Dycom Industries, Inc. (DY) Earnings Call Transcript & Summary

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.