TIC Solutions, Inc. (TIC) Q2 2026 Earnings Report, Transcript and Summary

Hello, and welcome, everyone, joining today's TIC Solutions Second Quarter 2026 Earnings Call. [Operator Instructions] Please note, this call is being recorded. It is now my pleasure to turn the meeting over to Andrew Shen with Investor Relations. Please go ahead.

Thank you, operator. Good morning, everyone, and thank you for joining the call. Joining me this morning is Ben Heraud, our Chief Executive Officer; Kristin Schultes, 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 detail material risks that may cause our future results to differ from our expectations. Our statements are as of today, August 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 second 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 C&E, and Geospatial or GEO. Any reference to combined results reflects a non-GAAP combined view of legacy Acuren and legacy NV5, where applicable for a 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.

Thank you, Andrew. Good morning, everyone. I want to take a moment to thank our shareholders for their continued support and our team members across the organization for their hard work and dedication to our clients. Our second quarter demonstrated solid execution across the platform. We delivered double-digit growth in Consulting & Engineering, strong growth in Geospatial and improving commercial indicators in Inspection & Mitigation as we enter the second half of the year. Cross-selling is working across the business and margin expansion is underway with consolidated adjusted EBITDA margin improving year-over-year as we progress towards our long-term target of 18%. Our services are in high demand. Aging infrastructure across the globe requires sustained investment in inspection, engineering and geospatial services. Growing energy demand is driving investment in power delivery, grid reliability, LNG and other energy infrastructure. Increasing data consumption supports the construction, commissioning and technical services required for data centers. Finally, the digitization of the physical world is increasing demand for the data, analytics and asset intelligence capabilities that help clients better plan, operate and maintain their critical assets. These megatrends reinforce the strategy we outlined at our Investor Day. We are building a more integrated company, increasing our exposure to attractive end markets, expanding our capabilities across the asset life cycle and improving margins through a more favorable service mix, higher utilization, cost discipline and improved opportunity selection. We are also executing on our strategy to expand geographically where we have established technical capabilities and strong leadership. Our M&A pipeline remains active, and we see a number of compelling opportunities ahead that we expect will expand our geographies, end markets and capabilities in ways that are complementary to the existing platform. We continue to build on our position as a tech-enabled life cycle partner, supporting clients from planning through construction and ongoing operations. Bringing those capabilities together allows us to address a broader portion of client needs than a single service provider can. We are receiving positive feedback from clients as they learn more about the breadth of our capabilities. In many cases, clients have been pleased to learn that we can support multiple needs across the asset life cycle. We are seeing this model translate into commercial results as cross-selling becomes a TIC-wide opportunity with our teams engaging clients across multiple service lines. This is expanding our scope of work and creating opportunities that would not have existed as separate businesses. That momentum is reflected in our record combined C&E and GEO backlog, which increased 20% year-over-year to $1.18 billion, providing high visibility as we enter the second half of 2026 and into next year. A recent example illustrates how this works in practice. A municipal client awarded us multiple assignments to support the life cycle of its bridges and water pump stations, including the development of digital twins to assist with Engineering, Inspection & Mitigation. The work translates asset data and condition assessments into actionable engineering and operating programs, positioning our Inspection teams to support the resulting work. It also creates a repeatable model that we can take to bridge and infrastructure owners globally. That is the integrated platform working as intended. Next, our focus on essential high-demand end markets continues to accelerate our growth and margin expansion goals. Our buildings end market increased 28% year-over-year to $115 million in the quarter. Our industrial manufacturing and metals business grew over 40% to $56 million, while power and utilities increased 11% to $90 million. Aerospace and defense also saw significant momentum with revenue up over 40% to $10 million. These markets benefit from long-term investment requirements and technical complexity, and they align well with the breadth of our platform. Technology and AI are also creating opportunities to be more efficient across the business. TIC Solutions operates at significant scale with thousands of active client engagements, a productive field workforce and complex technical workflows across our 3 segments. We have a number of AI initiatives underway to improve knowledge access, streamline workflows and accelerate decision-making. For example, our procedure knowledge assistant allows field technicians to query internal procedures, while our engineering report assistant helps engineers search and summarize historical reports so prior technical knowledge can be applied more efficiently to current projects. We're also using document intelligence tools as a second set of eyes across contracts, purchase orders, RFPs and certifications, helping identify inconsistencies, risks and potential compliance issues. Over time, we expect the cumulative benefit of tools like these to support utilization, cost discipline and margin expansion. With that, I'll turn to segment performance, beginning with Consulting & Engineering. Consulting & Engineering delivered record second quarter revenue of $207 million, up 16.8% from the prior year. Growth was driven by continued strength in power and utilities, buildings, infrastructure and data centers, reflecting both favorable end market exposure and solid execution across the segment. Aging infrastructure is driving ongoing investment in highways, water, transportation and related public assets. Rising electricity demand is supporting spending across power generation, transmission, distribution and grid modernization. Larger developers are executing substation programs at scale, moving sequentially from one project to the next, and we are well positioned and winning in this space. Recent wins include grid hardening work for a 230,000-volt transmission infrastructure, demonstrating our team's highly technical capabilities and a multiyear agreement with a large California utility, representing one of the most expansive awards in the power business unit's history. Battery storage is an additional area of growing activity as clients increasingly pair power generation with storage investments. The depth and breadth of our power delivery capabilities, combined with the demand, we are seeing gives us confidence in the long-term growth of this end market. Data centers remained a significant contributor to growth. Trailing 12-month revenue reached $98 million, and our data center backlog has grown to over $110 million, providing strong line of sight into the second half of the year. We continue to layer in additional services as clients invest in mission-critical capacity, reliability and expansion. Overall, C&E continues to benefit from attractive structural demand, differentiated capabilities and a growing ability to serve clients across a broader set of technical needs. Turning to Inspection & Mitigation. Second quarter revenue was $297 million, down 5.5% from the prior year. As discussed on our prior earnings call, this performance was contemplated in our Q2 guidance and primarily reflected 2025 site losses, along with the timing of planned outage work that shifted from the second quarter into the second half of the year. While the quarter was below our long-term expectations for the segment, commercial indicators have significantly improved. Call-out work grew during the quarter, and we were awarded multiple new run and maintain sites and meaningful new awards supporting client capital projects. Our open commercial proposal pipeline for the next 12 months is robust and supports our expectation for stronger commercial momentum through the balance of the year, and we were encouraged to see June revenue turn positive year-over-year. Power and utilities, industrial manufacturing and midstream oil and gas infrastructure continue to show healthy demand. We are also extending the I&M platform into attractive adjacent end markets and geographies, including an emerging position in data centers and traditional infrastructure. As the combined platform grows, we are bringing I&M's inspection and integrity management capabilities to complementary asset classes, creating more opportunities to connect these services with our C&E and Geospatial offerings. Bridges and traditional public infrastructure represent a meaningful expansion of I&M's addressable market. We recently began a multiyear bridge Inspection and NDT engagement, bringing our inspection and integrity management capabilities to transportation assets for the first time at scale. The North American bridge market is large and aging and ongoing public safety and asset condition requirements create the same recurring mandated demand that underpins our core industrial business. We see this as a repeatable model that broadens the long-term opportunity for the segment. The team remains focused on converting this commercial momentum and opportunities into attractive end markets and into profitable growth through disciplined pricing, selective work pursuit, stronger regional accountability and more effective deployment of resources. As we move through the second half of 2026, we expect I&M to benefit from normal seasonal activity, continued site win conversion and further progress in commercial execution. The segment is positioned to return to a more consistent growth profile while maintaining margin discipline. Turning to Geospatial. The segment continued to be a strong performer in the second quarter with revenue of $81 million, up 7.9% from the prior year. Second quarter growth was primarily driven by power and utilities clients with additional momentum across our broader private sector markets. We are encouraged by that progress, which reflects the continued diversification of the segment across end markets and client types. We also completed a major high-profile pilot for federal offshore mapping during the quarter. The project integrated vessel-based survey work, autonomous underwater vehicle imagery, seafloor data collection and physical sample recovery of mineral-rich seabed nodules across a complex deep sea environment. The work supports national priorities related to domestic supply chain independence for rare earth and other critical minerals. It also reflects the technical depth of our Geospatial platform and our ability to serve as an integrator on complex assignments. Given the successful execution of this marquee project, we expect this work to result in significant follow-on opportunities as these programs move towards a broader operational phase. Improved margins in the quarter reflected project mix and timing. GEO revenue and margins reflect the timing and mix of large fixed-fee contracts, which can create variability between periods. We remain focused on asset utilization, disciplined project execution and growing the contribution from higher-value commercial and analytics work over time. We are also investing in technology-enabled digital asset management solutions that help clients convert geospatial data into more actionable information for asset planning, monitoring and maintenance. Overall, TIC Solutions is well positioned to benefit from the continued digitization of the physical world, spanning the built and natural environments. Growing demand from utility, infrastructure and commercial clients for better data and decision support plays directly into our capabilities, and our geospatial offerings can strengthen the broader platform by enabling more integrated data inspection, engineering and asset management solutions across the business. And with that, I'll turn the call over to Kristin to review our financial results, provide an update on integration and offer more detail on our outlook.

Thank you, Ben, and good morning, everyone. Unless otherwise noted, all prior year comparisons reflect results on a combined basis. C&E and Geospatial reflects legacy NV5 results and I&M reflects legacy Acuren to provide a more meaningful view of year-over-year performance. Our second quarter results were in line with our internal expectations. This was led by Consulting & Engineering and Geospatial, which delivered strong growth and margin expansion. Total second quarter revenue was $584 million, up 3.3% from $566 million. Growth was 3.2% in constant currency and organic growth was 2.5%. While reported growth was below the long-term potential of our business, record combined backlog, improving I&M commercial activity, favorable end market exposure and cross-selling momentum support stronger and more consistent growth over time. Adjusted gross profit was $223 million, up 7.1% from $209 million. Adjusted gross margin was 38.2% compared with 36.8%, up 135 basis points. The margin expansion reflected commercial selection and favorable business mix in C&E and GEO as well as improving operating execution across the platform. Adjusted SG&A was $129 million or 22.1% of revenue, compared with 21.2% last year. The increase reflected higher incentive compensation, indirect labor, legal reserves, benefit costs and overhead from acquired businesses, offset by net synergy savings. We remain focused on improving SG&A leverage through cost management, integration initiatives and growth across our business. Adjusted EBITDA was $95 million compared with $89 million in the prior year period. Adjusted EBITDA margin was 16.2% compared to 15.8%, reflecting a 40 basis point improvement and progress towards our margin expansion goals. Second quarter adjusted diluted earnings per share was $0.10. Turning to segment results. Consulting & Engineering contributed revenue of $207 million, up 16.8% year-over-year, with adjusted gross margin of 47.2%, up 75 basis points. The improvement reflected favorable mix and improved operating execution. Inspection & Mitigation generated second quarter revenue of $297 million, down 5.5% year-over-year. As Ben discussed, we had strong growth in call-out work during the quarter. This was more than offset by an approximately $30 million worth of combined impact from 2025 site losses and known shifts in planned outage activity. These factors were contemplated in our second quarter outlook. I&M adjusted gross margin was 28.3%, down 45 basis points, primarily due to lower outage activity in the period, which carries higher margins. Geospatial contributed revenue of $81 million, up 7.9% year-over-year, with adjusted gross margin of 51.5%, up 360 basis points. The improvement reflected favorable mix and project timing. Given the mix of larger fixed fee contracts in the segment, GEO revenue and margins can vary quarter-to-quarter based on project timing and delivery schedules. For the first 6 months of 2026, total revenue was $1.072 billion compared with $1.034 billion in the prior year period. On a combined basis, revenue increased 3.7%, including 2.3% organically. Adjusted gross profit was $403 million or 37.6%. Adjusted EBITDA was $153 million, representing a margin of 14.2%. Adjusted SG&A was $252 million or 23.5% of revenue. For the first half of the year, I&M generated revenue of $532 million, down 3% year-over-year with adjusted gross margin of 26.6%. Consulting & Engineering generated revenue of $394 million, up 13.3% with adjusted gross margin of 47.4%. Geospatial generated revenue of $147 million, up 6.3% with adjusted gross margin of 51.3%. From a capital deployment perspective, we completed 3 bolt-on acquisitions during the quarter, adding technical capabilities and broadening our geographic density across the platform. Capital expenditures were $20 million during the second quarter and $25 million for the first 6 months, approximately 2.4% of year-to-date revenue. During the quarter, we repriced our $1.6 billion term loan, reducing our interest rate by 25 basis points and reducing annual cash interest by approximately $4 million. We also repurchased approximately 1.9 million shares at an average price of $8.33 per share for a total of $16 million under our previously announced share repurchase program. These repurchases reflect our confidence in the long-term value of this business and our focus on high-return investments. Turning to the balance sheet. As of June 30, total liquidity was $474 million, including $362 million of cash and $112 million of available capacity under our revolving credit facility, net of letters of credit outstanding. Bank-calculated net leverage was 3.7x, with the increase primarily reflecting the seasonal working capital build and our share repurchases during the quarter. The second quarter is typically our largest use of cash, reflecting the seasonality of this business. As collections catch up with revenue in the second half, we expect cash conversion to increase. For the full year, we anticipate net interest expense of $95 million to $105 million, cash taxes of $25 million to $30 million and capital expenditures of $50 million to $65 million. 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. Turning to integration. The team has worked collaboratively over the past year to build a scalable integrated back office. That work continues to translate into measurable results. I want to thank the team for their continued effort and commitment. As of June 30, we have actioned $20 million worth of annualized run rate savings, up from $17 million at the end of the first quarter, and we remain on track to deliver the full $25 million run rate program by year-end. We recognized approximately $6 million of savings through the first half and expect approximately $15 million of realized savings in the full year of 2026. Turning to our outlook. We expect third quarter revenue of $610 million to $630 million and adjusted EBITDA of $100 million to $110 million. The outlook reflects improvement across I&M, including planned outage work, run and maintain activity and project demand, along with continued strength in Consulting & Engineering. Year-over-year, this represents 9% revenue growth and 16% growth in adjusted EBITDA at the midpoint. We are reiterating our full year 2026 guidance of $2.15 billion to $2.25 billion of revenue and $330 million to $355 million of adjusted EBITDA. As we continue to unlock the full potential of our business, we look forward to providing further updates next quarter. Our leading indicators are healthy. Our backlog is at a record level. Proposal and commercial activity remains strong and the integration program continues to generate both cost and commercial benefits. With that, I will turn the call to Robbie for his thoughts.

Thank you, Kristin. The second quarter reinforced our conviction in the strategy we outlined at our Investor Day and supports our investment thesis in bringing together Acuren and NV5. Record backlog, early cross-sell results and continued synergy execution are tangible evidence that the integrated platform is creating value beyond what the businesses could generate independently. We are also executing with discipline on capital allocation. During the quarter, we reduced our cost of debt, opportunistically bought back 1.9 million shares and continue to build out the platform through strategic acquisitions. Our objective remains clear: deploy capital efficiently to strengthen the business while continuing to deleverage the balance sheet. The landscape for acquisition opportunities remains robust, and we have been disciplined in our approach to inorganic growth to strengthen our service offerings and geographic reach. The results this quarter support our confidence in the earnings power of the platform and the achievability of the long-term targets we have communicated. We remain focused on scaling the business responsibly, improving margins, converting earnings to cash flow and reducing leverage over time. With that, I'll turn the call back to Ben.

Thank you, Robbie. Before we open the line for questions, I'll highlight 3 key takeaways from the quarter. First, our life cycle model is delivering. Cross-selling activity is increasing, and we are capturing new and expanding scopes of work that further strengthen client relationships. Second, the trajectory of inspection and mitigation is improving. Site and project wins are increasing, commercial momentum is building, and we expect the segment to benefit from planned outage activity and continued conversion of the opportunity pipeline in the second half. Third, our end markets remain supportive. Demand across infrastructure, data centers, utilities and industrial markets is resilient, while our record backlog provides strong visibility as we enter the balance of 2026. We remain focused on the long-term objectives shared at our Investor Day, including our 3/ 18 / 85 goal of $3 billion in revenue and 18% adjusted EBITDA margin and 85% free cash flow conversion by 2029. The progress this quarter on margin expansion, synergies, commercial integration and capital allocation supports our confidence in those objectives and in our full year 2026 guidance. I want to thank our teams across the organization for their focus on clients, execution and operating discipline. With that, operator, we are ready to take questions.

[Operator Instructions] We'll go first to Chris Moore with CJS Securities.

Just keep going on the cross-selling. I know you're just starting to tap that cross-selling opportunity. Is there any way to put, kind of, an approximate value on the cross-selling revenue expected in '26 and a growth factor in '27? Is it having any -- does it have any, kind of, meaningful impact on organic growth this year? Or just trying to size it a little bit better.

Yes. While we're not sort of reporting on the cross-selling numbers itself, it is showing up in the record backlog numbers that we're talking about and the end market exposure that each of our segments are now getting through the cross-selling program. There's many, many examples of the great projects that we're winning because of the breadth of our services under this combined platform. And I think it's -- the momentum that we're getting in the connective tissue in the company is really starting to show up in those cross-selling results.

Got it. And the 9% CAGR you guys outlined at Investor Day, I think Consulting & Engineering, 7% to 9%; Geospatial, 5% to 8%. So in terms of visibility over the next 12 months, is one -- does one have meaningful higher visibility than the other? Just trying to, kind of, understand how you're looking at it in the near term? And the second part of that question was, I know Geospatial has bounced around a little bit quarterly. The assumption is still that's likely to happen over time.

Yes. With GEO, just with the large fixed price contract, that does move around a little bit more than the other segments. Obviously, C&E is performing extremely well. And with that backlog being up 20%, we've got really strong visibility into its continued growth. And I&M, we're very pleased to say it's on year-on-year growth now after the June and we continue to see that moving ahead. So pleased with that. And I think we're very happy to see I&M contribute to our overall growth as we move through the second half of the year and into next.

We'll turn now to Kathryn Thompson with Thompson Research Group.

Just first focusing on Consulting & Engineering segment was up 17%. Good to see strength there. Can you give a little bit more color on the levers for growth in that segment? In other words, more color on organic. You had mentioned cross-selling previously. How much did that play through and overall growth? And any other factors that we should take in consideration for driving that mid- to high teens growth?

Yes. Thank you. Obviously, we're very happy with that growth. And data centers is driving a lot of it. But what I really like is that if you remove data centers from the growth, it's actually still growing at a pace of about 7%. And the vast majority of this is organic. If I was to point to other areas, power and utilities and infrastructure, kind of, in line with these megatrends we talked about at our Investor Day. And absolutely, cross-selling within the segment is contributing to the growth. There's still plenty of runway there for us to capitalize on that.

And Kathryn, we're also -- we've been very focused on utilization. We're seeing some improvements in utilization in Consulting & Engineering as well, which is driving growth. And additionally, the M&A pipeline is extremely robust, and there's a lot of really nice opportunities in the consulting and engineering space, which will help accelerate growth as well.

Yes. Really large addressable market there for us.

Okay. Perfect. And you had indicated previously that there are improving indicators in the Inspection segment. What are these? And just maybe a little bit more color on that.

Yes. Obviously, the June being -- it's only 1 month, but being up year-on-year is really -- it's the first time we've been able to say that in a long time.

And I think this is a part of the plan and the model that we built. A big piece was the ramp effect of the site losses.

Of the site losses in August, and we've talked about that. We're also able to talk about new sites winning. That's a very positive momentum. Many of those were in the Gulf Coast. We're taking price where we can on contracts. And really, I would just say that the structural changes that we have made are really starting to shine through.

Okay. Perfect. And finally, just on backlogs up 20%. Where are you seeing those by project, by segment and by end market?

Yes. I mean it's quite broad. It's across the business. Obviously, again, data centers represents a large portion of it. But other areas, buildings in general, not just data centers, areas like aviation and healthcare are nice growers for us. Power and utilities, infrastructure, industrial. And while small, aerospace and defense has been growing nicely for us recently.

We'll turn now to Josh Chan with UBS.

I guess the legacy NV5 businesses seem to be growing much faster than maybe the long term or at least historically. So I guess in broader terms, do you feel like you're in a period where those businesses can, kind of, have a stronger-than-normal growth driven by some of the factors that you're talking about?

I think the backlog is an indicator of future growth, and that's at record levels. It's up 20%. And I think, obviously, the C&E performance in the quarter was very high but we still feel very, very good about its growth moving through the quarters and into next year. Just really -- we talked about it at the Investor Day, Josh, but those market tailwinds that we have in these megatrends are real and they really are driving the business. The digitization of the physical world, aging infrastructure and this huge increase of pressure on our power grid are all areas that we are capitalizing on and very well positioned to take.

Sure. That's great to hear. And maybe a follow-up on data center. I think historically, that business has been more APAC oriented, but I think you mentioned some growth in the U.S., too. So are you having more success, kind of, coming into the U.S. and doing work here?

Yes, we are. And I think I mentioned last quarter, really getting to a critical mass. It's now 25% of the revenue and continuing to grow as a proportion. So we're really pleased with that. Trailing 12 months revenues at just under $100 million of revenue. Just a nice little bright spot too, that I&M is really starting to see some exposure to the space, and we're rapidly seeing some growth, while it's very small at the moment, very pleased to see that I&M coming into play. And again, that's that cross-selling starting to work.

Excellent. That's great to hear and congrats on the good quarter.

We'll move now to Andy Wittmann with Baird.

So I just want to ask a couple of questions on the guidance and then maybe I'll do an accounting question. So I guess just as I look at the guide here, it implies -- in the revenue guide, it looks like it implies just a slight step-up to hit the midpoint in the second half of the year. This I&M, kind of, timing slippage out of 2Q, I think you previously said in 3Q, now you're saying second half. Has that work started maybe even here now that we're in early August? Or has it been scheduled? I'm just trying to see the kind of visibility that you might get on that. Obviously, I heard the comments on commercial indicators, but there was some defined work that's been slipping. I'm just wondering kind of the status. And is that one of the key variables that causes some of the acceleration that you're basically implying here to the midpoint of the second half guidance?

Yes, absolutely. The teams are ramping up for that work as we speak.

Yes. And I think -- thanks, Andy. I think our second quarter results helped enforce and enhance our confidence in the full year guidance. When we launched the guidance earlier this year, 5 or 6 months ago, we talked about 4% top line growth, 10% growth to adjusted EBITDA. Those -- the assumptions that went into that included things like we planned on winning new sites in I&M. We're winning new sites in I&M. We planned on growing backlog in C&E and GEO, and we're growing backlog at 20%. We planned on improving margins with the synergy program and utilization, and we're seeing that. We had 40 basis points of improvement in the quarter. And we also planned on diversifying end markets and Ben chatted about or mentioned that a bit ago. So I think largely, the year is playing out as we had planned. And so we're excited about a strong delivery for the year.

Got it. Okay. So just maybe kind of a similar question on -- maybe on the margin side then, Kristin, like I guess the second half implied margin percentage is like in the high 16s at the midpoint, which is a pretty good ramp over the first half performance. Obviously, you're going to have the contribution of those synergies and that makes sense. Is there -- and the business is seasonal as well. So I understand those factors. Are there other things besides that? Is it just really the mix of contracts that need to help you get to that margin level? How would you just define what needs to fall into place to hit that -- the accelerated margins in the second half besides those?

Yes, good question. I think there's a little over 100 basis points of improvement baked into the second half. I would put it in the category of mix and execution. So we are seeing growth in the higher-margin end markets. We're seeing improvement in utilization and also just seeing the metrics, the KPIs that we look at internally point us in that direction. So we take the internal forecasting very seriously and have been very thoughtful about the guidance we put forward.

Okay. And then I just wanted to finish up with this one. I'm going to apologize a little bit for it, but because it's a little bit detailed on the accounting. But in Consulting & Engineering and there's this idea of fixed price contracts that get -- you have a year under purchase accounting to mark the value and the profitability of those contracts to market. In this quarter, it appears that you revalued some contracts. The effect of that basically increases goodwill. It decreases your contract assets and increases your contract liabilities. It looks like that happened this quarter. Basically, what that means is that there was a change in the profitability of some work that was -- that you are doing under a fixed price contract. So my question is this, what types of projects or what project drove that? Is this a factor to the second quarter cash flow because basically, these contracts seem to be costing you more than you originally expected. And then there's another knock-on effect of the crazy accounting that goes with these things that has the effect of actually improving your gross margins. I guess the industry, they call it normal margin, normalized margin on these contracts. Do you know or happen to estimate the benefit to your gross margins from these contracts, which are actually getting marked down? Sorry for the complexity, but we've just seen these in the past, and I think these are worth understanding.

Yes. First, I want to say thank you for such a detailed accounting question. Look, we have 1 year as a measurement period on an acquisition. This is a very large acquisition. It's not uncommon for there to be measurement period adjustments in acquisitions in the first year. This does relate to project accounting from the legacy NV5 business. I would chalk it up more than anything to accounting noise. The $20 million you mentioned on goodwill is on a $3 billion balance sheet goodwill and intangible line item. The offset was construction assets or contract assets and liabilities, like you said, had an immaterial impact from a P&L perspective in the quarter. And we -- it's not projected to have -- it isn't projected to have an impact on gross margins going forward.

We'll hear now from Alex Rygiel with Texas Capital.

Can you speak to any headwinds you're seeing that might be impacting your business from AI? And is there any scenario where larger players like yourself increasingly take share from smaller players that may not have the capital to keep up with the investment needs to create AI tools?

Yes, we certainly do see that as a long-term opportunity. And as we do our bolt-on acquisitions and implement on that, it's something that we can layer in and increase the value of those. We're leaning into AI. We're deploying it on multiple work streams. We haven't seen it impact the pricing of our work or affect any, sort of, downward trajectory on our ability to win work. We're excited about it. And we've mentioned many times, it is an absolute opportunity for us to improve the efficiency of our business both through shared services and back of house piece of our business, but we really have some great examples of it flowing through our engineering work. I was with one of our structural engineers in the office recently, and he was just talking about the ability that he can go home at night and leave AI working on his drawings and he comes back and he can, sort of, pick it up from there. So it's pretty exciting stuff that we have going on in that space.

That's great to hear. And then I also felt like I heard an increased excitement with regards to M&A. So maybe if you could give us a little bit more color on that. And are the sellers more interested in selling because of macroeconomic conditions? Are pricing -- does pricing look more favorable to the buyer? Any color would be helpful.

Yes. Thank you. Good question, something that we are very passionate about. I think we laid this out at Investor Day, but our model reflects deploying between $100 million and $150 million of capital towards bolt-on M&A annually. Very confident in our ability to do that this year. We have -- we closed 3 small ones during the quarter. I think these sellers typically like the story we have to tell. We're a forever home for their business. We provide career opportunities for their team in a way that they would not see otherwise, and we can help accelerate growth. We closed on an acquisition just -- a smaller acquisition just last month. And the way that we saw the team deploy on cross-selling capabilities, resource sharing, equipment sharing was just really, really phenomenal to see and really helps solidify the opportunities we have. So very excited about what we're seeing. The multiples on these smaller deals are still accretive, 5 to 7x. So very positive.

We'll move now to Jeff Martin with ROTH Capital Partners.

I wanted to touch on the funding environment. A lot of the C&E is agency driven. I know in GEO, you're focused on growing the commercial opportunity. So maybe you could just discuss on the agency level, how the funding environment works. And then tying into that, any look under the hood on when follow-on opportunities with that rare earth project might start to come in?

Okay. I'll try and answer the 3 questions. Starting with the follow-on opportunities. We've got 3, sort of, active discussions around 3 other areas that we could explore for that. And then the other follow-on effect of that, if we think of it as a pilot and it's being proved out is sort of the work being privatized and us being very well positioned to support that work in the regions that we identify these rare earth minerals. So quite excited about the follow-on potential for that. The diversification of GEO is certainly working. Our commercial work was up 13% year-on-year in the quarter for Geospatial. So quite happy with that and power and utilities is a big driver of us diversifying away from the federal work as well. And then in terms of the funding environment, again, I'll just point to the backlog. We're really not seeing any slowdown in that work. And I think it really just points again to those megatrends, the aging infrastructure and the increase of demand on the power grid. This is work that absolutely needs to get done, and we're in a very strong position to do it.

Very good. My other question is on LNG. I know there are some large opportunities down the pipeline. Just curious if you could give us an update there and any details on potential timing would be helpful.

Yes. We were -- there was one sort of a bit of a drag on C&E through the first half of the year, and that's really starting to ramp up. We actually have a very high backlog of work over the next 3 years for that business. So I think with a lot of what's going on in the utility space and LNG being a hot topic, it's really starting to drive the work for that group. And then I&M, we actually just landed a $30 million multiyear MSA for some LNG work that's hot off the press. So quite excited about that to really set us up for a strong 2027.

[Operator Instructions] We'll turn next to Stephanie Moore with Jefferies.

I wanted to circle back on just the organic growth here. So it'd be helpful if you could talk about maybe the volume and pricing performance in the quarter. Any updates on pricing opportunities going forward? But also, I think it would be great to maybe if you could talk about cadence of organic growth in the back half. I do believe we'll be lapping some contract losses in August. Obviously, there's some cross-selling activity that's kind of brewing. So I would love to just get a sense on just cadence and momentum as we get through the back half of the year.

Yes. So for I&M specifically, technical yields are -- the amount we're getting per hour is up. So we are taking price within that, that's supporting the organic growth. We lapped those lost sites in August. So we're already starting to see year-on-year growth, and that's just really going to compound organically as we get through that and start to win new sites. Within the other segments, the backlog is probably -- I know I keep going on about it, but it is just a great indicator of how we see organic growth moving ahead. It really is a result of the great work that our teams are doing with their clients and the follow-on work that we get.

Perfect. And then I just wanted to follow up on the M&A question as well. Great to see you guys do a couple of tuck-in deals during the quarter. As you think about the consulting or the I&M side of your business, so maybe the legacy Acuren or the NV5 side, where would be your risk appetite for incremental M&A in either side or maybe it's both?

Yes. Look, I think if you think of total addressable market, the C&E, we sort of jokingly say it's infinite, but it is absolutely huge. So we do expect more opportunities, and we're certainly seeing that. That said, there are many opportunities in front of us in the Geospatial and I&M side. So we're exploring it on all avenues. I would just say if we looked at long-term trends, C&E is probably where we're going to see most of the opportunity.

Yes. Sorry, go ahead, Kristin.

Yes, I was just going to add that we're very thoughtful on identifying and selecting acquisitions in terms of which opportunities have the highest return from a cross-selling growth perspective. So it's really about the strategic fit and the upside for growth versus which segment it is in.

Yes, Stephanie, the only thing I would add is we're very focused on using M&A to execute sort of our business strategies, whether that be geographic expansion, additional solutions or exposure to end markets. and that's going to be across, sort of, all 3 segments. We have a very large addressable market and an even bigger sort of target universe of directions we can go. So we're being very targeted and specific looking at where we have the highest ROI for our total business to sort of capitalize on these growth trends.

We'll hear now from Brendan Shea with JPMorgan.

Actually, this is Tomo. So I wanted to ask you about I&M. Revenue was down 5.5% year-over-year on site losses and outage timing. Beyond the second half seasonality recovery, what supports a return to consistent growth? How much is structural versus deferred into second half? And if you could share any leading indicators that we can confirm some of your conviction there?

Yes. Look, if you set aside the outage and site losses within the quarter, the business was actually up 4%. So I would just -- that really, to me, points to the strength across the wider segment. As I sort of said earlier, we're now able to talk about new sites that we've been winning and year-on-year growth. So with all of that, I would just also point to the commercial activity. The pipeline of new sites that we have is the highest that I've seen it since been involved with the business. And I would just say, in general, the team is on the front foot commercially. I attended a leadership meeting, Kris and I recently and just the feeling in the room and the collaboration and the cross working going on, it's just really is a turnaround that I'm very pleased to see from the team.

And on a follow-up, you're scaling I&M into bridges, public infrastructures. How do margins compare to your recent high 20s I&M adjusted gross margin? And then what incremental fixed price execution risks and the mitigants should we underwrite?

Yes. It's absolutely part of our strategy is to grow into these higher end markets and Bridges is absolutely an example of that and just leveraging the relationships that the NV5 business has and vice versa, executing on that is what's driving us into these new end markets, which to your question, we do see higher margins.

And I would add, Tomo, that the -- one of the service lines within the Inspection & Mitigation segment is work done at heights and rope access technologies, and that piece of our business was up almost 10% in the quarter, and that's another area where we're demonstrating diversification within the segment.

And as there are no additional questions in queue at this time, I'd like to turn the floor back over to management for any additional or closing comments.

Thank you, everyone. Thank you for your questions and your continued interest in TIC Solutions. Before we close, I'd just like to leave you with a few final thoughts. We're really starting to see the full potential of this combined platform being unlocked. The cross-selling is working. Our backlog is at record levels, and all our segments are diversifying into new end markets. I'm extremely proud of the way our teams are collaborating and the entrepreneurial spirit is running deep in this organization, and it's really showing up. So thank you, everyone, and have a good day.

Ladies and gentlemen, that will conclude today's event. Thank you for your participation. You may disconnect at this time, and have a wonderful rest of your day.