Acuren Corporation (TIC) Q2 FY2025 Earnings Call Transcript & Summary

Hello, and welcome to Acuren Corporation Second Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Andrew Shen, Director of Investor Relations. Thank you. You may begin.

Thank you, operator. Good morning, everyone, and thank you for joining the call. Joining me on the call today for prepared remarks are Tal Pizzey, Acuren's CEO; Kristin Schultes, Acuren's Chief Financial Officer; and Robbie Franklin, Acuren's Executive Chairman. In addition, Sir Martin Franklin, Acuren's Co-Chairman; and Ben Heraud, Acuren's President and Chief Operating Officer, will be joining us for the question-and-answer session. Before we begin, I would like to remind you that certain statements in the company's earnings press release and on this call are forward-looking statements, which are based on expectations, intentions and projections regarding the company's future performance, anticipated events or trends and other matters that are not historical facts. These statements are not a guarantee of future performance and are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. In our press release and filings with the SEC, we detail material risks that may cause our future results to differ from our expectations. Our statements are as of today, August 14, 2025, and we undertake no obligation to update any forward-looking statements we may make, except as required by law. As a reminder, we have posted a presentation detailing our second quarter financial performance on the Investor Relations page of our website. Our comments today will also include non-GAAP financial measures and other key operating metrics. The required reconciliations of non-GAAP financial metrics can be found in our press release and our presentation. Before we begin, let me outline the agenda for our call. Tal will cover business performance and key operational highlights. Kristin will review our financial results and discuss the NV5 transaction. Robbie will share strategic context on our integration priorities and discuss the opportunities ahead for the combined organization. It's my pleasure to now turn the call over to Tal.

Thank you, Andrew. Good morning, everyone, and thank you for your continued interest in Acuren. Welcome to our second quarter 2025 earnings call. I'm proud to share that our second quarter demonstrated the strength and resilience of our business model as we delivered year-over-year top line growth and stable adjusted gross margins. This was achieved while successfully completing our transformational acquisition of NV5, which marks a major milestone in Acuren's journey as the market leader in testing, inspection, certification and compliance or TICC, and engineering services. Our team's unwavering focus on operational excellence, reliability and safety enables us to build upon our stable foundation. We continue to expand share of wallet with existing customers and win new accounts, positioning Acuren for continued momentum into the second half. There are three key takeaways I want to emphasize today: our solid business performance; our success with integrated solutions; and our transformative combination with NV5. First, our team delivered steady revenue growth, adjusted gross profit and solid adjusted EBITDA margin performance in the second quarter. We saw sustained momentum among existing customers and continue to secure new customers. Our callout activity, which addresses urgent customer needs, was particularly strong in Q2. The essential and mission-critical nature of our asset integrity services continues to drive demand even when customers are selected with capital spending and operating budgets. Our business fundamentals remain strong, and we believe Acuren is well positioned for continued growth. Second, I'd like to share a couple of examples where Acuren's integrated service offerings have created a differentiated turnkey solution for our customers. Acuren was recently awarded the NDT maintenance work at a new LNG facility. Our local NDT leadership recognized the opportunity to cross-sell additional services. We supported the customers through baseline inspections where we identified design and construction flaws but we also performed remediation services to support the successful plant start-up, substantially increasing our contract value. In another example of integrated service offerings, we recently completed the recoating and repair of a gas distribution line suspended from a bridge. The project included Acuren engineering and design for a suspended platform in coordination with the local transportation authority. The scope of work included laser ablation to remove existing coatings, mechanical replacement of pipe hangers, rope access platform installation, ultrasonic testing to verify pipe integrity and final coating application. This work was led by Acuren's engineering team, supported by rope access mitigation services and NDT crews. Following successful delivery, Acuren was sole sourced for a larger similar project in a new jurisdiction based on our reputation for this new turnkey infrastructure work. These two examples provide a good segue to introduce the next third takeaway. The recent combination with NV5 positions us to become a leading provider of integrated TICC and engineering services, dramatically expanding our ability to deliver complementary solutions to a broader customer base and creating substantial cross-selling opportunities. In the asset integrity management business, further connectivity between engineering, inspection and mitigation will allow us to offer compelling turnkey solutions to our expanding end markets. Before turning to Kristin, I want to recognize our dedicated team members, their professionalism, safety mindset and commitment to our customers, especially during this period of transformation are what makes Acuren unique. At Acuren, a higher level of reliability isn't just a tagline. It's core to our culture, guiding how we operate every day. Reliability builds trust, ensures stability and delivers consistent results to our customers, teammates and investors, independent of the macroeconomic environment. With that, I'll now hand the call over to Kristin to walk through our financial performance in greater detail.

Thank you, Tal, and good morning, everyone. Reported service revenues for the 3 months ended June 30 were $313.9 million, a 1.5% increase, compared to $309.3 million in the prior year period. On a constant currency basis, this represents top line growth of 2.1%, of which 2% was organic. Organic growth was driven by new customer wins, deeper engagement with existing customers and robust callout volumes during the quarter. While our run and maintain work provides a stable recurring revenue base, call out work acts as a key driver for revenue growth. Adjusted gross margin for the 3 months ended June 30 was 28.8%. This represents a 30-basis point decrease compared to the prior year period, which was driven primarily by FX headwinds. Adjusted EBITDA for the second quarter was $54.6 million compared to $59.1 million in the prior year. This resulted in an adjusted EBITDA margin of 17.4% for the quarter compared to 19.1% in the prior year. The current year margin reflects a more normalized business mix as well as planned incremental public company costs. Turning now to the recently announced transaction. On August 4, we completed our acquisition of NV5. The deal was valued at approximately $1.7 billion, which included the repayment of approximately $208 million of NV5's outstanding debt. We also issued approximately 79 million Acuren shares to NV5's shareholders at closing. In connection with the transaction, we amended our existing credit facility, adding $875 million in new term loan debt under the same terms as our original loan at a rate of [ S + 275 ]. This brings our total debt to $1.6 billion. We also increased our revolver from $75 million to $125 million to match the increased scale of the business, and it remains fully undrawn. We estimate our post-closing net leverage at roughly 4.1x on a combined LTM basis. We remain committed to reducing net leverage to our long-term target of under 3x through a combination of growth, operational execution and disciplined cash flow generation. Next, turning to our guidance. Following our recent transformational acquisition, we are taking time to fully review and update our financial outlook to reflect the combined business. We plan to share refreshed consolidated guidance, including ranges for revenue and adjusted EBITDA alongside our third quarter earnings release in November. This timing gives us the opportunity to be thoughtful and to incorporate deeper informational sharing and strategic planning into our full year outlook. Overall, we are pleased with the team's execution and dedication during this exciting time for Acuren. I look forward to sharing more updates on our progress, including the NV5 integration in coming quarters. With that, I'll turn the call over to our Executive Chairman, Robbie Franklin.

Thank you, Kristin, and good morning, everyone. We are pleased to have completed our transaction with NV5. Together, we have created a market-leading TICC and engineering firm uniquely positioned to deliver integrated tech-enabled solutions to customers across North America and select international markets. The combination immediately expands our reach into new geographies and end markets and accelerates our ability to provide comprehensive full asset life cycle services. We can now support customers from initial design and engineering through construction, commissioning, ongoing maintenance and decommissioning. We believe our highly complementary service portfolio will enable deeper customer partnerships and unlock substantial cross-selling opportunities. What is unique about this combination is that it is genuinely additive. Acuren's leadership in nondestructive testing and asset integrity is directly complemented by NV5's depth in engineering consulting and geospatial analytics. There is minimal service overlap, which means we are expanding capability, not just scale. As we integrate, our priorities are clear: deliver on identified synergy targets; retain and motivate top talent from both organizations; and ensure seamless service delivery for customers. I am encouraged that our initial conversations are servicing meaningful additional opportunities and believe that the $20 million synergy estimate we've shared is frankly conservative. We expect to grow that figure as we execute over the coming months, and we'll update you on our progress. To support this, we have established a dedicated integration management office, led jointly by leaders from both legacy companies to drive accountability and pace. We are focused on near-term execution, identifying quick wins, meeting integration milestones, protecting commercial momentum and ensuring retention of our key people. Dickerson Wright and Ben Heraud, who have joined our Board of Directors as planned, bringing valuable expertise and deep knowledge of the NV5 business and its end markets. We are also pleased to welcome Byron Roth to our Board, whose broad industry perspective will further strengthen our governance and oversight. Looking ahead, the combined entity's scale, diversification, exposure to high-growth end markets position us well for sustainable value creation. We believe we can deliver stronger cash flow, expand career opportunities and enhance customer outcomes. While we are confident in the long-term strategic benefits, we know the work of integration is just beginning. Our teams are energized and focused on delivering results, and we are committed to communicating our progress with transparency. With that, let me turn the call back over to Tal for closing remarks.

Thanks, Robbie, and thanks, Kristin, for those comprehensive updates. Our second quarter demonstrated steady execution, while at the same time, we closed one of the most significant acquisitions in our industry. Delivering solid operational results while navigating M&A complexity speaks to our team's strength and the resilience of our business model. I want to welcome our new colleagues from NV5 to the Acuren family. Your talent, expertise and customer relationships are invaluable, and we're excited to work together to serve our expanded customer base and pursue new market opportunities. This transaction positions us to capitalize on key trends driving demand for engineering and asset integrity solutions. Aging infrastructure, increasing regulatory complexity, energy transition and growing industrial complexity, all create demand for integrated solutions we can now provide. We see opportunity across data centers, infrastructure, geospatial and industrial markets. Offering comprehensive solutions from engineering through ongoing asset integrity, we have created a market leader that is positioned to serve customers and deliver superior value for our shareholders. Thank you to all team members, both legacy Acuren and NV5 for exceptional work during this transaction and continued commitment as we begin this new chapter together. With that, I would like to open the call for questions. Operator?

[Operator Instructions] Our first question is from Kathryn Thompson with Thompson Research Group.

Just a few margin questions that also tie into top line, I suppose, also is you said in this quarter that you returned to more normalized business mix. Could you clarify what that is, what is more normalized in terms of end market and type, and how was it different and how that impacted the top line and margins in the quarter?

All right. Hi, Kathryn. Thanks for the question. I think what we would say is the company's margin is really quite stable. And the end market mix doesn't change much throughout the year other than a slight peak in outage work in Q2 and Q3 with a lesser amount in Q1 and Q4. And on our Q1 earnings call, we talked about some of the reasons why Q1 had a lower margin. And those reasons were largely around development of staff and hiring for some run and maintain work that we had won, and also some utilization issues. There's a few things that suppressed the margin in Q1. So we might expect slightly lower margin in Q4, but generally Q2 and Q3 are quite similar. And this margin from Q2 is quite typical.

Okay. And then along with that, there were -- it would be helpful if we could better understand what are more onetime costs in the quarter, the business transformation cost? And what are the potential future benefits of these initiatives? So it could be business transformation, but also anything transaction related in terms of onetime costs, but then following back on the business transformation, what are the potential benefits of these initiatives?

Thanks for the question. In terms of the onetime costs associated with, we're still working through our public company buildup. And so from a onetime perspective, we have costs in there related to that as well as acquisitions. And we will still see some transaction-related expenses in the third quarter related to the NV5 transaction. But I think in terms of looking ahead, we feel good about the opportunities we have with NV5 to accelerate our public company infrastructure and return to a normalized level.

Okay. And then could you give a little bit more color on the transformation and the future benefits, more from this transaction? Yes, because I know that you guys had also talked about really enhancing your portfolio of business, so it may lead to shedding of lower-margin business in order in place with higher-margin business. It's really this kind of the angle we're looking to get a little bit more color on the update on that.

Okay. Sure. I'll speak to some of the revenue cross-selling opportunities, and Kristin can talk to some of the cost synergies. First of all, we're super excited about this acquisition because it creates entirely new end markets for both companies to sell their services in, and I'll actually let Ben speak a little bit to some of those synergies and examples. But largely, we see the combined companies as providing deep turnkey capabilities in the asset integrity management area across many end markets, including industrial and infrastructure. And as we look at the life cycle management of an asset, there are periodic requirements for both engineering and TICC or inspection-related requirements. And that's true of almost any asset as small as something like a pressure safety valve to as large as something like a bridge or a municipality or a entire gas plant, for example. So there's a lot of back-and-forth opportunities between engineering and inspection. And maybe, Ben, I could ask you to give Kathryn just a couple of examples of some of our early cross-selling initiatives that we've experienced.

Yes, no problem. We've already got a robust program and framework in place just to leverage these companies, geographies, clients and expertise. And it's looking really, really promising already with some really early wins. Just some specific examples. Our geospatial team is now delivering some drone and LiDAR work in Southern California that was previously going to a competitor through Acuren. We've been awarded -- NV5 was awarded a pipeline integrity test for a large port, which Acuren can now deliver on that project. Our building digitization team has a large retail contract with thousands of retail stores and many of those are actually in Canada. So we're going through a training program so that the Acuren team can actually deliver on that. And we've just submitted a joint proposal for $31 million, which includes engineering and consulting, along with testing and inspection. So this list is a lot longer and getting longer every day, but we're very, very excited about the opportunities we're seeing already.

Great. And final question, just a high-level question. With all the focus on AI and data center build-out and the energy infrastructure build-out, just some parting thoughts on how Acuren wins against that backdrop?

Yes. I think, again, this is a really good one for Ben because NV5 has created real market opportunities, supporting AI with data centers. So Ben, maybe you could just give some examples of how that is flushing out for the business.

Yes. The organic growth that we're seeing through the data center business continues to be strong, both with our international operations, where we're really market leaders in Asia Pacific. We work with all the hyperscalers there. And that's really been replicated in the U.S. over the last 18 months. And the growth that we're seeing there is not slowing down. So we're very excited around the data centers. Both cloud compute and AI, we work in both areas, and we're really looking -- part of our growth strategy there is not only continuing to grow the services we already provide, but bringing in new services that Acuren provide that are applicable and even on the NV5 side. Power delivery is a huge issue for data centers and something that we're very well positioned with a large degree of technical expertise in that area.

[Operator Instructions] Our next question is from Chris Moore with CJS Securities.

Congrats on the quarter and wrapping up so quickly on the transaction. Maybe just a follow-up on what Ben was talking about. Recognizing the integration plan is still pretty early stage, are there opportunities that you've uncovered over the last couple of months that even go beyond what you were thinking about initially?

Yes. It's a tough question, Chris, because we have many opportunities we've been thinking of initially. And just to refresh what those are, Ben talked to very specific things. But maybe one we didn't talk about is, across Canada, Acuren has a very strong footprint with smaller engineering facilities in major cities. And we think about being able to offer NV5 services from those locations that we have relationships with existing customers and the Acuren engineering business today kind of generally ends at materials expertise, rotating equipment expertise, failure investigation, fitness for service, but NV5 has such depth of experience in infrastructure and buildings that will be an immediate cross-sell for us. And over time, we'll build that expertise locally, but initially, we'll sell it locally. Definitely, we feel very strong. I gave examples of Acuren, how we've been having several opportunities in the infrastructure space to demonstrate our ability to do inspection, access solutions and engineering, and now that just expands significantly with NV5 capabilities. And on the NV5 side, they're often in a position as consulting engineers to be a general contractor managing various projects. And generally, you avoid requesting additional services to subcontract. And even in that environment, they are subcontracting NDT work on occasion. And now we'll seek to include NDT on those contracts. So there's a lot of excitement. And early days, even at the day of close, we had calls from NV5 engineers looking for Acuren to supply failure investigation expertise on projects. So every day, we are learning new things. But I think what I gave you are the main themes.

Very helpful, and I appreciate that. Obviously, different opinions on where this economy is headed. Assuming there is a meaningful slowdown over the next 12 months, any areas within Acuren or NV5 that are likely to be more impacted?

Sure. I'll speak for the Acuren business, and Ben, maybe you can comment on any end market dynamics that you see. On our side, our business has really been fairly consistent across our end markets, which sort of speaks to the resilience and the essential services that we provide. We do see in the -- particularly in chemical that some of our customers are more strained with their end markets and their product being oversupplied. And so that work, they still do the required work, but maybe some of the more discretionary spending like sustaining capital could be reduced. But beyond that, we don't see any significant end market headwinds. And we did see a slight uptick in fabrication and manufacturing, could be a sign of reshoring, but I think it's just a modest uptick.

Yes. If I can add on the NV5 side, I mean, we're really focused on building a business around mandated services. And we're not looking to see any issue through any downturn. I think we've already felt the pain of DOGE as far as our geospatial group through the first part of this year, and we're through that now. So we feel good about the 12 months ahead.

Perfect. Congrats again.

Thanks, Chris.

Thanks, Chris.

Our next question is from Andrew Wittmann with Baird.

I guess I just want to dig in a little bit more on the results from the quarter. You had the comment that the callout work, Tal, was very strong in the quarter. I was hoping you could just kind of drill into that a little bit more. What things have you seen in the quarter that led to the callout work? And can you just talk about how that -- the implication that, that is strong suggests that maybe the run and maintain work was not as strong. So could you just give maybe how much -- like how -- what was the growth year-over-year on the callout work? And maybe talk about the -- what the implication is for the run and maintain work in the quarter?

Sure. First of all, I want to emphasize that the variance between our various nature of works, which are run and maintain, callout, outage and project work was not really very different than normal. But of course, you can Pareto anything. And when we talk about what's up and down, callout stood out as a slight uptick. And so it's not significant, but it was higher than last quarter. And so as we look at that, there were a few projects we did across both countries and one that stood out is we had some containment work this year. So containment is an area where automotive parts manufacturers, if they have a defect supplying parts to one of the auto manufacturers, then their customer will put them in containment, which means they need to do 100% inspection of all of those parts before they'll accept them for installation in a vehicle. So we'll have semi-trailers show up at one of our labs to do those parts inspections. So we did -- in the quarter, we had some of that work, which wasn't there in the second quarter last year. So that more than any one thing probably provided a bit of an uptick in the callout work, but it wasn't really abnormal variance.

Andy, just to summarize, I think if you look across the service, the nature of work mix is we saw growth in our run and maintain business, which, as we've talked about before, is the most -- the stickiest, most stable recurring revenue that we have. We saw growth in the callout as well and less growth on the turnaround side, and that is attributable to just timing shifts.

Got it. And then I guess my follow-up question was just trying to understand the prior year just because you weren't public last year. Just what was it about the prior year quarter comparison that was unusual that had the difference from this year, which was more typical?

So the outages, they all shift around a little bit quarter-to-quarter. And I I've said a few times, just to reiterate, Q1 and Q4 are generally lighter, like maybe half the size of Q2 and Q3. And the variance between Q3 and -- Q2 and Q3 can change each year. Now last year, Q2 was larger than Q3. And this year, we expect Q3 to be larger than Q2. And I'm speaking to the outage work, which is just a little over 10% of our total revenue.

So Andy, if you're looking at margins from a comparable period, our margins this quarter were 20%, which we feel are more normalized. There was a onetime discrete overhead pickup in the prior year quarter that we didn't see this year, and so that affects the comparability. But in general, 17% business, we -- our margin for this quarter outperformed our full year of last year. And so we feel like this quarter is more indicative of our normalized business.

[Operator Instructions] Our next question is from Josh Chan with UBS.

This is Karan Singhania on for Josh. So I think in your prepared remarks, you mentioned that the cost synergies, the $20 million in cost synergies from NV5 seems a bit conservative. So I'm just wondering, are there any other areas of the businesses that you recognize where you can gain some additional cost synergies? Or would it just be around the corporate function side?

Yes. So in terms of business optimization, including cost synergies, we -- the more we learn, the more excited we get. This deal closed 10 days ago, and the way the nature of the transaction came about, we did not have a lot of ability to plan the integration or provide more detail on synergies until now. The -- like Robbie mentioned, the integration office has been launched, and we are excited to come back in November with a more bottoms-up approach and a refined number. But in general, we just continue to be more and more excited about both top line synergies, revenue synergies, cross-selling opportunities and then also cost optimization within the combined business.

Yes. All I would add is that our approach is sort of going from corporate all the way to the branch level, where we're going to -- we want to optimize and cross-sell services at the very local level kind of across all of our regions. So the opportunity, we're not looking at it just as a corporate exercise.

With no further questions, I would like to turn the conference back over to Tal for closing remarks.

All right. Thank you, everyone, for joining us today and for your thoughtful questions. We appreciate your continued support and look forward to updating you on our progress as we -- as the combined organization next quarter. We're excited about the opportunities ahead and remain committed to executing our integration successfully while maintaining our focus on operational excellence and customer service. Thanks again. Have a great day.

Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.