TETRA TECH, INC. Tetra Tech, Inc. (NASDAQ: TTEK) today announced results for the third quarter ended June 28, 2015.
Third Quarter Results
Revenue in the quarter was $575.1 million and revenue, net of subcontractor costs1, was $421.9 million. Revenue and revenue, net of subcontractor costs, increased 2% and decreased 1%, respectively, in the third quarter of fiscal 2015 compared to the same period in fiscal 2014, excluding the wind-down of the Remediation and Construction Management (RCM) segment and the impact from foreign currency translation. Operating income was $40.7 million and diluted earnings per share (EPS) were $0.43. Excluding an earn-out gain in the third quarter of fiscal 2014, operating income in the quarter compared to last year’s third quarter was up 35%, and EPS were up 39% compared to the third quarter of fiscal 2014. Cash generated from operations was $109.3 million, up 88% compared to last year’s third quarter.
On July 27, 2015, Tetra Tech’s Board of Directors declared a quarterly dividend of $0.08 per share payable on September 4, 2015 to stockholders of record as of August 17, 2015. Additionally, through the first nine months of fiscal 2015, the Company spent $75.5 million of the approved $200 million share repurchase program.
Tetra Tech’s Chairman and CEO, Dan Batrack commented, “Our business delivered solid performance in the third quarter supported by our water and environmental services for our government and commercial clients. Since the end of last quarter, we were awarded $1.4 billion of new contract capacity with our U.S. federal government clients and backlog in our ongoing operations grew 6%. We continue to improve our operating margin as demonstrated by the 35% increase in operating income, which contributed to a record quarterly cash flow from operations of $109 million. Our strong balance sheet will allow us to invest in our organic growth and acquisition strategies, while continuing to return capital to our shareholders through share repurchases and dividends.”
Nine-Month Results
Revenue for the nine-month period was $1.7 billion and revenue, net of subcontractor costs, was $1.3 billion. Operating income for the nine-month period was $107.7 million and EPS were $1.14. Cash generated from operations was $134.1 million.
Operating Results
| In thousands (except EPS data) | |||||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||
|
June 28,
2015 |
June 29,
2014 |
%
Y/Y |
June 28,
2015 |
June 29,
2014 |
%
Y/Y | ||||||||||||||||||||||
| Revenue | $ | 575,108 | $ | 629,502 | (9 | )% | $ | 1,720,927 | $ | 1,861,635 | (8 | )% | |||||||||||||||
| Foreign exchange | 15,726 | -- | -- | 48,304 | -- | -- | |||||||||||||||||||||
| RCM | (16,466 | ) | (67,083 | ) | -- | (69,046 | ) | (189,447 | ) | -- | |||||||||||||||||
Core revenue | $ | 574,368 | $ | 562,419 | 2 | % | $ | 1,700,185 | $ | 1,672,188 | 2 | % | |||||||||||||||
| Revenue, net of subcontractor costs | $ | 421,899 | $ | 458,756 | (8 | )% | $ | 1,291,733 | $ | 1,397,731 | (8 | )% | |||||||||||||||
| Foreign exchange | 14,172 | -- | -- | 42,920 | -- | -- | |||||||||||||||||||||
| RCM | (5,754 | ) | (22,430 | ) | -- | (18,446 | ) | (77,066 | ) | -- | |||||||||||||||||
| Core revenue, net of subcontractor costs | $ | 430,317 | $ | 436,326 | (1 | )% | $ | 1,316,207 | $ | 1,320,665 | 0 | % | |||||||||||||||
| Operating income | $ | 40,721 | $ | 39,167 | 4 | % | $ | 107,732 | $ | 129,070 | (17 | )% | |||||||||||||||
| Foreign exchange | 180 | -- | -- | 1,547 | -- | -- | |||||||||||||||||||||
| Earn-out gain | -- | (8,905 | ) | -- | (3,113 | ) | (34,878 | ) | -- | ||||||||||||||||||
| Subtotal | $ | 40,901 | $ | 30,262 | 35 | % | $ | 106,166 | $ | 94,192 | 13 | % | |||||||||||||||
| RCM | 190 | 5,922 | -- | 3,605 | 9,323 | -- | |||||||||||||||||||||
| Core operating income | $ | 41,091 | $ | 36,184 | 14 | % | $ | 109,771 | $ | 103,515 | 6 | % | |||||||||||||||
| EPS | $ | 0.43 | $ | 0.41 | 5 | % | $ | 1.14 | $ | 1.31 | (13 | )% | |||||||||||||||
| Foreign exchange | -- | -- | -- | 0.02 | -- | -- | |||||||||||||||||||||
| Earn-out | -- | (0.10 | ) | -- | -- | (0.44 | ) | -- | |||||||||||||||||||
| Subtotal | $ | 0.43 | $ | 0.31 | 39 | % | $ | 1.16 | $ | 0.87 | 33 | % | |||||||||||||||
| RCM | -- | 0.06 | -- | 0.04 | 0.09 | -- | |||||||||||||||||||||
| EPS | $ | 0.43 | $ | 0.37 | 16 | % | $ | 1.20 | $ | 0.96 | 25 | % | |||||||||||||||
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 fourth quarter of fiscal 2015 to be in the range of $0.48 to $0.52. Revenue, net of subcontractor costs, for the fourth quarter is expected to range from $420 million to $450 million. For fiscal 2015, EPS is expected to range from $1.63 to $1.67, and cash EPS2 is expected to range from $2.85 to $3.01. Revenue, net of subcontractor costs, for fiscal 2015 is expected to range from $1.71 billion to $1.74 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 www.tetratech.com/investors on July 30, 2015 at 8:00 a.m. (PT).
About Tetra Tech (www.tetratech.com)
Tetra Tech is a leading provider of consulting, engineering, program management, and construction management services. The Company supports commercial and government clients focused on water, environment, infrastructure, resource management, and energy. With 13,000 staff worldwide, Tetra Tech provides clear solutions to complex problems.
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.
1 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.
2 Cash EPS is a non-GAAP financial measure that provides a valuable perspective on the Company’s financial results. Cash EPS is defined as cash flow from operations divided by diluted shares outstanding. Refer to the cash flow statement for reconciliation from net income to cash flow from operations.
View source version on businesswire.com: http://www.businesswire.com/news/home/20150729006761/en/
