Form 8-K DYCOM INDUSTRIES INC For: Aug 13
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 13, 2018
DYCOM INDUSTRIES, INC. | ||||
(Exact name of Registrant as specified in its charter)
Florida | 001-10613 | 59-1277135 | ||
(State or other jurisdiction of incorporation) | (Commission file number) | (I.R.S. employer identification no.) | ||
11780 U.S. Highway One, Suite 600, | ||||
Palm Beach Gardens, Florida 33408 | ||||
(Address of principal executive offices) (Zip Code) | ||||
(561) 627-7171 | ||||
(Registrant’s telephone number, including area code) | ||||
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4c))
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
o Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Item 2.02 Results of Operations and Financial Condition.
On August 13, 2018, Dycom Industries, Inc. (the “Company”) issued a press release lowering expectations for the second quarter of fiscal 2019 and guidance for the full fiscal year, and providing guidance for the third quarter of fiscal 2019. Additionally, on August 13, 2018, the Company made available related materials to be discussed during the Company's webcast and conference call referred to in such press release. A copy of the press release and related conference call materials are furnished as Exhibit 99.1 and 99.2, respectively, to this Current Report on Form 8-K and are incorporated herein by reference.
The information in the preceding paragraph, as well as Exhibits 99.1 and 99.2, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), or otherwise subject to the liabilities of that section. It may only be incorporated by reference into another filing under the Exchange Act or the Securities Act of 1933 (the “Securities Act”) if such subsequent filing specifically references this Current Report on Form 8-K.
Item 7.01 Regulation FD Disclosure.
On August 13, 2018, the Company issued a press release lowering expectations for the second quarter of fiscal 2019 and guidance for the full fiscal year, and providing guidance for the third quarter of fiscal 2019. Additionally, on August 13, 2018, the Company made available related materials to be discussed during the Company's webcast and conference call referred to in such press release. A copy of the press release and related conference call materials are furnished as Exhibit 99.1 and 99.2, respectively, to this Current Report on Form 8-K and are incorporated herein by reference.
The information in the preceding paragraph, as well as Exhibits 99.1 and 99.2, shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section. It may only be incorporated by reference into another filing under the Exchange Act or the Securities Act if such subsequent filing specifically references this Current Report on Form 8-K.
Cautionary Statement Regarding Preliminary Results and Outlook
The financial information contained in the press release (furnished as Exhibit 99.1) and the related materials referred to in the press release (furnished as Exhibit 99.2) for the quarter ended July 28, 2018 is preliminary and represents estimates of financial results for the quarter then ended. When the Company files its Quarterly Report on Form 10-Q for the quarter ended July 28, 2018, such information may differ from this preliminary information as a result of the completion of the Company's financial closing procedures, final adjustments, or other developments that may arise between now and the time the Company files its Quarterly Report on Form 10-Q. The Company plans to announce second quarter financial results on August 29, 2018. Additionally, the revised guidance for fiscal 2019 and the guidance for the quarter ending October 27, 2018 included in the press release (furnished as Exhibit 99.1) and the related materials referred to in the press release (furnished as Exhibit 99.2) are subject to risks and uncertainties that could cause actual results for fiscal 2019 and the quarter ending October 27, 2018 to differ materially from this guidance. The guidance will be updated, as necessary, as part of the Company’s second quarter results release scheduled for Wednesday, August 29, 2018.
Forward Looking Statements
This Current Report on Form 8-K contains forward-looking statements as contemplated by the 1995 Private Securities Litigation Reform Act. These statements include those related to the outlook for fiscal 2019 and the third quarter of fiscal 2019, and statements found under the “Reconciliation of Non-GAAP Financial Measures to Comparable GAAP Financial Measures” section of the release. Forward looking statements are based on management’s current expectations, estimates and projections. These statements are subject to risks and uncertainties that may cause actual results for completed periods and periods in the future to differ materially from the results projected or implied in any forward-looking statements contained in this Current Report on Form 8-K. The most significant of these risks and uncertainties are described in our Form 10-K, Form 10-Q and Form 8-K reports (including all amendments to those reports) and include business and economic conditions and trends in the telecommunications industry affecting the Company’s customers, the adequacy of the Company’s insurance and other reserves and allowances for doubtful accounts, whether the carrying value of the Company’s assets may be impaired, preliminary purchase price allocations of acquired businesses, expected benefits and synergies of acquisitions, the future impact of any acquisitions or dispositions, adjustments and cancellations related to the Company’s backlog, weather conditions, the anticipated outcome of other contingent events, including litigation, liquidity and other financial needs, the availability of financing, and the other risks and uncertainties detailed from time to time in our filings with the Securities and Exchange Commission. These filings are available on a web site maintained by the Securities and Exchange Commission at http://www.sec.gov. The Company does not undertake to update forward looking statements except as required by law.
Item 9.01 Financial Statement and Exhibits.
(d) | Exhibits |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Dated: August 13, 2018
DYCOM INDUSTRIES, INC. (Registrant) | |
By: | /s/ Richard B. Vilsoet |
Name: | Richard B. Vilsoet |
Title: | Vice President, General Counsel and Corporate Secretary |
Exhibit 99.1
N E W S R E L E A S E
FOR IMMEDIATE RELEASE | Contact: | Steven E. Nielsen, President and CEO H. Andrew DeFerrari, Senior Vice President and CFO (561) 627-7171 |
August 13, 2018
DYCOM INDUSTRIES, INC. LOWERS EXPECTATIONS FOR FISCAL 2019 SECOND QUARTER RESULTS AND GUIDANCE FOR THE FULL FISCAL YEAR, AND PROVIDES GUIDANCE FOR THE NEXT FISCAL QUARTER
Palm Beach Gardens, Florida, August 13, 2018 - Dycom Industries, Inc. (NYSE: DY) announced today that revenues and results for the quarter ended July 28, 2018 will be below previous guidance. The Company’s previous guidance and its preliminary results are as follows:
Previous Guidance | Preliminary Results | |||
Quarter Ended | Quarter Ended | |||
July 28, 2018* | July 28, 2018 (a)(b) | |||
Contract revenues | $830 - $860 million | $799.5 million | ||
Diluted Earnings per Common Share - GAAP | $1.02 - $1.17 | $0.94 - $0.97 | ||
Non-GAAP Adjusted Diluted Earnings per Common Share | $1.13 - $1.28 | $1.05 - $1.08 | ||
Non-GAAP Adjusted EBITDA % of contract revenues | 12.4% - 12.8% | 12.0% - 12.2% | ||
(a) The Company’s preliminary results for contract revenues for the quarter ended July 28, 2018 include approximately $3.8 million of storm restoration services and approximately $9.1 million of contract revenues from a previously acquired business.
(b) The Company’s preliminary results for diluted earnings per share on a GAAP and Non-GAAP basis for the quarter ended July 28, 2018 include approximately $0.9 million of incremental tax benefits primarily from fiscal year tax filings and the tax effect of the settlement of share-based awards.
“Despite disappointing results for the quarter and near-term trends, we are pleased with our substantial backlog growth and remain confident in our industry’s opportunities,” said Steven Nielsen, President and Chief Executive Officer of Dycom.
A conference call to discuss this press release and related materials will be hosted Monday, August 13, 2018 at 9:00 a.m. (ET). Specific dial-in and replay information appears below. The Company plans to report full financial results for the fiscal 2019 second quarter on Wednesday, August 29, 2018, before the open of trading on the New York Stock Exchange.
Outlook
The Company is revising its financial guidance for the 2019 fiscal year ending January 26, 2019 to reflect the preliminary results for the fiscal 2019 second quarter and the current expectations for the remainder of the fiscal year. The revised financial guidance is preliminary and will be updated, as necessary, in the Company’s fiscal 2019 second quarter results release scheduled for Wednesday, August 29, 2018. The Company currently expects the following:
Previous Guidance Fiscal 2019* | Revised Guidance Fiscal 2019 (a) | |||
Contract revenues | $3.23 - $3.43 billion | $3.01 - $3.11 billion | ||
Diluted Earnings per Common Share - GAAP | $3.81 - $4.70 | $2.17 - $2.62 | ||
Non-GAAP Adjusted Diluted Earnings per Common Share | $4.26 - $5.15 | $2.62 - $3.07 | ||
Non-GAAP Adjusted EBITDA % of contract revenues | 12.4% - 12.9% | 10.7% - 11.1% | ||
(a) The Company's revised guidance for diluted earnings per share on a GAAP and Non-GAAP basis for fiscal 2019 includes approximately $0.9 million of incremental tax benefits primarily from fiscal year tax filings and the tax effect of the settlement of share-based awards recognized during the quarter ended July 28, 2018.
*For a reconciliation of the previous Diluted Earnings per Common Share guidance to the previous Non-GAAP Adjusted Diluted Earnings per Common Share guidance and a reconciliation of the previous Net income guidance to the previous Non-GAAP Adjusted EBITDA guidance, see Exhibit 99.1 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 22, 2018.
The Company is also providing its outlook for the quarter ending October 27, 2018. The following outlook is preliminary and will be updated, as necessary, in the Company’s fiscal 2019 second quarter results release scheduled for Wednesday, August 29, 2018:
Guidance Quarter Ending October 27, 2018 | |||
Contract revenues | $785 - $835 million | ||
Diluted Earnings per Common Share - GAAP | $0.69 - $0.93 | ||
Non-GAAP Adjusted Diluted Earnings per Common Share | $0.80 - $1.04 | ||
Non-GAAP Adjusted EBITDA % of contract revenues | 11.6% - 12.2% | ||
Other Information
As of July 28, 2018, on a preliminary basis, the Company had cash and equivalents of approximately $23.9 million, no outstanding borrowings on its revolving line of credit and $346.0 million of term loans outstanding.
Use of Non-GAAP Financial Measures
The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). In quarterly results releases, trend schedules, conference calls, slide presentations, and webcasts, the Company may use or discuss Non-GAAP financial measures, as defined by Regulation G of the Securities and Exchange Commission. See Explanation of Non-GAAP Financial Measures directly following the press release tables.
Conference Call Information and Other Selected Data
A conference call to discuss this press release and related materials will be hosted at 9:00 a.m. (ET), Monday, August 13, 2018; call (800) 288-8975 (United States) or (612) 332-0718 (International) ten minutes before the conference call begins and ask for the “Dycom Conference Call.” A live webcast of the conference call and related materials will be available on the Company’s Investor Center website at https://ir.dycomind.com. If you are unable to attend the conference call at the scheduled time, a replay of the live webcast and related materials will be available shortly after the call on the Company’s Investor Center website at https://ir.dycomind.com until Wednesday, September 12, 2018.
About Dycom Industries, Inc.
Dycom is a leading provider of specialty contracting services throughout the United States and in Canada. These services include program management, engineering, construction, maintenance and installation services for telecommunications providers, underground facility locating services for various utilities, including telecommunications providers, and other construction and maintenance services for electric and gas utilities.
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Cautionary Statement Regarding Preliminary Results and Outlook
The financial information contained in this press release for the quarter ended July 28, 2018 is preliminary and represents estimates of financial results for the quarter then ended. When the Company files its Quarterly Report on Form 10-Q for the quarter ended July 28, 2018, such information may differ from this preliminary information as a result of the completion of the Company’s financial closing procedures, final adjustments, or other developments that may arise between now and the time the Company files its Quarterly Report on Form 10-Q. The Company plans to announce second quarter financial results on August 29, 2018. Additionally, the revised guidance for fiscal 2019 and the guidance for the quarter ending October 27, 2018 included in this press release is preliminary and is subject to risks and uncertainties that could cause actual results for fiscal 2019 and the quarter ending October 27, 2018 to differ materially from this guidance. The guidance will be updated, as necessary, as part of the Company’s second quarter results release scheduled for Wednesday, August 29, 2018.
Forward Looking Information
This press release contains forward-looking statements as contemplated by the 1995 Private Securities Litigation Reform Act. These statements include those related to the outlook for fiscal 2019 and the quarter ending October 27, 2018, and statements found under the “Reconciliation of Non-GAAP Financial Measures to Comparable GAAP Financial Measures” section of this release. Forward looking statements are based on management’s current expectations, estimates and projections. These statements are subject to risks and uncertainties that may cause actual results for completed periods and periods in the future to differ materially from the results projected or implied in any forward-looking statements contained in this press release. The most significant of these risks and uncertainties are described in the Company’s Form 10-K, Form 10-Q and Form 8-K reports (including all amendments to those reports) and include business and economic conditions and trends in the telecommunications industry affecting the Company’s customers, the adequacy of the Company’s insurance and other reserves and allowances for doubtful accounts, whether the carrying value of the Company’s assets may be impaired, preliminary purchase price allocations of acquired businesses, expected benefits and synergies of acquisitions, the future impact of any acquisitions or dispositions, adjustments and cancellations related to the Company’s backlog, weather conditions, the anticipated outcome of other contingent events, including litigation, liquidity and other financial needs, the availability of financing, and the other risks and uncertainties detailed from time to time in the Company’s filings with the Securities and Exchange Commission. The Company does not undertake to update forward-looking statements.
---Tables Follow---
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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES | ||||||||
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO COMPARABLE GAAP FINANCIAL MEASURES | ||||||||
UNAUDITED | ||||||||
DILUTED EARNINGS PER COMMON SHARE TO NON-GAAP ADJUSTED DILUTED EARNINGS PER COMMON SHARE | ||||||||
The financial results for the quarter ended July 28, 2018, the guidance for the quarter ending October 27, 2018, and the revised guidance for fiscal 2019 included in this press release are preliminary and will be updated, as necessary, in the Company’s fiscal 2019 second quarter results release scheduled for Wednesday, August 29, 2018. | ||||||||
Preliminary | ||||||||
Results | Guidance | Revised | ||||||
Quarter Ended | Quarter Ending | Guidance | ||||||
July 28, 2018 (a) | October 27, 2018 | Fiscal 2019 (a) | ||||||
Diluted Earnings per Common Share - GAAP | $0.94 - $0.97 | $0.69 - $0.93 | $2.17 - $2.62 | |||||
Adjustment | ||||||||
Addback of after-tax non-cash amortization of debt discount and dilutive share effect of Notes (b) (c) | 0.11 | 0.11 | 0.45 | |||||
Non-GAAP Adjusted Diluted Earnings per Common Share | $1.05 - $1.08 | $0.80 - $1.04 | $2.62 - $3.07 | |||||
Diluted Shares - GAAP (in millions) (c) | 32.0 | 31.9 | 32.0 | |||||
Adjustment for economic benefit of note hedge related to Notes (in millions) (c) | (0.1 | ) | — | (0.2 | ) | |||
Non-GAAP Adjusted Diluted Shares (in millions) (c) | 31.8 | 31.9 | 31.9 | |||||
(a) The Company’s preliminary results for the quarter ended July 28, 2018 and revised guidance for fiscal 2019 for diluted earnings per share on a GAAP and Non-GAAP basis include approximately $0.9 million of incremental tax benefits primarily from fiscal year tax filings and the tax effect of the settlement of share-based awards recognized during the quarter ended July 28, 2018. | ||||||||
(b) The Company expects to recognize approximately $4.8 million, $4.8 million, and $19.1 million in pre-tax interest expense during the quarter ended July 28, 2018, the quarter ending October 27, 2018, and fiscal 2019, respectively, for non-cash amortization of the debt discount associated with the Company’s 0.75% convertible senior notes due September 2021 (the “Notes”). The addback for fiscal 2019 also includes approximately $0.01 for the Non-GAAP impact of the dilutive share effect of the Notes. | ||||||||
(c) The Company has a note hedge in effect to offset the economic dilution of additional shares from the Notes up to an average quarterly price of $130.43 per share. Non-GAAP Adjusted Diluted Shares for the quarter ended July 28, 2018 excludes the GAAP dilutive share effect of the Notes. For Non-GAAP Adjusted Diluted Earnings per Common Share calculations for the quarter ending October 27, 2018 and fiscal 2019, the Company expects to present results per share that exclude the dilutive effect of the Notes, if any, based on the expected effect of the note hedge. | ||||||||
Amounts in table above may not add due to rounding. | ||||||||
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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES | ||||||||||||
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO COMPARABLE GAAP FINANCIAL (CONTINUED) | ||||||||||||
UNAUDITED | ||||||||||||
NET INCOME TO NON-GAAP ADJUSTED EBITDA BASED ON THE MIDPOINT OF EARNINGS PER COMMON SHARE RANGE | ||||||||||||
The financial results for the quarter ended July 28, 2018, the guidance for the quarter ending October 27, 2018, and the revised guidance for fiscal 2019 included in this press release are preliminary and will be updated, as necessary, in the Company’s fiscal 2019 second quarter results release scheduled for Wednesday, August 29, 2018. | ||||||||||||
Preliminary | ||||||||||||
Results | Guidance | Revised | ||||||||||
Quarter Ended | Quarter Ending | Guidance | ||||||||||
July 28, 2018 | October 27, 2018 | Fiscal 2019 | ||||||||||
(at midpoint of EPS range) | ||||||||||||
Net income | $ | 30 | $ | 26 | $ | 77 | ||||||
Interest expense, net | 10 | 11 | 43 | |||||||||
Provision for income taxes | 10 | 10 | 28 | |||||||||
Depreciation and amortization | 45 | 45 | 179 | |||||||||
Earnings Before Interest, Taxes, Depreciation & Amortization (“EBITDA”) | 96 | 92 | 326 | |||||||||
Gain on sale of fixed assets | (5 | ) | (3 | ) | (17 | ) | ||||||
Stock-based compensation expense | 6 | 7 | 24 | |||||||||
Non-GAAP Adjusted EBITDA | $ | 97 | $ | 96 | $ | 333 | ||||||
Contract revenues (at midpoint of range) | $ | 799.5 | $ | 810.0 | $ | 3,060.0 | ||||||
Non-GAAP Adjusted EBITDA % of contract revenues (at midpoint of range) | 12.1 | % | 11.9 | % | 10.9 | % | ||||||
Amounts in table above may not add due to rounding. | ||||||||||||
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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
TO COMPARABLE GAAP FINANCIAL MEASURES (CONTINUED)
Explanation of Non-GAAP Financial Measures
The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). In the Company’s quarterly results releases, trend schedules, conference calls, slide presentations, and webcasts, it may use or discuss Non-GAAP financial measures, as defined by Regulation G of the Securities and Exchange Commission. The Company believes that the presentation of certain Non-GAAP financial measures in these materials provides information that is useful to investors because it allows for a more direct comparison of the Company’s performance for the period reported with the Company’s performance in prior periods. The Company cautions that Non-GAAP financial measures should be considered in addition to, but not as a substitute for, the Company’s reported GAAP results. Management defines the Non-GAAP financial measures used in this release as follows:
• | Non-GAAP Adjusted EBITDA - net income before interest, taxes, depreciation and amortization, gain on sale of fixed assets, stock-based compensation expense, and certain non-recurring items. Management believes Non-GAAP Adjusted EBITDA is a helpful measure for comparing the Company’s operating performance with prior periods as well as with the performance of other companies with different capital structures or tax rates. |
• | Non-GAAP Adjusted Net Income - GAAP net income before non-cash amortization of the debt discount and the related tax impact, certain tax impacts resulting from vesting and exercise of share-based awards, and certain non-recurring items. |
• | Non-GAAP Adjusted Diluted Earnings per Common Share and Non-GAAP Adjusted Diluted Shares - Non-GAAP Adjusted Net Income divided by Non-GAAP Adjusted Diluted Shares outstanding. The Company has a note hedge in effect to offset the economic dilution of additional shares from the Notes up to an average quarterly share price of $130.43. The measure of Non-GAAP Adjusted Diluted shares used in computing Non-GAAP Adjusted Diluted Earnings per Common Share excludes dilution from the Notes. Management believes that the calculation of Non-GAAP Adjusted Diluted shares to reflect the note hedge will be useful to investors because it provides insight into the offsetting economic effect of the hedge against potential conversion of the Notes. |
Management excludes or adjusts each of the items identified below from Non-GAAP Adjusted Net Income and Non-GAAP Adjusted Diluted Earnings per Common Share:
• | Non-cash amortization of the debt discount - The Company’s Notes were allocated between debt and equity components. The difference between the principal amount and the carrying amount of the liability component of the Notes represents a debt discount. The debt discount is being amortized over the term of the Notes but does not result in periodic cash interest payments. The Company has excluded the non-cash amortization of the debt discount from its Non-GAAP financial measures because it believes it is useful to analyze the component of interest expense for the Notes that will be paid in cash. The exclusion of the non-cash amortization from the Company’s Non-GAAP financial measures provides management with a consistent measure for assessing financial results. |
• | Tax impact of adjusted results - The tax impact of adjusted results reflects the Company’s effective tax rate used for financial planning for the applicable period. |
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Exhibit 99.2 2nd Quarter Fiscal 2019 August 13, 2018 Update Conference Call
Forward Looking Statements, Non-GAAP Financial Measures and Other Information The financial information contained in this presentation for the quarter ended July 28, 2018 is preliminary and represents estimates of financial results for the quarter then ended. When the Company files its Quarterly Report on Form 10-Q for the quarter ended July 28, 2018, such information may differ from this preliminary information as a result of the completion of our financial closing procedures, final adjustments or other developments that may arise between now and the time the Company files its Quarterly Report on Form 10-Q. Additionally, the revised guidance for fiscal 2019 and the guidance for the quarter ending October 27, 2018 included in this is presentation is preliminary and is subject to risks and uncertainties that could cause actual results for fiscal 2019 and the quarter ending October 27, 2018 to differ materially from this guidance. The guidance will be updated, as necessary, in our second quarter results release scheduled for Wednesday, August 29, 2018. This presentation contains “forward-looking statements”. Other than statements of historical facts, all statements contained in this presentation, including statements regarding the Company’s future financial position, future revenue, prospects, plans and objectives of management, are forward-looking statements. Words such as “outlook,” “believe,” “expect,” “anticipate,” “estimate,” “intend,” “should,” “could,” “project,” and similar expressions, as well as statements in future tense, identify forward-looking statements. You should not consider forward-looking statements as a guarantee of future performance or results. Forward-looking statements are based on information available at the time those statements are made and/or management’s good faith belief at that time with respect to future events. Such statements are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors, assumptions, uncertainties, and risks that could cause such differences are discussed in our Transition Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 2, 2018 and other filings with the SEC. The forward-looking statements in this presentation are expressly qualified in their entirety by this cautionary statement. The Company undertakes no obligation to update these forward-looking statements to reflect new information, or events or circumstances arising after such date. This presentation includes certain “Non-GAAP” financial measures as defined by Regulation G of the SEC. As required by the SEC, we have provided a reconciliation of those measures to the most directly comparable GAAP measures on the Regulation G slides included as slides 9 through 12 of this presentation. Non-GAAP financial measures should be considered in addition to, but not as a substitute for, our reported GAAP results. 2
Participants Steven E. Nielsen President & Chief Executive Officer H. Andrew DeFerrari Chief Financial Officer Richard B. Vilsoet General Counsel Agenda Introduction and Q2-19 Update Outlook Q&A 33
Q2-19 Summary The information for the quarter ended July 28, 2018 included in this presentation is preliminary. ™ Revenues and results for the quarter ended July 28, 2018 will be below previous guidance ¾ Contract revenues expected to be approximately $799.5 million (including $3.8 million of revenue from storm restoration services and $9.1 million from a previously acquired business) ¾ Non-GAAP Adjusted Diluted EPS expected to range from $1.05 - $1.08 (provision for income taxes includes approximately $0.9 million of incremental tax benefits primarily from fiscal year tax filings and the tax effect of the settlement of share-based awards) ¾ Large scale deployments were slower than expected during the quarter due to customer timing and tactical considerations, primarily permitting ¾ Margins pressured from under-absorption of labor and field costs at lower revenue level ™ Despite disappointing results for the quarter and near-term trends, pleased with substantial backlog growth and confident in industry opportunities ™ Liquidity solid at approximately $4Ϯϱ million as of July 28, 2018 with approximately $23.9 million expected in cash and $ϰϬϭ million of availability under our Credit Facility See “Regulation G Disclosure” slides 9-12 for a reconciliation of GAAP to Non-GAAP financial measures for the preliminary results. For a reconciliation of the previous guidance GAAP to Non-GAAP financial measures, see Exhibit 99.1 of the Company’s Current Report on Form 4 8-K filed with the Securities and Exchange Commission on May 22, 2018.
Q2-19 Revenue Update Organic % adjusted for revenues from an acquired business and storm restoration services The information for the quarter ended July 28, 2018 included in this presentation is preliminary. ™ Contract revenues expected to be $799.5 million for Q2-19, including $3.8 million of revenue from storm restoration services and $9.1 million from a previously acquired business ™ Excluding revenues from storm restoration services and a previously acquired business, contract revenues increased 0.8% organically: ¾ Top 5 customers increased 3.3% organically ¾ All other customers decreased 7.0% (a) organically (a) Contract revenue is preliminary for Q2-19 ™ Top 5 customers in quarters ended July 28, 2018 and July 29, 2017 represented 77.9% and 76.8%, respectively ™ Organic growth with Verizon at 88.1% and Comcast at 6.7% (a) (a) Customer revenue information is preliminary for Q2-19 See “Regulation G Disclosure” slides 9-12 for a reconciliation of GAAP to Non-GAAP financial measures. 5
Q2-19 Update - Backlog and Awards Financial charts - $ in millions The information for the quarter ended July 28, 2018 included in this presentation is preliminary. (a) (a) (a) (a) (a) Due to the change in the Company’s fiscal year end, the Company’s fiscal 2018 six month transition period consisted of Q1-18 and Q2-18. Selected Current Awards and Extensions Approximate Customers Description Area Term (in years) Comcast Framework Agreement Multi-year Verizon Construction & Engineering Services Various 4 AT&T Construction Services Michigan, Indiana, Ohio 3 Windstream Construction Services Pennsylvania 3 Various Rural and Other Services Oregon, South Dakota, Indiana, Virginia, South Carolina 1-2 Notes: Our backlog estimates represent amounts under master service agreements and other contractual agreements for services projected to be performed over the terms of contracts. These estimates are generally based on contract terms and assessments regarding the timing of the services to be provided. In the case of master service agreements, backlog is calculated based on the work performed in the preceding twelve month period, when available. When estimating backlog for newly initiated master service agreements and other long and short term contracts, we also consider the anticipated scope of the contract and information received from the customer in the procurement process. A significant majority of our backlog estimates comprise services under master service agreements and other long term contracts. Backlog is not a measure defined by United States generally accepted accounting principles; however, it is a common measurement used in our industry. Our methodology for determining backlog may not be comparable to the methodologies used by others. 6
Q2-19 Update The information for the quarter ended July 28, 2018 included in this presentation is preliminary. ™ Revenues and results for the quarter ended July 28, 2018 will be below previous guidance Previous Guidance Preliminary Results Q2-19 Q2-19(a)(b) Contract revenues $830-$860 million $799.5 million Diluted EPS – GAAP $1.02 -$1.17 $0.94 - $0.97 Non-GAAP Adjusted Diluted EPS $1.13 - $1.28 $1.05 - $1.08 Non-GAAP Adjusted EBITDA % of contract revenues 12.4% - 12.8% 12.0% - 12.2% (a) Preliminary results Q2-19 for contract revenues include approximately $3.8 million of storm restoration services and approximately $9.1 million of revenues from a previously acquired business. (b) Preliminary results Q2-19 for Diluted EPS and Non-GAAP Adjusted Diluted EPS include approximately $0.9 million of incremental tax benefits primarily from fiscal year tax filings and the tax effect of the settlement of share-based awards. ™ Liquidity solid at approximately $4Ϯϱ million as of July 28, 2018 with approximately $23.9 million expected in cash and $ϰϬϭ million of availability under our Credit Facility ¾ Term loan facilities outstanding of $346.0 million as of July 28, 2018 ¾ No outstanding revolver borrowings under Credit Facility as of July 28, 2018 See “Regulation G Disclosure” slides 9-12 for a reconciliation of GAAP to Non-GAAP financial measures for the preliminary results. For a reconciliation of the previous guidance GAAP to Non-GAAP financial measures, see Exhibit 99.1 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 22, 2018. 7
Outlook The revised guidance for fiscal 2019 and the guidance for the quarter ending October 27, 2018 included in this presentation are preliminary and will be updated, as necessary, in our second quarter results release scheduled for Wednesday, August 29, 2018. ™ Revised financial guidance for Fiscal 2019 Previous Guidance Revised Guidance Fiscal 2019 Fiscal 2019(a) Contract revenues $3.23 - $3.43 billion $3.01- $3.11 billion Diluted EPS – GAAP $3.81 - $4.70 $2.17 - $2.62 Non-GAAP Adjusted Diluted EPS $4.26 - $5.15 $2.62 - $3.07 Non-GAAP Adjusted EBITDA % of contract revenues 12.4% - 12.9% 10.7% - 11.1% (a) Revised Guidance for Diluted EPS and Non-GAAP Adjusted Diluted EPS for fiscal 2019 includes approximately $0.9 million of incremental tax benefits primarily from fiscal year tax filings and the tax effect of the settlement of share-based awards recognized during the quarter ended July 28, 2018. ™ Guidance for the Quarter Ending October 27, 2018 (Q3-19) Guidance Quarter Ending October 27, 2018 (Q3-19) Contract revenues $785 - $835 million Diluted EPS –GAAP $0.69 - $0.93 Non-GAAP Adjusted Diluted EPS $0.80 - $1.04 Non-GAAP Adjusted EBITDA % of contract revenues 11.6% - 12.2% See “Regulation G Disclosure” slides 9-12 for a reconciliation of GAAP to Non-GAAP financial measures for the revised guidance. For a reconciliation of the previous guidance GAAP to Non-GAAP financial measures, see Exhibit 99.1 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission 8 on May 22, 2018.
Appendix: Regulation G Disclosure Explanation of Non-GAAP Measures The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). In the Company’s quarterly results releases, trend schedules, conference calls, slide presentations, and webcasts, it may use or discuss Non-GAAP financial measures, as defined by Regulation G of the Securities and Exchange Commission. The Company believes that the presentation of certain Non-GAAP financial measures in these materials provides information that is useful to investors because it allows for a more direct comparison of the Company’s performance for the period reported with the Company’s performance in prior periods. The Company cautions that Non-GAAP financial measures should be considered in addition to, but not as a substitute for, the Company’s reported GAAP results. Management defines the Non-GAAP financial measures used in this presentation as follows: • Non-GAAP Organic Contract Revenues - contract revenues from businesses that are included for the entire period in both the current and prior year periods, excluding contract revenues from storm restoration services. Non-GAAP Organic Contract Revenue growth (decline) is calculated as the percentage change in Non-GAAP Organic Contract Revenues over those of the comparable prior year period. Management believes organic growth (decline) is a helpful measure for comparing the Company’s revenue performance with prior periods. • Non-GAAP Adjusted EBITDA - net income before interest, taxes, depreciation and amortization, gain on sale of fixed assets, stock-based compensation expense, and certain non-recurring items. Management believes Non-GAAP Adjusted EBITDA is a helpful measure for comparing the Company’s operating performance with prior periods as well as with the performance of other companies with different capital structures or tax rates. • Non-GAAP Adjusted Net Income - GAAP net income before non-cash amortization of the debt discount and the related tax impact, certain tax impacts resulting from vesting and exercise of share-based awards and certain non-recurring items. • Non-GAAP Adjusted Diluted Earnings per Common Share and Non-GAAP Adjusted Diluted Shares - Non-GAAP Adjusted Net Income divided by Non-GAAP Adjusted Diluted Shares outstanding. The Company has a note hedge in effect to offset the economic dilution of additional shares from the Company’s 0.75% convertible senior notes due September 2021 (the “Notes”) up to an average quarterly share price of $130.43. The measure of Non-GAAP Adjusted Diluted shares used in computing Non- GAAP Adjusted Diluted Earnings per Common Share excludes dilution from the Notes. Management believes that the calculation of Non-GAAP Adjusted Diluted shares to reflect the note hedge will be useful to investors because it provides insight into the offsetting economic effect of the hedge against potential conversion of the Notes. Management excludes or adjusts each of the items identified below from Non-GAAP Adjusted Net Income and Non-GAAP Adjusted Diluted Earnings per Common Share: • Non-cash amortization of the debt discount - The Notes were allocated between debt and equity components. The difference between the principal amount and the carrying amount of the liability component of the Notes represents a debt discount. The debt discount is being amortized over the term of the Notes but does not result in periodic cash interest payments. The Company has excluded the non-cash amortization of the debt discount from its Non-GAAP financial measures because it believes it is useful to analyze the component of interest expense for the Notes that will be paid in cash. The exclusion of the non-cash amortization from the Company’s Non- GAAP financial measures provides management with a consistent measure for assessing financial results. • Tax impact of adjusted results - The tax impact of adjusted results reflects the Company’s effective tax rate used for financial planning for the applicable period. 9
Appendix: Regulation G Disclosure Reconciliation of Non-GAAP Financial Measures to Comparable GAAP Financial Measures Non-GAAP Organic Contract Revenue – certain customers Unaudited ($ in millions) The information for the quarter ended July 28, 2018 included in this presentation is preliminary. Note: Amounts above may not add due to rounding. Use of Non-GAAP Financial Measures The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). In our quarterly results releases, trend schedules, conference calls, slide presentations, and webcasts, we may use or discuss Non-GAAP financial measures, as defined by Regulation G of the SEC. See Explanation of Non-GAAP Measures on slide 9. 10
Appendix: Regulation G Disclosure Reconciliation of Non-GAAP Financial Measures to Comparable GAAP Financial Measures Non-GAAP Diluted Earnings per Common Share Unaudited The financial results for the quarter ended July 28, 2018, the guidance for the quarter ending October 27, 2018, and the revised guidance for fiscal 2019 is preliminary and will be updated, as necessary, in our second quarter results release scheduled for Wednesday, August 29, 2018. Preliminary Results Guidance Quarter Ended Quarter Ending Revised July 28, 2018 October 27, 2018 Guidance (Q2-19)(a) (Q3-19) Fiscal 2019(a) Diluted Earnings per Common Share – GAAP $0.94 - $0.97 $0.69 - $0.93 $2.17 - $2.62 Adjustment for addback of after-tax non-cash amortization of debt discount and dilutive share effect of Notes (b)(c) 0.11 0.11 0.45 Non-GAAP Adjusted Diluted Earnings per Common Share $1.05 - $1.08 $0.80 –Ψ1.04 $2.62 - $3.07 Dilutive Shares – GAAP (in millions)(c) 32.0 31.9 32.0 Adjustment for economic benefit of note hedge related to Notes (in millions)(c) (0.1) - (0.2) Non-GAAP Adjusted Diluted Shares (in millions) (c) 31.8 31.9 31.9 (a) The Company’s preliminary results for the quarter ended July 28, 2018 and the revised guidance for fiscal 2019 for diluted earnings per share on a GAAP and Non-GAAP basis include approximately $0.9 million of incremental tax benefits primarily from fiscal year tax filings and the tax effect of the settlement of share- based awards recognized during the quarter ended July 28, 2018. (b) The Company expects to recognize approximately $4.8 million, $4.8 million, and $19.1 million in pre-tax interest expense during the quarter ended July 28, 2018, the quarter ending October 27, 2018, and fiscal 2019, respectively, for non-cash amortization of the debt discount associated with the Notes. The addback for fiscal 2019 also includes approximately $0.01 for the Non-GAAP impact of the dilutive share effect of the Notes. (c) The Company has a note hedge in effect to offset the economic dilution of additional shares from the Notes up to an average quarterly price of $130.43 per share. Non-GAAP Adjusted Diluted Shares for the quarter ended July 28, 2018 excludes the GAAP dilutive share effect of the Notes. For Non-GAAP Adjusted Diluted Earnings per Common Share calculations for the quarter ending October 27, 2018 and fiscal 2019, the Company expects to present results per share that exclude the dilutive effect of the Notes, if any, based on the expected effect of the note hedge. Note: Amounts above may not add due to rounding. Use of Non-GAAP Financial Measures The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). In our quarterly results releases, trend schedules, conference calls, slide presentations, and webcasts, we may use or discuss Non-GAAP financial measures, as defined by Regulation G of the SEC. See Explanation of 11 Non-GAAP Measures on slide 9.
Appendix: Regulation G Disclosure Reconciliation of Non-GAAP Financial Measures to Comparable GAAP Financial Measures Reconciliation of Net Income to Non-GAAP Adjusted EBITDA based on the Midpoint of Earnings per Common Share ("EPS") range Unaudited The financial results for the quarter ended July 28, 2018, the guidance for the quarter ending October 27, 2018, and the revised guidance for fiscal 2019 is preliminary and will be updated, as necessary, in our second quarter results release scheduled for Wednesday, August 29, 2018. Note: Amounts above may not add due to rounding. Use of Non-GAAP Financial Measures The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). In our quarterly results releases, trend schedules, conference calls, slide presentations, and webcasts, we may use or discuss Non-GAAP financial measures, as defined by Regulation G of the SEC. See Explanation of 12 Non-GAAP Measures on slide 9.
2nd Quarter Fiscal 2019 August 13, 2018 Update Conference Call