12 Aug Atlas Technical Consultants, Inc. (ATCX) Q2 2020 Earnings C…
Atlas Technical Consultants, Inc. (NASDAQ:ATCX)
Q2 2020 Earnings Call
Aug 11, 2020, 8:00 p.m. ET
- Prepared Remarks
- Questions and Answers
- Call Participants
Hello and welcome to the Atlas Technical Consultants’ Second Quarter 2020 Conference Call. [Operator Instructions]
I would now like to turn the conference over to your host, David Quinn, Chief Financial Officer. Thank you. You may begin.
David D. Quinn — Chief Financial Officer
Thank you for joining our second quarter 2020 conference call. We hope that you’ve seen our earnings release issued after market close 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 I 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 reconciliation of these non-GAAP measures to their most directly comparable GAAP measure.
Moving to our agenda on slide 3. I’m joined today by our Chief Executive Officer, Joe Boyer, who will run through a broad business overview and an operating update at which point I will take it back up and run through our financials, an update on progress with our M&A program and then round out with our reiterated outlook before we open up the call for questions.
So at this point, I’ll turn it over to Joe to pick up on slide 4.
Joe Boyer — Chief Executive Officer and Director
Thanks, David. Appreciate that.
Good afternoon to all of you on the — joining us on the line today.
Let me start by sending a sincere thank you out to all of our Atlas associates who have worked just so diligently to balance the difficult challenges of the COVID environment and their own personal lives and then while staying committed and focused to the safety and operational excellence of Atlas. You’re a talented and unique team. I’m blessed to have you on my team but hate to have to compete [Indecipherable]. So I want to thank each and every one of you.
Let me please direct you to slide 4 for an overview of our financials, a summary of the services we offer and the strategic tenants of our purpose-built business that results in Atlas being a resilient leader in non-discretionary compliance driven infrastructure services.
Moving to Q2 2020 highlights on slide 5. We’re very pleased with the resiliency and performance of our business during the unprecedented challenges of the COVID pandemic. It’s a quarter that was fully impacted with shelter in place orders throughout the US as well as commercial project shutdowns, and we delivered healthy gross revenue of $112.7 million while showing positive results in our strategy to cross-sell and self-perform more services which delivered $91.6 million of net revenue. This key strategy to drive more self-performance of our services provides margin enhancement opportunities for our business. Very important.
As I detailed in the last earnings call, our leadership team took quick and decisive actions in moderating cost impacts that were driven by the COVID revenue declines. We continue to prioritize our safety above all else, while enhancing our operational efficiency and financial flexibility were the benefits of our collective successes. The depth and timeliness of those cost-control measures, coupled with improved self-performance were instrumental in driving strong adjusted EBITDA of $15.4 million for this quarter, which is 16.8% of net revenue. And as always, we continue to maintain our focus on cash management resulting in $39 million of liquidity at the end of the quarter.
Demand conditions still remain solid in our markets. They’re propelled by regulatory compliance driven essential services as well as the upward trend of municipalities and state agencies’ outsourcing programmatic and quality assurance services to the private sector. In addition, approximately half of our business being government based, we do see stability and predictability in our revenue streams, even through these challenging times. We continue to take advantage of our strong professional service qualifications, our national scale and the depth of our technical resources to continue to win more marquee and contract awards, which have added to a record backlog of $621 million.
We also continue to execute strategic, accretive tuck-in acquisitions to broaden our footprint, deepen our technical capabilities and expand our client base, while deleveraging our balance sheet. Our recent acquisition of Long Engineering in February is performing nicely and are ahead of budget and also helping us to expand our transportation services into Alabama and additional services in Georgia as well. We are pleased to announce the signing of definitive agreements to acquire two solid regional leading firms in Alta Vista and WesTest, which further strengthens our transportation and infrastructure services in our West Central and Northeast regions.
Now turning to the current market landscape. And I refer you to slide 6, please. The nature of our mission critical services as well as our end market mix has allowed Atlas to respond well to the COVID-19 challenges without material impacts. Our government-based business delivered solid volume in Q2, with slight improvement over Q1, while our transportation volumes showed growth over the quarter. Now, in contrast, the shelter in place orders, most notably in the Northeast and Northern California did result in work delays in our commercial sector. However, I think it’s important to note, we have not experienced material project or contract cancellations.
Our business has a highly variable cost structure, which allows us to align our resources with these projected project delays to counteract the revenue shortage during the quarter. And our prompt planning did result in cost savings in the area of $6 million to $8 million by year-end 2020.
Moving to backlog and key wins on slide 7. We remain confident that the underlying earnings power of this Company remains unchanged from our initial public offering. We are aggressively continuing our strategy of growing the business organically and through deleveraging acquisitions that expand our technical service offerings and our geographical footprint with a focus on those states likely to benefit from increased government infrastructure spending. We’ve had another solid quarter of winning our share of projects and contracts throughout all of our regions. We provide a summary of…