2020 ANNUAL REPORT
TESTING, INSPECTION & CONSULTING · INFRASTRUCTURE · UTILITY SERVICES · ENVIRONMENTAL HEALTH SCIENCES · BUILDINGS & PROGRAM MANAGEMENT · GEOSPATIAL TECHNOLOGY
A B O U T N V5
is a provider of compliance, technology,
NV5 Global, Inc. (NASDAQ: NVEE)
and engineering consulting solutions for public and private sector clients
infrastructure, utility, and building assets and systems. The
suppor ting
Company primarily focuses on six business verticals: testing,
inspection &
consulting, infrastructure suppor t services, utility services, buildings & program
management, environmental health sciences, and geospatial
technology
services. NV5 operates out of more than 100 offices nationwide and abroad.
Additional information about NV5 and the services we provide can be found on
the Company’s website at www.NV5.com.
F O R WA R D - LO O K I N G S TAT E M E N TS
This repor t 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 qualified by impor tant factors that
could cause actual results to differ materially from those reflected by the forward-
looking statements contained in this repor t. 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 for th in the Company’s most
recent SEC filings.
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 without charge by
contacting our Investor Relations Department via email at ir@nv5.com or via phone
at 954.637.8048.
D E A R S T O C K H O L D E R S,
global pandemic. Our success throughout this unique period can be attributed to our organization’s ability to adapt,
led by our employees, the support of our stockholders, and our long-standing client relationships. Throughout the
pandemic we have adhered to the COVID-19 health and safety practices as recommended by the Centers for Disease
Control and Prevention. The vast majority of our employees worked remotely. We therefore grew our vir tual tools
to continue delivering service to our clients without interruption. The result of these effor ts, along with our position
Geospatial
demonstrating the success of the Quantum Spatial acquisition. The core business also delivered a strong performance
and we expect to see sustainable expansion of our services to suppor t domestic utilities in reliable power delivery, LNG
storage, and fire mitigation services. The Infrastructure and Testing, Inspection & Consulting ver ticals also grew in
to the COVID environment, we expect these businesses to rebound with the opening of the economy post-pandemic.
the synergies of these integrations with improved profit margins over the prior year. We also welcomed our latest
acquisition, Mediatech Design Group, a leader in technology design services, strengthening our multidisciplinary
engineering solutions for large-scale projects in the Middle East and South East Asia. NV5’s ascension has been the
result of organic growth as well as growth through acquisitions, and we continue to pursue acquisition opportunities
to strengthen our ver ticals and expand our capabilities in technologies that deliver high margins and barriers
to entry.
Prepared by S&P Global Market Intelligence
W H AT W E H AV E A C H I E V E D
as the fastest growing company on Zweig Group’s “Hot Firm List” for the four th consecutive year. We also
100 Pure Design Firms list.
successful year for selling across ver ticals and delivering the full breadth of NV5’s capabilities to our
valued clients.
W H AT W E A R E P L A N N I N G F O R T H E F U T U R E
Throughout our history, NV5 has established a track
targets and
record of setting ambitious growth
We have established a new growth target for the
company to generate $1 billion in gross revenue run
more than 100 NV5 offices are united in our drive to
achieve this milestone.
and a healthy backlog. We will continue to invest in
acquisitions to strengthen our ver ticals, introduce new
technologies that provide higher margins and barriers
to entry, and drive organic growth throughout the
organization.
suppor t of NV5.
Sincerely,
Dickerson Wright, P.E.
Chairman and CEO
Use of Non-GAAP Financial Measures; Comparability of Certain Measures
Earnings before interest, taxes, depreciation, and amortization (“EBITDA”) is not a measure of financial performance
under GAAP. Adjusted EBITDA reflects adjustments to EBITDA to eliminate stock-based compensation expense and
acquisition-related costs. Management believes Adjusted EBITDA, in addition to operating profit, Net Income, and
other GAAP measures, is a useful indicator of our financial and operating performance and our ability to generate
cash flows from operations that are available for taxes, capital expenditures, and debt service.
Our definition of Adjusted EBITDA may differ from other companies reporting similarly named measures. This
measure should be considered in addition to, and not as a substitute for, or superior to, other measures of financial
performance prepared in accordance with GAAP, such as Net Income.
RECONCILIATION OF GAAP NET INCOME TO ADJUSTED EBITDA
Net Income
Add: Interest expense
Income tax expense
Depreciation and amortization
Stock-based compensation
Acquisition-related costs
Twelve Months Ended
January 2, 2021
December 28, 2019
$ 21,018
$ 23,756
15,181
7,950
45,488
14,955
856
2,275
5,176
25,816
10,430
1,819
Adjusted EBITDA
$ 105,448
$ 69,272
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 2, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission File Number 001-35849
NV5 Global, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
200 South Park Road, Suite 350, Hollywood, FL
(Address of principal executive offices)
45-3458017
(I.R.S. Employer Identification No.)
33021
(Zip Code)
Registrant's telephone number, including area code: (954) 495-2112
Securities Registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $0.01 par value
Trading Symbol(s)
NVEE
Name of each exchange on which registered
The NASDAQ Stock 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
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
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files). Yes
No
No
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller
reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report.
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 computed by reference to the last
business day of the registrant’s most recently completed second fiscal quarter was approximately $507.5 million. 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 February 25, 2021, there were 13,295,685 shares outstanding of the registrant’s common stock, $0.01 par value.
Portions of the 2021 definitive Proxy Statement are incorporated by reference into Part III of this Form 10-K.
DOCUMENTS INCORPORATED BY REFERENCE
1
NV5 GLOBAL, INC.
FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
BUSINESS
RISK FACTORS
UNRESOLVED STAFF COMMENTS
PROPERTIES
LEGAL PROCEEDINGS
MINE SAFETY DISCLOSURES
PART I
PART II
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
SELECTED FINANCIAL DATA
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
CONTROLS AND PROCEDURES
OTHER INFORMATION
PART III
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
EXECUTIVE COMPENSATION
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
PRINCIPAL ACCOUNTANT FEES AND SERVICES
ITEM 1
ITEM 1A
ITEM 1B
ITEM 2
ITEM 3
ITEM 4
ITEM 5
ITEM 6
ITEM 7
ITEM 7A
ITEM 8
ITEM 9
ITEM 9A
ITEM 9B
ITEM 10
ITEM 11
ITEM 12
ITEM 13
ITEM 14
ITEM 15
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
PART IV
Page
5
16
31
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31
31
32
33
34
47
48
84
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87
87
87
87
88
2
Cautionary Statement about Forward Looking Statements
Our disclosure and analysis in this Annual Report on Form 10-K and in our 2020 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 “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 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, but are not limited to:
•
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the ongoing effects of the global COVID-19 pandemic;
our ability to retain the continued service of our key professionals and to identify, hire and retain additional
qualified professionals;
changes in demand from the local and state government and private clients that we serve;
general economic conditions, nationally and globally, and their effect on the demand and market for our services;
fluctuations in our results of operations;
the government’s funding and budgetary approval process;
the possibility that our contracts may be terminated by our clients;
our ability to win new contracts and renew existing contracts;
our dependence on a limited number of clients;
our ability to complete projects timely, in accordance with our customers’ expectations, or profitability;
our ability to successfully execute our mergers and acquisitions strategy, including the integration of new
companies into our business;
our ability to successfully manage our growth strategy;
our ability to raise capital in the future;
competitive pressures and trends in our industry and our ability to successfully compete with our competitors;
our ability to avoid losses under lump-sum 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;
3
•
•
•
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 “NV5 Global”, the “Company,” “we,” “us,” and “our” refer to
NV5 Global, Inc., a Delaware corporation, and its consolidated subsidiaries.
4
ITEM 1.
BUSINESS
Overview
PART I
NV5 Global is a provider of professional and technical engineering and consulting solutions to public and private
sector clients in the infrastructure, utility services, construction, real estate, and environmental markets, operating nationwide
and abroad. The Company's clients include the U.S. federal, state and local governments, and the private sector. NV5 Global
provides a wide range of services, including, but not limited to:
Utility services
LNG services
Engineering
Civil program management
Surveying
Testing, inspection & consulting (TIC)
Code compliance consulting
Forensic engineering
Litigation support
Ecological studies
MEP & technology engineering
Commissioning
Program management
Environmental health & safety
Real estate transaction services
Energy efficiency services
3D geospatial data modeling
Environmental & natural resources
Robotic survey solutions
Geospatial data applications & software
As the needs of our clients have evolved and the Company has grown, we organized into three operating and
reportable segments:
•
Infrastructure (INF), includes our engineering, civil program management, utility services, and construction
quality assurance, testing and inspection practices;
• Building, Technology & Sciences (BTS), includes our environmental health, buildings program management, and
MEP & technology engineering practices; and
• Geospatial Solutions ("GEO"), includes our geospatial solution practices.
NV5 Global originally operated as "Nolte Associates, Inc." in California prior to its acquisition in 2010. The Company
completed its initial public offering in March 2013 and has since expanded its scope and service offerings organically and
through acquisitions. We are headquartered in Hollywood, Florida, and operate our business from over 106 locations in the U.S.
and abroad. All of the Company's offices utilize its shared services platform, which consists of human resources, marketing,
finance, information technology, legal, corporate development, and other resources. The platform is scalable and optimizes the
performance and efficiency of our business as we grow. Our centralized shared services platform allows us to better manage our
business through the application of universal financial and operational controls and procedures and increased efficiencies, and
drives lower-cost solutions.
Our primary clients include United States federal, state, municipal, and local government agencies, and military and
defense clients. We also serve quasi-public and private sector clients from the education, healthcare, utility services, and public
utility industries, including schools, universities, hospitals, health care providers, insurance providers, large utility service
providers, and large to small utility service producers.
During our 70 years in the engineering and consulting business, we have worked and continue to work with many
clients including (in alphabetical order):
Airports
Boston Logan Airport, MA
Chicago O’Hare International Airport, IL
Dallas Fort Worth International Airport, TX
Commercial
Bronx Zoo Astor Court Reconstruction, NY
Cleveland Museum of Art, OH
Las Vegas City Hall, NV
Fort Lauderdale Hollywood International Airport, FL
JFK International Airport, NY
Manhattan Waterfront Greenway Improvement, NY
Massachusetts Division of Capital Asset Management, MA
McCarran International Airport, NV
Rose Bowl Stadium, CA
5
Miami International Airport, FL
Orlando International Airport, FL
San Diego International Airport, CA
Education and Public Institutions
Harvard University, MA
Michigan State University, MI
Princeton University, NJ
Rutgers University, NJ
Rice University, TX
Stanford University, CA
University of San Diego, CA
University of Illinois, IL
University of Iowa, IA
University of Maryland, MD
University of Massachusetts, MA
University of Miami, FL
University of Minnesota, MN
University of North Carolina, NC
University of Texas, TX
The National World War II Museum, LA
Healthcare
Atrium Health, NC
Boston Children's Hospital, MA
Cleveland Clinic, OH
Tufts Medical Center, MA
University of Kansas Medical Center, KS
Hospitality
Wynn Resorts, NV & Macau
Military
Peterson Air Force Base, CO
U.S. Department of Defense
U.S. Department of Veteran Affairs
Power and Utilities
Florida Power and Light, FL
Minnesota Power, MN
National Grid
New York Power Authority, NY
PECO Energy Company
University of Utah, UT
Federal, State, Municipal and Local Government Agencies
Portland General Electric, OR
Potomac Electric Power Company
Broward County, FL
California Department of Resources
City of Albuquerque, NM
City of Austin, TX
City of Bakersfield, CA
City of Carlsbad, CA
City of Colorado Springs, CO
City of Fresno, CA
City of Miami, FL
City of Oceanside, CA
City of Philadelphia, PA
City of Sacramento, CA
Sabal Trail Transmission Company
San Diego Gas & Electric, CA
Southern California Gas Company, CA
Spectra Energy, TX
Transportation
California Department of Transportation, or Caltrans, CA
California High Speed Rail, CA
Caldecott Tunnel
Florida Department of Transportation
Illinois Department of Transportation
Macau Light Rail System
Massachusetts Port Authority
Imperial County, CA
Kentucky Commonwealth Office of Technology
New Jersey Department of Transportation, NJ
New Jersey Turnpike Authority, NJ
New Mexico Department of Transportation
Miami-Dade County, FL
Minnesota Department of Natural Resources
New York Department of Transportation, NY
Montana Department of Natural Resources and Conservation North Carolina Department of Transportation
New York City Economic Development Corporation, NY
Oregon Department of Transportation
New York Department of Environmental Protection
Port Authority of New York and New Jersey
New York City Housing Authority, NY
North Carolina Department of Information Technology
Oregon Geospatial Enterprise Office
Oregon LiDAR Consortium
San Diego County, CA
Santa Clara County Government, CA
U.S. Bureau of Land Management
South Carolina Department of Transportation
Utah Department of Transportation, UT
Wisconsin Department of Transportation
Water
California Department of Water Resources
Colorado Water Conservation Board
Metropolitan Water District of Southern California, CA
6
U.S. Department of Homeland Security
U.S. Environmental Protection Agency
U.S. Geological Survey (USGS)
National Oceanic and Atmospheric Administration (NOAA)
Poseidon Desalination Plant, CA
South Florida Water Management District, FL
Washington Department of Natural Resources
Southwest Florida Water Management District
Competitive Strengths
We believe we have the following competitive strengths:
Organizational structure that enhances client service. We operate our business using a flat vertical structure organized
by service offerings rather than a matrix structure organized by geography, which is common among our competitors. Our
structure ensures that clients have access to the entire platform of services we offer and the most highly qualified professionals
within those service verticals, regardless of the location of the project. Our most skilled engineers and professionals in each
service sector work directly with the clients requesting those services, which facilitates relationship-based interactions between
our key employees and our clients, and promotes long-term client relationships. In addition, our vertical structure encourages
entrepreneurialism among our professionals.
Expertise in local markets. To support our vertical service model, we maintain over 106 locations in the United States
and abroad. Each of our offices is staffed with licensed or certified professionals who understand the local and regional markets
in which they serve. Our local professionals focus on client engagement within their local market while benefiting from the
back-office support functions of our shared services platform.
Synergy among our service verticals. We create value for our clients and our shareholders by encouraging our
professionals in different service verticals to work together to pursue new work, new clients, and to expand the range of
services we can provide our existing clients. Our commitment to cross-selling minimizes our use of sub-consultants to meet our
clients’ needs and helps maximize organic growth.
Strong, long-term client relationships. By combining local market experience and providing our clients expert services
in multiple verticals, we have developed strong relationships with our core clients. Some of our professionals have worked with
key clients for decades, including government transportation agencies, public utilities and local or state municipalities. By
serving as a long-term partner with our clients, we gain a deeper understanding of their overall business needs as well as the
unique technical requirements of their projects.
Experienced, talented, and motivated employees. We employ licensed and experienced professionals with a broad
array of specialties and a strong customer service orientation. Our senior staff have an average of more than 20 years of
operating and management experience in the engineering and consulting industry. We prioritize the attraction, motivation, and
retention of top professionals to serve our clients. Our compensation system includes performance-based incentives, including
opportunities for stock ownership.
7
Industry-recognized quality of service. We have developed a strong reputation for quality service based upon our
industry-recognized depth of experience, ability to attract and retain quality professionals, expertise across multiple service
sectors, and our commitment to strategic growth. During the past several years, we have received many industry awards and
national rankings, including:
Engineering News-Record Top 500 Design Firms (#27
in 2020, #34 in 2019, and #45 in 2018)
Environmental Business Journal Achievement Award in
Mergers & Acquisitions (2020 and 2013-2018)
Zweig Group Hot Firm List - (#1 in 2020, 2019, 2018
and 2017)
Building Design + Construction Magazine's Giants 300
Report - #6 (2020), #5 (2019), and #9 (2018)
Engineering/Architecture Firm
Consulting-Specifying Engineer Magazine
Commissioning Giants List - (#10 in 2020 and #12 in
2019)
Environmental Business Journal Achievement Award in
Business Achievement - Large Firms (2020)
Building Design + Construction Magazine's Top 70
Hotel Engineering Firms (#1 in 2019, #2 in 2018)
American Consulting Engineers Council - New York
Engineering Excellence Awards - 2018 Diamond Award
for Freshkills Park Road Project
Engineering News-Record Top 150 Global Firms - (#60
American General Contractors - New Mexico, 2018
in 2020, #70 in 2019, and #87 in 2018)
Best Buildings Award for Gila Catwalk Trail
Engineering News-Record Top 100 Pure Designers -
(#13 in 2020, #18 in 2019, and #25 in 2018)
2018 Advisory Board at Harvard Graduate School of
Design for Sustainable Infrastructure
Fortune Magazine's 100 Fastest Growing Firms List
American Consulting Engineers - New York
(2020, 2019 and 2018)
Consulting-Specifying Engineer Magazine MEP Giants
List - (#19 in 2020 and #17 in 2019)
Engineering Excellence Awards - 2018 Platinum Award
for Coastal Resiliency in Broad Channel Project
Environmental Business Journal Gold Achievement
Award in Business Achievement (2018 and 2017)
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, engineering and technical consulting 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 existing service offerings, or to supplement existing service offerings with new, closely related
service offerings. In the analysis of new acquisitions, we pursue opportunities that provide the critical mass necessary to
function as a profitable operation, that complement existing operations, and that have a strong potential for organic growth. We
believe that expanding our business through strategic acquisitions will give us economies of scale in the areas of finance,
human resources, marketing, administration, information technology, and legal, while also providing cross-selling opportunities
among 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 included in
this Annual Report on Form 10-K.
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 fiscal years 2020, 2019, and 2018,
approximately 68%, 68%, and 67%, respectively, of our gross revenues was attributable to public and quasi-public sector
clients. During unsteady economic periods, we have focused on public sector business opportunities resulting from public
agency outsourcing. We are also positioned to address the challenges presented by the aging infrastructure system of the United
States, and the need to provide solutions for transportation, energy, water, and wastewater 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 has 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 expand our
business within their areas of expertise. We will also continue to provide our personnel with personal and professional growth
opportunities, including additional training, performance-based incentives such as opportunities for stock ownership, and other
competitive benefits.
8
Reportable Segments
Historically, the Company operations were organized into two reportable segments. Our Chief Executive Officer, who
is the chief operating decision maker ("CODM"), re-evaluated the structure of our internal organization as a result of the 2019
acquisition of Geospatial Holdings, Inc. and its subsidiaries, including Quantum Spatial, Inc. (collectively "QSI"), which
resulted in certain changes to our operating and reportable segments. Effective the beginning of fiscal year 2020, our geospatial
solution practices were moved from the Company's INF reportable segment to the Company's new GEO reportable segment. To
reflect management's revised perspective, the Company is now organized into the following three operating and reportable
segments:
Infrastructure (INF) includes our engineering, civil program management, utility services, and construction quality
assurance, testing and inspection practices.
Building, Technology & Sciences (BTS) includes our environmental health sciences, buildings and program
management, and MEP & technology engineering practices.
Geospatial Solutions (GEO) includes our geospatial technology services practice.
The GEO segment has been created in order to provide greater visibility regarding the operational and financial
performance of the Geospatial business given the recent acquisition of QSI. The GEO segment is consistent with how the
Company plans and allocates resources, manages its business, and assesses its performance.
Description of Services
Infrastructure (INF)
Infrastructure, Engineering, and Support Services
We provide our clients with a broad array of services in the areas of infrastructure, engineering, and support. Our
integrated approach provides our clients with consistency and accountability for the duration of the project and allows us to
create value by maximizing efficiencies of scale. Our services include:
Site selection and planning. 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 architecture, engineering, planning, urban design, landscape architecture, 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.
Water resources. We assist our clients with a variety of projects related to water supply and distribution (such as
hydrogeological investigations and groundwater development), 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. 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. Examples of our projects include office and industrial
facilities, major highway and railroad crossings, complex rail and light rail structures, and a wide range of water-related
facilities.
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.
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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 / 3D laser scanning, and unmanned aerial vehicle
LiDAR mapping. 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.
Power delivery. Our power delivery services include both electrical power delivery (such as substation engineering,
overhead and underground electrical transmission and distribution design, and site civil engineering) and gas distribution and
transmission services (such as pipeline design, pipeline integrity evaluations, and regulator metering station design). These
services facilitate the development of comprehensive plans and improvements that lead to lower operational costs and improved
efficiency.
Building code compliance. We offer a broad array of outsourcing services, including building code plan review, code
enforcement, permitting and inspections, and the administration of public works projects and building departments.
Other services. Through our geographic information system services, we can provide clients with 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 modeling, flood
insurance study preparation, risk and HAZUS mitigation assessment and analysis, mapping, data tracking, and data hosting.
Testing, Inspection, and Consulting
We provide testing, inspection and consulting services with respect to diverse projects including 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 testing, inspection and
consulting 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 help our clients design 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. 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, help them identify the most 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 services 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 agencies including or similar to 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 allow our clients to determine whether sites are suitable for proposed projects and to design
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foundation plans that are compatible with project site and use conditions. We have experienced geotechnical engineers,
geologists, and earth scientists who provide these services nationwide.
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.
Civil Program Management
Civil program management provides for transportation and water construction projects, including construction
management. Our services consist of providing a wide variety of governmental outsourcing services and consulting services
that assist organizations with compliance related to technical government regulations and industry standards. We offer a broad
array of technical outsourcing services, including traffic studies. Our program management services are not at-risk services;
they are performed under a unit price fee arrangement, which is 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 our program management vertical. Faced with increased budgetary constraints and economic challenges, many
governmental agencies now seek to outsource various services, including professional guidance for 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 flexible control of 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 targeting acquisition opportunities that provide program management services.
Buildings, Technology & Sciences (BTS)
Buildings
Mechanical, Electrical, and Plumbing (MEP) Design. We design integrated facilities that reduce capital, energy,
maintenance, and operations costs and use technologies to virtualize the building process and improve collaboration.
• Mechanical – HVAC system design, air quality management, building automation and control, and sustainability
consulting
• Electrical – code consulting, infrastructure design, standby power, building automation, intelligent lighting
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control, and solar power
Plumbing – needs analysis, system design, construction administration, and evaluation for fresh, waste, and water
system design; gas supply systems; drainage systems; and water conservation and recovery
Commissioning. We provide our clients with a collaborative resource, ensuring that building owners and operators
benefit from improved systems performance. Our proprietary Lifecycle Commissioning ® is a systematic, engineering-based
process that optimizes building efficiency from initial project concept to decommissioning. In addition, we provide retro-
commissioning on existing facilities not originally commissioned which can result in energy consumption savings.
Energy Performance, Management, and Optimization. We assist building owners and operations in the reduction of
both energy and operational costs. We help our clients to identify and implement energy performance strategies that improve
operating efficiency and reduce greenhouse gas emissions, which entails load shaping and efficiency, fuel switching,
aggregation, cogeneration and other renewable energy alternatives. Our energy performance services include energy master
planning, energy assessments, integrated management of energy supply and demand, renewable energy, smart grid systems,
cogeneration, load response strategies and systems, energy modeling and energy star.
Building Program Management. We provide services for vertical construction projects, including project controls and
Building Information Modeling (BIM) services. The construction and program management phase includes plan review, bid
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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.
We provide program management services, which primarily consist of pre-construction and construction consulting
services that assist in owners representation. Our program management services are not at-risk services; they are performed
under a unit price fee arrangement, which is 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.
Audiovisual Technology
Acoustical Design Consulting. We provide sound and noise isolation, vibration mitigation, and acoustical optimization
services in sophisticated entertainment and hospitality environments.
Audiovisual – Security and Surveillance – IT – Data Center. We provide needs assessments, infrastructure design,
systems design, construction monitoring, and acceptance testing.
Environmental Services
The environmental services we offer include occupational health, safety, and environmental consulting and testing as
well as environmental transactional services. More specifically, our experts investigate and analyze environmental conditions
both outside and inside a building, and recommend corrective measures and procedures needed to comply with workplace
occupational health and safety programs. Our occupational health and safety services include workplace safety audits,
ergonomics studies, emergency preparedness plans and response services, and workplace monitoring in regulated industries.
We also specialize in the provision of radiation exposure and protection services, as well as nuclear safety and industrial
hygiene analyses.
Additional environmental services include hydrogeological modeling and environmental programs that assist our
public agencies and private industry clients in compliance with 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.
Geospatial Solutions (GEO)
Our geospatial solutions include a full spectrum of geospatial data analytic capabilities that leverage leading-edge
remote sensing technology and proprietary solutions. More specifically, our proprietary and analytic solutions include
autonomous solutions, subscription software, automated enrichment, proprietary algorithms, and cloud-based data engagement.
We provide remote sensing and data analytics to enable asset management, reliability and maintainability of assets, safety, and
predictive modeling. To take advantage of this growth market, during fiscal year 2019 we acquired QSI, a provider of
geospatial solutions for government and commercial applications.
Our geospatial services assist utilities in vegetation management of assets (i.e., overhead power transmission and
distribution lines). This entails providing data used by utilities to monitor and control vegetation growth potential close to their
assets for regulatory compliance requirements which enhance visibility and long-term stability. The trend towards use of remote
sensing and analytics by utilities is rapidly replacing 'boots on the ground' inspection with more reliable and accurate
monitoring.
In addition, our geospatial mapping services includes topobathymetric nearshore analytics in analyzing nearshore
underwater terrain (too shallow for sonar and not visible with topographic LiDAR). This service provides government agencies
with data used in coastal management, floodplain analysis, environmental ecology, and hydrological resource management. We
believe that climate change, extreme weather incidents, and water conservation efforts combine to make the data and services
we provide invaluable to agencies that utilize these data sets produced by our geospatial mapping services.
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Strategic Acquisitions
We maintain a full-time merger and acquisitions (“M&A”) initiative with executive personnel specifically dedicated to
the identification of acquisition targets, exploration of acquisition opportunities, negotiation of terms, and oversight of the
acquisition and post-acquisition integration process. Since 1993, our M&A team has completed over 100 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 primarily seek acquisitions that allow us to expand or enhance our capabilities in our existing service offerings or
to supplement our existing service offerings with new, closely-related service offerings. We pursue opportunities that provide
the platform to function as a profitable stand-alone operation, are geographically situated to complement our existing
operations, and are profitable with strong potential for organic growth. Acquisition targets must have 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
acquiring and integrating companies, entails a review of both back office and operational functions in order to, among other
things, identify how to improve:
Inefficiencies related to the delivery of our services to customers
Performance of a new acquisition through the integration of personnel into our organization
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• Risk management of a new acquisition
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• Cross-selling opportunities to create synergies within our service offerings
Integration of technology and shared services platforms
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 and Note 6, Business
Acquisitions, in the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K.
Key Clients and Projects
We currently serve approximately 11,100 different clients. Our ten largest clients accounted for approximately 26% of
our gross revenues during the year ended January 2, 2021. No individual client represented more than 10% of our gross
revenues during years 2020, 2019 or 2018. Although we serve a highly diverse client base, during years 2020, 2019, and 2018
approximately 68%, 68% and 67%, respectively, of our gross revenues was attributable to public and quasi-public sector
clients.
Public sector clients include:
• U.S. federal, state, and local government departments, agencies, systems, and authorities
• Transportation agencies
• Educational systems
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Public housing authorities
Quasi-public sector clients include:
• Utility service providers
• Energy producers
• Healthcare providers
Of our private sector clients, our largest clients are construction engineering firms and institutional property owners.
Although we anticipate public and quasi-public sector clients will 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.
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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
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 marketing support personnel located at our corporate headquarters and
operating units.
As our service offerings continue expanding, we anticipate increasing our cross-selling opportunities. Currently, we
are often able to offer our testing, inspection and consulting services to clients in conjunction with our infrastructure,
engineering, and support services. Another significant area of cross-selling has been our ability to leverage our electrical and
gas design services throughout our national geographic network of offices by introducing our services to new utility service
organizations.
We have observed a trend in the engineering and consulting industry which has shifted client relationships 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 remaining
responsive to our clients’ needs and continuing to offer a broad range of quality service offerings and value added solutions.
Human Capital Resources
Our experienced employees and management team are our most valuable resources and we are committed to attracting,
motivating, and retaining top professionals to service our clients. As of January 2, 2021, we had 3,197 employees, including
2,915 full-time employees, which includes 718 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.
Our success is directly related to the satisfaction, growth, and development of our employees. We strive to offer a
work environment where employee opinions are valued and one that provides our employees the opportunities to use and
augment their professional skills. To achieve our human capital goals, we intend to remain focused on providing our personnel
with entrepreneurial opportunities to expand our business within their areas of expertise and continue to provide our personnel
with personal and professional growth. NV5 emphasizes a number of measures and objectives in managing our human capital
assets, including, among others, employee safety and wellness, talent acquisition and retention, employee engagement,
development, and training, diversity and inclusion, and compensation and pay equity.
COVID-19 and Employee Safety and Wellness. During the COVID-19 pandemic, the safety and well-being of our
employees and their families has been a top priority as we continue to serve our customers. Our global pandemic efforts include
leveraging the advice and recommendations of infectious disease experts and organizations to establish appropriate safety
standards and secure appropriate levels of personal protective equipment for our workforce. Based upon this advice and
recommendations, we have adopted and implemented the NV5 COVID-19 Exposure Risk Response Policy ("NV5 COVID
Response Plan") to outline the Company's policies and procedures designed to mitigate the potential for transmission of
COVID-19 and prevent exposure to illness from certain other infectious disease. Among other things, the NV5 COVID
Response Plan memorializes employee, manager, and company responsibilities related to house-keeping and sanitization,
hygiene and respiratory etiquette, use of personal protective equipment, employee and visitor screening procedures, leave
policies and accommodations, remote working opportunities and infrastructure, and protocols for not reporting to work and/or
when to return to work upon potential and/or confirmed COVID-19 exposure or infection.
We believe in supporting our employees’ health and well-being. Our goal is to assist employees in making informed
decisions about their health by providing the tools and resources necessary to succeed in a healthier lifestyle. Our wellness
program incorporates wellness activities, such as, an annual physical, additional fitness activities, coaching and wellness
challenges to support those lifestyle goals. The program is rewards based and employees are offered specific incentives for
participation.
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Employee Engagement, Development, and Training. We provide all employees with the opportunity to share their
opinions and feedback on our culture which helps enhance the employee experience, promote employee retention, drive change,
and leverage the overall success of our organization. We provide all employees a wide range of professional development
experiences, both formal and informal, at all stages in their careers.
Diversity and Inclusion and Ethical Business Practices. We are committed to fostering work environments that value
and promote diversity and inclusion, including NV5's Diversity and Inclusion Program which focuses on initiatives to increase
the diversity of our workforce and promote an environment of trust where employees feel safe to express their opinions and
perspectives without fear of repercussion. This commitment includes providing equal access to, and participation in, equal
employment opportunities, programs, and services without regard to race, religion, color, national origin, disability, sex, sexual
orientation, gender identity, stereotypes or assumptions based thereon. We pride ourselves in the development and fair
treatment of our global workforce, including generous healthcare and benefit programs for our employees, equal employment
hiring practices and policies, anti-harassment, workforce safety, and anti-retaliation policies. We welcome and celebrate our
teams’ differences, experiences, and beliefs, and we are investing in a more engaged, diverse, and inclusive workforce.
NV5 also fosters a strong corporate culture that promotes high standards of ethics and compliance for our businesses,
including policies that set forth principles to guide employee, officer, director, and vendor conduct, such as our Code of
Business Conduct and Ethics. We also maintain a whistleblower policy and anonymous hotline for the confidential reporting of
any suspected policy violations or unethical business conduct on the part of our businesses, employees, officers, directors, or
vendors and provide training and education to our global workforce with respect to our Code of Business Conduct and Ethics
and anti-corruption and anti-bribery policies.
Competition
The engineering and consulting industry is highly fragmented and 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. The extent of our competition varies according to the particular markets and
geographic area. The level and type of competition we face is also influenced by the nature and scope of a particular project.
Providers of engineering and consulting services primarily compete based on 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 six 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
perceive that engineering and consulting firms can benefit considerably from diversified service offerings.
The number of competitors for any procurement can vary widely, depending upon technical qualifications, the relative
value of the project, geographic location, financial terms, 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 publicly listed and private company 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: J), Stantec Inc. (TSE:
STN), Tetra Tech, Inc. (NASDAQ: TTEK), Willdan Group (NASDAQ: WLDN), Leidos (NYSE: LDOS), Dewberry, POWER
Engineers, and Burns & McDonnell.
Seasonality
Historically, our operating results in the months of November through March have generally been weaker compared to
our operating results in other months primarily due to adverse weather conditions and the holiday season. As a result, our gross
revenues and net income for the first and fourth quarters of our fiscal year may be lower when compared to our results for the
second and third quarters of our fiscal year.
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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. Whenever 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 lump-sum 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:
•
•
•
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.
We are also subject to the requirements of the U.S. Occupational Safety and Health Act ("OSHA") and comparable
state statutes that regulate the protection of the health and safety of workers.
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.
Available Information
We use our website www.nv5.com as a channel of distribution of information about NV5 Global, although
information contained on our website is not part of, or incorporated into, this Annual Report on Form 10-K. 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 are made available on our website as soon as reasonably
practicable after we electronically file such material with, or furnish it to, the SEC. Our corporate governance documents,
including our code of conduct and ethics, are also available on our website. 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 2021 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 on our website.
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.
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Summary Risk Factors
The following is a summary of some of the risks and uncertainties that could materially adversely affect our business, financial
condition and results of operations. You should read this summary together with the more detailed description of each risk
factor contained below.
Risks Related to Our Operations
• We face business disruption and related risks resulting from the recent outbreak of the novel coronavirus 2019
(COVID-19).
• The loss of key personnel or our inability to attract and retain qualified personnel could significantly disrupt our
business.
• We depend on the continued services of Mr. Dickerson Wright, our Chairman and Chief Executive Officer.
• Demand from our state and local government and private clients is cyclical.
• Our revenue, expenses, and operating results may fluctuate significantly.
• We derive a majority of our gross revenues from government agencies.
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Federal and state budgetary processes and constraints may have a material adverse impact on us.
Public sector 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.
• We may fail to win or renew contracts with private and public sector clients which may adversely affect our business.
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If we fail to perform on a project, we may incur a loss on that project, which may reduce or eliminate our overall
profitability.
• We depend on a limited number of clients for a significant portion of our business.
• Our industry is highly competitive and we may not be able to compete effectively with competitors.
• Losses under lump-sum contracts may adversely impact our business operations and financial results.
• We are subject to client credit risks.
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Public employee unions may seek to limit the ability of public agencies to contract with private firms such as us.
• Our method of revenue recognition could result in a reduction or reversal of previously recorded revenue and profits.
• Our actual business and financial results could differ from estimates and assumptions used to prepare our financial
statements.
• Our profitability could suffer if we are not able to maintain adequate utilization of our workforce.
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Failure of our sub-consultants to satisfy their obligations and adversely impact our business operations and financial
results.
• Legal proceedings, investigations, and disputes could result in substantial monetary penalties and damages.
• Unavailability or cancellation of third-party insurance coverage would increase our overall risk exposure.
• Our failure to implement and comply with our safety program may adversely impact our financial results.
• Weather conditions and seasonal revenue fluctuations may adversely impact our financial results.
• We have only a limited ability to protect our intellectual property rights.
• We rely on third-party internal and outsourced software to run our critical information systems.
Risks Related to Our Indebtedness
• As a result of our acquisition of QSI, we incurred a significant amount of indebtedness.
• Our indebtedness contains a number of restrictive covenants which could limit our flexibility.
• Our variable rate indebtedness subjects us to interest rate risk.
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Risks Related to Our Acquisition Strategy
• We have made and expect to continue to make acquisitions that could disrupt our operations.
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If we are not able to integrate acquired businesses successfully, our business could be harmed.
• We may not be able to successfully manage our growth strategy.
Risks Related to Regulatory Compliance
• As a government contractor, we must comply with procurement laws and are subject to regular government audits.
• Misconduct or compliance failures may adversely impact our reputation as well as subject us to legal actions.
• Changes in laws, regulations, and programs could reduce the demand for our services, negatively impacting our
revenue.
• We may be subject to liabilities under environmental laws, including un-indemnified liabilities assumed in
acquisitions.
Risks Related to Our Common Stock
• Our Chairman and Chief Executive Officer owns a large percentage of our voting stock.
• Applicable legal protections we have adopted could discourage a takeover and adversely affect existing stockholders.
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Future issuances of our common stock pursuant to our equity incentive plan may have a dilutive effect on your
investment.
• We currently do not pay dividends and do not intend to pay dividends on our shares of common stock in the
foreseeable future.
General Risk Factors
• Worldwide economic uncertainties may adversely impact our operating results
• We previously identified a material weakness in our internal control over financial reporting
• Catastrophic events may adversely impact our business operations.
• We are highly dependent on information technology - system failures and breaches could significantly affect us.
Risks Related to Our Operations
We face business disruption and related risks resulting from the novel coronavirus 2019 (COVID-19) pandemic, which
could have a material adverse effect on our business and results of operations.
The spread of COVID-19 across the world resulted in the Director General of the World Health Organization declaring
the outbreak of COVID-19 as a global pandemic in March 2020. The continued global spread of the COVID-19 pandemic -
including the recent discovery of variant strains of the virus - and the responses thereto are complex and rapidly evolving, and
the extent to which the pandemic impacts our business, financial condition and results of operations, including the duration and
magnitude of such impacts, will depend on numerous evolving factors that we may not be able to accurately predict or assess.
COVID-19, and the volatile regional and global economic conditions stemming from the pandemic, as well as reactions to
future pandemics or resurgences of COVID-19, could also precipitate or aggravate the other risk factors that we identify in this
Annual Report on Form 10-K, which in turn could materially adversely affect our business, financial condition and results of
operations. There may be other adverse consequences to our business, financial condition and results of operations from the
spread of COVID-19 that we have not considered or have not become apparent. As a result, we cannot assure you that if
COVID-19 continues to spread, it would not have a further adverse impact on our business, financial condition and results of
operations.
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
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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. 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 of 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.
While we entered into an amended and restated employment agreement with Mr. Wright in November 2018 providing for a
five-year term commencing August 2017, Mr. Wright may terminate the agreement upon sixty days’ notice to us. 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, our financial results may be impacted.
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 and therefore, our business may not recover immediately when the
economy improves. If the economy weakens or client spending declines further, then our revenue, profits, and overall financial
condition may deteriorate.
Our state and local government clients may also 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 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 lump-sum contracts or contracts that 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.
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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.
During fiscal 2020, approximately 68% of our gross revenues was attributable to public and quasi-public sector clients.
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.
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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changes in and delays or cancellations of government programs, requirements, or appropriations;
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.
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.
We provide services to the U.S. federal government, if the U.S. government does not complete its budget process
before its fiscal year-end on September 30, 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, or should appropriations legislation not be enacted prior to the expiration of such continuing
resolution resulting in a partial shut-down of federal government operations, 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.
The state of California has historically been and is considered to be a key geographic region for our business, as
approximately 28%, 27%, and 30% of our gross revenues during fiscal years 2020, 2019, and 2018, 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.
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Public sector 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 public sector contracts may be modified, curtailed, or terminated. If a contract is terminated, 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.
Our failure to win new contracts and renew existing contracts with private and public sector clients may adversely affect our
business operations and financial results.
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 approvals, 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 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
certain contracts because of existing government policies designed to protect small businesses and underrepresented minority
contractors. The federal government has announced specific statutory goals regarding awarding prime and subcontracts to small
businesses, women-owned small businesses, and small disadvantaged businesses, which may obligate us 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.
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. If a
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 performance of projects can be affected by a number of factors 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 and labor disruptions. 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.
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We depend on a limited number of clients for a significant portion of our business.
Our ten largest clients accounted for approximately 26% of our gross revenues during the fiscal year ended January 2,
2021. Although no individual client represented more than 10% of our gross revenues during fiscal 2020, 2019, and 2018, the
loss of, or reduction in orders from, these large clients could have a material adverse effect on our business, financial condition,
and results of operations.
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.
Losses under lump-sum contracts may adversely impact our business operations and financial results.
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. During fiscal 2020,
approximately 45% of our revenue was recognized under lump-sum contracts. Lump-sum 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 lump-sum contracts could
adversely impact our results of operations.
If our clients delay in paying or fail to pay amounts owed to us, our business operations and financial results may be
adversely impacted.
Our accounts receivable are a significant 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 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. Our ten largest clients accounted for approximately 26% of our gross
revenues during fiscal 2020, although no individual client represented more than 10% of our gross revenues during fiscal years
2020, 2019, or 2018. 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.
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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 financial
results.
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 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 effect of eliminating or severely restricting the ability of municipalities to hire private firms 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, this may result in additional litigation which could affect our ability to compete for contracts.
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. During fiscal
2020, these contracts accounted for approximately 45% of our revenue. 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 a portion of 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;
value of goodwill and recoverability of other intangible assets; and
valuations of assets acquired and liabilities assumed in connection with business combinations.
Our actual business and financial results could differ from those estimates, which may significantly reduce or eliminate our
profit.
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
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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.
Failure of our sub-consultants to satisfy their obligations to us or other parties, or the inability to maintain these
relationships, may adversely impact our business operations and financial results.
We depend on sub-consultants in conducting our business. There is a risk that we may have disputes with our sub-
consultants arising from, among other things, the quality and timeliness of work performed, client concerns, or failure to extend
existing task orders or issue new task orders under a subcontract. In addition, if any of our sub-consultants fail to deliver on a
timely basis the agreed-upon supplies, go out of business, or fail to perform on a project, our ability to fulfill our obligations
may be jeopardized and we may be contractually responsible for the work performed. The absence of qualified sub-consultants
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.
We also rely on relationships with other contractors when we act as their sub-consultants 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.
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.
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. 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. As a public company, we also face the risk that one or more securities class action lawsuits will be
filed claiming investor losses are attributable to alleged material misstatements in, or omissions of material facts from, our
filings with the SEC or otherwise. Any unfavorable legal ruling against us could result in substantial monetary damages or even
criminal violations.
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
and as such, we may incur liabilities that exceed or that are excluded from our insurance coverage or for which we are not
insured.
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, 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 may adversely impact our financial results.
Our safety program is a fundamental element of our overall approach to risk management and the implementation of
the safety program is significant to 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, the cost of a project to our clients and our operating costs
as well as expose us to types and levels of risk that are fundamentally unacceptable. 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 requirements have been established in our contracts. We may be adversely affected if we fail to meet these requirements
or do not properly implement and comply with our safety program.
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Weather conditions and seasonal revenue fluctuations may adversely impact on our financial results.
Our financial results during the months of November through March may be impacted by adverse weather conditions
and the holiday season. As a result, our revenue and net income for the first and fourth quarters of our fiscal year may be lower
when compared to our results for the second and third quarters of our fiscal year. If we were to experience lower-than-expected
revenue during any such periods, our expenses may not be offset.
We have only a limited ability to protect our intellectual property rights, and our failure to protect our intellectual property
rights may 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. 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.
Risks Related to Our Indebtedness
As a result of our acquisition of QSI, we incurred a significant amount of indebtedness.
Our ability to make scheduled payments on or to refinance our obligations under our credit agreement will depend on
our financial and operating performance, which will be affected by economic, financial, competitive, business, and other
factors, some of which are beyond our control. We cannot assure you that our business will generate sufficient cash flow from
operations to service our indebtedness and fund our other liquidity needs. If we are unable to meet our debt obligations or fund
our other liquidity needs, we may need to restructure or refinance all or a portion of our indebtedness on or before maturity or
sell certain of our assets. We cannot assure you that we will be able to restructure or refinance any of our indebtedness on
commercially reasonable terms, if at all, which could cause us to default on our debt obligations and impair our liquidity. Any
refinancing of our indebtedness could be at higher interest rates and may require us to comply with more onerous covenants,
which could further restrict our business operations.
Our credit agreement with Bank of America, N.A. contains a number of restrictive covenants which could limit our ability to
finance future operations, acquisitions or capital needs or engage in other business activities that may be in our interest.
Our credit agreement contains a number of significant covenants that impose operating and other restrictions on us and
our subsidiaries. Such restrictions affect or could affect, and in many respects limit or prohibit, among other things, our ability
and the ability of certain of our subsidiaries to:
incur additional indebtedness;
create liens;
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pay dividends and make other distributions in respect of our equity securities;
redeem our equity securities;
enter into certain lines of business;
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sell certain kinds of assets;
enter into certain types of transactions with affiliates; and
undergo a change in control or effect certain mergers or consolidations.
In addition, our credit agreement also requires us to comply with a consolidated fixed charge coverage ratio and
consolidated leverage ratio. Our ability to comply with these ratios may be affected by events beyond our control.
These restrictions could limit our ability to plan for or react to market or economic conditions or meet capital needs or
otherwise restrict our activities or business plans, and could adversely affect our ability to finance our operations, acquisitions,
investments or strategic alliances or other capital needs or to engage in other business activities that would be in our interest.
A breach of any of these covenants or our inability to comply with the required financial ratios could result in a default
under the credit agreement. If an event of default occurs, the lenders under the credit agreement could elect to:
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declare all borrowings outstanding, together with accrued and unpaid interest, to be immediately due and payable;
require us to apply all of our available cash to repay the borrowings; or
prevent us from making debt service payments on certain of our borrowings.
If we were unable to repay or otherwise refinance these borrowings when due, the lenders under the credit agreement
could sell the collateral securing the credit agreement, which constitutes a significant majority of our domestic subsidiaries'
assets.
Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase
significantly.
Borrowings under our credit agreement are at variable rates of interest and expose us to interest rate risk. If interest
rates increase, our debt service obligations on the variable rate indebtedness will increase even though any amount borrowed
remains the same, and our net income and cash flows, including cash available for servicing our indebtedness, will
correspondingly decrease. As of January 2, 2021, we had $283.8 million outstanding under the credit agreement. We may
determine to enter into interest rate swaps that involve the exchange of floating for fixed rate interest payments in the future in
order to reduce interest rate volatility. However, we may not maintain interest rate swaps with respect to all of our variable rate
indebtedness, and any swaps we enter into may not fully mitigate our interest rate risk and could be subject to credit risk
themselves.
Risks Related to Our Acquisition Strategy
We have made and expect to continue to make acquisitions that could disrupt our operations and adversely impact our
business and operating results. Our inability 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:
• 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
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acquired companies may not perform as we expect, and we may fail to realize anticipated revenue and profits.
On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (“2017 Tax Reform”), which significantly revised
the U.S. tax code by, among other things, lowering the corporate income tax rate from 35% to 21%; limiting the deductibility of
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interest expense; implementing a territorial tax system, and imposing a repatriation tax on deemed repatriated earnings of
foreign subsidiaries. Future acquisitions could be impacted by this change if we choose to structure future acquisitions by
means of incurring indebtedness as opposed to issuing equity as in the case of our recent QSI acquisition.
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:
•
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:
•
•
•
•
•
•
•
•
•
•
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 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
become subject to litigation.
If we are not able to successfully manage our growth strategy, our business operations and financial results may be
adversely affected.
Our expected future growth presents numerous managerial, administrative and operational 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.
27
Risks Related to Regulatory Compliance
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 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.
Employee, agent or partner misconduct or our overall failure to comply with laws or regulations may adversely impact our
reputation and financial results as well as subject us to criminal and civil enforcement actions.
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 regulations regarding government procurements, the protection of classified information,
bribery and other foreign corrupt practices, pricing of labor and other costs in government contracts, lobbying or similar
activities, 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.
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. In addition, growing concerns about
climate change may result in the imposition of additional regulations, international protocols or other restrictions on emissions.
Accordingly, such additional laws and regulations or a relaxation or repeal of existing 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.
28
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.
Risks Related to Our Common Stock
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 1,963,825 shares, or
approximately 14.8% of our common stock on a fully diluted basis as of February 25, 2021. 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 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.
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.
Future issuances of our common stock pursuant to our equity incentive plan may have a dilutive effect on your investment
and resales of such shares may adversely impact the market price of our common stock.
As of January 2, 2021, we have registered an aggregate of 2,421,731 shares of common stock reserved under
Registration Statements on Form S-8 and we may file additional Registration Statements on Form S-8 to register additional
shares reserved under our equity incentive plan or employee stock purchase plan. Issuance of shares of common stock pursuant
to our equity incentive plan or employee stock purchase plan may have a dilutive effect on our common stock. Also, all shares
issued pursuant to a Registration Statement on Form S-8 can be freely sold in the public market upon issuance, subject to
restrictions on our affiliates under Rule 144 promulgated by the SEC under the Securities Act of 1933, as amended. If a large
number of these shares are sold in the public market, the sales may be viewed negatively by the market and adversely affect the
market price of our common stock.
29
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 our credit agreement contains restrictions regarding the payment of dividends.
Accordingly, we 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. 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.
General Risk Factors
Worldwide economic uncertainties and specific conditions in the markets we address may adversely impact our operating
results.
Over the past several years, the general worldwide economy has been affected, at various times, to slower economic
activity, concerns about inflation and deflation, increased energy costs, international trade disputes and imbalances, and adverse
business conditions. These conditions may make it difficult for our clients and vendors to accurately forecast future business
activities, which could cause businesses to slow spending on services. Such conditions may also make it difficult for us to
predict the short-term and long-term impacts of these trends 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.
We previously identified a material weakness in our internal control over financial reporting and if we fail to maintain an
effective system of internal control in the future this may adversely affect the accuracy and reliability of future financial
statements, and our reputation, business, and the price of our common stock, as well as may lead to a loss of investor
confidence in us.
As disclosed under Item 9A. Controls and Procedures, in our Annual Report on Form 10-K for the year ended
December 29, 2018, management concluded that a material weakness in our internal control over financial reporting existed as
of December 29, 2018. This material weakness related to internal control deficiencies over the initial set up of project contracts
in our project management system and adequate documentation to support the analysis of certain percentage of completion
projects. During 2019, we completed the remediation measures related to the material weakness and concluded that our internal
controls over financial reporting are effective as of December 28, 2019. Completion of remediation does not provide assurance
that our remediation or other controls will continue to operate properly. Failure to maintain effective internal controls over
financial reporting may adversely affect the accuracy and reliability of our financial statements and have other consequences
that may materially and adversely affect our business, including an adverse impact on the market price of our common stock,
potential actions or investigations by the SEC or other regulatory authorities, possible defaults under our credit agreement,
shareholder lawsuits, a loss of investor confidence, and damage to our reputation.
Catastrophic events may adversely impact our business operations.
Our business operations may be adversely impacted by force majeure or extraordinary events beyond the control of the
contracting parties, such as natural and man-made disasters as well as terrorist attacks. Such events could result in the closure of
offices, interruption of projects, and the relocation of employees. We typically remain obligated to perform our services after a
terrorist attack or natural disaster unless the contract contains a force majeure clause that relieves us of our contractual
obligations. 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 business operations.
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.
30
We are highly dependent on information and communications systems. System failures, security breaches 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 have limited ability to affect the timing and success of systems restoration. Any 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.
Cyber security breaches of our systems and information technology could adversely impact our ability to operate.
We need to protect our own internal trade secrets and other business confidential information from disclosure. We face
the threat to our computer systems of unauthorized access, computer hackers, computer viruses, malicious code, organized
cyber-attacks and other security problems and system disruptions, including possible unauthorized access to our and our clients'
proprietary or classified information. We rely on industry-accepted security measures and technology to securely maintain all
confidential and proprietary information on our information systems. We have devoted and will continue to devote significant
resources to the security of our computer systems, but they may still be vulnerable to these threats. A user who circumvents
security measures could misappropriate confidential or proprietary information, including information regarding us, our
personnel and/or our clients, or cause interruptions or malfunctions in operations. As a result, we may be required to expend
significant resources to protect against the threat of these system disruptions and security breaches or to alleviate problems
caused by these disruptions and breaches. Any of these events could damage our reputation and have a material adverse effect
on our business, financial condition, results of operations and cash flows. Although the aggregate impact on our operations and
financial condition has not been material to date, we have been the target of events of this nature and expect them to continue as
cyber security threats have been rapidly evolving in sophistication and becoming more prevalent in the industry.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
Not applicable.
ITEM 2.
PROPERTIES.
We lease office space in the U.S. and internationally from which we provide our services.
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
None.
31
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
PART II
Holders
Our common stock is listed on the Nasdaq Capital Market under the symbol NVEE. As of February 25, 2021, there
were 2,020 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 our credit agreement contains restrictions regarding the
payment of dividends. Accordingly, we do not expect to pay any dividends on our common stock for the foreseeable future, as
we intend to retain all earnings to provide funds for the operation and expansion of our business. The payment of cash
dividends in the future, if any, will 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.
Recent Sales of Unregistered Securities
None.
Issuer Purchase of Equity Securities
None.
32
ITEM 6.
SELECTED FINANCIAL DATA.
The following selected financial data was derived from our consolidated financial statements and provides summarized
information with respect to our operations and financial position. The data set forth below should be read in conjunction with
the information contained in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations,
and our consolidated financial statements and the notes thereto contained in Item 8, Financial Statements and Supplementary
Data, in this Annual Report on Form 10-K.
Statements of Operations Data
Fiscal Year Ended
January 2,
2021
December 29,
December 30,
December 28,
2019
2017
2018
(in thousands, except per share data)
December 31,
2016
Gross revenues
$
659,296
$
508,938
$
418,081
$
333,034
$
223,910
Direct costs:
Salaries and wages
Sub-consultant services
Other direct costs
Total direct costs
176,865
107,602
40,291
324,758
153,023
79,598
30,935
263,556
132,922
62,218
21,537
216,677
103,011
50,171
14,598
167,780
73,966
31,054
11,310
116,330
Gross Profit
334,538
245,382
201,404
165,254
107,580
Operating Expenses:
Salaries and wages, payroll taxes and
benefits
General and administrative
Facilities and facilities related
Depreciation and amortization
Total operating expenses
176,816
50,214
21,280
42,079
290,389
128,558
42,656
17,145
25,816
214,175
102,221
31,713
14,401
17,384
165,719
86,222
26,747
12,589
13,128
138,686
Income from operations
44,149
31,207
35,685
26,568
Interest expense
(15,181)
(2,275)
(1,966)
(1,935)
Income before income tax expense
Income tax expense
Net income
Basic earnings per share
Diluted earnings per share
Weighted average common shares
outstanding:
Basic
Diluted
28,968
(7,950)
21,018 $
1.70 $
1.65 $
28,932
(5,176)
23,756 $
1.96 $
1.90 $
33,719
(6,863)
26,856 $
2.44 $
2.33 $
24,633
(627)
24,006 $
2.36 $
2.23 $
$
$
$
12,362,786
12,713,075
12,116,185
12,513,034
10,991,124
11,506,466
10,178,901
10,777,806
9,125,167
9,540,051
55,586
19,351
8,012
6,228
89,177
18,403
(257)
18,146
(6,539)
11,607
1.27
1.22
Balance Sheet Data
Cash and cash equivalents
Total assets
Long-term debt, including current
portion
Total equity
January 2,
2021
December 28,
2019
December 29,
2018
December 30,
2017
December 31,
2016
$
$
$
$
64,909 $
881,175 $
31,825 $
893,137 $
40,739 $
439,421 $
18,751 $
305,780 $
35,666
221,486
$
307,522
394,069 $
$
358,187
355,963 $
51,684 $
317,542 $
$
70,447
180,097 $
34,835
148,161
33
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.” Dollar amounts presented are in thousands, except per share data or where the context otherwise
requires.
Overview
We are a provider of professional and technical engineering and consulting solutions to public and private sector
clients. We focus on the infrastructure, utility services, construction, real estate, and environmental markets. We primarily focus
on the following business service verticals: testing, inspection & consulting, infrastructure support services, utility services,
buildings & program management, environmental health sciences, and geospatial technology services. Our primary clients
include U.S. federal, state, municipal, and local government agencies, and military and defense clients. We also serve quasi-
public and private sector clients from the education, healthcare, utility services, and public utilities, including schools,
universities, hospitals, health care providers, insurance providers, large utility service providers, and large to small utility
service producers.
Although we anticipate public and quasi-public sector clients will 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.
Fiscal Year
We operate on a "52/53 week" fiscal year ending on the Saturday closest to December 31st (whether or not in the
following calendar year), with interim calendar quarters ending on the Saturday closest to the end of such calendar quarter
(whether or not in the following calendar quarter). As a result, fiscal 2020 included 53 weeks compared to fiscal 2019 and 2018,
which both included 52 weeks.
Critical Accounting Policies and Estimates
Our critical accounting estimates are those we believe require our most significant judgments about the effect of
matters that are inherently uncertain. A discussion of our critical accounting estimates, the underlying judgments and
uncertainties used to make them and the likelihood that materially different estimates would be reported under different
conditions or using different assumptions is as follows:
Revenue Recognition
On the first day of fiscal year 2018, we adopted ASC Topic 606, Revenue from Contracts with Customers (“Topic
606”), using the modified retrospective approach to all contracts that were not completed as of the beginning of fiscal year
2018. Topic 606 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. Topic 606 became effective for us in the first quarter of fiscal year 2018. Adoption of Topic 606 did
not have an impact on our consolidated net income, financial position, and cash flows; however, it has resulted in expanded
disclosures. Revenue from the vast majority of our contracts will continue to be recognized over time because of the continuous
transfer of control to the customer. The impact to revenues from adopting Topic 606 for the period ended December 29, 2018
was not material.
To determine the proper revenue recognition method, we evaluate whether two or more contracts should be combined
and accounted for as one single contract and whether the combined or single contract should be accounted for as more than one
performance obligation. The majority of our contracts have a single performance obligation as the promise to transfer the
individual goods or services that is not separately identifiable from other promises in the contracts and, therefore, is not distinct.
Our performance obligations are satisfied as work progresses or at a point in time. Gross revenues from services
transferred to customers over time accounted for 92%, 90%, and 92% of our revenues during fiscal years 2020, 2019, and 2018,
34
respectively. For our cost-reimbursable contracts, revenue is recognized over time using direct costs incurred or direct costs
incurred to date as compared to the estimated total direct costs for performance obligations because it depicts the transfer of
control to the customer which occurs as we incur costs on its contracts. Contract costs include labor, sub-consultant services,
and other direct costs. Gross revenue from services transferred to customers at a point in time accounted for 8%, 10%, and 8%
of our revenues during fiscal years 2020, 2019, and 2018, respectively. Revenue from these contracts is recognized when the
customer obtains control of the asset, which is generally upon delivery and acceptance by the customer of the reports and/or
analysis performed.
Contract modifications are common in the performance of our contracts. Contracts modified typically result from
changes in scope, specifications, design, performance, sites, or period of completion. In most cases, contract modifications are
for services that are not distinct, and, therefore, are accounted for as part of the existing contract.
Contract estimates are based on various assumptions to project the outcome of future events. These assumptions are
dependent upon the accuracy of a variety of estimates, including engineering progress, 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 effect of revisions to revenues, estimated costs to complete contracts, including penalties, incentive awards, change orders,
claims, anticipated losses and others are recorded on the cumulative catch-up basis 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. During
fiscal years 2020, 2019, and 2018 the cumulative catch-up adjustment for contract modifications was not material.
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:
• Client type (governmental or private client)
• Historical performance
• Historical collection trends
• 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 and 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.
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, we perform an assessment to determine the acquisition date fair value of the
acquired company’s tangible and identifiable intangible assets and liabilities.
We evaluate goodwill annually for impairment on August 1, or whenever events or changes in circumstances indicate
the asset may be impaired, using the quantitative method. 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 we may apply a one-step quantitative impairment test. The one-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. We determine fair value through multiple valuation techniques, and weight the results accordingly. We 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 a reporting unit
35
exceeds its fair value, we would record the amount of goodwill impairment as the excess of a reporting unit's carrying amount
over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit.
On August 1, 2020, we conducted our annual impairment tests using the quantitative method of evaluating goodwill.
Based on the quantitative analyses, we determined the fair value of each of the reporting units exceeded its carrying value and
therefore, there was no goodwill impairment. There were no indicators, events or changes in circumstances that would indicate
goodwill impairment for the period from August 2, 2020 through January 2, 2021.
Identifiable intangible assets primarily include customer backlog, customer relationships, trade names, non-compete
agreements, and developed technology. Amortizable intangible assets are amortized on a straight-line basis over their estimated
useful lives and reviewed for impairment whenever events or changes in circumstances indicate that the assets may be impaired.
If an indicator of impairment exists we compare the estimated future cash flows of the asset, on an undiscounted basis, to the
carrying value of the asset. If the undiscounted cash flows exceed the carrying value, no impairment is indicated. If the
undiscounted cash flows do not exceed the carrying value, then impairment, if any, is measured as the difference between fair
value and carrying value, with fair value typically based on a discounted cash flow model. There were no indicators, events or
changes in circumstances that would indicate intangible assets were impaired during fiscal 2020.
In conjunction with an acquisition of a business, we record identifiable intangible assets acquired at their respective
fair values as of the date of acquisition. The corresponding fair value estimates for these assets acquired include projected future
cash flows, associated discount rates used to calculate present value, asset life cycles, and customer retention rates. We use an
independent valuation specialist to assist in determining the estimated fair values of assets acquired and liabilities assumed. The
fair value calculated for intangible assets may change during the finalization of the purchase price allocation due to the
estimates and assumptions used in determining their fair value. As a result, we may make adjustments to the provisional
amounts recorded for certain items as part of the purchase price allocation subsequent to the acquisition, not to exceed one year
after the acquisition date, until the purchase accounting allocation is finalized. During 2020, we finalized the QSI purchase price
allocation reported at December 28, 2019 to account for updates to assumptions and estimates related to the fair value of the
trade name, customer relationships, and customer backlog. As a result, we determined the QSI trade name is a finite-lived asset
that will be amortized over a two-year period and the fair value was decreased by $54,313. Additionally, the fair value of QSI's
customer relationships and customer backlog increased $6,605 and $811, respectively.
Recent Acquisitions
The aggregate value of all consideration for our acquisitions consummated during 2020, 2019 and 2018 was
approximately $1,949, $369,879, and $95,450, respectively. The net assets acquired during 2020, 2019 and 2018 were $1,511,
$166,637 and $51,705, respectively, while the gross revenues associated with these acquisitions (from their respective dates of
acquisition) were $851, $42,127 and $33,468, respectively.
2020 Acquisitions
On July 16, 2020, we acquired all of the outstanding equity interests in Mediatech FZ, LLC and Mediatech
Information Technology Consultants ("Mediatech"), a technology company providing security, enterprise IT, and building
technology solutions in the Middle East and North Africa (MENA) region and South East Asia. Mediatech provides technology
design services for the hospitality, industrial, healthcare, commercial, retail, and convention center markets. We acquired
Mediatech for an aggregate purchase price of $1,949, including $882 of cash and $500 in promissory note, payable in four
equal installments of $125 due on the first, second, third, and fourth anniversaries of the closing date. The purchase price also
includes $312 of our common stock payable in four equal installments due at closing and on the first, second and third
anniversaries of the closing date. Further, the purchase price includes $255 in additional contingent payments. In order to
determine the fair values of tangible and intangible assets acquired and liabilities assumed for Mediatech, we performed a fair
value assessment. The final determination of the fair value of assets and liabilities will be completed within the one-year
measurement period as required by ASC Topic 805, Business Combinations ("ASC 805"). The Mediatech acquisition will
necessitate the use of this measurement period to adequately analyze and assess the factors used in establishing the asset and
liability fair values as of the acquisition date, including intangible assets, accounts receivable, and certain fixed assets.
2019 Acquisitions
On December 20, 2019 (the "Closing Date"), we acquired all of the outstanding equity interests in Geospatial
Holdings, Inc. and its subsidiaries, including Quantum Spatial, Inc. (collectively "QSI"), a full-service geospatial solutions
provider serving the North American market. QSI provides data solutions to public and private sector clients that need
geospatial intelligence to mitigate risk, plan for growth, better manage resources, and advance scientific understanding. We
36
acquired QSI in an all-cash transaction for $318,428, which includes excess working capital of $9,034 and closing date cash of
approximately $6,894. The purchase price and other related costs associated with the transaction were financed through our
amended and restated credit agreement (the "A&R Credit Agreement") with Bank of America, N.A. and the other lenders party
thereto. Pursuant to the A&R Credit Agreement, the lenders provided term commitments of $150,000 in the aggregate in a
single draw on the Closing Date and revolving commitments totaling $215,000. See Note 11, Notes Payable and Other
Obligations, in the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K for further detail on the
A&R Credit Agreement. In order to determine the fair values of tangible and intangible assets acquired and liabilities assumed
for QSI, we engaged a third-party independent valuation specialist to assist in the determination of fair values.
On November 8, 2019, we acquired from GHD Services, Inc. ("GHD") its assets related to the business for forensics
and insurance. The GHD forensics and insurance business provides engineering and environmental claim services for insurance
companies, law firms, and litigation support. We acquired GHD for a cash purchase price of $8,300. In order to determine the
fair values of tangible and intangible assets required and liabilities assumed for GHD, we engaged a third-party independent
valuation specialist to assist in the determination of fair values.
On July 2, 2019, we acquired all of the outstanding equity interests in WHPacific, Inc. (“WHPacific”), a provider of
design engineering and surveying services serving Washington, Oregon, Idaho, New Mexico, Arizona and California for a cash
purchase price of $9,000. In order to determine the fair values of tangible and intangible assets acquired and liabilities assumed
for WHPacific, we engaged a third-party independent valuation specialist to assist in the determination of fair values.
On July 1, 2019, we acquired all of the outstanding equity interests in GeoDesign, Inc. ("GeoDesign"), a geotechnical,
environmental, geological, mining and pavement engineering company serving Washington, Oregon, and California. The
aggregate purchase price was $11,245, including $8,247 of cash, $2,000 in promissory note (bearing interest at 4.0%), payable
in four equal installments of $500 due on the first, second, third, and fourth anniversaries of July 1, 2019, and $375 of our
common stock (4,731 shares) issued at the closing date. The purchase price also includes $425 of our common stock payable on
the first and second anniversaries of July 1, 2019. Further, the purchase price includes a $1,500 earn-out of cash, which was
recorded at the estimated fair value of $198. In order to determine the fair values of tangible and intangible assets acquired and
liabilities assumed for GeoDesign, we engaged a third-party independent valuation specialist to assist in the determination of
fair values.
On June 3, 2019, we acquired all of the outstanding equity interests in Alta Environmental, L.P. ("Alta"), a consulting
firm specializing in air quality, environmental building sciences, water resources, site assessment and remediation as well as
environmental health and safety compliance services. The aggregate purchase price was $6,323, including $4,000 of cash and
$2,000 in promissory note (bearing interest at 4.0%), payable in four equal installments of $500 due on the first, second, third,
and fourth anniversaries of June 3, 2019. Further, the purchase price includes a $500 earn-out of cash, which was recorded at an
estimated fair value of $323. In order to determine the fair values of tangible and intangible assets acquired and liabilities
assumed for Alta, we engaged a third-party independent valuation specialist to assist in the determination of fair values.
On June 3, 2019, we acquired all of the outstanding equity interests in Page One Consultants ("Page One"), a program
management and construction quality assurance firm based in Orlando, Florida. The aggregate purchase price was $3,995,
including $2,293 of cash, $1,000 in promissory note (bearing interest at 3.0%), payable in three equal installments of $333 due
on the first, second, and third anniversaries of June 3, 2019, and $200 of our common stock (2,647 shares) issued at the closing
date. The purchase price also includes $200 of our common stock payable on the first anniversary date of June 3, 2019. Further,
the purchase price includes a $500 earn-out of cash and stock, which was recorded at an estimated fair value of $302. In order
to determine the fair values of tangible and intangible assets acquired and liabilities assumed for Page One, we engaged a third-
party independent valuation specialist to assist in the determination of fair values.
On March 22, 2019, we acquired all of the outstanding equity interests in the Sextant Group, Inc. ("The Sextant
Group"), a national provider of audiovisual, information and communications technology, acoustics consulting, and design
services headquartered in Pittsburgh, PA. The Sextant Group provides services throughout the U.S. and is well-known for
creating integrated technology solutions for a wide range of public and private sector clients. The aggregate purchase price was
$10,501, including $6,501 of cash and $4,000 in promissory note (bearing interest at 4.0%), payable in four equal installments
of $1,000 due on the first, second, third, and fourth anniversaries of March 22, 2019. In order to determine the fair values of
tangible and intangible assets acquired and liabilities assumed for The Sextant Group, we engaged a third-party independent
valuation specialist to assist in the determination of fair values.
On December 31, 2018, we acquired certain assets of Celtic Energy, Inc. ("Celtic"), a nationally recognized energy
efficiency consulting firm that specialized in energy efficiency project management and oversight. The aggregate purchase
price was $1,881, including $1,000 in cash, $300 in promissory note (bearing interest at 3.0%), payable in three equal
37
installments of $100 on the first, second, and third anniversaries of December 31, 2018, and $200 of our common stock
(3,227 shares) issued at the closing date. The purchase price also includes $200 of our common stock payable on the first
anniversary December 31, 2018. Further, the purchase price includes a $200 earn-out of cash, which was recorded at an
estimated fair value of $181. In order to determine the fair values of tangible and intangible assets acquired and liabilities
assumed for Celtic, we performed a purchase price allocation.
2018 Acquisitions
On November 2, 2018 we acquired CHI Engineering Inc. ("CHI"), an infrastructure engineering firm based in
Portsmouth, New Hampshire. CHI is a leading provider of engineering, procurement, and construction management services to
the liquefied natural gas (“LNG”), petroleum gas (“LPG”) and Natural Gas industries. CHI’s client base includes the majority
of LNG facility owner/operators in the U.S. The aggregate purchase price of this acquisition is up to $53,000, paid with a
combination of cash, stock and promissory notes at closing and future cash, stock and note payments.
On August 24, 2018, we acquired all of the outstanding equity interests in CALYX Engineers and Consultants, Inc.
("CALYX"), an infrastructure and transportation firm based in Cary, North Carolina. CALYX provides roadway and structure
design, transportation planning, water resources, construction services, utility services, building structure design, land
development, traffic services, cultural resources, surveying, and environmental services. CALYX serves both public and private
clients, including state departments of transportation, municipalities, developers, higher education, and healthcare systems. The
purchase price of this acquisition is $34,000, paid with a combination of cash at closing, stock and future note payments.
On February 2, 2018, we acquired CSA (M&E) Ltd. (“CSA”), a leading provider of Mechanical, Electrical, and
Plumbing (MEP) engineering and sustainability consulting services. CSA provides MEP and sustainability services for the
retail, education, healthcare, industrial, corporate, hospitality and infrastructure market sectors with offices in Hong Kong,
Macau and the UAE. CSA serves private and public sector clients throughout Asia and the Middle East. The purchase price of
this acquisition was up to $4,200, paid with a combination of cash at closing, stock and future note payments.
On January 12, 2018, we acquired all of the outstanding equity interest in Butsko Utility Design, Inc. (“Butsko”).
Butsko is leading provider of utility planning and design services serving both public and private sector clients through its
offices in Southern California and Washington. The purchase price of this acquisition was up to $4,250, paid with a
combination of cash at closing, stock and future note payments.
Common Stock offering
On August 9, 2018, we priced an underwritten follow-on offering of 1,270,000 shares of the Company’s common
stock (the “2018 Firm Shares”) at an offering price of $79.00 per share. The shares were sold pursuant to an effective
registration statement on Form S-3 (Registration No. 333-224392). In addition, a selling stockholder of the Company granted
the underwriters of the offering a 30-day option to purchase up to 190,500 shares (the “2018 Option Shares”) of our common
stock at the public offering price less the underwriting discount. On August 13, 2018, we closed on the 2018 Firm Shares, for
which we received net proceeds of approximately $93,500 after deducting the underwriting discount and estimated offering
expenses payable by the Company, and the selling stockholder of the Company closed on the sale of all 2018 Option Shares.
We did not receive any proceeds associated with the sale of the 2018 Option Shares by the selling stockholder.
Segments
Effective the beginning of fiscal year 2020, we re-evaluated the structure of our internal organization structure as a
result of the 2019 acquisition of QSI. To reflect management's revised perspective, we are now organized into three operating
and reportable segments:
•
Infrastructure ("INF") – includes our engineering, civil program management, utility services, and construction
quality assurance, testing and inspection practices;
• Building, Technology & Sciences ("BTS") – includes our environmental health sciences, buildings and program
management, and MEP & technology engineering practices; and
• Geospatial Solutions ("GEO") – includes our geospatial technology services practice.
The GEO segment has been created in order to provide greater visibility regarding the operational and financial
performance of QSI. The GEO segment structure is consistent with how we plan and allocate resources, manage our business,
and assess our performance. The change in our segment reporting was not material to prior period segment financial results. As
38
such, prior period segment financial results were not retrospectively revised. The assets of QSI were reallocated from our INF
reportable segment to our new GEO reportable segment.
For additional information regarding our reportable segments, see Note 18, Reportable Segments, in the Notes to the
Consolidated Financial Statements in this Annual Report on Form 10-K.
Impact of COVID-19 on Our Business
The COVID-19 pandemic has significantly impacted global stock markets and economies. We are closely monitoring
the impact of the outbreak of COVID-19 on all aspects of our business, including how it will impact our customers and
employees. Some of our services were affected, primarily our real estate transactional services and hospitality-related services.
In particular, due to COVID-19 restrictions, some of our casino and hotel projects have been delayed. As U.S. and international
economies begin to reopen and with a vaccine underway we expect demand for these services to return, but we are unable to
predict the ultimate impact that it may have on our business, future results of operations, financial position, or cash flows. The
extent to which our operations may be impacted by the COVID-19 pandemic will depend largely on future developments,
which are highly uncertain and cannot be accurately predicted, including new information which may emerge concerning the
severity of the outbreak and actions by government authorities to contain the outbreak or treat its impact. We intend to continue
to monitor the impact of COVID-19 pandemic on our business closely.
Components of Income and Expense
Revenues
We enter into contracts with our clients that contain two principal types of pricing provisions, representing a percentage of total
revenue as shown below:
Cost Reimbursable
Fixed-unit Price
2020
92%
8%
2019
90%
10%
2018
92%
8%
Cost-reimbursable contracts. Cost-reimbursable contracts consist of the following:
• Time and materials contracts are common for smaller scale professional and technical consulting and
certification services projects. Under these types of contracts, there is no predetermined fee. Instead, we
negotiate hourly billing rates and charge our clients based upon actual hours expended on a project. In addition,
any direct project expenditures are passed through to the client and are typically reimbursed. These contracts
may have 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.
Under these type contracts, we charge clients for its costs, including both direct and indirect costs, plus a
negotiated fee. The total estimated cost plus the negotiated fee represents the total contract value.
• 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. In most cases, we can bill additional fees if the construction schedule is modified and
lengthened.
Fixed-unit price contracts. Fixed-unit price contracts consist of the following:
•
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 or on the percentage-of-completion method.
Revenues recognized on the percentage-of-completion method are generally measured by the direct costs incurred to date as
compared to estimated costs incurred and represents approximately 45%, 31%, and 22% of revenues recognized during 2020,
2019 and 2018, respectively. Revenues from fixed-unit price contracts are recognized at a point in time.
39
Direct Costs of Revenues
Direct costs of revenues consist of the following in connection with fee generating projects:
• Technical and non-technical salaries and wages
•
Production expenses, including depreciation
•
Sub-consultant services
Operating Expenses
Operating expenses are expensed as incurred and include the following:
• Marketing expenses
• Management and administrative personnel costs
•
Payroll taxes, bonuses and employee benefits
•
•
• Depreciation and amortization
•
Portion of salaries and wages not allocated to direct costs of revenues
Facility costs
Professional services, legal and accounting fees, and administrative operating costs
RESULTS OF OPERATIONS
Consolidated Results of Operations
The following table represents our condensed results of operations for the periods indicated (dollars in thousands):
Gross revenues
Direct costs
Gross profit
Operating expenses
Income from operations
Interest expense
Income tax expense
Net income
$
$
January 2, 2021
659,296
324,758
334,538
290,389
44,149
(15,181)
(7,950)
21,018 $
Fiscal Years Ended
December 28, 2019
508,938
$
December 29, 2018
$
418,081
263,556
245,382
214,175
31,207
(2,275)
(5,176)
23,756 $
216,677
201,404
165,719
35,685
(1,966)
(6,863)
26,856
Fiscal year ended January 2, 2021 compared to fiscal year ended December 28, 2019
Gross Revenues
Our consolidated gross revenues increased by $150,358, or 30% in 2020 compared to 2019. The increase in gross
revenue was primarily due to incremental gross revenues from QSI of $145,047, incremental gross revenues from other
acquisitions completed since the beginning of 2019 of $33,329, and an increase in our infrastructure support services of $2,542.
The increase in our infrastructure support services was primarily due to increases in our power delivery services of $9,358,
partially offset by decreases in our northeast infrastructure services of $4,447 and a decrease in our liquefied natural gas
business $876. These increases were partially offset by a decrease in our real estate transactional services and hospitality-related
services of $13,439, decreases from our mechanical, electric, and plumbing (MEP) services of $6,741, decreases in our
radiation & occupational safety program of $3,696, and a decrease in our pipeline inspection services of $3,099, primarily as a
result of the COVID-19 pandemic.
40
Gross Profit
As a percentage of gross revenues, our gross profit margin was 50.7% and 48.2% in 2020 and 2019, respectively. The
increase in gross profit margin was primarily due to a change in our mix of business resulting from the QSI acquisition. As a
percentage of gross revenues, direct salaries and wages decreased 3.2%, primarily as a result of our mix of work performed.
This decrease was partially offset by an increase in sub-consultant services as a percentage of gross revenues of 0.7%, primarily
as a result of our mix of work performed. Other direct costs remained flat year-over-year as a percentage of gross revenues.
Operating expenses
Our operating expenses increased $76,214, or 36% in 2020 compared to 2019. The increase in operating expenses
primarily resulted from increased payroll and performance-based compensation costs of $48,258, including stock-based
compensation of $14,955 during 2020 compared to $10,430 in 2019, increased general and administrative costs of $7,558, an
increase in facilities and facilities related expense of $4,135, an increase in intangible asset amortization expense of $14,108,
and an increase in depreciation expense of $2,156, primarily as a result of our acquisitions.
Interest Expense
Our interest expense increased $12,906 in fiscal 2020 compared to 2019. The increase in interest expense primarily
resulted from the increased level of indebtedness associated with the QSI acquisition.
Income taxes
Our consolidated effective income tax rate was 27.4% and 17.8% in 2020 and 2019, respectively. The higher effective
income tax rate is primarily due to a decrease in excess tax benefits from stock-based payments in 2020 as compared to 2019.
See Note 17, Income Taxes, of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K for further
detail of income tax expense.
Net income
Our net income decreased $2,738, or 12% compared to 2019 primarily as a result of the increase in our amortization
expense driven by our 2019 acquisitions. Our gross profit increased $89,156 primarily due to our 2019 acquisitions. This
increase was offset by increases in payroll and performance-based compensation costs of $48,258, general and administrative
costs of $7,558, facilities and facilities related expense of $4,135, intangible asset amortization expense of $14,108,
depreciation expense of $5,565, and interest expense of $12,906, which were also driven by acquisitions.
For comparison of 2019 to 2018, see "Results of Operations - Consolidated Results of Operations" under Item 7 of
Part II in our Annual Report on Form 10-K for the year ended December 28, 2019 filed with the SEC on February 26, 2020,
which discussion is expressly incorporated herein by reference thereto.
41
Segment Results of Operations
The following tables set forth summarize financial information concerning our reportable segments (dollars in
thousands):
Gross revenues
INF
BTS
GEO
Total gross revenues
Segment income before taxes
INF
BTS
GEO
January 2, 2021
Fiscal Years Ended
December 28, 2019 December 29, 2018
$
$
$
$
$
352,965 $
331,161 $
157,432
148,899
659,296
$
62,574 $
21,091 $
30,013 $
177,777
—
508,938
$
54,583 $
28,138 $
— $
254,723
163,358
—
418,081
43,832
26,656
—
For additional information regarding our reportable segments, see Note 18, Reportable Segments, of the Notes to
Consolidated Financial Statements in this Annual Report on Form 10-K.
Fiscal year ended January 2, 2021 compared to fiscal year ended December 28, 2019
INF Segment.
Our gross revenues from INF increased $21,804, or 7%, in 2020 compared to 2019. The increase in gross revenues
was primarily due to incremental revenue of $27,964 from acquisitions completed since the beginning of fiscal 2019 and
increases in our infrastructure support services of $2,542. These increases were partially offset by a decrease in our pipeline
inspection services of $3,099.
Segment Income before Taxes from INF increased $7,991, or 15%, in 2020 compared to 2019. The increase was
primarily due to incremental gross revenues from acquisitions completed since the beginning of fiscal 2019.
BTS Segment.
Our gross revenues from BTS decreased $20,345, or 11%, in 2020 compared to 2019. The decrease in gross revenues
was primarily due to decreases in our real estate transactional services and hospitality-related services of $13,439, decreases in
our MEP services of $6,741, and decreases in our radiation & occupational safety program of $3,696 primarily as a result of the
COVID-19 pandemic. These decreases were partially offset by incremental gross revenues of $5,365 from acquisitions
completed since the beginning of 2019.
Segment Income before Taxes from BTS decreased $7,047, or 25%, in 2020 compared to 2019. The decrease was due
to lower gross revenues primarily as a result of the COVID-19 pandemic.
GEO Segment.
Our gross revenues from GEO was $148,899 in 2020. Gross revenues were primarily derived from public and quasi-
public sector clients, which contributed $101,456 of gross revenues. Private sector clients contributed gross revenues of
$47,443 in 2020.
Segment Income before Taxes from GEO was $30,013 in 2020.
For comparison of 2019 to 2018, see "Results of Operations - Segment Results of Operations" under Item 7 of Part II
in our Annual Report on Form 10-K for the year ended December 28, 2019 filed with the SEC on February 26, 2020, which
discussion is expressly incorporated herein by reference thereto.
42
LIQUIDITY AND CAPITAL RESOURCES
Our principal sources of liquidity are our cash and cash equivalents balances, cash flow from operations, borrowing
capacity under our Senior Credit Facility, 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 and borrowing capacity under our Senior
Credit Facility will be sufficient to meet our projected cash requirements 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.
Operating activities
Net cash provided by operating activities was $96,009 in 2020 compared to $39,900 in 2019. The increase was a result
of the growth in our revenues primarily driven by our acquisitions and changes in our working capital. The changes in our
working capital primarily resulted from increased advanced billings of $25,981 primarily related to liquefied natural gas
projects, increased accrued liabilities and accounts payable of $5,283 related to timing of payments, and a decrease of $8,279 in
prepaid expenses and other assets primarily as a result of decreased prepaid insurance of $4,372, decreased prepaid income
taxes of $2,342, and a decrease in other receivables of $2,298. These increases were partially offset by $4,929 as a result of
increased billed and unbilled receivables primarily related to our growth in revenues during 2020.
Investing activities
During 2020 and 2019, net cash used in investing activities totaled $9,067 and $351,000, respectively. The decrease in
cash used in investing activities was primarily a result of decreased acquisition activity, partially offset by an increase in
purchases of property and equipment in 2020 of $7,230. The increase in purchases of property and equipment was primarily a
result of the acquisition of QSI which typically requires proportionally larger amounts of capital expenditures than our other
businesses.
Financing activities
Cash flows used in financing activities in 2020 was $53,858 compared to net cash provided by financing activities of
$302,186 in 2019. The change was primarily due to decreased borrowings from our Senior Credit Facility in 2020 compared to
2019. In 2019, we borrowed $330,457 from our Senior Credit Facility primarily to fund the December 2019 QSI acquisition. As
a result, we had an increase of $26,625 in principal payments related to our Senior Credit Facility in 2020 compared to 2019.
For comparison of 2019 to 2018 cash flows, see "Liquidity and Capital Resources - Cash Flows” under Item 7 of Part
II in our Annual Report on Form 10-K for the year ended December 28, 2019 filed with the SEC on February 26, 2020, which
discussions are expressly incorporated herein by reference thereto.
Financing
Senior Credit Facility
On December 20, 2019 (the "Closing Date"), we amended and restated our Credit Agreement (the "A&R Credit
Agreement"), dated December 7, 2016, as amended on December 20, 2018, with Bank of America, N.A. ("Bank of America"),
as administrative agent, swingline lender and letter of credit issuer, the other lenders party thereto, and certain of our
subsidiaries as guarantors. Pursuant to the A&R Credit Agreement, the lenders provided term commitments of $150,000 in the
aggregate in a single draw on the Closing Date to fund the acquisition of QSI and various costs and expenses relating thereto
and revolving commitments totaling $215,000 in the aggregate. The revolving commitment is available through December 20,
2024 (the "Maturity Date"), at which time the term commitments and revolving commitments will be due and payable in full.
An aggregate amount of $320,500 was drawn under the A&R Credit Agreement on the Closing Date to fund the QSI
acquisition and repay previously existing borrowings. Borrowings under the A&R Credit Agreement are secured by a first
priority lien on substantially all of our assets. The A&R Credit Agreement also includes an accordion feature permitting us to
request an increase in either the term facility or the revolver facility under the A&R Credit Agreement by an additional amount
of up to $100,000 in the aggregate.
Borrowings under the term facility amortize at the rate of 5.0% per annum for the first two years of the facility and
thereafter at the rate of 7.5% per annum until the Maturity Date.
43
On May 5, 2020 (the "Amendment Closing Date"), in response to the COVID-19 pandemic, we entered into an
amendment to the A&R Credit Agreement (the "Amended A&R Credit Agreement") to amend the financial covenants that
requires us to maintain a consolidated leverage ratio (the ratio of the our pro forma consolidated funded indebtedness to our pro
forma consolidated EBITDA for the most recently completed measurement period). The amended consolidated leverage ratio
requirements are as follows:
Measurement Period Ending
Maximum Consolidated Leverage Ratio
Amendment Closing Date through June 27, 2020
June 28, 2020 through October 3, 2020
October 4, 2020 through January 2, 2021
January 3, 2021 and April 3, 2021
April 4, 2021 and July 3, 2021
July 4, 2021 and thereafter
4.50 to 1.00
5.00 to 1.00
5.25 to 1.00
4.75 to 1.00
4.00 to 1.00
3.50 to 1.00
These financial covenants also require us to maintain a consolidated fixed charge coverage ratio of no less than 1.20 to
1.00 as of the end of any measurement period. As of January 2, 2021, we were in compliance with the financial covenants.
The Amended A&R Credit Agreement also amended pricing terms which remain variable and tied to a Eurocurrency
rate equal to LIBOR (London Interbank Offered Rate) plus an applicable margin or a base rate denominated in U.S. dollars.
Interest rates remain subject to change based on our consolidated leverage ratio. As of January 2, 2021, our interest rate was
2.8%.
The Amended A&R Credit Agreement contains covenants that may have the effect of limiting our ability to, among
other things, merge with or acquire other entities, enter into a transaction resulting in a Change in Control, create certain new
liens, incur certain additional indebtedness, engage in certain transactions with affiliates, or engage in new lines of business or
sell a substantial part of their assets. The Amended A&R Credit Agreement also contains customary events of default, including
(but not limited to) a default in the payment of principal or, following an applicable grace period, interest, breaches of our
covenants or warranties under the Amended A&R Credit Agreement, payment default or acceleration of certain indebtedness,
certain events of bankruptcy, insolvency or liquidation, certain judgments or uninsured losses, changes in control and certain
liabilities related to ERISA based plans.
The Amended A&R Credit Agreement limits the payment of cash dividends (together with certain other payments that
would constitute a "Restricted Payment" within the meaning of the Amended A&R Credit Agreement and generally including
dividends, stock repurchases and certain other payments in respect to warrants, options, and other rights to acquire equity
securities) to no more than $10,000 in any fiscal year, so long as no default shall exist at the time of or arise as a result from
such payment.
Total debt issuance costs incurred and capitalized in connection with the issuance of the Amended A&R Credit
Agreement were $4,123. Total amortization of debt issuance costs was $896 and $131 during 2020 and 2019, respectively.
Other Obligations
On July 16, 2020, we acquired Mediatech. The purchase price allowed for the payment of $230 in shares of our stock
or a combination of cash and shares of our stock, at our discretion, payable in three equal annual installments. At January 2,
2021, the outstanding balance on this obligation was $230.
On July 1, 2019, we acquired GeoDesign. The purchase price allowed for the payment of $425 in shares of our stock
or a combination of cash and shares of our stock, at our discretion, payable on the first and second anniversary of July 1, 2019.
The outstanding balance on this obligation was $44 and $382 as of January 2, 2021 and December 28, 2019, respectively.
On June 3, 2019, we acquired Page One. The purchase price allowed for the payment of $200 in shares of our stock or
a combination of cash and shares of our stock, at our discretion, payable on the first anniversary of June 3, 2019. There was no
outstanding balance on this obligation as of January 2, 2021. At December 28, 2019, the outstanding balance of this obligation
was $181.
On December 31, 2018, we acquired certain assets of Celtic. The purchase price allowed for the payment of $200 in
shares of our stock or a combination of cash and shares of our stock, at our discretion, payable on the first anniversary of
44
December 31, 2018. There was no outstanding balance on this obligation as of January 2, 2021. At December 28, 2019, the
outstanding balance of this obligation was $181.
On November 2, 2018, we acquired CHI. The purchase price allowed for the payment of $3,000 in shares of our stock
or a combination of cash and shares of our stock, at our discretion, payable in three equal annual installments. The outstanding
balance on this obligation was $877 and $1,754 as of January 2, 2021 and December 28, 2019, respectively.
On February 2, 2018, we acquired CSA. The purchase price allowed for the payment of $250 in shares of our stock or
a combination of cash and shares of our stock, at our discretion, payable in two equal annual installments. There was no
outstanding balance on this obligation as of January 2, 2021. At December 28, 2019, the outstanding balance of this obligation
was $111.
On January 12, 2018, we acquired all of the outstanding equity interest in Butsko. The purchase price allowed for the
payment of $600 in shares of our stock or a combination of cash and shares of our stock, at our discretion, payable in two equal
annual installments. There was no outstanding balance on this obligation as of January 2, 2021. At December 28, 2019, the
outstanding balance of this obligation was $267.
Uncollateralized Promissory Notes
Only July 16, 2020, we acquired Mediatech. The purchase price included an uncollateralized $500 promissory note
("Mediatech Note") payable in four equal annual installments. The outstanding balance of the Mediatech Note was $500 as of
January 2, 2021.
On July 1, 2019, we acquired GeoDesign. The purchase price included an uncollateralized $2,000 promissory note
bearing interest at 4.0% ("GeoDesign Note") and payable in four equal annual installments. The outstanding balance of the
GeoDesign Note was $1,500 and $2,000 as of January 2, 2021 and December 28, 2019, respectively.
On June 3, 2019, we acquired Alta. The purchase price included an uncollateralized $2,000 promissory note bearing
interest at 4.0% ("Alta Note") and payable in four equal annual installments. The outstanding balance of the Alta Note was
$1,500 and $2,000 as of January 2, 2021 and December 28, 2019, respectively.
On June 3, 2019, we acquired Page One. The purchase price included an uncollateralized $1,000 promissory note
bearing interest at 3.0% ("Page One Note") and payable in three equal annual installments. The outstanding balance of the Page
One Note was $700 and $1,000 as of January 2, 2021 and December 28, 2019, respectively.
On March 22, 2019, we acquired The Sextant Group. The purchase price included an uncollateralized $4,000
promissory note bearing interest at 4.0% ("The Sextant Group Note") and payable in four equal annual installments. The
outstanding balance of The Sextant Group Note was $3,000 and $3,140 as of January 2, 2021 and December 28, 2019,
respectively.
On December 31, 2018, we acquired certain assets of Celtic. The purchase price included an uncollateralized $300
promissory note bearing interest at 3.0% (the "Celtic Note") payable in three equal annual installments. The outstanding balance
of the Celtic Note was $100 and $300 as of January 2, 2021 and December 28, 2019, respectively.
On November 2, 2018, we acquired CHI. The purchase price included an uncollateralized $15,000 promissory note
bearing interest at 3.0% (the "CHI Note") payable in four equal annual installments. The outstanding balance of the CHI Note
was $7,500 and $11,250 as of January 2, 2021 and December 28, 2019, respectively.
On August 24, 2018, we acquired CALYX. The purchase price included an uncollateralized $4,000 promissory note
bearing interest at 3.75% payable in four equal annual installments of $1,000. The outstanding balance of the CALYX Note was
$2,000 and $3,000 as of January 2, 2021 and December 28, 2019, respectively.
On February 2, 2018, we acquired CSA. The purchase price included an uncollateralized $600 promissory note
bearing interest at 3.0% (the "CSA Note") payable in four equal annual installments of $150. The outstanding balance of the
CSA Note was $300 and $450 as of January 2, 2021 and December 28, 2019, respectively.
On January 12, 2018, we acquired all of the outstanding equity interest in Butsko. The purchase price included an
uncollateralized $1,000 promissory note bearing interest at 3.0% (the "Butsko Note") payable in four equal annual installments
45
of $250. The outstanding balance of the Butsko Note was $500 and $750 as of January 2, 2021 and December 28, 2019,
respectively.
On September 6, 2017, we acquired all of the outstanding interests in Marron and Associates, Inc. ("Marron"). The
purchase price included an uncollateralized $300 promissory note bearing interest at 3.0% (the "Marron Note") payable in three
equal annual installments of $100. There was no outstanding balance on the Marron Note as of January 2, 2021. As of
December 28, 2019, the outstanding balance of the Marron Note was $100.
On June 6, 2017, we acquired all of the outstanding equity interest in Richard D. Kimball Co. ("RDK"). The purchase
price included an uncollateralized $5,500 promissory note bearing interest at 3.0% (the "RDK Note") payable in four equal
annual installments of $1,375. The outstanding balance of the RDK Note was $1,375 and $2,750 as of January 2, 2021 and
December 28, 2019, respectively.
On May 4, 2017, we acquired all of the outstanding equity interest in Holdrege & Kull, Consulting Engineers and
Geologists ("H&K"). The purchase price included an uncollateralized $600 promissory note bearing interest at 3.0% (the "H&K
Note") payable in four equal annual installments of $150. The outstanding balance of the H&K Note was $150 and $300 as of
January 2, 2021 and December 28, 2019, respectively.
On May 1, 2017, we acquired all of the outstanding equity interest in Lochrane Engineering Incorporated
("Lochrane"). The purchase price included an uncollateralized $1,650 promissory note bearing interest at 3.0% (the "Lochrane
Note") payable in four equal annual installments of $413. The outstanding balance of the Lochrane Note was $413 and $825 as
of January 2, 2021 and December 28, 2019, respectively.
On December 6, 2016, we acquired all of the outstanding interests of CivilSource, Inc. ("CivilSource"). The purchase
price included an uncollateralized $3,500 promissory note bearing interest at 3.0% (the "CivilSource Note") payable in four
equal annual installments of $875. There was no outstanding balance on the CivilSource Note as of January 2, 2021. As of
December 28, 2019, the outstanding balance of the CivilSource note was $1,502.
On November 30, 2016, we acquired all of the outstanding interests of Hanna Engineering, Inc. ("Hanna"). The
purchase price included an uncollateralized $2,700 promissory note bearing interest at 3.0% (the "Hanna Note") payable in four
equal annual installments of $675. The outstanding balance of the Hanna Note was $430 and $675 as of January 2, 2021 and
December 28, 2019, respectively.
On October 26, 2016, we acquired all of the outstanding interests of J.B.A. Consulting Engineers, Inc. ("JBA"). The
purchase price included an uncollateralized $7,000 promissory note bearing interest at 3.0% (the "JBA Note") payable in five
equal annual installments of $1,400. The outstanding balance of the JBA Note was $3,011 and $4,163 as of January 2, 2021 and
December 28, 2019, respectively.
On September 12, 2016, we acquired certain assets of Weir Environmental, L.L.C. ("Weir"). The purchase price
included an uncollateralized $500 promissory note bearing interest at 3.0% (the "Weir Note") payable in four equal annual
installments of $125. There was no outstanding balance on the Weir Note as of January 2, 2021. As of December 28, 2019, the
outstanding balance of the Weir Note was $125.
On May 20, 2016, we acquired all of the outstanding equity interests of Dade Moeller & Associates, Inc. ("Dade
Moeller"). The purchase price included an aggregate of $6,000 of uncollateralized promissory notes bearing interest at 3.0%
(the "Dade Moeller Notes") payable in four equal annual installments of $1,500. There was no outstanding balance on the Dade
Moeller Notes as of January 2, 2021. As of December 28, 2019, the outstanding balance of the Date Moeller Notes was $1,497.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of January 2, 2021 and December 28, 2019.
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.
46
Contractual Obligations and Commitments
The following table summarizes our contractual obligations as of January 2, 2021 (in thousands):
Notes Payable and Other Obligations
Interest payments(1)
Contingent consideration obligations
Finance lease obligations
Operating lease obligations
Other long-term liabilities(2)
Total contractual obligations
$
$
Payments due by fiscal period
Less than 1
Year
1-3 Years
3-5 Years
More than 5
Years
23,690
3,846
1,334
1,416
14,597
5,580
50,463
$
$
32,387
7,064
1,066
1,744
19,508
5,343
67,112
$
$
252,081
3,223
—
233
10,095
—
265,632
$
$
—
—
—
—
5,814
—
5,814
$
Total
308,158
14,133
2,400
3,393
50,014
10,923
389,021
$
(1) Interest consists of remaining interest payments on our term loan. The amount of interest calculated for purposes of this table
were based upon rates as of January 2, 2021.
(2) Other long-term liabilities consist of payroll tax deferrals associated with the Coronavirus Aid, Relief and Economic Security
Act (the "CARES Act"), which we expect to be paid in fiscal 2021 and fiscal 2022.
Our accrued liabilities in the consolidated balance sheet include unrecognized tax benefits. As of January 2, 2021, we
had unrecognized tax benefits of $1,022. At this time, we are unable to make a reasonably reliable estimate of the timing of
settlements in individual years in connection with unrecognized tax benefit; therefore, such amounts are not included in the
above table.
Recently Issued Accounting Pronouncements
For information on recently issued accounting pronouncements, see Note 3, Recently Issued Accounting
Pronouncements, of the Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to certain market risks from transactions that are entered into during the normal course of business.
We have not entered into derivative financial instruments for trading purposes. We have no significant market risk exposure to
interest rate changes related to the promissory notes for acquisitions since these contain fixed interest rates. Our only debt
subject to interest rate risk is the Senior Credit Facility which rates are variable, at our option, tied to a Eurocurrency rate equal
to LIBOR (London Interbank Offered Rate) plus an applicable rate or a base rate denominated in U.S. dollars. Interest rates are
subject to change based on our Consolidated Senior Leverage Ratio (as defined in the Credit Agreement). As of January 2,
2021, there was $283,832 outstanding on the Senior Credit Facility. A one percentage point change in the assumed interest rate
of the Senior Credit Facility would change our annual interest expense by approximately $2,838 in 2020.
47
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Audited Consolidated Financial Statements:
Reports of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Net Income and Comprehensive Income
Consolidated Statements of Changes in Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
49
51
52
53
54
56
48
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of NV5 Global, Inc.
Hollywood, Florida
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of NV5 Global, Inc. and subsidiaries (the “Company”) as of
January 2, 2021 and December 28, 2019, the related consolidated statements of net income and comprehensive income, changes
in stockholders’ equity, and cash flows, for each of the three years in the period ended January 2, 2021, and the related notes
(collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material
respects, the financial position of the Company as of January 2, 2021 and December 28, 2019, and the results of its operations
and its cash flows for each of the three years in the period ended January 2, 2021, in conformity with accounting principles
generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company’s internal control over financial reporting as of January 2, 2021, based on criteria established in
Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated March 3, 2021, expressed an unqualified opinion on the Company’s internal control over
financial reporting.
Change in Accounting Principle
As discussed in Note 3 to the financial statements, the Company has changed its method of accounting for leases as of the first
day of fiscal year 2019 due to the adoption of Accounting Standards Codification (ASC) 842, Leases. The Company adopted
ASC 842 using the modified retrospective approach and elected not to adjust comparative periods.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that
was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and
we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
Revenue Recognition – Percentage of Completion – Refer to Note 2 of the Financial Statements
Critical Audit Matter Description
The Company recognizes lump-sum contract revenue over the contract term (“over time”) as the work progresses, which is as
services are rendered, because transfer of control to the customer is continuous. The Company’s revenues from lump-sum
49
contracts are recognized on the percentage-of-completion method, based primarily on contract costs incurred to date compared
to total estimated costs. The accounting for these contracts involves judgment, particularly as it relates to the process of
estimating total costs and profit for each performance obligation. Direct costs are recognized as incurred, and revenues are
determined by adding a proportionate amount of the estimated profit to the amount reported as direct costs. For the year ended
January 2, 2021, revenue was $659.3 million, of which approximately $297 million relates to lump-sum contracts.
We identified revenue on certain long-term lump-sum contracts as a critical audit matter because of the judgments necessary for
management to estimate total costs and profit in order to recognize revenue for certain lump-sum contracts. This required
extensive audit effort due to the long-term nature of certain lump-sum contracts and required a high degree of auditor judgment
when performing audit procedures to audit management’s estimates of total costs and profit and evaluating the results of those
procedures.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to management’s estimates of total costs and profit for each performance obligation used to
recognize revenue for certain long-term lump-sum contracts included the following, among others:
• We tested the effectiveness of controls over lump-sum contract revenue, including management’s controls over the
estimates of total costs and profit for performance obligations.
• We selected certain long-term lump-sum contracts and performed the following:
–
Evaluated whether the contracts were properly included in management’s calculation of lump-sum contract
revenue based on the terms and conditions of each contract, including whether continuous transfer of control
to the customer occurred as progress was made toward fulfilling the performance obligation.
– Compared the revenue recognized to the consideration expected to be received based on current rights and
obligations under the contracts and any modifications that were agreed upon with the customers.
–
–
–
Tested management’s identification of distinct performance obligations by evaluating whether the underlying
services were highly interdependent and interrelated.
Tested the accuracy and completeness of the costs incurred to date for each performance obligation.
Evaluated the estimates of total cost and profit by:
• Evaluating management’s ability to achieve the estimates of total cost and profit by performing
corroborating inquiries with the Company’s finance managers, project managers and engineers, and
comparing the estimates to management’s work plans, project budgets, and change orders, as
applicable.
• Comparing hours incurred subsequent to fiscal year end to the remaining hours management
estimated as of fiscal year end.
• Comparing management’s estimates for the selected contracts to costs and profits of similar
performance obligations, when applicable.
–
Tested the mathematical accuracy of management’s calculation of revenue for each performance obligation.
• We evaluated management’s ability to estimate total costs and profits accurately by comparing actual costs and profits
to management’s historical estimates for performance obligations that have been fulfilled.
/s/ Deloitte & Touche LLP
Miami, Florida
March 3, 2021
We have served as the Company’s auditor since 2015.
50
NV5 Global, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
January 2, 2021
December 28, 2019
Assets
Current assets:
Cash and cash equivalents
Billed receivables, net
Unbilled receivables, net
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Right-of-use lease assets, net
Intangible assets, net
Goodwill
Other assets
Total Assets
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
Accrued liabilities
Billings in excess of costs and estimated earnings on uncompleted contracts
Client deposits
Current portion of contingent consideration
Current portion of notes payable and other obligations
Total current liabilities
Contingent consideration, less current portion
Other long-term liabilities
Notes payable and other obligations, less current portion
Deferred income tax liabilities, net
Total liabilities
Commitments and contingencies
Stockholders’ equity:
$
$
$
64,909 $
142,705
74,458
6,804
288,876
27,011
43,607
174,931
343,796
2,954
881,175 $
39,989 $
45,325
24,962
380
1,334
24,196
136,186
1,066
38,737
283,326
27,791
487,106
31,825
131,041
79,428
8,906
251,200
25,733
46,313
255,961
309,216
4,714
893,137
36,116
47,432
3,303
221
1,954
25,332
114,358
2,048
34,573
332,854
53,341
537,174
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, 13,270,131
and 12,852,357 shares issued and outstanding as of January 2, 2021 and
December 28, 2019, respectively
Additional paid-in capital
Retained earnings
Total stockholders’ equity
Total liabilities and stockholders’ equity
$
—
—
133
268,271
125,665
394,069
881,175 $
129
251,187
104,647
355,963
893,137
See accompanying notes to consolidated financial statements.
51
NV5 Global, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF NET INCOME AND 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
January 2, 2021
$
659,296
Fiscal Years Ended
December 28, 2019 December 29, 2018
418,081
$
508,938
$
176,865
107,602
40,291
324,758
153,023
79,598
30,935
263,556
132,922
62,218
21,537
216,677
334,538
245,382
201,404
Operating expenses:
Salaries and wages, payroll taxes and benefits
General and administrative
Facilities and facilities related
Depreciation and amortization
Total operating expenses
176,816
50,214
21,280
42,079
290,389
128,558
42,656
17,145
25,816
214,175
Income from operations
44,149
31,207
Interest expense
(15,181)
(2,275)
Income before income tax expense
Income tax expense
Net income and comprehensive income
Earnings per share:
Basic
Diluted
$
$
$
28,968
(7,950)
21,018 $
28,932
(5,176)
23,756 $
1.70 $
$
1.65
1.96 $
$
1.90
2.44
2.33
Weighted average common shares outstanding:
Basic
Diluted
12,362,786
12,713,075
12,116,185
12,513,034
10,991,124
11,506,466
See accompanying notes to consolidated financial statements.
52
102,221
31,713
14,401
17,384
165,719
35,685
(1,966)
33,719
(6,863)
26,856
NV5 Global, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(in thousands, except share data)
Common Stock
Balance, December 30, 2017
Stock-based compensation
Restricted stock issuance, net
Stock issuance for acquisitions
Proceeds from secondary offering, net of costs
Proceeds from exercise of warrants, net of
costs
Net income
Balance, December 29, 2018
Stock-based compensation
Restricted stock issuance, net
Stock issuance for acquisitions
Payment of contingent consideration with
common stock
Net income
Balance, December 28, 2019
Stock-based compensation
Restricted stock issuance, net
Stock issuance for acquisitions
Payment of contingent consideration with
common stock
Net income
$
Shares
10,834,770
—
172,820
133,121
1,270,000
140,000
—
12,550,711
—
234,805
55,656
11,185
—
12,852,357
—
373,684
38,846
5,244
—
Balance, January 2, 2021
13,270,131 $
Amount
108
—
2
1
13
2
—
126
—
2
1
—
—
129
—
4
—
—
Additional
Paid-In
Capital
$
$
125,954
6,697
(2)
9,329
93,456
1,091
—
236,525
10,430
(2)
3,510
724
—
251,187
14,955
(4)
1,855
278
Retained
Earnings
54,035
—
—
$
—
—
—
26,856
80,891
—
—
—
—
23,756
104,647
—
—
—
—
—
133 $
—
268,271
$
21,018
125,665
$
Total
180,097
6,697
—
9,330
93,469
1,093
26,856
317,542
10,430
—
3,511
724
23,756
355,963
14,955
—
1,855
278
21,018
394,069
See accompanying notes to consolidated financial statements.
53
NV5 Global, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Fiscal Years Ended
January 2, December 28, December 29,
2019
2021
2018
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating
activities:
$
21,018
$
23,756
$
26,856
Depreciation and amortization
Non-cash lease expense
Provision for doubtful accounts
Stock-based compensation
Change in fair value of contingent consideration
(Gain) loss on disposals of property and equipment
Deferred income taxes
Amortization of debt issuance costs
Changes in operating assets and liabilities, net of impact of acquisitions:
Billed receivables
Unbilled receivables
Prepaid expenses and other assets
Accounts payable
Accrued liabilities
Income taxes payable
Billings in excess of costs and estimated earnings on uncompleted
contracts
Deposits
Net cash provided by operating activities
Cash flows from investing activities:
Cash paid for acquisitions (net of cash received from acquisitions)
Proceeds from sale of assets
Purchase of property and equipment
Net cash used in investing activities
Cash flows from financing activities:
Borrowings from Senior Credit Facility
Proceeds from common stock offering
Proceeds from exercise of warrant
Payments of borrowings from Senior Credit Facility
Payments on notes payable
Payments of contingent consideration
Payments of common stock offering costs
Payments of debt issuance costs
Net cash (used in) provided by financing activities
45,488
9,469
4,311
14,955
—
(462)
(13,064)
896
(13,592)
1,996
4,680
3,367
(4,865)
—
21,659
153
96,009
(882)
1,670
(9,855)
(9,067)
—
—
—
(36,625)
(15,207)
(1,579)
—
(447)
(53,858)
25,816
9,410
1,239
10,430
(216)
21
(6,634)
131
5,140
(11,807)
(3,599)
534
(7,315)
(2,697)
(4,322)
13
39,900
(348,375)
—
(2,625)
(351,000)
330,457
—
—
(10,000)
(13,393)
(1,202)
—
(3,676)
302,186
17,384
—
797
6,697
424
26
(3,585)
—
(8,662)
(2,813)
(109)
398
(2,984)
(3,405)
3,964
11
34,999
(58,155)
—
(2,203)
(60,358)
—
100,330
1,093
(36,500)
(9,741)
(728)
(6,861)
(246)
47,347
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents – beginning of period
Cash and cash equivalents – end of period
33,084
31,825
64,909 $
(8,914)
40,739
31,825 $
21,988
18,751
40,739
$
See accompanying notes to consolidated financial statements.
54
NV5 Global, 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
Non-cash investing and financing activities:
Contingent consideration (earn-out)
Notes payable and other obligations issued for
acquisitions
Stock issuance for acquisitions
Finance leases
Payment of contingent consideration and other
obligations with common stock
January 2, 2021
Fiscal Years Ended
December 28, 2019 December 29, 2018
$
$
$
$
$
$
$
15,623 $
19,748 $
1,218 $
16,215 $
255 $
1,641 $
500 $
1,855 $
1,244 $
10,044 $
3,511 $
1,084 $
278
$
724
$
1,895
13,634
3,112
23,987
9,330
2,884
—
See accompanying notes to consolidated financial statements.
55
NV5 Global, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
Note 1 – Organization and Nature of Business Operations
Business
NV5 Global, Inc. and its subsidiaries (collectively, the “Company” or “NV5 Global”) is a provider of professional and
technical engineering and consulting solutions to public and private sector clients in the infrastructure, utility services,
construction, real estate, and environmental markets, operating nationwide and abroad. The Company’s clients include the U.S.
federal, state and local governments, and the private sector. NV5 Global provides a wide range of services, including, but not
limited to:
Utility services
LNG services
Engineering
Civil program management
Surveying
Testing, inspection, & consulting (TIC)
Code compliance consulting
Forensic engineering
Litigation support
Ecological studies
Impact of COVID-19 on Our Business
MEP & technology engineering
Commissioning
Program management
Environmental health & safety
Real estate transaction services
Energy efficiency services
3D geospatial data modeling
Environmental & natural resources
Robotic survey solutions
Geospatial data application & software
The COVID-19 pandemic has significantly impacted global stock markets and economies. The Company is closely
monitoring the impact of the outbreak of COVID-19 on all aspects of its business, including how it will impact the Company's
customers and employees. Some of the Company's services were affected, primarily its real estate transactional services and
hospitality-related services. In particular, due to COVID-19 restrictions, some of the Company's casino and hotel projects have
been delayed. As U.S. and international economies begin to reopen and with a vaccine underway the Company expects demand
for these services to return, but the Company is unable to predict the ultimate impact that it may have on its business, future
results of operations, financial position, or cash flows. The extent to which the Company's operations may be impacted by the
COVID-19 pandemic will depend largely on future developments, which are highly uncertain and cannot be accurately
predicted, including new information which may emerge concerning the severity of the outbreak and actions by government
authorities to contain the outbreak or treat its impact. The Company intends to continue to monitor the impact of COVID-19
pandemic on its business closely.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The consolidated financial statements of the Company are presented in U.S. dollars in conformity with accounting
principles generally accepted in the United States of America (“U.S. GAAP”) and have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission (the “SEC”). The consolidated financial statements include the
accounts of the Company and its subsidiaries. All intercompany transactions and balances have been eliminated in
consolidation.
Fiscal Year
Effective March 7, 2017, the Audit Committee of our Board of Directors and the Board of Directors approved a
change in our fiscal year-end and financial accounting cycle. Beginning January 1, 2017, the Company commenced reporting
its financial results on a 52/53 week fiscal year ending on the Saturday closest to December 31st (whether or not in the
following calendar year), with interim calendar quarters ending on the Saturday closest to the end of such calendar quarter
56
NV5 Global, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
(whether or not in the following calendar quarter). As a result, fiscal 2020 included 53 weeks compared to fiscal 2019 and 2018,
which both included 52 weeks.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and
assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. These estimates
and assumptions are based on management’s most recent assessment of underlying facts and circumstances using the most
recent information available. Actual results could differ significantly from these estimates and assumptions, and the differences
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 include the following:
•
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 our reporting units for goodwill impairment assessment
•
• Revenue recognition over time
• Allowances for uncollectible accounts
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, 28%, 27% and 30% of the Company’s gross revenues for fiscal years
2020, 2019, and 2018, respectively, are from California-based projects. The Company did not have any clients representing
more than 10% of our gross revenues during 2020, 2019 or 2018. During fiscal years 2020, 2019, and 2018 approximately 68%,
68% and 67%, respectively, of our gross revenues was attributable to the public and quasi-public sector. Management
continually evaluates the creditworthiness of these and future clients and provides for bad debt reserves as necessary.
Fair Value of Financial Instruments
Fair value is defined as the amount that would be received for selling an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date and is measured using inputs in one of the following
three categories:
Level 1 measurements are based on unadjusted quoted prices in active markets for identical assets or liabilities that we
have the ability to access. Valuation of these items does not entail a significant amount of judgment.
Level 2 measurements are based on quoted prices for similar assets or liabilities in active markets, quoted prices for
identical or similar assets or liabilities in markets that are not active or market data other than quoted prices that are observable
for the assets or liabilities.
Level 3 measurements are based on unobservable data that are supported by little or no market activity and are
significant to the fair value of the assets or liabilities.
The Company considers cash and cash equivalents, accounts receivable, accounts payable, income taxes payable,
accrued liabilities and debt obligations to meet the definition of financial instruments. As of January 2, 2021 and December 28,
57
NV5 Global, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
2019, the carrying amount of cash and cash equivalents, accounts receivable, accounts payable, income taxes payable and
accrued liabilities approximate their fair value due to the relatively short period of time between their origination and their
expected realization or payment. The carrying amounts of debt obligations approximate their fair values as the terms are
comparable to terms currently offered by local lending institutions for arrangements with similar terms to industry peers with
comparable credit characteristics.
The Company applies the provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards
Codification (“ASC”) 805, Business Combinations, in the accounting for its acquisitions, which requires recognition of the
assets acquired and the liabilities assumed at their acquisition date fair values, separately from goodwill. 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 price to identifiable
intangible assets is based on valuations performed to determine the fair values of such assets as of the acquisition dates.
Generally, the Company engages a third-party independent valuation specialist to assist in management’s determination of fair
values of tangible and intangible assets acquired and liabilities assumed. 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. Changes in the estimated fair value of contingent earn-out
payments are included in General and Administrative expenses on the Consolidated Statements of Net Income and
Comprehensive Income.
Several factors are considered when determining contingent consideration liabilities as part of the purchase price,
including whether (i) the valuation of the acquisitions is not supported solely by the initial consideration paid, and the
contingent earn-out formula is a critical and material component of the valuation approach to determining the purchase price;
and (ii) the former owners of the acquired companies that remain as key employees receive compensation other than contingent
earn-out payments at a reasonable level compared with the compensation of other key employees. The contingent earn-out
payments are not affected by employment termination.
The Company reviews and re-assesses the estimated fair value of contingent consideration liabilities on a quarterly
basis, and the updated fair value could differ from the initial estimates. The Company measures contingent consideration
recognized in connection with business combinations at fair value on a recurring basis using significant unobservable inputs
classified as Level 3 inputs. The Company uses a probability-weighted discounted cash flow approach as a valuation technique
to determine the fair value of the contingent consideration liabilities on the acquisition date and at each reporting period. The
significant unobservable inputs used in the fair value measurements are projections over the earn-out period, and the probability
outcome percentages that are assigned to each scenario. Significant increases or decreases to either of these inputs in isolation
could result in a significantly higher or lower liability with a higher liability capped by the contractual maximum of the
contingent consideration liabilities. Ultimately, the liability will be equivalent to the amount paid, and the difference between
the fair value estimate on the acquisition date and amount paid will be recorded in earnings. See Note 12, Contingent
Consideration, for additional information regarding contingent considerations.
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 the assets. Leasehold
58
NV5 Global, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
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
Depreciation Period (in years)
Office furniture and equipment
Computer equipment
Survey and field equipment
Leasehold improvements
4
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. During fiscal years 2020, 2019 and 2018, no impairment charge relating
to property and equipment was recognized.
Goodwill and Intangible Assets
Goodwill is the excess of consideration paid for an acquired entity over the amounts assigned to assets acquired,
including other identifiable intangible assets and liabilities assumed in a business combination. To determine the amount of
goodwill resulting from a business combination, the Company performs an assessment to determine the acquisition date fair
value of the acquired company’s tangible and identifiable intangible assets and liabilities.
The Company evaluates goodwill annually for impairment on August 1 or whenever events or changes in
circumstances indicate the asset may be impaired. An entity has the option to first assess qualitative factors to determine
whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a
reporting unit is less than its carrying amount. These qualitative factors include: macroeconomic and industry conditions, cost
factors, overall financial performance and other relevant entity-specific events. If the entity determines that this threshold is
met, then the Company may apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a
reporting unit's carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit.
The Company determines fair value through multiple valuation techniques, and weights the results accordingly. NV5 Global is
required to make certain subjective and complex judgments in assessing whether an event of impairment of goodwill has
occurred, including assumptions and estimates used to determine the fair value of its reporting units. The Company conducts its
annual impairment tests on the goodwill using the quantitative method of evaluating goodwill.
Identifiable intangible assets primarily include customer backlog, customer relationships, trade names, non-compete
agreements, and developed technology. Amortizable intangible assets are amortized on a straight-line basis over their estimated
useful lives and reviewed for impairment whenever events or changes in circumstances indicate that the assets may be impaired.
If an indicator of impairment exists, the Company compares the estimated future cash flows of the asset, on an undiscounted
basis, to the carrying value of the asset. If the undiscounted cash flows exceed the carrying value, no impairment is indicated. If
the undiscounted cash flows do not exceed the carrying value, then impairment, if any, is measured as the difference between
fair value and carrying value, with fair value typically based on a discounted cash flow model.
During fiscal years 2020, 2019 and 2018, no impairment charge relating to goodwill and intangible assets was
recognized. See Note 9, Goodwill and Intangible Assets, for further information on goodwill and identified intangibles.
Revenue Recognition
On the first day of fiscal year 2018, we adopted ASC Topic 606, Revenue from Contracts with Customers (“Topic
606”), using the modified retrospective approach to all contracts that were not completed as of the beginning of fiscal year
2018. We utilize the contract method, which allows companies to account for contracts on a contract by contract basis. For our
time and materials contracts, we apply the as-invoiced practical expedient, which permits us to recognize revenue as the right to
invoice for services performed. The new standard did not materially affect our consolidated net income, financial position, or
cash flows.
59
NV5 Global, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
To determine the proper revenue recognition method, the Company evaluates whether two or more contracts should be
combined and accounted for as one single contract and whether the combined or single contract should be accounted for as
more than one performance obligation. The majority of the Company's contracts have a single performance obligation as the
promise to transfer the individual goods or services that is not separately identifiable from other promises in the contracts and,
therefore, is not distinct.
The Company’s performance obligations are satisfied as work progresses or at a point in time. Revenue on the
Company's cost-reimbursable contracts is recognized over time using direct costs incurred or direct costs incurred to date as
compared to the estimated total direct costs for performance obligations because it depicts the transfer of control to the
customer. Contract costs include labor, sub-consultant services, and other direct costs. Gross revenues from services transferred
to customers over time accounted for 92%, 90%, and 92% of the Company’s revenues during fiscal years 2020, 2019 and 2018,
respectively.
Gross revenue from services transferred to customers at a point in time is recognized when the customer obtains control
of the asset, which is generally upon delivery and acceptance by the customer of the reports and/or analysis performed. Gross
revenue from services transferred to customers at a point in time accounted for 8%, 10%, and 8% of the Company’s revenues
during fiscal years 2020, 2019 and 2018, respectively.
As of January 2, 2021, the Company had $575,052 of remaining performance obligations, of which $489,009 is
expected to be recognized over the next 12 months and the majority of the balance over the next 24 months. Contracts for
which work authorizations have been received are included in performance obligations. Most of the Company's contracts are
multi-year contracts for which funding is appropriated on an annual basis, therefore performance obligations include only those
amounts that have been funded and authorized and does not reflect the full amounts the Company may receive over the term of
such contracts. In the case of non-government contracts and project awards, performance obligations include future revenue at
contract or customary rates, excluding contract renewals or extensions that are at the discretion of the client. For contracts with
a not-to-exceed maximum amount, the Company includes revenue from such contracts in performance obligations to the extent
of the remaining estimated amount.
Contract modifications are common in the performance of our contracts. Contracts modified typically result from
changes in scope, specifications, design, performance, sites, or period of completion. In most cases, contract modifications are
for services that are not distinct, and, therefore, are accounted for as part of the existing contract.
Contract estimates are based on various assumptions to project the outcome of future events. These assumptions are
dependent upon the accuracy of a variety of estimates, including engineering progress, 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 effect of revisions to revenues, estimated costs to complete contracts, including penalties, incentive awards, change orders,
claims, anticipated losses and others are recorded on the cumulative catch-up basis 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. During
fiscal years 2020, 2019, and 2018 the cumulative catch-up adjustment for contract modifications was not material.
A significant amount of the Company’s revenues are derived under multi-year contracts. The Company enters into
contracts with its clients that contain two principal types of pricing provisions: cost-reimbursable and fixed-unit price. The
majority of the Company’s contracts are cost-reimbursable contracts that fall under the low-risk subcategory of time and
materials contracts.
Cost-reimbursable contracts consist of the following:
• Time and materials contracts, which 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 project.
In addition, any direct project expenditures are passed through to the client and are typically reimbursed. These
contracts may have an initial not-to-exceed or guaranteed maximum price provision.
60
NV5 Global, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
• Cost-plus contracts are the predominant contracting method used by U.S. federal, state, and local governments.
Under these types of contracts, the Company charges clients for its costs, including both direct and indirect
costs, plus a negotiated fee. The total estimated cost plus the negotiated fee represents the total contract value.
• 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. In most cases, we can bill additional fees if the construction schedule is modified
and lengthened.
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.
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.
Contract Balances
The timing of revenue recognition, billings and cash collections results in billed receivables, unbilled receivables
(contract assets), and billings in excess of costs and estimated earnings on uncompleted contracts (contract liabilities) on the
Consolidated Balance Sheet.
Billed receivables, net represents amounts billed to clients that remain uncollected as of the balance sheet date. The
amounts are stated at their estimated realizable value. The Company maintains an allowance for doubtful accounts to provide
for the estimated amount of receivables that will not be collected. 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 (governmental or commercial client)
• Historical performance
• Historical collection trends
• General economic conditions
Billed receivables are generally collected within less than 12 months. 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
included in income, while direct charge-offs of receivables are deducted from the allowance.
Unbilled receivables, net represents recognized amounts pending billing pursuant to contract terms or accounts billed
after period end, and are expected to be billed and collected within the next 12 months. Generally, billing occurs subsequent to
revenue recognition, resulting in contract assets. Unbilled receivables (contract assets) are generally classified as current.
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. This liability is generally classified as
current. During fiscal 2020, the Company performed services and recognized $3,235 of revenue related to its contract liabilities
that existed as of December 28, 2019.
Advertising
Advertising costs are charged to expense in the period incurred and amounted to $940, $939 and $1,019 during fiscal
years 2020, 2019 and 2018, respectively, which are included in General and Administrative Expenses on the accompanying
Consolidated Statements of Net Income and Comprehensive Income.
61
NV5 Global, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
Income Taxes
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. The Company’s policy is
to classify interest and penalties as income tax expense.
Note 3 – Recently Issued Accounting Pronouncements
Recently Adopted Accounting Pronouncements
Goodwill and Intangible Assets
In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350) Simplifying the
Test for Goodwill Impairment ("ASU 2017-04"). This ASU eliminates Step 2 of the goodwill impairment test and simplifies
how the amount of an impairment loss is determined. The update is effective for public companies in the beginning of fiscal
year 2020 and shall be applied on a prospective basis. The Company adopted this ASU at the beginning of fiscal year 2020. The
Company has determined there were no changes to its financial statements as a result of the adoption.
Financial Instruments
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) ("ASU
2016-13"). This ASU introduces a new accounting model, the Current Expected Credit Losses model ("CECL"), which could
result in earlier recognition of credit losses and additional disclosures related to credit risk. The CECL model requires the
Company to use a forward-looking expected credit loss impairment methodology for the recognition of credit losses for
financial instruments at the time the financial asset is originated or acquired. The expected credit losses are adjusted each period
for changes in expected lifetime credit losses. This model replaces the multiple existing impairment models in current GAAP,
which generally require that a loss be incurred before it is recognized. The new standard also applies to receivables arising from
revenue transactions such as contract assets and accounts receivable and is effective for fiscal years beginning after
December 15, 2019. The Company adopted this ASU at the beginning of fiscal year 2020. The standard was applied
prospectively and did not materially impact the consolidated financial statements.
Leases
In February 2016, the FASB issued Accounting Standards Update ("ASU") No. 2016-02, Leases (Topic 842) ("ASU
2016-02") which is intended to increase transparency and comparability of accounting for lease transactions. For all leases with
terms greater than 12 months, the new guidance requires lessees to recognize right-of-use assets and corresponding lease
liabilities on the balance sheet and to disclose qualitative and quantitative information about lease transactions. The new
standard maintains a distinction between finance leases and operating leases. As a result, the effect of the new guidance on
leases in the statement of operations and statement of cash flow is largely unchanged.
The Company adopted ASU No. 2016-02 as of the first day of the fiscal year 2019 using the modified retrospective
approach and elected not to adjust comparative periods. In addition, the Company elected the package of practical expedients
permitted under the transition guidance within the new standard, which permits the Company not to reassess under the new
62
NV5 Global, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
standard its prior conclusions about lease identification, lease classification, and the initial direct costs. The Company elected
the practical expedient to keep leases with an initial term of 12 months or less off the balance sheet and the practical expedient
to account for non-lease components in a contract as part of a single lease component. Lease payments are recognized in the
Consolidated Statements of Operations on a straight-line basis over the lease term. Adoption of the new standard resulted in the
recording of additional right-of-use lease assets and lease liabilities of $34,186 and $34,965, respectively, as of the first day of
the fiscal year 2019. The standard did not materially impact our consolidated net earnings and had no impact on cash flows.
Additionally, there was no cumulative effect of adoption on retained earnings in the Statement of Changes in Stockholders'
Equity.
Accounting Pronouncements Not Yet Adopted
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848) ("ASU 2020-04"). This ASU
provides optional expedients and exceptions to the current guidance on contracts, hedging relationships, and other transactions
affected by reference rate reform if certain criteria are met. The amendments in this update apply only to contracts and hedging
relationships that reference the London Interbank Offered Rate ("LIBOR") or another reference rate expected to be
discontinued due to reference rate reform. The guidance was effective upon issuance and generally can be applied to applicable
contract modifications through December 31, 2022. The Company is currently evaluating the impact this new guidance may
have on its consolidated financial statements.
Note 4 – Earnings per Share
Basic earnings per share is calculated by dividing net income by the weighted average number of common shares
outstanding during the period, excluding unvested restricted shares. Diluted earnings per share reflects the potential dilution that
could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in
the issuance of common stock that then shared in the earnings of the Company. The effect of potentially dilutive securities is
not considered during periods of loss or if the effect is anti-dilutive.
The weighted average number of shares outstanding in calculating basic earnings per share during fiscal years 2020,
2019 and 2018 exclude 763,183, 642,677 and 614,911 non-vested restricted shares, respectively. During fiscal 2020, there were
12,588 weighted average securities which are not included in the calculation of diluted weighted average shares outstanding
because their impact is anti-dilutive. There were no potentially anti-dilutive securities during fiscal years 2019 and 2018.
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 during fiscal years 2020, 2019 and 2018:
Numerator:
Net income – basic and diluted
Denominator:
Basic weighted average shares outstanding
Effect of dilutive non-vested restricted shares and units
Effect of issuable shares related to acquisitions
Effect of warrants
Diluted weighted average shares outstanding
January 2, 2021
Fiscal Years Ended
December 28, 2019 December 29, 2018
$
21,018 $
23,756 $
26,856
12,362,786
303,622
46,667
—
12,713,075
12,116,185
319,674
77,175
—
12,513,034
10,991,124
401,726
87,713
25,903
11,506,466
Note 5 – Stockholders' Equity
Warrant exercise
In conjunction with the Company’s initial public offering on March 26, 2013, the underwriter received a warrant to
acquire up to 140,000 units (“Unit Warrant”). On March 23, 2016, the underwriter paid $1,008 to the Company to exercise the
Unit Warrant. Each of the units delivered upon exercise consisted of one share of the Company’s common stock and one
63
NV5 Global, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
warrant to purchase one share of the Company’s common stock at an exercise price of $7.80 per share (“Warrant”), which
warrant expired on March 27, 2018. On March 19, 2018, the underwriter paid $1,093 to the Company to exercise the Warrant.
On March 21, 2018, the Company delivered 140,000 shares of common stock to the underwriter.
Common Stock offering
On August 9, 2018, the Company priced an underwritten follow-on offering of 1,270,000 shares of the Company’s
common stock (the “2018 Firm Shares”) at an offering price of $79.00 per share. The shares were sold pursuant to an effective
registration statement on Form S-3 (Registration No. 333-224392). In addition, a selling stockholder of the Company granted
the underwriters of the offering a 30-day option to purchase up to 190,500 shares (the “2018 Option Shares”) of the Company’s
common stock at the public offering price less the underwriting discount. On August 13, 2018, the Company closed on the 2018
Firm Shares, for which we received net proceeds of $93,469 after deducting the underwriting discount and estimated offering
expenses payable by the Company, and the selling stockholder of the Company closed on the sale of all 2018 Option Shares.
The Company did not receive any proceeds associated with the sale of the 2018 Option Shares by the selling stockholder.
Note 6 – Business Acquisitions
2020 Acquisitions
On July 16, 2020, the Company acquired all of the outstanding equity interests in Mediatech FZ, LLC and Mediatech
Information Technology Consultants ("Mediatech"), a technology company providing security, enterprise IT, and building
technology solutions in the Middle East and North Africa (MENA) region and South East Asia. Mediatech provides technology
design services for the hospitality, industrial, healthcare, commercial, retail, and convention center markets. The Company
acquired Mediatech for an aggregate purchase price of $1,949, including $882 of cash and $500 in promissory note, payable in
four equal installments of $125 due on the first, second, third, and fourth anniversaries of the closing date. The purchase price
also includes $312 of the Company's common stock payable in four equal installments due at closing and on the first, second
and third anniversaries of the closing date. Further, the purchase price includes $255 in additional contingent payments. In order
to determine the fair values of tangible and intangible assets acquired and liabilities assumed for Mediatech, the Company
performed a fair value assessment. The final determination of the fair value of assets and liabilities will be completed within the
one-year measurement period as required by ASC Topic 805, Business Combinations ("ASC 805"). The Mediatech acquisition
will necessitate the use of this measurement period to adequately analyze and assess the factors used in establishing the asset
and liability fair values as of the acquisition date, including intangible assets, accounts receivable, and certain fixed assets.
2019 Acquisitions
On December 20, 2019 (the "Closing Date"), the Company acquired all of the outstanding equity interests in
Geospatial Holdings, Inc. and its subsidiaries, including Quantum Spatial, Inc. (collectively "QSI"), a full-service geospatial
solutions provider serving the North American market. QSI provides data solutions to public and private sector clients that need
geospatial intelligence to mitigate risk, plan for growth, better manage resources, and advance scientific understanding. NV5
Global acquired QSI in an all-cash transaction for $318,428, which includes excess working capital of $9,034 and closing date
cash of approximately $6,894. The purchase price and other related costs associated with the transaction were financed through
the Company's amended and restated credit agreement (the "A&R Credit Agreement") with Bank of America, N.A. and the
other lenders party thereto. Pursuant to the A&R Credit Agreement, the lenders provided term commitments of $150,000 in the
aggregate in a single draw on the Closing Date and revolving commitments totaling $215,000. See Note 11, Notes Payable and
Other Obligations, for further detail on the A&R Credit Agreement. In order to determine the fair values of tangible and
intangible assets acquired and liabilities assumed for QSI, the Company engaged a third-party independent valuation specialist
to assist in the determination of fair values.
On November 8, 2019, the Company acquired from GHD Services, Inc. ("GHD") its assets related to the business for
forensics and insurance. The GHD forensics and insurance business provides engineering and environmental claim services for
insurance companies, law firms, and litigation support. The Company acquired GHD for a cash purchase price of $8,300. In
order to determine the fair values of tangible and intangible assets required and liabilities assumed for GHD, the Company
engaged a third-party independent valuation specialist to assist in the determination of fair values.
64
NV5 Global, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
On July 2, 2019, the Company acquired all of the outstanding equity interests in WHPacific, Inc. (“WHPacific”), a
provider of design engineering and surveying services serving Washington, Oregon, Idaho, New Mexico, Arizona and
California for a cash purchase price of $9,000. In order to determine the fair values of tangible and intangible assets acquired
and liabilities assumed for WHPacific, the Company engaged a third-party independent valuation specialist to assist in the
determination of fair values.
On July 1, 2019, the Company acquired all of the outstanding equity interests in GeoDesign, Inc. ("GeoDesign"), a
geotechnical, environmental, geological, mining and pavement engineering company serving Washington, Oregon, and
California. The aggregate purchase price was $11,245, including $8,247 of cash, $2,000 in promissory note (bearing interest at
4.0%), payable in four equal installments of $500 due on the first, second, third, and fourth anniversaries of July 1, 2019, and
$375 of the Company's common stock (4,731 shares) issued at the closing date. The purchase price also includes $425 of the
Company's common stock payable on the first and second anniversaries of July 1, 2019. Further, the purchase price includes a
$1,500 earn-out of cash, which was recorded at the estimated fair value of $198. In order to determine the fair values of tangible
and intangible assets acquired and liabilities assumed for GeoDesign, the Company engaged a third-party independent valuation
specialist to assist in the determination of fair values.
On June 3, 2019, the Company acquired all of the outstanding equity interests in Alta Environmental, L.P. ("Alta"), a
consulting firm specializing in air quality, environmental building sciences, water resources, site assessment and remediation as
well as environmental health and safety compliance services. The aggregate purchase price was $6,323, including $4,000 of
cash and $2,000 in promissory note (bearing interest at 4.0%), payable in four equal installments of $500 due on the first,
second, third, and fourth anniversaries of June 3, 2019. Further, the purchase price includes a $500 earn-out of cash, which was
recorded at an estimated fair value of $323. In order to determine the fair values of tangible and intangible assets acquired and
liabilities assumed for Alta, the Company engaged a third-party independent valuation specialist to assist in the determination
of fair values.
On June 3, 2019, the Company acquired all of the outstanding equity interests in Page One Consultants ("Page One"),
a program management and construction quality assurance firm based in Orlando, Florida. The aggregate purchase price was
$3,995, including $2,293 of cash, $1,000 in promissory note (bearing interest at 3.0%), payable in three equal installments of
$333 due on the first, second, and third anniversaries of June 3, 2019, and $200 of the Company's common stock (2,647 shares)
issued at the closing date. The purchase price also includes $200 of the Company's common stock payable on the first
anniversary date of June 3, 2019. Further, the purchase price includes a $500 earn-out of cash and stock, which was recorded at
an estimated fair value of $302. In order to determine the fair values of tangible and intangible assets acquired and liabilities
assumed for Page One, the Company engaged a third-party independent valuation specialist to assist in the determination of fair
values.
On March 22, 2019, the Company acquired all of the outstanding equity interests in the Sextant Group, Inc. ("The
Sextant Group"), a national provider of audiovisual, information and communications technology, acoustics consulting, and
design services headquartered in Pittsburgh, PA. The Sextant Group provides services throughout the U.S. and is well-known
for creating integrated technology solutions for a wide range of public and private sector clients. The aggregate purchase price
was $10,501, including $6,501 of cash and $4,000 in promissory note (bearing interest at 4.0%), payable in four equal
installments of $1,000 due on the first, second, third, and fourth anniversaries of March 22, 2019. In order to determine the fair
values of tangible and intangible assets acquired and liabilities assumed for The Sextant Group, the Company engaged a third-
party independent valuation specialist to assist in the determination of fair values.
On December 31, 2018, the Company acquired certain assets of Celtic Energy, Inc. ("Celtic"), a nationally recognized
energy efficiency consulting firm that specialized in energy efficiency project management and oversight. The aggregate
purchase price was $1,881, including $1,000 in cash, $300 in promissory note (bearing interest at 3.0%), payable in three equal
installments of $100 on the first, second, and third anniversaries of December 31, 2018, and $200 of the Company's common
stock (3,227 shares) issued at the closing date. The purchase price also includes $200 of the Company's common stock payable
on the first anniversary December 31, 2018. Further, the purchase price includes a $200 earn-out of cash, which was recorded at
an estimated fair value of $181. In order to determine the fair values of tangible and intangible assets acquired and liabilities
assumed for Celtic, the Company performed a purchase price allocation.
65
NV5 Global, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
2018 Acquisitions
On November 2, 2018 the Company acquired CHI Engineering, Inc. (“CHI”), an infrastructure engineering firm based
in Portsmouth, New Hampshire. CHI is a leading provider of engineering, procurement, and construction management services
to the liquefied natural gas (“LNG”), petroleum gas (“LPG”) and Natural Gas industries. CHI’s client base includes the
majority of LNG facility owner/operators in the U.S. The aggregate purchase price of this acquisition is up to $53,000,
including $30,000 in cash, $15,000 in promissory notes (bearing interest at 3.0%), payable in four equal installments of $3,750
on the first, second, third and fourth anniversaries of November 2, 2018 and $3,000 of the Company’s common stock
(36,729 shares) issued at the closing date. In July 2019, the Company received $2,360 from the sellers of CHI, as a working
capital adjustment which was recorded as a reduction of the purchase price paid for the acquisition of CHI. The purchase price
also includes $3,000 of the Company’s common stock payable in three installments of $1,000, due on the first, second and third
anniversaries of November 2, 2018. The purchase price also includes a $2,000 earn-out of cash (at a 3.0% interest rate which
begins to accrue on January 1, 2020), which was recorded at its estimated fair value of $1,547, based on a probability-weighted
approach valuation technique used to determine the fair value of the contingent consideration on the acquisition date. The note
and the earn-out are due to related party individuals who became employees of the Company upon the acquisition. In order to
determine the fair values of tangible and intangible assets acquired and liabilities assumed for CHI, the Company engaged a
third-party independent valuation specialist to assist in the determination of fair values.
On August 24, 2018, the Company acquired all of the outstanding equity interests in CALYX Engineers and
Consultants, Inc. ("CALYX"), an infrastructure and transportation firm based in Cary, North Carolina. CALYX provides
roadway and structure design, transportation planning, water resources, construction services, utility services, building structure
design, land development, traffic services, cultural resources, surveying, and environmental services. CALYX serves both
public and private clients, including state departments of transportation, municipalities, developers, higher education, and
healthcare systems. The acquisition of CALYX will expand our infrastructure engineering service in the southeast United
States. The purchase price of this acquisition is $34,000, subject to customary closing working capital adjustments, including
$25,000 in cash, $4,000 in promissory notes (bearing interest at 3.75%), payable in four installments of $1,000, due on the first,
second, third and fourth anniversaries of August 24, 2018, $3,000 of the Company’s common stock (36,379 shares) as of the
closing date of the acquisition, and $2,000 in cash payable within 120 days of the closing date. The note is due to related party
individuals who became employees of the Company. In order to determine the fair values of tangible and intangible assets
acquired and liabilities assumed for CALYX, the Company engaged a third-party independent valuation specialist to assist in
the determination of fair values.
On February 2, 2018, the Company acquired CSA (M&E) Ltd. (“CSA”), a leading provider of Mechanical, Electrical,
and Plumbing (MEP) engineering and sustainability consulting services. CSA provides MEP and sustainability services for the
retail, education, healthcare, industrial, corporate, hospitality and infrastructure market sectors with offices in Hong Kong,
Macau and the UAE. CSA serves private and public sector clients throughout Asia and the Middle East. The purchase price of
this acquisition was up to $4,200, including $2,000 in cash; $600 in promissory notes (bearing interest at 3.0%), payable in four
installments of $150, due on the first, second, third and fourth anniversaries of February 2, 2018, the effective date of the
acquisition; and $150 of the Company’s common stock (2,993 shares) issued as of the closing date. The purchase price also
includes $250 of the Company’s common stock payable in two installments of $125, due on the first and second anniversaries
of the acquisition. The purchase price also included a non-interest bearing earn-out of up to $1,200 payable in cash and stock,
subject to the achievement of certain agreed upon financial metrics for fiscal year 2018. The earn-out of $1,200 is non-interest
bearing and was recorded at its estimated fair value of $899, based on a probability-weighted approach valuation technique
used to determine the fair value of the contingent consideration on the acquisition date. The note and the earn-out are due to a
related party individual who became an employee of the Company upon the acquisition. In order to determine the fair values of
tangible and intangible assets acquired and liabilities assumed for CSA, the Company engaged a third-party independent
valuation specialist to assist in the determination of fair values.
On January 12, 2018, the Company acquired all of the outstanding equity interest in Butsko Utility Design, Inc.
(“Butsko”). Butsko is leading provider of utility planning and design services serving both public and private sector clients
through its offices in Southern California and Washington. The purchase price of this acquisition was up to $4,250, including
$1,500 in cash; $1,000 in promissory notes (bearing interest at 3.0%), payable in four installments of $250, due on the first,
second, third and fourth anniversaries of January 12, 2018, the effective date of the acquisition; and $300 of the Company’s
common stock (5,630 shares) issued as of the closing date. The purchase price also includes $600 of the Company’s common
stock payable in two installments of $300, due on the first and second anniversaries of the acquisition. The purchase price also
included a non-interest bearing earn-out of up to $850 payable in cash and stock, subject to the achievement of certain agreed
66
NV5 Global, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
upon financial metrics for fiscal year 2018. The earn-out of $850 is non-interest bearing and was recorded at its estimated fair
value of $666, based on a probability-weighted approach valuation technique used to determine the fair value of the contingent
consideration on the acquisition date. The note and the earn-out are due to a related party individual who became an employee
of the Company upon the acquisition. In order to determine the fair values of tangible and intangible assets acquired and
liabilities assumed for Butsko, the Company engaged a third-party independent valuation specialist to assist in the
determination of fair values.
The following table summarizes the fair values of the assets acquired and liabilities assumed as of the acquisition dates
for acquisitions closed during fiscal years 2020 and 2019:
Cash
Billed and unbilled receivables, net
Right-of-use assets
Property and equipment
Prepaid expenses
Other assets
Intangible assets:
Customer relationships
Trade name
Customer backlog
Developed technology
Other
Total Assets
Liabilities
Deferred tax liabilities
Net assets acquired
Consideration paid (Cash, Notes and/or stock)
Contingent earn-out liability (Cash and stock)
Total Consideration
Excess consideration over the amounts assigned to the net assets
acquired (Goodwill)
$
$
$
$
$
2020
Total
QSI
2019
Other
$
— $
6,894
$
75
$
1,439
—
28
33
28
237
30
56
—
42,523
6,131
15,718
2,612
2,075
71,314
4,234
7,646
32,944
5
1,856 $
—
192,091 $
(345)
—
(23,698)
(27,221)
18,726
—
2,163
997
1,048
10,541
1,365
1,409
—
814
37,138
(8,222)
(3,451)
$
Total
6,969
61,249
6,131
17,881
3,609
3,123
81,855
5,599
9,055
32,944
814
229,229
(31,920)
(30,672)
1,511 $
141,172 $
25,465
$
166,637
1,694 $
318,428 $
50,447 $
368,875
255
—
1,004
1,004
1,949
$
318,428
$
51,451
$
369,879
438
$
177,256
$
25,986 $
203,242
Goodwill was recorded based on the amount by which the purchase price exceeded the fair value of the net assets
acquired and the amount is attributable to the reputation of the business acquired, the workforce in place and the synergies to be
achieved from these acquisitions. See Note 9, Goodwill and Intangible Assets, for further information on fair value adjustments
to goodwill and identified intangible assets.
The consolidated financial statements of the Company include the results of operations from any business acquired
from their respective dates of acquisition. The following table presents the results of operations of businesses acquired from
their respective dates of acquisition for fiscal years 2019 and 2018.
Gross revenues
Income before income taxes
2019
2018
$
$
42,127 $
3,170 $
33,468
6,677
The revenue and earnings of Mediatech have been included in the Company's results since the acquisition date and are
not material to the Company's consolidated financial statements and have not been presented. General and administrative
67
NV5 Global, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
expense for fiscal years 2020, 2019 and 2018 included $856, $1,492 and $1,267, 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 fiscal years 2019 and 2018 as if the acquisitions of CHI, CALYX, The Sextant Group, Page One, Alta,
WHPacific, GeoDesign, GHD, and QSI had occurred at the beginning of fiscal year 2018. The pro forma information provided
below is compiled from the pre-acquisition financial statements of CHI, CALYX, The Sextant Group, Page One, Alta,
WHPacific, GeoDesign, GHD, and QSI and includes pro forma adjustments for amortization expense, adjustments to certain
expenses, and the income tax impact of these adjustments. These unaudited pro forma results are presented for informational
purposes only and are not necessarily indicative of what the actual results of operations of the Company would have been if the
acquisitions and related financing transactions had occurred on the date assumed, nor are they indicative of future results of
operations.
Gross revenues
Net income
Basic earnings per share
Diluted earnings per share
Fiscal Years Ended
2018
2019
$
$
$
$
677,109
$
16,728 $
1.38 $
1.34 $
689,580
20,805
1.88
1.80
Pro forma results for 2019 were adjusted to exclude acquisition-related costs incurred by NV5 Global and QSI.
Adjustments were also made to adjust amortization of intangible assets to reflect fair value of identified assets acquired, to
record the effects of extinguishing the debt of QSI and replacing it with the debt of NV5 Global, and to record the income tax
effect of these adjustments. Adjustments were made to the 2018 pro forma results to adjust amortization of intangible assets to
reflect fair value of identified assets acquired, to record the effect of extinguishing the debt of QSI and replacing it with the debt
of NV5 Global, and to record the income tax effect of these adjustments.
All other acquisitions were not material to the Company’s consolidated financial statements both individually and in
the aggregate.
Note 7 – Billed and Unbilled Receivables
Billed and Unbilled Receivables consists of the following:
Billed receivables
Less: allowance for doubtful accounts
Billed receivables, net
Unbilled receivables
Less: allowance for doubtful accounts
Unbilled receivables, net
$
$
$
$
January 2, 2021
149,233 $
December 28, 2019
134,900
(6,528)
142,705 $
76,609 $
(2,151)
74,458 $
(3,860)
131,041
80,639
(1,211)
79,428
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
Balance as of the end of the year
January 2, 2021
December 28, 2019
$
$
5,071 $
4,311
(703)
8,679 $
4,546
1,239
(714)
5,071
68
NV5 Global, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
Note 8 – Property and Equipment, net
Property and equipment, net consists of the following:
Office furniture and equipment
Computer equipment
Survey and field equipment
Leasehold improvements
Total
Less: accumulated depreciation
Property and equipment, net
$
$
January 2, 2021
3,782
15,597
22,866
6,322
48,567
(21,556)
27,011
$
December 28, 2019
4,198
$
10,704
24,165
6,266
45,333
(19,600)
25,733
Depreciation expense for fiscal year 2020 was $10,892, of which $4,510 was included in other direct costs.
Depreciation expense for fiscal years 2019 and 2018 was $5,327 and $4,331, respectively.
Note 9 – Goodwill and Intangible Assets
Goodwill
As discussed in Note 18, Reportable Segments, the Company's chief operating decision maker ("CODM"), re-
evaluated the structure of the Company's internal organization as a result of the 2019 acquisition of QSI, which resulted in
certain changes to the Company's operating and reportable segments. Effective the beginning of fiscal year 2020, the goodwill
of QSI and Skyscene were reallocated from the Company's INF reportable segment to the Company's new GEO reportable
segment. The changes in the carrying value by reportable segment for the fiscal years 2020 and 2019 were as follows:
INF
BTS
GEO
Total
INF
BTS
Total
Fiscal Year 2020
December 28, 2019
$
231,255 $
77,961
—
309,216 $
$
Acquisitions
Adjustments
January 2, 2021
— $
(143,922) $
438
—
438
$
449
177,615
34,142 $
87,333
78,848
177,615
343,796
Fiscal Year 2019
Acquisitions
Adjustments
December 29, 2018
$
69,255 $
$
71,675
140,930 $
162,814 $
6,286
169,100 $
December 28, 2019
231,255
(814) $
—
(814) $
77,961
309,216
Goodwill of $9,574 from acquisitions in 2019 is expected to be deductible for income tax purposes. During 2020, the
Company recorded purchase price allocation adjustments of $31,895, $1,107, $420, $266, and $30 that increased goodwill for
the acquisitions of QSI, WHP, The Sextant Group, GHD, and Alta, respectively, and a working capital adjustment of $424 for
QSI which was recorded as an increase to goodwill and the purchase price paid for the acquisition. The $31,895 increase to
goodwill related to the QSI acquisition included a decrease to the fair value of the trade name of $54,313, which was partially
offset by increases to the fair value of customer relationships, customer backlog, property and equipment, and other assets of
$6,605, $811, $2,093, and $758, respectively, and a decrease to deferred tax liabilities of $12,151. During 2019, the Company
received $2,360 from the sellers of CHI as a working capital adjustment which was recorded as a reduction of goodwill and the
purchase price paid for the acquisition of CHI. In addition, during 2019 there were fair value adjustments that increased
goodwill by $1,546.
69
NV5 Global, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
Intangible assets
Intangible assets, net, at January 2, 2021 and December 28, 2019 consist of the following:
January 2, 2021
December 28, 2019
Gross
Carrying
Amount
Accumulated
Amortization
Net
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Amount
$
183,048
$
(46,506) $
136,542
$
176,088
$
(29,198) $
146,890
14,517
25,111
9,373
32,944
(12,099)
(19,709)
(6,909)
(4,839)
2,418
5,402
2,464
28,105
10,253
24,198
9,369
32,944
(8,593)
(12,435)
(5,105)
(106)
1,660
11,763
4,264
32,838
264,993
(90,062)
174,931
252,851
(55,436)
197,415
—
—
—
—
—
—
58,546
58,546
—
—
58,546
58,546
Finite-lived intangible
assets:
Customer relationships(1)
Trade name(2)
Customer backlog(3)
Non-compete(4)
Developed technology(5)
Total finite-lived
intangible assets
Indefinite-lived
intangible assets:
QSI trade name
Total indefinite-lived
intangible assets
Total intangible assets
$
264,993 $
(90,062) $
174,931 $
311,397 $
(55,436) $
255,961
(1) Amortized on a straight-line basis over estimated lives (1 to 12 years)
(2) Amortized on a straight-line basis over their estimated lives (1 to 3 years)
(3) Amortized on a straight-line basis over their estimated lives (1 to 5 years)
(4) Amortized on a straight-line basis over their contractual lives (2 to 5 years)
(5) Amortized on a straight-line basis over their estimated lives (5 to 7 years)
The following table summarizes the weighted average useful lives of definite-lived intangible assets acquired during
2020 and 2019:
Customer relationships
Trade name
Customer backlog
Developed technology
Non-compete
2020
2019
10.0
1.5
1.5
—
2.0
10.7
2.0
2.0
7.0
3.2
During fiscal 2020, the Company finalized the QSI purchase price allocation reported at December 28, 2019 to account
for updates to assumptions and estimates related to the fair value of the trade name, customer relationships, and customer
backlog. As a result, the Company determined the QSI trade name is a finite-lived asset that will be amortized over a two-year
period and the fair value was decreased by $54,313. Additionally, the fair value of customer relationships and customer backlog
increased $6,605 and $811, respectively. These changes resulted in a corresponding adjustment to deferred tax liabilities of
$12,151. Amortization expense for fiscal years 2020, 2019 and 2018 was $34,596, $20,488 and $13,052 respectively.
70
NV5 Global, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
As of January 2, 2021, the future estimated aggregate amortization related to finite-lived intangible assets for the next
five fiscal years and thereafter is as follows:
Amount
30,119
23,201
22,078
21,784
21,286
56,463
174,931
$
$
December 28, 2019
13,108
13,161 $
11,998
10,744
4,764
2,792
949
506
411
45,325 $
10,048
12,146
4,637
4,574
1,083
949
887
47,432
2021
2022
2023
2024
2025
Thereafter
Total
Note 10 – Accrued Liabilities
Accrued liabilities consist of the following:
January 2, 2021
Current portion of lease liability
Accrued vacation
Payroll and related taxes
Benefits
Accrued operating expenses
Professional liability reserve
Accrued interest expense
Other
Total
Note 11 – Notes Payable and Other Obligations
Notes payable and other obligations consists of the following:
Senior credit facility
Uncollateralized promissory notes
Finance leases
Other obligations
Debt issuance costs, net of amortization
Total Notes Payable and Other Obligations
$
$
$
January 2, 2021
283,832
23,175
2,994
1,151
(3,630)
307,522
December 28, 2019
320,457
$
36,217
2,707
2,884
(4,078)
358,187
(25,332)
332,854
Current portion of notes payable and other obligations
Notes payable and other obligations, less current portion
$
(24,196)
283,326 $
As of January 2, 2021 and December 28, 2019, the carrying amount of debt obligations approximates their fair values
based on Level 2 inputs as the terms are comparable to terms currently offered by local lending institutions for arrangements
with similar terms to industry peers with comparable credit characteristics.
Senior Credit Facility
On December 20, 2019 (the "Closing Date"), the Company amended and restated its Credit Agreement (the "A&R
Credit Agreement"), dated December 7, 2016, as amended on December 20, 2018, with Bank of America, N.A. ("Bank of
America"), as administrative agent, swingline lender and letter of credit issuer, the other lenders party thereto, and certain of the
71
NV5 Global, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
Company's subsidiaries as guarantors. Pursuant to the A&R Credit Agreement, the lenders provided term commitments of
$150,000 in the aggregate in a single draw on the Closing Date to fund the acquisition of QSI and various costs and expenses
relating thereto and revolving commitments totaling $215,000 in the aggregate. The revolving commitment is available through
December 20, 2024 (the "Maturity Date"), at which time the term commitments and revolving commitments will be due and
payable in full. An aggregate amount of $320,500 was drawn under the A&R Credit Agreement on the Closing Date to fund the
QSI acquisition and repay previously existing borrowings. Borrowings under the A&R Credit Agreement are secured by a first
priority lien on substantially all of the assets of the Company. The A&R Credit Agreement also includes an accordion feature
permitting the Company to request an increase in either the term facility or the revolver facility under the A&R Credit
Agreement by an additional amount of up to $100,000 in the aggregate.
Borrowings under the term facility amortize at the rate of 5.0% per annum for the first two years of the facility and
thereafter at the rate of 7.5% per annum until the Maturity Date.
On May 5, 2020 (the "Amendment Closing Date"), in response to the COVID-19 pandemic, the Company entered into
an amendment to the A&R Credit Agreement (the "Amended A&R Credit Agreement") to amend the financial covenants that
requires NV5 Global to maintain a consolidated leverage ratio (the ratio of the Company's pro forma consolidated funded
indebtedness to the Company's pro forma consolidated EBITDA for the most recently completed measurement period). The
amended consolidated leverage ratio requirements are as follows:
Measurement Period Ending
Maximum Consolidated Leverage Ratio
Amendment Closing Date through June 27, 2020
June 28, 2020 through October 3, 2020
October 4, 2020 through January 2, 2021
January 3, 2021 and April 3, 2021
April 4, 2021 and July 3, 2021
July 4, 2021 and thereafter
4.50 to 1.00
5.00 to 1.00
5.25 to 1.00
4.75 to 1.00
4.00 to 1.00
3.50 to 1.00
These financial covenants also require the Company to maintain a consolidated fixed charge coverage ratio of no less
than 1.20 to 1.00 as of the end of any measurement period. As of January 2, 2021, the Company was in compliance with the
financial covenants.
The Amended A&R Credit Agreement also amended pricing terms which remain variable and tied to a Eurocurrency
rate equal to LIBOR plus an applicable margin or a base rate denominated in U.S. dollars. Interest rates remain subject to
change based on the Company's consolidated leverage ratio. As of January 2, 2021 the Company's interest rate was 2.8%.
The Amended A&R Credit Agreement contains covenants that may have the effect of limiting the Company's ability
to, among other things, merge with or acquire other entities, enter into a transaction resulting in a Change in Control, create
certain new liens, incur certain additional indebtedness, engage in certain transactions with affiliates, or engage in new lines of
business or sell a substantial part of their assets. The Amended A&R Credit Agreement also contains customary events of
default, including (but not limited to) a default in the payment of principal or, following an applicable grace period, interest,
breaches of the Company's covenants or warranties under the Amended A&R Credit Agreement, payment default or
acceleration of certain indebtedness, certain events of bankruptcy, insolvency or liquidation, certain judgments or uninsured
losses, changes in control and certain liabilities related to ERISA based plans.
The Amended A&R Credit Agreement limits the payment of cash dividends (together with certain other payments that
would constitute a "Restricted Payment" within the meaning of the Amended A&R Credit Agreement and generally including
dividends, stock repurchases and certain other payments in respect to warrants, options, and other rights to acquire equity
securities) to no more than $10,000 in any fiscal year, so long as no default shall exist at the time of or arise as a result from
such payment.
Total debt issuance costs incurred and capitalized in connection with the issuance of the Amended A&R Credit
Agreement were $4,123. Total amortization of debt issuance costs was $896 and $131 during 2020 and 2019, respectively.
72
NV5 Global, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
Other Obligations
On July 16, 2020, the Company acquired Mediatech. The purchase price allowed for the payment of $230 in shares of
the Company's stock or a combination of cash and shares of the Company's stock, at its discretion, payable in three equal annual
installments. At January 2, 2021, the outstanding balance on this obligation was $230.
On July 1, 2019, the Company acquired GeoDesign. The purchase price allowed for the payment of $425 in shares of
the Company's stock or a combination of cash and shares of the Company's stock, at its discretion, payable on the first and
second anniversary of July 1, 2019. The outstanding balance on this obligation was $44 and $382 as of January 2, 2021 and
December 28, 2019, respectively.
On June 3, 2019, the Company acquired Page One. The purchase price allowed for the payment of $200 in shares of
the Company's stock or a combination of cash and shares of the Company's stock, at its discretion, payable on the first
anniversary of June 3, 2019. There was no outstanding balance on this obligation as of January 2, 2021. At December 28, 2019,
the outstanding balance of this obligation was $181.
On December 31, 2018, the Company acquired certain assets of Celtic. The purchase price allowed for the payment of
$200 in shares of the Company's stock or a combination of cash and shares of the Company's stock, at its discretion, payable on
the first anniversary of December 31, 2018. There was no outstanding balance on this obligation as of January 2, 2021. At
December 28, 2019, the outstanding balance of this obligation was $181.
On November 2, 2018, the Company acquired CHI. The purchase price allowed for the payment of $3,000 in shares of
the Company’s stock or a combination of cash and shares of the Company’s stock, at its discretion, payable in three equal
annual installments. The outstanding balance on this obligation was $877 and $1,754 as of January 2, 2021 and December 28,
2019, respectively.
On February 2, 2018, the Company acquired CSA. The purchase price allowed for the payment of $250 in shares of
the Company’s stock or a combination of cash and shares of the Company’s stock, at its discretion, payable in two equal annual
installments. There was no outstanding balance on this obligation as of January 2, 2021. At December 28, 2019, the outstanding
balance of this obligation was $111.
On January 12, 2018, the Company acquired all of the outstanding equity interest in Butsko. The purchase price
allowed for the payment of $600 in shares of the Company’s stock or a combination of cash and shares of the Company’s stock,
at its discretion, payable in two equal annual installments. There was no outstanding balance on this obligation as of January 2,
2021. At December 28, 2019, the outstanding balance of this obligation was $267.
Uncollateralized Promissory Notes
Only July 16, 2020, the Company acquired Mediatech. The purchase price included an uncollateralized $500
promissory note ("Mediatech Note") payable in four equal annual installments. The outstanding balance of the Mediatech Note
was $500 as of January 2, 2021.
On July 1, 2019, the Company acquired GeoDesign. The purchase price included an uncollateralized $2,000
promissory note bearing interest at 4.0% ("GeoDesign Note") and payable in four equal annual installments. The outstanding
balance of the GeoDesign Note was $1,500 and $2,000 as of January 2, 2021 and December 28, 2019, respectively.
On June 3, 2019, the Company acquired Alta. The purchase price included an uncollateralized $2,000 promissory note
bearing interest at 4.0% ("Alta Note") and payable in four equal annual installments. The outstanding balance of the Alta Note
was $1,500 and $2,000 as of January 2, 2021 and December 28, 2019, respectively.
On June 3, 2019, the Company acquired Page One. The purchase price included an uncollateralized $1,000 promissory
note bearing interest at 3.0% ("Page One Note") and payable in three equal annual installments. The outstanding balance of the
Page One Note was $700 and $1,000 as of January 2, 2021 and December 28, 2019, respectively.
On March 22, 2019, the Company acquired The Sextant Group. The purchase price included an uncollateralized
$4,000 promissory note bearing interest at 4.0% ("The Sextant Group Note") and payable in four equal annual installments. The
73
NV5 Global, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
outstanding balance of The Sextant Group Note was $3,000 and $3,140 as of January 2, 2021 and December 28, 2019,
respectively.
On December 31, 2018, the Company acquired certain assets of Celtic. The purchase price included an
uncollateralized $300 promissory note bearing interest at 3.0% (the "Celtic Note") payable in three equal annual installments.
The outstanding balance of the Celtic Note was $100 and $300 as of January 2, 2021 and December 28, 2019, respectively.
On November 2, 2018, the Company acquired CHI. The purchase price included an uncollateralized $15,000
promissory note bearing interest at 3.0% (the "CHI Note") payable in four equal annual installments. The outstanding balance
of the CHI Note was $7,500 and $11,250 as of January 2, 2021 and December 28, 2019, respectively.
On August 24, 2018, the Company acquired CALYX. The purchase price included an uncollateralized $4,000
promissory note bearing interest at 3.75% payable in four equal annual installments of $1,000. The outstanding balance of the
CALYX Note was $2,000 and $3,000 as of January 2, 2021 and December 28, 2019, respectively.
On February 2, 2018, the Company acquired CSA. The purchase price included an uncollateralized $600 promissory
note bearing interest at 3.0% (the "CSA Note") payable in four equal annual installments of $150. The outstanding balance of
the CSA Note was $300 and $450 as of January 2, 2021 and December 28, 2019, respectively.
On January 12, 2018, the Company acquired all of the outstanding equity interest in Butsko. The purchase price
included an uncollateralized $1,000 promissory note bearing interest at 3.0% (the "Butsko Note") payable in four equal annual
installments of $250. The outstanding balance of the Butsko Note was $500 and $750 as of January 2, 2021 and December 28,
2019, respectively.
On September 6, 2017, the Company acquired all of the outstanding interests in Marron and Associates, Inc.
("Marron"). The purchase price included an uncollateralized $300 promissory note bearing interest at 3.0% (the "Marron Note")
payable in three equal annual installments of $100. There was no outstanding balance on the Marron Note as of January 2,
2021. As of December 28, 2019, the outstanding balance of the Marron Note was $100.
On June 6, 2017, the Company acquired all of the outstanding equity interest in Richard D. Kimball Co. ("RDK"). The
purchase price included an uncollateralized $5,500 promissory note bearing interest at 3.0% (the "RDK Note") payable in four
equal annual installments of $1,375. The outstanding balance of the RDK Note was $1,375 and $2,750 as of January 2, 2021
and December 28, 2019, respectively.
On May 4, 2017, the Company acquired all of the outstanding equity interest in Holdrege & Kull, Consulting
Engineers and Geologists ("H&K"). The purchase price included an uncollateralized $600 promissory note bearing interest at
3.0% (the "H&K Note") payable in four equal annual installments of $150. The outstanding balance of the H&K Note was $150
and $300 as of January 2, 2021 and December 28, 2019, respectively.
On May 1, 2017, the Company acquired all of the outstanding equity interest in Lochrane Engineering Incorporated
("Lochrane"). The purchase price included an uncollateralized $1,650 promissory note bearing interest at 3.0% (the "Lochrane
Note") payable in four equal annual installments of $413. The outstanding balance of the Lochrane Note was $413 and $825 as
of January 2, 2021 and December 28, 2019, respectively.
On December 6, 2016, the Company acquired all of the outstanding interests of CivilSource, Inc. ("CivilSource"). The
purchase price included an uncollateralized $3,500 promissory note bearing interest at 3.0% (the "CivilSource Note") payable
in four equal annual installments of $875. There was no outstanding balance on the CivilSource Note as of January 2, 2021. As
of December 28, 2019, the outstanding balance of the CivilSource note was $1,502.
On November 30, 2016, the Company acquired all of the outstanding interests of Hanna Engineering, Inc. ("Hanna").
The purchase price included an uncollateralized $2,700 promissory note bearing interest at 3.0% (the "Hanna Note") payable in
four equal annual installments of $675. The outstanding balance of the Hanna Note was $430 and $675 as of January 2, 2021
and December 28, 2019, respectively.
On October 26, 2016, the Company acquired all of the outstanding interests of J.B.A. Consulting Engineers, Inc.
("JBA"). The purchase price included an uncollateralized $7,000 promissory note bearing interest at 3.0% (the "JBA Note")
74
NV5 Global, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
payable in five equal annual installments of $1,400. The outstanding balance of the JBA Note was $3,011 and $4,163 as of
January 2, 2021 and December 28, 2019, respectively.
On September 12, 2016, the Company acquired certain assets of Weir Environmental, L.L.C. ("Weir"). The purchase
price included an uncollateralized $500 promissory note bearing interest at 3.0% (the "Weir Note") payable in four equal annual
installments of $125. There was no outstanding balance on the Weir Note as of January 2, 2021. As of December 28, 2019, the
outstanding balance of the Weir Note was $125.
On May 20, 2016, the Company acquired all of the outstanding equity interests of Dade Moeller & Associates, Inc.
("Dade Moeller"). The purchase price included an aggregate of $6,000 of uncollateralized promissory notes bearing interest at
3.0% (the "Dade Moeller Notes") payable in four equal annual installments of $1,500. There was no outstanding balance on the
Dade Moeller Notes as of January 2, 2021. As of December 28, 2019, the outstanding balance of the Date Moeller Notes was
$1,497.
Future contractual maturities of long-term debt as of January 2, 2021 are as follows:
Fiscal Year
2021
2022
2023
2024
2025
Total
Amount
$
$
25,012
19,909
13,969
252,257
5
311,152
Note 12 – Contingent Consideration
The following table summarizes the changes in the carrying value of estimated contingent consideration:
Contingent consideration, beginning of the year
Additions for acquisitions
Reduction of liability for payments made
Decrease of liability related to re-measurement of fair value
Total contingent consideration, end of the period
Current portion of contingent consideration
Contingent consideration, less current portion
Note 13 – Leases
$
$
January 2, 2021
December 28, 2019
4,698
4,002 $
255
(1,857)
—
2,400
(1,334)
1,066 $
1,316
(1,938)
(74)
4,002
(1,954)
2,048
The Company primarily leases property under operating leases and has six equipment operating leases for aircrafts
used by the operations of QSI. The Company's property operating leases consist of various office facilities, which it leases from
unrelated parties. The Company uses a portfolio approach to account for such leases due to the similarities in characteristics and
applies an incremental borrowing rate based on estimates of rates the Company would pay for senior collateralized loans over a
similar term. The Company's office leases with an initial term of 12 months or less are not recorded on the balance sheet. The
Company accounts for lease components (e.g. fixed payments including rent, real estate taxes and common area maintenance
costs) as a single lease component. Some of the Company's leases include one or more options to renew the lease term at its
sole discretion; however, these are not included in the calculation of its lease liability or ROU lease asset because they are not
reasonably certain of exercise.
The Company also leases vehicles through a fleet leasing program. The payments for the vehicles are based on the
terms selected. The Company has determined that it is reasonably certain that the leased vehicles will be held beyond the period
in which the entire capitalized value of the vehicle has been paid to the lessor. As such, the capitalized value is the delivered
price of the vehicle. The Company's vehicle leases are classified as financing leases.
75
NV5 Global, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
Supplemental balance sheet information related to the Company's operating and finance leases is as follows:
Leases
Assets
Operating lease assets
Finance lease assets
Total leased assets
Liabilities
Current
Operating
Finance
Noncurrent
Operating
Finance
Total lease liabilities
Classification
January 2, 2021
December 28, 2019
Right-of-use lease asset, net (1)
Property and equipment, net (1)
Accrued liabilities
Current portion of notes payable and other obligations
Other long-term liabilities
Notes payable and other obligations, less current
portion
$
$
$
$
43,607 $
2,946
46,553 $
(13,161) $
(1,321)
(32,290)
(1,673)
(48,445) $
46,313
2,371
48,685
(13,108)
(1,022)
(34,573)
(1,685)
(50,388)
(1)As of January 2, 2021, operating right of-use lease assets and finance lease assets are recorded net of accumulated
amortization of $19,096 and $2,499, respectively. As of December 28, 2019, operating right-of-use lease assets and finance
lease assets are recorded net of accumulated amortization of $9,657 and $1,592, respectively.
Supplemental balance sheet information related to the Company's operating and finance leases is as follows:
Weighted - Average Remaining Lease Term (Years)
January 2, 2021 December 28, 2019
Operating leases
Finance leases
Weighted - Average Discount Rate
Operating leases
Finance leases
4.9
2.1
4%
7%
5.0
2.8
4%
7%
76
NV5 Global, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
Supplemental cash flow information related to the Company's operating and finance lease liabilities is as follows:
Operating cash flows from operating leases
Financing cash flows from finance leases
Right-of-use assets obtained in exchange for lease obligations
Operating leases
Fiscal Year Ended
January 2, 2021 December 28, 2019
10,988
13,854 $
267 $
796
13,427
$
20,731
$
$
$
The following table summarizes the components of lease cost recognized in the consolidated statements of net income
and comprehensive income:
Lease Cost
Operating lease cost
Variable operating lease cost
Finance lease cost
Classification
Facilities and facilities related
Facilities and facilities related
Amortization of financing lease assets
Depreciation and amortization
Interest on lease liabilities
Interest expense
Total lease cost
$
$
Fiscal Year Ended
January 2, 2021
December 28, 2019
11,538
15,071 $
2,934
1,035
121
19,161 $
—
1,245
98
12,881
As of January 2, 2021, maturities of the Company's lease liabilities under its long-term operating leases and finance
leases for the next five fiscal years and thereafter are as follows:
Fiscal Year
2021
2022
2023
2024
2025
Thereafter
Total lease payments
Less: Interest
Present value of lease liabilities
Note 14 – Commitments and Contingencies
Litigation, Claims and Assessments
Operating Leases
$
14,597 $
10,975
8,533
5,936
4,159
5,814
50,014
(4,563)
45,451 $
$
Finance Leases
1,416
1,115
629
226
7
—
3,393
(399)
2,994
The Company is subject to certain claims and lawsuits typically filed against the engineering, consulting and
construction profession, alleging primarily professional errors or omissions. The Company carries professional liability
insurance, subject to certain deductibles and policy limits, against such claims. However, in some actions, parties are seeking
damages that exceed our insurance coverage or for which we are not insured. While management does not believe that the
resolution of these claims will have a material adverse effect, individually or in aggregate, on its financial position, results of
operations or cash flows, management acknowledges the uncertainty surrounding the ultimate resolution of these matters.
77
NV5 Global, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
Note 15 – 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 January 2, 2021, 863,340 shares of common stock are authorized and
reserved for issuance under the 2011 Equity Plan. This reserve automatically increases on each January 1 from 2014 through
2023, by an amount equal to the smaller of (i) 3.5% of the number of shares issued and outstanding on the immediately
preceding December 31, or (ii) an amount determined by the Company’s Board of Directors. The restricted shares of common
stock granted generally provide for service-based vesting after two to four years following the grant date.
The following summarizes the activity of restricted stock awards during fiscal years 2020, 2019 and 2018:
Unvested shares as of December 30, 2017
Granted
Vested
Forfeited
Unvested shares as of December 29, 2018
Granted
Vested
Forfeited
Unvested shares as of December 28, 2019
Granted
Vested
Forfeited
Unvested shares as of January 2, 2021
Share Units
Weighted
Grant Date
583,051 $
187,087 $
(127,870) $
(15,357) $
626,911 $
275,220 $
(207,039) $
(42,415) $
652,677 $
390,833 $
(251,178) $
(22,149) $
770,183 $
Average
Fair Value
27.13
65.15
19.98
32.14
39.81
70.90
20.41
53.24
58.20
47.00
44.95
64.00
57.20
Stock-based compensation expense relating to restricted stock awards during fiscal years ended 2020, 2019 and 2018
was $14,955, $10,430 and $6,697, respectively. Approximately $23,104 of deferred compensation, which is expected to be
recognized over the remaining weighted average vesting period of 1.65 years, is unrecognized as of January 2, 2021. The total
fair value of restricted shares vested during fiscal years 2020, 2019 and 2018 was $12,472, $14,680 and $7,422, respectively.
Note 16 – Employee Benefit Plan
The Company sponsors a 401(k) Profit Sharing and Savings Plan (the “401(k) Plan”) for which employees meeting
certain age and length of service requirements may contribute up to the defined statutory limit. The 401(k) Plan allows for the
Company to make matching 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 $1,673, $1,323 and $676, respectively, to the 401(k) Plan for fiscal years 2020, 2019 and
2018, respectively.
78
NV5 Global, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
Note 17 – Income Taxes
Income tax expense for years 2020, 2019 and 2018 consisted of the following:
Current:
Federal
State
Foreign
Total current income tax expense
$
Deferred:
Federal
State
Foreign
Total deferred income tax (benefit)
January 2, 2021
Fiscal Years Ended
December 28, 2019 December 29, 2018
13,192 $
7,690
137
21,019
(10,708)
(2,317)
(44)
(13,069)
8,059 $
3,800
(49)
11,810
(5,160)
(1,474)
—
(6,634)
.
7,261
2,911
276
10,448
(2,924)
(661)
—
(3,585)
Total income tax expense
$
7,950 $
5,176 $
6,863
Temporary differences comprising the net deferred income tax liability shown in the Company’s consolidated balance
sheets were as follows:
Deferred tax asset:
Lease liabilities
Tax carryforwards
Accrued compensation
Accrued payroll tax
Allowance for doubtful accounts
Other
Total deferred tax asset
Deferred tax liability:
Acquired intangibles
Right-of-use assets
Depreciation and amortization
Cash to accrual adjustment
Other
Total deferred tax liability
January 2, 2021
December 28, 2019
$
$
$
11,674 $
6,353
7,704
2,853
2,507
283
31,374 $
(39,148) $
(11,092)
(6,943)
(1,260)
(722)
(59,165)
17,651
7,767
6,682
—
1,789
327
34,216
(60,045)
(17,189)
(6,289)
(2,569)
(1,465)
(87,557)
Net deferred tax liability
$
(27,791) $
(53,341)
As of January 2, 2021 and December 28, 2019, the Company had net non-current deferred tax liabilities of $27,791
and $53,341, respectively. No valuation allowance against the Company’s deferred income tax assets is needed as of January 2,
2021 and December 28, 2019 as it is more-likely-than-not that the positions will be realized upon settlement. Deferred income
tax liabilities primarily relate to intangible assets and accounting basis adjustments where the Company has a future obligation
for tax purposes. During 2020, the Company recorded a decrease in deferred tax liability of $12,479 related to adjustments to
purchase price allocations associated with 2019 acquisitions. During 2019, the Company recorded a deferred tax liability of
$43,151, in conjunction with the purchase price allocation of the intangible assets associated with acquisitions.
79
NV5 Global, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
Total income tax expense 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
Stock-based compensation
Federal and state tax credits
Changes in unrecognized tax position
Transition tax
Effect of change in income tax rate
Other
Total income tax expense
January 2, 2021
6,083
2,653
(157)
(1,544)
179
—
—
736
7,950
$
$
$
Fiscal Years Ended
December 28, 2019 December 29, 2018
7,081
$
1,424
(1,014)
(923)
111
110
31
43
6,863
6,076
1,990
(2,808)
(1,247)
425
—
—
740
5,176
$
$
On December 22, 2017 the Tax Cuts and Jobs Act (“2017 Tax Reform”) was enacted in the United States. Among its
many provisions, the 2017 Tax Reform reduced the U.S. corporate income tax rate from 35% to 21%, effective January 1, 2018.
The 2017 Tax Reform required a one-time transition tax on undistributed foreign earnings and created a new provision designed
to tax global intangible low-taxed income (“GILTI”). Also, the SEC issued guidance in Staff Accounting Bulletin No. 118
which provided for a measurement period of up to one year after the enactment for companies to complete their accounting for
the 2017 Tax Reform. During the fiscal year ended December 29, 2018, the Company recognized a $110 adjustment to the
provisional amount recorded as of December 30, 2017.
The Company’s consolidated effective income tax rate was 27.4%, 17.8% and 20.4% for fiscal years 2020, 2019 and
2018, respectively. The difference between the effective income tax rate and the combined statutory federal and state income
tax rate in 2019 and 2018 was primarily due to excess tax benefits from stock-based payments and federal credits, offset by
other permanent items.
The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign
jurisdictions. 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. The
California Franchise Tax Board (“CFTB”) challenged research and development tax credits generated for the years 2012 to
2014. During the fourth quarter of 2017, the Company settled with the CFTB and paid $839 for research and development tax
credits for the years 2005 through 2011. Fiscal years 2012 through 2020 are considered open tax years in the State of California
and 2017 through 2020 in the U.S. federal jurisdiction and other state and foreign jurisdictions. The Company’s 2014 U.S.
federal income tax return was reviewed by the Internal Revenue Service and closed with no change during the second quarter of
2018
As of January 2, 2021 and December 29, 2018, the Company had $1,022 and $887, respectively, of gross
unrecognized tax benefits, which if recognized, $903 and $769 would affect our effective tax rate. It is not expected that there
will be a significant change in the unrecognized tax benefits in the next 12 months. A reconciliation of the beginning and
ending amount of unrecognized tax benefits is as follows:
January 2, 2021
December 28, 2019 December 29, 2018
Balance, beginning of period
Additions based on tax positions related to the current
year
Additions for tax positions of prior years
Lapse of statute of limitations
Reductions for positions of prior years
Settlement
Balance, end of period
$
$
80
887 $
548 $
155
30
(50)
—
—
1,022 $
124
338
(123)
—
—
887
$
437
45
66
—
—
—
548
NV5 Global, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
The Company records accrued interest and penalties related to unrecognized tax benefits in income tax expense.
Accrued interest and penalties related to unrecognized tax benefits in the Consolidated Balance Sheet were $249 and $204 as of
January 2, 2021 and December 28, 2019, respectively. An immaterial amount of interest and penalties were recognized in the
provision for income taxes during December 29, 2018.
Note 18 – Reportable Segments
Effective the beginning of fiscal year 2020, the Company's Chief Executive Officer, who is the CODM, re-evaluated
the structure of the Company's internal organization as a result of the December 2019 acquisition of QSI. To reflect
management's revised perspective, the Company is now organized into three operating and reportable segments as follows:
•
Infrastructure (INF), which includes the Company's engineering, civil program management, utility services,
and construction quality assurance, testing and inspection practices.
• Building, Technology & Sciences (BTS), which includes the Company's environmental, buildings program
management, and MEP & technology engineering practices.
• Geospatial Solutions (GEO), which includes the Company's geospatial solution practices.
The GEO segment has been created in order to provide greater visibility regarding the operational and financial
performance of the Geospatial business given the recent acquisition of QSI. The GEO segment structure is consistent with how
the Company plans and allocates resources, manages its business, and assesses its performance. The change in segment
reporting was not material to prior period segment financial results. As such, prior period segment financial results were not
retrospectively revised. The assets of QSI and Skyscene were reallocated from the Company's INF reportable segment to the
Company's new GEO reportable segment.
The Company evaluates the performance of these reportable segments based on their respective operating income
before the effect of amortization expense related to acquisitions and other unallocated corporate expenses. The following tables
set forth summarized financial information concerning our reportable segments:
Gross revenues
INF
BTS
GEO
Total gross revenues
Segment income before taxes
INF
BTS
GEO
Total Segment income before taxes
Corporate(1)
Total income before taxes
January 2, 2021
Fiscal Years Ended
December 28, 2019 December 29, 2018
$
$
$
$
352,965 $
157,432
148,899
659,296 $
331,161 $
177,777
—
508,938 $
62,574 $
54,583 $
21,091
30,013
113,678
(84,710)
28,968 $
28,138
—
82,721
(53,789)
28,932 $
254,723
163,358
—
418,081
43,832
26,656
—
70,488
(36,769)
33,719
(1) Includes amortization of intangibles of $34,596, $20,488 and $13,052 for the fiscal years ended 2020, 2019 and 2018,
respectively.
81
NV5 Global, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
Assets
INF
BTS
GEO
Corporate(1)
Total assets
January 2, 2021
December 28, 2019
$
$
252,755 $
166,939
342,052
119,429
881,175 $
303,239
131,967
365,605
92,326
893,137
(1) Corporate assets consist of intercompany eliminations and assets not allocated to segments including cash and cash
equivalents and certain other assets.
Subsequent to the issuance of the Company's 2019 financial statements, the disclosure of assets by reportable segment
has been restated for the creation of the GEO reportable segment as required by ASC 280, Segment Reporting. Additionally, the
previously reported disclosure of assets for the BTS and INF segments as of December 28, 2019 has been revised to reflect an
increase in total assets of the BTS reportable segment of $108 million and a decrease in the INF segment of the same amount.
Substantially all of the Company's assets are located in the United States.
The Company disaggregates its gross revenues from contracts with customers by geographic location, customer-type
and contract-type for each of its reportable segments. Disaggregated revenues include the elimination of inter-segment revenues
which has been allocated to each segment. The Company believes this best depicts how the nature, amount, timing and
uncertainty of its revenues and cash flows are affected by economic factors. No sales to an individual customer or country other
than the United States accounted for more than 10% of gross revenue for fiscal years 2020, 2019 and 2018. Gross revenue,
classified by the major geographic areas in which our customers were located, were as follows:
United States
Foreign
Total gross revenues
United States
Foreign
Total gross revenues
$
$
$
$
Fiscal Year 2020
INF
BTS
GEO
Total
352,965 $
—
352,965 $
147,806 $
9,626
157,432 $
146,511 $
2,388
148,899 $
647,282
12,014
659,296
Fiscal Year 2019
INF
BTS
GEO
Total
331,161
—
331,161
$
$
171,246
6,531
177,777
$
$
— $
—
— $
502,407
6,531
508,938
82
NV5 Global, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
INF
BTS
GEO
Total
Fiscal Year 2018
United States
Foreign
Total gross revenues
$
$
254,723 $
—
254,723 $
150,696 $
12,662
163,358 $
— $
—
— $
405,419
12,662
418,081
Gross revenue by customer were as follows:
Public and quasi-public sector
Private sector
Total gross revenues
Public and quasi-public sector
Private sector
Total gross revenues
Public and quasi-public sector
Private sector
Total gross revenues
$
$
$
$
$
$
Fiscal Year 2020
INF
BTS
GEO
Total
279,965
73,000
352,965
$
$
67,434
$
89,998
157,432
$
101,456
47,443
148,899
$
$
448,855
210,441
659,296
Fiscal Year 2019
INF
BTS
GEO
Total
271,935 $
59,226
331,161 $
66,544 $
111,233
177,777 $
— $
—
— $
338,479
170,459
508,938
Fiscal Year 2018
INF
BTS
GEO
Total
233,395 $
21,328
254,723 $
45,393 $
117,965
163,358 $
— $
—
— $
278,788
139,293
418,081
Gross revenues by contract type were as follows:
Cost-reimbursable contracts
Fixed-unit price contracts
Total gross revenues
Cost-reimbursable contracts
Fixed-unit price contracts
Total gross revenues
Cost-reimbursable contracts
Fixed-unit price contracts
Total gross revenues
$
$
$
$
$
$
Fiscal Year 2020
INF
BTS
GEO
Total
337,580 $
15,385
352,965 $
123,135 $
34,297
157,432 $
148,631 $
268
148,899 $
609,346
49,950
659,296
Fiscal Year 2019
INF
BTS
GEO
Total
318,112 $
13,049
331,161 $
139,406 $
38,371
177,777 $
— $
—
— $
457,518
51,420
508,938
Fiscal Year 2018
INF
BTS
GEO
Total
254,365 $
358
254,723 $
128,738 $
34,620
163,358 $
— $
—
— $
383,103
34,978
418,081
83
NV5 Global, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
Note 19 – Subsequent Events
On February 9, 2021 ("IDA Closing Date"), the Company acquired all of the outstanding equity interests in Industrial
Design Associates International, IDA Engineering Private Limited, and Industrial Design Associates International PTE. LTD.
(collectively "IDA"), an international engineering services consulting company that provides building commissioning and MEP
design services to clients throughout Asia and Europe. The aggregate purchase price is up to $2,975, including $1,975 of cash
and a $1,000 promissory note, payable in two equal installments of $500 due on each of the sixth month and twelve month
anniversaries of the IDA Closing Date.
On February 22, 2021 ("TerraTech Closing Date"), the Company acquired all of the outstanding equity interests in
TerraTech Engineers, Inc. ("TerraTech"), a geotechnical engineering, environmental consulting, and materials testing company
headquartered in North Carolina. The aggregate purchase price is up to $7,700, including $3,000 of cash, a $3,200 promissory
note, payable in five equal installments of $640 due on the first, second, third, fourth and fifth anniversaries of the TerraTech
Closing Date, and $1,500 of the Company's common stock payable in three equal installments of $500 due at closing and on the
first and second anniversaries of the TerraTech Closing Date.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Controls and Procedures
As of January 2, 2021, the end of the period covered by this Annual Report on Form 10-K, the Company carried out an
evaluation, under the supervision and with the participation of its management, including the Company's Chief Executive
Officer and its Chief Financial Officer, of the effectiveness of the design and operation of the Company's 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,
the Chief Executive Officer and Chief Financial Officer concluded that, as of January 2, 2021, the end of the period covered by
this Annual Report on Form 10-K, the Company’s disclosure controls and procedures were effective to provide reasonable
assurance that information required to be disclosed by the Company in the reports that it files or submits under the Exchange
Act is (1) recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange
Commission's rules and forms, and (2) accumulated and communicated to the Company's management, including the
Company's Chief Executive Officer and Chief Financial Officer, in a manner that allows timely decisions regarding required
disclosure.
Management's Annual Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting (as
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). 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. 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 January 2, 2021. In making this assessment, management
used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013
Internal Control—Integrated Framework.
As permitted by SEC guidance for newly acquired businesses, because it was not possible to complete an effective
assessment of the acquired companies’ controls by year-end, management has excluded Mediatech FZ, LLC and Mediatech
Information Technology Consultants ("Mediatech") from its evaluation of disclosure controls and procedures and control over
financial reporting and changes therein from the date of such acquisition through January 2, 2021. Mediatech constitutes less
than 1% of the total assets of the Company as of January 2, 2021, and less than 1% of the Company’s gross revenues for the
fiscal year ended January 2, 2021.
84
Our management has concluded that, as of January 2, 2021, our internal control over financial reporting was effective
based on these criteria. The effectiveness of the Company's internal control over financial reporting as of January 2, 2021 has
been audited by Deloitte & Touche LLP, the Company's independent registered certified public accounting firm. Their report,
which is set forth in Part II, Item 8, Financial Statements, of this Annual Report on Form 10-K, expresses an unqualified
opinion of the effectiveness of the Company's internal control over financial reporting as of January 2, 2021.
Changes in Internal Control
There were no changes to the Company's internal control over financial reporting during the fourth quarter of 2020 that
have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
As a result of the COVID-19 pandemic, in March 2020 certain employees began working remotely. As a result of these changes
to the working environment, the Company has not identified any material changes in the Company's internal control over
financial reporting. The Company is continually monitoring and assessing the COVID-19 situation to determine any potential
impacts on the design and operating effectiveness of our internal controls over financial reporting.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of NV5 Global, Inc.
Hollywood, Florida
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of NV5 Global, Inc. and subsidiaries (the “Company”) as of
January 2, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of January 2, 2021, based on criteria established in Internal
Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated financial statements as of and for the year ended January 2, 2021, of the Company and our report
dated March 3, 2021, expressed an unqualified opinion on those financial statements and included an explanatory paragraph
regarding the Company’s adoption of a new accounting standard.
As described in Management’s Annual Report on Internal Control Over Financial Reporting, management excluded from its
assessment the internal control over financial reporting at Mediatech FZ, LLC and Mediatech Information Technology
Consultants (“Mediatech”), which was acquired in 2020 and whose financial statements constitute less than 1% of total assets
and less than 1% of gross revenues of the consolidated financial statement amounts as of and for the year ended January 2,
2021. Accordingly, our audit did not include the internal control over financial reporting at Mediatech.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s
Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s
internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.
85
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
Miami, Florida
March 3, 2021
ITEM 9B. OTHER INFORMATION
None
86
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Information required by this item is incorporated by reference from our definitive proxy statement for the 2021 Annual
Meeting of Stockholders to be filed within 120 days of our fiscal 2020 year end.
ITEM 11. EXECUTIVE COMPENSATION.
Information required by this item is incorporated by reference from our definitive proxy statement for the 2021 Annual
Meeting of Stockholders to be filed within 120 days of our fiscal 2020 year end.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
Information required by this item is incorporated by reference from our definitive proxy statement for the 2021 Annual
Meeting of Stockholders to be filed within 120 days of our fiscal 2020 year end.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information required by this item is incorporated by reference from our definitive proxy statement for the 2021 Annual
Meeting of Stockholders to be filed within 120 days of our fiscal 2020 year end.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
Information required by this item is incorporated by reference from our definitive proxy statement for the 2021 Annual
Meeting of Stockholders to be filed within 120 days of our fiscal 2020 year end.
87
ITEM 15. EXHIBITS, 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
3.1
3.2
3.3
4.1
4.2
4.3*
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
Description
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)
Certificate of Amendment to the Amended and Restated Certificate of Incorporation of NV5 Holdings, Inc.
(Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on
December 8, 2015)
Amended and Restated Bylaws (Incorporated by reference to Exhibit 3.2 to the Company’s Current Report on
Form 8-K filed with the SEC on December 8, 2015)
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)
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)
Description of Securities
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)
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)
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)
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)
Second Amended and Restated Employment Agreement dated November 7, 2018 by and between the Company
and Mr. Dickerson Wright (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form
8-K filed with the SEC on November 7, 2018).
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)
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)
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)
Second Amendment to Employment Agreement, dated as of August 11, 2015, between NV5, Inc. and Donald
Alford.† (Incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed with
the SEC on August 14, 2015)
88
Number
10.10
Description
Second Amendment to Employment Agreement, dated as of August 11, 2015, between NV5, Inc. and Alexander
Hockman. † (Incorporated by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q filed
with the SEC on August 14, 2015)
10.11
10.12
10.13
10.14
10.15
10.16
21.1*
23.1*
31.1 *
31.2 *
32.1**
Second Amendment to Employment Agreement, dated as of August 11, 2015, between NV5, Inc. and Richard
Tong. † (Incorporated by reference to Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q filed with
the SEC on August 14, 2015)
Second Amendment to Employment Agreement, dated as of August 11, 2015 between NV5, Inc. and Mary Jo
O'Brien. † (Incorporated by reference to Exhibit 10.6 to the Company's Quarterly Report on Form 10-Q filed
with the SEC on August 14, 2015)
NV5 Global, Inc. Employee Stock Purchase Plan† (Incorporated by reference to Exhibit 10.1 to the Company's
Current Report on Form 8-K filed with the SEC on June 8, 2016)
Employment Agreement dated as of June 6, 2019 between NV5, Inc. and Edward Codispoti † (Incorporated by
reference in Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on July 10, 2019)
Amended and Restated Credit Agreement, dated as of December 20, 2019 by and among NV5 Global, Inc., as
borrower, the subsidiaries of NV5 Global, Inc. named therein, as guarantors, Bank of America, N.A., as
administrative agent, swing line lender and letter of credit issuer. (Incorporated by reference to Exhibit 10.1 to
the Company's Current Report on Form 8-K filed with the SEC on December 23, 2019)
Amendment No. 1 to Amended and Restated Credit Agreement, dated as of May 5, 2020 (Incorporated by
reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed with the SEC on May 7, 2020)
Subsidiaries of the Registrant
Consent of Deloitte & Touche LLP
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
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
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**
XBRL Instance Document
101.INS
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.
89
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.
Date: March 3, 2021
NV5 GLOBAL, INC.
Name:
Title:
/s/ Dickerson Wright
Dickerson Wright
Chairman and Chief Executive Officer
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
/s/ Edward H. Codispoti
Edward H. Codispoti
/s/ Alexander A. Hockman
Alexander A. Hockman
/s/ MaryJo O’Brien
MaryJo O’Brien
/s/ Laurie Conner
Laurie Conner
/s/ William D. Pruitt
William D. Pruitt
/s/ Francois Tardan
Francois Tardan
Chairman and Chief Executive Officer
March 3, 2021
(Principal Executive Officer)
Chief Financial Officer
March 3, 2021
(Principal Financial and Accounting Officer)
Chief Operating Officer, President and Director
March 3, 2021
Executive Vice President and Director
March 3, 2021
March 3, 2021
March 3, 2021
March 3, 2021
Director
Director
Director
90
EXECUTIVE OFFICERS
BOARD OF DIRECTORS
DICKERSON WRIGHT
DICKERSON WRIGHT
NV5 Global, Inc.
ALEXANDER A. HOCKMAN
President
ALEXANDER A. HOCKMAN
President
NV5 Global, Inc.
DONALD C. ALFORD
Executive Vice President
MARYJO O’BRIEN
Executive Vice President
NV5 Global, Inc
RICHARD TONG
Executive Vice President and General Counsel
LAURIE CONNER
President, The Detection Group, Inc., a WATTS brand
EDWARD H. CODISPOTI
WILLIAM D. PRUITT
General Manager, Pruitt Enterprises, LP
President of Pruitt Ventures, Inc.
MARYJO O’BRIEN
Executive Vice President,
FRANÇOIS TARDAN
NV5.COM