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NV5 Holdings Inc (NASDAQ:NVEE)
Q3 2020 Earnings Call
Nov 11, 2020, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon, everyone and thank you for participating in today's conference call to discuss NV5 Financial Results for the Third Quarter of 2020. Joining us today are Dickerson Wright, Chairman and CEO of NV5; Edward Codispoti, CFO of NV5; Alex Hockman, President and CEO of NV5; Mark Abatto, President and CEO of NV5 Geospatial Solutions and Richard Tong, Executive Vice President and General Counsel of NV5.

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

Richard Tong -- Executive Vice President and General Counsel

Thank you, operator. Welcome everyone to NV5's third quarter earnings call. Consistent with social distancing, speakers today are connected from different locations, but thank you for your patience including any latency as may be encounter when we answer questions.

Before we proceed, I'd 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 slide in our reports 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 2020 comparisons are being made against the third quarter of 2019.

In this presentation, NV5 has included certain non-GAAP financial measures as defined in Regulation G obligated under the Securities and Exchange Act of 1934 as amendment. The non-GAAP financial measurements 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 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 for those used by peer company.

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 third quarter 2020 results. Alex Hockman, President and CEO of NV5 and Mark Abatto, President of NV5 Geospatial Solutions will then provide some insights into the operational opportunities and strategic initiatives before turning the call back to Dickerson Wright for closing comments who will then open the call for your questions.

Dickerson, please go ahead.

Dickerson Wright -- Chairman and Chief Executive Officer

Thank you, Richard and thanks to everyone who is joining our call today. For those of you joining by webcast, let's turn to slide five in our presentation. Although there continues to be uncertainty in our personal and business lives associated with the COVID-19 [Indecipherable], our employees have adapted to this new environment. We are applying technology and software to continue to work remotely to provide essential business services. We continue to be proactive in implementing measures to address business and safety issues for employees working remotely and those supporting field activities that have continued to operate in NV5 offices and laboratories at our client and project locations. And what has been the result of our proactive measures? We have maintained the quality of our work, delivered a great operating quarter and grew backlog by 9% in quarter three.

Our financial position through quarter three 2020 also remained strong. We're continuing our activity with acquisitions [Indecipherable] have two potential acquisitions and due diligence that will strengthen our technology and substantially subscription-based revenue platform. We intend to do both acquisitions out of cash flows and not utilize our credit facility.

Our daily [Phonetic] cash position continues to average over $60 million and we intend to continue paying down our debt. Between July and October, we have paid $27.8 million in debt reduction. Our current cash and debt position is significant because the third quarter is usually our lowest cash position for the year due to increased revenue and higher labor utilization.

We also continue to benefit from our proactive cross-selling program. Our cross selling is program within inner offices and our cross-selling activity resulted in 7.7 million in cross sells for the third quarter. As we have stated previously, cross selling is very important because we strive to keep central business in-house. We're also keeping some excellent opportunities for cross-selling between our Geospatial with QSI platform in the core business. An example; one of our largest West Coast utility clients contracted the geospatial group to perform an aerial scanning of transmission assets. This work also included 410,000 of CAD work that typically is not performed by our geospatial service group, but this was performed by our core business and utility service group. So we kept this work within NV5. We are also seeing the benefit of our scalable business model.

Please turn to page six. Adjusted EBITDA for the third quarter increased to $29.9 million from $17.6 million in the third quarter of 2019. And adjusted earnings per share for the third quarter was $1.13 per share, exceeding the average consensus of $0.70 per share. The majority of NV5 services are considered essential and we have been able to scale our business to operate efficiently in this type of economic cycle. Our infrastructure, utility services and international markets have seen growth. We continue to see softening in our hospitality market due to COVID-19 consideration [Phonetic]. Our MEP or mechanical electrical plumbing and technology services have been impacted as commercial development still has not experienced growth. However, the residential sector is strong, which has been a positive for municipal budget.

Our transaction real estate portfolio business which has been negatively affected by COVID has began to see improvement in the third quarter and we look for positive results for the remainder of 2020. We are pursuing a number of growth opportunities in the technology sector, including data center program management, geospatial service and subscription-based energy efficiency.

We've also been very proactive in our acquisition pursuit. We continue to look for opportunities to strengthen our operating platforms. We also see opportunities in the municipal private provider market, including a recent award by major Northern California municipality for building department services. Our utility service business continues to provide needed support services to strengthen the aging utility distribution grid and we have seen growth in our LNG business with a large project award. Through our proactive efforts to expand diversity and employee opportunities, we have also seen an increase in hiring as well as a significant drop in employee attrition.

I will now hand the presentation over to our CFO, Ed Codispoti to provide an overview of our Q3 results.

Edward H. Codispoti -- Chief Financial Officer

Thank you, Dick and good afternoon everyone.

If you would please turn to slide eight, I'd like to start off with the review of our P&L results. As you can see, we had strong results this quarter as our gross revenues increased 30% to $169.9 million. Once again, our business model has shown its resiliency in light of the pandemic. I'll note that this quarter had an extra week compared to last year due to the way our fiscal calendar works. Our adjusted EBITDA also showed substantial growth, as it increased 70% from last year with $29.9 million and our adjusted EBITDA margin continues to show the benefits of our scale as it increased 18% of gross revenue for the quarter, a 410 basis point improvement over the prior year quarter. Our adjusted EPS was also very strong this quarter in light of the pandemic as we came in at a $1.13 per share, a 40% increase over the same quarter last year. In addition to our robust P&L performance, our balance sheet and cash flows also demonstrated the strength of our business.

If you would please turn to slide nine, you'll see that we ended the quarter with $64 million in cash and net receivables of $206.2 million. Our cash flows were particularly strong, as we generated $21.7 million of cash flows from operations during the third quarter of 2020. This is an increase of more than 4 times the cash flows from operations we generated during the same quarter last year. And so far during the first nine months of this year, we have generated $72.4 million in cash from operations. This fits well with our model, as we are very much focused on reducing our debt over-time. Accordingly, this quarter we paid down $18.9 million under our credit facility and last month we reduced our credit facility by another $8.9 million, bringing the cumulative credit facility reduction to $27.8 million from July 1st through today. As you can see, our P&L results were strong as were our cash flows and balance sheet position.

With that, I'll turn it over to Alex Hockman, our President to discuss our operations in more detail. Alex?

Alexander A. Hockman -- Director, Chief Operating Officer and President

Thank you, Ed and good afternoon everyone. Please turn to slide 11 for a review of the core business' third quarter highlights and the potential challenges and opportunities. In the third quarter, essential services continued to drive our growth with 70% of our revenues coming from public sector and essential infrastructure, we are more sheltered from economic cycles than many other businesses. As a result, our infrastructure TIC, which stands for testing, inspection and consulting, civil program management and utility services sectors continue to perform well and we have had minimal impacts from the COVID pandemic.

While we have begun to see a rebound in the real estate transaction market and our international MEP and technology business, our domestic hospitality and commercial development business continues to see lower activities. To counteract the situation, we have proactively implemented reductions and operating costs to maintain margins and profitability. Our business in public infrastructure and municipal government continues to be strong and we have been monitoring the funding sources for these projects. In the Northeast and North Carolina, funding levels have been on the rise and we have not seen any significant project cancellations. Our opportunity pipeline is strong and we have secured key wins with local municipalities and departments of transportation in the states of California, Florida, North Carolina, New Jersey, New Mexico and Utah in the third quarter.

We do have some potential challenges that we are facing in the domestic commercial development and hospitality markets as these industries are still struggling with the downturns during the COVID pandemic. However, we have seen an uptick in our international business. Our real estate transaction services is another area impacted by COVID, but we have started to see a rebound in the third quarter and proposal volume is increasing. We have a number of current and future opportunities that we expect to drive growth in the coming periods including our testing, inspection and consulting or TIC business where volume has been increasing and forensics due to the response to natural disasters. Our TIC and geotechnical engineering businesses also continue to perform well.

In the utility services business, our aging grid along with fire hardening efforts in the West continue to drive our conformity assessment services for electrical distribution. We have secured several large design and survey contracts in Q3 and wildfires this year in California are expected to continue driving utility efforts to modernize the electrical grid for the years to come.

In the Northeast, our Infrastructure sector business has picked up with the exception of New York City, which has been slower to open-up back to historic levels. We secured $26 million in Q3 infrastructure contracts in North Carolina and the DOT continues to release additional funds for projects. Therefore, we are seeing positive trends in North Carolina and our operations in the West continue their strong performance.

Our municipal business continues to perform well and we secured a large wins with cities and counties in California, New Mexico, Utah, and New Jersey in the third quarter. Residential housing starts continue to accelerate, which provides funding for municipalities and counties through permit and inspection fees. It also presents an opportunity for our code compliance business, which delivers outsource billing department services for municipal governments and directly to private developers.

Finally, expansion of our client relationships across the NV5 network with the combined capabilities of our core businesses and geospatial services is an initiative that we continue to drive.

Please turn to slide 12 as I review our successful cross-selling efforts. Cross-selling is rooted within NV5 corporate culture. Work performed in-house generates higher margins and our ability to provide a wide array of technical services differentiates from the competition. It allows us to become embedded with our clients organization, building barriers to entry and opportunities to continually expand these relationships. For 2020, we had an ambitious goal of $26 million in cross-sales and at the end of Q3, we are 28% of our year-to-date target with almost $25 million in cross-sales completed. For the year-over-year comparison, we are 60% ahead of where we were in Q3 2019. The program continues to accelerate and we are uncovering new growth opportunities with the integration of Quantum Spatial.

Please turn to page 13. We are moving into the fourth quarter with a healthy backlog of $572 million. This is an increase of 9% over second quarter of this year and 23% higher than Q3 2019. We had several large wins in the third quarter that contributed to the growth in the backlog, including a $28 million geospatial technology contract to support the Army Corps of Engineers and US Geological Survey. This project includes eGIS application development and data management, asset collection for utilities and lidar and topobathymetric data collection and processing. In California, we secured a $20 million contract to deliver design and survey services to support fire hardening and reliability for a major utility.

In North Carolina, DOT awarded NV5 $26 million in new contracts to provide design surveying and TIC services for transportation assets across the state and we secured a large cross selling win with the New Jersey utility to provide metering and regulating station improvements in Natural Gas Services. The New Jersey utility win is an example of how our coordinated cross-selling efforts provides unique value and a competitive advantage when approaching clients.

At this point, I will turn the call over to Mark Abatto, President of NV5 Geospatial Solutions. Mark?

Mark Abatto -- President and Chief Operating Officer of NV5 Geospatial Solutions

Thanks, Alan. On the geospatial technology side, we posted our 16th straight quarter of year-over-year EBITDA growth during quarter three. Despite the data acquisition challenges caused by West Coast wildfires in late September, we again grew topline because of the scale and diversity of our portfolio. Notably, during Q3, we completed the data acquisition phase of the largest topobathymetric, lidar program in US history.

In terms of bookings, Q3 was a strong quarter as expected as reoccurring program awards were announced before the end of the federal fiscal year and several utility contract renewals occurred, but it was our continued success in expanding our client base and our ability to offer new solutions to the market that were so encouraging. New geospatial solutions and new client awards together represented 16% of Q3 bookings. Further, we continue to gain traction in Canada, which is the second largest consumer of lidar-based geospatial solutions and our performance on defense and intelligence program has earned us a stable and growing share of work in that space.

On the integration front, the pipeline of cross-selling opportunities and wins continues to grow. In addition, we are able to further differentiate our solutions by adding ULD [Phonetic] low altitude remote sensing capabilities to existing ground-based and high altitude modalities. In the data processing and enrichment phase, teams have began to collaborate using proprietary machine learning routines that are yielding quality and efficiency gains.

Looking ahead, we continue to be excited about the long-term trajectory of the geospatial technology market. In a responsible way, we acknowledge and are planning for potential challenges that may come our way in relation to the pandemic and its secondary effects on the economy. It will be more important than ever to emphasize our qualification based differentiation and embedded relationships. Our third dynamic, which could impact utilities market slightly more is the challenge of developing new clients and demonstrating new solutions in a virtual sales environment. In a market that is under penetrated as utilities, outsized growth is driven in part by demonstrating new ways of solving existing and emerging problems through geospatial technology. Our challenge is flattening the adoption curve for new clients in non-traditional ways until things return to normal.

Now, as I said, we continue to be bullish on the macros that are driving future opportunities and I will focus on five of them that I highlighted last quarter, the first being infrastructure. Regulatory compliance and risk management concerns coupled with an aging infrastructure in the US will continue to drive demand for survey that is used in the planning, design and construction phases of major infrastructure projects as well as asset inspection, both of which rely on the quality and efficiency of remote sense in geospatial solutions. Likewise, we see strong demand for infrastructure related services that facilitate the nationwide 5G rollout.

In the environmental space, climate change adaptation including coastal resilience, flood analysis, environmental habitat and wildfire mitigation to name a few rely heavily on spatial and condition based risk analysis made possible by geospatial analytics. Further, demand continues to grow across government agencies, scientific organization and private industry for predictive analytics and monitoring of precious natural resources like water and forestry. National Defense Solutions represent a growth opportunity as we build upon our existing position supporting military facilities and certain classified geospatial program. Our qualifications position us well to continue growing share of wallet with these capabilities and expand the value proposition to include GIS integration and application development.

As a largely US-based solution provider, we see international markets as an attractive growth opportunity. Close to home, we have gained traction recently in the Canadian market as I've mentioned earlier and we anticipate entry points into Europe and the rest of the world to continue coming from a combination of NV5's international network and potentially, M&A.

And speaking of NV5 network, as previously stated, cross-selling results and the future pipeline look promising. We have a real opportunity to accelerate the expansion of our geospatial client base through the core NV5 team's entrenched relationships.

And with that, I would like to turn it back over to Dickerson Wright. Dickerson?

Dickerson Wright -- Chairman and Chief Executive Officer

Thank you, Mark. Let's go to slide 16 and I would like to introduce and update our growth objectives, which include higher margins driven by scalability, organic growth and mergers and acquisition opportunities. It is our goal to reach $1 billion in combined revenues by the end of 2024.

This completes our prepared remarks and now we'd like to open the call for your questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Your first question comes from the line of Chris Moore from CJS Securities. Your line is open.

Christopher Moore -- CJS Securities, Inc. -- Analyst

Hey, good afternoon guys. Great quarter.

Dickerson Wright -- Chairman and Chief Executive Officer

Hi Chris.

Christopher Moore -- CJS Securities, Inc. -- Analyst

Yes. Hi. Maybe we can just start where we finished on the geospatial, those -- the potential challenges. I was just wondering if maybe you could -- the three buckets that you have there, could you kind of rank those in order of most potential importance and just trying to get a sense, which of these you might feel kind of near-term and which might be a while still before you have a true sense as whether that challenge is going to crop-up.

Dickerson Wright -- Chairman and Chief Executive Officer

Yeah. I think Chris, a very key word for you to look is potential. We don't really -- this is up -- this was really presented more like we would do under risk factors that we would be submitting in our 10-K, our 10-Qs. There is a -- so rank of importance -- I don't see -- I see the opportunities. The federal -- delays in the federal budget that seems to be solved. The state and municipal governments now tend to be having more money because of the increase in residential housing and so therefore the constant need -- there'll be a need and then I think with the utilities we continue to introduce Quantum Spatial, our geospatial in cross-selling, we continue to introduce those utility clients to them. So the challenges are really more like potential and I would in ranking what could drop-off and where could something drop off I really don't -- utilities the pro-government seems to be very steady, the state municipalities seem to be better than we had anticipated and we just really cannot foresee what could happen with the COVID and the increase in COVID that may affect any of the client base, but I don't know if they are really challenges as more as they are opportunities.

Christopher Moore -- CJS Securities, Inc. -- Analyst

Got it. That's helpful. Just obviously generated some cost savings in 2020. Just trying to get a sense as to which of those would potentially carry into 2021. I know that utilization has been higher and travel has been less in the near term. Just trying to get a feel if there is much that's likely going to be kind of post-pandemic?

Dickerson Wright -- Chairman and Chief Executive Officer

Well, Chris, key to our businesses is scalability, so the services and support services that we always will give to each of the operations and those support services are finance, human resources, risk management with our legal group, our marketing group and our IT, they tend to be -- they tend to go down as revenue goes up because of, in a percentage-wise. So we really manage that. So I think you're going to see -- you're starting to see the real benefits of what we are doing by the scalability and as we increased from $100 million to now close to $700 million and as we do acquisitions and as we grow organically, we don't tend to scale-up the support services much. So there will always be -- we're anticipating an increase in profitability through scalability.

As far as reduction in costs, I think we are watching our travel very closely and we're beginning to see that may be some trips just weren't necessary and maybe they can be handled by Zoom as much of the market is seeing and understanding that. So I'm not really anticipating -- we're receiving our budgets now from operations and I'm not really anticipating any significant improvement, but it should be more on the scalability factor in our support services.

Christopher Moore -- CJS Securities, Inc. -- Analyst

Got you. It's helpful. I'll jump back in line. I appreciate it guys.

Operator

Your next question comes from the line of Rob Brown from Lake Street Capital. Your line is open.

Rob Brown -- Lake Street Capital Markets,LLC -- Analyst

Good afternoon. Nice job in the quarter as well.

Dickerson Wright -- Chairman and Chief Executive Officer

Hi, Rob. Thank you.

Rob Brown -- Lake Street Capital Markets,LLC -- Analyst

Turning to the real estate segment, you talked kind of positively about the uptick there, just let's get some color on what's driving that and what you're seeing and maybe how you see that playing out into next year.

Dickerson Wright -- Chairman and Chief Executive Officer

Well, I think what we've seen -- from what I have seen and maybe Alex or Mark may have a comment on this also, but we have seen a tremendous uptick in residential housing and purchasing of [Indecipherable] for housing and the municipalities depend very much on the building permit process for their fees. So as long as there is a robust housing market, residential housing market, there is more building permit fees and then there is more fees to the municipality to manage their operation. Also including in that and maybe more down the road is the increase in population and therefore the increase in sales tax as the municipality depend very much on for revenues. So the uptick that we are seeing is coming from the increase in residential housing and that has really been a positive impact in the municipalities that we did not foresee.

Rob Brown -- Lake Street Capital Markets,LLC -- Analyst

Okay, good. And then on your $1 billion revenue goal by the end of 2024, what you're thinking on organic growth rate that implies to get there and I guess you implied acquired amount in that number.

Dickerson Wright -- Chairman and Chief Executive Officer

Yeah, we are looking up -- no, this comes from ground up, so it is like just a quick, a little bit of history on this, Rob. We challenge our people to do things and many years ago, we, a smaller group of managers we said where do you think you could be in 2016 and the management group came up with $300 million. So we said, well, if you feel that strongly about it, let's tell the world we're going to do it and that really came from -- and it didn't change too much, but that we were growing quite a bit by acquisitions and 40% was organic growth and 60% was acquisitions. And the next ladder of course is our famous $620 million that came from one of our annual meetings when our management came up with that and they thought it was going to be 50-50 organic growth and through acquisitions and what we're seeing right now though in that $1 billion by 2024, we think 55% of that will just come from a compounded annual growth organically, 55% and about 45% will come through acquisitions.

Rob Brown -- Lake Street Capital Markets,LLC -- Analyst

Okay. Thanks. Thanks for the background there and I'll turn it over.

Operator

Your next question comes from the line of Michael Feniger from Bank of America. Your line is open.

Michael Feniger -- Bank of America Merrill Lynch -- Analyst

Hey, everyone. Thanks for taking --

Dickerson Wright -- Chairman and Chief Executive Officer

Hi Michael.

Michael Feniger -- Bank of America Merrill Lynch -- Analyst

Hope everybody is safe and well.

Dickerson Wright -- Chairman and Chief Executive Officer

Yeah.

Michael Feniger -- Bank of America Merrill Lynch -- Analyst

I'm just curious, I mean, the backlog did pick up. I'm curious if you saw any type of the delays with all this election uncertainty, in October, November, and do you feel with where the backlog is, do you need to build, continue to build backlog to feel comfortable with the second half of 2021 and into 2022 or there is a feel like some of those delays you talked about last quarter has really kind of flushed itself out and want a better trajectory right now.

Dickerson Wright -- Chairman and Chief Executive Officer

Well, things certainly seem to be better for us. We had originally budgeted a significant reduction in our revenue, but that have not transpired, but one thing, and it's a good what we've always used as a rule of thumb or our source of reference -- we worry or we are concerned of our backlog drops too much below 65% of anticipated revenue. So I'm saying $572 million and that would probably give us a solid backlog entering into the fourth quarter and to the New Year and we were very, very conservative in that backlog as we use it for budget purposes and we only recognize in backlog actual revenue that we are going to bill on a rolling 12-month period.

As far as some delays, maybe I can let Alex, maybe you can comment on -- will comment on if there is any large projects that we had seen push back because of various things. And of course, we're all waiting for this relief package there, an infrastructure bill, but Alex and then maybe Mark can comment from what he sees in the geospatial area.

Alexander A. Hockman -- Director, Chief Operating Officer and President

Yeah. So it's common in our, in the course of our business that we're going to have some delays and as you listened over the course of many of our reports, there has been delays that we've seen in North Carolina and now the North Carolina funding is coming back. There is an initial concern about Florida, but that's also been impacted -- in terms of those projects, they are now funding all the projects. The only area that we're currently seeing on the municipal side is New York City. They are not returning to the level of business that they historically have, but in terms of our DOT contracts and municipality contracts, we are not seeing any projects that are paying over or significantly below.

Dickerson Wright -- Chairman and Chief Executive Officer

Okay. Mark, you may want to comment -- go ahead, Mark.

Mark Abatto -- President and Chief Operating Officer of NV5 Geospatial Solutions

Yeah, absolutely. And I would just say on the geospatial side, starting with backlog, backlog heading into the fourth quarter of this year is actually ahead of pace from where we were 12 months ago, so very positive sign there. I think we've seen over the course of the year, maybe earlier some delays and to the extent there was discretion in the timing of when awards were granted. We saw that pushing a little bit earlier in the year than we have more recently. And it's been fairly -- fairly isolated. To the extent timing has played a factor, in our case, it really came down to, in some cases, logistics. And not having some of the administrative folks either at the state or local or even the federal level around to issue contracts and sign contracts, but that's beginning to resolve itself.

Michael Feniger -- Bank of America Merrill Lynch -- Analyst

That's great. Thanks team. And just -- I was hoping maybe you could flesh out a little bit more on the two acquisitions you're trying to close. You said it's more technology subscription-oriented, does it kind of overlap with QSI? Does it kind of require a higher multiple for that type of business? And just big picture, I mean, you guys are going to get your leverage down the 3 times, which is great. I saw another public engineering firm actually raise money in the public market. They tap the equity market with where the stock was to basically have extra funds to just go out on the offensive in 2021, take advantage of potential deals that could arise in this uncertainty. I'm just curious, you guys have used that playbook before, you're getting comfortable with your leverage going back to 3 times. Maybe you kind of talk about that -- these two acquisitions, what they're about? And maybe where you kind of see that M&A landscape in 2021. Thanks, everyone.

Dickerson Wright -- Chairman and Chief Executive Officer

Okay, Michael. I was counsel of cards, we can't speak too much of acquisitions. Normally, we don't even announce something until we've closed the deal, but we are in due diligence on these two. And I can't see -- I don't want to say too much, we've signed non-disclosure agreements and I cannot speak to their name. I can basically say that the two we're looking for are: one is, in subscription based revenue internationally for our energy efficiency practice; and the other one really deals with data centers and work for some of the things that are doing a tremendous increase in data center needs and work. So those are the two that I'm speaking of.

And we have not seen -- we have not seen an erosion in valuation nor have we seen a tick up in valuation. And my hats off to anyone who wants to -- acquisitions are never easy. If you don't have integration, if you don't have a culture and you don't share some common themes that you could really add value, we're just simply pass on the acquisition. So we don't want to roll up things for financial reasons. So you asked, we are specifically looking for things that will separate us from our competition and will enhance our profitability in certain platform. So technology seems to be one that works very well and it's profitable. And so we're not -- we don't do turnaround situations and so we're not looking for firms that may have gotten in financial trouble because of the downturn now. We are looking at firms that -- and I'm going to say, some of that in my concluding comments. The ability to adapt to the environment.

So we have not seen a -- we have not seen a -- the opportunities people are calling us all the time. Many of those opportunities we're just not interested in. And what we have not seen, a real elevation in the pricing either in -- being lower or higher. And we're just being very selective to -- on acquisitions now that can really strengthen our verticals that we have.

Thank you, Michael.

Michael Feniger -- Bank of America Merrill Lynch -- Analyst

Thank you. And just -- I just want to squeeze one in. On the projects you guys are bidding on and it seems like there is some healthy activity out there. Are you seeing more pressure, Dickerson, for those specific projects or more competition? Is anything on pricing? Or is it still consistent with what you guys were seeing a few quarters ago? Thank you.

Dickerson Wright -- Chairman and Chief Executive Officer

Okay, thank you. Okay, Michael, well, you're probably referring to the -- we don't bid, if you will, on projects. We -- on the larger projects which tend to be publicly funded, we really don't go after these projects unless we have a 70% assurance that we are going to get it. And so our first questions we ask when a large RFQ comes to us and we say to our people, what is your relationship with how with these people? How do you know of this? And if you're waiting for an RFQ to come out, you'd normally will not get it. So we try to look for relationships that -- we've had ongoing relationships and things where we can be of assistance. So in that regard the ones that are really subject to the pricing, we normally don't -- it's not normally the ones that we go after.

And on those public projects, many of our engineers are doing the work and putting that together and putting things together. So we're very selective, because we want those people to be billable. So we're careful on the projects, on the very large projects we go after. And then on certain verticals there are some projects that are more price sensitive. But the bigger ones that you were referring to and I think you and I had that conversation before, we're pretty selective on the bigger ones and we pretty well want to know that we have a pretty good chance of winning the work.

Michael Feniger -- Bank of America Merrill Lynch -- Analyst

Thank you.

Operator

Your next question comes from the line of Jeff Martin from ROTH Capital Partners. Your line is open.

Jeff Martin -- ROTH Capital Partners -- Analyst

Thanks. Good afternoon, guys. Hope you are doing well.

Dickerson Wright -- Chairman and Chief Executive Officer

Hi, Jeff. Hope you're doing well safe.

Jeff Martin -- ROTH Capital Partners -- Analyst

Thank you. Yeah. Doing well and thanks. Mark touched on this a little bit with respect to QSI in terms of the selling environment and that you can only do so much virtually. I was just curious about the other parts of the business and how those efforts are progressing as we get further along here? I know that in the past, you talked about not that difficult to get a business out of the master services agreement, but going after new master service agreements or new clients, it's tougher in this environment. Just wondering if you're seeing any change there?

Dickerson Wright -- Chairman and Chief Executive Officer

No, no. I think it is more difficult. I think nothing beats meeting a client face to face in person. And you can Zoom in virtual and do many different things. But eventually, you really have to have that relationship. And I think for me that relationship is one on one. We're doing very, very well. And as long as the playing field is level, I mean, if we were retracting from visiting and seeing clients and our competition or the whole world was out visiting clients, well, then we would be doing well. But everyone now seems to be under the same set of circumstances. We all are doing things the best we can virtually.

However, I think, eventually when things do change we have to be much more active in marketing. And I'm constantly and Alex and Mark will tell you that I always concerned about the sales efforts and what our people are doing and what our people are doing in a virtual world now that we're in. So to answer your question, Jeff. I think eventually nothing ever beats being with the client face to face, working with the client, rolling your sleeves up, assisting that client. But for now, everyone is in the same -- has the same restrictions and that is we have to do things virtually.

Jeff Martin -- ROTH Capital Partners -- Analyst

That's helpful. Thanks. And then with respect to the backlog composition, is there much change in the composition today versus, say, six months ago. And are there specific areas where you're noticing common themes where certain parts of the business are really heating up.

Dickerson Wright -- Chairman and Chief Executive Officer

Well, our core business backlog is growing. And the Geospatial Group has begun to grow their backlog again, but maybe Alex or Mark can answer that question more directly on where they see -- where we see increases in the backlog, where it's coming from.

Alexander A. Hockman -- Director, Chief Operating Officer and President

Hi, Jeff. So one of the areas that we've seen an increase in backlog is in the utility market. Our utility services engineering serving is definitely seen an uptick, both with respect to the transmission, as well as the prior hardening. As Dick mentioned previously, one of the things that's happened with this whole virtual meeting and ability to the sell is the fact that everybody is doing the same thing. So we are seeing an increase again in our MSA with various municipalities. Virtually interviewing for projects is something that we've all become accustomed to. So it is pretty much across the board, we're seeing a slight change in terms of, for example, in South Florida, it's not so much the high rise work, it's now becoming more industrial, commercial, mid-rise. So we see changes within various geographic areas. But all in all, it is -- it's pretty much spread over all of our verticals that we are seeing an uptick in backlog.

Dickerson Wright -- Chairman and Chief Executive Officer

And Mark, maybe if you would like to comment from the Geospatial, if you -- where you see a change in the sales or the -- working in a virtual environment.

Mark Abatto -- President and Chief Operating Officer of NV5 Geospatial Solutions

Well, sure. And again, from a backlog composition standpoint, there is some cyclicality quarter to quarter just based on the timing of when contracts tend to renew in our space. And where we are at the end of Q3 is very representative of our typical book of business. We've got about a 25%, 75% split in our backlog between the private and the public or quasi public sector. So very, again, representative.

I think that Dickerson said it well that, there is a level playing field in terms of our ability to reach existing and new clients and our ability to sell our existing solutions and even some new solutions. I think we're adapting. I'm very, very encouraged by the fact that year-to-date over $23 million worth of our bookings came from sales to new clients or to existing clients, but with new solutions. I do find that over time we've been able to adapt to the virtual world. And as things start to get back to normal, I see that pace accelerating.

Jeff Martin -- ROTH Capital Partners -- Analyst

Great. That's very helpful. Thank you. And last question, understanding you're not providing guidance at this time. I was just curious, one, if you could talk talk qualitatively about direction into next year in terms of scale in the business. Maybe on the combined acquisition and organic growth basis. And two, do you plan to reinstate guidance at some point in the future? Thank you.

Dickerson Wright -- Chairman and Chief Executive Officer

Well, let's -- the last question first. In the future we probably will begin guidance. It's just, it's -- there is so much, so many unknowns right now, Jeff. I mean, now we're supposed to the pandemic is going to be increasing. And so, we just don't know the effect that that's going to have on our hospitality sector of the business and our gaming sectors that we work and the travel sector. So it's very difficult for us to give guidance in that.

However, having said that we're receiving our budgets. Alex and Mark have been working very hard in the budgets along with Ed. And I'm encouraged, I think we're going to have a good year. I think we're going to be solid, but I just reluctant to give guidance when there is so much unknowns out there right now with -- who knows where this pandemic is going, who knows when there's going to be the vaccine. And there are so many things that we just don't have control of that it's very difficult for us to say what's going to happen, other than I can tell you this, backlog is strong, business seems to be good and so we are cautiously optimistic for next year, but I would certainly like to get this pandemic and this situation, unusual situation behind us before we start giving guidance again.

Jeff Martin -- ROTH Capital Partners -- Analyst

Understood. Thanks for your time and compliments on a nice quarter.

Dickerson Wright -- Chairman and Chief Executive Officer

Thanks, Jeff.

Operator

Your next question comes from the line of Lisa Springer from Singular Research. Your line is open.

Lisa Springer -- Singular Research -- Analyst

Congratulations on a really nice quarter.

Dickerson Wright -- Chairman and Chief Executive Officer

Thank you.

Lisa Springer -- Singular Research -- Analyst

My question, I wanted to ask about the scope of the opportunity associated with 5G rollout for the geospatial business. Has that been affected by COVID? Has this slowed the 5G rollouts? And over what timeframe do you expect to do the lion's share of the business in the 5G rollout area?

Dickerson Wright -- Chairman and Chief Executive Officer

Mark, maybe if you -- Lisa mentioned Geospatial, so maybe add what you're seeing and then maybe Alex can -- maybe want to comment also on that.

Mark Abatto -- President and Chief Operating Officer of NV5 Geospatial Solutions

Sure, I'll make a brief comment. Telco and specifically, our participation in the 5G rollout, we really do that as an adjacent space for us and growth opportunity. We are not very penetrated there today. Although the research that we've done to date seems to suggest that the rollout has not been significantly impacted. But we're not industry experts. Nevertheless, we still see that as a long-term play for the company. One where we anticipate making a pretty heavy deposit on in 2021.

Dickerson Wright -- Chairman and Chief Executive Officer

And I don't think we're seeing any great impact in the core business either.

Lisa Springer -- Singular Research -- Analyst

Okay. Thank you.

Operator

Your next question comes from the line of Marc Riddick from Sidoti. Your line is open.

Marc Riddick -- Sidoti -- Analyst

Hi, everyone. Very encouraging quarter [Multiple Speech]

Dickerson Wright -- Chairman and Chief Executive Officer

Okay. Go ahead, Marc. I'm sorry. Go ahead.

Marc Riddick -- Sidoti -- Analyst

I appreciate that. Thank you. So we get the corporate branding there. One of the things I did want to touch on, so you've covered so much in the comment, greatly appreciate all the detail and color that's already been done. I was wondering if could specifically focus on the the cross selling targets and the successes that you've seen so far. And then maybe how we should think about it going forward? Certainly well ahead of the target, for the year-to-date you're nearly already reached your full year target with the full quarter to go. I was wondering is it -- how should we think about that maybe going forward? Is it reasonable to think the best that $0.5 million per week target could -- would be reasonable to project into next year given the benefits that you're already seeing in some of the successes, particularly on the Quantum side, some of the -- what that composition might look like relative to maybe when that original goal is set?

Dickerson Wright -- Chairman and Chief Executive Officer

Okay. Good questions. And so, Mark, let's approach this way. A recording of the actual revenue for our cross-selling. So when you see the target of $26 million for the year, it's really for the total amount of that contract. So the only piece that you would see in the budget would be a piece of that, which is in the rolling 12-month period of time. So we want -- we don't -- we want them to record all of the backlog potential and that's what you see in the 500 a week target or the $26 million target.

As far as how we measure that progress, many people have heard me say this before, but when we first went public, about -- almost a third of our business was the sub consultants. And now it's probably not going to get too much below 20% [Indecipherable] not restricted and so therefore we have a more of a higher mark-up. But the reason it won't get below -- too much below 20% is, there is a minority requirement, whether it be MBE, WBE, BBE, that many of these public contracts require the use of these -- of the minority firms. And they also limit the amount and you can mark up that amount. So we're not going to see too much below the 20%, but it will normally increase -- the cross selling will increase as our total revenue increases, because we're really encouraging, it's much of this work as we possibly can do in-house.

And I know that we've recently set targets and goals for next year for our Geospatial group which will add to that. So as the company grows you're going to see the cross selling target grow, but as a percentage of the total revenue of the company it property will not -- it will not be -- we will still probably be at least 20% of our revenue going to sub consultants. So we're not going to get too much better than we are right now, but we're very -- it's been very, very positive for us. And where you see the benefits, Marc, is our profitability has increased and Scott Gabando, who leads the cross-selling program has a nice slide that actually shows the profitability of work that's kept in-house as opposed to work that's been given to sub consultant. So you're constantly seeing our profitability improve and a piece of that, of course, is through the cross selling effort.

Marc Riddick -- Sidoti -- Analyst

It's very encouraging. Thank you.

Operator

[Operator Instructions] Your next question comes from the line of Tate Sullivan from Maxim Group. Your line is open.

Tate Sullivan -- Maxim Group -- Analyst

Hi. Thank you all. Thanks for all the details. Dickerson, if I may just following up, what is -- do you currently do subscription-based energy efficiency projects that we've got more of a call out for opportunities going forward? And what is that business?

Dickerson Wright -- Chairman and Chief Executive Officer

Yeah. We do so it. It is -- we actually have sensors and we have equipment that is installed that we have through software and through other things that are with many of -- for one of our biggest clients in Macau, and that's MGM where we manage every one of their mechanical and electrical components and we see it on a screen in our office in Hong Kong. So it's -- and it's the same amount every single month. So what we say subscription based revenue, it's not -- it's not revenue that's -- it's reoccurring revenue, it's the same amount every month. And so, that's we call -- we look at revenue and that's subscription based. And it's mostly right now in our energy efficiency area, which we are expanding, but it's a constant revenue when we like it because it's always reoccurring.

Tate Sullivan -- Maxim Group -- Analyst

Thank you. And I think you mentioned growth in LNG with a large -- was that a large project this quarter, was that going back to CHI Engineering restarting a previous project, can you give more context on that LNG comment please?

Dickerson Wright -- Chairman and Chief Executive Officer

Yeah. I don't -- we haven't had clearance from the client and named the project yet, but the award was for this quarter, in Q3.

Tate Sullivan -- Maxim Group -- Analyst

Okay, great. All right, thank you. Have a good rest of the year. Thank you.

Dickerson Wright -- Chairman and Chief Executive Officer

Okay. Thank you.

Operator

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

Dickerson Wright -- Chairman and Chief Executive Officer

Well, thank you everyone, and thank you for the time and your interest in NV5. And we are very proud of the work that our -- we have done as a company and our people. And I think one of the key things in life and it applies to our business, it applies to our circumstance, we never know what's going to come about. We don't -- no one could anticipate that we're going to have this pandemic, but the key thing is, were you able or are we all able to adapt -- adapt to the circumstances. So I want to thank our clients, I want to thank our people for the service and how they been adapted to this environment. It's -- we are doing things virtually, our engineers are mainly working from their homes and everyone has had to make it adapt in their personal life, whether they have children or whether they people at home, they all had to adapt in doing this work.

So what can we do as a company to help them in that adapting. We with this COVID we have spent over $104,000 to date on personal protective equipment for our people, for our offices and any of them that you'll see of our offices or not occupied a very sparingly, you'll see signs and we have -- we have everything that we're trying to do to keep our people safe. And I want to once again thank Ralph Silver for the work he's done in that regard. So the very first thing is adapting to safety. Adapting to the business environment, we have constantly look for opportunities in this environment for our people to relate to clients, to contact clients and for work in an environment that we're all -- we are all not used to.

So what has been the result of that? You can see in the quarterly reporting. Our profit on EBITDA as a percentage of total revenue has gone up as a percentage of any type of revenue that we recognize that does not include the sub consultants as always has gone up. And we see the trends improving, we see now a much of our business, we're starting to learn how to operate in this environment and we think that we can only adapt to the situation that we are seeing.

The macro trends in the market, we see that there is now becoming more recognition to value stocks and truly we are our growth and value company. We've seen that, we've been able to grow and we've been able to improve the profitability. So we think it's a very good opportunity for our investors and for all of our people who got share in the company. So I want to thank everyone once again. I want to thank our people. I want to thank our clients and I want to thank everyone for the help that we've had, especially employees and delivering in our clients and delivering a solid quarter under these circumstances. So thank you once again and we look forward to speaking to you during the course of the rest of the year and in quarter four. Well, thank you for your attention.

Operator

[Operator Closing Remarks]

Duration: 58 minutes

Call participants:

Richard Tong -- Executive Vice President and General Counsel

Dickerson Wright -- Chairman and Chief Executive Officer

Edward H. Codispoti -- Chief Financial Officer

Alexander A. Hockman -- Director, Chief Operating Officer and President

Mark Abatto -- President and Chief Operating Officer of NV5 Geospatial Solutions

Christopher Moore -- CJS Securities, Inc. -- Analyst

Rob Brown -- Lake Street Capital Markets,LLC -- Analyst

Michael Feniger -- Bank of America Merrill Lynch -- Analyst

Jeff Martin -- ROTH Capital Partners -- Analyst

Lisa Springer -- Singular Research -- Analyst

Marc Riddick -- Sidoti -- Analyst

Tate Sullivan -- Maxim Group -- Analyst

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