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Atlas Technical Consultants, Inc. (NASDAQ:ATCX)
Q1 2020 Earnings Call
May 11, 2020, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings, and welcome to Atlas Technical Consultants' First Quarter 2020 Earnings Conference Call. [Operator Instructions] Please note this conference is being recorded.

I will now turn the conference over to your host, David Quinn, Executive Vice President. Thank you. Mr. Quinn, you may begin.

David D. Quinn Sr. -- Executive Vice President, Corporate Aaffairs

Good afternoon. Thank you all for joining us for our first quarter 2020 conference call. We trust that you have seen our first quarter earnings release issued after the market closed today. We have also posted a presentation to accompany this call, which can be found on 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 for 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 Atlas' Chief Executive Officer. Joe Boyer, who will begin with a business overview and COVID-19 update; our Chief Financial Officer, Walter Powell, will then begin an overview of our financials; and I will conclude with a discussion on our outlook before we open the call to your questions.

Now I will turn the call over to Joe, beginning on Slide 4. Joe. Please go ahead.

Joe Boyer -- Chief Executive Officer and Director

Thank you, David. I appreciate it. And good afternoon to all of you joining us on the call. We appreciate your time and and your interest in Atlas. At first, I would like to say that our thoughts are with those that have been impacted by the COVID-19 [Phonetic] pandemic. We are thankful to all the healthcare workers and first responders, and others that are braving the frontlines to help us get through this situation. And I include that many Atlas professionals who are really fulfilling their servant roles as a central workers as a provider of these mission-critical services to many essential sectors, I'm incredibly proud of how the Atlas team has risen to the occasion to take care of each other and continuing to provide exceptional work.

I'm starting on Slide 4. While the US economy has experienced an unprecedented transformation since our last update to you in March, our business entered the COVID-19 pandemic at the strongest point in our company's history. We produced our Q1 LTM revenue of $475 million and expanded our fully funded backlog to $607 million, which is a first quarter record for us. We had another strong quarter of adjusted EBITDA performance, which was up 18.6%, which is in line with our expectations while demonstrating the ongoing and underlying earnings power of our business.

We accomplished all of this while completing our business combination with Boxwood Merger Corporation and becoming a public company in February. And this marked a really important milestone for our rapidly growing company. Excluding the costs resulting from that transaction, we generated positive and higher first quarter net income compared to the prior year quarter. At the same time, due to this pandemic, we took the necessary actions to proactively manage cash and costs to not only mitigate the impact of the current pandemic, but also situate ourselves to better execute on our growth strategy, as we emerge out of this period.

We've provided some details on our COVID-19 business update, and I'm referring to Slide 5. Our entire team remains committed to our longer term objectives and they've done an exceptional job navigating the initial economic shock of the COVID-19 crisis. We are prioritizing safety, operational efficiency and financial flexibility for the benefit of our collective successes. And in regards to our people, unfortunately, we had one employee and contracted the virus. We moved quickly to accommodate that employee and to stop the spread of the virus to anyone else within our organization. And I'm pleased to confirm that this employee has fully recovered and has returned back to work.

And as always, we have been extremely proactive and on the front wave of ensuring the safe and responsible support to our employees, clients and the communities in which we serve. With this virus, we are adapting best policies and procedures to protect the health and well-being of our colleagues and others. We have been in constant contact with our hundred plus branch offices, employees and our customers. All our offices remain open, although our employees have seamlessly shifted to a remote workforce where that its stent is possible, and we have instituted CDC guidelines, including daily temperature monitoring, social distancing protocols, providing personal protective equipment and we're staggering shifts to keep the organization efficient and moving forward.

The broad range of our mission-critical professional statistical services that we do provide are in support of many of the essential market sectors. So we are continuing service across our diverse client base and across our wide geographic footprint. So that said, given the rapid decline in private sector work since the onset of the crisis, which included a double-digit decline in April revenue, our teams have really moved quickly to reduce cost and cash deployment. And this includes steady management salaries and cash incentive compensation, workforce reductions, furloughing and even reducing some hours to some employees, freezing hiring and really enforcing tight controls on non-essential expenses, while staying justice focused on continuing to pursue and add new work.

As you know, we are an asset light business and a significant portion of our cost structure is variable, which allows us to effectively align resources with the current level of work. And at the same time, we are mindful of the need to keep critical resources in place to execute growth as states and municipalities continue to gradually lift the shelter-in-place restrictions. We are making a balanced pause decisions in the best interest of our company for success today and in the longer term.

Now moving to a market dynamics, which I am referring to Slide 6, please. Our services predominantly relate to infrastructure, regulatory-driven, our code mandated work with roughly half of the revenues be in public or government-based, and non-discretionary in nature. So we are continuing to win projects all across our regions with most of our new work driven by repeat customers. Now in the private sector, we have experienced localized delays in the execution of some of our contracted work. We have a sizable focus in the transportation sector where we have seen local and state agencies continuing and even ramping up their activities. Many of the states are taking advantage of the lower traffic volumes seen across the country. Other public work projects were performing are largely continuing as normal during this time.

In addition, as I mentioned last quarter, we have over 500 industrial hygienists professionals, who are working closely with our new and our existing customers, to provide critical guidance through the pandemic as it relates to keeping people safe. And we have provided decontamination plans and monitoring services on many sites throughout the country directly related to the virus.

Now from a geographic standpoint, our work has continued at near normal volumes in most of the country. So we have faced localized challenges in our private work based on the severity of the stay-at-home orders in certain localities and states, which have had delayed many of our projects. We are seeing most of the declines occurring in the Northeast, really around the New York tri-state area in New England as well as in Northern California. And that's an important point here, we have not had any contract cancellations and thus no negative impacts to our backlog, and we are seeing some very recent signs of markets reopening.

Speaking about our durable business model on Slide 7, last quarter we did speak at length about our business, so I'm going to reinforce the elements that provide contexts, the resiliency and the broad range of our services in this demand environment. Most of our work is regulatory and compliance-driven, thus it provides consistent need for our services. Approximately 70% of our work is on existing structure and assets and 90% of revenue is from repeat customers, which provides a relatively stable platform for most of our business.

Geographically, we are weighted toward high growth well-funded regions in the US, such as Texas, throughout the Southeast and California. Across our diverse end markets, the approximately 50% of our business that is some way government-based is still benefiting from favorable industry tailwinds, and those tailwinds include the continuing upward trend of municipalities and state agencies outsourcing project quality assurance and quality control services to the private sector. Another tailwind is the perpetual need as I mentioned a lot of times with the upgrade and maintain our nation's aging infrastructure combined with our increased ability to win larger projects and our ability to cross sell as evidenced by the growth of our multi-year fully funded backlog, we are very confident of the resiliency in our business.

Our company is rapidly scaled up in recent years through strategic accretive acquisitions. We are better positioned today for economic cycles given our leading national platform, our broad range of services, deeper bench and our flexibility to relocate our services to where 9,000 clients need us the most. While our immediate capital allocation priority is cash preservation, we are staying close to our targeted M&A targets, but we can drive immediate accretion to our scale and our technical expertise.

In summary, we're continuing to monitor all aspects of our business very closely by working with our managers, health experts and safety professionals to ensure that our critical services are being performed responsibly and efficiently. As we have done in the past, we have led by taking decisive actions to adjust our business to economic realities. Our focus is the same during this unprecedented situation. We will come out of this pandemic stronger and we came in with an even higher performing business.

Before I turn the call over, I mention that in the next couple of days, we'll announce an update within our finance and accounting organization. In line with our fast growth in the demands of our new public company status, we are strengthened by realigning the significant roles within our finance and accounting team. We will appoint point David Quinn as to serve as our Chief Financial Officer. He serves as our Executive Vice President of Corporate Affairs since 2019 and that's building on the couple of decades of financial and operating experience, which does include a former CFO and other executive roles in multi-billion dollar companies within this industry, and he has worked as a valued partner of mine.

Walter Powell has worn many hats over the years and has helped us build Atlas into what it is today, and that's including leading us from our move from private to public company. He will continue to serve as a valued member of our executive team and will retain his role as our Chief Accounting Officer. With his over 25 years of [Indecipherable] experience, we are confident this will strengthen our organization.

I'll now turn the call over to Walter to discuss our financial results.

Walter George Powell -- Chief Financial Officer

Thanks, Joe, and I'm going to move on to Slide 8. Our first quarter performance demonstrates solid execution by our teams and they were in line with our expectations. We operated under relatively normal conditions for most of the quarter with the effects of the pandemic impacting only the second half of March. Gross revenue for the quarter increased 3.5% to $109 million. We had organic revenue growth of 1.4%, driven by increased scope of services and expansions in the new markets. And as I just mentioned, our growth was impacted by the pandemic in the second half of March.

Net revenues of $90.5 million grew faster than gross revenues in the quarter, increasing 5.5% year-over-year. Net revenues as a percentage of gross increased to 82.8%. We were able to self-perform more services during the quarter. Our acquisition of long engineering contributed over half of the revenue growth and also brought us additional opportunities to bring services in-house. Adjusted EBITDA increased 18.6% to $12.9 million year-over-year. We were able to build off of the good top line momentum combined with strong workforce operating efficiently as well as synergies from our merger with ATC a year ago. As a percentage of net revenue, adjusted EBITDA was 14.2%, up 160 basis points year-over-year.

Our first quarter net loss was $23.6 million, include $25 million of costs related to our business combination and the public company formation transaction. Our backlog remained firm at $607 million at quarter end. There are some seasonal elements to backlog, so we look at it on a year-over-year basis, which increased 6% compared to $575 million in the prior year quarter. We had good project wins across the platform and we're seeing an increase in average project size.

So let me turn to Slide 9, talk about liquidity and capital resources. When you look at the first quarter, we had an outflow of cash from operations of approximately $12.6 million. We had $14.7 million of one-time cash expenses incurred to complete the transaction and merger with Boxwood. Excluding one-time cash expenses, our cash flow from operations would have been positive $2.8 million for the quarter, which is an improvement of approximately $600,000 from the prior year quarter. Do keep in mind, the first quarter is seasonally low. It's a low point for cash flow given that it's our smallest revenue quarter. We already discussed our spending in cash preservation measures. So I'll talk about liquidity enhancements and recent financing activities.

We ended the quarter with total liquidity of $37 million, including cash of $19 million plus what was available under our revolving credit facility. After the quarter close, we did drawdown on the remainder of the credit facility out of an abundance of caution. Following the draw, we had cash on hand of approximately $37 million, which gives us ample liquidity to manage our business. At quarter-end, we had total debt outstanding of $302 million, consisting of the $281 million term loan and the borrowings under our revolving credit facility.

We entered into the term loan as part of the merger with Boxwood and in February, following the close of the transaction as scheduled, we worked with our lenders to syndicate our debt but with the rapid deteriorating credit markets with the pandemic, there were no new debt issuances going on. So we weren't able to complete the process and the lenders exercised their FLEX options on March 31. We'll continue to monitor the debt and capital markets for future potential opportunities, but in the interim, our existing credit agreement continues to provide us with the long-term maturity window.

Beyond nominal amortization payments, we have no other maturities until our $40 million revolver is due in 2025 and the balance of our term loan is due in 2026, that gives us and represents a weighted average maturity schedule of about five years. Our financial covenant is based on net debt to trailing 12-month adjusted EBITDA including acquisitions. On that basis, we ended the quarter at 3.2 times. We're comfortably within our covenant threshold, which calls for net leverage to be below 5.5 times. We continue to expect to generate positive free cash flow for the full year and expect to be within the financial covenant, which does step down to 5 times at December 31, 2020. And at that point, it remains at that level for the remainder of the term.

With that, I'll turn the call to David to provide some forward-looking color on Slide 10.

David D. Quinn Sr. -- Executive Vice President, Corporate Aaffairs

Thank you very much, Walter. So today, we have provided some insight into the factors that not only highlight the long-term potential of our business, but also the resiliency and flexibility of our business to win in all environments. We're proud of our teams and what they've been doing in their ability to quickly adjust to this new economic reality and continue winning work. At the time of our last call, we had not yet experienced a material impact from COVID-19, which was an unforeseen macro factor beyond our control. Since that time, the impact to our business from COVID-19 has been mixed with delays in the execution of some contracted work for commercial industrial clients, primarily in the Northeast and Northern California, as Joe mentioned, partially offset by some near-term accelerations of activity with our state DOT type work.

Given this rapidly changing environment and the diverse impact of COVID-19 occurring across the country, we are currently suspending our 2020 earnings guidance. As we monitor what is really a fluid and often inconsistent shelter-in-place order environment along with the longer-term state DOT and municipal funding levels outlook, we anticipate the bottom to the business trough being in the second quarter of 2020, but do see remain pressure over the course of the balance of the year, mainly reflecting the volatility in our private sector work.

From a near-term positioning perspective, we have quickly moved to scale our cost structure where we expect to realize savings on the order of $8 million to $10 million from overhead reductions for the balance of 2020. Our cost structure remains highly flexible as we've said and thus we're able to scale both up and down fairly rapidly in response to temporary shifts in business demand. Therefore, we do expect to manage our business with appropriate levels of liquidity and positive cash flow generation, while maintaining confinements [Phonetic] with all banking covenants.

As we look ahead, we do see some encouraging catalyst. We ended the quarter with a fully funded backlog of $607 million and again, to-date, no contracts and backlogs have been canceled, and we continue to pursue and secure many new project wins. Also important to note, as we have seen market improvement in our labor utilization relates over the past few weeks, which is encouraging and we attribute that to non-discretionary and transportation-related projects continuing. In addition, some states have also begun to ease economic restrictions and many others have initiated the decision-making process to ease their stay-at-home orders. With all of this, we remain confident that the underlying earnings power of this company remains unchanged from our initial public offering and expect to continue our strategy of growing the business both organically and through deleveraging acquisitions that expand our taxable service offerings and geographic footprint, especially those likely to benefit from increased government infrastructure spending.

Moving to our summary Slide number 11, we encounter the COVID-19 pandemic at the strongest point in our company's history and with a record first quarter backlog, and continuation of our strong margin performance. Our first quarter results demonstrate the continued forward momentum of the business and that our strategy of going through accretive acquisitions is driving returns. Near-term, we'll continue to focus on keeping our people safe, optimizing our efficiency and liquidity while maintaining and developing key client relationships as we look to substantially benefit from the upcoming government infrastructure stimulus spending as we move into 2021.

Thank you all again for joining us this afternoon. Operator, we would now like to open the lines for Q&A.

Questions and Answers:

Operator

[Operator Instructions] Our first question is from Rob Brown with the Street Capital Markets. Please proceed.

Rob Brown -- Street Capital Markets -- Analyst

Good afternoon.

Joe Boyer -- Chief Executive Officer and Director

Good afternoon, Rob.

Rob Brown -- Street Capital Markets -- Analyst

I think you guys mentioned briefly you had double-digit declines in April. Were you referring to the commercial markets in particular or business overall?

Joe Boyer -- Chief Executive Officer and Director

Rob, that was in reference to our business overall and those double-digit declines are in the mid to high-teens and that was mainly as we mentioned in the presentation, mainly in our commercial business and as we do not -- have not seen much impact in our transportation business at all. And mainly around the areas that really had the significant shelter-in-place programs, which were New York City, Northern California for us and Michigan as well.

Rob Brown -- Street Capital Markets -- Analyst

Okay. And then did you also say that you saw some loosening of that so far in May, I know it's early, but have you seen that...

Joe Boyer -- Chief Executive Officer and Director

We have in fact. Yes, we did see and have seen three consecutive weeks of utilization improvement and in particularly in the last two weeks, some increase in Northern California on our direct billable hours as well. So -- and that's just as the opening up of the Northern California shelter-in-place program is just beginning to loosen up, so besides there.

Rob Brown -- Street Capital Markets -- Analyst

Okay, great. Could you might think and how much of your business is transportation and I guess, were you see that start to stabilize or you see benefits there. What areas do you see benefits within the transportation sector?

Joe Boyer -- Chief Executive Officer and Director

So we've -- I've always liked the transportation business, because that's one of the strong industries that -- and markets that we're in that outsource construction engineering inspection, as well as construction quality assurance services. So it's a strong market for us, not to mention just the need for the nation's infrastructure spend and it's a great market to be in just due to the years of deferred maintenance and the need for upgrade in our infrastructure. So roughly, transportation is about 45% of our business and actually looking to grow that business going forward, which should really play well as we look for a long-term infrastructure stimulus spend coming our way.

Rob Brown -- Street Capital Markets -- Analyst

Okay, great. And then maybe just turning to the acquisition environment, I know you're focused on cash at the moment, but longer term, your acquisition strategy, sure, is still in place. But what's the market look like, are there things developing differently now in this environment or are things still active or they on hold? What are the sort of the acquisition activity?

Joe Boyer -- Chief Executive Officer and Director

That's a really good question, Rob. We have had a a really nice and active acquisition pipeline for quite a while as you're aware and I thought last quarter. Given the environment that we're in, we felt it was prudent on all sides of our business just to pull back and focus on our business and our operations there and to really see where the business was shaken out. We're still doing that now and that's one of the reasons for pulling back our guidance going forward. But we are in close contact with a number of our really great candidates that we have lined up and completely plan on moving forward that once we see a little bit more of a stable environment. And as we mentioned, of course, cash is king and we will continue to really favor our cash position, but have some nice candidates, particularly in the areas that I just told you about in areas that we're looking to grow.

Rob Brown -- Street Capital Markets -- Analyst

Okay. great. Thank you. I will turn over.

Joe Boyer -- Chief Executive Officer and Director

Thanks, Rob.

Operator

Our next question is from Kathryn Thompson with Thompson Research Group. Please proceed.

Kathryn Thompson -- Thompson Research Group -- Analyst

Hi, thank you for taking my questions today. Just a follow-up on your capital structure view and I appreciate the color you gave in the prepared commentary. But could you help us understand that where you stand in terms of your maintenance capex needs for the year. Any change we should think about other puts and takes in terms of cash taxes and interest expense? Thank you.

Walter George Powell -- Chief Financial Officer

Yeah, Kathryn, this is Walter Powell. So really from a maintenance capex perspective, we're still in the range of 1.5% of gross revenues for maintenance capex. In terms of cash taxes for the year, not really looking at a whole lot because we did -- we do have the benefit of the step up in tax basis at the C corp level. We've got some expenses that hit the year related to the transaction -- that limit our taxable income for the year, but if we end up with some, it would end up being shielded by the tax asset we have sitting at the C corp level.

Kathryn Thompson -- Thompson Research Group -- Analyst

Okay. And any other thoughts on just kind of your basic working capital needs -- that other than the obvious that generating -- that would impact your cash position for the remainder of the year?

Walter George Powell -- Chief Financial Officer

No, I mean this was, first quarter results are really a little bit seasonal driven. So it's typically we have working capital need in the first half of a normal year and in the back half of the year, we do have cash flow from operations picking up significantly. So, really good time for us to be picking back up with some of the states opening back up.

Kathryn Thompson -- Thompson Research Group -- Analyst

Okay, perfect. Last quarter, on your earnings call, you were -- first talked a little bit about the industrial hygienist demand obviously a lot has happened since then. Could you paint a picture for those calling in about the increase in demand? How Atlas has responded? And give a color of the types of services that you're providing now that perhaps were not in as greater demand six to nine months ago?

Joe Boyer -- Chief Executive Officer and Director

Thanks, Kathryn. That's a really good question and let me see if I can point that out. As I talked about last quarter, but we were seeing at that time is an increased need and really evaluating exposure pathway in existing businesses. We saw quite a bit of activity around developing decontamination plans and then overseeing and monitoring those decontamination plans. To be honest with you, as the shelter-in-place programs went into place, a lot of that work seem to be put on hold is either been done by another party or clients held up on those services currently. We continued in the first quarter, providing a lot of training and consulting services around things such as respiratory fit testing. We have been developing operational plans for existing businesses. So how to operate your business post coronavirus, so operating plans are -- and we're starting to see more of that request just as these shelter-in-place programs are picking up. So, that's been an area that we see continued growth in going forward.

A very attractive new area that has come up is really been on the West Coast where cities and municipalities are starting to require really independent third-party to really evaluate a COVID construction plan on existing sites. So, monitoring social distancing and how crews worked together, that is right up our alley and within our strengths as we're on the sites for third-party reasons as well. So we see that as in the area going forward that I think we'll open up for our business. In some general sense, I think our clients and dealing with contact tracing, additional turnaround -- as businesses might change shifts and the oversight of those kind of plans I think will be a growth area for us going forward.

So in summary, we do about $45 million a year annually industrial hygiene services I mentioned I think last quarter and roughly about $10 million of that is really in what I call, so the high-end industrial hygiene services, services that are really driven by our CIHs [Phonetic], an infectious disease control and such. So we do see a growth in that post shelter-in-place program going forward. It has been relatively insignificant in revenue dollars in first quarter, but we do see that in growth going forward in those areas that I've mentioned. I hope that helps.

Kathryn Thompson -- Thompson Research Group -- Analyst

Yeah, that helps. And even though it's on a very small level in Q1, is there a way that you can help us quantify on a year-over-year basis of growth when there was greater momentum building. So in other words, really back half of March and into April, understanding it's not a perfect straight line, you can't take what happened in April in Trayport, but even generally, are you seeing double-digit type growth in that segment?

Joe Boyer -- Chief Executive Officer and Director

No, I would -- I have to be honest to say no, we are not seeing double-digit growth in that segment coming out of Q1 as of yet. No.

Kathryn Thompson -- Thompson Research Group -- Analyst

Okay. But it's an area that based on initial conversations and request, it could be a greater contributor of organic growth going forward. Is that a fair statement?

Joe Boyer -- Chief Executive Officer and Director

Absolutely. That is a fair statement. That's true. Just [Speech Overlap] digit.

David D. Quinn Sr. -- Executive Vice President, Corporate Aaffairs

Yeah, Catherine, this is David Quinn. This is an ongoing assessment for us and one of the things that we're working through is that currently, there's a lack of consistent regulation on how the contamination side of things for COVID-19 are addressed. It's new and the policy is lagging, the broader policy is lagging, but it's going to catch up. It's taken a little bit of time. For now, our team really has been actively engaged and responding to not only the new bid opportunities and ongoing work, but they are busier and as the SIP orders open up and begin to unwind and hopefully CRISPR regulatory guidance comes out on how this stuff is supposed to be treated, that's when we think we're going to see sort of the next material bump with this team.

Kathryn Thompson -- Thompson Research Group -- Analyst

Okay, that's very helpful. Somewhat tied into that speaking a government is infrastructure, you touched on that. So you do have some expertise and working with government agencies and monitoring and echoing what you said, we've seen an acceleration infrastructure projects, particularly in Texas, Virginia, Illinois, Florida and Georgia. Could you remind us, though you've talked about transportation as precision business, but really percentage tied to infrastructure particularly existing at -- breaking out between existing assets and new construction. And then also could you confirm that you're not seeing any projects canceled or just any other additional color you can give just on infrastructure, that would include not only roads, but water and other buckets that you count as infrastructure?

Joe Boyer -- Chief Executive Officer and Director

Okay. I think, Kathryn, that's a lot of --. Let me say that I think I misspoke when I spoke earlier about the size of our transportation business. I think it's actually roughly about 30% of our business, not the 45% that I reported as whole. I did mention earlier that when we consider infrastructure, which is the majority of our business, we talk about 70% of our work is done on existing assets. So that is existing building structures, remodels for existing structures. You might -- number road that type of stuff. Those 70% of our work is on existing structures.

Trying to get to your other question, we don't do a tremendous amount of water work. So our infrastructure work is really around transportation, retail petroleum, commercial industrial type facilities, we do not do refineries and such. So, retail petroleum, the big part of our business. I forgot to point that I was going to say to...

Kathryn Thompson -- Thompson Research Group -- Analyst

Have you seen the new projects canceled?

Joe Boyer -- Chief Executive Officer and Director

That's what I was going to say, sorry. Thanks for reminding me, that's what I was going to say. We have not, and I will say we've got projects that have slid to the right, but not canceled. We had a large deal project that was under way and beginning to get under way that is now pushed to October and the beginning of 2021. So it's led to the right. But we haven't had a cancellation project to date.

Kathryn Thompson -- Thompson Research Group -- Analyst

Okay, perfect. Thank you very much.

Joe Boyer -- Chief Executive Officer and Director

Thank you, Kathryn. Appreciate it.

Operator

Our next question is from Charles Yonts [Phonetic] with Macquarie. Please proceed.

Charles Yonts -- Macquarie -- Analyst

Hi. Good evening, guys. My questions on business mix. Can you talk about the different margin and pricing dynamics for the private commercial end markets as it relates to T&M and cost plus contracts, and then maybe relative to the transportation and overall end for end markets? How should we think about margin for the overall business as the commercial mix winds down?

Joe Boyer -- Chief Executive Officer and Director

Sure, let me -- so Charles, in general sense, our gross margins from our commercial and transportation business aren't significant, they're roughly the same across our business. And as we've communicated in the past, about 90% of our overall work is time and materials and cost plus, obviously the cost plus work being more around the state DOTs and state agencies and such. So therefore, we don't -- we have not seen as the work changes up and down, we haven't seen a relative change in our gross margin mix in our business overall. So our transportation work has been a little up and our private sector down, but the margins have really been consistent across the businesses for the most part.

And as a part of that -- yeah, I didn't know if I missed the back-end of your question or not [Indecipherable].

Charles Yonts -- Macquarie -- Analyst

No, no. You guys answered it. So, it's really helpful. Thanks, guys.

Joe Boyer -- Chief Executive Officer and Director

Thanks again, Charles. I appreciate it.

Operator

We have reached the end of our question-and-answer session. I would like to turn the conference back over to Joe Boyer for closing remarks.

Joe Boyer -- Chief Executive Officer and Director

Thank you very much. Appreciate it. So listen, I want to thank everyone for joining us today. We do appreciate your support of Atlas and look forward to updating you on the progress as to be in the next quarter. Thank you very much and have a great evening.

Operator

[Operator Closing Remarks]

Duration: 45 minutes

Call participants:

David D. Quinn Sr. -- Executive Vice President, Corporate Aaffairs

Joe Boyer -- Chief Executive Officer and Director

Walter George Powell -- Chief Financial Officer

Rob Brown -- Street Capital Markets -- Analyst

Kathryn Thompson -- Thompson Research Group -- Analyst

Charles Yonts -- Macquarie -- Analyst

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