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.
BOWMAN CONSULTING GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. |
Nature of Business and Basis of Presentation |
Nature of Business
Bowman Consulting Group Ltd. (along with its consolidated subsidiaries, “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; as well as 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. However, with respect to certain specialty services or other compliance requirements within a particular contract, we may engage third-party sub-consultants. The Company’s headquarters is located in Reston, VA and the Company has over 40 offices throughout the United States.
Common Stock Offering
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. In addition, Gary Bowman, our President, Chairman and Chief Executive Officer, sold 150,000 shares of common stock.
On February 28, 2022, the underwriters exercised their option to purchase an additional 157,500 shares of the Company’s common stock at an offering price of $16.00 per share, resulting in additional gross proceeds of approximately $2.5 million. After giving effect to this exercise of the overallotment option, the total number of shares sold by the Company in this common stock offering increased to 1,057,500 shares with total gross proceeds of approximately $16.9 million. The exercise of the over-allotment option closed on March 2, 2022, at which time the Company received net proceeds of $2.4 million after underwriting discounts and commissions.
Deferred offering costs consist primarily of accounting, legal and other fees related to our common stock offering. Prior to the offering, all deferred costs were capitalized within prepaid and other current assets in the consolidated balance sheet. We capitalized $0.5 million of deferred offering costs within prepaid and other current assets in the consolidated balance sheet as of December 31, 2021.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements and footnotes of the Company 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 consolidated financial statements and related footnotes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31,2021 (the Annual Report) filed with the SEC on March 23, 2022.
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.
6
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 Securities Exchange Act of 1934 (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. In general, the Company has 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.
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.
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 three months ended March 31, 2022, or the year ended December 31, 2021. 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.
7
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.
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 March 31, 2022 and December 31, 2021:
|
• |
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; |
|
• |
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. The liability related to shares subject to repurchase was $0 and $7,000 as of March 31, 2022 and December 31, 2021, respectively. |
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 three months ended March 31, 2022 and 2021 was (8.8%) and 28.0%, respectively. The change was due primarily to a windfall tax adjustment which results from the vesting of restricted stock awards at a value higher than the grant date fair value, an increase in R&D credits and projected limitations on the deductibility of executive compensation. The windfall tax adjustment for restricted stock awards is $0.4 million for the three months ended March 31, 2022. There was no windfall tax adjustments from restricted stock awards for the three months ended March 31, 2021. The R&D credit was $2.0 million as of March 31, 2022 and $1.2 million as of March 31, 2021. The projected limitation on the deductibility of executive compensation was $3.4 million for the three months ended March 31, 2022. There was no projected limitation on the deductibility of executive compensation for the three months ended March 31, 2021.
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 2018 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.
8
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 recently adopted
In October 2021, the FASB issued Accounting Standards Update 2021-08, Accounting for Contract Assets and Liabilities from Contracts with Customers, creating an exception to the recognition and measurement principles in ASC 805, Business Combinations. The amendments in this Update require that an entity recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, Revenue from Contracts with Customers, rather than using fair value. The Company adopted the new standard on a prospective basis effective January 1, 2021. The impact of this ASU is reflected in the consolidated financial statements and was not material.
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. The Company adopted the new standard effective January 1, 2022. The impact of this ASU is not material to its consolidated financial statements.
Accounting guidance not yet adopted
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 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. This ASU is not required to be reflected in the consolidated financial statements or disclosures until the year ending December 31, 2022, and therefore is not reflected in the consolidated financial statements on this Quarterly Report on Form 10-Q. The Company is currently evaluating the impact this ASU may have on its consolidated financial statements and related disclosures.
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 and related disclosures.
The Company does not believe that any recently issued standards other than those noted above would have a material effect on 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 months ended March 31, 2022 and 2021. 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 dilutive effect of options is reflected in diluted earnings per share by application of the treasury stock method. The dilutive effect of shares to be purchased under the Company’s Employee Stock Purchase Plan is reflected in diluted earnings per share by the weighted-average number of shares outstanding that would have been outstanding during the period. The Company uses the two-class method to determine earnings per share.
For calculating basic earnings per share, for the three months ended March 31, 2022, the weighted average number of shares outstanding exclude 2,080,691 non-vested restricted shares and 14,586 unexercised substantive options. The computation of diluted
9
earnings per share for the three months ended March 31, 2022 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 months ended March 31, 2021, the weighted average number of shares outstanding exclude 691,038 non-vested restricted shares and 49,177 substantive options. The computation of diluted earnings per share for the three months ended March 31, 2021 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 months ended March 31, 2022 and 2021 (in thousands, except share data):
|
|
For the Three Months Ended March 31, |
|
|
|
2022 |
|
|
2021 |
|
Numerator |
|
|
|
|
|
|
|
|
Net income |
|
$ |
1,457 |
|
|
$ |
981 |
|
Earnings allocated to non-vested shares |
|
|
254 |
|
|
|
124 |
|
Subtotal |
|
$ |
1,203 |
|
|
$ |
857 |
|
Denominator |
|
|
|
|
|
|
|
|
Weighted average common shares outstanding |
|
|
9,926,395 |
|
|
|
5,083,470 |
|
Effect of dilutive nominal options |
|
|
- |
|
|
|
- |
|
Effect of dilutive contingently earned shares |
|
|
117,399 |
|
|
|
13,127 |
|
Dilutive average shares outstanding |
|
|
10,043,794 |
|
|
|
5,096,597 |
|
Basic earnings per share |
|
$ |
0.12 |
|
|
$ |
0.17 |
|
Dilutive earnings per share |
|
$ |
0.12 |
|
|
$ |
0.17 |
|
4. Acquisitions
Business Combinations
Perry Engineering, LLC.
In the first quarter of 2022, the Company signed a purchase agreement to acquire Perry Engineering, LLC (“Perry”), with an effective date of February 2, 2022. Perry is a civil engineering and land surveying firm based in Tucson, AZ. The Company paid total consideration of $0.9 million, which was comprised of 9,833 shares of common stock, at $17.01 per share, for a total of $0.2 million, plus $0.7 million in cash, promissory note and assumed liabilities. The promissory note has a 5.00% interest rate with equal quarterly payments beginning on May 2, 2022 and ending February 2, 2024.
The acquisition of Perry allows Bowman to further enhance its land architectural and civil engineering competencies thereby allowing the Company to broaden its offerings and better serve its public and private sector customers.
The purchase price allocation consists primarily of Goodwill and is based upon preliminary information that 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 Perry’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.
5. Disaggregation of Revenue and Contract Balances
The Company disaggregates revenues by contract type, see Revenue Recognition in Note 2 for further details. For the three months ended March 31, 2022 and 2021, the Company derived 94.5% and 91.6% of its revenue from contracts classified as lump sum, and 5.4% and 8.4% of its revenue from exclusively time and material contracts, respectively. The Company had approximately $152.5 million in remaining performance obligations as of March 31, 2022 of which it expects to recognize approximately 99.0% within the next twelve months and the remaining 1.0% thereafter.
The Company recognized $1.4 million of revenue for the three months ended March 31, 2022, which was included in the contract liabilities balance as of December 31, 2021, and $1.3 million of revenue for the three months ended March 31, 2021 which was included in the contract liabilities balance as of December 31, 2020.
10
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):
|
|
March 31, 2022 |
|
|
December 31, 2021 |
|
Costs incurred on uncompleted contracts |
|
$ |
187,657 |
|
|
$ |
168,110 |
|
Estimated contract earnings in excess of costs |
|
|
255,014 |
|
|
|
229,949 |
|
Estimated contract earnings to date |
|
|
442,671 |
|
|
|
398,059 |
|
Less: billed to date |
|
|
(437,826 |
) |
|
|
(393,493 |
) |
Net contract assets |
|
$ |
4,845 |
|
|
$ |
4,566 |
|
7. Notes Receivable
The Company has unsecured notes receivable from related parties, certain non-executive officers of the Company and an unrelated third party. The following is a summary of these notes receivable (in thousands):
|
|
March 31, 2022 |
|
|
December 31, 2021 |
|
Officers, employees and affiliated entities - Interest
accrues annually at rates ranging from 0.0% - 5.5%.
The notes receivable mature through November 2024. |
|
$ |
2,407 |
|
|
$ |
2,478 |
|
Unrelated third party - Currently no interest is being accrued
on this note. The note receivable matures in December 2023. |
|
|
903 |
|
|
|
903 |
|
Total: |
|
|
3,310 |
|
|
|
3,381 |
|
Less: current portion |
|
|
|
|
|
|
|
|
Officers, employees and affiliates |
|
|
(1,207 |
) |
|
|
(1,260 |
) |
Noncurrent portion |
|
$ |
2,103 |
|
|
$ |
2,121 |
|
Each borrower may prepay all or part of the outstanding balance at any time prior to the date of maturity. During the three months ended March 31, 2022, interest accrued on the notes receivable at the stipulated rates between 0.0% and 5.50%.
8. Property and Equipment, Net
Property and equipment for fixed assets are as follows (in thousands):
|
|
March 31, 2022 |
|
|
December 31, 2021 |
|
Computer equipment |
|
$ |
1,383 |
|
|
$ |
1,279 |
|
Survey equipment |
|
|
4,672 |
|
|
|
4,625 |
|
Vehicles |
|
|
844 |
|
|
|
763 |
|
Furniture and fixtures |
|
|
1,684 |
|
|
|
1,675 |
|
Leasehold improvements |
|
|
6,923 |
|
|
|
6,886 |
|
Software |
|
|
336 |
|
|
|
332 |
|
Fixed assets pending lease financing 1 |
|
|
241 |
|
|
|
519 |
|
Total: |
|
|
16,083 |
|
|
|
16,079 |
|
Less: accumulated depreciation |
|
|
(10,963 |
) |
|
|
(10,669 |
) |
Property and Equipment, net of capital leased assets |
|
$ |
5,120 |
|
|
$ |
5,410 |
|
1 assets acquired which will be re-financed under the Company's capital lease facilities
11
Depreciation expense for fixed assets for the three months ended March 31, 2022 and 2021 was $0.3 million and $0.2 million, respectively.
Property and equipment for capital leased assets are as follows (in thousands):
|
|
March 31, 2022 |
|
|
December 31, 2021 |
|
Equipment |
|
$ |
17,367 |
|
|
$ |
15,391 |
|
Vehicles |
|
|
5,916 |
|
|
|
5,542 |
|
Total: |
|
|
23,283 |
|
|
|
20,933 |
|
Less: accumulated amortization on leased assets |
|
|
(7,658 |
) |
|
|
(6,141 |
) |
Capital Leased Assets, net |
|
$ |
15,625 |
|
|
$ |
14,792 |
|
Amortization expense for capital leased assets for the three months ended March 31, 2022 and 2021 was $1.6 million and $1.2 million, respectively.
9. Goodwill
The following is a summary of goodwill resulting from business acquisitions held by the Company at March 31, 2022 (in thousands):
|
|
Goodwill |
|
Balance as of December 31, 2021 |
|
$ |
28,471 |
|
2022 Activity |
|
|
677 |
|
Balance as of March 31, 2022 |
|
$ |
29,148 |
|
10. Intangible Assets
Total intangible assets consisted of the following at March 31, 2022 and December 31, 2021 (in thousands):
|
|
March 31, 2022 |
|
|
December 31, 2021 |
|
|
|
Gross Amount |
|
|
Accumulated Amortization |
|
|
Net Balance |
|
|
Gross Amount |
|
|
Accumulated Amortization |
|
|
Net Balance |
|
Customer relationships |
|
$ |
10,018 |
|
|
$ |
(939 |
) |
|
$ |
9,079 |
|
|
$ |
10,018 |
|
|
$ |
(665 |
) |
|
$ |
9,353 |
|
Contract rights |
|
|
2,333 |
|
|
|
(412 |
) |
|
|
1,921 |
|
|
|
2,333 |
|
|
|
(224 |
) |
|
|
2,109 |
|
Leasehold |
|
|
160 |
|
|
|
(22 |
) |
|
|
138 |
|
|
|
160 |
|
|
|
(17 |
) |
|
|
143 |
|
Non-compete agreement |
|
|
137 |
|
|
|
(137 |
) |
|
|
- |
|
|
|
137 |
|
|
|
(137 |
) |
|
|
- |
|
Domain name |
|
|
281 |
|
|
|
- |
|
|
|
281 |
|
|
|
281 |
|
|
|
- |
|
|
|
281 |
|
Licensing rights |
|
|
400 |
|
|
|
- |
|
|
|
400 |
|
|
|
400 |
|
|
|
- |
|
|
|
400 |
|
Total |
|
$ |
13,329 |
|
|
$ |
(1,510 |
) |
|
$ |
11,819 |
|
|
$ |
13,329 |
|
|
$ |
(1,043 |
) |
|
$ |
12,286 |
|
The domain name and licensing rights acquired during the year ended December 31, 2021 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:
|
|
March 31, 2022 |
|
|
December 31, 2021 |
|
Customer relationships |
|
|
10.32 |
|
|
|
10.32 |
|
Contract rights |
|
|
2.87 |
|
|
|
2.87 |
|
Leasehold |
|
|
9.17 |
|
|
|
9.17 |
|
Non-compete agreement |
|
|
3.00 |
|
|
|
3.00 |
|
12
Amortization expense for the three months ended March 31, 2022 and 2021 was $0.5 million and $0.1 million, respectively.
Future amortization for the remainder of 2022 and for the succeeding years is as follows (in thousands):
2022 |
|
|
|
|
1,403 |
|
2023 |
|
|
|
|
1,809 |
|
2024 |
|
|
|
|
1,567 |
|
2025 |
|
|
|
|
950 |
|
2026 |
|
|
|
|
908 |
|
Thereafter |
|
|
|
|
4,501 |
|
Total |
|
|
|
$ |
11,138 |
|
11. Bank Revolving Line of Credit and Fixed Credit Facilities
The Company has one revolving (the “Revolving Line”) and three non-revolving credit facilities (“Fixed Line 1”, Fixed Line 2” and “Fixed Line 4”) with Bank of America. On March 31, 2022 and 2021, the interest rate on the Revolving Line was 3.25% and 3.60%, respectively. All outstanding principal on the Revolving Line is due on July 31, 2023. On March 31, 2022 and December 31, 2021, there was no outstanding balance on the Revolving Line.
Fixed Line #1 had a maximum advance of $1.0 million and does not allow for re-borrowings and is included in Notes Payable (see Note 12). On March 31, 2022 and 2021, the interest rate was 3.21% and 2.86%, respectively. Commencing the earlier of i) the date no remaining amount is available under the Fixed Line or, ii) August 31, 2018, the Company was obligated to pay the then outstanding principal balance in sixty equal monthly installments through maturity in August 2023. On March 31, 2022 and December 31, 2021, the outstanding balance on Fixed Line #1 was $0.3 million and $0.3 million, respectively.
Fixed Line #2 had a maximum advance of $1.0 million and does not allow for re-borrowings and is included in Notes Payable (see Note 12). 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 March 31, 2022 and December 31, 2021, the outstanding balance on Fixed Line #2 was $0.7 million and $0.7 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 equal monthly installments beginning April 13, 2020, through maturity on March 13, 2023. The interest rate on this loan is 3.49%. On March 31, 2022 and December 31, 2021, the outstanding balance on Facility #4 was $0.3 million and $0.4 million, respectively.
The Company secures its obligations under the Credit Agreement with substantially all assets of the Company. Obligations of the Company to 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 $10,000 and $0.1 million during the three months ended March 31, 2022 and 2021, respectively.
13
12. Notes Payable
Notes payable consist of the following (in thousands):
|
|
March 31, 2022 |
|
|
December 31, 2021 |
|
Related parties: |
|
|
|
|
|
|
|
|
Shareholders - Interest accrues annually at rates
ranging from 0.00% - 6.25%. The notes payable
mature on various dates through October 2025. |
|
$ |
10,106 |
|
|
$ |
10,771 |
|
Owners of Acquired Entity - Interest accrues annually at 3.25%. The note payable matures October 2024. |
|
|
414 |
|
|
$ |
450 |
|
Unrelated third parties: |
|
|
|
|
|
|
|
|
Note payable for purchase of software |
|
|
30 |
|
|
|
34 |
|
Note payable for purchase of intangible asset |
|
|
100 |
|
|
|
100 |
|
Fixed line notes payable - see note 11 |
|
|
1,321 |
|
|
|
1,502 |
|
Total |
|
|
11,971 |
|
|
|
12,857 |
|
Less: current portion |
|
|
(4,572 |
) |
|
|
(4,450 |
) |
Noncurrent portion |
|
$ |
7,399 |
|
|
$ |
8,407 |
|
The Company’s President, 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 $44,000 for the three months ended March 31, 2022 and 2021, respectively.
Future principal payments on notes payable for remainder of 2022 and succeeding years are as follows (in thousands):
2022 |
|
$ |
3,682 |
|
2023 |
|
|
4,276 |
|
2024 |
|
|
3,652 |
|
2025 |
|
|
361 |
|
Total |
|
$ |
11,971 |
|
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 March 31, 2022 and December 31, 2021 there were no amounts due to or receivables due from BCC. Rent expense for the three months ended March 31, 2022 and 2021, was $21,000 for both periods.
Bowman Lansdowne Development, LLC (BLD) is an entity in which Mr. Bowman, Mr. Bruen, Mr. Hickey have an ownership interest. On March 31, 2022 and December 31, 2021, 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 March 31, 2022 and December 31, 2021, our accounts receivable included $0.1 million and $0.1 million, respectively, due from LDG. On March 31, 2022 and December 31, 2021, notes receivable included $0.4 million and $0.4 million, respectively from LDG.
Bowman Realty Investments 2010, LLC (BR10) is an entity in which Mr. Bowman, Mr. Bruen, Mr. Hickey have an ownership interest. On March 31, 2022 and December 31, 2021, 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 March 31, 2022 and December 31, 2021, notes receivable included $1.2 million and $1.2 million, respectively, from AFD.
14
MREC Shenandoah VA, LLC (“MREC Shenandoah”) is an entity in which Lake Frederick Holdings, LLC (“Lake Frederick Holdings”) owns a 92% interest and Shenandoah Station Partners LLC, an entity owned in part by Bowman Lansdowne and in part by Bowman Realty 2013, owns an 8% interest. Mr. Bowman owns a 100% interest in, and is the manager of, Lake Frederick Holdings. Mr. Bowman, Mr. Bruen and Mr. Hickey are each members of Bowman Realty 2013. Since 2020, the Company has provided engineering services to MREC Shenandoah in exchange for cash payments. During the three months ended March 31, 2022, the Company received payments for engineering services provided to MREC Shenandoah in the amount of $0.1 million. The Company did not receive any payments for engineering services provided to MREC Shenandoah during the three months ended March 31, 2021.
During the three months ended March 31, 2022 and 2021, the Company provided administrative, accounting and project management services to certain of the related party entities. The cost of these services was $17,000 and $24,000, respectively. These entities were billed $20,000 and $29,000, respectively.
Gregory Bowman, the son of Mr. Bowman, is a full-time employee of the Company. Gregory Bowman was paid $34,000 and $30,000 for the three months ended March 31, 2022 and 2021, respectively.
On March 31, 2022 and December 31, 2021, the Company was due $0.1 million and $0.1 million, respectively, from shareholders under the terms of stock subscription notes receivable. These shareholders were executive officers as of the beginning of 2021 but are no longer.
On March 31, 2022 and December 31, 2021, the Company owed $0.2 million and $0.2 million, respectively, to a retired shareholder and former director in connection with a 2015 acquisition.
14. Employee Stock Purchase and Stock Incentive Plans
Employee Stock Purchase Plan
Effective April 30, 2021, the Company established the Bowman Consulting Group Ltd. 2021 Employee Stock Purchase Plan (“ESPP”). Under the Company’s Employee Stock Purchase Plan, eligible employees who elect to participate are granted the right to purchase shares of common stock at a 15% discount of the weighted average selling price of the Company stock for the 30 days prior to the last day of the offering period.
The following table summarizes the stock issuance activity under the Employee Stock Purchase Plan for the three months ended March 31, 2022 (in thousands, except share data):
|
|
March 31, 2022 |
|
Total purchase price paid by employees for shares sold |
|
$ |
282 |
|
|
|
|
|
|
Number of shares sold |
|
|
20,205 |
|
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.
15
For the three months ended March 31, 2022, 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 December 31, 2021 |
|
|
14,927 |
|
|
$ |
5.99 |
|
Granted |
|
|
- |
|
|
|
- |
|
Exercised |
|
|
(1,121 |
) |
|
|
5.99 |
|
Expired or cancelled |
|
|
- |
|
|
|
- |
|
Outstanding at March 31, 2022 |
|
|
13,806 |
|
|
$ |
5.99 |
|
The following summarizes information about options outstanding and exercisable at January 1, 2022 and March 31, 2022:
|
|
Options Outstanding and Exercisable |
|
|
|
Exercise
Price |
|
|
Total
Outstanding |
|
|
Weighted
Average
Remaining
Life (Years) |
|
|
Weighted
Average
Exercise
Price |
|
|
Total
Exercisable |
|
January 1, 2022 |
|
$ |
6.57 |
|
|
|
14,927 |
|
|
|
5.0 |
|
|
$ |
5.99 |
|
|
|
14,927 |
|
March 31, 2022 |
|
$ |
6.28 |
|
|
|
13,806 |
|
|
|
5.0 |
|
|
$ |
5.99 |
|
|
|
13,806 |
|
The intrinsic value of these options on March 31, 2022 and December 31, 2021 was $10.16 and $14.68, respectively.
The Company received cash payments of $6,739 from the exercise of options under the Stock Option Plan in the three months ended March 31, 2022.
The Company did not record any compensation costs related to stock options during the three months ended March 31, 2022.
As of March 31, 2022, 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.
Stock Bonus Plan
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 issue restricted stock awards. As of March 31, 2022, 3,450,729 shares of common stock are authorized and reserved for issuance under the Plan. This reserve automatically increases on each January 1, for the duration of the Plan, in an amount equal to 5% of the total number of shares outstanding on December 31st of the preceding calendar year. 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 three months ended March 31, 2022, the Board granted 30,957 shares of restricted stock under the Plan. The shares have a vesting period of up to five years during which there are certain restrictions as described in the Plan and Stock Bonus Agreements. The grant date fair value of the award is the closing price of the shares on such date, or if there are no sales on such date, on the next preceding day on which there were sales.
Effective April 2003, the Company adopted the Bowman Consulting Group Ltd. Stock Bonus Plan (“the Stock Bonus Plan”), which allowed for the awarding of restricted stock to employees. The Stock Bonus Plan was superseded by the Bowman Consulting Group Ltd. 2021 Omnibus Equity Incentive Plan except that the Stock Bonus Plan shall remain in effect with respect to awards granted under it until such awards have been forfeited or fully vested.
16
During the three months ended March 31, 2022 no new restricted stock awards were granted under the Stock Bonus Plan.
The following table summarizes the activity of restricted shares subject to forfeiture:
|
|
Number of
shares |
|
|
Weighted
Average
Grant Price |
|
Outstanding at January 1, 2022 |
|
|
2,218,283 |
|
|
|
13.74 |
|
Granted |
|
|
30,957 |
|
|
|
18.14 |
|
Vested |
|
|
(158,730 |
) |
|
|
12.89 |
|
Cancelled |
|
|
- |
|
|
|
- |
|
Outstanding at March 31, 2022 |
|
|
2,090,510 |
|
|
|
13.88 |
|
On November 10, 2021 the compensation committee of the Company’s Board of Directors adopted the 2021 Executive Officers Long Term Incentive Plan (“Officers LTIP”). The Officers LTIP is established under the Plan and is subject to the terms and conditions thereof. The purpose of this plan is to attract, retain and motivate key officers and employees through the grant of equity-based awards that reward Company performance over a period greater than one year and align their interests with long-term stockholder value.
During the three months ended March 31, 2022, the compensation committee approved the grants of 217,798 performance-based stock units to certain executive officers of the Company under the Officers LTIP. The performance based restricted stock units are subject to a market condition, with a vesting period of 2.91 years. The number of units earned is based on total shareholder return (“TSR”) of the Company’s common stock relative to the TSR of the components of a custom peer group during the performance period from February 10, 2022 to December 31, 2024. The performance stock units are valued using a Monte Carlo simulation with model inputs of opening average share value, valuation date stock price, expected volatilities, correlation coefficient, risk-free interest rate, and expected dividend yield for the Company and the custom peer group.
The following table summarizes the activity of performance stock units subject to forfeiture:
|
|
Number of
shares |
|
|
Weighted
Average
Grant Price |
|
Outstanding at January 1, 2022 |
|
|
260,842 |
|
|
|
13.81 |
|
Granted |
|
|
217,798 |
|
|
|
13.04 |
|
Vested |
|
|
- |
|
|
|
- |
|
Cancelled |
|
|
- |
|
|
|
- |
|
Outstanding at March 31, 2022 |
|
|
478,640 |
|
|
|
13.46 |
|
The Company recognized forfeitures as they occur.
The following table represents the change in the liability to common shares subject to repurchase and the associated non-cash compensation expense for the three months ended March 31, 2022 and the year ended December 31, 2021 (in thousands):
|
|
March 31, 2022 |
|
|
December 31, 2021 |
|
Beginning Balance |
|
$ |
7 |
|
|
$ |
842 |
|
Non-cash compensation from ratable vesting |
|
|
- |
|
|
|
41 |
|
Non-cash compensation from change in fair value of
liability |
|
|
- |
|
|
|
2 |
|
Other stock activity, net |
|
$ |
(7 |
) |
|
|
516 |
|
Reclassification upon modification |
|
|
- |
|
|
|
(1,394 |
) |
Ending balance |
|
|
- |
|
|
$ |
7 |
|
As of March 31, 2022, the Company had 2,569,150 shares of unvested stock awards that vest between April 1, 2022 and May 11, 2026.
17
The future expense of the unvested awards for the remainder of 2022 and succeeding years is as follows (in thousands):
2022 |
|
$ |
8,717 |
|
2023 |
|
|
10,481 |
|
2024 |
|
|
5,997 |
|
2025 |
|
|
1,360 |
|
Thereafter |
|
|
281 |
|
Total |
|
$ |
26,836 |
|
15. Capital Leases
The Company leases equipment and vehicles under capital lease agreements. The payment terms on the lease agreements range between 30 and 50 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 2022 and succeeding years are as follows (in thousands):
2022 |
|
$ |
4,844 |
|
2023 |
|
|
5,248 |
|
2024 |
|
|
3,059 |
|
2025 |
|
|
1,989 |
|
2026 |
|
|
140 |
|
Total minimum lease payments |
|
$ |
15,280 |
|
Less: amount representing interest |
|
|
(1,820 |
) |
Present value of total net minimum lease payments |
|
$ |
13,460 |
|
Less: current portion of net minimum lease payments |
|
|
(5,491 |
) |
Long-term portion of net minimum lease payments |
|
$ |
7,969 |
|
The above table is exclusive of the $2.7 million bargain purchase price associated with the $16.2 million total liability to capital leases as presented on the consolidated balance sheet.
18
16. Commitments and Contingencies
Operating leases
The Company leases office space, equipment and vehicles. Nearly all equipment and vehicles are leased under capital lease agreements and all office space under operating lease agreements. Rent, vehicle and equipment lease expense for the three months ended March 31, 2022 and 2021, was $1.8 million and $1.4 million, respectively.
Future minimum lease payments for the remainder of 2022 and for the succeeding years is as follows (in thousands):
2022 |
|
$ |
5,187 |
|
2023 |
|
|
5,547 |
|
2024 |
|
|
4,866 |
|
2025 |
|
|
4,023 |
|
2026 |
|
|
3,221 |
|
Thereafter |
|
|
7,342 |
|
Total |
|
$ |
30,186 |
|
17. Subsequent Events
On May 4, 2022, the Company completed the acquisition of McMahon Associates, Inc. pursuant to the Stock Purchase Agreement, dated May 4, 2022 (the “Agreement”), among the Company, McMahon, McMahon Associates Holdings, Inc. (“McMahon Holdings”) and certain shareholders of McMahon Holdings. The aggregate consideration was approximately $18.4 million which consisted of (i) $7.5 million in cash, (ii) non-negotiable promissory notes in the aggregate amount of $3.4 million, subject to adjustment, and (iii) the issuance of 476,796 shares of restricted common stock which was priced under the Agreement at $15.73 per share. The restricted shares are subject to a six-month lock-up agreement. The transaction was structured as a stock purchase with a joint election to treat the acquisition as an asset sale pursuant to the Internal Revenue Code. As such, determination of the final acquisition cost is subject to adjustment based on customary post-closing purchase price accounting. The acquisition of McMahon Associates, Inc. allows Bowman to further enhance its transportation planning and engineering services to private and public sector clients thereby allowing the Company to broaden its offering and better serve its public and private sector customers.
19