Financial Data and Key Metrics Changes - The company achieved record highs for operating income and earnings per share (EPS) in Q3 2025, with operating income at $159 million, up 37% year-over-year, and EPS at $0.41, up 46% from the prior year [5][9] - Net revenue for the quarter reached $1.06 billion, an 11% increase from the same quarter last year [8] - Cash flows generated from operations improved by 23% year-over-year, totaling $462 million for the trailing twelve months [24] Business Line Data and Key Metrics Changes - The Government Services Group (GSG) segment saw a 29% increase in net revenue to $429 million, with a margin of 19.9%, up 230 basis points from the prior year [10] - The Commercial International Group (CIG) segment's revenue was $633 million, showing slight growth year-over-year, with a margin of 15.2%, up 130 basis points [11][12] - U.S. Federal work increased by 46% year-over-year, now representing about 25% of total business [14] Market Data and Key Metrics Changes - State and local revenue grew by 30% year-over-year, with ongoing water programs up 18% excluding episodic disaster contributions [15][16] - International work, representing 42% of revenues, was essentially flat year-over-year, with growth in the UK and EU offset by declines in Australia [17] Company Strategy and Development Direction - The company is focusing on higher-margin consulting and design work for water and environmental projects, aiming to increase net revenue while improving EBITDA margins by 50 basis points annually [22][23] - Recent legislation has shifted funding priorities, with significant increases in defense spending and infrastructure upgrades, presenting new opportunities for the company [31][32] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the impacts of the new administration and its effects on the business environment, particularly in federal contracting [6][30] - Despite near-term uncertainties, the company remains optimistic about long-term demand for high-end water, environmental, and sustainable infrastructure [38] Other Important Information - The company has a backlog of $4.15 billion, which is stable and has grown slightly from the previous quarter [19] - A dividend of 6.5 cents was approved, marking a 12% increase year-over-year, and the company has initiated a stock buyback program with $200 million repurchased so far in 2025 [26][28] Q&A Session Summary Question: Can you provide more details on the backlog? - Management noted that while the backlog was flat year-over-year, the actual issuance of contracts has not changed, but there has been a slowdown in the conversion of task orders due to changes in government contracting personnel [43][44] Question: How do you see the backlog impacting 2026? - Management anticipates a continuation of the current book and burn situation, with less visibility on future task orders but no expected impact on revenue [65][66] Question: What is the outlook for disaster recovery revenue in Q4? - Management expects minimal contribution from disaster recovery activities in Q4, as most recovery work has been completed [68] Question: How does water market growth compare to infrastructure demand? - Management indicated that water infrastructure work is growing at rates above 10%, with state and local work driving much of this growth [76][80] Question: What are the opportunities for increasing front-end advisory consulting work? - Management sees opportunities in energy development and renewable energy sectors, focusing on technical evaluations and permitting for new projects [83][85]

Financial Performance (Q3-25) - Net revenue increased by 11% to $1.06 billion compared to $0.96 billion in Q3-24, excluding USAID and DOS [5] - Operating income increased by 37% to $159 million compared to $116 million in Q3-24, excluding USAID and DOS [5] - Earnings per share (EPS) increased by 46% to $0.41 compared to $0.28 in Q3-24, excluding USAID and DOS [5] Segment Performance (Q3-25) - CIG segment net revenue increased by 2% to $633 million [7] - GSG segment net revenue increased by 29% to $429 million [7] - CIG operating income margin increased by 230 basis points to 19.9% [7] - GSG operating income margin increased by 130 basis points to 15.2% [7] Customer Revenue (Q3-25) - U.S Federal net revenue increased by 46% [8] - U.S State & Local net revenue increased by 30% [8] - U.S Commercial net revenue decreased by 4% [8] - International net revenue decreased by 1% [8] Financial Overview (FY25 YTD) - Net revenue increased by 9% to $3.454 billion [14] - EBITDA increased by 15% to $476 million [15] - Operating income increased by 21% to $432 million [16] - Diluted EPS increased by 26% to $1.11 [16] Backlog - Q3-25 Backlog is $3.09B [10] Guidance - Q4-25 Net Revenue is expected to be between $1.0 billion and $1.1 billion [32] - Q4-25 Adjusted EPS is expected to be between $0.38 and $0.43 [32] - FY-25 Net Revenue is expected to be between $4.454 billion and $4.554 billion [32] - FY-25 Adjusted EPS is expected to be between $1.49 and $1.54 [32]

Core Insights - Tetra Tech (TTEK) reported quarterly earnings of $0.43 per share, exceeding the Zacks Consensus Estimate of $0.37 per share, and showing an increase from $0.32 per share a year ago, resulting in an earnings surprise of +16.22% [1] - The company achieved revenues of $1.15 billion for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 1.59% and up from $1.11 billion year-over-year [2] - Tetra has consistently outperformed consensus EPS and revenue estimates over the last four quarters [2] Earnings Outlook - The future performance of Tetra's stock will largely depend on management's commentary during the earnings call and the sustainability of the stock's price movement based on recent earnings and future expectations [3][4] - The current consensus EPS estimate for the upcoming quarter is $0.42 on revenues of $1.16 billion, and for the current fiscal year, it is $1.47 on revenues of $4.6 billion [7] Industry Context - Tetra Tech operates within the Zacks Pollution Control industry, which is currently ranked in the top 37% of over 250 Zacks industries, indicating a favorable industry outlook [8] - The performance of Tetra's stock may also be influenced by the overall outlook for the pollution control industry, as historical data shows that the top 50% of Zacks-ranked industries outperform the bottom 50% by more than 2 to 1 [8]

[Financial Performance Summary](index=1&type=section&id=Financial%20Performance%20Summary) This section provides an overview of Tetra Tech's financial performance, including key highlights for the third quarter and year-to-date fiscal 2025, along with commentary from the CEO [Third Quarter FY2025 Financial Highlights](index=1&type=section&id=Third%20Quarter%20Highlights) Tetra Tech reported strong Q3 FY2025 results, with significant year-over-year growth in reported and adjusted key financial metrics Q3 FY2025 Key Financial Metrics (Year-over-Year) | Metric (Excluding USAID/DOS) | Q3 FY2025 | Change (Y/Y) | | :--- | :--- | :--- | | Net Revenue | $1.06 billion | +11% | | Operating Income | $159 million | +37% | | EPS | $0.41 | +46% | | **Reported Metrics** | **Q3 FY2025** | **Change (Y/Y)** | | Revenue | $1.37 billion | - | | Operating Income | $165 million | +28% | | EPS | $0.43 | +34% | | Operating Cash Flow | $350 million | +148% | - The company's backlog increased both year-over-year and sequentially to **$4.15 billion** (excluding USAID/DOS), indicating strong future revenue potential[6](index=6&type=chunk) [Year-to-Date FY2025 Financial Highlights](index=1&type=section&id=Year%20to%20Date%20Highlights) For the first nine months of FY2025, Tetra Tech demonstrated consistent growth in net revenue, adjusted operating income, and adjusted EPS YTD FY2025 Key Financial Metrics (Year-over-Year, Excluding USAID/DOS) | Metric | YTD FY2025 | Change (Y/Y) | | :--- | :--- | :--- | | Revenue | $3.56 billion | +10% | | Net Revenue | $2.99 billion | +10% | | Adjusted Operating Income | $396 million | +24% | | Adjusted EPS | $1.01 | +31% | - Reported YTD EPS of **$1.11** includes adjustments for a non-cash goodwill impairment of **$0.31 per share** in Q2 and a legal contingency of **$0.35 per share** in Q1[4](index=4&type=chunk)[12](index=12&type=chunk)[15](index=15&type=chunk) [Chairman and CEO Comments](index=2&type=section&id=Chairman%20and%20CEO%20Comments) CEO Dan Batrack attributed strong performance to high-end services and increased client funding, while navigating shifts in U.S. federal priorities - Performance was driven by high-end water, environmental, and sustainable infrastructure services[9](index=9&type=chunk) - Increased client funding for preparing and responding to natural disasters contributed to the strong results[9](index=9&type=chunk) - The company is navigating financial impacts from changing U.S. federal government priorities and related effects on its end markets[9](index=9&type=chunk) [Business Operations and Outlook](index=2&type=section&id=Business%20Operations%20and%20Outlook) This section details Tetra Tech's recent contract wins, capital allocation strategies, and financial guidance for the remainder of fiscal year 2025 [Recent Key Wins](index=2&type=section&id=Recent%20Key%20Wins) Tetra Tech secured several significant U.S. government contracts, including a $990 million engineering design award and multiple large USACE contracts - Secured a **$990 million** multiple-award contract for engineering design for NAVFAC Pacific[13](index=13&type=chunk) - Awarded a **$249 million** multiple-award contract for energy resilience for USACE Huntsville District[13](index=13&type=chunk) - Won a **$248 million** multiple-award contract for planning and engineering services for USACE Europe District[13](index=13&type=chunk) - Obtained a **$94 million** single-award contract for emergency preparedness and response services for the U.S. EPA[13](index=13&type=chunk) [Capital Allocation: Dividend and Share Repurchases](index=2&type=section&id=Quarterly%20Dividend%20and%20Share%20Repurchase%20Program) The company increased its quarterly dividend by 12% and repurchased $25 million in stock, demonstrating continued capital return to shareholders - The Board of Directors approved the **45th consecutive quarterly dividend**, increasing it by **12% year-over-year to $0.065 per share**[8](index=8&type=chunk) - Repurchased **$25 million** of common stock during the third quarter[8](index=8&type=chunk) - As of June 29, 2025, **$648 million** remained available under the approved share repurchase programs[8](index=8&type=chunk) [FY2025 Business Outlook](index=2&type=section&id=Business%20Outlook) Tetra Tech provided FY2025 guidance, projecting full-year net revenue between $4.454 billion and $4.554 billion, with adjusted EPS of $1.49 to $1.54 Fiscal 2025 Guidance | Period | Metric | Guidance Range | | :--- | :--- | :--- | | **Full Year FY2025** | Net Revenue | $4.454B - $4.554B | | | Adjusted EPS | $1.49 - $1.54 | | **Q4 FY2025** | Net Revenue | $1.0B - $1.1B | | | EPS | $0.38 - $0.43 | - The adjusted EPS guidance for FY2025 excludes a legal contingency of **$0.35** (Q1) and a goodwill impairment of **$0.31** (Q2)[12](index=12&type=chunk) [Financial Statements](index=6&type=section&id=Financial%20Statements) This section presents Tetra Tech's consolidated financial statements, including the statements of income, balance sheet, and cash flows [Consolidated Statements of Income](index=7&type=section&id=Consolidated%20Statements%20of%20Income) Q3 2025 revenue was $1.37 billion with $113.8 million net income, while YTD net income of $120.0 million was impacted by significant one-time legal and impairment costs Income Statement Highlights (in thousands) | Metric | Three Months Ended Jun 29, 2025 | Nine Months Ended Jun 29, 2025 | | :--- | :--- | :--- | | Revenue | $1,369,816 | $4,112,490 | | Gross Profit | $251,539 | $687,197 | | Income from Operations | $164,986 | $227,114 | | Net Income Attributable to Tetra Tech | $113,844 | $119,979 | | Diluted EPS | $0.43 | $0.45 | [Balance Sheet](index=6&type=section&id=Balance%20Sheet) As of June 29, 2025, total assets increased to $4.35 billion, with total liabilities at $2.61 billion and stockholders' equity at $1.74 billion Balance Sheet Summary (in thousands) | Metric | June 29, 2025 | September 29, 2024 | | :--- | :--- | :--- | | Total Current Assets | $1,619,796 | $1,527,383 | | Total Assets | $4,353,447 | $4,192,676 | | Total Current Liabilities | $1,376,121 | $1,219,527 | | Long-term Debt | $862,483 | $812,634 | | Total Liabilities | $2,611,351 | $2,362,263 | | Total Stockholders' Equity | $1,742,096 | $1,830,413 | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities for the nine months ended June 29, 2025, was $356.8 million, with significant cash used in investing and financing activities Cash Flow Summary (Nine Months Ended, in thousands) | Cash Flow Activity | June 29, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $356,838 | $253,110 | | Net Cash used in Investing Activities | ($108,273) | ($104,308) | | Net Cash used in Financing Activities | ($234,987) | ($107,458) | | **Ending Cash and Cash Equivalents** | **$242,833** | **$212,321** | [Supplemental and Non-GAAP Information](index=3&type=section&id=Supplemental%20and%20Non-GAAP%20Information) This section provides additional financial details, including reconciliations of GAAP to non-GAAP measures and Regulation G information for a comprehensive view of performance [Reconciliation of GAAP and Non-GAAP Items](index=3&type=section&id=Reconciliation%20of%20GAAP%20and%20Non-GAAP%20Items) This section reconciles GAAP to non-GAAP measures, adjusting for items like legal contingencies and goodwill impairment to provide a clearer view of core performance YTD FY2025 Operating Income Reconciliation (in thousands) | Metric | Amount | | :--- | :--- | | **Operating Income (GAAP)** | **$227,114** | | Legal contingency | $115,000 | | Goodwill impairment | $92,416 | | Contingent consideration | ($2,355) | | **Adjusted Operating Income (Non-GAAP)** | **$432,175** | YTD FY2025 EPS Reconciliation | Metric | Amount | | :--- | :--- | | **EPS (GAAP)** | **$0.45** | | Legal contingency | $0.35 | | Goodwill impairment | $0.31 | | **Adjusted EPS (Non-GAAP)** | **$1.11** | [Regulation G Information](index=10&type=section&id=Regulation%20G%20Information) This section provides Regulation G non-GAAP reconciliations, including revenue breakdowns by segment and a detailed reconciliation from Net Income to Adjusted EBITDA YTD FY2025 Net Revenue by Segment (in millions) | Segment | Net Revenue | | :--- | :--- | | GSG Segment | $1,642.6 | | CIG Segment | $1,811.4 | | **Total Net Revenue** | **$3,454.0** | YTD FY2025 Net Income to Adjusted EBITDA Reconciliation (in thousands) | Metric | Amount | | :--- | :--- | | **Net Income Attributable to Tetra Tech** | **$119,979** | | Add: Income Tax, Interest, D&A | $134,621 | | Add: Goodwill Impairment | $92,416 | | Add: Legal Contingency Costs | $115,000 | | Other Adjustments | ($2,355) | | **Adjusted EBITDA** | **$475,717** |

Core Insights - Tetra Tech, Inc. (TTEK) has secured a $248 million contract from the U.S. Army Corps of Engineers (USACE) for architect-engineer services in the EUCOM region [1][9] - The five-year contract involves multidisciplinary design services across eight European countries, supporting military infrastructure [2][9] - Tetra Tech has recently won multiple contracts that are expected to drive growth, including a $249 million contract for environmental services in the U.S. [3][5] Contract Details - The contract with USACE includes services such as conceptual and detailed design, planning, 3D modeling, and various engineering services [2][9] - Tetra Tech's recent contracts also include a deal for flood management in the UK and three contracts worth $416 million for technical services in the Indo-Pacific region [4] Financial Performance - Tetra Tech's shares have increased by 24.3% over the past three months, outperforming the industry average growth of 17.7% [6] - The company is experiencing growth due to its focus on high-end consulting and engineering services, particularly in its Government Services Group [6] Challenges - Rising selling, general, and administrative expenses, particularly in marketing, may impact Tetra Tech's profit margins in the future [8] - The company's international operations expose it to foreign currency risks [8]

Core Viewpoint - Tetra Tech (NASDAQ: TTEK) has shown strong stock performance, gaining over 20% since mid-March despite concerns regarding budget cuts from USAID and the Department of State [1]. Group 1: Company Performance - Tetra Tech's stock has outperformed expectations, increasing by more than 20% since the last analysis [1]. Group 2: Analyst Background - The analyst has over 15 years of investment experience, focusing on mid-sized hedge funds with assets between $100 million and $500 million, and has a background in analyzing industrial, consumer, and technology sectors [1].

Core Insights - Tetra Tech, Inc. (TTEK) is positioned for growth due to strong performance in its end markets, strategic acquisitions, and a focus on operational excellence [1][5][10] - The company has a market capitalization of $9.5 billion and has outperformed the industry with a 22.4% gain over the past three months compared to the industry's 7.1% [3] Business Strength - TTEK is experiencing robust orders from various sectors including U.S. Federal, State & Local, Commercial, and International clients, with a 23.4% year-over-year increase in net sales from its Government Services Group in the first half of fiscal 2025 [5] - The CIG segment also saw a revenue increase of 1.8% year-over-year in the same period, aided by strong project performance in international operations and the RPS acquisition [6] Acquisition Benefits - Tetra Tech is actively acquiring businesses to enhance its customer base, geographic reach, and product offerings, including the acquisition of Convergence Controls & Engineering in May 2024, which expands its automation solutions in water and energy sectors [7] - The acquisition of LS Technologies in February 2024 strengthened its federal IT capabilities, while the RPS Group buyout in January 2023 enhanced its water practice in the UK and renewable energy focus [8] - A deal to acquire SAGE Group Holdings in May 2025 will further boost Tetra Tech's digital automation solutions across various sectors [9] Shareholder-Friendly Policies - Tetra Tech is committed to returning value to shareholders, having paid out $30.9 million in dividends in the first half of fiscal 2025, an 11.2% increase year-over-year, and a total of $58.8 million in fiscal 2024, up 12.9% [10] - The company raised its quarterly dividend rate by 12% in July 2024 [11] Bullish Guidance - Management has issued a positive revenue guidance for fiscal 2025, expecting revenues between $4.400 billion and $4.765 billion, an increase from $4.322 billion in fiscal 2024 [11]

Core Viewpoint - Tetra Tech (TTEK) shows potential as a strong investment opportunity due to significant revisions in earnings estimates, indicating an improving earnings outlook and potential for continued stock price gains [1][2]. Earnings Estimate Revisions - Analysts have become increasingly optimistic about Tetra Tech's earnings prospects, as reflected in the upward trend of estimate revisions, which typically correlate with stock price movements [2]. - The current-quarter earnings estimate is projected at $0.37 per share, representing a year-over-year increase of +15.63%. Over the past 30 days, the Zacks Consensus Estimate has risen by 8.82% with no negative revisions [6]. - For the full year, the earnings estimate stands at $1.47 per share, reflecting a +16.67% change from the previous year. The consensus estimate has increased by 7.3% during this period, with one estimate moving higher and no negative revisions [7][8]. Zacks Rank and Performance - Tetra Tech currently holds a Zacks Rank 2 (Buy), indicating strong agreement among analysts regarding the positive earnings revisions. This ranking is part of a system that has historically shown that Zacks 1 (Strong Buy) and 2 (Buy) stocks significantly outperform the S&P 500 [9]. - The Zacks Rank system has demonstrated an impressive track record, with Zacks 1 Ranked stocks generating an average annual return of +25% since 2008 [3]. Stock Performance - Tetra Tech's stock has appreciated by 15.8% over the past four weeks, driven by strong estimate revisions and positive investor sentiment, suggesting further upside potential [10].

Core Viewpoint - Tetra Tech (TTEK) has received a Zacks Rank 2 (Buy) upgrade, indicating a positive outlook on its earnings estimates, which significantly influence stock prices [1][3]. Earnings Estimates and Stock Price Impact - The Zacks rating system is based on changes in earnings estimates, which are strongly correlated with near-term stock price movements [4][6]. - Rising earnings estimates for Tetra suggest an improvement in the company's underlying business, likely leading to higher stock prices [5]. Recent Earnings Estimate Revisions - For the fiscal year ending September 2025, Tetra is expected to earn $1.47 per share, reflecting a 16.7% increase from the previous year [8]. - Over the past three months, the Zacks Consensus Estimate for Tetra has increased by 7.3% [8]. Zacks Rank System Overview - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with Zacks Rank 1 (Strong Buy) stocks historically generating an average annual return of +25% since 1988 [7]. - Tetra's upgrade to Zacks Rank 2 places it in the top 20% of Zacks-covered stocks, indicating strong potential for market-beating returns in the near term [10].

Core Viewpoint - Tetra Tech, Inc. reported strong second-quarter fiscal 2025 results, with adjusted earnings per share of 33 cents, exceeding expectations and reflecting an 18% year-over-year increase driven by robust performance across all segments [1][2]. Revenue & Segmental Performance - Tetra Tech generated revenues of $1.32 billion, a 5.6% year-over-year increase, surpassing management's guidance [1][2]. - Adjusted net revenues were $1.10 billion, up 5% year over year, also exceeding the Zacks Consensus Estimate of $1.05 billion [2]. - The backlog at the end of the fiscal second quarter was $4.09 billion, an increase of $127 million year over year [2]. - Revenues from U.S. Federal customers (30% of total revenues) increased by 1%, supported by projects from the Defense and U.S. Army Corps of Engineers [3]. - U.S. Commercial sales (17% of total revenues) rose by 5%, driven by environmental remediation and high-voltage transmission sales [3]. - U.S. State and Local sales (15% of total revenues) surged by 44% year over year, bolstered by disaster response efforts [4]. - International sales (38% of total revenues) increased by 1%, supported by U.K. planning and design [4]. - Government Services Group segment revenues were $521 million, up 12% year over year, while Commercial/International Services Group segment revenues totaled $597 million, a 2% increase [4]. Margin Profile - Subcontractor costs totaled $218.4 million, a 9.8% increase from the previous year [5]. - Adjusted operating income rose by 10.5% year over year to $130.09 million, with an adjusted margin increase of 40 basis points to 9.8% [6]. Balance Sheet and Cash Flow - Cash and cash equivalents at the end of the fiscal second quarter were $179.4 million, down from $232.7 million at the end of the previous quarter [7]. - Long-term debt decreased to $764.1 million from $812.6 million [7]. - In the first six months of fiscal 2025, net cash generated from operating activities was $7.24 million, compared to $112.2 million in the prior year [8]. - Capital expenditure increased by 25.6% year over year to $9.37 million [8]. - Proceeds from borrowings amounted to $215 million, with long-term debt repayments totaling $15 million [8]. Shareholder-Friendly Policies - Tetra Tech distributed dividends totaling $30.9 million in the first six months of fiscal 2025, up from $27.8 million in the previous year [9]. - The company repurchased shares worth $175 million during the same period [9]. Fiscal 2025 Outlook - For fiscal 2025, Tetra Tech anticipates net revenues in the range of $4.400-$4.765 billion, an increase from the previous guidance [10]. - Adjusted earnings are projected to be between $1.42 and $1.52 per share, compared to earlier expectations of $1.37-$1.52 [10]. - For the fiscal third quarter, management estimates net revenues of $1.10-$1.20 billion and adjusted earnings of 35-40 cents per share [11].