Lauren Wright - Director, IR Dickerson Wright - Chairman & CEO Michael Rama - CFO.

Jeff Martin - ROTH Capital Ryan Cassil - Seaport Global Jayant Ishwar - Singular Research.

Good afternoon, everyone and thank you for participating in today's conference call to discuss NV5's Financial Results for the Fourth Quarter and Full Year Ended December 31, 2016. Joining us today are Dickerson Wright, Chairman and CEO of NV5; Michael Rama, CFO of NV5; and Lauren Wright, Director of Investor Relations for NV5.

I would now like to turn the call over to Lauren Wright..

Thank you, Operator. Before we proceed, I would like to remind everyone that this conference call may contain forward-looking statements within the meaning of the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, including statements concerning future events and future financial performance.

The company cautions that these statements are qualified by important factors that could cause actual results to differ materially from those reflected by the forward-looking statements contained herein.

All forward-looking statements are based on information available to the company on the date hereof and the company assumes no obligation to update such statements except as required by law. I would like to remind everyone that a webcast replay of this call will be available via the company's website under presentation at nv5.com.

Any redistribution, retransmission, or rebroadcast of this call in any way without the express written consent of NV5 is strictly prohibited.

We will begin the call with comments from Dickerson Wright, Chairman and CEO of NV5, before turning the call over to Michael Rama, Chief Financial Officer, for a review of the fourth quarter and full-year 2016 financial results and outlook for 2017. We will then open the call for your questions. Dickerson, please go ahead..

JBA Consulting Engineers, The Hanna Group, and Civil Source. JBA is a MEP, mechanical, electrical, plumbing engineering, acoustics technology, and fire protection consulting firm focused on entertainment and hospitality clients.

They have served some of the best known companies in the world including Disney, Caesars, MGM, Wynn, Valleys, Marriott, Hilton and of course Stevens. JBA team was recently chosen by the Westfield Corporation to upgrade technology in 26 shopping centers. JBA has approximately $33 million in annual revenue, 12 offices in the U.S.

and several abroad in Vietnam, Macau, Shanghai, and Hong Kong. The firm promises strong opportunity for synergy and bridging the gap between predominantly private clients and our current public sector clients. JBA's main focus is to build a state-of-the-art environment while reducing building energy cost.

The Hanna Group which we acquired in December is a provider of program management services for public infrastructure projects in California. The Hanna acquisition introduces NV5 to a new geographic market and strengthens our bridge expertise. This is also a great fit with our existing infrastructure and program management practices in the West.

Hanna has approximately $11 million in annual revenues and four offices in California. Also in December, NV5 acquired Civil Source, a civil engineering consulting firm serving municipal, special district, industrial, and private sector clients with approximately $11 million in annual revenue.

We were briefly drawn to Civil Source by the dominant footprint they have been able to establish in Southern California. Civil Source accounts 23 of 34 cities in Orange County and 22 of 88 cities in Los Angeles County among its clients which are two key markets NV5 San Diego Infrastructure Group has been looking to enter.

Civil Source positions NV5 to capitalize on anticipated federal spending for municipal infrastructure projects. Our engineering and power service practices have also been growing notably.

Our engineers recently won a $5 million contract for retro commissioning services throughout Dallas-Fort Worth Airport and our Infrastructure Energy Group won $11 million in Phase 1 feed to act as delegate chief building official for two power plants in the Western U.S.

The owners of the two high-profile plants have chosen NV5 to provide services on all three phases of the project. We value these contracts at $20 million in fees over the next three years an official announcement will be forthcoming.

We're also starting to see some tailwinds associated with projected federal spending on infrastructure beyond the $305 billion transportation spending bill and the $600 billion pipeline safety bill that was signed in 2015 and 2016.

The new Presidential Administration has indicated that it intends to invest $1 trillion in infrastructure and has already published a list of high priority projects and service areas within NV5's geographic reach and expertise. I'd like to speak further to the NV5's strategy and position to benefit from future government and administrative changes.

The executive branch back focus on bridges, airports and roadways at any point in time is likely to benefit NV5. We also well situated in both anti and pro regulation political requirements.

While some of our business is derived from new standards imposed by federal agencies such as the EPA and DOE that are difficult to meet, when government is streamlined agencies are often forced to delegated enforcement responsibilities to company's like ours, who help commercial and government bodies meet the basic standards of safety, clean water and clean energy that we may.

Our private clients would still account for about 30% of our business will also have opportunities from Rules and Regulation. Clean air and clear water stands will not go way under the Trump administration. However there will be less administrative support enforcing them. This service will be outsourced and therefore provide more opportunities for NV5.

We feel optimistic about the direction of our industry and of NV5. I would now like to turn the call over to our Chief Financial Officer, Michael Rama, for a more detailed overview of the financial results for the fourth quarter and full-year.

Michael?.

Thank you, Dickerson, and thank you everyone for joining us this afternoon. First I'd like to review the results of the company's fourth quarter and full-year ended December 31, 2016, results and then I will provide an outlook for 2017.

Gross revenues in the fourth quarter of 2016 were $63 million an increase of 49% compared to gross revenues of $42.3 million in the fourth quarter of 2015. Net revenues for the fourth quarter of 2016 were $51.1 million compared to $33.6 million an increase of 52% from the fourth quarter of 2015.

These changes were due to organic growth of approximately 8% and contributions from acquisitions closed during 2016. Gross margin for the fourth quarter of 2016 was 49% compared to 45% for the fourth quarter of 2015 which is the result of our continuous efforts to reduce the use of sub-consultants.

EBITDA for the fourth quarter of 2016 was $7 million, an increase of 35% from $5.2 million in the fourth quarter of last year. Net income in the fourth quarter of 2016 was $3.3 million an increase of 23% compared to net income of $2.7 million in the fourth quarter of 2015.

Fourth quarter 2016 adjusted diluted earnings per share which is earnings per share excluding the impact of amortization of intangible assets was $0.44 per share versus $0.41 per share in the fourth quarter of 2015. Fourth quarter 2016 GAAP diluted earnings per share was $0.31 versus $0.33 in the fourth quarter of 2015.

Our fourth quarter 2016 adjusted and GAAP earnings per share reflects the weighted average shares outstanding of 10.5 million shares for the three months ended December 31, 2016, compared to the weighted average shares outstanding of 8 million shares for the three months ended December 31, 2015.

Included in the weighted average shares outstanding for the fourth quarter of 2016 is the impact of approximately 2 million shares issued during our secondary offering in May 2016. Now, we will review the results for the full-year 2016.

Gross revenues for the full-year 2016 were $223.9 million, an increase of 45% from $154.7 million for the full-year 2015. Net revenues for the full-year ended December 31, 2016, were $181.5 million compared to $122.5 million, an increase of 48%. Our organic growth for the full-year ended December 31, 2016, was 5%.

Gross margins for the full-year 2016 was 48% compared to 44% for the full-year 2015 which is the result of our continuous efforts to reduce the use of sub-consultants. EBITDA for the full-year ended December 31, 2016, was $24.6 million, an increase of 43% from $17.2 million for 2015.

Net income in the full-year 2016 was $11.6 million, an increase of 37% compared to net income of $8.5 million in the full-year 2015. Full-year 2016 adjusted diluted earnings per share was $1.53 per diluted share versus $1.41 in the full-year 2015. Full-year 2016 GAAP diluted earnings per share was $1.22 versus $1.18 in the full-year 2015.

Our full-year 2016 GAAP and adjusted earnings per share reflects the weighted average shares outstanding of 9.5 million shares for 2016 compared to weighted average shares outstanding of 7.2 million shares for the full-year 2015.

Included in the weighted average shares outstanding for 2016 is the impact of approximately 2 million shares issued during our secondary offering in May 2016. At December 31, 2016, our cash and cash equivalents were $35.7 million compared to $23.5 million as of December 31, 2015.

The increase in cash was due to $47.1 million in net cash proceeds from our secondary equity offering in May 2016 offset by $45.8 million used for acquisitions in 2016. During 2016, we generated $15.2 million of cash from operations compared to cash from operating activities of $6 million for 2015.

At December 31, 2016, we reported backlog of $220.8 million compared to $155.3 million as of December 31, 2015. Our backlog is an estimate of revenues to be recognized over a rolling 12-month period. Now moving on to our outlook for 2017. We are initiating 2017 guidance for revenues and earnings per share.

We expect full-year 2017 total revenues to range from $302 million to $316 million which represents an increase of 32% to 39% from 2016 total revenues. We further expect a full-year 2017 GAAP earnings per share will range from $1.53 per share to $1.65 per share compared to a $1.22 per share for the full-year 2016.

We expect full-year 2017 adjusted earnings per share will range from $1.93 to $2.05 per share. This guidance does not include any anticipated acquisitions for the remainder of 2017. This completes our prepared remarks and now we would like to open the call for your questions..

Thank you, sir. [Operator Instructions]. Our first question comes from the line of Jeff Martin of ROTH Capital. Your line is open..

Hi Dick, hi Mike, how are you?.

Hey, Jeff..

Good afternoon..

Dick, is there a way to quantify the revenue impact of rain and flooding in the Western U.S.

in the fourth quarter?.

It was a lot. I think we lost between our California operations which represent about 35% of our revenue and our Washington operations through the Hanford Group that's the Dade Moeller we probably lost at least seven full working days..

Okay. You have a percent --.

I like may be in a way to --.

Is that a dollar revenue?.

Yes, okay let me say in a graph. We really had a good fourth quarter as far as revenue.

Notice that we have had 8% organic growth in the quarter and we feel that if we would have been able to realize the not having an impact of weather we would have had closer to 11% organic growth or probably adding another $5 million or so in revenue for the quarter alone..

Okay, that's helpful.

And will that work all, you picked up in the first quarter or is that going to be spread out over?.

It's as the weather goes, it's delayed, it's being pushed -- it's being pushed further.

We are having better weather of course up at Hanford and we have had some rain of course we had some rain in January and February and thankfully because of the filling the reservoirs, or getting the reservoirs and rain backup, but we had some delay but we are catching all of it.

We are not losing -- we are not losing any of that work the backlog is just getting pushed forward..

Okay.

And then are you able to divulge how many contracts that covers or may be how many projects that covers?.

As associates, Jeff, I can't get -- I can't dial down into the smaller contracts but the public works, our transportation group and our infrastructure group really had some significant delays and so I can really quantify that and but those tend to be larger projects, so I can't give you the exact number of that.

The Hanford site which is a significant contract for us on the radiation remediation site for Dade Moeller that was one specific contract that was shutdown for at least two or three full days..

Okay.

And can you give us an update on New Jersey how those projects are progressing and how they progressed versus your expectation in Q4?.

Well you know they are smaller and larger projects but it was up to 66 projects that were delayed. They are all back on but they are slowly coming on and then so it's kind of a mixed blessing Jeff, if they were just all trying to ramp up and catch-up immediately then we would be having to support some of those projects on an overtime basis.

And so now that is being extended we are still able to get the gross margins that we are expecting on the projects because they are being extended through. So they are being blood into it, maybe they will start to fully catch-up by the third or fourth quarter of this year..

Okay.

And then I would imagine the impact from the weather in the West on West Coast had an impact on margins and looking at EBITDA margins versus last year they were down a little bit, since some of that is tied to some cost that you weren't able to necessarily rid of during the time that those days were lost?.

Yes, that is we have most of our people are license professionals and their promoter people are salary professionals. So obviously if we are going to self incur their salary and their cost even though we may not have the revenue at that period of time to cover their costs.

So again I'm very pleased that the organic growth and we had a strong fourth quarter and you will notice also that although the organic growth was 8% in the quarter, we only had 1% organic growth because of those delays in the third quarter, so that's what, so those are things that we had to catch-up.

So I'm not thinking 5% organic growth for the year, as a trend that was kind of a one-time situation because of the project delays..

Okay.

And then could you speak to the acquisition pipeline, what you're seeing in terms of multiples specifically and then collective opportunities versus what you are seeing over the last three years?.

Well I'm knocking on wood right now which is my head but I think we have so many opportunities and we feel very comfortable with the acquisition pipeline. We have a number of deals and the deals are now tending to be larger.

As far as valuation it still is that historic multiple that we are looking which is multiple of EBITDA that has not raised, that has not gone up at all and certainly not significantly at all even with a larger acquisition.

What I did Jeff if I took, I asked our people to go back on 21 acquisitions that we have done, actually 22 acquisitions that we have done over the years, we went into most of those on an average paying of six times trailing EBITDA and then looking back with our synergies and we look at all of those acquisitions we made, we paid 4.2 times.

So that seems to be steady, our synergies and scalability continues to work. So I think we are comfortable with the EBITDA margins we are projecting and I think as we add revenue, you are going to see more and more scalability with the company..

And then, last question Dick is your $600 million objective for 2020 what kind of acquisition revenue should one expect to be layered in, you did about $125 million or so by my tally of acquisition related revenue in 2015. You obviously don't need to keep that pace up to get to that objective of $600 million.

Just wondering on what your thoughts are in terms of how you layer that in over three years?.

Good question, good question and as you push out further of course we don't have that gift of processee but our team we came up with 620, we came up with a 620 number and I asked our management team and this was at our Annual Meeting last year, let's think about what's going to be acquisitions and what's going to be organic growth.

And it looks like almost 50:50. We are so very conservative on the acquisitions and then we are looking at compound annual growth which is really pretty conservative too. But we are looking at may be $145 million to $150 million in acquisitions and the rest from organic growth.

So that's and obviously if we did $122 million last year that's pretty conservative over a three year period of time. So we feel pretty comfortable with the 600 run rate and not so dependent on the acquisitions in that 600 or less we had, as we had in our goal of 300 million goal of 2016..

Okay, great, thanks. Congratulations on a good year..

Thank you. Thanks, Jeff..

Thank you. [Operator Instructions]. Our next question comes from the line of Ryan Cassil of Seaport Global. Your line is open..

Good afternoon gentlemen..

Hey Ryan, how are you?.

Good, thank you.

I guess may be just first you were just kind of talking about acquisitions and you mentioned deals skewing a little bit larger, could you give us a sense for kind of what that means, are they more kind of $20 million to $30 million sales range or are these kind of larger than ones that you -- we have seen in the past? Any color will be great..

Well you know Ryan and we like that label. But we are known as the company that does that smaller deals and smaller deals to the market is probably $15 million and under. And so we are starting to see deals in the range much more the bottom-line is growing.

The projects that we are considering now and when we started $1 million to $3 million was the bottom-line range that's creeping up over $5 million or so in revenue. And then the up the other larger ones tend to be closer to $50 million and above.

So that's kind of the pace that we are seeing now in that $5 million to $50 million and that's what we probably have on our place right now. We are certainly in solid due-diligence with our phone is ringing all the time and we're in really good position because of the -- because of our cash flow and because of our existing lines of credit.

So we're not looking to do any equity raises to at all to make these acquisitions. And so I would look very active in the range of $5 million low-end, $50 million above high-end..

In sales that's --?.

In revenue, yes. In revenue, right..

Okay. And in the past you talked about sort of other verticals out there but you have also mentioned strengthening the verticals that you already have in sort of broadening your reach inside of things that you already do.

What are you seeing there in terms of what's the market presenting where the opportunities? Are you seeing those developments in the water market or there more opportunities sort of in your five verticals to really strengthen the offering there?.

Well, we have always been in the water space but it's house inside our infrastructure group but we really looking for the opportunity to grow that business and grow that business either through infrastructure or grow that business through a separate vertical and you will see some specialty and look for going forward some specialty service lines that we are doing within the water group whether that grows into an independent vertical, we will see.

We -- our overall strategy is high margin EBITDA business with high barriers of entrée. So we really are looking for great opportunities now in the environmental space that will really support the work that we are doing in infrastructure.

So I would look for some -- look for us to approach opportunities in the environmental service space that's really in the more environmental planning, environmental program management space that would really speed into our existing infrastructure group.

And then in the other verticals we are still looking and we are having these opportunities and we have a great opportunity to be selective. And we are looking for high barrier of entrée, high margin EBITDA business.

And then I would also look into now as we see the economy really saw moving forward, we are probably looking for something in the private sector that will ducktail and support our infrastructure group. And I think I alluded this some of that in my opening remarks..

Okay, great. You mentioned the good margin businesses, your sort of sub-contractor cost crept down; I think you are at 17.6 for the year that was north of 20% in 2015.

Do you expect you can keep making progress on that in 2017, sort of reducing those cost rate or as a percent of gross revenues any sense for kind of where that shapes out in 2017?.

Well it's going to depend more on the macro service mix.

If we really see this opportunity and so I will give you an example, we see the wonderful opportunities to JBA which is privately predominantly private client not a tremendous need to for sub-consultants if we can do that work in-house, not an outside push requirement from public agency that say a certain amount of your business has to be with MBE to DBE firms.

So as we move our mix and if we see the economy moving in that direction as we move our mix more to the private sector, we will tend to lower the amount of sub-consultants. If we have more and more public sector work well then it's going to be pretty tough to get too much under 20% in minority business.

But as long as we are having more and more opportunities in the private sector then we are not going to have to have that mandated sub-consultant requirements..

Okay.

I guess based on what you can see today, do you see that holding relatively flat at 2017 versus 2016 or is that moving north?.

We don't anticipate it going up that's for sure, we want to -- we don't see it going above 20%. And hopefully if we think the market is going in the direction that we would that we are positioning ourselves we would hope that would be under 20%..

Got it, okay. And then just kind of thinking about the backlog growth your sales outlook feels like we are kind of going back towards that near double-digit organic growth range for the full-year.

Could you just give us a sense how the year plays out for may be first half versus second half, do you plan to maybe able to catch-up your from some of the events in the third and fourth quarter that makes growth faster in the first half and you end out in the back half or any sort of color on the cadence of growth for the year would be great..

Let's talk about historic, historically our first quarter of the year and our fourth quarter of the year is usually our slowest and that's why we are so encouraged with our fourth quarter this year. But historically that's it, that's weather-related.

So I think if we can find someone doing anti-rain dance and we have solid weather then we will really start to catch-up.

But look for historically and typically a ramping up of volume into the summer months and or so therefore our second quarter and third quarter it's usually and we pretty well budget it that way, that second and third quarter will be our highest quarters where the first and the fourth are the lowest.

Now we have a lot of growth, we got a solid backlog; now we just have to be able to do to do that work and may be have some work that's not so weather-related or dependent. So organic growth, I think we are anticipating somewhere between 8% and 10% organic growth for the year, we think that's pretty solid.

Double-digits in organic growth is something that we would certainly strive for but I would think that conservatively 8% to 10% organic growth is something that we would we are budgeting for..

Okay.

Now you are dealing kind of incremental weather impacts in the first quarter, so maybe that it takes up through the remainder of the year or have you seen some kind of balanced weather trends I guess probably still wet on the West Coast but maybe little better on the East Coast?.

Yes, I think that, that's a nice thing about having multiple offices in that. You are never going to have every single office meeting are exceeding budget, you are going to have some under but then you are going to have some exceeding budgets.

So I think this, I really don't see a whole lot different in our historic trend look for the first quarter we budgeted it for to be under in revenue, I think we will that's our budget and then look for the ramping up of volume in business throughout the year and that really overall and over the years that hasn't really changed too much..

Thank you. Our next question comes from Jayant Ishwar of Singular Research. Your line is open..

Thank you. Good quarter..

Thank you..

I had a question more on the expense side, Q4 expenses ramped up quite a bit from Q3 is that one-time or year-end bonuses can you give clarification on that?.

Jayant a few things happened in the quarter. If you recall we had four – three acquisitions in the fourth quarter that being JBA, Civil Source, and Hanna. Those came along with the obviously acquisition costs approximately $800,000 we spent just in the fourth quarter in acquisition-related expenditures. So that caused an increase in the fourth quarter.

Also included in our operating expenses is the intangible amortization expense, when you look at that that's doubled from the year before on a quarter-over-quarter basis. So it's just when you start looking at some and there is also as we bring in the new acquisitions there is still some scale that we got to go through.

We had some duplicate offices that we're still working through as we go through the integration costs on those acquisitions..

Second question is more strategic is kind of you're trying to get more into the commercial end of the business and leverage your experience of the government side, however the big opportunity this year and next comes from the trillion dollar governmental infrastructure business.

So are you shifting away from the area that is going to be very lucrative for the next two years and have divided attention?.

No, I think we can multi-task. I think we can do both but I think it's really a misnomer to understand how the impact of the infrastructure bill is going to come about. It is going to require a significant lead time and let's say what that lead time is to get those funds.

There is an application required; there is plans which we certainly help with both applications plans specifications required, then it's going to bid.

So the very first phase of our opportunity in the public side is more in the define, more in the infrastructure which is the lower margin piece, then once bids are let and then the contractors of the construction, you are looking 18 months down the road. And so we have positioned ourselves to be first in the design piece and the other piece.

But in the meantime we are not shifting in any way but when opportunities of solid business is going to introduce us and strengthen our platform and if a piece of that mix is private, if it continues to be public fine where they are, so it's not, I don't want to give you the impression that we are shifting away from something, we are being optimistic because as our platform densifies we have the ability to enter different markets and opportunities and so that's been the focus of NV5..

Thank you. Our next question comes from James Henninger [ph] of NV5. Your line is open..

Hi Jim..

Hi, Mr. Wright. How are you folks doing today? I have got my winders on today, I'm asking kind of a short-side question, so with today's report there is lot of really positive metrics and except and including and exceeding previous said expectations so that's all real good.

And so with those good increases in the metrics and the results, I'm kind of concerned about the erosion of stock price let's say last two-and-a-half weeks going from roughly 40.80 down to I think it was 35.75 or 35.77 today is around 11% or 12%.

So I'm trying to figure out what's driving that and what's the expectation the best you can tell anyway for say the next couple of months or where we go from here?.

Well Jim, thanks. Once you figure that out please let me know. So I think --.

Yes, I will start giving on my own..

I think -- let's say that -- let's say folks Jim you are great engineer, you are doing that engineer work. We are people that we are engineers; we are professionals for people that run our business.

So what we can deliver for our shareholders is that we want to be profitable, you will see that increase in gross margins, we want to be -- we want to have organic growth, we want a stable business and more so not so much for what and we love our investors what the market thinks but it's for us to give opportunity for employees and for all our people.

So we're going to continue our best, we are going to run a, we are going to try our best to run a good business, solid clients, strong backlog, organic growth, and you know what eventually the market recognizes that and the market recognizes one way or the other. There are short-term investors, there are long-term investors.

So what we try to do is just a focus on our business and then the price of the shares and the market will level out to whatever direction that's going to go.

But I know this, if we run a good company we cash flow, we have a solid balance sheet, we have organic growth, we are in the right markets at the right time eventually our -- the investors in the street recognizes that and that's about the only thing I could probably say, Jim..

Thank you. At this time, I would like to turn the call back over to Mr. Wright for any closing remarks.

Sir?.

Well thank you, thanks everyone and I really say this sincerely. We really appreciate the wonderful group of investors we've had and more so our employees, we have a great group of people, I say that we can compete in the market when we have a flat organization an organization that can support our people, so that they can support our clients.

So we continue to stay focused in the space we're in, we understand that the organic growth required in our verticals and we are going to stay focused one foot in front of the other and what we know and the space we know and the business that we know and look for opportunities.

So I want to thank everyone for -- everyone who has been listening all of our investors, all of our shareholders, all of our key employees for the support we have had in having a great year for NV5 and I'm very enthusiastic and very upbeat about 2017 and the opportunities in front of us. But the key thing is we just have to stay focused.

So I want to thank everyone for your interest in the company and we will look forward to speaking to you in the -- at the end of the first quarter. Thank you everyone..

Thank you, Mr. Wright. Thank you, ladies and gentlemen for your participation. That does conclude your program. You may disconnect your lines at this time. Have a wonderful day..