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What changed in Bowman Consulting Group Ltd.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Bowman Consulting Group Ltd.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+449 added−473 removedSource: 10-K (2024-03-12) vs 10-K (2023-03-15)

Top changes in Bowman Consulting Group Ltd.'s 2023 10-K

449 paragraphs added · 473 removed · 334 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

128 edited+53 added−56 removed68 unchanged
Biggest changeWe believe that the acquisition of McMahon allows us to further enhance our transportation and engineering competencies thereby allowing us to broaden our offerings and better serve our public and private sector customers. Competitive Strengths We are an agile, growth-oriented engineering services firm committed to providing essential technical and professional services to a broad base of long-term and repeat customers.
Biggest changeCompetitive Strengths 3 Table of Content We are an agile, growth-oriented consulting and engineering services firm committed to providing essential technical and professional services to a broad base of long-term and repeat customers. The recurring needs of our customers for technical services to monetize and operate their assets makes us a very important part of their ongoing operations.
Renewable Energy Renewable energy encompasses all activities supporting the energy sector’s transition away from fossil-based systems of energy production in favor of renewable energy sources such as wind and solar, as well as lithium-ion batteries.
Renewable energy encompasses all activities supporting the energy sector’s transition away from fossil-based systems of energy production in favor of renewable energy sources such as wind and solar, as well as lithium-ion batteries.
Energy Efficiency Recent acquisitions have provided us the capability and reputation needed to enter the energy efficiency market. Energy efficiency plays a pivotal role in advancing sustainable development within the global economy. Efforts to decarbonize the global energy system and advance the world’s climate objectives are dependent on improving energy efficiency.
Recent acquisitions have provided us the capability and reputation needed to enter the energy efficiency market. Energy efficiency plays a pivotal role in advancing sustainable development within the global economy. Efforts to decarbonize the global energy system and advance the world’s climate objectives are dependent on improving energy efficiency.
Civil and Site Engineering Since our founding in 1995 as a site/civil engineering and surveying firm, we have expanded our presence across the U.S. providing site planning and design services instrumental to creating communities where people live, work and play. Our land plans are attractive, marketable, and economically feasible. We creatively solve the toughest site challenges.
Civil and Site Engineering Since our founding in 1995 as a civil engineering and surveying firm, we have expanded our presence across the U.S. providing site planning and design services instrumental to creating communities where people live, work and play. Our land plans are attractive, marketable, and economically feasible. We creatively solve the toughest site challenges.
Our team of scientists and licensed professionals possess a broad range of experience in natural resource inventories, wetland delineations, and threatened and endangered species habitat assessments for conservation, development, and infrastructure improvement projects. Our environmental teams have developed, or contributed to numerous regional habitat conservation plans, statewide parks planning assessments, and endangered species research, planning, and compliance projects.
Our team of scientists and licensed environmental professionals possess a broad range of experience in natural resource inventories, wetland delineations, and threatened and endangered species habitat assessments for conservation, development, and infrastructure improvement projects. Our environmental teams have developed, or contributed to numerous regional habitat conservation plans, statewide parks planning assessments, and endangered species research, planning, and compliance projects.
Examples of services include: • Public information meeting support • Right of entry agreements • Title searches/title curatives • Appraisals/appraisal reviews • Relocation advisory assistance • Encroachment resolutions • Expert witness court testimony • Eminent domain/condemnation support Mechanical, Electrical and Plumbing – Building Services Our mechanical, electrical, and plumbing engineering services are focused on creating high performance connected environments.
Examples of services include: • Public information meeting support • Right of entry agreements • Title searches/title curatives • Appraisals/appraisal reviews • Relocation advisory assistance • Encroachment resolutions • Expert witness court testimony • Eminent domain/condemnation support Building Services - Mechanical, Electrical and Plumbing Our mechanical, electrical, and plumbing engineering services are focused on creating high performance connected environments.
We have focused our recent efforts in four areas: inspiring innovation through an engaging culture; expanding our efforts to recruit and hire diverse talent; advocating and facilitating internal affinity groups; and identifying opportunities to implement environmental, social and governance initiatives. We have a diversified business that is not dependent on any one service line, geographic region, or end market.
We have focused our recent efforts in four areas: inspiring innovation through an engaging culture; expanding our efforts to recruit and hire diverse talent; advocating and facilitating internal affinity groups; and identifying opportunities to implement environmental, social and governance initiatives. We have a diversified business that is not dependent on any one customer, service line, geographic region, or end market.
Our in-house expertise ranges from planning, design, and construction assistance to municipalities, county agencies, public utilities, and private clients in helping them meet potable water and wastewater needs. We work regularly with state and federal governments in maintaining existing systems. For customers who need funding assistance, our teams have expertise in attaining grants, funds, and loans.
Our in-house expertise ranges from planning, design, and construction assistance to municipalities, county agencies, public utilities, and private customers in helping them meet potable water and wastewater needs. We work regularly with state and federal governments in maintaining existing systems. For customers who need funding assistance, our teams have expertise in attaining grants, funds, and loans.
Examples of services include: • Construction observation • Direct systems functional performance testing • Develop systems readiness checklist • Post occupancy review • Review of construction documents • Deferred / seasonal functional testing • Final commissioning report • Commissioning review of submittals Construction Management The quality, durability, and safety of our infrastructure are all ensured by proficient construction engineering and management services augmented by sound quality assurance practices.
Examples of services include: • Construction observation • Direct systems functional performance testing • Develop systems readiness checklist • Post occupancy review • Review of construction documents • Deferred / seasonal functional testing • Final commissioning report • Commissioning review of submittals Construction Management & Oversight The quality, durability, and safety of our infrastructure are all ensured by proficient construction engineering and management services augmented by sound quality assurance practices.
Examples of services include: • ALTA boundary surveys • Topographic surveys • Route surveys • Right of way mapping • Drone inspection of transmission lines • Laser scanning and imaging • Land title surveys • Underground utility location • Reality capture • GIS mapping • Underwater and marine survey • Hydrology and geoscience Landscape Architecture Landscape architecture is place-making within the exterior environment.
Examples of services include: • ALTA boundary surveys • Topographic surveys • Route surveys • Right of way mapping • Drone inspection of transmission lines • Laser scanning and LiDAR imaging • Land title surveys • Underground utility location • Reality capture • GIS mapping • Underwater and marine survey • Hydrology and geoscience Landscape Architecture Landscape architecture is place-making within the exterior environment.
Examples of services include: • Constructability review • Value engineering • Budgeting and cost estimating • Bid solicitation, documentation, and preparation • Interagency and utility coordination • Onsite observation and report evaluation 12 Table of Content • Traffic routing, planning and management • Resident engineer service • Public communication and outreach Environmental Consulting Sound environmental management is essential to the health and safety of our surroundings and is a critical aspect of the development of any energy, transportation, or community development project.
Examples of services include: • Constructability review 11 Table of Content • Value engineering • Budgeting and cost estimating • Bid solicitation, documentation, and preparation • Interagency and utility coordination • Onsite observation and report evaluation • Traffic routing, planning and management • Resident engineer service • Public communication and outreach Environmental Consulting Sound environmental management is essential to the health and safety of our surroundings and is a critical aspect of the development of any energy, transportation, or community development project.
General criteria for our target expansion MSAs include: • Population scale of one million or greater • Highly ranked in the Urban Land Institute’s publication Emerging Trends in Real Estate • Location which complements and/or expands client opportunities • Availability of high caliber, skilled labor force We expect our geographic expansion decision making to be fluid, flexible, opportunistic, and loosely bound by the criteria described above.
General criteria for our target expansion MSAs include: • Population scale of one million or greater • Highly ranked in the Urban Land Institute’s publication Emerging Trends in Real Estate • Location which complements and/or expands customer opportunities • Availability of high caliber, skilled labor force We expect our geographic expansion decision making to be fluid, flexible, opportunistic, and loosely bound by the criteria described above.
We add value to the operations of our acquisitions by providing technical resources and subject matter experts that broaden opportunities with existing customers, technology investment to improve utilization, information systems to support productivity, professional development programs to promote staff engagement, supportive growth-oriented leadership, growth capital, and corporate services that improve client focus and utilization while leveraging overhead through scale.
We add value to the operations of our acquisitions by providing technical resources and subject matter experts that broaden opportunities with existing customers, technology investment to improve utilization, information systems to support productivity, professional development programs to promote staff engagement, supportive growth-oriented leadership, growth capital, and corporate services that improve customer focus and utilization while leveraging overhead through scale.
Examples of services include: • Conceptual land planning • Environmental consulting and permitting • Planning / zoning and entitlements • Roadway, bridge and highway designs • Erosion and Sediment designs • Stormwater management designs • Construction administration • Traffic studies • Floodplain studies • Utility relocation designs 11 Table of Content Transportation Functional transportation systems are crucial in connecting our communities and play an essential role in the development of society.
Examples of services include: • Conceptual land planning • Environmental consulting and permitting • Planning / zoning and entitlements • Roadway, bridge and highway designs • Erosion and Sediment designs • Stormwater management designs • Construction administration • Traffic studies • Floodplain studies 10 Table of Content • Utility relocation designs Transportation Functional transportation systems are crucial in connecting our communities and play an essential role in the development of society.
As of December 31, 2022, we were licensed to operate in all states within the continental United States either directly or through an affiliate. We must comply with laws and regulations relating to government contracts, which affect how we do business with our customers and may impose added costs on our business.
As of December 31, 2023, we were licensed to operate in all states within the continental United States either directly or through an affiliate. We must comply with laws and regulations relating to government contracts, which affect how we do business with our customers and may impose added costs on our business.
As an example, a large coffee shop chain as part of an initiative to “increase convenience-led formats” in the U.S. including both drive-thru and curbside pickup options, closed 400 traditional locations in North America while adding 300 net new convenience-oriented locations throughout North America in their place.
As an example, as part of an initiative to “increase convenience-led formats” in the U.S., a large coffee shop chain with both drive-thru and curbside pickup options closed 400 traditional locations in North America while adding 300 net new convenience-oriented locations throughout North America in their place.
Expanding regulations governing the treatment, distribution and storage of water resources will intensify demand for adaptive water and wastewater treatment solutions. We assist municipalities, county agencies, public utilities, and private clients in addressing their potable water and wastewater challenges. Our expertise with water solutions ranges from planning, design, construction management, and funding identification.
Expanding regulations governing the treatment, distribution and storage of water resources will intensify demand for adaptive water and wastewater treatment solutions. We assist municipalities, county agencies, public utilities, and private customers in addressing their potable water and wastewater challenges. Our expertise with water solutions ranges from planning, design, construction management, and funding identification.
On highly complex and sought-after projects, our breadth of services, financial foundation, work-sharing orientation and geographic reach afford us flexibility in pricing and cost estimation. Our ability to provide comprehensive and integrated solutions gives us flexibility when it comes to pricing strategies to meet client budgets and funding limitations.
On highly complex and sought-after projects, our breadth of services, financial foundation, work-sharing orientation and geographic reach afford us flexibility in pricing and cost estimation. Our ability to provide comprehensive and integrated solutions gives us flexibility when it comes to pricing strategies to meet customer budgets and funding limitations.
Some significant laws and regulations that affect us include: • federal, state, and local laws and regulations (including the Federal Acquisition Regulation or “FAR”) regarding the formation, administration, and performance of government contracts • the Civil False Claims Act, which provides for substantial civil penalties for violations, including for submission of a false or fraudulent claim to the U.S. government for payment or approval • federal, state, and local laws and regulations regarding procurement integrity including gratuity, bribery and anti-corruption requirements as well as limitations on political contributions and lobbying.
Some significant laws and regulations that affect us include: 19 Table of Content • federal, state, and local laws and regulations (including the Federal Acquisition Regulation or “FAR”) regarding the formation, administration, and performance of government contracts; • the Civil False Claims Act, which provides for substantial civil penalties for violations, including for submission of a false or fraudulent claim to the U.S. government for payment or approval; and • federal, state, and local laws and regulations regarding procurement integrity including gratuity, bribery and anti-corruption requirements as well as limitations on political contributions and lobbying.
Examples of services and projects include: • Heating ventilating and a/c systems • Medical-grade air filtration • Indoor air quality monitoring • Smoke control and evacuation • Energy management and controls • Medical gas and vacuum • Lighting design and lighting controls • Low and medium voltage power distribution • Fire / life safety systems • Standby power and UPS systems • Telecom/Data/AV Infrastructure • Arc flash hazard analysis Structural Engineering Our structural engineers work on the design and technical challenges involved in creating durable structures that meet the challenges of increasing 21st century demands.
Examples of services and projects include: • Heating ventilating and a/c systems • Medical-grade air filtration • Indoor air quality monitoring • Smoke control and evacuation • Energy management and controls • Medical gas and vacuum • Lighting design and lighting controls • Low and medium voltage power distribution • Fire / life safety systems • Standby power and UPS systems • Telecom/Data/AV Infrastructure • Arc flash hazard analysis • Acoustic engineering 13 Table of Content Structural Engineering Our structural engineers work on the design and technical challenges involved in creating durable structures that meet the challenges of increasing 21st century demands.
The market for engineering services in the United States is large, with an expected total revenue of $360 billion in 2023, according to IBISWorld. With over 130,000 firms, a large proportion of whom are small-scale organizations focused on specific local markets or specialized niches, the industry is extremely fragmented.
The market for engineering services in the United States is large, with an expected total revenue of $360 billion in 2023, according to IBISWorld. With over 130,000 firms, a large proportion of whom are small-scale organizations focused 5 Table of Content on specific local markets or specialized niches, the industry is extremely fragmented.
Contracts We enter into contracts with customers that either cover a single performance obligation consisting of one or more tasks (also referred to as assignments and deliverables) or are open-ended engagements that create a framework for our being retained for more than one discrete performance obligation and task (often referred to as master services agreements).
Contracts We enter into contracts with customers that either cover a single performance obligation consisting of one or more tasks (also referred to as assignments and deliverables) or are open-ended engagements that create a framework for our being retained for one or more discrete performance obligations and tasks (often referred to as master services agreements).
This broad field ranges from small-scale garden design and community parks to the large-scale design of plazas, institutional campuses, and streetscape settings. Each space is important to its users and to function well, it must meet specified programmatic needs while being aesthetically pleasing.
This broad field ranges from small-scale garden design and community parks to the large-scale design of plazas, institutional campuses, and streetscape settings. 12 Table of Content Each space is important to its users and to function well, it must meet specified programmatic needs while being aesthetically pleasing.
We evaluate targets holistically, considering all the factors mentioned above. Geographic Expansion We intend to continue a program of robust geographic expansion. Over the foreseeable future, we plan our geographic footprint to be generally focused on North America including the continental United States, Canada and Mexico.
We evaluate targets holistically, considering all the factors mentioned above. Geographic Expansion We intend to continue a program of deliberate and opportunistic geographic expansion. Over the foreseeable future, we plan our geographic footprint to be generally focused on North America including the continental United States, Canada and Mexico.
Examples of projects include: • Highway bridges 14 Table of Content • Culverts • Retaining walls • Pedestrian bridges • Buildings • Railroad bridges • Tanks • Contractor services Water Resources The U.S. water supply is becoming scarcer and in need of protection while at the same time our water infrastructure renewal needs increase.
Examples of projects include: • Highway bridges • Culverts • Retaining walls • Pedestrian bridges • Buildings • Railroad bridges • Tanks • Contractor services Water Resources The U.S. water supply is becoming scarcer and in need of protection while at the same time our water infrastructure renewal needs increase.
It is common for many of the companies we compete with to have greater financial resources, larger national platforms or greater service offerings than we currently have.
It is common for many of the companies we compete with to have greater financial resources, larger national platforms or more extensive service offerings than we currently have.
The reputation of our brand allows us to extend existing customer relationships, efficiently attract new customers and recruit and retain a credentialed and representative workforce.
We believe the reputation of our brand allows us to extend existing customer relationships, efficiently attract new customers and recruit and retain a credentialed and representative workforce.
Our five-fold growth of revenue over the past ten years is comprised of acquisitive growth and organic growth, including significant post-acquisition organic growth in the businesses we have acquired. Two of our universally embraced bedrock cultural values are growth and entrepreneurial spirit.
Our five-fold growth of revenue over the past ten years is comprised of both acquisitive and organic growth, including significant post-acquisition organic growth in the businesses we have acquired. Two of our bedrock cultural values are growth and entrepreneurial spirit.
In connection with the process of bidding for and being 19 Table of Content awarded certain government assignments we are required to provide an annual Federal Acquisition Regulation rate audit that determines our overhead reimbursement allowance.
In connection with the process of bidding for and being awarded certain government assignments we are required to provide an annual Federal Acquisition Regulation rate audit that determines our overhead reimbursement allowance.
Industry participants compete on the strength of client relationships, reputation for quality of service and reliability, expertise in local markets, technical capabilities, and price.
Industry participants compete on the strength of customer relationships, reputation for quality of service and reliability, expertise in local markets, technical capabilities, and price.
The American Society of Civil Engineers (“ ASCE”) Infrastructure Report Card rated the state of the U.S. Highway system as “D+” and estimates spending requirements of over $2.5 trillion over ten years on U.S. surface transportation infrastructure.
The American Society of Civil Engineers (“ASCE”) 2021 Infrastructure Report Card rated the state of the U.S. Highway system as “D+” and estimates spending requirements of over $2.5 trillion over ten years on U.S. surface transportation infrastructure.
While we are bullish on all the market spaces that we currently serve, we intend to especially focus our growth initiatives on markets that possess the following characteristics: • High potential for reoccurring revenue and multi-year assignments • Engagement with renewable energy, energy transition, and energy efficiency activities • Aging and failing infrastructure in need of upgrade and replacement • Transformational investment paradigms such as privatization • Economic vitality and attractive growth in population and workforce • Long-term public sector funding • Regulatory complexity The markets we serve typically require participants to engage with several of our services, affording us the opportunity to cross sell, optimize revenue potential, and differentiate ourselves as a single source supplier.
While we are bullish on all the market spaces that we currently serve, we intend to especially focus our growth initiatives on markets that possess the following characteristics: • High potential for reoccurring revenue and multi-year assignments • Engagement with renewable energy, energy transition, and energy efficiency activities • Aging and failing infrastructure in need of upgrade and replacement • Transformational investment paradigms such as privatization • Economic vitality and attractive growth in population and workforce • Long-term public sector funding • Prime for technology advancement with respect to delivery of our services • Complex regulatory environments The markets we serve typically require participants to engage with several of our services, affording us the opportunity to cross sell, optimize revenue potential, and differentiate ourselves as a single source supplier.
While acquisition will generally be the source of new geographies, we may also establish presence in new geographies by opening new offices. To maintain consistency with our acquisition program, we intend to establish a dynamic list of target metropolitan statistical areas (“MSAs”) that will serve as focus areas for expansion.
While acquisitions will generally be the source of geographic expansion, we may also establish presence in new areas by opening new offices. To maintain consistency with our acquisition program, we maintain a dynamic list of target metropolitan statistical areas (“MSAs”) that will serve as focus areas for expansion.
We work with our customers to develop the big picture ideas that can strengthen and transform a community, create tools needed to make vision a reality, guide our customers through regulatory approvals processes, and 13 Table of Content work closely with developers to ensure market success once projects are completed.
We work with our customers to develop the big picture ideas that can strengthen and transform a community, create tools needed to make vision a reality, guide our customers through regulatory approvals processes, and work closely with developers to ensure market success once projects are completed.
We deliberately focus many of our business pursuits in environments where laws and regulations create a level of complexity that places a premium on the value of our services, thereby providing us openings to develop new customer loyalty through creative problem solving.
We focus many of our business pursuits in end markets where laws and regulations create a level of complexity that places a premium on the value of our services, thereby providing us openings to develop new customer loyalty through creative problem solving.
Examples of services include: • Traffic engineering • Traffic signal design • Traffic studies • Intersection improvements • Route/alignment studies • Signing/pavement marking plans • Roadway design • Drainage design • Public involvement/consensus building • Traffic control plans • Alternate delivery methods Commissioning and Energy Efficiency Commissioning involves ensuring that a new building operates in as energy efficient a manner as the original design intent.
Examples of services include: • Traffic engineering • Traffic signal design • Traffic studies • Intersection improvements • Route/alignment studies • Signing/pavement marking plans • Roadway design • Drainage design • Bridge design • Hydraulics • Public involvement/consensus building • Corridor and program management • Traffic control plans • Alternate delivery methods Commissioning and Energy Efficiency Commissioning involves ensuring that a new building operates in as energy efficient a manner as the original design intent.
We have a significant presence in each of the following markets we currently serve: Transportation We believe the utilization of transportation infrastructure within the domestic built environment far exceeds its intended capacity.
We have a significant presence in each of the following markets we currently serve: Transportation We believe the current and future utilization of transportation infrastructure within the domestic built environment far exceeds its intended capacity.
Factors affecting our ability to win assignments include our marketing effectiveness, our client relationships, our ability to team with larger organizations, our capacity to accurately estimate costs and quantify the quality assurance requirements of the work, our ability to hire, train and retain qualified personnel, our ability to deliver timely, and our ability to obtain adequate professional insurance for the work we perform.
Factors affecting our ability to win assignments include our marketing effectiveness, our customer relationships, our ability to team with larger organizations, our capacity to accurately estimate costs and quantify the quality assurance requirements of the work, our ability to hire, train and retain qualified personnel, our ability to deliver timely, and our ability to obtain adequate professional liability, cyber liability, and other insurance for the work we perform.
We believe that our proven track record, ownership culture, and unyielding commitment to preserving our uniquely entrepreneurial and founder-led culture 10 Table of Content as we grow will provide us a competitive edge with acquisition targets as a desirable transaction partner.
We believe that our proven track record, ownership culture, and unyielding commitment to preserving our uniquely entrepreneurial and founder-led culture as we grow will provide us a competitive edge with acquisition targets as a desirable transaction partner.
The technical complexity and financial risks associated with designing most projects performed in the industry effectively restricts the free flow of new entrants, limiting participation to those with demonstrated capacities across a range of projects. Qualifications, sophisticated technical skills, expertise, financial resources, and scale are prerequisites for successful industry participation.
The technical complexity and financial risks associated with designing a substantial number of projects performed in the industry effectively discourages the free flow of new entrants, limiting participation to those with demonstrated capacities across a range of projects. Qualifications, sophisticated technical skills, expertise, financial resources, and scale are prerequisites for successful industry participation.
Companies aspiring to enter the market must have sufficient skilled human capital to complete complex projects, and the financial resources to provide adequate risk management and cover working capital and professional insurance requirements. These factors serve as both a barrier to entry and a catalyst for consolidation.
Participants aspiring to enter the market must have sufficient skilled human capital to complete complex projects, and the financial resources to provide adequate risk management and cover working capital and professional liability, cyber liability and other insurance requirements. These factors serve as both a barrier to entry and a catalyst for consolidation.
We have accelerated our growth organically through investments in expansion of our capacity and ability to share work across the company, our breadth of services and our geographic footprint, along with a commitment to cross selling and business development.
We have accelerated our growth organically through investments to expand our capacity and ability to share work across our company, our breadth of services and our geographic footprint, along with a commitment to cross-selling and business development.
We are cautious about advancing discussions or extending terms until we have ascertained a target is compatible with our culture and thoroughly committed to our strategic direction.
We are cautious about advancing discussions or extending terms until we have ascertained a target is compatible with our culture and thoroughly committed 14 Table of Content to our strategic direction.
Our private sector customers include owners and operators from multiple industries such as investor-owned utilities, participants in the renewable energy marketplace, owners of data centers, developers and owners of residential and commercial real estate, operators of big-box and convenience retail chains, mine operators and others.
Our private sector customers include owners and operators from multiple industries such as investor-owned utilities, participants in the renewable energy and decarbonization marketplace, wastewater treatment operations, data center operators, developers and owners of residential and commercial real estate, big-box and convenience retail chains, mine operators and others.
We provide planning, engineering, construction management, commissioning, environmental consulting, geospatial, survey, land procurement and other technical consulting services to customers that 1) develop and manage the infrastructure supporting places where people live, work, play and learn; 2) build and operate the systems that manage and distribute vital life services such as water, electricity, and other critical utilities; 3) manage the roads, bridges, and transportation systems used to get from place to place; 3) maintain the ports and other marine facilities used to transport and distribute goods; 4) advance technologies that provide clean energy, energy transition and decarbonization initiatives; and 5) promote public health and safety every day.
We provide planning, engineering, construction management, commissioning, environmental consulting, geospatial, survey, land procurement and other technical consulting services to customers that 1) develop and manage the infrastructure supporting places where people live, work, play and learn; 2) build and operate the systems that manage and distribute vital life services such as water, electricity, and other critical utilities; 3) manage the roads, bridges, and transportation systems used to get from place to place; 4) maintain the ports and other marine facilities used to transport and distribute goods; 5) advance technologies that provide clean energy, energy transition and decarbonization initiatives; 6) operate mission critical facilities where public and private data is stored, commercial transactions are processed, and communications are enabled; and 7) promote public health and safety every day.
Within the residential market there are fundamentally three sub-markets we address: 1) for-sale residential housing; 2) multi-family rental housing, and 3) mixed-use and urban cluster developments. Common to each of these sub-markets is the long lead time for the planning, design and approval of land inventory.
Within the residential market there are fundamentally three sub-markets in which our customers participate: 1) for-sale residential housing; 2) multi-family rental housing, and 3) mixed-use and urban cluster developments. Common to each of these sub-markets is the long lead time for the planning, design and approval of land inventory.
Backlog We calculate the value of our undelivered gross revenue to measure backlog and predict future revenue. Backlog includes fully awarded and contracted work along with revenue we expect to realize over time for renewable long term and multi-year assignments.
Backlog We calculate the value of our undelivered gross contract revenue to measure backlog and predict future revenue. Backlog includes fully awarded and contracted work along with revenue we expect to realize over an eighteen-month time frame for renewable long-term and undefined multi-year assignments.
Our business is one of inventory creation, not of land development or construction of structures. Recent interest rate hikes by the Federal Reserve Bank have, however, introduced an element of uncertainty as to the continued growth of the market for residential building infrastructure. Commercial and Retail .
Our business is one of inventory creation, not of land development or construction of structures. Interest rate hikes by the Federal Reserve Bank in 2022 and 2023, however, introduced an element of uncertainty as to the continued growth of the market for residential, commercial and mixed-use building infrastructure. Commercial and Retail .
We do not intend to maintain multiple brands or stand-alone operations for extended periods post-closing. Our goal is for an acquired company to be fully integrated into our operation within one year of closing.
We pursue opportunities that we can integrate efficiently. We do not intend to maintain multiple brands or stand-alone operations for extended periods post-closing. Our goal is for an acquired company to be fully integrated into our operation within one year of closing.
Our breadth of our customer base diversifies risk, with the ten largest customers we served accounting for approximately 18% and 26% of our net service billing during the years ended December 31, 2022 and 2021, respectively. We avoid concentration of exposure with no single client accounting for more than 6.0% of our net service revenue during each of these periods.
Our breadth of our customer base diversifies risk, with the ten largest customers we served accounting for approximately 18% and 26% of our net service billing during the years ended December 31, 2023 and 2022, respectively. We avoid concentration of exposure with no single customer accounting for more than 5% of our net service revenue during either of these periods.
We generally impose stringent criteria to the evaluation of targets including: • Advances one or more of our strategic growth objectives • Provides opportunities for cross-selling additional Bowman services • Embodies a culture that is entrepreneurial and compatible with the existing Bowman culture • Satisfies a robust infrastructure spending need • Is accretive to our leadership and executive talent pool Although we generally apply rigorous financial discipline in the execution of our acquisition program, purchase price is not always the primary deal determinant.
We generally impose stringent criteria to the evaluation of targets including: • Advances one or more of our strategic growth objectives • Provides opportunities for cross-selling additional Bowman services • Embodies a culture that is entrepreneurial and compatible with the existing Bowman culture • Satisfies a robust infrastructure spending need • Is accretive to our leadership and executive talent pool • Creates technology advancement opportunity • Aligns within our net service revenue size and profile for acquired companies Although we generally apply rigorous financial discipline in the execution of our acquisition program, purchase price is not always the primary deal determinant.
As the economy adapts to a post-pandemic state, we have experienced increased demand for retrofits of ventilation, air handling, air quality monitoring, and filtration systems in order to ensure healthier indoor environments necessary to mitigate the spread of infectious respiratory diseases.
As society continues to adapt to a post-pandemic state, we have experienced increased demand for retrofits of ventilation, air handling, air quality monitoring, and filtration systems to ensure healthier indoor environments necessary to mitigate the spread of infectious respiratory diseases.
Backlog definitions and methods of calculation vary within our industry. As such, backlog is not a reliable metric on which to evaluate us relative to our peers. As of December 31, 2022 we had approximately $243 million of gross backlog, representing a 45.5% increase as compared to $167 million as of December 31, 2021.
Backlog definitions and methods of calculation vary within our industry. As such, backlog is not a reliable metric on which to evaluate us relative to our peers. As of December 31, 2023, we had approximately $306 million of gross backlog, representing a 25.9% increase as compared to $243 million as of December 31, 2022.
Consumers of engineering and technical services consistent with ours can be local, regional, and national organizations with projects ranging from a single, quick-turn deliverable to complex long-term assignments and multi-year engagements.
Consumers of engineering and technical services consistent with those we offer can be local, regional, and national organizations with projects ranging from a single, quick-turn deliverable to complex long-term assignments and multi-year engagements with multiple phases and deliverables.
For the years ended December 31, 2022 and 2021, we derived over 70% and 67%, respectively, of our revenue from lump sum assignments and approximately 23% and 29%, respectively, from hourly assignments. The remainder of our revenue in each year was derived from reimbursements for itemized passthrough items such as consultants and direct expenses.
For the years ended December 31, 2023 and 2022, we derived approximately 62% and 70%, respectively, of our gross contract revenue from lump sum assignments and approximately 28% and 23%, respectively, from hourly assignments. The remainder of our gross contract revenue in each year was derived from reimbursements for itemized passthrough items such as consultants and direct expenses.
Our continuing work in the areas governed by these laws and regulations exposes us to the risk of substantial liability. To help ensure compliance with these laws and regulations, our employees are sometimes required to complete tailored ethics and other compliance training relevant to their position and our operations. Available Information Our Internet website is http://www.bowman.com.
Our continuing work in the areas governed by these laws and regulations exposes us to the risk of substantial liability. To help ensure compliance with these laws and regulations, our employees are sometimes required to complete tailored ethics and other compliance training relevant to their position and our operations.
As a public company, we intend to use our publicly traded equity to enhance this compensation strategy. Creative use of growth connected and retention-oriented equity incentives along with a commitment to maintaining our core culture are key to the entrepreneurial spirit that will drive our growth. Acquisitive Growth We are actively engaged in discussions with prospective acquisition targets.
Creative use of growth-connected and retention-oriented equity incentives along with a commitment to maintaining our core culture are key to the entrepreneurial spirit that will drive our organic growth. Acquisitive Growth We are actively engaged in discussions with prospective acquisition targets.
As our service offerings continue expanding and we expand our portfolio of services, we anticipate increases in our cross-selling successes. Competition Our competition varies according to the market, geographical area of the project and the nature and scope of a particular opportunity.
Our acquisitions offer significant cross selling and revenue synergy opportunities which facilitates organic growth. As our service offerings continue expanding and we expand our portfolio of services, we anticipate increases in our cross-selling successes. Competition Our competition varies according to the market, geographical area of the project and the nature and scope of a particular opportunity.
We focus our business development efforts on increasing the proportion of our revenue generated by long-term projects and multi-year contracts. While we anticipate public sector customers will continue to represent a meaningful portion of our revenues for the near future, we intend to continue expanding long-term relationships and multi-year assignments with private sector customers through organic growth and acquisitions.
We focus our business development efforts on increasing the proportion of our revenue generated by long-term projects and multi-year contracts. We intend to continue expanding long-term relationships and multi-year assignments with both public and private sector customers through organic growth and acquisitions.
We target acquisitions that provide strategic service line extensions, have a geographic footprint complementary to our existing operations or client assignments, demonstrate capacity for profitability with strong potential for organic growth, align with our corporate culture and have management we can develop into leaders within our operations. We pursue opportunities that we can integrate efficiently.
Our acquisition program revolves around a theme of adjacency whereby we target acquisitions that provide strategic service line extensions, have a geographic footprint complementary to our existing operations or customer assignments, demonstrate capacity for profitability with strong potential for organic growth, align with our corporate culture and have management we can develop into leaders within our operations.
Our fixed fee assignments generally include a specified scope of work and a defined set of 16 Table of Content deliverables. For accounting and financial reporting purposes we classify a contract as fixed fee if any portion of the performance obligation under the contract requires us to complete work outlined in the contract for a pre-determined fixed price.
For accounting and financial reporting purposes we classify a contract as fixed fee if any portion of the performance obligation under the contract requires us to complete work outlined in the contract for a pre-determined fixed price.
To calculate backlog, we assess the gross contract revenue we will recognize in connection with the completion of undelivered near-term and long-term customer commitments.
To calculate backlog, we assess the gross contract revenue we will recognize in connection with the completion of undelivered near-term and long-term customer commitments. Our backlog increases both because of new contracts entered into with customers and acquisitions.
We believe our positioning enables us to continue winning incrementally larger work assignments that will grow our business. Human Capital Resources As of December 31, 2022, we had nearly 1,600 employees, approximately 92% of which are full-time employees and approximately 8% of which represent our non-technical operations staff.
We believe our positioning enables us to continue winning incrementally larger work assignments that will grow our business. Human Capital Resources As of December 31, 2023, we had approximately 2,000 employees, of which approximately 92% are full-time employees.
At December 31, 2022 and 2021, our gross backlog was comprised as follows: December 31, 2022 December 31, 2021 Building Infrastructure 51.2 % 62.3 % Transportation 30.6 % 19.0 % Power & Utilities 13.4 % 16.2 % Other Emerging Markets 4.8 % 2.5 % We use backlog to determine appropriate staffing levels and predict company revenue growth, both of which typically move accordingly with changes in backlog.
On December 31, 2023 and 2022, our gross backlog was divided among our markets as follows: December 31, 2023 December 31, 2022 Building Infrastructure 54.7 % 51.2 % Transportation 24.2 % 30.6 % Power & Utilities 17.4 % 13.4 % Other Emerging Markets 3.7 % 4.8 % We use backlog to determine appropriate staffing levels and predict gross contract revenue growth, both of which typically move accordingly over time with changes in backlog.
While our business is not subject to significant regulation, the services we provide to our customers address various federal, state and local regulations that must be complied with to receive approval to proceed.
Regulation While our business is not generally subject to significant regulation, the services we provide to our customers address various federal, state and local regulations that must be complied with to receive approval to proceed. With respect to the operation of our business, we are subject to certain professional licensing and human resources requirements that vary by state.
For hourly engagements, we negotiate hourly billing rates and charge our customers based upon the actual hours expended toward a deliverable. Direct project expenditures such as subconsultants and other expenses generally pass through to the customer for reimbursement.
Under these types of engagements, there is no predetermined maximum fee, and we generally experience no risk associated with cost overruns. For hourly engagements, we negotiate hourly billing rates and charge our customers based upon the actual hours expended toward a deliverable. Direct project expenditures such as subconsultants and other expenses generally pass through to the customer for reimbursement.
The strategic locations of our offices support broad recruiting capabilities while the integrated nature of our technology enables flexible remote work and efficient cross-utilization of both technical experience and production resources thereby reducing inefficiency and enhancing profitability. Our diversified geography increases our sources of revenue and income, thereby insulating us from concentrated economic or political disruptions.
The strategic locations of our offices support broad recruiting capabilities while the integrated nature of our technology enables efficient cross-utilization of both technical experience and production resources. Our diversified geography increases our sources of revenue and income, thereby helping insulate us from concentrated economic or political disruptions. Diversified portfolio across growing end-markets and broad array of engineering services.
Our base of repeat customers and multi-year contracts reduce our customer 4 Table of Content acquisition expenses and provide increased visibility into future revenues, allowing us to make investments confidently to expand and take market share from competitors. We believe our competitive strengths include: National scale and brand.
Our base of repeat customers and multi-year contracts reduce our customer acquisition expenses and provide increased visibility into future revenues, allowing us to make investments confidently to expand and take market share from competitors. We believe we have the following competitive strengths: Scalable platform with differentiated capabilities and national reputation for operational excellence.
The demand for mined aggregates is strongly correlated to transportation construction. According to the U.S. Geological Survey, 94% of the materials used in the construction of interstate highways are natural aggregates including crushed stone, sand and gravel. We expect the funding provided by the Infrastructure Investment and Jobs Act to stimulate increasing long-term demand for aggregates.
Geological Survey, 94% of the materials used in the construction of interstate highways are natural aggregates including crushed stone, sand and gravel. We expect the funding provided by the Infrastructure Investment and Jobs Act to stimulate increasing long-term demand for aggregates. We believe our clients are well positioned to benefit from supply constraints facing increasing copper and aggregates demand.
For management discussion and analysis purposes, we evaluate the percentages of our revenues that are fixed fee and hourly based on the pricing of each individual task or assignment within our contracts.
For management discussion and analysis purposes, we evaluate the percentages of our revenues that are fixed fee and hourly based on the pricing of each individual task or assignment within our contracts. When we distinguish percentages of revenue based on contracts, we are considering any contract with at least one fixed fee task to be completely characterized as fixed fee.
We maintain a full-time, in-house acquisitions, diligence, and integrations teams and have developed a robust network of third-party representatives working on our behalf to identify future acquisition targets that meet our strategic objectives. We maintain a dynamic pipeline driven by general market awareness of our demand for acquisition, existing relationships we have cultivated, and deliberately directed activity of our representatives.
We maintain full-time, in-house acquisitions, diligence, and integrations teams and have developed a robust network of third-party representatives working on our behalf to identify future acquisition targets that 9 Table of Content meet our strategic objectives.
It is crucial that we continue to attract and retain top talent to continue to maintain our reputation for delivering high-quality services. To facilitate talent attraction and retention, we strive to make Bowman a diverse, inclusive, and safe workplace, with opportunities for our employees to grow and develop in their personal and professional lives. Diversity and Inclusion.
To facilitate talent attraction and retention, we strive to make Bowman a diverse, inclusive, safe and community-oriented workplace, with opportunities for our employees to grow and develop in their personal and professional lives. Diversity and Inclusion.
To achieve the aggressive growth targets we have established, we plan to focus effort and resources on markets and opportunities with the following characteristics: • High potential for reoccurring revenue and multi-year assignments • Increasing renewable energy, energy transition and energy efficiency activities • Infrastructure in need of upgrade and replacement • Expanding economic vitality and population • Geographic and market diversity • Investment incentives and funding initiatives • Complex regulatory requirements These characteristics of market opportunities are fluid, and we may adapt them from time to time to evolving dynamics.
To achieve the aggressive growth targets we have established, we plan to focus effort and resources on markets and opportunities with the following characteristics: • High potential for reoccurring revenue and multi-year assignments • Engagement with renewable energy, energy transitions, and energy efficiency activities • Aging and failing infrastructure in need of upgrade and replacement • Transformational investment paradigms such as privatization • Economic vitality and attractive growth in population and workforce • Long-term public sector funding • Prime for technology advancement with respect to delivery of our services • Complex regulatory environments These characteristics of market opportunities are fluid, and we may adapt them from time to time to evolving dynamics.
With respect to the operation of our business, we are subject to professional licensing and human resources requirements that vary by state. Each state establishes licensing and organizational requirements for our services. Certain states allow only individuals and individually owned professional services corporations to hold licenses. In those states there may be grandfathering exemptions that allow corporations to hold licenses.
We maintain a large fleet of vehicles, some of which are subject to various federal regulations. Each state establishes licensing and organizational requirements for our services. Certain states allow only individuals and individually owned professional services corporations to hold licenses. In those states there may be grandfathering exemptions that allow corporations to hold licenses.
We define cross-selling and revenue synergy as either expanding our relationship with a particular client by providing additional services and expanded geographic coverage or expanding our overall market penetration with respect to a particular service offering by introducing it throughout our national operation. Our acquisitions offer significant cross selling and revenue synergy opportunities which facilitates both acquired and organic growth.
We actively engage in creating revenue synergy by cross selling our services between customers, geographies and markets. We define cross-selling and revenue synergy as either expanding our relationship with a particular customer by providing additional services and expanded geographic coverage or expanding our overall market penetration with respect to a particular service offering by introducing it throughout our national operation.
We support our managers’ business development efforts with a seasoned team of marketing professionals embedded throughout our organization working to professionalize every touchpoint with customers, prospects and influencers. We complement our marketing and business development efforts with extensive social media awareness. In addition, we contract for services with a professional public and media relations agency.
We support our managers’ business development efforts with a seasoned team of marketing professionals embedded throughout our organization working to professionalize every touchpoint with customers, prospects and influencers. We complement our marketing and business development efforts with extensive social media awareness. We are neither engaged with, nor dependent on, traditional paid media advertising.
These engagements may have not-to-exceed parameters requiring us to receive additional authorizations from our customer to continue working but in these cases, we have no obligation to deliver a pre-negotiated result without authorization to continue at additional cost to the customer. Purely hourly contracts for financial reporting purposes do not include any lump sum components as outlined below.
These engagements may have not-to-exceed parameters requiring us to receive additional authorizations from our customer to continue working but in these cases, we have no obligation to deliver a pre-negotiated result without authorization to continue at additional cost 16 Table of Content to the customer.
We are regularly engaged in discussions with acquisition prospects. These discussions range in formality from an initial inquiry to a non-binding letter of intent. Recent Acquisitions Subsequent to September 30, 2022, we have closed on three acquisitions as detailed below.
We are regularly engaged in discussions with acquisition prospects. These discussions range in formality from an initial inquiry to a non-binding letter of intent. Not all prospective acquisitions materialize as completed transactions. Recent Acquisitions In 2023, we completed 11 acquisitions, six of which closed after September 30, 2023.
Building Infrastructure Encompassing all the places we live, sleep, work, shop, and play, the building infrastructure market is foundationally aligned with all day-to-day factors that are either influenced by or influence economic activity.
For the years ended December 31, 2023 and 2022, Power and Utilities represented 18.5% and 12.5%, respectively, of our gross contract revenues. Building Infrastructure Encompassing all the places we live, sleep, work, shop, and play, the building infrastructure market is foundationally aligned with all day-to-day factors that are either influenced by or influence economic activity.
Every project has a comprehensive plan to address stakeholder issues, utilities, construction access and safety, pedestrian movements, environmental constraints, and schedule and budgetary limitations.
Every project has a comprehensive plan to address stakeholder issues, utilities, construction access and safety, pedestrian movements, environmental constraints, and schedule and budgetary limitations. It is important to note that we do not provide general contracting services to our customers.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf we fail to develop or maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud. As a result, current and potential stockholders could lose confidence in our financial reporting, which would harm our business and the trading price of our common stock.
Biggest changeAs a result, current and potential stockholders could lose confidence in our financial reporting, which would harm our business and the trading price of our common stock. Effective internal controls are necessary for us to provide reliable financial reports, prevent fraud and operate successfully as a public company.
Our quarterly operating results may fluctuate due to several factors, including: • fluctuations in the spending patterns of our customers; • the number and significance of projects executed during a quarter; • unanticipated changes in contract performance, particularly with contracts that have funding limits; • the timing of resolving change orders, requests for equitable adjustments and other contract adjustments; • the timing of our meeting a project milestone that allows us to bill our client and recognize revenue; • project delays; • changes in prices of commodities or other supplies; • weather conditions that delay work at project sites; • the timing of expenses incurred in connection with acquisitions or other corporate initiatives; • natural disasters or other crises; • staff levels and utilization rates; • changes in prices of services offered by our competitors; and • general economic and political conditions.
Our quarterly operating results may fluctuate due to several factors, including: • fluctuations in the spending patterns of our customers; • the number and significance of projects executed during a quarter; • unanticipated changes in contract performance, particularly with contracts that have funding limits; • the timing of resolving change orders, requests for equitable adjustments and other contract adjustments; • the timing of our meeting a project milestone that allows us to bill our customer and recognize revenue; • project delays; • changes in prices of commodities or other supplies; • weather conditions that delay work at project sites; • the timing of expenses incurred in connection with acquisitions or other corporate initiatives; • natural disasters or other crises; • staff levels and utilization rates; • changes in prices of services offered by our competitors; and • general economic and political conditions.
We cannot be certain that our efforts to develop and maintain our internal controls will be successful, that we will be able to maintain adequate controls over our financial processes and reporting in the future or that we will be able to comply with our obligations under Section 404 of the Sarbanes-Oxley Act of 2002.
We cannot be certain that our efforts to maintain our internal controls will be successful, that we will be able to maintain adequate controls over our financial processes and reporting in the future or that we will be able to comply with our obligations under Section 404 of the Sarbanes-Oxley Act of 2002.
We also rely on third-party equipment manufacturers or suppliers to provide equipment used for certain of our projects. If we are unable to hire qualified sub-consultants or find qualified equipment manufacturers or suppliers, our ability to successfully complete certain projects could be impaired.
We also rely on third-party equipment manufacturers or suppliers to provide equipment used for certain of our projects. If we are unable to hire qualified sub-consultants or find qualified equipment manufacturers or suppliers, our ability to successfully complete those projects could be impaired.
If we, the owner, or others working at such sites fail to maintain safe work conditions, we can be exposed to significant financial losses and reputational harm, as well as civil and criminal liabilities; • Our services expose us to significant risks of liability, and our insurance policies may not provide adequate coverage; • The contracts in our backlog may be adjusted, cancelled, or suspended by our clients and, therefore, our backlog is not necessarily indicative of our future revenues or earnings.
If we, the owner, or others working at such sites fail to maintain safe work conditions, we can be exposed to significant financial losses and reputational harm, as well as civil and criminal liabilities; • Our services expose us to significant risks of liability, and our insurance policies may not provide adequate coverage; • The contracts in our backlog may be adjusted, cancelled, or suspended by our customers and, therefore, our backlog is not necessarily indicative of our future revenues or earnings.
Other principal federal environmental, health, and safety laws affecting us include, among others, the Resource Conversation and Recovery Act, the National Environmental Policy Act, the Clean Air Act, the Occupational Safety and Health Act, the Toxic Substances Control Act, and the Superfund Amendments and Reauthorization Act.
Other principal federal environmental, health, and safety laws affecting us include, among others, the Resource Conversation and Recovery Act, the National Environmental Policy Act, the Clean Air Act, the Clean Water Act, the Occupational Safety and Health Act, the Toxic Substances Control Act, and the Superfund Amendments and Reauthorization Act.
Accordingly, if we fail to maintain adequate safety standards, or even if we do maintain those safety standards but our employees are involved in accidents that result in our failing to meet stated safety criteria, we could suffer reduced profitability or the loss of projects or clients, which could have a material adverse impact on our business, financial condition, and results of operations.
Accordingly, if we fail to maintain adequate safety standards, or even if we do maintain those safety standards but our employees are involved in accidents that result in our failing to meet stated safety criteria, we could suffer reduced profitability or the loss of projects or customers, which could have a material adverse impact on our business, financial condition, and results of operations.
To the extent these events occur, the total costs of the project could exceed our estimates and we could experience reduced profits or, in some cases, incur a loss on a project, which may reduce or eliminate our overall profitability. Further, any defects or errors, or failures to meet our clients’ expectations, could result in claims for damages against us.
To the extent these events occur, the total costs of the project could exceed our estimates and we could experience reduced profits or, in some cases, incur a loss on a project, which may reduce or eliminate our overall profitability. Further, any defects or errors, or failures to meet our customers’ expectations, could result in claims for damages against us.
The difficulties of integrating acquisitions include, among other things: • unanticipated issues in integration of information, communications and other systems; • unanticipated incompatibility of logistics, marketing and administration methods; • maintaining employee morale and retaining key employees; • integrating the business cultures of companies; • preserving important strategic client relationships; • consolidating corporate and administrative infrastructures and eliminating duplicative operations; and • coordinating geographically separate organizations.
The difficulties of integrating acquisitions include, among other things: • unanticipated issues in integration of information, communications and other systems; • unanticipated incompatibility of logistics, marketing and administration methods; • maintaining employee morale and retaining key employees; • integrating the business cultures of companies; • preserving important strategic customer relationships; • consolidating corporate and administrative infrastructures and eliminating duplicative operations; and • coordinating geographically separate organizations.
The performance of projects can be affected by a number of factors including unavoidable delays from government inaction, public opposition, inability to obtain financing, weather conditions, unavailability of vendor materials needed by us or our clients, changes in the project scope of services requested by our clients, industrial accidents, environmental hazards and labor disruptions.
The performance of projects can be affected by a number of factors including unavoidable delays from government inaction, public opposition, inability to obtain financing, weather conditions, unavailability of vendor materials needed by us or our customers, changes in the project scope of services requested by our customers, industrial accidents, environmental hazards and labor disruptions.
A user who circumvents security measures can misappropriate confidential or proprietary information, including information regarding us, our personnel and/or our clients, or cause interruptions or malfunctions in operations. Our industry has not been immune from organized cyber-attacks from persons seeking a ransom as a condition of releasing access to the firm’s computer systems.
A user who circumvents security measures can misappropriate confidential or proprietary information, including information regarding us, our personnel and/or our customers, or cause interruptions or malfunctions in operations. Our industry has not been immune from organized cyber-attacks from persons seeking a ransom as a condition of releasing access to the firm’s computer systems.
We face the threat to our computer systems of unauthorized access, computer hackers, computer viruses, malicious code, organized cyber-attacks and other security problems and system disruptions, including possible unauthorized access to our and our clients’ proprietary or classified information. As a result of the conflict between Russia and the Ukraine, in February 2022 the U.S.
We face the threat to our computer systems of unauthorized access, computer hackers, computer viruses, malicious code, organized cyber-attacks and other security problems and system disruptions, including possible unauthorized access to our and our customers’ proprietary or classified information. As a result of the conflict between Russia and the Ukraine, in February 2022 the U.S.
Additionally, increases in inflation, along with the uncertainties surrounding COVID-19, geopolitical developments and global supply chain disruptions, have caused, and may in the future cause, global economic uncertainty and uncertainty about the interest rate environment, which may make it more difficult, costly or dilutive for us to secure additional financing.
Additionally, increases in inflation, along with the uncertainties surrounding geopolitical developments and global supply chain disruptions, have caused, and may in the future cause, global economic uncertainty and uncertainty about the interest rate environment, which may make it more difficult, costly or dilutive for us to secure additional financing.
In addition, as part of the recently adopted Inflation Reduction Act of 2022, the United States implemented a 1% excise tax on the value of certain share repurchases by publicly traded companies. This tax could increase the costs to us of any share repurchases. We intend to finance any stock repurchases through operating cash flow.
In addition, as part of the Inflation Reduction Act of 2022, the United States implemented a 1% excise tax on the value of certain share repurchases by publicly traded companies. This tax could increase the costs to us of any share repurchases. We intend to finance any stock repurchases through operating cash flow.
Unsafe work sites also have the potential to increase employee turnover, increase the cost of a project to our clients, and raise our operating and insurance costs. Any of the foregoing could result in financial losses or reputational harm, which could have a material adverse impact on our business, financial condition and results of operations.
Unsafe work sites also have the potential to increase employee turnover, increase the cost of a project to our customers, and raise our operating and insurance costs. Any of the foregoing could result in financial losses or reputational harm, which could have a material adverse impact on our business, financial condition and results of operations.
In addition, market conditions could negatively impact our clients’ ability to fund their projects and, therefore, utilize our services, which could have a material adverse impact on our business, financial condition, and results of operations. Some of our customers, suppliers and sub-consultants depend on access to commercial financing and capital markets to fund their operations.
In addition, market conditions could negatively impact our customers’ ability to fund their projects and, therefore, utilize our services, which could have a material adverse impact on our business, financial condition, and results of operations. Some of our customers, suppliers and sub-consultants depend on access to commercial financing and capital markets to fund their operations.
Some significant laws and regulations that affect us include: • federal, state, and local laws and regulations (including the Federal Acquisition Regulation or “FAR”) regarding the formation, administration, and performance of government contracts; • the Civil False Claims Act, which provides for substantial civil penalties for violations, including for submission of a false or fraudulent claim to the U.S. government for payment or approval; and • federal, state, and local laws and regulations regarding procurement integrity including gratuity, bribery and anti-corruption requirements as well as limitations on political contributions and lobbying.
Some significant laws and regulations that affect us include: • federal, state, and local laws and regulations (including the Federal Acquisition Regulation or “FAR”) regarding the formation, administration, and performance of government contracts; • the Civil False Claims Act, which provides for substantial civil penalties for violations, including for submission of a false or fraudulent claim to the U.S. government for payment or approval; and 32 Table of Content • federal, state, and local laws and regulations regarding procurement integrity including gratuity, bribery and anti-corruption requirements as well as limitations on political contributions and lobbying.
Our contracts do not always limit our liability for damages that arise from negligent acts, errors, mistakes, or omissions in rendering services to our clients. As such, we cannot be sure that these contractual provisions will protect us from liability for damages in the event we are sued.
Our contracts do not always limit our liability for damages that arise from negligent acts, errors, mistakes, or omissions in rendering services to our customers. As such, we cannot be sure that these contractual provisions will protect us from liability for damages in the event we are sued.
Demand for services from our clients is cyclical and vulnerable to economic downturns, which may result in clients delaying, curtailing or canceling proposed and existing projects. Our business traditionally leads in downturns to the overall economy and may lag in a recovery, therefore, our business may not recover immediately when the economy improves.
Demand for services from our customers is cyclical and vulnerable to economic downturns, which may result in customers delaying, curtailing or canceling proposed and existing projects. Our business traditionally leads in downturns to the overall economy and may lag in a recovery, therefore, our business may not recover immediately when the economy improves.
Difficult financing and economic conditions may cause some of our clients to demand better pricing terms or delay payments for services we perform, thereby increasing the average number of days our receivables are outstanding and the potential of increased credit losses on uncollectible invoices.
Difficult financing and economic conditions may cause some of our customers to demand better pricing terms or delay payments for services we perform, thereby increasing the average number of days our receivables are outstanding and the potential of increased credit losses on uncollectible invoices.
The market for these and other personnel is competitive. From time to time and in different regions, it may be difficult to attract and retain qualified individuals with the expertise, and in the timeframe, demanded by our clients, or to replace such personnel when needed in a timely manner.
The market for these and other personnel is competitive. From time to time and in different regions, it may be difficult to attract and retain qualified individuals with the expertise, and in the timeframe, demanded by our customers, or to replace such personnel when needed in a timely manner.
There is a risk that we may have disputes with our sub-consultants arising from, among other things, the quality and timeliness of work performed, client concerns, or failure to extend existing task orders or issue new task orders under a subcontract.
There is a risk that we may have disputes with our sub-consultants arising from, among other things, the quality and timeliness of work performed, customer concerns, or failure to extend existing task orders or issue new task orders under a subcontract.
Risks Relating to Our Business and Industry We engage in a highly competitive business. If we are unable to compete effectively, we could lose market share and our business and results of operations could be negatively impacted. We face continuing competition to provide technical, professional and construction services to clients.
Risks Relating to Our Business and Industry We engage in a highly competitive business. If we are unable to compete effectively, we could lose market share and our business and results of operations could be negatively impacted. We face continuing competition to provide technical, professional and construction services to customers.
The impact of COVID-19, geopolitical developments such as the Russia-Ukraine conflict and global supply chain disruptions continue to increase uncertainty in the outlook of near-term and long-term economic activity, including whether inflation will continue and how long, and at what rate.
The impact of COVID-19, geopolitical developments such as the Russia-Ukraine conflict, the conflict in the Middle East and global supply chain disruptions continue to increase uncertainty in the outlook of near-term and long-term economic activity, including whether inflation will continue and how long, and at what rate.
In many of our contracts with clients, sub-consultants, and vendors, we agree to retain or assume potential liabilities for damages, penalties, losses and other exposures relating to projects that could result in claims that greatly exceed the anticipated profits relating to those contracts.
In many of our contracts with customers, sub-consultants, and vendors, we agree to retain or assume potential liabilities for damages, penalties, losses and other exposures relating to projects that could result in claims that greatly exceed the anticipated profits relating to those contracts.
While we do not have any contract with the requirement to provide a bond or letter of credit to protect the client from our failure to perform under the terms of the contract, we may be required to do so at some time in the future.
While we do not have any contract with the requirement to provide a bond or letter of credit to protect the customer from our failure to perform under the terms of the contract, we may be required to do so at some time in the future.
In accordance with industry practice, substantially all our contracts are subject to cancellation, termination, or suspension at the discretion of the client. In the event of a project cancellation, we would generally have no contractual right to the total revenue reflected in our backlog.
In accordance with industry practice, substantially all our contracts are subject to cancellation, termination, or suspension at the discretion of the customer. In the event of a project cancellation, we would generally have no contractual right to the total revenue reflected in our backlog.
In addition, under the 2017 Tax Cut & Jobs Act, research and experimental costs are no longer fully deductible and are required to be capitalized and amortized for U.S. tax purposes effective for our fiscal year ended December 31, 2022.
In addition, under the 2017 Tax Cut & Jobs Act, research and experimental costs are no longer fully deductible and are required to be capitalized and amortized for U.S. tax purposes effective for our fiscal year ended December 31, 2023.
Many of our clients require that we meet certain safety criteria to be eligible to bid for contracts and many contracts provide for automatic termination or forfeiture of some or all of our contract fees or profit in the event we fail to meet certain measures.
Many of our customers require that we meet certain safety criteria to be eligible to bid for contracts and many contracts provide for automatic termination or forfeiture of some or all of our contract fees or profit in the event we fail to meet certain measures.
The contracts in our backlog may be adjusted, cancelled, or suspended by our clients and, therefore, our backlog is not necessarily indicative of our future revenues or earnings. Additionally, even if fully performed, our backlog is not a good indicator of future gross profit.
The contracts in our backlog may be adjusted, cancelled, or suspended by our customers and, therefore, our backlog is not necessarily indicative of our future revenues or earnings. Additionally, even if fully performed, our backlog is not a good indicator of future gross profit.
In addition, our amended and restated bylaws provide that any person 38 Table of Content or entity purchasing or otherwise acquiring any interest in shares of our capital stock is deemed to have notice of and consented to the Delaware Forum Provision and the Federal Forum Provision; provided, however, that stockholders cannot and will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder.
In addition, our amended and restated bylaws provide that any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock is deemed to have notice of and consented to the Delaware Forum Provision and the Federal Forum Provision; provided, however, that stockholders cannot and will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder.
Additionally, the forum selection clauses in our amended and restated bylaws may limit our stockholders’ ability to bring a claim in a judicial forum that they find favorable for disputes with us or our directors, officers, or employees, which may discourage the filing of lawsuits against us and our directors, officers and employees, even though an action, if successful, might benefit our stockholders.
Additionally, the forum 37 Table of Content selection clauses in our amended and restated bylaws may limit our stockholders’ ability to bring a claim in a judicial forum that they find favorable for disputes with us or our directors, officers, or employees, which may discourage the filing of lawsuits against us and our directors, officers and employees, even though an action, if successful, might benefit our stockholders.
If a client or another third party alleges that our report or opinion is incorrect or it is improperly relied upon and we are held responsible, we could be subject to significant liability or claims for damages.
If a customer or another third party alleges that our report or opinion is incorrect or it is improperly relied upon and we are held responsible, we could be subject to significant liability or claims for damages.
Under the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended (“CERCLA”), and comparable state laws, we may be required to investigate and remediate regulated hazardous materials. CERCLA and comparable state laws typically impose strict joint and several liabilities without regard to whether a company knew of or caused the release of hazardous substances.
Under the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended (“CERCLA”), and comparable state laws, we may be required to investigate and remediate regulated 33 Table of Content hazardous materials. CERCLA and comparable state laws typically impose strict joint and several liabilities without regard to whether a company knew of or caused the release of hazardous substances.
Furthermore, many of these contracts are subject to financing contingencies 25 Table of Content and, as a result, we are subject to the risk that the customer will not be able to secure the necessary financing for the project. In addition, certain contracts require us to satisfy specific progress or performance milestones in order to receive payment from the customer.
Furthermore, many of these contracts are subject to financing contingencies and, as a result, we are subject to the risk that the customer will not be able to secure the necessary financing for the project. In addition, certain contracts require us to satisfy specific progress or performance milestones in order to receive payment from the customer.
In addition, clients may be unable to fund new projects, may choose to make fewer capital expenditures or otherwise slow their spending on our services or to seek contract terms more favorable to them.
In addition, customers may be unable to fund new projects, may choose to make fewer capital expenditures or otherwise slow their spending on our services or to seek contract terms more favorable to them.
We are an emerging growth company and a smaller reporting company, and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies and smaller reporting companies will make our common stock less attractive to investors.
We are an emerging growth company, and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our common stock less attractive to investors.
If we are unable to compete effectively, we could lose market share and our business and results of operations could be negatively impacted; • Our continued success is dependent upon our ability to hire, retain and utilize qualified personnel; continued success is dependent upon our ability to hire, retain and utilize qualified personnel; • Our profitability could suffer if we are not able to maintain adequate utilization of our workforce due to slowdowns in the economy, reduced demand for our services or the impact of the COVID-19 pandemic; 20 Table of Content • If we are unable to integrate acquired businesses successfully, our business could be harmed; • We cannot assure you that we will achieve synergies and cost savings in connection with prior or future acquisitions; • Demand from clients is cyclical and vulnerable to economic downturns.
If we are unable to compete effectively, we could lose market share and our business and results of operations could be negatively impacted; • Our continued success is dependent upon our ability to hire, retain and utilize qualified personnel; continued success is dependent upon our ability to hire, retain and utilize qualified personnel; • Our profitability could suffer if we are not able to maintain adequate utilization of our workforce due to slowdowns in the economy, or reduced demand for our services; 20 Table of Content • If we are unable to integrate acquired businesses successfully, our business could be harmed; • We cannot assure you that we will achieve synergies and cost savings in connection with prior or future acquisitions; • Demand from customer is cyclical and vulnerable to economic downturns.
These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls.
These inherent 34 Table of Content limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls.
In addition, there can be no assurance that any of our existing insurance coverage will be renewable upon the expiration of the coverage period or that future coverage will be affordable at the required limits.
In addition, there can be no assurance that any of our existing insurance coverage will be renewable upon the expiration of the coverage period or that future coverage will be affordable at our desired limits.
In addition, a failure by a third-party sub-consultant, supplier, or manufacturer to comply with applicable laws, regulations or client requirements could negatively impact our business and, for government clients, could result in fines, penalties, suspension or even debarment being imposed on us, which could have a material adverse impact on our business, financial condition, and results of operations.
In addition, a failure by a third-party sub-consultant, supplier, or manufacturer to comply with applicable laws, regulations or customer requirements could negatively impact our business and, for government customers, could result in fines, penalties, suspension or even debarment being imposed on us, which could have a material adverse impact on our business, financial condition, and results of operations.
These events or circumstances could include a significant change in the business climate, including legal factors, economic impacts, 30 Table of Content operating performance indicators, competition, sale, or disposition of a significant portion of our business, potential changes in regulatory or licensing requirements, and other factors.
These events or circumstances could include a significant change in the business climate, including legal factors, economic impacts, operating performance indicators, competition, sale, or disposition of a significant portion of our business, potential changes in regulatory or licensing requirements, and other factors.
Backlog represents the total dollar amount of revenues we expect to record in the future from the performance of work under contracts we have been awarded. As of December 31, 2022, our gross backlog totaled approximately $243 million. There is no assurance that backlog will be realized as revenues in the amounts reported or, if realized, will result in profits.
Backlog represents the total dollar amount of revenues we expect to record in the future from the performance of work under contracts we have been awarded. As of December 31, 2023, our gross backlog totaled approximately $306 million. There is no assurance that backlog will be realized as revenues in the amounts reported or, if realized, will result in profits.
We believe that 35 Table of Content any disclosure controls and procedures or internal controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
We believe that any disclosure controls and procedures or internal controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
Although we maintain functional groups whose primary purpose is to ensure we implements effective health, safety and environmental (“HSE”) work procedures throughout our organization, including construction sites, roadways, mines and maintenance sites, the failure to comply with such regulations could subject us to 26 Table of Content liability.
Although we maintain functional groups whose primary purpose is to ensure we implements effective health, safety and environmental (“HSE”) work procedures throughout our organization, including construction sites, roadways, mines and maintenance sites, the failure to comply with such regulations could subject us to liability.
The instability created by these global uncertainties can make it extremely difficult for our clients, our vendors and us to accurately forecast and plan future business activities, and could cause constrained spending on our services, delays and a lengthening of our business development efforts, the demand for more favorable pricing or other terms and/or difficulty in collection of our accounts receivable.
The instability created by these global uncertainties can make it extremely difficult for our customers, our vendors and us to accurately forecast and plan future business activities, and could cause constrained spending on our services, 24 Table of Content delays and a lengthening of our business development efforts, the demand for more favorable pricing or other terms and/or difficulty in collection of our accounts receivable.
We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act, or JOBS Act, enacted in April 2012. For as long as we continue to be an emerging growth company, we intend to take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies.
We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act, or JOBS Act, enacted in April 2012, and we intend to continue to take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies.
If the economy weakens further or client spending declines, then our revenue, profits and overall financial condition may deteriorate. If there is additional economic downturn, including as a result of the worldwide political, social and economic uncertainties described above, our existing and potential clients may either postpone entering into new contracts, renew existing contracts or request price concessions.
If the economy weakens or customer spending declines, then our revenue, profits and overall financial condition may deteriorate. If there is additional economic downturn, including as a result of the worldwide political, social and economic uncertainties described above, our existing and potential customers may either postpone entering into new contracts, renew existing contracts or request price concessions.
Further, even where coverage applies, the policies have deductibles, which result in our assumption of exposure for certain amounts with respect to any claim filed against us. In addition, clients or sub-consultants who have agreed to indemnify us against any such liabilities or losses might refuse or be unable to pay it.
Further, even where coverage applies, the policies have deductibles, which result in our assumption 26 Table of Content of exposure for certain amounts with respect to any claim filed against us. In addition, customers or sub-consultants who have agreed to indemnify us against any such liabilities or losses might refuse or be unable to pay it.
Such claims could relate to, among other things, personal injury, loss of life, business interruption, property damage, pollution and environmental damage and be brought by our clients or third parties, such as those who use or reside near our clients’ projects.
Such claims could relate to, among other things, personal injury, loss of life, business interruption, property damage, pollution and environmental damage and be brought by our customers or third parties, such as those who use or reside near our customers’’ projects.
If economic conditions remain uncertain or weaken, or government spending is reduced, our revenue and profitability could be adversely affected. Demand from clients is cyclical and vulnerable to economic downturns. If the economy weakens or client spending declines, our financial results may be impacted.
If economic conditions remain uncertain or weaken, or government spending is reduced, our revenue and profitability could be adversely affected. Demand from customers is cyclical and vulnerable to economic downturns. If the economy weakens or customer spending declines, our financial results may be impacted.
Our profitability could suffer if we are not able to maintain adequate utilization of our workforce due to slowdowns in the economy, reduced demand for our services or the impact of the COVID-19 pandemic. The cost of providing our services, including the extent to which we utilize our workforce, affects our profitability.
Our profitability could suffer if we are not able to maintain adequate utilization of our workforce due to slowdowns in the economy, or reduced demand for our services. The cost of providing our services, including the extent to which we utilize our workforce, affects our profitability.
Rising inflation, interest rates, and/or construction costs could reduce the demand for our services as well as decrease our profit on existing contracts, particularly our fixed price contracts. Rising inflation, interest rates, or construction costs could reduce the demand for our services.
Increases in inflation, interest rates, and/or construction costs could reduce the demand for our services as well as decrease our profit on existing contracts, particularly our fixed price contracts. Increases in inflation, interest rates, or construction costs could reduce the demand for our services.
We rely on third-party internal and outsourced software to run our critical accounting, project management and financial information systems. As a result, any sudden loss, disruption or unexpected costs to maintain these systems could significantly increase our operational expense and disrupt the management of our business operations.
As a result, any sudden loss, disruption or unexpected costs to maintain these systems could significantly increase our operational expense and disrupt the management of our business operations. 28 Table of Content We rely on third-party software to run our critical accounting, project management and financial information systems.
In addition, while clients and sub-consultants may agree to indemnify us against certain liabilities, such third parties may refuse or be unable to pay it. 33 Table of Content Employee, agent or partner misconduct or our overall failure to comply with laws or regulations may adversely impact our reputation and financial results as well as subject us to criminal and civil enforcement actions.
In addition, while customers and sub-consultants may agree to indemnify us against certain liabilities, such third parties may refuse or be unable to pay it. Employee, agent or partner misconduct or our overall failure to comply with laws or regulations may adversely impact our reputation and financial results as well as subject us to criminal and civil enforcement actions.
Further, these conditions may result in the inability of some of our clients to pay us for services that we have already performed. If we are not able to reduce our costs quickly enough to respond to the revenue decline from these clients, our operating results may 24 Table of Content be adversely affected.
Further, these conditions may result in the inability of some of our customers to pay us for services that we have already performed. If we are not able to reduce our costs quickly enough to respond to the revenue decline from these customers, our operating results may be adversely affected.
For the years ended December 31, 2022 and 2021, approximately 21% and 13% of our gross revenue, respectively, was derived from services performed under contracts with governmental agencies. While attempts at such legislation have failed in the past, such measures could be adopted in the future.
For each of the years ended December 31, 2023 and 2022, approximately 21% of our gross revenue was derived from services performed under contracts with governmental agencies. While attempts at such legislation have failed in the past, such measures could be adopted in the future.
Our government clients may face budget deficits that prohibit them from funding proposed and existing projects.
Our government customers may face budget deficits that prohibit them from funding proposed and existing projects.
Our government clients may face budget deficits that prohibit them from funding proposed and existing projects or that cause them to exercise their right to terminate our contracts with little or no prior notice. In addition, any financial difficulties suffered by our sub-consultants or suppliers could increase our cost or adversely impact project schedules.
Our government customers may face budget deficits that prohibit them from funding proposed and existing projects or that cause them to exercise their right to terminate our contracts with little or no prior notice. In addition, any financial difficulties suffered by our sub-consultants or suppliers could increase our cost or adversely impact project 29 Table of Content schedules.
As of December 31, 2022 and 2021, we had $53.2 million and $28.5 million of goodwill, representing 20.8% and 20.6%, respectively, of our total assets as of December 31, 2022 and 2021. Under U.S. GAAP, we are required to evaluate goodwill carried in our consolidated balance sheet for possible impairment on an annual basis using a fair value approach.
As of December 31, 2023 and 2022, we had $96.5 million and $53.2 million of goodwill, representing 24.2% and 20.8%, respectively, of our total assets as of December 31, 2023 and 2022. Under U.S. GAAP, we are required to evaluate goodwill carried in our consolidated balance sheet for possible impairment on an annual basis using a fair value approach.
If we cannot attract and retain qualified personnel or effectively implement appropriate succession plans, it could have a material adverse impact on our business, financial condition and results of operations. We do not maintain key-man life insurance policies on all of our executive officers.
If we cannot attract and retain qualified personnel or effectively implement appropriate succession plans, there could be a material adverse impact on our business, financial condition and results of operations. We do not maintain key-man life insurance policies on our executive officers.
In addition, our credit agreement also requires us to comply with certain fixed charge coverage, debt to EBITDA and senior debt to EBITDA ratios. Events beyond our control may affect our ability to comply with these covenants.
In addition, our credit agreement also requires us to comply with certain fixed charge coverage, debt to EBITDA and senior debt to EBITDA ratios. Poor financial performance or events beyond our control may affect our ability to comply with these covenants.
The full economic and social impact of the sanctions imposed on Russia (as well as possible future punitive measures that may be implemented), as well as the counter measures imposed by Russia, in addition to the escalating military conflict between Ukraine and Russia, which could conceivably expand into the surrounding region, remains uncertain; however, both the conflict and related sanctions have resulted and could continue to result in disruptions to trade, commerce, pricing stability, credit availability, and/or supply chain continuity, in both Europe and globally, and has introduced significant uncertainty into global markets and the global economy.
The full economic and social impact of the sanctions imposed on Russia (as well as possible future punitive measures that may be implemented), as well as the counter measures imposed by Russia, in addition to the escalating military conflict between Ukraine and Russia as well as conflicts in the Middle East remains uncertain; however, the conflicts and sanctions have resulted and could continue to result in disruptions to trade, commerce, pricing stability, credit availability, and/or supply chain continuity, in both Europe and globally, and has introduced significant uncertainty into global markets and the global economy.
Our credit agreement with Bank of America, N.A. contains several restrictive covenants, which could limit our ability to finance future operations, acquisitions or capital needs or engage in other business activities that may be in our interest. Our credit agreement contains several financial covenants that impose operating and other restrictions on us, and our subsidiaries.
Our credit agreement contains several restrictive covenants, which could limit our ability to finance future operations, acquisitions or capital needs or engage in other business activities that may be in our interest. Our credit agreement contains several financial covenants that impose operating and other restrictions on us, and our subsidiaries.
If we are not able to locate qualified third-party sub-consultants or the amount we are required to pay for sub-consultants or equipment and supplies exceeds what we have estimated, especially in a lump sum or a fixed price contract, we may suffer losses on these contracts.
If we are not able to locate qualified third-party sub-consultants or the amount we are required to pay for sub-consultants or equipment and supplies exceeds what we have estimated and/or we are unable to pass through the excess cost to our customers, especially in a lump sum or a fixed price contract, we may suffer losses on these contracts.
Such changes would affect our ability to obtain new contracts and may decrease the demand for our services. Legislation is proposed periodically that attempts to limit the ability of governmental agencies to contract with private consultants to provide services. Should such changes occur and be upheld, demand for our services may be materially adversely affected.
Legislation is proposed periodically that attempts to limit the ability of governmental agencies to contract with private consultants to provide services. Should such changes occur and be upheld, demand for our services may be materially adversely affected.
In addition, if any of our key personnel retire or otherwise leave the company, we need to have appropriate succession plans in place and to successfully implement such plans, which requires devoting time and resources toward identifying and integrating new personnel into leadership roles and other key positions.
In addition, if any of our key personnel retire or otherwise leave the company, we need to have appropriate succession plans in place and successfully implement such plans. Implementing a succession plan requires that we devote time and resources toward identifying and integrating new personnel into leadership roles and other key positions.
If interest rates continue to increase, our debt service obligations on the variable rate indebtedness would continue to increase even though the amount borrowed would remain the same, and our results of operations and cash flows for servicing our indebtedness would decrease, perhaps significantly.
If interest rates continue to increase, our debt service obligations on borrowings under our credit agreement would continue to increase even though the amount borrowed would remain the same, and our results of operations and cash flows for servicing our indebtedness would decrease, perhaps significantly.
We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future. 39 Table of Content Item 1B. Unresolved Staff Comments None.
We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future. Item 1B.
The existence of our share repurchase program could also cause the price of our common stock to be higher than it would be in the absence of such a program and could potentially reduce the market 37 Table of Content liquidity for our common stock.
The share repurchase program could increase volatility in and affect the price of our common stock. The existence of our share repurchase program could also cause the price of our common stock to be higher than it would be in the absence of such a program and could potentially reduce the market liquidity for our common stock.
If an expected contract award is delayed or not received, we may incur additional costs resulting from reductions in staff or redundancy of facilities, which could have a material adverse effect on our business, financial condition and results of operations. Inflation could adversely affect our business and results of operations.
If an expected contract award is delayed or not received, we may incur additional costs resulting from reductions in staff or redundancy of facilities, which could have a material adverse effect on our business, financial condition and results of operations. Continuing worldwide political, social and economic uncertainties may adversely affect our revenue and profitability.
Additionally, we have an increased number of employees working remotely. As a result, we may have increased cyber security and data security risks, due to increased use of home Wi-Fi networks and virtual private networks, as well as increased distribution of physical machines.
As a result, we may have increased cyber security and data security risks, due to increased use of home Wi-Fi networks and virtual private networks, as well as increased distribution of physical machines.
These risks include: • The ability of the public agency to terminate the contract with 30 days’ prior notice or less; • Changes in public agency spending and fiscal policies which can have an adverse effect on demand for our services; • Contracts that are subject to public agency budget cycles, and often are subject to renewal on an annual basis; • The often wide variation of the types and pricing terms of contracts from agency to agency; • The difficulty of obtaining change orders and additions to contracts; and • The requirement to perform periodic audits as a condition of certain contract arrangements. 32 Table of Content Legislation, policy, rules, or regulations may be enacted that limit or change the ability of state, regional or local agencies to contract for our privatized services.
These risks include: • The ability of the public agency to terminate the contract with 30 days’ prior notice or less; • Changes in public agency spending and fiscal policies which can have an adverse effect on demand for our services; • Contracts that are subject to public agency budget cycles, and often are subject to renewal on an annual basis; • The often wide variation of the types and pricing terms of contracts from agency to agency; • The difficulty of obtaining change orders and additions to contracts; and • The requirement to perform periodic audits as a condition of certain contract arrangements.
Despite our implementation of network security measures, we are vulnerable to disruption, infiltration, or failure of these systems or third-party hosted services in the event of a major earthquake, fire, power loss, telecommunications failure, cyber-attack, war, terrorist attack, or other catastrophic event could cause system interruptions, reputational harm, loss of intellectual property, lengthy interruptions in our services, breaches of data security, and loss of critical data and could harm our future operating results.
Despite our implementation of network security measures, we are vulnerable to disruption, infiltration, or failure of these systems or third-party hosted services in the event of cyber-attack, natural disasters, terrorist attacks or other catastrophic events that could cause system interruptions, reputational harm, loss of intellectual property, lengthy interruptions in our services, breaches of data security, and loss of critical data and could harm our future operating results.
Our future revenue and growth prospects could be adversely affected if other contractors eliminate or reduce their subcontracts or teaming arrangement relationships with us or if a government agency terminates or reduces these other contractors’ programs, does not award them new contracts, or refuses to pay under a contract. 28 Table of Content Weather conditions and seasonal revenue fluctuations may adversely impact our financial results.
Our future revenue and growth prospects could be adversely affected if other contractors eliminate or reduce their subcontracts or teaming arrangement relationships with us or if a government agency terminates or reduces these other contractors’ programs, does not award them new contracts, or refuses to pay under a contract.
Disruptions in the credit or capital markets could adversely affect our clients’ ability to finance projects and could result in contract cancellations or suspensions, project delays and payment delays or defaults by our clients.
Disruptions in the credit or capital markets and increases in market interest rates could adversely affect our customers’ ability to finance projects and could result in contract cancellations or suspensions, project delays and payment delays or defaults by our customers.
If any of our third-party insurers fail, suddenly cancel coverage, or otherwise are unable to provide us with adequate insurance coverage, our overall risk exposure and operational expenses would increase, and the management of our business operations would be disrupted.
If any of our third-party insurers fail or cancel coverage, or we are otherwise are unable to obtain adequate insurance coverage at a reasonable cost, our overall risk exposure and operational expenses would increase, and the management of our business operations would be disrupted.
Continuing worldwide political, social and economic uncertainties may adversely affect our revenue and profitability. The last several years have been periodically marked by political, social and economic concerns, including decreased consumer confidence, the lingering effects of international conflicts, energy costs and inflation.
The last several years have been periodically marked by political, social and economic concerns, including decreased consumer confidence, the lingering effects of international conflicts, energy costs and inflation.
These risks include, among others, higher than expected standalone overhead expenses, delays in the anticipated timing of activities related to such initiatives and the incurrence of other unexpected costs associated with operating the business.
A variety of risks could cause us not to realize some or all of these expected benefits. These risks include, among others, higher than expected standalone overhead expenses, delays in the anticipated timing of activities related to such initiatives and the incurrence of other unexpected costs associated with operating the business.
As of December 31, 2022, we were licensed to operate in 45 states. Changes in tax laws could increase our tax rate and tax payments and materially affect our results of operations. 34 Table of Content We are subject to tax laws in the United States.
As of December 31, 2023, we were licensed to operate in all states in the continental U.S. Changes in tax laws could increase our tax rate and tax payments and materially affect our results of operations. We are subject to tax laws in the United States.

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Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed2 unchanged
Biggest changeWe currently operate out of more than 65 core locations nationally, of which one is a related party transaction with a property owner including members of our management team. Our lease terms vary ranging from month-to-month to multi-year commitments.
Biggest changeWe currently operate out of more than 90 core locations nationally, of which one is a related party transaction with a property owner including members of our management team, and two offices in Mexico. Our lease terms vary ranging from month-to-month to multi-year commitments.
While we do believe it is necessary to maintain offices through which our services are coordinated and our employees collaborate in person, we feel there are an ample number of available office rental properties that could adequately serve our needs should we need to relocate or expand any of our operations.
While we do believe it is necessary to maintain offices through which our services are coordinated and our employees collaborate in person, we feel there are an ample number of available office rental properties that could adequately serve our needs should we need to relocate or expand any of our operations. 39 Table of Content

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

8 edited+12 added−3 removed1 unchanged
Biggest changeWe expect to use the remaining net proceeds for general corporate purposes, including organic expansion and the funding of potential future acquisitions. 41 Table of Content Issuer Purchases of Equity Securities The following table summarizes the purchases of shares of our common stock made by us during the three months ended December 31, 2022 (in thousands, except share data and average price per share): Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs 10/1/22 - 10/31/22 11,464 14.60 - - 11/1/22 - 11/30/22 29,131 17.83 - - 12/1/22 - 12/31/22 14,042 20.50 - - We repurchased 54,637 shares of common stock which were tendered by employees to satisfy required tax withholding obligations arising from the vesting of restricted shares of common stock.
Biggest changeIssuer Purchases of Equity Securities The following table summarizes the purchases of shares of our common stock made by us during the three months ended December 31, 2023 (in thousands, except share data and average price per share): Period Total Number of Shares Purchased (1) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (3) 10/1/23 - 10/31/23 16,749 26.21 28,404 11/1/23 - 11/30/23 10,416 28.91 - 10,000,000 12/1/23 - 12/31/23 14,462 34.56 - 10,000,000 (1) This column reflects shares owned and tendered by employees to satisfy the required withholding taxes related to share-based payment awards, which are not deducted from shares available to be purchased under publicly announced programs. 42 Table of Content (2) On November 10, 2022, our board of directors authorized a share repurchase program, to spend up to $10.0 million for the repurchase of our common stock (the "2022 Repurchase Authorization").
Unregistered Sales of Equity Securities Sales of unregistered securities during the year ended December 31, 2022 were previously disclosed in our Quarterly Reports on Form 10-Q for each of the quarters March 31, 2022, June 30, 2022 and September 30, 2022.
Unregistered Sales of Equity Securities Sales of unregistered securities during the year ended December 31, 2023 were previously disclosed in our Quarterly Reports on Form 10-Q for each of the quarters ended March 31, 2023, June 30, 2023 and September 30, 2023.
The recipient had adequate access, through employment, business, or other relationships, to information about us.
The recipients had adequate access, through employment, business, or other relationships, to information about us.
The recipient of securities in this transaction acquired the securities for investment only and not with a view to, or for sale in connection with any, distribution thereof and appropriate legends were affixed to the securities issued in the transaction. The transaction did not involve any underwriters, underwriting discounts or commissions, or any public offering.
The recipients of securities in the above transactions acquired the securities for investment only and not with a view to, or for sale in connection with any, distribution thereof and appropriate legends were affixed to the securities issued in the transactions. The transactions did not involve any underwriters, underwriting discounts or commissions, or any public offering.
Subsequent to September 30, 2022 and through the reporting date of this Annual Report on Form 10-K, we made sales of the following unregistered securities: On November 4, 2022, we issued 134,042 shares of common stock as partial consideration for our acquisition of Spatial Acuity, LLC.
Subsequent to September 30, 2023 and through the reporting date of this Annual Report on Form 10-K, we made sales of the following unregistered securities: On October 2, 2023, we issued 14,622 shares of common stock at $26.35 per share as partial consideration for our acquisition of Excellence Engineering, LLC.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is listed on the Nasdaq Global Market under the symbol “BWMN.” Stockholders As of March 15, 2023, there were three holders of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is traded on the Nasdaq Global Select Market under the symbol BWMN. There were approximate ly 14 sto ckholders of record at February 29, 2024.
Dividends We have never paid cash dividends on our common stock and do not anticipate paying cash dividends in the foreseeable future.
Dividend We have never paid cash dividends on our common stock and do not anticipate paying cash dividends in the foreseeable future. Performance Graph The following graph shows a comparison of our cumulative total returns with those of the Russell 2000 Index and the Nasdaq Market Index.
In December 2022, we issued a $1.6 million 7.00% unsubordinated convertible note with a maturity date in September 2027, as partial consideration for the acquisition of H2H Geoscience Engineering, PLLC. The convertible promissory note will be convertible into shares of our common stock at the option of the holders at any time, at a conversion price of $18.00 per share.
The convertible promissory note will be convertible into shares of our common stock at the option of the holders at any time, at a conversion price of $28.13 per share. On December 11, 2023, we issued 4,085 shares of common stock at $33.54 per share as partial consideration for our acquisition of Hess Rountree, Inc.
Removed
Use of Proceeds On February 11, 2022, the Company closed on an offering of common stock in which it issued and sold 900,000 shares at an offering price of $16.00 per share, resulting in net proceeds of $13.7 million after deducting underwriting discounts and commissions, but before expenses of the offering.
Added
At this time, we do not have a comparable peer group due to the combination of our differentiated approach to the provision of consulting services and our end-markets. Thus, we have selected the Russell 2000 Index. The graph assumes that the value of an investment in our common stock and in each such index was $100 on May 7, 2021.
Removed
In addition, Gary Bowman, our President, Chairman and Chief Executive Officer, sold 150,000 shares of common stock. We utilized a portion of our net proceeds to pay expenses associated with the offering and the funding of acquisitions.
Added
The comparison in the graph below is based on historical data and is not intended to forecast the possible future performance of our common stock.
Removed
We did not purchase any shares subject to our share repurchase program. Item 6. Selected Financial Data [RESERVED] 42 Table of Content
Added
ASSUMES $100 INVESTED ON MAY 7, 2021 FOR THE YEAR ENDED DECEMBER 31, 2023 2021 2022 2023 Bowman Consulting Group Ltd. 100.00 156.07 253.71 Russell 2000 Index 100.00 77.53 89.23 Nasdaq Market Index 100.00 76.11 109.16 The performance graph above and related text are being furnished solely to accompany this annual report on Form 10-K pursuant to Item 201(e) of Regulation S-K, and are not being filed for purposes of Section 18 of the Exchange Act, 41 Table of Content and are not to be incorporated by reference into any of our filings with the SEC, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Added
On October 12, 2023, we issued 80,088 shares of common stock at $27.12 per share as partial consideration for our acquisition of Dennis Corporation. On November 9, 2023, we issued 94,090 shares of common stock at $29.06 per share as partial consideration for our acquisition of CFA, Inc.
Added
On November 10, 2023, we issued 57,755 shares of common stock at $30.30 per share as partial consideration for our acquisition of Blankinship and Associates, Inc.
Added
On November 14, 2023, we issued 131,515 shares of common stock at $30.74 per share and $1.3 million 8.00% unsubordinated convertible note with a maturity date in May 2024 as partial consideration for the acquisition of High Mesa Consulting Group, Inc.
Added
The common stock may have been repurchased from time to time depending upon market conditions and may have been purchased in the open market and through one or more trading plans designed to comply with Rule 10b5-1 under the Exchange Act.
Added
The plan did not obligate us to repurchase any specific number or any specific dollar amount of shares and may have been suspended at any time at our discretion. The 2022 Repurchase Authorization expired on November 10, 2022, with $9.3 million remaining available for repurchase.
Added
(3) On November 17, 2023, our board of directors authorized a new $10 million share repurchase program under which the Company may repurchase up to $10 million of our common stock (the "2023 Repurchase Authorization"). The 2023 Repurchase Authorization is effective from November 17, 2023, through November 16, 2024.
Added
The execution of the repurchase program is expected to be consistent with the Company’s strategic initiatives which prioritize investments in organic and acquisitive growth. The timing and amount of any share repurchases will be determined by management at its discretion based on several factors including share price, market conditions and capital allocation priorities.
Added
Shares may be repurchased from time to time through open market purchases, in privately negotiated transactions or by other means, including the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act in accordance with applicable securities laws and other restrictions.
Added
The share repurchase program does not obligate Bowman to acquire a specific number of shares of common stock and may be suspended, modified, or discontinued at any time without notice. As of December 31, 2023, we have repurchased no shares of our common stock under the 2023 Repurchase Authorization. Item 6. [RESERVED] 43 Table of Content

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

85 edited+35 added−40 removed38 unchanged
Biggest changeOf the $111.7 million increase in gross contract revenue during the year ended December 31, 2022, acquisitions represented $66.5 million or 59.5% of the increase. 48 Table of Content Changes in gross contract revenue (“GCR”) for the year ended December 31, 2022, disaggregated between our core and emerging end markets, were as follows (in thousands other than percentages): For the Year Ended December 31, Consolidated Gross Contract Revenue 2022 %GCR 2021 %GCR Change % Change Building Infrastructure $ 170,431 65.1 % $ 105,242 70.2 % $ 65,189 61.9 % Transportation 44,846 17.1 % 16,537 11.0 % 28,309 171.2 % Power & Utilities 32,672 12.5 % 22,525 15.0 % 10,147 45.0 % Other emerging markets 1 13,765 5.3 % 5,666 3.8 % 8,099 142.9 % Total: $ 261,714 100.0 % $ 149,970 100.0 % $ 111,744 74.5 % Organic $ 193,251 73.8 % $ 148,021 98.7 % $ 45,230 30.6 % Acquired 2 68,463 26.2 % 1,949 1.3 % 66,514 n/a Total: $ 261,714 100.0 % $ 149,970 100.0 % $ 111,744 74.5 % 1 represents renewable energy, mining, water resources and other 2 after four quarters post-closing, acquired revenue is reclassified as organic; this results in a change from previously reported numbers For the year ended December 31, 2022, gross revenue from our building infrastructure market increased $65.2 million as compared to the year ended December 31, 2021.
Biggest changeChanges in gross contract revenue (“GCR”) for the year ended December 31, 2023, disaggregated between our core and emerging end markets, were as follows (in thousands other than percentages): For the Year Ended December 31, Consolidated Gross Contract Revenue 2023 %GCR 2022 %GCR Change % Change Building Infrastructure $ 194,867 56.3 % $ 170,431 65.1 % $ 24,436 14.3 % Transportation 72,829 21.0 % 44,846 17.1 % 27,983 62.4 % Power & Utilities 64,156 18.5 % 32,672 12.5 % 31,484 96.4 % Other emerging markets 1 14,404 4.2 % 13,765 5.3 % 639 4.6 % Total: $ 346,256 100.0 % $ 261,714 100.0 % $ 84,542 32.3 % Organic $ 315,759 91.2 % $ 261,714 100.0 % $ 54,045 20.7 % Acquired 2 30,497 8.8 % - n/a n/a n/a Total: $ 346,256 100.0 % $ 261,714 100.0 % $ 54,045 32.3 % 1 represents environmental, mining, water resources and other 2 after four quarters post-closing, acquired revenue is reclassified as organic; this results in a change from previously reported numbers 49 Table of Content 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.
To determine the proper revenue recognition method under ASC Topic 606, we evaluate whether two or more contracts should be combined and accounted for as one single contract and if so, whether to account for the combined or single contract as more than one performance obligation.
Revenue Recognition To determine the proper revenue recognition method under ASC Topic 606, we evaluate whether two or more contracts should be combined and accounted for as one single contract and if so, whether to account for the combined or single contract as more than one performance obligation.
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 and “Cautionary Statement about Forward-Looking Statements,” in this Annual Report on Form 10-K, all of which are difficult to predict.
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 and “Cautionary Statements about Forward-Looking Statements,” in this Annual Report on Form 10-K, all of which are difficult to predict.
Estimates of our tax expense include both current and deferred tax expense along with all available tax incentives and credits. 45 Table of Content Other Financial Data, Non-GAAP Measurements and Key Performance Indicators Backlog We measure the value of our undelivered gross revenue in real time to calculate our backlog and predict future revenue.
Estimates of our tax expense include both current and deferred tax expense along with all available tax incentives and credits. Other Financial Data, Non-GAAP Measurements and Key Performance Indicators Backlog We measure the value of our undelivered gross revenue in real time to calculate our backlog and predict future revenue.
Components of Income and Expense Revenue We generate revenue from services performed by our employees, pass-through fees from sub-consultants, and reimbursable contract costs. On our consolidated financial statements, we report gross revenue, which represents total revenue billed to customers excluding taxes collected from customers.
Components of Income and Expense Revenue We generate revenue from services performed by our employees, pass-through fees from sub-consultants, and reimbursable contract costs. On our consolidated financial statements, we report gross revenue, which represents total 44 Table of Content revenue billed to customers excluding taxes collected from customers.
Our peers may define Adjusted EBITDA differently. Adjusted EBITDA Margin, net Adjusted EBITDA Margin, net, which is a non-GAAP financial measure, represents Adjusted EBITDA, as defined above, as a percentage of net service billings, as defined above. Critical Accounting Policies and Estimates We use estimates in the determination of certain financial results.
Our peers may define Adjusted EBITDA differently. 46 Table of Content Adjusted EBITDA Margin, net Adjusted EBITDA Margin, net, which is a non-GAAP financial measure, represents Adjusted EBITDA, as defined above, as a percentage of net service billings, as defined above. Critical Accounting Policies and Estimates We use estimates in the determination of certain financial results.
We do not limit our consideration to traditional bank financing, but rather include other structured debt and equity as option for additional capital. For more information about our credit facilities, see Note 11 – Bank Revolving Line of Credit and Fixed Credit Facilities.
We do not limit our consideration to traditional bank financing, but rather include other structured debt and equity as option for additional capital. For more information about our credit facilities, see Note 11 – Revolving Credit Facility and Fixed Credit Facilities.
Overview Bowman is a professional services firm delivering innovative engineering solutions to customers who own, develop, and maintain the built environment. We provide planning, engineering, construction management, commissioning, environmental consulting, geospatial, survey, land procurement and other technical services to over 3,000 customers operating in a diverse set of end markets.
Overview Bowman is a professional services firm delivering innovative engineering solutions to customers who own, develop, and maintain the built environment. We provide planning, engineering, construction management, commissioning, environmental consulting, geospatial, survey, land procurement and other technical services to over 4,750 customers operating in a diverse set of end markets.
Our principal uses of cash are operating expenses, working capital requirements, capital expenditures, repayment of debt, acquisitions, and acquisition related payments. On December 31, 2022, we maintained a $50.0 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.
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 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.
Under the terms of our Revolving Credit Facility, available cash in our primary operating account sweeps against the outstanding balance every evening. Our cash 53 Table of Content on hand therefore generally consists of petty cash and other non-operating funds not included in the nightly sweep.
Direct payroll costs include allocated fringe costs (i.e. health benefits, employer payroll taxes, and retirement plan contributions), paid leave and incentive compensation. Sub-consultants and direct expenses include both sub-consultants and other outside costs associated with performance under our contracts. Sub-consultant and direct costs are generally reimbursable by our customers under the terms of our contracts.
Direct payroll costs include allocated fringe costs (i.e. health benefits, employer payroll taxes, and retirement plan contributions), paid leave and incentive compensation. Sub-consultants and direct expenses include both sub-consultants and other outside costs associated with performance under our contracts. Sub-consultant and direct costs are generally reimbursable by our customers with little or no mark-up under the terms of our contracts.
Adjusted EBITDA Margin, net (non-GAAP) 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, 2022 and 2021, Adjusted EBITDA Margin, net was 14.5% and 12.2% respectively.
Adjusted EBITDA Margin, net (non-GAAP) 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.
This increase includes a $2.5 million increase in employee payroll taxes and a $3.3 million increase in health benefits for the year ended December 31, 2022, primarily due to the increase in the overall labor pool.
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.
Lump sum contracts can involve both hourly and fixed fee tasks. 44 Table of Content The majority of our assignments are lump sum in nature representing approximately 70% and 66% of our gross contract revenue for the years ended December 31, 2022 and 2021, respectively.
Lump sum contracts can involve both hourly and fixed fee tasks. 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.
At December 31, 2022 and 2021, our backlog was comprised as follows: December 31, 2022 December 31, 2021 Building Infrastructure 51.2 % 62.3 % Transportation 30.6 % 19.0 % Power & Utilities 13.4 % 16.2 % Other Emerging Markets 4.8 % 2.5 % Liquidity and Capital Resources Our principal sources of liquidity are our cash and cash equivalents balances, cash flow from operations, borrowing capacity under our revolving credit facility, lease financing, proceeds from stock sales and other structured debt securities.
At December 31, 2023 and 2022, our backlog was comprised as follows: December 31, 2023 December 31, 2022 Building Infrastructure 54.7 % 51.2 % Transportation 24.2 % 30.6 % Power & Utilities 17.4 % 13.4 % Other Emerging Markets 3.7 % 4.8 % Liquidity and Capital Resources 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.
Income Tax Benefit Income tax benefit for the year ended December 31, 2022 increased $1.7 million or 106.3% to $3.3 million benefit, as compared to $1.6 million benefit for the year ended December 31, 2021. Effective upon the completion of our initial public offering our tax status converted from cash basis to accrual basis, retroactive to January 1, 2021.
Income Tax (Expense) Benefit 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.
All of our leasing facilities allow for both operating and finance leasing. We allocate finance lease payments between amortization and interest. The payment terms on the lease agreements range between 30 and 50 months with payments totaling approximately $0.6 million per month.
At December 31, 2023, we maintained a fleet of approximately 500 vehicles. All of our leasing facilities allow for both operating and finance leasing. We allocate finance lease payments between amortization and interest. The payment terms on the lease agreements range between 30 and 50 months with payments totaling approximately $0.6 million per month.
Gross contract revenue for the years ended December 31, 2022, and 2021 was $261.7 million and $150.0 million, respectively. Gross contract revenue derived from our workforce represented 89.9% and 89.9% of gross contract revenue for the years ended December 31, 2022 and 2021, respectively (see Net service billing – non-GAAP below).
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).
Estimates used in financial reporting utilize only information available to us at the time of formulation. These estimates are subject to change as new information becomes available. Discussed below are the accounting policies for which we believe our judgments and estimates have the greatest potential impact. Revenue Recognition On January 1, 2019, we adopted ASC Topic 606.
Estimates used in financial reporting utilize only information available to us at the time of formulation. These estimates are subject to change as new information becomes available. Discussed below are the accounting policies for which we believe our judgments and estimates have the greatest potential impact.
During the year ended December 31, 2021, net cash provided by operating activities was $4.7 million, which primarily consisted of $0.3 million net income, adjusted for stock-based compensation expense of $8.2 million and depreciation and amortization expense of $6.4 million, offset by an increase in deferred taxes of $2.2 million, a decrease in a net cash outflow of $8.4 million from changes in operating assets and liabilities.
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.
We define Adjusted EBITDA as net income before interest expense, income taxes and depreciation and amortization, plus discontinued expenses, legal settlements, 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 preparing for our initial public offering.
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 net income for the years ended December 31, 2022, and 2021 was $5.0 million and $0.3 million, respectively. Our Adjusted EBITDA (see Adjusted EBITDA - non-GAAP below) was $34.0 million on net income of $5.0 million and $16.5 million on net income of $0.3 million for the years ended December 31, 2022, and 2021, respectively.
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.
Tax Expense Income tax (benefit) expense, current and deferred, includes estimated federal, state and local tax expense associated with our net income, as apportioned to the states in which we operate.
Other (Income) Expense Other (income) expense consists of other non-operating and non-core expenses. Tax (Benefit) Expense Income tax (benefit) expense, current and deferred, includes estimated federal, state and local tax expense associated with our net income, as apportioned to the states in which we operate.
As evidenced by recent increases in program commitments within the gas pipeline market, we believe trends in power and utilities provide meaningful opportunity for continued growth and we are committed to investing resources accordingly. Our other emerging markets consist of renewable energy and energy efficiency, mining, water resources, and other natural resources services.
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. Our other emerging markets consist of mining, water resources, environmental consulting, and other natural resources services.
Under the Amended and Restated 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 Amended and Restated Agreement).
Under Credit Agreement, the Company is required to comply with certain covenants, including covenants related to 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).
We utilize master lease facilities with Honour Capital LLC (“Honour”) and Enterprise Leasing (“Enterprise”). The Honour Capital lease facility finances our acquisition of IT infrastructure, geospatial and survey equipment, furniture and other long-lived assets. The Enterprise lease facility finances the acquisition of field trucks and other service vehicles. At December 31, 2022, we maintained a fleet of approximately 400 vehicles.
We utilize master lease facilities primarily with Honour Capital LLC (“Honour”) and Enterprise Leasing (“Enterprise”). The Honour Capital lease facility finances our acquisition of IT infrastructure, geospatial and survey equipment, furniture and other long-lived assets. The Enterprise lease facility finances the acquisition of field trucks and other service vehicles.
Other Expense Other expense increased by $2.0 million to $3.4 million of expense for the year ended December 31, 2022 as compared to $1.4 million of expense for the year ended December 31, 2021. Interest expense increased by $1.6 million and acquisition related costs increased by $0.8 million. This increase is primarily attributable to increases in finance leases and acquisitions.
Other Expense 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.
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, 2022 was (188.3%).
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%).
Other Acquisitions For information on the terms of additional promissory notes issued by the Company in connection with acquisitions during 2021 and 2022 that were not deemed significant acquisitions, see Note 4 – Acquisitions and Note 12 – Notes Payable 54 Table of Content Off-Balance Sheet Arrangements We have no material off-balance sheet arrangements, no special purpose entities, and no activities that include non-exchange-traded contracts accounted for at fair value.
Other Acquisitions For information on the terms of additional promissory notes issued by the Company in connection with acquisitions during 2023 and 2022 that were not deemed significant acquisitions, see Note 4 – Acquisitions and Note 12 – Notes Payable Off-Balance Sheet Arrangements We have no material off-balance sheet arrangements, no special purpose entities, and no activities that include non-exchange-traded contracts accounted for at fair value. 55 Table of Content Effects of Inflation Based on our analysis of the periods presented, we believe that inflation has not had a material effect on our operating results.
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.
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.
For the year ended December 31, 2022, gross contract revenue attributable to work performed by our workforce increased $100.3 million, or 74.4% to $235.2 million or 89.9% of gross contract revenue as compared to $134.9 million or 89.9% for year ended December 31, 2021 (see Net service billing – non-GAAP).
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).
Other direct payroll costs, the component of direct payroll costs associated with fringe and incentive compensation (cash and non-cash) increased by $10.7 million or 70.4% to $25.9 million for the year ended December 31, 2022 as compared to $15.2 million for the year ended December 31, 2021.
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.
Income (Loss) Before Tax Expense and Net Income Income before tax expense increased by $3.0 million or 230.8% to $1.7 million income for the year ended December 31, 2022, as compared to a $1.3 million loss for the year ended December 31, 2021.
Income (Loss) Before Tax Expense and Net Income 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.
Investing Activities Net cash used in investing activities was $18.8 million for the year ended December 31, 2022, $18 million was related to acquisitions that occurred in 2022 and $0.9 million was for purchases of property and equipment. 53 Table of Content Financing Activities Net cash provided by financing activities was $2.2 million during the year ended December 31, 2022.
Investing Activities 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. 54 Table of Content Financing Activities Net cash provided by financing activities was $22.8 million during the year ended December 31, 2023.
In most cases, we account for contract modifications as part of the existing contracts because they are for services that are not distinct from the original contract. 46 Table of Content We base contract estimates on various assumptions about future costs and other inputs.
In most cases, we account for contract modifications as part of the existing contracts because they are for services that are not distinct from the original contract. We base contract estimates on various assumptions about future costs and other inputs. Uncertainties inherent in the estimating process present the possibility that actual completion costs may vary from estimates.
Direct payroll accounted for 79.1% of total contract costs for the year ended December 31, 2022, a decrease of 0.6 percentage points as compared to 79.7% for the year ended December 31, 2021.
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.
For the year ended December 31, 2022 and 2021, total contract costs represented 48.4% and 49.7% of total contract revenue, respectively. For the years ended December 31, 2022 and 2021 total contract costs represented 53.8% and 55.3% of revenue attributable to our workforce, respectively (see Net Service Revenue).
For the year ended December 31, 2023 and 2022, total contract costs represented 49.1% and 48.4% of total contract revenue, 50 Table of Content 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).
Cash Flows The following table summarizes our cash flows for the periods presented: For The Year Ended December 31, Consolidated Statement of Cash Flows (amounts in thousands) 2022 2021 Net cash provided by operating activities $ 9,170 $ 4,717 Net cash used in investing activities (18,754) (21,534) Net cash provided by financing activities 2,247 37,050 Change in cash and cash equivalents (7,337) 20,233 Cash and cash equivalents, end of period 13,282 20,619 Operating Activities 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.
Cash Flows The following table summarizes our cash flows for the periods presented: For The Year Ended December 31, Consolidated Statement of Cash Flows (amounts in thousands) 2023 2022 Net cash provided by operating activities $ 11,722 $ 9,170 Net cash used in investing activities (27,156) (18,754) Net cash provided by financing activities 22,839 2,247 Change in cash and cash equivalents 7,405 (7,337) Cash and cash equivalents, end of period 20,687 13,282 Operating Activities 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.
Other financial information and Non-GAAP key performance indicators Net service billing (non-GAAP) Net service billing increased $100.3 million or 74.4% to $235.2 million for the year ended December 31, 2022, as compared to $134.9 million for the year ended December 31, 2021.
Other financial information and non-GAAP key performance indicators Net service billing (non-GAAP) 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.
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. Additionally, on November 10, 2022, our board of directors authorized a program to repurchase up to $10.0 million of our common stock.
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.
Selling, general and administrative expenses represent corporate and other general overhead expenses, salaries and wages not allocated to customer projects including management and administrative personnel costs, incentive compensation, personal leave, office lease and occupancy costs, legal, professional and accounting fees.
Operating Expense Operating expenses consists of selling, general and administrative costs, non-cash stock compensation, depreciation and amortization and settlements and other non-core expenses. 45 Table of Content Selling, general and administrative expenses represent corporate and other general overhead expenses, salaries and wages not allocated to customer projects including management and administrative personnel costs, incentive compensation, personal leave, office lease and occupancy costs, legal, professional and accounting fees.
Backlog (other key performance metrics) Our backlog increased $76 million or 45.5% to approximately $243 million during the year ended December 31, 2022, as compared to $167 million at December 31, 2021.
Backlog (other key performance metrics) 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.
Our cash on hand decreased by $7.3 million at December 31, 2022 as compared to December 31, 2021. 52 Table of Content We regularly monitor our capital requirements and believe our sources of liquidity, including cash flow from operations, existing cash, and borrowing availability under our credit and lease facilities will be sufficient to fund our projected cash requirements and strategic initiatives for the next year.
We regularly monitor our capital requirements and believe our sources of liquidity, including cash flow from operations, existing cash, and borrowing availability under our credit and lease facilities will be sufficient to fund our projected cash requirements and strategic initiatives for the next year.
We utilize a third party valuation specialist to formulate the incremental borrowing rates for the Company, to calculate the present value on new leases.
We utilize a third party valuation specialist to formulate the incremental borrowing rates for the Company, to calculate the present value on new leases. We regularly evaluate our options with respect to capital and our requirements for operations and growth.
We perform an annual impairment test as of October 1 of each year. 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 perform a Step 1 impairment analysis by comparing the fair value of the reporting unit to carrying value.
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.
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. Depreciation and amortization represent the depreciation and amortization expense of our property and general IT equipment, capital lease assets, tenant improvements and intangible assets.
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.
General overhead increased $17.3 million or 76.5% to $39.9 million for the year ended December 31, 2022, as compared to $22.6 million for the year ended December 31, 2021, due to increased costs associated with operating as a public company and the overall growth of the company.
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.
Credit Facilities and Other Financing As of December 31, 2022, we maintained a $50.0 million revolving credit facility (the “Revolving Line”) and three non-revolving credit facilities (“Fixed Line 1”, “Fixed Line 2” and “Facility 4”) pursuant to credit agreements (the “Credit Agreements”) with Bank of America, our primary lender.
Credit Facilities and Other Financing 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.
Operating Expense Total operating expense increased $54.7 million or 72.6% to $130.0 million for the year ended December 31, 2022, as compared to $75.3 million for the year ended December 31, 2021.
Operating Expense 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.
This increase includes an increase of $1.8 million in the cost of non-cash stock compensation to $4.2 million for the year ended December 31, 2022, as compared to $2.4 million for the year ended December 31, 2021.
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.
We record adjustments required to align revenue with costs in place on the cumulative catch-up basis in the period in which we identify the revisions. We apply changes to projected revenue from contingent fee awards or penalties during the period in which we determine such contingencies to be probable.
We apply changes to projected revenue from contingent fee awards or penalties during the period in which we determine such contingencies to be probable.
The net outflow from changes in operating assets and liabilities was primarily due to a $8.8 million increase in accounts receivable resulting from increased billing to our clients as well as additional billing from the acquired companies, a $2.3 million increase in prepaid expenses relating to the purchase of fiduciary directors and officer’s insurance and an increase in income tax receivable, and a $0.6 million net increase in contract assets and liabilities, partially offset by a $3.3 million increase in accounts payable and accrued expense.
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.
Net income increased by $4.7 million or 1566.7% to $5.0 million for the year ended December 31, 2022, as compared to $0.3 million for the year ended December 31, 2021.
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.
Selling, general and administrative expenses increased $48.8 million or 70.7% to $117.8 million for the year ended December 31, 2022, as compared to $69.0 million for the year ended December 31, 2021.
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.
Year ended December 31, 2022 as compared to the year ended December 31, 2021 Gross Contract Revenue Gross contract revenue for the year ended December 31, 2022 increased $111.7 million or 74.5% to $261.7 million as compared to $150.0 million for the year ended December 31, 2021.
Year ended December 31, 2023 as compared to the year ended December 31, 2022 Gross Contract Revenue 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.
The increase was primarily attributable to the acquisition of McMahon Associates, Inc. which accounted for $24.3 million of the increase. 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.
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.
This was primarily due to net proceeds of $15.5 million from our February 2022 public offering, net of underwriting discounts commissions and other offering costs, offset by $3.3 million of payments for the purchase of treasury stock, $6.0 million of payments on finance leases and $5.3 million of payments on notes payable and our fixed lines of credit.
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.
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 consolidated financial statements.
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.
Effects of Inflation Based on our analysis of the periods presented, we believe that inflation has not had a material effect on our operating results. There can be no assurance that future inflation will not have an adverse impact on our operating results and financial condition. Item 7A.
There can be no assurance that future inflation will not have an adverse impact on our operating results and financial condition.
(Gain) loss on sale represents gains or losses inclusive of foreign exchange and accumulated depreciation recapture resulting from the disposal of an asset upon the sale or retirement of such asset. Other (Income) Expense Other (income) expense consists of other non-operating and non-core expenses.
Depreciation and amortization represent the depreciation and amortization expense of our property and general IT equipment, capital lease assets, tenant improvements and intangible assets. (Gain) loss on sale represents gains or losses inclusive of foreign exchange and accumulated depreciation recapture resulting from the disposal of an asset upon the sale or retirement of such asset.
Results of Operations Consolidated results of operations The following represents our consolidated results of operations for periods indicated (in thousands): For The Year Ended December 31, 2022 2021 Gross contract revenue $ 261,714 $ 149,970 Contract costs (exclusive of depreciation and amortization) 126,586 74,532 Operating expense 130,008 75,278 Income from operations 5,120 160 Other expense 3,384 1,440 Income tax benefit (3,269) (1,579) Net income $ 5,005 $ 299 Net margin 1.9 % 0.2 % Other financial information 1 Net service billing $ 235,204 $ 134,854 Adjusted EBITDA 34,022 16,485 Adjusted EBITA margin, net 14.5 % 12.2 % 1 Represents non-GAAP financial measures.
Estimates of our tax expense include both current and deferred tax expense along with all available tax incentives and credits. 48 Table of Content Results of Operations Consolidated results of operations The following represents our consolidated results of operations for periods indicated (in thousands): For The Year Ended December 31, 2023 2022 Gross contract revenue $ 346,256 $ 261,714 Contract costs (exclusive of depreciation and amortization) 170,223 126,586 Operating expense 176,689 130,008 (Loss) Income from operations (656) 5,120 Other expense 5,791 3,384 Income tax benefit 177 (3,269) Net (loss) income $ (6,624) $ 5,005 Net margin (1.9) % 1.9 % Other financial information 1 Net service billing $ 303,994 $ 235,204 Adjusted EBITDA 47,031 34,022 Adjusted EBITA margin, net 15.5 % 14.5 % 1 Represents non-GAAP financial measures.
Under the terms of the Revolving Line, available cash in our primary operating account sweeps against the outstanding balance every evening. As of December 31, 2022, we did not have a balance on this Revolving Line.
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.
Indirect labor increased $21.4 million or 72.5% to $50.9 million for the year ended December 31, 2022, as compared to $29.5 million for the year ended December 31, 2021, as a result of increased staffing to accommodate growth.
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.
Direct labor, the component of direct payroll costs associated with the cost of labor relating to work performed on contracts increased $30.0 million or 67.7% to $74.3 million for the year ended December 31, 2022 as compared $44.3 million for the year ended December 31, 2021.
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, 2022, revenue from emerging markets increased $8.1 million as compared to the year ended December 31, 2021.
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 Amended and Restated Agreement increased the maximum principal amount of the revolving line of credit to $50 million, is secured by all the assets of the Company and the subsidiary guarantors and has a maturity date of September 30, 2024.
The First Amendment increased the maximum principal amount of the Revolving Credit Facility to $70 million, is secured by all the assets of the Company and the subsidiary guarantors and extended the maturity date of the Revolving Credit Facility to July 31, 2025.
For the year ended December 31, 2022 and 2021, direct labor costs represented 28.4% and 29.5% of gross contract revenue, respectively and represented 31.6% and 32.9% of the revenue attributable to our workforce, respectively.
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.
Adjusted EBITDA reconciles to net income as follows (in thousands): For The Year Ended December 31, 2022 2021 $ Change % Change Net Service Revenue $ 235,204 $ 134,854 $ 100,350 74.4 % Net Income $ 5,005 $ 299 $ 4,706 1573.9 % + interest expense 2,457 918 1,539 167.6 % + depreciation & amortization 12,251 6,371 5,880 92.3 % + tax expense (3,269) (1,579) (1,690) 107.0 % EBITDA $ 16,444 $ 6,009 $ 10,435 173.7 % + non-cash stock compensation 15,409 8,217 7,192 87.5 % + transaction related expenses - 1,555 (1,555) 100.0 % + settlements and other non-core expenses 654 - 654 100.0 % + acquisition expenses 1,515 704 811 115.2 % Adjusted EBITDA $ 34,022 $ 16,485 $ 17,537 106.4 % Adjusted EBITDA margin, net 14.5 % 12.2 % For the years ended December 31, 2022 and 2021, Adjusted EBITDA includes $15.4 million and $8.2 million, respectively, relating to non-cash stock compensation expenses resulting from the vesting of restricted stock awards.
Adjusted EBITDA reconciles to net income as follows (in thousands): For The Year Ended December 31, 2023 2022 $ Change % Change Net Service Billing $ 303,994 $ 235,204 $ 68,790 29.2 % Net (Loss) Income $ (6,624) $ 5,005 $ (11,629) (232.3 %) + interest expense 5,340 2,457 2,883 117.3 % + depreciation & amortization 18,723 12,251 6,472 52.8 % + tax benefit 177 (3,269) 3,446 (105.4 %) EBITDA $ 17,616 $ 16,444 $ 1,172 7.1 % + non-cash stock compensation 24,984 15,409 9,575 62.1 % + settlements and other non-core expenses 1,170 654 516 78.9 % + acquisition expenses 3,261 1,515 1,746 115.2 % Adjusted EBITDA $ 47,031 $ 34,022 $ 13,009 38.2 % Adjusted EBITDA margin, net 15.5 % 14.5 % 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.
Gains on the sale of certain IT equipment and automobiles remained unchanged for the year ended December 31, 2022 at $0.1 million of gain on the disposal of such assets. 50 Table of Content Income from Operations Income from operations increased $4.9 million to $5.1 million for the year ended December 31, 2022 as compared to $0.2 million for the year ended December 31, 2021 due to organic growth and acquisitions.
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.
We maintain what we believe to be an appropriate reserve against our accumulated credits. Estimates of our tax expense include both current and deferred tax expense along with all available tax incentives and credits.
We maintain what we believe to be an appropriate reserve against our accumulated credits.
Depreciation and amortization increased $5.9 million or 92.2% to $12.3 million for the year ended December 31, 2022, as compared to $6.4 million for the year ended December 31, 2021. This increase is primarily due to an increase in leased assets and intangible assets. We continue to increase the use of our finance lease facility as we continue to grow.
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.
Direct payroll costs increased $40.7 million or 68.5% to $100.1 million for the year ended December 31, 2022, as compared to $59.4 million for the year ended December 31, 2021 due to increased staffing and growth.
Total contract costs include both direct payroll costs, and sub-consultants and other expenses. 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.
For the years ended December 31, 2022 and 2021, public sector customers, defined as direct contracts with municipalities, public agencies, or governmental authorities, represented 13.1% and 16.8% of our gross contract revenue, respectively.
With recent and future acquisitions, we expect to experience continued growth from investment in various emerging market services. 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.
The exercise of the over-allotment option closed on March 2, 2022, at which time we received net proceeds of approximately $2.4 million after underwriting discounts and commissions. Methods of Evaluation We use a variety of financial and other information in monitoring the financial condition and operating performance of our business.
Methods of Evaluation We use a variety of financial and other information in monitoring the financial condition and operating performance of our business.
Net service billing reconciles to gross contract revenue as follows (in thousands): For The Year Ended December 31, 2022 2021 Gross revenue $ 261,714 $ 149,970 Less: sub-consultants and other direct expenses 26,510 15,116 Net services billing $ 235,204 $ 134,854 Net service billing was 89.9% of gross contract revenue for the year ended December 31, 2022, which is the same as for the year ended December 31, 2021. 51 Table of Content Adjusted EBITDA (non-GAAP) Adjusted EBITDA increased $17.5 million or 106.4% to $34.0 million for the year ended December 31, 2022 as compared to $16.5 million for the year ended December 31, 2021.
Net service billing reconciles to gross contract revenue as follows (in thousands): For The Year Ended December 31, 2023 2022 Gross revenue $ 346,256 $ 261,714 Less: sub-consultants and other direct expenses 42,262 26,510 Net services billing $ 303,994 $ 235,204 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.
For the year ended December 31, 2022 and 2021, sub-consultant and expenses represented 10.1% and 10.1% of gross contract revenue, respectively. The growth in sub-consultants and expenses is directly in-line with the increase of gross contract revenue.
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.
Gross contract revenue from projects for public sector clients are included in the end market most aligned with work performed. 49 Table of Content Contract costs (exclusive of depreciation and amortization) Total contract costs, exclusive of depreciation and amortization, increased $52.1 million or 69.9% to $126.6 million for the year ended December 31, 2022, as compared to $74.5 million for the year ended December 31, 2021.
Contract costs (exclusive of depreciation and amortization) 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.
Uncertainties inherent in the estimating process present the possibility that actual completion costs may vary from estimates. When estimated total costs on contracts indicate a loss, we recognize these losses in the period in which we identify the loss.
When estimated total costs on contracts indicate a loss, we recognize these losses in the period in which we identify the loss. We record adjustments required to align revenue with costs in place on the cumulative catch-up basis in the period in which we identify the revisions.
For the year ended December 31, 2022, revenue from power and utilities increased $10.1 million as compared to the year ended December 31, 2021. The increase is primarily attributable to increased revenue from our Florida utility and undergrounding along with gas line replacement projects in Illinois, Ohio and Arizona.
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.
Non-cash stock compensation increased $5.1 million or 87.9% to $10.9 million for the year ended December 31, 2022, as compared to $5.8 million for the year ended December 31, 2021, as several new stock awards were granted to management as well as employees in connection with acquisitions.
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.

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