Bowman Consulting Group Ltd. (NASDAQ:BWMN) is a professional services firm delivering innovative engineering solutions to customers who own, develop and maintain the built environment. The company provides planning, engineering, construction management, commissioning, environmental consulting, geospatial, survey, land procurement and other technical services to a diverse set of end markets.

Financials

Financial Performance

The financial performance of Bowman Consulting Group has been impressive, with the company reporting annual revenue of $346.3 million and net income of -$6.6 million in 2023. The company's annual operating cash flow was $11.7 million, while its annual free cash flow stood at $9.6 million.

In the first quarter of 2024, Bowman Consulting Group reported gross contract revenue of $94.9 million, up 24.7% year-over-year. Net service billing, a non-GAAP metric that represents revenue earned by the company's workforce, increased 26.8% to $85.7 million. Adjusted EBITDA for the quarter was $12.1 million, or 14.2% of net revenue.

Diversified End Market Exposure

The revenue of Bowman Consulting Group is well-diversified across several end markets, with 55.6% derived from building infrastructure, 19.1% from transportation, 19.5% from power and utilities, and the remaining 5.8% from other emerging markets such as environmental, mining, and water resources.

The building infrastructure business, which includes commercial, municipal and residential infrastructure, saw revenue increase 19.1% year-over-year in Q1 2024. This was driven by strong demand in data centers, quick-serve restaurants, industrial distribution facilities, schools, and build-for-rent communities.

Revenue from the transportation market, which includes both public and private sector customers, grew 13.2% in the quarter. Bowman Consulting Group expects to continue increasing its transportation revenue and improving the diversification of its overall revenue mix, as the company believes the transportation market presents significant growth opportunities.

The power and utilities market, which includes both traditional power operations and renewable energy, saw revenue increase 38.6% year-over-year. This was driven by acquisitions as well as increased revenue associated with the expansion of a multi-year utility undergrounding assignment in Florida, along with additional increases derived from gas pipeline and electric transmission projects nationally.

The other emerging markets, which include mining, water resources, environmental consulting, and other natural resources services, saw revenue increase 128.4% in Q1 2024. The company believes these emerging markets present meaningful opportunities for continued growth.

Robust Backlog and Guidance

The backlog of Bowman Consulting Group increased 7.9% during the first quarter of 2024 to $329.9 million, with the majority of the increase coming from the transportation and power and utilities markets. The company is confident in its ability to deliver on this backlog, as well as its pipeline of new business opportunities.

Bowman Consulting Group has increased its 2024 guidance, now expecting net revenue in the range of $382 million to $397 million and adjusted EBITDA between $63 million and $69 million. This guidance includes the impact of recent acquisitions, but does not contemplate any future M&A activity.

Recent Developments

Acquisitions and Integration

Bowman Consulting Group has been actively pursuing acquisitions as part of its strategic growth initiative. In the first quarter of 2024, the company completed two acquisitions, diversifying its geographic reach and service offerings. The company paid a total consideration of $8.9 million for these acquisitions.

In April 2024, Bowman Consulting Group closed its largest acquisition to date, acquiring Surdex Corporation for approximately $44 million. Surdex is a provider of high-altitude aerial imagery, complementing Bowman Consulting Group's existing terrestrial and low-altitude imaging capabilities. The integration of Surdex's operations is well underway, with the company's professional services teams becoming familiar with the expanded capabilities.

The management team of Bowman Consulting Group is focused on ensuring a smooth integration process, with a particular emphasis on the "social integration" to leverage cross-selling opportunities and realize revenue synergies. The company expects the financial and IT integration to be completed during the course of 2024.

Liquidity

Bowman Consulting Group has a strong liquidity position, with $25 million in cash on hand and $75 million of available borrowing capacity under its new $100 million credit facility as of the end of the first quarter. The company recently completed a $57.5 million equity offering, further strengthening its balance sheet and providing additional capital for growth initiatives, including acquisitions.

The company's leverage ratio, as measured by net debt to trailing 12-month adjusted EBITDA, was 1.7x at the end of the first quarter, but has since been reduced to less than 1.0x following the equity offering. The management team of Bowman Consulting Group believes the company's current liquidity and capital resources are sufficient to fund its projected cash requirements and strategic initiatives for the foreseeable future.

Risks and Challenges

While the growth prospects of Bowman Consulting Group appear promising, the company faces several risks and challenges that investors should be aware of. These include the ability to retain key personnel, the cyclical nature of some of its end markets, the potential for project delays or cancellations, and the integration risks associated with its acquisition strategy.

Additionally, Bowman Consulting Group operates in a highly competitive industry, and the company's success is dependent on its ability to win new contracts and renew existing ones. The company also faces risks related to government regulations, economic conditions, and the potential impact of weather on its operations.

Outlook

Bowman Consulting Group Ltd. is a diversified engineering firm with a strong track record of growth and a robust pipeline of opportunities across its end markets. The company's recent acquisitions, including the transformative Surdex acquisition, have further strengthened its service offerings and geographic reach.

With a healthy backlog, increased guidance, and a strong liquidity position, Bowman Consulting Group appears well-positioned to continue its growth trajectory. While the company faces some risks and challenges, its diversified business model, experienced management team, and strategic initiatives suggest that Bowman Consulting Group is poised to deliver value for its shareholders in the years to come.