Dycom Industries, Inc. (DY) Q4 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call highlights strong financial metrics and optimistic guidance, with revenue and margin growth expected. The Power Solutions acquisition is set to be accretive, and the company is well-positioned for future growth in digital infrastructure. Despite some uncertainties in acquisition timing and BEAD program impact, the overall sentiment is positive, supported by strong demand in telecommunications and data center infrastructure. With a market cap of $4.95 billion, the stock is likely to see a positive movement of 2% to 8% over the next two weeks.
Key Financial Performance
Fourth Quarter Revenue $1.46 billion, an increase of 34.4% compared to Q4 FY 2025. Organic revenue increased 16.6% for the quarter. The increase was attributed to the strength of the backlog and momentum going into the next year.
Adjusted EBITDA (Q4 FY 2026) $162.4 million, with an adjusted EBITDA margin of 11.1%. EBITDA margin increased by 41 basis points compared to Q4 FY 2025. The increase was due to significant additions to the workforce and working through severe winter storms.
Non-GAAP Adjusted Diluted EPS (Q4 FY 2026) $2.03, a 42% increase compared to Q4 FY 2025. The increase was attributed to improved operational performance.
Operating Cash Flow (Q4 FY 2026) $419 million, an increase of 27.7% year-over-year. The increase was due to improved internal processes and controls.
Full Year Revenue (FY 2026) $5.55 billion, an increase of 17.9% compared to FY 2025. Organic revenue increased 6.5% for the year. The increase was driven by growth opportunities across demand drivers.
Non-GAAP Adjusted EBITDA (FY 2026) $737.7 million, with an adjusted EBITDA margin of 13.3%. EBITDA margin increased by 105 basis points compared to FY 2025. The increase was due to productivity gains and operating leverage.
Non-GAAP Adjusted Diluted EPS (FY 2026) $11.97, an increase of 29.7% year-over-year. The increase was attributed to improved operational performance and margin expansion.
Free Cash Flow (FY 2026) $435.3 million, more than doubling year-over-year. The increase was due to improved cash conversion cycles and reduced capital expenditures.
Backlog (End of FY 2026) $9.5 billion, with $6.3 billion expected to be completed over the next 12 months. The increase was attributed to disciplined pipeline optimization and high-value engagements.
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Operating Highlights
Power Solutions Acquisition: Acquired Power Solutions on December 23, 2025, broadening Dycom's reach into the data center market and expanding its total addressable market.
Fiber-to-the-Home Deployment: Continued leadership in fiber-to-the-home deployment, with customers affirming or raising their passing goals, representing nearly 60 million additional passings.
New Training Facility: Breaking ground on a state-of-the-art training facility outside Atlanta to address evolving technical demands and workforce development.
Market Expansion with Power Solutions: Entry into the data center market and digital infrastructure space through the acquisition of Power Solutions, leveraging its expertise to sharpen Dycom's approach.
Hyperscaler and Carrier Partnerships: Secured new awards and partnerships with hyperscalers and carriers, focusing on long-haul, middle-mile, and inside defense fiber infrastructure.
Record Revenue and Backlog: Achieved record annual revenue of $5.55 billion in FY 2026, with a backlog of $9.5 billion, including $6.3 billion expected to be completed in the next 12 months.
Margin Expansion: Improved adjusted EBITDA margin to 13.3% for FY 2026, with further expansion expected in FY 2027.
Cash Flow Improvement: More than doubled free cash flow to $435.3 million in FY 2026, with significant improvements in DSOs and cash conversion cycle.
Strategic M&A: Focused on disciplined growth through strategic acquisitions like Power Solutions, while maintaining a long-term net leverage target.
Digital Infrastructure Leadership: Positioned as a leader in digital infrastructure, focusing on fiber-to-the-home, data centers, and AI economy requirements.
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Risk or Challenges
Workforce Expansion: Significant additions to the workforce to meet growth demands impacted margins this quarter. There is also an anticipated industry-wide shortage of skilled labor, which could challenge Dycom's ability to meet future demand.
Weather Disruptions: Severe winter storms impacted margins during the quarter, highlighting the risk of weather-related disruptions to operations.
Integration of Power Solutions: The integration of the recently acquired Power Solutions business is ongoing. While initial contributions are positive, there is inherent risk in ensuring smooth integration and achieving expected synergies.
Wireless Equipment Replacement Program: Revenue from the wireless equipment replacement program is expected to decline by approximately $100 million in fiscal 2027, with a further step down in fiscal 2028 as the program moves towards completion.
Capital Expenditures: While capital expenditures are being reduced strategically, there is a risk of underinvestment impacting operational efficiency or growth potential.
Debt and Leverage: The acquisition of Power Solutions increased net leverage to approximately 2.3x adjusted EBITDA. While there is a plan to deleverage, high debt levels could pose financial risks.
Customer Consolidations: Recent customer consolidations, such as Verizon's acquisition of Frontier, could impact Dycom's revenue streams and customer relationships.
Regulatory and Funding Risks: The execution of the BEAD program and other government-funded initiatives depends on the timely flow of funds and regulatory approvals, which could delay revenue realization.
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Guidance & Outlook
Revenue Expectations: For FY 2027, Dycom expects total revenue between $6.85 billion and $7.15 billion, representing year-over-year total revenue growth of approximately 23.6% to 29% or approximately 6.6% to 10.3% on an organic basis.
Adjusted EBITDA Margin: Continued adjusted EBITDA margin expansion is anticipated. Communications segment expects modest adjusted EBITDA margin gains, while Building Systems segment expects mid-teens adjusted EBITDA margin as operations scale.
Fiber-to-the-Home Deployment: Fiber-to-the-home deployment remains a dominant growth driver for FY 2027. Dycom is positioned to lead this market for the next decade, with significant ongoing opportunities in customer drops and network expansions.
Building Systems Segment Growth: Exceptional demand for electrical services in the growing data center market is expected to drive growth in the Building Systems segment.
Long-Haul and Middle-Mile Fiber Opportunities: Revenue opportunities from long-haul and middle-mile fiber infrastructure builds are expected to ramp considerably, with major builds starting in earnest in calendar 2028.
Wireless Equipment Replacement Program: Revenue from wireless equipment replacements is expected to decline by approximately $100 million in FY 2027 as the program transitions into its next phase, with further reductions anticipated in FY 2028.
Capital Expenditures: Annual capital expenditures net of disposal proceeds are expected to range from $210 million to $220 million for FY 2027, reflecting efficient fleet utilization and reduced capital intensity.
Backlog and Pipeline: Dycom concluded FY 2026 with a record $9.5 billion backlog, of which $6.3 billion is expected to be completed in the next 12 months. The company is optimizing for high-value engagements and diversifying across demand drivers.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:Can you talk about how you plan to increase the scope of work inside Power Solutions?
A:The Power Solutions acquisition is going well, with integration as expected. The company is investing in the business, adding resources, and seeing early cross-sell opportunities. Growth for Power Solutions is projected at 15%-25% this year. The company is focused on digital infrastructure and exploring organic and M&A opportunities within the data center space.
Q:Can you discuss the strong fourth-quarter organic growth and any surprises versus internal expectations?
A:There were no project pull-forwards. The strong performance exceeded expectations despite winter weather challenges. Wireless demand increased in Q4, but a $100 million deceleration is expected in line with original program expectations. Overall, demand remains strong, as reflected in the FY 2027 guide.
Q:Can you provide an update on the long-haul, middle mile, and inside defense work and the $20 billion TAM?
A:The $20 billion TAM is considered conservative, with demand from hyperscalers increasing. Programs are complex and back-half weighted, with significant growth expected in 2027 and 2028. The company is receiving more opportunities and calls, driven by the need for increased data capacity and low latency for AI applications.
Q:Can you discuss the BEAD program and its construction timelines?
A:Revenue opportunities are expected to begin in Q2, with momentum building in calendar 2027. Nearly all states and territories are approved, but funding and project timelines vary by state. Smaller projects may start sooner, while larger programs will take longer to ramp up.
Q:Does the guidance include the full potential impact of the BEAD program, and how do its margins compare to traditional work?
A:The guidance does not include the full potential impact of the BEAD program for this year. Margins are expected to be similar to traditional work, with skilled workforce investments positioning the company well for future demand.
Q:What is the current growth rate at Power Solutions compared to when it was acquired?
A:Power Solutions had a 4-year CAGR of about 15% at acquisition. The current growth projection is 15%-25%. The company is investing in skilled workforce expansion to support growth.
Q:Can you elaborate on the company's margin profile and investments for future growth?
A:Margins grew over 100 basis points last year, and further growth is expected this year. Investments in headcount and training are being made to support future programs. Power Solutions' growth is labor-driven, with a focus on responsible growth to maintain service quality.
Q:What is the company's approach to acquisitions and timing expectations?
A:The company is focused on long-term strategy, cultural fit, and growth opportunities. Acquisitions could range in size, with no specific timing guarantees. The company is patient and optimistic about opportunities in the building systems space.
Q:Can you discuss the Building Systems margin guidance and related investments?
A:Building Systems margins are expected to be in the mid-teens, with significant growth opportunities. Investments are being made to maintain service quality and support future growth.
Q:Why was SG&A as a percentage of sales higher in Q4, and what should be expected going forward?
A:SG&A was higher due to $18 million in transaction costs and the addition of Building Systems segment G&A. Future increases in SG&A are expected due to these factors.
Q:What is driving near-term hyperscale revenue, and how should its growth be viewed?
A:Near-term hyperscale revenue is driven by programs like Lumen's over-pull and smaller projects. Larger, more complex routes will contribute to growth in 2027 and 2028.
Q:Are acquisitions focused on the DMV area or new geographic locations?
A:Acquisitions are not limited to the DMV area. The company is considering expansion into new markets and frontier areas with significant growth potential.
Q:How is the company balancing leverage ratios with acquisition opportunities?
A:The company is maintaining a responsible approach to net leverage, with improvements in cash flow and operating efficiency supporting M&A opportunities.
Q:Are longer-term contracts in the traditional business offering more favorable terms and pricing?
A:The company is not increasing pricing with customers but is improving margins through operating leverage and internal efficiencies. Long-term customer relationships are prioritized over short-term pricing gains.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the timing and size of potential acquisitions, as well as the exact margin drag from investments in 2027. Additionally, responses about the BEAD program's full potential impact and the hyperscale revenue growth lacked precise quantification.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Building Systems
Communications segment
Dycom leader
Dycom positioning
Dycom workforce
FY Non
Lumen program
Non increase
Power Solutions
Systems segment
acquisition Power
building system
calendar Dycom
capacity
commitment fiber
communication building
construction
cycle
driver demand
ecosystem
expansion cash
expertise
facility
flow efficiency
flow record
gain
increase FY
margin expansion
phase
planning
safety quality
sector
solution
team
DY Transcript
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Positive3-4
The earnings call highlights strong financial metrics and optimistic guidance, with revenue and margin growth expected. The Power Solutions acquisition is set to be accretive, and the company is well-positioned for future growth in digital infrastructure. Despite some uncertainties in acquisition timing and BEAD program impact, the overall sentiment is positive, supported by strong demand in telecommunications and data center infrastructure. With a market cap of $4.95 billion, the stock is likely to see a positive movement of 2% to 8% over the next two weeks.
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Frequently Asked Questions
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They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
