Tetra Tech(TTEK) - 2025 Q3 - Quarterly Results

Financial Performance Summary 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 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] Year-to-Date FY2025 Financial Highlights 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][12][15] Chairman and CEO Comments 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] - Increased client funding for preparing and responding to natural disasters contributed to the strong results[9] - The company is navigating financial impacts from changing U.S. federal government priorities and related effects on its end markets[9] Business Operations and Outlook 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 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] - Awarded a $249 million multiple-award contract for energy resilience for USACE Huntsville District[13] - Won a $248 million multiple-award contract for planning and engineering services for USACE Europe District[13] - Obtained a $94 million single-award contract for emergency preparedness and response services for the U.S. EPA[13] Capital Allocation: Dividend and Share Repurchases 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] - Repurchased $25 million of common stock during the third quarter[8] - As of June 29, 2025, $648 million remained available under the approved share repurchase programs[8] FY2025 Business Outlook 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] Financial Statements This section presents Tetra Tech's consolidated financial statements, including the statements of income, balance sheet, and cash flows Consolidated Statements of Income 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 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 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 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 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 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 |