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Form 8-K TETRA TECH INC For: Apr 28

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April 28, 2021 5:03 PM EDT

 

EXHIBIT 99.1

 

  NEWS RELEASE
April 28, 2021

 

Tetra Tech Reports Strong Second Quarter 2021 Results

 

  · Revenue $755 million and Net Revenue $600 million
  ·  Operating Margin up 114 basis points Y/Y
  ·  EPS $0.83, up 26% Y/Y
  · 

Cash from Operations increased to $124 million, up 23% Y/Y

  ·  Increased quarterly dividend by 18% to $0.20

 

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 March 28, 2021.

 

Second Quarter Results

 

Revenue in the second quarter totaled $755 million and revenue, net of subcontractor costs (net revenue)1, was $600 million. Operating income was $61 million, up 28% year-over-year, driven by a 114 basis point increase in operating margin. Earnings per share (“EPS”) was $0.83, up 26% year-over-year. Cash generated from operations was a record $124 million, up 23% year-over-year. Backlog at the end of the quarter was $3.15 billion, up 5% year-over-year.

 

Quarterly Dividend and Share Repurchase Program

 

On April 26, 2021, Tetra Tech’s Board of Directors declared a $0.20 per share quarterly dividend, an 18% increase over the prior year, payable on May 28, 2021 to stockholders of record as of May 12, 2021; the seventh consecutive double-digit annual increase. In the second quarter, Tetra Tech repurchased $15 million of common stock. Additionally, as of March 28, 2021, the Company had $178 million remaining under the approved share repurchase program.

 

Chairman and CEO Comments

 

Tetra Tech’s Chairman and CEO, Dan Batrack, commented, “Tetra Tech continued to build on its strong start to fiscal year 2021, generating record second quarter revenue and operating income on higher margins in both our government and commercial businesses. We achieved year-over-year double digit revenue growth for our U.S. state & local and U.S. federal water and environmental services by leveraging our Tetra Tech Delta suite of advanced data analytics and digital water technologies. We continued to invest in these strategic growth areas by adding Coanda Research & Development and IBRA-RMAC, leaders in computational fluid dynamics and digital water transformation. Given our results to date and outlook, we are increasing guidance for both net revenue and EPS for fiscal 2021.”

 

 

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

 

 

 

 

Six-Month Results

 

Revenue for the six-month period was $1.52 billion and net revenue was $1.20 billion. Operating income was $127 million, up 15% compared to the same period in fiscal 2020, and EPS increased 19% to $1.79. Cash flow from operations was $157 million, up 89% 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 2021 to range from $0.85 to $0.90 and net revenue to range from $600 million to $650 million. For fiscal 2021, Tetra Tech is increasing its guidance outlook and now expects EPS to range from $3.60 to $3.70 and net revenue to range from $2.45 billion to $2.55 billion.2

 

Webcast

 

Investors will have the opportunity to access a live audio-visual webcast and supplemental financial information concerning the second quarter fiscal 2021 results through a link posted on the Company’s website at tetratech.com on April 29, 2021 at 8:00 a.m. (PT).

 

Reconciliation of GAAP and Non-GAAP Item

In thousands

 

   Three Months Ended   Six Months Ended 
   March 28,
2021		   March 29,
2020		   March 28,
2021		   March 29,
2020		 
Revenue  $754,764   $734,133   $1,519,868   $1,531,756 
Subcontractor Costs   (154,939)   (149,673)   (314,873)   (333,274)
Net Revenue  $599,825   $584,460   $1,204,995   $1,198,482 

 

 

 

2 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 

 

 

About Tetra Tech

 

Tetra Tech is a leading provider of high-end consulting and engineering services for projects worldwide. With 20,000 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

 

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 September 27, 2020, and Tetra Tech’s Quarterly Reports on Form 10-Q for fiscal year 2021, 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.

 

3 

 

 

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)

 

   March 28,
2021		   September 27,
2020		 
Assets          
Current assets:          
Cash and cash equivalents  $225,330   $157,515 
Accounts receivable, net   629,186    649,035 
Contract assets   95,079    92,632 
Prepaid expenses and other current assets   87,400    81,094 
Income taxes receivable   27,116    19,509 
Total current assets   1,064,111    999,785 
           
Property and equipment, net   37,423    35,507 
Right-of-use assets, operating leases   222,922    239,396 
Investments in unconsolidated joint ventures   7,700    7,332 
Goodwill   1,029,573    993,498 
Intangible assets, net   8,923    13,943 
Deferred tax assets   34,740    32,052 
Other long-term assets   49,670    57,045 
Total assets  $2,455,062   $2,378,558 
           
Liabilities and Equity          
Current liabilities:          
Accounts payable  $124,260   $111,804 
Accrued compensation   179,025    199,801 
Contract liabilities   185,602    171,905 
Short-term lease liabilities, operating leases   68,941    69,650 
Current portion of long-term debt and other short-term borrowings   28,885    49,264 
Current contingent earn-out liabilities   17,492    16,142 
Other current liabilities   192,446    174,890 
Total current liabilities   796,651    793,456 
           
Deferred tax liabilities   18,152    16,316 
Long-term debt   238,339    242,395 
Long-term lease liabilities, operating leases   179,645    191,955 
Long-term contingent earn-out liabilities   11,166    16,475 
Other long-term liabilities   63,830    80,588 
           
Equity:          
Preferred stock - authorized, 2,000 shares of $0.01 par value; no shares issued and outstanding at March 28, 2021 and September 27, 2020   -    - 
Common stock - authorized, 150,000 shares of $0.01 par value; issued and outstanding, 54,158 and 53,797 shares at March 28, 2021 and September 27, 2020, respectively   542    538 
Accumulated other comprehensive loss   (115,056)   (161,786)
Retained earnings   1,261,712    1,198,567 
Tetra Tech stockholders' equity   1,147,198    1,037,319 
Noncontrolling interests   81    54 
Total stockholders' equity   1,147,279    1,037,373 
Total liabilities and stockholders' equity  $2,455,062   $2,378,558 

 

5 

 

 

Tetra Tech, Inc.

Consolidated Statements of Income

(unaudited - in thousands, except per share data)

 

   Three Months Ended   Six Months Ended 
   March 28,   March 29,   March 28,   March 29, 
   2021   2020   2021   2020 
Revenue  $754,764   $734,133   $1,519,868   $1,531,756 
Subcontractor costs   (154,939)   (149,673)   (314,873)   (333,274)
Other costs of revenue   (487,341)   (487,460)   (976,201)   (991,745)
Gross profit   112,484    97,000    228,794    206,737 
Selling, general and administrative expenses   (51,907)   (51,041)   (101,928)   (97,476)
Contingent consideration - fair value adjustments   230    1,571    193    1,571 
Income from operations   60,807    47,530    127,059    110,832 
Interest expense   (2,823)   (3,501)   (5,849)   (6,849)
Income before income tax expense   57,984    44,029    121,210    103,983 
Income tax expense   (12,456)   (7,616)   (23,234)   (20,253)
Net income   45,528    36,413    97,976    83,730 
Net income attributable to noncontrolling interests   (11)   (16)   (23)   (23)
Net income attributable to Tetra Tech  $45,517   $36,397    97,953   $83,707 
                     
Earnings per share attributable to Tetra Tech:                    
Basic  $0.84   $0.67   $1.81   $1.53 
Diluted  $0.83   $0.66   $1.79   $1.51 
                     
Weighted-average common shares outstanding:                    
Basic   54,187    54,699    54,085    54,541 
Diluted   54,736    55,463    54,715    55,380 

 

6 

 

 

Tetra Tech, Inc.

Consolidated Statements of Cash Flows

(unaudited - in thousands)

 

   Six Months Ended 
   March 28,   March 29, 
   2021   2020 
Cash flows from operating activities:          
Net income  $97,976   $83,730 
           
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation and amortization   11,524    12,809 
Equity in income of unconsolidated joint ventures   (1,872)   (3,333)
Distributions of earnings from unconsolidated joint ventures   1,622    2,467 
Amortization of stock-based awards   10,566    9,437 
Deferred income taxes   350    3,153 
Provision for losses from uncollectible receivables   (1,538)   539 
Fair value adjustments to contingent consideration   (193)   (1,571)
Gain on sale of property and equipment   (66)   (3,523)
           
Changes in operating assets and liabilities, net of effects of business acquisitions:          
Accounts receivable and contract assets   35,415    104,388 
Prepaid expenses and other assets   18,091    5,317 
Accounts payable   12,063    (89,630)
Accrued compensation   (20,524)   (44,690)
Contract liabilities   9,957    24,130 
Other liabilities   (5,528)   (14,129)
Income taxes receivable/payable   (10,419)   (5,895)
Net cash provided by operating activities   157,424    83,199 
           
Cash flows from investing activities:          
Payments for business acquisitions, net of cash acquired   (3,065)   (27,739)
Capital expenditures   (4,297)   (5,876)
Proceeds from sale of property and equipment   79    6,316 
Net cash used in investing activities   (7,283)   (27,299)
           
Cash flows from financing activities:          
Proceeds from borrowings   141,628    243,364 
Repayments on long-term debt   (146,250)   (174,730)
Repurchases of common stock   (30,000)   (81,660)
Taxes paid on vested restricted stock   (17,488)   (10,857)
Stock options exercised   9,771    7,927 
Bank overdrafts   (21,121)   2,737 
Dividends paid   (18,410)   (16,414)
Payments of contingent earn-out liabilities   (8,037)   (9,624)
Principal payments on finance leases   (1,222)   - 
Net cash used in financing activities   (91,129)   (39,257)
           
Effect of exchange rate changes on cash, cash equivalents and restricted cash   8,803    (2,409)
           
Net increase in cash, cash equivalents and restricted cash   67,815    14,234 
Cash, cash equivalents and restricted cash at beginning of period   157,515    120,901 
Cash, cash equivalents and restricted cash at end of period  $225,330   $135,135 
           
Supplemental Information:          
Cash paid during the period for:          
Interest  $5,412   $6,510 
Income taxes, net of refunds received of $1.1 million and $0.5 million  $30,832   $23,437 
           
Reconciliation of cash, cash equivalents and restricted cash:          
Cash and cash equivalents  $225,330   $134,981 
Restricted cash   -    154 
Total cash, cash equivalents and restricted cash  $225,330   $135,135 

 

7 

 

 

Tetra Tech, Inc.

Regulation G Information

March 28, 2021

 

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

(in millions)

 

           2020   2021 
   2018   2019   1st Qtr   2nd Qtr   6 mos   3rd Qtr   9 mos   4th Qtr   Total   1st Qtr   2nd Qtr   6 mos 
Consolidated                                                            
Revenue (As Reported)   2,964.1    3,107.3    797.6    734.1    1,531.7    709.8    2,241.5    753.4    2,994.9    765.1    754.8    1,519.9 
RCM / Non-Cash Claims   (3.6)   15.2    (0.1)   -    (0.1)   (0.1)   (0.2)   -    (0.2)   -    (0.5)   (0.5)
Adjusted Revenue   2,960.5    3,122.5    797.5    734.1    1,531.6    709.7    2,241.3    753.4    2,994.7    765.1    754.3    1,519.4 
Adjusted Subcontractor Costs   (751.8)   (716.4)   (183.5)   (149.6)   (333.1)   (149.4)   (482.7)   (163.6)   (646.1)   (159.9)   (155.0)   (314.9)
Adjusted Net Revenue   2,208.7    2,406.1    614.0    584.5    1,198.5    560.3    1,758.6    589.8    2,348.6    605.2    599.3    1,204.5 
                                                             
GSG Segment                                                            
Revenue   1,694.9    1,820.7    457.4    436.9    894.3    432.2    1,326.5    452.4    1,778.9    468.7    473.8    942.5 
Subcontractor Costs   (482.6)   (491.4)   (127.7)   (115.9)   (243.6)   (112.9)   (356.5)   (122.3)   (478.8)   (123.8)   (126.7)   (250.5)
Adjusted Net Revenue   1,212.3    1,329.3    329.7    321.0    650.7    319.3    970.0    330.1    1,300.1    344.9    347.1    692.0 
                                                             
CIG Segment                                                            
Revenue   1,323.1    1,342.5    351.2    308.4    659.6    291.0    950.6    315.5    1,266.1    311.1    293.1    604.2 
Non-Cash Claims   10.6    13.7    -    -    -    -    -    -    -    -    -    - 
Adjusted Revenue   1,333.7    1,356.2    351.2    308.4    659.6    291.0    950.6    315.5    1,266.1    311.1    293.1    604.2 
Subcontractor Costs   (337.4)   (279.5)   (66.9)   (44.9)   (111.8)   (50.0)   (161.8)   (55.7)   (217.5)   (50.8)   (40.9)   (91.7)
Adjusted Net Revenue   996.3    1,076.7    284.3    263.5    547.8    241.0    788.8    259.8    1,048.6    260.3    252.2    512.5 
                                                             
RCM Segment                                                            
Revenue   14.2    (1.5)   0.1    -    0.1    0.1    0.2    -    0.2    -    0.5    0.5 
Subcontractor Costs   (11.6)   (1.3)   (0.1)   -    (0.1)   (0.1)   (0.2)   -    (0.2)   -    0.1    0.1 
Net Revenue   2.6    (2.8)   -    -    -    -    -    -    -    -    0.6    0.6 

 

Reconciliation of Net Income Attributable to Tetra Tech to EBITDA

(in thousands)                        

 

           2020   2021 
   2018   2019   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   136,883    158,668    47,310    36,398    83,708    45,497    129,205    44,654    173,859    52,436    45,517    97,953 
Interest Expense1   15,524    13,626    3,348    3,500    6,848    3,564    10,412    2,688    13,100    3,026    2,823    5,849 
Depreciation2    19,592    17,285    3,293    3,133    6,426    3,686    10,112    2,905    13,017    2,882    3,073    5,955 
Amortization2   18,249    11,559    2,942    3,442    6,384    2,570    8,954    2,640    11,594    3,356    2,213    5,569 
Contingent Consideration   5,753    3,085    -    (971)   (971)   550    (421)   (12,950)   (13,371)   -    -    - 
Goodwill Impairment   -    7,755    -    -    -    -    -    15,800    15,800    -    -    - 
Income Tax Expense   37,605    16,375    12,637    7,615    20,252    14,458    34,710    19,391    54,101    10,778    12,456    23,234 
EBITDA   233,606    228,353    69,530    53,117    122,647    70,325    192,972    75,128    268,100    72,478    66,082    138,560 
Acquisition & Integration Expenses   -    10,351    -    -    -    -    -    -    -    -    -    - 
Non-Core Dispositions   3,434    10,945    (800)   (2,184)   (2,984)   (4,493)   (7,477)   (1,047)   (8,524)   -    -    - 
RCM / Non-Cash Claims   16,836    19,526    -    -    -    -    -    -    -    -    -    - 
COVID-19   -    -    -    8,233    8,233    -    8,233         8,233    -    -    - 
Adjusted EBITDA   253,876    269,175    68,730    59,166    127,896    65,832    193,728    74,081    267,809    72,478    66,082    138,560 

 

1 Includes amortization of deferred financing fee

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

 

 

8 

 

 


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