Good afternoon, everyone. Welcome back here. I'm Steve Fisher, UBS Machinery Engineering Construction U.S. Building Materials Analyst. We are thrilled to have the management of Dycom here with us. We have Dan Peyovich, CEO, and we have Callie Tomasso here as well. Just one quick disclosure: as a research analyst, I am required to provide certain disclosures relating to the nature of my own relationship with any company in which I express a view on this call today and that of UBS as well. You can find these disclosures at ubs.com/disclosures, or you can reach out to me afterwards, and I can provide them to you. With that, I'm going to turn it over to Dan, who also has disclosures.
Speaking of disclosures, Steve, I might make four lengthy statements today. I will be shorter. Please reference our website for safe harbor statements. With that, let's jump into the fun stuff.
Terrific, so Dan, you've been CEO for a little over a year now. The stock has doubled over that time period. As you reflect back on this year, other than the stock price, what are you most pleased with? What stands out to you, and what do you think you're going to focus on in the upcoming fiscal year and basically 2026?
It's been an exciting year all around for Dycom, and what I'm most excited about, what I'm most proud of, is just our team. We've got over 16,000 people that are out there working in the elements, working with their tools. Our customers are asking a lot of us today, and we're very excited to rise up and deliver that for them, and our people have done that. While we've been doing that, we've been really trying to work on our own internal engine and build this durability that I've talked about in several of these fireside chats and talked about on our calls, really build this durable enterprise.
To do that at the rate of growth that we've had, not just top-line growth, but also while we're continuing to grow margin, while we're improving cash flows, and doing large deals like the one we just announced, I'm just really proud and impressed by the people that I get to work with every day being able to achieve that, because that's a tall order.
So the stock performance and the quarterly results that you've had would suggest that pretty much things are going really well. But any lessons that you've learned over the course of this year that you might do differently as we go into next year?
I don't think we have enough time to go through all the lessons, Steve. No, I mean, it's a learning role, for sure. One, just honored to be in this spot, honored to be part of the enterprise. It's been a fantastic year. I've learned a ton every day. I'm very fortunate to be surrounded by a very supportive board that's got a ton of expertise and a ton of talent. They've been great advisors, great partners. The team that we have at every level of the organization, I learn from every day, and we learn from our customers.
I could go through a number of specifics, but I think what we've really tried hard to do is make sure that the mistakes that we make are little ones that don't impact the business in a big way, and to do the big things right, and to do them with a lot of thought, do them with a lot of attention. And a lot of people that have heard me talk, we're really thinking about that long-term perspective. So really proud that we've done well there, but it's a laundry list of things that we've learned.
But it sounds like you 80/20 it.
That's right.
Yeah.
That's right. Can't get everything right, but get the important things right.
Got it. OK. Well, obviously, the acquisition that you made is, of course, very topical, so I want to spend a little time on that. Power Solutions, $2 billion deal. The biggest move that you've made, and probably the biggest for Dycom in a long time, certainly the biggest, depending on if you adjust for market cap and inflation and things like that. But a move to diversify into internal electrical, create opportunities in the data center area, or broader opportunities in the data center area. Can you just talk about that deal, talk about the significance of it? Why now? Was it opportunistic? Was it something the board was proactively looking to do for a while? How would you kind of frame this deal for people?
Yeah, so the setup comes down to the strategy that we've put together. And as I said, to start, it's all about long term. It's about long-term return to shareholders, long-term opportunities for our people, and not just jumping into things, but looking at long-term drivers for the business. The ecosystem that we're in today in digital infrastructure in the Dycom telecommunications business has been growing. It's been growing across multiple drivers for numerous years. And part of that, going back several years, is the hyperscalers really getting involved. This need to upgrade the long-haul, the middle-mile networks, and enhance both capacity and reduce latency effectively nationwide to get to grid-connected, city to city, state to state, campus to campus.
As we've kind of marched along with those relationships and trying to figure out how we can solve the puzzles that are in front of them and that we can be a good partner to them, one, the relationships have gotten deeper and stronger. And two, we've gotten closer and closer to the data center. We talked, going back several quarters, about work inside the fence. And so that's work that's on the other side of the right of way, going into the private property of the data centers and bringing the fiber connectivity, which is ultra-high capacity, and again, pushing towards ultra-low latency, bringing these networks to connect the data centers back to the right of way, connect them back to our carrier customers and network, and then also connect the data centers within the campus.
We're landing that fiber today inside the meet-me room, so we're literally one wall away from everything that's happening in the data halls. Our strategy, and this goes back to conversations that certainly we've been talking about for some time, but in earnest over the last year, was about taking that next step. Why not cross through that wall, open up this much wider aperture of opportunity? At the end of the day, it's really about how do you have a skilled workforce that can deliver on a very robust market and very robust demands from the customers? How do you just move that one wall? You're still dealing with that skilled workforce, but now you're into a new space with a new opportunity. So that strategy really came to that, that made a lot of sense. We've looked at a lot of businesses. We've had other management meetings as well.
We were very pleased when this came through a competitive process to us. We had not heard of Power Solutions before June, but when we got the book in June and started to have conversations, we could immediately see the cultural fit, which is hugely important in any, especially large acquisition, but in any acquisition. That cultural fit was there, and that culture for us is really about the front lines first. How do we make sure that we can provide value and really lean into that skilled workforce, and how do we use that as a solution set for our customers? Fantastic ownership team, fantastic depth in their organization, strength in their leadership group. They've proven their ability to grow 27 years in the business and high concentration in data centers, which really makes sense with where we are today.
As all that came together, it really fit into our strategy, moved them right to the top of our list. And again, just very fortunate that both sides really felt that energy and that synergy together. So again, a big acquisition for us. It's really an expansion of our platform overall, adds to the other demand drivers, and really probably what I want everybody to walk away with is it does not take away from the telecommunications focus. That's been our focus for decades. That certainly we've shown that we can excel there. We continue to raise the bar with our customers. And there's huge opportunities for growth. And this goes back to size adjusted, even for today, for Dycom as big as we are, even size adjusted, there's more opportunity in front of us on the telecommunications side than there's ever been.
I'm sure we'll talk more detail into that, Steve. When you take those two things together, we're just really excited about the business and really optimistic about the future.
Yeah, it's interesting. We thought that you've had a number of pillars of growth that have been even increasing over the last year. This just, like you're saying, adds on another big one.
Exactly right. Yeah, if you think about we talk about them as demand drivers. Just really, if you think about our business, think about this as adding another demand driver, that we get great synergies, great opportunities to cross-sell. There's a lot of things that come out of it.
Now, in terms of integration, you mentioned there's a good cultural fit that you found that probably helps out to some extent. But how should we think about the integration process and the potential for synergies with this deal?
Yeah, one is, as we're working towards close here, and we'll close before the end of the calendar year, or sorry, excuse me, the end of our fiscal year, which is the end of January, we're already working on integration. I think one of the things that we found that was very special about Power Solutions, this is a business that was started by two electricians that built the business from zero into really the kind of strength and breadth that they have today. It's a really sophisticated business. They've got a solid ERP in place. They put a ton of time and invested in their people around succession and how they build their business, high customer focus, how do they raise the bar for their customers. What it means is, Steve, to the integration side, that sophistication really helps.
Because this is an extension of our platform, there's a ton of work to do to bring them in, but we also start from a really good place. When you have that cultural synergy, it just makes the conversations a lot easier. I can tell you, I mean, I was just on the phone again today with one of the owners, and we're both excited to continue walking through this as we get to and through the close and really feel like things are lining up well for really, really strong integration.
Terrific. Now, in terms of you mentioned framing this as sort of a skilled work and adding to the skilled workforce narrative that you're bringing to the table here. I think they've been putting up mid-teens growth. How should we think about the workforce requirements that they have to sustain that? Do they need to be growing their workforce double digits to be able to keep that up, and can they do that?
Yeah, so like us, they're a large self-perform shop. The majority of the work that they do is self-perform. As they grow, they have to grow their workforce, and just like with us, it takes a lot of strategy, takes a lot of discipline in how you think about that. Their workforce is union, and so for them, it's really about how do they partner with the union to make sure that they're feeding and getting enough future workforce, and again, when I talk about the sophistication level that Power Solutions brings, they've really been in front of that. They're really thoughtful about making sure that they're well ahead of the growth that they know that they need in a workforce and really thoughtful about how they bring them into the organization, so yes, the short answer is yes.
If you're looking at we talked about 15% growth carrier, we talked about 15% growth opportunity this year. It's not exactly one to one, but you are talking about a lot of headcount growth that will happen with that. We've spent a lot of time talking through it with them. We feel really good about how they're set up to do that.
Great. Now, as you talked about, this business is located in sort of data center central, if you will, in the DMV area. But it is a concentrated regional exposure, and it's $2 billion of deal exposure for one region. How should we think about any risks associated with that concentration, how comfortable you are with putting $2 billion into one specific region?
Yeah, I would start with this is a space that I personally know very well. I started working on my first data center in 1998. My prior career spent decades working with the hyperscaler customers, the Amazons, the Microsofts, the [Metas] of the world. So I personally know this space very well. I know how the contracts I've negotiated many of the contracts on both sides, know how the contracts work, know the ecosystem, know the players, know the risks, know the opportunity set. So this is something that not just myself, though I started there with many people in our organization that way. So we walk in with eyes wide open as we looked at different businesses and different business opportunities. What we really liked about Power Solutions is they are in the largest data center market in the world.
They're in the data center market, the DMV, that comprises 27% of the U.S. data center capacity and is projected to get 30% of the forward build. All of those signs point to large opportunities for growth. We also like that they're a significant player in their space. They're one of the largest. Employing 2,800 skilled workers in that region is a significant thing. Being large in their space and really having established themselves at that high level of certainty that they deliver to their customers, raising the bar overall just sets them up well for continued growth. We could get into kind of the whole AI bubble conversation, but I just want to point to our strategy because it's really the same for our telecommunications business. Where we are is we're that intersection. We're bringing the skilled workforce for the infrastructure that needs to come.
Because if there's one thing that we know over the last 30 years, and there's one thing we know going forward, is that we're going to consume more data. As we consume more data, the infrastructure has to keep up with it. That consumption has led to data center growth that I believe, if I have this number right, it's at least double digits over the last decade that data centers have grown. That's obviously without AI because that's really only come up in the last couple of years. Projected going forward, if you think about it, industry analysts talk about 16% growth figure. That is not including AI. So that's purely just to keep up with data consumption. We feel like that's a really good opportunity set and gives us a lot of confidence in the ability to continue the growth with Power Solutions overall.
And what's great on top of that is AI and a lot of the energy and fervor behind it can only add to that incrementally. So we feel really good about being positioned there. It's the largest space in the country. And it is, again, I'm sure we'll talk about. It expands our platform so we can use this as an opportunity to continue to grow this part of the business in other places, whether that's organically or whether that's through further M&A.
That's actually where I wanted to go next is how do you build on this business if it is more localized? You mentioned union workforce. And maybe it's not so easy to sort of make that workforce fungible to a different region. Do you have to do it via M&A? How opportunistic can that be?
Yeah, let me first just come back to the skilled workforce because it's such a big part of this. So we'll have over 19,000 men and women working across the country. 16,000 of those are current Dycom people and 2,800 on the Power Solutions side. That 16,000-person workforce is highly dispersed. We're all over all 50 states. We're working in a lot of different municipalities. We're obviously working near and in some cases in a lot of data center campuses. So that gives us this huge scale and size and platform to be able to take this and lever it into something else. I do want to be clear that the workforce that Power Solutions has and the workforce that Dycom has, they're not fungible. We don't look at those as things that are going to cross between.
At the same time, we do believe that there's a ton of synergies where we can, one, cross-sell and, two, use one to help the other, so having us be across 50 states and taking Power Solutions is what they've done in the DMV, gives us a really good opportunity if we want to think about organic expansion or organic growth. The relationships that they have with the general contractors, the relationships that we both have with their end users, the hyperscalers, and who we're doing work directly for really give us a vehicle to have those conversations. At the same time, we're going to look at future M&A, and I would add that this widens the aperture of what we can look at. Our plan is to stay focused overall. We love the digital infrastructure space. We love the place that we play in it.
We think that there's a critical need for skilled labor resources. We think that we bring an offering that is difficult to replicate, not completely unique to us, but very difficult to replicate. We think that sets us up really well. We want to continue to lean into that as we go forward.
Now, I think you talked about on the conference call that this business has been upwards of 90% data center driven for quite a while. In the event that the data center market does not evolve into the way that we all think it will, what is their flexibility and experience in being able to kind of shift that skill set that they have? Can you just port that over to other buildings and structures that will require those types of services?
Yeah, I think that what they've done is build a skilled workforce that can do incredibly complex projects. Working on these data centers, I'm sure a lot of folks that are listening to the call or in the room understand that these go very, very fast. You have a ton of people. You have a ton of materials that are getting put in place in a very short period of time. That's a difficult thing to build. Taking that skill set, you can absolutely now, one, we have a ton of confidence in data center growth and specifically in that market. So we very much believe that we're going to have plenty of opportunity to continue to grow this business for a very long time in their space. And they do have 10%, which is $100 million. It is a significant number that's in other spaces like healthcare.
But one, a ton of confidence there. But two, absolutely, this is a portable skill set that you can take into adjacencies as needed. But again, today, looking at their backlog, looking at the opportunities that we feel a ton of confidence in the ability to continue to grow from the data center space. And quite frankly, that was what we were looking for.
Great. Now, maybe just one last question on this topic in terms of the balance sheet impact from a financial perspective. What do you think's the right level of leverage for the combined company and how quickly do you think you can get there?
Yeah, and so our fundamentals there really have not changed. We're not changing the way we have disciplines around our capital allocation. One, we're still going to continue to fund organic growth first. That remains a priority. And we have a lot of organic growth potential in front of us. And two, we're not going to let our net leverage get out of control. This is going to raise it up to under three times. We're going to be able to bring that down relatively quickly in 12 to 18 months. We feel really good about the position. Like I said, maybe within that time frame, we could be doing other acquisitions. Probably that would be smaller, but not entirely. But the focus overall, we want to get back into that under two range over time.
But it doesn't mean that we won't move in and around that space as we continue to think about other opportunities.
Great. So maybe shifting or digging a little deeper into the data center topic, you mentioned you're very confident in this market opportunity. How big would you say the business is for you today? And you've talked about a $20 billion market opportunity over that next five-year period. How do you see that developing on the fiber side versus the electric side?
Yeah, and it's a really good point. Steven, you said it well. The $20 billion has nothing to do with the work that's addressable by Power Solutions. That $20 billion is really us looking at lines on paper, really lines on maps based on conversations with hyperscalers, based on conversations with our carrier customers of all of the work that needs to get done to bring the networks and specifically bring the fiber networks up to where they need to be for current compute capacity and certainly future compute capacity. We think that over time, that $20 billion is going to be a light number. We think that's going to continue to increase. And you've also seen many of our customers talking about new routes, increasing their expectations of how much revenue that they are going to see coming through the hyperscalers.
Because the short answer is, as we use more data, as we enter into this AI race, the infrastructure that's there is 25 and 30 years old. These long-haul, the middle-mile networks that connect the data centers ultimately nationwide that connect the networks nationwide, it's aged and it's not of the capacity and it doesn't have the configuration to get low enough latency for what they need, what they need today and certainly what they need in the future. So there's a ton of work that has to happen. It's highly complex and it's going to take some time. But we would only reiterate our confidence in that $20 billion of real market opportunity over the next five years. And we think that even after you get past 2030, that's only going to be increasing.
Now, this may straddle into a conversation about margins, which I had planned for later. But you mentioned the complexity of this work. Can you talk about how these projects are, in what way they are complicated? How does that create a competitive advantage for you? And how do you differentiate within that context?
First, what you see is they take a long time to kind of come through the ecosystem, come through the supply chain. So you hear a lot of our customers talking about them. Lumen was very vocal because they have a lot of conduit that was in the ground for this overpull work. Really excited to partner with that customer. That's work that we've been doing for them for some time. That work is different than new construction. New construction where you're building entirely new routes, there's a lot of planning. There's a ton of permitting to do, and these are very long haul, long routes that are going to go across multiple municipalities, and in order to coordinate that, one, it takes time. So that's why we talk about 2027; you'll really start to see these projects ramp up. It just takes that.
The gestation is that long to really get them en masse. Not that there won't be revenue for us between now and then. There is. It'll be increasing between now and then. But that's when you'll really start to see them come on because of the complexity. To coordinate that level of complexity is significant. We feel that we're superbly positioned to be able to do that. We have workforce that are all across the country. We're not in every municipality, but we're in a whole lot of them. So we know how the municipality works. We know the different kinds of terrains, the different neighborhoods that you have to be in, and the different permitting processes and different inspections. There's a lot of things that you've got to put together because this is essentially a bullet shot. You've got to go one spot to another spot.
You've got to have a good flow of the crews. You've got to have a good flow of the work and make sure that you have the materials ahead of the work. To coordinate all of that, even though the work itself might sound a little more simplistic, is a very large effort that requires a ton of skill. We believe that we differentiate there. But as it comes through the space, that complexity, we have seen that be a challenge for others.
Despite that complexity, do you still tend to face some entrance into that market that try to get in there as a more local player?
Absolutely. Absolutely. And there's been big numbers even before we gave the $20 billion market opportunity in the next five years. There's been a lot of big numbers that are out there. And that's always going to bring attention. And the work that we do across our space, it's always been competitive. We have many competitors. We have many competitors that can deliver and deliver well. But as the complexity goes up, as the size goes up, it does change the game. And so that's going to take some time to work through the system as well about who can really perform the work, who can provide the level of certainty that our customers are ultimately looking for. And again, I like to say that complexity favors Dycom. And we're in a good position.
Great. So I think we've covered one of your many pillars of growth, maybe two.
But it's an exciting time for Dycom, like I said.
Yeah, exactly. So maybe we can shift to another one, which is fiber to the home. And so I think some investors out there have a perception that fiber to the home is peaking. And so I'm curious how you think about where you are in the cycle right now. And how do you think the next couple of years are going to be different than the last couple of years we've just completed?
Many points to cover here, Steve. Here's where I would like to start. A lot of this discussion comes in homes passed. And it's a really easy way to talk about it. But it's not what translates directly to what's meaningful for Dycom. We're still very much in a ramp in homes passed. You hear our customers talking about it. Some of our large customers still have significant ramp to do in their programs.
Often we hear discussions that make it sound like it's kind of reached some peak or it's already going to start decelerating. That's not the case. We have several more years of just the homes passed count continuing to increase over time, and in some cases, with some customers, pretty significantly. So I think that's the first really important point. Tons of growth opportunity there. The second is there are two different curves. There is the homes passed curve, and then there's the revenue opportunity curve, and those are not directly connected because over time, if you think about in the entirety, and this is not specific to a customer, not specific to a program, not specific to the location, but over time, across all of those homes that are going to get passed, the general cost basis is going to go up over time.
You're going to have more underground work. You're going to have lot lines that are further apart because generally you're going to prioritize the less expensive ones first. Again, it's not exactly true for every customer, but kind of across the board. So the revenue curve actually looks different and is both elongated and kind of delayed after once you do reach that apex of homes passed. You still have time after that while the revenue is still continuing to go up, even though the homes passed is going down. So all of that to say, there's a long, long story left here. We think that there's a good seven to 10 years left of just getting the $125 million homes passed.
Remember that $125 million, which is about 80% of the total homes in the U.S., which pretty well lines up with our customer commentary and what they've said they're going to get to. Remember, that's talking about one fiber connection per home. Ultimately, we still believe there's going to be two equivalent connections per home. We're working with our cable customer today on equipment replacements as they continue to increase the speeds in their plant. But it all comes together to add to continued infrastructure needs that are going to go well into the next decade.
From an actual year-over-year growth rate perspective, do you think we're sort of plateauing on that growth rate? Or you think we can still see a consistent growth rate going forward?
I'm going to caveat and say I'm not being specific to Dycom's growth rate because we'll talk as we get to the end of this year. We will give an outlook for how we're thinking about next year. But I don't want anybody to tie those things directly together. But the short answer is we see a ton of growth opportunity in the fiber to the home space for Dycom and certainly for the industry next year and for the next few years.
You mentioned multiple line connections and cable. How broadly are we seeing this investment across your customer base? Should we really be thinking that beyond the top handful of companies, it's a broad investment that can be driving your business?
That's exactly right. If you look at the telco side of the business, virtually all of those customers have announced build programs. They're in some place, some earlier stages of ramp, some later stages of their build programs. But I don't think it's entirely unanimous, but certainly in large part all moving in the same direction, which is again, very big positive.
Okay. Let's move on to BEAD. So it's been a long time coming. It seems like.
We've been talking about it for a while.
We have. It seems like it's getting closer. How excited are you getting about BEAD? How excited should investors be? Is this for real now?
I think we've been talking about it more than four years now. It is exciting. It's like you said at the beginning. We have all these demand drivers. So many of them are really heating up and coming online at the same time. We can talk about the goods and some of the things that we all got to be prepared for as that comes through. It is great to see BEAD where it is today. The program as it stands, as it's coming out, has been more attractive to our carrier customers. That's a positive. We've seen there was a lot of discussion around what was the play for satellite, what was the play for fixed wireless. Of all the states that we've accounted for to date, over two-thirds of that is going to be terrestrial plants, so either fiber or HFC from the cable providers.
That means a lot of infrastructure to get built. That equates to more than three-quarters of the actual revenue spend. And that amounts to our number is somewhere in the $18-$20 billion of addressable market for Dycom in that BEAD program, which is probably going to take, I think they're saying four years, but it's probably going to take a little more than five years because we have so many things coming on at the same time. It's an incredibly exciting time. This is something we've been talking with the states. We've been talking with our customers about for four years, talking about them earnestly and really getting ready for what that opportunity looks like. Over the past year, it's really started to take shape. Excuse me. I'm going to start losing my voice at the end of the day here.
So we're excited to be in that position. I think our customers, they're concerned about making sure that as they launch into this program, that they've committed to what the rates are. They've committed to the time of the build. They want to make sure they have a partner locked up to go deliver on that for them. And that's where Dycom comes in. We're already in numerous conversations. We talked about a lot of verbal awards in our last earnings call. We do believe that we will see that turn now as 29 states have been approved as of yesterday by NTIA. That's a big milestone. One has been, that's Louisiana, has been funded. As that funding comes through, we believe that'll start turning the contract opportunities and that build will start next year.
It's going to be a lot coming out of the gates because now you have a lot of states that are lined up at the same point in time. It's going to take some time to work through the system. But I think as you look towards there'll be some revenue opportunities next year. But again, 2026 and 2027, and you're getting a theme here. Really start, sorry, calendar 2027, calendar 2028, you're getting a theme here. Really start to heat up if you think about BEAD. Really start to heat up as you think about the long haul and middle mile related to the data center space. A lot of things coming together. You're still going to have fiber to the home going at a very high clip in that period of time.
So we're doing a lot of future planning about how do we make sure that we're in front of that for our customers so we can deliver on their aspirations.
Similar to the question about the data center build-out work, there are a lot of local competitors involved in the space. Do you think you need to see that type of bidding activity work through? Or like you said, you're already engaged with some of your customers. Is there going to be enough work on BEAD to go around for everybody?
We're in a great position. The conversations we're having are with some of our largest customers and they're with some very, very small cooperatives. So we love that we, and it's just the nature of our business and really the footprint that we have and the relationships that we have, that we have that opportunity set. That's important to us, right? This is not a single play for Dycom. We really think that we're going to have a good look at great opportunities. And as we look at our overall backlog, we're going to balance BEAD against these other very strong demand drivers. We're really committed again to this long-term view. And so part of that is making sure that we continue that diversification overall. So we think that opportunity will be there.
There's going to be smaller builds that I think some of the more local regional players will do very well. I also think there's going to need to play through that cycle a little bit about where the supply chain can really deliver as you have these other demand drivers coming on strong. What's really important to remember here is that at the end of the day, all of these things are going to pull from the same skilled workforce. And that workforce, we have it very strongly today. But you're talking about a lot of workforce growth that's got to happen. We're putting a ton of time, energy, and money to getting ready for that. We have a number of training facilities around the country. We're building additional training facilities.
We just bought a large piece of property outside of Atlanta that we're going to build really as kind of a signature training facility that's got a little town replica in it that our people can stay in and get trained in. All of that is about trying to future-proof how we're going to build our workforce to keep in front of that. I think as an industry at large, though, that is going to be a big, big challenge and could put a lot of pressure. At the same time, I think it's going to create huge opportunities for people to enter the skilled trades. That's something that I'm personally excited about. That's where I started my career. Every time I get to get on stage, I try and at least talk about it a little bit.
But I think it's a huge opportunity for people to enter into the skilled workforce and really see a long horizon of opportunity that's in front of them. So hopefully, all of this money, all these things coming together can help lead to that.
Next steps on that, bookings and revenue flow. How do we think about the sequence of those and the timing?
We could have some backlog to announce by the time we get through this quarter. I would think the opportunity is definitely there by Q1, and we think there will be revenue opportunities in Q2. It's not going to be a hockey stick coming out of the gates. I think you're going to have some that can get started because maybe they're not as large of builds or things are just kind of getting off the ground, but I would think it really starting to ramp up in the back half of next year from a revenue perspective.
Great. Maybe a couple of operational growth drivers that I think have emerged over the past year or so. Margins, I feel like a couple of years ago, the focus was more in our discussions about the revenue growth opportunities. But I think as you've shown this year with some of the upside surprises, there's a margin narrative here as well. Can you talk through how that has come to be and how you see the key drivers of margins going forward here?
Yeah. As you mentioned at the outset, I moved into this role a year ago. Right when that happened, Drew, our CFO, and I said to investors that we saw two areas for significant improvement that we were putting a lot of time and effort into. One was margin growth and one was cash flow improvement. And extremely pleased and proud of the team and what they've been able to deliver on this year. You've seen significant margin improvement, 169 basis points this last quarter that we just reported on year-over-year. That takes a lot of effort behind it. That certainly is a mix of our growth, right? But it's also a lot of work that we've been doing to the engine itself. And this goes to these durable outcomes. And you can carry it both to cash and to margin improvement.
But we've been working on the engine of Dycom to be more productive, to be more efficient, right? To translate that into stronger margins because it's not only good for us, it's good for our customers for us to be successful too. That work has come through and that creates this durable margin growth. And I would tell you that there's still opportunity for us to improve margins. Reminder that we are seasonal. Also that it's not always going to be perfectly linear stair stepping every quarter. But we do see that. And we'll be clear when we get to a point that we don't see continued margin growth opportunity. But today, as we stand, really proud of where we come to, but there's still opportunity ahead, Steve.
And maybe a bit of a nitpicky near-term question in that regard. You've had a very good margin upside so far the last two, three quarters. I think your implied guidance for the fourth quarter of the year-over-year is a bit of a step down in the year-over-year improvement in margin. Anything to discern on that? Is it conservatism? Is it accounting for weather that you can't be sure of in this time of year?
No read-through for anybody to take away there. Q4 is a very seasonal quarter. We've got two holidays that are in the kind of midweek. That's always an impact for us. When we're building what we're giving you all for the outlooks, we're building it from the nuts and bolts and the ground up. So as those different parts and pieces come together, that's a range that we feel comfortable about. Of course, we're always working hard to do better over time. You've seen that certainly in some of the results. But again, I want people to really think about we feel good about our margin profile and we feel good about continued opportunity over time.
And in terms of the things that do drive margins, how should we think about the relative importance of, just to name a few, project selectivity, the complexity we talked about with the data centers? Maybe you get to a point on the incremental hiring where maybe you're more sort of absorbing. Any sort of ranking on where the incremental margin impact is going to be most noticeable?
I think, I mean, again, certainly operating leverage is going to continue. As we grow, right, that's going to lead to margin improvement. We are working really hard on the business. The cash flow improvement and the work that we've put in for what you see in DSOs, which, by the way, taking 14 days out year-over-year, that's no small order to accomplish. Again, these are all about creating durability in the business. We think that those are going to continue to lead to future improvements. And then I certainly don't want to leave out AI and how we're bringing technology into the workforce. What I get really excited about when we talk about AI is we can take cost out of other parts of the business. We can really put that into our workforce.
We can improve the benefits for our skilled workforce employees, which we've just done again. That all leads to certainly better attraction, better retention over time. But it also leads to better performance. So all of that comes through ultimately in margins. So I'm not going to commit to exactly which part, Steve. You can tell I'm stepping a little bit, but really excited about the opportunities.
Okay. And then just you mentioned now a couple of times cash flow. I always thought that in this type of business, as you are growing at a nice clip, it's sort of a working capital consumer. And cash flow, you kind of wait till you can harvest that at the end of a cycle. But you've clearly demonstrated in the last year that you can generate cash here as well. To what extent is that because your underlying maintenance business has gotten to be a bigger piece of it? Are the terms and conditions getting more favorable? How do we think about those things? And I believe on the Power Solutions are going to be contributing to improve cash flow as well. So maybe just talk about those things.
Yeah. The last one I'll take first because, yes, both their DSOs are in the 60s and one, they're much less capital intensive, so from a CapEx perspective, it helps us, but also their cycle is better, so it will be good for operating cash, so we feel really good about that, great across pretty much all the metrics. On the other side of the business, that's purely been improvements that we've made. It really has. It's not been big mechanical changes. Certainly, we would love to see improvement in the industry, and that's one of the challenges we have with our DSOs is that's an industry thing. That's not a Dycom thing. We would love to see that improve over time, but knowing where that is, the question is, how can we again rebuild the engine and retool the engine and make it durable over time?
So everything that you've seen on the operating cash improvement, on the DSO improvement, that's from changes that we've made strategically investing in the business and things that we've built in that can continue over time.
Terrific. Well, we'll leave it there. Thank you very much, Dan. Really appreciate your time and insights. And have a great holiday season and good luck with the rest of the year.
Thank you, Steve. You as well.
Thank you.