Verizon's (NYSE: VZ) ongoing fiber build outs are having a clear effect on network installer Dycom's revenue stream, rising nearly 12 percent to $66.3 million in the second quarter of 2016 for the company.
Interestingly, Dycom said that this quarter's revenue with Verizon was the highest it's seen since the fourth quarter of 2005.
Dycom signed an agreement with Verizon last year that it said would expand the company's footprint.
"There was a staging effect where in each quarter we've added some new territory. We added a substantial amount of territory in this quarter," said Steven Nielsen, president and CEO of Dycom during the earnings call, according to a Seeking Alpha transcript. "There is a little bit more to go in this third quarter, and even into the fourth quarter and then that will be online."
The network construction provider also reported strong growth with its other top telco customers AT&T (NYSE: T) and CenturyLink (NYSE: CTL).
AT&T remained Dycom's largest customer with 22.4 percent, or $125.3 million of total revenue, growing 28.6 percent organically year-over-year.
No less impressive was CenturyLink, which made up $83.4 million or 14.9 percent of Dycom's revenue.
One of the other interesting elements in the telco space that could drive more growth for Dycom and other construction companies serving telcos will be the FCC's CAF-II program to bring 10 Mbps speeds to rural areas. A number of Dycom's customers such as AT&T, CenturyLink and Frontier are just starting to plan and roll out facilities to fulfill the mandates of the funding they accepted.
"New projects resulting from the Connect America Fund 2 are in planning and engineering with construction launching shortly," Nielsen said. "Each project is deploying fiber deeper into rural networks and more are expected as new multi-year opportunities emerge through the balance of this calendar year."
But Verizon and CenturyLink are just one element of Dycom's growth engine. The company reported Comcast contributed $75.3 million or 13.5 percent of revenue, and grew organically 29.8 percent.
Nielsen said that Dycom is seeing more of its cable company customers deploying more fiber to satisfy the growth of their small to medium business (SMB) customers.
"Cable operators are continuing to deploy fiber to small and medium businesses and with an increasing urgency some are doing so in anticipation of the customer sales process," Nielsen said. "Overall, cable capital expenditures new build opportunities and capacity expansions are increasing. Dramatically increased speeds to the consumers are being provisioned."
Contract revenues were $559.5 million, up from $441.1 million for the quarter ended January 24, 2015. For the six months ended January 23, 2016, contract revenues of $1.22 billion, compared to $952 million in the same period a year ago.
Additionally, contract revenues grew 19.4 percent on an organic basis after excluding contract revenues from acquired businesses that were not owned for the entire period in both the current and prior year quarter. Total contract revenues from acquired businesses were $32.9 million for the quarter ended January 23, 2016.
- see the earnings release
- see the Seeking Alpha transcript (sub req.)
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