In Conversation: Tetra Tech Inc.
Our discussion with the CEO on the science, scale, and software of the water ecosystem, plus more on competition and the fiscal outlook.
We spoke with Dan Batrack, CEO of one of our favorite stocks in our thematic basket on Water, Tetra Tech Inc. (TTEK US).
You can view our thematic primer, titled High Quality H2O, here:
The company had just reported earnings and held their inaugural investor day in the weeks prior, so we had a lot to talk about regarding the company and industry at large. It was very refreshing to hear from a CEO that has such an intimate knowledge of his company’s offerings as well as the mission that it is trying to advance, which is the implementation of reliable water systems in a variety of applications. This singular focus allows TTEK to be positioned very nicely to benefit from both endogenous (population shifts, replacement cycles, etc.) and exogenous (PFAS legislation, for example) developments under a range of market conditions.
We discuss the scientific approaches the company and others are taking to remediate PFAS and other emerging contaminants while also dealing with delicate issues in certain geographies related to climate and economic growth, which present a new opportunity set to win business and take price. We also discuss how software plays a role in their consulting business (both for volumes as well as adding unit pricing in addition to time and materials) both today and as they look towards their 2020 goals that call for mid-to-high-double digit top and bottom line growth.
Key Takeaways:
PFAS Regulation and Compliance:
Dan Batrack, Tetra Tech's CEO, discusses the new drinking water standards for PFAS, known as the Maximum Contaminant Level (MCL).
He mentions that approximately 150,000 utilities in the U.S. will need to evaluate their water systems for PFAS and comply within a specific timeline, which is now mandated by law.
Detection and Treatment:
The initial step for utilities is to determine if PFAS is present in their water supply, whether it comes from groundwater, lakes, rivers, or desalination plants.
Tetra Tech plans to help municipalities, with whom they have standing contracts, in evaluating and managing PFAS contamination.
Batrack emphasizes the importance of early detection to avoid last-minute compliance issues.
Implementation Timeline:
Batrack outlines a timeline where utilities need to report PFAS presence within three years and implement treatment solutions within the following two years, targeting a 2029 deadline.
He expects extensions and legal challenges due to economic and feasibility issues.
More insights from the CEO and the full transcript for paid subscribers: