Good morning, ladies and gentlemen. Welcome to the Bowman Consulting Group Ltd. Q1 2024 Earnings Conference Call and Webcast. My name is Jacquetta. I will be your moderator for today's call. [Operator Instructions] I would now like to pass the conference over to your host, Bruce. Please go ahead.

Thank you, Jacquetta. Before we get started, please note that many of the comments made today are considered forward-looking statements under federal securities 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, adjusted net income and net service billing. You can find this information together with the reconciliations to the most direct 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. We will deliver prepared remarks today, after which we will be taking live questions from published research analysts. Throughout the call, attendees on the webcast may post questions for management to answer on the call or in subsequent communications, but there will be no live Q&A for the webcast attendees. Replays of the call will be available on the company's investor website. With that, I'm going to turn the call over to Gary Bowman.

Thank you, Bruce, and good morning, everyone, and thank you for joining the Bowman Consulting Group Q1 2024 earnings call. As he introduced, with me this morning is Bruce Labovitz, our CFO. We want to welcome all of our new shareholders and thank everybody for taking time to participate this morning. We also want to welcome all the firm's new employees, including everyone who joined us recently from Surdex and Moore Consulting Engineers. As usual, I'm going to start off with a quick business update, then Bruce will discuss our financial results. After that, I'll talk about our markets and pipeline before opening the line for questions. The first quarter of 2024, along with the start of the second quarter, have been both busy and impactful to our long-term journey. Turning first to the results of the quarter, I'm pleased to report that our net service billing rebounded from December's drop-off with three consecutive months of revenue increases. With year-end 2023 now in our rearview mirror, we are on track as expected for a healthy growth in 2024. As mentioned in our press release last night, demand for engineering services remains strong in all of our markets. While it's certainly notable that backlog is up $78 million or 31% year-over-year, I think it's more relevant to note the $24 million increase in gross backlog during the first quarter, represented an increase of 8% over three months. The bulk of that increase was generated through new orders with transportation commitments being a meaningful component of the quarter's sales. As is typically the case in consequential election years, we see an uptick in urgency to produce transportation-related projects as local, state and federal administrations promote infrastructure accomplishments. Since the end of the quarter, we have significantly increased our capital resources through a follow-on equity offering, an increase in availability under our primary revolver and the refinance of the Surdex aviation and imaging assets. As of today, we have access to nearly $100 million of deployable capital between cash on hand, available debt and free cash flow. As such, we are well-positioned to continue to execute on our current strategic growth initiatives. At this point, I'm going to turn the call over to Bruce. Bruce?

Thanks, Gary. Just as a reminder, we refer to net service billing and net revenue interchangeably. This is a non-GAAP revenue metric that nets subcontractor and outside production costs from gross revenue. A reconciliation of all non-GAAP metrics is available in the press release we issued last night. At the end of March, we completed a $57.5 million equity offering, which included $51.1 million of gross primary proceeds after exercise of the issue. Due to the timing of the offering, with respect to Good Friday, the offering closed on Monday, April 1st, 2024. As a result, the offering will be accounted for entirely as a second quarter event and none of the associated activity is reflected in Q1. This means the share counts reflected on the balance sheet and the P&L will not reflect the dilution, but the share count on the cover of the 10-Q, we will file tonight will reflect all shares issued in connection with the offering, along with subsequent acquisitions and any other related stock activities. From a revenue perspective, the first quarter was a good rebound from the end of the fourth quarter for sure. We generated just under $95 million in gross revenue and just under $86 million in net service billing for a roughly 90% net to growth ratio. As Gary mentioned, net revenue increased sequentially each month throughout the quarter with a higher ratio of bill to earn this quarter, meaning the change in our net contract assets was a smaller percentage of total net revenue as compared to fourth quarter. It's important to highlight that even though gross revenue was relatively flat compared to Q4, net revenue, the revenue earned by our workforce, and from where we make most of our profit, increased nearly 7% over Q4. Gross margin for the…

Thank you, Bruce. It's been about six weeks since our last market update and frankly, not much has changed in that time with respect to our markets. I'd like to take a moment to address organic growth. Since Bowman's founding in 1995, we've been all about growth. Results ebb and flow over time and growth has not always been at a consistent pace, but we've always managed to deliver dependable growth over the long run and are committed to continuing to do so. As we grow ever larger, we're taking proactive steps by bringing on highly experienced and well-connected talent devoted to continually increasing revenues in absolute terms so as to ensure continued healthy organic growth rates. Reiterating what I said in the press release, with the bulk of our organic growth anticipated to occur during the balance of 2024, we're confident we have sufficient revenue and backlog and a rightsized organizational infrastructure to deliver expanding margins as we realize the increased benefits of scale throughout the year. In April, we closed on the Surdex acquisition, our largest since McMahon back in 2022. This is an exciting expansion of our geospatial services portfolio as it now includes high altitude aerial imagery as a complement to our existing terrestrial and low altitude imaging capabilities. Furthermore, the addition of our extensive unmanned drone fleet, mobile scanning, and licensed surveying crews from the Surdex suite of services will be immediately accretive to that business. The integration of imaging fleets and capabilities is well underway with our professional services teams becoming familiar with each other and the breadth of our expanded capabilities. Our business development resources are actively exploring synergies with clients. We've already seen the fruits of this effort with a new $3 million -- approximately $3 million award in Oregon to start…

Absolutely. We will now begin the question-and-answer session. [Operator Instructions] The first question comes from the line of Aaron Spychalla with Craig-Hallum. Your line is now open.

Yeah. Good morning, Gary and Bruce. Thanks for taking the questions. First for me, on transportation, you've had a big focus on expanding the capabilities there to provide more services to DOTs. It seems like you're starting to see more traction given activity this quarter. Can you just talk about how you're feeling about your offering, the outlook there? And is it still pretty early in those IIJA dollars kind of flowing from the states in the market?

Aaron, yes. Certainly, our position is expanding and we're seeing the results of that. I would say the flow of the IIJA dollars is early. However, it's advancing. And clearly, some of the activity we 're seeing with the deals that have been closed, and deals -- prospects that are in the pipeline are the results of IIJA activity.

Yeah, Aaron. Good morning. I think it's good news is that almost all the money now is at least at the states. And so that positions it now at the starting gate. And certainly, some of it has left the gate, but it's lining up and as we do think that there's still a lot of tailwinds to it.

All right. Thanks for that. And then, on backlog, good to see that you're getting close to that 50% level outside of building infrastructure, but not really at the expense of growth there. Can you just talk a little bit about the outlook in building infrastructures as we move through the year, where you're seeing some good prospects for growth in any areas that might be a little more challenged in the near-term?

It's good news on that. Certainly, starting with our data centers, which is a small part of it, but increasing. That market is just on fire, lots of orders there. We're seeing notable increase in activities in the residential market, both single-family -- single-family has started recovering at the beginning of the year and we're seeing some nice green shoots in the multifamily here in the recent month or so. All of the other segments are holding their own. The retail is still very robust. So, in the building infrastructure market, still looking for very strong year.

Yeah. We aren't involved in high -- in urban high-rise that, that market is not something we're engaged in. We've seen any change in that. We're not suddenly getting pulled into it. Still, everything suburban and exurban has been very popular.

Understood. Thanks for the color. I'll turn it over.

Thanks, Aaron.

Thanks, Aaron.

Thank you. The next question comes from the line of Jeff Martin with Roth. Your line is now open.

Thanks. Good morning, guys. Wanted to dive in a little bit more on the shift from Q4 to Q1. You mentioned sequential increases throughout the quarter. I was just curious if you could highlight which areas were particularly improved by segment?

I don't think it was necessarily that granular. I think that -- what we're sort of getting with the sequential is that -- as we said in December, we kind of had across the board drop off at the end, and during the course of the first quarter saw an evenly distributed recovery from the end of the year back to the revenue levels above. I don't think, Jeff, it was necessarily any one segment that drove any more so than usual during the period with -- again, transportation has been a solid and power, utility have been solid, catching up to -- in terms of building their market share. But the reference to growth is in the aggregate that as we had characterized at the end of last year, it would rebound and revenue would revert. It was just an episode.

Great. And then, on the Surdex acquisition, that's your largest to date. I was just -- curious if you could talk us through kind of integration timing. What may be different from integration from past acquisitions relative to its size and perhaps a bit more complexity?

So, Jeff, we think of integration as having three prongs to it. The first being, let's call it, financial systems integration. Second being, IT network integration. And the third being, operational and organizational integration, and they happen in different timings, time periods. We would expect the financial integration to happen during the course of this year. Again, our ultimate goal for all of our acquisitions is one P&L, one operating environment from a finance and reporting perspective. But it takes a little longer with some acquisitions. This one shouldn't be too different than the others, and it will get in queue and get integrated. IT networks, some of their systems are a little bit different. The amount of data that they process exceeds the amount of data that we process by multiple terms, just in terms of the imaging. So that will take a little bit of time to get the networks integrated. And that's when we're sharing really accelerates is when we have everybody on a common platform. But operationally, I like Gary talk to -- it's well underway.

Yeah. I'll speak to that. I'll call it the social integration, which is -- what is on my radar screen the most. And I would say this acquisition excited our leaders throughout the company as much or more than any about the potential of cross-selling. And we've already had some joint strategy planning sessions. So, I see that going -- early on, indicators going as well, as well as any of our integrations on that aspect of the deal, which in turn is to revenue synergies.

And then one more, if I could. On the SG&A in the quarter, you had quite a bit of unusual or non-recurring items. You mentioned that you expect it to be -- you experienced operating leverage year-over-year for the year on -- maybe just wanted to give you an opportunity to kind of dive a little deeper into SG&A in Q1 and particularly stock comp looks like a bit of an outlier?

Yeah. I think, I'm not sure that there's a whole lot more color than sort of usual on it. We continue to grow the infrastructure of the company. We've talked in the past about how we're growing some of the infrastructure as we prepare for next phases of our graduation from emerging growth company status. So, there's some investment there. As Gary talked about, we've been announcing, we've made some high-level business development investments, as we acknowledge that nominal growth doesn't -- has to be bigger in order to achieve similar rate type growth. Stock comp expense continues to have some drag from pre-IPO, but it is an aspect of our compensation philosophy that we continue to use to attract talent in the market. But I don't know that there's any one category necessarily, Jeff, of SG&A that say, okay, well, that's almost over with. Again, we continue to grow into and try to maintain as lean an organization as we can.

Thank you.

Thanks, Jeff.

Thank you. The next question comes from the line of Jean Ramirez with D.A. Davidson. Your line is now open.

This is Jean Ramirez for Brent Thielman. Good morning.

Good morning.

Starting with Surdex. Could you talk a little bit more about that seasonality compared to Bowman's business? And perhaps if you could provide some details about the margin profile, whether it's lower or higher than Bowman expected or any details around that?

So, as I guess we telegraphed in the press release about it, their margin profile is slightly higher than Bowman's overall organization. But I don't think that, that will necessarily be a pull, because it's a small percentage of our overall business. So, certainly, contribute positively, we believe, from a margin perspective. They've traditionally operated around a 20% margin or so. So, it's helpful. But it's not overwhelming in size that it will necessarily fully impact us. From a seasonality perspective, we typically don't think of our business as having seasonality to it. But we experienced some, let's say, calendar holiday-oriented seasonality. But this is more of a sort of foundational way they do business. So, when you're trying to image the earth, there are seasons where imaging becomes more challenging because of the foliage. Now, in some cases, that is what the customer is looking for them to image, its changes in the green scape, let's say. So -- but there is a little bit more, let's say, lumpiness to their revenues around what could be -- depending on the contracts that they are executing, whether there is more, let's call it, leaf-on oriented or leaf-off oriented work to be done, it could affect the timing. Not the gross amount of work, but just sort of how the work phases. And weather can be -- can impact that business more than it generally would ours in the overall aggregate.

Understood. And if I could, one more. Talking about the revenue guidance increase. What sort of -- what is the low-end and high-end of the new guidance range you consider? And what sort of handicap -- what is sort of handicapped at the low-end of the range?

Well, we look at our backlog, we look at the ability to deliver revenue. We narrowed that gap as we go through the year. Historically, we start with a slightly wider gap. It is a people business. It is a business that is often dependent on the timing of funding, the timing of public interactions. Even when they're private clients and private sector work, it often intersects with public activities, whether that's commissions, boards and approvals. And so, we start with what we are confident on the low-end that our backlog and momentum will produce and we look at where we think on the high-end if things go right, we can squeeze the additional revenue in and narrow that throughout the course of the year. It's not really a handicapping of any one event or two events. It's early in the year. It's 2,200 people billing work to customers that require milestones and approvals. So, sometimes we just -- as we get closer, we have better visibility.

That makes sense. And just adding on to that, with the organic growth rate of the company that has recently slowed down, and you mentioned a couple of reasons why, do you still expect low to mid-teens in 2024, and do you have that line of sight today?

Yeah. Probably in the low-teens or high single digits is what we 're looking at for organic growth rate in 2024.

Yeah. We look at our backlog. We know where backlog is coming from. And as companies we've acquired roll through their annual -- through their anniversary date, their revenue becomes organic revenue. So, there's sort of two ways we know that it's going to improve, because we know we 've had organic growth inside the acquired revenue that will convert to organic growth over the remainder of the year. And with the backlog and knowing where the delivery of the guided revenue is coming from and knowing that by the end of this year, it will all -- but what we have acquired this year, will be treated as organic growth. We're confident that we will achieve the same kinds of numbers we have historically.

And just to clarify, according to that conversion or transition, what was your exit organic growth rate for March?

I'm sorry. What's that?

I guess, just like so exiting March, the organic growth rate, you said it was 4% earlier, if they had converted -- previous acquisitions had converted in Q1? Is that correct?

There was additional organic growth that was embedded in the acquired revenue, that would have been the pro forma end of March. Yeah.

Got it. Thank you. Appreciate the time.

Thanks, Jean.

Thank you. There are no additional questions waiting at this time. So, I would now like to pass the conference back to management for any additional or closing remarks. End of Q&A:

Thank you, operator. I just want to close by thanking everybody for participating in the call this morning and certainly for bearing through our technical difficulties here. And thanks again for your attention and for all the hard work for those who are part of the company and for investing in us for those of our shareholders. Have a good morning.

That concludes today's conference call. Thank you for your participation. You may now disconnect your lines.