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FORM 10-Q
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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Delaware | 45-3458017 | ||||||
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incorporation or organization) | (I.R.S. Employer Identification No.) | ||||||
200 South Park Road, | Suite 350 |
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Hollywood, |
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(Address of principal executive offices) | (Zip Code) | ||||||
(954)
| 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 | ||
| Large accelerated filer |
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| Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |||
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Emerging growth company |
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September 30, 2017 December 31, 2016 Assets Current assets: Cash and cash equivalents Accounts receivable, net of allowance for doubtful accounts of $3,106 and $1,992 as of September 30, 2017 and December 31, 2016, respectively Prepaid expenses and other current assets Total current assets Property and equipment, net Intangible assets, net Goodwill Other assets Total Assets Liabilities and Stockholders’ Equity Current liabilities: Accounts payable Accrued liabilities Income taxes payable Billings in excess of costs and estimated earnings on uncompleted contracts Client deposits Current portion of contingent consideration Current portion of notes payable and other obligations Total current liabilities Contingent consideration, less current portion Notes payable and other obligations, less current portion Deferred income tax liabilities, net Total liabilities 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, 10,779,246 and 10,566,528 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively Additional paid-in capital Retained earnings Total stockholders’ equity Total liabilities and stockholders’ equity $ 15,582 $ 35,666 113,004 75,511 2,860 1,874 131,446 113,051 8,009 6,683 68,374 40,861 97,384 59,380 1,042 1,511 $ 306,255 $ 221,486 $ 17,133 $ 13,509 18,173 17,316 855 1,134 1,869 228 173 106 2,653 564 10,821 10,764 51,677 43,621 125 1,875 67,155 21,632 22,084 6,197 141,041 73,325 - - 108 106 122,576 118,026 42,530 30,029 165,214 148,161 $ 306,255 $ 221,486 March 28, 2020 December 28, 2019 Assets Current assets: Cash and cash equivalents $ 38,326 $ 31,825 Billed receivables, net 125,192 131,041 Unbilled receivables, net 86,713 79,428 Prepaid expenses and other current assets 8,220 8,906 Total current assets 258,451 251,200 Property and equipment, net 27,759 25,733 Right-of-use lease assets, net 43,950 46,313 Intangible assets, net 247,614 255,961 Goodwill 310,206 309,216 Other assets 3,438 4,714 Total assets $ 891,418 $ 893,137 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 36,176 $ 36,116 Accrued liabilities 41,087 47,432 Income taxes payable 1,365 — Billings in excess of costs and estimated earnings on uncompleted contracts 4,507 3,303 Client deposits 229 221 Current portion of contingent consideration 1,079 1,954 Current portion of notes payable and other obligations 24,946 25,332 Total current liabilities 109,389 114,358 Contingent consideration, less current portion 1,995 2,048 Long-term lease liabilities 32,624 34,573 Notes payable and other obligations, less current portion 331,317 332,854 Deferred income tax liabilities, net 51,727 53,341 Total liabilities 527,052 537,174 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, 12,874,424 and 12,852,357 shares issued and outstanding as of March 28, 2020 and December 28, 2019, respectively 129 129 Additional paid-in capital 255,402 251,187 Retained earnings 108,835 104,647 Total stockholders’ equity 364,366 355,963 Total liabilities and stockholders’ equity $ 891,418 $ 893,137
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Gross revenues | $ | 91,263 | $ | 60,091 | $ | 239,058 | $ | 160,888 | ||||||||
Direct costs (excluding depreciation and amortization): | ||||||||||||||||
Salaries and wages | 28,219 | 20,274 | 75,235 | 53,744 | ||||||||||||
Sub-consultant services | 12,663 | 8,854 | 33,719 | 22,246 | ||||||||||||
Other direct costs | 3,635 | 3,307 | 10,276 | 8,209 | ||||||||||||
Total direct costs | 44,517 | 32,435 | 119,230 | 84,199 | ||||||||||||
Gross Profit | 46,746 | 27,656 | 119,828 | 76,689 | ||||||||||||
Operating Expenses: | ||||||||||||||||
Salaries and wages, payroll taxes and benefits | 23,090 | 14,096 | 62,847 | 40,575 | ||||||||||||
General and administrative | 7,362 | 4,415 | 19,931 | 12,640 | ||||||||||||
Facilities and facilities related | 3,547 | 2,066 | 9,162 | 5,803 | ||||||||||||
Depreciation and amortization | 3,788 | 1,604 | 9,542 | 4,285 | ||||||||||||
Total operating expenses | 37,787 | 22,181 | 101,482 | 63,303 | ||||||||||||
Income from operations | 8,959 | 5,475 | 18,346 | 13,386 | ||||||||||||
Interest expense | (524 | ) | (81 | ) | (1,042 | ) | (221 | ) | ||||||||
Income before income tax expense | 8,435 | 5,394 | 17,304 | 13,165 | ||||||||||||
Income tax expense | (2,523 | ) | (1,990 | ) | (4,803 | ) | (4,847 | ) | ||||||||
Net Income and Comprehensive Income | $ | 5,912 | $ | 3,404 | $ | 12,501 | $ | 8,318 | ||||||||
Earnings per share: | ||||||||||||||||
Basic | $ | 0.58 | $ | 0.34 | $ | 1.23 | $ | 0.94 | ||||||||
Diluted | $ | 0.55 | $ | 0.33 | $ | 1.16 | $ | 0.90 | ||||||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic | 10,211,114 | 9,941,517 | 10,155,751 | 8,826,090 | ||||||||||||
Diluted | 10,785,630 | 10,353,793 | 10,744,619 | 9,215,365 | ||||||||||||
| Three Months Ended | |||||||
| March 28, 2020 | March 30, 2019 | ||||||
| Gross revenues | $ | 165,480 | $ | 117,335 | |||
Direct costs (excluding depreciation and amortization): | |||||||
| Salaries and wages | 45,034 | 35,257 | |||||
| Sub-consultant services | 27,427 | 16,952 | |||||
| Other direct costs | 8,487 | 9,696 | |||||
| Total direct costs | 80,948 | 61,905 | |||||
| Gross Profit | 84,532 | 55,430 | |||||
| Operating Expenses: | |||||||
| Salaries and wages, payroll taxes and benefits | 45,556 | 29,238 | |||||
| General and administrative | 13,157 | 8,862 | |||||
| Facilities and facilities related | 5,397 | 3,806 | |||||
| Depreciation and amortization | 11,040 | 6,113 | |||||
| Total operating expenses | 75,150 | 48,019 | |||||
| Income from operations | 9,382 | 7,411 | |||||
| Interest expense | (3,788 | ) | (351 | ) | |||
| Income before income tax expense | 5,594 | 7,060 | |||||
| Income tax expense | (1,406 | ) | (1,517 | ) | |||
| Net Income and Comprehensive Income | $ | 4,188 | $ | 5,543 | |||
| Earnings per share: | |||||||
| Basic | $ | 0.34 | $ | 0.46 | |||
| Diluted | $ | 0.33 | $ | 0.44 | |||
| Weighted average common shares outstanding: | |||||||
| Basic | 12,233,477 | 11,960,944 | |||||
| Diluted | 12,593,788 | 12,463,007 | |||||
Common Stock | Additional Paid-In | Retained | ||||||||||||||||||
Shares | Amount | Capital | Earnings | Total | ||||||||||||||||
Balance, December 31, 2016 | 10,566,528 | $ | 106 | $ | 118,026 | $ | 30,029 | $ | 148,161 | |||||||||||
Stock compensation | - | - | 2,743 | - | 2,743 | |||||||||||||||
Restricted stock issuance, net | 163,016 | 2 | (2 | ) | - | - | ||||||||||||||
Stock issuance for acquisitions | 47,982 | - | 1,746 | - | 1,746 | |||||||||||||||
Payment of contingent consideration with common stock | 1,720 | - | 63 | - | 63 | |||||||||||||||
Net income | - | - | - | 12,501 | 12,501 | |||||||||||||||
Balance, September 30, 2017 | 10,779,246 | $ | 108 | $ | 122,576 | $ | 42,530 | $ | 165,214 | |||||||||||
| Common Stock | Additional Paid-In Capital | Retained Earnings | ||||||||||||||||
| Shares | Amount | Total | ||||||||||||||||
| Balance, December 29, 2018 | 12,550,711 | $ | 126 | $ | 236,525 | $ | 80,891 | $ | 317,542 | |||||||||
| Stock compensation | — | — | 1,798 | — | 1,798 | |||||||||||||
| Restricted stock issuance, net | (6,750 | ) | (0.1 | ) | 0.1 | — | — | |||||||||||
| Stock issuance for acquisitions | 9,969 | 0.1 | 563 | — | 563 | |||||||||||||
| Payment of contingent consideration with common stock | 11,185 | 0.1 | 725 | — | 725 | |||||||||||||
| Net income | — | — | — | 5,543 | 5,543 | |||||||||||||
| Balance, March 30, 2019 | 12,565,115 | $ | 126 | $ | 239,611 | $ | 86,434 | $ | 326,171 | |||||||||
| Common Stock | Additional Paid-In Capital | Retained Earnings | ||||||||||||||||
| Shares | Amount | Total | ||||||||||||||||
| Balance, December 28, 2019 | 12,852,357 | $ | 129 | $ | 251,187 | $ | 104,647 | $ | 355,963 | |||||||||
| Stock compensation | — | — | 3,379 | — | 3,379 | |||||||||||||
| Restricted stock issuance, net | 4,417 | — | — | — | — | |||||||||||||
| Stock issuance for acquisitions | 12,406 | — | 558 | — | 558 | |||||||||||||
| Payment of contingent consideration with common stock | 5,244 | — | 278 | — | 278 | |||||||||||||
| Net income | — | — | — | 4,188 | 4,188 | |||||||||||||
| Balance, March 28, 2020 | 12,874,424 | $ | 129 | $ | 255,402 | $ | 108,835 | $ | 364,366 | |||||||||
Nine Months Ended | ||||||||
September 30, 2017 | September 30, 2016 | |||||||
Cash Flows From Operating Activities: | ||||||||
Net income | $ | 12,501 | $ | 8,318 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 9,542 | 4,285 | ||||||
Provision for doubtful accounts | 445 | 246 | ||||||
Stock compensation | 2,743 | 1,704 | ||||||
Change in fair value of contingent consideration | 56 | 88 | ||||||
Loss on disposal property and equipment | 2 | 2 | ||||||
Excess tax benefit from stock based compensation | - | (155 | ) | |||||
Deferred income taxes | 320 | 88 | ||||||
Changes in operating assets and liabilities, net of impact of acquisitions: | ||||||||
Accounts receivable | (17,031 | ) | (7,795 | ) | ||||
Prepaid expenses and other assets | (13 | ) | 372 | |||||
Accounts payable | (1,827 | ) | 2,892 | |||||
Accrued liabilities | (3,251 | ) | 476 | |||||
Income taxes payable | (279 | ) | 96 | |||||
Billings in excess of costs and estimated earnings on uncompleted contracts | 1,641 | (78 | ) | |||||
Client deposits | 822 | 147 | ||||||
Net cash provided by operating activities | 5,671 | 10,686 | ||||||
Cash Flows From Investing Activities: | ||||||||
Cash paid for acquisitions (net of cash received from acquisitions) | (60,241 | ) | (24,388 | ) | ||||
Purchase of property and equipment | (1,591 | ) | (566 | ) | ||||
Net cash used in investing activities | (61,832 | ) | (24,954 | ) | ||||
Cash Flows From Financing Activities: | ||||||||
Proceeds from borrowings from Senior Credit Facility | 47,000 | - | ||||||
Proceeds from secondary offering | - | 51,319 | ||||||
Payments of borrowings from Senior Credit Facility | (5,000 | ) | - | |||||
Payments of secondary offering costs | - | (4,172 | ) | |||||
Payments on notes payable | (5,360 | ) | (4,156 | ) | ||||
Payments of contingent consideration | (563 | ) | (296 | ) | ||||
Excess tax benefit from stock based compensation | - | 155 | ||||||
Proceeds from exercise of unit warrant | - | 1,008 | ||||||
Net cash provided by financing activities | 36,077 | 43,858 | ||||||
Net (decrease) increase in Cash and Cash Equivalents | (20,084 | ) | 29,590 | |||||
Cash and cash equivalents – beginning of period | 35,666 | 23,476 | ||||||
Cash and cash equivalents – end of period | $ | 15,582 | $ | 53,066 | ||||
| Three Months Ended | |||||||
| March 28, 2020 | March 30, 2019 | ||||||
| Cash Flows From Operating Activities: | |||||||
| Net income | $ | 4,188 | $ | 5,543 | |||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
| Depreciation and amortization | 11,040 | 6,113 | |||||
| Non-cash lease expense | 1,704 | 2,009 | |||||
| Provision for doubtful accounts | 215 | 206 | |||||
| Stock based compensation | 3,379 | 1,798 | |||||
| Change in fair value of contingent consideration | — | 49 | |||||
| (Gain) loss on disposals of property and equipment | (339 | ) | 1 | ||||
| Deferred income taxes | (1,614 | ) | (463 | ) | |||
| Amortization of debt issuance costs | 220 | — | |||||
| Changes in operating assets and liabilities, net of impact of acquisitions: | |||||||
| Billed receivables | 6,053 | 8,995 | |||||
| Unbilled receivables | (7,764 | ) | 3,350 | ||||
| Prepaid expenses and other assets | 1,962 | (1,331 | ) | ||||
| Accounts payable | 44 | (3,240 | ) | ||||
| Accrued liabilities | (8,061 | ) | (4,930 | ) | |||
| Income taxes payable | 1,365 | 1,521 | |||||
| Billings in excess of costs and estimated earnings on uncompleted contracts | 1,204 | (3,370 | ) | ||||
| Deposits | 7 | 62 | |||||
| Net cash provided by operating activities | 13,603 | 16,313 | |||||
| Cash Flows From Investing Activities: | |||||||
| Cash paid for acquisitions (net of cash received from acquisitions) | — | (8,000 | ) | ||||
| Proceeds from sale of assets | 425 | — | |||||
| Purchase of property and equipment | (4,525 | ) | (690 | ) | |||
| Net cash used in investing activities | (4,100 | ) | (8,690 | ) | |||
| Cash Flows From Financing Activities: | |||||||
| Payments on notes payable | (2,116 | ) | (1,848 | ) | |||
| Payments of contingent consideration | (650 | ) | (700 | ) | |||
| Payments of debt issuance costs | (236 | ) | — | ||||
| Net cash used in financing activities | (3,002 | ) | (2,548 | ) | |||
| Net increase in Cash and Cash Equivalents | 6,501 | 5,075 | |||||
| Cash and cash equivalents – beginning of period | 31,825 | 40,739 | |||||
| Cash and cash equivalents – end of period | $ | 38,326 | $ | 45,814 | |||
Nine Months Ended | ||||||||
September 30, 2017 | September 30, 2016 | |||||||
Supplemental disclosures of cash flow information: | ||||||||
Cash paid for interest | $ | 843 | $ | 255 | ||||
Cash paid for income taxes | $ | 4,962 | $ | 4,642 | ||||
Non-cash investing and financing activities: | ||||||||
Contingent consideration (earn-out) | $ | 908 | $ | - | ||||
Notes payable and other obligations issued for acquisitions | $ | 9,371 | $ | 9,333 | ||||
Stock issuance for acquisitions | $ | 1,746 | $ | 1,075 | ||||
Payment of contingent consideration and other obligations with common stock | $ | 62 | $ | 162 | ||||
| Three Months Ended | |||||||
| March 28, 2020 | March 30, 2019 | ||||||
| Non-cash investing and financing activities: | |||||||
| Notes payable and other obligations issued for acquisitions | $ | — | $ | 4,500 | |||
| Stock issuance for acquisitions | $ | 558 | $ | 563 | |||
| Finance leases | $ | 408 | $ | — | |||
| Payment of contingent consideration and other obligations with common stock | $ | 278 | $ | 725 | |||
actions by government authorities to contain the outbreak or treat its impact. We intend to continue to monitor the impact of COVID-19 pandemic on our business closely. NV5 Global, Inc. and Subsidiaries“Company” or“Company,” “NV5 Global”) is a provider of professional and technical engineering and consulting solutions to public and private sector clients in the infrastructure, energy,utility services, construction, real estate, and environmental markets.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:● Infrastructure, engineering and support ● Management oversight ● Construction quality assurance, testing and inspection ● Permitting ● Program management ● Inspection and field supervision ● Utility services ● Testing inspection and certification ● Environmental ● Forensic engineering ● Planning ● Litigation support ● Design ● Condition assessment ● Consulting ● Compliance certification ● Geospatial solutions planning, design, consulting, permitting, inspectionpredict the ultimate impact that it may have on our business, future results of operations, financial position, or cash flows. The extent to which our operations may be impacted by the COVID-19 pandemic will depend largely on future developments, which are highly uncertain and field supervision, testing inspectioncannot be accurately predicted, including new information which may emerge concerning the severity of the outbreak and certification, management oversight, forensic engineering, litigation support, condition assessment and compliance certification.NV5 Global, Inc.the Company and those of its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.allall 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 December 31, 2016. The accompanying consolidated balance sheet as of December 31, 2016 has been derived from those financial statements.28, 2019 (the “2019 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 20172020 fiscal year.Fiscal Year Effective March 7, 2017,Audit Committee of our Board of Directorsproper revenue recognition method, we evaluate whether two or more contracts should be combined and accounted for as one single contract and whether the Board of Directors approved a change in our fiscal year-end and financial accounting cycle. With effect from January 1, 2017, the Company commenced reporting its financial results on a 52/53 week fiscal year ending on the Saturday closest to December 31st (whethercombined or not in the following calendar year), with interim calendar quarters ending on the Saturday closest to the end of such calendar quarter (whether or not in the following calendar quarter). As such, in calendar year 2017, the first fiscal quarter ended on April 1, 2017, the second fiscal quarter ended on July 1, 2017, the third fiscal quarter ended on September 30, 2017, and the fiscal year will end on December 30, 2017.Use of EstimatesThe preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. These estimates and assumptions are based on management’s most recent assessment of underlying facts and circumstances using the most recent information available. Actual results could differ significantly from these estimates and assumptions, and the differences couldsingle contract should be material.
Estimates and assumptions are evaluated periodically and adjusted when necessary.
Concentrationestimated earnings on uncompleted contracts” represents billings in excess of Credit Risk
Trade receivable balances carried by the Company are comprised of accounts from a diverse client base across a broad range of industries and are not collateralized. However, approximately 32% and 35% of the Company’s gross revenues for the nine months ended September 30, 2017 and 2016, respectively, are from California-based projects. The Company does not have any clients individually representing more than 10% of gross revenues during the nine months ended September 30, 2017 and 2016. Furthermore, approximately 57% and 71% of the Company’s accounts receivable as of September 30, 2017 and December 31, 2016, respectively, are for public and quasi-public projects. Management continually evaluates the creditworthiness ofrecognized on these and future clients and provides for bad debt reserves as necessary.
Fair Value of Financial Instruments
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels of valuation hierarchy are defined as follows:
Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 - inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The Company considers cash and cash equivalents, accounts receivable, accounts payable, income taxes payable, accrued liabilities and debt obligations to meet the definition of financial instruments. As of September 30, 2017 and December 31, 2016, the carrying amount of cash and cash equivalents, accounts receivable, accounts payable, income taxes payable and accrued liabilities approximate their fair value due to the relatively short period of time between their origination and their expected realization or payment. The carrying amounts of debt obligations approximate their fair values 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.
The Company applies the provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805, Business Combinations, in the accounting for its acquisitions, which requires recognition of the assets acquired and the liabilities assumed at their acquisition date fair values, separately from goodwill. Goodwillcontracts as of the acquisition datereporting date. This liability is measuredgenerally classified as current. Revenue recognized that was included in the excess of consideration transferred andcontract liability balance at the netbeginning of the acquisition date fair values offiscal year was $2,767 for the tangible and identifiable intangible assets acquired and liabilities assumed. The allocation of
NV5 Global, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(in thousands, except share data)
Several factors are considered when determining contingent consideration liabilities as part of the purchase price, including whether (i) the valuation of the acquisitions is not supported solely by the initial consideration paid, and the contingent earn-out formula is a critical and material component of the valuation approach to determining the purchase price; and (ii) the former owners of the acquired companies that remain as key employees receive compensation other than contingent earn-out payments at a reasonable level compared with the compensation of other key employees. The contingent earn-out payments are not affected by employment termination.
We review and re-assess the estimated fair value of contingent consideration liabilities on a quarterly basis, and the updated fair value could differ materially from the initial estimates. The Company measures contingent consideration recognized in connection with business combinations at fair value on a recurring basis using significant unobservable inputs classified within Level 3, as defined in the accounting guidance. The Company uses a probability-weighted discounted cash flow approach as a valuation technique to determine the fair value of the contingent consideration liabilities on the acquisition date and at each reporting period. The significant unobservable inputs used in the fair value measurements are projections over the earn-out period, and the probability outcome percentages that are assigned to each scenario. Significant increases or decreases to either of these inputs in isolation could result in a significantly higher or lower liability with a higher liability capped by the contractual maximum of the contingent consideration liabilities. Ultimately, the liability will be equivalent to the amount paid, and the difference between the fair value estimate on the acquisition date and amount paid will be recorded in earnings (see Note 10). Adjustments to the estimated fair value related to changes in all other unobservable inputs are reported in income from operations.
There were no indicators, events or changes in circumstances that would indicate intangible assets were impaired during the three months ended March 28, 2020.company’scompany’s tangible and identifiable intangible assets and liabilities.performing the two-stepCompany may apply a one-step quantitative test and record the amount of goodwill impairment test is unnecessary. The two-step impairment test requires a comparisonas the excess of the carrying value of the assets and liabilities associated with a reporting unit, including goodwill, with theunit'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 certainIf the carrying value of a reporting unit exceeds the fair value of the reporting unit, the Company would calculate the implied fair value of its reporting unit goodwill as compared to the carrying value of its reporting unit goodwill to determine the appropriate impairment charge, if any. The Company has elected to perform its annual goodwill impairment review on August 1 of each year. The Company historically conducts its annual impairment tests on the goodwill using the quantitative method of evaluating goodwill.non-compete agreements.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.
NV5 Global, Inc.In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) ("ASU 2016-13"). This ASU introduces a new accounting model, the Current Expected Credit Losses model (CECL), which could result in earlier recognition of credit losses and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(additional disclosures related to credit risk. The CECL model requires the Company to use a forward-looking expected credit loss impairment methodology for the recognition of credit losses for financial instruments at the time the financial asset is originated or acquired. The expected credit losses are adjusted each period for changes in thousands, except share data)
expected lifetime credit losses. This model replaces the multiple existing impairment models in current GAAP, which generally require that a loss be incurred before it is recognized. The new standard also applies to receivables arising from revenue transactions such as contract assets and accounts receivable and is effective for fiscal years beginning after December 15, 2019. The Company adopted this ASU at the beginning of fiscal year 2020. The standard was applied prospectively and did not materially impact the consolidated financial statements. data) Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, 2017 2016 2017 2016 Numerator: Net income – basic and diluted Denominator: Basic weighted average shares outstanding Effect of dilutive non-vested restricted shares and units Effect of issuable shares related to acquisitions Effect of warrants Diluted weighted average shares outstanding In accordance with the FASB ASC 260, Earnings per Share, theThe effect of potentially dilutive securities is not considered during periods of loss or if the effect is anti-dilutive.and nine months ended SeptemberMarch 28, 2020 and March 30, 20172019 exclude 637,186 and 2016 exclude 560,689 and 434,082594,326 non-vested restricted shares, respectively, issued since 2010. These non-vested restricted sharesrespectively. During the three months ended March 28, 2020, there were 164,221 weighted average securities which are not included in basic earnings per share until the vesting requirement is met. Thecalculation of diluted weighted average number of shares outstanding in calculating diluted earnings per share forbecause their impact is anti-dilutive. There were 0 potentially anti-dilutive securities during the three and nine months ended SeptemberMarch 30, 20172019.2016 includes, if outstanding, non-vested restricted shares and units, issuable shares related to acquisitions, and the warrants associated with the Company’s initial public offering. In calculating diluted earnings perSubsidiariesfor the three and nine months ended September 30, 2017 and 2016, there were no potentially anti-dilutive securities.share for the three and nine months ended September 30, 2017 and 2016: $ 5,912 $ 3,404 $ 12,501 $ 8,318 10,211,114 9,941,517 10,155,751 8,826,090 311,677 203,997 305,392 209,032 146,958 102,810 170,768 55,551 115,881 105,469 112,708 124,692 10,785,630 10,353,793 10,744,619 9,215,365 Note 3 – Recent Accounting PronouncementsIn January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350) Simplifying the Test for Goodwill Impairment. This ASU eliminates Step 2 of the goodwill impairment test and simplifies how the amount of an impairment loss is determined. The update is effective for public companies in the beginning of fiscal year 2020 and shall be applied on a prospective basis. Early adoption is permitted for goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect the impact of this ASU to be material to its consolidated financial statements.In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments. This ASU clarifies guidance for cash flow classification to reduce current and potential future diversity in practice. The update is effective for public companies in the beginning of fiscal 2018. The amendments should be applied using a retrospective transition method to each period presented. For items that are impractical to apply the amendments retrospectively, they shall be applied prospectively as of the earliest date practicable. Early adoption is permitted. The Company does not expect the impact of this ASU to be material to its consolidated financial statements.In March 2016, FASB issued Accounting Standards Update 2016-09, Compensation – Stock Compensation: Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 simplifies the accounting for share-based payment award transactions including: income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. The Company adopted the requirements of ASU 2016-09 on January 1, 2017 on a prospective basis, which resulted in a decrease in income tax expense of approximately $974 for the nine months ended September 30, 2017. ASU 2016-09 requires excess tax benefits be presented within the statement of cash flows as an operating activity rather than as a financing activity and excess tax benefits to be excluded from the assumed future proceeds in the calculation of diluted shares. Three Months Ended March 28, 2020 March 30, 2019 Numerator: Net income – basic and diluted $ 4,188 $ 5,543 Denominator: Basic weighted average shares outstanding 12,233,477 11,960,944 Effect of dilutive non-vested restricted shares and units 297,999 407,724 Effect of issuable shares related to acquisitions 62,312 94,339 Diluted weighted average shares outstanding 12,593,788 12,463,007
NV5 Global, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(in thousands, except share data)
In February 2016, FASB issued ASU 2016-02, Leases. ASU 2016-02 requires lessees to recognize, in the balance sheet, a liability to make lease payments and a right-of-use asset representing the right to use the underlying asset over the lease term. The amendments in this accounting standard update are to be applied using a modified retrospective approach and are effective for fiscal years beginning after December 15, 2018. We are currently evaluating the requirements of ASU 2016-02 and its impact on the consolidated financial statements.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. This ASU is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to acustomer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. This ASU was originally effective for annual reporting periods beginning after December 15, 2016 and early adoption is permitted as of the original effective date. Companies may use either a full retrospective or a modified retrospective approach to adopt this ASU. In July 2015, FASB voted to approve a one-year deferral of the effective date to December 31, 2017 for interim and annual reporting periods beginning after that date and permitted early adoption of the standard, but not before the original effective date of December 15, 2016. As a result, ASU 2014-09 will become effective for us in the first quarter of our fiscal year ending December 31, 2018. The Company has begun its assessment and is evaluating the areas of impact on its consolidated financial statements. The Company has decided to adopt this standard under the modified retrospective approach. Currently, the Company has identified various revenue types by services, contracts, clients and billings. The Company is reviewing its contracts in the various revenue types in order to isolate those that will be significantly impacted as well as to identify the relevant revenue types for disaggregated disclosure. After the assessment is complete, the Company can estimate potential impacts, if any, of the new standard as well as the impact of adopting ASU 2014-09 on the Company's consolidated net income, financial position, cash flows, disclosures, information technology systems and internal controls.
September 6, 2017, the Company acquired all of the outstanding interests in Marron and Associates, Inc. (“Marron”December 20, 2019 (the "Closing Date"), a leading environmental services firm with offices in Albuquerque and Las Cruces, New Mexico. Marron provides environmental planning, natural and cultural resources, environmental site assessment, and GIS services. Marron primarily serves public and private clients throughout the Southwest, including the New Mexico Department of Transportation, Bureau of Land Management, Bureau of Indian Affairs, Federal Highway Administration, U.S. Department of Agriculture, U.S. Fish and Wildlife Service, and U.S. Forest Service. The purchase price of this acquisition is up to $990 including $400 in cash, $300 in promissory notes (bearing interest at 3.0%), payable in three installments of $100, due on the first, second and third anniversaries of September 6, 2017, the effective date of the acquisition (see Note 9), $67 of the Company’s common stock (1,510 shares) as of the closing date of the acquisition and $133 in stock or a combination of cash and shares of the Company’s stock, at its discretion, payable in two equal installments, due on the first and second anniversaries of September 6, 2017.The purchase price also included an interest bearing earn-out of $90 promissory note, subject to the achievement of certain agreed upon metrics for calendar year 2017. The Company internally determined the preliminary fair values of tangible and intangible assets acquired and liabilities assumed. We expect to finalize the purchase price allocation with respect to this transaction by the end of the fourth quarter of 2017. The note and the earn-out are due to a related party individual who became an employee of the Company upon the acquisition.On June 6, 2017, the Company acquired all of the outstanding equity interests in Richard D. Kimball Co.,Geospatial Holdings, Inc. ("RDK"and its subsidiaries, including Quantum Spatial, Inc. (collectively "QSI"), a full-service geospatial solutions provider serving the North American market. QSI provides data solutions to public and private sector clients that need geospatial intelligence to mitigate risk, plan for growth, better manage resources, and advance scientific understanding. NV5 Global acquired QSI in an established leader in the provisionall-cash transaction for $318,428, which includes estimated excess working capital of energy efficiency$8,781 and mechanical, electric and plumbing (MEP) services based in Boston, Massachusetts. In addition to MEP and fire protection services, RDK offers commissioning services, technology design services, and energy and sustainability services, including Whole Building Energy Modeling and ASHRAE Level Energy Audits, Green Building Certification, Energy Code Consulting, Carbon Emissions Management, and Renewable Energy Management. RDK primarily serves commercial, healthcare, science and technology, education, government, and transportation clients.estimated closing date cash of approximately $6,677. The purchase price and other related costs associated with the transaction were financed through the Company's amended and restated credit agreement (the "A&R Credit Agreement") with Bank of America, N.A. and the other lenders party thereto. Pursuant to the A&R Credit Agreement, the lenders provided term commitments of $150,000 in the aggregate in a single draw on the Closing Date and revolving commitments totaling $215,000. See Note 9, acquisition is upmeasurement period to $22,500, subject to customary closing working capital adjustments, including $15,000 in cash, $5,500 in promissory notes (bearing interest at 3.0%), payable in four installments of $1,375, due on the first, second, thirdadequately analyze and fourth anniversaries of June 6, 2017 (see Note 9), $667assess a number of the Company’s common stock (18,072 shares)factors used in establishing the asset and liability fair values as of the closingacquisition date, including intangible assets, accounts receivable, and certain fixed assets.and $1,333 in stock or a combination of cash and sharesdate, including accounts receivable.Company’s stock, at our discretion, payableoutstanding equity interests in two equal installments, due on the firstWHPacific, Inc. (“WHPacific”), a provider of design engineering and second anniversariessurveying services serving Washington, Oregon, Idaho, New Mexico, Arizona and California for a cash purchase price of June 6, 2017.$9,000. In order to ultimately determine the fair values of tangible and intangible assets acquired and liabilities assumed for RDK, weWHPacific, the Company engaged a third-party independent valuation specialist to assist in the determination of fair values. However, as of the date of this report, the valuation was not final. We expect to finalize the purchase price allocation with respect to this transaction by the end of the fourth quarter of 2017.
NV5 Global, Inc. and Subsidiaries
fair values.
NV5 Global, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(in thousands, except share data)
On May 20, 2016,December 31, 2018, the Company acquired Dade Moeller & Associates,certain assets of Celtic Energy, Inc. ("Celtic"), a North Carolina corporation ("Dade Moeller"). Dade Moeller provides professional servicesnationally recognized energy efficiency consulting firm that specialized in radiation protection, health physics,energy efficiency project management and worker safety to government and commercial facilities. Dade Moeller's technical expertise includes radiation protection, industrial hygiene and safety, environmental services and laboratory consulting. This acquisition expanded the Company’s environmental, health and safety services and allows the Company to offer these services on a broader scale within its existing network.oversight. The aggregate purchase price of this acquisition was $20,000$1,881, including $10,000$1,000 in cash, $6,000$300 in promissory notesnote (bearing interest at 3.5%3.0%), payable in four3 equal installments of $1,500, due on the first, second, third and fourth anniversaries of May 20, 2016, the effective date of the acquisition (see Note 9), $1,000 of the Company’s common stock (36,261 shares) as of the closing date of the acquisition, and $3,000 in stock or a combination of cash and shares of the Company’s stock, at our discretion, payable in three installments of $1,000, due$100 on the first, second, and third anniversaries of May 20, 2016.
On February 1, 2016,December 31, 2018, and $200 of the Company acquired Sebesta, Inc. (“Sebesta”), a St. Paul, Minnesota-based mechanical, electrical and plumbing (“MEP”) engineering and energy management company. Primary clients include federal and state governments, power and utility companies, and major educational, healthcare, industrial and commercial property owners throughoutCompany's common stock (3,227 shares) issued at the United States.closing date. The purchase price also includes $200 of this acquisitionthe Company's common stock payable on the first anniversary December 31, 2018. Further, the purchase price includes a $200 earn-out of cash, which was $14,000 paid from cash on hand. This acquisition expandedrecorded at an estimated fair value of $181. In order to determine the Company’s MEP engineeringfair values of tangible and energyintangible assets acquired and allowsliabilities assumed for Celtic, the Company to offer these services onperformed a broader scale within its existing network. In addition, this acquisition strengthens the Company’s geographic diversification and allows the Company to continue expanding its national footprint.
NV5 Global, Inc. and Subsidiaries
The
2017 | 2016 | |||||||
Acquisitions | Acquisitions | |||||||
Cash | $ | 315 | $ | 128 | ||||
Accounts receivable | 20,906 | 20,221 | ||||||
Property and equipment | 1,750 | 4,301 | ||||||
Prepaid expenses | 968 | 1,336 | ||||||
Other assets | 337 | 841 | ||||||
Intangible assets: | ||||||||
Customer relationships | 29,998 | 26,188 | ||||||
Trade name | 2,224 | 1,922 | ||||||
Customer backlog | 1,116 | 3,898 | ||||||
Non-compete | 1,703 | 1,259 | ||||||
Favorable (unfavorable) lease | - | (225 | ) | |||||
Total Assets | 59,317 | 59,869 | ||||||
Liabilities | (11,272 | ) | (12,250 | ) | ||||
Deferred tax liabilities | (15,567 | ) | (7,892 | ) | ||||
Net assets acquired | 32,478 | 39,727 | ||||||
Consideration paid (Cash, Notes and/or stock) | 70,712 | 76,011 | ||||||
Contingent earn-out liability (Cash and stock) | 908 | 1,417 | ||||||
Total Consideration | 71,620 | 77,428 | ||||||
Excess consideration over the amounts assigned to the net assets acquired (Goodwill) | $ | 39,142 | $ | 37,701 | ||||
2019:
| 2019 | |||||||||||
| QSI | Other | Total | |||||||||
| Cash | $ | 6,894 | $ | 75 | $ | 6,969 | |||||
| Billed and unbilled receivables, net | 42,523 | 20,723 | 63,246 | ||||||||
| Right-of-use assets | 6,131 | — | 6,131 | ||||||||
| Property and equipment | 13,499 | 2,163 | 15,662 | ||||||||
| Prepaid expenses | 2,612 | 997 | 3,609 | ||||||||
| Other assets | 1,317 | 1,048 | 2,365 | ||||||||
| Intangible assets: | |||||||||||
| Customer relationships | 64,709 | 10,423 | 75,132 | ||||||||
| Trade name | 58,546 | 1,365 | 59,911 | ||||||||
| Customer backlog | 6,835 | 1,363 | 8,198 | ||||||||
| Developed technology | 32,944 | — | 32,944 | ||||||||
| Other | — | 814 | 814 | ||||||||
| Total Assets | $ | 236,010 | $ | 38,971 | $ | 274,981 | |||||
| Liabilities | (23,698 | ) | (8,343 | ) | (32,041 | ) | |||||
| Deferred tax liabilities | (39,372 | ) | (3,779 | ) | (43,151 | ) | |||||
| Net assets acquired | $ | 172,940 | $ | 26,849 | $ | 199,789 | |||||
| Consideration paid (Cash, Notes and/or stock) | $ | 318,428 | $ | 50,447 | $ | 368,875 | |||||
| Contingent earn-out liability (Cash and stock) | — | 1,004 | 1,004 | ||||||||
| Total Consideration | $ | 318,428 | $ | 51,451 | $ | 369,879 | |||||
| Excess consideration over the amounts assigned to the net assets acquired (Goodwill) | $ | 145,488 | $ | 24,602 | $ | 170,090 | |||||
The consolidated financial statements of the Company for the three and nine months ended September 30, 2017 include the results of operations from the businesses acquired during 2017 from their respective dates of acquisition to September 30, 2017. For both the three and nine months ended September 30, 2017, the results include gross revenues of $21,316 and $35,524, respectively, and income before income taxes of $3,905 and $6,847, respectively. identified intangibles.
| Three Months Ended | |||
| March 30, 2019 | |||
| Gross revenues | $ | 766 | |
| Income before income taxes | $ | 48 | |
NV5 Global, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(in thousands, except share data)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Gross revenues | $ | 91,263 | $ | 78,481 | $ | 262,496 | $ | 222,089 | ||||||||
Net income | $ | 5,912 | $ | 4,583 | $ | 13,541 | $ | 11,805 | ||||||||
Basic earnings per share | $ | 0.58 | $ | 0.45 | $ | 1.33 | $ | 1.32 | ||||||||
Diluted earnings per share | $ | 0.55 | $ | 0.43 | $ | 1.26 | $ | 1.25 | ||||||||
The Company has determined the supplemental disclosures pursuant to ASC 805-10-50-2h, for the Lochrane, H&K and Marron acquisitions were not material to the Company’s unaudited interim consolidated financial statements both individually and in the aggregate.
Note5 – Accounts Receivable, net
Accounts receivable, net, consists of the following:
September 30, | December 31, | |||||||
2017 | 2016 | |||||||
Billed | $ | 81,399 | $ | 53,756 | ||||
Unbilled | 34,131 | 23,237 | ||||||
Contract retentions | 580 | 510 | ||||||
| 116,110 | 77,503 | |||||||
Less: allowance for doubtful accounts | (3,106 | ) | (1,992 | ) | ||||
Accounts receivable, net | $ | 113,004 | $ | 75,511 | ||||
Billed accounts receivable represents amounts billed to clients that remain uncollected as of the balance sheet date. Unbilled accounts receivable represents recognized amounts pending billing pursuant to contract terms or accounts billed after period end, and are expected to be billed and collected within the next 12 months.
NV5 Global, Inc. and Subsidiaries
| Three Months Ended | |||
| March 30, 2019 | |||
| Gross revenues | $ | 165,406 | |
| Net income | $ | 3,748 | |
| Basic earnings per share | $ | 0.31 | |
| Diluted earnings per share | $ | 0.30 | |
| March 28, 2020 | December 28, 2019 | ||||||
| Billed receivables | $ | 129,079 | $ | 134,900 | |||
| Less: allowance for doubtful accounts | (3,887 | ) | (3,860 | ) | |||
| Billed receivables, net | $ | 125,192 | $ | 131,041 | |||
| Unbilled receivables | $ | 87,982 | $ | 80,639 | |||
| Less: allowance for doubtful accounts | (1,269 | ) | (1,211 | ) | |||
| Unbilled receivables, net | $ | 86,713 | $ | 79,428 | |||
September 30, | December 31, | |||||||
2017 | 2016 | |||||||
Office furniture and equipment | $ | 1,575 | $ | 1,329 | ||||
Computer equipment | 8,530 | 6,808 | ||||||
Survey and field equipment | 1,943 | 1,426 | ||||||
Leasehold improvements | 1,670 | 1,583 | ||||||
| 13,718 | 11,146 | |||||||
Accumulated depreciation | (5,709 | ) | (4,463 | ) | ||||
Property and equipment – net | $ | 8,009 | $ | 6,683 | ||||
| March 28, 2020 | December 28, 2019 | ||||||
| Office furniture and equipment | $ | 4,497 | $ | 4,198 | |||
| Computer equipment | 10,522 | 10,704 | |||||
| Survey and field equipment | 27,586 | 24,165 | |||||
| Leasehold improvements | 6,717 | 6,266 | |||||
| Total | 49,322 | 45,333 | |||||
| Less: accumulated depreciation | (21,563 | ) | (19,600 | ) | |||
| Property and equipment, net | $ | 27,759 | $ | 25,733 | |||
Note 7 – Goodwill and Intangible Assets
Goodwill
On August 1, 2017, 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, 2017. There were no indicators, events or changes in circumstances that would indicate goodwill was impaired during the period from August 2, 2017 through September 30, 2017.
The table set forth below shows the change in goodwill during the nine months ended September 30, 2017 and year ended December 31, 2016:
September 30, | December 31, | |||||||
2017 | 2016 | |||||||
Balance as of the beginning of the year | $ | 59,380 | $ | 21,679 | ||||
Acquisitions | 39,142 | 37,701 | ||||||
Reduction from working capital proceeds | (1,138 | ) | - | |||||
Balance as of the end of the period | $ | 97,384 | $ | 59,380 | ||||
During the nine months ended September 30, 2017, the Company revised its allocation of purchase price for its JBA acquisition and reduced goodwill by $1,138.
NV5 Global, Inc. and Subsidiaries
| Three Months Ended | |||||||||||
| December 28, 2019 | Adjustments | March 28, 2020 | |||||||||
| INF | $ | 231,255 | $ | (144,917 | ) | $ | 86,338 | ||||
| BTS | 77,961 | 419 | 78,380 | ||||||||
| GEO | — | 145,488 | 145,488 | ||||||||
| Total | $ | 309,216 | $ | 990 | $ | 310,206 | |||||
September 30, 2017 | December 31, 2016 | |||||||||||||||||||||||
Gross Carrying Amount | Accumulated Amortization | Net Amount | Gross Carrying Amount | Accumulated Amortization | Net Amount | |||||||||||||||||||
Customer relationships | $ | 68,799 | $ | (9,720 | ) | $ | 59,079 | $ | 38,801 | $ | (5,746 | ) | $ | 33,055 | ||||||||||
Trade name | 6,409 | (4,477 | ) | 1,932 | 4,185 | (2,746 | ) | 1,439 | ||||||||||||||||
Customer backlog | 7,723 | (3,509 | ) | 4,214 | 6,607 | (2,284 | ) | 4,323 | ||||||||||||||||
Favorable lease | 553 | (134 | ) | 419 | 553 | (158 | ) | 395 | ||||||||||||||||
Non-compete | 4,249 | (1,519 | ) | 2,730 | 2,546 | (897 | ) | 1,649 | ||||||||||||||||
Total | $ | 87,733 | $ | (19,359 | ) | $ | 68,374 | $ | 52,692 | $ | (11,831 | ) | $ | 40,861 | ||||||||||
Trade names are amortized
| March 28, 2020 | December 28, 2019 | ||||||||||||||||||||||
Gross Carrying Amount | Accumulated Amortization | Net Amount | Gross Carrying Amount | Accumulated Amortization | Net Amount | ||||||||||||||||||
| Finite-lived intangible assets: | |||||||||||||||||||||||
Customer relationships(1) | $ | 176,088 | $ | (33,377 | ) | $ | 142,711 | $ | 176,088 | $ | (29,198 | ) | $ | 146,890 | |||||||||
Trade name(2) | 10,253 | (9,033 | ) | 1,220 | 10,253 | (8,593 | ) | 1,660 | |||||||||||||||
Customer backlog(3) | 24,198 | (14,469 | ) | 9,729 | 24,198 | (12,435 | ) | 11,763 | |||||||||||||||
Non-compete(4) | 9,369 | (5,615 | ) | 3,754 | 9,369 | (5,105 | ) | 4,264 | |||||||||||||||
Developed technology(5) | 32,944 | (1,290 | ) | 31,654 | 32,944 | $ | (106 | ) | $ | 32,838 | |||||||||||||
| Total finite-lived intangible assets | 252,851 | (63,784 | ) | 189,068 | 252,851 | (55,436 | ) | 197,415 | |||||||||||||||
| Indefinite-lived intangible assets: | |||||||||||||||||||||||
| QSI trade name | 58,546 | — | 58,546 | 58,546 | — | 58,546 | |||||||||||||||||
| Total indefinite-lived intangible assets | 58,546 | — | 58,546 | 58,546 | — | 58,546 | |||||||||||||||||
| Total intangible assets | $ | 311,397 | $ | (63,784 | ) | $ | 247,614 | $ | 311,397 | $ | (55,436 | ) | $ | 255,961 | |||||||||
their estimated lives (5 to 7 years)
As of September 30, 2017, the future estimated aggregate amortization related to intangible assets is as follows:
Period ending September 30, | ||||
2018 | $ | 10,370 | ||
2019 | 9,012 | |||
2020 | 7,461 | |||
2021 | 6,886 | |||
2022 | 6,642 | |||
Thereafter | 28,003 | |||
Total | $ | 68,374 | ||
September 30, | December 31, | |||||||
2017 | 2016 | |||||||
Deferred rent | $ | 675 | $ | 696 | ||||
Payroll and related taxes | 3,758 | 4,518 | ||||||
Professional liability reserve | 316 | 190 | ||||||
Benefits | 4,753 | 1,673 | ||||||
Accrued vacation | 6,172 | 5,327 | ||||||
Unreognized tax benefits | 770 | 770 | ||||||
Other | 1,729 | 4,142 | ||||||
Total | $ | 18,173 | $ | 17,316 | ||||
| March 28, 2020 | December 28, 2019 | ||||||
| Current portion of lease liability | $ | 12,751 | $ | 13,108 | |||
| Accrued vacation | 10,855 | 10,048 | |||||
| Payroll and related taxes | 6,068 | 12,146 | |||||
| Benefits | 1,805 | 4,637 | |||||
| Unrecognized tax benefits | 887 | 887 | |||||
| Professional liability reserve | 1,080 | 1,083 | |||||
| Other | 7,641 | 5,523 | |||||
| Total | $ | 41,087 | $ | 47,432 | |||
NV5 Global, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(in thousands, except share data)
September 30, December 31, 2017 2016 Senior Credit Facility Note Payable Other Obligations Uncollateralized promisory notes Total Notes Payable and Other Obligations Current portion of notes payable and other obligations Notes payable and other obligations, less current portion Period ending September 30, 2018 2019 2020 2021 2022 Total September 30, December 31, 2017 2016 Contingent consideration, beginning of the year Additions for acquisitions Reduction of liability for payments made Increase of liability related to re-measurement of fair value Total contingent consideration, end of the period Current portion of contingent consideration Contingent consideration, less current portion Note12– Stock-Based Compensation $ 42,000 $ - - 278 6,449 6,047 29,527 26,071 77,976 32,396 (10,821 ) (10,764 ) $ 67,155 $ 21,632 Senior Credit FacilityOn December 7, 2016, the Company entered into a Credit Agreement (the “Credit Agreement”) with Bank of America, N.A. (“Bank of America”) and Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPFS”). Pursuant to the Credit Agreement, Bank of America agreed to be the sole administrative agent for a five-year $80,000 Senior Secured Revolving Credit Facility (“Senior Credit Facility”) to the Company and, together with PNC Bank, National Association and Regions Bank as the other lenders under the Senior Credit Facility, has committed to lend to the Company all of the Senior Credit Facility, subject to certain terms and conditions. MLPFS has undertaken to act as sole lead arranger and sole book manager for the Senior Credit Facility. In addition, the Senior Credit Facility includes an accordion feature permitting the Company to request an increase in the Senior Credit Facility by an additional amount of up to $60,000. The Senior Credit Facility includes a $5,000 sublimit for the issuance of standby letters of credit and a $15,000 sublimit for swingline loans. The proceeds of the Senior Credit Facility are intended to be used (i) to finance permitted acquisitions, (ii) for capital expenditures, and (iii) for general corporate purposes.Borrowings under the Credit Agreement are at variable rates which are, at our option, tied to a Eurocurrency rate equal to LIBOR (London Interbank Offered Rate) plus an applicable rate or a base rate denominated in U.S. dollars. Interest rates are subject to change based on our Consolidated Senior Leverage Ratio (as defined in the Credit Agreement).The Senior Credit Facility contains certain financial covenants, including a maximum leverage ratio of 3.0:1 and minimum fixed charge coverage ratio of 1.20:1. Furthermore, the Senior Credit Facility also contains financial reporting covenant provisions and other covenants, representations, warranties, indemnities, and events of default that are customary for facilities of this type. March 28, 2020 December 28, 2019 Senior credit facility $ 320,457 $ 320,457 Uncollateralized promissory notes 34,785 36,217 Finance leases 2,800 2,707 Other obligations 2,316 2,884 Debt issuance costs, net of amortization (4,095 ) (4,078 ) Total notes payable and other obligations 356,263 358,187 Current portion of notes payable and other obligations (24,946 ) (25,332 ) Notes payable and other obligations, less current portion $ 331,317 $ 332,854 September 30, 2017March 28, 2020 and December 31, 2016, the Company is in compliance with these financial and reporting covenants. As of September 30, 2017 and December 31, 2016, the outstanding balance on the Senior Credit Facility was $42,000 and $0, respectively.Note PayableThe note held by the seller of Nolte Associates Inc. (the “Nolte Note”) matured on July 29, 2017. The Nolte Note interest rate was prime rate plus 1%, subject to a maximum rate of 7.0%. As of September 30, 2017 and December 31, 2016, the actual interest rate was 4.25%. Under the terms of the Nolte Note, as amended, the Company paid quarterly principal installments of approximately $100 plus interest. The Nolte Note was unsecured and the Company was permitted to make periodic principal and interest payments. As of September 30, 2017 and December 31, 2016, the outstanding balance on the Nolte Note was $0 and $278, respectively.NV5 Global, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)(in thousands, except share data)Other ObligationsOn September 6, 2017, the Company acquired all of the outstanding equity interest in Marron. The purchase price allowed for the payment of $133 in shares of the Company’s stock or a combination of cash and shares of the Company’s stock, at our discretion, payable in two equal installments, due on the first and second anniversaries of September 6, 2017. The outstanding balance of this obligation was $133 and $0 as of September 30, 2017 and December 31, 2016, respectively.On June 6, 2017, the Company acquired all of the outstanding equity interest in RDK. The purchase price allowed for the payment of $1,333 in shares of the Company’s stock or a combination of cash and shares of the Company’s stock, at our discretion, payable in two equal installments, due on the first and second anniversaries of June 6, 2017. The outstanding balance of this obligation was $1,333 and $0 as of September 30, 2017 and December 31, 2016, respectively.On November 30, 2016, the Company acquired all of the outstanding equity interests of Hanna. The purchase price allowed for the payment of $1,200 in shares of the Company’s stock or a combination of cash and shares of the Company’s stock, at our discretion, payable in two installments of $600, due on the first and second anniversaries of November 30, 2016. The outstanding balance of this obligation was $1,200 as of September 30, 2017 and December 31, 2016.On October 26, 2016, the Company acquired all of the outstanding equity interests of JBA. The purchase price allowed for the payment of $2,600 in shares of the Company’s stock or a combination of cash and shares of the Company’s stock, at our discretion, payable in two installments of $1,300, due on the first and second anniversaries of October 26, 2016. The outstanding balance of this obligation was $2,600 as of September 30, 2017 and December 31, 2016.On May 20, 2016, the Company acquired all of the outstanding equity interests of Dade Moeller. The purchase price allowed for the payment of $3,000 in shares of the Company’s stock or a combination of cash and shares of the Company’s stock, at our discretion, payable in three installments of $1,000, due on the first, second and third anniversaries of May 20, 2016. The outstanding balance of this obligation was $2,000 and $3,000 as of September 30, 2017 and December 31, 2016, respectively.Uncollateralized Promissory NotesOn September 6, 2017, the Company acquired all of the outstanding interests in Marron. The purchase price included an uncollateralized $300 promissory note bearing interest at 3.0% (the “Marron Note”) payable in three installments of $100, due on the first, second and third anniversaries of September 6, 2017. The outstanding balance of the Marron Note was $300 and $0 as of September 30, 2017 and December 31, 2016, respectively.On June 6, 2017, the Company acquired all of the outstanding equity interest in RDK. The purchase price included an uncollateralized $5,500 promissory note bearing interest at 3.0% (the “RDK Note”) payable in four installments of $1,375, due on the first, second, third and fourth anniversaries of June 6, 2017. The outstanding balance of the RDK Note was $5,500 and $0 as of September 30, 2017 and December 31, 2016, respectively.On May 4, 2017, the Company acquired all of the outstanding equity interest in H&K. The purchase price included an uncollateralized $600 promissory note bearing interest at 3.0% (the “H&K Note”) payable in four installments of $150, due on the first, second, third and fourth anniversaries of May 4, 2017, the effective date of the acquisition. The outstanding balance of the H&K Note was $600 and $0 as of September 30, 2017 and December 31, 2016, respectively.On May 1, 2017, the Company acquired all of the outstanding equity interest in Lochrane. The purchase price included an uncollateralized $1,650 promissory note bearing interest at 3.0% (the “Lochrane Note”) payable in four installments of $413, due on the first, second, third and fourth anniversaries of May 1, 2017, the effective date of the acquisition. The outstanding balance of the Lochrane Note was $1,650 and $0 as of September 30, 2017 and December 31, 2016, respectively.NV5 Global, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)(in thousands, except share data)On December 6, 2016, the Company acquired all of the outstanding interests of CivilSource. The purchase price included an uncollateralized $3,500 promissory note bearing interest at 3.0% (the “CivilSource Note”) payable in four installments of $875, due on the first, second, third and fourth anniversaries of December 6, 2016, the effective date of the acquisition. The outstanding balance of the CivilSource Note was $3,500 as of September 30, 2017 and December 31, 2016, respectively.On November 30, 2016, the Company acquired all of the outstanding interests of Hanna. The purchase price included an uncollateralized $2,700 promissory note bearing interest at 3.0% (the “Hanna Note”) payable in four installments of $675, due on the first, second, third and fourth anniversaries of November 30, 2016, the effective date of the acquisition. The outstanding balance of the Hanna Note was $2,700 as of September 30, 2017 and December 31, 2016, respectively.On October 26, 2016, the Company acquired all of the outstanding interests of JBA. The purchase price included an uncollateralized $7,000 promissory note bearing interest at 3.0% (the “JBA Note”) payable in five installments of $1,400, due on the first, second, third, fourth and fifth anniversaries of October 26, 2016, the effective date of the acquisition. The outstanding balance of the JBA Note was $7,000 as of September 30, 2017 and December 31, 2016, respectively.On September 12, 2016, the Company acquired certain assets of Weir. The purchase price included an uncollateralized $500 promissory note bearing interest at 3.0% (the “Weir Note”) payable in four installments of $125, due on the first, second, third and fourth anniversaries of September 12, 2016, the effective date of the acquisition. The outstanding balance of the Weir Note was $375 and $500 as of September 30, 2017 and December 31, 2016, respectively.On May 20, 2016, the Company acquired all of the outstanding equity interests of Dade Moeller. The purchase price included an aggregate of $6,000 of uncollateralized promissory notes bearing interest at 3.0% (the “Dade Moeller Notes”) payable in four equal payments of $1,500 each due on the first, second, third, and fourth anniversaries of May 20, 2016, the effective date of the acquisition. The outstanding balance of the Dade Moeller Notes was approximately $4,500 and $6,000 as of September 30, 2017 and December 31, 2016, respectively.On July 1, 2015, the Company acquired all of the outstanding equity interests of RBA. The purchase price included an uncollateralized $4,000 promissory notes bearing interest at 3.0% (the “RBA Note”) payable in four equal payments of $1,000 each due on the first, second, third, and fourth anniversaries of July 1, 2015, the effective date of the acquisition. The outstanding balance of the RBA Note was $2,000 and $3,000 as of September 30, 2017 and December 31, 2016, respectively.On June 24, 2015, the Company acquired certain assets of Allwyn. The purchase price included an uncollateralized $500 promissory note bearing interest at 3.5% (the “Allwyn Note”) that is payable in three equal payments of $167 each due on the first, second and third anniversaries of June 24, 2015, the effective date of the acquisition. The outstanding balance of the Allwyn Note was $166 and $333 as of September 30, 2017 and December 31, 2016, respectively.On April 22, 2015, the Company acquired all of the outstanding equity interests of Mendoza. The purchase price included an uncollateralized $3,000 short-term promissory note, based on the collection of acquired accounts receivable and work in process, payable within one year, and an uncollateralized $500 promissory note bearing interest at 3% (the “Mendoza Note”) that is payable in two equal payments of $250 each due on the first and second anniversaries of April 22, 2015, the effective date of the acquisition. The outstanding balance of the Mendoza Note was $0 and $250 as of September 30, 2017 and December 31, 2016, respectively.On January 30, 2015, the Company acquired all of the outstanding equity interests of JLA. The purchase price included an uncollateralized $1,250 promissory note bearing interest at 3.5% (the “JLA Note”) that is payable in four equal payments of $313 each due on the first, second, third, and fourth anniversaries of January 30, 2015, the effective date of the acquisition. The outstanding balance of the JLA Note was $625 and $938 as of September 30, 2017 and December 31, 2016, respectively.On November 3, 2014, the Company acquired certain assets of the Buric Companies. The purchase price included an uncollateralized, 3% interest bearing promissory note in the aggregate principal amount of $300 (the “Buric Note”). The note is payable in three equal payments of $100 due on the first, second and third anniversaries of November 3, 2014, the effective date of the acquisition. The carrying value of the Buric Note was approximately $100 as of September 30, 2017 and December 31, 2016.NV5 Global, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)(in thousands, except share data) On March 21, 2014, the Company acquired all of the outstanding equity interests of NV5, LLC. The purchase price included an uncollateralized $3,000 promissory note bearing interest at 3.0% (the “AK Note”) that is payable in three equal payments of $1,000 each due on the first, second and third anniversaries of March 21, 2014, the effective date of the acquisition. The outstanding balance of the AK Note was $0 and $1,000 as of September 30, 2017 and December 31, 2016. Future contractual maturities of long-term debt as of September 30, 2017 are as follows: $ 10,821 12,257 6,612 46,886 1,400 $ 77,976 As of September 30, 2017 and December 31, 2016,28, 2019, 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.Measurement Period Ending Maximum Consolidated Leverage Ratio Closing Date through June 30, 2020 4.25 to 1.00 July 1, 2020 through September 30, 2020 4.00 to 1.00 October 1, 2020 through December 31, 2020 3.75 to 1.00 January 1, 2021 and thereafter 3.50 to 1.00 Measurement Period Ending Maximum Consolidated Leverage Ratio Amendment Closing Date through June 27, 2020 4.50 to 1.00 June 28, 2020 through October 3, 2020 5.00 to 1.00 October 4, 2020 through January 2, 2021 5.25 to 1.00 January 3, 2021 and April 3, 2021 4.75 to 1.00 April 4, 2021 and July 3, 2021 4.00 to 1.00 July 4, 2021 and thereafter 3.50 to 1.00 $ 2,439 $ 1,279 908 1,417 (625 ) (458 ) 56 201 2,778 2,439 (2,653 ) (564 ) $ 125 $ 1,875 March 28, 2020 December 28, 2019 Contingent consideration, beginning of the year $ 4,002 $ 4,698 Additions for acquisitions — 1,316 Reduction of liability for payments made (928 ) (1,938 ) Increase (decrease) of liability related to re-measurement of fair value — (74 ) Total contingent consideration, end of the period 3,074 4,002 Current portion of contingent consideration (1,079 ) (1,954 ) Contingent consideration, less current portion $ 1,995 $ 2,048 NV5 Global, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)(in thousands, except share data)The Company’s office leases are classified as operating leases and rent expense is included in facilities and facilities related expense in the Company’s Consolidated Statements of Net Income and Comprehensive Income. Some lease terms include rent and other concessions and rent escalation clauses which are included in computing minimum lease payments. Minimum lease payments are recognized on a straight-line basis over the minimum lease term. The variance of rent expense recognized from the amounts contractually due pursuant to the underlying leases is included in accrued liabilities in the Company’s consolidated balance sheets.
| Number of Unvested Restricted Shares of Common Stock and Restricted Stock Units | Weighted Average Grant Date Fair Value | ||||
| December 28, 2019 | 652,677 | $ | 58.20 | ||
| Granted | 16,560 | $ | 65.00 | ||
| Vested | (9,908) | $ | 36.00 | ||
| Forfeited | (12,143) | $ | 63.00 | ||
| March 28, 2020 | 647,186 | $ | 59.06 | ||
Number of Unvested Restricted Shares of Common Stock and Restricted Stock Units | Weighted Average Grant Date Fair Value | |||||||
Unvested shares as of December 31, 2016 | 502,773 | $ | 19.35 | |||||
Granted | 186,437 | $ | 37.76 | |||||
Vested | (90,305 | ) | $ | 9.48 | ||||
Forfeited | (25,336 | ) | $ | 28.79 | ||||
Unvested shares as of September 30, 2017 | 573,569 | $ | 26.47 | |||||
Subsidiaries
2019 was $528 and $989, respectively.
In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes to simplify the presentation of deferred income taxes. The amendments in this update require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The Company adopted ASU 2015-17 as of January 1, 2017 and retrospectively applied ASU 2015-17 to all periods presented.
NV5 Global, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(in thousands, except share data)
The Company’sOur consolidated effective income tax rate was 29.9%25.1% and 27.8%21.5%, respectively, for the three and nine months ended SeptemberMarch 28, 2020 and March 30, 2017, respectively and 36.9% and 36.8% for the three and nine months ended September 30, 2016,2019, respectively. The difference between the effective income tax rate and the combined statutory federal and state income tax rate is principallywas primarily due to the federal domestic production activities deductioncredits and research and development credits. Furthermore, during the three and nine months ended September 30, 2017, the Company recorded a reduction in incomeexcess tax expense of $114 and $974, respectively, relating to the income tax benefit received in conjunction with the vesting of restricted stock during the periods. Also contributing to the decreasebenefits from share-based payments in the effective tax rate for the three and nine months ended September 30, 2017, is the lower effective tax rate applicable to the Asia operations purchased in the JBA acquisition at the endfirst quarter of 2016.
The Company evaluates2019.
At September 30, 2017 and December 31, 2016, the Company had $770 of unrecognized tax benefits. Included in the balance of unrecognized tax benefits at September 30, 2017 and December 31, 2016 were $770 of tax benefits that, if recognized, would affect our effective tax rate.foreign jurisdictions. It is not expected that there will be a significant change in the unrecognized tax benefits inwithin the next 12 months.
management practices; and Geospatial Solutions (GEO), which includes the Company's geospatial solution practices. The GEO segment has been created in order to provide greater visibility regarding the operational and financial performance of QSI and of the Company evaluatesas a whole. The GEO segment structure is consistent with how the Company plans and allocates resources, manages its business, and assesses its performance. There was no impact to the INF and BTS prior period segment financial results. The assets of QSI were reallocated from the Company's INF reportable segment to the Company's new GEO reportable segment.
NV5 Global, Inc. and Subsidiaries
| Three Months Ended | |||||||
| March 28, 2020 | March 30, 2019 | ||||||
| Gross revenues | |||||||
| INF | $ | 85,476 | $ | 77,772 | |||
| BTS | 43,525 | 40,274 | |||||
| GEO | 37,958 | — | |||||
| Elimination of inter-segment revenues | (1,479 | ) | (711 | ) | |||
| Total gross revenues | $ | 165,480 | $ | 117,335 | |||
| Segment income before taxes | |||||||
| INF | $ | 13,340 | $ | 12,574 | |||
| BTS | 5,419 | 5,917 | |||||
| GEO | 7,613 | — | |||||
| Total Segment income before taxes | 26,372 | 18,491 | |||||
Corporate(1) | (20,778 | ) | (11,431 | ) | |||
| Total income before taxes | $ | 5,594 | $ | 7,060 | |||
| March 28, 2020 | December 28, 2019 | ||||||
| Assets | |||||||
| INF | $ | 306,061 | $ | 303,239 | |||
| BTS | 129,556 | 131,967 | |||||
| GEO | 366,933 | 365,605 | |||||
Corporate(1) | 88,868 | 92,326 | |||||
| Total assets | $ | 891,418 | $ | 893,137 | |||
| Three Months Ended March 28, 2020 | Three Months Ended March 30, 2019 | ||||||||||||||||||||||||||||||
| INF | BTS | GEO | Total | INF | BTS | GEO | Total | ||||||||||||||||||||||||
| United States | $ | 84,426 | $ | 40,442 | $ | 37,537 | $ | 162,405 | $ | 77,273 | $ | 37,497 | $ | — | $ | 114,770 | |||||||||||||||
| Foreign | — | 2,670 | 405 | 3,075 | — | 2,565 | — | 2,565 | |||||||||||||||||||||||
| Total gross revenues | $ | 84,426 | $ | 43,112 | $ | 37,942 | $ | 165,480 | $ | 77,273 | $ | 40,062 | $ | — | $ | 117,335 | |||||||||||||||
| Three Months Ended March 28, 2020 | Three Months Ended March 30, 2019 | ||||||||||||||||||||||||||||||
| INF | BTS | GEO | Total | INF | BTS | GEO | Total | ||||||||||||||||||||||||
| Public and quasi-public sector | $ | 65,385 | $ | 17,836 | $ | 26,513 | $ | 109,734 | $ | 68,129 | $ | 15,316 | $ | — | $ | 83,445 | |||||||||||||||
| Private sector | 19,041 | 25,276 | 11,429 | 55,746 | 9,144 | 24,746 | — | 33,890 | |||||||||||||||||||||||
| Total gross revenues | $ | 84,426 | $ | 43,112 | $ | 37,942 | $ | 165,480 | $ | 77,273 | $ | 40,062 | $ | — | $ | 117,335 | |||||||||||||||
| Three Months Ended March 28, 2020 | Three Months Ended March 30, 2019 | ||||||||||||||||||||||||||||||
| INF | BTS | GEO | Total | INF | BTS | GEO | Total | ||||||||||||||||||||||||
| Cost-reimbursable contracts | $ | 80,365 | $ | 33,211 | $ | 37,942 | $ | 151,518 | $ | 75,767 | $ | 32,144 | $ | — | $ | 107,911 | |||||||||||||||
| Fixed-unit price contracts | 4,061 | 9,901 | — | 13,962 | 1,506 | 7,918 | — | 9,424 | |||||||||||||||||||||||
| Total gross revenues | $ | 84,426 | $ | 43,112 | $ | 37,942 | $ | 165,480 | $ | 77,273 | $ | 40,062 | $ | — | $ | 117,335 | |||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Gross revenues | ||||||||||||||||
INF | $ | 49,024 | $ | 42,713 | $ | 134,446 | $ | 118,902 | ||||||||
BTS | 43,262 | 18,846 | 107,997 | 45,637 | ||||||||||||
Elimination of inter-segment revenues | (1,023 | ) | (1,468 | ) | (3,385 | ) | (3,651 | ) | ||||||||
Total gross revenues | $ | 91,263 | $ | 60,091 | $ | 239,058 | $ | 160,888 | ||||||||
Segment income before taxes | ||||||||||||||||
INF | $ | 9,559 | $ | 7,065 | $ | 23,749 | $ | 19,676 | ||||||||
BTS | 6,974 | 2,704 | 15,065 | 5,607 | ||||||||||||
Total Segment income before taxes | 16,533 | 9,769 | 38,814 | 25,283 | ||||||||||||
Corporate (1) | (8,098 | ) | (4,375 | ) | (21,510 | ) | (12,118 | ) | ||||||||
Total income before taxes | $ | 8,435 | $ | 5,394 | $ | 17,304 | $ | 13,165 | ||||||||
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Leases Classification March 28, 2020 December 28, 2019 Assets Operating lease assets $ 43,950 $ 46,313 Finance lease assets 2,493 2,371 Total leased assets $ 46,443 $ 48,685 Liabilities Current Operating Accrued liabilities $ (12,751 ) $ (13,108 ) Finance Current portion of notes payable and other obligations (1,084 ) (1,022 ) Noncurrent Operating Long-term lease liability (32,624 ) (34,573 ) Finance Notes payable and other obligations, less current portion (1,716 ) (1,685 ) Total lease liabilities $ (48,175 ) $ (50,388 ) March 28, 2020 December 28, 2019 Operating leases 4.9 5.0 Finance leases 2.6 2.8 Operating leases 4% 4% Finance leases 7% 7% Three Months Ended Three Months Ended March 28, 2020 March 30, 2019 Operating cash flows from operating leases $ 3,520 $ 2,280 Financing cash flows from finance leases $ 267 $ 163 Right-of-use assets obtained in exchange for lease obligations Operating leases $ 4,990 $ 1,062 �� Three Months Ended Three Months Ended Lease Cost Classification March 28, 2020 March 30, 2019 Operating lease cost Facilities and facilities related $ 3,585 $ 2,452 Finance lease cost Amortization of financing lease assets Depreciation and amortization 249 163 Interest on lease liabilities Interest expense 30 25 Total lease cost $ 3,864 $ 2,640 Fiscal Year Operating Leases Finance Leases Remainder of 2020 $ 10,997 $ 817 2021 12,770 964 2022 8,956 769 2023 6,301 483 2024 4,034 213 Thereafter 6,940 6 Total lease payments 49,998 3,252 Less: Interest (4,623 ) (452 ) Present value of lease liabilities $ 45,375 $ 2,800 “our” “our,”“us”or “NV5 Global”) should be read in conjunction with the financial statements included elsewhere in this Quarterly Report and the audited financial statements for the year ended December 31, 2016, 28, 2019, included in our Annual Report on Form 10-K (File No. 001-35849).10-K. This Quarterly Report contains, in addition to unaudited historical information, forward-looking statements, which involve risk and uncertainties. The words “believe,” “expect,” “estimate,” “may,” “will,” “could,” “plan,” or “continue” and similar expressions are intended to identify forward-looking statements. Our actual results could differ materially from the results those anticipated in such forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, those discussed under the headings “Risk Factors” in our Annual Report on Form 10-K forthe year ended December 31, 201628, 2019and this Quarterly Report on Form 10-Q, if any. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. We undertake no obligation to (and we expressly disclaim any obligation to) revise or update any forward-looking statement, whether as a result of new information, subsequent events, or otherwise (except as may be required by law), in order to reflect any event or circumstance which may arise after the date of this Quarterly Report on Form 10-Q.Amounts presentedarein thousands, except per share data.energy,utility services, construction, real estate, and environmental markets. We primarily focus on the following business service verticals: construction quality assurance, infrastructure, energy,utility services, program management, and environmental solutions, and geospatial solutions. Our primary clients include U.S. federal, state, municipal, and local government agencies, and military and defense clients. We also serve quasi-public and private sector clients from the education, healthcare, energy,utility services, and public utilities, including schools, universities, hospitals, health care providers, insurance providers, large utility service providers, and large to small energyutility service producers.Recent Acquisition, Developments and ChallengesAcquisition.On September 6, 2017,Company acquired allbeginning of fiscal year 2020, we re-evaluated the structure of our internal organization structure as a result of the outstanding equity interests in Marron and Associates,2019 acquisition of Geospatial Holdings, Inc. (“Marron”), a leading environmental services firm with offices in Albuquerque and Las Cruces, New Mexico. Marron provides environmental planning, natural and cultural resources, environmental site assessment, and GIS services. Marron primarily serves public and private clients throughout the Southwest, including the New Mexico Department of Transportation, Bureau of Land Management, Bureau of Indian Affairs, Federal Highway Administration, U.S. Department of Agriculture, U.S. Fish and Wildlife Service, and U.S. Forest Service. The purchase price of this acquisition is up to $990, paid with a combination of cash at closing, stock and future note payments.On June 6, 2017, the Company acquired all of the outstanding equity interests in Richard D. Kimball Co., Inc. ("RDK"), an established leader in the provision of energy efficiency and mechanical, electric and pluming (MEP) services based in Boston, Massachusetts. In addition to MEP and fire protection services, RDK offers commissioning services, technology design services, and energy and sustainability services, including Whole Building Energy Modeling and ASHRAE Level Energy Audits, Green Building Certification, Energy Code Consulting, Carbon Emissions Management, and Renewable Energy Management. RDK primarily serves commercial, healthcare, science and technology, education, government, and transportation clients. The aggregate purchase price paid by us is up to $22,500, paid with a combination of cash at closing, stock and future note payments.On May 4, 2017, the Company acquired all of the outstanding equity interests in Holdrege & Kull, Consulting Engineers and Geologists (“H&K”), a full-service geotechnical engineering firm based in Northern California. H&K provides services to public, municipal and special district, industrial, and private sector clients. The purchase price of this acquisition is up to $2,200, paid with a combination of cash, stock and future note payments.On May 1, 2017, we acquired all of the outstanding equity interests in Lochrane Engineering, Inc. (“Lochrane”), an Orlando, Florida based civil engineering firm which specializes in the provision of services on major roadway projects and its major clients include the Florida Department of Transportation and Florida’s Turnpike Enterprise. The aggregate purchase price paid by us is up to $4,940, paid with a combination of cash at closing and future note payments.On April 14, 2017, the Company acquired all of the outstanding equity interests in Bock & Clark Corporation (“B&C”subsidiaries, including Quantum Spatial, Inc. (collectively "QSI"), an Akron, Ohio based surveying, commercial zoning, and environmental services firm. We believe that the acquisition of B&C will expand our cross-selling opportunities within our infrastructure engineering, surveying, and program management groups and with our financial and transactional real estate clients. The aggregate purchase price consideration paid by the Company in connection with the acquisition was $42,000, subject to customary closing working capital adjustments, funded entirely in cash.Tax credit.We To reflect management's revised perspective, we are currently under examination by the CFTB about certain research and development tax credits generated for the years 2005 to 2014. Fiscal years 2005 through 2016 are considered open tax years in the State of California and 2013 through 2016 in the U.S. federal jurisdiction and other state jurisdictions. At September 30, 2017 and December 31, 2016, we had $770 of unrecognized tax benefits related to this matter.Backlog. As of September 30, 2017, we had approximately $274,500 of gross revenue backlog expected to be recognized over the next 12 months compared to gross revenue backlog of approximately $220,800 as of December 31, 2016. We include in backlog only those contracts for which funding has been provided and work authorizations have been received. We cannot guarantee that the revenue projected in our backlog will be realized or, if realized, will result in profits. In addition, project cancellations or scope adjustments may occur, from time to time, with respect to contracts reflected in our backlog. For example, certain of our contracts with the U.S. federal government and other clients are terminable at the discretion of the client, with or without cause. These types of backlog reductions could adversely affect our revenue and margins. Accordingly, our backlog as of any particular date is an uncertain indicator of our future earnings.Segments. Our Chief Executive Officer is the chief operating decision maker and now organized the Company into twothree operating and reportable segments: Infrastructure (INF), which• • • engineering, civil program management,business, and construction quality assurance practices;assess our performance. Our INF and Building, Technology & Sciences (BTS) (formerly known as Building, Energy & Sciences (BES)), which includes our energyBTS segments remain unchanged and environmental practices as well as buildings program management. Components of Income and ExpenseRevenuesWe enter into contracts with our clients that contain two principal types of pricing provisions: cost-reimbursable and fixed-price. The majority of our contracts are cost-reimbursable contracts that fall under the relatively low-risk subcategory of time and materials contracts.Cost-reimbursable contracts. Cost-reimbursable contracts consistaddition of the following:• Time and materials contracts are common for smaller scale professional and technical consulting and certification services projects. Under these types of contracts, there is no predetermined fee. Instead, we negotiate hourly billing rates and charge our clients based upon actual hours expended on a project. In addition, any direct project expenditures are passed through to the client and are typically reimbursed. These contracts may have a fixed-price element in the form of an initial not-to-exceed or guaranteed maximum price provision.Cost-plus contracts are the predominant contracting method used by U.S. federal, state, and local governments. These contracts provide for reimbursement of the actual costs and overhead (predetermined rates) we incur, plus a predetermined fee.• Fixed-unit contracts typically require the performance of an estimated number of units of work at an agreed price per unit, with the total payment under the contract determined by the actual number of units performed, over a fixed construction schedule. In most cases, we can bill additional fees if the schedule is modified and lengthened.For the nine months ended September 30, 2017 and 2016, cost-reimbursable contracts represented approximately 95% and 96%, respectively, of our total revenues.Fixed-price contracts. Fixed-price contracts also consist of the following:• Lump-sum contracts typically require the performance of all of the work under the contract for a specified lump-sum fee, subject to price adjustments if the scope of the project changes or unforeseen conditions arise. Many of our lump-sum contracts are negotiated and arise in the design of projects with a specified scope and project deliverables.For the nine months ended September 30, 2017 and 2016, lump-sum contracts represented approximately 5% and 4%, respectively, of our total revenues.Revenues from engineering services are recognized in accordance with the accrual basis of accounting. Revenues under cost-reimbursable contracts are recognized when services are performed or on the percentage-of-completion method. Revenues from fixed-price contracts are recognized on the percentage-of-completion method. Revenues recognized on the percentage-of-completion method are generally measured by the direct costs incurred to date as compared to estimated costs incurred which represents approximately 24% and 14% of revenues recognized during the nine months ended September 30, 2017 and 2016, respectively.Direct Costs of Revenues (excluding depreciation and amortization)Direct costs of revenues consist primarily of that portion of technical and non-technical salaries and wages incurred in connection with fee generating projects. Direct costs of revenues also include production expenses, sub-consultant services, and other expenses that are incurred in connection with our fee generating projects. Direct costs of revenues exclude that portion of technical and non-technical salaries and wages related to marketing efforts, vacations, holidays, and other time not spent directly generating fees under existing contracts. Such costs are included in operating expenses. Additionally, payroll taxes, bonuses, and employee benefit costs for all of our personnel, facilities costs, and depreciation and amortization are included in operating expenses since no allocation of these costs is made to direct costs of revenues. We expense direct costs of revenues when incurred.Operating ExpensesOperating expenses include the costs of the marketing and support staffs, other marketing expenses, management and administrative personnel costs, payroll taxes, bonuses and employee benefits for all of our employees and the portion of salaries and wages not allocated to direct costs of revenues for those employees who provide our services. Operating expenses also include facility costs, depreciation and amortization, professional services, legal and accounting fees, and administrative operating costs. We expense operating costs when incurred.Jumpstart Our Business Startups Act of 2012We are an emerging growth company within the meaning of the rules under the Securities Act, and we utilize certain exemptions from various reporting requirements that are applicable to public companies that are not emerging growth companies. For example, we GEO segment did not have an impact on prior period segment financial results. The assets of QSI were reallocated from our INF reportable segment to provide an auditor’s attestation reportour new GEO reportable segment.internal controls inreported results for our Annual Reportfirst quarter, we are unable to predict the ultimate impact that it may have on Form 10-K forour business, future results of operations, financial position, or cash flows. The extent to which our operations may be impacted by the year ended December 31, 2016 as otherwise required by Section 404(b)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 Sarbanes-Oxley Act. The JOBS Act also permits us, as an “emerging growth company,”outbreak and actions by government authorities to take advantagecontain the outbreak or treat its impact. We intend to continue to monitor the impact of an extended transition period to comply with new or revised accounting standards applicable to public companies. We have chosen to “opt out” of this provision and, as a result, we will comply with new or revised accounting standards when they are required to be adopted by issuers. This decision to opt out of the extended transition period under the JOBS Act is irrevocable.COVID-19 pandemic on our business closely.
The
During the nine months ended September 30, 2017, we did not experience any significant changes in estimates or judgments inherent in the preparation of our consolidated financial statements. A summary of our significant accounting policies is contained in Note 2 to our consolidated financial statements included in our Annual Report on2019 Form 10-K for the year ended December 31, 2016.
10-K.
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Gross revenues | $ | 91,263 | $ | 60,091 | $ | 239,058 | $ | 160,888 | ||||||||
Less sub-consultant services and other direct costs | (16,298 | ) | (12,161 | ) | (43,995 | ) | (30,455 | ) | ||||||||
Net revenues (1) | 74,965 | 47,930 | 195,063 | 130,433 | ||||||||||||
Direct salary and wages costs | (28,219 | ) | (20,274 | ) | (75,235 | ) | (53,744 | ) | ||||||||
Gross profit | 46,746 | 27,656 | 119,828 | 76,689 | ||||||||||||
Operating expenses | 37,787 | 22,181 | 101,482 | 63,303 | ||||||||||||
Income from operations | 8,959 | 5,475 | 18,346 | 13,386 | ||||||||||||
Interest expense | (524 | ) | (81 | ) | (1,042 | ) | (221 | ) | ||||||||
Income tax expense | (2,523 | ) | (1,990 | ) | (4,803 | ) | (4,847 | ) | ||||||||
Net income | $ | 5,912 | $ | 3,404 | $ | 12,501 | $ | 8,318 | ||||||||
|
|
March 30, 2019. $220. Profit a percentage of gross revenue, primarily as a result of our mix of work performed. Expense Three Months Ended March 28, 2020 March 30, 2019 Gross revenues $ 165,480 $ 117,335 Less sub-consultant services and other direct costs (35,914 ) (26,648 ) 129,566 90,687 Direct salary and wages costs 45,034 35,257 Gross profit 84,532 55,430 Operating expenses 75,150 48,019 Income from operations 9,382 7,411 Interest expense (3,788 ) (351 ) Income tax expense (1,406 ) (1,517 ) Net income $ 4,188 $ 5,543 and Nine MonthsMonths Ended September30, 2017 comparedMarch 28, 2020 Compared to the Three and NineMonthsMonths Ended September30, 2016.approximately $31,172 and $78,170by $48,145, or approximately 51.9% and 48.6%41.0%, for the three and nine months ended September 30, 2017March 28, 2020 compared to the three and nine months ended SeptemberMarch 30, 2016. 2019. The increase in gross revenues was primarily due to the contribution from QSI of $37,942. Additionally, other acquisitions completed since the first quarter of 2019 contributed gross revenues of $15,608. Offsetting these increases was a decrease in gross revenue from our liquefied natural gas business of $9,936. This decrease is primarily due to the timing revenue recognition. All other locations had a net increase in gross revenues of $4,531.approximately $27,035 and $64,630by $38,879, or approximately 56.4% and 49.6%42.9%, for the three and nine months ended September 30, 2017March 28, 2020 compared to the three and nine months ended SeptemberMarch 30, 2016. The increases in gross and net revenues are due primarily to organic growth from our existing platform as well as the contribution from various acquisitions completed during the nine months ended September 30, 2017. The increases in gross revenues for the three and nine months ended September 30, 2017, includes gross revenues of $21,316 and $35,524, respectively, related to acquisitions closed during 2017.2019. The increase in net revenues forwas primarily due to the three and nine months ended September 30, 2017, includescontribution from QSI of $26,258. Additionally, other acquisitions completed since the first quarter of 2019 contributed net revenues of $17,164 and $27,223, respectively, related to acquisitions closed during 2017. Also contributing to the increases$12,401. All other locations had a net increase in net revenues for the nine months ended September 30, 2017 is an increased utilization of our billable employees and reduction of sub-consultants used to perform services in 2017. The growth in revenues was primarily attributable to increases in energy distribution services; construction materials testing and engineering services; and program and construction management services. However, the increases in gross and net revenues during the three and nine months ended September 30, 2017 were partially offset by reductions in revenues related to project delays due to record rainfall and hurricanes affecting our California, Florida and Texas projects. We are currently unaware of any long-term delays in current projects and therefore are not anticipating such to influence future revenues. Such revenues could be affected by changes in economic conditions and the impact thereof on our public and quasi-public sector funded projects.Profit.51.2%51.1% and 50.1%47.2% for the three and nine months ended SeptemberMarch 28, 2020 and March 30, 2017, respectively, compared to 46.0% and 47.7% for the three and nine months ended September 30, 2016,2019, respectively. GrossThe increase in gross profit includes direct costs of contracts such as direct labor and all costs incurred in connection with and directly for the benefit of client contracts. The level of direct costs of contracts may fluctuate between reporting periodsmargin was primarily due to a varietychange in our mix of factors, includingbusiness resulting from the amountQSI acquisition. As a percentage of sub-consultant costs we incur during a period. On those projects where we are responsible for subcontract labor or third-party materials and equipment, we reflect the amounts of such items in both gross revenues, direct salaries and costs. To the extent that we incurwages decreased 2.8%, primarily as a significant amountresult of pass-through costs in a period, our mix of work performed. Additionally, other direct costs decreased 3.1% as a percentage of contracts are likely to increasegross revenues on a combined basis. Partially offsetting these decreases, sub-consultant services increased 2.0% as well..approximately $15,606 and $38,179,$27,131, or 70.4% and 60.3%56.5% for the three and nine months ended September 30, 2017, respectively,March 28, 2020 compared to the three and nine months ended SeptemberMarch 30, 2016.2019. The increase in operating expenses for the threeprimarily resulted from increased payroll and nine months ended September 30, 2017 include operating expensesperformance-based compensation costs of $17,410 and $28,677, respectively, related to acquisitions closed during 2017. During the three and nine months ended September 30, 2017, acquisition related expenses were approximately $315 and $892, respectively, compared to approximately $8 and $439$16,318, including stock-based compensation of $3,379 during the three and nine months ended September 30, 2016. Also contributingMarch 28, 2020 compared to the increase in operating costs is the increased amortization of intangible assets. During the$1,798 during three and nine months ended SeptemberMarch 30, 2017,2019. General and administrative costs increased $4,295, which was primarily due to costs associated with acquisitions completed since the first quarter of 2019. Additionally, depreciation and amortization of intangible assets was approximately $3,022expenses increased $1,588 and $7,522, respectively, compared to $1,189 and $3,077 during the three and nine months ended September 30, 2016,$3,339, respectively. Operating expenses typically fluctuate as a result of changes in headcount (both corporate and field locations) and the amount of spending required to support our professional services activities, which normally require additional overhead costs. expense.$443 and $821$3,437, or approximately 979.1%, for the three and nine months ended September 30, 2017, respectively, compartedMarch 28, 2020 compared to the three and nine months ended SeptemberMarch 30, 2016.2019. The increase in interest expense is due primarily toresulted from the increase in outstanding borrowings during these periods.increased level of indebtedness associated with the QSI acquisition.
Income taxes.
taxes
$3,437.
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Gross revenues | ||||||||||||||||
INF | $ | 49,024 | $ | 42,713 | $ | 134,446 | $ | 118,902 | ||||||||
BTS | $ | 43,262 | $ | 18,846 | $ | 107,997 | $ | 45,637 | ||||||||
Segment income before taxes | ||||||||||||||||
INF | $ | 9,559 | $ | 7,065 | $ | 23,749 | $ | 19,676 | ||||||||
BTS | $ | 6,974 | $ | 2,704 | $ | 15,065 | $ | 5,607 | ||||||||
| Three Months Ended | |||||||
| March 28, 2020 | March 30, 2019 | ||||||
| Gross revenues | |||||||
| INF | $ | 85,476 | $ | 77,772 | |||
| BTS | 43,525 | 40,274 | |||||
| GEO | 37,958 | — | |||||
| Elimination of inter-segment revenues | (1,479 | ) | (711 | ) | |||
| Total gross revenues | $ | 165,480 | $ | 117,335 | |||
| Segment income before taxes | |||||||
| INF | $ | 13,340 | $ | 12,574 | |||
| BTS | $ | 5,419 | $ | 5,917 | |||
| GEO | $ | 7,613 | $ | — | |||
the unaudited consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
2019
of $2,032.
work performed.
Segment Income before Taxes from BTS increased $4,270 and $9,458, or 157.9% and 168.7%, respectively,for GEO was $7,613 during the three and nine months ended September 30, 2017 compared to the three and nine months ended September 30, 2016. The increases were primarily due to increased revenues from organic growth, contributions from acquisitions completed in 2017 as well as a reduction of sub-consultants used to perform services.
March 28, 2020.
Our
We believe our experienced employees and management team are our most valuable resources. Attracting, training, and retaining key personnel have been and will remain critical to our success. To achieve our human capital goals, we intend to remain focused on providing our personnel with entrepreneurial opportunities to increase client contact within their areas of expertise and to expand our business within our service offerings.
Cash Flows
As of September 30, 2017, our cash and cash equivalents totaled $15,582 and accounts receivable, net of allowance for doubtful accounts, totaled $113,004, compared to $35,666 and $75,511, respectively, on December 31, 2016. As of September 30, 2017, our accounts payable and accrued liabilities were $17,133 and $18,173, respectively, compared to $13,509 and $17,316, respectively, on December 31, 2016. In addition, as of September 30, 2017, we had notes payable and other obligations and contingent consideration of $77,976 and $2,778, respectively, compared to $32,396 and $2,439, respectively, on December 31, 2016.
For
For the ninethree months ended SeptemberMarch 30, 2016,2019, net cash provided by operating activities amountedwas $16,313, which was due to $10,686, primarily attributable to net incomeearnings of $8,318, which included$15,256 after adding back non-cash charges of $5,989adjustments and a change in working capital and other long-term assets and liabilities. Non-cash items from stock based compensation andoperating activities were depreciation and amortization, stock-based compensation, bad debt expense, deferred income taxes, non-cash lease expenses, changes in the fair value of contingent considerations, and loss on disposals of property and equipment. Changes in working (excluding cash) and changes in other long-term assets and liabilities provided $1,057 during the three months ended March 30, 2019. Working capital changes that provided operating cash flow included decreases in billed and unbilled receivables of $12,345. Additionally, increases in income tax payables and deposits provided operating cash flow of $3,368$1,521 and $62, respectively. Working capital changes that used operating cash flow during the three months ended March 30, 2019 included decreases in accounts payable, and accrued liabilities, offset byand billings in excess of costs and estimated changes on uncompleted contracts of $3,240, $4,930, and $3,370, respectively. Additionally, an increase in prepaid expenses and other assets used operating cash flow of $7,795 in accounts receivable. During 2016, we made income tax payments of approximately $4,642.
$1,331.
For
For the nine months ended September 30, 2016, net$8,690, respectively. The decrease in cash used in investing activities amountedwas primarily a result of decreased acquisition activity.
Financing activities
For the ninethree months ended SeptemberMarch 30, 2017, net cash provided by financing activities amounted to $36,077,2019. The increase was primarily due to proceeds from borrowing under the Senior Credit Facility of $42,000 offset by principal repayments of $5,360 towardspayments on our long-term debt and $563 towards contingent consideration.
Forof $2,116 during the ninethree months ended SeptemberMarch 28, 2020 compared to $1,848 during the three months ended March 30, 2016, net cash provided by financing activities amounted to $43,858, primarily due to2019. Additionally, we paid debt issuance costs of $236 during the net proceeds from the secondary offering of $47,147three months ended March 30, 2019.
Financing
Seniorrestated our Credit Facility
On Agreement (the "A&R Credit Agreement"), dated December 7, 2016, we entered into a Credit Agreement (the “Credit Agreement”)as amended on December 20, 2018, with Bank of America, N.A. (“("Bank of America”America"), as administrative agent, swingline lender and Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPFS”).letter of credit issuer, the other lenders party thereto, and certain of our subsidiaries as guarantors. Pursuant to the A&R Credit Agreement, Bankthe lenders provided term commitments of America agreed$150.0 million in the aggregate in a single draw on the Closing Date to fund the acquisition of QSI and various costs and expenses relating thereto and revolving commitments totaling $215.0 million in the aggregate. The revolving commitment is available through December 20, 2024 (the "Maturity Date"), at which time the term commitments and revolving commitments will be the sole administrative agent for a five-year $80,000 Senior Secured Revolving Credit Facility (“Senior Credit Facility”) to usdue and together with PNC Bank, National Association and Regions Bank as the other lenderspayable in full. An aggregate amount of $320.5 million was drawn under the A&R Credit Agreement on the Closing Date to fund the QSI acquisition and repay previously existing borrowings. The Senior Credit Facility has committed to lend to usis secured by a first priority lien on substantially all of the Seniorour assets. The A&R Credit Facility, subject to certain terms and conditions. MLPFS has undertaken to act as sole lead arranger and sole book manager for the Senior Credit Facility. In addition, the Senior Credit FacilityAgreement also includes an accordion feature permitting us to request an increase in either the Seniorterm facility or the revolver facility under the A&R Credit FacilityAgreement by an additional amount of up to $60,000. The Senior Credit Facility includes a $5,000 sublimit for$100.0 million in the issuance of standby letters of credit and a $15,000 sublimit for swingline loans. The proceeds of the Senior Credit Facility are intended to be used (i) to finance permitted acquisitions, (ii) for capital expenditures, and (iii) for general corporate purposes.
aggregate.
The Senior Credit FacilityAgreement also contains certain financial covenants includingthat requires us to maintain a maximum leverage ratio of 3.0:1 and minimumconsolidated fixed charge coverage ratio of 1.20:1. Furthermore,no less than 1.20 to 1.00 as of the Seniorend of any measurement period. In addition, prior to the Amendment Closing Date referred to below, we were required to maintain a consolidated leverage ratio as described below:
| Measurement Period Ending | Maximum Consolidated Leverage Ratio |
| Closing Date through June 30, 2020 | 4.25 to 1.00 |
| July 1, 2020 through September 30, 2020 | 4.00 to 1.00 |
| October 1, 2020 through December 31, 2020 | 3.75 to 1.00 |
| January 1, 2021 and thereafter | 3.50 to 1.00 |
| Measurement Period Ending | Maximum Consolidated Leverage Ratio |
| Amendment Closing Date through June 27, 2020 | 4.50 to 1.00 |
| June 28, 2020 through October 3, 2020 | 5.00 to 1.00 |
| October 4, 2020 through January 2, 2021 | 5.25 to 1.00 |
| January 3, 2021 and April 3, 2021 | 4.75 to 1.00 |
| April 4, 2021 and July 3, 2021 | 4.00 to 1.00 |
| July 4, 2021 and thereafter | 3.50 to 1.00 |
Note Payable
The note held by the seller of Nolte Associates Inc. (the “Nolte Note”) matured on July 29, 2017. The Nolte Note interest rate was prime rate plus 1%,U.S. dollars. Interest rates remain subject to a maximum rate of 7.0%. As of September 30, 2017 and December 31, 2016, the actual interest rate was 4.25%. Under the terms of the Nolte Note, as amended, we paid quarterly principal installments of approximately $100 plus interest. The Nolte Note was unsecured and we were permitted to make periodic principal and interest payments. As of September 30, 2017 and December 31, 2016, the outstanding balancechange based on the Nolte Note was $0 and $278, respectively.
our consolidated leverage ratio.
$382.
On November 30, 2016,2018, we acquired allcertain assets of the outstanding equity interests of Hanna.Celtic. The purchase price allowed for the payment of $1,200$200 in shares of our common stock or a combination of cash and shares of our common stock, at our discretion, payable in two installments of $600, due on the first and second anniversariesanniversary of November 30, 2016. TheDecember 31, 2018. There was no outstanding balance on this obligation as of March 28, 2020. At December 28, 2019, the outstanding balance of this obligation was $1,200 as of September 30, 2017 and December 31, 2016.
On October 26, 2016,November 2, 2018, we acquired all of the outstanding equity interests of JBA. The purchase price allowed for the payment of $2,600 in shares of our common stock or a combination of cash and shares of our common stock, at our discretion, payable in two installments of $1,300, due on the first and second anniversaries of October 26, 2016. The outstanding balance of this obligation was $2,600 as of September 30, 2017 and December 31, 2016.
28, 2019, the outstanding balance of this obligation was $111. 28, 2019. 28, 2019. 28, 2019. 28, 2019. 28, 2019. 28, 2019. 28, 2019. Off-Balance Sheet Arrangements March 28, 2020. Cautionary Statement about Forward-Looking Statements PART II – OTHER INFORMATION 28, 2019. XBRL Instance Document XBRL Taxonomy Extension Schema Document XBRL Taxonomy Extension Calculation Linkbase Document XBRL Taxonomy Extension Label Linkbase Document XBRL Taxonomy Extension Presentation Linkbase Document XBRL Taxonomy Extension Definition Linkbase Document **On May 20, 2016, the Company acquired all of the outstanding equity interests of Dade Moeller.CHI. The purchase price allowed for the payment of $3,000 in shares of our common stock or a combination of cash and shares of our common stock, at our discretion, payable in three installments of $1,000, due onequal annual installments. At March 28, 2020 and December 28, 2019, the first, second and third anniversaries of May 20, 2016. The outstanding balance of this obligation was $2,000$1,754.$3,000shares of our stock, at our discretion, payable in two equal annual installments. There was no outstanding balance on this obligation as of September 30, 2017 andMarch 28, 2020. At December 31, 2016, respectively.Uncollateralized Promissory NotesSeptember 6, 2017,January 12, 2018, we acquired all of the outstanding interestsequity interest in MarronButsko. The purchase price allowed for the payment of $600 in shares of our stock or a combination of cash and Associates, Inc. (“Marron”), a leading environmental services firmshares of our stock, at our discretion, payable in Albuquerquetwo equal annual installments. There was no outstanding balance on this obligation as of March 28, 2020. At December 28, 2019, the outstanding balance of this obligation $267.Las Cruces, New Mexico.payable in four equal annual installments. The outstanding balance of the GeoDesign Note was $2,000 as of March 28, 2020 and December 28, 2019.“Marron Note”"Celtic Note") payable in three equal annual installments. The outstanding balance of the Celtic Note was $200 and $300 as of March 28, 2020 and December 28, 2019, respectively.$100, due on$1,000. The outstanding balance of the first, secondCALYX Note was $3,000 as of March 28, 2020 and third anniversariesDecember 28, 2019.2017.2017, we acquired all of the outstanding interests in Marron. The purchase price included an uncollateralized $300 promissory note bearing interest at 3.0% (the "Marron Note") payable in three equal annual installments of $100. The outstanding balance of the Marron Note was $300 and $0$100 as of September 30, 2017March 28, 2020 and December 31, 2016, respectively.“RDK Note”"RDK Note") payable in four equal annual installments of $1,375, due on the first, second, third and fourth anniversaries of June 6, 2017.$1,375. The outstanding balance of the RDK Note was $5,500 and $0$2,750 as of September 30, 2017March 28, 2020 and December 31, 2016, respectively.“H"H&K Note”Note") payable in four equal annual installments of $150, due on the first, second, third and fourth anniversaries of May 4, 2017, the effective date of the acquisition.$150. The outstanding balance of the H&K Note was $600 and $0$300 as of September 30, 2017March 28, 2020 and December 31, 2016, respectively.“Lochrane Note”"Lochrane Note") payable in four equal annual installments of $413, due on the first, second, third and fourth anniversaries of May 1, 2017, the effective date of the acquisition.$413. The outstanding balance of the Lochrane Note was $1,650 and $0$825 as of September 30, 2017March 28, 2020 and December 31, 2016, respectively.CivilSource.CivilSource. The purchase price included an uncollateralized $3,500 promissory note bearing interest at 3.0% (the “CivilSource Note”"CivilSource Note") payable in four equal annual installments of $875, due on the first, second, third and fourth anniversaries of December 6, 2016, the effective date of the acquisition.$875. The outstanding balance of the CivilSource Note was $3,500$875 and $1,502 as of September 30, 2017March 28, 2020 and December 31, 2016,28, 2019, respectively.Hanna.Hanna. The purchase price included an uncollateralized $2,700 promissory note bearing interest at 3.0% (the “Hanna Note”"Hanna Note") payable in four equal annual installments of $675, due on the first, second, third and fourth anniversaries of November 30, 2016, the effective date of the acquisition.$675. The outstanding balance of the Hanna Note was $2,700$675 as of September 30, 2017March 28, 2020 and December 31, 2016, respectively.JBA.JBA. The purchase price included an uncollateralized $7,000 promissory note bearing interest at 3.0% (the “JBA Note”"JBA Note") payable in five equal annual installments of $1,400, due on the first, second, third, fourth and fifth anniversaries of October 26, 2016, the effective date of the acquisition.$1,400. The outstanding balance of the JBA Note was $7,000$4,163 as of September 30, 2017March 28, 2020 and December 31, 2016, respectively.“Weir Note”"Weir Note") payable in four equal annual installments of $125, due on the first, second, third and fourth anniversaries of September 12, 2016, the effective date of the acquisition.$125. The outstanding balance of the Weir Note was $375 and $500$125 as of September 30, 2017March 28, 2020 and December 31, 2016, respectively.“Dade"Dade Moeller Notes”Notes") payable in four equal paymentsannual installments of $1,500 each due on the first, second, third, and fourth anniversaries of May 20, 2016, the effective date of the acquisition.$1,500. The outstanding balance of the Dade Moeller Notes was approximately $4,500 and $6,000$1,497 as of September 30, 2017March 28, 2020 and December 31, 2016, respectively.28, 2019.On July 1, 2015, we acquired all of the outstanding equity interests of RBA. The purchase price included an uncollateralized $4,000 promissory notes bearing interest at 3.0% (the “RBA Note”) payable in four equal payments of $1,000 each due on the first, second, third, and fourth anniversaries of July 1, 2015, the effective date of the acquisition. The outstanding balance of the RBA Note was $2,000 and $3,000 as of September 30, 2017 and December 31, 2016, respectively.On June 24, 2015, we acquired certain assets of Allwyn. The purchase price included an uncollateralized $500 promissory note bearing interest at 3.5% (the “Allwyn Note”) that is payable in three equal payments of $167 each due on the first, second and third anniversaries of June 24, 2015, the effective date of the acquisition. The outstanding balance of the Allwyn Note was $166 and $333 as of September 30, 2017 and December 31, 2016, respectively.On April 22, 2015, we acquired all of the outstanding equity interests of Mendoza. The purchase price included an uncollateralized $3,000 short-term promissory note, based on the collection of acquired accounts receivable and work in process, payable within one year, and an uncollateralized $500 promissory note bearing interest at 3% (the “Mendoza Note”) that is payable in two equal payments of $250 each due on the first and second anniversaries of April 22, 2015, the effective date of the acquisition. The outstanding balance of the Mendoza Note was $0 and $250 as of September 30, 2017 and December 31, 2016, respectively.On January 30, 2015, we acquired all of the outstanding equity interests of JLA. The purchase price included an uncollateralized $1,250 promissory note bearing interest at 3.5% (the “JLA Note”) that is payable in four equal payments of $313 each due on the first, second, third, and fourth anniversaries of January 30, 2015, the effective date of the acquisition. The outstanding balance of the JLA Note was $625 and $938 of September 30, 2017 and December 31, 2016, respectively.On November 3, 2014, we acquired certain assets of the Buric Companies. The purchase price included an uncollateralized, 3% interest bearing promissory note in the aggregate principal amount of $300 (the “Buric Note”). The note is payable in three equal payments of $100 due on the first, second and third anniversaries of November 3, 2014, the effective date of the acquisition. The carrying value of the Buric Note was $100 as of September 30, 2017 and December 31, 2016. On March 21, 2014, we acquired all of the outstanding equity interests of NV5, LLC. The purchase price included an uncollateralized $3,000 promissory note bearing interest at 3.0% (the “AK Note”) that is payable in three equal payments of $1,000 each due on the first, second and third anniversaries of March 21, 2014, the effective date of the acquisition. The outstanding balance of the AK Note was $0 and $1,000 as of September 30, 2017 and December 31, 2016, respectively.September 30, 2017.12, Summary of Significant Accounting Policies, of the notes to the unaudited consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.management’smanagement’s good faith beliefs, expectations and assumptions as of that time with respect to future events. Because forward-looking statements relate to the future, they are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include:●our ability to retain the continued service of our key professionals and to identify, hire and retain additional qualified professionals;●changes in demand from the local and state government and private clients that we serve;●general economic conditions, nationally and globally, and their effect on the demand and market for our services;●fluctuations in our results of operations;●the government’s funding and budgetary approval process;●the possibility that our contracts may be terminated by our clients;●our ability to win new contracts and renew existing contracts;●our dependence on a limited number of clients;●our ability to complete projects timely, in accordance with our customers’ expectations, or profitability;●our ability to successfully execute our mergers and acquisitions strategy, including the integration of new companies into our business;●our ability to successfully manage our growth strategy;●our ability to raise capital in the future;●competitive pressures and trends in our industry and our ability to successfully compete with our competitors;●our ability to avoid losses under fixed-price contracts;●the credit and collection risks associated with our clients;●our ability to comply with procurement laws and regulations;●changes in laws, regulations, or policies;●the enactment of legislation that could limit the ability of local, state and federal agencies to contract for our privatized services;●our ability to complete our backlog of uncompleted projects as currently projected;●the risk of employee misconduct or our failure to comply with laws and regulations;●our ability to control, and operational issues pertaining to, business activities that we conduct with business partners and other third parties;●our need to comply with a number of restrictive covenants and similar provisions in our Senior Credit Facility that generally limit our ability to (among other things) incur additional indebtedness, create liens, make acquisitions, pay dividends and undergo certain changes in control, which could affect our ability to finance future operations, acquisitions or capital needs;●significant influence by our principal stockholder and the existence of certain anti-takeover measures in our governing documents; and●other factors identified throughout this Current Report on Form 10-Q, including those discussed under the headings “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Business.”“ItemItem 1A. Risk Factors”Factors in our Annual Report on Form 10-K for the year ended December 31, 2016.28, 2019. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities laws. You are advised, however, to consult any further disclosures we make on related subjects in our Form 10-Q, 8-K and 10-K reports filed with the SEC. Our Annual Report on Form 10-K filing for the fiscal year ended December 31, 201628, 2019 listed various important factors that could cause actual results to differ materially from expected and historic results. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995, as amended. Readers can find them in “Item 1A. Risk Factors” of that filing and under the same heading of this filing. You may obtain a copy of our Annual Report on Form 10-K through our website, www.nv5.com. Information contained on our website is not incorporated into this report. In addition to visiting our website, you may read and copy any document we file with the SEC at the SEC’s Public Reference Room at 100 F. Street, NE, Washington, D.C. 20549 or at www.sec.gov. Please call the SEC at 1-800-SEC-0330 for information on the Public Reference Room.acquisitionacquisitions since these contain fixed interestrates. Our only debt subject to interest rate risk is the Senior Credit Facility which rates are variable, at our option, tied to a Eurocurrency rate equal to LIBOR (London Interbank Offered Rate) plus an applicable rate or a base rate denominated in U.S. dollars. Interest rates are subject to change based on our Consolidated Senior Leverage Ratio (as defined in the Credit Agreement). As of September 30, 2017, theMarch 28, 2020, there was $320.5 million outstanding balance on the Senior Credit Facility was $42,000.Facility. A one percentage point change in the assumed interest rate of the Senior Credit Facility would change our annual interest expense by approximately $420 in 2017.$3,186 annually.wethe Company carried out an evaluation, under the supervision and with the participation of ourits management, including ourthe Company's Chief Executive Officer and its Chief Financial Officer, of the effectiveness of the design and operation of ourthe Company's disclosure controls and procedures (as such term is defined in Rulesrules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, ourthe Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, the Company’sCompany's disclosure controls and procedures were effective suchto provide reasonable assurance that the information relating to the Company required to be disclosed by the Company in our SECthe reports that it files or submits under the Exchange Act is (i) is recorded, processed, summarized and reported within the time periods specified inby the SEC’sSecurities and Exchange Commission's rules and forms, and (ii) is accumulated and communicated to the Company’sCompany's management, including ourthe Chief Executive Officer and Chief Financial Officer, as appropriate, to allowin a manner that allows timely decisions regarding required disclosure.Undersupervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of any changes in ourCompany’s internal control over financial reporting (as such term isas defined in Exchange Act Rules 13a-15(f) 13a-15(e) and 15d-15(f) under the Exchange Act)15d-15(e) that occurred during our most recently completed fiscal quarter. Based onthe quarter ended March 28, 2020 that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that there have not been any changes in our internal control over financial reporting during our most recently completed fiscal quarter that has materially affected, or isare reasonably likely to materially affect, ourthe Company’s internal control over financial reporting. As a result of the COVID-19 pandemic, in March certain employees of the Company began working remotely. As a result of these changes to the working environment, the Company has not identified any material changes in the Company's internal control over financial reporting. The Company is continually monitoring and assessing the COVID-19 situation to determine any potential impacts on the design and operating effectiveness of our internal controls over financial reporting.During the nine months ended September 30, 2017, there31, 2016 filed with the SEC.During the three months ended September 30, 2017, we issued the following securities that were not registered under the Securities Act:In September 2017, we issued 1,510 shares of our common stock as partial consideration for our acquisition of Marron. These shares were issued in reliance upon Section 4(a)(2) of the Securities Act as a transaction by an issuer not involving a public offering. For a description of these acquisitions, see Note 4, Business Acquisitions, to the consolidated interim financial statements appearing under Part I of this Quarterly Report on Form 10-Q.None.NumberDescriptionNumber Description 31.1*31.2*32.1**101.INS 101.INS101.SCH 101.SCH101.CAL 101.CAL101.LAB 101.LAB101.PRE 101.PRE101.DEF 101.DEF*Filed herewith.* Filed herewith. NV5 GLOBAL, INC.By: /s/ Michael P. RamaDate: November 8, 2017May 7, 2020Michael P. RamaVice President and 39