Bowman Consulting Group Ltd.

Good morning. My name is Becky and I'll be the conference operator today. At this time I would like to welcome everyone to the Bowman Consulting Group first quarter 2025 conference call. All lines will be placed on mute for the presentation portion of the call, with the opportunity for questions and answers at the end. Please note that many of the comments made today are considered forward-looking statements under federal security laws. As described in the company's filings with the SEC, these statements are subject to numerous risks and uncertainties that could cause future results to differ from those expressed, and the company is not obligated to publicly update or revise these forward-looking statements. In addition, on today's call, the company will discuss certain non-GAAP financial information such as adjusted EBITDA, adjusted net income, and net service billing. You can find this information together with the reconciliations of the most directly comparable gap information in the company's earning press release filed with the SEC and on the company's investor relations website at investors.bowman.com. Management will deliver prepared remarks, after which they will take questions from research analysts. Replays of the call will be available on the company's investor relations website. Mr. Bowman, you may now begin your prepared remarks.

All right. Thank you, Becky. Good morning, everyone. And thanks for joining our first quarter earnings call. Bruce Leibovitz, who is our CFO, he's with me here this morning, as always. So before I give my overview of the quarter, I want to welcome our investors, employees, and Virginia Grebien, who recently joined our board of directors. Virginia has spent over 30 years in the public and private water sectors throughout North America. She's a former tenured sea level executive with Parsons. Bob Whitefield, And also at several large municipal water districts in southern California. Virginia is filling a board vacancy. We're really fortunate to have her join our board as an independent director. Bob Whitefield, I'm going to start today's call with some introductory remarks and Bruce will cover our financial performance. I'll end the call with closing statements before opening it to Q&A. Bob Whitefield, So turning to slide three. We're pleased to report a very strong start to 2025 and our best performing first quarter on record in terms of bookings, gross revenue, net service billing, and cash conversion. Overall, the first quarter was a continuation of the momentum we saw building over the course of the second half of 2024. We had another quarter of exceptional new order activity in Q1. Net service billing grew by almost 17%, just surpassing $100 million. We also more than doubled organic revenue growth from what we reported in Q1 of last year. Importantly, our record bookings during the quarter were well balanced across all our markets, which resulted in roughly a 27% year-over-year increase in backlog to almost $419 million, which is $20 million over Q4. Once again, we reported a book-to-bill ratio of well over one. With that, I'm going to turn the call over to Bruce to discuss our strong financial performance for the quarter.

Bruce? Thanks, Gary. I'll start with a quick reminder before we get started that unless otherwise specified, when I refer to this quarter or the quarter, I mean Q1 2025, and when I refer to last year, I mean Q1 2024. All right, let's turn to slide four to review the quarter's results. Gross revenue was up 19% to $112.9 million compared to 94.9 million last year. And net service billing was up 17% to 100.1 million from 85.7 million last year. We continued to maintain a net to gross ratio in the high 80s, which means our growth is derived from work produced by our workforce and not simply from increasing outside subs or pass-through sales. Our growth strategy emphasizes a commitment to maintaining a high net to gross ratio because we believe that internally generated revenue is the foundation of high margin long-term organic growth and free cash flow. Gross margin increased slightly to 51.4% from 50.6% last year, a sign that our labor was more efficient this year as compared to last year. SG&A expenses were down 240 basis points and 170 basis points as a percentage of gross revenue and net revenue, at 44.7% of gross revenue and 50.5% of net revenue. Last year's labor realignment and refocusing efforts are paying utilization dividends now, and we believe the reductions in overhead as a percentage of revenue foreshadow continued margin expansion as the rate of revenue growth throughout the year will exceed that of labor growth. While our net loss was essentially flat at 1.7 million, pre-tax net income improved significantly from a loss of 5 million to a loss of just under a million. While it's not where we want to be or expect to be, it is a significant improvement over last year and is a solid indicator of improved performance. Adjusted EBITDA was 14.5 million this quarter, up 19.6% compared to 12.1 million last year. Adjusted EBITDA margin on net revenue was 14.5%, up 30 basis points from 14.2% last year. While this quarter's margin is lower than the indicated midpoint of our outlook, we are confident that higher quarterly revenue during the remainder of the year, combined with generally stable labor and overhead levels, will yield margins sufficient to compensate and enable us to meet or exceed our full-year margin guidance. Let's turn to slide five. Gross revenue in the quarter continued to diversify with every sector growing year over year. Transportation grew 30%, accounting for approximately 21% of revenue, up from 19% last year. Power and utilities grew 16%, accounting for 19% of revenue, down around a half a point from last year. Building infrastructure grew 6%, accounting for roughly 49% of revenue, down from 56% last year. And emerging markets grew 118%, counting for 11% of revenue up from 6% last year. As we mentioned in the recent year-end call, we are now classifying revenue from the CertX acquisition more specifically based on end customer. This may make year-over-year comparisons of emerging markets a bit challenging. Let's turn to slide six. The overall growth of organic net revenue in the quarter was approximately 6%, doubling last year's growth of organic net revenue. Organic growth this quarter was led by transportation at approximately 15%, followed by emerging markets at 10%, power and utilities at 6%, and building infrastructure at 2%. Given what we know about the composition of our backlog and the as yet unrecognized organic growth embedded in acquisitions whose revenue is still classified as inorganic, we remain confident that we can deliver high single to low double digit organic growth this year. Let's turn to slide seven. Cash flow from operations in the quarter improved considerably to $12 million compared to $2.5 million last year. But it's not just the absolute increase that's relevant. It's also the 83% operational cash flow conversion and 73% free cash flow conversion that are meaningful. Increasing cash flow conversion has been a commitment of ours as we've grown, and achieving these conversion rates enables us to invest in value creation and anti-dilutive initiatives over time without reliance on the equity capital markets for funding. During the quarter, we repurchased $6.7 million of common stock at an average price of 25.10 per share. This included $2.6 million to purchase stock granted to employees who opted to sell shares to pay taxes relating to vesting events and 4.1 million of purchases under our $35 million authorization. Since the end of the quarter through last week, we've repurchased an additional 5.3 million under our authorization at an average price of 2160 per share. On March 31st, 2025, we had approximately 17.3 million shares outstanding, which has been reduced to approximately 17.2 million as of May 2nd. With $97 million of net debt, Our balance sheet remains under leveraged at 1.6 times trailing four quarters adjusted EBITDA and 1.3 times forward adjusted EBITDA. We have the strength of balance sheet and sufficient access to debt capital to execute on M&A while also making innovative technological investments in our operations. Let's turn to slide eight. Our backlog was 419 million at the end of the first quarter. That's nearly $90 million increase from last year and around $20 million from the end of last year. Our backlog generally provides visibility to revenue stretching up to two years into the future, with 70% to 80% or so turning within 12 months. Let's turn to slide nine. We remain committed to our three-pronged capital allocation program, which balances investment between internal initiatives oriented to short- and long-term organic growth, acquisition of adjacent, complementary, and consequential operations, and antedilutive spending on share repurchases. We are committed to being a leader with respect to the application of innovation, visualization, geolocation, and automation in our operations. During the quarter, we increased our primary revolving line of credit to $140 million and expanded our capital leasing capacity to levels sufficient to support aggressive investment in technology, automation, and other revenue-enhancing and margin-expanding assets. We look forward to the combination of improving cash flow, a low-leverage balance sheet, a commitment to innovation, and a tremendous market dynamic positioning us for a reversion to a proper equity valuation and increased shareholder returns for everyone. With that, I'm going to return the call to Gary for closing remarks.