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Dycom Industries Inc (NYSE:DY)
Q1 2020 Earnings Call
May 21, 2019, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Dycom Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) Also as a reminder, today's teleconference is being recorded.

At this time, I'll turn the call over to your host, President and CEO, Mr. Steven Nielsen. Please go ahead, sir.

Steven E. Nielsen -- Chairman, President & Chief Executive Officer

Thank you, Tony. Good morning, everyone. I would like to thank you for attending this conference call to review our first quarter fiscal 2020 results.

Going to slide two. During this call, we will be referring to a slide presentation, which can be found on our website's Investor Center main page. Relevant slides will be identified by number throughout our presentation.

Today, we have on the call Tim Estes, our Chief Operating Officer; Drew DeFerrari, our Chief Financial Officer; and Rick Vilsoet, our Chief Legal Officer. Rick will be retiring today at the conclusion of our annual meeting, after 14 years of service. On behalf of the Board and employees of the company, thanks for all your hard work and wise counsel.

Now, I will turn the call over to Rick Vilsoet.

Richard B. Vilsoet -- Senior Vice President, Chief Legal Officer & Corporate Secretary

Thank you, Steve. Except for historical information, the statements made by company management during this call may be forward-looking and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements, including those related to the company's outlook, are based on management's current expectations, estimates and projections and involve known and unknown risks and uncertainties, which may cause the company's actual results in future periods to differ materially from forecasted results. Those risks and uncertainties are more fully described in the company's annual report on Form 10-K for the year ended January 26, 2019, and other periodic filings with the Securities and Exchange Commission. The company assumes no obligation to update forward-looking statements. Steve?

Steven E. Nielsen -- Chairman, President & Chief Executive Officer

Thanks, Rick. Now moving to slide four, and a review of our first quarter results. As we discuss our results, please note that organic revenue amounts exclude revenues from storm restoration services and from a business that was acquired during the quarter ended April 28, 2018. In addition, during the quarter we recognized pre-tax income from the recovery of previously reserved accounts receivable and contract assets of $10.3 million and we recorded a pre-tax charge of $8.2 million for estimated warranty costs related to work performed for customer in prior periods. During our comments, we will exclude this recovery and this warranty charge when discussing certain non-GAAP measures.

This presentation and the accompanying slides may include these and other non-GAAP financial measures. We refer you to the quarterly report section of our website for a reconciliation of these non-GAAP measures to their corresponding GAAP measures.

Revenue was $833.7 million, an increase of 14%. Organic revenue excluding $4.7 million of storm restoration services in the quarter and $14.8 million in the year-ago quarter increased 15.8%. As we deployed 1 gigabit wireline networks, wireless/wireline converged networks and wireless networks this quarter reflected an increase in demand from four of our top five customers.

Gross margins were 16.8% of revenue, reflecting the continued impacts of the complexity of a large customer program discussed previously on our fourth quarter fiscal 2019 call. An adjusted general and administrative expenses were 8.3%. All of these factors produced adjusted EBITDA of $73.6 million or 8.8% of revenue and adjusted diluted earnings per share of $0.53 compared to $0.65 in the year-ago quarter. And liquidity was ample as cash and availability under our credit facility was $358.9 million.

Now moving to slide five. Today, a number of major industry participants are deploying significant wireline networks across broad sections of the country. These networks are generally designed to provision bandwidth enabling 1 gigabit speeds to individual consumers. In addition, emerging wireless technologies are driving significant wireline deployments. These wireline deployments are necessary to facilitate what is expected to be a decades long deployment of fully converged wireless/wireline networks that will enable high bandwidth, low latency applications.

The industry effort required to deploy these converged networks continues to meaningfully broadened our set of opportunities. Total industry opportunities in aggregate are robust. We are providing program management, planning, engineering and design, aerial and underground construction and fulfillment services for 1-gigabit deployments. In addition, we have secured a number of converged wireless/wireline multiuse network deployments.

These services are being provided across the country in more than a dozen metropolitan areas to several customers. Customers are pursuing multiyear initiatives that are being planned and managed on a market-by-market basis.

Our ability to provide integrated planning, engineering and design, procurement and construction and maintenance services is of particular value to several industry participants. In addition to the timing challenges presented by a large customer program discussed fully on our fourth quarter fiscal 2019 call, we also expect some normal timing volatility and customer spending modulations as network deployment strategies and technologies evolve on other large-scale network deployments. Tactical considerations may also impact timing. We remain confident that our competitively unparalleled scale and our financial strength position us well to deliver valuable service to our customers.

Going to slide six. We continued to experience the effects of a strong overall industry environment during the quarter with increases in demand from four of our top five customers. Organic revenue, excluding storm restoration services, increased 15.8%. Our top five customers combined produced 80.4% of revenue, increasing 19.4% organically, while all other customers increased 3%.

AT&T was our largest customer at 25.1% of total revenue or $209.3 million. AT&T grew organically 28.7%. Revenue from Verizon was $179.8 million or 21.6% of revenue, Verizon was Dycom's second largest customer and grew 47.2% organically. Comcast was our third largest customer at $137.1 million or 16.4% of revenue. Revenue from CenturyLink was $109.8 million or 13.2% of revenue. CenturyLink was our fourth largest customer and grew organically 17.8%. And finally, revenue from Windstream was $34 million or 4.1% of revenue. Windstream was our fifth largest customer and grew 38% organically.

Of note, this quarter is the first since October 2015 -- the 2015 quarter, where all of our other customers in aggregate excluding the top five customers have grown organically. We are encouraged with our third consecutive quarter of double-digit organic growth and have continued to extend our geographic reach and expand our program management network planning services.

In fact, over the last several years, we have meaningfully increased the long-term value of our maintenance and operations business. A trend which we believe will parallel our deployment of 1 gigabit and wireless/wireline converged networks as those deployments dramatically increase the amount of outside plant network that must be extended and maintained.

Now moving to slide seven. Backlog at the end of the first quarter was $7.051 billion versus $7.33 billion at the end of the January 2019 quarter, a decrease of $279 million. Of this backlog approximately $2.7 billion to $3 billion is expected to be completed in the next 12 months. The total backlog calculation reflect solid performance as we book new work and renewing existing work. We continue to anticipate substantial future opportunities across a broad array of our customers.

For AT&T, we were awarded construction services agreements in California, Ohio, Kentucky, South Carolina and Georgia, with Comcast Fulfillment Services in Pennsylvania, New Jersey, for Charter Fulfillment Services nationwide and Construction Services in California and Michigan (inaudible) utilities, locating services agreements in Maryland, Washington DC, Virginia and South Carolina. And finally, we secured rural fiber services agreements in Wisconsin, Illinois and Kentucky. Headcount increased during the quarter to 15,278.

Now, I will turn the call over to Drew for his financial review and outlook.

H. Andrew DeFerrari -- Senior Vice President, Chief Financial Officer & Treasurer

Thanks, Steve, and good morning everyone. Going to slide eight. Contract revenues for Q1 2018 were $833.7 million and organic revenue growth was 15.8% with strong increases from four of our top five customers. Storm restoration services contributed $4.7 million of revenue, compared to $14.8 million in the year-ago period. Also revenue from an acquired business contributed $6.1 million of revenue.

Adjusted EBITDA was $73.6 million or 8.8% of revenue. During Q1, we incurred an $8.2 million charge for estimated warranty costs for work performed for a customer in prior periods. Excluding this charge, gross margins were at 16.8%, and declined 121 basis points from the April quarter last year. Margins were impacted by a large customer program during the quarter.

In G&A expense, we realized a pre-tax recovery of $10.3 million as a benefit during Q1 '20. This recovery was based on substantial cash collections to date from a customer, which previously filed for Chapter 11 reorganization. Excluding the recovery benefit, G&A expense decreased 25 basis points compared to the April quarter last year. Our lower financial performance this year resulted in a reduction of share-based compensation during the quarter. Our non-GAAP adjusted diluted EPS in Q1 '20 was $0.53 per share.

Now going to slide nine. Our balance sheet and financial position remains strong. We ended the quarter with $450 million of term loans outstanding and no revolver borrowings. Liquidity is ample at $358.9 million at the end of the quarter, consisting of availability from our credit facility and cash on hand. Cash flow used for operating activities was $56.1 million during the current quarter, which funded the sequential growth in revenue.

For Q1 '19, the combined DSOs of accounts receivable and net contract assets were 108 days, reflecting growth on a large customer program. Capital expenditures were $38.4 million during Q1 '20 net of disposal proceeds, and gross CapEx was $45.8 million. In summary, we continue to maintain ample liquidity and a strong balance sheet.

Going to slide 10. For the quarter ending July 2019, we currently expect total revenue to range from $835 million to $885 million. Non-GAAP adjusted diluted EPS to range from $0.70 to $0.92 per share and adjusted EBITDA percent of contract revenue which decreases from the Q2 '19 result. Other expectations include depreciation of $41.1 million to $41.9 million and amortization of $5.3 million. Share-based compensation included in G&A of $3.2 million to $3.7 million, adjusted interest expense of approximately $7.7 million to $7.8 million, excluding $5 million of interest for the non-cash debt discount amortization of our notes. Other income net is expected to range from $2.3 million to $2.9 million, the effective tax rate is expected at 27.5% before any tax effects of the settlement of share-based awards.

Now going to slide 11. Looking ahead to the October 2019 quarter, we currently expect revenue growth of low to mid single-digit as a percentage of revenue, compared to the Q3 '19 result and adjusted EBITDA margin percent of contract revenues which decreases from the Q3 '19 result.

Now I will turn the call back to Steve.

Steven E. Nielsen -- Chairman, President & Chief Executive Officer

Thanks, Drew. Moving to slide 12. Within the growing economy we experience the effects of the strong industry environment and capitalized on our significant strengths. First and foremost, we maintained strong customer presence throughout our markets. Second, our extensive market presence has allowed us to be at the forefront of the evolving industry opportunities. The end market drivers of these opportunities remain firm and our strengthening.

Fiber deployments and contemplation of emerging wireless technologies are under way in many regions of the country. Wireless construction activity in support of expanded coverage and capacity has begun to accelerate through the deployment of enhanced macro cells and new small cells.

Telephone companies are deploying fiber-to-the-home to enable 1 gigabit high speed connections. Cable operators are deploying fiber to small and medium businesses and enterprises. A portion of these deployments are in anticipation of the customer sales process. Fiber-deep deployments to expand capacity as well as newbuild opportunities are under way. Dramatically increased speeds to consumers are being provisioned. Customers are consolidating supply chains, creating opportunities for market share growth and increasing the long-term value of our maintenance and operations business.

In addition, we are increasingly providing integrated planning, engineering and design, procurement and construction and maintenance services. We remain encouraged that our major customers are committed to multiyear capital spending initiatives, and we are confident in our strategies, the prospects for our company, the capabilities of our dedicated employees and the experience of our management team as we grow our business.

Now, Tony, we will open the call for questions.

Questions and Answers:

Operator

Thank you very much. (Operator Instructions) Our first question will come from Chad Dillard with Deutsche Bank. Please go ahead.

Chad Dillard -- Deutsche Bank -- Analyst

Hi. Good morning, everyone.

Steven E. Nielsen -- Chairman, President & Chief Executive Officer

Good morning, Chad. Sorry, I got a little bit of a cold. I'm fighting through.

Chad Dillard -- Deutsche Bank -- Analyst

No worries at all. So just a question for you guys, based on your backlog, I mean, how far away is one fiber from hitting the full run rate contribution to the business? And is there further to go and how should we think about the margin implications from that program?

Steven E. Nielsen -- Chairman, President & Chief Executive Officer

So, Chad, I think, as always, we've never commented on individual programs, either with respect to kind of their identified margins or a program inside of the customer. I think we continue through the guidance to show that the business continues to grow based on what Drew has provided for the second and third quarters. And I think we have a number of opportunities across the entirety of the business. But we -- for obvious competitive reasons and other reasons, we can't just isolate on a single program.

Chad Dillard -- Deutsche Bank -- Analyst

Okay. And just moving to more of a margin question. Could you just talk about just what EBITDA margins you have in backlog versus what you're quoting right now, maybe over the last, like, 12 months or so. And to what extent is some of the other margin pressure that you're seeing like year-on-year more related to the ramp-up and work or is it a little more that you're seeing more pressure in terms of the contracts that you're signing right now?

Steven E. Nielsen -- Chairman, President & Chief Executive Officer

Well, as we discussed on the last quarter's call, Chad, we have a customer -- a program for a large customer, that has margins that are below the company average. As we said last quarter, and I think it was also true for this quarter, if you pull the impacts of that out of the business, the business looks very much like it always as.

And so, we don't see any impacts in particular on the overall company, other than this large program. And as we've talked about the impacts on the margins, they are really around the complexity of the program and the costs that we've incurred to manage the complexity and meet the needs of that particular program. So we don't think about this as something that's in the backlog, more broadly, it's really associated with that particular program.

Chad Dillard -- Deutsche Bank -- Analyst

Great. Thanks. I'll hop back in queue.

Operator

Thank you. The next question comes from Adam Thalhimer with Thompson, Davis. Please go ahead.

Adam Thalhimer -- Thompson, Davis. -- Analyst

Hey, good morning, guys. I like the new slide deck.

Steven E. Nielsen -- Chairman, President & Chief Executive Officer

Very good. We will let Callie (ph) know, Adam.

Adam Thalhimer -- Thompson, Davis. -- Analyst

Can I ask first about wireless. Steve, is wireless still roughly $250 million?

Steven E. Nielsen -- Chairman, President & Chief Executive Officer

It was about (Multiple Speakers)

Adam Thalhimer -- Thompson, Davis. -- Analyst

On annual basis or is it trending above that now?

Steven E. Nielsen -- Chairman, President & Chief Executive Officer

It was a little bit above 8% for the quarter, so it was up about 14%, 15% year-over-year and we think that's going to continue to grow as you look out through the balance of the guidance period. So we are still -- we're still optimistic about that portion of the business.

Adam Thalhimer -- Thompson, Davis. -- Analyst

Okay. And related to that, are you starting to see more small cell work related to 5G and do you think about that as wireless or wireline?

Steven E. Nielsen -- Chairman, President & Chief Executive Officer

So there is going to be and has begun to be a number of projects that we're executing through wireline master service agreements to feed small cells, and while in all cases, we may not know whether they are 4G small cells or 5G small cells, there are certainly work activity that's associated with those. We also have seen indications in our discussions at least with one customer that that may actually require some -- not surprisingly some fiber reinforcement to provide more capacity to those additional cell sites.

So for us, the way we would look at it is the fiber deployments to those small cells, whether they be 4G or 5G, we would call wireline to the extent and we are doing this work for a number of customers. We're actually doing the antenna and radio work at the small cell. We would categorize that as wireless.

Adam Thalhimer -- Thompson, Davis. -- Analyst

Okay. And last one from me, maybe it's more for Drew, but Drew, any sense for when the DSOs will start to step down?

H. Andrew DeFerrari -- Senior Vice President, Chief Financial Officer & Treasurer

Yeah. Adam, we had some sequential growth in the quarter clearly and we called out on the -- in the slides regarding a specific customer program there. So it's something we work at all the time, there are complexities around the work and working through the billing of that. We're working hard at it every day.

Steven E. Nielsen -- Chairman, President & Chief Executive Officer

Yeah. When the Q comes out, you'll have disclosure there and you'll see that the DSOs are generally in line, absent the effect of that program.

Adam Thalhimer -- Thompson, Davis. -- Analyst

Okay. But as long as that program is kind of at full stage deployment, the DSOs will be elevated?

Steven E. Nielsen -- Chairman, President & Chief Executive Officer

Well, look, as we said last quarter, Adam, we're working hard, we have lots of people working on billing initiatives and IT initiatives to facilitate the billing. But the actual contract terms there, once we get it through the approval process or industry standard, it's just the level of effort right now as we're dealing with the complexity to get it through the process. We're going to get better with that, but we're working hard at it right now to accomplish that.

Adam Thalhimer -- Thompson, Davis. -- Analyst

Okay. I'll turn it over. Thanks.

Operator

Thank you. Our next question will come from Brent Thielman with D.A. Davidson. Please go ahead.

Brent Thielman -- D.A. Davidson -- Analyst

Hey. Thanks. Good morning.

Steven E. Nielsen -- Chairman, President & Chief Executive Officer

Hey, Brent.

Brent Thielman -- D.A. Davidson -- Analyst

Hi, Steve, You continue to pretty aggressively build headcount here. Just wanted to get your thoughts on when you think that starts to plateau?

Steven E. Nielsen -- Chairman, President & Chief Executive Officer

Well, there's a couple things. Obviously, in the quarter there is always a seasonal uptick, Brent. So when you have sequential revenue growth, I'll call it $100 million, you're going to get $80 million to $100 million, you're going to get that kind of pickup in headcount seasonally. So I don't know that, that was anything particularly remarkable. I think we are pleased with the 15.8% organic growth. And as we work through opportunities that develop throughout the year, and to support those we need to add headcount, we will do that. But we don't think about that as kind of something that we manage with 2-1 objective, we manage the revenue and the headcount follows.

Brent Thielman -- D.A. Davidson -- Analyst

Okay. And then the -- I mean, the challenges that you faced on the large customer program. Are you seeing similar challenges or structures kind of develop in some of the new work you're pursuing or is this still pretty unique?

Steven E. Nielsen -- Chairman, President & Chief Executive Officer

Well, as I said to Chad earlier. If you look at the rest of the business, and remember, our customers work under long-term contracts for the most part, and we signed up some nice new extensions to our geographic territory with one customer last quarter. So we're not seeing any change outside of this one program. In fact, we've -- even with that customer, this program is not the entirety of what we do for that customer.

Brent Thielman -- D.A. Davidson -- Analyst

Okay. Lastly, Steve, just hoping to get maybe any additional thoughts on the overall backlog. It's, obviously, up a lot from last year, but it's kind of been coming in since 2Q '19. Obviously, there's big CapEx programs out there, but just want to get your thoughts on why we've seen that come in since then?

Steven E. Nielsen -- Chairman, President & Chief Executive Officer

I mean, Brent, I think it's interesting, right? The numbers come down as the organic growth has gone up, which would tell you in the short to intermediate term it's exclusively correlated which is what we've always said, I mean, we have renewals that occur and when the renewals come, we see increases in the backlog. I think the duration of the backlog is based on the number of the contracts that have had longer-term should made us a more durable business. And so, it's not something that we pay a particular attention as a indicator of where organic growth is going to go.

Brent Thielman -- D.A. Davidson -- Analyst

Okay. Thanks for that. Appreciate it.

Operator

Thank you. Our next question in queue comes from Noelle Dilts with Stifel. Please go ahead.

Noelle Dilts -- Stifel -- Analyst

Hi, guys. Good morning.

Steven E. Nielsen -- Chairman, President & Chief Executive Officer

Good morning, Noelle.

Noelle Dilts -- Stifel -- Analyst

So on the fourth quarter call you guys -- and you mentioned this a bit, but you spoke about implementing new processes and systems to help get ahead of the complexity on the specific large program. Just curious if you could give us an update on: one, how that's progressing, if you're starting to see any benefit; and then two, just to clarify, as these systems and processes really take effect, just curious if you're expecting pretty meaningful profit improvement associated with that large program or kind of how you're thinking about that on a go-forward basis from a longer-term perspective?

Steven E. Nielsen -- Chairman, President & Chief Executive Officer

Sure. So I think a couple of things, Noelle. So, yes, we have lots of people working on this, we have a substantial effort, we're making some headway, but as we talked about on the call, given the scale of the prior call, given the scale of the program, we're not going to go quarter-to-quarter trying to gauge the impact, we think as we get better at managing that complexity, it will be evident in the numbers. So we're just -- we're continuing to work hard, I know it would be helpful to kind of give a day-by-day assessment of how things are going. I would say that we're getting lots of effort across the entire company and people are working hard with a purpose. And what we've done at in the past, ultimately, we've worked through it. Go ahead, Noelle.

Noelle Dilts -- Stifel -- Analyst

And then, just for my own understanding, is that -- to trying to understand the complexity a little bit more deeply. Is it a function of more of a program management type role or is it just kind of the nature of the spend, and what the construction entails?

Steven E. Nielsen -- Chairman, President & Chief Executive Officer

The type of construction is not the issue, it's a program management. And as we've said last quarter, it was evolving objective processes and priorities and that's really the -- what we're working on is to manage that level of complexity of the actual construction work itself. It's a big program, there's -- and that's construction, there's challenges every day, but those are not the types of challenges that have created the complexity.

Noelle Dilts -- Stifel -- Analyst

Okay, understood. And then, Drew, would you mind sharing with us the rounding up of the top 10 customers and the cable and telco split?

H. Andrew DeFerrari -- Senior Vice President, Chief Financial Officer & Treasurer

Sure. Thanks, Noelle. Charter with number six at 2.6%, Frontier was number seven at 1.7%, Southwest Gas was number eight at 1.1%, Crown Castle was number nine at 1%, and Edison International was number 10 at 0.8%. Telco was at 72.3%, cable was at 19%, facility locating was 5.8% and electrical and other was 2.9%.

Noelle Dilts -- Stifel -- Analyst

Thank you.

Operator

Thank you. The next question in queue will come from Tahira Afzal with KeyBanc Capital Markets. Please go ahead.

Alex Kurtz -- KeyBanc Capital Markets -- Analyst

Hi, guys. This is Alex on for Tahira.

Steven E. Nielsen -- Chairman, President & Chief Executive Officer

Good morning.

Alex Kurtz -- KeyBanc Capital Markets -- Analyst

Good morning. Can you just talk about that slower top line growth guidance you gave in the third quarter? Would we need to see the backlog kind of tick up to see the revenue growth into the high-single-digits range?

Steven E. Nielsen -- Chairman, President & Chief Executive Officer

Well. To answer the second question, as we said earlier, the correlation between kind of near-term trends in growth and backlog are not as tight as I think some people model. Clearly as was evident in the earnings season, AT&T has publicly said that they're going to be slower or stopped their fiber program during the calendar second quarter. Now they've also said in a different conference that they have an outlook for fiber deployments generally from 2020 to 2025, right? So we don't look at this as something where they've lost interested, it's just a tactical reassessment. And I think that's been echoed by others. And so we reflected that in the guidance to make sure that we got that right. And then, clearly, it's been a challenging period for us and we just don't want to get ahead of ourselves in terms of guidance in the out period.

Alex Kurtz -- KeyBanc Capital Markets -- Analyst

Got it. And then my next question is about, what the current margin assumptions you guys have on the current -- with the permitting workflow delays and how those are playing out versus your assumptions. And are those becoming about more predictable to model in and is there room for further improvement?

Steven E. Nielsen -- Chairman, President & Chief Executive Officer

Well, there's always further improvement, that's right, we can always do better tomorrow. I think in this particular case, right, if we look at our revenue performance in this quarter, clearly there were less constraints on the business than we've seen previously with the out performance we had on the revenue and the organic growth. So we remain encouraged, but working hard.

Operator

Thank you very much. (Operator Instructions) Next in queue is Alex Rygiel with B. Riley FBR. Please go ahead.

Alex Rygiel -- B. Riley FBR. -- Analyst

Good morning, Steve and Drew.

Steven E. Nielsen -- Chairman, President & Chief Executive Officer

Good morning, Alex.

Alex Rygiel -- B. Riley FBR. -- Analyst

Steve, are you seeing any other customers with modulation in their spending patterns outside of AT&T?

Steven E. Nielsen -- Chairman, President & Chief Executive Officer

Well, in the first quarter and I think this was evident in the cable operators broadly, it was not a strong start to the year for them, that showed up in our business, although probably a little bit less perhaps in some other businesses. And I think that's just as one other industry participants product, there's been lots of capacity deployed in the networks in that industry and sometimes there is a period of time where customers want to let their networks settle in. But on the other hand, if you look at the disclosures from the operators about the amount of traffic growth to residential consumers, one talked about 200 gigs a month growing 34% a year and other was over 280 gigs a month, growing 20% a year.

So as long as traffic continues to grow and there is no sign then it won't. I think we're confident that spending will come back and I think that's been echoed by other participants in the industry.

Alex Rygiel -- B. Riley FBR. -- Analyst

And are you seeing any modulation due to equipment availability for 5G equipment?

Steven E. Nielsen -- Chairman, President & Chief Executive Officer

So much of what we do right now is related to the fiber portion of that. I think there's always when a new technology comes out, there's always going to be some things that occur in an unexpected way, but we don't think at this point that's been a material factor in our revenue outlook.

Alex Rygiel -- B. Riley FBR. -- Analyst

And then, as it relates to rural fiber and FirstNet, can you talk about where we stand on both of those developments and how they're passed through your P&L?

Steven E. Nielsen -- Chairman, President & Chief Executive Officer

So as we said, our wireless business with AT&T is growing. We expect it to continue to grow through the calendar year. So an exciting year in our wireless business. With respect to rural fiber, I think we're just at the beginning as some may have noted the FCC is talking about a $20 billion 10 year fund, what I'll call Cap3 (ph) but it's a follow-up, the Cap 2 (ph). And I think that has created opportunities for us, not only in our traditional customer base but while they're not top 10 customers individually, in aggregate we're doing lots of business for rural electric cooperatives who have decided to leverage our existing aerial plant and add fiber to those networks. So it's an area of focus for us right now.

Alex Rygiel -- B. Riley FBR. -- Analyst

Great. Rick, congratulation and best wishes in retirement.

Richard B. Vilsoet -- Senior Vice President, Chief Legal Officer & Corporate Secretary

Thank you.

Steven E. Nielsen -- Chairman, President & Chief Executive Officer

He is smiling, Alex.

Operator

Thank you. Our next question in queue will come from Alan Mitrani with Sylvan Lake Asset Management. Please go ahead.

Alan Mitrani -- Sylvan Lake Asset Management -- Analyst

Hi. Thank you. I missed a bit of the early part of the call, so I apologize if it's been asked. But have you seen any change to the competitive dynamics in the industry? From the bidding perspective or from new entrants or anything like that?

Steven E. Nielsen -- Chairman, President & Chief Executive Officer

We have not seen anything over the last quarter or two, Alan, that would change our assessment of the competition in the industry, there's a lot of work (technical difficulty). As you can see, we grew both sequentially and year-over-year pretty substantially. And so, I think there's plenty of opportunity out there.

Alan Mitrani -- Sylvan Lake Asset Management -- Analyst

Okay. And then, your SG&A was pretty tight this quarter, and even from the last couple of quarters, I guess when you put some clamp on some of the expenses. Can you talk about where do you think that's a sustainable level going forward keeping the SG&A level roughly in those -- in the sevens. And I know it's a goal, but is that sustainable over time?

Steven E. Nielsen -- Chairman, President & Chief Executive Officer

No, I don't believe that other periods of time where we have this kind of organic growth, we're going to invest appropriately in the business on the G&A side, but if we do it well, we should get G&A leverage over time than we have in the past. So I don't think we've certainly not done anything that's detrimental to the intermediate or long-term profitability of the business in the short-term.

Alan Mitrani -- Sylvan Lake Asset Management -- Analyst

Okay. Thank you.

Operator

Thank you. And we do have a follow-up in queue from Noelle Dilts with Stifel. Please go ahead.

Noelle Dilts -- Stifel -- Analyst

Hi. Thank you. You answered part of my question with just cable kind of being weaker in the early part of the year. As you look out for the remainder of the year and kind of with your initial fiscal third quarter guidance. Are you assuming some resumption, looking at CapEx guidance across the cable space there, suggesting maybe stronger back half, is that embedded in your thinking or you kind of being cautious in terms of that stepping up?

Steven E. Nielsen -- Chairman, President & Chief Executive Officer

Look, I think as we said earlier, we're being reasonably cautious. I think there's some opportunities for spending to pick up, particularly as customers kind of sort out their priorities around different technologies. So I think that's there. But we've not been particularly aggressive in that area.

Noelle Dilts -- Stifel -- Analyst

Okay. And then second, just given the labor market and we hear some folks in the industry talk about challenges, procuring labor and ramping up the workforce. How are you guys thinking about labor availability, any concerns, are you finding it's reasonably easy to fill positions?

Steven E. Nielsen -- Chairman, President & Chief Executive Officer

Noelle, we've discussed this before in a sub 4% unemployment environment, it's always going to be tough to get resources. I think that's part of what our businesses have dealt with in prior periods of tightness, but I look at the quarter and look at organic growth of about $112 million year-over-year. And so clearly, we were able to add capacity to fulfill that organic growth. We've done a number of things in our onboarding and recruiting area to try to facilitate the process of securing more applications and getting the work as quickly as we can. And I think, we will continue to to spend and innovate in that area.

Noelle Dilts -- Stifel -- Analyst

Great, thank you.

Operator

Thank you. We also have a follow-up in queue from Adam Thalhimer with Thompson, Davis. Please go ahead.

Adam Thalhimer -- Thompson, Davis. -- Analyst

Hey, Steve. The charter fulfillment services nationwide contract, was that a new contract or an extension?

Steven E. Nielsen -- Chairman, President & Chief Executive Officer

That was an extension, Adam. We've had that arrangement with them for a long period of time and it just is one of those contracts that renews periodically.

Adam Thalhimer -- Thompson, Davis. -- Analyst

Okay. That was it. Thanks.

Operator

Thank you. At this time, there is no additional questions in the queue. Please continue.

Steven E. Nielsen -- Chairman, President & Chief Executive Officer

All right. Well, we thank everybody for your time and attention today and we look forward to speaking to you on the next quarter's call at the end of August. Thank you.

Operator

Thank you. Ladies and gentlemen, that does conclude your conference call for today. We do thank you for your participation and for using AT&T's Executive Teleconference. You may now disconnect.

Duration: 37 minutes

Call participants:

Steven E. Nielsen -- Chairman, President & Chief Executive Officer

Richard B. Vilsoet -- Senior Vice President, Chief Legal Officer & Corporate Secretary

H. Andrew DeFerrari -- Senior Vice President, Chief Financial Officer & Treasurer

Chad Dillard -- Deutsche Bank -- Analyst

Adam Thalhimer -- Thompson, Davis. -- Analyst

Brent Thielman -- D.A. Davidson -- Analyst

Noelle Dilts -- Stifel -- Analyst

Alex Kurtz -- KeyBanc Capital Markets -- Analyst

Alex Rygiel -- B. Riley FBR. -- Analyst

Alan Mitrani -- Sylvan Lake Asset Management -- Analyst

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