Bowman Consulting Group Ltd. — FY2022 Form 10-K
Reporting period: Year ended December 31, 2022; filed March 15, 2023. This is an annual report, not a standalone fourth-quarter results release. Bowman provides engineering and related professional services across building infrastructure, transportation, utilities, and emerging markets. It reported as one operating segment.
Financial performance
| Metric | FY2022 | FY2021 | Change / context |
|---|---|---|---|
| Gross contract revenue | $261.7 million | $150.0 million | Up 74.5%; acquisitions contributed $66.5 million of the increase and organic growth $45.2 million. |
| Net service billing (non-GAAP) | $235.2 million | $134.9 million | Up 74.4%; 89.9% of gross revenue in both years. |
| Income from operations | $5.1 million | $0.2 million | Improved with organic growth and acquisitions. |
| Net income | $5.0 million | $0.3 million | Net margin was 1.9%, versus 0.2%. |
| Adjusted EBITDA (non-GAAP) | $34.0 million | $16.5 million | Up 106.4%; Adjusted EBITDA margin on net service billing rose to 14.5% from 12.2%. |
| Operating cash flow | $9.2 million | $4.7 million | Cash generation was affected by working-capital movements and deferred taxes. |
| Cash and cash equivalents | $13.3 million | $20.6 million | Down $7.3 million. |
Contract costs were $126.6 million and operating expenses were $130.0 million. The reported $3.3 million income tax benefit materially supported net income; the effective tax rate was negative 188.3%, reflecting tax items including research and development credits and deferred-tax changes. Adjusted EBITDA includes $15.4 million of non-cash stock compensation and other adjustments, so it is substantially above GAAP net income.
Balance sheet, debt, and liquidity
- Total assets were $255.8 million and shareholders’ equity was $122.9 million at year-end. Current assets of $102.1 million exceeded current liabilities of $69.1 million.
- Accounts receivable were $64.4 million, up from $38.5 million; contract assets were $16.3 million, up from $9.2 million.
- Notes payable totaled $26.4 million, including $10.2 million current; finance lease liabilities totaled $19.6 million and operating lease liabilities $35.0 million.
- The amended Bank of America revolving facility provides up to $50 million and had no balance outstanding at December 31, 2022. It is secured by company assets, matures September 30, 2024, and includes financial and other covenants. Management said available liquidity was expected to cover projected requirements and initiatives for the next year.
- Cash flow from operations was $9.2 million; investing used $18.8 million, including $18.0 million for acquisitions; financing provided $2.2 million, including $15.5 million of net proceeds from the 2022 stock offering and payments on leases, notes, and treasury stock.
Material changes and strategic developments
- Building infrastructure remained the largest market, at 65.1% of gross contract revenue versus 70.2% in 2021. Transportation increased to 17.1% from 11.0%, while power and utilities declined to 12.5% from 15.0%; other emerging markets rose to 5.3% from 3.8%.
- Gross backlog increased 45.5% to approximately $243 million from $167 million, representing about 12 months of trailing gross revenue. Transportation’s share of backlog rose to 30.6% from 19.0%, primarily following the McMahon acquisition. The filing cautions that backlog may be cancelled or changed and does not assure future revenue or profit.
- Acquisitions were a major growth driver. McMahon Associates, acquired in May, contributed $24.1 million of revenue from acquisition through year-end. Bowman also acquired businesses including Project Design Consultants, Anchor, Spatial Acuity, SEI, and H2H during 2022. Some purchase-price allocations remained preliminary; goodwill increased to $53.2 million from $28.5 million.
- The company completed a follow-on stock offering of 1,057,500 shares, receiving approximately $15.5 million net. A November 2022 authorization permits up to $10 million of repurchases; no shares had been repurchased under that program by year-end. The company reported no plans to pay cash dividends in the foreseeable future.
Outlook, risks, and unusual items
Bowman provided no specific numerical revenue or earnings guidance. Management plans to pursue organic growth and acquisitions, targeting recurring and multi-year work, infrastructure investment, transportation, renewable energy, and energy efficiency. Its stated longer-term ambition is to become an ENR Top 50 firm within five years of its IPO. Management reported no material adverse COVID-19 effect on results through the report date and said inflation had not materially affected the periods presented, while cautioning that future impacts remain possible.
- Key risks include hiring and retaining qualified staff, utilization and labor-cost pressure, competition, economic and housing-market weakness, government funding or contract changes, and the cancellation or delay of projects.
- Fixed-fee work exposes the company to cost overruns and schedule delays. The filing reports more than 70% of revenue from lump-sum assignments in its management discussion, while the financial-statement contract classification shows 93.9% of gross contract revenue from contracts classified as fixed fee. The different measures reflect different classification descriptions and warrant review.
- Acquisition execution and integration, goodwill impairment, contingent consideration, and acquired liabilities are important risks. Acquisitions also increased debt, lease obligations, amortization, and stock issuance.
- Variable-rate borrowing, rising interest rates, restrictive credit covenants, client collections, professional-liability claims, safety, cyber risk, and regulatory compliance could affect results or liquidity. The credit facility is secured by company assets.
- The company disclosed ordinary-course legal proceedings but said no matter was expected to have a material adverse effect. Management concluded disclosure controls and internal control over financial reporting were effective as of year-end; the auditor’s report did not express an opinion on internal control.
Investor verification priorities
- Reconcile the differing fixed-fee/lump-sum revenue percentages and review the definitions behind gross revenue, net service billing, and Adjusted EBITDA.
- Assess cash conversion and collection trends, especially the growth in accounts receivable and contract assets relative to revenue and operating cash flow.
- Review total debt and lease commitments, scheduled note repayments, interest-rate exposure, and covenant headroom under the secured credit facility.
- Examine acquisition purchase-price allocations, goodwill, acquired pension obligations, contingent consideration, and the contribution and integration performance of acquired businesses.
- Evaluate backlog composition and realization risk; backlog is a non-GAAP operating measure and is not a guarantee of revenue, margin, or cash flow.