2014 ANNUAL REPORT
Construction Quality Assurance
Infrastructure
Energy
Program Management
Environmental
NV5 Holdings, Inc.
200 South Park Road, Suite 350
Hollywood, Florida 33021
Tel 954.495.2112 / Fax 954.495.2102
Dear Stockholders,
I am pleased to share that NV5 experienced unprecedented growth and profitability in 2014. We exceeded our goals for
organic growth and continued to successfully execute our robust strategic growth plan with four accretive acquisitions.
Gross revenues grew to $108.4 million in 2014, an increase of 59% compared to $68.2 million in 2013. We reported
organic revenue growth of 14% for the year ended December 31, 2014, which was well above our industry standard. We
also grew our backlog to $82.1 million as of December 31, 2014, compared to the backlog of $60.2 million we reported at
December 31, 2013. Finally, net income for the full year 2014 was up 77% to $4.9 million from $2.8 million in 2013. We
are confident about the direction we are headed in 2015, and we anticipate full year gross revenues to range between $124
and $132 million, placing us within reach of our $300 million revenue goal by the end of 2016. We believe we can achieve
this through the performance excellence that our professionals continue to demonstrate to our clients, by maintaining a
strong balance sheet, and through continued success in targeting and integrating accretive acquisitions.
According to the American Society of Civil Engineers, approximately $3.6 trillion in public investments will be required to
improve the existing condition of our nation’s roads and bridges through 2030. The U.S. Department of Transportation
estimates that government and state agencies will need to allocate between $65.3 and $86.3 billion annually to
infrastructure maintenance to merely preserve the existing condition. Our Company is already poised to benefit from these
prospects in 2015, and the engineers and managers in our infrastructure vertical have won several significant multi-year
contracts in the transportation sector, including a $23 million contract with Caltrans-District 10 for three years, and a $10
million contract with the City of Bakersfield to manage the construction of the $104 million beltway operational
improvement project. More than 90% of our business is repeat business, and we have received extensions for many of our
large existing contracts and for projects with San Diego Gas & Electric, the Fort Lauderdale Hollywood International
Airport, the San Diego County Regional Airport Authority, San Diego State University, and the University of Kansas
Hospital, to name a few.
In addition to recurrently placing their trust in the hands of our professionals, we have seen an increase in the rate at which
legacy clients request services through more than one of our five verticals. We have been subcontracting 5% to 10% less
work than we have in previous years because of our commitment to synergy and cross-selling among our verticals.
Collaboration between our infrastructure and environmental services vertical has been particularly successful, as blue-chip
clients such as Xcel Energy take advantage of our diversified service offerings in states like Colorado, and our clients in the
Southeast continue to benefit from practiced cooperation between our construction quality assurance and infrastructure
groups.
In 2014 we welcomed two environmental services companies, AK Environmental and Air Quality Consulting, to the NV5
family, as well as two program and construction management firms, Owner’s Representative Services, Inc., and the Buric
Companies. These acquisitions extended NV5’s reach in the healthcare and hospitality sectors. We have already expanded
the national footprint of our program management vertical in 2015, with the acquisition of Joslin, Lesser and Associates,
Inc. (JLA) in January, a Boston-based construction project and owner’s representation services firm, which will be able to
strengthen our presence in the K-12 and higher education industries, particularly in the Northeast.
We are eager to continue building the NV5 brand in 2015 through our growing family of companies, to pursue new
opportunities under the direction of the entrepreneurial leaders that head our five verticals and demonstrated unparalleled
operational excellence in 2014, and to create value for our stockholders through our model of disciplined organic and
strategic growth.
I want to thank our employees, clients and stockholders on behalf of NV5 for their continued support of NV5 and for
participating in our exciting vision for the future.
Sincerely,
Dickerson Wright, P.E.
Chairman and CEO
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended December 31, 2014
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
or
For the transition period from to
Commission File Number 001-35849
NV5 Holdings, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or
organization)
200 South Park Road, Suite 350
Hollywood, Florida
(Address of principal executive offices)
(954) 495-2112
Registrant’s telephone number, including area code
45-3458017
(I.R.S. Employer
Identification No.)
33021
(Zip Code)
Securities Registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $0.01 par value
Warrants to Purchase Common Stock
Name of each exchange on which registered
The NASDAQ Capital Market
The NASDAQ Capital Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if
any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of
this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post
such files). Yes ☒ No ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this
chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer,
or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting
company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ☐
Accelerated filer ☐
Non-accelerated filer ☐
(Do not check if a smaller reporting company)
Smaller reporting company ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act). Yes ☐ No ☒
The aggregate market value of the voting and non-voting common equity held by non-affiliates based on the closing
sales price of the registrant’s common stock, as reported on The NASDAQ Capital Market on June 30, 2014 (the last
business day of the registrant’s most recently completed second fiscal quarter), was $22,381,397. For purposes of this
computation, all officers, directors, and 10% beneficial owners of the registrant are deemed to be affiliates. Such
determination should not be deemed to be an admission that such officers, directors, or 10% beneficial owners are, in
fact, affiliates of the registrant.
As of March 23, 2015, there were 6,346,442 shares outstanding of the registrant’s common stock, $0.01 par value.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement for the registrant’s 2015 Annual Meeting of Stockholders are incorporated
herein by reference in Part III of this Form 10-K to the extent stated herein.
NV5 HOLDINGS, INC.
FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
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BUSINESS
ITEM 1
ITEM 1A RISK FACTORS
ITEM 1B UNRESOLVED STAFF COMMENTS
ITEM 2
ITEM 3
ITEM 4 MINE SAFETY DISCLOSURES
PROPERTIES
LEGAL PROCEEDINGS
PART I
PART II
ITEM 5 MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
SELECTED FINANCIAL DATA
ITEM 6
ITEM 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 8
ITEM 9
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
ITEM 9A CONTROLS AND PROCEDURES
ITEM 9B OTHER INFORMATION
PART III
ITEM 10 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 11 EXECUTIVE COMPENSATION
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
ITEM 14 PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 15 EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
PART IV
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Cautionary Statement about Forward Looking Statements
Our disclosure and analysis in this Annual Report on Form 10-K and in our 2014 Annual Report to Stockholders,
including all documents incorporated by reference, contain “forward-looking” statements within the meaning of Section
27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995. From time to time, we also
provide forward-looking statements in other materials we release to the public, as well as oral forward-looking statements.
Forward-looking statements include, but are not limited to, statements regarding our “expectations,” “hopes,” “beliefs,”
“intentions,” or “strategies” regarding the future. In addition, any statements that refer to projections, forecasts, or other
characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements.
We have tried, wherever possible, to identify such statements by using words such as, but not limited to, “anticipate,”
“believe,” “expect,” “intend,” “estimate,” “predict,” “project,” “may,” “might,” “should,” “would,” “will,” “likely,” “will
likely result,” “continue,” “could,” “future,” “plan,” “possible,” “potential,” “target,” “forecast,” “goal,” “observe,” “seek,”
“strategy” and other words and terms of similar meaning, but the absence of these words does not mean that a statement is
not forward looking. The forward-looking statements in this Annual Report on Form 10-K reflect the Company’s current
views with respect to future events and financial performance.
Forward-looking statements are not historical factors and should not be read as a guarantee or assurance of future
performance or results, and will not necessarily be accurate indications of the times at, or by, or if which such performance
or results will be achieved. Forward-looking statements are based on information available at the time those statements are
made or management’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:
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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
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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;
significant influence by our principal stockholder and the existence of certain anti-takeover measures in our
governing documents; and
other factors identified throughout this Annual Report on Form 10-K, including those discussed under the
headings “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of
Operations,” and “Business.”
There can be no assurance that future developments affecting us will be those that we have anticipated. These
forward-looking statements involve a number of risks, uncertainties, or assumptions, many of which are beyond our
control, that may cause actual results or performance to be materially different from those expressed or implied by these
forward-looking statements. In light of these risks and uncertainties, there can be no assurance that the forward-looking
information contained in this Annual Report on Form 10-K will in fact transpire or prove to be accurate. Readers are
cautioned to consider the specific risk factors described herein and in “Item 1A. Risk Factors” of this Annual Report on
Form 10-K, and not to place undue reliance on the forward-looking statements contained herein, which speak only as of the
date hereof.
The Company undertakes no obligation to update or publicly revise any forward-looking statement, whether as a
result of new information, future developments or otherwise, except as may be required under applicable securities laws.
All subsequent written or oral forward-looking statements attributable to the Company or persons acting on its behalf are
expressly qualified in their entirety by this paragraph. You are advised, however, to consider any further disclosures we
make on related subjects in our Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and our other filings with
the Securities and Exchange Commission (the “SEC”). Also note that we provide a cautionary discussion of risks and
uncertainties relevant to our business under “Item 1A. Risk Factors” of this Form 10-K. We note these factors for investors
as permitted by the Private Securities Litigation Reform Act of 1995. You should understand it is not possible to predict or
identify all such factors.
References in this Annual Report on Form 10-K to (i) “NV5 Holdings, the “Company,” “we,” “us,” and “our”
refer to NV5 Holdings, Inc., a Delaware corporation, its consolidated subsidiaries, and the business of Nolte Associates,
Inc. as our historical accounting predecessor, (ii) “NV5 Global” refers to NV5 Global, Inc. (formerly known as NV5, Inc.),
a Delaware corporation and a wholly owned subsidiary of ours, (iii) “NV5” refers to NV5, Inc. (formerly known as Nolte
Associates, Inc.), a California corporation and a wholly owned subsidiary of ours, and (iv) “NV5, LLC” refers to NV5,
LLC, (formerly known as AK Environmental, LLC) a North Carolina limited liability company, and a wholly owned
subsidiary of ours.
5
ITEM 1. BUSINESS
Overview
PART I
We are a provider of professional and technical engineering and consulting solutions to public and private sector
clients in the infrastructure, energy, construction, real estate, and environmental markets. The scope of our projects includes
planning, design, consulting, permitting, inspection and field supervision, and management oversight. We also provide
forensic engineering, litigation support, condition assessment, materials testing, and compliance certification.
As the needs of our clients have evolved, we have grouped our engineering service capabilities across the
following five verticals:
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infrastructure, engineering, and support services;
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construction quality assurance;
● program management;
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energy services; and
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environmental services.
We identify operating segments at the subsidiary entity level. However, each entity’s operating performance has
been aggregated into one reportable segment.
We are headquartered in Hollywood, Florida, and operate our business nationwide from 29 locations in California,
Colorado, Florida, Massachusetts, New Jersey, Ohio, Pennsylvania, Utah and Wyoming. All of our offices utilize our
shared services platform, which consists of human resources, marketing, finance, information technology, legal, corporate
development, and other resources at our corporate headquarters. Our shared services platform is intended to optimize the
performance of our business as we increase our scale and scope. By maintaining a centralized, shared services platform, we
believe we can better manage our business, apply universal financial and operational controls and procedures, increase
efficiencies, and drive lower-cost solutions.
Our public sector clients include U.S. federal, state, municipal, and local governments; military and defense
clients; and public agencies. We also serve quasi-public and private sector clients from the education, healthcare, energy,
and utilities fields, including schools, universities, hospitals, health care providers, insurance providers, large utility service
providers, and large and small energy producers.
During our 60 years in the engineering and consulting business, we have worked with such clients and on such
well-known projects as (in alphabetical order):
● Atlantic City Tunnel Connection, NJ;
● Balboa Naval Hospital, CA;
● Borgata Hotel and Casino, NJ;
● Caldecott Tunnel, CA;
● California Department of Transportation, CA;
● Miami International Airport, FL;
● Miramar Marine Corps Air Station, CA;
● Mojave Water Agency, CA;
● Peterson Air Force Base, CO;
● Port of Miami, Tunnel and Capital Improvement to
Pier Wharfs, FL;
● California Public Employees’ Retirement System, CA; ● San Diego Zoo and Wild Animal Park, CA;
● Colorado Department of Transportation, CO;
● Cleveland Clinic, OH;
● Fort Lauderdale Hollywood International Airport, FL; ● Spectra Energy (various states);
● Los Angeles Community College, CA;
● SeaWorld, San Diego, CA;
● South Florida Water Management District, FL;
● Stanford University, CA.;
● University of Kansas Medical Center, KS; and
● University of San Diego, CA.
6
Our current representative clients and project portfolio include (in alphabetical order):
● Broward County, FL;
● California Department of Transportation, or Caltrans,
● Rutgers University, NJ;
● San Diego Gas & Electric, CA;
CA;
● City of Colorado Springs, CO;
● City of Sacramento, CA;
● City of Bakersfield, CA;
● Florida Power and Light, FL;
● Metropolitan Water District of Southern California,
● San Diego International Airport, CA;
● Santa Clara County Government, CA;
● University of California San Diego, CA;
● University of Miami, FL;
● University of Utah, UT; and
CA;
● Miami-Dade County, FL;
● Rose Bowl Stadium, CA;
Our History
● Utah Department of Transportation, UT.
NV5 Global, Inc. (formerly known as NV5, Inc.)(“NV5 Global”) was incorporated as a Delaware corporation in
2009. NV5, Inc. (formerly known as Nolte Associates, Inc.) (“NV5”), which began operations in 1949, was incorporated
as a California corporation in 1957, and was acquired by NV5 Global in 2010. In March 2010, NV5 Global acquired the
construction quality assurance operations of Bureau Veritas North America, Inc. In October 2011, NV5 Global and NV5
completed a reorganization transaction in which NV5 Holdings, Inc. was incorporated as a Delaware corporation, acquired
all of the outstanding shares of NV5 Global and NV5, and, as a result, became the holding company under which NV5,
NV5 Global and the Company's other subsidiaries conduct business. In 2014, NV5 Holdings acquired NV5,
LLC, (formerly known as AK Environmental, LLC) (“NV5, LLC”).
Key Developments
Initial public offering.
On March 26, 2013, we priced our initial public offering of 1,400,000 units. Each unit was sold at an offering price of
$6.00 per unit and consisted of one share of the Company’s common stock and one warrant to purchase one share of our
common stock at an exercise price of $7.80 per share. The units began trading on NASDAQ Capital Market (“NASDAQ”)
on March 27, 2013 and traded solely as units through September 26, 2013. The units sold in our initial public offering were
registered under the Securities Act of 1933, as amended (the “Securities Act”), on a registration statement on Form S-1
(No. 333-186229), which was declared effective by the Securities and Exchange Commission (the “SEC”) on March 26,
2013. On March 28, 2013, the underwriter of the offering exercised its option to purchase up to an additional 210,000 units,
solely to cover over-allotments. The closing of the offering occurred, and was recorded, on April 2, 2013, upon which we
received net proceeds of approximately $8.1 million after deducting fees associated with the initial public offering and
issued 1,610,000 units. In addition, upon closing, the underwriter received a warrant to acquire up to 140,000 units at an
exercise price of $7.20 per unit. The underwriter can exercise these warrants until the expiration date of March 26, 2016.
Each of these units consist of one share of the Company’s common stock and one warrant to purchase one share of the
Company’s common stock at an exercise price of $7.80 per share.
Separation of the Company’s units and warrant exercises.
On September 27, 2013, the common stock and warrants comprising our units began trading separately on NASDAQ
under the symbols “NVEE” and “NVEEW”, respectively. In connection with the separate trading of the common stock and
warrants, our units ceased trading under the symbol “NVEEU” on the close of the markets on September 26, 2013 and the
units were delisted from NASDAQ.
On September 27, 2013, the warrants became exercisable at an exercise price of $7.80 per share. The warrant
exercise period expires on March 27, 2018 or earlier upon redemption.
7
On September 27, 2013 and continuing until October 11, 2013 (the “Temporary Reduction Expiration Time”), we
temporarily reduced the exercise price of all of our outstanding public warrants from $7.80 per share to $6.00 per share. All
such warrants properly exercised in accordance with their respective terms prior to the Temporary Reduction Expiration
Time were accepted by us at the reduced $6.00 per share exercise price, and one share of our registered common stock per
warrant was issued to the exercising warrant holder. After the Temporary Reduction Expiration Time, the exercise price of
the public warrants automatically reverted to the warrant exercise price of $7.80 per share included in the original terms of
the public warrants and the reduced exercise price was no longer in effect. Except for the reduced $6.00 per share exercise
price of the warrants during the Temporary Reduction Expiration Time, the terms of the public warrants remain unchanged.
During the Temporary Reduction Expiration Time, 1,196,471 public warrants, or approximately 74% of the outstanding
public warrants were exercised at the reduced exercise price of $6.00 per share. The temporary reduction in the warrant
exercise price generated net cash proceeds of approximately $6.6 million after fees associated with the temporary reduction
in the warrant exercise price and offering expenses. During the period from January 1, 2014 through December 31, 2014,
600 public warrants were exercised at the warrant exercise price of $7.80 per share.
On January 5, 2015, in accordance with the amended and restated warrant agreement, we notified the holders of our
outstanding public warrants that we had called our warrants for redemption. Each public warrant entitled the holder to
purchase one share of the Company’s common stock at an exercise price of $7.80 per share. The public warrant holders had
until February 4, 2015 to exercise their public warrants at $7.80 per share. The redemption resulted in 408,412, or
approximately 99%, of our outstanding public warrants being exercised prior to the expiration time and generated cash
proceeds of approximately $3.2 million. The remaining 4,002 public warrants that were not exercised by the expiration
time were cancelled and redeemed for the sum of $0.01 per public warrant. In connection with the redemption of all
outstanding public warrants, the trading of the Company’s public warrants was suspended and the warrants were delisted
from the NASDAQ.
Acquisitions. One of our growth strategies is to focus on strategic acquisitions that enhance or expand our service
offerings. For information on our recent acquisitions, please refer to the “Recent Acquisitions” section included under
“Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report
on Form 10-K and such information is incorporated into this Item 1 by reference.
Competitive Strengths
We believe we have the following competitive strengths:
Organizational structure that enhances client service. We operate our business using a vertical structure grouped
by service offerings rather than the geography-based structure utilized by many of our competitors. This structure ensures
that clients engaging our services in any given sector, regardless of the location of the project, have access to the services of
our most highly qualified professionals. Our most skilled engineers and professionals in each service sector work directly
with the clients engaging those services, which facilitates relationship-based interactions between our key employees and
clients and assists in developing long-term client relationships. In addition, this structure encourages an entrepreneurial
spirit among our professionals.
Expertise in local markets. To complement our vertical service model, we maintain 29 locations in the United
States (“U.S.”). Each of our offices is staffed with licensed professionals who understand the local and regional markets in
which they serve. Our local professionals are allowed to concentrate entirely on their local market client engagements while
being supported by our shared services platform, under which we perform various back office support functions on a
centralized basis.
Strong, long-term client relationships. Our combination of local market experience and professionals with
expertise in multiple vertical service sectors has enabled us to develop strong relationships with our core clients. Some of
our professionals have worked with our key clients for decades. For example, we have worked with San Diego Gas &
Electric for over 30 years and are recognized as a preferred source of expertise by Caltrans. By serving as a long-term
partner with our clients, we are able to gain a deep understanding of their overall business needs as well as the unique
technical requirements of their projects. This increased understanding gives us the opportunity to provide superior value to
our clients by allowing us to more fully assess and better manage the risks inherent in their projects.
8
Experienced, talented, and motivated employees. We employ seasoned professionals with a broad array of
specialties and a strong customer service orientation. Our executive officers have an average of more than 20 years of
operating and management experience in or supporting the engineering and consulting industry and in analyzing potential
acquisition transactions. We place a high priority on attracting, motivating and retaining top professionals to serve our
clients, and our compensation system emphasizes the use of performance-based incentives, including opportunities for
stock ownership, to achieve this objective.
Industry-recognized quality of service. We believe that we have developed a strong reputation for quality service
based upon our industry-recognized depth of experience, ability to attract and retain quality professionals, and expertise
across multiple service sectors. During the past several years, we received many industry certificates, awards, and national
rankings, including:
● 2014 Environmental Business Journal Achievement
● 2011 Engineering News-Record Top 100
Award in Mergers & Acquisitions;
Construction Management-for-Fee Firms (ranked by
construction-specific revenue);
● 2013 Environmental Business Journal Achievement
● 2011 Sacramento Regional Transit District: Transit
Award in Mergers & Acquisitions;
Oriented Design of the Year; and
● 2010 Engineering News-Record: Best of the Best
Government Building Award.
● 2013/2012 Advisory Board at Harvard Graduate
School of Design for Sustainable Infrastructure;
● 2013/2012 Northwestern Kellogg Graduate School –
Visiting Faculty;
● 2011 Engineering News-Record Top 500 Design
Firms (ranked by design-specific revenue);
Growth Strategies
We intend to pursue the following growth strategies as we seek to expand our market share and position ourselves
as a preferred, single-source provider of professional and technical consulting and certification services to our clients:
Seek strategic acquisitions to enhance or expand our services offerings. We seek acquisitions that allow us to
expand or enhance our capabilities in our existing service offerings. In analyzing new acquisitions, we pursue opportunities
that provide critical mass to function as a profitable stand-alone operation, are geographically situated to be complementary
to our existing operations, and profitable with strong potential for organic growth. We believe that expanding our business
through strategic acquisitions will enable us to exploit economies of scale in the areas of finance, human resources,
marketing, administration, information technology, and legal, while also providing cross-selling opportunities among our
vertical service offerings.
Continue to focus on public sector clients while building private sector client capabilities. We have historically
derived the majority of our revenue from public and quasi-public sector clients. For the years ended December 31, 2014
and 2013, approximately 55% and 67%, respectively, of our gross revenues were attributable to public and quasi-public
sector clients. Even during unsteady economic periods, we have capitalized on public sector business opportunities
resulting from outsourcing initiatives, continued efforts to address the challenges presented by the nation’s aging
infrastructure system, and the need to provide solutions for transportation, energy, water, and waste water requirements.
However, we also seek to obtain additional clients in the private sector, which typically experiences greater growth during
times of economic expansion, by networking, participating in certain organizations, and monitoring private project
databases. We will continue to pursue private sector clients when such opportunities present themselves. We believe our
ability to service the needs of both public and private sector clients gives us the flexibility to seek and obtain engagements
regardless of the current economic conditions.
Strengthen and support our human capital. 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. We will also continue to provide our personnel with training, personal and professional growth opportunities,
performance-based incentives, including opportunities for stock ownership, and other competitive benefits.
9
Description of Services
Infrastructure, Engineering, and Support Services
We provide our clients with a broad array of services in the area of infrastructure, engineering, and support
services. We possess the professional and technical expertise necessary to design and manage clients’ infrastructure
projects from start to finish. This integrated approach provides our clients with consistency and accountability across the
life of their projects and allows us to create value by maximizing efficiencies of scale.
The specific infrastructure, engineering, and support services we offer fall into three phases of project
development:
Site selection. The site selection phase includes access assessment, parcel identification, easement descriptions,
land use permitting, pipeline routing analysis, site constraints analysis, surveying and mapping, and regulatory compliance.
Design. The design phase includes road design, grading design, alignment design, laydown design, station pad
design, storm drain design, storm water management, water supply engineering, site planning and profile drawings, and
construction cost estimating.
Construction and program management. The construction and program management phase includes plan review,
bid and award assessment, monitoring services for active construction sites, scheduling assistance, drawing review, permit,
approval and review processing, contractor, designer and agency coordination, cost control management, progress payment
management, change order administration, compliance inspections, and evaluation of cost reduction methods.
Our specialty areas within our infrastructure, engineering, and support service offering include:
Water resources. We assist our clients with a variety of projects related to water supply and distribution (such as
designing water treatment plants and pilot testing), water treatment (including designing and implementing water
reclamation, recycling, and reuse projects), and wastewater engineering (including wastewater facility master planning and
treatment, designing and implementing collection, treatment and disposal systems, and water quality investigations).
Transportation. We provide our clients with services related to street and roadway construction (including
alignment studies, roadway inspections, and traffic control planning), the construction of highways, bridges and tunnels,
and the development of rail and light rail systems.
Structural engineering. From elaborate office and industrial facilities to major highway and railroad crossings to
complex rail and light rail structures to a variety of water related facilities, our structural team provides design, inspection,
rehabilitation, and seismic upgrade services that include structural analysis and design, plans, specifications and estimates,
structural construction management, conceptual design studies, cost studies, seismic analysis, design and retrofit, structural
evaluations, earthquake damage assessments, structural repair design, and regulatory agency permitting services.
Land development. We assist our clients with many of the front-end challenges associated with private and public
land development, including planning, public outreach, sustainability, flood control, drainage, and landscaping.
Surveying. We are equipped to provide our clients with a full suite of traditional surveying techniques as well as
cutting edge technology services, including high-definition surveying services using three-dimensional Light Detection and
Ranging (LIDAR) point clouds. Our services can be used to determine current site condition, provide real-time
infrastructure measuring and mapping, preserve historic sites, aide in forensic and accident investigations, determine
volume calculations, and conduct surveys for project progress.
Other services. Through our Geographic Information System services, we can provide clients with other ancillary
services that include infrastructure management, property management, asset inventory, landscape maintenance, web-based
mapping services, land use analysis, terrain analysis and visualization, suitability and constraints analysis, hydrology
analysis, biological, agricultural and cultural inventories, population and demographic analysis, shortest path analysis,
street grid density, transportation accessibility analysis, watershed analysis, floodplain mapping, groundwater availability
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modeling, flood insurance study preparation, risk and HAZUS mitigation assessment and analysis, mapping, data tracking,
and data hosting.
Construction Quality Assurance
We provide construction quality assurance services with respect to such diverse projects as professional sports
stadiums, military facilities, cultural and performing arts centers, airports, hotels, hospitals and health care facilities, fire
stations, major public and private universities, and K-12 school districts. We offer these services on an “a la carte” or
integrated start-to-finish basis that is intended to guide a client through each phase of a construction project. Our
construction quality assurance services generally include site inspections, audits, and evaluations of materials and
workmanship necessary to determine and document the quality of the constructed facility. Before a project commences, we
offer our clients a variety of assessment services, including environmental, geotechnical, and structural suitability. We
perform these pre-construction evaluations in order to help detect any potential problems with the proposed site that could
prevent or complicate the successful completion of the project. In addition, we evaluate the onsite building conditions and
recommend the best methods and materials for site preparation, excavation, and building foundations.
During development, we assist our clients in designing a comprehensive construction plan, including a summary
of planned construction activities, sequence, critical path elements, interrelationships, durations, and terminations.
Construction planning services may also include developing procedures for project management, the change order process,
and technical records handling methodology to be employed. We offer inspection services for each phase of a project,
including excavation, foundations, structural framing, mechanical heating and air conditioning systems, electrical systems,
underground utilities, and building water proofing systems. Where applicable, we employ additional methods to test
materials and building quality. We maintain contact with our clients’ managers and, as issues are detected or anticipated,
assist them in determining appropriate, cost-effective solutions. We periodically provide construction progress inspections
and assessment reports. When a project is complete, we prepare an evaluation report of the project and certify the
inspections for the client. After construction, we offer periodic building inspection services to ensure that the building is
maintained in accordance with applicable building codes and other local ordinances to maximize the life of the project. We
also offer indoor environmental quality testing during this period.
Our specialty areas within our construction quality assurance service offering include:
Construction materials testing and engineering services. We provide materials testing services related to concrete,
steel, and other structural materials used in construction. We are equipped to provide these services in fabrication plants, in
our laboratories, and at the project or construction site itself. Our field personnel work directly under the supervision of
licensed engineers and maintain individual licenses and certifications in their respective areas of expertise. All of our in-
house laboratories are inspected routinely by the Cement and Concrete Reference Laboratory (“CCRL”) of the National
Institute of Standards and Measures. In addition, our laboratories participate in proficiency programs conducted by the
CCRL and the American Association of State Highway & Transportation Officials.
Geotechnical engineering and consulting services. We provide a wide variety of geotechnical engineering and
consulting services. These services assist our clients to determine whether sites are suitable for proposed projects and to
design foundation plans that are compatible with project site and use conditions. We have experienced geotechnical
engineers, geologists, and earth scientists focused on providing services primarily in the southeast, northeast, and western
regions of the U.S.
Forensic consulting. In the event of damage to a structure by natural or man-made causes, our professional staff is
qualified to provide forensic consulting and analysis as well as expert witness services. We provide a wide variety of
forensic consulting services, including studies related to water intrusion, building code compliance, and claims involving
insurance.
Program Management
We provide program management services, which primarily consist of providing a wide variety of governmental
outsourcing services and consulting services that assist organizations in complying with technical government regulations
and industry standards. We offer a broad array of technical outsourcing services, including traffic studies, building code
plan review, code enforcement, permitting and inspections, and the administration of public works projects, building
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departments, and safety departments. Our program management service is a not at-risk service, is performed under a unit
price fee arrangement and not outcome-based.
Program management also includes project administration, including bid and award assessment, monitoring
services for active projects, scheduling assistance, drawing review, permit, approval and review processing, contractor,
designer and agency coordination, cost control management, progress payment management, change order administration,
compliance inspections, constructability review, as needed, and evaluation of cost reduction methods.
The trend towards increased privatization of U.S. federal, state, and local governmental services presents an
opportunity for us in this service offering. Faced with increased budgetary constraints and economic challenges, many
governmental agencies are now seeking to outsource various services, including the running of their building departments.
For building departments specifically, we typically provide a turnkey solution in exchange for a percentage of the building
permit fees collected or a minimum monthly retainer. The governmental agency retains any overage without any overhead
costs associated with the fee charged. Outsourcing provides a positive source of revenue for us, while simultaneously
increasing the efficiency and quality of service to the public. The governmental agency also gains flexibility to control
service levels without the challenges of government bureaucracy. Although we plan to grow our program management
services organically through the numerous contacts and client relationships we have with U.S. federal, state and local
governments, tribal nations, and educational institutions, we are also actively pursuing acquisition opportunities that
provide services in this sector.
Energy Services
Our energy services include the management of existing infrastructure assets as well as capital expenditure
projects. Within energy services we provide inspection, program management and assistance in permitting in accordance
with requirements of the Federal Energy Regulatory Commission. We also provide traditional engineering services for
energy providers, including energy transmission and distribution; underground transmission and distribution; substation
engineering; power generation facility design services and surveying. We assist major utilities and energy providers in
assessing potential sites for a wide variety of new energy infrastructure projects, and operations and maintenance for
existing energy infrastructure assets. Our services are provided to energy generation and transmission clients for various
types of energy source producers (i.e., natural gas, oil, coal and renewables).
Environmental Services
Our environmental services include occupational health, safety and environmental consulting and testing, which
consists of investigating and analyzing environmental conditions both outside and inside a building, recommending
corrective measures and procedures needed to comply with work place occupational health and safety programs. Our
occupational health and safety services include workplace safety audits, ergonomics studies, plans for emergency
preparedness, and workplace monitoring in regulated industries. We assist our clients with compliance of regulatory
requirements and industrial air and water quality standards. Our environmental services also include hydrogeological
modeling and environmental programs that assist our public agencies and private industry clients with compliance of state,
federal, and local requirements for groundwater resource assessments; water resource planning, monitoring and
environmental management of wastewater facilities; solid waste landfill investigations; permitting and compliance; storm
water pollution; environmental impact statement support; agricultural waste management and permitting; and wetland
evaluations.
Strategic Acquisitions
We maintain a full-time merger and acquisitions (“M&A”) initiative with executive personnel specifically
dedicated to identifying acquisition targets, exploring acquisition opportunities, negotiating terms, and overseeing the
acquisition and post-acquisition integration. From 1993 to the present, across various prior-company employment, our
M&A team has completed over 45 transactions in the engineering and consulting industry. Over the course of these
transactions, our M&A team has established extensive relationships throughout the industry and continues to maintain an
established pipeline of potential acquisition opportunities.
We seek acquisitions that allow us to expand or enhance our capabilities in our existing service offerings. In
analyzing new acquisitions, we pursue opportunities that provide critical mass to function as a profitable stand-alone
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operation, are geographically situated to be complementary to our existing operations, and are profitable with strong
potential for organic growth. Acquisition targets must include an experienced management team that is compatible with our
culture and thoroughly committed to our strategic direction. We believe we add value to the operations of our acquisitions
by providing superior corporate marketing and sales support, cash management, financial controls, information technology,
risk management and human resources support through a performance optimization process. Our performance optimization
process, which was developed by our executives through their extensive experience in acquiring and integrating these types
of companies, entails a review of both back office and operational functions to, among other things, identify how to
improve (i) inefficiencies related to the delivery of our services to customers, (ii) the performance of a new acquisition
through the integration of personnel into our organization, (iii) the risk management of a new acquisition, (iv) the
integration of technology and shared services platforms, and (v) cross-selling opportunities to create synergies with in our
service offerings.
For more information on our recent acquisitions, please refer to the “Recent Acquisitions” section included under
“Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report
on Form 10-K.
Key Clients and Projects
We currently serve over 800 different clients. While our ten largest clients accounted for approximately 43% and
46% of our gross revenues during the years ended December 31, 2014 and 2013, respectively, approximately 21% and 28%
of gross revenues for the years ended December 31, 2014 and 2013, respectively, are from two clients. Although we serve a
highly diverse client base, for the years ended December 31, 2014 and 2013, approximately 55% and 67%, respectively, of
our gross revenues were attributable to public and quasi-public sector clients. In this regard, public sector clients include
U.S. federal, state, and local government departments, agencies, systems, and authorities, including the U.S. Department of
Defense, transportation agencies, educational systems, and public housing authorities, while quasi-public sector clients
include utility service providers, energy producers, and healthcare providers. Of our private sector clients, our largest
clients are contractors, construction engineering firms, and institutional property owners.
Although we anticipate public and quasi-public sector clients to represent the majority of our revenues for the
foreseeable future, we intend to continue expanding our service offerings to private sector clients. Historically, public and
quasi-public sector clients have demonstrated greater resilience during periods of economic downturns, while private sector
clients have offered higher gross profit margin opportunities during periods of economic expansion.
Marketing and Sales
We strive to position ourselves as a preferred, single-source provider of professional and technical consulting and
certification services to our clients. We obtain client engagements primarily through business development efforts, cross-
selling of our services to existing clients, and maintaining client relationships, as well as referrals from existing and former
clients.
Our business development efforts emphasize lead generation, industry group networking, and corporate visibility.
Most of our business development efforts are led by members of our engineering and other professional teams, who are
also responsible for managing projects. Our business development efforts are further supported by our shared services
marketing group, which consists of a seasoned marketing team and marking support personnel located at our corporate
headquarters as well as our operating units.
As our service offerings become more expansive, we anticipate increasing our cross-selling opportunities.
Currently, we are often able to offer our construction quality assurance services in conjunction with our infrastructure,
engineering, and support services to the same clients.
In our experience, there has been a recent trend in the engineering and consulting industry in which client
relationships have shifted away from project-specific engagements and toward long-term, multi-project relationships. This
shift requires that service providers commit considerable resources toward maintaining client relationships, including
dedicating both technical and marketing resources tailored to the specific client’s needs. We are committed to maintaining
our client relationships by, among other things, remaining responsive to our clients’ needs and continuing to offer a broad
range of quality service offerings and value added solutions.
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Employees
As of December 31, 2014, we had 649 employees, including 549 full-time employees, which include 146 licensed
engineers and other professionals. We have been able to locate and engage highly qualified employees as needed and do
not expect our growth efforts to be constrained by a lack of qualified personnel. We consider our employee relations to be
good.
Backlog
As of December 31, 2014, we had approximately $82.1 million of gross revenue backlog expected to be
recognized over the next 12 months, compared to gross revenue backlog of approximately $60.2 million as of December
31, 2013. 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 in its entirety 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.
Most of our government contracts are multi-year contracts for which funding is appropriated on an annual basis.
With respect to such government contracts, our backlog includes only those amounts that have been funded and authorized
and does not reflect the full amounts we may receive over the term of such contracts. In the case of non-government
contracts, our backlog includes future revenue at contract rates, excluding contract renewals or extensions that are at the
discretion of the client. For contracts with a not-to-exceed maximum amount, we include revenue from such contracts in
backlog to the extent of the remaining estimated amount. We calculate backlog without regard to possible project
reductions or expansions or potential cancellations until such changes or cancellations occur.
Backlog is expressed in terms of gross revenue and, therefore, may include significant estimated amounts of third-
party or pass-through costs to subcontractors and other parties. Moreover, our backlog for the period beyond 12 months
may be subject to variations from year-to-year as existing contracts are completed, delayed, or renewed or new contracts
are awarded, delayed, or cancelled. As a result, we believe that year-to-year comparisons of the portion of backlog expected
to be performed more than one year in the future are difficult to assess and not necessarily indicative of future revenues or
profitability. Because backlog is not a defined accounting term, our computation of backlog may not necessarily be
comparable to that of our industry peers.
Competition
We believe that the engineering and consulting industry is highly fragmented, characterized by many small-scale
companies that focus their operations on regional markets or specialized niche activities. As a result, we compete with a
large number of regional, national, and global companies. Certain of these competitors have broader service offerings and
greater financial and other resources than we do. Others are smaller, more specialized, and concentrate their resources in
particular areas of expertise. The extent of our competition varies according to the particular markets and geographic area.
The degree and type of competition we face is also influenced by the type and scope of a particular project.
We believe the providers of engineering and consulting services primarily compete on the quality of service,
relevant experience, staffing capabilities, reputation, geographic presence, stability, and price. Price differentiation remains
an important element in competitive tendering and is the most significant factor in bidding for public sector consultancy
contracts. The importance of the foregoing factors varies widely based upon the nature, location, and size of the project.
We believe that certain economies of scale can be realized by service providers that establish a national reputation for
providing engineering and consulting services in all five of the service verticals in which we do business. Since the demand
for engineering and consulting services within each service offering is viewed as only moderately correlated with the
demand for services within the other service offerings, we are of the view that engineering and consulting firms can benefit
considerably from diversified service offerings.
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The number of competitors for any procurement can vary widely, depending upon technical qualifications, the
relative value of the project, geographic location, the financial terms, the risks associated with the work, and any
restrictions placed upon competition by the client. Our ability to compete successfully will depend upon the effectiveness
of our marketing efforts, the strength of our client relationships, our ability to accurately estimate costs, the quality of the
work we perform, our ability to hire and train qualified personnel, and our ability to obtain insurance.
We believe our principal competitors include the following firms (in alphabetical order): AECOM Technology
Corporation (NYSE: ACM), AMEC plc (LSE: AMEC), Bureau Veritas (PAR: BVI), Hill International, Inc. (NYSE: HIL),
Intertek Group plc (LSE:ITRK), Jacobs Engineering Group Inc. (NYSE: JEC), Kleinfelder & Associates, Professional
Service Industries, Inc., Stantec Inc. (TSE: STN), Terracon Consultants, Inc., Tetra Tech, Inc. (NASDAQ: TTEK), TRC
Companies, Inc. (NYSE: TRR), Willdan Group (NASDAQ: WLDN), and WS Atkins plc (LSE:ATK).
Seasonality
Due primarily to inclement weather conditions, which lead to project delays and slower completion of contracts,
and a higher number of holidays, our operating results during the months of December, January, and February are generally
lower than our operating results during other months. As a result, our gross revenues and net income for the first and fourth
quarters of a fiscal year may be lower than our results for the second and third quarters of a fiscal year.
Insurance and Risk Management
We maintain insurance covering professional liability and claims involving bodily injury, property and economic
loss. We consider our present limits of coverage, deductibles, and reserves to be adequate. Wherever possible, we endeavor
to eliminate or reduce the risk of loss on a project through the use of quality assurance and control, risk management,
workplace safety, and other similar methods.
Risk management is an integral part of our project management approach for fixed-price contracts and our project
execution process. We have a risk management process group that reviews and oversees the risk profile of our operations.
We also evaluate risk through internal risk analyses in which our management reviews higher-risk projects, contracts, or
other business decisions that require corporate legal and risk management approval.
Regulation
We are regulated in a number of fields in which we operate. We contract with various U.S. governmental
agencies and entities. When working with U.S. governmental agencies and entities, we must comply with laws and
regulations relating to the formation, administration, and performance of contracts. These laws and regulations contain
terms that, among other things:
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require certification and disclosure of all costs or pricing data in connection with various contract
negotiations;
impose procurement regulations that define allowable and unallowable costs and otherwise govern our right
to reimbursement under various cost-based U.S. government contracts; and
restrict the use and dissemination of information classified for national security purposes and the exportation
of certain products and technical data.
Internationally, we are subject to various government laws and regulations (including the Foreign Corrupt
Practices Act (“FCPA”) and similar non-U.S. laws and regulations), local government regulations, procurement policies
and practices, and varying currency, political, and economic risks.
To help ensure compliance with these laws and regulations, our employees are sometimes required to complete
tailored ethics and other compliance training relevant to their position and our operations.
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Access to Information
Our Internet address is www.nv5.com. We make available at this address, free of charge, our Annual Reports on
Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after we electronically
file such material with, or furnish it to, the SEC. We also make available on our website, our corporate governance
documents, including our code of conduct and ethics. In this Annual Report on Form 10-K, we incorporate by reference as
identified herein certain information from parts of our proxy statement for our 2015 Annual Meeting of Stockholders,
which we will file with the SEC and will be available, free of charge, on our website. Reports of our executive officers,
directors and any other persons required to file securities ownership reports under Section 16(a) of the Exchange Act are
also available through our website. Information contained on our website is not part of, or incorporated into, this Annual
Report on Form 10-K.
You may also read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F
Street, NE, Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet website located at http://www.sec.gov that
contains the information we file or furnish electronically with the SEC.
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ITEM 1A. RISK FACTORS.
We operate in a changing environment that involves numerous known and unknown risks and uncertainties that
could materially adversely affect our operations. The risks described below highlight some of the factors that have
affected, and in the future could affect our operations and financial condition. Additional risks we do not yet know of or
that we currently think are immaterial may also affect our business operations. If any of the events or circumstances
described in the following risks actually occur, our business, financial condition or results of operations could be
materially adversely affected.
The loss of key personnel or our inability to attract and retain qualified personnel could significantly disrupt our
business.
As a professional and technical engineering and consulting solutions provider, our business is labor intensive
and, therefore, our ability to attract, retain, and expand our senior management, sales personnel, and professional and
technical staff is an important factor in determining our future success. The market for qualified scientists, engineers, and
sales personnel is competitive and we may not be able to attract and retain such professionals. It may also be difficult to
attract and retain qualified individuals in the timeframe demanded by our clients. Furthermore, some of our government
contracts may require us to employ only individuals who have particular government security clearance levels. Our
failure to attract and retain key individuals could impair our ability to provide services to our clients and conduct our
business effectively. In addition, with the exception of certain of our executive officers, we do not have employment
agreements with any of our employees. The loss of the services of any key personnel could adversely affect our business.
We do not maintain key-man life insurance policies on any of our executive officers.
We depend on the continued services of Mr. Dickerson Wright, our Chairman and Chief Executive Officer. We
cannot assure you that we will be able to retain the services Mr. Wright.
We are dependent upon the efforts and services of Mr. Dickerson Wright, our Chairman and Chief Executive
Officer, because of his knowledge, experience, skills, and relationships with major clients and other members of our
management team. The loss of the services of Mr. Wright for any reason could have an adverse effect on our operations.
Demand from our state and local government and private clients is cyclical and vulnerable to economic downturns.
If the economy weakens or client spending declines further, then our revenue, profits, and financial condition may
deteriorate.
Demand for services from our state and local government and private clients is cyclical and vulnerable to
economic downturns, which may result in clients delaying, curtailing, or canceling proposed and existing projects. Our
business traditionally lags the overall recovery in the economy. Therefore, our business may not recover immediately
when the economy improves. If the economy remains weak or client spending declines further, then our revenue, profits,
and overall financial condition may deteriorate. Our state and local government clients may face budget deficits that
prohibit them from funding new or existing projects. In addition, our existing and potential clients may either postpone
entering into new contracts or request price concessions. Difficult financing and economic conditions may cause some of
our clients to demand better pricing terms or delay payments for services we perform, thereby increasing the average
number of days our receivables are outstanding and the potential of increased credit losses on uncollectible invoices.
Further, these conditions may result in the inability of some of our clients to pay us for services that we have already
performed. If we are not able to reduce our costs quickly enough to respond to the revenue decline from these clients, our
operating results may be adversely affected. Accordingly, these factors affect our ability to forecast our future revenue
and earnings from business areas that may be adversely impacted by market conditions.
Our operating results may be adversely impacted by worldwide economic uncertainties and specific conditions in the
markets we address.
Over the past several years, the general worldwide economy has experienced a downturn due, at various times,
to the lack of available credit, slower economic activity, concerns about inflation and deflation, increased energy costs,
decreased consumer confidence, reduced corporate profits and capital spending, and adverse business conditions. These
conditions make it extremely difficult for our clients and vendors to accurately forecast future business activities, which
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could cause businesses to slow spending on services. Such conditions have also made it very difficult for us to predict the
short-term and long-term impacts on our business. We cannot predict the timing, strength or duration of any economic
slowdown or subsequent economic recovery worldwide or in our industry, and any such economic slowdown could have
any adverse effect on our results of operations.
Our revenue, expenses, and operating results may fluctuate significantly.
Our revenue, expenses, and operating results may fluctuate significantly because of numerous factors, some of
which may contribute to more pronounced fluctuations in an uncertain global economic environment. In addition to the
other risks described in this “Risk Factors” section, the following factors could cause our operating results to fluctuate:
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delays, increased costs, or other unanticipated changes in contract performance that may affect
profitability, particularly with contracts that are fixed-price or have funding limits;
seasonality of the spending cycle of our public sector clients, notably the U.S. federal government, the
spending patterns of our private sector clients, and weather conditions;
budget constraints experienced by our federal, state, and local government clients;
our ability to integrate any companies that we acquire;
the number and significance of client contracts commenced and completed during a quarter;
the continuing creditworthiness and solvency of clients;
reductions in the prices of services offered by our competitors; and
legislative and regulatory enforcement policy changes that may affect demand for our services.
As a consequence, operating results for a particular future period are difficult to predict and, therefore, prior
results are not necessarily indicative of results to be expected in future periods. Any of the foregoing factors, or any other
factors discussed elsewhere herein, could have a material adverse effect on our business, results of operations and
financial condition that could adversely affect our stock price.
We derive a majority of our gross revenues from government agencies, and any disruption in government funding or
in our relationship with those agencies could adversely affect our business.
For the years ended December 31, 2014 and 2013, approximately 55% and 67%, respectively, of our gross
revenues were attributable to public and quasi-public sector clients, of which approximately 78% and 81% for the years
ended December 31, 2014 and 2013, respectively, were attributable to public and quasi-public sector clients in California.
A significant amount of our revenues are derived under multi-year contracts, many of which are appropriated on an
annual basis. As a result, at the beginning of a project, the related contract may be only partially funded, and additional
funding is normally committed only as appropriations are made in each subsequent year. These appropriations, and the
timing of payment of appropriated amounts, may be influenced by numerous factors as noted below. Our backlog
includes only the projects that have had funding appropriated.
The demand for our government-related services is generally driven by the level of government program
funding. Accordingly, the success and further development of our business depends, in large part, upon the continued
funding of these government programs, and upon our ability to obtain contracts and perform well under these programs.
There are several factors that could materially affect our government contracting business, including the following:
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uncertainty surrounding how any remaining funds are being distributed under the American Recovery
and Reinvestment Act of 2009 (“ARRA”) and into what governmental areas such funds are being used,
and how much funding may remain available;
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changes in and delays or cancellations of government programs, requirements, or appropriations;
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budget constraints or policy changes resulting in delay or curtailment of expenditures related to the
services we provide;
re-competes of government contracts;
the timing and amount of tax revenue received by federal, state, and local governments, and the overall
level of government expenditures;
curtailment in the use of government contracting firms;
delays associated with insufficient numbers of government staff to oversee contracts;
the increasing preference by government agencies for contracting with small and disadvantaged
businesses, including the imposition of set percentages of prime and subcontracts to be awarded to such
businesses for which we would not qualify;
competing political priorities and changes in the political climate with regard to the funding or operation
of the services we provide;
the adoption of new laws or regulations affecting our contracting relationships with the federal, state, or
local governments;
a dispute with, or improper activity by, any of our subcontractors; and
general economic or political conditions.
These and other factors could cause government agencies to delay or cancel programs, to reduce their orders
under existing contracts, to exercise their rights to terminate contracts, or not to exercise contract options for renewals or
extensions. Any of these actions could have a material adverse effect on our revenue or timing of contract payments from
these agencies.
Each year, client funding for some of our government contracts may rely on government appropriations or public-
supported financing. If adequate public funding is delayed or is not available, then our profits and revenue could
decline.
Each year, client funding for some of our government contracts may directly or indirectly rely on government
appropriations or public-supported financing such as the ARRA. It is possible that such appropriated funding will never
be allocated to projects that represent opportunities for us to the extent that we anticipate, if at all. Legislatures may
appropriate funds for a given project on a year-by-year basis, even though the project may take more than one year to
perform. In addition, public-supported financing such as state and local municipal bonds may be only partially raised to
support existing projects. Public funds and the timing of payment of these funds may be influenced by, among other
things, the state of the economy, competing political priorities, curtailments in the use of government contracting firms,
increases in raw material costs, delays associated with insufficient numbers of government staff to oversee contracts,
budget constraints, the timing and amount of tax receipts, and the overall level of government expenditures. If adequate
public funding is not available or is delayed, then our profits and revenue could decline.
A delay in the completion of the budget process of the U.S. government could delay procurement of our services and
have an adverse effect on our future revenue.
When the U.S. government does not complete its budget process before its fiscal year-end on September 30 in
any year, government operations are typically funded by means of a continuing resolution. Under a continuing resolution,
the government essentially authorizes agencies of the U.S. government to continue to operate and fund programs at the
prior year end but does not authorize new spending initiatives. When the U.S. government operates under a continuing
resolution, government agencies may delay the procurement of services, which could reduce our future revenue.
California state budgetary constraints may have a material adverse impact on us.
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The state of California had experienced, and may continue to experience, budget shortfalls and other related
budgetary issues and constraints. The state of California has historically been and is considered to be a key geographic
region for our business, as approximately 45% and 65% of our gross revenues for the years ended December 31, 2014
and 2013, respectively, came from California-based projects. Ongoing uncertainty as to the timing and accessibility of
budgetary funding, changes in state funding allocations to local agencies and municipalities, or other delays in purchasing
for, or commencement of, projects may have a negative impact on our gross revenues and net income.
Governmental agencies may modify, curtail, or terminate our contracts at any time prior to their completion and, if
we do not replace them, we may suffer a decline in revenue.
Most government contracts may be modified, curtailed, or terminated by the government either at its discretion
or upon the default of the contractor. If the government terminates a contract at its discretion, then we typically are able to
recover only costs incurred or committed, settlement expenses, and profit on work completed prior to termination, which
could prevent us from recognizing all of our potential revenue and profits from that contract. In addition, the U.S.
government has announced its intention to scale back outsourcing of services in favor of “insourcing” jobs to its
employees, which could reduce the number of contracts awarded to us. The adoption of similar practices by other
government entities could also adversely affect our revenues. If a government terminates a contract due to our default, we
could be liable for excess costs incurred by the government in obtaining services from another source.
Our failure to win new contracts and renew existing contracts with private and public sector clients could adversely
affect our profitability.
Our business depends on our ability to win new contracts and renew existing contracts with private and public
sector clients. Contract proposals and negotiations are complex and frequently involve a lengthy bidding and selection
process, which is affected by a number of factors. These factors include market conditions, financing arrangements, and
required governmental approvals. For example, a client may require us to provide a bond or letter of credit to protect the
client should we fail to perform under the terms of the contract. If negative market conditions arise, or if we fail to secure
adequate financial arrangements or the required government approval, we may not be able to pursue particular projects,
which could adversely affect our profitability.
Our inability to win or renew government contracts during regulated procurement processes or preferences granted
to certain bidders for which we would not qualify could harm our operations and significantly reduce or eliminate
our profits.
Government contracts are awarded through a regulated procurement process. The U.S. federal government has
increasingly relied upon multi-year contracts with pre-established terms and conditions, such as indefinite
delivery/indefinite quantity (“IDIQ”) contracts, which generally require those contractors who have previously been
awarded the IDIQ to engage in an additional competitive bidding process before a task order is issued. The increased
competition, in turn, may require us to make sustained efforts to reduce costs in order to realize revenue and profits under
government contracts. If we are not successful in reducing the amount of costs we incur, our profitability on government
contracts will be negatively impacted. The U.S. federal government has also increased its use of IDIQs in which the client
qualifies multiple contractors for a specific program and then awards specific task orders or projects among the qualified
contractors. As a result, new work awards tend to be smaller and of shorter duration, since the orders represent individual
tasks rather than large, programmatic assignments. In addition, the U.S. government has announced its intention to scale
back outsourcing of services in favor of “insourcing” jobs to its employees, which could reduce our revenue. Moreover,
even if we are qualified to work on a government contract, we may not be awarded the contract because of existing
government policies designed to protect small businesses and underrepresented minority contractors, which would not
apply to us. The federal government has announced specific statutory goals regarding awarding prime and subcontracts to
small businesses, women-owned small businesses, and small disadvantaged businesses, with the result that we may be
obligated to involve such businesses as subcontractors with respect to these contracts at lower margins than when we use
our own professionals. While we are unaware of any reason why our status as a public company would negatively impact
our ability to compete for and be awarded government contracts, our inability to win or renew government contracts
during regulated procurement processes or as a result of the policies pursuant to which these processes are implemented
could harm our operations and significantly reduce or eliminate our profits.
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If we fail to complete a project in a timely manner, miss a required performance standard, or otherwise fail to
adequately perform on a project, then we may incur a loss on that project, which may reduce or eliminate our overall
profitability.
Our engagements often involve large-scale, complex projects. The quality of our performance on such projects
depends in large part upon our ability to manage the relationship with our clients and our ability to effectively manage the
project and deploy appropriate resources, including third-party contractors and our own personnel, in a timely manner.
We may commit to a client that we will complete a project by a scheduled date. We may also commit that a project, when
completed, will achieve specified performance standards. If the project is not completed by the scheduled date or fails to
meet required performance standards, we may either incur significant additional costs or be held responsible for the costs
incurred by the client to rectify damages due to late completion or failure to achieve the required performance standards.
The uncertainty of the timing of a project can present difficulties in planning the amount of personnel needed for the
project. If the project is delayed or canceled, we may bear the cost of an underutilized workforce that was dedicated to
fulfilling the project. In addition, performance of projects can be affected by a number of factors beyond our control,
including unavoidable delays from government inaction, public opposition, inability to obtain financing, weather
conditions, unavailability of vendor materials, changes in the project scope of services requested by our clients, industrial
accidents, environmental hazards, labor disruptions, and other factors. To the extent these events occur, the total costs of
the project could exceed our estimates and we could experience reduced profits or, in some cases, incur a loss on a
project, which may reduce or eliminate our overall profitability. Further, any defects or errors, or failures to meet our
clients’ expectations, could result in claims for damages against us. Our contracts generally limit our liability for damages
that arise from negligent acts, errors, mistakes, or omissions in rendering services to our clients. However, we cannot be
sure that these contractual provisions will protect us from liability for damages in the event we are sued.
We depend on a limited number of clients for a significant portion of our business.
Our ten largest clients accounted for approximately 43% and 46% of our consolidated revenue for the years
ended December 31, 2014 and 2013, respectively, whereby two clients represented approximately 21% and 28% of our
gross revenue for the years ended December 31, 2014 and 2013, respectively. The loss of, or reduction in orders from,
these clients could have a material adverse effect on our business, financial condition, and results of operations.
We have made and expect to continue to make acquisitions that could disrupt our operations and adversely impact our
business and operating results. Our ability to successfully integrate acquisitions could impede us from realizing all of
the benefits of the acquisitions, which could weaken our results of operations.
A key part of our growth strategy is to acquire other companies that complement our service offerings or
broaden our technical capabilities and geographic presence. Acquisitions involve certain known and unknown risks that
could cause our actual growth or operating results to differ from our expectations or the expectations of securities
analysts. For example:
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we may not be able to identify suitable acquisition candidates or acquire additional companies on
acceptable terms;
we may pursue international acquisitions, which inherently pose more risk than domestic acquisitions;
we compete with others to acquire companies, which may result in decreased availability of, or increased
price for, suitable acquisition candidates;
we may not be able to obtain the necessary financing on favorable terms, or at all, to finance any of our
potential acquisitions;
we may ultimately fail to consummate an acquisition even if we announce that we plan to acquire a
company; and
acquired companies may not perform as we expect, and we may fail to realize anticipated revenue and
profits.
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In addition, our acquisition strategy may divert management’s attention away from our existing businesses,
resulting in the loss of key clients or key employees, and expose us to unanticipated problems or legal liabilities,
including responsibility as a successor-in-interest for undisclosed or contingent liabilities of acquired businesses or assets.
If we are not able to integrate acquired businesses successfully, our business could be harmed.
Our inability to successfully integrate future acquisitions could impede us from realizing all of the benefits of
those acquisitions and could severely weaken our business operations. The integration process may disrupt our business
and, if implemented ineffectively, may preclude realization of the full benefits expected by us and could harm our results
of operations. In addition, the overall integration of the combining companies may result in unanticipated problems,
expenses, liabilities, and competitive responses, and may cause our stock price to decline.
The difficulties of integrating an acquisition include, among others:
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unanticipated issues in integration of information, communications, and other systems;
unanticipated incompatibility of logistics, marketing, and administration methods;
maintaining employee morale and retaining key employees;
integrating the business cultures of both companies;
preserving important strategic client relationships;
consolidating corporate and administrative infrastructures and eliminating duplicative operations; and
coordinating geographically separate organizations.
In addition, even if the operations of an acquisition are integrated successfully, we may not realize the full
benefits of the acquisition, including the synergies, cost savings, or growth opportunities that we expect. These benefits
may not be achieved within the anticipated time frame, or at all.
Further, acquisitions may also cause us to:
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issue securities that would dilute our current stockholders’ ownership percentage;
use a substantial portion of our cash resources;
increase our interest expense, leverage, and debt service requirements if we incur additional debt to pay
for an acquisition;
assume liabilities, including environmental liabilities, for which we do not have indemnification from the
former owners, as was the case in our acquisition of NV5, or have indemnification that may be subject to
dispute or concerns regarding the creditworthiness of the former owners;
record goodwill and non-amortizable intangible assets that are subject to impairment testing on a regular
basis and potential impairment charges;
experience volatility in earnings due to changes in contingent consideration related to acquisition
liability estimates;
incur amortization expenses related to certain intangible assets;
lose existing or potential contracts as a result of conflict of interest issues;
incur large and immediate write-offs; or
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become subject to litigation.
Finally, acquired companies that derive a significant portion of their revenue from the U.S. federal government
and that do not follow the same cost accounting policies and billing practices that we follow may be subject to larger cost
disallowances for greater periods than we typically encounter. If we fail to determine the existence of unallowable costs
and do not establish appropriate reserves in advance of an acquisition, we may be exposed to material unanticipated
liabilities, which could have a material adverse effect on our business.
If we are not able to successfully manage our growth strategy, our business and results of operations may be
adversely affected.
Our expected future growth presents numerous managerial, administrative, operational, and other challenges.
Our ability to manage the growth of our operations will require us to continue to improve our management information
systems and our other internal systems and controls. In addition, our growth will increase our need to attract, develop,
motivate, and retain both our management and professional employees. The inability of our management to effectively
manage our growth or the inability of our employees to achieve anticipated performance could have a material adverse
effect on our business.
Our ability to raise capital in the future may be limited, and our failure to raise capital when needed could prevent us
from achieving our growth objectives.
We may in the future be required to raise capital through public or private financing or other arrangements. Such
financing may not be available on acceptable terms, or at all, and our failure to raise capital when needed could harm our
business. Additional equity financing may dilute the interests of our stockholders, and debt financing, if available, may
involve restrictive covenants and could reduce our profitability. If we cannot raise funds on acceptable terms, we may not
be able to grow our business or respond to competitive pressures.
Our industry is highly competitive, and we may not be able to compete effectively with competitors.
Our industry is highly fragmented and intensely competitive. Our competitors are numerous, ranging from small
private firms to multi-billion dollar public companies. Contract awards are based primarily on quality of service, relevant
experience, staffing capabilities, reputation, geographic presence, stability, and price. In addition, the technical and
professional aspects of our services generally do not require large upfront capital expenditures and provide limited
barriers against new competitors. Many of our competitors have achieved greater market penetration in some of the
markets in which we compete and have more personnel, technical, marketing, and financial resources or financial
flexibility than we do. As a result of the number of competitors in the industry, our clients may select one of our
competitors on a project due to competitive pricing or a specific skill set. These competitive forces could force us to make
price concessions or otherwise reduce prices for our services. If we are unable to maintain our competitiveness, our
market share, revenue, and profits could decline.
Our business and operating results could be adversely affected by losses under fixed-price contracts.
Fixed-price contracts require us to either perform all work under the contract for a specified lump sum or to
perform an estimated number of units of work at an agreed price per unit, with the total payment determined by the actual
number of units performed. For the years ended December 31, 2014 and 2013, approximately 10% and 11%, respectively
of our revenue was recognized under fixed-price contracts. Fixed-price contracts expose us to a number of risks not
inherent in cost-plus and time and material contracts, including underestimation of costs, ambiguities in specifications,
unforeseen costs or difficulties, problems with new technologies, delays beyond our control, failures of subcontractors to
perform, and economic or other changes that may occur during the contract period. Losses under fixed-price contracts
could be substantial and adversely impact our results of operations.
If our clients delay in paying or fail to pay amounts owed to us, it could have a material adverse effect on our
liquidity, results of operations, and financial condition.
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Accounts receivable represent the largest asset on our balance sheet. While we take steps to evaluate and manage
the credit risks relating to our clients, economic downturns or other events can adversely affect the markets we serve and
our clients ability to pay, which could reduce our ability to collect all amounts due from clients. If our clients delay in
paying or fail to pay us a significant amount of our outstanding receivables, it could have a material adverse effect on our
liquidity, results of operations, and financial condition.
If we extend a significant portion of our credit to clients in a specific geographic area or industry, we may
experience disproportionately high levels of collection risk and nonpayment if those clients are adversely affected by
factors particular to their geographic area or industry.
Our clients include public and private entities that have been, and may continue to be, negatively impacted by
the changing landscape in the global economy. We face collection risk as a normal part of our business where we perform
services and subsequently bill our clients for such services. For the years ended December 31, 2014 and 2013,
approximately 21% and 28% of gross revenues are from two clients. In the event that we have concentrated credit risk
from clients in a specific geographic area or industry, continuing negative trends or a worsening in the financial condition
of that specific geographic area or industry could make us susceptible to disproportionately high levels of default by those
clients. Such defaults could materially adversely impact our ability to collect our receivables and, ultimately, our
revenues and results of operations.
As a government contractor, we must comply with various procurement laws and regulations and are subject to
regular government audits. A violation of any of these laws and regulations or the failure to pass a government audit
could result in sanctions, contract termination, forfeiture of profit, harm to our reputation or loss of our status as an
eligible government contractor and could reduce our profits and revenue.
We must comply with and are affected by U.S. federal, state, local, and foreign laws and regulations relating to
the formation, administration, and performance of government contracts. For example, we must comply with defective-
pricing clauses found within the Federal Acquisition Regulation (“FAR”), the Truth in Negotiations Act, Cost
Accounting Standards (“CAS”), the ARRA, the Services Contract Act, and the U.S. Department of Defense security
regulations, as well as many other rules and regulations. In addition, we must also comply with other government
regulations related to employment practices, environmental protection, health and safety, tax, accounting, and anti-fraud
measures, as well as many others regulations in order to maintain our government contractor status. These laws and
regulations affect how we do business with our clients and, in some instances, impose additional costs on our business
operations. Although we take precautions to prevent and deter fraud, misconduct, and non-compliance, we face the risk
that our employees or outside partners may engage in misconduct, fraud, or other improper activities. Government
agencies routinely audit and investigate government contractors. These government agencies review and audit a
government contractor’s performance under its contracts and cost structure and evaluate compliance with applicable laws,
regulations, and standards. In addition, during the course of its audits, such agencies may question our incurred project
costs. If such agencies believe we have accounted for such costs in a manner inconsistent with the requirements for FAR
or CAS, the agency auditor may recommend to our U.S. government corporate administrative contracting officer that it
disallow such costs. Historically, we have not experienced significant disallowed costs as a result of government audits.
However, we can provide no assurance that such government audits will not result in a material disallowance for incurred
costs in the future. In addition, government contracts are subject to a variety of other requirements relating to the
formation, administration, performance and accounting for these contracts. We may also be subject to qui tam litigation
brought by private individuals on behalf of the government under the Federal Civil False Claims Act, which could
include claims for treble damages. Government contract violations could result in the imposition of civil and criminal
penalties or sanctions, contract termination, forfeiture of profit, or suspension of payment, any of which could make us
lose our status as an eligible government contractor. We could also suffer serious harm to our reputation. Any interruption
or termination of our government contractor status could reduce our profits and revenue significantly.
State and other public employee unions may bring litigation that seeks to limit the ability of public agencies to
contract with private firms to perform government employee functions in the area of public improvements. Judicial
determinations in favor of these unions could affect our ability to compete for contracts and may have an adverse
effect on our revenue and profitability.
Over at least the last 20 years, state and other public employee unions have challenged the validity of
propositions, legislation, charters, and other government regulations that allow public agencies to contract with private
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firms to provide services in the fields of engineering, design, and construction of public improvements that might
otherwise be provided by public employees. These challenges could have the affect of eliminating or severely restricting
the ability of municipalities to hire private firms for the purpose of designing and constructing public improvements, and
otherwise require them to use union employees to perform the services. If a state or other public employee union is
successful in its challenge and as a result the ability of state agencies to hire private firms is severely limited, such a
decision would likely lead to additional litigation challenging the ability of the state, counties, municipalities, and other
public agencies to hire private engineering, architectural, and other firms, the outcome of which could affect our ability to
compete for contracts and may have an adverse effect on our revenue and profitability.
Our use of the percentage-of-completion method of revenue recognition could result in a reduction or reversal of
previously recorded revenue and profits.
We account for some of our contracts on the percentage-of-completion method of revenue recognition. These
contracts accounted for approximately 10% and 11% of our revenue for the years ended December 31, 2014 and 2013,
respectively. Generally, our use of this method results in recognition of revenue and profit ratably over the life of the
contract based on the proportion of costs incurred to date to total costs expected to be incurred for the entire project. The
effects of revisions to revenue and estimated costs, including the achievement of award fees as well as the impact of
change orders and claims, are recorded when the amounts are known and can be reasonably estimated. Such revisions
could occur in any period and their effects could be material. Although we have historically made reasonably reliable
estimates of the progress towards completion of long-term contracts, the uncertainties inherent in the estimating process
make it possible for actual costs to vary materially from estimates, including reductions or reversals of previously
recorded revenue and profit.
Our actual business and financial results could differ from the estimates and assumptions that we use to prepare our
financial statements, which may significantly reduce or eliminate our profits.
To prepare financial statements in conformity with generally accepted accounting principles in the U.S.
(“GAAP”), management is required to make estimates and assumptions as of the date of the financial statements. These
estimates and assumptions could affect the reported values of assets, liabilities, revenue, and expenses as well as
disclosures of contingent assets and liabilities. For example, we recognize revenue over the life of a contract based on the
proportion of costs incurred to date compared to the total costs estimated to be incurred for the entire project. Areas
requiring significant estimates by our management include:
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the application of the percentage-of-completion method of accounting and revenue recognition on
contracts, change orders, and contract claims;
provisions for uncollectible receivables and client claims and recoveries of costs from
subcontractors, vendors, and others;
provisions for income taxes, research, and experimentation credits and related valuation
allowances;
value of goodwill and recoverability of other intangible assets;
valuations of assets acquired and liabilities assumed in connection with business combinations;
valuation of stock-based compensation expense; and
accruals for estimated liabilities, including litigation and insurance reserves.
Our actual business and financial results could differ from those estimates, which may significantly reduce or
eliminate our profits.
If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial
results or prevent fraud. As a result, current and potential stockholders could lose confidence in our financial
reporting, which would harm our business and the trading price of our securities.
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Management continues to review and assess our internal controls to ensure we have adequate internal financial
and accounting controls. Failure to maintain new or improved controls, or any difficulties we encounter in their
implementation, could result in material weaknesses, and cause us to fail to meet our periodic reporting obligations or
result in material misstatements in our financial statements. Any such failure could also adversely affect the results of
periodic management evaluations (and, once we no longer qualify as an “emerging growth company” under the JOBS Act
or a “smaller reporting company” as defined under related SEC rules, annual audit attestation reports) regarding the
effectiveness of our internal control over financial reporting that will be required under Section 404 of the Sarbanes-
Oxley Act of 2002 (the “Sarbanes-Oxley Act”) with respect to annual reports that we will file as a public company. The
existence of a material weakness could result in errors in our financial statements that could cause us to fail to meet our
reporting obligations and cause investors to lose confidence in our reported financial information, leading to a decline in
our stock price.
For so long as we qualify as an “emerging growth company” under the JOBS Act, which may be up to five years
following our initial public offering, we intend to take advantage of certain exemptions from various reporting
requirements that are applicable to public companies that are not emerging growth companies, including, but not limited
to, not being required to comply with the auditor attestation requirements of Section 404. Once we are no longer an
emerging growth company or, if prior to such date, we opt to no longer take advantage of the applicable exemption, we
will be required to include an opinion from our independent registered public accounting firm on the effectiveness of our
internal controls over financial reporting.
Our profitability could suffer if we are not able to maintain adequate utilization of our workforce.
The cost of providing our services, including the extent to which we utilize our workforce, affects our
profitability. The rate at which we utilize our workforce is affected by a number of factors, including:
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our ability to transition employees from completed projects to new assignments and to hire and assimilate
new employees;
our ability to forecast demand for our services and thereby maintain an appropriate headcount in each of our
geographies and workforces;
our ability to manage attrition;
our need to devote time and resources to training, business development, professional development, and other
non-chargeable activities; and
our ability to match the skill sets of our employees to the needs of the marketplace.
If we over utilize our workforce, our employees may become disengaged, which will impact employee attrition.
If we under-utilize our workforce, our profit margin and profitability could suffer.
Our backlog is subject to cancellation and unexpected adjustments, and is an uncertain indicator of future operating
results.
As of December 31, 2014, we had approximately $82.1 million of gross revenue backlog expected to be
recognized over the next 12 months. 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.
Employee, agent or partner misconduct or our overall failure to comply with laws or regulations could harm our
reputation, reduce our revenue and profits, and subject us to criminal and civil enforcement actions.
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Misconduct, fraud, non-compliance with applicable laws and regulations, or other improper activities by one of
our employees, agents, or partners could have a significant negative impact on our business and reputation. Such
misconduct could include the failure to comply with government procurement regulations, regulations regarding the
protection of classified information, regulations prohibiting bribery and other foreign corrupt practices, regulations
regarding the pricing of labor and other costs in government contracts, regulations on lobbying or similar activities,
regulations pertaining to the internal controls over financial reporting, environmental laws, and any other applicable laws
or regulations. For example, the FCPA, and similar anti-bribery laws in other jurisdictions generally prohibit companies
and their intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or retaining
business. Our policies mandate compliance with these regulations and laws, and we take precautions to prevent and detect
misconduct. However, since our internal controls are subject to inherent limitations, including human error, it is possible
that these controls could be intentionally circumvented or become inadequate because of changed conditions. As a result,
we cannot assure that our controls will protect us from reckless or criminal acts committed by our employees and agents.
Our failure to comply with applicable laws or regulations or acts of misconduct could subject us to fines and penalties,
loss of security clearances, and suspension or debarment from contracting, any or all of which could harm our reputation,
reduce our revenue and profits, and subject us to criminal and civil enforcement actions. Historically, we have not had
any material cases involving misconduct or fraud.
If our contractors and subcontractors fail to satisfy their obligations to us or other parties, or if we are unable to
maintain these relationships, our revenue, profitability, and growth prospects could be adversely affected.
We depend on contractors and subcontractors in conducting our business. There is a risk that we may have
disputes with our subcontractors arising from, among other things, the quality and timeliness of work performed by the
subcontractor, client concerns about the subcontractor, or our failure to extend existing task orders or issue new task
orders under a subcontract. In addition, if any of our subcontractors fail to deliver on a timely basis the agreed-upon
supplies, fail to perform the agreed-upon services, go out of business, or fail to perform on a project, then our ability to
fulfill our obligations as a prime contractor may be jeopardized and we may be contractually responsible for the work
performed by those contractors or subcontractors. The absence of qualified subcontractors with which we have a
satisfactory relationship could adversely affect the quality of our service and our ability to perform under some of our
contracts. Historically, our relationship with our contractors and subcontractors has been good, and we have not
experienced any material failure of performance by our contractors and subcontractors. During the years ended December
31, 2014 and 2013, the utilization of contractors or subcontractors generated approximately 15% and 18%, respectively,
of our gross revenues.
We also rely on relationships with other contractors when we act as their subcontractor or joint venture partner.
Our future revenue and growth prospects could be adversely affected if other contractors eliminate or reduce their
subcontracts or teaming arrangement relationships with us or if a government agency terminates or reduces these other
contractors’ programs, does not award them new contracts, or refuses to pay under a contract.
Changes in resource management or infrastructure industry laws, regulations, and programs could directly or indirectly
reduce the demand for our services which could in turn negatively impact our revenue.
Some of our services are directly or indirectly impacted by changes in U.S. federal, state, local, or foreign laws
and regulations pertaining to resource management, infrastructure, and the environment. Accordingly, a relaxation or
repeal of these laws and regulations, or changes in governmental policies regarding the funding, implementation, or
enforcement of these programs, could result in a decline in demand for our services, which could in turn negatively
impact our revenue.
Legal proceedings, investigations, and disputes, including those assumed in acquisitions of other businesses for
which we may not be indemnified, could result in substantial monetary penalties and damages, especially if such
penalties and damages exceed or are excluded from existing insurance coverage.
We engage in professional and technical consulting and certification services that can result in substantial injury
or damages that may expose us to legal proceedings, investigations, and disputes. For example, in the ordinary course of
our business, we may be involved in legal disputes regarding personal injury claims, employee or labor disputes,
professional liability claims, and general commercial disputes involving project cost overruns and liquidated damages as
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well as other claims. In addition, in the ordinary course of our business, we frequently make professional judgments and
recommendations about environmental and engineering conditions of project sites for our clients. We may be deemed to
be responsible for these judgments and recommendations if they are later determined to be inaccurate. Any unfavorable
legal ruling against us could result in substantial monetary damages or even criminal violations.
In this regard, the agreement pursuant to which we acquired NV5, Inc. (formerly known as Nolte Associates, Inc.)
did not include representations and warranties regarding the business being acquired or any indemnification provisions or
other assurances from the seller regarding NV5, Inc. In the event any unforeseen matters arise, whether regarding the
permits and authorizations required to run the NV5, Inc business, filing of tax returns and payment of associated taxes, or
the existence or extent of any contingent liabilities of the NV5, Inc business (including third-party claims to which NV5,
Inc may be subject in the future including regarding professional liability for work performed prior to our acquisition of
NV5, Inc), we would be materially adversely affected if we were required to pay damages or incur defense costs in
connection with a claim for which no such indemnity has been provided. In this regard, in 2011, the California Franchise
Tax Board (“CFTB”) initiated an examination of the state of California tax filings and raised questions about certain
research and development tax credits generated and included on the tax returns of an acquired company for the years 2005
to 2009. We have been responding to inquiries generated by the CFTB regarding their agreed upon sample of contracts.
During the fourth quarter of 2014, we received in writing some correspondence from the CFTB on this matter. There has
been no final determination from the CFTB as to their acceptance of the filed tax credit. An extension was executed in
March 2015, which extended the statute of limitations through September 2016 on the exam period. As a result of this
correspondence received in the fourth quarter of 2014 from the CFTB, we concluded it would be prudent to record a
reserve of $550 for the year ended December 31, 2014 which impacted the effective income tax rate.
We maintain insurance coverage as part of our overall legal and risk management strategy to minimize our potential
liabilities; however, insurance coverage contains exclusions and other limitations that may not cover our potential
liabilities. Generally, our insurance program covers workers’ compensation and employer’s liability, general liability,
automobile liability, professional errors and omissions liability, property, and contractor’s pollution liability (in addition to
other policies for specific projects). Our insurance program includes deductibles or self-insured retentions for each covered
claim. In addition, our insurance policies contain exclusions that insurance providers may use to deny or restrict coverage.
Specialty liability and professional liability insurance policies provide for coverages on a “claims-made” basis, covering
only claims actually made and reported during the policy period currently in effect. Our insurance programs provide
coverage for acts or omissions associated with the Nolte business prior to our acquisition. If we sustain liabilities that
exceed or that are excluded from our insurance coverage or for which we are not insured, it could have a material adverse
impact on our results of operations and financial condition, including our profits and revenue.
Unavailability or cancellation of third-party insurance coverage would increase our overall risk exposure as well as
disrupt the management of our business operations.
We maintain insurance coverage from third-party insurers as part of our overall risk management strategy and
some of our contracts require us to maintain specific insurance coverage limits. If any of our third-party insurers fail,
suddenly cancel our coverage, or otherwise are unable to provide us with adequate insurance coverage, then our overall
risk exposure and our operational expenses would increase and the management of our business operations would be
disrupted. In addition, there can be no assurance that any of our existing insurance coverage will be renewable upon the
expiration of the coverage period or that future coverage will be affordable at the required limits.
Our failure to implement and comply with our safety program could adversely affect our operating results or
financial condition.
Our safety program is a fundamental element of our overall approach to risk management, and the
implementation of the safety program is a significant issue in our dealings with our clients. We maintain an enterprise-
wide group of health and safety professionals to help ensure that the services we provide are delivered safely and in
accordance with standard work processes. Unsafe job sites and office environments have the potential to increase
employee turnover, increase the cost of a project to our clients, expose us to types and levels of risk that are
fundamentally unacceptable, and raise our operating costs. The implementation of our safety processes and procedures
are monitored by various agencies and rating bureaus, and may be evaluated by certain clients in cases in which safety
28
requirements have been established in our contracts. If we fail to meet these requirements or do not properly implement
and comply with our safety program, there could be a material adverse effect on our business, operating results, or
financial condition.
We may be subject to liabilities under environmental laws and regulations, including liabilities assumed in
acquisitions for which we may not be indemnified.
We must comply with a number of laws that strictly regulate the handling, removal, treatment, transportation and
disposal of toxic and hazardous substances. Under the Comprehensive Environmental Response Compensation and
Liability Act of 1980, as amended (“CERCLA”), and comparable state laws, we may be required to investigate and
remediate regulated hazardous materials. CERCLA and comparable state laws typically impose strict joint and several
liabilities without regard to whether a company knew of or caused the release of hazardous substances. The liability for
the entire cost of clean-up could be imposed upon any responsible party. Other principal federal environmental, health,
and safety laws affecting us include, among others, the Resource Conversation and Recovery Act, the National
Environmental Policy Act, the Clean Air Act, the Occupational Safety and Health Act, the Toxic Substances Control Act,
and the Superfund Amendments and Reauthorization Act. Our business operations may also be subject to similar state
and international laws relating to environmental protection. Liabilities related to environmental contamination or human
exposure to hazardous substances, or a failure to comply with applicable regulations, could result in substantial costs to
us, including clean-up costs, fines and civil or criminal sanctions, third-party claims for property damage or personal
injury, or cessation of remediation activities. Our continuing work in the areas governed by these laws and regulations
exposes us to the risk of substantial liability.
Weather conditions and seasonal revenue fluctuations could have an adverse impact on our results of operations.
Due primarily to inclement weather conditions, which lead to project delays and slower completion of contracts,
and a higher number of holidays, our operating results during December, January, and February are generally lower in
comparison to other months. As a result, our revenue and net income for the first and fourth quarters of a fiscal year may
be lower than our results for the second and third quarters of a fiscal year. If we were to experience lower-than-expected
revenue during any such periods, our expenses may not be offset, which could have an adverse impact on our results of
operations.
Catastrophic events may disrupt our business.
Force majeure or extraordinary events beyond the control of the contracting parties, such as natural and man-
made disasters as well as terrorist actions, could negatively impact the economies in which we operate by causing the
closure of offices, interrupting projects, and forcing the relocation of employees. We typically remain obligated to
perform our services after a terrorist action or natural disaster unless the contract contains a force majeure clause that
relieves us of our contractual obligations in such an extraordinary event. If we are not able to react quickly to force
majeure, our operations may be affected significantly, which would have a negative impact on our financial condition,
results of operations, or cash flows.
Further, we rely on our network and third-party infrastructure and enterprise applications, internal technology
systems, and our website for our development, marketing, operational, support, hosted services, and sales activities.
Despite our implementation of network security measures, we are vulnerable to disruption, infiltration, or failure of these
systems or third-party hosted services in the event of a major earthquake, fire, power loss, telecommunications failure,
cyber-attack, war, terrorist attack, or other catastrophic event could cause system interruptions, reputational harm, loss of
intellectual property, lengthy interruptions in our services, breaches of data security, and loss of critical data and could
harm our future operating results.
We are highly dependent on information and communications systems. System failures, security breaches or cyber-
attacks of networks or systems could significantly disrupt our business and operations and negatively affect the market
price of our common stock.
Our business is highly dependent on communications and information systems. These systems are primarily
operated by third-parties and, as a result, we have limited ability to ensure their continued operation. In the event of
systems failure or interruption, we will have limited ability to affect the timing and success of systems restoration. Any
29
failure or interruption of our systems could cause delays or other problems in the delivery of our services, which could have
a material adverse effect on our operating results and negatively affect the market price of our common stock.
We rely on information technology systems, networks and infrastructure in managing our day-to-day
operations. Despite cyber-security measures already in place, our information technology systems, networks and
infrastructure may be vulnerable to deliberate attacks or unintentional events that could interrupt or interfere with their
functionality or the confidentiality of our information. Our inability to effectively utilize our information technology
systems, networks and infrastructure, and protect our information could adversely affect our business.
We have only a limited ability to protect our intellectual property rights, and our failure to protect our intellectual
property rights could adversely affect our competitive position.
Our success depends, in part, upon our ability to protect our proprietary information and other intellectual
property. We rely principally on trade secrets to protect much of our intellectual property where we do not believe that
patent or copyright protection is appropriate or obtainable. However, trade secrets are difficult to protect. Although our
employees are subject to confidentiality obligations, this protection may be inadequate to deter or prevent
misappropriation of our confidential information. In addition, we may be unable to detect unauthorized use of our
intellectual property or otherwise take appropriate steps to enforce our rights. Failure to obtain or maintain trade secret
protection would adversely affect our competitive business position. In addition, if we are unable to prevent third parties
from infringing or misappropriating our trademarks or other proprietary information, our competitive position could be
adversely affected.
We rely on third-party internal and outsourced software to run our critical accounting, project management, and
financial information systems. As a result, any sudden loss, disruption, or unexpected costs to maintain these systems
could significantly increase our operational expense and disrupt the management of our business operations.
We rely on third-party software to run our critical accounting, project management, and financial information
systems. We also depend on our software vendors to provide long-term software maintenance support for our information
systems. Software vendors may decide to discontinue further development, integration, or long-term software
maintenance support for our information systems, in which case we may need to abandon one or more of our current
information systems and migrate some or all of our accounting, project management, and financial information to other
systems, thus increasing our operational expense as well as disrupting the management of our business operations.
Our Chairman and Chief Executive Officer owns a large percentage of our voting stock, which may allow him to
have a significant influence on all matters requiring stockholder approval.
Mr. Dickerson Wright, our Chairman and Chief Executive Officer, beneficially owned 2,179,127 shares, or
approximately 34.3% of our common stock on a fully diluted basis as of March 23, 2015. Accordingly, Mr. Wright has
the power to significantly influence the outcome of important corporate decisions or matters submitted to a vote of our
stockholders, including decisions regarding mergers, going private transactions, and other extraordinary transactions, and
to significantly influence the terms of any of these transactions. Although Mr. Wright owes us and our stockholders
certain fiduciary duties as a director and an executive officer, Mr. Wright could take actions to address his own interests,
which may be different from those of our other stockholders.
As an emerging growth company within the meaning of the Securities Act, we will utilize certain modified disclosure
requirements, and we cannot be certain whether these reduced requirements will make our securities less attractive to
investors.
We are an emerging growth company within the meaning of the rules under the Securities Act. We plan in
current and future filings with the SEC to utilize, the modified disclosure requirements available to emerging growth
companies, including reduced disclosure about our executive compensation and omission of compensation discussion and
analysis, and an exemption from the requirement of holding a nonbinding advisory vote on executive compensation. In
addition, we will not be subject to certain requirements of Section 404 of the Sarbanes-Oxley Act, including the
additional testing of our internal control over financial reporting as may occur when outside auditors attest as to our
internal control over financial reporting. For example, we will not have to provide an auditor’s attestation report on our
internal controls in this Annual Report on Form 10-K for the year ended December 31, 2014, or in future annual reports
30
on Form 10-K as otherwise required by Section 404(b) of the Sarbanes-Oxley Act. As a result, our stockholders may not
have access to certain information they may deem important.
We could remain an “emerging growth company” for up to five years, or until the earliest of (i) the last day of
the first fiscal year in which our annual gross revenue exceed $1 billion, (ii) the date that we become a “large accelerated
filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that
is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal
quarter, or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three-
year period.
We will incur increased costs as a result of being a public company, and the requirements of being a public company
may divert management’s attention from our business.
As a result of our initial public offering, we became a public company and our securities are listed on NASDAQ.
As such, we are required to comply with laws, regulations, and requirements that we did not need to comply with as a
private company, including certain provisions of the Sarbanes-Oxley Act and related SEC regulations, as well as the
requirements of NASDAQ. Compliance with the requirements of being a public company have required us to increase
our operating expenses in order to pay our employees, legal counsel, and accountants to assist us in, among other things,
external reporting, instituting and monitoring a more comprehensive compliance and board governance function,
establishing and maintaining internal control over financial reporting in accordance with Section 404 of the Sarbanes-
Oxley Act, and preparing and distributing periodic public reports in compliance with our obligations under the federal
securities laws. In addition, in connection with Section 404(a) of the Sarbanes-Oxley Act, management was required to
deliver a report that assessed the effectiveness of our internal control over financial reporting beginning with the Annual
Report on Form 10-K for the year ended December 31, 2013. However, in connection with Section 404(b) of the
Sarbanes-Oxley Act, our auditors are not required to attest to our internal controls over financial reporting until we no
longer qualify as an emerging growth company under the JOBS Act or as a smaller reporting company, as defined in
Exchange Act Rule 12b-2. In order to maintain and improve the effectiveness of our disclosure controls and procedures
and internal control over financial reporting, significant resources and management oversight will be required. As a
result, our management’s attention might be diverted from other business concerns, which could have a material adverse
effect on our business, prospects, financial condition, and results of operations. Furthermore, we might not be able to
retain our independent directors or attract new independent directors for our committees.
Provisions in our charter documents and the Delaware General Corporation Law could make it more difficult
for a third party to acquire us and could discourage a takeover and adversely affect existing stockholders.
Anti-takeover provisions in our certificate of incorporation and bylaws, and in the Delaware General
Corporation Law, could diminish the opportunity for stockholders to participate in acquisition proposals at a price above
the then-current market price of our common stock. For example, while we have no present plans to issue any preferred
stock, our board of directors, without further stockholder approval, will be able to issue Shares of undesignated preferred
stock and fix the designation, powers, preferences, and rights and any qualifications, limitations, and restrictions of such
class or series, which could adversely affect the voting power of your Shares. In addition, our bylaws will provide for an
advance notice procedure for nomination of candidates to our board of directors that could have the effect of delaying,
deterring, or preventing a change in control. Further, as a Delaware corporation, we are subject to provisions of the
Delaware General Corporation Law regarding “business combinations,” which can deter attempted takeovers in certain
situations. We may, in the future, consider adopting additional anti-takeover measures. The authority of our board of
directors to issue undesignated preferred or other capital stock and the anti-takeover provisions of the Delaware General
Corporation Law, as well as other current and any future anti-takeover measures adopted by us, may, in certain
circumstances, delay, deter, or prevent takeover attempts and other changes in control of our company not approved by
our board of directors.
We currently do not pay dividends and do not intend to pay dividends on our shares of Common Stock in the
foreseeable future and, consequently, your only current opportunity to achieve a return on your investment is if the
price of our shares appreciates.
We currently do not pay dividends and do not expect to pay dividends on our shares of common stock in the
foreseeable future and intend to use cash to grow our business. The payment of cash dividends in the future, if any, will
31
be at the discretion of our board of directors and will depend upon such factors as the extent to which our financing
arrangements permit the payment of dividends, earnings levels, capital requirements, our overall financial condition, and
any other factors deemed relevant by our board of directors. Consequently, your only current opportunity to achieve a
return on your investment in us will be if the market price of our common stock appreciates.
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ITEM 1B. UNRESOLVED STAFF COMMENTS.
Not applicable.
ITEM 2. PROPERTIES.
Our principal executive offices are located in approximately 11,700 square feet of office space that we lease at
200 South Park Road, Suite 350, Hollywood, Florida. In addition, we lease office space in 29 other locations in
California, Colorado, Florida, Pennsylvania, New Jersey, Ohio, Massachusetts, Utah and Wyoming. In total, our facilities
contain approximately 161,000 square feet of office space and are subject to leases that expire through 2021. We do not
own any real property. Our lease terms vary from month-to-month to multi-year commitments. We do not consider any of
these leased properties to be materially important to us. While we believe it is necessary to maintain offices through
which our services are coordinated, we feel there are an ample number of available office rental properties that could
adequately serve our needs should we need to relocate or expand our operations.
ITEM 3. LEGAL PROCEEDINGS.
From time to time, we are subject to various legal proceedings that arise in the normal course of our business
activities. As of the date of this Annual Report on Form 10-K, we are not a party to any litigation the outcome of which, if
determined adversely to us, would individually or in the aggregate be reasonably expected to have a material adverse effect
on our results of operations or financial position.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
33
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
On March 26, 2013, we priced our initial public offering of 1,400,000 units. Each unit was sold at an offering
price of $6.00 per unit and consisted of one share of the Company’s common stock and one warrant to purchase one share
of our common stock at an exercise price of $7.80 per share. The units began trading on NASDAQ on March 27, 2013 and
traded solely as units through September 26, 2013. On September 27, 2013 (the “Separation Date”), the common stock and
warrants underlying our units automatically separated from the units and began trading separately on NASDAQ under the
symbols “NVEE” and “NVEEW”, respectively. Each warrant entitled the holder to purchase from us one share of our
common stock at an exercise price of $7.80 beginning on the Separation Date, provided that there was an effective
registration statement in effect covering the shares of common stock underlying the warrants.
On January 5, 2015, in accordance with the amended and restated warrant agreement, we notified the holders of
our outstanding public warrants that we have called our warrants for redemption. Each public warrant entitled the holder to
purchase one share of common stock at an exercise price of $7.80 per share. The public warrant holders had until February
4, 2015 to exercise their public warrants at $7.80 per share. The redemption resulted in 408,412, or approximately 99%, of
the outstanding public warrants being exercised prior to the expiration time and generated cash proceeds to the Company of
approximately $3.2 million. The remaining 4,002 public warrants that were not exercised by the expiration time were
cancelled and redeemed for the sum of $0.01 per public warrant. In connection with the redemption of all outstanding
public warrants, the trading of the Company’s warrants was suspended and the warrants were delisted from the NASDAQ.
The following table sets forth, for the calendar quarter indicated, the high and low sales prices per unit as reported
on the NASDAQ for the period from March 27, 2013 (the first day on which our units began trading) through September
26, 2013 (the day on which our units ceased trading), and our common stock and warrants for the period from September
27, 2013 (the first day on which our common stock and warrants began trading) through December 31, 2014.
Fiscal 2014:
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Fiscal 2013:
First Quarter (1)
Second Quarter
Third Quarter (2)
Fourth Quarter
High
N/A
N/A
N/A
N/A
High
$6.42
$8.49
$9.60
N/A
Units
Common Stock
Warrants
Low
N/A
N/A
N/A
N/A
High
$9.92
$10.43
$10.08
$14.70
Low
$7.52
$9.00
$9.00
$8.80
High
$3.47
$3.37
$3.40
$7.40
Low
$2.07
$2.69
$2.74
$2.70
Units
Common Stock
Warrants
Low
$6.09
$5.90
$7.90
N/A
High
N/A
N/A
$7.70
$9.03
Low
N/A
N/A
$7.70
$7.00
High
N/A
N/A
$2.25
$3.75
Low
N/A
N/A
$2.25
$1.00
“N/A” means not applicable.
(1) Beginning on March 27, 2013 with respect to the Company’s units.
(2) Ending on September 26, 2013 with respect to the Company’s units and beginning on September 27, 2013 with respect to
the Company’s common stock and warrants.
34
Holders
As of March 23, 2015, there were 168 holders of record of our common stock. These numbers do not include
beneficial owners whose shares are held in “street name.”
Dividends
We have not paid cash dividends on our common stock and do not expect to do so in the foreseeable future, as we
intend to retain all earnings to provide funds for the operation and expansion of our business.
Recent Sales of Unregistered Securities
As disclosed elsewhere in this Annual Report on Form 10-K, during fiscal year 2014, we issued the following
securities that were not registered under the Securities Act:
In November 2014, we issued 21,978 shares of our common stock as partial consideration for our November 2014
acquisition of Zollinger Buric, Inc., an Ohio Corporation and Buric Global LLC, an Ohio Limited Liability Company. We
issued these shares in reliance upon Section 4(a)(2) of the Securities Act as a transaction by an issuer not involving a public
offering.
Issuer Purchase of Equity Securities
None.
ITEM 6. SELECTED FINANCIAL DATA.
Not applicable.
35
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
The following discussion of our financial condition and results of operations should be read together with the
consolidated financial statements and the accompanying notes included elsewhere in this Annual Report on Form 10-K.
This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ
materially from those anticipated in those forward-looking statements as a result of certain factors, including, those
described under “Item 1A. Risk Factors.” Amounts presented in thousands, except per share data.
Overview
We are a provider of professional and technical engineering and consulting solutions to public and private sector
clients. We focus on the infrastructure, energy, construction, real estate, and environmental markets. We primarily focus on
five business verticals - construction quality assurance, infrastructure, energy, program management, and environmental
solutions. Our primary clients include U.S. federal, state, municipal, and local governments; military and defense clients;
and public agencies. We also serve quasi-public and private sector clients from the education, healthcare, energy, and
utilities fields, including schools, universities, hospitals, health care providers, insurance providers, large utility service
providers, and large and small energy producers.
NV5 Global, Inc. (formerly known as NV5, Inc.)(“NV5 Global”) was incorporated as a Delaware corporation in
2009. NV5, Inc. (formerly known as Nolte Associates, Inc.) (“NV5”), which began operations in 1949, was incorporated
as a California corporation in 1957, and was acquired by NV5 Global in 2010. In March 2010, NV5 Global acquired the
construction quality assurance operations of Bureau Veritas North America, Inc. In October 2011, NV5 Global and NV5
completed a reorganization transaction in which NV5 Holdings, Inc. was incorporated as a Delaware corporation, acquired
all of the outstanding shares of NV5 Global and NV5, and, as a result, became the holding company under which NV5,
NV5 Global and the Company's other subsidiaries conduct business. NV5, LLC, (formerly known as AK Environmental,
LLC) (“NV5, LLC”).
Recent Acquisitions
The aggregate value of all consideration for our acquisitions consummated during the years ended December 31, 2014
and 2013 was approximately $10,100 and approximately $3,300, respectively, before any fair value adjustments.
On January 31, 2014, we acquired certain assets of Air Quality Consulting Inc. (“AQC”) located in Tampa, Florida,
which specializes in occupational health, safety and environmental consulting. The purchase price of up to $815 consisted
of $250 in cash, a $300 non-interest bearing promissory note and $150 of our common stock (18,739 shares) as of the
closing date. The purchase price also included a non-interest bearing earn-out of $115 payable in cash, subject to the
achievement of a certain agreed upon metric for calendar year 2014, and is payable on April 1, 2015. The earn-out payment
was recorded at estimated fair value based on a probability-weighted approach valuation technique used to determine the
fair value of the contingent consideration on the acquisition date. AQC did not meet the agreed upon metric and as of
December 31, 2014, the estimated fair value of this contingent consideration was $0. The purchase price included a $300
uncollateralized non-interest bearing promissory note, with an imputed interest rate of 3.75%. The note is payable in two
equal payments of $150 due on the first and second anniversaries of January 31, 2014, the effective date of the acquisition.
The carrying value of this note was approximately $294 as of December 31, 2014.
On March 21, 2014, we acquired all of the outstanding equity interests of NV5, LLC, a North Carolina limited
liability company (formerly known as AK Environmental, LLC), a natural gas pipeline inspection, construction
management and environmental consulting firm, primarily servicing the Northeast, Mid-Atlantic and Southeast United
States. The purchase price of $7,000 included $3,500 in cash, a $3,000 promissory note (bearing interest at 3.0%), payable
in three installments of $1,000 due on the first, second and third anniversaries of March 21, 2014, the effective date of the
acquisition, and $500 of our common stock (64,137 shares) as of the closing date of the acquisition.
On June 30, 2014, we acquired certain assets of Owner’s Representative Services, Inc. (“ORSI”), a program
management firm specializing in healthcare facilities development and construction projects. The purchase price of up to
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$1,300 consisted of $400 in cash, a $450 non-interest bearing promissory note, and $150 of our common stock (14,918
shares) as of the closing date, which were issued in July 2014. The purchase price also included a non-interest bearing
earn-out of $300 payable in cash and the Company’s common stock, subject to the achievement of a certain agreed upon
metric for calendar year 2014, and is payable on March 31, 2015. The earn-out payment was recorded at its estimated fair
value based on a probability-weighted approach valuation technique used to determine the fair value of the contingent
consideration on the acquisition date. During 2014, the agreed upon metric was met and the earn-out was achieved. As of
December 31, 2014, the estimated fair value of this contingent consideration is approximately $285. The purchase price
also included a $450 uncollateralized non-interest bearing promissory note, with an imputed interest rate of 3.75%. This
note is payable in two equal payments of $225 due on the first and second anniversaries of June 30, 2014, the effective
date of the acquisition. The carrying value of this note was approximately $434 as of December 31, 2014.
On November 3, 2014, we acquired certain assets of Zollinger Buric, Inc. an Ohio corporation and Buric Global
LLC., an Ohio limited liability company (collectively the “Buric Companies”) The Buric Companies are based in
Cleveland, Ohio. The Buric Companies provide program management and construction claims consulting services, as well
as building information modeling, critical path scheduling, surety consulting, and litigation support. The purchase price of
up to $1,000, included a $300 uncollateralized 3% interest bearing promissory 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.
On August 12, 2013, we acquired certain assets and assumed certain liabilities of Dunn Environmental, Inc
(“Dunn”). The purchase price consisted of an uncollateralized promissory note in the aggregate principal amount of
approximately $92, bearing interest at 4.0%, payable in two equal payments of approximately $46 each due on the first and
second anniversaries of August 12, 2013, the effective date of the acquisition. The outstanding balance of this note was $46
and $92 as of December 31, 2014 and December 31, 2013, respectively.
On July 8, 2013, we acquired certain assets and assumed certain liabilities of the Tampa, Florida division of Pitman-
Hartenstein & Associates (“PHA”). The purchase price included an uncollateralized promissory note in the aggregate
principal amount of $168, bearing interest at 4.0%, payable in two equal payments of $84 each due on December 31, 2013
and December 31, 2014. The outstanding balance of this note was $0 and $84 as of December 31, 2014 and December 31,
2013, respectively.
On April 30, 2013, we acquired certain assets and assumed certain liabilities of Consilium Partners (“Consilium”).
The purchase price included an uncollateralized promissory note in the aggregate principal amount of $200, bearing interest
at 4.0%, payable in three equal payments of approximately $67 each, and due on the first, second and third anniversaries of
April 30, 2013, the effective date of the acquisition,. The outstanding balance of this note was $133 and $200, as of
December 31, 2014 and December 31, 2013, respectively.
On July 27, 2012, we acquired certain assets and assumed certain liabilities of Kaderabek Company (“Kaco”). The
purchase price included a note in the aggregate principal amount of $2,000 (the “Kaco Note”), bearing interest at 3.0% for
the first year and 200 basis points over the one-year LIBOR for the years thereafter, which is payable as follows: $500 due
by (and paid on) December 28, 2012 and three equal payments of $500 each due on the first, second and third anniversaries
of July 27, 2012, the effective date of the acquisition. As of December 31, 2014 and December 31, 2013, the actual interest
rate was 2.58%. The outstanding balance of the Kaco Note was $500 and $1,000 as of December 31, 2014 and December
31, 2013, respectively.
Key Trends, Developments and Challenges
Initial public offering. On March 26, 2013, the Company priced its initial public offering of 1,400,000 units. Each
unit was sold at an offering price of $6.00 per unit and consisted of one share of the Company’s common stock and one
warrant to purchase one share of the Company’s common stock at an exercise price of $7.80 per share. The units began
trading on the NASDAQ Capital Markets (“NASDAQ”) on March 27, 2013 and traded solely as units through
September 26, 2013. The units sold in our initial public offering were registered under the Securities Act on a registration
statement on Form S-1 (No. 333-186229), which was declared effective by the SEC on March 26, 2013. On March 28,
2013, the underwriter of the offering exercised its option to purchase up to an additional 210,000 units, solely to cover
over-allotments. The closing of the offering occurred, and was recorded, on April 2, 2013, upon which we received net
proceeds of approximately $8,100 after deducting fees associated with the initial public offering and issued 1,610,000 units.
37
In addition, upon closing, the underwriter received a warrant to acquire up to 140,000 units at an exercise price of $7.20 per
unit. The underwriter can exercise these warrants until March 26, 2016, at which time the exercise option expires. Each of
these units consist of one share of the Company’s common stock and one warrant to purchase one share of the Company’s
common stock at an exercise price of $7.80 per share.
Separation of the Company’s units and warrant exercises. On September 27, 2013, the common stock and warrants
comprising the Company’s units began trading separately on NASDAQ under the symbols “NVEE” and “NVEEW”,
respectively. In connection with the separate trading of the common stock and warrants, the Company’s units ceased
trading under the symbol “NVEEU” on the close of the markets on September 26, 2013 and the units were delisted from
NASDAQ.
On September 27, 2013, the warrants became exercisable at an exercise price of $7.80 per share. The warrant
exercise period expires on March 27, 2018 or earlier upon our redemption.
On September 27, 2013 and continuing until October 11, 2013 (the “Temporary Reduction Expiration Time”), we
temporarily reduced the exercise price of all of our outstanding public warrants from $7.80 per share to $6.00 per share. All
such warrants properly exercised in accordance with their respective terms prior to the Temporary Reduction Expiration
Time were accepted by the Company at the reduced $6.00 per share exercise price and one share of the Company’s
registered common stock per warrant was issued to the exercising warrant holder. After the Temporary Reduction
Expiration Time, the exercise price of the public warrants automatically reverted to the warrant exercise price of $7.80 per
share included in the original terms of the public warrants and the reduced exercise price was no longer in effect. Except for
the reduced $6.00 per share exercise price of the warrants during the Temporary Reduction Expiration Time, the terms of
the public warrants remain unchanged. During the Temporary Reduction Expiration Time, 1,196,471 public warrants, or
approximately 74% of the outstanding public warrants were exercised at the reduced exercise price of $6.00 per share. The
temporary reduction in the warrant exercise price generated net cash proceeds to the Company of approximately $6,600
after fees associated with the temporary reduction in the warrant exercise price and offering expenses.
On January 5, 2015, in accordance with the amended and restated warrant agreement, we notified the holders of
our outstanding public warrants that we had called our warrants for redemption. Each public warrant entitled the holder to
purchase one share of the Company’s common stock at an exercise price of $7.80 per share. The public warrant holders had
until February 4, 2015 to exercise their public warrants at $7.80 per share. The redemption resulted in 408,412, or
approximately 99%, of our outstanding public warrants being exercised prior to the expiration time and generated cash
proceeds of approximately $3,200. The remaining 4,002 public warrants that were not exercised by the expiration time
were cancelled and redeemed by us for the sum of $0.01 per public warrant. In connection with the redemption of all
outstanding public warrants, the trading of our public warrants was suspended, and the warrants were delisted from the
NASDAQ.
Shift in service mix. We group our capabilities into five core vertical service offerings. Historically, we have
concentrated on the verticals of (i) infrastructure, engineering and support services and (ii) construction quality assurance.
We believe, however, that further development of three additional service offerings of (i) program management, (ii) energy
services, and (iii) environmental services will become increasingly important to our business as we continue to grow
organically and through strategic acquisitions. Gross revenues derived from these three types of services offerings are
mostly generated under cost-reimbursable contacts. The methods of billing for these three services are expected to include
both time and materials or cost-plus basis.
Tax credit dispute. In 2011, the California Franchise Tax Board (“CFTB”) initiated an examination of the state of
California tax filings and raised questions about certain research and development tax credits generated and included on the
tax returns of an acquired company for the years 2005 to 2009. We have been responding to inquiries generated by the
CFTB regarding their agreed upon sample of contracts. During the fourth quarter of 2014, we received in writing some
correspondence from the CFTB on this matter. As a result of this correspondence received in the fourth quarter from the
CFTB, we concluded it would be prudent to record a reserve of $550 for the year ended December 31, 2014, which
impacted the effective income tax rate. There has been no final determination from the CFTB as to their acceptance of the
filed tax credit. An extension was executed in March 2015, which extended the statute of limitations through September
2016 on the exam period.
38
Components of Income and Expense
Revenues
We 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 consist of two similar contract types: time and materials
contracts and cost-plus contracts.
• 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. Under some cost-plus contracts, our fee may be based on quality,
schedule, and other performance factors.
For the years ended December 31, 2014 and 2013, cost-reimbursable contracts represented approximately 90% of our
total revenues.
Fixed-price contracts. Fixed-price contracts also consist of two contract types: lump-sum contracts and fixed-unit
price contracts.
• 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.
• Fixed-unit price 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.
For the years ended December 31, 2014 and 2013, fixed-price contracts represented approximately 10% 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 and revenues from fixed-price contracts are
recognized on the percentage-of-completion method, generally measured by the direct costs incurred to date as compared to
the estimated total direct costs for each contract. See “– Critical Accounting Policies and Estimates – Revenue
Recognition.”
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, subconsultant
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
39
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 Expenses
Operating 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.
Factors Affecting Comparability
We have set forth below selected factors that we believe have had, or can be expected to have, a significant effect on
the comparability of recent or future results of operations:
Recent Acquisitions
On November 3, 2014, we acquired certain assets and assumed certain liabilities of the Buric Companies. As a result
of this acquisition, we commenced recognizing the Buric Companies’ results of operations during the fourth quarter of
2014, primarily affecting the comparability of fiscal year 2014 to fiscal year 2013.
On June 30, 2014, we acquired certain assets and assumed certain liabilities of ORSI. As a result of this acquisition,
we commenced recognizing ORSI’s results of operations during the third quarter of 2014, primarily affecting the
comparability of fiscal year 2014 to fiscal year 2013.
On January 31, 2014 and March 21, 2014, we acquired certain assets and assumed certain liabilities of AQC and
AK, respectively. As a result of these acquisitions, we commenced recognizing the acquired companies’ results of
operations during the first quarter of 2014, primarily affecting the comparability of fiscal year 2014 to fiscal year 2013.
On August 12, 2013, the Company acquired certain assets and assumed certain liabilities of Dunn. Dunn specializes
in environmental and hydrogeology sciences in Northern California. As a result of this acquisition in 2013, we commenced
recognizing revenues and amortizing intangible assets during the third quarter of 2013, primarily affecting the
comparability of fiscal year 2014 to fiscal year 2013.
On July 8, 2013, we acquired certain assets and assumed certain liabilities of the Tampa, Florida division of Pitman-
Hartenstein & Associate, which specializes in transportation infrastructure engineering. As a result of this acquisition in
2013, we commenced recognizing revenues and amortizing intangible assets during the third quarter of 2013, primarily
affecting the comparability of fiscal year 2014 to fiscal year 2013.
On April 30, 2013, we acquired certain assets and assumed certain liabilities of Consilium, a 20-person owner’s
representation and program management firm that serves both public and private clients, such as municipalities, major
hospitality firms and institutional real estate owners. As a result of this acquisition in 2013, we commenced recognizing
revenues and amortizing intangible assets during the second quarter of 2013, primarily affecting the comparability of fiscal
year 2014 to fiscal year 2013.
Public Company Expenses
As a result of our initial public offering, we became a public company and our securities are listed on NASDAQ. As
such, we are required to comply with laws, regulations, and requirements that we did not need to comply with as a private
company, including certain provisions of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) and related
Securities and Exchange Commission (the “SEC”) regulations, as well as the requirements of NASDAQ. Compliance with
the requirements of being a public company have required us to increase our operating expenses in order to pay our
employees, legal counsel, and accountants to assist us in, among other things, external reporting, instituting and monitoring
a more comprehensive compliance and board governance function, establishing and maintaining internal control over
financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act, and preparing and distributing periodic
40
public reports in compliance with our obligations under the federal securities laws. In addition, being a public company has
made it more expensive for us to obtain director and officer liability insurance.
Stock-Based Compensation
In October 2011, the Company’s stockholders approved the 2011 Equity Incentive Plan, which was subsequently
amended and restated in March 2013 (as amended, the “2011 Equity Plan”). The 2011 Equity Plan provides directors,
executive officers, and other employees of the Company with additional incentives by allowing them to acquire ownership
interest in the business and, as a result, encouraging them to contribute to the Company’s success. We may provide these
incentives through the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, performance
shares and units, and other cash-based or stock-based awards. As of December 31, 2014, 537,910 shares of common stock
are authorized and reserved for issuance under the 2011 Equity Plan. This reserve automatically increases on each
January 1 from 2014 through 2023, by an amount equal to the smaller of (i) 3.5% of the number of shares issued and
outstanding on the immediately preceding December 31, or (ii) an amount determined by the Company’s Board of
Directors.
During the year ended December 31, 2014, we granted from the 2011 Equity Plan 116,794 restricted shares and units
of common stock, to management, employees, and non-employee directors with an aggregate deferred compensation
amount of approximately $1,100. The fair value of these shares and units is based on the quoted market values of our
common stock as of the grant dates, which is a weighted-average of $9.17, per share. The restricted shares of common
stock granted generally provide for service-based vesting after three years following the grant date.
During the year ended December 31, 2013, we granted from the 2011 Equity Plan 104,914 restricted shares and units
of common stock, to management, employees, and non-employee directors with an aggregate deferred compensation
amount of approximately $827. The fair value of these shares and units is based on the quoted market values of our
common stock as of the grant dates, which is a weighted-average of $7.88, per share. The restricted shares of common
stock granted generally provide for service-based vesting after three years following the grant date.
Share-based compensation expense relating to restricted stock awards during the years ended December 31, 2014 and
2013 was $752 and $365, respectively. As of December 31, 2014 and 2013, no shares or units have vested since the 2011
Equity Plan inception, and approximately $1,265 of deferred compensation, which is expected to be recognized over the
remaining weighted average vesting period of 1.5 years is unrecognized at December 31, 2014.
Jumpstart Our Business Startups Act of 2012
We are an emerging growth company within the meaning of the rules under the Securities Act, and we will utilize
certain exemptions from various reporting requirements that are applicable to public companies that are not emerging
growth companies. For example, we will not have to provide an auditor’s attestation report on our internal controls in this
Annual Report of Form 10-K for the year ended December 31, 2014 and in future annual reports on Form 10-K as
otherwise required by Section 404(b) of the Sarbanes-Oxley Act. The JOBS Act also permits us, as an “emerging growth
company,” to take advantage of an extended transition period to comply with new or revised accounting standards
applicable to public companies. We are choosing 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.
Critical Accounting Policies and Estimates
The discussion of our financial condition and results of operations is based upon our financial statements, which have
been prepared in accordance with Generally Accepted Accounting Principles in the U.S. ("GAAP"). During the preparation
of these financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues, costs and expenses, and related disclosures. On an ongoing basis, we evaluate our estimates and
assumptions, including those discussed below. We base our estimates on historical experience and on various other
assumptions that we believe are reasonable under the circumstances. The results of our analysis form the basis for making
assumptions about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates under different assumptions or conditions, and the impact of such differences may
be material to our financial statements. Our estimates and assumptions are evaluated periodically and adjusted when
41
necessary. The more significant estimates affecting amounts reported in our consolidated financial statements relate to the
revenue recognition on the percentage-of-completion method, reserves for professional liability claims, allowances for
doubtful accounts, valuation of our intangible assets, contingent consideration and income taxes.
We believe that the following critical accounting policies involve our more significant judgments and estimates used
in the preparation of our financial statements. For further information on all of our significant policies, see Note 2 to our
consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Revenue Recognition
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 and revenues from fixed-price contracts are
recognized on the percentage-of-completion method, generally measured by the direct costs incurred to date as compared to
the estimated total direct costs for each contract. We include other direct costs (for example, third-party field labor,
subcontractors, or the procurement of materials or equipment) in revenues and cost of revenue when the costs of these
items are incurred and we are responsible for the ultimate acceptability of such costs. Recognition of revenue under this
method is dependent upon the accuracy of a variety of estimates, including engineering progress, materials quantities,
achievement of milestones, labor productivity, and cost estimates. Due to uncertainties inherent in the estimation process, it
is possible that actual completion costs may vary from estimates.
If estimated total costs on contracts indicate a loss or reduction to the percentage of revenue recognized to date, these
losses or reductions are recognized in the period in which the revisions are determined. The cumulative effect of revisions
to revenues, estimated costs to complete contracts, including penalties, incentive awards, change orders, claims, anticipated
losses and others are recorded in the period in which the revisions are identified and the loss can be reasonably estimated.
Such revisions could occur in any reporting period and the effects on the results of operation for that reporting period may
be material depending on the size of the project or the adjustment.
Change orders and claims typically result from changes in scope, specifications, design, performance, materials, sites,
or period of completion. Costs related to change orders and claims are recognized when incurred. Change orders are
included in total estimated revenue when it is probable that the change order will result in an addition to the contract value
and can be reliably estimated.
Federal Acquisition Regulations (“FAR”), which are applicable to our federal government contracts and may be
incorporated in local and state agency contracts, limit the recovery of certain specified indirect costs on contracts. Cost-plus
contracts covered by FAR or certain state and local agencies also may require an audit of actual costs and provide for
upward or downward adjustments if actual recoverable costs differ from billed recoverable costs.
Unbilled work results when the appropriate revenue has been recognized when services are performed or based on
the percentage-of-completion accounting method but the revenue recorded has not been billed due to the billing terms
defined in the contract. Unbilled amounts as of the reporting date are included within accounts receivable in the
accompanying consolidated balance sheets. In certain circumstances, the contract may allow for billing terms that result in
the cumulative amounts billed being in excess of revenues recognized. The liability “Billings in excess of costs and
estimated earnings on uncompleted contracts” represents billings in excess of revenues recognized on these contracts as of
the reporting date.
Professional Liability Expense
We maintain insurance for business risks, including professional liability. For professional liability risks, our
retention amount under our claims-made insurance policies includes an accrual for claims incurred but not reported for any
potential liability, including any legal expenses, to be incurred for such claims if they occur. Our accruals are based upon
historical expense and management’s judgment. We maintain insurance coverage for various aspects of our business and
operations; however, we have elected to retain a portion of losses that may occur through the use of deductibles, limits and
retentions under our insurance programs. Our insurance coverage may subject us to some future liability for which we are
only partially insured or completely uninsured. Management believes its estimated accrual for errors, omissions, and
professional liability claims is sufficient and any additional liability over amounts accrued is not expected to have a
material adverse effect on our results of operations or financial position.
42
Allowance for Doubtful Accounts
We record billed and unbilled receivables net of an allowance for doubtful accounts. The allowance is estimated
based on management’s evaluation of the contracts involved and the financial condition of clients. Factors considered
include, among other things, client type (federal government or private client), historical performance, historical collection
trends, and general economic conditions. The allowance is increased by our provision for doubtful accounts, which is
charged against income. All recoveries on receivables previously charged off are credited to the accounts receivable
recovery account are included in income, while direct charge-offs of receivables are deducted from the allowance.
Although we believe the allowance for doubtful accounts is sufficient, a decline in economic conditions could lead to the
deterioration in the financial condition of our customers, resulting in an impairment of their ability to make payments, and
additional allowances may be required that could materially impact our consolidated results of operations. Trade receivable
balances carried by us are comprised of accounts from a diverse client base across a broad range of industries; however,
there are concentrations of revenues and accounts receivable from California-based projects, government and government-
related contracts, and one customer within the government sector.
Goodwill and Related Intangible Assets
Goodwill is the excess of consideration paid for an acquired entity over the amounts assigned to assets acquired,
including other identifiable intangible assets, and liabilities assumed in a business combination. To determine the amount of
goodwill resulting from a business combination, the Company performs an assessment to determine the fair value of the
acquired company’s tangible and identifiable intangible assets and liabilities.
Goodwill is required to be evaluated for impairment on an annual basis or whenever events or changes in
circumstances indicate the asset may be impaired. An entity has the option to first assess qualitative factors to determine
whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of
a reporting unit is less than its carrying amount. These qualitative factors include: macroeconomic and industry conditions,
cost factors, overall financial performance and other relevant entity-specific events. If the entity determines that this
threshold is met, then performing the two-step quantitative impairment test is unnecessary. The two-step impairment test
requires a comparison of the carrying value of the assets and liabilities associated with a reporting unit, including goodwill,
with the fair value of the reporting unit. The Company determines fair value through multiple valuation techniques, and
weights the results accordingly. We are required to make certain subjective and complex judgments in assessing whether an
event of impairment of goodwill has occurred, including assumptions and estimates used to determine the fair value of our
reporting units. If the carrying value of the 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. We have elected to perform our annual goodwill
impairment review on August 1 of each year. On August 1, 2014 and 2013, we conducted our annual impairment tests on
the goodwill using the quantitative method of evaluating goodwill. Based on these quantitative analyses we determined the
fair value of each of our reporting units exceeded the carrying value of the reporting unit. Therefore, the goodwill was not
impaired and the Company did not recognize an impairment charge relating to goodwill as of August 1, 2014 and 2013.
There were no indicators, events or changes in circumstances to indicate that goodwill was impaired during the years ended
December 31, 2014 and 2013.
Identifiable intangible assets primarily include customer backlog, customer relationships, tradenames and non-
compete agreements. Amortizable intangible assets are amortized 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 is measured as the difference between fair
value and carrying value, with fair value typically based on a discounted cash flow model. The Company did not recognize
an impairment charge relating to amortizable intangible assets during the years ended December 31, 2014 and 2013.
An adjustment to the carrying value of goodwill and/or identifiable intangible assets could materially impact the
consolidated results of operations.
43
Contingent Consideration
The fair values of earn-out arrangements are included as part of the purchase price of the acquired companies on
their respective acquisition dates. We estimated the fair value of contingent earn-out payments as part of the initial
purchase price of Consilium and record the estimated fair value of contingent consideration as a liability on the
consolidated balance sheet as of the acquisition date. We consider several factors when determining that contingent earn-
out liabilities are part of the purchase price, including the following: (i) the valuation of our 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 acquired companies that remain as key
employees receive compensation other than contingent earn-out payments at a reasonable level compared with the
compensation of our other key employees. The contingent earn-out payments are not affected by employment termination.
We measure our earn-out (contingent consideration) liabilities recognized in connection with business
combinations at fair value on a recurring basis using significant unobservable inputs classified within Level 3 of the fair
value hierarchy. We use a probability-weighted approach as a valuation technique to determine the fair value of the
contingent consideration on the acquisition date and at each reporting period until the contingency is ultimately resolved.
The significant unobservable inputs used in the fair value measurements are projections over the earn-out period (generally
one year), and the probability outcome percentages we assign 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 earn-out obligation. Ultimately, the liability will be equivalent to the amount paid,
and the difference between the fair value estimate and amount paid will be recorded in earnings. The amount paid that is
less than or equal to the contingent earn-out liability on the acquisition date is reflected as cash used in financing activities
in our consolidated statements of cash flows. Any amount paid in excess of the contingent earn-out liability on the
acquisition date is reported in operating income.
We review and re-assess the estimated fair value of contingent consideration on a quarterly basis, and the updated
fair value could differ materially from the initial estimates. Adjustments to the estimated fair value related to changes in all
other unobservable inputs are reported in operating income.
Income Taxes
We account for income taxes in accordance with ASC Topic No. 740 “Income Taxes” (“Topic No. 740”). Deferred
income taxes reflect the impact of temporary differences between amounts of assets and liabilities for financial reporting
purposes and such amounts as measured by tax laws. A valuation allowance against our deferred tax assets is recorded
when it is more likely than not that some portion or all of the deferred tax assets will not be realized. In determining the
need for a valuation allowance, management is required to make assumptions and to apply judgment, including forecasting
future earnings, taxable income, and the mix of earnings in the jurisdictions in which we operate. Management periodically
assesses the need for a valuation allowance based on our current and anticipated results of operations. The need for and the
amount of a valuation allowance can change in the near term if operating results and projections change significantly.
The Company recognizes the consolidated financial statement benefit of a tax position only after determining that
the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the
more likely-than-not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has
a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. In evaluating
the amount, if any, of the consolidated financial statement benefit of a tax position, management is also required to make
assumptions and to apply judgment. The Company applies the uncertain tax position guidance to all tax positions for which
the statute of limitations remains open. Fiscal years 2005 through 2014 are considered open tax years in the State of
California and 2011 through 2014 in the U.S. federal jurisdiction and other state jurisdictions. Our policy is to classify
interest accrued as interest expense and penalties as operating expenses.
Results of Operations
The following table represents our condensed results of operations for the periods indicated (in thousands of dollars
and as of a percentage of gross revenues):
44
Years Ended December 31,
2014
2013
Gross revenues
$
108,382
100.0 % $
68,232
100.0 %
Direct costs
Gross profit
63,201
58.3 %
33,416
49.0 %
45,181
41.7 %
34,816
51.0 %
Operating expenses
36,938
34.1 %
30,920
45.3 %
Income from operations
8,243
7.6 %
3,896
5.7 %
Other expense (net)
(274 )
-0.3 %
(263 )
-0.4 %
Income tax expense
(3,076 )
-2.8 %
(874 )
-1.3 %
Net income
$
4,893
4.5 % $
2,759
4.0 %
Year ended December 31, 2014 compared to year ended December 31, 2013
Gross revenues.
Our revenues increased approximately $40,200 or approximately 58.8%, for the year ended December 31, 2014,
compared to the same period in 2013. The increase in revenues is due primarily to organic growth from our existing
platform as well as the contribution from various acquisitions completed in 2014. Excluding revenues from acquisitions
closed during 2014, our revenues increased approximately $12,800, or approximately 18.7%, for the year ended December
31, 2014, compared to the same period in 2013. We are currently unaware of 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.
Direct costs.
Our direct costs increased approximately $29,800, or approximately 89.16%, for the year ended December 31, 2014,
compared to the same period in 2013. The increase in direct costs compared to the same period in 2013 is primarily due to
an increase in our utilization of billable employees in 2014 and direct costs incurred from operations of businesses acquired
after December 31, 2013. Excluding direct costs from acquisitions closed during 2014, our direct costs increased
approximately $8,200, or approximately 24.5%, for the year ended December 31, 2014, compared to the same period in
2013. Direct costs of contracts include 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 periods due to a variety of factors,
including the amount 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 and
costs. To the extent that we incur a significant amount of pass-through costs in a period, our direct costs of contracts are
likely to increase as well.
As a percentage of gross revenues, direct costs of contracts were 58.3%, for the year ended December 31, 2014, as
compared to 49.0% for the same period in 2013. Our gross profit percentage was 41.7% for the year ended December 31,
2014, as compared to 51.0% for the same period in 2013. The decrease in gross profit percentage for the year ended
December 31, 2014, was primarily due to the gross profit margin generated by the recently acquired NV5, LLC. NV5, LLC
is a technical staffing business in the energy industry, which is generally a high volume and lower margin business.
However, the administrative overhead costs (i.e., indirect labor, facilities costs, etc.) for this type of operation are typically
lower than our other service lines. The relationship between direct costs of contracts and revenues will fluctuate between
reporting periods depending on a variety of factors, including the mix of business during the reporting periods being
compared as well as the level of margins earned from the various types of services provided. As revenues from sub-
consultant costs typically have lower margin rates associated with them, it is not unusual for us to experience an increase or
45
decrease in such revenues without experiencing a corresponding increase or decrease in our gross margins and income from
operations.
Operating expenses.
Our operating expenses increased approximately $6,018, or 19.5%, for the year ended December 31, 2014, compared
to the same period in 2013. The increase in operating expenses was due to integration costs from businesses acquired
subsequent to December 31, 2013. Operating expenses include the costs of the marketing and support staffs, other
marketing expenses, management and administrative personnel costs, payroll taxes, bonuses and all employee benefits and
the portion of salaries and wages not allocated to direct costs of revenues. 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. 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. Therefore, when our professional services revenues increase or decrease, it is
not unusual to see a corresponding change in operating expenses.
As a percentage of revenues, operating expenses were 34.1%, for the year ended December 31, 2014, as compared to
45.3%, for the same period in 2013. This decrease was the result of the increase in utilization of our professional staff
compared to the same period last year, internal focus on performance optimization and the scalability of operations.
Other expenses, net.
Our other expenses, net, increased by approximately $11, compared to the same period in 2013. Other expenses
consist of interest expense on our outstanding debt. The change in other expenses was primarily due to the increase in the
average principal amount of outstanding debt during 2014, compared to the same period in 2013.
Income taxes.
Our consolidated effective income tax rate was 38.6% for the year ended December 31, 2014. The difference
between the effective tax rate and the combined statutory federal and state tax rate of 39.0% is principally due to the
domestic production activities deduction and research and development credits as well as higher tax deductions realized on
our 2013 federal and state tax returns filed during the third quarter of 2014 offset by $550 of additional income tax
provision related to research and development tax credits from an acquired company. Our consolidated effective income tax
rate was 24.1% for the year ended December 31, 2013. The reduction in the effective tax rate compared to the combined
statutory federal and state tax rate of 39.0% is principally due to the domestic production activities deduction as well as
higher tax deductions realized on our 2012 federal and state tax returns filed during the third quarter of 2013. The effective
tax rate for the year ended December 31, 2013 also includes the discrete federal tax benefit of $168 related to the
retroactive legislative reinstatement on January 2, 2013 of the research and development tax credit for the year ended
December 31, 2012, which is required to be included in the period the reinstatement was enacted into law.
Liquidity and Capital Resources
Our principal sources of liquidity are our cash and cash equivalents balances, cash flow from operations, our lines of
credit, and access to financial markets. Our principal uses of cash are operating expenses, working capital requirements,
capital expenditures, repayment of debt, and acquisition expenditures. We believe our sources of liquidity, including cash
flow from operations, existing cash and cash equivalents, proceeds from our recent initial public offering, proceeds from
the exercise of warrants issued in connection therewith, and borrowing capacity under our credit facilities will be sufficient
to meet our projected cash requirements for at least the next twelve months. This includes the increased operating expenses
we began to incur in April 2013 and will continue to incur in connection with our change in status to a publicly traded
company, such as financial and accounting personnel we have hired or will hire and our planned strategic acquisition
activity for at least the next twelve months. We will monitor our capital requirements thereafter to ensure our needs are in
line with available capital resources.
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
46
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 December 31, 2014, our cash and cash equivalents totaled $6,900 and accounts receivable, net of allowance
for doubtful accounts, totaled $27,015, compared to $13,900 and $16,700, respectively, on December 31, 2013. As of
December 31, 2014, our accounts payable and accrued liabilities were $5,300 and $4,800, respectively, compared to $3,800
and $4,200, respectively, on December 31, 2013. Also, as of December 31, 2014, we had notes payable, stock repurchase
obligations, and contingent considerations of $6,300, $900, and $900, respectively, including the current portions,
compared to $4,200, $1,600 and $1,000, respectively, including the current portions, on December 31, 2013.
Operating activities
For the year ended December 31, 2014, net cash provided by operating activities amounted to $1,420 primarily
attributable to net income of $4,900 which included non-cash charges of $2,000 from depreciation and amortization, and
increases of $1,700 in accounts payable and accrued liabilities, which is offset by an increase of $7,600 in accounts
receivable. During 2014, we made income tax payments of approximately $1,800.
For the year ended December 31, 2013, net cash provided by operating activities amounted to $3,400 primarily
attributable to net income of $2,800 which included non-cash charges of $1,500 from depreciation and amortization, and
increases of $1,000 in accounts payable and accrued liabilities partially offset by decreases of $1,800 in deferred and
income taxes payable. During 2013, we made income tax payments of approximately $2,400, which included payment of
2012 income taxes as a result of our acquisition of NV5 during 2010 whereby NV5 was required to switch from a cash
basis taxpayer to an accrual basis taxpayer. The phase-in period for this required tax accounting method change was
completed in 2012.
Investing activities
For the year ended December 31, 2014, net cash used in investing activities amounted to $5,700 primarily resulting
from cash used for our acquisitions during fiscal year 2014 and the purchase of property and equipment for our ongoing
operations.
For the year ended December 31, 2013, net cash used in investing activities amounted to $2,100 primarily resulting
from cash used for our acquisitions during fiscal year 2013 and the purchase of property and equipment for our ongoing
operations.
Financing activities
For the year ended December 31, 2014, net cash used in financing activities amounted to $2,700 primarily
attributable to cash used for scheduled repayments of $2,000 towards long-term debt, $700 in stock repurchase obligations,
and payment of contingent consideration of $200.
For the year ended December 31, 2013, net cash provided by financing activities amounted to $10,300 primarily
attributable to gross proceeds of $9,700 received from our initial public offering (as discussed elsewhere in this Annual
Report on Form 10-K), which was partially offset by initial public offering costs paid of $1,600. Contributing to the net
cash provided by financing activities was gross proceeds of $7,100 received from the exercise of our public warrants due to
our temporary reduction in the exercise price of such warrants (as discussed elsewhere in this Annual Report on Form 10-
K), which was partially offset by costs associated with the exercise of such warrants of $600. Also contributing to the net
cash provided by financing activities were borrowings of $500 from the Line Facilities (defined below), offset by scheduled
repayments of $4,100 towards long-term debt and $800 in stock repurchase obligations.
Financing
On January 31, 2014, we entered into a Business Loan Agreement with Western Alliance Bank, an Arizona
corporation (“Western Alliance”), as lender, which was amended on September 3, 2014 and provides for a two-year,
47
$8,000 revolving credit facility with a maturity date of January 31, 2016 (the “Credit Facility”). The interest rate is prime
rate plus 0.50%, with a minimum of 3.75%. As of December 31, 2014, the actual interest rate was 3.75%. The Credit
Facility contains a cross default and cross collateralization provision with the Term Loan (as defined below). The Credit
Facility contains certain financial covenants, including an annual maximum debt to tangible net worth ratio of 3.00:1.00 as
of December 31, 2014 and for each annual period ending on the last day of each fiscal year thereafter. In addition, the
Credit Facility contains an annual minimum debt service coverage ratio equal to 1.50:1.00 for each annual period ending on
the last day of the fiscal year beginning December 31, 2013. The 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. The Credit Facility is guaranteed by (i) NV5 Global, (ii) NV5 and (iii) AK. The Credit Facility is
secured by a first priority lien on substantially all of the assets of NV5 Holdings, Inc., NV5 Global, and NV5. In connection
with entering into the Credit Facility, on January 31, 2014, the Company terminated its two credit facilities totaling $4,000
(the “Line Facilities”). As of December 31, 2014, the outstanding balance on the Credit Facility was $0.
We have a note payable to Western Alliance, with a maturity date of February 1, 2015 (the “Term Loan”). The Term
Loan was amended on September 3, 2014 to adjust the guarantors and certain financial covenants. The interest rate on the
Term Loan is at prime rate with a minimum of 4.50%. As of December 31, 2014 and 2013, the actual interest rate was
4.50% and 5.0%, respectively. The Term Loan is payable in monthly principal installments of $46 with a lump sum of the
remaining principal balance outstanding due at maturity, which was repaid in full as of February 1, 2015. The Term Loan is
collateralized by substantially all of the Company’s assets and is guaranteed by NV5 Holdings, Inc., NV5, and AK. As of
December 31, 2014 and 2013, we had outstanding balances of approximately $300 and $1,100, respectively, in connection
with the Term Loan. Subsequent to December 31, 2014, the remaining balance of the Term Loan was repaid in full.
The note held by the seller of Nolte Associates Inc. (the “Nolte Note”) is currently outstanding with a maturity date
of July 29, 2017. The Nolte Note bears interest at the prime rate plus 1%, subject to a maximum rate of 7.0%. As of
December 31, 2014 and 2013, the actual interest rate was 4.25%. Under the terms of the Nolte Note, as amended, we pay
quarterly principal installments of approximately $100 plus interest. The Nolte Note is unsecured and is subordinated to the
Term Loan, although we are permitted to make our periodic principal and interest payments. The outstanding balance of the
Nolte Note was approximately $1,200 and $1,700 as of December 31, 2014 and 2013, respectively.
As of December 31, 2014 and 2013, there are stock repurchase obligations which represent notes payable for the
repurchase of common stock of certain former non-controlling interests in NV5. These notes are unsecured and
subordinated to bank debt and the maintenance of related debt covenants, and bear interest from 3.25% to 4.25%. The rates
adjust annually based on the prime rate. The notes require quarterly interest and principal payments through their maturity
dates, which range between 2014 and 2019. The outstanding balance of the stock repurchase obligation was $900 and
$1,600 as of December 31, 2014 and 2013, respectively, including the current portions.
On January 31, 2014, we acquired certain assets of AQC. The purchase price included an uncollateralized non-
interest bearing promissory note in the aggregate principal amount of $300 for which we have imputed interest at a rate of
3.75% (the “AQC Note”). This note is payable in two equal payments of $150 each, due on the first and second
anniversaries of the effective date of January 31, 2014. The carrying value of the AQC Note was approximately $294 as of
December 31, 2014.
On March 21, 2014, we acquired all of the outstanding equity interests of NV5, LLC. The purchase price included a
$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 the effective date of March 21, 2014. The outstanding balance of the AK
Note was approximately $3,000 as of December 31, 2014.
On June 30, 2014, we acquired certain assets of ORSI. The purchase price included an uncollateralized non-interest
bearing promissory note in the principal amount of $450 (the “ORSI Note”), which has an imputed interest rate of 3.75%.
The ORSI Note is payable in two equal payments of $225 each due on the first and second anniversaries of the effective
date of June 30, 2014. The outstanding balance of the ORSI Note was $434 as of December 31, 2014.
On November 3, 2014, we acquired certain assets of the Buric Companies. The purchase price included a $300
uncollateralized 3% interest bearing promissory 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.
48
On July 27, 2012, we acquired certain assets and assumed certain liabilities of Kaderabek Company (“Kaco”). The
purchase price included a note in the aggregate principal amount of $2,000 (the “Kaco Note”), bearing interest at 3.0% for
the first year and 200 basis points over the one-year LIBOR for the years thereafter, which is payable as follows: $500 due
by (and paid on) December 28, 2012 and three equal payments of $500 each due on the first, second and third anniversaries
of the effective date of July 27, 2012. As of December 31, 2014 and 2013, the actual interest rate was 2.58%. The
outstanding balance of the Kaco Note was $500 and $1,000 as of December 31, 2014 and 2013, respectively.
On April 30, 2013, we acquired certain assets and assumed certain liabilities of Consilium. The purchase price
included an uncollateralized promissory note in the aggregate principal amount of $200, bearing interest at 4.0%, payable
in three equal payments of $67 each due on the first, second and third anniversaries of the effective date of April 30, 2013.
The outstanding balance of this note was $133 and $200 as of December 31, 2014 and 2013, respectively.
On July 8, 2013, we acquired certain assets and assumed certain liabilities of the Tampa, Florida division of PH&A.
The purchase price included an uncollateralized promissory note in the aggregate principal amount of $168, bearing interest
at 4.0%, payable in two equal payments of $84 each due on December 31, 2013 and December 31, 2014. The outstanding
balance of this note was $0 and $84 as of December 31, 2014 and 2013, respectively.
On August 12, 2013, the Company acquired certain assets and assumed certain liabilities of Dunn. The purchase
price consisted of an uncollateralized promissory note in the aggregate principal amount of approximately $92 (bearing
interest at 4.0%), payable in two equal payments of approximately $46 each due on the first and second anniversaries of the
effective date of August 12, 2013. The outstanding balance of this note was $46 and $92 as of December 31, 2014 and
2013, respectively.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of December 31, 2014 and 2013.
Effects of Inflation
Based on our analysis of the periods presented, we believe that inflation has not had a material effect on our
operating results. There can be no assurance that future inflation will not have an adverse impact on our operating results
and financial condition.
Recent Accounting Pronouncement
In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update ("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 a customer at an amount that reflects the
consideration it expects to receive in exchange for those goods or services. This ASU is effective for annual reporting
periods beginning after December 15, 2016 and early adoption is not permitted. Accordingly, the Company will adopt this
ASU on January 1, 2017. Companies may use either a full retrospective or a modified retrospective approach to adopt this
ASU and management has not yet determined which method it will apply. The Company is currently evaluating the impact
of adopting ASU 2014-09 on the Company's consolidated net income, financial position and cash flows.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
49
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Audited Consolidated Financial Statements:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2014 and 2013
Consolidated Statements of Comprehensive Income for the years ended December 31, 2014 and 2013
Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2014 and
2013
Consolidated Statements of Cash Flows for the years ended December 31, 2014 and 2013
Notes to Consolidated Financial Statements
51
52
53
54
55
57
50
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
NV5 Holdings, Inc.
We have audited the accompanying consolidated balance sheets of NV5 Holdings, Inc. (a Delaware corporation) and
subsidiaries (the “Company”) as of December 31, 2014 and 2013, and the related consolidated statements of
comprehensive income, changes in stockholders’ equity, and cash flows for each of the two years in the period ended
December 31, 2014. These financial statements are the responsibility of the Company’s management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal
control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of NV5 Holdings, Inc. and subsidiaries as of December 31, 2014 and 2013, and the results of their operations and
their cash flows for each of the two years in the period ended December 31, 2014 in conformity with accounting principles
generally accepted in the United States of America.
/s/ GRANT THORNTON LLP
Fort Lauderdale, Florida
March 27, 2015
51
NV5 Holdings, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
Current assets:
Assets
Cash and cash equivalents
Accounts receivable, net of allowance for doubtful accounts of $845 and $1,320 as
of December 31, 2014 and 2013, respectively
Prepaid expenses and other current assets
Deferred income tax assets
Total current assets
Property and equipment, net
Intangible assets, net
Goodwill
Other assets
Deferred income tax assets
Total Assets
Current liabilities:
Liabilities and Stockholders’ Equity
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 stock repurchase obligation
Current portion of notes payable
Total current liabilities
Contingent consideration, less current portion
Stock repurchase obligation, less current portion
Notes payable, less current portion
Total liabilities
Commitments and contingencies
Stockholders’ equity:
December 31,
2014
December 31,
2013
$
6,872 $
13,868
$
$
27,015
1,224
358
35,469
1,625
5,221
11,142
810
1,123
55,390 $
5,335 $
4,763
1,157
277
121
618
372
2,878
15,521
323
563
3,378
19,785
16,722
509
1,004
32,103
1,310
2,993
7,106
639
724
44,875
3,780
4,189
765
401
111
333
687
1,725
11,991
638
935
2,502
16,066
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, 5,754,959 and
5,504,236 shares issued and outstanding as of December 31, 2014 and 2013,
respectively
Additional paid-in capital
Retained earnings
Total stockholders’ equity
Total liabilities and stockholders’ equity
-
-
58
25,617
9,930
35,605
55,390 $
55
23,717
5,037
28,809
44,875
$
See accompanying notes to consolidated financial statements.
52
NV5 Holdings, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands, except share data)
Gross revenues
Direct costs:
Salaries and wages
Sub-consultant services
Other direct costs
Total direct costs
Gross Profit
Operating Expenses:
Salaries and wages, payroll taxes and benefits
General and administrative
Facilities and facilities related
Depreciation and amortization
Total operating expenses
Income from operations
Other expense:
Interest expense
Total other expense
Income before income tax expense
Income tax expense
Net income and comprehensive income
Earnings per share:
Basic
Diluted
Weighted average common shares outstanding:
Basic
Diluted
Year Ended
December 31, December 31,
2014
2013
$
108,382 $
68,232
36,976
15,996
10,229
63,201
19,619
12,337
1,460
33,416
45,181
34,816
22,887
8,865
3,198
1,988
36,938
19,373
6,708
3,325
1,514
30,920
8,243
3,896
(274 )
(274 )
7,969
(3,076 )
4,893 $
0.96 $
0.87 $
(263 )
(263 )
3,633
(874 )
2,759
0.75
0.70
5,102,058
5,592,010
3,660,289
3,967,056
$
$
$
See accompanying notes to consolidated financial statements.
53
NV5 Holdings, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(in thousands, except share data)
Common Stock
Shares
Amount
Additional
Paid-In
Capital
Retained
Earnings
Total
Balance, January 1, 2013
2,600,000 $
26 $
9,065 $
2,278 $
11,369
Stock compensation
Proceeds from initial public offering, net of
offering costs
Exercise of warrants
Restricted stock issuance, net
Stock issuance for acquisitions
Comprehensive income
Balance, December 31, 2013
Stock compensation
Restricted stock issuance, net
Exercise of warrants
Stock issuance for acquisitions
Payment of contingent consideration with
common stock
Comprehensive income
Balance, December 31, 2014
-
-
365
-
365
1,610,000
1,196,986
91,298
5,952
-
5,504,236 $
-
102,362
600
134,774
16
12
1
-
-
55 $
-
1
-
2
7,638
6,604
(1 )
46
-
23,717 $
752
(1 )
5
1,044
-
-
-
-
2,759
5,037 $
-
-
-
-
7,654
6,616
-
46
2,759
28,809
752
-
5
1,046
12,987
-
5,754,959 $
-
-
58 $
100
-
25,617 $
-
4,893
9,930 $
100
4,893
35,605
See accompanying notes to consolidated financial statements.
54
NV5 Holdings, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Cash Flows From Operating Activities:
Comprehensive income
Adjustments to reconcile comprehensive income to net cash provided by operating
activities:
Depreciation and amortization
(Reduction of) / Provision for doubtful accounts
Stock compensation
Change in fair value of contingent consideration
Loss on disposal of leasehold improvements
Deferred income taxes
Changes in operating assets and liabilities, net of impact of acquisitions:
Accounts receivable
Prepaid expenses and other assets
Accounts payable
Accrued liabilities
Income taxes payable
Billings in excess of costs and estimated earnings on uncompleted contracts
Client deposits
Net cash provided by operating activities
Cash Flows From Investing Activities:
Cash paid for acquisitions
Purchase of property and equipment
Net cash used in investing activities
Cash Flows From Financing Activities:
Proceeds from initial public offering
Initial public offering costs
Borrowings on note payable
Payments of contingent consideration
Exercise of warrants costs
Payments on notes payable
Payments of debt issuance costs
Payments on stock repurchase obligation
Proceeds from exercise of warrants
Net cash (used in) provided by financing activities
Years Ended
December 31,
2014
December 31,
2013
$
4,893 $
2,759
1,988
(136 )
752
18
64
248
(7,592 )
(645 )
1,316
399
392
(124 )
(153 )
1,420
(4,650 )
(825 )
(5,475 )
-
-
-
(233 )
-
(1,999 )
(27 )
(687 )
5
(2,941 )
1,514
22
365
22
-
(566 )
(426 )
(1 )
133
875
(1,227 )
(29 )
(20 )
3,421
(1,617 )
(533 )
(2,150 )
9,660
(1,580 )
518
-
(567 )
(4,139 )
-
(772 )
7,183
10,303
11,574
2,294
13,868
Net (decrease) increase in Cash and Cash Equivalents
Cash and cash equivalents – beginning of period
Cash and cash equivalents – end of period
(6,996 )
13,868
6,872 $
$
See accompanying notes to consolidated financial statements.
55
NV5 Holdings, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Supplemental disclosures of cash flow information:
Cash paid for interest
Cash paid for income taxes
Years Ended
December 31,
2014
December 31,
2013
$
$
186 $
1,767 $
280
2,416
Non-cash investing and financing activities:
Contingent consideration (earn-out) for acquisitions
Notes and stock payable for acquisitions
Stock issuance for acquisitions
Payment of contingent consideration with common stock
Landlord-funded leasehold improvements
Reclassification of previously capitalized initial public offering costs from other assets to
additional paid in capital upon completions of initial public offering (including costs
incurred prior to 2013)
$
$
$
$
$
$
286 $
4,010 $
1,046 $
100 $
137 $
948
651
46
-
-
- $
426
See accompanying notes to consolidated financial statements.
56
NV5 Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
Note 1 - Organization and Nature of Business Operations
Business
NV5 Holdings, Inc. and its subsidiaries (collectively, the “Company” or “NV5 Holdings”) is a provider of
professional and technical engineering and consulting solutions in the infrastructure, energy, construction, real estate and
environmental markets, operating through a network of 29 locations in California, Colorado, Florida, Massachusetts, New
Jersey, Pennsylvania, Ohio, Utah and Wyoming. The Company’s clients include the U.S. federal, state and local
governments, and the private sector. NV5 Global, Inc. (formerly known as NV5, Inc.)(“NV5 Global”) was incorporated as
a Delaware corporation in 2009. NV5, Inc. (formerly known as Nolte Associates, Inc.) (“NV5”), which began operations
in 1949, was incorporated as a California corporation in 1957, and was acquired by NV5 Global in 2010. In March 2010,
NV5 Global acquired the construction quality assurance operations of Bureau Veritas North America, Inc. In October
2011, NV5 Global and NV5 completed a reorganization transaction in which NV5 Holdings, Inc. was incorporated as a
Delaware corporation, acquired all of the outstanding shares of NV5 Global and NV5, and, as a result, became the holding
company under which NV5, NV5 Global and the Company's other subsidiaries conduct business. NV5, LLC, (formerly
known as AK Environmental, LLC) (“NV5, LLC”) a North Carolina limited liability company which was originally
incorporated as a New Jersey limited liability company in 2002 and reincorporated in North Carolina in 2013, was acquired
by us in 2014. NV5 Holdings provides a wide range of services, including, but not limited to, planning, design, consulting,
permitting, inspection and field supervision, management oversight, forensic engineering, litigation support, condition
assessment and compliance certification.
Significant Transactions
On January 31, 2014, the Company acquired certain assets of Air Quality Consulting, Inc. (“AQC”) located in
Tampa, Florida, which specializes in occupational health, safety and environmental consulting, for a purchase price of up to
$815, consisting of cash, notes and common stock (see Note 4).
On March 21, 2014, the Company acquired all of the outstanding equity interests of NV5, LLC., a natural gas
pipeline inspection, construction management and environmental consulting firm, primarily servicing the Northeast, Mid-
Atlantic and Southeast United States. The purchase price was $7,000, consisting of cash, notes and common stock (see
Note 4).
On June 30, 2014, the Company acquired certain assets of Owner's Representative Services, Inc. (“ORSI”), a
program management firm specializing in healthcare facilities development and construction projects, for a purchase price
of up to $1,300, consisting of cash, notes and common stock (see Note 4).
On November 3, 2014, the Company acquired certain assets of Zollinger Buric, Inc. an Ohio corporation and Buric
Global LLC., an Ohio limited liability company (collectively the “Buric Companies”), for a purchase price of up to $1,000,
consisting of cash, notes and common stock (see Note 4).
These acquisitions expanded the Company’s environmental, energy and project management services and allow NV5
Holdings to offer these services on a broader scale within its existing network. In addition, the acquisitions strengthen NV5
Holdings’ geographic diversification and allow the Company to continue expanding its national footprint.
The acquisitions referenced above were accounted for as business combinations under the acquisition method of
accounting. Under this method, the assets acquired, liabilities assumed and non-controlling interest, if any, were recorded
in the Company’s consolidated financial statements at their respective fair values as of the acquisition dates, and the results
of these acquisitions are included in the Company’s consolidated results from the respective dates of acquisition.
On March 7, 2013, the Company’s Board of Directors approved a 1.3866-for-1 forward stock split of its outstanding
common shares, to be effected immediately prior to the consummation of the Company’s initial public offering. The stock
57
NV5 Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
split resulted in the issuance of 724,916 additional shares of common stock. All information presented in the accompanying
consolidated financial statements has been retroactively adjusted to reflect this stock split.
On March 26, 2013, the Company priced its initial public offering of 1,400,000 units. Each unit was sold at an
offering price of $6.00 per unit and consisted of one share of the Company’s common stock and one warrant to purchase
one share of the Company’s common stock at an exercise price of $7.80 per share. The units began trading on The
NASDAQ Capital Market (“NASDAQ”) on March 27, 2013 and traded solely as units through September 26, 2013. The
units sold in the Company’s initial public offering were registered under the Securities Act of 1933, as amended (the
“Securities Act”), on a registration statement on Form S-1 (No. 333-186229), which was declared effective by the
Securities and Exchange Commission (the “SEC”) on March 26, 2013. On March 28, 2013, the underwriter of the offering
exercised its option to purchase up to an additional 210,000 units, solely to cover over-allotments. The closing of the
offering occurred, and was recorded, on April 2, 2013, upon which the Company received net proceeds of approximately
$8,100 after deducting fees associated with the initial public offering and issued 1,610,000 units. In addition, upon closing,
the underwriter received a warrant to acquire up to 140,000 units at an exercise price of $7.20 per unit. The underwriter can
exercise these warrants until the expiration date of March 26, 2016. Each of these units consist of one share of the
Company’s common stock and one warrant to purchase one share of the Company’s common stock at an exercise price of
$7.80 per share.
Separation of the Company’s units and warrant exercises.
On September 27, 2013, the common stock and warrants comprising our units began trading separately on NASDAQ
under the symbols “NVEE” and “NVEEW”, respectively. In connection with the separate trading of the common stock and
warrants, the Company’s units ceased trading under the symbol “NVEEU” on the close of the markets on September 26,
2013 and the units were delisted from NASDAQ.
On September 27, 2013, the warrants became exercisable at an exercise price of $7.80 per share. The warrant
exercise period expires on March 27, 2018 or earlier upon redemption.
On September 27, 2013 and continuing until October 11, 2013 (the “Temporary Reduction Expiration Time”), the
Company temporarily reduced the exercise price of all of its outstanding public warrants from $7.80 per share to $6.00 per
share. All such warrants properly exercised in accordance with their respective terms prior to the Temporary Reduction
Expiration Time were accepted by the Company at the reduced $6.00 per share exercise price, and one share of the the
Company’s registered common stock per warrant was issued to the exercising warrant holder. After the Temporary
Reduction Expiration Time, the exercise price of the public warrants automatically reverted to the warrant exercise price of
$7.80 per share included in the original terms of the public warrants and the reduced exercise price was no longer in effect.
Except for the reduced $6.00 per share exercise price of the warrants during the Temporary Reduction Expiration Time, the
terms of the public warrants remain unchanged. During the Temporary Reduction Expiration Time, 1,196,471 public
warrants, or approximately 74% of the outstanding public warrants were exercised at the reduced exercise price of $6.00
per share. The temporary reduction in the warrant exercise price generated net cash proceeds of approximately $6,600 after
fees associated with the temporary reduction in the warrant exercise price and offering expenses. During the period
from January 1, 2014 through December 31, 2014, 600 public warrants were exercised at the warrant exercise price of
$7.80 per share.
On January 5, 2015, in accordance with the amended and restated warrant agreement, the Company notified the
holders of its outstanding public warrants that the Company had called its warrants for redemption. Each public warrant
entitled the holder to purchase one share of the Company’s common stock at an exercise price of $7.80 per share. The
public warrant holders had until February 4, 2015 to exercise their public warrants at $7.80 per share. The redemption
resulted in 408,412, or approximately 99%, of the Company’s outstanding public warrants being exercised prior to the
expiration time and generated cash proceeds of approximately $3,200. The remaining 4,002 public warrants that were not
exercised by the expiration time were cancelled and redeemed for the sum of $0.01 per public warrant. In connection with
the redemption of all outstanding public warrants, the trading of the Company’s public warrants was suspended and the
warrants were delisted from NASDAQ.
58
NV5 Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
Note 2 - Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The consolidated financial statements of the Company are presented in U.S. dollars in conformity with accounting
principles generally accepted in the United States (“GAAP”) and have been prepared pursuant to the rules and regulations
of the SEC. The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with 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 could be material.
Estimates and assumptions are evaluated periodically and adjusted when necessary. The more significant estimates
affecting amounts reported in the consolidated financial statements relate to the fair value estimates used in accounting for
business combinations including the valuation of identifiable intangible assets and contingent consideration, fair value
estimates in determining the fair value of its reporting units for goodwill impairment assessment, revenue recognition on
the percentage-of-completion method, allowances for uncollectible accounts, and reserves for professional liability claims.
Cash and Cash Equivalents
Cash and cash equivalents include cash on deposit with financial institutions and investments in high quality
overnight money market funds, all of which have maturities of three months or less when purchased. The Company from
time to time may be exposed to credit risk with its bank deposits in excess of the Federal Deposit Insurance Corporation
insurance limits and with uninsured money market investments. Management believes cash and cash equivalent balances
are not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits
are held.
Concentration 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 45% and 65% of the Company’s gross
revenues for the years ended December 31, 2014 and 2013, respectively, are from California-based projects and
approximately 21% and 28% of revenues for the years ended December 31, 2014 and 2013, respectively, are from two
clients. Furthermore, approximately 38% and 40% of the Company’s accounts receivable as of December 31, 2014 and
2013 are from government and government-related contracts. As management continually evaluates the creditworthiness of
these and future clients, the risk of credit default is considered limited.
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.
59
NV5 Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
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, cash surrender value of officers’ life
insurance, accounts payable, income taxes payable, accrued liabilities and debt obligations to meet the definition of
financial instruments. The carrying amount of cash and cash equivalents, accounts receivable, cash surrender value of
officers’ life insurance, 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. Goodwill as of the
acquisition date is measured as the excess of consideration transferred and the net of the acquisition date fair values of the
tangible and identifiable intangible assets acquired and liabilities assumed. The allocation of the purchase prices to
identifiable intangible assets (customer relationships, customer backlog, trade name and non-compete) are based on
valuations performed to determine the fair values of such assets as of the acquisition dates. The Company engaged a third-
party independent valuation specialist to determine the fair values of tangible and intangible assets acquired and liabilities
assumed for the 2014 acquisitions, except for the acquisition of the Buric Companies. The fair values of earn-out
arrangements are included as part of the purchase price of the acquired companies on their respective acquisition dates.
The Company estimates the fair value of contingent earn-out payments as part of the initial purchase price and records the
estimated fair value of contingent consideration as a liability on the consolidated balance sheet.
Several factors are considered when determining contingent earn-out 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.
The Company measures contingent consideration liabilities recognized in connection with business combinations at
fair value on a recurring basis using significant unobservable inputs classified within Level 3 of the fair value hierarchy. A
probability-weighted approach is used as a valuation technique to determine the fair value of the contingent consideration
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 (generally one year), and the probability outcome percentages
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 earn-out
obligation. As such, the contingent consideration is classified within Level 3. Items classified as Level 3 within the
valuation hierarchy, consisting of contingent consideration liabilities related to recent acquisitions, were valued based on
various estimates, including probability of success, discount rates and amount of time until the conditions of the contingent
payments are achieved.
Property and Equipment
Property and equipment is stated at cost. Property and equipment acquired in a business combination is stated at
fair value at the acquisition date. The Company capitalizes the cost of improvements to property and equipment that
increase the value or extend the useful lives of the assets. Normal repair and maintenance costs are expensed as
incurred. Depreciation and amortization is computed on a straight-line basis over the following estimated useful lives of
60
NV5 Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
the assets. Leasehold improvements are amortized on a straight-line basis over the lesser of their estimated useful lives
or the remaining terms of the related lease agreement.
Asset
Office furniture and equipment (years)
Computer equipment (years)
Survey and field equipment (years)
Leasehold improvements
Depreciation Period
5
3
5
Lesser of the estimated useful lives or remaining term
of the lease
Property and equipment balances are periodically reviewed by management for impairment whenever events or
changes in circumstances indicate that the carrying value of the asset may not be recoverable. 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 is measured as the difference between fair value and carrying
value, with fair value typically based on a discounted cash flow model. The Company has not recognized an impairment
charge relating to property and equipment during the years ended December 31, 2014 and 2013.
Goodwill and Intangible Assets
Goodwill is the excess of consideration paid for an acquired entity over the amounts assigned to assets acquired,
including other identifiable intangible assets, and liabilities assumed in a business combination. To determine the amount of
goodwill resulting from a business combination, the Company performs an assessment to determine the fair value of the
acquired company’s tangible and identifiable intangible assets and liabilities.
Goodwill is required to be evaluated for impairment on an annual basis or whenever events or changes in circumstances
indicate the asset may be impaired. An entity has the option to first assess qualitative factors to determine whether the
existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting
unit is less than its carrying amount. These qualitative factors include: macroeconomic and industry conditions, cost
factors, overall financial performance and other relevant entity-specific events. If the entity determines that this threshold is
met, then performing the two-step quantitative impairment test is unnecessary. The two-step impairment test requires a
comparison of the carrying value of the assets and liabilities associated with a reporting unit, including goodwill, with the
fair value of the reporting unit. The Company determines fair value through multiple valuation techniques, and weights the
results accordingly. The Company is required to make certain subjective and complex judgments in assessing whether an
event of impairment of goodwill has occurred, including assumptions and estimates used to determine the fair value of its
reporting units. If the carrying value of the 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. On August 1, 2014 and 2013, the Company conducted its annual impairment
tests using the quantitative method of evaluating goodwill. Based on these quantitative analyses it was determined that the
fair value of each of the Company’s 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, 2014 and 2013. No
indicators, events or changes in circumstances indicated that goodwill was impaired during the period from August 2
through December 31 of each of fiscal year 2014 and 2013.
Identifiable intangible assets primarily include customer backlog, customer relationships, tradenames and non-
compete agreements. Amortizable intangible assets are amortized 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
61
NV5 Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
undiscounted cash flows do not exceed the carrying value, then impairment is measured as the difference between fair
value and carrying value, with fair value typically based on a discounted cash flow model. The Company has not
recognized an impairment charge relating to amortizable intangible assets during the years ended December 31, 2014 and
2013.
See Note 7 for further information on goodwill and identified intangibles.
Earnings per Share
Basic earnings per share is calculated by dividing net income by the weighted average number of common shares
outstanding. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock or resulted in the issuance of common stock that then
shared in the earnings of the Company. In accordance with Accounting Codification Standards (“ASC”) 260, the effect of
potentially dilutive securities is not considered during periods of loss or if the effect is anti-dilutive. The weighted average
number of shares outstanding in calculating basic earnings per share for the years ended December 31, 2014 and 2013
exclude 607,906 and 505,544 non-vested restricted shares, respectively, issued since 2010. These non-vested restricted
shares are not included in basic earnings per share until the vesting requirement is met. The weighted average number of
shares outstanding in calculating diluted earnings per share for the years ended December 31, 2014 and 2013 includes, if
outstanding, the dilutive effect of non-vested restricted shares and units, issuable shares related to acquisitions, and the
warrants associated with its initial public offering. In calculating diluted earnings per share for the years ended December
31, 2014 and 2013, there were no potentially dilutive securities that were not considered.
The following table represents a reconciliation of the net income and weighted average shares outstanding for the
calculation of basic and diluted earnings per share for the years ended December 31, 2014 and 2013:
Numerator:
Comprehensive 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
Years Ended
December 31, December 31,
2014
2013
$
4,893 $
2,759
5,102,058
326,660
30,666
132,626
5,592,010
3,660,289
265,514
19,594
21,659
3,967,056
Revenue Recognition
The Company enters into contracts with its clients that contain two principal types of pricing provisions: cost-
reimbursable and fixed-price. The majority of its contracts are cost-reimbursable contracts that fall under the subcategory of
time and materials contracts.
Cost-reimbursable contracts. Cost-reimbursable contracts consist of two similar contract types: time and materials
contracts and cost-plus contracts.
• 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, the
Company negotiates hourly billing rates and charges the clients based upon actual hours expended on a
62
NV5 Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
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 (at predetermine
rates) incurred, plus a predetermined fee. Under some cost-plus contracts, the Company’s fee may be based
on quality, schedule, and other performance factors.
Fixed-price contracts. Fixed-price contracts also consist of two contract types: lump-sum contracts and fixed-unit
price contracts.
• 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 the Company’s lump-sum contracts are negotiated and arise in the design of projects with a
specified scope and project deliverables.
• Fixed-unit price 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.
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 and revenues from fixed-price contracts are
recognized on the percentage-of-completion method, generally measured by the direct costs incurred to date as compared to
the estimated total direct costs for each contract. The Company includes other direct costs (for example, third party field
labor, subcontractors, or the procurement of materials or equipment) in revenues and cost of revenue when the costs of
these items are incurred, and the Company is responsible for the ultimate acceptability of such costs. Recognition of
revenue under this method is dependent upon the accuracy of a variety of estimates, including engineering progress,
materials quantities, achievement of milestones, labor productivity and cost estimates. Due to uncertainties inherent in the
estimation process, it is possible that actual completion costs may vary from estimates.
If estimated total costs on contracts indicate a loss or reduction to the percentage of total contract revenues
recognized to date, these losses or reductions are recognized in the period in which the revisions are known. The
cumulative effect of revisions to revenues, estimated costs to complete contracts, including penalties, incentive awards,
change orders, claims, anticipated losses and others are recorded in the period in which the revisions are identified and the
loss can be reasonably estimated. Such revisions could occur in any reporting period and the effects on the results of
operations for that reporting period may be material depending on the size of the project or the adjustment.
Change orders and claims typically result from changes in scope, specifications, design, performance, materials, sites,
or period of completion. Costs related to change orders and claims are recognized when incurred. Change orders are
included in total estimated contract revenues when it is probable that the change order will result in an addition to the
contract value and can be reliably estimated.
Federal Acquisition Regulations (“FAR”), which are applicable to the Company’s federal government contracts and
may be incorporated in local and state agency contracts, limit the recovery of certain specified indirect costs on contracts.
Cost-plus contracts covered by FAR or certain state and local agencies also may require an audit of actual costs and provide
for upward or downward adjustments if actual recoverable costs differ from billed recoverable costs.
Unbilled work results when the appropriate contract revenues has been recognized when services are performed or
based on the percentage-of-completion accounting method but the revenue recorded has not been billed due to the billing
terms defined in the contract. Unbilled amounts as of the reporting date are included within accounts receivable in the
63
NV5 Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
accompanying consolidated balance sheets. In certain circumstances, the contract may allow for billing terms that result in
the cumulative amounts billed in excess of revenues recognized. The liability “Billings in excess of costs and estimated
earnings on uncompleted contracts” represents billings in excess of revenues recognized on these contracts as of the
reporting date.
Advertising
Advertising costs are charged to expense in the period incurred and amounted to $86 and $104 for the years ended
December 31, 2014 and 2013, respectively.
Allowance for Doubtful Accounts
The Company records billed and unbilled receivables net of an allowance for doubtful accounts. The allowance is
estimated based on management’s evaluation of the contracts involved and the financial condition of clients. Factors the
Company considers include, but are not limited to: client type (federal government or commercial client), historical
performance, historical collection trends and general economic conditions. The allowance is increased by the Company’s
provision for doubtful accounts which is charged against income. All recoveries on receivables previously charged off are
credited to the accounts receivable recovery account are included in income, while direct charge-offs of receivables are
deducted from the allowance.
Professional Liability Expense
The Company maintains insurance for business risks including professional liability. For professional liability risks,
the Company’s retention amount under its claims-made insurance policies includes an accrual for claims incurred but not
reported for any potential liability, including any legal expenses, to be incurred for such claims if they occur. The
Company’s accruals are based upon historical expense and management’s judgment. The Company maintains insurance
coverage for various aspects of its business and operations; however the Company has elected to retain a portion of losses
that may occur through the use of deductibles, limits and retentions under its insurance programs. The Company’s
insurance coverage may subject it to some future liability for which it is only partially insured or completely uninsured.
Management believes its estimated accrual for errors, omission and professional liability claims is sufficient and any
additional liability over amounts accrued is not expected to have a material effect on the Company’s consolidated results of
operations or financial position.
Leases
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 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.
Segment Information
The Company reports segment information in accordance with ASC Topic No. 280 “Segment Reporting” (“Topic
No. 280”). The Company has identified operating segments at the subsidiary entity level. However, each entity’s operating
performance has been aggregated into one reportable segment. Each entity’s operations meet the aggregation criteria set
forth in Topic No. 280. The Company’s operating segments are aggregated for financial reporting purposes because they
are similar in each of the following areas: economic characteristics, class of customer, nature of service and distribution
methods.
Income Taxes
64
NV5 Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
The Company accounts for income taxes in accordance with ASC Topic No. 740 “Income Taxes” (“Topic
No. 740”). Deferred income taxes reflect the impact of temporary differences between amounts of assets and liabilities for
financial reporting purposes and such amounts as measured by tax laws. A valuation allowance against the Company’s
deferred tax assets is recorded when it is more likely than not that some portion or all of the deferred tax assets will not be
realized. In determining the need for a valuation allowance, management is required to make assumptions and to apply
judgment, including forecasting future earnings, taxable income, and the mix of earnings in the jurisdictions in which the
Company operates. Management periodically assesses the need for a valuation allowance based on the Company’s current
and anticipated results of operations. The need for and the amount of a valuation allowance can change in the near term if
operating results and projections change significantly.
The Company recognizes the consolidated financial statement benefit of a tax position only after determining that the
relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the
more likely-than-not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has
a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The
Company applies the uncertain tax position guidance to all tax positions for which the statute of limitations remains open.
Generally, the Company remains subject to income tax examinations by its major taxing authorities from 2005 to 2014. The
Company’s policy is to classify interest accrued as interest expense and penalties as operating expenses.
Note 3 –Recent Accounting Pronouncement
In May 2014, the FASB issued Accounting Standards Update ("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 a customer at an amount that reflects the consideration it expects to receive in
exchange for those goods or services. This ASU is effective for annual reporting periods beginning after December 15,
2016 and early adoption is not permitted. Accordingly, the Company will adopt this ASU on January 1, 2017. Companies
may use either a full retrospective or a modified retrospective approach to adopt this ASU, and the Company has not yet
determined which method it will apply. The Company is currently evaluating the impact of adopting ASU 2014-09 on the
Company's consolidated net income, financial position and cash flows.
Note 4 – Business Acquisitions
On January 31, 2014, the Company acquired certain assets of AQC located in Tampa, Florida, which specializes in
occupational health, safety and environmental consulting. The purchase price of up to $815 consisted of $250 in cash, a
$300 non-interest bearing promissory note and $150 of the Company’s common stock (18,739 shares) as of the closing
date. The purchase price also included a non-interest bearing earn-out of $115 payable in cash, subject to the achievement
of a certain agreed upon metric for calendar year 2014, and is payable on April 1, 2015. The earn-out was recorded at an
estimated fair value of $54, based on a probability-weighted approach valuation technique used to determine the fair value
of the contingent consideration on the acquisition date. AQC did not meet the agreed upon metric and as of December 31,
2014, the estimated fair value of this contingent consideration was $0. The purchase price included a $300 uncollateralized
non-interest bearing promissory note, with an imputed interest rate of 3.75%. The note is payable in two equal payments of
$150 due on the first and second anniversaries of January 31, 2014, the effective date of the acquisition (see Note 9). The
carrying value of this note was approximately $294 as of December 31, 2014.
On March 21, 2014, the Company acquired all of the outstanding equity interests of NV5, LLC, a natural gas pipeline
inspection, construction management and environmental consulting firm, primarily servicing the Northeast, Mid-Atlantic
and Southeast United States. The purchase price of $7,000 included $3,500 in cash, a $3,000 promissory note (bearing
interest at 3.0%), payable in three installments of $1,000 due on the first, second and third anniversaries of March 21, 2014,
the effective date of the acquisition (see Note 9), and $500 of the Company’s common stock (64,137 shares) as of the
closing date of the acquisition.
65
NV5 Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
On June 30, 2014, the Company acquired certain assets of ORSI, a program management firm specializing in
healthcare facilities development and construction projects. The purchase price of up to $1,300 consisted of $400 in cash, a
$450 non-interest bearing promissory note, and $150 of the Company’s common stock (14,918 shares) as of the closing
date, which were issued in July 2014. The purchase price also included a non-interest bearing earn-out of $300 payable in
cash and the Company’s common stock, subject to the achievement of a certain agreed upon metric for calendar year 2014,
and is payable on March 31, 2015. The earn-out was recorded at its estimated fair value of $231, based on a probability-
weighted approach valuation technique used to determine the fair value of the contingent consideration on the acquisition
date. During 2014, the agreed upon metric was met and the earn-out was achieved. As of December 31, 2014, the estimated
fair value of this contingent consideration is approximately $285. The purchase price also included a $450 uncollateralized
non-interest bearing promissory note, with an imputed interest rate of 3.75%. This note is payable in two equal payments of
$225 due on the first and second anniversaries of June 30, 2014, the effective date of the acquisition (see Note 9). The
carrying value of this note was approximately $434 as of December 31, 2014.
On November 3, 2014, the Company acquired certain assets of the Buric Companies. The Buric Companies are based
in Cleveland, Ohio with a total of 15 engineering and construction management professionals. The Buric Companies
provide program management and construction claims consulting services, as well as building information modeling,
critical path scheduling, surety consulting, and litigation support. The purchase price was $1,000 consisting of $500 cash,
$300 uncollateralized 3% interest bearing promissory note which is payable in three equal payments of $100 each, due on
the first, second and third anniversaries of the closing date of November 3, 2014, and $200 of the Company’s common
stock (21,978 shares).
On April 30, 2013, the Company acquired certain assets and assumed certain liabilities of Consilium Partners, a 20-
person owner’s representation and program management firm that serves both public and private clients, such as
municipalities, major hospitality firms and institutional real estate owners. Consilium Partners possesses specialized
expertise in managing technically demanding projects, while having an affinity for leading teams and cultivating teamwork
with the people who ultimately determine a project’s success. The purchase price was $1,083, consisting of cash, notes (see
Note 9) and the Company’s common stock plus an earn-out of up to $1,000 in cash and/or common stock in the Company’s
sole discretion. Payment of the maximum $1,000 earn-out was subject to the achievement of a certain agreed upon metric
for calendar year 2013, and payable in three annual installments beginning in January 31, 2014 in cash and/or common
stock. The maximum earn-out payment of $1,000 is non-interest bearing. Therefore, the Company has discounted the
$1,000 payment obligation for imputed interest. During 2013, the agreed upon metric was met and the earn-out was
achieved. On January 31, 2014, the Company paid the first annual installment of $333, of which $233 was paid in cash and
the remaining $100 was paid by issuing 12,987 shares of the Company’s common stock. On February 2, 2015, the
Company paid the second annual installment of approximately $300, of which approximately $200 was paid in cash and
the remaining $100 was paid by issuing 8,298 shares of its common stock. As of December 31, 2014 and 2013, the
Company had contingent consideration obligations of $656 and $971, respectively.
Under the acquisition method of accounting, the Company recognized the assets acquired and the liabilities assumed
at their fair values and recorded an allocation of the purchase price to the tangible and identifiable intangible assets
acquired and liabilities assumed based on their estimated fair values as of the acquisition dates. Goodwill was recorded
based on the amount by which the purchase prices exceeded the fair value of the net assets acquired and the amount
attributable to the reputation of the businesses acquired, the workforces in place and the synergies to be achieved from
these acquisition. The allocation of the purchase prices to identifiable intangible assets (customer relationships, customer
backlog, trade name and non-compete) are based on valuations performed to determine the fair values of such assets as of
the acquisition dates.
The Company reviews and re-assesses the estimated fair value of its contingent consideration on a quarterly basis,
and the updated fair value could differ materially from the initial estimates. Adjustments to the estimated fair value related
to changes in all other unobservable inputs are reported in operating income. During the years ended December 31, 2014
and 2013, the Company recorded a change in fair value of $18 and $22, respectively, related to contingent consideration
obligations due to the increased probability of achieving the earn-out metric defined at the time of acquisition.
66
NV5 Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
The following table summarizes the fair values of the assets acquired and liabilities assumed as of the acquisition
dates for acquisitions closed during 2014:
$
Accounts receivable
Property and equipment
Prepaid expenses
Other assets
Intangible assets:
Customer relationships
Trade name
Customer backlog
Non-compete
Total Assets
Liabilities
Net assets acquired
Consideration paid (Cash, Notes and stock)
Contingent earn-out liability (Cash and stock)
Total Consideration
Excess consideration over the amounts assigned to the net assets acquired (Goodwill)
$
2,567
116
41
7
2,505
369
315
466
6,386
(576 )
5,810
9,560
286
9,846
4,036
Goodwill was recorded based on the amount by which the purchase price exceeded the fair value of the net assets
acquired and the amount is attributable to the reputation of the businesses acquired, the workforces in place and the
synergies to be achieved from these acquisitions. For income tax purposes, goodwill from these acquisitions is deductible
over a fifteen-year period.
The consolidated financial statements of the Company for the year ended December 31, 2014 include the results of
operations from the businesses acquired during 2014 from their respective dates of acquisition to December 31, 2014. For
the year ended December 31, 2014, the results include gross revenues and pre-tax income of approximately $27,400 and
$1,100, respectively. The consolidated financial statements of the Company for the year ended December 31, 2013 include
the results of operations from the business acquired in 2013 from the date of acquisition to December 31, 2013 and include
gross revenues and pre-tax income of approximately $3,700 and $600, respectively. Included in general and administrative
expense for each of the years ended December 31, 2014 and 2013 is $292 and $30, respectively, of acquisition-related costs
pertaining to the Company’s acquisition activities.
The following table presents the unaudited, pro forma consolidated results of operations (in thousands, except per
share amounts) for the fiscal year ended December 31, 2014 and 2013 as if the NV5, LLC acquisition had occurred as of
January 1, 2013. The pro forma information provided below is compiled from the financial statements of the combined
companies and includes pro forma adjustments for amortization expense, reduction in certain agreed on expenses, interest
expense and the income tax impact of these adjustments. The pro forma results are not necessarily indicative of (i) the
results of operations that would have occurred had the NV5, LLC operations actually been acquired on January 1, 2013; or
(ii) future results of operations:
Gross revenues
Comprehensive income
Basic earnings per share
Diluted earnings per share
For the year ended
December 31, December 31,
2014
2013
$
$
$
$
112,455 $
4,764 $
0.92 $
0.84 $
92,185
3,028
0.81
0.75
67
NV5 Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
The Company determined that neither the AQC, ORSI, or Buric acquisitions constitute significant business
combinations individually or in the aggregate. Therefore, pro forma financial statements are not required to be disclosed.
Note 5 – Accounts Receivable, net
Accounts receivable, net consists of the following:
Billed
Unbilled
Contract retentions
Less: allowance for doubtful accounts
Accounts receivable, net
December 31, December 31,
2014
2013
$
$
18,897 $
8,336
627
27,860
(845 )
27,015 $
12,301
5,118
623
18,042
(1,320 )
16,722
Billed accounts receivable represent amounts billed to clients that remain uncollected as of the balance sheet date.
Unbilled accounts receivable represent recognized revenues 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.
Activity in the allowance for doubtful accounts consisted of the following:
Balance as of the beginning of the year
Provision for doubtful accounts
Write-offs of uncollectible accounts
Other, net
Balance as of the end of the year
Note 6 – Property and Equipment, net
Property and equipment, net consists of the following:
Office furniture and equipment
Computer equipment
Survey and field equipment
Leasehold improvements
Accumulated depreciation
Property and equipment – net
December 31, December 31,
2014
2013
$
$
1,320 $
(136 )
(339 )
-
845 $
1,631
22
(290 )
(43 )
1,320
December 31, December 31,
2014
2013
$
$
341 $
1,571
1,027
1,096
4,035
(2,410 )
1,625 $
224
1,013
1,067
1,032
3,336
(2,026 )
1,310
Depreciation expense for the years ended December 31, 2014 and 2013 was $561 and $536, respectively.
68
NV5 Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
Note 7 – Goodwill and Intangible Assets
Goodwill
The table set forth below shows the change in goodwill during fiscal 2014:
Balance as of the beginning of the year
Acquisitions
Balance as of the end of the period
Intangible assets
December 31,
2014
$
$
7,106
4,036
11,142
Intangible assets, net, at December 31, 2014 and 2013 consist of the following:
Customer relationships
Trade name
Customer backlog
Non-compete
Total
December 31, 2014
December 31, 2013
Gross
Carrying
Amount
Accumulated
Amortization
Net
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Amount
$
$
6,780 $
1,227
1,200
672
9,879 $
(2,449 ) $
(1,048 )
(952 )
(209 )
(4,658 ) $
4,331 $
179
248
463
5,221 $
4,275 $
858
885
207
6,225 $
(1,653 ) $
(813 )
(720 )
(46 )
(3,232 ) $
2,622
45
165
161
2,993
Trade names are amortized on a straight-line basis over their estimated lives ranging from one to three years.
Customer backlog and customer relationships are amortized based on the future expected revenues, with weighted average
amortization periods ranging from 1 to 9 years. Non-compete agreements are amortized over their contractual lives ranging
from 4 to 5 years. The following table summarizes the weighted average useful lives of intangible assets acquired during
2014:
Customer relationships
Trade name
Customer backlog
Non-compete
Weighted
Average
Useful Life
9.4
1.4
1.6
3.4
Amortization expense for the years ended December 31, 2014 and 2013 was $1,427 and $978, respectively.
As of December 31, 2014, the future estimated aggregate amortization related to intangible assets is as follows:
69
NV5 Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
Period ending December 31,
2015
2016
2017
2018
2019
Thereafter
Total
Note 8 – Accrued Liabilities
Accrued liabilities consist of the following:
Stock payable for acquisitions
Deferred rent
Payroll and related taxes
Professional liability reserve
Benefits
Accrued vacation
Other
Total
Note 9 – Notes Payable
Notes payable consists of the following:
Term Loan
Note Payable
Uncollateralized promisory notes
Total Debt
(Less current maturities)
Long-term debt, net of current maturities
Credit Facility
$
$
1,391
902
706
529
444
1,249
5,221
December 31, December 31,
2014
2013
$
$
46 $
530
1,507
136
123
1,386
1,035
4,763 $
192
486
864
248
916
1,088
395
4,189
December 31, December 31,
2014
2013
$
$
318 $
1,231
4,707
6,256
(2,878 )
3,378 $
1,144
1,707
1,376
4,227
(1,725 )
2,502
On January 31, 2014, the Company entered into a Business Loan Agreement with Western Alliance Bank, an
Arizona corporation (“Western Alliance”), as lender, which was amended on September 3, 2014 and provides for a two-
year, $8,000 revolving credit facility with a maturity date of January 31, 2016 (the “Credit Facility”). The interest rate is
70
NV5 Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
prime rate plus 0.50%, with a minimum of 3.75%, which was the interest rate as of December 31, 2014. The Credit Facility
contains a cross default and cross collateralization provision with the Term Loan described below. The Credit Facility
contains certain financial covenants, including an annual maximum debt to tangible net worth ratio of 3.0:1.0 as of
December 31, 2014 and for each annual period ending on the last day of each fiscal year thereafter. In addition, the Credit
Facility contains an annual minimum debt service coverage ratio equal to 1.5:1.0 for each annual period ending on the last
day of the fiscal year beginning December 31, 2013. The 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. The Credit Facility is guaranteed by (i) NV5 Global, (ii) NV5 and (iii) AK. The Credit Facility is
secured by a first priority lien on substantially all of the assets of NV5 Holdings Inc., NV5 Global and NV5. In connection
with entering into the Credit Facility, on January 31, 2014, the Company terminated two credit facilities totaling $4,000. In
conjunction with closing the Credit Facility, the Company paid approximately $27 in debt issuance costs, which are
included in Prepaid Expenses on the consolidated balance sheet and are being amortized into interest expense over the two-
year term of the Credit Facility. As of December 31, 2014, the outstanding balance on the Credit Facility was $0.
Term Loan
The Company has a note payable to Western Alliance, with a maturity date of February 1, 2015 (the “Term Loan”).
The Term Loan was amended on September 3, 2014 to adjust the guarantors and certain financial covenants. The interest
rate on the Term Loan is prime rate with a minimum of 4.50%. As of December 31, 2014 and 2013, the actual interest rate
was 4.50% and 5.0%, respectively. The Term Loan is payable in monthly principal installments of $46 with a lump sum of
the remaining principal balance outstanding due at maturity, which was repaid in full as of February 1, 2015. The Term
Loan is collateralized by substantially all of the Company’s assets and is guaranteed by NV5 Holdings, Inc., NV5 and AK.
As of December 31, 2014 and 2013, the outstanding balance on the Term Loan was approximately $318 and $1,100,
respectively.
Note Payable
The note held by the seller of Nolte Associates Inc. (the “Nolte Note”) is currently outstanding with a maturity date
of July 29, 2017. The Nolte Note bears interest at the prime rate plus 1%, subject to a maximum rate of 7.0%. As of
December 31, 2014 and 2013, the actual interest rate was 4.25%. Under the terms of the Nolte Note, as amended, the
Company pays quarterly principal installments of approximately $100 plus interest. The Nolte Note is unsecured and is
subordinated to the Term Loan, although the Company is permitted to make periodic principal and interest payments. As of
December 31, 2014 and 2013, the outstanding balance on the Nolte Note was approximately $1,231 and $1,707,
respectively.
Uncollateralized Promissory Notes
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 $300 as of December 31, 2014.
On June 30, 2014, the Company acquired certain assets of ORSI. The purchase price included an uncollateralized
non-interest bearing promissory note in the aggregate principal amount of $450 (the “ORSI Note”) for which the Company
has imputed interest at a rate of 3.75%. This note is payable in two equal payments of $225 due on the first and second
anniversaries of June 30, 2014, the effective date of the acquisition. The carrying value of the ORSI Note was
approximately $434 as of December 31, 2014.
On March 21, 2014, the Company acquired all of the outstanding equity interests of NV5, LLC. The purchase price
included a $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 $3,000 as of December 31, 2014.
71
NV5 Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
On January 31, 2014, the Company acquired certain assets of AQC. The purchase price included an uncollateralized
non-interest bearing promissory note in the aggregate principal amount of $300 (the “AQC Note”) for which the Company
has imputed interest at a rate of 3.75%. This note is payable in two equal payments of $150 each, due on the first and
second anniversaries of January 31, 2014, the effective date of the acquisition. As of December 31, 2014, the carrying value
of the AQC Note was approximately $294.
On August 12, 2013, the Company acquired certain assets and assumed certain liabilities of Dunn Environmental,
Inc. The purchase price consisted of an uncollateralized promissory note in the aggregate principal amount of
approximately $92, bearing interest at 4.0%, payable in two equal payments of approximately $46 each due on the first and
second anniversaries of August 12, 2013, the effective date of the acquisition. The outstanding balance of this note was $46
and $92 as of December 31, 2014 and 2013, respectively.
On July 8, 2013, the Company acquired certain assets and assumed certain liabilities of the Tampa, Florida division
of Pitman-Hartenstein & Associates. The purchase price included an uncollateralized promissory note in the aggregate
principal amount of $168, bearing interest at 4.0%, payable in two equal payments of $84 each due on December 31, 2013
and December 31, 2014. The outstanding balance of this note was $0 and $84 as of December 31, 2014 and 2013,
respectively.
On April 30, 2013, the Company acquired certain assets and assumed certain liabilities of Consilium Partners. The
purchase price included an uncollateralized promissory note in the aggregate principal amount of $200, bearing interest at
4.0%, payable in three equal payments of approximately $67 each, and due on the first, second and third anniversaries of
April 30, 2013, the effective date of the acquisition,. The outstanding balance of this note was $133 and $200, as of
December 31, 2014 and 2013, respectively.
On July 27, 2012, the Company acquired certain assets and assumed certain liabilities of Kaderabek Company
(“Kaco”). The purchase price included a note in the aggregate principal amount of $2,000 (the “Kaco Note”), bearing
interest at 3.0% for the first year and 200 basis points over the one-year LIBOR for the years thereafter, which is payable as
follows: $500 due by (and paid on) December 28, 2012 and three equal payments of $500 each due on the first, second and
third anniversaries of July 27, 2012, the effective date of the acquisition. As of September 30, 2014 and 2013, the actual
interest rate was 2.58%. The outstanding balance of the Kaco Note was $500 and $1,000 as of December 31, 2014 and
December 31, 2013, respectively.
Future contractual maturities of long-term debt as of December 31, 2014 are as follows:
Period ending December 31,
2015
2016
2017
Total
$
$
2,878
2,000
1,378
6,256
Note 10 – Stock Repurchase Obligation
The stock repurchase obligation at December 31, 2014 and 2013 represents notes payable for the repurchase of
common stock of certain former stockholders’ noncontrolling interest in NV5. These notes are unsecured and subordinated
to bank debt and the maintenance of related debt covenants, and bear interest from 3.25% to 4.25%. The rates adjust
annually based on the prime rate. The notes require quarterly interest and principal payments though their maturity dates,
which range between 2014 and 2019. The outstanding balance of the stock repurchase obligation was $935 and $1,622 as
of December 31, 2014 and 2013, respectively.
72
NV5 Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
Future maturities of these notes as of December 31, 2014 are as follows:
Period ending December 31,
2015
2016
2017
2018
2019
Total
Note 11 – Leases
$
$
372
165
133
133
132
935
The Company leases various office facilities from unrelated parties. These leases expire through 2019 and, in certain
cases, provide for escalating rental payments and reimbursement for operating costs. During the year ended December 31,
2014, the Company leased office space from one stockholder on a month-to-month basis. During the year ended December
31, 2013, the Company leased office space from a stockholder on a month-to-month basis and from the former owner of
Kaco, who became a stockholder on December 28, 2012 in conjunction with the Kaco acquisition. The Company
recognized lease expense of $2,668 and $2,863 during the years ended December 31, 2014 and 2013, respectively, which is
included in “Facilities and facilities related” in the consolidated statements of comprehensive income. Included in these
amounts are $58 and $223 for the years ended December 31, 2014 and 2013, respectively, for office leases with
stockholders of the Company.
Future minimum payments under the non-cancelable operating leases as of December 31, 2014 are as follows:
Period ending December 31,
2015
2016
2017
2018
2019
Thereafter
Total minimum lease payments
Amount
2,631
1,874
1,798
819
647
451
8,220
$
$
Note 12 – Commitments and Contingencies
Litigation, Claims and Assessments
From time to time the Company may become subject to threatened and/or asserted claims arising in the ordinary
course of business. Management is not aware of any matters, either individually or in the aggregate, that are reasonably
possible to have a material adverse effect on the Company’s consolidated financial condition, results of operations or
liquidity.
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 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.
73
NV5 Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
Note 13 – Stock-Based Compensation
In October 2011, the Company’s stockholders approved the 2011 Equity Incentive Plan, which was subsequently
amended and restated in March 2013 (as amended, the “2011 Equity Plan”). The 2011 Equity Plan provides directors,
executive officers, and other employees of the Company with additional incentives by allowing them to acquire ownership
interest in the business and, as a result, encouraging them to contribute to the Company’s success. The Company may
provide these incentives through the grant of stock options, stock appreciation rights, restricted stock, restricted stock units,
performance shares and units, and other cash-based or stock-based awards. As of December 31, 2014, 537,910 shares of
common stock are authorized and reserved for issuance under the 2011 Equity Plan. This reserve automatically increases
on each January 1 from 2014 through 2023, by an amount equal to the smaller of (i) 3.5% of the number of shares issued
and outstanding on the immediately preceding December 31, or (ii) an amount determined by the Company’s Board of
Directors.
During the year ended December 31, 2014, the Company granted from the 2011 Equity Plan 116,794 restricted
shares and units of common stock, respectively, to management, employees, and non-employee directors with an aggregate
deferred compensation amount of approximately $1,071, respectively. The fair value of these shares and units is based on
the quoted market values of the Company’s common stock as of the grant dates, which is a weighted-average of $9.17, per
share. The restricted shares of common stock granted generally provide for service-based vesting after three years
following the grant date.
During the year ended December 31, 2013, the Company granted from the 2011 Equity Plan 104,914 restricted
shares and units of common stock, respectively, to management, employees, and non-employee directors with an aggregate
deferred compensation amount of approximately $827. The fair value of these shares and units is based on the quoted
market values of the Company’s common stock as of the grant dates, which is a weighted-average of $7.88, per share. The
restricted shares of common stock granted generally provide for service-based vesting after three years following the grant
date.
The following table summarizes the status of restricted stock awards as of December 31, 2014 and 2013, and changes
during the year ended December 31, 2014:
Restricted stock and units outstanding at January 1, 2014
Granted
Vested
Forfeited/Canceled
Restricted stock and units outstanding at December 31, 2014
Wtd. Avg.
Grant date
Fair value
Shares
514,050 $
116,794
-
(8,432 )
622,412 $
3.55
9.17
-
8.45
4.53
Share-based compensation expense relating to restricted stock awards during the years ended December 31, 2014 and
2013 was $752 and $365, respectively. As of December 31, 2014 and 2013, no shares or units have vested since the 2011
Equity Plan inception, and approximately $1,265 of deferred compensation, which is expected to be recognized over the
remaining weighted average vesting period of 1.5 years is unrecognized at December 31, 2014.
74
NV5 Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
Note 14 – Employee Benefit Plan
The Company sponsors a 401(k) Profit Sharing and Savings Plan (the “401(k) Plan”). Employees meeting certain age
and length of service requirements may contribute up to the defined statutory limit into the 401(k) Plan. The 401(k) Plan
allows for the Company to make matching contributions into the 401(k) Plan and profit sharing contributions in such
amounts as may be determined by the Board of Directors. The Company assesses its matching contributions on a quarterly
basis based primarily on Company performance in previous periods.
The Company contributed $309 and $232, respectively, to the 401(k) Plan for the years ended December 31, 2014
and 2013, respectively.
Note 15 – Income Taxes
Income tax expense (benefit) for the years ended December 31, 2014 and 2013 consisted of the following:
Year ended
December 31, December 31,
2014
2013
Current:
Federal
State
Total current income tax expense
Deferred:
Federal
State
Total deferred income tax (benefit)
$
2,519 $
309
2,828
191
57
248
Total income tax expense
$
3,076 $
1,369
71
1,440
(409 )
(157 )
(566 )
874
Temporary differences comprising the net deferred income tax asset (liability) shown in the Company’s consolidated
balance sheets were as follows:
Deferred tax asset:
Allowance for doubtful accounts
Accrued compensation
Deferred rent
Acquired intangibles
State income taxes
Other
Total deferred tax asset
Deferred tax liability:
State income taxes
Depreciation and amortization
Other
Total deferred tax liability
Net deferred tax asset
December 31, December 31,
2014
2013
$
$
251 $
867
220
498
36
120
1,992
-
(294 )
(217 )
(511 )
1,481 $
408
888
202
222
-
192
1,912
(40 )
(108 )
(36 )
(184 )
1,728
75
NV5 Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
Total income tax expense (benefit) was different than the amount computed by applying the Federal statutory rate as
follows:
Tax at federal statutory rate
State taxes, net of Federal benefit
Federal and state tax credits
Changes in unrecognized tax position
Discrete federal tax benefit
Domestic production activities deduction
Other permanent differences, net
Total income tax expense
Year ended
December 31, December 31,
2014
2013
$
$
2,709 $
392
(283 )
550
-
(230 )
(62 )
3,076 $
1,235
227
(367 )
-
(168 )
(107 )
54
874
As of December 31, 2014, the Company had net current and net non-current deferred income tax assets of $358 and
$1,123, respectively. As of December 31, 2013, the Company had current and net non-current deferred income tax assets of
$1,004 and $724, respectively. No valuation allowance against the Company’s net deferred income tax assets is needed as
of December 31, 2014 and 2013. Deferred income tax liabilities primarily relate to intangible assets and accounting basis
adjustments where the Company has a future obligation for tax purposes.
The Company’s consolidated effective income tax rate was 38.6% for the year ended December 31, 2014. The
difference between the effective tax rate and the combined statutory federal and state tax rate of 39.0% is principally due to
the domestic production activities deduction and research and development credits as well as higher tax deductions realized
on the Company’s 2013 federal and state tax returns filed during the third quarter of 2014. The Company’s consolidated
effective income tax rate was 24.1% for the year ended December 31, 2013. The reduction in the effective tax rate
compared to the combined statutory federal and state tax rate of 39.0% is principally due to the domestic production
activities deduction as well as higher tax deductions realized on its 2012 federal and state tax returns filed during the third
quarter of 2013. The effective tax rate for the year ended December 31, 2013 also includes the discrete federal tax benefit
of $168 (4.6%) related to the retroactive legislative reinstatement on January 2, 2013 of the research and development tax
credit for the year ended December 31, 2012, which is required to be included in the period the reinstatement was enacted
into law. In January 2013, the federal government extended research and development tax credits for years 2012 and 2013.
Accordingly, the Company recognized the benefits for 2012 research and development credits in 2013. In December 2014,
the federal government extended research and development tax credits for 2014.
The Company evaluates tax positions for recognition using a more-likely-than-not recognition threshold, and those
tax positions eligible for recognition are measured as the largest amount of tax benefit that is greater than 50% likely of
being realized upon the effective settlement with a taxing authority that has full knowledge of all relevant information.
Fiscal years 2005 through 2014 are considered open tax years in the State of California and 2011 through 2014 in the U.S.
federal jurisdiction and other state jurisdictions.
In 2011, the California Franchise Tax Board (“CFTB”) initiated an examination of the state of California tax filings
and raised questions about certain research and development tax credits generated and included on the tax returns of an
acquired company for the years 2005 to 2009. The Company has been responding to inquiries generated by the CFTB
regarding their agreed upon sample of contracts. During the fourth quarter of 2014, the Company received in writing some
correspondence from the CFTB on this matter. There has been no final determination from the CFTB as to their acceptance
of the filed tax credit. An extension was executed in March 2015, which extended the statute of limitations through
September 2016 on the exam period. As a result of this correspondence received in the fourth quarter of 2014 from the
76
NV5 Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
CFTB, the Company concluded it would be prudent to record a reserve of $550 for the year ended December 31, 2014,
which impacted the effective income tax rate.
The total amount of gross unrecognized tax liability as of December 31, 2014 and 2013 was $550 and $0,
respectively. A reconciliation of the beginning and ending amount of gross unrecognized tax liability is as follows:
Unrecognized tax liability—beginning of the year
Gross increases/(decrease)—prior year
Gross increases/(decrease)—current year
Unrecognized taxliability—end of the year
Note 16 – Subsequent Events
Year ended
December 31,
2014
$
$
-
550
-
550
On January 30, 2015, the Company acquired Joslin, Lesser and Associates, Inc. (“JLA”), a program management and
owner’s representation consulting firm that primarily services government owned facilities and public K through 12 school
districts in the Boston, MA area. The purchase price was up to $5,500 and was made with a combination of cash, note
payable and the Company’s common stock.
Under the acquisition method of accounting, the Company will recognize the assets acquired and the liabilities
assumed at their fair values and will record an allocation of the purchase price to the tangible and identifiable intangible
assets acquired and liabilities assumed based on their estimated fair values as of the acquisition dates. The Company
expects goodwill will be recorded based on the amount by which the purchase price exceeds the fair value of the net assets
acquired and the amount attributable to the reputation of the businesses acquired, the workforce in place and the synergies
to be achieved from these acquisitions. In order to determine the fair values of tangible and intangible assets acquired and
liabilities assumed, the Company engaged a third party independent valuation specialist. The Company expects to establish
a preliminary purchase price allocation with respect to these transactions by the end of the second quarter of 2015.
77
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
Controls and Procedures
As of December 31, 2014, the end of the period covered by this Annual Report on Form 10-K, we carried out an
evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and
our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as
such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, our Chief
Executive Officer and our Chief Financial Officer concluded that, as of December 31, 2014, the end of the period covered
by this Annual Report on Form 10-K, the Company’s disclosure controls and procedures, were effective such that the
information relating to the Company required to be disclosed in our SEC reports (i) is recorded, processed, summarized and
reported within the time periods specified in the SEC’s rules and forms and (ii) is accumulated and communicated to the
Company’s management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow
timely decisions regarding required disclosure.
Management's Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate control over financial reporting (as
defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended). Internal control over
financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting for
external purposes in accordance with accounting principles generally accepted in the United States. Because of its inherent
limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our
financial statements would be prevented or detected. Our management, with the participation of our Chief Executive
Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting as of
December 31, 2014. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in 2013 Internal Control—Integrated Framework. Our management
has concluded that, as of December 31, 2014, our internal control over financial reporting was effective based on these
criteria.
Report of Independent Registered Public Accounting Firm
This Annual Report on Form 10-K does not include an attestation report of the Company's independent registered
public accounting firm regarding internal control over financial reporting. Management's report was not subject to
attestation by the Company's independent registered public accounting firm pursuant to the rules of the SEC, applicable to
emerging growth companies and smaller reporting companies that permit the Company to provide only management's
report in this Annual Report on Form 10-K.
Changes in Internal Control Over Financial Reporting
Under the supervision and with the participation of our management, including our Principal Executive Officer and
Principal Financial Officer, we conducted an evaluation of any changes in our internal control over financial reporting (as
such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during our most recently
completed fiscal quarter. Based on that evaluation, our Principal Executive Officer and Principal 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 is reasonably likely to materially affect, our internal control over
financial reporting.
ITEM 9B. OTHER INFORMATION.
None.
78
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Incorporated by reference from our definitive proxy statement for the 2015 Annual Meeting of Stockholders, to be
filed within 120 days of our fiscal 2014 year end.
ITEM 11. EXECUTIVE COMPENSATION.
Incorporated by reference from our definitive proxy statement for the 2015 Annual Meeting of Stockholders, to be
filed within 120 days of our fiscal 2014 year end.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
Incorporated by reference from our definitive proxy statement for the 2015 Annual Meeting of Stockholders, to be
filed within 120 days of our fiscal 2014 year end.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
Incorporated by reference from our definitive proxy statement for the 2015 Annual Meeting of Stockholders, to be
filed within 120 days of our fiscal 2014 year end.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
Incorporated by reference from our definitive proxy statement for the 2015 Annual Meeting of Stockholders, to be
filed within 120 days of our fiscal 2014 year end.
79
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Financial Statements:
PART IV
(1) The financial statements required to be included in this Annual Report on Form 10-K are included in Item 8
therein.
(2) All supplemental schedules have been omitted since the information is either included in the financial
statements or the notes thereto or they are not required or are not applicable.
(3) See attached Exhibit Index of this Annual Report on Form 10-K.
(b) Exhibits:
Number Description
2.1
Membership Interest Purchase Agreement, dated as of March 21, 2014, by and among AK Environmental, LLC, a
North Carolina limited liability company, Amy B. Gonzales and Kelly S. Caldwell, as the sole members of AK
Environmental, LLC, and NV5 Holdings, Inc. (Incorporated by reference to Exhibit 2.1 to the Company's Current
Report on Form 8-K filed with the SEC on March 26, 2014)
3.1
Amended and Restated Certificate of Incorporation (Incorporated by reference to Exhibit 3.1 to the Company’s
Registration Statement on Form S-1 filed with the SEC on January 28, 2013)
3.2
Bylaws (Incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1 filed with
the SEC on January 28, 2013)
4.1
Specimen Unit Certificate (Incorporated by reference to Exhibit 4.1 to Amendment No. 1 to the Company’s
Registration Statement on Form S-1 filed with the SEC March 11, 2013)
4.2
Specimen Stock Certificate (Incorporated by reference to Exhibit 4.2 to Amendment No. 1 to the Company’s
Registration Statement on Form S-1 filed with the SEC March 11, 2013)
4.3
Specimen Warrant Certificate (included in Exhibit 4.5) (Incorporated by reference to Exhibit 4.5 to Amendment
No. 1 to the Company’s Registration Statement on Form S-1 filed with the SEC on March 11, 2013)
4.4
Underwriting Agreement, dated March 26, 2013, between the Registrant and Roth Capital Partners, LLC
(Incorporated by reference to Exhibit 1.1 of the Current Report on Form 8-K filed with the SEC on April 1, 2013)
4.5
Underwriter’s Warrant dated April 2, 2013 (Incorporated by reference to Exhibit 4.1 of the Current Report on
Form 8-K filed with the SEC on April 5, 2013)
4.6
Warrant Agreement, dated April 2, 2013, between Registrar and Transfer Company and NV5 Holdings, Inc.
(Incorporated by reference to Exhibit 4.2 of the Current Report on Form 8-K filed with the SEC on April 5, 2013)
4.7
Amended and Restated Warrant Agreement, dated September 24, 2013, between Registrar and Transfer Company
and the Registrant (Incorporated by reference to Exhibit 4.1 of the Current Report on Form 8-K filed with the SEC
on September 27, 2013)
10.1
2011 Equity Incentive Plan, as amended through March 8, 2013† (Incorporated by reference to Exhibit 10.1 to
Amendment No. 1 to the Company’s Registration Statement on Form S-1 filed with the SEC on March 11, 2013)
10.2
Form of Restricted Stock Agreement† (Incorporated by reference to Exhibit 10.2 to Amendment No. 1 to the
Company’s Registration Statement on Form S-1 filed with the SEC on March 11, 2013)
80
10.3
Form of Restricted Stock Unit Agreement† (Incorporated by reference to Exhibit 10.3 to Amendment No. 1 to the
Company’s Registration Statement on Form S-1 filed with the SEC on March 11, 2013)
10.4
Form of Indemnity Agreement (Incorporated by reference to Exhibit 10.5 to the Company’s Registration
Statement on Form S-1 filed with the SEC on January 28, 2013)
10.6
Employment Agreement, dated April 11, 2011, between NV5, Inc. and Dickerson Wright† (Incorporated by
reference to Exhibit 10.7 to the Company’s Registration Statement on Form S-1 filed with the SEC on January 28,
2013)
10.7
Employment Agreement, dated October 1, 2010, between NV5, Inc. (formerly Vertical V, Inc.) and Richard Tong,
as amended by that certain First Amendment to Employment Agreement, dated as of March 18, 2011, between
NV5, Inc. and Richard Tong† (Incorporated by reference to Exhibit 10.8 to the Company’s Registration Statement
on Form S-1 filed with the SEC on January 28, 2013)
10.8
Employment Agreement, dated October 1, 2010, between NV5, Inc. (formerly Vertical V, Inc.) and Alexander
Hockman, as amended by that certain First Amendment to Employment Agreement, dated as of March 18, 2011,
between NV5, Inc. and Alexander Hockman† (Incorporated by reference to Exhibit 10.9 to the Company’s
Registration Statement on Form S-1 filed with the SEC on January 28, 2013)
10.9
Employment Agreement, dated January 25, 2012, between NV5, Inc. and Michael Rama† (Incorporated by
reference to Exhibit 10.10 to the Company’s Registration Statement on Form S-1 filed with the SEC on January
28, 2013)
10.10
Employment Agreement, dated October 1, 2010, between NV5, Inc. (formerly Vertical V, Inc.) and MaryJo
O’Brien, as amended by that certain First Amendment to Employment Agreement, dated as of March 18, 2011,
between NV5, Inc. and MaryJo O’Brien† (Incorporated by reference to Exhibit 10.11 to the Company’s
Registration Statement on Form S-1 filed with the SEC on January 28, 2013)
10.11
Business Loan Agreement, dated March 16, 2012, between NV5, Inc., as borrower, and Torrey Pines Bank, as
lender, regarding Loan Number 0901122297 (Incorporated by reference to Exhibit 10.12 to the Company’s
Registration Statement on Form S-1 filed with the SEC on January 28, 2013)
10.12
Business Loan Agreement, dated September 19, 2012, between NV5, Inc., as borrower, and Torrey Pines Bank, as
lender, regarding Loan Number 0909121377 (Incorporated by reference to Exhibit 10.13 to the Company’s
Registration Statement on Form S-1 filed with the SEC on January 28, 2013)
10.13
Business Loan Agreement, dated September 19, 2012, between Nolte Associates, Inc., as borrower, and Torrey
Pines Bank, as lender, regarding Loan Number 0909122289 (Incorporated by reference to Exhibit 10.14 to the
Company’s Registration Statement on Form S-1 filed with the SEC on January 28, 2013)
10.14
Stock Purchase Agreement, dated as of August 3, 2010, between George S. Nolte Jr., George S. Nolte Jr. and
Jacqueline A. Nolte, as trustee of the Nolte Family Trust u/t/a/ dated March 28, 1989, as amended and restated
August 20, 2011, and NV5, Inc. (formerly Vertical V, Inc.) (Incorporated by reference to Exhibit 10.15 to the
Company’s Registration Statement on Form S-1 filed with the SEC on January 28, 2013)
10.15
10.16
Letter Agreement, dated March 12, 2013, between NV5 Holdings, Inc. and the Nolte Family Trust u/t/a dated
March 23, 1989, as amended and restated August 20, 2011 (Incorporated by reference to Exhibit 10.15 to
Amendment No. 2 to the Company’s Registration Statement on Form S-1 filed with the SEC on March 20, 2013)
Business Loan Agreement (Loan Number 0309136049), dated January 31, 2014, between NV5 Holdings, Inc., as
borrower, and Western Alliance Bank, as lender (Incorporated by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K filed with the SEC on February 5, 2014)
10.17
First Amendment to Business Loan Agreement, dated September 3, 2014, between NV5 Holdings, Inc., as
81
borrower, and Western Alliance Bank, as lender, regarding Loan Number 0309136049 (Incorporated by reference
to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on September 9, 2014)
21.1*
Subsidiaries of the Registrant
23.1*
Consent of Independent Registered Public Accounting Firm
24.1*
Power of Attorney (included in signature page)
31.1*
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) under the Securities Exchange
Act of 1934, as adopted pursuant to § 302 of the Sarbanes-Oxley Act of 2002
31.2*
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) under the Securities Exchange
Act of 1934, as adopted pursuant to § 302 of the Sarbanes-Oxley Act of 2002
32.1
Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted
pursuant to § 906 of the Sarbanes-Oxley Act of 2002**
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
† Indicates a management contract or compensatory plan, contract or arrangement.
* Filed herewith.
**
Furnished herewith. This certification is being furnished solely to accompany this report pursuant to 18 U.S.C.
Section 1350, and is not being filed for purposes of Section 18 of the Exchange Act of 1934, as amended, and is not to be
incorporated by reference into any filings of the Company, whether made before or after the date hereof, regardless of
any general incorporation language in such filing.
82
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
NV5 HOLDINGS, INC.
By: /s/ Dickerson Wright
Dickerson Wright
Chairman and Chief Executive Officer
Date: March 27, 2015
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and
appoints Dickerson Wright and Richard Tong, and each of them, the individual’s true and lawful attorneys-in-fact and
agent, with full power of substitution and resubstitution, for the person and in his or her name, place and stead, in any and
all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits
thereto, and other documents in connection therewith with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, and fully and to all intents and purposes as he might or could
do in person hereby ratifying and confirming all that said attorney-in-fact and agents, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Dickerson Wright
Dickerson Wright
Chairman and Chief Executive Officer
(Principal Executive Officer)
March 27, 2015
/s/ Michael P. Rama
Michael P. Rama
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
March 27, 2015
/s/ Alexander A. Hockman
Chief Operating Officer, President and Director
March 27, 2015
Alexander A. Hockman
/s/ Donald C. Alford
Executive Vice President and Director
March 27, 2015
Donald C. Alford
/s/ Gerald J. Salontai
Director
March 27, 2015
Gerald J Salontai
/s/ Jeffrey A. Liss
Director
March 27, 2015
Jeffrey A. Liss
/s/ William D. Pruitt
Director
March 27, 2015
William D. Pruitt
/s/ Francois Tardan
Director
March 27, 2015
Francois Tardan
83
Executive Officers
Dickerson Wright
Chief Executive Officer and Chairman
Alexander A. Hockman
Chief Operating Officer and President
Donald C. Alford
Executive Vice President
Richard Tong
Executive Vice President and General Counsel
Michael P. Rama
Vice President and Chief Financial Officer
MaryJo O’Brien
Executive Vice President, Chief Administrative Officer and Secretary
Board of Directors
Dickerson Wright
Chief Executive Officer and Chairman, NV5 Holdings, Inc.
Alexander A. Hockman
Chief Operating Officer and President, NV5 Holdings, Inc.
Donald C. Alford
Executive Vice President, NV5 Holdings, Inc.
Jeffrey A. Liss
Independent Consultant (investment and business consulting services)
William D. Pruitt
General Manager, Pruitt Enterprises, LP
President of Pruitt Ventures, Inc
Gerald J. Salontai
Chief Executive Officer, Salontai Consulting Group
François Tardan
Chief Executive Officer, Leitmotiv Private Equity
About NV5
NV5 Holdings, Inc. (NASDAQ: NVEE)
is a provider of professional and technical
engineering and consulting solutions
to public and private sector clients in
the infrastructure, energy, construction,
real estate and environmental markets.
NV5 primarily focuses on (cid:192) ve business
verticals: construction quality assurance,
infrastructure, engineering and support
services, energy, program management,
and environmental solutions. The
Company operates 29 of(cid:192) ces in California,
Colorado, Florida, Massachusetts,
New Jersey, Ohio, Pennsylvania, Utah
and Wyoming and is headquartered in
Hollywood, Florida.
Additional information about NV5 and
the services we provide can be found on
the Company’s website at www.NV5.com.
Forward-Looking
Statements
This report contains “forward-looking
statements” within the meaning of the
safe harbor provisions of the U.S. Private
Securities Litigation Reform Act of
1995. The Company cautions that these
statements are quali(cid:192) ed by important
factors that could cause actual results to
differ materially from those re(cid:193) ected by
the forward-looking statements contained
in this report. Such factors include: (a)
changes in demand from the local and
state government and private clients that
we serve; (b) general economic conditions,
nationally and globally, and their effect
on the market for our services; (c)
competitive pressures and trends in our
industry and our ability to successfully
compete with our competitors; (d)
changes in laws, regulations, or policies;
and (e) the “Risk Factors” set forth in the
Company’s most recent SEC (cid:192) lings. All
forward-looking statements are based on
information available to the Company
on the date hereof, and the Company
assumes no obligation to update such
statements, except as required by law.
You may obtain copies of NV5’s
annual report and Form 10-K by
contacting our Investor Relations
Department via email at ir@nv5.com
or via phone at 408.392.7233.