Bowman Consulting Group Ltd. Q2 FY2024 earnings call

• Acquisitions expanded geospatial, public sector, renewable energy, and water services; integration of acquired firms makes organic vs. acquired growth distinction challenging but is a point of pride.
• Financial results: Q2 2024 adjusted EBITDA up 21% to $13.4 million; first half 2024 adjusted EBITDA up 23% to $25.5 million. Non-cash stock compensation for 2024 projected to be $24M-$26M.
• Operational highlights: Successes in ports & harbors, geospatial services, data centers, fire protection, and renewable energy; ongoing assessment of workforce and overhead to improve margins.

During the three months ended June 30, 2024, Bowman Consulting Group generated record quarterly gross revenue of $104.5 million and net revenue of $94 million, a 27% increase over Q2 2023. Net revenue for the first half of 2024 was $179.7 million, up 27% from the first half of 2023. Gross margin was 52% in Q2 2024 and the first half of 2024, compared to 50% and 51% in the prior corresponding periods. Second quarter gross revenue by vertical was: building infrastructure 53%, transportation 18%, power 19%, and emerging markets 9% (due to Surdex allocation). Backlog as of June 30 was up 19% year-over-year and 5% quarter-over-quarter, with distribution: 48% building infrastructure, 27% transportation, 18% power, 9% emerging markets.

• Revised 2024 net service billing outlook to $375M-$385M and adjusted EBITDA to $58M-$63M.
• Anticipates second half ramp in EBITDA with consideration of backlog conversion timing delays but expects upside from scheduled projects.

• Market uncertainties: Impact of geopolitical factors, interest rate changes, and regulatory uncertainties on project timelines and revenue recognition.
• Integration challenges: Potential delays in integrating acquired firms and converting backlog into revenue.

Q: Aaron Spychalla asked about building infrastructure slowdown and data centers.

A: Bruce and Gary discussed building infrastructure slowdown due to clients waiting for favorable interest rate environment, but confidence in future performance; data centers and other submarkets like MEP, fire protection are strong.

Q: Andy Wittmann inquired about backlog and burn rate.

A: Bruce explained backlog includes under-contract projects with reasonable proceed expectation; burn rate may be extended but backfilled with shorter-term projects.

Q: Brent Thielman questioned EBITDA and project lumps.

A: Bruce noted EBITDA conversion issues due to labor vs. revenue mismatch; Gary discussed project lumpiness as part of growth spurt during transition phase.

Q: Alex Rygiel asked about billing rates and backlog organic growth.

A: Gary stated no pricing pressure downward; Bruce mentioned mid-single-digit organic growth in backlog.

Q: Jeff Martin asked about transportation awards and Surdex integration.

A: Bruce and Gary discussed transportation awards in existing markets, not funding issues; positive update on Surdex integration with cross-selling successes.

Q: Aaron Spychalla followed up on guidance split and organic growth.

A: Bruce mentioned ratable third and fourth quarters with mid-single-digit organic growth expectation.