NV5 Holdings, Inc. (NVEE) is “One to Watch”

Helmed by a 35-year industry veteran with a continuous track record of success managing and developing engineering companies, NV5 Holdings, Inc. (NASDAQ: NVEE) has rapidly emerged as one of the leading providers of professional and technical engineering, as well as consulting to the energy (33% of 2014 gross revenues), infrastructure (24%), construction quality assurance (19%), program management (18%), and environmental (6%) markets in the U.S., both for public and private entities. President, CEO and Board Chairman, Dickerson Wright, who founded NVEE back in 2009 before taking the company public shortly thereafter, is the man who previously founded the highly successful construction validation and structural materials integrity analysis firm, U.S. Laboratories, Inc. back in 1993. U.S. Laboratories was later sold for $83 million in 2002, after a highly successful IPO in 1999 and a superb run up from around $80M in revenues to over $300M, to Bureau Veritas, which was subsequently rolled up into NVEE’s construction quality assurance (CQA) division as of 2010.

NVEE has the luxury of operating in a highly fragmented industry, where there are over 144k engineering firms throughout the U.S. alone according to IBIS World, a fact which dovetails exceptionally well with the company’s acquisitive growth strategy. Moreover, the company has executed an impressive storm of key acquisitions already in just a handful of years, significantly expanding their operating footprint, with 13% organic expansion into choice growth markets, bottom line improvement of roughly 33% across the portfolio, and a robust stable of acquisition opportunities to boot.

With multiple parallel verticals and a healthy public/private client mix, NVEE has the distinct advantage of being able to cross-sell its services, while also benefitting from stable activity throughout varying economic cycles. This key advantage is further enhanced by a wealth of local market expertise across their operational footprint, which is defined by 28 offices throughout California, Colorado, Florida, New Jersey, Ohio, Pennsylvania, and Utah. Many of whom have a successful track record spanning over five decades and who are recognized for their expertise, as well as high quality service, both by the industries they serve and their peers. These cumulative tactical advantages, combined with a wealth of experience residing in the company’s 700-plus employees, has made NVEE an M&A powerhouse amid a fragmented industry.

The company’s most recent acquisition, executed in early February of 2015, was program management and owner’s representation consulting firm, Joslin, Lesser & Associates, Inc. (JLA). An acquisition which will be immediately accretive to NVEE’s earnings and which has annualized revenue in the neighborhood of $10 million, as well as a considerable footprint in the Boston, MA area servicing K-12 and government-owned facilities. This acquisition gives NVEE a nice boost to their already solid presence in the northeastern U.S., as JLA boasts a distinguished record of service managing public capital improvement projects throughout the region.

Also previously rolled up into the company’s program management vertical were Zollinger Buric, Inc. and Buric Global, LLC, as well as Owner’s Representative Services (all three in 2014), and Consilium Partners (2013). NVEE’s program management division services a wide range of clients from federal, state and municipal government agencies, to school districts, healthcare facilities and hospitality companies, as well as insurance, REITs, and financial institutions, providing a broad array of project initiation and preconstruction/construction services, as well as FFE (furniture, fixtures, and equipment) services. From building new hospitals and schools, to hotel renovations and various other projects across multiple industries, NV5 Holdings delivers tailored program management services that are fully customized to suit the individual client’s needs.

The company’s core division is focused on delivering cutting-edge energy project construction, as well as distribution, generation and transmission engineering, in addition to comprehensive consulting services – all targeted primarily on the natural gas supply and associated energy generating markets. This fact has allowed NVEE’s energy division to sidestep complications and flagging market activity related to slumping oil prices. Having acquired AK Environmental in 2014, NV5 Holdings has subsequently set about positioning the company on the leading edge of sustainable design and value-added services for the energy sector, emphasizing their “Beyond Engineering” philosophy and deep bench of talent in sustainable practices, which stretches back through over 25 LEED (Leadership in Energy and Environmental Design) registered projects, including Gold and Platinum projects certified by the U.S. Green Building Council. The company has numerous LEED Accredited Professionals on staff and has established a wining reputation for having sustainability champions in each of their offices that actively promote sustainable business practices, as well as overseeing associated reviews on client projects.

The company’s commitment to sustainable infrastructure runs as deep as their roots in the engineering sector and NV5 Holdings was actually one of the earliest adopters of sustainable practices, long before it was made trendy, with in-house R&D beginning in the 1990′s and the company’s first sustainable design guide published back in 2004. NV5 Holdings has played crucial roles in the development of thousands of megawatts of clean, renewable energy over the years and the company was even recently honored by environmental industry strategic business intelligence publication, Environmental Business Journal (EBJ), with EBJ’s 2014 award for business achievement in M&A. This coveted award signifies that NVEE is one of only a handful of companies recognized by EBJ for their acquisitions and revenue growth during 2014, as well as for having shown important industry leadership through innovative project design, the application of emergent technologies, pioneering efforts into new practices, and making proactive social contributions.

Speaking of revenue growth, NVEE’s Q3 2014 performance was impressive indeed, with gross revenue up 69% to $31.4 million, net income up 85% to $1.7 million, and a 34% increase in the company’s backlog to $80.7 million when compared with end of year 2013 figures. Income from operations was particularly strong year over year, with $2.8 million reported, or an increase of 143%, and NVEE was also pleased to be able raise their FY14 revenue guidance to as much as $108 million, with diluted EPS guidance of as much as $0.94/share. These are attractive figures given the incredibly strong tailwinds represented by INGAA Foundation estimates of some $641 billion in energy-related CAPEX that is projected over the next two decades throughout the U.S. and Canada. Even more so when one takes into account the whopping $3.6 trillion in investments INGAA has estimated over the next five years alone here in the U.S., which will be required in order to address rapidly deteriorating national infrastructure.

Nationwide NV5 Holdings is truly an infrastructure development leader, with a focus on turn-key solutions that are impeccably sustainable, making environmental, economic, and social sense, both for the present and well on into the future. This approach has won the company many adherents who look to NVEE as a preferred provider across the gamut of infrastructure design, from energy and program management, to forensic engineering, geographical information systems (GIS), land development, surveying, transportation, and even water resource management. The company made two key acquisitions in for their infrastructure division historically, rolling up Pitman Hartenstein & Associates in 2013 and Nolte Associates during 2010.

As a recent testament to the company’s extensive CQA expertise, particularly in the field of geotechnical investigations, evaluations and materials testing, NV5 was awarded a $1 million dollar contract in mid-February 2015 with the City of El Centro, California to provide architectural design, geotechnical, inspection, landscaping, on-call engineering, plan checking, and surveying services in support of ongoing capital programs, development reviews, and major repair projects. This deal handsomely extended the company’s existing working relationship with the City of El Centro and allows the city to take full advantage of NVEE’s impressive ability to efficiently and cost-effectively deliver on mission critical projects. The company previously acquired the central elements of their CQA division during 2012 and 2010 respectively, with the Kaderabek Company and aforementioned Bureau Veritas acquisitions, which have collectively placed NV5 in an ideal position to offer a multiplicity of such services as those mentioned in the El Centro deal, as well as other important services, like code compliance and technical drilling, to cities and municipalities throughout the country.

Earlier in 2015, the company was also selected by the City of Colorado Springs to deliver capital program and construction management, as well as inspection services and pavement management, under a contract which has the company directly serving the Colorado Springs Streets Division PPRTA (Pikes Peak Rural Transportation Authority). This is a huge deal for NVEE, as Colorado Springs is the second largest city in the state, second only to Denver and because Colorado Springs is the most expansive municipality in all of Colorado, with over 200 square miles of land.

NV5 Holdings’ fifth and final division is their environmental services segment, which is focused specifically on tasks like preserving cultural resources and doing environmental risk management and permitting, as well as more specialized services like archeological and wetland studies. The company’s environmental division also handles hydrogeology and hydrogeological engineering tasks, and it even provides comprehensive occupational health and safety services to NVEEs clients.

Investors will have a great opportunity to pop the hood on NVEE at the upcoming 27th annual ROTH Capital Partners Growth Stock Conference this March 9, which is being held at the Ritz-Carlton Laguna Niguel in Orange County, California. California continues to be a primary operational center for NVEE and the company’s rock-solid commitment to sustainability plays quite well to public and private concerns in the environmentally conscious state. CEO Wright will be making a presentation on the company at 12:30 p.m. PST and will then stick around to do one-on-one meetings with interested parties for the rest of the day. Interested investors and potential clients who want to schedule a meeting should contact oneononerequests@roth.com or Lauren Wright at ir@nv5.com

For more information on the company, visit www.NV5.com

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