Tetra Tech, Inc. (NASDAQ: TTEK) today announced results for the fourth quarter and fiscal year ended October 1, 2017.

Fourth Quarter Results

For the fourth quarter, Tetra Tech generated record high quarterly revenue, quarterly income and backlog. Results are summarized as follows:

$ million (except EPS data)   GAAP  

Ongoing Operations1

Q4-17   % Y/Y Q4-17   % Y/Y
Revenue $735   +1% $729   +10%

Net Revenue2

 $534   +1% $533   +9%
Operating Income $55   +16% $57   +18%
EPS $0.60   +13% $0.63   +15%
Backlog $2,541   +7% $2,536   +8%
 

Quarterly Dividend and Share Repurchase Program

On November 6, 2017, Tetra Tech’s Board of Directors declared a quarterly dividend of $0.10 per share payable on December 15, 2017 to stockholders of record as of November 30, 2017. Additionally, the Company has $100 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 had an excellent fourth quarter and finish to a strong fiscal 2017. During the fourth quarter, we generated our highest quarterly revenue, operating income and EPS in the Company’s history. We continue to see demand for our high-end water, environment and infrastructure services, which contributed to our seventh consecutive quarterly increase in backlog. With our record backlog, we’re entering fiscal 2018 in a stronger position than ever.”

Fiscal Year Results

For fiscal 2017, Tetra Tech generated record high revenue, income and backlog. Results are summarized as follows:

  $ million (except EPS data)   GAAP  

Ongoing Operations1

Fiscal 2017   % Y/Y Fiscal 2017   % Y/Y
Revenue $2,753   +7% $2,735   +10%
Net Revenue $2,034   +5% $2,034   +8%
Operating Income $183   +35% $191   +15%
EPS $2.04   +44% $2.13   +16%
Backlog $2,541   +7% $2,536   +8%
 

Fiscal Year 2018 Segments

Beginning in fiscal 2018, we further aligned our operations to better serve our clients and markets, resulting in two renamed reportable segments. Our Government Services Group ("GSG") reportable segment will primarily include activities with U.S. government clients (federal, state and local) and all activities with development agencies worldwide. Our Commercial/International Services Group ("CIG") reportable segment will primarily include activities with U.S. commercial clients and all international activities other than work for development agencies. This will allow us to capitalize on our growing market opportunities and enhance the development of high-end consulting and technical solutions to meet our growing client demand.

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 diluted EPS for the first quarter of fiscal 2018 to be in the range of $0.50 to $0.55. Net revenue for the first quarter is expected to range from $500 million to $525 million. For fiscal 2018, Tetra Tech expects diluted EPS to be in the range of $2.20 to $2.40 and net revenue to range from $2.05 billion to $2.15 billion.

Webcast

Investors will have the opportunity to access a live audio-visual webcast and supplemental financial information concerning the fourth quarter and fiscal year 2017 results through a link posted on the Company’s website at tetratech.com on November 9, 2017 at 8:00 a.m. (PT).

 

Reconciliation of Revenue and Operating Results

In thousands (except EPS data)
 

  Three Months Ended Fiscal Year Ended
Oct. 1,

2017

   Oct. 2,

2016

   %

Y/Y

Oct. 1,

2017

   Oct. 2,

2016

   %

Y/Y

 
Revenue $ 735,188 $ 728,508 1% $ 2,753,360 $ 2,583,469 7%
RCM   (5,805 )   (15,369 )     (18,207 )   (52,150 )  
Ongoing revenue $ 729,383   $ 713,139   2% $ 2,735,153   $ 2,531,319   8%
Ongoing revenue (52 wks) $ 729,383   $ 662,200   10% $ 2,735,153   $ 2,483,558  

10%

 
 
Revenue $ 735,188 $ 728,508 1% $ 2,753,360 $ 2,583,469 7%
Subcontractor costs   (201,161 )   (197,658 )     (719,350 )   (654,264 )  
Net revenue $ 534,027 $ 530,850 1% $ 2,034,010 $ 1,929,205 5%
RCM   (919 )   (4,730 )     86     (17,267 )  
Ongoing net revenue $ 533,108   $ 526,120   1% $ 2,034,096   $ 1,911,938   6%
Ongoing net rev. (52 wks) $ 533,108   $ 488,540   9% $ 2,034,096   $ 1,875,864   8%
 
 
Operating income $ 54,647 $ 47,189 16% $ 183,342 $ 135,855 35%
Earn-out (gain) expense 225 – (6,923 ) 2,823
RCM 1,953 2,144 14,712 11,834
Acq. & integration   –     2,632       –     19,548    
Ongoing operating income $ 56,825   $ 51,965   9% $ 191,131   $ 170,060   12%
Ongoing op. inc. (52 wks) $ 56,825   $ 48,253   18% $ 191,131   $ 166,851   15%
 
 
EPS $ 0.60 $ 0.53 13% $ 2.04 $ 1.42 44%
Earn-out (gain) expense – – (0.08 ) 0.03
RCM 0.03 0.03 0.17 0.14
Acq. & integration – 0.03 – 0.29
Coffey debt prepayment – – – 0.03
Retroactive R&D tax   –     –       –     (0.03 )  
Ongoing EPS $ 0.63   $ 0.59   7% $ 2.13   $ 1.88   13%
Ongoing EPS (52 wks) $ 0.63   $ 0.55   15% $ 2.13   $ 1.84   16%
 

About Tetra Tech

Tetra Tech is a leading, global provider of consulting and engineering services. We are differentiated by Leading with Science® to provide innovative technical solutions to our clients. We support global commercial and government clients focused on water, environment, infrastructure, resource management, energy, and international development. With more than 16,000 associates 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: continuing worldwide political and economic uncertainties; the new U.S. Administration’s potential changes to fiscal and tax 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; 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 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; and the ability to impede a business combination based on Delaware law and charter documents. 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 Refer to Reconciliation of Revenue and Operating Results table for a reconciliation to GAAP. All year-over-year percentages for the fiscal year and the fourth quarter exclude the additional week in Q4-16 as compared to Q4-17. The Company believes the information presented for the one-week difference provides important data for comparative purposes.
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.