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Trc q4 2016 earnings slides final

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Trc q4 2016 earnings slides final

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Trc q4 2016 earnings slides final

  1. 1. www.trcsolutions.com Q4 Fiscal 2016 Investor Review Aug. 31, 2016 Chris Vincze Tom Bennet Chairman & CEO Chief Financial Officer TRR
  2. 2. 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, 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; capital availability and project investment by our clients; 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, 2016, 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. These slides are intended as a visual aid to TRC’s commentary on the Fourth Quarter and Fiscal Year 2016 Financial Results Conference Call. As such they should be considered in the full context of that commentary, the transcript of that conference call and TRC’s fiscal year 2016 Form 10-K and fourth quarter 2016 financial results press release. Also, this presentation contains references to non-GAAP metrics such as EBITDA, gross margin, free cash flow and various adjusted metrics. A reconciliation of GAAP to non-GAAP metrics can be found on slides 17-22.
  3. 3. Q4 Fiscal 2016 Overview 3 NSR1 increased 16% YOY to $132.3M Energy +4%, Environmental -9%, Infrastructure +24%, Pipeline Services NSR of $20.8M NSR backlog increased 16% YOY to $367.2M Energy -9%, Environmental +8%, Infrastructure +1%, Pipeline Services backlog of $48M (1) TRC believes net service revenue (gross revenue less subcontractor costs and other direct reimbursable charges) best reflects the value of services provided to its customers and is the most meaningful indicator of its revenue performance. (2) Interest expense increase of $1.1M, less interest income increase of $0.5M. Operating cash flow of $17.7M Top quintile DSO performance fuels operating cash flow in excess of earnings Net income decreased 13% YOY to $5.9M Amortization expense increased $1.9M and net interest expense2 increased $0.6M EBITDA increased 15% YOY to $14.8M Highest quarterly earnings in company history
  4. 4. EnvironmentalSegment $13.8 $14.2 $44.1 $41.7 Q4 2015 Q4 2016 FY 2015 FY 2016 Segment Profit (in millions) -5% +3% $58.4 $53.1 $209.8 $206.1 Q4 2015 Q4 2016 FY 2015 FY 2016 Net Service Revenue (in millions) -9% -2% 4  NSR -9% YOY; primarily due to oil & gas industry downturn  Segment profit +3% YOY  NSR backlog +8% YOY  Continued decline in oil & gas market, delayed midstream capital projects and reduced spending across the entire spectrum  Increased segment profit due to previous employee headcount reductions to align productivity with revenue base ($4.0M of annualized payroll reductions in Q3 2016)  Construction, real estate and power markets gaining momentum Q4 Fiscal 2016 Results
  5. 5. EnergySegment 5  NSR +4% YOY  Segment profit -7% YOY, driven by administrative delays on a significant California program management contract  NSR backlog -9% YOY  Increased demand for services from long-term and newer clients from continued investment in electric transmission and distribution across the country  Demand for energy efficiency, testing / commissioning, and distribution engineering services driving growth $39.1 $40.5 $145.7 $150.6 Q4 2015 Q4 2016 FY 2015 FY 2016 Net Service Revenue (in millions) +3% $9.5 $8.8 $32.1 $33.7 Q4 2015 Q4 2016 FY 2015 FY 2016 Segment Profit (in millions) +5% -7%+4% Q4 Fiscal 2016 Results
  6. 6. InfrastructureSegment 6 Q4 Fiscal 2016 Results  NSR +24% YOY  Segment profit +32% YOY  NSR backlog +1% YOY  Transportation market strengthening via FAST Act, as well as increased state and local funding initiatives  Private investment and state legislation expanding PPP programs  Expansions of services in CA, FL, OH and SC $13.6 $16.9 $49.1 $57.2 Q4 2015 Q4 2016 FY 2015 FY 2016 Net Service Revenue(in millions) +17% $3.0 $3.9 $9.2 $12.0 Q4 2015 Q4 2016 FY 2015 FY 2016 Segment Profit (in millions) +32% +31% +24%
  7. 7. PipelineServicesSegment 7  NSR $20.8 million  Segment loss of $(3.2) million, including intangible asset amortization of $2.1 million and acquisition integration expenses of $2.3 million, primarily lease abandonment charges  NSR backlog $48 million  Realigned cost structure to address continued uncertainty in oil & gas markets • (~$18M annualized payroll reductions since 12/1/15)  Integration activities are substantially complete; focus is on client synergies and sales $21.5 $20.8 Q3 2016 Q4 2016 Net Service Revenue(in millions) Q4 Fiscal 2016 Results $(3.1) $(3.2) Segment (Loss) (in millions) Q4 2016Q3 2016
  8. 8. $90 $96 $91 $96 $91 $87 $131 $139 $141 $50 $48 Q4 2015 Q3 2016 Q4 2016 Segment NSR Backlog $367 NSR Backlog & New Project Wins 8 (in millions) $317 $376 Energy • PSE&G - $10M substation electrical commissioning and testing • Consolidated Edison - $2.5M for quality assurance / quality control services for energy efficiency Environmental • Xcel Energy Services, Inc. – $10M indefinite delivery / indefinite quantity contract for environmental services • Eversource Energy - $3M turnkey environmental services Infrastructure • LA Metro Transport. Authority – $6.4M for design and environmental studies in widening two freeways • Alabama DOT – $0.5M for testing and inspection of bridge and highway structures Pipeline Services • Confidential Client - $4.5M pipeline project • PSNC Energy (a SCANA company) - $3M compressor station project Recent Project Awards
  9. 9. Fiscal 2016 Highlights 9  NSR of $465.1 million, up 14%  Adjusted EBITDA of $44.6 million, up 11%  Operating cash flow of $48.1 million, up 50%  Acquisition-related debt reduced by $30 million or 29%  Acquired and fully integrated Willbros Professional Services  Quickly reduced costs as the downturn in oil and gas prices created market turmoil and uncertainty  Benefitted from the diversity of our four-segment portfolio: Infrastructure segment realized 17% NSR growth and 31% segment profit growth  16% backlog growth for the year sets the stage for fiscal 2017
  10. 10. Key Strategies and Initiatives 10  Continue to invest in organic growth opportunities  Increase focus on strategic markets:  Power / Utility – Continued investment to modernize gas & electric systems; significant renewable generation investment and focus on energy efficiency  Transportation – FAST transportation bill supports capital expansion; growing trend toward PPP projects  Oil & Gas – Changing midstream and LDC market dynamics resulting in focus on repair / maintenance, upgrade, and monitoring of existing assets using IT solutions  Continue building program management and construction management capabilities  Pursue acquisitions that provide geographic expansion and enhanced technical capabilities or new adjacent services  Continue focus on improving operating margin and increasing operating cash flow
  11. 11. FY 2017 Outlook 11  Long-term markets favorable for all segments  Mid term, Environmental and Oil and Gas segments are positioned for growth when midstream markets recover and capital expenditure uncertainty tapers  Near term, Oil and Gas segment will see growth opportunities due to proposed integrity “Mega Rule”  Environmental segment near-term outlook solid with demand growth in municipal, real estate and power markets  Power segment growth on demand from utility clients investing in energy efficiency, renewable power and robust distribution systems  Infrastructure segment backlog building on increased transportation spending and our national expansion strategy
  12. 12. $12.9 $14.8 Q4 2015 Q4 2016 EBITDA(in millions) Quarterly Financial Results Overview 12 $114.6 $132.3 Q4 2015 Q4 2016 Net Service Revenue (in millions) +16% $12.9 $15.2 Q4 2015 Q4 2016 Adjusted EBITDA*(in millions) +18% *Excludes $2.8 million of acquisition and integration expenses and the $2.5 million goodwill impairment credit. +15% $6.8 $5.9 Q4 2015 Q4 2016 Net Income (in millions) -13%
  13. 13. Q4 2015 $114.6 $0.3 $90.0 21.4% $12.0 10.5% -- -- $10.7 $10.7 $12.9 11.2% $12.9 11.2% $6.8 $6.8 $0.22 $0.22 Q4 2016 $132.3 $14.2 $121.6 8.1% $9.7 7.3% $2.8 $(2.5) $10.3 $10.6 $14.8 11.2% $15.2 11.5% $5.9 $6.1 $0.19 $0.20 13 (In millions, except per share data) Quarterly Income Statement Highlights 78.5% 91.9% Q4 2015 Q4 2016 Cost of Services as % of NSR 10.5% 7.3% Q4 2015 Q4 2016 G&A Expenses as % of NSR Net service revenue Insurance recoverables and other income Cost of services (COS) Gross margin % General and administrative expenses G&A as % of NSR Acquisition and integration expenses Goodwill impairment Operating income Adjusted operating income1 EBITDA EBITDA as a % of NSR Adjusted EBITDA1 Adjusted EBITDA as a % of NSR Net income Adjusted net income1, 2 Diluted earnings per common share Adjusted diluted earnings per common share1, 2 1 Excludes $2.8 million of acquisition and integration expenses and the $2.5 million goodwill impairment credit. 2 Excludes acquisition related expense and goodwill impairment credit in note 1, net of an income tax benefit of 0.1 million Q4 2015 Q4 2016 Net Service Revenue (0.2)$ (2.1)$ Insurance Recoverables 0.3 14.0 Cost of Services 0.2 11.4 Operating (Loss) Income (0.1)$ 0.5$ Exit Strategy Change in Estimate
  14. 14. $40.0 $16.1 FY 2015 FY 2016 EBITDA(in millions) FY 2016 Financial Results Overview 14 $408.0 $465.1 FY 2015 FY 2016 Net Service Revenue (in millions) +14% $40.0 $44.6 FY 2015 FY 2016 Adjusted EBITDA*(in millions) +11%-60% $19.4 $- FY 2015 FY 2016 Net Income (in millions) -100% 1 Excludes $6.6 million of acquisition and integration expenses and $22 million related to the impairment of goodwill. 2 Excludes goodwill impairment and acquisition related expense in note 1, net of an income tax benefit of $10.9 million.
  15. 15. FY 2015 $408.0 $6.6 $337.3 17.3% $37.3 9.1% -- -- $30.7 $30.7 $40.0 9.8% $40.0 9.8% $19.4 $19.4 $0.63 $0.63 YTD 2015 $192.5 $5.5 $163.8 14.9% $16.4 $12.9 $17.8 9.2% $7.5 $0.25 15 (In millions, except per share data) FY 2016 Income Statement Highlights 82.7% 86.5% FY 2015 FY 2016 Cost of Services as % of NSR 9.1% 7.4% FY 2015 FY 2016 G&A Expenses as % of NSR 1 Excludes $6.6 million of acquisition and integration expenses and $22 million related to the impairment of goodwill. 2 Excludes goodwill impairment and acquisition integration related expense in note 1, net of an income tax benefit of $10.9 million. Net service revenue Insurance recoverables and other income Cost of services (COS) Gross margin % General and administrative expenses G&A as % of NSR Acquisition and integration expense Goodwill impairment Operating income Adjusted operating income1 EBITDA EBITDA as a % of NSR Adjusted EBITDA1 Adjusted EBITDA as a % of NSR Net income Adjusted net income1, 2 Diluted earnings per common share Adjusted diluted earnings per common share1, 2 FY 2016 $465.1 $16.2 $402.3 13.5% $34.4 7.4% $6.6 $22.0 $1.3 $29.9 $16.1 3.5% $44.6 9.6% $0.0 $17.7 $0.00 $0.56 FY 2015 FY 2016 Net Service Revenue (2.6)$ (3.5)$ Insurance Recoverables 3.9 15.7 Cost of Services 2.5 13.3 Operating Loss (1.2)$ (1.1)$ Exit Strategy Change in Estimate
  16. 16. 16 Balance Sheet Highlights Cash and cash equivalents Days sales outstanding (DSO) Acquisition-related debt repayment Acquisition-related debt balance Cash Flow Highlights Cash flow from operations Capital expenditures Free cash flow Q4 2015 -- -- $19.5 $(1.6) $17.9 Q4 2016 $(2.8) $72.2 $17.7 $(1.8) $15.9 (In millions) Balance Sheet and Cash Flow Highlights FY 2015 $37.3 83 days $32.1 $(6.6) $25.5 FY 2016 $18.8 79 days $(29.8) $72.2 $48.1 $(8.3) $39.8
  17. 17. 17 Earnings Before Interest, Taxes, Depreciation, Amortization and Goodwill & Intangible Asset Impairment In millions Q4 - 2015 Q4 - 2016 Net income applicable to TRC Companies, Inc.'s common shareholders $6.8 $5.9 Interest expense 0.0 1.1 Interest income - (0.5) Provision for income taxes 3.9 3.7 Depreciation and amortization 2.2 4.6 Net income (loss) applicable to noncontrolling interest (0.0) 0.0 Equity in earnings from unconsolidated affiliates, net of taxes - - Accretion charges on preferred stock - - Consolidated EBITDA $12.9 $14.8 Less: Acquisition and integration expenses - $2.8 Less: Goodwill impairment - ($2.5) Consolidated Adjusted EBITDA $12.9 $15.2 In millions Q4 - 2015 Q4 - 2016 Net service revenue $114.6 $132.3 Cost of services 90.0 121.6 Gross Margin $24.6 $10.7 Gross Margin % 21.4% 8.1% Gross Margin and Gross Margin % Reconciliation of Non-GAAP Measures
  18. 18. 18 Earnings Before Interest, Taxes, Depreciation, Amortization and Goodwill & Intangible Asset Impairment In millions YTD - 2015 YTD - 2016 Net income applicable to TRC Companies, Inc.'s common shareholders $19.4 $0.0 Interest expense 0.1 2.7 Interest income - (0.8) Provision for income taxes 11.2 (0.7) Depreciation and amortization 9.3 14.7 Net income (loss) applicable to noncontrolling interest (0.0) 0.1 Equity in earnings from unconsolidated affiliates, net of taxes - - Accretion charges on preferred stock - - Consolidated EBITDA $40.0 $16.1 Less: Acquisition and integration expenses - $6.6 Less: Goodwill impairment - $22.0 Consolidated Adjusted EBITDA $40.0 $44.6 In millions YTD - 2015 YTD - 2016 Net service revenue $408.0 $465.1 Cost of services 337.3 402.3 Gross Margin $70.7 $62.8 Gross Margin % 17.3% 13.5% Gross Margin and Gross Margin % Reconciliation of Non-GAAP Measures
  19. 19. 19 In millions Q4 - 2015 Q4 - 2016 Net cash provided by operating activities $19.5 $17.7 Additions to property and equipment (1.6) (1.8) Free Cash Flow $17.9 $15.9 Free Cash Flow In millions YTD - 2015 YTD - 2016 Net cash provided by operating activities $32.1 $48.1 Additions to property and equipment (6.6) (8.3) Free Cash Flow $25.5 $39.8 Free Cash Flow Reconciliation of Non-GAAP Measures
  20. 20. 20 In millions Q4 - 2015 Q4 - 2016 Net income applicable to TRC Companies, Inc.'s common shareholders $6.8 $5.9 Acquisition and integration Expenses - $2.8 Tax Effect of Acquisition and integration Expenses - ($1.1) Goodwill impairment - ($2.5) Tax Effect of Goodwill impairment - $1.0 Adjusted Net Income Applicable to TRC Companies, Inc's Common Shareholders $6.8 $6.1 Adjusted Net Income Applicable to TRC Companies, Inc.'s Common Shareholders Reconciliation of Non-GAAP Measures In millions YTD - 2015 YTD - 2016 Net income applicable to TRC Companies, Inc.'s common shareholders $19.4 $0.0 Acquisition and integration Expenses - $6.6 Tax Effect of Acquisition and integration Expenses - ($2.4) Goodwill impairment - $22.0 Tax Effect of Goodwill impairment - ($8.5) Adjusted Net Income Applicable to TRC Companies, Inc's Common Shareholders $19.4 $17.7 Adjusted Net Income Applicable to TRC Companies, Inc.'s Common Shareholders
  21. 21. 21 In millions Q4 2015 Q4 2016 Operating income $10.7 $10.3 Acquisition and integration Expenses - $2.8 Goodwill impairment - ($2.5) Adjusted operating income $10.7 $10.6 In millions Q4 2015 Q4 2016 Net income applicable to TRC Companies, Inc.'s common shareholders $6.8 $5.9 Acquisition and integration Expenses - $2.8 Tax Effect of Acquisition and integration Expenses - ($1.1) Goodwill impairment - ($2.5) Tax Effect of Goodwill impairment - $1.0 Adjusted net income applicable to TRC Companies, Inc's common shareholders $6.8 $6.1 Diluted shares outstanding (as disclosed) 31.2 31.4 Add back for dilutive shares - - Adjusted diluted shares outstanding 31.2 31.4 Adjusted diluted earnings per common share $0.22 $0.20 Adjusted Diluted Earnings per Common Share Adjusted Operating Income Reconciliation of Non-GAAP Measures
  22. 22. 22 In millions YTD 2015 YTD 2016 Operating income $30.7 $1.3 Acquisition and integration Expenses - $6.6 Goodwill impairment - $22.0 Adjusted operating income $30.7 $29.9 In millions YTD 2015 YTD 2016 Net income applicable to TRC Companies, Inc.'s common shareholders $19.4 $0.0 Acquisition and integration Expenses - $6.6 Tax Effect of Acquisition and integration Expenses - ($2.4) Goodwill impairment - $22.0 Tax Effect of Goodwill impairment - ($8.5) Adjusted net income applicable to TRC Companies, Inc's common shareholders $19.4 $17.7 Diluted shares outstanding (as disclosed) 30.7 31.4 Add back for dilutive shares - 0.0 Adjusted diluted shares outstanding 30.7 31.4 Adjusted diluted earnings per common share $0.63 $0.56 Adjusted Diluted Earnings per Common Share Adjusted Operating Income Reconciliation of Non-GAAP Measures
  23. 23. 23 Earnings Before Interest, Taxes, Depreciation, Amortization (EBITDA) The Company presents EBITDA because it believes that it is a useful tool for the Company, its lenders and its investors to measure the Company’s ability to meet debt service, capital expenditure and working capital requirements. As used in the presentation, EBITDA is operating income plus depreciation and amortization. Adjusted Earnings Before Interest, Taxes, Depreciation, Amortization (Adjusted EBITDA) As used in the presentation, Adjusted EBITDA is defined as EBITDA plus acquisition and integration expenses and the amount of the goodwill impairment. Gross Margin and Gross Margin % The Company presents Gross Margin and Gross Margin % to allow investors to better evaluate short- term and long-term profitability trends. The definition of Gross Margin is equal to Net Service Revenue less Cost of Services. Gross Margin % is equal to Gross Margin Divided by Net Service Revenue. Free Cash Flow The Company presents free cash flow, and ratios based on it, to conduct and evaluate its business because, although it is similar to cash flow from operations, the Company believes it is a useful measure of cash flows since purchases of fixed assets are a necessary component of ongoing operations. The definition of Free Cash Flow is equal to net cash provided by (used in) operating activities plus additions to property and equipment. Definitions for Non-GAAP Measures
  24. 24. 24 Adjusted Operating Income The Company presents Adjusted Operating Income because it believes that it is a useful tool for the Company, its lenders and its investors to measure the Company’s underlying operating performance. As used in the presentation, Adjusted Operating Income is defined as operating income plus acquisition and integration expenses and the amount of the goodwill impairment. Adjusted Net Income The Company presents Adjusted Net Income because it believes that it is a useful tool for the Company, its lenders and its investors to measure the Company’s financial performance. As used in the presentation, Adjusted Net Income is defined as net income applicable to TRC Companies, Inc. plus the tax effected acquisition and integration expenses and the amount of the goodwill impairment. The Company utilizes its effective tax rate for the period in calculating the tax effect. Adjusted Diluted Earnings Per Share (Adjusted Diluted EPS) The Company presents Adjusted Diluted EPS because it believes that it is a useful tool for the Company, its lenders and its investors to measure the Company’s financial performance. As used in the presentation, Adjusted Diluted EPS is defined as Adjusted Net Income divided by diluted weighted average shares outstanding. Definitions for Non-GAAP Measures

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