Tetra Tech — May 5, 2025 release
Fiscal 2025 second-quarter results · 8-K Item 2.02 · Exhibit 99.1 · 0001104659-25-045597
Showing in the filing
Net revenue
“$1.10 billion to $1.20 billion”
Period
Q3 FY2025
Measure
GAAP-tied
Source
Prose
All guidance in this release · 6
Quarterly dividend
“$0.065 per share”
Share repurchase program
“additional $500 million”
Net revenue for FY2025
“$4.400 billion to $4.765 billion”
Adjusted EPS for FY2025
“$1.42 to $1.52”
Net revenue for Q3 FY2025
“$1.10 billion to $1.20 billion”
EPS for Q3 FY2025
“$0.35 to $0.40”
Exhibit 99.1 · full document
EXHIBIT 99.1
Exhibit 99.1
NEWS RELEASE
May 7, 2025
Tetra Tech Reports
Strong Second Quarter Results and Raises FY25 Guidance
● Record Second Quarter Revenue $1.322 billion
● Record Second Quarter Net Revenue $1.104 billion
● Record Second Quarter Adjusted Operating Income $130 million
● Increasing Quarterly Dividend +12% Y/Y
● Raising FY25 EPS Guidance
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 results for the second quarter ended March 30, 2025.
Q2 FY25
YTD FY25
$ million (except EPS data)
Reported
Adjusted 1
Reported
Adjusted 1
Revenue
$ 1,322.1
$ 1,322.1
$ 2,742.7
$ 2,742.7
Net Revenue
$ 1,103.7
$ 1,103.7
$ 2,301.0
$ 2,301.0
Operating Income
$ 39.6
$ 130.1
$ 62.1
$ 267.2
EPS
$ 0.02
$ 0.33
$ 0.02
$ 0.68
Year to Date Highlights
● Revenue increased 11% Y/Y to $2.74 billion
● Net Revenue increased 11% Y/Y to $2.30 billion
● Adjusted Operating Income increased 17% Y/Y to $267 million
● Adjusted EPS increased 21% Y/Y to $0.68
Second Quarter Highlights
● Revenue increased 6% Y/Y to $1.322 billion
● Net Revenue increased 5% Y/Y to $1.104 billion
● Adjusted Operating Income increased 11% Y/Y to $130 million
● Adjusted EPS increased 18% Y/Y to $0.33
● Book-to-Bill: 1.1x (excluding USAID and Dept. of State)
● Backlog $4.09 billion, up $127 million Y/Y (excluding USAID and Dept. of State)
1 Non-GAAP financial measures which the Company believes provide valuable perspectives on its business results.
Adjusted operating income and EPS exclude non-cash goodwill impairment related to USAID. Refer to tables at the end of the release and
Regulation G Information for reconciliations to the comparable GAAP metrics.
Recent Key Wins
● $416 million five-year multiple award contracts to deliver environmental engineering services for USACE Honolulu District
● $249 million five-year multiple award contract for planning and engineering services for USACE Mobile District
● $240 million five-year multiple award contract for planning and engineering services for USACE Middle East District
● £42 million five-year multiple award contract for stormwater management services for a U.K. water utility
● $48 million five-year multiple award contract for environmental engineering services for USACE Huntsville District
● $46 million three-year multiple award contract for planning and engineering services for USACE Los Angeles District
● £36 million three-year multiple award contract for water infrastructure services for Severn Trent Water in the U.K.
Capital Allocation, Quarterly Dividend and
Share Repurchase Program
On May 5, 2025, Tetra Tech’s Board
of Directors approved the Company’s 44 th consecutive quarterly dividend at an amount of $0.065 per share, a 12% increase
year-over-year, payable on June 5, 2025, to stockholders of record as of May 23, 2025.
In the second quarter, Tetra Tech repurchased
$150 million of common stock. Furthermore, the Board approved an additional $500 million share repurchase program. Together with the $173
million remaining under the previously approved program at the end of the second quarter of fiscal 2025, the Company had $673 million
available for share repurchase.
Subsequent to the end of the second quarter, on
May 5, 2025, Tetra Tech entered into an Amended and Restated Credit Agreement with a total borrowing capacity of $1.5 billion that
will mature in May 2030.
Chairman and CEO Comments
Dan Batrack, Chairman and CEO, commented, “We
generated record second quarter results for revenue and net income despite the decrease in revenue associated with the reorganization
of USAID. Our growth in State and Local, U.S. Commercial, and International revenues more than offset this headwind, which resulted in
net revenue and EPS exceeding consensus and the upper end of our guidance range for the quarter. We are seeing significant demand for
our differentiated Leading with Science ® services in
our water and environmental markets, including our high-end digital automation services for our municipal and commercial clients.
“In the last month, we announced strategic
acquisitions expanding our global digital technology and program management businesses. Based on our strong performance, we increased
our dividend by 12% and expanded our stock buyback program by an additional $500 million. With record year-to-date performance and a strong
outlook, we are raising our FY25 guidance for net revenue and EPS.”
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.
During the quarter, we were notified that virtually
all our contracts with USAID were terminated for convenience. Consequently, we performed an interim impairment review of the goodwill
in our Global Development Services division. As a result, we reduced backlog by the value of the terminated contracts and recorded a non-cash
goodwill impairment charge of $92.4 million in the second quarter of fiscal 2025. Tetra Tech has updated its guidance for fiscal year
2025 based on its current outlook, which includes the expected impact of the ongoing U.S. federal government review process.
For fiscal 2025, Tetra Tech is increasing full
year guidance for net revenue 2 to range
from $4.400 billion to $4.765 billion and is increasing adjusted EPS 3 guidance to range from $1.42 to $1.52. For the third
quarter in fiscal 2025, Tetra Tech expects net revenue to range from $1.10 billion to $1.20 billion and EPS to range from $0.35 to $0.40.
Webcast
Investors will have the opportunity to access
a live audio-visual webcast and supplemental financial information concerning the second quarter of fiscal 2025 results through a link
posted on the Company’s website at tetratech.com on May 8, 2025, at 8:00 a.m. (PT).
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, including subcontractor costs, required to provide
such reconciliation with sufficient precision.
3 The adjustments in our guidance for EPS are to exclude
the legal contingency of $0.35 and goodwill impairment of $0.31.
Reconciliation of GAAP and Non-GAAP Items
In thousands (except EPS data)
Three Months Ended
Six Months Ended
March 30,
March 31,
March 30,
March 31,
2025
2024
2025
2024
Revenue
$ 1,322,113
$ 1,251,616
$ 2,742,674
$ 2,479,883
Subcontractor costs
(218,408 )
(198,989 )
(441,639 )
(412,087 )
Net revenue
$ 1,103,705
$ 1,052,627
$ 2,301,035
$ 2,067,796
Operating Income
$ 39,603
$ 117,683
$ 62,129
$ 228,764
Legal contingency
-
-
115,000
-
Goodwill impairment
92,416
-
92,416
-
Contingent consideration
(1,931 )
14
(2,297 )
(22 )
Adjusted Operating Income
$ 130,088
$ 117,697
$ 267,248
$ 228,742
EPS
$ 0.02
$ 0.28
$ 0.02
$ 0.56
Legal contingency
-
-
0.35
-
Goodwill impairment
0.31
-
0.31
-
Adjusted EPS
$ 0.33
$ 0.28
$ 0.68
$ 0.56
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 res tore the environment, and design sustainable
and resilient infrastructure. 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 September 29, 2024. 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 set forth above in this release.
Tetra Tech, Inc
Consolidated Balance Sheets
(unaudited - in thousands, except par value)
March 30,
September 29,
2025
2024
Assets
Current assets:
Cash and cash equivalents
$ 179,433
$ 232,689
Accounts receivable, net
1,223,214
1,051,461
Contract assets
134,106
129,678
Prepaid expenses and other current assets
129,425
113,555
Total current assets
1,666,178
1,527,383
Property and equipment, net
66,048
73,065
Right-of-use assets, operating leases
185,499
177,950
Goodwill
1,913,134
2,046,569
Intangible assets, net
136,784
160,585
Deferred tax assets
106,137
105,529
Other non-current assets
110,524
101,595
Total assets
$ 4,184,304
$ 4,192,676
Liabilities and Equity
Current liabilities:
Accounts payable
$ 262,300
$ 197,440
Accrued compensation
242,017
332,096
Contract liabilities
373,591
351,738
Short-term lease liabilities, operating leases
65,870
63,419
Current portion of long-term debt
250,000
-
Current contingent earn-out liabilities
20,497
26,934
Other current liabilities
302,240
247,900
Total current liabilities
1,516,515
1,219,527
Deferred tax liabilities
27,193
30,162
Long-term debt
764,189
812,634
Long-term lease liabilities, operating leases
143,242
140,095
Non-current contingent earn-out liabilities
10,773
21,812
Other non-current liabilities
148,611
138,033
Total liabilities
2,610,523
2,362,263
Equity:
Preferred stock - authorized, 2,000 shares of $0.01 par
value; no shares issued and outstanding at March 30, 2025 and September 29, 2024
-
-
Common stock - authorized, 750,000 shares of $0.01 par
value; issued and outstanding, 263,503 and 267,717 shares at March 30, 2025 and September 29, 2024, respectively
2,635
2,677
Additional paid-in capital
-
35,900
Accumulated other comprehensive loss
(153,180 )
(78,875 )
Retained earnings
1,724,203
1,870,620
Tetra Tech stockholders' equity
1,573,658
1,830,322
Noncontrolling interests
123
91
Total stockholders' equity
1,573,781
1,830,413
Total liabilities and stockholders' equity
$ 4,184,304
$ 4,192,676
Tetra Tech, Inc
Consolidated Statements of Income
(unaudited - in thousands, except per share
data)
Three Months Ended
Six Months Ended
March 30,
March 31,
March 30,
March 31,
2025
2024
2025
2024
Revenue
$ 1,322,113
$ 1,251,616
$ 2,742,674
$ 2,479,883
Subcontractor costs
(218,408 )
(198,989 )
(441,639 )
(412,087 )
Other costs of revenue
(889,523 )
(845,132 )
(1,865,376 )
(1,669,803 )
Gross profit
214,182
207,495
435,659
397,993
Selling, general and administrative expenses
(84,094 )
(89,798 )
(168,411 )
(169,251 )
Legal contingency costs
-
-
(115,000 )
-
Contingent consideration - fair value adjustments
1,931
(14 )
2,297
22
Impairment of goodwill
(92,416 )
-
(92,416 )
-
Income from operations
39,603
117,683
62,129
228,764
Interest expense, net
(8,491 )
(9,883 )
(15,709 )
(19,461 )
Income before income tax expense
31,112
107,800
46,420
209,303
Income tax expense
(25,700 )
(31,341 )
(40,230 )
(57,864 )
Net Income
5,412
76,459
6,190
151,439
Net income attributable to noncontrolling interests
(24 )
(13 )
(55 )
(21 )
Net income attributable to Tetra Tech
$ 5,388
$ 76,446
$ 6,135
$ 151,418
Earnings per share attributable to Tetra Tech:
Basic
$ 0.02
$ 0.29
$ 0.02
$ 0.57
Diluted
$ 0.02
$ 0.28
$ 0.02
$ 0.56
Weighted-average common shares outstanding:
Basic
265,728
267,420
266,819
267,095
Diluted
267,439
269,375
269,691
269,125
Tetra Tech, Inc.
Consolidated Statements of Cash Flows
(unaudited - in thousands)
Six Months Ended
March 30,
March 31,
2025
2024
Cash flows from operating activities:
Net income
$ 6,190
$ 151,439
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
29,939
37,215
Amortization of stock-based awards
17,027
15,617
Deferred income taxes
(6,164 )
(8,049 )
Provision for losses on accounts receivables
3,331
-
Impairment of goodwill
92,416
-
Fair value adjustments to contingent consideration
(2,297 )
-
Gain on cash surrender value of life insurance policies
(1,599 )
-
Other non-cash items
4,267
1,032
Changes in operating assets and liabilities, net of effects of business acquisitions:
Accounts receivable and contract assets
(203,055 )
(23,195 )
Prepaid expenses and other assets
(28,322 )
(33,412 )
Accounts payable
66,917
36,406
Accrued compensation
(83,088 )
(74,291 )
Contract liabilities
37,354
34,801
Income taxes receivable/payable
(3,253 )
(18,556 )
Cash settled contingent earn-out liability
(7,420 )
-
Other liabilities
84,997
(6,826 )
Net cash provided by operating activities
7,240
112,181
Cash flows from investing activities:
Payments for business acquisitions, net of cash acquired
(5,680 )
(71,796 )
Capital expenditures
(9,372 )
(7,463 )
Proceeds from sale of assets
350
98
Proceeds from company-owned life insurance policies
1,934
-
Net cash used in investing activities
(12,768 )
(79,161 )
Cash flows from financing activities:
Proceeds from borrowings
215,000
180,000
Repayments on long-term debt
(15,000 )
(110,000 )
Repurchases of common stock
(174,984 )
-
Shares repurchased for tax withholdings on share-based awards
(13,848 )
(12,781 )
Payments of contingent earn-out liabilities
(14,445 )
(22,112 )
Stock options exercised
171
1,462
Dividends paid
(30,900 )
(27,781 )
Principal payments on finance leases
(3,431 )
(3,155 )
Net cash provided by (used in) financing activities
(37,437 )
5,633
Effect of exchange rate changes on cash and cash equivalents
(10,291 )
2,810
Net increase (decrease) in cash and cash equivalents
(53,256 )
41,463
Cash and cash equivalents at beginning of period
232,689
168,831
Cash and cash equivalents at end of period
$ 179,433
$ 210,294
Supplemental information:
Cash paid during the period for:
Interest
$ 16,180
$ 20,093
Income taxes, net of refunds received of $4.6 million and $2.4 million
$ 47,987
$ 84,916
Noncash financing activities:
Excise taxes accrued but not paid
$ 1,267
-
Tetra Tech, Inc.
Regulation G Information
March 30, 2025
Reconciliation of Revenue to Revenue, Net
of Subcontractor Costs ("Net Revenue")
(in millions)
2024
2025
2022
2023
1st
Qtr
2nd
Qtr
6
Mos
3rd
Qtr
9
Mos
4th
Qtr
Total
1st
Qtr
2nd
Qtr
6
Mos
Consolidated
Revenue
3,504.0
4,522.6
1,228.3
1,251.6
2,479.9
1,344.3
3,824.2
1,374.5
5,198.7
1,420.6
1,322.1
2,742.7
Subcontractor
Costs
(668.5 )
(771.5 )
(213.1 )
(199.0 )
(412.1 )
(234.7 )
(646.8 )
(230.0 )
(876.8 )
(223.3 )
(218.4 )
(441.7 )
Net
Revenue
2,835.5
3,751.1
1,015.2
1,052.6
2,067.8
1,109.6
3,177.4
1,144.5
4,321.9
1,197.3
1,103.7
2,301.0
GSG
Segment
Revenue
1,820.9
2,158.9
575.0
597.1
1,172.2
640.6
1,812.7
670.6
2,483.4
751.8
661.4
1,413.2
Subcontractor
Costs
(484.4 )
(523.4 )
(132.3 )
(130.6 )
(263.0 )
(152.3 )
(415.3 )
(158.1 )
(573.4 )
(150.6 )
(140.5 )
(291.1 )
Net
Revenue
1,336.5
1,635.5
442.7
466.5
909.2
488.3
1,397.4
512.5
1,910.0
601.2
520.9
1,122.1
CIG
Segment
Revenue
1,738.4
2,424.6
669.1
671.2
1,340.3
723.6
2,063.9
722.9
2,786.7
688.2
678.9
1,367.1
Subcontractor
Costs
(239.3 )
(309.0 )
(96.6 )
(85.1 )
(181.7 )
(102.2 )
(283.9 )
(90.9 )
(374.8 )
(92.1 )
(96.1 )
(188.2 )
Net
Revenue
1,499.1
2,115.6
572.5
586.1
1,158.6
621.4
1,780.0
632.0
2,411.9
596.1
582.8
1,178.9
Reconciliation of Net Income
Attributable to Tetra Tech to Adjusted EBITDA
(in
thousands)
2024
2025
2022
2023
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
263,125
273,420
74,972
76,446
151,418
85,810
237,228
96,154
333,382
747
5,388
6,135
Income Tax
Expense
85,602
127,526
26,523
31,341
57,864
32,894
90,757
39,266
130,023
14,530
25,700
40,230
Interest
Expense 1
11,584
46,537
9,578
9,883
19,461
9,912
29,374
7,897
37,271
7,218
8,491
15,709
Depreciation
13,859
19,980
6,951
5,637
12,588
5,713
18,301
5,421
23,722
5,402
5,248
10,650
Amortization
13,174
41,226
12,533
12,094
24,627
13,790
38,417
11,538
49,955
10,660
8,629
19,289
FX
Hedge Gain
(19,904 )
(89,402 )
-
-
-
-
-
-
-
-
-
-
EBITDA
367,440
419,287
130,557
135,401
265,958
148,119
414,077
160,276
574,353
38,557
53,456
92,013
Contingent
Consideration
-
12,255
(37 )
14
(22 )
500
477
2,064
2,541
(366 )
(1,931 )
(2,297 )
Goodwill
Impairment
-
-
-
-
-
-
-
-
-
-
92,416
92,416
Acquisition &
Integration Expenses 2
-
49,554
-
-
-
-
-
7,138
7,138
-
-
-
Legal Contingency
-
-
-
-
-
-
-
-
-
115,000
-
115,000
COVID-19 Credits
(6,486 )
-
-
-
-
-
-
-
-
-
-
-
Adjusted
EBITDA
360,954
481,096
130,520
135,415
265,936
148,619
414,554
169,478
584,032
153,191
143,941
297,132
1 Includes write-off of deferred
debt origination fees of $3.8M in fiscal 2023
2 Includes lease impairment
charge of $16.4M in fiscal 2023
the item shown at left
other guidance in this release
Text is the filed exhibit, verbatim.