PASADENA, Calif.--Tetra Tech, Inc. (NASDAQ: TTEK) today announced results for the fiscal 2016 second quarter ended March 27, 2016.
The following presents results from ongoing operations1 with year-over-year comparisons on a constant currency basis. Revenue in the quarter was $617 million, and revenue, net of subcontractor costs2 (net revenue), was $476 million, up 15% and 14%, respectively, in the second quarter of fiscal 2016 compared to the same period in fiscal 2015. Operating income was $35 million and diluted earnings per share (EPS) were $0.37, up 29% and 36%, respectively, compared to the second quarter of fiscal 2015. Backlog of $2.1 billion was up 18% year over year.
Quarterly Dividend and Share Repurchase Program
On April 25, 2016, Tetra Tech’s Board of Directors declared a 13% increase in the quarterly dividend, raising it to $0.09 per share payable on May 27, 2016 to stockholders of record as of May 13, 2016. Additionally, the Company has $50 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 delivered strong results for the second quarter of fiscal 2016 with 36% EPS growth driven by a wide range of commercial, municipal and international development projects globally. Backlog increased to more than $2.1 billion, providing Tetra Tech a solid base for future growth. In addition to strong performance in our ongoing operations, our recent acquisitions have also advanced our growth strategy. Since the addition of Coffey this January, we have already begun to realize the benefit of our combined platforms, particularly in international development. In the second quarter, we further expanded our smart water and federal IT growth strategies through the acquisition of INDUS.”
Revenue for the six-month period was $1.16 billion and net revenue was $890 million. Operating income for the six-month period was $74 million and EPS were $0.79.
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 third quarter of fiscal 2016 to be in the range of $0.47 to $0.52. Net revenue for the third quarter is expected to range from $475 million to $525 million. For the fiscal year 2016, diluted EPS is expected to range from $1.80 to $1.95, and net revenue is expected to range from $1.8 billion to $2.0 billion. Cash EPS3 is expected to range from $2.70 to $3.00 for the full year.
Investors will have the opportunity to access a live audio-visual webcast and supplemental financial information concerning the second quarter results through a link posted on the Company’s website at tetratech.com on April 28, 2016 at 8:00 a.m. (PT).
Reconciliation of GAAP to Ongoing Operations
|In thousands (except EPS data)|
|Three Months Ended||Six Months Ended|
|Foreign exchange (FX)||14,251||–||36,329||–|
|Ongoing revenue, net of FX||$||630,882||$||546,612||15||%||$||1,192,842||$||1,093,238||9||%|
|Ongoing net revenue||$||475,790||$||430,673||10||%||$||889,556||$||857,141||4||%|
|Ongoing net revenue, net of FX||$||489,276||$||430,673||14||%||$||922,910||$||857,141||8||%|
|Earn-out expense (gain)||1,822||(3,113||)||2,823||(3,113||)|
|RCM loss (income)||386||(5||)||5,668||3,416|
|Acq. & Integration||15,911||–||15,911||–|
|Ongoing operating income||$||34,769||$||27,280||27||%||73,983||$||67,313||10||%|
|Ongoing operating income, net of FX||$||35,128||$||27,280||29||%||$||75,510||$||67,313||12||%|
|Earn-out expense (gain)||0.02||(0.03||)||0.03||(0.03||)|
|Acq. & Integration||0.26||–||0.26||–|
|Coffey debt prepayment||0.03||–||0.03||–|
|Retroactive R&E tax||–||–||(0.03||)||(0.02||)|
|Ongoing EPS, net of FX||$||0.38||$||0.28||36||%||$||0.81||$||0.69||17||%|
About Tetra Tech
Tetra Tech is a leading provider of consulting and engineering services. For 50 years, the Company has supported commercial and government clients focused on water, environment, infrastructure, resource management, energy, and international development. With 16,000 staff 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.
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 Refer to the Reconciliation of GAAP to Ongoing Operations table.
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 results.
3 Cash EPS defined as cash flow from operations divided by diluted shares outstanding. Cash EPS is a non-GAAP financial measure that provides a valuable perspective on the Company’s financial results.