Earnings call transcript Q3 2022

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Operator

Good morning. My name is Nadia and I will be your conference operator today. At this time, I would like to welcome everyone to the Bowman Consulting Group Third Quarter 2022 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Instructions] [Operator

note statements the under Please are made many forward-looking considered federal that you. comments of today Thank securities laws.

the to these uncertainties not obligated in statements forward-looking those expressed, results statements. described Company's publicly Company the from with As is the SEC, to are differ subject could update numerous that and to and risks cause future filings these or revise

billing. non-GAAP today's call, and the financial certain information on discuss EBITDA such addition, In net will service adjusted as Company

this with and Company's and together to with at most find reconciliations can the You investors.bowman.com. SEC information, directly information website earnings the the on Company's the comparable X-K investor GAAP the release press filed

the questions or in they answer Replays be after Company's be of the Management will call questions remarks, on for on investor deliver will Q&A the the available but communications, attendees. taking will no prepared the webcast the may attendees live management call, from on be analysts. to website. post from will there which Throughout subsequent live public call research webcast

Bowman, your may begin prepared remarks. you Mr.

Gary Bowman

morning joined Good Bruce our I Chairman and am Chief CEO Officer. Bowman, everyone I Bowman Consulting to Nadia. by Group earnings third Gary you, Thank and Bowman. of call. this the morning quarter am XXXX welcome, Financial Labovitz,

many you everybody Bowman quarter added have all I for We’ve to yet and customers of Bowman as and want quarter to for our I start part the solutions by shareholders. to our at through delivering pleased another to employees thanking your exceptional of acquisitions team. am continued commitment to new record this

thank served many I Day, I as Bowman had is employees today a like would that also Veterans to recognize Veterans. who – to special Also

we are to business reflected indicators an our quarter, media. and concerns as strength experiencing hear clients of the continued the disconnect by in of we and the fourth performance in the apparent be our between in Given behavior quarter, the there so the momentum recessionary the far the key

net IPO, adopted a of strategic included what new we consider in high At with five talked gives time XX% be our us we in rates an acquisition XXXX rate five-fold again our in a growth of the defensive orders to XXXX. initiative, program compound investments size cautious year our internal initiatives, we’ve risk of XXXX. that $XXX which million and will managing see which the target we net of of about utilization growth growth the While and in a pace the a and approach million revenue growth trajectory to confidence to revenue results aggressive from combined growth when at organic and $XXX specific

August in, it million we plus QX acquisitions a M&A in teams years our pipeline. two currently were Nearly last ahead Since our a conference of by with call plans. integration closed the additional of stages the and busy. in bit are new We $XXX three at runrate various was end on opportunities

to to to engineering expanding Anchor transition Engineering while the solar harbor services, waterfront commitment our and underwater requirements. complex our infrastructure support also survey. skills portfolio demonstrates our ports infrastructure engineering added marine and adding finance energy practice continued SEI of energy and

provide capture from the while services also business the our and base bring value unique a They of which Spatial to cross-sell customers, certain Each growth. efficient of all grow our are we of data in our intend to reflects meaningful by And technologies proposition revenue. Bowman. demand value these and acquisitions collection then high Acuity in geospatial leveraging in reality enabling belief that

about to detail our Bruce? a Now financial your bit talk and I’ll taking let the to before me our call will turn who markets over questions. in discuss return Bruce results

Bruce Labovitz

you, Gary. Thank Great.

non-GAAP months three XX, to as to period refer refer discussing to quarter. net September such XXXX. I revenue. here financial presentation, and mean billing pleased to to the I be ended another record I the my will Throughout the XX, when When mean I XXXX as information September are we quarter refer ended year, last service and refer EBITDA which today We certain also I net

You reconciliations SEC the Day. since on information earnings this will closed find of Veterans GAAP in XX-Q, is and in direct most can comparable information yesterday’s be with filing together release we our in honor today Monday, to which the

revenue, we another EBITDA. net released of adjusted night, service Last and for quarter consecutive billing gross results record

continue exceptional third and pacing net acquisitions million in quarter, during quarter quarter organic rate the When annually. in are of of over normalize and the the growth fourth a deliver to billing the and closed we $XXX you service We XXXX acquisitive year-to-date. at

rational our call, closed so we year. optimism adjusted last and been for Gary EBITDA order quarter, the in for on acquisitions as indicated the net far guidance and experiencing next we believe year introduced raised we’ve trends suggests which since about guidance Based service and concurrently revenue XXXX, fourth

million $XX.X to Year-over-year Net quarter XX% $XX.X XX%. was Year-over-year for quarter revenue gross Gross for million. XX%. increased billing net organic was increased growth or the $XX.X the growth for $XX.X or million revenue to revenue million. XX% service organic

This basis of or X.X for $X.X net quarter share prior million margin QX quarter. to million compared for per fold EBITDA the is increase This adjusted which share as the compared XXXX. $X.XX points QX XXXX. million diluted. income XX.X%, and an is was Net per $X.X to EBITDA up Adjusted over to basic XXX% or $X.XX represents quarter increased as an the $X.X XXX

or $XXX.X was months organic growth nine revenue Turning revenue the organic gross revenue $XX.X $XXX to Year-over-year to XX, Year-over-year revenue million. to of XX%. net September growth or Net for XX% gross was XX.X million ended the XX%. year, the nine increased for for million. million months increased XXXX XX%

to year net adjusted up Net compared million. XX.X% increase XX% basic $XX.X prior an margin or income This basis and diluted. XXX which million last for four-fold $X.X Adjusted share the per is the or points year. is for increased a year to the $XX.X per of million EBITDA $X.XX $X.XX represents This over share year. was EBITDA

organic estimate – relatively increased approximately XX% the utilization of X% that suggesting rates, growth of of unchanged net inflation. in work of roughly headcount, on growth is non-acquisition growth is due to our a the gross inflation result the we – revenue Based to the XX% rate organic and core

margin the of basis net leverage for our year. in Gross this scale. as prior roughly to the the thesis quarter XX% of Overhead as year. XX%, regarding improvement for to quarter XX% the compared believe the efficiencies achieve through we demonstrates XX% We XXX points last can was operating compared was revenue,

transportation, XX% X% other and of markets, and XX% building revenue mining The utilities, the which XX% for gross power energy was distribution quarter water other resources, emerging services. includes transition roughly infrastructure, and

little dug that sale again to related uncertainty market aspects services Given possible. the end, around of quarter. of revenue revenue residential represented building for deeper the infrastructure total distribution market, as the into of for approximately gross give as much XX% To transparency certain we a market to the

the Again revenue emerging turning September building to ended roughly distribution year, months the XX, other XX% utilities XX% markets. was of nine gross and infrastructure, XXXX for power transportation, X% the and XX%

related of year-to-date. approximately residential services XX% revenue sale total gross For represented

be overall residential As of a respect we business, to to over sale component potential are consider weighted discussed for it on services call, we with future its our impact last do not while results. meaningful

increasing from and building gross revenue, to X%. reduced year, from the from XX% XX% markets emerging transportation infrastructure of have while to to During X% XX% X% we

While quarters. has a as it grown has next power trend reverse We declined revenue. and gross nominally, to percentage utilities few that marginally hope the of over

ratio as of in sheet cash remains million million with below well $XX approximately of September net $XX leverage strong balance a one. Our debt net XX, and

a financing acquisitions Our of notes is debt leases. rate fixed combination seller and from capital

our outstanding We outstanding excuse sheet revolver. balance no have balance BOA we no have – me, under

no carry we due have debt, escalating rate meaningful existing to to rate our exposure With increases. interest

in generated growth. capital. Before from result in million $XX just working operating after with is over because rapid million changes The in activities acquired receivable again capital, of accounts increased our activities organic principally changes capital we from operating and change the nearly working of working $XX

or increase XX% is of roughly or infrastructure, $XXX building transportation, X% as XX, $XX September power XX% million and XX, emerging an utilities a to Our and of compared backlog to September This as is million. Backlog XXXX other was million as $XX of XX% nine XXth compared of XX%, markets. increase comprised XX% month XXXX. and December

within In general, into XX-month we period. expect revenue roughly a turn XX% of backlog our to

$XX As we range guidance a and fiscal mentioned, XXXX of $XXX $XX our of million to with Gary increasing million. $XXX million billing are service in narrowing range for the to to adjusted EBITDA million net

growth. is fourth both November. result continuation last The of introducing raise recent guidance the from guidance This since our and issued of expected our organic of is increase outlook previously and XXXX acquisitions beat

represents and Growth million year a growth. for are introducing revenue existing clients projections to guidance XXXX an We from net million a expected million million. of $XXX $XX next EBITDA margin $XX range of adjusted net $XXX with XX%. result revenues, approximately and also discussions of This EBITDA to in fiscal is of adjusted

day in forecast. our issued. completed Future to acquisitions guidance impact Keep the accretive that guidance the an mind, of could have only as is been acquisitions includes have our

stock. to stock earnings released time plan yesterday up scheduled deemed respect address from used be $XX regularly to of to meeting, million. program our Finally, inefficiencies Meeting authorized Board market as our The after to connection is reasonable with repurchase a to in with time a

growth, remains both acquired investment top strategic and Our organic. priority for allocation capital in

on cash cash flow to We operations demands are meet we confident sufficient access from debt hand, potential to capital. for have that and all

consideration to equity offering, our equity of component continue we to current in as a execute intentions have a acquisitions. no use structured will While we

turn the I over to I'll on call wish the thank everyone to being for call and Gary. back

Gary Bowman

Bruce. Thanks, Okay.

to Now and including to relative our I markets address for and and moment of acquisitions. take allocation plans economy to capital positioning the general our want mergers state our a the

investment and our to built markets remains clients I I'll for customers. the demand the suggest in to sectors continue Signals overall. from the our most our demand start the environment industry's strong demand. that industry experience meet our for macro As Bottom-line an for our and in with infrastructure markets call, work capacity last is between did imbalance environment

rent In Housing been. and from third-party lots housing, demand mixed strong to to historical remained and perspective on demand a the builder ever developable billable remain low as homebuilders use residential or balance from includes developers. healthy are market, continues through for the relative for-sale as that sheets for they've directly and stock

and inventory the every multifamily positioned for for-sale dynamic. be have when creation developers will remain are a demand demand adapting conditions more active in revert models efforts of supply and their indication current we they projects mixed-use to and climate equilibrium normalized benefit and and to to reach Builders their

QX residential of goal our base. Overall, deconcentrating year-to-date. Bruce mentioned, in As from revenue clients revenues of infrastructure XX% to we building our represented our our realize beginning just XX% and for-sale revenue are within

incremental market in capturing traffic as and to revenue our for it within and grow mix. share increases provide Transportation engineering continues opportunity an concentration

our As have Through competitive too team expanded hiring, through grows size opportunity other commercial set and our credentials, has an acquisitions, traffic of roadway we both authorities. transportation in operators and developers, for with we deepened acquisition private transportation the enhanced municipalities, so does compete. nationally DOTs, which which transportation position and resulted the

several projects range transportation announcements traffic a made for new of recently We've services. regarding and

we We benefits the uptick early transportation to of extending assignments healthy foresee a transportation beginning in experience are and XXXX and into XXXX. the infrastructure in bill

ensure compete projects and extreme quasi/public and Demand values have customers. fortification evolve and public the larger resilience events weather longer-term gas support scale provisioning private to times of resources uninterrupted for contract and Recent to critical for increasingly to utility expand water of larger reinforce with the need larger initiatives to in services to power continues served electric for utilities and and the for. we

Power had with demand. expand and energy with and continues Our doing existing constructions. after Pike effect our a positive of electric we've profoundly to setting been Florida work efficiencies hurricane with Light high the and Reports rapidly Electric dangerous Florida life work clients recent new long-term in kind minimizing undergrounding work and served undergrounding on from and suggests &

results. work other which and and with and we're we're In great battery their and other our particular, energy emerging solar storage contributions potential of for infrastructure resources, pleased producers Our markets, we a wind wastewater transition, mining, water the marine as each refer operators markets for future has include alterative to doing to growth.

over infrastructure copper the support the spending fuel include an I transportation components. with focus you'll of addition, us unrestricted hear am other mining us the all sure about is that to our more quarters. today, area for planned mining few aggregates business, expand being and In next from

infrastructure to So say engineering. demand are of are overall, be offset while some pockets areas not are increasing for an are those what being it continues there weakness, be inactive by softening two more to than experienced we

labor, our and the to degree a force labor utilization. us our an the to our deliberate leverage and of maximize tenet to Turning our program. markets high serve affords M&A of required skillsets optimize opportunity between we remains of overlap fundamental This is

and continue recruiting invested employee We and efforts. to be engaged substantial with in retention

is tight, our increased in labor dividends. yes, but And manageable paying investment employee it's is engagement

voluntary influence and reduced our employees. a rate on and our attract increased the talented have turnover to very positive a professionals we company retain had public Being pursue. We with hiring has ability

we to grow as Bookings as also backlog book-to-burn note a acquisition. exclusive ratio This of to It's our with continue what of refer important to backlog book-to-burn in our is above can ratio by growth. sales revenue significantly evidenced be that's through along seen X. added that

at acquired revenue over of an deals multiple sizes, million all with adjusted our of EBITDA valuation valued annualized Xx we've under range. average of target inside varying active net Year-to-date, XXXX $XX estimates. remains pipeline M&A Our

few program. that million deals. But our $XX will close similar a size year-end laid recent year's to very And low probably happy with We expect in end hit we as of we'll somewhere by in We that acquisition result, acquisitions we're target up beginning on our out may $XX the this not million more the at year. be the to area. a

from price When closed an an X looking back annualized net growth XX% for alone in to We've roughly represents those purchase XXXX. average of X.Xx of a revenue the of that acquisitions multiple improvement at rate we approximately turn multiple. acquisitions generated

use to construction to geospatial find and three-dimensional operations. capture. XXX of scanners and moment high-definition commitment advanced technologies involves collect to on technology existing a conditions our or as Capture Reality help degree for laser take use will during reality such as the camera I Now and design, to focus built

data used measurement is control. accuracy What infrastructure progress speed to of technology selling commercial enhance to collection the the as and often tools referred for geospatial photographical to or support is project and

this The business and tremendous extend opportunity to technological capital. a about for future applications technology in construction the it advancements calls. our human present of utilization more of leveraging for geospatial excited very line engineering and We're to expect in this cover

Season. we've to to we deliver our I the everyone happy pleased closing, on a and our to continue to work work done proud shareholders. into Thanksgiving of forward I are wish I'm our In XXXX. continuing and commitments look Holiday healthy

to for to the Q&A Now I'm call turn the back going operator session.

Operator

Riley. Alex first Alex, to our ahead. And Instructions] goes [Operator question today please go Rygiel of B.

line is Your open.

Alexander Rygiel

Gary Thank Bruce, and you. morning, gentlemen. very, a nice very quarter. Good

Bruce Labovitz

Thank you, Alex.

Alexander Rygiel

quick Couple questions questions. quick here, couple

has reasons taking First, quarter. the organic you growth been current of fantastic, Can some talk Bowman is share? XX% in why the about

Gary Bowman

is Alex, they is I can't organic maybe we've from that. acquisitions. organic that one-third contributed of been would our to realizing. But growth I guess opportunities measure our with growth the synergies synergistic

Bruce Labovitz

of the think to limitations. be to the footprint that's multiple us from market the labor I ability allowed had constrained go as And scale have pockets we that national be and geographic configuration the grow grow nimble ability of that opportunities labor and afforded other way of we're and we in the not pockets the the we to size any stealing – this and share adaptability and creating providers. of after of for other by cover and to really very responsive workforce

Alexander Rygiel

That's helpful. And talked little kind of Very versus very, organic on driving – price what growth mix. you helpful. you about for volume then, the thank and is being metrics bit a very

relates to and to clearly, labor it a theory cost labor. price tight is obviously price As increased and of by that as inflation, market relates in driven it labor

pricing whether So program rise rates? or labor is the with number not up one, maybe can you keeping your in address,

end-markets? of of that we're seeing of how recessionary during number two, And what other is periods kind kind sort in like, sticky

Bruce Labovitz

Yes.

rates. So out daily isn't with interest on first costs. ongoing. I of thing fixed industry is our It's kind is think labor curve fluctuation that point like on a in doesn't commodity move to it to relative prices But pricing traded incrementally a the with relatively increasing in a

an to that's creep cost They occurred. certainly is we and We rate. think then a directly rate up meaning, clients. a is with labor inflation, charge the there kept sort and connected. not always there So opportunity are creep of have in of And likewise

it market little you constraint because ahead Sometimes in you're it. bit of sometimes and the a – is the advantage take labor feel of can

labor Sometimes the market. because understands – in labor has behind the you're constraint

We're in But cost the and they dynamic of a I think seeing that, little in inflation parts I a think the with that move bit. and the sort settling to together. with of little opportunity settle seems to business, bit. have of marketplace And settled our two a finding that likewise we're labor of the

that are they quick down, if labor our the coming don't will follow they or to is And enough rates clients cost that either that – necessarily cross. know lead if market we sense but

So you an dive that imbalance don't one below to the causes where have loss. you other see particularly

Alexander Rygiel

as And from ago, how impacted but of years be a revenue you clearly, shift? forward profit think here getting that mix into, might these your shifts of then of do even you're newer lastly, moving that little bit, markets your some in kind a by margin couple

Bruce Labovitz

but is there. gross – you we that when going where we're that one scale there's points between get tens over look another. our -- more it points than so know not going about And to distribution it's margins, over is of is so of to a at here to markets. fundamentally, So point premise here I take dominantly there's ever and be don't there, our and about revenue

sort as you to to would find market you that the a the and a of a we expands shift part anything transportation bit So as the us. gross We characteristic may just have percentage our I Gary, little becomes bigger probably see distribution to add? business. bigger think net. is want of thing you It's of dynamic of

Gary Bowman

covered all well. you've think covered and I

Bruce Labovitz

you. Thank

Gary Bowman

good I am a doing job.

Bruce Labovitz

the – time we that that some that could a becoming opportunity focused I for spent. see that, And that does mix on little Gary, because technology in of know on points more a provide couple don't geospatial do. of I the some leverage bit of – So, pervasive from it things some we we think work

the But larger, revenue of multipliers markets, a one are That's fundamentally, the consistent. bigger mix necessarily you not And we within get you a of people work business. the when The efficiencies the sort get and of contracts. how are – generally people longer-term the the is do mix is constituted. a but other

Alexander Rygiel

helpful. luck. Very much. Good you very Thank

Bruce Labovitz

Alex. Thanks,

Gary Bowman

Alex. Thanks,

Operator

question Davidson. Brent, Thielman Thank ahead. go you. And Please Brent of to D.A. next goes the

Your line is open.

Brent Thielman

Hey, on quarter. great. Thanks. Congrats a great

Gary Bowman

Thanks, back. Good you Brent. see come to

Brent Thielman

first the on suggests guess, XXXX. I basis reflective XXX bookings of point Is EBITDA contracts? that new of assuming margin improving question, Are outlook better sort leverage terms the XXXX simply the your ability to in SG&A? you over your and improvement around in

increase I imagine in you're margin could the degree. around talk is and know maybe and rising your I leveraging to cost in year. that next that labor you some But just

Bruce Labovitz

size Yes. spent from in – and years time of infrastructure around that lot money to – the infrastructure Principally, M&A it we comes build that of a and had a and an we integration, energy scale because grown the all dealing We've support with and X.X that. over Brent, last building the we bigger going would I top much to to public realization realizing too had over-support line. with size the the say SG&A

fees from, I we – think, our be a some spread between don't scale. I and do building. that overhead channels that say, of I that overly the is technology the the increase labor in think that next about said weighted start principally, a it's over of and bit margin. would with of realize we're believe margin going year. of think to But We little some benefit leveraged gross to had to are I We there – it's as

Brent Thielman

to can Okay. million much on think existing acquisition require? midpoint your drive have about does talent how this, revenue of to what of from And that? the out you're mean going call when and resources, workforce guidance, increase $XX to you I do kind extract on it, more in the existing you versus kind the at utilization go pull this

Gary Bowman

talent Brent, it's being very we the recruiting are market. successful – in

it's stretched. recognizing adding we is this are our like we everybody, – So workforce working are workforce. not is more – and really we our stretch everybody are successfully not to But by hard continuing to

Brent Thielman

Okay.

of flow you similar Bruce? you this suggests sort fourth similar mean, then, EBITDA of see conversion think And you this I can cash do the guidance lot into quarter. of generated quarter. quarter, Okay. the levels I of a free mean, cash a level

Bruce Labovitz

Yes, I do.

– cash that I think of path we coming is are flow where starting through. the to hit glide the

We change capital. on a the focusing working lot in sort are pre of

organic rates that As a a if we're on it basis. lot producing almost the about ourselves acquisitions we as are think consuming regular in making of growth because we're cash

seen growth, that going the But bottom we've line of of it's straight it's look still, turn know but I that improvement. on And the path over the to going that if at don't up, a you to improving. trend certainly continue year,

Brent Thielman

lot Okay. the And about hear then around in where on I'm are and But the of projects what just developed. and building the sort large business being of a infrastructure, around you informed discussion backlog that underlying industry facilities industrial non-residential sort curious going. of Gary, markets

business am I more just becoming meaningful if driver the a now. of wondering much that's

now? be if Just segment. that What's growth right into the you dive business driving curious could

Gary Bowman

at numbers. time not listening. so past outlook in driven lot stands, looking And it's a months where being several the out people of - to It's field, talking much just on in that the my the spending been

increased industrial softening retail share as of seeing We're our a which infrastructure, data infrastructure. any building in Our markets, share commercial has type markets. centers, building distribution is facilities of the not commercial

we're so residential in seeing our many markets. far, And not of softening

seeing residential in some softening out some significant West. markets are We

moving around. one commercial that markets mentioned, comments other. markets think the We're So everybody the fungible of residential his a sensitive I Bruce to we and easily, work Bruce in of our staff and are – we is and pretty is aware that to – it. talents

much. so together work finish I and each Bruce We other's sentences.

that. of we're staying getting, we're ahead So

we're staying ahead that. of far, So

We to where are that's sensitive headed. certainly

Brent Thielman

Okay.

targets. own how does sort that deals where maybe the is your or acquisition you buyback allocation authorized priorities right to and guess right and from go out the term now? that of cheaper reasoning now more your stock me. Sorry, near in a and buy sort just capital sort that's would at me It around our can than finding been doing inform you're I message of of seem one

Bruce Labovitz

is is Yes. than offensive. more program defensive it the Brent,

committed We up in to deploying acquisition acquisitions. are not to active growing through desk still into -- and capital good don't market. setting a the trading we're We be

extent there's the It's really that and to message that send a Board existing be our there will the the we of shareholders' market, volatility future in there. an to we and as stock relative stock the stock believe prospective the that the a the in understands understands valuation undervalued says the that market was that inefficiency the price the in in is to highly the and of yesterday in message to of shares want meeting that

in have grow to of are what But impact of future acquisitions around they – that to the very potential we world on us. value still allocation in ideal sort much be the capital terms a exponential focused add

I want or opportunity message to communicating have get So in. event in to market. – is But and the and confidence turned be our away our from right message capital the needed the don't to we willingness – the that we're needed we're step -- allocate we that out that toward to growth that the focus

Brent Thielman

right. Thank All appreciate Okay. I it you. guys.

Bruce Labovitz

Brent. Thanks.

Operator

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

Gary Bowman

to to morning, investors thanks thanks in for good our everybody, faith call everybody. this Thanks, you us for and our showing participating especially Nadia, the wish everybody, Thanks, continue morning. and

Operator

now concludes today's Thank call. for all you. conference you This Thank joining.

lines. may You your now disconnect

Bowman Consulting (BWMN) 11 Nov 222022 Q3 Earnings call transcript