Investor Presentation. August 2018

Transcription

1 Investor Presentation August 2018

2 Forward Looking Statements & Non-GAAP Financial Measures Certain statements contained in this presentation are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of These statements involve risks and uncertainties, such as those related to fluctuations in the Company s quarterly operating results and stock price, and the other risks detailed from time to time in the Company s SEC reports. To supplement the financial results presented in accordance with generally accepted accounting principles in the United States ( GAAP ), we present certain non-gaap financial measures within the meaning of Regulation G under the Securities Exchange Act of 1934, as amended. We provide these non-gaap financial measures because we believe they provide a valuable perspective on our financial results. However, non-gaap measures have limitations as analytical tools and should not be considered in isolation and are not in accordance with, or a substitute for, GAAP measures. In addition, other companies may define non-gaap measures differently which limits the ability of investors to compare non-gaap measures of Tetra Tech to those used by our peer companies. A reconciliation of these non-gaap financial measures to the most directly comparable GAAP financial measures can be found on the Company s website. 2

3 Our Business +17,000 Associates Worldwide Leading with Science - Premier Global Consulting and Engineering Firm 3

4 Industry Rankings: #1 Market Leading Positions TETRA TECH ENR RANKINGS 4

5 Business Segments Government Services Group GSG Commercial/International Services Group CIG U.S. Federal U.S. Commercial U.S. Infrastructure Canada/ South America International Development Australia/ Asia Pacific 5

6 Growth Opportunities August 2018 Investor Presentation 6

7 U.S. Federal Opportunities U.S. Federal DoD FY18 Budget up 14.2% Y/Y Priority Programs Energy and water resilience at military installations Evaluating risk of disruption to water supply and power Emerging Contaminants Assessing and implementing treatment solutions >$20B projects identified to date DoD priorities aligned with Tetra Tech expertise 7

8 U.S. State & Local Opportunities State & Local up 26% Y/Y, up > 15% for 8 consecutive quarters Disaster recovery: Increased demand for consulting services and damage assessment from fires and floods Fires Floods July 2018: Mendocino Complex Fire, CA July 2018: Carr Fire, CA July 2018: Spring Creek Fire, CO July 2018: Southeast Texas - flash floods across 3 counties May 2018: Ellicott City, MD 2nd 1,000 yr rain event in 2 yrs Tetra Tech provides engineering and environmental assessment services 8

9 Oil & Gas: Increased opportunities in U.S. Tetra Tech Midstream Capabilities Planning Permitting Engineering Design Environmental Services Annual Oil & Gas Midstream Infrastructure CAPEX ($Billions) Tetra Tech Offices Serving Oil Basins 9

10 Financial Update August 2018 Investor Presentation 10

11 Fiscal Year 2017 Results Revenue Operating Income* Earnings per Share* Backlog $2.8B $191M $2.13 $2.5B +7% +15% +16% +7% *Excludes Remediation and Construction Management (RCM) and purchase accounting adjustments. 11

12 Q3-18 Results ($ in millions, except EPS) Revenue Net Revenue* Operating Income Diluted EPS Total $765 $570 $55 $0.59 Ongoing Operations* $761 $569 $60 $0.71 Y/Y +12% +14% +26% +34% Note: refer to appendix for reconciliation summary *Non-GAAP financial measure 12

13 Net Revenue by Customer (Q3-18) U.S. Federal 29%* U.S. Commercial 28%* +10% +13% Q3-17 Q3-18 Q3-17 Q3-18 Department of Defense up Industrial environmental up U.S. State and Local 14%* International 29%* +26% +16% Q3-17 Q3-18 Municipal infrastructure and disaster recovery up Q3-17 Q3-18 Infrastructure programs up * % Of Net Revenue 13

14 Net Revenue by Segment (Q3-18) Government Services Group (GSG) Commercial / International Services Group (CIG) 12.0% OI Margin 14.7% OI Margin 10.4% OI Margin 10.4% OI Margin +13% +16% Q3 FY-17 Q3 FY-18 Q3 FY-17 Q3 FY-18 U.S. infrastructure up Disaster recovery up U.S. environmental up International infrastructure up OI Margin 12.1% w/o Canadian O&G 14

15 Backlog and Significant Wins 2,435 Significant Awards Contract Ceiling Funded Value 2,265 Various Commercial - $259M Int l Dev. Task Orders - $157M USAID Ukraine Energy Security Contract U.S. Army Corps of Engineers Pacific Northwest Contract $85M $15M $60M - U.S. Army Task Orders - $45M Funded and Authorized USAID Madagascar Community Development Contract $22M $7M U.S. FAA Task Orders - $13M 15

16 Capital Allocation Leverage (Net Debt/EBITDA) Credit Facility Amendment Acquisitions & Divestitures Target: 1x 2x Q3-18: 0.9x $1 Billion total capacity Divested non-core assets in Q3-18 Buyback Q3-18: $25M stock buyback $200M buyback program, $25M remaining Dividend Quarterly dividend: $0.12 per share 16

17 Guidance (as of August 1, 2018) Net Revenue Diluted Ongoing EPS Q4-18 $550M - $575M $ $0.75 FY-18 $2.20B - $2.22B $ $2.64 Assumptions FY18 Includes intangible amortization of $19 million or $0.24 per share 26% effective FY18 tax rate (28% effective Q4-18 tax rate) 57 million average diluted shares Excludes contributions from future acquisitions 17

18 Summary Record results year to date Broad-based growth 10% year to date Technically differentiated Leading with Science Increased guidance for Fiscal

19 Appendix August 2018 Investor Presentation 19

20 Reconciliation Summary ($ in millions, except EPS) Q3-18 Reconciliation Revenue Net Revenue Operating Income EPS Backlog Ongoing $761 $569 $59.6 $0.71 $2,435 RCM 4 1 (0.5) (0.01) Earn-out (0.2) Non-core divestitures (3.4) (0.11) Total $765 $570 $55.5 $0.59 $2,435 Q3-17 Reconciliation Revenue Net Revenue Operating Income EPS Backlog Ongoing $681 $497 $47 $0.53 $2,523 RCM 4 1 (1) (0.01) 11 Total $685 $498 $46 $0.52 $2,534 20

21 Investor Report Unaudited Investors Report ($ in Thousands, Except Per Share Data) Total Total 1st Qtr 2nd Qtr 6 mos 3rd Qtr 9 mos 4th Qtr Total 1st Qtr 2nd Qtr 6 mos 3rd Qtr 9 mos REVENUE 2,299,321 2,583, , ,781 1,332, ,539 2,018, ,188 2,753, , ,261 1,460, ,795 2,224,805 REVENUE, NET OF SUBCONTRACTOR COSTS ["Net Revenue" (1)] 1,718,715 1,929, , ,954 1,001, ,478 1,499, ,027 2,034, , ,793 1,077, ,352 1,647,992 Government Services Group (GSG) 763, , , , , , , ,527 1,067, , , , , ,550 Commercial / International Services Group (CIG) 932, , , , , , , , , , , , , ,443 ONGOING NET REVENUE (2) 1,695,440 1,911, , ,658 1,003, ,576 1,500, ,107 2,034, , ,425 1,076, ,873 1,644,993 Remediation and Construction Management (RCM) 23,275 17,267 1,795 (3,704) (1,909) 902 (1,006) 919 (86) 1, ,520 1,479 2,999 OTHER COSTS OF REVENUE 1,402,925 1,598, , , , ,228 1,247, ,003 1,680, , , , ,758 1,352,827 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 170, ,985 41,506 45,195 86,702 44, ,068 46, ,219 45,556 46,792 92,348 50, ,820 ACQUISITION AND INTEGRATION EXPENSES - 19, PURCHASE ACCOUNTING AND NON-CORE DIVESTITURES (57,650) (2,823) - 7,149 7,149-7,149 (225) 6,923 - (1,918) (1,918) (3,626) (5,544) INCOME FROM OPERATIONS, AS REPORTED 87, ,855 39,855 42,956 82,811 45, ,695 54, ,342 48,589 42,716 91,305 55, ,801 ONGOING INCOME FROM OPERATIONS (2) (3) 153, ,060 42,897 44,273 87,170 47, ,305 56, ,131 49,747 45,123 94,870 59, ,477 GSG 87, ,595 30,168 33,432 63,601 32,047 95,647 42, ,199 39,125 34,177 73,302 44, ,674 CIG 99, ,603 21,544 18,459 40,003 24,082 64,085 26,732 90,817 21,294 18,399 39,693 27,892 67,585 Corporate (4) (32,552) (38,138) (8,815) (7,618) (16,434) (8,994) (25,427) (12,459) (37,885) (10,672) (7,453) (18,125) (12,657) (30,782) RCM (8,614) (11,834) (3,042) (8,466) (11,508) (1,251) (12,759) (1,953) (14,712) (1,158) (489) (1,647) (485) (2,132) ONGOING OPERATING MARGIN [% of Net Revenue] (2) (3) 9.1% 8.9% 8.8% 8.6% 8.7% 9.5% 8.9% 10.7% 9.4% 9.1% 8.5% 8.8% 10.5% 9.4% GSG 11.4% 10.7% 11.7% 12.8% 12.3% 12.0% 12.2% 15.1% 13.0% 12.6% 11.8% 12.2% 14.7% 13.1% CIG 10.7% 11.1% 9.3% 7.3% 8.2% 10.4% 8.9% 10.7% 9.4% 9.1% 7.6% 8.3% 10.4% 9.1% Interest Expense 7,363 11,389 2,908 3,099 6,007 2,795 8,802 2,779 11,581 3,160 4,092 7,252 4,345 11,597 INCOME BEFORE INCOME TAX EXPENSE (BENEFIT) 80, ,466 36,947 39,857 76,804 43, ,893 51, ,761 45,429 38,624 84,053 51, ,204 Income Tax Expense (Benefit) 41,093 40,613 10,358 12,990 23,348 13,114 36,462 17,381 53,844 (623) 9,877 9,254 17,806 27,060 NET INCOME ATTRIBUTABLE TO TETRA TECH 39,075 83,783 26,562 26,862 53,424 29,983 83,407 34, ,874 46,034 28,726 74,760 33, ,082 DILUTED AVERAGE SHARES 61,532 58,966 58,145 58,270 58,194 58,161 58,116 57,326 57,913 56,875 56,673 56,825 56,390 56,681 DILUTED EPS ATTRIBUTABLE TO TETRA TECH, AS REPORTED $ 0.64 $ 1.42 $ 0.46 $ 0.46 $ 0.92 $ 0.52 $ 1.44 $ 0.60 $ 2.04 $ 0.81 $ 0.51 $ 1.32 $ 0.59 $ 1.91 ONGOING DILUTED EPS (2) (3) (5) $ 1.61 $ 1.88 $ 0.49 $ 0.48 $ 0.97 $ 0.53 $ 1.50 $ 0.63 $ $ $ ONGOING EBITDA (1) (2) (3) 195, ,088 53,906 55, ,340 57, ,311 67, ,019 59,450 55, ,640 69, ,274 ONGOING EBITDA MARGIN [% of Net Revenue] 11.5% 11.2% 11.1% 10.8% 10.9% 11.7% 11.1% 12.7% 11.6% 10.9% 10.4% 10.7% 12.2% 11.2% DAYS IN SALES OUTSTANDING CASH FLOW FROM OPERATIONS 162, ,020 (58,747) 109,111 50,364 21,209 71,573 66, ,992 (66,493) 81,267 14,774 52,673 67,447 CAPITAL EXPENDITURES 24,296 11,945 2,031 1,865 3,896 3,122 7,018 2,723 9,741 2,143 2,422 4,565 1,781 6,346 Y/Y NET REVENUE GROWTH % (7.6%) 12.2% 16.3% 6.9% 11.3% 0.0% 7.3% 0.6% 5.4% 11.3% 4.1% 7.6% 14.4% 9.9% GSG (4.5%) 24.6% 32.4% 22.0% 26.9% 1.7% 17.1% 0.5% 12.2% 20.5% 11.2% 15.8% 13.1% 14.9% CIG (5.0%) 3.1% 5.0% (2.8%) 0.8% (1.4%) 0.1% 2.2% 0.6% 1.4% (4.9%) (1.9%) 15.7% 3.8% RCM (70.7%) (25.8%) (75.0%) (224.5%) (118.8%) (61.9%) (108.0%) (80.6%) (100.5%) (35.8%) (110.0%) (179.7%) 63.8% (398.2%) NET REVENUE % BY CLIENT TYPE International 29% 31% 30% 32% 31% 28% 30% 29% 30% 25% 28% 26% 29% 27% U.S. Commercial 32% 30% 27% 27% 27% 29% 28% 27% 27% 28% 28% 28% 28% 28% U.S. Federal Government 27% 27% 30% 29% 30% 30% 30% 30% 30% 29% 30% 30% 29% 30% U.S. State & Local Government 12% 12% 13% 12% 12% 13% 12% 14% 13% 18% 14% 16% 14% 15% NET REVENUE % BY CONTRACT TYPE Fixed-Price 32% 28% 31% 29% 30% 34% 31% 33% 32% 31% 34% 32% 35% 33% Time-and-Materials 50% 55% 50% 52% 51% 47% 50% 48% 49% 50% 50% 50% 48% 50% Cost-Plus 18% 17% 19% 19% 19% 19% 19% 19% 19% 19% 16% 18% 17% 17% BACKLOG 1,901,712 2,378,894 2,469,511 2,496,857 2,496,857 2,533,672 2,533,672 2,541,105 2,541,105 2,428,698 2,510,037 2,510,037 2,435,461 2,435,461 (1) Non-GAAP financial measure. For a reconciliation of non-gaap financial measures to the most directly comparable GAAP measures, please visit tetratech.com/investor-presentations.html (2) Ongoing excludes Remediation and Construction Management (3) Excludes purchase accounting and non-core divestitures, and acquisition and integration expenses (4) Corporate costs not allocable to the segments (e.g., acquisition costs, amortization expense, stock option expense, etc.) (5) Excludes one-time tax benefit Excel file available on tetratech.com/investor-relations 21

22 Reg. G Reconciliation of Revenue to Revenue, Net of Subcontractor Costs ("Net Revenue") (in millions) st Qtr 2nd Qtr 6 mos 3rd Qtr 9 mos 4th Qtr Total 1st Qtr 2nd Qtr 6 mos 3rd Qtr 9 mos Consolidated (as reported) Revenue 2, , , , , , ,224.8 Subcontractor Costs (580.6) (654.3) (179.3) (151.8) (331.1) (187.0) (518.2) (201.2) (719.4) (214.9) (167.5) (382.4) (194.4) (576.8) Net Revenue 1, , , , , , ,648.0 GSG Segment Revenue 1, , , , ,272.7 Subcontractor Costs (248.9) (338.5) (105.7) (95.7) (201.5) (113.2) (314.7) (105.8) (420.4) (132.8) (115.5) (248.3) (122.9) (371.2) Net Revenue , CIG Segment Revenue 1, , , Subcontractor Costs (329.7) (336.3) (87.5) (74.8) (162.3) (86.7) (249.0) (110.0) (359.1) (97.8) (67.8) (165.6) (84.8) (250.4) Net Revenue Ongoing Operations Revenue 2, , , , , , ,213.2 Subcontractor Costs (517.3) (619.4) (172.9) (148.1) (321.0) (183.7) (504.8) (196.3) (701.1) (209.2) (166.5) (375.6) (192.5) (568.2) Net Revenue 1, , , , , , ,645.0 RCM Segment Revenue Subcontractor Costs (63.3) (34.9) (6.4) (3.7) (10.1) (3.3) (13.4) (4.9) (18.3) (5.7) (1.0) (6.8) (1.9) (8.6) Net Revenue (3.7) (1.9) 0.9 (1.0) 0.9 (0.1) Reconciliation of Net Income Attributable to Tetra Tech to EBITDA (in thousands) st Qtr 2nd Qtr 6 mos 3rd Qtr 9 mos 4th Qtr Total 1st Qtr 2nd Qtr 6 mos 3rd Qtr 9 mos Net Income Attributable to Tetra Tech 39,075 83,783 26,562 26,862 53,424 29,983 83,407 34, ,874 46,034 28,726 74,760 33, ,082 Interest Expense 1 7,363 11,389 2,908 3,099 6,007 2,795 8,802 2,779 11,581 3,160 4,092 7,252 4,345 11,597 Depreciation 2 23,110 22,756 5,251 5,764 11,015 5,345 16,360 5,848 22,207 5,169 5,101 10,270 4,864 15,134 Amortization 2 20,205 22,078 5,940 5,898 11,838 5,607 17,445 5,342 22,786 4,625 5,037 9,662 5,226 14,888 Contingent Consideration (3,113) 2,823 - (7,149) (7,149) - (7,149) 225 (6,923) - 1,918 1, ,110 Goodwill and other IA Impairment 60, Income Tax Expense (Benefit) 41,093 40,613 10,358 12,990 23,348 13,114 36,462 17,381 53,844 (623) 9,877 9,254 17,806 27,060 Acquisition Expenses - 7, Integration Expenses - 11, EBITDA 188, ,990 51,019 47,464 98,483 56, ,327 66, ,369 58,365 54, ,116 65, ,871 Non-Core Divestitures ,434 3,434 RCM 6,813 11,098 2,887 7,970 10,857 1,127 11,984 1,666 13,650 1, , ,969 Ongoing EBITDA 195, ,088 53,906 55, ,340 57, ,311 67, ,019 59,450 55, ,640 69, ,274 1 Includes amortization of deferred financing fee 2 Varies slightly from the Statements of Cash Flows, which includes amortization of deferred financing fee Excel file available on tetratech.com/investor-relations 22

23 Premier worldwide consulting and engineering firm 23