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小而美的UP
2020-10-21

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NV5 Global: Value And A Long Runway Of Growth Ahead

NV5 Global has continued to sell more work, make acquisitions and grow its backlog despite the economic uncertainties due to the pandemic.NV5 stands to benefit from infrastructure spending due to regulatory requirements, climate change initiatives, new technology adoption (5G, electric vehicles, etc.).Geospatial analytics is a huge growth space for NV5 and the QSI acquisition is fueling the company's 2020 growth.As a result of the QSI acquisition, the company has quite a bit of debt on its balance sheet.With a 14.32 forward P/E, NV5 presents a great growth opportunity for long-term investors.

NV5 Global: Value And A Long Runway Of Growth Ahead

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The global engineering and consulting services firm has been growing revenues, performing acquisitions, winning bigger projects and expanding its backlog during this pandemic.</p> <p>Infrastructure is the backbone of the global economy and the industry is primed for decades of global growth. Despite the strong performance, business fundamentals and growth prospects, NV5 Global shares continue to trade 25% below its 52-week highs, at a low forward P/E of 14.32</p> <p><img height=\"332\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2020/10/4/saupload_al3E2AfsuKMxiHC7S72JxAuJ5VMDXEHlzCQIJwDfDjksEcXkEM8kwUs1IQvJyYut0dsNMtYvm0bWcf7duGkwTW2Qd6QDifu6YPrx6sok1w8i3k61Jz6XUkNEHZAXzNfg-T5M1Yor.png\" width=\"602\"/></p> <h2>Business Strength</h2> <p>NV5 Global serves approximately 12,000 different clients and their largest 10 clients accounted for approximately 19% of the gross revenues in FY2019. No individual client represented more than 10% of our gross revenues during FY17, '18 and '19. In FY 2019, 68% of NV5's gross revenues were from public and quasi-public sector clients. The diversified client base is a strength during these times of economic uncertainty. (It is worth mentioning that 27% of FY2019 revenues were from California.) It is important to note that the public and quasi-public sector have demonstrated greater resilience during periods of economic downturns, including the COVID-19 pandemic, in comparison with the private sector.</p>\n<div></div> <p><img height=\"255\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2020/10/4/saupload_ZFVlvOWB0WiO1MBE_UcB_Zzs91KRUkQW5Ovhgh19S9H6b_9M7hv2VcLJlWGAr4-3CFfDNYogSrV_zER0aXXLnI3mSNpHgBd538Sri45zGL-02miTp5jtd8TMZQ3ChrNbzOngPDT2.png\" width=\"602\"/></p> <p>Source: FY2019 Form 10-K</p> <p>There are several factors that could boost NV5’s business in the near term.</p> <ul> <li><p>Regulatory compliance and risk management concerns associated with aging infrastructure in the United States requires comprehensive planning, design and construction as well as asset inspection.</p></li> <li><p>Nationwide 5G rollout will create a strong demand for infrastructure-related services that facilitate the support of the new technology.</p></li> <li><p>Environmental factors such as climate change adaptation, coastal resilience, flood analysis, environmental habitat and wildfire mitigation.</p></li> <li><p>The need to perform predictive analytics and monitoring of precious natural resources like water and forestry from government agencies, scientific organizations and the private sector.</p></li> </ul> <p>NV5 Global has service offerings that support widespread adoption of technology such as electric vehicles. Last year, NV5 Global was awarded a $4 million contract by Southern California Edison (SCE) to support its Charge Ready program for electric vehicle charging in California. NV5 will provide complete design packages (civil, electrical, survey, permitting, and building support) at nearly 300 private and public electric vehicle charging sites throughout SCE’s service territory over a 3-year period. With growing adoption of electric vehicles, it is only a matter of time before such projects spin in other states. Also, the company is also well-positioned to win work associated with the smart city infrastructure roll-out.</p> <h2>COVID-19 Actions</h2> <p>The majority of NV5 offerings are non-discretionary services with minimal dependence on economic cycles. Also, several of NV5’s segments are identified as critical services per the US Cybersecurity and Infrastructure Security (CISA).</p>\n<div></div> <p><img height=\"253\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2020/10/4/saupload_yCdT3Wm0h4rUGquXphtdBExrpTMsgPMMeF4RIOUN9-Lhvmk7Wa-9_kNqQhTLd2E5OnNqHJ8BU2x5pMjuETOBMRiABIFaXy2qkC7QuKRgHIal8m93L9h78dLZw3twJjtdW1xN2djt.png\" width=\"602\"/></p> <p>Source: Investor Presentation</p> <p>In early March, in order to prepare for the worst, the company cancelled non-essential travel along with all trade shows and conferences, froze salaries, bonuses and furloughed or laid off non-essential staff (1.5% of our 4,000 full-time equivalent personnel).</p> <p>Preparing for a disruption in the economy, the company took steps to negotiate terms, rates, abatement and deferrals from vendors and facility leases. In total, management expects these proactive steps to help save $4.5 million to $5.0 million in a forward 12-month period.</p> <p>Management estimates an increase in utilization by approximately 8% during the time their personnel have been working remotely.</p> <h2>Continuing to win new contracts</h2> <p>Despite economic slowdowns, NV5 Global continued winning new projects and in my opinion, the company is set to be a big winner in the multitrillion-dollar global infrastructure space in the years to come. During the past few months, the company has some notable wins, demonstrating the strength of its current product offerings, synergies from the acquisitions and cross-selling capabilities.</p> <p>Some notable wins since the beginning of the pandemic:</p> <ul> <li><p>$6 million engineering, procurement and construction <span>(EPC)</span> contract to expand the vaporization system at an LNG facility in the East Coast.</p></li> <li><p>$4 million in transportation infrastructure contracts in New Mexico to provide planning, engineering, surveying, and environmental services to support improvements to roadway infrastructure throughout the state.</p></li> <li><p>$12 million contract by the California Department of Transportation to provide construction management, including on-call construction inspection, office engineering, claims resolution, and constructability support services for transportation facilities throughout Kern, Tulare, Kings, Fresno, and Madera Counties.</p></li> <li><p>Contracts amounting to $28 million in total to support the U.S. Army Corps of Engineers (USACE) and the U.S. Geological Survey’s (USGS) Earth Mapping Resources Initiative. This is particularly big since it comes from Quantum Spatial Inc., a recently acquired subsidiary of NV5 Global.</p></li> </ul>\n<div></div> <h2>Expanding Backlog</h2> <p>Along with major wins during this time, NV5’s backlog has also expanded well during this time, with Q2 backlog being 16% higher than Q2 2019.</p> <p><img height=\"440\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2020/10/4/saupload_jcWtmYSWEO21wR6otVV4OPHdCnE7BVMzyLKRPk1v2BbEi0xxGPfRg0WnnPJ2BOOb4U1ECLDBCg-OsBhuk9Qx1kOD4Hrva4Q4Bd2NNanhCPZRy6JmBE5ISE4u-EACK-68OI7EpL-B.png\" width=\"602\"/></p> <p>Source: Investor Presentation</p> <h2>Acquisitions</h2> <p>NV5 management has made more than 100 acquisitions since 1993. M&amp;A is an important piece of NV5’s growth story. Management revealed last year that 2019 has been their busiest year with respect to M&amp;A activity. During the end of 2019, the company completed the acquisition of Quantum Spatial, for $303 million, which was their biggest acquisition in recent years (and worth close to half of NVEE’s market cap at the time). Hence, it was expected that 2020 will mostly be light on M&amp;A activity.</p> <p>The Geospatial analytics market is expected to be close to $100 billion by 2025. Geospatial data plays a key role in the climate change adaptation. Owing to changing climate conditions and increasing concerns over public safety, the demand for geospatial analytics solutions in the climate change adaptation segment is expected to grow. I believe NV5 has picked up a high-growth segment through the Quantum Spatial acquisition.</p> <p><img loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2020/10/4/saupload_L-g0V34ogxH7Sc9v9uYj1MxH0edNS7ZdewrkC-yOW6FMFFCv79Pcrgm6yHKJXwpaEeAujm-AaPE86g_F-hcCkl8lw08VPhU68FLJPGyakKyMcK8y88ht2-MA4-A9acJ-QfOVEwpw.png\"/></p> <p>Image Source: QSI Website</p> <p>Despite the economic impacts of COVID-19, NV5 Global continued making acquisitions to expand its scope and service offerings. Acquisitions in the midst of the pandemic speaks to the strength of NV5 Global’s business at this time.</p> <p>In Q2, the company acquired Mediatech Design Group, a company that specializes in technology design services, security, enterprise, IT and other building technology solutions in the Middle East and Asia.</p>\n<div></div> <p><img height=\"387\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2020/10/4/saupload_l1L61tlifVFm1fGvybBU1RlLhJXNqnGZIVW8A2DT8UVBWGZrLo1DY-I_AnHRnI3JrptGrL8KCLranSD1bP13JNTxNCWk6GMCEXXftw4AVS0wk8RsP_twhne8rjLiv8vdhxMAT4So.png\" width=\"602\"/></p> <p>Source: Investor Presentation</p> <p>Every acquisition NV5 has made fortifies <a href=\"https://laohu8.com/S/AONE.U\">one</a> or more service offerings in its integrated delivery platform and enables cross-selling of work to existing clients.</p> <p><strong>Improvements in Cross-Selling</strong></p> <blockquote><p>“Our cross-selling program continues to be ahead of its 2020 full year goal of $26 million in cross-sells. We completed $7.7 million of sales across verticals in Q2, bringing our year-to-date total at the end of Q2 to almost $15 million. This program has contributed 6% of our net revenues in the first half of the year, which was work that would have been outsourced to subcontractors.” - Alex Hockman - President and COO</p></blockquote> <h2>Debt</h2> <p>The Quantum Spatial acquisition added quite a bit of debt on NV5’s balance sheet. NVEE now has $363 million in long-term debt (up from $73 million in Sept 2019), which is a matter of concern for Wall Street.</p> <p><img height=\"268\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2020/10/4/saupload_HJA2fBHQ5wvxj8NAEnU5m112m5a5q7M8akHUXe9NC_2j9zI3q994BsnsHeb5g8jKbZvInfCKGYFxIz-zPjiauAVPZ1l5zCL34Zx9aD9DP6KiibPcfcQ9w_Oqs8zT6fbeJtjcR5Ex.png\" width=\"462\"/></p> <p>Data Source: WSJ</p> <p>NV5’s Debt/EV is perhaps the factor keeping NV5 Global’s stock lower in comparison to peers like Jacobs Engineering (J) and Aecom (ACM), despite strong performance.</p> <p><img loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2020/10/4/saupload_iM2uIKQsxFLmSq90CTbEmN1fqfiFT8g8jUYJDUeycdUK28JQU3LXX-bO7iuxMt4GWjmtbZiL-Tbe0BQKFxQWarkoaPZcDMp8CJjehs0kopq5YduyUFCGRXectblQ-LOABcxLJEr0_thumb1.png\"/></p> <p>Source: Seeking Alpha</p> <h2>Revenue and FCF Growth</h2> <p>NV5 Global has the highest YoY revenue and FCF growth among peers.</p>\n<div></div> <p><img height=\"53\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2020/10/4/saupload_qKYPkPc-vYrT1yJQGm6R4f-y6EhpS6hOO5yTDI6jaGQe4jFoxuaQ6j_LhyXc73gT25TNNKZfHs7OhcfdCILgJIlVJWaZ-XVfq-V4ILGwUK_JrPxNsJOtXnGzSvCnuC0JAwZ3woaO.png\" width=\"602\"/></p> <p>Data Source: WSJ</p> <p>~27% YoY revenue growth is expected in FY 2020.</p> <p><img height=\"349\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2020/10/4/saupload_cQyj4kAy-sV1Qj1I1MQuXpK_YdK9I4oJ7kcyc4XMKBp2-Y0j0RBCTchEK9VBMrC3zZ0A4Mn9B6S9uwC8sGQJ1rAYfMWGi7cVZRjz4b0-YDzfsy1OEpl3oaqsPACVtx9JaRoT8jWG.png\" width=\"602\"/></p> <p><img height=\"40\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2020/10/4/saupload_JxxlNzxBL7CTR9BoIBUYY1ugQKMvx2B3YdI-618lBKlWGhOEBFIq54gK8kR8_wih5mFpcchn-s41qYLsK4dqEnrQI3XGbscj7MMr3Ic2YFFVC6U2TxCb2QdVmh7AN8GEJve7Zrn0.png\" width=\"602\"/></p> <p>Data Source: WSJ</p> <p>NV5 Global previously had reporting segments: Infrastructure (INF) &amp; Building, Technology &amp; Sciences (BTS).</p> <ul> <li><p>Infrastructure<span> (INF)</span> includes engineering, civil program management, construction quality assurance, testing, and inspection, and geospatial solutions.</p></li> <li><p>Building, Technology &amp; Sciences (BTS) includes energy, environmental and building program management practices.</p></li> </ul> <p><img loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2020/10/4/saupload_dd8zR54MQCp9Z45io34WIJhGd_XWKbuI1pUmW9IGVNWUgt2ykag-eXVAgcHOyXDu7INznjsILA2kYxquZnh9yOAAE9sEcgq2O_x9y8xdt6K98tG6cbzHqkMUHifoZA6-9CZuw50b.png\"/></p> <p>Data Source: 10-K</p> <p>With the acquisition of Quantum Spatial and the growth opportunities in the Geospatial analytics space, the company has a new reporting segment this year - GEO, whose revenue in the first half of 2020 is already exceeding the BTS segment. I believe the GEO segment growth will outpace the other segments soon.</p> <p><img loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2020/10/4/saupload_LPbPEbtS-i9k-txXfmqWBZHhLpePqovQfI0jV2vWYNn0qiktjBZA-E4CsgkDRcu1VjpV50GMT2XzeBi7dza9owBNwoidl5pfGTYOYQTaXNcCu11D13b1nSPrBJ3to7V7hn6hppPg.png\"/></p>\n<div></div> <p>Data Source: Company 10-Q</p> <h2>Conclusion</h2> <p>With strong performance in 2020 with new projects, growing backlog and increasing cross-sells, NV5’s growth was not slowed by COVID-19. M&amp;A activity during this pandemic reveals strength in the company’s business. Though the company has high debt (in relation to its EV) at this time, I believe the result of it (QSI acquisition) is the addition of geospatial data analytics to NV5’s service offerings, a powerful growth segment with strong shareholder value creation capabilities. NV5 presents a strong growth opportunity in the infrastructure space for long-term investors.</p> <span></span><p><b>Disclosure:</b> <span>I am/we are long NVEE.</span> <span>I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.</span></p></div><div><div></div><span><svg height=\"16\" viewbox=\"5.799999713897705 7.799999237060547 20.30000114440918 16.39999771118164\" width=\"16\"><path d=\"M26.1 9.7c-.7.3-1.5.6-2.4.7.9-.5 1.5-1.3 1.8-2.3-.8.5-1.7.8-2.6 1-.8-.8-1.8-1.3-3-1.3-2.3 0-4.1 1.9-4.1 4.1 0 .3 0 .6.1.9-3.4-.2-6.5-1.8-8.5-4.3-.4.7-.7 1.4-.7 2.1 0 1.4.7 2.7 1.8 3.4-.7 0-1.3-.2-1.9-.5v.1c0 2 1.4 3.7 3.3 4.1-.3.1-.7.1-1.1.1-.3 0-.5 0-.8-.1.5 1.6 2.1 2.8 3.9 2.9-1.4 1.1-3.2 1.8-5.1 1.8-.3 0-.7 0-1-.1 1.8 1.2 4 1.9 6.4 1.9 7.6 0 11.8-6.3 11.8-11.8v-.5c.8-.6 1.5-1.3 2.1-2.2zm0 0\" fill=\"#FFFFFF\"></path></svg><svg height=\"18\" viewbox=\"11.000001907348633 6.799999713897705 9.999998092651367 18.600000381469727\" width=\"10\"><path d=\"M20.6 6.8h-2.4c-2.7 0-4.4 1.8-4.4 4.6v2.1h-2.4c-.2 0-.4.2-.4.4v3c0 .2.2.4.4.4h2.4V25c0 .2.2.4.4.4h3.1c.2 0 .4-.2.4-.4v-7.7h2.8c.2 0 .4-.2.4-.4v-3c0-.1 0-.2-.1-.3-.1-.1-.2-.1-.3-.1h-2.8v-1.8c0-.9.2-1.3 1.3-1.3h1.6c.2 0 .4-.2.4-.4V7.1c0-.2-.2-.3-.4-.3zm0 0\" fill=\"#FFFFFF\"></path></svg><svg height=\"16\" viewbox=\"6.200000286102295 6.699999809265137 19.5 18.700000762939453\" width=\"14\"><path d=\"M25.7 18.2v7.2h-4.2v-6.7c0-1.7-.6-2.8-2.1-2.8-1.2 0-1.8.8-2.1 1.5-.1.3-.1.6-.1 1v7H13s.1-11.4 0-12.6h4.2v1.8c.6-.9 1.5-2.1 3.8-2.1 2.7 0 4.7 1.8 4.7 5.7zM8.6 6.7c-1.4 0-2.4.9-2.4 2.2 0 1.2.9 2.2 2.3 2.2 1.5 0 2.4-1 2.4-2.2 0-1.2-.8-2.2-2.3-2.2zM6.5 25.4h4.2V12.8H6.5v12.6zm0 0\" fill=\"#FFFFFF\"></path></svg><svg height=\"14\" viewbox=\"4.5 6.499999523162842 22.900001525878906 18.999998092651367\" width=\"18\"><path d=\"M20.9 16.9c.1.2.1.3.1.5 0 .3-.1.6-.3.9-.2.2-.4.4-.7.5-.1 0-.3.1-.4.1-.3 0-.7-.1-.9-.3-.3-.2-.5-.5-.5-.8v-.3c0-.3.1-.6.3-.8.2-.2.4-.4.7-.5.2-.1.3-.1.5-.1.3 0 .6.1.8.3.1 0 .3.2.4.5zm-.9 3.7c-.1-.1-.3-.1-.4-.1-.1 0-.2 0-.3.1-1 .6-2.2.9-3.4.9-.9 0-1.8-.2-2.6-.6-.1 0-.3-.2-.4-.3-.1 0-.2-.1-.2-.1-.1 0-.2-.1-.3-.1-.1 0-.2 0-.3.1-.1.1-.2.1-.3.3-.1.1-.1.3-.1.4 0 .1 0 .2.1.4.1.1.1.2.3.3 1.1.8 2.5 1.1 3.8 1.1 1.2 0 2.4-.3 3.5-.8.1-.1.3-.2.5-.3.1-.1.2-.1.3-.2.1-.1.1-.2.2-.3v-.2c0-.1 0-.2-.1-.3l-.3-.3zm-8-1.9c.2.1.3.1.5.1.4 0 .7-.2 1-.4.3-.2.5-.6.5-1v-.1c0-.4-.2-.7-.5-1-.3-.2-.6-.4-1-.4h-.3c-.5.1-.9.5-1.1 1 0 .1-.1.3-.1.4 0 .3.1.6.3.9.2.3.4.4.7.5zm15.4-3.6v.2c0 .6-.2 1.1-.5 1.5-.3.4-.7.8-1.1 1v.7c0 1.2-.4 2.4-1.1 3.3-1.3 1.8-3.4 2.8-5.4 3.3-1.1.3-2.2.4-3.4.4-1.7 0-3.4-.3-4.9-.9-1.6-.7-3.2-1.7-4.1-3.3-.5-.8-.8-1.8-.8-2.8v-.7c-.4-.2-.8-.6-1.1-1-.3-.4-.5-1-.5-1.5 0-.8.3-1.5.8-2s1.2-.9 2-.9h.2c.4 0 .8.1 1.1.2.3.1.6.3.9.5.1 0 .2-.1.3-.1 1.7-1 3.6-1.4 5.4-1.5 0-.9.1-1.9.6-2.7.4-.7 1-1.3 1.8-1.4.3-.1.6-.1.9-.1.8 0 1.6.2 2.3.5.3-.5.8-.9 1.3-1.1.3-.1.7-.2 1-.2.4 0 .7.1 1.1.2.5.2.9.5 1.2 1 .4.4.6.9.6 1.5v.3c-.1.7-.4 1.3-.9 1.7-.5.4-1.1.7-1.8.7H23c-.6 0-1.3-.4-1.7-.8-.4-.5-.7-1.1-.7-1.8v-.1c-.6-.3-1.3-.5-1.9-.5h-.3c-.5 0-.9.4-1.1.8-.3.6-.4 1.4-.4 2.1 1.8.1 3.7.6 5.3 1.5 0 0 .1 0 .1.1.1-.1.2-.2.4-.3.5-.3 1.1-.5 1.7-.5.3 0 .5 0 .8.1.6.2 1.1.5 1.5 1 .4.4.7 1 .7 1.6zm-5.4-6s0 .1 0 0c0 .4.2.7.4.9.2.2.5.4.8.4h.1c.3 0 .6-.1.9-.4.2-.2.4-.5.4-.8v-.1c0-.3-.2-.6-.4-.9-.2-.2-.6-.4-.9-.4H23c-.3.1-.5.2-.7.4-.2.4-.3.6-.3.9zm-13.6 5c-.2-.1-.5-.2-.8-.2h-.1c-.4 0-.7.2-1 .4-.3.3-.5.6-.5 1v.1c0 .2.1.5.2.7.1.2.2.3.3.4.5-1 1.2-1.8 1.9-2.4zm16.1 4.5c0-.8-.3-1.7-.8-2.3-1-1.3-2.4-2.2-4-2.7-.3-.1-.6-.2-.9-.2-.9-.3-1.9-.4-2.8-.4-1.2 0-2.5.2-3.7.6-1.5.5-3 1.4-4 2.7-.5.7-.8 1.5-.8 2.3 0 .3 0 .6.1.9.2.7.5 1.3 1 1.8.4.5 1 1 1.6 1.3.1.1.3.2.4.2 1.7.9 3.6 1.3 5.4 1.3h1c1.9-.2 3.8-.7 5.4-1.9.5-.4.9-.8 1.3-1.3s.6-1.1.7-1.7c0-.2.1-.4.1-.6zm1.5-3.3c0-.2 0-.4-.1-.6-.1-.3-.3-.5-.6-.6-.3-.1-.6-.2-.8-.2-.3 0-.5.1-.8.2.8.7 1.4 1.4 1.8 2.4.1-.1.3-.3.3-.4.1-.3.2-.6.2-.8zm0 0\" fill=\"#FFFFFF\"></path></svg><svg height=\"10\" viewbox=\"4.699999809265137 8.300000190734863 22.599998474121094 15.40000057220459\" width=\"16\"><path d=\"M4.7 8.3v2.5L16 17l11.3-6.1V8.3H4.7zm0 3.7v11.7h22.6V12L16 18.1 4.7 12z\" fill=\"#FFFFFF\"></path></svg><svg height=\"14\" viewbox=\"87.43199920654297 227.56399536132812 422.6809997558594 382.7259826660156\" width=\"20\"><g><g><rect fill=\"none\" height=\"42.929\" width=\"42.929\" x=\"421.615\" y=\"375.172\"></rect><g><rect fill=\"none\" height=\"42.929\" width=\"42.929\" x=\"421.615\" y=\"375.172\"></rect><path d=\"M87.432,332.244v193.283h85.424v84.763h251.855v-84.763h85.402V332.244H87.432z M383.309,568.021H214.237 v-105.67h169.072V568.021z M464.543,418.101h-42.929v-42.929h42.929V418.101z\" fill=\"#FFFFFF\"></path></g></g><rect fill=\"#FFFFFF\" height=\"84.536\" width=\"253.609\" x=\"175.93\" y=\"227.564\"></rect></g></svg></span></div></div></body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; 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height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nNV5 Global: Value And A Long Runway Of Growth Ahead\n</h2>\n\n<h4 class=\"meta\">\n\n\n2020-10-07 00:28 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4377837-nv5-global-value-and-long-runway-of-growth-ahead><strong>Hidden Opportunities</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SummaryNV5 Global has continued to sell more work, make acquisitions and grow its backlog despite the economic uncertainties due to the pandemic.NV5 stands to benefit from infrastructure spending due ...</p>\n\n<a href=\"https://seekingalpha.com/article/4377837-nv5-global-value-and-long-runway-of-growth-ahead\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"NVEE":"Nv5 Global Inc"},"source_url":"https://seekingalpha.com/article/4377837-nv5-global-value-and-long-runway-of-growth-ahead","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"2073895907","content_text":"SummaryNV5 Global has continued to sell more work, make acquisitions and grow its backlog despite the economic uncertainties due to the pandemic.NV5 stands to benefit from infrastructure spending due to regulatory requirements, climate change initiatives, new technology adoption (5G, electric vehicles, etc.).Geospatial analytics is a huge growth space for NV5 and the QSI acquisition is fueling the company's 2020 growth.As a result of the QSI acquisition, the company has quite a bit of debt on its balance sheet.With a 14.32 forward P/E, NV5 presents a great growth opportunity for long-term investors. Introduction NV5 Global (NASDAQ:NVEE) continues to be overlooked despite its strong performance in 2020. The global engineering and consulting services firm has been growing revenues, performing acquisitions, winning bigger projects and expanding its backlog during this pandemic. Infrastructure is the backbone of the global economy and the industry is primed for decades of global growth. Despite the strong performance, business fundamentals and growth prospects, NV5 Global shares continue to trade 25% below its 52-week highs, at a low forward P/E of 14.32  Business Strength NV5 Global serves approximately 12,000 different clients and their largest 10 clients accounted for approximately 19% of the gross revenues in FY2019. No individual client represented more than 10% of our gross revenues during FY17, '18 and '19. In FY 2019, 68% of NV5's gross revenues were from public and quasi-public sector clients. The diversified client base is a strength during these times of economic uncertainty. (It is worth mentioning that 27% of FY2019 revenues were from California.) It is important to note that the public and quasi-public sector have demonstrated greater resilience during periods of economic downturns, including the COVID-19 pandemic, in comparison with the private sector.\n  Source: FY2019 Form 10-K There are several factors that could boost NV5’s business in the near term.  Regulatory compliance and risk management concerns associated with aging infrastructure in the United States requires comprehensive planning, design and construction as well as asset inspection. Nationwide 5G rollout will create a strong demand for infrastructure-related services that facilitate the support of the new technology. Environmental factors such as climate change adaptation, coastal resilience, flood analysis, environmental habitat and wildfire mitigation. The need to perform predictive analytics and monitoring of precious natural resources like water and forestry from government agencies, scientific organizations and the private sector.  NV5 Global has service offerings that support widespread adoption of technology such as electric vehicles. Last year, NV5 Global was awarded a $4 million contract by Southern California Edison (SCE) to support its Charge Ready program for electric vehicle charging in California. NV5 will provide complete design packages (civil, electrical, survey, permitting, and building support) at nearly 300 private and public electric vehicle charging sites throughout SCE’s service territory over a 3-year period. With growing adoption of electric vehicles, it is only a matter of time before such projects spin in other states. Also, the company is also well-positioned to win work associated with the smart city infrastructure roll-out. COVID-19 Actions The majority of NV5 offerings are non-discretionary services with minimal dependence on economic cycles. Also, several of NV5’s segments are identified as critical services per the US Cybersecurity and Infrastructure Security (CISA).\n  Source: Investor Presentation In early March, in order to prepare for the worst, the company cancelled non-essential travel along with all trade shows and conferences, froze salaries, bonuses and furloughed or laid off non-essential staff (1.5% of our 4,000 full-time equivalent personnel). Preparing for a disruption in the economy, the company took steps to negotiate terms, rates, abatement and deferrals from vendors and facility leases. In total, management expects these proactive steps to help save $4.5 million to $5.0 million in a forward 12-month period. Management estimates an increase in utilization by approximately 8% during the time their personnel have been working remotely. Continuing to win new contracts Despite economic slowdowns, NV5 Global continued winning new projects and in my opinion, the company is set to be a big winner in the multitrillion-dollar global infrastructure space in the years to come. During the past few months, the company has some notable wins, demonstrating the strength of its current product offerings, synergies from the acquisitions and cross-selling capabilities. Some notable wins since the beginning of the pandemic:  $6 million engineering, procurement and construction (EPC) contract to expand the vaporization system at an LNG facility in the East Coast. $4 million in transportation infrastructure contracts in New Mexico to provide planning, engineering, surveying, and environmental services to support improvements to roadway infrastructure throughout the state. $12 million contract by the California Department of Transportation to provide construction management, including on-call construction inspection, office engineering, claims resolution, and constructability support services for transportation facilities throughout Kern, Tulare, Kings, Fresno, and Madera Counties. Contracts amounting to $28 million in total to support the U.S. Army Corps of Engineers (USACE) and the U.S. Geological Survey’s (USGS) Earth Mapping Resources Initiative. This is particularly big since it comes from Quantum Spatial Inc., a recently acquired subsidiary of NV5 Global. \n Expanding Backlog Along with major wins during this time, NV5’s backlog has also expanded well during this time, with Q2 backlog being 16% higher than Q2 2019.  Source: Investor Presentation Acquisitions NV5 management has made more than 100 acquisitions since 1993. M&A is an important piece of NV5’s growth story. Management revealed last year that 2019 has been their busiest year with respect to M&A activity. During the end of 2019, the company completed the acquisition of Quantum Spatial, for $303 million, which was their biggest acquisition in recent years (and worth close to half of NVEE’s market cap at the time). Hence, it was expected that 2020 will mostly be light on M&A activity. The Geospatial analytics market is expected to be close to $100 billion by 2025. Geospatial data plays a key role in the climate change adaptation. Owing to changing climate conditions and increasing concerns over public safety, the demand for geospatial analytics solutions in the climate change adaptation segment is expected to grow. I believe NV5 has picked up a high-growth segment through the Quantum Spatial acquisition.  Image Source: QSI Website Despite the economic impacts of COVID-19, NV5 Global continued making acquisitions to expand its scope and service offerings. Acquisitions in the midst of the pandemic speaks to the strength of NV5 Global’s business at this time. In Q2, the company acquired Mediatech Design Group, a company that specializes in technology design services, security, enterprise, IT and other building technology solutions in the Middle East and Asia.\n  Source: Investor Presentation Every acquisition NV5 has made fortifies one or more service offerings in its integrated delivery platform and enables cross-selling of work to existing clients. Improvements in Cross-Selling “Our cross-selling program continues to be ahead of its 2020 full year goal of $26 million in cross-sells. We completed $7.7 million of sales across verticals in Q2, bringing our year-to-date total at the end of Q2 to almost $15 million. This program has contributed 6% of our net revenues in the first half of the year, which was work that would have been outsourced to subcontractors.” - Alex Hockman - President and COO Debt The Quantum Spatial acquisition added quite a bit of debt on NV5’s balance sheet. NVEE now has $363 million in long-term debt (up from $73 million in Sept 2019), which is a matter of concern for Wall Street.  Data Source: WSJ NV5’s Debt/EV is perhaps the factor keeping NV5 Global’s stock lower in comparison to peers like Jacobs Engineering (J) and Aecom (ACM), despite strong performance.  Source: Seeking Alpha Revenue and FCF Growth NV5 Global has the highest YoY revenue and FCF growth among peers.\n  Data Source: WSJ ~27% YoY revenue growth is expected in FY 2020.   Data Source: WSJ NV5 Global previously had reporting segments: Infrastructure (INF) & Building, Technology & Sciences (BTS).  Infrastructure (INF) includes engineering, civil program management, construction quality assurance, testing, and inspection, and geospatial solutions. Building, Technology & Sciences (BTS) includes energy, environmental and building program management practices.   Data Source: 10-K With the acquisition of Quantum Spatial and the growth opportunities in the Geospatial analytics space, the company has a new reporting segment this year - GEO, whose revenue in the first half of 2020 is already exceeding the BTS segment. I believe the GEO segment growth will outpace the other segments soon. \n Data Source: Company 10-Q Conclusion With strong performance in 2020 with new projects, growing backlog and increasing cross-sells, NV5’s growth was not slowed by COVID-19. M&A activity during this pandemic reveals strength in the company’s business. Though the company has high debt (in relation to its EV) at this time, I believe the result of it (QSI acquisition) is the addition of geospatial data analytics to NV5’s service offerings, a powerful growth segment with strong shareholder value creation capabilities. NV5 presents a strong growth opportunity in the infrastructure space for long-term investors. Disclosure: I am/we are long NVEE. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.","news_type":1},"isVote":1,"tweetType":1,"viewCount":106,"commentLimit":10,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"symbols":[],"verified":2,"subType":0,"readableState":1,"langContent":"EN","currentLanguage":"EN","warmUpFlag":false,"orderFlag":false,"shareable":true,"causeOfNotShareable":"","featuresForAnalytics":[],"commentAndTweetFlag":false,"andRepostAutoSelectedFlag":false,"upFlag":false,"length":4,"xxTargetLangEnum":"ORIG"},"commentList":[],"hasMoreComment":false,"orderType":2}