Tetra Tech — Nov 13, 2024 release
Fiscal 2024 fourth-quarter results · 8-K Item 2.02 · Exhibit 99.1 · 0001104659-24-117683
Showing in the filing
Net revenue
“$1.090 billion to $1.150 billion”
Period
Q1 FY2025
Measure
GAAP-tied
Source
Prose
All guidance in this release · 5
Quarterly dividend
“$0.058 per share”
Net revenue for Q1 FY2025
“$1.090 billion to $1.150 billion”
EPS for Q1 FY2025
“$0.32 to $0.34”
Net revenue for FY2025
“$4.565 billion to $4.765 billion”
EPS for FY2025
“$1.40 to $1.50”
Exhibit 99.1 · full document
EXHIBIT 99.1
Exhibit 99.1
NEWS
RELEASE
November 13, 2024
Tetra Tech Reports
Record Fiscal 2024 and Fourth Quarter Results
· Record
Annual Revenue $5.20 billion, up 15% Y/Y
· Record
Annual Net Revenue $4.32 billion, up 15% Y/Y
· Record
Annual Operating Income of $501 million, up 40% Y/Y
· Record
Annual EPS, up 21% Y/Y
· Record
Backlog of $5.38 billion, up 12% Y/Y
Pasadena, California .
Tetra Tech, Inc. (NASDAQ: TTEK), a leading provider of high-end consulting and engineering services in water, environment and sustainable
infrastructure, today announced record results for both the fiscal year and fourth quarter ended September 29, 2024.
Fiscal Year
Highlights
· Revenue
increased 15% Y/Y to $5.20 billion
· Net
Revenue 1 increased
15% Y/Y to $4.32 billion
· Operating
Income increased 40% Y/Y to $501 million
· EPS
of $1.23 and Adjusted EPS 1 of $1.26, both increased 21% Y/Y
· Backlog
increased 12% Y/Y to $5.38 billion
· Net
Debt / EBITDA improved Y/Y from 1.4x to 1.0x
Fourth Quarter
Highlights
· Revenue
increased to $1.37 billion
· Net
Revenue increased to $1.14 billion
· Operating
Income increased 33% Y/Y to $143 million
· EPS
increased 75% Y/Y to $0.35; Adjusted EPS increased 15% Y/Y to $0.38
· Industry-leading
DSO of 55 days
1
Non-GAAP financial measures which the Company believes provide valuable perspectives on its business results. Refer to tables at the end of the release and Regulation G Information for reconciliations to the comparable GAAP metrics.
Recent Key Wins
· $12
billion multiple-award contract to deliver innovative technology solutions for Defense
Logistics Agency’s most critical requirements in cybersecurity and systems modernization
· $5
billion multiple award contract to address complex resiliency challenges in countries
around the world for USAID
· $1
billion framework contract with Northern Ireland Water for support of sustainable water
infrastructure projects
· $249
million multiple award contract to provide environmental assessment and sustainable design
services for the U.S. Army Corps of Engineers
· $225
million multiple award contract to provide environmental remediation services including
site investigations, design, monitoring, and feasibility studies for the U.S. Army Corps
of Engineers
· $150
million in single award contracts to increase access for reliable water,
sanitation, electricity, and sustainable infrastructure in Africa for USAID
· $30
million single award contract to provide watershed-focused restoration and resiliency
services for the Utah Army National Guard
Chairman and CEO Comments
Tetra Tech Chairman
and CEO, Dan Batrack, commented, “We completed the fourth quarter and fiscal year 2024 with another record year with 15% annual
revenue growth and 21% annual EPS growth. Our all-time high fourth quarter and annual results were driven by increasing demand for our
differentiated high-end consulting services for managing water resources and resilient infrastructure. In 2024, we held our inaugural
investor day establishing 2030 targets which include expanding our leading global water consultancy and growing our recurring revenue
software business.
We continue to
see strong demand for our high-end services in coastal flood protection and recovery, security of water supplies, and digital modernization
of water infrastructure. Over this past year, we received increasing orders across all our client end-markets which drove backlog up
12% to an all-time high of $5.38 billion. With strong momentum in contract wins and a record backlog, we are initiating our full year
fiscal 2025 guidance for net revenue and earnings, which represents forecasted EPS growth of 15% for fiscal 2025.”
Quarterly Dividend
and Share Repurchase Program
On November 11,
2024, Tetra Tech’s Board of Directors approved the Company’s 42 nd consecutive quarterly dividend at an amount
of $0.058 per share, a 12% increase year-over-year, payable on December 13, 2024, to stockholders of record as of November 27, 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.
For the first
quarter in fiscal 2025, Tetra Tech expects net revenue to range from $1.090 billion to $1.150 billion 2 and
EPS to range from $0.32 to $0.34. For fiscal 2025, Tetra Tech expects net revenue to range from $4.565 billion to $4.765 billion and
EPS to range from $1.40 to $1.50.
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.
Webcast
Investors will
have the opportunity to access a live audio-visual webcast and supplemental financial information concerning the fourth quarter of fiscal
2024 results through a link posted on the Company’s website at tetratech.com on November 14, 2024, at 8:00 a.m. (PT).
Reconciliation
of GAAP and Non-GAAP Items
In thousands
(except EPS data)
Three
Months Ended
Fiscal
Year Ended
Sep.
29,
2024
Oct.
1,
2023
%
Y/Y
Sep.
29,
2024
Oct.
1,
2023
%
Y/Y
Revenue
$
1,374,474
$
1,260,612
9
%
$
5,198,679
$
4,522,550
15
%
Subcontractor
costs
(229,989
)
(203,209
)
(876,817
)
(771,461
)
Net revenue
$
1,144,485
$
1,057,403
8
%
$
4,321,862
$
3,751,089
15
%
EPS
$
0.35
$
0.20
75
%
$
1.23
$
1.02
21
%
Acq. / Integration
0.03
0.07
0.03
0.15
Earn-out adjustments
–
0.01
–
0.04
FX hedge gain
–
–
–
(0.25
)
Tax related
items
–
0.05
–
0.08
Adjusted
EPS
$
0.38
$
0.33
15
%
$
1.26
$
1.04
21
%
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 30,000 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
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 current expectations and beliefs
of Tetra Tech’s management and 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; 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 available at tetratech.com/investors .
Tetra Tech, Inc
Consolidated Balance Sheets
(unaudited - in thousands, except par value)
September 29,
October 1,
2024
2023
Assets
Current assets:
Cash and cash equivalents
$ 232,689
$ 168,831
Accounts receivable, net
1,051,461
974,535
Contract assets
129,678
113,939
Prepaid expenses and other current assets
91,585
89,096
Income taxes receivable
21,970
9,623
Total current assets
1,527,383
1,356,024
Property and equipment, net
73,065
74,832
Right-of-use assets, operating leases
177,950
175,932
Goodwill
2,046,569
1,880,244
Intangible assets, net
160,585
173,936
Deferred tax assets
105,529
89,002
Other non-current assets
101,595
70,507
Total assets
$ 4,192,676
$ 3,820,477
Liabilities and Equity
Current liabilities:
Accounts payable
$ 197,440
$ 173,271
Accrued compensation
332,096
302,755
Contract liabilities
351,738
335,044
Short-term lease liabilities, operating leases
63,419
65,005
Current contingent earn-out liabilities
26,934
51,108
Other current liabilities
247,900
280,959
Total current liabilities
1,219,527
1,208,142
Deferred tax liabilities
30,162
14,256
Long-term debt
812,634
879,529
Long-term lease liabilities, operating leases
140,095
144,685
Non-current contingent earn-out liabilities
21,812
22,314
Other non-current liabilities
138,033
148,045
Equity:
Preferred stock - authorized, 2,000 shares of $0.01 par value; no shares
issued and outstanding at September 29, 2024 and October 1, 2023
-
-
Common stock - authorized, 750,000 shares of $0.01 par value; issued
and outstanding, 267,717 and 266,238 shares at September 29, 2024 and
October 1, 2023, respectively
2,677
2,662
Additional paid-in capital
35,900
-
Accumulated other comprehensive loss
(78,875 )
(195,295 )
Retained earnings
1,870,620
1,596,066
Tetra Tech stockholders' equity
1,830,322
1,403,433
Noncontrolling interests
91
73
Total stockholders' equity
1,830,413
1,403,506
Total liabilities and stockholders' equity
$ 4,192,676
$ 3,820,477
Tetra Tech, Inc.
Consolidated Statements of Income
(unaudited - in thousands, except per share data)
Three Months Ended
Fiscal Year Ended
September 29,
October 1,
September 29,
October 1,
2024
2023
2024
2023
Revenue
$ 1,374,474
$ 1,260,612
$ 5,198,679
$ 4,522,550
Subcontractor costs
(229,989 )
(203,209 )
(876,817 )
(771,461 )
Other costs of revenue
(899,209 )
(845,311 )
(3,455,422 )
(3,026,060 )
Gross profit
245,276
212,092
866,440
725,029
Selling, general and administrative expenses
(92,731 )
(77,195 )
(356,024 )
(305,107 )
Acquisition and integration expenses
(7,138 )
(7,357 )
(7,138 )
(33,169 )
Right-of-use operating lease asset impairment
-
(16,385 )
-
(16,385 )
Contingent consideration - fair value adjustments
(2,064 )
(3,778 )
(2,541 )
(12,255 )
Income from operations
143,343
107,377
500,737
358,113
Interest expense, net
(7,897 )
(12,974 )
(37,271 )
(46,537 )
Other non-operating income
-
-
-
89,402
Income before income tax expense
135,446
94,403
463,466
400,978
Income tax expense
(39,266 )
(40,745 )
(130,023 )
(127,526 )
Net income
96,180
53,658
333,443
273,452
Net income attributable to noncontrolling interests
(26 )
(9 )
(61 )
(32 )
Net income attributable to Tetra Tech
$ 96,154
$ 53,649
$ 333,382
$ 273,420
Earnings per share attributable to Tetra Tech:
Basic
$ 0.36
$ 0.20
$ 1.25
$ 1.03
Diluted
$ 0.35
$ 0.20
$ 1.23
$ 1.02
Weighted-average common shares outstanding:
Basic
267,687
266,235
267,364
266,015
Diluted
271,656
268,510
270,042
268,185
Cash dividends paid per share
$ 0.058
$ 0.052
$ 0.220
$ 0.196
Tetra Tech, Inc.
Consolidated Statements of Cash Flows
(unaudited - in thousands)
Fiscal Year Ended
Sep 29,
Oct 1,
2024
2023
Cash flows from operating activities:
Net income
$ 333,443
$ 273,452
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
73,677
61,206
Amortization of stock-based awards
31,155
28,607
Deferred income taxes
(19,980 )
(21,204 )
Fair value adjustments to contingent consideration
2,541
12,255
Right-of-use operating lease asset impairment
-
16,385
Fair value adjustments to foreign currency forward contract
-
(89,402 )
Acquisition and integration expenses
7,138
-
Other non-cash items
5,369
975
Changes in operating assets and liabilities, net of effects of business acquisitions:
Accounts receivable and contract assets
(40,188 )
(19,783 )
Prepaid expenses and other assets
(20,894 )
78,686
Accounts payable
18,091
(19,214 )
Accrued compensation
6,657
37,094
Contract liabilities
4,704
44,152
Cash settled contingent earn-out liability
(7,943 )
-
Income taxes receivable/payable
(35,530 )
40,527
Other liabilities
468
(75,273 )
Net cash provided by operating activities
358,708
368,463
Cash flows from investing activities:
Payments for business acquisitions, net of cash acquired
(93,650 )
(854,319 )
Settlement of foreign currency forward contract
-
109,306
Capital expenditures
(18,135 )
(26,901 )
Proceeds from sale of assets
742
715
Net cash used in investing activities
(111,043 )
(771,199 )
Cash flows from financing activities:
Proceeds from borrowings
217,000
994,859
Repayments on long-term debt
(287,000 )
(1,026,051 )
Proceeds from issuance of convertible notes
-
575,000
Payment of debt issuance costs
-
(14,451 )
Capped call transactions
-
(51,750 )
Shares repurchased for tax withholdings on share-based awards
(12,982 )
(16,833 )
Payments of contingent earn-out liabilities
(46,107 )
(21,328 )
Stock options exercised
3,067
626
Dividends paid
(58,828 )
(52,113 )
Principal payments on finance leases
(6,530 )
(5,579 )
Net cash (used in) provided by financing activities
(191,380 )
382,380
Effect of exchange rate changes on cash and cash equivalents
7,573
4,093
Net increase (decrease) in cash and cash equivalents
63,858
(16,263 )
Cash and cash equivalents at beginning of year
168,831
185,094
Cash and cash equivalents at end of year
$ 232,689
$ 168,831
Supplemental information:
Cash paid during the year for:
Interest
$ 36,855
47,367
Income taxes, net of refunds received of $4.2 million and $2.2 million
$ 180,707
93,176
Tetra Tech, Inc.
Regulation G Information
September 29, 2024
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
2nd Qtr
6 mos
3rd Qtr
9 Mos
4th Qtr
Total
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
1,251.6
2,479.9
1,344.3
3,824.2
1,374.5
5,198.7
Subcontractor Costs
(661.3 )
(668.5 )
(158.2 )
(188.7 )
(346.9 )
(221.4 )
(568.3 )
(203.2 )
(771.5 )
(213.1 )
(199.0 )
(412.1 )
(234.7 )
(646.8 )
(230.0 )
(876.8 )
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
1,052.6
2,067.8
1,109.6
3,177.4
1,144.5
4,321.9
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
597.1
1,172.2
640.6
1,812.7
670.6
2,483.4
Subcontractor Costs
(507.1 )
(484.4 )
(118.0 )
(127.7 )
(245.7 )
(140.8 )
(386.6 )
(136.9 )
(523.4 )
(132.3 )
(130.6 )
(263.0 )
(152.3 )
(415.3 )
(158.1 )
(573.4 )
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
466.5
909.2
488.3
1,397.4
512.5
1,910.0
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
671.2
1,340.3
723.6
2,063.9
722.9
2,786.7
Subcontractor Costs
(214.3 )
(239.3 )
(56.0 )
(76.4 )
(132.4 )
(94.0 )
(226.4 )
(82.6 )
(309.0 )
(96.6 )
(85.1 )
(181.7 )
(102.2 )
(283.9 )
(90.9 )
(374.8 )
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
586.1
1,158.6
621.4
1,780.0
632.0
2,411.9
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
2nd Qtr
6 mos
3rd Qtr
9 Mos
4th Qtr
Total
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
76,446
151,418
85,810
237,228
96,154
333,382
Income Tax Expense
34,039
85,602
37,958
26,254
64,212
22,568
86,780
40,745
127,526
26,523
31,341
57,864
32,894
90,757
39,266
130,023
Interest Expense 1
11,831
11,584
5,372
13,323
18,695
14,869
33,564
12,973
46,537
9,578
9,883
19,461
9,912
29,374
7,897
37,271
Depreciation
12,337
13,859
3,178
4,849
8,027
5,624
13,651
6,330
19,980
6,951
5,637
12,588
5,713
18,301
5,421
23,722
Amortization
11,468
13,174
3,438
12,072
15,510
14,060
29,570
11,656
41,226
12,533
12,094
24,627
13,790
38,417
11,538
49,955
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
135,401
265,958
148,119
414,077
160,276
574,353
Contingent Consideration
(3,273 )
-
933
7,544
8,477
-
8,477
3,778
12,255
(37 )
14
(22 )
500
477
2,064
2,541
Acquisition & Integration Expenses 2
-
-
3,761
19,944
23,705
2,107
25,812
23,742
49,554
-
-
-
-
-
7,138
7,138
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
130,520
135,415
265,936
148,619
414,554
169,478
584,032
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
the item shown at left
other guidance in this release
Text is the filed exhibit, verbatim.