Bowman Consulting Group Ltd. — FY2021 Form 10-K
Business context and reporting period
Annual report for the fiscal year ended December 31, 2021, compared with FY2020. Bowman provides engineering, planning, surveying, environmental, construction management and related services to public- and private-sector clients. It reported more than 1,000 employees, over 3,000 customers and operations in 45 states. The company operates as a single business segment.
Financial performance and liquidity
| Metric | FY2021 / Dec. 31, 2021 | FY2020 / Dec. 31, 2020 |
|---|---|---|
| Gross contract revenue | $150.0 million | $122.0 million |
| Net service billing (non-GAAP) | $134.9 million | $103.7 million |
| Income from operations | $0.2 million | $1.9 million |
| Net income | $0.3 million | $1.0 million |
| Adjusted EBITDA (non-GAAP) | $16.5 million | $13.9 million |
| Adjusted EBITDA margin on net service billing (non-GAAP) | 12.2% | 13.4% |
| Cash from operating activities | $4.7 million | $10.8 million |
| Cash and cash equivalents | $20.6 million | $0.4 million |
- Revenue rose 22.9%; net service billing increased 30.1%. Acquisitions contributed $11.8 million, or 42.1%, of the gross revenue increase; reported organic growth was 13.2%.
- Contract costs were $74.5 million, 49.7% of gross revenue, versus $66.5 million, or 54.5%, in FY2020. The filing does not present a conventional gross-profit figure.
- Operating expenses rose 40.0% to $75.3 million, outpacing revenue growth. Management attributed the increase in part to public-company costs, stock-based compensation, performance bonuses, staffing and higher depreciation and amortization.
- FY2021 included a $1.6 million income-tax benefit despite a $1.3 million pretax loss; the filing cites approximately $1.7 million of estimated research and development credits. This benefit contributed to positive reported net income.
- Operating cash flow declined to $4.7 million, with higher accounts receivable among the stated uses of cash. Investing used $21.5 million, primarily for acquisitions; financing provided $37.1 million, mainly from IPO proceeds.
- Current assets were $74.4 million and current liabilities $32.9 million. The $17.0 million revolving facility had no balance at year-end. Notes payable totaled $12.9 million and capital lease obligations totaled approximately $15.2 million on the balance sheet.
Material changes and notable items
- Building infrastructure revenue increased 36.9% to $105.2 million and represented 70.2% of gross revenue. Transportation revenue fell 13.7% to $16.5 million, attributed mainly to completed projects and delayed starts. Power and utilities revenue rose 10.5% to $22.5 million.
- Gross backlog grew 47.8% to approximately $167 million; net backlog was approximately $145 million. Backlog is a company-defined measure, may be cancelled or changed, and is not a guarantee of future revenue or profit.
- Bowman completed multiple acquisitions during 2021. Acquired businesses generated $11.8 million of revenue from their respective acquisition dates. Acquisition spending and financing increased goodwill to $28.5 million from $9.2 million.
- The company completed its IPO in 2021, receiving $47.1 million in net proceeds. After year-end, it completed a follow-on offering that generated approximately $16.1 million in net proceeds, including the over-allotment.
Outlook, commentary and risks
- No specific revenue or earnings guidance is provided. Management said it intends to pursue organic expansion and acquisitions, targeting ENR Top 50 status within five years of its IPO. It expects to use a meaningful portion of liquidity for acquisitions and believes available liquidity is sufficient for projected cash needs and strategic initiatives over the next year.
- Management said its markets had rebounded to near or at pre-pandemic activity levels and reported no material adverse COVID-19 impact to date, while cautioning that future effects remained uncertain.
- Key risks include retaining qualified personnel (reported 23% overall employee attrition in 2021), acquisition integration and financing, fixed-price project cost overruns, backlog cancellations, customer payment and collection risk, government budgets and contract termination, and competitive pressure.
- Other disclosed exposures include inflation and rising labor costs, variable-rate borrowing, restrictive credit covenants, professional liability and insurance adequacy, cybersecurity, and regulatory or licensing compliance. The filing reported no litigation expected to have a material adverse effect and no material off-balance-sheet arrangements.
- Ernst & Young issued an unqualified opinion on the financial statements. Management concluded disclosure controls were effective at a reasonable-assurance level; the company did not provide a management assessment or auditor attestation of internal control over financial reporting for FY2021 under the new-public-company transition rules.
Important facts for investors to verify
- Whether revenue and backlog growth convert into stronger operating income and operating cash flow, particularly as receivables increase.
- The sustainability and assumptions behind adjusted EBITDA, including stock-compensation and other add-backs, and the decline in adjusted EBITDA margin.
- Acquisition purchase-price allocations, integration progress, seller-note and debt obligations, and the potential dilution from equity consideration and future share issuance.
- The recoverability of goodwill and acquired intangible assets, and the realization and timing of tax credits and other tax positions.
- Revolver availability, debt and lease maturities, covenant headroom, and exposure to variable interest rates.