Form 8-K - Current report

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):

July 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 July 31, 2024, Tetra Tech, Inc. (“Tetra Tech”) reported its financial results for the third fiscal quarter ended June 30, 2024. 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.

Dividend

On July 31, 2024, Tetra Tech announced that its Board of Directors has declared a $0.29 per share quarterly cash dividend. The dividend is payable on August 30, 2024 to stockholders of record as of the close of business on August 15, 2024.

Stock Split

Also on July 31, 2024, the Company announced a five-for-one forward stock split of the Company’s common stock. The stock split will be effected through an amendment to the Company’s Restated Certificate of Incorporation, which will result in a proportionate increase in the number of shares of authorized common stock. As a result of the stock split, each record holder of common stock as of the close of market on Thursday, September 5, 2024, will receive four additional shares of common stock, to be distributed after the close of market on Friday, September 6, 2024. Trading is expected to commence on a split-adjusted basis at market open on Monday, September 9, 2024.

Item 9.01.

Financial Statements and Exhibits.

(d) Exhibits

99.1

Press Release, dated July 31, 2024, reporting the financial results for Tetra Tech’s third fiscal quarter ended June 30, 2024, 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: July 31, 2024	By:	/s/ DAN L. BATRACK
		Dan L. Batrack
		Chairman and Chief Executive Officer

Exhibit 99.1

NEWS RELEASE
July 31, 2024

Tetra Tech Reports Record Third Quarter Results,

Raises Guidance and Announces Five-for-One Stock Split

Record Quarterly Revenue $1.34 billion, up 11% Y/Y

Record Q3 Operating Income $129 million, up 32% Y/Y

Record Q3 EPS $1.59, up 42% Y/Y

Record Backlog $5.23 billion, up 19% Y/Y

Increasing FY 2024 Net Revenue and 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 its third quarter ended June 30, 2024.

Third Quarter Highlights

Revenue increased 11% Y/Y to $1.34 billion

Net Revenue¹ increased 12% Y/Y to $1.11 billion

Operating Income increased 32% Y/Y to $129 million

EPS increased 42% Y/Y to $1.59

Backlog increased 19% Y/Y to $5.23 billion

Industry-leading DSO of 54 days

Cash Flow from Operations of $141 million

Net Debt / EBITDA reduced 34% Y/Y to 1.15x

Recent Key Wins

$439 million for expanding energy resiliency through innovative solutions for diversified generation, delivery and storage of energy in Ukraine

$73 million to increase energy resiliency and support sustainable infrastructure throughout West Africa

$65 million for disaster preparedness associated with impacts from climate change and rising sea levels across vulnerable areas in the Asia Pacific region

$64 million for supporting sustainable land and infrastructure systems including water resource management and irrigation in developing countries

$56 million to design advanced water treatment and PFAS removal solution for a new facility in Virginia

¹ Non-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.

$54 million for sustainable infrastructure programs addressing climate change adaptation in Southeast Asia

$35 million for assessment and restoration for water and environmental impacts associated with fire recovery in Hawaii

$32 million for investigation and evaluation of contaminated sediments within the Anacostia River in the Potomac River Basin

$27 million to assess and design water leachate treatment solutions in municipal landfills in California

Executive Management Comment

Dan Batrack, Chairman and CEO, commented, “Tetra Tech continued our strong performance through the third quarter with increasing demand for our high-end water, environment, and sustainable infrastructure services, resulting in record quarterly revenue and an all-time high backlog. We continued to grow our services for front-end advisory and consulting work, resulting in the expansion of our margins in GSG by 60 basis points and CIG by 230 basis points over the third quarter of last year. With increased profitability and record backlog, we are raising our full year guidance for net revenue and earnings, which represents forecasted EPS growth of 23% for fiscal 2024.”

Quarterly Dividend and Share Repurchase Program

On July 29, 2024, Tetra Tech’s Board of Directors approved the Company’s 41^st consecutive quarterly dividend at an amount of $0.29 per share, a 12% increase year-over-year, payable on August 30, 2024, to stockholders of record as of August 15, 2024. Tetra Tech has $348 million remaining under its $400 million share repurchase program.

Five-for-One Stock Split

On July 29, 2024, Tetra Tech’s Board of Directors approved a five-for-one stock split of the Company’s common stock. The split will be effected through an amendment to Tetra Tech’s Restated Certificate of Incorporation, which will result in a proportionate increase in the number of shares of authorized common stock. The stock split is intended to make shares more accessible to a broader base of investors and enhance liquidity in the trading of the Company’s shares. Each record holder of common stock as of the close of market on September 5, 2024, will receive four additional shares of common stock. The stock split is expected to be effective after close of trading on September 6, 2024. Trading is expected to commence on a split-adjusted basis at market open on September 9, 2024.

Nine-Month Results

Revenue for the nine-month period was $3.82 billion and net revenue was $3.18 billion, up 17% and 18%, respectively, over the same period in fiscal 2023. Operating income was $357 million, up 43%. EPS was $4.40 up from $4.10 for same period last year; last year included a one-time gain from the integrated FX hedge which increased EPS by $1.23.

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.

For fiscal 2024, Tetra Tech is raising EPS guidance to range from $6.23 to $6.28, an increase of 23% at the midpoint year-over-year, and is raising net revenue guidance to range from $4.27 billion to $4.32 billion², an increase of 15% at the midpoint year-over-year. Tetra Tech expects EPS for the fourth quarter of fiscal 2024 to range from $1.82 to $1.87 and net revenue to range from $1.09 billion to $1.14 billion.

Third Quarter Earnings Webcast

Investors will have the opportunity to access a live audio-visual webcast on the Company’s Investor Relations website at tetratech.com/investors on August 1, 2024, at 8:00 a.m. (PT). The webcast replay will be available following the call.

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 28,000 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. These statements include, but are not limited to, statements that address our forward stock split and 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 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 available at tetratech.com/investors.

Tetra Tech, Inc
Consolidated Balance Sheets
(unaudited - in thousands, except par value)

	June 30,			October 1,
	2024			2023
Assets
Current assets:
Cash and cash equivalents	$	212,321		$	168,831
Accounts receivable, net		1,053,758			974,535
Contract assets		118,556			113,939
Prepaid expenses and other current assets		121,846			98,719
Total current assets		1,506,481			1,356,024

Property and equipment, net		70,694			74,832
Right-of-use assets, operating leases		167,317			175,932
Goodwill		1,992,110			1,880,244
Intangible assets, net		164,459			173,936
Deferred tax assets		89,510			89,002
Other non-current assets		94,334			70,507
Total assets	$	4,084,905		$	3,820,477

Liabilities and Equity
Current liabilities:
Accounts payable	$	198,341		$	173,271
Accrued compensation		317,457			302,755
Contract liabilities		372,283			335,044
Short-term lease liabilities, operating leases		65,932			65,005
Current contingent earn-out liabilities		47,407			51,108
Other current liabilities		244,842			280,959
Total current liabilities		1,246,262			1,208,142

Deferred tax liabilities		17,254			14,256
Long-term debt		861,830			879,529
Long-term lease liabilities, operating leases		128,892			144,685
Non-current contingent earn-out liabilities		22,876			22,314
Other non-current liabilities		141,588			148,045
Equity:

Preferred stock - authorized, 2,000 shares of $0.01 par value; no shares issued and outstanding at June 30, 2024 and October 1, 2023		-			-
Common stock - authorized, 150,000 shares of $0.01 par value; issued and outstanding, 53,532 and 53,248 shares at June 30, 2024 and October 1, 2023, respectively		535			532
Additional paid-in capital		28,171			-
Accumulated other comprehensive loss		(154,689	)		(195,295	)
Retained earnings		1,792,121			1,598,196
Tetra Tech stockholders' equity		1,666,138			1,403,433
Noncontrolling interests		65			73
Total stockholders' equity		1,666,203			1,403,506
Total liabilities and stockholders' equity	$	4,084,905		$	3,820,477

Tetra Tech, Inc
Consolidated Statements of Income
(unaudited - in thousands, except per share data)

	Three Months Ended						Nine Months Ended
	June 30,			July 2,			June 30,			July 2,
	2024			2023			2024			2023
Revenue	$	1,344,323		$	1,208,947		$	3,824,205		$	3,261,938
Subcontractor costs		(234,742	)		(221,387	)		(646,828	)		(568,252	)
Other costs of revenue		(886,409	)		(798,714	)		(2,556,212	)		(2,180,749	)
Gross profit		223,172			188,846			621,165			512,937
Selling, general and administrative expenses		(94,042	)		(89,064	)		(263,293	)		(227,912	)
Acquisition and integration expenses		-			(2,107	)		-			(25,812	)
Contingent consideration - fair value adjustments		(500	)		-			(477	)		(8,477	)
Income from operations		128,630			97,675			357,395			250,736
Interest expense, net		(9,912	)		(14,869	)		(29,374	)		(33,563	)
Other non-operating income		-			-			-			89,402
Income before income tax expense		118,718			82,806			328,021			306,575
Income tax expense		(32,894	)		(22,568	)		(90,758	)		(86,781	)
Net income		85,824			60,238			237,263			219,794
Net income attributable to noncontrolling interests		(14	)		(3	)		(35	)		(23	)
Net income attributable to Tetra Tech	$	85,810		$	60,235		$	237,228		$	219,771

Earnings per share attributable to Tetra Tech:
Basic	$	1.60		$	1.13		$	4.44		$	4.13
Diluted	$	1.59		$	1.12		$	4.40		$	4.10

Weighted-average common shares outstanding:
Basic		53,515			53,231			53,451			53,188
Diluted		54,052			53,653			53,901			53,615

Cash dividends paid per share		0.29			0.26			0.81			0.72

Tetra Tech, Inc.
Consolidated Statements of Cash Flows
(unaudited - in thousands)

	Nine Months Ended
	June 30,			July 2,
	2024			2023
Cash flows from operating activities:
Net income	$	237,263		$	219,794

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		56,718			43,221
Amortization of stock-based awards		23,713			21,640
Deferred income taxes		(9,736	)		21,475
Fair value adjustments to foreign currency forward contract		-			(89,402	)
Fair value adjustments to contingent consideration		477			8,477
Other non-cash items		3,769			(796	)
Changes in operating assets and liabilities, net of effects of business acquisitions:
Accounts receivable and contract assets		(54,286	)		(41,824	)
Prepaid expenses and other assets		(18,437	)		1,970
Accounts payable		18,991			(3,678	)
Accrued compensation		(7,982	)		5,263
Contract liabilities		33,011			56,189
Income taxes receivable/payable		(16,436	)		10,645
Other liabilities		(13,955	)		(6,921	)
Net cash provided by operating activities		253,110			246,053

Cash flows from investing activities:
Payments for business acquisitions, net of cash acquired		(93,650	)		(854,319	)
Settlement of foreign currency forward contract		-			109,306
Capital expenditures		(11,324	)		(17,322	)
Proceeds from sale of assets		666			439
Net cash used in investing activities		(104,308	)		(761,896	)

Cash flows from financing activities:
Proceeds from borrowings		180,000			979,859
Repayments on long-term debt		(200,000	)		(411,676	)
Shares repurchased for tax withholdings on share-based awards		(12,906	)		(16,785	)
Payments of contingent earn-out liabilities		(29,112	)		(15,078	)
Stock options exercised		2,690			425
Dividends paid		(43,303	)		(38,268	)
Principal payments on finance leases		(4,827	)		(4,082	)
Net cash (used in) provided by financing activities		(107,458	)		494,395

Effect of exchange rate changes on cash and cash equivalents		2,146			12,410

Net increase (decrease) in cash and cash equivalents		43,490			(9,038	)
Cash and cash equivalents at beginning of period		168,831			185,094
Cash and cash equivalents at end of period	$	212,321		$	176,056

Supplemental information:
Cash paid during the period for:
Interest	$	26,867		$	34,839
Income taxes, net of refunds received of $4.0 million and $1.5 million	$	115,933		$	54,967

Tetra Tech, Inc.
Regulation G Information
June 30, 2024

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		2nd Qtr		6 mos		3rd Qtr		9 Mos
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		1,251.6		2,479.9		1,344.3		3,824.2
Subcontractor Costs	(661.3	)	(668.5	)	(158.2	)	(188.7	)	(346.9	)	(221.4	)	(568.3	)	(203.2	)	(771.5	)	(213.1	)	(199.0	)	(412.1	)	(234.7	)	(646.8	)
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		1,052.6		2,067.8		1,109.6		3,177.4

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		597.1		1,172.2		640.6		1,812.7
Subcontractor Costs	(507.1	)	(484.4	)	(118.0	)	(127.7	)	(245.7	)	(140.8	)	(386.6	)	(136.9	)	(523.4	)	(132.3	)	(130.6	)	(263.0	)	(152.3	)	(415.3	)
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		466.5		909.2		488.3		1,397.4

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		671.2		1,340.3		723.6		2,063.9
Subcontractor Costs	(214.3	)	(239.3	)	(56.0	)	(76.4	)	(132.4	)	(94.0	)	(226.4	)	(82.6	)	(309.0	)	(96.6	)	(85.1	)	(181.7	)	(102.2	)	(283.9	)
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		586.1		1,158.6		621.4		1,780.0

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	2nd Qtr	6 mos	3rd Qtr	9 Mos
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	76,446	151,418	85,810	237,228
Income Tax Expense	34,039		85,602		37,958		26,254		64,212		22,568	86,780		40,745	127,526		26,523	31,341	57,864	32,894	90,758
Interest Expense¹	11,831		11,584		5,372		13,323		18,695		14,869	33,564		12,973	46,537		9,578	9,883	19,461	9,912	29,374
Depreciation	12,337		13,859		3,178		4,849		8,027		5,624	13,651		6,330	19,980		6,951	5,637	12,588	5,713	18,300
Amortization	11,468		13,174		3,438		12,072		15,510		14,060	29,570		11,656	41,226		12,533	12,094	24,627	13,790	38,417
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	135,401	265,958	148,119	414,077

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	135,401	265,958	148,119	414,077

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

Cover	Jul. 31, 2024
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Jul. 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