Q1 2021 Bowman Consulting Group Ltd Earnings Call
Commercial and industrial municipal and other institutional customers as well as mixed Houston residential developments, we refer to these as the communities homes and buildings market.
And the residential Submarket and saw a significant increase and work relating to build for rent and single family. Construction. We initially serve this market and Arizona as we gain more experience and the nuances and this space. We have expanded our reach and work on these types of projects and Texas, Florida and other southeast markets.
Changing demographics and renewed consumer interest and living and a single family home has expanded this market, we see tremendous opportunity here.
Not to say that the traditional wholesale homebuilding market has tailed off at all.
During the first quarter, we were extremely busy supporting continued plans of our homebuilder customers replenish their inventories of buildable lots.
On the commercial truck datacenter and quick service restaurant customers continued to contribute to growth and our communities loans and building market long standing customers, such as Chipotle and circle K and we're extremely accurate, yes service billing it nearly doubled from a year ago.
Being based on Virginia, having been here for 25 years, we are well known and Loudoun County, Virginia, which is often referred to as the data center capital of the U S.
And all our data center or continue to grow nationally during the fourth quarter, our growth in Loudoun County, and the surrounding areas outpaced other markets.
Both the transportation and power and utilities market saw small decreases in revenue compared to the pre pandemic first quarter of last year.
And not unusual to see quarterly fluctuations and revenue relating to projects and the sector.
We believe this was due primarily to project timing and weather as the health of these markets and our ability to grow within them remains strong.
Some notable accomplishments and transportation and include our first ever engagement with the New Jersey Transit Authority and <unk>.
Additionally, through our leadership team with Paul <unk>, who was previously the Chief Engineering Officer of the Illinois, Tollway Authority and our selection for a significant multi year construction management and Engineering project Cook County, Illinois, and keep you updated as that large project develops.
And the power and utilities market, our gas pipeline work and Chicago picked up substantially during the quarter and continuing to grow.
And so at somewhat by a slowdown and our pipeline work and Arizona.
And we're not concerned about the slowdown in Arizona as we believe that work will pick back up as the year progresses are.
Our revenue from pipeline and identification work in Ohio and <unk>.
Notably impacted by weather during the first quarter, but we expect that project to continue the anticipated over the remainder of the year.
The Florida underground and project, a pilot projects, which are being refined and on ongoing basis by a sponsor was down and the first quarter as compared to last year with project involves face to face interaction the per obviously impacted by Covid.
And we're committed and this engagement, adding work been working closely with our customer optimize our staffing and this project.
And we remain confident that will be meaningful part of our power and utility revenue this year.
Emerging markets, which include mining water resources and energy efficiency and energy transition is continuing to gain traction on <unk>.
Water resources business has been robust.
Presents a meaningful opportunity for growth and <unk>.
Our substantial project working with the South Florida Water management district on a 6700 acres storm water reservoir. We also began work for a pilot and utility system asset management program per town around Hill, which using some unique technology tools.
And the energy space, we're excited about the initiation level small relationship with Tesla and I look forward to seeing how that develops our work with Samsung renewables is expanding and Ohio, the capacity and we're securing significant opportunities and utility scale battery storage.
The addition on a micro Ginsburg, who I mentioned earlier has been a catalyst for growth and this market as well.
And now ill turn things over to Bruce to walk you through the results of the first quarter.
Great. Thanks, Gary.
Happy to be with you today to discuss a very positive quarter.
<unk> operations for the quarter, along with the supporting tables and non-GAAP. Reconciliations are included in the earnings release, we issued yesterday.
On May 6 we price our initial public offering of $3 million 690000 shares at $14 per share.
On June 4 the underwriters exercised their over allotment option for an additional 115925 shares.
Proceeds of the offering totaled $53 million with the company and receiving around $49 million after discounts and commission.
None of that IPO activity is reflected as of March 31.
But the money is now on the bank, we have roughly $38 million of cash reserves with full access to our $17 million revolving credit line.
We believe we have sufficient capital to fund, our near and mid term growth plans.
Based on the timing of our IPO our S..1 our S..1 filings presented audited full fiscal year results only and we have not previously reported quarterly results against which we will be comparing 2021 quarters.
And it makes the first 3 quarters of this year unique and that the public has seen 2 sets of quarterly results and first time each quarter.
The first quarter got 2021 off to a great start.
Gross revenue increased 11, 2% to $31.8 million a.
A single quarter company record.
Organic revenue for the quarter was $29.9 million and acquired revenue was $1.9 million.
Our practice will be to report acquired revenue separate from organic revenue for a period of 12 months post closing.
With 17% growth to $28.9 million increases and net service billing outpaced increases in gross revenue and as a percentage of gross billings increased 7 percentage points to 91%.
And the increase and net billing as a percentage of growth revenue is primarily due to a higher concentration of revenue from community homes and buildings this quarter at 66% of our gross revenue.
Okay.
With respect to revenue I want to take a moment to remind everyone that none of our revenue is derived from general contracting activity. As a result, we have no bonding obligations with no exposure to construction materials cost fluctuation.
We work with customers on a fixed fee and hourly basis. When we talk about fixed fee assignments. Our exposure is generally limited to the hours. It takes our employees to complete a discrete task.
During the quarter approximately 70% of our gross revenue was associated with fixed fee assignments and 30% with hourly assignments.
Fixed fee assignments at market prices provide us and ability to improve profitability through experience and efficiency.
Fixed fee assignments also had the advantage of qualifying for research and development tax credit.
For revenue recognition purposes under ASC 606, however, all mixed fee contracts are classified as fixed fee, which is which sometimes skews the ratio of fixed fee and hourly contracts and our financial footnotes.
Adjusted EBITDA increased 157% to $4.1 million for the first quarter as compared to $1.6 million for the first quarter of 2020, and adjusted EBITDA margin net more than doubled to 14, 2%.
For the 3 months ended March 31, 2021, adjusted EBITDA includes and add back of $1.1 million and noncash stock comp and expenses stock compensation expenses, there were no other add backs.
Adjusted EBITDA for the first quarter of 2020 included the elimination of a noncash stock comp benefit that had.
Fit of lowering adjusted EBITDA.
Benefit is the result of a reduction and our liability to common stock subject to repurchase during Q1 'twenty.
And without getting too much into the accounting needs our periodic liability to common stock subject to repurchase was based on the net present value of financing obligations, we would have been subject to and the event certain redemption obligations have been triggered <unk>.
The reduction and the liability during Q1.2020 and the associated benefit.
And primarily from a reduction in interest rates that reduced the net present value of and otherwise unchanged liability.
This was a 1 off phenomenon and that quarter.
Gross margin net excluding depreciation and amortization was 54, 4% on net revenue and SG&A expense was 44% of net billing.
These are both improvements over first quarter and fiscal 2020 as a whole did.
Depreciation and amortization increased to $1.5 million almost entirely because of the refinancing of our operating leases to capital leases and September of last year.
This level of depreciation and amortization is representative of future expenses.
As Gary mentioned, we closed on the <unk> acquisition in early January.
Inclusive of working capital, we anticipated would be required post acquisition.
Purchase price was estimated to be a 5 times multiple of adjusted EBITDA.
We have not finalized the purchase price accounting, yet, but you will see a preliminary allocation and the 10-Q once it is filed early next week.
The <unk> acquisition and the IPO had a meaningful effect on our cash consumption this quarter.
We did not purchase their accounts receivable or other current assets from <unk> and as such used cash while waiting for the new kpa billing to turn into cash.
During the quarter, we added $1.2 million with new inventory to our capital lease facilities and ended the quarter with $500000 of inventory pending refinance from our leasing company.
We make every effort to limit the amount of fixed asset inventory and pass those through our books, but on certain occasions repurchase equipment directly before offloading it to our recent partners.
Our cash Capex for the quarter was about 100000.
With total capex related to spending was approximately $1.8 million.
Backlog on March 31, 2021 was $116 million up from $113 million at year end.
The composition of backlog on March 31, 2021, with approximately 44% community homes and buildings.
21% transportation.
29% power and utilities and 6% emerging markets.
This is roughly in line with the composition of backlog at year end and should not be construed as indicative of where we expect to see distributions of 2021 of them.
Our revolving line of credit with Bank of America is due for renewal in January.
As of now there's no outstanding balance under the loan so the renewal presents no liquidity risk.
We are confident we will achieve a favorable renewal prior to the lines exploration.
And finally and consistent with prior direction I'll reiterate that we plan to commence issuing guidance in connection with our second quarter earnings release in August.
As such we will not be providing any specific forecast and connection with this call.
Thank you and I'll now turn the call back over to Gary.
Great. Thanks Bruce.
Before we open the floor to questions I'd like to take a talk a few minutes about the current space on the business post IPO.
And May we announced the hiring of tims on to lead our M&A efforts. We're pleased to have and executive teams caliber join us at this critical phase of the company's development.
Acquisitions are a key component of our growth and diversification strategy moving forward and.
And as we discussed previously we're focused on are relatively small and strategic acquisitions, where we can expand our capabilities are entering or enter attractive metro markets, where we can retain the talent, we acquire and where we can achieve revenue synergies by layering on cross selling opportunity to drive further growth.
Additionally, our strategy to identify targets that align with our culture and rapid integration and rebranding rendering the acquired company's operations fully consolidated into our full year.
With the capital that we raised and the IPO and the pipeline of opportunities that we're evaluating we're excited about moving forward and bringing deals and finish line I remain confident that we will not disappoint and when it comes to our goals for acquisitive growth.
With respect to our second quarter operational performance and momentum that we experienced in the first quarter has carried over.
We believe we will continue to deliver results are in line with our expectations for the quarter.
Demand for our services is as high as I've seen it and a long time and bookings of new work or on a record setting pace.
In conclusion, and the entire Bowman team is energized by the success of our IPO.
By the acquisition of <unk> and by the return of in person collaboration.
The year is shaping up to be a successful 1 and a long term futures price.
Look forward to our continuing dialogue and to delivering value to our shareholders.
And now open the call to questions.
At this time I would like to remind everyone and order to ask a question.
And then the number 1 on your telephone keypad.
And that's for just a moment chicken Paul the Q&A roster.
Your first question comes from the line of Brent Thielman with D. A Davidson your line is open.
Thank you and good morning, Gary and Bruce Congrats on a strong start.
Thanks Brent.
Maybe on the transportation and power utilities groups it sounds like some other factors.
That weighed on the quarter, we're sort of timing and transitory could you just talk about maybe the level and some new bid that business activity and those sectors and.
And the outlook for the rest of the year and what the pipeline looks like for sort of new programmatic kind of a multiyear contracts and you all talked about.
Yes, Brett on.
On the Youre right previously.
And the comparison.
The ups and downs or transitory.
And in transportation, we have.
And second.
And we're looking over the course of the past several months some really good opportunities we landed for some program programmatic work the long term recurring revenue type work.
Actually up and Illinois.
And the utilities market.
And who you work down in Florida with the underground and is really picking up.
And over year for the second half of the year.
And we're working on Ohio.
The pipeline and location work picking up well so the activity has been strong program and programmatic work and both those areas and the transportation section and particular, Brexit and the lead time is a little bit longer than some of the other sectors and so we are seeing.
Lot of activity on that on the leading edge of work to be done meaning.
Proposals approved and and in place and then there's always some some bureaucratic process to to getting those 2 contract and conclusion, but.
The tailwind and that market is strong the infrastructure build.
<unk> is going on and Congress will go on.
Ultimately, we believe that.
The need for spending.
And has been evidenced by the activity that we've seen and that market and the availability of funding for that market is likewise evidenced by.
The amount of.
Demand for services there.
Okay I appreciate that and then that the commercial industrial sector within communities homes and buildings had been pretty good for you in 2020, despite the effects of the pandemic.
Do you see today, because I imagine clients with steel.
Even more comfortable now deploying capital towards new projects.
Okay.
And I would almost chips and repeat what you said I would say.
Seeing EBIT more confidence.
Even even stronger indications of growth throughout the year, evidenced by our new bookings and those areas a lot of the K Ta work falls into that commercial category and certainly the return to work.
And positioned ourselves to be and a to b and in a position to.
To provide services to their return to work and demand.
And that is a burgeoning economies.
And they are busy as ever answered on their phones, and and doing air filtration and and other related types of projects.
Okay, and then could you talk about some of the objective and the National energy transition services practice just curious.
And where you tend to take that and where you're focused.
Yes.
Our 2 areas of focus that we are involved in right now photovoltaic solar.
3 years photovoltaic solar wind and utility scale battery storage.
Utility scale battery storage is an area, where we are seeing some great synergies with the addition of Tpa.
Some clients, where we've landed.
Who are traditional civil engineering and survey and services and now we're layering on the electrical engineering services to provide more full service.
Micro Ginsberg.
Our new Vice President of energy transition.
And he's a thought leader and green hydrogen and.
And solar desalination, so while we have.
No.
Activity in those areas at this time.
Those are for cutting edge energy transition areas that Michael as a thought leader.
We look forward to exploring those areas and takes those are markets with tremendous opportunity and future.
Okay, and just lastly, Bruce I think you mentioned 5 times for <unk>, and maybe just refresh us on and a range of multiples you're seeing out there and the acquisition.
Pipeline today.
Yes, so it's a little bit on all over the board you are seeing.
The ones that are making the list the ones that are and are in our sweet spot are generally going to be in that range and I know there may be a plus 1 and there may be.
On the -1 on that.
And we're disciplined and what we're looking for and and.
And while we may stretch that a little bit for the right opportunity.
And that's that's for the sites that we're looking at and.
And.
And the universe of companies that are of interest to us today.
We think it will be and that.
<unk>, 4% to 7 with 5 and fixes and being in the sweet spot.
Okay, great. Thank you I'll pass it on.
Okay happy to have it.
Come back on if something else coming upfront.
Again, if you would like to ask a question press star.
And then the number 1 on your telephone keypad.
Your next question comes from the line of Alex Rygiel with B Riley Your line is open.
Good morning, Gary and Bruce and congratulations on your first conference call here.
Thanks, Alex.
A couple of quick questions.
First the residential market has been strong for you all and strong in general.
And it does seem like some homebuilders have been pulling back some at least their stocks and pulled back a bit here on concerns about homebuyer traffic and near term.
Have you seen a homebuilder and development or land development activity.
The pace of activity change at all and if so when and what direction.
It says as strong as ever so we do not see a turn back.
And we've.
And with me.
And for homebuilders.
Okay.
And if they're reacting to traffic and lead time for what we do is so long.
It takes a long time for them to.
The change direction on developing.
The pipeline of buildable lots.
So we're seeing the demand for our services and.
Getting buildable, Australia as strong as other.
And if there's any recurring vision, we have from the long history of the company, it's about the homebuilding cycles and I think.
There's a lot of institutional.
Understanding of those here when you look at AD inventory levels of lots not homes that we care about so much inventory of lots and it was such a pullback over the last 10 years.
On that debt homebuilders are as active as ever trying to secure forward inventory and thats a slice of that market we play in.
It's very helpful. And then understanding you have no exposure to building materials have you seen any other customers change their scope of work.
The transitory rise and building material costs.
We have we have not and.
And.
And we certainly hear it anecdotally, we read about it and we know our customers are affected by it.
It doesn't change their procurement activities for our third.
And then lastly, more to you Bruce adjusted EBITDA margins of 14% was very strong and better than last year at 13, 5% and better than 2019 at 13, 5% can you talk about.
Directionally EBITDA margins over the next couple of quarters and over the next couple of years, and where you think theyre going to be sort of settling out on a normalized basis.
Sure so without without providing any any official guidance anything going forward and everything to every every bit of this answer we're just going to be off.
And what we're thinking and the moment.
The margin expanded part of it is as I talked about has to do with the composition of revenue in any given quarter, where where revenue was 91 net revenue was 91% of gross revenue.
If youre thinking about growth and Thats, 1 thing, but when we talk about net debt doesn't really affect that.
Doesn't really affect us at office.
And we're talking about EBITDA margins net sales so forget about that part of the answer there for a second.
I think 14 and is a good the good place for US now, we certainly think that there is upward.
Mobility and in that margin over time as we as we achieve scale.
And as we're able to lever some of our overhead.
So I think that.
Some of our peers are in the high teens and maybe even have a 2 handle.
And on it I think that we can certainly approach that and we would not expect that this year, maybe not even early next year, but as we get into.
And the 2023 world.
And that's what our aspirational goal.
Very helpful. Thank you very much.
Okay.
There are no further questions at this time, Mr Bowman and Mr. <unk> I turn the call back over to you.
Thank you operator, and thank everyone for participating this morning.
Thanks for the analysts for.
Good insightful questions and.
And looking forward to be back on the next call Bruce Yes. This will be a short term for us between now and our next conference call with true. It should we will announce scheduling for shortly and should be in early August.
So with that we thank everybody for your participation and look forward to follow up conversations.
We certainly feel free to pay us and.
And with any questions.
<unk>.
As you read through our disclosures.
On a great day.
This concludes today's conference call you may now disconnect.
Yes.
And.
[music].
And.
[music].