Item 1. Financial Statements
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.
|
Nature of Business and Basis of Presentation
|
Nature of Business
Bowman Consulting Group Ltd. and its affiliates (“Bowman” or “we” or the “Company”) incorporated in the Commonwealth of Virginia on June 5, 1995 and reincorporated in the State of Delaware on November 13, 2020. Bowman is a professional services firm delivering innovative solutions to the marketplace of customers who own, develop and maintain the built environment. Within that arena, we provide planning, design, engineering, geomatics, survey, construction management, environmental consulting and land procurement services to markets that encompass the buildings in which people live, work and learn in, the systems that provide water, electricity and other vital services, and the roads, bridges, and transportation systems used to get from place to place. We provide services to customers through fixed-price and time-and-material based contracts containing multiple milestones and independently priced deliverables. Typically, contract awards are on a negotiated basis, ranging in value from a few thousand dollars to multiple millions of dollars and can have varying durations depending on the size, scope, and complexity of the project.
The Company’s workforce typically provides the full scope of engineering and other contract services. With respect to certain specialty services or other compliance requirements within a particular contract, however, we may engage third-party sub-consultants. The Company’s headquarters is located in Reston, VA and the Company has over 30 offices throughout the United States.
Initial Public Offering
On May 11, 2021, we closed on our initial public offering (“IPO”), in which we issued and sold 3,690,000 shares of our common stock at $14.00 per share, resulting in net proceeds of $48.0 million after deducting underwriting discounts and commissions, but before expenses of the IPO.
On June 4, 2021, the underwriters exercised their option to purchase an additional 115,925 shares of the Company’s common stock at the public offering price of $14.00 per share, resulting in additional gross proceeds of approximately $1.6 million. After giving effect to this partial exercise of the overallotment option, the total number of shares sold by Bowman in its initial public offering increased to 3,805,925 shares and gross proceeds increased to approximately $53.3 million. The exercise of the over-allotment option closed on June 8, 2021, at which time the Company received net proceeds of approximately $1.5 million after underwriting discounts and commissions.
Deferred offering costs consist primarily of accounting, legal, and other fees related to our IPO. Prior to the IPO, all deferred offering costs were capitalized within prepaid and other current assets in the consolidated balance sheet. After the IPO, $2.3 million of deferred offering costs were reclassified into shareholder’s equity as a reduction of the IPO proceeds. We capitalized $0.9 million of deferred offering costs within prepaid and other current assets in the consolidated balance sheet as of December 31, 2020.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements and footnotes have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and applicable regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial information. In the opinion of management, the interim financial information includes all adjustments of a normal recurring nature necessary for a fair presentation of the results of operations, financial position, changes in shareholders’ equity and cash flows. The results of operations for the current period are not necessarily indicative of the results for the full year or the results for any future periods.
The unaudited condensed consolidated financial statements should be read in conjunction with the audited combined financial statements and related footnotes included in our final prospectus dated May 6, 2021, and filed with the SEC pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended.
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
7
2. Significant Accounting Policies
The following is a summary of the significant accounting policies and principles used in the preparation of the condensed consolidated financial statements:
Emerging Growth Company
Section 102(b)(1) of the Jumpstart Our Business Startups Act (“JOBS Act”) exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company that is either not an emerging growth company or, an emerging growth company that has opted out of using the extended transition period, difficult or impossible because of the potential differences in accounting standards used.
Revenue Recognition
Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contract with Customers (“ASC Topic 606”) provides a single comprehensive revenue recognition framework and supersedes almost all revenue recognition guidance including industry-specific revenue guidance. To determine the proper revenue recognition method under ASC Topic 606, the Company evaluates 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. For most contracts, it is concluded that there is a single performance obligation because the promise to transfer individual goods or services is not separately identifiable from the commitment to the deliverable of the contract and, therefore, is not distinct.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could vary from the estimates and assumptions that were used.
Concentration of Credit Risk and other Concentrations
The Company’s financial instruments that are exposed to concentrations of credit risk consist of cash and accounts receivable.
Cash balances at various times during the year may exceed the amount insured by the Federal Deposit Insurance Corporation. The Company’s cash deposits are held in institutions whose credit ratings are monitored by management, and the Company has not incurred any losses related to such deposits.
The Company is subject to a concentration of credit risk with respect to outstanding accounts receivable, however, the Company believes no such concentration existed during the six months ended June 30, 2021, or the year ended December 31, 2020. The Company’s customers are located throughout the United States. Although the Company generally grants credit without collateral, management believes that its contract acceptance, billing, and collection policies are adequate to minimize material credit risk. Also, for non-governmental customers, the Company can often place mechanics liens against the real property associated with the contract in the event of non-payment.
Fair Value Measurements
Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures (“ASC Topic 820”) provides the framework for measuring and reporting financial assets and liabilities at fair value. ASC Topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
8
The codification establishes a three-level disclosure hierarchy to indicate the level of judgment used to estimate fair value measurements:
Level 1:Quoted prices in active markets for identical assets or liabilities as of the reporting date;
Level 2:Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and inputs other than quoted prices (such as interest rate and yield curves);
Level 3:Uses inputs that are unobservable, supported by little or no market activity and reflect significant management judgment.
As of June 30, 2021 and December 31, 2020:
|
•
|
The carrying amount of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their fair value due to the relatively short duration of these instruments;
|
|
•
|
The carrying amounts of debt obligations approximate their fair values as the terms are comparable to terms currently offered by local financial institutions for arrangements with similar terms to industry peers with comparable credit characteristics. Accordingly, the debt obligations involve Level 2 fair value inputs;
|
|
•
|
As of December 31, 2020 the liability related to shares subject to repurchase is recognized at fair value using Level 3 inputs that were primarily determined based on the contractual settlement price as defined by the terms of the Company’s Shareholders’ Buy-Sell Agreement. As of June 30, 2021 the liability related to shares subject to repurchase is recognized at fair value using Level 1 inputs as there is an active market for the Company’s publicly traded stock. For further discussion, see Note 15, Stock Bonus Plan.
|
Income Taxes
The Company recognizes deferred income tax assets or liabilities for expected future tax consequences of events recognized in the consolidated financial statements or tax returns. Under this method, deferred income tax assets or liabilities are determined based upon the difference between the financial statement and income tax bases of assets and liabilities using enacted tax rates expected to apply when the differences settle or become realized. Valuation allowances are provided when it is more likely than not that a deferred tax asset is not realizable or recoverable in the future.
The Company recognizes the effect of a change in tax rates on deferred tax assets and liabilities in income in the period that includes the enactment date. The Company’s effective tax rate for the six months ended June 30, 2021 and 2020 was 30.70% and 41.38%.
The Company assesses uncertain tax positions to determine whether the position will more likely than not be sustained upon examination by the Internal Revenue Service (IRS) or other taxing authorities. If the Company cannot reach a more-likely-than-not determination, no benefit is recorded. If the Company determines that the tax position is more likely than not to be sustained, the Company records the largest amount of benefit that is more likely than not to be realized when the tax position is settled. The Company recognizes interest and penalties, if any, related to uncertain tax positions in income tax expense.
The Company files income tax returns in the U.S. federal jurisdiction and certain states in which it operates. Based on the timing of the filing of certain tax returns, the Company’s federal income tax returns for tax years 2017 and after remain subject to examination by the U.S. Internal Revenue Service. The statute of limitations on the Company’s state income tax returns generally conforms to the federal three-year statute of limitations.
Segments
The Company operates in one segment based upon the financial information used by its chief operating decision maker in evaluating the financial performance of its business and allocating resources. The single segment represents the Company’s core business of providing engineering and related professional services to its customers.
Recently Issued Accounting Guidance
Accounting guidance not yet adopted
Leases. In February 2016, the FASB issued Accounting Standards Update 2016-02, Leases (Topic 842) (“ASU 2016-02”) to increase transparency and comparability of accounting for lease transactions by requiring lessees to recognize the right-of-use assets and lease liabilities on the balance sheet and to disclose qualitative and quantitative information about lease transactions and enable
9
users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The effective date of ASU 2016-02 for the Company is January 1, 2022, with early adoption permitted. The Company is currently evaluating the impact this ASU may have on its consolidated financial statements and related disclosures.
Financial Instruments – Credit Losses. In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326) to replace the incurred loss impairment methodology under U.S. GAAP. This ASU introduces a new accounting model, the Current Expected Credit Losses model (CECL), which could result in earlier recognition of credit losses and additional disclosures related to credit risk. The CECL model will require the Company to use a forward-looking expected credit loss impairment methodology for the recognition of credit losses for financial instruments at the time the financial asset is originated or acquired, and require a loss be incurred before it is recognized. The expected credit losses are adjusted each period for changes in expected lifetime credit losses. The new standard will apply to accounts receivable, loans, and other financial instruments. This standard is effective for the Company beginning January 1, 2023. Adoption of ASU 2016-13 will be applied using a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the effective date. The Company is currently evaluating the impact of this ASU on our consolidated financial statements.
Goodwill. In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350), simplifying the Test for Goodwill Impairment. ASU 2017-04 eliminates Step 2 of the goodwill impairment test. Goodwill impairment will now be the amount by which the reporting unit’s carrying amount exceeds its fair value, limited to the carrying amount of the goodwill. ASU 2017-04 is effective for us beginning January 1, 2022. The Company does not expect the impact of this ASU to be material to its consolidated financial statements.
3. Earnings per Share
Basic earnings (loss) per share is calculated by dividing net income (loss) attributable to the Company available to common stockholders by the weighted average number of common shares outstanding for the three and six months ended June 30, 2021 and 2020. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were either exercised or converted into common stock or resulted in the issuance of common stock that would share in the earnings of the Company. The Company uses the two-class method to determine earnings per share.
For calculating basic earnings per share, for the three and six months ended June 30, 2021, the weighted average number of shares outstanding exclude 1,719,138 and 1,209,177 non-vested restricted shares and 32,067 and 43,743 unexercised substantive options. The computation of diluted earnings per share for the three and six months ended June 30, 2021 did not assume the effect of restricted shares or substantive options because the effects were antidilutive.
For calculating basic earnings per share, for the three and six months ended June 30, 2020, the weighted average number of shares outstanding exclude 312,926 and 223,932 non-vested restricted shares and 53,302 and 51,219 substantive options. The computation of diluted earnings per share for the three and six months ended June 30, 2020 did not assume the effect of restricted shares or substantive options because the effects were antidilutive.
The following table represents a reconciliation of the net income and weighted average shares outstanding for the calculation of basic and diluted earnings per share for the three and six months ended June 30, 2021 and 2020 (in thousands, except share data):
|
|
For the Three Months Ended June 30,
|
|
|
For the Six Months Ended June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Numerator
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(439
|
)
|
|
$
|
1,617
|
|
|
$
|
542
|
|
|
$
|
2,043
|
|
Earnings allocated to non-vested shares
|
|
|
-
|
|
|
|
100
|
|
|
|
93
|
|
|
|
96
|
|
Subtotal
|
|
$
|
(439
|
)
|
|
$
|
1,517
|
|
|
$
|
449
|
|
|
$
|
1,947
|
|
Denominator
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
6,973,055
|
|
|
|
5,555,697
|
|
|
|
6,029,054
|
|
|
|
5,570,013
|
|
Effect of dilutive nominal options
|
|
|
-
|
|
|
|
4,366
|
|
|
|
-
|
|
|
|
4,366
|
|
Effect of dilutive contingently earned shares
|
|
|
-
|
|
|
|
31,055
|
|
|
|
-
|
|
|
|
31,055
|
|
Dilutive average shares outstanding
|
|
|
6,973,055
|
|
|
|
5,591,118
|
|
|
|
6,029,054
|
|
|
|
5,605,434
|
|
Basic earnings (loss) per share
|
|
$
|
(0.06
|
)
|
|
$
|
0.27
|
|
|
$
|
0.07
|
|
|
$
|
0.35
|
|
Dilutive earnings (loss) per share
|
|
$
|
(0.06
|
)
|
|
$
|
0.27
|
|
|
$
|
0.07
|
|
|
$
|
0.35
|
|
10
4. Acquisitions
Business Combinations
KTA Group Inc. (KTA)
In the first quarter of 2021, the Company signed a purchase agreement to acquire KTA Group Inc., with an effective date of January 1, 2021. KTA is a mechanical, electrical and plumbing (MEP) engineering firm based in Herndon, VA. The Company paid total consideration of $3.4 million, which was comprised of 53,159 shares of common stock, at $12.80 per share, for a total of $0.7 million, plus $2.7 million in cash and a promissory note. The promissory note is a four year note with a 3.25% interest rate with equal quarterly payments beginning on April 1, 2021, and ending January 1, 2025.
The acquisition of KTA allows Bowman to add electrical engineering to the group of core competencies thereby allowing the Company to cross sell to, and better serve, its renewable energy customers. In addition, KTA’s mechanical engineers bring the experience and expertise necessary to deliver plans and designs for building ventilation, indoor air quality monitoring and medical-grade air filtration.
The following summarizes the preliminary calculations of the fair values of KTA Group’s assets acquired and liabilities assumed as of the acquisition date (in thousands):
Total Purchase Price
|
$
|
3,447
|
|
Purchase Price Allocation:
|
|
|
|
Contract assets
|
|
217
|
|
Property and equipment, net
|
|
453
|
|
Intangible Assets
|
|
871
|
|
Other assets
|
|
18
|
|
Accounts payable and other current liabilities
|
|
(240
|
)
|
Contract liabilities
|
|
(416
|
)
|
Total identifiable assets
|
$
|
903
|
|
Goodwill
|
|
2,544
|
|
Net assets acquired
|
$
|
3,447
|
|
The purchase price allocation is based upon preliminary information and is subject to change when additional information is obtained. Goodwill results from an assembled workforce, which does not qualify for separate recognition, as well as expected future synergies from combining operations. All of the goodwill recognized is expected to be deductible for tax purposes. The Company has not completed its final assessment of the fair values of KTA Group’s assets acquired and liabilities assumed. The final purchase allocation could result in adjustments to certain assets and liabilities, including the residual amount allocated to goodwill.
Identified intangible assets are comprised of customer relationships, contract rights and favorable leaseholds for a total amount of $0.9 million, to be amortized over an estimated useful life of 20 years, 3 years, and 9 years, respectively.
5. Disaggregation of Revenue and Contract Balances
The Company generally recognizes revenue over time as control transfers to a customer based upon the extent of progress towards satisfaction of the performance obligation. For services delivered under fixed price contracts, the Company uses the ratio of actual costs incurred to total estimated costs at completion (an input method) as a reasonable measure of progress towards the satisfaction of a performance in order to estimate the portion of revenue earned. A contract containing a mix of hourly and fixed fee assignments may be characterized as one lump sum contract for purposes of ASC Topic 606. As such, a contract must contain hourly billed components exclusively to qualify for the as-billed practical expedient in ASC Topic 606. For the three and six months ended June 30, 2021, the Company derived 91.6% and 94.9% of its revenue from contracts classified as lump sum, and 8.4% and 5.1% of its revenue from exclusively time and material contracts, respectively. The Company had approximately $100.1 million in remaining performance obligations as of June 30, 2021, of which it expects to recognize approximately 77.1% within the next twelve months and the remaining 22.9% thereafter.
The Company recognized $0.9 million and $1.2 million of revenue for the three and six months ended June 30, 2021, which was included in the contract liabilities balance as of December 31, 2020, and $2.9 million and $4.1 million of revenue for the three and six months ended June 30, 2020, which was included in the contract liabilities balance as of December 31, 2019.
11
6. Contracts in Progress
The following table reflects the calculation of the net balance of contract assets and contract liabilities. Costs and estimated earnings on contracts in progress consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
|
December 31, 2020
|
|
Costs incurred on uncompleted contracts
|
|
$
|
137,778
|
|
|
$
|
113,856
|
|
Estimated contract earnings in excess of costs
|
|
|
185,396
|
|
|
|
151,423
|
|
Estimated contract earnings to date
|
|
|
323,174
|
|
|
|
265,279
|
|
Less: billed to date
|
|
|
(317,550
|
)
|
|
|
(260,142
|
)
|
Net contract assets
|
|
$
|
5,624
|
|
|
$
|
5,137
|
|
7. Notes Receivable
The Company has unsecured notes receivable from related parties, certain non-executive officers of the Company and an unrelated third party. This balance is included as a part of other assets on the accompanying combined balance sheets. The following is a summary of these notes receivable (in thousands):
|
|
June 30, 2021
|
|
|
December 31, 2020
|
|
Officers, employees and affiliated entities - Interest
accrues annually at rates ranging from 3.25% - 5.5%.
The notes receivable mature through December 2021.
|
|
$
|
2,398
|
|
|
$
|
2,479
|
|
Unrelated third party - Currently no interest is being accrued on this note. The note receivable matures in December 2023.
|
|
|
903
|
|
|
|
903
|
|
Total:
|
|
|
3,301
|
|
|
|
3,382
|
|
Less: current portion
|
|
|
|
|
|
|
|
|
Officers, employees and affiliates
|
|
|
(1,117
|
)
|
|
|
(1,182
|
)
|
Unrelated third party
|
|
|
-
|
|
|
|
-
|
|
Noncurrent portion
|
|
$
|
2,184
|
|
|
$
|
2,200
|
|
Each borrower may prepay all or part of the outstanding balance at any time prior to the date of maturity. During the six months ended June 30, 2021, interest accrued on the notes receivable at the stipulated rates between 3.25% and 5.50%.
8. Property and Equipment, Net
Property and equipment for fixed assets are as follows (in thousands):
|
|
June 30, 2021
|
|
|
December 31, 2020
|
|
Computer equipment
|
|
$
|
1,274
|
|
|
$
|
1,276
|
|
Survey equipment
|
|
|
4,444
|
|
|
|
4,444
|
|
Vehicles
|
|
|
464
|
|
|
|
463
|
|
Furniture and fixtures
|
|
|
1,658
|
|
|
|
1,638
|
|
Leasehold improvements
|
|
|
6,520
|
|
|
|
5,887
|
|
Software
|
|
|
283
|
|
|
|
283
|
|
Fixed assets pending lease financing 1
|
|
|
673
|
|
|
|
146
|
|
Total:
|
|
|
15,316
|
|
|
|
14,137
|
|
Less: accumulated depreciation
|
|
|
(10,272
|
)
|
|
|
(9,912
|
)
|
Property and Equipment, net of capital leased assets
|
|
$
|
5,044
|
|
|
$
|
4,225
|
|
|
|
|
|
|
|
|
|
|
1 assets acquired which will be re-financed under the Company's capital lease facilities
|
|
|
|
|
|
|
|
|
Depreciation expense for fixed assets for the three and six months ended June 30, 2021 was $0.2 million and $0.4 million, respectively. Depreciation expense for fixed assets for the three and six months ended June 30, 2020 was $0.2 million and $0.4 million, respectively.
12
Property and equipment for capital leased assets are as follows (in thousands):
|
|
June 30, 2021
|
|
|
December 31, 2020
|
|
Equipment
|
|
$
|
11,411
|
|
|
$
|
8,590
|
|
Vehicles
|
|
|
3,959
|
|
|
|
3,825
|
|
Total:
|
|
|
15,370
|
|
|
|
12,415
|
|
Less: accumulated amortization on leased assets
|
|
|
(3,571
|
)
|
|
|
(1,283
|
)
|
Capital Leased Assets, net
|
|
$
|
11,799
|
|
|
$
|
11,132
|
|
Amortization expense for capital leased assets for the three and six months ended June 30, 2021 was $1.2 million and $2.4 million, respectively. Amortization expense for capital leased assets for the three and six months ended June 30, 2020 was $0.1 million and $0.1 million, respectively.
9. Goodwill
The following is a summary of goodwill resulting from business acquisitions held by the Company at June 30, 2021 and December 31, 2020 (in thousands):
|
|
Goodwill
|
|
Balance as of December 31, 2020
|
|
$
|
9,179
|
|
Acquisition
|
|
|
2,544
|
|
Balance as of June 30, 2021
|
|
$
|
11,723
|
|
10. Intangible Assets
Total intangible assets consisted of the following at June 30, 2021 and December 31, 2020 (in thousands):
|
|
June 30, 2021
|
|
|
December 31, 2020
|
|
|
|
Gross Amount
|
|
|
Accumulated Amortization
|
|
|
Net Balance
|
|
|
Gross Amount
|
|
|
Accumulated Amortization
|
|
|
Net Balance
|
|
Customer relationships
|
|
$
|
1,479
|
|
|
$
|
(477
|
)
|
|
$
|
1,002
|
|
|
$
|
809
|
|
|
$
|
(382
|
)
|
|
$
|
427
|
|
Contract rights
|
|
|
191
|
|
|
|
(160
|
)
|
|
|
31
|
|
|
|
150
|
|
|
|
(150
|
)
|
|
|
-
|
|
Leasehold
|
|
|
160
|
|
|
|
(9
|
)
|
|
|
151
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Non-complete agreement
|
|
|
137
|
|
|
|
(137
|
)
|
|
|
-
|
|
|
|
137
|
|
|
|
(114
|
)
|
|
|
23
|
|
Domain name
|
|
|
281
|
|
|
|
-
|
|
|
|
281
|
|
|
|
281
|
|
|
|
-
|
|
|
|
281
|
|
Licensing rights
|
|
|
400
|
|
|
|
-
|
|
|
|
400
|
|
|
|
400
|
|
|
|
-
|
|
|
|
400
|
|
Total
|
|
$
|
2,648
|
|
|
$
|
(783
|
)
|
|
$
|
1,865
|
|
|
$
|
1,777
|
|
|
$
|
(646
|
)
|
|
$
|
1,131
|
|
The domain name and licensing rights acquired during the year ended December 31, 2020 for a total of $0.7 million have indefinite useful lives.
The following table summarizes the weighted average useful lives of intangible assets by asset class used for straight-line expense purposes:
|
|
June 30, 2021
|
|
|
December 31, 2020
|
|
Customer relationships
|
|
|
11.8
|
|
|
|
5.0
|
|
Contract rights
|
|
|
2.2
|
|
|
|
2.0
|
|
Leasehold
|
|
|
9.2
|
|
|
|
-
|
|
Non-compete agreement
|
|
|
3.0
|
|
|
|
3.0
|
|
Amortization expense for the three and six months ended June 30, 2021 was $0.1 million and $0.1 million, respectively. Amortization expense for the three and six months ended June 30, 2020 was $0.1 million and $0.1 million, respectively.
13
Future amortization for the remainder of 2021 and for the succeeding years is as follows (in thousands):
2021
|
|
|
|
$
|
114
|
|
2022
|
|
|
|
|
227
|
|
2023
|
|
|
|
|
165
|
|
2024
|
|
|
|
|
51
|
|
2025
|
|
|
|
|
51
|
|
Thereafter
|
|
|
|
|
576
|
|
Total
|
|
|
|
$
|
1,184
|
|
11. Bank Revolving Line of Credit and Fixed Credit Facilities
In 2017, the Company entered into a credit agreement (the Credit Agreement) with Bank of America (the Bank) which included a revolving line of credit (the Revolving Line) and a non-revolving line of credit (the Fixed Line #1). The Revolving Line allowed for repayments and re-borrowings. The maximum advance was equal to the lesser of $12.4 million (the Credit Limit) or the Borrowing Base as defined in the Credit Agreement. The Borrowing Base is computed based upon a percentage of eligible receivables within each aging category under 120 days and is further refined for customer type. Receivables more than 120 days and those from related parties or affiliates are not considered to be eligible receivables for the Borrowing Base.
During the year ended December 31, 2019, the Credit Limit increased to $15.0 million. During the year ended December 31, 2019, a second non-revolving line of credit was established (Fixed Line #2). During the year ended December 31, 2020, the Company entered into an additional credit agreement with Bank of America (Facility #4). Both credit agreements contained certain financial covenants including fixed charge coverage ratio, debt to EBITDA and adjusted debt to EBITDA, all of which the Company complied with on June 30, 2021 and December 31, 2020.
On July 30, 2021, the Company entered into a Sixth Amendment to the Credit Agreement whereby the Company and the Bank agreed to extend the maturity date of the Revolving Line to July 31, 2023. The Sixth Amendment also eliminated the adjusted debt to EBITDA covenant along with certain administrative requirements and established the Secured Overnight Financing Rate (SOFR) as the replacement for LIBOR. Additional modifications to the Revolving Line included expanded allowances for acquisition and reduced interest rate spreads to a range of 2.00% to 2.60%, among other things.
As of June 30, 2021, the Revolving Line required monthly payments of interest at the greater of the London Interbank Offered Rate (LIBOR) daily floating rate or 1.25% plus an applicable rate which varied between 2.35% and 2.95% based on the Company achieving certain leverage ratios as defined in the Credit Agreement. On June 30, 2021, and June 30, 2020, the interest rate was 3.60% and 3.25%, respectively. All outstanding principal is due upon expiration, which was extended to July 31, 2023, when the Company entered into the Sixth Amendment to the Credit Agreement. The Revolving Line is reported as bank line of credit on the consolidated balance sheets. On June 30, 2021 and December 31, 2020, the outstanding balance on the Revolving Line was $0 and $3.5 million, respectively.
Fixed Line #1 has a maximum advance of $1.0 million and does not allow for re-borrowings and is included in Notes Payable (see Note 12). Beginning October 1, 2017, the Company began paying interest on a monthly basis at a rate per year equal to LIBOR plus 2.75%. On June 30, 2021 and June 30, 2020, the interest rate was 2.85% and 2.93%, respectively. Commencing the earlier of i) the date no remaining amount is available under the Fixed Line or, ii) August 31, 2018, the Company is obligated to pay the then outstanding principal balance in sixty equal monthly installments through maturity in August 2023. On June 30, 2021, and December 31, 2020, the outstanding balance on Fixed Line #1 was $0.4 million and $0.5 million, respectively.
Fixed Line #2 has a maximum advance of $1.0 million and does not allow for re-borrowings and is included in Notes Payable (see Note 12). On April 1, 2020, the Company began paying interest monthly at a rate per year equal to LIBOR plus 2.00%. On June 30, 2021, the interest rate was 2.1%. Commencing the earlier of i) the date no remaining amount is available under the Fixed Line or, ii) August 31, 2020, the Company is obligated to pay the then outstanding principal balance in sixty equal monthly installments through maturity in September 2025. On June 30, 2021 and December 31, 2020, the outstanding balance on Fixed Line #2 was $0.8 million and $0.9 million, respectively.
Facility #4 is a term loan with a principal loan amount of $1.0 million and is included in Notes Payable (see Note 12). The loan is to be repaid over thirty-six months beginning April 13, 2020 through maturity on March 13, 2023. The payments consist of principal and interest in equal combined installments of $29,294. The interest rate on this loan is 3.49%. On June 30, 2021, and December 31, 2020, the outstanding balance on Facility #4 was $0.6 million and $0.8 million, respectively.
14
The Company secures its obligations under the Credit Agreement with substantially all assets of the Company. Fixed Line #1 is guaranteed by Gary Bowman, the Company’s Chairman and Chief Executive Officer (“Guarantor”). Obligations of the Company to the Guarantor and certain other shareholders of the Company are subordinated to the Company’s obligations under the Credit Agreement and Fixed Line loans. The Company must maintain, on a combined basis certain financial covenants defined in the Credit Agreement.
Interest expense on the Revolving and Fixed Lines totaled $42,000 and $0.1 million during the three and six months ended June 30, 2021. Interest expense on the Revolving and Fixed Lines totaled $59,000 and $0.2 million during the three and six months ended June 30, 2020.
12. Notes Payable
Notes payable consist of the following (in thousands):
|
|
June 30, 2021
|
|
|
December 31, 2020
|
|
Related parties:
|
|
|
|
|
|
|
|
|
Shareholders - Interest accrues annually at rates
ranging from 0.00% - 6.25%. The notes payable
mature on various dates through October 2025.
|
|
$
|
3,798
|
|
|
$
|
2,202
|
|
Unrelated third parties:
|
|
|
|
|
|
|
|
|
Note payable for purchase of intangible asset
|
|
|
150
|
|
|
|
-
|
|
Fixed line notes payable - see note 11
|
|
|
1,862
|
|
|
|
2,219
|
|
Total
|
|
|
5,810
|
|
|
|
4,421
|
|
Less: current portion
|
|
|
(2,093
|
)
|
|
|
(1,592
|
)
|
Noncurrent portion
|
|
$
|
3,717
|
|
|
$
|
2,829
|
|
The Company’s chairman and Chief Executive Officer guarantees certain of the notes payable, and certain of the notes payable are subordinate to the terms of the Credit Agreement disclosed in Note 11.
Interest expense attributable to the notes payable totaled $0.1 million and $0.1 million for the three and six months ended June 30, 2021, respectively. Interest expense attributable to the notes payable totaled $0.1 million and $0.1 million for the three and six months ended June 30, 2020, respectively.
Future principal payments on notes payable for remainder of 2021 and succeeding years are as follows (in thousands):
2021
|
|
|
|
$
|
1,205
|
|
2022
|
|
|
|
|
1,788
|
|
2023
|
|
|
|
|
1,428
|
|
2024
|
|
|
|
|
1,028
|
|
2025
|
|
|
|
|
361
|
|
Total
|
|
|
|
$
|
5,810
|
|
13. Related Party Transactions
The Company leases commercial office space from BCG Chantilly, LLC (BCC), an entity in which Mr. Bowman, Mr. Bruen and Mr. Hickey collectively own a 63.6% interest. As of June 30, 2021 and December 31, 2020 there were no amounts due to or receivables due from BCC. Rent expense for the three and six months ended June 30, 2021 was $21,000 and $40,000, respectively. Rent expense for the three and six months ended June 30, 2020 was $20,000 and $40,000, respectively.
Bowman Lansdowne Development, LLC (BLD) is an entity in which Mr. Bowman, Mr. Bruen, Mr. Hickey have an ownership interest. On June 30, 2021 and December 31, 2020, the Company’s notes receivable included $0.5 million and $0.5 million, respectively, from BLD.
Lansdowne Development Group, LLC (LDG) is an entity in which BLD has a minority ownership interest. On June 30, 2021 and December 31, 2020, our accounts receivable included $0.1 million and $0.1 million, respectively, due from LDG. On June 30, 2021 and December 31, 2020, notes receivable included $0.4 million and $0.4 million, respectively from LDG.
15
Bowman Realty Investments 2010, LLC (BR10) is an entity in which Mr. Bowman, Mr. Bruen, Mr. Hickey have an ownership interest. On June 30, 2021 and December 31, 2020, the Company’s notes receivable included $0.2 million and $0.2 million, respectively, from BR10.
Alwington Farm Developers, LLC (AFD) is an entity in which BR10 has a minority ownership interest. On June 30, 2021 and December 31, 2020, notes receivable included $1.2 million and $1.2 million, respectively, from AFD.
During the six months ended June 30, 2021 and 2020, the Company provided administrative, accounting and project management services to certain of the related party entities. The cost of these services was $46,000 and $0, respectively. These entities were billed $0.1 million and $0, respectively.
Bowman Realty Investments 2013 LLC (BR13) is an entity in which Mr. Bowman, Mr. Bruen, and Mr. Hickey have an ownership interest.
On June 30, 2021 and December 31, 2020, the Company was due $0.5 million and $0.6 million, respectively, from shareholders under the terms of stock subscription notes receivable.
On June 30, 2021 and December 31, 2020, the Company owed $0.3 million and $0.3 million, respectively, to a retired shareholder and former director in connection with a 2015 acquisition.
As of June 30, 2021 and December 31, 2020, the Company owed certain of our current and former shareholders $3.8 million and $2.2 million, respectively. The notes result from repurchases of stock from shareholders upon termination of employment and the promissory note issued to KTA Group Inc. as part of the KTA acquisition.
14. Stock Options
Effective May 11, 2021 the Company established the Bowman Consulting Group Ltd. 2021 Omnibus Equity Incentive Plan (“the Plan”). The plan is administered by the Board of Directors through which they can grant stock options, including Incentive Stock Options (“ISO”), and non-qualified stock options (“NQSO”). The purpose of the Plan is to grant equity incentive awards to eligible participants to attract, motivate and retain key personnel. The Plan supersedes and replaces any prior plan for stock options except that the prior plan shall remain in effect with respect to options granted under such prior plan until such options have been exercised, expired or canceled.
The number of shares for which each option shall be granted, whether the option is an ISO or NQSO, the option price, the exercisability of the option, and all other terms and conditions of the option are determined by the Board at the time the option is granted. The options generally vest over a period between two and five years.
For the six months ended June 30, 2021, no new option shares were granted.
A summary of the status of stock options exercised, including the substantive options discussed in Note 3, is as follows:
|
|
Number of
shares
|
|
|
Weighted
Average
Exercise Price
|
|
Outstanding at January 1, 2021
|
|
|
53,277
|
|
|
$
|
5.87
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
(31,004
|
)
|
|
|
5.56
|
|
Expired or cancelled
|
|
|
-
|
|
|
|
-
|
|
Outstanding at June 30, 2021
|
|
|
22,273
|
|
|
$
|
6.29
|
|
The following summarizes information about options outstanding and exercisable at January 1, 2021 and June 30, 2021:
|
|
Options Outstanding and Exercisable
|
|
|
|
Exercise
Price
|
|
|
Total
Outstanding
|
|
|
Weighted
Average
Remaining
Life (Years)
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Total
Exercisable
|
|
January 1, 2021
|
|
$
|
6.37
|
|
|
|
53,277
|
|
|
|
4.5
|
|
|
$
|
5.87
|
|
|
|
53,277
|
|
June 30, 2021
|
|
$
|
6.74
|
|
|
|
22,273
|
|
|
|
5.0
|
|
|
$
|
6.29
|
|
|
|
22,273
|
|
16
The intrinsic value of these options on June 30, 2021 and December 31, 2020 was $7.11 and $6.43, respectively.
The Company received cash payments of $8,861 and $27,285 from the exercise of options under the Stock Option Plan in the three and six months ended June 30, 2021.
The Company did not record any compensation costs related to stock options during the three and six months ended June 30, 2021.
As of June 30, 2021, there is no unrecognized compensation costs related to non-vested share-based compensation arrangements granted under the Stock Option Plan. The remaining unexercised shares are from substantive options in which the non-recourse notes may be pre-paid, therefore the Company recognized the total calculated compensation expense at the time of issuance.
15. Stock Bonus Plan
Effective May 11, 2021 the Company established the Bowman Consulting Group Ltd. 2021 Omnibus Equity Incentive Plan. The Plan is administered by the Board of Directors through which they can issue restricted stock awards. The purpose of the Plan is to grant equity incentive awards to eligible participants to attract, motivate and retain key personnel. The Plan supersedes and replaces any prior plan for stock bonus grants to employees of the Company except that the prior plan shall remain in effect with respect to awards granted under such prior plan until such awards have been forfeited or fully vested.
During the six months ended June 30, 2021, the Board granted 1,563,511 shares under the Plan. The shares have a vesting period of up to five years during which there are certain restrictions as defined by the Plan and Stock Bonus Agreements. The grant date fair value of the award is the closing price of the Share on such date, or if there are no sales on such date, on the next preceding day on which there were sales.
The following table summarizes the activity of restricted shares subject to forfeiture:
|
|
Number of
shares
|
|
|
Weighted
Average
Grant Price
|
|
Outstanding at January 1, 2021
|
|
|
702,926
|
|
|
$
|
12.80
|
|
Granted
|
|
|
1,563,511
|
|
|
|
13.96
|
|
Vested
|
|
|
(61,774
|
)
|
|
|
12.80
|
|
Outstanding at June 30, 2021
|
|
|
2,204,663
|
|
|
$
|
13.62
|
|
The following table represents the change in the liability to common shares subject to repurchase and the associated non-cash compensation expense for the six months ended June 30, 2021 and the year ended December 31, 2020 (in thousands):
|
|
June 30, 2021
|
|
|
December 31, 2020
|
|
Beginning Balance
|
|
$
|
842
|
|
|
$
|
8,267
|
|
Non-cash compensation from ratable vesting
|
|
|
41
|
|
|
|
2,712
|
|
Non-cash compensation from change in fair value of liability
|
|
|
2
|
|
|
|
2,457
|
|
Other stock activity, net
|
|
|
516
|
|
|
|
(786
|
)
|
Reclassification upon modification
|
|
$
|
(1,394
|
)
|
|
|
(11,808
|
)
|
Ending balance
|
|
$
|
7
|
|
|
$
|
842
|
|
As of June 30, 2021, the Company had 2,204,663 of unvested stock awards that vest between July 1, 2021 and May 11, 2026.
17
The future expense of the unvested awards for the remainder of 2021 and succeeding years is as follows (in thousands):
2021
|
|
$
|
4,873
|
|
2022
|
|
|
8,330
|
|
2023
|
|
|
7,258
|
|
2024
|
|
|
4,475
|
|
Thereafter
|
|
|
1,546
|
|
Total
|
|
$
|
26,482
|
|
16. Capital Leases
On September 30, 2020, the Company converted operating leases for equipment and vehicles to capital leases and recorded the associated equipment purchases and capital lease liability, current and non-current. The payment terms on the lease agreements range between 30 and 51 months with payments totaling approximately $0.4 million per month. We use the incremental borrowing rate on our revolving line of credit to calculate the present value on new leases.
Future minimum commitments under non-cancelable capital leases for the remainder of 2021 and succeeding years are as follows (in thousands):
2021
|
|
$
|
2,365
|
|
2022
|
|
|
4,406
|
|
2023
|
|
|
3,163
|
|
2024
|
|
|
970
|
|
2025
|
|
|
209
|
|
Total minimum lease payments
|
|
$
|
11,113
|
|
Less: amount representing interest
|
|
|
(1,076
|
)
|
Present value of total net minimum lease payments
|
|
$
|
10,037
|
|
Less: current portion of net minimum lease payments
|
|
|
(4,089
|
)
|
Long-term portion of net minimum lease payments
|
|
$
|
5,948
|
|
The above table is exclusive of the $2.0 million bargain purchase price associated with the $12.0 million total liability to capital leases as presented on the combined balance sheet.
17. Commitments and Contingencies
Operating leases
The Company leases office space, equipment and vehicles. The Company financed vehicles, certain IT, and other equipment under the terms of three primary master lease agreements accounted for as operating leases until September 30, 2020, when the Company converted the equipment and vehicles to capital lease as referenced in Note 17. The Company now leases nearly all equipment and vehicles under capital lease agreements and all office space under operating lease agreements. Rent, vehicle and equipment lease expense for the three and six months ended June 30, 2021, was $1.4 million and $2.8 million, respectively. Rent, vehicle, and equipment lease expense for the three and six months ended June 30, 2020, was $2.0 million and $4.1 million, respectively.
Future minimum lease payments for the remainder of 2021 and for the succeeding years is as follows (in thousands):
2021
|
|
$
|
2,845
|
|
2022
|
|
|
5,543
|
|
2023
|
|
|
4,380
|
|
2024
|
|
|
3,927
|
|
2025
|
|
|
3,515
|
|
Thereafter
|
|
|
8,075
|
|
Total
|
|
$
|
28,285
|
|
18
18. Subsequent Events
The Company has evaluated subsequent events through August 12, 2021, the date that financial statements were issued.
On July 30, 2021, the Company entered into a Sixth Amendment to the Credit Agreement whereby the Company and the Bank agreed to extend the maturity date of the Revolving Line to July 31, 2023. The Sixth Amendment also eliminated the adjusted debt to EBITDA covenant along with certain administrative requirements and established the Secured Overnight Financing Rate (SOFR) as the replacement for LIBOR. Additional modifications to the Revolving Line included expanded allowances for acquisition and reduced interest rate spreads, among other things.
On August 2, 2021, the Company completed the acquisition of assets and operations of McFarland-Dyer & Associates, Inc. located in the Greater Atlanta Metropolitan area. In connection with the acquisition, the Company issued 32,143 shares of common stock to the seller. Given the short period of time between the acquisition date and the issuance of this quarterly report on Form 10-Q, it is not practicable to disclose the preliminary purchase price allocation for this transaction.
19