Dycom Industries Inc

NYSE:DY

Earnings Call Analysis

Dycom Reports Strong Revenue Growth and Positive Outlook Amid Industry Opportunities

In the latest earnings call, Dycom Industries reported a 12% increase in contract revenues to $1.272 billion, with organic revenue up 7.6%. Adjusted EBITDA rose to $170.7 million, representing 13.4% of contract revenues. The backlog expanded to $7.856 billion, suggesting a robust demand with $4.467 billion expected to be completed in the next year. For Q4, Dycom anticipates mid- to high single-digit revenue growth, affected by seasonal factors. Importantly, the company foresees potential revenue opportunities from the BEAD program starting in the second half of 2025, ramping into 2026, as federal support for rural broadband increases.

Strong Revenue Growth Signals Resilience

During the third quarter of fiscal 2025, the company reported a robust $1.272 billion in contract revenues, marking a solid 12% increase year-over-year. Organic revenue growth stood at 7.6%, demonstrating the company's ability to thrive even after accounting for acquired businesses, storm work, and other one-time project effects. This growth is underpinned by increasing demands from key customers, particularly in fiber-to-the-home and converged network services.

Improved Margins Indicate Operational Efficiency

Adjusted EBITDA for the quarter reached $170.7 million, or 13.4% of contract revenues, reflecting a year-over-year increase in margin of 52 basis points. The gross margin improved to 20.8%, showing company efforts in operational efficiency yielding results. Non-GAAP G&A expenses, while increased slightly to 7.8% of revenue from the previous year's 7.7%, indicate ongoing management of costs even amidst growth.

Key Customer Contributions and Growing Backlog

The company's top five customers accounted for 55.7% of total revenues, with a notable organic growth rate of 16.7%. Notably, AT&T emerged as the largest customer, contributing $265.6 million (20.9% of revenues) and demonstrating significant growth of 58.4% organically. The backlog reached $7.856 billion, up from $6.834 billion the previous quarter, with approximately $4.467 billion expected to be completed in the next 12 months, indicating strong future revenue visibility.

Navigating Future Opportunities and Challenges

Looking ahead, the company expects total contract revenues in Q4 to increase by mid- to high single digits compared to the prior year, with organic revenue growth projected to be low to mid-single digits. This outlook reflects usual seasonal challenges, such as fewer working days and adverse weather conditions that could restrict operations. Additionally, anticipated costs associated with starting new contracts may constrain margins.

Strategic Mergers and Acquisitions Fuel Growth Potential

The company recently completed the acquisition of Black & Veatch’s wireless infrastructure division for $150 million, a move projected to enhance capabilities significantly. Integration efforts are progressing well, contributing positively to growth. Coupled with ongoing investments in expanding fiber networks, the company is positioning itself effectively to capitalize on increasing demand in high-capacity data networking, especially as hyperscalers expand their operations.

Federal Support for Broadband Expansion Represents Major Opportunity

The ongoing federal and state support for rural broadband initiatives is expected to yield substantial opportunities. The company anticipates beginning to see associated revenue from BEAD (Broadband Equity, Access, and Deployment) in the latter half of 2025, ramping into 2026. This generational deployment opportunity is critical for the company's long-term success as it navigates the evolving technological landscape.

Leadership Transition and Future Direction

The earnings call marked the retirement of longtime CEO Steven Nielsen, who highlighted the strong foundation laid over his tenure. The transition to new leadership under Dan Peyovich comes at a crucial time with various growth opportunities on the horizon. The company remains bullish on expanding customer demands and is committed to leveraging its scale and financial strength to deliver value.

Outlook for Q4 and Beyond

For Q4, the company expects a non-GAAP adjusted EBITDA percentage of revenue to rise by 25 basis points to approximately 9.8%. Despite the anticipated growth, increased operational costs due to seasonal factors and expansion efforts may challenge margin improvements. Overall, the underlying fundamentals remain strong, setting the stage for continued growth in the coming years.

Earnings Call Transcript 2025-Q3

[Operator]

Good day, and thank you for standing by. Welcome to the Dycom Industries, Inc. Third Quarter 2025 Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to Mr. Steven Nielsen, Chief Executive Officer. Please go ahead, sir.

[Steven Nielsen, executive]

Thank you, operator. Good morning, everyone. Thank you for attending this conference call to review our third quarter fiscal 2025 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 Dan Peyovich, our President and incoming Chief Executive Officer; Drew DeFerrari, our Chief Financial Officer; and Ryan Urness, our General Counsel. Now I will turn the call over to Ryan Urness.

[Ryan Urness, executive]

Thank you, Steve. All forward-looking statements made during this conference 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. These forward-looking statements are subject to risks and uncertainties, which may cause actual results to differ materially from current projections, including those risks discussed in the company's filings with the U.S. Securities and Exchange Commission. Forward-looking statements are made solely as of the original broadcast date of this conference call, and we assume no obligation to update any forward-looking statements. Steve?

[Steven Nielsen, executive]

Thanks, Ryan. As announced last June, I am retiring at the end of this month from Dycom, after over 30 years of service, 25 as CEO. This earnings call is my last. Accordingly, I will review this past quarter, Dan will review industry opportunities and operational highlights, while Drew will cover our financial performance and outlook. Dan and Drew will handle Q&A. After the Q&A, I will have a few final remarks.

Before I review our third quarter results, I would like to thank my fellow employees for their hard work and dedication. Your efforts make Dycom the special place it is, and I am so proud of what we have built together. To our directors, thanks for your wisdom, guidance and oversight over these last 25 years. I leave Dycom a much better leader because of you. To my fellow shareholders, your support as I have led our company has been invaluable. Thanks for the opportunity to benefit from your council in the market's discipline. And finally, Dan, I'm so excited for you and Dycom as you and your strong team lead our company to a bright future. I firmly believe Dycom's opportunities have never been greater. And I leave Dycom well assured that you and your team will take full advantage of those opportunities to the great benefit of customers, employees and shareholders. You have my full confidence in the support of the entire company.

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 Slides 12 through 18 for a reconciliation of these non-GAAP measures to their corresponding GAAP measures.

Turning to the quarter. Revenue increased year-over-year to $1.272 billion, an increase of 12%. Organic revenue increased 7.6% and as we deploy gigabit wireline networks, wireless/wireline converged networks and wireless networks. This quarter reflected an increase in demand from 3 of our top 5 customers. Non-GAAP gross margin was 20.8% of revenue and increased 45 basis points compared to Q3 of fiscal '24. Non-GAAP general and administrative expenses were 7.8% of revenue. And all of these factors generated adjusted EBITDA of $170.7 million or 13.4% of revenue and adjusted earnings per share of $2.68. Liquidity was strong at $462.8 million, and during the quarter, we completed the acquisition of Black & Veatch's public carrier wireless telecommunications infrastructure business.

Now I will turn the call over to Dan for a business update.

[Daniel Peyovich, executive]

Thank you, Steve, and good morning, everyone. I'd like to start by expressing my gratitude for the support and partnership Steve has provided throughout this transition. His guidance has firmly established our company as an industry leader. On behalf of the Board of Directors and all our employees across the country, I want to extend our deepest thanks to Steve for his dedication over the past 25 years.

I'd like to welcome Kevin Wetherington, who joined as our new Chief Operating Officer in October. Kevin brings over 25 years of experience in leading national operations with large distributed workforces across the country. Kevin has already been out in the field with a number of our subsidiaries and met with customers as he steps into lead operations across Dycom. We're delighted to have him join our executive team.

Moving to our results. We delivered another strong quarter with year-over-year growth in both revenue and EBITDA. We're encouraged to see continued and additional strategic transactions, including refinancings and commitments to increase capital expenditures by many of our customers with some customers also increasing homes past expectations. We work hard to deliver quality every day, and we believe we are well positioned to capitalize on these opportunities.

Fiber-to-the-home work and our maintenance and operations services are a core part of our business, and we secured both extensions and new awards in a number of markets for these services from AT&T during the quarter. We're excited about the increasing opportunities we see related to AI, including expansive new national deployments of high-capacity, low-latency inter and intra city networks. We believe we are in the early stages of a broad set of significant opportunities with a number of customers as hyperscalers look to connect their data centers with long-haul, private redundant fiber networks. During the quarter, we received an award from Lumen for the expansion of their inter and intercity fiber network to provide additional capacity for hyperscalers. The integration of our recent wireless acquisition is going well, and we are seeing a participated ramp in wireless network modernization and deployment services. We remain comfortable with our initial revenue expectations for this acquisition, and we continue to integrate and execute on anticipated synergies.

Lastly, we continue to see unprecedented levels of federal and state support for rural broadband deployment programs. We believe the magnitude and importance of these programs should not be underappreciated, as they address some of the more difficult locations to deploy in America and represent a generational deployment opportunity. We continue to believe that we will see revenue opportunities from BEAD in the second half of calendar 2025, ramping into 2026.

In summary, we executed well during the quarter and continue to capitalize on opportunities across our industry. We believe that the long-term value of our maintenance and operations business will continue to increase relative to our deployment of wireline and converged networks, as those deployments dramatically increase the amount of outside plant that must be extended and maintained. As customer projects increase in scope and complexity, our industry focus, scale and financial strength position us well to deliver valuable services and anticipate and meet the demand for our customers. We believe that we are building momentum in the markets we serve as we pursue our vision to connect America.

I would like to acknowledge our 16,000 employees for their dedication to delivering for our customers safely every day. We've grown significantly over the past several years and have unprecedented opportunities ahead of us. Our results and continued success are because of you. Thank you.

I'll pass the call to Drew for his financial review and outlook. Drew?

[H. DeFerrari, executive]

Thanks, Dan, and good morning, everyone. Going to Slide 6. Contract revenues were $1.272 billion, an increase of 12% compared to Q3 '24. Organic revenue increased 7.6% after excluding revenue from acquired businesses each period, storm work for the current quarter and revenue from a change order and project closeout in the prior year quarter. A presentation of these amounts can be found in our press release and materials for today's call. Adjusted EBITDA was $170.7 million or 13.4% of contract revenues, an increase of 52 basis points compared to $143.2 million or 12.9% in Q3 '24. Gross margin improved 45 basis points to 20.8% of revenue compared to 20.4%. For comparative purposes, the prior year adjusted EBITDA and gross margin exclude the impacts of a change order and closeout of several projects reported in Q3 '24.

G&A this quarter included incremental stock-based compensation of $7.1 million related to the CEO transition and acquisition integration costs of $4.2 million related to the Q3 '25 acquisition. Excluding these amounts, non-GAAP G&A expenses were 7.8% of revenue compared to 7.7% in Q3 '24. Non-GAAP net income increased to $2.68 per share compared to $2.23 per share in Q3 last year after excluding $0.59 for the change order and project closeout benefit last year in Q3.

Going to Slide 7. During the quarter, our top 5 customers combined produced 55.7% of revenue and grew organically 16.7%. AT&T was our largest customer at $265.6 million or 20.9% of revenue and grew organically 58.4%. Lumen was our second largest customer at $146.4 million or 11.5% of revenue. Our third largest customer was $104.9 million or 8.2% of revenue and grew 50.2% organically. Comcast was at $102.7 million or 8.1% of revenue. And finally, Brightspeed was our 5th largest customer at $88.6 million or 7% of revenue and grew 43.3% organically. All other customers decreased slightly on an organic basis.

Going to Slide 8. Backlog at the end of the third quarter was $7.856 billion versus $6.834 billion at July 2024, an increase of over $1 billion. Of this backlog, approximately $4.467 billion is expected to be completed in the next 12 months. Headcount was 15,980.

Going to Slide 9. Our financial position and balance sheet remain strong. Cash and equivalents were $15.3 million and liquidity was $462.8 million. At the end of Q3, we had $450 million of term loan and $155 million of drawn revolving credit facility borrowings, which was used for acquisition funding during the quarter. Additionally, we had $500 million of senior notes outstanding. Our capital allocation continues to prioritize organic growth, followed by M&A and opportunistic share repurchases within the context of a historical range of net leverage.

Going to Slide 10. Cash flows from operating activities were $65.8 million in Q3. The combined DSOs of accounts receivable and net contract assets were 119 days. Capital expenditures were $66.4 million, net of disposal proceeds, and gross CapEx was $74.6 million. During Q3, we acquired a wireless telecommunications infrastructure business for $150 million in cash.

Going to Slide 11. As we look ahead to the fourth quarter, we expect total contract revenues to increase mid- to high single digits as a percentage of contract revenues compared to $952.5 million in Q4 '24. Included in the expectation for Q4 '25 is approximately $35 million of revenues from acquired businesses not owned for the entirety of both the current and prior year quarters. For comparison purposes, there were no acquired revenues from these businesses in Q4 '24. As a result, organic revenues are expected to increase low to mid-single digit as a percentage of contract revenues.

Our outlook for Q4 reflects normal seasonal factors such as fewer available workdays due to the holidays, reduced daylight work hours and inclement winter weather conditions. These seasonal factors as well as additional operating costs to initiate work on a number of new awards are also expected to impact earnings. For Q4 '25, we expect non-GAAP adjusted EBITDA percentage of contract revenues to increase approximately 25 basis points compared to 9.8% in Q4 '24. Other expectations about the Q4 outlook include $9.9 million of amortization expense, $9.3 million of stock-based compensation, which includes $2.1 million of incremental expense related to the CEO succession transition, $16.5 million of net interest expense, a 26% non-GAAP effective income tax rate and 29.5 million diluted shares.

As I wrap up, I would like to personally say thank you to Steve for your leadership and dedicated service to the company over the past 3 decades. I wish you well in your retirement. I'm excited to work alongside Dan and our dedicated team as we continue to grow the business and focus on delivering long-term value for our shareholders.

Operator, this concludes our prepared remarks. You may now open the call for questions.

[Operator]

[Operator Instructions] And our first question will come from Adam Thalhimer from Thompson, Davis.

[Adam Thalhimer, analyst]

Nice quarter, and Steve, congrats on your last conference call.

Drew, can you actually just pick up where you left off, you talked about start-up incremental costs in Q4 related to the startup of large programs. Can you just flesh that out a little bit for us?

[H. DeFerrari, executive]

Yes, Adam, thanks for the question. So as we've done in the past, we've announced new awards. We're pleased to have a number of new awards and extensions. And as Dan called out, on the Lumen award as well. And so we've got some costs that we've been -- these are a number of new areas for us. So there are some costs expected in the quarter as we ramp up into next year. The other thing I would add there is we continue to ramp on the recent acquisition. And so we've got a little bit of cost there as well.

[Adam Thalhimer, analyst]

And then can you talk about the what you got from Lumen in the quarter versus the total Lumen AI opportunity, because the backlog went up basically by the Black & Veatch acquisition, I think.

[Daniel Peyovich, executive]

This is Dan. So first, we're not going to size the revenue of our backlog opportunity including the Lumen AI deal. We're very excited to continue our partners there. Certainly believe that we got our fair share. And really, I want to point out that we view this as kind of the start of what's to come for the data centers. As the hyperscalers look to connect and extend their data centers across the country and this new surge of long-haul activity, we really see this as being a significant potential opportunity. And excited to have the partnership with Lumen to get this started, but having a lot of conversations with other customers, having a lot of conversations with hyperscalers and believe this could be significant in the years to come.

[Operator]

Our next question will come from Alex Waters from BofA.

[Alexander Waters, analyst]

Maybe just first off here, Dan, I think in your script, you noted the BEAD opportunity kind of 2H '25 and 2026. It seems like it's changed a little bit from last quarter when I think it was noted 2Q. Maybe if you could just describe that a little bit more?

[Daniel Peyovich, executive]

Last quarter, we talked about was being in the second half, the third quarter of 2025, we still believe that we can see revenue in that time frame. We're just talking about probably the significant ramp being in 2026. And everybody saw Louisiana made some announcements yesterday. Certainly excited to see that 95% of that ended up being cyber. We'll see how it all plays out, but certainly a good start. And collectively, with what the amounts that would be contributed from the sub-brand fees, that's over $1 billion in fiber construction for Louisiana on. So excited to see how it plays out, and we'll see on timing, but we still believe back half of 2025, ramp in 2026.

[Alexander Waters, analyst]

Okay. Perfect. And then maybe just on kind of the all other customers bucket. It seems like that was down 9% year-on-year. Maybe just could you talk about what you're seeing from these customers and kind of what the expectations are going forward?

[Daniel Peyovich, executive]

Yes. No, it's a good question. So the way we look at it, and we understand that's how we show it on the slide there. The way we look at it, we have a lot of customers that are moving in and out of the top 5. We're very pleased with the breadth of our customers, and we have a number of customers now, 6, 7 and 8 are all in the $80 million range. So as those folks move in and out, it does affect the overall numbers. So we really like to look at it, if you look at the top 10 customers, which represents about 75% of our revenue. They increased 17% this quarter. So we feel that's a better guide.

[Operator]

Our next question will come from Alex Rygiel from B. Riley Securities.

[Min Chung Cho, analyst]

This is actually Min on for Alex. Steve, first, I want to thank you for this great and the long run, just wishing you the best in retirement. So my first question has to do with -- just in terms of the BEAD funding, obviously, it looks like you're not really expecting much change in terms of funding support. But can you just provide any update on your thoughts just under the Trump administration -- under a new Trump administration?

[Daniel Peyovich, executive]

The first thing I'd say is we are seeing some things coming out. The likely stance from the new administration around net neutrality, digital discrimination, those would be good for our customers, good for our industry. On the bulk of it, of course, for all of it, still too early for us to speculate that. What we would continue to say bipartisan support when BEAD was passed both the current and previous administration supported getting broadband to rural homes, and we believe that will continue. There's no doubt they're coming out of COVID that high-speed Internet is a priority, getting that out to rural homes into every home in America is really we look at it the same way as power was 90 years ago. So strongly believe that that's going to happen. Some questions around timing and exactly how it's going to play out. But again, some of these early awards, what we're seeing in Colorado and the participation there. We believe those are all good times.

[Min Chung Cho, analyst]

Excellent. Also, can you just provide any kind of detail around how the integration of Black & Veatch is going so far? And what were your wireless revenues in the quarter?

[Daniel Peyovich, executive]

Sure. The integration is going well. The work that they're doing for the equipment replacement is ramping up a little bit quicker than we expected. So we'd like to see that. And overall, it's been a good acquisition for us and the team is jelling well and getting ramped up for next year.

[H. DeFerrari, executive]

Yes. And Min, this is Drew. I'll jump in here as well. So we had about $4.2 million of integration costs in the quarter there. We expect some modest cost coming up in Q4 as well, but we're seeing a nice ramp there.

[Min Chung Cho, analyst]

Okay. And what were your total wireless revenues?

[H. DeFerrari, executive]

And wireless revenues around -- just over 4.5% of revenue for the quarter.

[Operator]

Thank you. And our next question will come from Frank Louthan from Raymond James.

[Frank Louthan, analyst]

Steve, congratulations on the career and finish in the last earnings call here. I appreciate all the help over the years. So I just wanted to check on as far as the guide, I assume any potential storm cleanup revenue is not in the guide. But can you give us an idea of what you think that impact will be on the fourth quarter? Will it be more or less do you think, from Q3? And any impact to to the regular business from -- related to the storms?

[H. DeFerrari, executive]

Yes. Frank, this is Drew. Thanks for the question. So certainly, our first focus on the storm work is helping our customers get service restored in these areas. We had about $46 million in Q3. That number has tapered off quite a bit as we roll into Q4. So not reflecting that, not calling out specific storm work in the guide at this point. And then as far as disruption in Q3, I would tell you we had four storms affecting our areas. So there is a little bit of trade-off of work there that the normally scheduled work that would have gotten done. But as we're moving into Q4, there's not really that displacement in the period.

[Frank Louthan, analyst]

Okay. And as far as some of these AI builds that you're seeing, is relative to maybe a few months ago, are you seeing these be more substantially related to larger long-haul projects versus short spurs off of networks that we maybe have seen previously?

[Steven Nielsen, executive]

Frank, quarter-over-quarter, we've just seen certainly more and more information, more and more of the hyperscalers talking about the need, certainly committing CapEx and future CapEx towards the endeavor. I think exactly how the shape of the curve plays out remains to be seen. But the conversations that we're having certainly have to do with long haul, they need to -- ultimately, they're trying to increase their capacity. They're looking for redundancy. When we think about redundancy, if that's redundancy of routes, that could be significant from a long-haul perspective. And then you have connection of the existing data centers. But as they kind of get the power side figured out and are building new data centers, we've got extensions to the new data centers as well. So all combined, we believe that not only is it going to be a significant opportunity in the shorter term, we still think that they're going to continue as they build those out that it could be there for a number of years.

[Operator]

Our next question comes from Sangita Jain from KeyBanc Capital Markets.

[Sangita Jain, analyst]

So if I can ask one on GigaPower. I think you showed up for the first time as your top 10 customers. Can you talk a little bit more about how you see that growing in the near term?

[Daniel Peyovich, executive]

Yes. So we've been working with GigaPower for a couple of years now. Very much enjoy our relationship there. The project is going well. As I mentioned before, some of these customers move in and out with the breadth of our business now, it just so happened in this quarter, they moved into the top 10. So pleased with that and continue -- we'll continue with those builds.

[Sangita Jain, analyst]

Great. And on your Lumen work and any other data center type work that you're looking at, is there a difference in how you price them or a margin profile for those versus your standard fiber, fiber-to-the-home type work?

[Steven Nielsen, executive]

Yes. Thanks, Sangita. The first thing I would say is we're certainly not going to talk about pricing kind of theory on the call. What I would tell you is we look at the opportunities, we look at the risk, we look at the size of the opportunities, we're putting all those things together. Again, I do want to just reinforce that we're excited about the Lumen award, but the opportunity that's out in front of us in the data center space is significant. And in addition to that, we still have, as everybody noted this quarter, Verizon and Frontier, the transaction got approved by the shareholders. What they've talked about now is adding an incremental 7 million to 12 million passings from what we saw before. So if you look prior to third quarter, there's already over 9 million passings added incremental this year, another 7 million to 12 million. we'll see what AT&T says in their upcoming call on December 3, that could be another 10 million to 15 million. So significant opportunities still there. We're very much excited about the opportunity to continue to fiber-the-home passing, and it's just great to see our customers continue to add CapEx and increase some of these homes past. So significant opportunities. And then, of course, we got asked about BEAD before, not just BEAD all of the funding, the world, whether it's the state programs, whether it's BEAD and whether it's everything else. We still see that, that is going to continue to shape well as we look forward to next year. And when we combine all three of those opportunities, again, we look forward at the business and just see tons of growth potential, and we're going to work hard to see if we can capitalize on that.

[Operator]

And our next question comes from Eric Luebchow from Wells Fargo.

[Eric Luebchow, analyst]

Great. Steve, best of luck on the next stage into retirement. So just to -- just to kind of talk about some of the large opportunities you have, the AI data center build, the bead program potentially picking up. Dan, maybe you could talk about whether you'll kind of have to ramp up your labor force to meet all this demand into the next year or so? And any color on what the environment is like for hiring new employees, whether they're direct Dycom employees or subcontractors?

[Daniel Peyovich, executive]

Appreciate the question. The first thing I'd say we're strategic and disciplined in the way that we look at talent. We're making investments in training programs. We're making investments in facilities and something we're always trying to stay ahead of. We don't stock up a ton of labor ahead of opportunities. We really want to wait to see how the opportunities develop. What I would point out a couple of years ago, we grew almost 22% in 1 year. Really proud of the job that our teams did to stay ahead of that from a labor perspective. We'll see how everything shakes out. To your point, we have a lot of factors that are coming together and we got to see what that shape looks like. But we feel confident that our teams can stay ahead of it. Certainly, it takes significant effort, but we feel good about our position there.

And then sorry, same question -- mix for subcontractors. That depends on project by project, geography by geography. And sometimes during the time of the project, we might start with more subcontractors to begin, and we might work in towards our labor forces. So always foresee a mix there.

[Eric Luebchow, analyst]

Got you. And I think the last earnings call, you mentioned that some of your smaller customers, you expect that they may slow a little bit near term as they we're kind of assessing opportunities under the BEAD program in their core market. So I just wanted to see if you think that's still the case over the next couple of quarters as we get more clarity on state awards from BEAD and any -- how that how that has tracked so far versus the expectations you laid out last quarter?

[Daniel Peyovich, executive]

Sure. Yes. So this quarter, we did see just a little bit come down from our co-ops when we look at it sequentially quarter-over-quarter. And we really do believe that, that has to do with them waiting to see how BEAD is going to shake out and what their funding lives. Again, looking at the Louisiana results, good to see some of our co-op customers in that mix as they pick up some of that work, we think that, that revenue is going to continue to move forward.

[Operator]

[Operator Instructions] And our next question will come from Gene Ramirez from D.A. Davidson.

[Unknown Analyst]

Just want to clarify, your cost of revenue and G&A -- SG&A for the next quarter, is it in line or with 3Q, or is there going to be a bit of a step-up like you mentioned earlier?

[H. DeFerrari, executive]

Thanks, Gene, this is Drew. So Q4 is going certainly from a margin -- gross margin perspective be impacted by the Q4 conditions around available workdays, available work hours, weather -- winter weather conditions as well. And so typically, we see some sequential impacts associated with that. And then from a G&A perspective, there are certain seasonal costs that come through there as well as the business seasonally comes in. There are certain costs there that come down. But it's something that we tightly manage.

[Unknown Analyst]

And regarding the BEAD's program, -- can you clarify whether you -- when will you actually start -- I guess the better question is, from your talks with your clients, when do you expect the actual building of fiber deployment will it be more towards the end of next fiscal year and going into 2026? Or would it -- or are you seeing more immediate turnarounds given how fast the BEAD program expected to accelerate now that we've passed the second phase. Any color on that?

[Daniel Peyovich, executive]

For sure. Thanks, Gene. This is Dan. So again, I think Louisiana is kind of first out of the gate. Those are preliminary awards. So we've got to see when they get to the actual awards. This is something we're tracking both with our customers. We're talking to the different state run programs as well. There's a lot of engineering to be done. There's a lot of permitting to be done. So there is some time even from when we get to start talking to our customers about potential opportunities and awards, there's time after that to really get through that cycle. And that's why we think that we'll really start to see some revenue in the back half, latter half of calendar 2025, and then ramping into 2026 as those programs themselves ramp up.

[Unknown Analyst]

And just again, going back to the backlog question. I guess you're not parsing out what would be organic backlog. But if we're taking that 12-month number, what is the cadence of the backlog -- or the burn rate through next year? Will it be more second half weighted? Or do you see some similarities compared to this year?

[H. DeFerrari, executive]

Yes, I'll jump in there. So pleased with the awards that we announced, the benefits that we see there both in the next 12 months as well as the total backlog. We're not going to disaggregate the timing of that. We're just -- I would just reiterate that we're happy to see that increase. And then the other thing I would add is that, as we've talked about in the past, it's not always tightly correlated to the revenue growth. That being said, I think the higher overall number as well as the next 12-month number is a nice starting point as we're looking ahead.

[Operator]

Our next question comes from Avi Jaroslawicz from UBS.

[Avinatan Jaroslawicz, analyst]

Just wanted to unpack what's driving the organic growth slow down, slight deceleration into Q4 here.

[H. DeFerrari, executive]

Sure. This is Drew. Avi,I'll jump in on that. So one, we had a strong Q3 as we've provided in our outlook, we see mid- to high single-digit total growth in that little to mid organic growth. We've had some customers. We called this out on the last call that had a stronger front half of the year that are a bit slower in the back half of the year. And then certainly, as you -- as we work into our Q4, as I mentioned, with the available days, hours, et cetera, and weather, there's just certain amounts of constraints of how much you can grow during that period of time. We're pleased with where we're heading. We're just not going to get ahead of ourselves in the outlook.

[Operator]

And our next question will come from Alan Mitrani from Sylvan Lake Asset Management.

[Alan Mitrani, analyst]

Congratulations, Steve. This is, I think, my longest CEO relationship, given how long you've been CEO, like separation anxiety, you're going to have to maybe

[Steven Nielsen, executive]

The longest investor relationship, too. And I may not have as much separation anxiety.

[Alan Mitrani, analyst]

We appreciate it. We look forward to working with Dan and the team. One thing that I noticed, besides the slowdown, obviously, at least short term, is the SG&A expense for last year and for this year, it seems like it's growing faster than the revenues. Is that -- can you talk about -- I realize there's been some transition, there's been multiple acquisitions, and I'm talking about taking out some of these excess costs that you're talking about. Do you see foresee over the next year or 2 years, obviously, revenue starting to ramp up faster than SG&A?

[H. DeFerrari, executive]

Yes, Alan, I'll jump in on that. This is Drew. So I think you'd highlighted there. We did have some incremental costs in the period that we called out, about $7.1 million of stock comp and then some incremental integration costs, about $4.2 million. If you strip those out, we're only up slightly year-over-year. I think what I would say is, as we've been able to grow in the past, we've been able to get some operating leverage out of G&A., and that would be something that I would expect to continue. Happy with what we see in the outlook and the opportunities that are there, and we'll just continue to tightly manage it.

[Alan Mitrani, analyst]

Yes. It seems like in the past, you've had these situations where you're spending a little more to anticipate the next big revenue jump, given the BEAD is coming and also these acquisitions and new opportunities with AI. Is that the setup that we're looking at over the next couple of years the way you envision it? I'm not talking about as a percent of revenue, SG&A has always been fairly contained and you guys have done the next job. I'm talking about more just the next step-up in terms of growing the ability to handle $5 billion to $6 billion plus in revenues instead of where you've been in the last few years?

[Daniel Peyovich, executive]

Alan, this is Dan. Thanks for the question. So absolutely, first off, we're always working on G&A and I entirely managing that. Hopefully, you heard from me today, very excited about the opportunities, right? We see the data center opportunity, which continues to grow quarter-over-quarter conversation over conversation. We talked about the customers have been very active strategically, some of the combinations. They've been increasing their homes passed. Again, we think that's something else that's going to hopefully play out next year and in the years to come. And then you add to that BEAD and other funding program. So the growth opportunities appear to be there. We're going to work hard to see if we can capitalize on them.

[Alan Mitrani, analyst]

Great. And then lastly, there's been a lot of talk, obviously, with the new administration, Elon Musk and Starlink, and you guys, people talk about the potential always the fear of BEAD being canceled or some sort of spending clawbacks. Can you talk about -- I realize you're further down on the totem pole. But can you just talk a little bit about how that works in terms of the allocation funding coming through the state, the matching with the government and the ability to delay or push that off, just what your view is on that.

[Daniel Peyovich, executive]

Well, I think the first thing on the alternative technologies. That's always been part of the conversation that predates the pending administration change. So we've always thought that that would play a part because for some homes, it just is what's going to make the most sense from an economic standpoint. We'll see how that plays out state over state. Again, with Louisiana coming out and showing a very small percentage of satellite, I think that bodes well. Over 95% is going to be fiber. And as we talked about over $1 billion when you include the money brought in by So a lot remains to be scripted. Obviously, you can't call the ball on everything that's going to come out of the new administration. But the states are pretty far along. All 50 states have gone through Phase 2 now. They're all working -- many of them now working on their sub-grantee process. So I think we're all going to learn a lot here in the coming months. .

[Operator]

And our next question comes from Adam Thalhimer from Thompson Davis.

[Adam Thalhimer, analyst]

AT&T, the awards in the quarter, were those wireless or wireline? And were there any new states in there?

[Daniel Peyovich, executive]

Yes. Thanks, Adam. This is Dan. Those were wireline. And yes, we were fortunate to pick up some new markets as well.

[H. DeFerrari, executive]

Yes, Adam, we did not list out the wireless in that. This was just new awards and extensions.

[Adam Thalhimer, analyst]

Got it. And then Verizon was down sequentially more than I expected in Q3. I was curious if you pulled crews like from those territories for stores? Or what drove the sequential decline considering they want to do more FiOS builds?

[Daniel Peyovich, executive]

Yes. Not related to storm work. As you know, these builds, sometimes they go a little bit faster, sometimes they go a little bit slower. Certainly excited about our relationship and the work that we continue to do for Verizon. And like I talked about before, we see that them getting through and getting the nod for the Frontier combination, we believe that's going to be a positive for us.

[Adam Thalhimer, analyst]

Okay. And then just lastly, I think I had a note there were $2.5 million of B&V integration costs in Q4, but I didn't see any in the guidance. So are those not...

[H. DeFerrari, executive]

No, Adam. So originally, we had guided a little bit higher than we thought was going to come through. The actual integration cost in Q3 was $4.2 million. We've got some modest costs that we would expect in this quarter, and we'll call them out if they're meaningful, but it wasn't notable for purposes of calling out ahead of time.

[Operator]

And I am showing no further questions from our phone lines. I'd now like to turn the conference back to management for closing remarks.

[Steven Nielsen, executive]

Thanks, operator. To conclude this, my final call, I have a special word for all of the Dycom team. Since last June, I've traveled across the country to thank hundreds of you in person for all you have done for me. I left each visit in awe of your dedication to our customers. Your strong desire to excel, your commitment to the well-being of your fellow employees and most importantly, your integrity doing the right thing even when no one is watching. In leaving Dycom, I have always tried to live up to an agent Chinese proper. It says, a leader is best when the people barely know he exists. When his work is done is an fulfilled, they will say, we did it ourselves. And you really did. Today, my work for Dycom is done, my aim for the company fulfilled. Remember, in everything serve customers skillfully, deliver results with discipline, accountable in all you do. Thanks so much. It's been great.

[H. DeFerrari, executive]

Thank you, and best wishes, Steve. We thank everybody for joining this morning. We look forward to updating you on our annual results the last week of February. Take care.

[Operator]

Thank you. This does conclude today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.