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DATE

Wednesday, May 6, 2026 at 9 a.m. ET

CALL PARTICIPANTS

  • Chairman & Chief Executive Officer — Gary P. Bowman
  • Chief Financial Officer — Bruce J. Labovitz
  • Chief Operating Officer — Dan Swayze

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TAKEAWAYS

  • Gross Contract Revenue -- $126.5 million, representing a 12% year-over-year increase driven by both organic execution and acquisitions.
  • Net Service Billing -- $114.2 million, up 14% year over year due to 6% organic growth and strong acquisition contributions.
  • Adjusted EBITDA -- $16.8 million, a 14.7% year-over-year increase, with margin expansion relative to last year.
  • GAAP Net Loss -- $3.7 million, incorporating noncash amortization of intangibles, acquisition-related expenses, and nonrecurring costs including CEO transition.
  • Cash from Operations -- $11.6 million in the quarter, equating to approximately 70% conversion of adjusted EBITDA to cash.
  • Share Repurchases -- approximately $9.2 million of stock repurchased during the quarter.
  • Backlog -- $653 million at quarter end, up 56% year over year and 36% sequentially; organic growth excluding one large contract award was at a 20% annualized rate.
  • Backlog Conversion -- Approximately 70%-80% of backlog typically converts to revenue within 12 months; 60% of 2026 revenue is supported by current backlog.
  • Guidance Update -- Raised full-year 2026 net revenue guidance to $520 million-$540 million and adjusted EBITDA margin guidance to 17.25%-17.5%.
  • Book-to-Burn Ratio -- Management stated a required book-to-burn ratio of just under 0.7x to meet full-year guidance, below their historical delivery rate above 1x.
  • Segment Growth -- Power sector gross revenue grew 37% year over year; transportation grew 13%, natural resources 6%, and building infrastructure 1%.
  • Sector Mix -- Power is now 28% of gross revenue, building infrastructure 41%, and data center activities have grown to over 6% of revenue.
  • Large Government Contract -- Management described a newly awarded $177 million, 36-month government contract with an expected ~75% net-to-gross ratio; major revenue impact anticipated in the second half of the year and beyond.
  • Net-to-Gross Trend -- Expected net-to-gross ratio to decrease by 3-5 points due to new higher subcost ratio service lines and awards.
  • Overhead Costs -- Overhead as a percentage of revenue rose 50 basis points year over year and 200 basis points sequentially, impacted by early-year slow activity and mobilization for new assignments.
  • Revolving Credit Facility -- Expanded to $250 million to fund increased CapEx, organic growth, and acquisitions.
  • Data Center Exposure -- Data center clients now constitute more than 6% of revenue, and their portion in backlog is growing, especially following recent acquisitions.
  • CapEx Allocation -- Approximately half of capital spending was directed to geospatial and data collection assets, supporting future revenue opportunities.
  • Contract Structure -- There is a steady shift toward more fixed-price contracts, particularly where available by industry.
  • Margin Outlook -- Management voiced confidence in achieving margins above the 17.25%-17.5% guidance in the remaining quarters to offset Q1’s lower margins.

SUMMARY

Bowman Consulting Group Ltd. (BWMN +5.29%) reported sustained double-digit organic and acquisition-driven growth across gross contract revenue, net service billing, and adjusted EBITDA, supported by a record backlog and sector strength in power, transportation, natural resources, and data center verticals. Management raised full-year 2026 guidance for both revenue and adjusted EBITDA margin, with visibility underpinned by high backlog conversion rates and an expanding mix of fixed-price contracts. The company highlighted a $177 million, 36-month government contract as a catalyst for significant revenue in upcoming periods, while also addressing anticipated lower net-to-gross ratios and increased overhead tied to mobilization for major assignments. Strategic investments in geospatial technology, automation, and proprietary operational tools were emphasized as drivers of process efficiencies and expanded service capabilities, especially in light of evolving AI and sector-specific demands.

  • Management stated, “organic growth embedded in power and utilities revenue characterized as inorganic for now,” clarifying that reported segment growth rates may understate underlying business expansion in these categories.
  • COO Swayze noted that transportation’s “Required book-to-burn is lower than average based on substantial existing backlog coverage for this year's forecast.”
  • Management described geospatial data collection as “core of everything we do,” with high-resolution 3D imaging and GIS-embedded point clouds increasingly underpinning client asset planning.
  • Labovitz stated, “our primary focus is really on the front office” regarding technology investment, distinguishing client-facing process improvement as the key efficiency target for automation and AI initiatives.
  • CEO Bowman explained the Smith and Associates acquisition as “adding talent and productive capability to an existing big client we have in that geography, in addition to expanding into the geography,” aligning with the company’s strategy to drive organic opportunity via targeted M&A.
  • Labovitz stated, “as you ascend through the tiers of size, opportunities present themselves to you that might not have otherwise presented themselves to you,” framing recent large contract wins as a function of scale and readiness rather than a shift in company risk profile.
  • Management maintained that SG&A as a percentage of revenue “will begin a downward trajectory again as higher-revenue quarters absorb more of that overhead.”

INDUSTRY GLOSSARY

  • Book-to-Burn Ratio: The ratio of new contract bookings to revenue recognized (“burned”) over a set period, used to gauge the sufficiency of new business versus delivered work for future revenue visibility.
  • Net-to-Gross Ratio: The percentage of net service billing revenue to gross contract revenue, indicating the proportion of revenue retained after subcontractor and direct pass-through costs.
  • EBITDA Margin: Adjusted EBITDA as a percentage of net revenue, offering a normalized indicator of operational profitability excluding certain nonrecurring items.

Full Conference Call Transcript

Gary P. Bowman: Great. Thank you, Rifka. Good morning, everyone, and thank you for joining our first quarter 2026 earnings call. Bruce J. Labovitz, our CFO, and Dan Swayze, our chief operating officer, are with me today. First, I would like to welcome all Bowman Consulting Group Ltd. employees on today's call, including those from Smith and Associates Land Surveying in Las Vegas, who are the newest members of the Bowman Consulting Group Ltd. team. After my introductory remarks, I will turn the call over to Bruce who will cover our financial performance and technology initiatives. Dan will provide more detail on the opportunities we are seeing across our end markets. Now turning to the first quarter.

From a performance standpoint, we delivered double-digit growth in gross contract revenue, net service billing, and adjusted EBITDA. Our backlog reached a record level of over $650 million. These results were driven by both organic execution and continued contribution from our acquisition strategy. We saw growth across our diversified end markets. Demand remains robust, and we continue to benefit from markets where we have deep expertise, strong client relationships, and increasingly integrated service delivery. Our capabilities are increasingly important in high-barrier, high-demand sectors where our expertise, national scale, and ability to self-perform work position us to win and execute consistently.

All this reinforces what we are seeing in the business: strong demand, durable revenue streams, and increasing opportunities to expand both organically and through targeted acquisitions. Based on our performance and outlook, we raised our full-year 2026 guidance and now expect over 20% revenue growth for the year. For 2026, we expect net revenue to be in the range of $520 million to $540 million, and we expect to report adjusted EBITDA margin between 17.25% and 17.5%. With that, I turn the call over to Bruce.

Bruce J. Labovitz: Thanks, Gary, and good morning, everyone. I will begin with a review of our financial performance for the first quarter, and then I will turn the call over to Dan to bridge Q1 to year end. After that, I will return to share some thoughts on how we are thinking about technology and automation, and begin to draw a line towards its impact on the future of Bowman Consulting Group Ltd. The first quarter culminated with a record March that capped off a solid start to 2026. Our results reflect the durability of our end markets, the scalability of our operating platform, and disciplined execution of our long-term strategic plan.

Gross contract revenue of $126.5 million represented a 12% increase over Q1 last year. At a 90% net-to-gross ratio, net service billing was $114.2 million, up 14% year over year. The increase was anchored by 6% organic growth enhanced by strong performance from recent acquisitions. Looking ahead, we expect to see our net-to-gross ratio come down by about 3 to 5 points based on new awards and new service lines with higher subcost ratios. Power was our fastest-growing sector, with 37% growth of gross revenue year over year. Transportation followed at 13%, with natural resources at 6%, and building infrastructure at 1%. Dan will talk more about where growth is coming from.

Growth of organic net service billing was 6% year over year with the highest organic growth rate coming from natural resources at 16%, followed by transportation at 13%, power at 5%, and building infrastructure at 2%. I will point out that there is a significant amount of organic growth embedded in power and utilities revenue characterized as inorganic for now. Our mix of gross revenue continues to evolve with power up to 28% and building infrastructure down to 41%. In just one year, data center activities have more than doubled to a bit over 6% of revenue.

Over the course of the next few quarters, we do expect to see a noticeable shift in mix as natural resources will expand by virtue of a significant new award being classified in that category. Contract costs represented approximately 48% of gross contract revenue at a 52% gross margin. When we combine a bit of a slow start in January and February with mobilization costs for assignments that begin in Q2, total overhead as a percentage of revenue was up around 50 basis points compared to last year. I will also point out that 2026 is the year we exit emerging growth company status, which generates some incremental costs this year that will normalize next year.

With accelerating revenue and relatively stable overhead, however, we expect to see total overhead once again trend down as a percentage of revenue moving forward. For the quarter, we reported a GAAP loss of $3.7 million. Unlike adjusted EBITDA, that result includes noncash amortization of acquired intangibles, acquisition-related expenses, financing costs, and other nonrecurring items, including those associated with the CEO transition. Adjusted EBITDA was $16.8 million, up 14.7%, at a margin that expanded year over year. We generated $11.6 million of cash from operations in the quarter, representing approximately 70% conversion of adjusted EBITDA to cash. It is nice to finally report a quarter with no deferred R&D tax adjustments on the cash flow.

During the quarter, we used cash to repurchase approximately $9.2 million of our stock and advance future organic growth initiatives through investments in data capture, automation, and internal-use software, among others. Big fund spending on geospatial and data collection assets associated with specific new future revenue opportunities represented about half of our CapEx in the quarter, along with another $1 million or so of OpEx spending which is not added back to adjusted EBITDA. To accommodate anticipated increases in CapEx this year, we expanded our revolving credit facility to $250 million, which provides sufficient liquidity to support continued investment in organic growth and acquisitions. Backlog increased to approximately $653 million, 56% year over year and 36% sequentially from year end.

Backlog growth in the quarter was entirely organic. Net of one unusually large organically generated contract award, backlog grew at a 20% annualized pace. As Gary mentioned, we are raising our 2026 net revenue guidance to a range of $520 million to $540 million and increasing our margin forecast. The guidance increase implies more than 20% growth of organic net revenue this year and nearly 28% year-over-year growth of adjusted EBITDA at the midpoints. In terms of revenue cadence, we expect the remaining three quarters will build on each other as some consequential assignments ramp up through the second half, with third quarter being at or near the midpoint of the second and fourth quarters.

It is notable that this is a bit of a change from prior years. With that, I am going to turn the call over to Dan.

Dan Swayze: Thank you, Bruce. Today, I am going to spend a few minutes bridging the revenue gap from Q1 to our full-year forecast. Backlog is a foundation of any revenue bridging exercise, and we have discussed in prior calls that somewhere between 70% to 80% of our backlog typically converts to revenue within a 12-month period with timing influenced by contract structure, phasing, and notice to proceed. For the remainder of the year, approximately 60% of our expected revenue is supported by existing backlog, with the balance driven by sell-and-deliver activity. As we move through the year, the mix naturally shifts more heavily towards backlog conversion.

Looking at Q2 through Q4, approximately $250 million of our remaining revenue is supported by backlog, leaving the remaining 40% or roughly $170 million to be delivered through new bookings within the year. When accounting for normal conversion timing between bookings and revenue, that translates to just under a 0.7x book-to-burn ratio to meet our full-year guidance. This remains at a manageable level given our ability to deliver book-to-burn above 1x on a consistent basis. The priority is ensuring our resources and capacity are aligned at the right time to deliver high-quality, on-schedule outcomes for our customers, something we actively plan for and manage every day. Let me cover where I believe our greatest opportunities are for new bookings.

Transportation is in a strong position to continue delivering results. Required book-to-burn is lower than average based on substantial existing backlog coverage for this year's forecast. With many long-term and recurring revenue assignments across infrastructure design, construction engineering, corridor management, and inspection services, we are well positioned to deliver. Power and energy: Longer-than-desired timelines to secure power from the traditional grid are forcing end users to develop their own power solutions. When our customers move forward with alternative power solutions, we expand our wallet share. Recent acquisitions have significantly broadened our reach and opportunities within the energy services vertical. They have also transformed the characteristics of our assignments to include higher-velocity sell-and-deliver opportunities.

To deepen our engagement with customers, address the resource void in the marketplace, and become more entrenched in long-term durable revenue, we have expanded to offer procurement services across the sector. Awards for services relating to midstream pipeline infrastructure, energy reliability centers, compressor stations, and terminal operations have shown meaningful increase of late and show no signs of abating. We are also seeing increased demand for renewable energy solutions, particularly as customers respond to upcoming expirations of IRA incentives. Natural resources includes a wide range of services and is a sector in which we will report the large government contract award going forward, as Bruce previously advised.

It is also much of where our industry-agnostic geospatial data collection efforts are reported. Recent upgrades to our fleet of data collection assets have already been impactful, opening opportunities for new streams of revenue. As an example, a recent manned aerial award from a long-standing government agency customer was nearly triple that of last year. Accelerated activity in mining and renewed demand for water resources have likewise supported sustained demand. Geospatial, while not a vertical, is a service that sits at the core of everything we do across all our markets. High-resolution 3D imaging and complex GIS-embedded point clouds are increasingly the basis of infrastructure planning and management.

Availability of intuitive and predictive real-time analytics is rapidly becoming a post-operational imperative. Having a comprehensive suite of data collection assets has led us to be engaged earlier and longer with customers. The key takeaways are these: We see the strongest bridge from work to revenue coming from mission-critical and adjacent energy infrastructure markets, along with transportation engineering and geospatial services. Our outlook for outsized organic growth this year is rooted in booked backlog conversion and predictable booking levels that are supported by a strong pipeline, a broad and expanding portfolio of capabilities, and disciplined execution.

Continuing to ensure we have the capacity to deliver, the discipline to convert demand into profitable revenue, and the tools to innovate remain our top operational priorities. With that, I will turn the call back to Bruce.

Bruce J. Labovitz: Thanks, Dan. Before turning the call back to Gary, I want to briefly address the narrative surrounding AI and automation in engineering, specifically in the context of pricing, margins, and long-term customer engagement. During our year-end call, I said, and I quote myself, we need to be sure we are prioritizing investments in processes and services relating to deliverables sold at stable values as opposed to efficiencies that merely cannibalize the value of work sold by the unit. That was true then, and it is still true now. But that was two months ago—a lifetime in this moment of technological change—and the message is expanding as we execute on our strategy.

There is a misconception in parts of the market that AI will cause an unsustainable compression in pricing and margins across all engineering services. In a vacuum, without a broader understanding of what is really happening inside the industry, the concern that AI leads to fewer hours, which equates to lower billable revenue, sounds reasonable, but it is not a plausible reality for established multidisciplinary engineering firms. Before we go any further, let us acknowledge that engineers and infrastructure professionals operate in an environment where tolerance for error is nonexistent and where the deliverables are foundational to public safety and reliable infrastructure performance in the face of ever-changing environmental stresses.

As a result, professional judgment, real-world experience, technical expertise, and accountability remain central to the engineering services value proposition, regardless of efficiencies deployed in the workflow. It is important to remember that this is not the first time technology has presented opportunity for process evolution in engineering. Our client engagements are not transactional; they are relationship-oriented, and that matters. A majority of our assignments are priced on a fixed-fee and not-to-exceed basis, where customers compensate us based on the value our deliverable produces over the entire life cycle of the asset. It is rare that we are engaged for one discrete individual hourly task.

Where work remains on a cost-plus or time-and-materials basis, it is generally with large public clients who prioritize professional intermediation and judgment over expedience and bargain hunting. These clients understand the inclusion of indirect costs such as compute and processing on burdened rate structures, and are grounded in the long-standing foundations of professional accountability and dependability. It is important to remember that engineering services represent a relatively small portion of total infrastructure project cost. The larger opportunity is combining AI-enabled automation with engineering know-how to help clients improve outcomes beyond construction to the broader asset life cycle.

As professional accountability, AI, process automation, and data analytics become more intertwined, we believe the conversation shifts from the pricing of individual tasks to the value of better decisions, reduced risk, and improved asset performance. The tools we are building are based on both inference and deterministic routines. Without getting too technical, this architecture allows for the harnessing of decades of engineering, construction, and operating knowledge in a platform that facilitates leveraging the collective expertise of everyone in the value chain.

To date, we have developed and introduced more than 25 proprietary tools to our operations, with additional capabilities in process that include an integrated operating environment designed to better connect us and the data embedded in all of our systems both internally amongst ourselves and externally with our clients post-operationalization. While our architecture is designed to minimize the operating cost of compute, the tools are focused on generating higher-value deliverables to customers through better execution and faster delivery. With all that said, do not view the impending wave of AI as a driver of commoditization.

Rather, we see it as an opportunity to enhance differentiation for firms that invest in the right capabilities at the right cost structure and integrate the tools effectively into empowering operating environments. From where we sit, this is not a race to the bottom. To the contrary, it is a race to the top. I am now going to turn the call back over to Gary for concluding remarks.

Gary P. Bowman: Great. Thank you, Bruce. Stepping back, what this quarter demonstrates is that our strategy is working. We are building a business with strong visibility, diversified demand, and a scalable operating model that continues to deliver. The combination of record backlog, consistent growth across our end markets, and continued investment in our capabilities—whether through technology, integrated service delivery, or targeted acquisitions—positions us extremely well for the future. We are seeing a clear path to sustained growth, margin expansion, and strong performance, not just through the balance of 2026, but into 2027 and beyond. We will now open the call for questions.

Operator: We will now open the call for questions. As a reminder, to ask a question, you will need to press 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press 1-1 again. The first question comes from the line of Aaron Michael Spychalla of Craig-Hallum Capital Group. Your line is now open.

Aaron Michael Spychalla: Yes, good morning, Bruce, Gary, and Dan. Thanks for taking the questions. First for me, any more details you can share on the government contract—what you are doing and the cadence of revenue? It sounds like a little higher, maybe subcontract mix, so just your confidence in execution there. And then just broadly, it seems like you are starting to see some larger awards. Can you talk to the scale and capability and other drivers that are driving that?

Bruce J. Labovitz: Aaron, good morning. I am going to take the first question on the government contract and reply that there is a limited amount of information that we can disclose based on nondisclosure agreements associated with the award. However, you are correct to infer from our commentary that it will operate at a slightly lower-than-average net-to-gross ratio, higher-than-average gross spread. If you think about the math behind lowering it by five points or so, that would indicate probably somewhere in the ~75% range for net-to-gross there. And that contract, as we have talked about, has a 36-month term to it and has a not-to-exceed value in total of about $177 million.

We are mobilizing for it and have been mobilizing for increasing activity there as we speak. As the commentary suggests, we would think that it would have most consequential impact on the second half of this year and into next year.

Aaron Michael Spychalla: Thanks for that color, and can appreciate that. And then on the margin front—you just hit on it—but it sounds like a slow start to the year for a couple months and then maybe ramp ahead of this and other projects. Just your confidence in the outlook for margin improvement and thoughts going forward there as you invest for growth?

Bruce J. Labovitz: We have looked ahead at where revenue growth is going to be and assessed that relative to overhead growth and the multipliers that we will be able to achieve on work in the remaining three quarters of the year, and we feel confident that we will be able to deliver margins in excess of where the year guide is, because in order to compensate for first quarter, those obviously have to be at a higher rate than the 17.25% to 17.5% that we have guided to. We think about it from the perspective that it does not take a whole lot more machine to support the contribution margin coming from incremental revenue.

It is not a zero-sum game, but it is a margin-expanding exercise.

Aaron Michael Spychalla: Alright. Thanks for taking the questions. I will turn it over.

Bruce J. Labovitz: Thanks, Aaron.

Operator: One moment for our next question. Our next question comes from the line of Liam Burke of B. Riley Securities. Your line is now open.

Liam Burke: Thank you. Good morning, Gary, Dan, Bruce. Bruce, I guess the fixed-price contracts are a competitive advantage for you. It is also a nice source of a pretty consistent margin. If I look at your backlog, is there a larger percentage of fixed-price contracts, or is the ratio pretty much the same? And on permitting, which is one of your competitive advantages, are you seeing any increase in that process to move projects along faster, or is it pretty much the same?

Bruce J. Labovitz: I think we are seeing a migration to a higher percentage of fixed-price contracts as the mix is changing a little bit. I would not characterize it as off-the-charts dramatic in its movement, but it is steady-state moving. It is also that some industries we work in are really just resistant to that—it is the way it has always been done. But in any opportunity where we have a chance to price on a fixed price, that is where we are driving contracting.

Dan Swayze: This is Dan Swayze speaking, Liam. Nice to talk with you. It is generally the same. We are seeing some hints that people would like to move faster, but we have yet to see a material shift that makes the permitting move faster than where it has been.

Bruce J. Labovitz: And that is not necessarily a negative. The effort involved is the service we provide. Yes, we like to be able to do more of it more quickly, but it is also—

Dan Swayze: We are hopeful we do see a shift on the NEPA front related to NEPA-type permits in the future, but we have yet to see it.

Liam Burke: Great. Thank you.

Bruce J. Labovitz: Thanks, Liam.

Operator: One moment for our next question. Our next question comes from the line of Tomasano of JPMorgan. Your line is now open.

Tomasano: Hi, good morning, everyone. I would like to ask about the 6% organic net service billing growth. What is the contribution from pricing, volume, new clients, and deeper penetrations of existing clients? And how sustainable do you see this growth for the next couple of quarters?

Bruce J. Labovitz: Tom, the organic growth that we have delivered historically is related to increased workload and not a function of pricing. I would not say that it is always a zero contribution from pricing—there is always some appreciation there—but when we look at the growth of our workforce and the sustained utilization of our workforce, we see that it is more people doing more work for more customers. It is really about increased capacity, increased volume of assignments, and increased wallet share with existing customers. When we look ahead at organic growth over the course of this year, we expect it to be in excess of 20%, so we do not think that the 6% is unsustainable in any way.

In fact, we think we are going to achieve a significantly greater amount of organic growth this year.

Tomasano: Thank you. And then a follow-up on margins, especially SG&A as a percentage of the gross contract revenue, was up significantly year over year. What are the main causes, and how will you control these costs? And also, Bruce, you talked about adopting AI—do you see it becoming a key tool for improving SG&A efficiency going forward?

Bruce J. Labovitz: The total cost of SG&A was about 50 basis points higher this quarter than last year's first quarter. The absolute amount grew, but the percentage of revenue grew modestly, and we acknowledge that. We think it will begin a downward trajectory again as higher-revenue quarters absorb more of that overhead. There is a level of cost to run the machine, and as we move forward to future quarters, we expect that to start coming down sequentially. Compared to last quarter, it was up about 200 basis points, but I think that is really a function of revenue, not anything else.

Tomasano: I was asking about the SG&A percent of GCR, which was 57.8%, plus 730 basis points compared to last year.

Bruce J. Labovitz: If you are talking about COGS, we generally try to focus more on total SG&A cost because the way we allocate labor cost into the payroll line can vary from quarter to quarter based on how timesheets are allocated. I think movements there are less consequential than overall movements in the overall cost of labor and SG&A.

Tomasano: Okay. That is clear. Thank you. And any comments on AI with SG&A opportunity?

Bruce J. Labovitz: Certainly. Part of what we are building are tools that will make operations—back office and front office—more efficient. Technology continues to provide process improvement opportunities throughout the business. I think that is going to be a natural evolution of technology. The higher-value orientation is really towards client engagement, client assignment, and client connectivity. We are not uninterested in what is going on in the back office, and yes, I think there are some points of improvement to be had there, but our primary focus is really on the front office.

Tomasano: Thank you. Appreciate it.

Operator: One moment for our next question. Our next question comes from the line of Mincho of Texas Capital Securities. Your line is now open.

Mincho: Good morning. Thank you for taking my question. You had mentioned that data centers were about 6% of revenue. Can you remind us how many data center projects you have worked on in the past and what that looks like today? And can you talk about data centers in your current backlog?

Bruce J. Labovitz: I am not sure any of us could give you an exact number of how many data center projects, other than to say that the fact we do not know exactly how many means it is a lot. I would also add that many of the data center clients are very strict about nondisclosure, so it is hard for us to talk about a specific project.

When you aggregate all of the experiences that the collective here has had—between us getting into data centers early in the Northern Virginia cycle and extending that to what is now really a power solutions play for data centers—the intersection with data centers that we have has grown faster than the number of projects has grown. We are doing more for more data centers, including existing clients. I would say that even where the project is the same, we are doing more things for the project today. And I would say that it is relatively aligned in our backlog, maybe slightly disproportionate to recognized revenue.

We see that as a continually growing space and, particularly coming off of the E3I, Laysen, and RPT acquisitions, there is just so much momentum in the space surrounding energy consumption—not just data centers, but other large-scale utility-size consumers—that it is a growing portion of our backlog.

Dan Swayze: From an operations perspective, there is not a week that goes by where we are not trying to shift resources to accommodate additional data center work. It is continuing to come in, and it is quite a substantial portion of our growth.

Mincho: Perfect. Thank you. Also, you announced the smaller acquisition of Smith and Associates. Can you talk about how that fits into your broader geographic and service expansion plan? And more broadly on M&A, how the pipeline is looking—are you still looking at smaller or larger projects—and any change in valuations recently?

Gary P. Bowman: Hey, Minh. On Smith and Associates, the play was really adding talent and productive capability to an existing big client we have in that geography, in addition to expanding into the geography. We already had a small presence in Vegas; the client was demanding a lot more, so it is a production capability play. The pipeline is still robust. We are evolving to be more narrow, focused, and strategic in what we are looking at. We will continue to look at a mix of large and small ones.

As we go to more strategic targets, the market is not driving multiples up—we see that fairly steady—but as we go to more strategic targets, the multiples are going up a bit because of the high demand in the energy markets, the utility markets, and so forth.

Bruce J. Labovitz: I think Smith is a good example of “we acquire to generate organic growth.” It is a little bit of one of those conundrums of yes, it is acquired, but it is for an organic opportunity.

Mincho: Got it. Okay, I think that does it for me right now. Thank you very much.

Bruce J. Labovitz: Thanks, Minh.

Operator: As a reminder, to ask a question, you will need to press 1-1 on your telephone and wait for your name to be announced. One moment for our next question. Our next question comes from the line of Jeffrey Michael Martin of ROTH Capital Partners. Your line is now open.

Jeffrey Michael Martin: Thanks. Good morning, guys. I wanted to dive into the decision that went into going after this large government contract. It is not the norm for Bowman Consulting Group Ltd. to pursue something like this. If you could walk us through the thought process and the competitive approach that you went in pursuing this contract, and secondarily, is this something that we could anticipate becoming more frequent in the future?

Bruce J. Labovitz: Jeff, part of what happens is as you ascend through the tiers of size, opportunities present themselves to you that might not have otherwise presented themselves to you. I would not characterize this as a deliberate multiyear chase for an opportunity. We had assembled the right capabilities in the right place at the right time to meet the demand that a client had for work, and so it was opportunistic, but it was not accidental that it happened. In terms of contracts like it in the future, we certainly hope so. I think this establishes a precedent. It establishes a foundation and a threshold for the kinds of work that we can accept and complete.

While I do not know that there is one in particular of like size, like kind sitting in our pipeline today, that does not mean that there will not be tomorrow.

Dan Swayze: Just to further expand on what Bruce was saying, this contract and the reach-out that occurred to us aligns directly with some of our strengths in our core services. This was not a reach at all for us to submit a proposal, provide the required scope, and meet their objectives, because it is the core services that we provide and that we are really good at.

Gary P. Bowman: Jeff, from a broad point of view, this contract really expands our paradigm internally of what we can do and what we go after. It has very positive cultural effects that are really cool to see.

Jeffrey Michael Martin: Well, congratulations on the contract. Bruce, I wanted to dig in on scaling up the resources that you need on this contract. Is there any short-term margin impact that comes back to you in the back half of the year? How should we think about utilization? I know in the past you have staffed up in anticipation for contracts coming on. Is that the case in this situation?

Bruce J. Labovitz: Yes. We have talked about margin in the business being a bit of a roller coaster based on the timing of notice to proceed and the accumulation of the resources needed. We do not capitalize any costs associated with future work in anticipation of it; it just gets expensed as incurred. There was definitely staffing up for the project.

It is going to be consequential enough through the rest of the year that we are not really calling it out as any particular item, other than to point out that the revenue we are going to deliver through the rest of the year that is in backlog does take staffing in real time, and so it does have some drag on Q1 from a multiplier perspective across the portfolio, because there is labor that was not as productive as it will be. But that is absolutely a variable in the margin expansion equation. It is not just for that project, but for other projects as well—this was not a one-trick quarter.

Backlog grew another ~5% independent of it, which also suggests having to staff up for growing revenue.

Jeffrey Michael Martin: Appreciate the time.

Operator: Ladies and gentlemen, as there are no further questions, we will conclude today's conference call. Thank you for joining.

Gary P. Bowman: Thank you. Bye.