Good morning. My name is Emily, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Bowman Consulting Group Second Quarter 2023 Conference Call. [Operator Instructions] Please note that many of the comments made today are considered forward-looking statements under federal securities 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 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 and 8-K filed with the SEC and on the company's investor website at investors.bowman.com. Management will deliver prepared remarks, after which they will be taking live questions from published research analysis throughout the call. Attendees on the webcast may post questions from 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 begin your prepared remarks.

Thank you, Emily. Good morning, everyone, and thank you for joining the Bowman Consulting second quarter 2023 earnings conference call. I'm joined here today by Bruce Labovitz, our CFO, and were joined virtually by many of our dedicated employees who are listening in on the webcast. Everything that we accomplished as a result of an extended team effort, and we're extremely appreciative of the hard work and client-first mindset exhibited by everyone associated with Bowman each and every day. During the second quarter, we welcomed some exciting additions to our organization which will serve as a solid building block for the second half of the year and beyond. We completed five acquisitions, adding roughly $36 million of annualized net service revenue and over 250 new employees to Bowman. Each of these acquisitions presented a compelling strategic rationale with respect to clients, geographies and complementary service offerings. But more importantly, the cultures of each of these companies aligned well with ours. Cultural compatibility is key to rapid and successful integration and facilitating immediate buy-in to the tenets of work sharing and cross referrals which result in accelerated growth opportunities, promotional revenue synergies and expansion of customer wallet share. In addition to the staff we added through acquisition, we organically expanded our workforce during the quarter by adding close to 50 professionals to ensure the timely delivery of work we've been awarded over the past six months and expect to deliver to customers over the year ahead. Our pace of new orders in the quarter complemented our M&A activity in the quarter. Once again, with gross orders exceeding $90 million, we achieved a book-to-burn ratio of greater than 1, which means our backlog grew independent of the acquisitions. We believe our industry continues to experience strong momentum as the overall infrastructure market…

Terrific. Thank you, Gary. Second quarter was active with five new acquisitions to underwrite, close, account for and integrate. I'm pleased to be here today reporting on another consecutive quarter of growth and positive progress toward our strategic objectives of achieving $500 million of annual revenue combined with above-average margins. Gross revenue for the second quarter increased $20.4 million or 33% to $82.8 million as compared to $62.4 million during the second quarter of last year. Building infrastructure represented 59% of our gross revenue for the quarter, with transportation and power each representing 19% of gross revenue. Year-over-year organic growth of gross revenue in the quarter was over 13%, which included our 2022 McMahon and Perry acquisitions, both of which have now passed their one year anniversary mark. Within the quarter, for-sale residential represented approximately 11% of gross revenue. Commercial, which includes a broad collection of submarkets, including data centers, industrial parks, MEP work, quick-serve restaurants, convenience stores and big box retail accounted for roughly 27% of gross revenue. Suburban and dense urban office is not a huge component of our commercial revenue base. Year-to-date, gross revenue was up $43.9 million or 38% to $158.9 million as compared to $114.9 million in the first six months of last year. Year-to-date, building infrastructure represented 59% of our gross revenue with transportation and power representing 20% and 18%, respectively. Last year, at the midpoint of the year, building infrastructure represented 71% of our gross revenue, with transportation and power representing 12% and 16%, respectively. This diversification has been deliberate and the effort continues to be a focus of our growth initiatives. Organic growth for the six months is 22%, again with McMahon and Perry included in the comparison. During the first half of '23, for-sale residential represented approximately 11% of gross revenue…

Thank you, Bruce. I'm going to turn briefly to our markets and our M&A pipeline before turning the call back to Emily for questions. As I mentioned, we continue to make good progress toward achieving market growth rates and revenue diversification. This quarter, we continued to deconcentrate our presence in the building infrastructure space while growing both our transportation and our power and utility services businesses. Over the course of one year, we've reduced building infrastructure revenue as a percentage of total revenue from just above 70% to below 60%, while growing our overall revenue base by 40%. At the same time, transportation revenue grew by 141% and nearly doubled its contribution to our gross revenue from 11% to 20%. Power and Utilities grew 60% year-over-year while increasing its total revenue contribution to gross revenue by nearly 20%, growing from 15% last year to 18% this year. I'm particularly encouraged by several awards we received this quarter. On the utility front, we expanded our relationship with Southwest Gas into Nevada. We've had a terrific long-standing partnership with Southwest Gas, and I'm appreciative of their confidence in us and with the great work our team has done for them. On the renewables front, we're continuing to win substantial solar infrastructure and battery storage projects. We also continue to see the impact of early-stage planning for infrastructure build funded projects with new large and midsized DOT projects. On the building infrastructure front, we continue to experience strong demand for data centers and our homebuilding customers feel that they've seen the market bottom out and are experiencing much stronger new home demand so far this year than their business plans anticipated. Our Quick Service Restaurant clients are keeping us busy as they reconfigure their sights to accommodate changing customer habits and we are…

Thank you. [Operator Instructions] Your first question comes from the line of Brent Thielman with D.A. Davidson. Brent, please go ahead. Your line is open.

Hi, great. Thanks. Good morning, Gary. I always appreciate an update just on the progress you feel like you're seeing from revenue synergies, how relevant is that to the low double-digit organic growth you're seeing in the business, maybe how you've been able to leverage all the transactions you've done into sort of expanding revenue from new customers, existing customers, so forth.

It's quite relevant. It's - the synergies from - our success in realizing synergies from the acquisitions is a very substantial contributor to our organic growth rate.

And then I was a little -

Go ahead, Brent.

No. Please, Gary, you were adding to that.

It's - since we started on our program, it's been part and parcel of our strategy is to search - is to maintain the cultural compatibility that was consistent with realizing revenue synergies and our culture of work sharing and revenue and referrals, cross referrals is we do that from the first day that an acquisition target comes on board. So we've been very successful in realizing the revenue synergies from acquired firms.

Understood. Okay. I appreciate that, Gary. And then I was a little surprised to see the revenue in the backlog in the transportation vertical a little lower relative to the first quarter. Is there some lumpiness to that business, completion of certain activities. Maybe just your view on the prospects for that vertical here through the rest of the year? I assume there's plenty of opportunities out there.

You identified it. It is quite lumpy, and we have some very good prospects coming up for the rest of the year.

Brent, what you - could you be more supportive of what you said you noticed?

I was referencing just the backlog quarter-on-quarter. Maybe I'm mistaken, Bruce, but -

Backlog. okay. I thought you talked about actual revenue. I thought you talked about actual revenue, sorry.

Yes.

You're talking about the composition of backlog -

Yes, just within the transportation vertical, I guess.

Sorry. Yes.

Just the timing of orders.

Yes. Fair enough. And then, Bruce, thanks for the comments just around SG&A going forward. You mentioned some elimination of duplicative costs. I think you called out McMahon that among other things should be a tailwind in terms of just better SG&A leverage here. Is there something unique about that transaction and the overhead with it. I know it was a relatively larger deal for you. I'm just wondering just because the size of the other transactions you're doing are also getting larger.

Yes. There's certainly - the difference in scale of acquisitions has impact on sort of the transition costs, right? But just more so is until an acquisition is fully integrated from a system's point of view, you're running dual systems. You're running dual accounting processes, some duplication of payrolls and duplication of the cost of auditing. So yes, there's some relativity, but it's more the binary of, are they or aren't they, that creates some leverage opportunity. So as we're bringing some of the - the second half of last year had some big acquisitions and a lot of activity. And as we're completing the integration, certainly we're seeing some efficiency out of that.

Got it. Okay. And just last one, I mean, $36 million in acquired revenue through the first half, obviously, very active here in the second quarter. I mean any objectives for the second half of the year in terms of your acquisition program, should we sort of not anticipate the first half pace will be staying, Gary or Bruce?

Yes. We're not going to put a number on it, lesson learned. But I think that we certainly intend to continue to be active. We have said our goal is always to do as well as last year and try to exceed it but without any specific target that we're setting, we're looking for good acquisitions. And as Gary said, we do expect to be talking about additional acquisitions by the time we get on the call in November. So it gives you an indication that we expect to continue to be active. Very pleased with the pipeline we have out there right now. And I think directionally, Brent, generally consistent with what we have been doing, right? While we say there's opportunity for larger. The sweet spot right now is what you've been seeing.

Understood. Thank you, guys.

Thanks Brent.

Your next question comes from the line of Alex Rygiel with B. Riley. Alex, please go ahead. Your line is now open.

Gary and Bruce, very nice quarter. What surprised you in the quarter, if anything, either strengthening or weakening or anything of that nature? I'm sorry, what surprised you in the quarter? Any economic - anything about the business that you found -

I guess a pleasant surprise is how soon it seems like the homebuilding industry has bottomed and recovered. We have seen some softening early - late last year and early this year, but lots of optimism amongst our customer base there. So that has certainly been a pleasant surprise. And not necessarily a surprise, maybe a crystallization like I mentioned in the remarks of this trend with the Quick Service Restaurants of the continued reconfiguration. We saw during COVID, it seems to be a permanent trend of reconfiguration of their sites to accommodate this - people aren't eating in the restaurants now, but it's more drive-through, more carryout.

And then within the transportation business, have you started to see - or even buildings business, have you started to see any federal funding evident yet in backlog, driving customer capital investment?

We are. Yes, yes. yes. It's a number of the projects that we are - there are opportunities that we're providing proposals on that actually we anticipate closing on the next quarter or two, are driven by federal funding.

Yes, we sort of survey the groups and the project managers for directional indication, and there's certainly that sense of optimism. Remember, we're at the very early stage in most of these projects, where the predominance of the funding will come to build whatever it is. But it's the sense of confidence that the funding is available, that they will - that unlocks the willingness to initiate the project. And so it may not always necessarily be - it's a direct correlation of 1:1, there is a fund, that funds what we do, but it's a - funding is in place to start the process to feel comfortable to issue the RFPs to get started with the process, and that's where we benefit the most.

And then, Bruce, as it relates to M&A, it sounded like you suggested that there's increasing opportunities for larger transactions. Can you talk about that in a little bit more detail and any relevant sort of end markets that maybe some of these transactions are targeted at.

Yes. So as we've said, the M&A is a spectrum of large and small. I mean, we have what we think is our high-frequency sweet spot that's a little higher than last year. You've looked at the last couple of acquisitions has been in that $8 million to $10 million range. And it really is where we're focused. We like these low-risk, easy-to-do impactful kinds of acquisitions. But that doesn't mean there aren't - similar to last year with McMahon where basically you had higher dollar value acquisitions scattered in there. So in the pipeline, there are larger opportunities. We've said that we're not out hunting for $50 million and $100 million opportunities; sometimes you stumble on a bear, but that doesn't mean that we're necessarily looking for one. Where we're really focused is kind of in that sweet spot of, let's call it, $5 million to $15 million and then a few that maybe have $2 million and potentially $3 million on the front of them. And a lot of this is you play the opportunities, but you hunt for the - where the game is out the most.

Super helpful. Nice quarter. Keep it up, guys.

Thanks Alex.

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

Thanks, Emily, and thanks, everyone, for listening to the call this morning. And thanks all the Bowman folks for continued hard work that you put in and to all our investors for the continued support. Good morning.

This concludes today's conference call. You may now disconnect.