Q1 2024 NV5 Global Inc Earnings Call
financial results for the first quarter, 2024, ended March 30th, 2024.
Joining us today are Dickerson Wright, Executive Chairman of NV5.
Edward Cospote, CFO of NV5.
Alex Hawkman, CEO of NV5.
infrastructure, Ben Harrod, CEO of NB5 Buildings and Technology, Dan Levine, President Geospatial at NB5, and Richard Tongue, Executive Vice President and General Counsel at NB5. I would now like to turn the call over to Richard Tong.
Ladies and gentlemen, good afternoon, and thank you for participating in today's conference call to discuss and defines our financial results for the first quarter 'twenty 'twenty four ended March 30th 2024.
Thank you, Operator. Welcome to NB5's first quarter, 2024 earnings call.
Speaker Change: Joining us today are different Dickerson Wright executive Chairman of N V. Five Edward Codispoti CFO of N V. Five Alex Hockman C E O F N b five infrastructure.
Before we proceed, I would like to notify all participants that today's presentation can be found on IR.nv5.com and remind everyone that today's discussion contains forward-looking statements about the company's future business and financial performance.
Herb Odd: Then her odd C E O a N V five buildings and technology.
These are based on management's current expectations and are subject to risks and uncertainties.
Herb Odd: Dan Levine President Geospatial at N V five and Richard Tong Executive Vice President and General Counsel at N B five.
Factors 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.
I would now like to turn the call over to Richard Tong.
Richard Tong: Thank you operator, welcome everyone to <unk> first quarter 2024 earnings call.
During this call, GAP and non- GAAP financial measures will be discussed.
A reconciliation between the two is available in today's earnings release and on the company's website at www.nv5.com. Please note that unless otherwise stated, all references the first quarter, 2024 comparison are being made against the first quarter of 2023.
Richard Tong: 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.
Richard Tong: The company's future business and financial performance. These are based on management's current expectations and are subject to risks and uncertainty factors.
In this presentation, NV5 has included certain non- GAAP financial measures as defined in Regulation G promulgated under the Securities and Exchange Act of 1934 as amended.
Factors that could cause actual results to differ materially from these statements are included in today's presentation slides.
Richard Tong: And in our reports on file with the SEC.
The non-cap financial measures included in this presentation are adjusted earnings per share and adjusted EB-up.
Richard Tong: 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 <unk> Dot com. Please note that unless otherwise stated all references to first quarter 2020 for comparison are being made against.
NV5 provides non- GAAP financial measures to supplement GAAP measures as they provide additional insight into NV5's results. However, non- GAAP measures have limitations as analytical tools and should not be considered in isolation and are not in accordance or a substitute for GAP.
Richard Tong: The first quarter of 2023.
Richard Tong: In this presentation <unk> has included certain non-GAAP financial measures as defined in regulation G promulgated under the Securities and Exchange Act of 1934 as amended.
In addition, other companies may define non- GAAP measures differently, which limits the ability of investors to compare non- GAAP measures of NV5 to those used by peer companies.
A webcap replay of this call and its company presentation will also be available via the link provided in today's news release and on the investors section of the company's website.
The non-GAAP financial measure is included in this presentation are adjusted earnings per share and adjusted EBITDA and <unk> provides non-GAAP financial measures to supplement GAAP measures because they provide additional insight into <unk> results. However, non-GAAP measures have limitations as analytical tools and should not.
You may also find today's presentation, which will be referenced during this call on the investors section of the company's website.
We will begin the call with comments from Dickerson Wright, Executive Chairman of NB5, before turning the call over to Edward Kodisputti, Chief Financial Officer, for a review of the first quarter, 2024 results.
Richard Tong: To be considered in isolation and are not in accordance or a substitute for GAAP.
Richard Tong: In addition, other companies may define non-GAAP measures differently, which limits the ability of investors to compare non-GAAP measures of <unk> to those used by peer company.
Dickerson Wright will then provide closing comments before we open the call for your questions. Dickerson, please go ahead. Thank you, Richard, and thank you to everyone for joining our call today.
Richard Tong: A webcast replay of this call and it's accompanied presentation will also be available via the link provided in today's news release and on the investors section of the company's website.
We're off to a great start in 2024. We are pleased to report that the first quarter results reflected strong organic growth, profitability, and increased cash flow.
Also for today's presentation, which will be referenced during this call on the investors section of the company's website.
Our infrastructure group, the larger segment of NV5, delivered strong growth in the quarter. This was a result of expansion into new geographies and service lines and the adoption of technology to provide accuracy, efficiency, and services over wider geographies.
Richard Tong: We will begin the call with comments from Dickerson Wright executive Chairman of MB five before turning the call over to Edward Codispoti, Chief Financial Officer for a review of the first quarter 2024 results.
Edward H. Codispoti: Sure Kristen Wright will then provide closing comments before we open the call for your questions.
The second largest segment of NME-5 is our geospatial services.
Please go ahead.
Edward H. Codispoti: Thank you Richard and thank you to everyone for joining our call today.
Once again, they produced double-digit organic growth and EBAA of over 20%.
Edward H. Codispoti: We are off to a great start in 2024, we are pleased to report that our first quarter results reflected strong organic growth and profitability and increased cash flow.
We have expanded their services to departments of transportation and utilities do not only increase geospatial growth, but allow Indy5 to have complementary technical additions to the traditional services provided.
Dickerson Wright: Our infrastructure group the largest segment of NV five delivered strong growth in the quarter.
Our buildings and technology group has become the leading provider of engineering services for data centers. We have teamed with computing chip and software providers to support the tremendous growth of data centers, particularly international operations, for Western clients.
Dickerson Wright: You saw that the expansion into new geographies and service lines and the adoption of technology to provide accuracy efficiency and services over wider geographies.
Dickerson Wright: Largest segment of <unk> is our geospatial services.
The clients have committed to investing an average of $300 billion in USD each year over the next five years to address the AI and data center demands.
Dickerson Wright: Once again, they produced double digit organic growth and EBITDA up over 20%.
Richard Tong: We have expanded their services to departments of transportation and utilities do not only increased geospatial growth, but allow us to have complementary technical additions to the traditional services provided our buildings and technology group as become the leading provider of engineering services for data centers.
The growing demand for energy has pressured the existing utility delivery grid, and NP5 has been asked to provide engineering service and technical support to provide greater efficiency in the energy delivery model.
85 is well known in the space. In fact, we know of no other firm doing as much work in this area.
Richard Tong: We have teamed with <unk> chip and software providers to support the tremendous growth of data centers, particularly international operations for western clients.
We'll speak later of acquisitions completed in quarter one of 2024 that will densify our international footprint and technology, densify our infrastructure group, and create a greater nexus of synergy of our geospatial group for our traditional Department of Transportation Services.
Richard Tong: The clients are committed to investing in average up $300 billion in U S. D. Each year over the next five years to address the AI and data center demands.
Richard Tong: The growing demand for energy has pressured the existing utility delivery grid and then <unk> been asked to provide engineering service and technical support to provide greater efficiency in the energy delivery model.
Let's turn to page 5 in the presentation deck that you have been furnished that will document the quarter 124 achievements of MB5.
You will see that we've experienced organic growth of 8% for quarter 124. Our total growth exceeded quarter 123 by 16%. And our gross profits were 18% greater than 2123.
Richard Tong: <unk> is well known in this space in fact, we know of no other firm doing as much work in this area.
Richard Tong: We will speak later of acquisitions completed in quarter, one of 2024 that will densify, our international footprint and technology Densify, our infrastructure group and create a greater nexus that synergy of our geospatial group for our traditional department of transportation services.
Another important metric is cash flow. Our cash flow from operations approved 73% in the quarter versus quarter 123.
Richard Tong: Turning to page five in the presentation deck that you have been furnished that will document.
Our growth was a result of the expansion of our data center services and our DOT and infrastructure growth initiatives, all of which have created a bridge for our geospatial offerings.
Richard Tong: Quarter, one 2004 achievements of MB five.
Richard Tong: You will see that we have experienced organic growth of 8%.
We entered new high growth areas in all verticals, and we justified our existing platform through acquisitions and three key segments of our business.
Richard Tong: For quarter 124.
Richard Tong: Our total growth exceeded quarter $1 23 by 16% and our gross profits were 18% greater than Q1 dollars 23.
Please turn to slide six. As you can see, our very conservative backlog, which represents a rolling going forward for the next 12 months, increased from $802 million in Q123 to $838 million in Q124.
Richard Tong: Another important metric is cash flow.
Richard Tong: Our cash flow from operations improved 73% in the quarter versus quarter $1 23.
This backlog includes awards of note, including 65 million in the Department of Transportation Services, 13 million in Data Center wins, 23 million in infrastructure awards, and 13 million in utility service wins.
Richard Tong: Our growth was a result of the expansion of our data center services and our <unk> and.
Richard Tong: And infrastructure growth initiatives, all of which have created a bridge for our geospatial offerings.
Richard Tong: We entered new high growth areas in all verticals and we densify their existing platform through acquisitions had three key segments of our business.
Please turn to slide seven where we can speak of actual accomplishments as we create the nexus of technology and engineering to deliver faster and more comprehensive services to our clients.
Richard Tong: Please turn to slide six as you can see our very conservative backlog, which represents a rolling going forward for the next 12 months increased from $802 million in Q1, 'twenty $3 million to $838 million in Q1 24.
We have highlighted in this stage five areas where this technology can be increasingly applied.
I spoke earlier of Data Center and Mission Critical Services that we are currently providing to all the major technology clients.
Richard Tong: This backlog includes awards of note, including $65 million in the department of Transportation services.
Richard Tong: $14 million in datacenter wins $23 million in infrastructure awards and $13 million in utility service wins.
We have teamed with suppliers of chips and software.
of which many are familiar names as we provide engineering commissioning IT and MEP energy delivery services to this market.
Richard Tong: Please turn to slide seven where we can speak of actual accomplishments as we create the nexus of technology and engineering to deliver a faster and more comprehensive services to our clients.
NP5 has been the leader in improving the sustainable infrastructure delivery.
Richard Tong: We have highlighted on this stage five areas, where this technology can be increasingly applied.
We have been a major contributor in developing the Envision standard along with Digital Twin and VIN services to provide a better delivery of infrastructure needs.
Richard Tong: I spoke earlier of datacenter and mission critical services.
Richard Tong: We are currently providing to all of the major technology clients.
The demand for more electrical power delivery has increased dramatically worldwide. NP5 has addressed this need through tech enabled and engineering services referred reference on this page.
Richard Tong: We have teamed with.
Richard Tong: Suppliers of chips and software.
Richard Tong: Of which many are familiar names as we provide engineering commissioning and MEP energy delivery services to this market.
Dan Levine will speak more specifically later in the presentation on geospatial data and software to improve delivery of our services. There continues to be increased demand for clean energy and decarbonization. NV5 has addressed this on this page.
Richard Tong: <unk> five has been the leader in.
Richard Tong: And improving the sustainable infrastructure delivery.
Richard Tong: We have been a major contributor in developing the envision standard along with.
We will make specific presentations in each of these segments. So let's begin with infrastructure. Alec Hotman, our CEO of infrastructure, will speak of our accomplishments in the infrastructure segment. Alex, please go ahead.
Richard Tong: Digital twin had been services to provide a better delivery of infrastructure needs.
Richard Tong: Demand for more electrical power deliberate has increased dramatically worldwide.
Richard Tong: And before I address this need through tech enabled and engineering services referred referenced on this page.
Thank you, Dickerson. Please turn to slide eight. Our 2023 investments to accelerate organic growth and the key leadership changes in our southeast and Pacific Northwest businesses are resulting in industry leading metrics.
Richard Tong: Dan Levine, who will speak more specifically later in the presentation on geospatial data and software to improve delivery of our services there.
Richard Tong: There continues to be increased demand for clean energy and de Carbonization and <unk> has addressed this on this stage.
According to the 2023 census, Florida is home to four of the nation's top five fastest growing metropolitan areas.
Richard Tong: We will make specific presentations in each of these segments.
The CHW acquisition that we completed in January .
Richard Tong: Let's begin with infrastructure, Alex Hockman, our CEO of infrastructure will speak of our accomplishments.
has us well positioned to take advantage of these growth opportunities to meet the demands of our urban, suburban, and rural communities by offering a full array of civil engineering design, surveying, transportation consulting, landscape architecture, and recently added geotechnical capabilities in north central Florida.
Alexander A. Hockman: The infrastructure segment.
Alexander A. Hockman: Alex Please go ahead.
Alexander A. Hockman: Thank you Victor Tseng.
Speaker Change: Please turn to slide eight our.
Alexander A. Hockman: Our 2023 investments to accelerate organic growth and the key leadership changes in our southeast and Pacific Northwest businesses are resulting in industry leading metrics.
We expect to increase our organic growth and profitability through the region.
The acquisition of Florida Reed expands our structural engineering services throughout North Carolina and the southeast.
Speaker Change: According to the 2023 centers, Florida is how long before the nations top five fastest growing metropolitan areas.
Located in Raleigh, North Carolina, they are well situated to take advantage of the unprecedented growth in the Research Triangle Park area, and the cities of Raleigh, Durham, and Kerry, which have the 10th fastest growth rate in the U.S.
Alexander A. Hockman: CH W acquisition that we completed in January has us well positioned to take advantage of these growth opportunities to meet the demands of our urban suburban and rural communities by offering a full array of civil engineering design surveying transportation consulting landscape architecture, and recently added geotechnical.
Our California Infrastructure Group was awarded more than $80 million in new contracts in Q1, of which over $65 million was related to transportation projects. These awards were directly related to the National DOT Growth Initiative launched in 2023.
Alexander A. Hockman: Capabilities and North Central Florida.
Alexander A. Hockman: We expect to increase our organic growth and profitability through the region.
Alexander A. Hockman: The acquisition of floor rate expands our structural engineering services throughout North Carolina in the southeast.
We are seeing a similar trend throughout the U.S. as federal, state, and local agencies are responding to the demand for infrastructure improvements.
Alexander A. Hockman: Located in Raleigh, North Carolina, there are well situated to take advantage of the unprecedented growth in the research Triangle Park area and the <unk>.
As we have in Florida, we anticipate strong growth and profitability for our infrastructure group.
Alexander A. Hockman: Cities of Raleigh, Durham, and carry which have the 10th fastest growth rate in the U S.
Our real estate transaction services has also rebounded well with significant organic growth quarter over quarter, which is due to stabilizing interest rates and pent up demand for real estate transactions.
Alexander A. Hockman: Our California infrastructure group was awarded more than $80 million in new contracts in Q1 of which over $65 million or is it related to transportation projects. These awards were directly related to the national Dirty growth initiative launched in 2023.
Our utility services continue to expand because of the electrical grid-hardening investments by utilities, and we are also seeing a significant increase in our natural gas services, which provides engineering design to improve the existing distribution infrastructure.
Alexander A. Hockman: We are seeing a similar trend throughout the U S as federal state and local agencies are responding to the demand for infrastructure improvements.
Alexander A. Hockman: As we have in Florida, we anticipate strong growth and profitability for our infrastructure group.
On slide 9, we highlight some of the technologies that we employ to provide specialized value to our clients.
Alexander A. Hockman: A real estate transaction services has also rebounded well with significant organic growth quarter over quarter, which is due to stabilizing interest rates and pent up demand for real estate transactions.
of particular significance is our integrated and technological solutions that allow us to combine several modalities that ultimately offer our clients and project stakeholders useful and understandable information through visualization.
Alexander A. Hockman: Our utility services continue to expand because of the electrical grid hardening investments by utilities and we are also seeing a significant increase in our natural gas services, which provides engineering design to improve the existing distribution infrastructure.
These technologies facilitate the development and ultimately the understanding of proposed solutions
to address asset management, designs to mitigate rising sea levels, and large-scale grid hardening projects that are in remote and urban locations,
Alexander A. Hockman: On slide nine we've highlighted some of the technologies that we employ to provide specialized value to our clients.
as where you combine aerial at-grade and subsurface information into actionable data, resulting in sustainable infrastructure for future generations.
Alexander A. Hockman: Of particular significance is our integrated and technological solutions that allow us to combine several of our dialysis that ultimately offer our clients a project stakeholders useful and understandable information through visualization.
Electrical grid hardening continues to be a driver of growth to mitigate fires in the West and protects against storm damage in the East.
Electrification initiatives are also driving a demand for additional electrical power delivery to support the conversion from petroleum energy to electricity.
Alexander A. Hockman: These technologies facilitate the development and ultimately the understanding of proposed solutions to address asset management designed to mitigate rising sea levels at large scale grid hardening projects that are in remote and urban locations as where your combined aerial at grade and subsurface information into action.
From specialized undergrounding design methodologies that reduce underground electrical distribution construction cost and time,
To geospatial asset management and remote inspection, NV5's implementation of specialized designing technology for transmission and distribution assets contribute to NV5's leadership position in the hardening of the nation's electrical grid.
Alexander A. Hockman: Data <unk>.
Alexander A. Hockman: Resulting in sustainable infrastructure for future generations.
Alexander A. Hockman: Electrical grid hardening continues to be a driver of growth to mitigate fires in the west and protects against storm damage in the east.
Thank you, Alex. Dan Levine, the president of our geospatial segment, will now speak of our accomplishments in this regard.
Alexander A. Hockman: Electrification initiatives are also driving the demand for additional electrical power delivery to support the conversion.
Thank you, Dickerson. Please turn to slide 10.
Alexander A. Hockman: Petroleum energy to electricity.
For the geospatial sector, we had a great quarter in organic growth and EBITA, driven largely but not exclusively by the activity in our commercial sector, which nearly doubled in Q-124 over Q-1-23.
Alexander A. Hockman: From a specialized underground design methodologies that reduced underground electrical distribution construction costs and time to geospatial asset management and remote inspection and <unk> implementation of specialized design and technology for our transmission and distribution assets contribute to <unk> leadership position in the <unk>.
This growth is a result of our focus on diversification, service expansion within our existing client base to expand beyond our traditional transmission line vegetation management work into more asset management related work.
Alexander A. Hockman: Our nation's electrical grid.
Speaker Change: Thank you Alex.
We have also experienced growth in our bookings in the commercial sector in Q1, signaling strong future performance in this market.
Alexander A. Hockman: Dan Levine, the president of our Geospatial segment will now speak of our accomplishments in this regard.
Another positive result in Q1 is that our airborne data collection activities were up 60% over prior year, and we have experienced record setting aircraft utilization each month this year without additional KAPX expenditures.
Dan Levine: Thank you Dickerson, please turn to slide 10.
Dan Levine: For the geospatial sector, we had a great quarter and the organic growth in EBITDA drive driven largely but not exclusively by the activity in our commercial sector, which nearly doubled in Q1 24 over Q1 2003 <unk>.
We have achieved a significant milestone this quarter by completing a statewide oblique imagery collection for the state of Kentucky to date the largest of its kind. We will be continuing to work on the data processing throughout the remainder of the year for the state of Kentucky.
Dan Levine: As a result of our focus on diversification service expansion within our existing client base to expand beyond our traditional transmission line vegetation management work into more asset management related work.
During the last earnings fall, I spoke about the challenges of the federal government continuing resolution on our federal business. As anticipated, budgets were resolved and federal dollars were not flowing.
Alexander A. Hockman: We have also experienced growth in our bookings in the commercial sector in Q1 signaling strong future performance in this market.
Alexander A. Hockman: Another positive result in Q1 is that our airborne data collection activities were up 6% over prior year and we have experienced record setting aircraft utilization each months of this year without additional capex expenditures.
Finally, we acquired GIS Solutions out of Illinois in April . GIS Solutions specializes in supporting state DOT GIS needs, including asset management analysis. This is a key addition to the geospatial business, but more importantly to the overall ND5 transportation sector strategy.
Alexander A. Hockman: We have achieved a significant milestone this quarter by completing a statewide a bleak imagery collection for the state of Kentucky to date, the largest of its kind.
Not only do they bring unique transportation-specific IP to NB-5, but the domain expertise and support they provide within DOTs strengthens the connection between our engineering work and our geospatial work.
Alexander A. Hockman: We will be continuing to work on the data processing throughout the remainder of the year for the state of Kentucky.
Alexander A. Hockman: During our last earnings call I spoke about the challenges that the federal government continuing resolution on our federal business as anticipated budgets were resolved and federal vials are now flowing.
Todd George, who leads Nd5 DOT growth initiative, says the knowledge, skills, and position within state DOTs that GIS solution brings completes the digital delivery cycle from planning, engineering, design, and construction management all the way through geospatial asset management.
Alexander A. Hockman: Finally, we acquired Gis solutions out of Illinois, and April giant solution specializes in supporting state Dot's Gis needs, including asset management analysis. This is a key addition to the geospatial business, but more importantly to the overall <unk> transportation sector strategy.
With this addition of GIS Solutions, we offer full lifecycle management of state DOT infrastructure assets.
We'll now move to slide 11.
Alexander A. Hockman: Not only do they bring unique transportation specific IP to MB five, but the domain expertise and support they provide within dot's strengthens the connection between our engineering work and our geospatial work Todd.
I want to take a few minutes to highlight some of the technologies that we have invested in and the deep expertise we have developed in the industries we serve.
Each of these are differentiators in the market we serve and are applied across Nd5, not just within the geospatial market.
Speaker Change: Hi, George who leads and <unk>.
Alexander A. Hockman: Growth initiatives says the knowledge skills and our position within state guarantees that Gis solution Brink's complete the digital delivery cycle from planning engineering design and construction management all the way through Geo Special asset manager with this addition of Gis solutions, we offer full lifecycle management of state Dot's infrastructure assets.
First, we have developed and deployed artificial intelligence, machine learning, and deep learning solutions, both internally and externally.
Utilizing our AIML routines to automatically detect and extract features from our sensor data has allowed us to streamline our data delivery process significantly, at volume, with speed, and accuracy.
Alexander A. Hockman: We'll now move to slide 11.
Combining our technology prowess with engineering domain expertise, we see the opportunity to connect our asset management data collection in transmission and power delivery as a direct connection to our engineering design as we help modernize the nation's electric grid as Alask spoke to.
Speaker Change: Wanted to take a few minutes to highlight some of the technologies that we have invested in and the deep expertise we have developed in the industries we serve each.
Speaker Change: Each of these are differentiators in the market, we serve and our applied across <unk> not just within the geospatial market.
Furthermore, we can deliver these AI ML capabilities directly as a SaaS model, software as a service model, through our software platform, NV and the NV ecosystem.
Speaker Change: First we have developed and deployed artificial intelligence machine learning and deep learning solutions, both internally and externally.
Speaker Change: Our AI ml routines to automatically detect and track features from our sensor data has allowed us to streamline our data delivery process significantly add volume with speed and accuracy, combining our technology prowess with engineering domain expertise, we see the opportunity to connect our asset management data collection and transmission and power delivery.
Now, speaking of NB and our NB ecosystem, this software platform has been a cornerstone of image processing science for over 30 years. We have recently modernized this technology as a hosted solution and as a software as a service licensing model.
Furthermore, our addition of workflow automation with NV Connect and simplification of the image processing science with Nd Inform has expanded our offerings and our client base.
Speaker Change: As a direct connection to our engineering design as we help modernize the nation's electric grid as Alan spoke to <unk>.
Speaker Change: Furthermore, we can deliver these AI and ml capabilities directly as a SaaS model software as a service model through our software platform and the and the MD ecosystem now speaking of MB and are in the ecosystem. This software platform has been a cornerstone of image processing.
Next, as a recognized premier enterprise developer of GIS solutions with cloud-based, on-premise, and hybrid solutions, we are able to tie together many of NP5s capabilities using geospatial IT as a connective tissue.
This allows us to create the connections of our digital spatial deliveries with other corporate enterprise systems, such as asset management and permitting, elegantly so that they can streamline their processes and systems to operate more effectively.
Speaker Change: Clients for over 30 years, we have recently modernize this technology as a hosted solution and as a software as a service licensing model.
Speaker Change: Furthermore, our addition of workflow automation with MB connect and simplification of the image processing science with Andy inform has expanded our offerings and our client base.
Finally, our extensive library of sensors and acquisition platforms has positions MVP as a leader in delivering digital twins.
Speaker Change: Next as recognized Premier enterprise developer of Gis solutions with cloud based on premise and hybrid solutions, we were able to tie together many of MP five capabilities using geo spatial.
These digital twins are manifested in the smart energy solutions that are buildings and technology group deploys and as part of our digital delivery platform for DOTs.
Thank you, Dan. We will now hear from our CEO of Buildings and Technology Menharad, who will speak of our accomplishments in our buildings and technology segment, as well as the recent initiatives to expand our technology in this area.
Speaker Change: As the connective tissue there.
Speaker Change: This allows us to create the connections of our digital special deliveries with our other corporate enterprise systems, such as asset management and permitting elegantly so that they can streamline their processes.
Speaker Change: And systems to operate more effectively.
Thank you, Dickerson. Let's now turn to slide 12.
Speaker Change: Finally, our extensive library of sensors and acquisition platforms has positioned <unk> as the leader in delivering digital twins. These digital twins are manifested in the smart energy solutions that our buildings and technology group deploys and as part of our digital delivery platform for <unk>.
NV5 has always had a strong focus on leveraging technology to deliver our work more efficiently and remain engaged with our clients for the long term. Our innovative approach to delivering more traditional services in this way sets us apart from the typical engineering firm.
Working closely with our geospatial group, we have been actively embedding 3D reality capture and digital twins into our design and existing building services, positioning us to work with our clients along the entire asset life cycle and drive more subscription-based revenue.
Speaker Change: Thank you Dan.
Speaker Change: We'll now hear from our CEO of buildings and technology, <unk>, who will speak of our accomplishments and our buildings at the technology segment as well as the recent initiatives to expand our technology in this area.
Looking to the work we're doing in the data center and AI compute space.
Speaker Change: Thank you Doug.
Speaker Change: Let's now turn to slide 12.
Our mission critical team continues to grow at a rapid pace. In Q1, we saw organic growth of 27%.
unknown: <unk> has always had a strong focus on leveraging technology to deliver our work more efficiently and remain engaged with our clients for the long term.
Our data center services include specialized MEP and technology design, installation consulting, energy efficiency and power delivery engineering. Our international operation is working with almost all of the major hyperscalers on their data centers.
Speaker Change: Innovative approach to delivering more traditional services in this way sets us apart from the typical engineering firm.
Speaker Change: Working closely with our geospatial grid, we have been actively bidding three D reality capture and digital twins and through our design an existing building services positioning us to work with our clients along the entire lifecycle and drive more subscription based revenue.
We're actively building our teams in existing locations and new geographies to meet the demand of our clients.
In the area of clean energy and decarbonisation, we're also seeing significant growth.
Speaker Change: Looking to the work we're doing in the data center and AI compute space.
Our Clean Energy Group achieved organic growth of 21% in Q1.
Speaker Change: How mission critical <unk> continues to grow at a rapid pace.
We expect this trajectory to continue as governments and businesses invest heavily in decarbonising the global economy. Working with our clients at the early stage of net zero planning often drives downstream work for our design and program management groups and in turn driving their growth also.
Speaker Change: Q1, we saw organic growth of 27%.
Speaker Change: <unk> services include specialized MEP and technology design installation consulting energy efficiency and power delivery engineering, yes.
Speaker Change: International Operation is working with almost all of the major hyperscale on their data centers.
Though relatively small in comparison to NV5's overall revenue, these are some key growth areas that are accelerating.
Speaker Change: We're actively building our teams and existing locations and new geographies to meet the demand of our clients.
In early April we acquired ASG engineering who provides structural engineering, permitting and compliance services in Dubai. This region is seeing massive growth right now. Our existing operation, which provides MEP and technology services, grew organically by 39% in Q1.
Speaker Change: In the area of clean energy and Decarbonization, We're also seeing significant got it now.
Speaker Change: Clean energy group achieved organic growth of 21% in Q1, we.
Speaker Change: We expect this trajectory to continue as governments and businesses invest heavily in decarbonizing the global economy, working with our clients at the early stage of planning often drives downstream work for our design and program management groups and in turn driving deal growth also.
ASG brings a new service line to our international operation and our intent is to bring these services to our other offices in Asia, including our data centre clients.
Let's now turn to slide 13 to discuss tech-enabled engineering solutions that we are deploying for our clients.
Speaker Change: So I relatively small in comparison to <unk> overall revenue. These of some key growth areas that are accelerating.
As I mentioned previously, our work in data centres has been expanding rapidly.
Speaker Change: In early April we acquired ISG engineering, who provides structural engineering.
Artificial intelligence computing puts even greater demand on the data center electrical usage and heat transfer. NV5's expertise in airflow and cooling design is helping data centers create the ideal environment for the demands created by AI computing, hardware and software.
Speaker Change: And compliant services in Dubai this.
Speaker Change: This region is seeing a massive growth right now our existing operation, which provides MEP and technology services grew organically by 39% in Q1.
Speaker Change: ISG brings a new service lines to our international operation and now <unk> is to bring these services to other offices in Asia, including our data center clients.
In addition, getting enough power to build these data centers is an issue all of our clients are facing right now, and this puts NV5 in a very unique position.
Speaker Change: Let's now turn to slide 13 to discuss taken eyeball engineering solutions that we're deploying for our clients.
Our expertise in energy efficiency and clean energy enables us to unlock captured power load in the data center, allowing for additional rack space. Our expertise in power delivery means we can assist our clients with getting the necessary power to the site.
Speaker Change: As I mentioned previously our work in data centers has been expanding rapidly Ida.
Speaker Change: Vishal intelligence computing puts even greater demand on the datacenter electrical usage and heat transfer.
On the clean energy and decarbonisation front, our subscription-based energy efficiency monitoring continues to grow, allowing facilities to identify inefficiencies and power spikes in real-time rather than waiting for a commissioning event that may be years down the road.
Speaker Change: <unk> expertise in air flow and cooling design is helping datacenters create the ideal environment for the demands created by AI computing hardware and software.
Speaker Change: In addition, getting enough payout to build these data centers as an issue all of our clients are facing right now and this puts <unk> in a very unique position.
Our renewable energy design and program management allows public entities, electric vehicle charging companies and private sector clients to turn to a single source for permitting, design and owner representation during the construction.
Speaker Change: Our expertise in energy efficiency and clean energy enables us to unlock captured pallet load and the data seem to us, allowing for additional rack space our expertise in power delivery means we can assist our clients with getting the necessary power to the site.
and our predictive energy auditing and decarbonization consulting is helping clients achieve net zero regulations that have been imposed by the public and private sectors.
Speaker Change: On the clean energy and Decarbonization front.
Speaker Change: Description based energy efficiency monitoring continues to guard, allowing facilities to identify inefficiencies in power sports and real time, rather than waiting for a commissioning event that might be years down the road.
Thank you, Ben. Ed Codespoody, the chief financial officer of NB5, who will now speak of our consolidated financial accomplishments for Q124, and the strong financial health of NB5 going forward. Ed?
Speaker Change: Our renewable energy design and program management allows public entities electric vehicle charging companies and private sector clients to turn to a single source of permitting designed in on a representation during the construction and how predictive energy order thing in Decarbonization consulting is helping clients achieve near zero regulations.
Thank you, Dickerson. And good afternoon, everyone. If you would please turn to slide 15 of the presentation, I'll review our 2024 first quarter financial results.
Our gross revenues in the first quarter grew 16% to $213.3 million, compared to $184.3 million in the first quarter of the prior year.
Speaker Change: It will be imposed by the public and private sectors.
Speaker Change: Thank you Ben Ed Codispoti, the Chief Financial Officer of MB, Five will now speak of our consolidated financial accomplishments.
Our gross profit was $112.8 million compared to $96 million in the prior year, an increase of 18%.
Speaker Change: Q1, 24, and the strong financial health of any type going forward Ed.
We had a busy year of acquisitions last year, and as a result, our intangible asset amortization increased by $3.1 million to $12.1 million for the quarter.
Ed: Thank you Dickerson and good afternoon, everyone.
Speaker Change: If you would please turn to slide 15 of the presentation I'll review, our 2024 first quarter financial results.
Our interest expense also increased $2.6 million quarter over quarter to $4.2 million due to our higher rates and the financing of a portion of our acquisitions.
Edward H. Codispoti: Our gross revenues in the first quarter grew 16% to $213 3 million.
Ed: Compared to $184 3 million in the first quarter of the prior year.
Our operating margins were also temporarily weighed down by the federal continuing resolution, which was resolved at the end of the first quarter, and by the ongoing integrations of Axum and Viz.
Ed: Our gross profit was $112 8 million compared to $96 million in the prior year, an increase of 18%.
Ed: We had a busy year of acquisitions last year and as a result, our intangible asset amortization increased by $3 1 million to.
Please keep these factors in mind when looking at our net income, which was $408,000 in the first quarter of 2024, compared to $5.9 million in the first quarter of prior year.
Ed: The $12 1 million for the quarter.
Ed: Our interest expense also increased $2 6 million quarter over quarter to $4 $2 million due.
With the federal continuing resolution now behind us, we anticipate that revenues will increase and operating margins will improve as we move through 2024.
Ed: Due to our higher rates and the financing of a portion of our acquisitions.
Ed: Our operating margins were also temporarily weighed down by the federal continuing resolution, which was resolved at the end of the first quarter and by the ongoing integrations of act some of this.
Our gap diluted earnings per share were 3 cents per share in the first quarter of 2024 compared to 39 cents in the prior year first quarter. EPS was based on 15.6 million shares outstanding this quarter compared to 15.4 million shares outstanding in the previous year quarter.
Ed: Please keep these factors in mind when looking at our net income which was $408000 in the first quarter of 2024 compared to $5 9 million in the first quarter of prior year.
Our adjusted EBRA was $28.7 million compared to $27.7 million in the first quarter of the prior year, a 4% increase.
Ed: With the federal continuing resolution now behind US, we anticipate that revenues will increase and operating margins will improve as we move through 2024.
And our adjusted earnings per share, which excludes the impact of impangible amortization and acquisition-related costs, was 66 cents in the first quarter of 2024, compared to 88 cents per share during the first quarter of last year.
Ed: Our GAAP diluted earnings per share were <unk> <unk> per share in the first quarter of 2024 compared to 39 in the prior year first quarter.
Ed: PFS was based on $15 6 million shares outstanding this quarter compared to $15 4 million shares outstanding in the previous year quarter.
Turning now to slide 16, as you can see, we significantly increased our cash flows 73% over last year's first quarter as we generated $19.6 million of cash from operations.
Ed: Our adjusted EBITDA was $28 7 million.
Ed: Compared to $27 $7 million in the first quarter of the prior year, a 4% increase.
This was despite an increase in interest rates. We ended the quarter with $44.8 million in cash and the low net leverage of 1.4 times.
Ed: And our adjusted earnings per share, which excludes the impact of intangible amortization and acquisition related costs was <unk> 66 cents in the first quarter of 2024 compared to 88 per share during the first quarter of last year.
Accordingly, we feel confident in the strength of our balance sheet and believe it positions as well for future growth.
I'll now turn it back over to Dickerson for some closing comments.
Ed: Turning now to slide 16, as you can see we significantly increased our cash flows 73% over last year's first quarter as we generated $19 $6 million.
Thank you, Ed. As you can see in the presentation, NB5 had a very strong first quarter 24. Let's now turn to slide 18, and I think
Ed: Of cash from operations.
Ed: This was despite an increase in interest rates.
What we're doing deserves a closer look. So we want you to ask these questions as you look at anyone in our space doing the work.
Ed: We ended the quarter with $44 8 million in cash and a low net leverage of one four times.
Ed: Accordingly, we feel confident in the strength of our balance sheet and believe it positions us well for future growth.
Do they have a history of profitability?
Do they have 40 years of success as a consolidator of engineering firms?
Ed: I'll now turn it back over to Dickerson for some closing comments.
Are they generating a strong free cash flow?
Dickerson Wright: Thank you Ed.
Dickerson Wright: As you can see in the presentation.
Is there a strategy for acquisitions?
Dickerson Wright: <unk> had a very strong first quarter 'twenty four let's now turn to slide 18, and I think.
Is there an integration that results in improvement of both the target and the consolidated company? And is there organic growth?
Dickerson Wright: What we're doing deserves a closer look so we want you to ask these questions as you look at anyone in our space doing the work.
The six things that really measure a company by in a closer look is what is the leverage?
Dickerson Wright: Do they have a history of profitability.
Are the acquisitions being done out of the profitability of the acquire, or are they taking on more debt or leverage?
Dickerson Wright: Do they have 40 years of success against consolidator of engineering firms.
And that finally,
Dickerson Wright: Are they generating a strong free cash flow.
Is there a scalable support services that furnishes the things that helps a company provide additional services?
Dickerson Wright: Is there a strategy for acquisitions.
Dickerson Wright: Is there an integration.
So if we ask these questions of every company we look at, we feel that NV5 is going to fare very well.
Ed: That results in improvement of both the target and the consolidated company and is there organic growth.
Therefore, the guidance that we are increasing the guidance for 2024, and as you look on the right of the page, we will increase the guidance to $937 million at $942 million for gross revenues.
Ed: The six things that really measure our company buying a closer look is what is the leverage.
Ed: Are the acquisitions being done at FNB out of the profitability of the acquire are they taking on more debt or leverage.
And the earnings per share on a gap basis from 287 to 293 cents a share. And then adjusted earnings for share will have a guidance of $5.5 to $5.10.1 per share.
Ed: And then finally.
Ed: Is there a scalable support services that furnishes the things that helps the company provide additional services. So if we ask these questions of every company. We look at we feel that Andy five it's going to fare very well.
And ladies and gentlemen, that concludes the prepared remarks, and we will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue.
Ed: Therefore, the guidance that we are increasing the guidance for 2024 and as you look on the right of the page, we will increase the guidance to $937 million at $942 million for gross revenues and the earnings per share from <unk> on a GAAP basis from 287 million to $2 93 a share.
If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via speakerphone on your device, please take up your handset and ensure that your phone is not on mute when asking your question.
Ed: And then adjusted earnings per share will have a guidance of $5 <unk>.
Again, it is Star 1 if you would like to join the queue. And your first question comes from the line of Chris Moore with CJS Securities. Your line is open.
Ed: $5 11 per share.
Ed: Okay.
Speaker Change: And ladies and gentlemen that concludes the prepared remarks, and we will now begin the question and answer session.
Hey, good afternoon guys. Thanks for taking a couple questions. Great start to the year. Maybe we'll start with geospatial. I mean 23 was a good year for geospatial. It feels like, you know, for a few reasons things probably, you know, weren't even as good as they could have been.
Speaker Change: If you have dialed in and we would like to ask a question. Please press star one on your telephone keypad to raise your hand and join the queue.
Ed: I would like to withdraw your question simply press Star one again.
Ed: If you are called upon to ask your question and our listening via Speakerphone on your device. Please pickup your handset and ensure that your phone is not on mute when asking your question.
Moving forward, can we talk a little bit about expectations for margins for this business versus the core business and talk about organic growth versus the core business here?
Ed: Again, it is star one if you would like to join the queue.
Ed: And your first question comes from the line of Chris Moore with CJS Securities. Your line is open.
Christopher Paul Moore: Hey, good afternoon, guys. Thanks for taking a couple of questions.
Christopher Paul Moore: Great start to the year.
defer to Dan Levine, who's the president of our geospatial group.
Christopher Paul Moore: Maybe we'll start with with Geospatial I.
Thanks for the questions, Chris, and thanks for listening. And the geospatial group, I think we feel very, we're encouraged about what is going on. We, that group is
Christopher Paul Moore: I mean 23 was a good year for geospatial it feels like.
Christopher Paul Moore: For a few reasons things probably.
Christopher Paul Moore: Werent, even as good as it could've been.
Speaker Change: Moving forward can we talk a little bit about expectations.
uses capital equipment quite a bit and you'll see that we're we're under budget and in growing that so we think that's going to grow with higher higher profitability we were really
Speaker Change: For margins.
Speaker Change: For this business versus the core business and talk about kind of organic growth versus the core business here.
Speaker Change: Okay. Sure. This is <expletive> Ryan I'll start and then for more specificity.
delayed by this continuing resolution. And so what you see in the first quarter
Speaker Change: Deferred to Dan Levine, who is the president of our Geospatial group.
That the third month of the first quarter really made up a tremendous amount.
Dan Levine: Thanks for the questions, Chris and <unk>.
Speaker Change: Thanks for listening and.
Dan Levine: The Geospatial group I think we feel very encouraged about what is going on.
of growth and profitability. So we're encouraged. We think that the profitability will climb with geospatial as the year goes forward because I think we now are off to a very good start now that a lot of the federal projects have been funded, and we're seeing some significant, and what was very encouraging to me, is this nexus between what we're doing on traditional the Department of Transportation work and what geospatial can bring to us. And I think Dan briefly mentioned the, acquisition of GSS that is currently working for Illinois DOT and the Florida DOT, and we think this is going to have a tremendous advantage for us and given us a technical advantage. So we really want to be recognized for the work that we're doing.
Dan Levine: Sure.
Dan Levine: That group is.
Dan Levine: Uses of capital equipment quite a bit and you'll see that we are under budget and in growing that so we think thats going to grow with higher higher profitability.
Dan Levine: We're really.
Dan Levine: Delayed by the continuing resolution and so what you see in the first quarter.
Dan Levine: That.
Dan Levine: The third month of the first quarter really made up a tremendous amount of of.
Dan Levine: Of growth and profitability. So were encouraged we think that the profitability will climb with geospatial as the year goes forward because I think we we.
doing in geospatial, but not just a standalone situation, but how it really fits in with our core businesses services and all of the other services. And hopefully in the presentation, that was made clear. So Dan, maybe you may have some thoughts or what you feel at the out.
Dan Levine: We now are off to a very good start now that a lot of the federal projects had been funded and we're seeing some significant and what was very encouraging to me is this nexus between what we're doing on traditional the department of transportation work and what geospatial can bring to us and I think Dan briefly mentioned the acquisition of GSA.
Yeah, thanks, <expletive> . And I do see our profitability will be increasing, and we're starting to see that now. And to Dick's point on the last slide on how...
Dan Levine: Yes that is currently working for Illinois.
Dan Levine: In the Florida.
Christopher Paul Moore: And we think this is going to have a tremendous advantage for us and given us a technical advantage. So we really want to be.
to measure ourselves against the rest of the market.
We are starting to absolutely see some synergies across the two, well, the three components, the existing NV5G and then Viz and Axum joining last year. Those synergies are starting to be realized and showing themselves now on the bottom line.
Christopher Paul Moore: Recognized for the work that we're doing in geospatial and not just a standalone situation, but how it really fits in with our core business is services and all of the other services and hopefully in the presentation.
Christopher Paul Moore: And that was made clear so Dan maybe you may have some thoughts are.
Got it. Appreciate that. I mean, I had always looked at geospatial
Christopher Paul Moore: Yes.
Dan Levine: Okay, Yeah, Thanks, <expletive> and I do see a R.
right or wrong as the kind of highest margin business
Dan Levine: Our profitability will be increasing and we're starting to see that now.
at NV5. Is that, am I looking at that accurately?
Dan Levine: And to Dick's point on the last slide on how.
Well, you know, in the business, there's always some operations that seem to be more profitable. In a fair measurement, most of our other businesses based on EBIT, where there's not a tremendous amount of depreciation and amortization. I think we benefit with geospatial because we're judging everyone on EBITDA, where they have the most equipment and depreciation. But I think I'd also look closely now. We really are encouraged about the profitability of our data. data center business and our business that really has distributed some reoccurring revenue across the board for all of our businesses. So for now, if you're measuring on pure EBITDA, geospatial gets the benefit of that, but
Dan Levine: The measure ourselves against the rest of the market.
Dan Levine: We are starting to absolutely seeing some synergies across the two level three components the existing <unk> and then there's an accident joining last year.
Christopher Paul Moore: Synergies are starting to be realized in showing themselves now and not on the bottom line.
Speaker Change: Got it I appreciate that and I mean, I had always looked at geospatial.
Christopher Paul Moore: Right or wrong as the kind of highest margin business.
Speaker Change: At MB five is that am I looking at that accurately.
Christopher Paul Moore: Well.
Christopher Paul Moore: And in the business, there's always some operations that seem to be more profitable and a fair measurement most of our other businesses based on EBIT, where theres not a tremendous amount of depreciation and amortization I think we benefit with geospatial because.
As far as pure profitability, all of our sectors are doing better. And I would look now, we're very encouraged about what will be going with our data center work.
Christopher Paul Moore: We're judging that everyone on EBITDA and where they have the most equipment and depreciation but I think I'd also look closely now we really are encouraged about the profitability of our data center business and our business that really has distributed some reoccurring revenue.
Got it. That makes perfect sense.
maybe just my last one. I mean, your business model has been certainly evolving over the past couple of years. You talked a little bit in the prepared remarks on subscription-based offerings.
Just trying to get a sense as to, you know, kind of what percentage of revenue
Christopher Paul Moore: Across the board for all of our businesses. So for now if you are measuring a pure EBITDA geospatial gets the benefit of that but as far as pure profitability all of our sectors are doing better.
that comprised in 23 and more importantly you know is there a goal there as a percentage of revenue over the next three to five years?
Christopher Paul Moore: And I would look now and we're very encouraged about what will be going with our data center work.
Dan, let me take a stab at that, and then I'm going to also again defer to Dan.
The
Speaker Change: Got it that makes perfect sense.
This acquisition that we recently made is almost 80% of reoccurring revenue. That's all software and that's revenue that is constantly, is not fluctuating from month to month. It's a continuing based revenue.
Speaker Change: Maybe just my last one I mean, the business model has been certainly evolving over the past couple of years.
Speaker Change: You talked a little bit in the prepared remarks on subscription based offerings, just trying to get a sense as to kind of what percentage of revenue.
But that's also a shift that we're making in what we're doing in our building technology group, particularly with what we're doing with the audiovisual group. So as a percentage of the whole company, it's probably around 10%, but it's really focused on work that we're doing in both the data center work or subscription-based revenue software work that we are doing with the biz acquisition, or from L3 Harris.
Speaker Change: That.
Speaker Change: Comprised in 'twenty, three and more importantly.
Speaker Change: Is there a goal there or is it percentage of revenue over the next three to five years.
Speaker Change: Yes, let me take a stab at that and then I'm going to also again defer to Dan.
Speaker Change: This acquisition that we recently made is almost 80% of reoccurring revenue that's all software and that's revenue that is constantly.
But Dan, maybe you have some thoughts.
Speaker Change: Not fluctuating by from month to month, it's continuing based revenue, but thats also a shift that we're making in what we're doing in our building technology group.
Yeah, and with intent, the Viz
Group developed two new products over the last few years, the NB Connect and NB Informed, which are cloud-hosted solutions with a specifically a software as a services licensing model. And that's one of the growth areas we expect on that software. That's now a modern solution.
Speaker Change: Typically with what we're doing with the audiovisual group, so as a percentage of the.
Christopher Paul Moore: Whole company, it's probably around 10%, but it's really it's really focused on work that we're doing.
compared to the baseline envy, which has been managed and developed over the last 30 years. So this is a new market for us and a new licensing model, and that's where we expect to see the growth occurring.
Christopher Paul Moore: In both the date datacenter work or subscription based revenue software work that we're doing with this acquisition or from L. Three Harris, but Dan maybe you have some thoughts.
Dan Levine: Yeah Yeah.
Dan Levine: With intent.
Got it. Very careful. I'll jump back in line. Thank you.
Dan Levine: This group developed two new products over the last few years.
Thanks, Chris.
And your next question comes from the line of Rob Brown with Lake Street Capital Markets. Your line is open.
Dan Levine: <unk> connect and <unk>, which are cloud hosted solutions with a specifically a software as a services licensing model and that's one of the growth areas. We expect on that software. That's now a modern solution compared to the.
Good afternoon. Thank you. All the progress. Just kind of going back to the data center market,
Dan Levine: The baseline entity, which has been managed and developed over the last 30 years. So this is a new market for us on a new licensing model and Thats, where we expect to see the growth.
Could you give us a sense of how much of that is your business and where you're where you're seeing kind of cross-selling opportunities with some of the other things you're doing and
Just a sense of the growth path in that data center business.
Dan Levine: Occurring.
Okay, we're a bit sensitive about that. I want Ben to speak specifically in what we're doing because
Speaker Change: Got it.
Speaker Change: I'll jump back in line. Thank you.
Speaker Change: Thanks, Chris.
The majority of the work that we are doing internationally has been focused on data center. We work for clients that you're certainly, Western clients, certainly going to know the names of, but we just can't mention my name or specific location where that was going. I was just in Singapore where a very significant software client that we know, maybe the largest in the world. We met with them. and they outline their growth and what they're going to be doing as far as data centers. But all of the work that we are doing internationally is for well-respected and well-known Western clients.
Speaker Change: Yeah.
Speaker Change: And your next question comes from the line of Rob Brown with Lake Street Capital markets. Your line is open.
Robert Duncan Brown: Hi, good afternoon.
Robert Duncan Brown: Chris you brought on all the progress.
Robert Duncan Brown: Just kind of going back to the data center market.
Robert Duncan Brown: Could you give us a sense of how much of that is your business, where youre, where youre seeing kind of cross selling opportunities with some of the things youre doing it.
Speaker Change: Just a sense of the growth path in the data center business.
Speaker Change: Okay.
Speaker Change: Sensitive about that I want vendor speak specifically in what we're doing because.
Speaker Change: The majority of the work that we're doing internationally. Its really been has been focused on data center. We work for clients that Youre certainly western clients, certainly going and know the names up but we just can't mention by name or specific location, where that was going I was just in.
But unfortunately, we can't name specifically about them. But as far as the growth of that market, we're very encouraged. But I'd like to maybe have Ben comment. He would happen to be with me on our trip. So maybe, Ben, you can mention how you feel about the data center work internationally.
Speaker Change: Singapore we're.
Yeah, I mean both internationally and domestically we're excited about it. The majority of the work that we're doing right now is international, but we're seeing that come domestically now, you're sort of cross-selling through these large clients that are actually Western clients. So I think as a percentage we'll see the revenue grow on the US side here quite quickly over the next 12 months or so.
Speaker Change: A very significant software client that we know may be the largest in the world are we.
Speaker Change: With them and they outlined their growth.
Speaker Change: What theyre going to be doing as far as data centers, but all of the work that we're doing internationally is for well respected and well known western clients, but unfortunately, we can't name specific lab about them, but as far as the growth of that market. We're very encouraged but I'd like to maybe have been comment he would happen.
And just maybe Rob an added comment.
Speaker Change: With me on the on our trip so maybe Ben you can mention how you feel about the datacenter work internationally.
there is a tremendous strain on the grid and energy producers because of data center work. In fact, in the U.S., there has been some slowdown or moratorium on that as the...
Ben: Yes, I mean.
Ben: Internationally and domestically we're excited about it the majority of the work that we're doing right now is international but we're seeing that come domestically now yes. It is.
Energy energy generators tend to get permitted in a long-term process.
Ben: Cross selling through these large clients that are actually western clients. So.
The clients that we have internationally don't have those constraints. They're doing an awful lot of these things much quicker. So I think the only constraints that we're going to have domestically is the power delivery use for the data centers. And that's becoming a point of concern for the work that's being done in the U.S.
Speaker Change: I think as a percentage will see the revenue grow.
Ben: On the U S side here quite quite quickly over the next 12 months or so.
Speaker Change: And just maybe Bob.
Bob: An added comment.
Bob: There is a tremendous strain on the grid energy producers because of data center work in fact in the U S. There has been some slowdown or a moratorium on that <expletive>.
Understood. Okay, thank you. And then on the
On the M&A kind of activity, I know you've been, I guess, densifying some of your offerings. Has some of the macro things taking place shifted your thinking there or where's your focus on MNA at this point?
Bob: <unk>.
Bob: Energy energy generators tend to get permitted in a long term process.
Bob: The clients that we have internationally don't have those constraints. They are doing an awful lot of these things much quicker. So I think the only constraint that we're going to have domestically is the power delivery use for the data centers.
Well, you know, we have a pretty disciplined process and the first part of that process is what is the strategy for an acquisition. How will it either support our existing platform
Bob: And Thats, becoming.
Bob: That's becoming.
Bob: Point of concern for for.
Bob: For the work that's being done in the U S.
how will it densify that existing platform, and then what profitability will we add to the company.
Speaker Change: Understood. Okay. Thank you and then on the.
Speaker Change: On the M&A kind of activity.
You know, Rob, this ebbs and flows in certain areas. We think we did a very significant successful acquisition in infrastructure. Two of them for this year. We think, though, that we see tremendous opportunities for acquisitions
Speaker Change: I know you've been.
in data center work and energy support work. And we think that we see a growing audio-visual market.
There'll be some technology acquisitions.
But we see also some significant strategy and use of acquisitions that support our existing
existing infrastructure. So, you know, we're very opportunistic. It's where that sees. Our focus right now is what will strengthen the platforms that we have.
What will give us that technical edge that we can deliver our services more profitable and we can grow faster and we're looking for acquisitions that's in that requirement.
Okay, great. Thank you. I'll turn it over.
All right.
And your next question comes from the line of Justin Hawk with Robert W. Baird. Your line is open.
Good afternoon, everybody. Thanks to take my question here for questions.
I guess the first one, I just wanted to understand kind of the organic outlook for the year. So your total revenue guide is up 9%.
You did 8% organic growth in the first quarter, but you're bringing on the additional acquisition. So I guess
Maybe the way to ask it is the four acquisitions you've done year to date, how much revenue you're expecting those to contribute to your year and kind of what's the expectation for organic growth?
Okay, I'll start with this and maybe add our CFOC and also see what he has outlook. We don't we separate
growth in two categories. One is growth through acquisition, and that is a compounded growth, and then what is the growth, organic growth through acquisition? So we don't combine the two. We feel that acquisitions that
that we can improve on and we can grow organically is how we measure that. And it's measured and it's measured in very different ways, but mostly it's measured so that we can look at each operation individually and look at their organic growth. As far as the growth we project the same growth at 8% or above or in that area for the rest of the year organically.
That does not include any growth that we may have contributed to us through acquisitions. Ed? I think when you look at...
The four acquisitions we've had to date, two were during the first quarter. But across all four acquisitions, those are probably at a $40 million run rate.
when it's all set and done. Of that amount, if you consider the first quarter on its own, maybe 5.7 million revenues came from acquisitions, that should give you a pretty good picture.
Okay, great. Thank you for that. And then I guess the second question is
So I appreciate the commentary on the hiring tangible expense and the interest expense on EPS.
But thinking about the EBITDA growth for the year, I think previously you guys were saying, expecting it to be kind of similar to the revenue growth.
Obviously, it was a little light here in the first quarter, but is that still the thinking that that would kind of grow in line with revenue this year? And then, if so, is the margin improvement that that's implying, is that primarily from the geospatial stuff improving or maybe just bridge that a little bit?
Yeah, so the margin, as I mentioned on the call, you know, there were a few factors that were impacting that, of course, intangible amortization, although that doesn't impact EBITDA, but it does impact our bottom line. But when you look at profitability in the first quarter, it's really affected by the continuing resolution, which, as we mentioned, resolved itself at the very end of Q1.
And so now when those resources come back online, it's going to improve our profitability. We also have the ongoing integrations of both Axum and Viz.
And there are a lot of synergies, as Dan was talking earlier about
those new software products. As we integrate those into our existing, our legacy geospatial operations, there are going to be revenue synergies that go along with that, as well as cost synergies that we're in the process of realizing. So all of those kind of put together will expand our margins, or we anticipate we'll expand our margins throughout the rest of this year.
Yeah, and in terms of EBITDA, I would, you know, hope that we can get close to a 17% margin or so, 17 and change. The first quarter was at 13.5% but I would expect it to be
Higher total amount we should be in the 100
The way the guidance is working right now, if we hit those numbers and we don't give guidance on EBITA, let me be clear, but we would expect to be in that 160, mid-160 range in terms of EBTA is what we would be targeting.
Okay, all right, thank you for that. I'll jump back to Q.
Your next question comes from the line of Jeff Martin with Roth Capital. Your line is open.
Good evening, guys. Dickerson, I know getting back to organic growth on the infrastructure side of the business,
is one of your primary objectives. Just curious if you could give us an update on progress you've made, you know, what kind of further progress you expect and over what timeframe.
Okay, thanks, Jeff. We are very encouraged about the organic growth of our infrastructure group. I think their organic growth is about 7%.
for the quarter. We had, as I spoke of earlier in the fourth quarter results, we have established a number of initiatives to 100% promote organic growth in infrastructure. We have...
one area where we took a very senior person in our infrastructure group, particularly in the transportation group, and he is devoting his full attention to growing the business with the DOTs, and we think that's a target-rich environment.
We also, on the initiative, we took our
one of our chief operating persons in environmental to really work on growing the rest of the infrastructure space, particularly, and I'm going to mention a couple of things in the concluding a comment on what we're doing in water, water resources and environmental growth and a number of other areas that are just purely focused.
on organic growth. So why we're encouraged is I see the growth of the, we probably doubled in organic growth in our infrastructure business from where we were. Now I think it's solely for our really concentrating on growing this business internally.
Great. And then outside of the continuing resolution, could you give us an update on what you're seeing
budgets and project funding with probably more in the state and local level but just just cares you know if you're noticing any particular trends
Well,
A significant portion of our geospatial business was impacted by, which is a fact they're working for the federal government, and that has been impacted by the continuing resolution. I was just in our Arlington, Washington, Washington, C office, and we've expanded work on the
embassy work and that's been federally coming from the department.
mostly from the Department of Defense.
But so we see that trend is picking up now. The federal infrastructure bill, we're not seeing as much of an impact, but I have not seen anything any significant delays. You know, everything may be on the commercial side where we're not that dependent is very dependent on interest rates. And then two of our areas that were...
very dependent on interest rates was in our real estate transaction business and you know Alex may want to had commented on earlier but I think that's growing significantly and very properly both of are those two we're doing about 60 million a year
in that area, but I think, you know, they're exceeding their budget, and they are the most dependent on what we see interest rates. So I kind of think that, I think that,
We, you know, as you saw in Ed's presentation, we do things out of cash flow. We're not, we don't borrow a lot of money, so we're not maybe expected as many other firms are on interest rates, and we don't have to expand any lines of credit. We try to do things out of cash flow. But, Alex, maybe you want to comment on what's going on with the transactional real estate group, what you see? Yeah, so what we're seeing is very nice growth quarter over quarter in our real estate transaction group. And I think, as I said in my comments, it's really a combination of adjusting to the interest rates and some stabilization.
And there's a lot of projects that as the balloon and turnover, there's a demand for the real estate transaction services that we offer.
And one for it, if I could, then I'll
See the floor here, but you gave a 5.7 million acquired revenue number for the acquisitions year to date this year. What about do you have a total number for acquisitions that were closed subsequent to the end of Q1 of last year?
I don't have that. I could tell you that the, if you're talking about a pro forma, as if we had owned them for the full quarter, I do have that number. Give me one second. That would have been,
200, we would have had pro forma revenue of 216 million if everything had been owned from day one.
in this quarter. Thank you. Okay. Thank you.
Bye.
And your next question comes from the line of Sam Cusworm with William Blair. Your line is open.
Hey, thanks for taking our questions here. A quick one, just circling back to geospatial for a second. I know you were budgeting for this business to be, I think, 320 million for the year. Given everything we've just discussed, is that still a good target for 2024?
Yes, I can say that that we haven't seen any adjustments to the budget. I'll defer to Dan, but I think that we don't expect that we're not expecting a degradation from the $320 million.
But then maybe you have more.
No, confidently, yes. I'm
I'm sticking to that number. We've had some nice, even with the federal delays, we did have some nice
coverage on that on the commercial side, as I mentioned in my comments as well. And that really helps for the year. And we've got some more that's going to continue to grow. So yes, we're confident of that number.
Great, good to hear. Maybe pivoting a little bit here to your utility services business. We saw the utility PG&E was trying to sell stake in their power operations.
sort of as a way to reduce rates while raising the funding to make improvements.
So the grids such as underground and cables. We know this is a high demand area through this type of service. I guess what we're trying to wonder and think about is that you think of lack of funds from utilities has been a hurdle to growth at all or if they're prioritizing this type of spending maybe over other improvements.
I think that they're looking to, number one, prioritize this just based on the risk associated with fire.
damages that they've had in the past. So I think that there's an absolute focus that they recognize that whether it's the fire hardening or strategic undergrounding, it's an issue that they have to face because the risk of not addressing it is too great.
Got it, thanks. We'll leave it there. Thanks.
And your next question comes from the line of David Marsh with singular research. Your line is open.
Hey, thank you for taking the questions, guys, and congrats on the quarter. It's a good way to start the year.
Thank you. Thank you.
I want to look at things kind of at a little bit of a higher level in terms of the P&L, if we could.
I know there's a lot of puts and takes that go into the gross margin. It looks like you came in around 49% if I'm doing my math rate right for a quarter, or is it a little higher than that, perhaps. But I just wanted to get a sense of...
You know, where you see that relative, oh, no, you were a little higher, that 53 for a quarter. So that's pretty high print, actually. Is that a sustainable level relative to the balance of the year in your eyes at this point? Or, you know, would we expect a little compression there?
This is a <expletive> and then I'll let Ed and others. We really have
been watching the gross margin and I would suspect that that number if you say 53% we expect our margin to be better than that as we go forward a lot of that is has been affected by when we do the acquisitions there's always a time for integration and a duplication of roles we just don't immediately cut
cut people off. So in the acquisitions, they may have a finance person.
They may have a human resources person. They may have IT. They may have some things that we would normally consider duplication. And that cost...
can affect the gross margin. So as we continue to integrate these teams and these appositions, as they become more mature with us, we anticipate the gross margin of improving. I don't see a real pressure on the cost side or the
What we do, the invoicing side of ours, pressurizing, and it's just some of the duplications and what we call support services of the backoff back office, but we anticipate the gross margin should be should be 53 or above, but Ed, you may have a... No, I would agree with that, and like you said, the first quarter was was 53%. So I could confirm that 52.9, I believe. For the full year, that's not...
unreasonable, you know, would probably be somewhere in that in that 51 to 53% range is how we've been trending. So that's what our expectation would be.
That's really super helpful. And then just on the other part of the P&L, just below there, you know, you get some pretty good increase here over year in salary, salaries, wages, payroll taxes at GNA.
Are there any one-timers in there that you would expect to fall out or we just, you know, is this kind of inflationary type pressure that we're going to have to live with here for the rest of the year?
Well, when you look at the year over year, just remember that on an as-reported basis, you had Axum come in in February of last year.
and Viz, the other
geospatial acquisition coming into April . So you have both of those fully weighted into this first quarter and not all in last year's first quarter.
along with all the other acquisitions that we did throughout the year. So really the increase you're seeing is a result of those acquisitions, along with some of the integration costs that we're weaning ourselves out of here as we integrate those geospatial operations.
Got it, got it, thank you. And then just lastly for me, you know, I suggest generate cash flow. You did take on a little bit of debt to make those acquisitions.
Would the first priority be to reduce the debt again?
You know, would you just continue to look for other acquisition opportunities or, you know, I guess kind of more generally, like what's the, what type of debt level are you comfortable with from, from Eutop perspective and, you know, how do we manage that going forward?
Well, I'll start with this, and Ed can be, let me answer it in terms that I can understand, which is certainly a low threshold. But I think that... I think that...
You need to look at everything as leverage to Iveda. And 1.4 is a very unlevered. You know, we've had 1.2, but many, many firms will go as high as five times debt.
So we do not think that we want to be over leveraged. So if we happen to have a great opportunity,
where we would borrow money, we would want to make sure that the EBITDA we're receiving does not tremendously impact our debt load. So right now, if you look on
slide, the last slide of our presentation, we want to be, continue to be low on leverage, and that would include opportunities for acquisitions. If we do borrow money, it's going to be at a levered point that we have earnings to cover that. I would agree with that, <expletive> , and I think absent any M&A opportunities, which, you know, we cycle through and they can't really predict when they're going to come around. We're going to use our free cash for the pay down debt to the extent possible.
That's the expectation.
Yep, makes a lot of sense. Okay, thank you guys very much. Again, great quarter and good luck to the balance of the year.
Thank you. Thank you.
And your final question comes from the line of Michael Finneger with Bank of America. Your line is open.
Hey, everyone. Thanks for us, squeezing me, and I appreciate it. I'm just curious, obviously geospatial, is you guys flag growing double digits. What areas are growing kind of below that where we see the organic growth at 8%? Or is it still some of the rate-sensitive areas? What areas do you kind of fly there are kind of growing at a less robust pace than we're seeing for areas like geospatial?
Well,
I'll start with.
They are.
I think if you look at the infrastructure group, it's our largest segment of the company. So I'm growing at 7% to me was very encouraging, even when we have to overcome the lack of startup of LNG. And so that's significantly under where we were last year. And also in our...
support services for ocean mapping, we were very concentrated on offshore wind, and now that has been a moratorium. But if we put all of that together,
in the infrastructure group, I would say that
is going very quickly if you exclude those two.
The geospatial group
independently can grow very strong, but when they combine their services,
to support our utility business and our DOT business, and they seem to grow much faster than that. So those are the two areas domestically where we're really looking for lack of of organic growth. And then internationally, I think you saw the presentation that Ben gave, and we are really growing a tremendously strong amount percentage-wise
organically, although it's from a low volume base.
But so if you look at pure infrastructure and their growth, we have to take in consideration a downturn in our LNG business and a downturn in our wind farm business offshore. So, okay.
But other than that, including that, we still grew at about 7%.
helpful and just
When we think of the acquisitions done year-to-date, is the rest of the year more just digesting and integrating the deals announced or is there more in the pipeline? And just to follow on to that, if there is more in the pipeline, is it more geared to these data centers?
subscription areas are multiples there moving up materially any help there would be would be helpful
What I like to say, Mike, is many people play at MNA work. I think you really have to vote resources. So we have two
full-time M&A people and they constant. So we always have opportunities out there. And we're there, at any one time we probably have, we're looking at 10 companies and maybe we'll end up doing two or three. I can say right now that I don't, we don't say let's look at this area, let's look at that area, but I leave that to our M&A people for opportunities. Right now though we were looking at a significant opportunity in the utility business.
And in the infrastructure area, we're looking at in new geographies or highly high growth areas to supplier services. But it's really
You have to honestly work at it. And so we, as I say, we devote two people full-time to do that and one part-time to do M&A work, and it's only to give us opportunities that are out there.
Great. And just lastly, you provided us to great color and updated guidance on how to think about the
Sure, Mike. So I, from a conversion standpoint, that conversion rate in Q1
was close to 70%. It was around a 66% conversion rate. As we move forward, there's different timings around tax payments, and in particular, you've heard us talk in the past about 174D, that's the IRS ruling that we're...
We're
unable to capitalize R&D expenses
sorry, we're only able to deduct them and we have to capitalize them and then amortize them. And so that over the next five years, it's more of a timing thing. It doesn't affect our effective tax rate, but from a cash flow perspective, we're having to pay more than what we normally would until all of that levels out over the five years. And so over the remaining part of the year, that number, those tax payments might increase. And so I would expect the conversion rate.
to be somewhere between the high 40%, you know, say 48% and 60% range if I had to, you know, try to predict that.
And I think he got back in line, so. Okay. Yeah.
That was it, right?
And ladies and gentlemen 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.
Okay, well, thank you. Thank you, operator. Thank everyone for listening in today. I thought it would be good
to mention
some ongoing projects that we have that are not. We've spoken a awful lot about geospatial, a lot about data centers, but I just wanted to let you know that we really are focused on our engineering projects and also that nexus to what we can bring
to technology to engineering so that we can have an edge in profitability and growth with our competitors. So I just wanted to, during the quarter, I just wanted to mention some areas that we've seen strong growth in. And in
in the states. The state of Washington, we won a, the Department of Ecology, we want a very significant water project to support the Department of Ecology. LA County, the Department of Public Works, we want to
a significant project to monitor stormwater release.
We've also won geospatial projects that
have the nexus for monitoring to monitoring our DOTs
what water use use. Also, I think it's noteworthy in our audio-visual work. We want a significant project in
for Cal State University to and work with their auto video. The reason I mention these is just so that
you get a good view that we are continuing to focus domestically and internationally. And the theme is really how do we bring technology
to that typical engineering services and how
people look at us as growing the business, but also growing it very profitably. So I want to thank you. We had a very good first quarter, but that's just the beginning. We have work to do, and I want to thank everyone for listening in. I want to thank everyone to help produce those first quarter results. And so now we'll be speaking to you again at the end of the second quarter, and I think we should – and I'm encouraged about what we see going forward. So thank you, everyone. I appreciate the time you get. Davis.
Ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.