DYCOM INDUSTRIES INC

Previous wording

Significant demand for broadband services is driven by applications that require high speed connections as well as the everyday use of mobile data devices. To respond to this demand and other advances in technology, an increasing number of diverse industry participants are constructing or upgrading wireline networks throughout the country. These wireline networks enable the delivery of gigabit network speeds to consumers and businesses. In addition, the advent of AI data centers has sparked interest in broad new national deployments of high-capacity, low latency, intercity networks, as well as metro rings. The level of interest in intercity networks is the highest we have seen in the last 25 years. Finally, wireless networks are deploying additional spectrum bands and equipment so as to more broadly and efficiently provision higher broadband services for both fixed and mobile access.

Current wording

Significant demand for broadband services is driven by applications that require high speed connections as well as the everyday use of mobile data devices. To respond to this demand and other advances in technology, an increasing number of diverse industry participants are constructing or upgrading wireline networks throughout the country. These wireline networks enable the delivery of gigabit network speeds to consumers and businesses. Dramatically increased speeds for consumers are being provisioned and consumer data usage is growing, particularly upstream.

Previous wording

We are pleased that a number of our customers have entered into strategic transactions (including refinancings) intended to provide the capital necessary for the incremental deployment of fiber to more than 9.5 million homes over the next several years. These individual transactions are currently awaiting regulatory approval, which is currently expected over the next 12 to 18 months. In addition to the incremental private capital associated with these transactions, a wide variety of programs are providing public capital to support broadband deployments. The largest of these programs, the Broadband Equity Access and Deployment Program (“BEAD Program”) includes over $40 billion for the construction of rural communications networks in unserved and underserved areas across the country. This represents an unprecedented level of support and meaningfully increases the rural market that we expect will ultimately be addressed. We believe the magnitude and importance of BEAD should not be under appreciated as it addresses some of the most difficult and expensive locations to deploy in America and represents a generational deployment opportunity. For planning purposes, we currently expect to see BEAD opportunities during the third quarter of calendar year 2025. As BEAD continues to develop, we are also seeing significant deployment activity funded by other state and federal programs.

Current wording

We are pleased that a number of our customers have entered into strategic transactions (including refinancings) intended to provide the capital necessary for the incremental deployment of fiber over the next several years. These individual transactions are currently awaiting regulatory approval. In addition to the incremental private capital associated with these transactions, we continue to see unprecedented levels of federal and state support for rural broadband deployment programs. We believe the magnitude and importance of these programs should not be under appreciated as they address some of the more difficult locations to deploy in America and represent a generational deployment opportunity.

Previous wording

We have established relationships with many leading telecommunications providers, including telephone companies, cable multiple system operators, wireless carriers, telecommunications equipment and infrastructure providers, as well as electric and gas utilities. Our customer base is highly concentrated, with our top five customers accounting for approximately 55.5% and 61.5% of our total contract revenues during the six months ended July 27, 2024 and July 29, 2023, respectively.

Current wording

We have established relationships with many leading telecommunications providers, including telephone companies, cable multiple system operators, wireless carriers, telecommunications equipment and infrastructure providers, as well as electric and gas utilities. Our customer base is highly concentrated, with our top five customers accounting for approximately 55.5% and 57.9% of our total contract revenues during the nine months ended October 26, 2024 and October 28, 2023, respectively.

Previous wording

The following reflects the percentage of total contract revenues from customers who contributed at least 2.5% to our total contract revenues during the three and six months ended July 27, 2024 or July 29, 2023:

Current wording

The following reflects the percentage of total contract revenues from customers who contributed at least 2.5% to our total contract revenues during the three and nine months ended October 26, 2024 or October 28, 2023:

Previous wording

In addition, another customer contributed 8.0% and 5.3% to our total contract revenues during the three months ended July 27, 2024 and July 29, 2023, respectively. During the six months ended July 27, 2024 and July 29, 2023 this customer contributed 7.4% and 5.0%, respectively.

Current wording

In addition, another customer contributed 8.2% and 6.1% to our total contract revenues during the three months ended October 26, 2024 and October 28, 2023, respectively. During the nine months ended October 26, 2024 and October 28, 2023 this customer contributed 7.7% and 5.4%, respectively.

Previous wording

Fiscal 2025. During the second quarter of fiscal 2025, we acquired a telecommunications construction contractor for a total purchase price of $25.1 million ($21.0 million purchase price plus cash acquired of $4.1 million). The acquired company is located in the northwestern United States and provides construction and maintenance services to telecommunications providers, with the majority of its revenues generated in Alaska. This acquisition expands our geographic presence and our customer base.

Current wording

During the second quarter of fiscal 2025, we acquired a telecommunications construction contractor for a total purchase price of $24.5 million ($20.4 million purchase price plus cash acquired of $4.1 million). The acquired company is located in the northwestern United States and provides construction and maintenance services to telecommunications providers, with the majority of its revenues generated in Alaska. This acquisition expands our geographic presence and our customer base.

Previous wording

Results of the businesses acquired are included in the condensed consolidated financial statements from the date of acquisition The purchase price allocations of the acquired companies are preliminary and will be completed when valuations for intangible assets and other amounts are finalized within the 12-month measurement period from the date of acquisition.

Current wording

Results of the businesses acquired are included in the condensed consolidated financial statements from the date of acquisition. The purchase price allocations of the companies acquired in fiscal 2025 are preliminary and will be completed when valuations for intangible assets and other amounts are finalized within the 12-month measurement period from the date of acquisition.

Previous wording

For certain contracts, representing less than 5% of contract revenues during each of the six months ended July 27, 2024 and July 29, 2023, we use the cost-to-cost measure of progress. These contracts are generally projects that are completed over a period of less than twelve months. Under the cost-to-cost measure of progress, the extent of progress toward completion is measured based on the ratio of costs incurred to date to the total estimated costs. Contract costs include direct labor, direct materials, and subcontractor costs, as well as an allocation of indirect costs. Contract revenues are recorded as costs are incurred. We accrue the entire amount of a contract loss, if any, at the time the loss is determined to be probable and can be reasonably estimated.

Current wording

For certain contracts, representing less than 5% of contract revenues during each of the nine months ended October 26, 2024 and October 28, 2023, we use the cost-to-cost measure of progress. These contracts are generally projects that are completed over a period of less than twelve months. Under the cost-to-cost measure of progress, the extent of progress toward completion is measured based on the ratio of costs incurred to date to the total estimated costs. Contract costs include direct labor, direct materials, and subcontractor costs, as well as an allocation of indirect costs. Contract revenues are recorded as costs are incurred. We accrue the entire amount of a contract loss, if any, at the time the loss is determined to be probable and can be reasonably estimated.

Previous wording

Contract Revenues. Contract revenues were $1,203.1 million during the three months ended July 27, 2024 compared to $1,041.5 million during the three months ended July 29, 2023. Contract revenues from acquired businesses were $65.9 million for the three months ended July 27, 2024. There were no acquired revenues during the three months ended July 29, 2023. Acquired revenues represent contract revenues from acquired businesses that were not owned for the full period in both the current and comparable prior periods.

Current wording

Contract Revenues. Contract revenues were $1,272.0 million during the three months ended October 26, 2024 compared to $1,136.1 million during the three months ended October 28, 2023. Contract revenues from acquired businesses (excluding contract revenues from storm restoration services) were $80.1 million for the three months ended October 26, 2024 and $45.2 million for the three months ended October 28, 2023. Acquired revenues represent contract revenues from acquired businesses that were not owned for the full period in both the current and comparable prior periods. Additionally, contract revenues from storm restoration services during the three months ended October 26, 2024 were $46.3 million while there were no significant revenues from storm restoration services during the three months ended October 28, 2023.

Previous wording

Excluding amounts generated by the acquired business, contract revenues increased by $95.6 million during the three months ended July 27, 2024 compared to the three months ended July 29, 2023. Contract revenues increased by $40.5 million for a customer for fiber deployments, and $35.9 million and $1.2 million for two large telecommunications customers primarily for fiber deployments. Contract revenues decreased by $20.2 million and $13.9 million for two large telecommunication customers. All other customers had net increases in contract revenues of $52.1 million on a combined basis during the three months ended July 27, 2024 compared to the three months ended July 29, 2023.

Current wording

Excluding amounts generated by the acquired businesses and storm restoration services, contract revenues increased by $54.7 million during the three months ended October 26, 2024 compared to the three months ended October 28, 2023. Contract revenues increased by $84.7 million, $42.3 million and $25.9 million, respectively, for three large telecommunications customers primarily for fiber deployments, and $35.1 million for another customer deploying fiber. Contract revenues decreased by $41.2 million, $39.0 million and $8.5 million, respectively, for three large telecommunications customers. All other customers had net decreases in contract revenues of $44.6 million on a combined basis during the three months ended October 26, 2024 compared to the three months ended October 28, 2023.

Previous wording

The percentage of our contract revenues by customer type from telecommunications, underground facility locating, and electric and gas utilities and other customers, was 90.3%, 6.8%, and 2.9%, respectively, for the three months ended July 27, 2024 compared to 89.0%, 7.4%, and 3.6%, respectively, for the three months ended July 29, 2023.

Current wording

The percentage of our contract revenues by customer type from telecommunications, underground facility locating, and electric and gas utilities and other customers, was 90.6%, 6.4%, and 3.0%, respectively, for the three months ended October 26, 2024 compared to 90.1%, 6.7%, and 3.2%, respectively, for the three months ended October 28, 2023.

Previous wording

Excluding amounts generated by the acquired business, contract revenues increased by $121.3 million during the six months ended July 27, 2024 compared to the six months ended July 29, 2023. Contract revenues increased by $70.2 million for a customer for fiber deployments, $27.0 million and $21.6 million for two large telecommunications customers primarily for fiber deployments. Contract revenues decreased by $41.9 million and $29.5 million for two large telecommunication customers. All other customers had net increases in contract revenues of $73.9 million on a combined basis during the six months ended July 27, 2024 compared to the six months ended July 29, 2023.

Current wording

Excluding amounts generated by the acquired businesses and storm restoration services, contract revenues increased by $176.0 million during the nine months ended October 26, 2024 compared to the nine months ended October 28, 2023. Contract revenues increased by $111.7 million, $68.7 million, and $46.3 million, respectively, for three large telecommunications customers primarily for fiber deployments, $24.7 million for another telecommunications customer and $105.2 million for another customer deploying fiber. Contract revenues decreased by $81.0 million and $19.6 million for two large telecommunication customers and $38.0 million for a leading cable multiple system operator from installation, maintenance and construction services. All other customers had net decreases in contract revenues of $42.0 million on a combined basis during the nine months ended October 26, 2024 compared to the nine months ended October 28, 2023.

Previous wording

The percentage of our contract revenues by customer type from telecommunications, underground facility locating, and electric and gas utilities and other customers, was 90.0%, 7.0%, and 3.0%, respectively, for the six months ended July 27, 2024 compared to 89.4%, 7.2%, and 3.4%, respectively, for the six months ended July 29, 2023.

Current wording

The percentage of our contract revenues by customer type from telecommunications, underground facility locating, and electric and gas utilities and other customers, was 90.3%, 6.7%, and 3.0%, respectively, for the nine months ended October 26, 2024 compared to 89.6%, 7.0%, and 3.4%, respectively, for the nine months ended October 28, 2023.

Previous wording

Costs of Earned Revenues. Costs of earned revenues increased to $952.9 million, or 79.2% of contract revenues, during the three months ended July 27, 2024 compared to $830.4 million, or 79.7% of contract revenues, during the three months ended July 29, 2023. The primary components of the increase were a $116.2 million aggregate increase in direct labor and subcontractor costs, a $2.5 million increase in equipment and fuel costs and a $10.2 million increase in other direct costs, partially offset by a $6.4 million decrease in direct materials expense.

Current wording

Costs of Earned Revenues. Costs of earned revenues increased to $1,007.4 million, or 79.2% of contract revenues, during the three months ended October 26, 2024 compared to $886.7 million, or 78.0% of contract revenues, during the three months ended October 28, 2023. The primary components of the increase were a $125.7 million aggregate increase in direct labor and subcontractor costs and a $4.0 million increase in other direct costs, offset by a $8.3 million decrease in direct materials expense and a $0.6 million decrease in equipment and fuel costs.

Previous wording

Costs of earned revenues as a percentage of contract revenues decreased 0.5% during the three months ended July 27, 2024 compared to the three months ended July 29, 2023. Direct material costs decreased 1.4% primarily as a result of our mix of work in which we provide materials for customers. Equipment and fuel costs decreased 0.4% on a net basis as a percentage of contract revenues. Labor and subcontracted labor costs increased 1.2% primarily due to the mix of work performed during the three months ended July 27, 2024. Other direct costs were in line as a percentage of contract revenues for the three months ended July 27, 2024 compared to the three months ended July 29, 2023.

Current wording

Costs of earned revenues as a percentage of contract revenues increased 1.2% during the three months ended October 26, 2024 compared to the three months ended October 28, 2023. Labor and subcontracted labor costs increased 3.3% primarily due to the mix of work performed during the three months ended October 26, 2024. Direct material costs decreased 1.3% primarily as a result of our mix of work in which we provide materials for customers. Equipment and fuel costs decreased 0.5% and other direct costs decreased by 0.3% on a net basis as a percentage of contract revenues for the three months ended October 26, 2024 compared to the three months ended October 28, 2023.

Previous wording

Costs of earned revenues increased to $1,874.5 million, or 79.9% of contract revenues, during the six months ended July 27, 2024 compared to $1,683.8 million, or 80.7% of contract revenues, during the six months ended July 29, 2023. The primary components of the increase were a $182.2 million aggregate increase in direct labor and subcontractor costs, a $16.3 million increase in other direct costs and a $2.3 million net increase from higher equipment costs, partially offset by lower fuel costs. In addition, there was a decrease of $10.0 million in direct materials expense.

Current wording

Costs of earned revenues increased to $2,881.9 million, or 79.7% of contract revenues, during the nine months ended October 26, 2024 compared to $2,570.4 million, or 79.7% of contract revenues, during the nine months ended October 28, 2023. The primary components of the increase were a $307.9 million aggregate increase in direct labor and subcontractor costs, a $20.3 million increase in other direct costs and a $1.7 million net increase from higher equipment costs, partially offset by lower fuel costs. In addition, there was a decrease of $18.3 million in direct materials expense.

Previous wording

Costs of earned revenues as a percentage of contract revenues decreased 0.8% during the six months ended July 27, 2024 compared to the six months ended July 29, 2023. Direct material costs decreased 1.1% primarily as a result of our mix of work in which we provide materials for customers and equipment and fuel costs decreased 0.4% on a net basis as a percentage of contract revenues. Labor and subcontracted labor costs increased 0.8% primarily due to the mix of work performed during the six months ended July 27, 2024. Other direct costs were in line as a percentage of contract revenues for the six months ended July 27, 2024 compared to the six months ended July 29, 2023.

Current wording

Costs of earned revenues as a percentage of contract revenues remained flat during the nine months ended October 26, 2024 compared to the nine months ended October 28, 2023. Direct material costs decreased 1.2% primarily as a result of our mix of work in which we provide materials for customers. Equipment and fuel costs decreased 0.4% and other direct costs decreased 0.1% on a net basis as a percentage of contract revenues. Labor and subcontracted labor costs increased 1.7% primarily due to the mix of work performed during the nine months ended October 26, 2024.

Previous wording

General and Administrative Expenses. General and administrative expenses increased to $99.6 million, or 8.3% of contract revenues, during the three months ended July 27, 2024 compared to $84.8 million, or 8.1% of contract revenues, during the three months ended July 29, 2023. The increase in total general and administrative expenses during the three months ended July 27, 2024 is mainly attributable to an increase in administrative, payroll, performance based compensation, stock based compensation, acquisition costs and other costs.

Current wording

General and Administrative Expenses. General and administrative expenses increased to $110.8 million, or 8.7% of contract revenues, during the three months ended October 26, 2024 compared to $87.5 million, or 7.7% of contract revenues, during the three months ended October 28, 2023. The increase in total general and administrative expenses during the three months ended October 26, 2024 is mainly attributable to an increase in administrative, payroll, performance based compensation, $7.1 million incremental stock based compensation expense resulting from the CEO transition, acquisition costs, $4.2 million acquisition integration costs and other costs, including incremental general and administrative expenses from the acquired businesses.

Previous wording

General and administrative expenses increased to $194.1 million, or 8.3% of contract revenues, during the six months ended July 27, 2024 compared to $167.2 million, or 8.0% of contract revenues, during the six months ended July 29, 2023. The increase in total general and administrative expenses during the six months ended July 27, 2024 is mainly attributable to an increase in administrative, payroll, performance based compensation, stock based compensation, acquisition costs and other costs.

Current wording

General and administrative expenses increased to $304.9 million, or 8.4% of contract revenues, during the nine months ended October 26, 2024 compared to $254.7 million, or 7.9% of contract revenues, during the nine months ended October 28, 2023. The increase in total general and administrative expenses during the nine months ended October 26, 2024 is mainly attributable to an increase in administrative, payroll, performance based compensation, $9.3 million incremental stock based compensation expense resulting from the CEO transition, acquisition costs, $4.2 million acquisition integration costs and other costs, including incremental general and administrative expenses from the acquired businesses.

Previous wording

Depreciation and Amortization. Depreciation expense was $40.7 million, or 3.4% of contract revenues, during the three months ended July 27, 2024 compared to $34.5 million, or 3.3% of contract revenues, during the three months ended July 29, 2023. Depreciation expense was $80.0 million, or 3.4% of contract revenues during the six months ended July 27, 2024 compared to $68.3 million, or 3.3% of contract revenues during the six months ended July 29, 2023. The increase in depreciation expense during the three and six months ended July 27, 2024 is primarily due to higher capital expenditures to support our growth in operations and the normal replacement cycle of fleet assets.

Current wording

Depreciation and Amortization. Depreciation expense was $42.4 million, or 3.3% of contract revenues, during the three months ended October 26, 2024 compared to $36.5 million, or 3.2% of contract revenues, during the three months ended October 28, 2023. Depreciation expense was $122.4 million, or 3.4% of contract revenues during the nine months ended October 26, 2024 compared to $104.8 million, or 3.3% of contract revenues during the nine months ended October 28, 2023. The increase in depreciation expense during the three and nine months ended October 26, 2024 is primarily due to higher capital expenditures to support our growth in operations and the normal replacement cycle of fleet assets.

Previous wording

Amortization expense was $5.9 million and $3.5 million during the three months ended July 27, 2024 and July 29, 2023, respectively and $11.8 million and $7.0 million during the six months ended July 27, 2024 and July 29, 2023, respectively. The increase in amortization expense during the three and six months ended July 27, 2024 is due to the increase in amortizing intangibles from acquired businesses.

Current wording

Amortization expense was $9.6 million and $6.0 million during the three months ended October 26, 2024 and October 28, 2023, respectively and $21.3 million and $13.0 million during the nine months ended October 26, 2024 and October 28, 2023, respectively. The increase in amortization expense during the three and nine months ended October 26, 2024 is due to the increase in amortizing intangibles from acquired businesses.

Previous wording

Interest Expense, Net. Interest expense, net was $14.7 million and $12.3 million during the three months ended July 27, 2024 and July 29, 2023, respectively, as a result of higher interest rates on funded debt balances and higher outstanding borrowings during the current period and lower interest income on invested cash balances.

Current wording

Interest Expense, Net. Interest expense, net was $17.5 million and $14.0 million during the three months ended October 26, 2024 and October 28, 2023, respectively, and $44.9 million and $37.6 million during the nine months ended October 26, 2024 and October 28, 2023, respectively, as a result of higher outstanding borrowings during the current period and lower interest income on invested cash balances.

Previous wording

Loss on Debt Extinguishment. Loss on debt extinguishment during the three months ended July 27, 2024 of $1.0 million includes the write-off of deferred debt issuance costs in connection with the Credit Agreement amendment. See “Liquidity and Capital Resources - Compliance with Credit Agreement” for more information.

Current wording

Loss on Debt Extinguishment. Loss on debt extinguishment during the nine months ended October 26, 2024 of $1.0 million includes the write-off of deferred debt issuance costs in connection with the Credit Agreement amendment. See “Liquidity and Capital Resources - Compliance with Credit Agreement” for more information.

Previous wording

Other Income, Net. Other income, net was $6.4 million and $5.7 million during the three months ended July 27, 2024 and July 29, 2023, respectively and $15.7 million and $10.7 million during the six months ended July 27, 2024 and July 29, 2023, respectively. Gain on sale of fixed assets, net was $8.2 million and $7.6 million during the three months ended July 27, 2024 and July 29, 2023, respectively and $20.6 million and $15.4 million during the six months ended July 27, 2024 and July 29, 2023, respectively. The change in other income, net is primarily a function of the number of assets sold and prices obtained for those assets during each respective period. Other income, net also reflects $3.0 million and $2.4 million of expense during the three months ended July 27, 2024 and July 29, 2023 respectively, and $5.9 million and $5.6 million during the six months ended July 27, 2024 and July 29, 2023, respectively, associated with the non-recourse sale of accounts receivable under a customer-sponsored vendor payment program.

Current wording

Other Income, Net. Other income, net was $6.9 million and $6.9 million during the three months ended October 26, 2024 and October 28, 2023, respectively and $22.6 million and $17.6 million during the nine months ended October 26, 2024 and October 28, 2023, respectively. Gain on sale of fixed assets, net was $8.2 million and $8.4 million during the three months ended October 26, 2024 and October 28, 2023, respectively and $28.8 million and $23.7 million during the nine months ended October 26, 2024 and October 28, 2023, respectively. The change in other income, net is primarily a function of the number of assets sold and prices obtained for those assets during each respective period. Other income, net also reflects $2.7 million and $2.2 million of expense during the three months ended October 26, 2024 and October 28, 2023 respectively, and $8.7 million and $7.8 million during the nine months ended October 26, 2024 and October 28, 2023, respectively, associated with the non-recourse sale of accounts receivable under a customer-sponsored vendor payment program.

Previous wording

Income Taxes. The following table presents our income tax provision and effective income tax rate for the three and six months ended July 27, 2024 and July 29, 2023 (dollars in millions):

Current wording

Income Taxes. The following table presents our income tax provision and effective income tax rate for the three and nine months ended October 26, 2024 and October 28, 2023 (dollars in millions):

Previous wording

Our effective income tax rate was 27.9% and 26.3% for the three months ended July 27, 2024 and July 29, 2023, respectively, and 24.0% and 24.4% for the six months ended July 27, 2024 and July 29, 2023, respectively. The interim income tax provisions are based on the effective income tax rate expected to be applicable for the full fiscal year, adjusted for specific items that are required to be recognized in the period in which they occur. The effective tax rate differs from the statutory rate primarily due to the difference in income tax rates from state to state where work was performed, non-deductible and non-taxable items, tax credits recognized, the tax effects of the vesting and exercise of share-based awards, and changes in unrecognized tax benefits. Deferred tax assets and liabilities are based on the enacted tax rate that will apply in future periods when such assets and liabilities are expected to be settled or realized.

Current wording

Our effective income tax rate was 23.6% and 25.5% for the three months ended October 26, 2024 and October 28, 2023, respectively, and 23.8% and 24.9% for the nine months ended October 26, 2024 and October 28, 2023, respectively. The interim income tax provisions are based on the effective income tax rate expected to be applicable for the full fiscal year, adjusted for specific items that are required to be recognized in the period in which they occur. The effective tax rate differs from the statutory rate primarily due to the difference in income tax rates from state to state where work was performed, non-deductible and non-taxable items, tax credits recognized, the tax effects of the vesting and exercise of share-based awards, and changes in unrecognized tax benefits. Deferred tax assets and liabilities are based on the enacted tax rate that will apply in future periods when such assets and liabilities are expected to be settled or realized.

Previous wording

Net Income. Net income was $68.4 million for the three months ended July 27, 2024 compared to $60.2 million for the three months ended July 29, 2023. Net income was $131.0 million for the six months ended July 27, 2024 compared to $111.8 million for the six months ended July 29, 2023.

Current wording

Net Income. Net income was $69.8 million for the three months ended October 26, 2024 compared to $83.7 million for the three months ended October 28, 2023. Net income was $200.7 million for the nine months ended October 26, 2024 compared to $195.5 million for the nine months ended October 28, 2023.

Previous wording

We are subject to concentrations of credit risk relating primarily to our cash and equivalents, accounts receivable, and contract assets. Cash and equivalents primarily include balances on deposit with banks and totaled $19.6 million as of July 27, 2024 compared to $101.1 million as of January 27, 2024. We maintain our cash and equivalents at financial institutions we believe to be of high credit quality. For all periods presented, we have not experienced any loss or lack of access to cash in our operating accounts.

Current wording

We are subject to concentrations of credit risk relating primarily to our cash and equivalents, accounts receivable, and contract assets. Cash and equivalents primarily include balances on deposit with banks and totaled $15.3 million as of October 26, 2024 compared to $101.1 million as of January 27, 2024. We maintain our cash and equivalents at financial institutions we believe to be of high credit quality. For all periods presented, we have not experienced any loss or lack of access to cash in our operating accounts.

Previous wording

Sources of Cash. Our sources of cash are operating activities, long-term debt, equity offerings, bank borrowings, proceeds from the sale of idle and surplus equipment and real property, and stock option proceeds. Cash flow from operations is primarily influenced by demand for our services and operating margins, but can also be influenced by working capital needs associated with the services that we provide. In particular, working capital needs may increase when we have growth in operations and where project costs, primarily associated with labor, subcontractors, equipment, and materials, are required to be paid before the related customer balances owed to us are invoiced and collected. Our working capital (total current assets less total current liabilities, excluding the current portion of debt) was $1,249.6 million as of July 27, 2024 compared to $1,061.2 million as of January 27, 2024.

Current wording

Sources of Cash. Our sources of cash are operating activities, long-term debt, equity offerings, bank borrowings, proceeds from the sale of idle and surplus equipment and real property, and stock option proceeds. Cash flow from operations is primarily influenced by demand for our services and operating margins, but can also be influenced by working capital needs associated with the services that we provide. In particular, working capital needs may increase when we have growth in operations and where project costs, primarily associated with labor, subcontractors, equipment, and materials, are required to be paid before the related customer balances owed to us are invoiced and collected. Our working capital (total current assets less total current liabilities, excluding the current portion of debt) was $1,293.3 million as of October 26, 2024 compared to $1,061.2 million as of January 27, 2024.

Previous wording

Sufficiency of Capital Resources. We believe that our capital resources, including existing cash balances and amounts available under our Credit Agreement, are sufficient to meet our financial obligations. These obligations include payments on our debt, working capital requirements, and the purchase of equipment at our expected level of operations for at least the next 12 months. Our capital requirements may increase to the extent we seek to grow by acquisitions that involve consideration other than our stock, experience difficulty or delays in collecting amounts owed to us by our customers, increase our working capital in connection with new or existing customer programs, or we repurchase our common stock, or repay Credit Agreement borrowings. Changes in financial markets or other components of the economy could adversely impact our ability to access the capital markets, in which case we would expect to rely on a combination of available cash and our Credit Agreement to provide short-term funding. Management regularly monitors the financial markets and assesses general economic conditions for possible impact on our financial position. We believe our cash investment policies are prudent and expect that any volatility in the capital markets would not have a material impact on our cash investments.

Current wording

12 months. Our capital requirements may increase to the extent we seek to grow by acquisitions that involve consideration other than our stock, experience difficulty or delays in collecting amounts owed to us by our customers, increase our working capital in connection with new or existing customer programs, or we repurchase our common stock, or repay Credit Agreement borrowings. Changes in financial markets or other components of the economy could adversely impact our ability to access the capital markets, in which case we would expect to rely on a combination of available cash and our Credit Agreement to provide short-term funding. Management regularly monitors the financial markets and assesses general economic conditions for possible impact on our financial position. We believe our cash investment policies are prudent and expect that any volatility in the capital markets would not have a material impact on our cash investments.

Previous wording

Net Cash Flows. The following table presents our net cash flows for the six months ended July 27, 2024 and July 29, 2023 (dollars in millions):

Current wording

Net Cash Flows. The following table presents our net cash flows for the nine months ended October 26, 2024 and October 28, 2023 (dollars in millions):

Previous wording

Cash used in Operating Activities. Depreciation and amortization, non-cash lease expense, stock-based compensation, amortization of debt issuance costs, deferred income taxes, gain on sale of fixed assets and (recovery) provision for bad debt were the primary non-cash items in cash flows from operating activities during the current and prior periods.

Current wording

Cash Provided by (Used in) Operating Activities. Depreciation and amortization, non-cash lease expense, stock-based compensation, amortization of debt issuance costs, deferred income taxes, gain on sale of fixed assets and (recovery) provision for bad debt were the primary non-cash items in cash flows from operating activities during the current and prior periods.

Previous wording

During the six months ended July 27, 2024, net cash used in operating activities was $44.9 million. Changes in working capital (excluding cash) and changes in other long-term assets and liabilities used $280.9 million of operating cash flow during the six months ended July 27, 2024. Changes that used operating cash flow during the six months ended July 27, 2024 included an increase in accounts receivable, an increase in contract assets, net, and a decrease in income taxes payable of $256.5 million, $26.3 million, and $7.0 million, respectively. In addition, changes that used operating cash flow during the six months ended July 27, 2024 included an increase in other current assets and inventories of $2.9 million. Changes that provided operating cash flow during the six months ended July 27, 2024 included an increase in accounts payable, an increase in accrued liabilities, and a decrease in other assets of $8.8 million, $2.6 million, and $0.3 million, respectively.

Current wording

During the nine months ended October 26, 2024, net cash provided by operating activities was $20.9 million. Changes in working capital (excluding cash) and changes in other long-term assets and liabilities used $341.8 million of operating cash flow during the nine months ended October 26, 2024. Changes that used operating cash flow during the nine months ended October 26, 2024 included an increase in accounts receivable and in other assets of $405.5 million and $9.1 million, respectively. Changes that provided operating cash flow during the nine months ended October 26, 2024 included a net increase in income taxes payable/receivable, an increase in accrued liabilities, net, a decrease in contract assets, net, a decrease in other current assets and inventories and an increase in accounts payable of $22.4 million, $21.2 million, $19.2 million, $7.1 million and $2.9 million, respectively.

Previous wording

Days sales outstanding (“DSO”) is calculated based on the ending balance of total current and non-current accounts receivable (including unbilled accounts receivable), net of the allowance for doubtful accounts, and current contract assets, net of contract liabilities, divided by the average daily revenue for the most recently completed quarter. Long-term contract assets are excluded from the calculation of DSO, as these amounts represent payments made to customers pursuant to long-term agreements and are recognized as a reduction of contract revenues over the period for which the related services are provided to the customers. Including these balances in DSO is not meaningful to the average time to collect accounts receivable and current contract asset balances. Our DSO was 117 as of July 27, 2024 compared to 111 as of July 29, 2023.

Current wording

Days sales outstanding (“DSO”) is calculated based on the ending balance of total current and non-current accounts receivable (including unbilled accounts receivable), net of the allowance for doubtful accounts, and current contract assets, net of contract liabilities, divided by the average daily revenue for the most recently completed quarter. Long-term contract assets are excluded from the calculation of DSO, as these amounts represent payments made to customers pursuant to long-term agreements and are recognized as a reduction of contract revenues over the period for which the related services are provided to the customers. Including these balances in DSO is not meaningful to the average time to collect accounts receivable and current contract asset balances. Our DSO was 119 as of October 26, 2024 compared to 121 as of October 28, 2023.

Previous wording

During the six months ended July 29, 2023, net cash used in operating activities was $28.8 million. Changes in working capital (excluding cash) and changes in other long-term assets and liabilities used $234.4 million of operating cash flow during the six months ended July 29, 2023. Changes that used operating cash flow during the six months ended July 29, 2023 included an increase in accounts receivable, and increase in contract assets, net, an increase in income taxes receivable, and an increase in other current assets and inventories, of $148.7 million, $32.0 million, $21.6 million, and $15.2 million, respectively. In addition, changes that used operating cash flow during the six months ended July 29, 2023 included a decrease in accrued liabilities of $14.2 million and accounts payable, net of $6.1 million. A decrease in other assets of $3.4 million provided operating cash flow during the six months ended July 29, 2023.

Current wording

During the nine months ended October 28, 2023, net cash used in operating activities was $66.1 million. Changes in working capital (excluding cash) and changes in other long-term assets and liabilities used $402.0 million of operating cash flow during the nine months ended October 28, 2023. Changes that used operating cash flow during the nine months ended October 28, 2023 included an increase in accounts receivable, a decrease in income taxes payable/receivable, an increase in contract assets, net, and an increase in other current assets and inventories, of $361.1 million, $14.6 million, $11.3 million and $5.7 million, respectively. In addition, changes that used operating cash flow during the nine months ended October 28, 2023 included a decrease in accrued liabilities of $6.6 million and accounts payable, of $3.5 million. A decrease in other assets of $0.7 million provided operating cash flow during the nine months ended October 28, 2023.

Previous wording

Cash Used in Investing Activities. Net cash used in investing activities was $119.0 million during the six months ended July 27, 2024 compared to $73.6 million during the six months ended July 29, 2023. During the six months ended July 27, 2024 and July 29, 2023, capital expenditures were $107.4 million and $93.9 million, respectively. Additionally, we acquired the assets of two telecommunications construction contractors for $33.8 million. These expenditures were offset in part by proceeds from the sale of assets of $22.2 million and $20.3 million during the six months ended July 27, 2024 and July 29, 2023, respectively.

Current wording

Cash Used in Investing Activities. Net cash used in investing activities was $335.4 million during the nine months ended October 26, 2024 compared to $253.5 million during the nine months ended October 28, 2023. During the nine months ended October 26, 2024 and October 28, 2023, capital expenditures were $182.0 million and $161.1 million, respectively, and cash paid for acquisitions was $183.9 million amd $122.9 million, respectively. These expenditures were offset in part by proceeds from the sale of assets of $30.4 million and $30.5 million during the nine months ended October 26, 2024 and October 28, 2023, respectively.

Previous wording

Cash Provided by (Used in) Financing Activities. Net cash provided by financing activities was $82.3 million during the six months ended July 27, 2024. During the six months ended July 27, 2024, borrowings and repayments under our Credit Agreement were $282.4 million and $147.4 million, respectively. We paid approximately $6.6 million in issuance costs and third party fees and expenses related to our financing transactions. In addition, we repurchased 210,000 shares of our common stock in open market transactions, at an average price of $141.84 per share, for $29.8 million, during the six months ended July 27, 2024. We also paid $16.3 million to tax authorities in order to meet the payroll tax withholding obligations on restricted share units that vested during the six months ended July 27, 2024. This was partially offset by the exercise of stock options, which provided $0.1 million during the six months ended July 27, 2024.

Current wording

Cash Provided by Financing Activities. Net cash provided by financing activities was $228.7 million during the nine months ended October 26, 2024. During the nine months ended October 26, 2024, borrowings and repayments under our Credit Agreement were $755.4 million and $465.4 million, respectively. We paid approximately $6.7 million in issuance costs and third party fees and expenses related to our financing transactions. In addition, we repurchased 210,000 shares of our common stock in open market transactions, at an average price of $141.84 per share, for $29.8 million, during the nine months ended October 26, 2024. We also paid $16.9 million, net to tax authorities in order to meet the payroll tax withholding obligations on restricted share units that vested during the nine months ended October 26, 2024. In addition, we paid $8.0 million, net, to tax authorities for payroll tax withholding obligations on the exercise of stock options.

Previous wording

Net cash used in financing activities was $38.4 million during the six months ended July 29, 2023. We repurchased 225,000 shares of our common stock in open market transactions, at an average price of $90.21 per share, for $20.3 million, during the six months ended July 29, 2023. We also paid $9.7 million to tax authorities in order to meet the payroll tax withholding obligations on restricted share units that vested during the six months ended July 29, 2023. In addition, we used approximately $8.8 million to repay term loan borrowings under our Credit Agreement. This was partially offset by the exercise of stock options, which provided $0.3 million during the six months ended July 29, 2023.

Current wording

Net cash provided by financing activities was $111.1 million during the nine months ended October 28, 2023. During the nine months ended October 28, 2023, borrowings under our credit agreement were $475.0 million. We used approximately $334.1 million to repay borrowings under our Credit Agreement. We repurchased 225,000 shares of our common stock in open market transactions, at an average price of $90.21 per share, for $20.3 million, during the nine months ended October 28, 2023. We also paid $9.8 million to tax authorities in order to meet the payroll tax withholding obligations on restricted share units that vested during the nine months ended October 28, 2023. This was partially offset by the exercise of stock options, which provided $0.3 million during the nine months ended October 28, 2023.

Previous wording

(1)There were no outstanding borrowings under our revolving facility as of July 27, 2024 and January 27, 2024.

Current wording

(1)There were no outstanding borrowings under our revolving facility as of January 27, 2024.

Previous wording

Our Credit Agreement contains a financial covenant that requires us to maintain a consolidated net leverage ratio of not greater than 3.50 to 1.00 as measured at the end of each fiscal quarter, and provides for certain increases to this ratio in connection with permitted acquisitions. The consolidated net leverage ratio is the ratio of our consolidated indebtedness reduced by unrestricted cash and cash equivalents in excess of $25.0 million to our trailing four-quarter consolidated earnings before interest, taxes, depreciation, and amortization as defined by our Credit Agreement. The Credit Agreement also contains a financial covenant that requires us to maintain a consolidated interest coverage ratio, which is the ratio of our trailing four-quarter consolidated EBITDA to our consolidated interest expense, each as defined by our Credit Agreement, of not less than 3.00 to 1.00, as measured at the end of each fiscal quarter. At July 27, 2024 and January 27, 2024, we were in compliance with the financial covenants of our Credit Agreement and had borrowing availability under our revolving facility of $602.5 million for both periods as determined by the most restrictive covenant. For calculation purposes, applicable cash on hand is netted against the funded debt amount as permitted in the Credit Agreement.

Current wording

Our Credit Agreement contains a financial covenant that requires us to maintain a consolidated net leverage ratio of not greater than 3.50 to 1.00 as measured at the end of each fiscal quarter, and provides for certain increases to this ratio in connection with permitted acquisitions. The consolidated net leverage ratio is the ratio of our consolidated indebtedness reduced by unrestricted cash and cash equivalents in excess of $25.0 million to our trailing four-quarter consolidated earnings before interest, taxes, depreciation, and amortization as defined by our Credit Agreement. The Credit Agreement also contains a financial covenant that requires us to maintain a consolidated interest coverage ratio, which is the ratio of our trailing four-quarter consolidated EBITDA to our consolidated interest expense, each as defined by our Credit Agreement, of not less than 3.00 to 1.00, as measured at the end of each fiscal quarter. At October 26, 2024 and January 27, 2024, we were in compliance with the financial covenants of our Credit Agreement and had borrowing availability under our revolving facility of $447.5 million and $602.5 million, respectively, as determined by the most restrictive covenant. For calculation purposes, applicable cash on hand is netted against the funded debt amount as permitted in the Credit Agreement.