Tetra Tech(US:TTEK)2022-11-10 21:21Financial Data and Key Metrics Changes - The company achieved record revenue of $3.5 billion for fiscal year 2022, up 9% from the previous year, and record net revenue of $2.84 billion, up 11% year-over-year [19] - Fourth quarter net revenue reached an all-time high of $736 million, a 12% increase from the same quarter last year, with operating income of $94 million, resulting in earnings per share of $1.26, up 30% year-over-year [11][19] - The backlog increased to an all-time high of $3.74 billion, representing an 8% increase from last year [16] Performance by Business Lines - Government Services Group (GSG) revenue was $336 million, up 8% year-over-year, with a margin of 15.1%, an increase of 130 basis points [14] - The Commercial/International Group (CIG) grew by 15% year-over-year, delivering a margin of 13.6%, up 80 basis points [15] - U.S. federal client revenue accounted for 29% of total revenue, increasing by 15% year-over-year, while U.S. commercial net revenue was up 25% [12][13] Market Data and Key Metrics Changes - International revenues increased by 15% on a constant currency basis, driven by sustainable infrastructure programs in Australia, the UK, and Canada [13] - The company reported strong demand for services aligned with climate change priorities across government and commercial clients [7] Company Strategy and Development Direction - The company is focused on water, environment, and sustainable infrastructure, leveraging its "Leading with Science" approach [6] - The strategic acquisition of RPS Group is expected to enhance capabilities in water management and expand geographic reach [48][50] - The company anticipates growth driven by recent legislative actions, including the Infrastructure Investment and Jobs Act, CHIPS Act, and Inflation Reduction Act [34][39] Management's Comments on Operating Environment and Future Outlook - Management expects U.S. federal revenue to grow by about 10% in alignment with government priorities, with state and local revenues projected to grow at a double-digit pace [43][44] - The company is optimistic about the impact of new funding from the Infrastructure Investment and Jobs Act, expecting new orders to ramp up in the second half of fiscal year 2023 [35][36] - Management noted that the Inflation Reduction Act may have the longest lag in terms of impact, with contributions expected in fiscal year 2024 [98] Other Important Information - The company paid out $46 million in dividends in fiscal 2022, with a 15% increase in the quarterly dividend to $0.23 per share [25] - The company returned $246 million to shareholders through dividends and share buybacks, achieving a total shareholder return of 54% over the last three years [26] Q&A Session Summary Question: Why is there no material contribution from IIJA funding in fiscal '23 guidance? - Management explained that funding flows through a sequence of steps, with solicitations for contracts occurring before revenue recognition, leading to a slow ramp-up in fiscal year 2023 [56][58][62] Question: What are the margin enhancement expectations from the RPS acquisition? - Management indicated that RPS historically had higher margins than Tetra Tech and expects to achieve double-digit margins within the first year post-acquisition [63][68] Question: Is RPS seen as a platform for further international acquisitions? - Management confirmed that RPS will provide a foothold for additional bolt-on acquisitions in international markets, particularly in the UK and Australia [80][84] Question: What is the expected financial profile post-RPS acquisition? - Management stated that they aim to maintain leverage between 1 to 2 times earnings and prioritize internal growth and acquisitions over buybacks [108][109]