Inve stor Pr e se ntation August 2020 Joint Venture with Snhetta - - PowerPoint PPT Presentation

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Inve stor Pr e se ntation August 2020 Joint Venture with Snhetta - - PowerPoint PPT Presentation

E X C E L L E N C E I N N O V A T I O N P E O P L E G R O W T H Inve stor Pr e se ntation August 2020 Joint Venture with Snhetta Temple University Charles Library Philadelphia, Pennsylvania, USA Photo credit: Michael Grimm 1


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SLIDE 1

Inve stor Pr e se ntation

August 2020

E X C E L L E N C E I N N O V A T I O N P E O P L E G R O W T H 1 Joint Venture with Snøhetta Temple University – Charles Library Philadelphia, Pennsylvania, USA Photo credit: Michael Grimm

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SLIDE 2

Cautionar y Note Re gar ding F

  • r

war d- L

  • oking State me nts

E X C E L L E N C E I N N O V A T I O N P E O P L E G R O W T H 2

Certain statements contained in this presentation constitute forward-looking information and statements within the meaning of applicable securities law (collectively, "forward-looking statements"). Forward-looking statements in this presentation include, but are not limited to:

  • ur financial targets (including our annual net revenue growth, adjusted EBITDA, and net income targets; employee count; and ROIC

target), our anticipated business and geographical mix, our expectations regarding economic and industry trends in the sectors and regions in which we operate, our acquisition strategy, our capital deployment strategy, and our overall growth strategy. These statements provide information about management’s current expectations and plans relating to the future. Readers are cautioned that this information may not be appropriate for other purposes. Stantec does not undertake any obligations to publicly update or revise any forward-looking statements except as required by law. By their nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties. Readers are cautioned not to place undue reliance on our forward-looking statements since a number of factors could cause actual future results, conditions, actions, or events to differ materially from the targets, expectations, estimates, or intentions expressed in these forward- looking statements. Risk factors include, but are not limited to, the risk of an economic downturn, decreased spending in the private and/or public sectors, changing market conditions for Stantec’s services, and the risk that Stantec fails to capitalize on its strategic

  • initiatives. Investors and the public should carefully consider these factors, other uncertainties, and potential events, as well as the

inherent uncertainty of forward-looking statements when relying on these statements to make decisions about our company. For more information about how other material risk factors could affect our results, please refer to the Risk Factor section in our 2019 Annual Report and Q2 2020 Management’s Discussion and Analysis incorporated herein by reference. Readers can access these documents by visiting EDGAR on the SEC website at sec.gov or by visiting the CSA website at sedar.com or on Stantec’s website at stantec.com. In determining our forward-looking statements, we consider material factors including assumptions about the performance of the Canadian, US, and global economies in 2020 and beyond and their effect on our business. These key factors and assumptions are

  • utlined thoroughly in our press release dated December 3, 2019. Unless otherwise indicated, all amounts expressed in Canadian

dollars.

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SLIDE 3

De sign & E ngine e r ing Se r vic e s

E X C E L L E N C E I N N O V A T I O N P E O P L E G R O W T H 3

BUSINESS OPERATING UNITS (TTM Q2 2020 Net Revenue)

WATER ENVIRONMENTAL SERVICES

$1,066M $828M $754M $570M

INFRASTRUCTURE BUILDINGS ENERGY & RESOURCES

$542M

Stantec is a signatory to the UN Global Compact and partners with clients to promote the achievement of the UN’s Sustainable Development Goals For everything from small local projects to iconic mega projects

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SLIDE 4

Dive r sifie d Global F

  • otpr

int – L

  • c al Pr

e se nc e

E X C E L L E N C E I N N O V A T I O N P E O P L E G R O W T H 4 54% 29% 17%

Distribution of Net Revenue

United States Canada Global

$3.8B

TTM Q2 2020

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SLIDE 5

Stante c at a glanc e

E X C E L L E N C E I N N O V A T I O N P E O P L E G R O W T H 5

65 YEARS

Of Uninterrupted Profitability

CDN $4.9B

(2)

Market Capitalization

STN

TSX & NYSE

350

Locations Worldwide

22,000

Employees Globally

6.6%

10-Year Adjusted Diluted EPS CAGR(1)

(1) TTM Q2 2020 (2) As of August 7, 2020

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SLIDE 6

Infr astruc ture

E X C E L L E N C E I N N O V A T I O N P E O P L E G R O W T H 6

International Ave Pedestrian Realm Calgary, Alberta

Global Canada United States Bridges Transit & Rail Community Development Roadways

Net revenue by geography Q2 2020 YTD Net revenue by sector Q2 2020 YTD Q2 2020 YTD 2020

Organic net revenue growth (retraction)

(1.7%) (0.2%)

Net revenue growth (retraction)

0.4% 1.1%

28%

% of Net Revenue Q2 2020 YTD

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SLIDE 7

Buildings

E X C E L L E N C E I N N O V A T I O N P E O P L E G R O W T H 7

Google Midwest Headquarters Phase IV Chicago, IL, USA

Global Canada United States Science & Technology Airports & Aviation Education Civic Healthcare Industrial Commercial

Net revenue by geography Q2 2020 YTD Net revenue by sector Q2 2020 YTD Q2 2020 YTD 2020

Organic net revenue growth (retraction)

(8.7%) (4.0%)

Net revenue growth (retraction)

(7.0%) 0.0%

22%

% of Net Revenue Q2 2020 YTD

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SLIDE 8

Wate r

E X C E L L E N C E I N N O V A T I O N P E O P L E G R O W T H 8

*

Hyperion Advanced Water Purification Facility Del Mar, Playa del Rey, CA, USA

Global Canada United States

Net revenue by geography Q2 2020 YTD Net revenue by sector Q2 2020 YTD

Client Enterprise Systems Water Treatement Stormwater Water Resources Wastewater Treatment Conveyance

Q2 2020 YTD 2020

Organic net revenue growth (retraction)

3.4% 4.5%

Net revenue growth (retraction)

5.3% 5.4%

21%

% of Net Revenue Q2 2020 YTD

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SLIDE 9

E nvir

  • nme ntal Se r

vic e s

E X C E L L E N C E I N N O V A T I O N P E O P L E G R O W T H 9

Lower Powers Creek West Kelowna, British Columbia

Global Canada United States Mining Community Development Transportation Power & Dams Buildings Water Oil & Gas

Net revenue by geography Q2 2020 YTD Net revenue by sector Q2 2020 YTD Q2 2020 YTD 2020

Organic net revenue growth (retraction)

(3.7%) 1.0%

Net revenue growth (retraction)

(1.6%) 2.2%

14%

% of Net Revenue Q2 2020 YTD

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SLIDE 10

E ne r gy & Re sourc e s

E X C E L L E N C E I N N O V A T I O N P E O P L E G R O W T H 10

Dokie Wind Energy Project British Columbia

Global Canada United States WaterPower & Dams Mining Power Oil & Gas

Net revenue by geography Q2 2020 YTD Net revenue by sector Q2 2020 YTD Q2 2020 YTD 2020

Organic net revenue growth (retraction)

2.0% 6.2%

Net revenue growth (retraction)

2.8% 6.3%

15%

% of Net Revenue Q2 2020 YTD

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SLIDE 11

2020 Outlook

E X C E L L E N C E I N N O V A T I O N P E O P L E G R O W T H 11

Bridge Replacement Design for a Structure on Sturgeon Road over Sturgeon Creek Winnipeg, Manitoba, Canada

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SLIDE 12

Ke y Dr ive r s by Busine ss Ope r ating Unit

E X C E L L E N C E I N N O V A T I O N P E O P L E G R O W T H 12

COVID-19 Long-term Impact Business Operating Unit % of Net Revenue (Q2 2020 YTD) Key Drivers Water

21%

▲ Multi-year frameworks for water utilities in UK and AUS; acceleration of UK AMP contract awards ▲ Likely to benefit if governments implement stimulus programs ▲ Investment drivers – climate change, water availability, sustainability. Infrastructure

28%

▲ Majority of projects are continuing as “essential” aside from slowdown in community development ▲ Likely to benefit if governments implement stimulus programs ▬ Investment drivers – state of good repair, urbanization, transportation, mass transit, etc. Buildings

22%

▲ Post COVID-19 requirements for workplace, education and healthcare environments ▼ Decrease in commercial and hospitality projects ▬ Investment drivers – healthcare, remote education / office working, connectivity Environmental Services

14%

▲ Opportunities to develop greenfield sites will increase post COVID-19, renewable energy surge ▼ Largely funded by private sector: energy & resource, industrial sector and land development ▬ Investment drivers – environmental stewardship as a public priority in most jurisdictions Energy & Resources

15%

▲ Midstream projects are continuing ▼ Largely funded by private sector ▬ Investment drivers – commodity prices, climate change, energy transition, green policies

Degree of Impact Less Impacted More Impacted

Public sector revenue >50% | Variable fee revenue >50%

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SLIDE 13

Ge ogr aphic Re gion % of Ne t Re ve nue (YT D) Outlook

United States

55%

  • Nominal revenue contraction in Q3 20 relative to Q2 20 is expected across all businesses

except Water, with a slightly more pronounced decline in Q4 20 due to the seasonal slowdown

  • Expect continuing benefit of US/Canadian exchange rate

Canada

28%

  • Q3 20 revenues are expected to be stable relative to Q2 20, while Q4 20 revenues are expected

to experience the typical seasonal downturn in activity

  • Ramp-up of major transportation and midstream projects

Global

17%

  • Net revenues are projected to improve modestly from Q2 20 to Q3 20 and stabilize at that level

in Q4 20

  • The strength of the Water business in the UK and Australia and the Transportation sector in

New Zealand are expected to offset the impact of COVID-19 related project slowdowns

2020 Ne t r e ve nue outlook

2 0 2 0 O U T L O O K 13

Full-year 2020 net revenue expected to be comparable to 2019

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SLIDE 14

2020 Outlook

2 0 2 0 O U T L O O K 14

  • Full-year 2020 net revenue expected to be comparable to 2019
  • Adjusted net income and adjusted diluted EPS comparable to 2019
  • 55% of adjusted earnings in Q2 and Q3, and 45% in Q1 and Q4

Net Revenue and Adjusted Earnings

  • Net debt to adjusted EBITDA expected to be at the low end of internal range of 1.0x to 2.0x
  • No near-term debt maturities
  • More than 70% of debt is floating rate

Leverage Liquidity & Capital Allocation

  • >$330 million available liquidity on committed revolving credit facility ($600 million also available through accordion)
  • Non-essential capital expenditures on hold
  • Dividend re-affirmed
  • Share repurchases on opportunistic basis

Continued balance sheet strength and disciplined capital deployment

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SLIDE 15

Ma'Amir & North Refinery Industrial Area Sewage Treatment Plant

E SG le ade r ship that dr ive s value

E X C E L L E N C E I N N O V A T I O N P E O P L E G R O W T H 15

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SLIDE 16

Stante c ’s E SG fr ame work

E X C E L L E N C E I N N O V A T I O N P E O P L E G R O W T H 16

Stantec is a signatory to the UN Global Compact and has adopted the UN’s sustainable development goals (SDGs)

Member of the UN Global Compact CFO Taskforce for the SDGs

Impact through

  • ur actions
  • ur project work

In addition to UN SDGs, Stantec’s programs take into account

GRI, TCFD, SASB, and CDP

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SLIDE 17

E nvir

  • nme ntal le ade r

ship

E X C E L L E N C E I N N O V A T I O N P E O P L E G R O W T H 17

Stewardship and innovation that drives value

Stantec’s recognized leadership in sustainable design helps win projects

Recent accolades

Corporate Knights 2020

Ranked as Top 100 Most Sustainable Companies in the World

CDP Climate Leader

2019 CDP score of A-

Top 100 Smart City Partners

Newsweek magazine

*ENR – Engineering News-Record Magazine

Industry Recognition*

#1

Green design firm for educational facilities

#1

International design firm for sewer and waste

#2

International design firm for water

#2

Green building firm

#2

Design firm in power for hydro plants

#4

Design firm in power for wind power

#4

Design firm in North America

#8

Environmental Firm

#11

Design firm in the world 1 2 3 4 5 14 15 16 17 18 19

Metric Tons CO2 Equivalent

Emissions per Employee by Year

Scope 1 and 2 Scope 3

In 2019 we achieved a 39% reduction in scope 1 and 2 emissions per employee from our 2013 baseline – We expect to surpass our 2028 reduction target of 40%

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SLIDE 18

E X C E L L E N C E I N N O V A T I O N P E O P L E G R O W T H 18

Stantec’s SaferTogether™ culture encourages safe choices so our people return home safely each

  • day. Stantec’s safety

metrics continue to improve

Soc ial le ade r ship

Embracing and engaging diverse groups

Improves the performance of our business and our ability to support clients. STN in included in the Bloomberg Gender-Equality and Jantzi Social Indexes Stantec attracts, retains, develops, and rewards talent by paying fairly, providing benefits with meaningful choices and offering a consistent global approach while being sensitive to local market practices. Employee Retention: Targeting < 12% voluntary turnover Global Compact Network Canada - Gender Equality Leadership in the Canadian Private Sector Project

  • participant. Signatory to UN Women

Empowerment Principles. Board of Director Composition Currently expanding our long-term support for diversity and inclusion programs with a focus on Black, Indigenous and People of Color communities around the world. Inclusion and Diversity: Targeting > 85% engagement

Gender 38% Female 62% Male

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SLIDE 19

Str

  • ng gove r

nanc e

E X C E L L E N C E I N N O V A T I O N P E O P L E G R O W T H 19

A diverse board and values-based leadership

A board dominated by independent directors from exceptional backgrounds and leadership driven by clear values position Stantec for the future

95%

Environmental and Social Factors 63% highly experienced 25% general experience 12% limited experience Governance 100% highly experienced

Board Composition and Experience

How Stantec’s people conduct themselves has a direct impact on the integrity of both the Company and the institutions in the jurisdictions where we operate

compliance with mandatory ethics training in 2019

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SLIDE 20

Our Str ate gic Plan

(L aunc hed Dec embe r 3, 2019)

E X C E L L E N C E I N N O V A T I O N P E O P L E G R O W T H 20

SEVA résidences – foot bridge and marsh development Candiac, Québec

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SLIDE 21

Our vision

E X C E L L E N C E I N N O V A T I O N P E O P L E G R O W T H 21

T

  • be a top 10 global de sign fir

m that maximize s long- te r m, sustainable value

Pure play design focus Strong alignment with shareholders Earnings growth Disciplined capital allocation

Peace River Regional Reservoir Bradenton/DeSoto County, Florida, United States

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SLIDE 22

Our

  • ppor

tunity

E X C E L L E N C E I N N O V A T I O N P E O P L E G R O W T H 22

US$24T

TOTAL SPEND IN THE NEXT DECADE

1) United Nations by 2030 2) Navigant Research by 2030 3) IEA by 2025

Key Market Trends

Climate change, Urbanization, Geopolitics and breakthrough technology

STRATEGIC GROWTH OPPORTUNITIES

US$2T

ADDRESSABLE ENGINEERING AND DESIGN SPEND

SMART CITIES AND URBAN PLACES ENERGY REMIX

US $300B1 US $9,000B1 US $1,700B2 US $13,040B3

COASTAL RESILIENCE ECOSYSTEM RESTORATION

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SLIDE 23

Our str ate gy

E X C E L L E N C E I N N O V A T I O N P E O P L E G R O W T H 23

We will do this through

Strong execution, efficient operations, and disciplined capital allocation while delivering a great client experience.

We will measure our success through

Strong earnings per share growth, improved returns on invested capital, balance sheet stability, employee engagement and client satisfaction.

T

  • gr
  • w and dive r

sify sustainably for the be ne fit of

  • ur

c lie nts, e mploye e s and shar e holde r s.

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SLIDE 24

Share buyback

Focused on achieving the best risk adjusted returns

Our c apital alloc ation philosophy

E X C E L L E N C E I N N O V A T I O N P E O P L E G R O W T H 24

Sustaining CapEx Maintaining a strong balance sheet Base dividend

Excess Cash Flow Operating cash flow

Growth Our core commitments Competing capital for the best risk adjusted returns Organic and innovation Acquisitions EPS Growth

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SLIDE 25

Our T ar ge ts

E X C E L L E N C E I N N O V A T I O N P E O P L E G R O W T H 25 Ruwais Marina District Rumais, Abu Dhabi, UAE

>10%

CAGR

16-17%

Of net revenue

>11% >10%

Net revenue Adjusted EBITDA margin Return on invested capital Adjusted earnings per share

CAGR

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SLIDE 26

Conc luding Re mar ks

Fremont Water Pollution Control Center Expansion Fremont, OH, USA E X C E L L E N C E I N N O V A T I O N P E O P L E G R O W T H 26

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SLIDE 27

Continuing to e xe c ute our str ate gy

2 0 2 0 O U T L O O K 27

  • Innovating client solutions to address the challenges created by COVID-19
  • Virtual marketing and business development toolkit developed and launched to enhance sales and client relationship management

Innovation

  • Focused account management has driven 7.4% organic growth in key accounts year-over-year
  • Pace of acquisitions slowed due to travel restrictions

Growth

  • Our people’s health and safety comes first as we begin our phased office remobilization
  • Integrity of workforce is being preserved to work through record backlog and to position Stantec for economic recovery

People

  • Continued focus on project execution and delivering exceptional work for clients
  • Stantec’s EBITDA margins bolstered by prudent management of discretionary spending

Excellence

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SLIDE 28

E X C E L L E N C E I N N O V A T I O N P E O P L E G R O W T H 28 Lyu-Chuan - Shin Sei Green Waterway Taichung City, Taiwan

Q2 2020

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SLIDE 29

Q 2 2 0 2 0 29

Long-term strategy of delivering value through diversified business model

United States Canada Global

$4.7 B

gross revenue backlog

12 Months of work

4%

Growth in Q2 Adjusted Diluted EPS

Solid Q2 r e sults

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SLIDE 30

Organic growth (retraction)

2.3% (6.8)% (7.4)%

Q2 net revenue

$532M $261M $158M

100 200 300 400 500 600 ($ millions)

Q2 20 Q2 19

Solid ne t r e ve nue ge ne r ation in Q2

Q 2 2 0 2 0 30

UNITED STATES CANADA GLOBAL

Q2 Net revenue stable year-over-year at:

$951M

2.1% organic retraction

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SLIDE 31

Organic growth (retraction)

(1.7)% (8.7)% 3.4% (3.7)% 2.0%

Q2 net revenue

$272M $202M $201M $141M $135M

100 200 300 ($ millions)

Q2 20 Q2 19

Busine ss line dive r sity bolste r s Stante c ’s r e silie nc y

Q 2 2 0 2 0 31

WATER ENVIRONMENTAL SERVICES INFRASTRUCTURE BUILDINGS ENERGY & RESOURCES

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SLIDE 32

Unite d State s

Q2 20 Net revenue growth 6.0% Organic net revenue growth 2.3% Backlog ($ millions) $2,781 Gross Margin 52.9%

Q 2 2 0 2 0 32

$532 $502

$0 $200 $400 $600 $800 Q2 20 Q2 19 ($ millions)

Gross & Net Revenue

Martin County, Florida Substation Lake Mary, Florida

2.3% organic growth in Q2

  • Driven by:
  • Water, Mining, and Power with the

commencement of several large projects and continuation of existing programs

  • New federal Environmental Services

projects that more than offset pandemic-related slowdowns

  • Partially offset by:
  • A slowdown in Buildings, particularly

in the commercial, airports, and hospitality sectors

Net Revenue Gross Revenue

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SLIDE 33

Canada

Q2 20 Net revenue retraction (6.8)% Organic net revenue retraction (6.8)% Backlog ($ millions) $1,163 Gross Margin 48.5%

Q 2 2 0 2 0 33

$261 $280

$0 $200 $400 $600 $800 Q2 20 Q2 19 ($ millions)

Gross & Net Revenue

University of Manitoba Museum Phase II Winnipeg, MB, Canada

6.8% organic retraction in Q2

  • Driven by:
  • Slowed economic growth amplified by

the COVID-19 pandemic

  • Buildings and Community

Development particularly affected

  • Environmental Services impacted by

project slowdowns in field work

  • Partially offset by organic growth in:
  • Oil & Gas driven by midstream

projects

  • Transportation related to several

large light-rail transit projects in Edmonton, Montreal, and the greater Toronto area

Net Revenue Gross Revenue

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SLIDE 34

Global

Q2 20 Net revenue retraction (7.9)% Organic net revenue retraction (7.4)% Backlog ($ millions) $769 Gross Margin 51.7%

Q 2 2 0 2 0 34

$158 $171

$0 $200 $400 $600 $800 Q2 20 Q2 19 ($ millions)

Gross & Net Revenue

University of Manitoba Museum Phase II Winnipeg, MB, Canada Center Parcs, Longford Forest County Longford, Ireland

7.4% organic retraction in Q2

  • Driven by:
  • Project slowdowns from COVID-19
  • Most pronounced in Buildings and

European Environmental Services

  • Pandemic-related mine closures in

Latin America

  • Partially offset by:
  • New Zealand transportation projects
  • UK Infrastructure strength
  • Water remaining steady in the UK

with increased work in Australia

Net Revenue Gross Revenue

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SLIDE 35

Q2 2020 r e sults

Q 2 2 0 2 0 35

$954 $953 $901 $955 $951

Q2 19 Q3 19 Q4 19 Q1 20 Q2 20

2.3% 7.4% 5.3% 4.2% (2.1)%

Net revenue & organic growth (retraction)

($ millions, %)

$145 $159 $143 $140 $143

Q2 19 Q3 19 Q4 19 Q1 20 Q2 20

15.2% 16.7% 15.8% 14.6% 15.0%

Adjusted EBITDA and margin

($ millions, %) Q2 20 Q2 19 Change

(In millions of Canadian dollars, except per share amounts and percentages) $ % of Net Revenue $ % of Net Revenue % Year-

  • ver-year

change Net revenue 951.1 100.0 953.6 100.0 (0.3)% Gross margin 489.7 51.5 517.5 54.3 (5.4)% Administrative and marketing expenses 344.0 36.2 372.4 39.1 (7.6)% EBITDA from continuing operations(1) 144.9 15.2 145.9 15.3 (0.7)% Net income from continuing operations 52.6 5.5 49.3 5.2 6.7% Diluted earnings per share (EPS) from continuing operations 0.47

  • 0.44
  • 6.8%

Adjusted EBITDA from continuing operations(1) 142.5 15.0 145.4 15.2 (2.0)% Adjusted net income from continuing operations(1) 57.7 6.1 56.1 5.9 2.9% Adjusted diluted EPS from continuing operations(1) 0.52

  • 0.50
  • 4.0%
(1) EBITDA, adjusted EBTIDA, adjusted net income, and adjusted diluted EPS are non-IFRS measures

(discussed in the Definitions section of Stantec's 2019 Annual Report and Q2 2020 Management's Discussion and Analysis).

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SLIDE 36

0.5 1 1.5 2 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20

Net debt to adjusted EBITDA(1) (TTM)

Balanc e she e t str e ngth

Q 2 2 0 2 0 36

Target range

1.0 - 2.0x

Net debt to adjusted EBITDA(1)

1.0x at June 30, 2020

70 75 80 85 90 95 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20

Days sales outstanding

Target

90 days

Days sales outstanding

82 days at June 30, 2020

(1) Net debt to adjusted EBTIDA and days sales outstanding are non-IFRS measures.

(discussed in the Definitions section of Stantec's 2019 Annual Report and Q2 2020 Management's Discussion and Analysis).

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SLIDE 37

L iquidity and c apital alloc ation

(Co mpariso ns to Q2 2019)

Q 2 2 0 2 0 37

$115 $94 $204 ($85) $210

Q2 19 Q3 19 Q4 19 Q1 20 Q2 20

Free cash flow(1)

($ millions)

$16 $16 $17 $16 $17 $12 $17 $33

Q2 19 Q3 19 Q4 19 Q1 20 Q2 20

Dividends Share buy backs

Capital returned to shareholders

($ millions)

  • 83% improvement in free cash flow(1)
  • >50% decrease in capital expenditures
  • >$330 million in undrawn credit capacity

Cash flow from continuing operations

(millions of Canadian dollars)

Q2 20 Q2 19 Inflow (Outflow) Operating 251.5 162.3 Investing (11.2) (18.6) Financing (100.4) (83.0) Net 139.9 60.7

(1) Free cash (out)flow is defined as operating cash flows less capital expenditures and net payment of lease obligations.
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SLIDE 38

T hank You!

E X C E L L E N C E I N N O V A T I O N P E O P L E G R O W T H 38