Earnings Call Transcript - DY Q1 2020

Operator, Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Dycom Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. Also as a reminder, today’s teleconference is being recorded. At this time, I’ll turn the call over to your host, President and CEO, Mr. Steven Nielsen. Please go ahead, sir.

Steven Nielsen, President and CEO

Thank you, Tony. Good morning, everyone. I’d like to thank you for attending this conference call to review our first quarter fiscal 2020 results. 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 Tim Estes, our Chief Operating Officer; Drew DeFerrari, our Chief Financial Officer; and Rick Vilsoet, our Chief Legal Officer. Rick will be retiring today at the conclusion of our annual meeting after 14 years of service. On behalf of the Board and employees of the Company, thanks for all your hard work and wise counsel. Now, I will turn the call over to Rick Vilsoet.

Rick Vilsoet, Chief Legal Officer

Thank you, Steve. Except for historical information, the statements made by Company management during this call may be forward-looking and are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, including those related to the Company’s outlook, are based on management’s current expectations, estimates, and projections and involve known and unknown risks and uncertainties which may cause the Company’s actual results in the future periods to differ materially from forecasted results. Those risks and uncertainties are more fully described in the Company’s annual report on Form 10-K for the year ended January 26, 2019, and other periodic filings with the Securities and Exchange Commission. The Company assumes no obligation to update forward-looking statements. Steve?

Steven Nielsen, President and CEO

Thanks, Rick. Now, moving to slide four and a review of our first quarter results. As we discuss our results, please note that organic revenue amounts exclude revenues from storm restoration services and from a business that was acquired during the quarter ended April 28, 2018. In addition, during the quarter, we recognized pretax income from the recovery of previously reserved accounts receivable and contract assets of $10.3 million, and we recorded a pretax charge of $8.2 million for estimated warranty costs related to work performed for a customer in prior periods. During our comments, we will exclude this recovery and this warranty charge when discussing certain non-GAAP measures. This presentation and the accompanying slides may include these and other non-GAAP financial measures. We refer you to the Quarterly Reports section of our website for reconciliation of these non-GAAP measures to their corresponding GAAP measures. Revenue was $833.7 million, an increase of 14%. Organic revenue excluding $4.7 million of storm restoration services in the quarter and $14.8 million in the year-ago quarter increased 15.8%. As we deploy 1 gigabit wireline networks, wireless/wireline converged networks, and wireless networks, this quarter reflected an increase in demand from four of our top five customers. Gross margins were 16.8% of revenue, reflecting the continued impacts of the complexity of a large customer program discussed previously on our fourth quarter fiscal 2019 call, and adjusted general and administrative expenses were 8.3%. All of these factors produced adjusted EBITDA of $73.6 million or 8.8% of revenue and adjusted diluted earnings per share of $0.53 compared to $0.65 in the year-ago quarter. And liquidity was ample as cash and availability under our credit facility was $358.9 million. Now moving to slide five. Today, a number of major industry participants are deploying significant wireline networks across broad sections of the country. These networks are generally designed to provision bandwidth enabling 1 gigabit speeds to individual consumers. In addition, emerging wireless technologies are driving significant wireline deployments. These wireline deployments are necessary to facilitate what is expected to be a decade long deployment of fully converged wireless/wireline networks that will enable high bandwidth, low latency applications. The industry effort required to deploy these converge networks continues to meaningfully broaden our set of opportunities; total industry opportunities in aggregate are robust. We are providing program management, planning, engineering and design, aerial and underground construction and fulfillment services for 1 gigabit deployments. In addition, we have secured a number of converged wireless/wireline multi-use network deployments. These services are being provided across the country in more than a dozen metropolitan areas to several customers. Customers are pursuing multi-year initiatives that are being planned and managed on a market by market basis. Our ability to provide integrated planning, engineering and design, procurement and construction and maintenance services is of particular value to several industry participants. In addition to the timing challenges presented by a large customer program discussed fully on our fourth quarter fiscal 2019 call, we also expect some normal timing volatility and customer spending modulations as network deployment strategies and technologies evolve on other large scale network deployments. Tactical considerations may also impact timing. We remain confident that our competitively unparalleled scale and our financial strength position us well to deliver valuable service to our customers. Going to slide six. We continue to experience the effects of a strong overall industry environment during the quarter with increases in demand from four of our top five customers. Organic revenue, excluding storm restoration services, increased 15.8%. Our top five customers combined produced 80.4% of revenue, increasing 19.4% organically, while all other customers increased 3%. AT&T was our largest customer with 25.1% of total revenue or $209.3 million. AT&T grew organically 28.7%. Revenue from Verizon was $179.8 million or 21.6% of revenue. Verizon was Dycom’s second largest customer and grew 47.2% organically. Comcast was our third largest customer at $137.1 million or 16.4% of revenue. Revenue from CenturyLink was $109.8 million or 13.2% of revenue. CenturyLink was our fourth largest customer and grew organically 17.8%. And finally, revenue from Windstream was $34 million or 4.1% of revenue. Windstream was our fifth largest customer and grew 38% organically. Of note, this quarter is the first since October 2015 where all of our other customers in aggregate, excluding the top five customers, have grown organically. We are encouraged with our third consecutive quarter of double-digit organic growth and have continued to extend our geographic reach and expand our program management network planning services. In fact, over the last several years, we have meaningfully increased the long-term value of our maintenance and operations business, a trend that we believe will parallel our deployment of 1 gigabit in wireless/wireline converged networks as those deployments dramatically increase the amount of outside plant network that must be extended and maintained. Now moving to slide seven. Backlog at the end of the first quarter was $7.051 billion versus $7.33 billion at the end of the January 2019 quarter, a decrease of $279 million. Of this backlog, approximately $2.723 billion is expected to be completed in the next 12 months. The total backlog calculation reflects solid performance as we book new work and renewed existing work. We continue to anticipate substantial future opportunities across a broad array of our customers. For AT&T, we were awarded construction services agreements in California, Ohio, Kentucky, South Carolina, and Georgia, with Comcast fulfillment services in Pennsylvania and New Jersey, charter fulfillment services nationwide, and construction services in California and Michigan, along with utilities locating services agreements in Maryland, Washington DC, Virginia and South Carolina. And finally, we secured rural fiber service agreements in Wisconsin, Illinois, and Kentucky. Headcount increased during the quarter to 15,278. Now, I will turn the call over to Drew for this financial review and outlook.

Drew DeFerrari, Chief Financial Officer

Thanks, Steve, and good morning, everyone. Going to slide eight. Contract revenues for Q1 2020 were $833.7 million and organic revenue growth was 15.8% with strong increases from four of our top five customers. Storm restoration services contributed $4.7 million of revenue compared to $14.8 million in the year-ago period, while revenue from an acquired business contributed $6.1 million of revenue. Adjusted EBITDA was $73.6 million, or 8.8% of revenue. During Q1, we incurred an $8.2 million charge for estimated warranty costs for work performed for a customer in prior periods. Excluding this charge, gross margins were 16.8% and declined 121 basis points from the April quarter last year. Margins were impacted by a large customer program during the quarter. In G&A expense, we realized a pretax recovery of $10.3 million as a benefit during Q1 '20. This recovery was based on substantial cash collections to-date from a customer that previously filed for Chapter 11 reorganization. Excluding the recovery benefit, G&A expense decreased 25 basis points compared to the April quarter last year. Our lower financial performance this year resulted in a reduction of share-based compensation during the quarter. Our non-GAAP adjusted diluted EPS for Q1 '20 was $0.53 per share. Now going to slide nine. Our balance sheet and financial position remain strong. We ended the quarter with $450 million of term loans outstanding and no revolver borrowings. Liquidity is ample at $358.9 million at the end of the quarter, consisting of availability from our credit facility and cash on hand. Cash flow used for operating activities was $56.1 million during the current quarter, which funded this sequential growth in revenue. For Q1 '20, the combined DSOs of accounts receivable and net contract assets were 108 days, reflecting growth on the large customer program. Capital expenditures were $38.4 million during Q1 '20, net of disposal proceeds, and gross CapEx was $45.8 million. In summary, we continue to maintain ample liquidity and a strong balance sheet. Going to slide 10. For the quarter ending July 2019, we currently expect total revenue to range from $835 million to $885 million. Non-GAAP adjusted diluted EPS is expected to range from $0.70 to $0.92 per share, and adjusted EBITDA as a percentage of contract revenue is expected to decrease from the Q2 '19 results. Other expectations include depreciation of $41.1 million to $41.9 million and amortization of $5.3 million. Share-based compensation included in G&A of $3.2 million to $3.7 million, adjusted interest expense of approximately $7.7 million to $7.8 million, excluding $5 million of interest for the non-cash debt discount amortization of our notes. Other income net is expected to range from $2.3 million to $2.9 million. The effective tax rate is expected at 27.5% before any tax effects of the settlement of share-based awards. Now going to slide 11. Looking ahead to the October 2019 quarter, we currently expect revenue growth of low to mid-single digits as a percentage of revenue compared to the Q3 '19 results and adjusted EBITDA margin as a percentage of contract revenue is expected to decrease from the Q3 '19 results. Now, I will turn the call back to Steve.

Steven Nielsen, President and CEO

Thanks, Drew. Moving to slide 12. Within a growing economy, we experienced the effects of a strong industry environment and capitalized on our significant strength. First and foremost, we maintained a strong customer presence throughout our markets; second, our extensive market presence has allowed us to be at the forefront of evolving industry opportunities. The end market drivers of these opportunities remain firm and are strengthening. Fiber deployments in contemplation of emerging wireless technologies are underway in many regions of the country. Wireless construction activity in support of expanded coverage and capacity has begun to accelerate through the deployment of enhanced macro cells and new small cells. Telephone companies are deploying fiber-to-the-home to enable 1 gigabit high-speed connections. Cable operators are deploying fiber to small and medium businesses and enterprises. A portion of these deployments are in anticipation of the customer sales process. Fiber deep deployments to expand capacity as well as new build opportunities are underway. Dramatically increased speeds to consumers are being provisioned. Customers are consolidating supply chains, creating opportunities for market share growth and increasing the long-term value of our maintenance and operations business. In addition, we are increasingly providing integrated planning, engineering and design, procurement, construction, and maintenance services. We remain encouraged that our major customers are committed to multiyear capital spending initiatives, and we are confident in our strategies, the prospects for our Company, the capabilities of our dedicated employees, and the experience of our management team as we grow our business. Now, Tony, we will open the call for questions.

Operator, Operator

Thank you very much. Our first question will come from Chad Dillard with Deutsche Bank. Please go ahead.

Chad Dillard, Analyst

Hi. Good morning, everyone.

Steven Nielsen, President and CEO

Good morning, Chad. Sorry, I’ve got a little bit of a cold, but I’m fighting through.

Chad Dillard, Analyst

No worries at all. So, just a question for you guys. Based on your backlog, I mean, how far away is one fiber from hitting the full run rate contribution to the business? And is there further to go, and how should we think about the margin implications from the program?

Steven Nielsen, President and CEO

So, Chad, I think as always, we’ve never commented on individual programs, either with respect to their identified margins or program inside of a customer. I think, we continue through the guidance to show that the business continues to grow, based on what Drew has provided for the second and third quarters. And I think we have a number of opportunities across the entirety of the business. But for obvious competitive reasons, and other reasons, we can’t just isolate a single program.

Chad Dillard, Analyst

Okay. And just moving to more of the margin question. Could you just talk about just what EBITDA margins you have in backlog versus what you’re posting right now, maybe over the last 12 months or so? And to what extent is some of the margin pressure that you’re seeing like year-on-year, more related to the ramp-up in work or is it more that you are seeing a little more pressure in terms of contracts that you’re signing right now?

Steven Nielsen, President and CEO

Well, as we discussed on the last quarter’s call, Chad, we have a program for a large customer that has margins that are below the Company average. As we said last quarter and I think was also true for this quarter, if you pull the impacts of that out of the business, the business looks very much like it always has. And so, we don’t see any impacts in particular on the overall company other than this large program. And as we talked about the impacts on the margins, there are really around the complexity of the program and the costs that we’ve incurred to manage the complexity and meet the needs of that particular program. So, we don’t think about this as something that’s in the backlog more broadly. It’s really associated with that particular program.

Operator, Operator

Thank you. The next question comes from Adam Thalhimer with Thompson Davis. Please go ahead.

Adam Thalhimer, Analyst

Hey. Good morning, guys. I like the new slide deck.

Steven Nielsen, President and CEO

Very good. We’ll let Kelly know, Adam.

Adam Thalhimer, Analyst

Can I first ask if wireless is still trending above $250 million?

Steven Nielsen, President and CEO

It was above $250 million, it was a little bit above 8% for the quarter. So, it was up about 14%, 15% year-over-year. And we think that’s going to continue to grow as you look out through the balance of the guidance period. So, we’re still optimistic about that portion of the business.

Adam Thalhimer, Analyst

Okay. And related to that, are you starting to see more small cell work related to 5G, and do you think about that as wireless or wireline?

Steven Nielsen, President and CEO

We are initiating several projects through wireline master service agreements for small cells. Although we may not always specify whether they are 4G or 5G small cells, there are work activities involved with both types. We have also noted from discussions with at least one customer that there may be a need for additional fiber to enhance capacity at those cell sites. Therefore, we view the fiber deployments to small cells—regardless of them being 4G or 5G—as wireline. Meanwhile, if we are handling projects for various customers that involve the antenna and radio components at the small cells, we classify that work as wireless.

Adam Thalhimer, Analyst

Okay. And last one for me, maybe it’s more for Drew. But, Drew, any sense for when the DSOs will start to step down?

Drew DeFerrari, Chief Financial Officer

Yes. Adam, we had some sequential growth in the quarter. Literally, we called out in the slides regarding a specific customer program there. So, it’s something we’ll work at all the time. There are complexities around the work and working through the billing of that. We’re working hard at it every day.

Steven Nielsen, President and CEO

Yes. When the Q comes out, you’ll have disclosure there, and you’ll see that the DSOs are generally in line, absent the effect of that program.

Adam Thalhimer, Analyst

Okay. But as long as that program is kind of a full stage deployment, the DSOs would be elevated?

Steven Nielsen, President and CEO

Well, look, as we said last quarter, Adam, we’re working hard. We have lots of people working on billing initiatives and IT initiatives to facilitate the billing. But the actual contract terms there, once we give it through the approval process, are industry standard. It’s just the level of effort right now as we’re dealing with the complexity to get it through the process. We’re going to get better at that. We’re working hard at it right now to accomplish that.

Operator, Operator

Thank you. Our next question will come from Brent Thielman with D.A. Davidson. Please go ahead.

Brent Thielman, Analyst

Hey. Steve, you guys continue to aggressively build headcount here. And just wanted to get your thoughts on when you think that starts to plateau?

Steven Nielsen, President and CEO

Well, there are a couple of things. Obviously, in the quarter, there’s always a seasonal uptick, Brent. So, when you have sequential revenue growth, call it $100 million, you’re going to get $80 million to $100 million in headcount seasonally. So, I don’t know that that was anything particularly remarkable. I think we’re pleased with 15.8% organic growth. And as we work through opportunities that develop throughout the year, if to support those we need to add headcount, we will do that. But we don’t think about that as something that we manage to an objective. We manage the revenue and the headcount follows.

Brent Thielman, Analyst

Okay. And then, the challenges that you faced on the large customer program, are you seeing similar challenges or structures kind of develop from some of the newer work you’re pursuing, or is this still pretty unique?

Steven Nielsen, President and CEO

As I mentioned to Chad earlier, when we examine the rest of the business, our customers mostly operate under long-term contracts. Last quarter, we secured some promising new extensions to our geographic territories with one customer. Therefore, we are not observing any changes outside of this specific program. In fact, that customer is involved with us in more ways than just this program.

Operator, Operator

Thank you. Our next question in queue comes from Noelle Dilts with Stifel. Please go ahead.

Noelle Dilts, Analyst

Hi, guys. Good morning.

Steven Nielsen, President and CEO

Good morning, Noelle.

Noelle Dilts, Analyst

During the fourth quarter call, you mentioned implementing new processes and systems to manage the complexity of a specific large program. Could you provide an update on how that is progressing and if you're seeing any benefits? Additionally, as these systems and processes take effect, do you expect significant profit improvement from that large program, and how are you viewing this from a long-term perspective?

Steven Nielsen, President and CEO

Sure. I think there are a few important points to mention, Noelle. Yes, we have many people involved in this, and there is a significant effort underway. We are making progress. However, as we mentioned earlier, considering the size of the program, we won't be tracking the impact on a quarterly basis. We expect that as we improve our management of that complexity, it will become clear in the results. We are continuing to put in a lot of hard work. I know it would be beneficial to provide a daily update on our progress, but I want to emphasize that we have a collective effort across the entire company, and everyone is working purposefully. In the past, when we've approached challenges this way, we have successfully navigated through them. Please go ahead, Noelle.

Noelle Dilts, Analyst

Then just for my understanding, is that to try and understand the complexity a little bit more deeply, is it more a function of a program management type role or is it simply the nature of the spending and what the construction involves?

Steven Nielsen, President and CEO

The type of construction is not the issue, it’s a program management. And as we said last quarter, it was evolving objective processes and priorities. That’s really what we’re working on, to manage that level of complexity. The actual construction work itself is a big program. There are construction challenges every day but those are not the types of challenges that have created the complexity.

Noelle Dilts, Analyst

Okay, understood. And then, Drew, would you mind sharing with us the rounding out the top 10 customers and the cable and telco split?

Drew DeFerrari, Chief Financial Officer

Sure. Thanks, Noelle. Charter was number six at 2.6%; Frontier was number seven at 1.7%; Southwest Gas was number eight at 1.1%; Crown Castle was number nine at 1%; and Edison International was number 10 at 0.8%; telco was at 72.3%; cable was at 19%; facility locating was 5.8%; and electrical and other was 2.9%.

Noelle Dilts, Analyst

Thank you.

Operator, Operator

Thank you. The next question in queue will come from Tahira Afzal with KeyBanc Capital Markets. Please go ahead.

Unidentified Analyst, Analyst

Hi, guys. This is Alex on for Tahira.

Steven Nielsen, President and CEO

Good morning.

Unidentified Analyst, Analyst

Good morning. Can you just talk about the slower top line growth guidance you gave in the third quarter, where we need to see the backlog kind of tick up to see the revenue growth into the high single digits range?

Steven Nielsen, President and CEO

To address the second question, as mentioned earlier, the link between short-term growth trends and backlog is not as strong as some might predict. Clearly, during the earnings season, AT&T indicated they would be slowing down or halting their fiber program during the second quarter of the calendar year. They have also mentioned in another conference that they expect fiber deployments to continue from 2020 to 2025. Therefore, we don’t see this as a loss of interest; it is merely a tactical reassessment, which has been echoed by others. We have reflected this in our guidance to ensure accuracy. It has been a challenging time for us, and we want to be cautious with our guidance for future periods.

Unidentified Analyst, Analyst

Got it. And then, my next question is about the current margin assumptions you guys have on the permitting, workflow delays and how those are playing out versus your assumptions. And are those becoming about more predictable to model in, and is there room for further improvement?

Steven Nielsen, President and CEO

Well, there is always further improvement. That’s right. We can always do better tomorrow. I think, in this particular case, if we look at our revenue performance in this quarter, clearly, there were less constraints on the business than we’ve seen previously with the outperformance we had on the revenue and the organic growth. So, we remain encouraged but working hard.

Operator, Operator

Thank you very much. Our next question in queue is Alex Rygiel with B. Riley FBR. Please go ahead.

Alex Rygiel, Analyst

Good morning, Steve and Drew.

Steven Nielsen, President and CEO

Good morning, Alex.

Alex Rygiel, Analyst

Steve, are you seeing any other customers with modulation in their spending patterns outside of AT&T?

Steven Nielsen, President and CEO

Well, in the first quarter, and I think this was evident in the cable operators broadly, it was not a strong start to the year for them that showed up in our business, although probably a little bit less perhaps in some other businesses. And I think that’s just as one other industry participant product. There’s been lots of capacity deployed in the networks in that industry. And sometimes there is a period of time where customers want to let their networks settle in. But on the other hand, if you look at the disclosures from the operators about the amount of traffic growth to residential consumers, one talked about 200 gigs a month growing 34% a year and other was over 280 gigs a month, growing 20% a year. So, as long as traffic continues to grow and there is no sign, then it won’t, I think we’re confident that spending will come back. And I think that’s been echoed by other participants in the industry.

Alex Rygiel, Analyst

And are you seeing any modulation due to equipment availability for 5G equipment?

Steven Nielsen, President and CEO

Much of our current focus is on the fiber aspect. With the introduction of new technology, unexpected developments can arise. However, we don’t believe this has significantly impacted our revenue outlook at this time.

Alex Rygiel, Analyst

And then, as it relates to rural fiber and FirstNet, can you talk about where we stand on both of those developments, and how they’re passed through your P&L?

Steven Nielsen, President and CEO

So, as we said, our wireless business with AT&T is growing. We expect it to continue to grow through the calendar year. So, an exciting year in our wireless business. With respect to rural fiber, I think we’re just at the beginning. As some may have noted, the FCC is talking about a $20 billion, 10-year fund, what I’ll call CAF-III, but as a follow-up to CAF-II. And I think that’s created opportunities for us, not only in our traditional customer base but while they’re not top 10 customers individually, in aggregate, we’re doing lots of business for rural electric cooperatives who have decided to leverage our existing aerial plant and add fiber to those networks. So, it’s an area of focus for us right now.

Alex Rygiel, Analyst

Great. Rick, congratulations and best wishes in retirement.

Rick Vilsoet, Chief Legal Officer

Thank you.

Steven Nielsen, President and CEO

He is smiling, Alex.

Operator, Operator

Thank you. Our next question in queue will come from Alan Mitrani with Sylvan Lake Asset Management. Please go ahead.

Alan Mitrani, Analyst

Hi. Thank you. I missed a bit of the early part of the call. So, I apologize if it’s been asked. But, have you seen any change to the competitive dynamics in the industry, from the bidding perspective or from new entrants or anything like that?

Steven Nielsen, President and CEO

We have not seen anything over the last quarter or two, Alan, that would change our assessment of the competition in the industry. There’s a lot of work. As you can see, we grew both, sequentially and year-over-year pretty substantially. And so, I think there is plenty of opportunity out there.

Alan Mitrani, Analyst

Okay. And then, your SG&A was pretty tight this quarter and even from the last couple of quarters, I guess, when you put some clamp on some of the expenses. Can you talk about where do you think that’s a sustainable level going forward, keeping the SG&A level roughly in the sevens? And I know it’s a goal, but is that sustainable over time?

Steven Nielsen, President and CEO

I don't think we've had other times with this level of organic growth. We plan to invest appropriately in the business on the G&A side, and if we manage it well, we should see G&A leverage improve over time compared to the past. I believe we haven't done anything that would harm the short-term profitability in relation to the intermediate or long-term profitability of the business.

Operator, Operator

Thank you. And we do have a follow-up in queue from Noelle Dilts with Stifel. Please go ahead.

Noelle Dilts, Analyst

Hi. Thank you. You answered part of my question with just cable kind of being weaker in the early part of the year. As you look out for the remainder of the year and kind of with your initial fiscal third quarter guidance, are you assuming some resumption? Looking at CapEx guidance across the cable space there, suggesting maybe stronger back half, is that embedded in your thinking or are you kind of being cautious in terms of that stepping up?

Steven Nielsen, President and CEO

Look, I think, as we said earlier, we’re being reasonably cautious. I think there’s some opportunities for spending to pick up, particularly as customers kind of sort out their priorities around different technologies. So, I think that’s there, but we’ve not been particularly aggressive in that area.

Noelle Dilts, Analyst

Okay. And then, second, just given the labor market and we hear some folks in the industry talk about challenges, procuring labor and ramping up the workforce. How are you guys thinking about labor availability, any concerns, or are you finding it’s reasonably easy to fill positions?

Steven Nielsen, President and CEO

Well, Noelle, we’ve discussed this before in a sub 4% unemployment environment, it’s always going to be tough to get resources. I think that’s part of what our businesses have dealt with in prior periods of tightness. But I look at the quarter and look at organic growth of about $112 million year-over-year. And so, clearly, we were able to add capacity to fulfill that organic growth. We’ve done a number of things in our onboarding and recruiting area to try to facilitate the process of securing more applications and getting the work as quick as we can. And I think, we will continue to spend and innovate in that area.

Operator, Operator

Thank you. We also have a follow-up in queue from Adam Thalhimer with Thompson Davis. Please go ahead.

Adam Thalhimer, Analyst

Hey, Steve. The charter fulfillment services nationwide contract, was that a new contract or an extension?

Steven Nielsen, President and CEO

That was an extension, Adam. We’ve had that arrangement with them for a long period of time. And it just is one of those contracts that renews periodically.

Adam Thalhimer, Analyst

Okay. That was it. Thanks.

Operator, Operator

At this time, there are no additional questions in the queue. Please continue.

Steven Nielsen, President and CEO

All right. Well, we thank everybody for your time and attention today. And we look forward to speaking to you on the next quarter’s call at the end of August. Thank you.

Operator, Operator

Thank you. Ladies and gentlemen, that does conclude your conference call for today. We do thank you for your participation and for using AT&T’s Executive Teleconference. You may now disconnect.