Tetra Tech(US:TTEK)2022-02-03 21:23Financial Data and Key Metrics Changes - The company reported record first-quarter revenue of $679 million, a 12% increase year-over-year from $605 million [2][3] - Operating income rose 25% year-over-year to $83 million, with a collective operating margin expansion of 120 basis points [2][3] - Adjusted earnings per share (EPS) reached $1.19, the highest quarterly EPS in the company's history, while GAAP EPS was $1.25, up 30% year-over-year [3][7] Business Line Data and Key Metrics Changes - State and local revenues increased organically by 29% year-over-year, with continued strength in municipal water businesses [3][4] - International revenues grew by 20%, benefiting from the addition of the high-performance buildings group and strong organic growth in sustainable infrastructure programs [4] - U.S. commercial net revenue accounted for 21% of total business, up 7% from the previous year, driven by sustainability services [4][5] Market Data and Key Metrics Changes - The Government Services Group (GSG) segment revenue increased by 7% year-over-year, with an operating income margin of 14.7%, up 70 basis points [5][7] - The Commercial International Group (CIG) grew by 17% year-over-year, with a margin increase of 100 basis points to 12.5% [6][7] - The company's backlog rose 8% year-over-year to $3 billion, with strong orders across global businesses [6] Company Strategy and Development Direction - The company is focused on high-end services in water and environmental markets, aligning with government priorities on climate change and infrastructure [12][14] - The Infrastructure Investment and Jobs Act (IIJA) is expected to create long-term increases in spending for water and resilient infrastructure services [12][16] - The company aims to leverage its strong balance sheet and liquidity to invest in technical capabilities and strategic growth areas [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about continued growth in state and local markets, expecting a double-digit growth rate of 10% to 15% [15] - International work is projected to grow at a rate of 10% to 15%, supported by sustainable infrastructure and climate change services [15] - The company anticipates a stable growth rate of 5% to 10% for U.S. Federal work, with significant contributions from IIJA funding expected in fiscal year 2023 [16][19] Other Important Information - The company generated $82 million in cash flow from operations, a 148% increase, with a decrease in days sales outstanding (DSO) to 61 days [8][9] - A dividend of $0.20 per share was approved, marking an 18% increase over the previous year, alongside $50 million utilized for stock buybacks [10][11] - The company is focused on strategic acquisitions to enhance competitiveness in the water, environment, and renewable energy markets [30][60] Q&A Session Summary Question: Can you expand on margin expectations for GSG and CIG? - Management noted that GSG margins benefited from disaster activities and increased utilization, with expectations for annualized margins of 13% to 14% for GSG and 11.5% to 12.5% for CIG [23][25] Question: What are the priorities for capital allocation? - The company prioritizes funding organic growth, maintaining dividends, and pursuing strategic acquisitions, with a focus on returning cash to shareholders [27][30] Question: What growth opportunities exist in the commercial sector? - Management highlighted increased commitments from multinational clients in sustainability and water management, with expectations for higher margins in the commercial sector [33][37] Question: How is the acquisition pipeline compared to last year? - The acquisition pipeline remains consistent with the previous year, with a balanced approach to international and U.S. opportunities [57][60] Question: What is the outlook on labor availability and turnover? - The company has not experienced labor shortages and reported a slight decrease in voluntary turnover rates, indicating stability in workforce availability [61][63]