Tetra Tech Reports Strong First Quarter Results

Rhea-AI Summary

Tetra Tech (NASDAQ: TTEK) reported strong Q1 FY2025 results with record-breaking performance across key metrics. Revenue reached $1.42 billion (up 16% Y/Y), while net revenue hit $1.20 billion (up 18% Y/Y). The company achieved adjusted operating income of $138 million (up 24% Y/Y) and adjusted EPS of $0.35 (up 25% Y/Y).

The company secured significant new contracts totaling over $1 billion, including a $498 million USACE contract for architect-engineering services, and maintained an industry-leading DSO of 55.9 days. Backlog grew 15% Y/Y to $5.44 billion. The Board approved a 12% increase in quarterly dividend to $0.058 per share and continued its share repurchase program, with $323 million remaining under the $400 million authorization.

Positive

• Record quarterly revenue of $1.42B, up 16% Y/Y
• Net revenue increased 18% Y/Y to $1.20B
• Adjusted operating income grew 24% Y/Y to $138M
• Record backlog of $5.44B, up 15% Y/Y
• Secured over $1B in new contract capacity
• 12% increase in quarterly dividend
• Industry-leading DSO of 55.9 days

Negative

• Operating income reported at only $23M before adjustments
• Base EPS at $0.00 before adjustments

Insights

Financial Analyst

Tetra Tech's Q1 FY25 results reveal exceptional operational execution and strategic positioning in high-growth environmental services markets. The 18% year-over-year net revenue growth to $1.20 billion significantly outpaces industry averages, indicating market share gains in key segments.

Several metrics deserve particular attention:

• The record backlog of $5.44 billion provides approximately 4.5x quarterly revenue coverage, offering outstanding revenue visibility and reducing business cyclicality risk.
• The industry-leading DSO of 55.9 days demonstrates superior working capital management, particularly impressive given the high proportion of government contracts which typically have longer payment cycles.
• The 24% growth in adjusted operating income suggests strong pricing power and operational leverage, important in the current inflationary environment.

The new contract wins, totaling over $900 million, are strategically significant as they focus on critical infrastructure and environmental services, areas receiving increased federal funding. The concentration in water management, flood control and emergency response services positions Tetra Tech to capitalize on climate resilience initiatives.

The 12% dividend increase, combined with the $323 million remaining in the share repurchase program, indicates management's confidence in future cash flow generation. This capital return strategy, representing approximately 2.8% of market capitalization, provides a meaningful shareholder return while maintaining flexibility for strategic investments.

• Record Revenue $1.42 billion, up 16% Y/Y
• Record Net Revenue $1.20 billion, up 18% Y/Y
• Operating Income $23 million; adjusted operating income $138 million, up 24% Y/Y
• Record Backlog $5.44 billion, up 15% Y/Y
• Raised high-end and reaffirmed midpoint of FY25 EPS guidance

PASADENA, Calif.--(BUSINESS WIRE)-- Tetra Tech, Inc. (NASDAQ: TTEK), a leading provider of high-end consulting and engineering services in water, environment and sustainable infrastructure, today announced results for the first quarter ended December 29, 2024.

First Quarter Highlights

• Revenue increased 16% Y/Y to $1.42 billion
• Net Revenue¹ increased 18% Y/Y to $1.20 billion
• Operating Income $23 million; adjusted Operating Income increased 24% Y/Y to $138 million
• EPS $0.00; adjusted EPS¹ increased 25% Y/Y to $0.35
• Backlog increased 15% Y/Y to $5.44 billion
• Industry-leading DSO of 55.9 days

Recent Key Wins

• $498 million five-year multiple award contracts to deliver architect-engineering services and civil works support for USACE in Los Angeles and Japan Districts
• $249 million five-year multiple award contract for planning and engineering services for USACE Mobile District
• $100 million five-year multiple award contract for the Office of Land and Emergency Management for research and analysis of emerging advanced environmental technologies
• $66 million five-year single award contract to provide disaster and emergency response services in the U.S. Midwest
• $46 million multiple award architect-engineering contract for flood and emergency response for USACE

Chairman and CEO Comments

Dan Batrack, Chairman and CEO, commented, “Tetra Tech began fiscal 2025 with a strong first quarter, which included all-time record high quarterly revenue and backlog, and record high first quarter adjusted operating income and EPS. We continued to see significant demand for our differentiated services in water, environment, and sustainable infrastructure across our global operations. In the first quarter, we added over $1 billion of new contract capacity, which included contracts for essential water supply, flood control structures and inland navigation. With our record backlog and momentum, we are well positioned to respond to our U.S. and international clients’ priorities.”

Quarterly Dividend and Share Repurchase Program

On January 27, 2025, Tetra Tech’s Board of Directors approved the Company’s 43^rd consecutive quarterly dividend at an amount of $0.058 per share, a 12% increase year-over-year, payable on February 26, 2025, to stockholders of record as of February 12, 2025. In the first quarter, Tetra Tech repurchased $25 million of common stock. Additionally, as of December 29, 2024, the Company had $323 million remaining under its $400 million share repurchase program.

Business Outlook

The following statements are based on current expectations. These statements are forward-looking, and the actual results could differ materially. These statements do not include the potential impact of transactions that may be completed or developments that become evident after the date of this release. The Business Outlook section should be read in conjunction with the information on forward-looking statements at the end of this release.

At the direction of the new U.S. Administration, Tetra Tech has paused some of its U.S. federal government work, particularly with USAID, while assisting our clients with their review of multiple programs across the various government agencies we support. Tetra Tech has updated its guidance for fiscal year 2025 based on its current outlook, which includes the potential impact of the ongoing U.S. federal government review process.

For fiscal 2025, Tetra Tech expects the full year guidance for net revenue² to range from $4.365 billion to $4.765 billion and adjusted EPS³ to range from $1.37 to $1.52. For the second quarter in fiscal 2025, Tetra Tech expects net revenue to range from $1.0 billion to $1.1 billion and EPS to range from $0.30 to $0.33.

Webcast

Investors will have the opportunity to access a live audio-visual webcast and supplemental financial information concerning the first quarter of fiscal 2025 results through a link posted on the Company’s website at tetratech.com on January 30, 2025, at 8:00 a.m. (PT).

_______________

1 Non-GAAP financial measures which the Company believes provide valuable perspectives on its business results. Refer to tables at the end of the release and Regulation G Information for reconciliations to the comparable GAAP metrics.

2 Reconciliation of the net revenue guidance to the most directly comparable GAAP measure is not available without unreasonable efforts because the Company cannot predict the magnitude and timing of all the components, including subcontractor costs, required to provide such reconciliation with sufficient precision.

3 The only adjustment in our guidance for EPS is to exclude the legal settlement costs of $0.35 in the first quarter of fiscal 2025.

Reconciliation of GAAP and Non-GAAP Items
In thousands (except EPS data)
	Three Months Ended
	December 29, 2024				December 31, 2023
Revenue	$	1,420,561			$	1,228,267
Subcontractor costs		(223,231	)			(213,098	)
Net revenue	$	1,197,330			$	1,015,169
Operating Income	$	22,526			$	111,081
Legal contingency costs		115,000				-
Contingent consideration		-				(37	)
Adjusted Operating Income	$	137,526			$	111,044
EPS	$	0.00			$	0.28
Legal contingency costs		0.35				-
Adjusted EPS	$	0.35			$	0.28

About Tetra Tech

Tetra Tech is the leader in water, environment and sustainable infrastructure, providing high-end consulting and engineering services for projects worldwide. With 30,000 employees working together, Tetra Tech provides clear solutions to complex problems by Leading with Science^® to address the entire water cycle, protect and restore the environment, design sustainable and resilient infrastructure, and support the clean energy transition. For more information about Tetra Tech, please visit tetratech.com or follow us on LinkedIn and Facebook.

Forward-Looking Statements

This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The use of words such as "anticipate," "expect," "could," "may," "intend," "plan" and "believe," among others, generally identify forward-looking statements. These forward-looking statements are based on current expectations and beliefs of Tetra Tech’s management and currently available operating, financial, economic and other information, and are subject to a number of risks and uncertainties. Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual future events or results. A variety of factors, many of which are beyond our control, could cause actual future results or events to differ materially from those projected in the forward-looking statements in this release, including but not limited to: continuing worldwide political and economic uncertainties; the U.S. Administration’s potential changes to fiscal policies; the cyclicality in demand for our overall services; the fluctuation in demand for oil and gas, and mining services; risks related to international operations; concentration of revenues from U.S. government agencies and potential funding disruptions by these agencies; dependence on winning or renewing U.S. government contracts; the delay or unavailability of public funding on U.S. government contracts; the U.S. government’s right to modify, delay, curtail or terminate contracts at its convenience; compliance with government procurement laws and regulations; the impact of global pandemics; credit risks associated with certain clients in certain geographic areas or industries; acquisition strategy and integration risks; goodwill or other intangible asset impairment; the failure to comply with worldwide anti-bribery laws; the failure to comply with domestic and international export laws; the failure to properly manage projects; the loss of key personnel or the inability to attract and retain qualified personnel; the ability of our employees to obtain government granted eligibility; the use of estimates and assumptions in the preparation of financial statements; the ability to maintain adequate workforce utilization; the use of the percentage-of-completion method of accounting; the inability to accurately estimate and control contract costs; the failure to adequately recover on our claims for additional contract costs; the failure to win or renew contracts with private and public sector clients; growth strategy management; backlog cancellation and adjustments; risks relating to cyber security breaches; the failure of partners to perform on joint projects; the failure of subcontractors to satisfy their obligations; requirements to pay liquidated damages based on contract performance; the adoption of new legal requirements; changes in resource management, environmental or infrastructure industry laws, regulations or programs; changes in bank and capital markets and the access to capital; credit agreement covenants; industry competition; liability related to legal proceedings, investigations, and disputes; the availability of third-party insurance coverage; the ability to obtain adequate bonding; employee, agent, or partner misconduct; employee risks related to international travel; safety programs; conflict of interest issues; liabilities relating to reports and opinions; liabilities relating to environmental laws and regulations; force majeure events; protection of intellectual property rights; stock price volatility; the ability to impede a business combination based on Delaware law and charter documents; and other risks and uncertainties as may be described in Tetra Tech’s periodic filings with the Securities and Exchange Commission, including those described in the “Risk Factors” section of Tetra Tech’s Annual Report on Form 10-K for the fiscal year ended September 29, 2024. Readers should not place undue reliance on forward-looking statements since such information speaks only as of the date of this release. Tetra Tech does not intend to update forward-looking statements and expressly disclaims any obligation to do so.

Non-GAAP Financial Measures

To supplement the financial results presented in accordance with generally accepted accounting principles in the United States (“GAAP”), we present certain non-GAAP financial measures within the meaning of Regulation G under the Securities Exchange Act of 1934, as amended. We provide these non-GAAP financial measures because we believe they provide a valuable perspective on our financial results. However, non-GAAP measures have limitations as analytical tools and should not be considered in isolation and are not in accordance with, or a substitute for, GAAP measures. In addition, other companies may define non-GAAP measures differently which limits the ability of investors to compare non-GAAP measures of Tetra Tech to those used by our peer companies. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is set forth above in this release.

View source version on businesswire.com: https://www.businesswire.com/news/home/20250129457214/en/

Jim Wu, Investor Relations

Charlie MacPherson, Media & Public Relations

(626) 470-2844

Source: Tetra Tech, Inc.

FAQ

What was Tetra Tech's (TTEK) revenue growth in Q1 2025?

Tetra Tech reported a 16% year-over-year revenue growth to $1.42 billion in Q1 2025.

How much did TTEK's backlog increase in Q1 2025?

Tetra Tech's backlog increased 15% year-over-year to $5.44 billion in Q1 2025.

What is the value of TTEK's new USACE contract in Q1 2025?

Tetra Tech secured a $498 million five-year multiple award contract for architect-engineering services with USACE in Los Angeles and Japan Districts.

How much did Tetra Tech increase its quarterly dividend in Q1 2025?

Tetra Tech increased its quarterly dividend by 12% to $0.058 per share.

What is the remaining amount in TTEK's share repurchase program?

As of December 29, 2024, Tetra Tech had $323 million remaining under its $400 million share repurchase program.