Financial Performance - Tetra Tech reported quarterly earnings of $0.35 per share, exceeding the Zacks Consensus Estimate of $0.34 per share, and up from $0.28 per share a year ago, representing an earnings surprise of 2.94% [1] - The company posted revenues of $1.2 billion for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 8.85%, compared to $1.02 billion in the same quarter last year [2] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.33 on revenues of $1.15 billion, and for the current fiscal year, it is $1.45 on revenues of $4.66 billion [7] - The estimate revisions trend for Tetra is mixed, resulting in a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [6] Industry Context - Tetra Tech operates within the Zacks Pollution Control industry, which is currently ranked in the bottom 40% of over 250 Zacks industries, suggesting potential challenges for stock performance [8] - The performance of Tetra's stock may be influenced by the overall outlook for the Pollution Control industry, as empirical research indicates that top-ranked industries outperform lower-ranked ones significantly [8]

Revenue and Growth - Record revenue of $1.42 billion, up 16% year-over-year[1] - Record net revenue of $1.20 billion, up 18% year-over-year[1] - Total revenue for 2024 was $5,198.7 million, up from $4,522.6 million in 2023, representing a growth of approximately 15%[25] - Net revenue for the GSG segment reached $1,910.0 million in 2024, compared to $1,635.5 million in 2023, indicating a growth of about 16.8%[25] - Adjusted EBITDA for the year 2024 was $584,032 thousand, an increase from $481,096 thousand in 2023, reflecting a growth of approximately 21.4%[26] Financial Performance - Adjusted operating income increased 24% year-over-year to $138 million[5] - Net income for the three months ended December 29, 2024, was $778 thousand, a significant decrease from $74,980 thousand in the same period of 2023[24] - Net cash provided by operating activities increased to $13,063 thousand from $9,246 thousand year-over-year[24] Backlog and Contracts - Record backlog of $5.44 billion, up 15% year-over-year[1] - Added over $1 billion of new contract capacity in the first quarter[6] Guidance and Expectations - Full year guidance for net revenue expected to range from $4.365 billion to $4.765 billion[10] - Adjusted EPS guidance for fiscal 2025 expected to range from $1.37 to $1.52[10] Shareholder Returns - Quarterly dividend increased by 12% year-over-year to $0.058 per share[7] - Repurchased $25 million of common stock in the first quarter[7] - The company repurchased $25,000 thousand of common stock during the period, indicating a commitment to returning value to shareholders[24] Cash and Capital Management - Cash and cash equivalents at the end of the period increased to $248,104 thousand from $198,689 thousand, marking a rise of about 24.9%[24] - Proceeds from borrowings amounted to $90,000 thousand, down from $125,000 thousand in the previous year[24] - Capital expenditures remained stable at $3,433 thousand, consistent with the previous year[24] - The company paid $14,489 thousand in income taxes during the period, a decrease from $43,297 thousand in the same quarter of the previous year[24] Operational Efficiency - Industry-leading Days Sales Outstanding (DSO) of 55.9 days[5]

Core Insights - Tetra Tech, Inc. (TTEK) is experiencing strong order growth across various sectors, particularly benefiting from its Government Services Group segment, which saw a 12% year-over-year increase in net sales in Q4 of fiscal 2024 [1] - The company anticipates revenues between $1.09 billion and $1.15 billion for Q1 of fiscal 2025, reflecting a 10% year-over-year increase at the midpoint [2] - Tetra Tech is actively pursuing acquisitions to expand its customer base and service offerings, including the recent acquisition of Convergence Controls & Engineering [3][4] - The company is committed to returning value to shareholders, having increased its dividend payouts by 12.9% year-over-year in fiscal 2024 [5] Financial Performance - The Government Services Group segment's net sales increased by 12% year-over-year in Q4 of fiscal 2024 [1] - The Commercial/International Services Group segment's revenues rose by 5% year-over-year in the same quarter [2] - Tetra Tech paid out $58.8 million in dividends in fiscal 2024, up from $52.1 million in fiscal 2023 [5] Acquisitions and Growth Strategy - The acquisition of Convergence Controls & Engineering enhances Tetra Tech's capabilities in integrated automation solutions for water and energy sectors [3] - The acquisition of LS Technologies in February 2024 expanded the federal IT practice within the Government Services Group [4] - The RPS Group buyout in January 2023 strengthened Tetra Tech's position in the UK water practice and renewable energy sectors [4] Cost and Expense Challenges - Total cost of sales increased by 13.2% in Q4 of fiscal 2024 due to rising input costs [8] - Selling, general, and administrative expenses rose by 20% year-over-year in the same quarter, primarily due to increased marketing costs [8] Market Performance - Tetra Tech's shares have gained 29% over the past year, outperforming the industry growth of 27.7% [7]

Company Overview - Tetra Tech, Inc. is a company founded in 1966 and headquartered in California, specializing in water treatment and environmental consulting [3] - The company has a strong institutional backing, with over 90% of its float being institutionally owned [3] Investment Position - The analyst has a beneficial long position in Tetra Tech shares, indicating confidence in the company's future performance [3] - The article expresses the analyst's personal opinions and is not influenced by external compensation [3]

Core Insights - Tetra Tech is a leading provider of consulting, construction management, engineering, program management, and technical services, focusing on water, environmental, and alternative energy solutions [1] Segment Performance - The Government Services Group (GSG) segment saw a 12% year-over-year increase in net sales in Q4 of fiscal 2024, driven by higher international development and advanced water treatment work [5] - The Commercial / International Services Group segment's revenues increased by 5% year-over-year in the same quarter, supported by strong project performance in international operations and the RPS acquisition [5] Recent Acquisitions - Tetra Tech acquired Amyx, Inc. in January 2023, enhancing its capabilities in advanced data analytics, cybersecurity, and digital transformation within the GSG segment [6] - In May 2024, the company acquired Convergence Controls & Engineering, which will allow it to offer integrated automation platform solutions in the water and energy sectors [9] - The acquisition of LS Technologies in February 2024 will add significant capabilities to Tetra Tech's federal IT practice within the GSG segment [9] Business Strength - Tetra Tech's diversified business structure mitigates risks from weaknesses in specific markets, while its focus on high-end consulting, design, and engineering services enhances its competitive edge [12] - The company reported a 9% year-over-year revenue increase in Q4 of fiscal 2024, driven by increased activity across various client sectors [12] Shareholder Returns - Tetra Tech returned $58.8 million to shareholders in dividends during fiscal 2024, marking a 12.9% increase year-over-year, with a quarterly dividend rate hike of 12% in July 2024 [18] Stock Performance - Tetra Tech's stock has gained 20% over the past year, outperforming the industry growth of 19.2% [17]

Company Performance - Tetra Tech ranked 1 in Water Treatment and Desalination for 11 consecutive years and also achieved top rankings in various consulting and engineering categories in 2024[9]. - The company worked on over 100,000 projects across more than 100 countries in fiscal 2024, supported by a workforce of 30,000 associates[9]. - Revenue for fiscal 2024 reached $5,198,679 thousand, a 15.0% increase from $4,522,550 thousand in fiscal 2023[124]. - Gross profit increased to $866,440 thousand, reflecting a 19.5% growth compared to $725,029 thousand in the previous year[124]. - Net income attributable to Tetra Tech was $333,382 thousand, a 21.9% increase from $273,420 thousand in the prior year[124]. - Diluted earnings per share (EPS) increased to $1.23, up 20.6% from $1.02 in fiscal 2023[126]. - The company’s backlog at the end of fiscal 2024 was $5.4 billion, an increase of $586 million, or 12.2%, compared to fiscal 2023 year-end[40]. - The company generated 38.5% of its revenue from international operations, primarily in Canada, Australia, Europe, and the United Kingdom[60]. Revenue Breakdown - Revenue from the Government Services Group (GSG) accounted for 47.8% of total revenue in fiscal 2024, while the Commercial/International Services Group (CIG) contributed 53.6%[17]. - CIG's revenue from U.S. federal government clients increased to 32.2% in fiscal 2024, up from 30.7% in 2023 and 30.4% in 2022[27]. - International clients accounted for 38.5% of CIG's revenue in fiscal 2024, compared to 36.7% in 2023 and 31.0% in 2022[27]. - U.S. federal government revenue grew by 20.8% to $1,676.0 million, primarily due to increased international development and environmental activities[120]. - International revenue rose by 20.6% to $1,999.9 million, supported by higher renewable energy revenue and contributions from recent acquisitions[122]. - Fiscal 2024 revenue breakdown: 32% from U.S. federal government, 12% from U.S. state and local government, 18% from U.S. commercial clients, and 38% from international clients[206]. Strategic Initiatives - Tetra Tech's proprietary technologies, collectively known as Tetra Tech Delta, provide a competitive advantage through advanced data analytics and AI-enabled solutions[14]. - The company emphasizes sustainable solutions in water management and environmental programs, addressing regulatory requirements and improving operational efficiencies[18]. - CIG's strategic growth plans include selective acquisitions to enhance service offerings and expand geographic presence[32]. - The company initiated the Billion People Challenge in 2021, aiming to improve the lives of one billion people by 2030[35]. - The company actively engages in disaster response and community resilience services, utilizing specialized software and advanced analytics for effective management[20]. Acquisitions and Growth - In fiscal 2023, the company completed the acquisition of RPS Group plc for a total of $784 million, funded with debt[36]. - The company acquired LS Technologies in Q2 of fiscal 2024, enhancing its capabilities in advanced data analytics and cybersecurity for U.S. government clients[36]. - The company acquired Convergence Controls & Engineering in Q3 of fiscal 2024, focusing on process automation and systems integration solutions[36]. - Recent acquisitions contributed $332 million to revenue growth, with $115 million attributed to U.S. federal government revenue[119]. Financial Management - The company employs a comprehensive risk management strategy, including general liability and cyber liability insurance policies[46]. - The company regularly evaluates acquisition opportunities to strengthen its market leadership and drive organic growth[36]. - The company declared and paid dividends totaling $0.220 per share in fiscal 2024, compared to $0.196, $0.172, $0.148, and $0.128 per share in fiscal 2023, 2022, 2021, and 2020 respectively[112]. - The company maintained a consolidated leverage ratio of 1.38x and a consolidated interest coverage ratio of 13.94x, in compliance with financial covenants[148]. Risks and Challenges - The company faces risks related to project completion and performance standards, which could adversely affect profitability if not managed effectively[58]. - Economic downturns and reduced client spending could lead to a deterioration in revenue, profits, and overall financial condition[60]. - The company operates in a highly competitive environment, which may force price concessions and impact market share if competitiveness is not maintained[60]. - The company relies on timely collection of receivables to generate cash flow, and delays in payment could negatively impact operations[74]. - Cybersecurity incidents could adversely impact operations and result in significant costs and reputational harm[71]. Compliance and Regulations - The company is subject to various procurement laws and regulations, and violations could result in sanctions or loss of government contractor status, significantly reducing profits and revenue[89]. - The company must comply with U.S. federal, state, local, and foreign laws related to government contracts, which are subject to regular audits[89]. - The company is subject to evolving data privacy laws, and non-compliance could lead to significant fines and operational disruptions[100]. Employee and Workplace Initiatives - The company is committed to maintaining a healthy and safe work environment, providing training to all associates to support safe work execution[49]. - The company emphasizes diversity, equity, inclusion, and accessibility, with initiatives to attract a diverse range of candidates and promote an inclusive culture[49]. - The company offers a wide range of internal and external learning and development opportunities to support employee growth and skill enhancement[49].

Core Insights - Tetra Tech, Inc. reported adjusted earnings of 38 cents per share for Q4 fiscal 2024, exceeding the Zacks Consensus Estimate of 37 cents, with a year-over-year increase of 15% driven by strong segment performance [1] - The company generated revenues of $1.37 billion, reflecting a 9% year-over-year increase, and adjusted net revenues were $1.14 billion, up 8% year over year, meeting the upper end of management's guidance [2] - The backlog at the end of Q4 was $5.38 billion, a 12% increase year over year, with U.S. Federal customer revenues up 12% and international sales up 6% [3][4] Revenue & Segmental Performance - U.S. Federal revenues accounted for 33% of total revenues, increasing 12% year over year, while U.S. Commercial sales rose 3% [3] - U.S. State and Local sales increased 9% year over year, and international sales were up 6%, supported by infrastructure sector strength [4] - Government Services Group segment net sales were $513 million, up 12% year over year, while Commercial/International Services Group revenues totaled $632 million, representing a 5% increase [4] Margin Profile - Subcontractor costs totaled $230 million, up 13.2% year over year, while other adjusted costs of revenues were $899.2 million, up 6.4% [5] - Operating income increased 33.4% year over year to $143.3 million, with an adjusted margin increase of 50 basis points to 13.3% [6] Balance Sheet and Cash Flow - Cash and cash equivalents at the end of Q4 were $232.7 million, up from $168.8 million a year ago, while long-term debt decreased to $812.6 million from $879.5 million [7] - Net cash generated from operating activities was $358.7 million, down from $368.5 million in the prior year, with capital expenditure down 32.7% to $18.1 million [8] - Tetra Tech distributed $58.8 million in dividends, an increase from $52.1 million in the previous fiscal year, and repurchased shares worth $12.9 million [8] Fiscal 2025 Outlook - For fiscal 2025, Tetra Tech anticipates net revenues between $4.565 billion and $4.765 billion, higher than the $4.322 billion reported in fiscal 2024, with adjusted earnings projected at $1.40-$1.50 per share [9] - For Q1 fiscal 2025, management estimates net revenues in the range of $1.09-$1.15 billion and adjusted earnings of 32-34 cents per share [9]

Company Performance - Tetra Tech reported quarterly earnings of $0.38 per share, exceeding the Zacks Consensus Estimate of $0.37 per share, and showing an increase from $0.36 per share a year ago, representing an earnings surprise of 2.70% [1] - The company posted revenues of $1.14 billion for the quarter ended September 2024, surpassing the Zacks Consensus Estimate by 2.46%, and up from $1.06 billion year-over-year [2] - Tetra Tech has consistently surpassed consensus EPS estimates over the last four quarters [2] Stock Performance - Tetra shares have increased approximately 44.6% since the beginning of the year, compared to the S&P 500's gain of 25.5% [3] - The current consensus EPS estimate for the upcoming quarter is $0.34 on revenues of $1.1 billion, and for the current fiscal year, it is $1.45 on revenues of $4.64 billion [7] Industry Outlook - The Pollution Control industry, to which Tetra Tech belongs, is currently ranked in the bottom 20% of over 250 Zacks industries, indicating potential challenges ahead [8] - The performance of Tetra Tech's stock may be influenced by the overall outlook for the industry [8]

Tetra Tech, Inc. (TTEK) recently announced that the company along with its business unit, RPS, secured a contract from Northern Ireland ("NI") Water for the NI water management framework. The NI framework, which is worth £800 million, aims to support the planning and delivery of major water and wastewater infrastructure projects in Northern Ireland. As part of the eight-year framework, Tetra Tech's experts will assist NI Water in managing the climate resilience program and delivering sustainable services to ...

Robert F. Abbott has been investing his family's accounts since 1995, and in 2010 added options, mainly covered calls and collars with long stocks. He is a freelance writer, and his projects include a website that provides information for new and intermediate-level mutual fund investors. A resident of Airdrie, Alberta, Canada, Robert has earned Bachelor of Arts and Master of Business Administration (MBA) degrees. Analyst's Disclosure: I/we have no stock, option or similar derivative position in any of the c ...