Bowman Consulting Group Ltd

Previous wording

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)

Current wording

Gross contract revenue for the three months ended June 30, 2024 and 2023 was $104.5 million and $82.8 million, respectively, representing year over year growth of 26.2%. Gross contract revenue derived from our workforce represented 90.0% and 89.2% of gross contract revenue for the three months ended June 30, 2024 and 2023, respectively (see Net service billing – non-GAAP below). Our net loss for the three months ended June 30, 2024 and 2023 was ($2.1) million and ($0.6) million, respectively. Our Adjusted EBITDA for the three months ended June 30, 2024 and 2023 was $13.4 million on net loss of ($2.1) million and $11.1 million on net loss of ($0.6) million, respectively.(see Adjusted EBITDA – non-GAAP below)

Previous wording

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 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.

Current wording

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 likewise do not have to continue working without assurances of payment for such additional work. Hourly assignments represented approximately $10.5 million and $20.3 million or 10% and 10% of our gross contract revenue for each of the three and six months ended June 30, 2024, respectively. For each of the three and six months ended June 30, 2023, hourly assignments represented approximately $9.2 million and $17.1 million or 11% of our gross contract revenue.

Previous wording

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.

Current wording

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. The majority of our assignments are lump sum in nature representing approximately $94.0 million and $179.1 million or 90% and 90% of our gross contract revenue for the three and six months ended June 30, 2024, respectively. For each of the three and six months ended June 30, 2023, assignments that are lump sum in nature represented approximately $73.5 million and $141.8 million or 89% of our gross contract revenue. 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 has no documented customer commitment and is performed at risk.

Previous wording

Operating expenses consists of selling, general and administrative costs, non-cash stock compensation, depreciation and amortization and settlements and other non-core expenses.

Current wording

Operating expenses consist of selling, general and administrative costs, non-cash stock compensation, depreciation and amortization and settlements and other non-core expenses.

Previous wording

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.

Current wording

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-Scholes-Merton value of stock options on the grant date, recognized ratably over the vesting period(s) 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.

Previous wording

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.

Current wording

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, and is the 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 than do those derived from gross revenue. Our industry uses the calculation of net service billing to normalize peer performance assessments and provide meaningful insight into trends over time.

Previous wording

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.

Current wording

Gross contract revenue for the three months ended June 30, 2024, increased $21.7 million or 26.3% to 104.5 million as compared to $82.8 million for the three months ended June 30, 2023. For the three months ended June 30, 2024, gross contract revenue attributable to work performed by our workforce increased $20.2 million, or 27.4% to $94.0 million or 90.0% of gross contract revenue as compared to $73.8 million or 89.2% for the three months ended June 30, 2023 (see Net service billing – non-GAAP). Of the $21.7 million increase in gross contract revenue during the three months ended June 30, 2024, acquisitions represented $17.5 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.

Previous wording

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.

Current wording

For the three months ended June 30, 2024, gross contract revenue from our building infrastructure market increased $7.3 million or 15.0% as compared to the three months ended June 30, 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, 33.2% of gross contract revenue was derived from residential assignments including single family, multi-family and mixed-use housing stock, 45.7% from commercial assignments including retail, hospitality and quick-serve restaurants (QSR), office and industrial, data centers and healthcare, and 21.1% from municipal assignments, including parks and schools. Within residential, 52.2% of gross contract revenue was derived from for-sale homebuilding assignments, 41.4% from residential multi-family and 6.4% from mixed use projects. While the homebuilding market shows signs of rebounding from prior year interest rate impacts, for-sale residential services represented just 9.3% of our total gross contract revenue for the three months ended June 30, 2024. Within commercial, 36.3% of revenue was derived from office and industrial assignments, 40.1% from retail, hospitality, and quick serve restaurants, 13.7% from data centers, and 9.9% 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.

Previous wording

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.

Current wording

For the three months ended June 30, 2024, revenue from transportation increased $3.4 million or 21.2% as compared to the three months ended June 30, 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, 63.5% of our gross contract revenue was derived directly from public sector customers including state and local departments of transportation ("DOTs"), tollway operators, transit authorities aviation operators and others with the remaining 36.5% 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.

Previous wording

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 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.

Current wording

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 June 30, 2024, revenue from power and utilities increased $3.9 million or 24.8% as compared to the three months ended June 30, 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, 73.8% of our gross contract revenue was derived from customers operating traditional power operations and 26.2% was derived from customers focused on renewables, electric vehicle ("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 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.

Previous wording

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.

Current wording

Our other emerging markets consist of mining, water resources, imaging and mapping, environmental consulting, and other natural resources services. Adjusted for the change, for the three months ended June 30, 2024, revenue from emerging markets increased $7.2 million or 269.2% as compared to the three months ended June 30, 2023. This increase is primarily due to the acquisition of Surdex Corporation; see Note 4 - Acquisitions for additional information. 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 51.6% from imaging and mapping activities, 18.7% from mining activities where we have specialized in copper mining, 23.8% from water resources activities, and 5.9% 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.

Previous wording

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.

Current wording

For the three months ended June 30, 2024 and 2023, public sector customers, defined as direct contracts with municipalities, public agencies, or governmental authorities, represented 24.6% and 17.1% 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.

Previous wording

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).

Current wording

Total contract costs, exclusive of depreciation and amortization, increased $8.6 million or 21.0% to $49.6 million for the three months ended June 30, 2024, as compared to $41.0 million for the three months ended June 30, 2023. For the three months ended June 30, 2024 and 2023, total contract costs represented 47.5% and 49.6% of total contract revenue, respectively. For the three months ended June 30, 2024 and 2023 total contract costs represented 52.8% and 55.6% of revenue attributable to our workforce, respectively (see Net Service Billing).

Previous wording

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.

Current wording

Direct payroll costs increased $7.0 million or 21.8% to $39.1 million for the three months ended June 30, 2024, as compared to $32.1 million for the three months ended June 30, 2023. Direct payroll accounted for 78.8% of total contract costs for the three months ended June 30, 2024, an increase of 0.6 percentage points as compared to 78.2% for the three months ended June 30, 2023.

Previous wording

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.

Current wording

Direct labor, the component of direct payroll costs associated with the cost of labor relating to work performed on contracts increased $5.7 million or 24.4% to $29.1 million for the three months ended June 30, 2024 as compared to $23.4 million for the three months ended June 30, 2023. The increase in direct labor is primarily due to an increase in staffing to accommodate growth. For the three months ended June 30, 2024 and 2023, direct labor costs represented 27.8% and 28.3% of gross contract revenue, respectively and represented 31.0% and 31.7% of the revenue attributable to our workforce, respectively.

Previous wording

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.

Current wording

Sub-consultants and other direct expenses increased $1.5 million or 16.7% to $10.5 million for the three months ended June 30, 2024 as compared to $9.0 million for the three months ended June 30, 2023. For the three months ended June 30, 2024 and 2023, sub-consultant and other direct expenses represented 10.0% and 10.8% 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.

Previous wording

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.

Current wording

Total operating expense increased $13.3 million or 31.1% to $56.1 million for the three months ended June 30, 2024 as compared to $42.8 million for the three months ended June 30, 2023.

Previous wording

Depreciation and amortization increased $2.4 million or 66.7% to $6.0 million for the three months ended March 31, 2024 as compared to $3.6 million for the three months ended March 31, 2023. This increase is primarily due to an increase in intangible assets and assets leased under financing arrangements. We continue to increase the use of our finance lease facility as we continue to grow. Intangible assets have increased due to multiple acquisitions. Gains on the sale of certain IT equipment and automobiles increased $0.1 million for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023.

Current wording

Depreciation and amortization increased $2.5 million or 53.2% to $7.2 million for the three months ended June 30, 2024 as compared to $4.7 million for the three months ended June 30, 2023. This increase is primarily due to an increase in intangible assets and assets leased under financing arrangements. We continue to increase the use of our finance lease facility as we continue to grow. Intangible assets have increased due to multiple acquisitions. Gains on the sale of certain IT equipment and automobiles remained $0.2 million for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023.

Previous wording

Other expense increased by $1.2 million to $2.4 million of expense for the three months ended March 31, 2024 as compared to $1.2 million for the three months ended March 31, 2023. This increase is primarily attributable to an increase in interest expense of $1.2 million due to an increase in finance leases and notes payable.

Current wording

Other expense increased by $0.9 million to $2.0 million of expense for the three months ended June 30, 2024 as compared to $1.1 million for the three months ended June 30, 2023. This increase is primarily attributable to an increase in interest expense of $0.7 million due to an increase in finance leases and notes payable.

Previous wording

Income tax benefit for the three months ended March 31, 2024, increased $3.3 million to a $3.5 million benefit, as compared to $0.2 million benefit for the three months ended March 31, 2023, see note 2, Income Taxes. Our effective tax rate for the three months ended March 31, 2024, is 68.9% as compared to (65.9%) for the three months ended March 31, 2023.

Current wording

Income tax benefit for the three months ended June 30, 2024, decreased $0.4 million to a $1.2 million benefit, as compared to $1.6 million benefit for the three months ended June 30, 2023, see note 2, Income Taxes. Our effective tax rate for the three months ended June 30, 2024, is 34.0% as compared to 71.9% for the three months ended June 30, 2023.

Previous wording

Loss before tax increased by $5.3 million for the three months ended March 31, 2024, to $5.0 million of loss compared to $0.3 million of income for the three months ended March 31, 2023. Net loss increased by $2.1 million to ($1.6) million for the three months ended March 31, 2024, as compared to $0.5 million of income for the three months ended March 31, 2023.

Current wording

Loss before tax increased by $1.0 million for the three months ended June 30, 2024, to ($3.3) million of loss compared to ($2.3) million of loss for the three months ended June 30, 2023. Net loss increased by $1.5 million to ($2.1) million for the three months ended June 30, 2024, as compared to ($0.6) million for the three months ended June 30, 2023.

Previous wording

Net service billing increased $18.1 million or 26.8% to $85.7 million for the three months ended March 31, 2024, as compared to $67.6 million for the three months ended March 31, 2023. Net service billing reconciles to gross contract revenue as follows (in thousands):

Current wording

Net service billing increased $20.2 million or 27.4% to $94.0 million for the three months ended June 30, 2024, as compared to $73.8 million for the three months ended June 30, 2023. Net service billing reconciles to gross contract revenue as follows (in thousands):

Previous wording

Adjusted EBITDA increased $2.5 million or 25.4% to $12.1 million for the three months ended March 31, 2024 as compared to $9.7 million for the three months ended March 31, 2023. Adjusted EBITDA reconciles to net income as follows (in thousands):

Current wording

Adjusted EBITDA increased $2.4 million or 21.3% to $13.4 million for the three months ended June 30, 2024 as compared to $11.1 million for the three months ended June 30, 2023. Adjusted EBITDA reconciles to net income as follows (in thousands):

Previous wording

For the three months ended March 31, 2024 and 2023, Adjusted EBITDA includes add backs of $7.9 million and $4.4 million, respectively, relating to non-cash stock compensation expenses from restricted stock awards. For the three months ended March 31, 2024 and 2023, Adjusted EBITDA also includes $0.8 million and $0.5 million, respectively, relating to non-reocurring acquisition expenses such as professional fees, fair value adjustments and working capital adjustments.

Current wording

For the three months ended June 30, 2024 and 2023, Adjusted EBITDA includes add backs of $6.1 million and $6.9 million, respectively, relating to non-cash stock compensation expenses from restricted stock awards. For the three months ended June 30, 2024 and 2023, Adjusted EBITDA also includes $1.2 million and $0.3 million, respectively, relating to non-reocurring acquisition expenses such as professional fees, fair value adjustments and working capital adjustments.

Previous wording

Adjusted EBITDA Margin, net represents Adjusted EBITDA (as defined above) as a percentage of net service billing (as defined above). For the three months ended March 31, 2024 and 2023, Adjusted EBITDA Margin, net was 14.2% and 14.3% respectively.

Current wording

Adjusted EBITDA Margin, net represents Adjusted EBITDA (as defined above) as a percentage of net service billing (as defined above). For the three months ended June 30, 2024 and 2023, Adjusted EBITDA Margin, net was 14.3% and 15.0% respectively.

Previous wording

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.

Current wording

Other direct payroll costs, the component of direct payroll costs associated with fringe and incentive compensation (cash and non-cash) increased by $4.3 million or 27.6% to $19.9 million as compared to $15.6 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.

Previous wording

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 due to increased costs associated with the overall growth of the Company. Non-cash stock compensation increased $1.9 million or 57.6% to $5.2 million as compared to $3.3 million 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.

Current wording

Selling, general and administrative expenses increased $21.9 million or 30.4% to $93.9 million for the six months ended June 30, 2024, as compared to $72.0 million for the six months ended June 30, 2023. Indirect labor increased $10.3 million or 32.7% to $41.8 million as compared to $31.5 million primarily due to an increase in staffing to accommodate growth. General overhead increased $8.2 million or 34.6% to $31.9 million as compared to $23.7 million due to increased costs associated with the overall growth of the Company. Non-cash stock compensation increased $1.2 million or 15.2% to $9.1 million as compared to $7.9 million 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.

Previous wording

Our backlog increased $24.2 million or 7.9% to $329.9 million during the three months ended March 31, 2024, as compared to $305.7 million at December 31, 2023. At March 31, 2024 and December 31, 2023 our backlog was comprised as follows:

Current wording

Our backlog increased $45.7 million or 14.9% to $351.4 million during the six months ended June 30, 2024, as compared to $305.7 million at December 31, 2023. At June 30, 2024 and December 31, 2023 our backlog was comprised as follows:

Previous wording

Our principal sources of liquidity are our cash and cash equivalents balances, cash flow from operations, borrowing capacity under our Revolving Credit Facility (as defined below), lease financing, proceeds from stock sales and other structured debt securities. Our principal uses of cash are operating expenses, working capital requirements, capital expenditures, repayment of debt, acquisitions, and acquisition related payments. On March 31, 2024, we maintained a $70.0 million Revolving Credit Facility with Bank of America, our primary lender. See -"Credit Facilities and Other Financing" below for more information on our Revolving Credit Facility. Under the terms of our Revolving Credit Facility, available cash in our primary operating account sweeps against the outstanding balance every evening. Our cash on hand therefore generally consisted of petty cash and other non-operating funds not included in the nightly sweep. Cash on hand included the cash we kept in short-term investment accounts along with deposits and payments in transit in our operating sweep account.. Our cash on hand decreased by $9.0 million at March 31, 2024 as compared to December 31, 2023.

Current wording

Our principal sources of liquidity are our cash and cash equivalents balances, cash flow from operations, borrowing capacity under our Revolving Credit Facility (as defined below), lease financing, proceeds from stock sales and other structured debt securities. Our principal uses of cash are operating expenses, working capital requirements, capital expenditures, repayment of debt, acquisitions, and acquisition related payments. On June 30, 2024, we maintained a $100.0 million Revolving Credit Facility with Bank of America N.A., our primary lender. See -"Credit Facilities and Other Financing" below for more information on our Revolving Credit Facility. Under the terms of our Revolving Credit Facility, available cash in our primary operating account sweeps against the outstanding balance every evening. Our cash on hand therefore generally consisted of petty cash and other non-operating funds not included in the nightly sweep. Cash on hand included the cash we kept in short-term investment accounts along with deposits and payments in transit in our operating sweep account. Our cash on hand increased by $2.5 million on June 30, 2024 as compared to December 31, 2023.

Previous wording

During the three months ended March 31, 2024, net cash provided by operating activities was $2.5 million, which primarily consisted of ($1.6) million net loss, adjusted for stock-based compensation expense of $7.8 million, depreciation and amortization expense of $6.0 million, and deferred taxes of $4.2 million, offset by a net cash outflow of $6.0 million from changes in operating assets and liabilities. The net outflow from changes in operating assets and liabilities was primarily due to a $7.9 million increase in accounts receivable resulting from a combination of acquired accounts receivable from acquisitions, and an increased billing to our clients, a $5.5 million increase in prepaid expenses and other assets, and $3.1 million increase in contract assets and liabilities, partially offset by a $10.6 million increase in accounts payable and accrued expenses.

Current wording

During the six months ended June 30, 2024, net cash provided by operating activities was $5.6 million, which primarily consisted of ($3.6) million net loss, adjusted for stock-based compensation expense of $13.9 million, depreciation and amortization expense of $13.2 million, and deferred taxes of $5.3 million, offset by a net cash outflow of ($23.8) million from changes in operating assets and liabilities. The net outflow from changes in operating assets and liabilities was primarily due to a $6.1 million increase in accounts receivable resulting from a combination of acquired accounts receivable from acquisitions and an increased billing to our clients, a $6.2 million increase in contract assets and liabilities, and a $15.6 million increase in accounts payable and accrued expenses partially offset by a $4.1 million increase in prepaid expenses and other assets.

Previous wording

During the three months ended March 31, 2023, net cash provided by operating activities was $6.3 million, which primarily consisted of our $0.5 million net profit, adjusted for stock-based compensation expense of $4.4 million, depreciation and amortization expense of $3.6 million, and deferred taxes of ($3.7) million, offset by a net cash inflow of $1.1 million from changes in operating assets and liabilities. Cash provided by operating activities before changes in operating assets and liabilities was $4.6 million. We believe this is significant given our high rate of growth. The net outflow from changes in operating assets and liabilities was primarily due to a $2.9 million increase in accounts receivable resulting from increased billing to our clients, and a $0.5 million increase in prepaid expenses and other assets, and $3.1 million increase in contract assets and liabilities partially offset by a $7.7 million decrease in accounts payable and accrued expenses.

Current wording

During the six months ended June 30, 2023, net cash provided by operating activities was $2.1 million, which primarily consisted of our $0.1 million net loss, adjusted for stock-based compensation expense of $11.2 million, depreciation and amortization expense of $8.3 million, and deferred taxes of ($7.3) million, offset by a net cash outflow of ($10.2) million from changes in operating assets and liabilities. Cash provided by operating activities before changes in operating assets and liabilities was $12.4 million. The net outflow from changes in operating assets and liabilities was primarily due to a $10.9 million increase in accounts receivable resulting from increased billing to our clients, and a $4.2 million increase in prepaid expenses and other assets, and $4.7 million increase in contract assets and liabilities partially offset by a $9.5 million decrease in accounts payable and accrued expenses.

Previous wording

Net cash used in investing activities increased by $2.3 million to $2.7 million for the three months ended March 31, 2024 as compared to $0.4 million for the three months ended March 31, 2023. The increase in net cash used for investing is primarily attributable to acquisitions that occurred in the first quarter of 2024.

Current wording

Net cash used in investing activities increased by $5.0 million to $20.6 million for the six months ended June 30, 2024 as compared to $15.6 million for the six months ended June 30, 2023. The increase in net cash used for investing is primarily attributable to acquisitions that occurred in the first two quarters of 2024.

Previous wording

Net cash used in financing activities during the three months ended March 31, 2024 was $8.8 million compared to $4.8 million for the three months ended March 31, 2023, an increase of $4.0 million. The increase in net cash used in financing is primarily attributable to the $5.7 million used for the purchase of treasury shares offset by net proceeds of $2.0 million from our Revolving Credit Facility.

Current wording

Net cash provided by financing activities during the six months ended June 30, 2024 was $17.5 million compared to $10.0 million for the six months ended June 30, 2023, an increase of $7.5 million. The increase in net cash used in financing is primarily attributable to the net proceeds of $47.2 million from the common stock offering offset by the $17.4 million used for repayment of the revolving line of credit and the $10.0 million used to purchase treasury shares.

Previous wording

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”

Current wording

On May 2, 2024 the Company and certain of its subsidiaries as guarantors entered into a new 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”) which provides for a new $100 million revolving credit facility (the “Revolving Credit Facility”). The Revolving Credit Facility replaced the Company’s previous $70.0 million revolving credit facility (the "2022 Revolving Credit Facility"), and its non-revolving fixed line of credit ("Fixed Line #2") with Bank of America, N.A. In addition, the Company and certain of its subsidiaries entered into a Security and Pledge Agreement, dated as of May 2, 2024, with Bank of America, N.A., in its capacity as Administrative Agent. The New Credit Agreement is secured by all the assets of the Company and the subsidiary guarantors.

Previous wording

The Credit Agreement is secured by all the assets of the Company and the subsidiary guarantors. Under the Credit Agreement, we are required to comply with certain covenants, including covenants on indebtedness, investments, liens and restricted payments, as well as to maintain certain financial covenants, including a fixed charge coverage ratio and leverage ratio of debt to EBITDA (as defined in the Credit Agreement). At March 31, 2024, we were in compliance with all covenants.

Current wording

Under the New Credit Agreement, the Company is required to comply with certain covenants, including covenants 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 New Credit Agreement). At June 30, 2024, we were in compliance with all covenants.

Previous wording

We utilize master lease facilities primarily with Honour Capital LLC (“Honour”) and Enterprise Leasing (“Enterprise”). The Honour Capital lease facility finances our acquisition of IT infrastructure, geospatial and survey equipment, furniture and other long-lived assets. The Enterprise lease facility finances the acquisition of field trucks and other service vehicles. At March 31, 2024, we maintained a fleet of approximately 500 vehicles. All of our leasing facilities allow for both operating and finance leasing. We allocate finance lease payments between amortization and interest. The payment terms on the lease agreements range between 30 and 50 months with payments totaling approximately $0.9 million per month. We utilize a third party valuation specialist to formulate the incremental borrowing rates for the Company, to calculate the present value on new leases.

Current wording

The Enterprise lease facility finances the acquisition of field trucks and other service vehicles. At June 30, 2024, we maintained a fleet of approximately 500 vehicles. All our leasing facilities allow for both operating and finance leasing. We allocate finance lease payments between amortization and interest. The payment terms on the lease agreements range between 30 and 50 months with payments totaling approximately $0.9 million per month. We utilize a third party valuation specialist to formulate the incremental borrowing rates for the Company, to calculate the present value on new leases.

Previous wording

We have on file with the Securities and Exchange Commission (the “SEC”) a shelf registration statement on Form S-3 (the “Shelf Registration Statement”), which enables us to issue shares of our common stock and preferred stock, warrants and rights to purchase any of such securities and/or debt securities, either individually or in units, in one or more offerings. We will file a prospectus supplement containing the amount and type of securities each time we issue securities under our Shelf Registration Statement. On April 1, 2024, we sold 1,502,942 shares of common stock for gross proceeds of approximately $51.1 million pursuant to the Shelf Registration Statement, as supplemented by the prospectus supplement dated March 26, 2024. The Selling Stockholders in the Offering sold an aggregate of 188,234 shares of common stock. The Company did not receive any proceeds from the sale of shares of common stock by the Selling Stockholders in the Offering. See “Subsequent Events” above for more details.

Current wording

We have filed with the Securities and Exchange Commission (the “SEC”) a shelf registration statement on Form S-3 (the “Shelf Registration Statement”), which enables us to issue shares of our common stock and preferred stock, warrants and rights to purchase any of such securities and/or debt securities, either individually or in units, in one or more offerings. We will file a prospectus supplement containing the amount and type of securities each time we issue securities under our Shelf Registration Statement. On April 1, 2024, we sold 1,502,942 shares of common stock for gross proceeds of approximately $51.1 million pursuant to the Shelf Registration Statement, as supplemented by the prospectus supplement dated March 26, 2024. The selling stockholders in the Offering sold an aggregate of 188,234 shares of common stock. The Company did not receive any proceeds from the sale of shares of common stock by the selling stockholders in the Offering See “Overview” above for more details.