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 investors section of its website at tetratech.com. This call is being recorded at the request of Tetra Tech and this broadcast is the copyrighted property of Tetra Tech. Any rebroadcast of this information in whole or part without the prior written permission of Tetra Tech is prohibited. With us today from management are Dan Batrak, Chairman and Chief Executive Officer, Steve Burdick, Chief Financial Officer, and Roger Argus, President and CEO Designate. 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 the 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 gap financial measures as references the appropriate gap financial reconciliations are posted in the investors section of tetra tax 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 wouldn't like now like to turn the call over to Dan backtrack. Please go ahead, Mr. Patrick.

Thank you very much, Diego, and good morning. And welcome to our fiscal year 2026 first quarter earnings conference call. I'm glad to report this morning that we had a very strong first quarter beginning to our 2026 fiscal year. During this past year, we had many different points to navigate. And this last quarter, we now had a new one, the longest U.S. government shutdown in history. But during all of these challenges, both during this last year and during the first quarter of this year, we've remained very focused on the enduring markets of water supply, water treatment, flood control, and environmental stewardship, all of which remain in very high demand. And yes, water is not going out of style. Now, as you're going to hear this morning, even with the government shutdown, we grew our revenue 8%. We expanded our margins by 140 basis points on a gap basis. Steve Burdick will talk more about this in a bit. And we improved the quality of our backlog by winning more front end work and increasing the embedded margins that we have in the new projects that we've been awarded just this last quarter. Today, Steve Burdick, our Chief Financial Officer, will provide additional details on our financial performance on a full gap basis. Roger Arcas, Tetra Tech's president and CEO designate will provide an update on our growth markets and market outlook. And with that, I'd now like to share with you an update on our financial performance and business as we both performed in the first quarter and as we see ourselves moving forward into the rest of 2026. I'll start with, again, we began 2026 with a strong first quarter, as I just indicated. We had a net revenue of $987 million in the quarter, which is up 8% from the prior year. In the quarter, we generated $131 million in operating income, which is up 12% from the prior year. And finally, our earnings per share was up even more, up 17% from the first quarter of last year, resulted in an adjusted earnings per share of $0.34 for the quarter. And that's an adjustment down from our gap number. Our actual gap earnings per share was 40 cents in a quarter, and Steve Burdick will go through a bit more of that in the Chief Financial Officer's presentation in just a few moments. I would like to present our performance by our segment. We do have two segments, a government services segment and a commercial and international group segment. The government services group segment delivered a strong quarter with margins of 18% of 40 basis points from last year. In the first quarter, our government services group net revenue was $382 million, which grew 5% from last year. And that was during a quarter where the U.S. government was shut down for about six weeks of that period, or about half of the entire quarter. Our commercial and international group segment also delivered a strong first quarter. The commercial international groups revenue was up 10% to $605 million. Driven by growth in the United Kingdom and in Ireland with strong water programs in both geographies and with new digital automation programs in Australia. Our commercial international groups margin for the first quarter was 13%, which was also up similar to GSG of 40 basis points from the prior year. Our commercial international groups benefited from strong performance in the United Kingdom, in Canada, and an improving business in our Australian activities. I'd now like to provide an overview of our performance by our end customers. This quarter, our federal work was up about 7% from the prior year, primarily for work with the U.S. Army Corps of Engineers, designing flood protection structures, upgrades to locks and dams, and design of new inland waterway navigation systems. Overall, our U.S. federal work was about 18% of our overall business in the first quarter. In the United States, our state and local markets continue to be very strong, with a 10% growth rate driven by municipal water treatment and digital water modernization. especially in the water stress regions of Texas, Florida, California, and Colorado, which Roger Argus will speak more to here in just a few moments. Our U.S. commercial work was actually down slightly, but this is pretty much as we expected. It was driven by reductions in renewable energy work this first quarter of 2026 compared to a very strong renewable energy practice that we had a year ago. This reduction in our renewable energy work was partially offset by growth and high voltage transmission and permitting and engineering work that we're doing here in the US. Our international work was 48% of our overall business or overall revenues or net revenues, and it grew at a 13% rate during the quarter. International growth included strong increases in the United Kingdom, In Ireland, as I've mentioned earlier, primarily around the water businesses, we also saw growth in our Canadian infrastructure, Canadian infrastructure programs, which we see strengthening really all across Canada. And it's been 1 of the strong lights for us and actually an improving business in our Australia activities where we actually saw the reductions of bait during the 1st quarter. And I'd like to discuss our backlog, which held steady during a strong revenue quarter that included, as I've mentioned a few times, a US federal government shutdown. Overall, we see the quality of our backlog much higher than before, as measured by the proportion of front end work that we have embedded in our backlog, which also brings higher embedded margins. As you can imagine, we did see a slowdown in our U.S. federal client orders in the first quarter due to the government shutdown that began on October 1st and continued for the first six weeks of the fiscal year. And even with the federal government reopening on November 12th, the startup for the government was still pretty slow because it started up in November right before Thanksgiving and continued through the holiday season. So we never saw it fully return to a level that we would have either expected or hoped for. While new project orders from the U.S. government were slow in the first quarter, new contract awards, task orders, and project startups were very strong from our U.S. state and local clients, commercial clients, international clients, collectively resulting in an overall stable but pretty flat backlog from what we saw from the first quarter last year. As we look forward, we expect that with more clarity on U.S. federal budgets and appropriations, The pace of US federal orders will increase beginning late in the second quarter and continuing through the second half of our fiscal year. Now we'd like to turn the presentation over to Steve Burdick, our Chief Financial Officer, to present more details on our financials for the first quarter.

Steve? Thank you, Dan. I'd like to now discuss an update of our reported first quarter fiscal 2026 results, working capital, cash flows, and capital allocation. So, as Dan just provided in our management analysis, our market leading focus on front end consulting and design for water environmental projects are carrying higher margins across all of our end markets. As such, even as the first quarter revenue was down from last year due to the decrease in revenue from our USA customer and virtually no revenues from hurricane disasters this year compared to last year, Our operating income increased significantly, and EBITDA on net revenue for the quarter increased by 140 basis points to 14.2% in the first quarter of fiscal 2026. Now, excluding our USAID and Department of State activities in both periods, then our margin was up about 80 basis points. As a result of our ability to enhance our profit margins, we were able to increase EPS over last year. as the 40 cents reported and the 35 cents as adjusted came in better due to the outperformance and the growth of our international business. You can find a reconciliation with the divestiture and earn out gains in the appendix of this presentation and in our Reg G reconciliations. Now, regarding our working capital, Cash flows generated from operations in the first quarter were $72 million, which represents an improvement of $59 million over fiscal 2025. Excluding the impacts of USAID and Department of State Business, our focus on working capital and cash flows has resulted in our DSO reflecting an industry-leading standard of 51 days, which is the lowest this key metric has been in over 10 years. This lower DSO metric provides significant insight into the core business as it reflects the outstanding work that our project managers lead relative to higher quality projects and highly satisfied clients in our broad portfolio across all of our end markets and geographies. Our net debt amounted to about $565 million, and the net debt on EBITDA was at a leverage of 0.86 times which is 20% lower as compared to our leverage one year ago. Now, as we continue to execute on high-quality operating results with increasing margins, operating cash flows and excessive net income, and lower working capital, we will continue to provide higher returns for our shareholders and improve our industry-leading return on capital employed. So for those following along in the presentation, I wanted to share a bit of our recent historical results relative to our net leverage and our current borrowing capacity. As I just reviewed, our strong balance sheet and healthy cash flows, we've continued to bring down our leverage from a high point when our net debt stood at over two times back in the second quarter of 2023 when we acquired RPS. As of the first quarter of fiscal 26, our net debt is less than the low end of our target range And this provides a significant room to use our balance sheet for investing in growth and providing for higher returns to shareholders. For example, we could lever up to take on an additional $2 billion in debt capacity for larger acquisitions. With that perspective in mind, I'd like to now present our capital allocation strategy and overview. We have a very strong and healthy balance sheet and our operating cash flow was over $500 million for the trailing 12-month period. Our balance sheet and cash flows provide us with significant available liquidity as we have revised our capital structure in the last year to take advantage of the credit market to support our strategic growth priorities. Roger will discuss our strategic growth areas later in this presentation. But I do want to point out that we have a significant amount of liquidity available to invest in organic and inquisitive growth priorities in order to take advantage of these key business opportunities. And these opportunities include technology and automation, which continue to provide us a dominant position in the market, and for acquisitions of technical leaders focused on defense, such as Halvik in the US and Providence in Australia. Now, regarding our dividend program, I'm pleased to announce that our board of directors approved the quarterly cash dividend, which is a 12% increase year over year to be paid in the second quarter. This is our 47th consecutive quarterly dividend and the increased dividend is in line with our practice of annual double digit increases in the amounts paid. Based on the lower net leverage, we've continued our stock buyback program this year. And in the first quarter of 2026, we bought back an additional $50 million. We do have $548 million available from stock buyback plans that have been approved by our board as part of our capital allocation strategy. You know, overall, I'm very pleased to share these really strong results for the start of 2026, which has enabled us to increase shareholder returns. And since the second quarter of fiscal 2023, when we completed the acquisition of RPS. We have increased our annual dividends every quarter and distributed a total of $180 million. We increased our stock buybacks and repurchased a total of $300 million. And we completed several accretive acquisitions, investing a total of $400 million. And we did this all while deleveraging our balance sheet and moving our net debt unneeded from more than two times to less than one time. I want to thank you all for your support, and I will now hand the call over to Roger to discuss Tetra Tech's future opportunities for 2026 and beyond.