Exhibit 99.1
 |
NEWS RELEASE January 31, 2024 |
Tetra Tech Reports Strong First Quarter Results and
Raises Full Fiscal Year Guidance
| · | Revenue $1.23 billion, up 37% Y/Y | |
| · | Net revenue $1.02 billion, up 38% Y/Y | |
| · | EBITDA $131 million, up 32% Y/Y | |
| · | Backlog of $4.74 billion, up 24% Y/Y | |
| · | Increasing Fiscal Year 2024 net revenue and EPS full year guidance |
Pasadena, California. Tetra Tech, Inc. (NASDAQ: TTEK), today announced results for the first quarter ended December 31, 2023.
As the pure play global leader in water and environmental consulting and engineering, Tetra Tech produces higher margins, organic growth rates and cash flows than the industry. For fiscal 2024, Tetra Tech is raising guidance for increased EPS growth of 20% with a 20% IFRS EBITDA1 margin.
In the past 90 days, the Company was awarded more than 1,000 individual high-end consulting projects addressing the entire water cycle. During the first quarter of fiscal 2024, Tetra Tech announced the award of a $5 billion water framework contract for the Republic of Ireland; an $800 million U.S. Army Corps of Engineers PFAS remediation contract; and a $450 million Great Lakes environmental restoration contract.
First Quarter Highlights
| · | Revenue increased 37% to $1.23 billion with double-digit organic growth |
| · | EBITDA increased 32% to $131 million; on pace to reach $575 million in FY24, doubling in the past 3 years |
| · | Record first quarter EPS of $1.40 |
| · | Largest first quarter backlog ever, up 24% year-over-year |
| · | Industry leading DSO of 55 days |
| · | RPS Group integration exceeding expectations: |
| – | RPS EBITDA margin exceeded 10%, up more than 600 basis points in less than one year |
| – | RPS revenue synergies with more than $100 million in new contracts won |
1Non-GAAP financial measures which the Company believes provide valuable perspectives on its business results. Refer to tables in the Regulation G Information for reconciliations to the comparable GAAP metrics.
Executive Management Comments
Dan Batrack, Chairman and CEO, commented, “Tetra Tech began fiscal 2024 with a strong first quarter as revenue was up in all of our key end markets, building on our record performance of the prior year. Based on the strength of our end markets, our strong results in the first quarter, and the increasing realization of revenue synergies with RPS, we have raised our full year guidance for both net revenue and EPS, with a forecasted 20% growth in EPS for fiscal 2024.”
Steve Burdick, Chief Financial Officer, said, “In addition to our record first quarter revenue and earnings, we continue to generate strong positive operating cash flow with $353 million over the trailing twelve months, which is 152% of net income for the same period. This annual cash generation continues our track record of cash flow exceeding net income every year for the last two decades.”
Jill Hudkins, President, stated, “These results demonstrate the value of Tetra Tech’s pure play focus on the water cycle that continues to drive increasing demand for our high-end services. Tetra Tech’s key differentiator is our Leading with Science® approach to the water cycle; from client-funded research and development, watershed management, water supply and treatment, to flood protection and marine navigation.”
Leslie Shoemaker, PhD., Chief Sustainability Officer, added, “Tetra Tech is changing lives through science, technology, and innovation. Our goal is to improve the lives of one billion people around the world by 2030, providing sustainable solutions across our water and environment markets by optimizing water management, preserving biodiversity, and mitigating climate change.”
Recent Key Wins
| · | $5 billion Republic of Ireland water framework contract, improving water quality and enhancing watershed protection for 4 million people |
| · | $800 million U.S. Army Corps of Engineers PFAS remediation contract, preventing future environmental contamination and protecting lives at more than 500 military bases |
| · | $450 million Great Lakes environmental restoration contract, providing environmental restoration of the world’s largest freshwater watershed and improving the lives of 34 million people |
| · | $125 million United Utilities Better Rivers AMP 8 program, reducing wastewater overflows and enhancing watershed quality for 7 million people in North West England |
| · | $34 million USAID Land and Resource Governance contract, protecting land, water, and resources for more than 100 million vulnerable households in developing countries |
| · | $24 Million USAID Biodiversity and Ecosystem Conservation contract, preserving ecosystems and enhancing community livelihoods for 16 million people in Cambodia |
Quarterly Dividend and Share Repurchase Program
On January 29, 2024, Tetra Tech’s Board of Directors approved the Company’s 39th consecutive quarterly dividend at an amount of $0.26 per share, a 13% increase year-over-year, payable on February 27, 2024, to stockholders of record as of February 14, 2024. Tetra Tech has $348 million remaining under its $400 million share repurchase program.
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 second quarter of fiscal 2024 to range from $1.25 to $1.35 and net revenue to range from $990 million to $1.04 billion. For fiscal 2024, Tetra Tech is raising EPS guidance to range from $5.90 to $6.20 and is raising net revenue guidance to range from $4.15 billion to $4.30 billion2.
Webcast
Investors will have the opportunity to access a live audio-visual webcast and supplemental financial information concerning the first quarter of fiscal 2024 results through a link posted on the Company’s website at tetratech.com on February 1, 2024, at 8:00 a.m. (PT).
About Tetra Tech
Tetra Tech is the leader in water, environment and sustainable infrastructure, providing high-end consulting and engineering services for projects worldwide. With 27,000 employees working together, Tetra Tech provides clear solutions to complex problems by Leading with Science® to address the entire water cycle, protect and restore the environment, design sustainable and resilient infrastructure, and support the clean energy transition. For more information about Tetra Tech, please visit tetratech.com or follow us on LinkedIn and Facebook.
CONTACTS:
Jim Wu, Investor Relations
Charlie MacPherson, Media & Public Relations
(626) 470-2844
2Reconciliation 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.
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; the impact of global pandemics like COVID-19; 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 bank and 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 1, 2023. 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.
| Tetra Tech, Inc | ||||||||
| Balance Sheet - Unaudited | ||||||||
| (unaudited - in thousands, except par value) | ||||||||
| December 31, | October 1, | |||||||
| 2023 | 2023 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | 198,689 | 168,831 | ||||||
| Accounts receivable, net | 1,040,510 | 974,535 | ||||||
| Contract assets | 89,073 | 113,939 | ||||||
| Prepaid expenses and other current assets | 125,769 | 98,719 | ||||||
| Total current assets | 1,454,041 | 1,356,024 | ||||||
| Property and equipment, net | 74,971 | 74,832 | ||||||
| Right-of-use assets, operating leases | 179,513 | 175,932 | ||||||
| Goodwill | 1,923,146 | 1,880,244 | ||||||
| Intangible assets, net | 168,134 | 173,936 | ||||||
| Deferred tax assets | 76,210 | 89,002 | ||||||
| Other non-current assets | 74,808 | 70,507 | ||||||
| Total assets | 3,950,823 | 3,820,477 | ||||||
| Liabilities and Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | 207,062 | 173,271 | ||||||
| Accrued compensation | 222,686 | 302,755 | ||||||
| Contract liabilities | 382,862 | 335,044 | ||||||
| Short-term lease liabilities, operating leases | 68,091 | 65,005 | ||||||
| Current contingent earn-out liabilities | 37,556 | 51,108 | ||||||
| Other current liabilities | 242,738 | 280,959 | ||||||
| Total current liabilities | 1,160,995 | 1,208,142 | ||||||
| Deferred tax liabilities | 11,620 | 14,256 | ||||||
| Long-term lease liabilities, operating leases | 139,537 | 144,685 | ||||||
| Long-term debt | 945,319 | 879,529 | ||||||
| Non-current contingent earn-out liabilities | 18,048 | 22,314 | ||||||
| Other non-current liabilities | 137,617 | 148,045 | ||||||
| Equity: | ||||||||
| Preferred stock - authorized, 2,000 shares of $0.01 par value; no shares issued and outstanding at December 31, 2023 and October 1, 2023 | - | - | ||||||
| Common stock - authorized, 150,000 shares of $0.01 par value; issued and outstanding, 53,466 and 53,248 shares at December 31, 2023 and October 1, 2023, respectively | 534 | 532 | ||||||
| Additional paid-in capital | 9,979 | - | ||||||
| Accumulated other comprehensive loss | (132,202 | ) | (195,295 | ) | ||||
| Retained earnings | 1,659,295 | 1,598,196 | ||||||
| Tetra Tech stockholders' equity | 1,537,606 | 1,403,433 | ||||||
| Noncontrolling interests | 81 | 73 | ||||||
| Total stockholders' equity | 1,537,687 | 1,403,506 | ||||||
| Total liabilities and stockholders' equity | 3,950,823 | 3,820,477 | ||||||
| Tetra Tech, Inc | ||||||||
| Consolidated Statements of Income | ||||||||
| (unaudited - in thousands, except per share data) | ||||||||
| Three Months Ended | ||||||||
| December 31, | January 1, | |||||||
| 2023 | 2023 | |||||||
| Revenue | 1,228,267 | 894,766 | ||||||
| Subcontractor costs | (213,098 | ) | (158,204 | ) | ||||
| Other costs of revenue | (824,671 | ) | (583,316 | ) | ||||
| Gross profit | 190,498 | 153,246 | ||||||
| Selling, general and administrative expenses | (79,417 | ) | (56,502 | ) | ||||
| Contingent consideration - fair value adjustments | - | (933 | ) | |||||
| Acquisition and Integration | - | (3,761 | ) | |||||
| Income from operations | 111,081 | 92,050 | ||||||
| Interest expense, net | (9,577 | ) | (5,372 | ) | ||||
| Other non-operating income | - | 67,995 | ||||||
| Income before income tax expense | 101,504 | 154,673 | ||||||
| Income tax expense | (26,524 | ) | (37,958 | ) | ||||
| Net income | 74,980 | 116,715 | ||||||
| Net income attributable to noncontrolling interests | (8 | ) | (9 | ) | ||||
| Net income attributable to Tetra Tech | 74,972 | 116,706 | ||||||
| Earnings per share attributable to Tetra Tech: | ||||||||
| Basic | 1.41 | 2.20 | ||||||
| Diluted | 1.40 | 2.18 | ||||||
| Weighted-average common shares outstanding: | ||||||||
| Basic | 53,317 | 53,069 | ||||||
| Diluted | 53,738 | 53,529 | ||||||
| Tetra Tech, Inc. | ||||||||
| Consolidated Statements of Cash Flows | ||||||||
| (unaudited, in thousands) | ||||||||
| Three Months Ended | ||||||||
| December 31, | January 1, | |||||||
| 2023 | 2023 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 74,980 | $ | 116,715 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 19,484 | 6,616 | ||||||
| Amortization of stock-based awards | 7,641 | 7,184 | ||||||
| Deferred income taxes | (1,624 | ) | 15,935 | |||||
| Fair value adjustments to foreign currency forward contract | - | (67,995 | ) | |||||
| Other non-cash items | 123 | 601 | ||||||
| Changes in operating assets and liabilities, net of effects of business acquisitions: | - | |||||||
| Accounts receivable and contract assets | (22,288 | ) | (16,175 | ) | ||||
| Prepaid expenses and other assets | (28,615 | ) | 5,967 | |||||
| Accounts payable | 33,790 | 3,820 | ||||||
| Accrued compensation | (80,069 | ) | (53,201 | ) | ||||
| Contract liabilities | 41,862 | 27,769 | ||||||
| Income taxes receivable/payable | (15,941 | ) | 4,387 | |||||
| Other liabilities | (20,097 | ) | (26,432 | ) | ||||
| Net cash provided by operating activities | 9,246 | 25,191 | ||||||
| Cash flows from investing activities: | ||||||||
| Capital expenditures | (3,456 | ) | (4,996 | ) | ||||
| Proceeds from sale of assets | 22 | 51 | ||||||
| Net cash used in investing activities | (3,434 | ) | (4,945 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from borrowings | 125,000 | 60,889 | ||||||
| Repayments on long-term debt | (60,000 | ) | (73,125 | ) | ||||
| Taxes paid on vested restricted stock | (12,670 | ) | (16,586 | ) | ||||
| Payments of contingent earn-out liabilities | (18,862 | ) | - | |||||
| Stock options exercised | 335 | 57 | ||||||
| Dividends paid | (13,873 | ) | (12,186 | ) | ||||
| Principal payments on finance leases | (1,539 | ) | (1,316 | ) | ||||
| Net cash provided by (used in) financing activities | 18,391 | (42,267 | ) | |||||
| Effect of exchange rate changes on cash and cash equivalents | 5,655 | 8,695 | ||||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | 29,858 | (13,326 | ) | |||||
| Cash, cash equivalents and restricted cash at beginning of period | 168,831 | 185,491 | ||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 198,689 | $ | 172,165 | ||||
| Supplemental information: | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | 9,768 | $ | 3,433 | ||||
| Income taxes, net of refunds received of $0.9 million and $0.1 million | $ | 43,297 | $ | 14,540 | ||||
| Reconciliation of cash, cash equivalents and restricted cash: | ||||||||
| Cash and cash equivalents | $ | 198,689 | $ | 164,397 | ||||
| Restricted cash included in other current assets | - | 7,768 | ||||||
| Total cash, cash equivalents and restricted cash | $ | 198,689 | $ | 172,165 | ||||
Tetra Tech, Inc.
Regulation G Information
December 31, 2023
Reconciliation of Revenue to Revenue, Net of Subcontractor Costs ("Net Revenue")
(in millions)
| 2023 | 2024 | |||||||||||||||||||||||||||||||||||||||
| 2021 | 2022 | 1st Qtr | 2nd Qtr | 6 Mos | 3rd Qtr | 9 Mos | 4th Qtr | Total | 1st Qtr | |||||||||||||||||||||||||||||||
| Consolidated | ||||||||||||||||||||||||||||||||||||||||
| Revenue | 3,213.5 | 3,504.0 | 894.8 | 1,158.2 | 2,053.0 | 1,208.9 | 3,261.9 | 1,260.6 | 4,522.6 | 1,228.3 | ||||||||||||||||||||||||||||||
| Subcontractor Costs | (661.3 | ) | (668.5 | ) | (158.2 | ) | (188.7 | ) | (346.9 | ) | (221.4 | ) | (568.3 | ) | (203.2 | ) | (771.5 | ) | (213.1 | ) | ||||||||||||||||||||
| Net Revenue | 2,551.6 | 2,835.5 | 736.6 | 969.5 | 1,706.1 | 987.5 | 2,693.6 | 1,057.4 | 3,751.1 | 1,015.2 | ||||||||||||||||||||||||||||||
| GSG Segment | ||||||||||||||||||||||||||||||||||||||||
| Revenue | 1,772.9 | 1,820.9 | 471.1 | 563.3 | 1,034.3 | 531.0 | 1,565.4 | 593.5 | 2,158.9 | 575.0 | ||||||||||||||||||||||||||||||
| Subcontractor Costs | (507.1 | ) | (484.4 | ) | (118.0 | ) | (127.7 | ) | (245.7 | ) | (140.8 | ) | (386.6 | ) | (136.9 | ) | (523.4 | ) | (132.3 | ) | ||||||||||||||||||||
| Net Revenue | 1,265.8 | 1,336.5 | 353.1 | 435.6 | 788.6 | 390.2 | 1,178.8 | 456.6 | 1,635.5 | 442.7 | ||||||||||||||||||||||||||||||
| CIG Segment | ||||||||||||||||||||||||||||||||||||||||
| Revenue | 1,500.1 | 1,738.4 | 439.6 | 610.4 | 1,049.9 | 691.4 | 1,741.3 | 683.3 | 2,424.6 | 669.1 | ||||||||||||||||||||||||||||||
| Subcontractor Costs | (214.3 | ) | (239.3 | ) | (56.0 | ) | (76.4 | ) | (132.4 | ) | (94.0 | ) | (226.4 | ) | (82.6 | ) | (309.0 | ) | (96.6 | ) | ||||||||||||||||||||
| Net Revenue | 1,285.8 | 1,499.1 | 383.6 | 534.0 | 917.5 | 597.4 | 1,514.9 | 600.7 | 2,115.6 | 572.5 | ||||||||||||||||||||||||||||||
Reconciliation of Net Income Attributable to Tetra Tech to Adjusted EBITDA
(in thousands)
| 2023 | 2024 | |||||||||||||||||||||||||||||||||||||||
| 2021 | 2022 | 1st Qtr | 2nd Qtr | 6 Mos | 3rd Qtr | 9 Mos | 4th Qtr | Total | 1st Qtr | |||||||||||||||||||||||||||||||
| Net Income Attributable to Tetra Tech | 232,810 | 263,125 | 116,706 | 42,830 | 159,536 | 60,235 | 219,771 | 53,649 | 273,420 | 74,972 | ||||||||||||||||||||||||||||||
| Income Tax Expense | 34,039 | 85,602 | 37,958 | 26,254 | 64,212 | 22,568 | 86,780 | 40,745 | 127,526 | 26,524 | ||||||||||||||||||||||||||||||
| Interest Expense1 | 11,831 | 11,584 | 5,372 | 13,323 | 18,695 | 14,869 | 33,564 | 12,973 | 46,537 | 9,577 | ||||||||||||||||||||||||||||||
| Depreciation | 12,337 | 13,859 | 3,178 | 4,849 | 8,027 | 5,624 | 13,651 | 6,330 | 19,980 | 6,951 | ||||||||||||||||||||||||||||||
| Amortization | 11,468 | 13,174 | 3,438 | 12,072 | 15,510 | 14,060 | 29,570 | 11,656 | 41,226 | 12,533 | ||||||||||||||||||||||||||||||
| FX Hedge Gain | - | (19,904 | ) | (67,995 | ) | (21,407 | ) | (89,402 | ) | - | (89,402 | ) | - | (89,402 | ) | - | ||||||||||||||||||||||||
| EBITDA | 302,485 | 367,440 | 98,657 | 77,921 | 176,578 | 117,356 | 293,934 | 125,353 | 419,287 | 130,557 | ||||||||||||||||||||||||||||||
| Contingent Consideration | (3,273 | ) | - | 933 | 7,544 | 8,477 | - | 8,477 | 3,778 | 12,255 | - | |||||||||||||||||||||||||||||
| Acquisition & Integration Expenses2 | - | - | 3,761 | 19,944 | 23,705 | 2,107 | 25,812 | 23,742 | 49,554 | - | ||||||||||||||||||||||||||||||
| COVID-19 Credits | - | (6,486 | ) | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||
| Adjusted EBITDA | 299,212 | 360,954 | 103,351 | 105,409 | 208,760 | 119,463 | 328,223 | 152,873 | 481,096 | 130,557 | ||||||||||||||||||||||||||||||
1 Includes write-off of deferred debt origination fees of $2.7M in Q1-23 and $1.1M in Q2-23
2 Includes lease impairment charge of $16.4M in Q4-23