NV5 Global Inc (NVEE) 2021 Q3 法說會逐字稿

Good afternoon, everyone, and thank you for participating in today's conference call to discuss NV5's financial results for the third quarter of 2021.

Joining us today are Dickerson Wright, Chairman and CEO of NV5; Edward Codispoti, CFO of NV5; Alex Hockman, President and COO of NV5; Mark Abatto, President and COO of NV5 Geospatial 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 Third Quarter 2021 Earnings Call. Before we proceed, I would like to remind everyone that today's discussion contains 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 these statements are included in today's presentation slides in our report on file with the SEC.

During this call, GAAP and non-GAAP financial measures will be discussed. A 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 third quarter 2021 comparisons are being made against the third quarter of 2020.

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. These 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.

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. A webcast replay of this call and its accompanying presentation will also be available via the link provided in today's news release 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 third quarter 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 joining us for NV5's Third Quarter 2021 Conference Call. Many of you have the Q3 presentation deck, so I will be referring to it in our presentation today. Please turn to Slide 5, where we will provide an overview of NV5's performance in quarter 3.

Gross revenues of $186 million and adjusted EBITDA of $35 million were our highest to date. We also had strong adjusted earnings per share of $1.25, and our margins continue to expand versus last year. The focus on the NV5 business model resulted in sustainable industry-leading margins, a record backlog to date and a resurgence of geospatial contract awards. Mergers and acquisition activity is also very high. Therefore, we can better focus on high-margin, high-growth sectors. We have multiple potential acquisition opportunities in due diligence and our pipeline of opportunities is growing. We strengthened our position on energy efficiency and decarbonization in quarter 3 with the acquisition of Sage, which we'll speak to in more detail later in the presentation.

So now let's turn to Slide 6. You can see our launch of NV5 ESG solutions to help our clients reach their goals for a sustainable and socially responsible future. ESG will be a focus of all of the NV5 verticals.

Now let's turn to Slide 7, where we will give more detail on our recent acquisition of Sage Renewable Energy Consulting. Sage complements our existing verticals and have a positive influence on the organic growth of our energy and efficiency service offering, as well as our infrastructure service vertical. Sage has a history of managing clean energy programs, have been supported over $2 billion in clean energy projects.

On Slide 8, Alex Hockman, NV5's President and CEO will provide an update on our historic service verticals for quarter 3.

Thank you, Dickerson, and good afternoon, everyone. The core business continues to deliver strong growth in margins in 2021. The utility services vertical continues its impressive performance with 96% growth in our LNG Utility business and 33% growth in our Power Delivery business in the first 3 quarters of 2021 versus the same period last year. We continue to see opportunities as utilities are investing to underground their power lines to mitigate fire risk and improved service reliability.

The strength of our utility backlog and pipeline indicates sustainable growth in this business. In the Testing, Inspection & Consulting business, we have seen double-digit growth through the first 3 quarters, and we have performed well in our forensics business, which provides insurance claims evaluation and expert witness services as well as both the east and west geotechnical and testing businesses are also growing. An increase in the industrial development and infrastructure projects has been a significant driver of this group. The strength of public sector budgets and a healthy pipeline of projects continue to drive opportunities for our infrastructure business.

One example is the $4 million contract NV5 was awarded by the North Carolina Department of Transportation to support engineering design and inspection of roadway improvements in the western part of the state. These opportunities along with our backlog growth entering Q4 will continue to drive our infrastructure vertical.

Environmental Health Sciences continues to gain momentum as we are integrating our Q2 acquisition of PES. Our real estate transaction services delivered another record quarter, growing 125% compared to Q3 2020. Domestically, our Buildings & Program Management services were impacted the most by the pandemic. And as the NV5 vertical with the greatest proportion of private sector clients, it has been the slowest to recover. However, we have begun to see signs of recovery in our MEP and technology design businesses and we are optimistic that this business will rebound in 2022. Internationally, our MEP business has already rebounded across Asia and the Middle East.

Our international and energy efficiency businesses have grown 63% year-to-date compared to last year's first 3 quarters, and we have strong pipeline in these businesses to build on our momentum. As we enter the final quarter of 2021, weather cooperating, we are well-positioned for strong future results. We entered the fourth quarter and 2022 with our largest backlog ever and there is a strong pipeline of opportunities to support our continued growth. We believe that our benefits of scale and increased utilization can drive sustainable margin improvement. Our businesses that largely support the public sector are well positioned to benefit from the increased public investments in transportation, utility, water and broadband infrastructure that will be funded when an infrastructure bill is ultimately funded.

Now I'll turn it back over to Dickerson.

Thanks, Alex. Let's now go to Slide 9 where Mark Abatto, President and COO of NV5 Geospatial will provide an update on our geospatial activity for quarter 3.

Thank you, Dickerson. I'm pleased to report that the pipeline of key deals in what we call our commercial or private sector market reached their final contracting phase over the past several quarters. And as a result, core commercial bookings have grown 38% through quarter 3 year-to-date. And demand for our UAV services have grown 70% year-to-date. The projects that commenced in quarter 2 and quarter 3 have driven 35% revenue growth across the commercial sector here in quarter 3, and we expect to see full year revenue growth in the mid- to high single digits.

The government sector, however, continues to experience procurement delays impacting the timing of project awards and project start. That said, the demand drivers for our geospatial services appear to be accelerating because of the critical role we play in the infrastructure and environmental spaces, whether it be advanced survey and asset management or coastal resilience, water and natural resource management.

Importantly, although project awards have experienced delays, we're highly encouraged that long-term contracting vehicles like the U.S. geological surveys, $850 million multiple-award IDIQ are falling into place. We announced that renewal in September, and we secured $6 million in new business under the contract already. Across our government portfolio, as we indicated on the right-hand side, deal activity is accelerating with proposal volume growing 42% year-over-year.

The other growth signals we are looking at over the short to intermediate term include a backlog heading into quarter 4 that has grown 54% over the prior quarter. The opportunity to expand our environmental resume in states like California and Florida that are poised to initiate programs aimed at wildfire mitigation and climate resilience. And we're excited to enter the offshore wind energy market with offerings that combine the capabilities of the core NV5 business, legacy Quantum Spatial and our recently acquired geodynamics team.

And the final point that I'll make is that these growth opportunities are available to us with or without the infrastructure bill or the climate change legislation. But the expected incremental spending over the next several years in the environmental and infrastructure spaces, transportation, airports, water and other natural resources, all where we are focused, further aligns with our growth thesis.

With that, let me turn things back over to Dickerson Wright to talk about backlog.

Thank you, Mark. You'll see on Slide 10, we underscore the health of future business as represented in our record backlog, which demonstrates an increase of 19% over the same period last year. I would also like to mention our cross-selling efforts and key wins for quarter 3, and that's on Slide 11. Cross-selling does not just create margin improvement, but it also creates opportunities for all of our 115 offices to grow. We are well on plan to meet our full year goal of $31.2 million in cross-selling. Our recent key wins are representative of various services provided throughout the NV5 network. Geospatial's recent wins indicates an anticipated strong growth for 2022. So we continue our positive outlook for all of NV5's future growth.

I will now hand the presentation over to our Chief Financial Officer, Ed Codispoti, to provide an overview of our Q3 2021 performance with our specific results. Ed?

Thank you, Dickerson, and good afternoon, everyone. If you would please turn to Slide 13, I'll review our results for the third quarter of 2021. As Dickerson mentioned, we had a record third quarter as our gross revenues increased by 9% compared to last year. And I will mention that due to the cycle of our accounting period, last year's third quarter included 14 weeks of revenue versus 13 weeks during the third quarter of this year. Therefore, the 9% growth in gross revenues was achieved despite having 1 less week this quarter. Our net income of $12.6 million was 62% greater than last year's third quarter. And our adjusted EBITDA margin was a record $34.7 million, a 16% increase over last year.

Adjusted EBITDA margins, in terms of revenues generated by employees, increased to 27.7% compared to 24.7% last year. This is a 300 basis point expansion. And if we look at adjusted EBITDA margins, as a percentage of gross revenues, our margin expanded to 18.7% from 17.6% last year, a 110 basis point expansion. This margin expansion demonstrates that we continue to execute our business model, focused on the growth of our high-margin businesses, while at the same time, leveraging our scale across the enterprise. Our adjusted earnings per share were also strong as we generated $1.25 per share compared to $1.13 per share last year, an 11% increase.

As Alex mentioned earlier, we have strong results in several of our business areas that helped drive this growth. In particular, our real estate transaction services increased 125% and our power delivery increased 16%. The Geospatial segment continued to experience delays this quarter, in particular with respect to federal contracts. However, although revenues were down 1.7% in this segment, we did see an increase in profitability as its EBITDA increased by 31% this quarter when compared to the same quarter last year.

It's also very helpful to see how our results compare to pre-pandemic levels. If you turn to Slide 14, you can see that compared to 2019, we also had very strong third quarter results. Our revenues increased 42%, our net income more than doubled as it grew by 115% and our adjusted EBITDA nearly doubled as it grew by 97%. Adjusted earnings per share grew by 54% and our cash flows from operations increased by 284%.

Turning to Slide 15, we see that our balance sheet continues to look strong. We had $121 million in cash as of the end of the quarter, which was a 90% increase over the same time last year. We brought down our net leverage from 2.5x last year to 0.4x this year, an 84% reduction. As a result of our decrease in debt and rate pricing, we were also able to realize a 60% decrease in interest expense this quarter as our interest expense decreased to $1.5 million from $3.7 million.

We believe that the strength of our balance sheet, combined with our strong cash flows and M&A strategy, continues to position us well for further growth.

With that said, I'll now turn it back to Dickerson Wright for some closing comments. Dickerson?

Thanks, Ed. Let's turn to Slide 17. We have set a goal of $1 billion in revenue for 2024, and we'll achieve this goal by focusing on high-growth segments, high-margin technology and continued emphasis on M&A and scale and synergy to increase growth and profitability. This completes our prepared remarks, and now we'd like to open the call for your questions.

(Operator Instructions)

Our first question is from Chris Moore with CJS Securities.

Maybe just on the guidance. I see where the adjusted EPS is going. On the revenue side, after Q2, it was $705 million to $727 million. Is that changing? Is that just a bias more towards the higher end of that? Or how are we looking at that?

Well, thanks for the question, Chris. We -- our fourth quarter is usually, if you could tell us how the weather is going to be, and we may not lose pace, we'd rather be conservative and maintain the guidance because we may -- and we don't want to be a glass half full, but we may lose some work days. Most of our work and our engineering service work is in the field, and you know how winter can be. I can talk about 2 years ago when we lost a good 4 days of revenue because of that. So we're tending to be a bit conservative. It doesn't really mean that we are expecting any drop in business. It's just that we're going to be very affected by the -- by weather that time of the year. And as you know, so the fourth quarter is usually there's holidays in that fourth quarter, and we have the impact of weather. Yes, so I just -- so we would just rather be conservative, and we're maintaining the guidance as it was.

Got it. I appreciate that. Yes, maybe we could talk a little bit further about this, the $850 million IDIQ with the U.S. geological survey. So I'm just trying to understand kind of how many players are in there? And is this a IDIQ that QSI had operated on previously and then want to recompete? Maybe we could start there.

Okay. I'll let Mark Abatto is on the call and I'll let him speak specifically. But before Mark answers your question, I can tell you that we are the driving supplier of the services, and we are actually doing work for others on this. And I think if you noticed in the slide, Mark has said, we've already realized $6 million of this contract. But Mark, maybe you can go ahead with more specificity on the contract and how many people to answer Chris' question.

Sure, Chris. And you're absolutely right. This is a recompete. We've actually worked under predecessor contract to this [gypsy] for 5-year multiyear award contract for several decades as a matter of fact. There are usually up to about 10 different providers on a contract this size, but it's a combination of large and small business providers. To Dickerson's point, we've enjoyed a significant share of wallet relative to the contract above and beyond those in the space. And just a little bit about the contract, as you may know that this was the primary funding vehicle for the 3-dimensional elevation program or 3DEP. And that program was aimed at creating a nationwide land elevation map for applications such as infrastructure planning and environmental and climate research, natural resource protection including coastal resilience.

The new contract, which is funding a program called, Next Gen 3DEP continues that mission and it updates that nationwide land elevation map, but it also is going beyond that and creating first-of-a-kind elevation maps for the nation's surface waters and groundwater, land -- wetlands and national wetland and man-made storm water systems. So that's an advancement well beyond what the predecessor program offered, and we're very well positioned to capture a significant share of wallet for that portion as well.

And you would see that getting in '22.

I'm sorry, Chris, can you repeat that?

You would see that -- you talked about capturing additional wallet share that would be in fiscal '22, where you'd start to really feel that?

Well, as Dickerson pointed out, we've already received about $6 million and, of course, we're under the program, and that will continue into '22 and beyond. Again, this is a 5-year contract.

Again, Chris, this is Dick. And if it's any help, looking in the rearview mirror, the last time this contract was awarded, we invoiced -- our Geospatial Group, invoiced $135 million on the previous contract. So it's substantial. And we think that we will be able to increase on that amount over the same period of time.

Our next question is from Rob Brown with Lake Street Capital Markets.

Just wanted to dig in a little bit on the geospatial business. You had some pretty strong growth in backlog and some of the metrics you've reported. What sort of the organic growth you see in geospatial going forward, say, 2022?

Well, once again, I'll refer to Mark, but I can say -- what -- we're in the middle of our budget and the budgeting process now. And we're assuming anywhere from 5% to 9% organic growth, and that's about representative of our entire business, but I think we could -- we're looking in the high single digit on geospatial for next year, but Mark, maybe you have some more color you'd like to add.

Sure. I think if we look at our couple of different verticals, commercial being extensively utilities and oil and gas, we have a lot of room to run in these core markets given that it's still a space that's in the early innings of adopting technology solutions like LiDAR to manage risk across their entire power grids. It's a very under-penetrated market, and we see the opportunity, especially if you're cross-selling and being able to get access to NV5's entrenched client base in the utility space as a real accelerator for us to grow. So we see significant opportunities in the private sector. On the government side, with or without the infrastructure bill or the climate resilience legislation, we're very well positioned to grow in the environmental solutions as well as infrastructure because of the solutions we offer relative to climate resiliency and water availability and consumption, decarbonization. So these are all themes that are certainly going to play out over the course of 2022 and beyond.

Rob, so we have, we're in the budgeting process now, and we are looking for geospatial to be at high single digits from 5% to 9%. Our real growth areas, and I was going to mention this in our -- we think we are really seeing a tremendous uptick in our transactional, environmental, real estate business and our international business. I was just going over with our CFO, Ed, this morning, and they're projecting for the consolidated group about a little over $30 million in gross profit. They're projecting almost a [50%] organic growth. So we really look at the opportunities in international, and we kind of wish that would be based on all of our segments. But I think our highest growth area is that in organic growth (inaudible) transactional real estate business and from our international.

Okay. Great. And then on the overall infrastructure bill, what's sort of your latest thinking on how that will impact you and areas you think will see growth and maybe how that sort of flows through to your business?

Okay. I'm going to give a general comment, and then Alex will answer with more specificity to that growth. But normally, our business, I mean, it could only help. The infrastructure bill is only going to help us, and we're in the right position. And a lot of that positioning is through our municipalities and state transportation agencies. As far as the direct work for the federal government infrastructure, that is usually through the municipalities and usually through the transportation agencies. But we are -- we haven't baked anything of like that into our budget. We just really use the backlog. So it can only help. But there are specific areas that we think we can be well positioned for. So Alex, you may want to comment.

Thank you, Dick. When you consider the revenue segment internally, we have our infrastructure division, which is primarily design and survey. They would be able to take advantage of any type of funding for transportation, utility infrastructure, water infrastructure, broadband. We have the ability within our TIC group which is the Testing Inspection & Consulting as well as our project management. So there's a number of ways as these projects are funded that our existing service lines would be able to take advantage of new opportunities.

Our next question is from Michael Feniger with Bank of America.

On the earlier question regarding why you didn't provide the revenue guide, just to help us, are we still thinking mid-120s of EBITDA for the year? Or has that changed any change in that at all?

Well, no. I mean, we, yes. Yes, to your question, we are expecting maybe at least that in our EBITDA. And if you'll notice, we also, Michael, reporting on our EPS, and we've raised our guidance on the EPS in earnings per share. And so that would naturally defer to our increase in EBITDA or at least be the same. But if you'll notice in the press release, using adjusted EPS and GAAP EPS, we increased the guidance on both areas. So that would also defer -- would have a relationship to our EBITDA.

Understood. And any reason why cash from ops, looks like it was, you had really nice growth this quarter on revenue, EBITDA, EPS. But it looks like cash from ops was down year-over-year. I don't know if it was just a quarter timing or some lumpiness. And any color you can give there?

Yes. Let me give a general answer, and then maybe Ed can, our CFO, can speak specifically. But historically, our cash flow is lowest at our busiest time of the year. And imagine this, Michael, if you will. We pay all of our employees every 2 weeks, and we collect our money in every 60 days. So the busier we are, the cash flow will be lower. And then in our slower months, like in our first and second quarter, we start to build cash and cash starts to build. So it's only a reflection on just how busy we are in generating revenue. But Ed, you may have some specific thoughts on that?

No, I think, that's exactly right. And along with that, if you're comparing against last year, which was a COVID year and we had the impact of COVID that affected us, now we're ramping back up as you can see the growth in our revenue. And along with that, you have that cycle that Dickerson is referring to where our billed receivables increased in a disproportionate way. And so that you have that draw on working capital. But it really is just that. It's working capital. When you think about our business, if you wanted to exclude the impact of working capital, you could just look at adjusted EBITDA and deduct CapEx, right, as another way of looking at it, if you want to exclude the impact of working capital. But it really is just normal cycles of AR collections and payments.

Helpful. And what sizes are you guys seeing in the pipeline for M&A? Are these smaller type deals? Are they midsize to bigger? And can you just remind us what areas? I think you're focusing on one of these growth areas. Can you highlight what those end markets look like?

I would say, starting with the size, it depends on -- for us, we think a $40 million revenue, $50 million revenue is one of our larger ones. We are though focusing right now and we have a luxury of doing this, Michael. When we were building our company, we were just looking at how to build the platform. So our platforms now, the verticals, if you will, are pretty seasoned and pretty solid. So we're looking at the smaller acquisitions or the tuck-ins that can support the verticals.

Our focus now is on energy efficiency, ESG-related acquisitions and technology that has a more higher bar area of entree, and we're looking for higher EBITDA. However, those type of acquisitions tend to be less than $40 million. So our normal size now is about $3 million to $5 million. We have some very good opportunities that we're looking at right now. And believe me, the pipeline is very robust, and we are now -- we have the luxury of focusing on things that can really increase our strength in our platform and increase our EBITDA.

Perfect. And just lastly, like this year, if I can squeeze one more in, this year, the margin expansion year-to-date, depending on how you slice it has been impressive. It's been up 170 to 200 basis points year-to-date, depending on how -- what metrics you use. How do we think about that going forward? Is there any giveback in 2022? Is that margin expansion the right numbers to think about also in 2022 and 2023? Just curious on how much of that is sustainable going forward and maybe some -- what are the tailwinds and headwinds you guys are thinking about when you look at your margin going to 2022?

Okay. If I understand the question, let me make some general comments. There has to be scalability, which we -- our shared services group has a very strict budget, and we look for scalability. Obviously, when we acquire something, that doesn't necessarily mean we have to put on a whole new accounting staff or if we acquire a company that we don't need to have to put on a whole human resources staff to support that or IT. We may have to put additional people, but it's in a reflection of the growth. Our shared services need to be flexible. And so I think you're going to see a profit improvement just from our scalability of our support services. That is one.

The second, as I mentioned, we are looking now the higher profitability, higher EBITDA services. So I would say I would look for an improvement. And I'm not saying that we're going to continue at the same rate of improvement because you see, we are very, very much higher than our E&C group, but I don't see it that we would regress or I don't see any degradation from that EBITDA. But I don't know if we're going to grow it at the same EBITDA rate. But every time we make an acquisition, scalability really helps us in our support services, and we're looking now for acquisitions that have the higher EBITDA. So at worst, I think we're going to be the same, if not a little better.

Our next question is from Lisa Springer with Singular Research.

I wanted to ask about the customer mix for the Sage business. Is it primarily government customers? Is it commercial customers? And what are the opportunities to cross-sell to their customers?

We're experiencing -- let me mention the latter first. We are really -- that is one of our more successful businesses in cross-selling. It's cross-selling to our existing platform, and it's really on commissioning and work that we can help them with and that they can now expand the platform. Their services is pretty much a 50-50 mix between government and what we call government and private sector because their energy efficiency is in the private sector. It has a real focus to their clients. But in the public sector, we're including universities, and we're including school districts, and we're including a number of quasi-public agencies. But the cross-selling, I'm just really pleased with it. And we don't want the sledgehammer to hit in for the head, but we are really, really happy with how Sage is performing now and how they've been able to cross-sell with the rest of our platform.

Our next question is from Andy Wittmann with Baird.

I just want help to understand the quarter a little bit better. Ed, tomorrow in your 10-Q when you file it, it's going to have a number in there. It talks about the revenue that was contributed from acquisitions or from companies owned less than 1 year. I was wondering if you could tell us what that number is? And if you could tell us what the backlog contribution was from acquisitions that closed during the third quarter was as well?

Yes. Andy, we don't have that 10-Q number quite yet. What you -- as I have said in the past, the backlog in that footnote, number one, is taking into account pro forma information that is pre-acquisition related to those acquired entities. And we also have the effect of that 1 less week in the numbers. So we're filing our 10-Q tomorrow, and so those numbers will be available tomorrow, but I just wanted to give you that color prior to receiving that information.

Got it. Okay. We'll take a look tomorrow on that. Dick, I was wondering if you could comment on the impact of the labor markets and the personnel availability that's out there. We're starting to hear from others in the industry that it's getting tighter that wages and other packages might be moving around today, maybe more than they have in some time. I was wondering what your experience was of this phenomenon and how it's impacting your profitability or how it might affect your profitability looking into '22?

Well, you took some of the comments, I was going to make in the concluding comments. We are really in a talent war right now. And we think that we think that other companies and other firms, we have to be competitive. I think the effect, though, is going to be more on revenue than it's going to be on profitability because most of our services are on a unit price basis, subject to FAR audit, and we get a net fee multiplier on what we charge for that person. So obviously, using an example, if we charge $10 an hour per person in our overhead, FAR audited overhead rate is 3.0, we would -- we can charge $30. If it's $15, we could charge $45.

So it's not -- and obviously, though, where it will affect profitability, if we're losing people and we have a lot -- or not losing people, but we have a lot of open slots, we can't bill for those people. So the revenue is affected. We are very aggressive. I'm very pleased with what our HR group is doing and recruiting to define people, but it is just right now, I don't think any engineering or consulting firm has all the people that they would like to have. And we have open positions that need to be filled. So Andy, we are really starting to feel and all firms are starting to feel this war for talent.

Got it. That's helpful commentary. Maybe for you, Alex, I just noticed a comment on your LNG business up, basically, doubled over last year. And I can just think back over the last few quarters, we clearly did see those awards kind of hit. So it's not surprising that it's up. But I guess maybe if you could provide us a little bit of context is what I'm looking for. And by that, what I mean is, how long in duration are these projects? If I'm not mistaken, this is like the one part of the business that you do, which is done on an EPC basis for.

And you can correct me if I'm wrong on that. I know you subcontract on a lot of the work, but I think you guys are the prime on that type of work. So how many projects are you working on maybe today versus historically? And is it an unusual amount of work right now in your LNG business that, I think, it tends to be a little bit lumpier than some of the other things that you do? So I guess I'm just looking for context as to what that growth rate means and if it's sustainable more than anything else?

Sure. So you are correct. The CHI acquisition is in the EPC arena. The type of revenue mix is, frankly, it's some larger projects, and then there are smaller projects where they're in a due diligence or a feasibility study. One of the things that we initiated just pre-COVID was expanding geographically. We now have -- CHI has a Houston branch. So the intent actually is to continue to see this organic growth by expanding geographically. And the large project is the EPC phase, the consulting phase, leading up to that is in the due diligence, and that is purely an engineering assessment.

Our next question is from Marc Riddick with Sidoti.

You actually hit on several things that I was going to ask, but one area that I wanted to touch on was I think you had mentioned in the past as far as kind of reevaluating throughout the pandemic and coming out the other side as to how much certain expenses were necessary versus not necessarily, particularly, obviously, we're thinking about travel and the like. I was wondering if, and I don't want to steal your thunder from any commentary or if this is something that's going into the budgeting process. But I was wondering if you had an updated view as to sort of what things you could do, continue to do well without incurring additional expenses that maybe you have in the past.

Thanks, Mark. Well, we've learned. We certainly -- like any other firm, we certainly have learned from what has happened on the pandemic. And what we've learned is this. We've learned that and we've been very focused on the travel. We've been very focused on conferences. And so we're -- we're actually not having the expenses that we would have had pre-pandemic. And most of our traveling now is to support clients, to support offices. So -- and all of those things that are -- that relate to expenses such as hotel, airfare, I can say, personally, for an example, we do a lot of the conferences virtually. I mean we have one coming up, and we'll do that right from this office and through a Zoom call. And so we -- for the same thing, we really will watch the expenses, we have facility costs.

Obviously, not everybody is working at in an office. Many people are working from their homes. So we're questioning really with the facilities that we have and how much base do we really need. So we're learning a little bit about that. The nice thing that I've seen is our utilization rate has gone up since this pandemic because people working from home are very focused on projects and what they can do. So I think where you're going to see, are we going to continue? No. But we are certainly going to improve. I mean, when we -- when I mean continue, will we have a complete drop-off in all of our expenses? No. They'll start to creep up.

But we're learning and what we've learned is that perhaps we don't need all of those in-person visits to or conferences that we can handle some of those things virtually. So I think that we will watch the indirect costs very closely. And I think what we -- the lessons we learned from the pandemic has been that we can really manage better at those indirect costs.

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

Well, thank you very much. I want to thank everyone for another successful quarter. I want to thank our employees. I want to thank for the adjustments that we've had to make concerning this pandemic and how they've adjusted and how they're working. So we really owe a lot to our people. I want to thank our clients. We have had clients that we really feel have been supportive of us and they are supportive because we want to continue to do work that is really, we are considered a very valued consultant.

Andy mentioned before the talent war, I -- we want to create, we're taking a very close look at our benefit package and how we -- what we can do to really recognize all of our employees and recognize that what they are adding is valued, and we realized when we have people working for us and we have people staying with us, it's certainly less disruptive. I also want to mention our scalability. As our revenue increases, that does not mean our support services has to increase as well. We feel that we will constantly be scalable. We feel that in that scalability, we'll see the benefits and increased margin, and we have a budget for all of our support services, and we want to make sure that we are in that budget. And then on the consolidation, we can certainly see the margin improvement.

I think one of the things that is really important is, we are known as an inquisitive company. We've made 47 acquisitions since we've -- since the inception of the company. But we are now developing specific plans so that we can grow these acquisitions organically. And it's not as a straight road as you see because some of these, with the acquisitions, and it's very difficult to manage organic growth because some we, there are some services that we acquire a company that we just will not do. But the services that we keep, it's really important that our team looks to how we can grow those firms organically, either through cross-selling or advantage or opening or expanding their markets or keeping them a national platform.

Going back to our people, though, I think it's really important that all of our people are our partners. And that's why we want them to have equity in the company. We want to create ways that people can share in the success of the company. And so we certainly recognize our employees. So I want to -- what I really wanted to do is thank both our employees and our clients for our success. And we wouldn't have that success if we didn't have a good management team, and we didn't have good employees working for us and clients that have been a source of recurring revenue for us.

So thanks again, everyone. I appreciate, we all appreciate very much the -- your interest in the company, and we'll see you again in first quarter of 2022 and, hopefully, we can deliver the results for quarter 4. Thank you very much. Thank you, everyone.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect. Thank you.