Dycom Industries, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended January 28, 2023 (52 weeks). The filing also reports fourth-quarter results; fiscal Q4 ended January 28, 2023. Dycom provides telecommunications and utility infrastructure engineering, construction, maintenance, locating, and related services across the United States.
Financial performance
| Metric | FY2023 | FY2022 |
|---|---|---|
| Contract revenue | $3,808.5 million | $3,130.5 million |
| Net income | $142.2 million | $48.6 million |
| Diluted earnings per share | $4.74 | $1.57 |
| Adjusted EBITDA (non-GAAP) | $366.1 million; 9.6% of revenue | $244.3 million; 7.8% of revenue |
| Net cash from operating activities | $164.8 million | $308.7 million |
| Capital expenditures | $201.0 million | $157.0 million |
- Costs of earned revenues declined to 83.0% of revenue from 84.1%; general and administrative expenses declined to 7.7% from 8.4% of revenue.
- Net cash provided by operations fell despite higher net income, primarily as working capital used $164.8 million. Accounts receivable increased $173.7 million.
- Cash and equivalents were $224.2 million at year-end, versus $310.8 million a year earlier. Working capital, excluding current debt, was $1,040.6 million.
- Debt principal comprised $500.0 million of 4.50% senior notes due 2029 and $332.5 million under the term loan due 2026. No revolver borrowings were outstanding; availability was $602.5 million. The term-loan rate was 6.21% at year-end.
- Backlog was $6.141 billion, up from $5.822 billion; Dycom expected to perform 56.3% within 12 months. Backlog is an estimate, not a GAAP measure, and customer work is generally cancellable.
Period comparison and fourth quarter
- FY2023 revenue increased about 21.7% year over year and net income nearly tripled. Growth was led by fiber deployment and network improvement work for several telecommunications customers.
- Fourth-quarter revenue was $917.5 million versus $761.5 million a year earlier; net income was $24.8 million versus $0.8 million. Quarterly revenue and earnings remained seasonal, with winter weather and fewer workdays affecting the January quarter.
- FY2023 revenue growth was broad, though customer results varied: AT&T revenue rose to $958.0 million, while Comcast revenue declined to $430.6 million. The top five customers represented 66.7% of revenue, compared with 66.2% in FY2022.
Outlook, risks, and unusual items
- Management cited fiber-to-the-home, wireless network upgrades, rural broadband deployment, and government-supported broadband programs as demand drivers. The Infrastructure Act includes over $40 billion for rural communications networks. Management also noted tight labor markets, equipment supply constraints, rising capital-equipment prices, and potential effects from higher capital costs.
- FY2024 capital expenditures, net of disposals, were expected to be $220 million to $230 million. Management said cash, operating resources, and credit availability should cover obligations and expected operating needs for at least 12 months. No revenue or earnings guidance was provided.
- Major risks include customer concentration and discretionary spending, cancellable contracts and backlog, labor and subcontractor availability, weather, cost overruns, safety and environmental claims, and collection of receivables. Accounts receivable and contract assets are substantial; DSO was 108 days, unchanged year over year.
- Gain on asset sales was $16.8 million, compared with $4.2 million in FY2022, contributing to other income. The effective tax rate increased to 21.0% from 8.0%. No goodwill impairment was recorded in FY2023; one reporting unit had a relatively narrow fair-value cushion under a downside sensitivity.
- A subsidiary reached a preliminary settlement in a California wage-and-hour class and representative action, subject to a definitive agreement and court approval. A separate disputed multiemployer pension withdrawal-liability claim is approximately $13 million; the subsidiary continues monthly payments while appealing an adverse arbitration ruling.
- Dycom repurchased 514,030 shares for $48.7 million in FY2023; $101.3 million remained under its repurchase authorization at year-end. It does not anticipate cash dividends in the foreseeable future.
Important facts for investors to verify
- Whether revenue growth and backlog convert into completed, profitable work, given customers’ ability to cancel or reschedule orders.
- Receivables, unbilled amounts, DSO, and operating cash flow trends as the business grows.
- Customer exposure—especially AT&T, which represented 25.2% of FY2023 revenue—and changes in customers’ spending plans.
- Debt-service costs and covenant headroom as variable rates and capital spending rise; the filing reports covenant compliance at year-end.
- Developments in the California settlement and pension withdrawal-liability dispute, as well as the adequacy of insurance reserves.
The financial statements received an unqualified audit opinion, and the auditor also reported effective internal control over financial reporting as of January 28, 2023.