Tetra Tech (TTEK) Q2 2025 earnings summary

Executive summary

• Achieved record Q2 and first-half results, with Q2 net revenue of $1.1 billion (up 5–6% year-over-year) and first-half revenue up 10.6–11%, driven by strong demand in water, digital, and government sectors.

• Adjusted operating income rose 11–17% year-over-year to $130 million in Q2 and $267 million for the first half; adjusted EPS up 18–21% to $0.33 in Q2 and $0.68 for the first half.

• Net income and EPS were impacted by a $92.4 million goodwill impairment and $115 million legal contingency charge, resulting in a sharp drop in GAAP net income.

• Despite the loss of the largest client (USAID/State Dept.), performance remained strong due to business and client diversity, with growth in State & Local, U.S. Commercial, and International markets.

• Strategic acquisitions (SAGE Group, Carron + Walsh) expanded digital and automation capabilities; new $1.5 billion credit facility secured.

Financial highlights

• First half FY25 net revenue up 10.6–11% to $2.3–$2.74 billion; adjusted operating income up 16.8–17% to $267 million; adjusted EPS up 21% to $0.68.

• Q2 adjusted operating income: $130 million (+11%); adjusted EPS: $0.33 (+18%).

• Cash flow from operations for the trailing 12 months ranged from $311–$368 million; cash and cash equivalents at quarter-end: $179.4 million.

• Book-to-bill ratio at 1.1x; backlog at $4.09–$4.31 billion, down due to USAID contract cancellations.

• Net debt/EBITDA leverage improved to 1.1–1.36x; interest coverage ratio at 15.81x.

Outlook and guidance

• FY25 net revenue guidance raised to $4.4–$4.77 billion; adjusted EPS guidance increased to $1.42–$1.52, reflecting 17% year-over-year growth at midpoint.

• Q3 FY25 net revenue expected at $1.10–$1.20 billion; adjusted EPS at $0.35–$0.40.

• Guidance excludes legal contingency and goodwill impairment charges; assumes 27.5% effective tax rate and $24 million depreciation.

• Remaining USAID backlog (mainly Ukraine) to be completed in Q3 and Q4, with some variability and risk.

• Management believes liquidity and borrowing capacity are sufficient for at least the next 12 months.