Financial Data and Key Metrics Changes - Tetra Tech reported record net revenue of $1.07 billion for Q4 2025, a 10% increase from the previous year [6] - Operating income reached $168 million, up 23%, with earnings per share growing by 29% to $0.44 for the quarter [6][7] - Fiscal year 2025 revenue increased by 7%, while operating income rose by 18%, and EBITDA increased by 13% [13][14] Business Line Data and Key Metrics Changes - Government Services Group (GSG) revenue grew by 17% to $396 million in Q4, with a margin performance of 22.9%, up 330 basis points from the prior year [8] - Commercial International Group revenue increased by 7% to $676 million, with margins excluding Australia up by about 60 basis points [8] - U.S. federal work accounted for 21% of total business, up 22% from the prior year, primarily driven by contracts with the U.S. Army Corps of Engineers [9] Market Data and Key Metrics Changes - International work constituted about 45% of overall business, growing at a 9% rate, with notable increases in the UK water business and Canadian clean energy [9] - U.S. state and local markets grew by 19%, driven by municipal water treatment and digital water modernization [9] - U.S. commercial work saw a slight decline, impacted by reductions in renewable energy work, but high-voltage transmission work is rapidly growing due to increased energy demand [9] Company Strategy and Development Direction - Tetra Tech focuses on high-end consulting and leadership in water services, which are expected to be in higher demand in the fastest-growing markets [4][20] - The company aims to capitalize on large global investments in water-reliant infrastructure, with a total addressable market in the hundreds of billions [20] - Tetra Tech is positioned to benefit from increased defense budgets and infrastructure projects, particularly in coastal resiliency and flood protection [26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate changes in U.S. federal government priorities and maintain record financial performance [4] - The outlook for fiscal year 2026 includes expected growth rates of 5-10% for international and U.S. commercial work, and 10-15% for state and local work [30][32] - The company anticipates a strong start to fiscal year 2026, supported by ongoing demand for high-end water services [33] Other Important Information - Tetra Tech's backlog reached $4.14 billion, with a strong quarter of contract awards, including over $1.2 billion in new contracts with U.S. defense agencies [11] - The company announced a 12% increase in its quarterly dividend, marking the 42nd consecutive quarterly dividend with annual double-digit increases [18] - Tetra Tech's net debt amounted to about $600 million, with a leverage ratio of 0.9 times EBITDA, indicating a strong balance sheet [16] Q&A Session Summary Question: Why is revenue growth expected to decouple from backlog growth this year? - Management explained that the U.S. federal government's funding has become shorter in duration, leading to smaller task orders, while state and local work continues to grow, keeping the backlog flat [36][38] Question: Can you provide details on international business performance? - The strongest growth was seen in the UK and Europe, particularly in water programs, while Canada is expected to improve due to recent infrastructure spending [42][44] Question: How was the fiscal 2026 guidance range built? - The guidance reflects expected growth rates across various sectors, with potential deviations based on clarity in international markets and U.S. state department funding [51][57]