- Earnings call transcript Q3 2022

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Operator

Hello, and welcome to the Atlas Technical Consultants Third Quarter 2022 Conference Call. Currently, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Jonathan Parnell, Chief Strategy Officer of Atlas. you. Thank

Mr. begin, Parnell. may You

Jonathan Parnell

morning, you joining thank Good for us. and

seen by call section Quinn. at Joe you've that issued we today, investor Please the Investors posted which closed our the We earnings market after ir.oneatlas.com. I'm that have David On the note CFO, can website joined CEO, be of yesterday. in release our our Boyer; hope an also our presentation, and found

include you we control. projections, and Any such recent forward-looking may with I'd future no by uncertainties forward-looking prospects statements. forward-looking anticipated a update variety may of results. to Commission, that reasons, today's Before Exchange results goals, that business, forecasts publicly assume expectations, any company's many from principal note our see the are the could statements. filings remind Please of risks describing Securities and identify We strategies, that statements beyond beliefs, begin, which assumptions our statements. for the which statements our Please and those differ actual to affect call like our plans, obligation forward-looking and are

it income EBITDA, and EBITDA addition, including comparable measure. of reconciliation will to today, to most non-GAAP margins, measures see CEO, their over adjusted turn earnings EPS. our adjusted I In directly financial GAAP filings we adjusted measures certain providing for a Please discussing be Joe will net Boyer. our and and adjusted release these now non-GAAP

Joe Boyer

and the year, your today's financial the our our and with our the for and third what joining strategic and then will quarter On discussion in call, the detailed outlook to represent more open then employees questions. Atlas’ then appreciate markets results. Thank call presenting continue overview provide core seeing you, remainder results for of our an we'll third we're up to Jonathan, record our than and us of I'll today. on David excited everyone quarter, I'm I updates more of you X,XXX a quarter priorities,

another backlog period highlighting quarterly Atlas, to Gross adjusted was costs, business execution company. remained and recognizing revenue our new growth technical costs, ongoing cross-sell transportation quarter excluding and are benefits strong for growth XX%, and level. XX%, impact services pricing was subcontractor performance excluding our of healthy in as of new core third a at quarterly we costs, limited XX%, adjusted EBITDA when as record discipline, existing growth a revenue, our and best a margin, experienced the model. due combination environmental to a of level a strong markets we our ability record near broader accelerated on Organic and across reached organic over including Adjusted portfolio strength EBITDA customers. subcontractor Our by pass-through EBITDA subcontractor end the a was quarters, to our scale record of margin, continue excluding reached several highs. margin, growth inflation Atlas. grow remained the Gross and margin to This last we public driven factors, have continued backlog all

forward. business project And we which factor continue the execution. expect backlog which seasonality during of is a our several contract of X% up is from addition, highest going noted, year. is quarter the at backlog from level our be Our of to another last reached third from last we quarter the the awards and quarter-to-quarter, year projects of $XXX wins, figures as pending growth quarter. larger last impact the the have due and quarter record backlog of as $XXX And and key down XX% award large from to lumpy end we've million to can our quarter we've the converted for in quarter, revenue be which Atlas to This as million, of especially up impressive is

markets looking their improve to overall our sustainability demand Now their forward, existing secular and things be our enhance of as the continues in environmental infrastructure. efficiency to driven to long-term customers invest by

the across We industrial, all all materials infrastructure management related service, are tunnels to power in structural tunnels rail and maintenance the addresses of existing our every project key highways part we nearly required building for of and transportation business services. are seeing repair including end asphalt expansions. quality, and and it's and markets, roads, our end existing to on the serve, and air demand our It's are geographies whether This education transportation quality lead projects in inspections customers technical and program industrial and resurfacing and overall management, clients, government and new this we management We're indoor all capital transportation our the and services in or testing inspection education demand program rail. our important testing hygiene assets. the seeing all and transportation markets, sciences provide we of and our for including business, see transit note asbestos project, continue management. such regional needs of major we strong markets our as In On on forms bridges that across government, bridges, subsectors investing including commercial, markets. to for

a these in program several services contract Orleans monitoring of You the school Boston Parish in and our board Schools with with see third can included quarter capital wins asbestos planning Louisiana. Public examples an

limit and environmental to from demand work compliance also customers address to We see continue industrial, commercial power impacts. our and solid as their environmental needs they their

and Jobs in example state these customers once work A flowing public projects. to our with Georgia management projects state manage and be Atlas benefit provide from to local GDOT and investment position Transportation throughout program. to ongoing for We future announced alongside transportation in local the the and we continue under services these confident program recently Act crucial meaningful projects infrastructure and of more Department contract local begin agencies is way. funds the the the our a administered to relevant will to

contract $XX contract million Now a is with value. this a maximum five-year

begin to from state. the through putting flow, we to under in work, also wide service but dollars the dollars infrastructure not As have there only array be contracts those supporting the of this we’ll contract, bill other

Additionally, times. of public $X as a backlog we I've the we've company, in Since on recent existing that calls, becoming large discussed private been on are in new both successful and greater with markets. grown million over X our public programs have number contracts by work customers than winning and and

project. only the also visibility top-tier our future. and win revenue, our in improves presence ability business on recently Those details is low new but end quality program I a programs to to markets. selected end and to capabilities, scope was are large to is forward near core fundamental very improves us year which and that of on look a joint we government, power And technical these finalized, services commercial to Expanding large the to allowing are transportation, environmental attract Important, and work. Our remains project more programs of markets our services venture wins large this penetrating contract provide additionally, sharing within details risk success broad-based that across a model. execution and into profile, our management not a infrastructure in with pillar in talent part projects maintain being our our continue large on rail

We impacting macroeconomic how for continue services impact to future and on environment the they closely monitor demand and factors broader projects. our would existing the

estate rates that interest more general and our I've noted such end sensitive are transaction conditions small to to business. higher build and markets relatively As real previously, piece are provide as a new services construction we macroeconomic of commercial

two-thirds of of existing result, ongoing regulatory are that demand infrastructure. services and a portion resilient economic maintenance through our nearly in our to nature, business And tied as Additionally, including testing for significant business is is of compliance, nondiscretionary a cycles.

is a maintained through we on structure. capital growth growth, our disciplined improving focused that organic driving beyond capital allocation and overall M&A strategy Now

across can through service regional or Our of expand platform integrating is management on and/or services. cross-selling M&A scaling quality business the targets Atlas offerings our identifying playbook that enhance into teams the our them our and presidents, based those with

confident our and strategy are We growth drive improve outsized ratio. to our M&A will that continue leverage

remains number candidates. robust M&A with a Our of proprietary pipeline

and disciplined accretive to we for of shareholders, will economic an will our deleveraging position highly all and partnership that cycle. any be to Atlas remain pursue continue we'll However, ensure stages continued we'll success during

to we that committed options As grow, continue to capital drive could structure we strengthening evaluating constantly our remain and value. all shareholder are

closing few based Our financial quarter that, David? and steady remained on our significantly last is I'll last the performance the deleveraging to we'll with David back quarters. on then With to outlook, and in provide year, trajectory, continue to come earnings over details call I'll expect down leverage turn a coming from our and and from remarks.

David Quinn

XX.X%, you, due XXXX to compared with in to Joe. our Gross quarter. contractor as in third of costs year well Gross strong service revenue was growth acquisitions. all quarter up in organic margin to greater last from modestly of prior million the year XX.X%, driven compared areas, quarter, the of Thank a performance contributions $XXX.X some as percentage by XX% down was

for level our of costs, The subcontractor strong revenue, to highlights subcontractor and of acquisitions. XX.X%, basis up points, overhead Excluding million represented increase as increased Atlas. an to XXX This which excluding the was EBITDA due year costs, project gross was and business our to and our benefits was pricing our quarter, points grow execution and record XX% fixed XX.X% year-over-year margin gross driven a last performance continue of disciplined $XX.X stronger scale from we workforce, Adjusted expanded last through of improvement to by in strategy. organically an XX margin both mainly and leveraging utilization compared year basis of costs. the

of we prior $X.X and versus of $X increase quarter. net and For produced the improved of in by of was adjusted earnings adjusted mainly the $X.XX share adjusted net third operating year-over-year $X.XX income earnings per per income driven share results. million adjusted The quarter, year million

cash our flow on sheet. and to Moving balance

with the generation for at to our the seasonal capital and a million of use business business, fourth the of XXXX. the revenue up quarter at last was operations increased Because to in and outlook Based end During of working year, same we quarter, in slightly the seasonal third the last million growth. the remainder our million, for use compared combined of with of was cash quarter third the million, $XXX our $X.X full-year end strength debt a cash patterns robust the year. the quarter line of in from the patterns of on quarter. seasonal $X.X expect quarter, support the of Net positive in $XXX our from

and significantly from down X.X and year ratio, the from remains acquisitions includes we times, covenant bank at forma company X.X% pro XXXX. EBITDA recapitalized efficiencies Our leverage in cost early last which steady after

sheet balance capital so. structure and for our improving we deleveraging Assuming do Atlas, an to at to aggressive continually and top our priority path are remains looking a overall avenues

to on of our outlook Moving year. remainder for the the

narrowing EBITDA are ranges reaffirming revenue the our XXXX. for We outlook of and midpoint adjusted and the

to margin million work to be For tightened to of $XXX XXXX year-end. and backlog, solid $XX results. of the expansion to range midpoint, XXX the of on of on we on of anticipate XXXX million. The $X increase year. the tightened the by expect reflecting each compared range visibility be XX.X% EBITDA basis points have visibility narrowed to through compared our demand the million XXXX in revenue, the range strength growth end, range timing million, the the now the and have midpoint by $XX reflects $XX to at we the as solid XX% of into adjusted and results. represents guidance We end million of trends each this our At end our of revenue our million the $XXX We an as range in

lies As demonstrate that quarter earnings the for the remarks. we're call now back Joe With long-term business, mentioned, turn of for that, the our ahead. closing Joe I'll excited and our to third results potential growth

Joe Boyer

and We David. another levels quarter strong EBITDA adjusted revenue, Thank backlog. you, of had with record

efficiency and potential and M&A recent growing the the organically to and in our service through capital and sustainability funding and lines Demand our in environment. to improve remain and improve business. success strategy, that We integrating driven of Atlas’ the we've of favorable, our our infrastructure growing to long-term trends project all end secular acquisitions committed infrastructure wins by robust continuing trends and executing nation's structure. our results markets overall and Our highlight are underscore had long-term programs and of across all

continuing many to please. established of Atlas you us. employees a for lines set look strategy to and can mission-critical have high-value Q&A, future. up for Operator, Atlas’ as open the out we Thank now company. I'm proud drive forward we are services founded and We on preeminent we represent when the delivering the provider growth to our in joining again

Operator

Thank you.

begin go Chris first We our CJS question-and-answer will will with ahead. And Instructions] the from Moore session. now question come [Operator Securities. Please

Lee Jagoda

Hi, actually Jagoda It's for Chris good morning. Lee Moore.

David Quinn

morning. good Hi,

Lee Jagoda

morning. Good

Just with in is talk growth you the general, starting Can forward? labor. you factor gating your of to And levels both availability it of labor terms looking in customers' your labor turnover at labor component, a Atlas? as terms to your and how in you're employee view

Joe Boyer

So that was is you? Less Lee. Good are this Boyer. How Joe Lee. question,

year always recruiting why said, you, for the ahead of good, that it set forward me within to resource forward. network one this been Let we so stay tell an to I going has doing ahead tight as with continue help that to and that's always look of and has able our company us we've our labor I've our stay needs, been throughout a resource reasons been up to think and internal demands do industry and we our of feel while,

So, as work, I full in our on and back us we can't task for good but our and don't we in constricting and and well, us really finding back feel as going labor, clients' continuing resource forward. execute it about speak where orders I to deliver force, for to think to contracts needs labor a see are they're

Lee Jagoda

how the just That a hedge as you great. yourself you works Can And environment where at obviously, just this rising took sounds up actions remind and current interest us sheet, balance that in to the protect protected you're to? rates. then from some follow-up, looking

David Quinn

Lee. David for the Absolutely, question. This Thanks is Quinn.

on it's now, out early. jumped So certainly there and that rate an interesting environment right this we we're happy

caps I downside so first further with point rate XXXX, And of of risk we and rate through portion this exposure it at our point interest interest I no the it works the make on fully interest mitigated X is forward think this that us exposure the JPMorgan, is point. would how basically hedge is for effectuated Atlas’ June there's June rate X%. at at variable

So basically, LIBOR. float on the

since X% of Fed debt so floor it the Our LIBOR flow has basis X% in between XX well, putting our We instituted timed has point the is exposure. X%, a it rate and increases. four place,

the at now, has exposure is and X.X% twice going since the we're pricing we the so hedge cost out the have at additional above hedge in paying place, for X% we've we're baked of kicked that covered. And Right it's the we've that. that with at So this and in point seeing our above pleased pleased forward. instrument how contained effectively is, us really anything effectively worked in so risk around the LIBOR point covered hedge X%, with what that has X.X%,

Lee Jagoda

very much, That’s in helpful. Thanks all. I’ll Very back hope queue

Joe Boyer

Thanks, Lee.

Operator

Brent ahead. Thielman Davidson. next will go Our question from come with Please D.A.

Brent Thielman

morning. Good thanks. Hey,

Joe Boyer

Brent. morning, Good

David Quinn

morning, Good Brent.

Brent Thielman

what up years? of year, to goes I way know the of next sense sort visibility Joe XXXX versus going will offers much pick think in you David, into work into current year. or a next through out along to trying you sense you're any but what just backlog of how this convert get the level subsequent

David Quinn

planning for that. operating higher revenue is that to the up the that's record on a Sure, line improve assume David. of backlog, than our into I'll we're it, next we're that programs year. throes This Hi, continued budgeting consecutive when running and revenues. our I more sizable quarter, some to our in and in And process portfolio, of call speak our month. But really can brought with Brett. growth And we're XXth been going sight XXXX, the XX-months that to the and touch XX%-ish, of at, and projects backlog. we're Yes. maybe where on next two-thirds the wrapping is just predictability we've of which we've now, really report one. mean, and with this even our we in take be two-thirds. pleased detail we safe it's first, currently Typically,

Brent Thielman

what's that's And as come is new talk Joe, private Can infrastructure work kind with Really picking now, like like the it's a Okay. I'm customer split business? the of a it then, -- few all in, that lot curious David. seeing then work just talk real you Solutions of And seems I can sounds the helpful, especially guess, you I key strength the up? behind Environmental markets area mean, about of just public momentum. of side

Joe Boyer

Sure.

approaching mentioned growth, end growth, seeing markets, and we're sure. services for where pretty as markets our XX% We're program our talked our work managed transportation our and the I overall, as there, that's anywhere seeing the in as well public management lot just our markets, sector well. markets, markets public to our right? across steady program public I'd a call, our Brent, well from, end in exposure quality we're growth are The indoor and So, clearly, of services facilities have from seeing we we education considerable show but say, continue markets as in of So the continued as to services. education quality air for about indoor as grown

program around the in say services but is is fastest. continued growing, coming the transportation our I'd probably PCQM our our So, line services growth market, management

it's said, coming transportation I our really As end from markets.

Brent Thielman

Okay, very good. Thank you.

Operator

will come from Kathryn Research Thompson question Our Group. Thompson Please next with go ahead.

Kathryn Thompson

my taking for today. you thank question Hi,

into in projects? inflation running of and on any of you we at cost get process? been but As how the further some curve improving you side bid are where changed least we've instances at relief stabilizing typically, the somewhat, the or look the as have that And you has escalators having

Joe Boyer

I might us whatever common would look say particularly finish, process, in I so it multi-year it from longer-term expansion, in, on which But continued the contract. clauses diligent midterm we don't Kathryn, in obviously, you our look of on our rates. -- I in in we contracts, allow in clauses changes our changes on say the for say, build margin have contracts our as and some anything in bid can me pricing, seen to you that the haven't and is contracts, that know on typically that let escalation be, do missed carefully. to escalation any I to or watch at in for would we task labor occurrence allowing tell to want look a we working regards have escalation I been labor when orders will escalations for here. increasing normally

David Quinn

Well, going I aren't is so guess gives reminding that of continue on Kathryn, losing drive based we're the us of a so lot margins latitude quite price, honestly, reimbursable, only done. would pricing power, just into we that add lot thing to XXXX. going exercise our I we've And it and work stretch to which we're a XX% you, cost to

Kathryn Thompson

Okay. over ideal projects manage talked And IPO about -- are years? a how stat of balance very what's next the Where because million in style? over you trajectory management that the up project type and of carry you is three your size $X of see do times. do And since project they kind visibility that different you that then X terms

Joe Boyer

Yes.

that. Let start me with

that our to which deeper a firm, going we built marquee bench, to We think. it's technical difficult think I allows clearly to bench, broader pursue would I what pursue look tremendous and a Kathryn, us we’ve larger, amount of for added say projects to projects as forward. marquee capabilities like strategy, more have me our mix

projects going right grow at that that's greater from we've is our have million look backlog, as that the of we in I our mix like will continue in in and that we are than probably projects XXXX, to where So still million larger kind backlog forward. is $X about we data had so grown $XX that XX now. shown it

would of it opportunities for from I just do, shift smaller currently. of think are in and number anticipate the we But really that huge what I so the we there's are pipeline basis like where where say our being in right pipeline still but I the I think can't than of don't the going opportunities a company greater a projects be, our I are forward, are kind we $X opportunities million now. mix ideal for

Kathryn Thompson

you. Thank That’s helpful.

Operator

will Brown Instructions] Street Rob next Please with from Markets. come question ahead. Capital [Operator go Our Lake

Rob Brown

question. my Good morning. nice the quarter. Thanks time for And taking in

a backlog kind the a how How trends, get had But to very of years? for growth wanted it's of year? couple the in the next on organic you see growth, on in strong quite growth Just sense that do see view do assume organic I you your next quarter. shaping organic growth up strong. with

David Quinn

and talking to of we to about of we’ll years that certainly since certainly next we're pleased year somewhere with with the forward last Hi look organic XX%, positive the got year-end, guiding really public, where us us you've another the the just the our the anticipate year in fits we've the land continue. Rob, and with I nicely right gone And planning think since in highest about our we between quarter, do beyond, but well, do, defer to puts we'll trend we I'll at end seen that which worth we've quarter I third X%. the land work landed reason guidance. year-to-date, Joe at to month's of throes about growth beginning and to it’s or where over year on now of have you Rob, upper for so, process to two mentioned, X% guided the X%

Rob Brown

on of that sort And activity of how is XX-months? pipeline, maybe pipeline Great. at of then Okay. M&A you interest looking kind areas you shaping over point? talked this about What the the up are next there. are And

Jonathan Parnell

lot so a can where a to in geographic and to it's so it's expertise partnering our that we're interest of bring Atlas. in a expertise we've we lot that some opportunities that we the built some platform active, bolt of morning. areas have clients, we'd of mix, bit pipeline, sell and evaluating fill to with the in Rob, here. still nationally now also very on looking little and certain We're deals Jonathan Hey like good a at Parnell technical

what our that's say would about So pipeline. I

Rob Brown

you. Okay, over. it turn great. I’ll Thank

Joe Boyer

Rob. Thanks,

David Quinn

Thanks, Rob.

Operator

over This concludes the to to our any turn Boyer, for back Joe CEO, question-and-answer session. conference closing I remarks. would like

Joe Boyer

very forward I of you Thank your you to support appreciate and for joining updating us much. to very thank want on Atlas today. progress. much. Thanks everybody We look our

Operator

you now presentation. The today's conference attending concluded. for Thank has

You may disconnect. now

Atlas Technical Consultants (ATCX) 12 Nov 222022 Q3 Earnings call transcript