Steven Nielsen - President & CEO Drew DeFerrari - CFO Tim Estes - COO Rick Vilsoet - General Counsel.

Tahira Afzal - Keybanc Simon Leopold - Raymond James Alex Rygiel - FBR Adam Thalhimer - BB&T John Rogers - DA Davidson Filomena Liggio - Clearwater Noelle Dilts - Stifel Alan Mitrani - Sylvan Lake Asset Management.

Ladies and gentlemen, thank you for standing by and welcome to the Dycom Results Conference Call. For the conference, all the participant lines are in a listen-only mode. There will be an opportunity for your questions; instructions will be given at that time. (Operator Instructions) As a reminder, today's conference is being recorded.

I'll turn the conference now to Mr. Steven Nielsen. Please go ahead..

Thank you, John. Good morning, everyone. I'd like to thank you for attending this conference call to review our fourth quarter fiscal 2014 results.

During the call, we'll be referring to a slide presentation, which can be found on our Web site, www.dycomind.com under the heading "Events." Relevant slides will be identified by number throughout our presentation.

Going to Slide two, today we have on the call, Tim Estes, our Chief Operating Officer; Drew DeFerrari, our Chief Financial Officer; and Rick Vilsoet, our General Counsel. Now, I will turn the call over to Rick Vilsoet..

Thank you, Steve. Referring to Slide three, except for historical information, the statements made by company management during this call may be forward-looking and are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements, including those relating to the company's outlook, are based on management's current expectations, estimates and projections and involve known and unknown risks and uncertainties which may cause the company's actual results in the future periods to differ materially from forecasted results.

Those risks and uncertainties are more fully described in the company's annual report on Form 10-K for the year ended July 27, 2013 and other periodic filings with the Securities and Exchange Commission. The company assumes no obligation to update forward-looking statements.

Steve?.

Thanks, Rick.

Now moving to Slide four and a review of our fourth quarter results; as you review our results, please note that we have presented certain revenue amounts excluding revenues from subsidiaries acquired during the fourth quarters of fiscal 2013 and 2014, certain revenue amounts excluding revenues from stimulus-funded projects, adjusted EBITDA and adjusted EPS, all of which are non-GAAP financial measures in our release and comments.

See Slides 14 through 18 for a reconciliation of non-GAAP measures to GAAP measures. Revenue for the quarter increased slightly year-over-year to $482.1 million, an increase of just less than 1%. After excluding revenues from subsidiaries acquired during the fourth quarters of 2013 and 2014, revenue declined 0.7% organically.

Revenues for the quarter were impacted by an expected decline in worker rural customers receiving stimulus-funding and customers modulating near-term spending as network strategies adapt to a changing environment.

Gross margins and general and administrative expenses as a percentage of revenue were essentially in line year-over-year, reflecting solid operating performance. All of these factors produced adjusted EBITDA of 57.5 million or 11.9% of revenue, and net income of $0.48 per share compared to net income of $0.44 in the year ago quarter.

Net income was increased from comparatively lower amortization expense and by higher than expected other income in the quarter, reflecting strong prices for assets sold through our routine asset disposal program. Liquidity was solid in the quarter with cash and availability under our current credit facility totaling 183.3 million.

And finally, during the quarter, we completed the acquisition of Watts Brothers Cable Construction, a supplier of wireline construction services throughout the southeast and Midwest..

Today, that consensus is fully visible. Since our last earnings call in May, a number of major industry participants have initiated significant wireline network deployments that dramatically increase bandwidth, public announcements of new high bandwidth network deployments are occurring almost weekly.

Most major industry participants now believe that newly deployed networks should be designed to provision bandwidth enabling 1 gigabit speeds to individual consumers.

Previous network architectures, which are not capable of the new standard are being faced out by some as not future-proof, and new architectures are being developed, tested and deployed. All of these industry developments are producing opportunities across a broad array of our existing customers, which in aggregate are unprecedented for the industry.

Currently, we're providing engineering and design in aerial and underground construction services for 1 gigabit full deployments. These services are being provided across the country in nine major metropolitan areas to a number of customers.

We believe their revenue and opportunities driven by this new industry standard are accelerating throughout the remainder of this calendar year and into 2015.

As with prior industry changes of this magnitude, we expect some near-term customer spending modulations as network strategies adapt to the new environment, as well as some of the normal timing uncertainty associated with the initiation of large scale network deployments.

We remain confident that our competitively unparallel scale and market share position us well to deliver valuable service to our customers for those opportunities which have the highest likelihood of benefiting our shareholders.

Moving to Slide six; during the quarter we experienced the effects of an industry environment, which we believe continues to improve. AT&T was our largest customer at 20% of total revenue or 96.5 million. AT&T grew 19.1% organically year-over-year. Wireline services grew organically for the sixth consecutive quarter.

Revenue from CenturyLink was 60 million or 12.4% of revenue. CenturyLink was our second largest customer. Revenue from Comcast was 58.6 million or 12.2% of revenue. Comcast was our third largest customer, and grew organically 12.1%. Verizon was Dycom's fourth largest customer for the quarter at 8% of revenue or 38.6 million.

Revenue from Windstream was 26.5 million or 5.5% of revenue. Windstream was our fifth largest customer. Altogether, our revenue declined 0.7% after excluding revenues from subsidiaries acquired during the fourth quarters of 2013 and '14.

Our top five customers combined produce 58.1% of revenue, declining 2% organically, while all other customers grew 1.1% organically. Of note, organic revenue increased 1.7%, excluding projects funded in part by the American Recovery and Reinvestment Act of 2009..

Today, that consensus is fully visible. Since our last earnings call in May, a number of major industry participants have initiated significant wireline network deployments that dramatically increase bandwidth, public announcements of new high bandwidth network deployments are occurring almost weekly.

Most major industry participants now believe that newly deployed networks should be designed to provision bandwidth enabling 1 gigabit speeds to individual consumers.

Previous network architectures, which are not capable of the new standard are being faced out by some as not future-proof, and new architectures are being developed, tested and deployed. All of these industry developments are producing opportunities across a broad array of our existing customers, which in aggregate are unprecedented for the industry.

Currently, we're providing engineering and design in aerial and underground construction services for 1 gigabit full deployments. These services are being provided across the country in nine major metropolitan areas to a number of customers.

We believe their revenue and opportunities driven by this new industry standard are accelerating throughout the remainder of this calendar year and into 2015.

As with prior industry changes of this magnitude, we expect some near-term customer spending modulations as network strategies adapt to the new environment, as well as some of the normal timing uncertainty associated with the initiation of large scale network deployments.

We remain confident that our competitively unparallel scale and market share position us well to deliver valuable service to our customers for those opportunities which have the highest likelihood of benefiting our shareholders.

Moving to Slide six; during the quarter we experienced the effects of an industry environment, which we believe continues to improve. AT&T was our largest customer at 20% of total revenue or 96.5 million. AT&T grew 19.1% organically year-over-year. Wireline services grew organically for the sixth consecutive quarter.

Revenue from CenturyLink was 60 million or 12.4% of revenue. CenturyLink was our second largest customer. Revenue from Comcast was 58.6 million or 12.2% of revenue. Comcast was our third largest customer, and grew organically 12.1%. Verizon was Dycom's fourth largest customer for the quarter at 8% of revenue or 38.6 million.

Revenue from Windstream was 26.5 million or 5.5% of revenue. Windstream was our fifth largest customer. Altogether, our revenue declined 0.7% after excluding revenues from subsidiaries acquired during the fourth quarters of 2013 and '14.

Our top five customers combined produce 58.1% of revenue, declining 2% organically, while all other customers grew 1.1% organically. Of note, organic revenue increased 1.7%, excluding projects funded in part by the American Recovery and Reinvestment Act of 2009..

Both backlog calculations reflect solid performance as we continue to book new work renew existing work and anticipate substantial future opportunities. For AT&T, we renewed for three years a wireless construction services agreement for Florida, Georgia and Kentucky.

With Comcast, we secured new construction service agreement in New Mexico and the state of Washington. For Charter, we renewed cable construction and maintenance service agreements in Illinois, Missouri, Tennessee, Alabama and Texas.

From Corning, we received construction and/or engineering services agreements for Washington, Oregon, Nevada, Utah and Colorado. For Verizon, we extended and expanded for three years our central office infrastructure services agreement for New York, New Jersey and Pennsylvania.

And finally, we secured rural and municipal broadband projects in a number of states, including Washington, Oregon, Colorado, Minnesota, Arkansas, and South Carolina. Headcount increased during the quarter to 10,592. Now, I'll turn the call over to Drew for his financial review and outlook..

Thanks, Steve, and good morning everyone.

Going to Slide eight for a summary of the quarterly results; contract revenues for Q4 of 2014 were 482.1 million, businesses acquired in the fourth quarter of 2014 and 2013 contributed 9.5 million of revenue on the current period, and 2.6 million in the year ago period, adjusted EBITDA came in at 57.5 million, which was near the prior year results, and earnings per share non-GAAP were $0.48 per share compared to $0.44 per share in Q4 '13.

Turning to Slide nine; total revenue increased 482.1 million, reflecting growth from several significant customers offset by declines from rural customers on stimulus projects and certain customer spending modulations during the quarter.

Gross margins were in line year-over-year, and G&A was up with the inclusion of acquired companies for the fourth quarter this year and a slight increase in stock-based compensation. Higher depreciation from recent CapEx was more than offset by the $2.9 million decline in amortization.

Adjusted EBITDA percent was essentially in line year-over-year and reflect the sound performance. Turning to Slide 10; our balance sheet continues to reflect the strength of our business and our liquidity as this is at 183.3 million with cash on hand and availability on our credit agreement.

Operating cash flows reflect changes in working capital from our sequential growth. Capital expenditures net of disposals were 12.6 million and gross CapEx was approximately 18.6 million. As we enter our new fiscal year, we anticipate capital expenditures net of disposals to range from 80 million to 85 million during fiscal '15.

On our credit facility, borrowings increased approximately 44.7 million to support sequential growth and to fund the acquisition of Watts Brothers Cable Construction during Q4. Now, going to our outlook on Slide 11; as we look ahead into the first quarter of fiscal 2015, we anticipate revenues which range from 490 million to 510 million.

We expect network investments by several large customers, decreases from rural customers on stimulus projects, and some customer spending modulations as strategies adapt to a changing environment. Gross margin percentage is expected to expand from the Q1 '14 results, reflecting an improving mix of growth opportunities.

Total G&A expenses reflecting scale and recent M&A; stock-based compensation is expected at approximately 4 million for the quarter. Depreciation and amortization on a combined basis is expected to range from 23.2 million to 23.6 million, including amortization expense of 4 million in Q1 '15.

Interest expense is expected to range from 6.7 million to 6.8 million. Other income from asset sales is expected to range from 1 million to 1.5 million. Taxes are expected to continue near a 40% effective tax rate during fiscal 2015.

The implacable factors are expected to generate an adjusted EBITDA margin percentage in line with the Q1 '14 results, and earnings, which are currently expected to range from $0.45 to $0.52 per diluted share.

We expect approximately 35.1 million diluted shares during Q1 '15, with shares gradually increasing in subsequent quarters, reflecting the future vesting organic equity awards.

Now, going to Slide 12; looking ahead to Q2 of fiscal 2014, our expectations currently reflect normal winter weather patterns, continued industry and trends of network investments, a headwind for rural customers on stimulus projects and some customer spending modulation.

These factors are expected to result in a revenue percentage growth in Q2 of mid single-digits compared to Q2 last year. Each year our second quarter gross margins decline sequentially from our first quarter due to seasonality.

Our results are impacted by inclement winter weather, fewer available workdays during the holidays, reduced daylight work hours, and the restart of calendar payroll taxes. Q2 of fiscal 2014 was a challenging quarter on gross margins based on the extreme weather experienced across a large portion of the U.S.

As we look to our Q2 of 2015, we have based our outlook on normal winter weather. If extreme weather conditions were to occur this year as they did in 2014, our margins could be impacted. We expect our G&A expense percentage to slightly increase year-over-year and to include non-cash stock-based compensation of approximately 3.6 million.

Adjusted EBITDA margin percentage is currently expected to expand year-over-year and the result will be influenced by the gross margin factors they outlined. Other factors influencing results include depreciation and amortization on a combined basis which is expected to range from 23.4 million to 23.8 million.

Interest expense which remains sequentially inline at approximately 6.7 million to 6.8 million, and other income from asset sales, which ranges from 1.2 million to 1.7 million. Now, I'll turn the call back to Steve..

Thanks, Drew. Moving to Slide 13, within an improving economy we experience the effects of a solid industry environment and capitalized on our significant strengths. First and foremost we maintain solid customer relationships around our markets. We continue to win projects and extend contracts of attractive pricing.

Secondly, the strength of those relationships in the extents of market presence they have created has allowed us to be at forefront of evolving industry opportunities. The end market drivers of these opportunities remain firm and are strengthening.

Telephone companies are deploying fiber-to-the-home and fiber-to-the-node technologies to enable video offerings, and in some instances, 1 gigabit high-speed connections. These deployments are accelerating and impacting our business.

Some of those telephone companies previously deploying fiber-to-the-node architectures are transitioning to fiber-to-the-home deployments. Cable operators are continuing to deploy fiber to small and medium businesses and with increasing urgency. Some are doing so in anticipation of the customer sales process.

Overall, cable capital expenditures are expanding. Wireless carriers are upgrading to 4G technologies creating meaningful growth opportunities in the near to intermediate term as well as planning to increase macro cell density. Industry participants continue to aggressively extend fiber networks for wireless backhaul services.

These services are now planned for small cells as well as macro cells dramatically increasing wireless data traffic may prompt further wire line deployments. We believe we are unique positioned, managed and capitalized and meaningfully experienced an improving industry environment to the benefit of our shareholders.

We remain encouraged that our major customers possess significant financial strength, it remain committed to multi year capital spending initiatives, which in some cases are meaningfully accelerating and expanding in scope.

We remain competent in our strategies, the prospects for our company, the capabilities of our dedicated employees and the experience of our management team; we have grown our business in capitalization in many times before. Now, John, we will open the call for questions..

(Operator Instructions) And first from the line of Tahira Afzal with Keybanc, please go ahead..

Hi, good morning folks, and nice to see you back on track..

Yes. Thanks, Tahira..

First question is, Steve, if you look at your -- when you talk qualitatively about accelerating growth on the revenue side, are we at the point past the fiscal second quarter when you could start to see double-digit revenue growth again?.

We have not provided guidance that's out beyond the next first and second quarters of fiscal '13 to here, Tahira, but I think if you look at the industry environment for calendar '15 it's as supportive of growth as any environment we've seen in a number of years..

Got it, okay. And then, Steve, if you first go back to old age, I know you have seen revenue growth on a compounded basis in the double-digit in fact around 15%. We have seen the gross margins pick up over that timeframe as well, but your G&A as a percentage of revenue remain flattish.

So going forward, should we assume that most of your operating margin improvements are going to continue to come from the gross margin line, or do we start to see G&A sort of head more of a steady state at some point and hence decreased as percentage of revenue?.

Tahira, you're looking at a period that includes a very severe recession, I don't know exactly how to draw conclusions based on that broader period.

What I'd tell you is that in an environment where we see multiple customers exploring large programs that that allows us the ability to make sure that that works that we except in the marketplace were best at performing. And I think given the environment, there is going to be plenty of that to do.

I think that will generally mean that we will have a lot of leverage on G&A, although there will be necessary investments there to make sure that we perform in the way that our customers expect us to.

So I think there is both an ability to be careful about that work which we undertake that will impact margin, but there is still going to be plenty of it to create leverage on the G&A line..

Okay, good. I have got some other questions, but I'll hop back in the queue. Thank you..

Next, we will go to Simon Leopold with Raymond James. Please go ahead..

Thank you very much.

First if we could maybe knock out the housekeeping questions, specifically the split of cable Telco business, and then rounding off your top ten customer list?.

Simon, this is Drew. The Telco was at 61.2%, cable was at 28.3%, facility locating was at 6.5% and then the electrical and another was at 4%. As far as the next five customers, customer number six was at 5.4% of revenue, and this is where our customers request that we not identify them by name. Time Warner Cable was number seven at 5.3% of revenue.

Charter was number eight at 4.4% of revenue. Ericsson was number nine at 1.4% of revenue, and Frontier was number 10 at 1.3% of revenue..

Great. And when you were talking earlier in the prepared remarks about some of the customer projects, you had mentioned Corning, and I apologize I think that's a new one to me on your customer list.

Given that they're not an operator, can you help us understand the nature of what you're doing with them, is that similar to the Ericsson relationship where you are basically a subcontractor on an operators' project?.

Sure, Simon. So, we have done a number of projects with Corning over a broad period of time, generally related on taking fiber all the way to the premise on a turnkey basis.

And in this particular case, over a pretty large geography, it made sense for one of our customers that in this particular opportunity to work with Corning and with us where Corning is taking the lead in the contractual relationship. But we also maintain lots of business with this particular customer directly. This is what made sense for everybody..

Okay. And then in terms of these one gigabit initiatives, there are obviously a number of your customers that are involved in them.

is there a metric you can give us to help us understand what percentage of your current revenue is driven by this initiative and then you can think about your backlogging when you think about this project profile what that percentage might look like about a year from now?.

Well, certainly it's increasing, Simon. I mean we are not going to break the revenue out. I would tell you that in the backlog there is over $113 million of projects at the end of the fourth quarter that we are directly targeted to one gigabit deployments. So it's a big number. It's a growing number.

Clearly we have a number of customers that are deemphasizing fiber-to-the-node approaches and replacing much more emphasis on taking fiber all the way to the home for much deeper into their networks and we see absolutely no indication in the marketplace that that's going to slow, so I think here for now the number will be much larger..

If it gets to be of certain significance and maybe you can help us understand is there a point where you would want to break it out?.

I don't think we generally want to get into individual programs, I mean we provide pretty robust disclosure about what we did, who we are working and below the line, I don't that that would be a benefit to us competitively..

Okay, I appreciate it. Thank you..

Our next question is from Alex Rygiel with FBR..

Thank you. Good morning, gentlemen..

Good morning, Alex..

Steve, could you quantify the wireless revenue in the quarter..

Yes. It was about 11%. There is a little over 53 million..

Perfect. And in your (indiscernible) remarks when you were discussing backlog, you mentioned that it also anticipates new opportunities.

Is that a suggestion that maybe you are forecasting backlog that doesn't include signed contracts of some sort?.

No, absolutely not. These are all singed contracts. If it's not signed, it's not in our backlog..

Perfect. And your new awards in the quarter were the strongest in 13, 14 years, unbelievable new awards in the quarter.

We are just very odd given that it's the July quarter, any one or two project awards in the quarter that spanned out that you would like to identify?.

Well, I mean I think Alex is indicative of what we thought about in the remarks about the number of public announcements from our customers about these gigabit deployments as well as the routine opportunities, the receipt of renew contracts that we already have in the business.

The word count on gigabit in our customer press releases and in their earnings calls and investor presentations, it's clearly accelerating throughout this calendar year..

And lastly, revenue with Verizon was down quite a bit year-over-year.

Did you lose market share there or are the possibly one of those customers that are modulating in a different fashion?.

Yes. We have not lost any market share there. I mean there are going to be customers that go up and down. I mean you will see that the CenturyLink's revenue was down also in that particular case. They've been very public about revisiting fiber to premise versus to fiber-to-the-node.

I think in Verizon's case they have got a lot of things going on, most of Vodafone sale, so they are making adjustments. We will think it's forever, but what those do occasionally occur in the business..

Perfect. Thank you. I will get back in the queue..

We will go to Adam Thalhimer with BB&T Capital Markets. Please go ahead..

Good morning, guys..

Good morning, Adam..

Yes.

You said in the slide back that you're working in nine major metro areas, what are you doing in those areas right now, is it preconstruction work?.

No, I think we are underway, I mean a portion of those are engineering. But a majority of those are actual construction deployments. We're putting fiber-in-the-air and in the ground and splicing it and doing all those things that are necessary for customers to turn up networks..

I mean, do you have a sense for metro areas you might add over the coming quarters or is nine a pretty good number?.

I think we are in the bottom of the first inning of this as a trend in the business. So I wouldn't expect that it would go down. How big it gets? There will be a function of where we feel like we are best suited to provide good service to customers that the right returns to shareholders..

And then, Steve, I wanted to ask about the all other customers category, because you finally saw a strong growth there first time in a number of quarters.

What -- I mean broadly speaking what are you seeing from rural?.

The rural network was as we expected was down year-over-year just under 11 million as we've had talked about in previous calls. We actually see the first quarter of '15, this October quarter is kind of the maximum decline. We think it will be close to 20 million year-over-year and after that it moderates pretty quickly.

I think the all other in large part was influenced by our number six customer and Time Warner that had pretty substantially year-over-year growth. Time Warner announced that they expect to spend about 4 billion in CapEx this year, which is sequentially up almost a billion dollars. It's a big number..

Lastly, what are your thoughts on liquidity and cash flow? Cash flow was negative in the quarter which maybe is to fund accelerating opportunities..

Yes. We're very comfortable with our liquidity. We have an interest payment in July just the way that falls. And we're not concerned about liquidity. There was some working capital bill, because that's what happens when you're building with new customers..

And you feel comfortable that you can continue to build the customers without having to do something else?.

We have got robust liquidity through the revolver. And we don't see any issues around financial capability..

Okay, thanks..

Our next question is from John Rogers with DA Davidson..

Hi, good morning..

Good morning, John..

Steve, just going back to sort of the pace of this roll out of the big surge in fiber in the ground, I mean you have been through a lot of these cycles before and you talked about this being a multiyear phenomenon, but we're still not seeing really robust growth yet.

And you have mentioned being in the first inning, but how do you see this playing out? I mean do we see a surge of competitors coming into the market or did the owners try to leapfrog in front of each other to build this out or does it just kind of grow over the next five years?.

John, as always, it's the beginning. But I think what experience would tell us is that this is a long-term development. This is not just six quarters there, a year or two, because these are big projects, when you change network architectures they take a long-time to deploy.

But I think what's interesting about this opportunity versus other industry opportunities is its extremely broad so it encompasses not only our traditional telephone customers, it also includes the cable operators talking about giga sphere. It includes some emerging entrance.

It includes for us some wireless and so I just think the breadth of the opportunity for us is really unprecedented compared to other cycles..

And specifically for Dycom, the advantage there, I mean besides just the regional diversity and breadth that you have there, is there anything technically specific that even to an advantage or disadvantage in it?.

Well, I think John; to begin with, these things are not easy to build. We have lots of experience in the organization on how to build large products where that doesn't mean they are easy to do.

And historically in other opportunities or other industry environments where there was some new competition, it didn't fair very well and it didn't stay very long. So I think if you were kind of wireline cable and Telco side of the business, I mean we're multiples of the next sized industry participant. That doesn't mean we're perfect.

That doesn't mean we don't have things to work on, but we start with much greater scale and technical capability than anybody else..

And I guess lastly, I mean, in the wireless side I mean we saw turf agreements in some of that, but are you looking at this as more discrete projects?.

No, on the wireless side, I mean we continue to see opportunities coming out of a number of carriers.

I mean I think as LTE gets deployed, you have both the coverage opportunity for those that are not complete with coverage and then you have capacity, and then I'd not underestimate even though there has been some slowing kind of a long run opportunity around fiber backhaul.

I mean we're increasingly seeing fiber to small cells incorporated and densification efforts for macro cells. So it's always in the interest of the carriers to get call or data off spectrum in the air and get it on the wireline network, and we think that continues for a long period of time..

Sorry. And lastly if I could a couple of other contractors recently talked about some spot equipment shortages and were longer lead times for certain equipment.

Are you running into that and what are you saying about relative to CapEx?.

I would tell you that the magnitude of the spent over the next several years as everybody in the industry making sure that they have got adequate capacity particularly around fiber. It's not unusual. It's something that we haven't seen before, but clearly something that all of our customers are paying attention to..

Thank you very much..

Our next question is from Filomena Liggio with Clearwater Capital Management. Please go ahead..

Good morning..

Good morning..

I hope you can clarify some of your disclosures relating to your round cost and estimated earnings in excess billings. I saw on Q2 and Q3 that you cutback that substantially all of your CIDs would be build to customers in collective with the next 12 months.

Is it something new or are you just telling us that your balance going forward is going to go down or are you expecting to incur new CIDs to replace once you have collected?.

Go ahead, Drew..

No, that is as we have worked that we're performing that replenishes that, so that's the normal course as we do the work and initially the CID, it gets build out to accounts receivables and then turned into cash..

And then you get new CIDs?.

Yes. We created everyday of the week. It's just the normal flow..

So you don't think it's going to come down the next year or so?.

Well, we are always working to become more efficient in our billing practices. I mean the vast majority of the work that we do is measured in units that we count everyday, and bill to the customer everyday. If we can create quicker turn cycles we will, but it's just normal ordinary course for the industry and for us..

What gives you the confidence that you will collect upon these CIDs?.

Have you looked at our customer list? I mean they are not a better customer list from credit quality of anybody..

Okay, great. And I guess lastly can you speak to why we see these balances growing in the last few years or so..

The company is growing..

Okay. Great, thank you..

And next, we'll move to Noelle Dilts with Stifel. Please go ahead..

Hi, guys. Good morning..

Hi, Noelle..

Hi.

I am looking at these figure to the home deployments, I am just curious how you think about if that demands some investment or upgrade in the longer haul transmission type of architecture and any upgrades necessary in the central office or if you think there is enough capacity there?.

It's a great question, Noelle. I mean I think the vast majority of the long distance network was installed between the mid 80s and 2000. There are some routes that are requiring reinforcement.

I think if you extrapolate total traffic growth of which these if you upgrade the access network you are going to create more traffic on the backhaul or the point-to-point network. I think that's possible. I wouldn't say that a big driver in the business right now although there is a level of activity there.

On the central office side or more broadly kind of central office switching head end work, I think that's also a possibility although I am not sure that at least for us that's a substantial growth driver, but generally it could be some opportunity there..

Okay.

And then are you starting to see any additional activity associated with this next phase of the Connect America fund or is that still another potential driver?.

No, that actually is, and we actually secured a pretty good award in August that's not reflected in our backlog. We will be at the end of the first quarter with $40 million or $50 million worth of Connect America fund work over the next 15-16 months. And that's real. We know where it is. We know what projects are.

So we feel good that that's coming into the business also..

Okay. Shifting over to wireless just because it has been AT&T the wireless kind of slowed down there. It has been such a big topic in the quarter. I know it's not a huge piece of the business for you.

but I guess in terms of what we are looking at, in terms of AT&T wireless CapEx in the back half of the calendar year, for you guys is that going to be significantly lower than you are anticipating or have you been adequately conservative in your forecast when you're initially looking at the year?.

Well, we took a look at what the monthly run rates were, the weekly run rates. There was a decline in May and June, just slightly from April.

We have it forecast kind of at that level were a little bit below through the first quarter there maybe some adjustments in the in the fourth calendar quarter, but I'd look at those as budget-related and not particularly indicative of anything about the program one way or another, these things that happen every year..

Okay. And then one quick question if I may. Could you talk a little bit more about Watt Brothers acquisition that you made? It seems pretty small, but just maybe if you could talk about the size, why it was attractive to you? That would be great, thanks..

So, Watts Brothers is about a $30 million in revenue business, somebody that has a great reputation for service in the upper southeast and lower Midwest and it's privately owned and it was just an opportunity that presented itself and it fit well and has integrated well..

Great, thank you..

The next question is from Alan Mitrani with Sylvan Lake Asset Management. Please go ahead..

Okay, thank you. Steve, you talked about in your contracts, you highlighted the fact that you're looking at jobs that gives you the highest likelihood of benefits to shareholders. I am assuming you are talking there about margins. When business is busy you can be a little more picky in terms of what you are looking at.

Can you just talk to us about that in terms of what you are seeing on the competitive front in the next 12 to 24 months (indiscernible) as it relates to margins and where you see the profile going?.

I think Alan as we have done in past industry cycles, it's not necessarily directly what we think about margins.

It's that when we have to grow capacity and the industry going to have to grow capacity, but when we have to grow capacity we need to make sure that we deploy that capacity in ways that is of highest value of the customer and where we do the best job, and in order to do that we are going to have to make sure that we select those opportunities that we're best for that customer, for us, and for shareholders.

It's always a balancing act, but when you got to grow capacity, then you got to balance it to make sure you are getting a return on capital to measure it with the increased investment..

Okay. I just want to as a long time follower of the business and someone who has been locally frustrated with some 20%, 19.5% gross margins in the long time in this year obviously has been disappointing.

I am assuming in this next cycle, we're looking for something that starts with a two over time to get back to where we were in the earlier decade?.

I think if you look at the environment that we're operating in, that we haven't operated in an environment in the last ten years that's similar to this..

Okay.

Also, last cycle, let's call it the Internet bubble cycle, the fiber layer cycle, the '97 to -- mid 90s up to 2001, you made 17-20 acquisitions, you were very acquisitive building the business, this cycle you haven't been preferring to use your money so far, I guess you haven't seen the cycle yet, but let's assume this cycle so far, you've been more spending on the CapEx side incrementally buying acquisitions, can you characterize for us how you think the next two years are going to go as it relates to whether you feel the need to build out more in terms of acquisitions or whether it's going to go much more towards working capital or CapEx and buybacks ….

Yes. I mean clearly in the periods you referenced, the industry was much more fragmented. We were much smaller. And so, lots of acquisitions made sense.

I think particularly most of the acquisition or the transaction we did with Quanta, but we're in a different place, I mean we're five times the size, we've got great geographic coverage and good customer relationships and our customers are much more consolidated today than they were in that time period.

So we're always looking to do good complimentary acquisitions, no matter how small the business, we always learned something if we buy the right folks that can make us better, by that we certainly don't need to deploy capital in acquisitions to be able to take advantage of this opportunity fully..

Okay.

And then lastly, maybe for Drew, for you, DSOs, someone previously referenced were highest they've been, can you just tell us were some of that influenced by the timing of the acquisition more as it relates to some of the legacy Quanta businesses and customers in terms of the government, can you just talk a little bit about that in terms of why they're at 91 days and where they're adjusted and where they can go over the next year? It's typically hard I find to cut the DSOs or to cut working capital when business is growing, so maybe talk to us about your strategy on that in terms of figuring out how to get the most out of your balance sheet?.

Sure, Alan. This is Drew. So, there is some on the rural customers that you alluded to, and then also I think when you got this sequential growth that happens in the quarter as well, I mean it's -- then there were some acquired balances in there as well..

So, do you see DSO -- is there something -- yes, I always felt when you're putting in the new computer systems and training all the guys at the Quanta subsidiaries when you acquired them they pulled in, call it a 100-day DSOs and merge with your's, which were a lot lower, that over time you'll be able to work that down to something more industry standard, it seems the released Dycom standards for you guys..

If you look at our industry, we're at standard DSO. So we're not any different than everybody else. We have less pre-billings because we don't do percentage completion work, but on the AR and the Web site we're in line. I think Alan, you can always do better.

We have a number of initiatives, but we also have customers that have 60-day payment terms on accounts receivable. So there is always going to be some build up to get to that contract term..

Okay, thank you..

And we do have a follow-up from Tahira Afzal. Please go ahead..

Hi, thanks a lot folks. I just had a couple of follow-ups on the cable/fiber.

Number one, if you look at some of the very small independent small cable companies in certain regions, like for example, Smithville Communications, it's the largest independent provider in Indiana, they're going to start doing Giga Fiber, Como Connect in Missouri, (indiscernible) Oregon, these are some examples.

When we look at the opportunity such as should we be tracking only the larger customers that we hear of on some of these smaller more independent and regionalized carriers also in a sense opportunities in the south in terms of scope?.

Sure. I mean lots of rural work. We did more rural stimulus work than anybody else in the industry. So certainly we're not going to go customer-by-customer, but we're familiar with the names that you listed.

The way I think about rural and smaller customers is that is indicative of what society wants to have built that there is demand for, but the best way to play that is generally been through large sophisticated customers that spent literally tens of billion or billions on networks every year. So that's a good ancillary market. We play in that market.

We've been very successful in the rural market, but not at the top line going to be anywhere near as important as our major customers..

Got it, okay.

And then, Steve, if you look back at that big cycle you saw in early 2000s that was referenced earlier on as well, but as of today, how should you view the competitive environment yourselves, is it generally the same bunch of folks, are we seeing more competition today versus at that time?.

Well, we always have competition. We run our business thinking that customers always have choices, because they do, but there has been a lot of consolidation in the business, if you think about the last 14 years the number of companies that we've acquired that's been very targeted in this space has been more than anybody else by a wide margin.

And I think that's reflected in our ability to pursue the work well. I think honestly to hear, this is an industry that if we were having this call two years ago, people thought we were crazy for being as focused as we were on wireline.

And so I think there is an advantage to having a long-term perspective and a sustained effort in a market, it doesn't mean we won't attract competition, it doesn't mean that we don't perform well that somebody won't figure out how to do it better than we can, but it does give us perspective on what to work on and how to get better..

Got it, okay.

And I promise, last question on this; one of your clients who has been at the forefront of the whole Giga Fiber movement, clearly, they don't have much infrastructure, so how should we be thinking when we're trying to extrapolate the size of the market? How should we think about the mild spending that some of the more established cable operators and telecom companies have to do versus someone who is doing this for the first time and have to build an infrastructure from scratch?.

Well, I mean broadly, obviously the incumbents have existing infrastructure. They have all provided -- they've sized what they expect their spent would be on a cost per homes passed, you can take a look at their investor presentations, they've been all pretty clear on what they expect.

And so, to me, it's a function of how many homes passed, what their expectations are on the spent in a period of time, and I think when customers are large like our customers and they highlight a change in architectural approach that you should assume that it's going to be a significant deployment over a fairly extended period of time.

Some will go faster, some will go slower, but these people operate very large networks and they think very carefully before they make public announcements..

Got it, okay. Thank you so much..

And we have a follow-up from Alex Rygiel. Please go ahead..

My question has been answered. Thank you..

And we'll go to Noelle Dilts. Please go ahead..

Hi, thanks.

Going to your look ahead at fiscal second quarter, you talked about improving gross margins year-over-year, and I think you said more of a normalized gross margin, so I went back and I think over the last eight years, gross margin averaged about 17% and then if you -- but if you just looked at fiscal '13 -- '12 and '13, it was closer to 18%.

Can you give us any sense of if you are looking at kind of where you're thinking in that range given that there is a little bit broad -- how you're looking at this coming fiscal second quarter?.

I mean clearly we'll get it closer as we get closer, Noelle I think directionally you're in the right range. There has been a lot of things that have occurred in the business in the last three and eight years. So, trying to picking the period drives the answer. But we feel comfortable that if we get decent weather, that will have better gross margins..

Okay. And then just looking at G&A, again, you're talking about that for the second quarter being up a little bit year-over-year, I'm just thinking about this; you have your Quanta integration cost have come off, I know some acquisitions has come in, but it seems like you have to be investing to some extent in SG&A for this anticipated growth.

Can you talk about that a little bit if that's some of what is driving maybe this SG&A ….

We're clearly going to always invest in those systems that we anticipate that we need to improve for the company to get bigger.

And the other thing I think, Noelle, just to not gloss over, when you have rural coming out of the business year-over-year at about 20 million, there are close out expenses in G&A that's associated without revenue where the G&A continues while you're finishing up the projects and the revenue is gone. So I think it's a normal thing.

We'd always like to have a lower G&A than we do and we have a number of things we're working on to make that happen.

But what's more important than lower G&A in a growing demand environment is highly effective G&A, right, because the last thing you want to do when you have growth opportunities is under-administer the business, right?.

Yes. Thank you..

And we have a follow-up from Alan Mitrani. Please go ahead..

Hi, Steve.

Like Noelle, I look back -- going back many years and just talking about since new investment thesis for Dycom doesn't rely on calendar '14, I want to look forward to '15 and '16, maybe you could talk about peak margins again back and forth, because I looked back to prior four peaks over the last 15 years, and it seems like we're meaningfully below where we had been.

Do you think the environment is conducive of the way you're describing for calendar '15 and into calendar '16 for these trends to really start accelerating in terms of getting you closer to what you'd consider better returns and we'd consider more profitable return to shareholders?.

I think, Alan, like anything as the business grows, this is not a step function business, this is a business where you grow margin incrementally as you add business and reduce business.

And I think as you look out as we've always said there is nothing in the business structurally in our robust demand environment that says you can't get to mid-teens EBITDA like we did, for example, the last time was in fiscal '07.

But there was a lot of damage done in the economy and the industry, I think we're coming out of that well and better positioned now than we've ever been before..

Alan Mitrani – Sylvan Lake Asset Management:.

:.

I think generally large M&A amongst our customers is generally been in part about expanding CapEx, I think that's the 20-year history of the industry. And so, I don't see any reason to believe that that's different.

I don't particularly see great risks about pausing although in the fourth calendar quarter as a number of other participants in the industry have talked about it.

It's always somewhat uncertain compared to the rest of the year, but there is no reason to believe that any of these mergers of which increased CapEx and network deployment has been explicitly stated by the participants is one of the reasons why they're doing them, why that wouldn't happen when that's the plan going in..

Okay, and on the REIT deal?.

I think the REIT deal is very interesting. Congratulations to our customer there at breaking new ground. I think what's interesting is that good portion of the tax savings is going into an increased forecast of capital intensity. I think that just reflects competitive realities in where the technology is going..

And then lastly, sorry for hogging the questions; but it is the end of the August, lastly -- second quarter, can you remind us for fiscal year '14, there is awful weather and I know you had to revise your numbers down, how much do you think you lost because of the bad storms?.

I mean it just wasn't -- we never -- I quantified it at the time, Alan, but clearly if you think on average it was really bad. I mean it was a tough quarter..

Okay, great. Thanks a lot..

All right, John, we'll take one more question, if there is one..

And actually no further questions in queue..

All right. Well, we thank everybody for your interest and attendance on the call. We look forward to speaking to you before thanksgiving after our first quarter. Thank you very much..

Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation. You may now disconnect..