Dycom Industries, Inc. Aktie

Well, thanks, everyone, for being here bright and early, and welcome to D.A. Davidson's 21st (sic) [ 25th ] Annual Diversified Industrials & Services Conference. Appreciate you guys all kicking off the day here with Dycom, and welcome, everyone, on the webcast as well. I'm Kurt Yinger. I cover building products and infrastructure services here at D.A. Davidson. I'm joined by Dan Peyovich, the CEO of Dycom. Dan...

Good morning.

Thanks so much for being here.

Thanks for having me, Kurt.

Maybe just to start for investors who aren't as familiar with Dycom and what you do. Can you just talk a little bit about the company, provide a quick overview?

Yes. If I could just briefly start with -- I might make forward-looking statements today, so everybody could just please reference the safe harbor statement on our website. That would be appreciated.

And jumping in, if you think about Dycom today, the best way to think about us is really end-to-end solutions to solve the growing data needs, right? Data consumption has grown for the last three decades. For a long, long time, Dycom provided all of the fiber, all of the HFC infrastructure around the country to connect people, to connect homes, to connect businesses, and we've extended that recently to get inside the data centers. So whether it's data being computed, data being stored, data being processed and then now the entirety of the transmission from that data center out ultimately to the end user, that's where Dycom comes into play. So end-to-end solutions, Kurt, and we're pretty excited about the opportunity set and the demand drivers.

Okay. Maybe big picture, you've been in the CEO seat for almost 2 years. You've done a great job kind of expanding the platform into building systems, improve the overall financial profile, some of those growth opportunities. Can you just talk a bit about kind of the strategy since you've come in and how that positions Dycom going forward?

The strategy is centered around growth. There is a ton of opportunity in infrastructure needs for the reasons I talked about, right? There's many that say that we will create more data in the next three years than has been created today from the dawn of time. So all of that is going to need infrastructure. And what we've really done is, over time, all of the work we've been doing on the telecommunications side has got closer and closer and closer to the data center.

We started spending a lot more time with the hyperscalers, making sure that we could get the fiber ultimately to their data centers, the work that we call inside the fence. And as those relationships started to grow, we saw a continued need. And again, it's all centered around the skilled workforce, all centered around the skilled workforce. We have about 21,000 employees nationwide today. We saw a growing need to also be able to lean into the data center itself. So we're right outside the 4 walls, bringing fiber to the meeting room, conversation said, maybe we just take that next step, go to the other side of the wall.

Pick up electrical, which was the first move we made in our building systems segment, expanded the breadth of the business, added National Technology Integrators recently. So now we're doing all of the structured cabling inside those facilities. And we have a very nice chart that shows this end-to-end step, right, that we can move through and have these conversations.

Cross-sell opportunities. We're having tons of conversations across platforms, even though they come through different contracting ultimately. What everybody is looking for is who's going to meet this need, right? Who's going to make sure that they have certainty of execution that they have certainty of delivery and the kind of growth that's happening out there today. And everybody certainly sees the headline, you see headlines around electricians, you see headlines around data center spend. And you see on the telecommunications side, a lot of headlines, making sure that our customers, the carriers are going to have enough fiber to meet the needs in the coming years.

So all of that is coming together. And Dycom's entire platform is we want to be an excellent partner. We want to lean into our customers and make sure that we can deliver success with them. So the conversations, Kurt, that we're having today with all of our customers, they are 3 years out there, 4 years out there or 5 years out to make sure that we're setting up our workforce, and I'm sure we'll talk more about our workforce today.

Yes.

We're setting up our workforce to be able to meet that demand and meet that growth.

Got it. Okay. And more recently, you guys reported strong Q2 results, really strong backlog growth kind of continuing there. But maybe a little bit of dislocation related to the outlook. I mean, what are you hearing from customers? I mean, is there any fundamental change in kind of their messaging to you, their outlooks, anything like that, that you could kind of communicate to the investment community?

There were some things that we talked about related to the second half of the year that didn't resonate with the investment community. But I would bring it back to, you talked about the backlog. If you look at the entire year and you look at the revenue for our fiscal 2027, we're looking at 10% to 12% organic growth, which is all coming through the telecommunications business.

Dycom has never been a quarterly business, it's never been a quarterly business. The way that the projects come through, whether you're on our communications sector or segment, you've got tens of thousands of work orders that are stacking at any given point in time. Those projects, those big build programs from the different customers, they move around all the time. They ebb, they flow. You might have permit challenges at one point in time. You might have a huge influx of needs and passings that you're trying to push through. So they're always moving. And so you do get some irregularities between the quarters that has nothing to do with the overall demand.

What investors should really be thinking about is that 10% to 12% organic growth. That is a huge number coming off of a $5.4 billion communications year last year. And that's really a much better indicator of where this is going as we talk further into the demand drivers.

And then again, as you look at the entirety of the business, part of the reason that we're diversifying, look at the consolidated results, right? We got very strong margins coming out of the building systems segment, fantastic growth there as well to meet the needs that we talked about before in the data center space. And if you bring all that together, it was a great quarter for Dycom from an overall margin perspective, great quarter for Dycom from a backlog. We're 1.4x book-to-bill in the year. And again, I think that's another really good indicator of what the future looks like and what that demand is.

Yes. Okay. And I mean it's a good segue. The communication business has these kind of three large fiber deployment opportunity sets. You got fiber-to-the-home, long-haul and middle mile infrastructure. A lot of that's data centers and BEAD. I mean, where are we in terms of the phasing of those opportunities? Maybe what you've already experienced and time line thinking about when some of those might hit?

Yes. And I'm happy to talk about them in detail, but what you'll hear us start to talk about going forward is we have service and maintenance, which everybody -- we really highlighted how large a part of our business that was, think about a year ago. So that's about half of Dycom's revenue. So rough numbers on communications is around $3 billion, plus or minus. That has growth that really comes more with the overall footprint as we expand, but it's a completely different growth curve than the program work.

So if you think about that, I talked about being kind of the bottom of the iceberg continuing over time, right? That's a highly recurrent nature to it, a lot of infrastructure to maintain. And then you have the other half, which is program work collectively, which is the demand drivers that you talked about. If you think about that program work, you see a huge amount of growth coming through there. Our fiber-to-the-home in the first half of the year grew 60% year-over-year, right? That's a very big number.

If you look at the actual number of passings that increased year-over-year, industry reports have put it more like 10%, maybe 12%, maybe 15%. So a huge opportunity for Dycom to lean further into that. But we look at it across all of those growth drivers, all of those demand drivers. So service and maintenance and then you have program work. What we see for a very long trajectory today is that program work providing a lot of growth opportunity for Dycom.

Today, fiber-to-the-home, obviously, you heard the 60% plus, 60%. A lot of growth opportunity in that. We still have several years of significant growth opportunity. And then at some point, you will see is some taper that's starting to happen. But on the other side, you have the long-haul and middle mile work, right? That is -- we talked about hundreds of millions of dollars of work that we put in place over the last couple of years. We talked about over $1 billion of -- and when I talk about pure backlog, I want to make sure we're not confusing it with anything else. This is literally just fiber connecting data centers nationwide. That's the only thing that's in that over $1 billion. And that's after we're already burning. So you can see that starting to ramp up.

Over a year ago, we talked about $20 billion of addressable market over the next 5 years. So that's going to really start to feather in nicely. And then you throw BEAD on top of that, taking a long time to get to where we are, but we are starting to see those green shoots of things getting through financing -- or excuse me, funding, getting through permitting. And so we're going to see that start to move as well.

What that means is when you get to calendar 2028, you're going to have fiber-to-the-home going completely hot and heavy like it is today. You're going to have these other demand drivers really coming on strong. What Dycom is doing today is making sure that we're investing. We are leaning into our customers very deeply. You actually see that in our backlog to make sure that we can build the workforce ahead of that need because you're going to have this huge balloon of all this activity starting in 2028 that the industry has got to get ready for.

And what we believe is there's going to be too much industry-wide. And ultimately, that's going to push a lot of these builds out for a much longer time horizon. So again, you can see evidence of that in our customers, the partnerships that they have with Corning for fiber, making sure that they have the fiber that they're going to need for these big builds. You can imagine they're doing the same thing with the services folks like Dycom to make sure that we have the labor force.

And you just talked about making those investments ahead of time. I mean how do you think about that in the context of margins, right? We get into 2028, the latter part of this decade. Do you start to leverage those much more meaningfully in the context of margins? Or do you have to continue to invest? Like is there a cycle element in there?

Yes. So we had significant investments, specifically on the communications side this quarter for the reasons I just talked about. I would say that's a big part of it. The other part is there's times we're investing in our customers. We have customers that call us up and say, "We want you to go as fast as you can through these different markets in fiber-to-the-home, right? We want you to go as fast as you can on this long-haul work."

And we're going to rise to that challenge and go do everything we can to meet that need. That's the kind of partner that we want to be for our customers. It's not as efficient upfront. But everything we're doing is with a long-term lens, right? The more that we can do that, the more that we can really lean into the customers and deliver success for them, the better we know it's going to be in the longer term. So you have those kind of investments coming through.

And we talked about where the margin profile in the communications business is for this year, which is kind of that plus or minus 13% range. And I'll remind folks last year, 13.3% adjusted EBITDA for really what ended up being the communications business. That's a really good range for us. That's a great return on our people. It's a great return on what we do. We feel really good with how that compares if you look across the landscape.

And it's really important that management as we do continue to grow, absolutely, there's opportunities for operating leverage as we grow, you can bring some of these efficiencies up as we grow. But we really want people to center around that plus or minus 13%, again, very strong return because we need to make sure that we can reinvest for the long term when we need to. And then at other times, sure, it will drop through to the bottom line.

And then if I can just quickly touch on margins for the building systems segment. Really, really, really proud of the team and the integration that's happened there. A lot of people working really, really hard, very quickly growing business. We want to make sure we brought them in right. We're able to really lever them up into all of that. And so you've seen the margins kind of go up and up. And then now what we're saying is over the longer term, we believe that, that high teens to low 20s adjusted EBITDA for that segment of the business, which, again, accretive for the overall position for Dycom goes to our diversification strategy. That's a good range to be looking forward.

Okay. Yes. And I mean that's still very healthy relative to a lot of the peer set, too, in terms of the margin profile of that business.

Yes. And again, we're looking on the returns, right? What are the returns on our people, what are the returns on our investment? And how does that come through the business? And again, we think that's a great profile for us to continue to lean into as we continue to grow.

Okay. And on a lot of discussion around bottlenecks kind of across the construction space. Is there -- is that 2028, is there a specific point in time where it's either labor or equipment that you think can get particularly tight? And I mean, what are you doing today to make sure you're positioned to address that?

Sure. It would surprise nobody on the building systems segment that electricians are in short, they are absolutely a bottleneck there. You have power and you have electricians, and that is keeping the flow of the data center builds. It's definitely going fast and faster than it was, but it is keeping that flow restrained. And that's not going to go anywhere anytime soon, right? There are limitations on how quickly you can grow that labor force. But we've obviously shown that we can grow and grow well even in spite of that. And I think you heard that from a lot of our peers as well.

On the communications side, today, labor is not a constraining factor for us. Really, the constraint today on the communications side comes down to permitting. We think that's going to continue overall. And Dycom, what we're leaning into is making sure that our labor force continues not to be what hinders our customers from meeting their program. That's why we're having these longer-term conversations. That's why most of my time is looking in that 3- to 5-year range today, right? It's not looking in the 1- to 2-year range to make sure that we are set up well to be able to deliver on that.

Now that said, we do think that industry-wide, yes, as you start to get to 2028, you are going to have labor constraints. You do -- again, you see the customers talking about making sure that they have fiber secured. What that would say that there could be fiber shortages for people that haven't done that. And then from an equipment perspective, we do feel good about the landscape today being able to meet that need.

Okay. And when we think kind of big picture around some of those constraints, and maybe this goes back to fiber-to-the-home growing 60% this year like, how do you prioritize those opportunities? What are some of the different factors you're looking at in selecting which of these you want to pursue, which offer the best returns?

Sure. First, just to say, don't expect fiber-to-the-home to always be growing 60% year-over-year, right? That's not how it works. That goes back to the quarterly conversation that we had. But continued strong growth for fiber-to-the-home for several years in front of us. And that's been fantastic work. We've got a great footprint that overlays our service and maintenance.

And let me just talk a little bit about service and maintenance and how it sets us up for these other programs. When we're across 50 states, we're not in every community in every ZIP code, but we're in a whole lot of them. We know how to build there. We know the municipalities. We know the difference in traffic control requirements. We have relationships in those markets. We know how to hire in those markets. So when things like fiber-to-the-home come, when things like long-haul, middle mile come, even when opportunities like BEAD come, we have this knowledge, years of experience on how we can leverage into those, years of experience on what those cost dynamics should look like that we can make sure we price in for success for us and for success for our customers. And so that's really how we're leaning into it.

And then we're thinking about the portfolio approach. So fiber-to-the-home has been great work. We're going to continue to lean into that because we have such a great footprint, a lot of great relationships there and a ton of growth. But we're also going to be balancing that with long-haul and middle mile. We are investing in that space. There's a huge amount of training.

There's a big difference between fiber-to-the-home training and long-haul middle mile training. And because there hasn't been a lot of the long-haul middle mile work actually put in place to date, even though we've been doing it for 2 years, and we've learned a lot of those lessons. But remember, for the entire industry, there was three decades of quiet, right? There were 3 decades of quiet in doing the long-haul work. And now it's different technology.

How you handle these fiber bundles that are extremely large, 864 fiber counts, 1,728 fiber count is completely different than how you are doing something in the community feeding homes or housing development. How you're splicing that and what the testing requirements are, the industry has never seen that kind of rigor. So you're talking about a vast difference. So we're leaning into that.

We're training into that today. We've been working on that work today, and we think that really positions us incredibly well to meet the customers' needs because as everybody knows, there is a lot of fiber that needs to get connected around the country. I think that $20 billion is just going to be the starting point, and we see that being a very long arc curve.

Okay. And that sort of ties into maybe the discussion around complexity. And whether it's maybe some of the more rural areas of fiber-to-the-home, the less easy passings or the long haul and middle mile. I mean, how does that differ from maybe the work you've been doing for the last decade? How does that ultimately impact sort of the competitor set when you're going to bid these jobs or looking at those opportunities?

Sure. Complexity has gone up just in general, if you think about the skilled workforce. When I started in the skilled workforce, many decades ago, many decades ago, very different. Today, all of our folks are using technology, right? They're using technology in everything they do.

The pace of deployment, and it just doesn't matter what industry you're in, the pace of deployment is way faster today, probably twice as fast today as it was a few decades ago. All of those things come together to add complexity. Then you throw -- let's take fiber-to-the-home. In fiber-to-the-home, you have our customers, the carriers, making commitments on how many passings that they're going to do in a given year. They have build programs that they're trying to hit for internal metrics. That means that you cannot fail, right? You have to meet those commitments.

And that's a different -- that's just a different arena with a huge, huge ramp into the project and then a huge expectation that happens month after month after month. Where we've really excelled again is leaning into that training upfront, leaning into using Dycom as a whole, bringing in services like program management to really partner with our customers to make sure that across their portfolio that we're delivering success month after month after month, and we're planning well ahead.

But I think that complexity, what we saw was created a lot of challenges in the industry. I think there were a lot of people that really struggled with that opportunity, and it was a differentiator for Dycom. It sets us up really well for the work that's coming. BEAD is going to have a lot of pressure behind it when it comes out. Again, you're going to have time-based pressure, cost-based pressure. You're also going to have a very, very busy industry on top of that. But the one really to look at is this long haul and middle mile.

The complexity, if you look at fiber-to-the-home, which incredibly complex, but if you are going to miss a few passings in one neighborhood, you might be able to pick them up somewhere else. On fiber-to-the-home, it's a straight shot, right? And if you miss 200 feet, it's not connected. If you miss 200 feet, you cannot test it. If you splice poorly and you're back digging up splices, you could be delayed for a very long time. All of those things come together to mean that you really have to know and really be able to plan out what that looks like.

And then your workforce, you're talking at least 6 months of training. If you're going to take somebody from fiber-to-the-home to bring them over to long-haul middle mile, 6 months of training to get them ready for the difference in that environment. Simple things like traffic control, right? People don't think a lot about traffic control. We drive past it every day. The difference of traffic control requirements, if you're in one municipality or another and in a lot of cases, it could be just across one bridge, you go from one county to the next.

The difference in how you price that, think about that, how it interrupts your flow of work, your speed of work can be completely night and day. I mean it can be 2, 3, 4x, 5x the cost to do it in one municipality compared to the other. And if you haven't spent time in those municipalities and you don't have those relationships, I think that's going to be a really big challenge for folks. And again, I think that's where Dycom is just incredibly well positioned to continue to lean into complexity. Kurt, one of my favorite things, complexity favors Dycom.

Okay. I like that. It's got a good ring. And maybe tying it back to kind of fundamentals, like when I think of complexity, I think better pricing, better economics? Like is that what you see in practice? And maybe how does that 50% maintenance and service blend together with maybe some of the opportunity on the program side?

Sure. Yes. I think if you look back historically, pick a period with Dycom, you see that 13% is very strong, especially if you're looking at over time, it's a very strong return. So we are very pleased with that. And as I said, are there opportunities as we go forward where you could see more margin opportunity come through where you could see the complexity of these programs maybe change some of that profile? That could happen. That absolutely could happen. And we will find opportunities where that is going to come through. And then there's other times we're going to make sure we continue to invest it in our workforce, continue to invest it to make sure that we can meet the growing needs.

Okay. Okay. That's great. Maybe just shifting to building systems. I mean, it's performed extremely well since you've acquired it. What are you hearing or seeing from customers in regards to kind of that more comprehensive Dycom service offering?

Really good reception. Conversations, again, cross-sell, this is not a cost-out type of synergy, right? This is a complementary platform synergy where we can go be having conversations with customers on more of end-to-end solutions. And there's a lot of receptivity there. Why is that? Because they want certainty, right? They want proven execution, and they would rather have one relationship across many different -- whether it's many different parts of the business or many different geographies, than they would have 40 or 50 that they have to manage when they're also moving so fast.

So we're seeing great reception there. We're working on multiple of those things on the same sites today. We do believe that, that will continue over time. So very pleased in how that's coming together. And to your point with the acquisitions, Power Solutions was a big acquisition for Dycom, right? That was a $2 billion acquisition. Let's see, getting close to a year now since we closed it and a lot of planning that went into that from a strategy perspective.

But what's really, really important and how people should think about how Dycom is approaching that M&A landscape is fit is the absolute most important thing, right? We are looking for cultures, that just like Dycom, are frontline first, right? When I get up every day, my most important job is to make sure that I'm driving value, driving value to the folks that are out working with their tools. That's my job.

That's the job of everybody in the business that is not out there working with their tools. And if we drive value to them, they're going to drive value to our customers, and they're going to ultimately drive value to our investors. And that really is how we operate the business, right? We have a team-based business. We sit down with large groups and we plan out how we're going to make sure that we continue to grow, how we're going to have profitability and all those things. It's not a top-down structure.

So when we meet with different companies and different prospects, it's really important that they have that same belief, right, that they're really looking at their skilled workforce as the lifeblood and what really drives it. And that filters out a lot of opportunities. So we have a ton of discipline there. We're not just growing for growth's sake. We're not just trying to diversify for diversification's sake. This is about really, really leaning into the overall platform.

And then as we talked about complementary services. So bringing all those together, when we find teams that have a growth mindset, and that means they've proven they can grow. But when we talk to them, they get really excited about how if you bring Dycom together with their business that may be 10, 20, 30, 40 years old, maybe even 100 years old, when you bring those together that you can have this inflection, right, that you can have this growth opportunity that maybe wasn't there before. And that's what we've been looking for. That's what we found in the acquisitions that we've done of late. And we're really excited and pleased to have them as part of the team, incredibly strong leadership teams. And we do expect to continue to be active over time, where it makes sense, looking to continue to add certainly both organically, but also looking for more M&A in the building systems segment.

Okay. And on the M&A point, you also acquired National Technology Integrators. Like, for a layperson, can you help us understand how that's working with Power Solutions? Did they historically work together? And what does that opportunity look like?

Sure. That's a great story because that comes from a relationship. So Power Solutions after we did the acquisition, after they spent some time with us, they've been working and -- working with and know the leadership at National Technology Integrators for a long time. They say, "Hey, why don't you guys should talk to Dycom, right? It could be something interesting here." And that's really the best case scenario, right?

That's somebody that's just come into the business saying that this is working so well, we want to recommend it to somebody else. And then the first time we met the leadership team at National Technology Integrators, we had that immediate connection. And again, another growth mindset. So they have been working together for a long time. In the data center, you have Power Solutions doing the electrical -- all the electrical connections, ultimately powering racks. National Technology Integrators is doing all the cabling in there, right, all of the fiber and bringing it back to that same meeting room that other Dycom operating companies are connecting out back to ultimately to the long haul.

So now we can sell not just electrical, but in structured cabling inside, but we can also say, hey, let's pick up the inside the fence work. Hey, we're going to be working with the carrier, bringing it to the right of way. There's a lot of synergies and a lot of opportunity there that make us stronger as a platform.

How do you think about saving the contractor time bringing these together? I mean how important is that in the synergy opportunity? Are there any examples you've already seen with that?

Well, first, prefabrication, and folks have talked about that quite a bit. The data center builds, they're so fast. The first data center I worked on in the late '90s in total was $30 million, right? That's like the paint today. I mean it's just -- they just gotten so big and so fast. And so you have a lot of trade stacking. You have a lot of people. Electricians, could be 100 to 300 electricians at a time, and you have a lot of other people in the building at the same time.

So anything you can do off-site is going to save that. Anything that you can essentially prebuild and then bring in, you're going to do it much more efficiently, effectively and be able to add to that. So that's the first part. And then the other is when you do have all that trade stacking, and this is a former general contractor talking. When you have all that trade stacking, you need the trades to get along, right? When they're going to be on top of each other, you need them to be able to work well together. And that's part of the pitch, right? If we have 2 businesses that have proven that, that's just another sigh of relief that you're going to get from that general contractor, another side of relief you're going to get from that hyperscaler. That means certainty of execution.

Okay. And maybe just one more on kind of this topic. How important is your financial strength, what Dycom can bring in terms of funding some of that growth opportunity for these companies that you acquired? Like, is that something that makes you a compelling partner? How do you think about that relative to the acquisitions you've done and maybe any future opportunities in that area?

It's a very good question. We talked about it from risk. Private companies often get to a place with incredibly strong leadership teams, incredibly strong proven growth. But still owners and operators, they get to a place where they start to think about risk, not putting capital back into a business, not growing too fast and maybe breaking what they've built, creating opportunities for the people to continue to grow while doing that.

And that's where Dycom comes in. Of course, you have the balance sheet. Of course, you have bonding. But it's more than that, right? It's how you lean and have those conversations. It's how you sit down with the team and get confidence. I'd like to say private companies, and I worked for a private company and general contractor side for over a decade before we were acquired in my past life.

Private companies typically operate in a minus 1 mentality. So if you think about back office staff, one less, a little bit leaner than what you need. You think about going and taking work, one less to make sure that you don't break everything you've built. And what we do is we go and partner with them, we talk about how do we go from minus 1 to plus 1, right? We can bring the resources to give that confidence to make sure that we really have that wrapped around risk covered, so we can go from a minus 1 mentality to a plus 1 mentality. And that's where you really start to unlock significant growth.

Okay. Okay. Clearly, a lot of noise around NIMBYism, moratoriums. I guess what are you hearing from your customers and your footprint? Any direct impacts? Or just what are you kind of hearing more generally?

A couple of key points to start. What we're hearing on the ground every day as recently as 2 days ago, was the last time I personally checked in, absolutely no change, right? Still massive demand, still massive velocity that needs to get done. There are challenges that are getting worked through, and that's going to take time for some of these things to get worked through.

You definitely see the hyperscalers leaning into that conversation more and more, which I think is going to help over time. But the impact on the ground really is not happening today. The other part is we do need to differentiate. Not all data centers are AI data centers. There are many, many cloud compute data centers that are getting built today.

And if you think about Dycom's focus, we are not trying to just play AI. AI upside, for sure. Are we getting revenue? Are we building AI data centers today? For sure. But the basis for it, again, goes back to data creation and consumption. As long as we're creating more data, you need more cloud compute storage, right? As long as we're all pushing more to the cloud and enterprises are pushing more to the cloud, and all of that -- the data I talked about is getting created, it's got to go somewhere. You need that infrastructure. So that's where we're playing with AI upside. We're not playing the AI race specifically.

And in that space, again, those data centers have been getting built. I think the CAGR is over 15% going back a long time, if I have that number right, that have nothing to do with AI itself. So growth opportunity there. And that's our starting point. Look for that AI upside, that's our starting point. So I think it's going to take time to play out. Like I said, we're not seeing any direct impact. And a lot of what you're hearing about, moratoriums and other things, remember, those are projects that haven't even got to permitting yet. And those are years out, right? Those are years out from today. So there is time to work through this, and it is great to see good conversations happening to try to do that.

Okay. And within building systems, can you just touch on the backlog? And maybe more importantly, any visibility you have beyond that, just customer conversations, I don't know, you don't have to say a specific how far these discussions are stretching out and maybe how real you think some of those opportunities are?

So that is always going to be an understated number. And even if you look at the correlation between our building systems backlog and their next 12 months, they're very tightly correlated. And in fact, those are even under the numbers that we're saying that we're going to deliver this year. That's purely just an industry mechanic. The way that those are contracted is basically just in time by phases.

So even though you know you're 99.9% likely to build the whole data center, you're still only going to get that first phase in that first award. Even though you might build multiple buildings on that campus, you're still only going to get the first phase of the first building when you start. The conversations that we're having today at the earliest are 2 years out, but more like 3 and 4 years out. And then remember, these are typically multiyear builds. Most of these data centers take a couple of years to build at least. But if you're doing a new set of data centers, you could be talking about 5, 6, 8 years of total build cycle.

Those are the conversations we're having today. If you were to look at that, we call it awarded, but not contracted backlog. So that's the whole data center, for example, if we're just starting that first phase, that would be multiples of what we report as that contracted backlog today.

Okay. Okay. And going back to the M&A discussion and acquisitions. I mean, is there interest in acquiring similar businesses that may not offer kind of that same synergy or overlap between communications and Power Solutions with the data centers? How do you think about maybe some different adjacency from an inorganic growth perspective?

First, let me just touch on capital allocation, if I could, Kurt. So we are always going to prioritize organic growth, and you can see that we have considerable organic growth. We're going to make sure that we're feeding that first. And then we do balance M&A with share repurchases. And you can see over time, we've bought back nearly half of the outstanding shares of Dycom over time. So we're always looking at the different mechanics around that. It's not just all systems go for M&A. I want to be really clear.

So we are being thoughtful on the M&A side. Right now, our focus is in that space, right? Geographic expansion would be our priority. And we think over time, again, there's highly unconsolidated space, lots of opportunities out there. We believe that over time, where and when it makes sense, there will be other opportunities to continue to grow that platform.

Okay. I mean you touched on your background a little bit. Just given that, I'm curious kind of what you see as core competencies or strengths of Dycom that gives you the confidence you have the right to win within that electrical or low-voltage space or that core competency that would maybe be the North Star as you look at other M&A type of opportunities.

First is proven execution, right? If you look at the companies that we brought into the family that stood up in that segment, these are folks that for a very long time, have proven that level of certainty, that level of quality. We're looking for partners that customers say, "If I get to pick anybody, I want to pick those folks," right? That's really how we believe we've become known on the communications side. And it's the same thing here. That is, first and foremost, that right to win partner.

And I talk a lot about if you're out there in the space competing for work, what is it that differentiates you, right? What is that thing that customers look to, to differentiate? And for us, level of service is number one, right? Our customers know across the enterprise that if we say we're going to do it, it's going to get done. And we're not perfect. We're not perfect. But in those instances where we fall a little bit behind, they know that we're going to bring the entire horsepower of the enterprise to make sure that we deliver on their success time and time and time again. Same thing in the building systems segment. And then I do talk about for folks that aren't differentiating that way, then the only thing you have to compete on is price, right? And that's not where we want to play, right? We want to differentiate by the level of service.

Are there opportunities you're seeing as maybe other competitors haven't delivered that proven execution, taking on projects, whether it's on the communications, building systems side, getting a little bit over their skis where you're getting asked to come in and fix the problem, so to speak, more often? Or I guess, broadly speaking, are you seeing that?

Yes. That's part of being a solutions partner, right, that they're looking to us to say, "what can you do to help us?" On the fiber-to-the-home builds that we've been doing for years now, very, very common for us to get a call near the end of a quarter from a customer saying, "We've had some challenges with some other folks. Can you find another 3,000 passings? Can you find another 5,000 passings? And by the way, you have a week to do it." That happens.

If you look at our growth in fiber-to-the-home, a lot of that is because of the challenges that we talked about and the complexity and our proven ability to deliver, where I think some other folks had some challenges coming through. Those projects are very fast and very complex. The first one for anybody is going to be incredibly painful. So the barriers to entry are high. And being in locality, right, the regionalization of that business really gives you a solid footprint.

Okay. Perfect. I think building systems is going to be a little bit over 20% of kind of the mix this year. Is there a loose mix target longer term for the business? How do you think about that going forward?

First, on the communications side, you have a lot of growth that's going to continue to happen that we talked about before. On the building systems side, a lot of organic growth opportunity there. But as we talked about doing some M&A selectively over time, we do believe that, that 20% will grow larger in comparison to the 80-20 it is today. Diversification is a positive thing.

Yes. Yes. That makes sense. All right. Perfect. Maybe lastly, just to close, I mean, what do you kind of want to leave investors with, better understand the story, kind of the opportunity set? Anything you want to emphasize that we've already touched on?

Dycom differentiates through our skilled workforce, right? That really is where it starts and ends. And the investments that we've been making, the investments that we've done from a benefit perspective. Giving people -- giving skilled workforce time off that equals people that have desk jobs, right? Two weeks when somebody starts with Dycom up to 5 weeks. No different if you're sitting behind the desk or out working in the field. 10 holidays, right? No different if you're sitting behind the desk or working out in the field.

Bringing up their medical benefits in a very difficult rising cost environment to give them better coverage, better peace of mind, providing them life insurance coverage, right? A lot of these things that folks that are sitting in the office are used to, the skilled workforce has really been lagging behind. So we've been investing there. And we absolutely believe that when you can do that and when you can really start to impact the hearts and minds of our employees that you're going to produce phenomenal long-term results, right?

Leaning into your workforce means that they're going to lean right back into you, right? They're going to have that pride of delivering, pride of being part of Dycom. I talk about -- to me, the perfect picture for Dycom is a world where anybody can come out of high school, maybe they didn't even graduate high school. They can start at any level of the company. We're going to provide them the opportunity. How do we do that? Through growth, right? We're going to provide them the opportunity, and we're going to provide them all of the training at every level.

Too often that we assume that somebody is good at one role can automatically be promoted to the next. We're going to step in and provide that training to make sure that they're ready for that next role so that they can move to any level of our organization. And if you look at our leadership across so much of the organization, you would see that that's exactly how many of us started and have come through that. That to us is what we're leaning into. That to us is what really differentiates us. And that's what sets us up to continue to deliver for our customers in an absolute generational growth deployment of infrastructure.

Got it. Okay. Well, Dan, thank you for the time. This is great. Appreciate it.

Good day, and thank you for standing by. Welcome to the Dycom Industries, Inc. Second Quarter 2027 Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to Ms. Callie Tomasso, Dycom's Vice President of Investor Relations and Corp Communications. Please go ahead.

Thank you, operator, and good morning, everyone. Welcome to Dycom's Fiscal 2027 Second Quarter Results Conference Call. Joining me today are Dan Peyovich, our President and Chief Executive Officer; and Drew DeFerrari, our Chief Financial Officer.

Earlier this morning, we released our fiscal 2027 second quarter results, along with certain outlook information. The press release and opening materials are available in the Investor Relations section of our website, including the outlook expectation summary document, which provides additional outlook metrics beyond what will be discussed on today's call. These materials, which we will discuss during today's call include forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Our discussion and these statements reflect our expectations, assumptions and beliefs regarding future events and are subject to risks and uncertainties that could cause actual results to differ materially.

A detailed discussion of these risks and uncertainties is included in our filings with the SEC. Forward-looking statements are made as of today's date, and we undertake no obligation to update them. Additionally, we will reference certain non-GAAP financial measures during today's call. Explanations of these measures and reconciliations to the most directly comparable GAAP measures can be found in our press release and accompanying materials.

With that, I will turn the call over to Dan Peyovich.

Thank you, Callie. Good morning, everyone, and thank you for joining us. Our strong results reinforce the power of our strategy as a leader in digital and critical infrastructure. We delivered record organic first half revenue, increased profitability and continued above-market growth. We also secured significant new awards supporting continued confidence in our growth trajectory.

Across our portfolio, Dycom brings together the national reach, local knowledge and skilled workforce required to execute end-to-end work safety, reliably and at the pace our customers demand. They recognize the unmatched certainty we bring to their most strategic and complex builds, allowing us to win quality work at returns that reflect our high level of service. This combination of scale, local expertise and operational focus differentiates Dycom as an essential part.

Our leadership is readily apparent in our Q2 results. We achieved record quarterly revenue at $2.01 billion, growing 45.6% year-over-year and 16.7% organically. Total adjusted EBITDA of $15.5 million, grew 54% year-over-year, exceeding the high end of our outlook and representing 15.7% of revenues. This performance reflects the continued strength of our revenue and quality of our backlog. Adjusted EPS of $5.29 grew 45% year-over-year, also exceeding the high end of our outlook and demonstrating our commitment and ability to deliver attractive returns for shareholders as our platform scales.

Demand across our portfolio remains robust. We see heightened activity across fiber-to-the-home, long-haul, data center connects and data center electrical and structured cabling systems. Customer demand on all these fronts is just as strong and in many cases, stronger than a quarter ago. This generational deployment of infrastructure is projected to go well into the next decade, and we have line of sight too and are in discussions on those many years out. Dycom continues to be well positioned to capitalize on the growth drivers across our enterprise.

Shifting to segment performance. In Communications, fiber in-the-home increased nearly 60% in the first half of this year compared to the first half of the prior year. We are clearly differentiating ourselves in this market and continue to receive awards that further expand our reach. Concurrently, cloud migration, AI workloads and data center both are driving unprecedented demand for long-haul fiber corridors and high strand interconnect as evidenced by the wave of major nationwide builds in [indiscernible] publicly and even expanding the $20 billion addressable market we identified more than a year ago.

Having entered this market early, we have a significant operational head start, an expanding backlog and clear line of sight toward marked acceleration in overall industry activity in calendar 2027. Dycom is well positioned to benefit from this massive investment cycle as hyperscaler, cloud providers and carriers scale their infrastructure.

On Building, we recognized revenue this quarter for field engineering in the Northeast. We continue to expect nominal engineering work through the back half of this year with construction starting in earnest next year. In service and maintenance, we continue to execute across our broad and growing footprint, providing a large base of recurring revenue, while uniquely positioning Dycom for builds across other demand drivers. Finally, our wireless equipment replacement program remains on track for a fiscal 2028 completion. Overall, this program has performed above expectations, providing outstanding returns on our wireless acquisition.

It is not uncommon for large-scale deployment schedules to adapt over time, and we now anticipate approximately $150 million of wireless revenues to shift from the second half of this fiscal year into FY 2028. Importantly, overall programs and backlog are unchanged. Dycom remains well positioned to support ongoing service and maintenance needs to capitalize on future wireless densification and upgrade opportunities.

Moving to the Building Systems segment. Power Solutions delivered another quarter of substantial growth. The strategic fit of this business is clearly reflected as performance. contributing to an exceptional segment margin of 24.5% for the quarter, well above its historical average. With data center demand as strong as ever, we remain focused on scaling the critical workforce required to execute on significant builds in the DMB region.

We also officially welcomed national technology integrators into the Dycom Family during the quarter. Integration is progressing smoothly, and we are already benefiting from the expanded reach and customer diversification they bring. Demand for inside plant structured cabling is very strong, and we are well positioned to leverage our collective footprint, including active cross-selling opportunities with Power Solutions and our communications operating companies. We finished the quarter with record total backlog of $12.2 billion, representing a total book-to-bill of 1.2x and 1.1x on an organic basis.

This quarter, we secured additional awards for long-haul and data center interconnect bringing total contracted backlog for long haul, middle mile and inside defense fiber to over $1 billion, with hundreds of millions of dollars of work already performed we are highly confident in our positioning to drive sustained growth across this burgeoning opportunity set. Our robust diversified backlog underpins our confidence in this year's performance and our ability to generate sustained long-term growth. Reflecting strong execution, the wireless deferral and the addition of national technology integrators, we are raising our full year outlook to a range of $7.48 billion to $7.66 billion. At the midpoint, this represents 36.5% total revenue growth and 11.3% organic growth year-over-year.

Moving to strategy. We continue to make progress on our key priorities. First, talent and workforce development. Our workforce is Dycom's primary growth engine, and we are on an intentional journey to continuously improve how we support our people. As part of these broader efforts, we've recently introduced key befit enhancements across our operations with further initiatives ahead to ensure Dycom remains the employer of choice. Our strategy is yielding results as we continue to grow our teams across the country. Central to this commitment is investing in the skills and safety of our people and construction is well underway on our new flagship training facility in Georgia, which is on track for an opening in the first half of calendar 2027.

Second, expansion of building systems. Power Solutions innovation continues to progress and the strength of the business is visible in both its revenue and margin growth. We are incredibly pleased with this performance, which clearly shows Dycom's ability to attract, integrate and grow quality businesses. This is also clear with National Technology Integrators whose initial contributions have exceeded expectations. As integration continues, we are confident in our combined ability to further enhance the business and capitalize on the opportunity set. As Dycom continues to diversify, we see opportunities to expand into other geographies and markets through additional M&A, a path we are actively pursuing. We believe that our culture and proven track record position us well for continued success.

Third, margin expansion continued this quarter with adjusted EBITDA margin reaching 15.7%, an 81 basis point improvement over the prior year. In Communications, [indiscernible] operating leverage stemming from the shift in wireless, combined with the investments to ramp across customer fiber infrastructure programs is expected to result in slight pressure on adjusted EBITDA margins year-over-year. The benefits of our diversification strategy are clearly taking hold, highlighted by exceptional margins from our Building Systems segment, which we expect to range from high teens to low 20s. Across all operations, we remain disciplined in managing our backlog execution to maintain and grow what we believe are industry-leading margins in each segment while investing in both technology and training to drive long-term operating metrics.

Fourth, cash flow enhancement. We continue to show rigorous working capital discipline with DSOs coming in at 101 days, a 7-day improvement year-over-year. Fundamental enhancements across our business have transformed our cash flow profile over the past year. Operating cash flow and free cash flow both expanded in the quarter. The trailing 12-month free cash flow increasing nearly 200% compared to the prior year period.

In summary, Dycom is effectively capitalizing on unprecedented demand and positioning our business for continued growth and diversification. We are executing with massive growth in fiber-to-the-home revenues, strong delivery and growing backlog of long haul, middle mile and inside defense fiber, increasing consolidated adjusted EBITDA margins and disciplined investments to ensure Dycom remains a leader in digital and critical infrastructure and a relentless partner for our customers.

Our success is made possible by our skilled workers, nearly 21,000 strong who bring excellence every day to the customers and communities we serve nationwide. I want to personally thank each of them for their dedication for distinguishing our family of companies and for continuously raising the bar. I am incredibly proud of our team and the value we are delivering for our customers and shareholders as we pursue our vision to be the people connecting America.

I'll now pass the call to Drew to go deeper into our results and outlook.

Thanks, Dan, and good morning, everyone. We delivered strong top line and adjusted EBITDA growth and margin expansion while also investing in our future growth. Q2 total contract revenues of $2.01 billion grew 45.6% over Q2 of last year. This reflects the strength of relationships and continued diversification across our customer base. Organic revenue of the Communications segment grew 16.7% and Building Systems grew significantly. Building Systems represented approximately 20% of total revenue for the quarter.

Consolidated adjusted EBITDA of $315.5 million increased 53.5% over Q2 '26, reflecting exceptional performance in the high demand environment. Consolidated adjusted net income was $160.7 million, and adjusted diluted EPS was $5.29 per share an increase of 45.3% over Q2 '26. These results are adjusted to exclude the amortization of intangible assets.

Moving to the results of our busines segments. Communications revenue was $1.608 billion and grew 16.7% organically, driven by robust fiber-to-the-home programs, increased long-haul and middle-mile fiber infrastructure builds and growing maintenance and operations services. Adjusted EBITDA for Communications of $218.3 million, increased approximately $12.8 million compared to Q2 '26, reflecting overall growth in revenue. Adjusted EBITDA margin for Communications of 13.6% of segment revenue, decreased approximately 134 basis points, reflecting higher investments to scale our operations, impacts on segment operating leverage from wireless projects deferred into next year and approximately 35 basis points of cost pressure in the segment from higher fuel prices year-over-year.

Building Systems revenue of $397.5 million exceeded our expectations as we continue to experience rapid growth in this segment. We completed the acquisition of National Technology Integrators during the quarter and are pleased to welcome our new team members to Dycom. The acquired business performed well and contributed approximately $22.9 million of revenue during the quarter. Adjusted EBITDA for the Building Systems segment was $97.2 million or 24.5% of segment revenue as our businesses performed exceptionally well. During the quarter, we had favorable changes in cost estimates on projects and scope of services that drove the outperformance on margins in addition to operating leverage benefits.

Total backlog at the end of Q2 was $12.2 billion, including $10.98 billion of Communications backlog and $1.26 billion of Building Systems backlog. Backlog expected to be completed in the next 12 months is $6.47 billion, including $5.36 billion from Communications and $1.11 billion from Building Systems.

Strong cash flows remains a primary focus area, and we generated $103.7 million of operating cash flow during the quarter. The combined DSOs of accounts receivable and contract assets net or 101 days, a reduction of 7 days year-over-year. We ended the quarter with cash and equivalents of $340.1 million, total liquidity of over $1.086 billion and pro forma net leverage of approximately 2.3x adjusted EBITDA, providing us with financial flexibility for continued strategic growth and investment. This week, our Board of Directors approved a new $150 million authorization for share repurchases through February 2028. This authorization replaces the remaining amount from our prior authorization.

We have clear momentum across our business and demand remains strong as we look ahead. We are updating our outlook for the full year and now expect total contract revenues to range from $7.48 billion to $7.66 billion. This revised outlook is an increase of approximately $55 million at the midpoint compared to our prior range of expectations. For the Communications segment, we now expect contract revenues ranging from $5.90 billion to $6.01 billion, reflecting the deferral of approximately $150 million of wireless revenues into FY 2028 compared to our prior expectations. For the Building Systems segment, we are increasing our outlook, and we now expect contract revenues ranging from $1.58 billion to $1.65 billion, including the addition of approximately $90 million of acquired revenues from National Technology Integrators in the second half of the fiscal year.

We continue to expect an increase in consolidated adjusted EBITDA margin for fiscal '27 compared to last year. For Communications, we expect adjusted EBITDA margin to decline slightly compared to last year, reflecting investments to scale our operations, impacts on segment operating leverage from wireless projects deferred into next year and cost pressure from fuel prices. Building Systems, we expect adjusted EBITDA margin in the high teens to low 20s as a percentage of segment revenue as we capitalize on a strong opportunity set and benefit from increased operating leverage in the segment.

On a consolidated basis for Q3, we expect total contract revenues of $1.90 billion to $1.98 billion, adjusted EBITDA of $281 million to $302 million and adjusted diluted EPS of $4.33 to $4.79 per share, excluding the impact of intangible amortization expense. With a strong first half of the year completed and momentum across the business, we are confident in our ability to execute our strategy as we pursue the significant and growing opportunities ahead.

Operator, this concludes our prepared remarks. You may now open the call for questions.

[Operator Instructions] And our first question will come from [ Richard Choe ] from JPMorgan.

I just wanted to get a little clarification on the wireless revenue push out, kind of what led to that and how confident do you feel on that revenue going through next year? And then along with that, how much of the first half of a contribution was wireless, so we can get a better sense of what the non-wireless growth is doing through the year?

Richard, yes, I want to be really clear about the wireless program.because the program that we outlined in detail several years ago, a 4-year program, and if you recall, that first year, we did have quite a bit of acceleration in the first year. So it's not abnormal for these programs to move and shift a little bit over time. But what we're talking about here with the $150 million is a deferral next year. We have line of sight to the projects. In fact, there's a little bit of scope being added. We can see all that out in front of us. So a ton of confidence that, that's going to continue. And we look at it as -- listen, we've already got significant organic growth this year, significant organic growth this quarter. So having another $150 million pushed to next year is just a positive thing for back log.

Got it. And then can you talk a little bit about the core wireless business, like what are the projects -- or what are the project cadence been like? And then on top of that, how much is the split between new projects and maintenance? And what are you seeing there?

The large majority is the equipment replacements that we've been talking about. So this large 4-year program. We did talk -- as you remember, we talked about that decelerating this year and then decelerating again next year with the deferral now looking at something that [indiscernible]...

On the wireline side, excuse me.

On the wireline side, excuse me. If you can ask the question again, sorry, Richard. On the wireline.

Yes, sorry. On the wireline side, I just wanted to get a sense of what projects you're seeing, has there been any ramp or slowdown because there's been some uncertainty about fiber belts and then maybe a split of new projects versus maintenance?

Absolutely. First, I'll talk about what that differentiates Dycom. So recall that about half of our overall Communications business is service and maintenance, that continues to grow, although not at the same pace. Our fiber-to-the-home 60% growth year-over-year in the first half for revenues. And again, if you recall, last year, we talked about passing millions of homes. A reminder, the passings and revenues don't directly correlate, but you're talking about significant growth and really a very large presence for Dycom across the space.

What that means though is we are accelerating across many programs all over the country. And that's really what you see in the margin and the margin outlook, right? We need to make sure that we're investing to continue to grow into these programs. certainly on the fiber to the home, and that's very evident. It does take investment, right? We're looking [indiscernible] out making sure that we can stay in front of our customers and having those conversations with them to ensure that we have the workforce of tomorrow and that we're feeding into that.

We talked a little bit in the prepared remarks about where we are now in the long haul. I want to be really specific there because I think this is an important point. The $20 billion we framed out over a year ago is fiber-in-the-ground to ultimately connect data centers nationwide. We talked about it as long-haul, middle mile and inside fiber. When we talk about hundreds of millions of dollars of work in place because we've been working on it for almost a couple of years now. And when we talk about over $1 billion backlog, we're not talking about data center-related work. We're talking about pure fiber that's ultimately going to connect data centers.

So I think that's a really important point. I think it positions us extremely well because remember, that $20 billion is back half loaded towards the end of the decade, so it positions us extremely well here at the outset. So we're already very active there, continue to add to that space. And I think that really, when you look at it all, this is where Dycom is differentiating is in that performance.

Our next question will come from Frank Louthan from Raymond James & Associates.

Reading into the deferral in the wireless business, is that customer doing anything else in the year? Will they increase some spending in some other areas? And then on the long-haul fiber, we've seen recent announcements from NVIDIA with Zayo and Verizon and so forth. Can you talk about how the nature of those projects? Are those in the backlog? When you -- are you going to be involved? When will we start to see some pickups there? And have you gotten any new customers lately on the long-haul side.

Frank, on the deferral, first of all, just to be clear $ more time, right? That's the same equipment replacement program we're talking about, it's the same overhal timing. So it's just simply a shift from this year to next year. So we still feel really good about that and the added potential revenue there on wireless. .

On the wireline side, for that same customer, and I think this really goes to all of our customers, another really important point. All of them reinforce their fiber-to-the-home, and they reinforced their build program this quarter. We feel very confident in that. Again, you can see it in our results. So I wouldn't talk about necessarily increased spending, but everybody continues to be on track and on target. And you can see Dycom capitalizing on that.

On the long haul, it is highly diversified. And I think that's a really important point. If you look at the hundreds of millions that we've done to date, if you look at the $1 billion that we have, that's not one program, that's not one customer. We really look at diversification. There's very small programs in there. There's very large programs. They vary across customers and they vary across Georogy.

Our next question will come from Manish Somaiya from Cantor Fitzgerald.

I was hoping to get a reconciliation on the margin year-over-year margin shortfall. I think, Drew, you mentioned few investments and revenue [indiscernible] impact on margin shift out from all these different factors?

Manish, you're breaking up a little bit. We think that you're asking about the comps margin and kind of what made up the difference there.

Yes, I'll jump in there. As I commented in my prepared remarks, the fuel impact was about 35 basis points in the quarter year-over-year. And then the other 2 items, as Dan mentioned, we're enhancing benefits, investing in our workforce. And so there's some costs there that we're happy to invest in. And then also with the deferral on the wireless work that's had some impact on the operating leverage as well. .

Just going back to the $150 million wireless deferral into fiscal '28. That's one customer. And I'm just trying to understand what drove the timing shift. Is it equipment availability or just allocation of work? And maybe if you can just help us understand if it is equipment, what kind of equipment are we talking about?

Thanks, Manish. We don't like to get too detailed in talking about the individual programs. This wireless program is something that we outlined several years ago. One, I would just reiterate. This, we did an acquisition in the wireless space to help meet us into the program. That's performed exceptionally well. The returns in this overall program size has been far more than we anticipated when we began that. So it is performing actually well.

We do have line of sight to the individual bills by line items. So we have a ton of confidence in how it's going to play out. And as I said in the prepared remarks, it just like all of our work, it is not encumbered for these programs to adjust over time and when the actual spend is going to be. Really important to note that the overall spend, if anything, has only gone up. It's not going down. And we have a ton of confidence that continue to deliver. So nothing atypical in how any of our programs play out over time.

And just lastly, Dan, on Building Systems, obviously, margins were exceptional 24.5%. And when you announced Power Solutions, you talked about margins in the mid- to high teens, and we sort of brought it down to mid-teens because of investments. Now we have massively outperformed and now we're saying going forward, high teens to low 20s. So I'm just trying to understand how we should think about normalized bridge as you kind of look out to fiscal '28, '29 from our standpoint?

Yes. And I think it's an excellent point to make. Dycom's commitment is about long-term returns, right? We're looking at finding -- if you think about M&A, we're looking at finding quality businesses that have performed well, that we know when we combine forces together, when we help them lead into the future and when we make those kind of investments that we made and we were very clear about that we're opening up really kind of shifting into other gear. So these are above the margins that they had performing coming into the business, and we feel very confident in going forward.

I would relate it really to the same thing that we're talking about on the communications margins, right? We see a period of time where we were capitalizing incredibly well. And I'll say it again, 60% growth year-over-year on an already very robust fiber-to-the-home build program -- we really believe that we're out in front overall on the long haul and middle mile. And as we look towards the future, our ability to capitalize there requires that we continue to invest. And so our strategy has to adapt over time and make sure that we're investing today for tomorrow's growth. We're investing today for tomorrow's returns. That's exactly what we did with Power Solutions. We will continue to do the same thing with national technology integrators. And I think what you're seeing in that 24.5% is really just proof of that those investments are really strengthening the overall business.

Our next question will come from Eric Luebchow from Wells Fargo.

Dan, I wanted to dig into the 60% fiber-to-the-home revenue growth you talked about first half of the year. Obviously, really impressive, but I think the guide implies at least organic growth does decel a little bit in the second half of the year. So maybe you could touch on whether the outperformance first half of the year. Is there any type of timing benefit or pull forward of activity that you might have expected in the second half of the year? Or do you think this is largely just a reflection of Dycom taking share in the market where you're doing work that maybe your competitors weren't able to get done?

I've used this phrase before, Eric. So I'll use it again. Complexity favors Dycom. These programs are incredibly complex to get going. They're incredibly complex to get ramped up. You have all the permitting components, you have the planning components. You have obviously getting our workforce on that side of the business. It's 17,000 people or so. In crews that are less than 3 people all across the country. These are incredibly heavy lift. And I think what you see is Dycom really differentiating in our ability to execute and deliver that. You see that in our backlog, like very strong backlog again after an incredible quarter of backlog growth last quarter.

And then you see it in our execution, that the deceleration is really just we're stacking these from the ground up, right? We're building it project by project, piece by piece. It's not always perfectly linear. But as we look out into the future, we still see significant opportunities for continued growth. And you see that in the organic growth even in the guidance for the year.

Great. And just one follow-up for me on the Building Systems segment. There's been a lot of press recently around data center moratoriums increasing backlash against data center construction more broadly in the country. So I wonder if you've seen any signs of that in the DMD market or any signs that could potentially slow some of your build? And then how does that kind of NIMbyism aspect, that type of risk inform how you're thinking about new market expansion as you look to move beyond just the DMD region?

With the incredible demand, Eric, there are issues being worked through that everybody certainly sees just about every day in newspapers today. I think from where we are having conversations, from where we are on the ground and in the field, the demand continues to be significant, continues to only grow, if anything. And we are in an incredible position. You certainly see that in the performance of Power Solutions. this year. You can already see it in the performance of national technology integrators as we bring them into the business. We're getting to have those conversations about projects that are not just happening today, but are happening many, many years out. Those partnerships built over decades really, we think, differentiate where we're at. We have a ton of confidence in our ability to continue to grow there. And then as we do look to other markets and other opportunities for acquisitions, of course, that's something that we're keeping top of mind. And again, we're just -- we believe that we're in a good position to be able to really see a lot more than what people might be reading in the headlines.

Our next question will come from Adam Thalhimer from Thompson, Davis.

I guess I'm still wondering how would you characterize the core wireline business? And maybe you can just comment generally on trends in the various fiber programs.

How I would characterize it for Dycom is that we are executing. We are executing incredibly well, and you can see that, again, not only in the performance and the growth across programs, but you also see it in the backlog and our focus on high-quality backlog and the right kind of margins for the returns on the level of execution that we have in the field. So I would say, if you look at fiber-to-the-home, I talked about that extensively, I think we're incredibly well positioned to continue to be a leader there. And that's a program that we see continuing to go and grow many years out as a reminder.

And then really, everything that we laid out about the long-haul and middle mile, and this is the first time we've given a little bit more insight into how we're approaching it. But that $20 billion we talked about over a year ago, Adam, really is taking shape. Our customers are talking about it quite a bit, reaffirming that, that $20 billion is out there. And even though it's back half weighted, we're already incredibly well positioned, both from a backlog and performance perspective.

So all in all, I would say, if you think about wireline on the Communications side, Dycom is incredibly well positioned, and that's because of our strategy and our discipline to date.

And those -- the long haul and the middle-mile fiber opportunities, how -- maybe you can help us think about how to size those and think about when that might come into backlog.

Yes, it would be tough to give an outlook on when they come into backlog, certainly around execution and the timing of sending contracts and whatnot. That $20 billion, remember, is back-half loaded. We do think that number has grown and extended over time and something that we're tracking closely, not prepared to give any more color from where we are today. But what we really wanted to show again is Dycom's ability to capitalize it, our ability to execute. And as I said earlier, we're doing this across customers. We're doing it across program. This isn't a singular bet. And Dycom, I would say, has more experience in this space. This work is highly, highly complex, and we believe that's going to differentiate us just like it did on fiber-to-the-home.

Thank you. our next question comes from Michael Funk from Bank of America.

Three quick ones, if I can. So tower companies noted during the quarter slower activity from one wireless customer, which they attributed to recent headcount reduction, not necessarily reduction in program overall. So wondering if that was the same customer that you're calling out here with the deferral or maybe I'm making a connection that isn't there. Second, you mentioned BEAD funding coming through in engineering revenue in 2026, contributing more in '27. Any more help on thinking about the ramp in that revenue in '27 would be helpful. And then final question on long-haul middle mile fiber. Have you seen any shift in the economics or competitive pricing for those contracts in the last several months?

Thanks, Michael. Yes, not sure on the correlation on the tower companies. Again, the way I would frame that is a ton of confidence in the remainder of that program, and it's still on track overall with what we outlined, just simply a deferral from this year to next year. On the BA side, pleased that we have some engineering work in place and that we're going to continue that. These are much smaller amounts if you look at Dycom's total backlog or total revenue for the year, but it does continue to position us well as that program gets to a place to really start building construction next year in our calendar -- excuse me, our fiscal '28 calendar 2027. We originally outlined that at about a $17 billion TAM. We'll kind of see how that comes in. There's some puts and takes.

Where is the $22 billion going to end up. You do have some guarantees changes that are happening. So we'll see how that all plays out, but we have a ton of confidence in incremental and upside opportunity overall for Dycom's portfolio. And then on the long haul, again, this is really complex work that a lot of people have not performed where Dycom has really been out in front. So we have a ton of confidence in what we're putting into our backlog as being quality backlog. We will see how it plays out with competitive dynamics over time.

Our next question will come from Steven Fisher from UBS.

Just wanted to follow up about the Communications segment growth rate and maybe thinking about it for next year in light of kind of the exit rate and the first half comps in mind. And I guess, bear with me on some of the numbers here, and maybe you're going to say it's still too early to comment. But it seems like we are going to be at a low single-digit growth rate in the second half of this year. So if we were to hit, let's say, double-digit growth for next year, you'd have to add around $600 million of revenues for next year. You're taking $150 million out of this year. I think in the next year, you need around $450 million. Is long haul and middle mile at a scale of ramp yet to add that? Or is the combination of the BEAD and fiber-to-the-home, can that get you there in light of the tough comps that you have in the first half of the year? Or is [indiscernible] growth in Coms too high an aspiration to think about for next year?

Steve, so you are right in what you said that it's a little too early to get ahead of giving you an outlook for next year. But I will comment on some of those programs because I think it's important, and it really goes to what we talked about with the comms margins. Right now is a time where we need to continue to invest. We have fiber-to-the-home that has grown significantly. As we've talked about, that has a lot of growth left in those programs for years out. So we continue to see that going at a very rapid pace and our customers reaffirm that. I talked a little bit about BEAD. So that's a lot of upside for next year, and we're having a lot of really good quality conversations. So we're preparing for that opportunity. And then you're going to start seeing the long-haul work ramping up over time. And you see that in our backlog, you see that in our performance to date.

As all those come together, you're talking about massive pressure on the industry when it comes around skilled workforce. And I think that's where we differentiate, right? We have around 17,000 people on the communications side that are out there every day. That really differentiates us in our ability to be ahead of this. There is a lot of training that has to happen if you're going to do long-haul fiber splicing. There is a lot of training on how you deploy fiber-to-the-home and program manage that properly. We're well ahead of that curve, and that's where we're making investments to stay there. So we see a lot of growth opportunity in the future, and we'll be excited to talk about it as we get closer to next year.

That's very helpful. And then I guess just to follow up on some elements of what you just were talking about there in terms of the margin pressures in comms this year. The scaling costs there, was that more than you actually expected you might spend in the quarter? I'm just trying to gauge how you're factoring that into some of your thinking for the next couple of quarters. And then on the fuel side, just can you remind us of the process for recovering that, if you can? Or does that need to just sort of reset next year? And when you get easier comps on that, it will kind of work its way through. If you could just help on some of those comms margin elements.

Yes. First, we believe we have industry-leading margins in our Communications segment. We're very pleased with the returns we're getting there. So I think that's a really important starting point. As we invest looking forward, we want to be a relentless partner to our customers. When they come to us with large aspirations about ramping fiber-to-the-home work or ramping or building more long-haul work, we're going to be there to deliver and execute on that. As those programs do that, it takes a little bit to get that learning curve down to get that program going. So we're making investments on that side. And then as Drew talked about, we're making investments with our workforce. We want to make sure that we maintain our status as the employer of choice in our space. So we're doing all that together to stay ahead of it overall.

And then just -- sorry, I was thinking on your -- for your first question, Steve, do remember on the back half that we have Q4 seasonality, and we're always going to take a prudent approach to that. We had very favorable Q4 and Q1 last year. But of course, there's no guarantee that, that could happen again.

Our next question comes from Liam Burke from B. Riley Securities.

Dan, on the Building Systems side, you've had strong organic growth, good margin expansion. Do you anticipate having a craft shortage in that area and having to reinvest at the expense of margin in the future? Or are you comfortable scaling that business?

We are comfortable scaling that business, and that's really where you see the margin raise in the high teens to low 20s as we go forward. Electricians, and this is going to be no surprise to anybody. Electricians are still in short demand. And even with our performance and our growth, there are still projects that we are turning away because it takes a while to get those resources ramped up and trained. So we feel really good about our growth prospects going forward. But absolutely, that industry continues to be constrained as we look down the road.

Great. And then you were talking about visibility on the longer term on your fiber projects. You took a margin hit or will take a margin hit on communications in the second half of the year. Do you have similar visibility on returning to positive operating leverage on that side of the business as we get past the initial investment in craft labor?

It's an ongoing thing, right? It's something that we're always testing with the market testing certainly as we look internally and think about our strategy. Those investments are not always linear. Drew and I talked in our prepared remarks about furthering our benefits for our workforce. It's really important right now that we stay ahead of the massive demand in the Communications segment. So again, I want to bring everybody back up to the top of we have outstanding margins in our Communications segment, what we believe are industry-leading. We're very pleased with that return. Are we always working to continue to grow it? Absolutely. But we feel really good about our positioning as we stand here today, our ability to continue to grow in that space and move ourselves into additional markets and additional customers.

Our next question will come from Joseph Osha from Guggenheim Securities.

This is Mike Stratoti on for Joe. Just on NTI, you mentioned that the initial contributions have been exceeding your expectations. Just curious if you could dive into this more. Is it smoother-than-expected integration? Are you seeing new cross-selling opportunities with Power Solutions? Is it stronger-than-expected demand, something like that?

It really goes into the profile, Mike, of the businesses that we look for. This is another very strong management team, a very strong improvement business with very strong customer relationships. So similar to Power Solutions, we're leaning in, we're making investments. It was great to see them have a very strong performance in the approximate months that they were part of our business this quarter. And you see a strong outlook in the overall margin profile for Building Systems segment. We absolutely are seeing cross-sell. That's something that quite frankly, we were having conversations about even before the acquisition closed, the opportunities out there from the prior relationships with Power Solutions. So we feel good about that. And as I said in my prepared remarks, we also feel good on the outlook of looking to continue to grow our footprint through future M&A opportunities in the Building Systems segment. .

[Operator Instructions] Our next question will come from Michael Dudas from Vertical Research Partners.

Maybe this is for Drew. Maybe you could share with us your thoughts on SAP operating and free cash flow dynamics relative to pretty good recovery here. And encouraged about the Board authorizing another share tranche for share repurchase. Dan, how are you thinking about allocation second half into next year, mentioning all the tremendous demand and growth opportunities in your and maybe a little color on your active M&A pipeline. And it will -- I've assumed share repurchase given where the shares have corrected to would be part of this calculus going forward?

Mike, thanks for the question. I really appreciate the observation there. So yes, over the past 12 months, we've had north of $700 million worth of operating income or operating cash flow. Very pleased with that, pleased with the result this quarter of over $103 million. As we think of the rest of the year, we do still have that seasonality that comes into the business on the cash flow side. So we do have expectations around that. Pleased that net leverage on a pro forma basis is in the 2.3 area. As we talked about when we acquired Power Solutions last December, we talked about bringing that down throughout the year over a 12- to 18-month period to get back to that 2 area. We're on our way there. And then as far as capital allocation, really no changes there from a priority perspective.

We're investing in organic growth. We've talked about all the opportunities that we have ahead of us there. Nice to see the organic growth this quarter and what we see ahead. followed by M&A, pleased that we closed on the National Technology Integrators acquisition in the quarter. And then pleased that we've re-upped the authorization around the share repurchases over the next 18 months that we'll continue to evaluate and look at that on an opportunistic basis. So no change on the capital allocation priorities.

Thank you. I'm showing no further questions from our phone lines. I'd now like to turn the conference back to Mr. Dan Peyovich for any closing remarks.

Thank you for joining us today. What we believe the takeaway is that Dycom is executing incredibly well across our platform. We are excited about the opportunities in front of us, and I want to thank all of the men and women working across the country to continue to deliver and raise the bar for our customers. .

And with that, we will see you all next quarter.

Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect.

Great. Well, hi, everybody. Thanks very much for joining us today. I'm Joe Osha from Guggenheim Securities. We are joined by Dan Peyovich, who is the CEO of Dycom. Thanks very much for hosting. We appreciate it.

Thanks for having.

Yes. We're going to talk through a number of aspects of the business today. This is 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 e-mail me. Most of you know my e-mail, we'll try and get to them. But anyway, thanks for joining us.

Let's start off at a high level here, right? And 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 is something more significant happening here? Is this the beginning of something secular?

Yes, 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 which has been out there for a while, a lot of room left to run and we can get in more specifics about that later. So if you look at that, almost total $12 billion of 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 positioned 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. So no, we think that this has a ton of staying power. These build cycles go well into the next decade. And we think that Dycom is incredibly well positioned to deliver that for them.

If you -- we're going to talk about fiber to the home in a little bit, but you've talked a lot about this long haul and middle mile opportunity is 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 5 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. And 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 no knowns, right? 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 that 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 in 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. So 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 to it?

Absolutely. Absolutely. And I think, again, that it's a really interesting point because it's not just about fiber count, it's about the routes as well. But 864 has become more of a norm today. So almost a tenfold increase over what was there previously. 1728, also quite common, so 2x of that. And I mentioned on our call last quarter that we're hearing some of our customers talking about the hyperscalers want to get something out 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. And sometimes it's a completely different route. All of that is coming together. So that $20 billion has grown considerably. This is a very, very active space that we're excited about. And 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 long-haul builds.

Okay. And that -- 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...?

Yes, the vast -- vast majority. I just think, again, we have meaningful contributions to our revenue today. We have meaningful backlog as part of that $11.9 billion. But for the work to come on generally when you're hearing about the complexity of these programs, it takes about a year to really get them going. And then once you start, you got to really get it to ramp to get at whatever that peak delivery rate is. So you just have to really add time into all these things. But they are progressing, right? They are moving through the ecosystem. And again, Dycom, we really feel like we're winning our fair share. We still see some activity from some of our competitors, it's a little bit concerning about how they're pricing this or maybe haven't done the work before, that's going to play through the ecosystem over time. And I think that creates additional upside if you think about where Dycom is in the future.

And 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? And in particular, you talk about it in the long-haul and middle trial?

Yes. And we saw this in fiber-to-the-home. It's -- I think 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 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. So we know the dynamics of a given market.

We know the dynamics of how to build in different places, and we know what that cost and what it takes. I think when you see a lot of folks coming in, we saw them fiber-to-the-home. They bite off more than they can chew. They take work at rates that just really can't be achieved. And coming through that, 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 a backlog with that work today, and 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. And just like it was on fiber-to-the-home, a lot of that becomes another market opportunity for us in the future. And 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. And for us, when you look at our backlog, that is quality backlog, right? We want to -- 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, and 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.

So you'd say you're sort of winning you're holding on to share right now, -ish. And then you have the potential to perhaps take share of some of this less rational behavior takes now.

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're really first doing this in large part, we believe we're 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 -- customers calling us and asking us to help where they brought other competitors in. So 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. And yes, we think that we are absolutely winning good quality work there today but 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 next couple of years.

Absolutely. I said at the end of last quarter that we thought we'd see some revenue contribution this quarter, but really to think about it, everybody should think about it as upside for this year. It is taking longer. It's a little bit stickier getting through the cycle, getting the NIST approvals, getting through their permitting for things really to come out. And so we have said for a long time, think about calendar 2027 really starts to take shape. Because that right now is the finite program to be delivered over 4 years. We think that the addressable market for Dycom, so this is -- excludes any materials. This is purely what Dycom can address is about $17 billion, very big number to do in 4 years. So if you think about '27, you think about '28, you're talking about multibillion spend years, is that growth 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 4 years just in kind of the noise that we're hearing in terms of the ecosystem.

And though we were hoping that we'd see a lot more shape to how it's going to come through Q2, it's probably going to be the back half of this year before we really see a better idea of how that's going to shape out through the years.

And 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 it, if you think about our backlog is we have a strategy about how we want to fill that and how we would diversify that backlog. And what I would tell you that we're not going to do is we're not going to say numbers that we want to get on how much BEAD work and then 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, then we're going to find opportunities where we can get a good return on our people or on capital. So we're thinking about that blend overall.

But 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. So we do believe we'll play a very big part in BEAD, but we are going to make sure that we're always prioritizing and getting good quality work.

So you are comfortable saying that, that 500 verbal that you've talked about has grown since you've discussed it?

It has. It has. And 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 preplanning to do the work, but it just has to get through these final approvals and then get to our customers' own systems before they can come into and be a true backlog for us.

And 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 more clarity.

Yes. I mean because we're 3 weeks away from our quarter end here, I mean you really think that in large part, you're going to see that start to kind of take shape in the back half of the year.

Okay. So let's talk about the big elephant in the room, which is Starlink. And 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, but let's start.

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. And that data consumption, that data growth requires more infrastructure, requires more compute, requires more to transmit that data. And 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. So from that perspective, everything that SpaceX is talking about, everything 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. And here on earth, we have the requisite skill force to make sure that, that can get connected in whatever capacity that is. So 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.

It's uneconomic to.

Yes, because it's much harder. These are much more difficult places, much lower density. And in that scenario, which again is as open of a landscape as you could have, Starlink took 25%, or what I should say is LEO took 25%. Actually, I think it's 23% -- so that's kind of the best case scenario. So 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. And so at 10-plus million passings a year that they're completed on, I think you got to think about the time lines and how those time lines will 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. So I think speed is a big component here. I think you could see that play out with our customers as well. But the second is that what you saw from a consumer perspective is they did prefer fiber, right? They had that preference for the highest capacity, the lowest latency. And in that scenario, fiber is really unmatched.

Okay. But 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?

Yes, absolutely. And like many, I grew up in the Star Wars generation. So this is exciting, right? It's exciting to talk about. But 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, and 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 communications? 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 6 months ago. So there is a ton of demand that continues to be there. But 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. So anything that augments that, I mean, the demand is there. The demand is incredible. The data centers in the space, that data is still got to get back to earth, right? And it's still got to get transmitted wherever it's ultimately going to go. And again, that's where Dycom comes in. And that's what we love about our portfolio, right? We have both parts of it. And we're not so heavily invested on the data center side that we're betting on all these -- what these could be, right? Remember, our strategy really is to be right down that fairway. So 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. And over time, that's only a good thing because, again, that means more data is getting computed and more data needs to get transmitted.

So 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?

Yes. So 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 if you don't mind --

You want to talk the communications...

[indiscernible] Comms and we'll get to the Power Solutions.

Yes. I was going more towards inside -- outside the 4 walls, exactly right. So 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. And you hear the hyperscalers, we'll look 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. And that's why that $20 billion is a much stronger number. The other thing is that, 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. So 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.

And then I think let's shift over to Power Solutions. How much of that business would you say is data center geared versus other opportunity?

Yes. So they continue to be 90-plus percent in the data center space. And in the DMV market, and 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. But what we're seeing on the ground every day is the demand is absolutely insatiable. And 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. So we are 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.

And 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? So you said you intend to continue to grow inorganic.

Absolutely. Yes. And 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. But moving to structured cabling, adding that into the electrical, that's a great combination, right? We're looking for those kind of synergies, but the aperture does get wider for us. Ultimately, diversification for Dycom is a positive, right? Further customer diversification, further market diversification, all of those are a positive, but 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. So we are active in the space. And there's -- this stuff doesn't happen by the day or by the quarter, you really want to find the right opportunities with the right teams. And I've talked about before what really those core components are that we're looking for in the business. But 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? Does 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?

Yes. I mean, obviously, I look at the electrical work, and it doesn't purely have to be data center-centric. I think Power Solutions is pretty unique in being so data center- centric. So 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 doing in multiple markets, you can look at opportunities to grow that. But there are other building systems that are in and related to it. And Joe, as I mentioned before, this is a space that I spent 2 decades in my life, so I know it incredibly well and inside and out. And 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. But 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 delever pretty quickly. So I guess it's a 2-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?

First and foremost, it's always going to be investing in organic growth. It 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 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. But 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 take the opportunity to buy back some shares. So we might mix that in over time, but I really think about M&A being the priority of that today.

From a net leverage, the first thing is we really spent a lot of time improving the cash flow engine for Dycom. And 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. So what we hope people see is that there's a strategy there, right? This is -- there is a plan. And then you saw when we did Power Solutions, though that levered us up, we were able to bring it down quite quickly. That getting a long-term net leverage of somewhere around 2, continues to be where we want to be.

That's unchanged. If we found the right opportunity and push this up around 3, would that be something we look at? Absolutely. It's -- 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 the team like the acquisitions we've done. That's something that if you need to press that envelope just a little bit and not want to be 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, provided that we can bring that net leverage down very quickly again.

Right. I mean your business cash flows quite predictably, right? Yes, we had a competitor announced 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.

Yes. The first part is on the -- just what competitors gone on. Obviously, I don't have any insight into their deals. Congratulations to them. It's a very active and exciting space, right? We 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 10x is because of the growth that has in front of it, because of the margin profile that has in front of it. So yes, the 10 is a number, but every business is different. 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? And what's our confidence in that ability for that team to continue to grow. And so 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 2 deals, which have both been in a similar range, both kind of after the tax savings in the high 8% range, if you will.

And 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. And 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, to take them to the next level, right, something that they didn't have when they were by themselves. And the 2 of us together can really create this rocket ships, interesting fun to use today, but just like you've seen with Power Solutions. So that's what we're looking for. That's what Dycom offers, and we believe that that's an attractive solution.

Yes. 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? But there's still really a dramatic disconnect. I mean it's going to -- it seems like it's going to persist.

Yes. 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. So they have a pretty good idea of where the market is.

Yes. That's interesting. You've talked a lot about your -- 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 bit about that and in particular, how that enables you to hold on to share and hopefully gain share over time?

Yes. It really comes down to the complexity of the work that we do. And 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, but it's not. And in mass, it's definitely not -- and that requires a very sophisticated and skilled workforce, and that requires a lot of training. That requires a lot of foresight in how you plan out the activities. On the communications side, remember that our average crew size is less than 3 people.

So 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 because you can just throw people at it and hope it gets done. And we see that out there every day. But to do it and do it right. And 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. So we talked about the flagship training facility we're building. We've talked about -- 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 because 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. And 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's going to get done.

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 communications side, because on Power Solutions, I'll talk a little bit about the union. But 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. So we do feel like we have the machine working well there. Again, room to improve, always, but we do believe it's working well. And then on the union side, remember, that's much more constrained. So 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. But there are opportunities that we are turning away because we don't have the management teams and the actual field resources to get delivered to.

How long does it take you hire somebody you're out of high school? How long does it take to grow a medium voltage IBW power guy?

Yes. So getting through the union is 4 years. Obviously, they're contributing, but you have a apprentice-to-journeyman requirements there that you have to make sure that you adhere to. Obviously, they're contributing to that, but it is a 4-year program. On the communications side, we can take somebody that really has no skill in our space. And in 6 months, we can get them to that contributing level.

Do you find your aim, is it getting easier or harder to hire people in general?

It's always -- I mean it's always difficult. I think that's -- again, it's a large -- it's a good competitive moat because 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, the strategic and proven disciplines that we have to do it and do it well.

And 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?

It's yes. 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. So the fact that our hourly workforce, they get up to 5 weeks of vacation of PTO. That's significant. That's not common from what we see out there. In addition to paid holidays, in addition to other benefits that we feel are very strong, and we continually work to improve. So we're making investments there. But people want to grow, right? They want to grow. And 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, but they also have the opportunity.

The opportunity, again, for Dycom is that they get a much longer view of what the world can look like. So one, they see people that are -- have worked up, started from the field to every level in the company. But 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? And so they can see that for years and years and years, they could be part of Dycom and grow their own career and grow both personally and professionally. And again, we do think that, that differentiates us.

Yes. And it's interesting when I look at other very good public companies, that's a message that really comes through in terms of how--

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. And 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 to shareholders?

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.

So 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 it 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 internally. And then those feed into our enterprise-wide systems. So now the question is how do you take AI and bring that up a whole another level? And I've talked about that, so I won't rehash on other calls, but that's a place where we continue to invest. And we really see huge opportunities because we create an enormous amount of data every day. And operationalizing that data and not just having to 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.

Can that -- 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 might show up in terms of better returns or better margins for them? I'm not after a guide here.

No. I want to be clear because I've said this before, too, Joe, that the margin improvement that you've seen, the margin improvement that we've talked about going forward, that is -- those are things that we're doing internally in the business. And why does that matter? Because if we do that, 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. And so those have all been internal business improvements.

Does that -- 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? And so 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 in that.

Right. And just to be clear for our listeners, you quote business on a per foot or per mile basis. You're not [indiscernible]

On the communication side, yes, it is important. And for a couple of reasons. So almost all the work we do on that side is unit-based, which is by the foot, by the inch. And 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 -- you take long-haul. -- one foot of long-haul, but you can do thousands of miles of it, you better get the number right. So there's the competitive side. The other part is for us, you know day 1 how you're performing. It's not like a contract where all a sudden in the fourth quarter, you figure out that it's a bad contract. We know day 1, and you can always be working to improve it. So you get that real-time feedback and real-time analysis. But again, the work that we've done around the country, the scale that Dycom has, we know what everything -- 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 costs in there? Are you doing?

No. So those are typically fixed -- price or GMP contracts.

Okay. Right. So I think we're starting to come up on it here. The last question I've got really relates to, look, you've been in this job now we said 1.5 years. Yes, 1.5 years now. Yes. What has surprised you most about the business? And 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.

Yes. The demand environment is incredible. We knew it was strong when I took the seat, but to say it's been growing in the last 1.5 years would be an understatement. So the demand environment and continues to be, right, no matter what we hear in the news, continues to be incredibly strong. So obviously, that's a very pleasant surprise. But of course, what I'd like to talk about is just the performance of our business. Look at the growth that Dycom's had in 1.5 years. Look at the -- how we've grown both organically and inorganically and to do that at the same time while improving cash flow, while onboarding a new ERP program, while doing the acquisitions that we've been doing, that's a lot of change put in the business. And I just couldn't be more proud of our team for being able to do that. And 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? Is there -- as you're out interacting with investors, are there attributes of your business that you think the Street doesn't appreciate?

I think the -- it comes back to the skilled workforce for sure. But 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 to go along with it. And Dycom is in premier position for all of that, right? I mean we're the largest in the communications side. We're, I believe, the only one in all 50 states. We're really well positioned to continue to capitalize on that. And even if you think about building systems, it requires more compute. So if you just think about that in concept, how do you build a skilled workforce to be able to deliver on that is a very complicated thing, and it's a very wide competitive moat, wide and deep, I would say. So then how do you take that and lever it into success, right? And I think that's what we've shown over the last 1.5 years and 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?

Yes. It'd be no surprise that we continue to see growth opportunities. And so not guiding beyond the year as stands today, but there's significant growth opportunities that are still out there today. And then we've talked about M&A, so continued diversification.

It's going to be a more diversified.

Yes. Yes, looking to continue to diversify in the right way to do it smartly, to do it aligned with our strategy and with the right level of discipline. That's where we're headed.

Okay. I think unless there's anything else you'd particularly like to bring up, I'm out of questions. So let me just leave it with you. Is there anything we should have talked about?

I mean thanks for the time today, Joe. I'm incredibly excited about where Dycom is positioned today. And again, I know that there's noise out there. I just really want people to take away that what we're seeing on the ground today is incredibly robust demand. Dycom has 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. So I 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. OpenExchange, let's call it, and have a great day, everybody.

Thank you.

Bye-bye.

Good day, and thank you for standing by. Welcome to the Dycom Industries, Inc. First Quarter 2027 Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to Ms. Callie Tomasso, Dycom's Vice President of Investor Relations and Corporate Communications. Please go ahead.

Thank you, operator, and good morning, everyone. Welcome to Dycom's fiscal 2027 First Quarter Results Conference Call. Joining me today are Dan Peyovich, our President and Chief Executive Officer; and Drew DeFerrari, our Chief Financial Officer. Earlier this morning, we released our fiscal 2027 first quarter results along with certain outlook information. We also announced a definitive agreement to acquire National Technology Integrators, a low-voltage engineering and construction firm based in Maryland. The press release and accompanying materials are available in the Investor Relations section of our website, including the outlook expectation summary document, which provides additional outlook metrics beyond what will be discussed on today's call.

These materials, which we will discuss during today's call include forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Our discussion and these statements reflect our expectations, assumptions and beliefs regarding future events and are subject to risks and uncertainties that could cause actual results to differ materially. A detailed discussion of these risks and uncertainties is included in our filings with the SEC.

Forward-looking statements are made as of today's date, and we undertake no obligation to update them. Additionally, we will reference certain non-GAAP financial measures during today's call. Explanations of these measures and reconciliations to the most directly comparable GAAP measures can be found in our press release and accompanying materials.

With that, I will turn the call over to Dan Peyovich.

Thank you, Callie, and good morning, everyone. Thank you for joining us today. We delivered an outstanding start to the year, continuing to execute our strategy and capitalize on the generational set of opportunities across our business. Total revenues of $1.965 billion exceeded the high end of our expectations, increasing 56% compared to Q1 FY 2026, including organic growth of 25%. With robust and intensifying demand drivers, we remain disciplined in our awards, high-grading the pipeline and intensely focusing on execution.

The results of this discipline are reflected in our earnings for the quarter, which also exceeded the high end of our expectations. Adjusted EBITDA of $262.5 million and adjusted EBITDA margin of 13.4% increased 75% and 141 basis points, respectively. And non-GAAP adjusted diluted EPS was $4.42, an 85% increase compared to Q1 fiscal 2026. We ended the quarter with record total backlog of $11.9 billion, growing 25% sequentially and representing a book-to-bill of 2.2x for the quarter.

Notably, awards this quarter continued to diversify our backlog across customers, demand drivers and geographies. In some cases, we are also seeing customers extend durations to ensure they have the skilled workforce to meet their goals. These awards provide certainty and visibility that allow Dycom to plan and invest for work far in the future and positions us for multiyear growth. With strong results in Q1 and intensifying demand across our business, we are increasing our full-year fiscal 2027 outlook to a range of $7.38 billion to $7.65 billion.

At the midpoint and excluding the extra week from last year, our new outlook represents total revenue growth of 38%, including 14% organic compared to last year. I'll shift now to our segments, which delivered excellent performance to start the year. Our Communications segment generated significant revenue growth of 25% compared to Q1 FY 2026 with adjusted EBITDA margins that increased 31 basis points year-over-year. Growth during the period was driven by expansion into additional geographies and fiber-to-the-home builds that ramped ahead of expectations, all aided by a favorable seasonal backdrop.

Demand for fiber infrastructure remains as strong as ever as evidenced by our customers' bullish commentary about their multiyear fiber-to-the-home and long-haul build programs as well as recent announcements from Corning to scale manufacturing capabilities in response to the demand for fiber in the coming years. Our Building Systems segment is off to a fantastic start, performing exceptionally well this quarter. Dycom's integration engine is firing on all cylinders, and I am immensely proud of the team for outpacing our internal projections in a very short period of time.

Power Solutions eclipsed expectations right out of the gate, delivering $395.4 million of revenue and adjusted EBITDA margin of 17.7%. Importantly, looking ahead, we expect their fiscal 2027 margin to be in a similar range to the Q1 performance. With Power Solutions, we have added an incredible team that has earned tremendous respect across all stakeholders for nearly 3 decades. As a result, we are positioned for significant long-term growth as we continue to scale our digital infrastructure platform.

Shifting to discuss our initiatives. Last quarter, I spoke of 4 core strategic priorities for the year, and we delivered on every one of them in our first quarter. First, talent and workforce development. Our investments in our training and our people are yielding great results. We added 730 employees in the quarter as we continue to invest to support our significant growth. Second, we are executing on the expansion of our Building Systems segment, both organically as Power Solutions scales its operations and through strategic M&A.

Today, we announced a definitive agreement to acquire National Technology Integrators, a tenured and fast-growing low-voltage engineering and construction firm based in Maryland, enhancing our position and further expanding our capabilities in the high-growth data center industry. National Technology Integrators specializes in inside-plant structured cabling, including within data centers as well as audio-visual and security systems.

This is a critical step that connects the work of both our segments. We will be able to offer our customers complete fiber infrastructure, starting at the racks and connecting data centers across America, ultimately bringing fiber connectivity to businesses, communities and homes. Their work marries incredibly well with our inside-plant electrical work as these trades are highly coordinated and in high demand. Importantly, this private founder-led business is another outstanding cultural fit with a team that is highly respected and excited to continue the growth story.

Based in Maryland and with much of their revenue in the DMV, they also have operations spanning Texas and the Midwest, brought there by their general contractor and hyperscaler customers because of their proven performance. This creates enormous opportunity for Dycom to continue to grow our Building Systems segment and cross-sell our services. This cross-selling is already occurring. Power Solutions and National Technology Integrators have been strategic partners for years and are currently working on projects together. In addition, we are already working together on inside-defense fiber work in our Communications segment.

In short, the synergies are incredibly strong, and this is a perfect fit to further increase our opportunity set. They consistently deliver superb results and the transaction is expected to be immediately accretive across key enterprise financial metrics. We are excited to welcome National Technology Integrators to the Dycom Family when the transaction closes expected in Q2.

Looking ahead, we will continue to pursue additional high-quality M&A while also maintaining our commitment to long-term net leverage discipline and investing in organic growth opportunities. Moving to our third strategic priority, margin expansion. We delivered year-over-year improvement of 141 basis points in adjusted EBITDA margin for the quarter. Looking toward the full fiscal year, we continue to expect our Communications segment to modestly increase adjusted EBITDA margin over the prior-year and we now expect our Building Systems segment to maintain adjusted EBITDA margin in the high teens.

Fourth, cash flow enhancement continues to be a priority, and our combined DSOs were 96 days for the quarter, a significant improvement of 15 days year-over-year. Over the past 5 quarters, we've laid out a clear picture of the intensifying demand across our industry, and we've proven Dycom's ability to step up and capitalize on it. We're doing that through clear strategy, consistent execution, organic investments and disciplined M&A.

Looking ahead, the momentum behind fiber deployments and data center builds is stronger today than we have ever seen. We are moving quickly to capture this opportunity, expanding our presence and footprint across our business while continuing to anchor ourselves with steady service and maintenance work. On top of that, BEAD is progressing through state level and subgrantee pipelines, which points to upside for both our backlog and our future outlook. In closing, Dycom's scale and positioning, combined with our local expertise is unmatched in digital infrastructure. We are focused on delivering value to our frontline employees and our customers and believe that this goes hand-in-hand with delivering value to our shareholders.

I would like to thank my 20,000 teammates for raising the bar every day for our customers and in our communities. I am incredibly proud of what we've accomplished together, and I'm confident we will continue to deliver value for our shareholders and long-term opportunities for our teams as we pursue our vision to be the people connecting America.

I'll turn the call over to Drew now for a deeper dive into our Q1 performance and further details on our acquisition.

Thanks, Dan, and good morning, everyone. In Q1, we outperformed the high-end of our expectations, delivering strong top-line and adjusted EBITDA growth and margin expansion while also investing in our future growth and returning capital to our shareholders through share repurchases. Q1 total contract revenues of $1.965 billion grew 56.1% over Q1 of last year. This reflects the strength of relationships and continued diversification across our customer base.

Organic revenue of the Communications segment grew 24.7%, and Building Systems grew significantly compared to the prior year quarter. Building Systems represented approximately 20% of total revenue for the quarter. Consolidated adjusted EBITDA of $262.5 million increased 75% over Q1 '26, reflecting strong performance in both of our business segments.

Consolidated adjusted net income was $134.3 million, and adjusted diluted EPS was $4.42 per share, an increase of 85% over Q1 '26. These results are adjusted to exclude the amortization of intangible assets. Results for the quarter included income tax benefits resulting from the vesting and exercise of share-based awards of $12.5 million or $0.41 per share compared to $2.2 million or $0.08 per share in Q1 last year.

Moving to the results of our business segments, each of which performed well in the quarter and exceeded our expectations. Communications revenue was $1.57 billion and grew 24.7% organically, driven by ramping fiber-to-the-home programs, increased long-haul and middle-mile fiber infrastructure builds and growing maintenance and operations services.

Adjusted EBITDA for Communications increased 28% to $192.4 million or 12.3% of segment revenue, reflecting operating leverage and continued investment to scale our footprint and increase headcount, further strengthening our position to execute on multiyear build programs. Building Systems revenue was $395.4 million, and adjusted EBITDA was $70 million or 17.7% of segment revenue as Power Solutions ramp growth ahead of our initial expectations and we integrated the operations.

Total backlog at the end of Q1 was $11.9 billion, including $10.8 billion of Communications backlog and $1.1 billion of Building Systems backlog. Backlog expected to be completed in the next 12 months was $6.4 billion, including $5.4 billion of Communications and $1 billion from Building Systems. Strong cash flow remains a primary focus. We delivered solid results supporting the growth in revenue and normal seasonal uses of cash during the quarter.

The combined DSOs of accounts receivable and contract assets net were 96 days, a reduction of 5 days sequentially from Q4 '26 and 15 days year-over-year. During Q1, we repurchased 100,000 shares of our common stock for approximately $36 million or $360 per share. We ended the quarter with cash and equivalents of $538.8 million and total liquidity of over $1.28 billion.

Pro forma net leverage at the end of the quarter was approximately 2.3x adjusted EBITDA, providing us with financial flexibility for continued strategic growth and investment. Building on our strong first quarter results and a favorable demand outlook, we are increasing our full year fiscal 2027 expected range of contract revenues. We now expect total contract revenues to range from $7.38 billion to $7.65 billion.

For the Communications segment, we expect contract revenues ranging from $6.03 billion to $6.2 billion, increasing approximately 12.6% to 15.8% organically from last year. For the Building Systems segment, we expect contract revenues ranging from $1.35 billion to $1.45 billion. We also anticipate adjusted EBITDA margin expansion. For Communications, we continue to expect modest adjusted EBITDA margin improvement over last year.

For Building Systems, we now expect an adjusted EBITDA margin in the high teens, similar to our Q1 performance as we capitalize on the strong opportunity set and proven performance in the DMV. On a consolidated basis for Q2, we expect total contract revenues of $1.94 billion to $2.01 billion, adjusted EBITDA of $284 million to $303 million and adjusted diluted EPS of $4.40 to $4.82 per share, excluding the impact of intangible amortization expense.

This outlook for fiscal 2027 and Q2 of fiscal 2027 excludes any results from the pending acquisition of National Technology Integrators. While we expect to close the acquisition in our fiscal Q2, impacts are dependent on the timing of completion. Now for more details on the pending acquisition. This acquired business will be included in our Building Systems segment, and we anticipate an initial annual revenue run rate of approximately $175 million.

Historically, the business achieved adjusted EBITDA margins in the mid- to high-teens, and we expect that to continue. The purchase price is $275 million on a cash-free, debt-free basis, and the consideration is approximately $234 million payable in cash and approximately $41 million of Dycom common stock valued as of the signing date of the transaction. Consolidated pro forma net leverage is expected to be below 2.5x adjusted EBITDA, and we remain committed to our long-term net leverage discipline.

The transaction is subject to customary closing and post-closing adjustments, and we expect it to close before the end of our July fiscal quarter. This acquisition presents key revenue synergy opportunities as we expand our capabilities across the digital infrastructure space. With a strong start to the year and clear momentum across the business, we are confident in our ability to execute our strategy as we pursue the significant and growing opportunities ahead.

Operator, this concludes our prepared remarks. You may now open the call for questions.

[Operator Instructions] our first question comes from the line of Manish Somaiya with Cantor Fitzgerald.

Congratulations on an exceptionally strong quarter to the team. A couple of questions, Dan. Maybe on the NTI Acquisition to begin with, if you could just help us understand the customer overlap between NTI, Power Solutions and the legacy Communications business? And how do you see immediate cross-selling opportunities?

That's the beauty of this transaction, Manish. So thank you for asking the question to start. This is a partnership with Power Solutions that goes back a number of years between them and NTI. That's how we were connected to NTI to begin with. And we started talking to them about opportunities on the communications side, the work we're doing inside the fence in other facilities around the country. We started to see some really good efficiencies there and began conversations on how we can make them part of the Dycom Family.

What you see ultimately is the potential for campuses to have not only Power Solutions doing the electrical inside, but NTI also doing the structured cabling, while our communications business is doing the inside defense work and then ultimately connecting it back to the long-haul and middle mile routes. So it's a completely comprehensive offering that quite literally connects the homes and businesses of America all the way into the data centers and the racks themselves. Ton of synergies that actually cross-sell that work.

So a lot of their work, just like Power Solutions goes to the general contractors, but they also have relationships with the hyperscalers. So we get to have conversations on really both those fronts, and we're already seeing, again, before the acquisition, just in conversations to try and sell that as a partnership, seeing really good connection there. And we think that's going to even go exponential here now that they'll be part of the Dycom family next quarter.

That's helpful. And then just going to the guidance for the full-year. Clearly, Q1 was exceptionally strong. Outlook for 2Q is strong. But when I look at the full-year guidance range, it still looks a bit conservative. So I'm just trying to figure out if there's anything in the second half that I'm missing. Specifically, when I look at the total increase in revenues versus the prior guidance that you gave for the full-year, I think it's about 7%, 7.5%. So maybe if you can just help us reconcile as to what's happening in the first half versus the second half?

Incredibly pleased with the start of the year. And I'll talk really about the collective Manish in each of the segments, if I could. So first, significant growth. We're looking at 56% year-over-year revenue growth. That takes a lot of investment. We were fortunate with the weather, right? Q1 really behaved more like Q2 or Q3 -- what's important, though, is the demand has to be there. And what it shows is this demand that we've been talking about across the business, across the demand drivers is incredibly strong, and we're able to capitalize on that.

On the communications side, we've been talking about fiber-to-the-home for a long time. And we've been sending the message that, listen, this is really only early in the build. There's a lot of growth opportunity left in fiber-to-the-home. There are still several years where the passings are going to continue to increase. There are several years beyond that where the cost per passing will increase. And what you really see in Q1 because that was really aided on the communications side by fiber-to-the-home is that is starting to take place.

So just as we talked about, just as we set up our strategy, and we believe that's going to continue. But like a lot of things, it doesn't mean it's perfectly linear when you start out with a very strong seasonal quarter and you're running into Q2 and Q3, and you see in our outlook for Q2 that, that does become a little more -- you don't see the same kind of upswing that you would see. And then a reminder, on both sides of business, of course, we build these from the bottoms up. And so it's not going to be perfectly linear, but we're incredibly pleased with the overall growth in results.

On the Building Systems segment, one, you see incredible growth in the first year. We're talking about now for the full year, them doubling the CAGR that they've had over the last 4 or 5 years. So going from 15% to 30% plus growth. That is significant, requires significant investment. And even with that investment, you can see already we're in the high-teens EBITDA margin range. So very pleased there as well. A couple of more comments. One is if you look at their backlog, it is very different in how it behaves. Those projects get contracted right before we're about to start to build.

What we do have behind that, though, is what we call A, B and C awarded but not contracted and then further behind that shadow backlog. And what I can tell you is even though we don't publish those numbers, they are multiples of what you see in that immediate backlog. So that gives us the confidence, Manish, for the year to raise the overall revenue on the Building Systems side, gives us confidence in the margin profile because we can see what those projects look like, and we can see how those shape.

But just like on the communications side, that doesn't mean that they all start at the exact same time and finish at the same time. So we do shape that out over the year. So all told, what you see is significant growth. We're incredibly pleased with that. We see continued opportunities to invest in the business for growth beyond this year. And we're just incredibly proud of our teams for being able to deliver at the level they're delivering today.

Our next question comes from the line of Eric Luebchow with Wells Fargo.

Dan, I think you said and you alluded to it in your last comment about fiber-to-the-home projects ramping a little faster than you expected. And maybe just a little more color on that. Do you think there's a little bit of a pull-forward of demand you saw in the first quarter? Or do you think there's signs you're actually gaining market share of some of these larger programs as they ramp this year and next?

That's exactly right, Eric. We are continuing to expand our market presence, right? We are getting additional awards in additional spaces. We continue to deliver at an exceptional level. We're not perfect. Trust me, we're not perfect, but our teams are absolutely committed to making our customers successful. From a timing perspective, we've been talking about how these builds themselves are building and growing and ramping and how that happens at different paces. What you're seeing this year is many coming online and really starting to increase in volume and velocity at the same time.

And again, if you look at our overall outlook for the year, you see that, that's continuing, right? You see the significant growth over last year. This isn't something we published. But if you just look sequentially quarter-over-quarter, our fiber-to-the-home work grew 33% in 1 quarter's time. So it just shows our ability to capitalize there to continue to grow against that. And I think if you listen to other commentary in the industry, it's not always the same method, which really, from our perspective, just shows our ability to, one, execute on the work, but two, have customers continue to grow our share as we continue to deliver for them.

And just one follow-up. So you alluded to the fact you're signing some longer duration contracts with your customers to lock in their labor supply. And I guess how are you thinking about structuring those contracts to make sure you have cost-inflation protection. I know we've seen some costs like fuel, in particular, rise pretty rapidly in the last couple of months. And just wondering how you think about projecting that future cost curve.

Yes. So fuel has obviously been an impact for anybody that's doing our line of work. What we've done when I talked about last quarter, we made intentional moves last year around our fleet to help offset that, and that has helped mitigate. Obviously, our expansion into the Building System segment that does not use as much fuel per dollar of revenue as we use on the communications side. So all that has helped offset. But to your point, yes, it's certainly been an impact.

And we're watching it closely like everybody else. We do have that model in based on everything that we can all know today in our outlook for the rest of the year. So we do feel good about that. When it comes to the long-term contracts, and this is a really good point to make. We've been talking about the skilled workforce. We've been talking about building ahead of our customers and making sure that we can be there to meet their needs.

We've talked about our relationships where we're spending time with customers, not just talking about the work that we're going to do this year or even next year, but out through the end of the decade. And what all of our customers recognize is that the skilled workforce is really what's going to make or break their builds. It's going to make or break their ability to succeed and they're very robust and in many cases, growing plans.

So as part of those conversations, as you would expect, it naturally evolves to, hey, Dycom, how do we make sure that we have your teams locked up to deliver on our plans all the way through the end of the decade? Of course, Eric, as you would think, we are very thoughtful in how we would contract that work. We were very thoughtful in how we would think about the different parts and pieces, and our customers understand that because contracting 3 or 4 years out, right? You got to be smart about how you set that up.

So we feel really good about how those contracts are structured. We feel really good about the relationships. We feel really good about, one, our ability to continue to deliver and our ability to continue to grow. But as you can see in our outlook for the Communications segment, also our ability to invest and grow margin at the same time.

Our next question comes from the line of Joseph Osha with Guggenheim Partners.

Two questions actually. First, you commented a bit in terms of the outcome. But as I think about the improved outlook on the Communications side for the rest of the year, is most of that coming from FTTH? Or is there some long-haul and middle-mile in there? And then the second question, I'll just ask now, is there an upper limit to leverage that you have that you're thinking about? I'm just trying to understand how far you might take that as you continue to explore other acquisition opportunities.

Absolutely. On the communications outlook, it is largely fiber-to-the-home. And again, Joseph, this is the message that we've been sending. Fiber-to-the-home is still earlier on in the overall cycle from our perspective, and we see significant continued growth, and that's really what gives us confidence in that raise for the year on the communications side and the overall performance there. And it also goes back to the question that was just asked about our confidence to continue to drive that further out. The long-haul middle-mile is still in early innings.

And I've said before that we really see that as 2027 calendar coming online, but 2028 really kind of being that fast and furious here. Now that said, we've been doing it for some time now. A couple of years, we've been working on these projects. We still think we were first on the field. We continue to get more and more work there. We continue to grow that revenue. But if you look at it compared to fiber-to-the-home. Fiber-to-the-home is just much more robust today. And we like that. We like how those will blend together as you start to move several years out.

On the leverage question, again, we're, one, very excited about the opportunity set. We do have a strategy, what kind of companies we're looking for. The culture has to fit first and foremost. It's got to fit our strategy for growth and how it actually augments our current opportunity set. From a leverage point itself, again, we're going to be very responsible, just like we've always been.

We're going to have that discipline to make sure any time we bring leverage up, we're going to have a clear path to bring it back down. We do not want to be elevated over long periods of time. That said, there's a lot of attractive opportunities out there. And we talked about in our prepared remarks that we're still actively looking and having those conversations. But again, we are going to be prudent in how we think about leverage.

Our next question comes from the line of Frank Louthan with Raymond James & Associates.

Great. On the DSOs, how sustainable is that? Is this a new normal? Or was there something in the quarter that impacted that? And what -- how should we think about that going forward? And then when we look at NTI, how should we think about its overall exposure if you kind of break it down between data centers and then more of the AV and DAS type opportunities?

Thanks for noticing the DSOs, Frank, because we put a lot of work into that. We talked about it being a priority going back to last year. We talked about it being part of 4 strategic priorities for this year. What I want to make clear is that's improvement on both segments of the business. That's not just an offset from Power Solutions having a better profile in that industry. We've been working hard on the communications side as well and saw a significant improvement in the DSOs there. So when you combine it together, very pleased to be below 100 coming in at 96 days. We do think that's a sustainable range over time.

On that NCI exposure, the raw number is about 2/3 data center exposure and about 1/3 that is non center.

[Operator Instructions] Our next question comes from the line of Richard Choe with JPMorgan.

I just wanted to follow up with the, I guess, long-haul, middle-mile type of builds. Has that opportunity set changed at all as things have developed? And when should we expect that revenue to maybe start ramping? Just wanted to get an update there.

It's grown significantly, Richard. We talked about -- I'm trying to think probably 5 quarters ago, this $20 billion opportunity set related to long-haul, middle-mile. That has certainly grown. We've updated numbers internally. We haven't published that. What you've seen more and more is our customers being very vocal about it. One of my favorite commentary is, one of our customers talked about how they're having conversations with hyperscalers about routes that would have up to 7,500 to 10,000 fiber strands per route.

And that is a huge number beyond even what we're talking about today when we're bringing in 864- or 1728-count fiber. If you think about getting to 7,500 or 10,000 over time, it goes back to what we said. This is a decade-plus-long build to get the architecture that they need out there to support the continued development and the continued consumption of data. We continue to do more work, and we are absolutely ramping up there. We are winning more.

We're seeing more opportunity set. We're capitalizing on that. They just take a long time to get started. And so that runway is typically a year-ish from when you start hearing about these programs to when they get going and then you have to ramp to get it on plane. So really start thinking about next year, calendar '27 and especially calendar '28.

One follow-up on the fiber-to-the-home. Was it multiple companies ramping? And do you expect -- or do you expect more to ramp from your entire base through the year? Just any color on the breadth.

Exactly. So you're seeing more and more of these programs that are getting to accelerated levels of execution that are consistent. And it is important to remember, when you hear our customers talk about it, it doesn't mean all markets that they have are ramping at the same time. It doesn't mean that we have every single market that they have. So we're looking at it from a very micro level. And yes, to your point, you're talking about ramping work across many customers, across many markets, which, again, just goes back to that indication that the homes in America are going to get past the $60 million that's yet that our customers have talked about are going to get passed. It's just going to take some time, and we're excited to be there to support them in that.

Our next question comes from the line of Steven Fisher with UBS.

Congrats on the quarter. I'm curious on the Building Segment Margins. What changed in the outlook for the rest of the year? I understand the first quarter had some good execution, weather perhaps, but you're also raising the rest of the year to be consistent with the first quarter. I assume you're still making some of the scaling investments and the back office. So I guess I'm curious what happened with the rest of the outlook? And does that imply that there's still potentially some upside beyond this year if you're still making those investments and achieving the higher margins there?

Yes. I really could not be more pleased, one, with our team's ability to integrate Power Solutions; and two, with just the strength of their operation and their customer relationships, Steven. So last quarter, we talked a lot about making investments. Every time we do an acquisition, this one was unique because it was in a segment of its own, so everybody could see it. But every time we make an acquisition, we're going to invest in that. When we close with NTI, we will make investments there because what we're trying to do is bring together 2 things to make something that's different than when they were apart.

And that does take investment. It does take clear strategy. We're typically adding resources and staff to help make that happen. And that's what we were doing a quarter ago with Power Solutions. What you can see is we were able to get traction on that incredibly quickly. When you talk about doubling a 4- or 5-year trailing CAGR rate in a very short period of time, I don't think it surprised anybody that takes a lot of investment and a whole lot of discipline.

So we couldn't be more pleased with how that's come through the business, and that gives us confidence as we look out to the rest of the year. But to your question, absolutely, we continue to make investments because this goes well beyond our fiscal 2027. We continue to make those investments for future growth. At the same time, we've got the confidence to say that, that margin that we saw this first quarter that we can be in that range throughout the year.

And then just a follow-up as it relates to NTI and a similar topic. Can you just maybe talk about some of the investments that you need to make there? And maybe just some of the differences in the skill sets that you're bringing along in terms of the type of labor and how easy or hard it is to go out and grow that skill set relative to what you brought in with Power Solutions in terms of electricians, et cetera.

Let me take the skill set one first, Steven. This is, again, great synergy for our business. This is an opportunity for us to have a fungible workforce. So some of the work that National Technology Integrators does is union. Some of the work that they do in other markets is non-union. And those non-union markets, that is very fungible for what we're doing in the inside-the-fence work. So we do have an ability to cross-train to augment staffing there.

I don't want to get too far ahead of all the investments that we'll make because right now, we're working to close and bring them formally into the Family. But similar to what we've done in other places, right? How do we augment that to really create an inflection in the growth opportunity to give a different balance sheet to give some different resources. And what we love about National Technology Integrators is that not only are they based in the DMV and have a lot of work there, but they're in these other markets, which are critical markets to what's going on in the data center space, markets like Texas. So that just gives us another ability to flex off of that and to continue to grow, and think about how do we continue to increase the Building segments part of our business overall.

Our next question comes from the line of Michael Dudas with Vertical Research Partners.

Dan, maybe you could share a little bit more of your thoughts. You mentioned in your prepared remarks about BEAD, the progress overall and how it's looking relative to when we could see some of that conversion into maybe backlog and into revenues maybe second half this year into fiscal year 2028.

So BEAD continues to make progress. And this is something that we've had a strategy going back, I think it's over 4 years now. And we've been partnering with the different states. We've had numerous conversations and tons of relationships across subgrantees. We still believe that we will see revenue in Q2 of this year. But really -- and we talked about this before and it is unchanged. Think about that as the calendar 2027 that when it really starts to take hold and get moving.

You are going to see the different programs and different subgrantees start at different paces. The smaller programs can start sooner. That's why we believe we'll still see some revenue in Q2. And just a reminder, this is not included in our outlook. So we really want people to think about BEAD for this year as potential uplift, and then really starting to take shape in calendar 2027.

Our next question comes from the line of Liam Burke with B. Riley Securities.

Dan, you mentioned in the earlier comments that you're working more and more with your customers on longer-term projects and multiyear planning. Does that change the composition of the business to multiyear projects versus MSA?

So still mostly under MSAs or long-term agreements, Liam. I think if you look at our backlog, our next 12 months, we had a significant backlog increase. Our next 12 months went up. But really, what you see, again, is we're adding firepower into the outer years, which again is a big positive for us. It allows us to plan to be proactive to continue to invest in the business and have really good foresight into what some of those builds are going to look like. So it's a big positive in our space to be talking about work and actually contracting work that's 3 or 4 years out.

Great. And on the data center volumes, are you seeing more activity? You talked about fiber-to-the-home, but is there more activity over and above fiber-to-the-home, on data center activity on the local loop?

If you're talking about Inside-the-fence and all the other fiber that's connected to that kind of middle-mile, absolutely continues to grow is the conversations, and I feel like I say this every quarter, the conversations only continue to grow, and that really is true. And then specifically on the data center side, again, the demand has not abated whatsoever. In fact, it's only increasing. You can see that in our outlook. You can see that in our results. And you can see that in the confidence in us raising for the year in that segment as well.

Our next question is a follow-up from the line of Manish Somaiya with Cantor Fitzgerald.

I appreciate that. Dan, I just had 2 follow-ups for you. One is on the Building Systems backlog; should we assume high-teens margin in line with the '27 margin expectations? Or is that different based on mix or customers, et cetera?

Yes. That backlog is consistent. As you can see, their next 12 months and there -- and we believe this will continue to be the case. Their next 12 months in their total backlog are very close and numerically to each other. So you get the margin profile is very similar to what we saw in Q1.

Okay. And then secondly, obviously, you talked about strong end markets, but I was wondering if there are any projects or work that you are essentially passing on? And if so, what are the big reasons for it? Is it execution? Is it pricing? Is it not meeting your hurdles? If you can just give us a sense as to what's happening on the ground?

We're very pleased that we have strong partnerships with our customer set. And that's really what we're looking for, Manish. We want customers that understand the value of the skilled workforce. They understand the value of all the investments that Dycom has made to help deliver at a higher level for them. There are still people out there that are looking for low-bid numbers, and that's just not where we play, right?

We want to play in those longer-term agreements where we can really have input into how they think about their builds, how they think about their programs, how we can support that, have really good dialogue that allows us both, quite frankly, to raise the bar together. So that's where we play. So yes, there is work that we pass up. What I would tell you, we feel really good, again, what we've done from a skilled workforce, feel really good about the growth that we saw in our headcount for the quarter and our continued growth for the year and the investments we're working there. So we don't believe that we're leaving any of these important builds behind. But at the same time, we are going to be selective on the pipeline.

And I'm showing no further questions from our phone lines. I'd now like to turn the conference back to Mr. Dan Peyovich for closing remarks.

I want to thank everybody for joining us today, and I want to thank our 20,000 Teammates for their fantastic execution this quarter. Look forward to seeing you all in about 3 months. Thanks so much.

This concludes today's conference. Thank you for your participation. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Dycom Industries, Inc. Fourth Quarter 2026 Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to Ms. Callie Tomasso, Dycom's Vice President of Investor Relations and Corporate Communications. Please go ahead.

Thank you, operator, and good morning, everyone. Welcome to Dycom's fiscal 2026 Fourth Quarter and Annual Results Conference Call. Joining me today are Dan Peyovich, our President and Chief Executive Officer; and Drew DeFerrari, our Chief Financial Officer.

Earlier this morning, we released our fiscal '26 4th quarter and annual results. along with certain outlook information. The press release and accompanying materials are available in the Investor Relations section of our website including a new outlook expectation summary document, which provides additional outlook metrics beyond what will be discussed on today's call.

These materials, which we will discuss during today's call include forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Our discussion and these statements reflect their expectations, assumptions and beliefs regarding future events and are subject to risks and uncertainties that could cause actual results to differ materially. A detailed discussion of these risks and uncertainties is included in our filings with the SEC.

Forward-looking statements are made as of today's date, and we undertake no obligation to update them. Additionally, we will reference certain non-GAAP financial measures during today's call. Explanations of these measures and reconciliations to the most directly comparable GAAP measures can be found in our press release and accompanying materials.

Before I turn the call over, I'd like to note an update to our segment reporting implemented during the fourth quarter. As a result of the recent acquisition of Power Solutions, we are now reporting our business in 2 reportable segments: communications and building systems. This new segment reporting reflects how Dycom business is managed and the positioning of the company's strategies and expanding platform to provide comprehensive solutions as we address the growing demands for digital infrastructure.

The Communications segment provides specialty contracting services for telecommunications providers, underground facility locating services for various utilities, including telecommunications providers as well as other construction and maintenance services for electric and gas utilities. The Building Systems segment provides comprehensive building infrastructure solutions including electrical, energy management, security and fire safety systems for data centers and other critical facilities. This segment includes the results of Power Solutions following the closing of the acquisition on December 23, 2025.

With that, I will turn the call over to Dan Peyovich.

Thank you, Kelly. Good morning, everyone, and thank you for joining us. Acom's fourth quarter results are an excellent finish to a record year as we set new benchmarks across nearly every financial metric we track. We exceeded the high end of our annual revenue outlook and our performance highlights our unique ability to capitalize on a diverse and intensifying demand environment. We delivered on the 2 pillars we set as priorities: meaningful margin expansion and improved operating cash flow. Our strategy and focus on scale efficiencies, strengthened our balance sheet and build a platform for sustained high performance growth. .

Beyond our solid organic growth, we fundamentally broadened Dycom's reach through strategic M&A. The acquisition of Power Solutions, which closed on December 23, positions us squarely at the intersection of digital infrastructure and the burgeoning data center market. Capitalizing on industry tailwinds, we are aggressively architecting our own trajectory ensuring Dycom and our robust skilled workforce remains the indispensable backbone of the next generation of digital connectivity. I will start by covering our fourth quarter and full year consolidated results. And then I'll move to our FY 2027 financial outlook and our objectives for the year ahead.

After that, Drew will provide further financial details and insights. For the quarter, we delivered all-time record fourth quarter revenue of $1.46 billion, an increase of 34.4% compared to Q4 FY 2025. Of note, this was a Q4 record both in total and on an organic basis. Organic revenue increased 16.6% for the quarter, a testament to the strength of our backlog and the momentum going into the next year.

Adjusted EBITDA was $162.4 million, and adjusted EBITDA margin was 11.1%. EBITDA margin increased by 41 basis points compared to Q4 FY 2025. The significant additions to our workforce position us well for next year's growth, but did have some impact on margins this quarter as they're working through the severe winter storms.

Non-GAAP adjusted diluted EPS was $2.03, a 42% increase compared to Q4 FY 2025. DSOs were 101 days, an improvement of 13 days year-over-year. And operating cash flow increased 27.7% to $419 million for the quarter. As I mentioned, the fourth quarter capped a year of exceptional performance for Dycom in which we capitalize on growth opportunities across our demand drivers, while also enhancing our underlying business to deliver stronger margins and improved cash flow.

For the full year, we delivered all-time record revenue of $5.55 billion, an increase of 17.9% compared to FY 2025. Organic revenue increased 6.5% for the year. Non-GAAP adjusted EBITDA was $737.7 million, and non-GAAP adjusted EBITDA margin was 13.3%. EBITDA margin increased by 105 basis points compared to FY 2025. Non-GAAP adjusted diluted EPS was $11.97, an increase of 29.7% year-over-year. We ended the year more than doubling free cash flow to $435.3 million.

Fiscal year 2026 set new records for Dycom and importantly, positioned us for continued growth, margin expansion and further cash flow improvement in fiscal 2027. Shifting to our backlog. Our approach to the pipeline remains disciplined. We are optimizing for high-value engagement that balances risk with superior returns. As evidenced by our FY 2026 margin. Communications demand drivers remain robust, and we moved aggressively to expand our footprint. With the strategic addition of Power Solutions, we successfully entered a new high demand sector with a distinct customer base significantly broadening our total addressable market.

In addition to diversification, we're capturing new territory, highly focused on digital infrastructure from a position of strength. Our year-end numbers confirm the velocity of our growth. We concluded the year with a record $9.5 billion of total backlog, of which $6.3 billion is expected to be completed over the next 12 months. Book-to-bill for the year was 1.3x in total at 1.2x on an organic basis, reflecting the increasing demand for our services.

As we turn the calendar to the new fiscal year, Dycom is strategically positioned for strong growth across multiple demand drivers led by significant increases in fiber-to-the-home deployments as well as increasing demand for communications and building system services to support data center and hyperscaler build.

For FY 2027, we expect 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. We also anticipate continued adjusted EBITDA margin expansion. In Communications, we expect modest adjusted EBITDA segment margin gains, driven by operating leverage, offsetting continued investment to support our growth. We expect Building Systems to deliver a mid-teens adjusted EBITDA segment margin as we scale the business to capitalize on favorable sector tailwinds.

Our strategy remains focused on driving long-term value for our shareholders and providing industry-leading opportunities for our people. Our execution consistently sets the standard for our industry and we are focused on continuously enhancing the solutions we provide to our customers as their businesses evolve. This operational foundation allows us to be disciplined in our growth. We are high-grading our pipeline and diversifying across robust demand drivers.

Collectively, these demand drivers have never been stronger and neither is Dycom's positioning within them. Our service and maintenance work remains the bedrock of our communications business, delivering over 50% of our communications revenue in FY 2026. This recurring base provides a scaled national footprint of facilities, equipment and skilled workers enable us to aggressively pursue larger capital programs. Our unmatched local knowledge provides significant value for our customers as they plan their network builds across the country.

While the growth rate for maintenance naturally trails our high-velocity build programs as it scales with new plant installations and geographic expansion, we will continue to grow this segment with purpose to lock in long-term recurring revenues as our customers' networks expand and identify. We see significant ongoing opportunities to further deepen these relationships and amplify Dycom's role as a long-term partner in our customers' ecosystems.

Fiber-to-the-Home deployment remains the most mature and dominant driver of growth in our Communications segment heading into FY 2027. This quarter, our customers, again, either affirmed or raised surpassing goals. With recently completed customer consolidations, we are seeing the same commitment to fiber infrastructure investment, further reinforcing our strategy. Current industry commitments represent nearly 60 million additional fiber-to-the-home passings.

Dycom is a leader in this deployment and our large skilled workforce enables us to meet the growing demand for this critical infrastructure. Crucially, the passing is only the first phase of the revenue life cycle. We are also accelerating our work on customer drops. The lateral connections required as subscribers sign on to the network.

Following the initial build, these connections typically take an average of 4 years to reach terminal penetration, the point at which most potential subscribers in an area have been connected. This creates a powerful multiyear tail of quality work. Simply put, Dycom is well positioned to lead the fiber to the home market for the next decade.

We believe that our strategy, deep customer relationships and proven performance will enable Dycom to be a leader in the execution of the B program as it enters the funding base. The NTIA has already cleared the large majority of states representing more than $30 billion in total spend, and [indiscernible] has moved over $17 billion or more than half of that amount into the funding stage.

Our teams are in active discussions with the state and the subgranteelevels, which has translated to additional verbal awards with subgrantees increasing the $500 million verbal awards we noted last quarter. We believe these verbal awards will begin moving to contracted backlog in Q1 or Q2. Our customers are choosing Dycom because they recognize that delivering on these massive individual programs requires to specialize high-capacity workforce that only we can provide at scale. We continue to expect the first revenue opportunities in Q2, and we anticipate revenue to ramp as programs move from the planning phase into active construction in the second half of this year.

We have the capacity to deliver on this demand, and we are ready to execute as these funds flow into the sector. Following a highly productive FY 2026 bill, the wireless equipment replacement program is transitioning into its next phase in accordance with the original build plan. While Drew will provide further details on this program, we remain ready to capture any future surge in network densification or new infrastructure initiatives.

Shifting to long haul and middle-mile fiber opportunities. Basin hyperscaler announcements by Verizon, AT&T, Meta and Corning confirm our thesis. Existing networks lack the capacity and latency required to support growing data consumption and AI inference. This quarter, hyperscalers collectively raised their CapEx guidance to nearly $718 billion, representing an approximate 70% increase year-over-year, affirming both the need and the capital behind it.

The $20 billion addressable market that we identified across long haul, middle aisle and inside the science fiber and infrastructure continues to grow as it progresses through the ecosystem. We are seeing more activity today than ever before. giving further confidence in the revenue opportunities now and in the future. As we've said before, these large programs have a longer planning phase than fiber-to-the-home or other programs, and we see their pace ramping considerably for build that would start in earnest in calendar [indiscernible]. Dycom is uniquely positioned for the long haul, middle mile and inside defense opportunity set.

First, we believe we were first on the field executing Lumen's overpull program. Their program continues with movement announcing that they received another $2.5 billion of awards this quarter to bolster their current bill. We expect our revenue to continue to ramp this year as we look to deliver on Lumen's overpull program.

Second, both overall and new construction build require massive foresight, geographic scale and technical sophistication. Complexity favors Dycom. While the incubation period from inception to construction is longer than fiber to the home, these programs generate elongated build cycles that provide revenue visibility well into the next decade.

Lastly, the surge in long-haul capacity must be matched by the fiber density inside the data center campuses. We continue to secure new awards inside the fence, validating the hyperscalers require a strategic scale partner to sustain their build base. Our strategy is to position Dycom as the indispensable partner for hyperscalers and carriers alike. We have deployed dedicated teams to work directly with customers and the supply chain, ensuring we proactively plan and precisely execute every program.

Our recent acquisition of Power Solutions and entry into the data center space is one way we are leading into those partnerships. Dycom now offers an extended suite of solutions across the digital infrastructure space. and we are already seeing opportunities to bring our communications and building system services together to meet the intensifying requirements of hyperscalers.

Specifically, they're looking for Dycom's bread, scale and proven execution, whether it's inside the 4 walls or interconnecting the fiber between data centers. We view this as a substantial growth driver and are executing a clear disciplined strategy to capitalize on this demand. Since closing the Power Solutions acquisition just over 2 months ago, the business is performing well and the integration has proceeded on schedule. We are leveraging their specialized expertise to sharpen our approach to the data center and digital infrastructure markets. The strong cultural and operational alignment between our teams has allowed us to hit the ground running, and we are very pleased with its initial contributions to our broader portfolio.

As we look to the year ahead, we are focused on 4 core strategic priorities. First, talent and workforce development. We are investing heavily in our workforce, now over 19,500 strong to meet intensifying customer demand. In the coming weeks, we will break ground on a new state-of-the-art training facility outside of Atlanta. While we operate numerous facilities nationwide, this center represents a major step in staying ahead of evolving technical demands. Designed to house employees for immersive multi-week programs -- the facility will provide hands-on training in real-world environments to ensure our teams consistently deliver the safety, quality and expertise that defines the Dycom brand.

This investment is part of our overall strategy. which includes significant enhancement of our benefits package as we continue our efforts to remain the employer of choice in our space. As diverse demand drivers intersect and overlap, we anticipate an industry-wide shortage of skilled labor that will favor Dycom scale workforce and proven execution. As a trusted partner, we maintain constant dialogue with our customers to build our talent ahead of the curve.

Second, expansion of our Building Systems segment with Power Solutions is our foundation. We're actively pursuing opportunities to drive their organic growth beyond their current footprint as well as pursuing additional complementary acquisitions while remaining committed to our strict criteria and long-term debt leverage target.

Third, margin expansion. We will continue to drive margin improvement through productivity gains and operating leverage. Our commitment to field efficiency is unwavering, rooted in our disciplined approach to safety, quality and financial performance. This past year, we delivered significant margin expansion and are applying that same discipline to fiscal year 2027.

Fourth, operating cash flow and fleet optimization. We have made significant strides in our cash position by improving internal processes and controls and sharpening our cash conversion cycle. We have driven significant improvement in our net DSOs, which are nearing a range we expect to remain relatively steady. We will continue to identify and execute on opportunities to further enhance operating cash flow. This includes capturing additional efficiencies within capital expenditures and reflected in our reduced spend last year and our outlook for FY 2027.

This reduction is a result of long-term strategic planning, not short-term cost savings. As a leading customer for many of our equipment suppliers and the strategic decision to favor ownership over leasing. We hold a unique position in their R&D cycles. R&D partnerships have led to advanced telematics that provide real-time insights into usage, maintenance and diagnostics.

By leveraging these insights, we have optimized our fleet allowing us to maintain high performance levels with a lower capital footprint. In summary, Dycom's strength is rooted in the expertise of our large workforce and our proven ability to raise the bar for our customers. is driving to deliver at the highest possible level, we believe we are setting the industry standard for what focused, scale and high-quality execution looks like.

Our record performance and historic backlog are a direct reflection of the trust we've earned as an indispensable partner to the world's leading carriers and hyperscalers. As we move into FY 2027, we will continue to leverage our scale and technical sophistication to solve the industry's most complex challenges and meet commercial opportunities from the massive fiber-to-the-home buildout to the critical infrastructure requirements of the data center and AI economy. We remain committed to the disciplined growth and superior execution at define Dycom and drive long-term value for our shareholders and long-term opportunities for our people.

I would like to thank the entire Dycom team across all 50 states for your relentless commitment to safety and quality and to delivering at the highest level for our customers and communities as we pursue our vision to be the people connecting America. With that, I'll turn the call over to Drew for a deeper look at the financials.

Thanks, Dan, and good morning, everyone. We delivered record annual results in fiscal 2026 with strong revenue growth, significant margin expansion and robust free cash flow. We executed well in Q4, and we are excited to welcome Power Solutions to Dycom. Together, we are positioned at the center of the powerful secular trends driving growth in digital infrastructure services. For the fourth quarter, we delivered strong growth in revenue, adjusted EBITDA and adjusted EPS. Consolidated total contract revenues were $1.458 billion a 34.4% increase over Q4 '25. Organic revenue exceeded the high end of our expectations, growing 16.6%, after excluding the acquired revenues from Power Solutions of $95.8 million and the extra week in our 53-week fiscal year. .

Consolidated adjusted EBITDA of $162.4 million increased 39.6% over Q4 '25, adjusted EBITDA margin of 11.1% was within our range of expectations and increased over 40 basis points compared to Q4 '25 even as we increased our workforce to meet the growing demand for our services and experience severe winter weather at the end of the quarter. Consolidated adjusted net income was $60.5 million, and adjusted diluted EPS was $2.03 per share. These results are adjusted to exclude nonrecurring acquisition-related items and the amortization of intangible assets.

For the segment results, Communications revenue was $1.362 billion, driven by continued execution of fiber-to-the-home programs, wireless activity fiber infrastructure programs for hyperscalers and maintenance and operations services. We are pleased with the strength of our relationships and diversification across our customer base. AT&T a lumen each exceeded 10% of total revenue for the quarter, contributing $350.5 million and $147.7 million, respectively.

Following Verizon's acquisition of Frontier during our fourth quarter, their combined revenue was $205.6 million, also exceeding 10% of total revenue. customers exceeding 5% of total consolidated revenue for the quarter were Bright speed, Charter, Comcast and Unity. Adjusted EBITDA for Communications increased 30% to $151.3 million or 11.1% of segment revenue. The Building Systems segment includes Power Solutions results from the date of acquisition on December 23 through the end of January. Revenue was $95.8 million, and adjusted EBITDA was $11.1 million or 11.6% of segment revenue, with results impacted by several seasonal holidays during the abbreviated operating period.

This acquisition fundamentally broadens our reach into the data center market. The integration is proceeding on schedule and the business is performing in line with our expectations. Backlog at the end of Q4 was $9.542 billion, including $8.333 billion of communications backlog and $1.209 billion of Building Systems backlog.

Backlog expected to complete in the next 12 months was $6.358 billion, including $5.25 billion from Communications and $1.108 billion from Building Systems. Strong cash flows remain a primary focus, and we delivered excellent results. Operating cash flow totaled $642.5 million for the full fiscal year and free cash flow increased 216% to $435.3 million after capital expenditures, net of disposal proceeds.

The combined DSOs of accounts receivable and contract assets net improved to 101 days, a 13-day improvement over Q4 '25. We made solid progress improving our cash conversion cycle in the communications segment, which is further bolstered by the lower DSO profile of the newly acquired business in our Building Systems segment. I'm pleased to report that our ERP implementation is on track, and we are actively deploying additional phases during fiscal 2027, further enabling future operational efficiencies. As we previously disclosed, the $1.95 billion acquisition of Power Solutions was completed in the quarter on a cash-free debt-free basis, subject to working capital and other post-closing adjustments.

The purchase price consisted of approximately 1 million shares of Dycom common stock with the remainder of consideration paid in cash. The net cash payment at closing of $1.63 billion was funded with a mix of proceeds from a $1.1 billion senior secured term loan A facility, a $600 million 364-day bridge loan facility and cash on hand. During January, we raised $800 million of senior secured term loan B repaid the bridge loan facility and added the remaining net proceeds from the debt issuance to cash on the balance sheet.

We ended the quarter with cash and equivalents of $709. -- million and total liquidity of $1.46 billion. The maturity of our senior credit facility has been extended to December 2030. And we had a total of $1.54 billion Term Loan A outstanding and an undrawn $800 million revolving credit facility. The Term Loan B balance was $800 million outstanding with a maturity in January 2033. Additionally, we have $500 million of senior notes outstanding that mature in April 2029. Pro forma net leverage at the end of the quarter was approximately 2.3x adjusted EBITDA, and we see a clear path to delever further to approximately 2x net leverage over the next 12 months in line with our expectations at the time of the transaction and maintaining our financial flexibility for continued strategic growth and investment.

Going forward, we remain committed to our capital allocation priorities of investing in organic growth, pursuing strategic M&A and opportunistically repurchasing shares. We continue to observe strong demand across a diverse set of drivers, creating significant opportunities for continued strong growth and performance. For fiscal 2027, we expect total contract revenues to range from $6.85 billion to $7.15 billion. For the Communications segment, we expect contract revenues to range from $5.70 billion to $5.90 billion, increasing approximately 6.6% to 10.3% organically when compared to $5.35 billion of fiscal 2026 communications revenue after excluding the extra week and our 53-week fiscal year.

For the Building Systems segment, we expect contract revenues ranging from $1.15 billion to $1.25 billion. We also anticipate continued adjusted EBITDA margin expansion. For Communications, we expect modest adjusted EBITDA segment margin improvement as operating leverage offset continued investment in our workforce to meet growing demand. For Building Systems, we expect a mid-teens adjusted EBITDA segment margin as we scale operations to capture increasing market opportunities.

To highlight some of the expectations driving our outlook range for fiscal 2027, within communications, we expect continued strong demand from fiber-to-the-home programs increasing demand from long-haul and middle-mile fiber infrastructure builds, growing inside defense opportunities and modest growth in our service and maintenance business. We expect revenue from wireless equipment replacements to decline by approximately $100 million in fiscal 2027 as the program transitions into its next phase in accordance with the original build plan.

We expect a further step down in fiscal 2028 as this program moves towards completion. Our strategy positions us well for future wireless opportunities. whether other equipment upgrades or overall densification. And for the Building Systems segment, we expect exceptional demand for electrical services in the growing data center market. We expect annual capital expenditures net of disposal proceeds to range from $210 million to $220 million for fiscal 2027 as we efficiently utilize our fleet of assets and strive to continue to reduce our capital intensity.

For Q1, we expect total contract revenues of $1.64 billion to $1.71 billion adjusted EBITDA of $202 million to $218 million and adjusted diluted EPS of $2.57 to $2.90 per share excluding the impact of intangible amortization expense. We encourage you to review the outlook expectation summary document newly available on the company's Investor Center website for additional metrics. With a record fiscal 2026 behind us, Dycom enters fiscal 2027 with solid strategic positioning and a strong financial foundation. We remain focused on the disciplined execution necessary to convert robust industry demand into long-term value for our shareholders.

Operator, this concludes our prepared remarks. You may now open the call for questions.

[Operator Instructions] And our first question will come from Sangita Jain from KeyBanc Capital Markets.

So Dan, can you talk a little bit about how you plan to increase the scope of work that you're doing inside Power Solutions. I know Dycom has telecom expertise, so maybe you can expand into cabling or something else that you're currently not doing there? Any color there would be helpful.

First, I just want to say Power Solutions acquisition is going incredibly well. The integration is going just as we expected it to be. This is an incredibly strong, very deep leadership team that's been in that market for a very long period of time. So -- we're excited about how they're performing. We're excited about the opportunity set in front of them, and you probably heard me say the demand, especially in the D&B right now, it's just off the charts. So plenty of opportunity there. As you can see, we're outlining significant growth for them this year with the range we gave is 15% to 25%. Really, that's about trying to ramp into that. over the year and set us up for the future and what that looks like. So we're investing in that business. We're certainly adding resources to that business.

And then to your question, the cross-sell is, quite frankly, taking place even earlier than we anticipated. The reaction from the hyperscalers has been fantastic. Where we can bring our inside defense communications work and couple that with what Power Solutions doing inside the 4 walls that we think is a recipe that wins over time. And again, with both of our proven expertise and the response has been fantastic.

If you think about inside the 4 walls, one, I would point to how we named the segment. So communications, obviously, for the Dycom business that's in the legacy side. But building systems, we wanted to be specific. So First, we're really architecting Dycom around digital infrastructure, right? It's about both the compute of data and the transmission of TA around the country, getting it all the way from the data centers themselves to the end consumer or to the end business. And that's really our play. But we want to be straight down the fairway as we're thinking about it. With Power Solutions, obviously, there's opportunities for organic expansion, and we're going to look into that and continue to work on that over time. And we're also looking at M&A opportunities. and we've been vocal about that.

That's not just limited to your point, not just limited to electrical. We call the building systems for a reason. We're not thinking about civil infrastructure. We're not thinking about getting outside of digital infrastructure. But there are other opportunities inside the 4 walls data center that could make sense. And as everybody knows, it's a very active space right now. And we're optimistic. Again, we've got discipline around what we're looking for strategy around what we're looking for. got to have a really strong culture. It's got to fit with the growth opportunities that we see. But yes, there could be other disciplines that we bring into the fold.

And then on the fourth quarter organic growth, which was especially strong, given winter weather and the holidays, et cetera, can you talk a little bit about where you were most surprised versus your internal expectations? -- if there was any notable project pull forward that came in.

No, but forwards. And yes, obviously, very pleased with the overall performance exceeding the high end of our range that we gave at the beginning of the year, giving that revenue outlook at the beginning of the year that we raised after Q1. But notably, for the fourth quarter, as you pointed out, one, we had to work through significant winter weather. What it shows, really, one, the ability for our team to execute even in those conditions, we did get a little bit of margin pressure from that. but the ability to keep that going.

But importantly, the demand from our customers. The demand coming out of Q4 and the demand going into this year, you can see it in the guide that we gave for 2027. You can see in the organic growth that we're talking about on the communications side and the outlook for 2027. So it really just shows all of these different demand drivers as they're coming through the business and the opportunity set there. So nothing specific, really a to point to the overall demand. One thing I would point out, we did have wireless that increased and you do have to think about that. As Drew talked about, we expect about $100 million of deceleration in line with the original expectations for that program. But since we got that work in we've talked about back half in the 4 years that it's going to start to taper off. So you do have to include that for any other direction.

Our next question comes from Eric Luebchow from Wells Fargo.

Dan, I wanted to just ask about the long-haul middle mile and inside defense work. I know you quantified the $20 billion TAM a few quarters ago. It sounds like you're optimistic that that's going to prove conservative. -- and we've seen some interesting announcements from the likes of Meta and Corning recently. So maybe any kind of quantification on how that program is progressing and where you think that addressable market ultimately goes. It sounds like $20 billion is just the start.

It really is Eric. If we think about the $20 billion, and remember, that is back half weighted because these programs are complex. They take a while to get off the ground. But what you've seen since the last quarter, and I think we put that number out a couple of quarters ago, in this last quarter, you saw a number of our customers now talking about it and talking about significant opportunities and appetite from hyperscalers. As recent as yesterday at some of the conferences, even more demand that they're seeing on their side. It does take time for that to get through the ecosystem. And that's what we tried to talk about early on when we identified the $20 million.

We really think that we were first on the deal with what we've been doing from Lumen. We saw another nice increase to their PCS that they're going to continue to build on over time. And then you have the new construction work, which again just takes further time to come in. I would really think about ramping this year, continuing to ramp this year, continuing to ramp in 2027 and a lot of that really taking flight in calendar 2028. So is it more than $20 billion -- we strongly believe that. Is there going to be more that comes there. What I would tell you is today, we are getting more phone calls and seeing more opportunities than we saw even a quarter ago or frankly, even a week ago, the demand is that strong.

And it comes back to a little bit of what I talked about at the beginning. This is about a change in how they need to transmit this data, right? They need more capacity. They need latency, ultra-low latency for these applications and for the future of AI. So -- we're excited that we can be a trusted partner there, and we really think that over time, that's going to continue to grow, and we'll continue to update as we see that move again.

Great. And maybe we could just touch on the [indiscernible] program. You talked about it a little bit. sounds like the verbal award balance is above that $500 million, but it also seems like it's taking a little longer for the funds to actually get dispersed. I think Louisiana is the only one that I've seen. So maybe you could just talk about the construction time lines there, when you think that's really going to ramp and kind of a more full run rate?

We still believe Q2 that we had some revenue opportunities to be putting work in place overall. But as we talked about and really unchanged what we've been saying for a bit now, if you really think about that in calendar 2027 is getting some momentum. So it's great to see the progress. Nearly all the states and territories are approved. So to your point, the funding this has pushed the funding data that continues to grow over time. We think that, that addressable market is approaching $20 billion, but it's going to take some time for those to get off the ground. You've got numerous states at different paces. The way that they're pushing it down to the subgrantees and then those upgrades also at different paces.

Within that, I'll just frame the context for you. If you think about a local cooperative where they own their own poles, they've probably already done the engineering to date. As soon as they get the funding pushed down, they can hit the go button. And that's why we talked about something, but the bigger programs, the longer duration build, those are probably going to come on much later in the year. So again, great to see progress. Do we all wish we'd go a little bit faster? Absolutely. But we have a lot of confidence in that coming through the supply chain soon.

Our next question will come from Joseph Osha from Guggenheim Partners.

This is Mike [indiscernible] on for Joe. Just to kind of follow up on that program. Is it fair to say that the guidance is on by the whole potential impact for this year? And then also, how do margins from this program just probably your traditional wet are they more treated Mike, I think you were breaking up just a little bit. I think you're referring to the BET program again and just how it builds over time.

First, on the margin profile, similar to all of our work, right? We think about our -- everything on the communications side, very similar. If it's taking the same type of skilled workforce resources if it's taking similar types of equipment, then the margin profile and that return all ends up in a similar range. So that doesn't mean every project is exactly the same, but it's in the same similar bandwidth. And we believe be will play out that way over time. But -- and I think this is an important point. You've got fiber-to-the-home demand that is really just reaching another level. And again, I do want to point out, it hasn't peaked yet, right? You still have a ton of growth that's happening in that program. you've got everything going on with the hyperscalers and those long-haul middle mile builds, that significant.

You still have a lot of activity on the wireless work today. We continue to add to our service and maintenance platform -- when you put all those together and you start adding them up and showing the increases over time, without question, there's going to be pressure on labor. So if you think about the skilled workforce, as you get later this year and really starting in calendar 2027 that's where we think Diacon is exceptionally well positioned. And we've been investing heavily in our workforce to make sure that if you think about [indiscernible] program and the needs that our customers are going to have there, when you already have these other programs going fast, we need to have been investing years ago, right? We needed to be thinking about having a strategy that was very long term.

You probably heard me in my prepared remarks, talked about, and I'm really excited about this, talk about the new training facility that we're opening outside of Atlanta. This is something you're going to hear more about in the coming days. And we have numerous training facilities around the country, but this one is really taking it to the next step. So picture a Hollywood style town where our folks can be working in the front yard and backyards of America in a simulated environment, whether they're going to stay on site for a multi-week training curriculum that we can get them very quickly orientated to the work and highly skilled to deliver at the level that [indiscernible] expected to do overall. I should point out this facility is also not just for what we're doing on the communications side, but the building system set as well.

That's just another example of how we invest in front of these programs to make sure that we will have the skilled workforce that our customers need and that the partnerships that we have and the depth of those partnerships allow us to plan those very far into the future. So back to your original question, on B, just really think about it lightly coming in this year. It's just going to take a while for these programs to start. Again, we're excited about the backlog that we have verbally awarded. -- [indiscernible] to point out that's still verbal to date. We think that those should transition to actual awards and moved to backlog in either Q1 or Q2 with some activity starting in Q2. But think about calendar 2027 is really when those projects are going to come online.

Next question comes from Frank Louthan from Raymond James & Associates.

Raymond James & Associates, Inc., Research Division

Can you comment on what the current growth rate is at Power Solutions today versus what it was when you acquired the business? And then secondly, can you characterize your exposure to EchoStar any projects that they have currently? And if you removed any of that from your guidance?

No exposure to EchoStar. So nothing to think about there for datacom. On Power Solutions growth rate, we talked about their trailing -- their 4-year CAGR being about 15% Frank, and that's what we gave as we were doing the acquisition and announced it for folks to look ahead. Obviously, as you saw on the guide, we're looking at that really at the bottom end of the range, so 15% to 25%. But here's a really important point, right? This is an organization that's delivering across around 3,000 skilled workforce over 3,000 electricians, over $1 billion of revenue. That's a very large pace.

And when you think about growth as a percentage, remember, you add the skilled workhorse by the person and doing that on a much larger base is something that you really have to lean into. So if you think about how we're looking at the year, how do we continue to invest in our solutions, a fantastic business that's got great leadership and fantastic strategy that they've proven over time. we wouldn't really lean in with them so we can think about future growth and future growth opportunities.

And I just want to come back to Dycom as a whole, right? When we think about growth, there's a right way to do growth and there's a wrong way to grow. We've had a ton of discipline around our backlog -- you see that in our margin profile. You see that last year, not only did we significantly increase our backlog, not only did we continue to diversify our backlog, but we also improved our margin profile.

And again, this year, as we look at the year out in front of us, we're telling you again that we can continue to improve that margin profile as we continue to grow. But as we invest in the business to ensure future growth, too. So just a couple of important points there.

Next question comes from Michael Dudas from Vertical Research.

Yes. Maybe a follow-up on Frank's answer to Frank, on the margin front. Maybe talk a little bit about you're investing in the business for the future. How much relative to '27 fiscal versus '26. And I think just also on the Power Systems side, Well, historically, in their self-perform capabilities, have they -- what has been their growth rate on the labor front? And -- is that within expectations from hiring and getting folks in to execute the backlog, not just for this year but for several years out.

Yes. Thanks, Mike. So on margin profile, if you look at last year, we grew over 100 basis points year-over-year. Very pleased with the overall results, and that's in a year of change in growth. We did a major acquisition. And I think, again, I would just point to how well Dycom is executing overall to be able to do all of those things that win. As you look towards this year, again, we've got -- we got big ideas and big initiatives that continue our growth and continue that long-term strategy.

What's really important to the point of your question is that we have to continue to invest ahead of that. We added a lot of head count for the communications side in the back half of last year. We see that continuing as we continue to get ahead of these programs that I talked about early on that are starting to stack on talking to each other. -- that takes an investment, right? We've got to invest in training. We got to bring those folks on. They're obviously not as productive day 1 as they are 6 months in. So when we think about that and we added into the growth profile of the overall enterprise, that's when we say, hey, we're going to continue to grow margins. But I wouldn't set expectations to be going as fast as we did last year from a raw dollars or a percentage profile, but still to grow to have that into our backlog, when I think a lot of others during periods of growth, maybe struggle with improving those margins. We feel really good about that.

Going to Power Solutions. They're really about labor. A lot of people know the hyperscalers buy all the big electrical equipment directly. So that does not come through the P&L of Power Solutions. So it really is about work for us. So if you think about 15% to 25% growth that we're projecting for this year during growing labor in a very similar range to that. And as I mentioned to Frank, if you think about that on a raw number of skilled workforce head count when you get to the size of the power solutions and to working on dozens of data centers, those are really big numbers in the we're partnered with the local union. We're getting well in front of that. But at some point, again, it goes back to responsible growth, right? You want to grow at the right rate where you continue to deliver and quite frankly, differentiate the level of service that we deliver to our customers over time. And that's what you see in the outlook.

I appreciate it. It makes sense. And just my quick follow-up. Dan, you mentioned a little bit about acquisitions in some of your prepared remarks in response to questions. Maybe you could share a little bit -- the timing on getting to that 2.0 level the size, the cadence, what should we anticipate maybe over the next 12 to 18 months. I'm assuming maybe there's another power solutions out there, I'm thinking a little bit more -- more modest in cadence and size.

I think it's important to go back to strategy that we have, right? And talking about long-term returns for our shareholders, long-term opportunities for our people. Obviously, as we did the Power Solutions, that was a very large acquisition for Dycom historically. But what we did well ahead of that might we were very intentional to drive our net leverage down before we did the acquisition, right? We were down to remember the exact number, but I think it was about 1.2x, maybe 1.2 and change when we did that. And then we talked last quarter about our ability to bring that net leverage down quite quickly. We talked about 12 to 18 months, but really what you heard resay earlier was to do that inside of 12 months to finish the year with a very strong cash position in order to get that down to 2.3x pro forma. We feel really good about the opportunity set that allows us to think about from an M&A perspective. .

Long-term strategy include improving our cash flow, right? And if you look at our free cash flow, I'm incredibly proud of what our team was able to accomplish there. our free cash flow increased 216% year-over-year. And I would point to -- these are durable changes that we've built into the business. These are not simply pulling a lever or taking a onetime thing. This is really about how we change One, how we collect cash. We changed our operating margin -- or excuse me, our operating cash collection profile and how we're thinking about that. So we get durable -- on the free cash flow side, you heard me talk a little bit about how we're thinking about our fleet differently and using technology differently there so we can optimize that as well.

And what that does is it positions us in a place those are big changes in cash position overall, setout much better when you think about M&A. So those are things that we set in motion quite some time ago to enable us to be able to continue the path that we're on today. When it comes to size, again, it's -- we've got a strategy around it. We're looking for very specific cultural fit, very specific growth opportunities. It could be something else that's in a kind of factoring of the size of power solutions, and there could be other opportunities that are much smaller than that. It's really going to depend on -- and there's obviously no guarantees about timing, how these move out we are going to be patient, but we are seeing some attractive things in the space.

Next question comes from Judah Aronowitz from UBS.

On for Steve Fisher. Just on the Building Systems margin guidance, can you talk about how you're thinking about the margin potential in that business? And how quickly can you improve kind of the mid- to high-teens level that you've talked about? And related to that, what investments need to be made and if you can quantify the margin drag from those investments in '27, that would be helpful.

Yes. This is really again about having a long-term strategy to do this. So when we think about that business, we did talk about mid- to high teens margin profile that they delivered historically. Mid-teens is really the right way to think about it today, right? We're talking about significant growth opportunity. We want to do that right, maintaining the level of service that they have proven over decades it's so imperative in a market that is -- the demand is surging at the level that it is today. So we're going to have that discipline. We're going to have that patient. We're very pleased, obviously, with the growth profile of 5% to 25% from a revenue perspective. But we feel like mid-teens is a very strong return in that space. And I think if you look comparatively, you would see that as well. So we feel very pleased with that over time. Obviously, we're going to -- just like we are on the communication side, work to improve that. But right for now, I think that's a really good starting point.

Okay. And then I was just curious about, I think SG&A as a percent of sales in Q4, a bit higher than it's been in quite some time. And I assume that's reflective of kind of the head count you're adding, but I was wondering if there's anything else in there, maybe something related to Power Solutions mix or anything else? And then what's to expect kind of going forward?

Yes, Tuna, thank you for the question. This is Drew. I'd just point out, we did have some transaction costs that we called out in the quarter, and that was in G&A. So over about $18 million in there. And then as we think about the Building Systems segment, the G&A profile does come into the business as well. So if you're looking at just total overall dollars, there will be some increases there. as well.

Next question will come from Richard Choe from JPMorgan.

I just wanted to get a little bit of clarification on the hyperscale opportunity. As we look through this year and then into next year and -- it seems like there's a lot of this build is coming back half weighted and it could be a big change. But what's kind of driving the near-term hyperscale revenue -- and how should we think about its growth for this year and then into next. .

So today, you have obviously the Lumin overall that doesn't have the same kind of new construction logistics or permitting around it. So that's a program that we've been working on for over a year now. That is going to grow this year [indiscernible] talk about that. I would think about that first, Richard. And then you do have smaller legs. The way that these long-haul minimal routes are working. There are some very big programs like [indiscernible] is talking about. There's everything in between, and then there are some that are just 100 or 200 miles, those much smaller distances. Those can be added in much more quickly, obviously. But when you're looking at routes that are thousands of miles or much longer, those are the ones that are pushed further out in duration.

And then as you would expect, there's also the pricing dynamics. So routes that are easier, are going to cost less. So those can come online a little bit quicker. The more expensive routes are going to take time and have a higher revenue profile in those out years of 2021 to 2028.

Got it. And a clarification on the acquisitions. Are you looking in the DMV area for acquisitions? Or could this be a new geographic location?

So we're not specific just to DMD. There's obviously another -- a number of other markets. But I would say what was important to us in -- with the Power Solutions acquisition was starting in a market that's been there for a very long time, right? This is a market that's been around for decades. It has a sustainability has a future build profile. With that now, we can certainly be thinking about some of the infringer markets or markets that are newer and are ramping up considerably. Those are all on the table as we think about it going forward. .

Our next question comes from Adam Thalhimer from Thompson Davis.

I also had a question on the M&A pipeline. Dan, is that all within the Building Systems segment? And then what should our expectations be on timing?

Yes, we're predominantly looking in the Building Systems segment. And that's mostly, Adam, as you know, Dicom has been a major acquirer and consolidator of the communications space. There are still some opportunities out there. But quite frankly, when you're in all 50 states and you're across the same kind of customer expense that we have today, we don't need to do those from an M&A perspective. Those are places where we can and have shown we can grow organically. .

So thinking a lot more about the building system space, as I mentioned, to an it's question earlier, doesn't just have to be electrical. There's other systems that happen in that digital infrastructure space or inside the data center. From a timing, there's no -- these things don't pace out some particular way you want them. I mean we closed Power Solutions 2 days before Christmas, right? It's just how things time out. We are active in the space. There are a number of opportunities that are out there. There's a number of really strong businesses that are coming to market for all the reasons you would expect, right? Sure, the multiples are higher, but the businesses are more valuable and the growth profile is stronger. So we're optimistic, but there's no guarantees on timing because we are going to be patient to make sure it says. [indiscernible].

Good color. And then I think you mentioned Power Solutions geographic expansion. Just curious what your thinking there? Does that mean just starting to pick up some work in West Virginia, North Carolina sort of building out from the DMC?

Exactly. They're not in every space, even if you think about the DMD itself, you can still continue to expand. And as everybody knows that, that space itself is expanding. You mentioned West Virginia, there's other markets that are really kind of coming online more in that territory. So today, we feel really good about the growth profile they have. There's opportunities for future organic expansion with that group because they've been around for a very long time. They've got a ton of talent. So those are all things we're thinking about as we layer that together with M&A. And what I would just say is we're very optimistic in the continued growth of the Building Systems

And our next question comes from Liam Burke from B. Riley Securities.

Dan, with your growing EBITDA and your growing cash flow, as you balance opportunities through acquisitions and managing the balance sheet, how are you balancing your current leverage ratios versus what you see in potential acquisition pipeline?

Yes. I think think about it the same way as we've always have. We're going to be very responsible around our net leverage. I think if you think about it, you have to think about it over time because we might do acquisitions that could come through. They're going to push it up a bit when we know, just like we did with Power Solutions that we can bring that down. And I mentioned, Liam, we -- this is a strategy that goes back so that we have these improvements in the business so we can do more M&A and stay ahead of it without really changing the way that we look at our overall net leverage profile.

Great. And when you're looking at the traditional business when negotiating longer-term contracts, are you seeing more favorable terms and pricing now that the scale is getting bigger, projects are more complex and you seem to be the leader in this space here.

Yes. I think we're the only that are across all 50 states, and we certainly have a number of customer relationships. If you think about the margin improvement last year, if you think about the margin improvement this year, I do want to be really clear about this. This is not coming from us increasing pricing with our customers. This is coming from, obviously, operating leverage, but also internal efficiencies that we're improving. Now over time, can those pricing dynamics change? We will see as these different programs come online and ramp up. But right now, one, we feel really good with our return profile. These are -- we have a long-term view with our customers. We want to deliver and execute for them across cycles and certainly across decades, we've shown that we can do that. But I wouldn't think about it from purely us having an opportunity to continue to raise pricing and also I would point that we don't need that to continue the margin improvement that we're on.

And I am showing no further questions from our phone lines. I'd now like to turn the conference back to Mr. Dan Povich for closing remarks.

Thank you all for your time today. We look forward to talking to you again in around 90 days. Thank you all. Be safe and be well.

Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.

Thank you very much. Okay. Good afternoon, everyone. I'm [ John Hoblik ] from UBS Equity Research. And I'm very pleased to introduce our next speaker, Dan Peyovich, the President and Chief Executive Officer of Dycom Industries. Dan, thanks for being here. .

Thanks for having me. A quick note, I might make forward-looking statements today. You can please reference our website for our safe harbor statement. Great. And with that to talk, John. Thanks for having me. .

Fantastic. As we do every time this year, I think the best way to start off is maybe talk a little bit about the sort of key highlights from the year and what the priorities are for the company as we look out into 2026. .

It's been a big significant growth year for us and for folks that aren't entirely familiar with our story. We're across all 50 states, we do both wireline and wireless infrastructure for the major telecommunications and cable customers and most recently have expanded more into the data center side from a power space. So it's an exciting time. There's a lot of opportunity coming through. And we've been very pleased with the work that we've done across the business, and I'm sure we'll get into more details as we go today, John. .

Great. As we were talking about in before we came in, our estimates show that fiber-to-home construction in the United States is set to continue to ramp, just given the efforts of AT&T, Verizon and T-Mobile. What's your view on the pace of fiber construction in the U.S. over the next few years? .

Yes. I think that we often hear that people believe because it's been going on for some time now that it's already reached some kind of Pinnacle or it's already started to decelerate when in fact, the opposite is true. Most of the customers that we have today are continuing to ramp their programs. There's obviously a lot of bullishness around getting fiber deployed.

The number if you take the passings collectively across our customers. If you look at the total homes in America, it gets to about 80% roughly or about 120 million, 125 million passing. So there's still a ton of work to do. And that's going to continue to ramp in the coming years. And I think there's a few points that I want to make really clear. One, as you said, the passing -- the number of passings per year are going to continue to grow over the next several years.

You certainly have -- AT&T has been very vocal about their continued growth any other customers that fall into that as well. But you have to think about the revenue opportunity for Dycom is being a little bit separated from that. We don't price by the home, we price by the foot. And as you move across in time, you're generally across the space, going to be more expensive. So if you've got several years of still fiber-to-the-home passing growth, you have several -- another couple of years probably beyond that of revenue opportunities.

So we still see a ton of revenue growth in the future as we tee up into looking at next year for us and not giving an outlook, but really fiber-to-home is going to be a key driver as we continue our growth in the years to come.

Yes, that's an interesting aspect. So we -- obviously, on our side, we track a number of homes passed each we have a sort of a buildup. But -- so you're saying it's not just a number of homes, but it's the sort of distance covered per home that actually drives your guys' revenue. So from our standpoint, we'd love to hear. So what are you seeing in that? I mean is there some sort of difference in sort of number of feet per home that we should expect over the next 5 years? Does it grow 10% a year, 20% a year or something like that? .

Yes. It's -- unfortunately, it's not exactly that clean, but that's -- you're exactly right, John. So you have a combination of the lot lines just get longer, wider, right?

Really have more rural areas. .

Yes. So there's not a ton of -- if you look kind of across all the homes that are going to get pass, there's not a ton of 40-foot aerial line left, right? So those got hit early on. Those are obviously less expensive. -- you also have -- are going to more to bury work, right? So you're going more underground as time goes on, it's obviously more expensive in the mix.

But again, I think 1 of the things that often gets more summarized and I looked at it in detail, is every home is unique. Every passing is unique, and our customers are looking across a large swath, right? So there might be some that are shorter lot lines that maybe it's just a part of a given area and there are some that are longer.

There's a mix of how much is varied compared to how much is aerial -- and all of that comes together into how they build and think about their programs. And of course, we spend a lot of time with them planning around that. Our point is, if you look at that in aggregate, it's going to generally grow over time, right? You're just -- you're not going to prioritize and do expensive first plus mints of later, you're going to generally prioritize it in that way.

So you have to look at those curves a little bit independently. And I think it's really easy to talk about passing. I think it's a great way to have the conversation. But you got to make sure that you reflect back on that revenue continuing to increase beyond that.

So you not only the number of homes passed, you just introduced a new variable and then also fee for home going up, but then the aero versus buried. Is there a correlation that as we move into the rural areas, not only is it more fee per home, but it's more buried versus aerial. I would imagine the aerials would be the dense suburbs in the cities, right? And then maybe as we go out to those rural areas, we are already seeing more, more per home. You're also seeing more bury.

Yes. And not to take everybody too far down the round of the hole, but it also depends on how we're going to approach the buried work, right? If we're going to bore, that's going to be more expensive than if we can plow -- but it really does -- it is quite neighborhood dependent.

I mean you would be quite -- you'd be surprised some neighborhoods that end up being buried compared to some that are still aerial. So it really is a blend. It's really hard to take it and put it in any particular category. That's why I was saying you really need to kind of stack it across that $10 million, $11 million or $12 million home count that you talked about that it's just going to generally increase.

Then in terms of the build-out, we talk a lot about the big guys, right? Like we just mentioned AT&T, Verizon, T-Mobile -- what about the smaller guys? Like those are the guys that are a little bit under the radar screen, and we try to track some of those guys that hit a certain level. But like -- is there like the middle of the pack that we're missing that's also building and maybe even smaller guys that are completely under radar screen that may use Dycom for their build-out? .

Absolutely. And again, I think something you need to Dycom is we work across the whole spectrum. We work from some of the smallest cooperatives in the country to obviously some of the largest carriers. And you do see that, right?

We continue to see growth opportunities continue to do work, continue to decide the homework across that entire space. We did see a lot of the co-ops in some of the smaller -- really some of the smaller carriers really thinking about being how that's going to play into the more rural footprint if they're going to roll footprint.

That did slow down a little bit as becomes kind of get to where we are now, we do believe that will come back. But really, across it all, it comes back to that -- the idea that 125-ish million homes are going to get passed because broadband has become a necessity. It's becoming a utility. And not only that, the penetration or because of that, the penetration is very strong and the returns that our customers, big or small, are getting, they just make sense. And so we see that continuing. And I think that's what you see in the build cycle to come.

Yes. I think that's sort of the biggest incremental change we could see -- we kind of know AT&T's plan with Lumen that's the latest. Verizon, if anything, with the new CEO, if anything, they they might not do as much of a build as as sort of and I were excited for, just given the sort of new capital focus. But it definitely sounds like T-Mobile is going to do more. It also sounds like BCE is sort of ready for the next deal or next couple of deals. When you -- when a company like -- and I don't know if you -- these are if Lumos or a customer of yours, but they are -- so when you get that injection, when that transaction happens, and we expect more transactions with T-Mobile. Does construction accelerate when that -- I mean if there's suddenly -- I mean these companies like Lumos mentioned and then anything smaller.

These companies are running to some additional headwinds from a financing standpoint and things like that. But when they get investment or when BC comes in and buys 1 of these smaller companies, which, again, both of these things we think are going to happen in '26. Is that good for you guys? .

Yes. We look at all of that consolidation, all that capital infusion is a positive because it usually is going to come with -- look at consolidation, it's generally going to come with some increase in capital expenditure -- and not just that, the customers are generally going to look for as the programs get larger as they get more complex, that favors us. I often say complexity favors Dycom because they don't want to take 2 companies worth of supply chain partners and have twice as many. They want to look for consolidation. We're the largest, right? We have an opportunity to be there. And then to your point, yes, right, they're doing that because they're looking at the growth opportunity.

They're doing that because they see the need to get broadband to get fiber to all the homes across America, and that just creates a tremendous platform for us to step in. So all the companies that you mentioned are all customers of ours, and we're all excited to continue to help their builds going forward.

So I was skipping around a little bit, but -- and I think this conversation sort of in tone with the B program. But how far -- you said 125 million homes. I mean obviously, there are some homes that can't get built, right? They're just -- it doesn't make sense, especially with the LEO programs, it's obviously a much more efficient way of getting broadband to people, how many -- or what percentage of sort of occupied homes do you think get built with fiber over a sort of reasonable 5- to 10-year period? Maybe how does beat play into that -- that will be the .

So I'll come back to that kind of 100 -- 125 about 80%, that's gone through the different permutations on where we are today and completely agree. There were a lot of homes that just made sense for LEO to serve, and you saw that come through a beat. You still have 2/3 that are going to be fiber or cable.

Of the original build plan for Beat, which is like $5.5 million, right? .

Well, yes, now the total number is 4, and then you have 2/3 that will be fiber, which amounts to -- it's over 3 quarters. I think even a little more than that spend. But there's a place to the point, there's a place for that for LEO to make sense. If you look across the country, again, I think that the 100, 125 makes sense.

We do think that it's going to take time to get all the way there. that you're going to -- once you get through the -- really the speed and all the things that we talked about early on, the 10 million, 11 million, 12 million passings per year, that there's going to be a slower fade when you get into the -- and that's not to say some customers won't finish by 2030.

We think they will. But if you look across the whole 125, we think that's more like 7-plus years out to get that completed.

Got it. Makes sense. And then sort of the other side of the ledger is cable. We had optimum to be here. And it sounds like they're sort of more measured given some of the balance sheet issues that they have. What are the sort of prospects of a first of all, how big of a source of business is the cable companies? And then what are the prospects of them being bigger customers as they are seeing more competition in broadband and potentially take it the next step in terms of upgrading their networks.

Significant. We do a large amount of work for Comcast, a large amount of work for Charter, many other of our cable customers. And the consolidation, whether that's Charter costs, again, we think that those favor us as they continue to expand the footprint and think about how they consolidate and what that looks like over time. So we think those are all positive.

And then of course, you have all the work that's being done, whether it's the high split or inspite work, and this idea of getting to 1 gig symmetrical moving to DOCSIS 4.0, that all requires physical plant upgrades. And so here involved in that -- yes, exactly right. So we're actively involved there, and that's great work for us. So as they continue to do that, we said -- I said last week, -- we have 1 fiber connection that's going to go to 80% of homes in America.

We think that there's going to be another connection that's considered equivalent by the consumer, right? Now that could very well be DOCSIS 4.0. -- could be another fiber connection. Fiber as our cable customers talk about is a very large part of their plants today. So we don't know exactly how that's going to play out.

But our point for Dycom is that all work that has to get done, right? That's going to take a skilled workforce, right? That takes stability that we have. We have the breadth, we have the scale in order to do that. So it sets us up well to help walk them through that path. So again, a lot of activity with our cable customers. We did a lot of hard off work for Charter that's starting to come down now. But we do see continued opportunities as they continue to really work towards getting those higher speeds.

Right. It does seem like we had Chris Winfrey here yesterday. And so it does seem like the rural builds are slowing a little bit. I mean certainly are for Charter. It's at least that's the plan. I think you talked about -- but -- so it sounds like you can do for the cable company, a combination of in region and how the region were. But that is the -- maybe talk about the entire spend?

What does cable spend look like these days versus maybe 5 years ago? And then -- how has that shifted between in-region and outreach.

Yes. I think customer by customer, everybody knows from the earnings calls, they're generally decelerating their CapEx spend. And Charter specifically is because they're coming off Artois in large part. Comcast on the other hand is the, I believe, the largest speed winner, right? And that's going to be HSE probably likely a large part fiber plant that they'll be deploying there.

So it is a little bit of a difference as you get through that. And again, the work that we're doing for them, it varies depending on the market. But it's both, one, service and maintenance, which we haven't spent a lot of time talking about. That's a huge part of the work we do for our cable customers as it is for a lot of our customers, but definitely the upgrade work as well.

So it's not just about the work that they're doing in rural America. There's still a lot of work to be done inside the footprint. And do you think that eventually, we're not going to hold you to it. And we're not going to tell the cable company you said this. But do you think eventually they got to go fiber-to-the-home for within their footprint to compete with fiber. I would -- there's a lot of people that believe that believe that, that's coming.

Yes. I mean that's not our area to be experts in. I think it goes back to what I said. The -- NSS this is just what they've been saying on their cost rate. the challenges from a consumer perspective, consumers are looking for the word fiber today. Now as they bring the speeds up and DOCSIS 4.0 comes on and the speeds do everything that the consumer needs, that could very well solve. We could very well sell for it. On the other hand, as they continue to push fiber for their infrastructure that could solve as well. From our standpoint, obviously, we're rooting for all of our customers to win. But importantly for us, we want to be in a place where we can help them and whatever that build is.

Right. we talked about the big fiber guys, the smaller fiber guys and the cable guys. What about the length of really small guys. The company -- and there's dozens of these out there that most are not household names, people haven't heard of. What's that sort of community doing as it relates to -- because I would say a couple of years ago, especially with Beat on coming, there is a tremendous amount of activity. I think -- and I get the impression that the funding is getting more difficult. What's -- how's that community's sort of spending profile?

Yes. I think if we talk specific to overbuilders or people that are building we have seen that smaller overbuilders have been challenged. They have been challenged from a financing perspective because those builds are difficult to do coming in and you've got to build the CEO, you've got to build now the backhaul. It's in a place that maybe you don't have all the relationships locally with -- and never mind that a lot of the customers that are in those spaces are coming to build on their [indiscernible]. So we have seen a few years ago that was very busy, very active. There's a lot of people making bets there. we have certainly seen that way.

There's been folks that have been successful in doing it, and we can name a few. I mean, GigaPower with AT&T, Google has obviously been doing that for some time. You have MetroNet and Lumos. So there are folks that are doing well there. But I think the smaller ones that are going kind of market by market, at least we're not seeing as much of them today.

Right. That makes sense. Okay. And getting back to the sort of cost for fiber construction. Can you give us a sense for sort of the costs you -- the increases that you've been seeing? What's the sort of -- or maybe for you, what's the sort of the average cost of a sort of fiber build versus what it was a few years ago. What kind of -- and I think you laid it out well in terms of more fee per home and more barrier.

But there -- first of all, are there other sources of I guess, inflation in the cost per build? And just how has that trended? And how do you expect it to trend?

Yes. It's very hard to talk about it in generalities. Every customer is different. The contract vehicle and how it's coming through is a little bit different. But I think importantly, one, labor has settled down from an annual increase perspective, we're in a much more normal space, that kind of typical, call it, 3.5-ish kind of range for a year. I think overall, on the build, they have settled from a pricing perspective.

Our job with our customers is to get well ahead of these things. And so we're trying to have conversations with customers. And I think what we're seeing, and this is important to your question. What we're seeing today is -- and this doesn't matter if it's a carrier customer or the hyperscaler customers that we're spending a lot of time with, what everybody is thinking about today is a skilled workforce. And the skilled workforce is what's going to drive these solutions. And everybody really wants to make sure that they get the skilled workforce locked up.

And so our conversations and a lot of the dialogue we're having is, "Hey, Dycom, we want to get you signed up for 3 years because we want to make sure we have certainty." And so there's a win for us. get that time. And then, of course, price is always going to be competitive.

Our customers -- I mean, if you look at our large customers, they know what a foot of fiber cost, right? I mean they've been doing it a long time. They've got a lot of metrics. So we feel really good about where we're at. I would point to that we've had significant margin expansion across the year.

And I think what's really important for people to understand is that's not just from raising prices and I would say, really not from raising prices at all. That's from 1 operating leverage. But too, we've really been working hard on the efficiencies in the business. We've been very strategic about that. We've been very vocal about the opportunity there, and you're seeing that come through. We think that 1 that builds a more durable business if we're improving the efficiency, and we're improving the margins innately.

But two, that's a win for our customers, right? If we can be more effective, more efficient for them, more cost efficient, more labor efficient, that's a positive. We'll probably talk a little bit more about labor. But I think coming back to labor is going to be a really important point because I think that's part of the conversation that needs to happen in the coming years.

Yes. I mean I think that's staying on this path now. I mean I remember just a couple of years, again, pre-breathe's a lot of worries. I was at FiberConnect. I forget which 1 it was, but they were talking about -- I think the number was like 300 -- people expected 300,000 workers we're going to need to eventually deploy this fiber. I mean it is -- first of all, I would say probably didn't -- wasn't the program we thought it would be in terms of the number of homes that we originally started and how much of it was fiber.

But is there still worries about sourcing labor, especially now. I mean, so we cover the data centers and obvious AI compute build, these guys the thousands of people to build out these sort of gigawatt scale sites. Is labor an issue for you guys now and do you foresee it to be shortages going forward.

So for us, we've been very strategic about how we've been building our labor as we're looking forward and talking to our customers. And there's a lot of things that we have line of sight to that we don't talk about publicly. And that's on all parts of the business, right? Again, carrier customers, hyperscale customers. There is a lot of network basket build. There's a lot of miles of fiber that have to get built. In order to do that, there's -- that path leads directly to the skilled workforce.

So our job is to be years in front of that, and we've been heavily investing in our organization. Our strategy and what we've been doing is you really have to build up that first-level supervisor and that first level manager and that enables you to bring more people into the workforce more quickly. If you don't spend time there, you're going to struggle over time. So we feel really good about our growth path. We feel really good about -- again, we're spending a lot of time with our customers to make sure that we're both aligned on what they need us to do in the coming years, so we can get down locked up and be in a good spot.

If you think about it from an industry perspective, though, I think there's going to be a lot of challenges, John. You have the fiber to the home, which is going gangbusters. And if you think about that for the next 4 or 5 years, it's only going to be increasing. You add to that now Beat coming online, and we think that it will start to be revenue in Q2 of next year, we think that, that's around $18 billion of addressable market.

How much does that mean in terms of -- so $18 billion in addressable market for the total fiber-to-the-home folk is speed.

Yes, fiber-to-the-home and the HFC.

That's right. The HFC stuff. And then -- what does that translate into in terms of incremental new homes added per year to our build numbers. We just don't have any Beat in it, I don't think.

I don't have the math off that, but million homes and some kind of ramp that gets you from '26 and getting on playing into calendar '27 something like that. I think it's probably going to take a little more than 4 years, more like 5 years to get available on, but you have to put that on top of an already overheated $5 billion -- now you have real markets, yes, but you have all the states lined up to really be starting it effectively at the same time.

And you have a lot of the sub-grantees who are going to be lined up to be starting at really the same time. That's going to put a ton of pressure on the ecosystem. And then if you add into that, what's happening with the hyperscalers in these long-haul middle mile routes. -- that we sized that at $20 billion of market opportunity over the next 5 years back half loaded.

Well, where does that put it right on top of the same thing. So if you think about calendar '27 going calendar '28. I think you're going to see a lot of strain on the skilled workforce.

And when you talk about skill workers, I know very little about this. Are the skills and basically the people you need that are involved in fiber-to-the-home. Are they the same guys with the same skill sets as building fiber to a data center or even wiring a data center. I mean that all the connectivity through the data center distribution within the building, distributing to each rack.

I mean the amount of connectivity and fiber that needs to be laid, not just to the data centers, but within the data centers is astounding. And do you guys -- I mean, first of all, is that the same labor pool, number one? And I guess we're going to get to that the complete different section, but are you guys involved in that?

Happy to talk about that. A huge advocate. I love talking about the skilled workforce. It's where I started. The answer is, yes, you are competing, but that's at about when kids are in about eighth grade, right? That's when you're going to start competing about whether they're going to college, whether they might becoming electrician, or whether they bring them into fiber telecommunications infrastructure or they might go a different other route. So it's really kind of starting that early.

But at some point in time, yes, we're competing to bring labor in on the telecommunications side. We might be competing with McDonald's or Walmart or other types of infrastructure or skilled trades. It can be the full spectrum. And the question is, how do you create more capacity there. How do you really change the paradigm that we have today and the stigma around moving into the skilled workforce and what opportunity that is compared to going to college because as we just talked about, there's massive opportunity in the skilled workforce over the next decade with anything that has to come online.

And these are challenging, very rewarding careers both financially and personally. So all of our job is to really continue to push to get more people into that. But I think as all those come together, at some point, they do compete with each other, right? At some point you are, you have a limiter of people who want to go out and work with their tools that you have a lot of industries that are in a growth cycle at the same time.

Yes. It's amazing. We were at our tech conference last week. -- we met with the Cruso guys about the Stargate site down in Abilene, Texas. So it's going to be scaled to 1.2 gigawatts, if I'm correct. Have workers there a day, every day on that site, 8,000 and there's a big number. There's a ton of these gigawatt-type projects all over the country right now. So that's just a lot of people. So yes, things are going to get worse than it better.

Can we talk about other bottlenecks in terms of building fiber to the home and sort of how they've trended outside of labor. I mean what are the other -- I think permitting is always 1 of the things that is an issue. Does that sort of -- is that a bit of a governor on your guys' growth?

Permitting has been a challenge over the last few years. It has been the primary bottleneck. Many of our customers would have gone faster, but for permitting. It definitely is there when you start to ramp, but it's always in front of you. And it's our job in many of these -- with many of our customers, our job to really be in front of that to be helping with that. There is a policy that's coming through the new administration that is targeted to help with that. I do think on the Federal level and on the state, as you think about environmental permits or working around railroads or going on rivers that can help.

I think when you get to a local municipality, it's really tough to change that. these local municipalities have limited funding, they've got limited staffing and resources. So you can put a shot back on them, but I'm not exactly sure how that plays through. And I was saying earlier, showing up with a truck and digging up the street on day 31 just because you can doesn't mean you should.

So I think that has to happen. I do think that as we look at all of the work that has to get done, permits are going to continue to be a bottleneck -- but I am very glad to see that there is now efforts and work around it and a lot of conversation that should help free it up.

What is the timing on that? First of all, I love the shot clock thing. I remember following the SEC for years with these deal approvals, they have the shot clock, but then they would stop the shot clock. So why do we even have a shot clock if you can stop the show.

Yes. What's the timing on potential change to the sort of regulatory the permitting, you said there's some Federal action.

There is, yes. There's a number of policy documents that are coming through. I couldn't give you the exact timing other than their inflow today. Certainly, the hope is that they're getting in front of a lot of these things like Beat. I mean I think Beat is 1 of the momentum pieces behind it. I couldn't be specific to that. But to the point, you can put shot clocks, you can put all these things in front.

At the same time, at the end of the day, you've got people that got to go do work. And you got to figure out how to open up that conversation. What we really need is clarity and consistency. What you don't want is when you think you're going to get a permit and you don't, right? So as long as we can improve the system and the process so we know and we don't just get held up for no reason for a long period of time.

I think that's going to help the time and it does feel like that's going to be coming to the system.

And just finishing up on Beat. So I think you said that money really sort of started to flow in '26. And then can you lay out sort of half your expectations for sort of how that scales. What's the biggest year in terms of the bed build? I mean, first of all, I have to say I haven't been following it as much in the last, say, 6 months, but we used to -- I mean going back 3 years.

It's been a 4-year sole exactly.

I guess we get to target better something. I don't know, but we were writing about it following each state. But I guess if all the states approved -- remind me of the process here, I think they had to rebid, right? With the Trump administration came in and all the states have rebid, so do we know who the winners are in each state and when when the money is going to be allocated.

We do. So there was a benefit of the bargain around that needed to go through. They needed to get NTI approval. 29 states as of my last check, 29 states have had that NTI approval. -- they just need to get funding from this now. That's the last step. One has gotten the funding Louisiana. It's anticipated that the approved states, and there'll be more approvals, but the approved states will get funding sometime before the end of the year, maybe even before Christmas, because that was NTI. So all of that is positive momentum, right? It's all positive indicators. And again, that's why we're having a lot of conversations.

We talked about on our last earnings call, we have over $0.5 billion in verbal Beat awards, which doesn't mean anything until it's on paper, but the point is it goes back to this concern around the skilled workforce. People are really worried about having the labor in front of these builds. They're committing to pricing, they're committing to a time line.

They want to make sure that they have the people on their team that can go deliver and execute.

Okay. Right. So that's a lot of focus on the fiber-to-the-home opportunity that's still a lot left. And frankly, the biggest year is still ahead of you, at least based on our math. But let's pivot to the long-haul fiber opportunity. First of all, I guess, is it all driven by -- when I look -- think of the long-haul power, is that all driven by data centers and the data center, but other is -- there other aspects to it.

Largely. Largely. You have infrastructure that's been there for 25, 30 years. the capacity is even close to what they're looking for today. And very importantly, the latency is not even in the ballpark. And they also need redundancy. So if something does get hit in the field, you don't want to take down their entire cloud, their entire network. So they are looking for redundancy as well.

So the primary driver behind that, absolutely, for any of our customers be very vocal about that. Lumen has been very vocal about it. But it really is about connecting ultimately data center to data center across the country, you're talking about tens of thousands of miles. And that's a market opportunity that I said before, we sides about $20 billion, and that's just addressable for us that do include the supply materials to get done in -- that $20 billion is really about the next 5 years, but it's not limited to that. We think it's going to continue probably for the next decade.

And I hate to ask you because no 1 know the answer to this, but that $20 billion number. So we follow data centers, we try to extrapolate based on what like saying in any given day or all the big hyperscalers, he's talking about 250 gigawatts over the next I think it's 8 years. I think there's no way they're going to spend the trillions of dollars and needed to do that.

But like the $20 billion market size, what kind of -- I think it's very hard to know this, but like that can't assume that all this build-out that people are talking about -- all the does.

Not even come close to assuming all that. And we think it's very conservative. That's quite literally lined on paper. That's from a lot of conversations. And of course, we're spending confidentiality of all of our customers. But we have a unique view perspective where we're talking to a number of hyperscalers, a lot of the carriers and so we can aggregate all that because, again, we think it's important that the industry understand how much is coming through because it needs to get -- you got to -- it has to be prepared for.

So this is the fiber spend for deals that you guys are for AI compute infrastructure that you feel you have a line of sight to getting built out over the next 5 years.

Right. And it's got very little kind of -- all the future state stuff that you're talking about, not even remotely in tone.

Okay. And where do you guys fit in the ecosystem? So like obviously, Lumen is a big one. Zayos another builder. We actually had the Optimum. I can't use the optimum guys in here talking about LightPath. I think that's system built. I guess you guys are sort of contractors for all these. You guys are actually doing the work that these guys are signing up.

Yes. And again, it comes back to the skilled workforce. And these are the same men and women that are doing the fiber to the homework that could do this work. Similar type of equipment, sometimes it's larger. But yes, at the end of the day, we're there to help them get these highly complex. These routes are much more complex as fiber to the home, take a ton of planning, took a ton of foresight in order to get it done. And they're going to take a long time.

And I think what a lot of people think about is how is the CapEx from the hyperscaler is going to move, how is it going to ebb and flow. This is not a big spend form, $20 billion over 5 years against -- it's not a big number, but this is a highly time constraint, right?

This is probably a decade plus of getting these networks built to the capacity that they need.

And it seems like the data center, maybe this is sort of similar to what you're seeing on the fiber to the home world. But from probably in the data you had sort of core data center markets, Northern Virginia, maybe Silicon Valley, maybe Chicago. The fact that they're sort of spreading to more tertiary and secondary markets, frankly, where they can get power and -- or sort of have the conditions for their own behind-the-meter pack solutions.

How does that affect your economics and the sort of size the opportunity?

Yes, that's only going to increase the market opportunity. And again, we're not or kind of the Dycom sell, if you will, is we're here in the middle of the digital infrastructure. We've got a skilled workforce, whether that's what we're doing in telecommunication side or whether what we've added in with Power Solution on doing data center electrical work. There's a ton of infrastructure that has to get built that's completely absent of AI, just as we consume more data, right?

And that's where we've positioned ourselves, but also positioned ourselves to take advantage of AI and the influx that certainly is going to come through. We'll all see exactly what it looks like. But I do think it's really important for those 2 things to get separated. There's a huge amount of infrastructure that has to get built even if a lot of this AI and these huge spending numbers don't come through.

And you mentioned Power Solutions. Can you talk about the recent deal to acquire Power Solutions and sort of how it helps you further your efforts in the data center area and sort of expectations for the integration process and the synergies exciting deal for us.

A large deal for us, a wonderful business, been there for 27 years, building data centers in the DMV. So the Washington, D.C., Virginia, Maryland market. This, again, is really just an extension of our platform. Hyperscalers have pulled us into their campuses. We're doing fiber within their campuses themselves. This is quite literally just crossing a wall.

So skilled workforce, different skilled workforce, not fungible with our current crews. But at the end of the day, you're solving for the same equation, right? How do we build the scale workforce for these very complex tasks that have to happen over time. And for us, it gives us tremendous opportunities to further our relationships with the hyperscalers on both sides, right? So something that we're really excited about. We think it's going to be fantastic for our shareholders and just want to welcome our solutions folks to our team.

It makes a lot of sense. It's sort of vertical is you're just going deeper with your data center customers? All right. And maybe to wrap up here. Could you talk a little bit about sort of how you guys think about operating leverage for the company on a sort of multiyear basis and sort of what the main priorities are from a capital allocation standpoint.

Yes. So our capital allocation fundamentals haven't changed, right? We're going to fund organic growth first. Obviously, M&A has taken a forefront. We do anticipate doing further deals in the same space as Power Solutions in the future. But as far as how we think about net leverage, that's unchanged. We're not going to change the paradigm overall. So we're only going to do that where we can quickly bring it back down into that range around 2x -- and this Power Solutions deal is 1 that we can bring that down quite quickly, somewhere in 12 to 18 months, we backfill 2x.

So -- the fundamentals are still there, but I would certainly -- we are looking for additional M&A opportunities in the space and I think that will be part of the future in additional organic growth.

Great. Dan, this is great. I appreciate you being here.

John I appreciate it. Thanks.

Okay. Good afternoon, everyone. Welcome back here. I'm Steve Fisher, UBS Machinery, Engineering & Construction, U.S. Building Materials analyst. We are thrilled to have the management of Dycom here with us. We have Dan Peyovich, CEO. Then we have Callie Tomasso here as well.

Just one quick disclosure. As a research analyst, I am required to provide certain disclosures relating to the nature of my own relationship with any company on which express to you on this call today and that of UBS as well. You can find these disclosures at ubs.com/disclosures or you can reach out to me afterwards, and I can provide them to you. With that, I'm going to turn it over to Dan, who will also...

Speaking of disclosure Steve. I might make forward-looking statements today, I will be shorter. Please reference our website for safe harbor statements. With that, let's jump in the fun stuff.

Terrific. So Dan, you've been CEO for a little over a year now. Stock has doubled over that time period. As you reflect back on this year other than the stock price, what are you most pleased with what stands out to you? And what do you think you're going to focus on in the upcoming fiscal year and basically 2026?

Yes. It's been an exciting year all around for Dycom. And what I'm most excited about and what I'm most proud of is just our team. We've got over 16,000 people that are out there working in the elements, working with their tools. Our customers are asking a lot of us today, and we're very excited to rise up and deliver that for them, and our people have done that. While we've been doing that, we've been really trying to work on our own internal engine and build this durability that I've talked about in several of these fireside chats and talked about on our calls, really build this durable enterprise.

To do that at the rate of growth that we've had, not just top line growth, but also while we're continuing to grow margin, while we're improving cash flows and doing large deals like the one we just announced. I'm just really proud and impressed by the people that I get to work with every day that being able to achieve that because that's a tall order.

So the stock performance and the quarterly results that you've had would suggest that pretty much things are going really well. But any lessons that you've learned over the course of this year that you might do differently as we go into next year?

I don't think we have enough time to go through all the lessons, Steve. No, I mean it's a learning role for sure. One, just honored to be in the spot, honored to be part of the enterprise. It's been a fantastic year. I've learned a ton every day. I'm very fortunate to be surrounded by a very supportive Board that's got a ton of expertise and a ton of talent. They've been great advisors, great partners.

The team that we have at every level of the organization, I learned from every day, and we learn from our customers. I could go through a number of specifics, but I think what we've really tried hard to do is make sure that the mistakes that we make are little ones that don't impact the business in a big way and to do the big things right and to do them with a lot of thought, do them with a lot of attention.

And a lot of people that have heard me talk, we're really thinking about that long-term perspective. So really proud that we've done well there, but it's a laundry list of things that we've learned.

But it sounds like you 80-20.

That's right. That's right. I can't get everything right, but get the important things.

Yes. Got it. Okay. Well, obviously, the acquisition that you made is, of course, very topical. So I want to spend a little time on that. Power Solutions, a $2 billion deal. The biggest move that you've made and probably the biggest for Dycom in a long time, certainly the biggest depending on that if you adjust for market cap and inflation and things like that.

But move to diversify into internal electrical create opportunities in the data center area or broader opportunities in the data center area. Can you just talk about that deal, talk about the significance of it? Why now? Was it opportunistic? Was it something the Board was proactively looking to do for a while? How would you kind of frame this deal for people?

Yes. So the setup comes down to the strategy that we put together. And as I said, to start, it's all about long term, right? It's about long-term return to shareholders, long-term opportunities for our people and not just jumping into things, but looking at long-term drivers for the business.

The ecosystem that we're in today in digital infrastructure in Dycom telecommunications business has been growing. It's been growing across multiple drivers for numerous years. And part of that, going back several years, is the hyperscalers are really getting involved. This need to upgrade the long haul, the middle mile network and enhance both capacity and reduce latency effectively nationwide to get the grid connected, city to city, state to state, campus to campus, as we've kind of marched along with those relationships and trying to figure out how we can solve the puzzles that are in front of them and that we can be a good partner to them.

One, the relationships have gotten deeper and stronger. And two, we've gotten closer and closer to the data center. We thought going back several quarters about work inside the fence. And so that's work that's on the other side of the right of way going into the private property of the data centers and bringing the fiber connectivity, which is ultra-high capacity and again, pushing towards ultra-low latency, bringing these networks to connected data centers back to the right of way, connect them back to our carrier customers and network and then also connect the data centers within the campus.

We're landing that fiber today inside the meet-me room. So we're literally one wall away from everything that's happening in the data holes. Our strategy, and this goes back to conversations that certainly, we've been talking about for some time, but in earnest over the last year was about taking that next step.

Why not cross through that wall, open up this much wider aperture of opportunity. At the end of the day, it's really about how do you have a skilled workforce that can deliver on a very robust market and very robust demands from the customers. How do you just move that one wall, you're still dealing with that skilled workforce, but now you're into a new space with a new opportunity.

So that strategy really came to that made a lot of sense. We've looked at a lot of businesses. We've had other management meetings as well. We were very pleased when this came through a competitive process to us. We had not heard of Power Solutions before June. But when we got the book in June and started to have conversations, we could immediately see the cultural fit, which is hugely important in any especially large acquisition, but in any acquisition -- that cultural fit was there.

And that culture for us is really about the front lines first. How do we make sure that we can provide value and really lean into that skilled workforce and how do we use that as a solution set for our customers. Fantastic ownership team. Fantastic depth in their organization, strengthen their leadership group. They've proven their ability to grow 27 years in the business and high concentration in data centers, which really makes sense with where we are today.

As all that came together, it really fit into our strategy, move them right to the top of our list. And again, just very fortunate that both sides really felt that energy and synergy together. So again, a big acquisition for us. It's really an expansion of our platform overall. Adds to the other demand drivers and really probably one I want everybody to walk away with. It does not take away from the telecommunications focus.

That's been our focus for decades. That certainly we've shown that we can excel there. We continue to raise the bar with our customers. And there's huge opportunities for growth, and this goes back to size adjusted even for today for Dycom as big as we are. Even size adjusted, there's more opportunity in front of us on the telecommunication side than there's ever been, and I'm sure we'll talk more detail into that, Steve.

But when you take those two things together, we're just really excited about the business and really optimistic about the future.

Yes. Sure thing. We thought that you've had a number of pillars of growth that have been even increasing over the last year. That's just like you're saying, adds on another big one.

Exactly right. Yes. If you think about -- we talk about them as demand drivers. Just really if you think about our business, think about this as adding another demand driver that we get great synergies, great opportunities to cross-sell. There's a lot of things that come out of that.

Now in terms of integration, you mentioned there's a good cultural fit that you found that probably helps out to some extent. But how should we think about the integration process and the potential for synergies with this deal?

Yes. One is, as we're working towards close here, and we'll close before the end of the calendar year -- or sorry, excuse me, the end of the fiscal -- our fiscal year, which is in January. We're already working on integration. I think one of the things that we found that was very special about Power Solutions -- this is a business that was started by 2 electricians that built the business from 0 into really the kind of the strength and breadth that they have today. It's a really sophisticated business. They've got a solid ERP in place. They put a ton of time and invested in their people around succession, how they build their business, high customer focus, how do they raise the bar for their customers.

What it means is, Steve, to the integration side, that sophistication really helps. And because this is an extension of our platform, there's a ton of work to do to bring them in, but we also start from a really good place. And when you have that cultural synergies, it just makes the conversations a lot easier.

And I can tell you, I mean, I was just on the phone again today with one of the owners, and we're both excited to continue walking through this as we get to and through the close and really feel like things are lining up well for really, really strong integration.

Terrific. Now in terms of -- you mentioned framing this as sort of a skilled work and adding to the skilled workforce narrative that you're bringing to the table here. I think they've been putting up mid-teens growth. How should we think about the workforce requirements that they have to sustain it?

Do they need to be going their workforce double digits to be able to keep that up and can they do that?

Yes. So like us, they're a large self-performed shop. The majority of the work that they do is self-perform. They have to -- as they grow, they have to grow their workforce. And it's just like with us, it takes a lot of strategy, it takes a lot of discipline in how you think about that.

Their workforce is union. And so for them, it's really about how they partner with the union to make sure that they're feeding and getting enough future work for us. And again, when I talk about the sophistication level that Power Solutions brings, they've really been in front of that. They're really thoughtful about making sure that they're well ahead of the growth that they know that they need in a workforce and really thoughtful about how they bring them into the organization.

So yes, the short answer is yes. If you're looking at -- we talked about 15% growth CAGR. We talked about 15% growth opportunity this year. It's not exactly 1:1, but you are talking about a lot of head count growth that will happen with that. We've spent a lot of time talking through it with them. We feel really good about how they're set up to do that.

Great. Now as you talked about this business is located in for data center central, if you will, in the DMV area. But it is a concentrated regional exposure then it's $2 billion of deal exposure for for one region. How should we think about that any risks associated with that concentration, how comfortable you are with putting $2 billion into one specific region?

Yes. I would start with -- this is a space that I personally know very well. I started working on my first data center in 1998, my prior career, spent decades working with the hyperscaler customers, the Amazons, the Microsofts, the Metas of the world. So I personally know this space very well. I know how the contract. I've negotiated many of the contracts on both sides.

Know how the contracts work, know the ecosystem, know the players, know the risks, know the opportunity set. So this is something that not just myself, the life started there with many people in our organization that way. So we walk in with eyes wide open as we looked at different businesses and different business opportunities.

What we really liked about Power Solutions is they are in the largest data center market in the world. They're in the data center market, the DMV that comprises 27% of the U.S. data center capacity and is projected to get 30% of the forward build. All of those signs point to large opportunities for growth. And we also like that there is a significant player in their space. They're one of the largest employing 2,800 skilled workers in that region is a significant thing.

So being large in their space and really having established themselves at that high level of certainty that they deliver to their customers, raising the bar overall, just sets them up well for continued growth. We could get into kind of the whole AI bubble conversation, but I just want to point to our strategy because it's really the same for our telecommunications business.

Where we are is we're that intersection, right? We're bringing the skilled workforce for the infrastructure that needs to come because if there's one thing that we know over the last 30 years, and there's one thing we know going forward is that we're going to consume more data. As we consume more data, the infrastructure has to keep up with it.

That consumption has led to data center growth that I believe if I have this number right, it's at least double digits over the last decade that data centers have grown. That's obviously without AI because that's really only come on in the last couple of years. Projected going forward, if you think about it, industry analysts talk about 16% growth CAGR that is not including AI.

So that's purely just to keep up with data consumption. We feel like that's a really good opportunity set and gives us a lot of confidence in the ability to continue the growth with Power Solutions overall. And what's great on top of that is AI and a lot of the energy and [ forever ] behind it, can only add to that incrementally.

So we feel really good about being positioned there. It's the largest space in the country and is again, I'm sure we'll talk about. It expands our platform so we can use this as an opportunity to continue to grow this part of the business in other places, right, whether that's organically or whether that's through further M&A.

That's actually where I wanted to go next is how do you build on this business if it is more localized. You mentioned union workforce and maybe it's not so easy to sort of make that workforce fungible to a different region? Do you have to do it via M&A, how opportunistic can that be?

Yes. Let me first just come back to the skilled workforce because it's such a big part of this, right? So we'll have over 19,000 men and women working across the country. So 16,000 of those are current Dycom people in 2,800 on the Power Solutions side. That 16,000-person workforce is highly dispersed. We're over all 50 states.

We're working a lot of different municipalities. We're obviously working near and in some cases, in a lot of data center campuses. So that gives us a huge scale and size and platform to be able to take this and leverage it into something else. I do want to be clear that the workforce that Power Solutions has and the workforce that Dycom has, they're not fungible.

We don't look at those things that are going to cross between. At the same time, we do believe that there's a ton of synergies where we can, one cross-sell and two use one to help the other. So having us be across 50 states and taking Power Solutions is what they've done in the DMV gives us a really good opportunity if we want to think about organic expansion or organic growth, the relationships that they have with the general contractors, the relationships that we both have with their end users, the hyperscalers and who we're doing and work directly for really give us a vehicle to have those conversations.

At the same time, we're going to look at future M&A. And I would add that this widens the aperture on what we can look at. Our plan is to stay focused overall. We love the digital infrastructure space. We love the place that we play in it. We think that there's a critical need skilled labor resources. And we think that we bring an offering that is difficult to replicate.

Not completely unique to us but very difficult to replicate. We think that sets us up really well, and we want to continue to lean into that as we go forward.

Now I think you talked about on the conference call that this business has been upwards of 90% data center driven for quite a while, in the event that the data center market does not evolve into the way that we all think it will, what is their flexibility and experience in being able to kind of shift that skill set that they have. Can you just port that over to other buildings and structures that will require those types of services.

Yes. I think that what they've done is build a skilled workforce that can do an incredibly complex project. Working on these data centers. I'm sure a lot of folks that are listening to the call or in the room understand, these go very, very fast at a ton of people, you have a ton of materials are getting put in place in a very short period of time. That's a difficult thing to build.

Taking that skill set, you can absolutely not one. We have a ton of confidence in data center growth and specifically in that market. So we very much believe that we're going to have plenty of opportunity to continue to grow this business for a very long time in their space. And they do have 10%, which is $100 million. It is a significant number that's in other spaces like health care.

But one, a ton of confidence there, but two, absolutely, this is a portable skill set that you can take into adjacencies as needed. But again, today, looking at the backlog, looking at the opportunities that we feel the ton of confidence in the ability to continue to grow in the data center space. And quite frankly, that was what we were looking for.

Great. Now maybe just one last question on this topic in terms of the balance sheet impact from a financial perspective, what do you think is the right level of leverage for the combined company? And how quickly do you think you can get there?

Yes. And so our fundamentals there really have not changed, right? We're not changing the way we have disciplines around our capital allocation. One, we're still going to continue to fund organic growth first. That remains a priority, and we have a lot of organic growth potential in front of us. And two, we're not going to let our net leverage get out of control. This is going to raise it up to under 3x. We're going to be able to bring that down relatively quickly in 12 to 18 months.

We feel really good about the position. Like I said, maybe within that time frame, we could be doing other acquisitions. Probably that would be smaller, but not entirely. But the focus overall, we want to get back into that under 2% range over time, but it doesn't mean that we won't move in and around that space as we continue to think about other opportunities.

Great. So maybe shifting or digging a little deeper into the data center topic, you mentioned you're very confident in this market opportunity. How big would you say the business is for you today? And you've talked about a $20 billion market opportunity over that next 5-year period. How do you see that developing on the fiber side versus the electric side?

Yes. So -- and it's a really good point, Steve, you said it well. The $20 billion is nothing to do with the work that's addressable by Power Solutions. The $20 billion is really us looking at lines on paper, really lines on maps based on conversations with hyperscalers, based on conversations with our carrier customers of all of the work that needs to get done to bring the networks and specifically bring the fiber networks up to where they need to be for current compute capacity and certainly future complete capacity.

We think that over time, that $20 billion is going to be a light number. We think that's going to continue to increase. And you've also seen many of our customers talking about new routes, increasing their expectations of how much revenue that they're going to see coming through the hyperscalers, because the short answer is as we use more data as we enter into this AI raise.

The infrastructure that's there is 25 and 30 years old. These long haul, the middle mile networks that connect the data centers ultimately nationwide that connect the networks nationwide. It's aged and it's not of the capacity, and it doesn't have the configuration to get low enough latency for what they need, what they need today and certainly what they need in the future.

So there's a ton of work that has to happen. It's highly complex, and it's going to take some time. But we would only reiterate our confidence in that $20 billion of really market opportunity over the next 5 years. And we think that even after you get past 2030, that's only going to be increasing.

Now this may straddle into a conversation about margins, which I had planned for later, but can you mention the complexity of this work. Can you talk about how these projects are -- in what way they are complicated, how does that create a competitive advantage for you? And how do you differentiate within that context?

First, what you see is they take a long time to kind of come through the ecosystem, come to the supply chain. So you hear a lot of our customers talking about them. Lumen was very vocal, because they have a lot of conduit that was in the ground for this overall work. Really excited to partner with that customer. That's work that we've been doing for them for some time. That work is different than new construction.

New construction where you're building entirely new routes, there's a lot of planning. There's a ton of permitting to do and these are very long haul, long routes that are going to go across multiple municipalities. And in order to coordinate that, one, it takes time. And so there's -- that's why we talked about 2027, you'll really start to see these projects ramp up.

It just takes out -- the gestation is that long to really get them in mass, not that there won't be revenue for us between now and then, there is. It will be increasing between now and then, but that's when you'll really start to see them come on because of the complexity. To coordinate that level of complexity is significant.

We feel that we are superbly positioned to be able to do that. We have workforces that are all across the country. We're not in every municipality, but we're on a whole lot of them. So we know how the municipality works. We know the different kinds of terrains, the different neighborhoods that you have to be in and the different permitting processes, the different inspections.

There's a lot of things you just got to put together, because this is essentially a bullet shot, right? You got to go one spot to another spot -- and you got to have a good flow of the crews. You got to have a good flow of the work and bringing -- making sure that you have the materials ahead of the work.

To coordinate all of that, even though the work itself might sound a little more simplistic, is a very large effort that requires a ton of skill. We believe that we differentiate there. But as it comes through the space, that complexity, we have seen that be a challenge for others.

And despite that complexity, do you still tend to face some entrants into that market that try to get in there as a more local player.

Absolutely absolutely. And there's been big numbers even before we gave the $20 billion market opportunity in the next 5 years. There's been a lot of big numbers that are out there, and that's always going to bring attention. And the work that we do across our space, it's always been competitive. We have many competitors. We have many competitors that can deliver and deliver well.

But as the complexity goes up, as the size goes up, it does change the game. And so that's going to take some time to work through the system as well about who can really perform the work, who can provide the level of certainty that our customers are ultimately looking for.

And again, I'd like to say that complexity favors Dycom and we're in a good position.

Great. So I think we've covered one of your many pillars of go maybe 2, but --

It's an exciting time for Dycom, is it?

Yes, exactly. So maybe we can shift to another one, which is fiber to the home. And so I think some investors out there have a perception that fiber to the home is peaking. And so I'm curious how you think about where you are in the cycle right now? And how do you think the next couple of years are going to be different than the last couple of years we've just completed.

Many points to cover here, Steve. Here's where I would like to start. A lot of this discussion comes in homes past. And it's a really easy way to talk about it, but it's not what translates directly to what's meaningful for Dycom. We're still very much in a ramp in [ homes passed ]. You hear our customers talking about it some more large customers still have significant ramp to do in their programs. Often, we hear discussions that make it sound like it's kind of reached some peak or it's already going to start decelerating -- that's not the case.

We have several more years of just the homes passed count continuing to increase over time. And in some cases, with some customers pretty significantly. So I think that's the first really important point, tons of growth opportunity there. The second is there are 2 different curves. There's the homes passed curve, and then there's the revenue opportunity curve.

And those are not directly connected, because over time, if you think about the -- in the entirety, and this is not specific to a customer, not specific to a program, not specific to the location. But over time, across all of those homes that are going to get passed, the general cost basis is going to go up over time.

You're going to have more underground work. You can have a lot lines that are further apart, because generally, you're going to prioritize the less expensive ones first. Again, it's not exactly true for every customer, but kind of across the board. So the revenue curve actually looks different and is both elongated and kind of delayed after once you do reach that apex of homes passed, you still have time after that, while the revenue is still continuing to go up even though the homes passed going down.

So all that to say, there's a long, long story left here. We think that there's a good 7 to 10 years left of just getting the 125 million homes passed. Remember, the 125 million, which is about 80% of the total homes in the U.S., which pretty well lined up with our customer commentary and what they've said they're going to get to.

Remember, that's talking about one fiber connection per home. Ultimately, we still believe there's going to be 2 equivalent connections for home. We're working with our cable customer today is on equipment replacement as they continue to increase the speeds in their plant, but it all comes together to add to continued infrastructure needs that going to go well into the next decade.

And from an actual year-over-year growth rate perspective, do you think we're were sort of plateauing on that growth rate? Or you think we can still see a consistent growth rate going forward?

I'm going to caveat and say, I'm not being specific to Dycom's growth rate, because we'll talk as we get to the end of this year, we will give an outlook for how we're thinking about next year. But I don't want anybody to tie those things directly together, but the short answer is we see a ton of growth opportunity in the fiber-to-the-home space for Dycom and certainly for the industry next year over the next few years.

And you mentioned multiple line connections and cable. How broadly are we seeing this investment across your customer base? Should we really be thinking that beyond the top handful of companies, it's a broad investment that can be driving your business?

That's exactly right. If you look at the Telco side of the business, virtually all of those customers have announced build programs. They're in some place, some earlier stages of ramp, some later stages of their build programs. But I don't think it's entirely unanimous, but certainly, in large part, all moving in the same direction which is again a very big positive.

Okay. Let's move on to BEAD. So it's been a long time coming. It seems like...

We've been talking about it for a while.

We have. It seems like it's getting closer. How excited are you getting about BEAD? How excited should investors be -- is this for real now?

We've been talking about it more than 4 years now. It is exciting. And this is -- it's like you said at the beginning. We have all these demand drivers and so many of them are really heating up and coming online at the same time. And we can talk about the goods and some of the things that we all got to be prepared for as that comes through.

It is great to see BEAD where it is today. The program as it stands, as it's coming out has been more attractive to our carrier customers. That's a positive. We've seen there was a lot of discussion around what was the play for satellite, what was the play for fixed wireless, of all the states that we've accounted for to date, over 2/3 of that is going to be terrestrial plants. So either fiber or HFC from the cable providers.

That means a lot of infrastructure to get built. That equates to more than 3/4 of the actual revenue spend. And that amounts to our number is somewhere in the $18 billion to $20 billion of addressable market for Dycom in that BEAD program, which is probably going to take.

i think they're saying 4 years, but it's probably going to take a little more than 5 years, because we have so many things coming on same time. It's an incredibly exciting time. This is something we've been talking with the states. We've been talking with our customers about for 4 years, talking about them earnestly and get really getting ready for what that opportunity looks like.

Over the past year. It's really started to take shape -- excuse me, we start losing my voice at the end of the day here. So we're excited to be in that position. I think our customers, they're concerned about making sure that as they launch into this program that they've committed to what the rates are.

They've committed to the time of the build, they want to make sure they have a partner locked up to go deliver on that form and that's where Dycom comes in. We're already in numerous conversations. We talked about a lot of verbal awards in our last earnings call. We do believe that we will see that turn now as 29 states have been approved as of yesterday by NTIA. That's a big milestone. One has been -- that Louisiana has been funded. As that funding comes through, we believe that will start turning the contract opportunities and that build will start next year.

It's going to be a lot coming out of the gates. Because now you have a lot of states that are lined up at the same point in time. It's going to take some time to work through the system. But I think as you look towards -- there will be some revenue opportunities next year.

But again, '26 and '27 and you're getting a theme here really start -- sorry, calendar '27, calendar '28, you're getting a theme here, really start to heat up, if you think about being really start to heat up as you think about the long haul and middle mile related to the data center space. A lot of things coming together, you're still going to have fire for the home going at a very high clip in that period of time. So we're doing a lot of future planning about how do we make sure that we're in front of that for our customers so we can deliver on their aspiration.

And similar to the question about the data center build-out work, there are a lot of local competitors involved in the space. Do you think you need to see that type of bidding activity work through? Or like you said, you're already engaged with some of your customers is -- is there going to be enough work on BEAD to go around for everybody?

We're in a great position. The conversations we're having are with some of our largest customers and there was some very, very small cooperative -- so we love that we -- and it's just the nature of our business and the -- really, the footprint that we have and the relationships that we have that we have that opportunity set, that's important to us, right? This is not a single play for Dycom.

We really think that we're going to have a good look at great opportunities. And as we look at our overall backlog, we're going to balance BEAD against these other very strong demand drivers. We're really committed again to this long-term view.

And so part of that is making sure that we continue that diversification overall. So we think that opportunity will be there. There's going to be smaller builds that I think some of the more local regional players will do very well.

I also think there's going to need to play through that cycle a little bit about where the supply chain can really deliver as you have these other demand drivers coming on strong.

What's really important to remember here is that at the end of the day, all of these things are going to pull from the same skilled workforce. And that workforce we have it very strongly today. We're talking about a lot of workforce growth that's got to happen. We're putting a ton of time, energy and money to getting ready for that. We have a number of training facilities around the country. We're building additional training facilities.

We just bought a large property outside of Atlanta that we're going to build really as kind of a signature training facility that's got a little town replicated that our people can stay in and get trained in all of that is about trying to future-proof how we're going to build our workforce to keep in front of that. I think as an industry at large, though, that is going to be a big, big challenge and to put a lot of pressure.

At the same time, I think it's going to create huge opportunities for people to enter the skilled trades. That's something that I'm personally excited about. That's where I started my career. Every time I get to get on stage, I try and at least talk about it a little bit. But I think it's a huge opportunity for people to enter into the skilled workforce and really see a long horizon of opportunity that's in front of them.

So hopefully, all of this money, all these things coming together can help lead to that.

So next steps on that. Bookings and revenue flow? How do we think about the sequence of those and the timing.

We could have -- we could have some backlog to announce by the time we get through this I would think the opportunity is definitely there by Q1.

And we think there will be revenue opportunities in Q2. There's not going to be a hockey stick coming out of the gates. I think you're going to have some that can get started because maybe they're not as larger builds or things are just kind of getting off the ground.

But I would think it's really starting to ramp up in the back half of next year from a revenue perspective.

Great. Maybe a couple of operational growth drivers that I think have emerged over the past year or so margins, I feel like a couple of years ago, the focus was more in our discussions about the revenue growth opportunities. But I think as you've shown this year with some of the upside surprises, there was a margin narrative here as well. Can you talk through how that has come to be and how you see the key drivers of margins going forward here?

Yes. As you mentioned at the outset, I moved into this role a year ago, right, when that happened, Drew, our CFO and I said to investors is that we saw 2 areas for significant improvement. That we were putting a lot of time and effort into. One was margin growth and one was cash flow improvement. I'm extremely pleased and proud of the team and what they've been able to deliver on this year.

You've seen significant margin improvement, 169 basis points this last quarter that we just reported on year-over-year. That takes a lot of effort behind it. That certainly is a mix of our growth, right? But it's also a lot of work that we've been doing to the engine itself, and this goes to these durable outcomes and you can carry both the cash and the margin improvement.

But we've been working on the engine of Dycom to be more productive, to be more efficient right, to translate that into stronger margins, because it's not only good for us, it's good for our customers for us to be successful, too. That work has come through and that creates this durable margin growth. And I would tell you that there's still opportunity for us to improve margins.

Reminder that we are seasonal. Also that is not always going to be perfectly linear, stair-stepping every quarter. But we do see that. And we'll be clear when we get to a point that we don't see continued margin growth opportunity. But today, as we stand, really proud of where we come to, but there's still opportunity.

And maybe a bit of a nitpicky near-term question in that regard. You've had a very good margin upside so far the last 2 or 3 quarters. I think your implied guidance for the fourth quarter, the year-over-year is a bit of a step down in the year-over-year improvement in margin. Anything to discern on that? Is it conservatism? Is it accounting for weather, that you can't be sure of in this time of the year.

No read-through for anybody to take away there. Q4 is a very seasonal quarter. We've got 2 holidays that are kind of midweek, that's always an impact for us. when we're building what we're giving you all for the outlooks, we're building it from the nuts and bolts in the ground up. So as those different parts of pieces come together, that's a range that we feel comfortable about.

Of course, we're always working hard to do better over time. You've seen that certainly in some of the results. But again, I want people to really think about -- we feel good about our margin profile, and we feel good about continued opportunity over time.

And in terms of the things that do drive margins, how should we think about the relative importance of just to name a few project selectivity, the complexity we talked about with the data centers, maybe it's you get to a point on the incremental hiring or maybe you're more sort of absorbing any sort of ranking on where the incremental margin impact is going to be most noticeable.

I think -- I mean, again, certainly, operating leverage is going to continue. As we grow, right, that's going to lead to margin improvement. We are working really hard on the business, the cash flow improvement and the work that we've put in for what you see in DSOs which, by the way, taking 14 days out year-over-year that's no small order to accomplish.

That's -- again, these are all about creating durability in the business. We think that those are going to continue to lead to future improvements. And then I certainly don't want to leave out AI and how we're bringing technology into the workforce. What I get really excited about when we talk about AI is that we can take take cost out of other parts of the business, we can really put that into our workforce.

We can improve the benefits for our skilled workforce employees, which we've just done again. That all leads to certainly better attraction, better retention over time, but it also leads to better performance. So all of that comes through ultimately in margins.

So I'm not going to commit to exactly which part, Steve, you could tell I'm stepping a little bit, but really excited about the opportunity.

Okay. And then just you mentioned now a couple of times cash flow. I always thought that in this type of business, as you are growing at a nice clip. It's sort of a working capital consumer and cash flow, you kind of wait until you can harvest that at the end of a cycle, but you've clearly demonstrated in the last year that you can generate cash here as well.

To what extent is that because, your underlying maintenance business has gotten to be a bigger piece of it? Are the terms and conditions getting more favorable? How do we think about those things, and I'm believe on the Power Solutions are going to be contributing to improved cash flow as well. So maybe just talk about those things.

Yes. The last one I'll take first because -- yes, it will both -- their DSOs are in the 60s and one, they're much more less capital intensive, so for -- from a CapEx perspective, it helps us, but also their cycle is better. So it will be good for operating cash. So we feel really good about that accretive across pretty much all the metrics.

On the other side of the business, that's purely been improvements that we've made. It really has not been big mechanical changes. Certainly, we would love to see improvement in the industry, and that's one of the challenges we have with our DSOs is that's an industry thing that's not a Dycom thing.

We would love to see that improve over time, but knowing where that is, the question is, how can we, again, rebuild the engine and retool the engine and make it durable over time. So everything that you've seen on the operating cash improvement on the DSO improvement, that's from changes that we've made strategically investing in the business and things that we've built in that can continue over time.

Terrific. Well, we'll leave it there. Thank you very much, Dan. Really appreciate your time and insights and have a great holiday season and good luck for the rest of the year.

Thank you, Steve. You as well.

Thank you.

Good day, and thank you for standing by. Welcome to the Dycom Industries, Inc. Third Quarter 2026 Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to Ms. Callie Tomasso, Vice President of Investor Relations and Corporate Communications. Please go ahead.

Thank you, operator, and good morning, everyone. Welcome to Dycom's Third Quarter Fiscal 2026 Results Conference Call. Joining me today are Dan Peyovich, our President and Chief Executive Officer; and Drew DeFerrari, our Chief Financial Officer. Earlier this morning, we released our fiscal 2026 third quarter results, along with certain outlook information. We also announced a definitive agreement to acquire Power Solutions, a premier data center electrical contractor in the Mid-Atlantic. Both press releases and accompanying materials are available in the Investor Relations section of our website.

These materials, which we will discuss during today's call include forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Our discussion and these statements reflect our expectations, assumptions and beliefs regarding future events and are subject to risks and uncertainties that could cause actual results to differ materially. A detailed discussion of these risks and uncertainties is included in our filings with the SEC.

Forward-looking statements are made as of today's date, and we undertake no obligation to update them. Additionally, we will reference certain non-GAAP financial measures during today's call. Explanations of these measures and reconciliations to their most directly comparable GAAP measures can be found in our press release and accompanying materials.

With that, I will turn the call over to Dan Peyovich.

Thank you, Callie. Good morning, everyone, and thank you for joining us. Today marks a pivotal moment for Dycom. We are announcing both a record-setting third quarter that reinforces our leadership in telecommunications infrastructure and our agreement to acquire Power Solutions that immediately positions Dycom at the heart of the explosive demand for digital and AI infrastructure.

I will start by reviewing our third quarter results and then move to further discuss our pending acquisition. Our third quarter performance was exceptional. We delivered all-time record revenue of $1.45 billion, an increase of 14.1% compared to Q3 FY 2025. Adjusted EBITDA was $219 million, and EPS was $3.63, both setting new all-time highs. Adjusted EBITDA margin was 15.1% and 169 basis point increase over the prior year, and our DSOs were 105 days, an improvement of 14 days year-over-year.

Our backlog was $8.2 billion, an all-time high with strong diversified bookings throughout the quarter. As a result of our strong performance, we are increasing the midpoint of our full year revenue outlook expecting revenue of $5.35 billion to $5.425 billion, representing a range of 13.8% to 15.4% total growth over the prior year. This outlook excludes any results from the pending acquisition expected to close in our fiscal Q4 as the impact is dependent on the date of completion.

Looking forward, telecommunications demand drivers have never been stronger. Fiber-to-home builds continue at a fever pitch and will further accelerate next year. The demand for fiber infrastructure to support data center growth continues to strengthen at an incredible rate. Our strong market position is validated by deepening engagement across our customer base. We are seeing robust activity from our long-standing traditional carrier partners complemented by accelerating demand from the world's leading hyperscaler providers.

We believe we are in the very early stages of a generational deployment of digital infrastructure and we project that the construction of new outside plant data center networks will begin a significant ramp up in calendar year 2026, leading to substantial growth throughout calendar 2027 and well into the future. Crucially, these are highly complex, large-scale builds that require specialized expertise. This complexity favors Dycom. Given our scale, national footprint and sophisticated operational capabilities, we are exceptionally well positioned to capitalize on what we estimate to be a $20 billion addressable market for outside plant data center network construction over the next 5 years.

I want to emphasize that this significant $20 billion opportunity is separate and distinct from any potential opportunities related to our pending acquisition, which provides an even broader and more substantial foundation for our future growth.

Our wireless work remains strong, and the current build programs go through calendar 2027, positioning us well for future equipment upgrades or densification. This close to becoming a reality with revenue currently projected in Q2 of next fiscal year. Just yesterday, the NTIA announced that has approved final BEAD deployment plans for 15 states and 3 U.S. territories and 1 state, Louisiana, officially has access to its BEAD funding. NTIA approval is 1 of the last steps before states can start signing contracts and projects can get underway.

$29.5 billion in total spending is expected from the states and territories based on preliminary sub-grant results split between grants and sub-grant match amounts. Of that, $26 billion will be used to serve roughly 2/3 of of total locations with fiber or HFC infrastructure, creating a large addressable market. And importantly, we are seeing the benefit of our positioning. We've already secured over $0.5 billion in verbal awards related to BEAD deployments, which is not yet reflected in our backlog. This speaks to our strong ability to capitalize on the significant spending on fiber and HFC networks over the next 4-plus years.

Lastly, underpinning it all, we continue to grow our service and maintenance business, which is a recurring and durable component of our annual revenue. Subsequent to the quarter, we executed additional service and maintenance agreements totaling over $500 million. While these agreements won't be in our backlog until next quarter, they demonstrate our ability to maintain our position as a service provider of choice while prioritizing profitable growth and shareholder returns.

Transitioning to our pending acquisition of Power Solutions. The telecommunications infrastructure space continues to evolve as hyperscalers and other large data-driven technology companies drive the need for new and enhanced fiber networks to connect their data centers and data center campuses nationwide. These changes are creating new demand drivers around long-haul and middle-mile fiber networks and data center interconnects within campuses to address growing data usage, needed compute capacity and the AI race.

With these new demand drivers, we developed relationships with a new customer set, technology companies with significant CapEx commitments to meet their evolving needs. Analysts estimate that $6.7 trillion of CapEx will be cumulatively deployed in data center infrastructure globally from 2025 to 2030, including $100 million for network infrastructure and $600 billion for labor. More than 40% of this spend will be deployed in the U.S., implying $240 billion of data center labor spent over the next 5 years alone.

[Audio Gap]

Employees, extending our capacity to execute large and complex projects.

Now I'd like to take a moment to give you more color on Power Solutions. The company has established itself as 1 of the largest electrical contractors in the greater DMB region. For more than 25 years, they have delivered high-quality execution and developed deep customer and end-user relationships. We share similar cultures. Like Dycom, most of their operational leadership started their careers in the skilled trades and their commitment to safety, quality and operational excellence raises the bar with their customers. Their focus on and success in data center electrical solutions is unique. As I mentioned, over 90% of their revenue year after year comes from data centers with repeat customers and end users. They differentiate in their ability to scale and deliver the highest level of service in a highly complex technical space.

Power Solutions is a fantastic financial fit. They bring a track record of strong, profitable growth with an impressive 15% 4-year revenue CAGR and EBITDA margins consistently in the mid- to high teens. With 2025 revenue expected to be approximately $1 billion, this is a high-quality, high-margin business that we expect to be immediately accretive to our performance. Power Solutions current backlog is over $1 billion, solidifying their strong position in the DMB region. The DMB is the largest data center region in the world, representing 27% of total operational capacity in the U.S. markets today. DMB is projected to capture 30% of U.S. data center capacity currently under construction and planned providing Dycom with substantial opportunities for growth in the world's fastest-growing data center region. In addition, data center infrastructure demand is poised for significant growth across the country providing opportunities to further scale our enterprise.

While AI-led demand of infrastructure CapEx is reaching all-time highs, it's important to recognize that data consumption has been rising annually for decades. And with it, the need for additional compute capacity to include new data centers and the digital infrastructure to connect them. Backed by persistent underlying drivers, such as cloud migration, mobile usage and the Internet of Things, this trend is projected to continue well into the next decade as industry participants predict non AI-related data center construction will grow at a 16% CAGR through at least 2030.

The expansion of Dycom's business adds to our enterprise strength, furthering our relationships and expanding opportunities with the hyperscalers and other technology companies. Combining our vast telecommunications infrastructure services, with Power Solutions, data center electrical expertise positions Dycom squarely in the center of the digital and AI infrastructure space.

Finally, let's talk about execution. With the addition of Power Solutions talented team over 2,800 to our current team of over 16,100, we will have a combined highly skilled workforce of 19,000 people. This is a massive competitive differentiator that enables us to meet the growing needs across our collective customers.

Dycom's vast history of acquisitions means we've built a robust integration engine, the people, systems and processes already working to bring power solutions into our family. Our time-tested approach preserves the culture, autonomy and local leadership that make our acquired companies successful and apply Dycom scale, financial resources and operational expertise to both deliver results and drive further growth opportunities.

Let me close by saying that we have never been more excited about Dycom's position and the opportunity set in front of us. Our diversified platform will be aligned to multiple attractive long-term growth vectors. We will benefit not only from the explosive demand for data center infrastructure and the fiber of electrical work that it requires, but also see continued strong growth from our other telecommunications demand drivers. Our commitment to our telecommunication services and our carrier customers is unchanged, and in fact, is emboldened by our expanded platform with this transaction.

Our strategy is clear. And we work every day to raise the bar for our customers and communities. We continue our focus on creating long-term value for our shareholders and providing long-term opportunities for our people. We are thrilled to add the Power Solutions brand to the Dycom family of company and welcome their strong leadership and teammates. I'd like to thank all our Dycom team members for your commitment to delivering excellence every day. as we pursue our vision to be the people connecting America.

And now I'd like to turn the call over to Drew for a financial review and further details on the pending acquisition.

Thanks, Dan, and good morning, everyone. I echo the excitement about a record quarter and the pending acquisition of Power Solutions, which we expect to generate considerable long-term value for our shareholders.

First, on the quarter. We are pleased that we outperformed the high end of our expectations for Q3, delivering solid top line and adjusted EBITDA growth and margin expansion. Third quarter total contract revenues of $1.452 billion grew 14.1% over Q3 of last year. Organic revenue grew 7.2%, revenues were driven by continued execution of fiber-to-the-home programs, wireless activity, fiber infrastructure programs for hyperscalers, and maintenance and operation services.

Adjusted EBITDA of $219.4 million increased 28.5% over Q3 '25, and we outperformed the high end of our expectations. Adjusted EBITDA was 15.1% of contract revenues, an increase of 169 basis points as a percentage of contract revenues over Q3 '25 and as we performed well and continued to benefit from operating leverage. Net income was $106.4 million, and diluted EPS was $3.63 per share also exceeding the high end of our expectations.

We are pleased with the strength of our relationships and diversification across our customer base. AT&T and Lumen each exceeded 10% of total revenues for the quarter. AT&T revenue was $361.9 million and Lumen revenue was $170.3 million. Customers exceeding 5% of total revenues for the quarter or Brightspeed, Charter, Comcast, Frontier and Verizon.

Backlog at the end of Q3 was $8.22 billion, including $4.99 billion that is expected to be completed in the next 12 months. As Dan highlighted, after the end of the quarter, we executed additional service and maintenance agreements, both renewals of existing markets and expansion into new markets that total over $500 million that will be reported in our Q4 backlog. Operating cash flows were strong at $220 million. The combined DSOs of accounts receivable and contract assets net improved to 105 days, a reduction of 14 days over Q3 25.

We made great progress year-over-year, and strong cash flows remain a key focus area for the company. We are implementing a comprehensive ERP system to upgrade and standardize our information technology systems. I am pleased to report that during Q3, we successfully completed the first phase of deployment across our business. We expect to complete additional phases during fiscal 2027, enabling further operational efficiencies and equipping our teams with the latest powerful technologies.

We continue to observe strong demand across a diverse set of industry drivers creating significant opportunities for our company. We have increased the midpoint of our revenue outlook for the year, and we expect our full year fiscal 2026 revenue to range from $5.35 billion to $5.425 billion, our outlook for Q4 reflects normal seasonal factors such as fewer available workdays due to the holidays, reduced daylight work hours and winter weather conditions.

For Q4, we expect contract revenues of $1.26 billion to $1.34 billion, adjusted EBITDA of $140 million to $155 million, and diluted EPS of $1.30 to $1.65 per share. Beginning in Q4, we expect to also report non-GAAP adjusted EPS excluding the impact of intangible amortization expense. Non-GAAP adjusted EPS, excluding the after-tax impact of intangible amortization expense is expected to range from $1.62 to $1.97 per share. Our outlook excludes any results from the pending acquisition and related financing. While we expect to close in our fiscal Q4 impacts are dependent on the timing of completion.

Now moving to more detail on the pending acquisition. We are excited to bring Power Solutions into the Dycom family. The purchase price is $1.95 billion on a cash-free, debt-free basis and consists of approximately 1 million shares of Dycom common stock valued at approximately $293 million, and the remainder of the consideration is payable in cash, subject to customary closing and post-closing adjustments. We anticipate the transaction to close before the end of our fiscal year of January 31, 2026. The purchase price represents a multiple of approximately 9.7x Power Solutions trailing 4 quarters of adjusted EBITDA.

The acquisition will be treated as an asset purchase for tax purposes and is expected to generate sizable tax deductible intangible assets and goodwill. The estimated net present value of the future cash benefit of the tax amortization further reduces the implied multiple paid by over 1x based on the trailing 4 quarters of adjusted EBITDA for an estimated net multiple of approximately 8.5x. We believe the purchase price and related future tax benefits support meaningful value creation for our shareholders.

We plan to fund the cash portion of the transaction with a mix of cash on hand, a committed $1 billion senior secured term loan A facility and proceeds from a committed $700 million senior secured 364-day bridge loan facility. Pro forma net leverage is expected to be below 3x at closing, and the free cash flow profile of the combined business is anticipated to provide a clear path to delever to approximately 2x net leverage in the next 12 to 18 months maintaining our financial flexibility for continued strategic growth.

Total borrowings for the acquisition will be determined at closing and the weighted average estimated interest rate based on SOFR plus a spread is expected to be under 6%. In the event, we borrow and maintain outstanding the committed debt amount of $1.7 billion for the entirety of fiscal 2027, we estimate incremental cash interest expense of approximately $96 million and noncash amortization of debt issue costs of approximately $5 million for fiscal 2027.

This transaction is directly aligned with Dycom's capital allocation priorities. It deploys capital in a high-return enterprise that enhances our scale capabilities and exposure to rapidly growing data center demand. It supports disciplined capital allocation by acquiring a business with a strong balance sheet. It bolsters free cash flow generation, supporting continued high-return strategic investments and it extends Dycom's long-standing customer partnerships enabling comprehensive telecommunications and electrical infrastructure solutions.

Power Solutions annual revenue is expected to be approximately $1 billion for calendar 2025, and -- the company's compounded annual revenue growth has been approximately 15% over the past 4 years, a trajectory that is expected to continue in calendar 2026. Total backlog for the company currently exceeds $1 billion, giving us confidence in their continued growth. The anticipated results of Power Solutions are expected to be immediately accretive to Dycom's adjusted EBITDA margin and adjusted diluted EPS, excluding noncash intangible amortization expense. Power Solutions has consistently delivered adjusted EBITDA margins in the mid- to high teens, and we expect this level of profitability to be sustained in calendar 2026. We see opportunities for synergies over time, but we have not yet included any of these potential benefits in our outlook.

As I mentioned earlier, the transaction is expected to generate sizable intangible assets that will be determined upon the closing of the transaction and amortized on an accelerated basis. Our preliminary estimate of noncash amortization expense from the acquisition is approximately $185 million in fiscal 2027 and declines annually thereafter. Beginning in Q4, we expect to present non-GAAP adjusted EPS that will exclude intangible amortization expense. Our estimates of all of these expected results are preliminary and subject to change as we work to complete the transaction.

The acquisition of Power Solutions positions Dycom for accelerated growth in digital and data center infrastructure services. We are honored to welcome Power Solutions employees to Dycom, where together, we will continue to be dedicated to serving customers and connecting America. This is a significant milestone for our company, and we are confident in our ability to execute our strategy as we pursue the opportunities ahead.

Operator, this concludes our prepared remarks. You may now open the call for questions.

[Operator Instructions] Our first question comes from the line of Frank Louthan with Raymond James & Associates.

Great. Quickly, the 14-day improvement on the DSOs. Is that -- are we at a new normal there? Or was there something in the quarter that helped? And then looking forward, what do you think about expansion of Power Solution to Texas, other areas with some significant data center activity. What are your thoughts on kind of future growth plans for them with your scale?

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. Honestly, we're very pleased with the 14-day year-over-year improvement in DSOs. We've had significant efforts and strong disciplines that we've built into 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, a lot to talk about there. A large part of this is really about adding skilled workforce to what Dycom has today. Over the years, we've gotten closer and closer with the hyperscalers, closer and closer to the data centers. I think it was a couple of quarters ago, we started talking about going inside the fence. This really is just that next natural step for inside the fence, and now we're just crossing over the wall to bring skilled services to really meet the growing demands of hyperscalers and the growing demands of data. I talked about it in the prepared remarks, and I just want to reiterate again, data center -- sorry, excuse me, data consumption has been growing significantly for decades. That's nothing new. Data center growth has been nothing new for decades that's continued.

What we see around AI, obviously, is a huge influx and a huge inflection point, but there is this really built-in data center growth underneath it all. We see that on our side of the business with the telecommunications infrastructure, and we certainly see that on the power side as well. When you bring those together and -- at the end of the day or over that entirety of the skilled workforce, I would say it this way, the AI race runs straight through the skilled workforce. That's how we're positioning Dycom for our next 10 years of growth plus, and that's how we're positioning ourselves with our customers.

Our next question comes from the line of Sangita Jain with KeyBanc.

So if I can ask one more on Power. Are there some anchor customers that Power has that you already have relationships with and other opportunities with the new build? Or is it more also retrofit in O&M?

They -- primarily, they're contracted general contractors, so not customers that we have today, but the end user is very much aligned with hyperscalers that we've moved inside the fence with and expanded our capabilities and expanded what we're doing today. So certainly overlap in the end users is pleased to get some customer diversification, of course, as well. They -- a few things that are unique about our 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 2 decades. The -- what you normally see with the electrical -- whether it's electrical, mechanical and just a lot of these skilled workforce is it's only going to be a portion and usually a much smaller portion, 25%, maybe 35% of the 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 who came up to the trades, great cultural fit with Dycom. You talked about it being accretive cross metrics. But importantly and uniquely, 90% of the 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. So we're excited about that concentration. They're also in the largest data center market in the world. And certainly, 1 of the largest electrical infrastructure providers in that market and is projected to grow to really consume over 30% of the future growth in the U.S. data centers.

So positioned well for future growth, Sangita, positioned well from how much data center work they do and the scope and coverage across customers and across end users is also positive.

Great. And then can I ask one on BEAD? You said the NTIA approval was 1 of the last step. What is the last step. And given that space approved yesterday or day before, like you mentioned, what is the likelihood that the revenue comes before fiscal second quarter for you guys?

So the last step is the actual funding that happens. And that did happen with Louisiana yesterday in the news. So exciting to see that progress. I think it affirms our Q2, and you heard in the prepared remarks, you heard us talk about, we have over $0.5 billion in verbal awards already. That number is increasing quite quickly. In fact, so we do feel good about starting to see revenue in Q2. Again, there is going to be a ramp to it. It's not going to be all at once and expect to see awards if not in this Q4 certainly in Q1.

Our next question comes from the line of Alex Waters with Bank of America.

Maybe just first off, Dan, you kind of hit on it in your prepared remarks, but with the $20 billion data center TAM that you guys gave, gosh, a couple of quarters ago. Can you just talk about perhaps how additive this acquisition is to that? And then secondly, just thinking about kind of the skilled labor force and the synergies there between the existing com labor base. Can you just talk about that, too?

Happy to -- Alex, listen, there's been a lot of press from our customers that really reinforced the $20 billion addressable market that we talked about over the next 5 years. Specific to the outside plant, right? That's inside the fence work, it's long haul, it's middle mile, completely separate and distinct and what we will see with Power Solutions joining the Dycom family. So that $20 billion, we really believe is a conservative number and continues to grow. And we didn't mention it specifically because we had a lot to talk about. But we did have additional awards this quarter in that space as well. So excited there.

This acquisition and the opportunity of -- just expand that in multiple ways. One, we have cross-sell opportunities with the hyperscalers. We can have a different level of conversation on how ultimately we meet the needs that they have, which everybody knows are significant. And really, even in the most conservative estimate of what the AI rates could yield even in the most conservative estimates is -- we're talking about a massive infrastructure.

I would say that the companies are going to succeed in the AI rates are the ones that are positioned to deliver on that infrastructure. And we've set Dycom squarely in the center of that going forward. So the $20 billion on -- if you bring it into the data center side, so I mentioned they're in the largest market in the world, certainly the largest market in the U.S. over 27% of total data center capacity right now is in the and the growth prospects in front of that are significant.

There's a lot of different numbers out there about what that addressable market could be, Alex. I think the 1 that I quoted in my prepared remarks is the 1 that we like $240 billion on labor in the next 5 years in the U.S. alone to meet at infrastructure needs. Obviously, that's a significant number. Again, that's going to be heavily weighted to the DMB market. So we think we're set up well.

So the skilled workforce, again, this is what attracts us to power solutions, and this is where we differentiate overall. We have 1 of the largest distributed skilled workforces in the country. We're across all 50 states, meeting the needs across numerous customers, certainly our carrier customers, certainly the hyperscaler customers. This adds to that collective. Now there's certainly a different skill set, right? They're going to come into the electrical components inside, but ultimately, when you're mobilizing a skilled workforce of this size to do projects, this kind of complexity in this kind of magnitude, how you manage that, how you do it are very, very similar.

So we feel extremely comfortable about the match. We feel extremely comfortable about the discipline and the strategy we have about continuing to build that workforce as we grow together. And again, just really excited to bring the power solutions into the Dycom family and excited to get to spend more time as we look to grow the business collectively.

Our next question comes from the line of Richard Choe with JPMorgan.

I just have two questions. One, regarding the fourth quarter guidance, the revenue range is a little bit wider than previous quarters. I just wanted to get a sense of what -- the puts and takes there might be as you look into the fourth quarter? And then on Power Solutions, can you give a sense of what the contracts are like and in terms of the $1 billion in backlog.

Absolutely. So on Q4 revenue range coming into Q4, as you know, is a seasonal quarter for us. I've often talked about how if you think about the lower end of the range and the higher end of the range in a normal quarter, looking at the speed of some of these programs. And I want to come back to a fiber to the home and make sure that we get enough air time. The fiber-to-the-home programs continue to increase. We've seen that. That's a large part of the outperformance that we had in this quarter is the growth that we saw in fiber-to-home builds. And we see that increasing considerably as we look towards next year. Many of our customers continue to reiterate that growth, continue to reiterate what their plans to build our -- so that's performing very well.

That, in large part, is how fast those programs go, how quickly we move into that is how we think about the range, the top and the bottom and the midpoint. As you look at Q4, we felt that we needed to add something in considering the seasonality. We've also got holidays that are midweek again this year, which we know from last year, we're going to have a lot of folks that are taking extended periods of time of all that's factored in. So the range is just a little bit lighter. But as you know, we did move up the midpoint considerably.

I think the second question is on what kind of -- how the contract -- so again, because over 90% of the work is in the data center space, what that means is they have dozens and dozens of data centers that they're working on at 1 time. Those are typically going to be a relative finite fill over that work. They could be generally 6 or 12 months that they're spending doing work out in the field. And these are massive crew sizes that are coming in to build these over a very quick period of time, highly sophisticated, highly complex work that Power Solutions, again, has proven time and time again that they really deliver at the highest level in their space.

I'll point to their 15% growth CAGR over the last 4 years and our confidence in being able to continue that next year. The contracts themselves, like I said, they're with the general contractors. So a little bit different from how we look at our work. And again, there's other synergies that we see in the business as we think about it. They're not going to have the same kind of seasonality. They are more capital light than the telecommunications business where the equipment costs for us are more significant. So more -- really more piece of that optimized Dycom as whole going forward.

And following up on the kind of new markets for Power Solutions. I think with MBA, there's been a long history and steady demand, and it continues to see that. But as you look to new markets, I think there is some worry with some of these builds that some new markets are going to be long-term markets and others are going to maybe not have the same gravity and long-term strength that an MBA will. So Dallas and Atlanta and maybe certain markets seem that way, but there's others that are less certain or on that outcome. Can you give us a little sense on how you would think about expansion to new markets?

Yes. And I think I missed that in 1 of the earlier questions, so thanks for bringing it up again, Richard. The first thing I would say is all of this is centered around our strategy for long-term shareholder returns. As we think about all of these parts and pieces they come together, as we think about the significant acquisition. We're thinking of multi -- multiyears out into the outer decades about how this can be accretive and how it has strong value creation overall. We're -- hopefully, people have seen were not ones to move quickly and react to things. We want to be very thoughtful about how we grow that business and how we grow the business that we've been growing for some time now.

As we look at other markets, there's a number of different factors. The first is Power Solutions is in the largest market. It's a proven market. It's got a large skilled workforce. And as we talked about, it's got huge growth opportunities even if we just stay there. So we can continue to work with them to expand. We're going to bring our balance sheet behind. We're going to bring relationship on equipment. And as I said, there's going to be other ways that we can leverage combined relationships even if we just stay in that greater [ D &B ] space.

At the same time, we will certainly look at other M&A opportunities on how we can leverage the whole of the enterprise. And that could include moving to new areas. Of course, we will factor in what -- where that is in the growth cycle, how long in that can continue to grow. As you know, there are many markets in the country that have been growing for a long time and have continued growth, maybe not as large as DMB, but still significant opportunities. All of that is part of the strategic discussions that we've been under some time and excited to continue to further that as we think full. So I would just end it great opportunities, organic growth, great opportunities for combined growth, bringing our customers together and certainly, we'll be looking at M&A as well.

Yes. Sorry to follow up on it, but it was just something that weren't relatively clear.

Our next question comes from the line of Steven Fisher with UBS. Steven Fisher with UBS. [Operator Instructions]

Congrats on the deal here. Just, Dan, relative to the 90% of Power Systems revenues coming from data centers. I'm curious what that mix was, say, 5 years ago when the revenues if you work backwards, we're probably around $500 million, was it still 90% data centers then when we were sort of in a different stage of data center development? And if not, what happened -- what was the rest of the business then? What happened to it? Because I guess, obviously, today, it's great to have 90% be focused on data centers, and I know you view this data center opportunity, as many of us do for many years, but just thinking about -- because you mentioned long-term shareholder value, what is this business set up to do beyond the data center market?

The key point around this is working in data centers is a highly complex mission-critical environment. So it's a unique skill set. It requires training, it requires a sensitivity to both the speed. And again, Steven, as you know, I spent a couple of decades in the space, contracted to many electrical contractors. I mean we really understand how this whole space works effectively. But if you think about it, it's about how significantly are to build and deliver on that work.

To answer your question directly, I don't have the exact number on where they were 5 years ago, but yes, in general, in the general term, they've been at 90-ish percent, certainly the sort of the revenue for a long time in that space. And I think that's where they differentiate their ability to handle that complexity. You've heard me say many times that complexity favors Dycom. It favors power solutions as well, and that's what attracted us to them. And we think that together, we're even better poised to address the growing needs of the customer set broadly.

So it is unique when you think about electrical contractors, for sure, it's unique that they're so concentrated. That is absolutely a benefit and something that separates our ability as we look forward and certainly, again, made it very attractive for us as we started having conversations with Power Solutions.

Great. And just maybe to talk about the $500 million of service and maintenance agreements that you talked about after the quarter. Can you just put maybe that into context a little bit? You're doing around $1.5 billion of new awards per quarter. Is the point here that, I'd say, 30% of awards on service is an indication of the importance and growing mix of service and maintenance? Or is it that you're an indication that you're setting up for another strong quarter of bookings already in Q4? Or is it both?

So a few points to make. One, pleased overall with our book-to-bill. This -- we had significant service and maintenance awards within the backlog that we reported in the quarter as well. I didn't call them out specifically. Like I said, we've kind of got a lot of things to talk about and we have to pick -- the reason we called this out twofold: one, to essentially the importance of service and maintenance as we think about our business and think about how we move forward. Two, it really shows our scale and our ability to continue to be in front of this work with our customers and how we can solve for their growing needs as they install more fiber around the country. So it sets us up well for all of those things.

I also want to point out, again, our back -- our total backlog different from a lot of the peer set or of other competitors because of the nature of the timing of our agreements, we're just continuing to try and show that it's not always going to be perfectly timed to the quarter, very pleased with the all-time high. I would certainly point to the next 12 months of $5 billion, again, another all-time high and really shows the overall momentum of the business. So yes, to answer your last question, definitely sets us up well for backlog as we think about coming into Q4, I wanted to point that out. But really, this is about cementing where we are in the service and maintenance space.

5 Our next question comes from the line of Adam Thalhimer with Thompson, Davis.

Congrats on the record results and the acquisition.

Thank you.

First of all, on the organic business, is it too early to talk about fiscal '27 and maybe broad strokes for revenue growth and margin improvement?

On the new business, we gave an outlook for that 15% growth is based on their CAGR. So you have that side, we're not going to give you a lot of detail overall in the business yet. We will, of course, as we come towards the end of the year, just like we did last year. The point I made last quarter, and you saw that come through this quarter with a 7.2% organic growth. And of course, now that the wireless business that we did, that's fully in the business as we think about Q4 going to be strong organic growth to lead to get to the numbers that we showed for Q4. That sets us up very well coming into FY '27, calendar 2026. So we're excited about how we're positioned there. We're excited about the diversification within the telecommunications business, how we are picking up already starting to talk about BEAD awards. How we are continuing to increase the amount of work that we're doing with hyperscalers and these all middle mile and inside defense opportunities.

As we talked about the wireless work is performing well. So just all of those growth drivers continue to be strong, continue to -- we continue to capitalize on the opportunity set. You can see we're also improving margins as we go and all that sets us up well looking into next year.

Sounds good. And then, Dan, can you give a little bit more background on the acquisition? How do the discussion start with Power Solutions?

Yes. It's our strategy, as I talked about, it's always been centered around long-term shareholder returns, long-term opportunities for our people. It would be no surprise that anybody has been in the seat nearly a year that as we took to seat. We did a top-down strategic review of the business and where we are in conversations that we've been having for some time. Part of that has been, as these hyperscalers relationships have developed as we've gotten closer and closer to the data centers is what is the next natural step. And this really made a lot of sense because we're already there. We're already on the campus. We're already working with the end users. We already have a skilled workforce doing highly complex work. This is just really a matter of crossing into the wall, crossing the wall and moving into the data center itself. This is a space that we know and understand extremely well. We understand how the projects flow. We understand the landscape from a competitive set.

So as we looked for different opportunities when we first met Power Solutions, it really came down to the culture and the relationships. That is so incredibly important to us, and that's really been the cornerstone of the success that we've had and the acquisitions we've done over the decades and certainly that we've done over the last few years as well. It comes down to culture. If you get the right fit, if you get the right mindset around how we can grow together and how we can lever further into growth together, that's where you really start to see the magic start to happen, so to speak.

So again, incredibly impressed with the strength of the leadership team with Power Solutions incredibly impressed with everybody that we've met so far. They run a fantastic operation. They're going to fit extremely well with our existing subsidiaries, and really embolden us on how we think about growth in the next decade.

Our next question comes from the line of Eric Luebchow with Wells Fargo.

Great. So Dan, as you think about kind of the landscape and the data center contracting space, I mean, could you maybe just talk a little bit about how concentrated it is? Is it still pretty fragmented? And do you see more opportunity there to do future M&A maybe compare and contrasted to your traditional telecom business where you see more opportunity over time to gain scale?

Eric, this acquisition for us really widens the aperture as we think about our place in digital infrastructure as we move forward. And as I said earlier, this puts us squarely in the middle of -- and I want to be clear, it's not just about AI there's a natural cadence. There's a natural growth that occurs on whether it's the telecommunications infrastructure or whether it's the data centers themselves. So we're stepping further into that. And believe that there's significant upside opportunity in addition.

As I'm sure everybody has seen -- there's been a number of acquisitions in this space. again, Power Solutions is unique in both the size that they have and the presence that they have in a very large region, the growth that they've had and the concentration in the data center, proven expertise that they have overall. But it is -- continue to be a fragmented space. There are not very many contractors and against all this in my past core, not a lot of contractors that are covering across all data center markets or even the majority of data center markets. So there are opportunities out there. There are definitely opportunities to continue to think about that and how we move if there's opportunities for us to grow organically with our new business, there's also opportunity to continue on from an M&A front.

So all of that is front and center to what we're thinking about. We're excited to move into this. We're certainly focused on integration and have built a strong integration engine ticket ahead of it and looking towards that close, towards the end of the year, where we will certainly come out and give a lot more insight in how we're thinking about the business and growth opportunities.

Great. And maybe just 1 follow-up for me. You touched on the BEAD program a little bit earlier. We've seen, I think a vast majority of the awards have gone to fiber and a lot of the capital will be fiber-related. Have you seen any of BEAD rewards go into your backlog at this point? I know you've talked about Q2 as kind of a starting point for revenue contributions. But just wondering if you've been having conversations and you're starting to see demand flow in already so that you can get started in Q2?

Yes. So about 2/3 to date, 2/3 of the locations are going to be served by either fiber or HFC infrastructure. So we're excited about that. It really lined up well with how we've been thinking about it to date. That addressable market is probably going to be in the neighborhood of $20 billion to include the matches from the sub-brands, so significant spending to do over the next 4 or 5 years. We are front and center there. We've been talking to the states for years. We've been talking to our customers for years. I mentioned in the prepared remarks, we have well over $500 million in verbal awards today. We don't have any in our backlog but significant opportunities that now as the funding starts to flow that we hope to move from verbal into backlog for next quarter.

Our next question comes from the line of Brent Thielman with D.A. Davidson & Company.

Yes, I had a question just on the margin progression, mid- to high teens is notable, Dan, but I want to understand how those margins have progressed over the last few years what you think is sustainable? And I guess, as a follow-up to that, can you sort of quantify the cash conversion cycle related to the acquisition, especially as we think about the business sort of driving deleveraging efforts.

Happy to -- on margin progression. So in that business, absolutely, they get operating leverage just as we do in the business. So growth certainly helps from a margin contribution. They've been strong margin for a long period of time and to find somebody that's accretive to our strong margin profile, again, something that we're very pleased with overall. We certainly believe that to be able to maintain strong margins. It's not always going to be -- just like our business is not always going to be perfect, depends on exactly how the projects stack depends on what the growth curve looks like. But that mid- to high teens is a good range to think about and certainly how we're thinking about next year and how we're thinking about the deal.

On cash conversion cycle, again, this is a positive from a cash perspective for us. Their DSOs are typically in the 60-plus day range. So that will be a positive impact for overall. And again, strong operating cash. And from a free cash flow, they're not as capital as intensive as I mentioned. So really, when you look across the fundamentals and the deal really does come down to the fundamentals, the fundamentals are strong all the way across the board.

Okay. And maybe one more, if I could. Your inside the fence strategy, maybe you could argue, at least for the core Dycom business is kind of early days. I know starting from a relatively low point. Does this accelerate it as you leverage these customer relationships, the Power Solutions has such that we could see some revenue synergies with that strategy as you sort of combine the 2 companies?

Absolutely, absolutely. Really a cornerstone to how we thought about this acquisition. Those relationships have continued to build and get stronger, and it's with more than 1 hyperscaler. I should be specific about that. But we continue to do more and more work. We are doing work in the same DMD region where Power Solutions operates. So you absolutely can start talking about synergies, you can start talking about how can we collectively together provide more -- even more value for the end users than we would apart. We can talk about what that means for again, there's so much growth in that space that's out front of hyperscalers.

The question is who's going to be there to meet that. And I said before, the companies that are going to succeed in the Iris are the ones that are positioned to deliver on the infrastructure. We're already well positioned, and that's why we've continued to move closer and further inside the fence. This just takes us another step even further, right? It makes those relationships even stronger. And if you think about it from a long-term perspective, the opportunities just get much, much broader and deeper overall

Our next question comes from the line of Laura Maher with B. Riley Securities.

My first question, Verizon recently announced potential large layoffs. Is this related to any kind of project that Dycom's involved with?

I'll just say we're following the news. Verizon has been a great customer for us for a long time and continue to do a significant amount of work for them. We see that continuing overall, we haven't seen impacts or yet on what their new CEO, and congrats to Dan, for taking the help. We haven't seen anything on our side of the business and look forward to just continue to part with them and make sure that we can meet their needs to set up other builds.

Okay. Great. And then in regard to the latest fiber build-out, how much more sophisticated is this build-out and the support of the growth of AI versus the previous fiber build-out that was driven by the Internet?

Just so I'm correct, are you talking about the work the Power Solutions does or?

No. Just the fiber work in general, not necessarily Power Solutions.

Yes, Yes. If you think about -- and again, I'll say it for again, complexity really favors Dycom. If you think about these long-haul and middle mile routes, this high-capacity, high-density fiber bundles -- they are more complex. They are more difficult to install. They are more -- they require a lot more sophistication in how you're thinking about the work planning the work, getting out front of the work. That's where we specialize. That's where we differentiate. So it's been a positive for us. We were really, I would say, first at that, but certainly first inning and getting out there to do that work. We've been out doing over polls, now with Lumen for the bulk of the year. And so we really have a ton of experience and a ton of lessons there that position us well to continue that.

And we continue to book further awards there and across customers. we talked about the calendar 2027 is really being a ramping period, but I don't want that to be mistaken. There's -- we're doing significant work today. We think there's going to be significant work next year. It's just when you think about new construction, that is not over pulling the existing conduits. New construction takes a while to get planned to get permitted and to really build that work plan itself for crew continuity and the flow work. So excited about all that. We think it's going to continue to build over time and a fantastic driver to augment the other extremely busy drivers in the business.

Thank you, and I'm showing no further questions from our phone lines. I'd now like to turn the conference back over to Mr. Dan Peyovich for closing remarks.

Absolutely. I'd just like to again comment on the strength of the demand drivers in the telecommunications space. Obviously, with the acquisition announcement today, we spend a lot of time talking about that, but I want to make sure that we really recognize that these demand drivers continue to be strong, whether it's fiber-to-the-home. Now the world is coming even stronger with BEAD work. Our service and maintenance continues to grow. We serve our customers well across the business. I'm excited to continue to do that.

As we think about the acquisition, really, this just makes us stronger for all of our customers and widens the opportunity set across all of our customers to make sure that we can meet their needs, because it's an active space, the amount of infrastructure that needs to get built in the coming years and in the coming decades is significant. And as we talked about, really generational level of deployment. We're excited and honored to be partnered to our customers and want to make sure that we can stay in front of all that. We think that this acquisition and all the work that we've been doing to make Dycom stronger to become more efficient. Really, at the end of the day, it's about our customers. It's about serving them well and serving our community as well.

So thanks to them, thanks to all of the Dycom employees for their hard work in continuing to differentiate us and to our future Power Solutions partners excited to get to the close and to welcome you officially to the family. Thank you all for joining the call today. Look forward to seeing you next quarter. Be safe and be well.

This concludes today's conference. Thank you for your participation. You may now disconnect.

Good morning, everyone, and welcome to day 4 of the Goldman Sachs Communacopia and Technology Conference. I have a privilege of introducing Dan Peyovich, President and CEO of Dycom. My name is Josh Frantz, and I cover telecom here at Goldman. Thanks for being here this morning.

Good morning, Josh, thank you.

I think you have a safe harbor or something to...

Please reference our website for safe harbor statements related to any forward-looking statements I might make today.

Perfect. Short and sweet.

Yes. Good to do the fun stuff.

So Dan, there are probably a fair amount of people in the room and listening online that are relatively new to the Dycom story. Can you just kind of give us a high-level overview of the company and where you stand today?

We're a premier digital infrastructure solutions provider across all 50 states. So we provide engineering, construction, service and maintenance of both wireline and wireless telecommunication services. We also do a lot of work now leaning in towards the hyperscalers looking at connecting the grid nationwide through long-haul and middle mile networks. So significant operations in all 50 states. And as you know, it's a very busy space right now.

Exactly. So fiber deployments, both on the consumer and the enterprise side have been quite topical in the past few years. And to your point, you kind of sit at the middle of that theme. And many of your biggest customers are in the midst of major deployments being passing tens of millions of more homes or building long-haul networks to connecting data centers. So as you think about your business over the next, call it, 5 to 10 years, how do you envision how your customers will change, how the industry will evolve and ultimately, your financial trajectory?

Consolidation is the first word I've used. You see that with our customers today. I think 5 of our major customers are either in the middle of some kind of acquisition or recently completed an acquisition. By the way, that's a positive for Dycom as our customers get bigger, what they're going to do is invest more capital into these new markets, into the businesses that they're buying.

And second, when they do combine and create bigger businesses, bigger build programs, generally, they're going to lean towards bigger solutions provider like Dycom. So the consolidation for us is a plus. I think that that's going to continue. You hear a lot of conversation, Josh, around the convergence, wireline, wireless convergence. You've heard that at this conference as well from many of our carrier customers. So we think that, that trend continues over time.

In our own space, we've been a major consolidator for the past couple of decades, been active the last couple of years as well. We do continue to lean into M&A, and we'll probably talk a little bit more about that later today. So we think consolidation both in our peer set, consolidation specific to our space, consolidation continues with our customer. And like I said, we think all of that is a positive for us.

Going to kind of the 30,000-foot view, the fiber-to-the-home builds are well underway today. I think they're 3, almost 4 years in. Our customers have continued to either add or reiterate their passing. And it's a very unique time where all of our -- virtually all of our customers are creating these large-scale builds. They are having a huge commitment towards building fiber and getting fiber-to-the-home, getting fiber out to businesses around the country. For a long time, we have said that we believe 80% of addressable homes in the U.S. will get covered by private capital with at least 1 fiber passing.

And if you add up all the fiber passings to date, which is getting high 70 million, getting close to 80 million. If you add that and incrementally add what our customers have said that they're going to go do over the next 5-plus years, that does get you to that 125-or-so million homes out of, call it, 145 million total. So that 80% is on track. Of course, there's some other government spending that's coming into play, which I'm sure we'll talk about later.

What that really means is just on the fiber-to-the-home, which has been going for a while, tons of opportunities continue, tons of growth opportunity that continue. We're very well positioned for that. Now you layer in the AI space, the data center space and all of the infrastructure, specifically all the telecommunications infrastructure, significant fiber accounts that have to happen. It's a lot happening right now. So what I would say is the 2 stories would be consolidation and a lot of growth opportunity.

So if I can follow up on that. I guess, one of the questions becomes labor. And if there's that much work to do, do you have the labor you need? Or is that something that you need to execute on? And what's your strategy for procuring labor?

I'm a huge advocate for the trade. I came up to the trade myself, started in the field myself. Huge plug, by the way, for wood and metal shop and auto shop at high school level. That's something we're going to be talking more about in the future.

So we have a clear strategy around our labor. We've had quarters where we've grown 20% organically. As you can imagine, that takes a lot of labor to be able to do that. And you're talking about a mix of skilled trades, delivering the work out in the field and then obviously, a lot of management supervision has to happen as well. So the question is, how do you ready that engine? How do you make sure that the engine is in the right spot to continue the growth cycle that we've already been on.

For those that are newer to Dycom, we've grown significantly over the last several years. This year, if you look at our outlook, we're $5.3 billion-ish is what we're talking about. When I started 4 years ago, we were $3.1 billion. So we've grown considerably over the last several years, but we see a ton of growth opportunity ahead. So how you set your labor force up for that? One is you got to have attractive labor proposition. What does that look like? How do you differentiate there?

For us, if you look at me, if you look at many of our leaders, we started in the field. That's a pretty attractive thing, right? If you're coming in, you're 18, you're 22, maybe you're changing careers and you can look up and say, at every single role throughout the organization, there's somebody that started where I am. That is a huge, huge thing. And again, I don't think a lot of folks can say that. We get a lot of attraction that comes because people say, I can have a whole career here. I can start and I can retire in the same place. So that's a pretty cool thing.

Second is, how do you intentionally invest in people, right? We're trying to make grow their skill sets, right? We're trying to challenge them every day. So you've got to build a culture and a structure around how you do that. Building the right training programs, building the right training facilities, always taking a look at those things, so that you make sure you're addressing the right point in time in their career, super important. Again, something we're proactive on.

Today, what I would tell you, Josh, to kind of get to the point, what I would tell you is the -- we will grow considerably. We'll have to meet that with labor forces. Finding kind of that entry-level field force is not as difficult as finding that tier of supervisors or managers that have to lead them every day. So what we're intensely focused on today and just being crystal clear with our strategy, we're very intently building that layer. We're very intently looking at that later, making sure that it's going to be able to adapt and be nimble to the needs that we're going to have as we continue this growth.

Got it. And as we just kind of finish out kind of some of the higher-level strategic things. One of the things that is probably overlooked in your business is the services and maintenance part, which I think you said at results was a little over 50% of your business today. Most people think it's fiber-to-the-home builds and AI data center, but services is quite large. So how do you think about the trajectory of that part? And how do you think about the margin of the services business versus the more specific kind of project builds?

It's another differentiator for us. So we've been focused on service and maintenance business for a decade. That's a very difficult business to do. It's highly capital intensive. If you think about it, you've got to have people that are highly trained. You've got to have equipment, you've got to have facilities all over the country. We're in all 50 states, right? We're certainly not in every municipality, but we're in a lot.

Just to have the capital intensity around that is one huge barrier. We have a really good recipe to do that. We've proven we can over time. Second is you've got to be able to attack the work. Take a holiday weekend. We have to have people that within usually 2 hours can get out and service an issue, whatever that issue might be and might come up.

So the infrastructure you have to build to be able to support that, again, highly complex, highly difficult. We do that extremely well. As you said, that's a really good recurring revenue stream. If you look at it year-over-year, it doesn't mean everything fire is exactly the same. That's why we sized it to say it's over 50%, which can be a broader range admittedly. But over half of our business is an important thing, right? That gives us this excellent foundation that underpins the rest of the demand drivers.

And again, coming back, if you look at us across the competitive set, we're almost everywhere almost all the time. So you lever into fiber-to-home build, as you think about what's coming with BEAD and especially if you think about all the infrastructure that has to get built for the data centers to be there, to understand how the municipality works, to understand soil types are a big deal in what we do to understand what kind of terrain it is that you're going to be dealing with, what the right of way into traffic control requirements are going to be as you price these significant builds is critical. And having the infrastructure to support all that is very difficult for someone to stand up. So again, we think it's a really good recurring revenue base, but it also stands us up really well to lever into these other demand drivers.

And I guess just as the fiber-to-the-home passings get larger and AI data center builds get larger and there's more fiber in the ground, that just is a nice trajectory for the services business overall. Is that the right way to think about it?

Yes. We just simply like to say every foot we put it in the ground today is something that we're going to maintain tomorrow. Again, that's a focus for us. It doesn't mean we always get contractor both, but that is our focus and everything we do today creates more plan. So as we continue to grow, don't just think about the growth that we have from these very specific project type work, think about growing the underlying business.

Everything that gets put in the ground -- and by the way, I'll just answer this question straight off. Yes, fiber is -- does cost less to maintain than copper that is absolutely true. Without question, it performs better. But the -- as we say, the world is going to do what the world does. Somebody is still going to dig things up. Things are still going to need a lot of service. So there is still a significant revenue opportunity regardless. So as we put more and more fiber plant in, it creates more future revenue opportunities.

Got it. I think the past 3 days of the conference, AI has been kind of the talk of everything. So moving -- and when you think AI, you think data centers. So the data center connectivity part of your business has garnered a lot more attention in the past year or so probably than it has in the prior '20. We know that data centers already have fiber connect today. So what's changed in the past few years that makes this a bigger theme for your company?

Yes. This is something that we think a lot of people don't understand about how we're positioned in this space and it's really important as we talk about it. If I think about where the enterprise is spending is energy today, like we talked, we have service and maintenance business. We've been doing that forever. Fiber-to-the-home has been going very well. We're spending a massive amount of energy and time and conversations in the AI space. How do you get fiber to all these data centers? We're talking to our carrier customers. We're spending a lot of time with the hyperscalers themselves.

When you hear some of the hyperscalers talk about all the data centers that they built to date are dwarfed by what their expectation of what they have to build in the future is, that's a significant statement. You have -- to answer your question, Josh, you have aging infrastructure. Fiber is not future-proof, right? A lot of these networks, these long-haul networks are over 2 decades old, sometimes 3 decades old. Nobody could have possibly envisioned the kind of capacity that we're thinking about today.

And so where today, you might have a couple of hundred fiber connections, now we're talking about -- I always get this number wrong, [864, 1,728 -- 1720 a bundle of 1,728] fiber cables that are going to go in a 2-inch conduit. That is a significant deal. But that capacity isn't there today. I think where we're talking about every day, but a lot of people don't think about from the outside the difference between training and inference, the difference about what happens when we go to the edge.

We talk about that with hyperscalers collectively. They're not differentiating. I want to build something today and something tomorrow. The pressure behind these networks, the pressure behind -- we all know that power is a constraint for the data center demand. We all know that today, right? Well, certainly, what they want to make sure it does not happen is all the data centers get built and they're not connected.

Getting these long-haul and middle mile connection routes done and complete. And keep in mind, there are all the newer things, right? If you miss 100 feet, you're not connected. So highly, highly complex, highly linear, tons of permitting. You're talking decades-long build plus. To get all that done to make sure that as they evolve as we move to inference, as we know, AI needs are grow as latency has to go down from what it is today, we're planning all of that as we speak, right?

We're starting to build all that as we speak. It's going to take time because they're really, really complex. It's going to take time to get them ramped up, and you heard us recently talk about. Today, we see $20 billion of opportunity and that's billion with a B, of opportunity just in the work streams that Dycom does today. That's in the next 5 years alone. And that's from quite literally looking at very specific information to build that model and using the data that we have because we're everywhere in the country to build that model.

But that doesn't mean in 2030, it stops. In fact, by 2030, everybody says it's only going to be going exponential to what it is today. So we have really good information for the next 5 years, even more on top of that. That's a significant opportunity and a lot of fiber that's got to get put in place. And you got to build that for tomorrow. This is time-bound construction. This is not bound around cost. This is a very small cost if you think about the hyperscalers total CapEx. But what it does have is a huge time constraint.

So a lot of energy going into it today. It takes -- we've been building the Lumen overpull for 8 or 9 months now. It's going very well, but it takes that long to really get these build up on plane. You're going to see more of that. We think that as you get towards the end of '26 and into '27, much, much more of this is going to continue to build, and we think that's going to build over time.

And I guess just following up on that, of that $20 billion TAM, what's the best way to think about your share of what that could be?

Yes, it would be tough to give a percentage today. Obviously, we have a strategy. We've built out how we're thinking about that. We're doing very well with awards. We've announced some of them, many we have not announced. Some of them are smaller, some of them are larger. There's a lot of competition. You've heard our carrier customers talk about the competitive set as they work with the hyperscalers to see who's going to carry that route and how that plays out over time.

And then you also have a lot of folks -- when you talk about these big numbers, a lot of competitors, they come rushing into the space. A lot of these folks haven't really done these kind of networks before. That has to play through some of the pricing that we're seeing out there putting forward that has to play through.

So we're winning a lot of work today, great opportunities, work we're already working on. We think there's going to be a whole another set from builds that are probably going to be challenged down the road. So Josh don't have a number, but we think we're incredibly well positioned to capitalize on the opportunity. And certainly, we wouldn't throw out the $20 billion if we didn't think we had a pretty good shot to do a portion of that.

Got it. And some of the data center work you've talked about is inside defense. And maybe can you take a step back and explain what exactly that entails? And for those of us who've been in data center and those who haven't, like, what exactly you're connecting that hasn't been connected today?

Inside Defense is included in the $20 billion for us because that's work that we're doing today and work that we're talking to the hyperscalers about. And if I can, first, Josh, let me just talk about why. So as we -- as our conversations evolved with the hyperscalers, one of the things that came up is right now, they're using a lot of local, a lot of regional vendor partners to do this inside defense fiber.

And it's a struggle for them, right? It's a challenge because they don't have control across many, many campuses. Maybe they're not seeing the kind of timely response that they want, maybe they're not seeing the level of certainty that they want. And so they came to us in a conversation and said, is this something that you can solve for.

And just like with our carrier customers where our size and our scale allows us to lean into that, we've already been awarded across different campuses in different states across different hyperscalers opportunities now to come in and do this work. We think that that's just kind of the tip of the iceberg, and there's more opportunity out there.

Specific to what the work is, for those who have been out to data center campuses, and by the way, in my past life, I've built a lot of data centers as a general contractor for many years. When you go out to these campuses, one of the first things that's going to happen when they're doing the infrastructure they're going to carry just a ton of conduit. And a lot of that is going to carry the power for the data center. It's going to carry it from -- ultimately, you're going to go from the right-of-way vault to the data center and then you're going to interconnect the data centers within the campus.

So all that pipe is going to get put underground before we ever get there. That's going to be utilized by the -- often put in by electrical contractor, utilized by the electrical contractor to do all the connections. They will leave empty pipe for us then to come in when the time is right and connect that now from the right-of-way vault, which, by the way, in some cases, we'll be doing the connection from the right of way back through middle mile and long-haul networks to other states and other areas.

But from the very same vault, you will take it now into the data center complex into the data center campus, connecting each of the data centers. So by footage, it's not as much, obviously, as you're going to get when you're going across the country. But these are massive, massive -- when I say massive, massive bundles of fiber and you are doing interconnections for redundancy between data centers. So there's actually quite a bit you have to pull. And as many of you know, these data center campuses can be quite physically large. So there is quite a bit of opportunity there. And there's recurring work as they -- many of these campuses build data center after data center after data center. So that's work that we can stay there and continue to pull over time.

Got it. If we shift to the kind of fiber-to-the-home part of the story, you mentioned earlier, there's a lot of consolidation, Verizon, Frontier, AT&T, Lumen, all 4 of them are your customers. So how should we think about your ability to do get incremental part of that business as those 2 mergers kind of happen?

The first point I would make is the increased capital intensity that they're going to have, right, whether that's additional CapEx or they're just going to go faster with the builds, nearly all of these customers that are growing that are acquiring are bringing more capital in. They're talking about AT&T with Lumen talking about many more passings that they're going to do much more quickly over time than Lumen was doing with their mass market segment before.

So the first part is you just simply have a lot more coming through. All of these customers, we have great relationships with. We've been working with them for a long time. We absolutely cherish the partnerships, and these are deep partnerships between us and them. Our question to them is how can we best solve for what you need. So we spend a lot of time talking to them as they think about these expansions, as they move into new markets, as they think about BEAD, where can we best fit? Where do we have the best opportunities?

And I think there's a good point to make here. We've done a really good job of expanding our margin. We've done that. We've done that as we've grown. We've done that. I talked about increased productivity in our last call. We have conversations with our customers where we can give them a price discount if they give us additional volume in a market or give us a connected market or give it a market where we have some really good adjacencies to, we can actually make it less expensive for them and margin accretive for us.

So as you think about these customers combining, having more to do, having more overlap, it just creates more of those opportunities over time. I'm not going to forecast exactly how that plays out, but what I would tell you is we're very excited. And again, just very much appreciate the partnerships we have there.

And is it fair to say that most of the business you get with Lumen is from their enterprise side, versus the resi side?

The bulk today, the bulk of our revenue is through their mass market segment. Now within some of that, we do have enterprise work, kind of more traditional enterprise work. And then now, of course, we have the overpull long-haul work. We count all of that under the kind of telecommunications group as we think about things. But the bulk of what we're doing for Lumen today is in the fiber-to-the-home work.

Got it.

And service and maintenance, I should add, both.

Got it. You specifically have not put BEAD in your forecast. It's been a long process and it doesn't feel like it's ever going to really end, but...

We're getting close.

Where do we stand? And -- how do you think about the opportunity to take advantage of this?

I'll get right to the headline. The headline is we think there's revenue opportunity in the second quarter of next year, been a long time coming for sure. A lot of things are working through the process. You've heard 34 states have announced subgrantees to date. If you calculate all that together, we've said for quite some time, even through the iterations, we still speculate that it's going to be 60% to 70% fiber. If you look at the -- everything that we've currently heard about in the 34 states, about 2/3 of that by address location is fiber or HSE today, that actually equates to about 75% of the dollars.

So those are a little bit disconnected. Of course, going with terrestrial networks is going to cost a little bit more. There's a few important points that I'd like to hit on BEAD. So one, there's conversations, we're having a lot of conversations today. We've been talking to the state broadband agencies for what they're going on 5 years now. We've been talking to our customers for a long time. We're talking to them today.

We see opportunities where we have existing contracts with our customers that we can just quickly, very quickly lever in with a new pricing sheet to move into some of these markets. So that's why we think the speed will be there. We also think there's going to be a lot of preplanning as they get to that funding button finally getting pushed as it gets through NTIA.

What's happened is, I called it, I think, last week, this kind of Kentucky Derby setup. So before, you had a lot of states that were going to progress at different rates and start construction in different time lines. Now you've got everybody in the starting blocks. And you've got a lot of horses that have been walking around ready to go for quite some time. So you're going to have everybody launch off in a very similar time frame.

Now I do think in the 90-day NTIA approval window, you're going to have some that get approved sooner and some later, because some, I think, are much kind of more vanilla as far as what they're trying to do and some maybe are trying to push the envelope a little more. So you're going to get just a tiny bit of variation, but you're really going to get a lot of people launching off. So a lot of preplanning to happen there.

Specific to the changes that have been made, and I think a few things that maybe people aren't aware of, the new administration made changes that made it more appetizing for our larger customers to participate, not as intensive in the requirements they have to fulfill across many levels. And so what you're seeing today, and if you look at some of the top -- our largest customers are now some of the, I think, #1 and #3 by total awards, they're very much playing in the BEAD space. That's obviously a positive overall.

You're also seeing them contribute high dollars per dollar that they're going to get from the government. So the minimum match requirement is 25%. If you look at just our customers that have been awarded alone and we added that up, that's over 90% match that they've done. So they're investing more capital into these passings as well. So a lot of positives to come through there. I do think it's going to take time to ramp up next year because everybody is going to hit going at the same time. But we do think that we'll be talking about it more as the year goes on, maybe even some prospective awards ahead of the formal awards and then likely in Q2 that we see revenue.

Got it. If we can shift to the kind of financials for a minute. You provided an annual revenue guide, which you reiterated last quarter. But people are still very much focused on kind of quarter-to-quarter, month-to-month kind of changes and timing of build plans. So can you give us like -- or elaborate on build cycles and how they impact results as we kind of think about the sequentials and timing through the year?

It's a good point. When I moved into this role here 9 or 10 months ago, one of the very first things we did is we said we're going to give you a revenue outlook for the full year. We want everybody to understand what our growth opportunity looks like and our ability to capitalize on that.

We've also moved away from giving a ton of customer detail to get away from conversations of why did customer X move by $4 million. The story, Josh, to your point, the story around Dycom really is what is the need that exists today. The need is that you have 75 million homes passed, and our customers have committed to 125 million. So we have to go build that 50 million. Dycom is very well positioned to go do that. The need is we have all these data centers that exist today that need more capacity, they need lower latency that has to happen quickly. It's highly complex. Dycom is well positioned to do that, $20 billion plus, whatever that number is going to be.

All of those parts and pieces that come together, we think that we're incredibly well positioned to be there for. That's how we're trying to communicate with our investors, with our shareholders. It's how are we set up to capitalize on the opportunity. When you think about that full year outlook we gave and raised in the first quarter and then reiterated this last quarter, that shows you our confidence in our ability to capitalize on those builds, and it shows you our confidence in the long-term trajectory of those builds.

Our customers continue to either raise or reaffirm what their fiber-to-the-home expectations are. The hyperscalers continue to -- well, frankly, mostly raise what their CapEx is going to be related to data center and AI infrastructure. We're part of all those conversations. There's a lot of things, obviously, I can't share on stage, but we have a lot of confidence in all that coming through.

Within a given quarter, one, you're talking about -- we operate on very small work orders. Our average work order is probably $10,000 -- you're stacking all those up to get to $1.38 billion. That's a lot of work orders. Our customers very often because they're -- many of them are publicly traded, many of them are like us. They're managing other initiatives. They're managing CapEx. They're managing a very large business, which doesn't mean that they're always going to build at the exact same pace.

Sometimes they're going to slow down a little bit. Sometimes they're going to go a little bit faster. Quite often, we can see that ahead of a quarter, sometimes in a quarter, that will change a little bit. So that's why we give a range within the quarters. We feel really good about our performance in Q2. We grew over 14.5% of revenue. We grew our margin 175 bps. Those all point in the right direction. Those are durable outcomes when you think about it over time. So we're really trying to get people to think about the nature of these builds and how Dycom is positioned to do it, and they gives you confidence by telling you what we think we can do for the year.

Got it. And at the beginning of the year, you kind of gave some margin and cash flow improvements and thoughts out there. And we saw pretty good results this past quarter on that. Can you kind of talk about the additional improvements or additional opportunities for improvements on margins and cash flows? And how should we think about the long-term profile of the company?

I'm a huge believer that we can get better every day, and that's very much ingrained to the Dycom culture. So we're never going to be satisfied with where we are. So if that means growth, which it does today, we're absolutely leaning into growth. That means leaning into new demand drivers as we are today, like the AI data center set, we're going to go do that.

Internally, again, when I moved into the chair, our CFO, Drew and I sat down, and we spent a lot of time thinking about where our position was from operating cash, free cash, our DSOs, spent a lot of time looking at margin and we could see opportunities to improve. You've seen that come through. Quite quickly, I would add, quite quickly we've been able to capitalize on lot of those through increased efficiencies, through dropping operating leverage through. Those are strategic initiatives and how we're going about them.

But I would tell you today is even though we've had really good progress, we see additional opportunity for margin improvement, absolutely. For cash flow improvement, absolutely. We're working really hard. They're not always going to be linear. We are seasonal, very much we're seasonal. But if you think about it in a longer horizon, what we're trying to do is continually raise the water line. Josh, what I would tell you is when we get to a point where we think that there's nothing left, we'll be clear about that. We will be clear about that. Today, we see continued opportunity.

And I guess improving cash flow kind of leads me to leverage, which is pretty low. What are your plans to do with the cash? You do some buybacks, but you probably have capacity for more than what you do. So how should we think about your capital allocation in total?

We're growing -- continuing to grow. You can see the growth opportunity. You can see the organic growth as you look at the tail end of the year. I think everybody can do the math if you look at it. There's going to be a lot more organic growth now that we've lapped the acquisition that we did in the wireless business.

We have to make sure that we can always invest in that. We've got to stay ahead of labor we talked about. We got to stay ahead of our equipment. Our commitment to our customers is that we're going to do everything in our power to make sure that our labor, our equipment that our processes don't ever hold up their builds.

So we have to stay in front of that. We're going to invest in that first and foremost. I would tell you that today, we are very aggressively looking at the M&A market. We're very aggressively looking for partners out there that fit our strategy, that fit our culture and fit where we're trying to go ultimately. We think that there are opportunities. It's obviously got to be the right value overall. It's got to make sense and long-term return for our shareholders. But we are seeing some incredible opportunities that we think will be the springboard for Dycom.

And what exactly those kind of opportunity to look like? Is it more of your type of kind of construction? Or is it something adjacent? What's kind of the most interesting?

Yes, I don't want to give away the secret sauce, so to speak. What I would say is we've got a clear strategy. I've talked about the opportunities that we have to continue to build on our existing business. What I would tell you is because we're in all 50 states, because we're across so many customers, we don't have a hole to fill. So we very much look at how do we add opportunistically.

I talked about how there's continued consolidation that we'll see in our space. And then I very much talked about the data center hyperscaler world. And what does that look like? And how can these partnerships continue to develop over time? Where do we find the need with the hyperscalers that we think that Dycom can bring a unique solution set, a unique solve for, and that's where we're spending our time and energy today, Josh.

Got it. The other thing is your backlog is growing quite quickly, which in theory gives us a pretty good indication of where top line is going. I'm a big proponent of kind of thinking about if revenue grows X, EBITDA grows Y, EPS grows Z. Is there like an algorithm that we should think about as to when we see the backlog, what that actually kind of foreshadows into what earnings and cash flow can really grow?

Yes. So first, I have to qualify the way that we represent our backlog. Our business is very different for folks that aren't very familiar with Dycom. Our business is different in the way that we record total backlog. It's a very conservative view.

So we are only looking at current contracts that we have and the length of time they go to using a trailing 12-month run rate. Build projects we can look at it separately. But if you think about service and maintenance business, it's over half. If I have a contract with AT&T, one of our largest customers that expires tomorrow, I have 0 backlog that we're reporting out to you all. If I renew it tomorrow, I'm going to have this huge jump up. What it means in the underlying business is absolutely nothing, right?

Our underlying business is still operating at the same level. We're trying to think about ways that we can improve our communication to investors so people understand that better. Next 12 months does give a much better overall view of the business. It still has the same criteria within it, but it gives a much better view. So that's just my quick kind of thought about how you think about our backlog.

We continue to -- one, obviously, we have a strategy around our growth. We continue to receive awards in markets that we're not in today. You've heard that on the last few calls, I've been mentioning that, which means that we're growing share, right? That's an important factor. We're not only growing with what's happening today, but we're growing share in addition to that. And I think that's really important takeaway.

If you try and connect the dots between revenue and EBITDA and EPS, it's not always going to be linear. What we've been working hard on and I think showing is that we're trying to improve the margins and the EPS independent of revenue as well. So we don't want to just grow with revenue. We want to grow it ahead of revenue. And like I said, we still continued opportunity to do that. So not a direct corollary. Don't forget the seasonality that's in the business, but I would kind of put a wrap on the whole things. We still see a lot of opportunity across all of those today.

Got it. And then just kind of circling back to the AI side. You've talked about your kind of conversations you've had with hyperscalers. Do you foresee conversations with kind of major enterprises as they figure out what their applications will be? Or is it -- they're just going to ride on the networks that's already there and there's really nothing incremental on that side?

So generally, those are going to come through our carrier customers in a similar way as the hyperscalers. And it is an important point, though, Josh. You have the big hyperscalers that we all talk about. But there are other -- both enterprises and other hyperscalers beneath that, that still have a lot of network need that has to get built for. And you're seeing some of those conversations happen. I mean even in the news recently, Oracle in the news yesterday. Obviously, there's infrastructure related to that kind of data center investment. So those are going to come through as well.

Got it. And real quickly, T-Mobile is relatively new to fiber. Do you have any kind of relationship with them or any of their kind of subsidiaries that they've been working with?

First, congrats to T-Mobile and Metronet and Lumos for closing those joint ventures. We've been working with Metronet and Lumos for some time. Very excited about their increased appetite and what they're going to do now that they have T-Mobile as a partner. And yes, we see that as a continued opportunity.

Got it. With the time we have left, what are the 1 or 2 things that we should take away from the conversation today? And what makes you most excited about where you stand?

A lot of excitement, a lot of energy overall in our business and thinking about the landscape in front of us. The first is we really have a unique solution set. We're all over the country. This is a very hard and difficult thing to stand up. When you're talking about 2, 3, 4 or 5-person crews, across 50 states, rural, suburban, urban, that's a very difficult thing for folks to replicate.

As I'm aware, nobody else is in all 50 states like we are. Levering that into these demand drivers, we have a strategy about how we can do that. We don't want to overcommit to one. We think that we can build off all 3 of these, as we think on them, all 3 being hyperscaler AI data center set, fiber-to-the-home and the rural, whether that's for BEAD or others, while we continue to underpin with the service and maintenance business, we see opportunities for significant growth.

Where that ends up, where does that go? What I would tell you today is that is a very long horizon of growth. So yes, we talk about a lot between now and 2030. We don't think that the world instantly changes when you get to 2030. We think that a lot of these other things are going to continue to increase intensity, capital intensity, build intensity when we come through there.

So what we're really doing and spending a lot of time on is gearing out. We're gearing up, right? How do we continue to grow and make sure that we can -- that what we've built with our customers, that level of certainty that they expect from Dycom that we think that we've raised the bar in the industry, how do we make sure that we can continue that with all of the growth that we see in front of us.

That's fantastic place to stop. Thanks so much for being here.

Thank you, Josh.

Well, welcome, everyone. My name is Alex Waters. I'm a part of the communications infrastructure and telecom team here at BofA. Very thrilled to have Dan Peyovich, CEO of Dycom at our conference today.

Dan, welcome.

Good morning.

Any safe harbors you need to make before we begin?

Yes. Thanks.

I see Callie in the room, so just making sure.

Yes. Keeping us in the court. I appreciate it. For any forward-looking statements I may make today, just make sure you consult our website for the safe harbor statement.

Perfect. Well, we'll get started then. Yes. Maybe just before we begin, for the folks in the audience and the people online, can you just maybe provide a little overview of Dycom and kind of what you guys do and the verticals that you operate in?

Absolutely. So we're a premier digital infrastructure services provider. We're in all 50 states across the U.S., doing wireline/wireless telecommunications construction. Our customers are the large carriers, the AT&Ts, the Lumens, the Verizons, the cable customers of the world. And then we do work related to hyperscaler or long-haul builds as well. So everything that's going on with the AI evolution.

And a huge part of our work is service and maintenance. So that perpetual work that happens year-over-year. And as everybody knows, very active space, a lot of homes to get passed in the coming years. So we're excited and excited to be here to talk about it.

Yes. Very active space. So maybe just starting off where you ended there, kind of the bread and butter of Dycom is fiber-to-the-home builds. Could you just start out and give us kind of the current state of what you're seeing? Obviously, your customers are increasing builds, a lot of folks in this kind of environment. So what's kind of the current state?

It's been fantastic work, Alex, as I believe a lot of people know, these builds have been going on now for several years. I think probably what we're trying to educate people on is they're not as far along as people believe. Our customers continue to increase the homes that they expect to pass. Collectively, they've added 50 million incremental passings over the last 16 months. That's a very big number when you think about 140-ish million homes in America. And ultimately, we think that about 80% of the homes are going to get passed with that private capital.

So if you're at about 75 million to 80 million today, you add another 50 million on, you're getting to something like 125 million homes. And that's going to take a huge amount of labor forces, a large amount of equipment and a ton of planning. That's work we've been doing and doing well for the last few years in earnest. And again, you've heard our customers talk about it.

It's a unique time when pretty much every single one of our customers is either affirming already high-speed run rates, affirming their commitments to pass a huge number of homes in their footprints and then also incrementally adding that. And they're adding it in 2 ways: one, through their own consolidation, AT&T and Lumen being probably one of the most recent. So you're seeing all that stack together. So you have this huge momentum behind it.

And what that means is that those numbers continue to increase and the number of homes expected to be passed every year continue to increase. I think industry estimates would tell you that about 10 million homes got passed last year. So if you think about that developing over the next 5-plus years, huge opportunity for us, one that we're extremely well positioned across customers. I think, again, people think about us connected to the large carrier customers. We have hundreds of customers we're working for every day. It could be a very small local co-op all the way up to the AT&Ts of the world.

So huge opportunity. And I think probably the message I would like people to hear is that although we've done a ton of work there, there's still a lot of growth potential and opportunity.

And when you think about the time line, right, I mean, AT&T, their build still kind of 2030. I mean how do you think of, I guess, from here to there and then perhaps after that of chance of overbuild, et cetera?

Yes. So some of our customers have been very specific about their time lines. And absolutely, there will be builds that get done by 2030 for sure. When you think about the 80% or getting to 125 million passings on the private capital, we believe that still a number of those are going to carry well through 2030.

And that's for a few reasons. One is not all the builds across all the customers are at the same pace. Two, these are highly complex projects. They're not -- I know it seems -- it can seem very simple, either dig a trench, put some pipe in it, pull glass through it, climb poles, string glass between them, but they're actually highly complex to do. You've got a huge amount of labor forces that are required behind that. You've got permitting, locating constraints that we continue to see in the space.

When you take that across everything and then you say, not only do we have all those fiber-to-the-home builds to go do, which are only increasing and expected to increase, you've also got all the hyperscaler long-haul middle mile work. That's really just getting started. So you have to add all of that on top. BEAD is finally starting to get some color and context behind it. So you have to add that on top. And we just think that there's a ton of opportunity coming into the space. So naturally, as part of that, some of the fiber-to-the-home is going to go past 2030 overall.

And I want to get to data centers and BEAD and the wireless side of the business. But maybe can you talk about the maintenance portion of your business? I know you guys came out a couple of quarters ago and kind of quantified it for us investors. I mean just where do you see that business growing? I mean, I know you've talked about this in the past of every home -- new home passed is a maintenance opportunity. Could you just dive into that a little bit?

Well, you took my tagline there. That's exactly right. First, it's a priority in our business. Service and maintenance has and continues to be a priority in our business. I do think that makes us unique. There's plenty of competitors out there that their preference will be just to do the project work. We really want to lean into the long-term relationships. The service and maintenance work is very difficult. It's very complex. You have to have people at the ready even on Labor Day weekend to go address any issue that comes up anywhere in the geographies that you cover, which for us, again, being across all 50 states is a large part of America, both rural, suburban and urban.

So it's a very difficult thing to set up. There's a ton of fleet equipment and personnel that you have to have at the ready. It's been a focus in our business for a very long time. And for as long as we've gone back and looked at the numbers, it's always been more than half of our business. And we continue to make it a priority to ensure that it stays over half of our business. Now that number can modulate, but the important point is that it underpins the rest of the work. What it does for us other than being able to have these deep relationships with our customers where we're servicing them on a daily basis. And then when the builds come up, it positions us well from a relationship standpoint. It also positions us from a people and capital equipment.

So all of that is at the ready, and we can leverage that, whether it's into fiber-to-the-home build or whether it's into long-haul middle mile routes or whether it's into what's going to come from BEAD because we are in many of these rural locations, too. I think when you take all of that together, it just sets us up well for the rest of the demand drivers, but it also just keeps this bedrock foundation that allows us to have that recurring revenue over time.

And within the maintenance portion, I believe, is the locating business, which is a large kind of recurring business for Dycom. Could you maybe just unpack what that locating business is and potentially quantify it of how much of that -- or greater than 50% it is because there is a recurring nature to that, right?

Yes. And for most of our locating business does end up in the service and maintenance category. So the maintenance business for us is typically around 6% to 7% of revenue. That is a business that we've been able to grow. And I think it's a lot of the same messaging that we have on the wireline and wireless side. What Dycom brings is, other than our footprint, is we're really leaning into the customers to provide a level of certainty and really raise the bar in the industry that we think differentiates us.

Our customers have shown that they want to consolidate vendors. They want to have vendors that prioritize that certainty of delivery, that certainty of execution. And prioritize the long-term relationships over short term. And so they've been continuing to consolidate vendors. And they've also, as we've talked about on some of the earnings calls, we've been awarded new markets, markets that we weren't in, but somebody else was in and was struggling to perform.

That all plays right into the utility locate business as well. Many of those are the same customers. There's additional customers outside of our core customers, too, but they're all looking for a similar recipe, right? They want that certainty. They want the relationships. And so we've been able to grow that business and see continued growth opportunities ahead of us.

And the scale of that business, I mean, obviously, Dycom operates in all 50 states. Is that a subset of the 50 states of the locating business?

It's across many states. It is across many states. Obviously, it doesn't cover our whole footprint, but we do cover a lot of ground.

Okay. All right. Maybe switching to the data center portion of the business. I mean, obviously, we cover the data centers here. It's a very big growing aspect of the industry and big for you guys as well. I mean you guys quantified it with 2Q earnings and kind of gave a $20 billion TAM over the next 5 years.

I mean maybe a couple of questions in there. What -- could you maybe give us the building blocks of that TAM or what kind of services those are? And then perhaps why only the 5-year outlook for this business?

So we wanted to be really clear about the $20 billion TAM. There's been a lot of conversation related to what is the potential impact, whether it's related to AI, the hyperscalers or enterprise. Enterprises continuing to move to the cloud. We wanted to -- we have a very unique insight there. We've been spending time with the hyperscalers over the last several years. Obviously, we've been spending time with our carrier customers who are doing a lot of this work for the hyperscalers.

And across all these conversations, we've gotten a really good look at what needs to get built across the U.S. What needs to get built. And I want to talk a little bit about timing and how connected and disconnected it is from the data center expansion. But we have insight to a lot of those routes, whether they're replacing existing routes, upping the capacity, lowering the latency or building completely new routes. Sometimes those are for redundancy. Sometimes those are just new routes going to new data center locations. So we have all this information that we could look at, and we're able to size and scale what that total opportunity set is.

We also included the inside defense work we've been talking about. So that's taking fiber from the right of way, pulling it into a data center campus and then interconnecting the data centers. Smaller portion of the $20 billion, but it's included in there. There is nothing in that $20 billion that's outside of the service lines that Dycom executes today. So we're not including supply of the fiber because that's not typically what we do. We're not including anything on the power side as well. So that purely is addressable into the work that we do today.

I just want to talk a little bit about why it's connected and disconnected from everything that's going on with the data center and AI space. What's unique about this long-haul middle mile work is it is highly time constrained. So I talked about complexity of the fiber-to-the-home build. The complexity goes up many, many notches if you think about long-haul and middle mile networks. Why that is, is because you're going through metropolitan areas, you might be going through downtown Chicago. You might be going on to the Mississippi River, but you're ultimately connecting a route over a long period that's got to be connected end-to-end.

So you have to balance across all of those different municipalities, all of those different terrains to have continuous workflow, continuous operation, ultimately, continuous connection ultimately for hyperscaler but certainly for carrier customers who we typically contract with. To orchestrate all that across different permitting environments in all those variables is highly complex. Physically doing the work because we're talking about very dense bundles of cable, very complex. The traffic control, everything around it is highly complex.

What that means is, ultimately, for the hyperscalers, this is a long period of time to go spend all of those dollars. It's a long period of time to get ultimately what they want to build or what they see that they need to build today to get all that done. So this is a time-constrained effort. Though the revenue dollars and potential are big for our space from a CapEx perspective for them against $400 billion and rising CapEx related to AI data center spend, it's very small. So the time is really what is creating the need and the urgency.

So yes, will there be more when AI continues to develop and there's more data centers? We believe so. Will there be more as power constraints get cleared out and they can go build in new areas or continue to build in existing areas? Absolutely. But in the meantime, there's just a ton of work that has to get done to really get the capacity up and the latency down and the redundancy in for what they purely need today. So you have all of that coming together.

And that's why we say that, one, we think this is a kind of once-in-a-generation build. Two, it's going to go well into the next decade. We see this as being 10-plus years. And then to your question, Alex, the reason that we said 5 years and painted a really detailed pictures around that is because we wanted to be specific about the addressable market that we see today. We have really good clarity and insight to what's going to happen in the next 5 years. Beyond that, we would have to start making a lot of assumptions.

Now we believe that after 2030, the numbers are only going to go up. The need is only going to grow. All of our data consumption only goes up year-over-year. We don't see that ending anytime soon. So all signs point to yes, so to speak, after 2030, but because we had such specific data, we want to really be clear about what we think that is over the next 5 years. And let me just finish with, we do think that's back half loaded.

Okay. So back half '28, '29, '30 is the way to think about it?

Yes. I think you'll start -- we've been doing overpull work with Lumen, a longtime partner, a fantastic opportunity. We've been doing that work out in the field for 7 or 8 months. It's just now kind of getting up on plane. These projects just take a long time to get going. So we see '27 is really being when things can start from a revenue opportunity being more significant and then absolutely '28, '29.

Sure. And then are there -- you spoke a little bit between -- the differences between the overpull work you're doing with Lumen or the existing routes versus the new builds. Can you maybe just talk about those 2 differences between the traditional fiber-to-the-home a little bit more in terms of how that work is? And then what specific geographies are you kind of operating in for this data center -- for these data center builds?

So I'll answer the last question first. Because we're across the entirety of the United States, we know both the subsurface conditions. We know how to work in these municipalities. For us, where we do the long-haul, middle mile work can be anywhere in the U.S., and we have work that's across multiple states and multiple geographies. So there isn't a limitation there. And certainly, we have an appetite to be across it all.

Related to the fiber-to-the-home work, the comparison I use is fiber-to-the home is a little bit of a shotgun approach where a customer is looking at a certain number of passings. And you can go across multiple neighborhoods, multiple municipalities to add up and aggregate those passings. Very different than long-haul or middle mile where you're just connecting point A to point B or point A to B to C.

So over here, you have more variability. So even though it's highly complex, you can kind of go to a broader approach to make sure you're going to hit the numbers. Here, you just got to be completely dialed in. You got to be exactly precise to make sure that you can deliver and execute on that route.

The actual equipment and people that it takes are similar. Just higher level of complexity and a much higher level of coordination, project and program management. And again, I think opportunities where we can differentiate. Permitting is much more complex because, again, in some of these situations, typically in a neighborhood, permitting continues to be a challenge and issues, and we could talk about that if you'd like. But even more so if you're talking about being in the downtown.

And you brought up the inside defense work. That's a newer "opportunity" for Dycom. I mean, maybe why weren't you completing this work beforehand? And what's the customer kind of take been since you guys started offering it?

It's a natural evolution for us. We've been talking to the hyperscalers for years. It's part of that conversation. It's part of doing some of these long-haul routes. It naturally led to what's happening once they get from the right of way into your data center campus, what's happening for connecting it now that you need a larger fiber count that you're getting out to the right of way itself and to that vault, what are you going to do to take that into the campus?

What we're finding with the hyperscalers is very similar with our carrier customers. They're looking across all of their different campuses, all their data centers and they're saying, we have a number of vendors, still highly regionalized, localized and who does the work, variability in level of execution, level of certainty they're getting. And so our conversation started from the same place. And again, where we think we differentiate is what if we talk about a high level of certainty, a high level of accountability, and we only have to learn at once, and we can translate that across multiple geographies. And that's really where the conversation started.

We're very pleased that we've been awarded different campuses in different states, where we can go do that. That's great work because there's work to do today, but also as they continue to build the data centers, as they continue to upgrade the networks, they're staying power. And then we did talk about a separate award that we received this quarter, which is just pure maintenance of their own facilities. I do want to be specific that, that is different work than what we do for our carrier customers. It's not work that competes with the carriers. This is very specific for the hyperscalers.

Okay. And just in terms of the time lines, I mean, obviously, these -- the long-haul builds for data centers are -- they take time to complete. I mean when -- for the inside defense work, is that mostly completed, I'm guessing once the data center is almost complete or completely built?

Yes. So there are some where today, they just want to upgrade the network. So the data centers are there, the campus is there, just go. There are others where they are continuing to add to the campus. So as things come online, we'll be there for a long period of time potentially, Alex, continuing as they bring new data center in creating that connection. As they bring higher density, higher count fiber in that's not there yet from long-haul, middle mile, then we'll come in and bring that out into the campus. So the answer is it kind of depends, but it's a little bit of both.

Okay. Maybe just switching to BEAD. I know we've been talking about BEAD for a couple of years now, but...

Five years.

Yes, exactly for a long time. The -- I mean, can we just talk about where we are currently, what your conversations have been like with the states? And I'm assuming some customers are getting plans ready. Program seems to be much more fiber than maybe people feared heading into the new administration. So I'd love to get your take on that.

We're excited. First, it's not included in any of the outlook that we've given or any of the future talk that we've had about the business. BEAD is not in there at all. At the same time, we're finally getting to a point in the program where everybody is getting more clarity. For a long period of time, we said that we thought 2/3, maybe 70% would be fiber in mass across tons of moving parts that have happened over the last 4 years around that. What we're seeing today as the states are starting to come out and talk about the awards that 2/3 of that has been fiber, has been either fiber or I should say there is some HFC in there as well now. So wireline side with the cable customers getting to bring their plans in as well.

That's all a huge positive. That's all a huge amount of opportunity that still has to get fully developed. I think it's important to remember, we've been talking to the states for a long time. We've been talking to our customers, the subgrantees for a long time. The states previewed their plans with the NTIA. They didn't just drop on the doorstep and run. So we believe that getting through these next spaces, there's also -- obviously, the new administration wants to get fiber built, right, wants to get capital deployed. So we think there's a lot of momentum that's going to carry it in. And we do think that we could see revenue opportunities as early as second quarter of next year.

We're already in conversations with our customers. Some have even come out and talked about the awards. Probably a big point that happened in all of the change as they released the new NOFO, Notice of Funding, that came out with the new program requirements, there was a number of changes that happened. Labor workforce requirements, how the states can spend the money and now it's got all the deployment related. But a big thing that happened there was they made it a lot more appetizing for our larger carrier customers.

What we've seen so far in the states that have announced, which is about half of the states is highly weighted towards our larger carrier customers. The AT&T, Comcast and Brightspeed are the top 3 by total awards for fiber to date across the states that have announced. Of the 10 top customers that have received the most fiber or wireline, 8 of those 10 are customers that we're working for every day today. So it's really favored moving towards customers that are larger scale, certainly favors us. We do work with hundreds of customers. So we have relationships throughout. We do think that there's going to be a lot of opportunity there.

So yes, we think that we're finally at a place that there's getting to be a little more understanding about how the program is going to go. We're already talking to customers about prospective builds. Another point that I would make for us with existing contracts with many of these customers, the opportunity is that we don't even have to have a new contract that we can really be just moving from one area, driving however many miles to an adjacent area to start once they do get the funding in place. And that's why we think that 2Q of next year is an opportunity.

Okay. So 2Q next year, we begin to get some funding. I mean, do you think the lion's share is probably in fiscal '28 for you guys or...

Yes. I think it's going to be -- one thing that has happened, it's a little bit of a Kentucky Derby now. So you have all the states where before, they were going to be more modulated in how they released. Now everybody is going to be lined up at the start when the year turned over pretty much the same time other than maybe Texas, who got an extension.

It's going to take some time for the supply chain to work through that. It's going to take some time for all these to get ramped up. It's going to get time for people to work through permitting and how that's going to work. So yes, I think you're going to see a lot of ramping in next year. I think you'll even see ramping, but good activity in '27. But again, there's certainly going to continue to build over the life cycle.

And then just thinking about the $42 billion, how much is a TAM for Dycom? Is it -- for the labor side, right, is it half of it, would you say? Or what are your kind of thoughts on that?

So the 42 -- so there's the $42 billion. There is the match that has to come from the subgrantees. So if you can call that round number, $50 billion-ish. Again, a few things have happened over the last 4 or 5 years as we've worked through BEAD. One, homes have continued to get passed out in rural America through other programs, right, through cooperatives, local cooperatives building out their plant. So the number of actual passings has gone down. So I think that's going to bring the number down some.

The other thing is the other programs, the nondeployment programs that were part of the $50 billion, those can't be done anymore. At the same time, there's obviously a big cost focus the way that BEAD is set up now. So the number is going to certainly come down from the $50 billion. Where does it end up? I think we're going to learn that. Hopefully, in the next few months, I think we'll have much better insight. It's still going to be a significant opportunity. Is it $20 billion? Is it $30 billion? I don't know yet, Alex, but we do think it's going to be a material number to spend. And again, remember, that's going to be in a relatively short 4- or 5-year time frame.

So we've kind of talked about the fiber-to-the-home side, data center opportunity, BEAD. We'll get to wireless. But just in terms of kind of your employee count, right? And I mean, do you feel like you're well positioned to capture all these opportunities going forward? Or how are you thinking about it on the labor side?

We believe one of the things that differentiates Dycom is our approach to labor. We've got a huge workforce. It's highly dispersed around the country. We have crews sometimes that are one person and we have crews that are maybe a dozen or 15 people. But our average crew size is a very small number of folks. How you set up to attract, retain, train, make safe that workforce is highly, highly complex, and it's something we've been doing and working on for a long time. So we do believe that we can differentiate in our ability to both attract and train and retain labor and have them deliver at a very high level. I talked about the level of certainty that our customers have come to expect from Dycom.

So we do think that sets us apart. We've shown -- in prior quarters, we've had organic growth of over 20%. So we've shown our ability to grow our workforce considerably over those periods of time. All that said is, we talked about all the different drivers coming in. We talked about the fiber-to-the-home builds continuing to ramp. We talked about BEAD. We talked about the hyperscalers. That's something that you have to be incredibly proactive about. You got to have a core strategy and discipline about your labor proposition, and again, this is where we think it makes Dycom different.

One, if you look at our leadership, and I'm talking across the organization and myself included, the majority of our leaders started in the field. So if you think about attracting new talent to the organization, new talent to start at the very entry-level position, we think that, that ability that people can see a career path. And we spend a lot of time talking about it and training through it, that you can quite literally get promoted all the way up to the CEO of Dycom, is a pretty unique and powerful message. Two, and I would tell you, I'm a huge advocate for the trades, a huge advocate for getting folks into the workforce. As an aside, huge advocate for getting metal shop and wood shop and auto shop back into high schools.

All of those things, I think, can help to feed the future workforce. But we do see that we get a lot of feedback from the new generation that they don't want to be sitting at a desk. And so the question is, how do you take that and operationalize it? How do you -- how do we craft our story, craft our message, craft our opportunities so that we can make sure that we're bringing the right people in to have staying power and that can deliver.

And I'll give you an interesting anecdote. We have found that people that play a lot of video games can excel at fiber splicing. So how do you take those skill sets that people have? And how do you have that conversation in the right way with somebody so that they understand what they're walking into. So all that to kind of wrap around, Alex, we feel like we're very well positioned. We've shown our ability to grow there. Very proud of our workforce.

Right now, we're spending a ton of time with our training programs. We're building new training facilities. And then within our numbers and what folks don't see, it's about the leadership. It's about the training. So the levels of folks that are managing people, we're spending a ton of time right now continuing to develop those, which allow us to grow the folks that are out working with their tools every day as the work comes through because there's going to be a lot of growth required.

Well, my seventh grade wood shop teacher will be very happy with what you just said. I mean maybe just on the equipment side quickly. I mean, how do you feel -- we talked about the employees for the equipment. I know you guys don't own the fiber that you're deploying, but the large chassis trucks, the diggers, everything like that, how do you view kind of what you have right now versus what you need?

The same way that we talk about our customers. We want to be long-term partners to our customers. We want to lean into the organizations and understand their needs. And we operate the same way with our supply chain partners. So our equipment suppliers, we consider to be very close partners. In fact, in a lot of cases, we're working with them and their R&D teams on how they can improve the equipment to make it more effective, more safe, more productive out in the field. And all of that lines us up to be ahead of the curve. I can tell you even when times were tough coming out of COVID and getting equipment, we were able to stay ahead of it.

Our commitment and our goal with our customers is that we don't ever want our labor or our equipment to hold what their builds. And so we spend a ton of time working to stay ahead of that. We do buy a lot of our equipment, which gives us resiliency across when pressures do come up. And it gives us a different level of relationship when we need to rapidly accelerate or buy more equipment. All that to say we feel like we're in a really good position. The supply chain is in a really good position today to be able to meet the needs of the growth ahead.

Okay. And then maybe just on the margin side of the business, 2Q margins were very strong. They've continued to kind of increase over the past, gosh, a year or 2. Can you just talk about perhaps the cost management efforts that you guys are doing? I mean, even the revenue capture as well as where should we kind of expect margins going here in the near to medium term?

When I moved into this seat, we made a few changes in a few statements. So one, we gave a revenue outlook for the year because we wanted investors and the Street to understand what kind of opportunity set we had. And also understand that within quarters, sometimes there can be parts and pieces that move, but they don't always have anything to do with what the longer-term drive in need is. So we said, here's a revenue outlook.

We also said, we have opportunities to improve margin, and we have opportunities to improve cash flow, and we're going to focus on those. We're going to invest in those and create a core strategy around improving them. You saw the improvement on both of those. You've seen those develop over the year, but you certainly saw them come through in Q2. Very proud of what our teams have done. Specific to margins, some of that does come through as operating leverage. And as I've talked about on the calls, strategically, we will reinvest operating leverage sometimes to continue to build the business. Other times, it's going to drop through the bottom line. So that will continue to happen as we grow.

The secondary and important part is I talked about our dispersed crews. I talked about our crew size. We continue to see opportunities out there about how we can get better, and we can get better in a number of ways, right? You can always improve safety. That is the first and foremost thing that we always talk about. We've made a ton of improvements and you're never done there. So we're always looking to improve safety.

What comes with that, we improve safety, quality gets better, production gets better. We have a focus on quality, and we certainly have a ton of focus on efficiency. We have a number of different ways that we measure it, and we've set goals and guideposts and expected outcomes with all of our operating companies. We spent a ton of time. I think, again, one thing that's unique to Dycom, we're working across all 50 states. We're working across many, many customers, the majority of customers. We create mountains of data every day, mountains of data.

And so the question is, how do you harness that data and operationalize it? How do you not just take it and have it be backward looking, but make it be forecasting in what you do or what you need to do. Since our work is unit-based, very different from a lot of companies who might be percentage of completion, ours is unit based. So we get real-time view into how our project is performing. On the very first day, we can see in the systems that we've built out in the field that are completely digital that our teams are using on the front lines, we can get real-time information on how a project is starting.

And then we can adapt to that. We can look across the enterprise and across contracts and look for bright spots, who's performing the best, right? Who's being the most efficient, who's being -- who's got the best safety records, all of those things. And we can take and bring those across the organization, so we talk about not having to learn things 30 or 40x. So intense focus in that. How do you bring AI into that kind of data set? And that's something that we've been working on for years now.

We built -- and I think I've talked about this before, we built a large language model that's reading tens of thousands of pictures to make sure that our berry depths meet specifications. That would take a massive team of people, and this goes to margin improvement, right? So you can either have a massive team of people or we can have one large language model that's looking at this and making sure that we have a level of quality and only bubbling up things that need to be addressed. That's really the tip of the iceberg from an AI standpoint because of the data that we create. And I can tell you, we've got large teams working on this today, and we think that we're going to continue to improve that.

Ultimately, what you're trying to solve for is you're taking somebody that's out working with their tools that's very expert at what they do. And we have to give them the right kind of information, the right kind of tools to also improve efficiency over time. So again, very proud of where we've gotten to and very impressed with what our teams have done, but we think there's continued opportunity for margin growth.

Okay. And maybe just thinking about the competitive landscape just for the service providers like you guys. I mean, can you just talk about, a, why does Dycom win versus perhaps some of the other publics and even the regional privates that you compete against?

It is a competitive space, to your point, Alex. It has been competitive for a long time. Our customers are highly sophisticated in the way that they procure work. As I've talked about on the calls, I think where we differentiate is our goal absolutely is to raise the bar and raise the expectations of our customers. Our goal is to deliver a level of certainty that our customers don't see from competitors in the space. Do we do that every day? There's always work to do, but we believe that we've done a good job of proving that if we tell you we're going to do something, we're going to do it. And where we do have missteps, our customers know that we're going to do everything in our power to overcome that and do even better. And we're going to continually raise the bar on ourselves never satisfied.

We think that gives us a competitive edge. We think that our approach to labor and our labor forces and the level that we can deliver with those forces that, that gives us a competitive edge. The knowledge that we have across customers, across geographies and taking all of that information as we go look at new bid opportunities. We think that, that gives us an edge to be more competitive and really knowing what the cost base is. So when you put all that together, I think it's the old -- proof is in the pudding. You see the growth that we've had, the continuing growth opportunities. I talked about on the call is how we continue to get awards for new markets. I think that's a really important data point.

But at the end of the day, it comes down to the relationships we have with customers. And what our employment proposition is. And we believe that our strategy is working well. Always room to improve for sure, but we think that we'll continue to be able to compete.

Okay. Maybe last one for here, and then I'll open up to the audience if they have any questions. But just thinking about kind of our whole conversation here, right, between the fiber-to-the-home builds, BEAD, data centers, I mean, it seems like next year is shaping out to be a very solid year for Dycom, especially with one of your largest customers really accelerating that traditional builds. I mean any kind of guardrails or guidelines of what to expect heading into calendar '26 that you could provide for investors?

Yes. As we did this year, we will give a revenue outlook for the full year as we get closer. Not going to give that today, but I would point to -- yes, no, I appreciate it. I would point to the back half of the year. We have a ton of momentum in the business. In Q2, record revenues, record EBITDA for Dycom, for the history of Dycom. Very excited about that. That rolls into a back half of the year where we've shown -- given an outlook for Q3 that's robust. We've given you the full year outlook for Q4. What that implies as you go into next year and certainly based on the dialogue that we've had today and dialogue in the industry is there continues to be significant growth opportunities ahead for Dycom.

We believe that we're well set up to be able to capitalize. We believe we continue to show that. And our goal is to be clear and transparent, right? I mean it's our job to build trust in the investment community. It's our job to build trust with our customers. We're always going to be straight over tackle on what we see. Right now, what we see, to your point, Alex, is our customers are highly invested in passing homes. They're highly invested in blanketing a majority of their footprint with fiber. You have other things like the AI and data center evolution, these long-haul and middle mile networks that are really just getting started.

And then on top of that now, I think we're going to finally see something for BEAD. We have the wireless work, which continues to perform and perform very well that will give us a great position for next year and opportunity to flex off of that. So all that said, we're confident in our ability to deliver for this year, and we've got a lot of energy and excitement around what next year looks like.

Well, maybe just to your point on the wireless side of the business, in the Black & Veatch acquisition was, gosh, around a year ago here. I mean that has performed very well the past couple of quarters. Can you maybe talk about what the work you're doing for there? I think you've noted in the past that it's not necessarily a pull forward of activity or maybe perhaps a little bit of a pull forward, but you've still identified some opportunity on the outside here.

Yes. It's a great customer we worked with for a very long time. It was a great opportunity for us to marry what we've done internally and the solutions that we've built with our own wireless business with what we did in the acquisition. And so we were able to very quickly add to that business, retool parts of that business to be able to take on and deliver at a high level for that customer in the ORAN equipment replacements.

What that's meant is that, one, we can go faster. So there has been some pull forward. Two, the scope has increased as well. It's performing very well. Very pleased with the acquisition. Great to have those team members as part of our team. We see another 2.5 years of that work continuing. And it sets us up well.

I think our strategy around wireless is to have it be large enough that we have a great footprint that we can flex into as densification comes in the coming years. And on the other side is, let's say, it takes a little bit longer, it's not so big that we can't backfill that very quickly with some of these other demand drivers. So we really feel like our strategy is solid there and feel well positioned.

Okay. And maybe just in terms of the densification point there. I mean, have you had conversations with the carriers about them starting to accelerate that? I mean, as a tower guy, I'd be upset if I didn't ask you.

Yes. There's always conversations we're having with our customers, a lot of which that I can't talk about when I'm on stage. I think there's a lot to be developed in exactly how densification is going to play out. I don't think that it's tomorrow. But again, I would also tell you that we have plenty on our plate for the next couple of years, and I think it just sets us up well. Ultimately, as I talked about with these other drivers, data consumption goes up. So over time, data consumption continues to go up, likely going to be more densification and equipment requirements.

Okay. Perfect. Well, I think that's a great place to leave it. Dan, thank you so much for being here. It's great to see you.

Alex, appreciate it.

Awesome. Thanks. Thank you all.