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Tetra Tech Reports Third Quarter 2017 Results
  • Record Q3 EPS of $0.52, up 18% Y/Y
  • Record Q3 operating income of $46 million, up 17% Y/Y
  • Record backlog of $2.53 billion, up 12% Y/Y

PASADENA, Calif.--(BUSINESS WIRE)--Aug. 2, 2017-- Tetra Tech, Inc. (NASDAQ: TTEK) today announced results for the third quarter ended July 2, 2017.

Third Quarter Results

Revenue in the third quarter totaled $685 million, up 3% year-over-year. For ongoing1 operations, revenue, net of subcontractor costs (net revenue) 2, was $498 million, consistent with the same period in fiscal 2016. Operating income for the third quarter was $46 million, up 17% year-over-year. On an ongoing basis, operating income totaled $47 million, up 7% year-over-year. Earnings per share (EPS) were $0.52, up 18% year-over-year, and on an ongoing basis totaled $0.53, up 6% over the prior-year quarter. Backlog of $2.53 billion was up 12% year-over-year.

Quarterly Dividend and Share Repurchase Program

On July 31, 2017, Tetra Tech’s Board of Directors declared a quarterly dividend of $0.10 per share payable on September 1, 2017 to stockholders of record as of August 17, 2017. Additionally, the Company has $140 million remaining under the previously approved $200 million share repurchase program. The Company anticipates expending $100 million in share repurchases in fiscal year 2017, of which $60 million was completed in the first nine months.

Comments on Results

Tetra Tech’s Chairman and CEO, Dan Batrack commented, “Tetra Tech generated record-high third quarter earnings, operating income, and backlog. Our U.S. federal and U.S. state and local markets continued to grow at double-digit organic rates in the third quarter, with revenues increasing 10% and 16%, respectively. Conversely, our oil and gas markets, particularly in Canada, have become increasingly challenged. Despite the downturn in this market, our backlog reached a record high of $2.5 billion, up 12% year-over-year, giving us confidence that growth will continue across our other end markets.”

Nine-Month Results

Revenue for the nine-month period was $2.0 billion and net revenue was $1.5 billion. Operating income for the nine-month period was $129 million and EPS was $1.44, up 45% and 62%, respectively, from the prior year period. On an ongoing basis, EPS totaled $1.50, up 16% 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 diluted EPS for the fourth quarter of fiscal 2017 to range from $0.60 to $0.62. Net revenue for the fourth quarter is expected to range from $500 million to $520 million. For fiscal 2017, ongoing diluted EPS is expected to range from $2.10 to $2.12 and net revenue is expected to range from $2.00 billion to $2.02 billion.

Webcast

Investors will have the opportunity to access a live audio-visual webcast and supplemental financial information concerning the third quarter 2017 results through a link posted on the Company’s website at tetratech.com on August 3, 2017 at 8:00 a.m. (PT).

 

Reconciliation of Revenue and Operating Results

   
 
In thousands (except EPS data)
 

  Three Months Ended Nine Months Ended
July 2,     June 26,     % July 2,     June 26,     %
2017 2016 Y/Y 2017 2016 Y/Y
 
Revenue $ 685,539 $ 666,869 3 % $ 2,018,171 $ 1,854,961 9 %
Subcontractor costs   (187,061 )   (168,235 )     (518,188 )   (456,606 )  
Net revenue $ 498,478   $ 498,634   0 % $ 1,499,983   $ 1,398,355   7 %
 
Revenue $ 685,539 $ 666,869 3 % $ 2,018,171 $ 1,854,961 9 %
RCM   (4,192 )   (5,202 )     (12,401 )   (36,781 )  
Ongoing revenue $ 681,347   $ 661,667   3 % $ 2,005,770   $ 1,818,180   10 %
 
 
Net revenue $ 498,478 $ 498,634 0 % $ 1,499,983 $ 1,398,355 7 %
RCM   (902 )   (2,372 )     1,006     (12,537 )  
Ongoing net revenue $ 497,576   $ 496,262   0 % $ 1,500,989   $ 1,385,818   8 %
 
 
Operating income $ 45,884 $ 39,085 17 % $ 128,695 $ 88,667 45 %
Earn-out (gain) expense (7,149 ) 2,823
RCM 1,251 4,023 12,759 9,691
Acq. & integration       1,005           16,916    
Ongoing operating income $ 47,135   $ 44,113   7 % $ 134,305   $ 118,097   14 %
 
 
EPS $ 0.52 $ 0.44 18 % $ 1.44 $ 0.89 62 %
Earn-out (gain) expense (0.08 ) 0.03
RCM 0.01 0.05 0.14 0.10
Acq. & integration 0.01 0.27
Coffey debt prepayment 0.03
Retroactive R&D tax                 (0.03 )  
Ongoing EPS $ 0.53   $ 0.50   6 % $ 1.50   $ 1.29   16 %
 

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 16,000 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.

Forward-Looking Statements

This news release contains forward-looking statements that are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include information concerning future events and the future financial performance of Tetra Tech that involve risks and uncertainties. Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual future events or results. Readers are urged to read the documents filed by Tetra Tech with the SEC, specifically the most recent reports on Form 10-K, 10-Q, and 8-K, each as it may be amended from time to time, which identify risk factors that could cause actual results to differ materially from the forward-looking statements. Among the important factors or risks that could cause actual results or events to differ materially from those in the forward-looking statements in this release are: continuing worldwide political and economic uncertainties; the new U.S. Administration’s potential changes to fiscal and tax 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; and the ability to impede a business combination based on Delaware law and charter documents. Any projections in this release are based on limited information currently available to Tetra Tech, which is subject to change. Although any such projections and the factors influencing them will likely change, Tetra Tech will not necessarily update the information, since Tetra Tech will only provide guidance at certain points during the year. Readers should not place undue reliance on forward-looking statements since such information speaks only as of the date of this release.

1 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.

Source: Tetra Tech, Inc.

Tetra Tech, Inc.
Jim Wu, Investor Relations
Charlie MacPherson, Media & Public Relations
(626) 470-2844