Exhibit 99.3
Dycom Industries, Inc.
Non-GAAP Reconciliations
Q3 2020
Explanation of Non-GAAP Financial Measures
The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). In the Company’s quarterly results releases, trend schedules, conference calls, slide presentations, and webcasts, it also reports Non-GAAP financial measures, as defined by Regulation G of the Securities and Exchange Commission. The Company believes that the presentation of certain Non-GAAP financial measures provides information that is useful to investors because it allows for a more direct comparison of the Company’s performance for the period reported with the Company’s performance in prior periods. The Company cautions that Non-GAAP financial measures should be considered in addition to, but not as a substitute for, the Company’s reported GAAP results. Management defines the Non-GAAP financial measures used as follows:
| • | Non-GAAP Organic Contract Revenues - contract revenues from businesses that are included for the entire period in both the current and prior year periods, excluding contract revenues from storm restoration services. Non-GAAP Organic Contract Revenue growth (decline) is calculated as the percentage change in Non-GAAP Organic Contract Revenues over those of the comparable prior year periods. Management believes organic growth (decline) is a helpful measure for comparing the Company’s revenue performance with prior periods. |
| • | Non-GAAP Adjusted EBITDA - net income (loss) before interest, taxes, depreciation and amortization, gain on sale of fixed assets, stock-based compensation expense, and certain non-recurring items. Management believes Non-GAAP Adjusted EBITDA is a helpful measure for comparing the Company’s operating performance with prior periods as well as with the performance of other companies with different capital structures or tax rates. |
| • | Non-GAAP Adjusted Net Income - GAAP net income (loss) before the non-cash amortization of the debt discount and the related tax impact, certain tax impacts resulting from vesting and exercise of share-based awards, and certain non-recurring items. |
| • | Non-GAAP Adjusted Diluted Earnings per Common Share and Non-GAAP Adjusted Diluted Shares - Non-GAAP Adjusted Net Income divided by Non-GAAP Adjusted Diluted Shares outstanding. The Company has a hedge in effect to offset the economic dilution of additional shares that would be issued in connection with the conversion of the Company’s 0.75% convertible senior notes due September 2021 (the “Notes”) up to an average quarterly share price of $130.43. The measure of Non-GAAP Adjusted Diluted shares used in computing Non-GAAP Adjusted Diluted Earnings per Common Share excludes dilution from the Notes. Management believes that the calculation of Non-GAAP Adjusted Diluted shares to reflect the hedge will be useful to investors because it provides insight into the offsetting economic effect of the hedge against potential conversion of the Notes. |
Management excludes or adjusts each of the items identified below from Non-GAAP Adjusted Net Income and Non-GAAP Adjusted Diluted Earnings per Common Share:
| • | Non-cash amortization of debt discount on Notes - The Company’s Notes were allocated between debt and equity components. The difference between the principal amount and the carrying amount of the liability component of the Notes represents a debt discount. The debt discount is being amortized over the term of the Notes but does not result in periodic cash interest payments. The Company has excluded the non-cash amortization of the debt discount from its Non-GAAP financial measures because it believes it is useful to analyze the component of interest expense for the Notes that will be paid in cash. The exclusion of the non-cash amortization from the Company’s Non-GAAP financial measures provides management with a consistent measure for assessing financial results. |
| • | Non-cash charge for accounts receivable and contract assets - During the quarter ended January 26, 2019, the Company recognized a pre-tax non-cash charge for accounts receivable and contract assets of $17.2 million related to balances owed from a customer. On February 25, 2019, this customer filed a voluntary petition for reorganization. The Company excludes the impact of this non-cash charge for accounts receivable and contract assets from its Non-GAAP financial measures because the Company believes it is not indicative of its underlying results or ongoing operations. |
| • | Impact on stock-based compensation expense from non-cash charge for accounts receivable and contract assets - The Company excludes the impact on stock-based compensation expense from the non-cash charge for accounts receivable and contract assets from its Non-GAAP financial measures because the Company believes it is not indicative of its underlying results or ongoing operations. |
| • | Recovery of previously reserved accounts receivable and contract assets - During the quarter ended April 27, 2019, the Company recognized $10.3 million of pre-tax income from the recovery of previously reserved accounts receivable and |
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contract assets based on collections from a customer. The Company excludes the impact of this recovery from its Non-GAAP financial measures because the Company believes it is not indicative of its underlying results.
| • | Q1-20 charge for warranty costs - During the quarter ended April 27, 2019, the Company recorded an $8.2 million pre-tax charge for estimated warranty costs for work performed for a customer in prior periods. The Company excludes the impact of this charge from its Non-GAAP financial measures because the Company believes it is not indicative of its underlying results in the current period. |
| • | Tax impact of the vesting and exercise of share-based awards - The Company excludes certain tax impacts resulting from the vesting and exercise of share-based awards as these amounts may vary significantly from period to period. Excluding these amounts from the Company’s Non-GAAP financial measures provides management with a more consistent measure for assessing financial results. |
| • | Tax impact of previous tax year filing - During the quarter ended July 27, 2019, the Company recognized an income tax expense of $1.1 million on a previous tax year filing. The Company has excluded this impact because the Company believes it is not indicative of the Company’s underlying results or ongoing operations. |
| • | Tax impact of pre-tax adjustments - The tax impact of pre-tax adjustments reflects the Company’s effective tax rate used for financial planning for the applicable period. |
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| Reconciliation of Non-GAAP Financial Measures to Comparable GAAP Financial Measures | ||||||||||||||||||||||
| Non-GAAP Organic Contract Revenues | ||||||||||||||||||||||
| Unaudited | ||||||||||||||||||||||
| (Dollars in millions) | ||||||||||||||||||||||
| Contract Revenues - GAAP | Revenues from acquired businesses1 | Revenues from storm restoration services | Non-GAAP - Organic Revenues | Growth (Decline)% | ||||||||||||||||||
| Quarter Ended | GAAP % | Non-GAAP - Organic % | ||||||||||||||||||||
| October 26, 2019 | $ | 884.1 | $ | — | $ | — | $ | 884.1 | 4.2 | % | 4.7 | % | ||||||||||
| October 27, 2018 | $ | 848.2 | $ | — | $ | (3.9 | ) | $ | 844.4 | |||||||||||||
| July 27, 2019 | $ | 884.2 | $ | — | $ | — | $ | 884.2 | 10.6 | % | 11.1 | % | ||||||||||
| July 28, 2018 | $ | 799.5 | $ | — | $ | (3.8 | ) | $ | 795.7 | |||||||||||||
| April 27, 2019 | $ | 833.7 | $ | (6.1 | ) | $ | (4.7 | ) | $ | 822.9 | 14.0 | % | 15.8 | % | ||||||||
| April 28, 2018 | $ | 731.4 | $ | (5.8 | ) | $ | (14.8 | ) | $ | 710.7 | ||||||||||||
| January 26, 2019 | $ | 748.6 | $ | (5.9 | ) | $ | (20.4 | ) | $ | 722.3 | 14.3 | % | 13.7 | % | ||||||||
| January 27, 2018 | $ | 655.1 | $ | — | $ | (19.8 | ) | $ | 635.3 | |||||||||||||
| October 27, 2018 | $ | 848.2 | $ | (8.8 | ) | $ | (3.9 | ) | $ | 835.6 | 12.2 | % | 12.9 | % | ||||||||
| October 28, 2017 | $ | 756.2 | $ | — | $ | (15.9 | ) | $ | 740.3 | |||||||||||||
| July 28, 2018 | $ | 799.5 | $ | (9.1 | ) | $ | (3.8 | ) | $ | 786.6 | 2.5 | % | 0.8 | % | ||||||||
| July 29, 2017 | $ | 780.2 | $ | — | $ | — | $ | 780.2 | ||||||||||||||
| April 28, 2018 | $ | 731.4 | $ | (15.4 | ) | $ | (14.8 | ) | $ | 701.1 | (7.0 | )% | (10.0 | )% | ||||||||
| April 29, 2017 | $ | 786.3 | $ | (7.1 | ) | $ | — | $ | 779.2 | |||||||||||||
| January 27, 2018 | $ | 655.1 | $ | (8.4 | ) | $ | (19.6 | ) | $ | 627.1 | (6.6 | )% | (10.6 | )% | ||||||||
| January 28, 2017 | $ | 701.1 | $ | — | $ | — | $ | 701.1 | ||||||||||||||
Note: Amounts above may not add due to rounding.
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| Reconciliation of Non-GAAP Financial Measures to Comparable GAAP Financial Measures | ||||||||||||||||||||||
| Non-GAAP Organic Contract Revenues - Certain Customers | ||||||||||||||||||||||
| Unaudited | ||||||||||||||||||||||
| (Dollars in millions) | ||||||||||||||||||||||
| Contract Revenues - GAAP | Revenues from acquired businesses1 | Revenues from storm restoration services | Non-GAAP - Organic Revenues | Growth (Decline)% | ||||||||||||||||||
| Quarter Ended | GAAP % | Non-GAAP - Organic % | ||||||||||||||||||||
| Verizon | ||||||||||||||||||||||
| October 26, 2019 | $ | 182.1 | $ | — | $ | — | $ | 182.1 | 4.6 | % | 4.6 | % | ||||||||||
| October 27, 2018 | $ | 174.1 | $ | — | $ | — | $ | 174.0 | ||||||||||||||
| CenturyLink | ||||||||||||||||||||||
| October 26, 2019 | $ | 164.1 | $ | — | $ | — | $ | 164.1 | 38.2 | % | 38.6 | % | ||||||||||
| October 27, 2018 | $ | 118.8 | $ | — | $ | (0.3 | ) | $ | 118.4 | |||||||||||||
| Windstream | ||||||||||||||||||||||
| October 26, 2019 | $ | 42.7 | $ | — | $ | — | $ | 42.7 | 37.3 | % | 43.2 | % | ||||||||||
| October 27, 2018 | $ | 31.1 | $ | — | $ | (1.3 | ) | $ | 29.8 | |||||||||||||
Top 5 Customers2 | ||||||||||||||||||||||
| October 26, 2019 | $ | 683.2 | $ | — | $ | — | $ | 683.2 | 2.8 | % | 3.4 | % | ||||||||||
| October 27, 2018 | $ | 664.9 | $ | — | $ | (3.8 | ) | $ | 661.0 | |||||||||||||
| All Other Customers (excluding Top 5 Customers) | ||||||||||||||||||||||
| October 26, 2019 | $ | 200.9 | $ | — | $ | — | $ | 200.9 | 9.6 | % | 9.6 | % | ||||||||||
| October 27, 2018 | $ | 183.4 | $ | — | $ | (0.1 | ) | $ | 183.3 | |||||||||||||
Note: Amounts above may not add due to rounding.
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| Reconciliation of Non-GAAP Financial Measures to Comparable GAAP Financial Measures | |||||||
| Non-GAAP Adjusted EBITDA | |||||||
| Unaudited | |||||||
| (Dollars in thousands) | |||||||
| Quarter Ended | |||||||
| October 26, 2019 | October 27, 2018 | ||||||
| Net income | $ | 24,229 | $ | 27,830 | |||
| Interest expense, net | 13,128 | 11,310 | |||||
| Provision for income taxes | 6,556 | 10,454 | |||||
| Depreciation and amortization | 47,356 | 45,533 | |||||
| Earnings Before Interest, Taxes, Depreciation & Amortization (“EBITDA”) | 91,269 | 95,127 | |||||
| Gain on sale of fixed assets | (2,241 | ) | (3,874 | ) | |||
| Stock-based compensation expense | 2,694 | 7,366 | |||||
| Non-GAAP Adjusted EBITDA | $ | 91,722 | $ | 98,619 | |||
| Contract revenues | $ | 884,115 | $ | 848,237 | |||
| Non-GAAP Adjusted EBITDA % of contract revenues | 10.4 | % | 11.6 | % | |||
Comparable Prior Periods for Q4 2020 and Q1 2021 Outlook: | Quarter Ended | ||||||
| January 26, 2019 | April 27, 2019 | ||||||
| Net (loss) income | $ | (12,054 | ) | $ | 14,279 | ||
| Interest expense, net | 12,447 | 12,233 | |||||
| (Benefit) provision for income taxes | (3,345 | ) | 6,199 | ||||
| Depreciation and amortization | 45,909 | 46,341 | |||||
| Earnings Before Interest, Taxes, Depreciation & Amortization (“EBITDA”) | 42,957 | 79,052 | |||||
| Gain on sale of fixed assets | (2,192 | ) | (6,738 | ) | |||
| Stock-based compensation expense | 1,910 | 3,479 | |||||
| Non-cash charge for (recovery of) accounts receivable and contract assets | 17,157 | (10,345 | ) | ||||
| Charge for warranty costs | — | 8,200 | |||||
| Non-GAAP Adjusted EBITDA | $ | 59,832 | $ | 73,648 | |||
| Contract revenues | $ | 748,619 | $ | 833,743 | |||
| Non-GAAP Adjusted EBITDA % of contract revenues | 8.0 | % | 8.8 | % | |||
Note: Amounts above may not add due to rounding.
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| Reconciliation of Non-GAAP Financial Measures to Comparable GAAP Financial Measures | |||||||||||
| Non-GAAP Adjusted Net Income and Non-GAAP Adjusted Diluted Earnings Per Share | |||||||||||
| Unaudited | |||||||||||
| (Dollars and shares in thousands, except per share amounts) | |||||||||||
| Quarter Ended October 26, 2019 | |||||||||||
| GAAP | Reconciling Items | Non-GAAP Adjusted | |||||||||
| Contract revenues | $ | 884,115 | $ | — | $ | 884,115 | |||||
| Costs of earned revenues, excluding depreciation and amortization | 724,378 | — | 724,378 | ||||||||
| General and administrative | 69,875 | — | 69,875 | ||||||||
| Depreciation and amortization | 47,356 | — | 47,356 | ||||||||
| Total | 841,609 | — | 841,609 | ||||||||
Interest expense, net3 | (13,128 | ) | 5,068 | (8,060 | ) | ||||||
| Other income, net | 1,407 | — | 1,407 | ||||||||
| Income before income taxes | 30,785 | 5,068 | 35,853 | ||||||||
Provision for income taxes4 | 6,556 | 1,231 | 7,787 | ||||||||
| Net income | $ | 24,229 | $ | 3,837 | $ | 28,066 | |||||
| Diluted earnings per common share | $ | 0.76 | $ | 0.12 | $ | 0.88 | |||||
| Shares used in computing diluted earnings per common share | 31,827 | — | 31,827 | ||||||||
| Quarter Ended October 27, 2018 | |||||||||||
| GAAP | Reconciling Items | Non-GAAP Adjusted | |||||||||
| Contract revenues | $ | 848,237 | $ | — | $ | 848,237 | |||||
| Costs of earned revenues, excluding depreciation and amortization | 687,164 | — | 687,164 | ||||||||
| General and administrative | 68,763 | — | 68,763 | ||||||||
| Depreciation and amortization | 45,533 | — | 45,533 | ||||||||
| Total | 801,460 | — | 801,460 | ||||||||
Interest expense, net3 | (11,310 | ) | 4,800 | (6,510 | ) | ||||||
| Other income, net | 2,817 | — | 2,817 | ||||||||
| Income before income taxes | 38,284 | 4,800 | 43,084 | ||||||||
Provision for income taxes4 | 10,454 | 1,321 | 11,775 | ||||||||
| Net income | $ | 27,830 | $ | 3,479 | $ | 31,309 | |||||
| Diluted earnings per common share | $ | 0.87 | $ | 0.11 | $ | 0.98 | |||||
| Shares used in computing diluted earnings per common share | 31,835 | — | 31,835 | ||||||||
Note: Amounts above may not add due to rounding.
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| Reconciliation of Non-GAAP Financial Measures to Comparable GAAP Financial Measures | |||||||||||
| Non-GAAP Adjusted Net Income and Non-GAAP Adjusted Diluted Earnings Per Share | |||||||||||
| Unaudited | |||||||||||
| (Dollars and shares in thousands, except per share amounts) | |||||||||||
Comparable Prior Periods for Q4 2020 and Q1 2021 Outlook: | Quarter Ended January 26, 2019 | ||||||||||
| GAAP | Reconciling Items | Non-GAAP Adjusted | |||||||||
| Contract revenues | $ | 748,619 | $ | — | $ | 748,619 | |||||
| Costs of earned revenues, excluding depreciation and amortization | 633,279 | — | 633,279 | ||||||||
General and administrative5 | 73,540 | (15,306 | ) | 58,234 | |||||||
| Depreciation and amortization | 45,909 | — | 45,909 | ||||||||
| Total | 752,728 | (15,306 | ) | 737,422 | |||||||
Interest expense, net3 | (12,447 | ) | 4,881 | (7,566 | ) | ||||||
| Other income, net | 1,157 | — | 1,157 | ||||||||
| (Loss) income before income taxes | (15,399 | ) | 20,187 | 4,788 | |||||||
(Benefit) provision for income taxes4 | (3,345 | ) | 4,886 | 1,541 | |||||||
| Net (loss) income | $ | (12,054 | ) | $ | 15,301 | $ | 3,247 | ||||
| Diluted (loss) earnings per common share | $ | (0.38 | ) | $ | 0.49 | $ | 0.10 | ||||
Shares used in computing diluted (loss) earnings per common share6 | 31,360 | 419 | 31,778 | ||||||||
| Quarter Ended April 27, 2019 | |||||||||||
| GAAP | Reconciling Items | Non-GAAP Adjusted | |||||||||
| Contract revenues | $ | 833,743 | $ | — | $ | 833,743 | |||||
Costs of earned revenues, excluding depreciation and amortization7 | 701,767 | (8,200 | ) | 693,567 | |||||||
General and administrative8 | 58,622 | 10,345 | 68,967 | ||||||||
| Depreciation and amortization | 46,341 | — | 46,341 | ||||||||
| Total | 806,730 | 2,145 | 808,875 | ||||||||
Interest expense, net3 | (12,233 | ) | 4,932 | (7,301 | ) | ||||||
| Other income, net | 5,698 | — | 5,698 | ||||||||
| Income before income taxes | 20,478 | 2,787 | 23,265 | ||||||||
Provision for income taxes4 | 6,199 | 128 | 6,327 | ||||||||
| Net income | $ | 14,279 | $ | 2,659 | $ | 16,938 | |||||
| Diluted earnings per common share | $ | 0.45 | $ | 0.08 | $ | 0.53 | |||||
| Shares used in computing diluted earnings per common share | 31,786 | — | 31,786 | ||||||||
Note: Amounts above may not add due to rounding.
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| Reconciliation of Non-GAAP Financial Measures to Comparable GAAP Financial Measures | ||
| Outlook - Non-GAAP Adjusted Diluted Earnings (Loss) Per Common Share | ||
| Unaudited | ||
| Quarter Ending | ||
| January 25, 2020 | ||
GAAP diluted loss per common share9 | $(0.27) - $(0.10) | |
| Adjustment: | ||
Addback of after-tax non-cash amortization of debt discount on Notes10 | 0.12 | |
Non-GAAP Adjusted Diluted Earnings (Loss) per Common Share9 | $(0.15) - $0.02 | |
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Notes to Reconciliation of Non-GAAP Financial Measures to Comparable GAAP Financial Measures
1) Amounts represent contract revenues from acquired businesses that were not owned for the full period in both the current and comparable prior periods, including any contract revenues from storm restoration services for these acquired businesses.
2) Top 5 Customers included Verizon, CenturyLink, AT&T, Comcast and Windstream for the quarters ended October 26, 2019 and October 27, 2018.
3) Non-GAAP Adjusted Interest expense, net excludes the non-cash amortization of the debt discount associated with the Notes.
4) Non-GAAP Adjusted Provision (Benefit) for income taxes excludes the tax related impact of the non-cash amortization of the debt discount associated with the Notes as well as the tax effects of the vesting and exercise of share-based awards.
5) During the quarter ended January 26, 2019, the Company recognized a pre-tax non-cash charge for accounts receivable and contract assets of $17.2 million related to balances owed from a customer. On February 25, 2019, this customer filed a voluntary petition for reorganization. Partially offsetting this charge, the Company’s stock-based compensation expense was reduced by approximately $1.9 million for the quarter ended January 26, 2019 as a result of the pre-tax non-cash charge for accounts receivable and contract assets. Excluding this reduction, Non-GAAP Stock-Based Compensation Expense was $3.8 million for the quarter ended January 26, 2019.
6) For the quarter ended January 26, 2019, GAAP diluted shares excludes 418,695 common stock equivalents related to share-based awards as their effect would be anti-dilutive. Non-GAAP Adjusted Diluted Shares includes the dilutive effect of these additional shares.
7) During the quarter ended April 27, 2019, the Company recorded an $8.2 million pre-tax charge for estimated warranty costs for work performed for a customer in prior periods.
8) During the quarter ended April 27, 2019, the Company recognized $10.3 million of pre-tax income from the recovery of previously reserved accounts receivable and contract assets for a customer that filed a voluntary petition for reorganization during February 2019, as referenced in footnote 5 above.
9) GAAP diluted loss per common share and Non-GAAP Adjusted Diluted Loss per Common Share for the quarter ending January 25, 2020 is calculated using 31.5 million shares, which excludes common stock equivalents related to share-based awards as their effect would be anti-dilutive. Non-GAAP Adjusted Diluted Earnings per Common Share for the quarter ending January 25, 2020 is calculated using 31.8 million shares.
10) The Company expects to recognize approximately $5.2 million in pre-tax interest expense during the quarter ending January 25, 2020 for the non-cash amortization of the debt discount associated with the Notes.
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