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Investor Presentation First Quarter Fiscal 2014
T R R
Safe Harbor Statement
2
Certain statements in this presentation may be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You can identify these statements by forward-looking words such as "may," "expects," "plans," "anticipates," "believes," "estimates," or other words of similar import. You should consider statements that contain these words carefully because they discuss TRC’s future expectations, contain projections of the Company’s future results of operations or of its financial condition, or state other "forward-looking" information. TRC believes that it is important to communicate its future expectations to its investors. However, there may be events in the future that the Company is not able to accurately predict or control and that may cause its actual results to differ materially from the expectations described in its forward-looking statements. Investors are cautioned that all forward-looking statements involve risks and uncertainties, and actual results may differ materially from those discussed as a result of various factors, including, but not limited to, the uncertainty of TRC’s operational and growth strategies; circumstances which could create large cash outflows, such as contract losses, litigation, uncollectible receivables and income tax assessments; regulatory uncertainty; the availability of funding for government projects; the level of demand for TRC’s services; product acceptance; industry-wide competitive factors; the ability to continue to attract and retain highly skilled and qualified personnel; the availability and adequacy of insurance; and general political or economic conditions. Furthermore, market trends are subject to changes, which could adversely affect future results. See the risk factors and additional discussion in TRC’s Annual Report on Form 10-K for the fiscal year ended June 30, 2013, Quarterly Reports on Form 10-Q, and other factors detailed from time to time in the Company’s other filings with the Securities and Exchange Commission.
This presentation contains references to non-GAAP metrics such as EBITDA, gross margin and free cash flow. A reconciliation of GAAP to non-GAAP metrics can be found on slide 19.
A pioneer in groundbreaking scientific and engineering developments since 1969, TRC is a national engineering, consulting and construction management firm that provides integrated services to three primary markets:
Energy | Environmental | Infrastructure
Expert problem solvers
100 + U.S. offices London office
2,900+ employees
NYSE: TRR
3
Company Profile
www.trcsolutions.com
Investment Highlights
4
Well positioned in markets with solid medium- to long-term growth opportunities
Executing a focused profitable growth strategy
Large addressable market opportunity
Diversified revenue stream with attractive customer base
Strong balance sheet and cash position
Stable but growing backlog
TRC’s Diversified Business Model
5
$110M14% YOY Growth
$163M3% YOY Growth
$44M2% YOY Growth
Net Service Revenue by Segment
Fiscal Year 2013Total NSR: $320.4 Million
6% YOY Growth
Infrastructure14%
Environmental 51%
Energy 35%
Estimated Client Distribution by Industry(1)
Power / Utility
Oil & Gas
Transportation
Other
50%
10%
10%
30%
(1) Estimates as of June 2013.
Envir
onm
enta
l S
eg
ment
6
Environmental Services Permitting and resource management Remediation and hazardous waste
management Air quality and air measurements Building sciences, industrial hygiene,
and compliance Solid waste
51% of Total NSR
Segment Drivers Increasing permitting and power plant
decommissioning activities Greenhouse gas rules – CO2 Continued development of upstream,
midstream and downstream oil & gas markets
Re-emergence of industrials and related capital spend
FY 2012 FY 2013
$159.0 $163.2
Net Service Revenue (in millions)
FY 2012 FY 2013
$32.0 $30.8
Segment Profit (in millions)
+3%
-4%
Energ
y
Seg
ment
7
35% of Total NSR
Energy Services Electrical transmission, distribution &
substation engineering Energy efficiency Communications engineering
Segment Drivers Greenhouse gas rule – CO2 Expanding utility capital spend
programs on aging transmission and distribution infrastructure
Dynamic revolution in domestic fuel supplies driving shifts in use of utility assets (e.g. Coal ↓, Natural Gas ↑, Renewables ↑, Efficiency ↑)
FY 2012 FY 2013
$96.0 $109.8
Net Service Revenue (in millions)
FY 2012 FY 2013
$23.5 $23.3
Segment Profit (in millions)
+14%
-1%
Infr
ast
ruct
ure
S
eg
mentInfrastructure Services
Transportation design services Civil engineering services Security consulting & engineering
services Geotechnical engineering & materials
inspection Construction engineering, inspection &
management
8
14% of Total NSR
Segment Drivers Need to upgrade and repair aging
infrastructure, especially bridges and roadways
Additional state funds for capital projects
Expansion of transportation services
FY 2012 FY 2013
$43.5 $44.2
Net Service Revenue (in millions)
FY 2012 FY 2013
$7.7 $8.7
Segment Profit (in millions)
+2%
+12%
Multi-disciplinary teams implement complex projects
Nationwide network is a crucial asset that can be integral to project success
TRC helps clients: realize a higher return on investment manage risks align project solutions with
operational priorities integrate multiple areas of
expertise to arrive at a better solution
Why Clients Choose TRC
9
Concept
Delivery & Operations
Permitting, Engineering, &
Construction
High-Profile Private Sector Clients
10
Working With All Levels of Government
11
State and Local Federal
12
Growth Strategy
Q2 2013 Q3 2013 Q4 2013 Q1 20140%
2%
4%
6%
8%
10%
12%
TotalOrganic
Total & Organic NSR Growth Recent Acquisitions
•Ocampo Esta Corp. (Covina operations)
•GE’s Air Emissions Testing business
•Heschong Mahone Group, Inc.
•Utility Support Systems, Inc. (USS)
• Invest in high-margin organic growth opportunities focused on: • Utility/Power • Oil & Gas• Infrastructure
• Pursue strategic acquisitions to enhance service offerings and geographic footprint of all three segments
13
$245.9 $301.8 $320.4
FY 2011 FY 2012 FY 2013
Net Service Revenue(in millions)
6%
Q1 2013 Q1 2014
$75.2$81.3
Net Service Revenue(in millions)
8%
Q1 2014 v. Q1 2013
Significant Long Term Growth Potential
14
Net service revenue
Cost of services
Gross margin
General and administrative expenses
Arena Towers litigation reversal
Operating income
EBITDA
EBITDA as a % of NSR
Federal and state income tax benefit
Net income applicable to TRC Companies, Inc.
Diluted earnings per common share
FY 2012
$301.8
$246.5
18.3%
$31.0
$(11.1)
$30.0
$24.4
8.1%
$3.9
$33.6
$1.16
FY 2013
$320.4
$268.5
16.2%
$30.7
-
$18.6
$25.5
7.9%
$18.0
$36.3
$1.23
(In millions, except per share data)
FY 2012 FY 2013
81.7% 83.8%
Cost of Services as % of NSR
FY 2012 FY 2013
10.3% 9.6%
G&A Expenses as % of NSR
Full Year Income Statement Highlights
$301.8
$320.4
$301.8
$320.4
$14,435
$24,403 $25,464
5.9%
8.1% 7.9%
FY 2011 FY 2012 FY 2013
Consolidated EBITDA
EBITDA Reflects Leverage in Business Model
15
(in thousands)
Consolidated EBITDA EBITDA Margin
2011 2012 2013
$52 $44 $54
$40 $60 $58
$138 $131 $135
Segment NSR Backlog
NSR Backlog & New Project Wins
16
(in millions)
Energy• Public Service New Hampshire
EPC Project• NYSERDA Multifamily
Environmental• Sabal Trail Natural Gas
Pipeline• Alabama Department of
Environmental Management
Infrastructure• Confidential Client – Waste
Water Treatment Plant• PennDOT District 4-0
$235 $247
New Project Wins
$230
17
Balance Sheet Highlights
Cash and cash equivalents
Days sales outstanding (DSO)
Cash Flow Highlights
Cash flow from operations
Capital expenditures
Free cash flow
FY 2012
$16.6
78 days
$19.4
$7.1
$12.3
FY 2013
$18.1
83 days
$14.4
$3.9
$10.5
(In millions)
Balance Sheet and Cash Flow Highlights
Investment Highlights
18
Well positioned in markets with solid medium- to long-term growth opportunities
Executing a focused profitable growth strategy
Large addressable market opportunity
Diversified revenue stream with attractive customer base
Strong balance sheet and cash position
Stable but growing backlog
Reconciliation of Non-GAAP Measures
19
In millionsFY 2011 FY 2012 FY 2013
Net income applicable to TRC Companies, Inc.'s common shareholders (16.6)$ 33.6$ 36.3$ Interest expense 0.8 0.7 0.3 Federal and state income tax provision 1.1 (3.9) (18.0) Depreciation and amortization 4.7 5.5 6.9 Net loss applicable to noncontrolling interest (0.1) (0.1) -Equity in earninngs from unconsolidated affiliates, net of taxes - (0.3) -Accretion charges on preferred stock 7.3 - -Consolidated EBITDA (2.8)$ 35.5$ 25.5$
In millionsFY 2011 FY 2012 FY 2013
Net service revenue 245.9$ 301.8$ 320.4$ Cost of services 202.3 246.5 268.5Gross Margin 43.6$ 55.3$ 51.9$ Gross Margin % 17.7% 18.3% 16.2%
In millionsFY 2011 FY 2012 FY 2013
Net cash provided by operating activities 12.5$ 19.4$ 14.4$ Additions to property and equipment (3.1) (7.1) (3.9) Free Cash Flow 9.4$ 12.3$ 10.5$
Earnings Before Interest, Taxes, Depreciation, Amortization
Gross Margin and Gross Margin %
Free Cash Flow