Investor Presentation. December 2018

Transcription

1 Investor Presentation December 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 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: Aligned with Markets We Serve 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 December 2018 Investor Presentation 6

7 Fiscal 2019 Outlook U.S. Federal U.S. Commercial 5% Driver: Increase in U.S. Federal budget *30% *25% Driver: Environmental services Sustainability buildings design 5% 5% U.S. State and Local Driver: Municipal water infrastructure *15% *30% International Driver: Priority infrastructure programs 10% +15% excluding emergency response * Approx. % of net revenue 7

8 U.S. Federal Tetra Tech Strategy Align water, environment and infrastructure expertise with priority funded programs $15B contract capacity to support both ongoing and emerging needs Dept of Defense Civilian Agencies International Development Emerging containments Federal Aviation Administration information management Restoring forests in Cambodia 8

9 U.S. State and Local Tetra Tech Strategy Provide innovative solutions to address water lifecycle Top ENR ranking in Water: #1 for 15 years in a row 9 consecutive quarters double digit revenue growth Water Supply Water Treatment Water Quality Brackish Water Desalination Wastewater treatment plant Watershed management 9

10 Commercial Tetra Tech Strategy Global leader in environmental management and sustainable design solutions Top ENR ranking in Environment: #1 for 10 years in a row. Tripled Sustainable Infrastructure design practice in FY-18 Renewable Energy Environmental Management Net Zero Buildings Block Island, RI offshore wind farm Groundwater treatment Hassalo on Eighth, Portland OR 10

11 Financial Update December 2018 Investor Presentation 11

12 Strong Financial Performance Strong growth across diverse portfolio of end-clients High-end differentiated services drive higher margins $220 $180 $140 Operating Income ($ in millions) $2,400 $2,200 $2,000 $1,800 $1,600 $1,400 $3.00 $2.50 $2.00 $1.50 Net Revenue ($ in millions) EPS Record $ Record Note: Results from ongoing operations $ Record 12

13 Capital Allocation CapEx $10M <0.5% of revenue FY-18 Cash Flow from Operations $177M Acquisitions $68M Investment in sustainable infrastructure design Buyback/ Dividend $75M Shares Repurchased $24M in Dividends 56% cash flow from operations returned to shareholders Announced $200M new share repurchase program Declared 19th consecutive quarterly dividend ($0.12 per share) 13

14 Backlog and Significant Wins (Q4 FY-18) Record 2,664 Significant Awards Contract Ceiling Funded Value USAID Land Tenure and Resource Mgmt Contract $650M $5M 2,379 Various Commercial - $451M Int l Dev. Task Orders - $278M L.A. Water Resources Engineering Services Contract $60M - Funded and Authorized U.S. Army Task Orders - $78M U.S. Navy Task Orders - $35M USAID Conservation in Cambodia Contract $21M $9M Up 9% Sequentially U.S. FAA Task Orders - $21M 14

15 Guidance (as of Nov. 7, 2018) Net Revenue Diluted Ongoing EPS Q1-19 $525M - $575M $ $0.65 FY-19 $2.2B - $2.4B $ $2.95 Assumptions FY-19 Includes intangible amortization of $9 million or $0.12 per share 26% effective FY-19 tax rate 56 million average diluted shares Excludes contributions from future acquisitions 15

16 Summary Strong finish to a record fiscal 2018 Broad-based demand for our high-end consulting and engineering services Record orders drove backlog to all-time high Guidance for another record year in

17 Appendix December 2018 Investor Presentation 17

18 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 4th Qtr Total REVENUE 2,299,321 2,583, , ,781 1,332, ,539 2,018, ,188 2,753, , ,261 1,460, ,795 2,224, ,343 2,964,148 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, ,742 2,200,734 Government Services Group (GSG) 763, , , , , , , ,527 1,067, , , , , , ,784 1,212,334 Commercial / International Services Group (CIG) (6) 932, , , , , , , , , , , , , , , ,328 ONGOING NET REVENUE (2) 1,695,440 1,911, , ,658 1,003, ,576 1,500, ,107 2,034, , ,425 1,076, ,873 1,644, ,669 2,208,662 Remediation and Construction Management (RCM) / Claim 23,275 17,267 1,795 (3,704) (1,909) 902 (1,006) 919 (86) 1, ,520 1,479 2,999 (10,927) (7,928) OTHER COSTS OF REVENUE 1,402,925 1,598, , , , ,228 1,247, ,003 1,680, , , , ,758 1,352, ,448 1,816,276 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 42, ,185 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) (3,643) (9,187) 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 43, ,086 ONGOING INCOME FROM OPERATIONS (1) (2) (3) 153, ,060 42,897 44,273 87,170 47, ,305 56, ,131 49,747 45,123 94,870 59, ,477 61, ,303 GSG 87, ,595 30,168 33,432 63,601 32,047 95,647 42, ,199 39,125 34,177 73,302 44, ,674 50, ,211 CIG (6) 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 19,323 86,908 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) (8,034) (38,816) RCM / Claim (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) (14,898) (17,030) ONGOING OPERATING MARGIN [% of Net Revenue] (1) (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% 11.0% 9.8% 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% 16.3% 13.9% CIG (6) 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% 7.6% 8.7% 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 3,927 15,524 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, ,203 39, ,562 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 10,545 37,605 NET INCOME ATTRIBUTABLE TO TETRA TECH 39,075 83,783 26,562 26,862 53,424 29,983 83,407 34, ,874 46,034 28,725 74,760 33, ,082 28, ,883 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 56,349 56,598 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 $ 0.51 $ 2.42 ONGOING DILUTED EPS (1) (2) (3) (5) $ 1.61 $ 1.88 $ 0.49 $ 0.48 $ 0.97 $ 0.53 $ 1.50 $ 0.63 $ $ 0.65 $ 0.54 $ 1.18 $ 0.71 $ 1.89 $ 0.75 $ 2.64 ONGOING EBITDA (1) (2) (3) 195, ,088 53,906 55, ,340 57, ,311 67, ,019 59,450 55, ,640 69, ,274 69, ,876 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% 12.3% 11.5% 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, , ,862 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 3,379 9,726 Y/Y ONGOING NET REVENUE GROWTH % (1) (2) (4.8%) 12.8% 17.9% 8.4% 12.8% 0.3% 8.3% 1.3% 6.4% 11.5% 3.3% 7.2% 14.3% 9.6% 5.7% 8.6% 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% 10.0% 13.6% 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% 0.9% 3.0% NET REVENUE % BY CLIENT TYPE International 29% 31% 30% 32% 31% 28% 30% 29% 30% 25% 28% 26% 29% 27% 29% 27% U.S. Commercial 32% 30% 27% 27% 27% 29% 28% 27% 27% 28% 28% 28% 28% 28% 26% 28% U.S. Federal Government 27% 27% 30% 29% 30% 30% 30% 30% 30% 29% 30% 30% 29% 30% 30% 30% U.S. State & Local Government 12% 12% 13% 12% 12% 13% 12% 14% 13% 18% 14% 16% 14% 15% 15% 15% NET REVENUE % BY CONTRACT TYPE Fixed-Price 32% 28% 31% 29% 30% 34% 31% 33% 32% 31% 34% 32% 35% 33% 35% 34% Time-and-Materials 50% 55% 50% 52% 51% 47% 50% 48% 49% 50% 50% 50% 48% 50% 48% 49% Cost-Plus 18% 17% 19% 19% 19% 19% 19% 19% 19% 19% 16% 18% 17% 17% 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 2,663,814 2,663,814 (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 and non-cash claim settlement (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 (6) Excludes non-cash claim settlement Excel file available on tetratech.com/investor-relations 18

19 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 4th Qtr Total Consolidated (as reported) Revenue 2, , , , , , , ,964.1 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) (186.6) (763.4) Net Revenue 1, , , , , , , ,200.7 GSG Segment Revenue 1, , , , , ,694.9 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) (111.4) (482.6) Net Revenue , ,212.3 CIG Segment Revenue 1, , , ,323.1 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) (87.0) (337.4) Non-Cash Claim Settlement Net Revenue Ongoing Operations Revenue 2, , , , , , , ,960.5 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) (183.6) (751.8) Net Revenue 1, , , , , , , ,208.7 RCM / Claim 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) (2.9) (11.6) Non-Cash Claim Settlement (10.6) (10.6) Net Revenue (3.7) (1.9) 0.9 (1.0) 0.9 (0.1) (10.9) (8.0) 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 4th Qtr Total Net Income Attributable to Tetra Tech 39,075 83,783 26,562 26,862 53,424 29,983 83,407 34, ,874 46,034 28,725 74,760 33, ,082 28, ,883 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 3,927 15,524 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 4,458 19,592 Amortization 2 20,205 22,078 5,940 5,898 11,838 5,607 17,445 5,342 22,786 4,625 5,038 9,662 5,226 14,888 3,360 18,249 Contingent Consideration (3,113) 2,823 - (7,149) (7,149) - (7,149) 225 (6,923) - 1,918 1, ,110 2,142 4,252 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 10,545 37,605 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 53, ,105 Non-core divestitures ,434 3,434-3,434 Non-cash claim adjustment ,457 12,457 Contingent Consideration - Compensation ,501 1,501 RCM 6,813 11,098 2,887 7,970 10,857 1,127 11,984 1,666 13,650 1, , ,969 2,410 4,379 Ongoing EBITDA 195, ,088 53,906 55, ,340 57, ,311 67, ,019 59,450 55, ,640 69, ,274 69, ,876 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 19

20 Premier worldwide consulting and engineering firm 20