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Atlas Technical Consultants, Inc. (ATCX)
Q2Â 2020 Earnings Call
Aug 11, 2020, 8:00 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
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 a few of those select wins here over the quarter, which include the crossing alternatives and environmental assessment study for the Mississippi River Bridge Crossing in Baton Rouge as well as a $4 million construction, engineering and inspection contract with the Odessa District of the Texas Department of Transportation, just to name a couple.
The strength of our existing client mix as well as these and additional wins have led the Company to record a record backlog of $621 million at the end of Q2, which is more than 130% of our guided gross revenue range for 2020.
So, Dave, let me turn it back to you.
David D. Quinn -- Chief Financial Officer
Thanks, Joe.
So jumping right in. We're very pleased with the solid second quarter results that our business has delivered, particularly given the tough COVID related impact in the marketplace. The durability and scalability of our business came through this quarter, with us delivering sequential improvements over last quarter, landing at the high end of our updated guidance and growing backlog to another new record high of $621 million. While Q2 grew and improved from Q1, as expected, volume was down marginally from the prior year quarter, with gross and net revenues at $112.7 million and $91.6 million respectively.
The COVID and shelter in place related headwinds we experienced during the quarter were largely in our private sector work in certain geographies, notably in Greater New York City and Northern California, while our government-related business continued to remain strong. April represented the low point for us, and since that time, our business has improved steadily through the balance of Q2 and into Q3.
And if I go a bit deeper into our Q2 drivers, we were able to optimize our performance and our profitability with a continued to increase in self-performance of work which at this point in the quarter was up to 81.2% which is a full 2 point improvement from where we were just one year ago. This, along with our improved staff utilization and the quick implementation of overhead controls that we discussed, allowed us to record $15.4 million of adjusted EBITDA at a near 17% margin.
We also produced positive Q2 net income of $2.2 million, which included approximately $1.4 million of one-time expense items. I'll also note a quick point of clarity, where under our current capital structure, our EPS to Class A shareholders is calculated by deducting net income to non-controlling Class B shareholders as well as preferred stock dividends, and post these adjustments, resulted in a $0.07 net loss per Class A share for the quarter.
Looking quickly at our half-year results, 2020 compared to 2019, we delivered comparable revenue at $220-plus million with adjusted EBITDA at $28 plus million at a 15.5% margin which really affirms the underlying resilience and momentum of our business in the face of these clearly challenging business conditions.
I'll now move to capital deployment on slide 9. As I indicated, at the outset of COVID we took quick and immediate steps to optimize our working capital and liquidity which helped us during the quarter and positioned us for a strong Q3. Excluding one-time cash expenses related to our public company formation, as indicated, we've generated substantial operating cash flow during the last 12 months. This has provided a significant capacity to execute our capital allocation priorities.
While near-term in Q2, we did temporarily focus on cash preservation and liquidity, as appropriate, given our strong performance coming out at the back of the quarter and the improving economic prospects we're seeing, we have now quickly pivoted back to our more balanced and long-term approach. And this includes investing in our growth through acquisitions, enhancing our balance sheet strength and providing maximum financial flexibility for the firm to optimize shareholder returns. And this is evident in our two recently signed acquisitions of Alta Vista and WesTest which represent great additions to our platform along with several other targeted M&A pursuits, which will also prove to be quickly accretive and deleveraging right in line with our strategy.
While we continue to fund our accretive acquisitions through a combination of cash and stock, which is deleveraging, with our net debt to trailing 12 month adjusted EBITDA of 3.6 times, including acquisitions and our weighted average maturities at 5 years, we are in a good position to continue investing in growth with our expectation to generate additional free cash flow into year end.
Turning to our strategic growth trajectory on slide 10. Our Company has rapidly scaled up in recent years through both organic growth and accretive acquisitions, and we've proven a strong record to execute on the strategy. This is evident based on the growth achieved in recent years. And from 2016 through 2019, we grew sales at a compound annualized growth rate of about 30%. With our strong backlog coverage, improving end market fundamentals and deep M&A pipeline, we are on track to continue driving above market growth in our business as we move into 2021.
So I'd like to provide a real-time update, more specifically where we are with M&A. And as Joe and I have discussed, we have a well-developed playbook to identify and integrate complementary, low-risk technical services firms, particularly with infrastructure exposure. We've been able to accelerate growth on our platform through cross-selling and self-performing more work, through our expanded capabilities and geographic reach. Our focus has been and continues to be on revenue growth, building relationships, retaining talent and expanding our client base.
And all of these dynamics are playing out in the acquisition of Long Engineering completed in February of this year, which has really outperformed our expectations. Long has proven to be a highly durable business even during this challenging year, positively contributing to our results, driving revenue synergies and increasing cross-selling. And they've also added some nice key project wins. The integration activities are also ahead of schedule. And as I mentioned previously, we did -- we delivered a 2 point improvement in self-performance over 81%, and that's in part due to the success with Long.
More recently, over the past week, we have announced two additional acquisition agreements which fit squarely with our strategy and playbook just as we did with Long. Last week, we announced that we'll acquire Alta Vista, which operates in California and New York, and earlier today we're pleased to announce our agreement to acquire WesTest which operates mainly in Colorado.
Both of these acquisitions are transportation focused, with a wide range of highly technical service offerings. These business combinations will further strengthen our ability to support our clients and to take on larger and more complex projects and support a potential $5 trillion of infrastructure investments that are required through 2025. Both Alta Vista and WesTest bring well respected brands with recurring high margin revenue where we can drive outsized adjusted EBITDA growth on our scale platform while deleveraging our business in the process. Beyond these two deals, we still see a tremendous amount of runway to further consolidate technical services firms in this highly fragmented regional market.
So before I turn it back to Joe, just let me touch on our full year outlook on slide 12. So based on our performance to date, we are optimistic about our outlook. The trajectory of our end markets that we discussed is moving in the right direction with government-based work expected to be positive year-over-year. And in the private sector, we've seen some stabilization, which is improving our confidence. As mentioned, in July and August, we've seen continued improvement in our labor utilization. We've adjusted our expected cost savings to $6 to $8 million for the year to reflect the steady improvement in utilization and our ability to bring back employees.
Based on our current visibility into the timing of work as stay at home orders continue to be lifted, we affirm our full year guidance provided in July. We expect revenue to be in the range of $453 million to $468 million, with adjusted EBITDA in the range of $58 million to $64 million, with improving delivery, operating efficiency and utilization allowing us to scale our resources as local economies further improve. We are very confident in the underlying earnings power of this Company as we look ahead. We expect to continue our strategy of growing the business organically and through accretive and deleveraging acquisitions, especially those likely to benefit from the increased government infrastructure spending. We're confident in our ability to deliver on our 2020 objectives and to enter 2021 with solid momentum behind us.
Thank you. I'll now turn it back to Joe for closing remarks on slide 13.
Joe Boyer -- Chief Executive Officer and Director
Thanks, Dave.
Please allow me the wrap up with a summary on slide 13. We have a proven, resilient business model that results in continuing strong margin performance and record Company backlog, even through the COVID-19 pandemic. Our second quarter results demonstrate the experience of an industry-seasoned leadership team, knowledgeable in this highly variable cost environment, and also demonstrates the reliability of recurring nondiscretionary technical services throughout our diverse end market mix. The continued forward momentum of our business has allowed us to be a disciplined acquirer of choice in advancing our growth strategy through organic cross-selling as well as accretive deleveraging acquisitions and driving improved returns.
So near-term, we'll continue to focus on keeping our people safe optimizing on our capital structure and liquidity, while maintaining and developing key client relationships as we look to substantially benefit from improved economies and any possible government infrastructure stimulus spending as we move into 2021.
So thank you for joining us today. And operator, we'd now like to open up the lines for Q&A.
Questions and Answers:
Operator
[Operator Instructions] The first question today comes from Rob Brown of Lake Street Capital Markets. Please proceed with your question.
Rob Brown -- Lake Street Capital Markets -- Analyst
Good afternoon. Thanks for taking the question. One is, if you could elaborate a little further on the demand trends you're seeing kind of into Q3 here. Are you seeing kind of recovery in project activity? Are you seeing more business starting to flow again? Just maybe some further color on how that's starting to ramp back up.
Joe Boyer -- Chief Executive Officer and Director
Sure, Rob. Thanks for the question. Rob, I think it's a mix of both, actually. I think we're seeing projects that were pushed to the right scaling back up and beginning to get back in the flow. We see that for sure. Obviously, our transportation business hasn't much faltered, and that continues to be strong. We are still impacted in some of the private sector work, particularly in the Northeast where the shelter in place orders haven't completely worked their way out and I think some projects that we have on board are soon to get picking up over the next several weeks as well to that. So that's what we see on both the private sector and the commercial side of our business.
Rob Brown -- Lake Street Capital Markets -- Analyst
Okay. Good. And then shifting over to the acquisitions you did. Could you give us a sense of the size of those businesses and then maybe elaborate on the pipeline, what you're -- what areas you're kind of looking at, how accretive you expect to be the rest of the year?
David D. Quinn -- Chief Financial Officer
Yeah, Rob. Hi. It's David. So, we're not going to provide a lot of information currently relative to this. But we -- what we will tell you is that consistent -- we want to be consistent with our disclosures, and in many cases, at the outset, our sellers -- or prospective sellers are sensitive to the financial information that we'd be disclosing. So we're trying to be respectful of that. What I will say, however, at this time, is that we do believe there's significant revenue synergy and cross-selling potential with both of these acquisitions. At the same time, we are providing headcounts, and I would imagine that the revenue and profitability expectations for the acquired businesses will be -- could accretive, but also consistent with the broader Atlas business.
Rob Brown -- Lake Street Capital Markets -- Analyst
Okay. Okay. Got it. That's clear. So thank you for that. And then just in terms of what you're looking at in terms of areas -- areas of focus for acquisitions. I think you mentioned transportation. But are there -- is that sort of your focus area for the rest of the year or what areas you're kind of looking at for the rest of the year?
Joe Boyer -- Chief Executive Officer and Director
Rob. Good question. I think I haven't made it a secret regards to our transportation focus. We like that business, particularly in the -- in the states that are really being proactive in finding ways, creative ways to really bridge their funding gap. So transportation, we like it, performs well during some downturns. So it's still a focus there. I would say our other targets are going to be around specialty services that currently increase our service capabilities as well as maybe some geographies where we don't have a solid revenue -- I'm sorry, service mix in a geography. So we may be adding a service capability in a region, so to provide a better mix of our services. So that's -- that's in general, some areas that we're looking at, and hope that answers that question there.
Rob Brown -- Lake Street Capital Markets -- Analyst
It does. Thank you very much.
Operator
The next question comes from Kathryn Thompson of Thompson Research Group. Please proceed with your question.
Kathryn Thompson -- Thompson Research Group -- Analyst
Hi. Thank you for taking my questions today. Really focusing something from your press release today that alludes to the potential business you make down the road in the post COVID world. But in your press release you've said that you're already positioned for future that will see demand for a safer environment in places of business, commercial structure and other spaces. What percentage of the business does this apply to? What types of work do you currently offer that really speak directly to what you alluded to? And if this is right and you're ready to perform in the future, any type of way you could flesh around addressing really that post COVID environment and how Atlas fits within that world? Thank you.
Joe Boyer -- Chief Executive Officer and Director
Sure, Kathryn, thank you for that. Some areas that we obviously have a feel we're nicely positioned for in regards to having technical resources is in that industrial hygiene space that's created from this challenges of the COVID pandemic. So industrial hygiene services, as I mentioned in the last quarter, and helping businesses to maintain continuity of their businesses, ensure a safe work environment. We see some trends opening up where I think project sites and construction sites in regards to how crews worked will change over time -- and given having the expertise around how to aid project sites to ensure that worker safety is paramount and that you have sort of this independent view of the -- of the workforce is there to ensure that there is no expansion of -- or any contamination at the project site. That's clearly -- we've seen a growth in our business in that area.
Obviously, I think I mentioned in the last quarter, it seems that the -- beginning of the Q2, there was a lot of confusion around really those services that can be provided for industrial hygiene and environmental services in this space. I think that we see that as a continuing growth area in the business to be able to help businesses in being able to keep their businesses thriving and efficient. So that's what we were implying in that in our press release there, Kathryn.
Kathryn Thompson -- Thompson Research Group -- Analyst
Okay. That's helpful. And then on the government work you guys performed in the quarter, so roughly, kind of that public being half of your business. How did it trend in Q2? And maybe [Indecipherable] around it, and you mentioned states. We're certainly tracking certain states that have been accelerating public construction, including Texas and Georgia. But are there any specific states that have been standouts for Atlas specifically?
Joe Boyer -- Chief Executive Officer and Director
For sure, Kathryn, as you mentioned, Texas has been a really strong performer of ours in that state and governmental agency. I think obviously with the state receiving really their full allocation of Prop 7 funding as well as fair share in their oil and gas production in the Prop 1. So both of those I think have helped us along in that space. I think obviously like a lot of areas, they've reduced the traffic flow was a push for us as projects were -- well they were accelerated along as well. And we see that same pickup in some other new DOT areas for us like Tennessee, Washington and Alabama. So some nice transportation and DOT services during this time.
Operator
Our next question is from Brent Thielman of D.A. Davidson. Please proceed with your question.
Brent Thielman -- D.A. Davidson & Co. -- Analyst
Great. Thank you. Good afternoon. Congratulations, working through a tough quarter.
Joe Boyer -- Chief Executive Officer and Director
Thank you very much. Appreciate that.
Brent Thielman -- D.A. Davidson & Co. -- Analyst
I guess my first question. The -- in the backlog continues to build here, $621 million, imagine that's probably moving up with some of these recent transactions. Can you talk about what level of visibility that gives you obviously in the second half of the year, but also thinking into 2021 as well?
David D. Quinn -- Chief Financial Officer
Yeah. So I'll start off, Brent. Again, based on the fact that we are pretty conservative relative to the backlog that we carry, anything we reported in backlog is both authorized and funded. So there's effectively not any speculation in the backlog that we're carrying. So part of the reason that Joe, myself, the Board made the decision to reinstitute guidance on the back end of pulling back guidance like many of the firms is squarely the result of the visibility that we have in our backlog and for the balance of the year.
Ultimately, our backlog performed very well in the second quarter. We saw particular resilience in the government side of our business in ongoing execution of that work and acceleration in certain cases. That, based on sequential improvement month over month through the second quarter and now into the third quarter relative to executing on our backlog, it put us in a comfortable position, a confident position to affirm the full year guidance and likely position us going into 2021 with some momentum at our back.
Brent Thielman -- D.A. Davidson & Co. -- Analyst
Okay. That's helpful, David. Thank you. I guess -- and thinking about all that's happened in New York and California when you guys have kind of gone through there, and who knows what comes still within those regions just with respect to stay at home orders and all that. But does that shift your sort of medium-term, long-term acquisition strategy at all? Heard a lot about the emphasis on infrastructure, but geographically does it change your views about where you want to build some more scale?
Joe Boyer -- Chief Executive Officer and Director
Let me say, Brent, that I think that did add some -- just some more information into where our near-term targets are. I think we've been working a number of targets for a long period of time in some areas that we really felt were critical for us to get into and improve our transportation services in California. That was the idea behind Alta Vista and also getting -- expand into Colorado, which is why WesTest was so important to us.
So we still have some very key targets that are in our pipeline, and I can't -- I guess I can't say that what particular geographic region they're in, but we still like the Northeast despite the shelter in place orders and the impact to that, it's still a really nice infrastructure market there. It's a market that we have some strong environmental services too and feel the need and opportunity to improve our [Indecipherable] as well. So I think we're continuing on with our strategy, getting smarter about what we've learned during the COVID environment as well. But all in all, I think we're really comfortable with what we have in front of us and where we're going.
Brent Thielman -- D.A. Davidson & Co. -- Analyst
Okay. That's helpful, Joe. Maybe one more just on the -- and it sounds like the private side is starting to kind of slowly open back up for you. It doesn't really sound like a demand issue. I'm just trying to get a sense how disruptive it's been or it is today, just trying to get your people and access customer facilities. Is there a way we can kind of think about how some of these regions that have been really disrupted are operating as a portion of capacity. I'm just trying to get a sense of what overhang is left there.
Joe Boyer -- Chief Executive Officer and Director
Great. Brent, we have seen really a seven to eight week steady increase in bringing our resources back onto project. So the projects have definitely been opening up in the private sector. So getting more of our resources onto the projects, that's been pretty steady and inclining week-in, week-out. So we haven't brought everybody back. We're not back to the pre COVID levels in regards to our technical resources yet, but it's less of an issue around the -- working around the COVID environment. It's just working more in line with those projects getting geared back up, getting momentum behind those projects and getting them out that have shifted to the right. So I'm not seeing a tremendous, more impact on these increasing cases really haven't changed our business much over the second wave if you have.
Brent Thielman -- D.A. Davidson & Co. -- Analyst
Okay. Well, it sounds like you might be carrying some more momentum into the fourth quarter to the extent that you're able to get it back to full speed.
Joe Boyer -- Chief Executive Officer and Director
Yeah. We feel strong about where we are producing now and into this third quarter. Obviously, we're -- our projections are looking like we'd be back to somewhere near pre-COVID levels in 2019 in the fourth quarter. That's the way it looks for us right now, and all signs are sort of leading to that.
Brent Thielman -- D.A. Davidson & Co. -- Analyst
Okay. That's great. Thank you, guys, for taking the questions.
Joe Boyer -- Chief Executive Officer and Director
Certainly. Thank you, Brent.
David D. Quinn -- Chief Financial Officer
Thank you. Thanks, Brent.
Operator
The next question is from Charles Yu of Macquarie. Please proceed with your question.
Charles Yu -- Macquarie Group -- Analyst
Hi, good evening, Joe and David. I just wanted to dig a bit further into the margins. Just based on your guidance for the back half of the year, at the midpoint, it seems to imply margins to expand by 1 point relative to Q2 levels or maybe slightly more with an increase in net revenue mix. What are some of the other puts and takes around the EBITDA margin outlook? And [Indecipherable] improvements in labor utilization or are there some other incremental costs that you expect in the back half relative to this quarter as an offset?
David D. Quinn -- Chief Financial Officer
Yeah. Thanks, Charles. Appreciate that question. So it is a few things. One, the proactive approach to us getting in front of the cost curve at the onset of COVID is going to help us in the back half of the year. So at this point, we've adjusted our expected overhead savings for the full year to $6 million to $8 million, and this is the result of our ability to bring resources back on to support the increased volume. So that's one thing. We're going to benefit from cost reductions.
Secondarily, as the business scales back up, it's very much a volume issue. So the third quarter is traditionally our strongest quarter. We expect it to be our strongest quarter this year. Not quite at the level that we would have been at in 2019. But at the same time, still a much improved quarter from the second quarter itself. So additional volume, additional gross margin. And then we're going to continue to optimize our self-performance. Perfect example is the introduction to Long Engineering to the business. It was a contributor to our improved sales performance in Q2. We were up, as I mentioned, 2 points to 81.3%. And as we look to introduce [Indecipherable] business, Alta Vistas of the business and then WesTest, we expect that only to further compound that that effect.
And then lastly, as you rightly mentioned, improved utilization. We've seen substantial gains in our utilization. Even in the face of the COVID challenge, we're operating currently at some of the highest levels of utilization we've been at in the past. So we're going to continue to build on that. So there're some economies and scalability that's going to help us in the back half of the year.
Charles Yu -- Macquarie Group -- Analyst
So that's good color there. And then just as a quick follow-up, what have you seen so far for state budgets that's come out for 2021 and what are some of the most important factors that you're thinking about for state and local budgets over the next year or two?
Joe Boyer -- Chief Executive Officer and Director
Yeah. So Charles, I think there is a little bit of reservation on the state budget. I think there's quite a bit of concern around those budgets at the state and municipality level. I also think, though, what we are seeing is that the states are realizing that the anticipated impact hasn't been as impactful as they once thought. Gas tax revenues and such are increasing as more driving is currently occurring. Less flights going on. Obviously, in the sales -- sales tax revenues are maybe not as visible as the first onset happened. So we're watching -- obviously you're watching the state budgets. We feel good about the fact that our work is funded and we have projects that are signed and funded. I think what's important to note as well is that our work is not dependent on a new build work.
We do a tremendous amount of maintenance work that's done on existing structures [Indecipherable] to happen and are regulatory driven in nature -- services driven in nature. So we feel comfortable that we've faced these kind of challenges in the past and downturns and our Company has performed quite well with our service mix as well as our end market mix. So we're watching carefully, but comfortable going forward.
Charles Yu -- Macquarie Group -- Analyst
Okay. That's great. Thank you, guys.
Operator
There are no additional questions at this time. I'd like to turn the call back over to Joe Boyer for closing remarks.
Joe Boyer -- Chief Executive Officer and Director
Thank you very much, Bob. Appreciate that. So we want to thank everyone for joining the call today. We appreciate your support of Atlas, and we look forward to updating you on the progress over the next quarters. Thank you very much and have a great day.
Operator
[Operator Closing Remarks]
Duration: 43 minutes
Call participants:
David D. Quinn -- Chief Financial Officer
Joe Boyer -- Chief Executive Officer and Director
Rob Brown -- Lake Street Capital Markets -- Analyst
Kathryn Thompson -- Thompson Research Group -- Analyst
Brent Thielman -- D.A. Davidson & Co. -- Analyst
Charles Yu -- Macquarie Group -- Analyst
