Q2 2021 Atlas Technical Consultants Inc Earnings Call

Yes.

Hello, and welcome to the Atlas Technical consultants second quarter, 2021 conference call.

Currently 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 then zero on your telephone keypad. As a reminder, this conference is being recorded I would now like to turn the call over to your host.

Mr. David Quinn, Chief Financial Officer of Atlas.

You may begin Mr. Quinn.

Thank you for joining our second quarter 2021 earnings conference call.

Hope that you have seen our earnings release issued after the market closed today.

Please note that we have also posted a presentation in support of this call, which can be found in the investors section of our website at one hour stockpile.

Before we begin.

I would like to remind you that today's call may include forward looking statements.

Any statements describing our beliefs.

<unk> plans strategies expectations projections forecasts and assumptions our forward looking statements.

Please note that the company's 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. In addition, we will be discussing and providing certain non-GAAP financial measures today, including adjusted EBITDA adjusted EBITDA margins adjusted net income and adjusted EPS.

Please see our release and filings for 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 and give an operations update.

I will continue with the discussion of our financial results and outlook before we open up the call for your questions.

At this point I'll turn the call over to Joe to pick it up on slide four.

Thank you, David and good afternoon and welcome investors.

This truly is an exciting time for all of us.

In my 32 plus years.

This may be the best market that have had the opportunity to.

Dissipate in.

Now, we're seeing drivers aligned to produce tremendous demand for renewed investment in.

And our aging infrastructure in the natural environment.

Things I haven't seen in my entire career.

And I'm excited to be leading analysts into it.

Our company is purpose built to ensure quality longevity and sustainability in our nation's public and private investments in the natural and built environments.

I'm proud to represent 3600, plus Atlas associates.

Working hard on mission critical projects across the U S such as the neutrino facility at.

At the South Dakota, Sanford Underground research complex, which demonstrate the expanding range of our technical capabilities.

And it's just one of many critical infrastructure projects across the country, where our teams are making a purposeful impact on our world.

Now today I'll detail three key themes.

Which not only reinforced the purposeful work that we perform but also the earnings power of our business and the value creation for our shareholders.

First.

Our positive results demonstrate the predictability of the Atlas platform.

Through solid execution by our teams.

And record revenue and margin growth through the cross selling of integrated acquisition.

Secondly, Atlas is focused and well positioned in growing public and private end markets that are being propelled by strong and expanding macro tailwind that are in addition to those proposed in the federal infrastructure Bill.

And lastly.

Our ability to successfully win work and all service areas and to consistently advance our acquisition integration strategy are contributing to our growth and a record backlog, which provides confidence in our outlook in the second half and entered 2022 and beyond.

Now, let's turn to slide five pleased to discuss the highlights.

Of our results.

I'm very pleased with the continued strong performance in the second quarter, thanks to the execution by our teams.

And the continued end market demands for our services.

We have nearly 17% year over year revenue growth with acquisitions performing as planned.

Our adjusted EBITDA was $18.2 million.

It was in line with our expectations and an 18% increase year over year.

We had a tremendous quarter in winning work as our backlog was up to yet another record at $751 million.

But another roughly 150 million of new awards that are pending contract execution.

Got to be added to our backlog.

Our results show increased end market momentum.

While battling some sluggishness in the public markets and continued impacts of Covid.

We did execute on our plan and positioned ourselves to deliver growth and increased profitability in the second half of the year and beyond.

M&A continues to be a key piece of our growth strategy.

As exemplified by the acquisitions of a L. I know ESG during the second quarter.

I'll discuss these accretive deleveraging acquisitions in greater detail shortly.

Unlike any time in my career, we continued to benefit from strong secular <unk> that are driving growth in our markets and service areas.

Our aging infrastructure requires critical investment to curtail further deterioration and necessitates upgrades to extend their useful life.

Recent building and bridge collapsed tragedy is remind us all of the importance of quality assurance and asset monitoring plays in keeping us safe.

Which is driving growing demand.

Or a higher safety regulatory and compliance environment.

We continue to see growth in outsourcing.

State D O tier cities and municipalities.

Our project and quality assurance services companies like Atlas.

And the growth of environmental social and governance or ESG.

As increased awareness and demands on sustainability and societal impacts of infrastructure assets.

Our clients are looking for healthy buildings in which to operate protect their employees and build a more sustainable future.

In addition to these macro drivers the Senate just passed a trillion dollar infrastructure, Bill, which has the potential to accelerate the investment in the vast array of infrastructure.

And then Atlas, we're exceptionally well positioned to benefit from the <unk>.

Infrastructure Bill.

A large part of the contemplated spending and the bill is core to our service offerings.

And it's in markets addressable to Atlas from transportation housing and education, and finally water and utilities.

We look forward to expanding our support for our government clients partnering with them to deliver innovative and effective solutions.

I want to remind everyone.

Our current guidance does not include any benefit from incremental investment arising from the passage of the federal Bill.

Now on a micro level.

We are seeing state transportation work ramping up recently in Texas, Georgia, Indiana, Utah, and California to name a few.

With some significant sized projects planned for kickoff in Q3 and Q4.

New federal work in general continues to be slow to get started.

But water and wastewater services are showing signs of increased planning and bidding with federal stimulus funding in states supporting lower project interest rates.

And finally, the level of activity supporting education, and New York.

Detroit and Boston has increased and our building Sciences group showing signs of second half expansion.

Please turn to slide seven.

I would like to highlight the increased demand for environmental solutions services, which increased to over a third of our revenues in the quarter.

Our environmental work touches all end markets and we're particularly proud of these contributions to ensure our children have safe and healthy educational environments to learn socialize and flourish and.

This includes analytical testing of the water they drink and the quality of the buildings, they populate and when construction is necessary, making sure. It is done safely and with quality.

Now I'd like to highlight our ESG commitment and progress.

Our core business is inherently connected by ESG and environmental sustainability is the key responsibility of our work.

Our ESG strategy really focuses on three key pillars.

Providing safe and healthy infrastructure.

Sustainable and resilient systems.

Finally, the first equitable and inclusive community.

Our environmental solutions are central to our capabilities, allowing us to help our clients achieve their ESG goals.

New analytical testing planning compliance and remediation that resolved environmental concerns associated with air land and water quality.

That was a heartland organization corporate governance, and our core values serve as the foundation of our company culture.

We've demonstrated our commitment to advancing diversity inclusion I appointed a chief diversity officer, informing our leadership council dedicated to our diversity and inclusion efforts.

We have also launched seven employee resource groups that foster a sense of community belonging and providing network support.

As C E O.

I'm also joined the CEO action for diversity and inclusion.

Evolution.

It's important for me to lead because I've taken the pledge to do my part in reshaping our future E.

Beyond this company.

Now, let me talk about another highlight.

And then dress some of our second quarter key wins.

We are enjoying an incredible quarter and winning a large number of major wins across all services and geographies.

We saw particular strength in new awards in our PC, QM and environmental solutions sales channels.

As you can see on slide nine.

The strength and diversity of our service offerings plays well to the increased demand for our infrastructure and environmental capabilities.

Which in turn drives backlog growth and future predictability.

The success, we're enjoying in winning work it is a direct reflection of our effectiveness in integrating our acquisitions technical capabilities into our platform and then cross selling these expanded services to our client network.

This strategy is at the core of our growing revenues backlog and continued confidence in future earnings.

Moving to slide 10.

We added to our M&A accomplishments during the second quarter.

In April we are acquired a L to align with expected growth in our key markets of New York and New Jersey.

And as expected <unk> performed solidly and began contributing to our results in the second quarter.

But we also closed our strategic acquisition of O S. T at the end of June.

And in our presence in the Pacific Northwest, which is a key growth focus area for us.

And providing unique specialty services.

In light rail construction quality assurance and environmental solutions.

Oh Gee will begin contributing to our results in the third quarter of 2021.

I'm excited about our M&A pipeline as it continues to be very strong with proprietary prospects.

We continue to focus on strong.

Well performing regional firms and geographies experiencing population growth.

And offering creative alternative funding for infrastructure.

Our strategy continues to focus on technical service expansion, which drives integrated cross selling growth.

We will continue to drive strategic accretive M&A deals funded with a mix of cash and stock that continue the progressive reduction of our net leverage.

And with that I'll turn the call over to David.

Thanks, Joe and good afternoon, everyone.

Please turn to slide 11.

Overall, we are very pleased to deliver another quarter of growth and predictability for the business.

We grew revenues and increased margins and cash flow.

A longer term perspective as bright as we continue to grow our backlog with over $150 million of recent awards pending contract not yet included in the 751 million we reported.

Now for the details of the quarter gross revenues of $131.6 million were up 16, 7% compared to the prior year quarter, driven by strong execution across all of our service offerings.

We delivered both organic and acquisitive growth, which contributed to the notable double digit jump over the prior year.

Our environmental solutions services saw the biggest gains in the quarter as we continue to see larger projects and programs into our portfolio.

Net revenue of $106.3 million was up 16%.

Over the prior year period and represented approximately 81% of gross revenues consistent with our strategy to cross sell and self perform more work.

We realized improved utilization rates, even as we grew our workforce during the quarter.

Like many businesses, we are feeling some labor capacity constraints.

And have expanded our internal and external recruiting resources to ensure client demand as Matt.

Adjusted EBITDA of $18.2 million represented 17, 1% of net revenue up 30 basis points from 16, 8% in the prior year quarter.

Higher revenue was the primary driver of EBITDA growth.

Which helped offset project mix wage and onboarding cost impacts.

And we move into our busier work season.

But the second quarter 2021 we produced adjusted net income of $3.5 million and adjusted EPS of 11.

Versus seven cents in the prior year quarter.

Some differential related to class a shares bounce between the periods.

Moving to slide 12 as.

As we mentioned last quarter following our recapitalization in February we have a focused plan to reduce net leverage to less than three times for the business.

We will accomplish this by growing our business organically generating strong operating cash flow and continuing to prioritize accretive and deleveraging M&A transactions.

Along these lines, we were pleased to have generated almost $8 million of operating cash flow of 23% versus the prior year quarter.

We also paid down $13 million of debt on our revolver, all expanding our liquidity by 30% over last quarter.

We grew our adjusted EBITDA by 18% year over year with more than half of that being organic.

We closed two accretive and deleveraging acquisitions during the quarter, which by design minimized cash out and reduced our net leverage ratio.

As business volume continues to increase in the second half of the year, we are well positioned to reduce our net leverage further to approximately five five times by year end 2021.

In line with expectations, while remaining on track with our ultimate goal.

Less than three times.

Moving to our full year outlook.

As Joe mentioned, we did experience some ongoing pandemic related sluggishness during the quarter. In addition to some wage inflation as the competition for talent heats up with the economy coming back.

Given our business is approximately 90% cost reimbursable.

Actively mitigate this as we price new contract and seek relief from our clients on existing ones.

There is some time lag to this which may pressure near term margins. However, we don't see this as an issue longer term.

With this we reiterate our increased guidance from Q1 for the full year 2021.

Revenue is projected to be in the range of $520 million to $540 million.

With adjusted EBITDA in the range of $73 million to $80 million.

This implies a 22% increase in adjusted EBITDA at the midpoint.

Third to our full year 2020 results.

This outlook reflects the continued strength of our backlog our current visibility on the timing of work and the contributions from recent acquisitions.

Separately I would highlight the steady increases to the run rate of our businesses, we continue to grow.

Looking at adjusted EBITDA on a pro forma run rate basis, assuming our E L and O S. G acquisitions had been closed on January one 2021 we.

We see an annualized range upwards of $76 million to $83 million.

In addition, we will deliver a step up improvement to operating cash flow in the second half of the year.

Paired to the first half.

Thank you and I'll now.

I will turn the call back to Joe for closing remarks on slide 14.

Great. Thank you again David.

We are all proud of our accomplishments since becoming a public company.

Our business has once again delivered solid results in Q2, and our organic growth efforts are gaining steam.

Complemented by the additions of a L and O S G.

We believe the performance continues to validate our resilient business model and the alignment of our business to strong key market tailwind.

We remain extremely well positioned to capitalize on the nation's continuing economic recovery and particularly the growing national commitment to infrastructure investment.

I firmly believe in the power of this organization and our ability to deliver strong margin performance and continued earnings growth.

All while rapidly deleveraging our balance sheet.

I look forward to continuing our positive momentum in the second half of 2021 and many years to come.

Thank you again for joining us.

Operator, we can now open the lines for Q&A. Please.

At this time, we'll be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad a confirmation from will indicate your line is in the question queue you might start to move your question from the queue for participants using speaker.

Now it may be necessary for you to pick up your handset before pressing the star keys, one moment, while we poll for questions.

Our first question comes from the line of Rob.

Rob Brown with Lake Street Capital markets. You May proceed with your question.

Good afternoon.

Good afternoon, Rob Hey, Rob.

Just wanted to follow up on the infrastructure Bill and get your view on on how you see that flowing through if it gets approved and sort of your experience in the past and how these programs work and how quickly the impact it can fall through.

Sure. So so let me say I guess first of all that.

Glad to be having this conversation for us to be B, what I believe to be close to closing.

Closing the transaction and a federal infrastructure, Bill, which I think is long overdue.

You know Rob According to what we've read.

Where the administration is focused on the end markets of transportation housing education, and water and utilities those are in markets that our firm is really well positioned for and and currently are in our core business and end markets.

We believe that all of our services from testing and inspection environmental solutions through.

Program construction quality management, and lastly, engineering design all of those core services directly align with the proposed spending of the bill so.

We feel really great that world, we're well positioned.

And if there is that bill was to be passed obviously, we'd benefit tremendously.

From those services I'd say.

Although it's really tough to say.

How the spending may flow through likely to come through states and municipalities. As is my experience timing on that it really is just very speculative Rob I would say certainly if something was to be past us relatively soon here you're looking at late 'twenty 'twenty, two before you'd see any kind of.

Lettings and transactions going out and most of the revenue really probably coming in around 2023.

Okay, great. Thank you and then just in terms of the new business environment. You cited a number of areas in particular seeing strength, but that really is is it a is it a state level, you're seeing kind of higher end I assume of your organic growth rates, but is it is it state level spending that's coming through and are there are there.

The things that I think you mentioned a number of projects, but what what's really driving that state level spending increase at this point.

Well, let me say I I believe that you know as I had mentioned Theres a number of really key market <unk> that are driving this business side, we're continuing to see the continued outsourcing of services from you know from municipalities to the private sector and I think that's due to staffing levels, but.

Also just the level of infrastructure investment that's going in.

So clearly seen that as well I would say as far as our growth we saw a fairly even distribution of.

<unk> of our growth in both public and private markets Rob.

I think really a little bit slower in the transportation area than we anticipated and.

And of course, the federal markets are slow to get started.

We did see some changes in our service mix and I think that that's really attributed to our testing inspection and certification business being down in the commercial markets, which is acceptable I mean expected there.

Our environmental solutions group.

And that's where we pick up from our building sciences in our industrial hygiene group that had been down in the past, but I think that's really driven by our clients you know really.

Interested in healthy buildings.

And our focus on that and then property transactions or.

Is really where our environmental services group for the quarter.

We have seen overall a growth in our.

Program construction quality management and that really come in mainly in the public sector, but it's on this renewed focus on quality.

Quality, both construction quality and design quality review.

So a market area that we have seen substantial growth in obviously as you've seen from some of our wins for the key in the quarter were substantial in the area of PC QM and then lastly, just our engineering design business has been relatively steady.

That help you out.

Yeah very helpful. Thank you and then last question just on the on the M&A environment.

Very good free cash flow in the quarter and should.

It should continue in the back half of the year, but how does that sort of influence your M&A activity at this point and what's sort of the outlook for the rest of the year.

Yeah, great Rob so from a cash flow standpoint, correct, we had a very solid quarter.

<unk>, just about $8 million of operating cash flow and at the same time, we paid down about $12 million on our revolver and increased liquidity by about 30%.

You couple this with the delayed draw term loan that we have in place that's really going to continue.

To find.

Find our active investment in M&A pie.

Pipelines flush right now and we've got several opportunities that are looking really good as a result.

<unk> are pretty confident track relative to driving the business to less than three times net leverage.

And achieving five five times net leverage which is about a full turn reduction for the year at the time, we get to the end of 'twenty one.

Rob what you just you asked about the M&A pipeline I think let me just comment on that in addition to that base comment so.

We feel really great about our pipeline both the depths.

And the and the width of our pipeline.

<unk>.

Opportunities I think that.

Our deal.

Our deals are mainly proprietary opportunities so they're not driven by for the most part not driven by broker led opportunities. So we're excited about that we feel that we've sort of made a name and continue to be an acquirer of choice with with the success, we've had in bringing on smaller firms onto our <unk>.

That form and growing those businesses so.

We like our opportunities for growth we are focused in some key geographies in some and continuing in the service expansion area that I talked about so we.

We like and we will continue to really focus on our M&A activities going forward.

Okay, great. Thank you very helpful and nice job on the quarter I will turn it over.

Thank you thanks, Rob.

Our next question comes from the line of Noelle Dilts with Stifel. You May proceed with your question.

Yes.

Hi, guys congrats on the nice quarter, particularly in the backlog.

Oh no no.

Sure thing I'm, not known and sorry, if I missed it but I was curious how much of the backlog in the quarter was acquired.

No versus organic.

Yeah, Great question. So again the differential we went from 689% to 751.

So we saw a 62 million dollar increase.

About $45 million of that was acquired.

Additions to our backlog, that's about $17 million of that related to.

Organic growth.

And Noel I want to add you got him notes on our slide there we have a $150 million of contracts. We haven't been awarded that have yet to be signed and when they are signed that will be moved to backlog. So thats. In addition to the 751 just wanted to make sure I was clear on that.

Okay perfect. Yeah that came back came across I just wasn't sure if I missed the other part.

And then just on the pandemic related sluggishness that you're seeing I'm just kind of curious.

You know the Delta variant.

Worsening, that's you know where you're starting to see some of them kind.

Kind of coming back I'm, just I'm just curious.

What are the trends, you're seeing and how that's playing into your thinking about the rest of the year.

No. That's a fair question, we are seeing it ourselves we had our highest.

Covid impact for probably six or eight months. This last prior month. So we are seeing our own employees impacted by the varian or at least the renewed wave if you would.

It has helped obviously its a we just continued and we have never left are our procedures in regards to monitoring temperature.

So having procedures in place and monitoring those with potential exposure.

And occupied office spaces with us so we have seen impacts there in the marketplace. We have we have seen impacts continue in the COVID-19 environment I can tell you that now in the public and Mr powder markets still have yet to see.

Our clients come back in full force their continued work from home, which is driving later Lettings and also later executions I believe that at $150 million that we have pending now currently is a direct reflection of COVID-19 and not being able to get those contracts do procurement and get signed so we are continuing to.

See that watching it closely.

I don't know, Dave you want to add anything else that you're that you'd you'd say to that I think Paul I think we're talking to sort of this generalized pandemic related sluggishness in what is unique that we're seeing is the.

The level of activity around bidding and winning work.

Is like nothing we've ever seen as you can see were falling out quarter after quarter with record backlog and if you look at the 150 million Joe referenced and the size of the awards within that they're bigger than we've ever seen and there is no risk to our risk tolerance profile relative to the work.

We've taken on they're just bigger opportunities so.

The business is fine it's operating well, it's just it's not throttling up and breaking out the way we would have anticipated now so we're continuing to bring resources on in and push driving volume in the third quarter and just based on.

The wave of work that has to get done it's not if it's it's really win.

Right.

That makes a lot of sense and then I guess just my last question with all of this work that you have in backlog that's pending.

You talked about.

And that you know investing in resources to try them on recruitment and that sort of thing just curious I mean do you see yourselves ramping now for a few quarters as you really try to meet that demand I guess my question really surrounds you know how are you thinking about building resources and and the resultant if theres a little bit of a jackup market you know should we expect that just.

As you kind of prepared to do a lot of this work that's out there you know that you've been awarded in that you made yes.

A couple of months.

So noelle that that's exactly our focus it has been for the last two quarters as we comment out of of Covid in our markets increase we've been adding on resources.

Obviously there is.

As I've always said that this industry has always said tight labor. So we knew this on numerous early on and rely heavily on our.

Internal recruiters to help US stay ahead of our demand we've added another recruiter on.

Does that staff and also gone to outside recruiters to help US stay ahead. So it will be a continual focus for us as we anticipate the growth of not all of these market drivers that I've talked about but if and when the federal infrastructure Bill comes through that will also be a further demand for us so high on our priority list.

And we deal we deal with that on a weekly basis.

Perfect Alright, thank you very much.

Thanks Noel.

Okay.

Our next question comes from the line of Brent Thielman with D. A Davidson you May proceed with your question.

Great. Thanks, Hey, Joe David.

The $150 million in pending awards I guess I hadn't heard you guys kind of quoted a number like that before can you give us any feel for what that compares to an abnormally high and kind of what you expect post quarter, just trying to get some perspective on that.

Yeah.

That's a that's a good question Robin I think I don't know that I wouldn't compare it to the past, it's certainly is higher and has taken longer.

Brent to two to get these contracts signed since what I can't recall being out there of $150 million in pending awards I will tell you that we just.

Signed an $8 million contract out of that $1.50. This week. So we're looking to drive that along and I think that's because our our Uh huh.

Hartmann a transportation clients are starting to really gear up towards a new fiscal.

Fiscal year. So it seems to me to be high I can't tell you that I know exactly what it is I mean, Dave do you want to yes, Brian I would so here's a couple of points I'll shift to this typically we'd see what we call our selections pending contract.

Roland somewhere between $80 million to $100 million.

Whats significant about this is that 80 to 100 million.

Average contract size was maybe $1 million right. What we're seeing now is.

Certainly an increase as we're jumping to 150 million, but if you look at the magnitude of the top four contraction there that we're excited to hopefully be talking about next quarter and maybe the early fourth quarter.

They are multiples multiples larger than what we've seen before in the tens of millions. So we're really starting to see a shift where the.

The strategy of the platform is playing out well bring in client relationships together, we're going after bigger opportunities and secure them and with us it's improving with these larger projects and programs, it's improving our visibility as we look out not just in the next six months, but into 'twenty, two and 'twenty three.

Yeah.

Okay.

Okay.

And then I guess on the.

I guess with the new acquisitions, you've done kind of pretty large book of business good sizable piece.

So pending awards I guess I'm just wondering.

Why you wouldnt have better visibility into year end and hence moved the guidance either at this point is it just some caution around COVID-19 delays at the customer level, primarily was there anything else I'm missing there.

Sure sure so well of course.

Monitoring what Covid is doing right and it certainly hasnt helped recently.

I would remind you that we did raise guidance in Q1.

We moved revenue.

$20 million and adjusted EBITDA by $3.5 million at the midpoint.

And we had closed.

E L. Prior to reporting so we talked about that now OSD is terrific.

Terrific addition.

Through our platform this added to 90 person firm.

And at this stage in the year really when you break it down it fits within the guidance that we had previously provided.

I think the more important point here, though Brent is as we start to really focusing on the earnings power and the momentum of the business going into 'twenty 'twenty two.

And again, if you look at our adjusted EBITDA on a pro forma run rate basis, assuming we got <unk> done at the beginning of the year. We're looking at annualized adjusted EBITDA ranges of 76 to 83 million. So.

We're quite optimistic as we look ahead to next year.

Okay.

And the last one the jump up in operating expenses. This quarter I mean, it looks like there is sort of $5 million of ships.

Kind of one time items in there, but if you back that out is this the sort of run rate you would expect as <unk>.

That's kind of come back into the business post pandemic.

Yeah, I mean, Q2 definitely was a heavy investment quarter for us.

Had $2.4 million of M&A related transaction costs for <unk>, We had a couple million that came through noncash related to a fair value adjustment related to earn out related to earn outs on acquisitions, we had $1 million related to.

Noncash equity comp I would point out Brent.

Not for those items, if you back them out and look at our operating expense as a percentage of revenue were actually down.

The business is operating efficiently, but not for these onetime items you are really looking at something closer to a normalized operating expense run rate for us moving ahead.

Got it okay. Thank you best of luck this quarter.

Thanks, Brett.

As a reminder, if you would like to ask a question. Please press star one on your telephone keypad, one moment, while we poll for questions.

Our next question comes from the line of Kathryn Thompson with Thompson Research Group you May proceed with your question.

Hey, good afternoon. This is actually Brian on for Catherine. Thank you for taking my questions I guess I wanted to see.

The building science services stands now compared to pre Covid levels I think before it was hit pretty hard during Covid and then last quarter saw a nice rebound I think like 75% of pre COVID-19 levels as people came back the high rises as cases started to come back I guess can you talk about where that is now and maybe the potential.

For the Delta variant of Covid, taking that back down at all.

Yes, I'd say that.

A little bit speculating here, but I'd say, we're very close back too.

Pre COVID-19 levels. So that group, we have added to it I would tell you that we have active positions.

Positions open and industrial hygiene now currently because of the anticipated growth and expansion of those services into Qs three and four so very close to pre COVID-19 levels, we might be right back out where we were but anticipated growth in that in Q3 and four.

Does that help.

It does yeah, and then are you seeing I guess, what's the downside potential is the Delta Varian.

I think go backwards.

Could that drop is as far as it did at the initial corporate level or we're not going to see that level of decline.

Well I think I'd have to speculate a little bit I don't want to do that but I would say this that the two areas that really hit us in Covid was as you mentioned was our building Sciences group because people were coming out of of the high rises and we had school shutdowns and that that's impacted our business tremendously and we didn't have environmental.

<unk> because of the financial markets tied up originally so those markets are now continuing on and our environmental transaction business is actually doing quite well as the financial markets are rolling.

Think you know with where the schools are in dealing with.

Exposures and Master I can't really say, where that's going to go but I just feel that that.

The school systems are more used to dealing with it and.

And so their work is continuing on with a lot of our work is maintenance and sort of continuation of code that you can't really pass up so I don't believe will be hit.

As if it was to turn I don't think we'd see the sort of turned down that we experienced.

In the first Covid experience in March April and May of last year.

Okay. That's very helpful. Thank you.

Sure.

Second follow up I guess.

Is.

The post Covid World now has that had any meaningful impact to dot's pace of outsourcing work.

Seeing more.

Increasing amount of work because of Covid or is that not really factoring into Europe.

Outsourcing decisions.

I would say that.

And that's a generalization because obviously I can't speak for all of the state Dot's, but we did see that during COVID-19.

I think in order to keep the resources.

Busy they they sort of didn't rely as much on outsourcing in the first couple quarters of this year that we anticipated I think thats now picking up as fundings anticipated you've got your new fiscal years Rolling So I don't anticipate that.

There'll be much change.

I should say it this way, we're going to see an increase going into Q3 and four from our current transportation business is the outsourcing will now pick up as the <unk>.

<unk> or picking up levels and they don't have the stats in levels of support so more outsourcing is what I suspect is headed our way.

Got it thank you.

Sure.

Ladies and gentlemen, we have reached today's question and answer session I would like to turn the call back over to Mr. Joe Boyer for closing remarks.

Thank you very much I appreciate everyone joining us today.

We appreciate your support of Atlas and we look forward to updating you on our progress next quarter. So thank you very much and have a great afternoon.

This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation and enjoy the rest of your day.

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