Good afternoon, everyone, and thank you for participating in today's conference call to discuss NV5's Financial Results for the Second Quarter of 2021. Joining us today are Dickerson Wright, Chairman and CEO of NV5; Edward Codispoti, CFO of NV5; and Richard Tong, Executive Vice President and General Counsel of NV5.

I would now like to turn the call over to Richard Tong..

Thank you, operator. Welcome everyone to NV5's second quarter 2021 earnings call. Before we proceed, I would like to remind everyone that today's discussions contain forward-looking statements about the company's future business and financial performance. These are based on management's current expectations and are subject to risks and uncertainties.

Factors that could cause actual results to differ materially from those statements are included in today's presentation slides in our reports on file with the SEC. During this call, GAAP and non-GAAP financial measurements will be discussed.

Reconciliation between the two is available in today's earnings release and on the company's website at www.nv5.com. Please note that unless otherwise stated all references to second quarter 2021 comparisons are being made against the second quarter of 2019.

In this presentation NV5 has included certain non-GAAP financial measures as defined in Regulation G promulgated under the Securities Exchange Act of 1934 as amended. The non-GAAP financial measures included in this presentation are adjusted earnings per share, adjusted EBITDA, and adjusted EBITDA margin.

NV5 provides non-GAAP financial measures to supplement GAAP measures as they provide additional insight into NV5's financial results. However, non-GAAP measures have limitations as analytical tools and should not be considered in isolation and are not in accordance or a substitute for GAAP.

In addition, other companies may define non-GAAP measures differently, which limits the ability of investors to compare non-GAAP measures of NV5 to those used by peer companies.

A webcast replay of this call and its accompanying presentation are also available via the link provided in today's news release and on the Investors section of the company's website.

We will begin the call with comments from Dickerson Wright, Chairman and CEO of NV5, before turning the call over to Edward Codispoti, Chief Financial Officer, for a review of the second quarter of 2021 results. Dickerson Wright will then provide closing comments before we open the call for your questions. Dickerson, please go ahead..

Thank you, Richard. And thank you to everyone who's joining us for NV5's second quarter 2021 conference call. Let's start by turning to slide 5. We are pleased to announce our record performance in the second quarter, delivering the highest gross revenues, net income, adjusted EBITDA and adjusted EPS since our inception.

As a result of the NV5 business model we generated $180 million in revenue, $34 million in adjusted EBITDA and $1.34 of adjusted earnings per share for the quarter, exceeding analysts' expectations.

GAAP earnings per share increased 153% from $0.36 per share in quarter two, 2020 to $0.91 per share in quarter two 2021, an increased share count of approximately 15 million shares compared to $12.6 million shares in quarter two, 2020.

Adherence to our business model resulted in margin improvement due to our focus on high growth, high margin businesses and our continued scaling of the service platform, which we will further discuss in slide 7. Our cash position continues to strengthen with approximately $113 million in cash on hand.

It goes without saying all of our employees contribute to these record results for NP5.

Our backlog and pipeline of opportunities identified across all of our verticals including business that were impacted by the COVID pandemic, such as industrial real estate transactions were strong and we can anticipate this continuing throughout the balance of the year.

As is everyone, we are also monitoring developments in the Federal Infrastructure bill, which would also provide tailwinds for our business. We strengthen our environmental Health Sciences vertical in quarter two with the acquisition of PES environmental. We also had multiple potential acquisitions currently in due diligence.

We continue to maintain a robust M&A pipeline consistent with our acquisition strategy; we are targeting companies with high growth, high margin service offerings, and firms that have a high barrier to entry. This will strengthen our platforms. PES was our fourth acquisition of 2021.

Based upon the strength of the M&A pipeline, we anticipate additional acquisitions in the second half of 2021. As a result of our record performance in the second quarter, and the momentum that we see entering the second half of the year, we are raising our guidance for 2021.

We have raised our gross revenue guidance from between $695 million and $720 million to a low of $705 million to $727 million, increased our GAAP EPS guidance to between $2.45 a share and $2.84 per share, and increased our adjusted EPS guidance to between $4.20 and $4.55 per share.

Please turn to slide 6, NV5's positive adaptation to uncertain market conditions resulted in business acceleration. And we anticipate our strong performance to continue through the second half of the year.

We saw increased volume in our Northwest and South East infrastructure businesses due in part to our ability to provide design work remotely in New York City and increased Transportation and Infrastructure business in the southeast.

Our testing and inspection and consulting vertical grew, and we expanded our traffic Service Group from just the southeast to a nationwide platform. Utility Services continue to be one of our fastest growing sectors as utilities expanded investments in LNG capacity, grid monetization, reliability and fire mitigation.

Our Geospatial volume improved in quarter two 2021. And we secured a number of awards in the commercial state and local government groups. Expect continued improvement in the federal government sector in the second half.

Finally, we brought more of our work and data acquisition and analytics in house, reducing these sub consultants, resulting in lower gross revenues and increasing net revenues. Our energy efficiency and international businesses delivered excellent results in the quarter with 93% total growth and 23% organic growth versus the second quarter of 2020.

Our environmental vertical grew 71% when compared to the second quarter of 2020. And our environmental transactions business delivered the strongest quarter in its history, which reflected 131% increase over quarter two 2020. The acquisition of PES Environmental strengthens our environmental compliance capabilities, particularly in water.

We've seen improvements in the hospitality, education, industrial segments that are building businesses support and saw increases of 52% for sustainability service and 39% for commissioning services over quarter two last year. Our mechanical, electrical, plumbing and fire protection design business improved despite supply chain disruptions.

Going to slide 7, we have highlighted our business model, which is built upon four pillars that drive our growth and margins, which exceeded the industry average. This unique business model allows NV5 to adapt to changing market conditions and continue our growth trajectory.

The first pillar is our focus on high growth segments, targeting segments with rapid growth such as utility services, infrastructure, and ESG which resulted in NV5's increased market share taken from our competitors. The second pillar refers to our high margin service mix.

High margin offerings such as terrestrial and oceanographic geospatial technologies and subscription based energy efficiency services, complement our traditional engineering appliance services, and drive margins that exceed those of our other firms in our space. The third pillar of our business model is mergers and acquisitions.

Mergers and acquisitions continue to play a vital role in our growth strategy. And the maturity of our platform allows us to be selective in the acquisition targets that we choose to pursue. We focus solely on those companies that will strengthen our platform and operate in higher barrier to entry sectors. The fourth pillar is scaling and synergy.

The integration of our acquisitions allows us to fully extract synergies of newly acquired companies through cost efficiencies of our shared service model and commercially through a single NV5 brand.

Cross selling across verticals allows us to bring work in-house at higher margins and subcontracting and enables communication across verticals to create a sense of inclusion across the organization, technology also provides synergies. Our IT systems allow us to work remotely limiting geographic restrictions.

One result of this investment is the ability to offshore geospatial data analytics and MEP designed to improve margins. Resources can also be shared across geographies, helping to maximize utilization and supports continuity of operations by allowing us to adapt to changing market conditions.

On slide 8, we have highlighted some of the macroeconomic factors that affecting our business, including public sector funding. The $350 billion for state, local, tribal and territorial governments in the 2021 American Rescue Plan Act is helping to replace public revenue loss during COVID.

Grant applications opened in May for the stimulus funding and it'll help you shore up the budgets of many municipalities and state governments. As for the proposed infrastructure bill, we're monitoring the developments in positioning NV5 to benefit from a bill, if it is signed in the coming months, would certainly be a tailwind for our business.

In the major markets that we serve, including infrastructure and utilities continues to be strong. Our municipal and state government clients have healthy budgets and should benefit from additional federal funding.

Investments in aging infrastructure, not discretionary, and environmental concerns such as the fire mitigation continue to grow in importance for utilities and public sector clients. The federal government has made progress in moving forward with a backlog of contract awards that were delayed due to the change in administration.

In particular, we expect federal geospatial awards to increase in the second half of the year. In the private sector, industrial, real estate transaction services are performing at a record level. And we have also seen increase in activity in the segment for our buildings and testing, inspection and consulting business.

I will now highlight PES expansion of our environmental platform on slide 9. PES Environmental engineers and environmental scientists provide site assessment of water resources environmental permitting, and compliance and litigation support services. PES also brings additional capabilities in water resources, groundwater and stormwater management.

Waters become a growing part of our business and we expect to continue growing our water capabilities in the core business and geospatial businesses. We believe that environmental sustainability is a growth opportunity for NV5. PES also strengthens our capabilities in ESG. On slide 10, I will touch on our dedicated focus on ESG.

Environmental Sustainability is a common thread that runs through all of our verticals. We have completed more than 300 sustainability centered projects from renewable energy and energy efficiency, the sustainable infrastructure. NV5 has also been active member of the Harvard Graduate School of Design Advisory Board sustainability and infrastructure.

We've been members for 10 years, and our employees maintain licensing accreditation to stay ahead of the curve on sustainable solutions to serve our clients. From a social perspective, NV5 has a strong focus on undertaking projects that benefit the communities where we live and work.

As an engineering and consulting business that supports the infrastructure that improves lives, one can say that all of our business is ESG related. However, our governance makes diversity, inclusion and integrity, fundamental to our values, and we believe in driving change through this action.

Our code of business conduct and ethics drive the importance of ethical behavior throughout our organization. The focus on diversity and inclusion is driven by management, and our leaders drive initiative to support our talented and diverse workforce. We are aligned.

We also support a number of organizations including the National Society of Black Engineers to support students who aspire to enter the fields of engineering and technology. On slide 11, you will see we have built a strong backlog of $603 million.

This backlog only reflects our rolling 12 months, and it represents over 80% of our revenue guidance for our 2021 budget. This is a healthy backlog for the remainder of 2021 and entering 2022.

We secured a number of significant awards in the second quarter, including utility services and infrastructure and geospatial and buildings and program management and the pipeline is strong for additional large wins in the second half of the year. On slide 12, I will give an update on our cross-selling program.

Year-to-date, we have complete $14.1 million in cross sales between verticals. And we're on track to meet our 2021 goal of $31.2 million. We've seen an increase in our cross-selling of technology services such as drone based geospatial to support our surveying groups, and an increase in cross sales between the core business and geospatial business.

We also anticipate additional cross-selling opportunities from our newly acquired firms. On the right hand side of the slide, I will highlight some of our recent key wins.

Our LNG business continues to secure it significant contracts, and last month they won a $16 million contract to upgrade the liquefaction infrastructure at a Northeast utility’s liquefied natural gas facility.

Our utility services vertical also secured a $9 million in surveying contract, permitting and technical services to support the construction and maintenance of the California Utility's electric and gas infrastructure.

Our geospatial group won a forestry contract in Alaska to provide imagery of two national forests in the City of Fresno in California awarded NV5 a $6 million contract to provide a program and management services for a major connector road and interchange in California Central Valley.

Our international businesses perform very well in 2021 securing a $5 million contract by the Hong Kong Hospital Authority to provide engineering services for hospitals and outpatient centers in the Hong Kong Island West Region. I will now hand the presentation over to our CFO, Edward Codispoti to provide an overview of our Q2, '21 performance.

Ed?.

Thank you, Dickerson and good afternoon, everyone. If you will please turn to slide 14, I'll review our results for the second quarter of 2021. As Dick mentioned, we had a record second quarter as our gross revenues increased by 10% compared to last year. We also achieved record adjusted EBITDA of $34.2 million for the quarter.

This represents a 27% increase over last year. Adjusted EBITDA margins in terms of revenues generated by employees increased to 27.1% compared to 22.1% last year. This is a 500 basis point expansion.

And if we look at adjusted EBITDA margins as a percentage of gross revenues, our adjusted EBITDA margin expanded to 19.1% from 16.6% last year, a 250 basis point expansion. Our adjusted EPS for the quarter was also a record as we generated $1.34 per share, compared to $0.93 per share last year, a 44% increase.

We had particularly strong results from our power delivery and utility services business units, which increased 35% and our real estate transactional services which increased to 131% after having been affected by the COVID pandemic last year.

Our geospatial vertical was down about 3% this quarter when compared to last year as a result of contract delays. However, we anticipate a stronger second half of the year for this vertical.

With respect to our earnings per share, there are quite a few drivers that have contributed to our increase in profitability, including our top line growth, as we have previously described, the scale achieved through our unique business model and operating efficiencies achieved through our investment in technology.

We also saw a reduction in our interest expense as a result of our pay down of debt and a reduction in our effective income tax rate from 31.3% to 19.7%. And please keep in mind that the effective rate in the second quarter is not representative of our full year effective tax rate, which typically is in the mid 20% range.

It's also important to note that the increase in adjusted earnings per share occurred despite 15 million diluted shares outstanding this quarter, compared to 12.6 million shares outstanding during the second quarter of last year.

If you would please turn to slide 15, I'd like to draw your attention to the strength of our balance sheet and the savings we've been able to generate as a result of our focus on paying down debt. As you can see, our net leverage has come down to half a term as of the end of the second quarter compared to 2.8x last year.

This has resulted in considerable savings in interest expense as we reduced interest expense by 64%, a savings of $2.8 million for the quarter when compared to last year. On top of this low net leverage, we were able to close the quarter with a strong cash balance of $113 million.

We believe the strength of our balancing positions as well for future growth. With that said, I'll turn it back to Dickerson Wright for some closing comments..

Thank you, Ed. Let's turn to slide 17. As we look toward the second half of 2021, we believe that we are poised for growth as a result of our strategy and business model, and we remain flexible to take advantage of the ever changing market. We're entering the third quarter with a record backlog and the pipeline of new opportunities is strong.

We chose the investments in reliability, safety and fire mitigation, continue to grow. And the strength of our municipal and state government budgets is expected to free funds for additional infrastructure investment. We expect the high volume of real estate transactions to continue.

And we believe that the turnaround of the hospitality industrial sectors will continue to progress. On the M&A front, we have multiple potential acquisitions and due diligence. And we expect to close additional acquisitions in 2021. The pipeline for M&A is strong, and we continue to identify new acquisition opportunities to build our platform.

Finally, we are optimistic about the progress of the Federal infrastructure bill. While we're not depending on a bill being passed, it would be a tailwind for us that would impact all of our verticals positively.

Based on our record performance in the second quarter, and our position, entering the second half of the year, we're increasing our guidance for 2021 full year gross revenues to between $705 million and $727 million, and our 2021 adjusted ETS guidance between $4.20 and $4.55 per share. This completes our prepared remarks.

And now we'd like to open the call for your questions. .

[Operator Instructions] First question we have Christopher Moore from CJS Securities..

Hey, good afternoon, guys. Nice quarter. So backlog record $603 million.

Are you seeing lead time stretched at all on some projects, kind of more than typical, given the environment?.

We have not seen, thanks, Chris, for the question. We have not seen anything that in the core business that is unusual. However, there have been some delays in the federal funding on our geospatial business. And that's mainly because of administrative delays.

And so that's the only stretching out that we have seen in the project is really not so much in the core business but more in our geospatial services..

Got it, it's helpful. Q4 is typically the softest quarter of the year.

Is there any reason to think that pattern would be different this year, is there any ketchup in Q4 on certain products or anything like that? How should we look at that?.

Well, Thanks Chris. Normally Q1 is our slowest quarter. And Q4 is very, can go a number of different ways. If we have good weather, then projects will continue. We have rules that we will adjust them and there'll be certain tax rates that will have an effect.

But it's really more difficult to predict where we'll be in Q4, because a lot of that is start to become weather related. And there are two holidays in that quarter that also impact the revenue..

Got it, it's helpful. Just last one for me hearing lots of talk about utilities, burying power lines, especially on the west coast to minimize the impact of fires.

Is that something that you're hearing much about and does it prevent -- present mostly an opportunity for you guys?.

Thank you, Chris. Yes, we are hearing. Not only are we hearing a lot about it, but we have been key utilities in the West that we've dealt with is most mainly PG&E and we've had meetings and we're starting to use that relationship.

And we are so far ahead of normally the curve what we're doing for San Diego Gas electric, PG&E is just starting on their burying of the utilities and we look at become an embedded very good resource for providing that. So it looks like a very good opportunity for us. Now we hate to see with a virus the way they are.

But it seems like the utilities now are starting to bury the local transmission distribution lines. Of course, it's, the major big transformer lines cannot be bury, but it's mostly the local ones that NPG is starting to do that now. And we're positioning ourselves to do this work..

Next question we have Robert Brown from Lake Street Capital..

Good afternoon.

I think you talked a little bit about the pipeline building and sort of extending the strength you saw in the second quarter, could you give us a sense of sort of the size of some of the pipeline activity that you're looking in the back half? And how you sort of see pulling out?.

Pipeline, are you speaking of a physical pipeline or pipeline of opportunities in the backlog?.

Yes, sorry, I am talking about the pipeline of new contracts that you're pursuing..

Yes, I think we are very encouraged about the amount of activity that we're seeing, we're seeing an increase in opportunities. And, of course, it's always we are fighting the same thing as any other technical service provider. And that is the staffing requirements to do this work.

But we see a very strong uptick in infrastructure; we see it in all regions of the country. And we also see a very strong uptick in our conversion of utility work versus the conversion, of course of overhead utilities to underground utilities that seems to be wider.

That's increasing and with particularly with some of our clients, so utility clients in the West, and then also on the smaller utilities that are converting from natural gas to LNG, we see expanded opportunities there.

The other area we're seeing, and at first it was unexpected, but we really positioned ourselves nicely for this is the transactional real estate market, which is really going strong. And we don't spend much time on the residential as much time in the residential real estate.

But we do see a tremendous amount of REIT activity and portfolio activity and industrial real estate that we expect to see a real growth in that area. One more thing, Rob, that kind of spills over to usually whenever there is an improvement in transactional work for real estate, it helps the utilities and so municipalities.

And so the municipalities, also we look for expanded opportunities there. And that's all mentioned in the concluding comments; I think we will help our utilities to position themselves for funding with this infrastructure bill that has just passed today..

And that was my second question, the infrastructure bill, how does that sort of flow into your business? How long does it take to show up? And does it help in certain areas? Or does it show up in an overall improved organic growth rate?.

Well, I think the first benefit we will see in the infrastructure bill is the application for funding. But the actual construction and building permit, we are seeing permits go up as long as eight years to, so it's really going to be the permitting process that will really slow down the actual construction.

But we're trying to position ourselves now to help the municipalities to get funding. And that is for, writing helping them to right to grant helping them with the specifications of the actual construction, that's going to be dependent on the permitting process. So normally, the smaller projects will go quicker than the larger projects..

The next question, we have Andrew Wittmann from Baird..

Okay, thanks. Sorry. I just want to get some numbers right. I may have missed these during the prepared remarks, and if so I apologize. But I did want to just make sure I heard the total company organic growth rate for the quarter. I know you gave it by a couple of different segments. But I don't know if I heard the total company consolidated.

If I've missed it, I'm sorry..

The total growth in our core business was about 10%. And as I had mentioned, that there was a slight flattening or retraction in the geospatial business. So the total growth for our business at both the core and the geospatial was about 8%..

Okay, that's helpful. And then I guess, on some of the acquisitions in the quarter, because PES is the big one. Can you talk about how much that contributed maybe to the backlog? And how much any acquisitions that were closed in the quarter, including PES. And I think geodynamics is also closed in the quarter.

Can you talk about how much those contributed? Yes, the backlog, as well as anything you could tell us about how they affected the guidance for the year versus the last quarter's guidance. .

Okay, let me start with your last question first, and then Ed will give some more definitive comments on, first, very little contribution, either both in backlog or growth from either one because of the timing of the acquisitions.

One came, we got more from geo dynamics than we did, geo dynamic also had suffered a little bit from delays in federal government, so not a tremendous amount there, I think, guidance, we don't anticipate it's very, very hard for us to say what our guidance is going to be based on acquisitions, because we just don't know, when they're going to close, we just don't know what to make in as far as the time of the year and that we can count on that revenue.

For example, we may be looking at some companies with significant run rate, not trailing 12 month basis, but we may not be able to acquire them to wait in the third quarter or the second quarter. So it's very, very difficult to really bake in what the guidance is going to be.

Obviously, we have some acquisitions of pipeline, we're in due diligence on three right now. And if they close sooner than they would -- that would be in the higher end of our guidance of $727 million. And if depending on the closing of those acquisitions, they would be in the lower portion of the guidance of the $705 million.

But Ed may speak a little bit about when we closed on both geodynamics and on PES and maybe their contribution..

Sure.

So if you recall, we have four acquisitions this year, there was TerraTech, which was in late February geodynamics, late March, IDA, which is the international acquisition in mid February, and PES, which was in mid May, and combined in terms of how much revenue they represented in the second quarter, it was about $8 million or $8.5 million worth of revenue..

Okay, so I just -- I just sorry, I just want to make sure I understand this correctly. It sounds like the deals that are kind of queued up here the three deals are factored into guidance to some extent, but the timing of which could swing it around.

Is that a fair characterization, Dickerson?.

Yes, I would say this, if we probably don't do any acquisitions, and look for the lower end of the guidance, and then timing of these acquisitions will push us towards the higher end or a higher end of the guidance that we can close those sooner in the remainder of 2021..

Okay, that's, thank you, then I guess maybe my final question here has to do with the profit margins, and particularly the ones against your own worth, I think he's called against your own revenues, or what some companies would call like a net service revenue kind of metric. The 27% that's obviously very, very high.

And so I was hoping you could talk a little bit more about what drove that. It sounds like mix and utilization were probably the two biggest drivers. But I'll let you correct me if I'm wrong on that.

And I was just wondering, is there any accounting changes or close outs or things where you picked up on a one time basis, but also help the segment margins? Just I have to ask the question, because the margins were what they were..

Well, let me do what I'm good at.

I'll answer very general, and then the specific Ed will speak specifically of any changes and that we may have, you are right, it's service mix and utilization, we were really watching our utilization, we've seen some increase and is as high as 80% on the utilization on some cases, but it's actually the service mix that has been profitable.

And we should learn on what we're doing. The more that we grow, we really watched our support services to be scalable, and we really want that to be more efficient and obviously the more, the higher our volume, the more efficient we want our support services to be in legal and finance and accounting. So those all add to the improvement.

I think there was some specific changes in concerning net revenue and maybe Ed can speak to that maybe speak of is there any benefit from taxes that propelled the margin to 27%. .

Sure. And I think when we look at that margin expansion is the scale based on our business model that Dickerson was just referring to. But as you alluded to, Andy, there's also the mix of business, and particularly across our verticals.

So we had -- some of our business lines that we mentioned earlier, for example, the real estate transactional services, and environmental that tend to have a higher margin. And those performed relatively better than others in terms of their growth. And although geo came down, in terms of revenue slightly, their margins continue to expand.

And that as a result of our investments in technology, which allows us to benefit from that efficiency and those improved margins. So it's a mix of scale, our investment in technology, and the mix of business across our verticals..

And let me just add too Andy, please look at the effectiveness of our cross-selling, when we can do the work internally, it's much more profitable.

So with sub consultants, it's almost a pass through administrative costs, and we are pushing and I can tell you that the cross-selling is really growing and seated above the $14.1 million that was reported in this quarter. And that also adds to the profitability and it also affects the net revenue.

I mean, because it's work that's done internally, it's not affecting the total revenue, but it does affect what we call the net revenue. And Ed we may want to comment too, on the work performed by our employees and network, that there's an interpretation on revenue that's done by employees..

Sure, and you alluded to the reference to net revenue, so we don't use the term net revenue anymore, because there's a preference by the SEC, that we refer to a pure revenue generated by employees, so that we eliminate any mark up within some of the subcomponents so that 27% margin is a percentage of a pure revenue generated by our employees without any output from sub consultants or labor, or sorry sub consultant costs..

Next question we have Jeff Martin from ROTH Capital Partners..

Thank you. Good evening, guys. How are you? Dick, wanted to get some relative perspective on the second half improvement for geospatial specifically QSI. And then also wanted to get a sense of how the integration of geodynamics into QSI is doing as it is progressing? And maybe what, when we should see some fruits of that labor..

Okay, let me make a general comment. And then Mark Abatto is here also, and he may comment on the integration of geodynamics. And from my perspective, it's going very well, we're able to do some things that before we would have the sub out that they're doing internally, we have not, and I don't want to look for some releases.

As soon as we get an approval, you'll see some significant wins that releases from our geospatial group for the second half. And we're starting to see contracts come around that were delayed. And I think so I think you'll see that improvement.

I'm encouraged by some of the recent wins, I've seen that we have not released yet, waiting of course on client approval.

But I do think that I am encouraged by seeing the cadence of awards that are coming from geospatial in the second half of the year that I anticipate or we anticipate improvement on, but maybe on the integration Mark of Geodynamics. And how [Sloan] and Chris are doing and you may want to comment on -- have a comment on that..

Yes, absolutely. And I'll just emphasize what Dickerson had said in terms of the momentum.

Beginning in Q2, I mean, the contract awards and tasking that were delayed late last year and into Q1 are beginning to fall into place, and the geospatial of bookings in Q2 are up 30%, most notably in utility services in our state and regional government sectors.

And the pipeline is strong across all of our geospatial sectors, including federal, and we started off Q3 with $18 million in bookings in July alone, which represented about 58% increase over just a year ago.

As far as positioning for the second half, especially given the cyclical nature of the federal awards in September, which is the final months of the federal fiscal year and also we've got some annual renewals of several large utility contracts, we're very optimistic in terms of that momentum continuing into the second half of the year.

Relative to geodynamics, we've followed a process that that NV5 has employed over and over again, with its acquisitions, the integration is going incredibly well, not just in terms of some of the support services.

But in terms of how we're presenting ourselves to clients both on the utility side, and we're seeing some very positive momentum relative to renewable energy, and in particular, offshore wind opportunities.

But as well, with some of our hanker clients on the federal side, most notably, Nova, we were able to take our services that go previously, up to an including some of the shallow water in near shore areas into the deep ocean with the acquisition of Geodynamics. So it's significantly expanded our capabilities.

And that's been very well received by a number of our clients..

That's great color Thank you, Mark.

And well have you with the 2021 being moderately the suppressed year for geospatial not of any fault of your own, from this set up for a quasi hyper growth year in 2022? And if so, what kind of additional resources do you need to staff up for that?.

Well, I think your characterization is probably accurate in the sense that we've seen timing delays. But in terms of the macros that are driving growth or we expect to drive growth in geospatial they're as strong as ever.

And I think that that goes, that speaks to just the core dynamics, and not even withstanding some of the tailwinds from the infrastructure bill. So I do think that the momentum that we're seeing here in Q2 and into the second half bode well for 2022 and a stronger backlog heading there.

I think that one of the benefits that we have, in terms of our traditional investment in technology and software and machine learning and developing capabilities and AI are allowing us to expand our capacity without necessarily having to invest proportionately in resources.

So in other words, we're able to do more with less that said we've got a strong pipeline of talent through the university systems that we partner with.

And I think we've got a very good perspective in terms of the technology that we'll need to, to have access to in the coming years in order to maintain that leading edge relative to efficient operations. And so I think that we're built to do this, and we'll continue through 2022 and beyond to stay on that leading edge technology. .

Next question we have Lisa Springer from Singular Research..

Hi, congratulations on a very good quarter.

You mentioned during your remarks about hospitality business, you've seen some improvement, but how is that tracking compared to pre COVID levels? I mean, how much recovery is left to be done with that business?.

Well, there's a lot of room for recovery. I mean we can really see an opening of -- in the hospitality network in our program management group and in our in the casino related business, but with a Delta variant there's a been a little bit of a setback, but we were awarded a very significant project in Las Vegas on the new, very large casino project.

So we look at that business to do better than if it hadn't been pre, post COVID. And we'll get back to where we were pre COVID. .

Next question we have Marc Riddick from Sidoti..

Good afternoon. So I was wondering, first of all, there's certainly quite a bit going on as well. I was wondering if you talk a little bit about maybe how the pace of order flows.

Is this something that built through the quarter and coming out of the quarter, was certainly there seems to be, there has been communicated good amount of positivity, and obviously, that was part of your guide.

But I was wondering if you could talk a little bit about the order flow pacing of what you saw, and sort of how that ran throughout the quarter..

Well, I think Marc and hopefully, in the concluding remarks, you'll see another slide that we added that really showed not only just the comparison of what we were doing first, last year, which was COVID related, but also where we were in 2019. And we'll have that slide; we could probably mention it now and show the cadence of business.

So overall business is very good, very strong. The order of business is we see that strongest, stronger than ever, but obviously staffing and getting good engineers and getting people to staff, it's a nice problem to have. But we have a tremendous amount of work. And we can see it much stronger than it has been in the past.

And it's, staffing is something that is a challenge that we will continue to do. I think we have the slide up there, if you look at on 18, in both Ed and I can comment on that. But I thought it was really meaningful, not so much to show the comparison of Q2 over the '21 over '20 because we had COVID related issues.

But if you look at '21, over '19, pre COVID, but you'll see a tremendous increase we've had in gross revenues and net income and adjusted EBITDA. And everywhere across we were showing improvement and it really measured against what life was like pre COVID.

So maybe Ed, there may be something you may want to comment on cash flow or something you may have a comment..

Sure. When you consider the comparison to the second quarter of '19, which was a pre pandemic quarter, our gross revenues were up by 40%. Our net income 55%, our adjusted EBITDA very strong. And actually 86% of our adjusted earnings per share, very close to GAAP also both 30% and 31%.

And cash from ops, very significant during the second quarter of 2019. We generated just about a $1 million from in cash from operations. And during the second quarter of this year, we were at $14.1 million. So that's over 1,000% increases. So very significant. I think we've made good traction in terms of recovery.

As Dick mentioned, there's some business units that are still in the process of recovering like hospitality. But overall, we're seeing very good [Indiscernible]..

Excellent. And then I was wondering if you could sort have highlight, you mentioned and certainly really appreciate the commentary around the acquisition pipeline and what you're seeing there. Just want to circle back as far as where we are leverage levels; I think we're now kind of slightly below one time.

So I guess or maybe just a quick update on that. I don't have that in front of you at the moment. But I wanted to sort of think about sort of how we should think about leverage levels that we're looking at going forward and what we might see there..

Sure. And I mentioned earlier that when you look at our net leverage, it's actually at about half a churn right now about 0.5x so it's under 1x and we've made we brought that down significantly as compared to last year.

Last year that was 2.8x and so we've been focused both through the pay down and also the goffering that we did earlier in the year and the growth in our EBITDA have really come together nicely and you see that in our -- the benefits of that in our, not only our balance sheet, but our interest expense.

Last quarter, the first quarter of this year, we incurred $2.3 million in interest expense, and it's come down to $1.6 million. And it was over $4 million last year, second quarter. So really nice progress that you see, not only on the bottom line but in our cash flows. And so it's really looking nicely..

So Marc to sum it, in my summation, we have plenty of firepower to really accelerate the acquisitions, we are in a very strong cash flow position. But we also have a very significant facility, in case we, so we can be very optimistic. And the nice problem we have is not only can we be opportunistic, but we can be very selective.

And so we're looking for that high margin, high technology business and something that can strengthen our existing platform. So as far as our ability to do acquisitions, we're in a pretty strong cash position to be able to do that..

Next question we have Michael Feniger from Bank of America..

Hey, everyone thanks for taking my questions.

And apologies if this is already touched on earlier, just the $1 trillion stimulus that passed senate today can you just help us, any idea of what like the baseline funding level of infrastructure spending you see a year and how much this is incremental increase on funding and some of these markets? And Dickerson, how long does this increasing funding kind of take trickle down into, discussions on projects, eventual backlog, and then into revenue?.

Okay, well, Michael, I think perception is the key thing that we have here. We are in the infrastructures servicing business, we're in that space. As I said I think our immediate opportunity is going to be to helping the municipalities get funding.

And then it depends on how long projects have been ready to go but have not had the funding and infrastructure, we could see some immediate benefit from those areas in the infrastructure work. A lot of this is dependent on permitting.

So if it's a brand new project, there's unless they can somehow accelerate the permitting process, we're not going to see an immediate impact in larger construction.

And so, the big, big firms that are doing the hot, big transportation work and unless that project has already been in the pipeline or in the queue, they're going to have to go through the permitting process, too. So our main focus is to -- is the strength of the local municipalities and how that how we can get that work.

I have Alex Hockman here with me to who runs our core business infrastructure. Maybe you have a different view on the infrastructure bill, Alex, I don't know..

No, I mean, I think at this point, you've summed it up quite well, because it's a matter of timing to see how it's going to impact and what stage some of these projects are from the perspective of both design funding as well as ultimately permitting..

Got it. And can you just help me with the guide raised, what the implied EBITDA range looks like this year..

Well, yes, I can't help you with that. I think we can assume it in conservative EBITDA, I think we're going to be 20% or more in EBITDA.

Are you talking in dollars of EBITDA or in percentage?.

I just was thinking dollars, but that help..

We don't give specific guidance on EBITDA but I think something in the mid-120s would be reasonable..

Okay, that's super helpful, guys. And then just on, Dickerson, you touched on this, like being selective on projects. That sounds important because there is concern about inflationary pressures.

Just what's your confidence on margin expansion next year? I mean, obviously, you guys have a good margin expansion, through COVID, this quarter margins were up nicely.

What's your visibility on margin expansion in next year? Does that expansion start to get a little limited because there's more focus on the top line, or can you continue to expand margins at this rate in 2022..

Well, we're certainly hopeful. That's our intent. We want to always improve.

But I think Michael, you should focus more on the scalability of our shared services and our support services, our scalability of our financial team, the scalability of our legal team, the scalability of our IT, the scalability of our human resources, they don't, we don't necessarily have to, we can take on a tremendous amount or an increase in volume, and not so much have impact in our shared services.

So the more efficient we can be, we certainly should improve, we should certainly improve on the margin. The second thing, of course, we are being very selective now. I think we see very good opportunities in a high growth businesses and businesses that come with a higher margin and have a higher barrier of entry.

So our M&A pipeline now are mature that we can be selective. And so we should see a margin improvement from both our scalability and the projects that we're doing, we want to be very efficient in what we do. And we want to continue to do consulting work and not so much a percentage completion of projects at risk.

So we expect to see the margins, certainly we'd like to see those margins improve, and we anticipate that..

At this time, we have Andrew Wittmann from Baird..

Great, thanks for taking my follow up. I felt inclined. I thought this one merits a clarification, because it's important. I know people are looking to the stuff, on the implied EBITDA question from just a second ago, I heard two answers.

And you said something in the mid 120s, on a dollar basis and Dick you said something in the 20% range on a percentage basis, 20% at the midpoint of your guidance would be something like $140 million of EBITDA and on dollar basis. So I just wanted to give you guys a chance to be a little bit more clear, -- EBITDA number is..

Clarity, we give the total amount in the guidance on gross revenues. When we were referring to 20% that's based on net revenue. So that would come in closer to that 120 or plus 120 range because of our income, our EBITDA, adjusted EBITDA percentage is based on net revenue.

So if you take that and I don't want to back up the envelope this but if we have 70%, 83% of that number is net revenue, then you would take the 20% of that, and you'd get pretty close to 120. But we can't be very specific. Ed is just and Ed will shoot me here if I get very specific so..

Yes, that's fine. I just sort of that makes sort of if it's gross revenue versus net revenue explains it then that explains it. I just. That wasn't immediately clear. So I'm glad you clarified that..

Oh, I am glad that you cleared it up; we should have been clear when we said it. Anyway, thank you, Andy. Thank all of you for your questions..

This concludes our question-and-answer session. I would now like to turn the call back over to Mr. Wright for closing remarks..

Thank you and thank you for everyone listening and those that have asked questions. We obviously had a strong quarter. And I just want to focus on what we want to accomplish. I think we've been at this, the team with me; we've been at this for many years.

And we realize that growth comes from doing good work, having good people, and also being able to integrate those acquisitions that we do, and stick to the model and the advantages that we've had. I think we spoke of the four pillars that indicate how we have that advantage and doing that.

And so if you look at those things, those are extremely important to us. That's our strategy in the market place and we are focused on high growth segment businesses high margin with technology. We feel like we're a known entity in the M&A space for what we do and we must be scalable.

Many companies are successful, but end up with many administrative costs because they don't stay focused on their strategy or the business model. So hopefully, we will continue to do that. And our success has really been through the great efforts of our people and the word-for-word to adapt. I mean, we have many, many people working remotely.

We have many people that are adjusting issues and following what's going on and being able to adapt in ever changing the world of the marketplace. So I just want to take this time to thank everybody, thank our investors, and thank our employees. And we hope to continue with another strong quarter in our growth.

So I thank everybody for the time that you spent with us today and we look forward to speaking to you again, as we progress. Thank you..

Thank you, presenters. This concludes today's conference. Thank you again for your participation and have a wonderful day. You may all disconnect..