Q4 2020 Atlas Technical Consultants Inc Earnings Call
Hello, and welcome to the Atlas Technical consultants fourth quarter and full year 2020 conference call.
All participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference you May Press Star Zero on your telephone keypad. As a reminder, this conference is being recorded I would now like to turn this call over to you.
Host Mr. David Quinn Chief Financial Officer. Thank you you may begin sir.
Thank you for joining our fourth quarter and full year 2020 conference call.
We hope that you've seen in our earnings release issued after the market closed today.
Please note we have also posted a presentation in support of this call, which can be found on the investors section of our website at one Atlas Dot com.
Before we begin I would like to remind you that today's call may include forward looking statements.
Any statements, describing our beliefs goals plans strategies expectations projections forecasts and assumptions our forward looking statements.
Please note that the Companys actual results may differ from those anticipated by such forward looking statements for a variety of reasons many of which are beyond our control.
Please see our recent filings with the Securities and Exchange Commission, which identify the principal risks and uncertainties that could affect our business prospects and future results.
We assume no obligation to update publicly any forward looking statements.
Kitchen, we will be discussing or providing certain non-GAAP financial measures today, including adjusted EBITDA and adjusted EBITDA margins.
Please see our release and filings for a reconciliation of these non-GAAP measures to their most directly comparable GAAP measure.
Moving to our agenda on slide three I am joined today by our Chief Executive Officer, Joe Boyer, who will provide an overview of our business.
Given operating update.
I will continue with a discussion on our financial results and outlook before we open up the call for questions.
At this point I'll turn it over to Joe to pick up on slide four.
Thank you Dave appreciate it.
Good afternoon, and thank you all for joining us.
In February we celebrated our first full year as a public company.
Since becoming public we have dramatically transform our company on many fronts.
The tireless efforts of the Atlas team.
Made that possible.
I'd like to thank every one of our team members for the tremendous work they've done despite the many challenges they faced over the past 12 months.
That includes more recently the unfortunate hardship caused by the prolonged freezing temperatures in Texas and the surrounding states, which impacted many of our colleagues and.
In August we firmed up our view of the evolving market landscape brought up by the pandemic and we said full year expectations for our business to produce strong results.
Our mission critical resilient business delivered on these goals and full year gross revenue of 468 million.
And adjusted EBITDA of $62 7 million.
In 2020, we also executed three solid acquisitions that are directly aligned with our growth strategy.
And our teams want a significant number of contracts.
To end the year with $628 million of backlog.
The recent recapitalization of our balance sheet is a validation of that success by our lenders.
And today, we will share more about the exciting catalysts, we see for our business through our stronger capital base.
Moving to slide five please.
We're very pleased with our accomplishments from 2020 and the exceptional finish to the year.
The fourth quarter reflected a return to strong resilient and predictable financial performance as evidenced by our revenue adjusted EBITDA cash flow and backlog.
This culminated in our solid fourth quarter and full year results, which met our expectations and submitted Atlas as a resilient leader in non discretionary compliance driven infrastructure services.
For the quarter, we delivered gross revenue of $125 7 million driven by the strength of our transportation and infrastructure related work as well as the continued recovery in the commercial markets.
Our focus on the expanding Sunshine state and their continued outsourcing of technical service continues to benefit the Atlas platform.
Your regulatory driven critical services, we provide on these end markets drove material growth.
Largely fueled by D O T contracts, including many large projects, we have previously announced.
Our net revenue performance at a sustained level above 80% of gross revenues underpins our strategy execute more self performance work through an expansion of those services provided to our customers, while reducing our reliance on third party providers.
Adjusted EBITDA of $15 4 million was in line with our expectations based on our anticipated mix of the work.
M&A continues to be a key piece of our growth strategy exemplified by our acquisitions of long engineering, Alta Vista and West test in 2020.
These acquisitions have been accretive to our earnings and consistent with our goal to deleverage our business through M&A.
Starting 2021 with continued strength our recent definitive agreement with a year on February flex. The first planned acquisition of 'twenty 'twenty, one as the depth of our pipeline represents exciting opportunities ahead.
The combined growth and deleveraging aspects of our M&A strategy are now even more attractive.
And our transformative steps to simplify and optimize our capital structure in February.
As David will discuss further we consolidated our debt on more favorable terms.
<unk>, our borrowing cost and fully redeemed our preferred equity.
It has increased our liquidity and unlock additional cash flow to invest in our growth.
This enhanced flexibility together with our expanding backlog.
Better positions, our business to grow and to outperform as our end markets continued to improve.
Our team is set up to excel.
In the past 12 months, we have strengthened our leadership team with industry seasoned professionals as free of Jane joins us as our chief growth Officer, and Jamie Myers, as our Chief diversity Officer.
We've built out our public company infrastructure to fuel the next phase of growth in the coming years.
Now please turn to slide six.
In the past we've discussed our end market performance, mainly in terms of government based and private sector work.
Today I'll also walk through our business performance from a service line perspective.
Beginning with our end markets are government based transportation work, which accounts for roughly 50% of our business remained resilient throughout the year outperformed our expectations and excelled in driving growth on our platform.
Our private commercial end market.
It makes up the other 50% of our business are recovering at a healthy pace and seen steadily improving growth since the demand trough in mid 2020.
Moving to our service lines now.
To be consistent beginning this quarter, we will discuss our business across force service lines.
Which include testing inspection and certification services.
Environmental services.
Program construction and quality management, or what we call P. C QM.
And finally engineering and design.
Margin performance across these service lines are relatively the same.
Our testing inspection and certification Arctic services, which represents approximately 35 per cent of our overall volume grew at a proportion of our portfolio by about one point year over year, reflecting the resilient demand for those services.
Our PC QM service offering makes up roughly 18% of our business volume.
And delivered low double digit growth in 2020, given the strength in our transportation work and the contribution of acquisitions.
Our engineering design business has likewise been strong and supporting transportation and infrastructure work growing in the mid teen percentage range to represent 14% of our business in 2020.
On the environmental side, which is a substantial portion of our business.
From 2020, environmental represented roughly a third of our platform.
We did see COVID-19, driven impacts on these areas of due diligence and building sciences here.
Fortunately these service lines have substantially rebounded as of the fourth quarter and are confident about our continued growth as we move forward into 2021.
Based on our ESG related service offerings, which continue to generate wins and new opportunities.
Now more broadly previously delayed work coming back on line along with our major project wins in 2020 leave us solidly optimistic on the future of our business.
It is important to reiterate the projects in our backlog are fully funded so we expect to see additional improvements in revenue trends in the coming quarters.
I'll expand on that point.
Moving to our backlog and key project wins on slide seven please.
Fourth quarter of 2020 marked another sound quarter of contract wins throughout all of our geographies.
On this slide we summarize a few key project wins, which reinforced the demand of our services remains strong propelled by regulatory compliance driven essential services as well as the upward trend of mist <unk> and state agencies outsourcing work the private companies like Atlas.
Major contract wins in Texas, and Georgia continue to contribute significantly to our performance.
We have also seen a pickup in activity in California, and New York, especially as we move past the pandemic induced macro challenges.
Our strategy of providing additional services to existing customers and pursuing larger projects is paying off especially in our ability to win projects greater than $5 million from revenue.
The integration of acquisitions is also contributing to the project wins.
As exemplified by ultimate there's multimillion dollar project wins sourced through long standing relationships with the California Department of transportation.
These key project wins and contract awards amongst others.
I've added to our strong $628 million of backlog, which represents 123% coverage at the midpoint of our expected gross revenue range of 2021.
We have confidence that our strong pipeline of work depth of technical resources to pursue larger projects, our national scale and solid professional qualifications will continue to drive outperformance with more marquee project awards in the future.
Now turning to growth trajectory, please turn to slide eight.
Our progress in 2020 builds on the tremendous growth, we've achieved organically and through acquisitions over the past five years.
Considering the 2020 COVID-19 impacts we couldnt be more pleased with the resiliency of our organic performance and the results of our M&A efforts.
We continue to execute accretive and deleveraging acquisitions to enhance our service offerings and expand our geographic customer base.
The performance of strategic acquisitions completed in 2020 collectively exceeded expectations and contributed favorably to our results for the year.
Our M&A activity is already off to a great start in 2021, with our announced agreement to acquire a L.
Strengthening our service capabilities in the New York Tri State region.
Our expanded access to capital through our new D. D. T. L will help propel our strategy of growing this business, 50% organically and 50% through deleveraging acquisitions that expand our technical capabilities and our geographic reach.
With our strong backlog combined with our robust M&A pipeline, we're on a path to further demonstrate the earnings capacity of the Atlas platform into 2020 one.
And with that I'll turn it over to David Please.
Thanks, Joe and good afternoon, everyone.
As we've discussed on prior calls.
Optimizing our capital structure and reducing its complexity to drive additional value to our shareholders. That's been one of our top priorities.
We're extremely pleased to have recently completed several highly accretive transactions and the furtherance of that objective.
The ability to do so was largely in part due to the resilience demonstrated by our business in 2020, and the positive trajectory of our results in the fourth quarter.
Our efforts to expand the Atlas platform into new geographies Cross sell more services increased self performance work and control costs all contributed to this success.
In the fourth quarter gross revenues of $125 7 million or up 11% compared to the prior year quarter with strength, especially evident in our transportation and infrastructure projects.
While some business disruptions from COVID-19 remain a headwind for our private sector work, especially in the northeast and Northern California.
These geographies have made steady progress since the trough in mid 2020.
We are also seeing an increasing number of new projects get off the ground.
Net revenue of $101 5 million increase sequentially to approximately 81% of gross revenues, a 30 basis point improvement from where we were last quarter, reflecting our strategy to cross sell and self perform more services.
Utilization levels have remained high in the fourth quarter and adjusted EBITDA of $15 4 million represented 15% of net revenue.
The decrease from prior year was mainly attributable to a shift in the mix of work and the timing of fringe related medical costs.
For the full year 2020, we delivered gross revenue of $468 2 million compared to $471 million in 2019 are roughly stable performance helped in part by our strategic acquisitions.
More impressively on net revenue in 2020 increased to $381 4 million up from 2019.
Net revenue as a percent of gross revenue was 81, 5% also up from 2019.
This underscored our M&A.
Cross selling success as we self performed more work and drove additional value through our expanded services to our clients.
Full year adjusted EBITDA was $62 7 million with a margin of 16, 4% on net revenue limited to a 100 basis point decline compared to the prior year as we tightly managed utilization levels and our highly variable cost structure.
I'll discuss enhancements to our capital structure on slide 10.
In February we completed a recapitalization of our balance sheet that will support our growth objectives through both organic expansion and deleveraging M&A.
This transformation of our balance sheet was achieved through several transactions.
We entered into a new $432 million long term loan.
We secured a $75 million delayed draw term loan and.
And we entered into a new $40 million asset based revolver.
With a 20 million dollar expansion feature.
Then use the proceeds to repay the $270 million of outstanding borrowings under our prior term loan.
And fully redeemed all outstanding preferred equity units at par.
These are immensely beneficial actions accomplished the following.
We dramatically simplified our balance sheet with a single term loan.
We lowered the aggregate interest rate on our debt by nearly 100 basis points.
We decreased our average annual cash outlays on borrowings by an estimated $13 million in year, one and $8 million thereafter.
We extended our maturities on debt by a weighted average of two years to 2028.
Finally.
The increased access to liquidity by roughly $116 million over the next two years.
The projected cash savings are an immediate win for our cash flow in 2020. One we believe Atlas is now better positioned to reduce net leverage through a combination of higher cash flow and anticipated EBITDA growth given our expanded capital base to execute organic growth.
<unk> and deleveraging M&A in the coming years.
Furthermore, we continue to expand access to our class a shares in public float.
In November we completed a warrant exchange, which nearly doubled our class a shares hit $10 million.
Since year end, we have provided for the voluntary conversion of class B shares to class a shares.
Which has further expanded our class a public shares to over $15 million.
The elimination of our preferred equity and refinancing of our higher cost debt is aligned with our goal of deleveraging our business and deliver an even stronger returns to our shareholders.
I'll now move to cash flow and capital allocation on slide 11.
Our disciplined cash management protocols have helped to generate $15 $8 million of operating cash flow for the year.
Excluding one time cash expenses related to our public company formation acquisitions, and COVID-19, we generated approximately $41 million of operating cash flow in 2020.
This represents approximately 65% of adjusted EBITDA.
We expect 2021 to be another year of strong cash performance.
With the public company transaction in the rearview in a cleaner balance sheet, we should begin to see a more normal cadence of cash generation.
With our reinforced balance sheet, we are laser focused on our unchanged capital priorities.
That includes identifying and executing deleveraging acquisitions funded with cash and stock.
This M&A strategy is directly aligned with our commitment to drive net leverage down to three times.
I'll note that our $75 million committed delayed draw term loan is specifically reserved for acquisitions, which will contribute to this objective.
We also expect to preserve financial flexibility to create additional value through opportunistic investments.
All of these actions support our goal to generate strong returns for our shareholders.
Yeah.
Moving to our full year outlook on slide 12.
I'll first note that going forward, we have changed our reporting calendar to a 454 schedule, which provides our year end to 413 week quarters.
<unk> into true four week months and one five week month.
This change provides for increased administrative efficiency and improve comparability of our quarterly performance moving forward.
Our prior year 'twenty 'twenty comparison will not be adjusted for this change and we will continue to be shown on a calendar month end.
But better comparability, we have provided in the appendix a comparison of the number of days in each quarter from both 2020 and 2021.
We are excited about the opportunity to deliver organic and acquisitive growth in 2021.
While some uncertainty exists with our ongoing challenges related to COVID-19, we believe market indicators and the positioning of our business and backlog provides us with a level of predictability to share our outlook with you for the full year of 2021.
We are initiating our full year 2021, your outlook for revenues to be in the range of $500 million to $520 million, reflecting.
The strength of our backlog and current visibility on the timing of work as local economies continue to improve.
We anticipate adjusted EBITDA to be in the range of $70 million to $76 million, which takes into account improving end market conditions operational efficiency and vigilant cost management.
This implies a 16% increase at the midpoint compared to our full year 2020 results.
In addition, we expect improved operating cash flow generation in 2021.
Thank you and I'll now turn the call back to Joe for closing remarks on slide 13.
Great. Thank you very much David.
We are exceptionally proud of how Atlas performed over the past year.
Our business delivered solid results despite the significant headwinds from the COVID-19 pandemic.
We feel this demonstrates our resilient business model and the strength of our leadership team to properly adjusted be successful in all market environments.
Our solid execution throughout the year and unrelenting commitment to safety.
As confidence that we're on the right track to further capitalize on the nation's continuing economic recovery and national commitment to infrastructure investment.
I firmly believe in the power of this organization and our ability to deliver strong margin performance as well as continuing to grow earnings.
I would like to reiterate our accomplishments over the past year being our first year as a public company.
I'm, particularly pleased with our proven consistent financial performance.
Also executing on strategic multiple highly accretive acquisitions.
We optimized our capital structure, including the retiring of warrants and preferred stock.
We increased our liquidity and access to capital for M&A.
We strengthened our diverse leadership team and built out our public company infrastructure.
These accomplishments all position Atlas for success in 2021, and we are well positioned to capitalize on the nations needed infrastructure investment.
I am pleased with the performance of our business and look forward to more positive momentum in 2021 and beyond.
I want to thank you all again for joining us.
Operator, we can now open up the lines for Q&A. Please.
At this time, we'll be conducting a question and answer session.
You would like to ask a question. Please press star one on your telephone keypad.
Tom will indicate your line is on the question queue you.
You May press Star two channel your question from the queue for participants using speaker equipment may be necessary for you to pick up your handset before pressing the star key one moment, while we poll for questions.
Our first question comes from the line of Rob Brown with Lake Street Capital Markets. You May proceed with your question.
Hi, good afternoon.
Hey, Rob good afternoon.
Nice job on the quarter.
On the.
The kind of organic growth view into into next year, given given where you're at right now and given the COVID-19 environment, where would you say the you kind of see the organic growth shaking out and how does the market look at this point.
Yeah, great. Thanks, Thanks, Rob.
Again, we feel really good looking forward into 2020, one we put a range out a revenue range of 500 $520 million, which indicates overall.
A 9% growth rate year over year at the mid <unk> from an organic perspective, we're looking at 5% to 6% and this will be driven by the continued growth in transportation and infrastructure as well as we're seeing in the new <unk>.
<unk> evolution and expansion on the environmental side of our business, specifically relative to ESG opportunities. So we're looking for that to fuel us as we move into 2021.
Okay, and you sort of alluded to it but how do you see the the.
Covid impacts sort of sort of worst thing at this point you have pretty good visibility into your contracts or do you still.
So feel that there are some headwinds that youre seeing.
Well, let me let me take that so let me first say that.
We feel really confident in our strategy for 2021, I think it was sort of.
Validated in 2020, so we feel good about our strategy and in our guidance, we put out there regarding COVID-19 specifically, we are still seeing COVID-19 impacts in Q1.
We're not quite back to pre Covid levels I will say that we are seeing continued growth, though in all of our services service sectors as well as our in market. So they are pretty steady and the growth coming across Q4 and into Q1.
But want to stress that there is still a little bit of an operational inefficiencies.
Our operations due to COVID-19 related requirements.
But as I mentioned, we've got we have considerable look into the visibility of our backlog and the confidence in the backlog I mean being that it's fully funded Rob.
Rob I think it's important to note that 60% to 65% of our plan has been identified in our backlog already so.
But in activities continue to be strong.
With larger transportation infrastructure Lettings increased in Q4 and Q1.
And I also think it's important to note that we hadn't had any really material cancellations in our 2020 backlog. So current projects starts are progressing pretty steadily as well.
Okay. Thank you I'll turn it over.
Our next question comes from the line of Brian Feldman with D. A Davidson you May proceed with your question.
Hey, Thank you congrats on all the accomplishments here on the last few months and over the last year.
Excellent I appreciate that.
Hey, Hey, Joe I wanted to follow up on the Environmental service line, Yes, I think you had mentioned debt, yes that particular area and it had some real challenges in 2020 I caught some of the commentary from you David just regarding some of the ESG opportunities could you expand a little bit on that.
Things that youre seeing out there for.
For that area, because thats, a fairly significant piece of the pie.
It is <unk>.
Environmental Brendan.
<unk> has always been a strong part of our revenue and backlog at about a third of our business.
You know what let me just speak a little bit about 2020, so where we saw some some impacts in 2020 were.
Really relating to our commercial and industrial parts of our business.
Being impacted.
Form really three areas of our environmental services.
You saw <unk>.
Headwinds in our due diligence business, which is closely tied to.
Finance and banking.
Markets, They're building sciences. So we do a lot of indoor air quality work for particularly older High rise buildings that was clearly impacted in the areas of the northeast where you had a lot of people working from home. So building owners were less.
Ah.
Didn't maintain the continued service level that we had on the high rise buildings. There and then also our retail petroleum business. So those are the three businesses that.
And were really impacted in the trough of the 2020. So we saw that the due diligence business really pick up pretty heavily on the financial markets recovered. So that was into the June July business that sort of picked up and is already back to full steam as well, we're still seeing some impacts on the building science side of the business.
And our retail petroleum business and environmental is.
Is there a project starts are back as well so we see consistent with that.
By the administration's focus on environmental we see growth in ESG services.
In areas of compliance and renewables.
And we're looking for growth in the federal business as well as continued growth on the commercial business on our environmental space. So.
I hope that helps out Rob.
Alright, that's helpful.
No worries.
Maybe just to follow up.
A lot going on in Washington, Joe What what are you keeping an eye on I know, obviously lot of talk around an infrastructure bill, but I wonder if theres other.
Policies and things being looked at push forward debt it could really benefit the business as well and maybe it's in that environmental arena any update there would be helpful.
Yeah.
Let me say Brent that I think clearly our firm is well positioned.
To capitalize on any infrastructure build Boeing forward been weighted my entire career for one of these days, it's going to come on but this business is well positioned will get wind in our sales from any infrastructure spend.
And I still attribute a lot of that growth potential coming from the states that we're focused on the states are really are being creative in finding ways to fund their own projects.
So I still think that the infrastructure Bill hopefully will still come but I think we'll get huge win from that and on the environmental business I think.
So we're watching that I think clearly think that the.
Democratic.
On the administration is we'll continue to to push.
Environmental regulations, and our growth in ESG type services.
So we still see continued growth in that business as well.
In areas like I mentioned compliance.
Renewables.
So those types of services.
Okay.
David This one might be for you the operating cash flow.
Adjusting for the one time was like 65% of adjusted EBITDA. This year is that is that a sustainable level on a way to think about operating cash flow from 2021.
Yes, it is Brent minus getting past the transaction costs that we experienced day.
Backing going public.
Had three obviously.
New acquisitions that occurred during the year, we had the recapitalization, we had the warrant offering. So we had an awful lot of sort of front end structural.
Type transactions they came through that carried a significant amount of expense. So when we look to adjust those and normalize those going forward yeah, 65% to 65% is a definitely a reasonable range for us to be.
Hopefully a touch better.
Okay, Great one quick one Joe.
Just thinking about all the activity at the company here.
Love to get your perspective on kind of where you think you are from a cross selling perspective or a shared service group shared services perspective, just in terms of all debt deal activity, you've done and whether that can be another lever here for 2021.
Okay.
Well, let me say that we.
We are and you've heard me say this before Brent I mean, I think this whole entire businesses and industry is extremely highly fragmented.
And we think theres lots of runway for growth.
And we do have a I think a really robust pipeline of strategic opportunities for M&A in our business and particularly with the recently added DVT L.
We're looking to continue to grow this business on our strategy of of half acquisitive, Lee and half the organic growth. So.
Okay.
Let me share node I think cross cross selling is going to continue to be prominent in our strategy as well as.
Pursuing larger opportunities, which we're seeing an abundance of on at this time, yes, I think Rob our strategy really is to it.
In areas, where we can provide a better mix of our services we're looking for.
We might look for a specialty company, that's a that's a tick related business, where I'm sorry, Brent.
So I'm going to get your name right.
Some time, maybe after the fourth analysts I'll get it right, but I'm sorry.
But that's okay.
Back.
<unk>.
Our strategy on our services and our service mix. There, we're looking to acquire businesses that will allow us to offer and the geography of a full range of services and.
And as you can tell we are growing our net revenues.
Faster than our growth revenue, our gross revenues and net where we're basically self performing more services than we've ever provided in the past. So that is all done by cross selling our services and Thats. A continued focus so in the geographies, where we have an environmental focus and less of a of a check or PC QM type services that we might look for company.
Uh huh.
To better integrate those services up that way. So that's still our continued strategy going forward.
Okay, Joe David I appreciate it thank you.
Thanks, Brian Thanks, Eric rent appreciate it.
Our next question comes from the line of Noelle Dilts with Stifel. You May proceed with your question.
Hi, guys good evening and congrats again on the strong year on the refinancing.
Thanks Noah.
So Joe I just wanted to go back to your comments on M&A and you mentioned you have a really robust pipeline.
And some of the markets that we follow we are seeing some competition from private equity really pushing on prices on targets are you seeing that at all or are the types of companies that are looking to join Atlas really just more interested in finding a solid strategic partner.
That's a great question, let me I do think.
Noel that debt, we feel that the way our deal structure I think our prior acquisitions success I think our focus on the heart led leadership.
And integration strategy have made us an acquirer of choice okay. So our deals.
We generally stay away from a bid process or no.
Broker led opportunity.
Most of our our pipeline is really built internally from from leads that we have from our.
Technical organization so.
I'd say.
We have definitely seen.
Competition increased in the in the sectors, we're in from private equity that's true but.
I can tell you I haven't seen and we haven't seen.
Any kind of significant increase in the multiples.
Didn't see that and I know other people have reported net we have not we have not seen that during 2020.
And.
And certainly in the opportunity we just signed in 2021 so.
It's definitely a little bit more competition, but I haven't seen multiples vary from what we've reported in the past and looked at that mine. This business for four to six times typically we've talked about no I'll just add we've talked about.
Positioning ourselves as an acquirer of choice and if you look at the history of.
Of our acquisitions, our retention of our principles that have come into the organization is on the high 90% range we brought in.
On a little over 80 principles to the organization thus far.
We've retained about 78 of on and we've had a couple of retirement a reason I bring this up is because.
Affirms that we're bringing in are specifically chosen are a great fit for us from a business standpoint and from a cultural standpoint.
And the leaders of these businesses believe in our strategy and they want to be a part of what we're doing here on Atlas and they see the longer term upside.
And becoming part of this company. So we really do believe we have a bit of an advantage in that regard. They can see the long term return of being part of the firm and not just simply the multiple theyre going to get at the outset.
Alright, great.
Yeah, that's that's great.
Second you know throughout the reporting season on.
When we've heard from companies that have exposure to the construction markets Theres been this kind of repeated.
Echo that third there's they're seeing a lot of strength in data centers and warehousing E. Commerce generally could you touch on to what extent you have exposure to those markets today, and how you're thinking about that moving forward.
Yeah, I'll start Noel and then I'll ask Joe to pick up.
I know we've talked about this in the past and how.
We are going to be a nimble organization. We believe we have good diversification in the platform.
And we're going to strategically pivot as we need to while where we're seeing.
Some retraction call it on the commercial side, particularly as Joe outlined in the building service side.
IH due diligence, we're going to turn our focus to areas that we see expanding and without making a named specifically.
One of the largest commerce.
Providers out there in the World right now we're starting to do work on the warehousing side of things supporting logistics.
And that type of work on forward. We're also starting to see some data center opportunities materialized. So I think our position of prospective is consistent with what you've heard those opportunities are developing we're seeing them and we're starting to win them.
Okay.
Well just to I'm, sorry did you have some day I'm, sorry, I really didn't go right ahead.
So just two more housekeeping questions I appreciate it.
Cody you gave on the weeks in the quarter.
Some of the weather impacts in the Texas event that we saw on the in the first quarter.
I know you don't give quarterly guidance, but any comments you can kind of make in terms of how to think about the overall seasonality for the year and particularly it though the first quarter.
Sure Noelle thanks, well.
First of all obviously the storms, we experienced here, we're unfriendly and unhelpful and unusual and unusual.
If I first let me start just looking ahead to Q1 I mean, we are we're cautious about Q1, yet optimistic and.
As it relates to the broader economy.
We do believe that we are on.
Starting to see the engine of this business really start to ramp again, there is still some uncertainty out there obviously relative to COVID-19 vaccination rates, how fast ozal per gram.
<unk> new strains.
Certain geographies being completely opened back up.
We do expect to be moving back to pre COVID-19 operating levels during the quarter.
With breakout growth in the second quarter.
You spoke to seasonality the seasonality profile for the business, while slightly tempered in Q1, we expect that to be our consistent profile as you've seen in prior years. So overall, we feel good.
About the consensus expectations that we've seen out there.
Little bit of an impact obviously, we had about a week of impacts in different parts of our business with the storm, but again, we think we will mitigate our way through that and still finished with a steady and solid first quarter.
Okay.
On the my last question was just kind of going basketball on well cost.
Hello question.
So on tax benefits from the cares act and how to think about moving forward.
Flow.
There wasn't anything substantial there.
Other than we were able to.
There was some cash flow benefit in that we were able to.
The first some employee related taxes.
Just like most businesses, but beyond that it wasn't significant for us.
Okay.
Alright, Thanks, that's it from me.
Thanks Noel.
Our next question comes from the line of Kathryn Thompson with Thompson Research Group you May proceed with your question.
Hi, Thank you for taking my questions today.
Following up on infrastructure I appreciated the color that you gave on the call, but could you flesh out a little bit more details in terms of the strength that you're seeing and more in particular said momentum building from previous work or is this just an overall improving environment.
Yes.
Sure.
Thanks, Katherine I would say that debt we have seen.
Considerable progress in all of our end markets and all of our services from from Q4 to Q1.
F 2021, so it's more of a consistent.
Yeah.
Growth pattern, we've seen obviously, we had some projects.
Particularly in our tech space on the commercial end markets that were delayed.
Basically Q2 and into Q3 of 2020 that are now progressing along.
And not a where we didn't have any material cancellations from projects in 2020, So it's more of a general across the board.
Growth I will tell you that our transportation business.
Had considerable growth.
In 2020 on all areas of the work that tech space visa QM as well as <unk>. So that continues to be strong even with states reporting.
Flat to.
Lately growing there are some states still that we're focused on that are still showing considerable growth in the transportation budgets in 2021.
So I hope that helps you Kathryn.
Catherine Yes, yes, no it does.
And then <unk>.
Excluding Texas.
And I guess it is.
Glued snub again.
That is.
On the south.
Excluding that could you break out relative strength by region and by type of projects and what regions have you seen the greatest relative improvement and you talked about private sector Im putting you provided some detail, but it'd be helpful. If you could give the types of projects that you're seeing relative in prison.
Net on the private sector side. Thank you.
Okay. So let me first go back to the first question was around re Agra geographies on on growth right. So.
What we say is that the.
The strength I would say in our recovery has been net.
A lot of the due diligence work that we do is across all four regions. So that that business that was really hampered in 2020 has now rebounded and thats showing across revenues across all the regions. We have seen recovery in our upstate New York with particularly around the some of the day.
Building Sciences side of the business both on a from a public sector and commercial sector, we've seen growth in that area as well from where we had seen the troughs in 2020.
Our transportation business.
<unk> has continued to be strong all throughout.
So that basically applies of the West Coast region, our central region as well as our southeast.
Business. So all all three of those reasons seen transportation growth as well.
On the private sector business I think.
The biggest hit to US was any kind of retail work that we saw that work has progressed on but I'd say that.
The retail work of that in 2020 looks a little.
It looks a little thin and challenged we.
We do look for that business to slowly recover but I think.
I think relative I was going to say relative strength wise, Joe we've seen.
On.
Our central region really outperform this year, particularly in our Texas and proximate states. The amount of work we've booked the amount of work, we executed not only in new contracts and contract <unk>.
<unk> sort of really fueled.
Some expansion and serve to mitigate some softness that we saw as examples in northern California, and New York.
From a from <unk>.
Commercial service standpoint.
<unk> was also very strong specialty inspection services wise that really.
That really shored up the business as we progress through the year. So those those are a couple of areas.
Areas that we saw strong performance petroleum retail petroleum had a nice bounce back certainly through the second half of the year that was going to say, our petroleum business, our private retail customers and our petroleum business serve back on line. It was a steady improvement from the trough as well so we're seeing that business steadily improve as well.
Okay. That's helpful. And then final question on capital structure.
And then can you touch a little bit on this on M&A.
Had the priorities changed or really kind of.
It'd be better informed but.
As we come out.
Covid and are dealing with the realities of the post COVID-19 world or their services or end markets that you are choosing to grow perhaps a little bit more because of that.
Our focus on less you really begin to understand Ken beer general.
Lucas in terms of M&A and an overall growth given a post COVID-19 world.
Maybe I'll ask maybe on Alright, and then I'll ask Joe at a time, then chime in first and foremost obviously, we're extremely pleased about being able to accomplish this recapitalization I mean, we we I think we're able to expedite it we did it quite frankly sooner than we.
Thought we would be able to we took the first big step to to clear our warrants through the public tender.
We executed in November, which not only eliminated an overhang issue, but it also allowed us to increase our class a public flow by nearly four 5 million shares and.
And here, we followed with the the second big step to strategically streamline and optimize our structure. So we consolidated everything into a single.
Perm loans, we redeemed our preferred equity at par.
We established an improved.
Asset based revolver with a $20 million expansion feature and then of course, we secured a $75 million committed delayed draw term loan that is exclusively for M&A. So I think that that plays right into your your question.
As it relates to.
The strategy and the priorities from an overall capital structure. Our strategy is the same which is we're going to focus on continuing to grow this business organically and through accretive and deleveraging M&A, we're going to continue to drive fundamental operating performance strong margins and strong cash flow.
<unk>.
And at the same time.
We're going to look at again acquiring businesses that can help strategically.
Reduce our leverage over time now two big areas that we'd be looking at certainly are going to be transportation and infrastructure spending in environmental which I know Joel talked about.
Yeah, Let me let me just.
I mean in regards to what your service.
We're talking about specific services.
Nearly.
Our transportation business, we see continued growth on that business with group considerably.
And our <unk> services, we're looking to continue growth and looking for.
Sue So site utility engineering work in that area. We're also looking on Arctic space for for growing specialty inspection services and environmental we're looking to grow that business in the federal sector as well as more compliance on renewable type work as well so those sort of free services there but.
Well, that's about all I'd add debt.
Okay, well you said debt.
Alright, great.
Very helpful. Thank you guys.
Thanks, Catherine appreciate it.
Ladies and gentlemen, we have reached the end of today's question and answer session I would like to try on this call back over to Mr. Giora <unk> CEO for closing remarks.
Thank you Larry I appreciate that so.
Thank you to everyone for joining us today.
We do appreciate your support and your time of Atlas Technical consultants and we look forward to updating you on our progress in the future. So thank you very much for joining us.
This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation and enjoy the rest of your evening.
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