TTEK Tetra Tech Inc

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported):

January 31, 2024

 

TETRA TECH, INC.

(Exact name of registrant as specified in its charter)

 

Delaware		0-19655		95-4148514
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification Number)

 

3475 East Foothill Boulevard, Pasadena, California 91107

(Address of principal executive office, including zip code)

 

(626) 351-4664

(Registrant’s telephone number, including area code)

 

Not Applicable

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading symbol(s)		Name of each exchange on which registered
Common Stock, $0.01 par value		TTEK		The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging Growth Company ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

 

 

Item 2.02.

Results of Operations and Financial Condition.

 

On January 31, 2024, Tetra Tech, Inc. (“Tetra Tech”) reported its financial results for the first fiscal quarter ended December 31, 2023. A copy of the press release is attached to this report as Exhibit 99.1.

 

Exhibit 99.1 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended.

 

Item 8.01.

Other Events.

 

On January 31, 2024, Tetra Tech announced that its Board of Directors has declared a $0.26 per share quarterly cash dividend. The dividend is payable on February 27, 2024 to stockholders of record as of the close of business on February 14, 2024.

 

Item 9.01.

Financial Statements and Exhibits.

 

(d) Exhibits

 

99.1

Press Release, dated January 31, 2024, reporting the financial results for Tetra Tech’s first fiscal quarter ended December 31, 2023, and the declaration of a quarterly cash dividend.

 

104

Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, Tetra Tech has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

	TETRA TECH, INC.
Date: January 31, 2024	By:	/s/ DAN L. BATRACK
		Dan L. Batrack
		Chairman and Chief Executive Officer

 

 

 

Exhibit 99.1

 

NEWS RELEASE January 31, 2024

 

  

Tetra Tech Reports Strong First Quarter Results and

Raises Full Fiscal Year Guidance

 

	·	Revenue $1.23 billion, up 37% Y/Y
	·	Net revenue $1.02 billion, up 38% Y/Y
	·	EBITDA $131 million, up 32% Y/Y
	·	Backlog of $4.74 billion, up 24% Y/Y
	·	Increasing Fiscal Year 2024 net revenue and EPS full year guidance

 

Pasadena, California. Tetra Tech, Inc. (NASDAQ: TTEK), today announced results for the first quarter ended December 31, 2023.

 

As the pure play global leader in water and environmental consulting and engineering, Tetra Tech produces higher margins, organic growth rates and cash flows than the industry. For fiscal 2024, Tetra Tech is raising guidance for increased EPS growth of 20% with a 20% IFRS EBITDA¹ margin.

 

In the past 90 days, the Company was awarded more than 1,000 individual high-end consulting projects addressing the entire water cycle. During the first quarter of fiscal 2024, Tetra Tech announced the award of a $5 billion water framework contract for the Republic of Ireland; an $800 million U.S. Army Corps of Engineers PFAS remediation contract; and a $450 million Great Lakes environmental restoration contract.

 

First Quarter Highlights

 

·

Revenue increased 37% to $1.23 billion with double-digit organic growth

 

·

EBITDA increased 32% to $131 million; on pace to reach $575 million in FY24, doubling in the past 3 years

 

·

Record first quarter EPS of $1.40

 

·

Largest first quarter backlog ever, up 24% year-over-year

 

·

Industry leading DSO of 55 days

 

·

RPS Group integration exceeding expectations:

 

–

RPS EBITDA margin exceeded 10%, up more than 600 basis points in less than one year

 

–

RPS revenue synergies with more than $100 million in new contracts won

 

¹Non-GAAP financial measures which the Company believes provide valuable perspectives on its business results. Refer to tables in the Regulation G Information for reconciliations to the comparable GAAP metrics.

 

 

Executive Management Comments

 

Dan Batrack, Chairman and CEO, commented, “Tetra Tech began fiscal 2024 with a strong first quarter as revenue was up in all of our key end markets, building on our record performance of the prior year. Based on the strength of our end markets, our strong results in the first quarter, and the increasing realization of revenue synergies with RPS, we have raised our full year guidance for both net revenue and EPS, with a forecasted 20% growth in EPS for fiscal 2024.”

 

Steve Burdick, Chief Financial Officer, said, “In addition to our record first quarter revenue and earnings, we continue to generate strong positive operating cash flow with $353 million over the trailing twelve months, which is 152% of net income for the same period. This annual cash generation continues our track record of cash flow exceeding net income every year for the last two decades.”

 

Jill Hudkins, President, stated, “These results demonstrate the value of Tetra Tech’s pure play focus on the water cycle that continues to drive increasing demand for our high-end services. Tetra Tech’s key differentiator is our Leading with Science^® approach to the water cycle; from client-funded research and development, watershed management, water supply and treatment, to flood protection and marine navigation.”

 

Leslie Shoemaker, PhD., Chief Sustainability Officer, added, “Tetra Tech is changing lives through science, technology, and innovation. Our goal is to improve the lives of one billion people around the world by 2030, providing sustainable solutions across our water and environment markets by optimizing water management, preserving biodiversity, and mitigating climate change.”

 

Recent Key Wins

 

·

$5 billion Republic of Ireland water framework contract, improving water quality and enhancing watershed protection for 4 million people

 

·

$800 million U.S. Army Corps of Engineers PFAS remediation contract, preventing future environmental contamination and protecting lives at more than 500 military bases

 

·

$450 million Great Lakes environmental restoration contract, providing environmental restoration of the world’s largest freshwater watershed and improving the lives of 34 million people

 

·

$125 million United Utilities Better Rivers AMP 8 program, reducing wastewater overflows and enhancing watershed quality for 7 million people in North West England

 

·

$34 million USAID Land and Resource Governance contract, protecting land, water, and resources for more than 100 million vulnerable households in developing countries

 

·

$24 Million USAID Biodiversity and Ecosystem Conservation contract, preserving ecosystems and enhancing community livelihoods for 16 million people in Cambodia

 

 

Quarterly Dividend and Share Repurchase Program

 

On January 29, 2024, Tetra Tech’s Board of Directors approved the Company’s 39^th consecutive quarterly dividend at an amount of $0.26 per share, a 13% increase year-over-year, payable on February 27, 2024, to stockholders of record as of February 14, 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.

 

Tetra Tech expects EPS for the second quarter of fiscal 2024 to range from $1.25 to $1.35 and net revenue to range from $990 million to $1.04 billion. For fiscal 2024, Tetra Tech is raising EPS guidance to range from $5.90 to $6.20 and is raising net revenue guidance to range from $4.15 billion to $4.30 billion².

 

Webcast

 

Investors will have the opportunity to access a live audio-visual webcast and supplemental financial information concerning the first quarter of fiscal 2024 results through a link posted on the Company’s website at tetratech.com on February 1, 2024, at 8:00 a.m. (PT).

 

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 27,000 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

 

²Reconciliation 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.

 

 

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: 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 like COVID-19; 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 included in this release.

 

 

Tetra Tech, Inc
Balance Sheet - Unaudited
(unaudited - in thousands, except par value)
		December 31,				October 1,
		2023				2023
Assets
Current assets:
Cash and cash equivalents			198,689				168,831
Accounts receivable, net			1,040,510				974,535
Contract assets			89,073				113,939
Prepaid expenses and other current assets			125,769				98,719
Total current assets			1,454,041				1,356,024
Property and equipment, net			74,971				74,832
Right-of-use assets, operating leases			179,513				175,932
Goodwill			1,923,146				1,880,244
Intangible assets, net			168,134				173,936
Deferred tax assets			76,210				89,002
Other non-current assets			74,808				70,507
Total assets			3,950,823				3,820,477
Liabilities and Equity
Current liabilities:
Accounts payable			207,062				173,271
Accrued compensation			222,686				302,755
Contract liabilities			382,862				335,044
Short-term lease liabilities, operating leases			68,091				65,005
Current contingent earn-out liabilities			37,556				51,108
Other current liabilities			242,738				280,959
Total current liabilities			1,160,995				1,208,142
Deferred tax liabilities			11,620				14,256
Long-term lease liabilities, operating leases			139,537				144,685
Long-term debt			945,319				879,529
Non-current contingent earn-out liabilities			18,048				22,314
Other non-current liabilities			137,617				148,045
Equity:
Preferred stock - authorized, 2,000 shares of $0.01 par value; no shares  issued and outstanding at December 31, 2023  and October 1, 2023			-				-
Common stock - authorized, 150,000 shares of $0.01 par value; issued and outstanding, 53,466 and 53,248 shares at December 31, 2023 and October 1, 2023, respectively			534				532
Additional paid-in capital			9,979				-
Accumulated other comprehensive loss			(132,202	)			(195,295	)
Retained earnings			1,659,295				1,598,196
Tetra Tech stockholders' equity			1,537,606				1,403,433
Noncontrolling interests			81				73
Total stockholders' equity			1,537,687				1,403,506
Total liabilities and stockholders' equity			3,950,823				3,820,477

 

 

Tetra Tech, Inc
Consolidated Statements of Income
(unaudited - in thousands, except per share data)
		Three Months Ended
		December 31,				January 1,
		2023				2023
Revenue			1,228,267				894,766
Subcontractor costs			(213,098	)			(158,204	)
Other costs of revenue			(824,671	)			(583,316	)
Gross profit			190,498				153,246
Selling, general and administrative expenses			(79,417	)			(56,502	)
Contingent consideration - fair value adjustments			-				(933	)
Acquisition and Integration			-				(3,761	)
Income from operations			111,081				92,050
Interest expense, net			(9,577	)			(5,372	)
Other non-operating income			-				67,995
Income before income tax expense			101,504				154,673
Income tax expense			(26,524	)			(37,958	)
Net income			74,980				116,715
Net income attributable to noncontrolling interests			(8	)			(9	)
Net income attributable to Tetra Tech			74,972				116,706
Earnings per share attributable to Tetra Tech:
Basic			1.41				2.20
Diluted			1.40				2.18
Weighted-average common shares outstanding:
Basic			53,317				53,069
Diluted			53,738				53,529

 

 

Tetra Tech, Inc.
Consolidated Statements of Cash Flows
(unaudited, in thousands)
		Three Months Ended
		December 31,				January 1,
		2023				2023
Cash flows from operating activities:
Net income		$	74,980			$	116,715
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			19,484				6,616
Amortization of stock-based awards			7,641				7,184
Deferred income taxes			(1,624	)			15,935
Fair value adjustments to foreign currency forward contract			-				(67,995	)
Other non-cash items			123				601
Changes in operating assets and liabilities, net of effects of business acquisitions:							-
Accounts receivable and contract assets			(22,288	)			(16,175	)
Prepaid expenses and other assets			(28,615	)			5,967
Accounts payable			33,790				3,820
Accrued compensation			(80,069	)			(53,201	)
Contract liabilities			41,862				27,769
Income taxes receivable/payable			(15,941	)			4,387
Other liabilities			(20,097	)			(26,432	)
Net cash provided by operating activities			9,246				25,191
Cash flows from investing activities:
Capital expenditures			(3,456	)			(4,996	)
Proceeds from sale of assets			22				51
Net cash used in investing activities			(3,434	)			(4,945	)
Cash flows from financing activities:
Proceeds from borrowings			125,000				60,889
Repayments on long-term debt			(60,000	)			(73,125	)
Taxes paid on vested restricted stock			(12,670	)			(16,586	)
Payments of contingent earn-out liabilities			(18,862	)			-
Stock options exercised			335				57
Dividends paid			(13,873	)			(12,186	)
Principal payments on finance leases			(1,539	)			(1,316	)
Net cash provided by (used in) financing activities			18,391				(42,267	)
Effect of exchange rate changes on cash and cash equivalents			5,655				8,695
Net increase (decrease) in cash, cash equivalents and restricted cash			29,858				(13,326	)
Cash, cash equivalents and restricted cash at beginning of period			168,831				185,491
Cash, cash equivalents and restricted cash at end of period		$	198,689			$	172,165
Supplemental information:
Cash paid during the period for:
Interest		$	9,768			$	3,433
Income taxes, net of refunds received of $0.9 million and $0.1 million		$	43,297			$	14,540
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents		$	198,689			$	164,397
Restricted cash included in other current assets			-				7,768
Total cash, cash equivalents and restricted cash		$	198,689			$	172,165

 

 

Tetra Tech, Inc.

Regulation G Information 

December 31, 2023

 

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
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
Subcontractor Costs			(661.3	)			(668.5	)			(158.2	)			(188.7	)			(346.9	)			(221.4	)			(568.3	)			(203.2	)			(771.5	)			(213.1	)
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
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
Subcontractor Costs			(507.1	)			(484.4	)			(118.0	)			(127.7	)			(245.7	)			(140.8	)			(386.6	)			(136.9	)			(523.4	)			(132.3	)
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
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
Subcontractor Costs			(214.3	)			(239.3	)			(56.0	)			(76.4	)			(132.4	)			(94.0	)			(226.4	)			(82.6	)			(309.0	)			(96.6	)
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

 

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
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
Income Tax Expense			34,039				85,602				37,958				26,254				64,212				22,568				86,780				40,745				127,526				26,524
Interest Expense1			11,831				11,584				5,372				13,323				18,695				14,869				33,564				12,973				46,537				9,577
Depreciation			12,337				13,859				3,178				4,849				8,027				5,624				13,651				6,330				19,980				6,951
Amortization			11,468				13,174				3,438				12,072				15,510				14,060				29,570				11,656				41,226				12,533
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
Contingent Consideration			(3,273	)			-				933				7,544				8,477				-				8,477				3,778				12,255				-
Acquisition & Integration Expenses2			-				-				3,761				19,944				23,705				2,107				25,812				23,742				49,554				-
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				130,557

 

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

 

 

v3.24.0.1

Cover	Jan. 31, 2024
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Jan. 31, 2024
Entity File Number	0-19655
Entity Registrant Name	TETRA TECH, INC.
Entity Central Index Key	0000831641
Entity Tax Identification Number	95-4148514
Entity Incorporation, State or Country Code	DE
Entity Address, Address Line One	3475 East Foothill Boulevard
Entity Address, City or Town	Pasadena
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	91107
City Area Code	626
Local Phone Number	351-4664
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock, $0.01 par value
Trading Symbol	TTEK
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	false

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