Good morning. My name is Mariama, and I will be your conference operator today. At this time, I would like to welcome everyone to the Bowman Consulting Group first quarter 2021 conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question- and- answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. Please note that many of the comments 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 and net service billing. You can find this information together with the reconciliation to the most directly comparable GAAP information, the company's earnings press release in the 8-K filed with the SEC, and on the company's investor website at investors.bowman.com. Management will deliver prepared remarks for about 50 minutes, after which they will be taking live questions from published research analysts.
Throughout the call, attendees on the webcast may pose questions for management to answer on the call or in subsequent communications, but there will be no live Q&A from the webcast attendees. Replays of the call will be available on the company's investor website. Mr. Bowman, you may begin your prepared remarks.
Thank you. Good morning. Welcome to Bowman's Q1 2021 earnings webcast. I'm Gary Bowman, the Chairman and Chief Executive Officer at Bowman. Also with me today is Bruce Labovitz, our Chief Financial Officer. We're excited to have you join us for our first earnings call as a public company, and we want to welcome all of our new shareholders. Your interest and support have made our journey to become a public company a reality. As we discussed during the roadshow, I, along with the entire leadership team, remain heavily invested in the success of Bowman, and we are fully committed to delivering the long-term growth and profitability you expect from us. Our IPO has been an affirmation to all our employees that the work we do every day continues to build something special. Employee ownership has always been a foundation of our corporate culture.
It creates a strong and ongoing alignment that benefits all our stakeholders. I also want to take a moment to acknowledge everyone involved in our IPO. First, I want to thank the bankers at D.A. Davidson and B. Riley. Thanks also to our auditors at Ernst & Young, our attorneys at Nelson Mullins, and the underwriters counsel at Akerman. Initiating reports were issued last week, and we appreciate the time and effort our new analysts invested in getting to know our story. Finally, I'm grateful to all my colleagues who work tirelessly not just to make this IPO happen, but to make us a company for which this IPO could happen. Now, I'm going to walk you through our accomplishments over the first quarter, then I'll hand the call over to Bruce to discuss the financial results.
Following that, I'll talk a bit about the current state of the business as we near the end of the second quarter. The first quarter was certainly a busy one. In early January, we closed the acquisition of KTA Group, a well-established mechanical, electrical, and plumbing engineering firm based in Herndon, Virginia. That acquisition was extremely complementary to what we do. It also adds expertise in energy efficiency to better serve our renewable energy customers, enabling us to accelerate our expansion in the energy transition market. That acquisition was quickly followed by hiring Michael Ginsberg as our Vice President of Energy Transition. We feel very fortunate to have Michael join our leadership team at this stage in the market evolution of alternative energy technologies. Michael has a proven track record of providing innovative, cost-effective, and environmentally sound technologies to a vast array of end users and markets.
We're excited to have him lead the firm's growing practice in the areas focused on low carbon technologies such as green hydrogen, photovoltaics, and solar powered desalination. We're already seeing positive results from these moves. KTA contributed $1.9 million of gross revenue in the first quarter, and the group is continuing to grow into the Bowman family. With the KTA acquisition, we reengaged our M&A activity, which is a key component of our long-term growth strategy. Now with the proceeds from the IPO, we intend to be quite active in this area going forward. I'll discuss our M&A activity in greater detail a bit later. The COVID pandemic had a profound effect on our employees, on our clients, the way we work, the U.S. economy, of course, the global economy.
While there was talk of COVID during the first quarter of 2020, the period we are now comparing to, the economy and our business were generally unfazed during those three months. However, the second quarter of 2020 was a whole different story. The pandemic hit, sent the country into a shelter in place mode. That said, we were fortunate that our services were deemed essential in every state where we conducted business, and work continued uninterrupted. With most of our employees working remotely, the third quarter of 2020 introduced a strong undercurrent of cautious optimism, and by the fourth quarter, we were experiencing the rebirth of confidence and economic recovery. From a historical perspective, the first quarter of 2021 was strong on its own, but given the prior fourth quarter, it was extraordinary.
Tailwinds, we now feel and are forceful we see a bright future for our business over both the near and long term horizon. The last four quarters were each unique with respect to the COVID effects, and these differences have made it difficult to draw conclusions based on the usual qualitative and quantitative year-over-year comparisons. For those new to our story, the majority of our revenue flows from engineering and related services tied to the development of commercial buildings and residential communities. This is a broad category covering a number of end markets, including commercial, industrial, municipal, and other institutional customers, as well as mixed- use and residential developments. We refer to these as the communities, homes, and buildings market. In the residential sub-market, we saw a significant increase in work relating to Build-for-Rent Single Family construction. We initially served this market in Arizona.
As we gained more experience with the nuances of this space, we have expanded our reach and work on these types of projects in Texas, Florida, and other Southeast markets. Changing demographics and renewed consumer interest in living in a single family home have expanded this market, and we see tremendous opportunity here. That's not to say that the traditional for-sale home building market has trailed off at all. During the first quarter, we were extremely busy supporting continued plans of our home builder customers to replenish their inventory of buildable lots. On the commercial front, data center and quick service restaurant customers continued to contribute to the growth of our communities, homes, and buildings market. Long-standing customers such as Chick-fil-A and Circle K were extremely active in this service, doubling at nearly double from a year ago.
Being based in Northern Virginia, having been here for 25 years, we are well known in Loudoun County, Virginia, which is often referred to as the data center capital of the U.S. While our data center work continued to grow nationally during the fourth quarter, our growth in Loudoun County and the surrounding areas outpaced other markets. Both the transportation and power utilities market saw small decreases in revenue compared to the pre-pandemic first quarter of last year. It's not unusual to see quarterly fluctuations in revenue relating to projects in this sectors. We believe this was due primarily to project timing and weather as the health of these markets and our ability to grow within them remain strong.
Some notable accomplishments in transportation include our first ever engagement with the New Jersey Turnpike Authority, the addition to our leadership team of Paul Kovacs, who was previously the Chief Engineering Officer at the Illinois Tollway Authority, and our selection for a significant multi-year construction management and engineering project in Cook County, Illinois. We'll keep you updated as that large project develops. In the power and utilities market, our gas pipeline work in Chicago picked up substantially during the quarter and is continuing to grow. It's offset somewhat by a slowdown in our pipeline work in Arizona. We are not concerned about the slowdown in Arizona, as we believe that work will pick back up as the year progresses.
Our revenue from pipeline identification work in Ohio was negatively impacted by weather during the first quarter, but we expect that project to continue as anticipated over the remainder of the year. The Florida undergrounding project, a pilot project which is being refined on an ongoing basis by its sponsor, was down in the first quarter as compared to last year. This project involves face-to-face interactions which are obviously impacted by COVID. We are committed to this engagement, having been working closely with our customer to optimize our staffing for this project. We remain confident that will be a meaningful part of our power and utility revenue this year. Emerging markets, which include mining, water resources, energy efficiency, and energy transition, is continuing to gain traction. Our water resources business has been robust and presents a meaningful opportunity for growth.
We secured a substantial project working with the South Florida Water Management District on a 6,700-acre stormwater reservoir. We also began work for a pilot utility system asset management program for the town of Round Hill, which uses some unique technology tools. In the energy space, we're excited about the initiation of a small relationship with Tesla. I look forward to seeing how that develops. Our work with Samsung Renewables is expanding from Ohio to Kentucky, and we're securing significant opportunities in utility-scale battery storage. The addition of Michael Ginsberg, whom I mentioned earlier, has been a catalyst for growth in this market as well. Now, I'm going to turn things over to Bruce to walk you through the results of the first quarter.
Great. Thanks, Gary. I'm happy to be with you today to discuss a very positive quarter. Results of operations for the quarter, along with the supporting tables and non-GAAP reconciliations, are included in the earnings release we issued yesterday. On May 6, we priced our initial public offering of 3,690,000 shares at $14 per share. On June 4th, the underwriters exercised their over-allotment option for an additional 115,925 shares. The proceeds of the offering totaled $53 million, with the company receiving around $49 million after discounts and commissions. None of that IPO activity is reflected as of March 31st, but the money is now in the bank, and we have roughly $38 million of cash reserves with full access to our $17 million revolving credit line. We believe we have sufficient capital to fund our near and midterm growth plans.
Based on the timing of our IPO, our S-1 filings presented audited full fiscal year results only, and we have not previously recorded the quarterly results against which we will be comparing 2021 quarters. This makes the first three quarters of this year unique in that the public is seeing two sets of quarterly results for the first time each quarter. The first quarter got 2021 off to a great start. Gross revenue increased 11.2% to $31.8 million, a single quarter company record. Organic revenue for the quarter was $29.9 million, and acquired revenue was $1.9 million. Our practice will be to report acquired revenue separate from organic revenue for a period of 12 months post-closing. With 17% growth to $28.9 million, increases in net service billing outpaced increases in gross revenue, and as a percentage of gross billing increased 7 percentage points to 91%.
The increase in net service billing as a percentage of gross revenue is primarily due to a higher concentration of revenue from Communities, Homes, and Buildings this quarter at 66% of our gross revenue. With respect to revenue, I want to take a moment to remind everyone that none of our revenue is derived from general contracting activities. As a result, we have no bonding obligations. We have no exposure to construction materials cost fluctuations. We work with customers on a fixed fee and hourly basis. When we talk about fixed fee assignments, our exposure is generally limited to the hours it takes our employees to complete a discrete task. During the quarter, approximately 70% of our gross revenue was associated with fixed fee assignments and 30% with hourly assignments. Fixed fee assignments at market prices provide us an ability to improve profitability through experience and efficiency.
Fixed fee assignments also have the advantage of qualifying for research and development tax credits. For revenue recognition purposes under ASC 606, however, all mixed fee contracts are classified as fixed fee, which sometimes skews the ratio of fixed fee and hourly contracts in our financial footnotes. Adjusted EBITDA increased 157% to $4.1 million for the first quarter as compared to $1.6 million for the first quarter of 2020, and adjusted EBITDA margin net more than doubled to 14.2%. For the three months ended March 31st, 2021, adjusted EBITDA includes an add back of $1.1 million in non-cash stock compensation expense. There were no other add backs. Adjusted EBITDA for the first quarter of 2020 included the elimination of a non-cash stock benefit that had the benefit of lowering adjusted EBITDA.
The benefit is the result of a reduction in our liability to common stock subject to repurchase during Q1 2020. Without getting too much into the accounting weeds, our periodic liability to common stock subject to repurchase was based on the net present value of financing obligations we would have been subject to in the event certain redemption obligations had been triggered. The reduction in the liability during Q1 2020 and the associated benefit resulted primarily from a reduction in interest rates that reduced the net present value of an otherwise unchanged liability. This was a one-off phenomenon in that quarter. Gross margin net, excluding depreciation and amortization, was 54% on net revenue, and SG&A expense was 44% of net billing. These are both improvements over first quarter and fiscal 2020 as a whole.
Depreciation and amortization increased to $1.5 million almost entirely because of the refinancing of our operating leases to capital leases in September of last year. This level of depreciation and amortization is representative of future expense. As Gary mentioned, we closed on the KTA acquisition in early January. Inclusive of working capital we anticipated would be required post-acquisition, the purchase price was estimated to be a five times multiple of adjusted EBITDA. We have not finalized the purchase price accounting yet, but you will see a preliminary allocation in the 10-Q once it is filed early next week. The KTA acquisition and the IPO had a meaningful effect on our cash consumption this quarter. We did not purchase their accounts receivable or other current assets from KTA, and as such, used cash while waiting for the new KTA billing to turn into cash.
During the quarter, we added $1.2 million of new inventory to our capital lease facilities and ended the quarter with $500,000 of inventory pending refinance from our leasing company. We make every effort to limit the amount of fixed asset inventory that passes through our books, but on certain occasions, we purchase equipment directly before offloading it to our leasing partners. Our cash CapEx for the quarter was about $100,000, but total CapEx related to spending was approximately $1.8 million. Backlog on March 31st, 2021, was $116 million, up from $113 million at year-end. The composition of backlog on March 31st, 2021, was approximately 44% communities, homes, and buildings, 21% transportation, 29% power and utilities, and 6% emerging markets. This is roughly in line with the composition of backlog at year-end and should not be construed as indicative of where we expect to see distribution of 2021 revenue.
Our revolving line of credit with Bank of America is due for renewal in January. As of now, there's no outstanding balance under the loan, so the renewal presents no liquidity risk. We are confident we will achieve a favorable renewal prior to the line's expiration. Finally, and consistent with prior direction, I'll reiterate that we plan to commence issuing guidance in connection with the second quarter earnings release in August. As such, we will not be providing any specific forecast in connection with this call. Thank you, and I'll now turn the call back over to Gary.
Great. Thanks, Bruce. Before we open the floor to questions, I'd like to talk , probably, a few minutes about the current state of the business post-IPO. In May, we announced the hiring of Tim Vaughan to lead our M&A efforts. We're pleased to have an executive of Tim's caliber join us at this critical stage of the company's development. Acquisitions are a key component of our growth and diversification strategy moving forward. As we discussed previously, we are focused on relatively small and strategic acquisitions where we can expand our capabilities or enter attractive metro markets, where we can retain the talent we acquire, and where we can achieve revenue synergies by layering on cross-selling opportunities to drive further growth.
Additionally, our strategy is to identify targets that align with our culture and permit rapid integration and rebranding, rendering the acquired company's operations fully consolidated into ours within a year.
With the capital that we raised in the IPO and the pipeline of opportunities we are evaluating, we're excited about moving forward and bringing deals to the finish line. I remain confident that we will not disappoint when it comes to our goals for acquisitive growth. With respect to our second quarter operational performance, the momentum that we experienced in the first quarter has carried over. We believe we will continue to deliver results that are in line with our expectations for the quarter. Demand for our services is as high as I've seen it in a long time, and bookings of new work are on a record-setting pace. In conclusion, the entire Bowman team is energized by their successful IPO, by the acquisition of KTA, and by the return of in-person collaboration. The year is shaping up to be a successful one, and our long-term future is bright.
I look forward to our continuing dialogue and to delivering value to our shareholders. We will now open the call to questions.
At this time, I would like to remind everyone, in order to ask a question, press star then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Brent Thielman with D.A. Davidson. Your line is open.
Thank you. Good morning, Gary and Bruce. Congrats on your strong start.
Thanks.
Thanks, Brent.
Maybe on the transportation and power utilities groups, it sounds like some of the factors that weighed on the quarter were sort of timing and transitory. Could you just talk about maybe the levels of new business activity in those sectors, and kind of the outlook for the rest of the year, and what the pipeline looks like for new programmatic, kind of the multi-year contracts you all talked about?
Yes, Brent. You're right. The comparison, the ups and downs were transitory. In transportation, we got second, third, we're looking over the course of the past several months, some really good opportunities we landed for some programmatic work, the long-term recurring revenue type work, especially up in Illinois. In the utilities market, the work down in Florida with the undergrounding is really picking up through the middle of the year, through the second half of the year. The work in Ohio with the pipeline location work is picking up well. The activity's been strong for programmatic work in both those areas.
Yeah, in the transportation section in particular, Brent, the lead time is a little bit longer than in some of the other sectors. We are seeing a lot of activity on the leading edge of work to be done, meaning getting proposals approved and in place, and then there's always some bureaucratic process to getting those to contract and conclusion. The tailwinds in that market are strong. The infrastructure build, whatever's going on in Congress will go on. Ultimately, we believe that the need for spending has been evidenced by the activity that we've seen in that market, and the availability of funding for that market is likewise evidenced by the amount of demand for services there.
Okay. Appreciate that. The commercial industrial sector within communities, homes, and buildings have been pretty good for you in 2020, despite the effects of the pandemic. What do you see today? I imagine clients would feel even more comfortable now deploying capital toward new projects.
I would almost just repeat what you said. I would say we're seeing even more confidence, even stronger indications of growth throughout the year, evidenced by our new bookings in those areas. A lot of the KTA work falls into that commercial category, and certainly the return to work, having positioned ourselves to be in a position to provide services to the return-to-work demand that is burgeoning in the economy as they're busy as ever answering their phones and doing air filtration and other related types of projects.
Okay. Then could you talk about some of the objectives of the National Energy Transition Services practice? Just curious where you tend to take that and where you're focused.
Our two areas of focus that we're involved in right now, photovoltaic solar, wind, and utility-scale battery storage. Utility-scale battery storage is an area where we've seen some great synergies with the addition of KTA. Some clients where we landed the client through our traditional civil engineering and surveying services, and now we're layering on the electrical engineering services to provide more full service. Michael Ginsberg, our new Vice President of energy transition, he's a thought leader in green hydrogen and solar desalination. While we have no activity in those areas at this time, those are cutting-edge energy transition areas that Michael is a thought leader. We look forward to exploring those areas and think those are our markets with tremendous opportunity over the future.
Okay. Just lastly, Bruce, I think you mentioned five times for KTA. Maybe just refresh us on the range of multiples you're seeing out there in the acquisition pipeline today.
Yeah. It's a little bit all over the board. You're seeing the ones that are making the list, the ones that are in our sweet spot, are generally going to be in that range. There may be a plus one, there may be a minus one on that. We're disciplined in what we're looking for, and while we may stretch that a little bit for the right opportunity, for the size that we're looking at and the universe of companies that are of interest to us today, we think we'll be in that four to seven with the five and sixes being in the sweet spot.
Okay, great. Thank you. I'll pass it on.
Okay. Happy to have you come back on if something else comes up.
You bet.
Again, if you would like to ask a question, press star then the number one on your telephone keypad. Your next question comes from the line of Alex Rygiel with B. Riley. Your line is open.
Good morning, Gary and Bruce, and congratulations on your first conference call here .
Thanks, Alex.
A couple quick questions. First, the residential market's been real strong for you all and strong in general. It does seem like some home builders have been pulling back some, at least their stocks have pulled back a bit here on concerns about home buyer traffic near term. Have you seen home builder development or land development activity, the pace of activity change at all? If so, in what direction?
It's as strong as ever, we've not seen a turn back. If the home builders, if they're reacting to traffic, the lead time for what we do is so long. It takes a long time for them to change direction on developing the pipeline of buildable lots. We're seeing the demand for our services in getting buildable lots ready as strong as ever.
If there's any recurring vision we have from the long history of the company, it's about the home building cycles. I think that there's a lot of institutional understanding of those here. When you look at inventory levels of lots, it's not homes that we care about so much, it's inventory of lots. There was such a pullback over the last 10 years on that home builders are as active as ever trying to secure forward inventory. That's the slice of that market we play in.
Very helpful. Then understanding you have no exposure to building materials, have you seen any of your customers change their scope of work because of a transitory rise in building material costs?
We have not. We certainly hear it anecdotally. We read about it. We know our customers are affected by it, but it doesn't change their procurement activities for our services.
Lastly, more to you, Bruce. Adjusted EBITDA margins of 14% was very strong. It's been better than last year, 13.5%, and better than 2019 at 13.5%. Can you talk about directionally EBITDA margins over the next couple of quarters and over the next couple of years and where you think they're going to be sort of settling out on a normalized basis?
Sure. Without providing any official guidance to anything going forward and everything, every bit of this answer was just going to be off of what we're thinking in the moment. The margins expanded. Part of it is, as we talked about, has to do with the composition of revenue at any given quarter, where net revenue was 91% of gross revenue. If you're thinking about gross, that's one thing. When we talk about net, that doesn't really affect us at all because when we're talking about EBITDA margins net, forget about that part of the answer there for a sec. I think 14% is a good place for us now. We certainly think that there is upward mobility in that margin over time as we achieve scale, as we're able to leverage some of our overhead.
I think that as some of our peers are in the high teens and maybe even have a two handle on it, I think that we can certainly approach that. I would not expect that this year, maybe not even early next year, but as we get into the 2023 world, that's what our aspirational goal is.
Very helpful. Thank you very much.
Sure.
There are no further questions at this time. Mr. Bowman and Mr. Labovitz, I turn the call back over to you.
Thank you, operator. Just want to thank everyone for participating this morning. Thanks to the analysts for the good insightful questions, and looking forward to be back on the next call, Bruce.
Yes. This will be a short turn for us between now and our next conference call, which we will announce scheduling for shortly and should be in early August. With that, we thank everybody for participation. Look forward to follow-up conversations. Certainly feel free to ping us with any questions as you read through our disclosures. Have a great day.
This concludes today's conference call. You may now disconnect.