Tetra Tech, Inc. (NASDAQ:TTEK) Q1 2023 Earnings Call Transcript

Andy Wittmann: Great. Thanks for taking my questions everyone. Dan I was just hoping maybe to just get a good sense of the quarter and how it relates to the guidance here. So, I guess I asked the question this way. You mentioned the GSG segment kind of had some items that artificially — I don’t artificially certainly earned them but the margins were a little bit higher than you expected and shouldn’t be viewed as a continuing benefit. In fact you said 15% is kind of more like what the underlying performance was. So like if you just do the difference of that margin difference — it’s probably about $0.10 which means you beat the quarter and beat your guidance but not as much. It looks like basically most of the guidance raise not all of it but the majority of the guidance raise is due to that GSG segment margin performance.

So, I guess the first question is, is that the right way to think about your guidance and the implication is that the balance of the year outlook is still good and supported, but maybe it’s not terribly changed. Is that the right way of thinking about it?

Dan Batrack: Yeah. I think that is primarily the right way to think about it. We had a great first quarter. The reason I made the comment that the extraordinary contributions and of course, I would say that we had — we mobilized an additional 1,500 staff during the months of October through December to respond to Hurricane Ian, all across Florida. We were really busy. We mobilized staff from across the rest of our operations to go down there and to accelerate the response, to minimize the impacts, to the residents of Florida in the surrounding area. But I do consider that, an extraordinary with climate change and the impact of storms, I’m hesitant to say one-time event, because it’s certainly not really become that. But the 17% if you model that out, it would have our guidance going up way up.

Now, we did flow through every bit of the beat in the quarter for our annual guidance and more. So we do expect things will be a little bit stronger. But we came into the year with actually a very high forecast for EPS. And we had actually embedded in our forecast for 2023 another 50 basis points increase in our margin across the company. And so to actually maintain that and increase it a bit, while actually absorbing and flowing through all of the beat that we had in Q1 I would say that, yes when you say, does it leave intact primarily the guidance we had coming into the year? I would say, yes, although, we did increase it even more than the beat. So we do have optimism coming in. And of course, in order to — with only 10 days with RPS with us was really — we struggled with, how can we communicate?

What they’re going to contribute, while trying to have perfect insight after 10 days. And that’s why we really presented this in two components. What is the base company doing, which you just highlighted we flow through all, the beat and more a little bit more. So yes, it remains intact plus — and then, I think as we go through the year with RPS, we’ll look to actually begin merging that into Tetra Tech, as we integrate the company. And you’re going to see one collective number. And it doesn’t take much to add these together to do a calculation on your and our collective parts to see the top line is growing well over 20% with these individuals. And I’ll be really excited to present what is going to contribute to the bottom-line both on valuable cost synergies and revenue.