Should flip it over. Okay, are we live? Okay, great. Hi everybody. Thanks very much for joining us today. I'm Joe Osha from Guggenheim Securities. We are joined by Dan Peyovich, and he is the CEO of Dycom. Thanks very much for hosting. We appreciate it.
Thanks for having me.
We're going to talk through a number of aspects of the business today. This is a one-way thing only, so we're not taking questions, although if any of you do have issues you want me to address, you can email me. Most of you know my email. We'll try and get to them. Thanks for joining us. Let's start off at a high level here. I call this the why now question. You just had a heck of a Q1, right? $12 billion in backlog. Is this just a cyclical upturn or something more significant happening here? Is this the beginning of something secular?
We've talked a lot about the different demand drivers, Joe, and again, thanks for the conversation today. Talked a lot about the different demand drivers and really where they're coming through the cycle, and I think one of the things we've really tried to impress on folks is there is a lot of room left to run. Even if you look at Fiber to the Home, that's been out there for a while, a lot of room left to run, and we can get more specifics about that later. If you look at that, almost $12 billion in backlog for the quarter, that really just represents a lot of these demand drivers coming in now on top of each other, and Dycom's positioning to do that. Remember, Dycom is really about the skilled workforce.
We've got over 20,000 men and women around the country today. What our customers need on either segment of the business or really anything we're offering is they need that skilled workforce to deliver on their very ambitious build programs. No, we think that this has a ton of staying power. These build cycles go well into the next decade. We think that Dycom's incredibly well positioned to be able to deliver that for them.
We're going to talk about Fiber to the Home in a little bit. You've talked a lot about this long-haul and middle mile opportunity as being something significant. Can you talk a little bit about that, starting with the size of the opportunity and how you see that growing?
We sized it just over a year ago now at $20 billion over the next five years.
That number has grown considerably. The number of incoming calls that we get about these long-haul networks is only growing. Growing by the day, growing by the week, growing by the month. That really comes back to the need, right? What is happening out there is you have aged networks that are just not at the capacity, they're not at the right routes, going to the right data centers, making the right connections of what's needed, not just today, but in the future build plans. That $20 billion that we did a year ago really was almost entirely lines on paper. That was known knowns, right?
That we could see coming through various customers. That number continues to grow. You see a lot more press releases from our customers. You see more press releases from the hyperscalers and others, but the demand really is significant. I think the part that we're trying to communicate is it's still extremely early in that. We've been out there on the field for over a year. We're doing a lot of that work across customers, across builds, but it's still really in its infancy in the overall build cycle. Think about that ramping up next year, and then significantly as you get to calendar 2028.
You spoke a little bit about higher fiber counts being one driver. Can you talk a little bit about the numbers there and what's added in?
Absolutely.
I think, again, it's a really interesting point because it's not just about the fiber count, it's about the routes as well.
864-fiber has become more of a norm today, so almost a tenfold increase over what was there previously.
1728-fiber also quite common, so 2X of that. I mentioned on our call last quarter that we're hearing some of our customers talking about that the hyperscalers want to get some of these routes to 7,500 or 10,000 count fiber. I think what's really important, again, is it's not just about the counts. What we're talking about is redundancy, route redundancy.
Sometimes that's in another conduit in the same ditch, sometimes it's in a completely different ditch on the other side of the road, sometimes it's a completely different route. All of that is coming together. That $20 billion has grown considerably. This is a very, very active space that we're excited about, I think that there's not a lot of folks that have proven, like Dycom has, that we have the ability, we have the workforce to go deliver and execute on these ambitious builds.
Okay. It's interesting because people are very, very focused on the FTTH side, right, which we're going to talk to in a little bit. Help us understand when we think about that $20 billion, or obviously larger than $20 billion now, how much of that lies in the future? Almost all of it, or? Mm-hmm.
Yeah, the vast majority.
Yeah.
I just think, again, we have meaningful contributions to our revenue today. We have meaningful backlog as part of that $11.9 billion. For the work to come on, generally from when you're hearing about it, the complexity of these programs, just takes about a year to really get them going. Once you start, you got to really get it to ramp to get at whatever that peak delivery rate is. You just have to really add time into all these things. They are progressing, right? They are moving through the ecosystem. Again, Dycom, we really feel like we're winning our fair share. We still see some activity from some of our competitors that's a little bit concerning about how they're pricing this or maybe haven't done the work before.
That's got to play through the ecosystem over time, and I think that creates additional upside if you think about where Dycom is in the future.
Yeah, let's detour a little bit because you do bring up this issue of irrational behavior. How do you think that's going to play out over the course of the next couple of years? In particular, you talk about it in the long-haul and middle mile.
Yeah. We saw this in Fiber to the Home.
People look at the work that we do, and they underestimate the level of complexity.
They underestimate the skill set on how you need to train people to go deliver it, and they underestimate the difference in building in one location as compared to another location, and how a municipality might be different, how the actual geology might be different. All of the parts and pieces that come together to price the work properly. Dycom is in all 50 states. We're working not in every zip code, but virtually all around the country. We know the dynamics of a given market. We know the dynamics of how to build in different places, and we know what that costs and what it takes. I think when you see a lot of folks come in, we saw it on Fiber to the Home. They bite off more than they can chew. They take work at rates that just really can't be achieved.
Coming through that was an opportunity for Dycom to continue to get additional markets with our customers because we proved that we could deliver time and time again. There's always things that we want to improve on. We want to constantly raise the bar, but we really feel like we are raising the bar across the industry. It's still so early in the long-haul middle mile that you have a lot of people filling up backlog with that work today. We would call it low-calorie backlog, right?
We don't see with the rates that they're putting out there that they're going to be able to make money or complete the work. Just like we saw on Fiber to the Home, a lot of that becomes another market opportunity for us in the future. We would believe that that's probably what's going to play out here. Now, it is important to point out, Joe, that we are winning our fair share.
For us, when you look at our backlog, that is quality backlog, right? We don't need practice, as we say, right?
We want to make sure that everything that we're doing and we're putting into backlog, we're delivering in the field. You see that in the margin growth we've shown over the last year and over the last couple of years.
that we're getting appropriate margins and good returns for our shareholders.
You'd say you're sort of winning, you're holding onto share right now-ish, and then.
Yeah
you have the potential to perhaps take share as some of this less rational behavior digs out.
I think that what needs to happen in the ecosystem is we need to see who can actually deliver on the work over time and who can't.
What Dycom has already proven, because we were really first doing this in large part, or we believe we were first doing this in large part in the long-haul that is, we've proven that we can do it. We have customers calling us. We have customers calling us and asking us to help where they've brought other competitors in. All of that is a positive and just goes again to where we really want to differentiate is in how we partner with our customers, having that long-term view. Yes, we think that we're absolutely winning good quality work there today.
More opportunity in the future.
Okay. All right. That's helpful. Let's talk a bit about BEAD. That's been much discussed, but I think it would be helpful for our audience if you talked about the magnitude of that opportunity, and I think more importantly, how you see that layering into your revenue over the course of the next couple of years.
Absolutely. I said at the end of last quarter that we thought we'd see some revenue contribution this quarter. Really to think about it, for everybody to think about is upside for this year. It is taking longer. It's a little bit stickier getting through the cycle, getting the NTIA approvals, getting through their permitting for things really to come out. We have said for a long time, think about calendar 2027 as it really starts to take shape. Because that right now is a finite program to be delivered over four years. We think that the addressable market for Dycom, so this excludes any materials, this is purely what Dycom can address, is about $17 billion. Very big number to do in four years. If you think about 2027, you think about 2028, you're talking about multi-billion spend years as that grows through the cycle.
As we sit here today, I think it's probably going to be more than $17 billion, and I think it's probably going to be longer than four years, just in kind of the noise that we're hearing coming through the ecosystem.
Though we were hoping that we'd see a lot more shape to how it's going to come through in Q2, I think it's probably going to be the back half of this year before.
Okay.
We really see a better idea of how that's going to shape out through the out years.
Can you help us understand how that $17 billion manifests in terms of your opportunity?
I think the most important thing for people to think about, if you think about our backlog, is we have a strategy about how we want to fill that and how we want to diversify that backlog. What I would tell you that we're not going to do is we're not going to set numbers that we want to get on how much BEAD work, we're going to go into any price to do that. If we see a flurry of people coming into the BEAD work at very low pricing, we're going to find opportunities where we can get a good return on our people and return on capital. We're thinking about that blend overall. We do believe, and we talked about $500 million of verbal awards, I think more than a quarter ago, probably a couple of quarters ago.
That has only grown. We do believe we'll play a very big part in BEAD.
We are going to make sure that we're always prioritizing and getting good quality work.
Yeah. You are comfortable saying that that 500 verbal that you've talked about has grown since you've discussed it?
It has.
Okay.
It has. The only reason that some of those haven't contracted in earnest is not because we're, in many cases, we're already kind of pre-planning to do the work, but it just has to get through these final approvals.
Get through our customers' own systems before we can come into and be true backlog for us.
Is it your sense that it's probably going to be the latter half of the calendar year before you're going to be able to give investors maybe?
Yeah. I mean, we're three weeks away.
Right
Quarter end here.
I really think that in large part, you're going to see that just start to kind of take shape in the back half of the year.
Okay. Let's talk about the big elephant in the room, which is Starlink. I think there are a lot of angles here, but let's start with Fiber to the Home. We've seen some estimates out there for potential Starlink subscribers that are big. How do you see in the markets, and stipulating that some of those numbers are outside the U.S., which are less relevant for you, how do you see potential Starlink subscriptions impacting your FTTH business? We'll talk about other compute and space and stuff separately. Let's start there.
It's important to start on really what is it that Dycom does for our customers? At the end of the day, we're here because for the last 30 years, and for as far as we can see going forward, the world consumes more data every day. The world consumes more data every year. That data consumption, that data growth, requires more infrastructure, requires more compute, requires more to transmit that data. That's really where Dycom comes in, right? We bring our large skilled workforce to really meet that need and either enhance, build or grow those networks so that that data can be delivered. From that perspective, everything that SpaceX is talking about, everything that Starlink is talking about, remember, even if it's up in space, the whole premise is it needs to come down.
It needs to come down to earth. Here on earth, we have the requisite skill force to make sure that that can get connected, in whatever capacity that is. I think that's really the first starting point that I believe is really important because I think there's as much upside to talk about as there is some of the concepts of how the impacts could be. Specific to Fiber to the Home, I would just stick to the known knowns. This really got tested in BEAD. BEAD is the most ripe opportunity for SpaceX or for Starlink, excuse me.
Yeah. It's on economic uptake.
Yeah, because it's much harder.
Yeah.
These are much more difficult places, much lower density. In that scenario, which again is as open of a landscape as you could have, Starlink took 25%.
What I should say is LEO took 25%.
Yeah.
Actually, I think it's 23%. That's the best case scenario. Do we see that now when you move to metropolitan areas, being a big impact? We don't believe that that's going to be the case. The second part is these Fiber to the Home build programs are very far along.
They've got a lot of momentum behind them. At 10+ million passings a year that they're completed on, I think you got to think about the timelines and how those timelines behave. What the Fiber to the Home build showed everybody is really it's about speed. Who can get there first? The first fiber connection was the one that got the best penetration. I think speed is a big component here. I think you could see that play out with our customers as well. The second is that what you saw from a consumer perspective is they did prefer fiber. They had that preference for the highest capacity, the lowest latency. In that scenario, fiber is really unmatched.
Okay. Let's return to that other point you made about space-based computing. If that happens, right, generating terrestrial demand. Let's build that out a bit. Let's imagine that we do have data centers in space. How is that going to manifest terrestrially for your company?
Yeah, absolutely. Like many, I grew up in the "Star Wars" generation, so this stuff's exciting to talk about.
Yeah. Did I, yeah.
Right? It's exciting to talk about. Remember, we're not computing anything in space to keep it in space. It's got to come back down to earth.
Probably the most important point to make today, this goes on whether it's our Building Systems segment and what we're doing inside the data centers or what we're doing on the communication side. The conversations on the ground, the conversations we're having with our customers every day are unchanged. In fact, today they're only hotter than they were six months ago. There is a ton of demand that continues to be there. We're not seeing any concerns or anything that gives us concern there. The second part is that anything that gets computed in space, what we know today is enough data centers can't get built here terrestrially to meet the needs. We even, with our business today, we are turning away work because the demand is so strong. Anything that augments that, I mean, the demand is there. The demand's incredible.
That data center's in space, that data's still got to get back to earth, right? It's still got to get transmitted wherever it's ultimately going to go. Again, that's where Dycom comes in, and that's what we love about our portfolio, right? We have both parts of it. We're not so heavily invested on the data center side that we're betting on all these would-be could-be, right? Remember, our strategy really is to be right down that fairway. We feel really good about the markets we're in. We feel really good about the opportunity set and the ability that both things can live and work together. Over time, that's only a good thing. Again, that means more data is getting computed and more data needs to get transmitted.
That kind of brings us to this data center question. You've talked about long-haul and middle-mile a little bit. How more directly adjacent to the data center opportunity do you see your business benefiting? What does that look like?
Yeah. First, the Power Solutions business is performing exceptionally well. You see considerable growth. We raised that number up 35%.
I'll actually set Power Solutions aside for a minute.
Okay
if you don't mind.
You want to stay on the communication side?
Let's stay on comms, and we'll get to the Power Solutions.
Okay. Yeah. I was going more towards inside the four walls.
Yeah, sorry about that. Yeah.
Outside the four walls, exactly right. As the data center space continues to take shape, as you're looking at markets that continue to grow or new markets, right, that become significant growth markets for data center, remember, all that has to be connected.
All that has to get back to those long-haul networks. You hear the hyperscalers very vocal about this. You hear a lot of our customers on the telco side talking about it, that there's just huge demand and appetite for all of that to happen. The more that comes there, the more opportunity it creates for Dycom. That's why that $20 billion is a much stronger number. The other thing is that work that we're doing now connected with the Building Systems side, that inside the fence opportunity on the fiber side continues to grow for Dycom.
Not only are we continuing to win more work, but the opportunity for us to use that and really cross-sell both parts of the business only grows as well.
I think let's shift over to Power Solutions.
Sure.
How much of that business would you say is data center geared versus other opportunity?
They continue to be 90 + % in the data center space and in the DMV market. Again, I think this is important because there is a lot of noise out there, and there's a lot of very complex issues that we're paying attention to. What we're seeing on the ground every day is the demand is absolutely insatiable.
That's with the kind of growth that I just talked about earlier, 35% growth on an already very large workforce and a very large business. Even there, we still have to turn away opportunities.
We're highly confident in that particular market continuing to grow and the market at large continuing to grow. Where we're going to be strategic is in how we play through that to make sure that where we're going and what we're doing is in the places where we do have a lot of confidence that those data centers are going to continue to be built.
Does that mean as we think about inorganic growth, adding to your portfolio from a regional standpoint or kind of a skill set standpoint, or both?
Yeah.
You said you intend to continue to grow inorganic. Help us.
Yeah. Absolutely. Yeah.
Yeah.
I do want to be clear about that. We are continuing to look at acquisition opportunities. You saw that with Power Solutions. You saw us widen the aperture further with NTI.
Very excited to welcome them to the Dycom family now. Moving to structured cabling, adding that into the electrical, that's a great combination, right? We're looking for those kind of synergies. The aperture does get wider for us. Ultimately, diversification for Dycom is a positive, right?
Sure.
Further customer diversification, further market diversification, all of those are a positive. We are going to be very disciplined about how we think about it. What I would tell you is we have a very strong M&A group here, very proud of what they've been able to do, integrating Power Solutions very quickly, being able to do NTI in addition to that. I would tell you we still have capacity today.
You can see we still have financial capacity today. We are active in the space. This stuff doesn't happen by the day or by the quarter. You really want to find the right opportunities with the right teams. I've talked about before, what really those core components are that we're looking for in a business. When and where we find that, we're confident that we have the ability to do more acquisitions in that space.
Without asking you to tip your hand too much when you talk about opening the aperture, what does that mean? Is it further afield in terms of different businesses or just saying, "Hey, we want the same skill sets in West Texas that we have in DMV," or what does that look like?
Yeah. Obviously, the electrical work, it doesn't purely have to be data center centric.
Right.
I think Power Solutions is pretty unique in being so-
So-
Data center centric.
Businesses that aren't as data center centric that are on the electrical side, obviously that makes sense. Continuing now with NTI in the business, the structured cabling, because they're-
Yeah
doing multiple markets.
You can look at opportunities to grow that. There are other Building Systems that are in and related to it. Joe, as I mentioned before, this is a space that I spent 2 decades of my life in, so I know it.
Incredibly well and inside and out. What I can tell you is that there's a lot of opportunity there that can really make sense for the Dycom portfolio over time.
Okay. That makes sense. That sort of begs the question on capital allocation. How do you think about how you put your company's money to work, especially because your cash flow is so well, right? You're able to de-lever pretty quickly. I guess it's a two-part question. On capital allocation broadly, and then how should investors think about kind of the high and low end of your leverage levels as you seek to add to the business?
Sure. First and foremost, it's always going to be investing in organic growth.
Does take investment, right? When you're growing at the rate that we're growing, we want to stay ahead of that, right? We're investing in our partnerships to make sure we're staying ahead of our customers. All of that is really where we need to start. Today, what I would tell you is that M&A, because we do see good opportunities out there, and again, we really have a good strategy around it, M&A would really be the next priority for us and where we believe that capital will go.
You did see last quarter that we did take an opportunity when we saw the share price, what we felt like was dislocated, that we took the opportunity to buy back some shares.
We might mix that in over time, but I would really think about M&A being the priority over that today. From a net leverage, the first thing is we really spent a lot of time improving the cash flow engine for Dycom.
Yeah.
You saw that 216% year-over-year improvement last year to set us up to go into these acquisitions. We drove net leverage extremely low before we started on all this. What we hope people see is that there's a strategy there, right?
There is a plan. You saw when we did Power Solutions, though that levered us up, we were able to bring it down quite quickly.
Yeah.
Getting a long-term net leverage of somewhere around two continues to be where we want to be. That's unchanged. If we found the right opportunity and pushed us up around three, would that be something we'd look at? Absolutely. Right? You don't get to pick the exact size and the exact timing, but when you find the right team and they're a really good culture fit and you can see that very strong growth opportunity. These are teams that want to win, like the acquisitions we've done. That's something that if you need to press that envelope just a little bit, and I don't want anybody to get carried away with that statement, then that's something that we would certainly look at.
Do you-
Let me just finish with one caveat.
Okay.
Provided that we can bring that net leverage down very quickly again afterwards.
Right. Your business cash flow is quite predictable, right?
It is.
Yeah. We had a competitor announce a transaction yesterday for a multiple that was surprisingly low. Do you feel like you're still able, given the business development efforts that you talked about, to source deals at multiples that investors will be happy with? By which I mean, I think most people on this call probably would like to see stuff happen for, say, under 10.
Yeah. The first part is on the just, well, competitor's gone out. Obviously, I don't have any insight-
Yeah
to their deals. Congratulations to them. It's a very active and exciting space, right? We've talked about that for some time, as our peers. Specific to the economics of the deals, remember, the reason that a deal actually works at 10 x is because of the growth that it has in front of it.
Right.
Because of the margin profile it has in front of it. Yes, the 10 is a number, but every business is different.
Right.
What you're looking at is what is that return? How is that going to come back to our investors, over what period of time? What's our confidence in that ability for that team to continue to grow? I think that's where you might see some of the numbers that move around a little bit. We're incredibly pleased with where we've done the last two deals, which have both been in a similar range.
Right
Both kind of after the tax savings in the high eight range, if you will. You can see with Power Solutions already that that's a very quick growth. It's going to be a very good return for our shareholders. Yes, to answer your question directly, we see continued opportunity there. We do think that there's businesses out there that are looking for the right partner, and we really think that Dycom differentiates in what we're offering to those businesses. Dycom does operate differently than many of our peers. We are absolutely field first. We really want and respect the entrepreneurship to continue, right? We want them to continue to run and grow their businesses. We want them to feel like they still are very similar to where they were before they were acquired.
We just want to give them that nitrous oxide, if you will.
We want to take them to the next level, right? Something that they didn't have when they were by themselves, and that the two of us together can really create this rocket ship. Interesting pun to use today.
Yeah
just like you've seen with Power Solutions. That's what we're looking for, that's what Dycom offers, and we believe that that's an attractive position.
Yeah. It's interesting, right? We imagine that a lot of these business owners must be reading research reports or "The Wall Street Journal" or whatever and know what public company multiples are, right? There's still really a dramatic disconnect, right?
Yeah.
I guess it seems like it's going to persist.
Yeah. What I would tell you is, there are no businesses in that space, call it electrical, mechanical kind of related spaces, anybody connected to data centers, anybody of size is getting regular phone calls. They have a pretty good idea of where the market is.
Yeah. That's interesting. You've talked a lot about the base that you have in terms of your craft labor, your training, the workforce that you have as being a differentiator. Talk a little about that, and in particular, how that enables you to hold onto share and hopefully gain share over time.
Yeah. It really comes down to the complexity of the work that we do. We have this conversation a lot, that it does, it seems when you break it down into its parts, it seems like it's pretty simple work. It's not. En masse, it's definitely not. That requires a very sophisticated and skilled workforce, and it requires a lot of training, and it requires a lot of foresight in how you plan out the activities. On the communication side, remember that our average crew size is less than three people.
If you think about having to train everything that that crew needs to go out there and deliver and execute for a customer that we're delivering for, maybe perhaps all across the country, it takes a huge amount of discipline and a huge amount of strategy.
Yeah.
You can just throw people at it.
Hope it gets done.
We see that out there every day. To do it and do it right, listen, we can always continue to get better, and there's always room for us to improve, but we do think we do a really good job of trying to get in front of that. We talked about the flagship training facility we're building. I talked about recently increasing the benefits for our skilled workforce and really trying to make sure that we're properly attracting and rewarding those folks for all the good work they do for us every day.
All of those things are part of our strategy to make sure we can stay ahead of our customers. If there's one thing that differentiates us today, it's our ability to deliver at the level of quality consistently time and time again. I hear this a lot from our customers in the conversations that I get to have with them, that Dycom really does differentiate, that when we say we're going to do something, that it's going to get done.
It gets done right. Has it become easier, harder to source people to train? Tell me about what that's like and where you're getting people from.
On the communication side, because on Power Solutions, I'll talk a little bit about the union.
Yeah. Mm-hmm.
On the communications side, we believe that we have a really good process set up. We've done a good job staying ahead of our customers and the build programs with the workforce. We do feel like we have the machine working well there. Again, room to improve? Always. We do believe it's working well. On the union side, remember that that's much more constrained.
Where communications permits still really are the constraint bottleneck there. On the electrical side, it is getting people through the apprenticeship, getting the management teams in place. We're growing very fast. We feel very good about the growth that we have in front of us.
There are opportunities that we are turning away because we don't have the management teams and the actual field resources to go build.
How long does it take if you hire somebody a year out of high school? How long does it take to grow a medium voltage IBEW power guy?
Yeah. Getting through the union is four years.
Yeah.
Obviously, they're contributing, but you have apprentice to journeyman requirements there.
Right. Mm-hmm.
That you have to make sure that you adhere to. Obviously, they're contributing sooner than that, but it is a four-year program.
On the communication side, we can take somebody that really has no skill in our space, and in six months we can get them to that contributing role.
Do you find you're able, is it getting easier or harder to hire people in general?
It's always difficult. I think that's, again, it's a good competitive moat.
Yeah
It's a large barrier to entry. To do that and do it well, to know what you're looking for, to put the right training in front of them at the right time, all of that takes really the strategic and proven disciplines that we have to do it and do it well.
You've talked about that craft workforce being a competitive differentiator. How do you keep people? Pay, benefits? What is it that makes them stay?
Yeah. I think pay is obviously critically important in how you attract labor. I do like to say that benefits is how we show people we care.
The fact that our hourly workforce, they can get up to five weeks of vacation, of PTO, that's significant. That's not common-
It's pretty decent. Yeah
that we see out there. In addition to paid holidays, right?
In addition to other benefits that we feel are very strong, we continually work to improve. We're making investments there. People want to grow, right? They want to grow. To grow, they need to see that they're going to get the training, because nobody assumes that they can always get to the next level without the right kind of training. They also have the opportunity, again, for Dycom is that they get a much longer view of what the world can look like. One, they see people that have worked up, started from the field to every level in the company. Two, we have these build programs and these relationships that go very far into the future, and many of our competitors are just doing one at a time. Right?
They can see that for years and years and years, they could be a part of Dycom and grow their own career, and grow both personally and professionally. Again, we do think that that differentiates us.
Yeah. It's interesting when I look at other very good public companies, that's a message that really comes through in terms of power.
Yeah. I say this all the time, Joe. To me, I'm here for the workforce, right? I'm here for the folks that are out working with their tools.
That's really kind of the ethos, if you will, of Dycom. Right?
We're all here to really try and figure out how do we drive value to those folks, how do we make sure we keep them safe, and how do we drive value to our customers?
What technology and tools are you giving your workforce, and how does that, A, how does that let you grow the business, and, B, how can that manifest perhaps in terms of improving returns for shareholders?
Yeah. For a typical E&C, if you will, we have a very large technology group. We have a very large IT group in Dycom because for decades we've been building our own software. When you're the largest in your space and it's very unique work and you're trying to create proprietary solutions for each customer so we meet them where they need us to, you have to be able to build that technology.
We have incredibly robust and well-tested systems that operate at every level. Whether it's what our folks are out there working in the field with every day on an iPad, so they can click through screens and record their units, record their time, make a super easy interface so they know the work they need to get done, or how that comes through from the project management side. Those are all systems that Dycom's built in internally. Those feed into our enterprise-wide systems. Now the question is how do you take AI
bring that up a whole other level? I've talked about that, so I won't rehash on other calls, but that's a place where we continue to invest. We really see huge opportunities because we create an enormous amount of data every day.
Yeah, I'll bet.
Operationalizing that data and not just having it be retroactive, but to be proactive, that's really where we see AI coming in, and hopefully we'll have more exciting things to talk about in the future as we get some of these programs up and running.
We talked a little earlier about how you're probably not interested in raising prices on your customers, but you do have the ability to perform better. Can investors perhaps hope that as you deploy these tools that that might show up in terms of better returns or better margins for them?
Yeah.
I'm not after a guide here.
No, I want to be clear, because I've said this before too, Joe, the margin improvement that you've seen, the margin improvement that we talked about going forward, those are things that we're doing internally to the business. Why does that matter? Because if we do that's durable. Right? If we improve the business, we have an opportunity to compete at a lower price and also get a better margin. Those have all been internal business improvements. Does that mean that, of course, the demand is extreme like we've talked about, does that mean you can raise pricing? That can certainly be a lever over time, but we look at our customer relationships really as being partnerships over a long horizon, right?
We want to make sure that we're working with them in the future as well as today, so we take all that into account as we're putting our pricing together. I think what investors should be pleased with is that not only have we continued to grow those relationships, you can see that in the backlog, but we've also grown margins inside of that.
Right. Just to be clear for our listeners, you quote business on a per foot or per mile basis. You're not-
On the communication side, yeah, it is important.
Yeah. Mm-hmm.
For a couple of reasons. Almost all the work we do on that side is unit-based, which is by the foot, by the each. There's a few reasons that's important. One is, if you think about that from a competitive standpoint, if somebody comes in, that's a lot of risk if you're pricing Take long-haul.
Yeah.
One foot of long-haul, but you can do thousands of miles of it, you better get the number right.
Yep.
There's the competitive side. The other part is for us, you know day one how you're performing.
Yeah.
It's not like a contract where all of a sudden in the fourth quarter you figured out that it's a bad contract.
We know day one, and you can always be working to improve it, so you get that real-time feedback and real-time analysis. Again, the work that we've done around the country, the scale that Dycom has, we know those costs extremely well.
Does that, obviously, you're quoting differently on the Power Solutions side of the business. Is there any close price in there?
No, those are typically.
That's all fixed price.
Those are typically fixed price or GMP contracts.
Okay. All right. I think we're starting to come up on it here. The last question, Dan, I've got really relates to, look, you've been in this job now what's that, a year and a half?
Yeah, a year and a half now.
Yeah. Heck of a thing, huh?
Heck of a time, yes.
What has surprised you most about the business? As you think about how you want Dycom to look in a couple of years, what do you want investors to know? Let's start with what surprised you the most.
Yeah. The demand environment's incredible.
We knew it was strong when I took the seat, to say it's been growing in the last year and a half would be an understatement.
The demand environment, and continues to be, right? No matter what we hear in the news, it continues to be incredibly strong. Obviously that's a very pleasant surprise. Of course, what I would like to talk about is just the performance of our business.
Look at the growth that Dycom's had in a year and a half. Look at how we've grown both organically and inorganically, to do that at the same time while improving cash flow, while onboarding a new DRP program, while doing the acquisitions that we've been doing. That's a lot of change to put on a business, I just couldn't be more proud of our team for being able to do that. I think that's a lot to ask. I don't see a lot of businesses that have accomplished that much in such a short period of time.
What do you think investors don't understand? As you're out interacting with investors, are there attributes of your business that you think the Street doesn't appreciate?
I think it comes back to the skilled workforce.
Right
For sure.
Yeah.
It probably goes back to one of the statements I made earlier about just data consumption. As data consumption goes up, and I know that there's a lot of other headlines that are out there in the news, but as long as we're using more data, there's infrastructure requirements that go along with it. Dycom is in premier position for all of that, right? We're the largest in the communication side, but we're, I believe, the only one in all 50 states. We're really well-positioned to continue to capitalize on that. Even if you think about Building Systems, that requires more compute. If you just think about that in concept, how do you build a skilled workforce to build and deliver on that is a very complicated thing, and it's a very wide competitive moat. Wide and deep, I would say.
How do you take that and lever it into success, right? I think that's what we've shown over the last year and a half-
Okay
Certainly over the history of Dycom.
How would you like, when you think about Dycom in 2028, what would you like the business to look like?
Yeah. It'd be no surprise that we continue to see growth opportunities.
Not guiding beyond the year as it stands today.
Sure
There's significant growth opportunities that are still out there today. We've talked about M&A, so continued diversification.
It's going to be a more diversified.
Looking to continue to diversify in the right way, to do it smartly, to do it aligned with our strategy, with the right level of discipline.
That's where we're headed.
I think, unless there's anything else you'd particularly like to bring up, I'm out of questions. Let me just leave it with you. Is there anything we should've talked about?
Thanks for the time today, Joe. I'm incredibly excited about where Dycom is positioned today. Again, I know that there's noise out there. I just really want people to take away what we're seeing on the ground today is incredibly robust demand. Dycom's proven our ability to capitalize on that, and we really think we're positioned well to continue to do that, both organically and through further acquisitions. Couldn't be more excited about the opportunity in front of us, and really our positioning to capitalize on it.
Great. Well, thanks, and thanks, everyone, for joining us. Open exchange, let's call it. Have a great day, everybody.
Thank you.
Bye-bye.