Good morning. My name is Megan, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Bowman Consulting Group Second Quarter 2024 Conference Call. [Operator's 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, 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 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 take 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 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.

Thanks Megan. Good morning and thank you for joining the Bowman Consulting Group second quarter 2024 earnings call. With me this morning, Bruce Labovitz, our CFO. I also want to welcome all of our new employees including everyone who joined us recently from Element Engineering in Colorado and the FCS Group in Washington State. This morning I'm going to start off with some introductory comments, after which Bruce will discuss our financial results. I'll then come back on the line for some additional remarks about our trajectory into 2025 and end with Q&A. Okay. During the three months ended June 30, 2024, we generated record quarterly gross and net revenue surpassing $100 million in a single quarter for the first time. While short of expectations, it is a meaningful advance toward our goal of a $500 million annual gross revenue pace within our first five years as a public company. The acquisitions we made during and after the quarter expanded our geospatial business and increase our public sector revenue, add capabilities around renewable energy engineering and they broaden our growing national water services practice. I'm pleased with the evolving position of the firm in the marketplace and the strategy that we're using to grow the business. It gives me great confidence in our collective ability to execute on our long-term vision. So during our quarterly calls and as we meet with investors, we spend a lot of time distinguishing between organic and acquired revenue and the associated growth rates. It's sometimes a tricky distinction to make, because while we're highly acquisitive and much of our growth has been through acquisition, we are also both committed to and highly proficient at post-closing integration. By the time an acquired firm reaches its 12-month anniversary closing it is often challenging to distinguish it within the overall organization and even more difficult to disaggregate it from our overall results of operations. In most cases, we have by that time integrated the systems individual practice areas and professional staff throughout Bowman. While this enables us to be efficient at work sharing unconstrained by geographic boundaries or legacy affiliations, it makes reporting on organic and acquired growth to challenge. As opposed to seeing this as a negative, it's an aspect of our approach that we're proud of and that we believe distinguishes us from many of our peers and adds value for our shareholders. Bruce will present a deeper dive into growth rates in his presentation. But suffice it to say, we believe our diversification efforts have been extremely impactful. With this, I'm going to turn the call over to Bruce to discuss financial results. Bruce?

Thanks, Gary. Let's turn to slide 4. A quick reminder, we refer to net service revenue, net service billings and net revenue interchangeably. This is a non-GAAP revenue metric that eliminates pass-through billings associated with subcontractors and outside production costs. Since pass-through billings are generally without markup, net revenue is meaningful because it reflects margin contributing revenue generated by our workforce. Reconciliations of all non-GAAP metrics we'll discuss are available in the press release we issued last night. Let's start with the quarter. Gross revenue for the second quarter was $104.5 million, which as Gary mentioned, is a milestone for us. Net revenue was $94 million, representing a 27% increase over second quarter 2023, with a 90% net to gross ratio, which shows growth of net revenue is keeping pace with the growth of gross revenue. Gross margin was slightly improved during the quarter at 52% compared to 50% last year with SG&A holding steady at around 52% of net revenue. Net loss before tax increased by about $1 million to a loss of $3.2 million from a loss of $2.2 million. Net loss after tax increased by approximately $1.4 million to a net loss of $2.1 million. Our tax benefit in the quarter was approximately $1.2 million, after accounting for the unwinding of our uncertain tax position relating to Section 174 R&D expensing -- more on that in a bit. Adjusted EBITDA was up 21% or $2.4 million for the quarter at $13.4 million which is a 14.3% margin on net revenue not where we had hoped it would be but up 20 basis points over first quarter 2024 nonetheless so in the right direction. We're committed to holding overhead and we're taking actions to ensure our labor is right-sized for our adjusted revenue projections which positions us for…

Thank you, Bruce. Now let's turn to Slide number 12. Before opening the call to Q&A, I want to take a few minutes to address markets share some recent successes and awards touch on areas of our business where we are excited about for the future and reassure everyone that we're laser focused on the performance of our operations. In 2022, we acquired Anchor consultants. That's a small company in Philadelphia focused on bridge and marine engineering. This acquisition and its talented staff laid the foundation for what is now a flourishing expanded Ports and harvest Group. With added depth of leadership this submarket of our transportation vertical is now proving to be an extremely promising practice area. The group has been very active lately with several wins up and down the East Coast from private and public port operators both as a prime and as a team member along some of the biggest firms in the industry. Leveraging our extensive skills and geographic information systems, or GIS for short our ports and harbors Group is providing delivery to clients utilizing sophisticated integrated technology that has distinguished us as a leader in port asset conditions tracking assessment management. Ports & Harbors there are interesting micro economies and to themselves exhibiting diverse demands for land and water-based infrastructure logistics safety and sustainability planning. I'm really excited about the inroads we're making the successes we're seeing and the potential for the future of our Ports & Harbors practice. Over the past couple of years the growth in our capabilities related to geospatial high-resolution imaging mapping and GIS services has kept pace with the other practice areas at Bowman. We've gone from being a terrestrial-based surveying firm to one that offers multiple altitudes of geospatial imaging LiDAR and scanning including both aerial and…

[Operator Instructions] Your first question comes from the line of Aaron Spychalla with Craig Hallum. Your line is open. Q – Aaron Spychalla: Yes. Good morning, Gary and Bruce. Thanks for taking the question. First for me, last quarter you kind of noted you were looking for a very strong year for building infrastructure and now calling out organic contraction in the first half. Can you just kind of talk about what's changed in the past few months? What end markets are you seeing slowdown the most? And what areas are you may be excited about data centers in the past that we've talked about? I'd appreciate that. Thanks.

Yes, good morning. I'll say, we still do believe in the aggregate that building infrastructure is going to be a strong performer. I mean, it's when you start to assess it in very granular detail between organic and acquired, we are investing in it. We think it's a good place to be. It's not something we want to withdraw from. So, we do think that there's going to be strong performance there. Gary, talk a little bit to the -- so which part we won [ph]

We're selling work in multifamily and – but, it's being booked, but being put on hold waiting for a more promising or a more favorable interest rate environment. So that's what we're -- we are seeing optimism amongst our clients, but they're both rationalizing their business models for a new interest rate environment and sitting tight -- waiting for the interest rates to decrease.

These sort of general, I think confusion of late even the last few months in the marketplace between impacts of discussion of changing evolution in the trajectory of rate discussions, a lot going on certainly in the geopolitical world and uncertainties. And those have impacted us more quickly, I think than circumstances like these in the past have, but I think they're temporary. As you think it's still a promising market. Data center is obviously very strong. We've got big box retailers who are issuing new orders for new stores. We've got a lot going on in health care. We got a lot going on in the MEP world and as talked about in terms of sort of preparing for transitions in regulatory environments and fire protection all in that group. But they are definitely the submarkets of multifamily certainly urban commercial, which doesn't really dramatically affect us our drag area.

A market that was very strong for us up until a year ago was the build-for-rent market and that has really slowed down. What we hear from our clients in that market that they're poised to reignite once interest rates start coming down.

Okay. Understood. Thanks for the color there. And then on transportation you noted multiple large projects where you've been selected that are still working through final contracting and notice to proceed. Can you just give a little bit more detail on what items are causing those delays? How confident you are that they'll start up in the second half and that they'll -- are they still to be added to backlog? And what could this mean for segment growth as we look towards 2025?

Yeah. So the process in that is you submit you get awarded -- broad strokes here. You get awarded then you go through a negotiation. You've submitted a price target and a characteristic of your package, but then you still have to go through a negotiation get the contract executed and then get a notice to proceed. That just has seemed to take longer in the last six months more recently. They don't get added to backlog until they're contracted. So there's the process of getting a contract and getting it into backlog and then getting everybody at the authorities wind up to proceed. In some cases as Gary talked about with shortages of personnel things are just sort of dragging a little bit longer than we anticipated with some of these larger projects.

We are in touch with these DOT clients continuously, and they give us a lot of reason to be confident that it will indeed commence in the second half of this year.

All right. Thanks for taking the questions. I’ll turn it over.

Thanks, Aaron.

Thank you. Your next question comes from the line of Andy Wittman with Baird. Your line is open.

Great. Good morning. Thanks for taking my question guys. I guess, I just had a question here about -- Bruce you mentioned that like some of the multifamily award, it sounds like you've got the contract but there was like the developers are holding off and waiting for interest rates or something else to happen before you are able to get to work. So in a situation like that where you have the contract, but the job isn't moving yet you don't have the notice to proceed. Does that still wind up in backlog? Or do you need also the notice to proceed beautiful comfortable putting that in your backlog number?

So a little bit different in the multifamily world. You don't get the same big contract number. It generally comes in phases more so than like a single big contract with one notice to proceed. But our philosophy is when it's under contract and there is a reasonable determination that is going to proceed, it goes into backlog.

Got it. Okay. So given all of this and given your comments in the prior answer about just how things are taking a little bit longer, is it a fair assumption to think about the backlog that you are reporting this quarter is maybe extending out in time? Or do you think the burn rate will be consistent with historical averages?

I think there may be. On the long end of what is normally in the backlog, so you sort of figure that 70%, 80% of your backlog turns in a 12-month period, the rest of it turns a little longer. Maybe the turns a little longer, part turns a little longer than it normally than it otherwise was and that maybe there's a small portion of that current portion still turns within the 12 months but it might be a little bit later in the 12 months right now than previously. But I don't -- I mean it's delaying but we do continue to backfill with shorter-term projects that come and go out of backlog. So yes, there's probably a little bit of an extension there. I don't know that I would say, it's like -- okay, now it's two years as opposed to a year.

Yes. Okay. Appreciate that.

That's part of the reassessment of the second half of the year is okay, contemplating that there maybe a little bit of drag in that backlog.

Yes, that makes sense. I just thought, I would ask you to just comment on kind of your outlook for free cash flow this year Bruce. I don't know what you're thinking but I thought maybe a good form to kind of talk about what your expectations are on that end?

So everybody -- I talked to four people, I get five definitions of how they think about cash flow conversion and free cash flow. In the absolute sort of simplest sense is saying, well, adjusted EBITDA net of -- net of CapEx we're running in that 70% range on an adjusted EBITDA to cash flow. Things are going to get a little bit impacted this year by the change in the tax for us if you think about having to write a big advance of our taxes this year. So that's going to have a short-term negative impact on cash flow conversion from adjusted EBITDA because that portion of real money that goes out the door for tax is going to go up. But if you think about it on a GAAP basis not accounting for timing change, I think we're still consistent with where we are today going forward.

Got it. Okay. I’m going to leave it there. Thank you very much.

Thanks.

Thank you, Andy.

Thank you. Your next question comes from the line of Brent Thielman with DA Davidson. Your line is open.

Good morning, Brent.

Yes, thanks. Bruce, I guess hoping you could create maybe a little more of a bridge of the EBITDA this year versus last and some of the moving pieces within that? I mean if I kind of go back and tally up the deals you guys have done since the second quarter last year, it's around kind of $60-plus million in annualized net service billings but we're up $2.5 million in EBITDA from last year. So, I understand some of the moving pieces you've given from an organic perspective but maybe just around the EBITDA what's working against you and what's working for you? Because I would have thought we'd seen a bigger increase just in those deals.

Yes. I mean I think what's working against us is we're not hitting the revenue that we expected the labor force we have to be able to generate and that we our cost structure is designed for a higher revenue base and we are addressing how to optimize that cost structure in a somewhat adjusted revenue expectation. So I think that the answer is that we're a little out of whack on our conversion of labor to revenue and associated profitability.

Okay. And obviously there's an implied kind of back half ramp in EBITDA here and it seems like a lot of that – and correct me if I'm wrong is contingent on converting this sort of transportation awards or backlog being in August now is there any evidence in the business that's happening? Gary, I heard you give a couple of signals there but any other details that kind of give you confidence that that's going to convert here in the second half versus maybe pushing it.

Yes. I suggest it's slightly a little bit differently Brett that the revision in our outlook contemplates that we think there is some delay in revenue. And we do have a strong we have a strong base of business. We have a strong demand from clients a good backlog and we do feel that there is the reason we've adjusted to where we have is that that is visible to us at this point in time and believe that's achievable. We don't need additional cost structure to generate additional revenue. So we think we can – that the increase in pace in the second half with upside from some of the things that we think are scheduled a little later than we think coming in a little sooner than we think.

Okay. And just the last question is you've evolved the business here in the last few years and agree the diversity has benefited you in the long run. But it seems as though you are taking on larger sort of assignments. Does that mean we should sort of expect more lumpiness? Is that the new normal in the business? Or do you sort of consider these kind of isolated issues?

I think they are isolated issues that frankly may be – there may be a little more regularity to the isolation. We are growing. We are getting bigger. We are taking on bigger assignments. Impact to them can have bigger short-term effect. They can also – but they're also very productive in the long run to have. So I'm not sure I would call it the new normal it may be a little more extreme. But I think there is – in all honesty there is some likelihood that some bigger projects could have – and I think this period where we are transitioning there can be some more impact from them. We will get to the other side of that where there are enough of them and they are the norm and they really don't have effect. I think we're in that sort of growth spurt where they could for the short term have a little bit more visibility if that makes sense.

Okay. I’ll pass it on. Thank you.

Thank you. Your next question comes from the line of Alex Rygiel with B. Riley. Your line is now open.

Good morning, Alex.

Thanks. Good morning, Gary and Bruce.

Good morning, Alex.

A couple of quarters here. With the softness in our – good morning, guys. Sorry, with the softness in organic growth, are you seeing any pressure on billing rates? And any thoughts directionally on gross margin over the next couple of quarters?

We're not seeing pricing pressures downward. That's not been an issue that we're seeing in the marketplace.

And then I don't think this question really came up yet. Net service billing growth is up, kind of, 27% year-over-year. Your backlog growth is only up about 19%. So what do you think organic growth inside backlog is right now?

I'm only pausing because it's a little complicated in some respect it depends, sort of, set when it delivers at what point in the life cycle of an acquisition in terms of whether they're in their first year period or not from the way we think about it. There is -- I'm not exactly sure how to parse it out in terms of what organic growth is in backlog other than to say I expect that it's slightly consistent overall with our mid-single-digit organic growth rate.

Okay. Thank you.

Thanks, Alex.

Thank you. [Operator's Instructions] Your next question comes from the line of Jeff Martin with Roth MKM. Your line is now open.

Thanks.

Good morning, Jeff.

I wanted to drill down a little more on transportation segment. Those new awards are those existing markets? Are those new markets? And is funding the primary issue? Or are there other factors that are delaying the starts?

Not funding at all. That's really not the issue. And when you say new markets they're existing geographies. They're generally existing clients. Sometimes they are new services within the portfolio of things we do because the authorities are expanding the range of things that they're subcontracting and outsourcing. So we are continually adjacently expanding the capabilities in those markets.

Yes, I just reinforce what Bruce said the big contracts that were sitting tight to get notice to proceed on. They are in markets that we've been serving.

Okay. And then you've owned Surdex almost four months now. I know that's not a long time but just was curious if you could provide an update on one, integration and two, the ability to take their services across your business lines?

We're very pleased with the pace and progress and integration and also very pleased with some of the synergies even this early on. There's been a good bit of cross-selling. The folks are very excited about the cross-selling opportunities and I mean I'm hearing anecdotally that some of the folks that maybe have initial some reluctance to go to a new provider. That being ourselves are seeing successes and getting over that reluctance. So we're quite pleased with the prospect of synergies.

Great. And then one more, if I could. You mentioned a market focus and labor adjustments. Just was curious, if you could elaborate on that one. And two, what kind of time line -- do you anticipate that to be over?

Well, Jeff, we're looking at -- we want to be able to deliver improved margin by -- during the course of the rest of this year particularly fourth quarter would be evidenced we're not going through and making huge adjustments. It's assessing where we can be better at labor sharing as opposed to growing labor. It's looking around and deciding where we -- where and how we can optimize the -- what we call the revenue factor on our business units by addressing, how we utilize labor around the system.

Thank you.

Thank you. Your next question comes from the line of Aaron Spychalla with Craig Hallum. Your line is open.

Yeah. Hi, again. I just had one -- thank you. I just had one follow-up on guidance. Can you just talk about how you're thinking about the split between third and fourth quarter? Are you still trying to be somewhat conservative on 4Q just given some of the issues last year? And then maybe just a breakdown on organic growth in guidance. It seems like it might be kind of mid- to high single digits but just wanted to confirm.

Yeah. So I think at the moment we're kind of looking at the third and fourth quarter relatively ratably maybe a slight marginal higher third than fourth, but not dramatic certainly. As I look ahead kind of at year-end at the midpoint of the guidance and I think about on the pro forma as adjusted basis that we talked about in the call maybe in the 6% to 6% to 8% organic rate for the year. That's not going to tie to our actual revenue right because we're doing a sort of a pro forma basis but that's about mid-single digits.

Right. Okay. No, I think that's helpful to just kind of try to parse that out. Thanks for that.

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

Great. Thanks, Megan. Just to wrap-up, we've had a very successful run in our first three years as a public company. But that said, we are not going to rest on our laurels. We've got a lot of work to do to achieve our profitability and long-term organic growth goals. Rest assured that both operational excellence and organic growth are and will continue to be a primary focus for both myself and our entire leadership team. So I want to thank everybody for the participation in this morning's call. Good morning.

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