Conference Transcript - DY 2026-09-24

Kurt Yinger, Analyst — D.A. Davidson

Well, thanks everyone for being here bright and early and welcome to D.A. Davidson's 21st annual Diversified Industrials and Services Conference. Appreciate you guys all kicking off the day here with DICOM and welcome everyone on the webcast as well. I'm Kurt Yinger. I cover building products and infrastructure services here at D.A. Davidson. I'm joined by Dan Pajovic, the CEO of DICOM. Dan, thanks so much for being here.

Dan Pajovic, CEO

Thanks for having me, Kurt.

Kurt Yinger, Analyst — D.A. Davidson

Maybe just to start, for investors who aren't as familiar with DICOM and what you do, just talk a little bit about the company, provide a quick overview.

Dan Pajovic, CEO

If I could just briefly start with, I might make forward-looking statements today, so if everybody could just please reference the Safe Harbor Statement on our website, that would be appreciated. And jumping in, if you think about DICOM today, the best way to think about us is really end-end solutions to solve the growing data needs. Data consumption has grown for the last three decades. For a long, long time, DICOM provided all of the fiber, all of the HFC infrastructure around the country to connect people, to connect homes, to connect businesses. And we've extended that recently to get inside the data centers. So whether it's data being computed, data being stored, data being processed, and then now the entirety of the transmission from that data center out ultimately to the end user, that's where DICOM comes into play.

Kurt Yinger, Analyst — D.A. Davidson

So end-to-end solutions, Kurt, and we're pretty excited about the opportunity set the demand drivers right huh okay maybe big picture you know you've been in the ceo seat for almost two years correct um you've done a great job kind of expanding the platform into building systems you know improve the overall financial profile some of those growth opportunities can you just talk a bit about kind of the strategy since you've come in and how that positions dicom going forward the strategy is centered around growth you know there is a ton of opportunity and infrastructure needs for the reasons I talked about, right?

Dan Pajovic, CEO

There's many that say that we will create more data in the next three years than is being created today from the dawn of time. So all of that is going to need infrastructure. And what we've really done is over time, all of the work we've been doing on the telecommunications side has got closer and closer and closer to the data center. We started spending a lot more time, Kurt, with the hyperscalers, making sure that we could get the fiber ultimately to their data centers, the work that we call inside the fence. and as those relationships started to grow we saw a continued need and again it's all centered around the skilled workforce all centered around skilled workforce we have about 21,000 employees nationwide today we saw a growing need to also be able to lean into the data center itself so we're right outside the four walls you know bringing fiber to the meet-me room the conversation said maybe we just take that next step go to the other side of the wall pick up electrical which was the first move we made in our building system segment expanded the breadth of the business uh added national technology integrators recently so now we're doing all the structured cabling inside those facilities and you know we have we have a a very nice chart that shows this this end-to-end step right that we can move through and have these conversations cross-sell opportunities we're having tons of conversations across platforms even though they come through different contracting ultimately um you know what everybody's looking for is who's going to meet this need right who's going to make sure that they have certainty of execution that they have certainty delivery in the kind of growth that's happening out there today and everybody you know certainly sees the headlines you see headlines around electricians you see headlines around data center spend and you see on the telecommunication side a lot of headlines making sure that our customers you know the carriers are gonna have enough fiber to meet the needs in the coming year so all of that is coming together and

Kurt Yinger, Analyst — D.A. Davidson

DICOM's entire platform is we want to be an excellent partner we want to lean into our customers and make sure that we can deliver success with them so the conversations Kurt that we're having today with all of our customers there are three years out there four years out there five years out to make sure that we're setting up our workforce and I'm sure we'll talk more about our workforce today you know we're setting up our workforce to be able to meet that demand and meet that growth got it okay and you know more recently you know you guys reported strong q2 results you know really strong backlog growth kind of continuing there but maybe a little bit of dislocation related to the outlook i mean what are you hearing from customers i mean is there any fundamental change and and kind of their

Dan Pajovic, CEO

messaging to you their outlooks anything like that that you could kind of communicate to the investment community there were some things that we talked about related to the second half of the year that didn't resonate with the investment community but i would bring it back to you talked about the backlog if you look at the entire year and you look at the revenue for RF fiscal 2027 we're looking at 10 to 12 percent organic growth which is all coming to the telecommunications business DICOM has never been a quarterly business it's never been a quarterly business the way that the projects come through whether you're on our communication sector or segment you've got tens of thousands of work orders that are stacking and having any given point in time those projects those big build programs from the different customers they they move around all the time they ebb they flow you might have permanent challenges at one point in time you might have a huge influx of needs and passings that you're trying to push through so they're always moving and so you do get some irregularities between the quarters that has nothing to do with the overall demand what investors should really be thinking about is that 10 to 12 percent organic growth that is a huge number coming off of a 5.4 billion dollar communications year last year and that's really a much better indicator of where this is going as we talk further into the demand drivers and then again you know as you look at the entirety of the business part of the reason that we're diversifying look at the consolidated results right we got very strong very very strong margins coming out of the building system segment fantastic

Kurt Yinger, Analyst — D.A. Davidson

growth there as well to meet the needs that we talked about before in the data center space and if you bring all that together you know it was a great quarter for dicom from an overall margin perspective great quarter for dicom from a backlog you know we're 1.4 times booked to bill in the year and again I think that's another really good indicator of what the future looks like and what that demand is yeah okay and I mean it's good segue you know that the communication business has these kind of three large fiber deployment opportunity sets you got fiber to the home long haul and middle mile infrastructure you know a lot of that's data centers and bead I mean where are we in terms of the phasing of those opportunities maybe what you've already experienced and timeline thinking about when some of those might hit?

Dan Pajovic, CEO

Yeah, and I'm happy to talk about them in detail, but what you'll hear us start to talk about going forward is we have service and maintenance, which everybody, you know, we really highlighted how large a part of our business that was, I think about a year ago. So that's about half of DICOM's revenue. So rough numbers on communications, it's around $3 billion plus or minus. You know, that has growth that really comes more with the overall footprint as we expand but it's a completely different growth curve than the program work so if you think about that you know I talked about being kind of the bottom of the iceberg continuing over time right that's a highly recurrent nature to it a lot of infrastructure to maintain and then you have the other half which is program work collectively which is the demand drivers that you talked about if you think about that program work you see a huge amount of growth coming through there our fiber to the home in the first half of the year grew 60% year over year That's a very big number. If you look at the actual number of passings that increased year over year, industry reports have put it more like 10, maybe 12, maybe 15%. So a huge opportunity for DICOM to lean further into that. But we look at it across all of those growth drivers, all of those demand drivers. So service and maintenance, and then you have program work. What we see for a very long trajectory today is that program work providing a lot of growth opportunity for DICOM. Today, fiber to the home, obviously. You know, you heard the 60 plus 60%. A lot of growth opportunity in that. We still have several years of significant growth opportunity. And then at some point, you know, you will see some taper that's starting to happen. But on the other side, you have the long haul and middle mile work, right? That is, we talked about hundreds of millions of dollars of work that we put in place over the last couple of years. We talked about over a billion dollars of, and when I talk about pure backlog, I want to make sure we're not confusing it with anything else. This is literally just fiber connecting data centers nationwide. that's the only thing that's in that over a billion dollars and that's after we're already burning so you can see that starting to ramp up over a year ago we talked about 20 billion of addressable market over the next five years so that's gonna really start to feather in nicely and then you throw a beat on top of that taking a long time to get to where we are but you know we are starting to see those green shoots of things getting through financing or excuse me funding getting through permitting and so we're gonna see that start to move as well what that means is when you get to calendar 2028 you're going to have fiber to the home going completely hot and heavy like it is today. You're going to have these other demand drivers really coming on strong. What DICOM is doing today is making sure that we're investing. We are leaning into our customers very deeply. You actually see that in our backlog to make sure that we can build the workforce ahead of that need because you're going to have this huge balloon of all this activity starting in 2028 that the industry has got to get ready for. And what we believe is there's going to be too much industry-wide and ultimately that's going to push a lot of these builds out for a much longer time horizon so again you can see evidence of that in our customers the partnerships that they have with corning uh you know for fiber making sure that they have the fiber that they're going to need for these big builds you can imagine they're doing the same thing you know with the services folks like dicom to make sure that we have the labor force and you just talked about making those investments ahead of time i mean how do you think about that in the context of margins right we get into 2028 the latter part of this decade you know do you start to leverage those much more meaningfully in the context of margins or you know do you have to continue to invest like is there a cycle element in there yeah so we had significant investments specifically on the communication side this quarter for the reasons I just talked about I would say that's that's a that's a big part of it the other part is is you know there's times we're investing in our customers we have customers that call us up and say you know we want you to go as fast as you can through these different markets in fiber to the home right we want you to go as fast as you can on this long-haul work and we're gonna we're gonna rise to that challenge and go do everything we can to meet that need that's the kind of partner that we want to be for our customers it's not as efficient upfront but everything we're doing is with a long-term lens right the more that we can do that the more that we can really lean into the customers and deliver success for them the better we know it's going to be in the longer term so you have those kind of investments coming through and we talked about where the margin profile in the communications business is you know is for this year which is kind of that plus or minus 13 percent range and I'll remind folks last year 13.3 percent adjusted EBITDA for really what ended up being the communications business that's a really good range for us that's a great return on our people there's a great return on what we do you know we feel really good with how that compares you know if you look across the landscape and it's really important that management as we do continue to grow absolutely there's opportunities for operating leverage you know as we grow You can bring some of these efficiencies up as we grow, but we really want people to center around that plus or minus 13 Again, very strong return because we need to make sure that we can reinvest for the long term when we need to And then at other times sure it'll drop through to the bottom line And then if I could just quickly touch on margins for the building system segment, you know Really really really proud of the team and the integration has happened there a lot of people working really really hard Very quickly growing business. We wanted to make sure we brought them in right. We're able to really lever them up into all of that. And so you've seen the margins kind of go up and up. And then now what we're saying is over the longer term, we believe that high teens to low 20s adjusted EBITDA for that segment of the business, which, again, accretive for the overall position for DICOM goes to our diversification strategy. That's a good range to be looking forward.

Kurt Yinger, Analyst — D.A. Davidson

And I mean, that's still very healthy relative to a lot of the peer set, too, in terms of the margin profile of that business.

Dan Pajovic, CEO

Yeah. And again, we're looking at on the returns, right? What are the returns on our people? What are the returns on our investment? And how does that come through the business? And again, we think that's a great profile for us to continue to lean into as we continue to grow.

Kurt Yinger, Analyst — D.A. Davidson

OK. And on a lot of discussion around bottlenecks, you know, kind of across the construction space. is there is a 2028 is there you know specific point in time where it's either labor or equipment that you think can get particularly tight and I mean what are you doing today to make sure you know your position to address that sure it would surprise nobody on the building system segment that electricians are in short right are they're absolutely a bottleneck there you have power and you have electricians and that is keeping the flow of the data center builds you know it's definitely going fast and faster than it was but it is keeping that flow restrained and that's not going to go anywhere anytime soon right

Dan Pajovic, CEO

there are limitations on how quickly you can grow that labor force but we've obviously shown that that we can grow and grow well even in spite of that and I think you hear that from a lot of our peers as well on the communication side today you know labor is not a constraining factor for us really the constraint today on the communication side comes down to permitting we think that's going to continue overall and and dicom what we're leaning into is making sure that our labor force continues not to be what hinders our customers from meeting their programs that's why we're having these longer term conversations that's why you know most of my time is looking in that three to five year range today right it's not looking in the one to two year range to make sure that we are set up well to be able to deliver on that now that said we do think that industry-wide yes as you start to get to 2028 you're going to have labor constraints you do again you see the customers talking about you know making sure that they have fiber secured what that would say excuse me is that there could be five fiber shortages for people that haven't done that excuse me um and then from an equipment perspective you know we do feel good about the landscape today being able to meet that need okay and when we think kind of big picture around you know some of those constraints and maybe this goes back to fiber the home growing 60 percent this year like how do you prioritize those opportunities you know what are some of the different factors you're looking at and selecting which of these you want to pursue which offer the best returns sure first just to say don't expect fiber the home to always be growing 60 percent year over year right that's that's that's not how it works that goes back to the quarterly conversation that we had but continued strong growth for fiber the home for several years in front of us and that's been that's been fantastic work we've got a great footprint that overlays our service and maintenance and and let me just talk a little bit about service and maintenance and how it sets us up for these other programs you know when we're across 50 states we're not in every community in every zip code but we're in a whole lot of them we know how to build there we know the municipalities we know the difference in traffic control requirements we have relationships in those markets we know how to hire in in those markets so when things like fiber the home come when things like long haul middle mile come even when opportunities like bead come you know we we have this this knowledge years of experience on how we can lever into those years of experience on what those cost dynamics should look like that we can make sure we price in for success for us and for sex for our customers and so that's really how we're leaning into it and then we're thinking about the portfolio approach so the fiber of the home has been great work we're going to continue to lean into that because we have such a great footprint a lot of great relationships there and a ton of growth but we're also going to be balancing that with long haul and middle mile you know we are investing in that space there is a huge amount of training there's a big difference between fiber to the home training and long haul middle mile training and because there hasn't been a lot of the long haul middle mile work actually put in place to date even though we've been doing it for two years and we've learned a lot of those lessons but remember for the entire industry there was three decades of quiet right there was three decades of quiet in doing the long haul work and Now, it's different technology. How you handle these fiber bundles that are extremely large, 864 fiber count, 1728 fiber count, is completely different than how you are doing something in the community, feeding homes or housing developments. How you're splicing that and what the testing requirements are. The industry's never seen that kind of rigor. So you're talking about a vast difference. So we're leaning into that. We're training into that today. We've been working on that work today, and we think that really positions us incredibly well to meet the customer's needs because, as everybody knows, there is a lot of fiber that needs to get connected around the country. I think that $20 billion is just going to be the starting point, and we see that being a very long arc, Kurt.

Kurt Yinger, Analyst — D.A. Davidson

And that sort of ties into maybe the discussion around complexity and whether it's maybe some of the more rural areas of fiber to the home, you know the less easy passings or the long haul and middle mile I mean how does that differ from maybe the work you've been doing for the last decade how does that ultimately impact sort of the competitor set you know when you're going to bid these jobs or looking at those opportunities sure complexity has gone up just in general if you think about the skilled workforce when I I started the skilled workforce many decades ago, many decades ago, very different.

Dan Pajovic, CEO

Today, all of our folks are using technology, right? They're using technology in everything they do. The pace of deployment, and this doesn't matter what industry you're in, the pace of deployment is way faster today, probably twice as fast today as it was a few decades ago. All of those things come together to add complexity. Then you throw, let's take fiber to the home. In fiber to the home, you have our customers, the carriers, making commitments on how many pass things that they're going to do in a given year. They have build programs that they're trying to hit for internal metrics. That means that you cannot fail, right? You have to meet those commitments. And that's just a different arena with a huge, huge ramp into the projects and then a huge expectation that happens month after month after month. Where we've really excelled, again, is leaning into that training up front, leaning into using DICOM as a whole, bringing in services like program management to really partner with our customers to make sure that across their portfolio that we're delivering success month after month after month, and we're planning well ahead. But I think that complexity, what we saw, created a lot of challenges in the industry. I think there were a lot of people that really struggled with that opportunity, and it was a differentiator for DICOM. It sets us up really well for the work that's coming. Bede is going to have a lot of pressure behind it when it comes out. Again, you're going to have time-based pressure, cost-based pressure. You're also going to have a very, very busy industry on top of that. But the one really to look at is this long haul and middle mile. you know the complexity if if you look at fiber to the home which incredibly complex but if you are going to miss a few passings in one neighborhood you might be able to pick them up somewhere else on fiber to the home it's it's a straight shot right and if you miss 200 feet it's not connected if you miss 200 feet you cannot test it if you splice poorly and you're back digging up splices you could be delayed for a very long time all of those things come together to mean that you really have to know and really be able to plan out what that looks like and then your workforce you're talking you know at least six months of training if you're going to take somebody from fiber to the home to bring them over to long home at a mile six months of training to get them ready for the difference in that environment simple things like traffic control right people don't think a lot about traffic control we drive past it every day the difference of tracking traffic control requirements if you're in one municipality or another and in a lot of cases it could be just across one bridge you go from one county to the next the difference in how you price the price that think about that how it interrupts your flow of work your speed of work can be completely night and day i mean it can be two three four times five times the cost to do it in one municipalities compared to the other and if you haven't spent time in those municipalities you don't have those relationships i think that's going to be a really big challenge for folks and again i think that's where dicom is just incredibly well positioned to continue to lean into complexity kurt one of my favorite sayings complexity favors dicom okay i like that it's got a good ring um and i mean maybe

Kurt Yinger, Analyst — D.A. Davidson

tying it back to kind of fundamentals like when I think of complexity I think better pricing better off economics like is that what you see in practice and maybe how does that 50% maintenance and service you know blend together with maybe some of the opportunity on the program side sure yeah I think if you look back historically you know pick a period with DICOM you'd see 13% is a very strong, especially if you're looking at over time, is a very strong return.

Dan Pajovic, CEO

So we are very pleased with that. And as I said, are there opportunities as we go forward where you could see more margin opportunity come through, where you could see the complexities programs maybe change some of that profile? That could happen. That absolutely could happen. And we will find opportunities where that is going to come through. And then there's other times we're going to make sure we continue to invest it in our workforce, continue to invest it to make sure that we can meet the growing needs okay okay that's great maybe just shifting to building systems i mean it's performed extremely well since you've acquired it what are you hearing or seeing from customers in regards to kind of that more comprehensive dicom service offering uh really good reception conversations again cross-sell this is not a cost out type of synergy This is a complementary platform synergy where we can go be having conversations with customers on more of end-to-end solutions. And there's a lot of receptivity there. Why is that? Because they want certainty. They want proven execution. And they would rather have one relationship across many different, whether it's many different parts of the business or many different geographies, than they would have 40 or 50 that they have to manage when they're also moving so fast. So we've seen great reception there. We're working on multiple of those things on the same sites today. We do believe that that will continue over time. So very pleased in how that's coming together. And to your point with the acquisitions, Power Solutions was a big acquisition for DICOM. That was a $2 billion acquisition. Let's see, getting close to a year now since we closed it, and a lot of planning that went into that from a strategy perspective. But what's really, really important, and how people should think about how DICOM is approaching that M&A landscape is fit is the absolute most important thing, right? We're looking for cultures that just like DICOM are frontline first, right? When I get up every day, my most important job is to make sure that I'm driving value, driving value to the folks that are out working with their tools. That's my job. That's the job of everybody in the business that is not out there working with their tools. And if we drive value to them, they're going to drive value to our customers and they're going to ultimately drive value to our investors. And that really is how we operate the business, right? We have a team-based business. We sit down with large groups and we plan out how we're going to make sure that we continue to grow, how we're going to have profitability and all those things. It's not a top-down structure. So when we meet with different companies and different prospects, it's really important that they have that same belief, right? That they're really looking at their skilled workforce as the lifeblood and, you know, what really drives it. And that filters out, you know, a lot of opportunities. So we have a ton of discipline there we're not just growing for growth sake we're not just trying to diversify for diversification sake this is about really really leaning into the overall platform and then as we talked about complementary services so bringing all those together when we find teams that have a growth mindset and that means they've proven they can grow but when we talk to them they get really excited about how if you bring DICOM together with their business that may be you know 10 20 30 40 years old maybe even 100 years old when you bring those together that you can have this inflection right that you can have this growth opportunity that maybe wasn't there before and that's what we've been looking for that's what we found in the acquisitions that we've done of late and you know we're really excited and pleased to have them as part of the team incredibly strong leadership teams uh and you know we we do expect to continue to be active over time you know where it makes sense looking to continue to add certainly both organically but also looking for more m a in the building systems okay and and on the m a point you know you also acquired national technology integrators like for a lay person can you help us understand you know how that's working with power solutions did they historically work together and what does that opportunity look like sure that's a great story because that comes from a relationship so power solutions after after we did the acquisition after they spent some time with us they've been working and know and working with and know the leadership at national technology integrators for a long time they said hey, why don't you, you guys should talk to DICOM, right? There could be something interesting here. And that's really the best case scenario, right? That's somebody that's just come into the business saying that this is working so well, we want to recommend it to somebody else. And then the first time we met the leadership team at National Technology Integrators, we had that immediate connection. And again, another growth mindset. So they have been working together for a long time. In the data center, you have Power Solutions doing the electrical, all the electrical connections, ultimately powering racks national technology integrators is doing all the cabling in there right all the fiber and bringing it back to that same meet me room that other DICOM operating companies are connecting out back to ultimately to the long haul so now we can sell not just electrical but in structure cabling inside but we can also say hey let's pick up the inside defense work hey you know we're gonna be working with the carrier bringing it to the right-of-way there's a lot of synergies a lot of opportunity there that make it stronger as a platform how do you think about saving you know a contractor time bringing these together i mean how important is that in the synergy opportunity are there you know any examples you've already seen with that uh well first prefabrication you know and folks have talked about that quite a bit the the data center builds they're so fast the first data center i worked on in the late 90s in total was 30 million dollars right you know that's like the paint today i mean it's just you know these have gotten so big and so fast and so you have a lot of trade stacking where you have a lot of people you know the electricians could be 100 to 300 electricians at a time and you have a lot of other people in the building at the same time so anything you can do off-site is going to save that anything that you can essentially pre-build and then bring in you're going to do it much much more efficiently effectively and and be able to add to that. So that's the first part. And then the other is, when you do have all that trade stacking, and this is a former general contractor talking, when you have all that trade stacking, you need the trades to get along, right? When they're going to be on top of each other, you need them to be able to work well together. And that's part of the pitch, right? If we have two businesses that have proven that, that's just another sigh of relief that you're going to get from that general contractor, another sigh of relief you're going to get from that hyperscaler. That means certainty of execution. Okay.

Kurt Yinger, Analyst — D.A. Davidson

Maybe just one more on kind of this topic. Like, how important is your financial strength, what DICOM can bring in terms of, you know, funding some of that growth opportunity for these companies that you acquired? Like, is that something, you know, that make you a compelling partner? How do you think about that relative to the acquisitions you've done and maybe any future opportunities in that area?

Dan Pajovic, CEO

It's a very good question. We talk about it from risk. Private companies often get to a place with incredibly strong leadership teams, incredibly strong proven growth, but still, you know, owners, operators, they get to a place where they start to think about risk. Not putting capital back into a business, not growing too fast and maybe breaking what they've built, creating opportunities for their people to continue to grow while doing that. And that's where DICOM comes in. Of course you have the balance sheet, of course you have bonding, but it's more than that, right? It's how you lean and have those conversations. It's how you sit down with the teams and give confidence. I like to say, you know, private companies, and I worked for a private company in general contractor side for over a decade before we were acquired in my past life, private companies typically operate in a minus one mentality. So if you think about back office staff, one less, a little bit leaner than what you need. If you think about going and taking work, one less to make sure that you don't break everything you've built. And what we do is we go and partner with them we talked about how do we go from minus one to plus one right we can bring the resources to get that that confidence and make sure that you know we really have that wrapped around risk covered so we can go from a minus one mentality to a plus one mentality and that's where you really start to unlock significant growth okay okay um clearly a lot of noise around nimbyism moratoriums i guess what are you hearing from your customers and your footprint any direct impacts or just what are you kind of hearing more generally a couple of key points to to start what we're hearing on the ground every day is recently as two days ago was the last time i personally checked in absolutely no change right still massive demand still massive velocity that needs to get done there are challenges that are getting worked through and that's going to take time for some of these things to get worked through you you definitely see the hyperscalers leaning into that conversation more and more, which I think is going to help over time. But the impact on the ground really is not happening today. The other part is, you know, we do need to differentiate. Not all data centers are AI data centers. There are many, many cloud-competed data centers that are getting built today. And if you think about DICOM's focus, we're not trying to just play AI. AI upside, for sure. Are we getting revenue? Are we building AI data centers today? For sure. but the basis for it again goes back to data creation and consumption as long as we're creating more data you need more cloud compute storage right as long as we're all pushing more to the cloud and enterprises are pushing more to the cloud and and all of that data i talked about is getting created it's got to go somewhere you need that infrastructure so that's where we're playing with ai upside we're not playing the ai race specifically and in that space again those data centers have been getting built, I think the CAGR is over 15% going back a long time, if I have that number right. I have nothing to do with AI itself. So, you know, growth opportunity there. And that's our starting point. Look for that AI upside. That's our starting point. So I think it's going to take time to play out. You know, like I said, we're not seeing any direct impacts. And a lot of what you're hearing about, you know, moratoriums and other things, remember, those are projects that haven't even got to permitting yet.

Kurt Yinger, Analyst — D.A. Davidson

And those are years out right those are years out from today so there is time to work through this and it's and it is great to see good conversations happening to try to do that okay in within building systems can you just touch on the backlog and and maybe more importantly any visibility you have beyond that just customer conversations I don't know you don't have to say a specific how far these discussions are stretching out and maybe how real you think some of those opportunities are so that is always going to be an understated number and if you even if you look at the correlation between our building systems backlog and their next 12 months they're very

Dan Pajovic, CEO

tightly correlated and in fact those are even under the numbers that we're saying that we're going to deliver this year that's purely just an industry mechanic the the way that those are contracted is basically just in time by phases so even though you know you're you're 99.9 likely to build the whole data center you're still only going to get that first phase in that first award even though you might build multiple buildings on that campus you're still going to get the first phase of the first building when you start the conversations that we're having today at the earliest or two years out but more like three and four years out and then remember these are typically multi-year builds most of these data centers take a couple years to build at least but if you're doing you know a new set of data centers you could be talking about five six eight years of total build cycle those are

Kurt Yinger, Analyst — D.A. Davidson

conversations we're having today if you were to look at that we call it awarded but not contracted backlog so that's the whole data center for example if you're just starting that first phase that would be multiples of what we report as that contracted backlog today okay okay and going back to the m a discussion and acquisitions i mean is there interest in acquiring similar businesses that may not offer kind of that same synergy or overlap between communications and power solutions with the data centers how do you think about you know maybe some different adjacency from an inorganic growth perspective first let me just touch on capital allocation if i could yeah so

Dan Pajovic, CEO

you know we are always going to prioritize organic growth and you can see that you know we have considerable organic growth we're going to make sure that you know we're feeding that first and And then we do balance M&A with share repurchases, and you can see over time, you know, we've bought back nearly half of the outstanding shares of DICOM over time. So we're always looking at the different mechanics around that. It's not just all systems go for M&A, I want to be really clear there. So we are being thoughtful on the M&A side. You know, right now, our focus is in that space, right?

Kurt Yinger, Analyst — D.A. Davidson

Geographic expansion would be our priority, and we think over time, again, there's highly unconsolidated space, lots of opportunities out there. we believe that over time you know where and when it makes sense there will be other opportunities to continue to grow that platform okay i mean you touched on your background a little bit just given that i'm curious kind of what you see as core competencies or strengths of dicom that you know gives you the confidence you have the right to win within that electrical or low voltage space or um you know that core competency that would maybe be the north star as you look at other M&A type of opportunities?

Dan Pajovic, CEO

First is proven execution, right? If you look at the companies that we brought into the family that stood up in that segment, these are folks that for a very long time have proven that level of certainty, that level of quality. We're looking for partners that customers say, if I get to pick anybody, I want to pick those folks, right? That's really how we believe we've become known on the communication side, and it's the same thing here. That is first and foremost you know that that right to win parker and I talk a lot about you know if if you're out there in the space competing for work you know what is it that differentiates you right what is that thing that customers look to to differentiate and for us level of service is number one right our customers know across the enterprise that if we say we're gonna do it it's gonna get done and we're not perfect we're not perfect but in those instances where we fall a little bit behind they know that we're gonna bring the entire horsepower of the enterprise to make sure that we deliver on their success time and time and time again. Same thing in the building system segment. And then I do talk about, you know, for folks that aren't differentiating that way, then the only thing you have to compete on is price, right? And that's not what we want to play, right? We want to differentiate, excuse me, by the level of service.

Kurt Yinger, Analyst — D.A. Davidson

Are there opportunities you're seeing as, you know, maybe other competitors, you know, haven't delivered that proven execution, taking on projects, whether it's on the communications, building system sides, getting a little bit over their skis where you're getting asked to come in and fix the problem, so to speak, more often? Or I guess broadly speaking, are you seeing that? Yeah, that's part of being a solutions partner, right?

Dan Pajovic, CEO

That they're looking to us to say, what can you do to help us? On the fiber-to-the-home builds that we've been doing for years now, Now, very, very common for us to get a call near the end of a quarter from a customer saying, you know, we've had some challenges with some other folks. Can you find another 3,000 passings? Can you find another 5,000 passings? And by the way, you have a week to do it. That happens. If you look at our growth in fiber to the home, a lot of that is because of the challenges that we talked about in the complexity and our proven ability to deliver, where I think some other folks, you know, had some challenges coming through. those projects are very fast and very complex the first one for anybody is going to be incredibly painful so the barriers to entry are high and you know being in in a in locality right that the regionalization of that business really gives you a solid footprint okay perfect um you know i think building systems can be a little bit over 20 of of kind of the mix this year um is there a a loose mixed target longer term for the business um how do you think about that going forward first on the communication side you have a lot of growth that's that's going to continue to happen that we talked about before um on the building system side a lot of organic growth opportunity there but as we talked about you know doing some m a selectively over time we do believe that that 20 will grow larger in comparison to the 80 20 it is today okay Diversification is a positive thing.

Kurt Yinger, Analyst — D.A. Davidson

That makes sense. Maybe lastly, just to close, I mean, what do you kind of want to leave investors with? Better understand the story, kind of the opportunity set, anything you want to emphasize that we've already touched on?

Dan Pajovic, CEO

DICOM differentiates through our skilled workforce. That really is where it starts and ends. And the investments that we've been making, you know, the investments that we've done from a benefit perspective, Giving skilled workforce time off that equals people that have desk jobs, right? Two weeks when somebody starts with DICOM, up to five weeks. No different if you're sitting behind a desk or out working in the field. Ten holidays, right? No different if you're sitting behind a desk or working out in the field. Bringing up their medical benefits in a very difficult, you know, rising cost environment to give them better coverage, better peace of mind. Providing them life insurance coverage, right? A lot of these things that folks that are sitting in the office are used to, the skilled workforce has really been lagging behind. So, you know, we've been investing there, and we absolutely believe that when you can do that and when you can really start to impact the hearts and minds of our employees, that you're going to produce phenomenal long-term results, right? Leaning into your workforce means that they're going to lean right back into you, right? They're going to have that pride of delivering, pride of being part of DICOM. I talk about, to me, the perfect picture for DICOM is a world where anybody can come out of high school, maybe they didn't even graduate high school, they can start at any level of the company. We're going to provide them the opportunity. How do we do that? Through growth, right? We're going to provide them the opportunity, and we're going to provide them all of the training at every level. Too often that we assume that somebody's good at one role can automatically be promoted to the next. We're going to step in and provide that training to make sure that they're ready for that next role so that they can move to any level of our organization. And if you looked at our leadership across so much of the organization, you would see that that's exactly how many of us started and have come through that. That to us is what we're leaning into. That to us is what really differentiates us. And that's what sets us up to continue to deliver for our customers in an absolute generational growth deployment of infrastructure. Got it.

Kurt Yinger, Analyst — D.A. Davidson

Well, Dan, thank you for the time. This is great. Appreciate it.