trc q3 2015 earnings slides final
TRANSCRIPT
Q3 Fiscal 2015 Investor Review
May 6, 2015
T R R
Chris Vincze Tom BennetChairman & CEO Chief Financial Officer
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, 2014, 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 Third Quarter Fiscal Year 2015 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 third quarter
Form 10-Q and Financial Results Press Release. Also, 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 16.
Q3 Fiscal 2015 Overview
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NSR1increased 15% YOY to $101M
Operating income increased 185% YOY to $7.1M
NSR backlog increased 18% YOY to $289M
(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.
EBITDA increased 100% YOY to $9.4M
Net income increased 261% YOY to $5.2M
Envi
ronm
enta
l Seg
men
t
4
Q3 Fiscal 2015 Results
NSR +22% YOY
Segment profit +28% YOY
Segment NSR backlog +6% YOY
Continued development of midstream oil & gas markets
Increased demand from oil & gas clients, particularly pipeline permitting services
$42.0
$51.0
Q3 2014 Q3 2015
Net Service Revenue (in millions)
$7.8
$9.9
Q3 2014 Q3 2015
Segment Profit (in millions)
+22% +28%
Ener
gy S
egm
ent
5
Q3 Fiscal 2015 Results
NSR +5% YOY
Segment profit +10% YOY
NSR backlog +16% YOY
Utility capital spend on power delivery projects
Growing investment in renewable energy projects
$34.6 $36.4
Q3 2014 Q3 2015
Net Service Revenue (in millions)
$7.9 $8.7
Q3 2014 Q3 2015
Segment Profit (in millions)
+10%+5%
Infr
astr
uctu
re S
egm
ent
6
Q3 Fiscal 2015 Results
NSR +19% YOY
Segment profit +99% YOY
NSR backlog +56% YOY
Received change orders that had been pending on large projects
Healthier state and municipal budgets providing for more transportation projects, particularly in CA, PA, WV
$10.4
$12.4
Q3 2014 Q3 2015
Net Service Revenue (in millions)
$1.4
$2.8
Q3 2014 Q3 2015
Segment Profit (in millions)
+19%
+99%
$47 $43$70
$86 $85
$86
$127 $126
$133
Q1 2015 Q2 2015 Q3 2015
Segment NSR Backlog
$289
NSR Backlog & New Project Wins
7
(in millions)
$260 $254
Energy• Substation rebuild, $2.5 million for a
large New England IOU
• $3 million energy efficiency project awards for California based utilities
Environmental• New York Governor's Office for Storm
Recovery – $3 million Super Storm Sandy-related Housing Recovery Project
• Enbridge Energy Company –Environmental Compliance Inspection
Infrastructure• Bizzack Construction – Design work for
Coalfields Expressway PPP Project (W.V.)
• PennDOT – Quality acceptance services for Rapid Bridge Replacement P3 Project and Steel Inspection Contract (Penn.)
8
Growth Strategy
0%
4%
8%
12%
16%
Q4 2014 Q1 2015 Q2 2015 Q3 2015
Total
Organic
Total & Organic NSR Growth Recent Acquisitions
X-Line (April 2015)
NOVA Safety & Environmental (September 2014)
Covino Environmental Associates (July 2014)
EMCOR Energy Services, Inc. (January 2014)
Utility Support Systems, Inc. (July 2013)
Investing in high-margin organic growth opportunities
Pursuing strategic acquisitions to expand our platform in key North American markets
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X-Line, Inc.
Growing and innovative distribution engineering services company with power and telecommunication clients in the Southeast (complementing the USS acquisition)
Services: Distribution design, joint-use, inspection, telecommunication engineering & design
Major Clients: AT&T, Georgia Power, electric cooperatives
Markets: Alabama, Georgia, Kentucky and Tennessee
Employees: 37
2014 Revenue: NSR: $2MM
Immediately accretive
Summary and Key Initiatives
10
Consistently improving financial performance
Invest in organic growth opportunities
Increase focus on strategic markets:
Oil & Gas – Midstream market provides expansive opportunities
Utility/Power – Aging and inefficient transmission and distribution systems require long-term capital investments
Transportation – Highways, bridges, transit, airports and rail require significant capital investments for a safe, sustainable, efficient and modernized U.S.
Continue to pursue strategic acquisitions that provide geographic expansion and enhanced technical capabilities
$88.1 $101.0
Q3 2014 Q3 2015
Net Service Revenue (in millions)
Quarterly Financial Results Overview
11
$4.7
$9.4
Q3 2014 Q3 2015
EBITDA (in millions)
$2.5
$7.1
Q3 2014 Q3 2015
Operating Income (in millions)
+15%
+185%
+100%
$0.05
$0.17
Q3 2014 Q3 2015
Diluted EPS
+240%
Q3 2015
$101.0
$0.8
$83.5
17.3%
$8.9
$7.1
$9.4
9.3%
$5.2
$0.17
Q3 2014
$88.1
$5.0
$80.1
9.0%
$8.4
$2.5
$4.7
5.3%
$1.4
$0.0512
(In millions, except per share data)
Quarterly Income Statement Highlights
$88.1
$101.0
91.0%
82.7%
Q3 2014 Q3 2015
Cost of Services as % of NSR
$88.1
$101.0
9.5%8.8%
Q3 2014 Q3 2015
G&A Expenses as % of NSR
Net service revenue
Insurance recoverables and other income
Cost of services (COS)
Gross margin %
General and administrative expenses
Operating income
EBITDA
EBITDA as a % of NSR
Net income
Diluted earnings per common share
$260.5 $293.5
YTD 2014 YTD 2015
Net Service Revenue (in millions)
YTD Financial Results Overview
13
$18.5
$27.1
YTD 2014 YTD 2015
EBITDA (in millions)
$12.0
$20.0
YTD 2014 YTD 2015
Operating Income (in millions)
+13%
+67%
+46%
$0.23
$0.41
YTD 2014 YTD 2015
Diluted EPS
+78%
Note: YTD 2014 represents the nine-month period ended March 28, 2014; YTD 2015 represents the nine-month period ended March 27, 2015.
YTD 2014
$260.5
$17.6
$234.9
9.8%
$24.6
$12.0
$18.5
7.1%
$7.0
$0.23
YTD 2015
$293.5
$6.2
$247.3
15.7%
$25.4
$20.0
$27.1
9.2%
$12.6
$0.41
14
(In millions, except per share data)
YTD Income Statement Highlights
$260.5 $293.5
90.2%84.3%
YTD 2014 YTD 2015
Cost of Services as % of NSR
$260.5 $293.5
9.5% 8.6%
YTD 2014 YTD 2015
G&A Expenses as % of NSR
Exit Strategy Change in Estimate
YTD 2014 YTD 2015
Net Service Revenue $ (6.9) $ -
Insurance Recoverables 17.3 -
Cost of Services 10.4 -
Operating Income $ - $ -
Net service revenue
Insurance recoverables and other income
Cost of services (COS)
Gross margin %
General and administrative expenses
Operating income
EBITDA
EBITDA as a % of NSR
Net income
Diluted earnings per common share
Note: YTD 2014 represents the nine-month period ended March 28, 2014; YTD 2015 represents the nine-month period ended March 27, 2015.
15
Balance Sheet Highlights
Cash and cash equivalents
Days sales outstanding (DSO)
Cash Flow Highlights
Cash flow from operations
Capital expenditures
Free cash flow
Q3 2014
$8.6
$(0.9)
$7.7
Q3 2015
$11.4
$(1.0)
$10.4
(In millions)
Balance Sheet and Cash Flow Highlights
YTD 2014
$11.4
92 days
$3.2
$(3.8)
$(0.6)
YTD 2015
$21.3
90 days
$12.6
$(5.0)
$7.6
Note: YTD 2014 represents the nine-month period ended March 28, 2014; YTD 2015 represents the nine-month period ended March 27, 2015.
Reconciliation of Non-GAAP Measures
16
in millions
Item Q3 - 2014 Q3 - 2015 YTD - 2014 YTD - 2015
Net income applicable to TRC Companies, Inc.'s common shareholders 1.4$ 5.2$ 7.0$ 12.7$
Interest expense 0.0$ 0.1$ 0.2$ 0.1$
Federal and state income tax provision 1.1$ 1.9$ 4.8$ 7.2$
Depreciation and amortization 2.2$ 2.2$ 6.6$ 7.1$
Net loss applicable to noncontrolling interest (0.0)$ (0.0)$ (0.0)$ (0.0)$
Consolidated EBITDA 4.7$ 9.4$ 18.5$ 27.1$
in millions
Item Q3 - 2014 Q3 - 2015 YTD - 2014 YTD - 2015
Net service revenue 88.1$ 101.0$ 260.5$ 293.5$
Cost of services 80.1$ 83.5$ 234.9$ 247.3$
Gross Margin 8.0$ 17.5$ 25.6$ 46.2$
Gross Margin % 9.0% 17.3% 9.8% 15.7%
in millions
Item Q3 - 2014 Q3 - 2015 YTD - 2014 YTD - 2015
Net cash provided by operating activities 8.6$ 11.4$ 3.2$ 12.6$
Additions to property and equipment (0.9)$ (1.0)$ (3.8)$ (5.0)$
Free Cash Flow 7.7$ 10.4$ (0.6)$ 7.6$
Earnings Before Interest, Taxes, Depreciation and Amortization
Gross Margin and Gross Margin %
Free Cash Flow
Definitions for Non-GAAP Measures
17
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. Note that a separate, modified non-GAAP term “Consolidated Adjusted EBITDA” is defined in the Company’s revolving credit agreement.
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 FlowThe 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.