Bowman Consulting Group Ltd Stock

Great. So good afternoon, everyone. I'm Nandita Nayar on the Machinery, Engineering and Construction team here at BofA. With us today is Bruce Labovitz, CFO of Bowman Consulting.

So in our coverage, we will focus on the infrastructure and construction side of the market. And over the past few years, we've really enjoyed watching Bowman's growth and evolution as it's kind of scaled into like a national like technology-enabled platform with increasing exposure to areas such as like power, utilities, data-driven infrastructure. So Bruce, it's really great to have you with us today.

Thank you for having me.

I'd love to just start off by just passing it over to you just to introduce yourself, provide a little bit of background and before we jump into some Q&A.

Terrific. Well, thanks, Nandita. It's a pleasure to be here. I really appreciate the coverage that you provide for us and it's really valuable to us. And so Bowman is a professional services firm that focuses on serving owners and operators of the built environment, right? So what does that really mean? That means that we're essentially an engineering firm. We do designing and planning of other infrastructure for owners and operators. And we also do life cycle asset management.

So from conception of a project through conclusion of a project and on to the next cycle of that project, Bowman is involved in everything from feasibility, from design and planning, permitting, constructability, construction oversight, asset management in a lot of different capacities and pretty multidisciplined organization. We do a lot of things within that service business in a number of sort of very -- what we think are high-value, high tailwind and in high-demand market sectors.

Got it. And just if you can just take a step back, Bruce, just before we kick things off for the audience and for those on the line that may not be as familiar with Bowman, can you just give us a little bit of a history on the firm? How is it formed? What kind of made you guys go public like 5 years ago, I guess, to the date?

Just about. I think today or yesterday or tomorrow is the anniversary of it is kind of block out some of that experience. But so Bowman is a 30-year-old firm founded by a gentleman named Gary Bowman, who very cleverly named the firm Bowman. And so Gary founded the firm. Gary is a civil engineer by trade, and he started the firm through a very tiny acquisition. His goal was to build the firm up to be a 30, 40-person firm, good lifestyle for himself and ultimately kind of adopted a very high-growth mindset, initially founded in the D.C. Northern Virginia suburbs doing mostly land planning for commercial and residential developers after the real estate setback of the late 2000s, I think we now refer to that decade as, decided that it was really in the best interest of the firm to diversify, expand the geography and the services that the company offered.

So while the company had contracted a little bit during that Great Recession, came out gangbusters and grew from that moment, started making acquisitions, expanding the geography, expanding the service lines. We grew the company to $100 million after that, I came in, in 2013 to help set the company up for whatever the next iteration of its growth was.

So when I got there, we're about a $45 million, $50 million company, grew it to $100 million and decided that the next best infusion of growth would be from a public offering. So we went public in 2021 at $100 million in revenue with the objective of over 5 years to grow to a $500 million company. We've achieved that now. We're in excess of $500 million run rate company and now we're off to the next objective.

And just to expand on that, Bruce, what types of projects does Bowman typically take on? What sectors of the market do you participate in, just like the size, scale, who would you compete with it, just the customer sets and so forth?

Yes. So we focus on 4 primary verticals, and that's just because you have to organize somehow, right? And there's things that sort of straddle different markets sometimes, but we think about our business is focused on transportation, power and energy, buildings and site civil work and natural resources. And those are the categories that most of our clients fit into. And that's -- those are the verticals.

And from a horizontal perspective, we have a number of different services that intersect with each of those verticals and kind of the heat map of where those services intersect with verticals is where our revenue comes from. Legacy-wise, our biggest segment was the buildings and sight civil. That was about 70-plus percent of our revenue when we went public. Today, it's about 40% of our revenue. So the other -- while everything has grown, the other parts of our business have grown faster because we've been more focused on growing in the areas of transportation and power and energy.

Typical project will be anything from a large-scale bridge, road, highway project from a state Department of Transportation. It could be a tunnel realignment or a tunnel bypass project. It could be in the traffic area, could be in traffic mitigation, traffic planning, traffic oversight. It could be in the ports and harbors part of the transportation segment is working on the development of infrastructure for a port from the seawall to everything that's on land. It's mass transit oriented, so developing rail and aviation assets for various transportation authorities. And projects can range from being small to very large. They could be in the $100,000 to the $30-plus million kinds of assignments.

In the power and energy space, we're really focused on the generation of power, the transmission of power and the resilience of the grid, right? So taking molecules from their original source, converting them into energy, transmitting that energy, terminating that energy somewhere and then ultimately preserving the capacity of the grid. So it could be everything from pipelining natural gas through the midstream to an endpoint at a compressor station at a terminal operator or on-site for power generation from a large-scale turbine. It could be overhead -- high-voltage overhead transmission corridors and lines. It can be anything in the renewables space from doing plans for solar implementations, battery storage facilities.

And then in the resilience arena, it's typically about undergrounding or other kinds of environmental protection so that if you think about the formula of the grid being how big it is and how much less -- how much downtime there is, right? We're trying to minimize the amount of downtime that the grid is experiencing. And those can be long-term large projects that involve undergrounding of utilities up and down the coast of Florida to building compressor stations in Central Texas to building on-site power at data centers and other large-scale utility type consumers. Buildings and site civil is permitting and design for large-scale development of any structure you can occupy. So whether that's in the residential, commercial, industrial, municipal space, we do from land permitting to -- through construction oversight and operationalization commissioning is one of the terms you use for bringing an asset online.

Everything from the land planning to the mechanical and electrical and plumbing engineering, all the inside systems. And so people often ask, where do data centers fit into that. They're a little bit of a hybrid between -- they were traditionally in our buildings group. Today, we keep them -- we consider them in our power group because really everything is a power-first project now and solving for power is the first challenge. And natural resources, sort of round that out, it's projects for mining operators, environmental remediations and conservations, water resources, whether that's water treatment or water as a resource as a scarce resource and land acquisition services and doing large-scale easement acquisition for developers of assets that have to cross over private property.

And that's really helpful in setting the stage there, Bruce. So you also mentioned that geospatial is kind of sitting at the core of everything you do, and it also allows you to kind of engage with clients much earlier in the project life cycle. Like could you just talk about like how that kind of translates into incremental revenue or wallet share gain over time? And maybe could you provide some examples of kind of how you kind of see that kind of play out in practice?

Yes. So it's earlier and later in the process. So the proliferation of data throughout the engineering design and asset management life cycle has really been changing over the last couple of years, and we've been embracing that. Geospatial was the term that took over surveying, right? So it used to be considered it surveying, then it became geospatial. Now we think of it as data capture because what we're doing is that we are collecting large sets of point clouds of data that represent assets and that are geolocated, right? So you're taking everything now is digital imagery, digitally captured imaging of assets that either below the surface that are on the surface. We capture them from mid-altitude and from high altitude.

So we've got marine vessels that are capturing imaging underwater. We've got people who are going around with surveying equipment and collecting terrestrial information. We've got drones and UAVs that are collecting from mid-altitude and fixed wing aircraft that are collecting imaging from high altitude at very high-resolution large aperture. It's at the center of everything because it is the source of truth for engineering services, right? It is -- when you're going to work on an asset, you're going to plan for an asset, you need to be able to visualize it. You need to see it, you need to be able to model it. And so data collection, data capture has really become the core of the process.

And then that data extends through the engineering cycle, through the asset life cycle so that the customer can access and understand in real time what's happening to their asset as it's experiencing the environment that it exists in. So we've got -- we do imaging that can span time so you can look for changes in structural attributes of an asset over time. We will do imaging that will create the digital twin environment where you can think of an asset in 3 dimensions and in time and space, experiencing what it's really experiencing. So there's any number of uses. The data itself is becoming a very valuable piece of our inventory, right? So we're very focused on how to collect, store, utilize and resell the data that we're collecting.

And also, if you're looking at just data centers, you mentioned even on your earnings call, I think it's about like [ 6 to 10 ] of revenues today, you kind of see that growing over the coming years. Just could you talk about just kind of like what kind of growth and opportunities are you guys seeing? Like where do you guys -- you mentioned where you guys participate on the power utility side, but specifically it comes to data centers, could you just expand on that a little bit as well?

Yes. So data centers, we think of as essentially utility scale types of facilities. So it's just one of the kinds of facilities. Data centers, the legacy for us with data centers was a permitting challenge. It was a service we provided. We're based in Northern Virginia. Northern Virginia was kind of the -- where the ground zero for data center proliferation. And so we kind of cut our teeth on planning for data centers.

Over the years, we've expanded the breadth of services that we provide to a data center owner from land feasibility, where can you build it, right? What can be built? What kind of capacity can it provide all the way through to energizing it, right? So bringing power to it, doing the mechanical engineering for the interior of the data center and then doing the post-operationalization, monitoring and management of the assets. How much power is it consuming? Where is it seeing inefficiency? Where can we engineer infrastructure to it and from it to better utilize the excess capacity that might have been built there. It's a very much -- it's a very evolving part of the business. The permitting process has become more challenging. The -- how do you solve for the objections has become a bigger opportunity? How do you provide for resident power and backup power for those facilities has become an increasing challenge for us.

But I think that the demand for those kinds of facilities is continuing to be as strong as we've ever seen it. And I would argue that even if the capacity expectations are off by 20%, it's still billions of dollars of engineering that has to be done for these facilities, not hundreds of thousands of dollars of engineering has to be done. So while it's not the only focus of our business, it is a growing component of our revenue and an important part of the sort of the complete solution that we provide.

And just maybe switching gears to the public side Bruce. We all know that the IIJA is set to expire on October 1. Like there has been some talks about the reauthorization bill being pushed out a little. There's also been some conversations about a potential CI that we could be looking at. Just curious if you could kind of just give us what you've been hearing on the ground specifically? And also, would you say there's like enough demand out there in the pipeline? Or are we kind of seeing like a slight easing on the edges?

So I think that we're continuing to see tremendous demand for transportation infrastructure investment, right? I think it is a relatively apolitical issue, right? It's one of those investment thesis that sort of everybody can get behind, right, building better roads, bridges and highways to the extent that there is a move to facilitate reshoring of manufacturing and of bringing industry back, you need more transportation infrastructure to support that. So we're not particularly worried about there being an end to funding with what's going on.

Most of the IIJA funds have been allocated to states. The states are working through those funds. And so I liken it to the World Series game last year where I tuned in, in the eighth inning and thought it was almost over, but ended up having to sit through 19 innings of the game. So this is sort of similar to that. This game is not over. And if you follow legislative events in Washington, there's constant funding that's being provided, new fundings that are coming out for mass transit for connectivity of communities to commuting and just recent funding that was passed on that front.

So -- and I think that there is a universal desire and demand for improving infrastructure. I think it will continue to find funding and it's still working through the funding that's already been provided.

That's good to know. And with your backlog just growing significantly, how does the mix change as you kind of reshape the company? And is that like a targeted mix by maybe service, markets or project size you guys would like to maintain?

So at the end of the day, we're market chasers, right? So if something changes and the market evolves, we're not going to be stuck with any one particular vertical as being -- without being willing to be flexible. Today, we are trying to balance the allocation of revenue between the verticals. So we've brought the buildings and site civil down. We brought transportation and power up. We want to be a multi-leg stool. We are a diversified infrastructure services provider. And so it would be nice to see them maybe in the 30s each with one of them being a little bit below to compensate for that.

But right now, we're liking the balance that we're seeing. Certainly, there's a lot of demand in power and energy, and that's consuming more internal market share of revenue today, and we're going to continue to lean into that, transportation likewise. And so I think that those have lots of tailwinds behind them and like to see that the 2 of them represent more than 60% of the business here in the near term.

And I'd like to just pull that a little bit more, Bruce. What do you say a typical project size kind of looks like in the backlog today relative versus in the past? And also, what -- on your earnings call, you mentioned this large government contract, it's a multiyear contract. How should we think about what this says about the evolution of Bowman's project size mix and the opportunity set that opens up going forward?

Yes. So I would say the generalization of that question will be they're getting bigger, right? The projects are getting bigger. And this is an industry where you qualify in tiers. So as you get bigger, as you move up the size spectrum, you qualify for bigger projects. The client's biggest concern is that you deliver it timely and then it functions, right? And so bigger projects, they want to know that there are companies with bigger resources and more capability. So we are working our way up the size continuum there.

We still do a lot of projects at the same time. So we do 12,000, 15,000 projects at a time. So on average, they're going to be a 6-figure, but sort of the large ones are getting larger and larger. So we've gone from doing $10 million to $15 million projects to $30 million to $50 million projects. The most recent one that you're referencing was is now $177 million assignment that runs over 3 years. It was originally a $30 million assignment that modified to be increased to $177 million. It's a land services engagement to work for government agency to help secure access rights and do surveying of properties.

So I think what it says about us is that we are now in a position to be considered as a player in larger and larger contracts, and they will continue to get bigger over -- I think over the next couple of years.

And I feel like we've gone through half of the call without surprising talking about the Middle East, which is surprising. We talked a lot about the strength in demand. And -- but just I want to touch on just given the ongoing developments in the Middle East, are you kind of seeing any impact on project activity, whether it's delays, like slower decision-making or changes in client behavior, anything that you're seeing there?

Yes, I'll start with -- I know it's not exactly the question, but we're a U.S. domestic operator. We don't have international operations in the Middle East. So directly, there's been no impact of that -- of what's going on there. I would say, in general, no, we're not really seeing any cessation of demand relative to that. If anything, I think this idea that we may need to be more self-reliant on for energy is increasing opportunity as we see it and the sort of sense of self-reliance that may be coming from it is probably a bit of a catalyst to work.

Direct impact of fuel prices and inflation, marginal in what we do. We've got a fleet of trucks that are driving around. It's not a big input to the business. I think that we're necessarily panicked over any costs like that sort of something we keep aware of. It's more the uncertainty of the political environment and geopolitical environment on the markets and sort of the capital side of the business than it is on the actual operational side of the business.

All right. And just staying on that topic for a minute, Bruce, given the more inflationary backdrop, higher diesel, tariffs, like how are you thinking about pricing and cost pass-throughs in your contracts? And how resilient would you say the model is at a higher cost environment?

So there is so much more work than there is supply of us to do it that there is opportunity to recover -- there's opportunity to recover pricing -- cost increases in pricing. That doesn't mean that we've got a blank check to increase prices at will, right? Our single biggest input is labor, right? Labor is a relatively fixed cost, but it adjusts annually, let's say. And so we do have the ability to make adjustment in pricing to cover incremental costs of labor. But our growth has mostly been about more work, not about pricing power.

Right. And I guess another key debate now, Bruce, is the increasing dialogue around AI's impact on E&C firms. Just how do you kind of -- in your view, how do you guys see AI reshaping the industry? And where does it create more of like an opportunity than a risk for Bowman?

Yes. I think that's a really important question. And we talked about this on our first quarter call that we see this as a race to the top, not as a race to the bottom that AI is going to be an impact on how we do business. But we've been through impacts before in this industry. We've gone from handndrafting to computer-aided design, right, to CAD. We've gone from manual surveying to electronic and very highly technical geospatial. This is another inflection in the industry. I think the narrative that this is an extension level event for the engineering professional services ignores the moat that exists around the industry that this is an industry where there's very little, if no tolerance for failure, right? There's no tolerance for unknowns of technology.

What we build has to withstand environmental pressures and stresses. And if it fails, that's a really catastrophic event. So you can't allow for, okay, well, there's a coding error, right? We'll fix that later, right? I think that what we do is done through relationships with folks that rely on the professionalism and experience of the industry. We will say we stamp plans. We create accountability for what we do. But that doesn't mean AI is not going to be an important component of the way we evolve the way the business works, right? So automation, which incorporates AI will be introduced throughout the industry. It will help make those who think about the work we do as a continuum of value, it will make the work we do more valuable.

Those of us who think of our work as purely transactional, I think it's going to be challenging for folks to think it's going to be transactional. And certainly, anybody who ignores the underlying compute costs associated with AI and thinks that this is a race to cost 0, therefore, price 0 is mistaken about how the model of all of this is going to work. So we're integrating technology into the way we operate, the way we deliver, the way we entrench ourselves with customers. And we're very focused on the value that we provide, not just the transactional pricing of any one component.

Got it. And can you maybe just give an example of kind of just so we can just flesh that out, if you kind of had a project in the past where maybe I guess, you had -- I guess the operational side was, I guess, a little bit heavier. But now I guess you can kind of scale that back a little while keeping like an opportunity to expand your TAM. So could you maybe just give an example of kind of how that you're seeing that kind of play out in bigger projects?

So automation can do interpretation. It can clue you into things that you might want to look more closely at. It can iterate faster than a human, but it doesn't mean that it can necessarily be deterministic on its own, right? We're focused really on that sort of deterministic approach to automation as opposed to sort of inference and probability-oriented orientation. So we use it to help to retrieve data to organize projects faster. We think about how can we deliver better value to the customer. They want it sooner. They want it in a more organized way. And so how do we implement automation tools within the various tasks within the business from understanding feasibilities or doing iterative layouts for asset design, retrieving information associated with funding for clients, interpreting proposals and helping us to connect current business to historical business that we've done.

This isn't creating a SaaS business out of engineering. We're not building tools that we're going to rent to our customers. We're improving the overall value that we deliver to customers by creating an environment that arcs from internal to external, right, that takes all of the data, all the systems, all the information and in a managed way, makes it available to everybody inside and to our customers in a way that you can interact with your infrastructure and understand how it's going to perform and where it needs attention better.

Okay. That's helpful. And I guess just looking at the broader picture, Bruce, last quarter, you outlined like the next long-term revenue milestone for Bowman. Could you walk us through like the key building blocks that kind of get you there?

So I think what you're referencing is we sort of set out that our first 5 years was $0.5 billion and our next journey was $1 billion, right? And while that's not a guide, that's an aspiration, right? And so we look at sort of the next increment of the business.

The things that get us there are accelerated revenue capture, right? So bigger contracts that help us to grow faster. It is leveraging labor in a more efficient way. This is not about reducing headcount, but it may be about metering headcount growth a little bit more and finding ways to generate more out of each of our resources in a way that is balancing to the way the culture of the company and the demands of the marketplace for growth. So I think it's about deepening our exposure to these strong markets, adding breadth to what we do and continuing the M&A program that we've been very successful at.

So in the 5 years we've been public, we've done over 40 acquisitions. They're generally small acquisitions that become fully integrated into our operations. So they are themed with adjacency. And so we find operations that are adjacent to what we're doing, whether that's geographically, whether that's from a service line perspective, from a client perspective, from a technology perspective and enable us to go after new business to expand the wallet share that we have with clients. I think that one of the key things is growing relationships with clients beyond just their capital budgets and into their operational budgets. The lowest friction, the lowest cost of capture relationship is an existing one, right? So the more you can deepen your connection with your customers, doing more things for them, providing them more life cycle revenue opportunities, I think the faster we can grow there.

Just to double-click on that M&A opportunity, Bruce. It's clearly been a really big part of Bowman's growth story. Just to what extent is M&A kind of adding scale versus adding like new capabilities, particularly in areas like you mentioned, like power, geospatial, data-driven services. And also if I can add just one more, what are the typical multiples that you're seeing in these acquisitions?

Right. So your first question, yes to both, right? It's about adding scale, but it's also about adding capability. It's not scale for scale's sake, right? We're not just collecting companies so that the total of the collective revenue will be higher. It's so that the product of all of the effort will be better, right?

So we're buying companies that we can integrate into our operation, who bring us a service line that we need or bring us a portfolio that we need. Oftentimes, qualification is one of the key obstacles to winning work, right? So when you buy a small operator, sometimes they're scale builders, sometimes they're capability builders and sometimes they're just tickets to the show as we call it, right? It's like to get you in front of new clients. And so we generally like acquisitions that have a purpose where the sellers want to join with us. They reached some limitation, and they want to meet that limitation and grow their business, not just retire.

So we're discriminating about who we buy. Generally speaking, depending on which vertical the acquisition targets are going to be a different multiple in today's world. I don't think multiples are getting higher necessarily, but we're shopping in a more elite part of the market where multiples are high. So on average, we could be buying in the, let's say, historically in the 6 to 9 because we mixed those verticals more. I think today, you're buying more in the 8 to 10 and 8 to low double-digit kind of multiples to get into some of these higher growth markets.

And can you remind us of the free cash flow conversion profile of the business, Bruce? And like as mix changes with increasing power and utility, you just have, I believe, higher-priced projects, do you change in maybe free cash flow profile?

Yes. So I'll take one step back from that. I think about it from a cash from operations perspective, it's a fairly low CapEx business, right? So we're not buying big equipment. We're not buying factories. We're not buying heavy machinery. We do have episodes of higher CapEx where we're cycling assets like large digital -- large -- high [ type of ] cameras, right? So very high-resolution cameras that we buy that are $2 million a piece, but they have long life cycles.

So from a cash conversion, let's say, sort of from the cash flow statement, cash from operations conversion, we run the last quarter with 70% of adjusted EBITDA. We generally run somewhere between, let's call it, 3% and 7%, mostly in the 3% to 5% of revenue for CapEx. So that might drop that down into the 50s or 60s from a cash flow conversion. But the beauty of the business is that it is not a CapEx-heavy business. I think there will be some episodes over -- as we go through another technology evolution where you're buying equipment to set you up for -- you're spending CapEx to save OpEx in the future. But generally speaking, fairly high conversion rate.

And one area we haven't touched on yet, Bruce, is you recently announced that Gary Bowman's plan to step down as a CEO after building the company into a national platform. Could you talk about how you're thinking about the leadership transition process and what the Board is like prioritizing as it searches for its next CEO?

Yes. So Gary has done a fantastic job building this company. If his goal was to build a small company, he failed miserably. Otherwise, I'd say he's done a great job. I think Gary is at a point where, okay, he's built what he's built, and he's ready for somebody else to take the reins. He announced earlier this year that at the end of this year, he was going to step down as CEO, giving the company plenty of time and plenty of space to do a search internal and external. And the Board wanted to make sure that they really met their fiduciary duty to a fulsome process. And so we're going through that now. I'd expect that it's probably got another couple of months to it, but by -- probably by the end of the summer, I'd say we'll have something in place.

What they're looking for is someone who will maintain the culture of the company, first and foremost, who understands what we've built at Bowman and how special it is and how important it is to attracting and retaining talent. Someone who understands the evolution that has to happen to this business over the next 5 years as technology and data become a more central theme of the business and certainly someone with leadership and the gravitas to represent the company in the marketplace.

As we just wrap things up, when you think about the next 5 to 10 years, what do you think Bowman looks at scale, whether that's in terms of revenue, capabilities, the types of projects you guys are aiming to take on? And I'll keep it open ended there.

Yes, I think we just continue on this trajectory. We get bigger. We deal with bigger projects, more consequential engagements. I don't think there is any ceiling to the revenue potential of the company done right. And I think that we are fundamentally what we look like today just with an add water and lot of grow.

Perfect. Great. I think that's a great note to end on. I want to thank Bruce for making the time. And everyone, thank you for joining us today. Thanks, everyone.

Appreciate it. Thank you.

Thank you.

Good morning. My name is Rivka, and I will be the conference operator today. At this time, I would like to welcome everyone to the Bowman Consulting Group First Quarter 2026 Conference Call. [Operator Instructions]

Please note that many of the comments made today are considered forward-looking statements under federal securities laws. As described in the company's filings with the SEC, these statements are subject to numerous risks and uncertainties that could cause future results to differ from those expressed, and the company is not obligated to publicly update or revise those forward-looking statements.

In addition, on today's call, the company will discuss certain non-GAAP financial information such as adjusted EBITDA, adjusted net income and net service billings. You can find this information together with the reconciliations to the most directly comparable GAAP information in the company's earnings press release filed with the SEC and on the company's Investor Relations website at investors.bowman.com.

Management will deliver prepared remarks, after which they will take questions from research analysts.

A replay of this call will be available on the company's Investor Relations website.

Mr. Bowman, you may begin your prepared remarks.

Great. Thank you, Rivka. Good morning, everyone, and thank you for joining our first quarter 2026 earnings call. Bruce Labovitz, our CFO; and Dan Swayze, our Chief Operating Officer, are with me today.

First, I'd like to welcome all Bowman employees on today's call, including those from Smith & Associates Land Surveying in Las Vegas, who are the newest members of the Bowman team. After my introductory remarks, I'll turn the call over to Bruce, who will cover our financial performance and technology initiatives. Dan will provide more detail on the opportunities we're 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're 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 17.75%.

So with that, I turn the call over to Bruce.

Thanks, Gary, and good morning, everyone. I'll begin with a review of our financial performance for the first quarter, and then I'll turn the call over to Dan to bridge Q1 to year-end. After that, I'll return to share some thoughts on how we're thinking about technology and automation and begin to draw a line towards its impact on the future of Bowman.

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 1 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 began in Q2, total overhead as a percentage of revenue was up around 50 basis points compared to last year. I'll 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 nearly 16% at a margin that expanded year-over-year to 14.7%.

We generated $11.6 million of cash from operations in the quarter, representing approximately 70% conversion of adjusted EBITDA to cash. It's 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, up 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're 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 revenues this year and nearly 28% year-over-year growth of adjusted EBITDA at the midpoint.

In terms of revenue cadence, we expect the remaining 3 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's notable that this is a bit of a change from prior years.

With that, I'm going to turn the call over to Dan.

Thank you, Bruce. I'm going to spend a few minutes bridging the revenue gap from Q1 to our full year forecast. Backlog is the foundation of any revenue bridging exercise. And we have discussed in prior calls, somewhere between 70% and 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 sale 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 0.7x book-to-burn ratio to beat our full year guidance. This remains at a manageable level, giving 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 reoccurring revenue assignments across infrastructure design, construction engineering, corridor management and inspection services, we are well positioned to deliver.

Power and Energy. Longer than desired time lines to secure power from the traditional grid is 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, and they have also transformed the characteristics of our assignments to include higher velocity sale 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 the 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 takeaway of these, we see the strongest bridge from 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 book 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.

Thanks, Dan. Before turning the call back to Gary, I want to briefly address the narrative surrounding AI and automation and 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's still true now. But that was 2 months ago, a lifetime in this moment of technological change, and the message is expanding as we execute on our strategy.

There's 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's really happening inside the industry, the concern that AI leads to a few hours, which equates to lower billable revenue sounds reasonable, but it's not a plausible reality for established multidisciplinary engineering firms.

Before we go any further, let's 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 remains central to the engineering services value proposition, regardless of efficiencies deployed in the workflow. It's 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're 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's 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's 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 are becoming 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, we 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's a race to the top.

Let me now turn the call back over to Gary for concluding remarks.

Great. Thank you, Bruce. So stepping back, what this quarter demonstrates is that our strategy is working. We're 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're seeing a clear path to sustained growth, margin expansion and strong performance, not just through the balance of 2026, but into 2027 and beyond.

With that, we'll open the line up for questions.

[Operator Instructions] The first question comes from the line of Aaron Spychalla of Craig-Hallum Capital Group.

First for me, any more details you can share on the government contract, what you're doing, kind of cadence of revenue? It sounds like a little higher maybe subcontract mix, so just confidence in execution there. And then just broadly, it seems like you're starting to see some larger awards, can you talk to the scale and capability and just other drivers that are driving that?

Yes, Aaron, it's Bruce. I'm going to take the first question on the government contract and reply with, there's 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 higher-than-average net-to-gross -- sorry, lower-than-average net-to-gross ratio, higher-than-average gross spread.

If you think about the math behind lowering it by 5 points or so that would indicate probably somewhere in the 75-ish percent range for net-to-gross spread there. And that contract, as we've talked about, has a 36-year term to it. It is on a -- months -- excuse me, 36-month term to it and has a not-to-exceed value of in total, 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.

Okay. I appreciate that. And then on the margin front, I mean, you just kind of touched on it, but it sounds like a slow start to the year for a couple of months there and then maybe ramp ahead of this and other projects. Just confidence in the outlook for margin improvement and just kind of thoughts going forward there as you invest for growth.

Yes. So I think we've looked ahead at where revenue growth is going to be and assess that relative to overhead growth, right, and the multipliers that we'll be able to achieve on work in the second -- in the remaining 3 quarters of the year and 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 17.2% to 17.7% that we've guided to.

So we think about it from a perspective of it doesn't take a whole lot more machine to necessarily generate the -- to support the contribution margin that's coming from incremental revenue. It's not a zero-sum game, but it's a margin expanding exercise.

Our next question comes from the line of Liam Burke of B. Riley Securities.

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?

I think we're seeing a migration to a higher percentage of fixed price contracts as the mix is changing a little bit. I don't think it is necessarily -- I wouldn't characterize it as off the charts dramatic in its movement, but it is steady state moving. It's also -- some industries we work in really just are resistant to that. It's just the way it's always been done. But in any opportunity where we have a chance to price on a fixed price, that's where we're driving contracting.

Great. 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?

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

That's not necessarily a negative, right? I mean the effort involved is the service we provide. So it's -- yes, we'd like to be able to do more of it more quickly, but it's also...

Yes, we're hopeful we see -- we do see a shift on the NEPA front related to NEPA-type permits in the future, but we've yet to see it.

Our next question comes from the line of Tomo Sano of JPMorgan.

I'd like to ask about the 6% organic net service billing growth, like billing growth. What is the contribution from pricing, volume, new clients and deeper penetration of existing clients? And if you could touch about the -- how sustainable do you see this growth for the next couple of quarters and so on, please?

Yes. Tomo, the organic growth that we've delivered historically is related to increased workload and not a function of pricing. I would say that it's always a 0% contribution from pricing. There's 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 people doing more work for more customers. So it's really about -- it's about increased capacity, increased volume of assignments, 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%. And so we don't think that there is any -- that the 6% is unsustainable in any way. In fact, we think it's -- we're going to achieve a significantly greater amount of organic growth this year.

And then a follow-up on the 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 you adapt AI. Do you see it becoming a key tool for improving SG&A efficiency going forward?

Yes. So Tomo, I'll start with the total cost of SG&A was about 50 basis points higher this quarter than last year's first quarter. So not a -- the absolute amount grew, but the percentage of revenue grew. And we acknowledge that we think it won't -- it will begin a downward trajectory again as higher revenue quarters absorbed more of that overhead. There is a level of cost to run the machine. And so, as we move forward to future quarters, we expect that to start coming down as compared to sequentially to last quarter, it was up about 200 basis points. But I think that's really a function of revenue, not anything else.

And I'm sorry, I don't remember what the second part of the question was.

Bruce, that is the AI. But I was asking about the SG&A percent of GCR, which was 57.8% plus 730 basis points compared to last year.

So if you're talking about COGS, so we generally try to focus more on total SG&A costs because the way we allocate labor cost into the payroll line can vary from quarter-to-quarter based on how time sheets are allocated. And so I think movements there are less consequential than overall movements in the overall cost of labor and G&A.

Okay. That's clear. And any comments on AI with SG&A opportunity?

Certainly, I think that part of what we're building are tools that will make operations back office and front office more efficient. So yes, I think that technology continues to provide process improvement opportunities throughout the business. I think that's going to be a natural evolution of technology. The higher value orientation is really towards client engagement, client assignment and client connectivity. So we're not interested in what's going to happen 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.

Our next question comes from the line of Min Cho of Texas Capital Securities.

So you had mentioned that data centers were about 6% of revenue. Can you remind us how many data center projects you've worked on in the past and what that looks like today? And can you talk about kind of data center in your current backlog?

I'm not sure any of us could give you an exact number of how many data center projects other than to say that the fact that we don't know exactly how many means it's a lot, right? We can't remember every one by name. So that means that there's been a lot of them.

I would also add that many of the data center clients are very strict about nondisclosure. So it's hard for us to talk about a specific project.

But I think 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, right? So we're doing more for more data centers, including existing clients. So I'd say that even where the project is the same, we're 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, right, because we see that as a continually growing space and particularly coming off of the E3i and Lazen and RPT acquisitions, there's just so much momentum in the space surrounding energy consumption, not just data centers, but other large-scale utility consumers, utility-sized consumers that it's a growing portion of our backlog. Dan?

Yes. And just to add one thing. From an operational perspective, there isn't a week that goes by where we're not trying to shift resources to accommodate additional data center work. So it's continuing to come in, and it's quite a substantial portion of our growth.

Perfect. Also, you announced the smaller acquisition of Smith & Associates. Can you just talk about how that fits into your broader geographic and service expansion plan? And if you can talk more broadly about M&A, kind of how the pipeline is looking, if you're still looking at the smaller or larger projects? And any change in valuations recently?

Min, this is Gary. On Smith & 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's a production capability play.

Pipeline is still robust. We are being -- we are evolving to be more narrow focused and strategic in what we're looking at. We continue to have a -- look at a mix of large and the small ones. As the -- as we go to more strategic, 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.

I think that's a good example. If we acquire to generate organic growth, right? It's a little bit of one of those conundrums of yes, it's acquired, but it is for an organic opportunity.

Okay. And then, let's see, we talked about backlog. I think that does it for me right now.

[Operator Instructions] Our next question comes from the line of Jeff Martin of ROTH Capital Partners.

I wanted to dive into the decision that went into going after this large government contract. It's not the norm for Bowman to pursue something like this. So if you could walk us through kind of 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?

Yes. 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 guess I wouldn't characterize this as a deliberate multiyear chase for an opportunity. It was 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 wasn't accidental, right, that it happened.

In terms of like size contracts like it in the future, we certainly hope so, right? I think this establishes a precedent. It establishes a foundation and a threshold for the kinds of work that we can accept and complete. And so while I don't know that there is one in particular of like size like kind sitting in our pipeline today, that doesn't mean that there won't be tomorrow.

Yes. And just to further expand 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. So this was not a reach at all for us to submit a proposal, provide the required scope and meet their objectives because it's the core services that we provide and that we're really good at.

Jeff, this is Gary. From a broad point of view, this contract, it really expands our paradigm internally of what we can do and what we go after. So it has a very intangible cultural -- positive cultural effect that's really cool to see.

Congratulations on the contract. And Bruce, I wanted to kind of dig in on the scaling up for the resources that you need to execute 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 the utilization? Because I know in the past, you've staffed up in anticipation for contracts coming on. Is that the case in this situation?

Yes. As we've talked about, margin in the business can be a little bit of a roller coaster based on the timing of notice to proceed and the accumulation of the resources needed. We don't capitalize any costs associated with future work in anticipation of it. It just gets expensed as incurred. So there was definitely staffing up for the project. It's going to be consequential enough through the rest of the year that we're not really calling it out as anything particular other than to point out that, sure, the revenue that we're going to deliver through the rest of the year that's in backlog does take staffing in real time.

And so it does have some drag on Q1 from a, let's call it, from a multiplier across the portfolio, right, because there's labor that wasn't as productive as it will be. But that is absolutely a variable in the margin expansion equation is this labor, not just for that project, but for some other projects that was just a one-trick kind of quarter. Backlog grew another 5% independent of it. And so that also is suggestive of having to staff up for growing revenue.

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

Thank you.

Thanks.

Good morning. My name is Becky, and I will be the conference operator today. At this time, I would like to welcome everyone to the Bowman Consulting Group Fourth Quarter and Fiscal Year 2025 Conference Call. [Operator Instructions]

Please note that many of the comments made today are considered forward-looking statements under federal securities laws. As described in the company's filings with the SEC, these statements are subject to numerous risks and uncertainties that could cause future results to differ from those expressed, and the company is not obligated to publicly update or revise these forward-looking statements.

In addition, on today's call, the company will discuss certain non-GAAP financial information such as adjusted EBITDA, adjusted net income and net service billing. You can find this information together with the reconciliations to the most directly comparable GAAP information in the company's earnings press release filed with the SEC and on the company's Investor Relations website at investors.bowman.com.

Management will deliver prepared remarks, after which they will take questions from research analysts. A replay of this call will be available on the company's Investor Relations website.

Mr. Bowman, you may now begin your prepared remarks.

Okay. Thanks, Becky. Good morning, everyone, and thanks for joining our year-end earnings call. Bruce Labovitz, our CFO, is with me this morning, along with Dan Swayze, our Chief Operating Officer.

First, I'd like to welcome all new Bowman employees who joined us this quarter, including those from RPT Alliance, who joined in December.

After my introductory remarks, I'll turn the call over to Bruce, who will cover our financial performance and technology initiatives. And then Dan will discuss operational successes, including where we're winning and why. I'll end the call with some closing statements before opening it to Q&A.

Going forward, we plan to periodically introduce members of our leadership team to provide deeper insight into specific aspects of our business.

Let's start with fourth quarter and full year results. It's hard to believe that 2025 was our fourth full year as a public company and the final year of our emerging growth company status. I'm pleased to report that we delivered another record year as we advanced our efforts to become an ENR top 50 firm.

We achieved our goals of generating double-digit in gross revenue -- double-digit growth in gross revenue, organic net revenue and adjusted EBITDA.

In addition, we increased our capture rate for public contracts with growth of approximately 28%.

We entered 2026 with a record backlog of over $479 million, of which 20% improvement over the prior year.

We strengthened our position in our existing markets through acquisitions, acqui-hires and organic workforce expansion.

Our increasing breadth of services, growing scale and redoubled commitment to relationship building produced new order growth for the year that was particularly strong in Power Utilities, Transportation and Natural Resources, all of which are markets where we are seeing increased durable long-term demand.

Our book-to-burn ratio continues to be over 1x, a level which I'm proud to say we have achieved consistently since our public debut in 2021.

The first quarter of 2026 is so far no exception with sales this quarter outpacing the fourth quarter. With the successful acquisition and integration of several consequential acquisitions during the year and these results as a springboard, I'm confident we are positioned for another breakout year in 2026.

With that, I'll turn the call over to Bruce to review our financial performance in greater detail. Bruce?

Great. Thanks, Gary. I'm going to start with a little off-script nod to Gary in light of his recent announcement. When I came to Bowman in 2013, we were a $50 million company with around 450 employees. Gary's vision of achievement at the time was a diversified $100 million revenue company where people could thrive and grow. For the past 13 years, he's been deliberate in his leadership with a conviction about growth and a steadfast commitment to our culture. So with $490 million in revenue to end the company's 30th anniversary year and 2,500 committed professionals living our values every day, I think it's fair to say Gary is qualified for membership in the overachievers club. On behalf of everyone at Bowman, I want to publicly thank you for all you've done.

That's right, Bruce. Thank you.

Okay. Turning to the fourth quarter and full year 2025. I'm pleased to be here today discussing another breakout year for Bowman. With quarterly gross revenue of $129 million, we've now had 2 consecutive quarters at a revenue run rate of greater than $500 million.

Net service billing, which we use interchangeably with net revenue, was $114.6 million in the quarter, up 16.2% compared to last year. At an 89% net to gross ratio, up 200 basis points over last year, growth was disproportionately achieved through net revenue.

For the full year, gross and net revenue were up 14.9% and 14.5% to $490 million and $434.8 million, while maintaining a net to gross ratio of 89%. We again generated double-digit growth of organic net revenue at 12.4%.

Gross margin for the quarter was 55%, up 190 basis points from last year and 53.4% for the full year, up 120 basis points over last year.

SG&A for the full year was down 250 basis points compared to the prior year.

Combined overhead for the year, in other words, the combination of all labor, both direct and indirect with SG&A, was down 400 basis points compared to the prior year. We believe this reflects an evolving mix of business and the scaling strategy we've been working towards for several years.

Pretax net income for the year was $11.2 million as compared to a loss of $8.9 million in the prior year. Net income was $12.8 million for the full year as compared to $3 million for the prior year.

With issues related to research and experimentation capitalization resolved, tax benefits had a lesser impact on our fourth quarter and the full year results. Moving forward, tax is projected to have a more normalized impact on our statements, including simplifying the calculation of changes in working capital on our operating cash flows, no longer splitting the effect above and within the working capital.

With Section 174 capitalization no longer an issue, it's key to note that we do still benefit from other permanent research and development credits that reduce our effective tax rate and never expire.

We believe the turnaround in pretax GAAP profitability this year is a result of the improved labor utilization, scale and full integration strategy we've been executing to achieve efficiency in operations.

We're pleased to see meaningful increase in EPS, both GAAP-based and adjusted. On a GAAP basis, our basic and diluted EPS of $0.74 and $0.73 were up 300% year-over-year. On an adjusted basis, our basic and diluted EPS of $1.72 and $1.68 were up nearly 40% from the prior year. Holding our share count through buybacks also helped.

With absolute growth in all market verticals this year, we continue to advance our objective of increased revenue diversification. Revenue distribution continued to shift positively in 2025 with Transportation at 21.2%, Power and Utility at 22.4%, Natural Resources at 11.5% and Building Infrastructure down to 44.9%. We expect this trend and trajectory to continue in 2026.

Our geospatial operations continue to be increasingly consequential and represented approximately 26% of 2025's gross revenue as a service that was spread across all markets. In the aggregate, around 30% of total gross revenue was derived from government or public funded work assignments, an area where we expect to continue to grow over the short and long term.

Organic net revenue growth was 11% in the fourth quarter and 12.4% for the full year, excluding [ UP E ], e3i, SOA, Lazen and RPT. Broken down by vertical for the quarter and for the full year, Natural Resources led the way with 29% and 27% growth. Power and Utilities delivered 11% and 13% growth. Transportation grew 6% and 22% and Building Infrastructure was up 9% and 6%. The organic growth rate in Transportation in the fourth quarter was a function of delayed contracting and notices to proceed in Q3 of 2024. While we caught up in Q4 of 2024, the delay created a skewed growth curve for the year. All was well within our Transportation business, and we continue to win consequential new awards. I think it's also worth pointing out the steady increase in organic net revenue growth in Building Infrastructure throughout the year. We're optimistic that this represents a developing trend for that market.

Backlog increased 20% to $479 million on December 31, 2025, up from $399 million at the end of 2024. While every vertical is up, the biggest gainer was Power and Utilities, where we were particularly active with business development and acquisitions. Excluding purchased backlog in place at year-end, the increase was 18.5% at $473 million. Sales of new work after closing an acquisition would not be considered acquired backlog.

In the case of RPT, while we have very strong visibility into projects and schedules, work is released in more frequent phases to keep their forecast high, but their backlog low relative to the overall companies.

Cash from operating activities for the full year increased by nearly 50% to $35.8 million from $24.3 million in the prior year.

Net working capital increases adjusted for the UTP changes represented the equivalent of a roughly 4-month investment in growth revenue. Reducing that investment by 25% through process automation and operational efficiencies could add 7 to 8 percentage points to cash flow conversion. This is high on our to-do list in 2026.

Net debt at the end of the year was $179 million, including the all-cash acquisition of RPT on December 5. Leverage was 2.45x trailing 12 months and 2.06x the midpoint of our 2026 guidance. We expect to increase cash flow from operations during the year to continue to reduce this debt throughout 2026.

On March 3, we executed a third amendment to our credit facility with BofA, TD Bank and PNC to increase the maximum borrowing to $250 million. We increased the facility to ensure we have sufficient access to affordable capital to continue funding investments in organic growth, innovation and efficiency, accretive acquisitions and stock repurchases. As of today, we have available liquidity of approximately $150 million.

During 2025, we periodically repurchased $18.8 million worth of our common stock at an average price of $27.51 per share. We continue to view stock repurchases as a means of addressing liquidity and valuation dislocations as opposed to a commitment to the return of capital.

Assuming market stability and a rational valuation of our equity, our top priorities remain investment in organic and inorganic growth.

We remain steadfast in our commitment to investment in innovation. The BIG Fund, our internal technology incubator, is funding ideas presented by our employees to make impactful investments that advance our capabilities, improve the efficiency of our workforce and decouple revenue growth from headcount growth, increase the value of our services and extend customer engagement.

It's admittedly a tricky time in our industry with respect to innovation and AI. We need to be sure we're prioritizing investments in processes and services relating to deliverables sold at stable values as opposed to efficiencies that merely cannibalize the work of work sold by the unit. We're making significant investments this year in our fleet of geospatial imaging assets, including high-resolution, high-altitude scanners, along with improved capture vehicles, including planes, UAVs, drones and boats, all of which increased collection rates and data processing efficiencies by as much as 30% to 40%.

We continue to integrate the technologies we've developed in-house with tools we purchased in the recent ORCaS acquisition. And we are launching PACK, our Port Asset Conditions Kit, which provides GIS-enabled digital twin-based life cycle asset management to port and marine operators.

As opposed to the traditional Software-as-a-Service subscription model, we've put forward a services powered by software model that engages our integrated digital platforms with customers through a professional services arrangement that combines process automation and professional intervention. As we develop our suite of AI and GIS-enabled tool sets, we believe we're well positioned to monetize the library of assets in our growing digital services and advisory practice into a unique value proposition for our customers and shareholders.

In connection with yesterday's release, we increased our full year 2026 guidance to a range of $495 million to $510 million and an adjusted EBITDA margin of 17% to 17.5%. At an 88% net to gross ratio, this would represent $563 million to $580 million of gross revenue. This increased net revenue guide includes the recent RPT acquisition without contemplating any future acquisitions. At the midpoint of our net revenue guidance, this represents approximately 16% absolute growth over last year.

Pro forma to exclude RPT's 2025 revenue from the basis and from next year -- from this year, we're projecting just over 12% organic net revenue growth.

We expect revenue during the year to again be nonlinear with the first and fourth quarters representing around 47% of net revenue and the second and third to be around 53% of net revenue. This should not be construed as quarterly revenue guidance, but rather as a guideline for relative weighting of the quarters throughout the year.

I'm now going to turn the call over to Dan Swayze, our Chief Operating Officer, who's joining us today to provide insight into the question of where we're winning and why. Dan has been with Bowman for over 3.5 years and has spent 2 decades in senior leadership roles in civil and energy-related engineering. At Bowman, Dan's focus as the Chief Operating Officer is on the management and execution of our portfolio of services across markets. Dan, welcome.

Thank you, Bruce, and good morning, everyone. I know a lot of our team is listening to the call today, and I sincerely thank them for all they do and their commitment to Bowman. I'm very proud of our team.

Today, I'm going to focus on where we are winning in the market and why those wins are becoming increasingly repeatable. In other words, our right to win. Over the past several years, we have been deliberate about building differentiated capabilities in markets where technical depth, geographical reach, capacity, execution consistency and integrated end-to-end ability creates a competitive advantage.

Our acquisition strategy across the country created integrated service delivery teams in our various markets. In our data center and mission-critical practice, we are increasing our win rate by meeting our clients where they are. Data center programs are rarely single service projects. They are multiphase, multiservice opportunities. For example, combining the electrical and mechanical engineering forces from our e3i acquisition, the fire and life safety design services from our Fisher acquisition with our established capabilities in civil planning and engineering, we have a strong service offering our clients can rely on.

Our ability to deliver consistent technical standards across jurisdictions while maintaining strong relationships positions us as a long-term partner rather than a onetime design provider. As major operators continue to deploy capacity into new regions, we are following them into those markets, pairing local engineering knowledge with the strength of our national platform. As a result, we are expanding wallet share and deepening our engagements in a durable growth market. This approach increases client stickiness.

The power utility sector remains a robust market for our organization, spanning electric, oil and gas as well as renewables. Bowman is actively involved in supporting the development and expansion of new power supplies for utilities, addressing the evolving and urgent need for bridging power for data centers and the rapid deployment of compressor stations for the midstream movement of natural gas. The services we provide for our natural gas clients are provided through a combination of several of our acquisitions, including MTX Surveying, RPT Alliance, Excellence Engineering and Birck Engineering.

Our approach leverages a comprehensive suite of services, seamlessly integrating a unique collection of geospatial expertise and equipment with proven engineering solutions to address the evolving needs of our clients. This multiservice end-to-end strategy ensures we can consistently deliver innovative, reliable one-stop shop outcomes across the diverse landscape of our clients' needs.

Being early establishes incumbency and incumbency is an important element to our right to win. Our geospatial engagements often create pull-through opportunities for related engineering and advisory services. Our recent investments in new aircraft and advanced LiDAR sensors directly strengthens our competitive position. These advanced capabilities allow us to support complex infrastructure initiatives, including utility expansion, both in electricity and natural gas, damage assessments, land acquisition, land development and other large-scale public works projects. As an example, we are recently renewed for a 5-year agreement with the U.S. Army Corps of Engineers to provide photogrammetric mapping and related survey services. Being awarded this renewal with this renewed agreement reflects both past performance and technical differentiation.

We're also continuing to build strength in Transportation across the U.S. where our extensive history of timely delivery and our expansive portfolio of creative bridge and highway design create a meaningful competitive opportunity. Our comprehensive transportation services offerings are an amalgamation of our acquisitions of McMahon, Speece Lewis and Exeltech and our legacy teams in Chicago area providing end-to-end solutions. Transportation agencies prioritize demonstrated experience and capacity to deliver on comparable assets. The depth of our expertise and project experience in these regions drives repeated wins.

Across these markets and others we participate in, the pattern is consistent. We win where specialized technical expertise matters. Past performance and incumbency create barriers to entries to our competitors. Our national presence enhances client value and where our integrated geospatial and engineering delivery improve client outcomes. Our operational investments, including workflow modernization, data integration and selective automation using AI and machine learning support these markets by improving throughput and timely delivery of superior outcomes. These investments are in service of a larger objective to strengthen our competitive standing in the market, where we see durable demand and long-term growth potential.

We are not pursuing growth indiscriminately. We are concentrating on efficient use of capital, leveraging our talent and embracing technology in markets where we have established credibility and where our integrated platform creates measurable differentiation and competitive advantage.

The result, we continue to successfully deepen client relationships, enhance our right to win multiservice assignments and strengthen our foundation for sustained revenue growth. Our competitive position in the industry has never been stronger, and our right to win continues to broaden throughout our markets.

With that, I'll turn it over to Gary.

Great. Thanks, Dan. As Bruce mentioned, our focus on execution, organic growth and strategic acquisition was evident in our results. We exited 2025 with strong momentum, some of the best margins in the E&C Group and a backlog that foreshadows another year of double-digit revenue growth.

We enter 2026 with a renewed focus on disciplined growth and continued operational improvement along our service platform. While change in the occupant of the CEO chair is ahead of us, the core of this company, its senior leadership and professional workforce is as intact, cohesive and aligned in its mission. With the exceptional talent we have at every level of this organization, I'm really excited for the future of the company I founded some 30 years ago.

With that, I'll now turn the call back to Becky for questions.

[Operator Instructions]Our first question comes from Aaron Spychalla from Craig-Hallum.

First, maybe on the RPT acquisition. On RPT, can you just maybe talk a little bit about what that brings to your offering, an early read on just how integration is going there and kind of potential synergies within the platform?

Yes. I'll start off with the second part of the question. Actually, integration there is well ahead of any other acquisition that we've done. It's pretty much integrated from an operating and financial perspective. It's on its way from a platform perspective. And so we jumped right on that one because the opportunity is right ahead of us to grow that business in connection with the rest of the components of Bowman. So it's integrated. It really extends our product offering in LNG. I'll let Dan talk for a second about the extension of the LNG and data center product offering.

Yes. If you go back to what we talked about a minute ago and you think about our right to win, RPT's skill set and client reach puts us right into the whole midstream move of natural gas, feeding liquefied natural gas centers and also gives us that opportunity to provide more consulting and engineering services for those building pipelines.

I'll also say we've already been successful in several cross-selling efforts where the combination of services has gotten us into projects that we otherwise probably wouldn't have been necessarily a lead contender for.

All right. And then maybe second on EBITDA margins. Good performance in the quarter, 17.3%. Just thinking about the guidance for 2026, were there anything noteworthy from a driver perspective in the fourth quarter? And what are some of the factors you're incorporating for 2026? And how are you thinking about potential for upside there?

Yes. So again, I think, Aaron, we've demonstrated that margin is not necessarily always consistent throughout the quarters, but that we look at the year as being able to deliver from what was a 16 -- high 16s this year to what we think will be a mid-17s next year.

So it's continuous improvement in margin. It always has to do with the timing of the acquisition of labor relative to the starts of projects. That's our biggest driver of margin in any particular period is the -- how well we time the collection of labor with the realization of revenue.

So I think that we continue to, as we scale, grow margin over overhead. And as we implement better and better workflow processes, automated processes, we optimize labor. And so I think we can increase by another -- we're projecting another 50 to -- 50-plus basis points of margin expansion this year to 80% -- 80 points. And I think those are the key drivers.

Gary, congrats on the retirement and best of luck to everyone moving forward.

Thank you, Aaron.

Our next question comes from Min Cho from Texas Capital Bank.

Congrats on a really strong year. You mentioned that the building segment saw some organic growth this quarter and that there were some developing trends. Can you talk a little bit about just the opportunities that you're seeing there?

So as I put it, we're optimistic that this is a developing trend. I'm not sure we're ready to call it yet. I think one thing that we are expecting to see at some point is a focus on affordability of housing. And we're already seeing it at the state level. You're seeing the requirements for permitting being loosened and stimulus for more affordable housing. That's where we really thrive is in creating supply for builders and for the homebuilding and multifamily market.

So we saw some good positive movement there. It is geographical in nature and some pockets of the country are better at times than others. But we're optimistic that, that's an early indicator of some opportunity for bigger growth in that market again.

Excellent. Got it. Also on Slide 8, you provided some gross margin by verticals. And I was just wondering if you can talk about how that has trended over the last few years. I'm assuming that it's kind of expanded just with the scale that you have. But can you talk a little bit about expectations for 2026 just directionally across the...

I mean you broke up a little bit there. So I think the question was about the gross margins by vertical and expectations on those for the year. I'm going to assume that was the question.

Yes.

And so it's consistent with where we were in the third quarter when we started reporting on gross margin by vertical with Transportation being more of a cost-plus kind of market, but with longer-term commitments and longer engagements that reduce turnover costs there and create stability in workforce. And we think that the other 3 markets continue to have favorable gross margins. And I don't see anything that's going to erode those throughout the course of this year. If anything, processes -- process automations can help to improve those slightly.

And then just finally, your Natural Resources segment obviously had strong organic growth this quarter and in the year. And I don't think Dan spoke too much about that segment. But can you just provide a little more detail about where that demand is coming from, any other -- seeing any green shoots there?

Yes. So in some respect, that's a little bit of the catchall for what doesn't fit into other categories, but it includes environmental, it includes mining, it includes water resources, it includes agricultural imaging and ortho imaging. And it includes land services associated with assisting landowners in acquisition of easements and other rights of way when it's not land acquisition for a power utility or for a road bridge or highway.

So it's a large category for us in terms of the number of things that fit in there, a lot of exciting projects that are developing in that area, particularly with water resources, particularly with high-altitude aerial imaging and in the land services business.

Our next question comes from Andy Wittmann from Baird.

I have a few here. So where do I want to start? I guess I don't know, maybe I'm reading into it too closely, but in your press release, you kind of talked about 2026 being -- I forgot the exact terminology, more of an organic year. Am I reading -- that sounds like a little bit of change. You said in your script here that your priorities are still in organic growth and inorganic growth. And so it just feels like maybe there's a change there. Is there more kind of organic focus in '26 than in the past? And if that is correct, why the change? And it's not -- I don't have a value judgment here. I don't -- this is not to say you should be doing more M&A or not. I'm just kind of curious if there is a change there, why there's a change there.

Andy, this is Gary. There is really -- there's not a fundamental change. We are still committed to inorganic growth. They were a little narrower in our focus of strategic opportunities and moving toward bigger opportunities. So you're seeing maybe less frequent -- certainly less frequent announcements. But we are just as committed to ever to a strong growth of -- a strong combination of inorganic and organic growth.

I think there is an evolving nature of the market that there's opportunity to invest in the expansion of our services through investment in technologies and innovation, and that's all organic. So we continue to be investing in expansion of our capabilities and expansion of the capability of our workforce to generate revenue.

But as Gary said, I think sort of we'll do less frequent small, but still be focused on acquisition and in the meantime, be focused on internal investment in organic growth. But thanks for bringing it up because I think it's an important distinction there.

Absolutely, we want to clarify that.

Yes. Okay. Great. And then, Bruce, in your comments, you talked about some things that are going to be kind of a priority on collecting working capital this year. Could you just elaborate on that a little bit more? It does feel like there is some working capital opportunity, maybe at lots of different places, including your receivables. I just thought it'd be worth checking in here again with those a little bit higher than you've been for a while. What is a realistic goal here for DSOs maybe as we progress here through '26?

Yes. One thing I will point out that we're already so far past in the year. It's hard to remember that at the end of the year, there was a government shutdown, and that did slow collection on a portion of our receivables, not because they weren't collectible, but just because getting them processed was slower in a portion of our business. So I think there's a little bit of extension of receivables from that artificial impact.

Getting -- working capital is an important focus for us, certainly, getting work to be billable, not necessarily that we aren't earning it, but getting it to the point of billing and collecting it is something that we're working towards narrowing down. And so I think reducing, let's say, work in process, which is a component of working capital will be a focus this year. And we're always working on collections, Andy. It's one of the great challenges that never seems to completely get solved. But between that, between the -- we had a -- we implemented a new -- not a new -- we upgraded our ERP system throughout in 2025, and we think that will help facilitate the process of processing work.

To follow on Bruce's point, I always work on the collections, the 31-some years, it's in our DNA. We have to keep the cash flowing.

Okay. My next few here are maybe just kind of more kind of model focused or some of these are kind of important. So Bruce, you talked about a more normalized tax rate. Are you still -- what is the effective tax rate that you think is applicable here in '26?

Yes. I would say that it is based on our statutory less our R&D credits, it's somewhere in that high teen, 20% kind of range.

Okay. Great. And then just -- this is really myopic, but I think notable in 2025 that's the total -- that's the number that we should use basically on the company's income statement, it's high teens, low 20s.

Yes.

Yes. Is that correct?

Yes.

Okay. So I was looking back at 2025 and the margin progression for 2020 -- I'm sorry, you're trying to say something. Go ahead.

No, go ahead.

Sorry to chime in. Okay. So the second quarter net adjusted EBITDA margin was higher than the third quarter adjusted EBITDA margin in 2025. That's usually for companies like yours, the third quarter margin is higher than the second quarter.

So I guess my question is as we -- you talked about revenue seasonality in your prepared remarks. But just on this one specifically, it feels like I want to put the higher margin in the third quarter than the second quarter. Am I thinking about that correctly? Or is there a reason that, that pattern from last year would repeat again here in '26?

No, I don't think it's necessarily a repeatable pattern from last year. I think we had some -- we talked about it in the second quarter of last year. There were a few exceptional items that sort of hit on all cylinders. I think that -- I wouldn't necessarily say that, that is indicative of our -- of a pattern permanently.

Okay. I just wanted to make sure. Trying to think if there's anything else here. Okay. I think I'm good there.

Our next question comes from Tomo Sano from JPMorgan.

And Gary, although we have only recently met, I would like to express our respect and appreciation for your leadership and culture as you prepare for your retirement.

Thank you, Tomo. It's very kind.

So I'd like to kick off. You raised your 2026 net revenue guidance to $495 million to $510 million. And which segments or projects are driving these upward revisions? And are you currently $479 million backlog? What proportion do you expect to convert to revenue in 2026, please?

Generally speaking, Tomo, we turn somewhere between 70% and 80% of backlog in a year -- in a 12-month period. So it gets a little longer, sometimes it gets a little shorter. But generally speaking, we think of 70% to 80% of backlog in any moment has a 12-month tail to it.

In terms of where we think we're going to continue to see growth, obviously, power is an area that we expect to contribute to the growth year-over-year. A big chunk of that guidance increase was from the acquisition of RPT that happened after last -- after third quarter's conference call. So that's all power related in that bit of the increase. The rest of it is between natural resources and...

Transportation.

And transportation.

And a follow-up on upcoming CEO transitions. Could you talk about how you're ensuring management stabilities and continuities? And are there any qualitative KPIs or targets related to successions and strategic continuity, please?

We have effective communication. We are doing retention -- economic retention packages for some key people and really the communication of the continuation of our culture. So a qualitative view of success in the succession is certainly retention of our key staff, retention of our leadership and continued forward execution of our strategic plan.

Yes. We've got 2,500 people who depend on the continued success of this company every day, and we take that responsibility very seriously. And the Board takes that responsibility very seriously. And so we are all wholly committed to the long-term success of this. We're all invested in the long-term success of this company and in the -- in seeing this through without any disruption in service to our customers, in service to our employees and in value generation to our shareholders.

I'll also follow up there, Tomo. As a member of the Board, I'm not on the search and selection committee, but certainly, I have input. But I would not have made this move if I didn't have great confidence in the Board getting this right, both for the legacy, my legacy, candidly, personal legacy and my personal economics. I'm still the largest shareholder -- single shareholder in the company, and I tend to continue to own a tremendous amount of the stock in the long run. So I have a real vested interest in the success.

Our next question comes from Liam Burke from B. Riley Securities.

Gary, congratulations on your retirement.

Thank you, Liam.

When you reached critical mass here on the front end of the infrastructure projects, is there -- has there been any push -- competitive pushback from some of the larger specialty contractors that are looking to move into your space since it is probably the most profitable piece of the project?

Are you talking about in the power space or just -- sorry, infrastructure at large, Liam? Power space?

Let's go on the infrastructure at large.

Yes. There's a real line of distinction in the industry between, I'd say, the construction companies. I think that's what you're asking about and the engineering firms and there's a collegial relationship between -- we've not felt threatened. Dan, you can tell if you felt it from the ground up from, let's say, specialty construction contractors trying to make their way into the engineering world.

No. In some cases, we're working for those contractors. So it's not really a threat that we see.

Yes. If anything I'd say it's drawn the other way is that there's such a resource constraint in this space that it's an all-hands-on-deck kind of mindset. And there are functions of the construction process that the specialty contractors need help with, right? The equipment providers, the GCs need help. There's no effort to share risk on that part of the process, but there is an effort to bring in help.

Okay. Fair enough. Across the board, you had good growth across all your business segments. Is there -- do you see any pockets of weakness? Or is it just your diversification to be able to move right past it?

Right now, I would say that there are no pockets of weakness. There's no negative connotation in any of the markets or segments. Obviously, we're keeping an eye on the growth rate of the building infrastructure space. It's still our biggest, it's still continuing to grow, and we have hopes for it to accelerate. And so I wouldn't characterize it as weakness. It's -- that's -- it's getting attention from us to make sure that we keep our staffing right and all of our overhead right for that group. But on the others, it's -- as I use the same phrase, it's an all hands-on-deck effort to try to keep up with power and transportation and other resources.

The good news, Liam, as we've talked about is that in our workforce, it's very fungible across the 4 markets. So we don't have silos of workforce that are only able to do one thing. The base of our labor pyramid really is very cross-disciplined and cross-market capable. And so we focus on that kind of business model deliberately.

Our next question comes from Jeff Martin from ROTH Capital Partners.

Bruce and Gary, I wonder if you could touch on RPT. I know that they were constrained for growth, and you've owned it roughly 3 months now. Just curious how much you've been able to staff up for RPT during the initial 3 months and maybe give us a glimpse at what your hiring plans for that business in particular as well as touch on just general availability of labor and ability to staff up in front of larger contracts in general.

This is Gary. I'll jump in. As we were doing our due diligence on RPT and certainly part of the attraction is all the opportunities in the space that they are in. And they're being down as a single office operation in Houston, being in Houston, there are pockets of the oil and gas industry that are -- especially the oil industry, maybe up until this past week that have been soft, and it's been a good availability of labor down there. So we've found the ability for the RPT group to staff up as flexible as any of our pieces of business.

I think it's been also them becoming part of a much larger organization has given them access to staffing that has availability of utilization as well. So we've tamped down the shortage by adding capacity from our system.

The other thing that we've been doing a lot of now is in-sourcing things that they used to outsource. And so we're finding they're using survey. They're using our fire protection. They're using our mechanical, and we're grabbing -- essentially, we're grabbing more work from their clients, which is, again, putting a little more stress on the need for people. But it's what we do for a living is making sure that we can meet the needs -- meet demand with supply.

Great. I wanted to touch on geospatial. You mentioned that's roughly 20 -- I think, 26%, 24% of your net revenue. It sounds like you're making investments, further investments in geospatial. Maybe you could elaborate kind of some of the general demand trends you're seeing there? And if you could also touch on the competitive dynamic for geospatial, that would be helpful.

Jeff, geospatial is pretty much at the core of everything that we do. A lot of the work we do originates with imaging. It processes through imaging and utilizes survey and scanning and 3-dimensional iteration throughout the life cycle of the asset. So we don't think of it as a vertical because it's a service that really supports every bit of business that we do kind of at the epicenter of our services portfolio. So we are making investments in that space because it's evolving so quickly. And those that are ahead have distinct advantages and geospatial is one of those service lines that creates, as Dan mentioned, incumbency.

And incumbency is such a valuable asset in the life cycle of asset work. So we're buying high-resolution scanners. We're buying imaging technology that does underwater LiDAR. We're buying vehicles that collect data, whether that's from the air, from the water. We're improving the operational efficiency of our high-altitude fleet, which spends a lot of time, let's say, chasing weather. And if we can shorten the chase, we get more productivity out of it, and there's plenty of work to be done there. So geospatial is -- we think it is really a critical part of the overall product we deliver. And so we want to be a leader in our fleet.

Great. And could you tie that into your CapEx and property and equipment acquired under capital lease projections or estimates for this?

It's generally included -- I mean it's included in that bucket. We may -- again, we sort of talk about an average of 3%, 4% spending on CapEx. Episodically, it may be a little bit higher and a little bit lower in years. This may be one of the little bit higher years as we continue to improve that fleet. But as revenue is growing, you absorb that CapEx from a percentage perspective as well. So I don't think it's going to, in any way, put it off the charts, but it could pop at a point or so this year. But then these are long-lived assets. So you buy them in one year, they last for several years.

And Gary, congratulations on your retirement.

Thank you, Jeff.

Jeff, look forward to seeing you guys in a couple of weeks.

Our next question comes from Sherif El-Sabbahy from Bank of America.

This is Nandita Nayar on for Sherif. Awesome. So just on the -- just quickly on the full year guide, guys. You raised the net revenues for the full year, but the EBITDA guide was maintained. Just -- could you just talk about the margin profile maybe of like recent acquisitions like RPT? Does it come at like lower margins with other cost optimization measures in the business holding margins steady at like 17%, 17.5%? Or on the flip side, is it slightly accretive? And are there other temporary investments in the business that we should be aware of that's holding margins back a little bit?

Yes. So I'm not sure I'd characterize it as holding margins back in the sense that, look, we continue to grow margin. We're growing it. We're committing to grow it another half -- 50 -- 50-plus basis points during the year. So we're very much focused on expanding margin over time.

RPT is a high-margin business. But again, as a percentage of our overall business, even being a significantly higher margin business doesn't necessarily drag the whole business along from a margin perspective. We think that being able to get 17.5% margin is pretty high bar for the industry. And I think that as you asked about contributors to that, certainly, sort of this concept that we introduced about decoupling revenue growth from headcount growth doesn't mean shrinking your workforce but it means growing revenue faster than you grow workforce, and that increases margin. And that's from the tools that we're employing and investing in as sort of one of the earlier questions about organic investment and investing in these processes and service line expansions, we think will add margin over time.

We've talked about that. We believe that this is a high teens margin business without innovation and an even higher one with, and it's a journey that we continue to be on.

That's helpful. And also guys, net leverage is, I think, around you mentioned 1.9x higher than historical levels. Just could you remind us of your target range again? And I believe like historically, it's been around, I think, 0.8x on average. Could we see leverage structurally closer maybe like to the high end of your range for like a certain period of time as Bowman kind of gets more acquisitive? Or is there a plan to delever to historical levels over the near to medium term?

Yes. So we've typically been in the 1.5x kind of range, the mid-1s. We made this acquisition of RPT on December 5. So didn't get any of the benefit at year-end for any of the EBITDA from that acquisition, but had all the leverage on our balance sheet. When we look ahead, it's about on a pro forma basis, about 2x. That's before we start paying that down with cash flow that we'll generate from this year. So we hit 50% cash flow generation this year. We think that's going to continue to improve. So at an EBITDA of -- in the 17s margin on $500 million of revenue, there's going to be a good deal of cash flow to be used to pay that down.

Now we'll continue to be growth oriented. And to the extent that we identify another acquisition, we would certainly -- there could be additional leverage from it, but there will also be a significant amount of EBITDA from it. So I think that you'll see us structurally trying to achieve a below 2x, keep it in that 1.5x to 2x range, which has been our sort of our target. But we've been consistent that episodically, we will be higher as we invest in growth.

Got it. And just lastly, on the $25 million BIG Fund, could you just give us a sense of how much has been committed versus funded, just kind of the runway there?

Yes. So I would say that we're roughly about halfway into it in terms of committed. That doesn't mean it's all been expended. There's a lot of proof of concept, a lot of proof of returns and a lot of other factors to -- that over the next 12 to 18 months, we would fund the projects that have come forward. Some of it is the investment in assets in geospatial that will facilitate some of these additional services. But I'd say we're about halfway into ideas that would be funded.

Okay. Perfect. That's great color. And Gary, congrats.

Thanks, Nandita.

Thank you. As we have no further questions on the line, I will now hand back to Gary Bowman for final comments.

Thanks, Becky. Well, thanks for everybody for joining us on the call today. We're very pleased with where we're at, pleased with the prospects for the year. And thanks certainly to all the employees and to our investors for all the faith that you put into us. Have a great day, everyone.

Thank you. This concludes today's call. You may now disconnect your lines.

Good morning. My name is Jasmine, and I will be the conference operator today. At this time, I would like to welcome everyone to the Bowman Consulting Third Quarter 2025 Conference Call. [Operator Instructions]

Please note that many of the comments made today are considered forward-looking statements under federal securities laws. As described in the company's filing with the SEC, these statements are subject to numerous risks and uncertainties that could cause future results to differ from those expressed, and the company is not obligated to publicly update or revise these forward-looking statements.

In addition, on today's call, the company will discuss certain non-GAAP financial information such as adjusted EBITDA, adjusted net income and net servicing billing. You can find this information together with the reconciliations to the most directly comparable GAAP information in the company's earnings press release filed with the SEC on the company's Investor Relations website at investors.bowman.com.

Management will deliver prepared remarks, after which they will take questions from research analysts. Replay for the call will be available on the company's Investor Relations website.

Mr. Bowman, you may begin your prepared remarks.

Thank you, Jasmine. Good morning, everyone. Thank you for joining our third quarter earnings call. Bruce Labovitz, our CFO, is here with me this morning.

I'm going to start today's call with a welcome to all new Bowman employees who joined us this quarter. After my introductory remarks, I'll turn the call over to Bruce, who will cover our financial performance. I'll then end the call with closing statements before opening it to Q&A.

Turn to Slide 3. The third quarter marked an important milestone in our continued evolution. For the first time, we surpassed a $500 million annualized gross revenue pace. This is a meaningful achievement, and the fact that we are ahead of schedule on this milestone, demonstrates both the strength of our business model and the capabilities of our skilled team of professionals.

For the third quarter, we delivered 11% year-over-year growth in both gross and net revenue and a 7.6% growth in adjusted EBITDA while maintaining healthy cash flow generation and a solid balance sheet.

Our net revenue for the quarter was $112 million and was supported by strong activity in transportation and power and utilities and energy. Together, these end markets grew over 20% during the quarter and account for more than 40% of our top line.

Importantly, our backlog grew nearly 18% year-over-year to $448 million. This sustained growth reflects continued demand across our end markets. Our book-to-bill ratio continues to be above 1, a clear indicator of the momentum we are seeing as we head toward the end of 2025 and into 2026. In fact, bookings in the fourth quarter are once again outpacing the prior quarter.

We've worked hard over the past year to regain our footing, and I'm proud to report that today we are a larger, more efficient, and more resilient organization than ever before. Our growing base of recurring public sector work and a solid foundation of private demand positions us well for the years ahead.

With that, I'm going to turn the call over to Bruce to review the financials in more detail. Bruce?

Great. Thank you, Gary, and good morning, everyone. While the third quarter marked an important milestone for Bowman in terms of reaching the $500 million annualized gross revenue rate, it also represents our achievement of 2 basic commitments we made to our shareholders this time last year, to prioritize GAAP profitability and to improve our conversion of earnings to cash.

This year, we've been hypervigilant about delivering on these 2 basic commitments because unlike political, macroeconomic and labor market uncertainties, these are outcomes we control. We're pleased to have delivered on these commitments.

For the third quarter and the 9 months ending September 30, we dramatically increased GAAP net income to $6.6 million and $10.9 million, respectively, compared to net income of $700,000 (sic) [ $800,000 ] and a loss of $2.9 million for the same period last year.

Concurrently, we more than doubled our cash flow from operations to $26.5 million from $12.4 million, affirming the capital efficiency of our effort. We achieved this improved performance in part through consistent and sequential growth in billed revenue throughout this year with an 11% year-over-year increase in net revenue in the third quarter with no erosion of our net to gross ratio.

Organic net revenue, which excludes revenue from acquisitions closed after September 30, 2024, grew 6.6% for the third quarter and now stands at approximately 11% through 9 months. Also contributing to our improved profitability was our ability to achieve the benefits of scale with revenue growth rates that outpace overhead growth rates.

To that end, as revenue grew year-over-year, total overhead, we define as COGS and SG&A, was down 290 basis points as a percentage of net revenue for the quarter at 89.5% and down 500 basis points for the 9 months at 89%. This disciplined approach to overhead growth will be a significant contributor to sustained positive GAAP earnings and an industry-leading margin profile.

Turning to some non-GAAP metrics. Adjusted EBITDA in the quarter increased by 8% to $18.3 million, representing a 16.3% margin on net revenue with adjusted EPS of $0.61, doubling Q3 2024. Through 9 months, adjusted EBITDA is up nearly 25% to $53 million and a margin of 16.6% on net revenue, a 150 basis point year-over-year expansion with adjusted EPS of $1.26, again, doubling adjusted EPS in the same period last year.

Absolute growth in revenue was broad-based with Transportation up 20%, Power, Utilities and Energy up 17% and Building Infrastructure up 8%. Natural Resources & Imaging, to which we allocated all Surdex related manned aerial and high-resolution mapping revenue last year saw a slight decline as we now allocate that revenue in a more deliberate manner across verticals.

On an organic basis, Building Infrastructure grew 6%, Transportation grew 10%, Power and Utilities grew 13% and Natural Resources & Imaging grew around 1%.

In previous quarterly calls, we've been asked about the relative gross margins of our primary verticals. We've suggested we believe they are relatively equal apart from Transportation, which has a lower contribution margin based on the nature of its primarily cost-plus contracts.

To corroborate this assertion, we calculated the gross margin of each vertical for the third quarter, during which gross margin was 53% and concluded that our representation was accurate. During the quarter, gross margins by vertical were 56% for both Building Infrastructure and Power and Utilities, 57% for Natural Resources & Imaging and 46% for Transportation.

With Building Infrastructure, gross margin is benefited by more fixed fee contracting. With Natural Resources & Imaging, gross margin is advantaged from a disproportionate use of labor leveraging technology. With Transportation, we enjoy meaningfully longer and larger government contracts that have lower labor multipliers, but generally generate higher utilizations and overhead leverage along with lower turnover costs. We will include this gross margin analysis in our quarterly presentations going forward.

We ended the quarter with a record $448 million backlog, up 18% year-over-year, with 38% of that backlog from Building Infrastructure, 30% for Transportation, 23% from Power and Utilities and 9% from Natural Resources & Imaging. This imbalance relative to revenue should indicate continuing diversification of our revenue mix, but it's likely not as dramatic as the percentages in backlog today reflect.

Operating cash flow totaled $10.2 million for the quarter and sits at $26.5 million year-to-date, both more than twice last year's levels. While we are pleased with this significant increase in conversion, we're confident there is room for continuing improvement.

Our balance sheet remains a strength and provides a solid foundation for growth. We ended the quarter with $16 million in cash and $57 million drawn on our revolver and net debt of approximately $105 million with a net leverage ratio of 1.5x trailing 12 months adjusted EBITDA.

After quarter end, we expanded our revolver to $210 million from $140 million, adding PNC Bank to the existing Bank of America and TD Bank syndicate. As a result, we have roughly $150 million in available liquidity for investment in growth initiatives.

Our internal innovation incubator, the BIG Fund, continues to produce high-value ideas and opportunities that present the prospect of tangible returns for us long term. We're actively engaged in advancing concepts that accelerate revenue growth through the deployment of proprietary AI-enabled asset control kits, which extend engagement with clients throughout the asset lifecycle.

With concepts that expand the application of the proprietary technology tools we acquired in the recent ORCaS acquisition, which drastically reduced the time it takes to perform repetitive feasibility and planning functions, thereby unlocking additional labor utilization.

Also concepts that connect all Bowman operating systems and platforms with AI-enabled capabilities, which empower employees to ask Bowman plain English questions, the timely informed answers to which improved business acquisition efforts and streamline proposal generation, estimation and profitable project execution.

Lastly, we're working on ideas that modify, extend and evolve the inherent capabilities and uses of our high-end geospatial assets to expand their applications, improve the quality of capture, extend revenue opportunities, shorten delivery times and increase return on investment.

All investments in innovation are measured against defined return thresholds, ensuring innovation spending meets the same rigorous financial discipline as acquisitions. To date, we have expended a little bit over $300,000 on advancing these ideas, the cost of which are not added back to adjusted EBITDA and the benefits of which are not yet contemplated in our current projections.

And while not a BIG Fund project, we also completed the upgrade of our accounting and enterprise management platform this quarter, an effort that consumed a meaningful amount of time and energy, but will be a solid foundation for our next phase of growth. These costs will likewise not add back to adjusted EBITDA.

It wouldn't be an earnings call if I didn't reference tax, so here it goes. Following enactment of OB3, we filed method change notifications with the IRS that allowed us to unwind our uncertain tax position with retroactive audit protection. The change in law and associated adoption by Bowman of the new standards released approximately $52 million of deferred tax assets and other non-current liabilities on our balance sheet and released $3.5 million in P&I accruals, which had previously run through the tax expense.

In addition to committing to GAAP profitability and cash flow conversion, we also committed to the reduction of non-cash stock compensation as a percentage of revenue. For the first 9 months of 2025, stock-based compensation totaled $14.2 million or 4.4% of net service billing, down from 7.3% a year earlier. Excluding about $1 million of pre-IPO related issuances, adjusted stock-based compensation was approximately 4.1% of net revenue.

As we've discussed in the past, these pre-IPO grant expenses represent the run out of GAAP costs related to awards issued prior to our IPO in 2021 and are not part of normalized long-term incentive costs. We expect total non-cash stock compensation for 2025 and '26 to be roughly $19 million and $20.5 million, respectively, which is consistent with our pledge to reduce equity compensation as a percentage of revenue while balancing its benefits for recruiting, retention and efficient capital allocation.

Thank you for your continued confidence in Bowman. With that, I'll turn the call back over to Gary.

Okay. Thank you, Bruce. As Bruce mentioned, our improved profitability and working capital management once again drove strong cash flow this quarter, with cash conversion now at about 50% year-to-date. Our margins and cash efficiency place us solidly in line with the best performing firms in the E&C space.

Now let me take a few minutes to share a summary of our market performance and outlook as we move into 2026. Transportation remains one of our most stable and resilient end markets, delivering double-digit growth year-to-date. Our expanding client base spans a broader range of state and municipal transportation agencies than ever before.

We're deeply engaged across state DOT programs and large local agencies throughout the Pacific Northwest, Midwest and East Coast, where our teams are supporting multiyear bridge, roadway and multimodal infrastructure programs.

Our long-standing relationship with DOTs continue to be a key competitive advantage, creating recurring opportunities as agencies seek partners with both specialized technical expertise and the capacity to scale across geographies.

We currently have strong bridge and roadway pipelines with backlog visibility through 2026. We continue to benefit from recurring construction management and inspection programs with multiple state agencies, including a major multiyear assignment with Illinois.

Our ports and harbors practice, which is part of our Transportation segment, continues to gain momentum with coastal and port authorities, extending our reach into critical intermodal and maritime infrastructure projects in regions, including Houston, Philadelphia and the Pacific Northwest. We have a growing active backlog in ports and harbors with anticipated wins continuing through 2026 in existing and new geographies.

Overall, we expect transportation to maintain steady, healthy growth. Less than 25% of IIJA funds have been released so far for permitted transportation projects, which we believe, coupled with state programs, ensures multiyear nationwide demand runway. We expect transportation will continue to provide the backbone of stability and recurring revenue across our portfolio.

Our Power, Utilities & Energy division continues to be our fastest-growing market, up 38% year-over-year and driven by national investment in electrification, renewables, grid modernization and data infrastructure.

The recent acquisitions of Sierra Overhead Analytics, ORCaS and Lazen Power Engineering significantly enhance our strategic positioning within this high-growth market. Sierra and its affiliate ORCaS, expand our capabilities in technology-enabled engineering, adding automation, precision mapping, hydrology and optimization tools that improve project delivery and efficiency across renewable energy, data center, and utility scale infrastructure design. These digital solutions strengthen our ability to provide faster, smarter and more cost-efficient design workflows to clients in the power and energy transition space.

The addition of Lazen establishes our platform in high-voltage overhead transmission line design, immediately positioning us to compete in one of the fastest-growing recurring revenue segments of the power industry. Lazen's expertise enhances our credentials with major utilities and transportation operators, transmission operators, while complementing our advanced geospatial and aerial imaging services for power corridor mapping.

Together, these acquisitions broaden our reach across the generation to grid continuum, connecting our existing strengths in site design, renewables and data centers with the infrastructure that delivers power across the U.S.

Looking forward, Power, Utilities & Energy represent a long-term growth engine for us. We expect continued revenue and margin expansion in 2026 as integration matures, our national footprint expands and our clients increasingly turn to us for end-to-end power infrastructure solutions.

Our well-balanced Building Infrastructure business grew by just over 8% year-over-year in gross revenue, reflecting solid execution in public and mixed-use work that continues to balance softer conditions in the residential space.

While some private development remains slightly constrained by interest rates, we see clear rebound potential emerging in mid- to late 2026 as financing conditions improve. Our current Building Infrastructure projects continue to generate long-term revenue visibility through 2027, and we remain well positioned to capture renewed private sector growth as market conditions improve.

Our Natural Resources & Imaging segment remains a steady performer and margin stabilizer, representing roughly 11% of our net service revenue. We have robust visibility into 2026 in this market, supported by recurring federal programs and strong municipal demand in water, environmental and geospatial services.

Automation and recurring federal mapping programs will continue to underpin growth in this segment, and our geospatial and remote sensing services continue to enhance efficiency across our broader business. Operating margins in this market remain among the highest company-wide, and we expect growth to be driven by technology-enabled delivery and long-term public sector funding.

Now I'd like to address the current operating environment, which includes the government shutdown. While the shutdown is causing some delays in project progression, invoicing collections within select federally supported programs and federally adjacent projects, our direct exposure to federal contracts remains limited, and we are not experiencing any unusual cancellation activity.

Most of our public sector work is performed for state and local governments, which provide a natural buffer to extended interruptions such as the current government shutdown. We continue to monitor this particular situation closely, noting that the longer the shutdown continues, the more likely it is to extend near-term revenue somewhat further into the future.

Looking ahead, our focus remains clear. We'll continue to convert backlog into revenue while improving utilization and project delivery efficiency. We will aggressively leverage technology and innovation to enhance margins and scalability, and we'll deploy capital strategically through disciplined M&A and organic growth derived from continued investment in people and systems.

We're reaffirming our full year 2025 guidance. We're also initiating 2026 guidance of net revenue between $465 million and $480 million and an adjusted EBITDA margin between 17% and 17.5%.

With that, I'll now turn the call back to Jasmine for questions.

[Operator Instructions] Our first question comes from Laura Maher with B. Riley Securities.

So some of the larger specialty contractors have mentioned total solutions packages. Do you see this creating competitive pressure in your data center business?

No, I don't think that that's going to impede on any of the work that we do. I think it's similar to any trends in design build or that don't necessarily compete with other industries. I think it's a big market. And even when firms offer complete solutions, they end up subcontracting a good portion of that to specialized contractors like us anyway. So I don't think that's a real threat.

I agree with that.

And then one more. On M&A, are there specific service lines or regions where you still see gaps relative to your growth objectives?

Yes. We're really focused on some of these markets that we've been focused on expanding into for years now, especially transportation, certainly power and energy and data centers and also water-related opportunities as they come along. No specific regions we're focused on. We find the, I'd say, usual suspects appealing Texas, California, the Southeast, but we're not particularly focused on any particular region in the U.S.

It's more service line and skill set focused than it is geographically focused.

Our next question comes from Andy Wittmann with Baird.

I guess I'll start with some top line questions here. It looks like the fourth quarter guidance here for '25 is implying a bit of a revenue acceleration to something in the double digits. So I think that's right. Bruce, I was just wondering if you could comment on which end markets you think will pick up the growth rate here as you move into fourth quarter and what gives you confidence in that?

Yes. The pick up is a couple of days' worth of work. It's not -- I don't know that I would necessarily say it's anything extraordinary. We think that across the board, we've got a healthy backlog of work that's making its way through. Sales are strong and a lot of the sales have been strong in what we consider to be shorter-term turn contracts, areas we can earn revenue relatively quickly. So we have a good sense that with what would be a couple of days' worth of improvement in the fourth quarter, we can grow revenue.

A couple -- sorry, Bruce, the idea of a couple, you're saying there's more work days in the fourth quarter of [ '20 ]?

No, I'm just saying that we have -- it's -- the amount of revenue that is to be accelerated is the equivalent of just a couple of days' worth of work. So a couple of improved utilization weeks here and there.

Got it. That makes sense.

Yes. We don't do the days of the quarter game. Like we -- quarters do have extra days and more holidays, but we really just think of them as quarters.

Yes. That's what I thought. That's why when you were talking about days' worth of work, I was trying to make sure that -- basically you're saying get a little bit more utilization out of the people. And what's really great about that, that accrues to the margins even better. So got it. So that makes sense.

And then I guess just kind of related to that, in the performance in the third quarter, I thought I'd ask a little bit about margins there, too. And your business mix is changing a lot as you've been diversifying. So I just was wondering -- and maybe I missed a little bit of the comments at the early part of the conference call, but did you comment on the margins? I guess they were down slightly year-over-year. Was that like investments in growth? Was that utilization rates? Was that mix? Every quarter is kind of its own thing, but I wanted to try to understand that a little bit better as it compared to the prior year.

Yes. I think, Andy, every year, as you said, every quarter is a little bit different. We talk about how we time labor sometimes can impact margins. You have to prepare for what's coming next. And so sometimes we'll get a little bit heavy on labor in a quarter in anticipation of stronger growth in the next quarter.

We are not downsizing labor at the moment, contrary to employment reports that have come out. We're in the hiring game. And so when labor becomes available, we take it. The margin change, there is a couple of hundred thousand dollars' worth of revenue on this fixed set of labor. So we talk about our bands today is a 16% to 18% margin. We'll fall in there between periods. And so I don't think there's anything to read into a 40 basis point change between last year and this year in margin.

And then I guess there's a similar question that just happened since you gave us initial guidance for '26. Your margins are either up a little or up a little bit more to the 17% to 17.5% range. Obviously, this is, I think, a good year to be able to get the margins up there. And I was just wondering kind of what the knobs are to get you there next year. You talked about the overhead leverage. I have to imagine that's a big part of it.

But what other things? Is mix in your favor? Maybe, Bruce, why don't you just kind of fill us into what do you think is going to drive the year-over-year margin expansion in '26?

Yes. In large part, I think it is improved overhead leverage, right? We continue to be very focused on growing revenue faster than we grow overhead. And so there's additional margin expansion to be had from that. There's also improved utilization of our labor. As we look at next year and we look at the mix of work, we think we can do it at a slightly higher revenue factor, which is our internal measurement of the efficiency of our labor. And so we gain a little bit of margin, which is somewhat embedded in that total overhead when you think about it, because we kind of combine those -- that together. But it's really a combination of the way we are utilizing geospatial technologies and technologies that exist today to advance the efficiency of the workforce and grow revenue quicker than we're growing overhead.

Our next question comes from Alex Rygiel with Texas Capital.

Very nice quarter there. As it relates to data centers, can you talk a bit about bidding opportunities and how you see that progressing sort of in 2026 versus maybe 2025 and 2024? Are you seeing the sort of bidding opportunities or new project opportunities to be greater than the prior year? Or is the average project or contract size kind of greater than they have been in the past year? Just a little bit of color on that.

Yes. Alex, it's certainly tailwinds in that market. So there are continuing greater number of opportunities. The facilities are getting larger. Really as the data centers, we've spoken to this is, with AI as opposed to before the lack of being critical to be located proximate to fiber just provides a lot more opportunities for data centers spread out across the country. We're seeing lots of drivers to locate data centers near natural gas to power them. And our acquisition of e3i, as an example, just has expanded our network. So that in itself expands our opportunities.

I think Alex, the other thing that's -- that data centers have become the hot ticket item for landowners. And so to some extent, there's a little bit of a phantom amount of data center work that occurs within our Building Infrastructure portfolio. Because when landowners come to us and say, what are the options -- we want our project to be a data center, right? Because everybody wants their project now to be a data center.

There's feasibility work we do within that Building Infrastructure segment related to data centers. But until it becomes a data center, it doesn't really become part of the kind of what we call the data center portfolio of revenue. So there's a little bit of -- because there's an increased availability of opportunity for lands to be data center, there's more activity in it.

And to take that another step, clearly, landowners in the past have seen sort of solar as being a big opportunity. How do you see your solar business right now and sort of as we think about the next 1 to 2 years?

For the next year, we're seeing it very strong. It's really being driven by the, I guess, a moment in the tax credits next year that's driving a lot of demand to accelerate planning of projects to get a critical mass of the project done before the middle of next year. So we see it very strong in 2026, certainly likely to taper off in 2027, but we're well positioned in that market and the development of solar projects is not going to go away. So we see a very strong 2026, cautious outlook after that.

And then lastly, your M&A activity this year has been, I don't know, a little bit slower than the last few years. Any comment on that and how we can think about M&A activity in 2026?

We're still committed to M&A. We got a strong pipeline of opportunities. I think we've shifted maybe more focus of our M&A to really focus on strategic opportunities. And certainly, with the new revolver in place and that dry powder really positions us for some strong M&A activity towards the end of this year and certainly into 2027. So we're still fully committed to inorganic growth to supplement our organic growth.

Our next question comes from Aaron Spychalla with Craig-Hallum.

Maybe first on Building Infrastructure. Can you kind of talk about how you're thinking about growth in that segment in 2026? It sounds like there's some crosscurrents between some of the subareas. And just maybe talk about your ability to kind of move labor kind of as projects kind of ebb and flow in that segment.

Well, the -- nice thing about our business is the skill set that we apply to Building Infrastructure is transferable to many of our other markets. So we do move that labor around readily. We're seeing with the interest rate decline, we're seeing projects come off the shelf earlier in the year and was a little more localized geographically.

As we come into the end of the year here, we're seeing it more broadly across the geographies that we're located in. So we're probably looking at in 2026, maybe as we allocate labor, I would bet the directionality would be some labor allocated toward the Building Infrastructure as opposed to away from it.

All right. And then maybe on OpEx, just -- there was an earlier question, but kind of a pickup in SG&A this quarter. Is there some kind of allocation of projects and timing there? Is that kind of in advance of growth moving forward or just opportunistic? Maybe just a little bit of color on that.

Yes. One of the reasons we talk -- we try to talk about total overhead as opposed to the SG&A relative to COGS is that our labor and operations, depending on utilization will be allocated a little bit more towards COGS or a little bit more towards SG&A in any given period depending on the proportion of direct and indirect labor.

I wouldn't say there's anything consequential that's really driven SG&A higher. It's going to grow as we grow. The question is can we meter it at a lower pace than revenues growing. So I really look at it as the overall all-in is down as a percentage of revenue, and that's really what we're focused on.

And then just maybe one last one. I mean, on labor, how are you feeling about availability there as you grow the business moving forward?

We have a very aggressive talent acquisition group. So it's a labor challenged market. I mean, in a good way, there's a challenge to find staff, but they're out there. And we have a good machine to recruit, onboard them. So it's -- we're well positioned to bring all the labor that we need.

And actually it's why we are so focused on developing labor leveraging innovation within the organization, not to shrink the labor pool, but to not have to grow it as dramatically as otherwise.

Our next question comes from Jeff Martin with ROTH Capital Partners.

I wanted to dive into a specific segment of the backlog. If you look at power and utilities, it looks like it's on a trajectory to double from where it was in the middle of 2024. Where are you seeing the strongest backlog growth there? And is this the segment that you're most focused on for M&A?

We're seeing it certainly in the linear projects, the transmission corridors -- we've included data centers in there now. So our data center activity certainly is growing that. Is it -- I wouldn't say it is the primary focus of M&A, but it is one of a couple of primary power and utilities, energy, certainly transportation if I pick areas that we're really focused on and the opportunities that really -- we find exciting.

And then just how would you characterize the environment in terms of the timeliness of projects? And by timeliness, I mean, starting on time, no delays, no weather delays, no other factors driving. because I know Transportation is a bit of a wildcard. I mean the large projects that can come on, they can get pushed out a month or 2, they can get pushed out a little longer. If you could just give an update of kind of how that's progressed this year. I know going back several quarters, Transportation kind of caused some disruption for you. So any insight there would be really helpful.

We did have some projects that got delayed in the starts. They didn't go away, so this business is lumpy. That's why we guide to a year, not a quarter. So there's -- we have seen some delays in starts here recently. But just that's only attributed to project-specific issues, nothing in the macro economy or in the funding of transportation driving that.

And then how would you characterize the M&A environment from a valuation standpoint? I know when you allude to strategic acquisitions, I assume those being larger than you've done historically. So just curious how you're seeing the competitiveness of those more strategic level acquisitions out in the market today?

It's competitive. I'll say no more competitive than it has been over the last year or so. But these strategic kind of opportunities, they drive a lot of attention. So it's -- we have to sharpen our pencil. We have to sell ourselves, but it's -- we're winning out on our share of nice strategic opportunities.

Our next question comes from Jean Veliz with D.A. Davidson.

Just a quick question on some of the comments you made about hiring. So you guys are -- said you're in hiring mode. And then I just wanted to sort of understand with some project delays and this growth that you're experiencing, how would you characterize sort of the growth cadence in 2026 versus previous year? Should we expect some -- maybe a higher pickup in the first half of next year versus this year, I guess?

And how should we think about EBITDA margins given that there could be some increase in SG&A? Or I guess, should I think about differently as you progress through the year, do those efficiencies start to kick in? And when would they kick in?

I think one thing we're hoping for, for next year, the first half of this year was a relatively chaotic time with a lot of disruption associated with uncertainty around tariffs and other economic issues. And so I think that, that stifled the first half a little bit. So hopefully, ex that factor, we'll see a little bit more balanced growth first quarter, second quarter of next year into third and kind of through the end of the year. So I think our cycles are relatively the same. Hopefully, there'll be maybe a little bit more calm with rates lower and some of the transition issues behind us. Are you there?

In terms of the EBITDA margins, yes -- thank you so much for all the comments and color. But I just sort of wanted to understand a little more with the pickup in projects or expected work, I guess, going into the fourth quarter, should we see it kind of come down to second quarter levels in terms of SG&A? Or it should be more in line with what you experienced this quarter?

I think it will be in between.

Makes sense. And just, I guess, into 2026, going back to my first question, should we expect more efficiencies that you talked about have a greater impact in SG&A sort of from the start of 2026? Or will that develop more as you head into the second half of 2026. Any color or comment around that helps.

Yes. I would expect it to be more beneficial on a relative basis in the second half of the year, but still be beneficial in the first half of the year.

There are currently no questions registered. [Operator Instructions] There are no questions waiting at this time, so I'll pass the conference back over to the team for any closing remarks.

Thank you, Jasmine, and thank you, everyone, for joining us on this call this morning. We're really looking forward to finishing out the year on a high note and certainly looking forward to a banner 2026.

So thanks for all the employees who are listening for all you're doing and for all the investors for the faith you put into us and for the analysts for staying in touch with us.

With that, I'm going to wrap it up. Good morning, everyone.

Ladies and gentlemen, that will conclude today's conference call. Thank you for joining.