Earnings Call Transcript - DY Q3 2022

Operator, Operator

Good day and welcome to the Dycom Third Quarter Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. As a reminder, this conference is being recorded. I would now like to hand the conference over to your host today, Mr. Steve Nielsen, President and Chief Executive Officer. Please go ahead, sir.

Steve Nielsen, CEO

Thank you, operator. Good morning, everyone. I'd like to thank you for attending this conference call to review our fiscal third quarter 2022 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 Drew DeFerrari, our Chief Financial Officer, and Ryan Urness, our General Counsel. Now, I will turn the call over to Ryan Urness.

Ryan Urness, General Counsel

Thank you, Steve. All forward-looking statements made during this 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 or performance that do not relate solely to historical periods. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current projections, including those risks described in our Annual Report on Form 10-K filed March 5, 2021 together with our other filings with the U.S. Securities and Exchange Commission. We assume no obligation to update any forward-looking statements. Steve?

Steve Nielsen, CEO

Thanks, Ryan. Now moving to Slide 4 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 the quarterly report section of our website for a reconciliation of these non-GAAP measures to their corresponding GAAP measures. To begin, I want to express my sincere thanks to our employees, who have served our customers with real fortitude in difficult times. Now for the quarter, revenue was $854 million, an organic increase of 6.6%. As we deployed 1-gigabit wireline networks, wireless/wireline converged networks, and wireless networks, this quarter reflected an increase in demand from two of our top five customers. Gross margins were 17.34% of revenue, reflecting the continued impacts of the complexity of a large customer program. Revenue declined year-over-year with other large customers and fuel costs. General and administrative expenses were 7.8% of revenue, and all of these factors produced adjusted EBITDA of $83.1 million or 9.7% of revenue and adjusted earnings per share of $0.95, compared to earnings per share of $1.6 in the year-ago quarter. Included in adjusted earnings per share are incremental tax benefits of $0.10 per share for credits related to tax filings for prior periods. Liquidity was solid at $314.7 million and operating cash flow was strong at $104.3 million, reflecting a sequential DSO decline of 12 days. During the quarter, we repaid our remaining 2021 convertible notes in full and subsequent to the end of the third quarter, we received 3-year awards for construction services in a number of states valued in excess of $500 million in total. Now, going to Slide 5. Today, major industry participants are constructing or upgrading significant wireline networks across broad sections of the country. These wireline networks are generally designed to provision 1-gigabit network speeds to individual consumers and businesses, either directly or wirelessly using 5G technologies. Industry participants have stated their belief that a single high-capacity fiber network can most cost-effectively deliver services to both consumers and businesses, enabling multiple revenue streams from a single investment. This view is increasing the appetite for fiber deployments and we believe that the industry's effort to deploy high-capacity fiber networks continues to meaningfully broaden our industry set of opportunities. Increasing access to high-capacity telecommunications continues to be crucial to society, especially in rural America. The recently enacted Infrastructure Investment and Jobs Act includes over $40 billion for the construction of rural communications networks in unserved and underserved areas across the country. This represents an unprecedented level of support. In addition, an increasing number of states are commencing initiatives that will provide funding for telecommunications networks even prior to the initiation of funding under the Infrastructure Act. We are providing program management, planning, engineering and design, aerial underground, and wireless construction and fulfillment services for 1-gigabit deployments. These services are being provided across the country in numerous geographic areas to multiple customers. These deployments include networks consisting entirely of wired network elements, as well as converged wireless/wireline multi-use networks. Fiber network deployment opportunities are increasing in rural America as new industry participants respond to emerging societal initiatives. We continue to provide integrated planning, engineering and design, procurement and construction, and maintenance services to several industry participants. Macroeconomic effects and potential supply constraints may influence the near-term execution of some customer plans. Broad increases in demand for fiber optic cable and related equipment may impact delivery lead times in the short to intermediate term. In addition, the market for labor continues to tighten in regions around the country. It remains to be seen how extensive these conditions will be and how long they may persist. Furthermore, the automotive supply chain is currently challenged, particularly for the large truck chassis required for specialty equipment. As we contend with these factors, we remain confident that our scale and financial strength position us well to deliver valuable service to our customers. Moving to Slide 6. During the quarter, organic revenue increased 6.6%. Our Top 5 customers combined produced 65.4% of revenue, decreasing 3.5% organically. Demand increased for two of our top five customers while all other customers increased 32.5% organically. AT&T was our largest customer at 23.4% of total revenue, or $199.5 million. AT&T grew 68% organically, which marked our third consecutive quarter of organic growth with AT&T. Revenue from Comcast was $121 million or 14.2% of revenue, making Comcast Dycom's second-largest customer. Lumen was third, accounting for 12.1% of revenue or $103 million. Verizon was fourth at $93.4 million or 10.9% of revenue, and finally, revenue from Frontier was $41.3 million or 4.8% of revenue. Frontier grew 118.6% organically. This is the eleventh consecutive quarter where all of our other customers in aggregate, excluding the top five, have grown organically. Notably, fiber construction revenue from electric utilities was $53.7 million in the quarter, increasing organically 75.3% year-over-year. We have extended our geographic reach and expanded our program management network planning services. In fact, over the last several years we believe we have significantly increased the long-term value of our maintenance and operations business, a trend we believe will parallel our deployment of 1-gigabit wireline direct and wireless/wireline converged networks, as those deployments dramatically increase the amount of outside plant network that must be extended and maintained. Now, going to Slide 7. Backlog at the end of the third quarter was $5.896 billion compared to $5.895 billion at the end of the July '21 quarter, essentially flat. Of this backlog, approximately $2.938 billion is expected to be completed in the next 12 months. We continue to anticipate substantial future opportunities across a broad array of our customers. During the quarter, we received from Frontier fiber construction agreements in California, Texas, Indiana, New York, Connecticut, and Florida, for Consolidated Communications, a construction and maintenance agreement in New Hampshire. From Windstream construction agreements for Ohio, Pennsylvania, New York, Kentucky, and Alabama. From Lumen construction and maintenance agreements in Oregon, Minnesota, and Iowa; various rural fiber deployments in Arizona, Colorado, Missouri, Indiana, Arkansas, Mississippi, Tennessee, and Georgia. Headcount increased during the quarter to 14,905. Now, I will turn the call over to Drew for his financial review and outlook.

Drew DeFerrari, CFO

Thanks, Steve and good morning, everyone. Going to Slide 8. Contract revenues were $854 million, and organic revenue increased 6.6% for the quarter. Storm work performed in Q3 of last year was $8.9 million, compared to none in Q3 '22. Adjusted EBITDA was $83.1 million or 9.7% of revenue, with gross margins of 17.3%, decreased 140 basis points from the year-ago period. As expected, this decrease reflected higher fuel costs of approximately 50 basis points, as well as the impact from revenue declines from several large customers. G&A expense was at 7.8% of revenue and came in approximately 40 basis points better than our expectations from improved operating leverage. Non-GAAP adjusted net income was $0.95 per share, compared to $1.6 per share in the year-ago period. Q3 '22 included approximately $3 million or $0.10 per share of incremental tax benefits for credits related to tax filings for prior periods. The total variance in net income resulted from the after-tax decline in adjusted EBITDA, higher interest expense, and lower gains on asset sales, offset by lower stock-based compensation, depreciation and amortization, and income taxes. Now, going to Slide 9. Our financial position and balance sheet remain strong. In September, we repaid the final balance of $58.3 million of the convertible notes at maturity. We ended the quarter with $500 million of senior notes, $350 million of term loan, and no revolver borrowings. Cash and equivalents were $263.7 million and liquidity was solid at $314.7 million. Our capital allocation prioritizes organic growth followed by opportunistic share repurchases and M&A within the context of our historical range of net leverage. Going to Slide 10. Operating cash flows were strong at $104.3 million in the quarter; capital expenditures were $44.1 million net of disposal proceeds, and gross CapEx was $45.1 million. For the full year of fiscal 2022, capital expenditures, net of disposals are now expected to range from $135 million to $150 million, an increase of $10 million to $25 million compared to the high end of approximately $125 million in the prior outlook provided in Q2 '22. The combined DSOs of accounts receivable and net contract assets were at 113 days, an improvement of 12 days sequentially from Q2 '22, as we made substantial progress on a large customer program. Now, going to Slide 11. Each year our January quarterly results are impacted by seasonality, including inclement weather, fewer available workdays due to the holidays, reduced daylight work hours, and the restart of calendar payroll taxes. These and other factors may have a pronounced impact on our actual results for the January quarter, compared to our expectations. Q4 of last fiscal year included 14 weeks of operations due to the company's 52, 53-week fiscal year, and also included $5.7 million of revenues from storm restoration services. Non-GAAP contract revenues adjusted for these amounts in Q4 '21 was $691.8 million. For Q4 of fiscal '22, there will be 13 weeks of operations, and the Company expects contract revenues to increase modestly compared to the non-GAAP organic contract revenues of $691.8 million in Q4 '21. The Company expects non-GAAP adjusted EBITDA to range from in-line to modestly higher as a percentage of contract revenues, compared to Q4 '21. Total interest expense is expected at approximately $8.8 million during Q4 and we expect a non-GAAP effective income tax rate of approximately 27%. Now, I will turn the call back to Steve.

Steve Nielsen, CEO

Thanks, Drew. Moving to Slide 12. Within a recovering economy, we experienced solid activity and capitalized on our significant strengths. First and foremost, we maintained significant customer presence throughout our markets. We are encouraged by the breadth in our business. Our extensive market presence has allowed us to be at the forefront of the evolving industry opportunities. Telephone companies are deploying fiber-to-the-home to enable 1-gigabit high-speed connections, and increasingly, rural electric utilities are doing the same, dramatically increased speeds to consumers are being provisioned and consumer data usage is growing, particularly upstream. Wireless construction activity in support of newly available spectrum bands is beginning and expected to increase next year. Federal and state support for rural deployments of communications networks is dramatically increasing in scale and duration. 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. Deployments to expand capacity, as well as new build opportunities, are underway. Customers are consolidating supply chains, creating opportunities for market share growth and increasing the long-term value of our maintenance and operations business. As our nation and industry continue to contend with the COVID-19 pandemic, we remain encouraged that a growing number of our customers are committed to multi-year capital spending initiatives. We are confident in our strategies, the prospects for our company, the capabilities of our dedicated employees, and the experience of our management team. Now, operator, we will open the call for questions.

Operator, Operator

Our first question comes from Sean Eastman with KeyBanc Capital Markets. Your line is open.

Sean Eastman, Analyst

Hi team. Thanks for taking my questions. So I just wanted to start on the margins; if we build in the fourth quarter guidance, it looks like you guys are trending somewhere around 8% for fiscal '22. And I just wanted to check back in on the bridge from there to that historical average that we've been anchored to. Is that entire roughly 400 basis points tied to the challenged customer program, or is there another component of that bridge that we need to be contemplating in our forecasts over the next year?

Steve Nielsen, CEO

Yes. I think, Sean, we've always thought about the long-term EBITDA margin in the mid-11s, and I think in this quarter and in this year, if you control for that large customer program you're in line with that long-run average.

Sean Eastman, Analyst

Okay. And how did the receivables and contract assets balance trend on that challenge program in the third quarter?

Steve Nielsen, CEO

Yes. As you'll see when we file the Q with that customer, the accounts receivable and contract assets came in about $100 million. So we actually had about $100 million of free cash flow out of that one customer and program.

Sean Eastman, Analyst

Okay, very helpful. And last one, if you just look back over the last 12 months, how much would you say DY's three to five year total addressable market has grown around these fiber commitments? And of course the rural broadband's funding that we've seen come through. And I'm just curious, are you seeing that incremental activity reflected in bid activity currently? Or have we not yet seen the big inflection in bid opportunities that should be following through from what we're seeing in the infrastructure deployment commitments that are coming through?

Steve Nielsen, CEO

Sure, Sean, there's a lot to unpack in your question, so let’s break it down. Over the past year in the telecommunications and cable sector, we've previously mentioned that since the advent of fiber-to-the-home, about 45 million homes have been reached by fiber. If we consider all the announced programs expected to be completed in the next five to eight years, we arrive at a similar figure. What took 17 years to achieve, customers are now eager to see accomplished in just five to eight years. Moreover, in the last three months, we've observed several smaller customers accelerating their long-term plans to reach more homes, surpassing their expectations from six months ago. For instance, one customer with a fixed wireless initiative opted to switch to a fiber deployment plan. This is before accounting for the effects of federal and state funding on the addressable market. There are three key components here: not widely recognized, several states have initiated their own broadband support programs and allocated grants. We’ve seen the impact on our business from these programs, with California’s roughly $4 billion to $5 billion initiative being the largest. In addition to state-level programs, there's the RDOF program, which is currently in Phase I, with another $16 billion allocated for Phase II and beyond. Furthermore, there’s significant support emerging from the Infrastructure Investment Act, estimated at over $40 billion. At a high level, it’s notable that historically, about 20% of rural America was deemed unsuitable for deploying high-capacity networks without support. Looking ahead ten years, government funding is expected to address, if not fully cover, the vast majority of this market. Therefore, this untapped market is now set to receive funding. Additionally, within the remaining 80%, telecommunications companies and cable operators have recognized the necessity for high-capacity networks of 1-gig-plus, which will require services from providers like us.

Sean Eastman, Analyst

Very helpful, Steve. I'll turn it over there.

Operator, Operator

Our next question comes from Alex Rygiel with B. Riley Financials. Your line is open.

Alex Rygiel, Analyst

Good morning, Steve. Very nice quarter.

Steve Nielsen, CEO

Thanks, Alex.

Alex Rygiel, Analyst

The accounts receivable are still running a bit higher than historically. Do you think you can continue to monetize accounts receivable for additional cash? Or is the company at a sort of a new norm?

Steve Nielsen, CEO

So Alex, if you consider the working capital that is tied up in the large customer program that remains, we've made significant progress on that in the third quarter. Regarding the days sales outstanding in the rest of the business, it is around the mid-90s. Additionally, during this quarter, we had about $70 million of growth sequentially. I believe this is in line with our expectations; we made notable progress and we anticipate that trend to continue in the fourth quarter. As we move into the next fiscal year, we don’t expect any deviations in the rest of the business from our normal range.

Alex Rygiel, Analyst

That's great. And then, 12-month backlogs up real strong. Can you talk a little bit about if you're seeing a mix shift away from the top five customers? And how that could impact margins moving forward?

Steve Nielsen, CEO

Yes. So, I think we certainly had great growth with Frontier and AT&T, and when you have your largest customer growing, call it 68% in the quarter, I think that augurs well, so looking ahead. If you deconstruct that AT&T number, wireless was still down just over 10%, but the wireline portion of the business was up over 110%. I think we see good opportunities across the top five. But that being said, the business is as broad now as it's ever been: about 35% of revenues from other than top five customers. I think we feel good about those growth opportunities; the electric utilities grew about 75% and I think there are others that we also see real opportunity with.

Alex Rygiel, Analyst

Thank you.

Operator, Operator

Our next question comes from Adam Thalhimer with Thompson Davis. Your line is open.

Adam Thalhimer, Analyst

Hey, good morning, guys. Nice quarter.

Steve Nielsen, CEO

Hey, good morning, Adam.

Adam Thalhimer, Analyst

Steve, what's the chance the large customer program is flushed before fiscal '23?

Steve Nielsen, CEO

We made good progress in the third quarter and expect that progress to continue in the fourth quarter. However, we believe there will still be some margin impact in the fourth quarter. We do expect that to significantly diminish as we move into next year.

Adam Thalhimer, Analyst

Okay. Earlier this year, we were a bit concerned about Windstream insourcing, but you had some new contracts from Windstream this quarter? So, I just looking for an update on the outlook for that customer?

Steve Nielsen, CEO

Yes, we continue to have opportunities there. I think we talked last quarter that we had signed an agreement last quarter. We signed some additional agreements this quarter that we'd like to be part of their forward solutions. They've got a lot of work to do, and so we're encouraged with the activity we had within this quarter.

Adam Thalhimer, Analyst

And then lastly, can you give us a little more color on the $500 million of incremental awards in October?

Steve Nielsen, CEO

Yes. It was across a number of states with a single client. So a nice-sized expansion with that customer primarily geographically.

Adam Thalhimer, Analyst

Okay. An existing top-five customer or somebody new?

Steve Nielsen, CEO

Yes.

Adam Thalhimer, Analyst

Okay, great. I'll turn it over. Thanks.

Operator, Operator

Our next question comes from Brent Thielman with D.A. Davidson. Your line is open.

Brent Thielman, Analyst

Hi, thanks. Hey, Steve, haven't heard you talk as much about fiber supply constraints on this call. Maybe you could just update us where you're seeing the impacts in the business; you had nice growth here with a couple of key customers. It doesn't appear it's holding them back, but where are you seeing that impact you the most?

Steve Nielsen, CEO

Yes. So look, customers are working hard to get in front of their supply chain issues. And so there are extended lead times on fiber. But they're carrying more inventory. They're ordering earlier, and we're working hard with our customers; as quickly as the cable comes in, we put it in service. I think the whole industry is working hard to contend with those issues. But if you haven't got your order in today and haven't planned for the half, it may be a while before you see it.

Brent Thielman, Analyst

Okay. Maybe to flip that, I guess, I'm wondering if you're seeing some signs in the business that these broader supply chain constraints plus inflation are getting you new awards, new wins, because of your scale, because some of the smaller regionals can compete with what you can provide there? Just curious, are you seeing any evidence in the business of that?

Steve Nielsen, CEO

Yes, certainly, Brent. I mean, managing in a period of inflation means you better stay on top of moment-to-moment what's happening in the supply chain and the capacity to grow labor. I think we have probably the advantage we have there is that we have a national perspective on what's going on. I think last quarter I talked about where we were literally moving resources from one quarter of the country to another to help the customer get a program started. I don't know that there's a particular advantage of scale in a period of inflation other than we've got an experienced organization that sees lots of inputs. We see emerging trends across the industry as quickly as anybody.

Brent Thielman, Analyst

Okay. And are you starting to see Lumen ramp back up? It looks like some new award activity in a couple of quarters here, sequential sales growth?

Steve Nielsen, CEO

Look, we were encouraged that we had some sequential growth with Lumen; that's a good thing. We're also encouraged about the recent announcement from Apollo, who is acquiring a portion of that footprint. We work extensively throughout the footprint, as Lumen's selling to Apollo, and we think that's future opportunities as you could see by their recent announcement.

Brent Thielman, Analyst

Okay. And last one, Steve. Just any color around the increases in CapEx and also should we start to see an increase in D&A at some point here?

Steve Nielsen, CEO

Well, certainly CapEx will drive D&A, Brent, so that's right from a modeling perspective; it will certainly follow. Look, we started off the year basically where we're ending the year in terms of our CapEx expectations. We were pleased that during the quarter that our suppliers were able to deliver, probably a little bit earlier than they had forecast to us four or five months ago. I think that's a testament to the scale that we have and the relationships and the history with our suppliers. It's still uncertain; if we order equipment today, we know we're going to get it, when exactly we're going to get is still a little bit of a guessing game. So, we're just happy we got what we did and we're perfect.

Brent Thielman, Analyst

Okay, thank you.

Operator, Operator

Our next question comes from Eric Luebchow with Wells Fargo. Your line is open.

Eric Luebchow, Analyst

Great. Thanks for taking the question. Steve, maybe you could talk about your cable business. Comcast was down for the second straight quarter. And I guess how much of it do you think is timing-related? How much of it might be related to some of the pivots away from fiber deep toward some of the mid and high splits that they've talked about? And do you have any thoughts on cable spending in your footprint, maybe picking back up, particularly as more of these fiber over builders come into new markets and start competing for share with the big cable operators?

Steve Nielsen, CEO

Look, we're still pleased. I think the Comcast revenue was in line sequentially where we were last quarter, as you highlighted. They have certainly been public about their evolving plans to create more upstream capacity on their path to 2-gig to 5-gig, and they, like others in the industry, are all working through similar technology changes at the same time.

Eric Luebchow, Analyst

Yes. Okay, fair enough. On the wireless side, I think you said it was down maybe just with AT&T 10%. I'm just wondering if you could just aggregate what percentage of revenue it was? And then, there have been some recent announcements about C-band deployments being delayed at least a month and some questions whether that be elongated? Have you seen any impact from the FAA dispute on the C-band side within your business or nothing to note?

Steve Nielsen, CEO

Yes, I think, Eric. We continue to have good levels of activity in wireless. It's certainly down as they look ahead to the C-band deployments. We have begun C-band deployments for a number of customers. We see that as a good opportunity. With respect to the discussion between the FCC and the FAA, our customers seem to be confident that that's going to resolve itself in the near-term, and we really don't have anything to add.

Eric Luebchow, Analyst

Fair enough. Just one last one from me, Steve, on the cost inflation side. I think you had talked before about looking at the forward cost curves and trying to appropriately account for future cost inflation in your business. Just wondering if you have any color on recent contract awards, how those discussions have gone, and if customers are generally understanding if you have to kind of reset rates to account for some of the higher labor cost inflation and component cost inflation that's come through the industry?

Steve Nielsen, CEO

Sure. Because it is coming through the industry, I think everybody is looking at those impacts on everybody's business. I think we owe it to our customers to make sure that we have the right economics to sustainably attract new employees that are new to the industry as well as incur subcontractors to grow with us. As we're booking new work, that's our objective. It's not a perfect science, but we feel pretty good about where we've been coming out.

Operator, Operator

Our next question comes from Jon Lopez with Vertical. Your line is open.

Jon Lopez, Analyst

Hey, thanks very much. I have three hopefully quick ones. The first one, I'm wondering just in the second half of your fiscal year, if there is anything unusual but you want to call out. And I guess why I ask it is because fiscal Q3 came in pretty strong relative to the seasonal pattern, like best in several years, but fiscal Q4 guide implies some deceleration organically. Is there any logic to that or anything you'd highlight?

Steve Nielsen, CEO

Yes, Jon, I think the growth, as you can see with the customer data that we provided, was pretty broad-based. Not everybody grew but we had substantial growth in two of the top five and then everybody else. It's always difficult in this January quarter to forecast trends for organic growth, Jon. We have five holidays, a week between Christmas and New Year's, and it's highly sensitive to weather, particularly at the end of January. Work always gets done, but it may not get done in this quarter. We don't see any diminished appetite across any of the customers to get less work done; it's just the uncertainty around our ability to get it done, given the seasonality in the quarter.

Jon Lopez, Analyst

Got you. That helps. The second one, I just wanted to come back to something, I think, I heard you say. But just to make sure I'm clear, I think historically, you've had a pretty good presence in the footprint that one customer is in the process of divesting. Has that, or I guess those assets as they change hands next year, is that an opportunity you feel pretty comfortable that you'll be attached to or you have the opportunity to be attached to?

Steve Nielsen, CEO

Yes, Jon. We're not going to go into discussions with specific customers other than to say that we've been through lots of mergers and acquisitions. As long as we continue to provide good service to the new owners, we think we'll get fair consideration and win our fair share of the work. No guarantees, but we know the new management team, and we will work hard to do a good job until it transfers and then hope that continues with the new owners.

Jon Lopez, Analyst

Got you; it's helpful. My last one is the obligatory backlog question. So I'm going to come out to you this way. If I look pre-pandemic to an asset like ended 2019 to now, your short-term backlog, it was highlighted earlier is higher, like $200 million higher. It's actually pretty close to the highest nominal level it's ever been. It's not the case with your long-term backlog that's down like $1.5 billion versus the end of 2019. That seems counterintuitive when we consider what your customers are planning and committing to. Walk us through, like what are the puts and takes there? It's just re-center on why that makes sense?

Steve Nielsen, CEO

Well, Jon, as a good example, we've highlighted on this call the two-year awards with Frontier. I don't believe they only have two years' worth of work. They've outlined their plans, but for both them and us, two years was the appropriate length for the initial agreement. And that's what we have documented. For this particular client, even considering their four-year objectives, that is the extent of the opportunity. That's all we could record in backlog at this time. Does the current inflationary environment affect the mechanics of backlog, specifically in terms of willingness to engage in longer-term agreements from you or your customers? Is that a consideration at all? Why it doesn't change the mechanics of the calculation, Jon, but it does. That's a good question. Again, we owe it to our customers to make sure that we've got the economics to perform during the term of an agreement. We've got to make sure that we can contemplate future cost inflation. If a customer wants to do a two-year contract versus what another customer might do three years, we're fine with that. We'll do our best to perform and meet their expectations, and when the contract comes up for renewal, we hope that we'll be successful. Pushing duration in an inflationary environment unless we've got the right terms to handle future cost increases.

Jon Lopez, Analyst

Yes, no, that makes sense. I appreciate the thoughts. Thanks, Steve.

Operator, Operator

Our next question comes from Noelle Dilts with Stifel. Your line is open.

Noelle Dilts, Analyst

Hi, thank you. Steve, you mentioned in your comments that your customers and just generally with the federal money coming into the market that the amount of work planned in the next five, three years is essentially more than double, I think you said '17? I'm just curious, given the supply chain constraints that we're seeing right now around chassis and obviously, the well-known labor challenges, like how realistic is that the industry can scale to meet that demand? Curious how you're thinking about that from an industry standpoint and then Dycom's ability to ramp as well? Thanks.

Steve Nielsen, CEO

Well, I think anytime that you have a pronounced priority placed on a certain economic activity by the government, as long as the economics are right, you could create supply. This is a country where people will see the attractive opportunity, as long as the economics work for them to grow capacity. We've had the ability to grow headcount year-over-year, call it 5%. We think that we can continue to do that. The challenges are how we search that there are lots of things in the industry that have to work together to grow the capacity; maybe near-term, sometimes people overestimate how much you can grow, but I think long-term, programs get built, and as long as the economics are right.

Noelle Dilts, Analyst

Okay. And then along those same lines, in the past you've talked about, during these types of periods where there is a lot of work to pick from, that you tend to be a little bit more focused on returns and just revenue. So could you speak to how you're thinking about sort of balancing revenue growth versus margin expansion over the next few years? Thanks.

Steve Nielsen, CEO

Yes. I think, Noelle, we've always been much more focused on margins than topline. We know that growing the business is important to create value, but we got to make sure that we're earning proper returns. But again it goes back to when you're trying to create or where you need to create capacity. You want to create an environment that's sustainably attractive for new employees and for subcontractors that either enter the market or grow. What we're based on returns, what we're trying to say is where can we do the customer the best job to meet their needs and do it in a sustainable way.

Operator, Operator

Our next question comes from Christian Schwab with Craig-Hallum. Your line is open.

Christian Schwab, Analyst

Hey guys, solid quarter. Steve, I'm just wondering what you guys as current thoughts are on potential M&A, given consolidating supply chain and in the fact that labor is extremely tight, large equipment is extremely tight. Have you guys had new thoughts about to your point that people will file substantial opportunities but it's tough to file substantial opportunities if we don't have strong relationships with the leading customers spending all the money, who are consolidating the supply chain. It seems like it's a market that you know, given especially the labor tightness might be time to make more acquisitions, or am I thinking about that wrong?

Steve Nielsen, CEO

So, Christian, we always think about acquisitions first and foremost about acquiring good relationships and good management teams. We can buy equipment as well as anybody; I think this quarter we spent top to like $44 million on CapEx. So it's primarily looking for those attributes. We've always been opportunistic about that. I think we're encouraged in the current quarter that we've been able to grow organically, as well as we have been. If you think about it, revenue with AT&T is up about $80 million year-over-year. If you annualize that, there are not a lot of M&A opportunities that would be attractive to us at that level. Those all come at a multiple of earnings, and we'd much rather just invest in our people and equipment to build on the relationships that we have. I don't mean that we won't contemplate some, because we've done lots of M&A here over the years, but we always think about capital as an opportunity to invest in our customers or invest in ourselves, and we'll just see where that leads us.

Operator, Operator

Our next question comes from Alan Mitrani with Sylvan Lake Asset Management. Your line is open.

Alan Mitrani, Analyst

Hi, thank you. I just wanted to be clear on one thing. You talked about a long-term average, call it mid-11s in terms of EBITDA, which is that's an accurate spin your long-term average; that's not your peak, right? I mean, you've had much higher peaks since then. And since we're coming out of a meaningful downturn the last few years and starting to head into what seems like a very big expansionary period in the next few years, I want to know that shareholders can be comforted that you have plenty of ability to go above what your long-term, call it 20-year average has been on EBITDA?

Steve Nielsen, CEO

Alan, we've certainly had EBITDA in periods of sustained and broad growth in the mid-teens. We're not sitting here saying mission accomplished; if we get back to average, we'd like to be better than average. So we're going to keep working on it. We have gone through a difficult period of time. We're encouraged that the cash has come in; cash creates opportunity. We do think all the ingredients are in place for broad growth, given the number of both public and privately funded opportunities that we see.

Alan Mitrani, Analyst

Okay. And then, can you talk a little bit more specifically about where how inflation is impacting you? You're obviously your main cost is labor. Just can you tell us what you're seeing in terms of what competitors are doing hiring crews, new people coming into the industry? And then, have you made any changes in your ordering patterns as it relates to buying CapEx sooner, or affordable F-150s, other things you're doing sooner or how you have changed in response to the inflationary environment?

Steve Nielsen, CEO

Certainly, in most regions, not all regions of the country, it's a tight labor market, particularly on the entry-level and the semi-skilled or entry-level workers. So we're addressing; we're offering more money. We're doing what we have to do to be attractive; we're ramping up our recruiting efforts. We continue to get lots of applications in every week, so we're still an attractive place to work. We're doing what everybody else is doing in my experience, that's the way these things have worked out in the past. And then on CapEx, Alan, you hit it right on the head. We're doing what everybody else is doing. We're carrying more inventory, we're ordering earlier, and we're providing visibility out. We've even talked about with some of our equipment suppliers, what if we gave you two years' worth of visibility, because we know what we own, we know what we need to replace, not only next year but the year after. I think we've generally been a good partner to our CapEx suppliers, and so I think they appreciate that and they're working with us.

Alan Mitrani, Analyst

Okay. And then lastly, can you just update us on the share buyback, how much do you have left and what you do this quarter?

Drew DeFerrari, CFO

Hey, Alan. So there is a $100 million that remains through August of '22. There were no repurchases in Q3.

Alan Mitrani, Analyst

Okay, thank you.

Operator, Operator

There are no further questions. I'd like to turn the call back over to Steven Nielsen for closing remarks.

Steve Nielsen, CEO

Well, thanks. Before we have closing remarks, Drew, just a couple of statistics to add.

Drew DeFerrari, CFO

Sure. Thanks, Steve. So for the customer split, telco was at 68.4%, cable was at 20.4%, facility locating was at 7.9%, electrical and other was at 3.3%. Steve?

Steve Nielsen, CEO

All right. Thanks, Drew. Thanks, everybody for joining the call. Again, thanks to all of our employees for the hard work this year. It's been a tough year for everybody, and we really appreciate what you've done and wish everybody a Happy Thanksgiving and look forward to the New Year. Thank you.

Operator, Operator

This concludes the conference. You may now disconnect. Everyone, have a great day.