Good morning. And thank you for joining the Tetra Tech Earnings Call. As a reminder, Tetra Tech is also simulcasting this presentation with slides in the Investors section of its website at tetratech.com. This call is being recorded at the request of Tetra Tech and this broadcast is the copyrighted property of Tetra Tech. Any rebroadcast of this information in whole or part without the prior written permission of Tetra Tech is prohibited. With us today from management are Dan Batrack, Chairman and Chief Executive Officer; Steve Burdick, Chief Financial Officer; and Jill Hudkins, President. They will provide a brief overview of the results and then we will open up the call for questions. I would like to direct your attention to the Safe Harbor statement in today’s presentation. Today’s discussion contains forward-looking statements about future business 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 undertakes 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 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 Batrack. Please go ahead, Mr. Batrack.

Great. Thank you very much, Melissa, and good morning. And welcome to our fourth quarter and fiscal year 2023 earnings conference call. We had an excellent fourth quarter that completed an already exceptionally strong 2023 fiscal year. Across our operations, we exceeded our already high expectations and delivered on both our financial and our strategic goals for the year. We were again recognized as industry leaders with number one rankings in water and environment and a newly announced number one ranking for Human Capital management, which I will speak to a bit later in this presentation. This ranking recognizes that Tetra Tech’s success is a result of our talented workforce and the technical excellence that has been the hallmark of the corporation. In fiscal year 2023, we increased our backlog by over $1 billion, including services in climate change, energy transition, water security and environmental management. Today, together with RPS, we are cross-selling new services. For example, we are now providing innovative water management solutions to 19 United Kingdom water utilities and look forward to significantly expanding these services in this upcoming year. As we enter the new year, we look forward to providing our technically differentiated services, our expanded Delta technologies and our newly launched software solutions to clients worldwide. I will begin today with an overview of our fiscal year and fourth quarter. Steve Burdick, our Chief Financial Officer, will provide an overview of our financial performance and our capital allocation. Jill Hudkins, President of Corporation will provide additional insight into some of our organic growth strategies. But before I review the fourth quarter results and the segment’s performance, I’d like to provide an overview of the fourth quarter and what we did for the year. Simply stated, we came into this year with an ambitious goal and…

Hey. Thank you, Dan. So as Dan has just reviewed the fourth quarter operating results, I would like to now review the annual GAAP financial results for the fiscal year ending 2023. Overall, we had record revenue, operating income, earnings and cash flow, and the strong performance from our operations was marked by record fiscal year revenue of $4.52 billion, which was up 29% over last year and record net revenue amounting to $3.75 billion, which was up 32% over last year. And as you heard, we executed strong revenue growth from all our markets, including federal government, state and local, commercial and international, which in particular, benefited from the RPS acquisition as our footprint in the U.K., Europe and Australia has been greatly enhanced. Now our operating income and earnings per share for the fiscal year were also both all-time highs. Our reported operating income came in at $358 million. This improvement resulted from both segments, and as Dan discussed earlier, the CIG margins have been closing in on the GSG margins. On a consolidated basis, these improvements resulted in our EBITDA increasing to $481 million, which is a 33% increase over fiscal 2022. Our EBITDA margins for Tetra Tech have been increasing at a higher rate compared to our revenue increases, such that our margins have increased an average of 50 basis points per year over the last four years. Now GAAP EPS came in at $5.10 and adjusted EPS was $5.21, which was up 16% over last year. The adjusted EPS excluded the final RPS integration costs and lease impairment charges, the one-time FX hedge gain and the associated tax related items. Now regarding our total FX hedge gain of $110 million. This provided a positive outcome relative to lowering the purchase price for RPS by almost…

Thank you, Steve. Tetra Tech’s core business of environment and sustainable infrastructure are extremely well aligned with U.S. Government priority programs for fiscal year 2024 and beyond. The Infrastructure Investment and Jobs Act or the IIJA, will provide our government clients with a $550 billion funding plus up to deliver priority infrastructure programs in the U.S. This increased climate resilient infrastructure spend is directly aligned with the work we do in water and the environment. Our U.S. state and local clients continue to prioritize digital water solutions to modernize and secure their water facilities. As the number one water firm in the U.S. Tetra Tech is leveraging domain expertise and digital innovation to deliver state-of-the-art automation, advanced analytics, artificial intelligence and proprietary software solutions to our 500-plus municipal clients nationwide. Tetra Tech’s recent key wins demonstrate why Tetra Tech has been ranked number one in water by engineering news record for 20 years in a row. Tetra Tech’s market leadership in high end water supply and treatment secured a key win to modernize Foster’s Wastewater Treatment Facility and to improve water quality in the Massachusetts Bay. In Southern California, Tetra Tech was awarded a major Drought Resilient Water Delivery program that will serve 7 million Metropolitan Water District customers. Tetra Tech will leverage its successful track record delivering industry-leading navigation and water control structures for the U.S. Army Corps of Engineers to win new contract capacity and new task orders. Tetra Tech recently announced major contract wins with multiple districts to support inland navigation, flood risk management and aquatic system, biodiversity. Tetra Tech is providing digital water transformation services for some of the largest cities in the U.S., including Los Angeles, Houston and San Diego. Our innovative digital water solution increased remote operability and reduce operating expenses for our water…

Great. Thank you very much, Jill. I’d now like to preside, not preside, I’d like to present our outlook for fiscal year 2024 across all of our four end client sectors. First, our U.S. Federal revenues should grow at about 10% from what they were in 2023, supported by our strong backlog and our ability to leverage our existing $25 billion contract capacity that we have with the U.S. Federal Government. For state and local, we expect to grow at a double-digit pace between a 10% and 15% rate. Client funding priorities are well aligned with our expertise in digital water transformation, high end water security and climate resiliency. U.S. commercial is expected to be about 20% of our overall net revenue business and grow at about a 5% to 10% rate. We see growth continuing in the high performance buildings and clean energy transformation markets that will probably be the fastest growing areas for us in the commercial sector. And the fourth area, international, our international work is now about 40% of our business, evenly split between government and commercial. We expect international to grow at about a 10% to 15% rate as we continue to expand our water, environment and sustainable infrastructure work in the United Kingdom, Australia and throughout Canada. In fiscal year 2024, we expect to leverage our expanded client base and resources, especially in the United Kingdom and Australia, and further realize the revenue synergies of the RPS acquisition. Before I move to the guidance for fiscal year 2024, I’d like to take just a moment to discuss how we here at Tetra Tech think about Human Capital. As a consulting company, Human Capital is the workforce that provides us the insight, the analysis and solutions that drive our business every single day. There are…

Thank you. [Operator Instructions] Our first question comes from the line of Sam Karlov [ph] with William Blair. Please proceed with your question.

Hey, Dan, Steve, Jill. I hope you all doing well this morning.

Thank you, Sam.

I guess to start, I wanted to ask a little bit about fiscal stimulus, namely the IIJA, which I know you highlighted in your prepared remarks. I understand you won quite a few contracts but are still in the early stages here. But based on what you see today, do you expect a more material impact to your backlog in fiscal 2024 and when you expect -- and when do you expect IIJA related projects to have a peak impact in your business, is that more of a 2025 timeframe?

It’s a great question. There’s no doubt IIJA or the Infrastructure Stimulus Program has been maybe the hottest topic that has been asked ever since we got passed into law here getting close to two years ago now. For us, we are seeing the first revenue contributions and I know your question went to backlog, and I will address that. But we are now seeing actual revenue contributions from specific clear earmarked programs associated with IIJA. We did press release earlier just this week, a $33 million lock and dam inland navigation program for the Army Corps of Engineers that is not just a contract capacity, is within a $200 million contract that we were awarded and it’s a $33 million individual project. So I will work a little bit backwards on this for this year, fiscal year 2024 and we have got a little bit less than $50 million anticipated to contribute to revenues. You can see that $33 million program will largely be completed over this next year. It really accounts for pretty much only what we have in orders already and so we think this is the beginning of a ramp-up. We think this year we will see backlog begin to grow. We have got just probably a little under $50 million in backlog. So that’s what we have calculated for revenue contribution this year. Hopefully, it turns out to be conservative, but that’s what we see this year. I do see it continuing to ramp. I think that we will add more contract capacity. It’s already measured in hundreds of millions of dollars just for IIIJA programs. I expect that number to go up quite significantly as we move toward the end of this fiscal year in contract capacity and orders. I do think that the peak and we -- I will let you know as we get closer to the end of the year, but it does look like the peak for us would be late 2025 and early 2026. So I think that the number this year that we have embedded, again, is around $50 million of actual revenue. I think that number will go up by several fold when you move into 2025 and since we are very early in the program with respect to infrastructure projects, both on the initial permitting, initial design layout we should see that much earlier than others would see it in the overall duration of the IIJA program.

Very helpful. I appreciate the color there. Maybe attributing to offshore wind next then. We have seen some negative news flows over the last month or two related to offshore wind from the no bid activity in the U.K. to some comments made by developers, also see negative headlines on the solar side. Can you remind me how big the renewables business is for you and whether you expect these recent developments to impact your business in the coming quarters?

That’s another great question, Sam. It’s interesting, we, of course, see these headlines. So let me start with how big is Tetra Tech’s renewable energy business overall right now? It’s about 5% of our business. So it’s about $200 million a year. Half of it has been longstanding traditional work with hydro or hydro power production. So that’s about $100 million. So that leaves the other $100 million roughly. So a couple of percent for the company associated with wind, both on and offshore and solar primarily. That makes up the rest. Now the headlines with respect to offshore wind being more expensive, potentially more difficult to move online. In many ways, it’s actually -- I don’t want to say it’s good news. We never want anything that’s difficult for our clients to be good news. But it actually is from a project standpoint, good news for us, because we can help our clients actually find different ways to get their projects completed at a lower price point. So if they would do it in a more traditional manner and I would say with other firms that might be less experienced, have less technical approach to it, their projects may not be viable. But certainly, some of the approaches that we have to make these projects more viable and in the instances where they don’t fit within their economic portfolio, we can actually come up with contributions on how they actually might move this to other developers who would fit within their economics. With respect to the one big developer who did cancel two programs, on the East Coast of the U.S. Those were not two of our programs. So we are not associated with those at all. I certainly have had a few incoming calls asking how disruptive is…

Great. Appreciate the answers there and congrats on the quarter.

Yeah. Thank you very much, Sam.

Thank you. Our next question comes from the line of Tate Sullivan with Maxim Group. Please proceed with your question.

Great. Thank you, all. Yeah. Really jumped out the implied number, order amount of $1,665 billion. And Dan, you said earlier that you had new programs across Australia, Canada and U.K., were those international orders a larger portion of those -- the total orders for the quarter?

They weren’t. They were really -- they were stronger than we normally see from those geographies that you just mentioned, Australia, Canada, U.K. But the fourth quarter of our fiscal year aligns with the end of the U.S. Federal Government year and that’s when the final funding where some, say, the final -- I don’t want to use the -- final topping off of projects takes place. So typically, in the fourth quarter is our biggest order from the U.S. Federal Government and that was definitely the case. So I would say, Q1s, Q2 and Q3 are more representative of other sources. But the fourth quarter is the Federal Government’s truing everything up from what they didn’t spend during the year and that’s what really drove the biggest numbers.

And then did you say earlier still a goal for going forward to have CIG margins move closer to GSG, particularly with the large number of commercial orders that you highlighted on the slide?

Well, yes. I think my ambitious goal is and this is to all the Tetra Tech experts and management in the CIG side. I am looking forward to CIG eclipsing GSG. So, but I guess we first got to match and it’s getting closer. I think that the performance in the commercial side has been good and -- but I will say that some of the extraordinary contributions such as disasters, some of the emergency work we do regarding very high priorities, can make catching them a little bit more difficult. But notwithstanding these extraordinary revenue contributions that drives very high utilization and positively impacts margins. If you sort of set that aside, maybe in 2024, CIG will catch them. So, yes, we are looking for them to catch and really the commercial side has the potential to be higher than the government side in a robust economic environment.

Thank you, Dan.

Thank you, Tate.

Thank you. Our next question comes from the line of Andrew Wittmann with Baird. Please proceed with your question.

Great. Thanks for taking my questions this morning. I guess the first couple that I want to ask or just to understand the quarter a little bit better and then talk a little bit more about on the forward look. But just, Dan, I don’t think you commented on the benefit to revenue from the activities you had in Ukraine for the quarter. Recognizing that those can be episodic. Obviously, they were back in the second quarter of 2023 than not in third quarter back here in the fourth quarter. You would probably smart to have that quantified unless I missed that. And then just maybe just because the margins in GSG in the fourth quarter we are obviously very good beyond what we were thinking. Just wondering if there was any award fees, incentive fees that hit in the quarter that are just notable, maybe not individually, but in totality, given that there sometimes are fees paid to you when you get a lot of awards, and obviously, the backlog here this quarter showing that you have a lot of awards. So if you could just comment on those two things to start off, I think, that would be helpful.

Yeah. Those are two great points with respect to things that were sort of standouts or great contributors in our fourth quarter. I will start with Ukraine. Ukraine, we have been doing what I call a -- an ongoing assistance level that we had even before the outbreak of the hostilities in Ukraine, which has probably been maybe $10 million a quarter or something like that, but we did an additional $40 million. So I think if you actually looked at Ukraine overall, we are probably just slightly above $50 million in the quarter and $40 million of that, I would call, incrementally higher than what we had anticipated coming in. That was for a lot of humanitarian work and now it is cost plus work. So it is a very low risk to the company. We don’t carry a big margin in that work for supporting humanitarian work. We do get paid quite quickly and it’s a low risk financially, but it does carry slightly lower margins. So -- what was the good thing in the quarter is it did help drive by about $40 million to beat on the top end revenue, Ukraine specifically. Above what we sort of had anticipated at the sort of maintenance level that we are doing, both in Ukraine and we have other areas around the world. But it did contribute to earnings per share, but actually, it kind of moderated the margin that we had in GSG, because that carried lower margins. So it was good. On the revenue side, it was good on EPS, but on margin. So it -- there’s two sides to that coin. With respect to margins in the quarter, we did not have a true award fee or any special award from our clients to make up…

That makes sense and its helpful context. Just digging a little bit here next into the guidance. It might be helpful actually for you guys just to comment on the interest expense, given that interest rates have been changing and are so much higher. Maybe you want to give that and then we can all kind of back into your EBITDA. But when you get to the EBITDA, it looks like there’s certainly some margin improvement baked into 2024 over 2023. Certainly, that makes sense. It sounds like your utilization is very good and it sounds like you have been getting better here. You have got year-over-year benefits from the cost synergies that you have got in flight but haven’t been recognized yet in the first quarter, second quarter and even into the third quarter from RPS. And then there’s even some of these mix things that we talked about, there’s always puts and takes on mix, but certainly, a lot of Ukraine contribution, like, you just talked about, mixes margins down, you had the incentive fee the other way, mix it up. But I guess maybe that would be helpful for you to kind of level set us about what the implicit EBITDA margin is and how much it is year-over-year and what you think the variable could be to make it even better than what you have guided? It seems like it’s good, but it could even be better if the year unfolds like you are saying it could?

There’s a lot of moving pieces there. Let me start at a high level and then I will let Steve talk to interest in some of the other items embedded within the company that we have. So for instance, our IAS up hired this year, because having RPS for a full year. But let me start at a high level. We do -- we have embedded, if you do the calculations of our low end of our revenue range to the low end of our EPS range. You would see there’s about a 50-basis-point increase. In fact, you would see it quite uniform, if you went high, high and mid, mid and you did the calculation, you will see about a 50-basis-point increase. I do think if you take a look at a favorable mix, which might be a low end of revenue and a high end of EPS, you would be up at about an 80-basis-point increase within fiscal year 2024. So that’s sort of a range. I will say that RPS was not with Tetra Tech in the first quarter of last year. It didn’t join us until the very end of January. So our guidance for the first quarter, margins are actually weighed on a little bit, even though they are higher than last year, they are weighed on a little bit, because RPS’ margins still are not at a level of Tetra Tech. In fact, Tetra Tech is up around 13%-ish, maybe a little more and they will be coming into the year around 10%. So in the first quarter, while you would expect margins to continue to increase, I will comment that we have about 20% additional revenue, which represents RPS at a lower margin, and of course, it will ramp through the year. So I think there are a number of puts and takes. But overall, I would go to the annual year at somewhere between 50 basis points to 80 basis points depending on how you take the comparisons of different components of our margin within guidance for 2024. And let me have Steve speak to some of the individual moving items such as interest and other items.

Yeah. So, Andy, if you take a look at our model, the -- based on the run rate of depreciation each quarter, midpoint is probably about $26 million of depreciation next year. Amortization, it was on Dan’s slide up there. You saw about $42 million. Our net interest cost probably somewhere between $40 million and $45 million is what we are looking at. So the midpoint about $42.5 million and those are probably those moving pieces to get to an EBITDA number.

Great. That’s all for me. Thank you very much.

Great. Thank you very much, Andy.

Thank you. Our next question comes from the line of Ryan Connors with Northcoast Research. Please proceed with your question.

Great. Thanks for fitting me in and good morning.

Good morning, Ryan.

So I want to go stick on the federal side, Dan, and you are one of the few companies that’s actually seeing, it seems like a tangible impact from some of the stimulus infrastructure spending. You definitely -- we are not hearing that from the equipment providers at this point and even some of your peers on the engineering side, we are not hearing that there either. One of the things it seems that is a recurring theme is that Build America provisions, the BABA provisions are kind of a headwind and impediment obstacle of those funds getting deployed and yet you are seeing it. So how do we interpret that? Is it your upstream nature that you don’t necessarily rely on actual projects in the field, but you are doing upstream study work? I mean, why do you think that is that you are seeing that a little sooner?

Yeah. I think you have hit it right and I think it went to the comment I had while it’s a different end market, my comments on offshore wind. My comment was that before anything that’s built you actually have to come up with a plan before you will build something. So the Buy America Build America and have something built here, that comes much farther down the road. That’s after -- so I sort of see the projects with respect to service providers in four areas. There’s where Tetra Tech resides, which is the upfront valuation, technology assessment, initial layout permitting and that’s us. That’s what Tetra Tech does. Second phase is -- and this goes to the other engineering companies, then you move to the full service engineering firms that will actually do detailed as-built drawings constructible drawings and they will take it from where we typically would leave at about a 30% design and they will take it all the way through detailed design, constructible design drawings. And those are a hallmark of large engineering houses typically characterize themselves as engineering companies, which we don’t and have an attribute of having offshore low cost engineering centers. So look for people who have big houses in Malaysia, India and places like that, they were in Phase 2. We can be very busy and they can never see a dollar of revenue unless the project is going to go to being prepared to go out. Phase 3, which really begins to move into the BABA or the Buy America Build America. Those folks that are after it’s been built or anticipating it being built and you are bidding either a design build project, which would be putting together the engineering and the constructor. And so that third piece is…

Yeah. Yeah. No. That’s great color. I appreciate that detail, Dan. And then my other question, just, look, nobody denies things are great today and optimism is a great quality and management and I think you given us all the positives. But just if I can get you to kind of talk about some of the risks that keep you up at night in the business and specifically looking at some data this morning about your stock and it’s been much more volatile historically in election years than not. And I look at the last 30 years, stock has been twice as volatile in election years as it has in non-election years and we are getting ready to go into an election year. So can you talk qualitatively about kind of the, how you see the different scenarios politically? I know you said you still think we are a year or two off from the peak in the current spending plan. But what are the scenarios you see out there and particularly focusing on what are the risks in the business, because certainly, listening to the call today, it seems like there’s very few things keeping up at night, but there must be some risk factors and specifically related to the election and maybe the budgetary situation?

Well, I am glad that we are not on a video conference today, because you would see a very tired worn out, Dan. Well, what keeps me awake at night and has got me awake, coming up to even tomorrow, because it isn’t signed yet is the dysfunction with the U.S. Congress and Government shutdown. We were sitting there in September. It was going to be a shutdown. They extended it for six weeks, which is until tomorrow. At the beginning of this week, it’s -- I think that through the media, it’s -- there’s no way they can come to any agreement and then these suddenly come to a bipartisan continuing resolution. But until it’s signed, I am not sleeping. And so what makes me feel uncomfortable is the dysfunction with the U.S. Federal Government and shutdowns. Now do I have a plan for what I am going to do when that happens is Tetra Tech. Yes, we are going to make sure that our clients have funded us for more than 30 days in advance before it gets shut down. So we do all these sorts of things. But records are made to be broken and not just our financial performance, but the amount of time the government shutdown, who knows if 35-ish days is the new high. Maybe they are going to go for the gusto and go 60 days and I will sleep over that. I really do. I will tell you, any time there’s disruption on these, it makes me feel very uncomfortable and so that is some of the areas that I pay a lot of attention to. Unfortunately, it’s not something other than my boat as a single individual to vote for people that will be collaborators and move things forward. So those…

Good. Well, that’s good color. I appreciate it. Thanks for your time today.

Hey. Thank you very much, Ryan.

Thank you. Our next question comes from the line of Michael Dudas with Vertical Research Partners. Please proceed with your question.

Good morning, Jill, Steve, Dan.

Good morning, Michael.

Good morning.

Obviously, given what you talked about with your growth in the business and certainly the opportunities internationally and it seems like evidence that the RPS simulation has gone quite well and probably can really kick into gear in the next 12 months to 18 months. How are you thinking about as you reset and recapitalize on the balance sheet, it sounds like you will be paying down further debt with the strong cash flow. How do you think about going forward relative to your historic kind of tuck-in smaller type acquisitions versus the opportunistic RPS? What do you see over the next couple of years, is it kind of in between, just opportunistic either way, I want to share how you are taking through that as you kind of meet some of these pretty aggressive markets that seem like you need your services for quite a few years?

Well, when we -- after RPS, one of the premises we had when we had RPS joined us, and yes, it was our largest acquisition, yes, it was 5,000 people, and yes, it expanded our U.K. and Australia footprints, and yes, it did take our leverage up to just over 2 times, which is right at the upper end of our range. But my discussion with our CFO and treasury staff is, we want to do this but without inhibiting at all Tetra Tech’s long-term plan to add technology experts, companies that can bring us new clients or new areas for growth. So, Steve Burdick, this is great. It’s going to be great for operations. But you have got to keep that channel open and that was part of what drove the convert -- convertible debt that we put in place. I expect that you will see continued more of what we have done for years and years and years, which are small, we call them tuck-ins, some of the scaling bolt-ons, which has just sort of assimilate them into the company. They come in as equal partners with the corporation. They are super important for us. They lead the technical areas for all of Tetra Tech. So if you are out there in firm that’s looking to think about is it a good fit for Tetra Tech. You don’t come to a Tetra Tech to work for us. You come to Tetra Tech to lead us all and so those will continue to take place. And if, I know Steve presented on the slide and prepared remarks that we have $800 million of existing today capacity, which would be more than enough to do what we just transacted with RPS. But that’s just what’s available today. We have access…

Seems like your business development team will be busy. Dan, I appreciate your thoughts. Thank you.

Hey. Thank you very much, Michael.

Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I will turn the floor back to Mr. Batrack for any final comments.

Well, thank you very much, Melissa. I appreciate you are moderating the call today. And I’d like to thank everyone who’s followed the company been supportive of us during fiscal year 2023. I think we are off to a bright start to 2024. I am really looking forward to talking to you in about 90 days from now on our next quarterly call to tell you how we have started off in the first quarter. And with that, I hope you enjoy not only today, the rest of this week, but I hope you have a safe and enjoyable holiday season. Thank you very much.

Thank you. This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.