Tetra Tech Reports Third Quarter 2016 Results

  • Revenue of $667 million, up 16% year over year
  • Record backlog of $2.3 billion, up 21% year over year
  • EPS $0.44; ongoing EPS $0.50, up 16% year over year

PASADENA, Calif.--()--Tetra Tech, Inc. (NASDAQ: TTEK) today announced results for the fiscal 2016 third quarter ended June 26, 2016.

Revenue in the third quarter totaled $667 million. For ongoing operations1, revenue totaled $662 million, and revenue, net of subcontractor costs2 (net revenue), was $496 million, up 19% and 20%, respectively, compared to the same period in fiscal 2015. Operating income for the third quarter was $39 million, and on an ongoing basis totaled $44 million, up 8% compared to the previous year. Earnings per share (EPS) were $0.44, and on an ongoing basis totaled $0.50, up 16% year over year. Backlog of $2.3 billion was up 21% year over year.

Quarterly Dividend and Share Repurchase Program

On July 25, 2016, Tetra Tech’s Board of Directors declared a quarterly dividend of $0.09 per share payable on August 31, 2016 to stockholders of record as of August 12, 2016. Additionally, the Company has $25 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 generated strong results for the third quarter 2016, with ongoing revenue up 19%. Our organic growth for the quarter was driven by U.S. federal government and state and local projects. We also achieved significant growth in EPS, which totaled $0.50 for ongoing operations, up 16%. The integration of Coffey continues to progress well, and, since the acquisition, Coffey’s margin has doubled from 4% to 8%. In addition, during the third quarter, we won a number of key programs, including single-award contracts from USAID and DoD that increased our backlog to a record high of $2.3 billion.”

Nine-Month Results

Revenue for the nine-month period was $1.9 billion and net revenue was $1.4 billion. Operating income for the nine-month period was $89 million and EPS was $0.89. On an ongoing basis1, operating income totaled $118 million and EPS was $1.29.

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 2016 to be in the range of $0.55 to $0.603. Net revenue for the fourth quarter is expected to range from $500 million to $550 million. For the fiscal year 2016, ongoing diluted EPS is expected to range from $1.85 to $1.903, and net revenue is expected to range from $1.9 billion to $2.0 billion.

Webcast

Investors will have the opportunity to access a live audio-visual webcast and supplemental financial information concerning the third quarter results through a link posted on the Company’s website at tetratech.com on July 28, 2016 at 8:00 a.m. (PT).

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1 Refer to the Reconciliation of GAAP to Ongoing Operations table.
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.
3 EPS excludes FY 2016 acquisition and integration expenses (including debt prepayment) of $20 million pre-tax ($18 million after-tax) and RCM results.
 

Reconciliation of GAAP to Ongoing Operations

In thousands (except EPS data)
 
 

Three Months Ended

Nine Months Ended

June 26,   June 28,   % June 26,   June 28,   %
  2016     2015   Y/Y   2016     2015   Y/Y
 
Revenue $ 666,869 $ 575,108 16 % $ 1,854,961 $ 1,720,927 8 %
RCM   (5,202 )   (16,466 )     (36,781 )   (69,046 )  
Ongoing revenue $ 661,667 $ 558,642 18 % $ 1,818,180 $ 1,651,881 10 %
Foreign exchange (FX)   4,837           41,166        
Ongoing revenue, net of FX $ 666,504   $ 558,642   19 % $ 1,859,346   $ 1,651,881   13 %
 
 
Net revenue $ 498,634 $ 421,899 18 % $ 1,398,355 $ 1,291,733 8 %
RCM   (2,372 )   (5,754 )     (12,537 )   (18,446 )  
Ongoing net revenue $ 496,262 $ 416,145 19 % $ 1,385,818 $ 1,273,287 9 %
FX   4,707           38,061        
Ongoing net revenue, net of FX $ 500,969   $ 416,145   20 % $ 1,423,879   $ 1,273,287   12 %
 
 
Operating income $ 39,085 $ 40,721 (4 )% $ 88,667 $ 107,732 (18 )%
Earn-out expense (gain) 2,823 (3,113 )
RCM 4,023 190 9,691 3,605
Acq. & integration   1,005           16,916        
Ongoing operating income $ 44,113 $ 40,911 8 % 118,097 $ 108,224 9 %
FX   58           1,584        
Ongoing operating income, net of FX $ 44,171   $ 40,911   8 % $ 119,681   $ 108,224   11 %
 
 
EPS $ 0.44 $ 0.43 2 % $ 0.89 $ 1.14 (22 )%
Earn-out expense (gain) 0.03 (0.03 )
RCM 0.05 0.10 0.03
Acq. & integration 0.01 0.27
Coffey debt prepayment 0.03
Retroactive R&E tax             (0.03 )   (0.02 )  
Ongoing EPS $ 0.50 $ 0.43 16 % $ 1.29 $ 1.12 15 %
FX             0.02        
Ongoing EPS, net of FX $ 0.50   $ 0.43   16 % $ 1.31   $ 1.12   17 %

About Tetra Tech

Tetra Tech is a leading provider of consulting and engineering services. For 50 years, the Company has supported commercial and government clients focused on water, environment, infrastructure, resource management, energy, and international development. With 16,000 staff 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: worldwide political and economic uncertainties; fluctuations in annual revenue, expenses, and operating results; the cyclicality in demand for our overall services; the cyclicality in demand for mining services; the cyclicality in demand for oil and gas services; concentration of revenues from U.S. government agencies and potential funding disruptions by these agencies; violations of U.S. government contractor regulations; 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; credit risks associated with certain commercial clients; risks associated with international operations; 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 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; acquisition strategy and integration risks; goodwill or other intangible asset impairment; growth strategy management; backlog cancellation and adjustments; 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; 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; the interruption of systems and information technology; the ability to impede a business combination based on Delaware law and charter documents; and stock price volatility. 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.

Contacts

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

Contacts

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