Q Stockholder Update Call

Transcription

1 Q Stockholder Update Call Jacque Hinman, Chairman and CEO Gary McArthur, Executive VP and CFO Natalie Eldredge, Director of Investor Relations March 7, 2017

2 Disclosures Forward Looking Statements This presentation contains forward-looking statements, as that term is defined in U.S. Federal and certain foreign securities regulations, including information related to our anticipated future operational and financial results, the amount and timing of charges and expenditures related to our restructuring activities, as well as the anticipated savings and operating efficiencies; the impact of terminating the fixed-price EPC contract in Australia; business strategies; client market segment concerns; and growth opportunities. Although CH2M s management believes that its expectations are based on reasonable assumptions, these assumptions are subject to a wide range of economic, business, regulatory, technical, legal, and other unforeseen risks which may cause actual results to differ materially from those stated or implied by these forward-looking statements. Factors that could cause or contribute to such differences include, among others, our ability to manage the costs associated with our fixed-price contracts, our ability to maintain the liquidity necessary for our operations, difficulties or delays incurred in the execution of our contracts, difficulties or delays incurred in the implementation of our restructuring activities and changes in the level of activity in the hydrocarbon industry. We undertake no duty to update any forward-looking statement made herein. All forward-looking statements speak only as of the date of this stockholder call. This presentation should be read in conjunction with all the other information included in our most current Prospectus and European Prospectus, which are filed with the U.S. Securities and Exchange Commission (SEC) and the U.K. Financial Conduct Authority (FCA), respectively, and, for our stockholders outside of the U.S. and the European Union, similar documents filed with local securities regulators, where required. You should also read our Annual Report on Form 10-K, which includes a more comprehensive list of factors that could cause actual operational and financial results to differ from those expected. All documents required to be filed with the SEC and other regulators are available via the investor relations website at ir.ch2m.com and on the SEC s website at 2 Fourth Quarter 2016 Results

3 Key takeaways: the upside for CH2M End-market tailwinds signal increased investments globally in infrastructure, industrial/ manufacturing, expected energy recovery, allied national defense and security and growing digitization in public and private sectors Competitively distinct operating model benefiting clients and CH2M s market position while generating annual savings of approximately $100 million Stronger core business portfolio refocused for win/win success and growth with key clients who value CH2M Robust sales pipeline and backlog to drive profitable growth Resolving problem projects: Texas tollway nearing completion, Australian power project contract terminated 3 Fourth Quarter 2016 Results

4 Solid fourth quarter Unobscured view of core business earning power Baseline for further improvement with benefits of new client-centric operating model Q marked highest revenue all year, slightly below Q4 2015, impacted by oil & gas slump and currency exchange rates Operating income up 73% Reduced Q SG&A expense by $30 million Net income improved to $37 million from $14 million a year ago 4 Fourth Quarter 2016 Results

5 Unlocking the value of our client-centric strategy Upgraded portfolio focused on attractive, growing core business with key clients Competitive advantage on unique operating model offering full complement of differentiated services and aligned to 3 client sectors: 1. National governments sector 2. Local/State/Regional governments sector 3. Private sector Higher earning power on core business backed by efficient, cost-effective management across the supply chain clients More nimble, less top-heavy operation with consistent processes, shared services and global design centers Set up to win more, serve more efficiently and grow profitably, with excellent prospects and job opportunities We re hiring! 5 Fourth Quarter 2016 Results

6 Q results New Gross Margin In Backlog 13% decline in Q4 contracted gross margin from new wins vs. a year ago $8.31 billion Revenue 3% decline to $1.36 billion vs. Q SG&A Improved to 16.2% of revenue vs. 17.7% in Q Q4 Net Income Earnings Per Diluted Share $37 million vs. $14 million from a year ago $1.08 vs. $0.37 in Q Fourth Quarter 2016 Results

7 Q business segments results Business segment Revenue Operating income (loss) Change y/y Environment & Nuclear $ 609 M $ 15 M -6% Water 292 M 22 M 14% Transportation 226 M ( 1 M) - Energy & Industrial 188 M ( 11M) - Power EPC 48 M 7 M Total $1,363 M $ 33 M 73% 7 Fourth Quarter 2016 Results

8 2016 full-year results New Gross Margin In Revenue Relatively flat compared with 2015 Essentially flat at $5.24 billion SG&A 17.5% of sales vs. 17.4% in Net Income $15 million versus $80 million a year ago Earnings Per Diluted Share $0.03 versus $2.61 versus in Fourth Quarter 2016 Results

9 2016 full-year business segments results Business segment Revenue Operating income (loss) Change y/y Environment & Nuclear $ 2,214 M $ 83 M 7% Water 1,190 M 93 M 0% Transportation 931 M ( 115 M) - Energy & Industrial 861 M ( 9 M) - Power EPC 40 M ( 292 M) - Total $5,236 M (240 M) - 9 Fourth Quarter 2016 Results

10 Cash and liquidity $131M $498M $107M $246M Cash at Dec. 30, 2016 Total debt outstanding, up $196M Unused available capacity under revolving credit facility Net cash used in operations in 2016, vs. $103M generated in Fourth Quarter 2016 Results

11 Stock price $50.69 Stock price per share for the next trade date 8% increase from the price set in January Exclusions from Q4 stock valuation: Results of the Power EPC business Acquisition amortization Restructuring charges Tax benefit associated with pension plan redesign Transitioning internal market processing system, certain equity plan administration functions, and transfer agent to Computershare Currently expect to open the market during the second week of April Will announce trade date and related deadlines in April 11 Fourth Quarter 2016 Results

12 CH2M stock price compared with EFCG peer valuations for Q EFCG Overall Range $1.1 to $2.0 Billion $1,100 $2,300 Public Market Comparables $900 $2,100 M&A Comparables DCF Analysis $1,300 $1,800 CH2M Equity Value $1.63 Billion, $50.69 per share $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 $2,000 $2,200 $2,400 $2,600 ($ in millions) 12 Fourth Quarter 2016 Results

13 Outlook: guidance for 2017 Expecting revenue and earnings growth year over year Fourth Quarter 2016 Results

14 Improving market trends CH2M opportunities Increased infrastructure investments Increased spending on national defense and security More digitization, monitoring, automation in public and private sectors Pent-up investment demand for private & public tech facilities Industrial tax credits tied to energy + U.S. tax reform expected to drive unprecedented business and industrial development investments Rising resiliency demands Increased nuclear decommissioning and environmental opportunities Emerging contaminants driving new mitigation provisions Privatization or streamlining of government functions Unprecedented momentum with U.S. Dept. of Energy Growing defense opportunities U.S. infrastructure investments in water, transportation, manufacturing and energy Strategy paying off in more holistic wins with key clients Significant pursuits to build backlog in coming quarters

15 Environmental and nuclear wins Defense Threat Reduction Agency and U.S. Strategic Command selected CH2M to lead biosafety and biosecurity improvements in West Africa 15 Fourth Quarter 2016 Results

16 Wins and honors in water The New York City Department of Design and Construction selected CH2M to deliver design of the East Side Coastal Resiliency project in Manhattan Rockaway Boardwalk Reconstruction Project the longest and largest resiliency project completed to date by New York City received the 2016 Waterfront Center award The Inland Brine Disposal Wetlands Innovation Project awarded 2016 Top Project by Water & Wastes Digest for innovation in habitat restoration and flood control 16 Fourth Quarter 2016 Results

17 Wins in transportation infrastructure Atlanta Airlines Terminal Corporation selected CH2M to provide continued facility maintenance services at the world s most travelled airport, Hartsfield-Jackson International Airport Transport Scotland awarded the Performance Audit Group commission for auditing, monitoring and reporting on the financial, technical and performance aspects of the Scottish trunk road network 17 Fourth Quarter 2016 Results

18 Energy and Industrial New and follow-on contracts serving upstream and downstream operations for four different energy-industry clients in the Americas, Europe, the Middle East and Asia. Several industrial contracts with loyal clients, providing design, engineering, construction management, facilities development and operation services for confidential clients in the advanced manufacturing, microelectronics and life sciences industries 18 Fourth Quarter 2016 Results

19 Questions and answers 19

20 Key takeaways: the upside for CH2M End-market tailwinds signal increased investments globally in infrastructure, industrial/ manufacturing, energy, defense and digitization Stronger core business portfolio refocused for mutual growth with key clients who value CH2M Competitively distinct operating model aligning our entire firm s value chain around each client, bolstering CH2M s market leadership while generating annual savings of approximately $100 million For key clients: industry-leading innovation and unparalleled thought leadership with seamless service and delivery across our full complement of capabilities For employees: greater growth and development opportunities Resolving problem projects: Texas tollway nearing completion, Inpex contract terminated Already contributing positively to operating results and growth prospects in our pipeline and backlog Signaling upside for CH2M, putting us in the best possible position this year and for the future 20 Fourth Quarter 2016 Results