Ryan Connors: So I want to go stick on the federal side, Dan, and you are one of the few companies that’s actually seeing, it seems like a tangible impact from some of the stimulus infrastructure spending. You definitely — we are not hearing that from the equipment providers at this point and even some of your peers on the engineering side, we are not hearing that there either. One of the things it seems that is a recurring theme is that Build America provisions, the BABA provisions are kind of a headwind and impediment obstacle of those funds getting deployed and yet you are seeing it. So how do we interpret that? Is it your upstream nature that you don’t necessarily rely on actual projects in the field, but you are doing upstream study work? I mean, why do you think that is that you are seeing that a little sooner?
Dan Batrack: Yeah. I think you have hit it right and I think it went to the comment I had while it’s a different end market, my comments on offshore wind. My comment was that before anything that’s built you actually have to come up with a plan before you will build something. So the Buy America Build America and have something built here, that comes much farther down the road. That’s after — so I sort of see the projects with respect to service providers in four areas. There’s where Tetra Tech resides, which is the upfront valuation, technology assessment, initial layout permitting and that’s us. That’s what Tetra Tech does. Second phase is — and this goes to the other engineering companies, then you move to the full service engineering firms that will actually do detailed as-built drawings constructible drawings and they will take it from where we typically would leave at about a 30% design and they will take it all the way through detailed design, constructible design drawings.
And those are a hallmark of large engineering houses typically characterize themselves as engineering companies, which we don’t and have an attribute of having offshore low cost engineering centers. So look for people who have big houses in Malaysia, India and places like that, they were in Phase 2. We can be very busy and they can never see a dollar of revenue unless the project is going to go to being prepared to go out. Phase 3, which really begins to move into the BABA or the Buy America Build America. Those folks that are after it’s been built or anticipating it being built and you are bidding either a design build project, which would be putting together the engineering and the constructor. And so that third piece is the construction piece and that’s — you are not going to see anything coming out of the BABA part of the work until it’s ready to be it’s already been build bid and they are ready to move forward.
Then you are going to see it move. And that could be anywhere from I don’t know and the fastest I have ever seen it maybe six months to nine months later and when we finish our work, not start or finish it until they just get started, and then they will move later. And then the fourth area I consider is really the commissioning and the O&M or the operation and maintenance people, which is the tail end of the projects once they have been commissioned. So almost every project that has a capital aspect to it has those fur faces. You might conflate number two and three, the engineering and the construction when you go to a design build, but that doesn’t encroach on the work that we do before. You can’t go to a design build project, which then would trigger BABA spending and both backlog funding and anything that you would visibly see from IIJA until after you have done what I call the Phase 1.
Phase 1 know hallmarks, which is classic Tetra Tech, sole source, limited competition, smaller project, much more diverse and I don’t want to call it completely immune or insulated from whether or not you build it or not, but largely decoupled, largely decoupled. And frankly, when there’s difficulties in supply chain, cost of materials, availability of construction trade labor with that, that actually means there’s more opportunity and it’s even more important to go back to your Phase 1 provider and we are one of those, and frankly, in certain areas like water, environment, sustainable infrastructure. We are clearly a market leader in those areas. But there’s other segments, there’s other people that are — will benefit from IIJA.
But I hope that sort of describes how we see this in a relationship with respect to what’s coming out of IIJA. And I would say for those that are farther downstream in general Phases 2, 3 and 4, they should be encouraged that we are seeing numbers come out both in contract capacity and revenue, because it’s pretty difficult to get to Phase 2, 3 and 4 without Phase 1.
Ryan Connors: Yeah. Yeah. No. That’s great color. I appreciate that detail, Dan. And then my other question, just, look, nobody denies things are great today and optimism is a great quality and management and I think you given us all the positives. But just if I can get you to kind of talk about some of the risks that keep you up at night in the business and specifically looking at some data this morning about your stock and it’s been much more volatile historically in election years than not. And I look at the last 30 years, stock has been twice as volatile in election years as it has in non-election years and we are getting ready to go into an election year. So can you talk qualitatively about kind of the, how you see the different scenarios politically?
