EX-99.3 4 dyfy2020q3non-gaapreco.htm EXHIBIT 99.3 Exhibit
Exhibit 99.3




Dycom Industries, Inc.
Non-GAAP Reconciliations
Q3 2020



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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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