Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- NV5 Global Inc (NVEE, Financial) reported strong organic growth and profitability in Q2 2024.
- The company's backlog increased to $877 million, representing a 5% increase over Q1 2024 and a 9% increase over Q2 2023.
- Gross revenues grew by 6% to $236.3 million compared to the same quarter last year.
- Gross profit increased by 12%, with gross margins expanding by 270 basis points to 52.2%.
- The company raised its full-year guidance for gross revenues to $944 million to $950 million and adjusted EPS to $5.13 to $5.20 per share.
Negative Points
- Net income decreased to $7.9 million from $15.4 million in the same quarter last year.
- GAAP diluted EPS dropped to $0.50 from $1 per share in the prior year period.
- The company experienced nonrecurring costs related to the VIS acquisition, impacting financial results.
- Cash flow was affected by working capital needs, resulting in a use of $11.3 million of cash from operations in Q2.
- Interest expense increased by $1 million quarter-over-quarter.
Q & A Highlights
Highlights of NV5 Global Inc (NVEE) Q2 2024 Earnings Call
Q: Dickerson, is your full year guidance raise primarily related to the expected contribution from pending acquisitions or an improved outlook on the organic side of the business?
A: Tim, it's the latter. We haven't included these acquisitions in our guidance. The guidance is based on a very strong second half from operations. We do not include pending acquisitions in our budget or guidance.
Q: Dan, can you dig deeper into the NV ecosystem and solutions you're building? How big is that business today, and do you expect it to grow faster than the overall geospatial business?
A: Right now, it's about $40 million total for the year. Margins are growing, and the software and services components are growing together. Software-as-a-Service is leading to a lot of services, growing that part of the business as well.
Q: What is the organic growth implied at the $947 million level for fiscal '24?
A: We expect 6% to 10% organic growth. Year-to-date, it's been 7% organic growth. We anticipate continuing at that rate for the second half of the year.
Q: Can you talk about the purchase price and expected annual revenue contribution for the two pending acquisitions?
A: We have reached an agreement on valuation but are under a nondisclosure agreement, so we cannot disclose the valuation. The combined acquisitions will add approximately 400 technical personnel to our existing platform.
Q: Can you clarify the onetime costs from the VIS integration and how they were treated in your adjusted results?
A: The expenses are not added back. We had about $800,000 in integration costs and $300,000 more in acquisition-related costs. The rest of the increase in G&A is due to acquisitions added to the business.
Q: Is the utility O&M business a new market opportunity that you can expand from?
A: Yes, it is a new area for us within the utility market. It is a sticky business with full-time staff working in utility operations, providing visibility into an area we hadn't done before.
Q: Can you provide an update on real estate transactions given the current rate environment?
A: The real estate transactional business is improving and is at or above budget. We expect a significant uptick once interest rates become more attractive for real estate transactions.
Q: What are your thoughts on EBITDA margin expectations over the balance of the year?
A: We expect geospatial to lift consolidated margins in the second half. For the full year, we estimate coming close to 17%.
Q: Are multiples for acquisitions starting to go higher than a few years ago?
A: Yes, multiples are tending to rise, particularly as private equity gets more involved. We use our appreciated stock in acquisitions, which can get multiples as high as 10x.
Q: What is the revenue guidance at the midpoint for fiscal '24, and what is the organic growth rate?
A: The midpoint revenue guidance is $947 million, showing a 10% total growth rate. The organic growth rate is around 7%.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
