HOLLYWOOD, Fla., Nov. 07, 2019 (GLOBE NEWSWIRE) --
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
- Total Revenues for the quarter were $132.1 million, an increase of 25% year-over-year. Gross Revenues - GAAP for the quarter were $131.0 million, an increase of 26% year-over-year.
- Net Revenues for the quarter were $103.9 million, an increase of 23% year-over-year.
- EBITDA for the quarter was $14.4 million or 14% of Net Revenues, an increase of 3% from $14.0 million, or 17% of Net Revenues in the third quarter of 2018.
- Net Income for the quarter was $5.8 million, a decrease of 20% compared to $7.3 million in the third quarter of 2018. Adjusting for the impact of intangible amortization, which results from acquisitions, net income for the quarter was $9.7 million, a 3% increase compared to the third quarter of 2018.
- Adjusted EPS for the quarter was $0.78 per diluted share, a decrease of 5% from $0.82 in the third quarter of 2018.
- Backlog was $463 million as of September 28, 2019, a 35% increase from $342 million as of September 29, 2018. Backlog includes those contracts for which work authorizations or awards have been received, estimated recurring revenue from one of the Company’s service lines that has a high volume of small contracts and a quick-burn estimate.
- Organic growth when compared to the quarter end June 28, 2019 and September 29, 2018 was flat when adjusting for customer delays and decreases in Asia attributable to geopolitical events.
Nine Months Ended September 28, 2019 Financial Highlights
- Total Revenues for the nine months ended September 28, 2019 were $379.1 million, an increase of 24% year-over-year. Gross Revenues - GAAP for the nine months ended September 28, 2019 were $376.3 million, an increase of 24% year-over-year.
- Net Revenues for the nine months ended September 28, 2019 were $294.1 million, an increase of 20% year-over-year.
- Organic net revenue growth for 2019 is expected to be relatively flat, when adjusting for decreases in Asia revenue.
- EBITDA for the nine months ended September 28, 2019 was $43.7 million or 15% of Net Revenues, an increase of 17% from $37.3 million, or 15% of Net Revenues for the nine months ended September 29, 2018.
- Net Income for the nine months ended September 28, 2019 was $20.2 million, an increase of 5% compared to $19.2 million for the nine months ended September 29, 2018. Adjusting for the impact of intangible amortization, net income was $31.7 million, a 24% increase compared to the nine months ended September 29, 2018.
- Adjusted EPS for the nine months ended September 28, 2019 was $2.56 per diluted share, an increase of 10% from $2.33 for the nine months ended September 29, 2018.
- Cash flows from operating activities increased 23% to $21.6 million for the nine months ended September 28, 2019 compared to $17.6 million for the nine months ended September 29, 2018.
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.