NV5 Global, Inc. (NASDAQ:NVEE) Q2 2024 Earnings Call Transcript

NV5 Global, Inc. (NASDAQ:NVEE) Q2 2024 Earnings Call Transcript August 7, 2024

Operator: Good afternoon, everyone. And thank you for participating in today’s conference call to discuss NV5’s Financial Results for the Second Quarter 2024 ended July 29, 2024. Joining us today are Dickerson Wright, Executive Chairman of NV5; Edward Codispoti, CFO of NV5; Alex Hockman, CEO of NV5 Infrastructure; Ben Heraud, CEO of NV5 Buildings & Technology; Dan Levine, President, Geospatial at NV5; and Richard Tong, Executive Vice President and General Counsel at NV5. I would now like to turn the call over to Richard Tong.

Richard Tong: Thank you, Operator. Welcome, everyone, to NV5’s second quarter 2024 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 actual results to differ materially from these statements are included in today’s presentation slides and in our report on file with the SEC. During the 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 2024 comparisons are being made against the second quarter of 2023. In this presentation, NV5 has included certain non-GAAP financial measures as defined in Regulation G promulgated under 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 an 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 on the Investor’s section of the company’s website. You may also find today’s presentation, which will be referenced during this call, on the Investor’s section of the company’s website. We will begin the call with comments from Dickerson Wright, Executive Chairman of NV5, before turning the call over to Edward Codispoti, Chief Financial Officer for a review of the second quarter 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 we thank everyone joining us for this call today. Although we are very pleased to report a successful second quarter, which reflected strong organic growth and profitability, the second quarter results further represented the positioning of NV5 to meet the expected increase demands for the second half of the year. As many of you know and had attended, an Investor Day was held on July 25th, which emphasized our position for not only the second half of this year, but our goals for NV5 in the three years to come, using technology to better deliver these services. Current market conditions confirm the NV5 positioning of being in a mandatory business. The global population growth has placed tremendous demands on Infrastructure and Energy Production and Delivery.

We have strengthened all aspects of NV5 Infrastructure and Energy Production and Delivery services. This has proven to be a very stable business model during all economic conditions. As an example of this, our backlog, which has increased to $877 million for the year, represents an increase of 5% over Q1 2024 and 9% over the second quarter of last year. As you can see on Slide 3, we have presented a combined performance for NV5 in the second quarter of 2024. These totals represent the accumulation of three segments of our business, Infrastructure, Geospatial, and Buildings & Technology. These three segments are supported by our six service verticals, construction quality assurance, utility services, infrastructure, environmental health sciences, Building & Technology, and Geospatial.

We will report the second quarter performance of these verticals as well as annual and future goals for each of these segments. We will also convey the competitive advantage of how these verticals work with each other to deliver effective and meaningful results to our clients through a robust cross-selling program of all our offices. The first segment we would like to discuss is our Infrastructure segment, which will be presented by Alex Hockman, CEO of Infrastructure. We will not only discuss the second quarter results but how we use technology to deliver these results and the cross-selling support that infrastructure receives from our other verticals. Alex?

Alex Hockman: Thank you, Dickerson. Please turn to Slide 5. Infrastructure as a reporting segment generated $101 million in gross revenue in Q2. The three verticals that comprise this segment include our business units that provide engineering design and surveying, which accounted for 51% of Q2 revenues, utilities were 29%, and construction quality assurance services were 20% of Q2 revenue. Of note, revenues generated by our Geospatial and Technology reporting segments associated with Infrastructure as an end market are reported separately. In 2023, we established key initiatives to focus on targeted growth sectors shown in the lower left of this slide. I will briefly discuss each of these initiatives. If you turn to Slide 6, our sustainable infrastructure addresses many facets of the built world.

One of the ways in which we are distinguishing our platform is to be leaders in adopting and enhancing technologies to refine the process from conceptual design through construction and operation phases, and this has resulted in increased profitability and growth. These technologies include the use of scanning, modeling and visualization tools that allow us to create 3D images of in-situ infrastructure and the proposed design, which reduce construction costs and delays and allow for the stakeholders to readily understand proposed designs. Slide 7 provides a summary of our DOT initiatives, which brings our technical people and solutions to all DOT clients to increase organic growth and profitability. Through this initiatives, we are experiencing strong growth in DOTs in North Carolina, California and New Jersey.

Last quarter, I mentioned the acquisition of CHW, and with the success of the integration and statewide opportunities, we plan to double the size of our Florida DOT and municipal engineering services by 2028. One of the unique aspects of our DOT initiative is our ability to integrate our Geospatial Services to complement our engineering expertise. This differentiator allows us to offer services throughout the CapEx and OpEx phases of an asset. Some recent key wins are a direct result of our DOT initiative, including $60 million in Civil Program Management contracts for Caltrans that have been secured this year. We also recently announced $10 million in North Carolina DOT contracts. Slide 8 identifies several growth drivers in our utility services business.

Some key items to note is that $42 billion in grid modernization costs proposed by the 50 largest investor-owned utilities have received approval from regulatory agencies. Other drivers include the growth in renewables, which is forecast to double over the next 20 years, increased electricity demand, and the public demand for increased reliability and resiliency. These growth drivers create high demand for our utility services. On Page 9, you’ll see examples of undergrounding. This technique has been proven to be extremely effective in grid hardening transmission lines. NV5 has been involved in designing over 700 miles of undergrounding, and through experience and innovation, the cost of undergrounding a mile of line has decreased over 50% since 2019.

Further, our solutions and analysis result in opportunities for all of the Infrastructure vertical and our unmatched Geospatial capabilities. With NV5’s multidisciplinary and integrated service offering to the utility market, we are well positioned to grow with the increased demand and able to provide our services throughout the United States. Dickerson?

Dickerson Wright: Thank you, Alex. The second segment is our Geospatial Services. Dan Levine, the President of our Geospatial segment, will discuss how this vertical provides key services to our clients. But it also delivers advanced technology to support our core business. Dan, please go ahead.

Dan Levine: Thanks, Dickerson. If you would please turn to Slide 11. I’m going to spend a few minutes talking about the Geospatial sector results for Q2, as well as some of the emerging trends in our markets and technologies we use, and how these are creating competitive advantages for us across all sectors of NV5. So Q2 gross revenue totaled $72 million, driven in large part by continued strength in the utilities market. We have a strong and growing backlog in the utility sector with several large wins in the quarter, including two totaling over $13 million from both the Southeast and SoCal regions, and a larger contract pending from the Northeast region. Additionally, our aircraft and sensor utilization continue to set records for us in flight times and miles flown.

These are revenue drivers for both our data acquisition and our data analytics services. I had mentioned in the Q1 earnings call that we expected to start seeing contracts flowing from the Federal Government towards the end of Q2 and into Q3, as a result of the continuing resolution being resolved in late March. This is exactly what we’ve experienced in May and June, and ongoing through today, with over $35 million in federal contract awards from just four agencies in both defense and civilian sectors. Finally, during May and June, we were able to book over $8 million in contracts for our hydrospatial business, creating a positive turn in that sector for us. If you could please turn to Slide 12. The Geospatial business is at core a technology-driven business and one of the things about technology is that it’s constantly changing.

This keeps us sticky with our existing clients, as they always want the next best thing. As the largest Geospatial Services business in the market, we have inherent advantages. NV5 Geospatial has a large and diverse portfolio, requiring and supporting the development of expertise in new and advancing technologies. This allows us to maintain our early adopter position in the spaces we are active in and provides access to new markets that benefit through leveraging our technologies. These technology advantages are in the form of land, sea and air sensors, and the ability to combine the multiple sensor types into a single collection system. Additionally, our commercial software, with over a 0.5 million users worldwide is built on 18 patents. These and the thousands of bespoke solutions we use internally for data production and analysis and externally by creating specific enduring solutions for our customers keep us ahead of our competition as well.

If you please turn to Slide 13. Not only does that help the Geospatial business directly, but the technologies and expertise we develop for that business applies directly to our Infrastructure & Building Technologies businesses. We are experiencing an increasing level of cross-selling and project work through leveraging Geospatial technologies across the sectors. Examples include using our Scan-to-BIM equipment and expertise to support that building technologies is doing for data centers and bringing that into airports and other facilities. We are actively supporting the power team and infrastructure with data for asset management and assessments. And we are seeing several areas in both transportation and water where Geospatial technologies are able to expand our client base and the work we do in these sectors.

This phenomenon goes both ways as the deep domain expertise in the power, water and transportation areas of the business is directly supporting Geospatial teams’ ability to win work where we would not have even attempted to win in the past. If you please turn to Slide 14. I wanted to speak for a moment specifically about our software capabilities. The NV ecosystem is a recognized leading software package that provides scientific image processing capabilities to our customers. Traditionally, that has been used by scientists and academia and large research agencies. Our software was embedded on the Hubble telescope, for example. It is also becoming a key component to some of the medical imaging analysis automation. X-rays and MRIs are being read by computer algorithms largely driven by our software.

Our software as a service platform is enhancing our traditional capabilities, allowing non-scientists to perform similar analyses but to do it over and over again. This capability is being used by large oil companies worldwide to auto detect issues with their assets, for transportation applications assessing subsidence along roads and railways. And finally, the DOD and intelligent communities are using this more and more as a force multiplier for detecting and assessing activities in parts of the world experiencing rising tensions. Work traditionally performed by banks of analysts. The NV software platform is a unique differentiator for NV5. Back to you, Dickerson.

Dickerson Wright: Thank you, Dan. Our third segment is our Buildings & Technology segment. This segment has seen significant organic growth domestically and internationally. The demand for energy delivery and efficiency is increasing. Ben Heraud, a CEO of Buildings & Technology who leads this group, will speak about our second quarter results and how we are using technology and analytics to meet this ever increasing demand. Ben, please go ahead.

Ben Heraud: Thank you, Dickerson. Let’s turn to Slide 16. Our Buildings & Technology segment delivered $64 million in the second quarter of 2024, which represents 18% growth over the second quarter of 2023. Some of the areas that are driving this growth are data centers, clean energy and building digitization. Please turn to Slide 17. To show our strong commitment towards the continued growth of our services associated with data centers, we have set a five-year target of $400 million in revenue, which is 10 times our current volume. We will achieve this by continuing to grow with our largest base of hyperscale clients, leveraging our strong expertise to win new clients and expanding the services we provide within this sector.

We have won over $25 million in mission critical and data center awards in the first half of 2024, and the pipeline for new opportunities continues to be strong in our data center business. We have also seen strong growth in our digital twin services for data centers, which we deliver in concert with our Geospatial business. A key factor to limiting the growth of the data center market and the domestic market is the availability of power, and according to recent studies, over 30% of data centers capacity is unused due to a lack of sufficient energy. NV5 is uniquely positioned to address this issue and are currently leveraging multiple service lines to help our clients unlock this unused capacity, including energy efficiency, power delivery, MEP design and commissioning.

On Slide 18, another challenge facing this sector are complexities that AI servers are bringing to the operation of these facilities. Large and unexpected spikes in load cause heat load issues. NV5 is at the forefront of solving these problems with our clients, utilizing cutting edge technology and expertise. With the use of software, this service is highly profitable, scalable and recurring. On Slide 19, our building digitization service is a great example of how we are leveraging technology to engage multiple NV5 services to support our clients. Working with our Geospatial and surveying teams, we’re able to create highly functional digital twins to improve a building’s operation, reduce energy costs and carbon emissions. This service is deployed for the entire lifecycle of a facility and puts us in a very strong position to bring all NV5 services to our clients over a long time period.

Back to you, Dickerson.

Dickerson Wright: Thank you, Ben. Let’s see how we’ve done cumulatively in Q2 of 2024 when we put all three segments that you’ve just listened to together and what we can then anticipate for the balance of the year. Let’s listen to Ed Codispoti, our Chief Financial Officer, as he addresses our financial results.

Edward Codispoti: Thank you, Dickerson, and good afternoon, everyone. If you would please turn to Slide 21 of the presentation, I’ll review our 2024 second quarter financial results. Our gross revenues in the second quarter grew 6% to $236.3 million, compared to $222.6 million in the second quarter of the prior year. Our gross profit was $123.3 million, compared to $110.3 million in the prior year, an increase of 12%. Gross margins expanded 270 basis points from 49.5% in the second quarter of last year to 52.2% in the second quarter of this year, largely driven by Geospatial and our Infrastructure segment. When looking at our operating results, please keep in mind that in the second quarter of last year, we had a $6.5 million reversal of contingent consideration related to acquisitions.

Additionally, in the second quarter of this year, we had non-recurring costs related to our VIS acquisitions. Our depreciation and amortization increased $2.7 million and our interest expense increased $1 million quarter-over-quarter. As a result, our net income was $7.9 million, compared to $15.4 million in the second quarter of last year, and our GAAP diluted EPS was $0.50 per share versus $1 per share in the prior year period. When you strip out this noise and look at results from an adjusted EBITDA perspective, we increased our results 10% over last year. Adjusted EBITDA was $38.5 million in the second quarter of this year versus $35 million in the same quarter last year. This represented a margin expansion of 60 basis points, as our margin increased to 16.3%.

Our adjusted EPS was $1.24 per share in this second quarter, compared to $1.29 per share in the same period last year. Please keep in mind that in the second quarter, we experienced a ramp up in our business. If you recall, we had a very strong cash flow quarter in Q1, as we generated $19.6 million of cash from operations. In Q2, our cash flow was affected by working capital needs as revenue ramps up. We used $11.3 million of cash from operations in the second quarter. Therefore, year-to-date, we have generated cash from operations of $8.2 million. Our net leverage remains low at 1.5 times. We feel confident in the strength of our balance sheet and believe it’s positioned us well for future growth. I’ll now turn it back over to Dickerson.

Dickerson Wright: Thank you, Ed. Please turn to Slide 22 to discuss some of our merger and acquisition activity currently ongoing at NV5. We have reached an agreement to acquire two businesses in the utility operations and maintenance business, and in the water resources sector. The first company will expand our services to utilities, providing operations and maintenance nationwide, which is a recurring revenue business. This acquisition will enhance our staffing capabilities for utilities and energy delivery services. The second company we have agreed to acquire is a California wastewater and water resources company that will strengthen our water services. The combined acquisitions result in approximately 400 additional technical personnel to our existing platform.

Please turn to Slide 23. We have had a very successful first half of the year. However, the year is not over. We must continue to stay focused on the delivery of growth and profitability to our investors. As a result, we are raising our guidance for gross revenues to $944 million to $950 million for the full year of 2024. Our full year guidance for GAAP EPS is $2.87 to $2.93. And for adjusted EPS, our full year guidance is $5.13 per share to $5.20 per share. This is a direct result of our services that are not dependent on economic conditions but are dependent on global population growth, which we have and increasing demands on our Infrastructure and this is evidenced by our increased backlog and including in our Geospatial businesses. Thank you.

Operator: [Operator Instructions] Your first question comes from the line of Tim Mulrooney with William Blair. Your line is open.

Tim Mulrooney: Good afternoon, everybody. Thanks for taking my question.

Q&A Session

Dickerson Wright: Good afternoon.

Tim Mulrooney: Yeah. Hey. Dickerson, appreciate the extra color on the two pending acquisitions. That’s helpful. My question is, is your full year guide, the guidance raised, is that primarily related to the expected contribution from these year pending acquisitions or is it more related to an improved outlook on the organic side of the business?

Dickerson Wright: Tim, it’s the latter. We don’t include these acquisition — haven’t included these acquisitions nor do we include any of the acquisitions ongoing that we expect in our guidance. So the guidance is just as we see, a very strong second half from operations and operations we do not include in the budget or the guidance, pending acquisitions or acquisitions that have been completed, which these two have and will be added to the second year over and above the guidance that we gave.

Tim Mulrooney: Okay. Thank you for clarifying, Dickerson. I think that that’s important. And then if I could throw on a Dan, Dan, I thought you prepared remarks on the NV ecosystem and solutions you’re building here is pretty interesting. I’m curious if you could dig a little deeper here for us, just how big that business is today, what the margin profile looks like. And if you expect that to grow faster than the overall Geospatial business that you’d expect it to be a larger piece of the business over time?

Dan Levine: Yeah. Sure. Thanks for the question. Right now, that part of the business is, I think, $40 million total for the year and the margins are starting to grow. They have been historically a little bit lower than we’d like, but they are definitely on the upturn and growing. And as it relates to how that is going to be a bigger, smaller component to the overall percentage of Geospatial, actually starting to see the software and services components growing together as some of the software-as-a-service is actually leading to a lot of services, abilities for implementation of the software for our clients and that’s actually growing that part of the business as well.

Tim Mulrooney: Okay. That’s interesting. Very good. Thanks for taking my question.

Operator: Our next question comes from the line of Christopher Moore with CJS Securities. Your line is open.

Christopher Moore: Hey. Good afternoon, guys. Thanks for taking a couple. Maybe just a…

Dickerson Wright: Good afternoon.

Christopher Moore: … quick follow-up. Good afternoon. A follow-up on the guide for fiscal 2024, at the midpoint there, roughly what is the organic growth that’s implied at that $947 million level [ph]?

Dickerson Wright: Well, we always, and we can expect 6% to 10%. You can see our year-to-date is 7% organic growth as I presented on the consolidated slide. But our anticipation is we’ll continue at that 6% to 10% organic growth as we would — as we look for the second half of the year and also as we integrate these new acquisitions.

Christopher Moore: Got it. Appreciate it. Backlog of sequentially year-over-year. Just trying to understand kind of how the mix is changing, evolving. Is it much different sequentially or year-over-year?

Dickerson Wright: Chris, I’m not quite sure I understand what you mean by sequentially, but we have really, and we emphasize this at Investor Day, we are really, really focused on how we can cross sell within each of those three segments and technology. And so we seem to see a greater increase in the Geospatial and the Building Technology business, which is dealing with servers and energy. And then we also see our Infrastructure growing because of the increased demand on energy delivery domestically. So I would say technology is kind of filtered through all of those three main segments and the real focus of our growth has been that we’re seeing — we are expecting the second half to be coming from our technology-based Geospatial and in our Building Technology services segment.

Edward Codispoti: Chris, if you look at a comparison versus a year ago, it’s about a 9% increase in that backlog.

Christopher Moore: Right. Got it. Got it. Okay. Maybe just last one, the data center, you talked about it at Investor Day and again today, looking to go from $40 million run rate to $400 million in five years. From where you sit today, I know you don’t have a perfect outlook, but does that growth, does it ramp early? Is it relatively smooth? Is it more back half loaded? Just trying to understand kind of what you’re seeing at this point.

Dickerson Wright: Yeah. It’s been here. I mean, we’re currently sitting at about 30% organic growth. So, yeah, it would be a combination, it’s about 55% CAGR over that time period of the goal. So I think it would be a combination of acquisition and organic growth. But if we continue on our current trajectory and keep pulling additional services as we are, we’ll get a large portion of that through the organic growth and then the remainder through acquisitions, which we’re looking at at the moment.

Christopher Moore: And from where you sit today on the organic growth side, is it skewed? I mean, is there a lot of that in the next year or two where it’s a little bit heavier or you’re looking at that as kind of smoother over this five years?

Dickerson Wright: Yeah. I mean, I would see us continuing at the rate that we are, sort of over that 30%, particularly in the U.S. where we’re starting out. We’re in an earlier stage, so I’ll expect a higher rate of growth there. The 30% I’ve been talking about is mostly on the international group. We’re expanding into new regions and bringing in new services. So, yeah, a lot of this will come from the organic growth and depending on how early we can bring those acquisitions in will depend on how much they play into it.

Christopher Moore: Got it. I appreciate it. I’ll leave it there. Thanks guys.

Operator: Next question comes from the line of Andrew Wittmann with Robert Baird. Your line is open.

Andrew Wittmann: Great. Good evening, afternoon, guys. I just had a question, I guess, on the acquisitions that you mentioned that haven’t closed yet. I understand that because they haven’t closed yet, you’re not going to maybe talk too much specifically on each one individually, but collectively, can you talk about what the purchase price for those acquisitions is and maybe what the annual expected revenue contribution for those two acquisitions would be on a combined basis?

Dickerson Wright: Just a couple of things, not to be too technical here. We don’t really, closing is a term we haven’t been using lately. The two that I’ve mentioned were absolutely, we’ve reached an agreement. We’ve agreed on valuation. We’ve reached an agreement on many different things that include both of those. We’re under a non-disclosure agreement right now, so I cannot, I’m not in a position to tell you the valuation or what we paid for these because of, but you can use whatever math you want and you can see that we tried to be as transparent as possible by saying that there’s roughly 400 people that will join the company…

Andrew Wittmann: Yeah.

Dickerson Wright: … between these two acquisitions.

Andrew Wittmann: Yeah. Okay. We’ll wait for that to clear and then check back next quarter maybe. Maybe Ed, just to understand the quarter better, you mentioned there were some one-time costs from the VIS integration and I was just wondering, I don’t — the quantum of that, how much was that in your bridges for your adjusted results? Is that added back or is that included as a cost penalty? I’m sorry, I just didn’t understand how you treated that?

Edward Codispoti: Hi Andy. No. The — those expenses are not added back, the ones that I was referring to. So when you think, when you look at G&A in the second quarter of last year versus this year, as I mentioned on the call, you had about a $6.7 million reversal in Q2 of last year, right? And then in this year…

Andrew Wittmann: Okay.

Edward Codispoti: … you had about, it’s roughly about $800,000 or so in integration IT type related costs and half of those are non-recurring. Going forward, that was just to prop them up and get them integrated. We also had about $300,000 more of acquisition related costs, transactional in one quarter over the other. That in particular is added back, but that was just a $300,000 delta. And then the rest of the increase in G&A is just because of the acquisitions that we’ve added to the business.

Andrew Wittmann: Okay. That’s clear. Thank you for that. And then I guess maybe this one’s for you too, Ed. Just, you talked about the quarter being a cash burn and you talked about the year-to-date progress. I’m just wondering as I was looking at the various accounts in your working capital, it looks like the unbilled is the area. Is that a result of the percentage of completion counting that you’re doing on LNG projects? It just looks like the biggest use of cash in the quarter, so I was hoping to understand that account in particular.

Edward Codispoti: Sure, Andy. Yeah. It is — a lot of it is driven by the unbilled, so that observation is correct. However, it’s really mostly the business in general that’s ramping up, but in particular Geospatial because they have that low when you think back to Q4 and Q1 because of the continuing resolution as that came back in the second quarter. Now you have to resume work and it takes a little bit of time to convert that to cash, right? Because you have to go from unbilled to AR and then collections. And so really that’s what’s driving it, but it’s really just a function of the ramp up in the business.

Andrew Wittmann: Okay. That makes a lot of sense. Thank you. That’s all my questions for evening. I hope you have a good night. Thanks.

Dickerson Wright: Thank you.

Edward Codispoti: Thanks, Andy.

Operator: Our next question comes from the line of Rob Brown with Lake Street Capital Markets. Your line is open.

Rob Brown: Good afternoon.

Dickerson Wright: Hi, Rob.

Rob Brown: I just wanted to follow up a little bit on the utility O&M business that you purchased. Is that a kind of a market opportunity that this gets you into that you can expand from and just kind of thinking on that vertical there of market?

Dickerson Wright: Well, I’ll speak in a macro picture and what we’re looking for and how we’re positioning us. The O&M business is one segment that we were not delivering to our utility clients. It tends to be a lot more sticky because the people that are on those projects tend to stay. So it’s more of a reoccurring model, but it gets us visibility into an area that we hadn’t done before. But maybe Alex, who will be probably absorbing most of the O&M in the infrastructure sector of the utilities business, I’ll let him speak to some of that.

Alex Hockman: Yeah. No. It’s a very good point. But one thing I just want to be clear on, we have not purchased it yet. We have an agreement to purchase. So don’t think that it’s already part of the NV5 family. The acquisition is not closed. But as Dickerson mentioned, it is a new area for us within the utility market. We see it as an area that, as was mentioned, it’s very sticky in that our folks are full time working in the utility operations. So as the plant asset has many, many years of operation, we’re able to staff it throughout the duration of the plant being operated.

Dickerson Wright: And just to — Rob, just maybe to add to that, we would not have announced it in this quarter if we had not reached a real definitive agreement. I think it’s on both of those. It’s just that there’s all types of certain approval and processes that we’re going through now. But we have no expectation of those not joining the NV5 team very shortly.

Rob Brown: Okay. And just to clarify, so that’s why you haven’t put it in your guidance and when they formally closed them that way?

Dickerson Wright: Yeah. Well, we never really use M&A as our guidance. We want our operations people to deliver the budget that they do. If an acquisition has been with us, then that may or may be included in the guidance. But no future acquisitions or no acquisitions that we are giving or what we’ve given in the guidance right now is included at all in the guidance we’ve given. And we never really know. We have a number of ongoing acquisitions. We never know what specific month they’re going to close in or what we can add and so we’d rather be a little bit conservative in that regard.

Rob Brown: Okay. Great. Thank you. I’ll turn it over.

Operator: Our next question comes from the line of Jeff Martin with ROTH Capital Partners. Your line is open.

Jeff Martin: Talked about real estate transactions in a while. Given the rate environment appears to be turning in a friendly direction here soon. Curious if you could give us an update on real estate transactions?

Dickerson Wright: Okay. I’ll mention just an overview and then that segment is in our Infrastructure Group. They’ve had a very strong quarter. They’re really coming back and certainly any relief and interest rates always helps their business. But we have two represent roughly $60 million annually and there is two — in regard to the real estate transactional business. But they are really on an uptick now and we think that they’re improving. I think both segments are at budget or above a budget in the real estate transaction group. But maybe Alex would be specifically on that.

Alex Hockman: Yeah. So, again, as you’ve mentioned, what we’re going to see a significant uptick once the rates, interest rates come down. That business is very much dependent on two different types of business. One is where there’s refinance and the other is when there’s actually a real estate transaction that takes place. So we’re still seeing a very good business by virtue of the fact that there’s a lot of refinances take place. But we’ll see that very nice uptick once we get to the point where interest rates become much more attractive for a real estate transaction.

Jeff Martin: Great. That’s helpful. And then one for Ed here. Ed, do you have handy the revenue contributions from acquired companies during the second quarter and the first half of the year? Do you have that handy?

Edward Codispoti: Sure. For the third — for the second quarter, the 2024 acquisitions contributed $10.5 million and for the six months, $15.9 million.

Jeff Martin: Okay. And then if I could squeeze one more in real quick. Thoughts on EBITDA margin expectations over the balance year. Sounds like mix is helping here with Geospatial booking, some nice contract wins recently in federal back on track. It seems like Geospatial may help the margin mix towards the back half of the year. I’m curious if you could comment on that?

Edward Codispoti: I think that’s accurate. We would expect Geospatial because we expect them to have a stronger second half. We would expect them to lift consolidated margins. For the full year, I would estimate that we’d come close to 17%. I think just when you consider the power tracking right now, that would be a good estimate.

Dickerson Wright: Jeff, just to what pleases me is all three of those key segments are — have improved over the same period of time last year. So we’re seeing good organic growth in our Infrastructure business. Of course, Geospatial is really contributing now that they have the continuing resolution issue resolved. And the explosion that we’re seeing in data center work, particularly internationally, so all three have really contributed. So I’m actually pleased with all three segments of the business over the same period last year.

Jeff Martin: Certainly good to hear. Thank you. Appreciate it.

Operator: Next question comes from the line of Marc Riddick with Sidoti. Your line is open.

Marc Riddick: Hi. Good evening.

Dickerson Wright: Good evening.

Marc Riddick: Touch on with the growth plans that you have here. I was wondering if you could talk a little bit about it. I think you sort of hinted at this at the — on the Investor Day, but I was wondering if you could talk a little bit about, yeah, as we’re approaching reaching the $1 billion goals, maybe you could talk about maybe any updated thoughts you may have as to the setting of that next marker, if you will and the timeframe that we might get that.

Dickerson Wright: Very good question, Marc. Two key things. Obviously, and what we said to our people and to our investors is the Investor Day was aspirational. That’s our goal, so that’s what we need that we want to do and it’s certainly different than this call where we’re specific on the results that we’re doing, and this is what we’ve actually accomplished. As far as the $1 billion, we will do the $1 billion. We said that we’ll be $1 billion by entering 2025 or the end of 2024. That will be done. And we have — we feel very strongly that that is, and of course, it’s on the run rate. So it will be a $1 billion going into the budget for 2025. So as far as what our next goal is, these come from ground up. It’s not me or the people on this call saying what they’re going to do, but it’s actually coming from all of our operations.

So we are now just looking at the information that we’ve gathered and we will be announcing shortly what our new goal is for 2028. But we’re waiting to see what comes from our operations and how they see the business. So we expect significant growth, but that milestone, we haven’t released it yet because we’re still kind of collating the information.

Marc Riddick: Okay. Great. Thanks for that. And then just a quick follow-up. I was wondering if you’re seeing much in the way of regional differentiation as far as spending patterns or is there any particular call outs like that, verticals that we should be thinking about that maybe are surging a little stronger than others at the moment? Thanks.

Dickerson Wright: Well, great. Thank you. Yeah. And you’re touching on some of the concluding comments that I make, but…

Marc Riddick: That’s why…

Dickerson Wright: No, no, no, no, no. I’m happy to say it now and then I get a chance to rehearse it, and then maybe I’ll say it again later. But we have always positioned our company to being a mandated business. It’s not so much dependent on economic conditions. So if they need a big Infrastructure project in Iowa, it’s not depending on whether the Iowa budget is due. It’s these are things that are needed. People need to drink clean water. People need to go over bridges. And so we’ve always wanted to be in mandated businesses. So this has served very well. If we’re going to regionalize things, I’d rather mention the differentiation that we’re seeing between domestic and internationally. Using the data center and their demand for energy, in the U.S., most of the energy is coming from the Public Utility Commission, and usually they are very careful.

They’re not — we don’t see any tremendous new power plants being built, so delivery is important. And they actually have moratoriums on some areas because of the need for power that they can’t deliver. However, internationally, especially Ben mentioned on the call, the hyperscalers, they are — we just — they just cannot keep up with the demand for data centers and the use of energy, and they don’t have, they’re not relying on a public grid to do this. Those hyperscalers are free to develop power and do power as they see. So we see more of a growth in the international market than right now that is taking place domestically.

Marc Riddick: Thank you. I appreciate it.

Operator: Our next question comes from the line of Michael Feniger with Bank of America. Your line is open.

Michael Feniger: Yes. Hi. Thanks for taking my questions. Just, Ed, I’m just curious on the outlook. You mentioned like the 17% EBITDA margin. Just, when we kind of think of the gross revenue and the EPS range, any help we should kind of be, framework we should be thinking for where EBITDA kind of settles for the year based on that guidance?

Edward Codispoti: We have a goal of 160. I mean, that could, of course that could vary, and we don’t give guidance on adjusted EBITDA, but I think that’s a reasonable number to shoot for.

Michael Feniger: Okay. Really helpful. And then just on Geospatial, I’m curious, obviously, things like you guys flagged the mixed impact and how that builds for the rest of the year. Just in terms of backlog and bookings for Geospatial, anything we should keep in mind about the election does that have an impact when it comes to Geospatial and how it works for the Federal Government? Just curious how to kind of think about that as we’re in an election year?

Dickerson Wright: I’ll start, and maybe anyone is free to join in, particularly, Dan, if you have something. But NV5 tend — we are agnostic as opposed to which way politically it is going, but that positions back to what I said earlier. We just want to go in the needs that are required by the whole nation, whether it’s whatever political party happens to develop. So we take to be in power. So we tend to just not be as involved in what the political environment is going to be. We will have to adjust if there’s taxes higher or lower or, but as far as the actual work, we don’t see a tremendous difference no matter which party is in power.

Michael Feniger: Great. And just…

Dan Levine: Yeah. And I can jump in a little bit, I’m sorry. Yeah. We shouldn’t see any impact at all this year in our business and usually any change in administration takes a couple of years to transition. And it ends up being — we still have the same amount of work. It just comes from different places because we’re technology and a solution implementer. So we’re pretty resilient to administration changes.

Michael Feniger: Right. Good to know. And just to understand, I’m curious with the M&A picking back up and you guys flagging, are multiples that you’re seeing out there in these conversations? Are they starting to go higher than maybe they were a few years ago? Are they still around the same areas? I’m just curious for you to touch on that. Thanks everyone.

Dickerson Wright: Well, yeah, I think that, they are attending. You have to be a little bit more creative. They’re tending to rise particularly as private equity gets more involved in this space. But we have the luxury of being publicly traded and using our stock is appreciated very nicely. And sometimes we will be using some of our stock in the acquisitions and that tends to get to multiple above the traditional 6 times as high as 10 times. So, but we have seen an increase in the multiples as more and more people, either brokers or the private equity gets involved.

Michael Feniger: Thank you.

Operator: [Operator Instructions] We do have another question came in from Keith Rosenbloom with Cruiser Capital. Your line is open.

Keith Rosenbloom: Hi, guys.

Dickerson Wright: Hi Keith.

Keith Rosenbloom: Hey. I wanted to clarify one question earlier, I think from Chris Moore. If I look at your revenue guidance at the midpoint at $947 million, that shows a 10% revenue growth rate year-over-year. Is that right? Last year was…

Dickerson Wright: Yeah. We think the second half is going to be very strong. I have not…

Keith Rosenbloom: Yeah.

Dickerson Wright: I have not…

Keith Rosenbloom: Yeah.

Dickerson Wright: I’m sure that probably the second half is above the 10%.

Edward Codispoti: Yeah. That is 10%…

Keith Rosenbloom: Yeah. I just think not…

Edward Codispoti: That is 10% on the total topline.

Keith Rosenbloom: I’d heard a different number and I just think mathematically it’s 10% revenue growth. So I was just making sure I was doing that right. I wanted to ask a question about the data center target. You’ve got all these really exciting irons in the fire, it seems like in terms of revenue growth. And I’m curious as to what this, and I appreciate that it’s a target, but in terms of the next couple of years and the acceleration of revenue, will this particular line of business contribute to margin enhancement?

Dickerson Wright: Yes. I think the organic growth, we’re targeting to, we see that aspirational goal of $400 million in revenue for the data centers or anything related to that technology group. And that will be a combination of organic growth and through acquisitions. And we have a few acquisitions in the pipeline right now for the data center business. And we need to take advantage of what we’ve been doing internationally. Keith, we are very well established in some locations in the East that our competitors just are not. I mean, I — we have a very good strong network. And so I think the growth that you see in data centers will be more internationally for now because of energy demands domestically. But we think that we can get to that aspirational goal of $400 million over a 10-year period, but it’s got to be a combination of organic growth and acquisitions.

Edward Codispoti: Keith, just to go back to that previous question, the 10% is total growth, right? In terms of growth revenue…

Keith Rosenbloom: Yeah.

Edward Codispoti: … projections if you take the midpoint, the growth rate that we alluded to earlier was an organic number, which was below that.

Keith Rosenbloom: Right. It was seven or so.

Edward Codispoti: Exactly. Yeah.

Keith Rosenbloom: Okay. And then just last as a point to make, I was looking at the 2022 Investor Day and there you guys pretty confidently said your target was going to be a $1 billion of run rate revenue leaving the fourth quarter of 2024. So it looks like you’re on point for your 2022 guidelines and hopefully this year’s Investor Day targets it there as well, so.

Dickerson Wright: Well, thank you, Keith, for noticing that. That’s correct. I think I remember spending some — seeing you there at Investor Day and that is — we are [inaudible]. What you survice is correct. We are well on that target for the $1 billion run rate.

Keith Rosenbloom: Yeah. Yeah. You called it out in May of 2022. Thanks Dickerson. Thanks Alex.

Dickerson Wright: Okay.

Keith Rosenbloom: Thanks, guys. Talk to you soon.

Dickerson Wright: Okay. Thank you, Keith.

Alex Hockman: Keith, thank you.

Operator: There are no further questions at this time. Mr. Wright, I turn the call back over to you.

Dickerson Wright: Well, thank you. I think that’s our last of the questions. I just had some concluding comments and then I thought we would speak to each of our segment leaders to see how they see the second half of the year. So if you saw or listened to what we’re saying today, we really feel comfortable on the position of NV5 and so that we’re not so dependent on economic conditions. The need for improved infrastructure, the building of roads, bridges, water, wastewater and energy delivery is really fueled by the population growth of the U.S. and the population growth of the planet. So we are doing things that are needed or mandated and so we’re not as dependent on specific economic conditions. So we’re very encouraged by and enthusiastic about this increased demand for our services and we think that the back, the end of the second half of 2024 will be very strong and we look forward to further growth as we’ve seen for the future.

We are really emphasizing how technology gives us that edge. So it will be significant in the delivery of all segments of our services, all of the verticals. Technology will play a key role that gives us a specific advantage that does two things. We’re able to measure and do things over a wider geography and we can deliver our information to our clients in a faster way than we’ve been able to do traditionally and this gives us an edge over our competitors. So you have seen that we feel very strong about the year so we’ve increased the guidance that you’ve seen and that was on Slide deck 23 and this is going to be coming as a technology will be a driver of this and it’s going to be a combination of our organic growth and what we’re doing in M&A activity.

So I want to thank everyone for listening today and before we go into the specific including comments I have, let’s just ask how our leaders feel about their sector. So Alex, how do you feel about the second half of the year for the Infrastructure Group segment?

Alex Hockman: Thanks, Dick. We have several indicators that support our continued growth of the platform. We’re seeing strong demand for our differentiated approach in providing interdisciplinary and integrated services and our cross-line opportunities are increasing. Our backlog is also increasing and importantly, our backlog numbers do not include the master services agreements that we have won since we do not include those amounts until we have an executed work order. As such, we have visibility for growth well beyond the next 12 months.

Dickerson Wright: Thank you, Alex. Dan, you received a lot of questions and interest on what we’re doing with the Geospatial. So we’ll ask specifically, how do you see the second half of the year for the Geospatial Group and the activities that you’re doing?

Dan Levine: Yeah, I see a lot of positive activity going on in the market in particular. One of the interesting phenomenons we’re seeing is this adoption of a digital transformation strategy in transportation and power in specific. They’re calling it digital delivery and this is connecting the data chain and system chain that are used in planning and design and construction through to operations and asset management and we’re good at all of that and being able to put that together in the market is really exciting. And then the other phenomenon we’ve seen and really growing right now is the digital twin solutions. Ben talked about the data center work we’re doing and the digital twinning there. We’re seeing that at scale. We won a contract for Salem, Oregon for more of an outdoor solution and that kind of activity is accelerating. So we’re really excited about that.

Dickerson Wright: Thanks, Dan. Ben, you’re doing an awful lot of work in the Building Technology segment. So maybe an overview of how you see this second half of 2024 and after that.

Ben Heraud: Yeah. Thanks, Dick. I’m really excited about the current and the future growth we’re seeing. I think both in Buildings & Technology but also the cross-working that we’re doing with the Infrastructure Group and Geospatial. We’ve talked a lot about data centers. Just wanted to touch on some areas where we sort of invested quite a bit of time and effort and are now seeing the results of that. Earlier in the year, we expanded into Japan and Indonesia and that was to meet the needs of some of our existing clients and then them asking us to be there and that’s really now starting to pay dividends. Some other areas that I think are going very, very well, clean energy and decarbonization group. We’ve really started to secure larger contracts with government agencies, school boards and utilities.

So really pleased with the work that we’ve got going there and the downstream work that that brings with infrastructure. And lastly, the building digitization things that we’ve been doing with Geospatial. We really formed that group late last year and have been growing it organically and it’s really starting to take off. Just in the last two weeks alone, working with Geospatial, we’ve secured over $2 million worth of contracts in the aviation space. So really, really happy with the progress there too. Thanks, Dick.

Dickerson Wright: Well, thank you everyone. I’m glad to see that our leaders share the enthusiasm. We’re looking forward to a very solid performance in the second half of the year and we have the luxury of doing the acquisitions now that really strengthen each of these segments and each of the verticals as they contribute to the segment. So I wanted to thank everybody for listening in today to our call and we look forward to speaking to you again in the third quarter. So thank you very much.

Operator: Ladies and gentlemen, this concludes today’s conference call. You may now disconnect.