Bowman Consulting Group Ltd. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; comparisons are with FY2022. Bowman provides engineering and related professional services across infrastructure, transportation, utilities, buildings and other markets. The company completed 11 acquisitions during 2023 and operated with approximately 2,000 employees across more than 90 U.S. offices and two offices in Mexico.
Financial performance
| Metric | FY2023 | FY2022 | Change |
|---|---|---|---|
| Gross contract revenue | $346.3 million | $261.7 million | +32.3% |
| Net service billing (non-GAAP) | $304.0 million | $235.2 million | +29.3% |
| Operating income (loss) | ($0.7) million | $5.1 million | Declined |
| Net income (loss) | ($6.6) million | $5.0 million | Declined |
| Adjusted EBITDA (non-GAAP) | $47.0 million | $34.0 million | +38.2% |
| Adjusted EBITDA margin on net service billing (non-GAAP) | 15.5% | 14.5% | +1.0 percentage point |
| Operating cash flow | $11.7 million | $9.2 million | +$2.6 million |
- Organic gross contract revenue increased $54.0 million, or 20.7%; 2023 acquisitions accounted for $30.5 million of the reported $84.6 million revenue increase.
- Net loss reflected higher operating costs, depreciation and amortization, interest expense and income-tax-related items. The company attributed weaker operating results in part to lower labor utilization in December and challenges integrating acquisitions.
- Contract costs were 49.1% of gross revenue, versus 48.4% in 2022. Gross contract revenue attributable to employee work was 87.8% of total revenue, down from 89.9%.
- Cash and equivalents were $20.7 million at year-end, up from $13.3 million. Cash from operations was more than offset by $27.2 million used in investing, principally acquisitions, while financing provided $22.8 million.
- At December 31, 2023, the company had $45.3 million outstanding on its $70 million revolving facility, bearing 9.60% interest, and $27.7 million of notes payable. Finance lease obligations were $21.0 million on the balance sheet; operating lease obligations were $46.7 million. The credit facility matures July 31, 2025, is secured by substantially all company and guarantor assets, and had covenants with which Bowman reported compliance.
- Total assets were $402.8 million and total liabilities $239.5 million. Current assets were $154.8 million against current liabilities of $126.8 million.
Changes and business trends
- Revenue growth was strongest in Power & Utilities, up 96.4% to $64.2 million, and Transportation, up 62.4% to $72.8 million. Building Infrastructure rose 14.3% to $194.9 million; emerging markets rose 4.6% to $14.4 million.
- Building Infrastructure represented 56.3% of revenue, down from 65.1%; Transportation rose to 21.0% from 17.1%, and Power & Utilities to 18.5% from 12.5%.
- Gross backlog grew 25.9% to approximately $306 million from $243 million. The company reported a net-service-billing book-to-bill ratio above 1.0 in both 2023 and 2022. Backlog is a company-defined, non-GAAP indicator and may be cancelled, suspended or changed.
- More than 78% of 2023 revenue came from repeat customers. No individual customer exceeded 5% of gross revenue; approximately 21% came directly from public-sector assignments.
- Eleven 2023 acquisitions had aggregate consideration of $75.7 million, comprising cash, notes, shares and assumed liabilities. The filing separately reports $25.7 million of cash paid for acquisitions and 2023 acquisition shares valued at approximately $26.1 million in the purchase-price allocation.
Outlook, risks and notable items
- No specific quantitative revenue, earnings or margin guidance is provided. Management describes demand and growth prospects positively, citing backlog, infrastructure spending, utility investment, transportation awards and opportunities in data centers and energy transition. It plans to pursue organic growth and acquisitions and expects liquidity to cover projected requirements and initiatives for the next year.
- Management said December’s seasonal utilization decline reduced revenue and Adjusted EBITDA margin; it estimated margin would have been significantly higher without the lost revenue, because labor costs were already incurred.
- Tax is a significant uncertainty. The company reported a $38.9 million ending balance of unrecognized tax benefits, primarily relating to the treatment of research and development costs under IRC Section 174, and recorded $4.8 million of related interest and penalties in 2023. Management characterizes the Section 174 position as a timing difference with no impact on overall tax expense or benefit; the filing also notes an uncertain tax position and potential tax-payment implications. The recorded income-tax benefit was only $0.2 million despite the pre-tax loss.
- Key risks include integrating acquisitions and realizing expected synergies; retention and utilization of skilled staff; fixed-price project cost overruns and estimate revisions; customer cancellations, delays or payment problems; economic, interest-rate and housing-market weakness; government funding and procurement changes; and cybersecurity, professional-liability and environmental exposures.
- Management reported effective disclosure controls and internal control over financial reporting. The 11 businesses acquired in 2023, representing 24% of year-end assets and 9% of revenue, were excluded from management’s internal-control assessment while integration proceeds. The auditor’s report expresses an unqualified opinion on the financial statements but does not opine on internal-control effectiveness.
- There were no legal proceedings disclosed that management expected to have a material adverse effect. Subsequent to year-end, Bowman completed two acquisitions in February 2024 for aggregate stated consideration of approximately $8.6 million, subject to adjustment.
Most important facts for investors to verify
- Reconcile strong revenue and Adjusted EBITDA growth with the GAAP operating loss and net loss, including the impact of stock-based compensation, acquisition expenses, amortization, interest and tax items.
- Review the $38.9 million unrecognized tax-benefit balance, Section 174 treatment, associated interest and penalties, and possible cash-tax consequences or examination outcomes.
- Assess leverage, interest expense and refinancing needs before the July 2025 revolving-credit maturity, together with notes, leases, seller financing and credit-facility covenants.
- Test whether backlog converts to profitable revenue and whether labor utilization, fixed-price estimates and acquisition integration support margins; backlog is not a guarantee of revenue or earnings.
- Track dilution and capital allocation from acquisition shares, convertible or seller notes, equity compensation and the authorized $10 million repurchase program; no repurchases had been made under the new authorization at year-end.