Tetra Tech(TTEK)2021-11-18 20:32Financial Data and Key Metrics Changes - The company achieved record results in Q4 and for the fiscal year 2021, with full year revenue of $3.21 billion and operating income of $275 million, representing a 13% increase from the previous year [10] - Adjusted EPS was $3.79, up 16% year-over-year, while GAAP EPS was $4.26, reflecting a 35% increase from last year [10] - Q4 net revenue increased 20% year-over-year to $709 million, with operating income of $79 million and EPS of $1.05, marking the highest quarterly EPS in the company's history [13] Performance by Business Lines - Revenue from state and local clients increased organically by 30% year-over-year, marking the sixth consecutive year of double-digit growth [14] - US Federal revenue accounted for 28% of total revenue, up 11% from the same quarter last year, driven by climate change-related services [15] - International revenue grew by 35% year-over-year, benefiting from the addition of the high-performance buildings group in the UK and a 24% growth in other international operations [16] Market Data and Key Metrics Changes - The company reported a backlog of $3.48 billion, up 7% year-over-year and sequentially, indicating strong future revenue visibility [13][18] - The Government Services Group (GSG) segment grew 13% year-over-year to $372 million, while the Commercial International Group (CIG) grew by 30% with a margin of 12.4% [17][18] Company Strategy and Industry Competition - The company is aligned with global priorities in water, environment, sustainable infrastructure, and renewable energy, which are driving new projects and funding commitments [7][33] - The recent $1.2 trillion infrastructure bill in the U.S. is expected to create new opportunities for the company, particularly in water and renewable energy sectors [37][110] - The company is focused on leveraging technology and data analytics to enhance margins and operational efficiency across its segments [90] Management's Comments on Operating Environment and Future Outlook - Management noted that the Biden administration's focus on climate change and infrastructure aligns well with the company's services, providing a favorable outlook for growth [33][34] - The company anticipates continued growth in the U.S. Federal sector in the high-single digits, with state and local growth expected between 10% and 15% [43][40] - Management expressed confidence in margin expansion, projecting an operating margin of 11.2% for fiscal year 2022 [46] Other Important Information - The company generated $304 million in cash flow from operations for fiscal 2021, allowing for strategic acquisitions and shareholder returns [28][31] - The Board of Directors approved a dividend increase of 18% for the upcoming payment, marking the 30th consecutive dividend [29] Q&A Session Summary Question: What is the impact of wage inflation and staff attrition? - Management reported little to no impact from wage inflation and noted a decrease in turnover rates since the pandemic began, attributing this to competitive pay and meaningful work [54][56] Question: Are there any benefits from COP26 for the international business? - Management highlighted increased funding commitments from countries like Canada, the UK, and Australia, which could lead to significant investment in climate change initiatives [59][60] Question: What are the long-term margin opportunities for the business? - Management indicated that they are reevaluating margin targets and see potential for higher margins due to technology improvements and operational efficiencies [62][63] Question: Can you elaborate on the high-performance building opportunities in the UK? - The addition of Hoare Lea is expected to enhance the company's capabilities in high-performance buildings, with anticipated growth driven by regulatory mandates and client preferences [68][72] Question: What are the utilization opportunities moving forward? - Management noted a current utilization rate of about 70% with a 10% to 15% surge capacity, allowing the company to handle increased demand without significant staffing changes [79][80]