Dycom Industries - Earnings Call - Q1 2020

Transcript

Speaker 0

Ladies and gentlemen, thank you for standing by. Welcome to the DICOM 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. If you should require assistance during the call, you may press star followed by 0, and an operator will assist you offline.

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.

Speaker 1

Thank you, Tony. Good morning, everyone. I'd like to thank you for attending this conference call to review our first quarter fiscal twenty twenty 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 Vilsway, our Chief Legal Officer. Rick will be retiring today at the conclusion of our annual meeting after fourteen 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 Philsway.

Speaker 2

Thank you, Steve. Except for historical information, the statements made by company management during this call may be forward looking are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward looking statements, including those relating to the company's outlook, are based on management's current expectations, estimates and projections and involve known and unknown risks and uncertainties, which may cause the company's actual results in 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 ks for the year ended January 2639, and other periodic filings with the Securities and Exchange Commission. The company assumes no obligation to update forward looking statements.

Steve?

Speaker 1

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 2838. In addition, during the quarter, we recognized pretax income from the recovery of previously reserved accounts receivable and contract assets of $10,300,000 and we recorded a pretax charge of $8,200,000 for estimated warranty costs related to work performed for a customer in prior periods. During our comments, we will exclude this recovery and this warranty charge 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 Reports section of our website for a reconciliation of these non GAAP measures to their corresponding GAAP measures. Revenue was $833,700,000 an increase of 14%. Organic revenue, excluding $4,700,000 of storm restoration services in the quarter and $14,800,000 in the year ago quarter, increased 15.8%. As we deployed one gigabit wireline networks, wirelesswireline 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 twenty nineteen call, and adjusted general and administrative expenses were 8.3%. All of these factors produced adjusted EBITDA of $73,600,000 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 358,900,000.0 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 one 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 wirelesswireline networks that will enable high bandwidth, low latency applications. The industry effort required to deploy these converged networks continues to meaningfully broaden 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 one gigabit deployments.

In addition, we have secured a number of converged wirelesswireline multi use network deployments. These services are being provided across the country in more than a dozen metropolitan areas to several customers. Customers are pursuing multi year 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 twenty nineteen call, we also expect some normal timing volatility in customer spending modulations.

As network deployment strategies and technologies evolve on other large scale network deployments. Tactical considerations may also impact 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 continue 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 and T was our largest customer at 25.1% of total revenue or 209,300,000.0 AT and T grew organically 28.7%. Revenue from Verizon was $179,800,000 or 21.6% of revenue. Verizon was DICOM's second largest customer and grew 47.2% organically. Comcast was our third largest customer at $137,100,000 or 16.4% of revenue.

Revenue from CenturyLink was $109,800,000 or 13.2% of revenue. CenturyLink was our fourth largest customer and grew organically 17.8%. And finally, revenue from Windstream was $34,000,000 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 of the twenty fifteen 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 one gigabit and wirelesswireline 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 $7,051,000,000 versus $7,330,000,000 at the end of the January, a decrease of $279,000,000 Of this backlog, approximately $2,723,000,000 is expected to be completed in the next twelve months. The total backlog calculation reflects solid performance as we booked new work and renewed existing work.

We continue to anticipate substantial future opportunities across a broad array of our customers. For AT and T, we were awarded construction services agreements in California, Ohio, Kentucky, South Carolina and Georgia. With Comcast fulfillment services in Pennsylvania and New Jersey, for charter fulfillment services nationwide and construction services in California locating services agreements in Maryland, Washington, DC, Virginia, and South Carolina. And finally, we secured rural fiber service 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.

Speaker 3

Thanks, Steve, good morning, everyone. Going to Slide eight. Contract revenues for Q1 twenty twenty were $833,700,000 and organic revenue growth was 15.8% with strong increases from four of our top five customers. Storm restoration services contributed $4,700,000 of revenue compared to $14,800,000 in the year ago period. Also, revenue from an acquired business contributed $6,100,000 of revenue.

Adjusted EBITDA was $73,600,000 or 8.8% of revenue. During Q1, we incurred an $8,200,000 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. Margins were impacted by a large customer program during the quarter. In G and A expense, we realized a pretax recovery of $10,300,000 as a benefit during Q1 'twenty.

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 and A expense decreased 25 basis points compared to the April. 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 twenty twenty was $0.53 per share. Now going to Slide nine.

Our balance sheet and financial position remains strong. We ended the quarter with $450,000,000 in term loans outstanding and no revolver borrowings. Liquidity is ample at $358,900,000 at the end of the quarter, consisting of availability from our credit facility and cash on hand. Cash flow used for operating activities was 56,100,000 during the current quarter, which funded the sequential growth in revenue. For Q1 'twenty, the combined DSOs of accounts receivable and net contract assets were one hundred and eight days, reflecting growth on a large customer program.

Capital expenditures were $38,400,000 during Q1 'twenty, net of disposal proceeds, and gross CapEx was $45,800,000 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 $835,000,000 to $885,000,000 non GAAP diluted EPS to range from $0.70 to $0.92 per share, and adjusted EBITDA percent of contract revenue, which decreases from the Q2 'nineteen result. Other expectations include depreciation of 41,100,000.0 to $41,900,000 and amortization of $5,300,000 share based compensation included in G and A of 3,200,000.0 to 3,700,000.0 adjusted interest expense of approximately 7,700,000.0 to $7,800,000 excluding $5,000,000 of interest for the non cash debt discount amortization of our notes. Other income net is expected to range from 2,300,000.0 to 2,900,000.0 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 twenty nineteen result and adjusted EBITDA margin percent of contract revenues, which decreases from the Q3 twenty nineteen result. Now I will turn the call back to Steve.

Speaker 1

Thanks, Drew. Moving to Slide 12. Within a growing economy, we experienced the effects of a strong industry environment and capitalized on our significant strengths. First and foremost, we maintain strong customer presence throughout our markets. Second, our extensive market presence has allowed us to be at the forefront of evolving industry opportunities.

The end market drivers of these opportunities remain firm and are strengthening. Fiber deployments and contemplation of emerging wireless technologies are underway 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 one 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 new build opportunities are underway. 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.

Speaker 0

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

Speaker 4

Hi. Good morning, everyone.

Speaker 1

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

Speaker 4

No. No worries at all. So just a question for you guys. Based on your backlog, I mean, how far away is is Onefiber from hitting the full run rate contribution to the business? And is there, you know, further to go?

And and how should we think about the the margin implications

Speaker 0

from that program?

Speaker 1

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 a 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 for obvious competitive reasons and other reasons, we can't just isolate on a single program.

Speaker 5

Okay.

Speaker 4

And just moving to more of the margin question. Can we just talk about just what EBITDA margins you have in backlog versus what you're posting right now, maybe over the last twelve months or so? To what extent is some of the margin pressure that you're seeing like year on year more related to the ramp up in work? Or is it more that you're seeing a little more pressure in terms of the contracts that you're signing right now?

Speaker 1

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 was also true for this quarter, if you pull the impacts of that out of the business, the business looked very much like it always has. And so we don't see any impacts in particular on the overall company other than this large program. And as we talked about, the impacts on the margins there are really around the complexity of the program and the cost 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.

Speaker 5

Great, thanks. I'll hop back in queue.

Speaker 0

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

Speaker 6

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

Speaker 1

Oh, very good. We'll we'll let Kelly know, Adam.

Speaker 6

Can I ask first about wireless? Steve, is wireless still roughly $250,000,000 on an annual basis, or is it trending above that now?

Speaker 1

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 optimistic we're about that portion of the business.

Speaker 6

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

Speaker 1

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're four gs small cells or five gs small cells, there's 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 four gs or five gs, 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.

Speaker 6

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

Speaker 3

Yeah, Adam, we had some sequential growth in the quarter clearly, and we called out 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.

Speaker 1

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

Speaker 6

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

Speaker 1

Well, look, as we said last quarter, Adam, we are working hard. We have lots of people working on billing initiatives and IT initiatives to facilitate the billing. The actual contract terms there, once we get it through the approval process, are 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 gonna get better at that, we're working hard at it right now to accomplish that.

Speaker 6

Okay, I'll turn it over. Thanks.

Speaker 0

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

Speaker 4

Thanks. Good morning.

Speaker 1

Hey, Brent.

Speaker 4

Hey, Steve, you guys continue to pretty aggressively build headcount here and just wanted to get your thoughts on when you think that starts to plateau?

Speaker 1

Well, there's a couple of things. Obviously, in the quarter, there's always a seasonal uptick, Brent. So when you have sequential revenue growth of, call it, dollars 100,000,000, you're gonna get or 80,000,000 to $100,000,000 you're gonna get that kind of pickup in headcount seasonally. So I know that that was anything particularly remarkable. I think we're pleased with the 15.8 percent organic growth.

And as we work through opportunities that develop throughout the year, if to support those we need to add headcount, we'll do that. But we don't think about that as kind of something that we manage to an objective. We manage the revenue and the headcount follows.

Speaker 4

Okay. And then 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?

Speaker 1

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, even with that customer, this program is not the entirety of what we do for that customer.

Speaker 4

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 Q2 twenty nineteen. Obviously, there's big CapEx programs out there, but just wanted to get your thoughts on why we've seen that come in since then.

Speaker 1

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 loosely 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 based on a number of the contracts that have had longer terms have made us a more durable business.

And so it's not something that we pay a particular attention as an indicator of where organic growth is going to go.

Speaker 4

Okay. Thanks for that. Appreciate it.

Speaker 0

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

Speaker 5

Hi guys, good morning.

Speaker 1

Good morning, Noelle.

Speaker 5

So, on the fourth quarter call, 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.

Speaker 1

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 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 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. When we've done that in the past, ultimately, we've worked through it.

And then I'm sorry, go Noel.

Speaker 5

And then just for my own understanding, is that to try and 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?

Speaker 1

The type of construction is not the issue. It's a program management. And as we said last quarter, it was evolving objectives, processes, and priorities. And that's really what we're working on is to manage that level of complexity. The actual construction work itself is a big program.

In its construction, there's challenges every day. But those are not the types of challenges that have created the complexity.

Speaker 5

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

Speaker 3

Sure, thanks, Noelle. Charter was 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%.

Speaker 5

Thank you.

Speaker 0

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

Speaker 7

Hi, guys. This is Alex on for Tahira.

Speaker 1

Good morning.

Speaker 7

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

Speaker 1

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, was evident in the earnings season, AT and T has publicly said that they're going to be slower or stop their fiber program during the calendar second quarter. 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 interest, 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 periods.

Speaker 7

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

Speaker 1

Well, there's always further improvement that we can always do better tomorrow. I think in this particular case, 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 outperformance we had on the revenue and the organic growth. So we remain encouraged, but working hard.

Speaker 0

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

Speaker 1

Morning, Steve and Drew. Good morning, Alex.

Speaker 8

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

Speaker 1

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 than some other businesses. And I think that's just as one other industry participant put it, there's been lots of capacity deployed in the networks in that industry. And sometimes there's a period of time where customers want to let their network 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, another was over two eighty gigs a month growing 20% a year.

So long as traffic continues to grow and there's no sign that 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.

Speaker 8

And are you seeing any modulation due to equipment availability for five gs equipment?

Speaker 1

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 gonna 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.

Speaker 8

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

Speaker 1

So as we said, our wireless business with AT and 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 $20,000,000,000 ten year fund, what I'll call CAF III, but as a follow-up to CAF II.

And I think that's 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 electrical cooperatives who have decided to leverage their existing aerial plant and add fiber to those networks. So it's an area of focus for us right now.

Speaker 8

Great, Rick, congratulations and best wishes in retirement.

Speaker 5

Thank you.

Speaker 1

Keep smiling, Alex.

Speaker 0

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

Speaker 8

Hi, thank you. I missed a bit

Speaker 9

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 a bidding perspective or from new entrants or anything like that?

Speaker 1

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. 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.

Speaker 9

Okay. And then your SG and 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 whether you think that's a sustainable level going forward, keeping the SG and A level roughly in those in the sevens? And I know it's a goal, but is that sustainable over time?

Speaker 1

Think we've had other periods of time where we have this kind of organic growth. We're going to invest appropriately in the business on the G and A side. But if we do it well, we should get G and 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.

Speaker 9

Okay, thank you.

Speaker 0

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

Speaker 5

Hi, thanks. 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, are suggesting maybe stronger back half, is that embedded in your thinking or are you kind of being cautious in terms of that stepping up?

Speaker 1

Look, 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.

Speaker 5

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, or are you finding it's reasonably easy to fill positions?

Speaker 1

Well, Noelle, we've discussed this before. In a sub 4% unemployment environment, it's always gonna 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 $112,000,000 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 to work as quick as we can. And I think we will continue to spend and innovate in that area.

Speaker 5

Great, thank you.

Speaker 0

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

Speaker 6

Hey, Steve, the Charter Fulfillment Services nationwide contract, was that a new contract or an extension?

Speaker 1

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.

Speaker 6

Okay, that was it. Thanks.

Speaker 0

At this time, there's no additional questions in the queue. Please continue.

Speaker 1

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 August. Thank you.

Speaker 0

Thank you. And ladies and gentlemen, that does conclude your conference call for today. We do thank you for your participation and for using AT and T's executive teleconference.