Exhibit 99.1

 

NEWS RELEASE

May 2, 2018

 

Tetra Tech Reports Second Quarter 2018 Results

 

 

·                  EPS $0.51; Ongoing EPS $0.54, up 13% Y/Y

·                  Increased quarterly dividend to $0.12 per share, up 20%

·                  Increasing net revenue guidance for FY18; midpoint up 8% Y/Y

·                  Increasing EPS guidance for FY18; midpoint up 20% Y/Y

 

Pasadena, California. Tetra Tech, Inc. (NASDAQ: TTEK) today announced results for the second quarter ended April 1, 2018.

 

Second Quarter Results

 

For the second quarter, Tetra Tech’s results exceeded net revenue and diluted earnings per share (EPS) guidance. Revenue in the second quarter totaled $700 million.  For ongoing(1) operations, revenue totaled $699 million, and revenue, net of subcontractor costs(2) (net revenue), was $533 million.  Operating income for the second quarter was $43 million, and on an ongoing basis totaled $45 million.  EPS was $0.51, and on an ongoing basis totaled $0.54, up 13% year-over-year.  Backlog at the end of the quarter was $2.5 billion.

 

Quarterly Dividend and Share Repurchase Program

 

On April 30, 2018, Tetra Tech’s Board of Directors declared a 20% increase in the quarterly dividend, raising it to $0.12 per share payable on June 1, 2018 to stockholders of record as of May 16, 2018.  Additionally, the Company has $50 million remaining under the previously approved $200 million share repurchase program.

 

Comments on Results

 

Tetra Tech’s Chairman and CEO, Dan Batrack, commented, “Tetra Tech had a very strong second quarter and record first half of the year results, exceeding the high end of our guidance range for both net revenue and earnings. Our broad-based growth has been led by work for U.S. state and local clients, which has increased organically at a double-digit rate for seven consecutive quarters, including 30% growth in the second quarter.  With the recent 2018 U.S. Federal spending bill in place, we have more visibility for the remainder of 2018. Given the strength of our results and outlook, we are increasing our guidance for both EPS and net revenue for fiscal 2018.”

 


(1)         Measures presented for ongoing operations are non-GAAP financial measures. Refer to Reconciliation of Revenue and Operating Results table for a reconciliation to GAAP.

(2)       Tetra Tech’s revenue includes a significant amount of subcontractor costs and, therefore, the Company believes revenue, net of subcontractor costs, which is a non-GAAP financial measure, provides a valuable perspective on its business results. Refer to Reconciliation of Revenue and Operating Results table for a reconciliation to GAAP.

 



 

Six-Month Results

 

Revenue for the six-month period was $1.5 billion and net revenue was $1.1 billion, up 10% and 8%, respectively, compared to the same period in fiscal 2017. Operating income for the six-month period was $91 million and EPS was $1.32, up 10% and 43%, respectively, compared to the same period in fiscal 2017.  On an ongoing basis, EPS totaled $1.18, up 22% year-over-year.

 

Business Outlook

 

The following statements are based on current expectations.  These statements are forward-looking and the actual results could differ materially.  These statements do not include the potential impact of transactions that may be completed or developments that become evident after the date of this release.  The Business Outlook section should be read in conjunction with the information on forward-looking statements at the end of this release.

 

Tetra Tech expects ongoing EPS for the third quarter of fiscal 2018 to range from $0.62 to $0.68.  Net revenue for the third quarter is expected to range from $525 million to $555 million.  For fiscal 2018, Tetra Tech is increasing guidance and now expects ongoing EPS to range from $2.50 to $2.62 and net revenue to range from $2.15 billion to $2.25 billion.

 

Webcast

 

Investors will have the opportunity to access a live audio-visual webcast and supplemental financial information concerning the second quarter 2018 results through a link posted on the Company’s website at tetratech.com on May 3, 2018 at 8:00 a.m. (PT).

 

2



 

Reconciliation of Revenue and Operating Results

 

In thousands (except EPS data)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

April 1,
2018

 

April 2,
2017

 

%
Y/Y

 

April 1,
2018

 

April 2,
2017

 

%
Y/Y

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

700,262

 

$

663,781

 

5

%

$

1,460,010

 

$

1,332,632

 

10

%

RCM

 

(1,480

)

23

 

 

 

(8,286

)

(8,209

)

 

 

Ongoing revenue

 

$

698,782

 

$

663,804

 

5

%

$

1,451,724

 

$

1,324,423

 

10

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

700,262

 

$

663,781

 

5

%

$

1,460,010

 

$

1,332,632

 

10

%

Subcontractor costs

 

(167,469

)

(151,827

)

 

 

(382,370

)

(331,127

)

 

 

Net revenue

 

$

532,793

 

$

511,954

 

4

%

$

1,077,640

 

$

1,001,505

 

8

%

RCM

 

(369

)

3,704

 

 

 

(1,521

)

1,909

 

 

 

Ongoing net revenue

 

$

532,424

 

$

515,658

 

3

%

$

1,076,119

 

$

1,003,414

 

7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

$

42,716

 

$

42,956

 

(1

)%

$

91,305

 

$

82,811

 

10

%

Earn-out expense (gain)

 

1,918

 

(7,149

)

 

 

1,918

 

(7,149

)

 

 

RCM

 

489

 

8,466

 

 

 

1,647

 

11,508

 

 

 

Ongoing operating income

 

$

45,123

 

$

44,273

 

2

%

$

94,870

 

$

87,170

 

9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EPS

 

$

0.51

 

$

0.46

 

11

%

$

1.32

 

$

0.92

 

43

%

Earn-out expense (gain)

 

0.03

 

(0.08

)

 

 

0.03

 

(0.08

)

 

 

RCM

 

 

0.10

 

 

 

0.01

 

0.13

 

 

 

Revaluation of deferred tax liabilities

 

 

 

 

 

(0.18

)

 

 

 

Ongoing EPS

 

$

0.54

 

$

0.48

 

13

%

$

1.18

 

$

0.97

 

22

%

 

About Tetra Tech

 

Tetra Tech is a leading, global provider of consulting and engineering services.  We are differentiated by Leading with Science® to provide innovative technical solutions to our clients.  We support global commercial and government clients focused on water, environment, infrastructure, resource management, energy, and international development.  With more than 17,000 associates worldwide, Tetra Tech provides clear solutions to complex problems.  For more information about Tetra Tech, please visit tetratech.com, follow us on Twitter (@TetraTech), or like us on Facebook.

 

CONTACTS:

Jim Wu, Investor Relations

Charlie MacPherson, Media & Public Relations

(626) 470-2844

 

3



 

Forward-Looking Statements

 

This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  The use of words such as “anticipate,” “expect,” “could,” “may,” “intend,” “plan” and “believe,” among others, generally identify forward-looking statements. These forward-looking statements are based on currently available operating, financial, economic and other information, and are subject to a number of risks and uncertainties.  Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual future events or results.  A variety of factors, many of which are beyond our control, could cause actual future results or events to differ materially from those projected in the forward-looking statements in this release, including but not limited to: continuing worldwide political and economic uncertainties; the U.S. Administration’s potential changes to fiscal policies; the cyclicality in demand for our overall services; the fluctuation in demand for oil and gas, and mining services; risks related to international operations; concentration of revenues from U.S. government agencies and potential funding disruptions by these agencies; dependence on winning or renewing U.S. government contracts; the delay or unavailability of public funding on U.S. government contracts; the U.S. government’s right to modify, delay, curtail or terminate contracts at its convenience; compliance with government procurement laws and regulations; credit risks associated with certain clients in certain geographic areas or industries; acquisition strategy and integration risks; goodwill or other intangible asset impairment; the failure to comply with worldwide anti-bribery laws; the failure to comply with domestic and international export laws; the failure to properly manage projects; the loss of key personnel or the inability to attract and retain qualified personnel; the ability of our employees to obtain government granted eligibility; the use of estimates and assumptions in the preparation of financial statements; the ability to maintain adequate workforce utilization; the use of the percentage-of-completion method of accounting; the inability to accurately estimate and control contract costs; the failure to adequately recover on our claims for additional contract costs; the failure to win or renew contracts with private and public sector clients; growth strategy management; backlog cancellation and adjustments; risks relating to cyber security breaches; the failure of partners to perform on joint projects; the failure of subcontractors to satisfy their obligations; requirements to pay liquidated damages based on contract performance; the adoption of new legal requirements; changes in resource management, environmental or infrastructure industry laws, regulations or programs; changes in capital markets and the access to capital; credit agreement covenants; industry competition; liability related to legal proceedings, investigations, and disputes; the availability of third-party insurance coverage; the ability to obtain adequate bonding; employee, agent, or partner misconduct; employee risks related to international travel; safety programs; conflict of interest issues; liabilities relating to reports and opinions; liabilities relating to environmental laws and regulations; force majeure events; protection of intellectual property rights; stock price volatility; the ability to impede a business combination based on Delaware law and charter documents; and other risks and uncertainties as may be described in Tetra Tech’s periodic filings with the Securities and Exchange Commission, including those described in the “Risk Factors” section of Tetra Tech’s Annual Report on Form 10-K for the year ended October 1, 2017, and Tetra Tech’s Quarterly Reports on Form 10-Q for fiscal year 2018, as well as in Tetra Tech’s other filings with the SEC.  Readers should not place undue reliance on forward-looking statements since such information speaks only as of the date of this release. Tetra Tech does not intend to update forward-looking statements and expressly disclaims any obligation to do so.

 

Non-GAAP Financial Measures

 

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 of 1934, 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 included in this release.

 

4



 

Tetra Tech, Inc.

Consolidated Balance Sheets

(unaudited - in thousands, except par value)

 

 

 

April 1,
2018

 

October 1,
2017

 

 

 

 

 

 

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

203,177

 

$

189,975

 

Accounts receivable - net

 

863,219

 

788,767

 

Prepaid expenses and other current assets

 

65,102

 

49,969

 

Income taxes receivable

 

18,406

 

13,312

 

Total current assets

 

1,149,904

 

1,042,023

 

 

 

 

 

 

 

Property and equipment - net

 

55,495

 

56,835

 

Investments in unconsolidated joint ventures

 

3,167

 

2,700

 

Goodwill

 

809,690

 

740,886

 

Intangible assets - net

 

20,847

 

26,688

 

Deferred tax assets

 

8,588

 

1,763

 

Other long-term assets

 

35,102

 

31,850

 

Total assets

 

$

2,082,793

 

$

1,902,745

 

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

155,257

 

$

177,638

 

Accrued compensation

 

140,426

 

143,408

 

Billings in excess of costs on uncompleted contracts

 

144,327

 

117,499

 

Current portion of long-term debt

 

15,466

 

15,588

 

Current contingent earn-out liabilities

 

11,669

 

2,024

 

Other current liabilities

 

92,863

 

81,511

 

Total current liabilities

 

560,008

 

537,668

 

 

 

 

 

 

 

Deferred tax liabilities

 

45,740

 

43,781

 

Long-term debt

 

463,544

 

341,283

 

Long-term contingent earn-out liabilities

 

18,443

 

414

 

Other long-term liabilities

 

54,830

 

50,975

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

Preferred stock - authorized, 2,000 shares of $0.01 par value; no shares issued and outstanding at April 1, 2018 and October 1, 2017

 

 

 

Common stock - authorized, 150,000 shares of $0.01 par value; issued and outstanding, 55,749 and 55,873 shares at April 1, 2018 and October 1, 2017, respectively

 

557

 

559

 

Additional paid-in capital

 

161,387

 

193,835

 

Accumulated other comprehensive loss

 

(118,044

)

(98,500

)

Retained earnings

 

896,146

 

832,559

 

Tetra Tech stockholders’ equity

 

940,046

 

928,453

 

Noncontrolling interests

 

182

 

171

 

Total stockholders’ equity

 

940,228

 

928,624

 

Total liabilities and stockholders’ equity

 

$

2,082,793

 

$

1,902,745

 

 

5



 

Tetra Tech, Inc.

Consolidated Statements of Income

(unaudited - in thousands, except per share data)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

April 1,

 

April 2,

 

April 1,

 

April 2,

 

 

 

2018

 

2017

 

2018

 

2017

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

700,262

 

$

663,781

 

$

1,460,010

 

$

1,332,632

 

Subcontractor costs

 

(167,469

)

(151,827

)

(382,370

)

(331,127

)

Other costs of revenue

 

(441,368

)

(430,952

)

(892,070

)

(839,141

)

Gross profit

 

91,425

 

81,002

 

185,570

 

162,364

 

Selling, general and administrative expenses

 

(46,791

)

(45,195

)

(92,347

)

(86,702

)

Contingent consideration - fair value adjustments

 

(1,918

)

7,149

 

(1,918

)

7,149

 

Income from operations

 

42,716

 

42,956

 

91,305

 

82,811

 

Interest expense

 

(4,092

)

(3,099

)

(7,252

)

(6,007

)

Income before income tax expense

 

38,624

 

39,857

 

84,053

 

76,804

 

Income tax expense

 

(9,877

)

(12,990

)

(9,254

)

(23,348

)

Net income

 

28,747

 

26,867

 

74,799

 

53,456

 

Net income attributable to noncontrolling interests

 

(22

)

(5

)

(40

)

(32

)

Net income attributable to Tetra Tech

 

$

28,725

 

$

26,862

 

$

74,759

 

$

53,424

 

 

 

 

 

 

 

 

 

 

 

Earnings per share attributable to Tetra Tech:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.51

 

$

0.47

 

$

1.34

 

$

0.93

 

Diluted

 

$

0.51

 

$

0.46

 

$

1.32

 

$

0.92

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

55,841

 

57,270

 

55,900

 

57,171

 

Diluted

 

56,673

 

58,270

 

56,825

 

58,194

 

 

 

 

 

 

 

 

 

 

 

Cash dividends paid per share

 

$

0.10

 

$

0.09

 

$

0.20

 

$

0.18

 

 

6



 

Tetra Tech, Inc.

Consolidated Statements of Cash Flows

(unaudited - in thousands)

 

 

 

Six Months Ended

 

 

 

April 1,

 

April 2,

 

 

 

2018

 

2017

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

Net Income

 

$

74,799

 

$

53,456

 

 

 

 

 

 

 

Adjustments to reconcile net income to net cash from operating activities:

 

 

 

 

 

Depreciation and amortization

 

20,312

 

23,234

 

Equity in income of unconsolidated joint ventures

 

(2,032

)

(2,489

)

Distributions of earnings from unconsolidated joint ventures

 

1,470

 

2,301

 

Non-cash stock compensation

 

8,705

 

6,610

 

Deferred income taxes

 

(10,100

)

19,851

 

Provision for doubtful accounts

 

2,390

 

(2,028

)

Fair value adjustments to contingent consideration

 

1,918

 

(7,149

)

Gain on disposal of property and equipment

 

(1,205

)

(266

)

 

 

 

 

 

 

Changes in operating assets and liabilities, net of effects of business acquisitions:

 

 

 

 

 

Accounts receivable

 

(42,912

)

2,631

 

Prepaid expenses and other assets

 

(15,528

)

(7,587

)

Accounts payable

 

(26,460

)

(15,587

)

Accrued compensation

 

(11,453

)

(12,888

)

Billings in excess of costs on uncompleted contracts

 

15,367

 

25,139

 

Other liabilities

 

716

 

(5,021

)

Income taxes receivable/payable

 

(1,213

)

(29,843

)

Net cash provided by operating activities

 

14,774

 

50,364

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Payments for business acquisitions, net of cash acquired

 

(64,451

)

(8,039

)

Capital expenditures

 

(4,565

)

(3,896

)

Proceeds from sale of property and equipment

 

1,651

 

303

 

Net cash used in investing activities

 

(67,365

)

(11,632

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Proceeds from borrowings

 

180,026

 

133,596

 

Payments on long-term debt

 

(62,109

)

(137,849

)

Repurchases of common stock

 

(50,000

)

(20,000

)

Net proceeds from issuance of common stock

 

11,945

 

7,661

 

Dividends paid

 

(11,172

)

(10,301

)

Payments of contingent earn-out liabilities

 

(854

)

 

Net cash provided by (used in) financing activities

 

67,836

 

(26,893

)

 

 

 

 

 

 

Effect of exchange rate changes on cash

 

(2,043

)

(958

)

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

13,202

 

10,881

 

Cash and cash equivalents at beginning of period

 

189,975

 

160,459

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

$

203,177

 

$

171,340

 

 

 

 

 

 

 

Supplemental information:

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

Interest

 

$

6,895

 

$

5,970

 

Income taxes, net of refunds received of $0.3 million and $0.6 million

 

$

20,151

 

$

32,995

 

 

7


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