Tetra Tech, Inc. Q4 FY2025 earnings call

• Dan Batrack highlighted record fourth quarter and fiscal year 2025 results, emphasizing focus on high-end consulting and water leading to competitive advantage. - Steve Burdick discussed fiscal 2025 financials, including record revenue, operating income, and EPS, strong cash from operations, working capital management, dividend increase, and stock buyback. - Roger Argus outlined growth drivers like water services covering full life cycle, data center market with large water demand, and increased defense budgets driving work in ports, harbors, and coastal resilience.

The Government Services Group (GSG) had a strong fourth quarter with revenue growing 17% to $396 million, and margin at 22.9%, up 330 basis points. The Commercial/International Group (CIG) had Q4 revenue up 7% to $676 million, with margin excluding Australia up about 60 basis points. International work was 45% of overall business, growing 9%; U.S. state and local markets up 19% (excluding disaster work up 13%); U.S. commercial work slightly down but some sectors like high-voltage transmission growing; U.S. federal work now 21% of business, up 22% y-o-y.

• Fiscal 2026 Q1 net revenue range $950 million to $1 billion, EPS $0.30 to $0.33. - Full year 2026 net revenue range $4.05 billion to $4.25 billion, EPS $1.40 to $1.55. - Assumptions include intangible amortization $27M, depreciation ~$25M, interest expense $30M, effective tax rate 27.5%, and 264 million shares outstanding. Guidance excludes acquisition contributions but expects them to impact results.

• U.S. federal government task orders becoming shorter duration, impacting backlog visibility. - Volatility in international tariffs and trading affecting international business. - Impact of U.S. government shutdowns on state/local projects with co-funding from federal government. - EPA permit issues affecting some projects, though minimally for Tetra Tech.

Q: Benjamin Luke McFadden asked about backlog being flat year-over-year while guidance calls for 8% organic growth.

A: Dan Batrack explained U.S. federal government task orders are shorter, but state/local, commercial, and international backlogs are growing, offsetting the federal impact.

Q: Sabahat Khan inquired about building fiscal 2026 guidance range.

A: Dan Batrack discussed growth drivers for different segments, and factors that could push guidance to high or low ends, including international clarity and federal government ramp-up.

Q: Sangita Jain asked about GSG margins.

A: Dan Batrack said factors include high utilization from disaster response, more fixed price work (50% of Q4 revenue), and mix shift to higher margin work.

Q: Maxim Sytchev asked about digital initiatives.

A: Dan Batrack mentioned digital products like SaaS were stymied by federal changes but retooling to target other sectors like ports and harbors, expecting better growth ahead.

Q: Michael Dudas asked about 2030 targets and M&A.

A: Dan Batrack said M&A will be more important to reach 2030 goals due to opportunities from changes, and Tetra Tech has the capital and appetite for acquisitions to close gaps.