Bowman Consulting Group Ltd.

Previous wording

The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains “forward-looking statements” reflecting our current expectations, estimates and assumptions concerning events and financial trends that may affect our future operating results or financial position. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to several factors. Factors that could cause or contribute to such differences include, but are not limited to, economic and competitive conditions, regulatory changes, and other uncertainties, as well as those factors discussed in the Risk Factors section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the “Annual Report on Form 10-K”) filed with the US Securities and Exchange Commission and elsewhere in this Quarterly Report on Form 10-Q, particularly in “Cautionary Statement about Forward-Looking Statements,” all of which are difficult to predict. Considering these risks, uncertainties and assumptions, the forward-looking events discussed may not occur. We assume no obligation to update any of these forward-looking statements, except to the extent required by applicable laws or rules. Unless the context otherwise requires, references to “Bowman,” the “company,” the “Company,” “we,” “us,” and “our” refer to Bowman Consulting Group Ltd., its wholly owned subsidiaries and combined entities under common control, or either or all of them as the context may require.

Current wording

The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains “forward-looking statements” reflecting our current expectations, estimates and assumptions concerning events and financial trends that may affect our future operating results or financial position. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to several factors. Factors that could cause or contribute to such differences include, but are not limited to, economic and competitive conditions, regulatory changes, and other uncertainties, as well as those factors discussed in the Risk Factors section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 (the “Annual Report on Form 10-K”) filed with the US Securities and Exchange Commission on March 12, 2025 (the “Annual Report on Form 10-K”) and elsewhere in this Quarterly Report on Form 10-Q, particularly in “Cautionary Statement about Forward-Looking Statements,” all of which are difficult to predict. Considering these risks, uncertainties and assumptions, the forward-looking events discussed may not occur. We assume no obligation to update any of these forward-looking statements, except to the extent required by applicable laws or rules. Unless the context otherwise requires, references to “Bowman,” the “company,” the “Company,” “we,” “us,” and “our” refer to Bowman Consulting Group Ltd., its wholly owned subsidiaries and combined entities under common control, or either or all of them as the context may require.

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 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 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 three months ended September 30, 2024 and 2023 was $113.9 million and $94.4 million, respectively, representing year over year growth of 20.7%. Gross contract revenue derived from our workforce represented 89.0% and 87.0% of gross contract revenue for the three months ended September 30, 2024 and 2023, respectively (see Net service billing – non-GAAP below). Our net income for the three months ended September 30, 2024 and 2023 was $0.8 million and $1.2 million, respectively. Our Adjusted EBITDA for the three months ended September 30, 2024 and 2023 was $17.0 million on net income of $0.8 million and $15.1 million on net income of $1.2 million, respectively.(see Adjusted EBITDA – non-GAAP below)

Current wording

Gross contract revenue for the three months ended March 31, 2025 and 2024 was $112.9 million and $94.9 million, respectively, representing year over year growth of 19.0%. Gross contract revenue derived from our workforce represented 88.6% and 90.3% of gross contract revenue for the three months ended March 31, 2025 and 2024, respectively (see Net service billing – non-GAAP below). Our net loss for the three months ended March 31, 2025 and 2024 was ($1.7) million and ($1.6) million, respectively. Our Adjusted EBITDA for the three months ended March 31, 2025 and 2024 was $14.5 million on net loss of ($1.7) million and $12.1 million on net loss of ($1.6) million, respectively.(see Adjusted EBITDA – non-GAAP below).

Previous wording

We generate revenue from services performed by our employees, pass-through fees from sub-consultants, and reimbursable contract costs. On our condensed consolidated financial statements, we report gross revenue, which represents total revenue billed to customers excluding taxes collected from customers. Gross revenue less revenue derived from pass-through sub-consultant fees, reimbursable expenses and other direct expenses represents our net service billing, or that portion of our gross revenue attributable to services performed by our employees. Our peers use the calculation underlying net service billing to normalize peer performance assessments and provide meaningful insight into trends over time. Refer to —Other Financial Data, Non-GAAP measurements and Key Performance Indicators below for further discussion of the use of this non-GAAP financial measure.

Current wording

We generate revenue from services performed by our employees, pass-through fees from sub-consultants, and reimbursable contract costs. On our condensed consolidated financial statements, we report gross revenue, which represents total revenue billed to customers excluding taxes collected from customers. Gross revenue less revenue derived from pass-through sub-consultant fees, reimbursable expenses and other direct expenses represents our net service billing, or that portion of our gross revenue attributable to services performed by our employees. Our industry uses the calculation underlying net service billing to normalize peer performance assessments and provide meaningful insight into trends over time. Refer to —Other Financial Data, Non-GAAP measurements and Key Performance Indicators below for further discussion of the use of this non-GAAP financial measure.

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. The majority of our assignments are lump sum in nature representing approximately $104.1 million and $283.1 million or 91% and 90% of our gross contract revenue for the three and nine months ended September 30, 2024, respectively. For each of the three and nine months ended September 30, 2023, assignments that are lump sum in nature represented approximately $83.0 million and $224.8 million or 88% and 89% of our gross contract revenue, 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 has no documented customer commitment and is performed at risk.

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.

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 $30.2 million or 9% and 10% of our gross contract revenue for each of the three and nine months ended September 30, 2024, respectively. For each of the three and nine months ended September 30, 2023, hourly assignments represented approximately $11.4 million and $28.5 million or 12% and 11% of our gross contract revenue, 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.

Previous wording

Performance under our contracts does not involve significant machinery or other long term depreciable assets. Most of the equipment we employ involves desktop computers and other shared ordinary course IT equipment. We present direct costs exclusive of depreciation and amortization and as such we do not present gross profit on our condensed consolidated financial statements.

Current wording

Performance under our contracts does not involve significant machinery or other long term depreciable assets. Most of the equipment we employ involves desktop computers and other shared ordinary course IT equipment, along with various geospatial systems and scanners. We present direct costs exclusive of depreciation and amortization and as such we do not present gross profit on our condensed consolidated financial statements.

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-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.

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. This expense is based on the amortization of the grant date fair value of equity grants over the vesting period. Non-cash stock compensation cost for permanent equity is 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. Stock issued as consideration in connection with acquisitions where there is no service period, and no risk of forfeiture, is considered a component of the purchase price and does not run through our income statement as non-cash compensation expense. 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

Other (income) expense consists of other non-operating and non-core expenses, including transaction related costs associated with acquisitions.

Current wording

Other (income) expense consists of other non-operating and non-core expenses.

Previous wording

We view Adjusted EBITDA, which is a non-GAAP financial measure, as an important indicator of normalized performance. We define Adjusted EBITDA as net income before interest expense, income taxes and depreciation and amortization, plus discontinued expenses, non-core legal settlements and other costs not in the ordinary course of business, non-cash stock-based compensation, and other acquisition related adjustments such as professional fees, fair value adjustments and working capital adjustments. Our peers may define Adjusted EBITDA differently.

Current wording

We view Adjusted EBITDA, which is a non-GAAP financial measure, as an important indicator of normalized performance. We define Adjusted EBITDA as net income before interest expense, income taxes and depreciation and amortization, plus expenses associated with discontinued operations, legal settlements not related to our general course of business professional services, and other costs not in the ordinary course of business, non-cash stock-based compensation (inclusive of expenses associated with the adjustment of our liability for common shares subject to redemption), and other adjustments such as costs associated with raising equity and other forms of capital. Our peers may define Adjusted EBITDA differently.

Previous wording

Gross contract revenue for the three months ended September 30, 2024, increased $19.5 million or 20.6% to $113.9 million as compared to $94.4 million for the three months ended September 30, 2023. For the three months ended September 30, 2024, gross contract revenue attributable to work performed by our workforce increased $19.3 million, or 23.5% to $101.4 million or 89.0% of gross contract revenue as compared to $82.1 million or 87.0% for the three months ended September 30, 2023 (see Net service billing – non-GAAP). Of the $19.5 million increase in gross contract revenue during the three months ended September 30, 2024, acquisitions represented $23.3 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 March 31, 2025, increased $18.0 million or 19.0% to $112.9 million as compared to $94.9 million for the three months ended March 31, 2024. For the three months ended March 31, 2025, gross contract revenue attributable to work performed by our workforce increased $14.4 million, or 16.8% to $100.1 million or 88.6% of gross contract revenue as compared to $85.7 million or 90.3% for the three months ended March 31, 2024 (see Net service billing – non-GAAP). Of the $18.0 million increase in gross contract revenue during the three months ended March 31, 2025, acquisitions represented $11.8 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

3 Includes periodic reclassifications of revenue between categories from prior periods for consistency of presentation.

Current wording

1 Includes periodic reclassifications of revenue between categories from prior periods for consistency of presentation.

Previous wording

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

Current wording

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

Previous wording

2 Acquired revenue in prior periods is as previously reported; four quarters post-closing, acquired revenue is reclassified as organic for the purpose of calculating organic growth rates.

Current wording

3 Acquired revenue in prior periods is as previously reported; four quarters post-closing, acquired revenue is reclassified as organic for the purpose of calculating organic growth rates.

Previous wording

For the three months ended September 30, 2024, gross contract revenue from our building infrastructure market increased $4.3 million or 8.2% as compared to the three months ended September 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, 39.3% of gross contract revenue was derived from residential assignments including single family, multi-family and mixed-use housing stock, 42.9% from commercial assignments including retail, hospitality and quick-serve restaurants (QSR), office and industrial, data centers and healthcare, and 17.7% from municipal assignments, including parks and schools. Within residential, 59.8% of gross contract revenue was derived from for-sale homebuilding assignments, 35.7% from residential multi-family and 4.5% from mixed use projects. While the homebuilding market shows signs of rebounding from prior year interest rate impacts, for-sale residential services represented just 11.6% of our total gross contract revenue for the three months ended September 30, 2024. Within commercial, 36.7% of revenue was derived from office and industrial assignments, 41.3% from retail, hospitality, and quick serve restaurants, 15.7% from data centers, and 6.2% 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 March 31, 2025, gross contract revenue from the building infrastructure market increased $3.1 million or 5.9% as compared to the three months ended March 31, 2024. Building Infrastructure includes commercial, municipal and residential infrastructure. The increase in building infrastructure revenue was the result of acquisitions. Within the building infrastructure market, 39.4% of gross contract revenue was derived from residential assignments including single family, multi-family and mixed-use housing stock, 43.5% from commercial assignments including retail, hospitality and quick-serve restaurants (QSR), office and industrial, data centers and healthcare, and 17.1% from municipal assignments, including parks and schools. Within residential, 51.2% of gross contract revenue was derived from for-sale homebuilding assignments, 42.4% 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 10.0% of our total gross contract revenue for the three months ended March 31, 2025. Within commercial, 40.5% of revenue was derived from office and industrial assignments, 39.5% from retail, hospitality, and quick serve restaurants, 15.9% from data centers, and 4.1% 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 September 30, 2024, revenue from transportation increased $2.1 million or 10.5% as compared to the three months ended September 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, 64.5% 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 35.5% 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.

Current wording

For the three months ended March 31, 2025, revenue from transportation increased $5.4 million or 29.9% as compared to the three months ended March 31, 2024. 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, 67.8% 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 32.2% 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 three months ended September 30, 2024, revenue from power and utilities increased $1.5 million or 7.8% as compared to the three months ended September 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.

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 March 31, 2025, revenue from power and utilities increased $3.0 million or 16.1% as compared to the three months ended March 31, 2024. 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, 74.1% of our gross contract revenue was derived from customers operating traditional power operations and 25.9% 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, imaging and mapping, environmental consulting, and other natural resources services. Adjusted for the change, for the three months ended September 30, 2024, revenue from emerging markets increased $11.7 million or 280.5% as compared to the three months ended September 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 54.0% from imaging and mapping activities, 12.9% from mining activities where we have specialized in copper mining, 25.3% from water resources activities, and 7.8% 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 emerging markets consist of mining, water resources, imaging and mapping, environmental consulting, and other natural resources services. For the three months ended March 31, 2025, revenue from emerging markets increased $6.5 million or 117.8% as compared to the three months ended March 31, 2024. 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 47.1% from imaging and mapping activities, 20.6% from mining activities where we have specialized in copper mining, 26.4% 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 September 30, 2024 and 2023, public sector customers, defined as direct contracts with municipalities, public agencies, or governmental authorities, represented 32.3% and 14.8% of our gross contract revenue, respectively. A portion of that increase is due to the reclassification of contracts for the 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 clients are included in the end market most aligned with work performed.

Current wording

For the three months ended March 31, 2025 and 2024, public sector customers, defined as direct contracts with municipalities, public agencies, or governmental authorities, represented 32.1% and 19.8% of our gross contract revenue, respectively. A portion of that increase is due to the reclassification of contracts for the 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 $8.6 million or 18.8% to $54.3 million for the three months ended September 30, 2024, as compared to $45.7 million for the three months ended September 30, 2023. For the three months ended September 30, 2024 and 2023, total contract costs represented 47.7% and 48.4% of total contract revenue, respectively. For the three months ended September 30, 2024 and 2023 total contract costs represented 53.6% and 55.6% of revenue attributable to our workforce, respectively (see Net Service Billing).

Current wording

Total contract costs, exclusive of depreciation and amortization, increased $7.9 million or 16.8% to $54.8 million for the three months ended March 31, 2025, as compared to $46.9 million for the three months ended March 31, 2024. For the three months ended March 31, 2025 and 2024, total contract costs represented 48.5% and 49.4% of total contract revenue, respectively. For the three months ended March 31, 2025 and 2024 total contract costs represented 54.7% and 54.7% of revenue attributable to our workforce, respectively (see Net Service Billing).

Previous wording

Direct payroll costs increased $8.3 million or 24.9% to $41.7 million for the three months ended September 30, 2024, as compared to $33.4 million for the three months ended September 30, 2023. Direct payroll accounted for 76.8% of total contract costs for the three months ended September 30, 2024, an increase of 3.7 percentage points as compared to 73.1% for the three months ended September 30, 2023.

Current wording

Direct payroll costs increased $4.3 million or 11.4% to $42.0 million for the three months ended March 31, 2025, as compared to $37.7 million for the three months ended March 31, 2024. Direct payroll accounted for 76.6% of total contract costs for the three months ended March 31, 2025, a decrease of 3.8% as compared to 80.4% for the three months ended March 31, 2024.

Previous wording

Direct labor, the component of direct payroll costs associated with the cost of labor relating to work performed on contracts increased $5.8 million or 22.8% to $31.2 million for the three months ended September 30, 2024 as compared to $25.4 million for the three months ended September 30, 2023. The increase in direct labor is primarily due to an increase in staffing to accommodate growth. For the three months ended September 30, 2024 and 2023, direct labor costs represented 27.4% and 26.9% of gross contract revenue, respectively and represented 30.8% and 30.9% 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 $3.6 million or 12.9% to $31.4 million for the three months ended March 31, 2025 as compared to $27.8 million for the three months ended March 31, 2024. The increase in direct labor is primarily due to an increase in staffing to accommodate growth. For the three months ended March 31, 2025 and 2024, direct labor costs represented 27.8% and 29.3% of gross contract revenue, respectively, and represented 31.4% and 32.4% of the revenue attributable to our workforce, 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 $2.6 million or 32.5% to $10.6 million as compared to $8.0 million.

Current wording

Other direct payroll costs, the component of direct payroll costs associated with fringe and incentive compensation (cash and non-cash) increased by $0.6 million or 6.1% to $10.5 million as compared to $9.9 million.

Previous wording

Sub-consultants and other direct expenses increased $0.3 million or 2.4% to $12.6 million for the three months ended September 30, 2024 as compared to $12.3 million for the three months ended September 30, 2023. For the three months ended September 30, 2024 and 2023, sub-consultant and other direct expenses represented 11.1% and 13.0% 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 $3.7 million or 40.2% to $12.9 million for the three months ended March 31, 2025 as compared to $9.2 million for the three months ended March 31, 2024. For the three months ended March 31, 2025 and 2024, sub-consultant and other direct expenses represented 11.4% and 9.7% of gross contract revenue, respectively. This increase 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 $13.1 million or 28.4% to $59.2 million for the three months ended September 30, 2024 as compared to $46.1 million for the three months ended September 30, 2023.

Current wording

Total operating expense increased $6.4 million or 12.6% to $57.0 million for the three months ended March 31, 2025 as compared to $50.6 million for the three months ended March 31, 2024.

Previous wording

Selling, general and administrative expenses increased $10.2 million or 24.5% to $51.9 million for the three months ended September 30, 2024, as compared to $41.7 million for the three months ended September 30, 2023. Indirect labor increased $4.5 million or 23.6% to $23.6 million as compared to $19.1 million primarily due to an increase in staffing to accommodate growth. General overhead increased $4.3 million or 32.6% to $17.5 million as compared to $13.2 million due to increased costs associated with the overall growth of the Company.

Current wording

Selling, general and administrative expenses increased $5.8 million or 13.0% to $50.5 million for the three months ended March 31, 2025, as compared to $44.7 million for the three months ended March 31, 2024. Indirect labor increased $2.9 million or 14.7% to $22.6 million as compared to $19.7 million primarily due to an increase in staffing to accommodate growth. General overhead increased $2.9 million or 19.9% to $17.5 million as compared to $14.6 million due to increased costs associated with the overall growth of the Company.

Previous wording

Depreciation and amortization increased $2.9 million or 64.4% to $7.4 million for the three months ended September 30, 2024 as compared to $4.5 million for the three months ended September 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 $0.1 million for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023.

Current wording

Depreciation and amortization increased $0.5 million or 8.3% to $6.5 million for the three months ended March 31, 2025 as compared to $6.0 million for the three months ended March 31, 2024. 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 below $0.1 million for the three months ended March 31, 2025, as in the three months ended March 31, 2024.

Previous wording

Other expense increased by $0.1 million to $1.6 million of expense for the three months ended September 30, 2024 as compared to $1.5 million for the three months ended September 30, 2023.

Current wording

Other expense decreased by $0.3 million to $2.1 million of expense for the three months ended March 31, 2025 as compared to $2.4 million for the three months ended March 31, 2024.

Previous wording

Income tax benefit for the three months ended September 30, 2024, increased $1.8 million to a $1.9 million benefit, as compared to $0.1 million benefit for the three months ended September 30, 2023, see note 2, Income Taxes. Our effective tax rate for the three months ended September 30, 2024, is 167.7% as compared to (5.5)% for the three months ended September 30, 2023.

Current wording

Income tax expense for the three months ended March 31, 2025, increased $4.3 million to $0.8 million expense, compared to ($3.5) million benefit for the three months ended March 31, 2024, see Note 2, Income Taxes. Our effective tax rate for the three months ended March 31, 2025, is (78.9)% compared to 68.9% for the three months ended March 31, 2024.

Previous wording

Loss before tax increased by $8.6 million for the nine months ended September 30, 2024, to ($9.4) million of loss compared to ($0.8) million of loss for the nine months ended September 30, 2023. Net loss increased by $4.0 million to ($2.9) million for the nine months ended September 30, 2024, as compared to $1.1 million of income for the nine months ended September 30, 2023.

Current wording

Loss before tax decreased by $4.0 million for the three months ended March 31, 2025, to ($1.0) million of loss compared to ($5.0) million of loss for the three months ended March 31, 2024. Net loss increased by $0.1 million to ($1.7) million for the three months ended March 31, 2025, as compared to ($1.6) million for the three months ended March 31, 2024.

Previous wording

Net service billing increased $19.3 million or 23.5% to $101.4 million for the three months ended September 30, 2024, as compared to $82.1 million for the three months ended September 30, 2023. Net service billing reconciles to gross contract revenue as follows (in thousands):

Current wording

Net service billing increased $14.4 million or 16.8% to $100.1 million for the three months ended March 31, 2025, as compared to $85.7 million for the three months ended March 31, 2024. Net service billing reconciles to gross contract revenue as follows (in thousands):

Previous wording

Adjusted EBITDA increased $1.9 million or 12.7% to $17.0 million for the three months ended September 30, 2024 as compared to $15.1 million for the three months ended September 30, 2023. Adjusted EBITDA reconciles to net income as follows (in thousands):

Current wording

Adjusted EBITDA increased $2.4 million or 19.6% to $14.5 million for the three months ended March 31, 2025 as compared to $12.1 million for the three months ended March 31, 2024. Adjusted EBITDA reconciles to net loss as follows (in thousands):

Previous wording

For the three months ended September 30, 2024 and 2023, Adjusted EBITDA includes add backs of $6.4 million and $7.2 million, respectively, relating to non-cash stock compensation expenses from restricted stock awards. For the three months ended September 30, 2024 and 2023, Adjusted EBITDA also includes $0.4 million and $0.1 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 March 31, 2025 and 2024, Adjusted EBITDA includes add backs of $6.6 million and $7.9 million, respectively, relating to non-cash stock compensation expenses from 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 three months ended September 30, 2024 and 2023, Adjusted EBITDA Margin, net was 16.7% and 18.3% 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 March 31, 2025 and 2024, Adjusted EBITDA Margin, net was 14.5% and 14.2% respectively.

Previous wording

Our backlog increased $74.1 million or 24.2% to $379.8 million during the nine months ended September 30, 2024, as compared to $305.7 million at December 31, 2023. At September 30, 2024 and December 31, 2023 our backlog was comprised as follows:

Current wording

Our backlog increased $19.8 million or 5.0% to $418.8 million during the three months ended March 31, 2025, as compared to $399.0 million at December 31, 2024. At March 31, 2025 and December 31, 2024 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 September 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 decreased by $9.0 million on September 30, 2024 as compared to December 31, 2023.

Current wording

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 $4.0 million on March 31, 2025 as compared to December 31, 2024.

Previous wording

During the nine months ended September 30, 2024, net cash provided by operating activities was $12.4 million, which primarily consisted of ($2.9) million net loss, adjusted for stock-based compensation expense of $20.3 million and depreciation and amortization expense of $20.6 million, offset by deferred taxes of ($18.4) million and a net cash outflow of ($8.4) million from changes in operating assets and liabilities. The net outflow from changes in operating assets and liabilities was primarily due to a $10.8 million increase in accounts receivable resulting from a combination of acquired accounts receivable from acquisitions and an increased billing to our clients, a $6.9 million increase in contract assets and liabilities, and a $6.4 million increase in accounts payable and accrued expenses partially offset by a $2.9 million increase in prepaid expenses and other assets.

Current wording

During the three months ended March 31, 2025, net cash provided by operating activities was $12.0 million, which primarily consisted of ($1.7) million net loss, adjusted for stock-based compensation expense of $6.6 million and depreciation and amortization expense of $6.5 million, offset by deferred taxes of $11.0 million and a net cash outflow of ($11.1) million from changes in operating assets and liabilities. The net outflow from changes in operating assets and liabilities was primarily due to a $1.9 million increase in accounts receivable resulting from a combination of acquired accounts receivable from acquisitions and an increased billing to our customers, a $2.6 million increase in contract assets and liabilities, and a $0.6 million increase in prepaid expenses and other assets, partially offset by a $14.9 million increase in accounts payable and accrued expenses.

Previous wording

Net cash used in investing activities increased by $6.6 million to $23.6 million for the nine months ended September 30, 2024 as compared to $17.0 million for the nine months ended September 30, 2023. The increase in net cash used for investing is primarily attributable to acquisitions that occurred in the first three quarters of 2024.

Current wording

Net cash used in investing activities decreased by $1.0 million to $1.7 million for the three months ended March 31, 2025 as compared to $2.7 million for the three months ended March 31, 2024. The decrease in net cash used for investing is primarily attributable to the greater number of acquisitions that occurred in the first quarter of 2024 compared to 2025.

Previous wording

Net cash provided by financing activities during the nine months ended September 30, 2024 was $2.2 million compared to $5.9 million for the nine months ended September 30, 2023, a decrease of $3.7 million. The decrease in net cash provided by financing is primarily attributable to the net proceeds of $47.2 million from the common stock offering, $4.6 million from finance leases, $1.5 million from issuance of common stock, offset by the $13.0 million used for repayment of the revolving line of credit and the fixed line, $11.0 million used for repayment of notes and $11.1 million used to purchase treasury shares.

Current wording

Net cash used in financing activities during the three months ended March 31, 2025 was $6.3 million compared to $8.8 million for the three months ended March 31, 2024, a decrease of $2.5 million. The decrease in net cash used in financing is primarily attributable to the net proceeds of $8.0 million from borrowing on the Revolving Credit Facility, offset by $2.6 million from payments on finance leases, $4.1 million for repurchase of common stock, $4.4 million used for repayment of notes and $2.6 million used to purchase treasury shares.