NV5 Announces Record Third Quarter Results; Exceeds Analysts' Expectations

Rhea-AI Summary

NV5 Global, Inc. (NVEE) reported a strong third quarter for 2020, with gross revenues increasing by 30% year-over-year to $169.9 million, surpassing analyst expectations by 9%. Net income rose 33% to $7.8 million, while adjusted EBITDA grew by 70% to $29.9 million. The company generated $21.7 million in cash flows from operations and paid down $27.8 million in debt. Despite a higher interest expense and tax rate, NV5's backlog increased by 9% and cash on hand was $64 million at the end of the quarter.

Positive

• Gross revenues up 30% YoY to $169.9 million, exceeding estimates by 9%.
• Net income increased 33% YoY to $7.8 million.
• Adjusted EBITDA rose 70% YoY to $29.9 million.
• Cash flows from operations surged over four times to $21.7 million.
• Backlog increased by 9%.

Negative

• Net income for the nine-month period decreased to $16.4 million from $20.2 million YoY.
• $10.7 million additional interest expense and $11.2 million additional intangible amortization expense reported.

HOLLYWOOD, Fla., Nov. 11, 2020 (GLOBE NEWSWIRE) -- NV5 Global, Inc. (Nasdaq: NVEE) ("NV5" or the "Company"), a leading provider of compliance, technology, and engineering consulting solutions, today reported financial results for the third quarter ended October 3, 2020.

Gross Revenues during the third quarter of 2020 increased 30% compared to the third quarter of 2019. Net Income increased 33% compared to the third quarter of 2019. “We delivered another strong performance in the third quarter that exceeded analyst expectations for gross revenues and adjusted earnings per share. We are pleased to see the continued success of NV5 despite the pandemic. During the quarter, we generated $21.7 million in cash flows from operations, allowing us to pay down an aggregate of $27.8 million in principal under our credit facility from July through today, while maintaining a strong balance sheet that includes $64.0 million of cash on hand at the end of the third quarter. We increased our backlog by 9% in the third quarter and continue to see a solid pipeline of opportunities as we enter the fourth quarter and beyond,” said Dickerson Wright, PE, Chairman and CEO of NV5.

Third Quarter 2020 Financial Highlights

• Gross Revenues grew by 30% in the third quarter of 2020 to $169.9 million compared to $131.0 million in the third quarter of 2019, which also exceeded analyst consensus expectations by 9%.
• Net income for the third quarter of 2020 was $7.8 million compared to $5.8 million in the third quarter of 2019, with the third quarter of 2020 including $3.3 million of additional interest expense, $3.4 million of additional intangible amortization expense, and a higher effective income tax rate compared to third quarter of 2019.
• Adjusted EBITDA, which excludes stock-based compensation and acquisition-related costs, grew by 70% in the third quarter of 2020 to $29.9 million compared to $17.6 million in the third quarter of 2019.
• GAAP EPS was $0.61 per share in the third quarter of 2020.
• Adjusted EPS in the third quarter of 2020 was $1.13 per share, exceeding analyst consensus expectations of $0.70 per share by 61%.
• Cash flows from operations for the third quarter of 2020 grew by more than four times to $21.7 million compared to $4.1 million in the third quarter of 2019.

Nine Months Ended October 3, 2020 Financial Highlights

• Gross Revenues grew by 32% for the nine months ended October 3, 2020 to $498.1 million compared to $376.3 million in the nine months ended September 28, 2019.
• Net income for the nine months ended October 3, 2020 was $16.4 million compared to $20.2 million in the nine months ended September 28, 2019, with the nine months of 2020 including $10.7 million of additional interest expense, $11.2 million of additional intangible amortization expense, and a higher effective income tax rate compared to nine months ended September 28, 2019.
• Adjusted EBITDA, which excludes stock-based compensation and acquisition-related costs, grew by 58% for the nine months ended October 3, 2020 to $81.0 million compared to $51.4 million in the nine months ended September 28, 2019.
• GAAP EPS was $1.30 per share in the nine months ended October 3, 2020.
• Adjusted EPS in the nine months ended October 3, 2020 was $2.91 per share.
• Cash flows from operations for the nine months ended October 3, 2020 were $72.4 million compared to $21.6 million in the nine months ended September 28, 2019.

52/53 Week Fiscal Year

NV5 uses a 52/53 week fiscal year ending on the Saturday closest to the calendar quarter end. Therefore, the third quarter of 2020 included 14 weeks while the third quarter of 2019 included 13 weeks.

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. A reconciliation of Net Income, as reported in accordance with GAAP, to Adjusted EBITDA is provided at the end of this news release.

Adjusted earnings per diluted share (“Adjusted EPS”) is not a measure of financial performance under GAAP. Adjusted EPS reflects adjustments to reported diluted earnings per share (“GAAP EPS”) to eliminate amortization expense of intangible assets from acquisitions, net of tax benefits, and acquisition-related costs. As we continue our acquisition strategy, the growth in Adjusted EPS will likely increase at a greater rate than GAAP EPS. A reconciliation of GAAP EPS to Adjusted EPS is provided at the end of this news release.

Our definition of Adjusted EBITDA and Adjusted EPS may differ from other companies reporting similarly named measures. These measures 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 and Diluted Earnings per Share.

Conference Call

NV5 will host a conference call to discuss its third quarter 2020 financial results at 4:30 p.m. (Eastern Time) on November 11, 2020. The accompanying presentation for the call is available by visiting http://ir.nv5.com. 

Date:	Wednesday, November 11, 2020
Time:	4:30 p.m. Eastern
Toll-free dial-in number:	+1 833-900-1538
International dial-in number:	+1 236-712-2278
Conference ID:	4987245
Webcast:	http://ir.nv5.com

Please dial-in at least 5-10 minutes prior to the start time to allow the operator to log your name and connect you to the conference.

The conference call will be webcast live and available for replay via the “Investors” section of the NV5 website.

About NV5

NV5 Global, Inc. (NASDAQ: NVEE) is a leading provider of compliance, technology, and engineering consulting solutions for public and private sector clients supporting infrastructure, utility, and building assets and systems. The Company primarily focuses on six business verticals: testing, inspection & consulting, infrastructure support services, utility services, buildings & program management, environmental health sciences, and geospatial technology services. NV5 operates out of more than 100 offices nationwide and abroad.  For additional information, please visit the Company’s website at www.NV5.com. Also visit the Company on Twitter, LinkedIn, Facebook, and Vimeo.

Forward-Looking Statements

This news release 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 important factors that could cause actual results to differ materially from those reflected by the forward-looking statements contained in this news release and on the conference call. Such factors include: (a) changes in demand from the local and state government and private clients that we serve; (b) general economic conditions, nationally and globally, and their effect on the market for our services; (c) competitive pressures and trends in our industry and our ability to successfully compete with our competitors; (d) changes in laws, regulations, or policies; and (e) the “Risk Factors” set forth in the Company’s most recent SEC 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.

Investor Relations Contact

 NV5 Global, Inc.
Jack Cochran
Vice President, Marketing & Investor Relations
Tel: +1-954-637-8048
Email: ir@nv5.com  

Source: NV5 Global, Inc.

NV5 GLOBAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in thousands, except share data)
	October 3, 2020				December 28, 2019
Assets
Current assets:
Cash and cash equivalents	$	64,022			$	31,825
Billed receivables, net	122,678				131,041
Unbilled receivables, net	83,535				79,428
Prepaid expenses and other current assets	9,493				8,906
Total current assets	279,728				251,200
Property and equipment, net	27,957				25,733
Right-of-use lease assets, net	46,029				46,313
Intangible assets, net	182,830				255,961
Goodwill	344,003				309,216
Other assets	2,777				4,714
Total Assets	$	883,324			$	893,137
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	33,842			$	36,116
Accrued liabilities	46,810				47,432
Billings in excess of costs and estimated earnings on uncompleted contracts	9,009				3,303
Client deposits	382				221
Current portion of contingent consideration	1,334				1,954
Current portion of notes payable and other obligations	21,957				25,332
Total current liabilities	113,334				114,358
Contingent consideration, less current portion	1,733				2,048
Other long-term liabilities	42,130				34,573
Notes payable and other obligations, less current portion	306,606				332,854
Deferred income tax liabilities, net	34,956				53,341
Total liabilities	498,759				537,174
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value; 5,000,000 shares authorized, no shares issued and outstanding	—				—
Common stock, $0.01 par value; 45,000,000 shares authorized,
13,244,713 and 12,852,357 shares issued and outstanding as of October 3, 2020 and December 28, 2019, respectively	132				129
Additional paid-in capital	263,341				251,187
Retained earnings	121,092				104,647
Total stockholders’ equity	384,565				355,963
Total liabilities and stockholders’ equity	$	883,324			$	893,137

NV5 GLOBAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF NET INCOME AND COMPREHENSIVE INCOME (UNAUDITED) (in thousands, except share data)
	Three Months Ended								Nine Months Ended
	October 3, 2020				September 28, 2019				October 3, 2020				September 28, 2019
Gross revenues	$	169,949			$	131,032			$	498,118			$	376,340
Direct costs:
Salaries and wages	46,815				40,426				136,929				113,762
Sub-consultant services	26,003				19,972				78,673				56,969
Other direct costs	10,370				7,139				27,771				25,244
Total direct costs	83,188				67,536				243,373				195,975
Gross Profit	86,761				63,496				254,745				180,365
Operating Expenses:
Salaries and wages, payroll taxes and benefits	43,750				33,428				133,456				93,431
General and administrative	13,216				11,028				38,196				30,786
Facilities and facilities related	5,370				4,664				16,125				12,407
Depreciation and amortization	10,187				6,551				32,387				18,908
Total operating expenses	72,523				55,671				220,164				155,533
Income from operations	14,238				7,825				34,581				24,832
Interest expense	(3,731		)		(421		)		(11,921		)		(1,230		)
Income before income tax expense	10,507				7,403				22,660				23,602
Income tax expense	(2,753		)		(1,560		)		(6,215		)		(3,422		)
Net Income and Comprehensive Income	$	7,754			$	5,843			$	16,445			$	20,180
Earnings per share:
Basic	$	0.62			$	0.48			$	1.33			$	1.67
Diluted	$	0.61			$	0.46			$	1.30			$	1.62
Weighted average common shares outstanding:
Basic	12,434,600				12,191,405				12,328,448				12,086,588
Diluted	12,749,917				12,566,966				12,650,107				12,485,049

NV5 GLOBAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands)
	Nine Months Ended
	October 3, 2020				September 28, 2019
Cash Flows From Operating Activities:
Net income	$	16,445			$	20,180
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	34,680				18,908
Non-cash lease expense	6,731				6,770
Provision for doubtful accounts	3,127				1,725
Stock-based compensation	10,900				6,989
Change in fair value of contingent consideration	—				49
Gain on disposals of property and equipment	(394		)		(48		)
Deferred income taxes	(5,905		)		(3,839		)
Amortization of debt issuance costs	669				—
Changes in operating assets and liabilities, net of impact of acquisitions:
Billed receivables	8,089				508
Unbilled receivables	(7,505		)		(4,490		)
Prepaid expenses and other assets	2,171				(5,279		)
Accounts payable	(2,780		)		(2,053		)
Accrued liabilities	322				(9,170		)
Income taxes payable	—				(2,789		)
Billings in excess of costs and estimated earnings on uncompleted contracts	5,706				(5,972		)
Deposits	163				68
Net cash provided by operating activities	72,419				21,557
Cash Flows From Investing Activities:
Cash paid for acquisitions (net of cash received from acquisitions)	(882		)		(29,365		)
Proceeds from sale of assets	1,053				—
Purchase of property and equipment	(8,342		)		(1,810		)
Net cash used in investing activities	(8,171		)		(31,175		)
Cash Flows From Financing Activities:
Borrowings from Senior Credit Facility	—				10,000
Payments on notes payable	(9,941		)		(8,483		)
Payments of contingent consideration	(913		)		(1,213		)
Payments of borrowings from Senior Credit Facility	(20,750		)		—
Payments of debt issuance costs	(447		)		—
Net cash (used in) provided by financing activities	(32,051		)		304
Net increase (decrease) in Cash and Cash Equivalents	32,197				(9,314		)
Cash and cash equivalents – beginning of period	31,825				40,739
Cash and cash equivalents – end of period	$	64,022			$	31,425

NV5 GLOBAL, INC. AND SUBSIDIARIES RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO COMPARABLE GAAP FINANCIAL MEASURES (UNAUDITED) (in thousands)
RECONCILIATION OF GAAP NET INCOME TO ADJUSTED EBITDA
		Three Months Ended								Nine Months Ended
		October 3, 2020				September 28, 2019				October 3, 2020				September 28, 2019
Net Income		$	7,754			$	5,843			$	16,445			$	20,180
Add:	Interest expense	3,731				421				11,921				1,230
	Income tax expense	2,753				1,560				6,215				3,422
	Depreciation and amortization	11,401				6,551				34,680				18,908
	Stock-based compensation	4,020				2,819				10,900				6,989
	Acquisition-related costs	274				433				845				671
Adjusted EBITDA		$	29,933			$	17,627			$	81,006			$	51,400

RECONCILIATION OF GAAP EPS TO ADJUSTED EPS
		Three Months Ended								Nine Months Ended
		October 3, 2020				September 28, 2019				October 3, 2020				September 28, 2019
Net Income - per diluted share		$	0.61			$	0.46			$	1.30			$	1.62
Per diluted share adjustments:
Add:	Amortization expense of intangible assets and acquisition-related costs	0.70				0.45				2.16				1.28
	Income tax expense	(0.18		)		(0.10		)		(0.55		)		(0.29		)
Adjusted EPS		$	1.13			$	0.81			$	2.91			$	2.61

 

FAQ

What were NVEE's third quarter 2020 revenue results?

NV5 Global reported gross revenues of $169.9 million for Q3 2020, which is a 30% increase compared to Q3 2019.

How much did NVEE's net income change in Q3 2020?

Net income for NVEE in Q3 2020 was $7.8 million, up 33% from $5.8 million in Q3 2019.

What was NVEE's adjusted EBITDA for Q3 2020?

The adjusted EBITDA for NV5 Global in Q3 2020 was $29.9 million, reflecting a 70% increase from Q3 2019.

What financial challenges did NVEE face in 2020?

For the nine months ended October 3, 2020, NVEE's net income decreased to $16.4 million, compared to $20.2 million in the same period in 2019.

What is NVEE's cash flow situation as of Q3 2020?

NV5 Global generated $21.7 million in cash flows from operations in Q3 2020, significantly higher than $4.1 million in Q3 2019.