Earnings Call Transcript - DY Q2 2022

Operator, Operator

Good day and thank you for standing by. Welcome to the Dycom Industries, Inc. Second 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. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host today, Steve Nielsen, President and Chief Executive Officer. Please go ahead.

Steve Nielsen, CEO

Thank you, operator. Good morning, everyone. I'd like to thank you for attending this conference call to review our second quarter fiscal 2022 results. Going to Slide 2; 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 which 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 second 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 over the last 18 months. Now for the quarter. Revenue was $787.6 million, an organic decrease of 4.4%. As we deployed one gigabit wireline networks, wireless/wireline converged networks, and wireless networks, this quarter reflected an increase in demand from two of our Top 5 customers. Gross margins were 17.29% of revenue, reflecting the continued impacts of the complexity of a large customer program and revenue declines year-over-year with other large customers. General and administrative expenses were 8.2% and all of these factors produced adjusted EBITDA of $73.8 million or 9.4% of revenue and adjusted earnings per share of $0.60 compared to earnings per share of $1.18 in the year-ago quarter. Liquidity was solid at $299.1 million and operating cash flow was $17.3 million. During the quarter, we repurchased 631,638 shares for $50 million. And subsequent to the end of the second quarter, we received a two-year award for fiber construction in a number of states valued at approximately $400 million to $500 million. 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 one 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 effort to deploy high-capacity fiber networks continues to meaningfully broaden our industry's set of opportunities. Over the last year, six of our Top 10 customers have announced substantial new plans for deployments of fiber-to-the-home, totaling over 40 million passings. In fact, one key customer recently announced plans for a strategic divestiture, whose stated purpose is to increase fiber investment in both its divested and retained service territories. Increasing access to high-capacity telecommunications continues to be crucial to society, especially in rural America. The wide and active participation in the FCC RDOF auction augers well for dramatically increased rural network investment. In addition, an increasing number of states are commencing initiatives that will provide funding for telecommunications networks separate from the FCC RDOF program. We are providing program management, planning, engineering and design, aerial, underground and wireless construction and fulfillment services for one gigabit deployments. These services are being provided across the country in numerous geographic areas to multiple customers, including customers who have initiated broad fiber deployments as well as customers who have resumed broad deployments. These deployments include networks consisting entirely of wired network elements as well as converged wireless/wireline multiuse networks. Fiber network deployment opportunities are increasing in rural America as new industry participants respond to emerging societal incentives. We continue to provide integrated planning, engineering and design, procurement, 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 decreased 4.4%. Our Top 5 customers combined produced 65.7% of revenue, decreasing 18% organically. Demand increased for two of our Top 5 customers. All other customers increased 39.9% organically. AT&T was our largest customer at 22.5% of total revenue or $177.5 million. AT&T grew 31.9% organically. This was our second consecutive quarter of organic growth with AT&T. Revenue from Comcast was $121.7 million or 15.5% of revenue. Comcast was Dycom's second-largest customer. Lumen was our third largest customer at 12.1% of revenue or $95.4 million. Verizon was our fourth largest customer at $90.8 million or 11.5% of revenue. And finally, revenue from Frontier was $31.9 million or 4% of revenue. Frontier grew 161.4% organically and was a Top 5 customer for the first time. This is the tenth consecutive quarter where all of our other customers in aggregate, excluding the Top 5 customers, have grown organically. In fact, the 39.9% organic growth rate with these customers is the highest growth rate in at least nine years. Of note, fiber construction revenue from electric utilities was $51.6 million in the quarter or 6.6% of total revenue. This activity increased organically 92.1% year-over-year. We have extended our geographic reach and expanded our program management and network planning services. In fact, over the last several years, we believe we have meaningfully increased the long-term value of our maintenance and operations business, a trend which we believe will parallel our deployment of one 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 second quarter was $5.895 billion versus $6.528 billion at the end of the April 2021 quarter, decreasing approximately $633 million. Of this backlog, approximately $2.655 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. For Windstream, a construction and maintenance agreement in Kentucky, from AT&T, construction and maintenance agreements in Wisconsin and Ohio; for Comcast of fulfillment agreements for Washington, Illinois, Michigan, Massachusetts, New Jersey, and Pennsylvania; from Lumen, an engineering agreement for Washington, Oregon, Idaho, Montana, Wyoming, Utah, Arizona, Colorado, New Jersey, Virginia and North Carolina; for DISH Network, a wireless construction agreement in North Carolina and South Carolina; from various electric utilities, fiber construction agreements in Missouri, Tennessee, Mississippi and Georgia; and various rural fiber deployments in Wisconsin, Indiana, Tennessee, South Carolina, and Georgia. Headcount increased during the quarter to 14,674. 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 revenue was $787.6 million, a decrease of 4.4% compared to Q2 of last year. Adjusted EBITDA was $73.8 million or 9.4% of revenue, gross margins of 17.3% in Q2 decreased 285 basis points from the year-ago period. Gross margins were approximately 85 basis points lower than our expectations as revenue was lower than expected for several large customers and this impacted our operating leverage. General and administrative expense was at 8.2% of revenue in line with Q2 '21. Non-GAAP adjusted net income was $0.60 per share in Q2 '22 compared to net income of $1.18 per share in Q2 '21. The variance 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. Now going to Slide 9; our financial position and balance sheet remains strong. We ended the quarter with $500 million of senior unsecured notes, $350 million of term loan, no revolver borrowings, and $58.3 million principal amount of convertible notes. Cash and equivalents were $261.9 million at the end of Q2. $58.3 million is expected to be used to repay our convertible notes due September 2021. Liquidity was solid at $299.1 million at Q2. 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 $17.3 million in the quarter. Capital expenditures were $35.5 million during Q2, net of disposal proceeds and gross CapEx was $36.7 million. During Q2, we repurchased 631,638 shares of our common stock at an average price of $79.16 per share for $50 million. As of the end of Q2, we have a remaining authorization of $100 million for share repurchases through August 2022. The combined DSOs of accounts receivable and net contract assets were at 125 days, an improvement of three days sequentially from Q1 '22. Now going to Slide 11; for Q3 2022, the company expects contract revenues in line as compared to Q3 '21 and non-GAAP adjusted EBITDA as a percentage of contract revenues to decrease compared to Q3 '21. We expect year-over-year gross margin decline of approximately 125 basis points and G&A increase of approximately 50 basis points. We expect approximately $8.8 million of non-GAAP adjusted interest expense and $0.3 million for the amortization of the debt discount on convertible notes for total interest expense of approximately $9.1 million during Q3. We expect a non-GAAP effective income tax rate of approximately 27% and diluted shares of $30.6 million.

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 with the emerging breadth in our business. Our extensive market presence has allowed us to be at the forefront of evolving industry opportunities. Telephone companies are deploying fiber-to-the-home to enable one gigabit high-speed connections. Increasingly, rural electric utilities are doing the same. 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 expand capacity as well as new build opportunities are underway. 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. 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 multiyear 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

And it looks like our first question is going to come from the line of Adam Thalhimer with Thompson, Davis. Your line is open. Please go ahead.

Adam Thalhimer, Analyst

Hey, good morning, guys. Steve, how much did the large customer program negatively impact margins in Q2? And what's your thought on when that begins to ease?

Steve Nielsen, CEO

Yes. So if you look at controlling for that program, the impact on margins, the EBITDA margin would have been in line as it has been in other periods with the long-term average. And I would say just an additional color that some of the new programs were net positive to that and some of the customers, who seem to be a little bit slower, were a little bit a drag. But the central tendency was around that long-term average controlling for that program.

Adam Thalhimer, Analyst

And then, just on the second part of that, when do you think that the headwind begins to ease?

Steve Nielsen, CEO

Well, we continue to work down and close out the project. The balance year-over-year that we're working on closing out is down about 25%. The amount of cash that came in sequentially reduced it in excess of $25 million. So I think we continue to make progress. And we hope that progress will continue, if not accelerate through the balance of the fiscal year.

Adam Thalhimer, Analyst

Okay. And then, the $400 million to $500 million fiber award, can you tell us if that was from an MSO or from a telco customer? And then how do you think about the revenue?

Steve Nielsen, CEO

I have more to say about it on the next call but I would say we were encouraged by the breadth of the award geographically.

Adam Thalhimer, Analyst

Okay, I'll turn it over. Thank you.

Operator, Operator

Thank you. And our next question comes from the line of Brent Thielman with D.A. Davidson. Your line is open. Please go ahead.

Brent Thielman, Analyst

Hey, thanks. Good morning, Steve.

Steve Nielsen, CEO

Good morning, Brent.

Brent Thielman, Analyst

Hey Steve, some of the supply and labor constraints discussed last quarter and I think you noted again in this call; what impact do you think that's having on the ramp in deployment right now?

Steve Nielsen, CEO

Sure. As we mentioned in the last call, we are clearly able to grow the business, with AT&T showing over 31% total growth. However, the more notable figure is that on the wireline side, we experienced over 75% organic year-over-year growth. We’ve successfully expanded our business with Frontier, but I believe that growth could have been even higher without certain constraints. Additionally, towards the end of the quarter, the Delta variant affected the number of people in quarantine. Unlike during the previous peak in winter when things were slower, we’re busier now, which certainly influenced our delivery capabilities and had an effect on costs related to overtime.

Brent Thielman, Analyst

Okay, that's helpful. And Steve, Lumen was expected to slow, but it was a little more than I would have expected. Can you just talk about what you're seeing with that customer?

Steve Nielsen, CEO

Regarding Lumen, after the conclusion of our quarter, they announced a strategic divestiture of several states, mainly east of the Mississippi. This accounts for about a quarter of the revenue we generate from that customer. While it was somewhat slow, we are generally optimistic about the transaction. They mentioned identifying an additional 12 million to 13 million homes with potential for fiber-to-the-home in the areas they are keeping. Apollo has indicated that the purpose of the transaction is to invest in fiber in the 20 states they are acquiring. This may have contributed to some sluggishness in the business during the first half of the year, but overall, it is encouraging regarding what the transaction could unlock for the rest of the business.

Brent Thielman, Analyst

Right, okay. And lastly, Steve, do you think Horizon continues to shrink as a percentage of the business over the near term? I mean I don't see any new order activity or extensions, at least listed in the presentation here.

Steve Nielsen, CEO

Yes. I think, Brent, we continue to work through closing out programs. I think there may be some opportunities as they get into another budget year but we'll just have to see. Recently, they made comments which were encouraging, about revisiting some of their fiber build plans in their existing ILEC service territory; so we'll just have to see how they play out.

Brent Thielman, Analyst

Okay, great. Thank you.

Operator, Operator

Thank you. And our next question comes from the line of Eric Luebchow with Wells Fargo. Your line is open. Please go ahead.

Eric Luebchow, Analyst

Great. Thanks for taking the question. So Steve, there have been some concerns about labor cost inflation in the industry. Could you discuss any contractual provisions you have with your customers that might help pass on some of those higher labor expenses and what impact that might have on your margins, if you've noticed any so far or if any is reflected in your guidance for the October quarter?

Steve Nielsen, CEO

I believe that within our current business agreements, some have annual increases tied to indices or are simply negotiated amounts. There are also agreements where the potential for adjustment is seen during the renewal process. Our main focus should be on managing our forward cost curve. As we engage in new business that is critical for our customers, it is essential that we can effectively provide the necessary labor. We have managed this well so far, and we will continue to strive to do so. We have navigated similar cycles in the past, and while this one may be more pronounced, it always involves delivering valuable services and ensuring that when investing resources in new opportunities, we secure the right pricing.

Eric Luebchow, Analyst

Right. I guess related to that Steve, I mean, in other periods of labor market tightness like this, do you see any opportunities to actually increase your share as some of your larger customers may be less likely or less able to in-source some of their fiber deployments?

Steve Nielsen, CEO

Historically, Eric, in-sourcing has not been a big factor in the business. So I don't know that we've seen that in prior periods. I do think that it certainly gives every incentive to continue to focus on building a broad labor pool through outsourcing, where we can reach across the country. I mean, we have one program right now where we moved resources literally from one corner of the country to the other because that was where the opportunity was and we had the ability to ship those resources.

Eric Luebchow, Analyst

Great. And then, just one more for me, Steve. I might have missed what you said on the wireless business but I was interested, it looks like you got a DISH award. Wondering if you're seeing more broad opportunities within wireless today, whether that's C-band deployments, T-Mobile's network integration, or the DISH network build. Just any color on what you're seeing from the wireless side of the business would be helpful.

Steve Nielsen, CEO

Yes. I think our wireless business in total, Eric, was still down year-over-year. And I think that reflects this, what I'll call, the gathering phase for C-band deployments, primarily. We have received something in excess of 500 sites that are in site acquisition right now for C-band deployments. And I think, as you know, probably better as well as we do as we look into '22 and '23, those C-band deployments will accelerate, have to understand the geography and when which band is where and when it clears. But clearly, I think the entire wireless industry is looking ahead to a better '22.

Operator, Operator

Thank you. And our next question comes from the line of Jon Lopez with Vertical Group. Your line is open. Please go ahead.

Jon Lopez, Analyst

Hi, thank you very much. Good morning, everyone. I have a couple of quick questions. First, I wanted to clarify the guidance. A year ago, there was around $8 million or $9 million from storm work. Drew, I believe you're seeing nominal contract revenues remaining flat, so is it correct to think that there is a slight organic increase year-on-year?

Drew DeFerrari, CFO

Yes, Jon. This is Drew. That's what we have on the slide and we spoke of.

Steve Nielsen, CEO

Yes. And to add to that, Jon, in our current guidance for the October quarter, we have not included any work related to storms. It is still too early to assess the impact of Hurricane Ida and whether any costs will be involved. Therefore, Drew's guidance does not account for any storm-related work for this quarter, consistent with our usual practice.

Jon Lopez, Analyst

Got you, helpful. Second thing, I'm wondering if you could spin back. I think a couple of questions ago, you mentioned something about the Verizon contract and there was a down 25% reference. That reference is to the sort of troubled portion of that business down 25% year-on-year in fiscal Q2. Do I have those parts right?

Steve Nielsen, CEO

No, Jon. That was with respect to the working capital tied up in the program that we've continued to be able to get working capital back out of that program. We hope that, that actually picks up through the balance of this fiscal year. So it's moving in the right direction. We'd all like it to move more quickly, but we are continuing to make progress on the closeout.

Jon Lopez, Analyst

I understand. For my final question, I want to ask about the backlog. Your 12-month backlog has now increased year-on-year for three consecutive quarters, showing high single digits in the last two quarters. However, your backlog exceeding 12 months is decreasing. Can you explain why that is happening?

Steve Nielsen, CEO

So Jon, as we discussed previously, the total backlog depends on the duration of the agreements and our current position within these long-term agreements. When you go through renewal cycles, if you're in the last year of a renewal cycle on a five-year agreement, you have 12 months of backlog, but nothing additional for the total. Additionally, as we mentioned last quarter, especially with the rural work, the projects are typically quite large but are awarded in phases. For example, you could have a $100 million project but never more than $10 million in backlog as you progress through each phase. I believe this reflects a fundamentally different environment compared to other parts of the business.

Jon Lopez, Analyst

Got it. Okay, understood. Thanks very much.

Operator, Operator

Thank you. And our next question comes from Noelle Dilts with Stifel. Your line is open. Please go ahead.

Noelle Dilts, Analyst

Hi. Good morning, Steve and Drew.

Steve Nielsen, CEO

Good morning.

Noelle Dilts, Analyst

Good morning. I just wanted to start with a question on AT&T. At a recent conference, they talked about they kind of lowered their plans fiber home passings to 2.5 million from 3 million this year. And they did talk a bit about fiber availability being a factor. That's not necessarily something that we're hearing broadly across the industry and didn't seem to be something that you cited. So is that a concern as it relates to, again, the pace of the build-out fiber availability or not really something you're seeing?

Steve Nielsen, CEO

So I think as we said in our comments Noelle, there are certainly some extended lead times around fiber. So customers are having to plan farther ahead, although I don't think that was the case in AT&T's situation. So we talked about our comments about some potential extended lead times. I think to keep the AT&T comment in perspective, I mean, 2.5 million homes in a year from a year where they were essentially doing very little, I think it's been an aggressive ramp. I think they continue to grow. And as you can see in our numbers, the business has grown nicely year-over-year. It might have grown a little bit more with a little more fiber. But I think we're pleased with our progress with AT&T. And from the outside looking in, I'm impressed with the sheer magnitude of their ambition to grow this year.

Noelle Dilts, Analyst

Right. Okay, got it. And then second, you mentioned in your discussion about margin that some of the new work is a positive margin contribution. I'm just curious, do you think at this point, industry participants are kind of recognizing what's coming in terms of the work next year and are coming in potential stimulus. Are we at a point now where these participants are looking to secure capacity earlier and are willing to pay more for capacity or do you think we're still getting to that point?

Steve Nielsen, CEO

Yes. We have many intelligent customers who continually assess market information. They work with numerous suppliers, shaping their own perspectives on market trends. More crucial than the industry's supply-demand dynamic for our customers is their launch of several significant initiatives. When a strategic initiative spans five to eight years, it reflects a deliberate strategy for securing the necessary capacity to accomplish the work. Therefore, customers are particularly motivated by the importance of strategic services in supporting their programs rather than merely focusing on immediate costs.

Operator, Operator

Thank you. And our next question comes from the line of Alex Rygiel with B. Riley. Your line is open. Please go ahead.

Alex Rygiel, Analyst

Thank you. Good morning, Steve and Drew. Steve, could we revisit the topic of equipment availability and the types of equipment you use to provide services, including yellow equipment and other rolling stock? As one of the largest players in the market, are you identifying opportunities where your available fleet could capture market share in the near future?

Steve Nielsen, CEO

I believe that's always a possibility, Alex. We maintain strong, long-term relationships with our suppliers and are constantly in dialogue with them. The chip situation poses a challenge for everyone. However, given the size of our fleet, there are certainly opportunities to extend operating lives, which could provide meaningful incremental capacity. We also see financial opportunities. For example, about a month ago, we received a call from a supplier whose order was canceled by someone else, and we were their first call; we took all 14 aerial devices. This illustrates the possibilities for us, but I don't want to downplay the reality of the constraints on the automotive supply chain. We must be mindful of these factors as we plan our business.

Alex Rygiel, Analyst

And then, coming back to the hurricane that's sort of working its way through the United States right now. Can you remind us how that initially hurts your business and then possibly offers you opportunities? And would you anticipate sort of all the negatives and positives to offset each other in this current quarter? Or do you think there could be extended negatives and positives that stretch into the future quarters?

Steve Nielsen, CEO

Yes, Alex. I think it's too early for us to determine anything beyond the October quarter. The restoration effort for communications isn't a top priority when there is a widespread electricity outage like the one affecting New Orleans and nearby areas. So, it's a bit premature to make conclusions. Generally, based on our extensive experience with storm recovery, it can provide some advantages for restoration services, but it also has potential downsides for the overall business. Ideally, we would prefer not to face any hurricanes, tornadoes, or floods.

Alex Rygiel, Analyst

Thank you very much.

Operator, Operator

Thank you. Our next question comes from Alan Mitrani with Sylvan Lake Asset Management. Your line is open. Please go ahead.

Alan Mitrani, Analyst

Thank you, Steven. In relation to the backlog question, you mentioned that we might be nearing the end of some contracts, but you didn't confirm that. Is that why the backlog hasn't increased more? Or do you anticipate receiving more awards in the coming months as we approach the end of these contracts?

Steve Nielsen, CEO

Yes. So Alan, I wouldn't necessarily focus with the contracts we have but I think the contracts and prospects. So you mentioned the share repurchase. We did buy $50 million worth of stock in the quarter. But I can tell you, as we got through the quarter, there were a number of substantial organic growth opportunities that emerged. And from a capital allocation perspective, we always focus on making sure that we can meet customer needs and new growth opportunities. And so we throttled back on the share repurchase because as we saw these opportunities emerge, we want to make sure that we're in a great financial position which we are, to take advantage of them.

Alan Mitrani, Analyst

Great. Can you discuss your guidance for this year's capital expenditures? Has it changed?

Drew DeFerrari, CFO

Yes. It hasn't changed since last quarter, Alan. It's $105 million to $125 million net.

Steve Nielsen, CEO

And we did take in about $36 million in gross CapEx in the quarter.

Alan Mitrani, Analyst

Okay. And then, it's a strange question but it seems like used car prices and obviously F-150 prices are really high. I know that's a good portion of some of your vehicle fleet. And yet other income for you guys was really low. Do you have a sense of where that's going to be? Did you not sell as much fleet because there were shortages? Can you just talk about where you see that line item? I mean it's not an operational line item, so I know it's impacted your earnings a bit this year but I'd rather see your business grow than that line necessarily move one way or the other.

Steve Nielsen, CEO

Yes. As we said earlier, Alan, we've been really prudent about making sure that we keep operating assets because as the supply chain has been constrained, again, we want to be able to grow when opportunities present themselves. And so I don't expect that we'll have an active disposal program. It's kind of a related loop, right? If we could get new assets, we'd sell more but then the prices wouldn't be as high in the used market.

Alan Mitrani, Analyst

Okay. And then one more question, if I can. Just a bigger picture in terms of the infrastructure bill as it relates to your business. Are you worried that in general, guys may push off some spending until the bill is passed and the effects come in because they want to take advantage of government money and matching money and others as opposed to spending privately?

Steve Nielsen, CEO

So it's an interesting question, Alan and it's one that we can really only speculate about. But I would say, there's really been a couple of effects that we could speculate about. I mean, one is, remember that the inter money is for unserved and underserved areas. And so to the extent that we have customers that are incumbents in those areas and they have plans to upgrade the capacity of the networks, I think, if anything, that the prospect of government funding in those areas may encourage them to go faster so that as the broadband mapping works out that the areas that they serve no longer fall in the area that's eligible for government funding. So actually, I would think it the other way. I think on the other hand, there are a number of statewide programs that are operating independent of the infrastructure bill. And so regardless of whether it passes or in what form, we've seen a number of announcements of substantial sums at the state level. So for example, in California, about a month ago or six weeks ago, they passed a law. So it is a law that they're going to fund $3.25 billion in middle mile network construction and then another $1 billion or $2 billion for last mile construction. So if you think about it, in total in California, that's, call it, $5 billion, that state alone is almost as much as what the federal stimulus was in 2009. So there's a lot of state level programs around the country that I think our customers will be taking advantage of or in the case of California it's actually an independent new entity.

Alan Mitrani, Analyst

Great. Thank you.

Operator, Operator

Thank you. And our next question comes from the line of Jon Lopez with Vertical Group. Your line is open. Please go ahead.

Jon Lopez, Analyst

Hey, thanks very much. I had two quick follow-ups. The first one is just, Drew, can you give us a sense for the gross margin versus a year ago, you're talking down like 100 basis points to 125 basis points; it feels like a flattish or say, sequentially. So, like what are the factors year-on-year that are driving that?

Drew DeFerrari, CFO

Yes, Jon. I think, in part, that's going to be fuel-driven. So if you look back at where the price of gas was a year ago, that certainly ticked up some. And then it's really, as we talked about last quarter, there's certain customers that have spent less this year than last year.

Jon Lopez, Analyst

Got you. Okay, that helps. And then, Steve, the customer who remains unnamed has kind of been hovering at or above $20 million here for a couple of quarters. That hasn't happened, I think, if we have our numbers right, since like 2015, 2016. Is there anything you can tell us about sustainability or visibility into that activity?

Steve Nielsen, CEO

I believe, John, this highlights the significant interest in deploying fiber networks and the available capital from various suppliers to support this initiative. There is a new level of industry alignment around fiber-to-the-home that we've never witnessed before. For instance, as we noted in our comments and slides, six of our Top 10 customers have recently launched plans to reach over 40 million homes with fiber-to-the-home. The industry has built a similar number, around the low 40s, over the past 17 years. Now we see plans in place to essentially double that output in a much shorter timeframe. This reflects a strong appetite among companies and investors to commit capital to fiber-to-the-home projects.

Jon Lopez, Analyst

Got you. Okay. Really helpful. Thanks, guys.

Operator, Operator

Thank you. And I'm showing no further questions at this time. And I would like to turn the conference back over to Steve Nielsen for any further remarks.

Steve Nielsen, CEO

Well, we thank everybody for their participation on the call. Just before we go, Drew had a couple of other statistics to share.

Drew DeFerrari, CFO

Sure. So for the customer split; telco was at 66.6%, cable was at 22%, facility locating was at 8.3% and electrical and other was at 3.1%.

Steve Nielsen, CEO

And wireless, Drew, was about 6.5%, 7% of the total.

Drew DeFerrari, CFO

Correct.

Steve Nielsen, CEO

Okay. Well, thanks, everybody, for your time and attendance. And we'll talk to you again just before Thanksgiving.

Operator, Operator

This concludes today's conference call. Thank you for participating. You may now disconnect.