Jeff Martin: Thanks. One for Ed, if I could. But Ed, you gave the $5.7 million acquired revenue number for the acquisitions year-to-date this year. Do you have a total number for acquisitions that were closed up sequent to the end of Q1 of last year?
Edward Codispoti: I don’t have that. I could tell you that the – if you’re talking about a pro forma as if we had owned them, for the full quarter. I do have that number. Give me one second. That would have been 200. We would have had pro forma revenue of $216 million, if everything had been owned from day one in this quarter.
Jeff Martin: Thank you. Okay, thank you.
Operator: And your next question comes from the line of Sam Kusswurm with William Blair. Your line is open.
Sam Kusswurm: Hey, thanks for taking our questions, here. A quick one, just circling back to Geospatial for a second, I know you were budgeting for this business to be, I think, $320 million for the year. Given everything we’ve just discussed, is that still a good target for 2024?
Dickerson Wright: Yes. I can say that we haven’t seen any adjustments to the budget. I’ll defer to Dan, but I think that we don’t expect – we’re not expecting a degradation from the $320 million. But Dan, maybe you have more to say.
Dan Levine: No. Confidently, yes, I’m sticking to that number. We’ve had some nice – even with the Federal delays, we did have some nice coverage on that on the commercial side, as I mentioned in my comments as well. And that really helps for the year. And we’ve got some more that’s going to continue to grow. So yes, we’re confident of that number.
Sam Kusswurm: Great. Good to hear. Maybe pivoting a little bit here to your Utility Services business. We saw the Utility PG&E was trying to sell stake in their power operations, sort of as a way to reduce rates while raising the funding to make improvements to the grid, such as underground cables. We know this is like a high demand area for this type of service. I guess what we’re trying to wonder and think about is that do you think the lack of funds from utilities has been a hurdle to growth at all or if they’re prioritizing this type of spending, maybe over other improvements?
Dickerson Wright: I think that they’re looking to, number one, prioritize this just based on the risk associated with fire damages that they’ve had in the past. So I think that there’s an absolute focus that they recognize that whether it’s the fire hardening or strategic undergrounding, it’s an issue that they have to face, because the risk of not addressing it is too great.
Sam Kusswurm: Got it. Thanks, I will leave it there. Thanks.
Operator: And your next question comes from the line of David Marsh with Singular Research. Your line is open.
David Marsh: Hey, thank you for taking the questions. Congrats on the quarter. It’s a good way to start the year.
Dickerson Wright: Thank you.
David Marsh: I want to look at things at a little bit of a higher level in terms of the P&L, if we could. Just I know there’s a lot of puts and takes that go into the gross margin. It looks like you came in around 49% if I’m doing my math right for the quarter or is it a little higher than that perhaps. But I just wanted to get a sense of where you see that relative – you were a little higher that, 53% for the quarter, so that’s a pretty high print actually. Is that a sustainable level relative to the balance of the year in your eyes at this point or would we expect a little compression there?
Dickerson Wright: This is Dick, and then I’ll let Ed and others. We really have been watching the gross margin. And I would suspect that, that number, if you say 53%, we expect our margin to be better than that as we go forward. A lot of that has been affected by – when we do the acquisitions, there’s always a time for integration and a duplication of roles. We just don’t immediately cut people off. So on the acquisitions, they may have a finance person. They may have a human resources person. They may have IT, they may have some things that we would normally consider duplication and that can affect cost, can affect the gross margin. So as we continue to integrate these teams and these acquisitions as they become more mature with us, we anticipate the gross margin improving.
I don’t see a real pressure on the cost side or what we do the invoicing side of our pressurizing it, it’s just the – some of the duplications and what we call support services of the back office, but we anticipate that the gross margin should be 53% or above. But Ed, you may have one.
Edward Codispoti: No. I would agree with that. And like you said, the first quarter was 53%. So I could confirm that 52.9%, I believe. For the full year, that’s not unreasonable. We’d probably be somewhere in that 51% to 53% range is how we’ve been trending. So that’s what our expectation.
David Marsh: That’s really super helpful. And then just the other part of the P&L, just below there, you get some pretty good increase year-over-year in salaries ranges, payroll taxes on G&A. Are there any one-timers in there that you would expect to fall out? Or are we just – is this kind of inflationary type pressure that we’re going to have to live with here for the rest of the year?
Edward Codispoti: Well, when you look at the year-over-year, just remember that on an as-reported basis, you had Axim come in, in February of last year and VIS the other geospatial acquisition coming in April. So you have those – both of those fully weighted into this first quarter and not all in last year’s first quarter, along with all the other acquisitions that we did throughout the year. So really, the increase you’re seeing is a result of those acquisitions, along with some of the integration costs that we are weaning ourselves out of here as we integrate those geospatial operations.
David Marsh: Got it. Got it, thank you. And then just lastly for me, should you guys generate cash flow, you did take on a little bit of debt to make those acquisitions. Would the first priority be to reduce the debt again? Or would you just continue to look for other acquisition opportunities? Or I guess, kind of more generally, what type of debt level or you confirm which from an EBITDA perspective? And how do you manage that going forward?
Dickerson Wright: Well, I’ll start with this, and Ed can be – let me answer the terms that I can understand, which is certainly a low threshold. But I think that you need to look at everything at leverage to EBITDA and 1.4x is a very unlevered. We’ve had 1.2x, but many, many firms will go as high as 5x debt. So we do not think that we want to be overlevered. So if we happen to have a great opportunity where we would borrow money, we would want to make sure that the EBITDA we’re receiving does not tremendously impact our debt load. So right now, we – if you look on the last slide of our presentation, we want to continue to be low on leverage, and that would include opportunities for acquisitions. If we do borrow money, it’s going to be at a levering point that we have earnings to cover that.
Edward Codispoti: I would agree with that, Dick. And I think absent any M&A opportunities, which we cycle through and they can’t really predict when they’re going to come around. We’re going to use our free cash flow to pay down debt to the extent possible. And that’s the expectation.
David Marsh: Yes. Makes a lot of sense. okay, thank you, guys, very much again. Great quarter and good luck to the balance of the year.
Dickerson Wright: Thank you.
Operator: And your final question comes from the line of Michael Feniger with Bank of America. Your line is open.
Michael Feniger: Hi, everyone. Thanks for bring me. I appreciate it. I’m just curious, obviously, geospatial U.S. flagged growing double digits. What areas are growing kind of below that where we see our organic growth at 8%? Is it still some of the rate-sensitive areas, what areas do you kind of flagged that are growing at a less robust pace than we’re seeing for areas like geospatial?
Dickerson Wright: Well, I’ll start with. If you look at the Infrastructure group, it’s our largest segment of the company. So I’m growing at 7%, to me, was very encouraging, even when we have to overcome the lack of start-up of LNG. And so that’s significantly under where we were last year and also in our support services for ocean mapping, we were very concentrated on offshore wind and now that has been a moratorium. But if we put all of that together, in the infrastructure group, I would say that it’s growing very quickly if you exclude those two. The Geospatial Group independently has grown very strong. But when they combine their services, to support our utility business and our DOT business, and they seem to grow much faster than that.
So those are the two areas domestically where we’re really looking for market growth or lack there of organic growth. And then internationally, I think you saw the presentation that Ben gave and we are really growing a tremendously strong amount percentage-wise organically, although it’s from a low volume base. But – so if you look at pure infrastructure and their growth, we have to take in consideration a downturn in our LNG business and a downturn in our wind farm business offshore. So – but other than that – including that, we still grew at about 7%.
Michael Feniger: Helpful. And just – when we think of the acquisitions done year-to-date, is the rest of the year more just digesting and integrating the deals announced? Or is there more in the pipeline? And just a follow-on to that, if there is one on the pipeline, is it more geared to these data centers, subscription areas? Are multiples there moving up materially? Any help there would be helpful.
Dickerson Wright: What I’d like to say, Mike, is many people play at M&A work. I think you really have to devote resources. So we have two full-time M&A people and they consent. So we always have opportunities out there. And we’re – at any one time, we probably have – we’re looking at 10 companies, and maybe we’ll end up doing two or three. I can say right now that we don’t say let’s look at this area. Let’s look at that area. But I leave that to our M&A people for opportunities. Right now, though, we were looking at a significant opportunity in the utility business, and we’re looking at continued opportunities in the data center business. And in the infrastructure area, we’re looking at in new geographies or high-growth areas to supplier services.
But it’s really – you have to honestly work at it. And so we – as I say, we devote two people full time to do that, and one part time to do M&A work. And it’s only to give us opportunities that are out there.
Michael Feniger: Great. And just lastly, you provided some great color on the updated guidance, how to think about [Technical Difficulty].
