TETRA TECH INC — Call Transcript 2025

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 investor 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 Leslie Shoemaker, Chief Innovation Officer. They will provide a brief overview of the results and will then 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 investor 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. Thank you very much, Kate, and good morning and welcome to our third quarter of fiscal year 2025's earnings conference call. Overall, we had a very strong third quarter, hitting new record highs for operating income and earnings per share. In fact, they were, I'll get into these details and Steve will talk about them, but they were all-time highs, not just for our third quarter, but for any quarter in the history of the company. Our operating income and margin that were at these very, very high levels were driven by the utilization of our staff that responded to the devastating fires that took place earlier in the calendar year here in Southern California. This high utilization of our staff drove our increased revenue and income even beyond the high end of our guidance, and it really supported these year-on-year growth rates that we saw in the quarter. The wind-down of our USAID work in the quarter continued to proceed generally as we projected. In fact, the revenue was slightly below what we had forecasted for the third quarter. However, one very bright spot is that we did receive payments of essentially all of our outstanding USAID invoices, which contributed to the extraordinarily strong cash generation and day sales outstanding, our DSO reduction that we saw in the quarter, and our CFO, Steve Burdick, will talk about that in more detail shortly. While we had an extraordinarily good third quarter, in fact, a record third quarter in many respects, we are still being very cautious in navigating the changes that are coming with this new administration and its near-term secondary impacts. In my prepared remarks here at the beginning of our presentation today, I will discuss some of the short-term impacts that we're seeing across our end markets. Presenting with me today is Steve Burdick, our Chief Financial Officer, who will provide additional details on our financial performance. Dr. Leslie Shoemaker, our Chief Innovation Officer, will provide an update on the outlook for our U.S. federal work and our digital automation markets. With that, I'd like to start today's call with an update of our financial performance and our overall business. In the third quarter, excluding our USAID and Department of State business, which is very quickly in fact USAID is no longer existing as an entity with the federal government. I think the best way to look at our business is actually with those removed from our financial numbers. In the quarter, our net revenue increased to $1.06 billion, which is up 11% from the same quarter a year ago. Our operating income was $159 million for the quarter, an increase of 37% from the prior year. We generated an earnings per share or EPS of $0.41 for the quarter, which is up 46% from the prior year. To look at our performance by segment, I'll start with our government services. Excluding when our USAID and Department of State work was only in our GSG segment, so excluding USAID and the Department of State, for the third quarter, the Government Services Group or the GSG segment increased its net revenue by 29% year-over-year to $429 million in the quarter. The GSG segment generated a 19.9% margin in the quarter, which is up a pretty impressive 230 basis points from the prior year. GSG's exceptional margin performance was driven by a combination of disaster response work and the reduction of the lower margin USAID and Department of State work that we had in prior quarters. The very rapid ramp-up of the fire-related recovery work in California drove higher utilization from the mobilization of staff really very broadly across all of Tetra Tech and certainly across the U.S. portions of Tetra Tech that we put those individuals on the fire to respond very quickly. The Commercial International Group or CIG segment delivered a very strong 15.2% margin in the quarter, up 130 basis points from last year. The CIG segment's revenue was $633 million in the quarter and was up slightly from the same quarter last year, with growth in CIG within our United Kingdom, the UK, and European Union operations, and reductions in our U.S. commercial and Australian activities that I'll speak about in a bit more detail on the next slide for the webcast. I'd now like to provide an overview of our performance by our end customers. Excluding USAID and Department of State for our U.S. federal clients, our U.S. federal work was up 46% from the same quarter last year and now represents about 25% of our business. In the quarter, disaster response work led by the US Army Corps of Engineers contributed about $70 million of revenue, again in the quarter, to our federal revenues. Our state and local revenue grew 30% year-over-year. Excluding the contribution of our episodic disaster response work, our ongoing water programs for our state and local clients were up 18% year-over-year. Our state and local work, excluding the episodic disaster contributions, is up 18%, continuing a little bit higher than a range that we've sort of anticipated for growth in our state and local work. Our U.S. commercial net revenues were down 4% year on year, primarily driven by reductions in renewable energy work that we do, especially in offshore wind projects. Overall, our environmental restoration work, which is environmental compliance activities, was stable and continued to be equal roughly to the previous year. That's supported by regulatory-driven requirements that are imposed at the state and local level. There's been really no impact on federal activities for that part of our commercial work. Finally, our international work, which now represents 42% of our revenues in the quarter, was down 1% year-over-year, so I'll call it essentially flat. We did see growth in our United Kingdom and Irish water programs, so UK and our EU work was up, and I think they have upper single digits. This growth was offset by a continued decrease in infrastructure work in Australia. If we actually take the Australia revenues out of our international revenues, you would see the rest of Tetra Tech's collective international activities are up about 5% in the third quarter. That gives you an idea of the impact of that reduction in Australia. I'd now like to discuss our backlog, which represents, and I think this is quite important, contracted, funded, and authorized work that we've received from our clients. Excluding USAID and Department of State activities, our backlog is $4.15 billion, which is up slightly from the second quarter. I think this is actually a great attribute and deserves recognition by our staff that we've really seen, excluding aid, the backlog not only be stable but actually grow in the third quarter, and that's typically not one of our big backlog growth quarters. In the quarter, we did add nearly $2 billion in new contract capacity with the U.S. federal government. We press-released these, and they include contract wins with the US Army Corps of Engineers in Huntsville, Europe, and in Honolulu. Geographically, very broad globally. Our recent $94 million Environmental Protection Agency, or US EPA, award is singularly focused on providing essential emergency response services. These are contracts that are activated for chemical spills, derailments of the railroad cars, and extraordinary events such as the East Palestine, Ohio train derailment that happened in 2023. It's for that type of work that requires extraordinary response. We continue to build our state contract capacity for disaster response services, and we did have a nice award with the state of Georgia for approximately $22 million that continues to build on work we've been doing there before. In fact, earlier in the year for Hurricanes Hilton, Milton, and Helena. Most recently, we announced the award of a new contract for digital automation from a very large water utility just here in California. At this point, I'd like to now turn the presentation over to Steve Burdick, our Chief Financial Officer, who will provide us additional details on our financials and give us an update on our capital allocation program. Steve. Hey, thanks, Dan. I'd like to now provide an update on our fiscal year-to-date results, working capital, cash flows, and capital allocation. As Dan discussed earlier on this call, we continue to focus on the front-end consulting and design for water and environmental projects, which are carrying higher margins across all of our end markets. As such, even as the 2025 revenue was up 9% over last year, our operating income and EBITDA for the year increased at higher rates of 21% and 15% respectively. These results on a year-to-date basis further support our long-term strategic goals to increase net revenue while improving EBITDA margins by 50 basis points annually. I do want to point out that the EBITDA margins on net revenue came in better and increased by over 70 basis points through the first three quarters of this year as compared to last year at this time. As a result of our ability to enhance our profit margins and further manage our working capital, we were able to increase the adjusted EBITDA or EPS by 26% over last year. On a GAAP basis, in the first half of the year, we did recognize a charge for litigation and non-cash charge relative to the goodwill impairment for our USAID reporting division. Please refer you to the appendix of this presentation and our Reg G for any reconciliation. These strong financial and operating results have resulted in a strengthening of our balance sheet and our cash flow position. Cash flows generated from operations for the trailing 12 months were $462 million, which represents a 23% improvement over the previous trailing 12 months. These cash flows have continued to exceed net income by more than 100%. Our focus on working capital and cash flows has resulted in our DSO reflecting an industry-leading standard of 56 days, which is an 11-day improvement from the second quarter of this year. Much of this improvement resulted from our collections of receivables due on USAID projects. When we include the current outstanding USAID receivables, our DSO is even lower at 54 days. This lower DSO metric provides significant insight into our core business as it reflects the outstanding work that our project managers lead relative to higher quality projects and highly satisfied clients in the broad portfolio across all of our end markets and all of our geographies. Our net debt amounts to about $620 million, and the net debt/EBITDA was at a leverage of 0.96x, which is lower than our leverage one year ago when it stood at 1.15x. As we continue to execute on high-quality operating results with increasing margins, operating cash flows in excess of net income, and lower working capital KPIs, we will continue to provide higher returns for our shareholders. Those higher shareholder financial returns are reflected in an improving return on capital employed, which stands at close to about 20%, which is among the best in our industry. For those following along the presentation, I would like to now present our capital allocation overview. We have a very strong balance sheet, probably the strongest balance sheet in our history, with over $1 billion in available liquidity as we've revised our capital structure in the last year to take advantage of the credit market to support our strategic growth opportunities. Leslie will discuss those strategic growth areas later in the presentation, but I do want to point out that we have a significant amount in liquidity available to invest in organic and acquisitive growth priorities, and we have a well-balanced mix of both fixed and floating rate debt to mitigate any interest rate risk and take advantage of any opportunities there. Regarding our dividend program, I want to announce that our board of directors approved a 6.5% dividend, which is a 12% increase year-over-year to be paid in the fourth quarter. This is our 41st consecutive quarterly dividend with annual double-digit increases in the amounts paid. Based on the lower leverage that I just talked about, we did reinstitute our stock buyback program this year. So far, in 2025, we have bought back a total of $200 million, which includes $25 million in stock buybacks for the third quarter. We have $648 million available from the stock buyback plans approved by our board of directors as part of our capital allocation strategy. In conclusion, I'm really pleased to share these financial results so far in fiscal 2025. Thank you for your support, and I will now hand the call over to Leslie to discuss Tetra Tech's future opportunities for the rest of 2025 and beyond. Leslie? Thank you, Steve. The U.S. federal government spending is realigned each time a new administration is put in place. In the first year of a new administration, new leadership is appointed, and often the most significant legislation is passed. It does take time for these changes to percolate through government policies and contracts. Since January, we've seen significant changes in funding priorities, changes in contracting practices, restructuring of entire agencies, and the passage of the One Big Beautiful Bill Act, or OBBBA. The new bill just signed on July 4th sets out the administration's new vision and clearly defines new funding for priority programs. The bill and subsequent executive orders do include significant actions that could adversely impact our renewable energy business. We see clear opportunities that are in Tetra Tech's wheelhouse. I would like to highlight just three areas of particular relevance to us. The bill identifies increases in defense spending of $150 billion, likely to be further augmented by increases in the 2026 budget. The focus on the upgrade of defense facilities aligns with our differentiated services, especially in resilient design, high-performance buildings, and automated inspections and asset management. A generational increase of $25 billion is also included for the Coast Guard. We can quickly ramp up to expand our current work for the Coast Guard in software solutions that they use for emergency responders and coastal monitoring today, as well as support an increase in the evaluation, planning, and design of marine infrastructure. Finally, the bill includes initial funding of $12.5 billion to upgrade our air traffic control systems. This is where Tetra Tech currently holds over $1.5 billion in Federal Aviation Administration capacity and is one of the leading experts in air traffic control, including the ongoing evaluation of new and emerging technologies. I'd now like to cover just a few recent developments in our digital automation sector. We started the Digital Water Initiative at Tetra Tech in 2021, and since then, we've added five firms with specialized expertise in the field of automation. These are firms that work in connecting the instruments, technology, and systems that are needed for the digital transformations of utilities and industry. Today, we're seeing some of the fastest growth in this sector, catalyzed by the increasingly affordable access to generative AI that's used to rapidly interpret information, optimize our client systems, and actually work in real time. Growth projections for this market, also referred to as the new industrial revolution or Industry 4.0, are for global expansion to reach over $600 billion by 2030 at a 20% CAGR. From our initial vision to focus on water utilities, which is really the majority of our work today, we've now added work for our commercial clients in oil and gas, mining, and manufacturing. Through the recent acquisition of Sage Automation, we now have significantly broader global resources, we've further diversified our clients, and we've added new software and intellectual property. Today, we're cross-selling digital automation to our global customers and broadening our reach in this rapidly growing market that's fueled by the adoption of AI that directly benefits our customers' bottom line. The trends we're seeing support our growth plan to reach $500 million in annual revenues for digital automation by 2030. I'd like to turn the presentation back over to Dan. Thank you, Leslie. I would now like to present our guidance for the fourth quarter and next year updated guidance for the entirety of fiscal year 2025. Our guidance is as follows. For Q4, fourth quarter fiscal year 2025, our net revenue guidance is for a range of $1 billion-$1.1 billion, with an associated earnings per share of $0.38-$0.43. Our updated guidance for the entire year is for a net revenue range of $4.454 billion-$4.554 billion, with an associated adjusted earnings per share of $1.49-$1.54. We do have the assumptions for our fourth quarter items included in the webcast and on the slide, but I will make a note. We do anticipate a contribution of work from USAID and Department of State of approximately $40 million-$50 million, which is actually down from what we had anticipated just a quarter ago. This is continuing to ramp down as an overall contribution to our revenues here at Tetra Tech. In summary, this morning, after nine months of fiscal year 2025, we've got three quarters through, and six months under this new administration, which included the elimination of our largest client, USAID, our revenues up, and we just delivered the highest income quarter in the company's history. Although there's near-term uncertainty in some of our end markets, we're well prepared to navigate these through our diversified services, through our contract capacity, and by using our balance sheet to be very opportunistic in many different strategic areas. Some of those areas include acquisitions, and Steve has indicated during his commentary, the buildup of cash can also be used to continue stock buybacks, which is another way of returning value to our shareholders. There is no doubt that the long-term demand and necessity for high-end water, environment, and sustainable infrastructure is unchanged, and the future looks very bright for us. I would like to open the call for questions. Kate. Thank you. The question-and-answer session will begin now. Please be aware that there will be a 30-second pause in our webcast to allow for buffering. At this time, audio participants are invited to submit their questions. 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'd like to ask a question, please press star one on your touchtone phone. The first question comes from the line of Tim Mulrooney with William Blair. Please proceed with your question. Dan, Steve, Leslie, good morning. Good morning. Two questions here on the backlog. Firstly, can you just dig into the backlog a little bit more? I mean, it looks like it was essentially flat year-over-year, excluding USAID and the Department of State. Are there things happening here on the federal government side where the cadence is a bit different than what you'd normally see? I'm curious if we should be thinking about the slowdown in backlog growth as being indicative of slower revenue growth, or maybe if the procurement cycle has just shifted somewhat, as maybe the agencies are taking a little bit longer to send out the RFPs or task orders. That's a good observation and a good question, Tim. There's two aspects with respect to the work that we do for the federal government. I would say that over this last quarter, one area we've not seen a change in is the cadence and timing and issuance of contracts. As I commented in my prepared remarks, our backlog with the federal government increased by nearly $2 billion. The actual issuance of contracts, scope of work, really none of that has seen any changes from what we anticipated and what we've seen earlier in the year, and frankly, from even prior to this administration. What we have seen a difference in is actually the conversion of the contracts to issuance of task orders that go into our backlog. I think part of this is actually an artifact of Tetra Tech itself. We do only report our backlog if we have a contract, which we've seen those announcements, but they funded it, which they have the funding for it from Congress with the bill, and then they've actually authorized us to go to work. That's initiated the activities in the field. What we have seen is there's been a lot of early retirements, people downsizing different departments within the government, and that has included a lot of senior individuals in the contracting officer ranks. We've seen a slowdown between contract issuance and task order delivery. Many of our peers and others that work for the government report their backlog differently than Tetra Tech. They actually have what they call a hard backlog, which would be ours, our funded backlog, funded and authorized, and then they also include a percentage of the amount of the contract that's issued. In fact, if we did that, you'd see our backlog actually reporting significant increases associated with the issuance of these contract vehicles. We have always held ourselves to an unusually, in fact, uniquely high standard on these, and we've seen that slow down through the changes with this new administration. You really do need all of the contracting officers and all of the different mechanisms in place to make that work smoothly. I think what it means, I don't think that the contract capacity is an issue. I don't think that the existing task orders we have in hand will, at least from our perspective now, have an impact on our revenue. It's just that there'll be shorter visibility with respect to how far out you see with the task orders through this new environment. This is something that is different. We're about a month into our fourth quarter. One thing I'll note is that as long as I've been with the company, which goes back quite a while, when the federal government, the fourth quarter has always been an issuance quarter for the government. It's the end of their fiscal year. There's a bit of use it or lose it. Anything that wasn't expended earlier, they issue and push out. I'll tell you, we're a month in and we're not seeing that phenomenon or that annual seasonal distribution. It does look like this is going to be more of a book and burn issuance on task orders from the federal government. Maybe we'll have a better view on that at the end of the fourth quarter. Issuance and the growth of the backlog may actually be less, but not affecting the revenue that's coming out of the contracts that we have. I know that's a long explanation, but it's a big part of the business. I want to put in context before we get to the end of the fourth quarter what we are seeing today and what it might look like at the end of the quarter. No, that's really helpful color. Dan, thank you for all that detail. I mean, it sounds like you're not checking more than $2 billion for the federal government. Your task cadence is very much still intact. It's just about the conversion into task orders, which sounds more like, to me, a push-out rather than anything being lost here. That was a really good color. I appreciate that. As my follow-up thing with the backlog, I'm curious how you see the profile of your backlog today relative to. Operator, Kate, I think we may have had a bit of an interruption on this last question. Dan, can you hear me okay? I've got you loud and clear, Tim. I hear you quite clearly now. Okay. I apologize about that. Just my follow-up question was just simply how you think about the margin profile of your backlog today relative to where it was this time last year, excluding USAID and Department of State. Thank you. Great, great question. You know, one plan we went into a fair amount of detail in actually our investor day, which was just a little bit over a year ago, so a year ago May. We'd actually talked about a long-term goal of increasing our margins by 50 basis points per year. That was exclusive of aid. We didn't anticipate that aid would have contributed any increase. We're actually seeing that. In fact, we're seeing it a little bit, you know, even slightly above that level. The reasoning is two items that are driving that. Number one, we're actually looking to shift the business to higher value services that we're providing to our clients. We're moving more to the front end. We're moving more to consulting, more to qualifications-based. We're moving that upfront portion of the business that we have and shifting the mix to a higher value delivery, which actually carries higher margins in and of itself. The second piece is our fixed price. We are increasing the percentage of fixed price work we have within the company, which actually carries higher margin. Embedded in our backlog, it actually is increasing and is supportive of that 50 basis points per year or more target of margin expansion. It needs to be put into the bids or the types of rates that we put to our clients in the backlog before it converts to earnings and margin expansion. That's what's happening right now. Yes, it's for those two reasons: changing contract type to fixed price and services provided, which is moving to even higher value services that we're providing to our clients. Got it. Thank you. Thank you very much, Tim. Thank you. Our next question comes from the line of Sangita Jain with KeyBanc Capital Markets. Please proceed with your question. Thank you so much for taking my question. Dan, if I can ask you on the previous question about the book and burn cadence of the federal work right now, based on your experience, how does that set you up for 2026? Do you think there's going to be pent-up orders coming, or do you think it's going to be a continuation of this book and burn type situation? That's a great question. At this moment, as of this call, I would tell you it looks like it's going to be more of a book and burn. I think that the items that have to be put in place for some of these agencies don't happen in a day or a week, not even maybe even a month. We're only talking 60 days between now and the end of our fiscal year. As I take a look at how we would finish this quarter and likely enter 2026, it does feel like it's going to be more of a book and burn on the federal government side than we've seen before. As many things I get to learn through continuing learning, maybe that'll be quite different and happen differently than we anticipate. I would say we anticipate that it'll be more of a book and burn. We could easily see the backlog being flat to Q4 is a big quarter for us. It's even conceivable that you'd have a decline in the backlog at the end of the fourth quarter, but not impact our outlook for revenue. It just will have a little bit less visibility on how far out you can see. I did appreciate that. Just a kind of housekeeping question. How should we think about disaster recovery revenue in fiscal fourth quarter? For the communities, it's a really good story. We've largely completed the support work of recoveries down in the flooded and impacted areas in Florida, Georgia, and the Carolinas. We'd see that as essentially over. I will say that the long-term target, or the initial target, I should say, was to have the fire clearance of all debris and materials for rebuilding to start. The original target was to have it all finished in a year. Thanks to the US Army Corps of Engineers, phenomenal leaders at the Corps, and of course, the cities and the State of California and the cities there, most of that work's all been completed here by the end of July, essentially now. I expect it to be very minimal contribution in the fourth quarter for those two events. It's early, but we haven't included in our guidance much contribution from what we'd call these response activities. We do have plenty of design work and planning work for emergency activities that'll continue, but we'd say that's relatively consistent year-over-year. For this episodic, it should be quite minimal in the fourth quarter. Appreciate that. Thank you, Dan. Yeah, thank you, Sangita. Our next question comes from the line of Sabahat Khan with RBC Capital Markets. Please proceed with your question. Great. Thanks, and good morning. You provided quite a bit of color through the slides on some of the demand drivers here, but we've been getting a lot of questions within this sort of volatile backdrop. Kind of what is the water market growth relative to infrastructure? Hoping maybe to give you an opportunity to maybe just lay out some of the drivers across the U.S., UK, and Australia that you're seeing broadly across commercial and federal within the specific end markets that you're playing in and more around how do the rates of growth in water demand maybe compare to underlying infrastructure demand? Any color would be great. Thanks. I think partly one of the best indicative end markets for us for water infrastructure is really our state and local work. That's mostly for upgrading or new water treatment plants for delivery, wastewater treatment, and in some instances, coastal protection. A lot of it comes from our state and local clients. We've historically indicated a range of 10%-15%, and I don't know how many quarters in a row we've now been well north of that this last quarter. If you take out the special disaster response activities that are funded by our state and local clients, we're still just under 20%. So 18% is essentially a very similar number to the prior quarter. I know many have asked me, isn't the real number closer to 20%? It is on given quarters, but I would say that the water infrastructure work that we do and the water, both the chemistry and investigation assessment work, is probably that 10%-15% range. If we're wrong, it's generally at the higher than that. It's not just unique here to the United States. We report that out as an end client. You can see it in our slides. What's really growing, what's driving much of our growth in Ireland and across the United Kingdom is also what we would call municipal, which is water utility work there. The framework contracts are in sort of similar type numbers, sort of mid-teens. Other things are growing a little slower. We've seen out of the UK and Ireland, as I'd indicated in my earlier remarks, sort of 7%, 8%, 9%. What's on the upside of that are drivers, really the water infrastructure, water supply, water treatment. In the case of the UK and Ireland, it's a lot of water conveyance, getting water from point A to point B where they need it, and overflows with respect to protection of surface waters like lakes and rivers for recreation and general public safety. They call those sewer overflows. Here in the US, they call them CSOs, combined sewer overflows, which is the biggest driver in the UK, driving this growth rate well above 10%. That's also true in Canada. We're seeing similar items there, and there's been a lot of different areas where the budgets are actually supporting that. One of the most common questions I've received here in the last six months is, are changes in priorities at the federal government going to impact your local state funding for these types of growth rates? My comments on earlier calls have been no. I don't expect it because there's other alternative funding sources such as the rates that rate payers and the customers receive. There's bonds, and there's just healthy budgets at the state level. I will put one caveat. I have not seen it impact our water programs yet, but we do other work for state and local clients too on the water side, which is on hydraulics and drainage and stormwater channeling, even on transportation projects. For the first time, we saw this in the end of the third quarter. The U.S. government, the Department of Transportation matching funds canceled and saw a very large transportation project that we're participating in actually clawed back, and it was already funded. I would say where I have no, I put essentially close to no impact on federal to our state and local water, I've now seen it actually on transportation. It has all of a sudden become a high watch list. I don't expect it to have an impact on the water programs at this time, but it's now, and I do want to say that that was a secondary impact of the federal budget changes that's got us watching on that front. Okay, great. Maybe just following up on a comment you made earlier around doing more front-end advisory consulting work. I think you already have a pretty vibrant sort of mix of front-end work. If you can maybe just dig a little bit deeper into maybe what are some of the regions, types of customers, or types of work where you do see an opportunity to maybe push that front-end work penetration somewhat higher? Thanks. It's interesting. I would say we have energy development customers that have tax incentives, had the Inflation Reduction Act, and so their investments are going into renewable energy. The fact is that the work that we do is on the front-end consulting, advisory, technical evaluation. How can that work be changed to be invested in more conventional and fossil fuel? How can you actually go to develop a power generation using alternative supplies? Maybe it's natural gas and how you can connect to the grid. How can they still meet their power generation goals for these energy developers? How can it pivot from a renewable source like offshore? I'll use offshore wind as an example. Can you go from offshore wind in a marine environment, and can you pivot your investments to support LNG, which would also be in a marine environment, offshore terminals? I think the technical evaluation, including work we're doing with respect to the grid upgrades. Is it a place that the grid could actually and transmission projects be moved with respect to permitting? I think that there are more projects coming to light that we're seeing because of reduced regulatory requirements. There may be less work per project, but there'll be a lot more projects. When you change your math on those, you actually end up with a bigger number. They all need evaluation of how can that be done, what are the permitting requirements, and what's the timing? The new input is also the economics of raw materials and other construction costs on the front end is becoming more and more important, and we're involved in all of those. Okay, thanks very much. Thanks, Avid. Thank you. Our next question comes from the line of Andy Wittmann with Baird. Please go ahead with your question. Great. Thank you for taking my questions. Dan, I was looking at the CIG segment results and particularly the revenue. Your slide here shows that it was up 2%, and that's the calculation. It's interesting because the Commercial International Group, if you look at the, if you go by customer type, most of the customers are down in the Commercial International Group, but the segment is up. I just was hoping that you could explain how that happens. That's a great question. How do two minus numbers equal a plus number? Because you're minus 4 on our U.S. commercial and you're minus on our international by a percent, and you end up plus. While our commercial international is U.S. commercial and international contracted work is in our CIG, there are some entities here in the U.S. that do work for mostly, I'd say, state and local clients. It just so happens that in addition to working for a commercial client, there may be some work that is co-joined or done in parallel for a state and local client. That work is actually up quite a bit. In fact, when you've seen our pure state and local, when you go to CIG, we talk about U.S. commercial, that's not an absolutely pure just commercial. Some of that work is actually in that CIG segment. If you look at CIG, you would see +2%. When you look at U.S. commercial, it's actually separated out. Just a little bit of that state and local growth rate is actually embedded in the CIG segment, and it's enough to take those small negative numbers and make it a small positive number. Okay. That makes sense. Thank you for clarifying that. I guess just as I look at the two segments and think about the outlook from here, with renewables being one of the reasons that's down, and you can talk about Australia and see if you're seeing any green shoots of that coming back. I guess the assumption here into the fourth quarter and then probably into 2026 is that at least for the next few quarters, the government segment is probably the horse that's probably got the better growth potential over the CIG segment. Is that the correct way of thinking about it? I guess the renewables are going to be kind of a tough comp for a while, so that's going to make that segment a little harder is what I'm thinking. Kind of just wanted to bounce that off of you and take your time to think about it the right way. Yeah, I think that's right. I think that I'll stick with the U.S. commercial for the moment. You know, our renewable energy work that we do here in the U.S. was down probably close to 30% year-over-year in the quarter, and you know, that's a big number. That still leaves quite a bit that's actually underway. I think it's going to continue to see reductions over the next several quarters. Certainly, a year-on-year comparison until we twilight the year-on-year comparisons, I think that that's going to be for sure a difficult comp on the U.S. commercial. International, there are two ways Australia can get better. It can get more work, which is, you know, I think we're seeing it still very soft. We do have one benefit that's hiding in plain sight. It was down a lot last year too, so the year-on-year comps in Australia are going to look better because they were a lot lower last year. I think that's going to moderate, but it's certainly not going to contribute and drive our top-line numbers. I do think that'll come out of our state and local and the federal, which is mostly coming out of defense. I think we've got pretty good visibility, but the horse that's going to pull the top-line growth is going to be, you're right, mostly government here in the U.S. I would say actually our international government work is pretty strong too. I do think we've got several quarters of challenges there in the commercial side. Okay, that makes sense. Just for the benefit of everybody, I think the U.S. renewables business is only like 2% or 3% of revenue, just for context. I know maybe that's worth verifying for everyone there too. You said 30%. It's a big number down, obviously, but not a big part of the business, but not that big. Is that right, Dan? No, that's absolutely right. I think we've said we had about company-wide, the entire enterprise globally, we're about $250 million, about half of that. The amount we're talking about, to actually put real dollars to it, we were talking before this reduction about $125 million. It's a pretty small overall component of the business. Just the last one for me, Dan. This might be just kind of, but you know, the posture towards the U.S.'s posture towards Ukraine has evolved, I'd say, in the last few months. You're seeing, you know, weapons supply coming back and other things. I just don't, I know USAID is shut down, but are the systems in place? Are you hearing anything about the humanitarian support for like the grid work that you're doing there potentially coming back? Could that come back on? What are you hearing? It seems like maybe with the posture change from the administration, there might be something there. Maybe I'm grasping at straws here, but I thought I'd have you comment. No, it's a great comment. We've not, I did not intentionally, I've not included that as a driver or a potential material contributor to drive numbers up. There's no doubt that's true. You're right. It went from we're not going to support, we're pulling weapons back to we're going to go to neutral, and now they're supportive of Ukraine. The one thing that's positive, and there are many things that are positive for us, is we're working in Ukraine today. When I said that we did slightly less work than anticipated for USAID coming into the quarter, my comments on the last investor call were I thought we'd do about $100 million of revenue with USAID and most of it in Ukraine. We did about $90 million. In fact, I'd say $91 million is the number. When you ask how much is slightly less, we're $91 million instead of $100 million. I think in the fourth quarter, we originally thought we'd do about another $100 million. It's down to about $40 million or $50 million, which was my comment on the guidance. We have a contract, we have sufficient contract capacity. They could provide us, by picking up the phone or sending us a task, numbers that are $100 million, $200 million in a quarter. We've seen that before. We're not processing a task order for that right now, I'll tell you that much. If you go back a couple of years ago on an unusual damage to the grid, we were called with about a week's notice and asked could we deploy and initiate what turned out to be close to $100 million in a couple of week periods. I don't want to call it a lottery pick. That makes it too random, but yes, it's a possible upside. We don't have to compete. We had the single awarded contract to Tetra Tech. It is possible it could be an unusual large contributor. Thank you. Excuse me. Thank you. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. This will conclude the question-and-answer session. I will now turn the conference back over to Dan Batrack to conclude. Thank you very much, Kate. I want to thank all of our investors and stakeholders. Most importantly, I want to thank all of the Tetra Tech employees. This has been a period of a lot of change. It's been a lot of new items coming to us, navigating both the direct and indirect impacts of the new administration, which is really here in the U.S., which has really had impacts globally. Both keeping backlog up, supporting the collection of receivables, driving margins up, which is actually, you know, sort of delivering on our forecast or our assessment that we actually have higher margins embedded in the business as we go forward. I think this last quarter and the third quarter was an excellent example of that, and we see more to come. In fact, if you do the math on the guidance, a simple math, you'd actually see our margins are even higher computed in the fourth quarter guidance that we just provided today. I really look forward to providing you all the results for our fourth quarter, and probably most importantly, our guidance for fiscal year 2026 when I talk to you in 90 days and report our results for the fourth quarter and all of fiscal year 2025. I hope you all have a safe and enjoyable rest of the week. Thank you very much. Bye. Ladies and gentlemen, this concludes our conference for today. Thank you all for participating and have a nice day. All parties may disconnect now.

Speaker 6: 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 investor 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 Leslie Shoemaker, Chief Innovation Officer. They will provide a brief overview of the results and will then 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. Good morning and thank you for joining the Tetra Tech earnings call. 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 investor section of its website at tetratech.com. as a reminder tetra tech is also simulcasting this presentation with slides in the investor 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. 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. 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 Leslie Shoemaker, Chief Innovation Officer. with us today from management are dan batrack chairman and chief executive officer steve burdick chief financial officer and leslie shoemaker chief innovation officer They will provide a brief overview of the results and will then open up the call for questions. they will provide a brief overview of the results and will then open up the call for questions I would like to direct your attention to the safe harbor statement in today's presentation. 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. 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 investor 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. 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. 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. 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 investor section of Tetra Tech's website. in addition since management will be presenting some non-gaap financial measures as references the appropriate gaap financial reconciliations are posted in the investor section of tetra tech's website At this time, I would like to inform you that all participants are in a listen-only mode. 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. 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. with that i would like to turn the call over to dan batrack Please go ahead, Mr. Batrack. please go ahead mr batrack

Speaker 1: Thank you very much, Kate, and good morning and welcome to our third quarter of fiscal year 2025's earnings conference call. Overall, we had a very strong third quarter, hitting new record highs for operating income and earnings per share. In fact, they were, I'll get into these details and Steve will talk about them, but they were all-time highs, not just for our third quarter, but for any quarter in the history of the company. Our operating income and margin that were at these very, very high levels were driven by the utilization of our staff that responded to the devastating fires that took place earlier in the calendar year here in Southern California. This high utilization of our staff drove our increased revenue and income even beyond the high end of our guidance, and it really supported these year-on-year growth rates that we saw in the quarter. Thank you very much, Kate, and good morning and welcome to our third quarter of fiscal year 2025's earnings conference call. thank you very much kate and good morning and welcome to our third quarter of fiscal year 2025's earnings conference call Overall, we had a very strong third quarter, hitting new record highs for operating income and earnings per share. overall we had a very strong third quarter hitting new record highs for operating income and earnings per share In fact, they were, I'll get into these details and Steve will talk about them, but they were all-time highs, not just for our third quarter, but for any quarter in the history of the company. in fact they were i'll get into these details and steve will talk about them but they were all-time highs not just for our third quarter but for any quarter in the history of the company Our operating income and margin that were at these very, very high levels were driven by the utilization of our staff that responded to the devastating fires that took place earlier in the calendar year here in Southern California. our operating income and margin that were at these very very high levels were driven by the utilization of our staff that responded to the devastating fires that took place earlier in the calendar year here in southern california This high utilization of our staff drove our increased revenue and income even beyond the high end of our guidance, and it really supported these year-on-year growth rates that we saw in the quarter. this high utilization of our staff drove our increased revenue and income even beyond the high end of our guidance and it really supported these year-on-year growth rates that we saw in the quarter The wind-down of our USAID work in the quarter continued to proceed generally as we projected. In fact, the revenue was slightly below what we had forecasted for the third quarter. However, one very bright spot is that we did receive payments of essentially all of our outstanding USAID invoices, which contributed to the extraordinarily strong cash generation and day sales outstanding, our DSO reduction that we saw in the quarter, and our CFO, Steve Burdick, will talk about that in more detail shortly. While we had an extraordinarily good third quarter, in fact, a record third quarter in many respects, we are still being very cautious in navigating the changes that are coming with this new administration and its near-term secondary impacts. In my prepared remarks here at the beginning of our presentation today, I will discuss some of the short-term impacts that we're seeing across our end markets. The wind-down of our USAID work in the quarter continued to proceed generally as we projected. the wind-down of our usaid work in the quarter continued to proceed generally as we projected In fact, the revenue was slightly below what we had forecasted for the third quarter. in fact the revenue was slightly below what we had forecasted for the third quarter However, one very bright spot is that we did receive payments of essentially all of our outstanding USAID invoices, which contributed to the extraordinarily strong cash generation and day sales outstanding, our DSO reduction that we saw in the quarter, and our CFO, Steve Burdick, will talk about that in more detail shortly. however one very bright spot is that we did receive payments of essentially all of our outstanding usaid invoices which contributed to the extraordinarily strong cash generation and day sales outstanding our dso reduction that we saw in the quarter and our cfo steve burdick will talk about that in more detail shortly While we had an extraordinarily good third quarter, in fact, a record third quarter in many respects, we are still being very cautious in navigating the changes that are coming with this new administration and its near-term secondary impacts. while we had an extraordinarily good third quarter in fact a record third quarter in many respects we are still being very cautious in navigating the changes that are coming with this new administration and its near-term secondary impacts In my prepared remarks here at the beginning of our presentation today, I will discuss some of the short-term impacts that we're seeing across our end markets. in my prepared remarks here at the beginning of our presentation today i will discuss some of the short-term impacts that we're seeing across our end markets Presenting with me today is Steve Burdick, our Chief Financial Officer, who will provide additional details on our financial performance. Dr. Leslie Shoemaker, our Chief Innovation Officer, will provide an update on the outlook for our U.S. federal work and our digital automation markets. With that, I'd like to start today's call with an update of our financial performance and our overall business. In the third quarter, excluding our USAID and Department of State business, which is very quickly in fact USAID is no longer existing as an entity with the federal government. I think the best way to look at our business is actually with those removed from our financial numbers. In the quarter, our net revenue increased to $1.06 billion, which is up 11% from the same quarter a year ago. Our operating income was $159 million for the quarter, an increase of 37% from the prior year. Presenting with me today is Steve Burdick, our Chief Financial Officer, who will provide additional details on our financial performance. presenting with me today is steve burdick our chief financial officer who will provide additional details on our financial performance Dr. Leslie Shoemaker, our Chief Innovation Officer, will provide an update on the outlook for our U.S. federal work and our digital automation markets. dr leslie shoemaker our chief innovation officer will provide an update on the outlook for our u.s federal work and our digital automation markets With that, I'd like to start today's call with an update of our financial performance and our overall business. with that i'd like to start today's call with an update of our financial performance and our overall business In the third quarter, excluding our USAID and Department of State business, which is very quickly in fact USAID is no longer existing as an entity with the federal government. in the third quarter excluding our usaid and department of state business which is very quickly in fact usaid is no longer existing as an entity with the federal government I think the best way to look at our business is actually with those removed from our financial numbers. i think the best way to look at our business is actually with those removed from our financial numbers In the quarter, our net revenue increased to $1.06 billion, which is up 11% from the same quarter a year ago. in the quarter our net revenue increased to $1.06 billion which is up 11% from the same quarter a year ago Our operating income was $159 million for the quarter, an increase of 37% from the prior year. our operating income was $159 million for the quarter an increase of 37% from the prior year We generated an earnings per share or EPS of $0.41 for the quarter, which is up 46% from the prior year. To look at our performance by segment, I'll start with our government services. Excluding when our USAID and Department of State work was only in our GSG segment, so excluding USAID and the Department of State, for the third quarter, the Government Services Group or the GSG segment increased its net revenue by 29% year-over-year to $429 million in the quarter. The GSG segment generated a 19.9% margin in the quarter, which is up a pretty impressive 230 basis points from the prior year. GSG's exceptional margin performance was driven by a combination of disaster response work and the reduction of the lower margin USAID and Department of State work that we had in prior quarters. We generated an earnings per share or EPS of $0.41 for the quarter, which is up 46% from the prior year. we generated an earnings per share or eps of $0.41 for the quarter which is up 46% from the prior year To look at our performance by segment, I'll start with our government services. to look at our performance by segment i'll start with our government services Excluding when our USAID and Department of State work was only in our GSG segment, so excluding USAID and the Department of State, for the third quarter, the Government Services Group or the GSG segment increased its net revenue by 29% year-over-year to $429 million in the quarter. excluding when our usaid and department of state work was only in our gsg segment so excluding usaid and the department of state for the third quarter the government services group or the gsg segment increased its net revenue by 29% year-over-year to $429 million in the quarter The GSG segment generated a 19.9% margin in the quarter, which is up a pretty impressive 230 basis points from the prior year. the gsg segment generated a 19.9% margin in the quarter which is up a pretty impressive 230 basis points from the prior year GSG's exceptional margin performance was driven by a combination of disaster response work and the reduction of the lower margin USAID and Department of State work that we had in prior quarters. gsg's exceptional margin performance was driven by a combination of disaster response work and the reduction of the lower margin usaid and department of state work that we had in prior quarters The very rapid ramp-up of the fire-related recovery work in California drove higher utilization from the mobilization of staff really very broadly across all of Tetra Tech and certainly across the U.S. portions of Tetra Tech that we put those individuals on the fire to respond very quickly. The Commercial International Group or CIG segment delivered a very strong 15.2% margin in the quarter, up 130 basis points from last year. The CIG segment's revenue was $633 million in the quarter and was up slightly from the same quarter last year, with growth in CIG within our United Kingdom, the UK, and European Union operations, and reductions in our U.S. commercial and Australian activities that I'll speak about in a bit more detail on the next slide for the webcast. I'd now like to provide an overview of our performance by our end customers. The very rapid ramp-up of the fire-related recovery work in California drove higher utilization from the mobilization of staff really very broadly across all of Tetra Tech and certainly across the U.S. portions of Tetra Tech that we put those individuals on the fire to respond very quickly. the very rapid ramp-up of the fire-related recovery work in california drove higher utilization from the mobilization of staff really very broadly across all of tetra tech and certainly across the u.s portions of tetra tech that we put those individuals on the fire to respond very quickly The Commercial International Group or CIG segment delivered a very strong 15.2% margin in the quarter, up 130 basis points from last year. the commercial international group or cig segment delivered a very strong 15.2% margin in the quarter up 130 basis points from last year The CIG segment's revenue was $633 million in the quarter and was up slightly from the same quarter last year, with growth in CIG within our United Kingdom, the UK, and European Union operations, and reductions in our U.S. commercial and Australian activities that I'll speak about in a bit more detail on the next slide for the webcast. the cig segment's revenue was $633 million in the quarter and was up slightly from the same quarter last year with growth in cig within our united kingdom the uk and european union operations and reductions in our u.s commercial and australian activities that i'll speak about in a bit more detail on the next slide for the webcast I'd now like to provide an overview of our performance by our end customers. i'd now like to provide an overview of our performance by our end customers Excluding USAID and Department of State for our U.S. federal clients, our U.S. federal work was up 46% from the same quarter last year and now represents about 25% of our business. In the quarter, disaster response work led by the US Army Corps of Engineers contributed about $70 million of revenue, again in the quarter, to our federal revenues. Our state and local revenue grew 30% year-over-year. Excluding the contribution of our episodic disaster response work, our ongoing water programs for our state and local clients were up 18% year-over-year. Our state and local work, excluding the episodic disaster contributions, is up 18%, continuing a little bit higher than a range that we've sort of anticipated for growth in our state and local work. Our U.S. Excluding USAID and Department of State for our U.S. federal clients, our U.S. federal work was up 46% from the same quarter last year and now represents about 25% of our business. excluding usaid and department of state for our u.s federal clients our u.s federal work was up 46% from the same quarter last year and now represents about 25% of our business In the quarter, disaster response work led by the US Army Corps of Engineers contributed about $70 million of revenue, again in the quarter, to our federal revenues. in the quarter disaster response work led by the us army corps of engineers contributed about $70 million of revenue again in the quarter to our federal revenues Our state and local revenue grew 30% year-over-year. our state and local revenue grew 30% year-over-year Excluding the contribution of our episodic disaster response work, our ongoing water programs for our state and local clients were up 18% year-over-year. excluding the contribution of our episodic disaster response work our ongoing water programs for our state and local clients were up 18% year-over-year Our state and local work, excluding the episodic disaster contributions, is up 18%, continuing a little bit higher than a range that we've sort of anticipated for growth in our state and local work. our state and local work excluding the episodic disaster contributions, is up 18% continuing a little bit higher than a range that we've sort of anticipated for growth in our state and local work Our U.S. our u.s commercial net revenues were down 4% year on year, primarily driven by reductions in renewable energy work that we do, especially in offshore wind projects. Overall, our environmental restoration work, which is environmental compliance activities, was stable and continued to be equal roughly to the previous year. That's supported by regulatory-driven requirements that are imposed at the state and local level. There's been really no impact on federal activities for that part of our commercial work. Finally, our international work, which now represents 42% of our revenues in the quarter, was down 1% year-over-year, so I'll call it essentially flat. We did see growth in our United Kingdom and Irish water programs, so UK and our EU work was up, and I think they have upper single digits. This growth was offset by a continued decrease in infrastructure work in Australia. commercial net revenues were down 4% year on year, primarily driven by reductions in renewable energy work that we do, especially in offshore wind projects. commercial net revenues were down 4% year on year primarily driven by reductions in renewable energy work that we do especially in offshore wind projects Overall, our environmental restoration work, which is environmental compliance activities, was stable and continued to be equal roughly to the previous year. overall our environmental restoration work which is environmental compliance activities was stable and continued to be equal roughly to the previous year That's supported by regulatory-driven requirements that are imposed at the state and local level. that's supported by regulatory-driven requirements that are imposed at the state and local level There's been really no impact on federal activities for that part of our commercial work. there's been really no impact on federal activities for that part of our commercial work Finally, our international work, which now represents 42% of our revenues in the quarter, was down 1% year-over-year, so I'll call it essentially flat. finally our international work which now represents 42% of our revenues in the quarter was down 1% year-over-year so i'll call it essentially flat We did see growth in our United Kingdom and Irish water programs, so UK and our EU work was up, and I think they have upper single digits. we did see growth in our united kingdom and irish water programs so uk and our eu work was up and i think they have upper single digits This growth was offset by a continued decrease in infrastructure work in Australia. this growth was offset by a continued decrease in infrastructure work in australia If we actually take the Australia revenues out of our international revenues, you would see the rest of Tetra Tech's collective international activities are up about 5% in the third quarter. That gives you an idea of the impact of that reduction in Australia. I'd now like to discuss our backlog, which represents, and I think this is quite important, contracted, funded, and authorized work that we've received from our clients. Excluding USAID and Department of State activities, our backlog is $4.15 billion, which is up slightly from the second quarter. I think this is actually a great attribute and deserves recognition by our staff that we've really seen, excluding aid, the backlog not only be stable but actually grow in the third quarter, and that's typically not one of our big backlog growth quarters. If we actually take the Australia revenues out of our international revenues, you would see the rest of Tetra Tech's collective international activities are up about 5% in the third quarter. if we actually take the australia revenues out of our international revenues you would see the rest of tetra tech's collective international activities are up about 5% in the third quarter That gives you an idea of the impact of that reduction in Australia. that gives you an idea of the impact of that reduction in australia I'd now like to discuss our backlog, which represents, and I think this is quite important, contracted, funded, and authorized work that we've received from our clients. i'd now like to discuss our backlog which represents and i think this is quite important contracted funded and authorized work that we've received from our clients Excluding USAID and Department of State activities, our backlog is $4.15 billion, which is up slightly from the second quarter. excluding usaid and department of state activities our backlog is $4.15 billion which is up slightly from the second quarter I think this is actually a great attribute and deserves recognition by our staff that we've really seen, excluding aid, the backlog not only be stable but actually grow in the third quarter, and that's typically not one of our big backlog growth quarters. i think this is actually a great attribute and deserves recognition by our staff that we've really seen excluding aid the backlog not only be stable but actually grow in the third quarter and that's typically not one of our big backlog growth quarters In the quarter, we did add nearly $2 billion in new contract capacity with the U.S. federal government. We press-released these, and they include contract wins with the US Army Corps of Engineers in Huntsville, Europe, and in Honolulu. Geographically, very broad globally. Our recent $94 million Environmental Protection Agency, or US EPA, award is singularly focused on providing essential emergency response services. These are contracts that are activated for chemical spills, derailments of the railroad cars, and extraordinary events such as the East Palestine, Ohio train derailment that happened in 2023. It's for that type of work that requires extraordinary response. We continue to build our state contract capacity for disaster response services, and we did have a nice award with the state of Georgia for approximately $22 million that continues to build on work we've been doing there before. In the quarter, we did add nearly $2 billion in new contract capacity with the U.S. federal government. in the quarter we did add nearly $2 billion in new contract capacity with the u.s federal government We press-released these, and they include contract wins with the US Army Corps of Engineers in Huntsville, Europe, and in Honolulu. we press-released these and they include contract wins with the us army corps of engineers in huntsville europe and in honolulu Geographically, very broad globally. geographically very broad globally Our recent $94 million Environmental Protection Agency, or US EPA, award is singularly focused on providing essential emergency response services. our recent $94 million environmental protection agency or us epa award is singularly focused on providing essential emergency response services These are contracts that are activated for chemical spills, derailments of the railroad cars, and extraordinary events such as the East Palestine, Ohio train derailment that happened in 2023. these are contracts that are activated for chemical spills derailments of the railroad cars and extraordinary events such as the east palestine ohio train derailment that happened in 2023 It's for that type of work that requires extraordinary response. it's for that type of work that requires extraordinary response We continue to build our state contract capacity for disaster response services, and we did have a nice award with the state of Georgia for approximately $22 million that continues to build on work we've been doing there before. we continue to build our state contract capacity for disaster response services and we did have a nice award with the state of georgia for approximately $22 million that continues to build on work we've been doing there before In fact, earlier in the year for Hurricanes Hilton, Milton, and Helena. Most recently, we announced the award of a new contract for digital automation from a very large water utility just here in California. At this point, I'd like to now turn the presentation over to Steve Burdick, our Chief Financial Officer, who will provide us additional details on our financials and give us an update on our capital allocation program. Steve. In fact, earlier in the year for Hurricanes Hilton, Milton, and Helena. in fact earlier in the year for hurricanes hilton milton and helena Most recently, we announced the award of a new contract for digital automation from a very large water utility just here in California. most recently we announced the award of a new contract for digital automation from a very large water utility just here in california At this point, I'd like to now turn the presentation over to Steve Burdick, our Chief Financial Officer, who will provide us additional details on our financials and give us an update on our capital allocation program. at this point i'd like to now turn the presentation over to steve burdick our chief financial officer who will provide us additional details on our financials and give us an update on our capital allocation program Steve. steve

Speaker 7: Hey, thanks, Dan. I'd like to now provide an update on our fiscal year-to-date results, working capital, cash flows, and capital allocation. As Dan discussed earlier on this call, we continue to focus on the front-end consulting and design for water and environmental projects, which are carrying higher margins across all of our end markets. Hey, thanks, Dan. hey thanks dan I'd like to now provide an update on our fiscal year-to-date results, working capital, cash flows, and capital allocation. i'd like to now provide an update on our fiscal year-to-date results working capital cash flows and capital allocation As Dan discussed earlier on this call, we continue to focus on the front-end consulting and design for water and environmental projects, which are carrying higher margins across all of our end markets. as dan discussed earlier on this call we continue to focus on the front-end consulting and design for water and environmental projects which are carrying higher margins across all of our end markets As such, even as the 2025 revenue was up 9% over last year, our operating income and EBITDA for the year increased at higher rates of 21% and 15% respectively. These results on a year-to-date basis further support our long-term strategic goals to increase net revenue while improving EBITDA margins by 50 basis points annually. I do want to point out that the EBITDA margins on net revenue came in better and increased by over 70 basis points through the first three quarters of this year as compared to last year at this time. As a result of our ability to enhance our profit margins and further manage our working capital, we were able to increase the adjusted EBITDA or EPS by 26% over last year. As such, even as the 2025 revenue was up 9% over last year, our operating income and EBITDA for the year increased at higher rates of 21% and 15% respectively. as such even as the 2025 revenue was up 9% over last year our operating income and ebitda for the year increased at higher rates of 21% and 15% respectively These results on a year-to-date basis further support our long-term strategic goals to increase net revenue while improving EBITDA margins by 50 basis points annually. these results on a year-to-date basis further support our long-term strategic goals to increase net revenue while improving ebitda margins by 50 basis points annually I do want to point out that the EBITDA margins on net revenue came in better and increased by over 70 basis points through the first three quarters of this year as compared to last year at this time. i do want to point out that the ebitda margins on net revenue came in better and increased by over 70 basis points through the first three quarters of this year as compared to last year at this time As a result of our ability to enhance our profit margins and further manage our working capital, we were able to increase the adjusted EBITDA or EPS by 26% over last year. as a result of our ability to enhance our profit margins and further manage our working capital we were able to increase the adjusted ebitda or eps by 26% over last year On a GAAP basis, in the first half of the year, we did recognize a charge for litigation and non-cash charge relative to the goodwill impairment for our USAID reporting division. Please refer you to the appendix of this presentation and our Reg G for any reconciliation. These strong financial and operating results have resulted in a strengthening of our balance sheet and our cash flow position. Cash flows generated from operations for the trailing 12 months were $462 million, which represents a 23% improvement over the previous trailing 12 months. These cash flows have continued to exceed net income by more than 100%. Our focus on working capital and cash flows has resulted in our DSO reflecting an industry-leading standard of 56 days, which is an 11-day improvement from the second quarter of this year. Much of this improvement resulted from our collections of receivables due on USAID projects. On a GAAP basis, in the first half of the year, we did recognize a charge for litigation and non-cash charge relative to the goodwill impairment for our USAID reporting division. on a gaap basis in the first half of the year we did recognize a charge for litigation and non-cash charge relative to the goodwill impairment for our usaid reporting division Please refer you to the appendix of this presentation and our Reg G for any reconciliation. please refer you to the appendix of this presentation and our reg g for any reconciliation These strong financial and operating results have resulted in a strengthening of our balance sheet and our cash flow position. these strong financial and operating results have resulted in a strengthening of our balance sheet and our cash flow position Cash flows generated from operations for the trailing 12 months were $462 million, which represents a 23% improvement over the previous trailing 12 months. cash flows generated from operations for the trailing 12 months were $462 million which represents a 23% improvement over the previous trailing 12 months These cash flows have continued to exceed net income by more than 100%. these cash flows have continued to exceed net income by more than 100% Our focus on working capital and cash flows has resulted in our DSO reflecting an industry-leading standard of 56 days, which is an 11-day improvement from the second quarter of this year. our focus on working capital and cash flows has resulted in our dso reflecting an industry-leading standard of 56 days which is an 11-day improvement from the second quarter of this year Much of this improvement resulted from our collections of receivables due on USAID projects. much of this improvement resulted from our collections of receivables due on usaid projects When we include the current outstanding USAID receivables, our DSO is even lower at 54 days. This lower DSO metric provides significant insight into our core business as it reflects the outstanding work that our project managers lead relative to higher quality projects and highly satisfied clients in the broad portfolio across all of our end markets and all of our geographies. Our net debt amounts to about $620 million, and the net debt/EBITDA was at a leverage of 0.96x, which is lower than our leverage one year ago when it stood at 1.15x. As we continue to execute on high-quality operating results with increasing margins, operating cash flows in excess of net income, and lower working capital KPIs, we will continue to provide higher returns for our shareholders. When we include the current outstanding USAID receivables, our DSO is even lower at 54 days. when we include the current outstanding usaid receivables our dso is even lower at 54 days This lower DSO metric provides significant insight into our core business as it reflects the outstanding work that our project managers lead relative to higher quality projects and highly satisfied clients in the broad portfolio across all of our end markets and all of our geographies. this lower dso metric provides significant insight into our core business as it reflects the outstanding work that our project managers lead relative to higher quality projects and highly satisfied clients in the broad portfolio across all of our end markets and all of our geographies Our net debt amounts to about $620 million, and the net debt/EBITDA was at a leverage of 0.96 x, which is lower than our leverage one year ago when it stood at 1.15 x. our net debt amounts to about $620 million and the net debt/ebitda was at a leverage of 0.96 x which is lower than our leverage one year ago when it stood at 1.15 x As we continue to execute on high-quality operating results with increasing margins, operating cash flows in excess of net income, and lower working capital KPIs, we will continue to provide higher returns for our shareholders. as we continue to execute on high-quality operating results with increasing margins operating cash flows in excess of net income and lower working capital kpis we will continue to provide higher returns for our shareholders Those higher shareholder financial returns are reflected in an improving return on capital employed, which stands at close to about 20%, which is among the best in our industry. For those following along the presentation, I would like to now present our capital allocation overview. We have a very strong balance sheet, probably the strongest balance sheet in our history, with over $1 billion in available liquidity as we've revised our capital structure in the last year to take advantage of the credit market to support our strategic growth opportunities. Those higher shareholder financial returns are reflected in an improving return on capital employed, which stands at close to about 20%, which is among the best in our industry. those higher shareholder financial returns are reflected in an improving return on capital employed which stands at close to about 20% which is among the best in our industry For those following along the presentation, I would like to now present our capital allocation overview. for those following along the presentation i would like to now present our capital allocation overview We have a very strong balance sheet, probably the strongest balance sheet in our history, with over $1 billion in available liquidity as we've revised our capital structure in the last year to take advantage of the credit market to support our strategic growth opportunities. we have a very strong balance sheet probably the strongest balance sheet in our history with over $1 billion in available liquidity as we've revised our capital structure in the last year to take advantage of the credit market to support our strategic growth opportunities Leslie will discuss those strategic growth areas later in the presentation, but I do want to point out that we have a significant amount in liquidity available to invest in organic and acquisitive growth priorities, and we have a well-balanced mix of both fixed and floating rate debt to mitigate any interest rate risk and take advantage of any opportunities there. Regarding our dividend program, I want to announce that our board of directors approved a 6.5% dividend, which is a 12% increase year-over-year to be paid in the fourth quarter. This is our 41st consecutive quarterly dividend with annual double-digit increases in the amounts paid. Based on the lower leverage that I just talked about, we did reinstitute our stock buyback program this year. Leslie will discuss those strategic growth areas later in the presentation, but I do want to point out that we have a significant amount in liquidity available to invest in organic and acquisitive growth priorities, and we have a well-balanced mix of both fixed and floating rate debt to mitigate any interest rate risk and take advantage of any opportunities there. leslie will discuss those strategic growth areas later in the presentation but i do want to point out that we have a significant amount in liquidity available to invest in organic and acquisitive growth priorities and we have a well-balanced mix of both fixed and floating rate debt to mitigate any interest rate risk and take advantage of any opportunities there Regarding our dividend program, I want to announce that our board of directors approved a 6.5% dividend, which is a 12% increase year-over-year to be paid in the fourth quarter. regarding our dividend program i want to announce that our board of directors approved a 6.5% dividend which is a 12% increase year-over-year to be paid in the fourth quarter This is our 41st consecutive quarterly dividend with annual double-digit increases in the amounts paid. this is our 41st consecutive quarterly dividend with annual double-digit increases in the amounts paid Based on the lower leverage that I just talked about, we did reinstitute our stock buyback program this year. based on the lower leverage that i just talked about we did reinstitute our stock buyback program this year So far, in 2025, we have bought back a total of $200 million, which includes $25 million in stock buybacks for the third quarter. We have $648 million available from the stock buyback plans approved by our board of directors as part of our capital allocation strategy. In conclusion, I'm really pleased to share these financial results so far in fiscal 2025. Thank you for your support, and I will now hand the call over to Leslie to discuss Tetra Tech's future opportunities for the rest of 2025 and beyond. Leslie? So far, in 2025, we have bought back a total of $200 million, which includes $25 million in stock buybacks for the third quarter. so far in 2025 we have bought back a total of $200 million which includes $25 million in stock buybacks for the third quarter We have $648 million available from the stock buyback plans approved by our board of directors as part of our capital allocation strategy. we have $648 million available from the stock buyback plans approved by our board of directors as part of our capital allocation strategy In conclusion, I'm really pleased to share these financial results so far in fiscal 2025. in conclusion i'm really pleased to share these financial results so far in fiscal 2025 Thank you for your support, and I will now hand the call over to Leslie to discuss Tetra Tech's future opportunities for the rest of 2025 and beyond. thank you for your support and i will now hand the call over to leslie to discuss tetra tech's future opportunities for the rest of 2025 and beyond Leslie? leslie

Speaker 5: Thank you, Steve. The U.S. federal government spending is realigned each time a new administration is put in place. In the first year of a new administration, new leadership is appointed, and often the most significant legislation is passed. It does take time for these changes to percolate through government policies and contracts. Since January, we've seen significant changes in funding priorities, changes in contracting practices, restructuring of entire agencies, and the passage of the One Big Beautiful Bill Act, or OBBBA. The new bill just signed on July 4th sets out the administration's new vision and clearly defines new funding for priority programs. The bill and subsequent executive orders do include significant actions that could adversely impact our renewable energy business. We see clear opportunities that are in Tetra Tech's wheelhouse. I would like to highlight just three areas of particular relevance to us. Thank you, Steve. thank you steve The U.S. federal government spending is realigned each time a new administration is put in place. the u.s federal government spending is realigned each time a new administration is put in place In the first year of a new administration, new leadership is appointed, and often the most significant legislation is passed. in the first year of a new administration new leadership is appointed and often the most significant legislation is passed It does take time for these changes to percolate through government policies and contracts. it does take time for these changes to percolate through government policies and contracts Since January, we've seen significant changes in funding priorities, changes in contracting practices, restructuring of entire agencies, and the passage of the One Big Beautiful Bill Act, or OBBBA. since january we've seen significant changes in funding priorities changes in contracting practices restructuring of entire agencies and the passage of the one big beautiful bill act or obbba The new bill just signed on July 4th sets out the administration's new vision and clearly defines new funding for priority programs. the new bill just signed on july 4th sets out the administration's new vision and clearly defines new funding for priority programs The bill and subsequent executive orders do include significant actions that could adversely impact our renewable energy business. the bill and subsequent executive orders do include significant actions that could adversely impact our renewable energy business We see clear opportunities that are in Tetra Tech's wheelhouse. we see clear opportunities that are in tetra tech's wheelhouse I would like to highlight just three areas of particular relevance to us. i would like to highlight just three areas of particular relevance to us The bill identifies increases in defense spending of $150 billion, likely to be further augmented by increases in the 2026 budget. The focus on the upgrade of defense facilities aligns with our differentiated services, especially in resilient design, high-performance buildings, and automated inspections and asset management. A generational increase of $25 billion is also included for the Coast Guard. We can quickly ramp up to expand our current work for the Coast Guard in software solutions that they use for emergency responders and coastal monitoring today, as well as support an increase in the evaluation, planning, and design of marine infrastructure. Finally, the bill includes initial funding of $12.5 billion to upgrade our air traffic control systems. The bill identifies increases in defense spending of $150 billion, likely to be further augmented by increases in the 2026 budget. the bill identifies increases in defense spending of $150 billion likely to be further augmented by increases in the 2026 budget The focus on the upgrade of defense facilities aligns with our differentiated services, especially in resilient design, high-performance buildings, and automated inspections and asset management. the focus on the upgrade of defense facilities aligns with our differentiated services especially in resilient design high-performance buildings and automated inspections and asset management A generational increase of $25 billion is also included for the Coast Guard. a generational increase of $25 billion is also included for the coast guard We can quickly ramp up to expand our current work for the Coast Guard in software solutions that they use for emergency responders and coastal monitoring today, as well as support an increase in the evaluation, planning, and design of marine infrastructure. we can quickly ramp up to expand our current work for the coast guard in software solutions that they use for emergency responders and coastal monitoring today as well as support an increase in the evaluation planning and design of marine infrastructure Finally, the bill includes initial funding of $12.5 billion to upgrade our air traffic control systems. finally the bill includes initial funding of $12.5 billion to upgrade our air traffic control systems This is where Tetra Tech currently holds over $1.5 billion in Federal Aviation Administration capacity and is one of the leading experts in air traffic control, including the ongoing evaluation of new and emerging technologies. I'd now like to cover just a few recent developments in our digital automation sector. We started the Digital Water Initiative at Tetra Tech in 2021, and since then, we've added five firms with specialized expertise in the field of automation. These are firms that work in connecting the instruments, technology, and systems that are needed for the digital transformations of utilities and industry. Today, we're seeing some of the fastest growth in this sector, catalyzed by the increasingly affordable access to generative AI that's used to rapidly interpret information, optimize our client systems, and actually work in real time. This is where Tetra Tech currently holds over $1.5 billion in Federal Aviation Administration capacity and is one of the leading experts in air traffic control, including the ongoing evaluation of new and emerging technologies. this is where tetra tech currently holds over $1.5 billion in federal aviation administration capacity and is one of the leading experts in air traffic control including the ongoing evaluation of new and emerging technologies I'd now like to cover just a few recent developments in our digital automation sector. i'd now like to cover just a few recent developments in our digital automation sector We started the Digital Water Initiative at Tetra Tech in 2021, and since then, we've added five firms with specialized expertise in the field of automation. we started the digital water initiative at tetra tech in 2021 and since then we've added five firms with specialized expertise in the field of automation These are firms that work in connecting the instruments, technology, and systems that are needed for the digital transformations of utilities and industry. these are firms that work in connecting the instruments technology and systems that are needed for the digital transformations of utilities and industry Today, we're seeing some of the fastest growth in this sector, catalyzed by the increasingly affordable access to generative AI that's used to rapidly interpret information, optimize our client systems, and actually work in real time. today we're seeing some of the fastest growth in this sector catalyzed by the increasingly affordable access to generative ai that's used to rapidly interpret information optimize our client systems and actually work in real time Growth projections for this market, also referred to as the new industrial revolution or Industry 4.0, are for global expansion to reach over $600 billion by 2030 at a 20% CAGR. From our initial vision to focus on water utilities, which is really the majority of our work today, we've now added work for our commercial clients in oil and gas, mining, and manufacturing. Through the recent acquisition of Sage Automation, we now have significantly broader global resources, we've further diversified our clients, and we've added new software and intellectual property. Today, we're cross-selling digital automation to our global customers and broadening our reach in this rapidly growing market that's fueled by the adoption of AI that directly benefits our customers' bottom line. The trends we're seeing support our growth plan to reach $500 million in annual revenues for digital automation by 2030. Growth projections for this market, also referred to as the new industrial revolution or Industry 4.0, are for global expansion to reach over $600 billion by 2030 at a 20% CAGR. growth projections for this market also referred to as the new industrial revolution or industry 4.0 are for global expansion to reach over $600 billion by 2030 at a 20% cagr From our initial vision to focus on water utilities, which is really the majority of our work today, we've now added work for our commercial clients in oil and gas, mining, and manufacturing. from our initial vision to focus on water utilities which is really the majority of our work today we've now added work for our commercial clients in oil and gas mining and manufacturing Through the recent acquisition of Sage Automation, we now have significantly broader global resources, we've further diversified our clients, and we've added new software and intellectual property. through the recent acquisition of sage automation we now have significantly broader global resources we've further diversified our clients and we've added new software and intellectual property Today, we're cross-selling digital automation to our global customers and broadening our reach in this rapidly growing market that's fueled by the adoption of AI that directly benefits our customers' bottom line. today we're cross-selling digital automation to our global customers and broadening our reach in this rapidly growing market that's fueled by the adoption of ai that directly benefits our customers' bottom line The trends we're seeing support our growth plan to reach $500 million in annual revenues for digital automation by 2030. the trends we're seeing support our growth plan to reach $500 million in annual revenues for digital automation by 2030 I'd like to turn the presentation back over to Dan. I'd like to turn the presentation back over to Dan. i'd like to turn the presentation back over to dan

Speaker 1: Thank you, Leslie. I would now like to present our guidance for the fourth quarter and next year updated guidance for the entirety of fiscal year 2025. Our guidance is as follows. For Q4, fourth quarter fiscal year 2025, our net revenue guidance is for a range of $1 billion-$1.1 billion, with an associated earnings per share of $0.38-$0.43. Our updated guidance for the entire year is for a net revenue range of $4.454 billion-$4.554 billion, with an associated adjusted earnings per share of $1.49-$1.54. We do have the assumptions for our fourth quarter items included in the webcast and on the slide, but I will make a note. We do anticipate a contribution of work from USAID and Department of State of approximately $40 million-$50 million, which is actually down from what we had anticipated just a quarter ago. Thank you, Leslie. thank you leslie I would now like to present our guidance for the fourth quarter and next year updated guidance for the entirety of fiscal year 2025. i would now like to present our guidance for the fourth quarter and next year updated guidance for the entirety of fiscal year 2025 Our guidance is as follows. our guidance is as follows For Q4, fourth quarter fiscal year 2025, our net revenue guidance is for a range of $1 billion- $1.1 billion, with an associated earnings per share of $0.38- $0.43. for q4 fourth quarter fiscal year 2025 our net revenue guidance is for a range of $1 billion- $1.1 billion with an associated earnings per share of $0.38- $0.43 Our updated guidance for the entire year is for a net revenue range of $4.454 billion -$4.554 billion, with an associated adjusted earnings per share of $1.49- $1.54. our updated guidance for the entire year is for a net revenue range of $4.454 billion -$4.554 billion with an associated adjusted earnings per share of $1.49- $1.54 We do have the assumptions for our fourth quarter items included in the webcast and on the slide, but I will make a note. we do have the assumptions for our fourth quarter items included in the webcast and on the slide but i will make a note We do anticipate a contribution of work from USAID and Department of State of approximately $40 million -$50 million, which is actually down from what we had anticipated just a quarter ago. we do anticipate a contribution of work from usaid and department of state of approximately $40 million -$50 million which is actually down from what we had anticipated just a quarter ago This is continuing to ramp down as an overall contribution to our revenues here at Tetra Tech. In summary, this morning, after nine months of fiscal year 2025, we've got three quarters through, and six months under this new administration, which included the elimination of our largest client, USAID, our revenues up, and we just delivered the highest income quarter in the company's history. Although there's near-term uncertainty in some of our end markets, we're well prepared to navigate these through our diversified services, through our contract capacity, and by using our balance sheet to be very opportunistic in many different strategic areas. Some of those areas include acquisitions, and Steve has indicated during his commentary, the buildup of cash can also be used to continue stock buybacks, which is another way of returning value to our shareholders. This is continuing to ramp down as an overall contribution to our revenues here at Tetra Tech. this is continuing to ramp down as an overall contribution to our revenues here at tetra tech In summary, this morning, after nine months of fiscal year 2025, we've got three quarters through, and six months under this new administration, which included the elimination of our largest client, USAID, our revenues up, and we just delivered the highest income quarter in the company's history. in summary this morning after nine months of fiscal year 2025 we've got three quarters through and six months under this new administration which included the elimination of our largest client usaid our revenues up and we just delivered the highest income quarter in the company's history Although there's near-term uncertainty in some of our end markets, we're well prepared to navigate these through our diversified services, through our contract capacity, and by using our balance sheet to be very opportunistic in many different strategic areas. although there's near-term uncertainty in some of our end markets we're well prepared to navigate these through our diversified services through our contract capacity and by using our balance sheet to be very opportunistic in many different strategic areas Some of those areas include acquisitions, and Steve has indicated during his commentary, the buildup of cash can also be used to continue stock buybacks, which is another way of returning value to our shareholders. some of those areas include acquisitions and steve has indicated during his commentary the buildup of cash can also be used to continue stock buybacks which is another way of returning value to our shareholders There is no doubt that the long-term demand and necessity for high-end water, environment, and sustainable infrastructure is unchanged, and the future looks very bright for us. I would like to open the call for questions. Kate. There is no doubt that the long-term demand and necessity for high-end water, environment, and sustainable infrastructure is unchanged, and the future looks very bright for us. there is no doubt that the long-term demand and necessity for high-end water environment and sustainable infrastructure is unchanged and the future looks very bright for us I would like to open the call for questions. i would like to open the call for questions Kate. kate

Speaker 6: Thank you. The question-and-answer session will begin now. Please be aware that there will be a 30-second pause in our webcast to allow for buffering. At this time, audio participants are invited to submit their questions. 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'd like to ask a question, please press star one on your touchtone phone. The first question comes from the line of Tim Mulrooney with William Blair. Please proceed with your question. Thank you. thank you The question -and -answer session will begin now. the question -and -answer session will begin now Please be aware that there will be a 30-second pause in our webcast to allow for buffering. please be aware that there will be a 30-second pause in our webcast to allow for buffering At this time, audio participants are invited to submit their questions. at this time audio participants are invited to submit their questions Please remember to mute the audio function on your computer before you speak. 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 are using a speakerphone please pick up the handset before pressing any numbers If you'd like to ask a question, please press star one on your touchtone phone. if you'd like to ask a question please press star one on your touchtone phone The first question comes from the line of Tim Mulrooney with William Blair. the first question comes from the line of tim mulrooney with william blair Please proceed with your question. please proceed with your question

Speaker 3: Dan, Steve, Leslie, good morning. Dan, Steve, Leslie, good morning. dan steve leslie good morning

Speaker 1: Good morning. Good morning. good morning

Speaker 3: Two questions here on the backlog. Firstly, can you just dig into the backlog a little bit more? I mean, it looks like it was essentially flat year-over-year, excluding USAID and the Department of State. Are there things happening here on the federal government side where the cadence is a bit different than what you'd normally see? I'm curious if we should be thinking about the slowdown in backlog growth as being indicative of slower revenue growth, or maybe if the procurement cycle has just shifted somewhat, as maybe the agencies are taking a little bit longer to send out the RFPs or task orders. Two questions here on the backlog. two questions here on the backlog Firstly, can you just dig into the backlog a little bit more? firstly can you just dig into the backlog a little bit more I mean, it looks like it was essentially flat year-over-year, excluding USAID and the Department of State. i mean it looks like it was essentially flat year-over-year excluding usaid and the department of state Are there things happening here on the federal government side where the cadence is a bit different than what you'd normally see? are there things happening here on the federal government side where the cadence is a bit different than what you'd normally see I'm curious if we should be thinking about the slowdown in backlog growth as being indicative of slower revenue growth, or maybe if the procurement cycle has just shifted somewhat, as maybe the agencies are taking a little bit longer to send out the RFPs or task orders. i'm curious if we should be thinking about the slowdown in backlog growth as being indicative of slower revenue growth or maybe if the procurement cycle has just shifted somewhat as maybe the agencies are taking a little bit longer to send out the rfps or task orders

Speaker 1: That's a good observation and a good question, Tim. There's two aspects with respect to the work that we do for the federal government. I would say that over this last quarter, one area we've not seen a change in is the cadence and timing and issuance of contracts. As I commented in my prepared remarks, our backlog with the federal government increased by nearly $2 billion. The actual issuance of contracts, scope of work, really none of that has seen any changes from what we anticipated and what we've seen earlier in the year, and frankly, from even prior to this administration. What we have seen a difference in is actually the conversion of the contracts to issuance of task orders that go into our backlog. I think part of this is actually an artifact of Tetra Tech itself. That's a good observation and a good question, Tim. that's a good observation and a good question tim There's two aspects with respect to the work that we do for the federal government. there's two aspects with respect to the work that we do for the federal government I would say that over this last quarter, one area we've not seen a change in is the cadence and timing and issuance of contracts. i would say that over this last quarter one area we've not seen a change in is the cadence and timing and issuance of contracts As I commented in my prepared remarks, our backlog with the federal government increased by nearly $2 billion. as i commented in my prepared remarks our backlog with the federal government increased by nearly $2 billion The actual issuance of contracts, scope of work, really none of that has seen any changes from what we anticipated and what we've seen earlier in the year, and frankly, from even prior to this administration. the actual issuance of contracts scope of work really none of that has seen any changes from what we anticipated and what we've seen earlier in the year and frankly from even prior to this administration What we have seen a difference in is actually the conversion of the contracts to issuance of task orders that go into our backlog. what we have seen a difference in is actually the conversion of the contracts to issuance of task orders that go into our backlog I think part of this is actually an artifact of Tetra Tech itself. i think part of this is actually an artifact of tetra tech itself We do only report our backlog if we have a contract, which we've seen those announcements, but they funded it, which they have the funding for it from Congress with the bill, and then they've actually authorized us to go to work. That's initiated the activities in the field. What we have seen is there's been a lot of early retirements, people downsizing different departments within the government, and that has included a lot of senior individuals in the contracting officer ranks. We've seen a slowdown between contract issuance and task order delivery. Many of our peers and others that work for the government report their backlog differently than Tetra Tech. They actually have what they call a hard backlog, which would be ours, our funded backlog, funded and authorized, and then they also include a percentage of the amount of the contract that's issued. We do only report our backlog if we have a contract, which we've seen those announcements, but they funded it, which they have the funding for it from Congress with the bill, and then they've actually authorized us to go to work. we do only report our backlog if we have a contract which we've seen those announcements but they funded it which they have the funding for it from congress with the bill and then they've actually authorized us to go to work That's initiated the activities in the field. that's initiated the activities in the field What we have seen is there's been a lot of early retirements, people downsizing different departments within the government, and that has included a lot of senior individuals in the contracting officer ranks. what we have seen is there's been a lot of early retirements people downsizing different departments within the government and that has included a lot of senior individuals in the contracting officer ranks We've seen a slowdown between contract issuance and task order delivery. we've seen a slowdown between contract issuance and task order delivery Many of our peers and others that work for the government report their backlog differently than Tetra Tech. many of our peers and others that work for the government report their backlog differently than tetra tech They actually have what they call a hard backlog, which would be ours, our funded backlog, funded and authorized, and then they also include a percentage of the amount of the contract that's issued. they actually have what they call a hard backlog which would be ours our funded backlog funded and authorized and then they also include a percentage of the amount of the contract that's issued In fact, if we did that, you'd see our backlog actually reporting significant increases associated with the issuance of these contract vehicles. We have always held ourselves to an unusually, in fact, uniquely high standard on these, and we've seen that slow down through the changes with this new administration. You really do need all of the contracting officers and all of the different mechanisms in place to make that work smoothly. I think what it means, I don't think that the contract capacity is an issue. I don't think that the existing task orders we have in hand will, at least from our perspective now, have an impact on our revenue. It's just that there'll be shorter visibility with respect to how far out you see with the task orders through this new environment. This is something that is different. We're about a month into our fourth quarter. In fact, if we did that, you'd see our backlog actually reporting significant increases associated with the issuance of these contract vehicles. in fact if we did that you'd see our backlog actually reporting significant increases associated with the issuance of these contract vehicles We have always held ourselves to an unusually, in fact, uniquely high standard on these, and we've seen that slow down through the changes with this new administration. we have always held ourselves to an unusually in fact uniquely high standard on these and we've seen that slow down through the changes with this new administration You really do need all of the contracting officers and all of the different mechanisms in place to make that work smoothly. you really do need all of the contracting officers and all of the different mechanisms in place to make that work smoothly I think what it means, I don't think that the contract capacity is an issue. i think what it means i don't think that the contract capacity is an issue I don't think that the existing task orders we have in hand will, at least from our perspective now, have an impact on our revenue. i don't think that the existing task orders we have in hand will at least from our perspective now have an impact on our revenue It's just that there'll be shorter visibility with respect to how far out you see with the task orders through this new environment. it's just that there'll be shorter visibility with respect to how far out you see with the task orders through this new environment This is something that is different. this is something that is different We're about a month into our fourth quarter. we're about a month into our fourth quarter One thing I'll note is that as long as I've been with the company, which goes back quite a while, when the federal government, the fourth quarter has always been an issuance quarter for the government. It's the end of their fiscal year. There's a bit of use it or lose it. Anything that wasn't expended earlier, they issue and push out. I'll tell you, we're a month in and we're not seeing that phenomenon or that annual seasonal distribution. It does look like this is going to be more of a book and burn issuance on task orders from the federal government. Maybe we'll have a better view on that at the end of the fourth quarter. Issuance and the growth of the backlog may actually be less, but not affecting the revenue that's coming out of the contracts that we have. One thing I'll note is that as long as I've been with the company, which goes back quite a while, when the federal government, the fourth quarter has always been an issuance quarter for the government. one thing i'll note is that as long as i've been with the company which goes back quite a while when the federal government the fourth quarter has always been an issuance quarter for the government It's the end of their fiscal year. it's the end of their fiscal year There's a bit of use it or lose it. there's a bit of use it or lose it Anything that wasn't expended earlier, they issue and push out. anything that wasn't expended earlier they issue and push out I'll tell you, we're a month in and we're not seeing that phenomenon or that annual seasonal distribution. i'll tell you we're a month in and we're not seeing that phenomenon or that annual seasonal distribution It does look like this is going to be more of a book and burn issuance on task orders from the federal government. it does look like this is going to be more of a book and burn issuance on task orders from the federal government Maybe we'll have a better view on that at the end of the fourth quarter. maybe we'll have a better view on that at the end of the fourth quarter Issuance and the growth of the backlog may actually be less, but not affecting the revenue that's coming out of the contracts that we have. issuance and the growth of the backlog may actually be less but not affecting the revenue that's coming out of the contracts that we have I know that's a long explanation, but it's a big part of the business. I want to put in context before we get to the end of the fourth quarter what we are seeing today and what it might look like at the end of the quarter. I know that's a long explanation, but it's a big part of the business. i know that's a long explanation but it's a big part of the business I want to put in context before we get to the end of the fourth quarter what we are seeing today and what it might look like at the end of the quarter. i want to put in context before we get to the end of the fourth quarter what we are seeing today and what it might look like at the end of the quarter

Speaker 3: No, that's really helpful color. Dan, thank you for all that detail. I mean, it sounds like you're not checking more than $2 billion for the federal government. Your task cadence is very much still intact. It's just about the conversion into task orders, which sounds more like, to me, a push-out rather than anything being lost here. That was a really good color. I appreciate that. As my follow-up thing with the backlog, I'm curious how you see the profile of your backlog today relative to. No, that's really helpful color. no that's really helpful color Dan, thank you for all that detail. dan thank you for all that detail I mean, it sounds like you're not checking more than $2 billion for the federal government. i mean it sounds like you're not checking more than $2 billion for the federal government Your task cadence is very much still intact. your task cadence is very much still intact It's just about the conversion into task orders, which sounds more like, to me, a push-out rather than anything being lost here. it's just about the conversion into task orders which sounds more like to me a push-out rather than anything being lost here That was a really good color. that was a really good color I appreciate that. i appreciate that As my follow-up thing with the backlog, I'm curious how you see the profile of your backlog today relative to. as my follow-up thing with the backlog i'm curious how you see the profile of your backlog today relative to

Speaker 1: Operator, Kate, I think we may have had a bit of an interruption on this last question. Operator, Kate, I think we may have had a bit of an interruption on this last question. operator kate i think we may have had a bit of an interruption on this last question

Speaker 3: Dan, can you hear me okay? Dan, can you hear me okay? dan can you hear me okay

Speaker 1: I've got you loud and clear, Tim. I hear you quite clearly now. I've got you loud and clear, Tim. i've got you loud and clear tim I hear you quite clearly now. i hear you quite clearly now

Speaker 3: Okay. I apologize about that. Just my follow-up question was just simply how you think about the margin profile of your backlog today relative to where it was this time last year, excluding USAID and Department of State. Thank you. Okay. okay i I apologize about that. i apologize about that Just my follow-up question was just simply how you think about the margin profile of your backlog today relative to where it was this time last year, excluding USAID and Department of State. just my follow-up question was just simply how you think about the margin profile of your backlog today relative to where it was this time last year excluding usaid and department of state Thank you. thank you

Speaker 1: Great, great question. You know, one plan we went into a fair amount of detail in actually our investor day, which was just a little bit over a year ago, so a year ago May. We'd actually talked about a long-term goal of increasing our margins by 50 basis points per year. That was exclusive of aid. We didn't anticipate that aid would have contributed any increase. We're actually seeing that. In fact, we're seeing it a little bit, you know, even slightly above that level. The reasoning is two items that are driving that. Number one, we're actually looking to shift the business to higher value services that we're providing to our clients. We're moving more to the front end. We're moving more to consulting, more to qualifications-based. Great, great question. great great question You know, one plan we went into a fair amount of detail in actually our investor day, which was just a little bit over a year ago, so a year ago May. you know one plan we went into a fair amount of detail in actually our investor day which was just a little bit over a year ago so a year ago may We'd actually talked about a long-term goal of increasing our margins by 50 basis points per year. we'd actually talked about a long-term goal of increasing our margins by 50 basis points per year That was exclusive of aid. that was exclusive of aid We didn't anticipate that aid would have contributed any increase. we didn't anticipate that aid would have contributed any increase We're actually seeing that. we're actually seeing that In fact, we're seeing it a little bit, you know, even slightly above that level. in fact we're seeing it a little bit you know even slightly above that level The reasoning is two items that are driving that. the reasoning is two items that are driving that Number one, we're actually looking to shift the business to higher value services that we're providing to our clients. number one we're actually looking to shift the business to higher value services that we're providing to our clients We're moving more to the front end. we're moving more to the front end We're moving more to consulting, more to qualifications-based. we're moving more to consulting more to qualifications-based We're moving that upfront portion of the business that we have and shifting the mix to a higher value delivery, which actually carries higher margins in and of itself. The second piece is our fixed price. We are increasing the percentage of fixed price work we have within the company, which actually carries higher margin. Embedded in our backlog, it actually is increasing and is supportive of that 50 basis points per year or more target of margin expansion. It needs to be put into the bids or the types of rates that we put to our clients in the backlog before it converts to earnings and margin expansion. That's what's happening right now. Yes, it's for those two reasons: changing contract type to fixed price and services provided, which is moving to even higher value services that we're providing to our clients. We're moving that upfront portion of the business that we have and shifting the mix to a higher value delivery, which actually carries higher margins in and of itself. we're moving that upfront portion of the business that we have and shifting the mix to a higher value delivery which actually carries higher margins in and of itself The second piece is our fixed price. the second piece is our fixed price We are increasing the percentage of fixed price work we have within the company, which actually carries higher margin. we are increasing the percentage of fixed price work we have within the company which actually carries higher margin Embedded in our backlog, it actually is increasing and is supportive of that 50 basis points per year or more target of margin expansion. embedded in our backlog it actually is increasing and is supportive of that 50 basis points per year or more target of margin expansion It needs to be put into the bids or the types of rates that we put to our clients in the backlog before it converts to earnings and margin expansion. it needs to be put into the bids or the types of rates that we put to our clients in the backlog before it converts to earnings and margin expansion That's what's happening right now. that's what's happening right now Yes, it's for those two reasons: changing contract type to fixed price and services provided, which is moving to even higher value services that we're providing to our clients. yes it's for those two reasons changing contract type to fixed price and services provided which is moving to even higher value services that we're providing to our clients

Speaker 3: Got it. Thank you. Got it. got it Thank you. thank you

Speaker 1: Thank you very much, Tim. Thank you very much, Tim. thank you very much tim

Speaker 6: Thank you. Our next question comes from the line of Sangita Jain with KeyBanc Capital Markets. Please proceed with your question. Thank you. thank you Our next question comes from the line of Sangita Jain with KeyBanc Capital Markets. our next question comes from the line of sangita jain with keybanc capital markets Please proceed with your question. please proceed with your question

Speaker 8: Thank you so much for taking my question. Dan, if I can ask you on the previous question about the book and burn cadence of the federal work right now, based on your experience, how does that set you up for 2026? Do you think there's going to be pent-up orders coming, or do you think it's going to be a continuation of this book and burn type situation? Thank you so much for taking my question. thank you so much for taking my question Dan, if I can ask you on the previous question about the book and burn cadence of the federal work right now, based on your experience, how does that set you up for 2026? dan if i can ask you on the previous question about the book and burn cadence of the federal work right now based on your experience how does that set you up for 2026 Do you think there's going to be pent-up orders coming, or do you think it's going to be a continuation of this book and burn type situation? do you think there's going to be pent-up orders coming or do you think it's going to be a continuation of this book and burn type situation

Speaker 1: That's a great question. At this moment, as of this call, I would tell you it looks like it's going to be more of a book and burn. I think that the items that have to be put in place for some of these agencies don't happen in a day or a week, not even maybe even a month. We're only talking 60 days between now and the end of our fiscal year. As I take a look at how we would finish this quarter and likely enter 2026, it does feel like it's going to be more of a book and burn on the federal government side than we've seen before. As many things I get to learn through continuing learning, maybe that'll be quite different and happen differently than we anticipate. I would say we anticipate that it'll be more of a book and burn. That's a great question. that's a great question At this moment, as of this call, I would tell you it looks like it's going to be more of a book and burn. at this moment as of this call i would tell you it looks like it's going to be more of a book and burn I think that the items that have to be put in place for some of these agencies don't happen in a day or a week, not even maybe even a month. i think that the items that have to be put in place for some of these agencies don't happen in a day or a week not even maybe even a month We're only talking 60 days between now and the end of our fiscal year. we're only talking 60 days between now and the end of our fiscal year As I take a look at how we would finish this quarter and likely enter 2026, it does feel like it's going to be more of a book and burn on the federal government side than we've seen before. as i take a look at how we would finish this quarter and likely enter 2026 it does feel like it's going to be more of a book and burn on the federal government side than we've seen before As many things I get to learn through continuing learning, maybe that'll be quite different and happen differently than we anticipate. as many things i get to learn through continuing learning maybe that'll be quite different and happen differently than we anticipate I would say we anticipate that it'll be more of a book and burn. i would say we anticipate that it'll be more of a book and burn We could easily see the backlog being flat to Q4 is a big quarter for us. It's even conceivable that you'd have a decline in the backlog at the end of the fourth quarter, but not impact our outlook for revenue. It just will have a little bit less visibility on how far out you can see. We could easily see the backlog being flat to Q4 is a big quarter for us. we could easily see the backlog being flat to q4 is a big quarter for us It's even conceivable that you'd have a decline in the backlog at the end of the fourth quarter, but not impact our outlook for revenue. it's even conceivable that you'd have a decline in the backlog at the end of the fourth quarter but not impact our outlook for revenue It just will have a little bit less visibility on how far out you can see. it just will have a little bit less visibility on how far out you can see

Speaker 8: I did appreciate that. Just a kind of housekeeping question. How should we think about disaster recovery revenue in fiscal fourth quarter? I did appreciate that. i did appreciate that Just a kind of housekeeping question. just a kind of housekeeping question How should we think about disaster recovery revenue in fiscal fourth quarter? how should we think about disaster recovery revenue in fiscal fourth quarter

Speaker 1: For the communities, it's a really good story. We've largely completed the support work of recoveries down in the flooded and impacted areas in Florida, Georgia, and the Carolinas. We'd see that as essentially over. I will say that the long-term target, or the initial target, I should say, was to have the fire clearance of all debris and materials for rebuilding to start. The original target was to have it all finished in a year. Thanks to the US Army Corps of Engineers, phenomenal leaders at the Corps, and of course, the cities and the State of California and the cities there, most of that work's all been completed here by the end of July, essentially now. I expect it to be very minimal contribution in the fourth quarter for those two events. For the communities, it's a really good story. for the communities it's a really good story We've largely completed the support work of recoveries down in the flooded and impacted areas in Florida, Georgia, and the Carolinas. we've largely completed the support work of recoveries down in the flooded and impacted areas in florida georgia and the carolinas We'd see that as essentially over. we'd see that as essentially over I will say that the long-term target, or the initial target, I should say, was to have the fire clearance of all debris and materials for rebuilding to start. i will say that the long-term target or the initial target i should say was to have the fire clearance of all debris and materials for rebuilding to start The original target was to have it all finished in a year. the original target was to have it all finished in a year Thanks to the US Army Corps of Engineers, phenomenal leaders at the Corps, and of course, the cities and the State of California and the cities there, most of that work's all been completed here by the end of July, essentially now. thanks to the us army corps of engineers phenomenal leaders at the corps and of course the cities and the state of california and the cities there most of that work's all been completed here by the end of july essentially now I expect it to be very minimal contribution in the fourth quarter for those two events. i expect it to be very minimal contribution in the fourth quarter for those two events It's early, but we haven't included in our guidance much contribution from what we'd call these response activities. We do have plenty of design work and planning work for emergency activities that'll continue, but we'd say that's relatively consistent year-over-year. For this episodic, it should be quite minimal in the fourth quarter. It's early, but we haven't included in our guidance much contribution from what we'd call these response activities. it's early but we haven't included in our guidance much contribution from what we'd call these response activities We do have plenty of design work and planning work for emergency activities that'll continue, but we'd say that's relatively consistent year-over-year. we do have plenty of design work and planning work for emergency activities that'll continue but we'd say that's relatively consistent year-over-year For this episodic, it should be quite minimal in the fourth quarter. for this episodic it should be quite minimal in the fourth quarter

Speaker 8: Appreciate that. Thank you, Dan. Appreciate that. appreciate that Thank you, Dan. thank you dan

Speaker 1: Yeah, thank you, Sangita. Yeah, thank you, Sangita. yeah thank you sangita

Speaker 6: Our next question comes from the line of Sabahat Khan with RBC Capital Markets. Please proceed with your question. Our next question comes from the line of Sabahat Khan with RBC Capital Markets. our next question comes from the line of sabahat khan with rbc capital markets Please proceed with your question. please proceed with your question

Speaker 4: Great. Thanks, and good morning. You provided quite a bit of color through the slides on some of the demand drivers here, but we've been getting a lot of questions within this sort of volatile backdrop. Kind of what is the water market growth relative to infrastructure? Hoping maybe to give you an opportunity to maybe just lay out some of the drivers across the U.S., UK, and Australia that you're seeing broadly across commercial and federal within the specific end markets that you're playing in and more around how do the rates of growth in water demand maybe compare to underlying infrastructure demand? Any color would be great. Thanks. Great. great Thanks, and good morning. thanks and good morning You provided quite a bit of color through the slides on some of the demand drivers here, but we've been getting a lot of questions within this sort of volatile backdrop. you provided quite a bit of color through the slides on some of the demand drivers here but we've been getting a lot of questions within this sort of volatile backdrop Kind of what is the water market growth relative to infrastructure? kind of what is the water market growth relative to infrastructure Hoping maybe to give you an opportunity to maybe just lay out some of the drivers across the U.S., UK, and Australia that you're seeing broadly across commercial and federal within the specific end markets that you're playing in and more around how do the rates of growth in water demand maybe compare to underlying infrastructure demand? hoping maybe to give you an opportunity to maybe just lay out some of the drivers across the u.s uk and australia that you're seeing broadly across commercial and federal within the specific end markets that you're playing in and more around how do the rates of growth in water demand maybe compare to underlying infrastructure demand Any color would be great. any color would be great Thanks. thanks

Speaker 1: I think partly one of the best indicative end markets for us for water infrastructure is really our state and local work. That's mostly for upgrading or new water treatment plants for delivery, wastewater treatment, and in some instances, coastal protection. A lot of it comes from our state and local clients. We've historically indicated a range of 10%-15%, and I don't know how many quarters in a row we've now been well north of that this last quarter. If you take out the special disaster response activities that are funded by our state and local clients, we're still just under 20%. So 18% is essentially a very similar number to the prior quarter. I know many have asked me, isn't the real number closer to 20%? I think partly one of the best indicative end markets for us for water infrastructure is really our state and local work. i think partly one of the best indicative end markets for us for water infrastructure is really our state and local work That's mostly for upgrading or new water treatment plants for delivery, wastewater treatment, and in some instances, coastal protection. that's mostly for upgrading or new water treatment plants for delivery wastewater treatment and in some instances coastal protection A lot of it comes from our state and local clients. a lot of it comes from our state and local clients We've historically indicated a range of 10%- 15%, and I don't know how many quarters in a row we've now been well north of that this last quarter. we've historically indicated a range of 10%- 15% and i don't know how many quarters in a row we've now been well north of that this last quarter If you take out the special disaster response activities that are funded by our state and local clients, we're still just under 20%. if you take out the special disaster response activities that are funded by our state and local clients we're still just under 20% So 18% is essentially a very similar number to the prior quarter. so 18% is essentially a very similar number to the prior quarter I know many have asked me, isn't the real number closer to 20%? i know many have asked me isn't the real number closer to 20% It is on given quarters, but I would say that the water infrastructure work that we do and the water, both the chemistry and investigation assessment work, is probably that 10%-15% range. If we're wrong, it's generally at the higher than that. It's not just unique here to the United States. We report that out as an end client. You can see it in our slides. What's really growing, what's driving much of our growth in Ireland and across the United Kingdom is also what we would call municipal, which is water utility work there. The framework contracts are in sort of similar type numbers, sort of mid-teens. Other things are growing a little slower. We've seen out of the UK and Ireland, as I'd indicated in my earlier remarks, sort of 7%, 8%, 9%. It is on given quarters, but I would say that the water infrastructure work that we do and the water, both the chemistry and investigation assessment work, is probably that 10%- 15% range. it is on given quarters but i would say that the water infrastructure work that we do and the water both the chemistry and investigation assessment work is probably that 10%- 15% range If we're wrong, it's generally at the higher than that. if we're wrong it's generally at the higher than that It's not just unique here to the United States. it's not just unique here to the united states We report that out as an end client. we report that out as an end client You can see it in our slides. you can see it in our slides What's really growing, what's driving much of our growth in Ireland and across the United Kingdom is also what we would call municipal, which is water utility work there. what's really growing what's driving much of our growth in ireland and across the united kingdom is also what we would call municipal which is water utility work there The framework contracts are in sort of similar type numbers, sort of mid-teens. the framework contracts are in sort of similar type numbers sort of mid-teens Other things are growing a little slower. other things are growing a little slower We've seen out of the UK and Ireland, as I'd indicated in my earlier remarks, sort of 7%, 8%, 9%. we've seen out of the uk and ireland as i'd indicated in my earlier remarks sort of 7% 8% 9% What's on the upside of that are drivers, really the water infrastructure, water supply, water treatment. In the case of the UK and Ireland, it's a lot of water conveyance, getting water from point A to point B where they need it, and overflows with respect to protection of surface waters like lakes and rivers for recreation and general public safety. They call those sewer overflows. Here in the US, they call them CSOs, combined sewer overflows, which is the biggest driver in the UK, driving this growth rate well above 10%. That's also true in Canada. We're seeing similar items there, and there's been a lot of different areas where the budgets are actually supporting that. What's on the upside of that are drivers, really the water infrastructure, water supply, water treatment. what's on the upside of that are drivers really the water infrastructure water supply water treatment In the case of the UK and Ireland, it's a lot of water conveyance, getting water from point A to point B where they need it, and overflows with respect to protection of surface waters like lakes and rivers for recreation and general public safety. in the case of the uk and ireland it's a lot of water conveyance getting water from point a to point b where they need it and overflows with respect to protection of surface waters like lakes and rivers for recreation and general public safety They call those sewer overflows. they call those sewer overflows Here in the US, they call them CSOs, combined sewer overflows, which is the biggest driver in the UK, driving this growth rate well above 10%. here in the us they call them csos combined sewer overflows, which is the biggest driver in the uk driving this growth rate well above 10% That's also true in Canada. that's also true in canada We're seeing similar items there, and there's been a lot of different areas where the budgets are actually supporting that. we're seeing similar items there and there's been a lot of different areas where the budgets are actually supporting that One of the most common questions I've received here in the last six months is, are changes in priorities at the federal government going to impact your local state funding for these types of growth rates? My comments on earlier calls have been no. I don't expect it because there's other alternative funding sources such as the rates that rate payers and the customers receive. There's bonds, and there's just healthy budgets at the state level. I will put one caveat. I have not seen it impact our water programs yet, but we do other work for state and local clients too on the water side, which is on hydraulics and drainage and stormwater channeling, even on transportation projects. For the first time, we saw this in the end of the third quarter. One of the most common questions I've received here in the last six months is, are changes in priorities at the federal government going to impact your local state funding for these types of growth rates? one of the most common questions i've received here in the last six months is are changes in priorities at the federal government going to impact your local state funding for these types of growth rates My comments on earlier calls have been no. my comments on earlier calls have been no I don't expect it because there's other alternative funding sources such as the rates that rate payers and the customers receive. i don't expect it because there's other alternative funding sources such as the rates that rate payers and the customers receive There's bonds, and there's just healthy budgets at the state level. there's bonds and there's just healthy budgets at the state level I will put one caveat. i will put one caveat I have not seen it impact our water programs yet, but we do other work for state and local clients too on the water side, which is on hydraulics and drainage and stormwater channeling, even on transportation projects. i have not seen it impact our water programs yet but we do other work for state and local clients too on the water side which is on hydraulics and drainage and stormwater channeling even on transportation projects For the first time, we saw this in the end of the third quarter. for the first time we saw this in the end of the third quarter The U.S. government, the Department of Transportation matching funds canceled and saw a very large transportation project that we're participating in actually clawed back, and it was already funded. I would say where I have no, I put essentially close to no impact on federal to our state and local water, I've now seen it actually on transportation. It has all of a sudden become a high watch list. I don't expect it to have an impact on the water programs at this time, but it's now, and I do want to say that that was a secondary impact of the federal budget changes that's got us watching on that front. The U.S. government, the Department of Transportation matching funds canceled and saw a very large transportation project that we're participating in actually clawed back, and it was already funded. the u.s government the department of transportation matching funds canceled and saw a very large transportation project that we're participating in actually clawed back and it was already funded I would say where I have no, I put essentially close to no impact on federal to our state and local water, I've now seen it actually on transportation. i would say where i have no i put essentially close to no impact on federal to our state and local water i've now seen it actually on transportation It has all of a sudden become a high watch list. it has all of a sudden become a high watch list I don't expect it to have an impact on the water programs at this time, but it's now, and I do want to say that that was a secondary impact of the federal budget changes that's got us watching on that front. i don't expect it to have an impact on the water programs at this time but it's now and i do want to say that that was a secondary impact of the federal budget changes that's got us watching on that front

Speaker 4: Okay, great. Maybe just following up on a comment you made earlier around doing more front-end advisory consulting work. I think you already have a pretty vibrant sort of mix of front-end work. If you can maybe just dig a little bit deeper into maybe what are some of the regions, types of customers, or types of work where you do see an opportunity to maybe push that front-end work penetration somewhat higher? Thanks. Okay, great. okay great Maybe just following up on a comment you made earlier around doing more front-end advisory consulting work. maybe just following up on a comment you made earlier around doing more front-end advisory consulting work I think you already have a pretty vibrant sort of mix of front-end work. i think you already have a pretty vibrant sort of mix of front-end work If you can maybe just dig a little bit deeper into maybe what are some of the regions, types of customers, or types of work where you do see an opportunity to maybe push that front-end work penetration somewhat higher? if you can maybe just dig a little bit deeper into maybe what are some of the regions types of customers or types of work where you do see an opportunity to maybe push that front-end work penetration somewhat higher Thanks. thanks

Speaker 1: It's interesting. I would say we have energy development customers that have tax incentives, had the Inflation Reduction Act, and so their investments are going into renewable energy. The fact is that the work that we do is on the front-end consulting, advisory, technical evaluation. How can that work be changed to be invested in more conventional and fossil fuel? How can you actually go to develop a power generation using alternative supplies? Maybe it's natural gas and how you can connect to the grid. How can they still meet their power generation goals for these energy developers? How can it pivot from a renewable source like offshore? I'll use offshore wind as an example. Can you go from offshore wind in a marine environment, and can you pivot your investments to support LNG, which would also be in a marine environment, offshore terminals? It's interesting. it's interesting I would say we have energy development customers that have tax incentives, had the Inflation Reduction Act, and so their investments are going into renewable energy. i would say we have energy development customers that have tax incentives had the inflation reduction act and so their investments are going into renewable energy The fact is that the work that we do is on the front-end consulting, advisory, technical evaluation. the fact is that the work that we do is on the front-end consulting advisory technical evaluation How can that work be changed to be invested in more conventional and fossil fuel? how can that work be changed to be invested in more conventional and fossil fuel How can you actually go to develop a power generation using alternative supplies? how can you actually go to develop a power generation using alternative supplies Maybe it's natural gas and how you can connect to the grid. maybe it's natural gas and how you can connect to the grid How can they still meet their power generation goals for these energy developers? how can they still meet their power generation goals for these energy developers How can it pivot from a renewable source like offshore? how can it pivot from a renewable source like offshore I'll use offshore wind as an example. i'll use offshore wind as an example Can you go from offshore wind in a marine environment, and can you pivot your investments to support LNG, which would also be in a marine environment, offshore terminals? can you go from offshore wind in a marine environment and can you pivot your investments to support lng which would also be in a marine environment offshore terminals I think the technical evaluation, including work we're doing with respect to the grid upgrades. Is it a place that the grid could actually and transmission projects be moved with respect to permitting? I think that there are more projects coming to light that we're seeing because of reduced regulatory requirements. There may be less work per project, but there'll be a lot more projects. When you change your math on those, you actually end up with a bigger number. They all need evaluation of how can that be done, what are the permitting requirements, and what's the timing? The new input is also the economics of raw materials and other construction costs on the front end is becoming more and more important, and we're involved in all of those. I think the technical evaluation, including work we're doing with respect to the grid upgrades. i think the technical evaluation including work we're doing with respect to the grid upgrades Is it a place that the grid could actually and transmission projects be moved with respect to permitting? is it a place that the grid could actually and transmission projects be moved with respect to permitting I think that there are more projects coming to light that we're seeing because of reduced regulatory requirements. i think that there are more projects coming to light that we're seeing because of reduced regulatory requirements There may be less work per project, but there'll be a lot more projects. there may be less work per project but there'll be a lot more projects When you change your math on those, you actually end up with a bigger number. when you change your math on those you actually end up with a bigger number They all need evaluation of how can that be done, what are the permitting requirements, and what's the timing? they all need evaluation of how can that be done what are the permitting requirements and what's the timing The new input is also the economics of raw materials and other construction costs on the front end is becoming more and more important, and we're involved in all of those. the new input is also the economics of raw materials and other construction costs on the front end is becoming more and more important and we're involved in all of those

Speaker 4: Okay, thanks very much. Okay, thanks very much. okay thanks very much

Speaker 1: Thanks, Avid. Thanks, Avid. thanks avid

Speaker 6: Thank you. Our next question comes from the line of Andy Wittmann with Baird. Please go ahead with your question. Thank you. thank you Our next question comes from the line of Andy Wittmann with Baird . our next question comes from the line of andy wittmann with baird Please go ahead with your question. please go ahead with your question

Speaker 2: Great. Thank you for taking my questions. Dan, I was looking at the CIG segment results and particularly the revenue. Your slide here shows that it was up 2%, and that's the calculation. It's interesting because the Commercial International Group, if you look at the, if you go by customer type, most of the customers are down in the Commercial International Group, but the segment is up. I just was hoping that you could explain how that happens. Great. great Thank you for taking my questions. thank you for taking my questions Dan, I was looking at the CIG segment results and particularly the revenue. dan i was looking at the cig segment results and particularly the revenue Your slide here shows that it was up 2%, and that's the calculation. your slide here shows that it was up 2% and that's the calculation It's interesting because the Commercial International Group, if you look at the, if you go by customer type, most of the customers are down in the Commercial International Group, but the segment is up. it's interesting because the commercial international group if you look at the if you go by customer type most of the customers are down in the commercial international group but the segment is up I just was hoping that you could explain how that happens. i just was hoping that you could explain how that happens

Speaker 1: That's a great question. How do two minus numbers equal a plus number? Because you're minus 4 on our U.S. commercial and you're minus on our international by a percent, and you end up plus. While our commercial international is U.S. commercial and international contracted work is in our CIG, there are some entities here in the U.S. that do work for mostly, I'd say, state and local clients. It just so happens that in addition to working for a commercial client, there may be some work that is co-joined or done in parallel for a state and local client. That work is actually up quite a bit. In fact, when you've seen our pure state and local, when you go to CIG, we talk about U.S. commercial, that's not an absolutely pure just commercial. Some of that work is actually in that CIG segment. That's a great question. that's a great question How do two minus numbers equal a plus number? how do two minus numbers equal a plus number Because you're minus 4 on our U.S. commercial and you're minus on our international by a percent, and you end up plus. because you're minus 4 on our u.s commercial and you're minus on our international by a percent and you end up plus While our commercial international is U.S. commercial and international contracted work is in our CIG, there are some entities here in the U.S. that do work for mostly, I'd say, state and local clients. while our commercial international is u.s commercial and international contracted work is in our cig there are some entities here in the u.s that do work for mostly i'd say state and local clients It just so happens that in addition to working for a commercial client, there may be some work that is co-joined or done in parallel for a state and local client. it just so happens that in addition to working for a commercial client there may be some work that is co-joined or done in parallel for a state and local client That work is actually up quite a bit. that work is actually up quite a bit In fact, when you've seen our pure state and local, when you go to CIG, we talk about U.S. commercial, that's not an absolutely pure just commercial. in fact when you've seen our pure state and local when you go to cig we talk about u.s commercial that's not an absolutely pure just commercial Some of that work is actually in that CIG segment. some of that work is actually in that cig segment If you look at CIG, you would see +2%. When you look at U.S. commercial, it's actually separated out. Just a little bit of that state and local growth rate is actually embedded in the CIG segment, and it's enough to take those small negative numbers and make it a small positive number. If you look at CIG, you would see + 2%. if you look at cig you would see + 2% When you look at U.S. commercial, it's actually separated out. when you look at u.s commercial it's actually separated out Just a little bit of that state and local growth rate is actually embedded in the CIG segment, and it's enough to take those small negative numbers and make it a small positive number. just a little bit of that state and local growth rate is actually embedded in the cig segment and it's enough to take those small negative numbers and make it a small positive number

Speaker 2: Okay. That makes sense. Thank you for clarifying that. I guess just as I look at the two segments and think about the outlook from here, with renewables being one of the reasons that's down, and you can talk about Australia and see if you're seeing any green shoots of that coming back. I guess the assumption here into the fourth quarter and then probably into 2026 is that at least for the next few quarters, the government segment is probably the horse that's probably got the better growth potential over the CIG segment. Is that the correct way of thinking about it? I guess the renewables are going to be kind of a tough comp for a while, so that's going to make that segment a little harder is what I'm thinking. Okay. okay That makes sense. that makes sense Thank you for clarifying that. thank you for clarifying that I guess just as I look at the two segments and think about the outlook from here, with renewables being one of the reasons that's down, and you can talk about Australia and see if you're seeing any green shoots of that coming back. i guess just as i look at the two segments and think about the outlook from here with renewables being one of the reasons that's down and you can talk about australia and see if you're seeing any green shoots of that coming back I guess the assumption here into the fourth quarter and then probably into 2026 is that at least for the next few quarters, the government segment is probably the horse that's probably got the better growth potential over the CIG segment. i guess the assumption here into the fourth quarter and then probably into 2026 is that at least for the next few quarters the government segment is probably the horse that's probably got the better growth potential over the cig segment Is that the correct way of thinking about it? is that the correct way of thinking about it I guess the renewables are going to be kind of a tough comp for a while, so that's going to make that segment a little harder is what I'm thinking. i guess the renewables are going to be kind of a tough comp for a while so that's going to make that segment a little harder is what i'm thinking Kind of just wanted to bounce that off of you and take your time to think about it the right way. Kind of just wanted to bounce that off of you and take your time to think about it the right way. kind of just wanted to bounce that off of you and take your time to think about it the right way

Speaker 1: Yeah, I think that's right. I think that I'll stick with the U.S. commercial for the moment. You know, our renewable energy work that we do here in the U.S. was down probably close to 30% year-over-year in the quarter, and you know, that's a big number. That still leaves quite a bit that's actually underway. I think it's going to continue to see reductions over the next several quarters. Certainly, a year-on-year comparison until we twilight the year-on-year comparisons, I think that that's going to be for sure a difficult comp on the U.S. commercial. International, there are two ways Australia can get better. It can get more work, which is, you know, I think we're seeing it still very soft. We do have one benefit that's hiding in plain sight. Yeah, I think that's right. yeah i think that's right I think that I'll stick with the U.S. commercial for the moment. i think that i'll stick with the u.s commercial for the moment You know, our renewable energy work that we do here in the U.S. was down probably close to 30% year-over-year in the quarter, and you know, that's a big number. you know our renewable energy work that we do here in the u.s was down probably close to 30% year-over-year in the quarter and you know that's a big number That still leaves quite a bit that's actually underway. that still leaves quite a bit that's actually underway I think it's going to continue to see reductions over the next several quarters. i think it's going to continue to see reductions over the next several quarters Certainly, a year-on-year comparison until we twilight the year-on-year comparisons, I think that that's going to be for sure a difficult comp on the U.S. commercial. certainly a year-on-year comparison until we twilight the year-on-year comparisons i think that that's going to be for sure a difficult comp on the u.s commercial International, there are two ways Australia can get better. international there are two ways australia can get better It can get more work, which is, you know, I think we're seeing it still very soft. it can get more work which is you know i think we're seeing it still very soft We do have one benefit that's hiding in plain sight. we do have one benefit that's hiding in plain sight It was down a lot last year too, so the year-on-year comps in Australia are going to look better because they were a lot lower last year. I think that's going to moderate, but it's certainly not going to contribute and drive our top-line numbers. I do think that'll come out of our state and local and the federal, which is mostly coming out of defense. I think we've got pretty good visibility, but the horse that's going to pull the top-line growth is going to be, you're right, mostly government here in the U.S. I would say actually our international government work is pretty strong too. I do think we've got several quarters of challenges there in the commercial side. It was down a lot last year too, so the year-on-year comps in Australia are going to look better because they were a lot lower last year. it was down a lot last year too so the year-on-year comps in australia are going to look better because they were a lot lower last year I think that's going to moderate, but it's certainly not going to contribute and drive our top-line numbers. i think that's going to moderate but it's certainly not going to contribute and drive our top-line numbers I do think that'll come out of our state and local and the federal, which is mostly coming out of defense. i do think that'll come out of our state and local and the federal which is mostly coming out of defense I think we've got pretty good visibility, but the horse that's going to pull the top-line growth is going to be, you're right, mostly government here in the U.S. i think we've got pretty good visibility but the horse that's going to pull the top-line growth is going to be you're right mostly government here in the u.s I would say actually our international government work is pretty strong too. i would say actually our international government work is pretty strong too I do think we've got several quarters of challenges there in the commercial side. i do think we've got several quarters of challenges there in the commercial side

Speaker 2: Okay, that makes sense. Just for the benefit of everybody, I think the U.S. renewables business is only like 2% or 3% of revenue, just for context. I know maybe that's worth verifying for everyone there too. You said 30%. It's a big number down, obviously, but not a big part of the business, but not that big. Is that right, Dan? Okay, that makes sense. okay that makes sense Just for the benefit of everybody, I think the U.S. renewables business is only like 2% or 3% of revenue, just for context. just for the benefit of everybody i think the u.s renewables business is only like 2% or 3% of revenue just for context I know maybe that's worth verifying for everyone there too. i know maybe that's worth verifying for everyone there too You said 30%. you said 30% It's a big number down, obviously, but not a big part of the business, but not that big. it's a big number down obviously but not a big part of the business but not that big Is that right, Dan? is that right dan

Speaker 1: No, that's absolutely right. I think we've said we had about company-wide, the entire enterprise globally, we're about $250 million, about half of that. The amount we're talking about, to actually put real dollars to it, we were talking before this reduction about $125 million. It's a pretty small overall component of the business. No, that's absolutely right. no that's absolutely right I think we've said we had about company-wide, the entire enterprise globally, we're about $250 million, about half of that. i think we've said we had about company-wide the entire enterprise globally we're about $250 million about half of that The amount we're talking about, to actually put real dollars to it, we were talking before this reduction about $125 million. the amount we're talking about to actually put real dollars to it we were talking before this reduction about $125 million It's a pretty small overall component of the business. it's a pretty small overall component of the business

Speaker 2: Just the last one for me, Dan. This might be just kind of, but you know, the posture towards the U.S.'s posture towards Ukraine has evolved, I'd say, in the last few months. You're seeing, you know, weapons supply coming back and other things. I just don't, I know USAID is shut down, but are the systems in place? Are you hearing anything about the humanitarian support for like the grid work that you're doing there potentially coming back? Could that come back on? What are you hearing? It seems like maybe with the posture change from the administration, there might be something there. Maybe I'm grasping at straws here, but I thought I'd have you comment. Just the last one for me, Dan. just the last one for me dan This might be just kind of, but you know, the posture towards the U.S.'s posture towards Ukraine has evolved, I'd say, in the last few months. this might be just kind of but you know the posture towards the u.s.'s posture towards ukraine has evolved i'd say in the last few months You're seeing, you know, weapons supply coming back and other things. you're seeing you know weapons supply coming back and other things I just don't, I know USAID is shut down, but are the systems in place? i just don't i know usaid is shut down but are the systems in place Are you hearing anything about the humanitarian support for like the grid work that you're doing there potentially coming back? are you hearing anything about the humanitarian support for like the grid work that you're doing there potentially coming back Could that come back on? could that come back on What are you hearing? what are you hearing It seems like maybe with the posture change from the administration, there might be something there. it seems like maybe with the posture change from the administration there might be something there Maybe I'm grasping at straws here, but I thought I'd have you comment. maybe i'm grasping at straws here but i thought i'd have you comment

Speaker 1: No, it's a great comment. We've not, I did not intentionally, I've not included that as a driver or a potential material contributor to drive numbers up. There's no doubt that's true. You're right. It went from we're not going to support, we're pulling weapons back to we're going to go to neutral, and now they're supportive of Ukraine. The one thing that's positive, and there are many things that are positive for us, is we're working in Ukraine today. When I said that we did slightly less work than anticipated for USAID coming into the quarter, my comments on the last investor call were I thought we'd do about $100 million of revenue with USAID and most of it in Ukraine. We did about $90 million. In fact, I'd say $91 million is the number. No, it's a great comment. no it's a great comment We've not, I did not intentionally, I've not included that as a driver or a potential material contributor to drive numbers up. we've not i did not intentionally i've not included that as a driver or a potential material contributor to drive numbers up There's no doubt that's true. there's no doubt that's true You're right. you're right It went from we're not going to support, we're pulling weapons back to we're going to go to neutral, and now they're supportive of Ukraine. it went from we're not going to support we're pulling weapons back to we're going to go to neutral and now they're supportive of ukraine The one thing that's positive, and there are many things that are positive for us, is we're working in Ukraine today. the one thing that's positive and there are many things that are positive for us is we're working in ukraine today When I said that we did slightly less work than anticipated for USAID coming into the quarter, my comments on the last investor call were I thought we'd do about $100 million of revenue with USAID and most of it in Ukraine. when i said that we did slightly less work than anticipated for usaid coming into the quarter my comments on the last investor call were i thought we'd do about $100 million of revenue with usaid and most of it in ukraine We did about $90 million. we did about $90 million In fact, I'd say $91 million is the number. in fact i'd say $91 million is the number When you ask how much is slightly less, we're $91 million instead of $100 million. I think in the fourth quarter, we originally thought we'd do about another $100 million. It's down to about $40 million or $50 million, which was my comment on the guidance. We have a contract, we have sufficient contract capacity. They could provide us, by picking up the phone or sending us a task, numbers that are $100 million, $200 million in a quarter. We've seen that before. We're not processing a task order for that right now, I'll tell you that much. If you go back a couple of years ago on an unusual damage to the grid, we were called with about a week's notice and asked could we deploy and initiate what turned out to be close to $100 million in a couple of week periods. When you ask how much is slightly less, we're $91 million instead of $100 million. when you ask how much is slightly less we're $91 million instead of $100 million I think in the fourth quarter, we originally thought we'd do about another $100 million. i think in the fourth quarter we originally thought we'd do about another $100 million It's down to about $40 million or $50 million, which was my comment on the guidance. it's down to about $40 million or $50 million which was my comment on the guidance We have a contract, we have sufficient contract capacity. we have a contract we have sufficient contract capacity They could provide us, by picking up the phone or sending us a task, numbers that are $100 million, $200 million in a quarter. they could provide us by picking up the phone or sending us a task numbers that are $100 million $200 million in a quarter We've seen that before. we've seen that before We're not processing a task order for that right now, I'll tell you that much. we're not processing a task order for that right now i'll tell you that much If you go back a couple of years ago on an unusual damage to the grid, we were called with about a week's notice and asked could we deploy and initiate what turned out to be close to $100 million in a couple of week periods. if you go back a couple of years ago on an unusual damage to the grid we were called with about a week's notice and asked could we deploy and initiate what turned out to be close to $100 million in a couple of week periods I don't want to call it a lottery pick. That makes it too random, but yes, it's a possible upside. We don't have to compete. We had the single awarded contract to Tetra Tech. It is possible it could be an unusual large contributor. I don't want to call it a lottery pick. i don't want to call it a lottery pick That makes it too random, but yes, it's a possible upside. that makes it too random but yes it's a possible upside We don't have to compete. we don't have to compete We had the single awarded contract to Tetra Tech. we had the single awarded contract to tetra tech It is possible it could be an unusual large contributor. it is possible it could be an unusual large contributor

Speaker 2: Thank you. Thank you. thank you

Speaker 1: Excuse me. Excuse me. excuse me

Speaker 6: Thank you. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. This will conclude the question-and-answer session. I will now turn the conference back over to Dan Batrack to conclude. Thank you. thank you If you'd like to ask a question, please press star one on your telephone keypad. if you'd like to ask a question please press star one on your telephone keypad A confirmation tone will indicate your line is in the question queue. a confirmation tone will indicate your line is in the question queue This will conclude the question -and -answer session. this will conclude the question -and -answer session I will now turn the conference back over to Dan Batrack to conclude. i will now turn the conference back over to dan batrack to conclude

Speaker 1: Thank you very much, Kate. I want to thank all of our investors and stakeholders. Most importantly, I want to thank all of the Tetra Tech employees. This has been a period of a lot of change. It's been a lot of new items coming to us, navigating both the direct and indirect impacts of the new administration, which is really here in the U.S., which has really had impacts globally. Both keeping backlog up, supporting the collection of receivables, driving margins up, which is actually, you know, sort of delivering on our forecast or our assessment that we actually have higher margins embedded in the business as we go forward. I think this last quarter and the third quarter was an excellent example of that, and we see more to come. Thank you very much, Kate. thank you very much kate I want to thank all of our investors and stakeholders. i want to thank all of our investors and stakeholders Most importantly, I want to thank all of the Tetra Tech employees. most importantly i want to thank all of the tetra tech employees This has been a period of a lot of change. this has been a period of a lot of change It's been a lot of new items coming to us, navigating both the direct and indirect impacts of the new administration, which is really here in the U.S., which has really had impacts globally. it's been a lot of new items coming to us navigating both the direct and indirect impacts of the new administration which is really here in the u.s which has really had impacts globally Both keeping backlog up, supporting the collection of receivables, driving margins up, which is actually, you know, sort of delivering on our forecast or our assessment that we actually have higher margins embedded in the business as we go forward. both keeping backlog up supporting the collection of receivables driving margins up which is actually you know sort of delivering on our forecast or our assessment that we actually have higher margins embedded in the business as we go forward I think this last quarter and the third quarter was an excellent example of that, and we see more to come. i think this last quarter and the third quarter was an excellent example of that and we see more to come In fact, if you do the math on the guidance, a simple math, you'd actually see our margins are even higher computed in the fourth quarter guidance that we just provided today. I really look forward to providing you all the results for our fourth quarter, and probably most importantly, our guidance for fiscal year 2026 when I talk to you in 90 days and report our results for the fourth quarter and all of fiscal year 2025. I hope you all have a safe and enjoyable rest of the week. Thank you very much. Bye. In fact, if you do the math on the guidance, a simple math, you'd actually see our margins are even higher computed in the fourth quarter guidance that we just provided today. in fact if you do the math on the guidance a simple math you'd actually see our margins are even higher computed in the fourth quarter guidance that we just provided today I really look forward to providing you all the results for our fourth quarter, and probably most importantly, our guidance for fiscal year 2026 when I talk to you in 90 days and report our results for the fourth quarter and all of fiscal year 2025. i really look forward to providing you all the results for our fourth quarter and probably most importantly our guidance for fiscal year 2026 when i talk to you in 90 days and report our results for the fourth quarter and all of fiscal year 2025 I hope you all have a safe and enjoyable rest of the week. i hope you all have a safe and enjoyable rest of the week Thank you very much. thank you very much Bye. bye

Speaker 6: Ladies and gentlemen, this concludes our conference for today. Thank you all for participating and have a nice day. All parties may disconnect now. Ladies and gentlemen, this concludes our conference for today. ladies and gentlemen this concludes our conference for today Thank you all for participating and have a nice day. thank you all for participating and have a nice day All parties may disconnect now. all parties may disconnect now