TTEK - Earnings call transcript Q1 2019

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Operator

Good morning and thank you for joining the Tetra Tech Earnings Call. By now you should have received a copy of the press release, if you have not please contact the company’s corporate office at 626-351-4664.

As a reminder, Tetra Tech is also simulcasting this presentation with slides in the Investor section of its website at www.tetratech.com. This call is being recorded at the request of Tetra Tech and this broadcast is a copyrighted property of Tetra Tech. Any rebroadcast of this information in whole or part without the prior written permission of Tetra Tech is prohibited. management Steve Batrack, Burdick, from Executive and today and Officer; Chief us are Chairman Dan Chief With Financial Officer. a up questions. provide we’ll will brief the of They results then open the for call overview and harbor I would your Page direct like of presentation. statement the today’s attention X on to to safe future forward-looking expectations. and discussion contains growth Today’s statements about financial Tech’s with results differ significantly the forward-looking SEC. various to due uncertainties may from including today’s filed Actual risks described risks periodic Tetra in statements the those projected reports and in Except Tech update as takes no its forward-looking by law, required Tetra obligation statements. to

In to financial [Operator Investor website. addition financial the Dan to turn section the go since reconciliations management as GAAP like Tech’s Tetra Instructions] will call Mr. be over With presenting some appropriate Batrack. Please the of Batrack. measures that, non-GAAP are I ahead in posted now references would

Dan Batrack

began morning, first Thank welcome of I’m glad you revenue, company’s to and report call. record quarter share. history Tetra in best to income the first net our we XXXX and much, results And Regina earnings earnings conference Tech per achieved adjusted very our with very the and its quarter fiscal year. good quarterly how

our per We QX operating business an Financial significant beyond. strong while XXXX will on high for from achieving and Officer this year net our quarter, also our performance our across provide details to new of opportunities now for Tetra results across capital a up adjusted had fiscal backlog visibility income increased Tech’s highs Burdick, in and base, record Another business see Steve last client provide of an at overview quarter allocation. Chief we that’s earnings our orders revenue, billion first With quarterly growth and $X.XX share. outlook, excellent drove record our XX% additional I’ll year. diverse very and financial

our first million. revenue was our $XXX quarter, For

from prior up million, last in a of the up million, from the net diluted generated Our quarter year. income over overview year-over-year share customers. is the each XX-year XX% for up earnings our year. like an revenue an resulted end of provide which which performance $X.XX in of the highest from our $X.XX company. by And operating per finally XX% billion I’d X% $XX to backlog of the now was $XXX was of history at That operations client

U.S. was record led for by growth our work first programs. in international growth performance and quarter and commercial strong Our U.S. municipal continued environmental water

revenue for sustainable in which International from quarter management was international by practices resource Our slower in XX% our including and infrastructure design the significant work previous bit been up a Western year-over-year. net was increases had quarters. Canada, supported growth revenue our

approximately primarily commercial as environmental just Our clients and and up net to gas oil sectors. States about as well this X%. United due revenue U.S. the slightly commercial In growth at was was in for work services at also energy the

Our revenues the high were due prior had year. comparisons that state collectively our X% record and we in of local for the with business down year-on-year disaster quarter XX% to the recovery revenues

infrastructure water revenue in water federal U.S. for partial by in to very performance our double-digit like was began by strong the the and quarter. we up late budget On the due lead driven growth that a business December. segments. uncertainties to of government projects clients services slightly to now local shutdown state However, XX% collective I’d were Work our the our down California, continued basis, of and primarily our our our Florida. and areas to net be Texas in present with

workout the GSG XX.X%. had federal group growth quarter. year just and GSG Hurricane Those performance strong local Note for with The the was driving slight delivered a simultaneous Harvey, margin for was ago, Government a with our even in groups and over a responding the another in GSG United efforts past and point The Maria strong our of first quarter in This strong ago. consistent performance by year-on-year the Irma, California state across quarter resulting up were margin we only year Group Services to a States. It hurricane really both group this margin had year our group. high of and performance decline business markets business GSG quarter. in a Business that three comparisons recovery our a for very overall the

here operations. the infrastructure group season their of in in States. programs in the driven infrastructure quarter by while expansion very revenue Australia, in net XX%, the revenue commercial environmental really Canada to pleased our basis margin and that groups XX.X% high it’s and margin given and business most from first year CIG’s in The actually to the work I’m and particularly points United margin. For U.S. a was by increased XXX their holiday international by And grew report our last commercial that’s and industrial work

Our up from fiscal year-over-year $X,XXX,XXX,XXX end sequentially total up of year. where completed quarter at and X% record XX% we closed backlog we the first high last all-time as is the an at

disaster programs also to see across our our task the to which forecast us Army for quarter, worldwide. given development first Notably us clients you execute orders were over can simulcast, visibility allowed state if environmental in million U.S. with extraordinary our for on awarded programs our remainder for and international work rewarded commercial increase in you’re has of broadly and As response services, year. We $XXX tasks local our support the clients. we quarter and both had along that the distributed perform orders slide were government following were commercial

Steve I’d details Financial turn of quarter Burdick, present Chief financials the to like XXXX. the the first Officer over to Now, presentation to our Steve? for of

Steve Burdick

you, Thank Dan.

XXXX The million operating quite quarter Tetra quarter So fiscal first to fact, were XXXX compared first XXXX. And to first to subcontracting hurricanes. The fiscal a the as net the due was less XXXX highlighted, as where for first lower quarter. income million $XXX of and Tech in quarter disaster for are $XXX in difference multiple revenue, of projects result EPS Dan quarter of last activity just a year strong. revenue the response each first we records of compared had of is revenue the in

XXXX lower services addition, divestiture In revenue of quarter our the field third reflects operations.

would the efforts our X% work by of the our about XXXX from increased The divestiture fiscal CIG well sustainable environmental total revenue year-over-year. revenue resulted first fiscal as international quarter Now, to divestiture net XXXX. to on net have revenue $XXX And quarter of when revenue compared in increased of had this similar are our increase our which $XXX both consulting our group. as the the million without impact part million of infrastructure net first

margins were the quarter. to and driven a resulting $XX growing mentioned our from the from income operating We also XX% income was EPS saw current margins CIG Dan increase primarily in prior On by $X.XX. XX% in These operating earlier. increased in CIG $XX as the operating income uptick EBITDA our The Western revenues million. in in a improving healthy GAAP XX.X% Canada by discussed group, in were over in X.X% improvements due year basis, and to the year-over-year million improvement to the net

the this is $X.XX adjusted per Excluding increase X% last our of the share over XXXX up income. law tax EPS in year impacts due $X.XX year the our operating to primarily

of prior per about law XXXX the tax GAAP to earnings and that on fiscal results included impact benefit share deferred year law quarter taxes. the our for per $X.XX this the our We first benefit. Now, $X.XX tax per in assessment tax tax share a deferred non-recurring for due recognized share completed tax new

flow cash of million, million. million. year an in quarter first used favorably to is of about improvement totaled $XX the $XX This compares the For cash operations prior $XX usage which

fiscal cash operating cash typically XXXX. was seasonal The such, but a user. is of expected far negative plan ahead as today cash first our we And quarter so are the for

in Our of totaled leverage ratio and net $XXX debt resulted times. million X.X about a

Lastly, work less, was This toward. DSO days improvement our two the sale year or is quarter. and XX days of last days day target which XX our we is from an for continue to outstanding for first

strategy. our capital Now going to allocation

Our And us first consecutive just dividend, annualized operating continue for XXth paid of million to continued allow $X.XX in in business growth dividends just balance We balance $X.X returning sheet our out our of the out and of February rate strategy our will paid in the And this quarter. be do week for that. a which the cash approved flows our cash per strong Directors shareholders. a at share. managing our to calls investing of to Board

And going years I quarter delivering significant the and million allocation am back we the buyback utilize capital was want to buyback strategy. share program now $XXX we today. for initiated part call shareholders over hand previous that implemented. very buyback will returns quarter ago continue as to the pleased outstanding So remains a of key I’ll these Dan. stock for in exhausted the to current stock you the our financial just two a million. first And $XX thank your results balanced time of with such million for $XXX forward our to I

Dan Batrack

very much, Thank Great. you Steve.

industrial all supported sustainable As rate in consulting Pacific by our growth and positive engineering international across we we services fiscal will year growth Asia growth four be trends building clients XX% region. This year our of a client Canada fiscal of and see with being our in work. XXXX, enter the In by expect sectors. XXXX, second we driven quarter and our design

recovery municipalities state through be differentiated the state to XXX Our and disaster that with municipal and at response more high a services States here cities to very rate grow combination the a offices key with quite services. water contracts comprise also for United XX% us. markets of expected local in hundreds is demand our this This in United continues of than well-positioned States and for we’re market by and work and supported local

energy to a in industrial a U.S. commercial environmental treatment, combination and of grow expected work is X% the programs, with waste. growth rate cleanup water Our solid at

grow Tech’s would the year. business lower details We to even and impact a impact shutdown of recently on to our rate brief did the and here States to The impacts X% including the expect growth provide caused that X% for business X% its the federal from I in growth rate fiscal some work full our us government to and Tetra almost considering our our be us of shutdown for XXXX on and next. United update history. to in X/X speak shutdown year to government partial cause longest has completed federal adjust entire the I’ll like those the about U.S.

being work work of revenue. net approximately to the X/X We in portions. first we of about to and of quarter or federal distributed XX% federal Our U.S. business that’s for the is work typically business. typically our agencies think referring federal the and be U.S. components our three was equal In precise, numerous

Protection Department agencies, agencies third federal First, include of X/X. X/X about of work of development the the other Aviation is X/X international Defense which is and the civilian Environmental the Agency, about our civil work; and final second Federal Administration the comprise our

in of earlier or impact spending second and the For quarter expect saw the approved from budgets the with the nothing work. really XXXX do been quarter the federal first our so we we component shortfalls in Defense quarter Department had first no to of in budget

fiscal does The includes the budget and International States of for approved Development XXXX. second have area, State Agency an not development, which international the Department for United year

part government shutdown. was it the of partial So

relatively previously However, they’re operating our unaffected funded since projects on awards. were

Protection see impact which civilian an as for and and Agency, include Science Now the of third United with see the partial on for our this We Environmental clients’ shutdown. depleted. did the were deepen agencies, the shutdown a we XX% Federal extended National approximately funds projects States Foundation immediate contingency put did hold Aviation our government the others for Administration, category

catch the see for their affected which impact was government and to second the second of government impact associated the the December restart shutdown. did that due has And we quarter to that actually see of expect be an February quarter earnings agencies. programs we agencies at the the impact have the in the million budgets $XX set estimated uncertainty some on overhang up do we to and and about – estimate were our earnings impact $X.XX in procurement awards here shutdown to we the here prior And Now about the in while of the revenue, quarter. as to in for contract some aside and in X% the second shutdown partial beginning

continued we quarter, services the saw in to wide related a strength range especially During of those sustainability.

diversified and led the In services the three these business of that infrastructure referred year. remarkably remainder of model fact, mix to the that the highlight growth major disputes and high-growth We our our by to to differentiated mentioned resilience secure occur. provide for very just were California the opportunities be strong for exemplify events I reliable resilience do continue sustainable by strengthen for primarily earlier. business. that Water of droughts areas water of Texas, extreme design the I our further services like like their clients big U.S. prepare management Florida storms unaffected programs supplies, demonstrates budgetary I’d help water for us, regions and and when services of hurricanes infrastructure and that

global Our million designs. sustainable business our leverages buildings $XXX capabilities of clients to the with a practice now provide high-end

and with our healthy well proprietary existed both all types buildings our and continue building before. and I’d and new of evolve. create our now power demand the first to working We Tetra generate local use, than teams in very several Science Our buildings guidance designs to all for deliver enhance focus to our more the present to disasters. the year are more to a solutions problem-solving. on business and they Leading like Sustainability-related that environment, quality needs XXX that commitment and with and Addressing workspace functional occurred are water finally, across and it recovery clients quarter that fiscal the response capture of long-term for our second buildings disasters on water forward-looking that past disaster recycle those continues maintained that have than address our XXXX. cumulative including years. recovery for to approach the software of And contracts highest services over Tech services to with and are aligned kind

is as Our guidance follows.

quarter to guidance range net $X.XX of per with is second diluted to earnings the an our million For $XXX from associated revenue million share $X.XX. $XXX

XXXX represents $X.XX exclude share. include diluted assumes at year of a saw I and in assume billion of earnings an from and benefit adjusted shares for outstanding be we’ll the earnings per approximately this first the our excellent $X.X number be non-recurring We to from revenue per This $X range this that quarter. as quarter summary, a one-time XX% law that are earlier from start adjusted income benefit do diluted million, does an and does the $X.XX first In we we net the we be quarter associated include rate it tax does entire not range. a X% or this which There year. non-cash intangible it not tax $X.X per reiterate X% the It effective future to number share a acquisitions. share. the that year here the is For It And of higher. a amortization contributions in contribution revenue average billion that per guidance – XX great diluted just first record include tax tax a the and mentioned, we to with does assumptions earnings would in the had and with of share would guidance from benefit for realized million included $X.XX.

high reached driven across Our business. backlog an of broad by base all-time orders our a

I’m year. Our very focus opportunities fiscal services how water And pleased even markets from this never XXXX before. ability environment seen in in we on sustainability and is we’ve high-end and began that and closing, year orders increased new resulting with fiscal in

the for and like provides changes with flexible that questions. opportunities, open the market. our demand Regina, resilient navigate a high-end and I’d consulting ability Our now on to clients to call business from proven And services excellent consistent us focused model in

Operator

Boenning first Please & ahead. question Scattergood. comes of Ryan Instructions] the line Connors go [Operator with from The

Ryan Connors

shutdown sign Is markets shifting some first for that the dynamics. civilian result actually federal guess, clients question. markets the there had your I impacted? a taking agencies. of competitive that that are other resources probe little a any was were any government have as by on into of to ask issues wanted Thanks though my Great. just even impact those the And bit and I mean minimal the what aside from whether I is your on impact other competitors on

Dan Batrack

preparation if working procurement it prepare seemed and these the activities. like have not, years up days seen to the with an had in of The while eternity. the the positioning into flexibility There We was markets We’ve people had respect in it. cycle was many many, servicing if that. for preparation few for you’re quarters, responding either and work any not XX seen and not we or recompetes other none often for moving is to these market, that actually not a work to

having So not And work really that the affected were those on people that was we impact existing in on. to long-term are really multi-year. were typically contracts plays go home us that were

just Because at So not, the least commercial quite servicing has called concentrated could the that impacted, that what impact and with market. of highly point feel changed have company look we’ve ask competitive heard subcontract But in this how do the government. the catastrophic. leave our bringing the local it this they’re modest. any actually shutdown new if that much individuals work them than for state seen were this concentrated XX-day at we’ve to into the by – quite are we federal impacted dynamic more to that they is for side If work anything, and those those components we is people were of could fortunate be

Ryan Connors

next Okay. was energy. question Interesting, on my

did ago, when the of Obviously issue Canada over. much. prices kind energy a mention didn’t with energy time You rolled last years of the have couple we

again the down – prices So like can there? whether business what you on profile looks that us risk and just with energy reset there’s

Dan Batrack

for is talk Canadian acutely When actually gas a XXXX. oil we about headwind evolving for in a or geothermal, in more the has us it, Yes. certainly, been talking to theory energy when That’s renewable impact more the most one solar, energy items. least about challenge question. aspect was and obvious energy, and wind, and gas oil at for oil reasons It other But a was you’re cost sands. production quite great was that higher

margin really of seen financial in increase reason for And in is the have part had really abate. XXXX the the challenges that abated. we We the

Western a We We’ve increase oil seen United it States, have steady seen in steady, be in up. sands. seen picked and Alberta the we’ve more and work bit the the Canada,

to the have work it adjusted the and XX% was in oil grow, midstream engineering with XX%. in work that released about I’m a speaking And enough has work. Canada more around of continued but or Canada We and and said to head work. pulled both for bit has our U.S. actually on that about Tetra turnkey pipelines U.S. to turned work gas Tech and was back again had mostly

And pump across actually compressor to that low strength this clearance, stations, both away saw we was type been So right performance the which results the Canada CIG. work. U.S. the But help because point Canada, has of and of stations, it a contribute strengthening in such

seen XX/XX to this working a being might because a it’s the on basis holding Canada because now the wouldn’t moved of this something it wasn’t back up because the company, between big not we $XXX of year. to contributor. somewhere more quarter. off also and base mix isn’t didn’t needle would – XX we positive small about have something we’re us mover and and certainly it’s XXX it’s early. and We number U.S. bit the But highlight it little I But XXX for think go actually a I last Still say of that but year, with impact and million XX in driving a

Ryan Connors

of articles through their community. kind get out pretty Hunters pretty probably one. I story. And these name I last can on one of Got making you the are there’s dragged there investment sense in a the mud your do And to know this rounds getting too it. not And unfairly, topic, reports some and it’s point you press say. those But much of unbalanced and have continue

about you should be give comments all to to want opportunity the just any that we that. make situation you how can I and about thinking So that

Dan Batrack

have about behaved EC. – at the of of – back low-level and I Tetra particular ago transpired. in all instance. standards organization eight Unfortunately, high was of Well, the time, are We Tetra of characterization seriously the in violated highly matters what And criminally its we years addressed Tech think two aware individuals – what’s our the and and legal immediately this by XXXX you’re organization this subsidiary, the media. completeness in EC. representations XXXX Tech is ethical organization very this EC, we Tetra our take wrongful that who and Tech The wrongdoing did

this complete a that actual time, some is with actually of With perhaps Tech process, scientific all move not media and prevail this were can the which oversight process And now implementation impartial and of we input, defend beneficial and and to submitted and extensive which record from corrective and that at time legal will Tetra it’ll legal the did we fabrication. client’s facts agencies, including public in in at or all actions, an any summarized reality in report ways fact confident vigorously an and is publications our grounded reviewed review because that is is civil following that approved manner. of investigation was a transparent There not in its client. unsubstantiated EC away

I share So you. can with that,

Ryan Connors

very helpful. that’s Well, Thank you, Dan.

Operator

the of next KeyBanc. Tahira question line from Your Afzal with comes

Tahira Afzal

team and quarter. your you a to on congrats Dan, good Thanks.

Dan Batrack

Thank you, Tahira.

Tahira Afzal

that extensive of think weather. will an Do seems is With And across when of revenues do the for this be this going local know like was year. with there ongoing to source you you unfortunately your you and lot But subject forward? outlook clients? you state talk studies. your I to becoming it know a on world sustainability extreme more that I it based is And

Dan Batrack

long And design disasters new the of facilities levees is oversight of a and not a planning term of which work. actual implementation planning of the facilities just the And a to XX-year that’s certainly it making and a a response we program. disaster And the course, our The the wanted highlight of process. and that’s insurance slide we construction where we’ve more this respect initial dikes levels recovery between response and also our I’m issues the activity, part and immediate are good most previous the quarters, glad you previously, the five-year in one a we then detail detailed the area in disaster a this. of but question, actually asked recovery. bigger clients on overall the that a really more In the planned even not and to gives recovery. quarters is the for to to That’s question. response a me note typically That chance bigger actually of had just from for higher bit at XXXX, treatment following to very treatment and the and wastewater happened exist moving one response overall of evaluation year. month more But water the and of which water debris from actually more recovery. that infrastructure and types and or out work, beyond two and of much of or of we is and dams initial that’s is the just final plants and what and that fires the impact there’s had followed into like actually doing hazardous that up these come of our We’ve we’re think clients with the And one number assessments size successes, larger. the the

New between long fact XX We – how In Orleans there about worked that’s in XX and Katrina XX-plus area. about years. in were we – the for

XXXX, actually that’s impact much, need events the these see doubt, more is say it resources me it extremely you something you and be a in once or larger take off was and fires XXXX, big was more. In do every the more maybe course, measured XXXX, the there serious. hurricane XXXXs about were No the there And year. it’s XX saying years, So a to more. of sitting world we And the we was had were with XXXXs the in just bringing longer years. word big largest there are XX it times tail, while a XXXX, in twice a let In have this much financially of the largest and disaster. few it’d in a thought within here being fire just the it’s do disaster years, the last episodic. But and record. we’ve events company. it last a three one California this

what considered happen event. reoccurring So a a becoming would is event more episodic again that never was single

to It appears plan So a you during I wouldn’t be anticipate may can that – it is case. some you the to moving No. on it calendar? But year? there can be the certainly

work product a for so competitive, the And brings that than better one-of-a-kind, get more before and they were quicker on communities us physically and building faster turnaround so where the residents back can it and actually we’re our technology best-in-the-industry a to they our and we actually brought to clients marketplace. It citizens makes ever.

programs we the long-term think think do all company staying to what well we reasons the in completion we’re revenue be work. we of not is through a recovery the we for fair But planning work. the So upfront it’s the with our for we and building do going do fabric way after stream. very It’s the actually just those to what

Tahira Afzal

it and back typically mean economy the of So the going the little But just there budgets are in muni U.S. because could deal of things on, how local you. it have I state behaves. seems go XX your in time, the work this different seems, some and cyclicality if you result had business, you’ve Dan, be cyclicality and versus what years, that a longer

Dan Batrack

And was in which and that that business, that anticipated disaster give with the from the that’s had we did caused state all and and to quarter Harvey. many standout X% in $XXX we was on I recovery response very in market work a the work us point was entire months year and – that’s we this a to for while for call want double that what a began rate were And quarter. that confidence. growth XXXX, we ago, on favorable do our us our three perhaps felt skews very the growth year embodied That’s XXXX, forecast some million good one-item over in fiscal non-recurring local a more headwind book happened two, for we out with think But four. year, lot one things when and true. three the think we – had state was local ago

Tahira Afzal

it. Got

a I just then know on margins you And talked as about follow-up it. Okay. structure.

niche You to point of starting business area at a feel feel the where organically you? that you’re that now? Or gain on. an that’s is you can now made you grow for you focus some traction acquisitions Do M&A earlier do asset

Dan Batrack

The as business, internally refer design think would high-performance we so to we our – building infrastructure it practice.

eastern the We the well positioned. of at seaboard U.S., have –

relationships, have We clients, staff.

all way We’re on the down through British the Columbia Coast from Diego. West Vancouver, San

add have the be utilize. could areas. we lot with think just think and highest should the Europe. We it add Australia we the And is there. business growth the it among is we under then we But could offshore that rest and acquisition XXX an other focus we do what have in company. margin that organic a a of to and in have globally, But an people. is of I U.S., do an Australian But do office we platform something that can a best-in-class, think do presence We rate

it margin impact getting it to overall that it’s the can scale of grow the actually the line. as corporation top continues to So

Tahira Afzal

very congrats it. much and Thank again, Dan. Got you

Operator

the Maxim line Please Our Sullivan ahead. of next with question Group. go from comes Tate

Tate Sullivan

partly contributed? Dan, revenue pointed you you. coming that detail good can thank earlier net growth? international out year-over-year Canada. you were – international growth there I from areas XX% other think gave on But Hi, you

Dan Batrack

Yes. It pickup commented only Western was to Canada. isolated the Canada was while, Western not I it. And component and on work midstream oil in gas It was that the of that. in a

activity water actually work, municipal bit supply, that’s treatment. the some pickup the little in saw saw mining also in We a we Western a Canada. water of of on industrial side infrastructure But

bit strong a quite It’s a, of significant areas contributing of only now. note year Western gas do fact, equally other because I So and But a matter while was ago. were these Canada. in headwind a it oil

say is primarily growth in line. helped would also that top region. infrastructure we’re in and the – Asia Canada building say high- Pacific top the So in strength I practice performance our it seeing set would broad-based Australia work, I really line on work that

of So of doing Asian we out do countries, But we’re out work. taken it being to Kong, where Philippines Pacific have design Center multinational our and the of some have clients Excellence the is like done other of that areas primarily Asia places Melbourne. Hong us

the actually [Audio that in spoken presentation the So gas is Canada or for revenue headwind then had the embedded costs and earlier that And the all moderated. growth. as on the earlier, abatement of were Dip] I and our question about the oil

margins, the So high-performance that margin helped to and in CIG to contributed increase a contribute buildings at the business then higher significant practice just margin group. in

Tate Sullivan

about clients, that talk environmental the infrastructure of point commercial that the international different? about on just When you that you sustainable is clarification. Or talk work? that same – sustainable as when And is work for buildings, – a

Dan Batrack

That’s different. different. That’s

about produce we’re systems do infrastructure zero, I you positive buildings, maybe energy, moving producing were will energy? platinum So buildings more up net whereas have but We mentioned more all a lead produce buildings. we’re water designation, kind building, actually more actually highest more we’re to actually designed way the only actually work to moving that were buildings you from is you do But water? platinum capture rain. And of a wonder, high-performance water. sustainable producing buildings how talk primarily that how gold which about the when from we not and more And talking net

reservoirs. go They’re cooling So served as onto actually chambers. they

decreases So use. energy it actually

really If as to we around all-encompassing high for and to groundwater, it’s say discharges, the upgrading So buildings. water, the for a construction a leading work emissions, course, actually any world, so air high-end we’re estuaries. green impacts air of of buildings for for impacts lakes our legacy the surface of existing or operations it’s is when primarily sustainable and And actually a renovation is infrastructure number most or new those environmental for soil end, to clients buildings. fields assessing

work go and and of evaluate including chemicals cleaned evaluation to that’s so emerging And new up back even assessment earlier. environmental that been sites cleanup

not items, different same two restating markets. really that’s simply end So the

Tate Sullivan

more. Okay. Thank you. question other And that answered my with

buildings. mentioned about in $XXX sustainable million You

XXXX. least revenue about that’s my for net of X% at So forecast

So linked new it’s retrofit as existing do buildings the well. to directly – not you all it’s not construction built that correct? Is

Dan Batrack

construction Yes. And is first-of-a-kind And half actually It’s is about XX% the division facility. new of actually That’s correct. about the renovation rehabilitation, other of buildings. that existing or that for XX-XX. the of partitioning

it is both. So

Tate Sullivan

And last me. great. one one Okay just for

that energy exactly? renewable is permitting-related Is spreads? renewable new for Or work. energy mentioned that work what You

Dan Batrack

a more for than for permitting. believe, combined. the the done work the of Yes. work. assessment done environmental permitting wind entities done evaluation, We’ve also of has Tech other the evaluation offshore. market, Marine We’ve upfront Tetra offshore sliding, impact more work, permitting mostly evaluation generation all and I It’s It’s majority permitting impacts. both environmental

I because gotten. believe, few you then created if in and I’d facilities, all actually we’ve it’s to respect where, than conflict the And collection with a And entire there announcements because others ask, done combined. work, this that monopolized of adjacent that there’s we’ve All has haven’t area. individuals one the area a all more that been of data add,

renewable and with what energy referring I’m there. type that’s So we to work the of market do

Tate Sullivan

much. a good day. the very you Thank Okay. of Have rest

Operator

next Your of the Andrew with Wittmann comes question Please from go line Baird. ahead.

Andrew Wittmann

the of Summarized down line. of by the kind I morning. that like bit guidance more. wanted Looks government as a to top to the you restoration guess, the backlog had you called just good kind shutdown That little and offsetting line into negative I Great to that. the better exemplified basically gives I here. revenue in see what disaster dig

margins. suggest particularly heard beat I here I you expectation, there’s the unusual to the beat guide anything You that today guess on the anything And haven’t in guidance.

guidance beat when happen? is kind I conservatism So get expecting margin there beat the Or the that you reconciling of It at the not the much. changed despite level it change the guidance from the of like sort And help as year your kind your that balance outlooks for given that. the quarter, look wanted I some quarter. of that in actually to guidance? feel of EPS you to I just in raised for quite feels you’re this of is a guess are initial that some not

Dan Batrack

– back more off is our cautious, when appropriately just good by would and our actually respect would turned an just prudent the and and had sort as a the on clarity It release. see prudent, to in completed now. was give all impacts update some guidance immediate to raising lower call before. No. that more increase. being work The great of appropriate be discussion actually we a say no line. been QX and doubt quarter. to us certainly released to if beat days. we go clear, overall modest would certainly know be top possible such we perhaps had QX be the that with Andy. year. are for coming our We’ll actual had actually earnings that that both we to QX. We for top the And what through are observation, what two increase it XX and given it It’s XX a hours bottom about to to would in insight EPS at expect have of EPS in a or turned did the we performance end by the with remainder any documents be proximity prepare government both it. downward yesterday, second in it be the There And raising $X.XX. happened adjust that there’s to bottom number in XX-day the Tetra I about potentially shutdown, No the to but the our I you even per of from to never actually here was impact the the year out share But and issue it with it thought The you days the will And in the on in seemed look guidance the the there’s no guidance the otherwise that is or just Tech conservative of greater to more other item end lead say including raising markets I conservative, see could are

Andrew Wittmann

balance year. year lot work providers one cash That’s helpful which kind here, of I used working disaster last there the guess a other isn’t And had targets. restoration consumed of always versus bit. the leverages known a you then above color. planned, said flow Okay. I of thing wondering, their government only little capital the because And just is to you give now. guys guess, Last And I sheets you’re guess,

it’s good better. So that it’s

on track. you’re said You

what’s You you’re actually I the guess flow? planned. said question planned above for is, cash

Steve Burdick

Yes.

is to So I more flow compared plan would income. year net our generate say operations every cash to from our as

that And couple year. so our goal that’s of we last the did years, and this

this flow expect So to net we increase also year, our income as cash increase. will our

Andrew Wittmann

you And little a going just Steve, bit can maybe, keep more.

reasons. one, the you hearing one have year kind XXs, low had of there. main target been rather targeting of closer of the we getting And is RCM project a statement, the see affecting as target? factor. the of out at DSO That DSO start least an income the Still guys had the the as progresses is You a to XXs there the DSO not is much on think much RCM level? But opportunity how the you than

Steve Burdick

Yes.

I spend and those, quicker than on to cash our more to receivables were the or to will to But be think have our impact RCM expect minimal become resolved. a that from we get results – revenue has claims RCM get We resolve in expect wrap don’t And up on on the collect operations cash to which do as DSO terms able out, to longer those those as we operations. both you pointed need we do thing the term. we positive is hope flow very of breakeven. the to one basically they do

Andrew Wittmann

just for you what all is in claim? can the your view RCM But us opportunity the refresh of

Steve Burdick

probably It’s days, Yes. five, days that. couple six like something DSO, probably

And – beneficial as quite be so it’s could get results. we those

Andrew Wittmann

there this basically for on where or year? to of that the any DSO? is of for six just this days opportunity top there that the target is And Is five a your is? couple seeing the Is another get year DSO target that maybe there resolved get you’re on the it. Got of to the year to goal rest –

Steve Burdick

We’re what in past. targeting always we’ve to better the do than done

towards what of goal, is we’re the operations, our and that So the working for though. that’s rest

Andrew Wittmann

course. Of

there. I Thank to you it leave Okay, going your for time.

Operator

next comes from Stifel. the Your Noelle of with Dilts Please ahead. question line go

Noelle Dilts

thanks. morning. Hi, Good

So my question. first

the in of in you You year? bit margin Q&A session. a you’re about to had GSG margins But thinking for strong kind on just pretty segment how margins XXXX. a definitely touched could us understand each the You help for

came and at then how a for the the target Is that I and can And beat of XX.X%. CIG? on over for you year long you number if GSG you in think XXXX. think touch kind about that in term think you about margins your you just

Dan Batrack

Absolutely, so at year very we last year have good did XX.X% a GSG. for

I think performance in by exceptional quarter. that number driven was really fourth the

felt right the up metaphor if well, performed – an has work mark for that in that lot there overall probably we high quarter fact drove GSG. really of fourth In high number watermark We’ve there. mix. water was it a that But thought the the of a XX.XX% It’s given at work. always

Our margin be a can and annual XX% XX% between on an Government business basis. Services

So we the were right in middle.

I XX-plus margin is a did the pleased What in utilization better to quite certainly I and work the something the it higher were high. possible. little for even year. say of last But if It that that it in quarter. wasn’t quarter volume year. line you then bit range, wouldn’t be fourth number quarter that number a percent we’d think did easily which actually maybe work, the XX% we that translated higher which that’s can increased achieved, given in it fourth achieve was where was course, we bottom drove

year. margin keep up overall we very we be last to volume the the able if be what close was So to should

XX%, the can – XX%. we again, were XX%. high, we roughly term up Now longer quite goal XX% so is volume be with at We think to if could

probably basis that So to are if point another add XXX things relatively optimal. we business, we could have that

were CIG, there at X.X%. upside. Last we upside actually there’s So year there. is significant

is has well see can the we work respect We this XX%. if or to mining work You commodities resource think another under services do gate just and energy number government margins. year gas at that the started here work the should beat work match strong with able run some and oil and is there out of be the economy and to that

X.X%. So we last year think recovery year a at that

goal this would closer be XX% a get to Our to year.

So they hope be year. with below, a at think things may should what could number that of and and actually may would with so CIG a bit it year between solid significantly be close they than late is in market, an then GSG last be given some quarter do be closer the flow XX%. a you XX% should robust in optimal much GSG think to XX% the to could on gap would I what GSG. beat be We match XX% higher quarter headwinds, XX% a be the range, or plenty we as be wider in our very a with may saw that to goal of this term would which work We a there would market longer of pickup begin year XX%. perhaps in And some down markets. these see in lot of end out be And and

that GSG And closer. them match above. challenging market, will with we’re there’ll a market, in amount a be we for below. probably I But In year, a margin not aggregate. fair in be much to be think strong this it to the respect So looking a they’ll bit think

for XX% be XX will GSG plus the it year. this maybe at at XX% look last year you if So

collective on the basis biggest single a see Corporation, its the you’d move. for so basis because has CIG of And relative contribution a on

Noelle Dilts

markets of mentioned kind up looking of quarter your attractive, you’d of upon, helpful. you very a attractive that’s expand size little could Okay, kind bit in allocation you’re M&A how And that and at? about color. and that two, the how be you’re last was capital – today, question, you I one, priorities. hoping that just little up for bit are about My that Thanks geographies thinking are thinking earlier second that bit of terms little a you’re targets

Dan Batrack

technical water environment Asia there. of grow and are looking a focused for that We and market, were can generally Zealand. on Areas but is we Pacific organically some and energy, basically best-in-class lot be somewhat like New underrepresented additional size, renewable We a to Australia are are We the fit environmental bring is in water, and partners technically Well. in looking that of markets. to on we’re agnostic what work. do firms

here area. leverage capabilities So be could in We would then the one U.S. think we have and experience the we that

to there’s here more even well looking with on respect that planning we’re to the U.S. actually promising portion the them join do management And are business. and both entities think in disaster expertise We to add their build that of for to would we us recovery actually and program us faster recovery some for –

consolidators another asked it, business. focused We can top of and reason areas, progress on to recovery longer them, mature in of or with one the the clients we commercial that of have So them. there some there and a based marketplace, in some then we us those either is and here. but area obviously, make would a of service Europe we a in Brexit rest and we’re add and quickly clearly uncertainty the technical of area we’re or continuity in and, side, significantly underrepresented bottom areas. and that we’re on. market, tail are big international very natural the the think are the think upfront client where resources are I That’s EU number line we market a Europe lot they’ve that But think, the leader longer And with And in assessments and Europe, particular – to translate not do area.

So the would go that why there. reason we we do is think that

we to provide market them. are work more can clients service that to of a some to for a be looking that honor actually not multilingual providing the go It’s for It’s to our it for not great We’re us. that’s naturally add that Europe badge us. continuity to for and we growth if to resources

be an that that is So looking. area we’d

for some areas that are us. higher priority those the So would be of

as you been note. have We would

We continue company a also to remained talent on But discipline. high to very very acquisitions. bring the through we’ve

actually feel end those And them to make to best-in-class add that fit top their carry needs to and a join of It we will our don’t just so any type strategy line professional career the be growth. drive us to days. actually have to want of necessity the this

Noelle Dilts

so Thanks much.

Operator

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

Dan Batrack

interest Well, thank again to speaking on you making every than be and and and we I looking quarter to quarter, before. questions focused Tetra it business very we’re had quarter insight, going for I’ll your next forward the in And next be your much, want to of your you with Regina. thank you our Tech. one better

the of Have to Midwest at States. hope great end on talking to week. have United of quarter. forward you I East you and look Coast hope and here you I up warm great second So the a I the Bye. a week the

Operator

Ladies and All gentlemen, this Thank for concludes a day. conference and you for disconnect may have today. nice our parties participating all now.

Tetra Tech (TTEK) 31 Jan 192019 Q1 Earnings call transcript