Dycom Industries, Inc.

Good day, and thank you for standing by. Welcome to the DICOM Industries, Inc. Third Quarter 2025 Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Mr. Stephen Nielsen, Chief Executive Officer. Please go ahead, sir.

Thank you, operator. Good morning, everyone. Thank you for attending this conference call to review our third quarter fiscal 2025 results. Going to slide two. During this call, we will be referring to a slide presentation, which can be found on our website's Investor Center main page. Relevant slides will be identified by number throughout our presentation. Today we have on the call Dan Paevich, our President and incoming Chief Executive Officer, Drew DeFerrari, our Chief Financial Officer, and Ryan Ernest, our General Counsel. Now I will turn the call over to Ryan Ernest.

Thank you, Steve. All forward-looking statements made during this conference call are provided pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all comments reflecting our expectations, assumptions, or beliefs about future events. These forward-looking statements are subject to risks and uncertainties, which may cause actual results to differ materially from current projections. including those risks discussed in the company's filings with the U.S. Securities and Exchange Commission. Forward-looking statements are made solely as of the original broadcast date of this conference call, and we assume no obligation to update any forward-looking statements. Steve?

Thanks, Ryan. As announced last June, I am retiring at the end of this month from DICOM after over 30 years of service, 25 as CEO. This earnings call is my last. Accordingly, I will review this past quarter, Dan will review industry opportunities and operational highlights, while Drew will cover our financial performance and outlook. Dan and Drew will handle Q&A. After the Q&A, I will have a few final remarks. Before I review our third quarter results, I would like to thank my fellow employees for their hard work and dedication. Your efforts make DICOM the special place it is, and I am so proud of what we have built together. To our directors, thanks for your wisdom, guidance, and oversight over these last 25 years. I leave DICOM a much better leader because of you. To my fellow shareholders, your support as I have led our company has been invaluable. Thanks for the opportunity to benefit from your counsel and the market's discipline. And finally, Dan, I'm so excited for you and DICOM as you and your strong team lead our company to a bright future. I firmly believe DICOM's opportunities have never been greater, and I leave DICOM well assured that you and your team will take full advantage of those opportunities to the great benefit of customers, employees, and shareholders. You have my full confidence in the support of the entire company. Now moving to slide four and a review of our third quarter results. As we review our results, please note that in our comments today, And in the accompanying slides, we reference certain non-GAAP measures. We refer you to slides 12 through 18 for a reconciliation of these non-GAAP measures to their corresponding GAAP measures. Turning to the quarter. Revenue increased year over year to $1.272 billion, an increase of 12%. Organic revenue increased 7.6% as we deployed gigabit wireline networks. wireless wireline converged networks, and wireless networks. This quarter reflected an increase in demand from three of our top five customers. Non-GAAP gross margin was 20.8% of revenue and increased 45 basis points compared to Q3 of fiscal 24. Non-GAAP general and administrative expenses were 7.8% of revenue. And all of these factors generated adjusted EBITDA of $170.7 million or 13.4% of revenue, and adjusted earnings per share of $2.68. Liquidity was strong at $462.8 million, and during the quarter, we completed the acquisition of Black & Veatch's public carrier wireless telecommunications infrastructure business. Now I will turn the call over to Dan for a business update.

Thank you, Steve, and good morning, everyone. I'd like to start by expressing my gratitude for the support and partnership Steve has provided throughout this transition. His guidance has firmly established our company as an industry leader. On behalf of the Board of Directors and all our employees across the country, I want to extend our deepest thanks to Steve for his dedication over the past 25 years. I'd like to welcome Kevin Wetherington, who joined as our new Chief Operating Officer in October. Kevin brings over 25 years of experience in leading national operations with large, distributed workforces across the country. Kevin has already been out in the field with a number of our subsidiaries and met with customers as he steps in to lead operations across DICOM. We're delighted to have him join our executive team. Moving to our results, we delivered another strong quarter with year-over-year growth in both revenue and EBITDA. We're encouraged to see continued and additional strategic transactions, including refinancings, and commitments to increase capital expenditures by many of our customers, with some customers also increasing homes' past expectations. We work hard to deliver quality every day, and we believe we are well-positioned to capitalize on these opportunities. Fiber-to-the-Home work and our maintenance and operations services are a core part of our business, and we secure both extensions and new awards in a number of markets for these services from AT&T during the quarter. We're excited about the increasing opportunities we see related to AI, including expansive new national deployments of high-capacity, low-latency inter- and intra-city networks. We believe we are in the early stages of a broad set of significant opportunities with a number of customers as hyperscalers look to connect their data centers with long-haul, private, redundant fiber networks. During the quarter, we received an award from Lumen for the expansion of their inter- and intra-city fiber network to provide additional capacity for hyperscalers. The integration of our recent wireless acquisition is going well, and we are seeing a anticipated ramp in wireless network modernization and deployment services. We remain comfortable with our initial revenue expectations for this acquisition, and we continue to integrate and execute on anticipated synergies. Lastly, we continue to see unprecedented levels of federal and state support for rural broadband deployment programs. We believe the magnitude and importance of these programs should not be underappreciated as they address some of the more difficult locations to deploy in America and represent a generational deployment opportunity. We continue to believe that we will see revenue opportunities from BEAD in the second half of calendar 2025 ramping into 2026. In summary, we executed well during the quarter and continue to capitalize on opportunities across our industry. We believe that the long-term value of our maintenance and operations business will continue to increase relative to our deployment of wireline and converged networks. as those deployments dramatically increase the amount of outside plant that must be extended and maintained. As customer projects increase in scope and complexity, our industry focus, scale, and financial strength position us well to deliver valuable services and anticipate and meet the demands for our customers. We believe that we are building momentum in the markets we serve as we pursue our vision to connect America. I would like to acknowledge our 16,000 employees for their dedication to delivering for our customers safely every day. We've grown significantly over the past several years and have unprecedented opportunities ahead of us. Our results and continued success are because of you. Thank you. I'll pass the call to Drew for his financial review and outlook.

Drew? Thanks, Dan, and good morning, everyone. Going to slide six, contract revenues were $1.272 billion, an increase of 12% compared to Q3 24. Organic revenue increased 7.6% after excluding revenue from acquired businesses each period, storm work for the current quarter, and revenue from a change order and project closeout in the prior year quarter. A presentation of these amounts can be found in our press release and materials for today's call. Adjusted EBITDA was $170.7 million or 13.4% of contract revenues. an increase of 52 basis points compared to 143.2 million or 12.9% in Q3-24. Gross margin improved 45 basis points to 20.8% of revenue compared to 20.4%. For comparative purposes, the prior year adjusted EBITDA and gross margin exclude the impacts of a change order and closeout of several projects reported in Q3-24. G&A this quarter included incremental stock-based compensation of $7.1 million related to the CEO transition and acquisition integration costs of $4.2 million related to the Q3 25 acquisition. Excluding these amounts, non-GAAP G&A expenses were 7.8% of revenue compared to 7.7% in Q3 24. Non-GAAP net income increased to $2.68 per share compared to $2.23 per share in Q3 last year after excluding 59 cents for the change order and project closeout benefit last year in Q3. Going to slide seven. During the quarter, our top five customers combined produced 55.7% of revenue and grew organically 16.7%. AT&T was our largest customer at $265.6 million or 20.9% of revenue and grew organically 58.4%. Lumen was our second largest customer at $146.4 million or 11.5% of revenue. Our third largest customer was $104.9 million or 8.2% of revenue and grew 50.2% organically. Comcast was at 102.7 million, or 8.1% of revenue. And finally, Brightspeed was our fifth largest customer at 88.6 million, or 7% of revenue, and grew 43.3% organically. All other customers decreased slightly on an organic basis. Going to slide eight, backlog at the end of the third quarter was 7.856 billion, versus 6.834 billion at July 2024, an increase of over $1 billion. Of this backlog, approximately 4.467 billion is expected to be completed in the next 12 months. Headcount was 15,980. Going to slide nine, our financial position and balance sheet remain strong. Cash and equivalents were 15.3 million and liquidity was 462.8 million. At the end of Q3, we had 450 million of term loan and 155 million of drawn revolving credit facility borrowings, which was used for acquisition funding during the quarter. Additionally, we had 500 million of senior notes outstanding. Our capital allocation continues to prioritize organic growth, followed by M&A and opportunistic share repurchases, within the context of a historical range of net leverage. Going to slide 10, cash flows from operating activities were 65.8 million in Q3. The combined DSOs of accounts receivable and net contract assets were 119 days. Capital expenditures were 66.4 million, net of disposal proceeds, and gross capex was 74.6 million. During Q3, we acquired a wireless telecommunications infrastructure business for $150 million in cash. Going to slide 11, as we look ahead to the fourth quarter, we expect total contract revenues to increase mid to high single digit as a percentage of contract revenues compared to $952.5 million in Q4 24. Included in the expectation for Q425 is approximately $35 million of revenues from acquired businesses not owned for the entirety of both the current and prior year quarters. For comparison purposes, there were no acquired revenues from these businesses in Q424. As a result, organic revenues are expected to increase low to mid single digit as a percentage of contract revenues. Our outlook for Q4 reflects normal seasonal factors such as fewer available work days due to the holidays, reduced daylight work hours, and inclement winter weather conditions. These seasonal factors, as well as additional operating costs to initiate work on a number of new awards, are also expected to impact earnings. For Q4-25, we expect non-GAAP adjusted EBITDA percentage of contract revenues to increase approximately 25 basis points compared to 9.8% in Q4-24. Other expectations about the Q4 outlook include 9.9 million of amortization expense, 9.3 million of stock-based compensation, which includes 2.1 million of incremental expense related to the CEO succession transition, 16.5 million of net interest expense, a 26% non-GAAP effective income tax rate, and 29.5 million diluted shares. As I wrap up, I would like to personally say thank you to Steve for your leadership and dedicated service to the company over the past three decades. I wish you well in your retirement. I'm excited to work alongside Dan and our dedicated team as we continue to grow the business and focus on delivering long-term value for our shareholders. Operator, this concludes our prepared remarks. You may now open the call for questions.

Thank you. As a reminder, to ask a question, please press Star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press Star 11 again. Please stand by while we compile the Q&A roster. And our first question will come from Adam Thalheimer from Thompson Davis. Your line is open.

Hey, good morning, guys. Nice quarter. And Steve, congrats on your last conference call.

Very heartfelt, Adam, I'm sure.

Hey, Drew, can you actually just pick up where you left off? You talked about startup incremental costs in Q4 related to the startup of large programs. Can you just flesh that out a little bit for us?

Yeah, Adam, thanks for the question. So as we've done in the past, we've announced new awards. We're pleased to have a number of new awards and extensions. And as Dan called out on the Lumen Award as well. And so we've got some costs that we've been, you know, these are a number of new areas for us. So there are some costs expected in the quarter. as we ramp up in the next year. The other thing I would add there is we continue to ramp on the recent acquisition. And so we've got a little bit of cost there as well.

And then can you talk about what you got from Lumen in the quarter versus the total Lumen or AI opportunity? Because the backlog went up basically by the Black & Veatch acquisition, I think.

Yeah, hey, good morning, Adam. This is Dan. So, you know, first, we're not going to size the revenue, you know, of our backlog opportunities, including the Lumen AI deal. We're very excited to continue our partnership there. Certainly believe that we got our fair share. And really, I want to point out that we view this as kind of the start of what's to come for the data centers. As the hyperscalers look to connect and extend their data centers across the country in this new surge of long-haul activity. We really see this as being a significant potential opportunity and excited to have the partnership with Lumen to get this started, but having a lot of conversations with other customers, having a lot of conversations with hyperscalers, and believe this could be significant in the years to come.

I'll turn it over. Thanks, guys.

Thank you. Our next question will come from Alex Waters from B of A. Your line is open.

Hey, good morning. Thanks so much for taking my questions. Maybe just first off here, Dan, I think in your script you noted the beat opportunity kind of 2H25 and 2026. It seems like it's changed a little bit from last quarter when I think it was noted 2Q. Maybe if you could just describe that a little bit more.

Yeah, good morning. Thanks, Alex. Last quarter, what we talked about was being in the second half, the third quarter of 2025. We still believe that we can see revenue in that timeframe. We're just talking about probably the significant ramp being in 2026. You know, I'm sure everybody saw Louisiana made some announcements yesterday. Certainly excited to see that 95% of that ended up being fiber. You know, we'll see how it all plays out, but certainly a good start. And collectively, with what the... Amounts that would be contributed from the subgrantees there, that's over a billion dollars in fiber construction for the Louisiana loan. So excited to see how it plays out and we'll see on timing, but we still believe we got back half of 2025 ramped into 2026.

Okay, perfect. Thanks. And then maybe just on kind of the all other customers bucket, it seems like that was down 9% year on year. Maybe just could you talk about what you're seeing from these customers and kind of what the expectations are going forward?

Yeah, it's a good question. So the way we look at it, and we understand that's how we show it on the slide there, the way we look at it, we have a lot of customers that are moving in and out of the top five. We're very pleased with the breadth of our customers, and we have a number of customers now. Six, seven, and eight are all in the $80 million range. So as those folks move in and out, it does affect the overall numbers. So we really like to look at it. If you look at the top 10 customers, which represents about 75% of our revenue, they increased 17% this quarter. So we feel that's a better guide.

Perfect. Thanks so much, Steve. Congratulations again. Thank you.

Thank you. Our next question will come from Alex Regal from B Riley Securities. Your line is open.

Hi there. Good morning. This is actually Min on for Alex. Steve, first I want to thank you for this great and long run. Just wishing you the best in retirement. So my first question has to do with, in terms of the BEAD funding, obviously it looks like, you know, you're not really expecting much change in terms of funding support, but can you just provide any update on your thoughts just under this Trump administration, under a new Trump administration?

Yeah, good morning, Min. You know, the first thing I'd say is, you know, we are seeing some things change. coming out, you know, the likely stance from the new administration around net neutrality, digital discrimination, those would be good for our customers, good for our industry. On the bulk of it, of course, you know, for all of us, still too early for us to speculate that. You know, what we would continue to say, bipartisan support when Bede was passed, you know, the current and previous administration supported getting broadband to rural homes, and we believe that will continue. You know, there's no doubt that coming out of COVID that high-speed internet is a priority. Getting that out to rural homes and every home in America, really, we look at it the same way as power was 90 years ago. So, you know, strongly believe that that's going to happen. Some questions around timing and exactly how it's going to play out. But again, some of these early awards, you know, what we're seeing in Colorado and the participation there, We believe those are all good signs.

Excellent. Also, can you just provide any kind of detail around how the integration of Black & Veatch is going so far, and what were your wireless revenues in the quarter?

Sure. The integration is going well. The work that they're doing for the equipment replacement is ramping up a little bit quicker than we expected, so we'd like to see that. And overall, you know, it's been a good acquisition for us, and the team is gelling well and getting ramped upward next year.

Yeah, and, man, this is Drew. I'll jump in here as well. So we had about $4.2 million of integration costs in the quarter there. We expect some modest costs coming up in Q4 as well, but we're seeing a nice ramp there.

Okay, and what were your total wireless revenues?

Oh. And wireless revenue is right around just over 4.5% of revenue for the quarter. Great.

Thank you.

Thank you. And our next question will come from Frank Louthan from Raymond James. Your line is open.

Great. All right. Thank you, Steve. Congratulations on the career and finishing the last earnings call here. I appreciate all the help over the years. I just wanted to check on as far as the guide. I assume any potential storm cleanup revenue is not in the guide, but can you give us an idea of what you think that impact will be on the fourth quarter? Will it be more or less, do you think, from Q3 and any impact to the regular business related to the storms? Thanks.

Yeah, Frank, this is Drew. Thanks for the question. So, you know, certainly our first focus on the storm work is helping our customers get service restored in these areas. We had about 46 million in Q3 and that number has tapered off quite a bit as we roll into Q4. So, you know, not reflecting that, you know, not calling out specific storm work in the guide at this point. And then as far as, you know, disruption, you know, in Q3, I would tell you we had four storms affecting our areas. So there is a little bit of trade-off of work there that normally, the normally scheduled work that would have gotten done. But as we're moving into Q4, there's not really that displacement in the period.

Okay, thank you. And as far as some of these AI builds that you're seeing, relative to maybe a few months ago, are you seeing these be more substantially related to larger long-haul projects versus short spurs off of networks that we maybe have seen previously?

Yeah, good morning, Frank. Quarter over quarter, we've just seen certainly more and more information, more and more of the hyperscalers talking about the need, certainly committing CapEx and future CapEx towards the endeavor. You know, I think exactly how the shape of the curve plays out remains to be seen. But, you know, the conversations that we're having certainly have to do with long haul. You know, they need to, ultimately, they're trying to increase their capacity. They're looking for redundancy. You know, when we think about redundancy, if that's redundancy of routes, that could be significant from a long haul perspective. And then, you know, you have connection of the existing data centers, but, you know, as they kind of get the power side figured out and start building new data centers, we've got extensions to the new data centers as well. So, All combined, we believe that not only is it going to be a significant opportunity in the shorter term, we still think that there's going to continue as they build those out, that it could be there for a number of years.

All right, great. Thank you very much.

Thank you. Our next question comes from Sangeeta Jain from KeyBank Capital Markets. Your line is open.

Thank you so much for taking my question. So if I can ask one on Gigapower, I think you showed up for the first time as your top 10 customers. Can you talk a little bit more about how you see that growing in the near term?

Yeah. So we've been working with Gigapower for a couple of years now. Very much enjoy our relationship there. The project's going well. As I mentioned before, some of these customers move in and out with the breadth of our business now. It just so happened that this quarter they moved into the top 10. So, you know, pleased with that and we'll continue with those builds.

Great. And on your Lumen work and any other data center type work that you're looking at, is there a difference in how you price them or a margin profile for those versus your standard fiber to the home type work?

Yeah, thanks, Sangeeta. You know, the first thing I would say is, you know, we're certainly not going to talk about pricing, you know, pricing kind of theory on the call. What I would tell you is, you know, we look at the opportunities, we look at the risk, you know, we look at the size of the opportunities, we're putting all those things together. You know, again, I do want to just reinforce that we're excited about the Lumen Award, but the opportunity that's out in front of us in the data center space is significant. And in addition to that, you know, we still have, you know, as everybody noted this quarter, you know, Verizon and Frontier transaction got approved by the shareholders. What they've talked about now is adding an incremental 7 to 12 million passings from what we saw before. So if you look prior to third quarter, there's already over 9 million passings added incremental this year, another 7 to 12. We'll see what AT&T says in their upcoming call on December 3rd. That could be another 10 to 15 million. So significant opportunities still there. You know, we're very much excited about, you know, the opportunity to continue these fiber to home passings, and it's just great to see our customers continue to add CapEx and increase some of these homes passed. So significant opportunities. And then, of course, you know, we got asked about BEAD before. Not just BEAD, you know, all of the funding that goes towards rural, whether that's the state programs or whether it's BEAD and whether it's everything else, we still see that that is going to continue to shape well as we look towards next year um and when we combine all three of those opportunities uh you know again we look forward at the business and just see tons of growth potential and we're going to work hard to see if we can capitalize on that great thank you so much for taking my questions thank you and our next question comes from eric lubko from wells fargo your line is open

Great. Thanks for taking the question. And, you know, Steve, best of luck on the next stage into retirement. So just to just just to kind of talk about some of the large opportunities you have, the AI data center bill, the bead program potentially picking up. Dan, maybe you could talk about whether you'll kind of have to ramp up your labor force to meet all this demand, you know, into the next year or so. in any color on what the environment is like for hiring new employees, whether they're direct ICOM employees or subcontractors?

Good morning, Eric. Appreciate the question. The first thing I'd say, we're strategic and disciplined in the way that we look at talent. We're making investments on training programs. We're making investments in facilities and something we're always trying to stay ahead of. We don't stock up a ton of labor ahead of opportunities. We really want to wait to see how the opportunities develop You know, what I would point out a couple years ago, we grew almost 22% in one year. You know, really proud of the job that our teams did to stay ahead of that from a labor perspective. We'll see how everything shapes out, to your point. You know, we have a lot of factors that are coming together, and we've got to see what that shape looks like. But, you know, we feel confident that our teams can stay ahead of it. You know, it certainly takes significant effort, but we feel good about our position there. And then, sorry, on your second question. Sorry, on your second question, you asked about mix for subcontractors. That depends on project by project, geography by geography. And sometimes during the time of the project, we might start with more subcontractors to begin and we might work in towards our labor forces. So always foresee a mix there.

Gotcha. And I think the last earnings call, you mentioned that some of your smaller customers, you expect that they may slow a little bit near term as they we're kind of assessing opportunities under the BEAD program in their core market. So just wanted to see if you think that's still the case over the next couple quarters as we get more clarity on state awards from BEAD and any, you know, how that has tracked so far versus the expectations you laid out last quarter.

Sure. Yeah, so this quarter we did see, you know, just a little bit come down from our co-ops when we look at it sequentially quarter over quarter. And we really do believe that that has to do with them waiting to see how BEAD is going to shake out and what that funding lies. You know, again, looking at the Louisiana results, good to see some of our co-op customers in that mix.

You know, as they pick up some of that work, we think that that revenue is going to continue to move forward. Great. Thank you, Dan.

Thank you. And as a reminder, to ask a question, please press star 1-1. And our next question. We'll come from Jean Ramirez from DA Davidson. Your line is now open.

Thank you.

Just want to clarify, your cost of revenue and GNA, SGNA for the next quarter, Is it in line with 3Q, or is there going to be a bit of a step up like you mentioned earlier?

Thanks, Gene. This is Drew. So Q4 is going, you know, certainly from a gross margin perspective, be impacted by the Q4 conditions around available work days, available work hours, winter weather conditions as well. And so typically we see some sequential impacts associated with that. And then from a G&A perspective, there are certain seasonal costs that come through there as well as the business seasonally comes in. There are certain costs there that come down, but it's something that we tightly manage.

Thank you.

And regarding the BEATS program, can you clarify whether you – when will you actually start – I guess the better question is, From your talks with your clients, when do you expect the actual building of Fiverr deployment? Will it be more towards the end of next fiscal year and going into 2026? Or are you seeing more immediate turnarounds given how fast the B program is expected to accelerate now that we've passed the second phase? Yeah, any color on that?

For sure. Thanks, Jane. This is Dan. You know, so again, I think Louisiana's kind of first out of the gate. Those are preliminary awards. So we've got to see when they get to the actual awards. This is something we're tracking both with our customers. You know, we're talking to the different state broadband programs as well. There's a lot of engineering to be done. There's a lot of permitting to be done. So there is some time, even from when we get to start talking to our customers about potential opportunities and awards, there's time after that to really get through that cycle. And that's why we think that we'll really start to see some revenue in the back half, latter half of calendar 2025. And then, you know, ramping into 2026 as those programs themselves ramp up.

Thank you.

And just, again, going back to the backlog question, I guess you're not parsing out what would be organic backlog. But if you're taking that 12th month, number, what is the cadence of the backlog decimation or the burn rate through next year? Will it be more second-half weighted, or do you see some similarities compared to this year?

Yeah, I'll jump in there. So, you know, pleased with the awards that we announced, you know, the benefits that we see there both in the next 12 months as well as the total backlog. We're not going to disaggregate the timing of that. I would just reiterate that we're happy to see that increase. And then the other thing I would add is that, as we've talked about in the past, it's not always tightly correlated to the revenue growth. That being said, I think the higher overall number, as well as the next 12-month number, is a nice starting point as we're looking ahead.

All right. Well, I appreciate your time. Thank you so much.

And Steve, congratulations and best of luck on your next chapter. Thank you.

Thank you. Our next question comes from Avi Jaroslawicz from UBS. Your line is open.

Hi. Good morning, guys. Thanks for taking the question. Just wanted to unpack what's driving the organic growth slowdown, you know, slight deceleration into Q4 here.

Sure. This is Drew. Avi, I'll jump in on that. So, you know, one, we had a strong Q3. As we've provided in our outlook, we see mid to high single-digit total growth and then low to mid organic growth. You know, we've had some customers, we called this out on the last call, that had a stronger front half of the year that are a bit slower in the back half of the year. And then certainly as we work into our Q4, as I mentioned, with the available days, hours, etc., And weather, there's just certain amounts of constraints of how much you can grow during that period of time. We're pleased with where we're heading. We're just not going to get ahead of ourselves in the outlook.

Got it. That makes sense. Enjoy retirement, Steve.

Thank you. And our next question will come from Alan Matroni from Sylvan Lake Asset Management. Your line is open.

Hi, thank you, and congratulations, Steve. This is, I think, my longest CEO relationship, given how long you've been CEO. It's like separation anxiety you're going to have to maybe put that in your head.

I think Alan is my longest investor relationship, too, and I may not have as much separation anxiety.

Well, we appreciate it. We look forward to working with Dan and the team. One thing that I noticed, besides the slowdown, obviously, at least short-term, is The SG&A expense for last year and for this year, it seems like, is growing faster than the revenues. Is that, can you talk about, I realize there's been some transition, there's been multiple acquisitions, and I'm talking about taking out some of these excess costs that you're talking about. Do you foresee over the next year or two years, obviously, revenue starting to ramp up faster than SG&A?

Yeah, Alan, I'll jump in on that. This is Drew. So I think you'd highlight there, we did have some incremental costs in the period that we called out, about $7.1 million of stock comp and some incremental integration costs, about $4.2 million. If you strip those out, we're only up slightly year over year. I think what I would say is as we've been able to grow in the past, we've been able to get some operating leverage out of G&A, and that would be something that I would expect to continue, you know, happy with what we see and the outlook and the opportunities that are there, and we'll just continue to tightly manage it.

Yeah, it seems like in the past you've had these situations where you're spending a little more to anticipate the next big revenue jump, given that BEAT is coming and also these acquisitions and new opportunities with AI. Is that the setup that we're looking at over the next couple of years the way you envision it? I'm not talking about as a percent of revenue, SG&A has always been fairly contained, and you guys have done a nice job in talking about more Just the next step up in terms of growing the ability to handle $5 to $6 billion plus in revenues instead of, you know, where you've been the last few years.

Hey, Alan. This is Dan. Thanks for the question. So, you know, absolutely, you know, first off, we're always working on G&A and, like Chris said, tightly managing that. Hopefully you heard from me today, very excited about the opportunities. We see the data center opportunity, which continues to grow quarter over quarter, conversation over conversation. We talked about the customers have been very active strategically, some of the combinations. They've been increasing their homes past. Again, we think that's something else that's going to hopefully play out next year and in the years to come. And then you add to that BEAD and other funding programs. The growth opportunities appear to be there. We're going to work hard to see if we can capitalize on them.

Great. And then lastly, there's been a lot of talk, obviously, with the new administration, Elon Musk and Starlink, and you had people talking about the potential, always the fear of being canceled or some sort of spending clawbacks. Can you talk about, I realize you're further down on the totem pole, but can you just talk a little bit about how that works in terms of the allocation funding coming through the state, the matching with the government's? And the ability to delay or push that off, just what your view is on that?

Well, I think the first thing on the alternative technologies, that's always been part of the conversation that predates the pending administration change. So, you know, we've always thought that that would play a part because for some homes, it just is what's going to make the most sense from an economic standpoint. We'll see how that plays out state over state. Again, with Louisiana coming out and showing a very small percentage for satellite, we think that bodes well. You know, over 95% is going to be fiber, as we talked about, over a billion dollars when you include the money brought in by the subgrantee. So, you know, a lot remains to be scripted. You know, obviously, we can't call the ball on everything that's going to come out of the new administration, but the states are pretty far along. All 50 states have gotten through phase two now. We have many of them now working on their subgrantee process, so I think we're all going to learn a lot here in the coming months.

Thank you. Best of luck. Thank you.

Thank you. And our next question comes from Adam Tolheimer from Thompson Davis. Your line is open.

Hey, guys. Thanks for taking the follow-up. AT&T, the awards in the quarter, were those wireless or wireline, and were there any new states in there?

Yeah, thanks, Adam.

This is Dan.

Those were wireline, and yes, we were fortunate to pick up some new markets as well.

Yeah, Adam, we did not list out the wireless in that. This was just new awards and extensions.

Got it. And then Verizon was down sequentially more than I expected in Q3. I was curious if you pulled crews from those territories for storms, or what drove the sequential decline, considering they want to do more FIOs builds?

Yeah, not related to storm work. As you know, these builds, sometimes they go a little bit faster, sometimes they go a little bit slower. Certainly excited about our relationship and the work that we continue to do for Verizon. Like I talked about before, we see that them getting through and getting the nod for the frontier combination, we believe that's going to be a positive for us.

Okay. And then just lastly, I think I had a note there were 2.5 million of B&V integration costs in Q4, but I didn't see any in the guidance. So are those not?

No, Adam. So originally we had guided a little bit higher that we thought was going to come through. The actual integration cost in Q3 was $4.2 million. We've got some modest costs that we would expect in this quarter, and we'll call them out if they're meaningful. But it wasn't notable for purposes of calling out ahead of time.

Got it. Okay. Thank you.

Thank you. Thank you. And I am showing no further questions from our phone lines, and I'd like to turn the conference back to management for closing remarks.

Thanks, operator. To conclude this, my final call, I have a special word for all of the DICOM team. Since last June, I've traveled across the country to thank hundreds of you in person for all you have done for me. I left each visit in awe of your dedication to our customers, your strong desire to excel, your commitment to the well-being of your fellow employees, and most importantly, your integrity, doing the right thing even when no one is watching. In leaving DICOM, I have always tried to live up to an ancient Chinese proverb. It says, a leader is best when the people barely know he exists. When his work is done, his aim fulfilled, they will say, we did it ourselves. And you really did. Today, my work for DICOM is done. My aim for the company fulfilled. Remember, in everything, serve customers skillfully, deliver results with discipline, accountable in all you do. Thanks so much. It's been great.

Thank you, and best wishes, Steve. We thank everybody for joining this morning. Look forward to updating you on our annual results the last week of February. Take care.

Thank you. This does conclude today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.