NV5 Global, Inc. (NASDAQ:NVEE) Q2 2023 Earnings Call Transcript

NV5 Global, Inc. (NASDAQ:NVEE) Q2 2023 Earnings Call Transcript August 9, 2023

NV5 Global, Inc. misses on earnings expectations. Reported EPS is $1.29 EPS, expectations were $1.31.

Operator: Good afternoon, everyone and thank you for participating in today’s conference call to discuss NV5’s Financial Results for the Second Quarter 2023 Ended July 1, 2023. Joining us today are Dickerson Wright, Chairman and CEO of NV5; Edward Codispoti, CFO of NV5; Alex Hockman, President and COO of NV5; Ben Heraud, COO of NV5; and Richard Tong, Executive Vice President and General Counsel at NV5. I would like now to turn the call over to Richard Tong.

Richard Tong: Thank you operator. Welcome, everyone to NV5’s second quarter 2023 earnings call. Before we proceed, I would like to notify all participants that today’s presentation can be found on ir.nv5.com and remind everyone that today’s discussion contains forward-looking statements about the company’s future business and financial performance. These are based on management’s current expectations and are subject to risks and uncertainties. Factors that could cause results to differ materially from these statements are included in today’s presentation slides and in our reports on file with the SEC. During this call GAAP and non-GAAP financial measures will be discussed. A reconciliation between the two is available in today’s earnings release and on the company’s website at www.nv5.com.

Please note that unless otherwise stated all references to second quarter 2023 comparisons are being made against the second quarter of 2022. In this presentation NV5 has included certain non-GAAP financial measures as defined in Regulation G promulgated by the Securities and Exchange Act of 1934 as amended. The non-GAAP financial measures included in this presentation are adjusted earnings per share and adjusted EBITDA. NV5 provides non-GAAP financial measures to supplement GAAP measures as they provide additional insight into NV5’s financial results. However, non-GAAP measures have limitations as analytical tools and should not be considered in isolation and are not in accordance or a substitute for GAAP. In addition, other companies may define non-GAAP measures differently, which limits the ability of investors to compare non-GAAP measures of NV5 to those used by peer companies.

A webcast replay of this call and its accompanying presentation are also available via the link provided in today’s news release and on the Investors section of the company’s website. You may also find today’s presentation, which will be referenced during this call on the Investors section of the company’s website. We will begin the call with comments from Dickerson Wright, Chairman and CEO of NV5, and turning the call over to Ben Heraud, COO of NV5, then hearing from Alex Hockman, President and COO of NV5, before turning the call over to Ed Codispoti, Chief Financial Officer for a review of the second quarter 2023 results. Dickerson Wright will then provide closing comments before we open the call for your questions. Dickerson please go ahead.

Dickerson Wright: Thank you, Richard, and thanks to everyone for joining us today for this call. The second quarter results exceeded our planned budget. We are on track to meet the guidance previously given for 2023. As you see turning to page 5, not only was an improvement over quarter one but we finished the quarter above consensus. Results consisted of organic growth from our existing business but also revenue and organic growth of acquisitions made prior to and during quarter number one. In particular, the acquisitions of software and analytical services strengthens a stable foundation for growth and subscription based and reoccurring revenue. We also announced some recent project wins that support and enhance a sustainable infrastructure, and assist the existing utility power grid.

We have begun to see the Federal Infrastructure bill materialize. We have recently begun to see green shoots for our real estate transactional business, with revenue increasing, but still not at prior rates. We have established organic growth initiatives that can provide additional resources for our clients. We have structured the organization to have our most senior people spend additional time with our clients. We feel that this will increase organic growth. Perhaps, we can now go to Slide 6, which highlights our technology expansion with the acquisition of — which was announced yesterday of Red Technology in Singapore. This increases our resources in the areas, strengthening our mission-critical data center support activity and promoting further organic growth in the Asia Pacific region.

In fact, the acquisition will be a catalyst for further growth, and adds to our existing employee base. The employee base now numbers over 250 full-time equivalents in the region. I will now turn the presentation over to Ben Heraud and Alex Hockman, to provide an update on the Buildings and Infrastructure businesses.

Ben Heraud: Please turn to Slide 7. In 2020, we formed a highly focused division within our international team called NV5 Mission Critical. The idea was to provide a one-stop shop for blue chip clients that was highly outcome-driven. Our clients needed a consultant that could rapidly bring international standards to unskilled markets, while adopting the local regulations and culture. Our Mission Critical business has grown close to 400% since its founding, and in the first half of the year it has delivered 14% organic growth. The acquisition of Red Technologies expands both our client base, and service offerings in the mission-critical space. Red Technologies provides IT and fiber optic consulting, which is both upstream and downstream of our systems design and commissioning services.

Having already worked together on a number of projects, we are very well positioned to vertically integrate our services and bring more recurring revenue into the business. In the domestic market, we’re also seeing areas of very strong growth. The acquisition of Sage Energy in 2021, bolstered our clean energy group, with expertise in renewables and the electric vehicle market services that are in very high demand right now. As an owner’s representative, we engage at the early phase of a project, which often leads to downstream engineering work in other NV5 verticals. At the beginning of this year, we formed a building digitization group, drawing from our expertise in geospatial, building analytics and information modeling to provide scanned system and digital twin platforms to our clients.

This is now becoming a core part of our more traditional services such as MEP design and program management, bringing more value to our clients, allowing us to deliver projects more efficiently while growing our subscription-based revenue. Our Technology & Acoustics Group is on track for a record year. We continue to be market leaders in higher education, a market which is currently seeing a strong rebound since the pandemic. We continue to diversify into other markets, with recent master services agreements awarded with a large software and government entity. Alex Hockman, will now give an update on the Infrastructure and Utilities businesses.

PI/Shutterstock.com

Alex Hockman: Thank you, Ben and good afternoon to everyone. Please turn to Slide 8. NV5 has been at the forefront of sustainable planning, design and construction to meet the demands of the population functionality and protecting our environment. We have participated in the Institute for Sustainable Infrastructure and have been active in the development of ENVISION. ENVISION is a holistic sustainability framework, and rating system that enables a thorough examination of the sustainability and resiliency of all types of civil infrastructure. Examples of infrastructure investments that protect our environment include the recently announced $16 million New York City DEP greenwater stormwater project. This project will include the design of an interceptor sewer system to address the concerns with combined sewage outflow systems also known as CSOs. When treatment plants are overcapacity untreated sewage is discharged directly into our waterways.

The design and construction of interceptor systems reduces the demand on treatment centers and drastically improves the water quality of our rivers and oceans. We are also starting to see projects resulting from the Infrastructure Investment and Jobs Act, IIJA which is also known as the Bipartisan Infrastructure law or BIL. The BIL will make available more than $1 trillion in funding for infrastructure programs across transportation, energy and water sectors through a combination of grants loans and tax incentives. Our Philadelphia office authored a successful raise grant application for Camden County, New Jersey announced in June, 2023. Through this grant, Camden County won $19 million for segments of the Camden County trail, a 34-mile trail through 17 municipalities, which NV5 is designing.

RAISE is an acronym for Rebuilding American Infrastructure with Sustainability and Equity. And our Long Island office has performed grant writing services for counties and towns and are awaiting results of the application for federal funds for pedestrian safety and non-motorized Greenway programs. We are in the early stages, but are well-positioned to assist our public and private sector clients with grant writing, design and project management services for these important infrastructure projects. The multi-disciplined approach of our utility services group has us well-positioned to assist throughout the life cycle of energy company’s assets and capital improvement projects. We are seeing increased activity across all of our areas of expertise including transmission and distribution lines, substations, gas, LNG and the rapidly growing demand for EV charging stations.

Recently a major West Coast utility reported that undergrounding lines was by far more effective in reducing outages and preventing fires than attempting to mitigate fires through forest management. NV5 has extensive expertise in all aspects and disciplines required to design and project manage these improvements and are projecting significant growth in the future. At this time, I will turn it back to Dickerson.

Dickerson Wright: Thank you Alex. By turning to Slide 9, we will provide an update of our geospatial platform and we’ll speak about our continued success as well as our strategy for future growth. The geospatial platform provides three key solutions; one, it mitigates risk; two, it plans for growth; and three, manages our existing resources. As Ed Codispoti will mention later, we are increasing our investments to provide the most updated technology and to better address new markets. Data acquisition requires updated aerial measurement equipment. Software solutions provide a competitive edge and embeds our relationship with clients with patented software solutions. NV5 is by far the leader in analytical solutions for our clients.

These solutions tailor the acquired data to user friendly solutions. Going to Slide 10, you’ll see that we depict our backlog and key wins for the second quarter. You’ll really see that our backlog grew 70% over Q2 2022 or Q2 last year, all the way to $803 million over a rolling 12-month period. Our key wins touched most of our service offerings. Our geospatial wins provide data for our government agencies, including the Department of Defense. Our infrastructure wins enhances our delivery and energy efficiency for the existing utility grid. Our geospatial technology investments, will support our geospatial wins. We will now transition the presentation to our CFO, Ed Codispoti to provide an overview of our second quarter performance. Go ahead, Ed.

Edward Codispoti: Thank you, Dickerson and good afternoon, everyone. If you would please turn to Slide 12 of the presentation, I’ll review our second quarter 2023 financial results. Our gross revenues were $222.6 million compared to $202.7 million in the second quarter of last year. The 10% increase in growth was primarily fueled by our Axim and VIS acquisitions as well as organic growth in our geospatial business, which combined represented about $31.4 million. Our top line growth was partially offset by decreases in our real estate transactional business revenue of $8.3 million, driven by market reactions to interest rates and decreases in our LNG business revenue of $3 million driven by the timing of project cycles. Gross profit was $110.3 million compared to $99.2 million in the second quarter of last year, an increase of $11.1 million or 11%.

Gross margin also expanded by 50 basis points during this period. Net income was $15.4 million in the quarter compared to $17.3 million in the second quarter of last year, a decrease of $1.9 million. Net income was impacted by amortization expense from acquisitions, which increased $3.2 million when compared to the second quarter of last year and interest expense which increased $2.8 million. Additionally, our net income this quarter was affected by profit margins in our real estate transactional business due to market reactions to interest rates and profit margins in our LNG business due to the timing of project cycles, as well as the reduction of acquisition earn-out accruals. I’ll note that we did see resiliency in our real estate business revenue, as it increased 26% over the first quarter of this year.

Our adjusted EBITDA was $35 million compared to $37.8 million in the second quarter of last year. As was the case with net income, adjusted EBITDA was impacted by the real estate business and timing of LNG projects. Our GAAP diluted earnings per share were $1 per share in the second quarter of 2023 compared to $1.13 per share in the second quarter of 2022. Our adjusted earnings per share which excludes the impact of intangible amortization and acquisition-related costs were $1.29 per share in the second quarter of this year compared to $1.49 per share in the second quarter of last year. On Slide 13, you can see that our cash flows from operations during the second quarter were $14.2 million. Our cash flows from operations for the second quarter were impacted by working capital timing during the quarter, which to a certain extent was driven by the bringing on board of the Axim and VIS acquisitions.

As of July 1, 2023, we had $28.8 million of cash on hand and our net leverage was 1.4x. This net leverage includes the impact of the Axim and Viz acquisitions. Turning now to Slide 14. We can see how we have invested CapEx in our future growth so far this year. When you look at the $10.2 million of CapEx investments, we made in the first half of this year about $8.4 million related to geospatial growth. Of this amount $2 million was invested in our new geospatial vessel to expand the capacity of our fleet and which has already been engaged in active projects. Another $1.5 million went towards offshore wind equipment to support the offshore wind growth initiative and about $2.7 million was invested in Topo-bathymetric LiDAR sensors for rivers and nearshore geospatial contracts.

We believe these investments along with the strength of our balance sheet position us well for future growth. I’ll now turn it back over to Dickerson for some closing comments.

Dickerson Wright: Thank you, Ed. What is our strategy and drivers for future growth? Let’s now turn to Slide 15 and you will see mention seven focus points to position NV5 for future growth. Number one, we’ll expand our geospatial leadership, which approaches $300 million and makes us the leader at least in North America for sure in the geospatial activity. As Ben mentioned international data centre expansion from new markets and M&A activity will also be a driver. We’re going to capitalize on the federal infrastructure activity which we are starting to see begin now in its infancy. There will always be utility improvements for power distribution and natural gas conversion to LNG and NV5 is positioned very well to capitalize on these opportunities.

We will continue our public sector focus, which requires mandated in central services and it’s not dependent on economic conditions. Clean energy and building efficiency will always be something that we focus on to grow. And last but not least is the sustainable infrastructure that Alex mentioned not only in the civil area but in every aspect of the infrastructure support services, we will look for sustainability. So we remain optimistic and we’ll continue to implement our strategy and stay nimble in our approach based upon market conditions. We maintain our 2023 guidance of $878 million to $915 million revenues and our GAAP and adjusted EPS guidance will remain the same. Thank you.

See also 30 Most Affordable Cities in the US and 30 Best Movies on Hulu.

Q&A Session

Operator: [Operator Instructions] And your first question comes from Chris Moore, CJS Securities. Chris, please go ahead.

Chris Moore: Hey. Good afternoon, guys. Thanks for taking a couple questions. So revenue growth guide stays at roughly 14%. Just give me a sense how much of that is versus M&A.

Dickerson Wright: Yes. We expect the organic to be in the high single digits Chris. So around 7% or so is what we’re planning for.

Chris Moore: Got it. Very helpful. Backlog $803 million just roughly what percentage of that is geospatial? Has that changed significantly year-over-year?

Dickerson Wright: Geospatial — This is Dick. Thanks, Chris for the question. Geospatial has been running about 50% of their turnover and I think the turnover growth will be about $200 million this year. So, not all of that $803 million of course is based on the geospatial activity. So I would say it’s about 25%.

Chris Moore: Got it. Very helpful. And last one for me. Maybe I know LNG project cycle impacted the first half. Can you talk a little bit more about where you are in those project cycles? And what the impact would be in the second half of the year?

Dickerson Wright: Well, yes, LNG of course is billed as what we call a percentage of completion. So, it’s their estimate of the completion of that projects that they’re working on will vastly impact the revenue that they choose to generate. So we always try to match up labor and revenue at the same time. So they are being more conservative in they’re growing. And we think towards the second half of the year the LNG business, because of the percentage of completion will be stronger or higher. But it doesn’t depict any slowdown in the LNG process. It’s just that how they’re recognizing the revenue on a percent of completion basis.

Chris Moore: Got it. So the accounting related to that should be a little bit of a tailwind for the second half.

Dickerson Wright: Correct. Correct.

Chris Moore: Got it. all right. I appreciate it. I’ll leave it there guys.

Dickerson Wright: Thanks Chris.

Operator: Next question comes from Andy Wittmann from Baird. Andy, please go ahead.

Andy Wittmann: Okay. Thanks for taking my questions guys. Good afternoon. I guess I wanted to start just trying to understand the margin profile in the quarter your G&A line was down pretty substantially in the quarter to $11.5 million. That number had been reliably running in the $17 million to — gosh, just over $18 million per quarter run rate. So I was wondering, what the difference was this quarter? Perhaps it was maybe accruals for incentive compensation or maybe did you take your, I guess, you’d call it a contra expense on the earn-out liability that you reversed and got to benefit from. Was that — does that show up in G&A? And I was just hoping you could help us understand that item on the income statement.

Edward Codispoti: Absolutely Andy, it’s the latter of those that you just mentioned. It’s the — it’s a reversal of an earn-out accrual. And so if you refer to the reconciliation of GAAP to non-GAAP in the back of the earnings release, you’ll see that our acquisition-related costs had a reversal of $5.3 million on a net basis during the quarter. So that’s part of it. We have as you know earn-out built into some of our acquisitions, and that was just an earn-out that was not met that was reversed during the quarter.

Andy Wittmann: Okay.

Dickerson Wright: It’s milestone-based. It’s milestone-based. Andy this is Dick. Milestone-based, there’s segments of the earn-out that depends on the acquisition. And I am not specific to what Ed is mentioning. But the earn-out does not indicate necessarily that they are not operating correctly revenue-wise, but it’s that segment of time they were supposed to meet — and the acquisitions may have met a certain revenue base on a certain timeframe according to the contract, and they may not have met it. Sometimes they’ll catch-up, sometimes they won’t.

Andy Wittmann: Got it. Ed, you mentioned the $5.3 million net. I was wondering sometimes you do actually have positive expenses on that, you did some acquisitions in the quarter. So what was the gross number for now?

Edward Codispoti: $6.25 million was the reversal. And like you said we had positive expense going the other way. So $6.25 million was a reversal and $5.3 million was the net.

Andy Wittmann: Got it, yeah. Okay. That’s helpful. And then I was just wondering just in terms of the cash flow, because you did have some working capital build here. You talked about timing. I guess, what are you guys now thinking for the year? And some of the things that got you in the quarter for working capital usage have you collected those items here as it stands here in early August in the third quarter?

Edward Codispoti: Yeah. I would expect for working capital to — the impact of working capital in terms of the cash flows in the second half to improve. What happens oftentimes when you have on acquisition the size of Axim is that the weeks following and the first few months following the acquisition you’re — the AR collections and certain working capital components may not fall into place during that immediate post-acquisition post-closing period. And so I think that will recover during the second half and we should see improvements in our cash flow from operations.

Andy Wittmann: Got it. Okay. Then just my final question. I guess, I just want to try to understand the level of confidence you have here in the second half, because for the first half of the year earnings are down slightly, you guys talked about a 7% organic growth rate, which would suggest that your back half organic growth rate to make 7% for the year would have to be into the double digits given that you started out a little down on the first half of the year. So what are the business lines that you’re seeing accelerate to the degree needed to at these levels for the second half?

Dickerson Wright: Well, this is Dick. Thanks Andy. I think if you’re just — you’re not just — we’re not just relying purely on organic growth but total growth. So there will be some acquisitions also that will be part. It looks like it was going to be just pure organic would have to be a growth rate of 13%, but we’re not expecting that. It does not show any revenue or input from a recent acquisition we just read. And so it will look for us to depend both on the organic growth of the company and growth that we may do through acquisitions. As far as the specific areas that we’re looking at, I don’t want to get too specific but we are still looking at — we have phenomenal opportunities in technology for acquisitions and the geospatial area technology areas such as Red and also we are looking for some very good opportunities in our core business.

So those we all anticipate not knowing if all of those will come in, but we certainly anticipate some of those to help the second half of the year.

Andy Wittmann: Okay. I just want to make sure that I’m clear on that then. So just as it relates to the guidance, did I hear you say that Red is not in the guidance? And are there — if that’s right or wrong, but then comment on that. But did you also — are you also suggesting that there are acquisitions in guidance that are not announced publicly? Is that what you’re saying?

Dickerson Wright: I’m not saying neither. But what I — so let me say what I did say. Red, of course, is included in our guidance because we have it. It was not included in the revenue that was reported because we didn’t own it at the time. But it’s certainly the revenue we’re expecting is in the guidance for the second half of the year. And we’re assuming — I’m just saying, if you look at the model and look at what we’ve done and look at the guidance, then you’re assuming that, all — collectively not you personally, but collectively, one would assume that it’s just going to be organic growth. I’m saying that we are both active in acquisitions and organic growth. So you’d have to look at a combination of that and that’s why we have a little bit more of a comfort level with our guidance given for the rest of the year.

Andy Wittmann: Okay. That makes sense. Okay. Thank you, very much. Have a good night.

Dickerson Wright: Thank you.

Edward Codispoti: Thank you.

Operator: [Operator Instructions] Your next question comes from David Marsh, Singular Research. David, go ahead.

David Marsh: Hi guys. Thanks for taking my questions. Just to follow up a little bit on that last question. Especially in regards to your top line guidance being maintained and how we think about the business and potential seasonality, would there still be an expectation that the fourth quarter would be a little bit lighter than the third quarter from a revenue perspective?

Dickerson Wright: Well, if we were looking at things in the rearview mirror and it’s always been that our fourth quarter is not as strong as the third quarter. However, the fourth quarter can be — is really — is affected by many things. It’s affected by weather, it’s affected by what accruals we may have in place and what we’ve left, but the fourth quarter in the — it’s not as weak as the first quarter, but it’s certainly not usually as strong. We just — but we can’t make any assumptions.

Edward Codispoti: In this case, the growth — this particular year, as Dick mentioned, the fourth quarter is always — it could go either way, right? But in this particular year, the way we see the backlog rolling out, we see Q3 revenue and Q4 revenue very similar in terms of their run rate.

Dickerson Wright: And it’s also dependent on weather.

David Marsh: So, I mean to meet that top line number as was alluded to by some of the previous callers, I mean you’re going to have to put up some pretty sizable numbers here in the second half. And I guess, I’d just like to understand, where you get the confidence in terms of — just in terms of the pipeline and the backlog that it’s going to come through kind of this quickly in order to be able to help you meet those numbers. Just really don’t want to see you guys have to use here in the future.

Dickerson Wright: Well, obviously, we have more confidence that you seem to have. We work here, so we get to see things a little, a little bit clearer than you may have seen things. But we expect — we’ve had a history of meeting our guidance and we feel comfortable with what can be expected. We certainly see things that perhaps you have — you don’t have the ability to see right now and we may have an advantage there.

David Marsh: Sure. Sure. Absolutely. And then just kind of turning to the balance sheet a little bit. Obviously, you guys have a little bit of leverage here to make some of these recent acquisitions, particularly some of the bigger ones. Would the expectation be that as you generate positive free cash flow, you’ll pay down that debt. And what’s kind of — what would you say is your kind of ideal debt profile for the company?

Edward Codispoti : Yes. I mean, as I mentioned earlier, our leverage right now is 1.4 times, which is relatively low versus some of our competitors. And so we feel very comfortable with that. As we add acquisitions to the balance sheet some — two things. First of all, some of those purchases may be funded through our cash from operations. And then just going forward any excess cash that we’ve got coming in through our cash flows we would try to pay down as much of that leverage as possible.

David Marsh: Yes. I just noticed obviously a pretty sizable bump up sequential in interest expense. And so I’m sure that just in the current rate environment there would probably be some desire to till that down a little bit and get that back down to a lower number.

Edward Codispoti: And by the way we did pay down during the quarter. I mean, if you don’t consider the acquisitions we actually paid down around $13 million or so, so far during this first half of the year. So we have been on that track of paying down the debt. And then when an acquisition comes along, we — if there’s a need to fund some of that through the facility then we add to that as needed. But our focus is on good acquisitions in terms of return on capital, while at the same time deleveraging as much as possible throughout that period.

David Marsh: All right. Thanks guys. Well, good luck for the second half and I appreciate you taking the questions.

Edward Codispoti: Thank you.

Operator: Next question comes from Rob Brown, Lake Street Capital Markets. Rob, please go ahead.

Rob Brown : Good afternoon Dickerson.

Dickerson Wright : Hi.

Rob Brown : I just wanted to follow back up on the real estate transaction business. You had some pretty good stabilization in the quarter. How is that looking the back half of the year? And I guess what’s sort of some of the dynamics there that’s allowing it to stabilize?

Dickerson Wright : Well, it improved in this last reporting quarter, we’re seeing some buildup in their backlog. And where we’ve seen some improvement it’s more in the government areas that’s where we have two groups in our transactional real estate. One of them is primarily works with Fannie Mae and Ginnie Mac. And so we’ve seen some improvement in that area. And overall we’re just — we’re starting to see improvement. They continue to remain profitable. They’re certainly under where they were last year by about $15 million but we’re starting to see some improvement. In revenue $15 million in revenue.

Rob Brown: Yes. Okay. Okay. Great. And then on the Red acquisition it seems like a good fit in the building area the how does that sort of fit in in terms of cross-selling and in I guess synergies in the building area just elaborate on how that fits with what you’ve been doing.

Dickerson Wright : Well, the cross-selling from any of our international operations has really been an offshoring work that they do work for our offices in the U.S. So we would hope that some of our increased capability with Red will improve on the cross-selling and offshoring work that they can be doing for our operations in the states.

Rob Brown: Okay. Great. Thank you and congrats on a nice quarter.

Dickerson Wright: Thank you.

Operator: Your next question comes from Jeff Martin from ROTH MKM. Jeff, go ahead.

Jeff Martin: Thanks. good afternoon, everyone. Dick, I apologize if some of these questions are ever done and I hopped on the call a bit late. What is the — what was the impact from the LNG business? It sounds like it was more of a timing issue than end of project situation? What — if you already covered that, if you could repeat it that would be helpful. If not then, look forward to hearing more about it.

Dickerson Wright: Well, the LNG business as a percent of completion business. So, they build on an estimate of where they think things are complete. And so the project – although, the projects are working on we felt a steady buildup as it gets into the third and fourth quarter, they were recognizing their percentage of completion lower than they have done traditionally.

Edward Codispoti: It’s also – Jeff, it’s also thinking about it as these are larger contracts, lower volume. And so when you compare one year to the other, just any little timing differences in terms of when things get started just kind of push things to the right, which is what happens. So there’s a lot of demand and a strong backlog for the business. It’s really more just a timing issue. And it really relates more to the first half of last year versus the first half of this year. I think the second half will be slightly up, from what it was last year. So, it’s just a timing issue.

Jeff Martin: Okay. And then on the real estate transaction side, my understanding was that the comparisons in the second half of this year gotten much easier relative to last year. Are you expecting that business to be, above last year, or are we still in that period of recovery mode, where it may take a couple more quarters before the comps become sufficiently easy to post real estate transactions growth.

Dickerson Wright: Yes. We’re not anticipating the real estate transaction business to be what it was last year, and it’s slowly coming back. But it just — it depends on interest rates and the appetite that — the one side is a very large portfolio of business, and so they are very dependent on interest rates and the other piece of the business that I said with Fannie Mae or Ginnie Mae [ph] are also very dependent on mortgage rates that they can get. So, we see a slow coming back. It’s a profitable business. It’s quite scalable, but we don’t anticipate this year to be what it was last year.

Jeff Martin: Okay. Great. And then one more, if I could. With the new geospatial ocean vessel being delivered, what is the offshore wind opportunity look like in terms of — start to see some revenue generation and some growth in geospatial related to the offshore wind opportunity. Is that a 2024 event or even further out?

Dickerson Wright: Yes. We just spoke to the people running the geo dynamics group, which has the vessel. That project has been delayed, but they’re very enthusiastic about the growth of the wind farm. And so we’re seeing much more of the revenue to be generated in 2024 than 2023.

Jeff Martin: Excellent. Thank you.

Operator: Next question comes from Tate Sullivan, Maxim Group. Tate, go ahead.

Tate Sullivan: Thank you. Dick, you mentioned for 2023 initiatives rare earth minerals geospatial work. Is that already a meaningful portion of what you do in geospatial or is it mostly US geological survey. Can you give some more background on that?

Dickerson Wright: It’s an additive to our geospatial platform. We are just positioning ourselves now to take advantage of that market. So it’s really — and it’s a very — the genesis and beginning stage of that and the contribution to revenue. But we see an increase in our defense work through Axim and we see a defense in the geospatial work from — and Alex mentioned the ambition from software and so we think that they will be more of a contributor than the rare earth for this year. We will see some revenue from that piece of the business.

Tate Sullivan: Okay. And then the opportunity with BIM and Digital Twin what is that? Did you refer to that in the Analyst Day as well?

Dickerson Wright: Well, I think I’m going to — if Ben is on the call, I’m going to defend the part of Penta what we see the opportunities with them. And Ben and Alex have been working much closer to that than I have been.

Ben Heraud: Yes it’s Ben Heraud here. Basically with that side of the business we are much more traditional services for example our MEP group. When we go in and do a tenant improvement job we’ll now scan this space using one of the geospatial scanners and create a Digital Twin from that whereas more traditionally we would do that with manual measurements. So that enables us to present a more comprehensive solution to the client and actually set us up for an ongoing contract off the back of what was more traditionally a one-off project.

Tate Sullivan: Great. Thank you for that.

Operator: Next question comes from Marc Riddick, Sidoti. Marc, please go ahead.

Marc Riddick: Hi. Good evening. So a lot of my questions have been answered. I did want to start though, I wonder, if you could talk a little bit about IIJA and sort of how that was initially sort of beginning to show up? Maybe you can talk a little bit about the — what you’re seeing relative to maybe what expectations may have been as to the types of what your types of projects you’re seeing or the types of visibility that might be coming from that and then I had just one other follow-up.

Alex Hockman: So I think the expectation that we had is pretty much what we’re seeing. I think the public expectation may have been that we have a waterfall of projects as a result of the bill. In fact what we’re seeing is the initial start is coming through some of the grant writing opportunities. And as those go into the design phase we’ll be in a position to perform design. When it goes to construction will be there for the project management. So from our expectation it’s basically meeting our expectation.

Marc Riddick: Okay. And then just as a quick reminder so earlier in the year there was the weather impact on construction certainly. And that certainly, wasn’t just something that affected yourselves but many others particularly in Northern California. I was wondering, if you could talk a little bit about how that is — is there expectation for some of that to have been delayed and flow through later, or maybe you can sort of bring us up-to-date on maybe what’s taking place specifically with that market? Thank you.

Alex Hockman: So, many of our projects were clearly impacted by weather. We felt that very strongly in Q1, and what it does is essentially just move the revenue to the right. The projects aren’t terminated. They’re not stopped but they’re delayed and sometimes the delay carried on a little further. And even when the weather is clear there would still be some areas where excavations, for example, had already been done but they are not filled with water. So, there’s a number of ripple effects that happened as a result of severe weather.

Marc Riddick: Make sense. Thank you.

Alex Hockman: You’re welcome.

Operator: All right. At this time, this concludes our question-and-answer session, and I would like now to turn the call back over to Mr. Wright for closing remarks.

Dickerson Wright: Thank you, operator. I think if you see the tagline of NV5, there’s a quote Effort beyond Engineering. What do we mean by that, or what does it mean to be that we want to be beyond engineering. Let me mention a few examples and the reason for that strategy. As the earth’s population increases we must deliver infrastructure and services in a more efficient manner. That is just understood. So our strategy is to have a natural intersection between technology and our traditional engineering services so that we can deliver the infrastructure services that we can help deliver that in a more efficient basis and improve that delivery. So let’s mention a few specific technology and improvements that we make to go beyond the traditional engineering.

We use geospatial services and software and all forms of artificial intelligence to improve infrastructure support. Examples of our geospatial mapping of transition lines, improves the delivery of utility services. We use the latest geospatial technology to monitor coastline erosion in the delivery of clean water sources. Our mission-critical business delivers IT and fiber optics to improve system design for our commercial services. We formed a building digital group, which marries our building analytics information modeling to deliver our BIM and digital twin platforms that we’ve mentioned previously. This all becomes an integrated part of our transition to the MEP design and to all forms of infrastructure delivery. Our software technology develops a product named ENVISION, you’ve heard, Alex mention that, which enables us to measure sustainable infrastructure delivery.

All of these, this technology helps us to strengthen our core platform and gives us a competitive edge. For this reason, we feel very optimistic about the future growth of NV5 and we feel it gives us a competitive advantage in the marketplace. So we look forward this will complete our call for the quarter and what we’ve done and we look forward to being with you in the second half of the year and we’re very optimistic about the future of NV5. Thank you.

Operator: Thank you all for joining. You may now disconnect.