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Atlas Technical Consultants, Inc. (NASDAQ:ATCX)
Q3 2020 Earnings Call
Nov 9, 2020, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings, and welcome to the Atlas Technical Consultants' Third Quarter 2020 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, David Quinn, Chief Financial Officer. Please go ahead.

David D. Quinn -- Chief Financial Officer

Thank you for joining our third quarter 2020 conference call. We hope that you have seen our earnings release issued after the market closed 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 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 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 our Chief Executive Officer, Joe Boyer, who will run through a business overview and operating update, I will follow with a discussion of our financials and our improved outlook before we open up the call for questions.

At this point, I will turn it over to Joe to pick up on Slide 4.

Joe Boyer -- Chief Executive Officer and Director

Good afternoon, and thank you for joining us. As this pandemic continues, I hope you and your families are staying safe and healthy. I would also like to again recognize the Atlas team and thank each and every one of them for their continued commitment and dedication during the challenges of these past several months. The safety of our employees and surrounding communities remains our top priority and continues to guide our operating strategy.

So moving to Slide 5, please. Our third quarter results reinforce our excitement about our purpose-built business that results in Atlas being a resilient leader in non-discretionary compliance driven infrastructure services. Our strong third quarter results were in line with our expectations and showed a continuation of positive market momentum since mid-year as well as super execution by the entire Atlas team. We produced gross revenue of $120.5 million, with stronger revenues on our infrastructure-focused business. The weighting of our business toward the Sunshine states and our transportation focus are driving a combined benefit from rapidly growing states, but are not only increase in their infrastructure spending, but also outsourcing more work. These mission critical services in this end market allowed us to partially offset the impact of COVID-19-related disruptions in our private sector work.

Our net revenue performance in excess of 80% of our gross revenues continues to demonstrate the success of our strategy, a self-performing more work and cross-selling all of our services across our client network. A higher mix of self-performance provides margin enhancing opportunities to our business. Along with tight management of staff utilization and quick implementation of overhead controls, we were able to generate $19 million of adjusted EBITDA at a margin over 19% of net revenue. All of these favorable trends support our improved 2020 adjusted EBITDA outlook.

Our M&A pipeline remains strong and we're executing on our deleveraging M&A strategy as an acquirer of choice. Our three announced acquisitions this year add to our geographic and service line expansion. More importantly, the deals are accretive to our earnings and structured in a way that reduces net leverage on our balance sheet. This deleveraging benefit is important to us because we're very focused on improving our capital structure. We took a major step down that path with our recently announced warrant exchange tender offer, which will produce a substantial increase in the free float of our staff upon completion later this month.

Now turning to the current market landscape and I please refer you to Slide 6. We are pleased with the resiliency and performance of our business during these times. As I mentioned earlier, the nature of our mission critical services as well as our end market mix has allowed Atlas to respond very well to the COVID-19 complexities. Our government-based business, particularly in our transportation work showed growth over the prior year period. We expect this trend to continue and to help offset the pressure points in our private sector work, where inconsistent shelter-in-place orders throughout the US and commercial project impacts have slowed the timing of some work. The impact of shutdowns is most pronounced in the Northeast and Northern California resulted in delays in our commercial sector.

On a more positive note, previously delayed projects are increasingly starting or resuming work and we are seeing sequential quarterly improvements in our revenue trends. It is important to note that we have not experienced material project or contract cancellations and we have, fortunately, continue to win projects in both the commercial and government sectors. I'll expand on that point.

Moving to backlog and key project wins on Slide 7, please. We've had another solid quarter of winning our share of projects and contracts throughout our regions. Demand conditions continued to remain strong, propelled by regulatory compliance driven essential services as well as the upward trend of municipalities and state agencies outsourcing program management and other quality assurance services to private companies like Atlas. In addition, with approximately half of our business being government-based and due to our long-term client relationships, we see stability and predictability in our revenue streams throughout these complex times.

We provided a summary of a few select wins over the quarter. Two key tenants of our organic growth strategy are providing more services to existing clients and pursuing larger projects, which we define as projects that are greater than $5 million in revenue. Our growing scale and becoming a public company are helping on both fronts. Gwinnett County in Georgia has been our customer for more than 30 years and in September, it select us for a $7 million contract to provide comprehensive transportation program management services, which is renewable for an additional four years.

During the quarter, we also continue to win Environmental Service projects, which represent a sizable portion of our work. In August, Engineering News-Record magazine named Atlas among the Top 10 firms in the Environmental Management Market segment, as measured by revenues and compliance, due diligence. audits and information technology in the environmental space.

Overall, we continue to take advantage of our strong qualifications, our national scale and depth of resources to continue to win more marquee projects and contract awards, which are added to our record backlog of $638 million, including $29 million from the recently completed acquisition of Alta Vista. Our backlog now represents roughly a 140% coverage of our guided gross revenue for 2020.

Moving to Slide 8, please. In addition to organic momentum, we also continue to execute accretive and tuck-in acquisitions that deepen our technical capabilities and expand our client base, while also deleveraging our balance sheet. Our acquisition of Long Engineering in February is performing well and ahead of budget, while also helping us to expand transportation services into Alabama and Georgia. In September, we are pleased to close our acquisition of Alta Vista, expanding the size and the scale of our transportation services in California. The initial integration is progressing very well and we couldn't be more excited to officially welcome these high quality professionals to the Atlas family. Our definitive agreement to acquire WesTest is poised to add another solid leading regional firm to further strengthen our transportation and infrastructure services in our central region.

All three of these acquisitions possess the key elements of what we're looking for in our M&A strategy. They're infrastructure-focused with the range of highly technical services to drive high margin recurring revenue. The sellers have all rolled considerable equity in Atlas and have empowered their tenured workforce to drive outsized growth on our scalable platform. We are extremely confident that we have the right strategy in place to continue our growth trajectory. As we integrate these complementary business, we are increasing our ability to cross-sell more services and self-perform more work through expanded technical capabilities. We accomplish that by educating all of our technical resources through our Atlas Technical Organization, which we refer to as our ATO.

Our ATO lines up our technical capabilities by discipline throughout the company and then matches that to regional leads to ensure that we are effectively cross selling our wider service mix. This has further amplified our customer relationships and there are few peers of our scale and service capabilities in the end markets that we're focused in.

We remain confident that the underlying earnings power of Atlas remains unchanged. We are aggressively continuing our strategy of growing this business organically and through deleveraging acquisitions that expand our technical service offerings and geographic footprint with a focus on those states benefit from increased government infrastructure spending.

So Dave, let me turn it back to you, please.

David D. Quinn -- Chief Financial Officer

Thanks, Joe, and good afternoon, everyone. I'm very pleased to be speaking to you today about our third quarter results, which reflect solid momentum in our business and continued optimization of all facets of our operations. Gross revenue of $120.5 million was down 6% compared to the prior year quarter. There are several takeaways in relation to that performance. First, the non-discretionary mission critical nature of our services was again evident in transportation and infrastructure, where revenue continued to increase compared to the prior year sector. Second, in our private sector work, demand strengthened as the quarter progressed. While business disruptions from COVID-19 certainly remain a headwind for our business and our private sector work, especially in the Northeast and in Northern California, we are encouraged that our business is showing ongoing improvement across our geographies and end markets.

Moving to net revenue. We generated approximately $98 million, which represented an increase of 81.2% of gross revenues and nearly 3 percentage point improvement from where we were just a year ago. This shows continuation of positive results in our strategy to cross-sell and self-perform more services. Our highly valuable cost structure allowed us to align our resources with estimated project timing, which helped us to counteract the revenue shortage and maintain strong labor utilization levels during the quarter.

Together with the benefits of our previously implemented cost measures, we were able to deliver adjusted EBITDA of $19 million this quarter, representing 19.4% of net revenue. On a year-to-date basis, the benefit of our self-perform efforts, variable cost structure and cost savings actions are even more evident. For the first nine months of 2020 compared to 2019, we delivered adjusted EBITDA at $47.2 million at a margin of 16.9%. This margin held with the prior year period despite lower revenue, which we enforce is the inherent strength of our business model.

I'll now move to our capital structure and deployment on Slide 10. We have been implemented a multi-year plan to streamline and optimize our capital structure of our organization to support our growth objectives through both organic enhancement and deleveraging M&A. Our disciplined cash management protocols put in place at the outset of COVID has continued to generate working capital improvement and strong operating cash flow. During the quarter, we generated $16 million of operating cash flow and excluding one-time cash expenses related to our public company formation, acquisitions and COVID-19, we have generated $60 million of operating cash flow over the past 12 months. This represents approximately 92% of adjusted EBITDA over that same time period.

As Joe mentioned, M&A plays a key role in our deleveraging strategy. Our acquisitions have typically been funded with roughly half cash and half stock, and involve some form of earn-out over a two to three-year period that aligns with our overall growth expectations. Our acquisitions of Alta Vista and WesTest [Indecipherable]. They are not only great additions to our platform, but structured with a combination of cash and stock to be quickly accretive and deleveraging. We will continue to fund future acquisitions in this manner and we have the capacity to continue doing so.

We remain committed to getting our net leverage down to 3 times, while at the same time continuing to grow our business. We are also looking at taking direct actions to provide maximum financial flexibility and to create additional value for our shareholders. In October, we announced a warrant exchange tender offer, which is expected to close on November 16. Any shares not tendered during the exchange window will be converted to [Phonetic] a 10% discount. Accordingly, the 4.4 million shares that are expected to be issued in exchange for the warrants are a great step forward toward meaningfully expanding our publicly tradable shares.

Moving to our full year outlook on Slide 11. Our third quarter year-to-date results put us on a track to deliver on our full-year 2020 performance expectations. The trajectory of our end markets continue to move in the right direction with government-based work [Phonetic] expected to be positive year-over-year. And in the private sector, we expect sequential volume improvement into the fourth quarter. Based on the strength of our backlog, we are providing an improved full-year outlook for adjusted EBITDA, which we now expect to be in the range of $61 million to $64 million. This reflects a $3 million or 5% improvement in the low end of our prior range of $58 million to $64 million.

With our update visibility and the timing of work, we are also tightening our revenue outlook to a range of $455 million to $462 million. The resulting improvement in our adjusted EBITDA margin versus our prior outlook reflects improving logistics, operating efficiency and utilization, allowing us to scale our resources as local economies get better. Our full year outlook implies fourth quarter revenues and adjusted EBITDA advancing back toward pre-pandemic quarterly performance levels.

Turning to our strategic growth trajectory on Slide 12. Our company is rapidly scaled in recent years through both organic growth and accretive acquisitions. We expect to continue our strategy of growing the business organically and through accretive and deleveraging acquisitions, especially those likely to benefit from increased government infrastructure spending. With $638 million of backlog and improving end market fundamentals, we are confident in our ability to deliver on our 2020 objectives and to enter 2021 with solid momentum behind us.

Thank you, and I'll turn the call back to Joe for closing remarks on Slide 13.

Joe Boyer -- Chief Executive Officer and Director

Thank you, David, appreciate it. We believe our performance has demonstrated the exceptional resilience of our business model. We have delivered outstanding performance in a safe manner as we position ourselves to capitalize on the nation's continuing economic recovery. We have a proven business model that has produced strong margin performance and record company backlog in extremely difficult market conditions. We are encouraged by the reliability of our recurring services throughout our diverse end markets, particularly in our government-based business. We're still working through COVID-19 complexities, which is primarily in our private sector work. We believe we have rebounded from the bottom of the COVID induced downturn and we expect to exit the year with our volume award [Phonetic] back to near prior year levels.

The forward momentum of our business has allowed us to advance our growth strategy through organic cross selling, as well as accretive deleveraging acquisitions to drive improved returns. We will continue to focus on our strategy of keeping our people safe and working hard to further optimize our capital structure as we drive additional value for shareholders into 2021.

So, again, thank you for joining us. Operator, we can now open up the lines for Q&A.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from Kathryn Thompson with Thompson Research. Please go ahead.

Kathryn Thompson -- Thompson Research -- Analyst

Hi, thank you for taking my questions today. But first focusing on the government-based work, could you give a little bit more color in particular that's driving greater demand, separating both the local and municipal work versus federal work? And if you could give a little bit more color by geography -- there are certain geographies that are outperforming relative to others?

Joe Boyer -- Chief Executive Officer and Director

Thanks, Kathryn. This is Joe. Both the state and local markets and transportation markets have been strong markets for us, which have performed really well during COVID and also during economic downturns in the past. So as we see those markets, our transportation business, we see as a growth business for us and going forward in the fourth quarter as well in the 2021. With regards to the state and municipal markets, that business has been obviously a little bit of a tighter budget concern. I think that it's a business that is strong, the business that we are watching carefully, but we are optimistic on the business, our relationships tell us that at all of those markets although they've seen a little bit of a squeeze in budgets, we do anticipate them still performing well going forward. So I'm not giving up on that market as well.

I think at geography wise, we still favoring, love the Sunshine State -- states that are really being proactive and finding ways to manage their infrastructure spend, being creative and and how they're funding their GAAP, not weighed on federal spending. Those states like Texas, Georgia, California, we like, going up in this -- I love DC, Maryland markets as well. Colorado doing well. So for us, we still see transportation as a big growth area for us going forward. Hope that helps.

Kathryn Thompson -- Thompson Research -- Analyst

Okay. Yeah. Could you flesh out more color on the Alta Vista acquisition in terms of government work and how does this asset certain [Phonetic] to Atlas portfolio and the strategic direction of the company?

Joe Boyer -- Chief Executive Officer and Director

Sure. Alta Vista has been on our target list for a long time. Absolutely, great business. Solid regional player, technical expert in the field of transportation markets, bridge inspection work, special inspection around [Phonetic] bridges. So, we like that business. For us in the market, it allows us to get into the transportation space in California, that market has really been predominantly a commercial market for us in transportation. So, the growth of -- and adding Alta Vista will allow us to to grow in California into the transportation space as well as a New York City as well. So both of those areas, our transportation -- our strategic fits to our business and from a really strong player.

Kathryn Thompson -- Thompson Research -- Analyst

Okay. How are your California operations impacted by the wildfires in Q3 and did have a greater relative impact to your private or your public end market-focused operations?

Joe Boyer -- Chief Executive Officer and Director

So, we obviously have seen some minor impact from the wildfires on the West Coast, and it's probably a little bit of an impact on both private and public as well, just from the disruption of services in that marketplace. I wouldn't say it's substantial. It's probably a small impact, maybe a 5% to 10% impact on Northern California is probably my estimation, but -- since roll back and our services are just about up to speed, not quite to pre-COVID levels but doing fairly well and increasing.

Kathryn Thompson -- Thompson Research -- Analyst

Are these -- did it -- private versus public have a greater relative impact?

Joe Boyer -- Chief Executive Officer and Director

Yeah, probably more of a commercial and private impact, and I'd say commercial. But I'm just thinking of the -- just the disruption as the general population out there with with the haze and fires out there as well, but probably more of a private impact than commercial -- I mean sorry, than the government.

Kathryn Thompson -- Thompson Research -- Analyst

Okay. On the private side what end markets or geographies saw greater relative sequential movement -- improvement, I understand you pointed to geographies that have had more extended lock downs but -- and other areas that may be getting back to a little bit more normal, what markets are improving and what does this tell you about the economy and about future demand?

David D. Quinn -- Chief Financial Officer

Yeah, Kathryn, good afternoon. This is Dave, and I'll take that one. We've spoken about the impacts to Greater New York, our business in the Northeast and we spoken about the impacts in Northern California. Those would be the areas that we saw solid rebound in the third quarter. I would say, Northern California, minus the fires that we just discussed is basically back ramped up to near pre-COVID levels. New York City, we still got a bit of an extended pull there, I mean -- as well as -- you as well as everybody sort of aware of about the migration from New York City. So that's going to take a bit more time. With the addition of -- I will mention with the addition of Alta Vista to the portfolio and the strength, they bring in the transportation infrastructure side of the business now to New York City, that's going to contribute made to the acceleration of the rebound we see there.

Joe Boyer -- Chief Executive Officer and Director

Let me add just a little bit on your question on future demand. I think, we are cautiously optimistic on the commercial markets, we're not giving up on that market space. We see growth in -- our environmental business [Indecipherable] strategies there, but also in the commercial space growth data center, obviously logistics, communications as an area for growth in that business as well as we believe our due diligence services rebounds pretty nicely in this quarter and in the 2021 as well as the financial markets have recovered. So, those are areas that we like not to mention, as we mentioned before, transportation is still an area we like for growth.

Kathryn Thompson -- Thompson Research -- Analyst

Okay, and then on guidance, maybe give a little bit more details on the assumptions that specifically point to further sequential improvement in private sector work. Is this more geographic or is it just more of a broad economic? What are the signs are and how much relative improvement are you seeing so far as we heading to the close of the year?

Joe Boyer -- Chief Executive Officer and Director

Great, Kathryn. Thank you. So, let's talk about just I guess I'll start broadly on it. So we did revise our guidance. We've tightened our projection around volume for the reasons we discussed, we're seeing sort of broad improvements, particularly in Northern California and New York. We have been generally have better economic visibility at this point following an improved third quarter from the second quarter. Our backlog levels continue to increase, another new record at $638 million. So it's got strong visibility of the timing of our work into year-end.

I'd say the ongoing resilience we're seeing in our government business along with steady project execution that we've delivered and the operating efficiency of the business and utilization levels reached new highs in the third quarter. Couple that with the follow through on the cost measures that we enacted, it put us in a good place to round out the guidance for the year and actually bump it up a bit. And of course, we have Alta Vista coming in to the third quarter, which is also reflected in that raised EBITDA guidance.

Kathryn Thompson -- Thompson Research -- Analyst

Okay, perfect. And then just final point on Alta Vista that you may not comment on specific assets and the relative profitability, but when you look at the EBITDA margin in this quarter versus a year ago, it seen some definite improvement, is Alta Vista more in line with current EBITDA margins, or is it type of there is some additional improvement as you integrate into that network...

David D. Quinn -- Chief Financial Officer

Yes, I think it absolutely does [Phonetic]. So, obviously we look to acquire good solid businesses and Alta Vista fit squarely with that. Their margins are consistent with where the business is operating now that being said, the more we scale this business and benefit from our operating leverage. We're going to be able to continue to expand our bottom line and EBITDA margins.

Kathryn Thompson -- Thompson Research -- Analyst

Okay, great. Thank you for taking my questions today.

David D. Quinn -- Chief Financial Officer

Sure. Thanks, Kathryn.

Operator

Next question Rob Brown of Lake Street Capital Markets. Please go ahead.

Rob Brown -- Lake Street Capital Markets -- Analyst

Hi, Joe. Hi, Dave.

David D. Quinn -- Chief Financial Officer

Hey, Rob.

Joe Boyer -- Chief Executive Officer and Director

Hey, Rob.

Rob Brown -- Lake Street Capital Markets -- Analyst

Nice job on the quarter on a tough environment. I think you said...

Joe Boyer -- Chief Executive Officer and Director

Thank you.

Rob Brown -- Lake Street Capital Markets -- Analyst

Yeah, I think you said coming out of the year you expect to be sort of near pre-COVID levels, is that really a comment on the commercial side of the market coming back? And I guess as follows from that, do you -- when coming out of kind of downturns, do you see pent-up demand come through that accelerate things or does it assume more of a normalized situation I think grow from there?

Joe Boyer -- Chief Executive Officer and Director

Yes, great question, Rob. So, I would say, the largest component of it is sort of a reramp on the private side of our business, that's going to sort of drive the continued improvement. We see in year-end, however, the government-related side of our business continues to really perform well. So, we expect strong performance into year-end as we move into next year, and beyond that we see our backlog continuing to expand. So three quarters in a row this year we set new record levels on backlog. So, yeah, I believe there is a little bit of pent-up demand there and with a coverage ratio of 130%, we feel pretty good about going into next year.

We still are seeing a little bit of a delay on the lending side of work that we're bidding, our pipeline currently is high, it's larger than it's ever been. So, the opportunities are there. It's taken a little bit more time for our customers to turn the awards around. So again, qualifying everything from a COVID standpoint, assuming we don't see some material second wave. We do expect momentum and improvement going into next year.

Rob Brown -- Lake Street Capital Markets -- Analyst

Great, thank you. And then -- in the acquisition pipeline, now that you've got this next set sort of in the fall, what you're thinking on further acquisitions through [Phonetic] timing and maybe areas that [Indecipherable]?

Joe Boyer -- Chief Executive Officer and Director

Yeah. Rob, I think, as you know, we did announced this kind of definitive agreement with WesTest and that acquisition is expected to close in the fourth quarter, should be soon this month here. So, that will really help us in our transportation and CMT space and services in Colorado as well. So, great opportunity for us there with a really solid company as well. So continuing with that pipeline, we have several opportunities that are in different stages along the M&A process. Obviously, not going to be able to disclose much more than that, but our pipeline looks really, really strong. We still have that geographic focus on areas of population growth positive, infrastructure spends high, so we're looking for performance in that space.

So there is -- the market is highly fragmented, I see lots of runway for growth, continuing with our proven model and our strategy of buying these businesses as well as being accretive and deleveraging to our balance sheet. So, nice opportunities ahead of us.

Rob Brown -- Lake Street Capital Markets -- Analyst

Okay, great. Thank you. I'll turn it over.

Operator

Next question comes from Brent Thielman with D.A. Davidson. Please go ahead.

Brent Thielman -- D.A. Davidson -- Analyst

Yeah, great, thanks. Joe, maybe following up on that question. How critical is it for you to -- as you look at M&A to maintain this sort of 50-50 public-private exposure going forward?

Joe Boyer -- Chief Executive Officer and Director

Well, I will tell you, Brent, that we have seen that move a little bit. Last year, our government sector business was a little bit smaller than our commercial business. We have seen it grow into where it is now about 50-50. That has been a growing business for us and continue to grow as well as our engineering services, so that will likely be improving over time.

I think in regard to our M&A activities, obviously, transportation is just a business that is proven to be really resilient and has really grown for us during these really challenging overtime. So it is a real growth area for us, it will continue to be our focus, particularly in the Sunshine State and those states that are really active. So, if we can get the -- our sales from a federal perspective in a infrastructure build out would be even better for us. So, it is a market that we like and will continue to be a focus for us certainly in the near term.

Brent Thielman -- D.A. Davidson -- Analyst

Yeah. And you mentioned pretty strong pipeline there, Joe. Yes, question is -- I think is little more certainty seems to be returning to the market or the economy hopefully here, has the conversations picked up more than where you stood a few months ago in terms of dialog, and there is potential target?

Joe Boyer -- Chief Executive Officer and Director

Yeah, Brent, I think I talk a little bit about this last quarter. So in Q2, there seems to be a slowdown period for that initial period in late March through May where really no conversations were happening and people are really focusing on their existing businesses just because of the unknowns. right. So since then, it really has picked quite up. We haven't seen a lot of disruption in our pipeline, conversations are ongoing now pretty regularly and is if -- I shouldn't say is if COVID didn't happen, but certainly it's not as big of a focus as it was in the past that's sort of getting on the next side of that. So, it's really strong and our pipeline looks strong and I feel good about continuing on a growth trajectory through the model that we've employed.

Brent Thielman -- D.A. Davidson -- Analyst

Yeah. Got it. David, there is lingering sort of COVID business disruption -- I think it was in that $6 million or $7 million within that -- did that sort of fade away here in the fourth quarter, it is still going to be some of that in the results?

David D. Quinn -- Chief Financial Officer

So actually, Brent, if you look at the COVID-related costs, right a little over $3 million year-to-date, just to clarify that piece. Again, with the qualifier that we don't see any sort of reramp with the second wave. Yeah, we wouldn't expect to have anything going as we move out into and out of the fourth quarter.

Brent Thielman -- D.A. Davidson -- Analyst

Got it. Maybe one more another way to ask how your visibility in the next year, your backlog is obviously very strong, some deals contributed to that. Can you just talk a little bit about the visibility that going into the new year at this time of the year here in November? If you relative to where you were in the last couple of years, how -- frame that up for us, maybe just on organic basis, how you feel like you've got visibility into the end of the next year and relative to where you have...

Joe Boyer -- Chief Executive Officer and Director

Yeah, Brent. Thank you. So again, first of all, just to reinforce in the point from backlog coverage standpoint, we're continuing to see that improve as our backlog level improves. In any given year, we'll start the year with somewhere between 60% to 65% of our plan year in backlog, we're working through our annual budgeting right now, so I'll be looking forward to talking more precisely about this on our next quarter call, but if anything I would say, based on our strategic focus going into next year, we're probably toward the upper end of that, going into next year and the point I made moments ago around the strength of our pipeline and the level of bidding, we're doing currently in conjure with the magnitude of the opportunities of projects and programs that we're bidding and securing, -- confidence that again, we will go into next year assuming the market cooperates, we'll go into next year with excellent visibility and strong confident on our ability to deliver on our revised projection -- updated projection for next year.

David D. Quinn -- Chief Financial Officer

Well, let me add to that Brent, I think it's important to note that we have literally hundreds of large master service -- that are repetitive in nature, year-over-year work. So we have a lot of insight into what our revenue has looked like in 2021. We obviously as part of our strategy of pursuing more larger projects, which has now increased in our backlogs that those projects are one to three-year or so more -- again, more visibility into what the revenue streams look like in 2021 as well.

Brent Thielman -- D.A. Davidson -- Analyst

Great. Helpful color. Thank you.

Operator

Next question, Noelle Dilts with Stifel. Please go ahead.

Noelle Dilts -- Stifel -- Analyst

Hi guys, and congrats on the quarter.

Joe Boyer -- Chief Executive Officer and Director

Hi, Noelle.

David D. Quinn -- Chief Financial Officer

Hi, Noelle.

Noelle Dilts -- Stifel -- Analyst

Thanks. So my first question was just kind of targeted at outsourcing. I'm just curious when you're looking at sort of these date and municipal agencies has been under some budgetary pressure, do you think that could actually increase the extent to which they are looking to outsource some of that work to private service providers?

Joe Boyer -- Chief Executive Officer and Director

I think it's a great way, actually we have seen that. We have seen continue -- outsource and I do believe as you suggested that I think those at budget tightening will in fact push maybe even some more outsourcing opportunities to the private sector in the areas of quality assurance, quality control, project management, program management type services, even engineering. In some aspects, we have seen growth in our engineering services during the COVID times as well. So, I agree with you that we are seeing it and I think it will continue.

Noelle Dilts -- Stifel -- Analyst

Okay, great. Thank you. And then, I'm just curious in terms of some of these M&A targets that you're looking at, has sort of the COVID and the economic uncertainty changed the number of folks who are reaching out to you or who are looking to generally become a part of a larger company. I'm just curious if it's changing from that perspective.

Joe Boyer -- Chief Executive Officer and Director

Yes, I will say that the firms that reach out to us, I think we have seen an increase in that. Whether it's COVID-related and market conditions, I really believe that it's much to do with us becoming a public company, our brand name being out there becoming more of an acquirer of choice now, like in the model that we employ, and I think the other thing is we have a really good track record of retaining our technical resources -- turnover is lower, we also retain our technical staff and our principles in the business.

So I think that gets around and I do believe that adds to firms reaching out to us that matches of their desire. So, we have seen increased and reaching us obviously, we prefer relationships that we generate on our own and are driven from our technical resources, the firms that we like to acquire in an open process. So yes, I think that it has been increasing and it's a continuous increasing from quarter-to-quarter.

Noelle Dilts -- Stifel -- Analyst

Okay, great. Thank you. And then my last question, just given the elections, any thoughts on how the outcome may strengthen or represent a headwind for any of your businesses and any change in how you're thinking about the potential for an infrastructure bill [Phonetic]?

Joe Boyer -- Chief Executive Officer and Director

So, I'll tell you, I thought about this a lot, I've been asked that question a lot. I've been waiting for years for an infrastructure bill, I got to say. We have done well under both administrations, right. With both parties, our business has grown. So, I really haven't seen a difference either way, I'm still waiting for that federal infrastructure bill to come in place now. I can't say that I have any more confidence that it's coming out. I can just tell you that we're well positioned, if it is to come out, the benefit, I do believe that you can keep checking that came down the road, it will come to roost and hopefully we'll have that in this administration. But it's only going to be a bonus to our projections and our growth trajectory for sure.

Noelle Dilts -- Stifel -- Analyst

Thank you. That's it from me.

Operator

Thank you. I would like to turn the floor over to Joe Boyer for closing remarks.

Joe Boyer -- Chief Executive Officer and Director

Thank you so much. Thank you everyone for joining us today. We appreciate it. We appreciate your support of Atlas Technical Consultants and we look forward to updating you on our progress. Thank you very much.

Operator

[Operator Closing Remarks]

Duration: 46 minutes

Call participants:

David D. Quinn -- Chief Financial Officer

Joe Boyer -- Chief Executive Officer and Director

Kathryn Thompson -- Thompson Research -- Analyst

Rob Brown -- Lake Street Capital Markets -- Analyst

Brent Thielman -- D.A. Davidson -- Analyst

Noelle Dilts -- Stifel -- Analyst

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