Q3 2020 NV5 Global Inc Earnings Call
[music].
Good afternoon, everyone and thank you for participating in today's conference call to discuss Nvfives financial results for the first quarter of 2020, joining us today.
Our Dickerson Wright, chairman and CEO of Nvfive, Edward kind of spotty CFO of Nvfive.
Kochman, President and CEO of Nvfive markup auto President and CEO, Nvfive Geo spatial solutions, and Richard Cohen Executive Vice President and General Counsel.
Of Nvfive I would now like to turn the call over to Richard Tong.
Thank you operator, welcome everyone to Nvfives third quarter earnings call consistent with social distancing speakers today are connected from different locations. So thank you for patients, including any latency as maybe.
Countered when we answer questions.
Before we proceed I would like to remind everyone that today's discussions contain forward looking statements about the company's future business and financial performance.
They are based on management's current expectations and are subject to risks and uncertainties.
Factors that could cause actual results to differ.
Being purely from those statements are included in today's presentation slides in our reports on file with the FCC.
During this call GAAP and non-GAAP financial measures will be discussed a reconciliation between the two is available in todays earnings release and on the company's website at Www Dot Nvfive.
Hi, Tom.
Please note that unless otherwise stated all references to third quarter 2020 comparisons are being made against the third quarter of 2019.
In this presentation Nvfive has included certain non-GAAP financial measures as defined in regulation G promulgated under the security.
Ladies and Exchange Act of 1934 as amendment the non-GAAP financial measurements included in this presentation, our adjusted earnings per share adjusted EBITDA.
And adjusted EBITDA margin.
And to be five provides non-GAAP financial measures this supplement GAAP.
Measures as they provide additional insight into Nvfives 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 different.
Which limits the ability of investors to compare our non-GAAP measures of Nvfive 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 web site.
We will begin the call with comments from Dickerson Wright, Chairman and CEO of Nvfive before turning the call over to Edward Codispoti, Chief Financial Officer for a review of the third quarter 2020 results.
Alex Hockman, President and CEO of Nvfive and market Pato President of Nvfive Geo spatial solutions will then provide some.
Insights into the operational opportunities and strategic initiatives before turning the call back to Dickerson Wright for closing comments.
Well then open the call for your questions Dickerson. Please go ahead.
Thank you Richard and thanks to everyone who's joining our call today.
For those of you joining by webcast.
Cast, let's turn to slide five in our presentation.
Though there continues to be uncertainty in our personal and business wise associated with the COVID-19 buyers.
Our employees have adapted to this new environment, we are applying technology and software to continue to work remotely to provide.
Slide essential business services.
We continue to be proactive and implementing measures to address business and safety issues for employees working remotely and those supporting field activities that have continued to operate at Nvfive offices and laboratories are a client and project locations.
And what has been the result of our proactive.
Measures.
We have maintained the quality of our work delivered a great operating quarter and group backlog by 9% in quarter three.
Our financial position through quarter. Three 2020 also remains strong we.
We are continuing our activities with acquisitions antibiotics and have to potential acquisition.
Patients in due diligence that will strengthen our technology and substantially subscription based revenue platform.
We intend to do both acquisitions had a cash flows and not utilized our credit facility.
Our daily cash position continues to average over $60 million and we intend to continue paying.
On our debt.
Between July and October we have paid $27.8 million in debt reduction.
Our current cash and debt position is significant because the third quarter is usually our lowest cash position for the year due to increased revenue and higher labor utilization.
We also continued to benefit from our proactive.
Cross selling programs.
Our cross selling is program within their inner offices, and our cross selling activity resulted in 7.7 million a cross sells for the third quarter.
As we have stated previously cross selling is very important because we strive to keep the central business in house.
We're also keeping cynics that opportunities for cross selling.
Ranging between our Geo spatial which QSR.
Platform and the core business.
As an example, one of our largest west coast utility clients contracted the Geospace group to perform an aerial scanning of transmission assets.
This work also included 410000 of CAD work that typically does not perform.
Selling by our Geospatial service group.
This was performed by our core business and utility service groups. So we kept this work within Nvfive.
We're also seeing the benefit of our scalable business model.
Please turn to page six.
Our adjusted EBITDA for the third quarter increased to $29.9 million from $17.6 million in the third quarter of 2019.
And adjusted earnings per share for the third quarter was one dollar and 13 cents per share exceeding the average consensus of 70 cents per share.
The majority of Nvfive services are considered essential and we have been able to scale our business to operate efficiently in this type of economic cycle.
Our infrastructure utility services and in international markets have seen growth.
We continue to see softening in our hospitality market to the COVID-19 consideration.
Our.
Our MDP or Mega panicle, electrical plumbing and technology services have been impacted EPS commercial development, so as not experience growth.
However, the residential sector is strong which has been a positive or municipal budgets.
Our transaction real estate portfolio business, which has been negative.
Typically affected by co bid has begun to see improvement in the third quarter and we look for positive results for the remainder of 2020.
We are pursuing a number of growth opportunities in the technology sector, including data Center program management Geospatial service and subscription based energy efficiency.
We have also been.
And very proactive in our acquisition pursuits, we continue to look for opportunities that strengthen our operating platforms.
We also see opportunities and diminish some private provider market, including a recent award by major Northern California Municipality for building Department services.
Our utility service business continues to provide needed.
It support services to strengthen the aging utility distribution grid and we have seen growth in our LNG business with a large project awards.
Through our proactive efforts to expand diversity and employee opportunities. We have also seen an increase in hiring as.
As well as a significant drop in employee attrition.
I will now hand, the presentation over to our CFO and Codispoti to provide an overview of our Q3 results.
Thank you Dick and good afternoon, everyone.
If you would please turn to slide eight I'd like to start off with a review of our PNM results.
As you can see we had strong results this quarter as our gross revenues increased 30.
30% to $169.9 million.
Once again, our business model has shown its resiliency in light of the pandemic.
I'll note that this quarter had an extra week compared to last year due to the way our fiscal calendar works.
Our adjusted EBITDA also showed substantial growth.
As it increased 70% from last year to $29.9 million.
And our adjusted EBITDA margin continues to show the benefits of our scale as it increased to 18% of gross revenue for the quarter.
410 basis point improvement over the prior year quarter.
Both our adjusted EPS was also very strong this quarter in light of a pandemic as we came in at a dollar and 13 cents per share.
A 40% increase over the same quarter last year.
In addition to our robust PML performance, our balance sheet and cash flows also demonstrated.
The strength of our business.
If you would please turn to slide nine you'll see that we ended the quarter with $64 million in cash and net receivables of $206.2 million.
Our cash flows were particularly strong as we generated $21.7 million of cash.
Those from operations during the third quarter of 2020.
This is an increase of more than four times. The cash flows from operations, we generated during the same quarter last year.
And so far during the first nine months of this year, we have generated $72.4 million in cash from opera.
Situations.
This fits well with our model as we are very much focused on reducing our debt overtime.
Accordingly, this quarter, we paid down $18.9 million under our credit facility and last month, we reduced our credit facility by another $8.9 million bring.
During the cumulative credit facility reduction to $27.8 million from July onest through today.
As you can see our PML results were strong as where our cash flows and balance sheet position.
With that I'll turn it over to Alex Hoffman, our president to discuss our operations in more detail.
I will now.
Alex.
Thank you Ed and good afternoon, everyone. Please.
Please turn to slide 11 for a review of the core businesses third quarter highlights and a potential challenges and opportunities.
In the third quarter essential services continued to drive our growth with 70% of our revenues coming from power.
Click sector and essential infrastructure.
We are more sheltered from economic cycles than many other businesses.
As a result, our infrastructure tick, which stands for testing inspection and consulting.
Civil program management, and utility services sectors continued to perform well and we have had minimal impacts from the co.
Two endemic.
While we have begun to see a rebound in the real estate transaction market and our international IP and technology business, our domestic hospitality and commercial development business continues to see lower activities.
To counteract this situation, we have proactively implemented reductions and operating cost containment.
Margins and profitability.
Our business in public infrastructure and municipal government continues to be strong.
And we have been monitoring the funding sources for these projects.
In the northeast and North Carolina funding levels have been on the rise and we have not seen any significant project cancellations.
Our.
Margaret Trinity pipeline is strong and we have secured key wins with local municipalities and departments of transportation States of California, Florida, North Carolina, New Jersey, New Mexico, and Utah in the third quarter.
We do have some potential challenges that we are facing in the divested commercial development and also.
Our outstanding markets as these industries are still struggling with the downturns due to the covered pandemic.
However, we have seen an uptick in our international business, our real estate transaction services is another area impacted by cobot, but we have started to see a rebound in the third quarter and proposal volume is increasing.
We have a number of current and future opportunities. So we expect to drive growth in the coming periods, including our testing inspection and consulting or tech business.
Our volume has been increasing and forensics due to the response to natural disasters.
Arctic and geotechnical engineering businesses also continue to perform well.
In the utility services business, our aging grid, along with fire hardening efforts in the West continue to drive our conform reassessment services for electrical distribution.
We have secured several large design and survey contracts in Q3 and the wildfires. This year in California are expected to continue driving utility efforts tomorrow.
And I guess, the electrical grid for the years to come.
In the northeast our infrastructure sector business has picked up with the exception of New York City, which has been slower to open up back to historic levels.
We secured $26 million in Q3 infrastructure contracts in North Carolina, and the DRTV continues to release additional.
Paradigms for projects.
Therefore, we are seeing positive trends in North Carolina, and our operations on the West continue their strong performance.
Our municipal business continues to perform well and we secured large wins with cities and counties in California, New Mexico, Utah, and New Jersey in the third quarter profit.
Residential housing.
So far it's continued to accelerate which provides funding for municipalities and counties through permit and inspection fees.
It also presents an opportunity for our code compliance business, which delivers outsource building department services for municipal governments and directly to private developers.
Finally expansion of our client relationships across.
75 network with the combined capabilities of our core businesses and Geospatial services is an initiative that we continue to drive.
Please turn to slide 12, as I review, our successful cross selling efforts.
Cross selling is rooted with Nvfives corporate culture.
Work performed in house generate.
See higher margins and our ability to provide a wide array of technical services differentiates from the competition.
Now allows us to become embedded with our clients organization building barriers to entry and opportunities to continually expand these relationships.
For 2020, we had an ambitious goal of $26 million in cross sales.
At the end of Q3, we are 28% of our year to date target with almost $25 million and cross sales completed.
The year over year comparison, we are 65% ahead of where we were in Q3 2019.
The program continues to accelerate and we are uncovering new growth opportunities with the integrating.
None of quantum special.
Please turn to page 13.
We are moving into the fourth quarter with a healthy backlog of $572 million.
This is an increase of 9% over second quarter of this year and 23% higher than Q3 2019.
We had several large wins in the third.
Greater that contributed to the growth of the backlog, including a 28 million dollar Geo spatial technology contract to support the Army Corps of Engineers and US Geological Survey this.
This project includes Iot application development and data management asset collection for utilities, and lighter and Copa Bath and metric edit collection and processing.
40, California, we secured a 20 million dollar contract to deliver design and survey services to support higher hardening and reliability for a major utility.
The North Carolina, Diodati awarded Nvfive $26 million in new contracts to provide design surveying and tech services for transportation assets across the state and we secured a large.
Cross selling win with a new Jersey utility to provide metering and regulating station improvements and natural gas services.
The New Jersey utility when is an example of how our coordinated cross selling efforts provide unique value and a competitive advantage when approaching clients.
At this point I will turn the call over.
Over to Mark of our President of Nvfive Geo spatial solutions are.
Thanks, Alex on.
On the gestational technology side, we posted our 16th straight quarter of year over year EBITDA growth during quarter three despite the data acquisition challenges caused by West coast wildfires in late September we again.
<unk> grew topline because of the scale and diversity of our portfolio, notably during Q3, we completed the data acquisition phase of the largest pullback metric light our program in us history.
In terms of bookings Q3 was a strong quarter as expected as recurring program awards were announced before the end.
Did the federal fiscal year and several utility contract renewals occurred.
But it was our continued success in expanding our client base and our ability to offer new solutions to the market that we saw encouraging.
New Geo spatial solutions and new client awards together represented 16% of Q3 bookings.
Further we continue to gain traction in Canada, which is the second largest consumer of light our base Geo spatial solutions and our performance on defense and intelligence program has earned US a stable and growing share of work in that space.
On the integration front, the pipeline of cross selling opportunity than wins continues.
To grow in addition, we are able to further differentiate our solutions by adding use the low altitude remote sensing capabilities to existing ground based and high altitude modalities.
In the data processing and enrichment phase teams are beginning to collaborate using proprietary machine learning.
In that are yielding quality and efficiency gains.
Looking ahead, we continue to be excited about the long term trajectory of the Geo spatial technology market and.
A responsible way we acknowledge and are planning for potential challenges that may come our way in relation to the pandemic and its secondary effects on the EPS.
Connie.
It will be more important than ever to emphasize our qualification based differentiation and embedded relationships.
A third dynamic which could impact the utilities market slightly more is the challenge of developing new clients and demonstrating new solutions in a virtual sales environment.
In a market as underpenetrated as utilities outsized growth is driven in part by demonstrating new ways of solving existing and emerging problems through Geospace technology.
Our challenge is to flatten the adoption curve for new clients in non traditional ways until things return to normal.
Now as I said.
We continue to be bullish on the macros that are driving future opportunities and I'll focus on five of them that I highlighted last quarter.
We're seeing infrastructure regulatory compliance and risk management concerns coupled with an aging infrastructure in the US will continue to drive demand for survey that is used in the planning design.
Zine and construction phases of major infrastructure projects as well as asset inspection, both of which rely on the quality and efficiency of remote sensing Geo spatial solutions.
Likewise, we see strong demand for infrastructure related services that facilitate the nationwide fiveg rollout.
In the environmental stay.
Face climate change adaptation, including coastal resilient blood analysis, environmental habitat and wildfire mitigation to name a few rely heavily on spatial and condition based risk analysis made possible by Geo spatial analytics further.
Further demand continues to grow across government agencies scientists.
Perfect organizations and private industry for predictive analytics and monitoring of precious natural resources like water and forestry.
National Defense solutions represent a growth opportunity as we build upon our existing position supporting military facilities and certain classified Geo spatial program.
Our qualifications position us well to continue growing share of wallet with these capabilities and expand the value proposition to include JCI EPS integration and application development.
As the largely us based solutions provider, we see international markets as an attractive growth opportunity.
As to home.
We have gained traction recently in the Canadian market as I've mentioned earlier, and we anticipate entry points into Europe, and the rest of the world to continue coming from a combination of Nvfives International network and potentially M&A.
And speaking of Nvfive network as previously stated cross selling results and.
Future pipeline look promising we have a real opportunity to accelerate the expansion of our geo spatial client base through the quarter Nvfive teams entrenched relationships.
And with that I'd like to turn it back over to Dickerson Wright Dickerson.
Thank you Mark.
Let's go to slide 16.
Team and I would like to introduce an update our growth objectives, which include higher margins driven by scalability organic growth and mergers and acquisition opportunities.
It is our goal to reach $1 billion in combined revenues by the end of Twentytwenty four.
This completes our prepared remarks.
And now we'd like to open the call for your questions.
Thank you ask a question you all need to press Star and then one on your telephone to withdraw your question press the pound or has key please standby with some high acuity roster.
Your first question comes from the line of Chris for.
From C.J.S. Securities. Your line is open.
Hey, good afternoon, guys great quarter.
Hi, Chris Yes, hi.
Maybe we could just start where where we finished on the on the Geo spatial those the potential challenges. So I was just wondering if maybe you could.
Could the three buckets that you have there could you could you kind of rank those in order of most potential importance and just trying to get a sense, which of these you might feel you know kind of near term in which you know might be a while still before you have to have a true sense as to whether for whether that challenge.
I'm just going to crop up.
Yes, I think Chris the very key word for you to look as potential.
We don't really this is up.
This was really presented more like we would do under risk factors that we would be submitting in our 10-K or art or 10-Q's, there isn't so.
Frank of importance.
I don't see I see the opportunities the federal there were delays in the federal budget that seems to be that seems to be solved.
The state and municipal governments now tend to be having more money because of the increase in residential housing.
So therefore, the constant need there'll be a need and then I think with the utilities up we continue to introduce quantum spatial our geospatial.
Cross selling we continue to introduce those utility clients to them. So that challenges are really more like potential.
And I would say in ranking what could drop off and work at something drop off but I really don't.
Utilities, the federal government seem to be very steady state and municipalities seem to be better than we had anticipated and we just really cannot.
Foresee what could happen.
With the co bid.
And the increase in Coke profit that may affect.
Affect any of the client base, but I don't know if they are really challenges it's more as they are opportunities.
Got it that's helpful.
Yes, just obviously generated some some.
Some some cost savings in 2020, just trying to get a sense as to you know which of those would potentially carrying into 2021 I know that.
Utilization has has been higher and travel spend less in the near term just trying to get a feel if if there's much that that's likely.
<unk> kind of post pandemic.
Well, Chris the <unk> know the key the key to our business is scalability. So their services and support services that we always will give to each of the operations and those support services, our finance human resources risk management.
With our legal group, our marketing group and our IP they tend to be they.
They tend to go down as as revenue goes up because of in percentage in a percentage wise. So we really manage that so I think you're going to see you're starting to see the real benefits of.
Some of what we are doing by the scalability and as far as.
We increased from 100 million to now close to $700 million.
You and as we do acquisitions and as we grow organically, we don't tend to scale up the support services much. So there will always be we're anticipating.
An increase in profitability through scalability as far as reduction in costs.
You know I think we are watching our travel very closely and we're beginning to see that may be some trips just smart necessary and maybe they can be handled by zone as much of the market is seeing and understanding that so I'm I'm not.
And not really anticipating we are receiving our budgets now from from operations and I am not really anticipating any.
I'm visiting a significant improvement, but it should be more on the scalability factor in our in our support services.
Gotcha Thats helpful ill jump back in line I appreciate it.
Okay.
Yes.
Your next question comes from the line of profit Brown from Lake Street Capital. Your line is open.
Good afternoon, I shut in the quarter as well hi, Rob.
Thank you.
Turning to the real estate segment, you talked to kinda positively about the up.
Hi, there just.
Because some color and what's driving that and what you're seeing and.
And maybe how you see that playing out into next year.
Well I think what we've seen all from what I've seen and maybe.
Alex our Mark May have a comment on this also but.
We have seen a tremendous uptick.
Pick in residential housing and purchasing it for ourselves for housing and you are in the midst of penalties depend very much on the building permit process for their fees. So as long as there is a robust housing market residential housing market. There's more building permit fees and then theres more fees, thus to the municipality to.
Anish their operation also including in that and May be more down. The road is the increase in population and therefore the increase in sales tax at the minutes probably depend very much on for four revenues. So the uptick that we're seeing is coming from the increase in residential housing and that has really.
Matt.
Positive impact in the municipalities that we did not per se.
Okay. Okay. Good and then on your on your.
Billion dollar revenue goal by the end of 24, what's the what's your thinking on organic growth rate.
Ali.
As to get there and I guess, the implied acquired amount in that in that number.
Yes, we are looking up no. This comes from ground up so just a quick a little bit of history on this Rob we challenge our people to do things and many years ago. We a smaller group of managers, we said where would you think.
It could be in 2016, and the management group came up with 300 million. So we said well if you feel that strongly about it lets tell the world, we're going to do it and that really came from.
And it didn't change too much about that we were growing quite a bit by acquisitions and 40% was organic growth and 60% was acquisitions and the next.
Thanks ladder of course is our famous 620 that came from one of our annual meetings and our management came up to that and they thought it was going to be 50, 50 organic growth and through acquisitions and what we're seeing right now though in that 1 billion by 2004, we think 55% of that will just become from a compounded annual growth.
Growth organic.
Organically.
55% in about 45% will come through acquisitions.
Okay. Thanks for thanks for the background, there I'll turn it over.
Your next question comes from the line of Michael Finder from Bank of America. Your line is open.
Hey, everyone. Thanks for I'm liking.
Hi, Michael bolt.
Hope everybody safe and well.
Im just curious I mean, the backlog did pick up.
I'm curious if you saw any type of delays with with all this election uncertainty and in October November.
Do you feel with where the backlog is do you need to build continue to build backlog to feel comfortable with the second half of 2021 and into 2022 or does it feel like some of those delays. The you talked about last quarter has really kind of flush itself out and we are on a better run a better trajectory right now.
Well things certainly seem to be better for us we had originally budgeted a significant right.
Reduction in our revenue but that.
That has hadn't transpired, but.
One thing it's a good what we've always used as a a rule of thumb or source or preference we worry.
Thank you are we are concerned if our backlog drops too much below 65% of anticipated revenue, so I'm, saying 572 million and that would probably give us a solid backlog entering into the fourth quarter and into the new year and you were very very conservative in that backlog as we use it for budget for.
Purposes, and we only recognized in backlog actual revenue that we're going to build on a rolling 12 month period as far as some delays maybe actually let Alex maybe you can comment on.
I will comment on if theres any large projects that we had seen pushback because of.
Various things and of course, we're all waiting for this.
Relief package that an infrastructure bill, but Alex.
Alex and then maybe Mark can comment from what he sees in the Geo spatial area. So it's it's common in our during the course of our business that we're going to have some delays and edge.
Loosened over the course of many of our reports there has been delays that we've seen in north.
There are lining up in North Carolina funding is coming back doors and initial concern about Florida, but thats also been.
In terms of those projects are now finding all the projects the only area that we're currently saying on the municipal side is New York City, there are not returning to the level of.
Business if they.
Historically have been.
But in terms of our duty contracts in our Michigan municipality contracts, we are not seeing any projects that are being pulled or significantly delayed.
Okay, and Mark and I wouldn't want to comment go ahead.
Absolutely and I would just say on the Geo spatial side.
Parting with backlog backlog heading into the fourth quarter of this year is actually ahead of pace from where we were 12 months ago. So very positive sign there on I think we've seen over the course of the year maybe earlier.
Sure on some delays and to the extent there was discretion in the timing of when awards were granted we saw about pushing a little bit earlier in the year than we had.
More recently and it's been fairly fairly isolated to the extent tiny has played a factor in our case it really.
Came down to in some cases logistics and not having some of the administrative folks either at the state or local or even the federal level around two to issue contracts and signed contracts, but thats beginning to resolve itself.
Okay Thats great. Thanks team.
Just I was hoping maybe you could flesh out a little bit more on the on the two acquisitions, you're trying to close you said, it's more technology subscription oriented.
Does it kind of overlap with with QSR tied to it.
I don't require a higher multiple for that type of business and just big picture I mean.
You guys are going to get your leverage down to three times.
Which is which is great I saw another public engineering firm actually raise money in the public market. They tap the equity market with where the stock was basically have extra funds to just go out on the offense.
Additive in 2021 take advantage of potential deals that could arise in this uncertainty I'm. Just curious you guys have used that playbook before youre getting comfortable with where your leverage going back to three times, maybe kind of talk about that these two acquisitions, what theyre about maybe what you kind of see that M&A landscape in 2021.
Since everyone.
Okay Mike.
Michael I was council of course, we can't speak too much of a.
Acquisitions normally we don't even announce something until we close.
Close a deal but were in due diligence on these two and I can't speak I don't want to say too much we've signed nondisclosure agreements and I can't.
Not speak to their name I can basically say that the two we're looking for are one is in subscription based revenue internationally for our energy efficiency practice and the other one really deals with data centers and work for some of the things that are are doing.
Tremendous increase in data center needs and work. So those are the two that I'm speaking of and we have not seen.
We have not seen an erosion in and valuation nor have we seen a tick up in valuation and you know.
My hats off to anyone who wants to.
Acquisitions are never easy.
If you don't have integration if you don't have a share a culture and you don't share. Some common themes that you could really add value. We just simply passing on the acquisition. So we don't want to roll up things for financial reasons. So you ask we are specifically looking for things that will.
Will separate us from our competition and will enhance our profitability in certain platform. So technology seems to be one that works very very well and is profitable and.
So were not we don't do turnaround situations and so we're not looking for firms that may have gotten in financial trouble.
Because of.
Of of the downturn now we're looking at from side and I'm going to say some of that in my concluding comments the ability to adapt to the to the environment. So.
We have not seen a we have not seen a.
The opportunities people are calling us all the time many of those opportunity we just.
Uninterested in and what we have not seen a real elevation in the pricing.
Either in being lower or higher and we're just being very selective to an acquisitions now back and really strengthened our verticals that we have.
Thank you Michael.
Okay. Thank you and just.
I just want to squeeze one in on the projects you guys are bidding on it and it seems like there.
There is some healthy activity out there are you seeing more pressure dickerson for those specific projects more competition is anything on pricing or is it still consistent with.
What you guys were seeing.
[music] quarters ago. Thank you.
Okay. Thank you, okay, Michael well, you're probably referring to the you know we don't bid if you will on on projects.
We on the larger projects, which tend to be publicly funded we really don't go after these projects.
Unless we have a 70% assurance that we're going to get it and so our first questions. We ask when a large are few comes to us we and we say to our people. What is your relationship we've had with these people how do you know this and if you're waiting for an RFP to come out you'd normally will not not get it. So we try to look for relationships that.
We've had long going the relationships and and things where we can be of assistance. So in that regard.
The ones that are really subject to the pricing. We normally don't we is not normally the ones that we go after and on those public projects. Many of our engineers are doing the work.
Work in putting that together and putting things together. So we're very selective because we want those people to keep the level. So we're we're careful on the projects on the very large projects. We go after and then on certain verticals. There are some projects that are more price sensitive, but the bigger ones that you were referring to and I think you and I add thats conversation.
Before we're pretty selective on the bigger ones and we pretty well want to know that we have a pretty good chance of winning the work.
Thank you.
Your next question comes from the line of Jeff Martin from Roth Capital Partners. Your line is open.
Hey, good afternoon, guys hope you're doing well.
Hi, Jeff for.
For your doing well safe. Thank you yeah Caroline.
Thanks.
Mark touched on this a little bit with respective Qs I in terms of the selling environment.
And that you know you can only do so much virtually well just curious about you know the other parts of the business and how.
Those efforts are progressing as we get further along here.
I know that in the past you've talked about not that difficult to get new business off of a master services agreement, but going after.
New Master service agreements or core new clients.
It's tougher in this environment just wondering if.
Are you seeing any change there.
Well no I think it is more difficult I think nothing beats.
Meeting our clients face to face in person and you can zoom in virtual and do many different things, but essentially you really have to have that relationship and I think for me.
The relationship is a is one on one we're doing very very well.
And as long as the playing field is level I mean, if we were retracting from visiting and seeing clients and our competition are up at the whole world was out visiting clients will then we wouldn't be doing well, but everyone now seems to be under the same set of circumstances.
As we all are doing things the best we can virtually however, I think eventually when when things do change we have to be much more active in marketing and I am constantly and Alex and Mark will tell you that I always am concerned about the sales efforts.
And what our people are doing and what our people are doing in a virtual world now that we're in so.
To answer your question, Jeff I think.
Actually nothing ever before being with the client face to face working with the client rolling your sleeves up assisting that client.
But for now.
Hello, everyone is in the same has the same restrictions and that is.
We have to do things virtually.
All right. That's helpful. Thanks, and then with respect to the backlog composition is there much change.
Change in the composition of it today versus say six months ago.
Go and are there specific areas, where you are noticing common themes were certain parts of the business are really heating up.
Well our card business.
Backlog is growing and.
The Geo spatial group has begun to grow their backlog again, but maybe.
Now, Alex or or Mark would answer that question more directly on where they see where we see increases in the backlog and where it's coming from Jeff. So what are the areas that we've seen an increase in backlog is in the utility market our utility services engineering, serving as its definitely seen an uptick.
Both with respect to the transmission as well as the fire hardening.
As Dick mentioned previously one of the things that's happened with.
This whole virtual meeting and an ability to sale. So is the fact that everybody is doing the same thing. So we are seeing.
An inquiry.
Actually gain in our in our MSC with various municipalities.
Right.
Virtually interviewing for projects is something that we've all become accustomed to.
So it is pretty much across the board, we're seeing a slight change in terms of for example in South Florida, it's not so much the high.
Three hours work, it's now becoming more industrial commercial mid rise. So we see changes within various geographic areas, but all in all it is it's pretty much spread over all of our verticals that were seeing an uptick.
In backlog.
And Mark maybe a market bottom, maybe you would like to come.
Permit from the Geo spatial of where you see a change in the.
And the sales are the and working in a virtual environment.
Well sure and again from a backlog composition standpoint.
There is some cyclicality quarter to quarter, just based on the timing of when contracts tend to renew.
In our space and where we are at the end of Q3 is very representative.
Of our typical book of business, we've got about a 25, 75% split in our backlog between the private and public or quasi public sector. So very again representative.
I.
I think that Dickerson said, it well that there is a level playing field in terms of our ability to reach existing and new clients.
And our ability to to sell our existing solutions and even some new solutions I think we are adapting I am very very encouraged.
How about the fact that no.
Year to date over $23 million worth of our bookings came from.
Sales to new clients or to existing clients, but with new solutions I do find that overtime weve been able to to adapt to the virtual world and as things start.
To get back to normal I see that pace accelerating.
Great Thats very helpful. Thanks, and last question understanding you're not providing guidance at this time I was just curious.
One if you could talk qualitatively about direction.
Into next year.
Sure in terms of.
Scale in the business.
Maybe on a combined acquisition and organic growth basis, and two do you plan to reinstate guidance at some point in the future. Thank you.
Well, let's say you're the last.
A question for.
Here in the future, we probably will begin guidance.
It's just it's there's so much so many unknowns right now at your EPS I mean now we're supposed the pandemic is going to be increasing and so we just don't know the effect that thats going to have on our.
Our hospitality sector of the business and our.
First a gaming sectors that we work in and and the travel sector. So it's very difficult for us to give guidance and that however, having said that we're receiving our budgets, Alex Alex and market been working very hard in the budgets along with that and I'm encouraged I think.
We're going to have a good year I think we're going be solid, but I'd just reluctant to give guidance. When there is so much unknowns out there right now with who knows where this pandemic is going who knows when there is going to be the vaccine and.
There's so many things that we just don't have control of that it's very difficult for us to say.
Hey, what's going to happen other than I can tell you. This.
August strong. This this seems to be good and so we are cautiously optimistic for next year, but I would certainly like to get this pandemic and this situation unusual situation behind us before we start giving guidance again.
Understood. Thanks for your time and complements on a nice quarter.
Thanks, Jeff.
Your next question comes from the line of Lisa Springer from singular research. Your line is open.
Congratulations on a really nice quarter.
Thank you.
My question I wanted to ask.
Oh, the scope of the opportunity associated with five key rollout for the geospatial business.
Has that been affected by coal business has slowed the fiveg rollouts and over what timeframe do you expect to do the lion share of the business in the past you rollout area.
Mark maybe a few she meant lesa mentioned geo spatial so maybe you had.
But I know what you're seeing in and then maybe Alex can.
Maybe you want to comment also on that.
Sure I'll make a brief comment telco and specifically our participation in the Fiveg rollout, we really view that as an adjacent space for us a growth opportunity.
We're not very penetrated there today, although the research that we've done to date seems to suggest that that the rollout has not been significantly impacted but we're not industry experts.
Nevertheless, we still see that as a long term play for the company one.
One, where we anticipate making a pretty heavy deposit on in 2021.
And I don't think were any missing.
Thing any great impact in the core business either.
Okay. Okay. Thank you.
Your next question comes from the line of Mark.
From.
Set off your line is open.
Good evening, everyone I'm very encouraged sunquest and signal, you're assuming I know you're good.
[laughter].
Okay go ahead, Martin Im sorry go ahead.
I appreciate that thank you so I'm good good for corporate branding there.
One of the things.
So I did want to touch on just you've covered so much in the polymer greatly appreciate all the detail and color. That's already been given I was wondering could specifically focused on the the cross selling.
Targets and the.
<unk> expenses that you've seen so far and then maybe how we should think about it going forward certain.
Certainly well ahead.
The target for the year to date, you're you're nearly already reached your full year target with a full quarter to go I was wondering is is how should we think about that maybe going forward is it reasonable to think that that that half a million per week target could we.
Would be reasonable to project into.
Into next year given the.
The benefits that you're already seeing in some of the the successes, particularly well in the quantum side some of the what that composition might look like relative to maybe when that original goal was set.
Okay. Good good questions.
And so mark let's let's approach this.
Courting of the actual revenue for us.
For our cross selling so when you see the target of $26 million for the year, it's really for the total amount of that contract. So the only piece that you would see in and watch it would be eight that you have.
That which is.
In a rolling 12 month period of time. So we want we don't we want them to record all of the backlog potential and that's what you see in that 500 a week.
Target or the $26 million.
Dollar target.
As far as how we measure that project progress.
Many people have heard me say this before but when we first.
Public about almost a third of our business with the sub consultants and now it's probably not going to get too much below 20%.
We are not.
Not not really restricted and so therefore, we'll have a more of a higher mark.
Gulf, but.
The reason it won't get below too much below 20% is there is a there is a.
Minority requirement, whether be NVE W.B.D. that many of these public contracts require the use of these of the minority.
And they also limit the amount that you can you can mark up that that that amount. So.
We're not going to see too much below the.
20%, but it will normally increase.
The cross selling will increase as our total revenue increases because.
Because we are really encouraging is much of this work as they possibly can can do in house and I know that we've recently set targets and goals for next year for.
For our Geospatial group, which will add to that so as the company grows you're going to see the cross selling target grow but.
As a percentage of the total revenue of the company it probably will not.
It will not.
B.
We will still probably be at least 20% of our revenue.
Going to sub consultant, so were not going to get too much better than we are right now.
But we're very it's been very very.
A positive for us and where you see the benefits Mark is.
Our profitability has increased and Scott Gabon, who leads the cross selling program has a nice slide that actually shows the profitability of work that's kept in house as opposed to work Thats.
I mean, given the Subconsultants. So you are constantly seeing our profitability improved and a piece of that of course is through the cross selling effort.
It's very encouraging thank you.
Okay.
Okay, and if you would like to ask a question. Please press the Star then one on your telephone.
Your next question comes from the line of Tate Sullivan from Maxim Group. Your line is open.
Hi, Thank you all thanks for all the detail on ticker soon if I may just following up what is do you currently do subscription based energy efficiency projects or was that more of a call out for opportunities going forward and what is that business.
Yes, we do do it it is we actually have sensors and we have equipment that is installed that we have and it's through software and into other things that are with many from one of our biggest clients is in Macau and Nancy MGM, where we manage every every one of their mechanical electrical.
Trickle components and we see it on a screen in our office in Hong Kong. So it's and it's the same amount every single month. So what we say subscription based revenue it's not it's.
It's not revenue that's it's recurring revenue. It's the same amount every month and so thats why we call we look at revenue and that's.
Also subscription based and it's mostly right now in our energy efficiency area, which we are we are expanding.
But it's a constant revenue when we like it because it's it's always re occurring.
Thank you and I think you mentioned growth in LNG with a.
Was that a large project this quarter was that going back to CH High engineering restarting a previous project can you can you give more context on the LNG comment I don't we havent had clearance from the client and name the name the project yet, but with the award was for this quarter in Q3.
Okay, Great Alright, Thank you have a good rest with.
Okay. Thank you.
At this time this concludes our question and answer session.
I would now like to turn the call over to Mr. Wright for closing remarks.
Okay, well. Thank you everyone and thank you for that for the time and your interest in Nvfive.
Alone.
We are very proud of the work that our we have done as a company and our people and I think one of the key things in in life and it applies to our business that applies our circumstance, we never know whats going to come about we don't know when could anticipate that we're going to have this pandemic, but the key.
The thing is where you able or where are we all able to adapt to adapt to this to the circumstances. So.
I want to thank our clients I want to thank our people for the service and how they've adapted to this environment. It's we're doing things virtually.
Our engineers are month, namely working from their homes and everyone has had to make it.
Adapting their personal life, where they have children or whether they have.
People at home to they've all had to adapt and doing this work. So what can we do as a company to help them in that adapting we with.
The scope and we have spent over $104000 to date on personal protective equipment for our people for our offices in any of them that you will see although our offices or not.
Occupied very smart and sparingly you will see signs and we have we have everything that we're trying to do to two.
Keep our people safe and I want to once again thank.
Ralph Silver for the work is done in that regard. So the very first thing is adapting to safety adapted to the business environment we have.
Constantly looked for opportunities.
In this environment for our.
With people to to relate to clients the contact clients and to work in an environment that we're all we're all not used to so what has been the result of that.
You can see in the recorder were reporting our.
Our profit on EBITDA as a percentage of total revenue has gone up EPS.
Percentage of and any type of revenue that we recognize that does not include the sub consultants as always has gone up and and.
And we see the trends improving we see we see now a much of our business, we're starting to learn how to operate in this environment and we think that.
We can only adapt to the situation that that where we are we're seeing the macro trends trends in the market.
We see that.
There is now becoming more recognition to value stocks and truly we are a growth in value company. We've seen that we've been able to grow and weve enabled.
When proof the profitability. So we think it's a very good opportunity for our investors and for all of our people that share in the company. So I want to thank everyone. Once again I want to thank our people I want to thank our our clients and I want to thank.
Everyone for the health is that we've had.
Especially our employees and delivering in our clients and delivering a solid quarter under these circumstances. So thank you once again and we look forward to speaking to you during the course of the rest of the year in quarter four will thank you for your attention.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
Connect.
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