Bowman Consulting Group Ltd. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. Unaudited consolidated results; financial statement amounts are in thousands of dollars unless stated otherwise. Bowman provides engineering and related professional services across building infrastructure, transportation, power and utilities, and other markets.
Financial performance and liquidity
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Gross contract revenue | $76.1 million | $52.5 million; up 45.1% |
| Net service billing (non-GAAP) | $67.6 million | $47.7 million; up 41.7% |
| Income from operations | $1.5 million | $1.8 million |
| Net income | $0.5 million | $1.5 million |
| Basic and diluted EPS | $0.04 | $0.12 |
| Adjusted EBITDA (non-GAAP) | $9.7 million | $7.4 million |
| Net margin | 0.7% | 2.8% |
| Adjusted EBITDA margin on net service billing | 14.3% | 15.5% |
| Cash from operating activities | $6.3 million | $2.4 million |
At March 31, 2023, cash and equivalents were $14.3 million, current assets $110.1 million and current liabilities $59.5 million. Notes payable totaled $23.6 million, including $9.2 million current. Operating and finance lease liabilities totaled approximately $54.7 million. The $50 million revolving credit facility had no borrowings; it is secured by substantially all company assets, matures September 30, 2024, and Bowman reported compliance with its covenants. Total liabilities were $140.8 million.
Material changes versus the prior comparable period
- Revenue growth included $17.3 million of acquired revenue; organic gross contract revenue increased 12.6%. Acquisitions were a substantial driver of reported growth.
- Revenue mix shifted toward transportation, which rose 303.5% to $16.0 million, principally due to the McMahon acquisition. Building infrastructure increased 14.4% to $44.3 million; power and utilities rose 52.3% to $13.3 million.
- Contract costs increased 47.2% and operating expenses increased 47.6%, broadly in line with revenue growth. SG&A rose 47.4%, reflecting increased staffing, public-company and growth-related overhead, and stock compensation. Depreciation and amortization increased 50.0%.
- Other expense increased to $1.2 million from $0.5 million, mainly due to higher interest expense, including lease-related interest. Net income fell despite higher revenue and Adjusted EBITDA.
- Operating cash flow improved to $6.3 million. Investing cash outflow was $0.4 million; financing cash outflow was $4.8 million, compared with $12.3 million of inflow in Q1 2022, which included proceeds from a stock offering.
Outlook, commentary and risks
- Management issued no specific numerical earnings or revenue guidance in the filing. It expects liquidity sources to fund projected cash needs and strategic initiatives for the next year, and anticipates using resources for acquisitions.
- Management cited demand in data centers, restaurants, industrial facilities, schools, build-for-rent, transportation, energy transition and utility infrastructure. It expects building infrastructure to remain the largest revenue market for the rest of 2023 and sees transportation and power and utilities as growth opportunities.
- Remaining performance obligations were approximately $202.6 million at quarter-end, with approximately 100% expected to be recognized within 12 months. Backlog was $252.0 million, up 3.5% from year-end; the company cautions that backlog definitions vary and backlog is not a GAAP measure.
- Management identified risks including hiring and retaining qualified personnel, client demand and collections, contract wins and cancellations, project execution, economic and interest-rate conditions, government funding, acquisition execution and integration, and restrictive credit covenants. The company reported no material COVID-19 financial distress and no litigation expected to have a material adverse effect.
- The effective tax rate was a benefit of 65.9%, affected by estimates of R&D credits, executive compensation limits and forecast income. The company disclosed a $16.9 million uncertain tax position related to required capitalization and amortization of R&D costs.
- On April 4, 2023, Bowman completed the acquisition of Richter & Associates for approximately $5.4 million in cash, stock and a promissory note, subject to adjustment. The filing states that the acquisition supports growth in power and utility assignments.
Important facts for investors to verify
- How much future growth is organic versus acquisition-driven, and whether acquisitions deliver expected integration benefits and profitability.
- Whether margins recover as staffing, overhead, interest, lease and stock-compensation costs rise.
- Collection trends and working-capital needs, particularly accounts receivable of $67.2 million and contract assets of $19.9 million at quarter-end.
- The resolution and cash-tax implications of the $16.9 million uncertain tax position and the unusually large quarterly tax benefit.
- Debt and lease obligations, variable-rate exposure, and continued compliance with the secured credit facility’s covenants.
- Whether backlog and remaining performance obligations convert to revenue on schedule; neither metric guarantees future results.