DYCOM INDUSTRIES INC [DY] Filings

10-Q 1 dy-20231028.htm 10-Q dy-20231028

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 28, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File Number 001-10613

DYCOM INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

Florida

59-1277135

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

11780 US Highway 1, Suite 600

Palm Beach Gardens,

33408

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (561) 627-7171

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol(s)

Name of Each Exchange on Which Registered

Common stock, par value $0.33 1/3 per share

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

There were 29,338,337 shares of common stock with a par value of $0.33 1/3 outstanding at November 20, 2023.

Dycom Industries, Inc.

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PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41
Item 4.	Controls and Procedures	42

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	43
Item 1A.	Risk Factors	43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43
Item 5.	Other Information	43
Item 6.	Exhibits	44

SIGNATURES		45

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share amounts)

(Unaudited)


	October 28, 2023		January 28, 2023
ASSETS
Current assets:
Cash and equivalents	$	15,665	$	224,186
Accounts receivable, net (Note 6)	1,461,170		1,067,013
Contract assets	70,451		43,932
Inventories	114,016		114,972
Income tax receivable	2,346		3,929
Other current assets	45,081		38,648
Total current assets	1,708,729		1,492,680

Property and equipment, net	430,739		367,852
Operating lease right-of-use assets	74,369		67,240
Goodwill	309,953		272,545
Intangible assets, net	115,755		86,566
Other assets	24,620		26,371

Total assets	$	2,664,165	$	2,313,254

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	215,278	$	207,739
Current portion of debt	17,500		17,500
Contract liabilities	21,320		19,512
Accrued insurance claims	45,713		41,043
Operating lease liabilities	30,135		27,527
Income taxes payable	2,814		14,896
Other accrued liabilities	156,060		141,334
Total current liabilities	488,820		469,551

Long-term debt	949,406		807,367
Accrued insurance claims - non-current	50,281		49,347
Operating lease liabilities - non-current	43,846		39,628
Deferred tax liabilities, net - non-current	57,981		60,205
Other liabilities	19,884		18,401
Total liabilities	1,610,218		1,444,499

COMMITMENTS AND CONTINGENCIES (Note 20)

Stockholders’ equity:
Preferred stock, par value $1.00 per share: 1,000,000 shares authorized: no shares issued and outstanding	—		—
Common stock, par value $0.33 1/3 per share: 150,000,000 shares authorized: 29,337,537 and 29,350,021 issued and outstanding, respectively	9,779		9,783
Additional paid-in capital	19,147		5,654
Accumulated other comprehensive loss	(1,548)		(1,771)
Retained earnings	1,026,569		855,089
Total stockholders’ equity	1,053,947		868,755
Total liabilities and stockholders’ equity	$	2,664,165	$	2,313,254

See notes to the condensed consolidated financial statements.

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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except share amounts)

(Unaudited)


	For the Three Months Ended
	October 28, 2023		October 29, 2022

Contract revenues	$	1,136,110	$	1,042,423


Costs of earned revenues, excluding depreciation and amortization	886,662		850,897
General and administrative	87,511		78,798
Depreciation and amortization	42,522		35,454

Total	1,016,695		965,149

Interest expense, net	(13,952)		(10,592)

Other income, net	6,906		2,474
Income before income taxes	112,369		69,156




Provision for income taxes	28,633		15,144

Net income	$	83,736	$	54,012

Earnings per common share:
Basic earnings per common share	$	2.85	$	1.83

Diluted earnings per common share	$	2.82	$	1.80

Shares used in computing earnings per common share:
Basic	29,334,798		29,524,516

Diluted	29,689,316		29,978,795

See notes to the condensed consolidated financial statements.

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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except share amounts)

(Unaudited)


	For the Nine Months Ended
	October 28, 2023		October 29, 2022

Contract revenues	$	3,223,119	$	2,890,996


Costs of earned revenues, excluding depreciation and amortization	2,570,437		2,394,606
General and administrative	254,699		221,514
Depreciation and amortization	117,786		107,436

Total	2,942,922		2,723,556

Interest expense, net	(37,601)		(29,057)

Other income, net	17,628		9,856
Income before income taxes	260,224		148,239




Provision for income taxes	64,719		30,835

Net income	$	195,505	$	117,404

Earnings per common share:
Basic earnings per common share	$	6.66	$	3.97

Diluted earnings per common share	$	6.58	$	3.91

Shares used in computing earnings per common share:
Basic	29,344,064		29,561,172

Diluted	29,710,603		30,007,257

See notes to the condensed consolidated financial statements.

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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands)

(Unaudited)


	For the Three Months Ended				For the Nine Months Ended
	October 28, 2023		October 29, 2022		October 28, 2023		October 29, 2022
Net income	$	83,736	$	54,012	$	195,505	$	117,404
Foreign currency translation (losses) gains, net of tax	(2)		(4)		223		(4)
Comprehensive income	$	83,734	$	54,008	$	195,728	$	117,400

See notes to the condensed consolidated financial statements.

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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Dollars in thousands, except share amounts)

(Unaudited)


	For the Three Months Ended
	October 28, 2023
	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total Equity
	Shares	Amount
Balances as of July 29, 2023	29,332,495	$	9,777	$	12,982	$	(1,546)	$	942,833	$	964,046

Stock-based compensation	555	—		6,298		—		—		6,298
Issuance of restricted stock, net of tax withholdings	4,487	2		(133)		—				(131)




Other comprehensive loss	—	—		—		(2)		—		(2)
Net income	—	—		—		—		83,736		83,736
Balances as of October 28, 2023	29,337,537	$	9,779	$	19,147	$	(1,548)	$	1,026,569	$	1,053,947

	For the Three Months Ended
	October 29, 2022
	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total Equity
	Shares	Amount
Balances as of July 30, 2022	29,457,520	$	9,819	$	4,630	$	(1,769)	$	784,336	$	797,016
Stock options exercised	96,567	32		3,120		—		—		3,152
Stock-based compensation	290	—		4,515		—		—		4,515
Issuance of restricted stock, net of tax withholdings	1,805	1		(76)		—		—		(75)




Other comprehensive loss	—	—		—		(4)		—		(4)
Net income	—	—		—		—		54,012		54,012
Balances as of October 29, 2022	29,556,182	$	9,852	$	12,189	$	(1,773)	$	838,348	$	858,616

See notes to the condensed consolidated financial statements.

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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Dollars in thousands, except share amounts)

(Unaudited)


	For the Nine Months Ended
	October 28, 2023
	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive (Loss) Income		Retained Earnings		Total Equity
	Shares	Amount
Balances as of January 28, 2023	29,350,021	$	9,783	$	5,654	$	(1,771)	$	855,089	$	868,755
Stock options exercised	9,879	3		301		—				304
Stock-based compensation	1,211	—		19,240		—		—		19,240
Issuance of restricted stock, net of tax withholdings	201,426	68		(5,949)		—		(3,901)		(9,782)



Repurchase of common stock	(225,000)	(75)		(99)		—		(20,124)		(20,298)
Other comprehensive income	—	—		—		223		—		223
Net income	—	—		—		—		195,505		195,505
Balances as of October 28, 2023	29,337,537	$	9,779	$	19,147	$	(1,548)	$	1,026,569	$	1,053,947

	For the Nine Months Ended
	October 29, 2022
	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total Equity
	Shares	Amount
Balances as of January 29, 2022	29,612,867	$	9,871	$	2,028	$	(1,769)	$	748,414	$	758,544
Stock options exercised	119,430	40		4,517		—		—		4,557
Stock-based compensation	1,568	1		12,272		—		—		12,273
Issuance of restricted stock, net of tax withholdings	126,347	42		(3,321)		—		(2,346)		(5,625)



Repurchase of common stock	(304,030)	(101)		(3,307)		—		(25,124)		(28,532)
Other comprehensive loss	—	—		—		(4)		—		(4)
Net income	—	—		—		—		117,404		117,404
Balances as of October 29, 2022	29,556,182	$	9,852	$	12,189	$	(1,773)	$	838,348	$	858,616

See notes to the condensed consolidated financial statements.

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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)


	For the Nine Months Ended
	October 28, 2023		October 29, 2022
Cash flows from operating activities:
Net income	$	195,505	$	117,404
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization	117,786		107,436
Non-cash lease expense	26,035		23,775
Deferred income tax (benefit) provision	(2,224)		3,742
Stock-based compensation	19,240		12,273

Provision for bad debt, net	1,028		2,149
Gain on sale of fixed assets	(23,730)		(13,991)


Amortization of debt issuance costs and other	2,295		2,140

Change in operating assets and liabilities:
Accounts receivable, net	(361,051)		(350,734)
Contract assets, net	(11,265)		(32,874)
Other current assets and inventories	(5,695)		(37,753)
Other assets	701		4,238
Income taxes payable/receivable	(14,602)		22,081
Accounts payable	(3,503)		42,143
Accrued liabilities, insurance claims, operating lease liabilities, and other liabilities	(6,631)		16,515
Net cash used in operating activities	(66,111)		(81,456)

Cash flows from investing activities:
Capital expenditures	(161,133)		(135,777)
Proceeds from sale of assets	30,526		14,486
Cash paid for acquisitions, net of cash acquired	(122,902)		—


Net cash used in investing activities	(253,509)		(121,291)

Cash flows from financing activities:

Proceeds from borrowings on senior credit agreement, including term loan	475,000		—
Principal payments on senior credit agreement, including term loan	(334,125)		(13,125)


Repurchase of common stock	(20,298)		(28,532)





Exercise of stock options	304		4,557
Restricted stock tax withholdings	(9,782)		(5,625)

Net cash provided by (used in) financing activities	111,099		(42,725)
Net decrease in cash, cash equivalents and restricted cash	(208,521)		(245,472)

Cash, cash equivalents and restricted cash at beginning of period (Note 8)	225,990		312,561

Cash, cash equivalents and restricted cash at end of period (Note 8)	$	17,469	$	67,089

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Supplemental disclosure of other cash flow activities and non-cash investing and financing activities:
Cash paid for interest	$	41,897	$	32,338
Cash paid for taxes, net	$	81,892	$	3,811
Purchases of capital assets included in accounts payable or other accrued liabilities at period end	$	11,433	$	9,513


See notes to the condensed consolidated financial statements.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

Dycom Industries, Inc. (“Dycom”, the “Company”, “we”, “our”, or “us”) is a leading provider of specialty contracting services throughout the United States. These services include program management; planning; engineering and design; aerial, underground, and wireless construction; maintenance; and fulfillment services for telecommunications providers. Additionally, Dycom provides underground facility locating services for various utilities, including telecommunications providers, and other construction and maintenance services for electric and gas utilities. Dycom supplies the labor, tools, and equipment necessary to provide these services to its customers.

Accounting Period. Our fiscal year ends on the last Saturday in January. As a result, each fiscal year consists of either 52 weeks or 53 weeks of operations (with the additional week of operations occurring in the fourth quarter). Fiscal 2023 and fiscal 2024 each consist of 52 weeks of operations. The next 53 week fiscal period will occur in the fiscal year ending January 31, 2026.

The accompanying unaudited condensed consolidated financial statements of the Company and its subsidiaries, all of which are wholly-owned, have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and notes required by GAAP for annual financial statements and should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in this report and the Company’s audited financial statements included in the Company’s Annual Report on Form 10-K for fiscal 2023, filed with the SEC on March 3, 2023. In the opinion of management, all adjustments considered necessary for a fair statement of the results for the interim periods presented have been included. This includes all normal and recurring adjustments and elimination of intercompany accounts and transactions. Operating results for the interim period are not necessarily indicative of the results expected for any subsequent interim or annual period.

Segment Information. The Company operates in one reportable segment. Its services are provided by its operating segments on a decentralized basis. Each operating segment consists of a subsidiary (or in certain instances, the combination of two or more subsidiaries), whose results are regularly reviewed by the Company’s Chief Executive Officer, the chief operating decision maker. All of the Company’s operating segments have been aggregated into one reportable segment based on their similar economic characteristics, nature of services and production processes, type of customers, and service distribution methods.

2. Significant Accounting Policies and Estimates

There have been no material changes to the Company’s significant accounting policies and critical accounting estimates described in the Company’s Annual Report on Form 10-K for fiscal 2023.

Use of Estimates. The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the amounts reported in these condensed consolidated financial statements and accompanying notes. These estimates are based on our historical experience and management’s understanding of current facts and circumstances. At the time they are made, we believe that such estimates are fair when considered in conjunction with the Company’s consolidated financial position and results of operations taken as a whole. However, actual results could differ materially from those estimates.

Per Share Data. Basic earnings per common share is computed based on the weighted average number of common shares outstanding during the period, excluding unvested restricted share units. Diluted earnings per common share includes the weighted average number of common shares outstanding during the period and dilutive potential common shares arising from our stock-based awards (including unvested restricted share units), convertible senior notes, and warrants if their inclusion is dilutive under the treasury stock method. Common stock equivalents related to stock-based awards, convertible senior notes, and warrants are excluded from diluted earnings per common share calculations if their effect would be anti-dilutive.

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3. Accounting Standards

Recently issued accounting pronouncements are disclosed in the Company’s Annual Report on Form 10-K for fiscal 2023. As of the date of this Quarterly Report on Form 10-Q, there have been no changes in the expected dates of adoption or estimated effects on the Company’s condensed consolidated financial statements of recently issued accounting pronouncements from those disclosed in the Company’s Annual Report on Form 10-K for fiscal 2023. Accounting standards adopted during the nine months ended October 28, 2023 are disclosed in this Quarterly Report on Form 10-Q.

Recently Adopted Accounting Standards

Business Combinations. In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The amendments in ASU 2021-08 require acquiring entities to apply ASU 2014-09, Revenue from Contracts with Customers (Topic 606) to recognize and measure contract assets and liabilities in a business combination. This update is intended to improve comparability after the business combination by providing consistent recognition and measurement of acquired revenue contracts and revenue contracts with customers not acquired in a business combination. ASU 2021-08 is effective for annual periods beginning after December 15, 2022 and interim periods within those annual periods, with early adoption permitted. The amendments in ASU 2021-08 should be applied prospectively. We adopted the provisions of ASU 2021-08 in the first quarter of fiscal 2024 and there was no material effect on our consolidated financial statements.

Reference Rate Reform. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides temporary optional expedients and exceptions to the guidance in U.S. GAAP on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from LIBOR and other interbank offered rates to alternative reference rates. ASU 2020-04 was effective for adoption at any time between March 12, 2020 and December 31, 2022. In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848. ASU 2022-06 defers the sunset date included within Topic 848 from December 31, 2022 to December 31, 2024. We adopted the provisions of ASU 2020-04 in the second quarter of fiscal 2024 and there was no material effect on our consolidated financial statements.

Presentation of Financial Statements, Income Statement-Reporting Comprehensive Income, Distinguishing Liabilities from Equity, Equity, and Compensation-Stock Compensation. In July 2023, the FASB issued ASU 2023-03 to amend various SEC paragraphs in the Accounting Standards Codification to primarily reflect the issuance of SEC Staff Accounting Bulletin No. 120. Staff Accounting Bulletin No. 120 provides guidance to companies issuing share-based awards shortly before announcing material, nonpublic information to consider such material nonpublic information to adjust observable market prices if the release of material nonpublic information is expected to affect the share price. The ASU does not provide any new guidance so there is no transition or effective date associated with it and therefore, the Company adopted the ASU with no impact to our consolidated financial statements.

Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. This ASU incorporated certain SEC disclosure requirements into the FASB Accounting Standards Codification. The amendments in the ASU are expected to clarify or improve disclosure and presentation requirements of a variety of Codification Topics. They will also allow users to more easily compare entities subject to the SEC’s existing disclosures with those entities that were not previously subject to the requirements, and align the requirements in the Codification with the SEC’s regulations. ASU 2023-06 will become effective for each amendment on the effective date of the SEC’s corresponding disclosure rule change. The Company adopted the ASU with no impact to our consolidated financial statements.

Accounting Standards Not Yet Adopted

Leases. In March 2023, the FASB issued ASU 2023-01, Leases (Topic 842): Common Control Arrangements. The amendments require all entities including public companies to amortize leasehold improvements associated with common control leases over the useful life to the common control group. ASU 2023-01 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been made available for issuance. If an entity adopts the amendments in an interim period, it must adopt them as of the beginning of the fiscal year that includes that interim period. Transition can be done either retrospectively or prospectively. We will adopt the provisions of ASU 2023-01 in the first quarter of fiscal 2025 and do not expect the adoption to have a material effect on our consolidated financial statements.

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All other new accounting pronouncements that have been issued but not yet effective are currently being evaluated and at this time are not expected to have a material impact on our financial position or results of operations.

4. Computation of Earnings per Common Share

The following table sets forth the computation of basic and diluted earnings per common share (dollars in thousands, except per share amounts):


	For the Three Months Ended				For the Nine Months Ended
	October 28, 2023		October 29, 2022		October 28, 2023		October 29, 2022
Net income available to common stockholders (numerator)	$	83,736	$	54,012	$	195,505	$	117,404

Weighted-average number of common shares (denominator)	29,334,798		29,524,516		29,344,064		29,561,172

Basic earnings per common share	$	2.85	$	1.83	$	6.66	$	3.97

Weighted-average number of common shares	29,334,798		29,524,516		29,344,064		29,561,172
Potential shares of common stock arising from stock options, and unvested restricted share units	354,518		454,279		366,539		446,085
Total shares-diluted (denominator)	29,689,316		29,978,795		29,710,603		30,007,257

Diluted earnings per common share	$	2.82	$	1.80	$	6.58	$	3.91

Anti-dilutive weighted shares excluded from the calculation of earnings per common share	133,858		93,147		140,580		98,863

5. Acquisitions

On August 18, 2023, the Company acquired Bigham Cable Construction, Inc. ("Bigham"), for $131.2 million ($127.0 million purchase price, plus cash acquired of $8.3 million, less indebtedness of $4.1 million.) Bigham provides construction and maintenance services for telecommunications providers in the southeastern United States. This acquisition expands the Company’s geographic presence within its existing customer base.

Purchase Price Allocation

The purchase price allocation of Bigham is preliminary and will be completed when valuations for intangible assets and other amounts are finalized within the 12-month measurement period from the date of acquisition.

The following table summarizes the aggregate consideration paid (dollars in millions):

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Assets
Cash and equivalents	$	8.3
Accounts receivable	47.6
Other current assets	0.1
Property and equipment, net	9.9
Goodwill	37.4
Intangible assets, net	42.2
Other assets	0.8
Total assets	146.3

Liabilities
Accounts payable	8.2
Other accrued liabilities	2.8
Income taxes payable	4.1
Total liabilities	15.1

Net Assets Acquired	$	131.2

The excess purchase price over the estimated fair value of the net assets acquired was recognized as goodwill and totaled $37.4 million. Goodwill and intangible assets total $79.6 million and are deductible for tax purposes. Accounts receivable and current liabilities were stated at their historical carrying value, which approximates fair value given the short-term nature of these assets and liabilities. The estimate of fair value for fixed assets was based on an assessment of acquired assets’ condition as well as an evaluation of the current market value of such assets.

The Company recorded intangible assets based on its preliminary estimate of fair value which consisted of the following (dollars in millions):


	Estimated Useful Life (in years)	Intangible Assets Acquired
Customer relationships	12.0	$	26.8
Backlog intangibles	3.0	11.6
Trade names	10.0	3.8
Total intangible assets acquired		$	42.2

The valuation of intangible assets was determined using the income approach methodology. More specifically, the fair values of the customer relationships and the backlog intangibles were estimated using the multi-period excess earnings method, while the trade name was estimated using the relief-from-royalty method. Key assumptions used in estimating future cash flows included projected revenue growth rates, profit margins, discount rates, customer attrition rates and royalty rates among others. The projected future cash flows are discounted to present value using an appropriate discount rate.

Results of the business acquired are included in the condensed consolidated financial statements from the date of acquisition. The results from the business acquired during fiscal 2024 were not considered material to the Company’s condensed consolidated financial statements.

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6. Accounts Receivable, Contract Assets, and Contract Liabilities

The following provides further details on the balance sheet accounts of accounts receivable, net; contract assets; and contract liabilities.

Accounts Receivable

Accounts receivable, net, classified as current, consisted of the following (dollars in thousands):


	October 28, 2023		January 28, 2023
Trade accounts receivable	$	583,621	$	367,842
Unbilled accounts receivable	838,471		670,066
Retainage	42,643		32,351
Total	1,464,735		1,070,259
Less: allowance for doubtful accounts	(3,565)		(3,246)
Accounts receivable, net	$	1,461,170	$	1,067,013

We maintain an allowance for doubtful accounts for estimated losses on uncollected balances. The allowance for doubtful accounts changed as follows (dollars in thousands):


	For the Three Months Ended				For the Nine Months Ended
	October 28, 2023		October 29, 2022		October 28, 2023		October 29, 2022
Allowance for doubtful accounts at beginning of period	$	3,801	$	785	$	3,246	$	724
Provision for bad debt (recovery)	(205)		2,012		1,028		2,149
Amounts charged against the allowance	(31)		—		(709)		(76)
Allowance for doubtful accounts at end of period	$	3,565	$	2,797	$	3,565	$	2,797

Contract Assets and Contract Liabilities

Net contract assets consisted of the following (dollars in thousands):


	October 28, 2023		January 28, 2023
Contract assets	$	70,451	$	43,932
Contract liabilities	21,320		19,512
Contract assets, net	$	49,131	$	24,420

The increase in net contract assets primarily resulted from increased services performed under contracts consisting of multiple tasks. During the three and nine months ended October 28, 2023, we performed services and recognized $4.2 million and $13.2 million, respectively, of contract revenues related to contract liabilities that existed at January 28, 2023. See Note 7, Other Current Assets and Other Assets, for information on our long-term contract assets.

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Customer Credit Concentration

Customers whose combined amounts of accounts receivable and contract assets, net, exceeded 10% of total combined accounts receivable and contract assets, net, as of October 28, 2023 or January 28, 2023 were as follows (dollars in millions):


	October 28, 2023			January 28, 2023
	Amount		% of Total	Amount		% of Total
Lumen Technologies	$	381.2	25.2%	$	189.3	17.4%
Comcast Corporation	$	124.4	8.2%	$	125.2	11.5%
AT&T Inc.	$	102.6	6.8%	$	136.2	12.5%
Frontier Communications Corporation	$	100.8	6.7%	$	153.2	14.0%

We believe that none of the customers above were experiencing financial difficulties that would materially impact the collectability of the Company’s total accounts receivable and contract assets, net, as of October 28, 2023 or January 28, 2023.

7. Other Current Assets and Other Assets

Other current assets consisted of the following (dollars in thousands):


	October 28, 2023		January 28, 2023
Prepaid expenses	$	22,676	$	17,357
Deposits and other current assets	19,983		19,642
Insurance recoveries/receivables for accrued insurance claims	68		—
Restricted cash	1,372		1,372
Receivables on equipment sales	982		277
Other current assets	$	45,081	$	38,648

Other assets consisted of the following (dollars in thousands):


	October 28, 2023		January 28, 2023
Long-term contract assets	$	3,838	$	8,333
Deferred financing costs	2,847		3,685
Restricted cash	432		432
Insurance recoveries/receivables for accrued insurance claims	4,723		4,957

Other non-current deposits and assets	12,780		8,964
Other assets	$	24,620	$	26,371

Long-term contract assets represent payments made to customers pursuant to long-term agreements and are recognized as a reduction of contract revenues over the period for which the related services are provided to the customers.

See Note 11, Accrued Insurance Claims, for information on our Insurance recoveries/receivables.

8. Cash, Cash Equivalents and Restricted Cash

Amounts of cash, cash equivalents and restricted cash reported in the condensed consolidated statement of cash flows consisted of the following (dollars in thousands):


	October 28, 2023		January 28, 2023
Cash and cash equivalents	$	15,665	$	224,186
Restricted cash included in:
Other current assets	1,372		1,372
Other assets (long-term)	432		432
Cash, cash equivalents and restricted cash	$	17,469	$	225,990

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9. Property and Equipment

Property and equipment consisted of the following (dollars in thousands):


	Estimated Useful Lives (Years)	October 28, 2023		January 28, 2023
Land	—	$	8,419	$	8,419
Buildings	10-35	10,553		10,466
Leasehold improvements	1-10	18,317		17,623
Vehicles	1-5	856,646		815,266
Equipment and machinery	1-10	402,215		359,021
Computer hardware and software	1-7	138,221		165,582
Office furniture and equipment	1-10	11,951		12,215
Total		1,446,322		1,388,592
Less: accumulated depreciation		(1,015,583)		(1,020,740)
Property and equipment, net		$	430,739	$	367,852

Depreciation expense was $36.5 million and $31.6 million for the three months ended October 28, 2023 and October 29, 2022, respectively and $104.8 million and $95.7 million for the nine months ended October 28, 2023 and October 29, 2022, respectively.

10. Goodwill and Intangible Assets

Goodwill

The Company’s goodwill balance was $310.0 million and $272.5 million as of October 28, 2023 and January 28, 2023, respectively. Changes in the carrying amount of goodwill consisted of the following (dollars in thousands):


	Goodwill		Accumulated Impairment Losses		Total
Balance as of January 28, 2023	$	521,576	$	(249,031)	$	272,545
Goodwill from fiscal 2024 acquisition	37,408		—		37,408
Balance as of October 28, 2023	$	558,984	$	(249,031)	$	309,953

The Company’s goodwill resides in multiple reporting units and primarily consists of expected synergies, together with the expansion of our geographic presence and strengthening of our customer base from acquisitions. Goodwill and other indefinite-lived intangible assets are assessed annually, or more frequently if events occur that would indicate a potential reduction in the fair value of a reporting unit below its carrying value. The profitability of individual reporting units may suffer periodically due to downturns in customer demand, increased costs of providing services, and the level of overall economic activity. Our customers may reduce capital expenditures and defer or cancel pending projects due to changes in technology, a slowing or uncertain economy, merger or acquisition activity, a decision to allocate resources to other areas of their business, or other reasons. The profitability of reporting units may also suffer if actual costs of providing services exceed the costs anticipated when the Company enters into contracts. Additionally, adverse conditions in the economy and future volatility in the equity and credit markets could impact the valuation of our reporting units. The cyclical nature of our business, the high level of competition existing within our industry, and the concentration of our revenues from a limited number of customers may also cause results to vary. These factors may affect individual reporting units disproportionately, relative to the Company as a whole. As a result, the performance of one or more of the reporting units could decline, resulting in an impairment of goodwill or intangible assets.

During August 2023, the Company acquired Bigham for $131.2 million. The purchase price was allocated based on the fair value of the assets acquired and the liabilities assumed on the date of acquisition. The excess purchase price over the estimated fair value of the net assets acquired was recognized as goodwill and totaled $37.4 million, which is deductible for tax purposes. See Note 5, Acquisitions, for more information regarding the acquisition.

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The Company performs its annual goodwill assessment as of the first day of the fourth fiscal quarter of each fiscal year. As a result of the Company’s fiscal 2023 period assessment, the Company determined that the fair values of each of the reporting units and the indefinite-lived intangible asset were in excess of their carrying values and no impairment had occurred. As of October 28, 2023, the Company continues to believe the remaining goodwill and the indefinite-lived intangible asset are recoverable for all of its reporting units.

Intangible Assets

Our intangible assets consisted of the following (dollars in thousands):


	October 28, 2023							January 28, 2023
	Weighted Average Remaining Useful Lives (Years)	Gross Carrying Amount		Accumulated Amortization		Intangible Assets, Net		Gross Carrying Amount		Accumulated Amortization		Intangible Assets, Net
Customer relationships	8.2	$	338,117	$	241,285	$	96,832	$	312,017	$	231,028	$	80,989
Trade names, finite	9.3	13,050		8,602		4,448		9,250		8,448		802
Trade name, indefinite	Indefinite	4,700		—		4,700		4,700		—		4,700
Contract backlog	2.8	11,600		1,885		9,715		—		—		—
Non-compete agreements	4.0	75		15		60		75		—		75
		$	367,542	$	251,787	$	115,755	$	326,042	$	239,476	$	86,566

Amortization of our customer relationship intangibles is recognized on an accelerated basis as a function of the expected economic benefit. Amortization of our other finite-lived intangibles is recognized on a straight-line basis over the estimated useful life. Amortization expense for finite-lived intangible assets was $6.0 million and $3.9 million for the three months ended October 28, 2023 and October 29, 2022, respectively and $13.0 million and $11.7 million for the nine months ended October 28, 2023 and October 29, 2022, respectively.

As of October 28, 2023, we believe that the carrying amounts of our intangible assets are recoverable. However, if adverse events were to occur or circumstances were to change indicating that the carrying amount of such assets may not be fully recoverable, the assets would be reviewed for impairment.

11. Accrued Insurance Claims

For claims within our insurance program, we retain the risk of loss, up to certain annual stop-loss limits, for matters related to automobile liability, general liability (including damages associated with underground facility locating services), workers’ compensation, and employee group health. Losses for claims beyond our retained risk of loss are covered by insurance up to our coverage limits.

For workers’ compensation losses during fiscal 2023 and 2024, we retained the risk of loss up to $1.0 million on a per occurrence basis. This retention amount is applicable to all of the states in which we operate, except with respect to workers’ compensation insurance in two states in which we participate in state-sponsored insurance funds.

For automobile liability and general liability losses during fiscal 2023, we retained the risk of loss up to $1.0 million on a per-occurrence basis for the first $5.0 million of insurance coverage. We also retained the risk of loss for the next $5.0 million on a per-occurrence basis with aggregate stop loss limits of $11.5 million within this layer of retention over the period from fiscal 2021 to fiscal 2023. Additionally, we retained $5.0 million risk of loss on a per occurrence basis for losses between $10.0 million and $15.0 million, if any, and we retained $10.0 million risk of loss on a per occurrence basis for losses between $30.0 million and $40.0 million, if any.

For automobile liability and general liability losses during fiscal 2024, we retained the risk of loss up to $1.0 million on a per-occurrence basis for the first $5.0 million of insurance coverage. We also retained the risk of loss for the next $10.0 million on a per-occurrence basis for losses between $5.0 million and $15.0 million, if any. Additionally, during fiscal 2024 we retained $10.0 million risk of loss on a per occurrence basis for losses between $30.0 million and $40.0 million, if any.

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We are party to a stop-loss agreement for losses under our employee group health plan. For the calendar years 2022 and 2023, we retain the risk of loss on an annual basis, up to the first $600,000 of claims per participant.

Amounts for total accrued insurance claims and insurance recoveries/receivables are as follows (dollars in thousands):


	October 28, 2023		January 28, 2023
Accrued insurance claims - current	$	45,713	$	41,043
Accrued insurance claims - non-current	50,281		49,347
Accrued insurance claims	$	95,994	$	90,390

Insurance recoveries/receivables:
Current (included in Other current assets)	$	68	$	—
Non-current (included in Other assets)	4,723		4,957
Insurance recoveries/receivables	$	4,791	$	4,957

Insurance recoveries/receivables represent the amount of accrued insurance claims that are covered by insurance as the amounts exceed the Company’s loss retention. During the nine months ended October 28, 2023, total insurance recoveries/receivables decreased approximately $0.2 million primarily due to the settlement of claims that exceed our loss retention. Accrued insurance claims decreased by a corresponding amount.

12. Leases

We lease the majority of our office facilities as well as certain equipment, all of which are accounted for as operating leases. These leases have remaining terms ranging from less than 1 year to approximately 6 years. Some leases include options to extend the lease for up to 5 years and others include options to terminate.

The following table summarizes the components of lease cost recognized in the condensed consolidated statements of operations for the three and nine months ended October 28, 2023 and October 29, 2022 (dollars in thousands):


	For the Three Months Ended				For the Nine Months Ended
	October 28, 2023		October 29, 2022		October 28, 2023		October 29, 2022
Lease cost under long-term operating leases	$	9,795	$	8,593	$	28,426	$	25,520
Lease cost under short-term operating leases	5,745		7,183		17,845		19,898
Variable lease cost under short-term and long-term operating leases(1)	718		897		2,868		2,917
Total lease cost	$	16,258	$	16,673	$	49,139	$	48,335

(1) Variable lease cost primarily includes insurance, maintenance, and other operating expenses related to our leased office facilities.

Our operating lease liabilities related to long-term operating leases were $74.0 million as of October 28, 2023 and $67.2 million as of January 28, 2023. Supplemental balance sheet information related to these liabilities is as follows:


	October 28, 2023		January 28, 2023
Weighted average remaining lease term	2.9 years		2.9 years
Weighted average discount rate	4.8	%	3.9	%

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Supplemental cash flow information related to our long-term operating lease liabilities for the three and nine months ended October 28, 2023 and October 29, 2022 is as follows (dollars in thousands):


	For the Three Months Ended				For the Nine Months Ended
	October 28, 2023		October 29, 2022		October 28, 2023		October 29, 2022
Cash paid for amounts included in the measurement of lease liabilities	$	10,612	$	9,452	$	27,692	$	25,317
Operating lease right-of-use assets obtained in exchange for operating lease liabilities	$	10,836	$	9,202	$	33,447	$	28,659

As of October 28, 2023, maturities of our lease liabilities under our long-term operating leases for the next five fiscal years and thereafter are as follows (dollars in thousands):


Fiscal Year	Amount
Remainder of 2024	$	8,248
2025	33,178
2026	22,205
2027	12,262
2028	5,786
2029	2,165
Thereafter	168
Total lease payments	84,012
Less: imputed interest	(10,031)
Total	$	73,981

13. Other Accrued Liabilities

Other accrued liabilities consisted of the following (dollars in thousands):


	October 28, 2023		January 28, 2023
Accrued payroll and related taxes	$	37,164	$	32,448
Accrued employee benefit and incentive plan costs	54,580		44,487
Accrued construction costs	37,606		37,735
Other current liabilities	26,710		26,664
Other accrued liabilities	$	156,060	$	141,334

14. Debt

The following table summarizes the net carrying value of our outstanding indebtedness (dollars in thousands):


	October 28, 2023		January 28, 2023
Credit agreement - Revolving facility (matures April 2026)	$	154,000	$	—
Credit agreement - Term loan facility, net (matures April 2026)	317,955		330,603
4.50% senior notes, net (mature April 2029)	494,951		494,264
	966,906		824,867
Less: current portion	(17,500)		(17,500)
Long-term debt	$	949,406	$	807,367

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Credit Agreement

On April 1, 2021, the Company and certain of its subsidiaries amended its credit agreement, dated as of October 19, 2018, with the various lenders party thereto and Bank of America, N.A., as administrative agent (the “Credit Agreement”), to among other things, decrease the maximum revolver commitment to $650.0 million from $750.0 million and decrease the term loan facility to $350.0 million from $416.3 million. The Credit Agreement includes a $200.0 million sublimit for the issuance of letters of credit and a $50.0 million sublimit for swingline loans. As part of the amendment, the maturity of the Credit Agreement was extended to April 1, 2026.

The following table summarizes the net carrying value of the term loan as of October 28, 2023 and January 28, 2023 (dollars in thousands):


	October 28, 2023		January 28, 2023
Principal amount of term loan	$	319,375	$	332,500
Less: Debt issuance costs	(1,420)		(1,897)
Net carrying amount of term loan	$	317,955	$	330,603

Subject to certain conditions, the Credit Agreement provides us with the ability to enter into one or more incremental facilities either by increasing the revolving commitments under the Credit Agreement and/or by establishing one or more additional term loans, up to the sum of (i) $350.0 million and (ii) an aggregate amount such that, after giving effect to such incremental facilities on a pro forma basis (assuming that the amount of the incremental commitments are fully drawn and funded), the consolidated senior secured net leverage ratio does not exceed 2.25 to 1.00. The consolidated senior secured net leverage ratio is the ratio of our consolidated senior secured indebtedness reduced by unrestricted cash and equivalents in excess of $25.0 million to our trailing four-quarter consolidated earnings before interest, taxes, depreciation, and amortization (“EBITDA”), as defined by the Credit Agreement. Borrowings under the Credit Agreement are guaranteed by substantially all of our domestic subsidiaries and secured by 100% of the equity interests of our direct and indirect domestic subsidiaries and 65% of the voting equity interests and 100% of the non-voting interests of our first-tier foreign subsidiaries (subject to customary exceptions).

Under our Credit Agreement, borrowings bear interest at the rates described below based upon our consolidated net leverage ratio, which is the ratio of our consolidated total funded debt reduced by unrestricted cash and equivalents in excess of $25.0 million to our trailing four-quarter consolidated EBITDA, as defined by our Credit Agreement. In addition, we incur certain fees for unused balances and letters of credit at the rates described below, also based upon our consolidated net leverage ratio.


Borrowings - Eurodollar Rate Loans			1.25% - 2.00% plus SOFR
Borrowings - Base Rate Loans			0.25% - 1.00% plus Base rate(1)
Unused Revolver Commitment			0.20% - 0.40%
Standby Letters of Credit			1.25% - 2.00%
Commercial Letters of Credit			0.625% -1.000%

(1) Base rate is described in the Credit Agreement as the highest of (i) the Federal Funds Rate plus 0.50%, (ii) the administrative agent’s prime rate, and (iii) the Eurodollar rate plus 1.00% and, if such rate is less than zero, such rate shall be deemed zero.

Standby letters of credit of approximately $47.5 million and $47.5 million issued as part of our insurance program, were outstanding under our Credit Agreement at each of October 28, 2023 and January 28, 2023, respectively.

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The weighted average interest rates and fees for balances under our Credit Agreement as of October 28, 2023 and January 28, 2023 were as follows:


	Weighted Average Rate End of Period
	October 28, 2023	January 28, 2023
Borrowings - Term loan facility	6.93%	6.21%
Borrowings - Revolving facility(1)	7.56%	—%
Standby Letters of Credit	1.50%	1.75%
Unused Revolver Commitment	0.25%	0.35%

(1) There were no outstanding borrowings under our revolving facility as of January 28, 2023.

Our Credit Agreement contains a financial covenant that requires us to maintain a consolidated net leverage ratio of not greater than 3.50 to 1.00, as measured at the end of each fiscal quarter, and provides for certain increases to this ratio in connection with permitted acquisitions. The consolidated net leverage ratio is the ratio of our consolidated indebtedness reduced by unrestricted cash and cash equivalents in excess of $25.0 million to our trailing four-quarter consolidated earnings before interest, taxes, depreciation, and amortization as defined by our Credit Agreement. The Credit Agreement also contains a financial covenant that requires us to maintain a consolidated interest coverage ratio, which is the ratio of our trailing four-quarter consolidated EBITDA to our consolidated interest expense, each as defined by our Credit Agreement, of not less than 3.00 to 1.00, as measured at the end of each fiscal quarter. At each of October 28, 2023 and January 28, 2023, we were in compliance with the financial covenants of our Credit Agreement and had borrowing availability under the revolving facility of $448.5 million as determined by the most restrictive covenant. For calculation purposes, applicable cash on hand is netted against the funded debt amount as permitted in the Credit Agreement.

On May 9, 2023, the Company and certain of its subsidiaries amended the Credit Agreement to replace LIBOR with the Secured Overnight Financing Rate (“SOFR”) and provides that term loans and revolving loans will bear interest at a rate per annum equal to, either term SOFR or the base rate, plus, in each case, an applicable margin that will be determined based on the Company’s consolidated net leverage ratio, as specified above. “Term SOFR” will be the published forward-looking SOFR rate for the applicable interest period plus a 0.10% spread adjustment.

4.50% Senior Notes Due 2029

On April 1, 2021, we issued $500.0 million aggregate principal amount of 4.50% senior notes due 2029 (the “2029 Notes”). The 2029 Notes are guaranteed on a senior unsecured basis, jointly and severally, by all of our domestic subsidiaries that guarantee the Credit Agreement.

The indenture governing the 2029 Notes contains certain covenants that limit, among other things, our ability and the ability of certain of our subsidiaries to (i) incur additional debt and issue certain preferred stock, (ii) pay certain dividends on, repurchase, or make distributions in respect of, our and our subsidiaries’ capital stock or make other payments restricted by the indenture, (iii) enter into agreements that place limitations on distributions made from certain of our subsidiaries, (iv) guarantee certain debt, (v) make certain investments, (vi) sell or exchange certain assets, (vii) enter into transactions with affiliates, (viii) create certain liens, and (ix) consolidate, merge or transfer all or substantially all of our or our Subsidiaries’ assets. These covenants are subject to a number of exceptions, limitations and qualifications as set forth in the indenture governing the 2029 Notes.

The following table summarizes the net carrying value of the 2029 Notes as of October 28, 2023 and January 28, 2023 (dollars in thousands):


	October 28, 2023		January 28, 2023
Principal amount of 2029 Notes	$	500,000	$	500,000
Less: Debt issuance costs	(5,049)		(5,736)
Net carrying amount of 2029 Notes	$	494,951	$	494,264

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The following table summarizes the fair value of the 2029 Notes, net of debt issuance costs. The fair value of the 2029 Notes is based on the closing trading price per $100 of the 2029 Notes as of the last day of trading (Level 2), which was $85.74 and $97.50 as of October 28, 2023 and January 28, 2023, respectively (dollars in thousands):


	October 28, 2023		January 28, 2023
Fair value of principal amount of 2029 Notes	$	428,700	$	451,250
Less: Debt issuance costs	(5,049)		(5,736)
Fair value of 2029 Notes	$	423,651	$	445,514

15. Income Taxes

Our interim income tax provisions are based on the effective income tax rate expected to be applicable for the full fiscal year, adjusted for specific items that are required to be recognized in the period in which they occur. Deferred tax assets and liabilities are based on the enacted tax rate that will apply in future periods when such assets and liabilities are expected to be settled or realized.

Our effective income tax rate was 25.5% and 21.9% for the three months ended October 28, 2023 and October 29, 2022, respectively, and 24.9% and 20.8% for the nine months ended October 28, 2023 and October 29, 2022, respectively. The effective tax rate differs from the statutory rate primarily due to the difference in income tax rates from state to state where work was performed, the impact of the vesting and exercise of share-based awards, tax credits recognized, and variances in non-deductible and non-taxable items. Other fluctuations in our effective income tax rate from the statutory rate each period are mainly attributable to changes in unrecognized tax benefits and tax law changes.

We are currently under IRS audit for fiscal year 2020. We believe our provision for income taxes is adequate; however, any assessment may affect our results of operations and cash flows.

16. Other Income, Net

The components of other income, net, were as follows (dollars in thousands):


	For the Three Months Ended				For the Nine Months Ended
	October 28, 2023		October 29, 2022		October 28, 2023		October 29, 2022
Gain on sale of fixed assets	$	8,357	$	5,135	$	23,730	$	13,991
Discount fee expense	(2,231)		(3,266)		(7,784)		(5,682)
Miscellaneous income, net	780		605		1,682		1,547
Other income, net	$	6,906	$	2,474	$	17,628	$	9,856

We participate in a vendor payment program sponsored by one of our customers. Eligible accounts receivable from this customer are included in the program and payment is received pursuant to a non-recourse sale to a bank partner. This program effectively reduces the time to collect these receivables as compared to that customer’s standard payment terms. We incur a discount fee to the bank on the payments received that is reflected as discount fee expense in the table above and is included as an expense component in other income, net, in the condensed consolidated statements of operations.

17. Capital Stock

Repurchases of Common Stock. On August 23, 2023 the Company announced that its Board of Directors had authorized a $150 million program to repurchase shares of the Company’s outstanding common stock through February 2025 in open market or private transactions. During the three months ended October 28, 2023, the Company did not repurchase any shares of its own common stock. As of October 28, 2023, $150.0 million of the authorization was available for repurchases.

Upon cancellation of shares repurchased or withheld for tax withholdings, the excess over par value is recorded as a reduction of additional paid-in capital until the balance is reduced to zero, with any additional excess recorded as a reduction of retained earnings. During the nine months ended October 28, 2023, $20.1 million was charged to retained earnings related to shares canceled during the period.

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18. Stock-Based Awards

We have certain stock-based compensation plans under which we grant stock-based awards, including common stock, stock options, time-based restricted share units (“RSUs”), and performance-based restricted share units (“Performance RSUs”) to attract, retain, and reward talented employees, officers, and directors, and to align stockholder and employee interests.

Compensation expense for stock-based awards is based on fair value at the measurement date. This expense fluctuates over time as a function of the duration of vesting periods of the stock-based awards and the Company’s performance, as measured by criteria set forth in performance-based awards. Stock-based compensation expense is included in general and administrative expenses in the condensed consolidated statements of operations and the amount of expense ultimately recognized depends on the quantity of awards that actually vest. Accordingly, stock-based compensation expense may vary from period to period.

The performance criteria for the Company’s performance-based equity awards utilize the Company’s operating earnings (adjusted for certain amounts) as a percentage of contract revenues for the applicable annual period (a “Performance Year”) and its Performance Year operating cash flow level (adjusted for certain amounts). Additionally, certain awards include three-year performance measures that, if met, result in supplemental shares awarded. For Performance RSUs, the Company evaluates compensation expense quarterly and recognizes expense for performance-based awards only if it determines it is probable that performance criteria for the awards will be met.

Stock-based compensation expense and the related tax benefit recognized during the three and nine months ended October 28, 2023 and October 29, 2022 were as follows (dollars in thousands):


	For the Three Months Ended				For the Nine Months Ended
	October 28, 2023		October 29, 2022		October 28, 2023		October 29, 2022
Stock-based compensation	$	6,298	$	4,515	$	19,240	$	12,273
Income tax effect of stock-based compensation	$	3,201	$	1,113	$	4,768	$	3,031

During the three months ended October 28, 2023 and October 29, 2022 the Company realized less than $0.1 million and approximately $1.5 million of net excess tax benefits, respectively, related to the vesting and exercise of share-based awards. During the nine months ended October 28, 2023 and October 29, 2022, the Company realized approximately $2.9 million and $4.1 million of net excess tax benefits, respectively.

As of October 28, 2023, we had unrecognized compensation expense related to stock options, RSUs, and target Performance RSUs (based on the Company’s expected achievement of performance measures) of $3.7 million, $23.6 million, and $19.3 million, respectively. This expense will be recognized over a weighted-average number of years of 2.8, 2.8, and 1.4, respectively, based on the average remaining service periods for the awards. We may recognize an additional $13.1 million in compensation expense in future periods after October 28, 2023 if the maximum number of Performance RSUs is earned based on certain performance measures being met.

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Stock Options

The following table summarizes stock option award activity during the nine months ended October 28, 2023:


	Stock Options
	Shares	Weighted Average Exercise Price
Outstanding as of January 28, 2023	245,706	$	65.36
Granted	38,155	$	94.99
Options exercised	(9,879)	$	30.83

Outstanding as of October 28, 2023	273,982	$	70.73

Exercisable options as of October 28, 2023	180,369	$	64.75

RSUs and Performance RSUs

The following table summarizes RSU and Performance RSU award activity during the nine months ended October 28, 2023:


	Restricted Stock
	RSUs			Performance RSUs
	Share Units	Weighted Average Grant Date Fair Value		Share Units	Weighted Average Grant Date Fair Value
Outstanding as of January 28, 2023	439,903	$	53.76	385,673	$	90.32
Granted	164,052	$	95.27	230,127	$	94.99
Share units vested	(198,746)	$	45.32	(112,787)	$	83.25
Forfeited or canceled	(5,417)	$	63.63	(66,706)	$	81.54
Outstanding as of October 28, 2023	399,792	$	74.86	436,307	$	95.95

The total number of granted Performance RSUs presented above consists of 157,380 target shares and 72,747 supplemental shares. The total number of Performance RSUs outstanding as of October 28, 2023 consists of 296,774 target shares and 139,533 supplemental shares. With respect to the Company’s Performance Year ended January 28, 2023, the Company canceled 2,506 target shares and 57,199 supplemental shares during the nine months ended October 28, 2023, as a result of the performance period criteria not being met.

19. Customer Concentration and Revenue Information

Geographic Location

We provide services throughout the United States.

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Significant Customers

Our customer base is highly concentrated, with our top five customers accounting for approximately 57.9% and 67.0% of total contract revenues during the nine months ended October 28, 2023 and October 29, 2022, respectively. Customers whose contract revenues exceeded 10% of total contract revenues during the three and nine months ended October 28, 2023 or October 29, 2022, as well as total contract revenues from all other customers combined, were as follows (dollars in millions):


	For the Three Months Ended						For the Nine Months Ended
	October 28, 2023			October 29, 2022			October 28, 2023			October 29, 2022
	Amount		% of Total	Amount		% of Total	Amount		% of Total	Amount		% of Total
AT&T Inc.	$	145.1	12.8%	$	258.2	24.8%	$	543.8	16.9%	$	751.5	26.0%
Lumen Technologies	187.6		16.5	142.9		13.6	486.5		15.1	373.3		12.9
Comcast Corporation	111.2		9.8	108.8		10.4	351.3		10.9	331.9		11.5
Total other customers combined	692.2		60.9	532.5		51.2	1,841.5		57.1	1,434.3		49.6
Total contract revenues	$	1,136.1	100.0%	$	1,042.4	100.0%	$	3,223.1	100.0%	$	2,891.0	100.0%

See Note 6, Accounts Receivable, Contract Assets, and Contract Liabilities, for information on our customer credit concentration and collectability of trade accounts receivable and contract assets.

Customer Type

Total contract revenues by customer type during the three and nine months ended October 28, 2023 and October 29, 2022 were as follows (dollars in millions):


	For the Three Months Ended						For the Nine Months Ended
	October 28, 2023			October 29, 2022			October 28, 2023			October 29, 2022
	Amount		% of Total	Amount		% of Total	Amount		% of Total	Amount		% of Total
Telecommunications	$	1,023.2	90.1%	$	940.7	90.3%	$	2,888.5	89.6%	$	2,590.5	89.6%
Underground facility locating	76.9		6.7	72.1		6.9	226.6		7.0	214.5		7.4
Electrical and gas utilities and other	36.0		3.2	29.6		2.8	108.0		3.4	86.0		3.0
Total contract revenues	$	1,136.1	100.0%	$	1,042.4	100.0%	$	3,223.1	100.0%	$	2,891.0	100.0%

Remaining Performance Obligations

Master service agreements and other contractual agreements with customers contain customer-specified service requirements, such as discrete pricing for individual tasks. In most cases, our customers are not contractually committed to procure specific volumes of services under these agreements.

Services are generally performed pursuant to these agreements in accordance with individual work orders. An individual work order generally is completed within one year. As a result, our remaining performance obligations under the work orders not yet completed is not meaningful in relation to our overall revenue at any given point in time. We apply the practical expedient in Accounting Standards Codification Topic 606, Revenue from Contracts with Customers, and do not disclose information about remaining performance obligations that have original expected durations of one year or less.

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20. Commitments and Contingencies

During the fourth quarter of fiscal 2016, one of the Company’s subsidiaries ceased operations. This subsidiary contributed to a multiemployer pension plan, the Pension, Hospitalization and Benefit Plan of the Electrical Industry - Pension Trust Fund (the “Plan”). In October 2016, the Plan demanded payment for a claimed withdrawal liability of approximately $13.0 million. In December 2016, the subsidiary submitted a formal request to the Plan seeking review of the Plan’s withdrawal liability determination. The subsidiary disputes the claim that it is required to make payment of a withdrawal liability as demanded by the Plan as it believes that a statutory exemption under the Employee Retirement Income Security Act (“ERISA”) applies to its activities. The Plan has taken the position that the work at issue does not qualify for that statutory exemption. The subsidiary has submitted this dispute to arbitration, as required by ERISA. In that proceeding, the arbitrator has issued an order indicating that the statutory exemption is not available to the Company’s subsidiary, and the Company’s subsidiary is appealing the arbitrator’s ruling on various grounds. There can be no assurance that the Company’s subsidiary will be successful in its appeal of the arbitrator’s ruling regarding this statutory exemption. As required by ERISA, this subsidiary began making payments to the Plan in the amount of approximately $0.1 million per month in November 2016. The aggregate amount of these payments has been recorded as an asset. If the subsidiary prevails in disputing the withdrawal liability, all such payments are expected to be refunded. Given the stage of this action, it is not possible to estimate a range of loss that could result from either an adverse judgment or a settlement of this matter.

From time to time, we are party to other various claims and legal proceedings arising in the ordinary course of business. While the resolution of these matters cannot be predicted with certainty, it is the opinion of management, based on information available at this time, that the ultimate resolution of any such claims or legal proceedings will not, after considering applicable insurance coverage or other indemnities to which we may be entitled, have a material effect on our financial position, results of operations, or cash flow.

Commitments

Performance and Payment Bonds and Guarantees. We have obligations under performance and other surety contract bonds related to certain of our customer contracts. Performance bonds generally provide a customer with the right to obtain payment and/or performance from the issuer of the bond if we fail to perform our contractual obligations. As of October 28, 2023 and January 28, 2023, we had $382.8 million and $299.8 million, respectively, of outstanding performance and other surety contract bonds. In addition to performance and other surety contract bonds, as part of our insurance program we also provide surety bonds that collateralize our obligations to our insurance carriers. As of October 28, 2023 and January 28, 2023, we had $20.4 million and $20.4 million, respectively, of outstanding surety bonds related to our insurance obligations. Additionally, we periodically guarantee certain obligations of our subsidiaries, including obligations in connection with obtaining state contractor licenses and leasing real property and equipment.

Letters of Credit. We have issued standby letters of credit under our Credit Agreement that collateralize our obligations to our insurance carriers. At each of October 28, 2023 and January 28, 2023, we had $47.5 million of outstanding standby letters of credit issued under the Credit Agreement.

Cautionary Note Concerning Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements. These statements are intended to qualify for the “safe harbor” from liability established by the Private Securities Litigation Reform Act of 1995. These statements may relate to future events, financial performance, strategies, expectations, and the competitive environment. Words such as “believe,” “expect,” “anticipate,” “estimate,” “intend,” “project,” “forecast,” “target,” “outlook,” “may,” “should,” “could,” and similar expressions, as well as statements written in the future tense, identify forward-looking statements.

You should not consider forward-looking statements as guarantees of future performance or results. When made, forward-looking statements are based on information known to management at such time and/or management’s good faith belief with respect to future events. Such statements are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors, assumptions, uncertainties, and risks that could cause such differences include, but are not limited to: projections of revenues, income or loss, or capital expenditures, future economic conditions and trends in the industries we serve, customer capital budgets and spending priorities, our plans for future operations, growth and services, including contract backlog, our plans for future acquisitions, dispositions, or financial needs, expected benefits and synergies of businesses acquired and future opportunities for the combined businesses, anticipated outcomes of contingent events, including litigation, availability of capital, restrictions imposed by our senior notes and credit agreement, use of our cash flow to service our debt, the effect of changes in tax law, potential liabilities and other adverse effects arising from occupational health, safety, and other regulatory matters, potential

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exposure to environmental liabilities, determinations as to whether the carrying value of our assets is impaired, assumptions relating to any of the foregoing, the duration and severity of a pandemic caused by COVID-19 and its ultimate impact across our business, and the other risks and uncertainties discussed within Item 1, Business, Item 1A, Risk Factors, and Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for fiscal 2023, filed with the U.S. Securities and Exchange Commission (“SEC”) on March 3, 2023 and our other periodic filings with the SEC. Our forward-looking statements are expressly qualified in their entirety by this cautionary statement and are only made as of the date of this Quarterly Report on Form 10-Q. We undertake no obligation to update or revise any forward-looking statements to reflect new information or events or circumstances arising after such date.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and the accompanying notes thereto included elsewhere in this Quarterly Report on Form 10-Q and with our Annual Report on Form 10-K for fiscal 2023. Our Annual Report on Form 10-K for fiscal 2023 was filed with the SEC on March 3, 2023, and is available on the SEC’s website at www.sec.gov and on our website at www.d