investor presentation · 2020. 12. 1. · group services established national platform acquisition...
TRANSCRIPT
NOVEMBER 2020
INVESTOR PRESENTATION
FORWARD LOOKING STATEMENTS
2
The statements contained in this presentation that are not purely historical are forward-looking statements. Our forward-looking
statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. The information included in this presentation in relation to Atlas has been provided by
Atlas and its management team, and forward-looking statements include statements relating to Atlas’ management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projec tions,
forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward -looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “ intend,” “may,” “might,” “plan,” “possible,”
“potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward -looking statements, but the absence of these words does not mean that a statement is not forward-looking. The forward-looking statements contained in this presentation
are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a
number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and
uncertainties include, but are not limited to: (1) the ability to maintain the listing of the Company’s shares of Class A commonstock and warrants on Nasdaq; (2) the ability to recognize the anticipated benefits of the business combination or acquisitions, which may
be affected by, among other things, competition, the ability of the Company to grow and manage growth profitably, maintain relationships with customers and suppliers and retain management and key employees; (3) costs related to the business
combination and acquisitions; (4) changes in applicable laws or regulations; (5) the possibility that the Company may be adve rsely affected by other economic, business, and/or competitive factors; and (6) other risks and uncertainties indicated from time to time in
the Company’s filings with the U.S. Securities and Exchange Commission, including those under “Risk Factors” therein. You arecautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this presentation.
Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this presentation.
PRESENTERS
Joe BoyerChief Executive Officer
30+ years of experience
Oversaw the delivery of infrastructure
planning, engineering, architecture, construction management,
environmental consulting and program management services as
CEO, Atkins North America
Previously held the position of
President of Shaw Environmental & Infrastructure’s Federal division
David QuinnChief Financial Officer
25+ years of experience in the
construction, engineering and technical services industries
Previously served in Senior
Executive roles at the Shaw Group and Atkins North America, most
recently in Chief Financial Officer and Chief Operating Officer capacities.
3
OVERVIEW
INVESTMENT HIGHLIGHTS
KEY FINANCIALS
TABLE OF CONTENTS
1
2
3
4
TESTING, INSPECTION & ENVIRONMENTAL CONSULTING
ESSENTIAL PROVIDER OF
MISSION CRITICAL SERVICES
HIGH QUALITY CUSTOMER AND WORK MIX
ATLAS OVERVIEW
90% Time & Materials
70% Existing Structures
9,000+ Annual
Customers
50,000+ Annual
Projects
<$10k+ Average
Project Size
Materials Engineering & Testing
Environmental Services
Construction Quality Assurance
Disaster Response & Recovery
ENGINEERING, PLANNING & DESIGN
Engineering & Design Services
Program Management
Construction Support Services
5
A LEADING NATIONAL TECHNICAL SERVICES PLATFORMSpecialized provider of testing, inspection, environmental and engineering services to support and maintain critical infrastructure
$456M
Gross
Revenue1
17.5%
Adj. EBITDA
Margin1,2
$638M
Backlog
1. Based on LTM Q3 2020.2. Adj. EBITDA Margin calculated as LTM Q3 2020 Adjusted EBITDA / LTM Q3 2020 Net Revenues.
WHO WE AREValues-driven approach
We work together as partners, doing what we say with full
accountability.
Always striving for the highest quality, we ensure greatness
inspires all our work.
We enhance quality of life. We value people and safety above
all else.
As our hallmarks, we act with compassion, empathy and
respect.
Life Heart
Trust Mastery
6
VISION
We strive to be the most sought-after infrastructure and environmental solutions brand, known for our unique values-driven
approach and brought to life by the industry’s most exceptional people.
PURPOSE BUILT PLATFORMA modern approach backed by a legacy of excellence
2016 2017 2018 2019 2020
Forming the
Strategy
Establishing
the Platform
Executing the
Atlas Playbook
Creating
National Scale
Completed
Public Listing
National Scale
Platform
Created the Atlas
playbook and
initiated M&A
discussions to
create the platform
Acquired three
regional market
leaders in
Texas, Georgia
and California
Integration of platform
and cross-selling
jumpstarted backlog
growth
Merger with ATC
Group Services
established
national platform
Acquisition of Long
Engineering, Alta
Vista1 & WesTest1
Completed Public
Listing
Nasdaq: ATCX
71 Alta Vista & WesTest acquisitions expected to close by end of 2020
ROBUST FUNDAMENTALS SUPPORT VALUATION UPSIDE
Strong Growth Profile1,2
Attractive Margin Dynamics1,2
25%
14%
ATCX Key Peers
2019 Net Revenue Growth Versus Peers
25%
7%
ATCX Key Peers
2019 Adj. EBITDA Growth Versus Peers
17%
12%
ATCX Key Peers
2019 Adj. EBITDA Margin Versus Peers
8
Enterprise Value / 2020 Adj. EBITDA Versus Peers4,5,9
1. Net Revenue figures used where available and Adjusted EBITDA margin calculated as % of Net Revenue where available.2. Net Revenue is not a financial measure determined in accordance with GAAP. For a definition of Net Revenue and a reconciliation to our most directly
comparable financial measure calculated and presented in accordance with GAAP, please see the Appendix included herewith.3. Key Peers: NV5 Global, Tetra Tech, and ICF International.4. Source: FactSet, Capital IQ and company filings as of 11/11/2020.5. Multiples based on Enterprise Value as of 11/11/2020.6. Engineering & Design (“E&D”) Peers: NV5 Global, Tetra Tech, Parsons Corporation, Stantec, WSP Global, Jacobs Engineering Group and AECOM.7. Testing & Inspection (“T&I”) Peers: Applus Services, S.A., ALS Limited, Bureau Veritas S.A., Intertek Group plc and SGS S.A.8. Professional Services Peers: Accenture plc, Booz Allen Hamilton, CGI, FTI Consulting, Huron Consulting Group and ICF International.9. Adjusted EBITDA is not a financial measure determined in accordance with GAAP. For a definition of Adjusted EBITDA and a reconciliation to our most
directly comparable financial measure calculated and presented in accordance with GAAP, please see the Appendix included herewith.
10.0x
13.5x
11.2x
13.9x 13.7x
ATCX Key Peers E&D Peers T&I Peers Professional
Services Peers
9
CURRENT MARKET LANDSCAPE Non-discretionary and government-based work remained strong throughout 2020
Atlas’ mission critical services support
infrastructure and other essential
industries
NET REVENUE BY END MARKET1,2
1. Net Rev enue is not a f inancial measure determined in accordance with GAAP. For a definition of Net Revenue and a reconciliation to our most directly comparable financial measure calculated and presented in accordance with GAAP,
please see the Appendix included herewith.2. Management estimates based on FY 2019.
• Transportation
• Government
• Education
• Water
• Commercial
• Industrial
No material contracted backlog
projects have been cancelled
Highly variable cost structure to align
resources with market activity
Preciously enacted cost savings
to benefit 2020E by $6-8M
~50%
Government
Based
No Material
COVID-19 Impact
Government-based volume
higher YoY in Q3 2020 YTD
Localized
COVID-19 Impact
Localized geographic work
delays, most notably in the
Northeast and Northern California
~50%
PRIVATE SECTOR
~50%
GOVERNMENT-
BASED
36%
15%
38%
6%4%
OVERVIEW
INVESTMENT HIGHLIGHTS
KEY FINANCIALS
TABLE OF CONTENTS
1
2
3
10
INVESTMENT HIGHLIGHTS
Purpose-built platform delivering highly-technical, mission critical infrastructure & environmental services
Entrenched long-term relationships with high quality customers base
Resilient business model driven by repeatable, contracted revenue base derived mostly from non-
discretionary projects
Proven ability to execute multi-pronged growth strategy
Continued growth in backlog provides Atlas with one of the strongest backlog positions in
the technical services space
Disciplined deleveraging M&A approach
11
Industry leading gross margins and EBITDA margin profiles, driving substantial free cash flow
36%
15%
38%
6%4%
• Materials, Engineering & Testing
• Environmental Services
• Design / Construction Quality Assurance
• Disaster Response & Recovery
• Engineering & Design Services
• Program Management
• Project Support Services
Example of Atlas Services by End Market Key Tenets of Atlas Services
Engineering, Planning & Design
1. Trusted Advisor – Services ensure safety of employees, customers and the general public
2. Technical Expertise – Highly-skilled employee base able to add value to a diverse array of projects
3. Compliance Driven – Non-discretionary, highly recurring services
4. Local Knowledge and Relationships – Extensive knowledge and expertise of local regulations and codes
5. National Scale and Reputation – Strategic footprint enables the Company to deliver highly customized solutions nationwide
6. No Construction – Atlas does not perform construction or take construction risk
Net Revenue by Service1,2 Net Revenue by End Market1,2
Note:1. Management estimates.2. Excludes the pro forma impact of Long Engineering acquisition.
BROAD RANGE OF HIGHLY TECHNICAL, MISSION-CRITICAL SERVICESDiverse set of highly technical infrastructure and environmental services
12
• Transportation
• Government
• Education
• Water
• Commercial
• Industrial
80%
20%Testing,Inspection &EnvironmentalConsulting
Engineering,Planning &Design
Testing, Inspection & Environmental Consulting
Atlas Services
Reinforced concrete testing and inspection for facility renovations,
environmental & industrial hygiene
Structural inspection and materials testing for tanks and retention ponds
Geotechnical and structural inspection for renovations and expansions,
environmental & industrial hygiene
Materials testing, QA, engineering, inspection and design for road, bridge,
and airport modif ications, environmental and program management Transportation
Commercial
Industrial
Government
Education
Water
System-w ide operations and maintenance for remediation systems,
environmental & industrial hygiene
Program management, design, and oversight for publicly funded projects,
environmental & industrial hygiene
LONG-TERM CUSTOMER RELATIONSHIPS AND DIVERSE REVENUE BASEAtlas’ technical expertise, performance and strong relationships have led to decades-long relationships with customers, providing a strong base of repeating revenues and leading backlog position
13+
15+
15+
18+
20+
25+
25+
25+
30+
30+
1
2
3
4
5
6
7
8
9
10 Transportation
Government
Commercial
Education
Water
Industrial
Blue-Chip Customer Base(Relationship Length in Years for Top 10
Customers by Net Revenue)
Across Diverse End Markets(Representative Customers)
Tenured Relationships Driving Consistent Demand
(% of 2018A Net Revenue from top 15 customers)1
1. Approximate values based on historical trends.2. Repeat customers defined as those that have used Atlas services in the prior year.
30+ Years
27%
20 - 30
Years25%
10 - 20
Years44%
<10 Years
4%
Entrenched, Highly Repeating and Diversified Customer Base
• 9,000+ Annual Customers
• ~90% Revenue from Repeat Customers2
• 50,000+ Annual Projects
• 90%+ T&M or Cost-Plus Contracts
13
RESILIENT BUSINESS MODELResilient, purpose-built platform delivering highly-technical, mission critical infrastructure & environmental services
Fully-funded backlog
provides multi-year view
of work pipeline
Government-based
work grows steadily
throughout cycles
Geographic exposure
to well-funded
regions in the U.S.
Testing, inspection and
environmental work is
regulatory and
compliance driven
Work performed for
repeat customers
~90%
Work performed on
existing assets and
structures
~70%
Diverse and resilient
end markets, with
approximately half of
work government-based
~50%
Highly variable cost
structure and low
capex needs
enhances resiliency
BACKLOG DRIVEN CYCLE-TESTED HIGH GROWTHMISSION CRITICAL ASSET-LIGHT
14
Purpose-built platform
through seven accretive
acquisitions with a
pipeline of additional
opportunities
7Purpose-built platform
through seven accretive
acquisitions with a
pipeline of additional
opportunities
7
BACKLOG DRIVES HIGH BUSINESS CONFIDENCE Record backlog fueled by key wins across Atlas service offerings and geographies
15
BACKLOG
2017
$502M
Q3 2020
$638M
Building strong pipeline of
work, providing favorable
trajectory into 2021
Q3 KEY WINS VALUE SERVICES
Gwinnett County, GA GDOT Highway $7M Program Management
United States Army Corp of Engineers,
Los Angeles District$5M
Materials Engineering,
Consulting & Testing
Construction Management
Services for BART Projects$5M
Materials Engineering,
Consulting & Testing
TxDOT Highway $3.5MConstruction Quality
Assurance
County of Los Angeles
Department of Public Works$3M
Materials Engineering,
Consulting & Testing
Environmental Protection Agency –
Groundwater Treatment$2.5M
Environmental
Services
United States Postal Service –
Water/Tank Compliance$2.5M
Environmental
Services
16
STRATEGIC GROWTH TRAJECTORYProven execution of growth plan through organic and M&A means
20161
$228M
2017
$278M1
2018
$426M
2019
$471M1
2020
~$459M3
2021Ongoing execution of organic
and M&A growth strategy
Gross Revenue2
1 2016 Includes ATC as the accounting predecessor. 2017 includes partial year impact of acquisitions. 2019 Formal y ear of merger between Atlas and ATC.
2 GAAP based historical revenue.3 Midpoint of FY2020 outlook range for gross revenue, does not include planned WesTest acquisition.
NATIONAL SCALABLE GROWTH PLATFORMExecuting multi-pronged growth strategy across expanded footprint
National Platform of Scale
17
Source: 1. Global Market Insights 2. American Society of Civil Engineers 3. Orbis Research
Key Market Tailwinds
• Favorable secular trends independent of the broader economy
• 40% of T&I services outsourced and increasing1
• $4.6tn needed US infrastructure2
• $30bn annual T&I and environmental consulting market3
Cross-Selling and
National Accounts
• Cross-selling and national accounts strategy driving wins
• Self-performing more work to increase share of wallet share
• Expanded capabilities to cross-sell more services
3
1Growth in Large Contracts
• Leveraging national scale and local expertise to win premier projects >$5 million
• Service expansion allows Atlas to bid for larger, marquee contracts
• Geographic expansion to pursue additional large-scale contracts
2
Disciplined Approach
to M&A
• Track record of successfully acquiring businesses at accretive valuations
• Strategy of acquiring smaller business at lower multiples and realizing synergies to drive outsized Adjusted EBITDA growth relative to leverage
• Management actively reviews M&A opportunities
4
CAPITALIZING ON KEY MARKET TAILWINDSCompelling investment thesis supported by strong secular trends
America’s Engineering & Construction Infrastructure Condition Report Card
1. Aging Infrastructure – Continued investment and spending programs dedicated to deteriorating
U.S. infrastructure
2. Safety & Reliability – Services ensure safety requirements
3. Regulation & Compliance – Complex regulatory environment requires third-party consultants;
compliance required through a dow nturn
4. Population Growth – Key Atlas geographies include Texas, California, Georgia and New York
5. Environmental, Social and Governance – Increased public aw areness on the sustainability and
societal impact of assets
6. Outsourcing – Mitigates cost and resource allocation associated w ith training programs
7. Technological Innovation – Emerging technologies driving change
Favorable Secular Trends Driving Growth
Source: 1. Global Market Insights 2. American Society of Civil Engineers 3. Orbis Research 4. Wall Street Journal 5. Texas Department of Transportation 6. California Road Repair & Accountability Act 7. New York Department of Transportation
Market Opportunity
Key Geographic Developments
• Constant effort to improve New York’s transportation infrastructure (e.g.
MTA)
• DOT budget forecast of $12.0bn7
• $14bn 20-year infrastructure budget approved in 2018
• Over $130bn estimated backlog for road and bridge repairs6
• TxDOT budget has grow n +70% ($30bn) and staff decreased 15%5
• 2019 Unif ied Transportation Program approves $75bn in projects through
2028
Texas
California
Georgia
New York
• 2015 Transportation Funding Act provides $10bn for infrastructure funding
• Major Mobility Investment Program secures $11bn for large scale projects
40% $4.6tn
$30bn $2tn+
Of testing and inspection services are outsourced1
Spending need for aging US infrastructure through 20252
Proposed federal infrastructure package4
Market for US infrastructure & construction TIC and environmental consulting3
Aviation Public Parks
Bridges
Drinking Water
Energy
Hazardous Waste
Inland Waterways
Levees
Dams
Ports
Rail
Roads
Schools
Solid Waste
Transit
Wastewater
D
C+ C+
D
D
D+
D+
D
D
D+
B
D
D+
C+
D
D-
18
Overview of Acquisition Pipeline
Atlas has a well-developed “playbook” of identifying, integrating and scaling its accretive acquisitions
Source: 1. American Society of Civil Engineers, IBIS World
Company / Region Strategic Rationale
SoutheastEnhance program management capabilities with
specialty proprietary services
Southeast Expansion into new growth transportation area
NortheastExpand geographic diversity of service offerings
with client targets
WesternDiversity of services with highly specialized
inspection capabilities
The Atlas Playbook
• Leverage industry relationships to identify leading providers
in targeted markets
• Complete acquisition and maintain branding and local
autonomy while integration commences
• Begin early-stage integration
IDENTIFY
• Transition to the Atlas brand and align management on near
and medium-term vision
• Identify cross-selling opportunities
• Consolidate back-office and other administrative functions
INTEGRATE
• Execute on cross-selling initiatives
• Leverage platform capabilities to expand core competency
• Incentivize sales personnel to drive cross-selling and
educate customers on new capabilities
SCALE
1
DISCIPLINED M&A STRATEGYPursue targeted low-risk bolt-ons that both benefit from and expand national scale
2
3
Illustrative Acquisition Targets
140,000+Companies operating
in a highly fragmented market1
~$100MTotal EBITDA
in Pipeline
20+Total Target
Companies in Pipeline
19
OVERVIEW
INVESTMENT HIGHLIGHTS
KEY FINANCIALS
TABLE OF CONTENTS
1
2
3
20
TRACK RECORD OF FINANCIAL SUCCESSStrong results achieved through execution of multi-pronged growth strategy
>100%CAGR
30%CAGR
36%CAGR
(Dollars in Millions)
1 Adjusted EBITDA margin calculated as Adjusted EBITDA / Net Revenues.
27%CAGR
$228
$278
$426
$471
2016 2017 2018 2019
GROSS REVENUE NET REVENUE
$174 $195
$302
$378
2016 2017 2018 2019
Adjusted EBITDA & Margin1 GROSS PROFIT
$3 $9
$53
$66
2%
4%
17% 17%
1%
4%
20%
100%
$-
$10
$20
$30
$40
$50
$60
$70
2016 2017 2018 2019
$83
$114
$177
$211
2016 2017 2018 2019
21
STRENGTHING AND SIMPLIFYING CAPITAL STRUCTUREStrong cash flow profile, financial flexibility and disciplined capital deployment
(Dollars in Millions)
22
Invest in Growth
AcquisitionsPurpose-built platform with
strong accretive deal pipeline
Maintain capital discipline
Financial Flexibility
Optimize ReturnsPrioritized actions to optimize capital structure and returns
Value-enhancing initiatives
Adj.
Operating
Cash Flow1
LTM $60M
1 Adj. Operating Cash Flow excludes $37.3 million of one-time cash expenses related to acquisitions, the business combination with Boxwood Merger Corp., public company formation costs and 2020 COVID-19 related expenses.2 Net lev erage calculated as (debt – cash) / LTM Covenant Adj. EBITDA including predecessor period of acquisitions.
Balance Sheet
3.8x Net Leverage2
Deleveraging M&A strategy
Liquidity of $42M
23
Q3 2020 HIGHLIGHTSResilient business model, proactive execution and safety-first emphasis drove strong results
• Stronger YoY revenues in government-based work
• Private sector work strengthened as Q3 progressed
• Net revenue at 81% of gross revenues, compared to 78% in prior year quarter, attributable to a higher level of self-performed work
• Adj. EBITDA at 19.4% of net revenues, benefitting from operating efficiencies and previous cost actions
• $16.4 million of operating cash flow generation
• Deleveraging M&A progress: acquisition of Alta Vista, strengthening mix of government-based revenue exposure with deal structured to reduce net leverage
• Backlog up year-over-year to a record $638 million, including $29 million from Alta Vista
• Completed warrant exchange offer in November 2020 as part of broader initiative to simplify capital structure
Gross Revenue
$120.5M
Backlog
$638M
Net Revenue1
$97.9M
Adj. EBITDA1
$19.0M
1. Adjusted EBITDA and Net Revenue are not financial measures determined in accordance with GAAP. For a definition of Adjusted EBITDA and Net Revenue and a reconciliation to our most directly comparable financial measure calculated and
presented in accordance with GAAP, please see the Appendix included herewith.
APPENDIX
24
RECONCILIATIONNet Income to Adj. EBITDA and LTM Q3 2020
25
Reconciliation Revenues LTM Q3 2020 Gross Revenues
Reimburseable
Expenses Net Revenues
Nine months ended September 31, 2020 342,503$ (62,550)$ 279,953$
Plus: Quarter ended December 31, 2019 113,014 (20,562) 92,452
LTM Q3 2020 455,517$ (83,112)$ 372,405$
Reconciliation Net Income to Adjusted EBITDA
For the nine
months ended
September 30,
2020
For the quarter
ended December 31,
2019 LTM Q3 2020
Net (loss) income (20,764)$ (5,511)$ (26,275)$
Interest 18,349 1,835 20,184
Taxes - 1,228 1,228
Depreciation and amortization 15,470 4,278 19,748
EBITDA 13,055 1,830 14,885
EBITDA for acquired business
prior to acquisition date 800 579 1,379
Other non-recurring expenses 22,395 14,908 37,303
Non-cash equity compensation 10,995 600 11,595
Adjusted EBITDA 47,246$ 17,917 65,163
Adj. EBITDA % of Net Revenues LTM Q3 2020 17.5%
(Unaudited)
(in $ 000's)