Dycom Industries, Inc. Q3 FY2026 earnings call

Key Points

• Third quarter revenue of $1.45 billion, adjusted EBITDA $219 million, and EPS $3.63 all set new all-time highs.
• Backlog reached $8.2 billion, an all-time high, with strong diversified bookings.
• Increased full-year revenue outlook midpoint to $5.35 billion to $5.425 billion.
• Announced acquisition of Power Solutions, a premier data center electrical contractor, with a total purchase price of $1.95 billion.
• Telecommunications demand drivers remain strong, including fiber-to-home builds, BEAD program progress, and service and maintenance agreements totaling over $500 million post-quarter.
• Implemented a comprehensive ERP system, completing the first phase of deployment in Q3.

In the third quarter, Dycom Industries, Inc. delivered all-time record revenue of $1.45 billion, a 14.1% increase compared to Q3 FY 2025. Adjusted EBITDA was $219 million, setting a new all-time high, with an adjusted EBITDA margin of 15.1%, a 169 basis point increase over the prior year. Backlog was $8.2 billion, an all-time high. The telecommunications segment benefited from fiber-to-home builds, wireless activity, and maintenance services. The pending acquisition of Power Solutions, a data center electrical contractor, is expected to expand exposure to mission-critical data center demand.

Forward-Looking Statements

• Increased full-year revenue outlook midpoint to $5.35 billion to $5.425 billion, representing 13.8% to 15.4% total growth over prior year, excluding acquisition impact.
• Q4 guidance: Contract revenues $1.26 billion to $1.34 billion, adjusted EBITDA $140 million to $155 million, diluted EPS $1.30 to $1.65 per share.
• Anticipate the acquisition of Power Solutions to be immediately accretive to adjusted EBITDA margin and adjusted diluted EPS, with a path to delever to 2x net leverage in 12-18 months.

Risks

• Market risks related to the telecommunications and data center infrastructure markets, including changes in demand, competition, and regulatory environments.
• Integration risks associated with the acquisition of Power Solutions, including cultural integration, operational challenges, and financial performance impacts.
• Uncertainties related to the timing and impact of the BEAD program on revenue recognition and backlog.

Q: Quickly, the fourteen-day improvement on the DSOs, is that a new normal there? Was something in the quarter that helped? And then looking forward, what do you think about the expansion of Power Solutions to Texas and other areas with some significant data center activity? What are your thoughts on kind of future growth plans for them with your scale?

A: Good morning, Frank. As we talked about when we started the year, cash improvement was definitely a priority and something that we were focused on. And you've seen that improvement throughout quarter over quarter. Obviously, we're very pleased with the fourteen-day year-over-year improvement in DSOs. We've had significant efforts and strong disciplines that we've built in the business. We do feel good that we're in a much better place overall. It's not always going to be perfect, but we certainly like the range that we're in going forward. Shifting to Power Solutions, obviously, there's a lot to talk about there. A large part of this is really about adding a skilled workforce to what Dycom Industries, Inc. has today. Over the years, we've gotten closer and closer with the hyperscalers, closer and closer to the data centers. It was a couple of quarters ago we started talking about going inside the fence. This really is just that next natural step inside the fence, and now we're just crossing over the wall to bring skilled services to really meet the growing demands of the hyperscalers and the growing demands of data.

Q: Are there some anchor customers that Power has that you already have relationships with? And other opportunities will be new build, or is it more also retrofit O&M?

A: Primarily, they're contracted general contractors, so not customers that we have today. But the end users are very much aligned with the hyperscalers that we've moved inside the fence with and expanded capabilities and expanded what we're doing today. So certainly overlap in the end users. Pleased to get some customer diversification, of course, as well. A few things that are unique about Power Solutions. We've been looking at this space for some time. I think I've mentioned before, in my past career, I started on my first data center in 1998 and pretty much built them for over two decades. What you normally see with the electrical, whether it's electrical, mechanical, just a lot of these skilled workforces, is only going to be a portion and usually a much smaller portion. 25%, maybe 35% of their work is going to be data center specific. What really attracted us to Power Solutions, first and foremost, was the culture. This is a fantastic leadership team, many of whom came up through the trades, great cultural fit with Dycom Industries, Inc., talked about it being accretive across metrics. But importantly and uniquely, 90% of their revenue year over year has come from the data centers themselves. To your question, the majority of that is new data center builds, but they also do renewals as well. They go in and retrofit and upgrade data centers in addition to that.

Q: The fourteen-day improvement on the DSOs, is that a new normal there? Was something in the quarter that helped? And then looking forward, what do you think about the expansion of Power Solutions to Texas and other areas with some significant data center activity? What are your thoughts on kind of future growth plans for them with your scale?

A: Good morning, Frank. As we talked about when we started the year, cash improvement was definitely a priority and something that we were focused on. And you've seen that improvement throughout quarter over quarter. Obviously, we're very pleased with the fourteen-day year-over-year improvement in DSOs. We've had significant efforts and strong disciplines that we've built in the business. We do feel good that we're in a much better place overall. It's not always going to be perfect, but we certainly like the range that we're in going forward. Shifting to Power Solutions, obviously, there's a lot to talk about there. A large part of this is really about adding a skilled workforce to what Dycom Industries, Inc. has today. Over the years, we've gotten closer and closer with the hyperscalers, closer and closer to the data centers. It was a couple of quarters ago we started talking about going inside the fence. This really is just that next natural step inside the fence, and now we're just crossing over the wall to bring skilled services to really meet the growing demands of the hyperscalers and the growing demands of data.