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NV5 Global, Inc. (NVEE)·Q3 2024 Earnings Summary

Executive Summary

  • Record Q3 performance: gross revenues $250.9M (+6% YoY), gross margin 51.6% (+350 bps YoY), Adjusted EBITDA $44.5M (+21% YoY), and operating cash flow $48.9M (+145% YoY) .
  • Guidance trimmed following out-of-period revenue adjustments and seasonality caution: FY24 gross revenues to $939–$943M, GAAP EPS to $0.48–$0.54 (split-adjusted), Adjusted EPS to $1.15–$1.19 (split-adjusted); down from Q2’s $944–$950M, $0.72–$0.73 (split-adjusted GAAP), and $1.28–$1.30 (split-adjusted Adjusted EPS) .
  • Strategic tailwinds: backlog at $914M and expanding data center pipeline; cross-selling across Infrastructure, Geospatial, and Buildings & Technology remained a differentiator .
  • Watch items: Axim-related prior period corrections and 12b-25 late filing notice for the Q3 10-Q; management emphasized impact was not material and filing within the extension period .

What Went Well and What Went Wrong

What Went Well

  • Gross margin expanded 350 bps to 51.6% on stronger mix and execution; “record results in gross revenues and Adjusted EBITDA… improved profit margins” (Dickerson Wright) .
  • Geospatial momentum: Q3 revenue $84M with federal wins (e.g., $290M NGA LUNA A award) and utility asset management contracts >$26M; “capabilities at scale… remain sticky with our clients” (Kurt Allen) .
  • Data center expansion: $14M in new AI-driven infrastructure awards; surpassed 1GW of design/CFD throughput; “helped… unlock ~300MW of additional computing capacity” (Ben Heraud) .

What Went Wrong

  • Guidance reduction versus Q2: FY24 revenue and EPS ranges reduced (split-adjusted), with ~$0.06 EPS impact tied to Axim restatement and conservative Q4 seasonality/weather considerations .
  • MEP headwinds: large CapEx projects slowed by rates in some life sciences/commercial verticals, though proposals remained active and management expects a pickup early next year .
  • Higher interest expense: Q3 net income included ~$0.665M of higher interest cost amid elevated debt balances; leverage remains low at 1.3x .

Financial Results

Core metrics across recent quarters

MetricQ1 2024Q2 2024Q3 2024
Gross Revenues ($M)$213.3 $236.3 $250.9
Gross Profit ($M)$112.8 $123.3 $129.5
Gross Margin (%)52.9% 52.2% 51.6%
Net Income ($M)$0.41 $7.91 $17.08
GAAP Diluted EPS ($)$0.03 $0.50 $0.27
Adjusted EBITDA ($M)$28.7 $38.5 $44.5
Adjusted EBITDA Margin (%)13.5 16.3 17.7
Adjusted EPS ($)$0.66 $1.24 $0.44
Operating Cash Flow ($M)$19.6 $(11.3) $48.9

Year-over-year comparison (Q3)

  • Revenues: $250.9M vs $237.5M (+6%) .
  • Gross margin: 51.6% vs 48.1% (+350 bps) .
  • Net income: $17.1M vs $13.1M (+31%) .
  • Adjusted EBITDA: $44.5M vs $36.7M (+21%) .
  • Adjusted EPS: $0.44 vs $0.36 (+22%) .

Segment breakdown

Segment Revenue ($M)Q2 2024Q3 2024
Infrastructure$101 $101
Geospatial$72 $84
Buildings & Technology$64 Record quarter; revenue not disclosed

KPIs and balance sheet highlights

  • Backlog: $914M (slide reference, reiterated in Q&A) .
  • Net leverage: 1.3x .
  • Cash & equivalents: $73.3M (Sep 28, 2024) .
  • Total debt (notes payable and other obligations, long-term): $248.4M (Sep 28, 2024) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Gross Revenues ($M)FY 2024$944–$950 $939–$943 Lowered
GAAP EPS (split-adjusted $)FY 2024$0.72–$0.73 (from $2.87–$2.93 pre-split) $0.48–$0.54 Lowered
Adjusted EPS (split-adjusted $)FY 2024$1.28–$1.30 (from $5.13–$5.20 pre-split) $1.15–$1.19 Lowered
Other guidance (OpEx, OI&E, tax rate, segment-specific, dividends)FY 2024Not provided Not provided N/A

Management cited conservative posture into Q4 (seasonality/weather impacts) and Axim-related prior period adjustments (~$0.06 EPS effect) for part of the revision .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
AI/Data Center initiativesQ1: mission-critical +27% organic; strategy to unlock captured load/power delivery; international hyperscalers growth . Q2: $25M awards 1H; 5-year target $400M; constraints from power availability .$14M new AI-driven awards; >1GW design/CFD; pipeline expanding; U.S. commissioning with major hyperscalers .Accelerating; cross-segment leverage rising
Federal/geospatial fundingQ1: CR resolution late March; confidence in $320M FY target . Q2: strong federal awards late Q2 into Q3; margin mix lift .58% federal revenue mix; NGA LUNA A contract; hydrospatial bookings exceeded budget .Strengthening backlog & mix
Interest rates/real estateQ1: real estate transactions rebounding with stabilizing rates . Q2: favorable rate direction; uptick expected .Easing cycle aiding transactions; green shoots; Global Realty/Bock & Clark improving .Improving activity
Regulatory/permitting/macroQ2: bipartisan federal demand; technology-led differentiation .Potential permitting speed-up under new administration; geospatial viewed as bipartisan; cautious but constructive .Neutral-to-positive
Subscription/softwareQ1: VIS software recurring revenue ~10% company-level; SaaS products (ENVI Connect/Inform) . Q2: software ~$40M annual, margins improving .Emphasis on growing SaaS/subscription, contributing to recurring revenue and stickiness .Expanding recurring base
MEP/CapEx headwindsQ2: rate-sensitive verticals slowing; pivot to data centers/clean energy .Some life sciences/commercial headwinds persisted; expectation of resumption early next year .Near-term headwind; medium-term recovery expected

Management Commentary

  • “NV5 delivered record results in the third quarter in gross revenues and Adjusted EBITDA… we have now achieved our targeted annual revenue run rate of over $1 billion.” — Dickerson Wright, Executive Chairman .
  • “Our adjusted EBITDA was a record $44.5 million… cash flows from operations of $48.9 million in the third quarter. Our net leverage remains low at 1.3x.” — Edward Codispoti, CFO .
  • “Geospatial recognized $84 million… having capabilities in all four areas at scale is unique… provides NV5 with a competitive advantage.” — Kurt Allen .
  • “We were recently awarded a commissioning project in the U.S. with one of the biggest global hyperscalers… record quarter in organic growth, revenue and EBITDA.” — Ben Heraud .
  • “In an abundance of caution, we just want to make sure that we’re conservative heading into the end of the year… we revised to accommodate for that.” — Edward Codispoti on guidance .

Q&A Highlights

  • Prior period revision: Axim client–related timing correction; ~$0.06 EPS impact in first half; management expects Q3 10-Q filing within 12b-25 extension and no broader client impact .
  • Backlog and mix: $914M backlog; growth skewing to Geospatial and international data centers; stickier subscription/software revenues emerging .
  • Data center opportunity: Working with four major U.S. hyperscalers; strong international footprint; power delivery engineering a key growth vector to unlock capacity .
  • Rates and real estate: Easing rates expected to drive transaction activity; early signs of improvement in Global Realty and Bock & Clark .
  • Guidance posture: Conservative into Q4 due to weather/seasonality; acquisitions’ contributions reflected only if closed; prior period adjustment factored into FY guide .

Estimates Context

  • Wall Street consensus (S&P Global/Capital IQ) for Q3 2024 EPS and revenue was unavailable due to missing CIQ mapping for NVEE in our data source. Accordingly, estimate-based beat/miss analysis cannot be provided at this time [SpgiEstimatesError].

Key Takeaways for Investors

  • Margin trajectory positive: gross margin expanded 350 bps YoY and Adjusted EBITDA margin reached 17.7%; mix and execution continue to drive profitability .
  • Geospatial and data centers are durable growth engines with strong federal/utility demand and hyperscaler-led pipelines; cross-selling remains a competitive moat .
  • Guidance reset lowers near-term expectations but reflects conservatism and limited impact from prior period corrections; leverage is low (1.3x) and cash generation robust .
  • Watch seasonal/weather risk into Q4 and rate-sensitive MEP verticals; management expects proposal-to-award conversion to improve as rates ease .
  • Strategic positioning strengthened by stock split and targeted acquisitions (e.g., California Water Resources Group) to densify platform and expand services .
  • Near-term trading implications: potential sentiment volatility around restatement/late filing offset by record backlog and Q3 cash flow strength; medium-term thesis anchored on technology-driven, recurring, and mandated infrastructure exposure .
  • Monitor forthcoming FY2025 target update; management indicated a new revenue milestone for 2028 is in development and confidence in entering 2025 at ~$1B run rate .