Bowman Consulting Group Ltd. (Nasdaq: BWMN) (“Bowman” or the “Company”), a national engineering and infrastructure services firm supporting owners and developers of the built environment, today released financial results for the fiscal year ended December 31, 2023.

“This past year we surpassed $300 million in net service billing representing nearly 30% year-over-year growth and approximately 31% compound annual growth since 2020, the year before our May 2021 initial public offering,” said Gary Bowman, Chairman and CEO of Bowman. “We remain focused on becoming one of the 50 largest domestic engineering firms and are continually working to optimize the utilization of our resources as we advance toward this goal. Our pipeline of opportunities, including both new and existing customer assignments and prospective acquisitions, is healthy, and the significant public funding available for infrastructure projects provides a positive outlook for the future.”

“During 2023 we completed 11 acquisitions representing approximately $60 million in annualized net service billing,” continued Bowman. “We added new customers and grew our relationships with existing customers while expanding our geographic footprint and increasing our ability to gain both market-share and wallet-share through the introduction of adjacent service offerings and leading-edge geospatial solutions. We remain committed to our fully integrated operating model as we continue to weave together a diverse mix of acquired organizations into one common culture. We are confident about our long-term prospects and believe our approach to growth will continue to deliver shareholder value.”

Financial highlights for the three months ended December 31, 2023, compared to December 31, 2022:

• Gross contract revenue of $93.0 million, compared to $75.6 million, a 23% increase
• Year-over-year organic gross contract revenue growth¹ of 6%
• Net service billing² of $80.5 million, compared to $66.2 million, a 22% increase
• Year-over-year organic net service billing growth of 4%
• Net loss of $7.7 million, compared to net income of $0.5 million
• Adjusted EBITDA² of $11.2 million, compared to $9.4 million, a 19% increase
• Adjusted EBITDA margin, net ² of 14.0% compared to 14.2%, a 20 bps decrease
• Gross backlog² of $306 million, compared to $243 million, a 26% increase

Financial highlights for fiscal year 2023, compared to fiscal year 2022:

• Gross contract revenue of $346.3 million, compared to $261.7 million, a 32% increase
• Year-over-year organic gross contract revenue growth¹ of 21%
• Net service billing² of $304.0 million, compared to $235.2 million, a 29% increase
• Year-over-year organic net service billing growth of 18%
• Net loss of $6.6 million, compared to a net income of $5.0 million
• Adjusted EBITDA² of $47.0 million, compared to $34.0 million, a 38% increase
• Adjusted EBITDA margin, net ² of 15.5% compared to 14.5%, a 100 bps increase

Impact of IRC Section 174 Research & Development Tax Expense Deductibility

The Tax Cuts and Jobs Act (“TCJA”) drastically altered IRC Section 174 and the treatment of Research and Experimental (“R&E”) expenditures for tax years beginning after December 31, 2021. Prior to this alteration, under IRC Sec. 174 businesses were permitted to deduct the full amount of R&E expenditures as an expense in the taxable year in which they were incurred. As amended, IRC Sec. 174 eliminated the ability for U.S. businesses to deduct their R&E expenditures as an expense, instead requiring businesses to capitalize these expenses and amortize them over a period of five years resulting in acceleration of tax remittance. The Company maintains an uncertain tax position (“UTP”) with respect to its position that its R&E expenses are not subject to the altered IRC Sec. 174 treatment based on specific facts and circumstances. The Company’s tax expense for the three months ended December 31, 2023 and full-year 2023 include a $4.6 million accrual relating to the UTP and the Company is carrying approximately $38 million of associated deferred tax assets. On January 31, 2024, the US House of Representatives passed HR 7024, the Tax Relief for American Families and Workers Act of 2024, on a bi-partisan basis, which, among other things, restores U.S. taxpayers’ ability to deduct currently, and retroactively, domestic R&E costs paid or incurred in tax years beginning after December 31, 2021, and before January 1, 2026. If HR 7024 is adopted by the U.S. Senate and the President, the Company would reverse its UTP related liability, tax expense and deferred tax assets.

Activity Under Stock Repurchase Program:

In November 2022, the Company's Board of Directors authorized a stock repurchase program ("2022 Stock Repurchase Program") to repurchase up to $10.0 million of the Company’s common stock. As previously disclosed, during the twelve months ended December 31, 2023 the Company repurchased a total of 28,704 shares of its common stock at an average price of $25.94. The 2022 Stock Repurchase Program expired on November 10, 2023. On November 17, 2023, the Company’s Board of Directors authorized a new $10.0 million repurchase program ("2023 Stock Repurchase Program"). As of March 11, 2024, the Company has $10.0 million remaining under the 2023 Stock Repurchase Program.

Non-GAAP Adjusted Earnings per Share:

In connection with the release of financial results for the three and nine months ended September 30, 2023, the Company introduced the new non-GAAP financial metric of adjusted earnings per share (“Adjusted EPS”). To calculate Adjusted EPS, the Company adds back non-reoccurring expenses specific to acquisitions, non-cash stock compensation expense associated with pre-IPO grants, and other expenses not in the ordinary course of business. With respect to the elimination of any non-cash stock compensation expense, the Company computes an adjusted tax expense or benefit which accounts for the elimination of any periodic windfall or shortfall tax effects resulting from the difference between grant date fair value and vest date value. With respect to all other eliminations, the Company applies its average marginal statutory tax rate, currently 25.6%, to derive the tax adjustment associated with the elimination of these expenses. A reconciliation of non-GAAP Adjusted EPS to GAAP EPS, both basic and diluted, is included with this press release for reference.

For the three months ended December 31, 2023, compared to December 31, 2022:

• Basic Adjusted EPS was $0.33 compared to $0.44
• Diluted Adjusted EPS was $0.31 compared to $0.41

For the twelve months ended December 31, 2023, compared to December 31, 2022:

• Basic Adjusted EPS was $1.12 compared to $1.46
• Diluted Adjusted EPS was $1.03 compared to $1.36

Updating FY 2024 Guidance

The Company is adjusting its full year 2024 outlook for net service billing² to be in the range of $363 to $378 million and Adjusted EBITDA² in the range of $59 to $65 million. The current outlook for 2024 is based on completed acquisitions as of the date of this release and does not include contributions from any future acquisitions. Management discusses the Company’s acquisition pipeline and its prospective impact during regularly scheduled earnings calls.

“Our 2024 forecast assumes uneven growth in net service billing from first to third quarter with an accommodation for a modest seasonal impact during the fourth quarter,” said Bruce Labovitz, Chief Financial Officer at Bowman. “Generally speaking, we have found that it can take acquisitions a couple of months to return to normal net service billing levels due to the unusual demands of immediate post-closing integration. We reiterate that when acquisitions are added to guidance, we include a pro-rated amount of announced annualized net service billing run rate that is based on the timing of closing and anticipated integration related revenue disruptions.”

Q4 2023 Earnings Webcast

Bowman will host an earnings webcast to discuss the results of the quarter as follows:

Date: March 12, 2024

Time: 9:00 a.m. Eastern Time

Hosts: Gary Bowman, Chairman and CEO and Bruce Labovitz, Chief Financial Officer

Where: http://investors.bowman.com

About Bowman Consulting Group Ltd.

Headquartered in Reston, Virginia, Bowman is a national engineering services firm delivering infrastructure solutions to customers who own, develop, and maintain the built environment. With over 2,000 employees and more than 90 offices throughout the United States, Bowman provides a variety of planning, engineering, geospatial, construction management, commissioning, environmental consulting, land procurement and other technical services to customers operating in a diverse set of regulated end markets. Bowman trades on the Nasdaq under the symbol BWMN. For more information, visit bowman.com or investors.bowman.com.

Forward-Looking Statements

This press release may contain “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. All statements contained in this press release other than statements of historical fact, including statements regarding our future results of operations and financial position, business strategy and plans and objectives for future operations, are forward-looking statements and represent our views as of the date of this press release. The words “anticipate”, “believe”, “continue”, “estimate”, “expect”, “intend”, “may”, “will”, “goal” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives and financial needs, These forward-looking statements are subject to several assumptions and risks and uncertainties, many of which involve factors or circumstances that are beyond our control that could affect our financial results. The Company cautions that these statements are qualified by important factors that could cause actual results to differ materially from those reflected by the forward-looking statements contained in this news release. Such factors include: (a) changes in demand from the local and state government and private clients that we serve; (b) general economic conditions, nationally and globally, and their effect on the market for our services; (c) competitive pressures and trends in our industry and our ability to successfully compete with our competitors; (d) changes in laws, regulations, or policies; and (e) the “Risk Factors” set forth in the Company’s most recent SEC filings. Considering these risks, uncertainties and assumptions, the future events and trends discussed in this press release may not occur and actual results could differ materially and adversely from those anticipates or implied in any forward-looking statements. Except as required by law, we are under no obligation to update these forward-looking statements after the date of this press release, or to update the reasons if actual results differ materially from those anticipated in the forward-looking statements.

Non-GAAP Financial Measures and Other Key Metrics

We supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, with certain non-GAAP financial measures, as described below, to help represent, explain, and understand our operating performance. These non-GAAP financial measures may be different than similarly referenced measures used by other companies. The non-GAAP measures are intended to enhance investors’ overall understanding and evaluation of our financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. We present these non-GAAP financial measures to assist investors in seeing our financial performance in a manner more aligned with management’s view and believe these measures provide additional tools by which investors can evaluate our core financial performance over multiple periods relative to other companies in our industry. Reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the financial tables accompanying this press release.

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