Good morning, and thank you for joining the Tetra Tech Earnings Call. By now, you should have received a copy of the press release. If you have not, please contact the Company’s corporate office at 626-351-4664. As a reminder, Tetra Tech is also simulcasting this presentation with slides in the Investors section of its website at www.tetratech.com.

This call is being recorded at the request of Tetra Tech, and this broadcast is the copyright 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; and Steve Burdick, Chief Financial Officer. They will provide a brief overview of the results, and we will 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 growth 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 takes 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.

At this time, I would like to inform you that all participants are in a listen-only mode. At the request of the Company, we will open up the conference for questions and answers after the presentation. With that, I would like to turn the call over to Dan Batrack. Please go ahead, Mr. Batrack..

Great. Thank you very much, Laura, and good morning, and welcome to our fourth quarter and fiscal year 2020 earnings conference call. Before I begin my presentation today, I would like to begin with an update on the potential implications to our business from the election here in the United States that took place just nine-days ago.

Well, first, it is very early, and the transition process hasn’t even started yet. But we do know some things, and let me share with you what we have observed to-date. Joe Biden has identified climate change is a top priority of his administration.

This priority is directly in-line with our expertise in more than 50-year history in addressing the complicated aspects of water, environment and energy associated with climate change for the Federal Government. We work for agencies, such as the United States Environmental Protection Agency, U.S.

Agency for International Development, the Army Corps of Engineers and FEMA, who we believe will be among the frontline entities leading the government’s climate change initiatives. The Biden administration has also emphasized investing in infrastructure is a key to revitalizing the United States economy.

Even in a likely divided Congress, government-sponsored infrastructure stimulus funding has the potential for bipartisan support. Clearly, we would also benefit from increased infrastructure spending. However, the timing of the new infrastructure stimulus package is uncertain at this time.

As we see the new administration’s programs develop, we will give you additional updates on our quarterly calls. I will now begin with an overview of our performance and customers, followed by Steve Burdick, our Chief Financial Officer, who will provide a more detailed review of our financials and capital allocation.

I will then address our customer outlook and our earnings guidance for fiscal year 2021. We had a strong fourth quarter, led by our record EPS and backlog performance. Our revenue of $753 million was up 6% from the prior quarter.

Our net revenue also increased on a sequential quarterly basis by 5% to $590 million, which was at the high end of our forecast. Our Q4 EBITDA of $74 million generated in adjusted earnings per share of $0.91, which was ahead of our expectations on strong performance across all of our operating divisions. And it was also up 17% from the prior quarter.

This represents the highest quarterly earnings per share in the Company’s history. In our backlog, which is our best forward indicator, was up 5% year-over-year and 6% sequentially, growing to over $3.2 billion, also the highest in the history of the company. I would now like to provide an overview of our performance by our end customer.

In the fourth quarter, revenue for all of our customers increased sequentially. We saw continued strength in our state and local revenues, which were up organically year-over-year, 14% and up sequentially 9%.

Excluding the extraordinary contributions of our disaster response work, this is the 5th consecutive year of double-digit growth in our state and local business. Work for our U.S. Federal clients was 30% of our net revenue in the quarter and was up 4% sequentially. Our U.S. Federal work grew 5% year-over-year for civilian agencies and 10% for the U.S.

Department of Defense. However, this growth was offset by delays in work for U.S.A. due to travel restrictions associated with the COVID-19 virus. Our U.S. commercial net revenue was 24% of our business and up 3% from the prior quarter. Our environmental providing, our regulatory-driven programs and renewable energy services continue to be stable.

We did see some reductions in consulting for non-regulatory services, especially for new buildings in the commercial property sector. And finally, our international net revenue was up 7% from the prior quarter. We saw continued growth in our local government services and commercial energy work in Canada.

However, discretionary work for commercial clients was impacted by project delays and cancellations in our Asia Pacific region. I would now like to present our performance by segment. This quarter, I would like to provide more insight into our margin performance by segment, a key metric that we have been very focused on for the past several years.

In the fourth quarter, both of our segments showed significant margin expansion on both a year-over-year basis and a quarter-over-quarter basis. The Government Services Group or the GSG segment was up 50 basis points year-over-year, delivering 14.6% margin in Q4 of fiscal year 2020.

Strong margin performance was driven by our high-end data analytics and design services for a broad base of our clients in the water and environmental and for both our local and Federal clients. The Commercial International Group or CIG segment, margins were up 150 basis points year-over-year as per our plan and is now closer to the GSG’s margin.

CIG delivered an 11.9% margin, up 180 basis points from the prior quarter, demonstrating a continued expansion of their margin in spite of the impacts of COVID-19. CIG’s fourth quarter results were the result of the change to a more favorable business mix and a disciplined project delivery that our management team oversaw during the quarter.

For the full fiscal year of 2020, we achieved all-time record highs for EPS, cash from operations and backlog. Tetra Tech’s full-year revenue was $3 billion. Notably, we generated a record earnings per share of $3.16 on a GAAP basis and a record adjusted earnings per share of $3.26 for the year.

We also generated record cash from operations of $262 million, for the year, and I’m quite pleased with the performance of our team in this area, especially during the unusual circumstances and disruption caused by the global pandemic. Finally, rounding out the year, our key leading indicator backlog was also a record high of just over $3.2 billion.

Backlog was up 5% on a year-on-year basis and up 6% sequentially on strong broad-based orders, resulting in a new all-time high of just over $3.2 billion. Last quarter of the fiscal year is typically our strongest quarter for orders from the Federal Government, and this quarter delivered fully up to our expectations.

In the fourth quarter, we won new programs and task orders for differentiated water, environmental and renewable energy services across a broad base of our clients, both in the United States and internationally. We expanded our contract capacity by $277 million to over $250 million with the United States Environmental Protection Agency and the U.S.

Army Corps of Engineers for environmental restoration and hazardous waste management services. In just in the fourth quarter, we won $69 million in contracts for renewable energy and power consulting services, continuing our differentiated leadership in this market.

Now I would like to turn the presentation over to Steve Burdick, to present the details of our financials for the quarter and year. Steve..

Okay. Thank you, Dan. So I would like to now review the GAAP financial results for the fourth quarter of fiscal 2020 as well as our financial position as of the end of fiscal 2020. Overall, our net revenue came in about as expected.

The fiscal 2020 fourth quarter revenue was $753 million and net revenue amounted to $590 million, which was in-line with the higher end of our guidance range of $560 million to $600 million.

Our fourth quarter revenue and net revenue growth rate was impacted by the completion of large disaster response projects in 2019 as well as our decision last year to dispose of our Canadian turnkey pipeline business. Excluding these two impacts, our revenues would have been in-line with the prior year.

Our operating margin and earnings per share increased compared to the prior year. This improvement in margins has resulted from both our project performance and our business mix as we continue to shape our portfolio. Our adjusted earnings per share of $0.91 came in better than the top end of our guidance, for Q4, which was a range of $0.78 to $0.83.

This improvement in our EPS was driven by the continued improvement in our operating margin, which show an increase of 150 basis points over last year on a GAAP basis. In the current year, both our GAAP EPS of $0.82 and adjusted EPS of $0.91 were improvements over the fourth quarter of last year.

The reconciliation details between our GAAP and adjusted results are included in the appendix of this presentation. Excluded from our adjusted earnings this quarter were two matters. First, we realized additional cash positive gains, these equipment sells now are complete, and the total gain for fiscal 2020 is just shy of $9 million.

Secondly, we recorded non-cash adjustments relative to purchase accounting in the fourth quarter. One for true up of our earn out liabilities and two a good will charge for our Asia Pacific division. Tetra Tech continues to be fiscally disciplined and focused on generating positive cash flows in excess of net-net income.

And proactively, we are strengthening the balance sheet to ensure a healthy level of liquidity. As such, our cash flows generated from operations for the year totaled $262 million, including $68 million in the fourth quarter. Total cash flow from operations amounts to about $4.80 of cash per share for the year.

And on an annual basis, the cash flow generated is about 26% higher over our fiscal 2019. Our focus on working capital and cash flows has also resulted in our days sales outstanding, or DSO, decreasing to 68-days as of the fourth quarter. This is an improvement of 10-days from last year and a sequential improvement of two days from last quarter.

Our net debt amounts to $134 million, which is a 14% decrease from last year. While still our net debt-to-EBITDA came in at about 0.5 times. Our long-term capital allocation strategy calls for balance of investing in growth of the business, managing the balance sheet and providing shareholder returns.

Over the last fiscal year, we have generated $262 million in cash from operations. And during the fourth quarter, we continued to benefit from this cash position by providing significant returns for our shareholders through both dividends and share buybacks.

Regarding our dividend program, during the past quarter, we paid out $9.2 million in dividends, and for the year, we paid out $35 million. I want to announce that our Board of Directors approved our 26th consecutive dividend, which will be paid in the month of December at a rate of $0.17 per share, which is a 13% increase over last year.

Furthermore, we utilized $15 million in the fourth quarter and $117 million for the year on our stock buyback program. On a combined basis, we have $208 million remaining under both of our previously approved stock buyback programs.

And just is important to successfully implementing our capital allocation strategy to provide returns to our shareholders, is to ensure that we have a strong balance sheet and ample liquidity.

We have both in terms of our balance sheet at the end of Q4 and available liquidity of over $800 million in the form of cash on hand and funds available under our credit agreements.

As a result, Tetra Tech is in a financial position such that we will continue to provide significant returns to our shareholders while investing in strategic growth areas, both organically and through key strategic acquisitions, such as Segue Technologies, which we closed in February and BlueWater Federal, which we closed in September.

I’m very pleased to share these results with you for the fourth quarter. I want to thank you all for your support, and I will now hand the call back over to Dan..

for the first quarter, we anticipate a net revenue of approximately $570 million to $600 million with an associated diluted earnings per share of a range of $0.78 to $0.83.

For the entire year and fiscal year 2021, we anticipate our collective net revenue to be in a range of $2.35 billion to $2.55 billion with an associated diluted earnings per share of $3.30 to $3.50. And if you are following along on the webcast, you can see the basis of some of the assumptions for this guidance for 2021 in the first quarter.

We do anticipate, based on acquisitions previously concluded that we will have approximately $8 million of amortization, which represents $0.12 per share. That is incorporated into the guidance. We expect a 25% effective tax rate. We expect approximately 54.5 million shares outstanding for the company.

And I will note, as in past practices with our annual guidance, this guidance does exclude the contributions of any future acquisitions that may take place during the year. In summary, we had an excellent fourth quarter and fiscal year 2020, setting new records for earnings, cash generation and EPS for our shareholders.

As we enter fiscal year 2021, our high-end water, environment and renewable energy services and our approach of leading with science is more in demand than ever before. Our all-time high backlog of over $3.2 billion provides us with both excellent visibility and momentum as we move into our new fiscal year.

And with that, I would now like to open up the call for questions. Laura..

The question and answer session will begin now. [Operator Instructions] Our first question comes from the line of Sean Eastman with KeyBanc Capital Markets..

Thank you. Nice, strong finish to the year, thanks for taking my questions.

I just wanted to start with the customary swing factors around the fiscal 2021 guidance, just the real needle-moving dynamics that could get you to the upper or lower end? And looking longer term, as we think about this election outcome, what drives sort of an accelerated top line growth trajectory into fiscal 2022 under this administration?.

Good question, Sean. The swing factors, the growth rates that I had shared during my prepared remarks do represent and would model out to the midpoint of our guidance. We certainly have the ability to go to the high end. And I think some of the items that could drive us to the high end.

Some of them are very short-term transactional items such as increased revenues from the storm events. That would include the fires out of West Coast. That would include the storms that have taken place. But those would be one time. Certainly, they would have a short-term impact on a positive, both in the early quarters and the year.

Probably on a longer-term basis, though, a more structural contribution would be the new priorities that the new Federal administration if the Biden administration fully gets this implemented. And this would be is that in my prepared remarks, focus on climate change, clean environment, focus on renewable energy.

All of these are absolutely fundamental core areas of expertise for the company. And I think that we would have high confidence that, in fact, they would be put in place.

And even without increases in funding or budget funding, we would also expect that they could actually prioritize the existing dollars that are spent by the government to areas that would be a focus of Tetra Tech..

Got you. Okay. That is helpful. And on the Advanced Analytics side, it seems like the fourth quarter was another leg of momentum on that side. And I’m just curious how you guys are tracking against that $300 million target for fiscal 2021 sort of Advanced Analytics revenue that you outlined last quarter.

And is it fair to say that as we look over the next year or two, growth in that as Advanced Analytics business is really the kind of key margin expansion driver over that time frame?.

Yes. The Federal Government, I think the continued growth in Advanced Analytics is going to expand our margin. We are on track for $300 million. It continues to grow at about a 15% to 20% organic rate for the Federal Government, and it is slightly higher margin.

We do think that the growth of that business over the year will increase our overall targets for our GSG or Government Services Group from what had been a 12% to 13%. We think it will add up probably 50 basis points for fiscal year of 2021. So probably the 12.5% to 13.5%. So it is making an impact even right now..

Okay. Got it. And I’m going sneak one last one in. I mean, clearly, you guys are well positioned within the framework of what this new administration has outlined here.

But maybe on the flip side of that, Dan, are there any pockets of maybe risk, whether it would be within the DoD business? Or otherwise that you guys are watchful of on the downside?.

Well, I think the biggest issue would be not the administration of its priorities. I think with respect to defense, we have no engagement or participation in weapons platforms or logistics or these other items. Our work is on the environmental restoration side.

So even a reduced spending in the defense sector, typically, we have seen with the base realignment and closure back a decade ago, actually had increased costs for environmental investigation assessment. Probably the biggest issue is a divided congress that would end up a lack of progress with respect to coming up with budgets.

But even a continuing resolution, which means a freeze of the budget from the prior year is actually fine for us, because the executive administration or the President’s administration would actually give the priority of where those funds are spent largely within each of the departments, which should be very favorable for us..

Excellent really helpful. I will pass it over. Thanks so much..

Good. Thank you Sean..

Our next question comes from the line of Noelle Dilts with Stifel. You may proceed with your questions..

Hi guys good morning and congrats on a nice quarter. So thanks for the clarity on the GSG margins.

I was hoping you could also give us a sense of how you are thinking about CIG margins as you look out to fiscal 2021 and what some of the key factors are that will impact how those are trending?.

Yes. Well, we think that as a range for CIG, we think it is increased over 100 basis points from the previous year. So we think 11% to 12% range would be what we would anticipate for the year. So it is closing in on GSG.

Some of the swing factors, I think we have taken care of a number of them that needed to be addressed coming into the year, which is business mix, including closing down our turnkey Canadian pipeline work, that has been helpful. And probably the next most material area that we view for improvement is actually in our United Kingdom or the U.K.

acquisition of WYG. We think that just moving into double-digit performance, which we think can happen this year. That in and of itself would account for probably half of that increase that we need to obtain this.

And I would say the swing factors with respect to what might be a headwind obviously, on the commercial side and some of the international lockdowns with respect to the pandemic, could represent a bit of unknown factors at this moment.

So both the slowdown or lockdown associated with the economic impacts that are associated with that are items that we are watching closely. But we have had those this last six months, eight months. And we think we have pretty effectively developed structures and business approaches to address these lockdowns so far..

Okay. Great. And then on the topic of the U.K., could you give us an update on how you are thinking about the M&A opportunity there, I know you chatted a bit about looking at a U.K. water acquisition to complement WYG.

Just curious kind of what the progress has been there and how you are thinking about that opportunity?.

Well, we have had meetings with a number of firms. So there are opportunities out there. So I would say the classic pipeline is full or at least it is sufficiently full that we have alternatives. We are looking for just the right firm.

And I think some of the characteristics would be strong technical reputation, existing contracts with the utilities as they exist. And preferably, they would add a new sense of capability and expertise in the water sector that might not be as strong.

Some of it might be on the economics portion that were not necessarily strong economist, but that is certainly is part of some of the AMP Cycle Seven’s priorities for doing that analysis. So that is something that we would look to make progress on in fiscal year 2021..

Great. Thank you..

Thank you Noelle..

Our next question comes from the line of Sam England with Berenberg. You may proceed with your questions..

Hi guys thanks for taking the questions.

The first one I had, could you just talk about how the integration of recent acquisitions is going and whether those acquisitions, the enhanced proposition you have has led to any contract wins that you might not otherwise have won before you did those deals?.

Well, obviously, we have had here just a little over 30-days ago.

I guess probably about a month and a half ago we announced the acquisition of BlueWater Federal, it is only a little over 30-days and we have already seen a number of new contract winds for maybe more importantly wit new departments and agencies within the Federal Government that we haven’t worked before.

So that is extremely valuable for us it gives us new opportunity not only for the acquisition in this case BlueWater to bring in their expertise that we can offer to our clients which we have already initiated. But it also opens up offerings of the rest of the Tetra Tech services to these clients that we haven’t had access to in the past.

So that is run quite well. If I go back just over a year ago WYG or White Young Green in the UK, I’m proud to announce that we have them fully integrated into our ERP systems. So it took us about a year. But we have migrated those couple of thousand people over to our ERP systems.

We have had a significant number of wins across multiple client sets in the UK that we would not have had before, including working for some of the water utilities that they had not worked before by getting slow source work in the UK. We have had additional wins with the Ministry of Defense and number of other areas there.

So that has worked out quite well. And by putting them on our platforms. It is allowed us to the free up a number of their back office staff to do more meaningful contributions to the operation folks, which has increased margins. And while we are not anywhere close to where we want to be in the UK yet.

We are probably halfway there, even in light of the pandemic taking place. So moving on to these more efficient systems we have and integrating and cross-selling for revenue synergies has worked very well there..

Okay. Great. And then the next one, you mentioned that you have been seeing sort of the trend towards a larger volume of smaller contract wins in Q4.

What is behind that trend and do you think it will continue into 2021?.

Well, I think it will. So let me characterize what we are seeing. In fact, in the fourth quarter, I think it was our second highest number of orders that we received in the company so it wasn’t a single order. It wasn’t just a Department of Defense task or project or program that drove it.

It wasn’t a single project or country mobilization for aid or anything else. It was really a very, very large number of projects and task orders, and many of those were new programs that were starting up. So instead of single big blocks coming in with large orders, and I think you can actually see it in our backlog presentation slide.

If you look down the orders that we booked, they typically were bundled into a number of categories. So I think there is a couple of things that it reflects. It reflects our clients making smaller bets as they go forward. So instead of providing is $10 million for six months. They are providing us $1 million every three weeks to get to the same levels.

It does give them more flexibility. It allows them to be a bit more nimble. And it allows them also to perhaps spread out those single dollars to other projects that could move forward also. So we see it as a favorable trend.

And I expect that it is going to continue for a little while until some of the uncertainty associated with this pandemic and other economic items get a little bit clearer for them..

Great. Thanks for your answers guys. I will leave it there..

Great. Thank you Sam..

Our next question comes from the line of Marc Riddick with Sidoti & Company. You may proceed with your questions..

Hi good morning..

Good morning Marc..

I wondered if you could spend a little time talking about potential opportunities around and this is more, I guess, more global focus, I suppose, but as far as the opportunity as far as rejoining of Paris Climate Accord.

And as well as with the Federal election, I was wondering with as much focus that we have had on the Federal election, I was wondering if there was some state and local mandates or funding that was sort of top of mind or areas that presents opportunity at least for the company as well. Thank you..

It is a good question. And I do believe that the U.S. rejoining the Paris Climate Accord. While that is one act that I understand will be put in place, and there has been a commitment or an indication from the Biden administration, that will be the case.

What we actually see, and we have seen early publications of some of the policies of doctrines that will be with the U.S.

Federal Government with the executive branch is actually a whole of government approach, which actually indicates that what they are going to do is identify individual champions and individual focuses that we will address climate change as it impacts each and every department and each an individual agency.

And so this, I think, is going to broaden out the access and the priority for the types of services we have. And a lot of that is both here in the U.S. And of course, the impact that it has globally through the U.S. State Department, through international development through a bilateral accords through all of these.

So I do believe this focus on a whole of government will ripple globally through all of the investments and priorities that exist.

And I just can’t think of a individual end marketer focus that would be more closely aligned to what Tetra Tech does and the expertise we have at the very front leading edge of this type of research and practical implementation of the Tetra Tech delta for the technologies we have developed over the last 50-years.

So I think that alignment portends very well for the company..

That is great. And then I guess maybe a quick follow-up on a different note. So wondering what the opportunities that you do see for the year as far as the budgeting for that was embedded with the guidance.

I was wondering if you could spend a little time talking about talent acquisition thoughts and sort of maybe what we might see throughout the year and if there is a timing component to that to take advantage of the opportunities that you see before you? Thank you..

Well, I do think the one item that Tetra Tech does have great bench strength, a great contra of world-class experts in a number of areas. And some would say that our staff is quite fungible with respect to being able to move from supporting commercial clients at front end cutting-edge treatment technologies to Federal Government.

So as these opportunities increase, I think we will be able to mobilize our staff quite quickly to address them and to be not only respond to precisely what they are asking, but also to be able to introduce additional scenarios or alternatives that perhaps haven’t been fully vetted yet.

So I think we can be both on the front implementable, which I believe in my comments are, it is not only being developed, but it is actually being mobilized. So I think that with respect to talent acquisition, we certainly are bringing some of the best and brightest through acquisitions.

We do have a number of strategic hires that join us from academic institutions and other leading entities globally, but we do have the ability to take the best and brightest across our entire enterprise and apply it to the clients problems where they need solutions on almost a real time.

So there should be no lag as these opportunities present themselves during 2021..

Very encouraging. Thank you very much for the color..

Thank you Marc..

Our next question comes from the line of Ryan Connors with Bening and Scattergood. You may proceed with your questions..

Great. Thanks for taking questions and congratulations on a tremendous run for the stock..

Thank you very much, Ryan..

So my question is more big picture in nature. Just this topic, you have talked a lot about this potential for Federal infrastructure, environmental spending under Biden administration.

And the stock does appear to be pricing some of that in, but how worried are you that he will be inheriting a massive Federal budget deficit, especially given that the politics seem to be such that maybe additional stimulus spending for COVID economically seems like the first priority.

So they definitely got to get even bigger before they even get around to any of this.

So how realistic is it to expect a big ramp there, when you look back at the history, generally coming off a recession, the government is trying to get the deficit under control, and Tetra Tech actually tends to underperform because the government is trying to reduce the deficit.

So what is your view there?.

Yes, I have seen that note. First of all, there are some things I agree with, with respect to what the natural progression of stimulus is. So when the initial stimulus comes out, there is more work, more projects, more demand for the services that we provide.

We think that because these will be more aligned with renewable energy, environment, climate change, that they actually are different than just traditional A&E services. So we think that we would fare better. But I do think if you just look at it from a macro view and sort of set aside the services, they do spend a lot at the beginning.

There is big spending. And then, of course, what happened under the Obama administration during the last major global financial crisis is that it does then go through eventually, at least historically, through sequestration, which was their words for spending less to get the budgets in place.

What we have seen is that as the Federal budget begins to decrease its spending to recover from these very large deficits. And by the way, I wanted to emphasize, the very large spending for the deficits for infrastructure and others, which also happened under Obama have not yet happened.

So that is still in front of us, which is a big hill to climb with respect to work that needs to be done. So that should be an enormous tailwind. But if you do want to take it to its logical next step is, at some point, you need to now pay for the amount that you have spent.

What happens is and this is what we have observed that then typically is followed by a recovery in the general economy with commercial clients and even state and local spending, tax receipts, property values and other items that are the output of the stimulus.

So yes, we have seen during sequestration, where there was a 10% year-over-year reduction in spending at the local government. We did see that come down a bit, but we saw offsetting increases in commercial and state and local.

And with respect to Tetra Tech’s performance during previous recessions or stimulus spending, we haven’t gone back and looked at that, and there were actually other factors with respect to submarkets that we had that actually account for that, and it was not associated with the actual work or the positions we had with the Federal Government.

So I do think that while at the surface, it could be attributed with the lack of knowledge of what the actual impacts were. If you look a little deeper, you could see that it was actually other drivers that had impacts in those particular years..

Okay. Now what about the fact that if we peel back the onion on the politics, obviously, the presidential politics is highest profile. But it sounds like based on what you are saying, if the big driver is the Federal spend, the environmental spending, green new deal, infrastructure, et cetera. It sounds like the Senate is really the key issue.

So how different is your outlook a couple of months from now if the Republicans hold the Senate, and this is very difficult to get some of this through versus if it is even or if Democrats take control the Senate, and then a lot of this could really just really deviously could expand for a few years.

I mean, how critical is that side in your view?.

Well, the one thing we feel very optimistic about for the type of work that we provide and the areas that we are focused on is that - let’s pick a complete stalemate. Nobody will do anything. House goes one way, Senate goes the other way and that they just will agree on nothing.

So what they end up with, and unless you are going to shut the government down, is to end up with a continuing resolution, which is we agree to disagree, and we are just going to not fund anything, and there will be no increase.

So under that scenario, it is the executive branch, the President that sets the priority within his points as to where the dollars are spent that have been provided through the continuing resolution. And that should be very favorable to us.

And that is why we believe that even without an increase or an increased deficit spending whatsoever, we could still be a very large beneficiary of the priorities with respect to the government to actually implement their priorities for climate change, the new big deal, the items we just outlined. So we don’t need increased stimulus spending.

We don’t need increased Federal deficits in order to fare very well through this next period..

Got it. Okay. And then one last one for me. Just you kind of danced around this a little bit, but if you could just kind of look at your buckets of business, specifically the types of projects you see coming down the pike, not everything carries the same type of margin.

So in terms of the mix of business, what are the margin profiles of the things that you see, the areas that you see growing relative to the areas of potential contraction?.

Growing, well, the areas that we think will grow, we think, in the Federal Government, our advanced data analytics is going to help expand our margin. It is an area that is growing 15% to 20% organically in 2020. We saw 20% organic growth. We think that number is in the same neighborhood coming into 2021.

We did add Blue water Federal here essentially in the first day of this fiscal year. That gives us additional contributions in area of a bit higher margin. So this is an area that we think is growing. It is growing well for us and has higher margins. Renewable energy in the commercial sector to move over to CIG, work that we are doing in offshore wind.

Tetra Tech has done more permitting work, monitoring evaluation and during construction, monitoring and environmental impairment in the marine environment, net sedimentation impact to marine mammals, a shellfish, fisheries, flyways. We have done more work on offshore leases than all others combined.

And so we are not just the majority that we don’t have the most of a given share. We are actually quite dominant there. And it has a priority. We will see additional focus on that as part of the new green deal and others. But it also makes economic sense. They are larger turbines.

You have less impact with respect to local land use since it is far offshore, and we think this is another growth area for us, and we are in an excellent position for that, and that also carries higher-margin for us. So those are a couple of areas that we see growing, both on the government and commercial side that are coming down the pike.

That will actually carry margins and help that margin expansion, both on the government and commercial and international sectors for us..

Got it. Well that is great. Thanks so much for your time Dan..

Great. Thank you very much Ryan..

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

Thank you very much, Laura, and thank all of you for your insights, questions and interest in Tetra Tech. We were really glad to finish fiscal year 2020 with such a strong fourth quarter. And in the 50-years, and I haven’t been here at Tetra Tech for all 50-plus years of its history, but I have been here for an awful lot of those.

And no doubt fiscal year 2020 was the most complicated, the most varied with the pandemic, with oil prices going to negative, with the largest single unemployment drops, followed by quick recoveries.

In many ways, it was one of the most complicated or the most complicated year, but I just want to commend the staff at Tetra Tech, the leadership team that I work with every day. Our Board of Directors, because I believe that we could not have navigated this better. I was glad to see that revenues held up unbelievably well.

We saw growth through the second half, all-time high earnings per share, all-time high backlog, all-time cash generation. And thanks to our phenomenal finance team, I was glad we are able to finish the year with completing stock buybacks, with completing dividend executions, completing multiple acquisitions and decreasing the leverage of the company.

And I think there are a few or no firms that can say that irrespective of the very bright end markets that we have looking forward to us in 2021. But with that said, I look forward to talking with all of you on the next quarterly call and be safe and healthy until then. Thank you..

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