Tetra Tech, Inc.

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 for management are Dan Batryk, Chairman and Chief Executive Officer, Steve Burdick, Chief Financial Officer, and Jill Hudkins, President. 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 Investors section of Tetra Tech's website. At this time, I would like to inform you that all participants are in a listen-only mode. At the request of the company, we will open up the conference for questions and answers after the presentation. With that, I would like to turn the call over to Dan Batryk. Please go ahead, Mr. Batryk.

Great. Thank you very much, Daryl, and good morning, and welcome to our fiscal year 2023 first quarter's earnings conference call. We had an excellent first quarter and start to our 2023 fiscal year, setting new records for net revenue, our operating income and earnings per share. In the quarter, our EBITDA margin exceeded 14% for the first time in our history. Backlog, the best indicator of future growth for us achieved an all time high of $3.81 billion, up 11% from last year. And just as the first quarter closed, We announced the acquisition of AMEX, bringing 500 high-end security-cleared staff to our U.S. federal IT practice. And more recent, back just 10 days ago, we completed our acquisition of the RPS Group that adds 5,000 staff and provides new growth opportunities, especially in international water and energy consulting business. I'll begin today's presentation with an overview of our first quarter results and the business outlook, while Steve Burdick, our Chief Financial Officer, will provide additional details of our financial performance and capital allocation. Jill Hudkins, our President, will also provide additional insight into our strategic growth opportunities that we see together with RPS. We had a very strong first quarter, setting new records for net revenue, operating income, adjusted earnings per share, and backlog. Our net revenue was $737 million in the quarter, up 8% from the prior year, a new all-time high for any quarter in the company's history. We also had a record 14% adjusted EBITDA margin, which is 90 basis points increase from the prior year. As a result of this increased margin, we generated an operating income of $97 million for the company, up 17% year over year. Earnings per share from operations were a record $1.34 for the quarter. First time we've ever seeded $1.30, up 20% from last year on an equivalent tax basis. And in fact, we were well over $2 on a gap basis of earnings per share in the quarter. I'd now like to provide an overview of our performance by our end customer. In the first quarter, our growth was driven by strong performance across all four of our key client sectors. Our U.S. commercial net revenue was the fastest growing sector in the company with net revenue up 22% year over year and comprised about a quarter of our overall business. The commercial growth was driven by strong performance and high performance buildings, environmental restoration, and a very fast growing area in renewable energy services. Work for U.S. federal clients was up 10% year over year and represented 28% of our net revenue in the quarter. The increase in our U.S. federal work was driven by a very broad-based increases across all of our key government clients, but it was especially driven by civilian agencies for the U.S. federal government, such as the Environmental Protection Agency, U.S. State Department, and the U.S. Agency for International Development. Our state and local revenues for municipal water infrastructure and planning services grew at a 10% rate year over year this quarter, with continued strong demand for our best-in-class water supply and watershed management solutions. This 10% growth builds on our seven consecutive years of double-digit growth in the state and local markets here in the United States. Our international net revenue was up 13% year-on-year on a constant currency basis, driven by growth in water, environmental, and sustainable infrastructure work primarily in the countries of Canada, Australia, and the United Kingdom.

I'd now like to present our performance by our two segments.