EX-99.1 2 tm2214471d1_ex99-1.htm EXHIBIT 99.1

 

Exhibit 99.1

 

 

NEWS RELEASE 

May 4, 2022

 

Tetra Tech Reports Strong Second Quarter Results

 

·Revenue $853 million, up 13% Y/Y

·Net revenue $700 million, up 17% Y/Y

·EPS $0.98, up 18% Y/Y

·Backlog of $3.61 billion, up 15% Y/Y

 

Pasadena, California. Tetra Tech, Inc. (NASDAQ: TTEK), a leading provider of high-end consulting and engineering services, today announced results for the second quarter ended April 3, 2022.

 

Second Quarter Results

 

Tetra Tech achieved record second quarter results in revenue, net revenue, and operating income. Revenue in the second quarter totaled $853 million and revenue, net of subcontractor costs (net revenue)1 was $700 million, up 13% and 17% year-over-year, respectively. Operating income was $75 million, up 23%, and earnings per share (“EPS”) was $0.98, up 18%. Cash generated from operations was $95 million, and DSO improved to 59 days. Backlog increased to $3.61 billion, up 15% year-over-year.

 

Quarterly Dividend and Share Repurchase Program

 

On May 2, 2022, Tetra Tech’s Board of Directors declared a $0.23 per share dividend, a 15% increase over the prior year, payable on May 27, 2022, to stockholders of record as of May 13, 2022. In the second quarter, Tetra Tech repurchased $50 million of common stock. Additionally, the Company had $448 million remaining under the approved share repurchase programs. The Company has returned $122 million to shareholders in the first six months of the fiscal year through a combination of share repurchases and dividends while maintaining a net debt ratio of 0.2x.2

 

Chairman and CEO Comments

 

Tetra Tech Chairman and CEO, Dan Batrack, commented, “We continued our strong operating and financial performance, driven by double digit growth in our U.S. State & Local, International and Commercial end markets. During the second quarter, we further expanded our client service offerings as Tetra Tech welcomed two technical leading consulting and engineering firms, Piteau Associates and Axiom Data Science. Given the strength of our end markets and backlog, we are increasing our guidance for both net revenue and EPS for fiscal 2022.”

 

 

 

1 Non-GAAP financial measures which the Company believes provide valuable perspectives on its business results. Refer to Reconciliation of GAAP and Non-GAAP Items.

2 The net debt leverage ratio is defined as total debt less cash and cash equivalents divided by 12-month adjusted EBITDA. Refer to Regulation G Information and Reconciliation of GAAP and Non-GAAP Items. 

 

 

 

Annual Sustainability Report and Inaugural Sustainability Linked Credit Facility

 

We released our annual Sustainability Report on Earth Day 2022 and established our inaugural sustainability-linked credit facility on February 22, 2022. Tetra Tech President and Chief Sustainability Officer, Leslie Shoemaker, commented, “This year’s sustainability report highlights the positive impact our projects are making on the world with a goal of improving the lives of one billion people. We have established this ground-breaking and first-of-its-kind measurement and quantification of environmental and social benefits directly associated with the projects the Company performs.”

 

Steve Burdick, Tetra Tech Chief Financial Officer, further stated, “We are pleased that the bank lender group has recognized Tetra Tech’s long-term commitment to advancing sustainability and incorporated financial rewards in our credit facility for achieving measurable benefits.”

 

Six-Month Results

 

Revenue for the six-month period was $1.71 billion and net revenue was $1.38 billion, up 13% and 14%, respectively, over the same period in fiscal 2021. Operating income of $162 million was up 27%, and EPS of $2.23 increased 25% over last fiscal year. Cash flow from operations was $178 million, up 13% 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 EPS for the third quarter of fiscal 2022 to range from $1.00 to $1.05 and net revenue to range from $665 million to $715 million. For fiscal 2022, Tetra Tech is increasing EPS to now range from $4.30 to $4.40, and increasing the guidance for net revenue to range from $2.72 billion to $2.82 billion.3

 

Webcast

 

Investors will have the opportunity to access a live audio-visual webcast and supplemental financial information concerning the second quarter fiscal 2022 results through a link posted on the Company’s website at tetratech.com on May 5, 2022, at 8:00 a.m. (PT).

 

 

 

3 Reconciliation of the net revenue guidance to the most directly comparable GAAP measure is not available without unreasonable efforts because the Company cannot predict the magnitude and timing of all the components required to provide such reconciliation with sufficient precision. 

 

2

 

 

Reconciliation of GAAP and Non-GAAP Items

In thousands (except EPS data)

 

   Three Months Ended   Six Months Ended 
   April 3,
2022		   March 28,
2021		   April 3,
2022		   March 28,
2021		 
Revenue  $852,744   $754,764   $1,711,255   $1,519,868 
Subcontractor Costs   (153,103)   (154,939)   (332,280)   (314,873)
Net Revenue  $699,641   $599,825   $1,378,975   $1,204,995 
                     
EPS  $0.98   $0.83   $2.23   $1.79 
COVID-19 Credits   -    -    (0.06)   - 
Adjusted EPS  $0.98   $0.83   $2.17   $1.79 
                     
Current portion of long-term debt  $12,503   $28,885           
Long-term debt   237,500    238,339           
Less: Cash and cash equivalents   (194,378)   (225,330)          
Net debt  $55,625   $41,894           
                     
Trailing 12-month EBITDA  $330,777   $278,473           
                     
Net debt leverage ratio   0.2x   0.2x          

 

About Tetra Tech

 

Tetra Tech is a leading provider of high-end consulting and engineering services for projects worldwide. With 21,000 associates working together, Tetra Tech provides clear solutions to complex problems in water, environment, sustainable infrastructure, renewable energy, and international development. We are Leading with Science® to provide sustainable and resilient solutions for our clients. 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: the impact of the COVID-19 pandemic; 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 fiscal year ended October 3, 2021, and Tetra Tech’s Quarterly Reports on Form 10-Q for fiscal year 2022, 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 3,
2022		   October 3,
2021		 
Assets          
Current assets:          
 Cash and cash equivalents  $194,378   $166,568 
 Accounts receivable, net   667,125    668,998 
 Contract assets   114,958    103,784 
 Prepaid expenses and other current assets   100,648    112,338 
 Income taxes receivable   4,517    14,260 
 Total current assets   1,081,626    1,065,948 
           
Property and equipment, net   36,715    37,733 
Right-of-use assets, operating leases   205,087    215,422 
Investments in unconsolidated joint ventures   4,605    3,282 
Goodwill   1,158,623    1,108,578 
Intangible assets, net   39,480    37,990 
Deferred tax assets   59,272    54,413 
Other long-term assets   60,217    53,196 
 Total assets  $2,645,625   $2,576,562 
           
Liabilities and Equity          
Current liabilities:          
 Accounts payable  $128,683   $128,767 
 Accrued compensation   183,340    206,322 
 Contract liabilities   224,978    190,403 
 Short-term lease liabilities, operating leases   64,789    67,452 
 Current portion of long-term debt and other short-term borrowings   12,503    12,504 
 Current contingent earn-out liabilities   27,517    19,520 
 Other current liabilities   213,381    223,515 
 Total current liabilities   855,191    848,483 
           
Deferred tax liabilities   17,098    10,563 
Long-term debt   237,500    200,000 
Long-term lease liabilities, operating leases   165,630    174,285 
Long-term contingent earn-out liabilities   51,551    39,777 
Other long-term liabilities   74,013    69,163 
           
Equity:          
 Preferred stock - authorized, 2,000 shares of $0.01 par value; no shares issued and outstanding at April 3, 2022 and October 3, 2021   -    - 
 Common stock - authorized, 150,000 shares of $0.01 par value; issued and outstanding, 53,683 and 53,981 shares at April 3, 2022 and October 3, 2021, respectively  
 		  
 		  
537		  
 		  
 		  
 		  
540		  
 
 Accumulated other comprehensive loss   (115,303)   (125,028)
 Retained earnings   1,359,367    1,358,726 
 Tetra Tech stockholders' equity   1,244,601    1,234,238 
 Noncontrolling interests   41    53 
 Total stockholders' equity   1,244,642    1,234,291 
 Total liabilities and stockholders' equity  $2,645,625   $2,576,562 

 

 

 

 

 

Tetra Tech, Inc.

Consolidated Statements of Income

(unaudited - in thousands, except per share data) 

 

   Three Months Ended   Six Months Ended 
   April 3,   March 28,   April 3,   March 28, 
   2022   2021   2022   2021 
Revenue  $852,744   $754,764   $1,711,255   $1,519,868 
Subcontractor costs   (153,103)   (154,939)   (332,280)   (314,873)
Other costs of revenue   (564,468)   (487,341)   (1,104,035)   (976,201)
Gross profit   135,173    112,484    274,940    228,794 
Selling, general and administrative expenses   (60,653)   (51,677)   (113,200)   (101,735)
Income from operations   74,520    60,807    161,740    127,059 
Interest expense, net   (3,144)   (2,823)   (6,048)   (5,849)
Income before income tax expense   71,376    57,984    155,692    121,210 
Income tax expense   (18,327)   (12,456)   (34,144)   (23,234)
Net income   53,049    45,528    121,548    97,976 
Net income attributable to noncontrolling interests   (9)   (11)   (19)   (23)
Net income attributable to Tetra Tech  $53,040   $45,517    121,529   $97,953 
                     
Earnings per share attributable to Tetra Tech:                    
Basic  $0.99   $0.84   $2.25   $1.81 
Diluted  $0.98   $0.83   $2.23   $1.79 
                     
Weighted-average common shares outstanding:                    
Basic   53,834    54,187    53,916    54,085 
Diluted   54,346    54,736    54,492    54,715 

 

 

 

 

Tetra Tech, Inc.

Consolidated Statements of Cash Flows

(unaudited - in thousands)

 

   Six Months Ended 
   April 3,   March 28, 
   2022   2021 
Cash flows from operating activities:          
Net income  $121,548   $97,976 
           
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation and amortization   12,662    11,524 
Equity in income of unconsolidated joint ventures   (3,760)   (1,872)
Distributions of earnings from unconsolidated joint ventures   2,506    1,622 
Amortization of stock-based awards   12,392    10,566 
Deferred income taxes   494    350 
Fair value adjustments to contingent consideration   199    (193)
Loss (gain) on sale of property and equipment   178    (66)
           
Changes in operating assets and liabilities, net of effects of business acquisitions:          
Accounts receivable and contract assets   (862)   33,877 
Prepaid expenses and other assets   12,977    18,091 
Accounts payable   (632)   12,063 
Accrued compensation   (25,725)   (20,524)
Contract liabilities   34,529    9,957 
Other liabilities   4,426    (5,528)
Income taxes receivable/payable   6,617    (10,419)
Net cash provided by operating activities   177,549    157,424 
           
Cash flows from investing activities:          
Payments for business acquisitions, net of cash acquired   (33,611)   (3,065)
Capital expenditures   (5,620)   (4,297)
Proceeds from sale of divested business   3,124    - 
Proceeds from sale of property and equipment   541    79 
        Net cash used in investing activities   (35,566)   (7,283)
           
Cash flows from financing activities:          
Proceeds from borrowings   141,456    141,628 
Repayments on long-term debt   (105,824)   (146,250)
Bank overdrafts   -    (21,121)
Repurchases of common stock   (100,000)   (30,000)
Taxes paid on vested restricted stock   (25,055)   (17,488)
Stock options exercised   1,205    9,771 
Dividends paid   (21,562)   (18,410)
Payments of contingent earn-out liabilities   (4,035)   (8,037)
Principal payments on finance leases   (1,979)   (1,222)
        Net cash used in financing activities   (115,794)   (91,129)
           
Effect of exchange rate changes on cash and cash equivalents   1,621    8,803 
           
Net increase in cash and cash equivalents   27,810    67,815 
Cash and cash equivalents at beginning of period   166,568    157,515 
Cash and cash equivalents at end of period  $194,378   $225,330 
           
Supplemental information:          
Cash paid during the period for:          
Interest  $5,141   $5,412 
Income taxes, net of refunds received of $2.4 million and $1.1 million  $25,476   $30,832 

 

 

 

 

 

Tetra Tech, Inc.

Regulation G Information

April 3, 2022                        

 

Reconciliation of Revenue to Revenue, Net of Subcontractor Costs ("Net Revenue") 

(in millions)

 

           2021   2022 
   2019   2020   1st Qtr   2nd Qtr   6 mos   3rd Qtr   9 mos   4th Qtr   Total   1st Qtr   2nd Qtr   6 Mos 
Consolidated                                                
Revenue (As Reported)   3,107.3    2,994.9    765.1    754.8    1,519.9    801.6    2,321.5    892.0    3,213.5    858.5    852.7    1,711.3 
RCM / Non-Cash Claims   15.2    (0.2)   -    (0.5)   (0.5)   (0.1)   (0.6)   -    (0.6)   -    -    - 
Adjusted Revenue   3,122.5    2,994.7    765.1    754.3    1,519.4    801.5    2,320.9    892.0    3,212.9    858.5    852.7    1,711.3 
Adjusted Subcontractor Costs   (716.4)   (646.1)   (159.9)   (155.0)   (314.9)   (163.5)   (478.4)   (182.9)   (661.3)   (179.2)   (153.1)   (332.3)
Adjusted Net Revenue   2,406.1    2,348.6    605.2    599.3    1,204.5    638.0    1,842.5    709.1    2,551.6    679.3    699.6    1,379.0 
                                                             
GSG Segment                                                            
Revenue   1,620.7    1,578.3    424.6    432.6    857.2    444.3    1,301.5    471.4    1,772.9    456.1    449.0    905.1 
Subcontractor Costs   (473.8)   (460.8)   (120.0)   (122.5)   (242.5)   (129.1)   (371.7)   (135.5)   (507.1)   (129.0)   (111.5)   (240.5)
Adjusted Net Revenue   1,146.9    1,117.5    304.6    310.1    614.7    315.2    929.8    335.9    1,265.8    327.1    337.5    664.6 
                                                             
CIG Segment                                                            
Revenue   1,544.8    1,471.1    356.6    335.4    692.0    372.7    1,064.7    435.4    1,500.1    416.3    416.9    833.2 
Non-Cash Claims   13.7    -    -    -    -    -    -    -    -    -    -    - 
Adjusted Revenue   1,558.5    1,471.1    356.6    335.4    692.0    372.7    1,064.7    435.4    1,500.1    416.3    416.9    833.2 
Subcontractor Costs   (299.3)   (240.0)   (56.0)   (46.2)   (102.2)   (49.9)   (152.0)   (62.2)   (214.3)   (64.0)   (54.8)   (118.8)
Adjusted Net Revenue   1,259.2    1,231.1    300.6    289.2    589.8    322.8    912.7    373.2    1,285.8    352.3    362.1    714.4 
                                                             
RCM Segment                                                            
Revenue   (1.5)   0.2    -    0.5    0.5    0.1    0.6    -    0.6    -    -    - 
Subcontractor Costs   (1.3)   (0.2)   -    0.1    0.1    (0.1)   -    -    -    -    -    - 
Net Revenue   (2.8)   -    -    0.6    0.6    -    0.6    -    0.6    -    -    - 

 

Reconciliation of Net Income Attributable to Tetra Tech to EBITDA

(in thousands)  

 

           2021   2022 
   2019   2020   1st Qtr   2nd Qtr   6 mos   3rd Qtr   9 mos   4th Qtr   Total   1st Qtr   2nd Qtr   6 Mos 
Net Income Attributable to Tetra Tech   158,668    173,859    52,436    45,517    97,953    51,903    149,856    82,954    232,810    68,489    53,040    121,529 
Interest Expense1   13,626    13,100    3,026    2,823    5,849    2,737    8,586    3,245    11,831    2,904    3,144    6,048 
Depreciation2    17,285    13,017    2,882    3,073    5,955    3,070    9,026    3,311    12,337    3,433    3,310    6,743 
Amortization2   11,559    11,594    3,356    2,213    5,569    2,216    7,785    3,683    11,468    2,678    3,241    5,919 
Contingent Consideration   3,085    (13,371)   37    (230)   (193)   31    (162)   (3,111)   (3,273)   -    -    - 
Goodwill Impairment   7,755    15,800    -    -    -    -    -    -    -    -    -    - 
Income Tax Expense (Benefit)   16,375    54,101    10,778    12,456    23,234    15,146    38,379    (4,340)   34,039    15,817    18,327    34,144 
                                                             
EBITDA   228,353    268,100    72,515    65,852    138,367    75,103    213,470    85,742    299,212    93,321    81,062    174,383 
                                                             
Acquisition & Integration Expenses   10,351    -    -    -    -    -    -    -    -    -    -    - 
Non-Core Dispositions   10,945    (8,524)   -    -    -    -    -    -    -    -    -    - 
RCM / Non-Cash Claims   19,526    -    -    -    -    -    -    -    -    -    -    - 
COVID-19 Charges (Credits)   -    8,233    -    -    -    -    -         -    (4,451)   -    (4,451)
Adjusted EBITDA   269,175    267,809    72,515    65,852    138,367    75,103    213,470    85,742    299,212    88,870    81,062    169,932 

 

1 Includes amortization of deferred financing fee

2 Varies slightly from the Statements of Cash Flows, which includes amortization of deferred financing fee