Tetra Tech : Quarter 1 2020 Earnings Conference Slides

Q1-20 EARNINGS CALL

January 30, 2020

Dan Batrack, Chairman & CEO Steve Burdick, Executive VP & CFO

WATER	ENVIRONMENT	SUSTAINABLE INFRASTRUCTURE

Forward Looking Statements &

Non-GAAP Financial Measures

Certain statements contained in this presentation are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties, such as those related to fluctuations in the Company's quarterly operating results and stock price, and the other risks detailed from time to time in the Company's SEC reports.

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 included in the Appendix to this presentation.

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Q1-20 Results

Net Revenue

EPSBacklog

$553M

$614M

$0.84	$3.17B
$0.70	$2.79B

+11%

Q1-19Q1-20

+20%

+13%

Q1-19

Q1-20

Q1-19

Q1-20

Note: Financial measures (non-GAAP) and Y/Y presented on adjusted basis. Refer to appendix for reconciliation summary.

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Net Revenue by Customer (Q1-20)

International 34%

U.S. Federal 28%

U.S. Commercial 24%

U.S. State & Local 14%

+25%

+12%

+5%

-7%

UK environmental		Water and	U.S renewable	Disaster Response
Renewable energy		environmental	energy
	programs	Environmental	Water infrastructure
			(+10% Y/Y)
			remediation

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Net Revenue by Segment (Q1-20)

($ in millions)

GSG

$330

$303

+9%

Q1-19Q1-20

Broad-based water and environmental programs

Disaster response

CIG

$284

$250

+14%

Q1-19Q1-20

North America renewable energy UK environmental consulting

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Backlog (Q1-20)				Record High
								$3.17B
3200
3100
3000
2900
2800
2700
2600
2500
2400	$2.43B
				Funded and
2300							Authorized Work
2200
Q1-18	Q2-18	Q3-18	Q4-18	Q1-19	Q2-19	Q3-19	Q4-19	Q1-20

Significant Awards		Contract		Funded
	Ceiling		Value
Various Commercial		―		$344M
Int'l Dev Task Orders		―		$181M
USACE Transatlantic
Middle East District A&E		$45M		―
Contract
U.S. Army Task Orders		―		$41M
U.S. EPA Ecological &		$21M		―
Human Health contract
U.S. EPA Task Orders		―		$12M

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Financial Overview (GAAP)

Revenue ($ in millions)

$717	$798
	+11% Y/Y
Q1-19	Q1-20

Operating Income ($ in millions)

	$63
$56	+14% Y/Y
Q1-19	Q1-20

Net Revenue ($ in millions)
$553	$614
	+11% Y/Y
Q1-19	Q1-20

Diluted EPS

	$0.85
$0.75	+13% Y/Y
	Adj. EPS
	+20% Y/Y
Q1-19	Q1-20

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Cash Flow Overview

Cash Flow from Operations ($ in millions)

	-18% Y/Y
$(15)	$(18)
Q1-19	Q1-20

	Net Debt ($ in millions)
$194	$224
Net debt/
	EBITDA:
	0.8x
Q1-19	Q1-20

	DSO
83	73
	10-day
		improvement
		Y/Y
Q1-19	Q1-20

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Capital Allocation Q1-20

Cash Flow

from

Operations

			•	Geographical
	Acquisitions		•	Technical
			•	Clients
			• Add'l $200M buyback approved
	Return to
		•	$304M buyback capacity
	Shareholders
		•	$8.2M in dividends
	Current
		•	Net Debt/EBITDA: 0.8x
	Leverage

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Fiscal 2020 Outlook

U.S. Federal

	Drivers:
	▪ Increase in U.S. Federal
5% to 10%
budget

	U.S. Commercial
Drivers:
▪	Environmental services
3% to 8%
▪	Sustainable buildings

					Leading
					with
	U.S. State and Local		Science®
	Drivers:					International
	▪	Municipal water
10% to 15%*		infrastructure					Drivers:
	▪	Disaster recovery						▪ Infrastructure and
						7% to 12%
								environmental programs
	* Excludes disaster response

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U.S. Federal: Increased funding and visibility

• $1.4 trillion fiscal 2020 spending bills approved in December 2019 provide more visibility
• Leverage Tt's $18B in U.S. Federal contract capacity

Defense

Civilian Agencies

International Development

FY20	$738B; +$22B Y/Y
Budget

$607B; +$53B Y/Y

$55B; +467M Y/Y

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Sustainable High-Performance Buildings

• Demand for sustainable buildings that:
• • Generate more power than they use
  • Capture and recycle water
  • Minimize waste and promote recycling
• Grow $250M practice to $500M annual revenue

Net Zero School

International Towers Sydney

Commercial Mixed Use

School building generates surplus	Harbor water cooling system - 100M	Recycles 54,000 gallons of water daily
energy - 140,000 kWh per year	liters of potable water saved per year
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Guidance

	Net Revenue	Adjusted Diluted EPS
Q2-20	$580M	- $630M	$0.73 - $0.78
FY-20	$2.4B	- $2.6B	$3.40 - $3.55

Assumptions FY-20

• Includes intangible amortization of $10 million or $0.14 per share
• 23% effective tax rate for remainder of FY-20
• 55.5 million average diluted shares
• Excludes contributions from future acquisitions

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Summary

• Record first quarter start to fiscal 2020
• Broad-baseddemand for high-end consulting and engineering services
• Strong orders drove backlog to all-time high

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Questions & Answers

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APPENDIX

WATER	ENVIRONMENT	SUSTAINABLE INFRASTRUCTURE

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Reconciliation Summary

($ in millions, except EPS)

Revenue	Net Revenue	Operating Income	EPS

Q1-20

Q1-19

GAAP	$798	$614	$63	$0.85
Non-core Equipment
―	―	(1)	(0.01)
Disposition
Adjusted	$798	$614	$62	$0.84

	Revenue	Net Revenue	Operating Income	EPS
GAAP	$717	$553	$56	$0.75
Revaluation of Deferred	―	―	―	(0.05)
Tax Liabilities
Adjusted	$717	$553	$56	$0.70

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