NV5 Holdings, Inc.
Chairman, CEO, and Pres: Dickerson Wright
WSA: Good day from Wall Street, this is Juan Costello, senior analyst with the Wall Street Analyzer, joining us today is Dickerson Wright, CEO, Chairman and President for NV5 Holdings Inc., the company trades on NASDAQ and their ticker symbol is NVEE. Thanks for joining us today there Dickerson.
Dickerson Wright: Happy to be here, thank you Juan.
WSA: Great and starting off, please give us a history and overview of the company for some of our listeners new to the story?
Dickerson Wright: Sure, we founded NV5 in 2009 and it’s the second company that we had as our team and took public. We had a company called US Laboratories that we did an IPO in 1999 and then we were acquired by a very large French firm in 2002. And we became their platform for North America and I was the CEO of North America and we built that company from the base of $80 million that we were when we were a small public company and we were trading also under NASDAQ symbol USLB. We took that from $80 million in the 5 years that I was the CEO of their company, Bureau Veritas North America, we went through organic growth and acquisitions to $300 million and we did 13 acquisitions at that time. Our team then – after my contract had ended, my team, the same people that were with me in US Labs and other people that were together, we started a company called NV5 and we will get into the strategy later on why its NV5 and what the verticals that it stands for, but we really believed in a flat management that could really grow and be a build up strategy because of the opportunities for acquisitions. So we started that in 2009 and then in 2013 we went public through an IPO with Roth Capital Partners under the JOBS Act and I believe we are probably the second company to go public under the JOBS Act and we went public at $6 a share with as a unit and with a warrant and a share and the stock is trading today somewhere between a little over $9 and $10 a share. So it’s been quite an increase for our investors. And we look at our strategy of organic growth where we do process improvement, all our team has been together for about 10 years and we have been doing things that in the engineering space and in specific areas of engineering that we really believe that there is an opportunity for consolidation in the industry. There are 141,000 engineering firms in the US and we know that through both process improvement and acquisition, we have a real opportunity to grow the company. We are called vertical because we are flat, we don’t believe in a matrix organization, we believe in entrepreneur leaders to run each of our verticals and we have 5 key service offerings and that’s why it’s called Vertical 5. So that’s just a brief overview of the company.
WSA: Great, great and talk about some of the recent contracts – you just had a contract through the San Diego County Water Authority?
Dickerson Wright: Yeah, well you know we are really happy to grow that area. We think that water, either water quality, water quantity, water treatment is a key, key thing that’s driving infrastructure and the need for infrastructure of one basic thing for humanity is water. So the San Diego Water Authority – this is a long-term contract where we are working on transmission and moving water. As you know in Southern California water is really a finite commodity and the San Diego Water Authority has a very big, big offer of water particularly from the Colorado River and other resources, and they are constantly looking for infrastructure improvement. So this contract is – and we are kind of the managing partner. It’s a 3- to 5-year contract. Our fees alone will be $2.5 million, but obviously we have an opportunity to grow on that because we have had a long relationship with the San Diego Water Authority. We also, in recent news, we acquired in our vertical, our program management vertical, we acquired a small program management firm headquartered in Denver and Cleveland that’s in the healthcare space and their big contract is with the University of Kansas and their medical facility and we really think there is some growth in that vertical too. So the water authority contract was in our infrastructure vertical and the program management acquisition, which is called ORSI, was in the program management vertical. That’s the most recent news that we have had in the last week or so.
WSA: Certainly yes, and so yeah as you mentioned you have multiple verticals, what are some of the current trends – some of the other trends that you have been seeing right now in the sector and how you are positioning the company for growth?
Dickerson Wright: Okay, well you know we believe that the driving – and the engineering space is so fragmented and one of the driving things is overall infrastructure because we think infrastructure supports some very highly profitable and growing, above the industry standard, service lines. So in our 5 verticals, infrastructure is our largest. We have program management, we have environmental services, we have energy and we also have our construction quality assurance, which makes up our five verticals. The trend is we are seeing in industry, and many of your viewers and listeners may have heard the news today, where a very large firm in our space AECOM brought another very large firm called URS. These are both billion dollar companies, so there is a real trend that we see for consolidation, where that gives us an opportunity though as the bigger firms get bigger, the smaller acquisitions where our sweet-spot is somewhere between $3 and $50 million dollars, those will not move the needle on the bigger firms. So the trend is to be the industry to become less fragmented through consolidation and we think that this will give a good opportunity for our strategy. And I can speak a little bit to what that is later on or as we get into some of the things that may position ourselves differently than other firms.
WSA: Right, well yeah, that’s actually what I was just going to ask, is what makes you guys unique and in a better position than some of the companies in the sector.
Dickerson Wright: Well, as we are considered a smaller company in the sector, although we have 650 employees now and our run rate towards the end of the year we look to be at about a $150 million. We went public at about $60 million. We have had organic and M&A growth of over 50 percent in an annualized basis since we went public. But what has really made us unique is two things, first in the organizational style we believe in a very flat organization, where we want our leaders of the verticals to be in direct contact with the clients, be real entrepreneurs and real leaders and add client value. The other though, which is I think very different for us as a public company, is we want to drive shares deep into the organization as possible. We want to recognize those young leaders, we want those people to be not just employees, but partners with us and so for us to be a public company, the strategy one is of course using shares as currency to grow the company through acquisitions, but also really driving stock and ownership deep into the company so that we could be using that to align all of our people together and not to be long winded, I would just like to mention anecdotally I sit on a lot of panels, industry panels, and one of the conference panels, I won’t forget this question because it really goes to how we are unique, the panel was asked by the audience what is the price of your publically traded shares, what impact does that have on your doing acquisitions. And the larger companies, I will not forget this but the larger companies were there, and I won’t mention names, but on that panel was Jacobson, URS and I believe that AECOM may have been on the panel, Tetratek, but all of those people said the price of our share does not make any difference because we don’t put shares in the acquisition, we want the EPS or the earnings per share. I raised my hand and I said that is the opposite of what we do, we want partners, we want shareholders and we think the long term value, we want our employees to be our partners, to be our shareholders and we think that the more we can drive shares into the organization, the more it aligns everyone. So that’s where our style is different. Very flat organization, where we want partners and owners going forward with us.
WSA: Right, and so perhaps you can walk us through you background experience Dick and talk a little bit about the management side there.
Dickerson Wright: Well, yeah, first my background is more like acquired knowledge going through. I have an undergraduate degree in civil engineering, I’m licensed in California and Wisconsin as a professional engineer and I have just been in this business all of my life. I started my first business in 1976 and through a series of acquired knowledge of building up the companies, selling them, and/or taking companies public, I have just had an uninterrupted career in this business since the early 70s. So a long time doing it and I guess the trough of knowledge maybe narrow, but very deep in this space and so what I have acquired through this is to really see the importance of people and how to grow the business. And so my background has been – its not finance and I think what I have learned about in acquisitions, I spend probably half of my time looking for deals. It’s really through putting myself in the place of those founders and owners of companies, I know what that’s like, I can share that with them and I am not approaching it from a financial point of view, but more of a strategic point of view.
Our team has been together for quite some time, our directors of human resources and our managerial team has been with me since 1996. We have a full time M&A person who I bought his company; he has been with us since 1998. We have – for a company our size, we have a full time general counsel and he’s been with me for over 10 years. Our chief operating officer of the company has also been with me for over 10 years. So we have had a solid team together doing this and our goal is to be $300 million by the year 2016 and I think our team is really poised to do this and so we are not – you know we are not novices at this, but we do learn things everyday.
WSA: Certainly, and so what are some of the goals and milestones that you and the team are hoping to accomplish over the course of the next year?
Dickerson Wright: Well thank you, I just briefly touched on it. I think that a CEO’s job is to put the vision and put a challenge out to its people. So we said at the beginning after we went public and we said in 2013 we would be at least $300 million run rate by the year 2016 and it would come through organic growth and through acquisitions and we would be in the upper 10 percent of profitability of our industry. So we would get to 300 in ’16 through organic growth, through acquisitions and process improvement that would return the profitability of the company. We are very profitable right now, we continue to cash flow the company, we do not have any debt associated at all with operations and so we think we are really in a position to grow. So our target is to be $300 million by 2016. Where we need to be at the end of this year would be at $140 million run rate and right now if we don’t do another acquisition, we will end up –somewhere our guidance to the Street is somewhere around $105 – $110 million and as I said we went public in 2013 at $60 million. So we think we are right on target to grow that. We think the industry is consolidating, but we can run a very flat organization and be truly recognized as a national player as we grow and as we grow towards the 300 in ’16 and that’s kind of what the milestone is and so in the next 12 months we want to end – we want to enter so that’ll be more like 16 months, we will enter the year 2016 at a run rate to be $300 million. So that’s probably about $150 million or so more than what we are doing now.
WSA: Certainly and so when it comes to investors in the financial community because you guys have recently joined the Russell Microcap Index. Do you believe that the company’s story, your message and the upside are completely understood and appreciated by them, and if it is not, what do you wish investors better understood about the company?
Dickerson Wright: Well I think in my role and our company’s role, we have always – our story can never completely be understood. It’s got to be always out there and it’s an evolving thing. It’s a process, so we have to make sure that we are in and not just – we are not just in our industry standard but we want the general public to recognize what we are doing. I think – I will say this, its kind of mixed thing, our underwriters Roth Capital really deals with institutions and we have 8 to 10 institutions that own the stock. The stock stays solid, it’s supported, but of course they are not trading the stocks. So we need more stock out there to be traded and I think this is just an education process to the retail investor, to the small investor. And you mentioned the Russell Microcap index, well that’s great, but you know there has to be enough turnover so that people can have an opportunity to buy that stock. So our goal really now is to do more things and that could come in eventual further secondary offering or offerings where we get more stock out there. We are trading at a very low multiple right now, at about 15 times trailing earnings and we are targeted to do about 90 cents a share in earning, so I think that story really needs to be better understood and I think its the job of our investor relations and our key management and myself to be on the road and being in publications like yours, the Wall Street Analyst, and I want to thank you for this opportunity and for finding us, but its forums like this that help get the stock better understood.
WSA: Great, and so once again joining us today is Dickerson Wright, CEO, Chairman and President of NV5 Holdings Inc., the company trades on NASDAQ, ticker symbol NVEE, as mentioned currently trading at $9.81 a share, market cap is north of $56 million and before we conclude here Dick, to briefly recap some of your key points, why do you believe investors should consider the company as a good investment opportunity today?
Dickerson Wright: Well I think it’s a sound investment and I don’t think you can get small microcap stocks that you know – we are targeting 13 percent organic growth, we have grown over 50 percent this year alone and we have earnings per share. We continually increase our earnings per share, we–It’s a investment where an opportunity for investors to grow with us and not only while they are growing, they are going to see earnings per share as they go and they are buying into a management team that has done this before and we are kind of like the old Spax, but using our own money. All of our management teams put our money into this company. We are not leveraged and we still have significant firepower to do more deals. So we have organic growth, we have the M&A growth and we have a good operational presence in the company as validated by our earnings per share.
WSA: Well, we certainly look forward to continuing to track the company’s growth and report on your upcoming progress and we would like to thank you for taking the time to join us today Dick and update our investor audience on NVEE.
Dickerson Wright: Well thank you very much, and thank you for the opportunity. Once again I would like to thank the Wall Street Analyzer for taking the time that they spent with us today.