Title

Presentation

NV5 Global, Inc. misses on earnings expectations. Reported EPS is $0.00859 EPS, expectations were $0.3.

Operator: Good afternoon, everyone, and thank you for participating in today’s conference call to discuss NV5’s Financial Results for the Fourth Quarter and Full Year 2024 ended December 28, 2024. Joining us today are Dickerson Wright, Executive Chairman of NV5; Ben Heraud, CEO of NV5; Kurt Allen, President of NV5 Geospatial; and Richard Tong, Executive Vice President and General Counsel of NV5. I would now like to turn the call over to Richard Tong.

Richard Tong: Thank you, operator. Welcome, everyone, to NV5’s 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.nv5.com, and 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 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 in today’s earnings release and on the company’s website at www.nv5.com.

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 comparison are being made to full year 2023. In this presentation, NV5 has included certain non-GAAP financial measures as defined in Regulation G promulgated by the Securities and Exchange Act of 1934 as amended. The non-GAAP financial measures included in this presentation are adjusted earnings per share and adjusted EBITDA. NV5 provides non-GAAP financial measures to supplement GAAP measures as they provide additional insight into NV5’s 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 reconciliation of non-GAAP and GAAP measures is included in the appendix to the presentation. We will begin the call with comments from Dickerson Wright, Executive Chairman of NV5, before turning the call over to Ben Heraud, Chief Executive Officer of NV5 for review of NV5 operations. Edward Codispoti, Chief Financial Officer, will provide a review of fourth quarter and full year 2024 results. Dickerson Wright will then provide closing comments before we open the call for your questions. Dickerson, please go ahead.

Dickerson Wright: 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. We are very excited about the wonderful prospects for 2025. First, I will speak to our record performance in 2024. So let’s turn to Page 3 of our presentation deck. On the left side of this page, we present our comparison for the full year ’24 versus the full year of 2023. So let’s go through them. Organic growth increased over 100% to 6% of revenues. Our revenues grew from $857 million in 2023 to $941 million in 2024, a 10% increase. Adjusted EBITDA, earnings before interest, taxes, depreciated and amortization grew from $134 million in 2023 to $143 million in 2024, which is a 7% increase.

Gross margins grew from 49.7% in 2023 to 51.3% in 2024. The center portion of the page speaks of our positioning in our three main segments. Infrastructure Support, Geospatial Operations and Buildings and Technology. In these three segments, we concentrate on conformity assessment or TIC services included in at least seven of these main areas. We’re very pleased with our 2024 performance and we also reached our goal of $1 billion in revenue entering 2025. We are also excited about our future. We have set a specific revenue target of $1.6 billion by the end of 2028. What does our $1.6 billion revenue goal mean for shareholders, employees and clients? For our shareholders, it means a continued increase in profitability. 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. So I will now turn the call over to Ben Heraud, the CEO of NV5, for an update on NV5’s operations.

Ben Heraud: Thank you, Dickerson, and good afternoon, everyone. Please turn to Slide 4. NV5 entered 2025 well positioned to build upon the momentum we have generated in 2024. We began 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. As we’ve discussed on prior calls, organic growth is a focus of NV5’s operations and the initiatives we introduced in 2024 will play a significant role in our accelerated organic growth in 2025. We also continue to see tailwinds in our key sectors of utilities, data centers and digital transformation. Though Presidential Executive Orders and the Department of Government Efficiency have been covered broadly by media platforms, we have seen minimal impact due to the essential mandated nature of our work for the federal government and for state and local agencies.

In 2025, we recognized the opportunity to expand our cash flows from operations and our operating margins. Improvements in these key metrics are in our control, and we have launched initiatives to strengthen our performance in these areas. Our CFO, Ed Codispoti, will speak about these initiatives in more detail later in today’s presentation. Mergers and acquisitions continue to work alongside organic growth as a key component of NV5’s growth strategy. Our pipeline of opportunities remain strong, and we continue to benefit from favorable multiples in our acquisitions as we target successful tech-enabled services that strengthen our testing, inspection and certification or TIC services and bolster our existing platform. I’ll now turn the call over to Edward Codispoti, NV5’s Chief Financial Officer for an overview of NV5’s performance in the fourth quarter and full year 2024 and overview of our new cash flow conversion and margin improvement initiatives.

Ed?

Edward Codispoti: Thank you, Ben, and good afternoon, everyone. If you would please turn to Slide 6 of the presentation, I’ll review our 2024 fourth quarter and full year financial results. Our gross revenue in the fourth quarter grew 15% to $246.5 million compared to $214.9 million in the fourth quarter of the prior year. These are record fourth quarter results for the company. Our gross profit was $122.2 million compared to $108 million in the prior year, an increase of 13%. 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 $0.09 versus $0.16 in the prior year period. Keep in mind that our GAAP results were impacted by increases of $3.9 million in acquisition-related costs and $2.3 million in intangible amortization expense.

Additionally, in 2023, our fourth quarter had a onetime $5.2 million reversal of expense related to the company’s transition to a flexible time-off policy. Our adjusted EBITDA was $36.3 million versus $36.7 million in the prior year. Excluding the flexible time-off policy transition, the margins would have been similar in both periods at 14.7%. Our adjusted EPS was $0.28 in both periods. Gross revenues for the full year were a record $941.3 million, an increase of 10% over the prior year. Our gross profit was $483.2 million compared to $426.2 million, a margin expansion of 160 basis points. Net income was $28 million compared to $43.7 million in the prior year and our GAAP diluted EPS was $0.44 compared to $0.71 in the prior year. 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.

Also, 2024 had $11.2 million greater acquisition-related costs, driven in part by reversals of acquisition earn-out expenses in the prior year. Additionally, 2023 was impacted by the $5.2 million flexible time-off policy initiatives. Adjusted EBITDA was $143.5 million compared to $133.8 million in the prior year. Our margin in 2024 was 15.2% compared to 15% in the previous year, excluding the impact of the flexible time-off policy initiative. Our net leverage has remained relatively low at 1.4 times. Our weighted average borrowing rate during 2024 and 2023 was the same at approximately 6.5%. However, the rate has been trending down favorably as it was 5.8% as of year-end. If you turn to Slide 7, I’ll discuss some of the initiatives to expand our EBITDA margins and cash conversion that are currently underway.

An important component of NV5’s business model is to continue to expand our operating margins as we grow and benefit from our scale. Recently, our margins have been impacted by inflation and the integration period of some of our acquisitions. We currently have several initiatives actively in place to expand our adjusted EBITDA margins in 2025 by a targeted expansion of 150 basis points. The initiative is focused on optimization, utilization and productivity, reducing administrative costs through scale and consolidating and optimizing lease space. We generated $57.3 million in cash from operations compared to $62.2 million in the previous year. The decrease is primarily driven by working capital timing. We 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. This should translate into higher cash conversion rates. Our EBITDA free cash flow conversion in 2024 was about 40%. Through the renegotiation of contracts and optimization of billing cadence, we believe we can achieve a free cash flow conversion rate of 60% in 2025. 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. I’ll now turn it back over to Ben for some additional comments.

Ben Heraud: Thank you, Ed. Please turn to Slide 9 for an overview of NV5’s unique business model. Though NV5 is typically lumped into the Engineering and Construction segment, NV5 is really better compared to businesses in the testing, inspection and certification or TIC industry. While engineering design is viewed as a conflict in the European TIC industry, it is a catalyst in the US TIC market. The majority of our service offering is in the TIC space and our engineering capabilities in civil, structural, MEP and technology allow us to enter client relationships at a higher level giving us a standing as the expert on the asset or system that we’ve designed and open the door for cross-selling of our high-margin TIC services.

Our TIC services provide ongoing relationship with clients that extend past the design phase throughout the entire asset 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. On Slide 10, you’ll see an overview of the Infrastructure Support segment’s Q4 performance. We generated $111 million in revenue in the quarter, led by a strong performance in our Utility Services Group. Our Utility Services Group benefited from a strong demand for our Utility Undergrounding and LNG Services. We also had strong performances in our infrastructure design and surveying business units in both East and West Coast.

The growth drivers for essential Infrastructure Support services remain strong and one area that has received a great deal of attention publicly is the undergrounding of power lines due to the fires earlier this year in Los Angeles. These types of high-profile events drive nationwide demand for these services in the near to mid-term. One area that we’re focusing on for 2025 is the leveraging of our Geospatial Technology Platform for both Infrastructure Support and our Buildings and Technology businesses. Geospatial Services provide ongoing client relationships in such areas as bridge delamination, aerial inspections, power delivery system resiliency and asset management. On the right-hand side of the slide, I’d like to bring your attention to some of the acquisitions that we’ve recently made to strengthen our high-margin recurring TIC services.

From conformity inspections and materials testing to building digitization, we continue to expand our expertise and reach in highly profitable TIC services that support margin expansion and long-term client engagements. Please turn to Slide 11 for an overview of Buildings and Technology. Data center systems and design and commissioning continue to grow and now make up 15% of our Buildings and Technology portfolio. Clean Energy also continues its strong growth, supporting energy conversion and electrification initiatives largely with public sector clients. Our growth drivers for the sector are in high-growth areas with strong demand and as with the Infrastructure Support segment, we are focused on leveraging our Geospatial Platform for our Buildings and Technology clients.

Two particular growth segments that we’re focusing on include our international and data center groups. In the Data Center business, we are expanding into new geographies of Thailand, South Korea, Indonesia and the Middle East and now receiving direct requests from our clients in the European market. We’ve also seen success in cross-selling services to both domestic and US clients to expand our existing relationships and services provided. Some of the newer services that are gaining traction include power delivery for data centers as well as clean energy, structural engineering and bifurcation consulting. For the Geospatial segment update, I’ll turn the call over to Kurt Allen, our President of Geospatial. Kurt?

Kurt Allen: Thanks, Ben. As you can see on Slide 12, Geospatial recognized $69 million in revenue in the fourth quarter, with 50% of this revenue coming from the Federal government, 31% coming from utilities and the remaining 19% coming from state and local government. 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 L3Harris Geospatial Software business and Axim Geospatial. We are confident that these will result in improved profitability and performance of the Geospatial business. On the Federal side of the business, we have had no contract cancellations today coming from those activities and we do not see anything yet that will significantly affect our budget.

We believe that the backlog we have brought into the year will enable us to weather any impact. In fact, those activities may create opportunities for NV5 as history has shown us, that when resources are constrained at agencies, they tend to increase their dependence on outside consultants such as NV5. On a very positive note, we are seeing several of our growth drivers bearing fruit. Right after the first year, we announced a major award for Topobathymetric LiDAR 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, such as Topobathymetric LiDAR, satellite-based monitoring solutions and eGIS. Additionally, our all commercial growth driver has been on a successful path forward.

Being beholden to government political change and budgets must be balanced with additional commercial business and our utility business exceeded its bookings budget in 2024 by 38%. We expect continued growth within this segment in 2025. Additionally, the last Congress passed a supplemental funding bill for Hurricanes Helene and Milton. Of that amount, we are expecting NOAA to contract out a record amount of tasking to their contractors in the late summer. NV5 is one of three contractors under this Topobathymetric LiDAR program and we typically enjoy the largest share of wallet amongst the three eligible contractors. Next, we all witnessed with horror what happened to many families because of the catastrophic damage caused by the Palisades and the Eaton fires in Southern California.

As most of you know, NV5 has more than 900 employees living and working in California and we felt obliged to help. NV5 acquired LiDAR over the fire area immediately after the fires came under control and when temporary flight restrictions were lifted for overflights above 7,000 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 NV5 clients and we believe that data provided made a difference in the response effort as the rain started to fall. Since then, the University of California San Diego has stepped up and purchased the data for the public domain.

This allows NV5 to finish processing the data with additional meaningful analytics for the community. 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 fuel loads that caused these out-of-control wildfires. Additionally, we wanted to provide an update on Geospatial’s effort towards artificial intelligence. The geospatial profession has been rising towards AI for a wide variety of deep learning and large language model applications for a number of years.

NV5 has a team of data scientists to implement large language model or LLM services to our clients in support of the big data management challenges. The US Army Corps of Engineers has relied on NV5 to employ LLM’s to support their dredging operations around the country. AI has assisted the Army to make sense of dredge data that the human brain can’t see. We have recently entered our third year of the multimillion-dollar contract with the Army Corps and we believe this contract alone has positioned ourselves well in this space. Also, NV5 is using deep learning models to determine and understand the irrigated landscape for water conservation in California and also for coastal resilience programs for NOAA. Both multimillion-dollar AI programs drive efficiencies through automated processing that allows us to accomplish much, much more with less.

Finally, we are seeing major government agencies move towards automated detection and change analysis from a more manual mapping process. Our ENVI Inform software workflow has allowed us to make this automated transition towards AI and to be among the multiple awardees for these type of activities for both the nine-figure Luno A and Luno B contracts for the National Geospatial Intelligence Agency. The US Space Force is also contracted within NV5 for a similar automated detection proof-of-concept contract and we are waiting an award decision from this client and follow-up work in the coming weeks. With that, I’ll turn it back over to Ben.

Ben Heraud: Thank you, Kurt. On Slide 13, I’d like to highlight some of the recent acquisitions that have joined NV5. Group Delta is a large-scale infrastructure testing, inspection and certification and PFAS environmental services company in Southern California. The acquisition expands our conformity assessment services in the region for electrical, utility, water and transportation infrastructure and its PFAS environmental services expand our PFAS capabilities. Global Fire Protection Group is a leader in the high-margin recurring fire protection consulting sector. Fire protection is a service that is in demand by all of our clients and its first month with NV5, Global Fire Protection Group has completed $1 million in cross-selling with other NV5 business units, including data center projects.

Southport Engineering is a provider of mandated energy efficiency, engineering and owners’ representation consulting in New York City and surrounding areas. 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. In the domestic data center sector, we completed two acquisitions, Senergy BCS and Kisebach Consulting to strengthen our data center design and commissioning services in the US and they brought with them strong relationships with several hyperscalers. As we now move in the growth positioning section of our presentation, please turn to Slide 15 to discuss the bolstering of our successful cross-selling program. Our rich history of cross-selling has provided benefits and margin improvement from in-sourcing subcontracted work and a driver for our organic growth.

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 NV5 service offerings. Technology is a differentiator and competitive advantage for NV5. We are 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, where building digitization continues its rapid growth as a greenfield initiative using technology and expertise from the Geospatial segment. Another example of NV5’s geospatial data collection and analytics of the Los Angeles wildfires, which provides introduction for NV5 to work with numerous government and relief agencies and private development as the Los Angeles area is to be rebuilt.

No 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. Please turn to Slide 16 as we review our new growth target that we announced last month of $1.6 billion of revenue by the end of 2028. Since our inception, we have created growth targets that all NV5 leaders and employees work towards achieving. These targets are built from the bottom up with input from every business unit in the organization. By successfully achieving these targets, we create growth opportunities for our employees are better able to serve our clients and deliver more value to our investors. This new target is being modeled to include both organic growth in the mid to high-single-digit range as well as strategic acquisitions to strengthen our platform and expand our tech-enabled TIC solutions.

Growth will come from all of NV5’s businesses with a particular focus on our high-growth sectors of geospatial technology, utility services and data center. NV5 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. I’d now like to turn the call back over to Dickerson Wright to discuss our 2025 goals, objectives and full year guidance. Dickerson?

Dickerson Wright: Thank you, Ben. I would now like to list our goals and objectives for 2025. So let’s turn to Page 17. These goals and objectives for 2025 are based upon confidence in our plan. Our plan is to, one, accomplish mid to high-single-digit organic growth, which will continue improvement in this area. Two, we want to increase our gross margin expansion by concentrating on high barrier, high revenue and EBITDA services. Three, continue our improvement converting EBITDA results to cash. We have instituted a method of faster billing and stronger collections. Four, our M&A program has expanded and we will concentrate on higher profit through acquisition of technology and TIC related companies. We expect to see accelerated growth in service lines that increase the profitability of NV5.

Our positive view going forward has resulted in full year confidence in our 2025 guidance of $1.026 billion to $1.045 billion in gross revenue with adjusted earnings per share of $1.27 per share to $1.37 per share and GAAP earnings per share of $0.52 per share to $0.62 per share. Thank you.

Operator: Thank you, sir. We will now begin the question-and-answer session. [Operator Instructions] And our first question will come from Chris Moore with CJS Securities. Please go ahead.

Christopher Moore: Hey, good afternoon guys. Thanks for taking a couple of questions. Maybe we could just dig into the margin — EBITDA margin improvement a little bit further. So it looks like 150 basis point improvement in ’25 roughly the same revenue growth as in ’24 versus ’25. Is it Dickerson is starting to talk about, is it mix? Is it cost curve? Is it maybe just anything you have on that would be helpful.

Dickerson Wright: Thanks, Chris. I’m going to cover some of that in the concluding comments, but we really want to focus to always improve EBITDA and it’s through efficiency. So we want to accelerate our administrative program, and I think we’re going to be doing that, which will absolutely increase our EBITDA because the administrative people are nonbillable. So we’re going to lower the administrative cost as a percentage and this will result in a higher EBITDA and we’ll approach that growth to 2025 of 150 basis points. But it’s not unreasonable. I mean we have achieved that same amount in prior years, albeit and right now, we have a higher revenue basis. But the increase, Chris, is not something that’s unrealistic. And certainly, the cash flow conversion is not unrealistic.

But to answer your question, we think that it’s not a big leap to improve our EBITDA margins and approaching an improvement of 150 basis points. And those are not unreasonable targets. And nor are they targets that we have not reached in the past. 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.

Christopher Moore: No. I appreciate it. It’s helpful. And maybe just my follow-up. Just Geospatial, obviously, it’s still an area with done well and tremendous potential. Just trying to get a sense, from an organic growth standpoint, what is a reasonable target over the next few years given kind of all the opportunities that are out there?

Dickerson Wright: Yes. I think we have budgeted in about 10% to 11% organic growth of our Geospatial Group. And that’s fairly historic and that’s really we’re basing that improvement more in EBIT than EBITDA.

Christopher Moore: Got it. That’s helpful. I’ll get back in line. I appreciate it guys.

Dickerson Wright: Thank you.

Operator: And our next question will come from Tim Mulrooney with William Blair. Please proceed.

Timothy Mulrooney: Dickerson, Ben, Ed, good afternoon.

Dickerson Wright: Good afternoon.

Edward Codispoti: Hi, Tim.

Timothy Mulrooney: So revenue guide, it looks like you’re comp for 10% revenue growth. I’m curious how much of that you’re expecting to come from 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 around from last year.

Edward Codispoti: Hi, Tim. This is Ed. The assumptions there on the low and high end are range from 5% organic on the low end to 7% on the high end. And so you have about $17 million or so dropping into the 2025 period that was not in 2024 because we hadn’t owned those acquisitions yet.

Timothy Mulrooney: Okay. That’s helpful. So just to confirm, though, Ed, your guidance doesn’t include any acquisitions that haven’t yet been completed.

Edward Codispoti: That is correct. It does not include any acquisition that have not been announced or closed yet. Correct.

Timothy Mulrooney: Yes. Okay. That’s helpful. And Dickerson that was helpful that 10% to 11% organic growth outlook in Geospatial. Was that organic revenue growth?

Dickerson Wright: Yes. We didn’t include any acquisitions in that. So it’s just organic revenue growth and its gross revenue. I just want to comment a little bit on our confidence in the 2025 guidance. You’ll see on the previous slide, I can’t tell you the number, our backlog was the highest ever, 904. And that represented — that represents almost that’s over 80% of the budget. And normally a good backlog is between 60% and 65%. So we really feel good about what’s going on in ’25. And it’s really a lot of it is backlog of work to be performed in that period. So that kind of gives us more confidence.

Timothy Mulrooney: That’s actually really good color. It’s Slide 4 and I see you have it right there. So your backlog represents a higher percentage of your revenue guide relative to historical standards?

Dickerson Wright: Yes. Normally, it’s about 65% and I think this is over 80%. You can do the math, Tim, but I’m not — but I think 904 is over 80%.

Edward Codispoti: It’s 88% on the low end of the guidance.

Dickerson Wright: 88% on the low end. So that really gives us great confidence.

Timothy Mulrooney: Yes. No, that is definitely reassuring. I’ll just ask one more question and get back in line, which is about the backlog, which is, is there any very large projects in there that’s really pushing it up? And in particular, are they Federal, where there may be some investor concern or risk from DOGE or anything like that? Can you just parse apart the backlog for us a little bit?

Ben Heraud: No, it’s a pretty good mix across the different segments that we’ve got. We touched on DOGE 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 we’re not seeing a huge impact from that right now.

Dickerson Wright: 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, and that also includes Salt River project with another utility in that area. And then we had a special initiative and a support initiative to grow the Pacific Gas and Electric. And so we’ve seen some rewards from that. We’ve seen some of the backlog growth. So a specific amount of the backlog is with utilities and public agencies and that makes us feel pretty confident going forward.

Timothy Mulrooney: Yes. Very helpful color. Thank you, guys.

Operator: And our next question will come from Rob Brown with Lake Street Capital. Please proceed.

Robert Brown: Good afternoon. Thanks for taking my question. Just wanted to check on the data center demand environment. Are you sort of seeing those projects coming into your plan? And maybe give us a sense of how much growth you’re seeing in that vertical?

Ben Heraud: 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, both internationally and I touched on this on last call. We’re really starting to make good headway in the US as well. And it’s sort of the organic growth of our existing services that we’ve been providing and then also expanding those services. I touched on the Fire Protection Services that we’re now able to bring to data centers, structural and power delivery really is a big one that we’re expanding in that space is obviously very important.

Robert Brown: Okay. Great. And on the M&A pipeline, I think you gave a little more specificity this time about the areas you’re going and looking after. I guess is the — could you give us a sense on the tech-enable services? How is that pipeline shaping up? Are there geographic kind of additions you want to add or are there new kind of technical verticals you think you can bring into the mix that can be accretive?

Dickerson Wright: Well, as it relates to data centers, I think it’s more of an approach. In the US the ones that deliver energy to these data centers are the public utility commissions and they are very selective in who they’re going to give energy to. For example, in Arizona, there’s a moratorium on energy for data centers because they want to use that energy for air conditioning. However, internationally, they don’t have such a big reliable grid. And so 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 inefficient. And so Ben can comment better on this than me, but we seem to be see a much stronger organic growth as a percentage internationally than we do domestically?

Ben Heraud: Yes. I think there’s still a lot of opportunity here in the states. But, yes, I think it’s just worth on the international piece. A lot of that’s driven by an increase in cloud storage in some of these developing countries where the data, the cloud storage is just increasing so significantly. That’s one of the huge drivers of redevelopment.

Robert Brown: All right. Thank you. I’ll turn it over.

Ben Heraud: Okay.

Dickerson Wright: Thanks, Rob.

Operator: And our next question will come from Jeff Martin with ROTH Capital Markets. Jeff, please proceed.

Jeff Martin: Thanks. Good evening, everyone.

Dickerson Wright: Hi, Jeff.

Jeff Martin: I guess I’ll dive in. Hi, Dick. Dive in what you touched on organic growth expectations for Geospatial. I was wondering if you could do the same for Infrastructure and Building and Technology.

Dickerson Wright: Yes. I think in the budget, we’ve isolated those. We kind of think that they’ll be because of the infrastructure demand. So I think that’s a higher percentage as a percentage of organic growth. That’s probably the three segments, we have the Geospatial segment, which we gave you the organic growth somewhere between 10% and 11%.

Edward Codispoti: Yes. I think the rest are in the mid-single-digits. Remember in terms of our expectations. On the low end, we’re seeing 5% and on the high end 7%. So on a blended basis.

Dickerson Wright: The overall organic growth. If you consolidate all three of our reporting sectors. It will be mid to high-single-digits.

Jeff Martin: And then I wanted to drill in on your comment that inflation is also impacting your EBITDA margin. Just curious if that’s embedded within contracts that you’ve had labor increases, cost of labor increases, that you can’t recoup because those contracts are already in place. And if so, are these under master service agreements that can be changed or not? I guess how nimble are you in terms of recouping some of that margin due to inflation.

Edward Codispoti: No, we are nimble. And what I was referring to mostly there, Jeff, is, for example, I think we’ve spoken about this before. But when inflation was peaking, our LNG business transitioned from a purely fixed price model to a hybrid with some T&M in it. And so that has — 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 came around, our margins were higher than even what we’re projecting for next year like Dick said. So they’re all — we’ve been at those higher margin levels before. And as we cycle through some of these large LNG contracts and get into the newer ones, we should be able to see margins expand overall for the company.

Dickerson Wright: Jeff, this is Dick. Just if you got your answer, believe me, I won’t say anything, but.

Jeff Martin: Go ahead, Dick.

Dickerson Wright: A lot of the inflation hits our administrative things and stuff. That is not easily as passed through as a direct inflation numbers. So certain people let everybody deserves a raise, a certain cost things, but not every one of those inflationary costs can be directly passed on to the client. Everything that Ed was referring to, so he was referring to a mix of those. And so that’s where you’ve seen a little bit of erosion and the increased inflation has caused a little bit of erosion in the profitability.

Jeff Martin: Makes sense. Okay. One more from me if I could. Last summer, at your Investor Day, you talked about the — taking your software on the Geospatial side and making that essentially a cloud model. Just curious the progress that you’ve made there? And are you seeing large opportunities to do the remote monitoring and other types of enhanced features that you can get out of the cloud version of that software.

Edward Codispoti: Yes. So I think just Geospatial in general, we’re seeing a great opportunity to leverage the technology within our more traditional engineering services to deliver more efficiently and push us more along the asset lifecycle. They have a longer relationship with that and then drive the recurring revenue. But Kurt you might be better to respond to the cloud-based software and where we’re at with that. I think we’re taking it to market, right?

Kurt Allen: Yes, absolutely. We’re taking it to market. The cloud-based revenue that we — with our ENVI ecosystem software products doubled in size last year, but it was coming from a very small base. And our success with software is absolutely all about being able to grow that part of the business. We’re seeing that happened. And we’re also implementing that software workflow into what I call the detections and change analysis that we’re seeing a lot of large government agencies go towards that are very interested in remotely sensed information. I mentioned the National Geospatial Intelligence Agency. We have two massive contracts that we have — it’s the 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 want to understand changes in an airfield, we can do that automatically. And so that workflow gives us a lot of use cases and a lot of — and a very large total addressable market to go after. So we’re turning the battleship, but at the same time, we were very bullish on this for 2025.

Jeff Martin: Appreciate the color. Thank you.

Operator: And our next question will come from Andrew Wittmann with Baird. Andrew, please proceed.

Andrew Wittmann: 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 detail from you. It sounded like from the answer a question or two ago, that just running off some of the old LNG plants that were fixed contracts under some inflation is going to be positive to your margin. So I guess a couple of ways to ask this, but how much of the 150 basis points of year-over-year margin improvement that you’re looking for this year is just like mix that you don’t have to really go after and get versus things that you’re talking about doing, whether it’s overhead, real estate, whatever. And so could you talk about that? And then if you could just drill in a little bit more about some of the specific actions that you expect to do to effectuate 150 basis points. Just recognizing that 150 is a lot for a professional services model. So I think it’s an important question.

Ben Heraud: Yes. Look, I think one thing that we can move, and we are moving the needle on quite quickly here is utilization. So that’s just getting our existing team more busy. So that obviously improves margin. Yes, we do have some opportunities on the real estate side and some efficiencies through indirect labor. And so these are the things that we’re working on through this quarter. And also G&A, there’s some IT expenses that we’ve identified that we can bring down here in the short-term. And so that will also help. Ed, if you want to add?

Edward Codispoti: No, I think that’s right. Some of it is mix, Andy, but I think that, well, I know that throughout the company, we’re looking very carefully at cost optimization like Ben said, IT is an example. But just because you’re at a certain level of utilization doesn’t mean that you can’t increase that. And that goes right to the bottom line. And so we’re basically 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 a 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 cost cutting, making sure that from an administrative standpoint, we’re being as efficient as possible. And again utilization is a big focus.

Dickerson Wright: Let me just jump in here as well, Andy. Just we always remember this budget that you see is a consolidate, but it came ground up. It came from every one of our operations and all of our operations had mandates on reducing indirect costs and just the scalability. You’ll see an increase in revenue. And so that increase in revenue does not necessarily have to mean that there’s going to be an increase in administrative cost 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, I would say, this what presented you is more conservative from what I’ve seen from the individual budgets and operations.

But that was a key initiative to lower administrative costs and which would therefore increase the profitability and as a result you see 150 basis points in front of you. But this came ground up. This didn’t come be mandated, 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 it, but it can go to facilities. It can go to many things that are fixed costs that should be reduced, but also in non-fixed cost, which is really a target-rich environment for us. So that’s how we arrived at that number.

Andrew Wittmann: Okay. Then just my follow-up question, I guess, it’s probably going to be for Ed, and just heard the comments that the government is one of the reasons the cash flow has been or the days out receivables are up. They’re up a decent amount and obviously that’s furloughed ground to pull it back out. But I guess, specifically, the unbilleds are up the most. I mean maybe the direct question is, what’s the right number for your DSOs and for your — and specifically underneath that your unbilled. I mean you’re at 42 days of unbilled to level that you haven’t really seen before. So I’m trying to just get a better sense of what you think the opportunity there is and how you get after it.

Edward Codispoti: It’s a good question, Andy. And from an unbilled, sorry, from a billed perspective, our DSO is very good. There are some business units that have DSOs as low as 40 and others internationally, it’s typically a little bit longer. And so let’s say, overall for the company, it’s say, 60 days. That’s fine. I think the opportunity is more on the unbilled receivables. And what I was referencing earlier is the bucket of — it’s a handful of contracts where the milestone — the milestones for billing for actually sending out an invoice don’t necessarily match up with the work that’s being performed and it’s just kind of skewed to the right. And that’s where our opportunity is. We want to see that cash coming sooner and the quality of the unbilled is very good.

We scrub that project by project. And it’s all high-quality unbilled receivables. The key there to optimizing is just to be very focused on each contract of the milestones themselves at the initial contract stage when you execute a contract so that it’s not in a favorable way to the company. And then as you perform the work, making sure that you’re performing in alignment with those milestones that you can get build, if it’s task-oriented across different phases that you’re getting that money in as quickly as possible.

Ben Heraud: I think it’s also just worth noting that there’s been some key lessons learned from those projects that we have those issues with. So moving ahead, we won’t be making those same mistakes again. So we’ll see improvement there too.

Andrew Wittmann: Okay. Thanks, guys. Have a good evening.

Edward Codispoti: Thank you.

Ben Heraud: Thank you.

Operator: At this time, this concludes our question-and-answer session. I would now like to turn the call back over to Mr. Wright for closing remarks.

Dickerson Wright: Thank you, everyone. We appreciate that you’re listening to what we’ve had to say. I think I took a few notes as these presentations are given. But I think you can conclude and see that we at NV5 have a very positive outlook for 2025 in both revenue and EBITDA improvement. But it’s going to require hard work. It’s going to requires tremendous work on every one of our offices. Every person that is providing a service. All of us will have to do this as a team and to do this together. But to help that and to insist the growth, I’d like to speak to the growth initiatives that we’ve had. And these growth initiatives are supported by our corporate office and some of those growth initiatives are in areas where we are — we want to be supportive, but we also want to be optimistic.

So the growth areas that we have. We have a specific organic growth initiative that to develop our capabilities in these three key areas. And so one of them is in our PFAS environmental. We want to expand our environmental. We’ve looked for a senior executive that we’re going to support to grow that area. The second key area that we’re very excited about is our position currently in Southern California. We have with many, many, many municipalities and we have a specific business that provides staff augmentation to the municipalities in the public work areas. And as you well know, there’s a mandate that municipalities have now to expedite their permitting process. And with 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 for many years with the Department of Public Works to really address the municipalities that have been particularly affected by having to rebuild and regrow and we want to be — we want to support that. So we look in that area as a specific growth initiative. And the third is the restructuring of our power group so that we can really look for opportunities we have with public utilities across the nation. And so we have a specific way of addressing that. All of these will serve to do two things. It will absolutely improve their revenue that we look for and it will make us even more scalable with our administrative cost. We don’t look for a tremendous cost to do these initiatives, but we look at a way that we can grow our revenue and support the bottom line.

So we’re very pleased going forward. We feel good about the year 2024 we’ve had. We had a very profitable year. We’ve cash flowed. And but there’s always ways that we can grow. And so we’re looking very optimistically for year 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 on 17 where we give — we’re increasing our guidance from ’24 to 2025 and 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 and we look forward to reporting our progress as we go further into 2025. Thank you very much.

Operator: That concludes today’s call. Thank you all for joining. You may now disconnect.