TTEK - NASDAQ

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 Leslie Shoemaker, Chief Sustainability Officer. 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, the appropriate GAAP financial reconciliations are posted in the Investors section of Tetra Tech's website. [Operator Instructions] With that, I would now like to turn the call over to Dan Batrack. Please go ahead, Mr. Batrack.

Thank you very much, Shamal, and good morning, and welcome to our second quarter fiscal year 2024 earnings conference call. I'm looking forward to providing all of you an overview of Tetra Tech's second quarter results over this next hour of our call. During the quarter, our focus on high-end consulting continued to reshape our revenue and our profit margins, resulting in Tetra Tech exceeding the high end of our guidance for this past quarter. At the same time, software as a recurring revenue stream continues to gain traction as an offering that we're providing in tandem with our consulting services. In March, at the end of our second quarter, we were very pleased to see the U.S. federal budget finally get completed after a series of continuing resolutions over the past 6 months. On April 10, and then following the next week on April 19th, 2 new regulations were finalized in the United States that represent a step change in the country's efforts to reduce and virtually eliminate the presence of PFAS-related chemicals in our water and in the environment. I'll begin this call with an overview of our second quarter and the performance across our operations. Steve Burdick, our Chief Financial Officer, who will provide an overview of our financial performance and our capital allocation program. and Dr. Leslie Shoemaker, our Chief Innovation and Sustainability Officer will provide some early insights into the significance of the recently announced PFAS regulations as well as giving an update of our sustainability report that was just released in April. On another note, we look forward to presenting our strategic plan for Tetra Tech in 2030 at our inaugural Investor Day that will take place in about 2 weeks on May 14, and I'll provide an overview of our key agenda items later in this call. In the second quarter of fiscal year 2024, our net revenues increased 9% to $1.105 billion in total. Excluding the impact of onetime events associated with our support in Ukraine, our year-on-year revenue growth was 12%, well into the double digits. Our EBITDA -- our earnings increased 28% to $135 million and over double the rate of our revenue growth, which is directly in line with our goal to increase our margins more rapidly than our revenue. And finally, in the quarter, we generated an all-time high for our second quarter of earnings per share, which was $1.42, up 34% from the prior year. I'd now like to present our performance by our segments. In the second quarter, the Government Services Group or our GSG segment was up 15% compared to last year, excluding Ukraine and disaster response to a total of $466 million and generated a very strong 13.7% margin, which is up 170 basis points from the prior year. The key driver for GSG's margin expansion was an increase in the higher-margin environmental and advanced water treatment work that we do all across the United States. The Commercial/International Group or CIG segment grew net revenue by 10% year-over-year and delivered a 13% margin, which was up an impressive 320 basis points from last year. This CIG margin expansion was largely driven by the increase in the RPS margins, which are well ahead of the RPS margin expansion plan that we put in place. In addition, growth in higher-margin renewable energy services also contributed to the higher margins that we saw in CIG in the quarter. I'd now like to provide an overview of our performance by our end customers. Work for our U.S. federal clients was up 14% from the same quarter last year, excluding Ukraine. Growth was driven primarily by increases in our federal environmental practice, including for our clients in Defense, NASA of the U.S. Department of Energy and the U.S. Environmental Protection Agency. Our U.S. state and local revenues grew organically 14%, excluding the effects of disaster response, continuing to be driven by the work we do in advanced water treatment for cities and utilities all across the United States. Our U.S. commercial net revenues were essentially flat year-over-year. We did incur some weather-related delays in our larger coal ash programs that take place in the Midwest of the United States. And finally, our international revenues were up 17% year-over-year. Tetra Tech international operations, together with RPS, that joined us our growing water and renewable energy services, particularly in the geographies of the United Kingdom and in Australia. I'd now like to discuss our backlog, which completed the quarter -- second quarter at $4.74 billion, which is up 11% from last year. In the quarter, we further increased our PFAS-related contract capacity with the award of a new $464 million U.S. Army environmental remediation services contract. And we also added a new $375 million NASA environmental restoration contract. We also augmented our contract capacity for coal ash remediation with an addition of a $55 million single-award contract in the quarter. And finally, decarbonization continues to drive new awards in the United Kingdom with addition of a $22 million single-award contract for building system optimization. With the federal budgets now fully in place, since March '24 or really at the end of our second quarter, we're already seeing a significant uptake in the pace of new contract awards and more importantly, the actual release of task orders under our existing standing contracts. At this point, I'd now like to turn the presentation over to Steve Burdick, Chief Financial Officer, to present some details of our financials. Steve?

Thank you, Dan. So I'd like to now provide an update on the results of our first half of the fiscal year as well as our working capital, cash flow and capital allocation through the second quarter. So net revenues increased by 21% to just under $2.1 billion year-to-date, driven by strong end markets across all geographies and a contribution from RPS. Over the same 6 months, our EBITDA and operating income increased at a higher rate than our top line revenue growth. And as Dan discussed earlier in the call, we continue to focus on the front-end cycle for water and environmental projects, which are carrying higher margins across our end markets. As such, EBITDA for the first 6 months came in at $266 million or up 27% year-over-year. And our operating income also increased 23% to $229 million. And so for the first 6 months of the year, our earnings per share of $2.81 increased compared to last year. And the increase was primarily driven by the improvement in the second quarter operating margins across both our GSG and CIG operations. Now Cash flows generated from operations for the second quarter were $103 million and exceeded net income by over 30%. And the trailing 12 months totaled $368 million or up 35% from the previous trailing 12-month period. And when we look back over our historical financial results, we noted that our cash flow from operations has exceeded our net income every fiscal year for the last 2 decades. Our focus on working capital and cash flows has resulted in our DSO, reflecting an industry-leading standard of 55 days versus the industry average at over 80 days. The second quarter results saw an improvement of 4 days from last year. This historical low of the DSO for working capital is sustainable over the longer term as we continue to make cash flows from operations a priority. And this lower DSO metric also provides significant insight into our 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 all of our geographies. Our net debt amounted to $741 million and the net debt on an EBITDA multiple was at a leverage of 1.4x. This leverage includes the capital used to acquire LST in the second quarter, and if not for this acquisition, our leverage would have been closer to about 1.2x. Our leverage is well within our target and much lower than when we acquired RPS just over a year ago. So in the second quarter, as I mentioned, we did close the LST acquisition. LST is a leading federal government technology consultant focused on the civil agencies in those markets and is part of our GSG segment. So as we presented here today, we continue to execute on high-quality operating results with strong cash flows, industry-leading days sales outstanding and a net debt leverage well within our target range. And while this strengthening financial position and balance sheet is occurring, I would like to now present our capital allocation overview as of the second quarter of fiscal 2024. We have a significant amount in liquidity available to invest in both organic and acquisitive priorities, and we have a well-balanced mix of both fixed rate debt at a 2.25% coupon, which matures in 2028. While our variable rate debt is sitting now just over 6.5% interest rate. This balance helps to mitigate interest rate risk as we look to invest in these key strategic priorities. We have a strong pipeline for acquisitions which is aligned towards technical leaders, especially in the water and environmental services spaces where we have led the market for the last 20 years. And regarding our dividend program, I'm pleased to announce that our Board of Directors approved a $0.29 quarterly dividend, which is a 12% increase year-over-year to be paid in the third quarter. This is our 36th consecutive quarterly dividend with an annual double-digit increase in the amount paid. And as we've revised our capital structure in the last year to take advantage of the credit market to support our financing needs, I want to remind our shareholders that we do have available a significant portion of the $400 million from the stock buyback plan approved by our Board of Directors back in 2022 for future consideration as part of our disciplined capital allocation strategy. So just as Dan also said, I'm also pleased to share these really strong results for the start of our fiscal 2024. I want to thank you for all your support. And I will now hand the call over to Leslie to discuss Tetra Tech's differentiated and market leadership in water and sustainability. Leslie?

Thank you, Steve. On Earth Day, April 22nd, just 10 days ago, we released our 2024 sustainability report. At Tetra Tech, we report both on the company's internal operational metrics as well as tracking our project impacts worldwide. In alignment with our commitments to the UN Sustainable Development Goals and science-based targets initiative, we're pleased to have further reduced our emissions from Scope 1 and 2, both on a per person and absolute basis collectively. Emission reductions have benefited from our initiatives to reduce office space by 30% as well as the highly efficient use of cloud-based computing and data storages that we use in our operations. This year, we continue to expand our Scope 3 emissions coverage by including a global assessment of employee commuting frequency and practices. Our commitment to doing our part in the reduction of global greenhouse gas emissions is best realized by the project work we do, which since 2021 has removed over 153.6 million metric tons of carbon equivalent emissions. This exceeds our entire scope 1, 2 and 3 from internal operational admissions by more than 2,000x. And finally, we continue to progress to our goal of beneficially impacting 1 billion people's lives by 2030 through our project work. To date, we have positively impacted 625 million people's lives since we launched the 1 billion people challenge in 2021. So I'd now like to move to talking a bit about the recently announced PFAS-related regulations, both for drinking water and the EPA Circular program. These 2 announcements have really created a step change in the overall regulation of the removal of PFAS sources throughout the United States. And I can't understate how well this is aligned with what we do and the services Tetra Tech provides in environmental work and analytical work all across the United States. The PFAS water treatment MCLs addressing 6 different PFAS compounds announced April 10, 2024, are the first new drinking water pollutant limits to be announced since 1996. These limits provide, for the first time, a consistent threshold and a schedule for implementation and remove the state-specific variability and lack of clarity that has existed across the United States. Just 9 days later, EPA announced that PFAS compounds will also be considered hazardous substances and assessed through the risk-based circular process. Taken together, these regulations affect our clients across the United States, including cities, municipalities, industries, federal defense and civilian agencies. We see the first wave of work for us as data analysis and modeling to assess key questions that our clients have. Where is PFAS present? Where is it migrating? What are the mitigation strategies and ultimately, how can we define treatment solutions. This type of analysis will also spawn additional research specifically to support pressing questions associated with who pays for these increased treatment requirements. Now we expect to see a quick ramp-up of data analysis and modeling services as we enter 2025 that directly leverages our expertise, client relationships and the contract vehicles that we hold in this space. This analytical work will become a springboard for us, providing a competitive advantage for the long-term design and implementation services we expect to see over the next 5 years and well beyond. We are really looking forward to further expanding on our strategies associated with PFAS and other items during our upcoming Investor Day, which now Dan will give you an overview of.

Great. Well, thank you very much, Leslie. I and all Tetra Tech are very pleased to host our inaugural Investor Day, which is going to be held via simulcast on May 14, 2024, at 09:00 a.m. in the morning Eastern Time. And there just could not be a better time for us to provide a long-term outlook and a deeper discussion into the opportunities that are right in front of us now. During the meeting, myself; Steve Burdick, our Chief Financial Officer; Dr. Leslie Shoemaker, you've just heard from, and 6 of our key management members are going to be there to provide you with an update on our strategy spanning from now all the way through 2030. We'll describe during the Investor Day, our growth strategies that encompass the entire full water cycle as well as emerging opportunities at the nexus between environment, renewable energy transition, and building decarbonization. And also during the Investor Day, we're going to describe the strategies and goals that we're setting in place to expand our recurring revenues, and we'll establish and share with you both our revenue and margin expansion targets that we've established for this period. At this time during the call, I'd like to provide our guidance for the third quarter and our updated guidance for all of fiscal year 2024. Our guidance is as follows: for net revenue in the third quarter, our net revenue range is estimated between $1.05 billion and $1.1 billion of net revenue, with an associated earnings per share of $1.50 to $1.55. And our guidance for fiscal year of 2024, which has been raised, represents a net revenue range of $4.21 billion to $4.31 billion with an associated earnings per share of $6.15 to $6.25. After following along on the simulcast, you -- this morning you can see some of the assumptions, I'll touch on them very briefly. Our earnings per share guidance range does include intangible amortization of $49 million for the year or $0.66 per share, and if you're following along on the slide presentation, you can see it broken down per quarter. But we do estimate that we will have an effective tax rate of 27% for the year, 54 million average diluted shares outstanding. And this guidance does exclude any additional acquisitions that we would complete from this phone call today forward through the end of the year. In summary, we see a very strong demand for our differentiated leading with science services across the water and environmental markets that we're working in. Our second quarter results set new records for revenue, operating income and earnings per share while maintaining industry-leading days sales outstanding and cash flow that Steve Burdick went over. Our strategic focus on high-end water and environmental consulting is driving margin expansion and is growing our operating income. And as a result, the strong performance that we had in the last quarter and the confidence in our outlook I'm very pleased to have shared with you that we've raised our fiscal year '24 guidance for both net revenue and earnings per share. And with that, operator, I'd now like to open the call for questions.

[Operator Instructions] The first question comes from Tim Mulrooney with William Blair.

I'll leave the questions about the quarter and the guide to others. We'd really like to dig into PFAS with you for a moment, given all the recent events that have occurred here. Dan, I noticed something that we've discussed together, and I know this is an issue you care a lot about and know a lot about. So for my first question, I'm curious how you're thinking about timing now that these regs are passed. And what I mean by that is the MCLs, they've got a 5-year grace period for remediation. And the super fund designation, I think, takes quite a while to unfold. So in your mind, is this not a 2024, 2025 story, or do you expect some folks to start moving quickly to get ahead of these new regs?

Well, you're right. I'm extremely interested in this having spent much of my career several decades on the environmental investigation and assessment, both working on circa working on Recro programs. both the federal government and commercial side. So I'm extremely interested and somewhat knowledgeable on PFAS and thank goodness, I have Dr. Leslie Shoemaker, both a PhD and engineering, a leading modeler for the federal government for many years, for decades, a member of the National Academy of Engineers. So if I ever need any more detailed advice, I've got Dr. Shoemaker at my back all the time. But with respect to timing, I'll just say a couple of words on that. With the regulations coming out, it really answered a couple of things. We've been working with our clients for years and years, and I've always been asked, is it coming out, if this is really going to happen. Well, that's off the table now, it did happen. Second was, when is it going to happen? We've got the dates. So 3 years and a day from April 10, you got to monitor it at the municipal level. And 5 years and a day, you actually have to treat it to remove it from your water delivery systems. So I would say that things aren't going to move immediately with respect to treatment, are people going to get ahead to upgrade their plans. I've seen numbers from the American Water Works Association at I think roughly $37 billion, an upfront cost to upgrade the treatment plants. There's other numbers from many different groups and agencies and advocacy practices that have the numbers much higher. So I think those -- other than the federal government, who had a lower number, all of the independent entities have numbers that are higher and some nobody is going to rush to put that numbers in place until they can actually do it the most effective way. And I think what Dr. Shoemaker commented on is we've been contacted already regarding, can you tell us what we're going to have to do, is it here? Is it coming? What are the different options, and a lot of the options are, can we draw from water supplies that are not impaired? And could we actually manage our systems, and if there is a hotspot, can we actually bifurcate it or isolate it and move it to be treated or addressed by the responsible party, which was her comment on, there's going to be a lot of work done between now and when implementation is put in place even to monitoring. With respect to those that caused it, will pay for it. And it will be their responsibility, which means there is going to be a lot of upfront modeling, analysis and the rest of it that will take place. And I think that will be the first large wave that comes in because you're going to have to implement what's been impacted and if it's being addressed by other parties, best to have them take care of their responsibility. So anything to add, Leslie?

No, I think you have it spot on. And that early analysis and sort of can't understate how much Tetra Tech does in that space. And we think of it as accelerating the consulting side, this upfront work. So it's essentially doubling it as we go on a run rate into 2025. We do roughly $60 million a year in PFAS-related work. So it gives you sort of a sense of what that first wave might look like. And as Dan pointed out directly in our wheelhouse to do the analysis and modeling scale for PFAS, whoever the client may be.

Our next question comes from the line of Sangita Jain with KeyBanc Capital Markets.

So if I can ask 1 on, aside from the PFAS rules, there was also new limits on pollutant discharges from coal plants, wastewater from coal plants, does that, in any way, add to your scope since you do work with coal-ash remediation.

It does. It does. In fact, we see that as an additional driver for the work that we're doing. The coal ash both compliance and remediation cleaning up of these very large ponds and effluence discharges, which are creating new ponds are now seeing more regulations. And it's really interesting. There's been a lot of questions about administration changes. Obviously, there's election here in the United States and questions as to if there's a change of administration, can these regulations be rolled back or changed or modified, they're being inculcated so deeply at the -- from the federal level and sort of embedded at the state level that to untwine these is really complicated at best. And so I believe these are going to go forward. The work that we have both to treat the effluent standards at combusted coal locations or coal-fired power plants and the resulting impoundments that they have, we think it's going to be an additional driver. That's just another case in point, there's been questions, it's not, if it's coming, it's when it's coming, and when it's going to be implemented. And by almost all standards, and it's not a direct reference to inflation, but things cost more later to do than they do sooner in this particular front. So the work that we're doing on combusted coal residuals, remediation and management of these large impoundments that almost all are in close proximity to water bodies, mainly rivers and things, which really prompted many of these regulations with failures of these impoundments that caused enormous environmental and even human health impacts and in some instances, even fatalities. So I expect this to continue moving forward. We are no doubt one of the leaders. We work for some of the largest utilities across the United States, and I expect this to actually pick up as an additional -- it's not new, an additional opportunity and become more of a tailwind as we go forward.

Great. And if I can follow up with one. You mentioned software subscriptions in your prepared remarks, becoming a bigger part of the portfolio. Should we hear -- should we expect to hear more on that in a couple of weeks. Will you quantify that for us in terms of revenue and margin targets?

Yes. Yes. In fact, one item I'll comment just to put it in context, and we'll provide more details on where we are, what the growth rates are, what we expect the margins to be. But it is a little different approach that we're taking here. Many think of software sales a recurring revenue as, I guess, in the old days, you'd say, on a CD disk in a cellophane wrapper that you would sell to somebody. This is really being done highly in tandem with the consulting services where we have well over 20,000 clients that we do significant work for. They represent the largest government agencies around the world, certainly in the English-speaking Commonwealth countries and the United States. The largest Fortune-100 clients, and putting these software programs in place to add value to our clients as part of the consulting work that we're providing to them, gives us a trusted relationship, the value that it provides, the cost savings to our clients. We'll speak in detail about that in our Investors Day. But it is a different approach. We're coming at it as a domain expert that can actually identify the value and the savings from not only the consulting service fees, that can be more effective. But the use of the software can make faster real-time decisions that have better outcomes from them when they're done in tandem with our consulting services. So this is not a sales force that we're giving suitcases full of disks in cellophane and saying how many can you sell? We're actually going to our clients, and we've already placed with existing clients that we have, 2,000 licenses in one instance that we have currently, and we'll give more details on what we have today and how we see that progressing. And so I welcome you and all others on this call and further to dial in, so to speak, to our Investor Day on the 14th of May.

Our next question comes from the line of Sabahat Khan with RBC Capital Markets.

Great obviously, a strong growth year this year. We're seeing some margin improvement, I guess. So maybe if you could just help us think through the medium term a little bit as you head into calendar '25 and onwards, maybe just some of the bigger picture growth drivers. I'm not sure if that's some of the stuff you're saving for Investor Day, but would love to get a bit of perspective on you're going to have a bit of difficult comps here from the good growth last couple of years. How should we think about the medium-term growth algo, perhaps?

Well, I don't want to give too big a preview or you won't show up on May 14, but I'll give you -- but I think one of the things that we want to approach on our Investor Day, and I'll touch on it here, is we really do want to look beyond just what is 2025. So for fiscal year 2025, which amazingly is about 4.5 months away. It's amazingly not that far away for us because we are on a federal government calendar. So I will say that once we complete fiscal year 2024, we'll provide you specific details on our guidance for the first quarter and for fiscal year 2025. So I'll try to stay away from that. But our goal, and we've been very clear for many years that our overall goal is to be between 10% and 15% top line growth. We -- a portion of that has been acquisitive with respect to adding new clients, rounding out certain critical scale, and geographies that we think is important to be a market leader in and to add technology. In the very strong environment that we've seen today economically, we see the acquisitive portion being a smaller component of our growth and the organic being larger. And of course, we do have the flexibility when things slowdown in the events of economic cycles, high and low. When things do get slower, we would see the acquisitive portion to be a larger part of our growth. So I think from a growth standpoint, if you sort of take half of the 15% organic, you sort of see in the middle, I would say, beginning to wonder if there is a new normal and it being more than mid- to upper single digits and maybe a bit higher. But that's what we would look at from a longer standpoint, and that's nothing new that we haven't communicated in the past, and we expect that to continue. I do think with the mix of the work we have and the advent and the addition of software services from a reoccurring basis, margins are substantially higher. And it has caused us to relook at what the upper limits could be even on the government side. The value being contributed to our clients can actually yield higher margins for ourselves but most importantly, even better value for our government clients. So they're going to get more for each dollar that they contract with Tetra Tech. So it is a win-win. But we will provide more details on what we expect over the next 5 years, roughly. So between now and 2030, we'll provide targeted margin ranges at that time, and we'll actually provide specific drivers, which we think, and I'll repeat what we've said in the past, including today, we think the focus on clean water, clean environment, mitigation of impacts to climate change and actually resiliency to protect the structures that we have. And the structures are not just man-made, concrete or steel or other physical structures is to protect the natural environment for degradation of biodiversity and the natural environment as it should exist without unusual impairment from these events. So we are engaged in all of those, every one of those have tailwinds that are not measured in 5 years, they're not even measured in a decade. We're just beginning, and these are really generationally long priorities for certainly the United States, Canada, Australia, U.K. and frankly, the world. So those are what we're focused on. Those are our tailwinds, and we'll look forward to giving a lot more detail in a couple of weeks.

That's great. I think that was enough of a teaser to get us to attend the Investor Day. So I guess, maybe just switching back to RPS for a bit. You talked about good 12 months beyond the acquisition. You talked a little bit about the synergies. If you can maybe remind us a bit on some of the revenue opportunities with the combined platform. I know we talked about the integration a bit on the last call, but just not that the business is largely rolled into your base numbers, where have you seen some wins taking the combined capabilities to customers? And maybe what are some of the opportunities that you think would show up over the next 12, 24 months, that we should be keeping an eye on that could potentially provide accelerated top line?

Well, I like these questions because we can give specific answers because we press release them. So I'll give you an example of where we think we have seen revenue synergies within the first year, and it was in the U.K. AMP programs, so in the United Kingdom, the priority for their AMP8 or their asset management program over the next 5 years is CSOs or overflows or impacts to surface water leaks streams, bugs, coastal areas from overflows from the sewer systems. And while it's brand new and it's a new priority in the United Kingdom, Tetra Tech has been doing that here for the past 20, 25 years, has been regulated here. The investments that have been spent by the U.S. EPA and state and local agencies that we've done a bunch of this work. Dr. Shoemaker is actually one of the people who have done some of the early work regarding chemical loading for rivers and estuaries. And she's really the one thing, we will provide this in Investor Day is she is the original author, much of modeling that has set the standards for the United States. So Leslie is not just an amazing executive and a good speaker. She's as deep of a technical expert in his work as comes in the industry anywhere. And so those expertise we've taken, coupled with what we had in RPS, and we won a $125 million 10-year program management for United Utilities that we announced here a month or 2 ago that we're just getting started with. It's a 10-year program. We think we can bring the technologies together with RPS to these new geographies to make a leap in the technologies and the solutions provided in the geographies that RPS with our clients and not have to go through this long learning curve. We've also had enormous wins already that we press released on offshore wind and other renewable energy clients. The RPS has brought technologies such as offshore buoys and monitoring. They've given us a great geographic presence in Australia and the U.K., where renewable energy investments are enormous. And then if you take the expertise that Tetra Tech has, and its modeling of the effects on the environment and wildlife, the combination has added tens of millions of dollars in a short time with commercial clients and commercial energy developers. And we've named a global renewable energy. We don't call them a cult leader, where we've knitted all of this together. And so we're working very closely, and we've had tens of millions of dollars of hard awards that we're working on now that would have not happened either for us or for RPS if we hadn't been together. I think we're going to see a lot more of that with respect to the U.K. water. We're going to see more of that on renewable energy globally. And I think that some of the work that's being done by the defense departments globally, Ministry of Defense in the U.K. Department of Defense in the U.S. and Australia are going to benefit greatly from contract capacities that we have that these entities are sharing, and so you don't have to win necessarily a new framework contract or a new IDIQ if they're actually doing work in a bilateral fashion between these different government agencies. And we're as well positioned in that front as anybody. So that's another revenue synergy that we're seeing just beginning to take off, and we've had hard wins in those areas. So it's kind of nice to be able to share dollar amounts for renewable energy, dollar amounts for U.K. water utilities, and dollar amounts for defense globally, that have come from the combination of RPS and Tetra Tech already.

[Operator Instructions] Our next question comes from the line of Tate Sullivan with Maxim Group.

Leslie, did you mention earlier you mentioned 65 million number, I think you said of PFAS-related work. Was that for what you've done in fiscal year '24, or can you reiterate that or talk about that number please?

60-ish, we'd say, is about our annual PFAS work that we're doing mostly in the investigation and consulting space, including quite a bit of work for the U.S. Defense Department and scoping PFAS expense, and we would look to see that accelerate as we go into next year with more of the investigatory work that we talked about, and so our target -- our expectation is that we'll see it double on our run rate from that 60 approximately this year.

And then you had some details in the press release in early April on your work in the city of Dayton with PFAS, and is the city type of work that you're doing in Dayton is that very unique and large scale compared to what other cities might do? Or is that a good blueprint for what Tetra Tech might be able to do for other cities?

I think it's an excellent example of some of the early works. So you have a few of the municipalities that have sort of gotten ahead of the curve in terms of managing their various water sources, balancing water sources and then putting in place treatment that anticipates both PFAS regulations as well as other contaminants, and so that's actually a really nice example of some of the types of design work that might be coming our way in the future. But we actually see these as relatively unique in the early stage of the ones that want to get ahead of it way in advance of the requirement to have treatment in place.

And Dan, you mentioned earlier a little bit on the U.K. work and looking forward to hearing more on May 14th. The presentation, you called out some U.K. water planning and design work, is that not related at all to future U.K. AMP8 spending, which you've commented before that most of that will start to be spent in fiscal year '25, but I'm not sure if you have some design work ahead of that spending, please.

The work that we summarized in our materials regarding other U.K. planning and design work is really that's come out of the existing contracts that are held over there. So Tetra Tech in its offices and resources we have all across the United Kingdom and Republic of Ireland, have a number of framework contracts. I think I had mentioned in the past, we're not #1 yet in the U.K., stay tuned for that, as that's clearly our target. But through the contracts and frameworks that we do through existing support of the water utilities across the United Kingdom, that really represents this, and it's not unique to AMP8. I'd say the most notable one is since technically, AMP8 doesn't start, they're putting contracts in place, but it doesn't start until just in front of us. So I would say this represents other work that we're doing under existing contracts that we have in place across the United Kingdom.

And this will conclude the Q&A session. I'll now turn the conference back over to Dan Batrack to conclude.

Thank you very much, Shamal. And thank you for your questions. Thank you for your interest in Tetra Tech. We consider other than presenting the detailed results of our second quarter and our first half of the year that we just went through. We're really looking forward to spending time with all of you here on May 14th to go through more details of what's driving our business and our outlook really over the next 5 years. So I won't say goodbye until the next quarterly call. I'll say so long until we're able to speak with you all during our Investor Day presentation in a couple of weeks. And with that, I appreciate you attending, and I'll talk to you soon.