Dycom’s Nielsen: AT&T’s FTTH commitment, 50M home broadband expansion plans are encouraging

fiber wire
AT&T's pending builds could be beneficial to Dycom, which cites AT&T as its second largest customer.

Dycom says AT&T’s plans to ramp up its FTTH and overall broadband network footprint could bode well for its business in the coming quarters.

Steven Nielsen, CEO of Dycom, told investors during its earnings call that AT&T’s FTTH and broadband expansion plans are favorable.

“I think it was encouraging that not only did they talk about their commitments to fiber-to-the-home, but more broadly expanding their broadband speeds across 50 million homes,” Nielsen said during the earnings call, according to an earnings transcript. “And then, AT&T offered that if tax reform was concluded successfully, that they would spend $1 billion more in the fiber-to-the-premise activity in calendar '18.”

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AT&T said during its third-quarter earnings call that it is on schedule to reach 7 million locations with gigabit-capable fiber before the end of the year.

By the time AT&T completes its FTTP build, the company could reach 14 million locations, surpassing the 12.5 million the telco agreed to build out as a condition of its DirecTV acquisition.

Additionally, AT&T will continue to extend the capabilities of its VDSL2 network, offering 50 and 75 Mbps speed tiers in its wireline footprint as well as moving forward with 5G wireless. These pending builds could be beneficial to Dycom, which cites AT&T as its second largest customer. Besides AT&T, Dycom says that the wireless industry segment’s expansion of current 4G and planned 5G networks will result in more wireline network expansion opportunities.  

“Emerging wireless technologies are now beginning to drive significant incremental wireline deployments,” Nielsen said. “It is clear that a complementary wireline investment cycle is underway to facilitate what is expected to be a decade-long deployment of fully converged wireless/wireline networks. Notably 1 industry participant has begun to invest in the wireline infrastructure required to enable fully converged wireless/wireline networks.”

AT&T, Comcast, Verizon see growth

AT&T joined Comcast and CenturyLink as the top four customers in terms of revenue at Dycom in the quarter. Revenue from AT&T was $143.5 million, or 19%. AT&T remained Dycom’s second largest customer. Revenue from CenturyLink, which is Dycom’s third largest customer, was $143.3 million, or 18.9%, and grew organically 13.9%.

Comcast remained Dycom’s largest customer with 21.8% of the company’s total revenue, or $165 million, and grew organically 26.5%.

Verizon was Dycom's fourth largest customer for the quarter at 10.7% of revenue, or $80.6 million, while finally, revenue from Charter was $34 million, or 4.5%.

“We are pleased that we have continued to gain profitable market share, extend our geographic reach, and expand our program management and network planning services,” Nielsen said. “In fact, over the last several years, we have meaningfully increased the long-term value of our maintenance business, a trend which we believe will parallel our deployment of 1 gigabit and wireless/wireline converged networks as those deployments dramatically increase the amount of outside plant network that must be maintained.”

Revenues take slight slip

While Dycom continues to see robust demand for its services out of its top customers, the company noted that slower spending at one of its customers had a near-term effect during the quarter.  

Here’s a breakdown of Dycom’s key metrics:

Net income: On a GAAP basis, net income was $28.8 million, or 90 cents per common share diluted, for the quarter ended Oct. 28, 2017, compared to net income of $51 million, or $1.59 per common share, diluted for the quarter.

Financials: Contract revenues were $756.2 million for the quarter, down year over year from $799.2 million. Contract revenues declined 8.4% on an organic basis after excluding $8.6 million of contract revenues from an acquired business that was not owned during the prior-year quarter and $15.5 million of contract revenues from storm restoration services in the current period.

“This quarter reflected an increase in demand from 3 key customers as we deployed 1 gigabit wireline networks and grew core market share, offset by near-term moderation by a large customer,” Nielsen said.

Outlook: Dycom expects total contract revenues for the fiscal quarter ending Jan. 27, 2018, to be in the range of $645 million to $675 million.