Q1 2021 NV5 Global Inc Earnings Call
Ladies and gentlemen, todays conference is scheduled to begin and five minutes. Please continue the standby. Thank you for your patience.
Once again of todays conference is scheduled to begin and five minutes. Please continue to standby. Thank you for your business.
[music].
Good afternoon, everyone and thank you for participating in today's conference call to discuss NV five financial results for the first quarter of two cell phones Nike one.
Joining us today are of Dickerson Wright, Chairman and C. E. L. F N B five Edward Codispoti C. F O F N B fives, and Richard Tong Executive Vice President and General Counsel F N B side.
I would now like to turn the call over to Richard Tong.
Thank you operator, welcome everyone to NV five first quarter 2021 earnings call.
Before we proceed I would like to 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 our reports on file with the SEC.
During this call GAAP and non-GAAP financial measures will be discussed a reconciliation between the two is available in today's earnings release and on the company's website at Www Dot NV five dot com.
Please note that unless otherwise stated all references to the first quarter 2021 comparisons are being made against the first quarter of 2020.
And this presentation and be <unk> has included certain non-GAAP financial measures as defined and regulation G promulgated under the Securities Exchange Act of 19, and 34 as amended and.
Non-GAAP financial measures included in this presentation are adjusted earnings per share and.
Adjusted EBITDA and adjusted EBITDA margin and <unk> provides non-GAAP financial measures the supplement GAAP measures and they provide additional insight into the NV five financial results.
However, non-GAAP measures have limitations as analytical tools and should not be considered in the isolation and are not and accordance or a substitute for GAAP.
In addition, other companies may define non-GAAP measures differently, which limits the ability of investors the cure non-GAAP measures of NV five and those used by peer companies.
A webcast replay of this call and it's the company presentation are also available via the link provided in today's news release and on the investors section of the company's website.
We will bring the call with comments from Dickerson Wright, Chairman and CEO of NV five for turning the call over to Edward Codispoti Chief Financial Officer.
For a review of the first quarter 2021 results.
Kristen Wright will then provide closing comments before we open the call for your questions Dickerson.
And please go ahead.
Thank you Richard and thank you to everyone joining us for NV box first quarter.
We are pleased to announced the successful first quarter I will start on slide five with the <unk>.
Q1 highlights.
We deliberate $153 million and revenue $24 2 million and adjusted EBITDA and the 88 cents per share of adjusted earnings per share for the quarter.
We also had improved margins over the same period as last year.
We generated record cash flows from the first quarter with $48 2 million of cash flows from operations.
We finished the quarter with $93 million and cash on hand, giving us a lot of dry powder for our M&A program, which continues to be fueled by a healthy pipeline of opportunities.
The first quarter is always our slowest quarter of the year due in large part the winter weather delays.
The more severe the weather the greater the possibility for project delays.
One of the Big stories and the early part of 2021 was the winter weather.
Oh for 170 million Americans were under of winter weather alerts, which was the most and 15 years and this was the nation's coldest February and 30 years.
And the five did experienced some project delays and multiple parts of our business, including impacts of our Geospatial group.
We had delays and the data collection for some significant projects due to the inability to operate and severe weather.
This temporary disruption and the early stage of the data collection and also dissuade the timing of some revenue recognition on the data and analytics space as well.
We also experienced some delays and projects wards and project starts.
And our infrastructure related businesses, which include the infrastructure utility services and testing and inspection and consulting verticals, we delivered four 5% growth over the first quarter of 2020. Despite the impacts of both weather and the pandemic.
Furthermore of the total backlog grew for <unk>, five and we expect to see accelerated growth and the rest of the year and expect the finished the year ahead of the current analyst consensus for revenue and adjusted earnings per share.
And so many of the have you know NV.
NV five is conservative.
We prefer to limit leverage.
Subsequently in March we execute day follow on offering that raised 141 million of net proceeds.
We have applied along with our strong cash flows to pay down debt and to fund further acquisitions.
You can see the results as our net leverage is less and one which is where we were prior to the climate of spatial acquisition at the end of 2019.
We have always reduced leverage through operating cash flows and we retired $145 million and debt and Q1. This low net leverage brings us back to our preferred capital structure and along with our significant cash on the hand allows us to act quickly when the acquisition opportunity presents itself.
And it gives us the strong strategic advantage.
And funding acquisitions.
Our strong capital position allows us to pursue larger acquisitions that may strengthen our platform or provide entry into new high margin service offerings.
And the first quarter, we completed three acquisitions for the first being international design associates are either.
<unk> strengthened our commissioning capability and subscription based energy efficiency offerings, and the middle East and Asia and complements our international group, which has been performing well and 2021.
In February we also acquired tariff Tech engineers, which strengthened our geotechnical engineering capabilities and testing inspection and consulting services, which comp of light our strong infrastructure capabilities and the south east.
In March we acquired Geodynamics, a sonar based full ocean depth of Geospatial solutions company.
That strengthens NV, five geospatial nearshore and shallow water geospatial capabilities.
We expect water use of climate change and sustainability of the B a strong driver of Geospatial services and the addition of geodynamics expands our marine capabilities and provides a competitive advantage when pursuing a wide range of marine based environmental and infrastructure related opportunities.
Let's turn to slide six for an update on our core business. The infrastructure market is not as dependent on economic cycles.
And our business has performed well throughout the COVID-19 pandemic.
And the first quarter, we secured large contracts and New York, North Carolina, and Florida, three of our largest markets and the eastern U S.
And New York City resumed and design services, which had been put on hold for much of 2020 due to the pandemic.
In addition, the North Carolina and Department of Transportation continued to increase funding for projects throughout the state.
And the West we took steps to expand our transportation infrastructure business and southern California.
Led by a key hire in the Los Angeles area of will lead those efforts with Caltrans.
And the Pacific Northwest, we have seen and increase particularly in our geotechnical engineering group and.
And we have continued to maintain strong margins.
Utility service continues to be the fastest growing segment within M. D. Five as the push towards our energy 2021 target of about $250 million run rate by the end of the shear.
Modernization of the electrical grid and natural gas delivery are the main drivers of this business.
With an emphasis on the safe and reliable delivery of power.
In addition, our real estate transaction services are above pre pandemic levels.
Throughout the pandemic, we have heard many questions about the COVID-19 impact on municipal and state budgets.
I guess one of the state budget impacts were not nearly as bad as we once feared.
Gas taxes, which fund much of the transportation infrastructure benefited from additional vehicle use of people avoided air travel.
The boom and residential housing provided permit feeds for amidst the power of these along with increase in sales taxes, which have definitely kind of it.
And the municipalities.
In addition, the 2020 One American Rescue Plan Act signed in March for by Day, 350 billion and relief funding to state local tribal and territorial governments.
We are optimistic that state and local governments will have adequate funding to move forward with their infrastructure plans.
Please turn to slide seven for an update on the geospatial business.
And you know, we collect geospatial data by drones fixed wing aircraft helicopters brokers and vessels using sophisticated remote sensing technology, including Lidar sonar and various types of advanced imagery.
As I touched on earlier weather conditions can sometimes play a factor and the collection of remote sensing data.
And due to the severe weather and the first quarter of 2021, the experience data collection delays.
In addition to weather delays of our largest market for geospatial services as the federal government.
The transition to the new Federal administration did cause some delays and project awards, which contribute the delays, we experienced and project starts and the first quarter.
However, we believe that we are poised well for an increase for the balance of the year.
As we began to see some momentum in March with increases in volume and sales activities along with a strong pipeline of the verbal awards, which are waiting signed the contracts.
We also secured key wins and April including our support for our $48 million five year contract with the Bureau of land and management.
We believe that there is potential for margin improvement and the geospatial business and we continue to seek opportunities to strengthen our position in the sector and consolidate the is highly fragmented geospatial market.
Finally, we launched insight our cloud base Geospatial data management software platform and the first quarter.
The platform strengthens our entrenched client relationships and we.
Expect it to expand our subscription based and geospatial data and analytics model.
It is the new service offerings and the interest from the market has been strong.
We have already provided 20 quotes to customers and we expect interest to grow as the demand for cloud based geospatial data management solutions continue to expand.
Let's turn to slide eight for an overview of geodynamics of the latest addition to the geospatial and the five service vertical.
We expect water to be a driver of growth and the geospatial space from water conservation and blood planed mapping and sea level rise and the shoreline resilience the applications for geospatial services to support water are vast.
For sure align and C level of projects and.
<unk> Geospatial previously had the capabilities to provide remote sensing analytics solutions for shoreline and shallow water geospatial solutions.
But we lack of deepwater sonar based capabilities.
Gil dynamics provides that deepwater sonar based capability to provide a full ocean depth range geospatial solutions.
And it positions us to pursue expansion opportunities with key federal state and local clients.
As well as offshore wind power.
We're geodynamics has built a strong resume.
We're excited about this new addition to our geospatial capabilities and we will continue to pursue other opportunities to expand our geospatial business.
Please turn to slide nine for a look at our record backlog for quarter one.
Our backlog is higher than it was a year ago before the pandemic and we believe that it shows that clients are feeling more comfortable with moving forward on their infrastructure investments.
And the first quarter, we secured significant wins of the geospatial utility services infrastructure and buildings and program management protocols.
We are conservative and with how we calculate backlog looking at a 12 month rolling backlog.
And in other words work that we plan to do and the consecutive 12 month period.
We're also pleased with our 586 million backlog number and are confident that we are well positioned for a strong year.
On slide 10, I will give an update on our cross selling program and some recent key wins.
Cross selling and stay focused for NV five and it allows us to bring work in house and would otherwise have been sub contracting.
On average work performed in house, it's much more profitable and this year, we have increased our cross selling goals of $600000 per week for $31 $2 million for the year.
It is an ambitious goal and in the first quarter, we are on target.
Cross selling is part of the culture at <unk> five.
And we are confident that we can meet the challenge.
On the right side of the slide we have highlighted some of the notable contract wins for quarter one.
Excluding the $10 million contract with New York City Department of design and construction to provide engineering and inspection services.
This is our second time and succession and winning this contract and we.
We're pleased and continue growing our relationship with the city.
And the geospatial business, we secured a $48 million contract with the Bureau of land and management.
Which will support the bureaus land management and conservation mission.
And our utility services group, we secured a $23 million contract and modernized the vaporization equipment out of utility LNG facility.
Our LNG business has been performing very well and securing great projects throughout the country.
Finally, and South Florida are testing inspection and consulting and program management group secured key projects supporting high rises and online retail distribution facilities.
We expanded our program management services into Florida last year, and we have been pleased with the success that they have in such a short amount of time.
Now I'll turn to slide 11.
We received many questions about proposed infrastructure packages and.
And I wanted to take a moment to discuss how and infrastructure bill might impact and be pipes business.
Before we look at any of the proposed investments of the infrastructure Bill.
I would like to point out that infrastructure is essential and it's not.
The optional.
So even if no infrastructure bill is passed spending on infrastructure will continue.
And B, five and build without a major infrastructure bill.
And we continue to grow and the infrastructure services.
We are optimistic that a bill will be passed and we expect it to benefit NV five.
And the currently proposed bill approximate 1.2 trillion and of the $2 three trillion.
And the infrastructure proposal would impact segments that and B five serves.
Transportation infrastructure would receive 449 billion for projects that could be served by all of NV five verticals.
200 billion is being proposed for utilities, and broadband, which our utility services and geospatial business.
For it.
128 billion is being proposed for water and infrastructure, which could be supported by our geospatial infrastructure environmental and are testing and inspection and certification vertical.
Finally, 393 billion is being proposed for buildings and facilities, including public buildings and sustainable retrofit of our presidential and commercial properties.
Our MEP commissioning technology design and energy efficiency and building program management. This is this could support projects funded by this investment.
I cannot provide estimates on what the specific impact would be on that would be fine because we don't know when the ABL will be passed or what would be included and the final bill.
We'll keep an eye on the progress of the proposed Bill and make sure. We are well positioned to act quickly should a final bill the signed into law.
I will now hand, the presentation over to our CFO, Ed Codispoti to provide an overview of our Q1 financial and full year 2021 performance.
Thank you <expletive> and good afternoon, everyone.
Please turn to slide 13, I'll review our results for the first quarter of 2021.
Before we review the results for the quarter I believe it's important to point out that we are comparing our results against the first quarter of last year, which was only partially affected by the pandemic versus the first quarter of this year, which was a full quarter under the COVID-19 pandemic.
In light of this our gross revenues decreased by 7% when compared to last year driven in large part of the geospatial segment, which decreased $11 $7 million when compared to last year.
This decrease and geospatial revenue was driven by contract award and project start delays as well as delays due to weather.
The decrease and geospatial was largely offset by strong performance and our infrastructure related businesses.
And while our business technology services continued to be affected by restrictions due to the pandemic.
We are pleased that we maintained our adjusted EBITDA of $24 $2 million, while also expanding our adjusted EBITDA margin to 21 three.
And 3% versus 19, 9% last year as a percentage of gross revenues generated by employees.
Furthermore, adjusted EPS increased to 88.
From 84 and prior year.
We can attribute much of the improvement and adjusted EPS for the increase and our adjusted EBITDA margin driven by our scale and operating efficiencies.
Some of these efficiencies of the result of our response to the COVID-19 pandemic and we expect the continued to benefit from these efficiencies as we move forward and the post pandemic environment.
We also saw a reduction and our interest expense as a result of our paydown of debt throughout 2020, and Q1 of this year and a reduction and our effective income tax rate from $25. One for 24 three per cent.
The increase and adjusted EPS occurred despite an increase and diluted shares outstanding.
Also worth highlighting is that we had a record quarter in terms of cash flows from operations as we generated $48 1 million compared to $13 $6 million and the first quarter of last year.
$36 million of this was the result of collections of billed receivables, which is a testament to our focus on working capital and the quality of our balance sheet. If you would please turn to slide 14 will discuss how we've strengthened our balance sheet and order to enhance our ability to execute our growth strategy.
On March 15th of this year, we completed the secondary offering that raised net proceeds of $141 million.
As I mentioned earlier, we also generated cash flow from operations of $48 million.
As a result, we were able to pay down a significant amount of our debt this quarter as we paid down $145 million and debt.
As of the end of the quarter, we had $93 million and cash and our net leverage ratio was <unk> eight which is the 75% reduction when compared to December 19, when it was three two.
We feel confident and the strength of our balance sheet and how it can help fuel and <unk> growth and including our M&A strategy with.
With that said I'll now turn it back the Dickerson Wright for some closing comments.
You add please turn to slide 16, and when you look into the remainder of 2021, we believe that we're poised for growth organically and through our M&A program.
We're in the favorable financial position with a strong balance sheet and market conditions are expected to improve as the economy continues to open.
Our public sector clients are benefiting from additional gas tax residential permitting revenues and stimulus funding from the 20th why the American Rescue Fund Act.
And the infrastructure and utility markets are expected to remain strong we expect our building segment to have and additional opportunities for growth as economic conditions improved from the pandemic.
We are focused on capturing revenue.
That was pushed to future quarters by Q1 weather and contracting delays.
We believe that the federal infrastructure Bill would provide additional tailwind, but we do not need and the infrastructure built to meet our targets for 2021 and beyond.
On the M&A front, we continue to seek opportunities to strengthen our platform and expand the high margin high barrier to entry offerings.
Our strong cash flows from operations.
Significant cash on hand, and low leverage that gives us the ability to act quickly when opportunities arise and complete larger acquisitions, if they fit within our M&A strategy.
Our financial position also provides a strategic advantage when pursuing acquisitions due to our ability to use cash.
We also expect to see margin improvements as we invest and high margin business and realize the benefits of scale and increase the number of services that we can keep in house as opposed to the sub contracting.
For 2021, we are resuming guidance.
The opening of the economy provides additional clarity regarding the impact of the pandemic on our business and gives us confidence to provide guidance for revenue and earnings per share.
We expect gross revenues in 2021 to range between $695 million, and 720 million, which would be a 5% and 9% increase over our $659 million in 2020 gross revenue.
We expect full year adjusted EPS to be of between $4 five per share and $4 45 per share.
Which would be an increase of 8% to 20% over our 2020 full year adjusted EPS of $3 and 72. This.
This completes our prepared remarks and now we'd like to open the call for your questions.
Thank you Sir and at this time, if you would like to ask any questions you won't meet the press star one on the telephone keypad again of that is the star one on your telephone keypad.
For just a moment to compile the Q&A roster.
And your first question comes from the line of Chris Moore from CJS Securities. Your line is open.
Hey, good afternoon, guys. Thanks, and thanks for taking a few questions and maybe we could just start with the.
Net revenue as a percentage of of our gross sales.
Obviously, it looks like sub consultant services. It was only 15, 2% of of revenue. This quarter can you just talk in terms of you know kind of expectations of.
No. The those percentage is moving forward and and the drivers there.
Okay. Chris sure. This is <expletive> I'll start with and answer and then Mike may want to be a little bit more specific but we usually.
Budget of about 17% or above in.
Work that is gross revenue.
The 15% net.
And that you saw on this quarter is a bit unusual and that is probably because most of we had more work and the public sector.
And lesser work and the private sector, but normally I think you can expect about 17% or so.
And sub consulting revenue and it's really driven by.
Requirements that we have to use to use people and.
And use of consultants and that are disadvantaged business our and.
The Rd business enterprise.
Got it and that's helpful.
In terms of the the the.
Guidance, maybe just talk a little bit about expected quarterly cadence.
Yes sure.
Normally our.
Weakest or slowest quarter is the first quarter and then the second lowest is usually in the fourth quarter with the second and third quarters being much more.
Larger and volume and that's the tremendous weather related when clients are re leasing work for us to do and we can we can work. So it's usually the cadences first quarter that we just presented is usually our weakest.
Second and third quarter tends to be stronger and we're starting to see indications of that and the second quarter and then the fourth quarter can usually be it it could be somewhat.
Slower than the second and third quarters.
Got it Okay I was wondering when it and see if there was any catch up.
There was any day any different on on the Q4 side. So.
Got it.
I think this quarter.
Chris This quarter, we were and I'm going to speak a little bit and some other comments later, but this had a much more significant weather related impact and we would normally of attic had experience and are historically and the first quarter.
Got it.
Alright, I'll jump back in line and I really appreciate it.
Thank you.
And your next question comes from the line of Rob Brown from Lake Street Capital. Your line is open.
Hi, Rob.
Excuse me Mr. Brown. Your line is now open.
Hi, Thank you good afternoon, I bet, you dynamics acquisition and just wanted to get a little more color on your thinking there how how that opens up the the.
The geospatial market and and I guess generally how you see that market in terms of the ability to make acquisitions there and the.
Of the footprint there.
Well, great, Rob I'm going to speak generally and an overview and then specifically as we wind dark.
Including comments Mark the bottom of our president of our Geospatial group, who have more specificity on that but I can tell you. This we.
We are so happy with the Nymex because it gives the G of our geospatial capability that we are really strength in and that is and ocean Agra feet deep water measurements, we were able with the geospatial did shoreline and shallower, but this now is.
Deep water measurements and it's a it's a growing business and fact anecdotally I, just I've got and email yesterday, where they were just off the coast of our Hollywood corporate office and they were doing a.
Our client surveys.
And the oceanography and deepwater for deepwater measurements, so what it does and does that enhances that and it gives us the tremendous competitive advantage because we can now do things that not many other geospatial firms have that tape the ability to do and we really like the geodynamics and the market sector, they have and the and.
The revenue is not of cyclical as some of other.
Other commercial activities.
Yeah.
Okay great.
And then maybe you talked a little bit about the of some of the efficiencies you saw during COVID-19.
And I assume that's related to travel, but how do you see that continuing and do you see see those efficiencies that you can could.
Could you keep those gains going forward.
Well, we've learned a lot from it and it was.
Part of the some of the concluding discussion on moving to have us I've really seen our company and we're very very proud of our people and our ability to adapt and it's interesting to note that there is many things you can do that obviously, sometimes you didn't think you could do before so obviously our savings has been and travel related.
Cost of accommodation cost a.
The conference cost.
And as you know Rob we've done this together, but roadshows and now we're doing virtually and we're doing a lot of conferences virtually so we to some extent, we think that we think that as the economy opens we will still have some of that scalability and efficiency and.
There'll be some things of course, nothing beat thing our clients.
The face, but we think that we saved a lot and.
And costs that were not essential.
Because of this and other costs. We've seen is people are working remotely we have seen a tremendous oh.
The.
The contribution from our remote engineers and people work remotely in the utilization rate and also on our facility costs. We've learning now that a lot of our facilities, we may not need all of that space. So our general counsel.
And their group is looking very closely at some leases we have in fact up Alex Hockman President of our company was just in our southern California areas and looking for at least the efficiency and lease space. So we anticipate that facility costs.
As a percentage of revenue will go down we think travel costs as a percentage of revenue will go down and we think some of the the other.
Other accommodation costs et cetera will go down and as a percentage of revenue.
And we I don't think it'll be as draconian as it's been through the pandemic, but we certainly learned by by the efficiencies, we can have and some of those fixed costs.
Okay. Thank you I'll turn it over.
And your next question comes from the line of Jeff Martin from Roth Capital Partners. Your line is open.
And then thanks for taking my questions.
Jack I was wondering if you could elaborate on the insight cloud platform more than geospatial is that part of the driver of your expected margin improvement or is it more broad broad based on that.
I think it's up and as I said Mark of BARDA will be speaking specifically to that.
And in the are concluding comments and but I think we're looking for it more as a revenue generator and a way to go to market and.
To maybe drive more of the top line.
And I, just not experienced enough with it to know what it will do for the bottom line, but as it applies the fixed costs and other costs. The more revenue we have.
<unk> costs will go down as the standard so I think that insight will be more of a top line driver and.
Revenue.
Okay, and then regarding your comment around business technology services being more severely impacted by the pandemic could you elaborate on that I'm not exactly sure what you mean by that and.
The business Technology services, I guess, you of the Bts segment, but.
Yes, it's Jeff.
Jeff It's a fancy name its mechanical electrical commissioning of plumbing things and a lot of bar client base is based in the hospitality industry. So obviously win.
Las Vegas operation was.
Definitely impacted because of the.
Casinos were not growing and expanding during that period of time, it's opening up now and so the that.
And that is this technology service is something that really applies to our hospitality and our entertainment business and we were doing and where we still do working and our subscription based revenue energy efficiency work and Macau, but no. One no one can even go to Macau and shut off even from mainland China.
So a lot of that has impacted some of the work that we were doing and and.
And the mechanical and electrical components of what's going on and the hospitality and hotels et cetera that are just werent, making the improvements and that's really the business that was that had been impacted.
Okay, Great and then I was just curious if you could give us some sort of insight into what you're thinking in terms of Q2 and you know.
And I'd have to necessarily give revenue guidance for that but to help you know the consensus be more accurate for Q2.
Just curious if there's any any color you can provide so that we can get a sense of.
And of how that's going to play out.
Well the color is gonna be pretty gray, Jeff, but the what we can say is that what we can say is that we're starting to see improvement we're getting some clarity on April <unk>, and we will learn more about me, but we're starting to see and improvement in.
In the business and an improvement in and revenue for that.
And we're seeing that really.
<unk> by the opening of the economy and delayed projects and we mentioned the pipeline that are getting to start and.
And so we're starting to see and improvement in Q2.
But it's really much too early to say exactly what we're expecting and revenue other than and improvement that we're seeing.
Okay, Great and then one housekeeping item I missed the number on geospatial and Gabe.
Regarding the the revenue dollars that was down.
$11 7 million.
Great. Thank you.
Okay.
And your next question comes from the line of Michael Feniger from Bank of America. Your line is open.
Hey, guys. Thanks for my.
Taking my questions.
Just on the growth.
Just on the gross revenue guidance with the acquisitions that have closed how much.
Your contribution to net gross revenue number.
Not in 2020.
Well its minimal because a lot of that of the acquisitions depends on the timing in the quarter of the acquisition. So we got little benefit from all three.
And obviously there were smaller acquisitions, but we got little benefit from any of that and the quarter minimal.
And at AST.
And and I would say, even the accumulative, maybe three to 5 million maximum.
Okay.
Okay, but that's for the quarter I was just curious for 2021 like what we should be kind of expecting with that with that range. There are a number of how much of that revenue range that you guys have provided which is great that you read and stated guidance how much of that is organic versus acquired revenue.
While the acquired revenue of all three.
And is probably going to be a maximum of about 50 50.
$15 million for the full year and then the rest of IV.
The growth of the company.
Great and.
Just on that Dickerson and I'm curious, how we should think about the backlog, which is good to see that that it was up.
The 4% or on a 5% year over year, but if you look at your backlog relative to your revenue over the next nine months it looks lower than where it was the last three years relative to what you guys were able to.
To deliver so I guess I'm, just curious like how much of that backlog.
Net to be delivered and 2021 and does that mean you guys kind of win more work, where you guys are now deliver that that outlook and maybe you guys were a year ago and the year before that any context around that would help.
Okay sure.
If you go to that the slide that we showed the bar chart and you can see the backlog increasing.
A very good backlog and our service engineering business.
Is about 65% of the anticipated revenue over a 12 month period and so if you take that 500 in 80, something number 586 and look at the low end of our guidance that is certainly above the 65% 80 for its 84% so.
We think that the backlog is an indicator of strong growth and our guidance.
Got it Okay, and then just lastly, if I could squeeze it in on the on the on the acquisition and the pipeline you talked about potentially large acquisitions you guys moving.
Towards higher margin higher services I'm, just curious we're hearing that there's a lot of aggressive private equity in the space. We're seeing more M&A. How should we think about you got your appetite to do a bigger deal and how to think about maybe the multiples for these types of higher value at <unk>.
The geospatial type type of businesses at those multiples have in fact, the Cree tire and the last few months on the last six months.
Yeah.
Michael I think you're dead on.
We've seen a lot of the involvement of private equity.
And that's a pure the pure financial buyers.
It's interesting, though the private equity has been a.
Has it been a majority of participant but not 100% total acquisition. So the multiples tend to go up.
And we're seeing in our core business the multiple increasing from what we would historically look at 6%, it's and increasing the seven and and higher and.
And.
And some of our high barrier of Entre and since it's the multiples and forgotten as high as 10, what we tried to do is we try to be eight of course, we're a strategic buyer and not a financial buyer. So we are really <unk>.
Interested and people being with us and we use arm.
And we use the natural arbitrage and the and the stock portion of the acquisition to get they'll allow that multiples of that get a little bit higher.
So I mean, there's a bit of pause so what I'm, saying is that we're tending to see more of utilization of our stock.
As part of the transaction and as our stock appreciates. We can we can apply that more and that would even though the valuation is rising the.
The utilization of our stock allows for more of an arbitrage and the price of our stock and the multiple of the earnings that we're pursuing.
Great.
And your next question comes from the line of Lisa Springer from singular Research. Your line is open.
Okay.
My question is for what happened to the colonial pipeline kind of highlight how susceptible are U S infrastructure is two and outside of the Tac.
I'm wondering if you know providing security for infrastructure, how big of an opportunity that presents for you and and what what areas of your business would be affected.
Well the cyber security is always an issue and.
And we are we've taken more of a defensive posture and we are really making sure that we have the security and place with all of our people and we have we've applied a certain software protections for what we're doing.
But I don't know what that creates is that's going to create an opportunity of.
And for US more and more then it's going to be more of a defensive posture that we want to put up more about a firewall against the against the ransomware.
Okay. Thank you.
And your next question comes from the line of Mark Riddick from Sidoti Your line is open.
Hey, good evening everyone.
Hi, Mark.
And I wanted to touch a little bit on and I know, there's a lot of questions around the just the inability of of cost savings and and the expense savings and some of the differences of of what we may see the sustained overtime I was wondering if you could touch on some areas that you might see as internal areas of investment that maybe could benefit from the savings of other areas that you.
Might be looking to to shore up and and and what we might look for a future internal investments for the company.
Mark I'm not quite sure I understand your question, but.
Are you looking at what further efficiencies, we could look for or maybe you could maybe you could ask me that again because of some yes sure sure sure I'm not I'm looking more so on the on the offensive side of the thing so I'm thinking along the lines of our investments and labor investments of technology things like that are there other areas that you are looking at and.
Internally that that you might end up.
Going on the offensive as far as increasing spending.
Take advantage of some of the savings that youre getting from other places of internally.
Well I'm.
Certainly.
I can speak for <unk>.
Alex and and the AD.
But you know I'm fairly allergic joy spending if it's not directly applied so.
We feel we have a our scalability comes from our efficiency and integrating and managing the companies that we have so we all wait and Theres a budget, there's a budget for our management.
Of the support services and the support services of course are our legal and financial.
Our human resources or accounting, our I T and over on our overall branding of marking of all of the organizations and that they have a set budget.
And obviously the more of our revenue growth.
The more efficient the more of that will drop to the bottom line because of the scalability of our network now if there is.
I'm not certain of specific key tools that would.
Would allow for more efficiency I can say this our international group has really benefited by software and that we've had that allows our people to work remotely and it's come in quite handy and this and the COVID-19 area, where our people working remotely so our engineers can apply software.
They don't necessarily have to be housed in a one central specific location and so we think we've seen some efficiencies there and we will export more and more ways of efficiencies that we can deliver our service and a more cost effective manner, but as far as the actual support service management.
The specific budgets that we manage very closely.
Okay, Great and then the the last question for me I was wondering if you could just maybe share some thoughts as to and now with the with the leverage levels back down to below one time.
And the acquisition pipeline, but you have the for you I was wondering if you could sort of just share some general thoughts as to how you feel about leverage levels going forward, whether we should think about it as being somewhat similar to what we had seen historically prior to the geospatial acquisition or just the.
General and how we should think about maybe what your comfort level is with the with the general range of of the leverage going forward well amazingly amazing to me, but I'm going to I'm going to defer to add on some of the specifics on the leverage but amazing to me is that we've grown this company.
From an absolute start up to our guidance of close to $700 million and revenue with little leverage and leverage under under one and now youre going to hear from many astute financial people I'd say that you can have more leverage we just think that we would like to operate out of cash flow.
We'd really like to keep our leverage under one but Ed can speak to what the highest SAR leverage has been and I think he had a slide to that and really what are kind of our comfort level. This week, we just don't.
We don't believe and leverage unless it's a specific opportunities such as we had with quantum spatial but Ed maybe you can speak a little bit to that Joe and I was going to say the same thing takes on.
And we dig and I, both feel the same way and in the sense of that we're very comfortable being under one times and there'd have to be of specific opportunity.
We'd come in and in an opportunistic way and they would have to justify bringing that leverage up right and the case of quantum spatial but other than that we.
And in the ordinary course of business, we would prefer to be under one times.
That's very helpful. I really do appreciate it and I appreciate all the detail of that was included in the in the remarks of the presentation. Thank you.
Okay. Thank you.
And again, if you have any questions just press the star one on your telephone keypad.
Your next question comes from the line of Andy Wittmann from Baird. Your line is open.
Great and Super Thanks, and for taking my questions. This afternoon, I guess I was just hoping to understand the weather impact of a little bit more and I was wondering if you could quantify how.
How much revenue you think got pushed out of the quarter and if the revenue that was pushed out into the quarter. It will all be made up and <unk> or if it basically kind of pushes the whole chain of events associated with that work out through the year then.
So just wanted to try to understand how much when you put that was.
Sure well, we would hope we would hope to recover a lot of that revenue, but in it and the service business.
You have to be opportunistic and you have to.
Supply the service when it's needed.
When projects are absolutely shut down are you just can't acquire.
Due to weather it.
Just some facts, 70% of our addressable service area was affected by the severe winter and.
And I think they are.
And the loss in revenue was.
Was twofold.
Twofold, one we lost.
And it's very hard to be very specific as to what the revenue.
<unk> loss, but and the geospatial area we.
And we lost business days, because we couldn't fly and then that has a twofold effect. If you can acquire that data.
On the other revenue generating with the with the geospatial business as the analytic side. So what the acquisition of data feeds the analytic side. So when you can't fly you've loss of significant a significant amount of revenue. We also were affected by COVID-19 we.
We had been impacted and some phases of our business, but the weather was something that we just did not anticipate and as I said, 70% of our addressable market was under severe weather conditions and February and.
And quantitatively I'm not going to say that all of the geospatial revenue.
Will can be recovered, but we're certainly hoping that some of those projects were delayed and and can move further but mark of motto will get paid.
And with more specificity, what he is but he anticipates seeing and the and the second and the remainder of the year with as far as geospatial and and he'll be commenting on that shortly.
Got it thanks, and I was just wondering.
And with so much going on with Ross.
Reopening or whatever you want to call. It here I was hoping you could talk a little bit more detail about.
If the bidding submission pace I don't know if you track the amount of bids that you've got out pending response from customers or if there's anything you can sink your teeth into that can help us get a sense of.
How much or if the bidding pace with your private sector as well as your public sector customers has improved if at all.
Yes.
We're probably a little bit.
Unusual and one way and we don't really look at things and the bidding process.
We rather be selected and on the qualifications and we usually have a go no go decision on 70 per cent of them. So we're not you know.
I don't really.
Gain of tremendous amount on what bidding opportunities.
That we have I look for more is what is the ratio of wins of the opportunities that we know we can we can apply to as far as what the IC and I don't want to be anecdotal about this from what I see is.
Certain of them.
Increase the significant increase in activity, but.
In the concluding comments, we're gonna ask Alex Hockman, specifically, who runs the majority of our core business and he will also give his outlook on what he sees on how we see the market growing I certainly have seen I'm optimistic I've certainly seen a significant increase in activity, but I think Alex will.
And mentioned some specific projects that are specific.
Uh huh.
Carry on one what we see going forward.
Got it okay guys.
I'll leave it there I'll touch on for you later.
Thank you.
And over the last question comes from Michael Feniger from Bank of America. Your line is open.
He gets to he had one already but will allow us the second one go ahead.
Thank you I just wanted to squeeze one and I. Appreciate it was it was of great cash flow quarter.
<unk> and I mean can you guys just help us quickly with with the guidance I know you gave the revenue and the EPS just.
And maybe this is more for Ed how should we think about the EBITDA.
The range with your guidance and also the cash flow conversion like what the cash flow could potentially look like for the year given the good start to the year and your guidance on the revenue and earnings. Thank you guys.
And.
Sure Mike This is Ed.
From the perspective of adjusted EBITDA and of course, we don't have a.
Our crystal ball, but given the guidance on on the revenue side the <unk>.
Adjusted EBITDA, we feel.
And would come in somewhere in the range of $110 million to $120 million and our conversion rates are between 85% and now.
90%, obviously Q1 was a strong quarter because some of that cash flow was in the.
Within the $48 million.
Stemmed from the collections of receivables and there's been a lot of focus on that as I mentioned earlier.
But throughout the the remainder of the year, we will have some volatility and working capital. So we wouldn't expect to maintain that that same level of cash flow generation, but we still do feel strong about the overall the overall year being out of conversion rate of 85 to 90 per cent.
Thank you.
Youre welcome.
And at this time of the skin piece or a question and answer session I would now like to turn the call over back to Mr. Wright for closing remarks.
Thank you.
As you can see and our presentations today, we are very optimistic about the year, we're optimistic about what will and.
And the economy opening.
<unk> that we have but I thought we should be more specifics so.
You'll notice there was a erosion trend and our geospatial business and sold the very good to hear from Mark on what he sees as the second half of the year to look like as parts of the geospatial services and and we will probably ask Alex Hockman. The same question and the core business. So Mark maybe you can comment on how you see things and.
And going forward.
Sure happy to Dickerson on.
And the geospatial side, we expect to see and improvement in the second half of the year for for several reasons for.
First and most importantly, the demand drivers for advanced Geospatial solutions continue to accelerate with respect to infrastructure investment electrical grid resiliency renewable energy development.
Long with environmental impact studies, and environmental monitoring and planning.
And the second.
Reason for optimism as our solutions are essential to the design and the execution the monitoring and the ongoing analytics of significant regulatory compliance and safety programs across both the government and the private sectors and and.
We believe that the pent up demand for these required programs that have been delayed could be very very significant.
And now the timing of those tasking will determine how much we're able to convert to revenue this year and how much will be added to backlog entering 2022.
And then finally, despite the delays and tasking that Dickerson mentioned the contract vehicles through which the these tasking our awarded remain in place today with NV five and we are positioned very well for those that are renewing this year. So those are just three of the the.
The key themes that we look to relative to the outlook for the remainder of 2021.
Thank you Mark very helpful. I May ask Alex Hockman, who who is depressed and it up or what we call our core business and which is.
A significant amount of of the operations that are traditional services that we would have an alley.
Alex maybe you can comment on how you see the the.
The remainder of the year.
I think with the what we call the reopening of the economy. It has been.
Very optimistic in terms of how the year will finish up I think we're also seeing synergies that we're developing.
The Geospatial group and the core business sitting now allow for a full suite of service offerings to clients frankly.
Frankly, we didn't have before and while the acquisition of quantum took place at.
At the end of 2019. It has taken time for this relationship to mature and we're seeing new opportunities that are presenting themselves.
As you mentioned previously we don't actually look at it opportunities many of our contracting vehicles come through the request for qualifications through which will ultimately.
She's a professional services agreement of our Master service agreement. So we don't actually have that churning of responding to pitch there for opportunities that then available himself and once we have defined the qualifications and have the categories. We're then able to have the contracting mechanism in place and that is true.
And a lot of opportunities as well for for the quarter of business.
Thank you Alex.
I think theres, a couple of things of that I would like to have us.
Think of and and apply them to us as we see the balance of 'twenty 'twenty. One I think what this COVID-19 has brought to all of us as our new.
Allowing us or requiring us to have the ability to adapt adapt to the circumstances, yes, we all can't go into one fixed office now, yes, we need to keep our distance, yes, we need to.
We need to support our people.
Remotely. So these are adapting and that we had to do we're now getting used to doing many of zoom calls, where we would do a lot of our roadshows and dealing with our clients and so the ability to adapt is something that I am very proud of that we've been able to do and these are things that adjustments that we have.
Made as the company and our people and and I wanted to congratulate them on their ability to operate under changing circumstances and changing requirements.
Where are we there are questions about our leverage and where we are and stock price.
We can now be much more selective and the M&A front, because our verticals our platforms are much more mature and each year and they become more mature and our people can be very selective too and acquisition or a growth area of our service area that they can improve the margin get more embedded with.
The client and so I think this is something that we are we are pursuing.
We mentioned also arbitrage as our stock has increased.
And remember the days, we went public at $6 a share and now with our stock continues to increase we can use this to be much more stretch.
The strategic and our acquisitions were becoming very selective and the acquisitions, we won and yes, even though.
There is a real increase and infrastructure by the market and those entering and those paying prices that they may feel.
And.
Historically are much higher than they have before our ability with the growth and our stock and our ability to utilize stock continues to give us the competitive advantage. We've been at the acquisition process for quite some time the phone rings people. We are we can be much more selective and we always you've heard me say this.
Before but we have a number of acquisitions right now on the plate and we're looking now and strategic areas that we can strengthen our platform. So I want to thank everyone for your continued interest and NV five I think that we are looking forward to a very good year and.
And that's why we've been Inc.
And restored the guidance with increases on and we feel comfortable with us meeting and the projections and guidance that we get for it and I. Thank everyone for your support and we look forward to working together to have a.
Good balance of the year.
'twenty one so thank you everyone for your time and we'll speak to you once again and the at the end of the second quarter results.
Yeah.
And this concludes today's conference call. Thank you for participating you may now disconnect your lines.
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