Tetra Tech, Inc. ( TTEK Quick Quote TTEK - Free Report) delivered impressive results for the fourth quarter of fiscal 2020 (ended Sep 27, 2020), with earnings surpassing estimates by 12.3%. This was the 13th consecutive quarter of better-than-anticipated results. The company’s adjusted earnings per share in the reported quarter came in at 91 cents, handily outpacing the Zacks Consensus Estimate of 81 cents. Also, its earnings increased 3.4% from the year-ago quarter’s 88 cents as improved margins significantly offset weak sales generation. The bottom line also fared better than management’s projection of 78-83 cents per share. For fiscal 2020, the company’s adjusted earnings were $3.26 per share, beating the Zacks Consensus Estimate of $3.16. The figure also came in higher than the year-ago reported number of $3.17. Revenues & Segmental Performance
In the fiscal fourth quarter, Tetra Tech generated adjusted revenues of $753.4 million, reflecting a year-over-year decline of 11.8%. Alternatively, adjusted net revenues (adjusted revenues minus subcontractor costs) came in at $589.8 million, reflecting a decline of 7.9% from the year-ago quarter. The figure lies at the higher end of the company’s guidance of $560-$600 million.
Further, Tetra Tech’s revenues exceeded the Zacks Consensus Estimate of $587.1 million. Backlog at the end of the quarter was $3,239.3 million, marking growth of 5.6% from the previous quarter. Revenues from the U.S. Federal customers (accounting for 30% of the quarter’s revenues) were down 1% year over year. Growth in federal IT businesses was negated by a delay in international development projects to a large extent. The U.S. Commercial sales (24% of the quarter’s revenues) declined 2% year over year on lower industrial programs. Stability was witnessed in regulatory-driven programs. The U.S. State and Local sales (15% of the quarter’s revenues) increased 14% on strength in the water infrastructure and digital water system businesses. International sales (31% of the quarter’s revenues) decreased 7% year over year. The company reports revenues under the segments discussed below: Net sales of Government Services Group came in at $330.1 million, down 7.7% year over year. Revenues from Commercial / International Services Group totaled $259.7 million, underlining a year-over-year decline of 8.1%. For fiscal 2020, the company’s adjusted revenues were $2,994.7 million, down 4.1% year over year. Meanwhile, net revenues came in at $2,348.6 million, declining 2.4% year over year. Margin Profile
In the fiscal fourth quarter, Tetra Tech’s subcontractor costs totaled $163.6 million, reflecting a decline of 23.5% from the year-ago quarter. Other costs of revenues (adjusted) were $465.5 million, down 10.6% year over year. Selling, general and administrative expenses (adjusted) came in at $55.8 million, flaring up 2% year over year.
Adjusted operating income in the reported quarter increased 5.5% year over year to $68.5 million, while adjusted margin expanded 150 basis points year over year to 11.6%. Balance Sheet and Cash Flow
Exiting the fiscal fourth quarter, Tetra Tech had cash and cash equivalents of $157.5 million, up 11.2% from the $141.7 million recorded at the end of the prior quarter. Long-term debt was down 8.4% sequentially to $242.4 million.
During the fiscal year, the company’s proceeds from borrowings amounted to $345 million, while repayments totaled $331.1 million. In fiscal 2020, it generated net cash of $262.5 million from operating activities, highlighting an increase of 25.9% from the previous year. Capital expenditure was $12.2 million, down 24.4% year on year. Shareholder-Friendly Policy
In fiscal 2020, the company bought back shares worth $117 million and distributed dividends totaling $35 million.
A couple of days before the earnings release, the company’s board of directors approved a quarterly dividend payout of 17 cents per share to shareholders of record as of Nov 30. The payment will be made on Dec 11. Exiting the fiscal fourth quarter, the company has $208 million worth authorization left under its approved buyback programs. Outlook
For fiscal 2021 (ending September 2021), Tetra Tech anticipates net revenues of $2.35-$2.55 billion, while adjusted earnings are predicted to be $3.30-$3.50. The bottom-line projection is higher than the $3.26 recorded in fiscal 2020.
For the fiscal first quarter (ending December 2020), the company estimates net revenues of $570-$600 million and adjusted earnings per share of 78-83 cents. Tax rate is expected to be 25%.