Good morning, and thank you for joining the Tetra Tech, Inc. Earnings Call. As a reminder, Tetra Tech, Inc. 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, Inc. And this broadcast is the copyrighted property of Tetra Tech, Inc. Any rebroadcast of this information in whole or part without the prior written permission of Tetra Tech, Inc. is prohibited. With us today from management are Roger Argus, chief executive officer and president, and Steve Burdick, chief financial officer. They will provide a brief overview of the results and will then open 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, Inc.'s periodic reports filed with the SEC. Except as required by law, Tetra Tech, Inc. 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, Inc.'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 the conference for questions and answers after the presentation. With that, I would now like to turn the call over to Roger Argus. Please go ahead, Mr. Argus. Thank you, Christine.

Morning, and welcome to our fiscal year 2026 second quarter earnings conference call. I am pleased to join you today for my first quarterly call as CEO of Tetra Tech, Inc. I want to begin by recognizing Dan Batrack’s leadership for more than two decades. Dan and I have worked together for many years, and I am grateful for his continued partnership and support as our executive chairman. Tetra Tech, Inc.’s success is made possible by our 25,000 employees around the world. I have had the privilege of working with many of our technical teams across our operations. Their expertise, client commitment, and ability to solve complex problems are what make Tetra Tech, Inc. different. Demand for clean water, environmental quality, and resilient infrastructure continues to grow worldwide. Our strategy is not changing. We will continue to focus on high-end solutions that address the complex challenges where our clients need us most. For the call today, I will begin with an overview of our second quarter’s performance, and the client markets that are driving our growth. Steve Burdick, our chief financial officer, will provide detail on our financial performance and capital allocation. We delivered a strong second quarter with positive performance across our key financial metrics. Net revenue increased by 8% during the quarter on a year-over-year basis, supported by demand for our high-end consulting services in water, environment, and sustainable infrastructure. EBITDA of $146 million resulted in a margin expansion of 90 basis points when compared to last year and is an all-time record for a second quarter. Earnings per share were $0.36, including $0.02 associated with the completion of the divestiture of our Norwegian operations. Our adjusted earnings per share of $0.34 exceeded the high end of our guidance and was also the highest for any second quarter. And importantly, our backlog increased by 8% sequentially and is now $4.28 billion, which illustrates the resiliency of our technically differentiated “Leading with Science” approach. Overall, the quarter demonstrated the strength of our business model. We are growing in the right markets, improving margins, and entering the second half of the fiscal year with strong momentum. I would now like to discuss our performance by segment. The Government Services Group, or GSG, grew 5% in the second quarter on a year-over-year basis and generated a margin of 16.3%, up 220 basis points from last year. Demand remained solid for our water, environment, defense, and resilient infrastructure services. The Commercial International Group, or CIG, also performed well with revenue up 10% from the prior year and a margin of 12.2%. CIG’s diversified mix of clients across water, environmental, power, and energy markets worldwide provided growth across the key geographies that we work in. I would now like to provide an overview of our net revenue by customer. Our U.S. federal work was up 11% last year and represented 20% of our business. This growth was driven by our work with the U.S. Army Corps of Engineers for resilient infrastructure, including flood protection and inland navigation, defense facility systems modernization, and major planning and permitting programs for defense. Our U.S. state and local business grew 9% this quarter on a year-over-year basis and represented 14% of our business. Growth was driven by municipal water projects, primarily in the high priority regions of Florida, Texas, California, and Virginia. Our U.S. commercial business represented 19% of our business and was down 2% compared to last year. We did see a significant increase in revenues for energy and transmission-related services; however, this growth was offset by a reduction in renewable energy services, especially associated with the wind-down of the large offshore wind programs we worked on last year. Our international work was up 12% on a year-over-year basis, driven by revenue growth in water services in the U.K., Ireland, and the Netherlands, an increase in infrastructure services in Canada, and growth in digital automation revenues in Australia. I would now like to discuss our backlog. We had a strong quarter for new orders, and our backlog increased 8% sequentially. This is an important indicator of our increased demand for our services. As we have stated before, we take a conservative approach to backlog. We include only work that is contracted, funded, and authorized. This gives us high-quality visibility into future performance and increases our confidence in our project pipeline. Our backlog growth was supported by several important wins across our priority markets. In the United States, we added more than $650 million in contract capacity from U.S. defense clients for water and resilient infrastructure services. These projects support critical infrastructure needs that align directly with our strengths in water, environmental services, engineering design, and digital systems. In Northern Ireland, we added a new £18 million single-award contract for water and wastewater treatment services. In the Netherlands, we added a framework contract that significantly expands our capacity in key regions, with planned investments to address essential flood protection infrastructure modernization needs. At the Port of Los Angeles, we were awarded a master service agreement that supports one of the most important trade and logistics gateways in the United States. And finally, we further expanded high-end solutions for United Utilities in the U.K. with our Waternet software that provides a comprehensive platform for managing priority water leakage and water delivery modernization needs. I will now turn the call over to Steve Burdick, our chief financial officer, to discuss our financial results and capital allocation in more detail. Steve? Thank you, Roger.

I would like to now provide an update on our reported year-to-date fiscal 2026 results, working capital, cash flows, and capital allocation. As Roger discussed, our market-leading focus on the front-end consulting and design for water and environmental projects is carrying higher margins across all of our end markets. As such, even as the reported revenue was down from last year due primarily to the decrease in revenue from USA customers, and revenues from one-time disasters this year compared to last year, our operating income increased significantly and adjusted EBITDA on net revenue year-to-date increased 110 basis points to 14% for 2026. These results further support our long-term strategic goals in improving EBITDA margins by 50 basis points annually. As a result of our ability to enhance our profit margins and further manage our working capital, we were able to increase EPS over last year and come in well above our previous guidance range for the second quarter. Now regarding our working capital, cash flows generated from operations for the first half of the year were a historical record at $238 million, which represents a significant improvement over fiscal 2025. And consistent with the last 20-plus years, our operating cash flows have continued to exceed net income. Our focus on working capital and cash flows has resulted in our DSO reflecting an industry-leading standard of 58 days, which is a 9-day improvement compared to Q2 of last year. This lower DSO metric provides a significant insight into our core business as it reflects outstanding work that our project managers lead relative to higher quality projects and highly satisfied clients in a broad portfolio across all of our end markets and geographies. Our net debt amounted to about $657 million and the net debt to EBITDA was at a leverage of 1.0x, which is a little over 25% lower than our leverage ratio one year ago when it stood at 1.36x. As we continue to execute on high-quality operating results with increasing margins, our operating cash flows in excess of net income and lower working capital KPIs will continue to provide higher returns for our shareholders, and those higher shareholder financial returns are reflected in an improving return on capital employed, which now stands at over 20%. With that perspective, I would like to now present our capital allocation strategy and overview. We have a very strong balance sheet, probably the strongest balance sheet in our history, and our operating cash flow was $688 million for the trailing twelve-month period. Roger will discuss our strategic growth areas later in this presentation, but I do want to point out that our balance sheet and cash flows provide us with significant liquidity available to invest in organic and acquisitive growth priorities in order to take advantage of these key business opportunities, which includes technology and automation that continue to provide us a dominant position in those markets. During the second quarter, and third quarter to date, we have closed the acquisitions of technical leaders focused on defense such as Halvik in the U.S. and Providence in Australia. Regarding our dividend program, I am pleased to announce that our board of directors approved the quarterly cash dividend with an 11% increase year-over-year to be paid in the third quarter. This is the 44th consecutive quarterly dividend with annual double-digit increases in the amounts to be paid. Based on the lower leverage, we have continued our stock buyback program this year, and in 2026, we bought back a total of $100 million. We have $498 million available from the stock buyback plan approved by our Board as part of our capital allocation strategy. I am pleased to share these really strong results for the start of fiscal 2026, which has enabled us to increase shareholder returns as we pay increasing dividends, increase our stock buybacks, and engage in accretive acquisitions, all the while deleveraging our balance sheet. I want to thank you for your support, and I will now hand the call back over to Roger to discuss Tetra Tech, Inc.’s growth opportunities for 2026 and beyond.

Thank you, Steve. I would now like to provide an update for our outlook for the second half of the fiscal year. We are beginning the third quarter with strong backlog and clear growth opportunities across our markets. As a result, we are increasing our forecasted growth rates for the second half of the year for both our U.S. federal and U.S. commercial client sectors to 8% to 12%. Together, these sectors represent 40% of our revenues. We expect U.S. Federal to increase as our clients fund programs to address both domestic civil works and defense facility modernization globally. U.S. Commercial’s increased growth rates align with the expected demand for water management for mining operations, expansion of domestic rare earths mine development, and further acceleration of the upfront work of planning and permitting for power generation and transmission. International work we expect to grow at a 5% to 10% rate with continued strength in the United Kingdom, Ireland, and the Netherlands water, and expected marine defense infrastructure spending in the U.K. and Australia. State and local work is expected to be about 15% of our business, with a growth rate in the high single digits between 5% and 10%. Our long-term outlook remains strong, with state and local spending increasing regionally in alignment with demand. I will now discuss our U.S. commercial, U.S. defense, and U.S. state and local municipal water business each in a bit more detail. Our U.S. commercial business is being driven by growth in power, data centers, and transmission. Electricity demand in the United States is expected to grow significantly over the next decade. Utilities and energy developers are responding by expanding and diversifying energy sources. We are ranked number one by Engineering News-Record in U.S. environmental work and have supported over 6,000 energy-related permitting studies. New transmission corridors and upgrades are also needed to connect power generation with fast-growing demand centers. These projects often cross multiple jurisdictions, which create complex planning and environmental requirements. We have permitting experience in all 50 states and bring experience from over 10,000 miles of transmission projects. At the same time, data centers further increase demand for water and power. Across the U.S., we are seeing examples of community resistance to data centers, and over 15 states are considering restrictions to data centers. Tetra Tech, Inc.’s front-end feasibility expertise is increasingly valuable for data center developers. Clients need clear answers on water availability, power sourcing, environmental constraints, permitting risk, and scheduling implications. For data centers, we currently have more than 20 active feasibility assessments for developers and providers at the earliest stage of their projects, supported by a multidisciplinary community of planning, water, environmental, and power subject matter experts. For our U.S. Federal business, the large budget increases and heightened priority of defense are expanding our opportunities to provide resilient infrastructure and planning services. In the U.S., we have federal contract capacity of $30 billion with coverage across defense agencies and locations domestically, and for facilities the U.S. has placed around the world. For the Army Corps civil works program, we design critical water infrastructure, including flood protection, dams and reservoirs, navigation systems. For the U.S. Navy, we similarly provide planning, permitting, and design services for the modernization of their specialized marine facilities. And for the U.S. Air Force, we provide the specialized expertise to transition to new firefighting foam technology and apply our PFOS scrub technology to remove remaining legacy PFAS contaminants. Our state and local business, where we hold contracts with over 500 municipalities, remains a strong and stable growth driver for our business. Across the U.S., we are working with our clients on the early stages of more than $30 billion in capital spending. We are helping our U.S. municipal water clients mitigate droughts by adding new water supplies that require the design of advanced treatment solutions. In low-lying coastal regions affected by saltwater intrusion, including high population areas of Florida, we design specialized solutions to inject treated water into groundwater. In the near term, municipal clients are anticipating less reliance on supplemental federal grants by adding new funding resources. They are increasing rates, issuing bonds, and restructuring funding to move their essential water projects forward. States such as California, Texas, and Florida, and others are stepping up and issuing new funding to support their local water utilities. With strong demand for sustainable water supplies, we expect to see continued growth and significant opportunities to address the regional water challenges in the major California, Texas, and Florida markets, as well as in the expanding population centers in coastal regions such as Virginia, and in the drought-affected areas in Colorado. I would now like to present our guidance for the third quarter and the entire 2026 fiscal year. Our guidance is as follows: For the third quarter, net revenue guidance is from $1.05 billion to $1.10 billion. Adjusted earnings per share guidance is from $0.38 to $0.41. And for fiscal year 2026, our increased net revenue guidance is from $4.25 billion to $4.40 billion, and our increased adjusted earnings per share guidance is from $1.50 to $1.58. The FY26 net revenue growth is up 9% year over year at the midpoint, with an associated margin expansion of 70 basis points year over year at the midpoint. You can read the FY26 assumptions, but I will highlight a few: intangible amortization of $33 million, depreciation of $24 million, interest expense of $33 million, and a steady effective tax rate of 27.5%. This guidance does not include contributions from future acquisitions. In summary, we had a strong second quarter and first half of FY26. Our operations continue to generate record cash. Demand for Tetra Tech, Inc.’s differentiated “Leading with Science” services in water, environment, and consulting is continuing to drive our growth as exemplified by the sequential increase in our backlog and significant wins with defense agencies. Our high-end technical services are well aligned with long-term demand in the United States and internationally, and with our increased confidence, we have raised our guidance for the full fiscal year ’26. We will now open the call for questions.

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 your 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 would like to ask a question, please press star then 1 on your touch tone phone. One moment, while we poll for questions. Our first question comes from the line of Tim with William Blair. Please proceed with your question.

Yes. Good morning. Thank you for taking my questions. I had a few questions on backlog to start off. I see it was up 8% sequentially. Curious if you expect to build on that momentum as you move through the year and, crucially, what the margin profile of the backlog looks like? I also wanted to ask about your international business. You talked a lot about the water opportunities in the U.K. and Ireland and the increased spending in some areas in Australia. But I wanted to ask about Canada because we recently saw the Canadian government announce more than $40 billion for development of the Northern and the Arctic regions for new forward operating locations, radar systems, and other hubs. Given you do a lot of front-end work for infrastructure development, how are you thinking about this opportunity over the next few years?

Good morning, Tim, and thank you for the questions. On our last quarterly earnings call, we noted that we expected that once the U.S. federal budget was resolved, we might see an influx or release of new orders. The budget was largely resolved in early Q2, and as expected, we saw new orders increase from the U.S. federal government. These included task orders from defense, including U.S. Army Corps, Naval Facilities Engineering Command, U.S. Air Force Civil Engineering Corps, and other federal clients as well. As I mentioned in my prepared remarks, we have seen an increase in our defense contract capacity by $650 million just in Q2. We are starting to see task orders under those contracts. Additionally, we received work under our contracts with U.K. water utilities, including United Utilities, as well as new awards in Northern Ireland. Collectively, these resulted in an 8% sequential growth, which gives us great visibility into Q3 and Q4 as we convert the backlog into revenue. I believe that Q2 represents an inflection point for Tetra Tech, Inc. in terms of our backlog, and we expect to see continued growth based on new orders through the rest of the fiscal year. The backlog is consistent with the growth rates reflected in our forecast for the second half and also supports continued margin expansion in line with what we have been experiencing in the last couple of years. Regarding Canada, we are quite excited about the opportunity that the new funding presents. It is early days, but we are positioning for opportunities for export terminals and marine facilities on the East and West Coast, as well as build-out of Northwest Passage ports and harbors related to not just military use but also potentially commercial use. Our expertise in coastal resiliency, marine facility design, planning, and permitting is well suited on both coasts. We also have very specialized capabilities and experience working in the Arctic and designing roads and facilities in extreme weather. In terms of timing, it is early, and while there is tremendous growth potential, I do not see this impacting FY26. More broadly, the resolution of the federal budget—while not completely resolved—has been helpful for our clients’ funding visibility and has fueled the uptick in backlog that we have seen. We do not anticipate any government shutdown the rest of this fiscal year, so we see that momentum continuing into Q3 and Q4, alongside strong non-federal drivers in power, water, and data centers.

Particularly as we think about some of your markets outside of the U.S., having seen some clarity on the U.S. side, how are you finding the demand backdrop or just the macro view in some of your international markets—whether it is the U.K., Australia, etc.? Has the demand outlook there followed macro headlines, or has it been more driven by local needs in markets such as water?

It is a bit of both. The global geopolitical situation affects all of the geographies that we work in; however, there are local demands for water, power, and other needs that drive our services as well. In the U.K., for example, AMP8 has received double the funding from AMP7, and we continue to see growth in our water services funded through that program across the utilities we work with. As noted, new projects and awards in Northern Ireland continue to fuel growth. In Canada, there is a lot of activity and potential opportunity with new infrastructure funding. Interestingly, U.S. “America first” policies are fueling work and investment in geographies we work in, notably Canada—development of export terminals and the northern front are, in part, responses to U.S. policies. In Australia, with gold hovering near $2,500 per ounce, we see increased mining activities. Post-COVID, there was a bubble of infrastructure investment to get everyone back to work, and we saw a bit of a decline as that work burned off, but we are starting to see green shoots in new infrastructure spending. Mining is fueling projects, defense shore facilities are driving growth, and we are even seeing opportunities tied to new infrastructure spending for the 2032 Olympics in Brisbane. On capital allocation priorities relative to M&A versus buybacks and dividends, we look at the totality of our balance sheet and leverage, along with multiple sources of capital. We have never used equity for acquisitions, but it is not off the table. Between our balance sheet and our equity, we have the opportunity to invest in the growth areas that will have the most value for the company and our shareholders over the next couple of years.

Our next question comes from the line of Sangeetha Jain with KeyBanc. Please proceed with your question.

Thank you for taking my question. On the cash flow strength, now that the business has recalibrated post USAID, how much further room do you think you have on DSO reduction to keep up this cash flow strength? And on data centers, can you tell us exactly what work you are doing for them and how your scope is evolving as data centers get bigger?

As we continue to make improvements in our systems and enhance how we go to market with our clients, you have seen over the last four to five years a continual improvement in our DSO year over year. Now our DSO is hovering in the mid-50s. I think we have the ability to take that down closer to 50 days, and our goal is to continue to see that improvement. One thing to understand is that our fixed-price contracts not only provide higher margins but also lower DSO in our working capital. As we continue to shift our mix toward more fixed-price work, we believe we will be able to further reduce DSO over the next couple of years.

On data centers, our primary work is feasibility and siting. There were many announcements of large investments, developers started to move forward, and then began facing community resistance and concerns around impacts on water availability and rates, power, environmental conditions, and more. We are seeing developers come to us to address these concerns and perform feasibility studies covering power considerations and availability, water availability, local regulations, community input, permitting, and scheduling. These are core competencies within Tetra Tech, Inc. that we offer across end markets. We also do work inside the envelope—data systems, commissioning, and other high-end engineering—but the predominance right now is upfront feasibility and supporting siting, permitting, and locating the data centers.

Our next question comes from the line of Ryan Connors with Northcoast Research. Please proceed with your question.

Good morning. You laid out the outlook by market. You did lower the outlook for state and local to 5% to 10% from 10% to 15%, and you had comments around municipalities shifting federal to local funding. Can you expand on that and how it impacts your strategy? Also, with a lot of budget posturing and the midterms coming up, how should we think about calendar 2027? And then any take on the Iran conflict and potential Mideast postwar opportunities now that USAID is off the books?

The municipal water market has been a staple and steady growth area for many years. My comments indicate caution from clients related to proposed federal budgets for next year that include potential reductions in supplemental grant funding. Most of our projects do not rely on IIJA money, but some clients depend on co-funding. In an abundance of caution, clients are looking at alternative methods—rate increases, bonds, restructuring—to keep projects moving forward. We still see the market growing, but this, along with the compounding on a higher base, informed our range. Regarding federal budget dynamics and midterms, visibility into FY27 is limited. What we saw last year was an aggressive initial budget that was moderated through the process. It is difficult to speculate now. Our end markets have proven resilient; for example, EPA Superfund work historically is immune to cuts due to long-term legal obligations. On the Iran conflict and the Mideast in a postwar scenario, opportunities for us would be driven by the U.S. Army Corps of Engineers—rebuilding damaged facilities, foreign military sales, and other infrastructure. We still have contracts with the U.S. Army Corps Middle East District and are prepositioning for post-conflict opportunities.

Our next question comes from the line of Maxim Sytchev with National Bank. Please proceed with your question.

Good morning. I wanted to go back to your comment around fixed-price exposure, which is up almost 900 basis points year on year, alongside significant margin improvement. Can you talk about that algorithm as both percentages go higher? And philosophically on capital allocation and M&A, given new technological developments, where do you land on where to deploy capital?

A historical perspective: in 2023, fixed-price work represented about 37% of total net revenue. Year-to-date, it is about 48%. With that increase, and the types of fixed-price work we do, margins have increased over the same time period. In GSG, last year fixed price represented about 29% of net revenue; this year it is about 42%, and you saw a significant increase in margins. Our goal is to continue progressing our contract mix toward fixed price. Fixed-price work carries higher margins and lower working capital requirements, which we believe will be a financial and value benefit going forward.

On M&A, we have always been very disciplined—strategic fit, financial accretion, and timing. Given uncertainty from various sources, M&A for us is about fit and timing—finding the right time when a deal is advantageous to our shareholders. Our priorities include advanced analytics in water, digital automation, and areas that increase client touchpoints and technology leadership across our geographies.

Our next question comes from the line of Andrew Wittmann with Baird. Please proceed with your question.

Good morning, and thanks for taking my questions. First, backlog versus revenue expectations. After USAID went away, your backlog ex-USAID is up about 2%, but your underlying growth rate in the back half is higher. Has the average duration of the backlog shortened? Also, can you comment on FX impact to net revenue this quarter, whether there was any disaster work, and the $61 million of net revenue from Ukraine—what is embedded for the back half?

With the backlog decrease from USAID—which did have longer-term backlog—and with different federal agencies ramping back up after gaining clarity in early February, a lot of backlog remains shorter term compared to prior years. We do see a bit more book-and-burn this year versus prior years; that is the key driver of the dynamic you are seeing. FX impact was minimal and not material relative to guidance. There was effectively no one-time disaster revenue in the quarter, unlike last year with large hurricanes in Florida and fires in Southern California. Regarding USA work primarily related to increased activity in Ukraine, the appendix shows about $61 million this quarter. For the rest of the year, we have about $20 million per quarter for both Q3 and Q4 included in our guidance.

Our next question comes from the line of Tate Sullivan with Maxim Group. Please proceed with your question.

Hi. Thank you very much. I am looking at the CIG operating income margin versus GSG margin. Understanding there are some acquisition impacts in the margin for the fiscal second quarter, do you still expect the CIG margin to approach closer to the GSG margin level, or is that changing? And on the Port of LA work you called out in backlog and via a March press release, was it a meaningful contributor to the backlog increase, and will you be doing much more at the Port of LA in the next three years compared to prior periods?

Q2 is typically the weakest quarter for CIG due to seasonality—many CIG geographies are in the Northern Hemisphere, where winter reduces field work and utilization, and Australia has many holidays. This year was a bit more pronounced than expected. We do expect CIG margins to improve through the balance of the year and return to normal levels.

When we look at the projects and revenue in backlog, we can see increased margins, primarily in CIG more so than GSG, so we do see those two getting closer together.

The Port of Los Angeles has been a long-term client. We are excited about the renewal of the MSA and expect to continue to do work and grow that portfolio. It is impactful for us, and while it may not be material at the total-corporation level, it is a premier U.S. port and illustrates our differentiated capabilities that lead to selection on prestige opportunities.

Our next question comes from the line of Michael Dudas with Vertical Research Partners. Please proceed with your question. Michael Dudas, your line is live. This will conclude the Q&A session. I will now turn the conference back over to Roger Argus to conclude.

Thank you, Christine. In closing, I would like to thank everyone for your insightful questions and interest in Tetra Tech, Inc. Tetra Tech, Inc. is addressing our clients’ most complex challenges in water, environment, and sustainable infrastructure using our “Leading with Science” approach. As CEO, my focus is to build on the foundation that has made Tetra Tech, Inc. successful. I look forward to speaking with you again next quarter, and have a great day. Goodbye.

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