Google Fiber’s pause leaves Dycom’s Q4 earnings unharmed

Google Fiber Nashville
Image: Google Fiber

With AT&T making up $222 million of its revenue, it’s clear that Dycom was unscathed by Google Fiber’s move to pause FTTH rollouts in certain markets. Revenue from AT&T rose 82.9 percent year-over-year organically, and comprised 28.1 percent of Dycom’s fiscal fourth quarter revenue.

What drove AT&T contract growth at Dycom was the telco’s ongoing FTTH buildouts to meet the 12.5 million home commitment set by the FCC in order to get approval of its DirecTV deal.

During the quarter, Dycom won multiple contracts with AT&T, including construction and maintenance and services work in two states and engineering services in one state.

However, one of Dycom’s unnamed customers, which analysts say is Google Fiber, saw revenues slide during the quarter.

Concerns about Google Fiber’s momentum emerged as reports surfaced about Google Fiber potentially delaying rollouts in cities like San Jose, California and Portland, Oregon, after the company acquired Webpass.

“DY's unnamed customer (presumed to be Google) only generated $28.2M in revenue, down 40% yr/yr,” said Jennifer Fritzsche, a senior analyst for Wells Fargo, in a research note. “While some of this may be due to Google's announced pause as it reassesses its fiber deployment we also believe DY is not chasing this revenue growth at any cost given strong demand from other core customers.”

However, this does not mean that Google Fiber can’t be a solid revenue source going forward. Earlier, Wells Fargo cited Google’s recent earnings call comments about Fiber continuing to be a “huge market opportunity” as further evidence that Google Fiber, and subsequently fiber buildouts as a whole, is not slowing down.

Dycom noted that revenues from its top five customers rose 44 percent organically, while all other customers decreased 18.5 percent organically.

Besides AT&T, Dycom also saw growth at three of its other largest customers – Comcast, Verizon and Windstream. Verizon made up 67.7 percent of Dycom’s revenue, while Comcast and Windstream consisted of 32 and 45.3 percent of total revenue

Another factor is that Dycom has a total backlog of $6.03 billion, up 64 percent year-over-year. In particular, Dycom saw gains in wireless construction and CAF-II builds.

Dycom signed a three year wireless services construction services agreement with AT&T covering 7 states and announced various CAF-II 1-year contracts covering 10 states. 

Driven by ongoing 1 Gbps FTTH deployments, cable capacity projects and CAF II projects, Dycom said it expects total contract revenues for the first quarter of fiscal 2017 to range from $780 million to $810 million. It also expects to report diluted earnings per common share for the first quarter of fiscal 2017, ranging from $1.47 to $1.62.

The company expects that its acquisition of Goodman Networks will also produce revenues of approximately $100 million.

Dycom reported that total contract revenue was $789.2 million for the quarter, up from $578.5 million in the same period a year ago.

Contract revenues for the quarter grew 20 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 – and adjusting for the additional week of operations during the quarter ended July 30, 2016, as a result of the Company’s 52/53 week fiscal year.

For more:
- see the earnings release (PDF)

Related articles:
Google still high on fiber and Dycom stands to benefit long-term, analyst says
Windstream's fiber-based data center drive could be boon for Dycom, other installers
Dycom acquires network construction assets from Goodman Networks for $108M
AT&T, Verizon fiber build acceleration helps drive big 3Q for Dycom