q3-20 earnings call€¦ · backlog (q3-20) 0 500 1000 1500 2000 2500 3000 q3-18 q4-18 q1-19 q2-19...
TRANSCRIPT
Dan Batrack, Chairman & CEOSteve Burdick, Executive VP & CFO
EARNINGS CALLQ3-20July 30, 2020
WATER ENVIRONMENT SUSTAINABLE INFRASTRUCTURE
Certain statements contained in this presentation are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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 of1934, 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 is available at www.investor.tetratech.com.
Forward Looking Statements & Non-GAAP Financial Measures
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Q3-20 Results
Q3-20
Revenue $710M
Net Revenue $560M
EPS $0.83
Adjusted EPS $0.78
Backlog $3.07B
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Net Revenue by Customer (Q3-20)
Customer% of
Net Rev.Pro-forma
Y/Y*Comments
U.S. Federal 31% 0%• Federal IT up
• International development projects delayed
U.S. State and Local 14% +5%*• Water infrastructure up
• Operational technology up
U.S. Commercial 25% -7%• Discretionary industrial programs down
• Regulatory driven programs steady
International 30% +3%*• International government stable
• Commercial discretionary down
U.S. Federal
U.S. State & Local
U.S. Commercial
International
* Excludes disaster response and Canadian turnkey pipeline disposition.
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Performance by Segment (Q3-20)
SegmentPro-forma
Net Rev Y/Y*Adj. OI Margin Comments
GSG +3% 13.5%• Water advanced analytics and IT up
• International development projects delayed
CIG -5% 10.1%• Industrial down
• Renewable energy up
GSG
CIG
* Excludes disaster response and Canadian turnkey pipeline disposition.
Backlog (Q3-20)
0
500
1000
1500
2000
2500
3000
Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20 Q3-20
$2.44B
Funded and
Authorized Work
Significant AwardsContract Ceiling
Funded Value
U.S. DoD Assessment & Evaluation Contract
$300M $11M
Int’l Dev. Task Orders ― $160M
U.S. Air Force Environmental Services Contract
$90M ―
EPA Region 3 Emergency Response and Preparedness Services contract
$47M $5M
U.S. Navy Task Orders ― $40M
USACE A-E Design Services Contract $34M ―
U.S. Army Task Orders ― $19M
Montana Environmental Services Contract
$15M ―
USAID Development Activities, Colombia Contract
$14M ―
U.S. EPA Task Orders ― $13M
U.S. DOS A-E Services Contract $10M ―
Various Commercial ― $333M
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$3.07B
Federal Contract Capacity: >$18B
Financial Overview (GAAP)
Net Revenue ($ in millions)
Q3-20 Guidance
$540M-$560M
Q3-19 Q3-20
Revenue ($ in millions)
• Disaster response
• Canadian disposition
Q3-19 Q3-20
$826$710
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Operating Income ($ in millions)
Q3-19 Q3-20
CIG margin
up
$64
Diluted EPS
Q3-19 Q3-20
$0.88
Q3-20
Adjusted EPS
$0.78
$0.83$65
$623 $560
Q3-20 Reconciliation Summary($ in millions, except EPS)
Revenue Net Revenue Operating Income EPS
GAAP $710 $560 $64 $0.83
Non-core Equipment Disposition ― ― (5) (0.06)
Earn-outs ― ― 1 0.01
Adjusted $710 $560 $60 $0.78
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Cash Flow Overview
Cash Flow from Operations ($ in millions)
+72% YTD
+30% TTM
Q3-20Q3-19
$14
$111
Net Debt ($ in millions)
Net debt/EBITDA: 0.5x
$225$136
Q3-20Q3-19
DSO
10-day improvement
Y/Y
Q3-20Q3-19
8070
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Liquidity and Capital AllocationQ3-20
• $9.2M in dividends in Q3
• $21M buyback in Q3; $223M buyback capacity
• Technical Expertise
• Geographical Presence
• Client Expansion
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• Net Debt/EBITDA: 0.5x
• Cash: $142M
• Access to capital: Over $800M
Return to Shareholders
Liquidity &Leverage
TTM Cash From Operations:
$290M
Acquisitions
• Increase efficiency and accuracy by applying autonomous monitoring
Tetra Tech Experts Leverage Advanced Analytics Technology Resources
Commercial Clients
• Enable Water Treatment remote operations
• Rapidly deploy and process disaster recovery assessments
State and Local
• Advanced environmental predictive analysis and digital dashboards
Federal Agencies
Te
tra T
ech
De
lta T
ech
no
log
ies
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• Further expansion of artificial intelligence, machine learning, and operational technology
2019
• Further expands data analytics, system modernization, and cloud services
• Adds innovation lab for artificial intelligence, advanced analytics, and cybersecurity solutions
• Proprietary data visualization and environmental modeling software
2023
TARGET:$500M
2021
Estimate$300M
2020
$200M
2018$75M
2016$50M
• Expands water data management services
$125M
U.S. Federal Advanced Analytics Growth Strategy
Organic and acquisitive growth
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Guidance
Net Revenue Adjusted Diluted EPS
Q4-20 $560M - $600M $0.78 - $0.83
FY-20 $2.32B - $2.36B $3.13 - $3.18
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Assumptions FY-20
• Includes intangible amortization of $11 million or $0.16 per share
• 24% effective tax rate for Q4-20
• 55 million average diluted shares
• Excludes contributions from future acquisitions
• Solid Q3 results with near record backlog
• Strong balance sheet and access to capital
• Technically differentiated business model –Leading with Science®
• Well-positioned to address global challenges in water, environment and climate change
Summary
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Questions & Answers
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