Unaudited Investors Report 2015 2016 2017 2018 ($ in Thousands, Except Per Share Data) Total Total 1st Qtr 2nd Qtr 6 mos 3rd Qtr 9 mos 4th Qtr Total 1st Qtr 2nd Qtr 6 mos 3rd Qtr 9 mos REVENUE 2,299,321 2,583,469 668,851 663,781 1,332,632 685,539 2,018,171 735,188 2,753,360 759,749 700,261 1,460,010 764,795 2,224,805 REVENUE, NET OF SUBCONTRACTOR COSTS ["Net Revenue" (1)] 1,718,715 1,929,205 489,551 511,954 1,001,505 498,478 1,499,983 534,027 2,034,010 544,847 532,793 1,077,640 570,352 1,647,992 Government Services Group (GSG) 763,023 951,030 257,159 261,359 518,518 266,114 784,632 282,527 1,067,158 309,966 290,565 600,531 301,019 901,550 Commercial / International Services Group (CIG) 932,417 960,908 230,597 254,299 484,896 231,462 716,357 250,580 966,938 233,729 241,860 475,589 267,854 743,443 ONGOING NET REVENUE (2) 1,695,440 1,911,938 487,756 515,658 1,003,414 497,576 1,500,989 533,107 2,034,096 543,695 532,425 1,076,120 568,873 1,644,993 Remediation and Construction Management (RCM) 23,275 17,267 1,795 (3,704) (1,909) 902 (1,006) 919 (86) 1,152 368 1,520 1,479 2,999 OTHER COSTS OF REVENUE 1,402,925 1,598,994 408,190 430,952 839,141 408,228 1,247,369 433,003 1,680,372 450,702 441,367 892,069 460,758 1,352,827 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 170,455 171,985 41,506 45,195 86,702 44,366 131,068 46,152 177,219 45,556 46,792 92,348 50,472 142,820 ACQUISITION AND INTEGRATION EXPENSES - 19,548 - - - - - - - - - - - - PURCHASE ACCOUNTING AND NON-CORE DIVESTITURES (57,650) (2,823) - 7,149 7,149-7,149 (225) 6,923 - (1,918) (1,918) (3,626) (5,544) INCOME FROM OPERATIONS, AS REPORTED 87,685 135,855 39,855 42,956 82,811 45,884 128,695 54,647 183,342 48,589 42,716 91,305 55,496 146,801 ONGOING INCOME FROM OPERATIONS (2) (3) 153,949 170,060 42,897 44,273 87,170 47,135 134,305 56,825 191,131 49,747 45,123 94,870 59,607 154,477 GSG 87,029 101,595 30,168 33,432 63,601 32,047 95,647 42,552 138,199 39,125 34,177 73,302 44,372 117,674 CIG 99,472 106,603 21,544 18,459 40,003 24,082 64,085 26,732 90,817 21,294 18,399 39,693 27,892 67,585 Corporate (4) (32,552) (38,138) (8,815) (7,618) (16,434) (8,994) (25,427) (12,459) (37,885) (10,672) (7,453) (18,125) (12,657) (30,782) RCM (8,614) (11,834) (3,042) (8,466) (11,508) (1,251) (12,759) (1,953) (14,712) (1,158) (489) (1,647) (485) (2,132) ONGOING OPERATING MARGIN [% of Net Revenue] (2) (3) 9.1% 8.9% 8.8% 8.6% 8.7% 9.5% 8.9% 10.7% 9.4% 9.1% 8.5% 8.8% 10.5% 9.4% GSG 11.4% 10.7% 11.7% 12.8% 12.3% 12.0% 12.2% 15.1% 13.0% 12.6% 11.8% 12.2% 14.7% 13.1% CIG 10.7% 11.1% 9.3% 7.3% 8.2% 10.4% 8.9% 10.7% 9.4% 9.1% 7.6% 8.3% 10.4% 9.1% Interest Expense 7,363 11,389 2,908 3,099 6,007 2,795 8,802 2,779 11,581 3,160 4,092 7,252 4,345 11,597 INCOME BEFORE INCOME TAX EXPENSE (BENEFIT) 80,322 124,466 36,947 39,857 76,804 43,089 119,893 51,868 171,761 45,429 38,624 84,053 51,151 135,204 Income Tax Expense (Benefit) 41,093 40,613 10,358 12,990 23,348 13,114 36,462 17,381 53,844 (623) 9,877 9,254 17,806 27,060 NET INCOME ATTRIBUTABLE TO TETRA TECH 39,075 83,783 26,562 26,862 53,424 29,983 83,407 34,467 117,874 46,034 28,726 74,760 33,322 108,082 DILUTED AVERAGE SHARES 61,532 58,966 58,145 58,270 58,194 58,161 58,116 57,326 57,913 56,875 56,673 56,825 56,390 56,681 DILUTED EPS ATTRIBUTABLE TO TETRA TECH, AS REPORTED $ 0.64 $ 1.42 $ 0.46 $ 0.46 $ 0.92 $ 0.52 $ 1.44 $ 0.60 $ 2.04 $ 0.81 $ 0.51 $ 1.32 $ 0.59 $ 1.91 ONGOING DILUTED EPS (2) (3) (5) $ 1.61 $ 1.88 $ 0.49 $ 0.48 $ 0.97 $ 0.53 $ 1.50 $ 0.63 $ 2.13 - $ 0.65 0.54 $ 1.18 0.71 1.89 ONGOING EBITDA (1) (2) (3) 195,309 214,088 53,906 55,434 109,340 57,971 167,311 67,708 235,019 59,450 55,190 114,640 69,634 184,274 ONGOING EBITDA MARGIN [% of Net Revenue] 11.5% 11.2% 11.1% 10.8% 10.9% 11.7% 11.1% 12.7% 11.6% 10.9% 10.4% 10.7% 12.2% 11.2% DAYS IN SALES OUTSTANDING 85.3 84.2 86.8 82.3 82.3 80.4 80.4 83.1 83.1 85.4 92.4 92.4 81.3 81.3 CASH FLOW FROM OPERATIONS 162,848 142,020 (58,747) 109,111 50,364 21,209 71,573 66,419 137,992 (66,493) 81,267 14,774 52,673 67,447 CAPITAL EXPENDITURES 24,296 11,945 2,031 1,865 3,896 3,122 7,018 2,723 9,741 2,143 2,422 4,565 1,781 6,346 Y/Y NET REVENUE GROWTH % (7.6%) 12.2% 16.3% 6.9% 11.3% 0.0% 7.3% 0.6% 5.4% 11.3% 4.1% 7.6% 14.4% 9.9% GSG (4.5%) 24.6% 32.4% 22.0% 26.9% 1.7% 17.1% 0.5% 12.2% 20.5% 11.2% 15.8% 13.1% 14.9% CIG (5.0%) 3.1% 5.0% (2.8%) 0.8% (1.4%) 0.1% 2.2% 0.6% 1.4% (4.9%) (1.9%) 15.7% 3.8% RCM (70.7%) (25.8%) (75.0%) (224.5%) (118.8%) (61.9%) (108.0%) (80.6%) (100.5%) (35.8%) (110.0%) (179.7%) 63.8% (398.2%) NET REVENUE % BY CLIENT TYPE International 29% 31% 30% 32% 31% 28% 30% 29% 30% 25% 28% 26% 29% 27% U.S. Commercial 32% 30% 27% 27% 27% 29% 28% 27% 27% 28% 28% 28% 28% 28% U.S. Federal Government 27% 27% 30% 29% 30% 30% 30% 30% 30% 29% 30% 30% 29% 30% U.S. State & Local Government 12% 12% 13% 12% 12% 13% 12% 14% 13% 18% 14% 16% 14% 15% NET REVENUE % BY CONTRACT TYPE Fixed-Price 32% 28% 31% 29% 30% 34% 31% 33% 32% 31% 34% 32% 35% 33% Time-and-Materials 50% 55% 50% 52% 51% 47% 50% 48% 49% 50% 50% 50% 48% 50% Cost-Plus 18% 17% 19% 19% 19% 19% 19% 19% 19% 19% 16% 18% 17% 17% BACKLOG 1,901,712 2,378,894 2,469,511 2,496,857 2,496,857 2,533,672 2,533,672 2,541,105 2,541,105 2,428,698 2,510,037 2,510,037 2,435,461 2,435,461 (1) Non-GAAP financial measure. For a reconciliation of non-gaap financial measures to the most directly comparable GAAP measures, please visit tetratech.com/investor-presentations.html (2) Ongoing excludes Remediation and Construction Management (3) Excludes purchase accounting and non-core divestitures, and acquisition and integration expenses (4) Corporate costs not allocable to the segments (e.g., acquisition costs, amortization expense, stock option expense, etc.) (5) Excludes one-time tax benefit
Regulation G Information July 1, 2018 Reconciliation of Revenue to Revenue, Net of Subcontractor Costs ("Net Revenue") (in millions) 2017 2018 2015 2016 1st Qtr 2nd Qtr 6 mos 3rd Qtr 9 mos 4th Qtr Total 1st Qtr 2nd Qtr 6 mos 3rd Qtr 9 mos Consolidated (as reported) Revenue 2,299.3 2,583.5 668.9 663.8 1,332.6 685.5 2,018.2 735.2 2,753.4 759.7 700.3 1,460.0 764.8 2,224.8 Subcontractor Costs (580.6) (654.3) (179.3) (151.8) (331.1) (187.0) (518.2) (201.2) (719.4) (214.9) (167.5) (382.4) (194.4) (576.8) Net Revenue 1,718.7 1,929.2 489.6 512.0 1,001.5 498.5 1,500.0 534.0 2,034.0 544.8 532.8 1,077.6 570.4 1,648.0 GSG Segment Revenue 1,011.9 1,289.5 362.9 357.1 720.0 379.3 1,099.3 388.3 1,487.6 442.8 406.0 848.8 423.9 1,272.7 Subcontractor Costs (248.9) (338.5) (105.7) (95.7) (201.5) (113.2) (314.7) (105.8) (420.4) (132.8) (115.5) (248.3) (122.9) (371.2) Net Revenue 763.0 951.0 257.2 261.4 518.5 266.1 784.6 282.5 1,067.2 310.0 290.5 600.5 301.0 901.5 CIG Segment Revenue 1,262.1 1,297.2 318.1 329.1 647.2 318.2 965.4 360.6 1,326.0 331.5 309.7 641.2 352.6 993.8 Subcontractor Costs (329.7) (336.3) (87.5) (74.8) (162.3) (86.7) (249.0) (110.0) (359.1) (97.8) (67.8) (165.6) (84.8) (250.4) Net Revenue 932.4 960.9 230.6 254.3 484.9 231.5 716.4 250.6 966.9 233.7 241.9 475.6 267.8 743.4 Ongoing Operations Revenue 2,212.7 2,531.3 660.7 663.8 1,324.4 681.3 2,005.8 729.4 2,735.2 752.9 698.8 1,451.7 761.5 2,213.2 Subcontractor Costs (517.3) (619.4) (172.9) (148.1) (321.0) (183.7) (504.8) (196.3) (701.1) (209.2) (166.5) (375.6) (192.5) (568.2) Net Revenue 1,695.4 1,911.9 487.8 515.7 1,003.4 497.6 1,501.0 533.1 2,034.1 543.7 532.3 1,076.1 569.0 1,645.0 RCM Segment Revenue 86.6 52.2 8.2-8.2 4.2 12.4 5.8 18.2 6.8 1.5 8.3 3.3 11.6 Subcontractor Costs (63.3) (34.9) (6.4) (3.7) (10.1) (3.3) (13.4) (4.9) (18.3) (5.7) (1.0) (6.8) (1.9) (8.6) Net Revenue 23.3 17.3 1.8 (3.7) (1.9) 0.9 (1.0) 0.9 (0.1) 1.1 0.5 1.5 1.4 3.0 Reconciliation of Net Income Attributable to Tetra Tech to EBITDA (in thousands) 2017 2018 2015 2016 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 39,075 83,783 26,562 26,862 53,424 29,983 83,407 34,467 117,874 46,034 28,726 74,760 33,322 108,082 Interest Expense 1 7,363 11,389 2,908 3,099 6,007 2,795 8,802 2,779 11,581 3,160 4,092 7,252 4,345 11,597 Depreciation 2 23,110 22,756 5,251 5,764 11,015 5,345 16,360 5,848 22,207 5,169 5,101 10,270 4,864 15,134 Amortization 2 20,205 22,078 5,940 5,898 11,838 5,607 17,445 5,342 22,786 4,625 5,037 9,662 5,226 14,888 Contingent Consideration (3,113) 2,823 - (7,149) (7,149) - (7,149) 225 (6,923) - 1,918 1,918 192 2,110 Goodwill and other IA Impairment 60,763 - - - - - - - - - - - - - Income Tax Expense (Benefit) 41,093 40,613 10,358 12,990 23,348 13,114 36,462 17,381 53,844 (623) 9,877 9,254 17,806 27,060 Acquisition Expenses - 7,925 - - - - - - - - - - - - Integration Expenses - 11,623 - - - - - - - - - - - - EBITDA 188,496 202,990 51,019 47,464 98,483 56,844 155,327 66,042 221,369 58,365 54,751 113,116 65,755 178,871 Non-Core Divestitures - - - - - - - - - - - - 3,434 3,434 RCM 6,813 11,098 2,887 7,970 10,857 1,127 11,984 1,666 13,650 1,085 439 1,524 445 1,969 Ongoing EBITDA 195,309 214,088 53,906 55,434 109,340 57,971 167,311 67,708 235,019 59,450 55,190 114,640 69,634 184,274 1 Includes amortization of deferred financing fee 2 Varies slightly from the Statements of Cash Flows, which includes amortization of deferred financing fee
Consolidated Balance Sheets (unaudited - in thousands, except par value) July 1, 2018 October 1, 2017 Assets Current assets: Cash and cash equivalents $ 214,040 $ 189,975 Accounts receivable - net 847,211 788,767 Prepaid expenses and other current assets 60,115 49,969 Income taxes receivable 12,577 13,312 Total current assets 1,133,943 1,042,023 Property and equipment - net 44,719 56,835 Investments in unconsolidated joint ventures 2,560 2,700 Goodwill 795,752 740,886 Intangible assets - net 15,378 26,688 Deferred tax assets 6,201 1,763 Other long-term assets 35,277 31,850 Total assets $ 2,033,830 $ 1,902,745 Liabilities and Equity Current liabilities: Accounts payable $ 131,752 $ 177,638 Accrued compensation 144,119 143,408 Billings in excess of costs on uncompleted contracts 163,696 117,499 Current portion of long-term debt 18,737 15,588 Current contingent earn-out liabilities 12,134 2,024 Other current liabilities 92,645 81,511 Total current liabilities 563,083 537,668 Deferred tax liabilities 41,687 43,781 Long-term debt 418,950 341,283 Long-term contingent earn-out liabilities 19,081 414 Other long-term liabilities 54,736 50,975 Commitments and contingencies Equity: Preferred stock - authorized, 2,000 shares of $0.01 par value; no shares issued and outstanding at July 1, 2018 and October 1, 2017 - - Common stock - authorized, 150,000 shares of $0.01 par value; issued and outstanding, 55,332 and 55,873 shares at July 1, 2018 and October 1, 2017, respectively 553 559 Additional paid-in capital 144,470 193,835 Accumulated other comprehensive loss (131,738) (98,500) Retained earnings 922,806 832,559 Tetra Tech stockholders' equity 936,091 928,453 Noncontrolling interests 202 171 Total stockholders' equity 936,293 928,624 Total liabilities and stockholders' equity $ 2,033,830 $ 1,902,745
Consolidated Statements of Income (unaudited - in thousands, except per share data) Three Months Ended Nine Months Ended July 1, July 2, July 1, July 2, 2018 2017 2018 2017 Revenue $ 764,795 $ 685,539 $ 2,224,805 $ 2,018,171 Subcontractor costs (194,443) (187,061) (576,813) (518,188) Other costs of revenue (460,758) (408,228) (1,352,827) (1,247,369) Gross profit 109,594 90,250 295,165 252,614 Selling, general and administrative expenses (53,906) (44,366) (146,254) (131,068) Contingent consideration - fair value adjustments (192) - (2,110) 7,149 Income from operations 55,496 45,884 146,801 128,695 Interest expense (4,345) (2,795) (11,597) (8,802) Income before income tax expense 51,151 43,089 135,204 119,893 Income tax expense (17,806) (13,114) (27,060) (36,462) Net income 33,345 29,975 108,144 83,431 Net (income) loss attributable to noncontrolling interests (23) 8 (62) (24) Net income attributable to Tetra Tech $ 33,322 $ 29,983 $ 108,082 $ 83,407 Earnings per share attributable to Tetra Tech: Basic $ 0.60 $ 0.52 $ 1.94 $ 1.46 Diluted $ 0.59 $ 0.52 $ 1.91 $ 1.44 Weighted-average common shares outstanding: Basic 55,537 57,184 55,780 57,108 Diluted 56,390 58,161 56,681 58,116 Cash dividends paid per share $ 0.12 $ 0.10 $ 0.32 $ 0.28
Consolidated Statements of Cash Flows (unaudited - in thousands) Nine Months Ended July 1, July 2, 2018 2017 Cash flows from operating activities: Net Income $ 108,144 $ 83,431 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 30,592 34,377 Equity in income of unconsolidated joint ventures (3,604) (3,504) Distributions of earnings from unconsolidated joint ventures 3,701 2,747 Non-cash stock compensation 15,519 10,037 Deferred income taxes (8,266) 27,886 Provision for doubtful accounts 5,841 (1,891) Fair value adjustments to contingent consideration 2,110 (7,149) Loss (gain) on sale of assets 1,938 (369) Changes in operating assets and liabilities, net of effects of business acquisitions and divestitures: Accounts receivable (58,713) (9,485) Prepaid expenses and other assets (20,539) (14,806) Accounts payable (44,279) (2,484) Accrued compensation (7,300) (13,390) Billings in excess of costs on uncompleted contracts 35,666 36,401 Other liabilities 7,786 (5,523) Income taxes receivable/payable (1,149) (64,705) Net cash provided by operating activities 67,447 71,573 Cash flows from investing activities: Payments for business acquisitions, net of cash acquired (65,901) (8,039) Capital expenditures (6,346) (7,018) Proceeds from sale of divested business 36,250 - Proceeds from sale of property and equipment 3,145 507 Net cash used in investing activities (32,852) (14,550) Cash flows from financing activities: Proceeds from borrowings 293,756 199,574 Payments on long-term debt (217,259) (220,845) Repurchases of common stock (75,000) (60,000) Net proceeds from issuance of common stock 13,200 17,992 Dividends paid (17,836) (16,039) Payments of contingent earn-out liabilities (854) - Net cash used in financing activities (3,993) (79,318) Effect of exchange rate changes on cash (6,537) 608 Net increase (decrease) in cash and cash equivalents 24,065 (21,687) Cash and cash equivalents at beginning of period 189,975 160,459 Cash and cash equivalents at end of period $ 214,040 $ 138,772 Supplemental information: Cash paid during the period for: Interest $ 11,391 $ 8,770 Income taxes, net of refunds received of $0.5 million and $1.6 million $ 36,620 $ 70,146