Tetra Tech ((TTEK)) has held its Q4 earnings call. Read on for the main highlights of the call.
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Tetra Tech’s Earnings Call Highlights Record Performance Amid Challenges
Tetra Tech’s recent earnings call painted a picture of robust financial and operational performance for fiscal year 2025, despite facing several hurdles. The company reached record highs in revenue, operating income, and segment growth, effectively navigating challenges such as a U.S. federal government shutdown and a decline in U.S. commercial work. While there were some setbacks in digital initiatives, the overall outlook remains strong, buoyed by a solid backlog and strategic capital allocation.
Record Financial Performance
Tetra Tech reported unprecedented results for the fourth quarter and fiscal year 2025, achieving record highs in net revenue, operating income, and earnings per share. The company saw a 10% increase in net revenue, reaching $1.07 billion, while operating income rose by 23% to $168 million. Earnings per share also experienced a significant boost, climbing 29% to $0.44.
Strong Segment Performance
The Government Services Group (GSG) had an outstanding year, with fourth-quarter revenue growing 17% to $396 million. The Commercial/International Group also delivered robust results, with a 7% increase in fourth-quarter revenue, totaling $676 million.
International Growth
International operations accounted for about 45% of Tetra Tech’s overall business, growing at a rate of 9%. This growth was primarily driven by the UK’s water business and Canadian clean energy practice. Additionally, U.S. federal work saw a 22% increase from the previous year.
Backlog and New Contracts
Tetra Tech concluded the quarter with a $4.14 billion backlog and secured over $1.2 billion in new contracts with U.S. defense agencies. Notably, the high-voltage transmission practice’s backlog grew by an impressive 120% year-on-year in the U.S.
Cash Flow and Capital Allocation
The company reported a 28% improvement in cash from operations, nearing $0.5 billion. Tetra Tech increased its dividend by 12% and repurchased $250 million in stock, with $598 million still available in the stock buyback plan.
U.S. Commercial Work Decline
Despite overall strong performance, U.S. commercial work experienced a slight decline, primarily due to reductions in renewable energy work. However, this was partially offset by growth in other sectors.
Impact of U.S. Federal Government Shutdown
The U.S. federal government’s backlog has shortened, affecting visibility. The recent government shutdown had an estimated negative impact of $15 million to $20 million.
Transition Challenges in Digital Initiatives
Tetra Tech’s digital products, particularly SaaS offerings, faced challenges due to a moratorium on new software packages by the U.S. federal government, impacting growth in this area.
Forward-Looking Guidance
Looking ahead, Tetra Tech projects net revenue between $4.05 billion and $4.25 billion for fiscal year 2026, with earnings per share expected to range from $1.40 to $1.55. These forecasts reflect the company’s confidence in maintaining its growth trajectory despite current challenges.
In conclusion, Tetra Tech’s earnings call highlighted a year of record achievements and strategic resilience in the face of obstacles. The company’s strong financial performance, coupled with a robust backlog and strategic capital allocation, positions it well for continued success in the coming fiscal year.