Bowman Consulting Group Ltd.

Good morning. My name is Victoria, and I will be the conference operator today. At this time, I would like to welcome everyone to the Bowman Consulting Group second quarter 2025 earnings conference call. All lines will be placed on mute for the presentation portion of the call with an 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 to the most directly comparable GAAP information in the company's earnings 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 begin your prepared remarks.

Great. Thank you, Victoria. And good morning, everyone. And thanks for joining our second quarter earnings call. Bruce Labovitz, our CFO, is with me this morning. I'll start today's call with some introductory remarks, and then Bruce will cover our financial performance. I'll end the call with closing statements before opening to Q&A. So, turning to slide three. The second quarter marked another period of growth due to strong demand across our core verticals. New orders were especially strong in transportation, renewables, and energy transmission, where our expertise and differentiated capabilities continued to drive increase client engagement and long-term opportunities. The momentum we experienced across the business reflects our ability to execute with discipline and deliver high impact outcomes for our clients. For the quarter, we recorded a 17% increase in gross contact revenue, a 15% increase in net service billing, over 8% organic net service billing growth, and almost 51% growth in adjusted EBITDA. Importantly, record bookings during the quarter were well balanced across our markets. Once again, we reported a book-to-bill ratio of well over one. As we sit here today, I'm pleased to report that bookings so far in the third quarter are outpacing second quarter bookings. I'll now turn the call over to Bruce to go into greater detail. Bruce?

Okay. Thanks, Gary, and good morning, everyone. Let's turn to slide four. As we detailed in our earnings release last night, the second quarter was record setting on several fronts, including both gross revenue and net revenue at 122 million and 108 million respectively. Adjusted EBITDA of 20.2 million and a margin of 18.7 were also records. Adjusted EBITDA margin was up 440 basis points over the second quarter last year and 420 points over the first quarter of this year. Gross margin in the second quarter increased by 120 basis points over last year and by 230 basis points compared to the first quarter this year. That's helpful, but it's just a component of the margin expansion story. Keep in mind, gross margin sometimes fluctuates because it only reflects the burdened utilization driven cost of our operations workforce, but does not include indirect non-billable operations labor. So to be more complete, Let's look at total overhead. The combination of the direct payroll and SG&A lines on the P&L is total operating overhead. When we compare the second quarter to the first quarter this year and look at the sequential quarter-to-quarter changes in revenue versus changes in total overhead, you see that the $8 million sequential period increase in net revenue was achieved with essentially a flat total overhead. Unpacking that a little further, total unburdened operations labor increased roughly 1%, while net revenue increased roughly 8%. What we find most encouraging about the second quarter's results is the validation of our belief in the scale effect on our adjusted EBITDA margin, the point in our growth cycle where revenue is growing faster than overhead. While there were ups and downs across overhead expenses, we believe that in the aggregate, we are delivering on the scale effect. In large part, the margin expansion we delivered this quarter was the product of deliberate and disciplined labor cost management supported by the commitment of every member of our workforce to optimize our collective utilization. Year to date, our adjusted EBITDA margin is 16.7%, a 250 basis point increase over last year. At the midpoint of our guidance, we're projecting a 17% adjusted EBITDA margin for the year. This implies operating in what we believe is an extremely achievable second half average margin of a little over 17%. Non-cash stock compensation expense in the second quarter was 3.1 million compared to 6.1 million last year and 6.7 million in the first quarter. This sequential quarterly drop is attributable to two primary considerations. First, in the first quarter we benefited from a cost arbitrage based on lower than expected grant date fair value for the shares we issued in April in settlement of our 2024 non-cash stock bonus accrual. Secondly, we implemented structural changes to our 2025 bonus plan during the second quarter that impacted the anticipated annual accrual for non-cash stock compensation. We currently project total non-cash stock comp expense of around $20 million in 2025. We firmly believe our culture of widespread employee ownership creates shareholder alignment, which contributes meaningfully to improving efficiencies and to our ability to deliver a high teen's margin profile. Let's turn to slide five. The composition of our revenue continues to evolve and deconcentrate. To better illustrate the composition of our revenue, we've added a few new subcategories to the revenue pinwheel. In addition, We reclassified data center work to the power utilities and energy sector, given the rapidly evolving nature of our work in data centers, which Gary will discuss later. Additionally, we added a breakdown of our transportation business to highlight what we believe will be consequential areas of concentration and growth for us over the next few years. This includes ports and harbors and mass transit, including aviation, both small parts of our business today. Within transportation, Our work remains approximately two-thirds public and one-third private in nature. Natural resources and imaging revenue is roughly 50% public-funded digital orthoimaging and photogrammetry for federal customers such as the Department of Agriculture, with the remainder split between water resources, mining, and environmental services. Let's turn to slide six. In the second quarter, we generated 8% organic growth in net revenue over last year. For the year, we have generated nearly 10% organic growth of net revenue. Organic growth of net revenue was positive across all verticals, being strongest in transportation at 21%, followed by natural resources and imaging at 19%, power utilities and energy at 5%, and finally building infrastructure at 4%. These organic growth rates demonstrate the strength of our diversified service offerings and reflect the revenue synergies that have been generated through an uncompromising commitment to adjacency and complete integration in our M&A program. Let's turn to slide seven. Backlog at the end of Q2 was nearly $87 million, or 25% higher as compared to last year, and over 19 million, or 5% higher than the end of Q1. This healthy growth in our backlog is the product of organic sales, as no new one-time inorganic backlog was added during the quarter. This growth of transportation backlog relative to revenue is a result of our deliberate efforts to grow our transportation business, and at this time we consider it to be indicative of continued future deconcentration of building infrastructure revenue. Let's turn to slide eight. Our balance sheet remains healthy with low leverage of just 1.6 times trailing four quarters adjusted EBITDA. The strength of our balance sheet and improving cash conversion provides sufficient liquidity and access to debt capital to fund our drive to greater scale. At the end of Q2, we had $108 million in net debt with nearly $16 million in cash on hand and $80 million available under the current revolver with sufficient access to lease financing for capital expenditures. We see no imminent need to access the equity capital markets. Cash flow from operations was down a bit in the quarter due to the payment of accrued bonuses and an increase in working capital resulting from backloaded growth in revenue and increased receivables during the quarter. Year to date, we've generated $16.3 million of cash flow from operations, a nearly 50% adjusted EBITDA conversion rate, and a threefold increase over last year. We remain confident that we will continue to increase that ratio and end the year with conversion in the mid to high 60s. At the beginning of the quarter, we spent $6.7 million, sorry, at the beginning of the quarter, we spent $6.7 million capitalizing on the opportunity to repurchase stock amidst a tumultuous market. We're purchasing over 300,000 shares at an average price of $22.19 per share. With markets more settled and our stock having rebounded, we're now focused on alternative capital deployment priorities, having not made any additional repurchases so far in the third quarter. Let's turn to slide nine. A couple weeks ago, we announced that we had committed $25 million for innovation investment through the formation of the Bowman Innovation Growth Fund, or the BIG Fund for short. This initiative is one way we are demonstrating our commitment to engaging our workforce in our quest to expand our digital and data service offerings, expand our revenue capture into OPEX and maintenance budgets, enhance the utility of our deliverables and increasing residual interaction with customers, and enable continued margin expansion through the introduction of innovation-driven efficiencies. We consider this to be an imperative for engineering services providers that want to remain relevant and competitive. Our efforts toward innovation are focused on three primary areas of technology. One, geolocation GIS and intelligent spatial awareness. Two, high resolution digital imaging, and interactive 3D modeling. And three, artificial intelligence tools that leverage large language modeling, hyper iteration, and agentic applications. We're already funding several employee initiated pilot projects and are vetting several others. We expect to yield meaningful returns on these investments over time. For now, we are only investing in internally generated ideas with internally executed implementations. I'll close by addressing the impacts of the recent One Big Beautiful Bill on our business. Keep in mind, the legislation was passed in July, so there are no visible effects in Q2. Of particular benefit to Bowman are the reversion to 100% bonus depreciation and the elimination of the requirement to capitalize and amortize research and experimental expenditures. This change finally affords us the ability to permanently unwind our uncertain tax position over time and reverse corresponding accruals for potential interest, with such future reversals having positive impacts on earnings per share. With that, I'm going to turn the call back over to Gary for closing comments.