TIC (TIC) Q1 2026 Earnings Call Transcript

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DATE

Wednesday, May 6, 2026 at 8:30 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Benjamin Heraud
• Chief Financial Officer — Kristin Schultes
• Executive Chairman — Robbie Franklin
• Vice President, Investor Relations — Andrew Shen

TAKEAWAYS

• Total Revenue -- $488 million, up 4.3% year over year on a combined basis, with 2.2% organic combined growth.
• Adjusted Gross Profit -- $180 million, a 3.8% increase primarily from Consulting Engineering growth and margin expansion.
• Adjusted Gross Margin -- 36.9%, roughly flat; Consulting Engineering margin expansion offset by Inspection & Mitigation pressure.
• Inspection & Mitigation (I&M) Revenue -- $235 million, essentially flat, with a 0.3% increase driven by higher call-out and outage work, offset by lower sustaining capital activity.
• I&M Adjusted Gross Margin -- 24.4%, down from 25.2% due to less sustaining capital work.
• Consulting Engineering (CE) Revenue -- $187 million, up 9.5%; growth led by data centers, infrastructure, and broad-based capabilities.
• Consulting Engineering Adjusted Gross Margin -- 47.6%, a 60-basis-point increase reflecting infrastructure and building services strength.
• Geospatial (GO) Revenue -- $66 million, a 4.5% gain from commercial and utility client demand.
• Geospatial Adjusted Gross Margin -- 51.0%, down from 54.2%, impacted by a pilot project with higher subcontractor costs.
• Backlog in CE and GO -- $1.12 billion, a 14% rise over the previous year's quarter end, indicating expanding future business.
• Adjusted SG&A -- $123 million or 25.2% of revenue, with ongoing focus on cost discipline and synergy realization.
• Adjusted EBITDA -- $57.7 million, up from $55.6 million, in line with combined revenue growth; adjusted EBITDA margin 11.8% (versus 11.9%).
• Operating Cash Flow -- $10 million with capital expenditures of $6 million, reflecting expected first-half working capital seasonality.
• Liquidity -- $537 million, including $427 million in cash and $111 million of undrawn revolver capacity; term loan debt totals $1.6 billion.
• Synergy Actions -- $17 million of $25 million cost program actioned; expected 2026 realized savings now $15 million, above prior $12.5 million estimate.
• Q2 2026 Guidance -- Revenue of $570 million–$582 million and adjusted EBITDA of $90 million–$96 million, implying an adjusted EBITDA margin of about 16.1% at the midpoint.
• Full-Year 2026 Guidance -- Revenue of $2.15 billion–$2.25 billion and adjusted EBITDA of $330 million–$355 million, with midpoint margins at approximately 15.6%; 4% revenue and 10% EBITDA growth implied.
• Cash Taxes and Capex 2026 Outlook -- Cash tax guidance of $25 million–$35 million; capital expenditures expected at $55 million–$65 million.
• I&M Segment Outlook -- Expected to be back-half weighted due to seasonality and timing of maintenance and outage projects.

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RISKS

• Inspection & Mitigation continues to experience "mix and margin pressure" and "broader market uncertainty is creating more variability in customer decisions around planned outages and scheduled maintenance, including timing, scope and duration".
• Performance pressure in the Gulf Coast region persists, attributed to "LNG construction timing and several 2025 site losses," affecting year-on-year growth in I&M.
• Geospatial margin impacted by a pilot project that "carries a higher proportion of subcontractor costs and a lower gross margin profile," reducing segment margin from 54.2% to 51.0%.

SUMMARY

TIC Solutions (NYSE:TIC) demonstrated year-over-year revenue growth driven by Consulting Engineering and Geospatial segments, supported by strong demand in data centers, infrastructure, and utilities. Management highlighted ongoing success in integration synergy capture, raising 2026 synergy savings expectations to $15 million while advancing cross-segment collaboration and centralized commercial initiatives. Quarter-end backlog expansion signals visibility for revenue, with investment focus sustained on organic growth, cost control, and high-value technical services. Organic growth is projected to be led by Consulting Engineering and Geospatial, while Inspection & Mitigation is expected to recover in the latter half of the year due to seasonality and project timing.

• CEO Heraud said, "no additional lost sites since last year." in Inspection & Mitigation, and outlined targeted leadership and commercial initiatives to pursue new site opportunities.
• CFO Schultes confirmed synergy realization efforts are "ahead of schedule on synergy actions with approximately $17 million of the $25 million cost program now actioned."
• Data center revenues reached $80 million trailing twelve months with a backlog of similar size, contributing around 5% to total revenue, with management focused on extending participation in ongoing operations beyond build-out.
• Geospatial segment's normalized growth is characterized as "mid-single digits," according to CFO Schultes, with future expansion potential underscored by digital transformation demand and upcoming Investor Day segment review.

INDUSTRY GLOSSARY

• Call-out and Outage Work: Emergency or planned client-requested technical service for equipment downtime, inspection, or maintenance.
• Rope Access: A specialized inspection or maintenance technique involving the use of ropes and related equipment for difficult-to-access industrial structures.
• Backlog: The total value of contracted work not yet completed; an indicator of future recognized revenue.
• Adjusted Gross Margin: Gross profit as a percentage of revenue, adjusted for certain non-recurring or non-cash items.
• Adjusted EBITDA: Earnings before interest, taxes, depreciation, and amortization, adjusted for non-recurring or non-cash items.
• NV5: Company acquired by TIC Solutions in 2025, referenced here as the driver for ongoing integration and synergy realization.
• White Space Opportunities: Underserved or uncovered market segments where expansion can yield additional business growth.
• LiDAR: Light Detection and Ranging, a technology for mapping and geospatial data collection through laser scanning.
• Hyperscaler: An enterprise that provides scalable cloud computing infrastructure; often among the largest buyers of data center capacity.
• CFD (Computer Fluid Dynamics): Advanced engineering modeling used in data center optimization.

Full Conference Call Transcript

Andrew Shen: Thank you, operator. Good morning, everyone, and thank you for joining the call. Joining me this morning is Ben Hard, our Chief Executive Officer; Kristen Chultas, our Chief Financial Officer; and Robbie Franklin, Executive Chairman. I would now like to remind you that certain statements in the company's earnings press release and on this call are forward-looking statements that 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 detailed material risks that may cause our future results to differ from our expectations. Our statements are as of today, May 6, 2026, 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 first quarter financial performance on the Investor Relations page of our website at ticsolutions.com.

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 in our presentation. For the purposes of this call, we refer to our segments as Inspection and Mitigation, or I&M, Consulting Engineering, or CE and Geospatial or GO. Any reference to combined results reflects a non-GAAP combined view of legacy Acron and legacy NV5, where applicable for period-to-period comparability. More details on the calculation of the combined results are included in the presentation. It's now my pleasure to turn the call over to Ben.

Benjamin Heraud: Thank you, Andrew, and good morning, everyone. Before I begin, I want to say how proud I am to lead this talented organization. Over the past several months, I've seen strong support from our leaders across the business and from the field and technical professionals who serve our clients every day. We have started 2026 with healthy momentum across the business. First quarter results reflect the strength of our combined platform, the resilience of our recurring and nondiscretionary services and the demand drivers that support tech solutions. This includes aging infrastructure, increasing energy demand, increasing data consumption and the digitization of the physical world.

We believe these megatrends will continue to drive demand across our business and expand the need for technical services that enable us to turn data into solutions for our clients. These tailwinds inform our strategic priorities, winning in essential high-demand end markets and geographies, expanding our role across the asset life cycle and client relationships and driving higher value growth through technical differentiation and disciplined capital allocation. These priorities are supported by the breadth of our business. Through consulting engineering, we help clients plan, design and commission critical assets and infrastructure. Through inspection and mitigation, we help clients maintain asset integrity, reduce downtime and address reliability needs.

Through Geospatial, we help clients capture, process and interpret asset and location data at scale. Together, these capabilities position Tech Solutions as a life cycle partner rather than a point solution provider. Our 2026 operating objectives are directly aligned with these strategic priorities. First, to win in essential high-demand end markets and geographies, we are focused on driving organic growth across the platform. This means expanding scope and market share and pursuing attractive opportunities to sell additional capabilities. Second, to expand our role across the asset life cycle and client relationships, we are strengthening organizational alignment and cross-segment collaboration.

That includes improving how we manage accounts, deploy resources, support our field and technical teams and bring our capabilities together for our clients. Third, to drive higher value growth, we are focused on margin expansion and disciplined capital allocation. That means maintaining pricing discipline, improving utilization, managing costs, enhancing service mix and directing capital towards the highest value opportunities. In the quarter, we saw growth across transportation, infrastructure, utilities, manufacturing, midstream energy and data center end markets. We remain focused on converting these trends into sustainable, attractive and profitable growth. With that framework in mind, I'll walk through the performance across our segments and highlight where we are seeing progress against these priorities.

Consulting Engineering delivered strong performance in the quarter with revenue increasing 9.5% year-over-year. We experienced broad-based revenue growth, offsetting pressure from timing in LNG engineering and power delivery. Adjusted gross profit increased 11% year-over-year and adjusted gross margin expanded 60 basis points, reflecting strong execution, improving mix and continued demand for high-value technical services. Data centers were the largest driver of growth in the first quarter, supported by hyperscaler and mission-critical infrastructure activity across both domestic and international operations. AI, cloud adoption and enterprise digitization continue to increase demand for data consumption storage and mission-critical uptime. Our focus is on capturing that demand where we have the right capabilities, client relationships and return profile.

Consulting engineering also saw broad-based growth across several core capabilities, including civil program management, geotechnical and materials testing and buildings. Overall, Consulting Engineering's first quarter performance demonstrates the value of technical capabilities we offer across infrastructure and the built environment. The segment continues to benefit from durable demand trends tied to aging infrastructure, infrastructure investment and growth in key regional markets. Our performance also shows the operating leverage that can come from better utilization, focused execution and delivery of higher-value services. Geospatial also performed well, growing 4.5%, supported by strong commercial and utility demand, healthy fleet utilization and continued interest in geospatial digital transformation solutions. The team continues to pursue technically complex work across multiple markets and geographies.

Recent examples include deep sea hydrographic survey work tied to rare earth minerals and advanced LiDAR and imagery opportunities internationally. These demonstrate the breadth of our capabilities and the ability to scale and apply specialized technical expertise across borders. We are also advancing our Geo AI efforts with a focus on improving processing efficiency, automating workflows and expanding higher-value analytics. We look forward to discussing these capabilities in more detail at our Investor Day, including how they support our broader Geospatial platform over time. Quarter end total backlog within Consulting Engineering and Geospatial was $1.12 billion, up approximately 14% from $983 million at the prior year quarter end.

This backlog expansion, combined with the solid commercial execution supports our confidence in continued momentum and near-term outlook. Inspection and Mitigation delivered a steady result with revenue essentially flat year-over-year. While results were below our long-term expectations for the segment, the team remained focused on margin integrity, disciplined staffing and prioritizing higher quality, higher-margin opportunities. In the first quarter, our callout and outage activity increased moderately, helping offset lower sustaining capital work and continued pressure in certain regions. Performance was stronger in areas such as industrial road access, containment and in-lab services, and we're focused on replicating that execution more consistently across the I&M footprint through disciplined opportunity selection, stronger local accountability and a higher mix of high-value technical services.

Inspection and mitigation demand continues to vary by end market and geography. Customer focus on throughput, uptime and critical integrity work remains intact, but broader market uncertainty is creating more variability in customer decisions around planned outages and scheduled maintenance, including timing, scope and duration. In the quarter, certain planned outage work shifted from the second quarter to the third quarter and some work was resized as customers remain selective on near-term spending. Performance pressure remains concentrated in the Gulf Coast, where LNG construction timing and several 2025 site losses continue to weigh on year-on-year growth. We are managing through these dynamics while expanding in areas we have a proven track record and pursuing new white space opportunities.

We continue to execute on the operating model changes we outlined last quarter with a focus on regional accountability, cost control and more consistent opportunity sourcing. As discussed on the previous call, we have strengthened regional leadership in the segment and are adding both new and returning leaders in key areas to drive operational efficiency and commercial focus. As we move through the year, we expect I&M performance to benefit from normal seasonality, outage activity and stronger conversion of commercial opportunities while remaining disciplined on margin and work selection. To recap, Consulting engineering and Geospatial continued to benefit from strong demand and differentiated capabilities, while inspection and mitigation remains focused on improving execution, accountability, pricing and resource deployment.

Across the platform, integration is improving how we manage accounts, expand services and control costs. Together, these actions position us to deliver durable growth, improved profitability and stronger cash flow over time. We are looking forward to hosting our Investor Day on Tuesday, May 19, in New York City. We plan to discuss the next phase of the TIC Solutions story, including our long-term growth framework, margin expansion plans, capital allocation priorities and how stronger execution can create additional value across the business. And with that, I will turn the call over to Kristen to review the financial results for the first quarter, provide an update on integration and offer more detail on our outlook.

Kristin Schultes: Thank you, Ben, and good morning, everyone. In the first quarter, total revenue was $488 million. On a combined basis, total revenue grew 4.3% year-over-year or 3.1% in constant currency. Organic growth on a combined basis was 2.2%. Adjusted gross profit for the quarter was $180 million, up 3.8% from the combined adjusted gross profit of $174 million in the prior year period, driven primarily by revenue growth and margin expansion in Consulting and Engineering. Adjusted gross margin was 36.9%, roughly flat compared with the combined margin of 37.1% in the prior year period as Consulting Engineering margin expansion was offset by mix and margin pressure in Inspection & Mitigation.

Inspection & Mitigation contributed first quarter revenue of $235 million, up 0.3%, driven by increased call-out and outage work and offset by lower sustaining capital activity. Inspection & Mitigations adjusted gross margin was 24.4% for the quarter compared with 25.2% in the prior year period, reflecting the impact of mix from less sustaining capital work. Consulting Engineering contributed first quarter revenue of $187 million, up 9.5%. Consulting Engineering's adjusted gross margin was 47.6%, up 60 basis points from 47.0% in the prior year period, driven by strength in infrastructure and building design and commissioning. Geospatial contributed first quarter revenue of $66 million, up 4.5%, driven by healthy demand from utility clients.

Geospatial's adjusted gross margin was 51.0% compared with 54.2% in the prior year period, impacted by a pilot project that carries a higher proportion of subcontractor costs and a lower gross margin profile. We believe this work is highly strategic and supports higher value growth over time with a key client. Adjusted SG&A for the quarter was $123 million or 25.2% of revenue. This continues to be a critical focus area as we work to drive SG&A leverage through synergy realization as well as cost discipline in the business. Adjusted EBITDA was $57.7 million compared to combined adjusted EBITDA of $55.6 million in the prior year period, representing growth in line with the increase in combined revenue.

Adjusted EBITDA margin was 11.8% compared with 11.9% a year ago on a combined basis, reflecting a path towards improved operating leverage. From a cash flow perspective for the quarter, operating cash flow was $10 million and capital expenditures were $6 million. The operating cash flow reflects the expected seasonality of the business, which includes greater working capital intensity in the first half of the year. Moving now to our balance sheet and capital resources. As of March 31, 2026, we had total liquidity of $537 million, including $427 million of cash and $111 million of available capacity under our revolving credit facility. Total term loan debt was $1.6 billion. Our capital allocation priorities remain unchanged.

We remain focused on investing organically in the business and using free cash flow to provide additional flexibility for disciplined acquisitions while achieving lower leverage over time. Turning to integration. We continue to make great progress capturing the benefits and cost synergies associated with the NV5 combination. Importantly, we are ahead of schedule on synergy actions with approximately $17 million of the $25 million cost program now actioned on an annualized run rate basis. We now expect realized savings in 2026 to be roughly $15 million, modestly above the $12.5 million we discussed in previous quarters. These actions are intended to create lasting efficiencies in the combined cost structure and support margin expansion as our business scales.

Now turning to our unchanged outlook. For the second quarter, our guidance reflects revenue of approximately $570 million to $582 million and adjusted EBITDA of approximately $90 million to $96 million. At the midpoint, this implies an adjusted EBITDA margin of approximately 16.1% for the second quarter, which would represent margin expansion year-over-year. We are reaffirming our previously issued full year 2026 guidance of $2.15 billion to $2.25 billion of revenue and $330 million to $355 million of adjusted EBITDA. At the midpoint, our guidance implies approximately 4% revenue growth and 10% growth in adjusted EBITDA against our 2025 combined results with an adjusted EBITDA margin of approximately 15.6% at the midpoint.

By segment, on a combined basis, we expect CE and GEO growth to outpace growth in I&M for the full year. In Inspection & Mitigation, our outlook assumes a back half weighting supported by normal seasonality and the anticipated timing of certain outage and sustaining capital work. For 2026, we anticipate net interest expense of $95 million to $105 million, cash taxes in the range of $25 million to $35 million and capital expenditures of $55 million to $65 million. We typically see a working capital build as activity ramps through the first half of the year, followed by stronger cash conversion in the second half as collections catch up with revenue.

We manage and evaluate free cash flow primarily on a full year basis, and we continue to expect healthy free cash flow generation over the full year. With that, I'll turn the call back to Ben.

Benjamin Heraud: Thank you, Kristen. The first quarter reinforced the resilience of our business model and the benefits of our diversified platform. As discussed at the start of the call, the trends around aging infrastructure, increasing energy demand, increasing data consumption and the digitization of the physical world continue to support demand for the essential technical services we provide. As we move through 2026, we remain focused on the strategic priorities that define how we create value, winning in essential high-demand end markets and geographies, expanding our role across the asset life cycle and client relationships and driving higher value growth through technical differentiation and disciplined capital allocation.

We are seeing progress against our top priorities while recognizing there is more work ahead. I want to close by acknowledging the strength of this organization and the leaders across our business. TIG Solutions has a significant long-term opportunity supported by a highly engaged team, strong cultural alignment and essential technical capabilities across resilient end markets. Our teams have continued to execute with discipline and focus while staying centered on our core purpose of delivering for our clients every day. With that, operator, we're ready to open the line for questions.

Operator: And we'll take our first question from Chris Moore with CJS Securities.

Unknown Analyst: So you exited some lower-margin customers contracts in inspection and mitigation in 2025. Just trying to get a sense if that process is still ongoing in '26.

Benjamin Heraud: Yes. We're still maintaining discipline around our pricing and approach to the market. We're sort of seeing price increases amongst a number of our contracts, and we will continue to stay disciplined on our pricing model.

Operator: Got it.

Benjamin Heraud: Just to point out, no additional lost sites since last year.

Unknown Analyst: Got it. In terms of the 4% organic growth that you're targeting in '26, maybe just from a big picture perspective, can you walk through the segments or subsegments and kind of rank those where you have the most visibility for the year and perhaps those where visibility is a little bit more limited at this point in time?

Kristin Schultes: Yes, sure. I'll take that Chris. So if we look at our full year guidance at that midpoint, I think we haven't provided segment level guidance, but I would tell you that with the visibility that we have that our outlook for growth for Consulting Engineering and Geospatial is higher than I -- if we look at what drives confidence in our ability to deliver that, we have backlog within GO, which provides a lot of visibility. And as we disclosed that our backlog is up significantly. And also just with our internal flash and forecasting process within the I&M business, we also have good visibility.

And inherently, things are moving, but we have good visibility to kind of what's to come. So this is our high conviction number and feel good about our ability to deliver in 2026.

Unknown Analyst: Terrific. Very helpful. This one may be more for Investor Day. But just last one. Geospatial growth has bounced around a little bit, 4.5% this quarter. still sounds like lots of opportunities there. Just trying to get a sense for what a reasonable expectation is for a normalized annual growth rate for Geospatial.

Benjamin Heraud: I think we'll continue to see good growth within it. We're pleased with the performance of Geospatial. We did have a little bit of margin pressure from that one project we pointed out earlier. But for the most part, there's a lot of digitization required around the world, and we have a very scalable platform that we're excited about expanding and growing.

Kristin Schultes: Chris, you'll have an opportunity to meet the leader of our Geospatial business in a few weeks at our Investor Day, and he'll speak more to the long-term growth outlook of the segment. I think what you're seeing in the mid-single digits is the right way to think about it.

Operator: We'll move next to Thomas Sano with JPMorgan.

Unknown Analyst: I would like to ask about the IM business. Could you quantify the revenue and margin impact of each key headwind you talk about? Excluding these, like what do you see as the segment's underlying growth and margin potential? And what is your outlook for the recovery? And there any specific KPIs you are targeting in this business?

Benjamin Heraud: Yes. Look, we're tracking a number of KPIs, and I would say, I would point to the Gulf has been an area of focus around improvement. We're seeing month-on-month improvement there. And with the leadership that we put in place earlier in the year, we're now just seeing a very aggressive commercial approach to that business. We talked earlier on the call about some shift with some outage work into Q3. That was known and sort of expected. Some real positive signs also around service line expansion. Our rope access group is up 9% and our in-lab work is up 20%. So also good indications of the business and its potential growth later in the year.

Unknown Analyst: And follow-up on data centers in S business. What is your outlook for growth in data centers? What proportions of total revenue do you expect these segments to represent in 2026 and 2027?

Benjamin Heraud: Yes. So use round numbers around 5%. We continue to see very, very nice growth within that business. We remain very excited about it. The U.S. business is starting to really -- the efforts that we've put in over the last couple of years are really starting to pay dividends, and that is growing at a really nice clip. -- now. So it's -- trailing 12 months was around $80 million in revenue. Backlogs of a similar amount. So we have a very strong line of sight into a strong year ahead.

Operator: We'll move next to Kathryn Thompson with Thompson Research Group.

Kathryn Thompson: Just first, big picture, you're approaching in June, first full year of NV5 as part of TIC Solutions. How is the integration as we approach the year mark? What has worked and what are areas for continued growth?

Benjamin Heraud: I'll just sort of start at a high level and then let Kristen get into some more detail. I'd just say, and I've said this before, how pleased I am with the cultural alignment between the 2 organizations and the general level of excitement around bringing each company's services to their clients. And I think that's really starting to show in some of the activity we have around service line expansion with our clients. I'll let Kristen dig into a bit more detail.

Kristin Schultes: Yes. Thanks, Catherine. I'd love to talk about integration. So just a reminder, we closed in August, so that's when we'll hit the 1-year mark. From an integration milestone perspective, look, like I mentioned, we're ahead of schedule on and the actions. And we had a few million of savings in this quarter, and that's going to continue to ramp for the full year, and we expect $15 million of savings to flow through the P&L this year, which is really exciting. I'm proud of the leadership team that we have leading that integration for us. And in the quarter, we hit some key milestones. We exited or reduced 4 sites. We've accomplished 13 to date.

I think we've got 40 on our road map, and those are either reductions in footprint or exits of sites. We have added some key leadership additions to the team in different functional areas that are helping drive really creating scalability for this organization as we continue to grow and look to become an even larger organization and continue to grow. We have hit some internal system implementation milestones. We've stood up a shared services function within the finance organization and using technology. So lots of good exciting activity on the integration front.

Kathryn Thompson: Okay. Obviously, a lot of focus on AI build-out, but also the energy build-out is critical and gaining more headlines. And really, the build-out includes generation, energy storage and transmission. When you think about those 3 legs of the stool, how does TIC solutions play in the energy build-out that's supporting not just only AI, but the broad reindustrialization of the U.S. market?

Benjamin Heraud: Yes. I mean they're directly related aren't they, I mean the energy demand coming from AI and other areas. The 3 that you pointed out are areas that we're very well positioned for power delivery, the engineering work that we do around that right through from transmission to distribution to substation design. We actually just were awarded an energy storage project within the consulting and engineering group recently, a first of its kind, which is really exciting.

And on the generation side of things, both -- it's an area that our NDT and inspection business works in, and it's actually quite an exciting opportunity we're working on at the moment, bringing together the data center expertise that we have in engineering and inspection and mitigation. So I think we're very well positioned for that growth in that area.

Kathryn Thompson: So if I'm hearing correctly, you're there for the build-out, but also for the follow-on inspection work that one way to think about it?

Benjamin Heraud: Yes. And also I would point to Geospatial, we fly 150,000 miles of lines every year. That's been growing, and that's recurring work that we do for utilities.

Kathryn Thompson: Okay. Great. And when you look at say, 12 to 18 months from now, where do you see -- and you see kind of the end market exposure for TIC. What areas do you see growing the most as a percentage of total overall mix? And what may -- just by sheer growth in other markets may be shrinking. So it's broader because before, if you -- infrastructure with the mix was 25% in data centers were just 2%, but data centers obviously has grown a bit more than that. So high level, what are the areas of the greatest growth in terms of mix? And then speak to the margin profile of the growth areas.

Benjamin Heraud: Yes. No worries. I mean I think if I were -- I wouldn't point to any areas shrinking, but there's obviously areas that we have more tailwinds and that we're more well positioned for. Energy, certainly, when you look at both generation and distribution, as I mentioned, we're well positioned for, and we do expect to continue to grow. The built environment in general is an area that is going very well for us, and we will continue to see. And then infrastructure across all segments is an area where just with aging infrastructure, the additional demand that is going on it, we just see a lot of tailwinds in that area, and we'll continue to grow.

Operator: We'll move next to Jeff Martin with ROTH Capital Partners.

Jeff Martin: I wanted to dive in a little bit on progress you're making with the initiatives on I&M. And are you seeing an expanding pipeline opportunity there, particularly given the chemicals business appears as though it has the potential to turn around here?

Benjamin Heraud: Yes. We've actually had some positive signs on the chemicals side recently in our sales pipeline. We sort of talked about the reorganization efforts that we were doing on the U.S. and particularly the Gulf Coast I mentioned earlier, I don't want to bang on about it too much. But I'm just really pleased with the leadership that we have in place and the tone in the meetings -- we're definitely taking an aggressive approach to getting to new sites. And we have a nice pipeline of opportunities that I see.

Once we get through this wrap effect of the lost sites into the second half of the year, we're expecting growth and very pleased with the progress that we've been making with the leadership there.

Jeff Martin: Yes. And it's great to hear you have not lost additional sites since last quarter. I wanted -- my follow-up question was on GEO. I know contract renewals on the federal government level are always kind of a tricky point as we transition out of the end of the year. And I know there was a little bit of headwind exiting last year on contract renewals. Just curious if you could give us an update there.

Benjamin Heraud: Yes. We haven't seen any major disruption there. They've sort of been coming in at the expected clip. So I think the bumps in the road that we had in Q4, we're not seeing signs of continuing at the moment.

Operator: We'll take our next question from Andy Wittmann with Baird.

Andrew J. Wittmann: So I guess I wanted to just ask a little bit more on the C&I segment. I heard that the call out in the lab testing work was good. That's about half of the segment. So I guess what I'm trying to understand is the -- obviously, when you lose a run and maintain, you got to go 4 quarters till the comps ease and you talked about how that gets better in the fourth quarter. How much of the kind of softness is just the fact that a couple of quarters ago or a quarter ago, you lost some of those contracts? And how much of it is really kind of systemic or uncertain demand?

And can you talk about the uncertainty in the demand? Is that just because of volatile oil prices? Is it something else? And what does it take for better visibility to return to that market so that you can have a better sense of the timing and the scope of services that you're likely to do?

Benjamin Heraud: Yes. I mean you're right. The run and maintain business is our most stable piece and it sort of drives some of the more higher-margin work, and we need to get back to winning new sites, which is sort of talking about the commercial discipline and focus that we've got. I'm confident we'll get back to, especially as we get past the ramp effect of these lost sites. Talking about uncertainty or volatility, where we're seeing that is with the outage work, and we called out the shift in some of that work from Q2 to Q3. This is nondiscretionary work that needs to be done. So they're going to need to do it at some point.

And so we'll expect that work to start to flow in.

Kristin Schultes: And Andy, I would just add that we certainly recognize the macro volatility that's out there right now. And I think the structure of our I&M business is fairly diversified compared to some of our other comps. We've got less than 10% of our I&M revenue is outage work, which is 5% of the combined business. Our refinery oil and gas exposure is less than 50% of our consolidated results as well. So we're potentially less impacted by timing and also less impacted by direct oil prices. we're focused on staying disciplined with regard to inflation pressures, whether it be with rates and fuel charges and whatnot.

Andrew J. Wittmann: Yes. Just as an addendum to that question, what -- how has the competitive environment evolved against that volatility? Obviously, any time you're losing sites, that's a competitive dynamic. Has it improved or changed at all since late last year to what you're seeing this year for that? It sounds like then you've got some initiatives there, new leadership, talking about kind of motivating the team to get these new sites. What does it take? And what's it looking like right now competitively for those?

Benjamin Heraud: Yes. In some cases, it's getting the culture right in the region, getting some of the leadership back that we had and that they bring work with them. So we've seen some really good initiatives around that. There has been some pricing pressure in the Gulf in particular. I think some of that's short-lived, and we're maintaining our discipline around that. And we've got a good line of sight on some pretty good opportunities.

Andrew J. Wittmann: Okay. And then maybe just one last question. Just kind of looking at the cash flow statement, Kristen, it looks like -- obviously, the first quarter is always seasonally weak. I understand that. But just looking at the working capital here, your contract assets were a pretty big consumer of capital. Is that a result of -- you had a reference to like a larger contract where there was some subcontracted scope. Is that what we're seeing there? Is there like a percentage of completion projects that you're using a lot of subcontract labor? And is that why that contract asset is consuming capital right now?

And when do you think that, that account can reverse and start giving you back some of that capital?

Kristin Schultes: Yes. Good question, Andy. It was a big focus area of mine as well. I would say that there were a couple of larger billings that went out in early April that should have gone out in March, and that was the driver. We've got an isolated list of what those were. If you look at what else went through the cash flow statement in the quarter that was unusual, we did clear out some contingent payments for previous acquisitions, and that impacted the cash during the quarter as well. So the subcontractor cost by nature didn't drive the contract assets, but driving contract assets is a key focus of ours.

Operator: We'll move next to Josh Chan with UBS.

Joshua Chan: So maybe just a strategic one. I guess at the branch level, how would you say your combined company vision is being translated or proliferated at the branch level? Like how would you assess that at the moment?

Benjamin Heraud: Yes. So we have a very -- like a commercial -- centralized commercial team that is absolutely focused on educating our branches on what the services they now have at their fingertips to take to their clients. So we have a very programmatic approach to that, that's driven from the top. We drive a very entrepreneurial culture throughout the organization. So the leaders at the branch levels are naturally very interested in what they can be bringing to their clients. And that's something that we really cultivate as a business, and that's what helps us drive our organic growth.

Joshua Chan: Okay. I appreciate that. And then maybe on consulting engineering, obviously, a very good quarter. What's the right run rate for that business in terms of growth? I wonder if you can think about it from a matter of volume or hours plus price. Is that how you think about growth in that business?

Benjamin Heraud: I mean, yes, volume and price, but I would say half of it is fixed fee, we really position ourselves at the higher value end of the work that we do to command solid pricing. And I would expect the growth path that we've got to continue. We have some really, really nice tailwinds with that business, point again to that backlog being up 14%. That's a very strong indicator of the strength of that business right now.

Operator: We'll take our next question from Stephanie Moore with Jefferies.

Stephanie Benjamin Moore: I wanted to maybe circle back to some of the commentary around data centers. Look, I think, obviously, you're seeing some of the benefits of that growth and those investments that are being made. But could you also talk about what this can mean from a longer-term standpoint and just remind us about -- obviously, there's the build-out opportunity, but then kind of the ongoing opportunity that we could expect to see where you guys would benefit because I think there's a little bit of a misunderstanding that there's certainly a long tail here.

Benjamin Heraud: That's good, and I'm glad you asked that question because we are really focused on making sure that we're heavily involved in the ongoing operations of data centers. The services that we have position us really well for that actually. So only about 15% of the revenue we do in data centers is associated with ongoing operations right now. But if you think about that's growing. And if you think about what happens in these data centers, the technology is changing all the time. And so as they bring these new servers in, they require engineering, retro commissioning, CFD, computer fluid dynamics. These are all things that we do, and we're working with our clients ongoing.

We also have a program management owners rep service that applies to data centers. So we are very, very focused on making sure that this isn't a one-off with all the work that we do and that we have a strong tail with each of these sites that we touch.

Stephanie Benjamin Moore: Great. That's very helpful. And then maybe just thinking about -- I guess, just thinking about the underlying business, as you think about just what -- as you think about the cross-selling opportunity, I know you touched on this a little bit, but I think if we think back to the original merits of NV5, there were significant cross-selling opportunities. So maybe just help us focus on what might be the more immediate benefits that we could start to see and what actions -- and I guess, more importantly, what actions have been taken behind the scenes from either management or operations level that allow you to go and capture those revenue synergies?

Benjamin Heraud: Yes. Great. We have a team that actually reports directly to me that's 100% focused on driving cross-selling through the organization. as you know, NV5 had a very strong cross-selling program, and we've extended and improved upon that for the FI Solutions platform. I would say as we're getting more mature with it, we are starting to see the trends in the areas that we can get more behind and focused on. Some examples is we're seeing clients really excited about the fact that we can do materials testing and quality assurance along with our NDT capabilities. So sort of a turnkey approach there.

Pipeline and integrity, all segments have exposure there and bringing all the capabilities that we have sort of seamlessly is also something that we're excited about. And then around infrastructure and bridge inspection, that's an area where NV5 has very strong credentials, and we're bringing along our rope access and inspection capabilities and called out some specific projects last quarter. So just a few examples at a strategic level of where we're seeing opportunity. But I'm really pleased with the activity and the momentum that we're gaining around our cross-selling program right now.

Kristin Schultes: And Stephanie, I would just add that we look at cross-selling more broadly even and see tremendous opportunity for service line expansion within the segment as well. So if you think about growth access opportunities in lab engineering, cross-selling within I&M as well as geospatial across to consulting engineering. So from a broad perspective, tremendous opportunity from a white space perspective within our existing customer base and also within M&A market.

Operator: And it does appear that there are no further questions at this time. I would now like to hand back to Ben for any additional or closing remarks.

Benjamin Heraud: Yes. Well, thanks, everyone, for your questions and for your continued interest in Tech Solutions. We remain focused on growth, execution and delivering on our commitments. We look forward to seeing you all at our Investor Day later this month, hopefully, and updating you on our progress next quarter. Thanks, everyone, and have a good day.

Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

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