NV5 Global, Inc. [NVEE] Filings

10-Q 1 nvee-20221001.htm 10-Q nvee-20221001

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 October 1, 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 October 28, 2022, there were 15,559,982 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	23
ITEM 3	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	31
ITEM 4	CONTROLS AND PROCEDURES	31

PART II – OTHER INFORMATION

ITEM 1	LEGAL PROCEEDINGS	32
ITEM 1A	RISK FACTORS	32
ITEM 2	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	32
ITEM 3	DEFAULTS UPON SENIOR SECURITIES	32
ITEM 4	MINE SAFETY DISCLOSURES	32
ITEM 5	OTHER INFORMATION	32
ITEM 6	EXHIBITS	33

SIGNATURES		34

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

NV5 Global, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except share data)


	October 1, 2022		January 1, 2022
Assets
Current assets:
Cash and cash equivalents	$	54,171	$	47,980
Billed receivables, net	141,308		153,814
Unbilled receivables, net	98,081		89,734
Prepaid expenses and other current assets	20,896		12,442
Total current assets	314,456		303,970
Property and equipment, net	41,042		32,729
Right-of-use lease assets, net	38,008		44,260
Intangible assets, net	167,592		188,224
Goodwill	398,614		389,916
Other assets	2,427		2,844
Total assets	$	962,139	$	961,943

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	48,722	$	55,954
Accrued liabilities	58,481		50,461

Billings in excess of costs and estimated earnings on uncompleted contracts	27,886		29,444
Other current liabilities	1,421		1,551
Current portion of contingent consideration	9,224		5,807
Current portion of notes payable and other obligations	18,140		20,734
Total current liabilities	163,874		163,951
Contingent consideration, less current portion	2,813		2,521
Other long-term liabilities	28,760		34,304
Notes payable and other obligations, less current portion	63,238		111,062
Deferred income tax liabilities, net	21,097		25,385
Total liabilities	279,782		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, 15,559,921 and 15,414,005 shares issued and outstanding as of October 1, 2022 and January 1, 2022, respectively	156		154
Additional paid-in capital	467,416		451,754
Retained earnings	214,785		172,812
Total stockholders’ equity	682,357		624,720
Total liabilities and stockholders’ equity	$	962,139	$	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				Nine Months Ended
	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Gross revenues	$	204,075	$	185,553	$	596,960	$	518,151

Direct costs:
Salaries and wages	48,295		45,145		141,976		131,630
Sub-consultant services	41,253		35,779		116,557		89,003
Other direct costs	14,592		12,802		45,426		35,714
Total direct costs	104,140		93,726		303,959		256,347

Gross profit	99,935		91,827		293,001		261,804

Operating expenses:
Salaries and wages, payroll taxes and benefits	49,670		44,597		146,719		131,761
General and administrative	16,730		12,978		47,611		37,891
Facilities and facilities related	5,441		5,194		15,822		15,330
Depreciation and amortization	9,771		10,108		29,373		29,764
Total operating expenses	81,612		72,877		239,525		214,746

Income from operations	18,323		18,950		53,476		47,058

Interest expense	(1,003)		(1,475)		(2,804)		(5,362)

Income before income tax expense	17,320		17,475		50,672		41,696
Income tax expense	(1,257)		(4,902)		(8,699)		(10,005)
Net income and comprehensive income	$	16,063	$	12,573	$	41,973	$	31,691

Earnings per share:
Basic	$	1.09	$	0.86	$	2.85	$	2.27
Diluted	$	1.05	$	0.83	$	2.75	$	2.19

Weighted average common shares outstanding:
Basic	14,768,689		14,593,623		14,732,726		13,963,372
Diluted	15,301,545		15,069,660		15,242,453		14,486,683

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, July 3, 2021	15,365,382	$	154	$	441,049	$	144,783	$	585,986
Stock-based compensation	—	—		4,297		—		4,297
Restricted stock issuance, net	20,551	—		—		—		—
Stock issuance for acquisitions	15,118	—		1,266		—		1,266

Net income	—	—		—		12,573		12,573
Balance, October 2, 2021	15,401,051	$	154	$	446,612	$	157,356	$	604,122

Balance, July 2, 2022	15,537,134	$	155	$	462,066	$	198,722	$	660,943
Stock-based compensation	—	—		5,351		—		5,351
Restricted stock issuance, net	22,787	1		(1)		—		—

Net income	—	—		—		16,063		16,063
Balance, October 1, 2022	15,559,921	$	156	$	467,416	$	214,785	$	682,357


	Nine 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	—	—		12,087		—		12,087
Restricted stock issuance, net	223,607	2		(2)		—		—
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	50,855	—		4,326		—		4,326
Proceeds from secondary offering, net of costs	1,854,838	19		161,773		—		161,792
Payment of contingent consideration with common stock	2,200	—		209		—		209
Net income	—	—		—		31,691		31,691
Balance, October 2, 2021	15,401,051	$	154	$	446,612	$	157,356	$	604,122

Balance, January 1, 2022	15,414,005	$	154	$	451,754	$	172,812	$	624,720
Stock-based compensation	—	—		14,312		—		14,312
Restricted stock issuance, net	133,397	2		(2)		—		—
Stock issuance for acquisitions	12,519	—		1,352		—		1,352

Net income	—	—		—		41,973		41,973
Balance, October 1, 2022	15,559,921	$	156	$	467,416	$	214,785	$	682,357

See accompanying notes to consolidated financial statements (unaudited).

NV5 Global, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)


	Nine Months Ended
	October 1, 2022		October 2, 2021
Cash flows from operating activities:
Net income	$	41,973	$	31,691
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	33,091		33,397
Non-cash lease expense	9,409		7,941
Provision for doubtful accounts	1,252		1,077
Stock-based compensation	15,249		12,087
Change in fair value of contingent consideration	(543)		(67)
Gain on disposals of property and equipment	(100)		(1,059)
Deferred income taxes	(4,288)		(4,318)
Amortization of debt issuance costs	556		1,024
Changes in operating assets and liabilities, net of impact of acquisitions:
Billed receivables	13,281		16,728
Unbilled receivables	(8,633)		(10,024)
Prepaid expenses and other assets	(8,105)		(4,160)
Accounts payable	(7,937)		1,366
Accrued liabilities	(1,608)		403

Billings in excess of costs and estimated earnings on uncompleted contracts	(2,902)		(8,233)
Other current liabilities	(304)		218
Net cash provided by operating activities	80,391		78,071

Cash flows from investing activities:
Cash paid for acquisitions (net of cash received from acquisitions)	(5,020)		(23,569)
Proceeds from sale of assets	87		843
Purchase of property and equipment	(14,874)		(6,714)
Net cash used in investing activities	(19,807)		(29,440)

Cash flows from financing activities:
Proceeds from common stock offering	—		172,500
Borrowings from Senior Credit Facility	—		138,750
Payments on notes payable	(7,796)		(7,299)
Payments of contingent consideration	(1,597)		(663)
Payments of borrowings from Senior Credit Facility	(45,000)		(283,832)
Payments of common stock offering costs	—		(10,657)
Purchases of common stock tendered by employees to satisfy the required withholding taxes related to stock-based compensation	—		(52)
Payments of debt issuance costs	—		(890)
Net cash (used in) provided by financing activities	(54,393)		7,857

Net increase in cash and cash equivalents	6,191		56,488
Cash and cash equivalents – beginning of period	47,980		64,909
Cash and cash equivalents – end of period	$	54,171	$	121,397

See accompanying notes to consolidated financial statements (unaudited).

NV5 Global, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)


	Nine Months Ended
	October 1, 2022		October 2, 2021
Non-cash investing and financing activities:
Contingent consideration (earn-out)	$	5,849	$	3,476
Notes payable and other obligations issued for acquisitions	$	2,933	$	11,544
Stock issuance for acquisitions	$	1,352	$	4,326
Accrued common stock offering costs	$	—	$	51
Finance leases	$	644	$	269
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. 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. 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.

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.

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NV5 Global, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(in thousands, except share data)

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 October 1, 2022, the Company had $841,149 of remaining performance obligations, of which $668,884 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 and nine months ended October 1, 2022 the Company performed services and recognized $2,421 and $24,499, respectively, 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 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.

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NV5 Global, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(in thousands, except share data)

As of August 1, 2022, 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, 2022. Furthermore, there were no indicators, events or changes in circumstances that would indicate goodwill was impaired during the period from August 2, 2022 through October 1, 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 nine months ended October 1, 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 nine months ended October 1, 2022 and October 2, 2021 exclude 760,050 and 767,622 non-vested restricted shares, respectively. During the three and nine months ended October 1, 2022, there were 36,794 and 25,282 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. During the three and nine months ended October 2, 2021, there were 11,081 and 6,612 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				Nine Months Ended
	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Numerator:
Net income – basic and diluted	$	16,063	$	12,573	$	41,973	$	31,691

Denominator:
Basic weighted average shares outstanding	14,768,689		14,593,623		14,732,726		13,963,372
Effect of dilutive non-vested restricted shares and units	517,238		451,892		494,047		497,287
Effect of issuable shares related to acquisitions	15,618		24,145		15,680		26,024
Diluted weighted average shares outstanding	15,301,545		15,069,660		15,242,453		14,486,683

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

2022 Acquisitions

The Company has completed four acquisitions during 2022. The aggregate purchase price for all four acquisitions was $13,776, including $4,994 in cash, a $2,500 promissory note, $433 of the Company's common stock, and potential earn-outs of up to $15,850 payable in cash and common stock, which has been recorded at an estimated fair value of $5,849. 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 2022 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 relevant acquisition date, including intangible assets, accounts receivable, certain fixed assets, and the fair value of the earn-outs..

2021 Acquisitions

The Company completed eight acquisitions during 2021. The aggregate purchase price of all eight acquisitions was $100,449, including $69,501 of cash, $19,028 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

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NV5 Global, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(in thousands, except share data)

factors used in establishing the asset and liability fair values as of the acquisition date, including intangible assets, accounts receivable, and certain fixed assets.

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 nine months ended October 1, 2022 and the fiscal year ended January 1, 2022:


	Nine Months Ended		Fiscal Year Ended
	October 1, 2022		January 1, 2022
Cash	$	—	$	1,480
Billed and unbilled receivables, net	1,745		17,728
Right-of-use assets	632		2,932
Property and equipment	1,510		3,741
Prepaid expenses	—		519
Other assets	—		13
Intangible assets:
Customer relationships	3,123		36,338
Trade name	228		2,098
Customer backlog	217		3,847

Non-compete	241		4,456
Total Assets	$	7,696	$	73,152
Liabilities	(2,850)		(13,984)
Deferred tax liabilities	—		(4,521)
Net assets acquired	$	4,846	$	54,647

Consideration paid (Cash, Notes and/or stock)	$	7,927	$	95,316
Contingent earn-out liability (Cash and stock)	5,849		5,133
Total Consideration	$	13,776	$	100,449
Excess consideration over the amounts assigned to the net assets acquired (Goodwill)	$	8,930	$	45,802

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 and nine months ended October 2, 2021. The revenue and earnings of the fiscal 2022 acquisitions included in the Company's results since the acquisition dates are not material to the Company's consolidated financial statements and have not been presented.


	Three Months Ended		Nine Months Ended
	October 2, 2021		October 2, 2021
Gross revenues	$	9,026	$	19,007
Income before income taxes	$	871	$	4,158

General and administrative expenses for the three and nine months ended October 1, 2022 and October 2, 2021 include acquisition-related costs pertaining to the Company's acquisition activities. Acquisition-related costs were not material to the Company's consolidated financial statements.

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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 and nine months ended October 1, 2022 and October 2, 2021 as if the fiscal 2022 and 2021 acquisitions had occurred at the beginning of fiscal year 2021. The pro forma information provided below is compiled from 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				Nine Months Ended
	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Gross revenues	$	204,195	$	198,017	$	601,383	$	564,098
Net income	$	16,097	$	13,353	$	42,399	$	33,921
Basic earnings per share	$	1.09	$	0.91	$	2.88	$	2.42
Diluted earnings per share	$	1.05	$	0.88	$	2.78	$	2.33

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.

Note 6 – Billed and Unbilled Receivables

Billed and Unbilled Receivables consists of the following:


	October 1, 2022		January 1, 2022
Billed receivables	$	146,208	$	159,942
Less: allowance for doubtful accounts	(4,900)		(6,128)
Billed receivables, net	$	141,308	$	153,814

Unbilled receivables	$	100,374	$	91,558
Less: allowance for doubtful accounts	(2,293)		(1,824)
Unbilled receivables, net	$	98,081	$	89,734

Note 7 – Property and Equipment, net

Property and equipment, net, consists of the following:


	October 1, 2022		January 1, 2022
Office furniture and equipment	$	3,414	$	3,314
Computer equipment	24,187		20,063
Survey and field equipment	47,832		35,436
Leasehold improvements	6,526		6,395
Total	81,959		65,208
Less: accumulated depreciation	(40,917)		(32,479)
Property and equipment, net	$	41,042	$	32,729

Depreciation expense was $2,988 and $8,727 for the three and nine months ended October 1, 2022, respectively, of which $1,262 and $3,718 was included in other direct costs. Depreciation expense was $2,974 and $8,413 for the three and nine months ended October 2, 2021, respectively, of which $1,353 and $3,633 was included in other direct costs.

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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 nine months ended October 1, 2022 were as follows:


	Nine Months Ended
	January 1, 2022		2022 Acquisitions		Adjustments		October 1, 2022
INF	$	90,725	$	120	$	87	$	90,932
BTS	111,005		338		(319)		111,024
GEO	188,186		8,472		—		196,658
Total	$	389,916	$	8,930	$	(232)	$	398,614

Goodwill of $8,930 from acquisitions during the nine months ended October 1, 2022 is expected to be deductible for income tax purposes.

Intangible Assets

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


	October 1, 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)	$	222,509	$	(81,488)	$	141,021	$	219,455	$	(65,017)	$	154,438
Trade name(2)	16,842		(15,636)		1,206		16,615		(14,815)		1,800
Customer backlog(3)	29,175		(26,830)		2,345		28,971		(25,162)		3,809
Non-compete(4)	14,070		(10,872)		3,198		13,829		(9,024)		4,805
Developed technology(5)	32,944		(13,122)		19,822		32,944		(9,572)		23,372
Total finite-lived intangible assets	$	315,540	$	(147,948)	$	167,592	$	311,814	$	(123,590)	$	188,224

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

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

The identifiable intangible assets acquired during the nine months ended October 1, 2022 consist of customer relationships, trade name, customer backlog, and non-compete with weighted average lives of 7.9 years, 1.9 years, 1.7 years, and 3.7 years, respectively. Amortization expense was $8,045 and $24,364 during the three and nine months ended October 1, 2022, respectively, and $8,487 and $24,984 during the three and nine months ended October 2, 2021, respectively.

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NV5 Global, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(in thousands, except share data)

Note 9 – Accrued Liabilities

Accrued liabilities consist of the following:


	October 1, 2022		January 1, 2022
Current portion of lease liability	$	13,011	$	12,897
Accrued vacation	13,867		12,819
Payroll and related taxes	18,251		10,931
Benefits	5,053		6,767
Accrued operating expenses	6,162		4,329
Other	2,137		2,718
Total	$	58,481	$	50,461

Note 10 – Notes Payable and Other Obligations

Notes payable and other obligations consists of the following:


	October 1, 2022		January 1, 2022
Senior credit facility	$	53,750	$	98,750
Uncollateralized promissory notes	26,709		31,493
Finance leases	1,945		2,215
Other obligations	1,814		2,733
Debt issuance costs, net of amortization	(2,840)		(3,395)
Total notes payable and other obligations	81,378		131,796
Current portion of notes payable and other obligations	18,140		20,734
Notes payable and other obligations, less current portion	$	63,238	$	111,062

As of October 1, 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 October 1, 2022 and January 1, 2022, the outstanding balance on the Second A&R Credit Agreement was $53,750 and $98,750, respectively.

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 October 1, 2022 the Company's interest rate was 3.8%.

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NV5 Global, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(in thousands, except share data)

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 October 1, 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 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 $556 during the three and nine months ended October 1, 2022, respectively, and $571 and $1,024 during the three and nine months ended October 2, 2021, respectively.

Other Obligations

The Company has aggregate obligations related to acquisitions of $28,523 and $34,226 as of October 1, 2022 and January 1, 2022, respectively. As of October 1, 2022, the Company's weighted average interest rate on other outstanding obligations was 2.3%.

Note 11 – Contingent Consideration

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


	October 1, 2022		January 1, 2022
Contingent consideration, beginning of the year	$	8,328	$	2,400
Additions for acquisitions	5,849		5,133
Reduction of liability for payments made	(1,597)		(1,538)
(Decrease) increase of liability related to re-measurement of fair value	(543)		2,333
Total contingent consideration, end of the period	12,037		8,328
Current portion of contingent consideration	9,224		5,807
Contingent consideration, less current portion	$	2,813	$	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

Table of Contents

NV5 Global, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(in thousands, except share data)

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 (the “CTS 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 prior to the collapse of the Champlain Tower South Condominium Building. On June 16, 2022, a settlement agreement was reached to settle these cases with (a) proposed class of unit owners, (b) invitees, (c) residents, (d) persons who died or sustained any personal injury (including, without limitation, emotional distress) as a result of the CTS Collapse, (e) persons or entities who suffered a loss of, or damage to, real property or personal property, or suffered other economic loss, as a result of the CTS Collapse, (f) representative claimants, and (g) derivative claimants. The Company’s insurers have paid the settlement amount on behalf of the Company pursuant to the settlement agreement. The Court granted preliminary approval of the settlement on May 28, 2022, and the plaintiffs provided notice to the proposed settlement class. The Court held a fairness hearing on June 23, 2022, and it issued an order granting final approval of the settlement on June 24, 2022.

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 October 1, 2022, 1,958,653 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 nine months ended October 1, 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	188,378	$	116.26
Vested	(115,429)	$	64.96
Forfeited	(57,981)	$	66.91
October 1, 2022	759,458	$	78.65

Stock-based compensation expense relating to restricted stock awards during the three and nine months ended October 1, 2022 was $5,634 and $15,249, respectively, and $4,297 and $12,087 during the three and nine months ended October 2, 2021, respectively. In connection with the Company's 401(k) Profit Sharing match, stock-based compensation expense during the three and nine months ended October 1, 2022 includes $283 and $

NV5 Global, Inc. [NVEE] Filings
10-Q	[2022-11-04]
10-Q	[2022-08-05]
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]
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10-Q	[2019-11-07]
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10-Q	[2018-11-07]
10-Q	[2018-08-02]
10-Q	[2018-05-04]
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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]