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 Batrack, Chairman and Chief Executive Officer; Steve Burdick, Chief Financial Officer; and Jill Hudkins, President. They will provide a brief overview of the results, and we'll 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, their appropriate GAAP financial reconciliations are posted in the Investors section of Tetra Tech's website. At this time, I’d 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.

Great. Thank you very much, Darryl. 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. Just as the first quarter closed, we announced the acquisition of Amyx, bringing 500 high-end security cleared staff to our US federal IT practice. More recently, back just 10 days ago, we completed our acquisition of the RPS Group, which adds 5,000 staff and provides new growth opportunities, especially in the 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 a 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, the first time we've ever exceeded $1.30, up 20% from last year on an equivalent tax basis. In fact, we were well over $2 on a GAAP 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 US 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 in high-performance buildings, environmental restoration, and the very fast-growing area in renewable energy services. Work for our US Federal clients was up 10% year-over-year and represented 28% of our net revenue in the quarter. The increase in our US Federal work was driven by broad-based increases across all of our key government clients, but it was especially driven by civilian agencies for the US Federal government such as the Environmental Protection Agency, US State Department, and the US 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. Our GSG and our CIG segments both grew in the first quarter as a result of broad-based demand for our high-end services. I'll start with the GSG segment, or the Government Services Group segment, which was up 8% year-over-year with the growth in water and environmental programs. Our GSG segment delivered a record 17.1% margin, up 240 basis points from last year. This record margin was a result of three different factors. First, continued business shift in our mix to higher-margin services. Second, favorable project close-outs. And third, higher utilization in the quarter. We had especially strong utilization for US Federal work and our disaster recovery services for responding to Hurricane Ian, which impacted Florida just coming into the quarter during the month of October and extending through November and December. Without the extraordinary margin contributions from these project close-outs and episodic disaster work, we would have seen about a 15% margin in the GSG segment for the quarter, which is probably more representative of an ongoing margin for that particular segment. The CIG segment grew by 9% year-on-year and delivered a 13.1% margin in the quarter, up 60 basis points from last year in line with our expectations. This is the fifth consecutive quarter with year-on-year margin expansions for the CIG segment. The margin expansion in the first quarter was driven by strong utilization in high-performance buildings, environmental programs, and renewable energy services across our global operations. Backlog at the end of the quarter was up 11% year-on-year, resulting in an all-time high ending value of $3.81 billion for the company. In the first quarter, we won many new programs and task orders with both our commercial and government clients here in the United States and internationally. We leveraged our $25 billion value in contract capacity with the US federal government and our existing master service agreements to generate almost $1 billion in new orders just in the quarter. We were also awarded new programs such as the $42 million in additional contract capacity by USA for Energy Transformation Services in Moldova and a new $95 million contract with the United States Navy to support their environmental restoration needs. This broad-based backlog provides us with excellent visibility through the remainder of fiscal year 2023. Now, just 10 days ago on January 23, we closed the acquisition of the RPS Group, and we're rapidly moving forward on shared opportunities, collaboration, and aligning their systems with ours. I'm very pleased to welcome everyone at the RPS Group to Tetra Tech. The RPS Group brings to Tetra Tech over 5,000 staff that are highly aligned with our approach to projects and high-end consulting services in key geographic regions that we've been targeting for future growth for some time. RPS doubles our staff in the United Kingdom and Australia, broadening our services and client relationships in both regions. RPS also extends our operations by adding 1,200 employees in Europe, across the countries of Norway, Netherlands, and the Republic of Ireland, giving us for the first time a significant presence in that region. When we combine Tetra Tech and the RPS Group, we now have an organization collectively with 27,000 employees, working from 550 offices worldwide, servicing 22,000 clients. We collectively deliver 100,000 projects a year with an annualized revenue of approximately $4.5 billion. Together, Tetra Tech and RPS, this team is leading the science and driving growth by addressing our clients' increasing needs for water, environment, and sustainable infrastructure services. At this point, I'd like to turn the presentation over to our Chief Financial Officer, Steve Burdick, to go through more details of our financial performance in the quarter. Steve?

Thank you, Dan. So I'd like to now review the financial results for the first quarter of fiscal 2023. Overall, as Dan mentioned, we had record revenue and earnings. The strong performance from our operations is marked by quarterly revenue of $895 million and net revenue amounting to $737 million, which is a quarterly record for us. Now when adjusting for the FX change from last fiscal year, revenue was up 7% and net revenue was up 12% over the last year on a constant currency basis. We experienced strong revenue growth from all the end markets, including US commercial, international, federal government, and our state and local clients. Our profitability for the first quarter was also very strong. Our adjusted EBITDA came in at $103 million, which was up 16% over last year, and our EBITDA margin increased 90 basis points to 14%. This improvement came from both segments as you heard from Dan about three-quarters of this increase was driven by our growth in the GSG segment, while an improvement in GSG's operating margin, which was up 240 basis points over last year, and about one-quarter of the increase was in operating income coming out of CIG, where the margins were up 60 basis points over last year. Our GAAP EPS came in at $2.18, an increase of 74% from last year. As noted in our reconciliation summary, we entered into a hedge for the purpose of locking in the RPS price in US dollars at the time we signed the agreement back in September. Now for the first quarter of fiscal 2023, we had an FX hedge gain of $68 million that contributed $0.94 to the GAAP EPS. We entered into this hedge when the British pound was trading at a 30-year low to the US dollar. At the time the acquisition closed in late January, just 10 days ago, the cumulative gain on our FX hedge amounted to about $110 million, effectively reducing our purchase price by almost 15% and saving over $6 million in interest expense per year going forward. In addition to the hedge gain, we incurred costs related to the RPS acquisition for bridge debt financing fee of about $2.7 million recorded in our net interest and for legal fees of about $3.8 million recorded in operating income. Excluding these acquisition gains and losses, our quarterly EPS came in at an all-time record high of $1.34, a 13% increase compared to the adjusted EPS last year. I also want to point out that our tax rate in the quarter was 25% versus 19% a year ago, and that tax rate differential had an impact on our EPS. If we were at a similar lower tax rate, our EPS would have been even higher by another 20%. Cash flows generated from operations for the first quarter totaled $25 million. Historically, the first quarter is seasonally our lowest period relative to cash generated from operations. Our focus on working capital and cash flows has resulted in our DSO maintaining the leading industry standard of 61 days. This is a sustainable improvement from prior years, and this lower DSO trend continues to reflect 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 amounts to $82 million, and the net debt to EBITDA was at a leverage of 0.2 times with a total cash position of about $164 million. Regarding our dividend program, we paid out $12 million in dividends in the first quarter, and I want to announce that our Board of Directors approved a $0.23 dividend to be paid this quarter. This is our 35th consecutive quarterly dividend and our seventh consecutive year of double-digit year-over-year increases in the dividends paid. The continued high-quality operating and financial results with improved EBITDA margins, positive cash flows, and lower leverage has provided the opportunity for Tetra Tech to comfortably take on greater leverage through our banking relationships to fund the RPS acquisition, which I will speak to next. For those following the presentation, I'd like to present our financial plan for the integration of RPS, which is a significant opportunity for Tetra Tech. When looking out over the next three years, we expect to; first, increase the EBITDA margins of RPS from the lower historical levels to be more in line with Tetra Tech, generating margins well over 13%. This will be accomplished in a similar manner as what we had done for our two previous public company acquisitions, both Coffey in 2016 and WYG in 2019, by focusing on high-end differentiated services and revenues while integrating the business into our ERP platform and corporate systems for greater cost synergies. We had increased the margins in those businesses from breakeven to the current Tetra Tech double-digit levels. Secondly, through improved RPS profit margins and cash flows, along with Tetra Tech's strong positive cash flows from operations, we expect to deleverage our balance sheet to a level to be more in line with our long-term net debt-to-EBITDA goal of one times to two times. We would expect to have a net debt leverage of about 1.5 times by the end of this year. I'm very pleased to share these quarterly results with you for the start of our fiscal 2023. I want to thank you for your support, and I will now hand the call over to Jill to discuss just a few of the many business opportunities of bringing Tetra Tech and RPS together.

Thank you, Steve. RPS is an excellent strategic fit for Tetra Tech, expanding both our global water and renewable energy opportunities. Tetra Tech has a leadership position in water, as demonstrated by our number one water ranking by engineering news record for 19 consecutive years. Tetra Tech is working worldwide to provide our clients with sustainable water supplies and innovative water treatment solutions. Our rapidly growing digital water practice is advancing water utilities programs by providing remote automation, monitoring, and data analytics. The addition of RPS expands Tetra Tech's addressable market by providing us with access to a £10 billion per year UK water market. RPS brings long-term relationships and consulting contracts with all the major UK water agency clients. These clients utilize RPS Group's Water net Pro software platform on a subscription basis, a cloud-based decision-making system that provides predictive analytics and visualization for water quality, hydraulics, and asset management. The addition of RPS also advances Tetra Tech's global energy strategy by giving Tetra Tech access to a £15 billion per year offshore wind market in the United Kingdom and Europe, significantly increasing Tetra Tech's renewable energy opportunities. Tetra Tech holds top rankings with engineering news record in renewable energy for hydropower, wind power, and solar power. Tetra Tech has long-term relationships with energy utilities, having provided high-end siting and permitting consulting for more than 1,000 projects in the US. For the US offshore wind market, Tetra Tech provided all of the front-end planning and permitting services for the only two operational projects, the Block Island Wind project and the Coastal Virginia Wind project. RPS also brings an impressive resume for offshore wind in the UK and Europe, having worked for over a decade on the development of the various wind projects, providing specialized services in marine investigation and geophysical analytics. Together, we are ideally suited to support our clients in the expected 260 gigawatts of offshore wind development in the North Sea, representing a fivefold increase in current wind generation. With offices in Ireland, the United Kingdom, Norway, and the Netherlands, RPS is well positioned to put Tetra Tech on the map in the North Sea. And now, I'd like to turn the presentation back to Dan.

Great. Thank you very much, Jill. I'd now like to present our guidance for the second quarter and for all of fiscal year 2023. I will do that in two parts this morning. First, I'll present Tetra Tech's guidance without RPS. I'll remind the collective group here that they've been with us for just 10 days now. Second, I'll provide the outlook for the RPS Group's financial contributions for both the second quarter and for all of fiscal year 2023 for the amount post-acquisition or post-January 23. I'd like to begin with our guidance as follows for Tetra Tech excluding RPS. For the second quarter of 2023, our net revenue guidance is a range of $685 million to $735 million, with an associated earnings per share of $1.03 to $1.08. For the entire year of fiscal year 2023, we are increasing our net revenue guidance range to a level of $3 billion to $3.15 billion of net revenue, with an associated earnings per share guidance of $4.90 to $5.05. This guidance for Tetra Tech excluding RPS has the following assumptions: It assumes we will take an expense of $0.21 per share, or $15 million for intangible amortizations, and we'll have an effective tax rate for the year of 26% for the remainder of the year. We have approximately 54 million diluted shares outstanding, and this guidance does exclude any other contributions that would take place after the RPS acquisition. Regarding the financial contributions for RPS for the second quarter, we have estimated that they will contribute approximately $100 million of net revenue to Tetra Tech, with an associated earnings per share of minus $0.10 in the second quarter. For the entire fiscal year 2023, the eight months that they will be with us in total, we expect that they will contribute approximately $400 million of net revenue and be neutral to our earnings per share on an adjusted basis, excluding transaction and integration costs. In summary, we had an excellent first quarter and a fantastic start to fiscal year 2023, setting first quarter records for net revenue, income, and earnings per share. Our backlog reached another all-time high comprised of services that are aligned with our long-term growth strategy, providing us excellent visibility for the remainder of 2023 and even further into the future. As we begin the year, we're seeing increased opportunities and demand for our Leading with Science approach and advanced analytics solutions reaffirming our strategy to focus on the high-end services in water, environmental programs, and sustainable infrastructure. And with that, Darryl, I would like to open the call up for questions.

The question-and-answer session will begin now. Our first questions come from Noelle Dilts with Stifel. Please proceed with your question.

Hi. Thank you, everyone. Could you please elaborate on your expectations for RPS margins for fiscal 2023? Before the acquisition, RPS was discussing achieving a double-digit EBITDA margin in the near term. Could you provide more details on your margin outlook for this year and how the cost savings you mentioned will unfold over the next approximately 2.5 years? Thank you.

Absolutely, Noelle. Thanks for the question. Steve actually put together a slide that was included in his prepared remarks that graphically depict our expanding margin expectations for the RPS Group. Now in 2022, which has been completed, let's call that the trailing 12 months, RPS Group was around 4%, just slightly over 4%. We expect that under Tetra Tech that number will double and we expect as an average for the year that it will increase to approximately 8%. In fact, we'll be exiting fiscal year 2023 at a run rate closer to 10%. But for the average, they will contribute for 2023, it's approximately 8% for the year, beginning at approximately 4% now, and expanding to a run rate at about 10% at the end of the year. We expect in 2024, that number to move into a double-digit level, approximately 11%, and that level will enter at about 11x at about 12 with an annual average right there in the middle at about 11 for 2024. And finally, in the following 12 months, we expect that to be at Tetra Tech level, which would be a 13% plus. In one respect, I would say that 2024 sounds like a long way away. But since we're on the US federal government calendar, that's less than eight months away. So, it's actually quite close. With respect to savings, I did make a comment on the adjustments regarding our forecast for contributions from RPS to Tetra Tech. We expect that on a cost synergies basis, moving to common platforms and aligning our systems, we will see once fully implemented, we will have approximately a $25 million contribution from reduced cost or it will contribute to their EBITDA. That is embedded in helping assist to get to the margins I just indicated. We expect that it will cost us about $20 million to achieve the $25 million in savings per year. We expect to get about half of that cost synergies this year in fiscal year 2023. So of the $25 million, we'd expect to get about $10 million a year in savings here in this current fiscal year. The cost for that will be about $15 million. So of our total $20 million that we'll spend to achieve the $25 million, we'll incur about half of that this fiscal year. That will leave about $5 million for fiscal year 2024. We expect the annual yield to be up to about $20 million a year for 2024, and then beyond that, $25 million on an ongoing basis. I know I ran through those numbers pretty fast, so if there are some questions on that, I'd be happy to get into those details or have Steve provide some of the underlying support.

Sure. While we're discussing RPS, I know that sales synergies were mentioned as a significant rationale behind the acquisition. Can you elaborate on your thoughts regarding these opportunities and the growth potential of the combined Tetra Tech-RPS entity as you look ahead over the next couple of years?

I'm really excited about the progress we're making. Our financial team and I take great satisfaction in the growth we anticipate. We're expecting the financial contribution from RPS to Tetra Tech to reach the mid to upper teens after the first year of integration, and I firmly believe we can exceed that target. What's truly thrilling are the revenue synergies. The combination of Tetra Tech and RPS opens up new geographic markets and capabilities, particularly in permitting for innovative renewable energy projects globally. Offshore wind stands out as a major focus. While RPS would struggle to access US markets alone, Tetra Tech brings significant opportunities in the fastest-growing offshore wind regions, such as the North Sea. This merger can be seen as one plus one equals four or five, rather than just a slight increase. Additionally, we are eager to make a significant impact in the UK water markets. Tetra Tech has extensive experience with water quality programs, while we have expertise in agricultural impacts on water quality. This aligns perfectly with the new priorities for UK water utilities' asset management programs. Tetra Tech has been supporting the US EPA for decades, and now we can apply that knowledge in the UK. With RPS holding master service agreements with major UK water utilities, we believe we can quickly move up the ranks by offering unprecedented value. The water utilities can leverage the significant investments made by the US government without having to make those expenditures themselves, thanks to Tetra Tech's advanced technological capabilities.

Great. Thanks very much.

Thank you. Our next questions come from the line of Andy Wittmann with Baird. Please proceed with your question.

Thank you for taking my questions. Dan, I would like to get a clearer understanding of the quarter and how it aligns with the guidance provided. You mentioned that the GSG segment had some items that led to higher margins than anticipated, which shouldn't be seen as a lasting advantage. You indicated that 15% is more reflective of the underlying performance. If we consider the margin discrepancy, it suggests a difference of about $0.10, indicating that you exceeded the quarter's expectations and your guidance, but perhaps not by a wide margin. It seems that the majority, if not all, of the guidance increase is attributed to the GSG segment's margin performance. So, my first question is whether this is the correct way to interpret your guidance, and does this imply that the outlook for the rest of the year remains positive and intact, though not significantly altered? Am I understanding this correctly?

I believe that's a good way to look at it. We had a strong first quarter. I mentioned the significant effort we made by staffing an additional 1,500 employees from October to December to respond to Hurricane Ian in Florida. We were quite active during that time, bringing in staff from other areas of our operations to speed up our response and reduce the impact on Florida residents. I consider this an extraordinary situation, especially with the effects of climate change and storms. I'm cautious about calling it a one-time event, as it doesn't seem that way. If you model the 17%, it would significantly raise our guidance. We reflected all of the positive results from the quarter in our annual guidance. We anticipate stronger performance moving forward. We entered the year with an optimistic EPS forecast, which included a planned 50 basis points increase in our overall company margin. We aim to maintain and slightly improve that margin while accounting for the positive results from Q1. So, yes, our guidance entering the year remains intact, though we’ve raised it further based on the positive performance. We're optimistic, but it’s been a challenge to forecast RPS's contributions after just 10 days of integration. That's why we presented two parts: what the base company has achieved, which includes exceeding the quarter's expectations, and looking ahead with RPS as we integrate them into Tetra Tech. We expect to report a combined strong growth rate of over 20%. I’m eager to share how this will positively impact our bottom line through valuable cost synergies and revenue. So, I think your assessment of us maintaining and improving our outlook throughout the year, despite the positive results, is correct.

Okay. And then, I guess, the follow-on question to that is, obviously only 10 days with RPS here, but going forward can you just talk about how you're going to discuss EPS guidance? There's going to be an intangible amortization hit which you don't know yet. So you provided a very realistic way of looking at it with this kind of two pieces. But going forward, do you think that 2023 will have an adjustment for some of this intangible amortization? And then maybe as you move into 2024, will it return to a more historical approach which is really based on GAAP principles, or how are you thinking about that internally?

That's a great question. For those familiar with Tetra Tech's guidance, it's clear that we're operating on a GAAP basis. In fact, we're likely the only company across all industries that makes adjustments to lower our actual performance figures. You can see that we adjusted our earnings per share from over $2 down to $1.34. Last year, we took any extraordinary contributions into account and adjusted our EPS accordingly. I don't know of any other company that does that besides us. We do present GAAP results, and we plan to revert to that once we've fully integrated RPS and understand the one-time costs associated with that integration as well as the intangible amortization. I expect these will be accounted for on an adjusted basis, and we will be transparent about these figures. Moving into 2024, I anticipate that we'll return to our historical reporting practices, including this quarter's clean and straightforward GAAP reporting. Any extraordinary contributions have been excluded to ensure our increases are accurately represented. I'm not looking to change Tetra Tech's reporting methods moving forward. There will be one-time items related to RPS joining us, and it's important to adjust for these to clarify their contributions as we still don't know the intangible amortization figure. We'll incorporate that next quarter and will likely have adjustments throughout 2023 before reverting to GAAP reporting at the appropriate time.

Okay. That all makes a lot of sense. Thank you for your time and perspective.

Great. Thank you very much, Andy.

Thank you. Our next questions come from the line of Alex Dwyer with KeyBanc. Please proceed with your question.

Hi guys. Can you talk about the IIJA? It sounds like the expectation is still for a minimal contribution later this year? Has anything changed here since the last update maybe in terms of customers moving forward with projects or more funding coming through the pipeline? I'm just trying to get a sense of what's currently baked into the guidance could ultimately prove conservative this year?

Well, it's a good question. It's probably one we get quite frequently ever since both the IIJA passed into law, I would say when the CHIPS Act and even the Inflation Reduction Act have been enacted, we get varying comments. We do believe it will have a contribution, primarily late in the year. We have it been quite de minimis overall. The growth rates that we've had in our state and local, which we expect one area to be contributed to the funding. We've seen our clients begin to get some of the funds or grants provided to them, but they haven't necessarily flowed at any material level to us yet. I expect in late Q2 but really in Q3 and Q4, these projects to start. It's mostly going to be on the upfront planning, the initial outline of even conceptual design. I expect many projects to start in the second half of fiscal year 2023. What’s exciting for us about it is not the financial contribution in 2023, but the projects that will start generally begin at a small level and will begin to build up like a bell curve. These projects start with small conceptual tasks and assignments, eventually moving into permitting and detailed design. So they'll build and really contribute over many years. These programs that will start in the second half of this year are going to build for multiple years and they'll contribute for three to five years or more. Moving on to the owners engineer and oversight during implementation by the constructors. It’s a de minimis contribution during 2023. We had no contribution in our first quarter and is not included in any material way in the second quarter. You'll see it begin to build in the second half. I've not seen anything that would cause it to be delayed or pushed out to the right. We're now seeing what's appropriate, the funds go to our clients, which then trigger their ability to procure, and you'll begin to see it in backlog. It’s also worth noting that the funds and legislation didn’t contribute to our backlog growth in the first quarter.

Got it. And second question, you guys raised the margin target ranges for both of the segments last quarter. This quarter was interesting with the GSG margin coming in well above the high end of the range even when you back out those three items you called out in the prepared remarks. I was just wondering if there was the latest message on the timing of CIG margins potentially catching up with GSG margins. Is this still the case, or what could be the timeline?

That's a great question. It's a great question. Every time I speak with our CIG leads and executives, they say they're going to close the gap, GSG widens the gap by additional performance like you saw this last quarter. I will say that we expect that GSG as an overall range for the year to be between an EBITDA margin between 13.5% and 14.5%. CIG thought they were beginning to close that gap by being 13.1% in the first quarter. I keep saying, I expect that CIG will catch and surpass GSG. I can tell you, whether it will be in one of the quarters this year is uncertain. If they miss catching up, it's not because CIG has underperformed; it’s because GSG has outperformed. For our investors, shareholders, and analysts who track this, if CIG doesn't catch or surpass GSG, it’s good for our performance because that means we're going to be over the top of any of our estimates as you saw in this last quarter.

Thank you. Our next questions come from the line of Tate Sullivan with Maxim Group. Please proceed with your question.

Hello. Thank you and good morning. Again, you mentioned renewable energy great growth in US commercial and used the term I haven't heard before renewable energy services being a fast-growing business. Is the majority of that already the offshore wind projects that you work on before adding RPS?

The fastest-growing area has been renewable energy services. Onshore wind continues to perform well, and solar energy has also shown strength. Currently, hydro represents the largest single component of our activities in Canada and the US. Up until about ten days ago, our focus was primarily on projects in Canada and the US. With RPS now part of our team, we anticipate significantly greater opportunities, particularly with new renewable energy initiatives in Australia, the UK, and Europe. The growth driving our 22% year-over-year commercial increase has largely been from renewable energies, with offshore wind permitting being a key factor. It's important to note, as Jill mentioned, that Tetra Tech has handled all the permitting and preliminary studies for the only two operational offshore wind projects in the US. We are also supporting the majority of the offshore leases from the recent New York block lease auctions. We see strong prospects in the US, considering our involvement in these two operational projects and our support for the new offshore leases. RPS has indicated that our achievements are modest compared to our extensive decade-long work on developing the world's largest offshore wind generation facilities. The combination of Tetra Tech's projects and RPS's initiatives looks very promising for us as we move into this year and beyond.

And bringing what you have done in offshore wind to RPS is it similar capabilities, or can there be cross-selling of the RPS and offshore wind opportunities in the UK?

We can. One thing that's interesting is the work that RPS has been doing to support the offshore wind is different than what we've been doing. They are both under the buoy or under the general topic of permitting or offshore studies. But RPS brings new technologies that we've just not seen or utilized here in the United States. For example, they have offshore automated autonomous buoys—very large buoys, almost like small vessels—and they have LiDAR systems and Radar systems, with self-regenerating power supplies through solar panels. They measure all of the different attributes necessary for modeling in case of a discharge of oils or environmental impacts from offshore wind or the vessels servicing them. You can do real-time monitoring for oil spill trajectories and state transport with these buoys. We haven't used those in the US. On the other hand, our work here in the US with the offshore includes very high-resolution marine biology divers impacts to benthic studies, fisheries, avian flyways. We have a small fleet of offshore high-resolution surveys, hydro survey, sub-bottom profiling, and real-time evaluation of marine mammals we can bring to them. There’s synergy in that we'll bring technologies that haven’t yet been used in Europe or other locations and vice versa. I think it really is very complementary and synergistic, so that's why I'm very thrilled about the financial model that will come out with mid to high-teens accretion, but the revenue side is really what excites us.

And then are there any lower-margin construction management works in RPS that may lead to divestitures?

Well, the gross to net is actually smaller than Tetra Tech. They have less of a difference from gross to net. On a full annualized basis, a 12-month basis, they're about $700 million in gross revenue or total revenue, and we expect on an annualized or 12-month basis to be around $600 million in net revenue. That about 15% difference between gross and net is actually less than what we have at Tetra Tech. We do more government work than they do, and we have more requirements for using small disadvantaged participation on execution of federal work. Naturally, we have contractual obligations to meet the subcontracting requirements. They do have some work that is lower margin. We're not necessarily seeing any divestiture. As we've implemented in both Coffey and WYG, we will change the model and move it decisively in one direction, which is more high-end, reflected with less competition, and higher-margin and technically differentiated services that are just not offered in the marketplace or have a much different competitive landscape. Our efforts will not be focused on being bigger, but our absolute focus is on being better with RPS. That will be reflected in the margins.

Thank you, Dan.

Thanks, Tate.

Thank you. Our next questions come from the line of Michael Dudas with Vertical Research. Please proceed with your question.

Thank you. Good morning, Dan and Jill.

Hi, Michael.

Hi, Michael.

Okay. So continuing on the thoughts on RPS. I know it's only been 10 days and such, but maybe you could share a little bit about your expectations relative to managing the new employees' retention expectations? Are there any significant senior people that need to be around the or join the team? Relative to that and the margin question you just touched on before, have these margins in more Tetra Tech expertise and value proposition added through the contract base of RPS, or are there things RPS can do better to extract those better margins amongst their, especially their government clients?

So, two questions there. One is retention, the second is increasing the margins or project execution. With respect to retention, it is new. We do have retention programs here in Tetra Tech. We have equity positions that we will provide access to Tetra Tech stock, as we do with Tetra Tech staff, that is a component of retention. We will provide selective retention stock awards that vest over multi-years for select areas across the top to ensure they own a piece of the rock. RPS's turnover currently, or I shouldn't say currently, prior to our acquisition is higher than Tetra Tech, quite a bit higher. Tetra Tech's overall turnover rate is right around 10%, slightly below that. The turnover rate of Tetra Tech when you've been here for more than five years is about 1%, very low. What I'm looking to achieve is to provide that type of career stickiness with the people at RPS. This is not a next step in their career. This is the next landing spot where they will continue their career throughout retirement for those wanting to be high-end technical engineers and scientists. I expect they have a home here forever and that they will help make Tetra Tech better than we were before they joined us and provide our clients with extraordinary levels of institutional knowledge consistency. Tetra Tech is not going anywhere. The next recession is not impacting our business. In fact, if you look at 2008, we grew through that. If you look at the pandemic, we were up through that. The tougher things get, the better home this is for those employees. Regarding can they run better, I think they have been hampered and restricted by a lack of a single ERP system in their back office. The ability for their project management and technical staff to have real-time understanding of where they are and decisions-making to be made immediately, regarding access to knowledge systems across the entire organization is substantially higher at Tetra Tech. We're one to two decades ahead of where RPS is on that journey. We're going to move what would be another five to ten-year journey for them into a 12 to 24-month period, and they will be on our systems. That will help provide new solutions for their clients and will then result in better performance and better delivery and value propositions for all of our clients and the 100,000 projects.

Excellent, Dan. Thank you.

Thank you, Michael.

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

Thank you very much, Darryl, and thank every one of you for being on this call. Thank you very much for your patience with us, as we look to have more clarity with respect to the very specific contributions on both revenue and earnings and really the outcome of the revenue synergies we have with more projects for our end clients. I know we have probably too many times during this call, but the first 10 days with us have actually been exceptional. I had the great pleasure to be in the UK last Monday when we closed and had a chance to spend the entire week with many of their operations across the UK, Norway, the Netherlands, and I left more excited than I went even going over there. I think it's going to be a great contribution. I'm going to have the great opportunity to do the same across our Australian and Asian markets. It’s not just me doing a ceremonial visit, it’s going on the front line with our operations staff that are initiating the collaboration for new project wins. I can say that on the first day, we've already had wins together that we wouldn’t have otherwise had. I hope you can tell from today's presentation, I'm really looking forward to sharing more details and progress we're making, as soon as this next quarter in 90 days. I hope you have a great rest of the week, and I look forward to talking to you on next quarter's call. Thank you.

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