Bowman Consulting Group Ltd

Previous wording

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 over 4,750 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.

Current wording

Bowman is a professional services firm delivering innovative engineering, technology and program management services to customers who own, develop, and maintain the built environment. We provide planning, engineering, construction management, commissioning, environmental consulting, geospatial imaging, surveying, land procurement and other technical services to over 4,750 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.

Previous wording

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.

Current wording

We have a diversified business that is not dependent on any one customer 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.

Previous wording

Gross contract revenue for the years ended December 31, 2023, and 2022 was $346.3 million and $261.7 million, respectively. Gross contract revenue derived from our workforce represented 87.8% and 89.9% of gross contract revenue for the years ended December 31, 2023 and 2022, respectively (see Net service billing – non-GAAP below). Our net (loss) income for the years ended December 31, 2023, and 2022 was ($6.6) million and $5.0 million, respectively. Our Adjusted EBITDA (see Adjusted EBITDA - non-GAAP below) was $47.0 million on net loss of $6.6 million and $34.0 million on net income of $5.0 million for the years ended December 31, 2023, and 2022, respectively.

Current wording

Gross contract revenue for the years ended December 31, 2024, and 2023 was $426.6 million and $346.3 million, respectively. Gross contract revenue derived from our workforce (see Net service billing – non-GAAP below) represented 89.0% and 87.8% of gross contract revenue for the years ended December 31, 2024 and 2023, respectively. Our net income (loss) for the years ended December 31, 2024, and 2023 was $3.0 million and ($6.6) million, respectively. Our Adjusted EBITDA (see Adjusted EBITDA - non-GAAP below) was $59.5 million on net income of $3.0 million and $47.0 million on net loss of $6.6 million for the years ended December 31, 2024, and 2023, respectively.

Previous wording

The majority of our assignments are lump sum in nature representing approximately 62% and 70% of our gross contract revenue for the years ended December 31, 2023 and 2022, 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

The majority of our assignments are lump sum in nature representing approximately 60% and 62% of our gross contract revenue for the years ended December 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.

Previous wording

We perform an annual impairment test as of October 1 of each year with quarterly confirmations that no changes in circumstances have occurred. As our business is highly integrated and its components have similar economic characteristics, we have concluded we operate as one reporting unit at the combined entity level. We do not amortize goodwill, but rather evaluate goodwill for potential impairment on an annual basis or at other times during the year if indicators of impairment exist. We evaluate goodwill for potential impairment by comparing the carrying value of the reporting unit to its fair value. When we evaluate goodwill for potential impairment, generally, we first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If we determine qualitatively that it is more likely than not that the fair value of a reporting unit is less than its carrying value, or if we decide to bypass the qualitative assessment, we perform a quantitative analysis. The quantitative analysis is used to identify both the existence of impairment and the amount of the impairment loss by comparing the estimated fair value of a reporting unit to its carrying value, including goodwill. The estimated fair value is based on forward-looking estimates of performance and cash flows of our reporting units, which are based on historical operating results, adjusted for current and expected future market conditions, as well as various internal projections and external sources. If the carrying value of the reporting unit exceeds its estimated fair value, an impairment loss would be recognized in our consolidated statement of operations in an amount equal to the excess of the carrying value over the estimated fair value, limited to the total amount of goodwill allocated to that reporting unit.

Current wording

We perform an annual impairment test as of October 1 of each year with quarterly confirmations that no triggering events have occurred. As our business is highly integrated and its components have similar economic characteristics, we have concluded we operate as one reporting unit at the combined entity level. We evaluate goodwill for potential impairment on an annual basis or at other times during the year if indicators of impairment exist. We evaluate goodwill for potential impairment by comparing the carrying value of the reporting unit to its fair value. When we evaluate goodwill for potential impairment, generally, we first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If we determine qualitatively that it is more likely than not that the fair value of a reporting unit is less than its carrying value, or if we decide to bypass the qualitative assessment, we perform a quantitative analysis. The quantitative analysis is used to identify both the existence of impairment and the amount of the impairment loss by comparing the estimated fair value of a reporting unit to its carrying value, including goodwill. The estimated fair value is based on forward-looking estimates of performance and cash flows of our reporting units, which are based on historical operating results, adjusted for current and expected future market conditions, as well as various internal projections and external sources. If the carrying value of the reporting unit exceeds its estimated fair value, an impairment loss would be recognized in our consolidated statement of operations in an amount equal to the excess of the carrying value over the estimated fair value, limited to the total amount of goodwill allocated to that reporting unit.

Previous wording

Gross contract revenue for the year ended December 31, 2023 increased $84.6 million or 32.3% to $346.3 million as compared to $261.7 million for the year ended December 31, 2022. For the year ended December 31, 2023, gross contract revenue attributable to work performed by our workforce increased $68.8 million, or 29.3% to $304.0 million or 87.8% of gross contract revenue as compared to $235.2 million or 89.9% for year ended December 31, 2022 (see Net service billing – non-GAAP). Of the $84.6 million increase in gross contract revenue during the year ended December 31, 2023, acquisitions completed in 2023 represented $30.5 million or 36.5% of the increase.

Current wording

Gross contract revenue for the year ended December 31, 2024 increased $80.3 million or 23.2% to $426.6 million as compared to $346.3 million for the year ended December 31, 2023. For the year ended December 31, 2024, gross contract revenue attributable to work performed by our workforce increased $75.7 million, or 24.9% to $379.7 million or 89.0% of gross contract revenue as compared to $304.0 million or 87.8% for year ended December 31, 2023 (see Net service billing – non-GAAP). Of the $80.3 million increase in gross contract revenue during the year ended December 31, 2024, acquisitions completed in 2024 represented $42.5 million or 52.9% of the increase.

Previous wording

1 represents environmental, mining, water resources and other

Current wording

1 Represents environmental, mining, water resources, imaging and mapping and other.

Previous wording

For the year ended December 31, 2023, gross contract revenue from our building infrastructure market increased $24.4 million or 14.3% as compared to the year ended December 31, 2022. Building Infrastructure includes commercial, municipal and residential infrastructure. The increase in building infrastructure revenue is the result of organic growth and acquisitions. Within the building infrastructure market, 35.7% of gross contract revenue was derived from residential assignments including single family, multi-family and mixed-use housing stock, 48.3% from commercial assignments including retail, hospitality and quick-serve restaurants (QSR), office and industrial, data centers and healthcare, and 16.0% from municipal assignments. Within residential, 43.9% of gross contract revenue was derived from for-sale homebuilding assignments, 47.0% from residential multi-family and 9.1% from mixed use projects. While the homebuilding market shows signs of rebounding from prior year interest rate impacts, for-sale residential services represented just 8.8% of our total gross contract revenue for year ended December 31, 2023. Within commercial, 42.1% of revenue was derived from office and industrial assignments, 39.1% from retail, hospitality, and quick serve restaurants, 11.6% from data centers, 5.1% from healthcare and 2.1% was from other projects. 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 year ended December 31, 2024, gross contract revenue from our building infrastructure market increased $24.7 million or 12.7% as compared to the year ended December 31, 2023. Building Infrastructure includes commercial, municipal and residential infrastructure. The increase in building infrastructure revenue is the result of organic growth and acquisitions. Within the building infrastructure market, 36.0% of gross contract revenue was derived from residential assignments including single family, multi-family and mixed-use housing stock, 45.0% from commercial assignments including retail, hospitality and quick-serve restaurants (QSR), office and industrial, data centers and healthcare, and 19.0% from municipal assignments. Within residential, 53.3% of gross contract revenue was derived from for-sale homebuilding assignments, 40.4% from residential multi-family and 6.3% 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 year ended December 31, 2024. Within commercial, 36.6% of revenue was derived from office and industrial assignments, 40.0% from retail, hospitality, and quick serve restaurants, 15.1% from data centers, 8.3% 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.

Previous wording

For the year ended December 31, 2023, revenue from transportation increased $28.0 million or 62.4% as compared to the year ended December 31, 2022. 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, 66.7% 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 33.3% 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 year ended December 31, 2024, revenue from transportation increased $14.9 million or 20.5% as compared to the year ended December 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, 61.8% 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 38.2% 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 year ended December 31, 2023, revenue from power and utilities increased $31.5 million or 96.4% as compared to the year ended December 31, 2022. 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, 78.3% of our gross contract revenue was derived from customers operating traditional power operations and 21.7% 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 year ended December 31, 2024, revenue from power and utilities increased $10.9 million or 16.9% as compared to the year ended December 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, 75.4% of our gross contract revenue was derived from customers operating traditional power operations and 24.6% 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.

Previous wording

Our other emerging markets consist of mining, water resources, environmental consulting, and other natural resources services. Adjusted for the change, for the year ended December 31, 2023, revenue from emerging markets increased $0.6 million or 4.6% as compared to the year ended December 31, 2022. 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 46.6% from mining activities where we have specialized in copper mining, 43.7% from water resources activities, and 9.7% 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 emerging markets consist of mining, water resources, environmental consulting, imaging and mapping and other natural resources services. For the year ended December 31, 2024, revenue from emerging markets increased $29.8 million or 206.8% as compared to the year ended December 31, 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 43.7% from imaging and mapping, 19.9% from mining activities where we have specialized in copper mining, 26.3% from water resources activities, and 10.1% 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 year ended December 31, 2023 and 2022, public sector customers, defined as direct contracts with municipalities, public agencies, or governmental authorities, remained relatively unchanged at 20.8% and 21.0% 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 years ended December 31, 2024 and 2023, public sector customers, defined as direct contracts with municipalities, public agencies, or governmental authorities, represented 26.8% and 20.8% of our gross contract revenue,, respectively. A portion of that increase is due to the reclassification of Pike Corporation from the private sector to the public sector. This does not include work done indirectly on public sector projects. Gross contract revenue from projects for public sector customers are included in the end market most aligned with work performed.

Previous wording

Total contract costs, exclusive of depreciation and amortization, increased $43.6 million or 34.4% to $170.2 million for the year ended December 31, 2023, as compared to $126.6 million for the year ended December 31, 2022. For the year ended December 31, 2023 and 2022, total contract costs represented 49.1% and 48.4% of total contract revenue, respectively. For the years ended December 31, 2023 and 2022 total contract costs represented 56.0% and 53.8% of revenue attributable to our workforce, respectively (see Net Service Revenue). Total contract costs include both direct payroll costs, and sub-consultants and other expenses.

Current wording

Total contract costs, exclusive of depreciation and amortization, increased $33.6 million or 19.7% to $203.8 million for the year ended December 31, 2024, as compared to $170.2 million for the year ended December 31, 2023. For the years ended December 31, 2024 and 2023, total contract costs represented 47.8% and 49.1% of total contract revenue, respectively. For the years ended December 31, 2024 and 2023 total contract costs represented 53.7% and 56.0% of revenue attributable to our workforce, respectively (see Net Service Revenue). Total contract costs include both direct payroll costs, and sub-consultants and other expenses.

Previous wording

Total direct payroll costs increased $27.9 million or 27.9% to $128.0 million for the year ended December 31, 2023, as compared to $100.1 million for the year ended December 31, 2022 due to increased staffing resulting from acquisitions and organic growth. Total direct payroll accounted for 75.2% of total contract costs for the year ended December 31, 2023, a decrease of 3.9 percentage points as compared to 79.1% for the year ended December 31, 2022.

Current wording

Total direct payroll costs increased $28.9 million or 22.6% to $156.9 million for the year ended December 31, 2024, as compared to $128.0 million for the year ended December 31, 2023 due to increased staffing resulting from acquisitions and organic growth. Total direct payroll accounted for 77.0% of total contract costs for the year ended December 31, 2024, an increase of 1.8 percentage points as compared to 75.2% for the year ended December 31, 2023.

Previous wording

Direct labor, the component of total direct payroll costs associated with the labor time charged to contracts (often referred to within or industry as utilization) increased $21.7 million or 29.2% to $96.0 million for the year ended December 31, 2023 as compared $74.3 million for the year ended December 31, 2022. For the year ended December 31, 2023 and 2022, direct labor costs represented 27.7% and 28.4% of gross contract revenue, respectively and represented 31.6% and 31.6% of the revenue attributable to our workforce, respectively. Labor costs not charged directly to customer contracts is considered indirect time and is treated as selling, general and administrative expense.

Current wording

Direct labor, the component of total direct payroll costs associated with the cost of labor relating to work performed on contracts (often referred to within our industry as utilization) increased $22.0 million or 22.9% to $118.0 million for the year ended December 31, 2024 as compared $96.0 million for the year ended December 31, 2023. For the year ended December 31, 2024 and 2023, direct labor costs represented 27.7% and 27.7% of gross contract revenue, respectively and represented 31.1% and 31.6% of the revenue attributable to our workforce, respectively. Labor costs not charged directly to customer contracts is considered indirect time and is treated as selling, general and administrative expense.

Previous wording

Other direct payroll costs, the component of total direct payroll costs associated with fringe and incentive compensation (cash and non-cash) increased by $6.0 million or 23.2% to $31.9 million for the year ended December 31, 2023 as compared to $25.9 million for the year ended December 31, 2022. This increase includes a $3.4 million increase in employee payroll taxes and a $3.3 million increase in health benefits for the year ended December 31, 2023, primarily due to the increase in the overall labor pool. This increase includes an increase of $2.9 million in the cost of non-cash stock compensation relating to direct payroll costs to $7.1 million for the year ended December 31, 2023, as compared to $4.2 million for the year ended December 31, 2022. The increase in non-cash stock compensation is likewise attributable to the increase in the overall labor pool.

Current wording

Other direct payroll costs, the component of total direct payroll costs associated with fringe and incentive compensation (cash and non-cash) increased by $6.9 million or 21.6% to $38.8 million for the year ended December 31, 2024 as compared to $31.9 million for the year ended December 31, 2023. This increase includes a $3.5 million increase in employee payroll taxes and a $1.1 million increase in health benefits for the year ended December 31, 2024, primarily due to the increase in the overall labor pool. This increase includes an increase of $1.1 million in the cost of non-cash stock compensation relating to direct payroll costs to $8.2 million for the year ended December 31, 2024, as compared to $7.1 million for the year ended December 31, 2023. The increase in non-cash stock compensation is likewise attributable to the increase in the overall labor pool.

Previous wording

Sub-consultants and expenses increased $15.8 million or 59.6% to $42.3 million for the year ended December 31, 2023, as compared to $26.5 million for the year ended December 31, 2022. For the year ended December 31, 2023 and 2022, sub-consultant and expenses represented 12.2% and 10.1% of gross contract revenue, respectively. We expect sub-consultant costs to be in the range of 10-15% of gross contract revenue depending on contract mix at any given time, with transportation contracts tending to have a slightly higher sub-consultant percentage. The growth in sub-consultants and expenses is directly in-line with the increase of gross contract revenue.

Current wording

Sub-consultants and expenses increased $4.6 million or 10.9% to $46.9 million for the year ended December 31, 2024, as compared to $42.3 million for the year ended December 31, 2023. For the years ended December 31, 2024 and 2023, sub-consultant and expenses represented 11.0% and 12.2% of gross contract revenue, respectively. We expect sub-consultant costs to be in the range of 10-15% of gross contract revenue depending on contract mix at any given time, with transportation contracts tending to have a slightly higher sub-consultant percentage. The growth in sub-consultants and expenses is directly in-line with the increase of gross contract revenue.

Previous wording

Total operating expense increased $46.7 million or 35.9% to $176.7 million for the year ended December 31, 2023, as compared to $130.0 million for the year ended December 31, 2022.

Current wording

Total operating expense increased $48.1 million or 27.2% to $224.8 million for the year ended December 31, 2024, as compared to $176.7 million for the year ended December 31, 2023.

Previous wording

Selling, general and administrative expenses increased $40.6 million or 34.5% to $158.4 million for the year ended December 31, 2023, as compared to $117.8 million for the year ended December 31, 2022. Indirect labor increased $20.2 million or 39.7% to $71.1 million for the year ended December 31, 2023, as compared to $50.9 million for the year ended December 31, 2022, as a result of increased staffing to accommodate growth and a seasonally impacted decrease in utilization in December 2023. General overhead increased $11.1 million or 27.8% to $51.0 million for the year ended December 31, 2023, as compared to $39.9 million for the year ended December 31, 2022, due to increased costs associated with operating as a public company, geographic expansion, and the overall growth of the company. Non-cash stock compensation associated with indirect labor hours, those not charged to customer contracts, increased $6.7 million or 61.5% to $17.6 million for the year ended December 31, 2023, as compared to $10.9 million for the year ended December 31, 2022, primarily resulting from the increase in our overall labor pool. We believe our ability to provide long-term stock related compensation to our employees is a competitive advantage for attracting and retaining labor.

Current wording

Selling, general and administrative expenses increased $39.1 million or 24.7% to $197.5 million for the year ended December 31, 2024, as compared to $158.4 million for the year ended December 31, 2023. Indirect labor increased $19.2 million or 27.0% to $90.3 million for the year ended December 31, 2024, as compared to $71.1 million for the year ended December 31, 2023, as a result of increased staffing to accommodate growth. General overhead increased $15.1 million or 29.6% to $66.1 million for the year ended December 31, 2024, as compared to $51.0 million for the year ended December 31, 2023, due to increased costs associated with operating as a public company, geographic expansion, and the overall growth of the company. Non-cash stock compensation associated with indirect labor hours, those not charged to customer contracts, decreased ($0.1) million or (0.6%) to $17.5 million for the year ended December 31, 2024, as compared to $17.6 million for the year ended December 31, 2023.

Previous wording

Depreciation and amortization increased $6.4 million or 52.0% to $18.7 million for the year ended December 31, 2023, as compared to $12.3 million for the year ended December 31, 2022. This increase is primarily due to an increase in leased assets and intangible assets accumulated through acquisitions. We continue to increase the use of our finance lease facility as we continue to grow. Intangible assets have increased due to multiple acquisitions in 2023. Gains on the sale of certain IT equipment and automobiles increased $0.3 million or 300% to $0.4 million for the year ended December 31, 2023, as compared to $0.1 million for the year ended December 31, 2022.

Current wording

Depreciation and amortization increased $9.1 million or 48.7% to $27.8 million for the year ended December 31, 2024, as compared to $18.7 million for the year ended December 31, 2023. This increase is primarily due to an increase in leased assets and intangible assets accumulated through acquisitions. We continue to increase the use of our finance lease facility as we continue to grow. Intangible assets have increased due to multiple acquisitions in 2024. Gains on the sale of certain IT equipment and automobiles increased $0.1 million or 25.0% to $0.5 million for the year ended December 31, 2024, as compared to $0.4 million for the year ended December 31, 2023.

Previous wording

Other expense increased by $2.4 million to $5.8 million of expense for the year ended December 31, 2023 as compared to $3.4 million of expense for the year ended December 31, 2022. Interest expense increased by $2.9 million. This increase is primarily attributable to increases in finance leases and acquisitions.

Current wording

Other expense increased by $1.1 million to $6.9 million of expense for the year ended December 31, 2024 as compared to $5.8 million of expense for the year ended December 31, 2023. Interest expense increased by $2.6 million. This increase is primarily attributable to increases in finance leases and acquisitions.

Previous wording

Income tax benefit for the year ended December 31, 2023 decreased $3.5 million or 106.1% to ($0.2) million expense, as compared to $3.3 million benefit for the year ended December 31, 2022. Effective upon the completion of our initial public offering our tax status converted from cash basis to accrual basis, retroactive to January 1, 2021. This affects the timing of the payment of tax but not the expense of tax. Our effective tax rate for the year ended December 31, 2023 was (2.7%).

Current wording

Income tax benefit for the year ended December 31, 2024 increased $12.2 million or 6,100% to $12.0 million benefit, as compared to ($0.2) million income tax expense for the year ended December 31, 2023. As an accrual basis taxpayer, this affects the timing of the payment of tax but not the expense of tax. Our effective tax rate for the year ended December 31, 2024 was 133.91%.

Previous wording

Loss before tax expense increased by $8.1 million or 476.5% to $6.4 million loss for the year ended December 31, 2023, as compared to a $1.7 million income for the year ended December 31, 2022. Net loss increased by $11.6 million or 232.0% to ($6.6) million for the year ended December 31, 2023, as compared to $5.0 million for the year ended December 31, 2022.

Current wording

Loss before tax expense increased by $2.5 million or 39.1% to $8.9 million loss for the year ended December 31, 2024, as compared to a $6.4 million loss for the year ended December 31, 2023. Net income (loss) increased by $9.6 million or 145.5% to $3.0 million of income for the year ended December 31, 2024, as compared to ($6.6) million of loss for the year ended December 31, 2023.

Previous wording

Net service billing increased $68.8 million or 29.3% to $304.0 million for the year ended December 31, 2023, as compared to $235.2 million for the year ended December 31, 2022. Net service billing reconciles to gross contract revenue as follows (in thousands):

Current wording

Net service billing increased $75.7 million or 24.9% to $379.7 million for the year ended December 31, 2024, as compared to $304.0 million for the year ended December 31, 2023. Net service billing reconciles to gross contract revenue as follows (in thousands):

Previous wording

Net service billing decreased by 2.1 percentage points to 87.8% of gross contract revenue for the year ended December 31, 2023, as compared to 89.9% for the year ended December 31, 2022. This change was within our expected range of 85% to 90% depending on contract mix.

Current wording

Net service billing increased by 1.2 percentage points to 89.0% of gross contract revenue for the year ended December 31, 2024, as compared to 87.8% for the year ended December 31, 2023. This change was within our expected range of 85% to 90% of gross contract revenue, and varies depending on contract mix.

Previous wording

Adjusted EBITDA increased $13.0 million or 38.2% to $47.0 million for the year ended December 31, 2023 as compared to $34.0 million for the year ended December 31, 2022. Adjusted EBITDA reconciles to net income as follows (in thousands):

Current wording

Adjusted EBITDA increased $12.5 million or 26.6% to $59.5 million for the year ended December 31, 2024 as compared to $47.0 million for the year ended December 31, 2023. Adjusted EBITDA reconciles to net income as follows (in thousands):

Previous wording

For the years ended December 31, 2023 and 2022, Adjusted EBITDA includes $25.0 million and $15.4 million, respectively, relating to non-cash stock compensation expenses resulting from the on-going vesting of restricted stock awards.

Current wording

For the years ended December 31, 2024 and 2023, Adjusted EBITDA includes $25.8 million and $25.0 million, respectively, relating to non-cash stock compensation expenses resulting from the on-going vesting of restricted stock awards.

Previous wording

Adjusted EBITDA Margin, net represents Adjusted EBITDA (as defined above) as a percentage of net service billing (as defined above). For the years ended December 31, 2023 and 2022, Adjusted EBITDA Margin, net was 15.5% and 14.5% respectively. Reduced revenue resulting from a seasonally affected reduction in labor utilization in December 2023 impacted Adjusted EBITDA margin. Since all labor was captured and there would have been no meaningful added cost associated with the lost revenue, margin would have been significantly higher had we not experienced the seasonally affected reduction to utilization.

Current wording

Adjusted EBITDA Margin, net represents Adjusted EBITDA (as defined above) as a percentage of net service billing (as defined above). For the years ended December 31, 2024 and 2023, Adjusted EBITDA Margin, net was 15.7% and 15.5% respectively.

Previous wording

Our backlog increased $63 million or 25.9% to approximately $306 million during the year ended December 31, 2023, as compared to $243 million at December 31, 2022. At December 31, 2023 and 2022, our backlog was comprised as follows:

Current wording

Our backlog increased $93 million or 30.5% to approximately $399 million during the year ended December 31, 2024, as compared to $306 million at December 31, 2023. At December 31, 2024 and 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 December 31, 2023, 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 consists of petty cash and other non-operating funds not included in the nightly sweep. Cash on hand includes the cash we keep in short-term investment accounts along with deposits and payments in transit in our operating sweep account. Our cash on hand increased by $7.4 million at December 31, 2023 as compared to December 31, 2022.

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 December 31, 2024, we maintained a $100.0 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 consists of petty cash and other non-operating funds not included in the nightly sweep. Cash on hand includes the cash we keep in short-term investment accounts along with deposits and payments in transit in our operating sweep account. Our cash on hand decreased by $14.0 million at December 31, 2024 as compared to December 31, 2023.

Previous wording

We are actively pursuing acquisitions as part of our strategic growth initiative. At any given time, we are assessing multiple opportunities at varying stages of due diligence. These acquisition opportunities range in size, timing of closing, valuation and composition of consideration. In connection with acquisitions, we use a combination of cash, bank financing, seller financing, and equity to satisfy the purchase price. At this time, we have several acquisitions under consideration. There can be no assurance that any opportunity in the process of being reviewed will close but we expect over time to utilize a meaningful portion our current liquidity and capital resources for acquisitions.

Current wording

We are actively pursuing acquisitions as part of our strategic growth initiative. At any given time, we are assessing multiple opportunities at varying stages of due diligence. These acquisition opportunities range in size, timing of closing, valuation and composition of consideration. In connection with acquisitions, we use a combination of cash, bank financing, seller financing, and equity to satisfy the purchase price. There can be no assurance that any opportunity in the process of being reviewed will close but we expect over time to utilize a meaningful portion our current liquidity and capital resources for acquisitions.

Previous wording

During the year ended December 31, 2022, net cash provided by operating activities was $9.2 million, which primarily consisted of $5.0 million net income, adjusted for stock-based compensation expense of $15.1 million and depreciation and amortization expense of $12.3 million, offset by an increase in deferred taxes of $18.0 million, and an increase in a net cash outflow of $6.1 million from changes in operating assets and liabilities. The net outflow from changes in operating assets and liabilities was primarily due to a $13.8 million increase in accounts receivable resulting from increased billing to our clients as well as additional billing from the acquired companies, a $2.0 million increase in prepaid expenses and a $5.9 million net increase in contract assets and liabilities, offset by a $15.8 million increase in accounts payable and accrued expenses, inclusive of a long-term accrual relating to an uncertain tax position with respect to the capitalization of research and development expenses.

Current wording

During the year ended December 31, 2024, net cash provided by operating activities was $24.3 million, which primarily consisted of $3.0 million net income, adjusted for stock-based compensation expense of $25.7 million and depreciation and amortization expense of $28.4 million, offset by an increase in deferred taxes relating to the capitalization of research and development costs of $20.0 million, and an increase in a net cash inflow of $14.5 million from changes in operating assets and liabilities. The net inflow from changes in operating assets and liabilities was primarily due to a $9.3 million increase in accounts receivable resulting from increased billing to our customers as well as additional billing from the acquired companies, a $5.7 million increase in prepaid expenses and a $7.1 million net increase in contract assets and liabilities, offset by a $7.6 million increase in accounts payable and accrued expenses, inclusive of a long-term accrual relating to an uncertain tax position with respect to the capitalization of research and development expenses.

Previous wording

During the year ended December 31, 2023, net cash provided by operating activities was $11.7 million, which primarily consisted of ($6.6) million net loss, adjusted for stock-based compensation expense of $24.7 million and depreciation and amortization expense of $18.7 million, offset by an increase in deferred taxes relating to the capitalization of research and development costs of $25.5 million, and an increase in a net cash outflow of $0.3 million from changes in operating assets and liabilities. The net outflow from changes in operating assets and liabilities was primarily due to a $13.6 million increase in accounts receivable resulting from increased billing to our clients as well as additional billing from the acquired companies, a $0.1 million decrease in prepaid expenses and a $7.1 million net increase in contract assets and liabilities, offset by a $27.7 million increase in accounts payable and accrued expenses, inclusive of a long-term accrual relating to an uncertain tax position with respect to the capitalization of research and development expenses.

Current wording

During the year ended December 31, 2023, net cash provided by operating activities was $11.7 million, which primarily consisted of ($6.6) million net loss, adjusted for stock-based compensation expense of $24.7 million and depreciation and amortization expense of $18.7 million, offset by an increase in deferred taxes relating to the capitalization of research and development costs of $25.5 million, and an increase in a net cash outflow of $0.3 million from changes in operating assets and liabilities. The net outflow from changes in operating assets and liabilities was primarily due to a $13.6 million increase in accounts receivable resulting from increased billing to our customers as well as additional billing from the acquired companies, a $0.1 million decrease in prepaid expenses and a $14.6 million net increase in contract assets and liabilities, offset by a $27.7 million increase in accounts payable and accrued expenses, inclusive of a long-term accrual relating to an uncertain tax position with respect to the capitalization of research and development expenses.

Previous wording

Net cash used in investing activities was $27.2 million for the year ended December 31, 2023, $25.7 million was related to acquisitions that occurred in 2023 and $2.1 million was for purchases of property and equipment.

Current wording

Net cash used in investing activities was $27.5 million for the year ended December 31, 2024, $27.4 million was related to acquisitions that occurred in 2024 and $0.1 million was for purchases of property and equipment.

Previous wording

Net cash provided by financing activities was $22.8 million during the year ended December 31, 2023. This was primarily due to net proceeds of $45.3 million from our Revolving Credit Facility, offset by $4.8 million of payments for the purchase of treasury stock, $0.7 million for repurchase of common stock, $6.8 million of payments on finance leases and $11.2 million of payments on notes payable and our fixed lines of credit.

Current wording

Net cash used in financing activities was $10.8 million during the year ended December 31, 2024. This was primarily due to net borrowing of $8.3 million from our Revolving Credit Facility, $11.1 million of payments for the purchase of treasury stock, $23.3 million for repurchase of common stock, $9.0 million of payments on finance leases and $16.6 million of payments on notes payable and our fixed lines of credit, offset by $47.2 million of proceeds from a common share offering.

Previous wording

As of December 31, 2023, we maintained a $70.0 million revolving credit facility (the “Revolving Credit Facility”) and two non-revolving credit facilities (“Fixed Line 1” and “Fixed Line 2”) pursuant to an Amended and Restated Credit Agreement (collectively with the Revolving Credit Facility, as amended and restated the “Credit Agreement”) with Bank of America, our primary lender. The Credit Agreement has a maturity date of July 31, 2025. Under the terms of the Revolving Credit Facility, available cash in our primary operating account sweeps against the outstanding balance every evening. As of December 31, 2023, the balance on this Revolving Credit Facility was $45.3 million.

Current wording

As of December 31, 2024, we maintained a $100.0 million revolving credit facility (the “Revolving Credit Facility 2024”) pursuant to a 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 Revolving Credit Facility 2024 has a maturity date of May 2, 2029. Under the terms of the Revolving Credit Facility 2024, available cash in our primary operating account sweeps against the outstanding balance every evening. As of December 31, 2024, the balance on this Revolving Credit Facility 2024 was $37.0 million.

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 December 31, 2023, we were in compliance with all covenants.

Current wording

The Revolving Credit Facility 2024 is secured by all the assets of the Company and the subsidiary guarantors. Under the Revolving Credit Facility 2024, 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 Revolving Credit Facility 2024). At December 31, 2024, we were in compliance with all covenants.

Previous wording

For more information about our credit facilities, see Note 11 – Revolving Credit Facility and Fixed Credit Facilities.

Current wording

For more information about our credit facilities, see Note 11 – Revolving Credit Facility and Fixed Credit Facility.