HOLLYWOOD, Fla.- NV5 Global, Inc. (Nasdaq: NVEE) (“NV5” or the “Company”), a provider of professional and technical engineering and consulting solutions, today reported financial results for the third quarter ended September 28, 2019.
In the third quarter 2019, Gross Revenues – GAAP increased 26% year-over-year, EBITDA increased 3%, Net Income decreased 20% and Net Income adjusted for the impact of intangible amortization increased 3%. Our backlog as of September 28, 2019 increased 35% compared to September 29, 2018 and cash flows from operating activities for the nine months ended September 28, 2019 increased 23% compared to the nine months ended September 29, 2018.
In July 2019, the Company acquired two companies, GeoDesign, Inc. and WH Pacific, Inc., expanding NV5’s infrastructure design, surveying and construction quality assurance capabilities in the Pacific Northwest and supporting the Company’s ENERGY 2021 initiative. Operating results for the third quarter of 2019 were negatively affected, however, by both an unexpected delay in the Company’s liquefied natural gas (“LNG”) service line and declining revenue from contracts with the North Carolina Department of Transportation (“NCDOT”), as projects throughout the state were put on temporary hold pending funding. We expect that the project delay in our LNG service line and the NCDOT are temporary in nature. Decreases in other areas were partially offset by healthy upward trends in our power and construction quality assurance divisions. Erosion of utilization, along with integration of four acquisitions in the late second quarter and early third quarter, resulted in increased overhead costs in the third quarter. Scalable indirect costs are expected to begin in the fourth quarter, and full synergy is anticipated in 2020.
NV5 today also announced the signing of a definitive agreement to acquire Quantum Spatial, Inc. (“QSI”), the largest full-service geospatial solutions provider in North America, with approximately 600 employees operating out of 8 offices in the United States, Canada, and India. QSI combines advanced remote sensing technologies and proprietary processes, analytics tools, and algorithms to transform the way client utilize and value geospatial data, including subscription software. QSI’s client base contributes significant recurring revenue and includes federal agencies, major utility companies, and state and regional government authorities. QSI is an all cash transaction for $303 million. QSI is expected to generate $30 million of EBITDA on 2019 expected gross revenues of $128 million.
“NV5 continues to strategically invest in technical capabilities that add value to our clients and deepen our relationships, have significant barriers to entry, and provide margins that are higher than the industry average. Our seven acquisitions in 2019 only contributed partial year revenue, but have given us a significant presence in the Pacific Northwest, provided us with access to key DOTs and utilities, and made us the leading provider of geospatial solutions, a rapidly-growing, specialized service that impacts important fields such as power transmission line fire mitigation, pipeline asset management, and forestry management, said Dickerson Wright, PE, Chairman and CEO of NV5. “NV5 is at the forefront of advancements in service delivery and data management solutions, an example of which is our monitoring-based energy efficiency commissioning services. We are excited for QSI to lead our new Technology service line, a suite of technologically advanced service offerings that provide unique value for our clients.”
Peter LaMontagne, President and CEO of QSI added, “Our employees are looking forward to contributing to NV5’s strategy of adding value to client relationships through technology. We have worked with NV5 over the past few years and are very enthusiastic about the new value that we can provide to our expanding list of federal, state, and commercial clients.”
Houlihan Lokey served as the exclusive financial advisor to QSI. Sheppard Mullin served as legal advisor to QSI.
Third Quarter 2019 Financial Highlights
Nine Months Ended September 28, 2019 Financial Highlights
As a result of the previously mentioned developments affecting revenue, the Company is lowering guidance for full year 2019 Gross Revenues – GAAP, Net Revenues, GAAP earnings per share and Adjusted EPS, including the impact of acquisitions closed or signed as of today. The Company now expects Gross Revenues – GAAP to range from $511 million to $527 million, which represents an increase of 22% to 26% from 2018 Gross Revenues of $418 million. Net Revenues are expected to range from $401 million to $415 million, which represents an increase of 20% to 24% from 2018 Net Revenues of $334 million. The Company expects full year 2019 Adjusted EPS to range from $3.18 per share to $3.42 per share, a decrease of 2% to an increase of 6% over 2018 adjusted EPS of $3.24 per share. Furthermore, the Company expects full year 2019 GAAP EPS to range from $1.91 per share to $2.15 per share. This guidance for Gross Revenues, Net Revenues, Adjusted EPS and GAAP EPS includes acquisitions that are expected to be closed during the remainder of 2019.
Preliminary 2020 Outlook
By adding QSI, NV5 expects 2020 gross revenues to range from $655 million to $710 million, excluding future acquisitions. The Company expects full year 2020 Adjusted EPS to range from $3.42 per share to $3.98 per share.
Use of Non-GAAP Financial Measures
Total Revenues and Net Revenues are not measures of financial performance under U.S. generally accepted accounting principles (“GAAP”). Gross Revenues – GAAP include sub-consultant costs and other direct costs, which are generally pass-through costs. Furthermore, Gross Revenues – GAAP eliminates intercompany revenues where the Company performed the service in lieu of utilizing third-party sub-consultants. The Company believes that Total Revenues and Net Revenues, which are non-GAAP financial measures commonly used in our industry, provide a meaningful perspective on our business results. A reconciliation of Gross Revenues as reported in accordance with GAAP to Total Revenues and Net Revenues is provided at the end of this news release.
Earnings before interest, taxes, depreciation and amortization (“EBITDA”) is not a measure of financial performance under GAAP. Management believes EBITDA, in addition to operating profit, Net Income and other GAAP measures, is a useful indicator of our financial and operating performance and our ability to generate cash flows from operations that are available for taxes, capital expenditures and debt service. A reconciliation of Net Income, as reported in accordance with GAAP, to EBITDA is provided at the end of this news release.
Adjusted earnings per diluted share (“Adjusted EPS”) is not a measure of financial performance under GAAP. Adjusted EPS reflects adjustments to reported diluted earnings per share (“GAAP EPS”) to eliminate amortization expense of intangible assets from acquisitions, net of tax benefits. As we continue our acquisition strategy, the growth in Adjusted EPS will likely increase at a greater rate than GAAP EPS. A reconciliation of GAAP EPS to Adjusted EPS is provided at the end of this news release.
Our definition of Total Revenues, Net Revenues, EBITDA and Adjusted EPS may differ from other companies reporting similarly named measures. These measures should be considered in addition to, and not as a substitute for, or superior to, other measures of financial performance prepared in accordance with GAAP, such as Gross Revenues, Net Income and Diluted Earnings per Share.
NV5 will host a conference call to discuss its third quarter 2019 financial results at 4:30 p.m. (Eastern Time) on November 7, 2019. The accompanying presentation for the call is available by visiting http://ir.nv5.com.
|Date:||Thursday, November 7, 2019|
|Time:||4:30 p.m. Eastern|
|Toll-free dial-in number:||+1 844-348-6875|
|Conference ID:||+1 509-844-0152|
Please dial-in at least 5-10 minutes prior to the start time in order for the operator to log your name and connect you to the conference.
The conference call will be webcast live and available for replay via the “Investors” section of the NV5 website.
NV5 Global, Inc. (NASDAQ: NVEE) is a provider of professional and technical engineering and consulting solutions ranked #34 on the Engineering News-Record’s Top 500 Design Firms list. NV5 serves public and private sector clients in the infrastructure, energy, construction, real estate and environmental markets. NV5 primarily focuses on five business verticals: construction quality assurance, infrastructure engineering and support services, energy, program management, and environmental solutions. The Company operates out of more than 100 locations worldwide. For additional information, please visit the Company’s website at www.NV5.com. Also visit the Company on Twitter, LinkedIn, Facebook, and Vimeo.
This news release contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. The Company cautions that these statements are qualified by important factors that could cause actual results to differ materially from those reflected by the forward-looking statements contained in this news release and on the conference call. Such factors include: (a) changes in demand from the local and state government and private clients that we serve; (b) general economic conditions, nationally and globally, and their effect on the market for our services; (c) competitive pressures and trends in our industry and our ability to successfully compete with our competitors; (d) changes in laws, regulations, or policies; and (e) the “Risk Factors” set forth in the Company’s most recent SEC filings. All forward-looking statements are based on information available to the Company on the date hereof, and the Company assumes no obligation to update such statements, except as required by law.