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 ...

Tetra Tech, Inc. (TTEK) has secured a $249 million contract from the U.S. Army Corps of Engineers (USACE) Omaha District to offer environmental evaluation and design services for facilities and sites across the United States. Per the seven-year, multiple-award deal, TTEK's scientists, engineers and technical experts will deliver various environmental services. This includes creating water resource management plans, evaluating and protecting ecosystems and designing sustainable building features to enhance w ...

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Financial Data and Key Metrics Changes - Tetra Tech reported record quarterly revenue of $1.11 billion, a 12% increase year-over-year [6] - EBITDA increased by 32% to $129 million, resulting in a 13.3% EBITDA margin, up 120 basis points from the previous year [6] - Earnings per share reached an all-time high of $1.59, up 42% from the prior year [6][11] - Year-to-date net revenues increased by 18% to over $3 billion, with EBITDA up 41% to $414 million [12][13] - The company raised its full-year guidance for fiscal year 2024, projecting revenue between $4.27 billion and $4.32 billion [25] Performance by Business Segments - Government Services Group (GSG) revenue increased by 25% to $488 million, with a margin of 14.6%, up 60 basis points [6][11] - Commercial International Group (CIG) grew net revenue by 4% year-over-year, achieving a margin of 13.9%, up 230 basis points [7][11] - RPS activities within CIG reached an 11% margin, up 400 basis points from the previous year [7] - Excluding disaster response work, state and local revenues grew by 8%, driven by advanced water treatment projects [9] Market Data and Key Metrics Changes - U.S. federal client work increased by 34%, with underlying growth at 18% excluding extraordinary work in Ukraine [8][9] - International revenue represented about 40% of total company revenue, growing at a rate of 5% during the quarter [9] - The backlog reached an all-time high of $5.23 billion, up 19% year-over-year, with a book-to-bill ratio of 1.4 [11] Company Strategy and Industry Competition - The company focuses on high-end consulting and sustainable infrastructure, particularly in water and environmental sectors [4] - Tetra Tech aims to enhance margins through front-end advisory and consulting work [4][5] - The company is actively pursuing acquisitions in technology innovations, especially in water and environmental spaces [17][44] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in strong demand for differentiated services across water and environmental markets [27] - The company anticipates continued organic growth rates of 6% to 10% over the next several years [40] - Management noted that the recent Supreme Court ruling on Chevron deference may create new opportunities for Tetra Tech [34] Other Important Information - Tetra Tech announced a 5-for-1 stock split to increase liquidity and lower trading costs for investors [19] - The company approved a quarterly dividend of $0.29, marking a 12% increase year-over-year [17] Q&A Session Summary Question: How should investors interpret the healthy backlog in terms of visibility for hitting annual organic growth targets? - Management cautioned that backlog growth may not directly translate into net revenue growth, noting that extraordinary contributions from Ukraine were included in the backlog [30] Question: Are there areas of the business exposed to changes in regulation due to the Chevron ruling? - Management indicated that most environmental compliance work is regulated at the state and local level, minimizing the impact of federal regulatory changes [31][32] Question: What is the revenue contribution from high-performance buildings and data centers? - The company is tracking towards a $100 million revenue target for advanced manufacturing and data centers, expecting a 20% CAGR for that market [35] Question: How does the company view M&A opportunities in light of rising uncertainty in U.S. policy? - Management emphasized that the U.S. remains the largest market for environmental stewardship and clean water, and they will continue to focus on technology acquisitions [36][44] Question: What is the visibility on the Ukraine contribution to revenue? - Management confirmed that they have significant contract capacity in Ukraine, with $160 million booked in the quarter and expectations for continued work [47] Question: How long will the transition away from lower-margin work in RPS take? - Management indicated that the transition is expected to complete within one to two quarters, after which higher-margin contributions from RPS will be realized [49]

Core Viewpoint - Tetra Tech, Inc. reported strong financial performance for the third quarter of fiscal 2024, with adjusted earnings and revenues exceeding expectations, driven by robust growth across all segments [1][2]. Revenue & Segmental Performance - Tetra Tech generated revenues of $1.34 billion, reflecting an 11% year-over-year increase, and adjusted net revenues were $1.11 billion, up 12% year over year [2] - The backlog at the end of the fiscal third quarter was $5.23 billion, representing a 19% increase year over year [2] - Revenues from U.S. Federal customers increased by 34% year over year, while U.S. Commercial sales rose by 7% [3] - U.S. State and Local sales increased by 8% year over year, and international sales were up 5% [4] - The Government Services Group segment reported net sales of $488 million, up 25% year over year, while the Commercial/International Services Group segment totaled $621 million, representing a 4% increase [4] Margin Profile - Tetra Tech's operating income increased by 32% year over year to $129 million, with an adjusted margin rising by 150 basis points to 11.6% [5] Balance Sheet and Cash Flow - At the end of the fiscal third quarter, Tetra Tech had cash and cash equivalents of $212.3 million, up from $168.8 million at the end of the previous fiscal year [6] - Long-term debt decreased to $861.8 million from $879.5 million [6] - In the first nine months of fiscal 2024, net cash generated from operating activities was $253.1 million, compared to $246.1 million in the prior year [7] Shareholder-Friendly Policies - Tetra Tech distributed dividends totaling $43.3 million in the first nine months of fiscal 2024, an increase from $38.3 million in the same period last year [8] - The company repurchased shares worth $12.9 million during the same period [8] Fiscal 2024 Outlook Raised - For fiscal 2024, Tetra Tech anticipates net revenues in the range of $4.27-$4.32 billion, an increase from the previous guidance of $4.21-$4.31 billion [9] - Adjusted earnings are projected to be $6.23-$6.28 per share, up from the earlier estimate of $6.15-$6.25 [9] - For the fiscal fourth quarter, net revenues are estimated to be between $1.09-$1.14 billion, with adjusted earnings projected at $1.82-$1.87 per share [9]

While management's discussion of business conditions on the earnings call will mostly determine the sustainability of the immediate price change and future earnings expectations, it's worth having a handicapping insight into the odds of a positive EPS surprise. Revenues are expected to be $1.09 billion, up 10.4% from the year-ago quarter. Earnings Whisper The earnings report, which is expected to be released on July 31, 2024, might help the stock move higher if these key numbers are better than expectations ...