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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_____________________________________________
FORM 10-Q
_____________________________________________
(Mark One)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024
OR
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 001-40371
_____________________________________________
BOWMAN CONSULTING GROUP LTD.
(Exact Name of Registrant as Specified in its Charter)
_____________________________________________
Delaware54-1762351
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
12355 Sunrise Valley Drive, Suite 520
Reston, Virginia
20191
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code: (703) 464-1000
_____________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
Symbol(s)
Name of each exchange on which registered
Common Stock, $0.01 par valueBWMN
The Nasdaq Global Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated fileroAccelerated filerx
Non-accelerated fileroSmaller reporting companyo
Emerging growth companyx 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of May 7, 2024, the registrant had 17,666,531 shares of common stock outstanding.


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Page
 
i

Table of Contents
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
1

Table of Contents
BOWMAN CONSULTING GROUP LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands except per share data)
March 31,
2024
December 31,
2023
(Unaudited)
ASSETS
Current Assets
Cash and equivalents$11,673 $20,687 
Accounts receivable, net95,975 87,565 
Contract assets36,673 33,520 
Notes receivable - officers, employees, affiliates, current portion1,181 1,199 
Prepaid and other current assets17,365 11,806 
Total current assets162,867 154,777 
Non-Current Assets  
Property and equipment, net28,122 27,601 
Operating lease, right-of-use assets40,236 40,743 
Goodwill102,538 96,393 
Notes receivable903 903 
Notes receivable - officers, employees, affiliates, less current portion1,116 1,119 
Other intangible assets, net45,525 46,294 
Deferred tax asset, net37,981 33,780 
Other assets1,250 1,175 
Total Assets$420,538 $402,785 
LIABILITIES AND EQUITY  
Current Liabilities  
Revolving credit facility$47,254 $45,290 
Accounts payable and accrued liabilities49,015 44,394 
Contract liabilities7,955 7,481 
Notes payable, current portion13,672 13,989 
Operating lease obligation, current portion9,567 9,016 
Finance lease obligation, current portion7,271 6,586 
Total current liabilities134,734 126,756 
Non-Current Liabilities  
Other non-current obligations50,095 42,288 
Notes payable, less current portion12,177 13,738 
Operating lease obligation, less current portion36,659 37,660 
Finance lease obligation, less current portion14,987 14,408 
Pension and post-retirement obligation, less current portion4,630 4,654 
Total liabilities$253,282 $239,504 
Shareholders' Equity
Preferred Stock, $0.01 par value; 5,000,000 shares authorized, no shares issued and outstanding as of March 31, 2024 and December 31, 2023.
$ $ 
Common stock, $0.01 par value; 30,000,000 shares authorized as of March 31, 2024 and December 31, 2023; 18,191,818 shares issued and 15,428,519 outstanding, and 17,694,495 shares issued and 15,094,278 outstanding as of March 31, 2024 and December 31, 2023, respectively
182 177 
Additional paid-in-capital226,681 215,420 
Accumulated other comprehensive income579 590 
Treasury stock, at cost; 2,763,299 and 2,600,217, respectively
(32,142)(26,410)
Stock subscription notes receivable(66)(76)
Accumulated deficit(27,978)(26,420)
Total shareholders' equity$167,256 $163,281 
TOTAL LIABILITIES AND EQUITY$420,538 $402,785 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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BOWMAN CONSULTING GROUP LTD.
CONDENSED CONSOLIDATED INCOME STATEMENTS
(Amounts in thousands except per share data)
(Unaudited)
For the Three Months
Ended March 31,
20242023
Gross Contract Revenue$94,907 $76,100 
Contract costs: (exclusive of depreciation and amortization below)
Direct payroll costs37,687 28,835 
Sub-consultants and expenses9,218 8,538 
Total contract costs46,905 37,373 
Operating Expenses:
Selling, general and administrative44,713 33,636 
Depreciation and amortization5,995 3,565 
Gain on sale
(96)(11)
Total operating expenses50,612 37,190 
(Loss) Income from operations
(2,610)1,537 
Other expense2,401 1,213 
(Loss) Income before tax expense
(5,011)324 
Income tax (benefit)
(3,453)(213)
Net (loss) income
$(1,558)$537 
Earnings allocated to non-vested shares 69 
Net (loss) income attributable to common shareholders
$(1,558)$468 
(Loss) Earnings per share
Basic$(0.11)$0.04 
Diluted$(0.11)$0.04 
Weighted average shares outstanding:
Basic13,827,72811,800,308
Diluted13,827,72812,669,581
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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BOWMAN CONSULTING GROUP LTD.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(Unaudited)
For the Three Months
Ended March 31,
20242023
Net (loss) income
$(1,558)$537 
Other comprehensive (loss) income
Pension and post-retirement adjustments(11)(10)
Other comprehensive loss
(11)(10)
Income tax provision related to items of other comprehensive income (loss)  
Other comprehensive loss, net of tax
(11)(10)
Comprehensive (loss) income, net of tax
$(1,569)527 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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BOWMAN CONSULTING GROUP LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
For the Three Months Ended March 31, 2024 and 2023
(Amounts in thousands except per share data)
(Unaudited)
Common StockAdditional
Paid-in
Capital
Treasury Stock Accumulated
 Other Comprehensive Income
Stock
Subscription
Notes
Receivable
Accumulated
Deficit
Total
Shareholders'
Equity
SharesAmountShares Amount
Balance at January 1, 202315,949,805$159 $162,922 (2,393,255)$(20,831)$578 $(173)$(19,796)$122,859 
Issuance of new common shares– 7 – – – – 7 
Purchase of treasury stock– – (32,500)(667)– – – (667)
Issuance of new common shares under stock compensation plan53,7571 (1)– – – –  
Issuance of new common shares under employee stock purchase plan16,039– 383 – – – – 383 
Stock based compensation– 4,129 – – – 4,129 
Collection on stock subscription notes receivable– – – – 22 – 22 
Other comprehensive income, net of tax– – – (10)– – (10)
Net income– – – – – 537 537 
Balance at March 31, 202316,019,601$160 $167,440 (2,425,755)$(21,498)$568 $(151)$(19,259)$127,260 
         
Balance at January 1, 202417,694,495$177 $215,420 (2,600,217)$(26,410)$590 $(76)$(26,420)$163,281 
Issuance of new common shares107,9271 3,702 3,703 
Purchase of treasury stock– (163,082)(5,732)(5,732)
Issuance of new common shares under stock compensation plan349,1513 (3) 
Cancellation of common shares under stock compensation plan(22,855)– – – 
Issuance of new common shares under employee stock purchase plan15,099– 466 466 
Stock based compensation6,4256,425 
Collections on stock subscription notes receivable1010 
Exercises of conversion feature of convertible note48,0011671672 
Other comprehensive loss, net of tax(11)(11)
Net loss(1,558)(1,558)
Balance at March 31, 202418,191,818$182 $226,681 (2,763,299)$(32,142)$579 $(66)$(27,978)$167,256 
    
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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BOWMAN CONSULTING GROUP LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months Ended March 31,
20242023
Cash Flows from Operating Activities:
Net (loss) income$(1,558)$537 
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization2,656 2,196 
Amortization of intangible assets3,339 1,369 
Gain on sale of assets(96)(11)
Credit losses402 222 
Stock based compensation7,829 4,363 
Accretion of discounts on notes payable117 140 
Deferred taxes(4,201)(3,669)
Changes in operating assets and liabilities, net of acquisition of businesses  
Accounts receivable(7,946)(2,943)
Contract assets(2,151)(3,610)
Prepaid expenses and other assets(5,523)(533)
Accounts payable and accrued expenses10,614 7,748 
Contract liabilities(963)469 
Net cash provided by operating activities2,519 6,278 
Cash Flows from Investing Activities:  
Purchases of property and equipment(262)(536)
Fixed assets converted to lease financing424  
Proceeds from sale of assets and disposal of leases96 11 
Payments received under loans to shareholders20 105 
Acquisitions of businesses, net of cash acquired(3,027) 
Collections under stock subscription notes receivable10 22 
Net cash used in investing activities(2,739)(398)
Cash Flows from Financing Activities:  
Borrowings under revolving credit facility1,964  
Repayments under fixed line of credit(49)(185)
Repayment under notes payable(3,734)(2,685)
Payments on finance leases(1,716)(1,687)
Payments for purchase of treasury stock(5,732)(667)
Proceeds from issuance of common stock473 390 
Net cash used in financing activities(8,794)(4,834)
Net (decrease) increase in cash and cash equivalents(9,014)1,046 
Cash and cash equivalents, beginning of period20,687 13,282 
Cash and cash equivalents, end of period$11,673 $14,328 
Supplemental disclosures of cash flow information:
Cash paid for interest$1,962 $757 
Cash paid for income taxes$11  
Non-cash investing and financing activities:  
Property and equipment acquired under finance lease$(3,002)$(2,964)
Note payable converted to common shares
$(672)$ 
Issuance of notes payable for acquisitions$(2,461)$ 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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BOWMAN CONSULTING GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Nature of Business and Basis of Presentation
Nature of Business
Bowman Consulting Group Ltd. (along with its consolidated subsidiaries, “Bowman” or “we” or the “Company”) incorporated in the Commonwealth of Virginia on June 5, 1995 and reincorporated in the State of Delaware on November 13, 2020. Bowman is a professional services firm delivering innovative solutions to the marketplace of customers who own, develop and maintain the built environment. Within that arena, we provide planning, design, engineering, geospatial, survey, construction management, environmental consulting and land procurement services to markets that encompass the buildings in which people live, work and learn in; as well as the systems that provide water, electricity and other vital services, and the roads, bridges, and transportation systems used to get from place to place. We provide services to customers through fixed-price and time-and-material based contracts containing multiple milestones and independently priced deliverables. Typically, contract awards are on a negotiated basis, ranging in value from a few thousand dollars to multiple millions of dollars and can have varying durations depending on the size, scope, and complexity of the project.
The Company’s workforce typically provides the full scope of engineering and other contract services. However, with respect to certain specialty services or other compliance requirements within a particular contract, we may engage third-party sub-consultants. The Company’s headquarters is located in Reston, VA and the Company has over 90 offices throughout the United States and two offices in Mexico.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements and footnotes of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and applicable regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial information. In the opinion of management, the interim financial information includes all adjustments of a normal recurring nature necessary for a fair presentation of the results of operations, financial position, changes in shareholders’ equity and cash flows. The results of operations for the current period are not necessarily indicative of the results for the full year or the results for any future periods.
The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related footnotes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the SEC on March 12, 2024.
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
2. Significant Accounting Policies
The following is a summary of the significant accounting policies and principles used in the preparation of the condensed consolidated financial statements:
Emerging Growth Company
Section 102(b)(1) of the Jumpstart Our Business Startups Act (“JOBS Act”) exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934 (the “Exchange Act”)) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company that is either not an emerging
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growth company or, an emerging growth company that has opted out of using the extended transition period, difficult or impossible because of the potential differences in accounting standards used.
Revenue Recognition
As discussed in Note 1, the Company provides a variety of engineering and related professional services to customers located throughout the United States. The Company enters into agreements with clients that create enforceable rights and obligations and for which it is probable that the Company will collect the consideration to which it will be entitled as services transfer to the customer. It is customary practice for the Company to have written agreements with its customers and revenue on oral or implied arrangements is generally not recognized. The Company recognizes revenue based on the consideration specified in the applicable agreement. Excluded from the transaction price are amounts collected on behalf of third parties for sales and similar taxes.
Long-term contracts typically contain billing terms that provide for invoicing once a month and payment on a net 30-day basis. Exceptions to monthly billing terms are to ensure that the Company performs satisfactorily rather than representing a significant financing component. For example, fixed price contracts may provide for milestone billings based upon the attainment of specific project objectives to ensure the Company meets its contractual requirements rather than having billing monthly. Additionally, contracts may include retentions or holdbacks paid at the end of a project to ensure that Company meets the contract requirements. The Company does not assess whether a contract contains a significant financing component if the Company expects, at contract inception, that the period between payment by the customer and the transfer of promised services to the customer will be less than one year.
As a professional services engineering firm, the Company generally recognizes revenue over time as control transfers to a customer based upon the extent of progress towards satisfaction of the performance obligation.
For services delivered under fixed price contracts, the Company uses the ratio of actual costs incurred to total estimated costs since costs incurred (an input method) which represents a reasonable measure of progress towards the satisfaction of a performance in order to estimate the portion of revenue earned. This method faithfully depicts the transfer of value to the customer when the Company is satisfying a performance obligation that entails a number of interrelated tasks or activities for a combined output that requires the Company to coordinate the work of employees and sub-consultants. Contract costs typically include direct labor, subcontract and consultant costs, materials and indirect costs related to contract performance. Changes in estimated costs to complete these obligations result in adjustments to revenue on a cumulative catch-up basis, which causes the effect of revised estimates to be recognized in the current period. Changes in estimates can routinely occur over the contract term for a variety of reasons including, changes in scope, unanticipated costs, delays or favorable or unfavorable progress than original expectations. In situations where the estimated costs to perform exceeds the consideration to be received, the Company accrues the entire estimated loss during the period the loss becomes known.
When a performance obligation is billed using a time-and-material type contract, the Company measures its progress to complete based upon the hours incurred for the period times contractually agreed upon billing rates plus any materials delivered or consumed in the project. When applicable, the Company will recognize revenue under these contracts as invoiced under the practical expedient.
In certain situations, it is possible that two or more contracts should be combined and accounted for as a single contract, or a single contract should be accounted for as multiple performance obligations. This requires significant judgment and could impact the amount and timing of revenue recognition. Such determinations are made using management’s best estimate and knowledge of contracts and related performance obligations.
The Company’s contracts may contain variable consideration in the form of unpriced or pending change orders or claims that either increase or decrease the contract price. Variable consideration is generally estimated using the expected value method but may from time to time be estimated using the most likely amount method depending on the circumstance. Estimated amounts are included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur or when the uncertainty associated with the variable consideration is resolved. Estimates of variable consideration are based upon historical experience and known trends.
The Company recognizes claims against vendors, sub-consultants, and others as a reduction in costs when the contract establishes enforceability, and the amounts of recovery are reasonably estimable and probable. Reduction in costs are recognized at the lesser of the amount management expects to recover or costs incurred.
Contract related assets and liabilities are classified as current assets and current liabilities. Significant balance sheet accounts related to the revenue cycle are as follows:
Accounts receivables, net:
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Accounts receivable, net (contract receivables) includes amounts billed under the contract terms. The amounts are stated at their net realizable value. The Company maintains an allowance for doubtful accounts to provide for the estimated number of receivables that will not be collected. The Company considers several factors in its estimated expected credit losses including knowledge of a client’s financial condition, its historical collection experience, and other factors relevant to assessing the collectability of such receivables. No single client accounted for more than 10% of the Company's outstanding receivables at March 31, 2024 and December 31, 2023.
Contract Assets:
Contract Assets are recorded when progress to completion revenue earned on contracts exceeds amounts billed under the contract. It may also include contract retainages that can be billed once contract stipulations are satisfied.
Contract Liabilities:
Contract Liabilities are recorded when amounts billed under a contract exceeds the progress to completion revenue earned under the contract.

Allowance for Doubtful Accounts and Expected Credit Losses
The Company records accounts receivable net of an allowance for doubtful accounts. The allowance is determined based upon management’s review of the estimated collectability of the specific accounts receivable, client type, client credit worthiness, plus a general provision based upon the historical loss experience and existing economic conditions. The Company charges off uncollectible amounts against the allowance for doubtful accounts once management determines the amount, or a portion thereof, to be worthless. Upon determination that a specific receivable is uncollectible, the receivable is written off against the allowance for expected credit losses. As of March 31, 2024 and December 31, 2023, the balance in the allowance for expected credit losses was $2.5 million and $2.2 million, respectively.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could vary from the estimates and assumptions that were used.
Concentration of Credit Risk and other Concentrations
The Company’s financial instruments that are exposed to concentrations of credit risk consist of cash and accounts receivable.
Cash balances at various times during the year may exceed the amount insured by the Federal Deposit Insurance Corporation. The Company’s cash deposits are held in institutions whose credit ratings are monitored by management, and the Company has not incurred any losses related to such deposits.
The Company can, at times, be subject to a concentration of credit risk with respect to outstanding accounts receivable. However, the Company believes no such concentration existed during the three months ended March 31, 2024, or the year ended December 31, 2023. The Company’s customers are located throughout the United States. Although the Company generally grants credit without collateral, management believes that its contract acceptance, billing, and collection policies are adequate to minimize material credit risk. Also, for non-governmental customers, the Company can often place mechanics liens against the real property associated with the contract in the event of non-payment.
Fair Value Measurements
Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures (“ASC Topic 820”) provides the framework for measuring and reporting financial assets and liabilities at fair value. ASC Topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
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The codification establishes a three-level disclosure hierarchy to indicate the level of judgment used to estimate fair value measurements:
Level 1:    Quoted prices in active markets for identical assets or liabilities as of the reporting date;
Level 2:    Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and inputs other than quoted prices (such as interest rate and yield curves);
Level 3:    Uses inputs that are unobservable, supported by little or no market activity and reflect significant management judgment.
As of March 31, 2024 and December 31, 2023:
The carrying amount of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their fair value due to the relatively short duration of these instruments;
The carrying amounts of debt obligations approximate their fair values as the terms are comparable to terms currently offered by local financial institutions for arrangements with similar terms to industry peers with comparable credit characteristics. Accordingly, the debt obligations involve Level 3 fair value inputs;

Fair value measurements relating to our business combinations are made primarily using Level 3 inputs including discounted cash flow and to the extent applicable, Monte Carlo simulation techniques. Fair value for the identified intangible assets is generally estimated using inputs primarily for the income approach using the multiple period excess earnings method. The significant assumptions used in estimating fair value include (i) revenue projections of the business, including profitability, (ii) attrition rates and (iii) the estimated discount rate that reflects the level of risk associated with receiving future cash flows. Other personal property assets, such as property, plant and equipment, are valued using the cost approach, which is based on replacement or reproduction costs of the asset less depreciation. The fair value of the contingent consideration is estimated using published treasury rates in the Wall St. Journal and discounting the present value along with other significant assumptions which include projections of revenue, and probabilities of meeting those projections, as well as Monte Carlo simulation techniques.
The following is a summary of change in contingent consideration:
(in thousands)For the Three Months Ended March 31, 2024For the Year Ended December 31, 2023
Balance at beginning of period$10,567 $487 
Fair value of contingent consideration issuances174 10,379 
Change in fair value of contingent consideration(96)(299)
Settlement of contingent consideration  
Balance at end of period$10,645 $10,567 
The change in fair value consideration is included in Other Expense in the Condensed Consolidated Income Statement.
Income Taxes
The Company recognizes deferred income tax assets or liabilities for expected future tax consequences of events recognized in the condensed consolidated financial statements or tax returns. Under this method, deferred income tax assets or liabilities are determined based upon the difference between the financial statement and income tax bases of assets and liabilities using enacted tax rates expected to apply when the differences settle or become realized. Valuation allowances are provided when it is more likely than not that a deferred tax asset is not realizable or recoverable in the future. As of March 31, 2024, no valuation allowances are required, and all deferred tax assets are realizable.
The Company assesses uncertain tax positions to determine whether the position will more likely than not be sustained upon examination by the Internal Revenue Service or other taxing authorities. If the Company cannot reach a more-likely-than-not determination, no benefit is recorded. If the Company determines that the tax position is more likely than not to be sustained, the Company records the largest amount of benefit that is more likely than not to be realized when the tax position is settled. The Company recognizes interest and penalties, if any, related to uncertain tax positions in income tax expense. Beginning January 1, 2022, the Tax Cuts and Jobs Act (TCJA) of 2017 eliminated the option to deduct
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research and development expenditures in the current year and now requires taxpayers to capitalize and amortize research and development costs pursuant to Internal Revenue Code Section 174. The capitalized expenses are amortized over a 5-year period for domestic expenses and a 15-year period for foreign expenses. As a result of this provision of the TCJA, we have established a $47.9 million uncertain tax position related to capitalized and amortizable research and development ("R&D") costs as of the three-month period ended March 31, 2024.
The Company recognizes the effect of a change in tax rates on deferred tax assets and liabilities in income in the period that includes the enactment date. The Company’s effective tax rate for the three months ended March 31, 2024 and 2023 was 68.9% and (65.9)%, respectively. The change in the Company’s effective tax rate is predominantly due to changes in the estimated annual effective tax rate. The most prominent factors include a decrease in projected R&D credits generated for 2024, a change in the projected limitations of the deductible executive compensation for 2024, and an overall reduction in forecasted income for 2024 relative to 2023. With respect to the projected R&D credit, the Company anticipates the 2024 generated R&D credit to be $3.0 million as of March 31, 2024, as compared to the projected R&D credit to be generated of $3.8 million as of March 31, 2023. Similarly, the Company anticipates the annual projected limitation on the deductibility of executive compensation to be $13.8 million for 2024 as compared to $2.4 million for 2023. These factors as well as the forecasted change in book income predominantly resulted in the change in the estimated annual effective tax rate.
Further, the Company also recognized net discrete benefits of $1.2 million for the three months ended March 31, 2024, as compared to net discrete benefit of $0.1 million for the three months ended March 31, 2023. The net discrete benefits are predominantly the result of a windfall tax benefit for restricted stock awards, penalties and interest recorded for uncertain tax positions, and other non-recurring adjustments. More specifically, the windfall tax adjustment for restricted stock awards recognized at a value higher than the grant date fair value is $2.5 million for the three months ended March 31, 2024, and $0.3 million for the three months ended March 31, 2023. Penalties and interest accrued for uncertain tax positions is $1.3 million for the three months ended March 31, 2024, and $0.1 million for the three months ended March 31, 2023. These factors increased the rate by 24.2% for the three months ended March 31, 2024, and reduced the rate by 11.6% for the three months ended March 31, 2023.
The Company files income tax returns in the U.S. federal jurisdiction and certain states in which it operates. Based on the timing of the filing of certain tax returns, the Company’s federal income tax returns for tax years 2020 and thereafter remain subject to examination by the U.S. Internal Revenue Service. The statute of limitations on the Company’s state income tax returns generally conforms to the federal three-year statute of limitations.
Segments
The Company operates in one segment based upon the financial information used by its chief operating decision maker in evaluating the financial performance of its business and allocating resources. The single segment represents the Company’s core business of providing engineering and related professional services to its customers.
Recently Issued Accounting Guidance
Accounting guidance recently adopted
In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326) to replace the incurred loss impairment methodology under U.S. GAAP. This ASU introduces a new accounting model, the Current Expected Credit Losses model (CECL), which could result in earlier recognition of credit losses and additional disclosures related to credit risk. The CECL model will require the Company to use a forward-looking expected credit loss impairment methodology for the recognition of credit losses for financial instruments at the time the financial asset is originated or acquired, and require a loss be incurred before it is recognized. The expected credit losses are adjusted each period for changes in expected lifetime credit losses. The new standard will apply to accounts receivable, loans, and other financial instruments. This standard is effective for the Company beginning January 1, 2023. Adoption of ASU 2016-13 has been applied using a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the effective date. The Company adopted the new guidance starting January 1, 2023. The impact of this ASU is reflected in the condensed consolidated financial statements and was not material.
Accounting guidance not yet adopted
In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, Improvements to Reportable Segment Disclosures, which requires disclosure of significant segment expenses and other segment items in annual and interim periods. ASU 2023-07 is effective for fiscal years beginning after December 15,
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2023, and interim periods within fiscal years beginning after December 15, 2024, and requires retrospective application to all prior periods presented in the financial statements. We are currently evaluating the impacts of the new standard.
In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which requires disaggregated information about an entity’s effective tax rate reconciliation as well as information on income taxes paid. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, and should be applied prospectively. Retrospective application is permitted. We are currently evaluating the impacts of the new standard.
The Company does not believe that any recently issued standards would have a material effect on its condensed consolidated financial statements.
3. (Loss) Earnings Per Share and Certain Related Information
Basic (loss) earnings per share is calculated by dividing net (loss) income attributable to the Company available to common stockholders by the weighted average number of common shares outstanding for the three months ended March 31, 2024 and 2023. Diluted (loss) earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were either exercised or converted into common stock or resulted in the issuance of common stock that would share in the (loss) earnings of the Company. The dilutive effect of options is reflected in diluted (loss) earnings per share by application of the treasury stock method. The dilutive effect of shares to be purchased under the Company’s Employee Stock Purchase Plan is reflected in diluted (loss) earnings per share by the weighted-average number of shares outstanding that would have been outstanding during the period. The dilutive effect of convertible debt is reflected in diluted (loss) earnings per share by application of the if-converted method. The Company uses the two-class method to determine (loss) earnings per share.
For calculating basic loss per share, for the three months ended March 31, 2024, the weighted average number of shares outstanding exclude 1,431,607 non-vested restricted shares and 4,791 unexercised substantive options. The computation of diluted earnings per share for the three months ended March 31, 2024 did not assume the effect to all potential dilutive common stock equivalents outstanding for the period.
For calculating basic earnings per share, for the three months ended March 31, 2023, the weighted average number of shares outstanding exclude 1,750,268 non-vested restricted shares and 9,690 unexercised substantive options. The computation of diluted earnings per share for the three months ended March 31, 2023 did not assume the effect of restricted shares or substantive options because the effects were antidilutive.
The following table represents a reconciliation of the net (loss) income and weighted average shares outstanding for the calculation of basic and diluted (loss) earnings per share for the three months ended March 31, 2024 and 2023 (in thousands, except share data):
 For the Three Months Ended March 31,
 20242023
Numerator
Net (loss) income$(1,558)$537 
Earnings allocated to non-vested shares 69 
Subtotal$(1,558)$468 
Denominator
Weighted average common shares outstanding13,827,72811,800,308
Effect of dilutive nominal options
Effect of dilutive contingently earned shares869,273
Dilutive average shares outstanding13,827,72812,669,581
Basic (loss) earnings per share$(0.11)$0.04 
Dilutive (loss) earnings per share$(0.11)$0.04 
Share Repurchases
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On November 17, 2023, the board of directors authorized a new $10 million share repurchase program under which the Company may repurchase up to $10 million of our common stock (the "2023 Repurchase Authorization"). The authorization is effective from November 17, 2023, through November 16, 2024. The execution of the repurchase program is expected to be consistent with the Company’s strategic initiatives which prioritize investments in organic and acquisitive growth. The timing and amount of any share repurchases will be determined by management at its discretion based on several factors including share price, market conditions and capital allocation priorities. Shares may be repurchased from time to time through open market purchases, in privately negotiated transactions or by other means, including the use of trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, in accordance with applicable securities laws and other restrictions. The share repurchase program does not obligate Bowman to acquire a specific number of shares of common stock and may be suspended, modified, or discontinued at any time without notice.
At March 31, 2024, the Company has $10.0 million remaining under the 2023 Repurchase Authorization.
There has been no repurchases of common stock under the 2023 Repurchase Authorization as of March 31, 2024.
4. Acquisitions
Business Combinations
During the three months ended March 31, 2024, the Company completed two acquisitions, diversifying across geographic regions and services. The Company paid total consideration of $8.9 million which was comprised of combinations of cash, promissory notes, shares of common stock and assumed liabilities. No cash was acquired with these acquisitions. Shares of common stock issued in connection with the acquisitions are subject to a six-month lock-up. Promissory notes bear a simple interest rate ranging from 5.00% to 6.75% and are payable in quarterly payments of principal and interest beginning May 2024 and ending in February 2027. For tax purposes, dependent on the transaction, the acquisitions were treated either as an asset acquisition, in which case the assets have been stepped up and recorded at their respective fair values, or a tax-free merger, in which case the assets have been recorded at their respective carrying values. For one of the acquisitions, the purchase agreement includes a contingent consideration feature, which affords the sellers the opportunity to earn additional consideration in the form of the Company's common stock, cash and non-negotiable promissory notes, based on certain financial performance thresholds. The final settlement amount will depend on ongoing operations of the acquired company. The payout amounts range between $0 and $0.5 million; see Note 2 Fair Value Measurements for additional information regarding the fair value of contingent consideration. Goodwill results from an assembled workforce, which does not qualify for separate recognition, as well as expected future synergies from combining operations. All of the goodwill recognized is expected to be deductible for tax purposes for the asset acquisition.
During 2023, the Company completed eleven acquisitions, diversifying across geographic regions and services. The Company paid total consideration of $75.7 million which was comprised of combinations of cash, promissory notes, convertible notes, shares of common stock and assumed liabilities. No cash was acquired with these acquisitions. Shares of common stock are subject to a six-month lock-up. Promissory notes bear a simple interest rate ranging from 5.00% to 11.00% and are payable in quarterly payments of principal and interest beginning February 2023 and ending in December 2026. Convertible notes bear a simple interest rate ranging from 7.00% to 8.00% and are payable in lump sum payments or quarterly payments of principal and interest beginning December 2024 and ending in September 2027; see Note 12 Notes Payable for additional information regarding the convertible notes payable. For tax purposes, dependent on the transaction, the acquisitions were treated either as an asset, stock or a merger. For six of the acquisitions, the purchase agreement includes a contingent consideration feature, which affords the sellers the opportunity to earn additional consideration in the form of the Company's common stock, cash and non-negotiable promissory notes, based on certain financial performance thresholds. The final settlement amount will depend on ongoing operations of the acquired company. The payout amounts range between $0 and $3.0 million; see Note 2 Fair Value Measurements for additional information regarding the fair value of contingent consideration. Goodwill results from an assembled workforce, which does not qualify for separate recognition, as well as expected future synergies from combining operations. Portions of the Goodwill recognized is expected to be deductible for tax purposes.
In connection with these acquisitions, the Company recognized $0.5 million and $0.5 million of acquisition related expenses within Other Income and Expenses in the condensed consolidated statement of income for the three months ended
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March 31, 2024 and 2023, respectively, including legal fees, consulting fees, and other miscellaneous expenses associated with acquisitions.
The purchase price allocations at fair value, for 2024 and 2023 acquisitions as of March 31, 2024 and December 31, 2023 are presented below:
(in thousands)20242023
Assets:
Accounts receivable, net$865 $10,112 
Contract assets1,002 6,334 
Prepaid and other current assets54 361 
Property and equipment, net362 1,952 
Operating lease, right-of-use assets635 7,078 
Goodwill5,873 43,784 
Other intangible assets2,570 27,361 
Other assets - non-current 44 
Total assets acquired:$11,361 $97,026 
Liabilities:
Accounts payable and accrued liabilities, current portion$372 $3,228 
Contract liabilities1,437 4,891 
Other non-current obligations2,284 24,222 
Operating lease obligation, less current portion635 7,078 
Deferred tax liability 5,787 
Total liabilities assumed:$4,728 $45,206 
Net assets acquired:$6,633 $51,820 
Cash flow reconciling items:
Issuance of common stock as partial consideration$(3,605)$(26,133)
Cash paid for acquisitions, net of cash acquired$3,028 $25,687 

For the three months ended March 31, 2024, the Company recorded measurement period adjustments of $0.3 million increase to goodwill offset by $0.3 million increase to accounts payable and other non-current obligations. The change did not result in a change to operating income.
The amounts in the tables above represent the preliminary purchase allocation for both the 2024 and 2023 acquisitions. The purchase price allocation, including the residual amount allocated to goodwill, is based on preliminary information and is subject to change as additional information concerning final asset and liability valuations are obtained and management completes its reassessment of the measurement period procedures based on the results of the preliminary valuation. During the applicable measurement period, the Company will adjust assets and liabilities if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in revised estimated values of those assets or liabilities as of that date. The effect of measurement period adjustments to the estimated fair values will be reflected as if the adjustments had been completed on the acquisition date.
Definite-lived intangible assets that were acquired through asset acquisitions or business combinations include customer relationships, contract rights, and favorable leaseholds. These intangible assets are amortized over their estimated useful lives ranging from two to thirteen years using a straight-line method as it approximates the accelerated method.
The following table summarizes the preliminary purchase price allocation at fair value for identifiable intangible assets acquired in 2024 and 2023:
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2024Weighted-Average Life2023Weighted-Average Life
Customer relationships$1,790 8.88$20,050 10.45
Contract rights780 0.946,980 1.18
Favorable leaseholds- n/a331 7.76
Total$2,570 $27,361 

Pro Forma Results of Operations - 2023 Acquisitions
The following table presents the unaudited, pro forma consolidated results of operations for the three months ended March 31, 2024 and 2023 assuming that the companies acquired in 2023, described above, occurred on January 1, 2023. The pro forma information provided below is compiled from pre-acquisition information and includes pro forma adjustments for amortization and depreciation and non-cash compensation expense. The unaudited pro forma results are presented for informational purposes only and are not meant to represent actual operating results that would have been achieved had the related events occurred on such date (in thousands):
For the Three Months Ended
March 31, 2024March 31, 2023
Gross Contract Revenue 2
$92,217 $89,698 
Pre-tax Net Loss
$(5,745)$(648)

2Gross contract revenue in these pro forma financials does not conform to GAAP as required by ASC 606, Revenue from Contract with Customers, as it is impracticable to obtain the historical information necessary to apply this accounting standard. The historical estimates required to be able to accurately determine the percent complete accounting on the contracts that comprise the revenue is not available for the required periods.
5. Disaggregation of Revenue and Contract Balances
The Company disaggregates revenues by contract type, see Revenue Recognition in Note 2 for further details. For the three months ended March 31, 2024 and 2023, the Company derived 89.7% of its revenue from contracts classified as lump sum, and 10.3% of its revenue from time and material contracts. The Company had approximately $259.9 million in remaining performance obligations as of March 31, 2024 of which it expects to recognize approximately 86.6% within the next twelve months and the remaining 13.4% in the next twelve to twenty-four months.
Disaggregated revenues by contract type were as follows (in thousands):
For the Three Months Ended March 31,
20242023
Fixed fee$85,124 89.7 %$68,245 89.7 %
Time-and-materials9,783 10.3 %7,855 10.3 %
Gross contract revenue$94,907 100.0 %$76,100 100.0 %
The Company recognized $2.6 million of revenue for the three months ended March 31, 2024, which was included in the contract liabilities balance as of December 31, 2023, and $2.6 million of revenue for the three months ended March 31, 2023, which was included in the contract liabilities balance as of December 31, 2022.
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6. Contracts in Progress
The following table reflects the calculation of the net balance of contract assets and contract liabilities. Costs and estimated earnings on contracts in progress consist of the following (in thousands):
March 31, 2024December 31, 2023
Costs incurred on uncompleted contracts$362,065 $359,509 
Estimated contract earnings in excess of costs incurred
539,446 541,851 
Estimated contract earnings to date901,511 901,360 
Less: billed to date(872,793)(875,321)
Net contract assets$28,718 $26,039 
7. Notes Receivable
The Company has unsecured notes receivable from related parties, certain non-executive officers of the Company and an unrelated third party. The following is a summary of these notes receivable (in thousands):
March 31, 2024December 31, 2023
Officers, employees and affiliated entities - Interest accrues annually at rates ranging from 0.0% - 5.5%. The notes receivable mature through January 2026.
$2,297 $2,318 
Unrelated third party - Currently no interest is being accrued on this note. The note receivable matures in December 2025.1
903 903 
Total:3,200 3,221 
Less: current portion  
Officers, employees and affiliates(1,181)(1,199)
Noncurrent portion$2,019 $2,022 
1Notes initiated prior to the Company's initial public offering.
Each borrower may prepay all or part of the outstanding balance at any time prior to the date of maturity. During the three months ended March 31, 2024, interest accrued on the notes receivable at the stipulated rates between 0.0% and 5.50%.
8. Property and Equipment, Net
Property and equipment for fixed assets are as follows (in thousands):
March 31, 2024December 31, 2023
Computer equipment$2,314 $2,321 
Survey equipment5,828 5,711 
Vehicles2,351 2,127 
Furniture and fixtures2,525 2,498 
Leasehold improvements9,101 8,870 
Software396 389 
Fixed assets pending lease financing 1
536 960 
Total:23,051 22,876 
Less: accumulated depreciation(15,488)(14,818)
Property and Equipment, net of finance leased assets$7,563 $8,058 
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1assets acquired which will be re-financed under the Company's finance lease facilities
Depreciation expense for fixed assets for the three months ended March 31, 2024 and 2023 was $0.7 million and $0.5 million, respectively.
Property and equipment for finance leased assets are as follows (in thousands):
March 31, 2024December 31, 2023
Equipment$23,132 $20,435 
Vehicles8,409 8,540 
Total:31,541 28,975 
Less: accumulated amortization on leased assets(10,982)(9,432)
Finance Leased Assets, net$20,559 $19,543 
Amortization expense for finance leased assets for the three months ended March 31, 2024 and 2023 was $2.0 million and $1.7 million, respectively.
9. Goodwill
Changes in the carrying amount of goodwill were as follows (in thousands):
Goodwill
Balance as of December 31, 2023$96,393 
2024 Acquisitions - additions5,873 
2023 Acquisitions - adjustments272 
Balance as of March 31, 2024$102,538 
There were no impairments of goodwill during the periods presented.
10. Intangible Assets
Total intangible assets consisted of the following at March 31, 2024 and December 31, 2023 (in thousands):
March 31, 2024December 31, 2023
Gross AmountAccumulated
Amortization
Net BalanceGross AmountAccumulated
Amortization
Net Balance
Customer relationships$45,434 $(6,786)$38,648 $43,644 $(5,643)$38,001 
Contract rights15,042 (10,214)4,828 14,261 (8,036)6,225 
Leasehold518 (124)394 518 (105)413 
Domain name281 – 281 281 – 281 
Licensing rights1,374 – 1,374 1,374 – 1,374 
Total$62,649 $(17,124)$45,525 $60,078 $(13,784)$46,294 
The domain name and licensing rights acquired for a total of $1.7 million, have indefinite useful lives.
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The following table summarizes the weighted average useful lives of intangible assets by asset class used for straight-line expense purposes:
March 31, 2024December 31, 2023
Customer relationships10.7211.27
Contract rights1.791.84
Leasehold7.867.86
Amortization expense for the three months ended March 31, 2024 and 2023 was $3.3 million and $1.4 million, respectively.
Future amortization for the remainder of 2024 and for the succeeding years is as follows (in thousands):
20247,737 
20255,185 
20264,618 
20274,445 
20284,009 
Thereafter17,876 
Total$43,870 
11. Revolving Credit Facility and Fixed Credit Facility
The Company has one revolving credit facility (the “Revolving Credit Facility”) and one non-revolving credit facility ("Fixed Line #2” or the “Fixed Line”) with Bank of America, N.A. On March 31, 2024 and 2023, the interest rate on the Revolving Credit Facility was 9.60% and 9.00%, respectively. All outstanding principal on the Revolving Credit Facility is due on July 31, 2025. On March 31, 2024 and December 31, 2023, there was $47.3 million and $45.3 million outstanding balance on the Revolving Credit Facility, respectively.
On November 11, 2022, the Company and certain of its subsidiaries, as guarantors, entered into an Amended and Restated Credit Agreement with Bank of America, N.A. (the "Amended and Restated Agreement") as well as an Amended and Restated Pledge and Security Agreement. The Amended and Restated Agreement increased the maximum principal amount of the Revolving Credit Facility to $50 million, is secured by all the assets of the Company and the subsidiary guarantors and has a maturity date of September 30, 2024. Under the Amended and Restated Agreement, the Company is required to comply with certain covenants, including covenant on indebtedness, investments, liens and restricted payments, as well as maintain certain financial covenants, including a fixed charge coverage ratio and leverage ratio of debt to EBITDA (as defined in the Amended and Restated Agreement). On August 2, 2023, the Company entered into a First Amendment to the Amended and Restated Credit Agreement whereby the maximum principal amount of the Revolving Credit Facility was increased to $70 million, the term was extended to July 31, 2025, and certain provisions relating to interest rate spreads and used fees were modified.
Fixed Line #2 had a maximum advance of $1.0 million, and does not allow for re-borrowings and is included in Notes Payable (see Note 12). Commencing the earlier of i) the date no remaining amount is available under the Fixed Line or, ii) August 31, 2020, the Company was obligated to pay the then outstanding principal balance in sixty equal monthly installments through maturity in September 2025. On each of March 31, 2024 and December 31, 2023, the outstanding balance on Fixed Line #2 was $0.3 million and $0.3 million, respectively.
The Company secures its obligations under the Amended and Restated Agreement with substantially all assets of the Company. Obligations of the Company to certain other shareholders of the Company are subordinated to the Company’s obligations under the Amended and Restated Agreement and Fixed Line loan. The Company must maintain, on a combined basis certain financial covenants defined in the Amended and Restated Agreement.
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Interest expense on the Revolving Credit Facility and Fixed Line totaled $1.1 million and $6,000 during the three months ended March 31, 2024, respectively. Interest expense on the Revolving Credit Facility and Fixed Line totaled $8,000 and $4,000 during the three months ended March 31, 2023, respectively.
12. Notes Payable
Notes payable consist of the following (in thousands):
March 31, 2024December 31, 2023
Related parties:
1Shareholders and Owners of Acquired Entities - Interest accrues annually at rates ranging from 3.25% - 11.00% annually. The notes payable mature on various dates through February 2027.
20,501 21,663 
Convertible Notes Payable - Interest accrues annually at rates ranging from 4.75% - 8.00% annually. The convertible notes payable mature on various dates through September 2027.
5,959 6,631 
Unrelated third parties:
Note payable for purchase of software and vehicles18 130 
Fixed line notes payable - see note 11295 344 
Discounts on notes payable issued as consideration in acquisitions:
1Shareholders and Owners of acquired entities
(924)(1,041)
Total25,849 27,727 
Less: current portion(13,672)(13,989)
Noncurrent portion$12,177 $13,738 
1Includes notes payable to all owners irrespective of current relationship with the Company
The Company’s Chairman and Chief Executive Officer guarantees certain of the notes payable, and certain of the notes payable are subordinate to the terms of the Credit Agreement disclosed in Note 11.
Interest expense attributable to the notes payable totaled $0.6 million and $0.4 million for the three months ended March 31, 2024 and 2023, respectively.
Future principal payments on notes payable for remainder of 2024 and succeeding years are as follows (in thousands):
2024$11,457 
20259,494 
20264,781 
20271,041 
Total$26,773 
Convertible Notes Payable
In July 2022, the Company issued a $4.0 million 4.75% unsubordinated convertible note with a maturity date in July 2027 as partial consideration for the acquisition of Project Design Consultants, LLC. The convertible note is convertible into shares of common stock at the option of the holders, at any time, at a conversion price of $14.00 per share upon proper notice. Subject to the exercise of the conversion, the convertible note is payable in quarterly payments of principal, interest or both beginning in October 2022 and ending in April 2027. At any time, upon ten (10) business days’ notice to the Company, the holders may request that a prepayment of the principal or all or part of a regularly scheduled quarterly payment of the principal be made in the form of common stock of the Company, with the number of shares of common
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stock equal to the amount of the requested prepayment divided by the stock conversion price. If the request is made with respect to a regularly scheduled quarterly payment of principal, then the accrued interest shall be paid in cash. Elections were made by the holders, and as of March 31, 2024, $2.0 million of the note was converted to 144,003 shares of common stock at $14.00 per share.
In August 2022, the Company issued a $1.1 million 5.50% unsubordinated convertible note with a maturity date in May 2027 as partial consideration for the acquisition of Anchor Consultants, LLC. The convertible note is convertible into shares of common stock at the option of the holders, at any time, at a conversion price of $18.00 per share upon proper notice. Subject to the exercise of the conversion, the convertible note has quarterly payments of principal, interest or both beginning in November 2022 and ending in May 2027. At any time, upon ten (10) business days’ notice to the Company, the holders may request that a prepayment of the principal or all or part of a regularly scheduled quarterly payment of the principal be made in the form of common stock of the Company, with the number of shares of common stock equal to the amount of the requested prepayment divided by the stock conversion price. If the request is made with respect to a regularly scheduled quarterly payment of principal, then the accrued interest shall be paid in cash. As of March 31, 2024, there has been no election by the holders to convert any portions of the convertible note to common stock.
In December 2022, the Company issued a $1.6 million 7.00% unsubordinated convertible note with a maturity date in September 2027 as partial consideration for the acquisition of H2H Geoscience Engineering, PLLC. The convertible note will be convertible into shares of common stock at the option of the holders, at any time, at a conversion price of $18.00 per share upon proper notice. Subject to the exercise of the conversion, the convertible note has quarterly payments of principal, interest or both beginning in December 2024 and ending in September 2027. At any time, upon ten (10) business days’ notice to the Company, the holders may request that a prepayment of the principal or all or part of a regularly scheduled quarterly payment of the principal be made in the form of common stock of the Company, with the number of shares of common stock equal to the amount of the requested prepayment divided by the stock conversion price. If the request is made with respect to a regularly scheduled quarterly payment of principal, then the accrued interest shall be paid in cash. As of March 31, 2024, there has been no election by the holders to convert any portions of the convertible note to common stock.
In November 2023, the Company issued a $1.3 million 8.00% unsubordinated convertible note with a maturity date in May 2024 as partial consideration for the acquisition of High Mesa Consulting Group, Inc. (see Note 4 Acquisitions). The convertible note will be convertible into shares of common stock at the option of the holders, at any time, at a conversion price of $28.13 per share upon proper notice. Subject to the exercise of the conversion, the convertible note and the accrued interest shall be payable in May 2024. At any time, upon ten (10) business days’ notice to the Company, the holders may request that a prepayment of all or part of the unpaid principal amount and accrued interest be made in the form of common stock of the Company, with the number of shares of common stock equal to the amount of the requested prepayment divided by the stock conversion price. As of March 31, 2024, there has been no election by the holders to convert any portions of the convertible note to common stock.

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13. Pension and Post-retirement Benefit Obligations
The Company sponsors various non-qualified defined benefit pension plans in the U.S. (the "Plan"). Individual benefits under the Plan generally are based on the employee’s years of creditable service and compliance with non-competes. The plan is unfunded and there are no plan assets.
The following table details the components of net periodic benefit costs for the Company's pension plan for the three months ended March 31, 2024 and 2023:
For the Three Months Ended March 31,
(Amounts in thousands)
2024
2023
Components of net periodic benefit cost:
Service costs
$10 $11 
Interest costs64 68 
Amortization of net gain(11)(11)
Net periodic benefit cost$63 $68 
There are no required minimum contributions for the pension plans.
14. Related Party Transactions
The Company leases commercial office space from BCG Chantilly, LLC (BCC), an entity in which Mr. Bowman, Mr. Bruen and Mr. Hickey collectively own a 63.6% interest. As of March 31, 2024 and December 31, 2023 there were no amounts due to or receivables due from BCC. Rent expense for each of the three months ended March 31, 2024 and 2023 was $21,000 and $21,000, respectively.
Bowman Lansdowne Development, LLC (BLD) is an entity in which Mr. Bowman has an ownership interest. On March 31, 2024 and December 31, 2023, the Company’s notes receivable included $0.5 million from BLD, with a maturity date of January 31, 2026.
Lansdowne Development Group, LLC (LDG) is an entity in which BLD has a minority ownership interest. On each of March 31, 2024 and December 31, 2023, our accounts receivable included $0.1 million, due from LDG. On March 31, 2024 and December 31, 2023, notes receivable included $0.4 million and $0.4 million, respectively from LDG, with a maturity date of January 31, 2026.
Bowman Realty Investments 2010, LLC (BR10) is an entity in which Mr. Bowman has an ownership interest. On March 31, 2024 and December 31, 2023, the Company’s notes receivable included $0.2 million, from BR10, with a maturity date of January 31, 2026.
Alwington Farm Developers, LLC (AFD) is an entity in which BR10 has a minority ownership interest. On each of March 31, 2024 and December 31, 2023, notes receivable included $1.2 million, from AFD, with a maturity date of December 31, 2024.
MREC Shenandoah VA, LLC (“MREC Shenandoah”) is an entity in which Lake Frederick Holdings, LLC (“Lake Frederick Holdings”) owns a 92% interest and Shenandoah Station Partners LLC, an entity owned in part by BLD and in part by Bowman Realty Investments 2013 LLC "Bowman Realty" (BR13), owns an 8% interest. Mr. Bowman owns a 100% interest in, and is the manager of, Lake Frederick Holdings. Mr. Bowman is the sole member of Bowman Realty 2013 (BR13). Since 2020, the Company has provided engineering services to MREC Shenandoah in exchange for cash payments. During the three months ended March 31, 2024, and 2023 the Company invoiced $0.1 million and $0.1 million, respectively, and received payments of $3,900 and $0.1 million, respectively.
During the three months ended March 31, 2024 and 2023, the Company provided administrative, accounting and project management services to certain of the related party entities. The cost of these services was $11,000 and $15,000, respectively. These entities were billed $17,000 and $16,000, respectively.
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Gregory Bowman, the son of Mr. Bowman, is a full-time employee of the Company. Gregory Bowman was paid $35,000 and $35,000 for the three months ended March 31, 2024 and 2023, respectively.
On March 31, 2024 and December 31, 2023, the Company was due $0.1 million and $48,000, respectively, from shareholders under the terms of stock subscription notes receivable.
On March 31, 2024 and December 31, 2023, the Company owed $0.1 million and $0.1 million, respectively, to the estate of a retired shareholder and former director in connection with a 2015 acquisition.
In August 2022, the Company agreed to reimburse Mr. Bowman at a fixed hourly rate for the business use of an aircraft owned by Sunrise Asset Management, a company owned 100% by Mr. Bowman. The Company paid $0.2 million and $0.1 million for the three months ended March 31, 2024 and 2023, respectively.
15. Employee Stock Purchase and Stock Incentive Plans
Employee Stock Purchase Plan
Effective April 30, 2021, the Company established the Bowman Consulting Group Ltd. 2021 Employee Stock Purchase Plan (“ESPP”). Under the ESPP, eligible employees who elect to participate are granted the right to purchase shares of common stock at a 15% discount of the weighted average selling price of the Company stock for the 30 days prior to the last day of the offering period.
The following table summarizes the stock issuance activity under the ESPP for the three months ended March 31, 2024 (in thousands, except share data):
March 31, 2024
Total purchase price paid by employees for shares sold$466 
Number of shares sold15,099
Stock Options
Effective May 11, 2021 the Company established the Bowman Consulting Group Ltd. 2021 Omnibus Equity Incentive Plan (“the Plan”). The plan is administered by the board of directors (the “Board”), who on its own action or through its designee may make grants of restricted stock options, including Incentive Stock Options (“ISO”), and non-qualified stock options (“NQSO”). The purpose of the Plan is to grant equity incentive awards to eligible participants to attract, motivate and retain key personnel. The Plan supersedes and replaces any prior plan for stock options except that the prior plan shall remain in effect with respect to options granted under such prior plan until such options have been exercised, expired or canceled.
The number of shares for which each option shall be granted, whether the option is an ISO or NQSO, the option price, the exercisability of the option, and all other terms and conditions of the option are determined by the Board at the time the option is granted. The options generally vest over a period between two and five years.
For the three months ended March 31, 2024, no new options were granted.
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A summary of the status of stock options exercised, including the substantive options discussed in Note 3, is as follows:
Number of
shares
Weighted
Average
Exercise
Price
Outstanding at December 31, 20235,133$6.02 
Granted 
Exercised(1,180)5.98 
Expired or cancelled 
Outstanding at March 31, 20243,953$6.03 
The following summarizes information about options outstanding and exercisable at December 31, 2023 and March 31, 2024:
Options Outstanding and Exercisable
Exercise
Price
Total
Outstanding
Weighted
Average
Remaining
Life (Years)
Weighted
Average
Exercise
Price
Total
Exercisable
December 31, 2023$6.28 5,1335.0$6.02 5,133
March 31, 2024$6.28 3,9535.0$6.03 3,953
The intrinsic value of these options on March 31, 2024 and December 31, 2023 was $27.19 and $29.24, respectively.
The Company received cash payments of $6,739 from the exercise of options under the Stock Option Plan in the three months ended March 31, 2024.
The Company did not record any compensation costs related to stock options during the three months ended March 31, 2024.
As of March 31, 2024, there is no unrecognized compensation costs related to non-vested share-based compensation arrangements granted under the Stock Option Plan. The remaining unexercised shares are from substantive options in which the non-recourse notes may be pre-paid, therefore the Company recognized the total calculated compensation expense at the time of issuance.
Stock Bonus Plan
Effective May 11, 2021, the Company established the Bowman Consulting Group Ltd. 2021 Omnibus Equity Incentive Plan (“the Plan”). The Plan is administered by the Board through which they can issue restricted stock awards. As of March 31, 2024, 4,883,271 shares of common stock are authorized and reserved for issuance under the Plan. This reserve automatically increases on each January 1, for the duration of the Plan, in an amount equal to 5% of the total number of shares outstanding on December 31st of the preceding calendar year. The Plan supersedes and replaces any prior plan for stock bonus grants to employees of the Company except that the prior plan shall remain in effect with respect to awards granted under such prior plan until such awards have been forfeited or fully vested.
During the three months ended March 31, 2024, the Board granted 88,309 shares of restricted stock under the Plan. The shares have a vesting period of up to four years during which there are certain restrictions as described in the Plan and Stock Bonus Agreements. The grant date fair value of the award is the closing price of the shares on such date, or if there are no sales on such date, on the next preceding day on which there were sales.
Effective April 2003, the Company adopted the Bowman Consulting Group Ltd. Stock Bonus Plan (“the Stock Bonus Plan”), which allowed for the awarding of restricted stock to employees. The Stock Bonus Plan was superseded by the Bowman Consulting Group Ltd. 2021 Omnibus Equity Incentive Plan except that the Stock Bonus Plan shall remain in effect with respect to awards granted under it until such awards have been forfeited or fully vested.
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During the three months ended March 31, 2024 no new restricted stock awards were granted under the Stock Bonus Plan.
The following table summarizes the activity of restricted shares subject to forfeiture:
Number of
shares
Weighted
Average
Grant Price
Outstanding at January 1, 20241,719,61918.78 
Granted88,30935.65 
Vested(350,684)19.47 
Cancelled(22,855)18.75 
Outstanding at March 31, 20241,434,38919.73 
On November 10, 2021 the Company’s Board adopted the 2021 Executive Officers Long Term Incentive Plan (the “Officers LTIP”). The Officers LTIP is established under the Plan and is subject to the terms and conditions thereof. The purpose of this plan is to attract, retain and motivate key officers and employees through the grant of equity-based awards that reward Company performance over a period greater than one year and align their interests with long-term stockholder value.
During the three months ended March 31, 2024, the compensation committee approved the grants of 137,421 performance-based stock units to certain executive officers of the Company under the Officers LTIP. The performance based restricted stock units are subject to a market condition, with a vesting period of 2.91 years. The number of units earned is based on total shareholder return (“TSR”) of the Company’s common stock relative to the TSR of the components of a custom peer group during the performance period from February 9, 2024 to December 31, 2026. The performance stock units are valued using a Monte Carlo simulation with model inputs of opening average share value, valuation date stock price, expected volatilities, correlation coefficient, risk-free interest rate, and expected dividend yield for the Company and the custom peer group.
The following table summarizes the activity of performance stock units subject to forfeiture:
Number of
shares
Weighted
Average
Grant Price
Outstanding at January 1, 2024693,13916.49 
Granted137,42125.52 
Vested(260,842)13.81 
Cancelled 
Outstanding at March 31, 2024569,71819.90 
The Company recognizes forfeitures as they occur.
As of March 31, 2024, the Company had 2,004,107 shares underlying unvested stock awards that vest between April 1, 2024 and December 31, 2027.
The future expense of the unvested awards for the remainder of 2024 and succeeding years is as follows (in thousands):
2024$13,151 
20259,691 
20262,993 
202780 
Total$25,915 
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16. Leases
We lease certain office space, equipment and vehicles. These leases are either non-cancelable, cancellable only by the payment of penalties or cancellable upon notice provided. All lease payments are based on the lapse of time and certain leases are subject to annual escalations for increases in base rents. The Company's lease terms includes options to extend or terminate the lease when it is reasonably certain that the option will be exercised.
The Company recognizes a right-of-use asset and lease liability for its operating leases at the commencement date equal to the present value of the contractual minimum lease payments over the lease term. The present value is calculated using the rate implicit in the lease, if known, or the Company's incremental borrowing rate. The discount rate used for operating leases is primarily determined based on an analysis of the Company's borrowing rate, while the discount rate used for finance leases is primarily determined by the rate specified in the lease.
Operating and Finance Leases
The Company's operating leases primarily include material leases of buildings (consisting primarily of office lease commitments) and equipment. These leases are classified as operating leases and are recognized as right-of-use assets and operating lease liabilities on the condensed consolidated balance sheets.
The Company's finance leases primarily include equipment and vehicles in certain contracts with payment terms on the lease agreements that range between 30 and 50 months.
The following tables present our balance sheet information related to leases:
As ofAs of
(Amounts in thousands)Balance Sheet ClassificationMarch 31, 2024December 31, 2023
Assets:
Operating lease assetsOperating lease, right-of-use assets$40,236 $40,743 
Finance lease assetsProperty and equipment, net$20,559 $19,543 
Total lease assets$60,795 $60,286 
Liabilities:
Current:
Operating lease liabilitiesOperating lease obligation, current portion$(9,567)$(9,016)
Finance lease liabilitiesFinance lease obligation, current portion$(7,271)$(6,586)
Total current lease liabilities$(16,838)$(15,602)
Non-current:
Operating lease liabilitiesOperating lease obligation, less current portion$(36,659)$(37,660)
Finance lease liabilitiesFinance lease obligation, less current portion$(14,987)$(14,408)
Total non-current lease liabilities$(51,646)$(52,068)

The following tables present selected financial information:
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Three Months Ended
(Amounts in thousands)March 31, 2024March 31, 2023
Operating lease cost
Amortization of right-of-use assets$3,088 $2,484 
Finance lease cost:
Amortization of right-of-use assets1,964 1,670 
Interest on lease liabilities364 356 
Sublease Income(27) 
Total lease cost$5,389 $4,510 
Three Months Ended
(Amounts in thousands)March 31, 2024March 31, 2023
Cash paid for amounts included in the measurements of lease liabilities
Operating cash flows from operating leases$3,021 $1,847 
Operating cash flows from finance leases364 355 
Financing cash flows from finance leases1,716 1,687 
Right-of-use assets obtained in exchange for new operating leases1,772 2,921 
Right-of-use assets obtained in exchange for new finance leases3,002 2,964 
As ofAs of
March 31, 2024December 31, 2023
Weighted average remaining lease term (in years):
Operating leases5.085.28
Finance leases2.692.73
Weighted average discount rates:
Operating leases6.9 %7.1 %
Finance leases7.2 %7.4 %
Future minimum commitments under leases for the succeeding years are as follows (in thousands):
(Amounts in thousands)
Year ending December 31,Operating LeaseFinance Lease
2024 (nine months remaining)$9,217 $6,487 
202511,402 8,211 
20269,772 4,765 
20278,557 1,583 
20287,764 156 
Thereafter8,130  
Total lease payments$54,842 $21,202 
Less: Amounts representing interest$(8,787)$(2,439)
Total lease liabilities$46,055 $18,763 
The above table is inclusive of $0.2 million sub-lease income associated with the $46.2 million total liability of operating leases as presented on the condensed consolidated balance sheet.
The above table is exclusive of the $3.5 million purchase price associated with the $22.3 million total liability of finance leases as presented on the condensed consolidated balance sheet.
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17. Subsequent Events
On April 1, 2024, the Company closed on an offering of common stock in which it issued and sold 1,323,530 shares at an offering price of $34.00 per share, resulting in net proceeds of $42.0 million after deducting underwriting discounts and commissions, but before expenses of the offering. On April 1, 2024, the underwriters exercised their option to purchase an additional 179,412 shares of the Company’s common stock at the public offering price, resulting in additional gross proceeds of approximately $6.1 million. After giving effect to this exercise of the overallotment option, the total number of shares sold by the Company in this common stock offering increased to 1,502,942 shares with total gross proceeds of approximately $51.1 million. The exercise of the over-allotment option closed on April 1, 2024, at which time the Company received net proceeds of $5.7 million after underwriting discounts and commissions.

On April 4, 2024, the Company completed the acquisition of Surdex Corporation pursuant to the Merger Agreement, dated April 2, 2024 (the “Agreement”), among the Company, Surdex Corporation and its Shareholders. The aggregate consideration was approximately $44 million which consisted of cash, common stock and promissory note, subject to adjustment.
On May 2, 2024 the Company and certain of its subsidiaries as guarantors entered into a new $100 million credit agreement with lenders, Bank of America N.A, as Administrative Agent, the Swingline Lender and L/C Issuer, and TD Bank, N.A. as syndication agent (the “New Credit Agreement”). The New Credit Agreement replaces the Company’s existing $70.0 million Revolving Credit Facility with Bank of America and its non-revolving fixed line of credit with Bank of America. The New Credit Agreement has a term of 5 years and matures May 2, 2029.
On May 3, 2024 Surdex entered into an Aircraft Loan and Security Agreement with Wingspire Equipment Finance LLC, and the Company as Guarantor, pursuant to which Surdex received a loan in the amount of approximately $6.2 million secured by certain aircraft. In addition, on May 3, 2024, pursuant to its master lease facility with Honour Capital LLC the Company received approximately $4.7 million in connection with the financing of cameras and equipment of Surdex.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains “forward-looking statements” reflecting our current expectations, estimates and assumptions concerning events and financial trends that may affect our future operating results or financial position. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to several factors. Factors that could cause or contribute to such differences include, but are not limited to, economic and competitive conditions, regulatory changes, and other uncertainties, as well as those factors discussed in the Risk Factors section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the “Annual Report on Form 10-K”) filed with the US Securities and Exchange Commission and elsewhere in this Quarterly Report on Form 10-Q, particularly in “Cautionary Statement about Forward-Looking Statements,” all of which are difficult to predict. Considering these risks, uncertainties and assumptions, the forward-looking events discussed may not occur. We assume no obligation to update any of these forward-looking statements, except to the extent required by applicable laws or rules. Unless the context otherwise requires, references to “Bowman,” the “company,” the “Company,” “we,” “us,” and “our” refer to Bowman Consulting Group Ltd., its wholly owned subsidiaries and combined entities under common control, or either or all of them as the context may require.
Overview
Bowman is a professional services firm delivering innovative engineering solutions to customers who own, develop and maintain the built environment. We provide planning, engineering, construction management, commissioning, environmental consulting, geospatial, survey, land procurement and other technical services to customers operating in a diverse set of end markets. We work as both a prime and sub-consultant for a broad base of public and private sector customers that generally operate in highly regulated environments.
We have a diversified business that is not dependent on any one service line, geographic region, or end market. We are deliberate in our efforts to balance our sources of revenue and avoid reliance on any one significant customer, service line, geography or end market concentration. Our strategic focus is on penetrating and expanding our presence in markets which best afford us opportunities to secure assignments that provide reoccurring revenue and multi-year engagements thus resulting in dependable and predictable revenue streams and high employee utilization. We limit our exposure to risk by providing professional and related services exclusively. We do not engage in general contracting activities either directly, or through joint ventures, and therefore have no related exposure. We are not a partner in any design-build construction projects. We carry no heavy equipment inventory, and our risk of contract loss is generally limited to time associated with fixed fee professional services assignments.
Gross contract revenue for the three months ended March 31, 2024 and 2023 was $94.9 million and $76.1 million, respectively, representing year over year growth of 24.7%. Gross contract revenue derived from our workforce represented 90.3% and 88.8% of gross contract revenue for the three months ended March 31, 2024 and 2023, respectively (see Net service billing – non-GAAP below). Our net (loss) income for the three months ended March 31, 2024 and 2023 was ($1.6) million and $0.5 million, respectively. Our Adjusted EBITDA for the three months ended March 31, 2024 and 2023 was $12.1 million on net loss of ($1.6) million and $9.7 million on net income of $0.5 million, respectively. (see Adjusted EBITDA – non-GAAP below)
Subsequent Events
On March 26, 2024, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with BofA Securities, Inc. and Robert W. Baird & Co. Incorporated, as representatives of the underwriters named in the Underwriting Agreement (the “Underwriters”), and selling stockholders, including the Gary Bowman and Michael Bruen (the “Selling Stockholders”), relating to an underwritten public offering (the “Offering”) of its common stock. Pursuant to the Underwriting Agreement, the Company agreed to sell 1,323,530 shares of common stock, and the Selling Stockholders agreed to sell an aggregate of 147,058 shares of common stock, to the Underwriters at a public offering price of $34.00 per share. The Company and the selling stockholders granted the Underwriters a 30-day over-allotment option to purchase up to 220,588 additional shares of Common Stock, which over-allotment option was exercised in full on March 27, 2024. The Offering, including the exercise of the over-allotment option, closed on April 1, 2024. The shares of common stock were sold at a public offering price of $34.00 per share and were purchased by the Underwriters from the Company and the Selling Stockholders at a price of $31.722 per share. The Company sold 1,502,942 shares of common stock to the Underwriters for gross proceeds of approximately $51.1 million. The Selling Stockholders sold an aggregate of 188,234
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shares of common stock in the Offering. The Company did not receive any proceeds from the sale of shares of common stock by the Selling Stockholders in the Offering.

On April 4, 2024, the Company completed the acquisition of Surdex Corporation pursuant to the Merger Agreement, dated April 2, 2024, among the Company, Surdex Corporation and its shareholders. The aggregate consideration was approximately $44 million which consisted of cash, common stock and a promissory note, subject to adjustment.
On May 2, 2024 the Company and certain of its subsidiaries as guarantors entered into a new $100 million credit agreement with lenders, Bank of America N.A, as Administrative Agent, the Swingline Lender and L/C Issuer, and TD Bank, N.A. as syndication agent (the “New Credit Agreement”). The New Credit Agreement replaces the Company’s existing $70.0 million Revolving Credit Facility with Bank of America and its non-revolving fixed line of credit with Bank of America. The New Credit Agreement has a term of 5 years and matures May 2, 2029. For additional information see “Part II, Item 5. Other Information”
On May 3, 2024 Surdex entered into an Aircraft Loan and Security Agreement with Wingspire Equipment Finance LLC and the Company as Guarantor, pursuant to which Surdex received a loan in the amount of approximately $6.2 million secured by certain aircraft. In addition, on May 3, 2024, pursuant to its master lease facility with Honour Capital LLC, the Company received approximately $4.7 million in connection with the financing of cameras and equipment of Surdex.
Methods of Evaluation
We use a variety of financial and other information in monitoring the financial condition and operating performance of our business. Some of the information we use to evaluate our operations is financial information that is in accordance with generally accepted accounting principles (GAAP), while other information may be financial in nature and either built upon GAAP results or may not be in accordance with GAAP (Non-GAAP). We use all this information together for planning and monitoring our operations, as well as determining certain management and employee compensation.
The Company operates as a single business segment represented by our core business of providing multi-disciplinary professional engineering solutions to customers. While we evaluate revenue and other key performance indicators relating to various divisions of labor, our leadership neither manages the business nor deliberately allocates resources by service line, geography, or end market. Our financial statements present results as a single operating segment.
Components of Income and Expense
Revenue
We generate revenue from services performed by our employees, pass-through fees from sub-consultants, and reimbursable contract costs. On our condensed consolidated financial statements, we report gross revenue, which represents total revenue billed to customers excluding taxes collected from customers. Gross revenue less revenue derived from pass-through sub-consultant fees, reimbursable expenses and other direct expenses represents our net service billing, or that portion of our gross revenue attributable to services performed by our employees. Our peers use the calculation underlying net service billing to normalize peer performance assessments and provide meaningful insight into trends over time. Refer to — Other Financial Data, Non-GAAP measurements and Key Performance Indicators below for further discussion of the use of this non-GAAP financial measure.
We generally do not generate profit from the pass-through of sub-consultants and reimbursable expenses. As such, contract profitability is most heavily impacted by the mix of labor utilized to complete the tasks and the efficiency of those resources in completing the tasks. Our largest direct contract cost is consistently our labor. To grow our revenue and maximize overall profitability we carefully monitor and manage our cost of labor and the utilization thereof. Maintaining an optimal level of utilization on a balanced pool of growing labor resources represents our greatest prospect for delivering increasing profitability.
We enter into contracts that contain two types of pricing characteristics:
Hourly contracts, also referred to as time and materials, are common for professional and technical consulting assignments both short-term and multi-year in duration. Under these types of contracts, there is no predetermined maximum fee and we generally experience no risk associated with cost overruns. For hourly contracts, we negotiate billing rates and charge our customers based upon the actual hours expended toward a deliverable. These contracts may have not-to-exceed parameters requiring us to receive additional authorizations from our customer to continue working, but we
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likewise do not have to continue working without assurances of payment for such additional work. Hourly assignments represented approximately $9.8 million and $7.9 million or 10% and 10% of our gross contract revenue for each of the three and three months ended March 31, 2024 and 2023, respectively.
Lump sum contracts, also referred to as fixed fee, typically require the performance of some, or all, of the obligations under the contract for a specified amount, subject to price adjustments only if the scope of the project changes or unforeseen requirements arise. Our fixed fee contracts generally include a specific scope of work and defined deliverables. Lump sum contracts can involve both hourly and fixed fee tasks. Most of our assignments are lump sum in nature representing approximately $85.1 million and $68.2 million or 90% and 90% of our gross contract revenue for the three months ended March 31, 2024 and 2023, respectively. Recognizing revenue from lump sum assignments requires management estimates of both total contract value when there are contingent compensation elements of the fee arrangement and expected cost at completion. We closely monitor our progress to completion and adjust our estimates when necessary. We do not recognize revenue from work that is performed at risk with no documented customer commitment.
Contract Costs
Contract costs consists of direct payroll costs, sub-consultant costs and other direct expenses exclusive of depreciation and amortization.
Direct payroll costs represent the portion of salaries and wages incurred in connection with the production of deliverables under customer assignments and contracts. Direct payroll costs include allocated fringe costs (i.e. health benefits, employer payroll taxes, and retirement plan contributions), paid leave and incentive compensation.
Sub-consultants and direct expenses include both sub-consultants and other outside costs associated with performance under our contracts. Sub-consultant and direct costs are generally reimbursable by our customers under the terms of our contracts.
Performance under our contracts does not involve significant machinery or other long term depreciable assets. Most of the equipment we employ involves desktop computers and other shared ordinary course IT equipment. We present direct costs exclusive of depreciation and amortization and as such we do not present gross profit on our condensed consolidated financial statements.
Operating Expense
Operating expenses consists of selling, general and administrative costs, non-cash stock compensation, depreciation and amortization and settlements and other non-core expenses.
Selling, general and administrative expenses represent corporate and other general overhead expenses, salaries and wages not allocated to customer projects including management and administrative personnel costs, incentive compensation, personal leave, office lease and occupancy costs, legal, professional and accounting fees.
Non-cash stock compensation represents the expenses incurred with respect to shares and options issued by the Company, both vested and unvested, to employees as long-term incentives. Non-cash stock compensation cost will be the grant date fair value of the awards, or the Black-Sholes-Merton value of stock options on the grant date, recognized ratably over the vesting periods of each award. Future non-cash stock compensation expense for unvested shares is the cumulative total of the unvested portion of all issued and outstanding awards and their individual grant date fair values. Stock awards will continue to be an important part of our long-term retention and rewards philosophy.
Depreciation and amortization represent the depreciation and amortization expense of our property and general IT equipment, capital lease assets, tenant improvements and intangible assets.
(Gain) loss on sale represents gains or losses inclusive of foreign exchange and accumulated depreciation recapture resulting from the disposal of an asset upon the sale or retirement of such asset.
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Other (Income) Expense
Other (income) expense consists of other non-operating and non-core expenses, including transaction related costs associated with acquisitions.
Tax (Benefit) Expense
Income tax (benefit) expense, current and deferred, includes estimated federal, state and local tax expense associated with our net income, as apportioned to the states in which we operate. Estimates of our tax expense include both current and deferred tax expense along with all available tax incentives and credits.
Other Financial Data, Non-GAAP Measurements and Key Performance Indicators
Backlog
We measure the value of our undelivered gross revenue in real time to calculate our backlog and predict future revenue. Backlog includes awarded, contracted, and otherwise secured commitments along with revenue we expect to realize over time for predictable long-term and reoccurring assignments. We report backlog quarterly as of the end of the last day of the reporting period. We use backlog to predict revenue growth and anticipate appropriate future staffing needs. Backlog definitions and methods of calculation vary within our industry. As such, backlog is not a reliable metric on which to evaluate us relative to our peers. Backlog neither derives from, nor reconciles to, any GAAP results.
Net Service Billing
In the normal course of providing services to our customers, we routinely subcontract services and incur direct third-party contract expenses that may or may not be reimbursable and may or may not be billed to customers with mark-up. Gross revenue less revenue derived from pass-through sub-consultant fees and reimbursable expenses represents our net service billing, which is a non-GAAP financial measure, or that portion of our gross contract revenue attributable to services performed by our employees. Because the ratio of sub-contractor and direct expense costs to gross billing varies between contracts, gross revenue is not necessarily indicative of trends in our business. As a professional services company, we believe that metrics derived from net service billings more accurately demonstrate the productivity and profitability of our workforce. Our industry uses the calculation of net service billing to normalize peer performance assessments and provide meaningful insight into trends over time.
Adjusted EBITDA
We view Adjusted EBITDA, which is a non-GAAP financial measure, as an important indicator of normalized performance. We define Adjusted EBITDA as net income before interest expense, income taxes and depreciation and amortization, plus discontinued expenses, non-core legal settlements and other costs not in the ordinary course of business, non-cash stock-based compensation, and other acquisition related adjustments such as professional fees, fair value adjustments and working capital adjustments. Our peers may define Adjusted EBITDA differently.
Adjusted EBITDA Margin, net
Adjusted EBITDA Margin, net, which is a non-GAAP financial measure, represents Adjusted EBITDA, as defined above, as a percentage of net service billings, as defined above.
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Results of Operations
Combined results of operations
The following represents our condensed consolidated results of operations for periods indicated (in thousands):
For the Three Months Ended March 31,
2024
2023
Gross contract revenue$94,907 $76,100 
Contract costs (exclusive of depreciation and amortization)
46,905 37,373 
Operating expense50,612 37,190 
(Loss) income from operations
(2,610)1,537 
Other expense2,401 1,213 
Income tax (benefit)
(3,453)(213)
Net (loss) income
$(1,558)$537 
Net margin(1.6)%0.7 %
Other financial information 1
Net service billing$85,689 $67,562 
Adjusted EBITDA12,128 9,673 
Adjusted EBITDA margin, net14.2 %14.3 %
1Represents non-GAAP financial measures. See Other Financial Information and Non-GAAP key performance indicators below.
Three months ended March 31, 2024 as compared to the three months ended March 31, 2023
Gross Contract Revenue
Gross contract revenue for the three months ended March 31, 2024, increased $18.8 million or 24.7% to $94.9 million as compared to $76.1 million for the three months ended March 31, 2023. For the three months ended March 31, 2024, gross contract revenue attributable to work performed by our workforce increased $18.1 million, or 26.8% to $85.7 million or 90.3% of gross contract revenue as compared to $67.6 million or 88.8% for the three months ended March 31, 2023 (see Net service billing – non-GAAP). Of the $18.8 million increase in gross contract revenue during the three months ended March 31, 2024, acquisitions represented $18.5 million of the increase. To evaluate the Company’s growth, revenue from acquisitions is treated as acquired for a period of four quarters post-closing, after which it is considered organic. For each measurement and comparison period, historical balances of acquired and organic revenue bases are adjusted to reflect revenue accordingly.
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Changes in gross contract revenue disaggregated between our core and emerging end markets were as follows (in thousands other than percentages):
For the Three Months Ended March 31,
Consolidated Gross Contract Revenue2024%GCR2023%GCRChange% Change
Building Infrastructure$52,785 55.6 %$44,337 58.3 %$8,448 19.1 %
Transportation18,128 19.1 %16,019 21.0 %2,109 13.2 %
Power & Utilities18,467 19.5 %13,324 17.5 %5,143 38.6 %
Other Emerging Markets 1
5,527 5.8 %2,420 3.2 %3,107 128.4 %
Total:$94,907 100.0 %$76,100 100.0 %$18,807 24.7 %
Organic$76,433 80.5 %$76,100 100.0 %$333 0.4 %
Acquired 2
18,474 19.5 %– – %18,474 n/a
Total:$94,907 100.0 %$76,100 100.0 %$18,807 24.7 %
1Represents environmental, mining, water resources and other
2After four quarters post-closing, acquired revenue is reclassified as organic; this results in a change from previously reported numbers.

For the three months ended March 31, 2024, gross contract revenue from our building infrastructure market increased $8.4 million or 19.1% as compared to the three months ended March 31, 2023. Building Infrastructure includes commercial, municipal and residential infrastructure. The increase in building infrastructure revenue is the result of acquisitions. Within the building infrastructure market, 34.4% of gross contract revenue was derived from residential assignments including single family, multi-family and mixed-use housing stock, 45.8% from commercial assignments including retail, hospitality and quick-serve restaurants (QSR), office and industrial, data centers and healthcare, and 19.8% from municipal assignments. Within residential, 51.9% of gross contract revenue was derived from for-sale homebuilding assignments, 39.7% from residential multi-family and 8.4% from mixed use projects. While the homebuilding market shows signs of rebounding from prior year interest rate impacts, for-sale residential services represented just 9.9% of our total gross contract revenue for the three months ended March 31, 2024. Within commercial, 34.4% of revenue was derived from office and industrial assignments, 40.3% from retail, hospitality, and quick serve restaurants, 14.0% from data centers, and 11.3% from healthcare. We continue to experience strong demand for our building infrastructure services and maintain a positive outlook on this market as we continue to experience strength in markets including data centers, quick serve restaurants, industrial distribution facilities, schools, and build-for-rent communities.
For the three months ended March 31, 2024, revenue from transportation increased $2.1 million or 13.2% as compared to the three months ended March 31, 2023. The increase was attributable to new contract awards in transportation both from public and private customers along with acquired transportation backlog which we were able to deliver to customers, within transportation, 60.3% of our gross contract revenue was derived directly from public sector customers including DOTs, tollway operators, transit authorities aviation operators and others with the remaining 39.7% derived from private sector customers. We expect to continue to increase our transportation revenue and improve the diversification of our revenue. We believe the transportation market continues to present significant opportunity for future growth and we remain committed to investing in leadership, technical expertise, business development and acquisitions for this market.
With the convergence of renewable energy with traditional transmission infrastructure and the continued growth we are projecting in the clean energy transition, we have consolidated renewable energy into the power and utilities category (sometimes referred to herein as the power, utilities and energy market) of our revenue mix and have adjusted historical balances accordingly. For the three months ended March 31, 2024, revenue from power and utilities increased $5.1 million or 38.6% as compared to the three months ended March 31, 2023. The additional increase in gross contract revenue from the power and utilities market is principally attributable to acquisitions and increased revenue associated with the expansion of a multi-year utility undergrounding assignment in Florida, along with additional increases derived from gas pipeline and electric transmission projects nationally. Within the power and utilities market, 80.8% of our gross contract revenue was derived from customers operating traditional power operations and 19.2% was derived from customers focused on renewables, EV infrastructure and energy transition operations. The power and utilities market continues to experience increasing infrastructure investment as changing weather patterns, energy transition mandates and other safety initiatives positively impact demand for the services we provide. Based on recent increases in program commitments
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within the gas pipeline replacement market, we believe trends in power and utilities provide meaningful opportunity for continued growth and we are committed to investing resources accordingly.
Our other emerging markets consist of mining, water resources, environmental consulting, and other natural resources services. Adjusted for the change, for the three months ended March 31, 2024, revenue from emerging markets increased $3.1 million or 128.4% as compared to the three months ended March 31, 2023. Emerging market sectors represent lines of business that have not yet grown to a size whereby we would distinguish them as a separate market. Gross contract revenue within our emerging markets was 40.9% from mining activities where we have specialized in copper mining, 41.3% from water resources activities, and 17.8% from environmental and other natural resources consulting. Scarcities in water resources and the increasing need for water management gives us confidence that we will be able to increase revenue accordingly. With recent and future acquisitions, we expect to experience continued growth from investment in various emerging market services.
For the three months ended March 31, 2024 and 2023, public sector customers, defined as direct contracts with municipalities, public agencies, or governmental authorities, represented 19.8% and 24.2% of our gross contract revenue, respectively. This does not include work done indirectly on public sector projects. Gross contract revenue from projects for public sector clients are included in the end market most aligned with work performed.
Contract costs (exclusive of depreciation and amortization)
Total contract costs, exclusive of depreciation and amortization, increased $9.5 million or 25.4% to $46.9 million for the three months ended March 31, 2024, as compared to $37.4 million for the three months ended March 31, 2023. For the three months ended March 31, 2024 and 2023, total contract costs represented 49.4% and 49.1% of total contract revenue, respectively. For the three months ended March 31, 2024 and 2023 total contract costs represented 54.7% and 55.3% of revenue attributable to our workforce, respectively (see Net Service Billing).
Direct payroll costs increased $8.9 million or 30.9% to $37.7 million for the three months ended March 31, 2024, as compared to $28.8 million for the three months ended March 31, 2023. Direct payroll accounted for 80.4% of total contract costs for the three months ended March 31, 2024, an increase of 3.2 percentage points as compared to 77.2% for the three months ended March 31, 2023.
Direct labor, the component of direct payroll costs associated with the cost of labor relating to work performed on contracts increased $6.0 million or 27.5% to $27.8 million for the three months ended March 31, 2024 as compared to $21.8 million for the three months ended March 31, 2023. The increase in direct labor is primarily due to an increase in staffing to accommodate growth. For the three months ended March 31, 2024 and 2023, direct labor costs represented 29.3% and 28.7% of gross contract revenue, respectively and represented 32.4% and 32.3% of the revenue attributable to our workforce, respectively.
Other direct payroll costs, the component of direct payroll costs associated with fringe and incentive compensation (cash and non-cash) increased by $2.9 million or 41.4% to $9.9 million as compared to $7.0 million. This increase includes a $1.6 million increase in non-cash stock compensation as several new stock awards were granted to Company leadership as well as employees in connection with acquisitions. Also, stock compensation has become a larger part of our employee incentive plans.
Sub-consultants and other direct expenses increased $0.7 million or 8.2% to $9.2 million for the three months ended March 31, 2024 as compared to $8.5 million for the three months ended March 31, 2023. For the three months ended March 31, 2024 and 2023, sub-consultant and other direct expenses represented 9.7% and 11.2% of gross contract revenue, respectively. This decrease is not indicative of an anticipated long-term shift in the composition of our gross contract revenue, and we expect to experience periodic volatility in concentration of sub-consultant utilization.
Operating Expense
Total operating expense increased $13.4 million or 36.0% to $50.6 million for the three months ended March 31, 2024 as compared to $37.2 million for the three months ended March 31, 2023.
Selling, general and administrative expenses increased $11.1 million or 33.0% to $44.7 million for the three months ended March 31, 2024, as compared to $33.6 million for the three months ended March 31, 2023. Indirect labor increased $4.8 million or 32.2% to $19.7 million as compared to $14.9 million primarily due to an increase in staffing to accommodate growth. General overhead increased $3.2 million or 28.1% to $14.6 million as compared to $11.4 million