Overview

Bowman Consulting Group Ltd. is a professional services firm that provides innovative engineering, technology, and program management services to customers who own, develop, and maintain the built environment. The company has a diversified business model that is not dependent on any one customer, service line, geographic region, or end market. Bowman’s strategic focus is on penetrating and expanding its presence in markets that provide recurring revenue and multi-year engagements, resulting in dependable and predictable revenue streams.

For the year ended December 31, 2024, Bowman reported gross contract revenue of $426.6 million, up 23.2% from $346.3 million in 2023. Net income for 2024 was $3.0 million, compared to a net loss of $6.6 million in 2023. Adjusted EBITDA, a non-GAAP metric, increased 26.6% to $59.5 million in 2024 from $47.0 million in 2023.

Revenue and Profit Trends

Bowman’s gross contract revenue growth was driven by strong performance across its core end markets of building infrastructure, transportation, and power & utilities, as well as its emerging markets. Building infrastructure, the largest segment, saw a 12.7% increase in revenue to $219.6 million, with strength in residential, commercial, and municipal projects. Transportation revenue grew 20.5% to $87.7 million, benefiting from new contract awards in both the public and private sectors. Power & utilities revenue increased 16.9% to $75.0 million, reflecting growth in both traditional power operations and renewable energy projects.

The company’s emerging markets, which include environmental, mining, water resources, imaging and mapping, and other services, saw a 206.8% surge in revenue to $44.2 million, primarily due to the acquisition of Surdex Corporation. Public sector customers represented 26.8% of Bowman’s gross contract revenue in 2024, up from 20.8% in 2023.

Total contract costs, excluding depreciation and amortization, increased 19.7% to $203.8 million in 2024. Direct payroll costs, the largest component of contract costs, grew 22.6% to $156.9 million, reflecting increased staffing from acquisitions and organic growth. Sub-consultant and other direct expenses increased 10.9% to $46.9 million, in line with the revenue growth.

Operating expenses rose 27.2% to $224.8 million in 2024, driven by a 24.7% increase in selling, general, and administrative (SG&A) costs, as well as a 48.7% jump in depreciation and amortization. The increase in SG&A was primarily due to higher indirect labor and general overhead costs associated with the company’s growth and public company status.

Despite the increase in operating expenses, Bowman was able to improve its profitability, with Adjusted EBITDA margin (net) increasing slightly to 15.7% in 2024 from 15.5% in 2023. This was achieved through the company’s focus on high-margin, recurring revenue streams and effective management of its cost structure.

Strengths and Weaknesses

One of Bowman’s key strengths is its diversified business model, which reduces the company’s reliance on any single customer, service line, geography, or end market. This diversification has enabled the company to navigate market fluctuations and capitalize on growth opportunities across a range of sectors.

Another strength is Bowman’s strategic focus on penetrating and expanding its presence in markets that provide recurring revenue and multi-year engagements. This has resulted in more dependable and predictable revenue streams, as evidenced by the company’s strong backlog growth of 30.5% to $399 million at the end of 2024.

Bowman’s ability to effectively manage its cost structure and maintain high employee utilization has also been a key driver of its profitability. The company’s focus on optimizing its labor resources and limiting exposure to risk through its professional services-only model has allowed it to maintain strong Adjusted EBITDA margins.

One potential weakness is the company’s reliance on acquisitions to drive growth. While Bowman has been successful in integrating and leveraging acquired businesses, the integration process can be complex and may present integration risks. Additionally, the company’s ability to continue finding and executing on attractive acquisition targets will be crucial to its future growth.

Another potential weakness is the company’s exposure to the cyclical nature of the construction and infrastructure markets. While Bowman’s diversification helps mitigate this risk, the company’s performance is still tied to the overall health of the built environment sector.

Outlook and Future Considerations

Bowman’s outlook for the future appears positive, with the company well-positioned to capitalize on continued growth in its core and emerging markets. The strong demand for building infrastructure, transportation, and power & utilities services, as well as the company’s strategic focus on high-margin, recurring revenue streams, suggest that Bowman should be able to maintain its momentum.

However, the company will need to navigate several potential challenges and considerations in the years ahead. These include the potential impact of the Organization for Economic Cooperation and Development’s Pillar Two Model Rules, which aim to ensure that large multinational enterprises pay a minimum level of tax in each jurisdiction where they operate. While Bowman does not currently anticipate a material impact from these rules, the company will need to closely monitor their implementation and implications.

Additionally, Bowman’s continued reliance on acquisitions to drive growth will require the company to carefully evaluate and integrate new businesses, while also ensuring that it maintains a strong balance sheet and liquidity position to fund these transactions.

Overall, Bowman’s diversified business model, focus on high-margin, recurring revenue streams, and effective cost management have positioned the company for continued success. As the company navigates the evolving regulatory landscape and pursues its acquisition-driven growth strategy, investors will be closely watching Bowman’s ability to maintain its strong financial performance and capitalize on the opportunities in its core and emerging markets.