Post on 20-Jan-2017
www.trcsolutions.com
Q4 Fiscal 2016 Investor Review
Aug. 31, 2016Chris Vincze Tom BennetChairman & CEO Chief Financial Officer
T R R
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.
Q4 Fiscal 2016 Overview
3
NSR1 increased 16% YOY to $132.3MEnergy +4%, Environmental -9%, Infrastructure +24%, Pipeline Services NSR of $20.8M
NSR backlog increased 16% YOY to $367.2MEnergy -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 $17.7MTop quintile DSO performance fuels operating cash flow in excess of earnings
Net income decreased 13% YOY to $5.9MAmortization expense increased $1.9M and net interest expense2 increased $0.6M
EBITDA increased 15% YOY to $14.8MHighest quarterly earnings in company history
Envi
ronm
enta
l Seg
men
t
$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
Ener
gy S
egm
ent
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
Infr
astr
uctu
re S
egm
ent
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%
Pipe
line
Serv
ices
Seg
men
t
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
$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
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
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
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
$12.9 $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%
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
1Excludes $2.8 million of acquisition and integration expenses and the $2.5 million goodwill impairment credit. 2Excludes acquisition related expense and goodwill impairment credit in note 1, net of an income tax benefit of 0.1 million
Q4 2015 Q4 2016
Net Service Revenue (0.2)$ (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
$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%
1Excludes $6.6 million of acquisition and integration expenses and $22 million related to the impairment of goodwill. 2Excludes goodwill impairment and acquisition related expense in note 1, net of an income tax benefit of $10.9 million.
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
$0.2515
(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
1Excludes $6.6 million of acquisition and integration expenses and $22 million related to the impairment of goodwill. 2Excludes 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
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
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
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
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
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
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
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
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
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