Tetra Tech(US:TTEK)2022-05-06 20:08Revenue Growth - Revenue increased by 12.6% in the first half of fiscal 2022 compared to the prior-year period, driven by increased activity with U.S. state and local government clients and commercial clients [114]. - U.S. state and local government revenue rose by 23.7% in the first half of fiscal 2022, particularly from municipal water infrastructure projects in California, Texas, and Florida [115]. - U.S. federal government revenue decreased by 2.5% in the first half of fiscal 2022, primarily due to reduced international development activity, especially in Afghanistan [116]. - U.S. commercial revenue increased by 15.6% in the first half of fiscal 2022, attributed to more activity on environmental programs and high performance buildings [117]. - International revenue increased by 22.7% in the first half of fiscal 2022 compared to the prior-year period, driven by government stimulus spending and sustainability initiatives [118]. - Total revenue for the second quarter of fiscal 2022 was $852.7 million, a 13.0% increase from $754.8 million in the same quarter of the previous year [120]. - Revenue for Q2 fiscal 2022 was $416.9 million, a 24.3% increase from $335.4 million in Q2 fiscal 2021; for the first half, revenue was $833.2 million, up 20.4% from $692.0 million [130]. - For the first half of fiscal 2022, revenue increased by $191.4 million, or 12.6%, compared to the prior-year period [122]. Profitability - Net income for the second quarter of fiscal 2022 was $53.0 million, reflecting a 16.5% increase from $45.5 million in the same quarter of fiscal 2021 [120]. - Diluted earnings per share (EPS) increased to $0.98 in the second quarter of fiscal 2022, up 18.1% from $0.83 in the prior-year period [120]. - Adjusted EPS for the first half of fiscal 2022 was $2.17, reflecting a 21.2% increase from the prior-year period [124]. - Operating income increased by $8.9 million (17.0%) in Q2 and $17.4 million (28.9%) in the first half of fiscal 2022 compared to the prior-year periods [129][132]. - The operating margin improved to 15.3% in the first half of fiscal 2022 from 13.7% in fiscal 2021; excluding ERCs, the margin was 14.8% [129]. Segment Performance - The Government Services Group (GSG) accounted for 52.6% of revenue in the three months ended April 3, 2022, while the Commercial/International Services Group (CIG) accounted for 48.9% [106]. - The Government Services Group (GSG) segment reported revenue of $448.9 million in the second quarter of fiscal 2022, a 3.8% increase from $432.6 million in the same quarter of fiscal 2021 [128]. - The Commercial/International Services Group (CIG) segment's revenue increased by $81.5 million, or 24.3%, in the second quarter of fiscal 2022 compared to the same quarter of fiscal 2021 [120]. Cash Flow and Financial Position - The company generated $177.5 million in cash from operations in the first half of fiscal 2022, an increase of $20.1 million compared to the prior-year period [141]. - As of April 3, 2022, the company had $194.4 million in cash and cash equivalents and access to an additional $799.3 million in borrowings under its credit facility [134]. - The company had $250.0 million in outstanding borrowings under the Amended Credit Agreement as of April 3, 2022, with a year-to-date weighted-average interest rate of 1.27% [146]. - The company maintained a consolidated leverage ratio of 0.82x and a consolidated interest coverage ratio of 28.09x as of April 3, 2022, in compliance with its credit agreement covenants [147]. - The company repurchased 618,236 shares at an average price of $161.75 per share for a total cost of $100.0 million in the first half of fiscal 2022 [137]. Tax and Interest Rates - The effective tax rate for the first half of fiscal 2022 was 21.9%, compared to 19.2% in the first half of fiscal 2021 [126]. - The company is exposed to interest rate risk under its Amended Credit Agreement, with borrowing options based on a benchmark rate plus a margin ranging from 1.000% to 1.875% per annum [160]. - The notional principal of the company's outstanding interest rate swap agreements was $206.3 million, with an average effective interest rate of 3.50% on borrowings [161]. Foreign Currency and International Business - For the first half of fiscal 2022, 30.8% of the company's consolidated revenue was generated by international business, compared to 28.3% in the first half of fiscal 2021 [164]. - The effect of foreign exchange rate translation on the consolidated balance sheets for the first half of fiscal 2022 resulted in an increase in equity by $2.1 million, compared to an increase of $43.4 million in the first half of fiscal 2021 [164]. - The company reported $1.3 million of foreign currency losses in the first half of fiscal 2021, while the impact for the first half of fiscal 2022 was immaterial [163]. Strategic Focus - The company continuously evaluates acquisition opportunities to strengthen its market leadership and expand service offerings [110]. - The company remains focused on providing high-end consulting and engineering services, leveraging advanced analytics, artificial intelligence, and digital technology solutions [98]. - The company utilizes off-balance sheet arrangements, including letters of credit and bank guarantees, to support project performance and insurance programs [155]. - The company has entered into various agreements related to unconsolidated subsidiaries and joint ventures, where it is jointly and severally liable for project execution commitments [156]. - The company does not enter into derivative financial instruments for trading or speculation purposes, focusing instead on managing interest rate and foreign currency transaction risks [159].