On Wednesday, Dycom Industries (NYSE:DY) discussed first-quarter financial results during its earnings call. The full transcript is provided below.

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Summary

Dycom Industries reported a strong first quarter with total revenues of $1.965 billion, marking a 56% increase year-over-year, driven by 25% organic growth.

The company announced a definitive agreement to acquire National Technology Integrators, a firm specializing in low voltage engineering and construction, expected to enhance Dycom's capabilities in the data center industry.

Future outlook for fiscal 2027 has been raised, with expected contract revenues ranging from $7.38 billion to $7.65 billion, reflecting a 38% growth including 14% organic growth.

The company reported a record total backlog of $11.9 billion, indicating strong demand and diversified customer base.

Management highlighted strategic priorities including talent development, margin expansion, and disciplined M&A, contributing to strong operational performance and future growth prospects.

Full Transcript

OPERATOR

Good day and thank you for standing by. Welcome to the Dycom Industries Inc. First Quarter 2027 Results Conference Call. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised to withdraw your question. Please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Ms. Callie Tomasso, Dycom's Vice President of Investor Relations and Corporate Communications. Please go ahead.

Callie Tomasso (Vice President of Investor Relations and Corporate Communications)

Thank you operator and good morning everyone. Welcome to Dycom's fiscal 2027 first quarter results conference call. Joining me today are Dan Pajevich, our President and Chief Executive Officer, and Drew DeFerrari, our Chief Financial Officer. Earlier this morning we released our fiscal 2027 first quarter results along with certain outlook information. We also announced a definitive agreement to acquire National Technology Integrators, a low voltage engineering and construction firm based in Maryland. The press release and accompanying materials are available in the Investor Relations SECtion of our website, including the Outlook Expectations Summary document which provides additional outlook metrics beyond what will be discussed on today's call. These materials, which we will discuss during today's call, include forward looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform act of 1995. Our discussion and these statements reflect our expectations, assumptions and beliefs regarding future events and are subject to risks and uncertainties that could cause actual results to differ materially. A detailed discussion of these risks and uncertainties is included in our filings with the SEC. Forward looking statements are made as of today's date and we undertake no obligation to update them. Additionally, we will reference certain non Generally Accepted Accounting Principles (GAAP) financial measures during today's call. Explanations of these measures and reconciliations to the most directly comparable Generally Accepted Accounting Principles (GAAP) measures can be found in our press release and accompanying materials. With that, I will turn the call over to Dan Pajevich.

Dan Pajevich

Thank you Callie and good morning everyone. Thank you for joining us today. We delivered an outstanding start to the year, continuing to execute our strategy and capitalize on a generational set of opportunities across our business. Total revenues of 1.965 billion exceeded the high end of our expectation, increasing 56% compared to Q1 FY 2026, including organic growth of 25% with robust and intensifying demand drivers. We remain disciplined in our awards, high grading the pipeline and intensely focusing on execution. The results of this discipline are reflected in our earnings for the quarter which also exceeded the high end of our expectations. Adjusted EBITDA of 262.5 million and adjusted EBITDA margin of 13.4% increased 75% and 141 basis points respectively and non GAAP adjusted diluted Earnings Per Share (EPS) was $4.42, an 85% increase compared to Q1 fiscal 2026. We ended the quarter with record total backlog of 11.9 billion, growing 25% sequentially and representing a book to bill of 2.2 times for the quarter. Notably, awards this quarter continued to diversify our backlog across customers, demand drivers and geographies. In some cases we are also seeing customers extend durations to ensure they have the skilled workforce to meet their goals. These awards provide certainty and visibility that allow Dycom to plan and invest for work far in the future and positions us for multi year growth with strong results in Q1 and intensifying demand across our business. We are increasing our full year fiscal 2027 outlook to a range of 7.38 billion to 7.65 billion at the midpoint and excluding the extra week from last year. Our new outlook represents total revenue growth of 38% including 14% organic compared to last year. I'll shift now to our segments which delivered excellent performance to start the year. Our communications segment generated significant revenue growth of 25% compared to Q1 FY 2026 with adjusted EBITDA margins that increased 31 basis points year over year. Growth during the period was driven by expansion into additional geographies and fiber to home builds that ramped ahead of expectations, all aided by a favorable seasonal backdrop. Demand for fiber infrastructure remains as strong as ever as evidenced by our customers bullish commentary about their multi year fiber to the home and long haul build programs as well as recent announcements from Corning to scale manufacturing capabilities in response to the demand for fiber in the coming years. Our building systems segment is off to a fantastic start, performing exceptionally well this quarter. Dycom's integration engine is firing on all cylinders and I am immensely proud of the team for outpacing our internal projections in a very short period of time. Power Solutions eclipse expectations right out of the gate, delivering $395.4 million of revenue and adjusted EBITDA margin of 17.7%. Importantly, looking ahead, we expect their fiscal 2027 margin to be in a similar range to the Q1 performance with power Solutions. We have added an incredible team that has earned tremendous respect across all stakeholders for nearly three decades As a result, we are positioned for significant long term growth as we continue to scale our digital infrastructure platform. Shifting to discuss our initiatives Last quarter I spoke of four core strategic priorities for the year and we delivered on every one of them in our first quarter. First, talent and workforce development, our investments in our training and our people are yielding great results. We added 730 employees in the quarter as we continue to invest to support our significant growth. Second, we are executing on the expansion of our building system segment both organically as Power Solutions scales its operations and through Strategic M and A. Today we announced a definitive agreement to acquire National Technology Integrators, a tenured and fast growing low voltage engineering and construction firm based in Maryland, enhancing our position and further expanding our capabilities in the high growth data center industry. National Technology Integrators specializes in inside plant structured cabling including within data centers as well as audio, visual and security systems. This is a critical step that connects the work of both our segments. We will be able to offer our customers complete fiber infrastructure starting at the racks and connecting data centers across America, ultimately bringing fiber connectivity to businesses, communities and homes. Their work marries incredibly well with our inside the plant electrical work as these trades are highly coordinated and in high demand. Importantly, this private founder led business is another outstanding cultural fit with a team that is highly respected and excited to continue their growth story. Based in Maryland and with much of their revenue in the DMV, they also have operations spanning Texas and the Midwest brought there by their general contractor and hyperscaler customers. Because of their proven performance, this creates enormous opportunity for Dycom to continue to grow our building systems segment and cross sell our services. This cross selling is already occurring. Power Solutions and National Technology Integrators have been strategic partners for years and are currently working on projects together. In addition, we are already working together on inside defense fiber work in our communications segmentation. In short, the synergies are incredibly strong and this is a perfect fit to further increase our opportunity set. They consistently deliver superb results and the transaction is expected to be immediately accretive across key enterprise financial metrics. We are excited to welcome National Technology innovators to the TYCOM family when the transaction closes expected in Q2. Looking ahead, we will continue to pursue additional high quality M&A while also maintaining our commitment to long term net leverage discipline and investing in organic growth opportunities. Moving to our third strategic priority margin expansion, we delivered year over year improvement of 141 basis points in adjusted EBITDA margin for the quarter. Looking toward the full fiscal year, we continue to expect our communications segment to modestly increase adjusted EBITDA margin over the prior year and we now expect our building system segment to maintain adjusted EBITDA margin in the high teens. Fourth, cash flow enhancement continues to be a priority and our combined DSOs were 96 days for the quarter, a significant improvement of 15 days year over year. Over the past five quarters we've laid out a clear picture of the intensifying demand across our industry and we've proven Dycom's ability to step up and capitalize on it. We're doing that through clear strategy, consistent execution, organic investments and disciplined M and A. Looking ahead, the momentum behind fiber deployments and data center builds is stronger today than we have ever seen. We are moving quickly to capture this opportunity, expanding our presence and footprint across our business while continuing to anchor ourselves with steady service and maintenance work. On top of that, VEID is progressing through state level and sub grantee pipelines, which points to upside for both our backlog and our future outlook. In closing, Dycom scale and positioning combined with our local expertise is unmatched in digital infrastructure. We are focused on delivering value to our frontline employees and our customers and believe that this goes hand in hand with delivering value to our shareholders. I would like to thank my 20,000 teammates for raising the bar every day for our customers and in our communities. I am incredibly proud of what we've accomplished together and am confident we will continue to deliver value for our shareholders and long term opportunities for our teams as we pursue our vision to be the people connecting America. I'll turn the call over to Drew now for a deeper dive into our Q1 performance and further details on our acquisition.

Drew DeFerrari

Thanks Dan and good morning everyone. In Q1 we outperformed the high end of our expectations, delivering strong top line and adjusted EBITDA growth and margin expansion while also investing in our future growth and returning capital to our shareholders through share repurchases. Q1 total contract revenues of 1.965 billion grew 56.1% over Q1 of last year. This reflects the strength of relationships and continued diversification across our customer base. Organic revenue of the communications segment grew 24.7% and building systems grew significantly compared to the prior year quarter. Building Systems represented approximately 20% of total revenue for the quarter. Consolidated Adjusted EBITDA of 262.5 million increased 75% over Q1 2026 reflecting strong performance in both of our business segments. Consolidated adjusted NET income was 134.3 million and adjusted diluted EPS was $4,42 cents per share, an increase of 85% over Q1 2026 these results are adjusted to exclude the amortization of intangible assets. Results for the quarter included income tax benefits resulting from the vesting and exercise of share based awards of 12.5 million or 41 cents per share compared to 2.2 million or 8 cents per share in Q1 last year. Moving to the results of our business segments, each of which performed well in the quarter and exceeded our expectations, communications revenue was 1.57 billion and grew 24.7% organically driven by ramping fiber to the home programs, increased long haul and middle mile fiber infrastructure builds and growing maintenance and operations services. Adjusted EBITDA for Communications increased 28% to 1 92.4 million and or 12.3% of segment revenue reflecting operating leverage and continued investment to scale our footprint and increase headcount, further strengthening our position to execute on multi year build programs. Building Systems revenue was 395.4 million and adjusted EBITDA was 70 million or 17.7% of segment revenue. As Power Solutions ramped growth ahead of our initial expectations and we integrated the operations, total backlog at the end of Q1 was 11.9 billion including 10.8 billion of communications backlog and 1.1 billion of building systems backlog. Backlog expected to be completed in the next 12 months was 6.4 billion including 5.4 billion of communications and 1 billion for building systems. Strong cash flow remains a primary focus. We delivered solid results supporting the growth in revenue and normal seasonal uses of cash during the quarter. The combined Days Sales Outstanding (DSOs) of accounts receivable and contract assets net were 96 days, a reduction of 5 days sequentially from Q4, 26 and 15 days year over year. During Q1 we repurchased 100,000 shares of our common stock for approximately 36 million or $360 per share. We ended the quarter with cash and equivalents of 538.8 million and total liquidity of over 1.28 billion. Pro forma net leverage at the end of the quarter was approximately 2.3 times adjusted EBITDA providing us with financial flexibility for continued strategic growth and investment. Building on our strong first quarter results and a favorable demand outlook, we are increasing our full year fiscal 2027 expected range of contract revenues. We now expect total contract revenues to range from 7.38 billion to 7.65 billion. For the communications segment we expect contract revenues ranging from 6.03 billion to to 6.2 billion, increasing approximately 12.6% to 15.8% organically from last year. For the building system segment, we expect contract revenues ranging from 1.35 billion to 1.45 billion. We also anticipate adjusted EBITDA margin expansion. For communications, we continue to expect modest adjusted EBITDA margin improvement over last year. For building systems, we now expect an adjusted EBITDA margin in the high teens similar to our Q1 performance as we capitalize on the strong opportunity set and proven performance in the DC, Maryland, Virginia (DMV). On a consolidated basis for Q2 we expect total contract revenues of 1.94 billion to 2.01 billion, adjusted EBITDA of 284 million to 303 million and adjusted diluted EPS of $4.40 to $4.82 per share, excluding the impact of intangible amortization expense. This outlook for fiscal 2027 and Q2 of fiscal 2027 excludes any results from the pending acquisition of National Technology Integrators. While we expect to close the acquisition in our fiscal Q2, impacts are dependent on the timing of completion now for more details on the pending acquisition, this acquired business will be included in our building system segment and we anticipate an initial annual revenue run rate of approximately 175 million. Historically, the business achieved adjusted EBITDA margins in the mid to high teens and we expect that to continue. The purchase price is 275 million on a cash free debt free basis and the consideration is approximately 234 million payable in cash and approximately 41 million of DICOM common stock valued as of the signing date of the transaction. Consolidated pro forma net leverage is expected to be below 2.5 times adjusted EBITDA and we remain committed to our long term net leverage discipline. The transaction is subject to customary closing and post closing adjustments and we expect it to close before the end of our July fiscal quarter. This acquisition presents key revenue synergy opportunities as we expand our capabilities across the digital infrastructure space. With a strong start to the year and clear momentum across the business, we are confident in our ability to execute our strategy as we pursue the significant and growing opportunities ahead. Operator this concludes our prepared remarks. You may now open the call for questions.

OPERATOR

Thank you. As a reminder to ask a question, please press Star one one of your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q and A roster. Our first question comes from the line of Maneesh Samayo with Cantor Fitzgerald, your line is now open.

Maneesh Samayo (Equity Analyst at Cantor Fitzgerald)

Thank you. And congratulations on an exceptionally strong quarter to the team. A couple of questions, Dan, maybe on the NTI acquisition to begin with. If you could just help us understand the customer overlap between NTI Power Solutions and the legacy communications business and how do you see immediate cross selling opportunities?

Dan Pajevich

That's the beauty of this transaction, Manish. So thank you for asking the question. To start, this is a partnership with Power Solutions that goes back a number of years between them and NTI. That's how we were connected to NTI to begin with and we started talking to them about opportunities on the communication side, the work we're doing inside defense in other facilities around the country. We started to see some really good efficiencies there and began conversations on how we can make them part of the Dycom family. What you see ultimately is the poteNTIal for campuses to have not only Power Solutions doing the electrical inside, but NTI also doing the structured cabling while our communications business is doing the inside defense work and then ultimately connecting it back to the two, the long haul and middle mile routes. So it's a completely comprehensive offering that quite literally connects the homes and businesses of America all the way into the data centers and the racks themselves ton of synergies to actually cross sell that work. So a lot of their work, just like Power Solutions goes to the general contractors but they also have relationships with the hyperscalers. So we get to have conversations on really both those fronts and we're already seeing again before the acquisition just in conversations to try and sell that as a partnership, seeing really good connection there. And we think that's going to even go exponeNTIal here now that they'll be part of the dicom family next quarter.

Maneesh Samayo (Equity Analyst at Cantor Fitzgerald)

That's helpful. And then just going to the guidance for the full year. Clearly Q1 was exceptionally strong outlook for 2. Q is strong. But when I look at the full year guidance range, it still looks a bit conservative. So I'm just trying to figure out if there's anything in the second half that I'm missing. Specifically when I look at the total increase in revenues versus the prior guidance that you gave for the full year, I think it's about 7, 7.5%. So maybe if you can just help us reconcile as to what's happening in the first half versus the second half. Thank you.

Dan Pajevich

Incredibly pleased with the start of the year and I'll talk really about the collective monition in each of the segments if I could. So first significant growth, we're looking at 56% year over year revenue growth, that takes a lot of investment. We were fortunate with the weather. Q1 really behaved more like a Q2 or a Q3. What's important though is the demand has to be there. And what it shows is this demand that we've been talking about across the business, across the demand drivers is incredibly strong and we're able to capitalize on that. On the communication side, we've been talking about fiber the home for a long time and we've been sending the message that listen, this is really only early in the build. There's a lot of growth opportunity left in Fiber to the Home. There's still several years where the passings are going to continue to increase. There are several years beyond that where the cost for passing will increase. And what you really see in Q1 because that was really aided on the communication side by Fiber to the Home is that is starting to take place. So just as we talked about, just as we set up our strategy, we believe that's going to continue. But like a lot of things, that doesn't mean it's perfectly linear. When you start out with a very strong seasonal quarter and you're running into Q2 and Q3 and you see in our outlook for Q2 that that does become a little more. You don't see the same kind of upswing that you would see. And then a reminder on both sides of the business, of course we build these from the bottoms up and so you know it's not going to be perfect linear. But we're incredibly pleased with the overall growth and results on the building system segment one, you see incredible growth the first year we're talking about now for the full year them doubling the CAGR that they've had over the last four or five years. So going from 15% to 30% plus growth that is significant requires significant investment. And even with that investment you can see already we're in the high teens EBITDA margin range. So very pleased there as well. A couple more comments. One is if you look at their backlog, it is very different in how it behaves. Those projects get contracted right before we're about to start the build. What we do have behind that though is what we call A, B and C awarded but not contracted and then further behind that shadow backlog. And what I can tell you is even though we don't publish those numbers, they are multiples of what you see in that immediate backlog. So that gives us the confidence, Manish, for the year to raise the overall revenue on the building system Side gives us confidence in the margin profile because we can see what those projects look like and we can see how those shape. But just like on the communication side, that doesn't mean that they all start at the exact same time and finish at the same time. So we do shape that out over the year. So all told, what you see is significant growth. We're incredibly pleased with that. We see continued opportunities to invest in the business for growth beyond this year. And we're just incredibly pleased, proud of our teams for being able to deliver at the level they're delivering today.

OPERATOR

Thank you. Our next question comes from the line of Eric Lubko with Wells Fargo. Your line is now open.

Eric Lubko (Equity Analyst at Wells Fargo)

Great. Thanks for taking the question. You know, Dan, I think you said, and you alluded to it in your last comment about fiber to the home projects ramping a little faster than you expected and maybe just a little more color on that. Do you think there's a little bit of a pull forward of demand you saw in the first quarter or do you think there's signs you're actually gaining market share of some of these larger programs as they ramp this year and next? That's exactly right, Eric. We are continuing to expand our market presence. Right. We are getting additional awards in additional spaces. We continue to deliver at an exceptional level. We're not perfect, trust me, we're not perfect. But our teams are absolutely committed to making our customers successful. From a timing perspective, we've been talking about how these builds themselves are building and growing and ramping and how that happens at different paces. What you're seeing this year is many coming online and really starting to increase in volume and velocity at the same time. And again, if you look at our overall outlook for the year, you see that that's continuing. You see the significant growth over last year. This isn't something we publish, but if you just look sequentially quarter over quarter, our fiber to the home work grew 33% in one quarter's time. So it just shows our ability to capitalize there, continue to grow against that. And I think if you listen to other commentary in the industry, it's not always the same message, which really from our perspective just shows our ability to one, execute on the work, but two, have our customers continue to grow our share as we continue to deliver for them. Great, thanks for that, Dan. And just one follow up. So you alluded to the fact you're signing some longer duration contracts with your customers to lock in their labor supply. And I guess how are you thinking about structuring those contracts to make sure you have cost inflation protection. I know we've seen some costs like fuel in particular rise pretty rapidly in the last couple months. And just wondering how you think about projecting that future cost curve. Thank you. Yeah, so fuel has obviously been an impact for anybody that's doing our line of work. You know what, what we've done and what I talked about last quarter, we made intentional moves last year around our fleet to help offset that. And that has helped mitigate, obviously our expansion into the building system segment that does not, does not use as much fuel per dollar revenue as we use on the communication side. So all that has helped offset. But to your point, yeah, it's, it's certainly been an impact and we're watching it closely like everybody else. We do have that model in based on everything that we can all know today in our outlook for the rest of the year. So we do feel good about that when it comes to the long term contracts. And this is a really good point to make. We've been talking about the skilled workforce. We've been talking about building ahead of our customers and making sure that we can be there to meet their needs. We talked about our relationships where we're spending time with customers, not just talking about the work that we're going to do this year or even next year, but out through the end of the decade. And what all of our customers recognize is that the skilled workforce is really what's going to make or break their bills. It's going to make or break their ability to succeed. And they're very robust and in many cases growing plans. So as part of those conversations, as you would expect, it naturally evolves to, hey, Dicom, how do we make sure that we have your teams locked up to deliver on our plans all the way through the end of the decade? Of course, Eric, as you would think, we are very thoughtful in how we would contract that work. We were very thoughtful in how we would think about the different parts and pieces. And our customers understand that because contracting three or four years out. Right. You got to be smart about how you set that up. So we feel really good about how those contracts are structured. We feel really good about the relationships. We feel really good about it. One, our ability to continue to deliver, our ability to continue to grow. But as you can see in our outlook for the communications segment, also our ability to invest and grow margin at the same time. Great. Thanks, Dan. Congrats on the quarter.

OPERATOR

Thank you. Thank you.

Joseph Osha (Equity Analyst at Guggenheim Partners)

Our next question comes from the line of Joseph Osha with Guggenheim Partners. Your line is now open. Hi. Thanks very much for taking the question. Two questions actually. First, you commented a bit in terms of the outcome, but as I think about the improved outlook on the communications side for the rest of the year, is most of that coming from FTTH or is there some long haul and middle mile in there? And then the second question I'll just ask now, is there an upper limit to leverage that you have that you're thinking about? I'm just trying to understand how far you might take that as you continue to explore other acquisition opportunities. Thank you.

Dan Pajevich

Absolutely. On the communications outlook, it is largely fiber to Home. And again, Joseph, this is a message that we've been sending. Fiber to home is still earlier on in the overall cycle from our perspective and we see significant continued growth and that's really what gives us confidence in that raise for the year on the communication side and the overall performance there. And it also goes back to the to the question that was just asked about our confidence to continue to contact track that further out. The long haul middle mile is still in early innings. And you know, I've said before that we really see that as 2027 calendar coming online, but 2028 really kind of being that fast and furious here. Now that said, we've been doing it for some time now, a couple of years we've been working on these projects. You know, we still think we were first on the field. We continue to get more and more work there. We continue to grow that revenue. But if you look at it compared to Fiber to Home, Fiber to Home is just much more robust today. And we like that. We like how those will blend together as you start to move several years out. On the leverage question, again, we're one very excited about the opportunity set. We do have a strategy, what kind of companies we're looking for. The culture has to fit first and foremost. It's got to fit our strategy for growth and how it actually augments our current, current opportunity set from a leverage point itself. Again, we're going to be very responsible just like we've always been. We're going to have that discipline to make sure anytime we bring leverage up, we're going to have a clear path to bring it back down. We do not want to be elevated over long periods of time. That said, there's a lot of attractive opportunities out there and we talked about in our prepared remarks that we're still actively looking and having those conversations. But again, we are going to be prudent in how we think about leverage. Thank you.

OPERATOR

Thank You. Our next question comes from the line of Frank Laughen with Raymond James and Associates. Your line is now open.

Frank Laughen (Equity Analyst at Raymond James and Associates)

Great, thank you. On the DSOs, how sustainable is that? Is this sort of a new normal or was there something in the quarter that kind of impacted that? And how should we think about that going forward? And then when we look at nti, how should we think about its overall exposure if you kind of break it down between data centers and then more the AV and DAS type opportunities. Thanks.

Dan Pajevich

Thanks for noticing the DSOs, Frank, because we put a lot of work into that. We talked about it being a priority. Going back to last year. We talked about it being part of four strategic priorities for this year. What I want to make clear is that's improvement on both segments of the business. That's not just an offset from Power Solutions having a better profile in that industry. We've been working hard on the communications side as well and saw a significant improvement in the DSOS there. So when you combine it together, very pleased to be below 100 coming in at 96 days, we do think that's a sustainable range over time. On the NTI exposure, the raw numbers is about 2/3 data center exposure and about a third that is non data center. All right, great. Thank you.

OPERATOR

Thank you. As a reminder to ask a question at this time, please press star 11 on your Touchstone telephone. Our next question comes from the line of Richard Cho with JP Morgan. Your line is now open.

Richard Cho (Equity Analyst at JP Morgan)

I just wanted to follow up with the, I guess long haul, middle mile type of build. Has that opportunity set changed at all as things have developed and when should we expect that revenue to maybe start ramping? Just wanted to get an update there.

Dan Pajevich

It's grown significantly. Richard, we talked about, I'm trying to think probably five quarters ago, this 20 billion opportunity set related to long haul middle mile, that has certainly grown. You know, we've updated numbers internally. We haven't published that. What you've seen more and more is our customers being very vocal about it. One of my favorite commentaries, one of our customers talked about how they're having conversations with hyperscalers about routes that would have up to 7,500 to 10,000 fiber strands per route. And that is a huge number beyond even what we're talking about today when we're bringing in 864 or 1728 count fiber. If you think about getting to 7500 or 10,000 over time, it goes back to what we said. This is a decade plus long build to get the architecture that they need out There to support the continued development and the continued consumption of data. We continue to do more work and we are absolutely ramping up there. We are winning more, we're seeing more opportunities set. We're capitalizing on that. They just take a long time to get started. And so that Runway is typically a year ish from when you kind of start hearing about these programs to when they get going. And then you have to ramp up to get it on plane. So really start thinking about next year, calendar 27 and especially calendar 28.

Richard Cho (Equity Analyst at JP Morgan)

Yeah, those strength counts are pretty amazing. One, follow up on the fiber to the home. Was it multiple companies ramping and do you expect or do you expect more to ramp from your entire base through the year? Just any color on the breadth.

Dan Pajevich

Exactly. So you're seeing more and more of these programs that are getting to accelerated levels of execution that are consistent. And it is important to remember when you hear our customers talk about it, that doesn't mean all markets that they have are ramping at the same time. It doesn't mean that we have every single market that they have. So we're looking at it from a very micro level. And yes, to your point, you're talking about ramping work across many customers across many markets, which again, just goes back to that indication that, you know, the homes in America are going to get passed the 60 million that's yet that our customers have talked about are going to get passed. It's just going to take some time and we're excited to be there to support them in that build. Great, thank you.

OPERATOR

Thank you. Our next question comes from the line of Stephen Fisher with ubs. Your line is now open.

Stephen Fisher (Equity Analyst at UBS)

Good morning and congrats on the quarter. I'm curious on the building segment margins, what changed in the outlook for the rest of the year? I understand first quarter had some good execution weather perhaps, but you're also raising the rest of the year to be consistent with the first quarter. I assume you're still making some of the scaling investments and the back office. So I guess I'm curious what happened with the rest of the outlook and does that imply that there's still potentially some upside beyond this year if you're still making those investments and achieving the higher margins there?

Dan Pajevich

Yeah, I really could not be more pleased. One, with our team's ability to integrate power solutions and two, with just the strength of their operation and their customer relationships? Stephen. So you know, last quarter we talked a lot about making investments every time we do an acquisition. This one was unique because it was in a segment of its own. So everybody could see it. But every time we make an acquisition, we're going to invest in that. When we close with nti, we will make investments there. Because what we're trying to do is bring together two things to make something that's different than when they were apart. And that does take investment, it does take clear strategy. We're typically adding resources and staff to help make that happen. And that's what we were doing a quarter ago with Power Solutions. What you can see is we were able to get traction on that incredibly quickly. You know, when you talk about doubling a four or five year trailing Tegr rate in a very short period of time, I don't think it surprised anybody that that takes a lot of investment and a whole lot of discipline. So we couldn't be more pleased with how that's come through the business. And that gives us confidence as we look out to the rest of the year. To your question. Absolutely. We continue to make investments because this goes well beyond our fiscal 2027. We continue to make those investments for future growth. At the same time, we've got the confidence to say that that margin that we saw this first quarter, that we can be in that range throughout the year. Okay, thanks.

Stephen Fisher (Equity Analyst at UBS)

And then just a follow up as it relates to NTI and the similar topic. Can you just maybe talk about some of the investments that you need to make there and maybe just some of the differences in the skill sets that you're bringing along in terms of the type of labor and how easy or hard it is to go out and grow that skill set relative to what you brought in with Power Solutions in terms of electricians, et cetera.

Dan Pajevich

Let me take the skill set one first, Stephen. This is again great synergy for our business. This is an opportunity for us to have a fungible workforce. Some of the work that National Technology Integrators does is union. Some of the work that they do in other markets is non union. And in those non union markets that is very fungible for what we're doing in the inside defense work. So we do have an ability to cross train to augment staffing there. You know, I don't want to get too far ahead of all the investments that we'll make because right now we're working to close and bring them formally into the family. But similar to what we've done in other places. Right. How do we augment that to really create an inflection in the growth opportunity, to give a different balance sheet, to give some different resources and what we love about national technology integrators is that not only are they based in the DMV and have a lot of work there, but they're in these other markets which are critical markets to what's going on in the data center space markets like Texas. So that just gives us another ability to flex off of that and to continue to grow and think about how do we continue to increase the building segments part of our business overall. Thank you very much.

OPERATOR

Thank you. Our next question comes from the line of Michael Dudas with Vertical Research Partners. Your line is now open.

Michael Dudas (Equity Analyst at Vertical Research Partners)

Good morning Callie. Drew. Dan. Morning. Dan, maybe you could share a little bit more of your thoughts. You mentioned in your prepared remarks about beads the progress overall and how it's looking relative to when we could see

Dan Pajevich

some some of that conversion into maybe backlogging into revenues, maybe second half this year into fiscal year 2028. So BE continues to make progress. And you know this is something that we've had a strategy going back. I think it's over four years now and we've been partnering with the different states. We've had numerous conversations and tons of relationships across sub grantees. We still believe that we will see revenue in Q2 of this year. But really, and we've talked about this before and it's unchanged. Think about that as a calendar 2027 to when it really starts to take hold and get moving. You are going to see the different programs and different sub grantees start at different paces. Smaller programs can start sooner. That's why we believe we'll still see some revenue in Q2. And just a reminder, this is not included in our outlook. So we really want people to think about bead for this year as potential uplift and then really starting to take shape in calendar 2027. Excellent. Thank you Dan.

OPERATOR

Thank you. Our next question comes from the line of Liam Burke with B. Riley Securities. Your line is now open.

Liam Burke (Equity Analyst at B. Riley Securities)

Thank you. Dan, you mentioned in earlier comments that you're working more and more with your customers customers on longer term projects and multi year planning. Does that change the composition of the business to multi year projects versus MSA? So still mostly under MSAs or long term agreements. Liam, I think if you look at our backlog Our next 12 months we had a significant backlog increase. Our next 12 month went up. But really what you see again is we're adding firepower into the out years which again is a big positive for us. It allows us to plan to be proactive to continue to invest in the business and have really Good foresight into what some of those builds are going to look like. So it's a big positive in our space to be talking about work and actually contracting work that's three or four years out. Great. And on the data center volumes, are you seeing more activity? You talked about fiber to the home, but is there more activity over and above fiber to the home on data center activity on the local loop? If you're talking about inside defense and all the other fiber that's connected to that kind of middle mile, Absolutely. Continues to grow, is the conversations. And I feel like I say this every quarter, the conversations only continue to grow. And that really is true. And then specifically on the data center side, again, the demand has not abated whatsoever. In fact, it's only increasing. You can see that in our outlook, you can see that in our results and you can see that in the confidence in us raising for the year in that segment as well. Great. Thank you, Dan.

OPERATOR

Thank you. Our next question is a follow up from the line of Manish Samaya with Cantor Fitzgerald. Your line is now open. Manish, your line is open. Please check your mute button.

Maneesh Samayo (Equity Analyst at Cantor Fitzgerald)

Hi, I'm sorry, can you hear me? We got you, Manish. Okay, awesome. I appreciate that. Dan. I just had two follow ups for you. One is on the building systems backlog. Should we assume sort of high teens margin in line with the 27 margin expectations or is that different based on mix or customers, et cetera?

Dan Pajevich

Yes, that backlog is consistent. As you can see, their next 12 months and we believe this will continue to be the case. Their next 12 months and their total backlog are very close numerically to each other. So the margin profile is very similar to what we saw in Q1.

Maneesh Samayo (Equity Analyst at Cantor Fitzgerald)

Okay. And then secondly, obviously you talked about strong end markets, but I was wondering if there are any projects or work that you are essentially passing on and if so, what are the big reasons for it? Is it execution? Is it pricing? Is it not meeting your hurdles? If you can just kind of give us a sense as to what's happening on the ground.

Dan Pajevich

We're very pleased that we have strong partnerships with our customer set and that's really what we're looking for in East. We want customers that understand the value of the skilled workforce. They understand the value of all the investments that dicom has made to help deliver at a higher level for them. There are still people out there that are looking for low bid numbers and that's just not where we play. We want to play in those longer term agreements where we can really have input into how they think about their builds, how they think about their programs, how we can support that, have really good dialogue that allows us both to, quite frankly, to raise the bar together. So that's where we play. So, yes, there is work that we pass up. What I would tell you, we feel really good again, what we've done from a skilled workforce, feel really good about the growth that we saw in our headcount for the quarter and our continued growth for the year and the investments we're working there. So we don't believe that we're leaving any of these important builds behind. But at the same time, we are going to be selective on the pipeline. Okay. Appreciate that, Dan. Thank you.

OPERATOR

Thank you. And I'm showing no further questions from our phone lines. I'd now like to turn the conference back to Mr. Danpayevich for closing remarks.

Dan Pajevich

I want to thank everybody for joining us today. And I want to thank our 20,000 teammates for their fantastic execution this quarter. Look forward to seeing you all in about three months. Thanks so much.

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