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spk09: Good afternoon, everyone, and thank you for participating in today's conference call to discuss NV5's financial results for the first quarter 2022 and at April 2nd, 2022. Joining us today are Dickerson Wright, Chairman and CEO of NV5, Edward Kodaspody, CFO of NV5, and Richard Tong, Executive Vice President and General Counsel at NV5. I would now like to turn the call over to Richard Tong. Thank you, operator.
spk11: Welcome, everyone, to NV5's first quarter 2022 earnings call. Before we proceed, I would like to remind everyone that today's discussion contains forward-looking statements about the company's future, business, and financial performance. These are based on management's current expectations and are subject to risks and uncertainties. Factors that could cause actual results to differ materially from these statements are included in today's presentation slides and in our reports on file with the SEC. During this call, GAAP and non-GAAP financial measures will be discussed. A reconciliation between the two is available on today's earnings release and on the company's website at www.nv5.com. Please note that unless otherwise stated, all references to first quarter 2022 comparisons are being made against the first quarter of 2021. In this presentation, NV5 has included certain non-GAAP financial measures as defined in Regulation G promulgated under the Securities Exchange Act of 1934 as amended. The non-GAAP financial measures included in this presentation are adjusted earnings per share, adjusted EBITDA, and adjusted EBITDA margin. NV5 provides non-GAAP financial measures to supplement GAAP measures as they provide additional insight into NV5 financial 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 GAAP. 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 webcast replay of this call, and it's an accompanying presentation, are also available via the link provided in today's user release and on the Investors section of the company's website. We will begin the call with comments from Dickerson Wright, Chairman and CEO of NV5, for turning the call over to Edward Kodispody, Chief Financial Officer, for a review of the first quarter 2022 results. Dickerson Wright will then provide closing comments before we open the call for your questions. Dickerson, please go ahead.
spk10: Thank you, Richard, and thank you to everyone that is joining us for today's call. You will notice we provided an investor deck for you to use during the presentation. So now let's turn to slide five on that investor deck, where we will discuss our first quarter 2022 results. Post revenues were $190 million, a 24% increase over the first quarter of 2021. Our adjusted EBITDA was $29 million, a 19% increase over the first quarter of 2021. Adjusted earnings per share was $0.99 per share, a 13% increase over 2021 first quarter. Even though the share count rose from 13.4 million shares in Q1 2021 to 15.2 million shares in Q1 2022. Growth was driven across all verticals of the core business and the geospatial service lines. Although we live in a difficult global environment with wars and the COVID pandemic, we continue to see positive opportunities for growth. NV5 has recorded 683 million backlog with continued strong pipeline of opportunities for organic growth and mergers and acquisition growth. Our cash position and cash flows remain strong. This serves as a safety net in an uncertain macro world and also positions us for the growth through M&A for the year. Turning to page six, we will discuss our quarter one highlights and opportunities for the balance of the year. You will see we highlight growth from our six verticals, which all remain robust. We are seeing exceptionally strong growth in energy efficiency, geospatial services, utility and environmental transaction services, all of which are exceeding our budget projections for 2022. Let's now go to page seven where we will discuss our acquisition activity that has either taken place or opportunities that we see going forward for 2022. During the beginning of quarter one of this year, we completed two strategic acquisitions to strengthen our MEP services and our construction quality and TIC services. Fulton Consulting Engineers further strengthens our MEP or mechanical electrical plumbing engineering and energy efficiency services in the Southwest. River City testing allowed us to further expand our construction quality and TIC services in the Riverside and San Bernardino counties, two of the largest counties in Southern California. We expect to see larger future acquisitions in geospatial and infrastructure in 2022. Our model for acquisition remains the same. Culture, competitive advantage, and a strong history of profitability. On page eight, I would like to briefly mention our backlog growth, which gives a strong indication of the continual growth of the company for 2022. Our backlog grew in quarter one of 2022 by 17% over the same period of quarter one in 2021. Now turning to page nine. As you have heard us mention many times, cross-selling is a major component of our internal organization's growth. Our cross-selling increases inter-office sales between locations through the NV5 network and has been very inclusive for the network. We have increased our cross-selling target for 2022 to $34.3 million for the year from $31.2 million in 2021. We will now transition the presentation to our CFO, Ed Kodaspody, to provide an overview of our first quarter financial performance. Go ahead, Ed.
spk07: Thank you, Dickerson, and good afternoon, everyone. If you would please turn to slide 11 of the presentation, I'll highlight some of our first quarter financial results. Our gross revenues for the first quarter of 2022 increased by 24% over the same period in 2021. If you strip out incremental acquisition-related revenue, our year-over-year growth was 12%. Net income increased to $8.6 million in the first quarter of 2022, compared to $5.5 million in the first quarter of 2021, a 58% increase. Our adjusted EBITDA increased 19% to $28.9 million in the first quarter of 2022, from $24.2 million in the same period last year. Our GAAP earnings per share increased to 57 cents per share in the first quarter of 2022, from 41 cents per share in the 2021 first quarter, a 39% increase. And our adjusted earnings per share increased to 99 cents per share in the first quarter of 2022 from 88 cents per share in the 2021 first quarter, a 13% increase. On slide 12, you can see we continue to demonstrate strong cash flows on top of a relatively low net leverage position. Our cash flows from operations for the first quarter was $46.5 million, which was 1.6 times our adjusted EBITDA, and our net leverage was 0.4 times. We believe our strong cash flows and balance sheet position as well for the execution of our business model and strategy, and we're excited about the remainder of 2022. With that, I'll turn it back over to Dickerson for some additional perspective on our growth positioning. Thank you, Ed.
spk10: Let's turn now to slide 14 of the presentation. You'll see as a result of our strong performance for Q1 2022, we're increasing guidance for full year of 2022 for gross revenues from an original $773 million to $802 million, now to $785 million to $810 million, and increasing guidance for full year 2022 adjusted EPS from $5.39 to to $5.70 to $5.39 now to $5.80 per share. We feel comfortable in our outlook for 2022 based on NV5's strong position in support of infrastructure throughout all of our services. Now I would like to turn it over to the operator to begin the question and answer session.
spk09: Thank you, sir. At this time, I'd like to remind everyone, if you'd like to ask a question, please press star then 1 on your telephone keypad. Our first question will come from Andy Whitman with Baird. Please proceed.
spk08: Great. Thanks for taking my question, and good evening, guys. I just wanted to start out, Dickerson, with a question on some of the businesses that you have around the commercial real estate. You've got clearly the MEP stuff that you've talked about, and I know that you've been high on real estate transaction services where you've seen very good momentum, and that's evident on your slide that you put out here today. I'm just curious, I mean, I expect that the quarter is obviously good on both of those, but on a forward-looking basis, in a rising interest rate environment, can you tell us what you've seen historically on how those businesses react in a world that's starting to look a little bit more realistic for higher rates and more challenging economy?
spk10: That's a good question, Andy, and it's one that I often ask how we're doing in the real estate transactional service business because they are very sensitive to and subject to interest rates. In fact, I spoke to one of our key operators in the group today, and they are busier than they've ever been, and it could be two things. It could be The portfolios, you know, we do very large portfolio transaction services, and I think many people are probably trying to get those done before they see the interest rate go up. I can't give too much away on forward thinking, but our April results continue in that area from both groups, our recent acquisition of Global Services and the Bach and Clark one that make up our transactional real estate. Both are operating very, very strong. But in that area, there could be erosion. There could be erosion. It's a natural thing with interest rates, too. This type of service is dependent on those. So it's not realistic to continue to see at a zero interest rate that the services would continue at the same pace that they are now. But I can say from what we see and what we know now, they're continuing very, very strong. that is probably the main area that we have that is subject to uh you know really subject to interest rates and i'll speak in our concluding comments how we try to position our company to be more in mandated work so that that is not as sensitive to interest rates i see uh thanks for that color and i was just wondering um maybe a little little clarification on the guidance here um
spk08: I think I heard in the script that organic growth was 12% in the quarter. And I was just wondering, with the acquisitions that have been filtered in here, what you're thinking the organic growth rate could be for the year that's implicit in the revenue guidance that has been updated here today. And if there's any... acquisition revenue in there that has not been publicly announced? In other words, is it assuming any future acquisitions that we don't, here in the public markets, know about yet?
spk10: No, we're not assuming any future acquisitions. We did two very small acquisitions that were strategic that I mentioned in my covered remarks. We do not consider acquisition that we haven't taken place. We don't consider any growth in that. So when we gave guidance, it did not include any anticipated acquisitions that we may have. I would say, though, that our growth, we would continue, and we feel comfortable still with the mid to high single digits overall organic growth, and that would be based on on work that we're going forward from now through the remainder of the year. We did have a very good quarter on organic growth in our first quarter, but we still think that our guidance of 5% to 9% or so of organic growth is what we're anticipating for the rest of the year. Great.
spk08: I'll leave it there. Have a good evening.
spk09: Thank you. The next question is from Jeff Martin with Roth Capital Partners. Please proceed.
spk06: Thanks. Good evening, guys. Nice quarter. Great to see it. Hi, Dick. How are you?
spk03: Good, good.
spk05: Dick, I was just curious if you could give us an update on geospatial with respect to contract bidding activity, contract awards, if the government-related delays that we saw in 2021 are clearly in the rearview mirror now. And then also wanted to tie that into how Geodynamics has been performing a little over a year now, and that ties in well with the QSI business.
spk10: Yeah, let me mention, Mark Abato, the president of our geospatial group, is on the phone, and he may have some specific things, but let me give you a macro picture. One, we are very happy with the geospatial performance this year, and the fact that they had anticipated growth of about 14% organic growth from their budget and that they are right on that budget and included in that budget was geodynamics because of Because of the acquisition happened we have them in a full year rate right now the initiatives, you know, and I We're going to be speaking of specific initiatives that we are doing For the year that continue to grow the company and that hopefully will be mentioning some of those during the investor day presentations on May 26 however some of the things that we're looking at is offshore wind. Geodynamics has, you know, their structure of that acquisition was an earn out, and they have made all of their revenue projections. They've had a slight delay in one project that is going to be starting, but now we've given through capital expenditure, we've given them the ability to do deep water, deep water mapping that they weren't able to do before. And, you know, we're having a a ship modified to do just that. So the geospatial area, we think is, I'm very pleased with it, certainly pleased with what's been going from last year. And that's why I think we have some specific initiatives for the geospatial work. Mark, maybe you're there if there's anything specific you'd like to comment, feel free to.
spk00: Yeah, I'd be happy to jump in. I think that what we saw very encouragingly in 2021 was that the large federal IDIQ contracting vehicles did start to close out in a timely fashion. And those are the leading indicators to future work at large scale with the federal government in particular. The pacing of awards is roughly about the same as what we saw through 2021. And that is to say a little bit slower, but it's a matter of timing and working through some of the kinks in the procurement cycle. So we're still very encouraged by the contracting vehicles sort of proceeding on time. The demand is no different than what we had expected. It's just that there's been some delay in timing from a federal perspective. At the same time, as Dickerson mentioned, Geodynamics is doing incredibly well. They're positioned very well in a market which is beginning to grow relative to offshore wind and cable corridor landing. which they're tailor-made for, as well as a number of coastal resilience and charting projects. So those are starting to come through as well. So we're feeling very good on the government side.
spk03: Thank you, Mark.
spk05: Yeah, that's very helpful detail. Thank you for that. And then I just have a couple questions for Ed here. One, on the other direct cost line of the model, that increased about 50% year over year. I haven't seen a number, you know, in the 15 million range on a quarterly basis in history of the company. Just curious if there are, you know, certain things contributing to that and if that's an unusually high number, how we should think about that going forward. And then second question for Ed is, was there any change in contingent consideration estimate liability within the P&L this quarter? Thanks.
spk07: Hi, Jeff. Yes. So with respect to other direct costs, it is really driven primarily by mix of business, in particular our L&G business, which at times throughout the year, depending on what phase of the projects they're in, may have more pass-through costs than others. So we would expect that to normalize throughout the year. And with respect to your question on contingent consideration, we did pay off about $1.5 million during the first quarter related to one particular earn out. So not material, but just a sign that some of our acquisitions have been hitting their targets, which is a positive thing.
spk05: Okay. My question was more around was there any change in the contingent consideration liability that hit the income statement during the quarter?
spk03: Not in the first quarter, no. Okay. Very helpful. Thank you.
spk09: Our next question is from Chris Sakai with Singular Research. Please proceed.
spk02: Hi, I'm in for Lisa Springer. Just had some questions on let's see. So in Indy five just recently added deep water geospatial capabilities. What types of customers need these services and what factors do you see driving increased demand in 2022?
spk10: Well, and I'm going to let Mark Avato speak to the specific demand. But generally speaking, our work for any of the deep water mapping and measurements, our client are government agencies that are looking for mapping of an erosion of the seawall. And many of those measurements are taken because of changing in environmental conditions. Those clients tend to be government clients, and this is not really a commercial application. But, Mark, you may want to comment further.
spk00: I think that's well said. I think that we're starting to see a real balance in terms of demand for full ocean depth solutions. Whereas before, I think the government space clearly was the driver for demand, and in particular some of the scientifically-based agencies know of being a very good example of that, where we're providing coastal resilience, ocean floor mapping, charting-type solutions. But as the offshore wind energy market is developing, that is a space where we are investing and it's a very under-penetrated market and we see some great growth opportunities there as well.
spk03: And that happens to be more private sector.
spk02: Okay, great. And so you mentioned at the end of your last call that your geodynamics business was well positioned to pursue offshore wind energy opportunities. And as a result of the 16 projects currently underway, could you give us a sense of what would be your average contract size for this type of project? And if customers for this type of project are generally multi-site developers or not?
spk10: Well, I would give you that answer, but I may have to kill you. But we don't want to do that. The reason I'm a little bit hesitant, we will be speaking of Investor Day on some very specific initiatives that we're doing to capture the offshore wind power work. Those contracts tend to be larger, though. They tend to be six-digit in contracts. And so what each individual... There's one main general developer that we have just signed two initial contracts with, and I think those contracts are for $3 million. But I can't tell you of the 16 how much each of those are going to be, but there's one general contract. In fact, we're having a ship built that's being built to do that measurement, and it should be completed, but it's being done to the specifications that we're we require and this particular client for the wind offshore has asked for. So we see a tremendous market there, but I'd rather defer to our investor day where we speak and we'll have some visual on what we're actually going to be doing on wind and offshore measurement.
spk02: OK, great. I suppose I'll have to try and find Lisa first. Last question for me. It seems like there's a lot of acquisitions you've had in California. Could you comment on opportunities for your utilities service business in that state?
spk03: Could you repeat the question, please?
spk02: Could you comment on any sort of opportunities that you're seeing in California in the utility services business?
spk10: Yeah, there's a lot of opportunities, and I'm glad that you mentioned a specific reason. In the West, there's huge issues with taking overhead power lines and putting them underground for fire mitigation and fire mitigation work. And the major utilities in California all have issues with fires being developed from transmission lines, and so we are doing a lot of work in the mitigation area and design area, and those are for the western utilities, and so we think that there's a very good opportunity for that. Nationwide, there's an aging grid. The overall grid for supplying electrical power, it needs constant improvement, so we see some very good opportunities there as well.
spk02: Okay, great. Thanks for the answers.
spk03: Okay, thank you. Thanks for the questions.
spk09: Our next question is from Rob Brown with Lake Street Capital Markets. Please proceed. Hi, Rob.
spk06: Hi, Nick. Nice quarter. Thank you. I wanted to clarify on the demand environment, are you seeing any of the infrastructure bill spending or is this growth or strength really kind of other things going on and maybe some of your own internal cross-selling efforts? Just help me understand the demand environment drivers here.
spk10: Yeah, well, that's good. I think, you know, you and I will probably agree on the definition of infrastructure. Maybe this administration doesn't agree on what infrastructure is or not. But as far as pure ground up projects, we've seen very little actual support from the infrastructure bill. We think that we're in a very nice space. We like the idea that we have tailwinds rather than headwinds because Infrastructure absolutely is something that is mandated and needs to have improvement. That infrastructure can be anything from water delivery service, drinking of clean water, going over safe bridges, going down roads that need to be done. We are defining infrastructure as work for services that we actually provide. I think we've seen the government funding that we're expecting to see hasn't come to realization yet, Rob.
spk06: Okay, thank you. And then the second question, just on the inflationary environment, I know you can adjust that with some of your government contracts, but are you trying to kind of play catch-up in general, or can you manage your cost structure in your contracts kind of within a similar time period?
spk10: Well, I don't know if you mean from staffing. Obviously, we want to keep most of our people utilized, and most of our work, though, is based on a unit price basis where we have the people, we pay the people, they do the work. So it isn't that we're being overwhelmed, but we could always utilize more people, and we would watch the utilization rate. But I wouldn't say we're at maximum capacity to do this work. But I certainly think that the guidance we've given as far as the revenue generation, we certainly have the staff to support that guidance.
spk03: Okay, great. Thank you. I'll turn it over. Okay.
spk09: Again, that is star one, if you'd like to ask a question. Our next question is from Mark Riddick with Sidoti. Please proceed.
spk01: Good evening, everyone.
spk10: Hi, Mark.
spk04: So I wanted to start with, I'm trying to, if I remember correctly, last year, geospatial started the year maybe a little slowly or had some impacts around the weather and seasonality. I was wondering if Mark could talk a little bit about that as to how that looked this year versus last year, if I'm remembering that properly.
spk10: You have a good memory, that's right.
spk03: Mark will answer that for you.
spk00: Yeah, from time to time, the weather patterns, particularly in the northeast, snow and ice, do disrupt the first phase of our value chain, the data collection. And that was an impact in Q1 of last year. I think we saw fairly similar situations towards the latter part of the first quarter this year as well. The difference being and the reason why we were able to grow in spite of some of those challenges is that we entered 22 with a stronger backlog. We had done enough of the data collection for some large projects, particularly for utilities, in the fourth quarter of 21, with that kind of information available to us, the processing and the analytics phase is where we focus quite a bit of our time in Q1 of this year.
spk04: I see. Because it didn't necessarily seem as though weather was particularly your friend this year either. So the idea that you were just still able to benefit is certainly a positive. Quick switching of gears, so appreciate the increase of guidance. A quick question on is there a general share count assumption we should be looking at for that range of guidance?
spk10: Basically using the 15.3 million shares. Okay. Which is an increase of about 13.8, but we could probably easily go to 15.5. I think the balance sheet in our financial statement shows 15.2 million shares. Okay. Okay. Excellent.
spk04: And then I was sort of thinking about the, as far as with Deepwater, is there sort of a general way we should be looking at the competitive dynamic in that part of the business and maybe what your thoughts are there around that compared to the rest of the company?
spk10: Okay. I'll, you know, Mark can comment on this too, but it's really geography driven and We have the capabilities in deep water measurement in the Atlantic Ocean. There's probably a competing firm in the Pacific area, though we can still do some of that work, but not as much deep water work. So I think that the competitive landscape is really who has the equipment and who really has the expertise. And right now, what I know of is we are probably the main main person on the Atlantic Coast, and then there's a competitor in the Pacific. And Mark, maybe you can comment on that a little bit more if you like.
spk00: Sure, happy to. I think on the government side and the IDIQs under which we participate, They are multi-partner. We definitely enjoy a significant share of wallet under those contracts. But as Dickerson mentioned, the differentiating factor is how we've invested in the equipment, the advanced technology, the processing, and the analytics. I think that sets us apart from a number of the competitors in that space, particularly on the eastern seaboard. But as we also expand into offshore wind, that's a very under-penetrated market with very few competitors, especially in the particular part we play in, which is the near-shore cable corridor landing environment. So we really like our position there, and that's where we'll be investing. Okay, so very encouraging.
spk04: So thank you very much. I really appreciate it.
spk09: Thank you. At this time, this concludes our question and answer session. I'd now like to turn the call back over to Mr. Wright for closing remarks. Thank you, operator.
spk10: I thought I would have, and the company should have, a few comments to kind of give a sense of where we are, what the presence is. And to do that, I'd first like to go back. NB5 was historically structured And we've always been structured to support the public market demands. And, you know, we've ranged, but basically speaking, our public entity service demands is usually 70%. And this is mandated work. And this is, you've heard me say many times, this is work where, you know, people need to drink clean water, they need to go over safe bridges, and they're not so dependent on the economy. With that in mind, we've always structured the organization to be nimble, to look at opportunities and be opportunistic on the most current market trends. So we've all been following the news, and you know the international news, it's very apparent that energy sources and delivery of energy is of worldwide concern. There could be geopolitical reasons, there could be many different reasons, but obviously the supply of energy outstrips It does not face, or the demand, I should say, outstrips the supply. So, we're anticipating from our space an increased focus on alternative energy sources, conservation, and delivery systems that will address these concerns. So, there will be much more investment, and we've seen this all over, and this has been stated, and you can see that. There's going to be a tremendous amount of more investment in North America for energy, and we at ND5 want to be prepared and are prepared to support that. So what we will be doing, and you've heard me reference this, we are having an investor day on the 26th of May, and you're going to see three specific initiatives that we will be talking about that will support the energy delivery systems, energy demand, existing utility support. And all of these will be initiatives that we tended to continue to do and add corporate resources to grow those. So we'll be introducing those three and we invite anyone to, any investor to come in attendance in Chicago on May 26th. And also for those that cannot attend in person, there'll be a website And we'll be answering many questions, but I think it's very, I am very encouraged about what we're doing to grow this initiative, how we're supporting it from the corporate level. And you'll see a tremendous focus now on systems to deliver energy. and new ways to map that. And hopefully you will see those and we will be presenting those at the investor day to help grow the company. So anyway, we live in very, you know, we live in very fragile times. We know with the economy is changing and it's very, very important that we at NV5 be nimble, as I said before, so that we can support opportunities and we can change. We can change from things that could be affected by interest rates, those that may not be, those that will be affected by higher demands for all of our services. So we keep this in mind and we hope that we wanna stay focused on what we do in our vertical flat organization. So I wanna thank everyone today for joining us for this call. We're proud of the first quarter results. We look forward to a very successful 22. and we want to continue to support you and our employees. We want to support them so that they can support you. So anyway, thank you for the time you've given us today, and we'll look forward to speaking to you either during the investor day or certainly be speaking to you next quarter.
spk09: Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.
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