Tetra Tech(TTEK)2022-05-08 00:32Financial Data and Key Metrics Changes - The company achieved record second quarter revenue, net revenue, and operating income, with net revenue increasing 17% year-over-year from 700 million [9] - Operating income rose 23% year-over-year, reaching a record 0.98 [9][19] - Cash flows from operations totaled 178 million, a 13% increase from the previous year [21] Business Line Data and Key Metrics Changes - The Commercial/International Group (CIG) grew by 25% year-on-year, with a margin increase of 50 basis points [13] - The Government Services Group (GSG) expanded its net revenue by 9% in the quarter, achieving a margin of 14.9%, an increase of 150 basis points [14][19] - U.S. commercial net revenue was up 14% year-over-year, while state and local revenues increased by 25% [11][12] Market Data and Key Metrics Changes - International net revenue grew by 29%, driven by sustainable infrastructure programs in Canada, Australia, and the UK [10] - The U.S. federal government work remained stable, accounting for 27% of net revenue, with a 7% year-over-year growth when excluding the Afghanistan wind-down impact [12] Company Strategy and Development Direction - The company focuses on high-end differentiated services in water and environmental markets, addressing climate change and resiliency challenges [5][28] - Recent acquisitions, including Piteau Associates and Axiom Data Science, aim to enhance capabilities in hydraulic modeling and big data analysis [31][32] - The company anticipates continued growth in state and local markets, supported by federal funding from the Infrastructure Investment and Jobs Act [78] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining strong growth rates, projecting double-digit growth for the remainder of the year [42] - The company expects to see increased demand for consulting and engineering services due to new federal budgets and climate change programs [28][29] - Management highlighted the importance of technology in enhancing productivity and reducing reliance on headcount for revenue growth [57][59] Other Important Information - The company reported a backlog of 0.23 per share was announced, representing a 15% increase over the previous year [24] Q&A Session Summary Question: Context on growth rate adjustments for the second half - Management clarified that the extra week in the fourth quarter impacts growth comparisons, but growth rates are expected to remain strong [41][42] Question: Durability of commercial growth amid recession concerns - Management indicated that commercial growth is broad-based and less vulnerable to economic downturns due to reduced exposure to volatile sectors like oil and gas [44][47] Question: Growth rate and margin expectations for segments - Management expects continued margin expansion in both CIG and GSG, with higher margins anticipated in the upcoming quarters [50][52] Question: Employee attrition and retention - Management reported a voluntary turnover rate of just under 10%, with a very low turnover rate for employees with over five years of service [70][74] Question: Impact of Afghanistan-related revenues - Minimal revenues were recognized from Afghanistan, with an expected headwind of 10 million per quarter in 2022 due to the withdrawal [80]