Hello, and welcome to the Atlas Technical Consultants' Fourth Quarter and Full Year 2020 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn this call over to your 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 have seen 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 in the Investors section of our website at oneatlas.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 are 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 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 3. I am joined today by our Chief Executive Officer, Joe Boyer, who will run through a business overview and operating update, I will continue with a discussion of our financials and outlook before we open up the call for questions. At this point, I will turn it over to Joe to pick up on Slide 4.

Thank you, Dave, I 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 transformed our company on many fronts. The tireless efforts of the Atlas team have 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 have 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. In August we firmed up our view of the evolving market landscape brought up by the pandemic. And we set 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 won a significant number of contracts at the end of 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'll share more about the exciting catalysts we see for our business through our stronger capital base. Moving to Slide 5, please. We're very pleased with our accomplishments in 2020 and the exceptional finish to the year. 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,…

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 has been one of our top priorities. We're extremely pleased to have recently completed several highly acquisitive transactions in 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, were up 11% compared to the prior year quarter. The 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 increased 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 $15.4 million, represented 15% of net revenue. A decrease from prior year was mainly attributable to 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, a roughly stable performance help in part by our strategic acquisitions. More impressively, our net revenue in 2020 increased to $381.4 million up from 2019. Net revenue…

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 promptly adjust to be successful in all market environments. Our solid execution throughout the year and unrelenting commitment to safety give us confidence that we are on the right track to further capitalize on the nation's continuing economic recovery and national commitment to infrastructure investment. We 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 am particularly pleased with our proven consistent financial performance also executed on strategic multiple, highly accretive acquisitions. We optimize our capital structure, including the retiring of warrants and preferred stock. We increased our liquidity and access to capital for M&A. We strengthen 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 nation's 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 will be conducting a question-and-answer session. [Operator Instructions] 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.

Good afternoon.

Nice job on the quarter. On the kind of organic growth view into next year, given, where you're at right now and given the COVID environment, where would you say you kind of see the organic growth shaking out and how does the market look at this point?

Yes. Great. Thanks Rob. Again, we feel really good looking forward into 2021. We put a range out, a revenue range of $520 million, which indicates overall a 9% growth rate year-over-year at the mid. 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 you know, we're seeing a new 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 COVID impact sort of lessening at this point? Do you have pretty good visibility into your contracts or do you still feel that there's some headwinds that you're seeing?

Rob, let me take that. So, let me first say that, we're still really competent in our strategy for 2021. I think it was sort of validated in 2020. So, we feel good about our strategy and our guidance we put out there. Regarding COVID specifically, we are still seeing COVID 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're pretty steady and the growth coming across Q4 and into Q1, but want to stress that that there's still a little bit of an operational inefficiencies in our operations due to COVID-related requirements. But as I mentioned, we've got – we have considerable look into the visibility of our backlog and the competence in that backlog. I mean, being that it's fully funded. Rob, I think it's important to note that that's 60% to 65% of our plan has been identified in our backlog already. So – bidding activities continue to be strong with larger transportation infrastructure [lettings] [ph] 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 project starts are progressing pretty steadily as well.

Okay, thank you. I'll turn it over.

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

Hey, thank you. Congrats on all the accomplishments you had in the last few months and over the last year.

Thanks Brent. I appreciate that.

Thanks Brent.

Hey Joe, I wanted to follow up on the environmental service line. I think you had mentioned that particular area, 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 and sorts of things that you're seeing out there for that area, because it's a very significant piece of the pie?

It is environmental, Brent, has always been a strong part of our revenue and backlog at about a third of our business. Let me just speak a little bit about 2020, so where we saw some impacts in 2020, we're really relating to our commercial and industrial parts of our business being impacted from really three areas of our environmental services. We saw headwinds and our due diligence business was as closely tied to finance and banking markets they're building sciences. So, we do a lot of indoor [air] [ph] 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 – didn't maintain the continuous service level that we had in the high-rise buildings there, and then also our retail petroleum business. So those are the three businesses that were really impacted in the trough of the 2020. So, we saw the due diligence business really pick up pretty heavily when 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 sciences side of the business and our retail petroleum business and environmental is their project starts back as well. So, we see consistent with the Biden 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 in the commercial business in our environmental space. So, I hope that helps out, Rob?

Yes, that helps, Joe.

Sorry Brent.

No worries. Maybe just to follow up, a lot going on in Washington. Joe, what are you keeping an eye on, I know we – obviously a lot of talk around infrastructure bill, but I wonder if there's other policies and things being looked at [push forward] [ph] that it could really benefit the business as well? And maybe it's in that environmental arena, any update there would be helpful?

Yes. Let me say Brent that I think clearly our firm is well positioned to capitalize on any infrastructure bill going forward and waiting my entire career for it. One of these days it's going to come, but this business is well positioned. We'll get wind in our sails from any infrastructure spend. And I still attribute a lot of that growth potential coming from the States that we're focused in the States are really, are being creative and finding ways to fund their own projects. So, I still think that that the infrastructure bill hopefully will still come, but I think we'll get huge win from that. The environmental business, I think, we're watching that. I think I clearly think that democratic administration is willing to continue 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 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 a sustainable level or a way to think about operating cash flow for 2021?

Yes, it is Brent. Minus getting past the transaction costs that we experienced, [de-spacing] [ph] going public. We had three obviously new acquisitions that occurred during the year, we had the re-capitalization, we had the warrant offering. So, we had an awful lot of sort of front-end structural type transactions that came through that carried a significant amount of expense. So, when we look to adjust those and normalize those going forward, yes, 65% is a definitely a reasonable range for us to be in, hopefully a touch better.

Okay, great. One quick one, Joe, just thinking about all the activity at the company here, I'd love to get your perspective and kind of where you think you are from a cross-selling perspective or shared services perspective, just in terms of all the deal activity you've done and whether that can be another lever here for 2021?

Well, let me say that we are, and you've heard me say this before Brent. I mean, I think this whole entire business – industry is extremely highly fragmented. And we think there's 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 DDTL. We are looking to continue to grow this business on our strategy of half acquisitively and half the organic growth. So…

I think 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 at this time.

Yes. I think, Rob, our strategy really is to, 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 TIC-related business where, and I'm sorry, Brent, I'm going to get your name right. Sometime maybe after the fourth analyst, I'll get it right. But I'm sorry Brent, but…

That's okay. No worries.

Our strategy and our services and our service mix that we're looking to acquire businesses that will allow us to offer in the geography of a full range of services. And as you can tell, we're growing our net revenues faster than our growth revenues, and that 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 that's a continued focus. So, in the geographies where we have an environmental focus and less of a TIC or PCQM type service that we might look for company to better integrate the services up that way. So that's still our continued strategy going forward.

Okay, Joe, David, appreciate it. Thank you.

Thanks Brent. Take care.

Thanks Brent. I 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 in the refinancing.

Thanks, Noelle.

Thanks.

Joe, I just wanted to go back to your comments on M&A, and you mentioned you have a really robust pipeline. In some of the markets that we follow, we are seeing some competition from private equity, really pushing up 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? Thanks.

Thanks. That's a great question. Let me, I do think Noelle, that we feel that the way our deal structure, I think our prior acquisition success. I think our focus on a heart led leadership and integration strategy have made us an acquirer of choice. Okay. So, our deals we generally stay away from mid-process or a broker lead opportunity. Most of our pipeline is really built internally from leads that we have from our technical organization. So, I'd say we have definitely seen competition increase 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. And I didn't see that, and I know other people reported that we have not seen that during 2020. 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 [indiscernible] business for four to six times typically.

We've talked about Noelle, I'll just add we've talked about, positioning ourselves as an acquirer of choice. And if you look at the history of our acquisitions, our retention of principals that have come into the organization is in the high 90% range. We brought in a little over 80 principals to the organization thus far, and I think we've retained about 78 of them. And then we've had a couple of retirements. The reason I bring this up is because the firms that we're bringing in are specifically chosen, they're 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 in 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 they're going to get at the outset.

Right. Right. Okay. That's great. Second, throughout the reporting season, when we've heard from companies that have exposure to the construction markets, there has been this kind of repeated, echo that 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 are thinking about that moving forward?

I'll start Noelle 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 name 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 going forward. We're also starting to see some data center opportunities materialize. So, I think, our position and perspective is consistent with what you've heard, those opportunities are developing, we're seeing them and we're starting to win them.

Okay great. And then just two – I’m sorry Did you ever…

I really didn't know right ahead.

Okay. So just two more housekeeping questions. I appreciate, all of the color you gave on the weeks in the quarter, but just give them some of these weather impacts and the Texas event that we saw in the first quarter. Joe, 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 the first quarter?

Sure Noelle, thanks. Well, first of all, obviously, the storms we experienced here were unfriendly, and unhelpful.

And unusual.

And unusual. First, let me start just looking ahead to Q1, I mean, we're cautious about Q1 yet optimistic. And as it relates to the broader economy, we do believe that we are starting to see, the engine of this business really starts to rev again. There's still some uncertainty out there, obviously, relative to COVID and vaccination rates, how fast those will progress, new strains, certain geographies being completely opened back up. But this said, we do expect to be moving back to pre-COVID 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 in prior year. So, overall, we feel good about the consensus expectations that we've seen out there a 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 finish with a steady and solid first quarter.

Okay, great. And then my last question was just kind of going back to the cashflow question, can you remind us if you saw any tax benefits from the CARES Act and how to think about that moving forward?

There wasn't anything substantial there Noelle, other than we were able to – there was some cash flow benefit in that we were able to defer some employer related taxes, just like most businesses. But beyond that, it wasn't significant for us.

Okay. All right thanks. That's it for me.

Thanks Noelle.

Thanks Noelle.

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 appreciate the color that you gave them a call. But could you flesh out a little bit more details in terms of the strength that you are seeing and more particulars of momentum building from previous work, or is this just an overall improving environment? Thank you.

Sure. Thanks, Kathryn. I would say that that we have seen considerable progress in all of our end markets and all of our services, from Q4 to Q1 of 2021. So, it's more of a consistent growth pattern we've seen, obviously, we had some projects, particularly in our tech space and the commercial end markets that were delayed in basically Q2 and into Q3 of 2020, that are now progressing along. And not aware, we didn't have any material cancellations or 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, in all areas of the work, the tech space, PCQM, as well as EMD, so that continues to be strong. Even with states reporting flat to slightly 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.

Yes, it does. And then excluding Texas, and I guess, if you exclude Snowmageddon that impacted the Southwest. 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 improving, you provided some detail, but it would be helpful if you could give types of projects that you are seeing relative improvement on the private sector side? Thank you.

Okay, so let me first go back to the first question was around…

Geography.

Geographies and regional growth, right. So, what we say is that the strength I would say, in our recovery has been that a lot of the due diligence work that we do is across all four regions. So that business that was really hampered in 2020 is now rebounded. And that's showing across revenues across all the regions. We have seen recovery in our upstate New York particularly around the some of the building sciences side of the business, both on 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 businesses continue to be strong all throughout. So that basically applies to the West Coast region, our central region, as well as our Southeast business. So, all three of those regions seen transportation growth as well. In 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 thin and challenged. We do look for that business to slowly recover, but I think…

I think – I was going to say relative strength wise, Joe, we've seen, our central region really outperformed this year, particularly, sort of in our Texas and proximate states, the amount of work we booked, the amount of work we executed not only in new contracts and contract extensions, 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 commercial service standpoint, tech was also very strong, specialty, inspection services wise, that really, shored up the businesses as we progress through the year. So those are a couple of areas that we saw strong performance, petroleum, retail petroleum, had a nice bounce back, certainly through the second half of the year.

I was going to say, our petroleum business, our private retail customers and our petroleum business serve back online, 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. Again, you touched a little bit of this on M&A, but have the priorities changed, or really kind of, I'm not going to say be better informed, but as we come out of COVID, and are dealing with the realities of the post-COVID world, are there services or end markets, that you are choosing to grow perhaps a little bit more because of that, or focus on less. Really help us understand their general focus in terms of M&A and an overall growth, given a post-COVID world?

Kathryn, maybe I'll start and then I'll ask Joe to chime in. First and foremost, obviously, we're extremely pleased about being able to accomplish this recapitalization. I mean, 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 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 float by nearly 4.5 million shares. And here we followed with the second big step is to strategically streamline and optimize our structure. So, we consolidated everything into a single term loan, 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 delay to our term loan that is exclusively for M&A. So, I think that that plays right into 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 de leveraging M&A. We're going to continue to drive fundamental operating performance, strong margins, and strong cash flow generation. 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, infrastructure spending and environmental, which I know Joe will talk about.

Yes Dave, let me just add that. In regards to what your service – talking about specific services, clearly, our transportation business, we see continued growth in that business, we grew considerably in our PCQM services, we're looking to continue growth and looking for SUE, so Site Utility Engineering work in that area. We're also looking at our tech space for growing specialty inspection services, in environmental we're looking to grow that business in federal sector as well as more compliance and renewable type work as well. So those are sort of three services there, but – that’s all that I would add to what you said there.

Okay perfect. Very helpful. Thank you, guys.

Thanks, Kathryn. Appreciate it.

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

Thank you, I appreciate that. So, thank you 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.