NV5(NVEE) - 2023 Q3 - Earnings Call Transcript

Financial Data and Key Metrics - Gross revenues for Q3 2023 were $239.3 million, up from$ 204.1 million in Q3 2022, driven by organic growth and acquisitions [54] - Gross profit increased by $15.5 million (15.5%) to$ 115.4 million compared to Q3 2022 [54] - Net income decreased by $2.7 million to$ 13.3 million, impacted by higher amortization and interest expenses [54][55] - Adjusted EBITDA was $37.8 million, up from$ 36 million in Q3 2022, despite project cycles in the LNG business and VIS acquisition pre-integration [66] - Backlog grew to $833 million, representing work planned for the next 12 months [53] Business Line Data and Key Metrics - **Infrastructure Group**: Grew 14% organically in key geographic areas like New York [33] - **LNG Business**: Grew 33% organically over Q3 2022, with strong demand for peak shaping facilities [45][104] - **Geospatial Services**: Year-to-date total growth of 69%, with 7% organic growth, driven by acquisitions like Axim and L3Harris [36] - **Buildings and Technology**: International mission-critical opportunities grew 44%, with 12% organic growth in Q3 2023 [30] - **Utility Services**: 21% organic growth, driven by substation and grid optimization projects [44] Market Data and Key Metrics - **International Growth**: Expansion into Japan and South Korea, with strong traction in mission-critical data centers [23] - **Domestic Growth**: Strong performance in New York and other key regions, with infrastructure projects benefiting from federal funding [33][92] - **Casino and Hospitality Sector**: Reopening post-COVID has driven spending, with new design projects in Macau [24] Company Strategy and Industry Competition - Focus on diversification across sectors to mitigate downturns, with stable revenue and minimal leverage [148] - Expansion into subscription-based and recurring revenue models, particularly in Geospatial and Technology services [129] - Strategic acquisitions like Red Technologies and L3Harris to enhance capabilities and client base [26][52] - Emphasis on technology as a competitive edge, with investments in software and advanced imaging solutions [141] Management Commentary on Operating Environment and Future Outlook - Management remains optimistic about 2024, with a strong backlog and recurring revenue streams driving growth [89][124] - Interest rate increases have impacted private sector development, but infrastructure projects remain stable due to federal funding [92] - LNG business is expected to remain strong, with high demand for peak shaping facilities [104] - Geospatial business is poised for organic growth acceleration in 2024, driven by strong bookings and backlog [116] Other Important Information - The company has$ 46.4 million in cash on hand and a net leverage of 1.3x, positioning it well for future growth [56] - Integration of acquisitions like Axim and L3Harris is nearly complete, with CRM integration expected by Q1 2024 [38] - The company is targeting $1 billion in revenue by the end of 2024, driven by organic growth and strategic acquisitions [124] Q&A Session Summary Question: Drivers behind the fiscal 2023 guidance revision - The revision is due to project delays in the Geospatial group and timing of acquisitions, with some expected to extend into 2024 [71] Question: Impact of interest rates on infrastructure work - Infrastructure projects have not been significantly impacted by interest rates, but private sector development has seen delays [46] Question: Growth outlook for the utility business - The utility business is expected to grow, driven by opportunities in power distribution and delivery, with no slowdown observed [84][100] Question: Gross margin dynamics and outlook - Gross margins are influenced by project cycles and labor costs, with some variability expected quarter-to-quarter [79] Question: LNG business growth and project completions - The LNG business is expected to remain strong, with growth driven by engineering and procurement phases, though construction cycles may cause lumpiness [104][114] Question: Geospatial organic growth acceleration in 2024 - Strong bookings and backlog in Geospatial are expected to drive organic growth acceleration in 2024 [116] Question: Impact of Orsted's offshore wind project cancellations - The company has limited exposure to Orsted's projects, with most work focused on North Carolina and not directly impacted by the cancellations [122]