Good morning. My name is Candice, and I will be the conference operator today. At this time, I would like to welcome everyone to the Bowman Consulting Group First Quarter 2022 Conference Call. [Operator Instructions] Thank you. Please note, many of the comments made today are considered forward-looking statements under federal security law. 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 and net service billing. You can find this information together with the reconciliations to the most direct comparable GAAP information, the company's earnings press release and 8-K filed with the SEC and the company's investor website at www.investors.sbowman.com. Management will deliver prepared remarks after which they will be taking live questions from published research analysts. Throughout the call attendees on the webcast may pose questioned for management to answer on the call or in subsequent communications, but there will be no live Q&A from the webcast attendees. Replays of the call will be available on the company's investor website. Mr. Bowman, you may now begin your prepared remarks.

Thank you, Candice, and welcome to the Bowman Consulting Group’s First Quarter 2022 Earnings Call. I'm Gary Bowman, Chairman and CEO of Bowman. joined here this morning by Bruce Labovitz, our Chief Financial Officer. Before we get started, I want to welcome everyone from McMahon Associates, the most recent addition to Bowman. The addition is committed team of talented professionals and is going to be transformative for our transportation practice as well as to our business overall. We're excited to have this transaction completed, and we're really looking forward to the great work we're going to be doing together. The first quarter of 2022 picked up where 2021 left off generating record results for sales revenue and adjusted EBITDA. And the Q1 momentum continues on the [indiscernible] into the second quarter. During the quarter, we closed on a $17 million equity raise, we booked over $60 million in net new orders, and we produced record gross and net revenue. The growth was driven across every one of the markets served by our business. Despite challenging world conditions, we continue to see multiple opportunities for profitable growth. Net service billing for the quarter increased 65% over the first quarter of 202 with an organic growth rate of 36% over that period. During the quarter, we continued with the integration of seven acquisitions that we made post IPO. When we closed on an eight with Perry Engineering in Tucson. Our collaborative culture cross-selling and work-sharing generated meaningful revenue synergies between our acquisitions and our legacy operations that positively impacted the quarter results. Continuing to execute on our growth strategy, last week we closed on the purchase of transportation engineering firm, McMahon Associates, which is our largest acquisition to date. Within the first week, we've already realized over a $1 million of revenue…

Terrific. Thanks, Gary. As you mentioned -- as Gary mentioned, first quarter was a record setting quarter of Bowman. Last week was the one-year anniversary of the pricing of RPO. I'm extremely proud to say that we've successfully navigated the transition from private to public and completed the year of first. Last year Q1, we were still a private company. So, comparisons to that quarter and periods which include that quarter are still a bit apples to oranges. As compared to Q1 2021, gross revenue for the first quarter increased 65% or $20.7 million to $52.5 million from $31.8 million. Of the nearly $21 million increase, $7.6 million was from acquired revenue and $13 million was organic representing a 41% organic growth rate on gross revenue. Net service revenue, which we refer to as net revenue, a non-GAAP metric, increased 62. -- 65.2%, or 18.8 million to 47.7 million in the first quarter compared to 28.9 million for the first quarter last year. Of the nearly $19 million increase in net revenue, 8.6 million was from acquisition, and the remaining 10 million was organic representing a nearly 36% organic growth rate year over year. Gross margin for the first quarter was 51.5%. As compared to 49.2% in Q1 2021 improvement of gross margin over Q1 last year is principally a function of lower non-cash stock comp expense, but also improved utilization, mix of business, and a bit of pricing power. SG&A was 43.5% of gross revenue in the first quarter compared to 40.1% for Q1 2021. As I mentioned earlier, this comparison is not necessarily meaningful, since the last -- since this time last year, we were still private and did not have any of the costs of being public, and we had lower non-cash stock comp expenses. What is…

Thanks, Bruce. This morning, we announced the addition of Raymond Vicks to our board of directors. I'm very happy to have Ray join us on our upcoming journey. I want to thank for his service to the board over the past year. I want to thank everybody here for delivering a fantastic quarter. We all continue to work diligently every day to deliver discipline growth and return to our shareholders. And that includes many of the fantastic professionals working here at Bowman. Ownership's always been part of our culture and today more than ever, the alignment of interest between employees and investors inspires us to succeed. Thanks. So now turn it back over to the operator, open it up for questions.

[Operator Instructions] First question comes from the line of Brent Thielman of D.A. Davidson.

My first question, I mean, really strong start to the year here. Anything to be aware that might have had an unusually strong impact this quarter, specific programs or contracts. As a seasonally slower quarter to where, if I annualize, that gets me to the midpoint of your guidance, frankly, a little bit above that. So, I just want to be sure I understand all the moving pieces in the quarter and what we should be thinking about for the rest of the year.

Brent, there really isn't one particular contractor, one particular client or any one particular event that made the quarter strong. It was just a strong quarter for us. It's the culmination of a lot of hard work in business development and acquisition strategy. And there’s a really a very balanced portfolio of revenue that makes up the quarter. So that's, we think that's a positive that there. There isn't one anomalous thing that impacted it positively…

I’ll just reinforced that, Brent, it is spread all over. There's not any big rock, a couple big rocks that are not sustainable but…

Yes. We were not terribly seasonably weather affected generally, if it was a mild, more mild winter in a lot of our markets and we have become, as we become more geographically diversified, somewhat less impacted by, by winter weather on outdoor work.

Okay. Okay. Fair enough. And then the next question was just on, the gross margins seem to be fine, new contracts. How do you feel they're sort of appropriately capturing the cost increases we all see out there: fuel labor, all that sort of stuff we've seen the business? And then, how are you kind of monitoring that as new workflows into the backlog?

And Brent, we have -- I anticipated that in thinking about it this morning. We have really probably hundreds of pricing agents out there, seller doers, and we counsel them, we coach them, and we listen through them, and our customers are experiencing price increases all across the board, in their materials, their fuel, their labor, and, and we're coaching our folks because. We are having a lot of pressure to increase our labor price of our labor is going up. So, our folks are -- and they’re not needing resistance to increase pricing. Our customers are expecting it. So our folks are receptive to the coaching and they're out there. And we were able to get our pricing up for what's happening in the marketplace. This inflationary environment's new to everybody. Another think, Brent, just to point out -- fuel in particular, since you mentioned that —is not a significantly large component of our costs on a regular basis. We have a fleet of vehicles that are out, that they do survey work, but the vast majority of the work that we produce and the revenue that comes out of here is done from inside an office and it isn't necessarily from our cost point of view, particularly fuel driven, our expense labor is labor.

Yes. Okay. Fair enough. And the, Gary, why McMahon associates? Why was that the right kind of large transaction to expand the transportation for you? I mean, what did you especially like about this business?

Great question. It's a little bit -- it was geographically correct more than bite-sized, but it was comfortable size for us. It was the appropriate stretch. We really liked the culture similar to our culture. They have -- it's a strong ownership culture, lots of stockholders that have been there a long time and it’s very receptive leadership to taking the next step along with us and growing with us and certainly congruent with our strategy of growing our transportation practice really has some great clients [indiscernible]. They do work for Florida DOT, which we do, but they own the design size, some really complimentary clients. So there's lots of factors made them a great fit for us. Our first really big increase in a diverse market. Also say from —as we started to do due diligence, the way they've grown the organization, as they've grown, the size of the business was very professional. The products of information that they were able to provide to us was quick, accurate, organized. And so, they had built in a lot of ways the way we had built as we grew through their size. And so, it was very easy to understand them and compliment to the folks who do all of their back-office work there. It was an easy —we saw that it would be easy to plug in. And it was kind of manna from heaven, but it was really, really confirmed literally within the first few days this one deal from one of our longstanding clients immediately. Hey, we closed this 7-figure traffic study deal because we had an advance. It's like, wow, that's what it's all about.

That's great. Maybe just the last one and I'll turn it over. Considering this is a larger deal, I assume there's a little more integration to it, but you obviously have some bigger targets for what you like to do. I think this year in terms of acquired revenue, do you take a step back here on the short term and focus on integration, maybe just how we might think about the deal flow here through the rest of the year.

They're going to continue to come we've we have built a very robust integration team dedicated integration team. And so, we've, we've got strong integration bandwidth. And in fact, I will, yes, we, we've got a lot of listing to do to integrate McMahon. It's a, it's going to be a long haul to integrate McMahon. But the deals will keep on coming and we've got the bandwidth, we've got the team, we've got the machine built to continue to integrate and bring them into the team here. McMahon is not going to slow us down.

Your next question comes from the line of Alex Rygiel of B. Riley Financial.

Couple quick questions. You've talked in the past about some other some other end markets such as power infrastructure, mining, water, and renewables. Can you talk about the activity in the quarter there and the pipeline of work that you see on the horizon?

Yes, so those are still, the smaller parts of our business. We definitely saw good growth in renewables over the course of the quarter, a little bit of a decline in water resources and strong activity in mining. But again, sort of as a collective, they represent less than 5% of revenue today. I think that they are, knowing our pipeline, they are a focus of M&A activity. I don't think anything necessarily in the short term of the size that would move them into a more competing percentage as the 3 other primary.

I'll expand a little bit of what this is saying. Our own renewables are focus, although we've not had any hits on acquisitions, but it is a focus. And we've really had some super successes, kind of under candidly under my radar, that just my radar just started lighting up organic growth of successes and renewables. So organically we're really growing our renewables practice. We're going to continue to focus on going by acquisition, so can really continue our commitment to growing that. And on the mining front, our we're looking at several relatively smaller, but meaningful acquisitions. And our paradigm is expanding on that. We've been in the mining business some 10 years in Arizona is compromising. And our paradigm is expanding to include, I'll say, mining slash [indiscernible] with aggregates to be trying to expand to an infrastructure play, to serve the highway and infrastructure market. That market is on fire with the infrastructure bill.

And then more broadly speaking, can you talk about inflation risk and in particular, obviously labor inflation and how quickly you can react to that and pass that along to be able to keep your margin profile fairly consistent.

Yes, it's a great question, Alex. And I like was anticipating -- like I told Brent this morning, anticipating that this morning and so far, so good. And the way I look at that is I started my professional career when Paul Volker was chairman of the fed. So, I think none of us, none of us who are in the professional world today really have experienced inflation as professionals. So, we all kind of feel our way through it. I said this a little bit before, so far, we are finding that our clients are expecting price increases from us. They're getting hit from they're getting hit from all sides. So, they are not that resistant to it. And it's new for our folks to push that, like say, we're coaching them to do it. They're going out. And they're being appropriately aggressive about pushing the pricing. They're learning that they're, that the market is receptive to it. So, it's kind of new to everybody. So, we are finding that we are able to increase our pricing to be able to keep up with the demands of our demands to increase the cost of labor. So far so good, like said, we continue to feel our way through it. We are optimist and confident we're going to be able to continue to navigate through it, and that we don't have any meaningful contracts that are, so that are old enough that are out of the money on labor, right? I mean, we're not, we're not locked in, and we don't have these kinds of contracts that 5 years ago we set rates and have no escalators in. And part of the benefit of kind of the term of our business right now. Yes. Is that we're, we are in a somewhat real time pricing environment for a lot of the work that we do.

And then, Bruce, can you talk about rising interest rates and sort of how you think about that as it relates to your capital structure moving forward?

Right. So today, we're fairly low leverage. Interest rates aren't necessarily consuming a lot of changing rates. Interest carries on consuming a lot of capital here. We think that the next, in our near future, as we grow, debt will be a component of what we do, but we're not necessarily looking to lock in a large amount of capital today that we have to carry for a period where we don't really necessarily need it imminently. So, I think rate movements of rate movements long term are just going to be a cost of playing for us. We'll sort of deal with rates when we get to when we need more capital. But I don't think it's going to be, we're not going to be so highly leveraged ever that it’s a huge negative drag on the capital structure here. Does that address what you're looking for?

We now have a follow up from Brent Thielman of D.A Davidson.

Just one more on the cash flow was particularly solid this quarter. Maybe just your thoughts on how that flows Bruce through the rest of the year.

Yes, I think we're, we're reaching a stride there. Again, our operating cash flow, we believe is going to be strong. We still consume cash for investment activity and probably won't be generating necessarily. We we've done the financing activity earlier this year, but certainly one of the things that we see over time here and the impact of, of the growth is that it generates cash. And so sort of back to Alex's question of kind of, how do we see interest rates affecting the business? We're looking for the growth to start generating more free cash flow that can be used for investment in additional growth. But I think we had solid trajectory this, this quarter for cash flow and expect that we can turn our adjusted EBITDA into cash at a pretty healthy rates going forward.

There are no further questions at this time. Mr. Bowman, I turn the conference call back over to you.

Thanks you, Candice. We'll wrap it up this morning. Thank you everybody for listening in and, and thanks, Brent and Alex, for thoughtful questions and appreciate everybody being on the call and thanks for all the Bowman employees for all the hard work and all the investors for the faith you put in us. And it's not misplaced work hard to build value here. Good morning, everyone. Thanks, operator. That's it.

That now concludes today's conference call. You may now disconnect your line. Have a great day.