Tetra Tech(TTEK) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Tetra Tech achieved record net revenue of $1.2 billion for Q1 2025, an 18$138 million, a 24% increase year-over-year, also setting a record for the first quarter [14] - Earnings per share increased by 25% to $0.35, exceeding both internal guidance and market consensus [15] - The backlog grew to$5.44 billion, up 15% from the previous year [16] Business Segment Performance - The Government Services Group (GSG) segment reported revenue of $601 million, a 36$596 million, a 4% increase year-over-year, with a margin of 13% [20] - U.S. federal client work increased by 32%, while state and local revenues surged by 47%, driven by hurricane response activities [22][23] Market Data and Key Metrics Changes - International work accounted for over a third of revenues, including projects in the UK, Canada, and Australia [25] - The company won several contracts with the Army Corps of Engineers, focusing on civil works and sustainable water infrastructure [26] Company Strategy and Industry Competition - Tetra Tech is focusing on high-demand areas such as water services, disaster response, and infrastructure modernization, aligning with government priorities [38][49] - The company plans to continue investing in strategic initiatives, including acquisitions in the water and environmental sectors [34][85] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the recovery of USAID contracts post-review, emphasizing the importance of development work for national security [66][71] - The company anticipates strong demand for disaster response services, particularly in light of recent hurricanes and wildfires [42][49] Other Important Information - Tetra Tech's Board approved a 12% increase in dividends, marking the 39th consecutive quarterly dividend [35] - The company has a strong balance sheet, with net debt to EBITDA at 1.33 times, allowing for continued investment in growth [33] Q&A Session Summary Question: Can you walk us through what's assumed at the midpoint of your guidance range for USAID work? - Management assumed approximately $400 million worth of USAID work for the entire year, with$200 million already completed in Q1 [54][56] Question: How much incremental revenue do you expect from disaster response? - Management expects $40 million to$50 million of incremental revenue from disaster response activities, which will offset any reductions from the USAID hold [78][80] Question: Can you discuss your M&A pipeline and acquisition strategy? - The company has a robust acquisition pipeline focused on technical leadership in water and environmental sectors, aiming to enhance capabilities rather than just increase size [85] Question: What are your expectations for the civil and DoD segments for the rest of the year? - Management expects continued growth in the DoD segment at a rate of 5% to 10%, with strong backlog and funding in place [90][92] Question: Can you quantify the amount of USAID work booked in backlog? - Management indicated that USAID work typically represents about 10% of revenue, with approximately $600 million expected for the current year [120]