1. Q1 Fiscal 2015 Investor Review
November 4, 2014
TRR
Chris Vincze Tom Bennet
Chairman & CEO
Chief Financial Officer
2. 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 First 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 first 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 14.
3. Q1 Fiscal 2015 Overview
3
NSR1 increased 14% YOY to $92.6M Energy +15%, Environmental +24%, Infrastructure +4% Growth: 77% Organic, 23% from Acquisitions
Operating income increased 41% YOY to $6.0M
NSR backlog increased 9% YOY to $260.0M
Energy +25%, Environmental +2%, Infrastructure +4%
(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 30% YOY to $8.3M
Net income increased 40% YOY to $3.5M
4. Environmental Segment
4
Q1 Fiscal 2015 Results
NSR +24% YOY
Continued development of upstream, midstream and downstream oil & gas markets
Increased demand for remediation and pipeline permitting services
Segment profit +9% YOY
$38.4
$47.7
Q1 2014
Q1 2015
Net Service Revenue (in millions)
$9.3
$10.2
Q1 2014
Q1 2015
Segment Profit (in millions)
+24%
+9%
5. Energy Segment
5
Q1 Fiscal 2015 Results
NSR +15% YOY
Expanding utility capital spend programs on aging transmission and distribution infrastructure
Growing geographic presence
Segment profit +38% YOY
Improved labor utilization
$28.8
$33.2
Q1 2014
Q1 2015
Net Service Revenue (in millions)
$4.1
$5.6
Q1 2014
Q1 2015
Segment Profit (in millions)
+38%
+15%
6. Infrastructure Segment
6
Q1 Fiscal 2015 Results
NSR +4% YOY
Healthier State and municipal budgets providing for more transportation projects
Segment profit -20% YOY
Contract scope changes under negotiation
$12.6
$13.1
Q1 2014
Q1 2015
Net Service Revenue (in millions)
$2.8
$2.3
Q1 2014
Q1 2015
Segment Profit (in millions)
+4%
-20%
7. $45
$47
$47
$69
$83
$86
$125
$127
$127
Q1 2014
Q4 2014
Q1 2015
Segment NSR Backlog
NSR Backlog & New Project Wins
7
(in millions)
Energy
•PSE&G
•Excelon
Environmental
•Confidential mid-stream oil & gas client
•Spectra Energy
Infrastructure
•PennDOT
•VDOT
$239
$260
$257
8. 8
Growth Strategy
0%
5%
10%
15%
20%
25%
Q2 2014
Q3 2014
Q4 2014
Q1 2015
Total
Organic
Total & Organic NSR Growth
Recent Acquisitions
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
9. 9
NOVA Safety & Environmental (NOVA)
•Acquired in September 2014
•Strengthens TRC’s position in robust oil and gas market
•Provides safety training, environmental services, oil spill response, remediation and general oil field construction services
•Enhances presence in Permian Basin region of West Texas and New Mexico
•Profitable and growing company with impeccable safety record
•Approximately 60 employees
•Gross revenues of $16.5 million in 2013
•Based in Midland, TX
10. Summary and Key Initiatives
10
•Consistently improving financial performance
•Invest in organic growth opportunities
•Increase focus on strategic markets:
•Oil & Gas – Market provides expansive opportunities
•Utility/Power – Aging and inefficient transmission and distribution systems require long-term capital investments
•Transportation – National transportation and energy delivery systems need to be modernized
•Continue to pursue strategic acquisitions that provide geographic expansion and enhanced technical capabilities
11. $81.3
$92.6
Q1 2014
Q1 2015
Net Service Revenue (in millions)
Quarterly Financial Results Overview
11
$6.4
$8.3
Q1 2014
Q1 2015
EBITDA (in millions)
$4.3
$6.0
Q1 2014
Q1 2015
Operating Income (in millions)
+14%
+41%
+30%
$0.08
$0.11
Q1 2014
Q1 2015
Diluted EPS
+38%
12. Q1 2015 $92.6 $4.8 $81.2 12.3% $8.0 $6.0 $8.3 9.0% $3.5 $0.11
Q1 2014 $81.3 $12.3 $78.4 3.5% $8.8 $4.3 $6.4 7.9% $2.5 $0.08
12
(In millions, except per share data)
Quarterly Income Statement Highlights
$81.3
$92.6
96.5%
87.7%
Q1 2014
Q1 2015
Cost of Services as % of NSR
$81.3
$92.6
10.8%
8.7%
Q1 2014
Q1 2015
G&A Expenses as % of NSR
Exit Strategy Activity
Q1 2014
Q1 2015
Net Service Revenue
$ (5.1)
$ (1.0)
Insurance Recoverables
12.4
4.6
Cost of Services
7.3
4.1
Operating Income
$ -
$ (0.5)
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
13. 13
Balance Sheet Highlights Cash and cash equivalents Days sales outstanding (DSO) Cash Flow Highlights Cash flow from operations Capital expenditures Free cash flow
Q1 2014 $22.0 95 days $1.1 $(1.6) $(0.5)
Q1 2015 $28.8 92 days $2.5 $(1.4) $1.1
(In millions)
Balance Sheet and Cash Flow Highlights
Announced $10 million share repurchase program
14. Reconciliation of Non-GAAP Measures
14
In millionsQ1 - 2014Q1 - 2015Net income applicable to TRC Companies, Inc.'s common shareholders$2.5$3.5Interest expense0.10.0Federal and state income tax provision1.72.5Depreciation and amortization2.12.3Net loss applicable to noncontrolling interest0.00.0Consolidated EBITDA$6.4$8.3In millionsQ1 - 2014Q1 - 2015Net service revenue$81.3$92.6Cost of services78.481.2Gross Margin$2.9$11.4Gross Margin %3.5%12.3% In millionsQ1 - 2014Q1 - 2015Cash flow from operations$1.1$2.5Additions to property and equipment(1.6)(1.4) Free Cash Flow$(0.5)$1.1Earnings Before Interest, Taxes, Depreciation, AmortizationGross Margin and Gross Margin % Free Cash Flow
15. Definitions for Non-GAAP Measures
15
Earnings Before Interest, Taxes, Depreciation, Amortization (EBITDA) The Company presents EBITDA because it believes that it is a useful tool for the Company, its lender 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 specified 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 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.
