Q1 2022 Tetra Tech Inc Earnings Call

February 3, 2022

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Good morning and thank you for joining the Tetra Tech earnings call. By now you should have received a copy of the press release.

Good morning, and thank you for joining the Tetra Tech earnings call by now you Should've received a copy of the press release.

If you have not, please contact the company's corporate office at 626-351-4664.

If you have not please contact the company's corporate office at 6263514664.

As a reminder, Tetra Tech is also simulcasting this presentation with slides in the investor section of its website at www.tetratech.com

As a reminder, Tetra Tech is also simulcast me with the presentation with slides in the investors section of its website at Www Dot Tetra Tech Dot com.

This call is being recorded at the request of Tetra Tech and this broadcast is the copyrighted property of Tetra Tech. Any re-broadcast of this information in whole or part without the prior written permission of Tetra Tech is prohibited.

This call is being recorded at the request of Tetra Tech and this broadcast is copyrighted property of Tetra Tech any rebroadcast of this information in whole or part without the prior written permission of <unk> is prohibited.

With us today from management are Dan Batrack, Chairman and Chief Executive Officer, and Steve Burdick, Chief Financial Officer.

US today from management are Dan Backtrack, Chairman, and Chief Executive Officer, and Steve Burdick, Chief Financial Officer.

They will provide a brief overview of the results and will open up the call for questions.

I will provide a brief overview of the results and we'll open up the call for questions.

I'd like to direct your attention to the Safe Harbor statement in today's presentation.

I'd like to direct your attention to the Safe Harbor statement in today's presentation. Today's discussion contains forward looking statements about future growth and financial expectations. Actual results may differ significantly from those projected in today's forward looking statements due to various risks and uncertainties, including the risks described in Tetra Tech.

Today's discussion contains forward-looking statements about future growth and financial expectations.

Actual results may differ significantly from those projected in today's forward-looking statements due to various risks and uncertainties, including the risks described in Tetra Tech's periodic reports filed with the SEC. Except as required by law, Tetra Tech takes no obligation to update its forward-looking statements. In addition, since management will be presenting some non-GAAP financial measures as references, the appropriate GAAP financial reconciliations are posted in the investor section of Tetra Tech's website.

Your attic reports filed with the SEC, except as required by law <unk> takes no obligation to update its forward looking statements. In addition, since management will be presenting some non-GAAP financial measures as references the appropriate GAAP financial reconciliations are posted in the investors section of Tetra Tech's website at.

At this time, I'd like to inform you that all participants are in a listen only mode. After the request of the company, we will open up the conference for questions and answers after the presentation. With that, I would like to turn the call over to Dan Battrack. Please go ahead, Mr. Battrack.

At this time I would like to inform you that all participants are in a listen only mode at the request of the company. We will open up the conference for questions and answers after the presentation with that I would like to turn the call over to Dan <unk>. Please go ahead Mr. <unk>.

Great, thank you very much Laura and good morning and welcome to our fiscal year 22 first quarters earnings conference call

Great. Thank you very much Lora and good morning, and welcome to our fiscal year 'twenty, two first quarters earnings conference call.

We had an excellent first quarter and an exceptionally strong start to our 2022 fiscal year.

Our performance resulted in record first quarter revenue, operating income and earnings per share, and 120 basis point expansion in our collective operating margin.

Our performance resulted in record first quarter revenue.

Operating income and earnings per share and 120 basis point expansion in our collective operating margin.

This extraordinary performance is a direct result of our long-term strategy to grow our high-end services, which is defined by our leading with science approach applied to our water and environmental market.

This extraordinary performance is a direct result of our long term strategy to grow our high end services, which is defined by our leading with science approach applied to our water and environmental markets.

Given the strength of our performance and our outlook, we're increasing our guidance for both net revenue and earnings per share for fiscal year 2020.

Given the strength of our performance and our outlook, we're increasing our guidance for both net revenue and earnings per share for fiscal year 'twenty two.

We will begin today with an overview of our performance and customers, followed by Steve Burdick, our Chief Financial Officer, who will provide a more detailed review of our financials and capital allocations.

I will begin today with an overview of our performance and customers followed by Steve Burdick, Our Chief Financial Officer, who will provide a more detailed review of our financials and capital allocation.

After Steve, I'll then address our customer outlook and our updated earnings guidance for fiscal year 2022.

Steve I'll, then address our customer outlook and.

Our updated earnings guidance for fiscal year 2022.

In the quarter, we hit all-time first quarter highs for revenue, operating income, and earnings per share.

In the quarter.

We hit all time first quarter highs for revenue operating income and earnings per share.

Our revenue increased by 12% year over year from $605 million to a new all-time high for a first quarter of $679 million.

Our revenue increased by 12% year over year from 605 billion to a new all time high for a first quarter of $679 million.

Our operating income increased at more than double the rate of our revenue growth.

and our operating income was up 25% from last year, reaching a record $83 million for the quarter.

Operating income was up 25% from last year, reaching a record $83 million for the quarter.

And finally, we delivered $1.19 in adjusted earnings per share, the highest quarterly earnings per share of any quarter in the company's history, and up 14 cents from our previous high-record earnings per share of any quarter.

And finally, we delivered $1 19, and adjusted earnings per share.

Quarterly earnings per share of any quarter in the company's history.

14th.

From a previous high record earnings per share of any quarter.

I will note that on a GAAP basis, our quarterly earnings per share was even higher, at $1.25 per share, up 30 percent year over year, which Steve Burdick, our CFO , will address later on this fall.

I will note that on a GAAP basis, our quarterly earnings per share was even higher.

At $1 25 per share up 30% year over year, which Steve Burdick, Our CFO will address later on this fall.

And I'd like to provide an overview of our performance by our end customer in the first quarter.

I'd now like to provide an overview of our performance by our end customer in the first quarter.

We saw continued strength in our state and local revenues, which were up organically 29% from the first quarter of last year.

We saw continued strength in our state and local revenues, which were up organically, 29% from the first quarter of last year.

Even excluding the contributions of our disaster response work, this is another quarter of double digit growth rate for our state and local municipal water.

Even excluding the contributions of our disaster response work. This is another quarter of double digit growth rate for state and local municipal water businesses.

Our second fastest growing client sector was international, where our net revenue was up 20% from last year.

Our second fastest growing client sector was international where our net revenue was up 20% from last year.

Our international revenues benefited from the addition of our new high performance buildings group in the United Kingdom, Corley, who joined us in the fourth quarter and contributed about half of our international growth rate.

Our international revenues benefited from the addition of our new high performance buildings group in the United Kingdom poorly who joined US in the fourth quarter and contributed about half of our international growth rate.

The rest of our international work grew organically at a strong year-on-year pace with the expansion of broad-based sustainable infrastructure programs in Canada, Australia, and in the United Kingdom.

The rest of our international work grew organically at a strong year on year pace with the expansion of broad based sustainable infrastructure programs in Canada, Australia and in the United Kingdom.

Our U.S. commercial net revenue was 21 percent of our business, up 7 percent from last year.

Our U S. Commercial net revenue was 21% of our business up 7% from last year.

Our services in sustainability, including those for environmental permitting, high performance building designs, and renewable energy services all contributed to growth in this.

Our services and sustainability, including those for environmental permitting high performance building designs and renewable energy services all contributed to growth in this sector.

Worked for our U.S. federal clients with 28% of our net revenues in the quarter and was stable from the same quarter last year.

Work for our U S. Federal clients was 28% of our net revenues in the quarter and was stable from the same quarter last year.

Although our civilian and our Department of Defense work increased during the quarter, this growth was offset by reductions that we saw with the U.S. Agency for International Development related work associated with the rapid wind down and exit of the project work that we had in Afghanistan.

Although our civilian and our department of Defense work increased during the quarter. This growth was offset by reductions that we saw with U S Agency for international development related work associated with a rapid wind down and exit of the project work that we had in Afghanistan.

I'd now like to present, our performance by segment.

Both of our business segments grew their revenue while expanding their margins from last year.

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Business segments grew their revenue, while expanding their margins from last year.

The government services group, or our GST segment, was up 7% year on year, and that was based on challenging comparison.

The government services group or our GSP segment was up 7% year on year and that was based on challenging comparisons.

while delivering a very strong 14.7 operating income margin, which was up 70 basis points from last year.

While delivering a very strong 14, 7% operating income margin, which was up 70 basis points from last year.

Our GST performance was driven by our high end data analytics and digital consulting and engineering services for water and environmental pro.

Our <unk> performance was driven by our high end data analytics, and digital consulting and engineering services for water and environmental programs.

The Commercial International Group, or CIG, grew by 17% year over year and increased margins by 100 basis points from last year.

The commercial international group or <unk> grew by 17% year over year and increased margins by 100 basis points from last year.

The CIG margin expansion was directly in line with our strategy to continue to expand our high-end commercial sustainability services while increasing margins in our international operations.

Margin expansion was directly in line with our strategy to continue to expand our high end commercial sustainability services, while increasing margins in our international operations.

Our backlog was 8% year on year on strong broad-based orders, resulting in $3,450 million of contracted funded and authorized work here in the company.

Our backlog was up 8% year on year on strong broad based orders, resulting in $3 $450 million of contracted funded and authorized work here in the company we.

We did see the US dollar strengthened during the quarter, so if evaluated on a constant current basis, just from the beginning of the first quarter, our backlog would have been not only up year on year, but up sequentially also to an all-time high for the company.

We did see the U S dollar strengthened during the quarter. So if evaluated on a constant currency basis, just from the beginning of the first quarter. Our backlog would have been up not only up year on year, but up sequentially also to an all time high for the company.

In the first quarter, we won new programs and task orders across our global businesses that are a direct result of our strategic focus on our clients' most highest priority programs that they have.

Building on our expanded presence in the United Kingdom, we were awarded a large $2 billion public framework contract. Notably, Tetra Tech was the only fur that was awarded a position in all six scope areas.

Building on our expanded presence in the United Kingdom, We were awarded a large $2 billion public framework contract, notably Tetra Tech was the only firm that was awarded a position in all six scope areas.

We were also awarded a $24 million contract for our U.S. international development work that advances carbon mitigation and biodiversity.

We were also worded a $24 million contract for our U S International development work that advances carbon mitigation and biodiversity.

And for the U.S. Environmental Protection Agency, they've issued us new task orders for high-end water and environmental services through our Watershed and Science and Technology contract.

And for the newest for the U S. Environmental Protection Agency issued its new task orders for high end water and environmental services through our watershed in science and technology contracts.

Now I'd like to turn the presentation over to Steve Burtig to present the details of our financials for the quarter.

Now I'd like to turn the presentation over to Steve Burdick to present, the details of our financials for the quarter.

Hey, thank you, Dan. So I'd like to now review the Gap and the Ends results for the first quarter of 2022. So overall, as Dan noted earlier, we had record Q1 results for revenue and earnings.

Hey, Thank you Dan so I'd like to now.

I'll review the financial results for the first quarter of 2022.

So overall as Dan noted earlier, we had record Q1 results for revenue and earnings we.

We'd stop very strong top-ranked growth with the first quarter revenue of $859 million.

We had.

Very strong topline growth with first quarter revenue of $859 million.

The net revenue amounted to $679 million, which was at the upper end of our guidance range of $630,680 million.

The net revenue amounted to $679 million.

Which was at the upper end of our guidance range of $630 million to $680 million.

A revenue and net revenue were both at 12% over last year with strong growth from state local, international and commercial markets.

Our revenue and net revenue were both up 12% over last year with strong growth from state local and international and commercial markets.

Our operating and financial results are the highest of any first quarter.

Our operating profit and earnings per share for the first quarter increased over last year also.

GAP EPS came in as a $1.25 in the first quarter, which is an increase of 30% over last year.

GAAP EPS came in at $1 25 in the first quarter, which is an increase of 30% over last year.

The higher EPS was due to the increase in reported operating income, which came in at $87 million this quarter, which is up 32% over less.

The higher EPS was due to the increase in reported operating income which came in at $87 million this quarter, which is up 32% over last year.

A record operating income for the first quarter was largely driven by a 27% growth in CIG segment operating income and a 13% growth in GSD segment operation.

Our record operating income for the first quarter was largely driven by a 27% growth in CIB segment operating income and a 13% growth in GST.

<unk> operating income.

The resulting CIG margin of 12.5% is up by 100 basis points over last year. And the GST margin of 14.7% is up 70 basis points over last year.

The resulting margin of 12, 5% is up by 100 basis points over last year and the GST margin of 14, 7% is up 70 basis points over last year.

We also had lower corporate cost which contributed to the better margin.

We also had lower corporate costs, which contributed to the better margins.

And I'll told on a consolidated basis, this resulted in an EBITDA margin of 13.7%, which is 170 basis points over the first quarter of last year of 12.

And all told on a consolidated basis. This resulted in an EBITDA margin of 13, 7%, which is the 170 basis points over the first quarter of last year of 12%.

Now, our Gap EPS came in better than our adjusted journeys for share of $1.19 and better than the top end of our guidance range of $98 and $2.3.

Now our GAAP EPS came in better than our adjusted earnings per share of $1 19, and better than the top end of our guidance range of 98 to.

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The difference between our Gap DPS of $1.25 and the adjusted DPS of $1.19 was due to the benefit from employee retention credits received in the quarter related to COVID-19 programs instituted back in fiscal 20.

The difference between our GAAP EPS of $1 25.

Adjusted EPS of $1 19 was due to the benefit from employee retention credits received in the quarter related to COVID-19 programs instituted back into fiscal 2020.

So as you can see, our record revenue and profits have further translated to a continued increase in our cash flow generation.

So as you can see our record revenue and profits are further translated to a continued increase in our cash flow generation.

Cash flow is generated from operations for the first quarter total of $82 million, which is 148%.

Cash flows generated from operations for the first quarter totaled $82 million, which is up 148%.

Our focus on working capital and cash flows has resulted in our de-asowed decreasing to 61 days as of the first quarter.

Our focus on working capital and cash flows as resulted in our DSO decreasing to 61 days as of the first quarter.

This is a further reduction of six days from last year.

This is a further reduction of six days from.

Last year at this time.

And so, and for many of those who have been following us for a while, you may remember that our long-term goal was to generate a DSO of 70 days. I think however, we now believe that we can do better and generate a sustainable DSO below 70.

And so for many of those who've been following us for a while you may remember that our long term goal was to generate a DSO of 70 days.

I think however, we now believe that we can do better and generate a sustainable DSO below 70 days.

You know, also, I don't look at the CSO just as a financial KPI. I also look at it as an indicator of our client satisfaction, resulting in timely payments for the work that we perform on so many projects throughout the year.

Also I don't look at DSO, just as a financial Kpis.

I also look at it as an indicator of our client satisfaction, resulting in timely payments for the work that we perform.

On so many projects throughout the year.

Our net debt amount.

amounts to about 58 million. Our net debt to EBITDA was at a leverage of 0.2 times this year versus 0.5 times a year ago. This reduction in net debt by 81 was a reduction in net debt by $81 million compared to last year.

Mounts to about $58 million.

Net debt to EBITDA was at a leverage of 0.2 times this year versus 0.5 times a year ago.

This reduction in net debt by 81.

<unk> and net debt by 81 billion compared to last year.

And so as we presented here today, these high quality results, including an increase in EBITDA and higher margins, along with strong cash flows, lower working capital requirements, have all resulted in a return on invested capital of 20% over the last trailing 12.

And so as we presented to you today.

<unk> high quality results, including an increase in EBITDA and higher margins along with strong cash flows lower working capital requirements have all resulted in a return on invested capital of 20% over the last trailing 12 months.

Now, our long-term capital allocation strategy calls for balance of investing in the growth of our business, managing the balance sheet, and also providing returns for shareholders.

Now.

Our long term capital allocation strategy calls for balance of investing in the growth of our business.

Managing the balance sheet and also providing returns for shareholders.

And so for the trailing 12 month cash from operations generated $354 million or about $6.50 per share. Sequentially from last quarter, this was an increase of 16% from our fiscal 2021 record year where we generated $304 million cash.

For the trailing 12 months cash from operations generated $354 million or about $6 50 per share.

Sequentially from last quarter. This was an increase of 16% from our fiscal 2021 record.

Year, we generated $304 million cash flow.

During the first quarter, we continue to provide significant returns to our shareholders through both dividends and share by that.

During the first quarter, we continued to provide significant returns to our shareholders through both dividends and share buybacks.

And so regarding our dividend program, during the past quarter, we paid out $10.28 million in dividends. And I want to announce that our board of directors approved our 31st consecutive dividend, which will be paid in the month of February , at a rate of 20 cents per share, which is an 18% increase over last year.

And so regarding our dividend program during the past quarter, we paid out $10 8 million in dividends and I want to announce that our board of directors approved our 30 <unk> consecutive dividend, which will be paid in the month of February at a rate of two per share, which is an 18% increase over last year.

For the more, we utilize $50 million in the first quarter on our stock buyback program.

Furthermore, we utilized $50 million in the first quarter on our stock buyback program.

So as of the end of the first quarter, we have a total $498 million for Nany in our approved stock buyback program.

As of the end of the first quarter, we have a total of $498 million remaining in our approved stock buyback programs.

All toll for Q1, we return more than $60 million for our shareholders to these dividend and share by back program.

All told for Q1, we returned more than $60 million to our shareholders through these dividend and share buyback programs.

Perstron cash flow has allowed us to successfully complete several strategic acquisitions.

Our strong cash flow has allowed us to successfully complete several strategic acquisitions and continue to reinsure return capital to our shareholders, while deleveraging to 0.2 times from 0.5 times a year ago and this lower leverage point also helps us to derisk the impact of inflationary interest rates on the company.

continue to re-tru return capital to our shareholders, while we'll be leveraging to 0.2 times from 0.5 times a year ago. And this lower leverage point also helps us to be risk the impact of inflationary interest rates on the company.

A strong balance sheet, available liquidity of over $900 million, positions us to continue investing in technical capabilities and strategic growth areas as Dan will cover next.

Our strong balance sheet and available liquidity of over $900 million.

Positions us to continue investing in technical capabilities and strategic growth areas as Dan will cover next.

So, you know, I'm very pleased to share these financial results for the Star of Ruffles school year. I want to thank you for your support. And I will now hand the call back over to you, Dan.

So.

Im very pleased to share these financial results.

The start of our fiscal year I want to thank you for your subordinate will now the call back over to Dan.

Thank you, Steve. And next, recovering the details on our quarterly performance, not just on the work from our operations, but also where we sit on the balance sheet.

Thank you, Steve and thanks for covering the details on our quarterly performance not just on the work from our.

From our operations, but also where we sit on the balance sheet.

presented it quite clearly. We have here at Tetra Tech three key market drivers that continue to shape our client spending, long term programs and investments in the future.

<unk> presented a quite clearly.

We have here at Tetra Tech three key market drivers that continue to shape, our clients' spending.

Long term programs and investments in the future.

First is the U.S. government has identified climate change, water, and environmental protection as critical priority.

The first is the U S government has identified climate change water and environmental protection is critical priorities.

First and foremost, these priority programs are implemented through the federal budget associated with spending by key agencies that we work for, such as the US Army Corps of Engineers, the US Environmental Protection Agency, and the US Agency for International Development.

First and foremost these priority programs are implemented through the federal budget associated with spending by key agencies that we work for such as the U S. Army Corps of engineers, the U S. Environmental Protection Agency and the U S Agency for International development.

The second area that is a key driver for us is the US government is now also working with state and local governments to implement the Infrastructure Investment in Jobs Act or IIEJA. This supplement, additional funding to the government budgets, especially at the state and local levels, are creating long-term increases in spending for water, environment, and infrastructure services that we provide and that we're market leaders.

A second area that is a key driver for US is the U S. Government is now also working with state and local governments to implement the infrastructure investment and jobs Act or IHA.

The supplement additional fundings to the government budgets, especially at the state and local levels are creating long term increases in spending for water environment and resilient infrastructure services that we provide and that we're market leaders.

The White House's guidebook to IIJA was just released Monday, just three days ago, and outlined an estimated $80 billion that's been identified for distribution to states as just the first step in releasing the funding associated with IIJA.

The white the white house's guidebook to <unk> was just released Monday.

Three days ago.

And outlined an estimated $80 billion thats been identified for distribution to states is just the first step and releasing the funding associated with <unk>.

Hey.

The third market driver is in our international markets. Here we are seeing a new focus on climate change programs and an increase in associated budgets, including decarbonizing buildings, biodiversity and land management, and protecting the ocean.

The third market driver is in our international.

National markets here, we are seeing a new focus on climate change programs and an increase in associated budgets, including Decarbonising buildings biodiversity and land management and protecting the oceans.

This focus is resulting in an increased demand for our high-end consulting and engineering services in the United Kingdom, Australia and all throughout Canada.

This focus is resulting in an increased demand for our high end consulting and engineering are.

High end consulting and engineering services in the United Kingdom, and Australia, and all throughout Canada.

But now like to highlight how the same priorities are affecting our commercial clients. Now we've previously commented on sustainability drivers across our government clients, but more recently, we've also seen our global commercial clients significantly increase their commitments to sustainability.

I'd now like to highlight.

These same priorities are affecting our commercial clients that we've previously commented on sustainability drivers across our government clients, but more recently, we've also seen our global commercial clients significantly increased their commitments to sustainability.

As part of corporate reporting, companies are focused on ESG or environment, social and governance metrics, and in particular, the E or the environment aspect. This has resulted in very public commitments to science-based targets.

As part of corporate reporting companies are focused on ESG environment, social and governance metrics and in particular, the E or the environment aspect.

This has resulted in very public commitments to science based targets schedules for reduction in greenhouse gas emissions and increased funding for sustainability initiatives.

schedules for reduction in greenhouse gas emissions and increased funding for sustainability initiatives.

Increasingly, stringent government regulations are driving additional spending for our scientists and our engineers to investigate, assess, and evaluate innovative treatment technologies to address emerging contaminants such as PFAS.

Increasingly stringent government regulations are driving additional spending for our scientists and our engineers to investigate assessed and evaluate innovative treatment technologies to address emerging contaminants such as P trucks.

And at the same time, the bars being raised for the restoration of impacted lands. Being increased from just basic cleanup to more sustainable solutions that now often include the creation and management of biodeverse ecosystem.

And at the same time the bar is being raised for the restoration of impacted Lance it's being increased from just basic cleanup to more sustainable solutions that now often include the creation and management of biodiversity ecosystems.

I would now like to present our outlook for fiscal year 2022 across our four in client sex.

I would now like to present, our outlook for fiscal year 2022 across our four and client sectors.

First, our U.S. state and local should continue to grow at a double digit pace for us, between 10 and 15 percent. We expect continued strong growth in this sector as additional projects are initiated by our clients. This growth rate excludes future revenues associated with any extraordinary or episodic disaster response activities that we may undertake.

Our U S state and local should continue to grow at a double digit pace for us between 10% to 15% we expect.

<unk> continued strong growth in this sector as additional projects are initiated by our clients. This growth rate excludes future revenues associated with any extraordinary or episodic disaster response activities that we may undertake.

International work is expected to be about a third of our business, evenly split between government and commercial work.

International work is expected to be about a third of our business evenly split between government and commercial work.

Our international work is expected to grow at 10 to 15% rate, as we increase our support for sustainable infrastructure and climate change services, and the United Kingdom, Australia, and Canada.

Our international work is expected to grow at 10% to 15% rate as we increase our support for sustainable infrastructure and climate change services in the United Kingdom, Australia and Canada.

US commercial work is expected to be about 20% of our business in grow at a 5 to 10% rate.

U S. Commercial work is expected to be about 20% of our business and grow at a 5% to 10% rate.

This growth will be supported by our clients' programs associated with sustainability, including environmental restoration, high performance buildings work, such as net zero building designs, and renewable energy programs.

This growth will be supported by our clients programs associated with sustainability, including environmental restoration high performance buildings work, such as net zero building designs and renewable energy programs.

Our U.S. federal work should grow at a rate of 5 to 10 percent as budgets for fiscal year 2022 finalized in alignment with Biden's administration priorities.

Our U S. Federal work should grow at a rate of 5% to 10% as budgets for fiscal year 'twenty two finalized in alignment with <unk> administration priorities, we assume however that increases associated with the new infrastructure Act.

We assume, however, that increases associated with the new Infrastructure Act or the IIA funding will not begin until the very end of fiscal year 22 and most likely in early fiscal year 23, creating an increased tailwind as we move into the next fiscal year. And therefore, we've not included any significant contributions and revenue to our FY22 outlet.

Or the IHA a funding will not begin until the very end of fiscal year 'twenty, two and most likely in early fiscal year 'twenty three creating a increase tailwind as we move into the next fiscal year and therefore, we have not included any significant contributions in revenue to our FY 'twenty two outlook.

I'd now like to present our guidance for the second quarter and for all the fiscal year 2022. Our guidance for the second quarter is as follows. For that revenue, our guidance ranges from 620 million to 670 million with an associated earnings per share of 86 cents to 91 cents.

I'd now like to present, our guidance for the second quarter and for all of fiscal year 2022.

Our guidance for the second quarter is as follows for net revenue.

Our guidance ranges from $620 million to $670 million with an associated earnings per share of <unk> 86.

To <unk> 91.

Now as noted in my opening remarks, we are increasing our full year guidance for both revenue and for earnings.

That was noted in my opening remarks, we are increasing our full year guidance for both revenue and for earnings.

The excellent performance we had in the first quarter has been incorporated into the full year guidance.

The excellent performance, we had in the first quarter has been incorporated into the full year guidance.

For revenue first, we've increased the bottom end of our guidance by our net revenue beat in the first quarter, resulting in increased guidance for net revenue of a range of $2.650 million to $2.8 billion.

For revenue first we've increased the bottom end of our guidance by our net revenue beat in the first quarter, resulting in increased guidance for net revenue of a range of $2 $650 million to $2 8 billion.

For earnings per share, in the first quarter, we beat our quarterly guidance by 21 cents above the lower end and 16 cents above the high end.

Our earnings per share in the first quarter, we beat our quarterly guidance by 'twenty one.

Above the lower end and <unk> 16 above the high end.

Based on our profitability, we now have estimated that our tax rate for the remainder of the year will increase from our previously estimated 25% to now 26%.

This tax increase represents about a 2-cent per quarter increase or an increase of 6 cents over the remainder of the fiscal year.

This tax increase represents about a <unk> <unk> per quarter increase or an increase of <unk> <unk> over the remainder of the fiscal year.

Our guidance incorporates both our first quarter beat and the impact of the increased tax rate for the remainder of the year. As a result, we're increasing the bottom and top end of our earnings per share guidance for fiscal year 22 to $4.15, to $4.

Our guidance incorporates both our first quarter beat and the impact of the increased tax rate for the remainder of the year. As a result, we are increasing the bottom and top end of our earnings per share guidance for fiscal year 'twenty two to $4 15.

Eight to $4 30.

Now, this guidance does include the following assumptions. It does assume, and it's incorporated into our guidance for the year, of a $10 million charge or 14 cents per share.

Now this guidance does include the following assumptions it does assume and its incorporated into our guidance for the year of a $10 million charge or <unk> 14 per share.

associated with intangible amortization. It does, as I've just commented, assume a 26% tax rate for Q2, three, and four for each of the remaining quarters this year. It does assume that we have a 54 and a half million average diluted shares outstanding, and it excludes any contributions from future acquisitions that may happen subsequent to this call between now and the end of the fiscal year.

Shade with intangible amortization.

It does as Ive just commented assume a 26% tax rate for Q2, three and four are with each of the remaining quarters. This year.

It does assume that we have a $54 5 million average diluted shares outstanding and it excludes any contributions from future acquisitions that may happen.

Subsequent to this call.

Between now and the end of the fiscal year.

In summary, we had an excellent first quarter and start the fiscal year 2022, setting new first quarter records for revenue and earnings for share of performance.

In summary, we had an excellent first quarter and start to fiscal year 2020 to set a new first quarter records for revenue and earnings per share performance are.

Our high-end water, environment, sustainable infrastructure, and renewable energy services are directly aligned with our clients' priorities.

Our high end water environment sustainable infrastructure and renewable energy services are directly aligned with our clients' priorities.

Our strong backlog, abundant and authorized work provides us with both excellent visibility and momentum as we move throughout this year and look to even increase as we move out into the coming year.

Our strong backlog of funded and authorized work provides us with both excellent visibility and momentum as we move throughout this year and look to even increase as we move out into the coming years.

And at this point, Laura, I would actually like to open up a call to question.

And at this point, Laura I would actually like to open up the call to questions.

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Our first question comes to a line of Noel Dilt, with people you may retrieve with your question.

Our first question comes from the line of Noelle Dilts with Stifel. You May proceed with your question.

Yes.

Hi guys, good morning and thanks for taking my questions.

Hi, guys.

Good morning, and thanks for taking my questions.

Sure. So first I was hoping that you could extend a little bit more on what you're seeing and expecting.

Sure. So first I was hoping that you could expand a little bit more on what youre seeing and expecting is it.

As it relates to margins, GSC margins were, well, really margins and both segments were strong in the quarter, GSC particularly strong. Could you speak to how you're thinking about, the strength in the quarter, how much of that is sort of sustainable versus how much may be benefited a bit from storm work? And then if you could speak to your expectations from margins for each segment for the year, if anything has changed relative to the last conference call and also longer term. Thanks.

Relates to margins <unk> margins were really margins in both segments were strong in the quarter GSV, particularly strong could.

Can you speak to how youre thinking about.

The strength in the quarter, how much of that is sort of sustainable versus how much maybe benefited a bit from store Mark and then if you could speak to your expectations for margins for each segment for the year. If anything has changed relative to the last conference call and also longer term. Thanks.

Let me start with any extraordinary contributions during the first quarter from unusual events. We did have a contribution from disaster activities that did contribute to margin expansion in the first quarter. We typically associate that with increase in utilization.

Absolutely let me start with.

And the extraordinary contributions during the first quarter from.

Unusual events.

We did have a contribution from disaster activities that did contribute to margin expansion in the first quarter and we typically associate that with increase in utilization.

So the GST margins, which were 14.7 during the quarter, a year ago we were 14 even. And so we were, if you take a direct year on year, we're up 0.7. About half of the increase in the GST margins, we've associated with increased individualization, such as being driven by the disaster work and the other half is actually mixed shift by adding more data analytics and high-end federal IT activities.

So.

The GSC margins, which were $14 seven during the quarter a year ago, we were 14, even and.

So we were if you take a direct year on year were up 7% about half of the increase in the GST margins, we've associated with increase in utilization such as being driven by the disaster work and the other half is actually.

The mix shift by adding more data analytics at high end federal activities.

So if you take a look at just the GST margins in the quarter, about half of the 70 basis points was associated with increased utilization, largely driven by the disasters. If you take a look at, so that would be about 35 basis points. Since our government work is a GST segment, it's about half. If you actually imputed to the entire company, it'd be about half of 35 basis points. So about 17 basis points, if you want to be precise.

If you take a look at just the GST margins in the quarter about half of the 70 basis points was associated with increased utilization largely driven by the disasters. If you take a look at so it would be about.

35 basis points.

Since our government work as GSP segment is about half if you actually appeared it to the entire company it would be about half of 35.

At this point, so about 17 basis points, if you want to be precise so.

So it did contribute, but it's roughly on that order. So I would call it, it contributed, but it wasn't the driver.

Contribute but.

Roughly on that order, so I would call it a contributed but it wasn't the driver.

With respect to our CIG margins, they were just increase in performance based on the mixtures that we've been employing. We've continued to emphasize higher end consulting and front end engineering work, which actually does carry margins, higher margins. And so I'd say it's more structurally representative of where we're going.

With respect to our <unk>.

<unk> margins.

They were just increase in performance based on the mix shift that we've been employing.

Continue to emphasize higher end consulting and front end engineering work, which actually does carry margins higher margins.

So I'd say, it's more structurally representative of where we're going.

with respect to what are the annual or annualized margin rates for the two groups.

With respect to what are the annual our annualized.

Margin rates for the two groups I would say that we have increased this year for Cie.

I would say that we've increased this year for CIG. On an annual basis, a range of 11.5% to 12.5%, so we moved up both the bottom and top end up another 50 basis points from what we were estimating and achieved last year. And on the government services side, we've increased it to 13 to 14% on an annualized basis. I will make one observation. We do have a bit of a seasonal effect with our business. We're Now allowed to host a monthly report with new

On an annual basis, a range of 11, 5% to 12, 5%. So we moved up both the bottom and top end up another 50 basis points from won't be.

Estimating and achieved last year and on the government services side, we've increased it to 13% to 14%.

On a annualized basis I will make one observation, we do have a bit of a seasonal effect with our business.

In the second quarter, this most notably the weather and the downtime impacts our commercial and international group.

In the second quarter and.

Most notably is the weather and the downtime impacts our commercial and international group and it's mostly on the <unk> International primarily in Canada.

mostly on the I-part international, primarily in Canada, with the colder weather, although I think the folks on the East Coast would say it's extended well down.

With the colder weather, although I think the folks on the east Coast would say, it's extended well down.

earlier in the week all the way down to Florida. But in the course is impacting much of the central U.S. we do see less activity during the winter months of January , February and March was there are Q2. So we will see margins a bit lower in Q2. That is not unusual. You've seen it every year from us.

I guess earlier in the week, all the way down to Florida.

And of course is impacting much of the central U S. We do see less activity during the winter months of January February and March was their Q2. So we will see margins a bit lower in Q2 that is not unusual you've seen it every year from us and so I would expect margins to be muted in Q2 and of course, much higher and the <unk>.

so I would expect the margins to be muted in Q2 and of course much higher in the emerging Q3 and then Q4 but on an anglerized basis, GST at 13 to 14.

In Q3, and then Q4, but on an annualized basis.

<unk> at 13% 2014.

and CIG at 11.5 to 12.5 and I just spoke.

In CIP at 11, five to $12 five that I've just spoken.

a bit to what took place in Q1, that was a bit extraordinary. I hope that covered some of those comments. Questions?

A bit to what took place in Q1 that was a bit extraordinary I hope that covered some of those comments questions go up.

That said, thank you. It was very helpful. And then just to make, secondly, you definitely stepped up the share repurchased in the quarter. You know, shares have been under pressure in the early part of the year. Can you have a speak to how you're thinking about priorities for capital allocation and the relative attractiveness of repurchased versus acquisitions at this point? Thanks.

Thank you.

Very helpful. And then just secondly, you.

You have definitely stepped up the share repurchase in the quarter.

Shares have been under pressure and the early part of the year could you speak to how youre thinking about priorities for capital allocation relative attractiveness.

Repurchases versus acquisitions at this point thanks.

Well, that's a good question. I think Steve covered it and I'll...

Well that's a good question I think Steve covered it.

So basically just do a quick recap on the priority number one is of course, we want to fund internal organic growth.

Basically just do a quick recap on the priority. Number one is of course we want to fund internal organic growth.

That's embedded in our operations already with respect to CAPEX, which is quite modest. We're down to about half 1%, so we're incredibly at set light. So the organic growth that we are realizing the company is only requiring a very, very small amount of our cash generated from operations.

That's embedded in our operations already with respect to Capex, which is quite modest we're down to about half of 1%. So we're incredibly asset light. So the organic growth that we are realizing the company is only requiring a very very small amount of our cash generated from operations. Our second we're committed to the dividends.

A second we're committed to the dividends. We've now, in every year that we've had the dividend, Steve had indicated we're 31 consecutive quarters, so we do that math.

We've now and every year that we've had the dividend as Steve had indicated were 31 consecutive quarters. So if you do that math, it's about eight years.

about eight years. Every one of those years we've increased the dividend, doubled it.

Every one of those years, we've increased the dividend double digits, and we're committed to that and to continuing that process. So that's the next priority for the site's internal growth Thats. The next priority for our use of capital.

and we're committed to that and to continuing that process. So that's the next priority for the size internal growth, that's the next priority for our use of capital.

The next is actually used for acquisitions and making touch-to-tech more competitive and furthering our strategic plan into the marketplace and to differentiating ourselves in the water, environment, sustainable infrastructure, renewable energy markets.

Next is actually used for acquisitions, and making tetra tech more competitive and furthering our strategic plan into the marketplace and to differentiating ourselves in the water environment sustainable infrastructure and renewable energy markets. So we are we are very very focused on bringing the best and brightest firms to come join to be our partners here at Tetra.

So we are very, very focused on bringing the best and brightest firms to come joining the VR partners here at Tetra Deck. And that's through acquisition.

And thats through acquisitions now.

Now, acquisitions can be less consistent with respect to the timing and the size, and therefore we've employed a buyback. And in fact, this was the second greatest quarter we've had, and the amount of buyback we've had, and it was not triggered, even though there's been some dislocation in multiples and pricing, and it wasn't unique to Tattortack. Of course, there was a pullback across entire market sectors.

Now acquisitions can be.

Less.

And thats consistent with respect to the timing and the size and therefore, we've employed a buyback and in fact this was the second greatest quarter. We've had in the amount of buyback we've had and it was not triggered even though there's been some dislocation in multiples and pricing and it wasn't unique to Tetra Tech of course, there was a pullback across.

It's entire market sectors, but we've put in a essentially a even.

but we put in a century, even...

and even purchased throughout the quarter. Some weeks it's higher, some weeks it's lower, and we also are supportive of our company at an underlying grid in the event that we would become more constructive, even than what you've seen here. So what we see is that the cash generator from our operation.

And even purchased throughout the quarter. Some weeks, it's higher some weeks, it's lower and we also are supportive of our company at an underlying grid in the event that we would become more constructive even than what you've seen here.

So what we see is that the cash generated from our operations.

take a look at this last quarter at $61 million between dividends and buybacks.

A look at this last quarter at $61 million between dividends and buybacks.

We can sustain that through cash through operations. It's not our goal to just pile up cash and leave it unreturned to our shareholders. So through dividends and buyback, we will return the cash to our shareholders and then we'll use our credit facilities to remain active on the M&A front. And so we're not borrowing cash in order to create a dividend and buyback. We're actually using the cash generated from operations. And in fact, we're not borrowing cash from our shareholders.

We can sustain that through cash through operations. It is not our goal to just pile up cash and leave it on return to our shareholders. So through dividends and buybacks. We will return the cash to our shareholders and that will use our credit facilities to remain active on the M&A front and so we're not borrowing cash in order to create a.

And buyback we are actually using the cash generated from operations and in fact, we have surplus cash to actually fund a portion of our acquisitions and if we need to go with more acquisitions or larger as Steve said, we have access essentially to $1 billion credit facility.

We have surplus cash to actually fund a portion of our acquisitions. And if we need to go with more acquisitions or larger, as Steve said, we have access essentially to a billion dollar credit facility.

to put no limit on the ability to have great companies come join us at any time.

No limit.

The ability to have great companies come join us at anytime.

So that's sort of the hierarchy in how we think about the use of a capital or a generate.

So that's sort of the hierarchy and how do we think about the use of our capital we're generating.

Thank you very helpful.

Our next question comes to line of Sean Eastman and with Keith Ann Capital-Morges, you may pursue their question.

Our next question comes from the line of Sean Eastman with Keybanc Capital markets. You May proceed with your question.

Hi, Dan and team. I'd love to dig a little deeper into the gross optionality in commercial. I think the high performance building side is pretty well defined, but if you could round out what other opportunities are firming in commercial and maybe tie that in with this nice margin of creative mix shift we're already seeing in the commercial book of business, that would be super helpful.

Hi, Dan and team.

I'd love to dig a little deeper.

And to the growth Optionality and commercial.

I think the high performance building side is pretty well defined but if you could round out what other opportunities are firming and commercial and maybe tie that in with this nice margin accretive mix shift we're already seeing in the commercial book of business that would be super helpful.

Yeah, it's a really good question. This one we've really not spent a lot of time talking about in our...

Yes, that's a really good question. It's one we've really not spent a lot of time talking about in our.

investor calls quarterly here for some time. But I know over the past few quarters, and certainly through the early part of the pandemic, we saw commercial impact negatively. And we've actually indicated that we thought that the first quarter of this year would be the second step in inflection to go from being flat or even down to actually growing. We actually see that continue.

Investor calls quarterly here for some time, but I know over the past few quarters and certainly through the early part of the pandemic, we saw commercial impacted negatively and we've actually indicated that we thought that the first quarter of this year would be the second step an inflection to go from being flat or even down to actually growing.

We actually see that continue and whats.

and what's it would be fine to be quite encouraging is not only do we see the commercial investment just in the United States really for our very large multinational global clients including heavily on the industrial

To be quite incur.

Encouraging is not only do we see.

The commercial and that's not just in the United States, It's really for our very large multinational global clients.

Including heavily on the industrial side, Theres more dollars and more commitments and funding and contracts being committed by these clients that we both have here.

There's more dollars and more commitments in funding and contracts being committed by these clients that we both have here at Tetra Tech now, which is many of the Fortune 100, but we're also looking to bring other firms onto Tetra Tech. So if you ask what's one of our priority areas, you've certainly heard me in the past, US Federal Data Analytics.

Here at Tetra Tech now, which as many of the Fortune 100.

But we're also looking to bring other firms on to Tetra Tech. So if you ask what's one of our priority areas and you've certainly heard me in the past our U S federal data analytics.

IT differentiation with respect to using Advanced data to solve some of our clients problems water firms both in the UK and Australia and we are now going to add here tactically Looking for firms to join us that have leadership positions with global commercial clients

Differentiation with respect to using advanced data analytics to sell some of our clients problems of water firms both in the UK and Australia and we are now going to add here tactically looking for firms to join us that have leadership positions with global commercial clients.

And these are solving their problems regarding sustainability. A big issue has been water. We've always talked about this, both for water, for supply, for their operation.

And these are solving their problems regarding sustainability big issue has been water. We've always talked about this both for water for supply for their operations for their containment in treatment before any type of discharge and of course, theyre long term sustainability and resiliency programs.

for their containment and treatment before any type of discharge, and of course, their long-term sustainability and resiliency programs. What we do like, and I have said this...

What we do like and I have said this.

I'm sure for the past many years that the CIG or commercial international has the ability to have margins much higher than our government services group and that's going to be driven by

Hundred recall I'm sure for the past many years that the CAGR commercial international has the ability to have margins much higher than our government services group and that's going to be driven by work that we do at the C suite for our large global commercial clients, where we're bringing exceptional value and so while it does carry higher margins for us.

work that we do at the C-suite for our large global commercial clients, where we're bringing exceptional value. And so while it does carry higher margins for us, it actually carries enormous savings for our clients by selecting the right alternatives, the right compliance activities.

It actually carries enormous savings for our clients by selecting the right alternatives the REIT compliance activities and the right decisions to make be made in their future for.

and the right decisions to make be made in their future for

anticipating new regulations and compliance requirements on the environmental and water side. So we think not only carries better margins for us, which will help accelerate CIGs closing and in fact

Anticipating new regulations and compliance requirements on the environmental and water side. So we think not only carries better margins for us, which will help accelerate <unk> closing and in fact, I would expect beating of Gst's margins, but I'll tell you the value, we're bringing to our clients and these services are really extraordinary and I believe not only best.

of GST's margins, but I'll tell you the value of bringing to our clients' service are really extraordinary. And I believe not only best in play at class, and many instances really not offered by anyone.

<unk> class in many instances really not offered by anyone else.

Interesting stuff and to the extent just hypothetically, you know, the business cycle rolls over. I mean, how much sensitivity is there there in this, you know, sort of growth prospect pipeline for the commercial business?

Interesting.

And to the extent just hypothetically.

Business cycle rolls over.

How much sensitivity is there there.

This.

Sort of growth prospect pipeline for the commercial business.

What's a real good question? I know that we've had in the past, if he went back.

Well, that's a real good question I know that we've had in the past. If you went back 10 years ago, where we were actually doing much more of the detailed design and even construction management, we saw the volatility or the cyclicality of commodities drive that business up and down for us by having moved way to the front end and actually working on the front end planning.

10 years ago where we were actually doing much more of the detailed design and even construction management, we saw the volatility or the cyclicality of commodities drive that business up and down for us. By having moved way to the front end and actually working on the front end planning,

the strategies and the upfront prioritization of programs. We find ourselves much, much less.

The strategies and the upfront.

Prioritization of programs, we find ourselves much much less exposed to.

exposed to cyclicality that you see with commodities that is inherent.

Cyclicality that you see with commodities that is inherent in a lot of these large multinational programs, especially when youre talking about.

and a lot of these large multinational programs, and especially when you're talking about fossil energy companies, which are really oil and gas, reminding really we're moving away from that. And in case of energy, it's not just oil and gas, but it's transformation to add other energy sources, such as renewable energy, or even decarbonizing some of the standard oil and gas or fossil fuel production that exists today. So we would find the work that we do to be much more consistent.

Fossil energy companies, which are really oil and gas or mining who were moving away from that and in case of energy its not just oil and gas, but its transformation to add other energy sources, such as renewable energy or even decarbonising some of the standard.

Oil and gas or fossil fuel production that exists today. So we would find the work that we do to be much more consistent.

I will say we're prioritizing quality over quantity. So by not doing the implementation, the projects are smaller, they're less volatile and they're higher margin and they're highly differentiated. Because when you become the long term consultant and partner with the strategy and implementation where the companies are going, we see that to be much less fluctuation through these business cycles that would have been seen if you're actually implementing these.

I will say, we are prioritizing quality over quantity so by not doing implementation of the projects are smaller they are less volatile and they're higher margin and they are highly differentiated because when you become the long term consultant and partner with the strategy and implementation where the companies are going to we see that to be much seed.

Much less fluctuation through these business cycles that would have been seen if you're actually implementing these.

These solutions.

interesting one last quick one for me then how would you characterize the timing risk around the ii j tailwind for tetra tech i mean are you increasingly convicted that we're going to see you know you know meaningful momentum they're starting in fiscal twenty three uh... uh... how would you characterize that

Okay interesting one last quick one from me then how would you characterize the timing risk around JA.

Tailwind for Tetra Tech I mean are you increasingly convicted that we're going to see.

Meaningful momentum there starting in fiscal 'twenty three.

Yes.

How would you characterize that.

you know i would i would say that we're increasingly uh... focused were very i'm a thought about this were very analytic about this i think my comments regarding the first eighty billion which is just the first installment that's been earmarked for the programs in fact the guidebook that's come out uh... so that's uh... further i would say that make us more encouraged now it's just additional support to what that we've seen so i do think that it's important

I would say.

I wouldn't say that we're increasingly focused we're very methodical about this we're very analytic about this I think my comments regarding the first 80 billion, which is just the first installment that's been earmarked for the programs and in fact, the guide book that's come out. So Thats further I would say is that make us more encouraged now just.

<unk> support to what we've seen so I do think it's important to note is in my comments that we've not included any material contribution from <unk> into our fiscal 2022. So we think it will come out in the fall.

but we've not included any material contribution.

from IIA into our fiscal 2022. So we think it'll come out in the fall. We're already seeing contract vehicles be put in place. We think the first beneficiaries of the funding are going to come out to current contract holders. And here at Tetra Tech with over $20 billion.

Already seeing contract vehicles be put in place. We think the first beneficiaries of the funding are going to come out to current contract holders.

Here at Tetra tech with over $20 billion and existing contract capacity that we have.

existing contract capacity that we have, I think we're there. So I've heard anecdotally, you know, impact the contracting officers, you know, being impacted and us being able to come to work because of the Omicron or something else. We don't need new contracts. We have contract vehicles. So actually the technical staff and the people at the frontline can provide funding through the vehicles we have now.

Think we're there so I've heard.

Anecdotally.

<unk> contracting officers.

Being impacted not being able to come to work because of the omicron or something else, we don't need new contracts, we have contract vehicles. So it actually the technical staff and the people at the frontline can provide funding through the vehicles. We have now so I would say we continue to be optimistic.

So I would say we continue to be optimistic regarding the timing of IJA. And...

Regarding the timing of Iga.

And to reiterate.

to reiterate it and it's just to take your question actually one step farther.

To take your question actually one step further some have asked well what about the build back better has there been some disappointment or discouragement that it hasnt passed in fact here at Tetra Tech, we think that a very.

some have asked, well what about the build back better? Has there been some disappointment or discouragement that it hasn't passed? In fact here at Tetra Tech, we think that a very methodic, careful, furthering of that on a timely basis and in fact as components and it's been some discussion of breaking it up into pieces, actually may be better for us.

<unk> careful.

<unk> of that.

On a timely basis and in fact as components and there's been some discussion of breaking it up into pieces actually may be better for us. It will create the governments to have the systems to actually put the new funding through to get to the contractors and in fact allow the best contractors to perform this work not everything at once but to actually do it in a thoughtful meaningful way.

It will create the governments to have the systems to actually put the new funding through to get to the contractors and in fact allow the best contractors to perform this work not everything at once but to actually do it in a thoughtful meaningful way that will get the best value for the government. So to IHA we continue to be optimistic and I wouldn't say we're more optimistic. We continue to track it and it's coming in just as we expect at this point. Excellent. Thanks so much for the end.

That will get the best value for the government so to.

We continue to be optimistic and I wouldn't say, we're more optimistic we continue to track it and its coming in just as we expect at this point.

Excellent. Thanks, so much for the insights.

<unk>.

Our next question comes from a line of tape solven with masking group you may proceed with their question.

Our next question comes from the line of Tate Sullivan with Maxim Group You May proceed with your question.

Hi, thank you just to start off. Can you just give more background on moving the high performance building from GST to CIG? I mean, what are the show in terms of the evolution of that business?

Hi, Thank you just to start off can you just give more background on moving high performance building.

From GST to <unk> I mean, what does it show in terms of the evolution of that business.

I'm not going to be involved based on the end customer book. Yes, yes. So if you went back, if you went back three years, two years, even a little more than a year ago, the largest revenues that were being generated here in the United States and a lot of it was government work. And so if you went back pre five years ago, it was 100% US as mostly East Coast, and it was about 50, 50 government and commercial. So it made sense to go to government.

I would imagine it could be in both based on the end customer, but yes, yes, yes. So.

If you went back if you went back.

Three years, two years, even a little more than a year ago. The largest revenues that were being generated here in the United States and a lot of it was government work and so if you went back pre five years ago. It was 100% U S is mostly east Coast. Then it was about 50 50 government and commercial so it made sense to go to government.

When we added a West Coast operation about four years ago, it was still all United States and that was also about 50-50 government and commercial. So I'd say in the US there could have been a decision, but we were looking to grow government more, so that's why we put it in GST.

When we added a west coast operation about four years ago was still all United States and that was also about 50 50 government and.

And commercial so I'd say in the U S. There could have been a decision, but we're looking to grow government more so that's why we put it in GST.

About three and a half years ago, we actually acquired our first international buildings practice high-performance buildings practice in Australia. I had quoted out of Melbourne with 5,000 engineers. Now that all of that work was being done and contracted for outside the US. Very quickly, the work that we had within the buildings had moved to be international and the US was about half commercial. Of course, with the most recent acquisition back in August .

About three five years ago, we actually acquired our first international buildings practice.

Performance buildings practice in Australia headquartered out of Melbourne with a thousand engineers now that all all of that work is being done and contracted for outside the U S. So very quickly the work that we had within the buildings had moved to be international and the U S was about half commercial and of course with the most recent acquisition back.

In August .

for in our fourth quarter of or Lee which is all international in the united kingdom the overwhelming majority of the revenue uh... became either international which was in the u.k.a. is all international Australia is all international and the u.s. is probably close to half

We're in our fourth quarter.

Core Lee, which is all international and the United Kingdom. The overwhelming majority of the revenue became either international which was in the UK as all International Australia was all international and the U S is probably close to half.

commercial that when you're sitting at 70 80% of the collective buildings group Residing either in commercial or international it made sense to How's it there now we didn't really want to break it up and because that we're sharing clients we're staring

Commercial that when Youre sitting at 70%, 80% of the collective buildings group residing either in commercial or international it made sense to.

How is it there that we didn't really want to break it up because that we're sharing clients were staring projects and I assure you one of the big growth areas that we see in our high performance building Terry is actually with the U S. Federal government that we're growing work right now with the Australian government through their administered through the department of defense.

And I assure you one of the big growth areas that we see in a high-performance building area is actually with the U.S. federal government. Now we're growing work right now with the Australian government through their Ministry of Defense, through MOD Ministry of Defense in the U.S.

Through MLR Ministry of defense in the U K and so we do have government work and we have had that overseas, but we're looking to grow that even more here in the U S.

So we do have government work and we have had that full receipts, but we're looking to grow that even more here in the US.

But the reason we moved it was to keep it consolidated so the group could work cohesively, seamlessly and bring all of the best that we have in tetrotech of the clients and not have to go intersegment.

But the reason we moved it was to keep a consolidated so the group could work cohesively seamlessly and bring all of the best that we Havent Tetra tech to the clients and not have to go inter segment.

And so that's the reason we moved it fully. Now just as a point, we didn't move the entire...

And so that's the reason we moved to fully now just as a point we didn't move the entire.

high performance buildings from government services to international because half of it are more than half of it was already in the international group for the work that we had in Australia and of course in the fourth quarter in the UK. So that was the rationale for consolidating it into the CIG.

High performance buildings from government services to international because half of it or more than half of it was already in the international group for the work that we had in <unk>.

Australia and of course in the fourth quarter in the U K. So that was the rationale for consolidating it into the <unk> segment.

Thank you for that context, Dan. And then you mentioned emergent contaminants in your paragraph of Marx and in the annual report, you showed that you mentioned 50 million in new programs.

Thank you for that context, Dan and then you mentioned emerging contaminants.

In your prepared remarks and in the annual report.

You showed that you had mentioned $50 million in new programs to investigate and treat emerging contaminants was that up from a base of zero in the prior year and then you also mentioned the new ion <unk>.

to investigate and treat emerging contaminants. Who's that? But from a base of zero the prior year, and then you also mentioned the new ion. The ion treatment plant, I mean, is this a ion exchange plant?

Treatment plant I mean is this a client exchange plant can you just is this an opportunity right now and just a couple of states has it already grown to multiple states can you go into a little more background on that opportunity. Please sure we're up to $50 million and we have $50 million worth of orders to investigate our emerging contaminants.

Can you just get, is this an opportunity right now in just a couple states? Has it already grown to multiple states can go to a little more background on that opportunity?

We're up to $50 million in, we have $50 million worth of orders to investigate our emerging contaminants and to be specific as primarily PFAS.

And to be specific is primarily <unk>.

And now it's not up from zero. So it was up from what I would say coming into 2021. So to look back a year, that number was probably around 20 million. So it's up by about 150%. So it's growing.

And it's not up from zero. So it was up from what I would say coming into 2021, so to look back a year. The number was probably around $20 million. So it's up by about 150%. So it is growing.

Now with respect to high on exchange, there are a number of different methodologies of treating PFOS. I guess the conventional best demonstrated available technology has been carbon or granular activated carbon. And also ion exchange and tentative design here in California for the largest PFOS municipal treatment facility in the United States.

Now with respect to ion exchange.

There are a number of different methodologies.

Treating.

P. Pos.

I guess the conventional.

<unk> demonstrated available technology has been.

Carbon or granular activated carbon.

And also ion exchange and contradicted the design.

Here in California for the largest P fast municipal treatment facility in the United States and we happen to have used an exchange.

and we happen to be used on exchange. There are other methods that we are working with on innovative technologies that are looking to be, to disrupt this technologies of either IAM exchange.

There are other methods that we are working with an innovative technologies that are looking to be.

Two disruptive technologies of either ion exchange.

or granular activated carbon. And so we did call it out because it's...

Or grant.

Granular activated carbon and so we did call it out because its first of its kind in scale for a municipality or we.

first of its kind in scale, per municipality. We do think it's going to grow. There are several things that are driving it. One are the responsible parties who discharge.

Do think it is going to grow.

There are several things that are driving it one or.

The responsible parties, who discharged paphos, which is really an.

PFAS, which is really an additive to firefighting foam, largely used by the military, but other firefighting institutions also. Ultimately, this is on track to be regulated as a drinking water contaminant that will have a maximum level that will be treated at every single municipality in the United States. And similarly, they're developing drinking water standards in Australia.

And additive to firefighting foam largely used by the military but other firefighting institutions also.

Ultimately this is on track to be regulated as a drinking water contaminant that will have a maximum level that will be half that will be treated at every single municipality in the United States and similarly, they are developing drinking water standards in Australia.

and the united kingdom with their uh... well down the road are similar to the u s are moving parallel to the boat

In the United Kingdom with their well down the road similar to the U S sort of moving in parallel to developing it.

So what is the market opportunity? Adding a treatment technology to treat PFAS at every single water supply utility in the US. And that's ultimately our eye on the prize. And ultimately the demonstration of putting full scale treatment in place we're among the first to do it. And certainly the entity to do it at the largest scale in the US now.

So what is the market opportunity.

Adding a treatment technologies to treat <unk> at every single.

Water supply utility in the U S and that's ultimately our eye on the prize and ultimately the demonstration of putting full scale treatment in place.

We're among the first to do it and certainly to the entity to do it at the largest scale in the U S. Now.

And that's what we're focused on. So it isn't going up to 50 from zero, but it hasn't hit that steep part of the curve in funding, which will be driven by regulatory requirements. And that'll should take it and have it grow by really orders of magnitude. Thank you.

And that's what we're focused on so it isn't going up to 50 from zero, but it hasnt hit that steep part of the curve and funding, which will be driven by regulatory requirements and that will should take it and have it grow by orders of magnitude.

Okay. Thank you Dan.

Thanks, Dave.

Our next question comes from a line of Mark Ridic, what's the dirty and may proceed with your question.

Our next question comes from the line of Marc Riddick with Sidoti You May proceed with your question.

Hey, good morning.

Good morning, Mark.

So I mean, a lot's been covered in the Q&A, which is great. I did want to sort of just circle back on a more high level, just view us to maybe what you're seeing out there within the acquisition pipeline today, maybe versus a year ago, I guess.

So a lot's been covered in the Q&A, which is great I did want to just circle back on a more high level view as to maybe what youre seeing out there within the acquisition pipeline today, maybe versus a year ago I guess.

last calendar year, I'm going to my calendar year, you guys ended up doing five acquisitions. And I wanted to sort of get your thoughts on maybe, if you compare to what the pipeline looks like now versus a year ago, as well as maybe the attractive midst of international versus Smith.

Last.

Calendar year going by calendar year, you guys ended up doing size acquisitions and I wanted just wanted to get your thoughts on maybe.

If you compare to what the pipeline looks like now versus a year ago.

As well as maybe the attractive mix of international business. Thank you.

Thanks for that question, Mark. I think our acquisition pipeline actually looks very consistent to what we saw a year ago. So we...

Thanks for that question, Mark I think our acquisition pipeline actually looks very consistent with what we saw a year ago. So we are.

We're looking at it on fiscal years and that calendar, but we did four acquisitions in fiscal year 2021. We did one in our first quarter, so we got one down. We looked at it relatively similar. We're relatively agnostic whether or not it's international or US because some of our priorities with respect to international, particularly in Australia.

We're looking at it on fiscal year's calendar, but we did four acquisitions in fiscal year 2021, we did one in our first quarter. So we've got one down.

Look that it's relatively similar.

We're relatively agnostic, whether or not it's international or U S. Because some of our priorities with respect to international, particularly in Australia, and the United Kingdom with adding water Consultancies is the priority, but we wouldn't put that priority over adding additional federal companies here in the U S or advanced data.

and the United Kingdom with adding water consultancies is a priority.

but we wouldn't put that priority over adding additional federal IT companies here in the US or advanced data analytic companies primarily here in the US or digital water companies here in the US and really a tactic that I think will

Companies, primarily here in the U S or digital water companies here in the U S and.

Really a tactic that I think we will.

contributed to the company very high-end commercial

A contributor to the company.

Very high end commercial.

and environmental companies here in the US. So if you'd asked if a water company came up in the UK or Australia versus a data analytics company or a commercial high end environmental company here in the US, will we go international or will we go US? Will we go US environmental over IT? My response is we'll do all four.

Environmental companies here in the U S. So if if you'd asked.

A water company came up in the U K or Australia versus a data analytics company.

Or a commercial high end environmental company here in the U S, where we go international or we go U S will be go U S. Environmental over at my responses will do all four.

We'll do one water in the UK, Australia, and we'll do an environmental, the US, and we'll do an IT company.

We will do one of water in the U K, Australia, and we will do an environmental and the U S and we will do an IP company here in the U S. So I think with the balance sheet, we have that Steve covered it's not either or for us. It's just one criteria.

here in the US. So I think with the balance sheet we have, that's deep covered, it's not a either or. For us, it's just one criteria.

Will it increase tetratex competitive position, bring new clients and differentiate us in the marketplace? Will it make it better than we are today? And if the answer is yes, we don't.

It increased tetra tech's competitive position bring new clients and differentiate us in the marketplace will it think it's better than we are today and if the answer is yes, we don't have a a governor or a threshold by which we have to make a selection of one over another and with respect to what the pipeline looks like.

a governor or a threshold by which we have to make a selection of one over another. And with respect to what the pipeline looks like.

It looks very similar to what we saw last.

It looks very similar to what we what we saw last year.

Okay, and I guess I would be remiss if I didn't ask a question on which a lot of folks are concerned about across the board and that's just overall labor availability spending, recruiting and the like. And as one is, you give us a quick update on sort of what you're what you're seeing and what your expectations are and maybe also tying that into what they're giving the backlog and the opportunity to go about things that you see going forward. Thank you.

Okay, and I guess I would be remiss if I didn't ask the question with Joe a lot of folks are concerned about across the board and Thats just overall labor availability.

Availability spending.

<unk> and the like and I just wanted to say.

A quick update on sort of what youre, what youre seeing and what your expectations are and maybe also tying that into what data given the backlog and the opportunity growth opportunities that you see going forward. Thank you.

Yeah, that's a good question. It's probably the most common question I receive. And that's just myself, but really our entire team is our

Yes, it's a good question, it's probably the most common question I received and not just myself, but really our entire team.

Is are we seeing labor shortages.

We have not seen labor shortages. We've not had a shortfall of labor to perform any of the work we have here. We have had, there's been a lot of consolidation in the environmental water fields. Some of them have been consolidators that have caused disruption in those that have actually gone through this consolidation.

We have not seen labor shortages, we have not had a <unk>.

<unk> followed labor to perform any of the work we have here.

We've had.

Have had to spend a lot of consolidation in the environmental.

Water fields some of them have been consolidators that have caused disruption in those that have actually gone through this consolidation and so we've actually been a big benefactor of what I would call very high and internally, we call them strategic hires but I would call them thought leaders are technical leaders in the marketplace. So interestingly enough.

So we've actually been a big benefactor of what I would call very high end, internally we call them strategic hires, but I would call them top leaders or technical leaders in the marketplace. So interestingly enough, that's actually gone quite well for us. We do track very, very closely our turnover rate and our turnover rate of voluntary turnover rate is

It's actually gone quite well for us.

We do track very very closely our turnover rate and our turnover rate of voluntary turnover rate is.

It's actually down slightly once the pandemic has started from pre-pandemic levels. Now I think some of it's kind of in the noise. We're down a few tens of a percent on turnover. We're just some 10 percent. And before we were like 9.8 and we're down to 95. So those types of numbers. So I consider it.

He is actually down slightly once the pandemic has started from pre pandemic levels.

I think some of it is kind of in the noise. We're down a few tenths of a percent on turnover, we're just sub 10%.

And before we were like $9 eight and went down to $95. So those types of numbers.

So I consider it de.

but we've not seen turnover in the company be a particular issue. Increases, we are a cognizant of

De minimis, but we've not seen a turnover in the company would be a particular issue.

Increases we are cognizant of.

salary pressures and inflation and the rest of it, we do pay at market. But I will say that most of our contracts or I guess the great majority are either time and materials where we have annual escalation rates that take it into account or cost plus where it's passed through. So we don't really see that. And I will say one item that we're very focused on here in the company.

Salary pressures and inflation on the rest of it we do pay up market.

But I will say that most of our contracts or I guess, the great majority are either time and materials, where we have annual escalation rates that taken into account or cost plus where it's pass through so we don't really see that and I will.

One item that we're very focused on here in the company. We believe the productivity of the company can go up dramatically by the use of advanced data analytics and other technology that will allow each of our <unk>.

We believe the productivity of the company can go up dramatically by the use of advanced data analytics, another technology that will allow each of our associates to be more productive than they are.

Associates to be more productive than they are today and it doesn't mean I want you to work more hours, we want to actually have better output with the same amount of labor input and so we are working hard at trying to decouple that old adage in a professional consulting firm to where to do 10% more work you need 10% more staff.

And it doesn't mean I want you to work more hours. We want to actually have better output with the same amount of labor input.

So we are working hard at trying to decouple that old adage in a professional consulting firm where to do 10% more work, you need 10% more staff, that's not the case. We think we can actually produce much more output, much more value for our clients. Do it faster, have even better outcomes.

That's not the case, we think we can actually produce much more output much more value for our clients do it faster have even better outcomes from a technical standpoint, with the same or even less labor.

from a technical standpoint with the same or even less labor.

And it doesn't mean we're going to have less people because we're growing. We're still going to have more people. It's just going to create new, new use of technologies and career opportunities that we're never seen before. So the best and brightest that they come to Tetra Tech, they're going to be able to do more things on more projects and more geography, solving more problems, using more technology than they ever could have even imagined. And that's how we're keeping up with these challenges in the workforce. you

And it doesn't mean, we're going to have less people because we're growing we're still going to have more people. It's just going to create new ticked up new or use of technologies and career opportunities that we've never seen before.

So the best and brightest that they'll come to Tetra Tech theyre going to be able to do more things on more projects and more geography solving more problems using more technology than they ever could have even imagined and that's how we're keeping up with these challenges in the workforce.

Much appreciate it thank you very much.

Great. Thanks, a lot Ron Clark.

Our next question comes from one of Michael Dutans with vertical research you may proceed with your question.

Our next question comes from the line of Michael Dudas with vertical research you May proceed with your question.

Good morning, Dan and Steve.

All right Michael.

getting me reaching a little record back along on a constant currency basis. How do you, how do the order flow then, especially for me, the federal side view? And just to make that during 2022, you can maintain growth in the backlog, positive book to bills, any issues given maybe some of the funding or so.

Give me more.

And a little weaker vacuum unit.

Currency basis.

How do you how does the order flow being reversed.

The federal side.

<unk> and <unk>.

During 2022, you can maintain growth in the backlog positive ghouls.

<unk> given maybe some of the familiar soon.

discussions out of Washington, especially with what's going on in defense and some of the focuses maybe turned elsewhere on how to make some of those awards to you.

Discussions on Washington, especially with what's going on defense and some of the focus is maybe turn to elsewhere.

Some of the recent rewards students.

Well, I actually was very encouraged with our first quarter of a book of business or new task orders being awarded to us. It was...

Well our.

I actually was very encouraged with our first quarter.

Our book of business, our new task orders being awarded to Us.

And honestly, it exceeded our expectations a little bit with having one of the biggest revenue, well, having the biggest first quarter revenue that we've ever had, and normally puts pressure on the backlog in the first quarter. And normally it's a little bit lighter activity for new awards.

And honestly it exceeded our expectations a little bit with having one of the biggest revenue will have the biggest first quarter revenue that we've ever had and normally puts pressure on the backlog in the first quarter and normally its a little bit lighter.

Activity for New awards, because you've got Thanksgiving and Christmas and new year's and it's just generally slowdown, but we saw really good flow of new orders, so with respect to the first quarter it.

because you've got Thanksgiving, and Christmas, and New Year's, and it's just generally slowdown, but we saw a really good flow of new orders. So with respect to the first quarter, it was very good. Now with respect to what we see in the outcome or in the outlook, it is interesting. I do expect defense, it's not to be a priority. So we have three even buckets, or even components of our federal work. So civilian,

It was very good now with respect to what we see in the outcome.

Outlook. It is interesting I do expect defense is not to be a priority. So we have three even buckets or even components of our federal work. So civilian agencies things like the FAA Federal Aviation Administration USEPA NASA No National Science Foundation of these folks we see most of their budgets up.

like the FAA Federal Aviation Administration, US EPA, NASA, NOAA, National Science Foundation, these folks. We see most of their budgets up. It is an alignment with the priorities of the administration. So I think that the book of business and the outlet there looks very good. So it's increased in priority.

It is in alignment with the priorities of the administration. So I think that the book of business in the outlet there looks very good so it's increased in priority.

um... you can see you know i don't want to point to you crane uh... as they work off as they uh... work off opportunity for task but i do want to point it to as administration's priority for it's diplomacy and development diplomacy and development are the priorities not defend

You can see.

On a point to Ukraine.

They work as a work opportunity for tasks, but I do want to point it to his administration's priority for its diplomacy development diplomacy in development are the priorities not defense. So more dollars will go into diplomacy, followed by development, which we don't want to give you.

So more dollars will go into diplomacy followed by development, which we want to give as a US hand up.

The U S a hand up.

to those last fortune and that is actually good for all of us. And as one of the largest USA contractors, we think that will benefit from that because the year goes on. So I feel very good on that front. Now defend.

For those less fortunate and that is actually good for all of US and is one of the largest USAID contractors, we think that will benefit.

Benefit from that as the year goes on so I feel very good on that front that defense.

We feel that even with defense being, let's call it flat, or not the ultimate priority of where additional funding will go, we think we're going to be a benefactor of it.

We feel that even with defense being let's call it flat or not the ultimate priority of where additional funding will go we think we're going to be a benefactor of this and how we think thats. The case as we think dollars will move from weapons platforms or other areas that are considered offensive or areas that.

how we think that's the case is we think dollars will move from weapons platforms or other areas that are considered offensive or areas that are very large portions of the budget and it's going to move toward quality of life.

Our very large portions of the budget and it's going to move toward quality of life sustainability cleaning up as environment from legacy operations of defense, creating new.

sustainability, cleaning up his environment from legacy operations of defense, creating new buildings that actually reduce the carbon footprint high-performance buildings, many of the things that we do. So we think that defense budget in and of itself may not be increased or be, quote, flush with additional funds, but we think that the reprioritization of funding within.

Buildings that actually reduce the carbon footprint high performance buildings. Many of the things that we do so we think that defense budget in and of itself may not be.

Increased or be quote flushed with additional funds, but we think that the re prioritization of funding within.

the Department of Defense for activities that we perform should actually be pretty strong as we continue to move through this administration and end to the

The department of defense for activities that we perform should actually be pretty strong as we continue to move through this administration and into the future.

I've been encouraging them and my follow up is they just go back to the cat location and the minute.

That's encouraging and my follow up is.

Maybe just to go back to the capital allocation in the M&A pipeline.

is very target level of capacity, balance sheet capacity.

Is there a target level of capacity balance sheet capacity.

that you like this is awful for you and I give him what you discuss it sounds like

Got you.

Optimal for you.

Given what you've discussed it sounds like.

Q2 will be more.

which smaller acquisitions may be several of them as opposed to one or two ones that be able to might be out into the car or probably less likely is that something college we should think about that relative to how the Catholic is allocated this year and in the end.

H smaller acquisitions, maybe several of them as opposed to one or two once you move it might be.

Probably less likely to use is that something we should think about that relative to the capital gets allocated this year and beyond.

Well, I would like to start with a very high level, 100,000 foot overview on our capital allocation at target levels. We really would like to get to a range of one to two times. I probably, if they've went over two, but it was for the right action for the company, I wouldn't feel uncomfortable at all if it was the right strategy and the right move. Now,

Well I would like to start with a very high level of 100000 foot overview on our capital allocation at target levels.

We would like to get.

To a range of one to two times, probably if it went over to but at least for the rate the rate.

Action for the company I wouldn't feel uncomfortable at all if it was the right strategy and the right move.

No.

you would be right to point out you said this for i don't know how many years then one to two you haven't yet been able to get there uh... i don't think it's i don't think it's the worst uh...

You would be right to point out you have said this for I don't know how many years, Dan one to two and you haven't yet been able to get there.

But I don't think it's I don't think it's the worst.

a faul that we've had if we've been able to grow the company at double digit we've been able to acquire great companies We've been able to return cash to the shareholders who've been able to increase our dividends and we de-lover

Our funnel that we've had if we'd been able to grow the company at double digit we've been able to acquire great companies, we've been able to return cash to the shareholders will be able to increase our dividends and we de lever.

because of the strong cash flow. So that's it's not what what we're targeting, but it's not a bad place to be. I do think in the in the short term, at least if you looked at the horizon and I commented earlier on the questions here, that I see the pipeline similar to what we saw last year and year before which does lend itself to

Because of the strong cash flow so that's.

It's not what.

What we're targeting but it's not a bad place to be.

I do think in the in the short term at least if you looked at the horizon and I commented earlier on the questions here that I see the pipeline similar to what we saw last year and year before which does lend itself to.

several if you want to call it niche firms, but I think every firm that's joined us whether or not it's had

Several if you want to call it niche firms.

I think every firm that has joined us whether or not it's had 20 people or has had 1000 people are not niche now may be from a financial standpoint, as a percentage of the company's revenue. It can be characterized but we think that they are incredibly.

twenty people or it's had a thousand people uh... are not niche now maybe from a financial standpoint as a percentage of companies revenue can be characterized but we think that they're incredibly

a credit for the company's intellectual status in the marketplace, whether it's a smaller firm like EA or Ibra RMAC, I'll tell you they are unbelievably valuable in the company. Whether it's a small Canadian company like Coanda, which is a very high in research and development firm with an expert on fluid mechanics and other calculations.

Accretive to the company's intellectual status in the marketplace, whether it's a smaller firm like EAA or <unk> I'll tell you. They are unbelievably valuable in the company, whether it's a small Canadian company like <unk>, which is a very high end research and development firm with an expert on fluid mechanics.

Calculations moved us to another level or if it's bigger like really at a thousand people added both geography and some of the best buildings. So for US every one of those has made us better as some have made our revenues.

move us to another level or if it's bigger like orally at a thousand people added both geography and some of the best buildings so for us every one of those has made us better as some of made our revenues

you know, is moved at the need a little bit more than others. If we find a larger firm.

His moved at the need a little bit more than others.

If we find a larger firm.

that fits with Tetra Tech and I think there are a few out there that they would benefit every bit as much as us because what's important is it's not a one-way street. It's not the benefit Tetra Tech. We think that every associate that comes to us with the acquisition will have a better, brighter future than they now have on their own. And frankly, Tetra Tech staff have on their own.

That fits with Tetra Tech and I think there are a few out there that they would benefit every bit as much as us because what's important is it's not a one way street, it's not the benefit Tetra Tech. We think that every associate that comes to us with the acquisition, we will have a better brighter future than they now have on their own and frankly that tetra Tech staff have on their own.

So, do I like to go bigger? Yes, but it needs to be for the reason that we're going to be better. And if that gets us to a temperature two, I'll be even happier. But we want to be...

So do I like to go bigger, yes, but it needs to be for the reason that we're going to be better and if that gets us to a leverage of two I'll be even happier, but but we want to be the.

The risk of being redundant, we really want to move to be better, not just

The risk of being redundant, we really want to move to be better not just bigger.

down like the cork down to the department's going to continue to be pointed. This is thank you, Dan.

It sounds like.

The department is going to continue to be quite this thank you Dan.

Alright, great. Thank you very much Michael.

This will conclude the Q&A session. I will now turn the conference back over to Dan Batch, to conclude.

This will conclude the Q&A session I will now turn the conference back over to Dan <unk> to conclude.

Well, thank you very much, Laura, and I want to thank every one of you for attending the call. I know you all have busy schedules and take the time out and to participate and ask these questions and to follow Tetra Tech. It's really very much appreciated.

Well, thank you very much Laura and I want to thank every one of you for attending the call I know you all have busy schedules and take the time out and to participate and ask these questions and to follow Tetra Tech is really very much appreciate it.

I feel really good and our entire company feels very good about the start to the year with a good first quarter. But of course we do know what we did in the first quarter is what we did before and we're focused on doing as well or better as we move into the future. And I really look forward to giving you an update here on our next quarter to be called on how our second quarter has performed and providing you more updates on both our outlook for the rest of the year. And how things like the IIA and other programs are progressing and as we see them moving forward.

I feel really good and our entire company feels very good about the start to the year with a good first quarter, but of course, we do know what we did in the first quarter is what we did before and we're focused on doing as well or better as we move into the future and I really look forward to giving you an update here on our next quarterly call on how our second quarter.

<unk> has performed and providing you more updates on both our outlook for the rest of the year and how things like the <unk> and other programs are progressing and as we see them moving forward.

into the rest of 2022 and beyond. So with that, I hope you have a great rest of the week and...

Into the rest of 2022 and beyond so with that I hope you have a great rest of the weekend.

Stay safe thank you.

Ladies and gentlemen, this concludes our conference for today. Thank you all for your participation. Have a great rest of your day. I'll parties me now disconnect.

Ladies and gentlemen, this concludes our conference for today. Thank you all for your participation and have a great rest of your day all parties may now disconnect.

We that F the.

Yeah.

Yes.

[music].

Okay.

[music].

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