a given month, and even better, hopefully we're going to exceed that and provide them opportunities to exceed whatever their build's going to be, so that certainty that we provide throughout the spectrum is where we're really trying to differentiate.
We talk to the customers very early, and what we say is, you know, bad news early, that's good news, so if we can sit down with a customer and say, here's the difficulty of the build, or here's the plan that you've laid out in an RFP, here's a better way to think about it based on the knowledge that we have. In many, many cases, you know, we see what's happening from across a multitude of customers in a given market or certainly in a given state and around the country. We can provide information, of course, following the confidentiality rules that we need to, but we can provide information for customers to help them that maybe they don't know who else is adjacent or that another build might be ramping up and it could create challenges.
We bring all that upfront and early, and that's how we try and differentiate from a competitive set, and as you can see, you know, over the last three years, we grew 50% in revenue. At the same time, our EBITDA margin went up 450 basis points, so that ability to do both in the growth is really based on that next level of value we're providing for our customers. And we believe that they see that and recognize that value.
All right, great. So clearly the bull market here for constructing fiber, really with most of this being fiber to the home, but also a newer opportunity with AI. Kind of talk to us about where we are in that process. How long do you think you expect this to last? And then maybe give us an idea of where we are in that overall fiber to the home build, whether it's numbers that have passed, numbers to be passed, and then also on the AI opportunities you have, what you see there?
You know, overall, I would say more than five years. If you look at some of what the customers have talked about in their build expectations or their build goals, many of those go out of full five years. But in the greater landscape of, again, connecting America with high-speed digital infrastructure, it's just going to take some time. And that doesn't matter if we're talking about the fiber to the home builds, if we're talking about the hyperscaler AI builds, or you're talking about some of the government-subsidized programs that are occurring today and will be occurring in the future. It's always a longer arc than I think we originally anticipated. But I think the bigger point is that data consumption continues to grow, right? year-over-year, data consumption continues to grow.
We saw the recent, you know, there's a little bit of a scuttlebutt when DeepSeek came out and how the industry was going to think about that, how the hyperscalers were going to think about that. And what you heard them all say is this is just part of the iteration in this AI race. Those things are going to happen, but as they happen, it just means if we can make it cheaper, there's going to be more entry, there's going to be more data usage. And so as that cheaper and it moves forward and it moves forward, you know, we think we've never stopped consuming more data. You know, we've never had a less appetite year-over-year. So once you look beyond that five years, impossible to call the ball today, but we think that trend continues for a very long time.
Specific to each different revenue opportunity. So the first one would be the fiber to the home builds. And what we saw over the last 14 months was our customers have collectively publicly announced, and I think that's an important point, publicly announced an incremental 37 million passings that are in their expectations or in their plans. And again, some of those go beyond five years, but certainly over the next five years. 37 million is a very, very big number, and that's incremental to whatever build plan that they had ahead of that. What that tells us, you know, in kind of what we'll call the middle stages of that fiber build, so about 76 million passings have been passed today.
That 76 is against something around, we like to say, 80% of total homes in the US, which is getting close to 150 million, will be passed with private capital. So that would be 120-ish million. So 76 on that journey to 120. And incrementally, they added 37 million. So important point, right? We're into the cycle. We've been doing it for several years. Many people would have said, hey, by the time you get a few years in, the economics for the ISPs for our customers may not work, right? They're not going to get the same kind of penetration. It's going to cost more per passing. What they're saying in their announcements is, no, it's working really well. Not only are we here and this far in, we can see the path in front of us.
That path in front of us, not only do we like it, we like it enough to incrementally address more homes, more passings. So that tells us that the economics work, right? They're getting great penetration. The ARPU has gone up, and the costs are within reason for what they're trying to do. So the economics are behind it, and that'll continue to grow. So, you know, I think there was about 10 million passings by some estimates last year. Over time, you know, we got to put all those in place year-over-year as the homes, right? They're not going to get closer together as the build goes on. I can assure you they're going to do the 40-foot lot lines, you know, that are aerial as early as they can in the builds. So those will take longer over time.
We've got five good years of that and again, tens of billions of revenue in an addressable market set. The second would be the AI hyperscaler race, which is something that, you know, we've been in tune to for quite some time. You know, we've only been able to publicly start talking about it following the lead of some of our customers for, I don't know, probably about a year or so. That's in early innings. I said it on the call the other day, very early innings. You know, we're excited to be a partner to Lumen and really kind of be in that first inning, you know, maybe even first at bat. Out there, our crews are pulling, overpulling fiber. Again, just to be clear, so for the hyperscalers, this is high capacity, low latency or ultra low latency, many times private networks.
So, and when I say private, what that means is they want to have their own path. Sometimes that might be in a trench with other hyperscalers. Sometimes it won't. Sometimes it wouldn't be completely isolated. And then they want to be redundant, meaning every data center in their cloud gets at least two high capacity, low latency fiber feeds or triversity, which is three. And then most recently, they're even talking about quadversity, which means that every data center is connected by four separate times, four separate routes. That's thousands and thousands and thousands of miles around the country for each hyperscaler. And when we talk about hyperscalers, you know, there's kind of the big five, but there's many behind that that may not have the exact same appetite, but large appetites. It's yet to be scripted exactly how that all plays out over time.
You know, we know some of our customers have made announcements. We know some of the early builds. And again, all of those are very large dollars, billions and billions of dollars, thousands and thousands of miles. But how it plays out exactly over time, you know, we're extremely optimistic around because we're talking to the hyperscalers themselves. We're talking across many, many of our customers as they're engaging with the hyperscalers themselves. And an important point here too, there's how is the new data center world going to play out? You know, how many more data centers are they going to build? How are they going to get power to them? What does that look like? What's the capital spending against that? And that is going to be the majority of their capital spending without question, right? It's going to be on getting power to it.
It's going to be on the data center itself. And certainly, it's going to be on the equipment that goes in the data center. But they need to connect all of those data centers. They want them connected today, the footprint they have today, again, with high capacity, low latency. So this is infrastructure that doesn't exist, as we said here, in large part. In some part, it certainly does, but in large part, huge, huge fiber bundles in these cables that we're pulling. So they want to connect all these data centers. So they're thinking about their footprint today, but they're also thinking forward. And if you look at our space, huge TAM and opportunity for us. You know, some people are putting it on $100 billion over the next five years, $100 billion.
And again, if you adjust that against our scale, and we're certainly one of the largest in our space, that's a massive number, even if only part of that is the addressable market that we have. Massive number, but in the scope of hyperscalers, that's not a big number. It's the small number that's really more time constrained than it is dollar constrained for them. So it's going to take a long time to connect these routes. The Lumen overpull is unique because that conduit's in place. So like I said, we're out there. We can pull that today. But if you're doing new construction and you got to go through downtown Orlando because we're sitting here or downtown Atlanta or New York City, pick any major metropolitan area. You don't get to do that tomorrow. You don't get to just fire that up.
You got a long time to engineer, figure out the routes, get all that permitted, get it set up, and get enough in front of you to go. So really that kind of work, even if it's awarded today, is in most part not going to start until next year and be multi-year builds. So we're very early in the program. The hyperscalers have recommitted even after DeepSeek to what their spend is going to be over $300 billion in CapEx towards AI and connecting their cloud this year. And in our scale and a total addressable market for us, while huge in our space, massive even, is a small number against that spend. So a lot to play out. Glad to be on the field right out of the gates, but that's going to take a long time to come through the business.
I'll move to, you know, and I'll call it everything rural that needs to be subsidized. Everything rural needs to be subsidized. We can talk about BEAD, and I certainly will. As we sit here today, there was over $1 billion in state grant money towards bridging the rural digital divide. Last quarter alone, $1 billion in grant money. These are big numbers. When we saw Louisiana announce BEAD, they had already covered many more homes with their own funding programs by the time BEAD played out, that they could look at that solution set differently. All of this is happening today. State grants are happening around the country. We're very active in those builds. They often come through existing customer agreements.
So where we're already doing fiber to the home, and they pick up an adjacency or another market in that state, they might just push it right through our contract. Sometimes we'll bid on it too. But the opportunity set isn't just limited to BEAD. So we have some of that coming through our business, and then some of it that certainly is yet to come. How BEAD plays out, we got to give that time to work through the system. And I'm sure Frank probably asked me more about that, and I go into more detail. But we're still optimistic that there's a lot of work to do out there. And then I'll just leave with this statement on this question. Underneath all of that is our service and maintenance business. And I think it's often overlooked.
You know, it's not as sexy as some of the big terms that we talk about in the markets we talk about, but that's ongoing work. There's always going to be new developments. There's always going to be roads that move. There's always going to be a pole that gets hit and needs to be repaired. That still continues to be the workhorse in our business. And our goal with every kind of build that we do is that we're ultimately going to get that maintenance and service business that just operates in perpetuity. It's always going to happen. It's always going to be there. And we can see pretty good run rates and consistency over time. So that really underpins the three different drivers.
All right. That's great. Very, very good overview. I get a lot of, you know, just talk a little bit about BEAD and some of the subsidy work. You get a lot of questions about that. It's an easy headline for people to look at. Talk to us about how dependent you are on subsidy work just in general, and then where you see BEAD fitting in, you know, this year and as far as impact to your business.
Appreciate it, Frank. In the revenue outlook we gave for our FY26, so this calendar 2025 plus January, in our outlook, we did not include BEAD whatsoever. Not a dollar, not a go get them, nothing around it. We just wanted to be prudent given where it's at. There's still opportunity, and that could be upside for us, and I'll talk going into that in more detail, but right now we haven't included anything. As far as the rest of the grants and what we included in our outlook, I think this is important. We only include things that we know about and are working on. Those are programs that our customers already have, builds that they already have, and how that might come through the system. I think that is important.
When you look at BEAD, and I'll just kind of cut to the chase, yes, there's going to be more satellites than there were or people would have thought a few years ago, for sure, without question. It's still a huge addressable market in figuring this out, and we still believe that fiber is going to play a part of it. Whatever part that is, it's going to be a large addressable market, and I think when kind of everybody gets through and every state has an opportunity to look at it through a different set of eyes that they are today, we're going to see completely different flavors state by state. Some that have more fiber, some that have more satellites. Some of that will be by appetite.
Some of it will be by geography and location of these homes and the number of passings that they can hit for a reasonable cost per passing, so there's a lot to play out there that certainly we're keeping closely attuned to. I think it's important to note that other than the three states, so Louisiana, Delaware, and Nevada that came out early and had some prospective subgrantee awards that haven't been finalized. By the way, we're talking to many of those subgrantees about opportunities. They're in a short-term pause right now. We'll see how that plays out over time, but some of them are certainly signaling that they think that they can put shovels in the ground by the end of the year, even with what they're learning about where we're at in the space today, but the rest of the states and territories, they've continued on their path.
They're still moving down and figuring out exactly what the solution set is, moving through subgrantee awards and scoping that out. So there is progress being made. But again, as we looked at the year, we wanted to be prudent. We didn't include that. So upside opportunity and conversations that we're having both at the subgrantee, a.k.a. our customers, and with the state broadband agencies as they work through it. So more to play out. The other programs, they don't get as much spotlight today, but they're out there. I talked about $1 billion. Texas has a BOOT program that they just launched from a state-funded program. We continue to see a lot of state money and a state opportunity. RDOF continues. We're doing RDOF work, and we've been doing it for some time. That work is going to continue for a couple more years at least.
There's a lot more money left in the RDOF kitty, so to speak. The reality is this, right? I talked about 150 million-ish homes around the U.S. Everybody needs to get connected, right? High-speed internet is a utility, without question. It's the new utility. People would, I'm sure if you ask a lot of people, and certainly, you know, my kids' generation, younger generations, they're going to cut just about any other utility before they cut their internet access. It's very much becoming a utility. Those homes are going to get connected. Will satellite and fixed wireless hit some? Absolutely, they will. And you know, that will certainly be a great alternative. We'll see how that plays out over time. For now, that'll be a great alternative.
But there are still many, many, many homes that need to be connected and will be connected with fiber access because we know today it provides the highest speeds, right? We know today it provides the highest reliability. So we'll see how it plays out over time, but again, very bullish that that rural and bridging that rural divide is going to be important and something that we're going to be a part of.
All right, great. And just to kind of put that in perspective, I think BEAD's a total of eight million locations as it's been announced. And you said there's 37 million that were announced in the last 12 months. So from your customers.
That's right. Yeah. Yeah. And if you take each of those drivers, and this is the joke that we make a little bit around the office, if you take any one of the three drivers I talked about, in most times, any one of those would be just phenomenal. Huge amounts of opportunity. We're talking about not just having one, not even two, but three different opportunities that are going to attract a little bit different timelines, for sure. But you know, that's, again, gives us incredible optimism about where our business is today, you know, how we've capitalized on it and what's in front of us.
All right, great. Let's talk a little bit about the wireless business. You made an acquisition late last year, Black & Veatch, increased your exposure to the wireless business. Talk to us about getting larger in that space and how that'll impact the pace of your business going forward, having, you know, a lot more wireless exposure than you had in the past.
Yeah. So I think I mentioned at the outset, so we've had our wireless business for 15, 16 years. You know, we do a lot of work for AT&T, but we do do, you know, a little bit of work for some other customers as well. And it's been a great business. You know, it's ebbed and flowed based on kind of the tides and, you know, where our customers are on densification. But right now, there's a large opportunity set with these equipment replacements. So, you know, we'll see that in the organic business that we had. And then when we got to talk about this acquisition opportunity, that's really twofold. First is we saw, you know, the market moving up with the equipment replacement, so we knew that there's opportunity over the next several years. But the second side is we saw a ton of synergy opportunities.
That's really what we look for in acquisitions is, you know, what kind of synergies are there and what can we invest in the business to make it better. In this particular case, what we saw was the ability to remove swivel chairs. And I'm not sure if people know what that means, but a swivel chair is when somebody's got to take some piece of information from some system, swivel their chair over here and put it in manually into another system. Anytime we can find those synergies, and this goes back to that hyperfocus I talked about, when we can find those synergies, you know, we know that we can make, obviously make it, you know, margins increase, but too, we can deliver better success ultimately for the customer because we're going to make life a lot easier as we augment their systems and their workforce.
So, and we're starting to run a long time. Am I talking too much? Okay. Make sure you keep track. So in that particular instance, you know, we saw these huge opportunity for synergies, a customer that we knew well, and an upswing in equipment replacements that we knew, one, we can increase the breadth of our wireless business. Love to be better positioned when, you know, all the wireless providers do end up in a densification phase at some point in time. And again, I talked about before, we're only using more data. It doesn't matter if it's wireless or wireline. So we feel like we're well set up now for the future there. But two, you know, we've got a customer relationship, you know, that we certainly have cherished for decades.
We get an opportunity to go a little bit deeper on their wireless build and bring some synergies that both benefit them and, you know, get to drop a little more margin to the bottom line.
All right, great. I've got another question, and then maybe we've got some questions from the audience. We have a couple of minutes there. So, you know, we've talked about all different parts of your business. What would you say is the biggest misperception about the business, about the industry, and something maybe you'd like to maybe set the record straight on that? What do you see folks that don't fully, when they look at the industry, they maybe miss or don't fully understand?
Yeah. You know, we have worked very hard to broaden our customer base, and I think the first one would be customer movements don't necessarily mean something directly into our business, so if somebody's going a little bit faster or a little bit slower or does a change here or there, we broaden the customer base, so those don't necessarily come through one-to-one. Sometimes in big cases, they can. You know, we certainly wouldn't argue that, but we've done a really good job of broadening that base, and so I think, you know, the idea that something, some piece of news or some change comes through, or even maybe a run rate that we had in a particular quarter with a customer doesn't necessitate a long-term trend or a long-term arc or a long-term story.
That's part of why we moved to giving the full-year revenue outlook this year is we really want people to see, one, the trajectory of the business over time because, again, you know, quarterly results might not necessarily show that, and we have a lot of seasonality, as people know. But two, you know, the velocity of the business is important too, the velocity of the business. So we might have, you know, little fits and starts. We're talking about adding up tens and tens of thousands of work orders to get to any result that you might see from us. Any customer program, you know, or what they're doing with CapEx may or may not affect us. In fact, it can go in the other direction depending on how we're laced in with them and what the footprint looks like.
So the first one would absolutely be, you know, we want to be absolutely clear and direct about what the opportunity set is and how we're capitalizing on it. Those micro movements, you know, may not mean something in a longer picture. And the second, I kind of mentioned at the outset, complexity favors Dycom. We've worked really, really hard to differentiate the offering and the value proposition that we bring to our customers. And we think that our customers, one, appreciate and, two, recognize the difference there. How that plays out over time, well, you've seen in the last three years, we've grown by over 50%. What happens a lot of times when people grow 50% is one of two things. One, margins start to fade, right? You take a lot of backlog. It's hard to keep that backlog.
You got a lot of machine parts to move to grow that way. Margin starts to fade. We didn't fade margin. In fact, we were able to grow margin as that happened, and the second is that you can compromise customer relationships. When you're growing fast and everybody goes from, you know, a jog to a sprint, what can happen is you lose some of those disciplines. We have been adamant about making sure that we offer a higher solution set for our customers, that we continue to innovate and further increase and build those, and I think you've seen that in some of the awards that we've talked about these last couple of quarters. We're trying to do both, and we believe that that quality as a brand idea, again, is something that our customers appreciate and differentiates us across the space.
All right, great. All right, Dan, this is really helpful. Really appreciate it. Thank you for being here. We got a breakout session after this if anybody wants to join us for some more questions. Thank you very much, Dan.