– Record Quarterly Revenue, Adjusted EBITDA, and Backlog – Each with Double-Digit Growth Year -Over-Year –
– Record Adjusted EBITDA Margin Highlights Strong Execution and Benefits of Growing Scale –
– Reaffirming the Midpoint and Narrowing 2022 Revenue and Adjusted EBITDA Outlook Ranges –
Atlas Technical Consultants, Inc. (Nasdaq: ATCX) (“Atlas” or the “Company”), a leading infrastructure and environmental services provider, announced today results for the third quarter ended September 30, 2022.
Third Quarter 2022 Highlights:
(all comparisons versus the prior-year period unless otherwise noted)
- Gross revenue grew 17% to $162.1 million, including 10% organic growth. Revenue, excluding subcontractor costs, grew 15%.
- Gross margin, excluding subcontractor costs, was 59.5%, up 75 basis points; operating margin excluding subcontractor costs was 10.8%, up 310 basis points, driven by higher revenues, benefits of scale, improved pricing, and solid operational execution.
- Net income was $2.0 million. Adjusted net income (1) was $8.9 million, or $0.23 per share, up 68%, which excludes $6.2 million of amortization of intangible assets and $0.8 million of non-recurring expenses.
- Adjusted EBITDA(2) increased 30% to $25.8 million; Adjusted EBITDA margin, excluding subcontractor costs was a record 20.0%, and up 240 basis points.
- Backlog reached another record level at $864 million, up 14% compared to last year.
“We continue to make excellent progress on our strategic initiatives, resulting in another quarter of record operating results, highlighted by 10% organic revenue growth,” said L. Joe Boyer, Atlas’ Chief Executive Officer. “Our third quarter results were strong across the board and included record revenue, margin performance, and backlog. These results are a testament to the success of our growth strategy and strong market demand for professional services across the infrastructure and environmental end-markets we serve. We remain committed to expanding our technical expertise across the organization, growing our scale, and attracting world-class talent to strengthen our position as a preeminent provider of mission-critical services for infrastructure and environmental markets.”
“Our record backlog and new business activity highlight the demand for our services and Atlas’ strong market position,” continued Boyer. “In the third quarter we saw particular strength in our transportation and government markets, and we continue to have success winning larger, long-term projects. Spending in our core infrastructure and environmental markets is expected to continue to grow in 2023 and beyond, with additional support from major government spending initiatives including the Infrastructure Investment and Jobs Act and the Inflation Reduction Act.”
“Our record third quarter results and strong year to date performance demonstrate the long-term growth potential we have at Atlas,” noted Boyer. “We are firmly on track to achieve our 2022 guidance and have tightened our outlook ranges for revenue and adjusted EBITDA. Additionally, we are optimistic that our growth and strong operating performance will continue in 2023 and beyond.”
Third Quarter 2022 Financial Performance
Gross revenue in third quarter 2022 was $162.1 million, an increase of $23.4 million, or 16.9% compared to the prior year period. Gross revenue growth was driven by revenue synergies created through the cross-selling of technical services, solid end-market fundamentals, improved pricing, and contributions from acquisitions. Organic gross revenue growth was 10.3%.
Gross profit increased to $76.8 million, compared to $66.1 million in the prior year quarter. Gross margin on gross revenue was 47.4%, compared to 47.7% in the prior year quarter, due to a higher mix of subcontracted work related to environmental remediation and transportation projects. Gross margin, excluding subcontractor costs, was 59.5%, compared to 58.8% in the prior year quarter due to pricing increases and solid operational execution.
Operating income was $13.9 million, compared to $8.6 million in the prior year quarter. Operating margin on gross revenue was 8.6%, compared to 6.2% in the prior year quarter. Operating margin, excluding subcontractor costs, was 10.8%, compared to 7.7% in the prior year quarter due to benefits of scale, cost controls, and $2.6 million of higher non-recurring expenses in third quarter 2021.
Net income was $2.0 million, compared to a net loss of $2.5 million in the prior year quarter. Adjusted net income (1) was $8.9 million or $0.23 per share, compared to $5.0 million, or $0.14 per share, in the prior year quarter, mainly due to improved operating results in the quarter. Adjusted net income excludes $6.2 million of amortization of intangible assets and $0.8 million of non-recurring expenses.
Adjusted EBITDA was $25.8 million, an increase of $6.0 million, or 30.3% compared to the prior year period.
Backlog was $864 million, up 1.1% from second quarter 2022, and up 14.1% compared to the prior year period, driven by key transportation, government, and power contract wins. Notifications of pending contract awards were approximately $133 million.
Operating cash flow was a use of $7.7 million in the quarter, in-line with seasonal patterns when working capital typically expands and compared to a use of $6.2 million in the prior year quarter.
Balance Sheet Update
Net leverage (3) at September 30, 2022 was 5.6x, unchanged from the end of second quarter 2022, and down from 6.4x at the end of second quarter 2021. The company remains committed to optimizing its capital structure by generating cash flow from operations, deleveraging M&A transactions, and continuously evaluating all options to enhance the balance sheet.
“In-line with typical summer seasonality, working capital increased in the third quarter, the period where we see the greatest demand for our services,” said David Quinn, Chief Financial Officer. “We expect to convert a large portion of this working capital in the fourth quarter leading to positive cash flow from operations for the full year.”
Updating Full Year 2022 Outlook
- Gross revenue is anticipated to be in a range of $590 million to $610 million, compared to $538.8 million in 2021.
- Adjusted 2022 EBITDA is expected to be in a range of $85 million to $89 million, compared to $73.2 million in 2021.
(1) Adjusted net income is a Non-GAAP financial measure. Please see “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of Adjusted Net Income to the most comparable financial measure calculated in accordance with GAAP.
(2) Adjusted EBITDA is a Non-GAAP financial measure. Please see “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of Adjusted EBITDA to the most comparable financial measure calculated in accordance with GAAP.
(3) Net leverage is bank covenant net leverage calculated as (debt –cash) / LTM Adj. EBITDA including the pro forma impact from acquisitions and cost efficiencies.
Webcast and Conference Call
The Company will host a webcast and conference call on Wednesday, November 9, 2022, at 9:00 a.m. Eastern time (8:00 a.m. Central time) to review third quarter 2022 results, discuss recent events and conduct a question-and-answer session. The live webcast will be available at www.oneatlas.com in the Investors section. The conference call will also be accessible by dialing 1-877-300-8521 (Domestic) and 1-412-317-6026 (International). A replay of the webcast will be available on the Company’s website.