NV5 Global, Inc. [NVEE] Filings

10-Q 1 nvee-20220402.htm 10-Q nvee-20220402

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________________________________

FORM 10-Q

_______________________________________________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 2, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-35849

_______________________________________________________

NV5 Global, Inc.

(Exact name of registrant as specified in its charter)

_______________________________________________________

Delaware

45-3458017

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

200 South Park Road,

Suite 350

Hollywood,

Florida

33021

(Address of principal executive offices)

(Zip Code)

(954) 495-2112

(Registrant’s telephone number, including area code)

_______________________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value

NVEE

The NASDAQ Stock Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated Filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of April 29, 2022, there were 15,495,451 shares outstanding of the registrant’s common stock, $0.01 par value.

NV5 GLOBAL, INC.

INDEX


		Page

PART I – FINANCIAL INFORMATION

ITEM 1	FINANCIAL STATEMENTS	1

	Consolidated Balance Sheets (unaudited)	2

	Consolidated Statements of Net Income and Comprehensive Income (unaudited)	3

	Consolidated Statement of Changes in Stockholders’ Equity (unaudited)	4

	Consolidated Statements of Cash Flows (unaudited)	5

	Notes to Consolidated Financial Statements (unaudited)	7

ITEM 2	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	21
ITEM 3	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	27
ITEM 4	CONTROLS AND PROCEDURES	27

PART II – OTHER INFORMATION

ITEM 1	LEGAL PROCEEDINGS	29
ITEM 1A	RISK FACTORS	29
ITEM 2	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	29
ITEM 3	DEFAULTS UPON SENIOR SECURITIES	29
ITEM 4	MINE SAFETY DISCLOSURES	29
ITEM 5	OTHER INFORMATION	29
ITEM 6	EXHIBITS	30

SIGNATURES		31

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

NV5 Global, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except share data)


	April 2, 2022		January 1, 2022
Assets
Current assets:
Cash and cash equivalents	$	81,948	$	47,980
Billed receivables, net	129,990		153,814
Unbilled receivables, net	87,627		89,734
Prepaid expenses and other current assets	8,758		12,442
Total current assets	308,323		303,970
Property and equipment, net	36,297		32,729
Right-of-use lease assets, net	41,899		44,260
Intangible assets, net	180,081		188,224
Goodwill	389,954		389,916
Other assets	3,299		2,844
Total assets	$	959,853	$	961,943

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	48,126	$	55,954
Accrued liabilities	58,043		50,461

Billings in excess of costs and estimated earnings on uncompleted contracts	24,345		29,444
Other current liabilities	1,266		1,551
Current portion of contingent consideration	2,747		5,807
Current portion of notes payable and other obligations	18,335		20,734
Total current liabilities	152,862		163,951
Contingent consideration, less current portion	3,984		2,521
Other long-term liabilities	32,097		34,304
Notes payable and other obligations, less current portion	107,931		111,062
Deferred income tax liabilities, net	23,476		25,385
Total liabilities	320,350		337,223

Commitments and contingencies

Stockholders’ equity:
Preferred stock, $0.01 par value; 5,000,000 shares authorized, no shares issued and outstanding	—		—
Common stock, $0.01 par value; 45,000,000 shares authorized, 15,495,451 and 15,414,005 shares issued and outstanding as of April 2, 2022 and January 1, 2022, respectively	155		154
Additional paid-in capital	457,894		451,754
Retained earnings	181,454		172,812
Total stockholders’ equity	639,503		624,720
Total liabilities and stockholders’ equity	$	959,853	$	961,943

See accompanying notes to consolidated financial statements (unaudited).

NV5 Global, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF NET INCOME AND COMPREHENSIVE INCOME

(UNAUDITED)

(in thousands, except share data)


	Three Months Ended
	April 2, 2022		April 3, 2021
Gross revenues	$	190,154	$	153,095

Direct costs:
Salaries and wages	45,977		41,459
Sub-consultant services	34,825		23,246
Other direct costs	15,525		9,798
Total direct costs	96,327		74,503

Gross profit	93,827		78,592

Operating expenses:
Salaries and wages, payroll taxes and benefits	49,767		42,951
General and administrative	16,387		11,549
Facilities and facilities related	5,185		5,097
Depreciation and amortization	9,934		9,440
Total operating expenses	81,273		69,037

Income from operations	12,554		9,555

Interest expense	(914)		(2,318)

Income before income tax expense	11,640		7,237
Income tax expense	(2,998)		(1,757)
Net income and comprehensive income	$	8,642	$	5,480

Earnings per share:
Basic	$	0.59	$	0.43
Diluted	$	0.57	$	0.41

Weighted average common shares outstanding:
Basic	14,693,323		12,876,822
Diluted	15,216,105		13,429,102

See accompanying notes to consolidated financial statements (unaudited).

NV5 Global, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

(in thousands, except share data)


	Three Months Ended
	Common Stock			Additional Paid-In Capital		Retained Earnings
	Shares	Amount						Total
Balance, January 2, 2021	13,270,131	$	133	$	268,271	$	125,665	$	394,069
Stock-based compensation	—	—		3,696		—		3,696
Restricted stock issuance, net	13,536	—		—		—		—
Purchases of common stock tendered by employees to satisfy the required withholding taxes related to stock-based compensation	(580)	—		(52)		—		(52)
Stock issuance for acquisitions	35,737	—		3,150		—		3,150
Proceeds from secondary offering, net of costs	1,612,903	16		140,621		—		140,637
Payment of contingent consideration with common stock	2,200	—		209		—		209
Net income	—	—		—		5,480		5,480
Balance, April 3, 2021	14,933,927	$	149	$	415,895	$	131,145	$	547,189

Balance, January 1, 2022	15,414,005	$	154	$	451,754	$	172,812	$	624,720
Stock-based compensation	—	—		4,789		—		4,789
Restricted stock issuance, net	68,927	1		(1)		—		—
Stock issuance for acquisitions	12,519	—		1,352		—		1,352
Net income	—	—		—		8,642		8,642
Balance, April 2, 2022	15,495,451	$	155	$	457,894	$	181,454	$	639,503

See accompanying notes to consolidated financial statements (unaudited).

NV5 Global, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)


	Three Months Ended
	April 2, 2022		April 3, 2021
Cash flows from operating activities:
Net income	$	8,642	$	5,480
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	11,167		10,542
Non-cash lease expense	3,092		2,161
Provision for doubtful accounts	678		(536)
Stock-based compensation	4,789		3,696
Change in fair value of contingent consideration	—		209
Gain on disposals of property and equipment	(54)		(530)
Deferred income taxes	(1,903)		(2,282)
Amortization of debt issuance costs	185		227
Changes in operating assets and liabilities, net of impact of acquisitions:
Billed receivables	23,211		36,037
Unbilled receivables	2,042		2,032
Prepaid expenses and other assets	3,230		(1,114)
Accounts payable	(7,854)		(6,332)
Accrued liabilities	4,684		2,629
Income taxes payable	—		3,085
Billings in excess of costs and estimated earnings on uncompleted contracts	(5,104)		(7,241)
Other current liabilities	(289)		92
Net cash provided by operating activities	46,516		48,155

Cash flows from investing activities:
Cash paid for acquisitions (net of cash received from acquisitions)	(326)		(15,007)
Proceeds from sale of assets	—		460
Purchase of property and equipment	(6,044)		(1,470)
Net cash used in investing activities	(6,370)		(16,017)

Cash flows from financing activities:
Proceeds from common stock offering	—		150,000
Payments on notes payable	(4,581)		(1,669)
Payments of contingent consideration	(1,597)		(150)
Payments of borrowings from Senior Credit Facility	—		(143,207)
Payments of common stock offering costs	—		(9,044)
Purchases of common stock tendered by employees to satisfy the required withholding taxes related to stock-based compensation	—		(52)
Net cash used in financing activities	(6,178)		(4,122)

Net increase in cash and cash equivalents	33,968		28,016
Cash and cash equivalents – beginning of period	47,980		64,909
Cash and cash equivalents – end of period	$	81,948	$	92,925

See accompanying notes to consolidated financial statements (unaudited).

NV5 Global, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)


	Three Months Ended
	April 2, 2022		April 3, 2021
Non-cash investing and financing activities:
Contingent consideration (earn-out)	$	—	$	1,870
Notes payable and other obligations issued for acquisitions	$	—	$	8,180
Stock issuance for acquisitions	$	1,352	$	3,150
Accrued common stock offering costs	$	—	$	319
Finance leases	$	375	$	78
Payment of contingent consideration with common stock	$	—	$	209

See accompanying notes to consolidated financial statements (unaudited).

NV5 Global, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(in thousands, except share data)

Note 1 – Organization and Nature of Business Operations

Business

NV5 Global, Inc. and its subsidiaries (collectively, the “Company,” or “NV5 Global”) is a provider of technology, conformity assessment, and consulting solutions to public and private sector clients in the infrastructure, utility services, construction, real estate, and environmental markets, operating nationwide and abroad. The Company’s clients include the U.S. Federal, state and local governments, and the private sector. NV5 Global provides a wide range of services, including, but not limited to:


●	Utility services	●	MEP & technology design
●	LNG services	●	Commissioning
●	Engineering	●	Building program management
●	Civil program management	●	Environmental health & safety
●	Surveying	●	Real estate transaction services
●	Testing, inspection & consulting (TIC)	●	Energy efficiency & clean energy services
●	Code compliance consulting	●	3D geospatial data modeling
●	Forensic services	●	Environmental & natural resources
●	Litigation support	●	Robotic survey solutions
●	Ecological studies	●	Geospatial data applications & software

Fiscal Year

The Company operates on a "52/53 week" fiscal year ending on the Saturday closest to the calendar quarter end.

Impact of COVID-19 on Our Business

The COVID-19 pandemic has significantly impacted global stock markets and economies. The Company is closely monitoring the impact of the outbreak of COVID-19 on all aspects of its business, including how it will impact the Company's customers and employees. Some of the Company's services were affected, primarily its Geospatial segment, real estate transactional services and hospitality-related services. In particular, due to COVID-19 restrictions, some of the Company's casino and hotel projects have been delayed. As U.S. and international economies reopen and with increased vaccine availability, real estate transactional services have recovered, however the Company is unable to predict the ultimate impact that it may have on its business, future results of operations, financial position, or cash flows. The extent to which the Company's operations may be impacted by the COVID-19 pandemic will depend largely on future developments, which are highly uncertain and cannot be accurately predicted, including new information which may emerge concerning the severity of the outbreak and actions by government authorities to contain the outbreak or treat its impact. The Company intends to continue to monitor the impact of the COVID-19 pandemic on its business closely.

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The consolidated financial statements of the Company are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for reporting of interim financial information. Pursuant to such rules and regulations, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

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NV5 Global, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(in thousands, except share data)

In the opinion of management, the accompanying unaudited interim consolidated financial statements of the Company contain all adjustments necessary to present fairly the financial position and results of operations of the Company as of the dates and for the periods presented. Accordingly, these statements should be read in conjunction with the consolidated financial statements and notes contained in the Company’s Annual Report on Form 10-K for the year ended January 1, 2022 (the “2021 Form 10-K”). The results of operations and cash flows for the interim periods presented are not necessarily indicative of the results to be expected for any future interim period or for the full 2022 fiscal year.

Performance Obligations

To determine the proper revenue recognition method, the Company evaluates whether two or more contracts should be combined and accounted for as one single contract and whether the combined or single contract should be accounted for as more than one performance obligation. The majority of the Company's contracts have a single performance obligation as the promise to transfer the individual goods or services that is not separately identifiable from other promises in the contracts and therefore, is not distinct.

The Company’s performance obligations are satisfied as work progresses or at a point in time. Revenue on the Company's cost-reimbursable contracts is recognized over time using direct costs incurred or direct costs incurred to date as compared to the estimated total direct costs for performance obligations because it depicts the transfer of control to the customer. Contract costs include labor, sub-consultant services, and other direct costs.

Gross revenue from services transferred to customers at a point in time is recognized when the customer obtains control of the asset, which is generally upon delivery and acceptance by the customer of the reports and/or analysis performed.

As of April 2, 2022, the Company had $724,663 of remaining performance obligations, of which $610,558 is expected to be recognized over the next 12 months and the majority of the balance over the next 24 months. Contracts for which work authorizations have been received are included in performance obligations. Performance obligations include only those amounts that have been funded and authorized and does not reflect the full amounts the Company may receive over the term of such contracts. In the case of non-government contracts and project awards, performance obligations include future revenue at contract or customary rates, excluding contract renewals or extensions that are at the discretion of the client. For contracts with a not-to-exceed maximum amount, the Company includes revenue from such contracts in performance obligations to the extent of the remaining estimated amount.

Contract Balances

The timing of revenue recognition, billings and cash collections results in billed receivables, unbilled receivables (contract assets), and billings in excess of costs and estimated earnings on uncompleted contracts (contract liabilities) on the Consolidated Balance Sheet. The liability “Billings in excess of costs and estimated earnings on uncompleted contracts” represents billings in excess of revenues recognized on these contracts as of the reporting date. This liability is generally classified as current. During the three months ended April 2, 2022 the Company performed services and recognized $16,010 of revenue related to its contract liabilities that existed as of January 1, 2022.

Goodwill and Intangible Assets

Goodwill is the excess of consideration paid for an acquired entity over the amounts assigned to assets acquired, including other identifiable intangible assets and liabilities assumed in a business combination. To determine the amount of goodwill resulting from a business combination, the Company performs an assessment to determine the acquisition date fair value of the acquired company’s tangible and identifiable intangible assets and liabilities.

Goodwill is required to be evaluated for impairment on an annual basis or whenever events or changes in circumstances indicate the asset may be impaired. An entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. These qualitative factors include: macroeconomic and industry conditions, cost factors, overall financial performance and other relevant entity-specific events. If the entity determines that this threshold is met, then the Company may apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit's carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The Company determines fair value through multiple valuation techniques, and weights the results accordingly. NV5 Global is required to make certain

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NV5 Global, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(in thousands, except share data)

subjective and complex judgments in assessing whether an event of impairment of goodwill has occurred, including assumptions and estimates used to determine the fair value of its reporting units. The Company has elected to perform its annual goodwill impairment review as of August 1 of each year. The Company conducts its annual impairment tests on the goodwill using the quantitative method of evaluating goodwill.

As of August 1, 2021, the Company conducted its annual impairment tests using the quantitative method of evaluating goodwill. Based on the quantitative analyses the Company determined the fair value of each of the reporting units exceeded its carrying value. Therefore, the goodwill was not impaired and the Company did not recognize an impairment charge relating to goodwill as of August 1, 2021. Furthermore, there were no indicators, events or changes in circumstances that would indicate goodwill was impaired during the period from August 2, 2021 through April 2, 2022.

Identifiable intangible assets primarily include customer backlog, customer relationships, trade names, non-compete agreements, and developed technology. Amortizable intangible assets are amortized on a straight-line basis over their estimated useful lives and reviewed for impairment whenever events or changes in circumstances indicate that the assets may be impaired. If an indicator of impairment exists, the Company compares the estimated future cash flows of the asset, on an undiscounted basis, to the carrying value of the asset. If the undiscounted cash flows exceed the carrying value, no impairment is indicated. If the undiscounted cash flows do not exceed the carrying value, then impairment, if any, is measured as the difference between fair value and carrying value, with fair value typically based on a discounted cash flow model. There were no indicators, events or changes in circumstances that would indicate intangible assets were impaired during the three months ended April 2, 2022.

See Note 8, Goodwill and Intangible Assets, for further information on goodwill and identified intangibles.

There have been no material changes in the Company's significant accounting policies described in the audited financial statements included in the Company's Annual Report on Form 10-K for the year ended January 1, 2022.

Note 3 – Recent Accounting Pronouncements

In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805) - Accounting for Contract Assets and Contract Liabilities from Contracts with Customers ("ASU 2021-08"). This ASU improves the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and resulting inconsistencies. This ASU requires an entity to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, Revenue from Contracts with Customers. ASU 2021-08 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption of ASU 2021-08 is permitted, including adoption in an interim period. The standard should be applied prospectively to business combinations occurring on or after the effective date of the amendments. The Company is currently evaluating the impact of ASU 2021-08 and does not expect it will have a material impact to its financial statements.

Note 4 – Earnings per Share

Basic earnings per share is calculated by dividing net income by the weighted average number of common shares outstanding during the period, excluding unvested restricted shares. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company. The effect of potentially dilutive securities is not considered during periods of loss or if the effect is anti-dilutive.

The weighted average number of shares outstanding in calculating basic earnings per share for the three months ended April 2, 2022 and April 3, 2021 exclude 743,496 and 767,186 non-vested restricted shares, respectively. During the three months ended April 2, 2022 and April 3, 2021, there were 31,439 and 8,023 weighted average securities, respectively, which are not included in the calculation of diluted weighted average shares outstanding because their impact is anti-dilutive or their performance conditions have not been met.

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NV5 Global, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(in thousands, except share data)

The following table represents a reconciliation of the net income and weighted average shares outstanding for the calculation of basic and diluted earnings per share:


	Three Months Ended
	April 2, 2022		April 3, 2021
Numerator:
Net income – basic and diluted	$	8,642	$	5,480

Denominator:
Basic weighted average shares outstanding	14,693,323		12,876,822
Effect of dilutive non-vested restricted shares and units	505,534		527,957
Effect of issuable shares related to acquisitions	17,248		24,323

Diluted weighted average shares outstanding	15,216,105		13,429,102

Secondary Offering

On March 10, 2021, the Company priced an underwritten public offering of 1,612,903 shares of its common stock (the "Firm Shares") at a price of $93.00 per share. The shares were sold pursuant to an effective registration statement on Form S-3 (Registration No. 333-237167). In addition, the Company also granted the underwriters a 30-day option to purchase 241,935 additional shares (the "Option Shares") of its common stock at the public offering price. On March 15, 2021, the Company closed on the Firm Shares, for which it received net proceeds of approximately $140,693 after deducting the underwriting discount and estimated offering expenses payable by the Company. On April 13, 2021, the underwriters exercised the Option Shares and the Company received net proceeds of $21,150 after deducting the underwriting discount and estimated offering expenses payable by the Company.

Note 5 – Business Acquisitions

2021 Acquisitions

The Company completed eight acquisitions during 2021. The aggregate purchase price of all eight acquisitions is $100,693, including $69,501 of cash, $19,272 of promissory notes, $6,787 of the Company's common stock, and potential earn-outs of up to $25,700 payable in cash and stock, which was recorded at an estimated fair value of $5,133. An option-based model was used to determine the fair value of the earn-outs, which is a generally accepted valuation technique that embodies all significant assumption types. In order to determine the fair values of tangible and intangible assets acquired and liabilities assumed, the Company engaged an independent third-party valuation specialist to assist in the determination of fair values. The final determination of the fair value of assets and liabilities will be completed within the one-year measurement period as required by ASC 805. The 2021 acquisitions will necessitate the use of this measurement period to adequately analyze and assess the factors used in establishing the asset and liability fair values as of the acquisition date, including intangible assets, accounts receivable, and certain fixed assets.

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NV5 Global, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(in thousands, except share data)

The following table summarizes the fair values of the assets acquired and liabilities assumed as of the acquisition date for the acquisitions closed during the fiscal year ended January 1, 2022:


	Fiscal Year Ended
	January 1, 2022
Cash	$	1,480
Billed and unbilled receivables, net	17,733
Right-of-use assets	2,932
Property and equipment	3,741
Prepaid expenses	587
Other assets	13
Intangible assets:
Customer relationships	36,407
Trade name	2,098
Customer backlog	3,860

Non-compete	4,456
Total Assets	$	73,307
Liabilities	(13,984)
Deferred tax liabilities	(4,521)
Net assets acquired	$	54,802

Consideration paid (Cash, Notes and/or stock)	$	95,560
Contingent earn-out liability (Cash and stock)	5,133
Total Consideration	$	100,693
Excess consideration over the amounts assigned to the net assets acquired (Goodwill)	$	45,891

Goodwill was recorded based on the amount by which the purchase price exceeded the fair value of the net assets acquired and the amount is attributable to the reputation of the business acquired, the workforce in place and the synergies to be achieved from these acquisitions. See Note 8, Goodwill and Intangible Assets, for further information on fair value adjustments to goodwill and identified intangibles.

The consolidated financial statements of the Company include the results of operations from any business acquired from their respective dates of acquisition. The following table presents the results of operations of businesses acquired from their respective dates of acquisition for the three months ended April 3, 2021.


	Three Months Ended
	April 3, 2021
Gross revenues	$	1,451
Income before income taxes	$	493

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NV5 Global, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(in thousands, except share data)

The following table presents the unaudited, pro forma consolidated results of operations (in thousands, except per share amounts) for the three months ended April 3, 2021 as if the acquisitions had occurred at the beginning of fiscal year 2021. The pro forma information provided below is compiled from the pre-acquisition financial information and includes pro forma adjustments for amortization expense, adjustments to certain expenses, and the income tax impact of these adjustments. The pro forma results are not necessarily indicative of (i) the results of operations that would have occurred had the operations of these acquisitions actually been acquired at the beginning of fiscal year 2021 or (ii) future results of operations:


	Three Months Ended
	April 3, 2021
Gross revenues	$	170,151
Net income	$	6,287
Basic earnings per share	$	0.49
Diluted earnings per share	$	0.47

Adjustments were made to the pro forma results to adjust amortization of intangible assets to reflect fair value of identified assets acquired, to record the effects of promissory notes issued, and to record the income tax effect of these adjustments. The pro forma results for the three months ended April 2, 2022 have not been presented as the financial impact on the Company's consolidated financial statements would be immaterial.

Note 6 – Billed and Unbilled Receivables

Billed and Unbilled Receivables consists of the following:


	April 2, 2022		January 1, 2022
Billed receivables	$	136,359	$	159,942
Less: allowance for doubtful accounts	(6,369)		(6,128)
Billed receivables, net	$	129,990	$	153,814

Unbilled receivables	$	89,515	$	91,558
Less: allowance for doubtful accounts	(1,888)		(1,824)
Unbilled receivables, net	$	87,627	$	89,734

Note 7 – Property and Equipment, net

Property and equipment, net, consists of the following:


	April 2, 2022		January 1, 2022
Office furniture and equipment	$	3,333	$	3,314
Computer equipment	21,808		20,063
Survey and field equipment	39,879		35,436
Leasehold improvements	6,426		6,395
Total	71,446		65,208
Less: accumulated depreciation	(35,149)		(32,479)
Property and equipment, net	$	36,297	$	32,729

Depreciation expense was $2,904 and $2,574 for the three months ended April 2, 2022 and April 3, 2021, respectively, of which $1,233 and $1,102 was included in other direct costs for each of the three months ended April 2, 2022 and April 3, 2021.

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NV5 Global, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(in thousands, except share data)

Note 8 – Goodwill and Intangible Assets

Goodwill

The changes in the carrying value by reportable segment for the three months ended April 2, 2022 were as follows:


	Three Months Ended
	January 1, 2022		2022 Acquisitions		Adjustments		April 2, 2022
INF	$	90,725	$	120	$	19	$	90,864
BTS	111,005		61		(162)		110,904
GEO	188,186		—		—		188,186
Total	$	389,916	$	181	$	(143)	$	389,954

Intangible Assets

Intangible assets, net, as of April 2, 2022 and January 1, 2022 consist of the following:


	April 2, 2022						January 1, 2022
	Gross Carrying Amount		Accumulated Amortization		Net Amount		Gross Carrying Amount		Accumulated Amortization		Net Amount
Finite-lived intangible assets:
Customer relationships(1)	$	219,548	$	(70,485)	$	149,063	$	219,455	$	(65,017)	$	154,438
Trade name(2)	16,615		(15,081)		1,534		16,615		(14,815)		1,800
Customer backlog(3)	28,984		(25,867)		3,117		28,971		(25,162)		3,809
Non-compete(4)	13,842		(9,664)		4,178		13,829		(9,024)		4,805
Developed technology(5)	32,944		(10,755)		22,189		32,944		(9,572)		23,372
Total finite-lived intangible assets	$	311,933	$	(131,852)	$	180,081	$	311,814	$	(123,590)	$	188,224

(1) Amortized on a straight-line basis over estimated lives (5 to 12 years)

(2) Amortized on a straight-line basis over their estimated lives (1 to 3 years)

(3) Amortized on a straight-line basis over their estimated lives (1 to 10 years)

(4) Amortized on a straight-line basis over their contractual lives (2 to 5 years)

(5) Amortized on a straight-line basis over their estimated lives (5 to 7 years)

Amortization expense was $8,263 and $7,968 during the three months ended April 2, 2022 and April 3, 2021, respectively.

Note 9 – Accrued Liabilities

Accrued liabilities consist of the following:


	April 2, 2022		January 1, 2022
Current portion of lease liability	$	12,830	$	12,897
Accrued vacation	13,788		12,819
Payroll and related taxes	16,841		10,931
Benefits	6,429		6,767
Accrued operating expenses	6,093		4,329
Other	2,062		2,718
Total	$	58,043	$	50,461

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NV5 Global, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(in thousands, except share data)

Note 10 – Notes Payable and Other Obligations

Notes payable and other obligations consists of the following:


	April 2, 2022		January 1, 2022
Senior credit facility	$	98,750	$	98,750
Uncollateralized promissory notes	27,075		31,493
Finance leases	2,270		2,215
Other obligations	1,381		2,733
Debt issuance costs, net of amortization	(3,210)		(3,395)
Total notes payable and other obligations	126,266		131,796
Current portion of notes payable and other obligations	18,335		20,734
Notes payable and other obligations, less current portion	$	107,931	$	111,062

As of April 2, 2022 and January 1, 2022, the carrying amount of debt obligations approximates their fair values based on Level 2 inputs as the terms are comparable to terms currently offered by local lending institutions for arrangements with similar terms to industry peers with comparable credit characteristics.

Senior Credit Facility

On August 13, 2021 (the "Closing Date"), the Company amended and restated its Credit Agreement (the "Second A&R Credit Agreement"), originally dated December 7, 2016 and as amended to the Closing Date, with Bank of America, N.A. ("Bank of America"), as administrative agent, swingline lender and letter of credit issuer, the other lenders party thereto, and certain of the Company's subsidiaries as guarantors. Pursuant to the Second A&R Credit Agreement, the previously drawn term commitments of $150,000 and revolving commitments totaling $215,000 in the aggregate were converted into revolving commitments totaling $400,000 in the aggregate. These revolving commitments are available through August 13, 2026 (the "Maturity Date") and an aggregate amount of approximately $138,750 was drawn under the Second A&R Credit Amendment on the Closing Date to repay previously existing borrowings under the term and revolving facilities prior to such amendment and restatement. Borrowings under the Second A&R Credit Agreement are secured by a first priority lien on substantially all of the assets of the Company. The Second A&R Credit Agreement also includes an accordion feature permitting the Company to request an increase in the revolving facility under the Second A&R Credit Agreement by an additional amount of up to $200,000 in the aggregate. As of April 2, 2022 and January 1, 2022, the outstanding balance on the Senior Credit Facility was $98,750.

Borrowings under the Second A&R Credit Agreement bear interest at variable rates which are, at the Company's option, tied to a Eurocurrency rate equal to LIBOR (London Interbank Offered Rate) plus an applicable margin or a base rate denominated in U.S. dollars. Interest rates remain subject to change based on the Company's consolidated leverage ratio. As of April 2, 2022 the Company's interest rate was 1.2%.

The Second A&R Credit Agreement contains financial covenants that require NV5 Global to maintain a consolidated net leverage ratio (the ratio of the Company's pro forma consolidated net funded indebtedness to the Company's pro forma consolidated EBITDA for the most recently completed measurement period) of no greater than 4.00 to 1.00.

These financial covenants also require the Company to maintain a consolidated fixed charge coverage ratio of no less than 1.10 to 1.00 as of the end of any measurement period. As of April 2, 2022, the Company was in compliance with the financial covenants.

The Second A&R Credit Agreement contains covenants that may have the effect of limiting the Company's ability to, among other things, merge with or acquire other entities, enter into a transaction resulting in a Change in Control, create certain new liens, incur certain additional indebtedness, engage in certain transactions with affiliates, or engage in new lines of business or sell a substantial part of their assets. The Second A&R Credit Agreement also contains customary events of default, including (but not limited to) a default in the payment of principal or, following an applicable grace period, interest, breaches of the

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NV5 Global, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(in thousands, except share data)

Company's covenants or warranties under the Second A&R Credit Agreement, payment default or acceleration of certain indebtedness, certain events of bankruptcy, insolvency or liquidation, certain judgments or uninsured losses, changes in control and certain liabilities related to ERISA based plans.

The Second A&R Credit Agreement limits the payment of cash dividends (together with certain other payments that would constitute a "Restricted Payment" within the meaning of the Second A&R Credit Agreement and generally including dividends, stock repurchases and certain other payments in respect to warrants, options, and other rights to acquire equity securities), unless the Consolidated Leverage Ratio would be less than 3.25 to 1.00 and available liquidity (defined as unrestricted, domestically held cash plus revolver availability) would be at least $30,000, in each case after giving effect to such payment.

Total debt issuance costs incurred and capitalized in connection with the issuance of the Second A&R Credit Agreement were $3,702. Total amortization of debt issuance costs was $185 and $227 during the three months ended April 2, 2022 and April 3, 2021, respectively.

Other Obligations

The Company has aggregate obligations related to acquisitions of $28,456 and $34,226 as of April 2, 2022 and January 1, 2022, respectively. As of April 2, 2022, the Company's weighted average interest rate on other outstanding obligations was 2.4%.

Note 11 – Contingent Consideration

The following table summarizes the changes in the carrying value of estimated contingent consideration:


	April 2, 2022		January 1, 2022
Contingent consideration, beginning of the year	$	8,328	$	2,400
Additions for acquisitions	—		5,133
Reduction of liability for payments made	(1,597)		(1,538)
Increase of liability related to re-measurement of fair value	—		2,333
Total contingent consideration, end of the period	6,731		8,328
Current portion of contingent consideration	2,747		5,807
Contingent consideration, less current portion	$	3,984	$	2,521

Note 12 – Commitments and Contingencies

Litigation, Claims and Assessments

The Company is subject to certain claims and lawsuits typically filed against the engineering, consulting and construction profession, alleging primarily professional errors or omissions. The Company carries professional liability insurance, subject to certain deductibles and policy limits, against such claims. However, in some actions, parties are seeking damages that exceed our insurance coverage or for which we are not insured. While management does not believe that the resolution of these claims will have a material adverse effect, individually or in aggregate, on its financial position, results of operations or cash flows, management acknowledges the uncertainty surrounding the ultimate resolution of these matters.

In August 2021, a Consolidated Amended Class Action Complaint was filed in a case titled In Re: Champlain Towers South Collapse Litigation, 2021-015089-CA-01, Circuit Court of the Eleventh Judicial District, Miami-Dade County regarding the collapse of the Champlain Tower South condominium building in Surfside, Florida. The case initially claimed negligence by the Champlain Towers South Condominium Association, Inc. (the “Association”) led to the building’s partial collapse. In November 2021, a Consolidated Second Amended Class Action Complaint (the “Second Complaint”) was filed against firms involved in the construction of a neighboring building known as “Eighty-Seven Park” alleging that work at Eighty-Seven Park may have been a contributing factor in the collapse. The defendants in the Second Complaint included the developers of Eighty-Seven Park, the general contractor and four other firms, including the Company (collectively, the “Eight-Seven Park Defendants”). The Company provided limited services to the developers of Eight-Seven Park in 2016, which is more than 5 years

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NV5 Global, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(in thousands, except share data)

prior to the collapse of the Champlain Tower South Condominium Building. The litigation is still in preliminary stages, although on February 3, 2022, the Court denied the Eighty-Seven Park Defendants’ motions to dismiss the consolidated complaint. In March 2022, a Consolidated Third Amended Class Action Complaint was filed to include three additional firms involved in the development and construction of Eighty-Seven Park. The Company believes the claims against it in this proceeding have no merit and intends to defend against them vigorously. The Company does not expect the resolution of these matters to have a material adverse effect on the Company's business, financial condition, results of operations or cash flows.

Note 13 – Stock-Based Compensation

In October 2011, the Company's stockholders approved the 2011 Equity Incentive Plan, which was subsequently amended and restated in March 2013 (as amended, the “2011 Equity Plan”). The 2011 Equity Plan provides directors, executive officers, and other employees of the Company with additional incentives by allowing them to acquire ownership interest in the business and, as a result, encouraging them to contribute to the Company’s success. The Company may provide these incentives through the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares and units, and other cash-based or stock-based awards. As of April 2, 2022, 567,564 shares of common stock are authorized and reserved for issuance under the 2011 Equity Plan. This reserve automatically increases on each January 1 from 2014 through 2023, by an amount equal to the smaller of (i) 3.5% of the number of shares issued and outstanding on the immediately preceding December 31, or (ii) an amount determined by the Company's Board of Directors. The restricted shares of common stock granted generally provide for service-based vesting after two to four years following the grant date.

The following summarizes the activity of restricted stock awards during the three months ended April 2, 2022:


	Number of Unvested Restricted Shares of Common Stock and Restricted Stock Units	Weighted Average Grant Date Fair Value
January 1, 2022	744,490	$	66.34
Granted	70,608	$	118.08
Vested	(12,132)	$	65.85
Forfeited	(1,681)	$	64.59
April 2, 2022	801,285	$	70.29

Stock-based compensation expense relating to restricted stock awards during the three months ended April 2, 2022 and April 3, 2021 was $4,789 and $3,696, respectively. Approximately $32,747 of deferred compensation, which is expected to be recognized over the remaining weighted average vesting period of 1.5 years, is unrecognized at April 2, 2022. The total fair value of restricted shares vested during the three months ended April 2, 2022 and April 3, 2021 was $1,376 and $841, respectively.

Note 14 – Income Taxes

As of April 2, 2022 and January 1, 2022, the Company had net deferred income tax liabilities of $23,476 and $25,385, respectively. Deferred income tax liabilities primarily relate to intangible assets and accounting basis adjustments where we have a future obligation for tax purposes.

The Company's effective income tax rate was 25.8% and 24.3% during the three months ended April 2, 2022 and April 3, 2021, respectively. The difference between the effective income tax rate and the combined statutory federal and state income tax rate was primarily due to federal credits.

The Company evaluates tax positions for recognition using a more-likely-than-not recognition threshold, and those tax positions eligible for recognition are measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon the effective settlement with a taxing authority that has full knowledge of all relevant information. Fiscal years 2018 through 2021 are considered open tax years in the U.S. federal jurisdiction, state and foreign jurisdictions. Fiscal years 2012 - 2014 are considered open in the State of California. It is not expected that there will be a significant change in the unrecognized tax benefits within the next 12 months.

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NV5 Global, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(in thousands, except share data)

Note 15 – Reportable Segments

The Company reports segment information in accordance with ASC Topic No. 280 “Segment Reporting” (“Topic No. 280”). The Company's Chief Executive Officer, who is the chief operating decision maker ("CODM"), organized the Company into three operating and reportable segments: Infrastructure ("INF"), which includes the Company's engineering, civil program management, utility services, and construction quality assurance, testing and inspection practices; Building, Technology & Sciences ("BTS"), which includes the Company's environmental health sciences, buildings and program management, and MEP & technology design practices; and Geospatial Solutions ("GEO"), which includes the Company's geospatial solution practices.

The Company evaluates the performance of these reportable segments based on their respective operating income before the effect of amortization expense related to acquisitions and other unallocated corporate expenses. The following tables set forth summarized financial information concerning our reportable segments:


	Three Months Ended
	April 2, 2022		April 3, 2021
Gross revenues
INF	$	99,963	$	87,533
BTS	60,454		38,605
GEO	29,737		26,957
Total gross revenues	$	190,154	$	153,095

Segment income before taxes
INF	$	16,250	$	16,812
BTS	12,812		6,265
GEO	5,104		3,906
Total Segment income before taxes	34,166		26,983
Corporate(1)	(22,526)		(19,746)
Total income before taxes	$	11,640	$	7,237

(1) Includes amortization of intangibles of $8,263 and $7,968 for the three months ended April 2, 2022 and April 3, 2021, respectively.

The Company disaggregates its gross revenues from contracts with customers by geographic location, customer-type and contract-type for each of our reportable segments. Disaggregated revenues include the elimination of inter-segment revenues which has been allocated to each segment. The Company believes this best depicts how the nature, amount, timing and uncertainty of its revenues and cash flows are affected by economic factors. Gross revenue, classified by the major geographic areas in which the Company's customers were located, were as follows:


	Three Months Ended April 2, 2022								Three Months Ended April 3, 2021
	INF		BTS		GEO		Total		INF		BTS		GEO		Total
United States	$	99,963	$	52,917	$	29,215	$	182,095	$	87,533	$	35,298	$	26,374	$	149,205
Foreign	—		7,537		522		8,059		—		3,307		583		3,890
Total gross revenues	$	99,963	$	60,454	$	29,737	$	190,154	$	87,533	$	38,605	$	26,957	$	153,095

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NV5 Global, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(in thousands, except share data)

Gross revenue by customer were as follows:


	Three Months Ended April 2, 2022								Three Months Ended April 3, 2021
	INF		BTS		GEO		Total		INF		BTS		GEO		Total

Public and quasi-public sector	$	79,206	$	15,261	$	22,989	$	117,456	$	68,684	$	20,323	$	17,973	$	106,980
Private sector	20,757		45,193		6,748		72,698		18,849		18,282		8,984		46,115
Total gross revenues	$	99,963	$	60,454	$	29,737	$	190,154	$	87,533	$	38,605	$	26,957	$	153,095

Gross revenues by contract type were as follows:


	Three Months Ended April 2, 2022								Three Months Ended April 3, 2021
	INF		BTS		GEO		Total		INF		BTS		GEO		Total

Cost-reimbursable contracts	$	95,725	$	39,487	$	29,644	$	164,856	$	83,385	$	28,709	$	26,889	$	138,983
Fixed-unit price contracts	4,238		20,967		93		25,298		4,148		9,896		68		14,112
Total gross revenues	$	99,963	$	60,454	$	29,737	$	190,154	$	87,533	$	38,605	$	26,957	$	153,095

Note 16 – Leases

The Company primarily leases property under operating leases and has six equipment operating leases for aircrafts used by the operations of QSI. The Company's property operating leases consist of various office facilities. The Company uses a portfolio approach to account for such leases due to the similarities in characteristics and apply an incremental borrowing rate based on estimates of rates the Company would pay for senior collateralized loans over a similar term. The Company's office leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company accounts for lease components (e.g. fixed payments including rent, real estate taxes and common area maintenance costs) as a single lease component. Some of the Company's leases include one or more options to renew the lease term at its sole discretion; however, these are not included in the calculation of its lease liability or right-of-use ("ROU") lease asset because they are not reasonably certain of exercise.

The Company also leases vehicles through a fleet leasing program. The payments for the vehicles are based on the terms selected. The Company has determined that it is reasonably certain that the leased vehicles will be held beyond the period in which the entire capitalized value of the vehicle has been paid to the lessor. As such, the capitalized value is the delivered price of the vehicle. The Company's vehicle leases are classified as financing leases.

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NV5 Global, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(in thousands, except share data)

Supplemental balance sheet information related to the Company's operating and finance leases is as follows:


Leases	Classification	April 2, 2022		January 1, 2022
Assets
Operating lease assets	Right-of-use lease asset, net (1)	$	41,899	$	44,260
Finance lease assets	Property and equipment, net (1)	2,251		2,197
Total leased assets		$	44,150	$	46,457

Liabilities
Current
Operating	Accrued liabilities	$	(12,830)	$	(12,897)
Finance	Current portion of notes payable and other obligations	(1,191)		(1,225)
Noncurrent
Operating	Other long-term liabilities	(30,940)		(33,169)
Finance	Notes payable and other obligations, less current portion	(1,079)		(990)
Total lease liabilities		$	(46,040)	$	(48,281)

(1) At April 2, 2022, operating right of-use lease assets and finance lease assets are recorded net of accumulated amortization of $31,926 and $3,944, respectively. At January 1, 2022, operating right-of-use lease assets and finance lease assets are recorded net of accumulated amortization of $29,257 and $3,643, respectively.

Supplemental balance sheet information related to the Company's operating and finance leases is as follows:


Weighted - Average Remaining Lease Term (Years)	April 2, 2022	January 1, 2022
Operating leases	4.3	4.5
Finance leases	1.6	1.6

Weighted - Average Discount Rate
Operating leases	4%	4%
Finance leases	7%	7%

Supplemental cash flow information related to the Company's operating and finance lease liabilities is as follows:

NV5 Global, Inc. [NVEE] Filings
10-Q	[2022-05-06]
10-K	[2022-03-01]
10-Q	[2021-11-10]
10-Q	[2021-08-11]
10-Q	[2021-05-13]
10-K	[2021-03-03]
10-Q	[2020-11-12]
10-Q	[2020-08-06]
10-Q	[2020-05-07]
10-K	[2020-02-26]
10-Q	[2019-11-07]
10-Q	[2019-08-07]
10-Q	[2019-05-08]
10-K	[2019-03-14]
10-Q	[2018-11-07]
10-Q	[2018-08-02]
10-Q	[2018-05-04]
10-K	[2018-03-13]
10-Q	[2017-11-08]
10-Q	[2017-08-03]
10-Q	[2017-05-04]
10-K	[2017-03-10]
10-Q	[2016-11-03]
10-Q	[2016-08-05]
10-Q	[2016-05-06]
10-K	[2016-03-11]
10-Q	[2015-11-12]
10-Q	[2015-08-14]
10-Q	[2015-05-12]
10-K	[2015-03-27]
10-Q	[2014-11-13]
10-Q	[2014-08-14]
10-Q	[2014-05-15]
10-K	[2014-03-28]
10-Q	[2013-11-13]
10-Q	[2013-08-14]
10-Q	[2013-05-14]
10-K	[2013-04-01]
S-1	[2013-01-28]