NV5 Global, Inc.
(NASDAQ: NVEE)
Chairman, CEO, and President: Dickerson Wright
Podcast: Play in new window
INTERVIEW TRANSCRIPTS:
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 Global Incorporated. The company trades on NASDAQ, ticker symbol NVEE. Thanks for joining us today there, Dickerson.
Dickerson Wright: Well, happy to do it Juan. Always good to talk to you.
WSA: Surely. So for some of our listeners that didn’t catch our last interview from six months ago, can you give us a history and overview of the company?
Dickerson Wright: Sure. I’m asked that a lot, about the unusual name, NV5, and it really portrays us being a very flat vertical organization, with five key service areas in the overall engineering space. And we have chosen those five areas because of our management expertise and experience in a way that we are entering service lines that are much more profitable than the industry standard. So the vertical five is just the name of how we operate, and those five service lines are infrastructure, of course, which is the overall entering of the client at the highest level, at the design level, and that feeds those more profitable verticals such as program management, our construction quality assurance division, which we call CQA, our environmental program and platform which we entered a very high level that’s mostly in industrial hygiene radiation health safety, health physics ect. Our fourth is the energy vertical where we really have a strong presence in mechanical, electrical, plumbing, fire safety design mostly in indoor – inside the building envelope, which is always an ongoing OpEx area.
So people ask us, why have we been able to have organic growth averaging 8% to 9% when the market in engineering is under 5%, and why do we average at 12% to 15% EBITDA when the industry standard is significantly less than that. And I liken it this way: our universe are these five verticals. And I think if anyone can choose their universe then they should be able to compete very well on that. So this is the area we know. We believe in entering the client at the very high level, and to supply those services. So we approach the client more as a key value consultant in the design phase, and this helps to feed those other more profitable verticals. So, it’s been successful to date. We went, as you know, Juan, and for those investors that have been following us, we went public in 2013. We had a very small IPO at $6.00 per share and warrant as a unit. And now I believe the stock is trading over $38 a share and we’ve exercised the warrants, and we’ve grown the market cap from a post of $25 million to over $400 million market cap in that period of time. So our strategy is one foot in front of the other and it seems to be working.
WSA: So, yeah, in regard to the company’s growth, can you talk about the Bock & Clark acquisition?
Dickerson Wright: Yeah, sure. We really are excited about this acquisition. Bock & Clark deals with the out-office surveys, anything to do with a high-end commercial real estate transactions. And they supply the boundary surveys, property condition assessments on a broad, national basis. The acquisition is in revenue of approximately $40 million EBITDA, very strong for a period of many years at close to $7 million in EBITDA. And we acquired that as an all-cash transaction with a very little amount of restricted stock. So it’ll be extremely accretive to our investors. Bock & Clark has been in business for well over 25 years. And their services are more annuity-like or reccurring revenues, and this is what we like. They have a database of over 140,000 properties that have been surveyed before, so they are the people that on any new transaction for that same property, they will go to that.
Why we like it is we believe in cross selling and synergy is a very part strong of our DNA. And this now gives us just – two-fold, we have very, very strong surveying operations in some areas of the country where Bock & Clark is not Bock & Clark, so they can use our services. But in many, many cases, we are using Bock & Clark where they have surveying licensing and capabilities to do that work. For example, we have now been doing highly advanced Lidar surveys with drone capabilities, and we’re using the support of the survey people in Florida, and in various locations around the country where we are not where Bock & Clark is supporting us. So two things — very profitable operation, very synergistic to what we have, and something that can really densify the existing engineering platform we have. So we’re very happy with that acquisition. As I said, it was an all-cash transaction, and it was $42 million in cash. So nothing too dilutive, and we’re looking for it to be extremely accretive to our shareholders.
WSA: And how does that fit in with some of the key trends that you’re seeing in the sector, and how will that position you to continue to capitalize?
Dickerson Wright: Well, what we like, and as you know Juan, we are structured predominantly–our business is in the public sector or quasi public, anything with a tax-based revenue we consider a public-based client. And close to 80% of our revenue was within the public sector. Bock & Clark is a private, and really with emphasis on the real estate and growing real estate private market. So this rounds out our overall offering so that we now have a stronger mix in the private sector. And we feel that the one question I get is how does Bock & Clark respond to economic cycles. And you know that in the real estate business, it’s…let’s say at times can be feast or famine. But even through the darkest periods of time we know that till The Great Recession of 2008, Bock & Clark continued to do work because they are just known in the marketplace, and they are the largest provider in the country for doing that work. So, it’s going to round out our service offerings to both the public and the private sector.
WSA: And what are some of the factors that you feel make you unique from some of the other key players in the sector?
Dickerson Wright: Well I think the main thing is our discipline in having a flat organization. And what do I mean by that? I mean, that we absolutely understand that our corporate staff, our support staff is here to keep our best people in front of the client. And we feel that when we can put our best people in an area in front of the client we are very, very successful. So we want the people that are known leaders in civil design, and program management, and environmental, we want those people to be free to do the things that is their passion and to support that. So, we feel as companies get very big they tend to internalize. They tend to have internal memos. They start thinking of things that are not specific to growing their services. They may get involved in real estate; buildings and offices, and all types and internal things that are really not in the interest of keeping our best people forward.
What we have in our organization and being a flat organization is, we are looking for entrepreneurs and leaders, we’re not looking for highly compensated administrators. Big companies tend to get internalized — and although we have 2,000 employees now, the theme that, and it’s like a mantra that is drummed into our leaders: be it in front of the client, to be of service to the client. We often say, if you’re asked to go to a meeting for environmental or consulting or engineering services, and you’re asked by the client to attend that meeting for that reason, you better be the smartest person in the room for the reason you are asked to be there. You have to add value. So we want our organization to really reflect that. We know that it’s the operations that drive the organization, it’s not the support services or the internalized things that really build the business.
So I think that’s probably a difference. And this is from acquired knowledge. Our management team’s been together a long time. We’ve come from other companies. This is our second public company. We have large organizations. So we tend to want to capitalize on the things that worked well, and we want to repeat those.
WSA: Good. And what are the main goals and milestones moving forward here over the next six to twelve months that you’re hoping to accomplish?
Dickerson Wright: Well, we are very active in the transaction M&A market. We have a full-time M&A person — he’s been with our organization since 1998. We’re very active, so I would tell your investors to continue to look for us to do more acquisitions. I think our management team has given us the long-term goal of being at $600 million by the year 2020. We announced publicly we were going to be at $300 million by 2016. We will be well above the $300 million number by the end of the year. And I think that we say this: why is it important that we grow? It creates more and more opportunities for our employees.
We just had a conference with all of our employees by webcast, and we said the importance for growth is that we want more and more opportunities for our people. We now have 81 offices, and obviously you can have a lot more opportunities in 81 offices than you can in 10 or 12. So we think growth is extremely important for our people. And I think we have to understand that companies are organic, they need to grow. Change is not an option, change is inevitable. And so, we know that we’re looking for the positive change. So I would say to our investors, continue to see the growth, and continue to see the profits that we have. We have a very strong balance sheet. We’re not leveraged in any way, or at least overly leveraged. We have no leverage to speak of.
We are making acquisitions through cash flow; we have positive cash flow every quarter. So I think I would tell your investors that if they’re looking for a high-growth company with continued earnings per share, continued earnings growth per share, and not a dilution. We’re not going to the market for equity raises any longer. We’re well financed. So I think it’s something that is in the long-term best interest and a good investment for many of your listeners.
WSA: Certainly. And so for some of our listeners once again that might have not caught our last interview, can you talk about your background experiences as well as the key management
Dickerson Wright: Sure. I’m a licensed engineer. I think life is acquired knowledge. And there’s an old saying, you learn something every day, you get better every day. And unfortunately when you reach perfection you die, so hopefully we’re nowhere near that yet. But we want to learn. And I think it’s through acquired knowledge. I have been doing this – I had my first company I started in this engineering space in construction quality assurance when I was 29 years old. I know what it means to use our own financing to do things, and so it’s very near and dear to me to grow the company. So, through a series of events I have sold companies. This is the second company I took public. And our management team, many of the people that were with me in our first public company, U.S. Labs, were with me now through the transition. We went public in 1999. We were taken private in 2002 by a very, very large international French firm called Bureau Veritas. We were their platform in the U.S., I had five years with them managing, left on very good terms, and we grew that company to over $300 million in revenue.
And it’s that same management team, so it’s the process, it’s the lessons learned, it’s the space we know. I like to say that we may have a narrow trench in knowledge, but it’s very, very deep in the services that we provide.
WSA: Certainly. And so when it comes to investors and the financial community, are there any drivers there that you wish perhaps they still better understood about you guys?
Dickerson Wright: Yeah, obviously the infrastructure market is a good place to be in right now. I think we are well-known in it, we are positioning ourselves now. We are well-known in the municipal marketplace. I think that the federal government has learned from the TARP act and the shovel-ready projects that no one can get federal funding for infrastructure right now under the FAST Act, which is $305 billion that’s undergoing now, unless you have planned specifications, applications in the process. So we are a support function for the many municipalities that we support around the country. And those municipalities that are going to get federal funds for bridges, highways, roads — we are embedded with them to get that.
So we feel it’s going to be a very steady stream of revenue. We think the wind is at our back. But I think for investors, people say, “well, there’s been a significant increase in NV5 stock.” I would point to the forward earnings with – we were going to be trading at a very, very low multiple to our forward earnings. We tend to do what we say, and we tend to meet our goals. So I think that it’s a good opportunity if people are looking for steady organic growth, significant earnings per share, and not a huge dilution. We only have about 10.5 million shares outstanding. And the only shares that we issue is restricted shares mostly, a very limited amount in acquisitions because we really want to not only drive equity deep in the organization, but we want to make sure that everything we do is accretive.
WSA: Sure. Once again, joining us today is Dickerson Wright, Chairman, CEO, and President for NV5 Global Incorporated, which as mentioned trades on NASDAQ ticker symbol NVEE, currently trading at $38.40, a share market cap north of $400 million. And before we conclude here, Dickerson, to 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 do and our management team does. And every one of us are invested. I have not sold a share of stock. I am by far the largest shareholder. And we have, I think, 40% of our ownership is through employees and investors. And we in fact, our team together with our outside investors, because we really want to grow the company and it’s a space we know. It’s those five service lines, we’re growing organically faster. We have a number of acquisitions in our pipeline. We’re active doing that. So if an investor is looking for earnings per share, organic growth, and a steady platform, we have never had a losing year in business. I’m knocking on wood when I say that, but I think that we’re in a very good space. Infrastructure is a hot area right now, and we are performing well within that space. So I think it’s a great opportunity for investors.
WSA: Well, we certainly look forward to continuing to track the company’s growth, and report your upcoming progress. And we’d like to thank you for taking the time to join us today and update our investor audience on NV5 Global. It’s always good to have you on.
Dickerson Wright: Okay, Juan. It’s always good to speak with Wall Street Analyzer. And we look forward to hearing from you again, and thank you for the opportunity you gave me today.
