Q3 2022 Tetra Tech Inc Earnings Call
Every year, which reflected a 70 basis point increase in our operating margin over last year.
Our backlog on a constant currency basis increased to an all time high of $3 $65 billion, which is up 12%.
<unk> from last year.
This collective performance is really a direct result of our successful long term strategy to provide high in leading with science services in the water and environmental markets.
Our strategy has put us at the forefront of our client's critical programs to address climate change increased resiliency provide essential water supplies and protect the environment.
Given the strength of our performance, we're increasing our guidance for both the net revenue and earnings per share for the entirety of fiscal year 2022, and I'll provide more details of that at the guidance at the toward the end of this call.
Now I'll begin with an overview of our performance and our customers followed by Steve Burdick, Our Chief Financial Officer, who will provide a more detailed review of our financials and capital allocation.
I'll, then follow Steve with addressing our customer outlook in our earnings guidance for fiscal year 2022, and for the fourth quarter.
In the quarter, we hit new all time third quarter highs.
For revenue.
Net revenue operating income and earnings per share.
Our net revenue increased 13% year over year from $638 million to $720 million, which represents an all time high for any quarter in the company's history.
Our operating income increased at an even faster rate up 20% from last year, reaching a third quarter record of $84 million and increasing our operating margin by 70 basis points from the same quarter last year.
And finally, we delivered $1 nine and earnings per share, which is up 15% from the 95.
That was produced last year.
And as a new all time high of $1 <unk> for the third quarter and the second highest earnings per share of any quarter in the history of the company.
I'd now like to provide an overview of our performance by our end customer.
In the third quarter, we saw growth across all four of our customer sectors.
International.
From from clients and projects that were contracted for outside the United States represented 35% of our revenue and was up 18% from last year.
And it was actually up 26% if you evaluated on a constant currency basis.
This strong performance was driven by rapid growth in our high performance buildings practice and a resilient infrastructure design work across the United Kingdom, Australia, and all across Canada.
We saw continued strength in our state and local revenues, which were up 10% compared to last year.
This is the seventh consecutive quarter of double digit state and local growth.
And our underlying municipal water services work was up 15% year over year led by the rapid growth of our digital water practice, while our episodic disaster response services were flat in comparison to last year.
Our U S. Commercial net revenue was 22% of our business up 19% from last year.
Our services and sustainability, which include environmental permitting high performance buildings design and renewable energy all contributed to strong growth in this sector.
And finally, our work for our U S. Federal clients represented 27% of our net revenues in the quarter and was up 8% year over year, if we exclude the onetime impact of our Afghanistan wind down that took place almost a year ago now.
Our federal work was driven by growth in all three of our main federal client sectors and that includes the civilian agencies International development and all of the defense agencies that we work for all three of them grew during the quarter.
Yes.
I would now like to present, our performance by segment.
The commercial international group or <unk> segment grew by 19% year over year.
Higher utilization and strong project performance resulted in a 13, 8% margin in the quarter up 230 basis points from the prior year.
Well 13, 8% was a very strong quarter about 50 basis points of that increase was associated with pickups.
Due to excellent project execution during the quarter.
I expect <unk> to continue to perform at the high end or even exceed the range that we've identified earlier for the CIT segment, which was 11 five to $12 five margin range and.
That particularly will be the case as we have higher margins and typically the third and even more especially in the fourth quarter of the fiscal years due to seasonality.
<unk> did have a strong broad based growth from international work in the United Kingdom, Australia, and Canada as well as work for commercial clients here in the United States.
Our government services group or the <unk> segment grew by 6% and delivered a 13, 4% margin.
The <unk> segment's government work grew for municipal clients and federal clients during the quarter, while the episodic disaster work was a smaller portion of the <unk> segment's revenue this quarter.
<unk> 13, 4% margin is right in the middle of the expected range that we have for this group of 13% to 14% margin range.
Typically.
<unk> fourth quarter, which we're entering will be at the high end of this range, which we expect as utilization increases due to summer field programs and other federal projects close out that her time at the end of the fiscal year.
And even in the quarter with an all time record revenue our strong orders resulted in a book to bill of greater than one for the quarter.
In the third quarter, we won new programs and task orders across all of our global operations that leveraged our more than $20 billion in federal contract capacity.
U S federal orders from long term clients such as the department of Defense USAID.
We continue to receive significant orders for climate change related international development work from both Australia, and the United Kingdom's eight agencies.
At this point I'd like to turn the presentation over to Steve Burdick, Our Chief financial Officer to present, the details of our financials Steve.
I would like to now review the GAAP financials for the third quarter of 2022.
The strong performance from our operations resulted in top line growth with third quarter revenue of $890 million and net revenue amounted to $720 million, which was above the upper end of our guidance range of 665 million to 750 $715 million.
Our revenue net revenue were both up 11% and 13% respectively over last year with strong growth from U S commercial international state and local and markets.
Our operating income and earnings per share for the third quarter also improved over last year.
Our reported operating income came in at $84 million this quarter up 20% over last year.
Our improved operating income for the third quarter was largely driven by our 19% growth in the <unk> segment net revenue coupled with a 44% growth in <unk> operating income.
On a consolidated basis. These improvements resulted in our EBITDA margin, increasing 70 basis points over the third quarter of last year.
GAAP EPS came in at $1 nine in the third quarter, which was an increase of 15% over last year.
Our EPS of $1 nine which also came in better than the top end of our guidance range, which was a $1 to $1 five.
And Furthermore, our effective tax rate last year was lower so a more appropriate way to look at the year over year comparison would be to utilize a consistent tax rate basis with last year and this would have resulted in an EPS being up 22% over last year.
Cash flows generated from operations for the third quarter totaled $98 million.
An increase of 42% over last year, our focus on working capital and cash flows as resulted in our DSO improving once again to an all time low of 58 eight days.
This is an improvement of about <unk> <unk> from last year at this time and this lower DSO trend continues to reflect the outstanding work of our project managers lead relative to high quality projects and highly satisfied clients in the broad portfolio across all of our end markets and geographies.
Our net income amounts to $44 million and our net debt to EBITDA was at a leverage of 0.1 times with a total cash position of more than $200 million.
Our return on invested capital on a trailing 12 month basis exceeds 22% and as it is of note are our ROIC has been over 20% for each quarter of this fiscal year.
So as we presented here today the continued high quality results with improved EBITDA margins, along with strong cash flows and lower working capital requirements has shown that Tetra tech is able to reinvest in the business and generate very strong returns.
Now our long term capital allocation strategy calls for a balance of investing in this growth in our business managing the balance sheet.
We will now present, providing returned to our shareholders.
Year to date cash flow from operations generated $276 million.
Our strong cash flow allowed us to successfully complete for acquisitions. So far this year, all of which advance our digital strategy, which Dan will discuss later.
And during the third quarter, we continued to provide significant returns for our shareholders through dividends and share buybacks.
Now regarding our dividend program year to date, we've paid up $34 million in dividends and I want to announce that our board of directors approved our 30 <unk> consecutive dividend, which is set at 23 per share and a 15% increase over last year.
Furthermore, year to date, we utilized $150 million on our stock buyback program, we have a total of $398 million remaining in our approved stock buyback program.
And all told year to date.
So we've returned $184 million to our shareholders through these dividend and share buyback programs and a strong balance sheet and available liquidity of over $1 billion.
Positions us to continue investing in technical capabilities and strategic growth areas.
No.
Prior to handing the presentation back over to Dan I want to remind everybody of three key items for reconciliation towards Q4, 'twenty one results from the actual net revenue of $709 million.
First we had one extra week in Q4 of last year.
Because of how our 50 253 week fiscal year works, we had an extra week in last year's Q4, which we do not have repeating this year that will result in a year over year impact of about $50 million or 8% of net revenue, which we highlighted on our previous earnings call.
Second the Afghanistan wound down occurred late in September 2021, where the U S and other countries departed from the country and as a result of our projects were wound down swiftly, which we expect to have about a $10 million impact in the fourth quarter.
And third we had a $15 million, we had $50 million of episodic disaster recovery work in the fourth quarter last year that we do not expect to have in the current year.
In addition to these three issues I wanted to note that the FX rate impact on our fourth quarter with the recent strengthening of the U S dollar.
So as a reminder, our primary non U S operations are represented by Canada, Australia, and the U K, which have all been performing well in their local currencies.
And I have to say across the board are exceeding expectations on both the topline and bottomline.
And so the recent strengthening of the U S dollar versus the currencies. In these countries is expected to create an FX translation impact of about $20 million or.
We're just just about 3% of our net revenue.
So in total the net revenue amounting to $614 million should be utilized as a baseline for the year over year comparison to the fourth quarter and fiscal 2022 guidance that Dan will provide in the next few slides.
I am very pleased to share these great results with with you all for the third quarter and fiscal year to date.
Thanks for your support and I'll hand, the call back over to Dan.
Great. Thank.
Thank you Steve.
One of Tetra Tech's key growth initiatives that advances our strategy <unk> strategy is digital water.
Our digital water practice was launched back in 2019 and over the past three years has grown to $150 million in annual revenue and.
And we expect this to double again in the next three years.
We've grown our digital water practiced by attracting top talent and automation systems integration and data analytics.
And we're seeing a growing demand from our municipal clients for innovative scalable technology solutions.
This market is being driven by first new and proposed regulations for water utilities to address cyber security and other remote monitoring and operations.
Digital twin technologies that support facility optimization.
And funding for all of this work and for New municipal programs is included in the bipartisan infrastructure investment and jobs Act or <unk> also known as the infrastructure.
Stimulus program.
Our strategy is to deliver Tetra Tech suite of Delta technologies to more than 500 municipal agencies that we're working for today.
In the past two years, we've added three firms that each bring new technologies and expertise to Tetra Tech to further our digital water practice. The most recent addition is a firm called the integration group of the Americas or Tiger, who joined US just 30 days ago.
The addition of Tiger further expands our digital water practice with industry, leading software engineers and digital transformation consultants experienced in solving the complex challenges faced by utilities.
Tiger brings tetra tech customers and customized analytics software and platform as a service applications that are rapidly integrating into tetra Tech's differentiated suite of Delta technologies.
I'd now like to provide.
Our guidance for the fourth quarter and for all of fiscal year 2022.
First our guidance for the fourth quarter is.
For a net revenue of a range of $676 million to $726 million for net revenue and.
And an associated earnings per share of $1 13 to $1 18.
As noted in my opening remarks, we're increasing our full year guidance for both net revenue and earnings per share.
Our new guidance for all of fiscal year 2022.
Our net revenue is $2 78 billion to $2 eight 3 billion. This is an implied net revenue growth.
14% for the fourth quarter at the midpoint of guidance.
Our new increase for earnings per share for fiscal year, 2022 is $4 38 to $4 43.
This guidance both for the fourth quarter and for the year includes for the fourth quarter includes intangible amortization of 3.4.
$4 million, which is approximately <unk> <unk> per share.
Our effective tax rate of 26% for the fourth quarter. It assumes we have $54 million.
Shares diluted shares outstanding and it does exclude any contributions of revenue or income from acquisitions that we complete during the fourth quarter.
Or the remainder of the year.
In summary, we had a very strong quarter with record high Q3 results.
This performance is a direct result of our successful long term strategy to provide high end differentiated services that are leading with science and the water and environmental markets. We advanced our digital water growth strategy with the addition of Tiger in the quarter, a high end industry, leading automation firm.
And given the strength of our end markets and the increase in our backlog.
Pleased that we were able to increase our guidance for both net revenue and earnings per share for the full fiscal year of 2022.
And with that Laura I would like to open up the call for questions.
The question and answer session will begin now please be aware that there will be a 32nd pause in our webcast to allow for buffering. At this time audio participants are invited to submit your question. Please remember to mute the audio function on your computer before you speak if you are using a speakerphone. Please pick up the handset before pressing any numbers if you would.
I'd like to ask a question. Please press star one on your Touchtone phone.
While we poll for questions. Our first question comes from the line of Sean Eastman with Keybanc. You May proceed with your question.
Hi, James Thanks for taking my questions.
Great quarter and another another great update.
Compliments to the team.
So I wanted to I wanted to start I know, it's early to talk fiscal 'twenty three but then I am sure. You knew this was common obviously, we're focused on on where this growth rate is going to end up into the out years and yeah.
You guys helped us out by pointing out the very strong exit growth velocity embedded in the fiscal fourth quarter guidance.
So we have we have that exit growth rate to work with.
We're thinking about the.
Momentum that really hasn't hit the model yet.
But then maybe on the other hand, we got to think about the FX drag that will carry into next year and.
Maybe.
The disaster response creates a little bit of a tougher comp for state and local.
Could you just put a finer point around any of those elements and are there any other considerations you'd point out to us at this point as we try to bridge to fiscal 'twenty three revenue.
Well good morning, Sean Thanks.
Thanks for being on the call and for the question no doubt, we're very focused here at Tetra Tech and first of all completing.
This this fiscal year 'twenty two.
Strong in the fourth quarter, you've seen the guidance I think it's a 14% mid point on.
Revenue growth, we are looking at 2023.
We'll say that.
There are mostly positive indications as we're moving forward forward and a few items that we're looking very closely at that we had particular strength in 2022.
As far as detailed guidance provide that in the next call for fiscal year 2023, but I will identify a few macro trends are areas that our clients are providing new funds.
Even new builds as we speak today.
Obviously it.
It was passed earlier this fiscal year.
Had estimated or forecasted that we'd begin to see its contributions in early 2023.
Seeing no change in our initial projections.
Projections and so we think that that is a very large program that will continue over the next five to 10 years. So we think it will begin.
Contributing in 2023, so we think that Thats a material contributing factor as we look into this next year.
There are things that have past such as the chips at $53 billion.
We find that.
Ah represents.
Presents a fair amount of opportunity for us. This is for manufacturing it is requiring facilities to be put in place and every one of those facilities and buildings will require permitting.
Acquire environmental evaluation, it'll be citing it'll be storm water that will participate in in the buildings themselves. One thing with respect to a chip manufacturing every one of them require ultra pure water water supply water treatment water recycling and sourcing and those are the things that we would participate in every.
One of those.
So those are those are areas and of course, a high performance buildings with respect to making the buildings highly efficient in fact self sufficient with respect to energy consumption generation.
Water and waste, we think that those will all be very good for us and of course. The most recent one which is sort of the topic of the day in some circles as the inflation reduction act, which will generate approximately.
Approximately $700 million in new or new funding or reduce spending, but they're going to then reallocate about half of that and I think the overall numbers up around $400 million with 301 billion, sorry, 1 billion being attributed to.
Climate change renewable energy, it's actually very favorable for us it actually broadens out tax benefits.
Benefits and incentives for more than just narrowly focused wind or solar it broadens it out much broader.
Expansive definition from renewable energy to clean energy, which at least in the bill as it stands today includes things such as hydrogen and other items that would be a very effective and of course all of these would require high voltage engineering for interconnects environmental permitting, citing resource evaluation all of the things that Tetra Tech.
As a leader in so I think there is three that we see from the federal government that are measured in the.
And in case of the chip chip back the smallest $50 billion that they want to deploy right away in the case of the.
The inflation to that deficit.
Bill that would act that would represent in the hundreds of billions of dollars and of course <unk>.
Which has yet to materially deploy any of that funding. It's measured if you include earmark dollars from existing budgets over a trillion dollars.
So we see all of these as favorable trends going into 2023.
I wanted to mention one item that we see that could be a counter for us we had an exceptional.
Contribution to responding to disasters or episodic events, particularly early in 2022.
<unk> us to some amazing numbers in our first quarter I think it was $1 19 in the first quarter of last year because of high utilization and fast response for disaster activities.
And.
It's very difficult to forecast those into your next year.
So that's one item that we'll be looking at and we'll be updating in our next quarterly guidance, but I would say the only item that we are not forecasting at this moment similar to acquisitions. We don't include them in our guidance until they are completed and we don't include disaster response episodic activities until they've occurred.
The other item I would mention and we'll see where this moves is foreign exchange.
It's amazing we've seen just during the last 90 days certainly last short period, we've seen the euro go from approximately $1 20 to parity.
We've seen the British pound go from $1 40, or higher to sub 120, I think 118 I saw earlier. This week. So in our operations there are actually quite materially and collectively we're at 35% of our revenues.
Come from Australia.
Canada, and the United Kingdom, and if you take a look at those Steve I thought did a good job of outlining.
What the headwind is from revenues from those sources at least as we see the translation today.
So I think those are items that were put altogether and will provide a very detailed forecast but.
And a little bit long winded, but I hope that provided some insight of what we're looking at from sort of a big picture is we're heading towards 2023.
Yes, very very helpful. Very excited a lot of very exciting stuff there I appreciate that.
Maybe just one more question as we think about potential offsets.
<unk>.
We're hearing from a lot of government contractors about slow New award activity around.
Sluggish federal outlays, which I think is generally just a function of productivity issues at government agencies.
Wondering if that is something tetra tech seeing.
And if you see.
Personnel challenges at the client level as a risk to to the growth profile of Tetra tech over over the coming year.
Well, it's a good question and I would say we have seen.
Bit of a slower contract activity is not that's not been.
It's limited.
Limited to a single location. So for US are where it comes department of defense is about a third of our federal revenues civilian agencies about a third and then the international development or USAID. The state departments about a third we've seen all of them a little bit slower than we had before I would say that appears to be equally.
The COVID-19.
Impacts have taken people to work remotely maybe it hasnt been quite as efficient with the federal government. It has been in some private companies like ourselves and the quote great resignation.
Has nuts not left the U S government untouched and its impact of contracting officers now with that I would with that as a backdrop that they've been impacted.
We didn't see when the budget for 2022, the federal budget was passed in late March.
Some thought that there would be a catch up or sort of a tidal wave of work that would slip back in.
We didn't see that we've seen it have a nice steady even progressing growth you saw this quarter. Our federal revenue growth was twice that of the second quarter. So it is ramping up but it is a ramp up not a perfect step up and I think it's because of certain personnel.
Challenges both on working remotely from the pandemic.
And impacts of staff.
Really departing the industry, which has affected a lot of people.
I am glad to say, though that we had forecast at a 5% to 10% growth in our federal government if you.
Normalized <unk> just for Afghanistan, which this year on year comparable will go away after this quarter.
At 8%. So we're right in the Middle now I would expect would have hoped that the number would have been even better that would've been well into the double digits, but I think as part of this ramp up rather than step up.
So yes, it is a little slower than we've seen historically given you a few reasons why we think that's the case, but we've not seen it.
Favoring one portion of the federal government over another its been really quite broad and even across those sectors for us.
Thanks for the insight I'll turn it over there.
Great. Thank you very much John .
Our next question comes from the line of Noelle Dilts with Stifel. You May proceed with your question.
Hi, Dan Thanks for taking my question.
Can you discuss some of these elements in your in your comments, but I.
Last quarter I asked about this idea that we should be converging in the <unk> margin.
It certainly happened in the quarter, maybe a little bit faster than I was anticipating.
Understanding you're not giving 'twenty three guidance, maybe you could speak directionally to how we should think about that.
The <unk> margins and if we should expect.
Some further convergence next year, you know again understanding that.
Not going to be guiding to the.
The emergency work repeating.
Yes, it's a good question I have spoken and indicated.
<unk>.
The past many quarters that I expected to.
To trend up and to catch or to converge with GST now. The one thing I would also say is the goal is that <unk> will converge to GST without GST coming down at all so to make that point.
I did see that.
<unk> was particularly strong typically third quarter is good.
Ed mentioned, the 50 basis points, a quarter of extraordinary contributions, but if I take the 50 basis points from the 13 eight that would put them low thirteen's 13 three to be precise.
That's sort of a number they are up to I think that they are running in the low <unk> and I think because of the work that we have in CIB in Canada. It does make them seasonally stronger in our Q3 and particularly Q4.
So if you want to look sequentially I think that <unk> is going to be up from where it just was certainly equivalent or maybe even higher than the 13 eight we just saw.
<unk> will also be a bit stronger than we put them at a 13% to 14% it should be a pretty close race on who has the highest margins in our fourth quarter.
Now with respect to annual convergence I still think our government is probably 50 basis points higher.
We'll see how we we.
See that as we get a little bit closer to 2013, but this gap between <unk> and <unk>.
Is becoming a smaller it is diminishing and I expect that during 2023, it may fully fully close without.
GST coming down.
And in fact will I'd like to give you an update on our next call on what the next incremental increase in <unk> margin on a forward basis is so.
Without getting too precise twenty-three yet I hope that directionally provide some insight.
Yes that definitely helps.
Was just hoping last quarter you spoke to.
On her offerings with federal law.
And software.
Software as a service any update on how that's progressing and.
How youre thinking about that opportunity today.
While software as a service and a term we're using round here more and more of that.
<unk> rivaling or we think will actually may exceed what we're seeing our software as a service or SaaS is actually a platform as a service and some of the areas that we have with a it can be found on our website and other areas, but we're offering our clients a consolidation product that is technically is the technical basis for doing.
Analytics for water flow distribution flow rates contaminant loading all of these other items, which are SaaS, but theyre. All then represented on a platform as a service and this allows tetra Tech's platform as a service subscription model to take all of the different items that are out in the marketplace.
Whether it's air water soil operational efficiency asset management and be on our platform for them and it's not just a programmers.
<unk> actually has to be a domain expert to actually understand all of the input parameters from those to manage though so this area is growing for us acquisitions that we've done this year.
Firms like IBRA or Mac or Tiger.
<unk> like.
EAA consulting of course.
And of course, axiom, which is a little different it's on the federal climate change all have subscriptions both on the SaaS and on the platform as a service.
I'm, hoping that in 2023, we can actually begin to provide some quantitative measurement of how much we're actually driving from a reoccurring subscription based revenue.
But at this point I'll say, we're making good progress we're getting a really hesitant to provide a quantified number which would then trigger all of which are growth rate. What's your CAGR. What's the gross margin all of that will come from.
We open this up for tracking.
But we are making progress it is growing and it's being supported by the most recent acquisitions in fact, the ones that Steve presented that we've done this year all of those bring.
Bringing a subscription revenues to the company.
Great. Thank you very much.
Thank you Noel.
As a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
Molly poll for questions.
Okay.
Yeah.
Our next question comes from the line of Tate Sullivan with Maxim Group You May proceed with your question.
Alright. Thank you. Thank you all.
Thank you on the comments on digital water in the slides to showing that in 2025 target that you've included.
But I have a question that I think you've addressed in previous calls too about the.
<unk> growth versus acquisition based growth and in terms of the potential targets for digital water are there.
Hundreds of incremental new incremental technologies, you can add or is it mostly is it going to shift to more organic.
Yeah.
Well it's a.
A really good question for us it's been a.
About evenly split so the firms that we brought on have brought technology.
To us, but actually very little revenue.
And so in the case of.
Tiger IBRA or Mac as examples I'd say, even axiom data science, what they brought to US is technology and platforms that we can then use to.
<unk> and bring to solve solutions for our suite of clients in here in the U S. That's roughly 500 municipal clients. So what we've been acquiring as really the technologies and the expertise and automation.
Remote monitoring remote operation and other.
Specs.
On the digital transformation sector, but the actual implementation has been organic with respect to our clients or projects or contracts and it's been co linked with the experts we have internally in my prepared remarks, where we've been very proactive on recruiting and hiring individuals into the automation.
Data analytics, and other and Thats, an organic portion so I would say as far as furthering the technology and market penetration acquisitions are very helpful for.
Bringing in <unk>.
<unk> technology, but the actual execution of the work and those that we're targeting is really our client sector and so I'd put that all into organic.
Thank you Dan and then also just following up on the slide where you could comment on the orders in your release details earlier. This month on our $500 million order with the Army Corps of engineers in international orders for the Dod.
Is that $500 million order.
Part of that included in backlog for fiscal <unk> 22, and also related to that can you give more detail on that order was it a renewal from a NIM out five years ago that a new contract or the new contract.
Yes, I would say.
Let's say U S Army Corps of engineers contract, it's an environmental contract for.
Environmental assessments and cleanup and remediation, it's a new contract for us it's not a renewal of a contract we have but.
But it's a contract capacity and now we just issue that.
Press release this week.
As far as a notification, although I do know that the U S. Army Corps of engineers provided its announcement earlier. So some may have seen our name on it from the <unk> announcement not one dollar yet has been put into a funded our two our backlog that's all contract capacity and I think that's a great illustration of how Tetra Tech reports its backlog.
Substantially.
<unk> different than others in the industry.
I am cognizant and partner and aware of how others than peers in the market do it and in order to.
Provide an optic of their backlogs looking strong they add contract capacity that have no funding to it into their report a backlog since its not a GAAP item, we only put the numbers into our backlog if we have a contract signed.
Legal contract that's been binding they have funded it and they've authorized us to go do all the work and so I think if you look at some of these others that report backlogs being up.
Burying numbers, if you actually look at the underlying portions that are funded I think youre quite often find that in fact, it's only a very small percentage of what's being reported our number only when it's.
When it's been contracted funded and authorized.
So that's the difference between just with the federal government, we're well over $20 billion in contract capacity the $500 million that you're referring to is a new contract capacity that we have that would go to increase the overall availability of contract vehicles, we have with the federal government, but in that case of that particular.
Contract, we did receive the initial task order so but.
Still hasn't been put into funded I expect that we'll fall here in Q4.
So.
That's an update on that particular contract that was announced by yourselves. This week.
Thank you Dan.
More follow up for me. Please on you mentioned physical one Q22 included disaster remediation work.
Any rough.
How much of the $1 19 from the prior year.
<unk> network.
I don't have that broken out.
For you today.
But we would.
But we think it was about 25, if you wanted approximation I'll give you a rough number on the revenue side. So it was about $25 million contribution.
Top line.
Does that then drove Utah.
Utilization had higher margins so.
I could convert that.
As we get into guidance for next year, but on a revenue basis. It was about $25 million and maybe a bit more but in that neighborhood for the first quarter.
Perfect. Okay. Thank you Dan.
Thank you Dave.
This will conclude the Q&A session I will now turn the conference back over to Mr. Dan <unk> to conclude.
Thank you very much Laura I appreciate it and thank all of you for attending this call for your great questions.
We here at Tetra Tech are excited about finishing fiscal year 2022, very strongly as we have had.
Great momentum through the first three quarters and I look forward to speaking with you in our next quarterly call, which will both give you the results of our fourth quarter of 2022, but of course and probably even more importantly, what our guidance for 2023 years and our outlook for the first quarter. So I hope you all have a great rest of the day.
And a great rest of the summer and I look forward to talking to you on the next call bye.
Bye.
Ladies and gentlemen, this concludes our conference for today. Thank you all for your participation and have a nice day all parties may now disconnect.
[noise].