Q3 2021 Tetra Tech Inc Earnings Call
Sectors, including International development work.
Billion agencies and the department of Defense.
Our international net revenue was 34% of our business and the quarter up 26% from last year.
We saw strengthening revenue in Canada, the United Kingdom and.
And our Australian operations, driven by broad base orders for water environment and sustainable infrastructure services.
Our U S. Commercial net revenue was 21% of our business from the quarter and it was down slightly about 2% from the prior year.
Sure.
And our discretionary environmental work for our industrial clients.
I'd now like to present our performance.
By segment, our 2 business segments and.
And the third quarter, both of our segments grew revenue by double digits, while also.
And and earning their operation margins.
The government services group or the <unk> segment's revenue was up 12% and purchase increased by 30 basis points year over year, resulting and a 13, 8% margin for the quarter.
The strong margin was driven by high and high value data analytics.
And design services debt significantly and significant municipal growth that drove higher utilization across the GST operations.
The commercial international group or the CA. These segments revenue was $282 million up 17% from the prior year.
Their.
The margin increased but by a much higher number at 130 basis points year over year, resulting in an in and 11 points.
Right in line with our plan for the segment.
Revenue growth and margin performance were driven by a resurgence of work across multiple international and markets that had been impacted.
Associated economic downturn that we saw in fiscal year 2020.
1 of the best metrics that we had in the quarter was our backlog.
And our backlog reached $3.25 billion at the end of the quarter, which is a new all time high for the company.
And the quarter, we booked new orders across our federal commercial state and local and international markets demonstrating the broad based strength of our book of business.
Orders for the quarter included significant international development programs that advance ESG priorities globally.
Even in this record quarter.
Further we had a book to bill.
Record revenue quarter, we had a book to bill of 1.1 to 2 giving us excellent visibility into the remainder of the year.
We also added over a $1 billion and new contracts.
Capacity to support the U S government's priorities and sustainable infrastructure and and environmental programs with the U S Army Corps of engineers.
Now I'd like to turn the presentation over to Steve.
The verdict, our chief financial officer to present the details of.
Our financials and the quarter Steve.
Thank you Dan I'd like to now review the GAAP financial results for the third quarter of fiscal 2021.9 months of the year.
Overall, our revenue and net revenue came in much better when compared to our third quarter from last year holders the.
The net.
Net revenue.
On track amounted to 638 million and was towards the upper end of our guidance range of $600 million $650 million.
Our revenue was up 13% over last year.
And net revenue was up 14% over last year.
And when compared to last year, our revenue and net revenue.
And was positively impacted by a strong demand for water and environmental services advanced analytics for our U S. Federal clients disaster response per state and local clients and improved economic conditions for international operations, resulting from the loosening restrictions due to the COVID-19.
Global pandemic.
Similarly, our operating profit margin and earnings per share improved.
Our earnings per share of <unk> 95.
Came in better than the top end of our Q3 guidance range of 85 to 90.
And better than the third quarter of last year by 14%.
And by 22%.
When we compared the prior year's adjusted results.
The higher EPS was due to the improvement and our operating income which came in at $70 million This quarter, which was up 10% from last year and up 17%.
When compared to the prior year's adjusted results.
Our improved operating.
<unk> income was driven by an increase and our segment margins over the last year as Dan described as we continued to focus on providing higher and consulting and technical engineering services to our clients.
So as Dan talked about before.
The <unk> segment realized the higher margin of 11.
And 4%, which was up 130 basis points, and GST realized and even better margin of 13, 8%, which was up 30 basis points.
In the quarter. We also remain focused on generating positive cash flows and excess of our net income.
Cash flows generated from operations.
And prior quarter totaled $69 million.
We continued to improve our working capital management and also benefited from a decrease and our day sales outstanding or DSO.
Year to date for fiscal 'twenty, 1, we generated $227 million and cash flow from operations.
For the churches ahead of last year by 16%.
Our focus on working capital and cash flows as resulted in our DSO decreasing to 65 days as of the third quarter.
And this was an improvement of 5 days from last year at this time.
Our net debt amounts to $16 million.
This was an improvement of $120 million compared to last year, even as we used our cash for strategic acquisitions as well as stock buybacks and dividends and the last 12 months, which amounted to over $100 million.
Our long term capital allocation.
The strategy calls for balance of investing and the growth of our business managing the balance sheet and providing returns to our shareholders.
Over the trailing 12 months cash generated from operations was $294 million.
We're over $5 per share.
During the third quarter.
We continued to benefit from this cash position by providing significant returns for our shareholders through dividends and share buybacks.
Regarding our dividend program during the past quarter, we paid out $10.8 million and dividends.
And I want to announce that of board of directors approved our 29th consecutive dividend, which will be which.
Which will be paid and the month of August at a rate of <unk> 20 per share, which is an 18% increase over last year.
Furthermore, we utilized $15 million from the third quarter for our stock buyback program.
And we have $163 million remaining under our previously approved stock by stock buyback.
Tech program.
So all told year to date, we've returned $74 million.
To our shareholders through both of our dividends and our share buybacks.
But just as important is implementing our capital allocation strategy is and ensuring that we have a strong balance sheet and ample liquidity and we are.
Both in terms of our balance sheet at the end of Q3, which is the current leverage of zero point of 1 times and available liquidity of over $800 million and the form of cash on hand and funds available under our current credit agreements.
As a result, Tetra Tech is the net financial position such that we continue to invest and.
Coke capabilities and strategic growth areas, both organically and through acquisitions with top tier firms this quarter, such as <unk> and <unk>.
And most recently and in fact, just this week, we added or Lee a leader and sustainable Engineering design, which Dan will discuss later in this presentation.
And I'm pleased to share these financial results for the third quarter on and thank you for your support and all and the presentation back over to Dan.
Great. Thank you very much Steve.
I'd now like to provide directions for our 4 client sectors that we see over the next several quarters.
As of the board.
For our United States, and our international market sectors.
And the U S. Our state and local markets are expected to grow at a 15% to 20% rate driven by high demand for our differentiated services.
The led by critical need for sustainable.
Water supplies and long term disaster planning programs and coastal zone protection for our local clients.
Our long term experience with more than 500 municipalities is key to our ability to maintain strong growth rates and the significant market.
Our U S. Federal work is expected to grow at a 10 day.
The 15% rate leveraging our more than $20 billion and federal contract capacity to address the administration's priorities and climate change environmental protection and the digital transformation.
Across both the civilian.
And the environmental program support.
Alright.
And we expect our renewable energy revenues to grow at a double digit rate.
With the leading area.
Focused on emerging offshore wind programs.
And finally, our international work.
Work is expected to grow at a 10% to 15% rate year over year with broad based growth across Canada. The NAV.
The Kingdom and Australia for both our commercial of those areas.
All 3 of them.
Regions have strengthened the economic conditions, and we see work continuing to increase.
Nation I'd now like to.
Give you an update on our high performance buildings growth strategy.
Over the past few.
Peers, we've been focusing on expanding this service line and a significant market debt is highly synergistic with our focus on water environment and renewable.
<unk> energy.
Buildings.
Collectively around the world are estimated to account for 28% of.
Of the world's carbon emissions and higher efficiency and greener.
The building design is increasingly important to our clients.
Our leading with science approach can significantly address.
And our clients goal to reduce emissions and increase efficiency by Decarbonising building.
Our high and building designs use advanced simulations to optimize air flow and create more.
We are designing systems.
So that recycled water and generate their own of energy.
<unk> effectively creating net zero of water and energy solutions for our clients.
This market is now just over $220 million of year and revenue for us and it's tripled in size since we initiated our growth strategy.
Although we saw some contraction during the pandemic, we now expect this market.
And to grow rapidly for us with our objective to build a over 500 million dollar per year business by the year 2024.
And I am very pleased to announce that just this week, we took a significant step and our high performance building strategy.
Sheet with the addition of Whore, Lee and the United Kingdom.
Quarterly adds to our team and entity, that's a pioneer and mechanical electrical and hydraulic design of building systems.
And the Harley actually was the very first designer of the first air conditioning system and the world and they are very.
Very well aligned to Tetra tech, leading with science culture.
As leaders and sustainable design innovation, and they're going to work with us to address the future challenges of building de carbonization.
<unk> brings over 900 staff that will join our global practice and work on some of the most advanced designs for buildings.
Buildings across our commercial and government client base.
And concluding myself, our management team and all of our operations. Our entire team is very excited to have them on board and we're looking forward to their successful contribution to our global operations.
I would now like to update you.
And on 1 of our other key growth strategies and that's in the area of advanced analytics.
Across our U S federal client base, the drive for digital transformation and advanced analytics continues to build.
Our advanced analytics teams worked with our federal clients to apply artificial intelligence machine learning.
<unk> and cyber security analysis of their programs.
By combining our domain expertise and knowledge with advanced analytics, we can help our clients visualized environmental data.
Better communicate with their stakeholders and perform high and modeling and forecasting for all of their programs.
Since 2000.
And 16.
And in the last 5 years, we focused on expanding our team through both organic and strategic acquisitions of leading firms focused primarily on U S federal market.
We've added 5 firms each bringing another dimension of specials.
And the strategies.
It's really been working for us and this resulted in a $300 million per year revenue for.
And for US today, a 6 fold increase since.
We began this back in 2016.
We're focused on achieving a 2023 target of $500 million per.
Per year and revenue and we'll continue to target acquisitions that can further expand our services.
For the U S Federal government, primarily with the civilian agencies.
And both of our buildings growth strategy our high.
The performance.
Advanced data analytics programs that we have with the federal government and many others actually contributing to us increasing our guidance today for the remainder of the year and I'd now like to present, our guidance for the fourth quarter and for all of fiscal year 2021.
For the fourth quarter, our guidance is for.
Or a range of $650 million to $700 million of net revenue with an associated earnings per share up 95.
To 1 dollar for the quarter.
For the entire year the increased net revenue guidance range is for net revenue $2.5 billion to $2.
$5 billion with and associated annual earnings per share for fiscal year 2021 of $3.69.
To $3.74.
This new updated annual guidance does include an increased amount of intangible amortization that's associated.
The acquisition of <unk>.
It does.
It does estimate of tax rate of 25% for the fourth quarter.
Half of $54.6 million.
Shares outstanding and does exclude contributions from any additional acquisitions that we may complete between.
<unk> now and the end of the fiscal year.
In summary, we had and absolutely excellent third quarter setting New records for net revenue operating income earnings per share backlog and many other financial metrics.
Our high and water environment, sustainable infrastructure, and renewable energy services and our.
Our leading the science approach and high demand and well aligned with the United States and international priorities.
We significantly advanced our high performance building strategy with the addition of <unk>.
And as a result of our Q3 performance and outlook for the remainder of the year, we're raising our annual guidance for both revenue.
Revenue and earnings per share.
And with that Hillary I would now like to open the call up for questions.
Thank you the question and answer session will begin now.
And there will be a 32nd pause on our webcast rollouts of the buffering.
This time audio participants.
Events on Friday.
Net debt question.
And you remember can mute the audio from Shannon you can here before you speak.
And of Speakerphone, please pick up the handset before pressing on the number.
To ask a question. Please press star 1 on your touched on zone.
Our first question is from Sean Eastman of Keybanc capital market.
Please state your question.
Hi, guys. This is Alex on for Sean This morning, Congrats on the strong quarter.
So yeah. So some of my first 1 is so and so the conversion of the state and local budgets has completely flipped compared to this time last year.
It's the types of tech starting to see that funding start to be used.
And on our projects starting to be advanced and if so 1 of the priority areas from state and local clients have they changed at all with the pandemic shakeup and the federal the fed.
The government of advancing sustainability agenda.
Both of its a really good question and it's 1 that we actually received somewhat frequently is.
Have we seen the.
Utilized positive impact from federal funding at the state and local level for us we've actually not seen with the exception of just a few specialized instances the color of the money being the marked either for their existing general fund coming from certain bonds or whether or not its from the federal government, but what we have.
The is the initial funding that came out to address the pandemic that had very very broad applications of what it could be applied for.
The used for many different items and whether or not the dollars have come from.
And.
Targeting it from funds they've initiated initially received from.
C and of demick funding or whether or not its from the general strength of their own budgets at the state.
We have seen the programs that were in place that we've been following for years continue to go forward.
It does seem to us that the increased confidence and the funding that's coming from the federal government now has allowed the water programs.
Penn such as coastal protection water supply.
And we're headquartered out here in southern California priority with respect to water reuse desalination storm water capture and other water sourcing programs that had been a priority for many years have continued to go forward and I think it's a combination both of strengthening state budgets.
Programmer of lack of having a financial hole and then having additional funds come from the federal government and we really have seen it not speciate of 2 just the federal funding has caused certain projects to go forward, but to give an overall confidence for the projects that have been slated for years and we're focused on water programs coastal.
Protection environmental programs.
And to move forward. So we have not seen it divided into specific buckets as to where it's coming from but just an overall strengthening of funding of the programs that they've had scheduled for years.
That's very helpful and then.
Next.
And next 1 Tetra Tech Tetra Tech now is the portfolio of advanced analytics capabilities.
The acquisition and EMEA of hard a lot about the margin opportunity there, but could you refresh us on the revenue synergy potential around the portfolio and the legacy business and then relative to the growth targets that you guys outlined and the investor deck and.
The rate of growth and the market.
Or what's the trajectory of specific to Tetra Tech.
Well and so the.
And from last the first I think that's what we're seeing it within Tetra Tech.
We've certainly seen the general markets being up but I do believe that the areas that we focused on debt.
And that has actually been fully aligned with the.
The new administration's priorities has given growth rates for Tetra tech a bit higher and what we've seen and the and the overall <unk>.
General market with respect to the advanced analytics.
The synergies are very very high and in fact, our federal business.
Is embedded and work that we do for international develop.
USAID the U S State Department, our civilian agencies and department of defense and it is carrying higher margins. It is higher and demand. It's a more specialized services and it has carried a few percentage points higher margin, which has helped increase our overall <unk> margin outlook as we've been going forward.
So.
We do see additional acquisitions in this area to strengthen it and.
And it is supports the management consulting not only by giving us the technical differentiation by bringing new tools that don't exist and the market.
The 1 area that we've been beginning to grow and actually see more promising areas is in.
And recurring revenue and portions of subscription services for some of the software packages that we put together, we've actually seen and beginning to take hold and while it hasn't been a big priority for us it's actually been requested by our clients more and more so we do see it as a and emergent Eric and emerging area that will drive margins.
Even more quickly and this part of our business.
Got it last 1 from me.
And since we're hearing more and more about the high performance building strategy.
We were wondering if it is the better.
And the distractions and there's already such a great story on the water and environment side, and if you can just create value debt by.
<unk> down there.
On some color on why deploying resources here makes sense strategically and the broader context would be helpful.
So that's the because that's of great question and we.
We actually think see that they are hand and glove.
And what I mean by that is if you have a water programs such as the water treatment program or water.
The double and claim they do have facilities and buildings and how we got into this business. Originally was by designing the physical structures. In addition to the pumps and the pipes and the the chemical processing. In addition to that the physical structures and to now design physical structures that are net carbon zero that actually can decrease the.
The recycle of cart their carbon footprint is been requested by our clients and so we rarely see projects that have and environmental or a water program or a climate change that have no structure associated with them and so it would be focused on the high buildings component of it is actually just a natural move for us and in fact was.
The amount of debt by our clients as part of their environmental stewardship of the programs that we were performing and water environment and sustained and sustainability and.
And earlier years. So this is just a natural outgrowth and in fact 2 to not have this building would actually create more of a discontinuity with respect.
Specht of distraction as to how are we going to address this and why would we not actually address our clients' request and an area that has complete synergies with the core services of the company.
Thank you.
Great. Thanks Al.
Yes.
Yes.
Our next question Dan.
England and of Bang Bang. Please state your question.
Hey, guys. Thanks for taking the questions and just a follow up on the sustainable buildings point and I was just wondering if you've now got the platform that you need to grow to the target scale of what you're targeting and in that space, So Jay and youre going to need to be inside of the M&A.
And towards perhaps and some of the all the geographies that you're operating.
A good question, we really do think that Harley and the U K was the last major piece that we needed to add we have a significant presence and the United States, primarily on the east and West Coast.
And we really do have 1 of the most.
He lead high and.
The design practices and consulting practices and buildings and we've had and the company for about 4 years.
Now.
On a large practice in Australia the services both of the Australia the.
New Zealand and the Asia Pacific region for Us, but the area that we've been significantly.
Underrepresented was in the United Kingdom, and hardly felt that and we do think there are specialty and niche areas that can be added.
With respect to some advanced work on communications and low level of lighting that we are a market leader, but we'll still be looking to add niche components, but we think that poorly fills out the geographic coverage.
And looking for as a corporation.
Great. Thanks, so much and then on the on the margin side I was just wondering with the improvements, you're making and and what you're doing around analytics and whether you're a long term view on the margins that you can achieve it is changing of whether there's a point where you have to hand back any margin improved.
Moving to the client through lower pricing.
I don't think so our goal the 1 girl we have here at Tetra Tech has to really been to work at the very we talked about at the fair is highest and of the technical offerings and not to be Commoditized typically what we've seen is dollars and we'd have to hand back.
Is the kind of Commoditization of the services and that would include components of I T.
And we're looking to do is to advance.
The the very highest valued services that we're providing to the clients.
We are getting more of the work.
On the fixed price or other value proposition and the case of the government and it could be.
Cost of cost plus fixed fee with an award fee component and so we've actually put more of our.
On March and even in areas that have typically been range bound on to an award fee basis. In addition to the base fee such that the value of being contributed can actually be identified and rewarded.
Back to the company based on the value that the client receives not just the price and so no I don't see the margin actually hitting the point, an inflection point that would come down because of its been commoditized, we're actually looking at adding new services and new capabilities and in fact aren't being offered and the marketplace that today.
Day at all and we expect that that will not only achieve these higher margins that we've spoken of but actually raise debt bar and and then close and the government services area, which is typically more range bound because of the nature of the costing models with the state local and federal clients.
Great. Thanks, very much on the outbound.
I'll pass the Avalon.
Right.
Thank you Sam.
As a reminder, if you would like to ask the question. Please press star 1 on your Touchtone phone.
Our next question is from Andrew Wittmann of NAV.
I'm sorry. The next question is from Haynesville.
Sullivan of Maxim Group.
Please state your question.
Alright, Thank you and thank you Kyle Thank you for the detail on the high performance building strategy, as well and Dan and I, sorry, if I missed the but can you talk about is the catalyst for that business different innovations, forcing billings to go net zero or is it most of the Newbuild operating.
And at least for that business. Please.
Well it's I.
And I would say that 1 there is a growing regulatory requirement for new builds to meet certain.
Energy efficiency.
Water recovery and self sufficiency and spud.
On 1 component of it but I would say that the bigger driver for it.
And that's more what I call grass roots and that is especially with the pandemic as individuals of returning to their office, whether or not its workers or whether it's on the industrial buildings Theyre looking for safer buildings healthier buildings and the the real estate market in order to attract new tenants or to keep the tenants. They have are looking for.
Conferences that are more efficient are healthier or more allow for higher productivity of their workers are providing a safer environment and.
And on.
Of the.
Axioms that our staff has and the design is youre, a safer and healthier at true work office location.
Of the buildings that we design and the facilities that we design and then you are at your home.
So the fact is the drive is actually coming from the.
The building owners for our renovation to a sort of the up their game and to go through renovation.
To address health concerns and so that you would more than be familiar with with the pandemic and.
Another.
Pathogens that have the potential to be present, and so we're leading in that area. So yes. There is the regulatory portion, but it's a little bit like sustainability and climate change was it did it come from the top down and from our regulations or is it from the grassroots up that we actually want to address.
And protect the planet and the occupancy of our buildings and we see that the grassroots of driving of this to drive demand is actually a precursor to the regulations.
And in fact has much more legs to it then and just the regulation that would be passed and given geography.
And and the most recent act.
And and.
And that and the high performance buildings.
And as the U K ahead of the U S. In terms of the percent of adoption of the buildings or is it about the same in terms of the business and is it mostly of U K opportunity in terms of their current practice.
And I think it's actually going to be ahead of that come out with specific targets.
With respect to building energy usage reduction of.
The new requirements to meet certain LEED standards that would put them on a new category that haven't fully been adopted here in the U S. So we do think some of the practices that we've developed and the U S that are best in class and the world can be taken and lessons.
Since learned and capability export it to the U K and some of the expertise. They have there to meet regulatory requirements will then be re transferred over to the U S. As a precursor to meet requirements that are just emerging here and now it's coming out certainly in the U S. Certain states our communities have very very high building requirements.
And so the collaboration from both our Australia.
And U K operations, we believe will be best in class meet or exceed the regulatory requirements and actually be used as not just the marketing, but as a true differentiator for the building owners.
In order to attract new new occupants while.
The decarbonising and reducing the the overall footprint of buildings around the world. So U K is ahead of <unk>.
On the regulatory there are a number of financial.
Estimates as to how large that is and is enormous with respect to the dollars to be spent both for renovation and for compliance on new buildings. So so we.
Awful lot of synergies through the collaboration across our high performance buildings practices.
And.
Great and then just a separate question from.
And I heard you mentioned recurring revenue from software and certainly the <unk> that.
Makes sense and it's part of the data and growing data analytics business.
All of it.
Can you is it a very small piece right now or do you have growth targets or I mean, how and how big is that opportunity.
Well it is apparent and the best we can take and it's very small right now it's very small we have had it and I've spoken of this from the past we do have subscriptions for.
Environmental assessments and.
And projections for airport play corridors and the cities around the world for software that we put in place, which is part of their ongoing monitoring and evaluation of the environmental impacts from new air corridors and other items.
And what we're looking at carefully is how we can.
Utilize that.
Approach for the Tetra Tech Delta tools that we have that actually consists of more than 100 different proprietary software.
Analytic tools and other methods that we use for our clients.
The goal is that we cannot only do the work but to put something in place and can continue the consulting and engineering evaluation.
How can on a more automated approach by the embedded software and tools that we have with our clients. It will save them money and we'll keep them up at the state of the art and it allow us to monetize the and some instances 50 years' worth of investments, we've made and the software and these analytic packages.
Great. Thank you for.
The follow up detail. Thank you.
Thank you Dave.
Okay.
Our next question is from Andrew Wittman of Robert W. Baird.
Please state your question.
Hi.
Good morning, Thanks for taking my question, Dan I wanted to talk about utilization of little bit.
Certainly over the past 12 months of the pandemic I have to imagine there were points, where the utilization kind of ebbed and flowed.
Can you give us a sense of the trajectory through that time and in the quarter and then maybe more importantly, even with the outlook that you have.
Portrayed here on slide 10.
Double digit type growth for the next few quarters.
Does this put tetra tech into hiring mode or.
And like you kind of have enough.
Lack of the word but is there enough team available to accomplish this and push utilization higher and obviously the implications to the margins on this is what I'm ultimately trying to get at but probably could do.
Due to the ones of utilization.
Yes.
Good question Andy.
And there has been a little bit of ebbing and flowing of utilization I would say the overall.
We did see utilization actually go up.
When the pandemic first came on and there was the onset.
And part of it was less traveling the conferences and other other items like that so there was a bit of Inc.
Increase, but I wouldn't say that.
<unk> and this last few quarters of utilization has gone up and particularly and the government services. It's been the primary contributor to margin expansion on the government services and in fact, that's a per.
First of that out if you look over the past.
Yeah.
12 to 24 months of 4 to 8 quarters, let's say about half of the expansion and our government services.
<unk> has been from utilization and the other half has been from advanced data analytics and actually a higher that.
That demand and higher margin now the 1 thing you would note this last quarter we had.
Exceptional growth and our state and local revenues side. The just over 30% you saw our international work.
Except.
<unk> for the quarter at.
Over 25% to 26%, but we did see a very slow recovery and our.
Commercial work our U S commercial work and the 1 thing that we have accomplished and I'm glad we started this many years before the pandemic is to move the company to a cloud to a common platform.
And after that we have and 1 area of that may be slower and in this case at least this current this last quarter of third quarter was the state and local the quite fungible with respect to water treatment engineers and scientists that could then be utilized on state and local work or federal government work that grow well or international and if you would wonder.
Wonder can you really use a and American civil engineer on and Australian project the.
And the answer is being on a common platform, yes the.
The physics of so compaction or the.
And the issues with respect to hydraulics, and hydrology of don't change, whether or not you're down under or and.
Some other geography, and so we have been able to use our staff across the board increasing utilization.
For the company it has translated into increased.
The increased margin you saw over 100 basis points again, and our commercial International group This last quarter.
With respect to what do we have enough capacity to handle.
I do believe we have embedded.
Sufficient resource capacity to handle the 10% to 15% growth without and active hiring mode and we are adding.
The ability to recruit and add staff as.
Hey.
And as any.
Anything that would restrict our ability to respond to work that.
Today with our increased.
The backlog or even work that could come out from a U S stimulus program, yes. It is.
The bipartisan infrastructure deal that and it's just been income.
Cohen.
And here and the last just over 24 hours and we've seen some of the numbers, but we think we're more than a position with resources and contract capacity because just because you have staff doesn't mean, you can't get the work and put your staff to work on it you still have to have the.
The contracts the clients and the ability.
<unk> to move forward on a contracted basis. So I think we're in a good income.
Position and all of the above we have the resources. We have the client are long term relationships and the standing contracts in place.
Got it thanks.
I guess just opening could have maybe in the form of people now.
Being able to go on vacation of perhaps.
People are taking elective surgeries again that the deferred maybe the last year.
Or even the fact that.
People might be traveling more now that that it could you just comment on some of those kind of <unk>.
Factors and if there's any factor we should be considering as we think into the first.
2 that these may or may not have on your margins.
I'd say really good question solutions, both in the U S and and internationally is opening up of the economy and our.
The traveling and reducing travel restrictions and opening of restaurants and all of the rest of this.
<unk> put an additional priority for folks that haven't been on vacation size of themselves or with their families for the past year and a half.
Put a priority so I do think that here in the fourth quarter.
We will have.
The more vacations and utilization will actually be impact of a little bit.
And it's obviously completely embedded in our guidance already and in fact, the mid points of our guidance for Q4 just to put this in the proper context.
Do represent a record high and while we had a great third quarter and just set records.
Records across the board the mid points of our guidance for the fourth quarter actually clips, but we just did this last third quarter, but we do think that there are.
More of vacation, that's going to take place, it's not a cost per se because we've already accrued for the vacation. So it's already embedded and our balance sheet. So it's not and additional expense.
But that does mean that utilization will drop because theyre not on projects during those times I don't see that as of fiscal year 'twenty 2 impact.
Because.
I think that the vacations are going to be done at least in the northern hemisphere and the late summer and which is now the summer of the fall, but I do believe as we move into 'twenty..2 this is a very.
Sort of temporal impact with let me get of vacation, let me actually go see.
Family members, we havent seen lets get out and do something but then lets get back to work. So I don't see this as a fiscal year 'twenty 2 impact.
And I actually see.
Utilization remaining high because tetra tech is good as is.
And as gone and is going to a.
Hi, Brad work.
Schedule, where we allowed some individuals to work on the dedicated basis remotely.
Many are both in the office and remote and somewhere in the office completely and so it has helped us with respect to recruiting.
As you can come to Tetra Tech and work on a project that is from southern California, but very well you may live in Kansas for some other geography, and so the flexibility that we offer as the corporation.
As I think.
And second to none of what we are.
To get better smarter and to be continue to be a market leader and the areas of water environment and sustainable infrastructure. So yes, there'll be some modifications, it's embedded in our guidance and our guidance reflects record performance and the fourth quarter and I don't see it continue moving into fiscal year 'twenty 2.
Yes, great I'll leave it there have a good day.
Thank you very much Andy.
Hi.
Our next question is from now on jealous of the coupons and please state your question.
Hey, guys and then.
Congratulations.
And another good quarter.
And I just had 1 question relatively detailed list of lot of my questions have been answered, but you talked about.
Double digit growth and renewables with particular, just kind of curious how you're thinking about that.
Growth opportunity around offshore western of wind and solar so off.
Thinking about.
And also how you're thinking about the outlook for those markets.
The offshore wind has as large promise some of the offshore wind leases by the federal government have required certain developers to pay.
And the higher dairy very large sums in order to.
To obtain lease rights and actually development rights offshore so when obviously any entity and put that amount at.
And investment upfront the pre.
<unk> is moving forward and the items that are required to do the upfront of evaluation line.
Pay very well the tetra tech with respect of offshore impacts for water quality offshore impacts for sedimentation marine mammals fisheries.
All of the rest of it so that's why it.
The graphic capability that we have it really goes all the way back from the founding of the company. So those of the reasons, we really like offshore wind.
And that's why we see.
That it has a higher priority because of the investments and also has less.
Citizen opposition in most instances because of its out of sight, it's out of complaints to certain expense.
So that's why we're interested and that.
Certainly wouldn't minimize Ah.
Our hydro and whether or not that's just as simple as a.
And our Repowering with the new turbines that are much more efficient, which is the more conventional method of increasing output on a given hydro facility are whether or not it's actually raising it or add.
Channel.
Uh huh.
Penn stocked to group that actually drive it.
<unk> of New channel Chambers that then have.
Fish bypass requirements and the other has been a big hit with respect of hydro being 1 of the largest of renewable energy generation methods and certainly in Canada and the U S..1 thing that's been very interesting the.
And dish conservation of the environment is largely revolved around fisheries and its fish bypass switch and there has been.