Q3 2023 NV5 Global Inc Earnings Call
[music].
Yeah.
Good afternoon, everyone and thank you for participating in today's conference call to discuss NN. Besides its financial results for the third quarter 2023 ended September 30th 2023.
Joining us today are Dickerson Wright, chairman and CEO of NN beside Edward Codispoti C.
CFO of N V five.
Hockman, President and C O O of N. Besides.
Then her road C O O of N beside.
Kurt Allen Senior Vice President Geospatial, and besides <unk> and Richard Tong Executive Vice President and General Counsel and besides I would now like to turn the call over to Richard Tong.
Thank you operator, welcome everyone to <unk> third quarter 2023 earnings call.
Before we proceed I would like to notify all participants that today's presentation can be found on IR dot <unk> dot com and remind everyone that today's discussion contains forward looking statements about the company's future business and financial performance.
That could cause actual results to differ materially from these statements are included in today's presentation slides and in our reports on file with the SEC.
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 <unk> Dot com.
Please note that unless otherwise stated all references to third quarter 2023 comparisons are being made against the third quarter of 2022. In this presentation. <unk> has included certain non-GAAP financial measures as defined in regulation G promulgated by the Securities and Exchange Act of 1934 as amended.
The non-GAAP financial measures included in this presentation are adjusted earnings per share and adjusted EBITDA and <unk> provides non-GAAP financial measures to supplement GAAP measures. They provide additional insight into <unk> financial results. However, non-GAAP measures have limitations as analytical tools and should not be considered.
A webcast replay of this call and its accompanying presentation are also available via the link provided in today's news release and on the investors section of the company's website.
May also find today's presentation, which will be referenced during this call on the investors section of the Companys sub site we.
We will begin the call with comments from Victor <unk>, Chairman and CEO of <unk> before turning the call over to Edward Codispoti, Chief Financial Officer for a review of the third quarter of 2023 result.
Hickerson right will then provide closing comments before we open the call for all your questions <unk>. Please go ahead.
Thank you Richard and thanks to everyone for joining us for today's call the third quarter results exceeded analysts' consensus.
Due to the timing of acquisitions and project delays our full year forecast may vary from original guidance. The results consisted of organic growth from our existing business. Despite headwinds caused by interest rates to our construction and transaction real estate service lines.
These two service lines delivered negative growth in revenue and EBITDA for the market, although we have begun to see improvement in these sectors.
Last quarter I spoke concerning two initiative to promote further organic growth in our core business markets, particularly transportation and water resources.
That's an update from then to now we have strengthened our recruiting organization to fill project needs and to train our people on all service lines of MB five.
Let's now turn to slide five where we will discuss our accomplishments for the third quarter of 2023 and to discuss our growth momentum for 2024.
<unk> grew 17% in quarter number three up 23 over quarter three of 2022.
This growth was comprised by a combination of organic growth and growth from earlier acquisitions.
The specific areas of growth include geospatial. Despite some federal project delays in 2024, and also our buildings and technology sector growth was driven by clean energy Datacenters and audio visual support for international and domestic projects.
Infrastructure overcame degradation and interest rate sensitive businesses and has driven our recent growth with contributions of our growth initiatives through project wins.
Let's now turn to slide six where we will highlight our building and technology accomplishments in opportunities.
International mission critical opportunities continue to grow.
And we had a total growth of 44% and 12% organic growth in the service line in Q3 this year over Q3 of 'twenty two.
This continues to be driven by increased demand for our cloud access for smartphones.
We anticipate the acquisition of Red technologies will further extend our growth.
We are seeing growth in clean energy and technology services as well as international design projects.
Been a rod is responsible for our buildings and technology growth in our international businesses.
I would now like to ask a few questions.
And the International group has really been growing organically.
What is driving this growth.
We will mention in a moment, we recently did an acquisition in Singapore, Brad technologies and tell us what they are doing.
<unk> is a number of factors, which are driving our international growth. Firstly, we're a premium service provider in the mission critical data center space, which has seen huge crisis right now.
With an impressive portfolio of well known companies in the sector.
Hey, guys sorry to wait this.
This includes expansion into new geographies, most recently, Japan and South Korea.
It is also worth noting our domestic mission critical team continues to gain good traction with several large project wins.
Team works closely with our international group, the labor technical expertise and client relationships.
We also have a very strong reputation in the casino and hospitality sector reopening of the tourism post Covid is driving a lot of spending in this area, which we're well poised to capitalize on for example earlier this year the Cal renewed the gaming licenses, but major casino operators and we are now being awarded new design projects as they ramp up in.
Basement in their properties.
Read technologies have integrated very well with our existing operations. They bring on an entirely new client base and being upstream and downstream at about current services positions us well for cross selling.
We were recently awarded a project with a major insurance provider in Singapore, which incorporates all about services.
It support services are a source of reoccurring revenue and we're actively bringing this to our existing client base.
Thanks, Dan Thats very helpful. Another question here in the states and internationally the acoustics and audiovisual group has had a very good year for organic growth and profitability.
Can you tell us about their client base and focus.
So lately what are you a visual as the primary service of the technology and <unk> Group. In addition to <unk>, We also provide services and building.
Building security lighting and acoustics, but these services were a market leader in higher education and have done over 1400 projects for 400 different campuses in North America.
12 months ago, we acquired <unk> consulting who specialize in hospitality and gaming this aligns nicely with our design and commissioning groups and our revenue in this sector is growing significantly.
We've also broadened our core services within the group to include site lighting design and we were recently awarded our largest lighting project.
We have a strong focus on diversifying the sake as we work in Atlanta, some large federal government projects, including new headquarter buildings for the cyber security and infrastructure Security agency and the immigration and customs enforcement, both under the department of Homeland Security.
Thanks, Ben why don't we now go to slide seven in our presentation deck and we can see a little more graphic highlights red technologies acquisition that bandwidth speaking up.
So I'm going to three attractive features that position us for cellular commercial expansion in southeast Asia reoccurring revenue due to ongoing maintenance of existing data centers and also the expanded footprint as part of MB five and the adoption of technology in the region.
Let's now give an update on our infrastructure and utility service lines.
Please turn to slide eight.
Overall, our infrastructure group has had a very good third quarter in key geographic areas of North America.
New York, a very important part of our infrastructure growth grew 14% organically in quarter three versus quarter three of 22.
We had a 7% organic growth in California, Oregon, Washington, Idaho, and New Mexico.
Turning to our utility businesses, which youll see on the right side of the page, we drove 21% organic growth in our utility services, including substation in grid optimization.
Our LNG business grew 33% organically over Q3 'twenty two as well we have also continued to replace subcontract work with our personnel based in North America, as well as India and Malaysia.
We continue to face headwinds in our construction quality assurance group, but we have recently seen improvement in this sector, Alex Hockman leads our infrastructure and utility services groups I would like to ask him a few questions to provide an update for all of US Alex has the interest rate increase had a detrimental effect on infrastructure.
Work.
Thank you Jake our infrastructure end markets, including design project management and inspection has not been impacted by interest rates. However, we have seen some regional impacts and services that are primarily focused on private sector development.
We have previously discussed the downturn in our real estate transaction services and the impact of some of our municipal outsourcing services for example, and pairing real estate transaction services. Our 2022 revenue for the nine months through September was approximately $57 million while in 2020.
Three the revenue was $37 7 million.
Corresponding EBITDA, whereas 10, six versus $5 6 million.
Also noteworthy is how the division adapted to the reality of higher interest rates since the Q1 EBITDA margin was 10, 2% and they've expanded margins to almost 15% on a year to date basis. Thanks, Alex very helpful. I know in this market you need to be creative and adapt.
So what are some of the new opportunities in growth areas that you see in infrastructure.
The transportation and utility end markets are very well positioned for growth.
We are seeing an increase in proposal requests and awards for roadway and bridge design and inspections throughout our infrastructure offices.
We are also seeing significant proposal opportunities in water resiliency and our power group is poised to grow organically with opportunities in all aspects of power delivery.
One project of interest is an approximately 40 mile long alignment.
High voltage overhead transmission lines in the Pacific Northwest.
Type of project is an example of what is required to strengthen our grid and avoid power disruption and expand the infrastructure for green energy initiatives.
The design involves multiple NV five disciplines, including geotechnical, environmental geospatial surveying and our civil and electrical engineering divisions.
Thank you Alex.
Let's now move to our Geospatial service line for an update so I will start by going to slide nine we are expecting a very good year from geospatial services. As you can see year to date total growth has been 69% over last year organic growth was 7%. Our recent acquisition of axiom gives us greater access to <unk>.
<unk> projects and <unk> III Harris Geospatial acquisition provides a reoccurring revenue base for geospatial software.
Both acquisitions grew 8% over the previous quarter and bookings and backlog are growing.
Alan is responsible for sales for all of our Geospatial services.
Let's ask him for an update.
Kurt We recently made two acquisitions in the geospatial space at some geospatial Enel III Harriss geospatial businesses.
<unk> been very involved in the integration of the entire geospatial sales organization, particularly with our recent acquisition.
How have you combined our federal and commercial sales organizations.
Thanks Dickerson, yes in fact, the sales integration of both axiom and the LTE Harris digital information systems group or <unk> for short.
I say almost complete because integrating our CRM does take some time, but even with that we expect that capability to go live.
During Q1 of next year.
<unk> reporting perspective.
Geospatial vertical is divided into four sub verticals.
Those sub verticals, our defense and intelligence.
Federal civilian state.
State and regional and commercial.
We also have to cross functional disciplines that sell into each of those four.
Verticals that are tracked separately they are hydro spatial and software.
Additionally, with regards to integration all geospatial will be branding as one <unk> starting on January one.
We're moving into the new year in good shape, one team one brand.
I thought I'd also take a minute to discuss ask them and how they fit into the core and B five geospatial group.
Excellent brings us a hugely expanded capability within the defense and intelligence market.
This means access to clients, we have been unable to sell too because of the classified nature of the business.
In addition, <unk> was recognized as a premier enterprise <unk> provider, which adds to our capabilities within the final portion of the lifecycle.
With these two acquisitions and be five probably now has the broadest and deepest geospatial lifecycle capability from the world.
Thanks Kurt.
Perhaps you can also tell us how the acquisition of <unk> III Harriss component. That's helped introduced a new client base and revenue stream for Geospatial services.
Sure. The addition of <unk> has greatly expanded our ability to provide a wide range of solutions to our existing client base.
It also allows us to tap into the NV software ecosystem that business been known for for the last 46 years in a nutshell. The NV ecosystem includes more than 500000 software users worldwide and the acquisition have now made MP five the world's leader in providing advanced imaging software, particularly.
With respect to imaging spectroscopy, and synthetic aperture radar, which is also known as Saar.
From a growth perspective, this acquisition that geographically opened up the world for our geospatial vertical by adding four offices in Europe and two offices in the Asia Pacific region. It has also allowed us to open doors within the Geospatial project lifecycle, where the core Geospatial group was not as strong.
While quantum spatial was a leader in the collection and processing of geospatial data and the development of derived analytics <unk> enhances our ability to provide proven developed software and modeling capabilities within the geospatial lifecycle.
Already we are seeing the integration of our professional services sales team with our software team bear fruit.
For example, we just recently closed an envy informed software bookings with a publicly traded mining company.
This company wanted to utilize NV to analyze hyper spectral data for mineral exploration.
For business would probably have just been a software sale instead <unk> introduced our services capability to the client.
We are now also providing a complete solution to optimize their workflow with hyper spectral data revenue.
Our revenue to be generated by our professional services group for that transaction is more than five times the software revenue.
While this is just one example, it speaks to our growth possibilities within geospatial with the acquisition of this.
Exciting. Thank you Kurt on slide 10, we get insights into how the overall <unk> business is doing or.
Our backlog has grown to 833 million, which represents work we plan to do in the coming 12 months.
Any new awards.
The results represented growth year over year and quarter over quarter.
On the right hand side of the page you can reference key wins and infrastructure utility services and geospatial.
I would now like to turn the call over to our Chief Financial Officer, Ed Codispoti to provide an overview ed. Thank.
Thank you Dickerson and good afternoon, everyone.
If you would please turn to slide 12 of the presentation I'll review, our third quarter 2023 financial results.
Our gross revenues were $239 3 million.
Compared to $204 1 million in the third quarter of last year.
The 17% increase in growth was fueled by organic growth and acquisitions, primarily Axsom Andrews.
Gross profit was $115 4 million compared to $99 9 million in the third quarter of last year.
An increase of $15 5 million or 15, 5% net.
Net income was $13 $3 million in the quarter compared to $16 1 million in the third quarter of last year, a decrease of $2 7 million.
The decrease in net income was impacted by amortization expense from acquisitions, which increased $3 5 million when compared to the third quarter of last year and interest expense, which increased $2 9 million.
Additionally, our margins this quarter were impacted by the pre integration period of our <unk> acquisition and LNG project cycles.
Our net income during the quarter also reflects a benefit from income taxes of $2 $1 million, which was driven by a larger R&D tax credits and deductions related to stock compensation.
As a result, our GAAP diluted earnings per share were <unk> 86 per share in the third quarter of 2023 compared to $1 <unk> per share in the third quarter of 2022.
This EPS is based on 15 5 million shares outstanding this quarter compared to $15 3 million shares outstanding in the third quarter of last year.
Our adjusted EBITDA was $37 8 million compared to $36 million in.
In the third quarter of last year.
The increase was impacted by project cycles, and our LNG business and by the pre integration period of our <unk> acquisition.
Our adjusted earnings per share, which excludes the impact of intangible amortization and acquisition related costs were $1 51 per share in the third quarter compared to $1 50 per share in the third quarter of last year.
On Slide 13, you can see that our cash flows from operations during the third quarter were $19 $9 million.
We have seen a sequential increase in our cash flows during each quarter. This year as we generated $11 $3 million of cash from operations in the first quarter, followed by $14 2 million in the second quarter and $19 9 million in the third quarter.
Keep in mind that we generated $19 $9 million of cash from operations in the third quarter, despite higher interest rates when compared to the first and second quarters of this year.
As of September 32023, we had $46 $4 million of cash on hand, and our net leverage was one three times down slightly from one four times last quarter. This net leverage includes the impact of the axiom and <unk> acquisitions.
We feel confident in the strength of our balance sheet and believe it positions us well for future growth.
I'll now turn it back over to Dickerson for some closing comments.
You add.
Let's go now to slide 16, and we have updated this slide from last quarter presentation, and you will see some of the <unk>.
Initiatives that were doing to grow the company even further.
Please note that along with our seven previous drivers, we will expand our focus on software revenues.
That will serve as driver number eight.
We have also expanded our international footprint to capitalize on the growing technology market.
Thank you I would like to now turn the call over to the operator.
Thank you at this time, if you would like to ask a question Press Star then the number one on your telephone keypad.
Our first question will come from Chris Moore with CJS Securities. Please proceed.
Hey, good afternoon, guys. Thanks for taking a couple of questions Chris.
Alright, So meet me, maybe you could start with the fiscal 'twenty three we got obviously is down a bit from Q2, you talked a little bit about it can you maybe talk some more about the drivers there and.
Was it.
Work that you thought you might get in Q4, that's not happening or just kind of any any further insight there.
Sure Chris.
One thing I can say its not was not based on our.
Lack of organic growth, which is actually improving.
But a couple a lot of our growth is based on acquisitions as well and so we've had some acquisitions that we were anticipating to come to fruition much sooner are earlier in the year that have not come and we're anticipating that maybe some of those acquisitions.
Could extend over to 2024.
Other thing is that we haven't really lost any backlog or any work, but we've had some project delays in our geospatial group with traps.
Our federal delays for specifically that were pushed over to the fourth quarter, but so we've been very conservative in the guidance and.
A lot of that was really based on just the timing of project delays and acquisitions that have not come to fruition, but the company has been growing organically.
Got it I appreciate that.
Maybe just in terms of what Youre seeing from utility Capex spending it looks like it slowed down a little bit in Q2 did that slower pace continue in Q3 is it.
Picking up I know typically it had been low single digits. It was much higher than that for a while I'm just trying to get a sense as to what youre seeing.
Well.
I'll, let Ed maybe answer that specifically more but generally we've been you've seen a real growth that we've seen a real growth in our geospatial business and the geospatial is much more capital intensive so if it's.
Your question was on utilities and I wasn't quite sure if you met the capital expenditure.
Many of our clients or our capital expenditure yes.
Of your clients.
Yes, well, we've had some delays in the <unk> and <unk> seen some recent things that delay in the wind and wind farm work. So we have seen.
The lack of capital there, but there has been significant improvement in capital on improving the grid optimizing the grid modernizing the grid and not so much in capital to actually in energy generation is mostly an energy delivery, but maybe add or Alex may have a specific comment to you on that but I think you said.
It very well, we have seen that will slowdown with respect to the wind.
Our our power distribution.
Distribution and delivery, we're not seeing any slowdown right now.
Got it I appreciate that maybe just ask one.
Backlog $833 million.
Roughly what percentage of that is geospatial.
Yeah.
Geospatial is around $156 million or so of that portion.
Got it and has that changed much over the.
Over the last year year over year is that number a much different I think.
Well of course, we had the acquisition.
Sure Yep.
But I think the proportion that youre seeing now should should be representative going forward absent any.
It is an expected mix right now as of end of Q3.
Very helpful I'll leave it there thanks guys.
Okay.
Thank you. Our next question will come from Rob Brown with Lake Street Capital markets. Please go ahead.
Good afternoon.
Hi, Rob.
Just wanted to first talk about gross margins a little bit I think you talked about some one time things, but maybe just clarify that the damage and gross margins should those kind of snapback here as those flow through in Q3.
Yes.
I'll, just give a general comment, but I'd like add this maybe speak specifically on that the interesting thing to me on gross margins is.
If you look at our second quarter, we had a higher gross margin, but a lower net.
Net income.
Our lowered adjusted EBITDA.
And it really depends on the one the mix of the client.
And then on our percentage of completion projects, what we think is.
Completed.
One we are very labor intensive.
And so sometimes our increase in labor our salary increases that people may not match up to the exact timing of our contract acceleration are increasing and so so that youll have some very variance in gross margin from month to month and quarter to quarter, but I think with respect to Q3 raw.
The outlier there as we mentioned in the releases the LNG business and Thats just timing of contracts. So as we cycle through different contracts I would expect that.
Those margins would get back to normal over over time, but I think Q3 was.
A lower than average quarter with respect to margin because of that reason.
Yes.
Okay. Thank you.
And then I know you talked a little bit about Q4, but how do you sort of think about next year in terms of the trends in the business for organic growth.
Or some of these headwinds kind of meeting that a little bit in the next year or do you feel like this sort of sorts out in next year, it looks sort of normalized.
Well.
We are certainly optimistic about the business and I'll speak a little bit more of that in the including comments, but noticed we've had a very we have a very strong backlog.
And we really use our backlog in the budgeting processes, but we are anticipating a solid strong good year.
In 2024, and I was going to comment on this and maybe you mentioned it again.
Including comments, but.
No.
I think we all need to look at the credibility of the company and.
I'll, just kind of say in general on favorability in and we can speak to specifics, but yes.
We have never had a losing year in business, we have never had since our inception, we have never had anything.
That would.
Would indicate any kind of a loss so.
We want to base that on that credibility and for what I see in the backlog and all the indicators that we have used in the past from 2013, when we went public.
Where we were doing $100 million in revenue to two.
To date year to date or year end, we're anticipating $864 million in revenue. So all of that growth has gone from very limited leverage always profitability and so going into 2024 I have to use those same indicators and I'll speak specifically of those things and are concluding comments.
But we have a very strong backlog and we have a switch and <unk>.
And stability in revenue, because we're getting more and more portion of our businesses and reoccurring revenue subscription based revenue and that tends to be a little more solid so I am very encourage rob about 2024, and we're entering it with us entering the year with <unk>.
Really.
Optimistic viewpoint, and we expect that 2024 to be a stronger year.
Okay, great. Thank you I'll turn it over.
Great. Thank you. Our next question comes from Tim Mulrooney with William Blair. Please go ahead.
Yes. Good afternoon, thanks for taking my questions.
Welcome and thank you for following US we appreciate it.
Yes. Thanks.
I'd ask build on an earlier question.
On the utility business, we've seen some favorable regulatory changes lately when T&D whether thats.
In Texas with the ERCOT reforms of the recent FERC order in 2023 that will hopefully streamline the interconnection queue.
I was just curious is that helping drive that strong organic growth that you saw in the utility services business for the quarter are those dynamics that really impact what youre doing in utility services.
Well I'll give the general thing and then I'll really leave it to Alex.
Perhaps answer, but we are really focused on utility business in <unk>.
We've hired additional people and we're entering into new markets. So we are very positive and I wouldnt.
For our piece I wouldn't say, it's so much of the increase in the overall general utility business, but the specific client basis that we're going after so we're really focused on the utility business from areas that we want to identify and we want to focus on so.
I think we're just getting more emphasis towards it and so we feel very optimistic in 2024 about the utility business, but no. Alex you may have a comment on that I would agree with you said Dickerson the only thing that I would add is that we're seeing.
<unk> opportunities with our strategic underground.
Both transmission and distribution as well as in general increase in Capex on distribution lines.
Got it. Thank you and I also wanted to ask on your infrastructure business and apologies. If you already addressed this but I just wanted to get your 10000 foot view on where we are in fiscal stimulus with a particular focus on <unk>.
I ask because we've been hearing some more dollars that finally falling into actual projects and new contract vehicles being announced so I'm just curious.
You would expect this particular piece of stimulus to unfold over the next several years and when you really think it might.
Really start to impact your numbers if at all.
I'll just speak from our provincial look at things.
We've always wanted to be in a mandated business, so anything and infrastructures not so much based on the economy as it is based on needs people need to drink clean water people need to use the facilities people need to go over bridges and those things have to be done.
Whether the economy is.
Whether the economy is good or bad and so we think that we wanted to have something that is much more.
Stable than something that is just.
Some business that are based on.
On the economy and infrastructure, we are starting to see some <unk>.
New projects that had been had some.
Support from federal funding and so the overall general view is we do we are seeing some.
<unk> and so we think the federal mandated projects.
They are getting some assistance to that in.
And we seem to be benefiting from that.
Okay. Thank you and if I might sneak one more just modeling question.
Thank you for add add apologies, but I'm still new to the story. So I was just curious within Cogs. It looks like that other direct cost line jumped up about $6 million sequentially here in the third quarter.
Just curious what drove that increase.
And if the 21% to $22 million is a good run rate for how to think about that particular line item in our models moving forward.
So that particular line of Cogs.
A few things flowing through one is your traditional pass throughs for expenses of employees that are working on their projects.
Items that move the needle more which are the ones that youre alluding to or in the case of the LNG business when they assemble.
And manufacture the equipment the equipment itself passes through that line and so sometimes it's a little bit noisy right.
Because a lot of it has to do with the timing of the project cycles, but thats whats driving that particular spike or youre, referring to.
Okay. So maybe not something that we should be using as a run rate moving forward it sounds like.
You kind of look at them at a larger or longer window, right and look at averages, but its hard to say, it's going to stay static.
Current run rate of 21 mill.
Got it. Thank you all for taking my questions and good luck in the fourth quarter.
Thank you.
Thank you. Our next question comes from Jeff Martin with Roth and Ken. Please proceed.
Thanks, Hi, guys, Hi, Dickerson how are you.
But goods.
I was wondering if you could give us.
A frame of reference on the LNG projects I mean, I don't recall, a whole lot of discussion on previous calls regarding LNG, So maybe give us.
The high level view, and maybe narrow it down on.
Specific projects.
Now how are collectively how large is LNG this year versus last year are there large projects that are tailing off.
Would be helpful for us to know and half a point of reference as we model out the balance of this year and into next year.
Okay I'll start to come on and you are right for me theres going to be very high level. So.
I think.
This is one of our one of our business units that is really focused on percent of completion.
We anticipate having a <unk>.
Barry a much stronger very strong year quarter in the fourth quarter of LNG, where they will be recognizing.
Our revenue better I don't think there is I don't think there is.
There isn't anything that they are.
Doing now.
That would indicate that.
There would be a slowdown in the fourth quarter a lot of the work they are doing now.
Is on is transferred over to unit price basis, rather than.
They are very risk averse, so where theyre not so much.
<unk> an outcome as they are on billing for the progress they are making it and they tend to be a little bit conservative conservative in recognizing revenue.
The LNG group.
Ports and infrastructure group too.
Alex and he is here. He is here today and Ed may have some comments on how they see the LNG business. So the one thing thats unique about the LNG business.
Jeff.
And EPC model, so theyre, providing engineering procurement as well as.
Overseeing the construction.
So as you look at the types of projects. It is considered in these three phases. So while the engineering phase is actually very steady in terms of its revenue.
The issue that you have with the cost of goods or relative to the procurement various.
Pieces of equipment, that's where we start to get the lumpiness, but overall, we're seeing still a very very high demand for these peak shaving facilities.
We're very bullish on the future of our LNG business.
And then just from a numbers standpoint to give you a sense, it's around an $80 million business right now on the on the top line.
$80 million this year and what was it last year and when do you think it could be next year.
Last year was also in the $80 million range.
So.
Okay and then.
Do you foresee any project completions that would create growth headwinds for next year.
A little less.
Sure it's not about growth headwinds were halfway as the project completes the engineering phase is still very strong in terms of the pass through revenue that is very dependent upon where you are in the construction cycle.
Thanks.
Okay, Great and then in terms of project delays.
You mentioned at the start of the call. There was some construction related project delays I was wondering if you could elaborate on that.
Okay.
Some of the delays that we're seeing relative to construction.
With interest rates, increasing seven under private development have just put projects on hold they are already acquired land.
The actual initiation of breaking ground and going through with the projects or the types of projects, where we've typically seen some headwinds.
Okay, Great and then as we head into next year I would assume.
With the strong bookings and strong backlog and geospatial you would expect some organic.
Organic growth acceleration for the business next year and geospatial.
And that's certainly been the trend.
We really are seeing an increase in our in our organic growth and in the infrastructure business.
We are optimistic about the future organic growth.
Okay, Great and then just one last question if I could on the real estate transaction side, what has been the trend over the course of this year I think in Q2, we thought it may have bottomed out did it uptick in Q3.
There's been a slight uptick in both segments of that business, but.
As Alex mentioned the interest rates are really driving.
Projects, we've had some project delays recently.
We're awarded a large.
Project and I cant name the specific I won't name the specific name, but they have delayed it until they see they're sure that interest rates are going to stabilize so you can imagine that if everyone is working on more.
So then not on borrowed money so when the increase of interest rates. It really has slowed down.
That business, which is really a portfolio acquisition and things that are very dependent on investments and the investments are dependent on what the interest rates were and I'll just add to that that sequentially over the last three quarters. This year. So real estate has improved each quarter through Q3.
That's very helpful. Thank you.
Okay. Thank you and as a reminder to ask a question. Please press star followed by the number one.
Our next question comes from Andy Wittmann with Baird. Please proceed.
Yeah, great. Thanks for taking my question guys I just wanted to ask couple of questions here first to the quarter a little bit better.
Can you hear me just want to make sure.
<unk> okay.
Okay. Good.
Too many calls recently, where I haven't been coming.
Difficulty hearing hard questions, but if you have any.
Yes.
See I don't think so.
So I guess, maybe for Ed how much of the revenue in the quarter.
<unk>.
Derived from companies owned less than 12 months since number is going to show up in your K or in your 10-Q anyway, but just thought.
To understand that one to calculate the organic growth rate for the quarter.
Quarter, three had around 30 $33 million or so of $32 nine of revenue from from acquisitions.
Got it okay. Thank you for that and then just on the on the tax rate here. It looks like you actually had like a.
Kind of a refund or something that was recognized you've got positive or negative tax positive income on that I was wondering if you could describe what happened in the quarter and what.
When these things happen, it's always somewhat difficult to understand what the underlying.
Effective tax rate was for the quarter because I imagine there is some kind of one time or special item in there.
Understood.
So with respect to the third quarter as you as you alluded to there is a benefit this quarter.
And that was primarily driven by both R&D tax credits and deductions for stock compensation, but the larger piece of that.
R&D tax credits and that's just.
And the business that we operate in those those come around.
As a result of of the R&D work that we do frankly across our businesses. So.
Our statutory rate Andy.
Is <unk>.
25, 5%, that's the statutory rate, but on top of that you're going to get discounts for R&D tax credit stock comp deductions et cetera, and this particular quarter.
Naturally right.
It's always going to be in that 25, 5% range 30% of of the.
30% represented R&D tax related and then <unk> got about another 7% that stock comp deductions that got you to that 19%.
If that makes sense.
Yes.
Yes.
We have 19.
Right. That's a benefit if you will if you start with your effective rate of 25, 5% or so.
Deduct, 30% first stop for R&D tax credits and another 7% for stock comp and then you have some other items mixed in there, but the bigger story is that it's it's related to R&D tax credits.
Okay. That's good thank you and then.
I guess.
Kind of curious.
The cancellations that <unk> has made or that announced a couple of days ago for two therefore offshore wind projects I didn't know if you had direct exposure to oil that or not I think you've talked in the past about doing some things related to offshore wind I think some of the investments that you have.
Made in subsea geospatial and as well as some I think you've done some onshore stuff for the grid I. Just don't know if you are connected to do these projects at all so I was wondering if you could comment on if this has any impact on <unk> five and.
What that impact could be if so.
Very good question, we did or said is a client of ours and we.
We have done some things for their specific needs. The cancellation of the project that was in the news today in New Jersey, we Werent really doing much there so.
I'm knocking on serious hardwood, which is my head right now.
We are doing a lot of work in North Carolina as you know we had we.
One of our capital expenditures was that deep.
Deep water measurement ocean.
Vessel and that was really for.
Foundations for wind farms that has not.
That portion of the <unk> project has.
Has not been delayed as much but.
We are so it is a client and we will be affected if they if there's further delays.
Got it okay.
Okay.
That is all I had for now thank you very much.
Thanks, Andy.
Thank you at this time. This concludes our question and answer session I would now like to turn the call back over to Mr. Wright for closing remarks.
Thank you operator.
Just had a few thoughts and.
Actually.
I am often asked are we our company is often asked what is our vision what do we see for the company how do we what areas are we going to grow and what do we.
What are we going to do to mitigate any downturns in certain sectors of the business first is diversification.
All of that we have a very diversified and NP five was built on segments.
So when some segments are down other segment seem to improve but we're not so dependent on any one specific area. So we want to grow but not grow for the sake of growth. So we are growing with we're looking for.
Stable revenue with minimal leverage and you can see that in our base. So we don't want to grow by that.
By taking on more debt.
We have and we have many ways of independently doing this but we really are looking for a continuity of earnings we want to make sure that the earnings are stable what revenue that we have that that translates to earnings is is going to be stabilized so youll notice and Youll note.
On our geospatial and other formats, we're really moving to subscription based revenue revenue that's reoccurring revenue that we can.
Nearly count on and so that is another way that we are positioning <unk>.
Technology.
<unk> noticed a lot in the presentation today, we think the competitive edge will be given by technology and so we want to be on the forefront of that and we're positioning our company to be very.
To be very dependent and have that advantage of technology. So look for that.
In the growth of the company.
I would say if there is a good outcome of the.
The increase in interest rates as it allows for more opportunities for <unk> and <unk> did.
B to move in our vision and to be to capitalize on companies that are leveraged but may have good earnings.
<unk>.
The valuations are becoming more realistic and we've moved we moved competitors that are basing on that this increase in interest rates is something that if they have to utilize more that it becomes more expensive for us. So we think there's some good opportunities there.
Think.
I, often asking we often the company off of it as flat.
Two companies what separates you from the competitors and they can use many.
Things that are not objective, we believe an objective measurement. So I said this earlier I would like to.
<unk> mentioned to you and just something that we constantly need to improve we constantly need to grow but if you look from when we the inception of the company with one zero, but when we went public and I said this earlier in 2013, our revenue was a 100.
A little over $100 million.
Up.
In 2023, we think our revenue is going to be close to $900 million 865, and we're looking at a very strong.
Year in 2024, we have positioned with everybody our goal of being $1 billion in revenue by the end of 'twenty four we still are focused on that and so.
What im trying to mention or to convey is.
If we are anticipating a good year every indicator that that we view is that we've grown from 2013 to 2023 from 100 million to $800 million those indicators that we use.
Really are.
Showing us or giving us some clarity on having a stronger year in 2024. So we look for a good prospects in 2024 and some of those dashboard indicators of course, our backlog, we take that very seriously we will learn much more in the budget process and hopefully we will have some.
Of this acquisitions that enhance our growth will be dialed in sooner in the year.
Later, so I want to thank everybody for.
For listening in and we like to be very conservative on our outlook on things that we wanted to base. It on one whereas the company selling what is the vision how are we going to get there and then what are we forecasting so I. Thank everyone for their continued interest in the company.
<unk>.
We look forward to having to speaking to you again in the fourth quarter and entering into 2024. So thank you everyone.
Thank you ladies and gentlemen that concludes today's call you may now disconnect.
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