Q4 2024 NV5 Global Inc Earnings Call
Good afternoon, everyone and thank you for participating in today's conference call to discuss that'd be fine financial results for the fourth quarter and full year 'twenty to 'twenty four ended December 28 2024.
Speaker Change: Joining us today are Dr. Christian right executive Chairman of MB Five Pantera C. O N V. Five Curtis Island President of N V five geospatial.
Tor: Tor Executive Vice President and General Counsel of N V fight.
Speaker Change: I would now like to turn to go all bunch of Richard Dahl.
Speaker Change: Thank you operator, welcome everyone to <unk> fourth quarter and full year 2024 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.
Speaker Change: And financial performance.
These are based on management's current expectations and are subject to risks and uncertainty.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: Please note that unless otherwise stated all references to fourth quarter 2024 comparisons are being made against the fourth quarter of 2023 and any references to full year 2024 comparisons are being made to full year 2023.
Speaker Change: 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.
Speaker Change: non-GAAP financial measures included in this presentation are adjusted earnings per share and adjusted EBITDA.
Speaker Change: <unk> provides non-GAAP financial measures to supplement GAAP measures as they provide additional insight into <unk> as a result.
Speaker Change: However, non-GAAP measures have limitations as analytical tools and should not be considered in isolation and are not in accordance or a substitute for GAAP.
Speaker Change: 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 companies.
Speaker Change: A reconciliation of non-GAAP and GAAP measures is included in the appendix to this presentation. We will begin the call with comments from Dickerson Wright executive Chairman of <unk> before turning the call over to Beth Horizon, Chief Executive Officer of MB five for a review of <unk> operation.
Speaker Change: Evercore just body Chief Financial Officer will provide a review of fourth quarter and full year 2024 results.
Dickerson Wright: <unk> will then provide closing comments before we open the call for your questions.
Dickerson Wright: Please go ahead. Thank you Richard welcome everyone to the earnings call today, which will not only present, our positive accomplishments for full year 2024, but more importantly, our growth and profit improvement plans for 2025.
Dickerson Wright: We're very excited about the wonderful prospects for 2025.
Dickerson Wright: First I will speak to our record performance in 2024.
Dickerson Wright: So, let's turn to page three of our presentation deck.
Dickerson Wright: On the left side of this page we present, our comparison for the full year 24 versus the full year of 2023.
Dickerson Wright: So let's go through them all.
Dickerson Wright: Growth increased over 100% to 6% of revenues.
Dickerson Wright: Our rugby as group from $857 million in 2000 $23 million to $941 million in 2020 for a 10% increase.
Dickerson Wright: Adjusted EBITDA earnings before interest taxes, depreciation and amortization grew from $134 million in 2000 $23 million to $143 million in 2024.
Dickerson Wright: Which is a 7% increase gross margins grew from 49 seven in 2023% to 51, 3% in 2024.
Dickerson Wright: The center portion of the page speaks of our positioning in our three main segments.
Dickerson Wright: Restructure support geospatial operations and buildings and technology.
Dickerson Wright: Okay.
Dickerson Wright: And these three segments will be concentrating on conformity assessment or <unk> services.
Dickerson Wright: Included in at least seven of these main areas.
Dickerson Wright: We are very pleased with our 2020 for performance and we also reached our goal of $1 billion in revenue entering 2025.
Dickerson Wright: We are also excited about our future we have set a specific revenue target of $1 6 billion by the end of 2028.
Dickerson Wright: What does our $1 6 billion revenue goal.
Dickerson Wright: And for shareholders employees and clients.
Dickerson Wright: For our shareholders. It means a continued increase in profitability for.
For our employees it means increased opportunities for career growth and for our clients. It means an ever widening of our services across all geographic areas.
Ben: So I will now turn the call over to Ben <unk>.
Speaker Change: <unk> <unk> five for an update on <unk> operations.
Ben: Thank you Doug and good afternoon, everyone. Please turn to slide four.
Ben: And before I move into 2025, well positioned to vote. Upon the momentum we have generated in 2024.
Ben: To begin the year with the largest backlog we've ever had entering the first quarter with $904 million of backlog on a rolling 12 month basis. This is 8% higher than our backlog entering 2024.
Ben: As we've discussed on prior calls organic growth is a focus of bnb thoughts operations and the initiatives. We introduced in 2024 will play a significant role in our accelerated organic growth in 2025.
Ben: We also continue to see tailwind in our key sectors of utilities and data centers and digital transformation.
Ben: Presidential executive orders and the department of government efficiency had been covered broadly by media platform, we have seen minimal impact to the essential mandated nature of our work for the federal government emphasized and local agencies.
Ben: In 2025, we recognize the opportunity to expand our cash flows from operations and our operating margin improvements in these key metrics are in our control and we have launched initiatives to strengthen our performance in these areas. Our CFO <unk> will speak about these initiatives in more detail later in today's presentation.
Ben: Mergers and acquisitions continue to work alongside organic growth is a key component can be box growth strategy. Our pipeline of opportunities remains strong and we continue to benefit from favorable multiples in our acquisitions as we target successful taken IV services that strengthen our testing inspection and certification or tech services.
Speaker Change: And bolster our existing platform I will now turn the call over to <unk>, Chief Financial Officer for an overview of <unk> performance in the fourth quarter and full year 2020 for an overview of our new cash flow conversion and margin improvement initiatives.
Speaker Change: Thank you Ben and good afternoon, everyone.
Speaker Change: If you would please turn to slide six of the presentation I'll review, our 2020 for fourth quarter and full year financial results.
Speaker Change: Our gross revenues in the fourth quarter grew 15% to $246 5 million.
Speaker Change: Compared to $214 9 million in the fourth quarter of the prior year.
These are record fourth quarter results for the company.
Speaker Change: Our gross profit was $122 2 million compared to $108 million in the prior year.
Speaker Change: An increase of 13%.
Speaker Change: Our net income was $5 4 million in the fourth quarter of 2024 compared to $10 1 million in the fourth quarter of last year and our GAAP diluted EPS was <unk> <unk> versus <unk> 16 in the prior year period Keith.
Speaker Change: Keep in mind that our GAAP results were impacted by increases of $3 $9 million in acquisition related costs, and $2 3 million and intangible amortization expense.
Speaker Change: Additionally, in 2023, our fourth quarter had a one time $5 2 million reversal of expense related to the company's transition to a flexible time off policy.
Speaker Change: Our adjusted EBITDA was $36 3 million versus $36 7 million in the prior year.
Speaker Change: Excluding the flexible time off policy transition the margins would have been similar in both periods at 14, 7%.
Speaker Change: Our adjusted EPS was <unk> 28 in both periods.
Speaker Change: Gross revenues for the full year were a record $941 3 million an increase of 10% over the prior year.
Speaker Change: Our gross profit was $483 2 million compared to $426 $2 million of margin expansion.
Speaker Change: Spansion of 160 basis points.
Speaker Change: Net income was $28 million compared to $43 7 million in the prior year and our GAAP diluted EPS was <unk> 44, compared to <unk> 71 in the prior year.
Speaker Change: Just as in the fourth quarter analysis. Please keep in mind that due to our acquisitive nature, our intangible amortization increased $9 6 million and our interest expense increased $4 2 million.
Speaker Change: Also 2024 had $11 2 million greater acquisition related costs, driven in part by reversals of acquisition earn out expenses in the prior year.
Speaker Change: Additionally, 2023 was impacted by the $5 $2 million of flexible time off policy initiatives.
Speaker Change: Adjusted EBITDA was $143 5 million compared to $133 8 million in the prior year.
Speaker Change: Our margin in 2024 was 15, 2% compared to 15% in the previous year, excluding the impact of the flexible time off policy initiatives.
Speaker Change: Our net leverage has remained relatively low at one four times, our weighted average borrowing rate during 2024 and 2023 was the same at approximately six 5%.
However, the rate has been trending down favorably as it was five 8% as of yearend.
If you turn to slide seven I'll discuss some of the initiatives to expand our EBITDA margins and cash conversion that are currently underway.
Speaker Change: An important component of <unk> business model is to continue to expand our operating margins as we grow and benefit from our scale.
Speaker Change: Recently, our margins have been impacted by inflation and the integration period of some of our acquisitions.
Speaker Change: We currently have several initiatives actively in place to expand our adjusted EBITDA margins in 2025.
Speaker Change: Targeted expansion of 150 basis points.
Speaker Change: The initiatives focus on optimization utilization and productivity, reducing administrative costs through scale and consolidating and optimizing fleet space.
Speaker Change: We generated $57 3 million in cash from operations compared to $62 2 million in the previous year the.
Speaker Change: The decrease was primarily driven by working capital timing.
Speaker Change: Have a handful of geospatial contracts that have contractual billing milestones towards the end of the projects. We are in the process of renegotiating. Some of these projects and anticipate that billings and collections will increase during 2025.
Speaker Change: This should translate into higher cash conversion rates.
Speaker Change: Our EBITDA free cash flow conversion in 2024 was about 40%.
Speaker Change: Through the renegotiation of contracts and the optimization of building cadence. We believe we can achieve our free cash flow conversion rate of 60% in 2025.
Speaker Change: We believe our strong balance sheet will enable us to continue to execute our business model as we focus on organic growth and strategic acquisitions.
Ben: I'll now turn it back over to Ben for some additional comments.
Speaker Change: Thank you David Please turn to slide nine for an overview of <unk> unique business model in the 5% is typically lumped into the engineering and construction segment <unk> five is really beta compared to businesses in the testing inspection and certification or tech industry. While engineering design is viewed as a conflict in the European Tech industry and is a catalyst.
Ben: In the U S Tech market.
Ben: The majority of our service offering is in the tech space, and our engineering capabilities and civil structural MEP in technology allow us to anchor client relationships at a higher level, giving us a standing as the expert on the ICA or system that we've designed and open the door for cross selling of our high margin Tech services.
Ben: Our tech services provide ongoing relationship with clients that extreme cost the designed based throughout the entire lifecycle. These high margin services are often recurring opex services that keep us engaged with clients for years and are a significant contributor to our margins that are higher than the industry average.
Ben: On slide 10, Youll see an overview of the infrastructure support segments Q4 performance, we generated $111 million in revenue in the quarter led by a strong performance in our utility services group, our utility services growth benefited from a strong demand for our utility underground and LNG services. We also had strong performances.
Ben: Infrastructure design and <unk> business units in both east and West Coast.
Ben: The growth drivers for our central infrastructure support services remained strong and one area that has received a great deal of attention publicly is young the grounding of power lines due to the <unk> earlier this year in Los Angeles. These types of high profile events drive nationwide demand for these services in the near to midterm.
Ben: One area that we're focusing on for 2025 is the leveraging of our geospatial technology platform infrastructure support and our buildings and technology businesses.
Ben: Our specialty services provide ongoing client relationships in such areas as delamination aerial inspections power delivery system resiliency and asset management.
Ben: On the right hand side of the slide ill like to bring your attention to some of the acquisitions that we've recently made to strengthen our high margin recurring tech services from conformity inspections and materials testing to building Digitization, we continue to expand our expertise in rates and highly profitable <unk> services that support margin expansion and long.
Ben: Term client engagements.
Ben: Please turn to slide 11 for an overview of buildings and technology.
Ben: Data center systems, and design and commissioning continue to grow and now make up 15% of our buildings and technology portfolio.
Ben: Clean energy also continues its strong growth supporting energy conversion and electrification initiatives largely with public sector clients.
Ben: Our growth drivers for the sector.
Ben: Alright high growth areas with strong demand and as with the infrastructure as a fourth segment. We are focused on leveraging our special platform for our buildings and technology clients.
Two particular growth segments that we're focusing on include our international and data seen at groups in the data center business, we are expanding into new geographies in Thailand, South Korea, Indonesia, and the Middle East and now receiving direct request from our clients in the European market. We are also seeing success in cross selling services to both domestic and U S clients.
Ben: To expand our existing relationships and services provided some of the U S services that are gaining traction include power delivery data centers as well as clean energy structural engineering and fire protection consultant for.
Ben: The Geospatial segment update I'll turn the call over to Kurt Allen, our president of Geospatial Okay.
Kurt Allen: Thanks, Ben as you can see on slide 12, geospatial recognize $69 million in revenue in the fourth quarter with 50% of this revenue coming from the federal government.
Kurt Allen: 31% coming from utilities, and the remaining 19% coming from state and local government.
Kurt Allen: We approached our 2025 budget process with an eye towards margin expansion and leveraging some of the cost efficiencies in our major 2023 acquisitions of the <unk> Harris Geospatial software business and axiom geospatial.
Kurt Allen: We're confident that these will result in improved profitability and performance of the geospatial business.
Kurt Allen: On the federal side of the business, we've had no contract cancellations to date coming from those activities and we do not see anything yet that will significantly affect our budget.
Kurt Allen: We believe that the backlog we have brought into the year will enable us to weather any impact.
Kurt Allen: In fact, those activities may create opportunities for <unk>.
Kurt Allen: History has shown us that when resources are constrained at agencies they tend to increase their dependence on outside consultants such as MB five.
Kurt Allen: On a very positive note, we are seeing several of our growth drivers bearing fruit.
Right. After the first of the year, we announced a major award for <unk>, our mapping for the South Island in New Zealand. This multimillion dollar award is part of our effort to expand internationally, particularly with our niche capabilities that we can project globally, let's just talk about the much glide our satellite based monitoring solutions and <unk>.
Kurt Allen: <unk> are all commercial growth driver has been on a successful path forward.
Kurt Allen: Being beholden to government political change in budgets must be balanced with additional commercial business and our utility business exceeded its bookings budget 2024 by 38%.
Kurt Allen: We expect continued growth within this segment in 2025.
Kurt Allen: Additionally, the last Congress passed a supplemental funding bill for Hurricanes Helene and Milton.
Kurt Allen: That amount, but youre expecting no other contract out a record amount of tasking.
Kurt Allen: Their contractors in the late summer.
Kurt Allen: <unk> is one of three contractors and really just talk about the much broader program and we typically enjoy the largest share of wallet amongst the three eligible contractors.
Kurt Allen: Next we all witnessed with horror what happened to many families because of the catastrophic damage caused by the Palisades and Eaton fires in southern California.
Kurt Allen: As most of you know <unk> has more than 900 employees living and working in California, and we felt obliged to help <unk>.
<unk> five acquired Lidar over the fire area immediately after the fires came under control.
Kurt Allen: When temporary flight restrictions were lifted for overflights above 7000 feet. The purpose of the acquisition was to quickly acquire and process provisional digital elevation data and get that data in the hands of responders. The initial data is most useful to model potential mudslide areas due to heavy rain.
La County, the California Department of natural resources, and the utility companies in the areas are all NV five clients and we believe the data provided made a difference in the response effort as the rain started to fall.
Kurt Allen: Since then the University of California, San Diego has stepped up and purchased the data for the public domain.
Kurt Allen: This allows <unk> to finish processing the data with additional meaningful analytics with the community.
Kurt Allen: Lidar is not only valuable for emergency response, but it is also useful for future wildfire mitigation, if newly collected lidar over the entire southern California area as part of the California supplemental package being considered by Congress. It will allow the communities the state and federal agencies to contribute towards reducing the <unk>.
Kurt Allen: Loads that caused these out of control wildfires.
Kurt Allen: Additionally, we wanted to provide an update on geospatial effort towards artificial intelligence.
Kurt Allen: The geospatial profession has been racing towards AI for a wide variety of deep learning and large language model applications for a number of years.
Kurt Allen: <unk> five has a team of data scientists to implement large language.
Kurt Allen: Or <unk> services to our clients and support of the Big data management challenges.
Kurt Allen: The U S. Army Corps of engineers has relied on <unk> to employ LMS to support the dredging operations around the country.
Kurt Allen: <unk> has assisted the army to make sense of dredge data that the human brain can't see.
Kurt Allen: We have recently entered our third year of the multimillion dollar contract with the Army Corps and we believe this contract alone is positioned ourselves well in this space.
Kurt Allen: Also <unk> using deep learning models to determine that understand irrigated landscape for water conservation in California.
Kurt Allen: And also for coastal resilience programs for Noah.
Kurt Allen: Both multimillion dollar AI programs drive efficiencies through automated processing that allows us to accomplish much much more with less.
Kurt Allen: Finally, we are seeing major government agencies move towards automated detection and change analysis from a more manual mapping process.
Kurt Allen: Our NV inform software workflow has allowed us to make this automated transition towards AI and to be among the multiple award <unk> for these type of activities for both the nine figure Luna.
Kurt Allen: And Luna contracts for the National Geospatial Intelligence agency.
Kurt Allen: The U S space Force is also contracted with <unk> for a similar automated detections proof of concept contract and we are waiting an award decision for this client and follow up work in the coming weeks.
Ben: With that I'll turn it back over to Ben.
Ben: Thank you Ken.
On slide 13, I would like to highlight some of the recent acquisitions that have joined <unk>.
Ben: Delta at the large scale infrastructure testing inspection and certification and DFAST Environmental services company in Southern California the.
Ben: The acquisition expands our conformity adjacent services in the region for electrical utility water and transportation infrastructure and as <unk> environmental services expand our DFAST capabilities.
Ben: Global Fire Protection group is a leader in the high margin recurring fire protection consulting Victor arbitration as a service that is in demand by all of our clients and its first month with MB five global fabrication group has completed $1 million in cross selling with other MB five business units, including data center projects.
Ben: <unk> engineering is a provider of mandated energy efficiency engineering, and <unk> representation consulting in New York City and surrounding areas.
Ben: The city has been a target for our building systems design and energy efficiency consulting due to the mandate nature of these services in the region.
Ben: And the domestic data center we.
Ben: We completed two acquisitions synergy BCS and keys back consulting to strengthening our data center design and commissioning services in the U S and they brought with them strong relationships with several hyperscale.
Ben: As we now move and the growth positioning section of our presentation. Please turn to slide 15 to discuss the bolstering of our successful cross selling program are.
Ben: Our rich history of cross selling has provided benefits in margin improvement from insourcing sub contracted work and a driver for our organic growth in.
Ben: In 2025, we are bolstering our cross selling program with management incentives based on recording revenue from sales across business units and mapping key clients for applicable <unk> service offerings.
Ben: Technology is a differentiator and competitive advantage for MB five we're leveraging technology to enter new client relationships deliver our services more efficiently and expand ongoing relationships with clients in the fields of reoccurring Opex services asset management and digital Twins. One example is in the buildings and technology business.
Ben: We are building Digitization continues its rapid growth as a greenfield initiative using technology and expertise from the geospatial segment.
Ben: Another example is <unk> geospatial data collection and analytics of the Los Angeles Wildfires, which provides an introduction for <unk> to work with numerous government and relief agencies and private development and the Los Angeles area has to be rebuilt.
Ben: Now competitors have delivered geospatial data that is publicly accessible for the entire region and this first mover advantage in Los Angeles gives us a competitive advantage when approaching clients and prospects.
Ben: Please turn to slide 16, as we review our new growth target that we announced last month, a $1 6 billion of revenue by the end of 2028.
Ben: Since our inception, we have created growth targets that <unk> leaders and employees.
Ben: Work toward achieving these targets are built from the bottom up with input from every business unit and the organization by successfully achieving these targets we create growth opportunities for our employees, a better able to serve our clients and deliver more value to our investors. This new target has been modeled to include by organic growth in the mid to high single digit range.
Ben: As well as strategic acquisitions to strengthen our platform and expand our tech enabled solutions.
Ben: Growth will come from all of <unk> businesses with a particular focus on our high growth sectors of Geospatial technology utility services and data centers can be five has a successful history of achieving ambitious growth targets and we're excited to work towards making the $1 6 billion revenue goal a reality.
Speaker Change: I'd now like to turn the call back over to <unk> to discuss our 2025 goals objectives and full year guidance.
Ben: Ben I would now like to list our goals and objectives for 2025.
So, let's turn to page 17.
Ben: These goals and objectives for 2025 are based upon confidence in our plan.
Ben: Our plan is to one accomplished mid to high single digit organic growth, which will continue improvement in this area.
Ben: Two we want to increase our gross margin expansion by concentrating on high barrier high revenue and EBITDA surfaces.
Ben: Three continue our improvement converting EBITDA results to cash.
Ben: We have instituted a method of faster billing and stronger collections.
Ben: For our M&A program has expanded and we will concentrate on higher profit through acquisition of technology and tech related companies.
Ben: We expect to see accelerated growth in service slides that increase the profitability of <unk>.
Ben: Our positive view going forward as resulted in full year confidence in our 2025 guidance of $1 <unk> 6 billion to $1 <unk> 5 billion in gross revenue with adjusted earnings per share of $1, 27% to $1 37 per share and GAAP earnings per share up 52% at <unk>.
Ben: <unk> per share.
Speaker Change: Thank you Sir.
Speaker Change: To begin the question and answer session, if you'd like to ask the question. This time Super breasts are followed by the number one on your telephone keypad collectively Tiger a question press Star one again.
Speaker Change: And our first question.
Speaker Change: Welcome from Chris Moore with CJS Securities. Please go ahead.
Speaker Change: Hey, good afternoon, guys. Thanks for taking a couple of questions.
Speaker Change: Maybe we could just.
Speaker Change: Dig into the margin to EBITDA margin improvement a little bit further so let's say 100.
Speaker Change: 50 basis point improvement.
Speaker Change: In 25, roughly the same.
Speaker Change: Revenue growth is as an 24 versus 25 is it.
Speaker Change: Starting to talk about is is it mix is it question sure.
Speaker Change: And maybe just any anything you have on that would be helpful.
Chris Moore: Thanks, Chris I'm going to cover some of that.
Speaker Change: And the concluding comments, but.
Chris Moore: We really want to focus.
Chris Moore: I always improve EBITDA and it's through efficiency. So we want to accelerated our administrative program and I think we're going to be doing that which will absolutely increase equal.
Chris Moore: Our EBITDA because the administrative piece people are non billable so we're going to look.
Chris Moore: Lower the administrative costs as a percentage and this will result in a higher EBITDA and.
Chris Moore: We will approach that growth of 2025 of a 150 basis points.
Chris Moore: But it is not unreasonable I mean, we have achieved that.
Chris Moore: Same amount in prior years, albeit and right now we have a higher.
Chris Moore: Revenue basis, but the.
Chris Moore: Increased Chris is not something thats unrealistic and certainly the cash flow conversion.
Chris Moore: Is not unrealistic, but to answer your question.
Chris Moore: We think that it's not a big leap to improve our EBITDA margins.
Approaching.
Chris Moore: Approaching an improvement of 150 basis points and those are not unreasonable targets nor are they targets that we have not reached in the past.
Speaker Change: So this is something we've already done in the past so it's not like it's a phenomenal leap of faith to do that Chris but anyway. Thank you for the question.
Chris Moore: I appreciate it that's helpful.
Chris Moore: Yes, my follow up just a geospatial obviously, it's still an area with done well and tremendous potential I'm just trying to get a sense from an from an organic growth standpoint.
Chris Moore: What is a reasonable target over the next few years, given kind of all the opportunities that are out there.
Chris Moore: Okay.
Chris Moore: Yes, I think we have budgeted in about 10% to 11%.
Chris Moore: Organic growth of our Geospatial group.
Chris Moore: And Thats fairly historic and Thats.
Chris Moore: Yeah.
Chris Moore: Really we're basing that improvement more in EBIT than EBITDA.
Chris Moore: Got it Thats helpful.
Chris Moore: I'll get back in line I appreciate it guys.
Chris Moore: Thank you.
Speaker Change: And our next question will come from Timur <unk> with William Blair. Please proceed.
Ben Anderson: Anderson, Ben and good afternoon.
Speaker Change: Good afternoon.
Ben Anderson: So.
Ben Anderson: <unk> revenue guide.
Ben Anderson: Looks like Youre, calling for 10% revenue growth.
Speaker Change: I'm curious how much of that you're expecting to come from <unk>.
Speaker Change: Acquisitions that you've already made and how much of that you expect will come organically or maybe you could give an acquisition dollar amount roll out from the from last year.
Speaker Change: Hi, Tim This is Ed.
Speaker Change: The assumptions there.
Speaker Change: The low and high end our range from 5% organic on the low end to seven on the high end.
Speaker Change: And so you have about $17 million or so dropping into the 2025 period that was.
Speaker Change: In 2024, because we had owned those acquisitions yet.
Okay. That's helpful. So just to confirm though Ed your guidance.
Speaker Change: It doesn't include any acquisitions that haven't yet been completed.
Speaker Change: It does not include any acquisitions that have not been announced or closed yet correct.
Speaker Change: Yes, Okay. That's helpful and Decker said that was helpful that 10% to 11% organic growth outlook and geospatial was that was that organic revenue growth.
Speaker Change: Yes, we didn't include any acquisitions in that so it is just organic revenue growth and thats.
Speaker Change: Gross revenue.
I want to comment a little bit on our confidence in that 2025 guidance Youll see on a previous slide I can't tell you the number or backlog was the highest ever and 904 and that represented that represents almost at over 80% of the budget and normally a good backlog is between 60 and 65, so we really.
Speaker Change: We feel good about what's going on in 'twenty, five and it's really a lot of it is backlog of work to be formed.
Performed in that period.
Speaker Change: So.
Speaker Change: So that kind of gives us more confidence.
Speaker Change: That's actually really good color.
Speaker Change: Slide four.
And I see you have it right there so your backlog represents a higher percentage.
Speaker Change: Of your revenue guide relative to historical standards.
Speaker Change: Yes, normally it's about 65% and I think this is over 80% you can do the math.
Speaker Change: Tim, but I'm not but I think it's I think 900 horse over age 80% 80, it's 88 of the low end of the guidance 88 on the low end.
Speaker Change: Okay that really gives us great confidence.
Speaker Change: Yeah, no that is definitely reassuring I will just ask one more question I'll get back in line, which is about the backlog, which is is there any.
Speaker Change: Very large projects in there that is really pushing it up in particular are they federal where there may be some investor concern of risk from those or anything like that can you just parse apart the backlog for us a little bit.
Speaker Change: No its pretty good mix across the different segments that we've got.
Speaker Change: Touched on Dodge.
Speaker Change: Through the presentation, we haven't had any contracts canceled we've had one delayed by two weeks, but there's been minimal disruption from that right now we're watching it very closely but.
Speaker Change: We're not seeing a huge impact from that right now and a lot of the growth in the backlog has come from our expanding the relationships that we have with utilities, Arizona Public service for example, it's a growing relationship.
Speaker Change: And that also includes salt broker project another utility in that area and then we had a special initiative and our support initiatives to grow the Pacific gas and electric and so we've seen some rewards from that we've seen some of that backlog growth. So a specific amount of the backlog is with utility.
Speaker Change: <unk> and public agencies and that makes us feel pretty pretty confident.
Going forward.
Speaker Change: Yep.
Speaker Change: Barry.
Speaker Change: Very helpful color. Thank you guys.
Rob Brown: And now our next question will come from Rob Brown with Lake Street Capital. Please proceed.
Speaker Change: Yes.
Rob Brown: Good afternoon, and thanks for taking my question.
Speaker Change: Yes.
Speaker Change: Just wanted to check on the datacenter demand environment are you.
Speaker Change: Sort of seeing those those projects coming in tier to your plan and maybe give us a sense of how much growth youre seeing in that vertical.
Yes, we're still seeing really nice organic growth sort of tracking around that 25% organic growth and we're not seeing that slow down at all.
Speaker Change: Both internationally and you touched on this on last calls we're really starting to make good headway on the U S. As.
Speaker Change: As well as sort of the organic growth of our existing services that we've been providing and then it's also expanding those services I touched on the.
Speaker Change: Our fire protection services that we're now able to bring to datacenters structural and power delivery really is the big one that we're expanding in that space, obviously very important.
Speaker Change: Okay.
Speaker Change: Okay great.
Speaker Change: On the M&A pipeline I think you gave a little more specificity at this time about the areas Youre going Toing and looking after I guess is the.
Speaker Change: Could you give us a sense of the tech Tech enabled services, how is that pipeline shaping up.
Speaker Change: Are there geographic kind of additions do you want to add or are there new kind of technical verticals. You think you can.
Speaker Change: Bring into the mix that can be accretive.
Speaker Change: Well.
Speaker Change: As it relates to data centers I think it's more of an approach.
Speaker Change: The U S.
Speaker Change: The ones that deliver energy to these data centers are the public utility commissions and they they are very selective in who they are going to give energy to for example in Arizona Theres a moratorium on energy for data centers, because they want to use that energy for.
For air conditioning, however, internationally, they don't have such a big reliable grid and so a lot of a lot of the data center growth is being done by private people developing their own energy sources and as a result, we haven't had the inefficiency so.
Ben Anderson: Ben can comment better on this than me, but we seem to see a much stronger organic growth as a percentage internationally than we do domestically, yes, I think theres still a lot of opportunity here in the states. So I think it's just worth on the international piece a lot of that is driven by an increase in cloud storage on some of these developing countries where.
Speaker Change: The other data.
Speaker Change: Storage is just increasing size significantly that's one of the huge draws its redevelopment.
Speaker Change: Okay.
Oh.
Speaker Change: Thank you I'll turn it over.
Speaker Change: Okay. Thanks.
Speaker Change: Thanks, Rob.
Speaker Change: And our next question will come from Jeff Martin with Roth Capital markets. Jeff. Please proceed.
Jeff Martin: Thanks, Good evening everyone.
I guess I'll dive in high Tech.
David you touched on organic growth expectations for.
Jeff Martin: Geospatial I was wondering if you could do the same for infrastructure and building technology.
Jeff Martin: I think in our budget, we isolated those.
Jeff Martin: We kind of think that there'll be because of the infrastructure demand. So I think thats, a higher percentage as a percentage of organic growth that's probably the high of the three segments. We have the geospatial segment, which we gave you the organic growth somewhere between 10 and 11.
Jeff Martin: Yes, I think the rest are in the mid single digits remember.
Jeff Martin: Terms of our expectations on the low end, we're seeing 5% and on the high end seven so on a blended basis.
Jeff Martin: The overall organic growth overall consolidated all three of our reporting sectors.
Jeff Martin: Okay, it'll be mid to high single digits.
Jeff Martin: And then I wanted to drill in on your comment that inflation is also impacting your.
Jeff Martin: EBITDA margin.
Jeff Martin: Just curious if that's embedded within some contracts that <unk> had labor increases cost of labor increases that you can't recoup because those contracts are already in place.
Jeff Martin: And if so are these under master service agreements that that can be changed or not.
Jeff Martin: How I guess, how nimble are you in terms of recouping some of that margin due to we are nimble in what I was referring to mostly there Jeff is for example.
Jeff Martin: Talking about this before but when when inflation was peaking our LNG business transitions from a purely fixed price model to a hybrid with some Tms at PNM.
Jeff Martin: And so that that has.
Jeff Martin: That's an example of what would have impacted on a temporary basis. Our margins. If you think back to before any of the inflation.
Jeff Martin: Sure.
Jeff Martin: Came around our margins were higher than even what we're projecting for next year like <unk>. So theyre all we've been at those higher margin levels before.
Jeff Martin: As we cycle through some of these large LNG contracts.
Jeff Martin: <unk> get into the newer ones, we should we should we should be able to see margins expand overall for the company.
Okay, Jeff This is <expletive>.
Jeff Martin: Yes.
Speaker Change: If you've got your answer I believe me I won't say anything.
Jeff Martin: But go.
Speaker Change: Go ahead <expletive>.
Jeff Martin: A lot of the.
Jeff Martin: Inflation hits, our administrative things and set that aside easily as pass through as direct inflation numbers. So.
Speaker Change: Certain people that everybody deserves to raise a certain cost things, but not every one of those inflationary costs can be directly pass on the client everything that Ed was referring to so he was referring to a mix of those and so thats, where <unk> seen a little bit of erosion.
Speaker Change: The increase in inflation has caused a little bit of erosion in the.
Speaker Change: Profitability.
Speaker Change: Makes sense, Okay, one more from me if I could.
Speaker Change: Last summer at your Investor Day, you talked about.
Speaker Change: No.
Speaker Change: The taking.
Taking your software on on the Geospatial side.
Speaker Change: And making that a essentially a cloud model just curious the progress that you've made there and are you seeing large opportunities.
Speaker Change: To do the remote monitoring and other types of.
Speaker Change: <unk> features you can get out of the cloud version of that software.
Speaker Change: Yes, So I think just geospatial in general we've seen a great opportunity to leverage the technology with and add more traditional engineering services to deliver more efficiently and push us more along the lifecycle of a longer relationship with that and drive the recurring revenue, but you might be better to respond to the cloud based software and where we're at with it I think.
Speaker Change: We're taking that to market right.
Speaker Change: Yes, absolutely, we're taking it to market.
Speaker Change: The cloud based revenue that we with our <unk> ecosystem software products doubled in size last year.
Speaker Change: But it was coming from a very small base.
Speaker Change: Our success with software is absolutely.
Speaker Change: All about.
Speaker Change: Being able to grow that part of the business.
Speaker Change: We're seeing that happen and we're also implementing that software workflow into what I called the Detections and change analysis that we're seeing a lot of large.
Speaker Change: Government agencies go towards debt are very interested in remotely sensed information I mentioned the <unk>.
Speaker Change: Geospatial Intelligence agency.
We have two massive contracts that we have there.
Speaker Change: Multi award contracts, but so there are a number of bidders on it but it gives us the opportunity to stay in the game and be in the game for major detections around the world. If they wanted to understand changes in the near field, we can do that automatically and so that workflow gives us a lot of use cases.
Speaker Change: And a very large total addressable market to go after.
Speaker Change: Yes.
Speaker Change: Sure.
Speaker Change: Turning the battleship, but at the same time.
Speaker Change: We were very bullish on this.
Speaker Change: 25.
Speaker Change: I appreciate the color. Thank you.
Andrew Wittmann: And our next question will come from Andrew Wittmann with Baird. Andrew. Please proceed.
Speaker Change: Yes.
Thanks for taking my questions. This afternoon, guys I guess I just wanted to kind of dig into the margins one more time and just get a little bit more.
Speaker Change: Tell from you it sounded like from the answer a question or two ago.
Speaker Change: Just turning off some of the old LNG plant that for fixed contracts under some inflation is going to be positive to your margin. So yes, a couple of ways to ask this but how much of the 150 basis points of year over year margin improvement that you are looking for this year is just like.
Speaker Change: Mix that you don't have to really go after and get versus things that you are talking about doing whether its overhead real estate.
Speaker Change: Whatever and so could you talk about that and then if you could just drilling a little bit more about some of the specific actions that you expect to do to effectuate 150 basis points, just recognizing the 150 is a lot.
Speaker Change: For professional services model so.
Speaker Change: I think its important question.
Speaker Change: Yes look I think one thing that we can move and we are moving the needle on quite quickly here as utilization. So that's just getting our existing team.
Speaker Change: More busy so that obviously improves margin, yes, we do have some opportunities on the real estate side and some efficiencies.
Speaker Change: Our indirect labor and.
Speaker Change: So these are things that we're working on through this quarter and also G&A.
Speaker Change: There's some expenses that we've identified that we can bring down here in the short term.
Speaker Change: That will also help if you want to add I think thats right. Some of it is may expanding but I think that.
Speaker Change: I know that throughout the company, we're looking very carefully at.
Speaker Change: Cost optimization.
Ben Anderson: Ben said it as an example, but just because youre at a certain level of utilization doesn't mean that you can't.
Ben Anderson: You can increase that and that has that goes right to the bottom line.
Ben Anderson: So we're basically you want to do that while at the same time, reducing our indirect labor, it's not just a matter of increasing utilization and then having.
Ben Anderson: Shifting between indirect and direct I mean, we want to reduce overall labor, while still increasing revenue if that makes sense. So there are we've got several initiatives throughout the company that are focused on on cost cutting you are making sure that from an administrative standpoint, we're being as efficient as possible.
Ben Anderson: And again utilization is a big focus.
Speaker Change: Let me just jump in here as well Andy.
Speaker Change: Okay, just we always remember this <unk>.
Speaker Change: Our budget that you see as a consolidated but it came ground up it came from every one of our operations in all of our operations had mandates.
Speaker Change: <unk>, reducing indirect costs and just the scale ability youll see an increase in revenue and so that increase in revenue does not necessarily have to.
Speaker Change: Mean that theres going to be.
Speaker Change: An increase in administrative costs to provide that revenue. So we're looking for that efficiency, we focused on a specific thing to lower administrative costs and so when we looked at everything coming up.
Speaker Change: <unk>.
Speaker Change: I would say this we spent as you its more conservative from what I've seen from the individual budgets in operations, but that was a key initiatives to lower administrative cost and which would therefore increase the profitability and.
Speaker Change: And as a result, you see a 150 basis points in front, a few but it's but this came ground up this didn't come be mandated.
Speaker Change: But it's each came from individual budgets with the direction that to reduce indirect labor and all types of indirect costs and it goes from anything I'm being long winded here, but it can go to.
Speaker Change: Facilities that can go to many things that are fixed costs that should.
Speaker Change: It should be reduced but also in <unk>.
Speaker Change: And non fixed costs, which is really a target rich environment for us.
Speaker Change: Okay. So that's how we arrived at that number.
Speaker Change: Yeah, Okay, and then just my follow up question I guess this is probably going to be for her.
Speaker Change: I heard the comments that the government is one of the reasons the cash flow has been.
Speaker Change: The days out receivables are up.
Speaker Change: They're up a decent amount and obviously, that's fertile ground to pull it back out but.
Speaker Change: I guess, specifically they are around the unbilled or up.
Speaker Change: The most I mean.
Speaker Change: Maybe the direct question is what's the right number for your Dsos and for your.
Speaker Change: And specifically underneath that Youre unbilled when you're at 42 days of Unbilled.
Speaker Change: Level that you haven't really seen before so I'm trying to.
Speaker Change: Just to get a better sense of what you think the opportunity there is in.
Speaker Change: Hi, good afternoon.
Andy: So it's a good question Andy from an Unbilled.
Andy: I'm sorry from a build perspective, our DSO is is very good.
Andy: If there are some business units that have.
Andy: DSO is as low as.
Andy: <unk> 40, and others internationally, there is typically a little bit longer and so let's say.
Andy: Overall for the company itself.
Andy: Let's say, it's 60 days, that's fine I think the opportunity is more on the given the on the Unbilled receivables and what it was what I was referencing earlier.
Andy: The bucket.
Andy: Handful of contracts where the.
Andy: The milestone.
Andy: Milestones for building for actually sending out an invoice.
Andy: Necessarily match up with.
Andy: The work that's being performed.
Andy: Kind of skewed to the right.
Andy: And Thats, where our opportunity is we want to see that cash come in sooner and that the quality of the Unbilled is is very good.
Andy: We scrub that project by project.
Andy: All high quality Unbilled receivables the key there to optimizing is is just the b.
Andy: To be very.
Andy: <unk> focused on each contract.
Andy: Millstones themselves at the initial contract phase when you execute a contract so that.
Andy: So it's starting to move in a favorable way to the company and.
Andy: As quickly as possible.
It's also just worth noting that there has been some key lessons learnt from from those projects that we have those issues website. Moving ahead, we won't be making the same mistakes again, so we will see improvement there too.
Andy: Okay.
Andy: Thanks, guys have a good evening.
Andy: Thank you. Thank you.
Speaker Change: At this time. This concludes our question and answer session I would now like to turn the call back up which I Mr. Wright for closing remarks.
Speaker Change: Thank you everyone. We appreciate your listening to.
Speaker Change: To what we've had to say.
Speaker Change: I think.
Speaker Change: I took a few notes as.
Speaker Change: These presentations were given but I think you can conclude and see that we at <unk> have a very positive outlook for 2020.
Speaker Change: Five in both revenue and EBITDA improvement.
Speaker Change: But it's going to require hard work is required tremendous work on every one of our offices every every person that is.
Speaker Change: Providing a service.
Speaker Change: All of US will have to do this as a team and to do this together.
Speaker Change: But to help that into insists that growth I'd like to speak to the growth initiatives that we've had in these growth initiatives are supported by our corporate office.
Speaker Change: And some of those growth initiatives are.
Speaker Change: In areas, where we are we want to be.
Speaker Change: Supportive, but we also want to be optimistic so the growth areas that we have we have a specific organic growth initiatives that to develop our capabilities. In these three key areas and so one of them is.
Speaker Change: In our <unk> environmental we want to expand our environmental we've looked for a senior executive that we're going to support to grow that area.
Speaker Change: The second key area that we're very excited about is our position currently in southern California, we have with <unk>.
Speaker Change: Many many many municipalities and we have a specific business that provides staff augmentation to the municipalities in and the public work areas and as you well know there is a mandate that the municipalities have now to expedite the permitting process and with.
Speaker Change: Financial penalties for not doing so so we want to take that same relationship. It's not like we're breaking new ground, we want to take that same relationship that we've had through.
Speaker Change: For many years with the department of public works to really address the med <unk> side have been particularly affected by having to rebuild and re grow and we want to be we want to support that so we look we're looking at that area as as a specific growth initiatives and the third is the restructuring of our.
Speaker Change: Power group, so that we can really look for opportunities we have with up.
Speaker Change: Public utilities across the nation and so we have a specific way of addressing that.
Speaker Change: All of these will serve to do two things it will absolutely improve their revenue that that we look for and it will make us even more scalable with our administrative costs. We don't look for tremendous cost to do these initiatives, but we look at a way that we can grow our revenue and support.
Speaker Change: The bottom line. So we're very pleased going forward.
Speaker Change: We feel good about the year 2024, we've had.
Speaker Change: We had a very profitable year with cash flows.
Speaker Change: But there is always ways that we can grow and so we are looking very optimistically for year 2005, 2025, and we have specific tools in place to grow that so please review our presentation, maybe you would like to look at the last page of 17, where we get we are increasing our guidance.
Speaker Change: <unk>, increasing our guidance for up from 24 to 2025.
Speaker Change: That's because we have a positive outlook on what we need going forward. So I want to thank everyone for the time that you gave us today.
Speaker Change: And we look forward to reporting our progress as we get to go further into 2025. Thank you very much.
Speaker Change: That concludes today's call. Thank you all for joining you may now disconnect.
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: [music].