Q1 2022 NV5 Global Inc Earnings Call
<unk> for organic growth and merger and acquisition growth.
Our cash position and cash flows remained strong.
This serves as a safety net in an uncertain macro world and also positions us for growth through M&A.
The year.
Turning to page six we will discuss our quarter, one highlights and opportunities for the balance of the year.
You will see we highlight growth from our six protocols, which all remained robust we're seeing exceptionally strong growth in energy efficiency Geospatial services utility and environmental transaction services, all of which are exceeding our budget projections for 2022.
Let's now go to page seven where we will discuss our acquisition activity that is either taken place or opportunities that we see going forward for 2022.
During the beginning of quarter one of this year, we completed two strategic acquisitions to strengthen our MEP services and our construction quality and Chegg services.
Fulton consulting engineers further strengthens our MEP or.
Electrical plumbing engineering and energy efficiency services in the southwest.
River City testing allowed us to further expand our construction quality and kick services in <unk> and San Bernardino counties, two of the largest counties in southern California.
We expect to see larger future acquisitions in geospatial and infrastructure in 2022.
Our model for acquisition remains the same culture competitive advantage and a strong history of profitability.
On page eight I would like to briefly mention our backlog growth, which gives us a strong indication of the continual growth of the company for 2022 or.
Our backlog grew in quarter, one of 22 by 17% over the same period or quarter one in 2021.
Now turning to page nine as you have heard US mention many times cross selling is a major component of our internal organizations growth.
Our cross selling increases inter office sales between locations due to the <unk> network and has been very inclusive for the network.
We have increased our cross selling target for 2022 to $34 3 million for the year from $31 2 million in 2021.
We will now transition that presentation to our CFO Ed Codispoti to provide an overview of our first quarter financial performance go ahead, Ed. Thank you Dickerson and good afternoon everyone.
If you would please turn to slide 11 of the presentation I'll highlight some of our first quarter financial results.
Our gross revenues for the first quarter of 2022 increased by 24% over the same period in 2021.
If you strip out incremental acquisition related revenue our year over year growth was 12%.
Net income increased to $8 6 million in the first quarter of 2022 compared to $5 5 million in the first quarter of 2021, 58% increase.
Our adjusted EBITDA increased 19% to $28 9 million in the first quarter of 2022 from $24 2 million in the same period last year.
Our GAAP earnings per share increased to 57 per share in the first quarter of 2022.
<unk> <unk> 41 per share in the 2021 first quarter.
39% increase and our adjusted earnings per share increased to 99 per share in the first quarter of 2022 from 88 per share in the 2021 first quarter, a 13% increase.
On Slide 12, you can see we continue to demonstrate strong cash flows on top of a relatively low net leverage position.
Our cash flows from operations for the first quarter was $46 $5 million, which was one six times, our adjusted EBITDA and our net leverage was four times.
We believe our strong cash flow and balance sheet position us well for the execution of our business model and strategy and we're excited about the remainder of 2022 with that I'll turn it back over to Dickerson for some additional perspective on our growth positioning.
Thank you Ed.
Let's turn now to slide 14 of the presentation Youll see as a result of our strong performance for Q1 2022, we are increasing guidance for full year of 2022, where gross revenues from an original $773 million to $802 million.
Now to $785 million to $810 million.
And increasing guidance for full year 2022, adjusted EPS from $5 39.
570 <unk>.
To $5 39, now to $5 80 per share.
We feel comfortable in our outlook for 2022 based on <unk> strong position in support of infrastructure throughout all of our services now I would like to turn it over to the operator to begin the question and answer session.
Thank you Sir.
At this time I would like to remind everyone. If you'd like to ask a question. Please press Star then one on your telephone keypad.
First question will come from Andy Wittmann with Baird. Please proceed.
Okay.
Great.
Thanks for taking my question and good evening guys.
Just wanted to start out ticker soon with a question.
Some of the businesses that you have around the commercial real estate, you've got the clearly the MEP stuff that you've talked about.
I know that you've been high on real estate transaction services, we're seeing very good momentum and that's evident on your slide that you put out here today I'm just curious.
I expect that the quarter was obviously good on both of those.
On a forward looking basis and a rising interest rate environment can you tell us what you've seen historically on how those businesses react.
In a world that's starting to look a little bit more realistic for higher rates and more challenging economy.
That's a good question, Andy and it's one that I often ask.
How we're doing in their real estate transactional service business, because they are very sensitive to and subject to interest rates.
In fact, I spoke to one of our key operators and the group today and they are as the year than they've ever been and it could be two things that could be the portfolios. We do very large portfolio transaction services and I think many people are probably trying to get those done before they see the interest rate.
Interest rates could go up I can't give too much away on forward thinking but.
Our April results continue in that area from both groups. Our recent acquisition of global services and the Bakken Clark one that make up our transactional real estate. Both are operating very very strong but in that area there could be erosion there could be erosion.
A natural thing with interest rates.
<unk>.
This type of service is dependent on those so.
It is not realistic to continue to see at a zero interest rate at.
The services would continue at the same pace that they are now, but I can say from what we see and what we know now they're continuing very very strong.
That is probably the main area that we have that is subject to.
No really subject to interest rates and I'll speak and are concluding comments, how we try to position our company to be more and mandated work. So that is not as sensitive to interest rates.
I see thanks for that color and I was just wondering.
Maybe a little a little clarification on the guidance here.
I think I heard in the script.
Organic growth was 12%.
In the quarter.
And I was just wondering with the acquisitions that have been filtered in here.
We're thinking the organic growth rate could be for the year. That's implicit in the in the revenue guidance has been updated here today and if theres any.
Acquisition revenue in there that has not been publicly announced in other words is that assuming any future acquisitions that we don't hear in the public markets know about yet.
Now, we're not assuming any future acquisitions, we did two very small acquisitions that were strategic and I mentioned in the <unk>.
In my cupboard remarks.
We do not we do not.
Consider acquisition.
That we haven't taken place we don't consider any growth in that so when we gave guidance. It did not include any anticipated acquisitions that we may have.
I would say, though that.
Our growth, we would continue and we feel comfortable still with the mid to high single digits overall.
Organic growth.
And that would be based on.
On work that we are going forward.
From now through.
Through the remainder of the year, we did have a very good quarter on organic growth in our first quarter and but we still think that our guidance of 5% to 9% or so of organic growth is what we're anticipating for the rest of the year.
Great I'll leave it there have a good evening. Thank you.
Okay.
The next question is from Jeff Martin with Roth Capital Partners. Please proceed.
Hi, guys nice quarter.
Thank you.
Alright good.
I think I was just curious if you could give us an update on geospatial with respect to.
Contract bidding activity contract awards.
The government related delays that we saw in 2021.
Clearly in the Rearview mirror now and then also wanted to tie that into how.
Dynamics.
Performing <unk>.
A little over a year now in Taiwan.
Thank you.
Yes, let me I mentioned.
<unk> the president of our Geospatial group is on the phone and he may have some specific things, but let me give you a macro picture.
One we are very happy with the geospatial performance this year and in fact, they're they had anticipated growth of about 14% organic growth.
From their budget and they are right on that budget and included in that budget was geodynamics because of.
Because of the acquisition happened, we have them in our full year rate right now the initiatives.
We're going to be speaking up specific initiatives that we are doing.
For the year to continue to grow the company and hopefully what we mentioned some of those during our Investor day presentation on May 26th However.
Some of the things that we're looking at is offshore wind geodynamics has.
The structure of that acquisition was an earn out and they have made all of their revenue projections they've had a slight delay in one project that is going to be starting but now we've given through capital expenditure, we've given them the ability to deepwater.
Deepwater mapping that they werent able to do before and we are having.
Ship modified to do just that so the geospatial area. We think is where I'm very pleased with it certainly pleased with whats been going.
From last year and Thats why I think we have a some specific initiatives for the geospatial work Mark maybe you are there if there is anything specific you'd like to comment the frito.
Yes, I'd be happy to jump in I think that.
What we saw.
Encouragingly in 2021 was that the large federal.
I'd IQ contracting vehicles did start to close out in a timely fashion and that those are the leading indicators to future work at large scale with the federal government in particular.
The pacing of awards is roughly about the same as what we saw through 2021 and that is to say a little bit slower, but it's a matter of timing.
And working through some of the Kinks in the procurement cycle. So we are still very.
Encouraged by the contracting vehicles sort of proceeding on time the demand is no different than what we had expected. It just there's been some delay in timing from a federal perspective at the same time as Dickerson mentioned geodynamics is doing incredibly well there.
They are positioned very well in a market, which is beginning to grow relative to offshore wind in cable corridor landing on which they are tailor made for as well as a number of coastal resilience and chartering projects. So those are starting to come through as well. So we're feeling very good on the government side.
Thank you Mark.
Yes, that's very helpful detail. Thank you for that and then.
I just have a couple of questions for Ed here.
One on the other.
Other direct cost line of the model of that increased about 50% year over year.
<unk> seen a number.
$14 million range on a quarterly basis in history at the company I'm just curious if there are.
Certain things contributing to that and if that's an unusually high number.
You should think about that going forward and then second question for Adam.
Are there any change in contingent consideration liability on the P&L this quarter.
Hi, Jeff, Yes, so with respect to other direct cost it is really driven by.
Primarily by mix of business in particular, our LNG business.
Which at times throughout the year, depending on what phase of the projects they are in.
May have more pass through costs and others. So we would expect that to normalize.
Throughout the year.
And with respect to your question on contingent consideration, we did pay off about.
$1 $5 million during the first quarter related to one particular earn out so were not material.
But just a sign that.
Some of our acquisitions have been hitting their targets, which is a positive thing.
Okay well my question was more around was there any change in the.
<unk>.
Contingent consideration liability that hit the income statement.
Quarter.
In the first quarter.
Okay very helpful. Thank you.
Okay.
Our next question is from Chris Sakai with singular research. Please proceed.
Hi, I'm in for Lisa Springer.
Just had some questions.
Let's see so.
<unk>, just recently added deepwater geospatial capabilities, what types of customers need these services and what factors you see driving increased demand in 2022.
Well up.
I'm going to let mark.
Speak to the <unk> speak to the specific demand, but generally speaking our work for any of the deepwater mapping and measurements.
Our client or government agencies that are looking for.
Mapping of an erosion of the Seawall and many of that those measurements are taken because of.
Changing an environmental conditions, but.
Those clients tend to be.
<unk> tended to be government clients and it's this is not really a commercial application, but mark you may want to comment further.
I think that well.
Well said I think that we're starting to see a real balance in terms of demand for full ocean depth.
Solutions.
Whereas before I think the government space clearly was the driver for demand in particular some of the scientifically based agencies now of being a very good example of that.
We will providing close to resilient.
Ocean floor mapping.
Charting type solutions.
Yes.
The offshore wind energy market is developing that is.
Space, where we are investing.
And it's a very underpenetrated market and we see some some great growth opportunities, there as well and that happens to be more private sector.
Okay.
Okay great.
So you mentioned at the end of your last call that Youre geodynamics business with well positioned pursue offshore wind energy opportunities.
And as a result of the <unk> projects currently underway.
Could you give us a sense of what would be your average contract size.
For this type of project.
And if our customers for this type of project. They are generally multi site developers or not.
While I would give you that answer but I may have to kill you.
So we don't want to do that.
The reason I'm a little bit hesitant.
We'll be speaking.
Investor day on some very specific initiatives that we're doing to capture the offshore wind power work those contracts tend to be larger, though they tend to be.
Tend to nice six digit.
In contracts and so what each individual there's one main general developer that we have just signed two initial contracts with and those are I think those contracts are for $3 million.
But I can't tell you the 16th of the 16, how much each of those are going to be but there's one general contract. In fact that we are having a ship built that's being built to do that measurement and it should be completed but it's being done to the specifications that we require and this particular client where the window.
Sure.
As for so.
We see a tremendous market, there, but I'd really I'd, rather defer to our Investor day, where we speak in and we will have some visual what were actually doing going to be doing on.
Wind and offshore measurement.
Okay great.
I suppose to try and find Lisa <unk>.
Last question for me.
So it seems like Theres a lot of acquisitions.
In California.
Could you comment on opportunities for your utilities service business in that state.
Could you repeat the question please.
Could you comment on.
Any sort of opportunities.
That youre seeing in California.
In the utility services business.
Yeah.
Yes, there is a lot of opportunities and I'm glad that you mentioned a specific reason in.
In the west there is huge issues with taking overhead power lines and putting them underground for a buyer mitigation and fire mitigation work and the major utilities in California, all have issues with buyers being developed from from transmission lines and so we're doing a lot of work and the mitigation.
Area and design area and those are the <unk>.
Western utilities, and so we think that there is there is a very good opportunity for that nationwide nationwide. There is an aging grid. The overall grid for supplying electrical power it needs constant improvement. So we see some very good opportunities there as well.
Okay, great. Thanks for the answers.
Okay. Thank you thanks for the questions.
Our next question is from Rob Brown with Lake Street Capital markets. Please proceed.
Hi, Rob.
Nice quarter.
Thank you I wanted to clarify on the on the demand environment are you seeing any of the infrastructure spending or is this growth are our strength really kind of other things going on and maybe from your own internal cross selling efforts just help me understand the demand environment drivers here.
Yes, that's good I think you and I will probably agree on the definition of infrastructure. Maybe this administration doesn't agree on what infrastructure is or not but as.
As far as pure ground up projects, we've seen very little actual.
Support from the infrastructure Bill we think that we're in a very nice space.
We like the idea that we have.
We have we have tailwind rather than headwinds because.
Infrastructure, absolutely, it's something that is mandated it needs to be needs to have improvement in that infrastructure can be anything from water delivery service shrinking of clean water going over safe bridges going down roads that needs that need to be done and it's probably we are defining infrastructure work that.
For services that we actually provide.
So.
I think we have that we we've.
We've seen the government funding that we're expecting to see hasnt come to realization yet Rob.
Okay. Thank you and then my second question just on the placement rate environment. I know you can you can adjust that with some of your government contracts for you are you trying to kind of play catch up in general or do you can you manage your cost structure.
Your contracts kind of within a similar time period.
Well I don't know if you mean from staffing obviously, we want to keep most of our people to utilized in most of our work is based on a unit price basis, where we have the people we pay the people. They do the work so it isn't that.
It isn't that we're being overwhelmed, but we can always utilize more people and we can we would watch the utilization rate.
But.
I Wouldnt say, we are at Mexican maximum capacity to do to do this work, but I certainly think that the guidance, we've given as far as the revenue generation, we certainly have the staff to support that guidance.
Okay, great. Thank you I'll turn it over.
Okay.
Again that is star one if you'd like to ask a question. Our next question is from Marc Riddick with Sidoti. Please proceed.
Hi, good evening everyone.
Hi, Mark.
So I wanted to start with.
I'm trying to if I remember correctly last year geospatial started the year, maybe a little slowly or had some had some impacts around the weather and seasonality just wondering if.
Mark can you talk a little bit about that because as to how that looked at this year versus last year.
Remembering that profitable.
Do you have a good memory, that's right Mark will answer that for you.
Yes from time to time.
Weather patterns, particularly in the northeast.
Snow and ice do disrupt the first phase of our of our value chain the data collection.
And.
And that was an impact in Q1 of last year I think we saw fairly similar situations.
Situations towards the latter part of the first quarter this year as well the difference being in the reason why we were able to grow in spite of some of those challenges that we enter 'twenty two with a stronger backlog, we had done enough of the data collection.
Some.
Large projects, particularly for utilities in the fourth quarter of 'twenty, one with that kind of information available to us the processing and the analytics phase is where we focused quite a bit of our time in Q1 of this year.
Because it doesn't necessarily seem as though weather was particularly our friend this year either so the idea that you were just.
Still able to benefit is certainly a positive.
Quick switching gears. So I appreciate the increased guidance quick.
Quick question on is there a general share count assumption, we should be looking at that range of guidance.
Yes.
Basically using the 15 3 million shares okay.
Okay, which is an increase from our 13 eight but we could probably easily go to 15, five I think the balance sheet.
In our financial statements shows 15 million point.
$15 2 million shares.
Okay. Okay excellent and then I was sort of thinking about the.
<unk>.
As far as.
Deep water.
Is there sort of a.
General way, we should be looking at the competitive dynamic.
And that part of the business and maybe what your thoughts are there around that.
Sure.
The rest of the company.
Okay.
I can comment on this too, but it's really geography driven.
We have the capabilities and deepwater measurement in the Atlantic Ocean.
So probably it.
Competing firm.
On the Pacific in the Pacific area that we can still do some of that work, but not as much deepwater work. So I think that the.
Competitive landscape is really who has the equipment and who has really has the expertise and right now what I know of is we are probably the main main person in the Atlantic on the Atlantic Coast and then there is a competitor in the.
In the Pacific.
Mark maybe you can comment on that a little bit more if you like.
Sure happy to I think on the government side.
And the IDI cues.
Under which we participate there.
They are multi partner, we definitely enjoy a significant share of wallet under those contracts.
But as Dickerson mentioned, the differentiating factor as well.
How we've invested in the equipment the advanced technology, the processing and the analytics I think that sets us apart from a number of the competitors in that space, particularly on the on the eastern Seaboard.
We also expand into offshore wind thats, a very underpenetrated market with very few competitors, especially in the particular part we play in which is near.
Near shore cable cord or landing environment.
So we really like our position there and that's where we'll be investing.
So very encouraging so thank you very much I really appreciate it.
Thank you.
At this time. This concludes our question and answer session I'd now like to turn the call back over to Mr. Wright for closing remarks.
Thank you operator.
I thought I would have.
Company should have a few comments to kind of.
Give a sense of where we are what their preference is.
To do that I'd first like to go back and be five was historically structured and we've always been structured to support the public market demands.
Range, but basically speaking our public entity service demand is usually 70% and this is mandated work and this is you've heard me say many times. This is work where people need to drink clean water they need to go for safe bridges and theyre not so it sounds not so dependent on the economy.
With that in mind, we've always structured the organization to be nimble to look at opportunities and be up to them.
Opportunistic on the most current market trends. So we've all been following the news and you know the international news, it's very apparent that energy sources.
And delivery of those of energy is a worldwide concern there could be geopolitical reasons, there can be many different reasons, but obviously the supply of energy outstrips.
It does not face or the demand I should say outstrips the supply.
So we arent anticipating.
Anticipating from our space.
An increased focus on alternative energy sources.
Conservation and delivery systems that will address these concerns.
So there will be much more investment and we've seen this all over in state. This had been stated and you can see that there's going to be a tremendous amount of more investment in North America for energy and we added five one and be prepared and are prepared to support that so.
What we will be doing and you've heard me references we are having an investor day on the 26th of May and Youre going to see three specific initiatives that we will not we will be talking about that will support the energy delivery systems energy demand existing utility support and all of these will be initial.
Lives that we tended to to continue to do and add corporate resources to grow those so we'll be introducing those three and we invite anyone to any investor to come in attendance has been in Chicago on May 26th.
They'll also for those that cannot attend in person there'll be a web site and will be answering many questions, but I think it is I am very encouraged about what we're doing to grow this initiative, how we're supporting it from the corporate level and Youll see a tremendous focus now on systems to deliver energy and new way.
As to map that and hopefully you will see those and we will be presenting those at the investor day to help grow the company. So anyway, we live in very.
We live in very fragile times, we know with.
The economy is changing and.
It's very very important that we at <unk>.
Nimble as I said before it so that we can support opportunities. When we can change we can change from things that could be affected by interest rates. Those that may not be those that will be affected by higher demands for all of our services. So we keep this in mind and we hope that we want to stay focused on what we do.
And our vertical flat organization, so I want to thank everyone today for joining us for this call. We're proud of the first quarter results. We feel very we look forward to a very successful 2002.
And we want to continue to support you in our employees, we want to support them. So that they can support you. So anyway. Thank you for the time you have given us today and we'll look forward to speaking to you either during the Investor day or certainly be speaking to you next quarter. Thank you.
Okay.
Ladies and gentlemen. This concludes today's conference call. Thank you for thank you for participating you may now disconnect.
Okay.