What changed in this filing

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Item 1. Financial Statements

2024-05-03 compared with 2024-02-02 · 228 added, 139 removed, 572 unchanged (39% of the section changed)

3 unchanged sentences

(unaudited - in thousands, except par value)

ASSETS December 31,

ASSETS March 31,

2024 October 1,

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Preferred stock - authorized, 2,000 shares of $ 0.01 par value;

no shares issued and outstanding at December 31, 2023 and October 1, 2023

no shares issued and outstanding at March 31, 2024 and October 1, 2023

Common stock - authorized, 150,000 shares of $ 0.01 par value;

issued and outstanding, 53,466 and 53,248 shares at December 31, 2023 and October 1, 2023, respectively

issued and outstanding, 53,497 and 53,248 shares at March 31, 2024 and October 1, 2023, respectively

Additional paid-in capital 18,972 —

9 unchanged sentences

(unaudited – in thousands, except per share data)

Three Months Ended

2023 January 1,

Three Months Ended Six Months Ended

2024 April 2,

2023 March 31,

2024 April 2,

Revenue $ 1,251,616 $ 1,158,226 $ 2,479,883 $ 2,052,991

23 unchanged sentences

(unaudited – in thousands)

Three Months Ended

2023 January 1,

Three Months Ended Six Months Ended

2024 April 2,

2023 March 31,

2024 April 2,

Net income $ 76,459 $ 42,841 $ 151,439 $ 159,556

2 unchanged sentences

( 24,344 ) ( 8,154 ) 38,762 24,953

Gain (loss) on cash flow hedge valuations, net of tax — ( 89 )

Loss on cash flow hedge valuations, net of tax — ( 896 ) — ( 985 )

Net pension adjustments — 2,794 ( 13 ) 2,794

Other comprehensive income, net of tax 63,093 33,018

Other comprehensive income (loss), net of tax ( 24,344 ) ( 6,256 ) 38,749 26,762

Comprehensive income, net of tax $ 52,115 $ 36,585 $ 190,188 $ 186,318

5 unchanged sentences

(unaudited – in thousands)

Three Months Ended

2023 January 1,

Six Months Ended

2024 April 2,

Cash flows from operating activities:

5 unchanged sentences

Fair value adjustments to foreign currency forward contract — ( 89,402 )

Fair value adjustments to contingent consideration — 8,477

Other non-cash items 1,032 ( 884 )

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Cash flows from investing activities:

Payments for business acquisitions, net of cash acquired ( 71,796 ) ( 854,319 )

Settlement of foreign currency forward contract — 109,306

Capital expenditures ( 7,463 ) ( 10,294 )

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Repayments on long-term debt ( 110,000 ) ( 249,667 )

Taxes paid on vested restricted stock ( 12,670 ) ( 16,586 )

Shares repurchased for tax withholdings on share-based awards ( 12,781 ) ( 16,680 )

Payments of contingent earn-out liabilities ( 22,112 ) ( 2,000 )

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Principal payments on finance leases ( 3,155 ) ( 2,714 )

Net cash provided by (used in) financing activities 18,391 ( 42,267 )

Effect of exchange rate changes on cash, cash equivalents and restricted cash 5,655 8,695

Net increase (decrease) in cash, cash equivalents and restricted cash 29,858 ( 13,326 )

Cash, cash equivalents and restricted cash at beginning of period 168,831 185,491

Cash, cash equivalents and restricted cash at end of period $ 198,689 $ 172,165

Net cash provided by financing activities 5,633 680,491

Effect of exchange rate changes on cash and cash equivalents 2,810 7,899

Net increase in cash and cash equivalents 41,463 46,294

Cash and cash equivalents at beginning of period 168,831 185,094

Cash and cash equivalents at end of period $ 210,294 $ 231,388

Supplemental information:

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$ 84,916 $ 40,107

Reconciliation of cash, cash equivalents and restricted cash:

Cash and cash equivalents $ 198,689 $ 164,397

Restricted cash — 7,768

Total cash, cash equivalents and restricted cash $ 198,689 $ 172,165

See Notes to Consolidated Financial Statements.

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Consolidated Statements of Stockholders' Equity

Three Months Ended January 1, 2023 and December 31, 2023

Three Months Ended April 2, 2023 and March 31, 2024

(unaudited – in thousands)

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Shares Amount

BALANCE AT OCTOBER 2, 2022 52,981 $ 530 $ — $ ( 208,144 ) $ 1,390,701 $ 1,183,087 $ 50 $ 1,183,137

BALANCE AT JANUARY 1, 2023 53,226 $ 532 $ 3,281 $ ( 175,126 ) $ 1,495,221 $ 1,323,908 $ 59 $ 1,323,967

Net income 42,830 42,830 11 42,841

Other comprehensive loss ( 6,255 ) ( 6,255 ) ( 1 ) ( 6,256 )

Cash dividends of $ 0.23 per common share

( 12,242 ) ( 12,242 ) ( 12,242 )

Stock-based compensation 7,418 7,418 7,418

Restricted & performance shares released 1 — ( 94 ) ( 94 ) ( 94 )

Stock options exercised 1 — 34 34 34

BALANCE AT APRIL 2, 2023 53,228 $ 532 $ 10,639 $ ( 181,381 ) $ 1,525,809 $ 1,355,599 $ 69 $ 1,355,668

BALANCE AT DECEMBER 31, 2023 53,466 $ 534 $ 9,979 $ ( 132,202 ) $ 1,659,295 $ 1,537,606 $ 81 $ 1,537,687

Net income 76,446 76,446 13 76,459

Other comprehensive income ( 24,344 ) ( 24,344 ) ( 24,344 )

Distributions paid to noncontrolling interests — ( 38 ) ( 38 )

Cash dividends of $ 0.26 per common share

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Shares issued for Employee Stock Purchase Plan — — 2 2 2

BALANCE AT JANUARY 1, 2023 53,226 $ 532 $ 3,281 $ ( 175,126 ) $ 1,495,221 $ 1,323,908 $ 59 $ 1,323,967

BALANCE AT MARCH 31, 2024 53,497 $ 535 $ 18,972 $ ( 156,546 ) $ 1,721,833 $ 1,584,794 $ 56 $ 1,584,850

Tetra Tech, Inc.

Consolidated Statements of Stockholders' Equity

Six Months Ended April 2, 2023 and March 31, 2024

(unaudited – in thousands)

Common Stock Additional

Capital Accumulated

Comprehensive

Loss Retained

Earnings Total

Equity Non-Controlling

Interests Total

Shares Amount

BALANCE AT OCTOBER 2, 2022 52,981 $ 530 $ — $ ( 208,144 ) $ 1,390,701 $ 1,183,087 $ 50 $ 1,183,137

Net income 159,536 159,536 20 159,556

Other comprehensive income (loss) 26,763 26,763 ( 1 ) 26,762

Cash dividends of 0.46 per common share

( 24,428 ) ( 24,428 ) ( 24,428 )

Stock-based compensation 14,602 14,602 14,602

Restricted & performance shares released 146 1 ( 16,681 ) ( 16,680 ) ( 16,680 )

Stock options exercised 3 — 91 91 91

Shares issued for Employee Stock Purchase Plan 98 $ 1 $ 12,627 12,628 12,628

BALANCE AT APRIL 2, 2023 53,228 $ 532 $ 10,639 $ ( 181,381 ) $ 1,525,809 $ 1,355,599 $ 69 $ 1,355,668

BALANCE AT OCTOBER 1, 2023 53,248 $ 532 $ — $ ( 195,295 ) $ 1,598,196 $ 1,403,433 $ 73 $ 1,403,506

Net income 151,418 151,418 21 151,439

Other comprehensive income 38,749 38,749 38,749

Distributions paid to noncontrolling interests — ( 38 ) ( 38 )

Cash dividends of 0.52 per common share

4 unchanged sentences

Shares issued for Employee Stock Purchase Plan 104 1 14,676 14,677 14,677

BALANCE AT DECEMBER 31, 2023 53,466 $ 534 $ 9,979 $ ( 132,202 ) $ 1,659,295 $ 1,537,606 $ 81 $ 1,537,687

BALANCE AT MARCH 31, 2024 53,497 $ 535 $ 18,972 $ ( 156,546 ) $ 1,721,833 $ 1,584,794 $ 56 $ 1,584,850

See Notes to Consolidated Financial Statements.

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Recent Accounting Pronouncements

In November 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) No.

2021-10, Government Assistance (Topic 832) , which requires annual disclosures for transactions with a government authority that are accounted for by applying a grant or contribution model by analogy, including (1) the types of transactions, (2) the accounting for those transactions, and (3) the effect of those transactions on an entity's financial statements.

ASU 2021-10 was effective for us beginning in the first quarter of fiscal 2023.

In fiscal 2020, the Canadian federal government implemented the Canadian Emergency Wage Subsidy ("CEWS") program in response to the negative impact of the coronavirus disease 2019 pandemic on businesses operating in Canada.

Some of our Canadian legal entities qualified for and applied for these CEWS cash benefits to partially offset the impacts of revenue reductions and on-going staffing costs.

The $ 21 million total received was initially recorded in "Other long-term liabilities" until all potential amendments to the qualification criteria, including some that were proposed with retroactive application, were finalized in fiscal 2022.

In the first quarter of fiscal 2024, we distributed approximately $ 10 million to our Canadian employees.

The remaining $ 11 million, which we expect to distribute within one year, is reported in "Accrued compensation".

We do not expect there will be any related impact on our operating income, and we have no outstanding applications for further government assistance.

In November 2023, the FASB issued ASU No.

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We are currently evaluating the impact of this guidance on our consolidated financial statements;

however, we do not plan to adopt Topic 280 before fiscal 2025.

In December 2023, the FASB issued ASU No.

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Revenue and Contract Balances

We disaggregate revenue by client sector and contract type, as we believe it best depicts how the nature, timing and uncertainty of revenue and cash flows are affected by economic factors.

The following tables present revenue disaggregated by client sector and contract type (in thousands):

Three Months Ended

2023 January 1,

We disaggregate revenue by client sector and contract type, as we believe it best depicts how the nature, timing and uncertainty of our revenue and cash flows are affected by economic factors.

The following tables present our revenue disaggregated by client sector and contract type (in thousands):

Three Months Ended Six Months Ended

2024 April 2,

2023 March 31,

2024 April 2,

Client Sector:

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Other than the U.S.

federal government, no single client accounted for more than 10% of our revenue for the first quarters of fiscal 2024 and 2023.

federal government, no single client accounted for more than 10% of our revenue for the three and six months ended March 31, 2024 and April 2, 2023.

Contract Assets and Contract Liabilities

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Net contract liabilities $ ( 270,691 ) $ ( 221,105 )

(1) Inclu des $ 6.0 million and $ 6.8 million of contract retentions at December 31, 2023 and October 1, 2023, respectively.

In the first quarters of fiscal 2024 and 2023, we recognized revenue of approximately $ 130 million and $ 81 million, respectively, from the amounts included in the contract liability balances at the end of fiscal 2023 and 2022, respectively.

(1) Inclu des $ 5.5 million and $ 6.8 million of contract retentions at March 31, 2024 and October 1, 2023, respectively.

Our contract assets decreased, and our contract liabilities increased in the second quarter of fiscal 2024 compared to fiscal 2023 year-end, due to the timing of our milestone billing on fixed-price contracts which were different from the timing of revenue recognition on those contracts.

In the first halves of fiscal 2024 and 2023, we recognized revenue of approximately $ 177 million and $ 121 million, respectively, from the amounts included in the contract liability balances at the end of fiscal 2023 and 2022, respectively.

Revenue is recognized by measuring progress over time under Accounting Standards Codification Topic 606, "Revenue from Contracts with Customers".

We estimate and measure progress on our contracts over time whereby we compare our total costs incurred on each contract as a percentage of the total expected contract costs.

Changes in those estimates could result in the recognition of cumulative catch-up adjustments to the contract’s inception-to-date revenue, costs and profit in the

period in which such changes are made.

As a result, in the first quarters of fiscal 2024 and 2023, we recognized net favorable revenue and operating income adjustments of $ 5.7 million and $ 3.5 million, respectively.

C hanges in revenue and cost estimates could also result in a projected loss, determined at the contract level, which would be recorded immediate ly in earnings.

At December 31, 2023 and October 1, 2023, our consolidated balance sheets included liabilities for anticipated losses of $ 9.2 million and $ 8.5 million, respectively.

The estimated cost to complete these related contracts was approximately $ 68 million at December 31, 2023 and October 1, 2023.

Changes in those estimates could result in the recognition of cumulative catch-up adjustments to the contract’s inception-to-date revenue, costs and profit in the period in which such changes are made.

As a result, in the first halves of fiscal 2024 and 2023 , we recognized net favorable revenue and operating income adjustmen ts of $ 9.9 million and $ 4.0 million , respectively.

C hanges in revenue and cost estimates could also result in a projected loss, determined at the contract level, which would be recorded immediately in earnings.

At March 31, 2024 and October 1, 2023, our consolidated balance sheets included liabilities for anticipated losses of $ 13.3 million and $ 8.5 million, respectively.

The estimated cost to complete these related contracts was approximately $ 104 million and $ 68 million at March 31, 2024 and October 1, 2023, respectively.

Accounts Receivable, Net

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Unbilled accounts receivable, which represent an unconditional right to payment subject only to the passage of time, include unbilled amounts typically resulting from revenue recognized but not yet billed pursuant to contract terms or billed after the period end date.

Substantially all of our unbilled receivables at December 31, 2023 are expected to be billed and collecte d within 12 months.

Substantially all of our unbilled receivables at March 31, 2024 are expected to be billed and collecte d within 12 months.

The allowance for doubtful accounts represents amounts that are expected to become uncollectible or unrealizable in the future.

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Other than the U.S.

federal government, no single client accounted for more than 10% of our accounts receivable at December 31, 2023 and October 1, 2023.

Remaining Unsatisfied Performance Obligations (“RUPO”)

federal government, no single client accounted for more than 10% of our accounts receivable at March 31, 2024 and October 1, 2023.

Remaining Unsatisfied Performance Obligation (“RUPO”)

Our RUPO represents a measure of the total dollar value of work to be performed on contracts awarded and in progress.

We had $ 4.7 billion of RUPO at December 31, 2023.

RUPO increases with awards from new contracts or additions on existing contracts, and decreases as work is performed and revenue is recognized on existing contracts.

RUPO may also decrease when projects are canceled or modified in scope.

We had $ 4.7 billion of RUPO at March 31, 2024.

Our RUPO increases with awards from new contracts or additions on existing contracts, and decreases as work is performed and revenue is recognized on existing contracts.

Our RUPO may also decrease when projects are canceled or modified in scope.

We include a contract within our RUPO when the contract is awarded and an agreement on contract terms has been reached.

We expect to satisfy our RUPO at December 31, 2023 over the following periods (in thousands):

We expect to satisfy our RUPO at March 31, 2024 over the following periods (in thousands):

Within 12 months $ 3,260,974

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Although RUPO reflects business that is considered to be firm, cancellations, deferrals or scope adjustments may occur.

RUPO is adjusted to reflect any known project cancellations, revisions to project scope and cost, foreign currency exchange fluctuations and project deferrals, as appropriate.

Our operations and maintenance contracts can generally be terminated by the clients without a substantive financial penalty.

Our RUPO is adjusted to reflect any known project cancellations, revisions to project scope and cost, foreign currency exchange fluctuations and project deferrals, as appropriate.

Our operations and maintenance contracts can generally be

terminated by the clients without a substantive financial penalty;

therefore, the remaining performance obligations on such contracts are limited to the notice period required for the termination (usually 30 , 60 , or 90 days).

In the second quarter of fiscal 2024, we acquired LS Technologies ("LST"), an innovative U.S.

federal enterprise technology services and management consulting firm based in Fairfax, Virginia.

LST provides high-end consulting and engineering services including advanced data analytics, cybersecurity and digital transformation solutions to U.S.

government clients.

LST is included in our Government Services Group ("GSG") segment.

The total fair value of the purchase price of LST was $ 102 million.

This amount was comprised of $ 76 million in initial cash payments, $ 4 million of cash holdback related to a tax reserve, and $ 22 million for the estimated fair value of contingent earn-out obligations, with a maximum of $ 45 million, based upon the achievement of specified operating income targets in each of the three years following the acquisition date.

The purchase price for LST of $ 102 million was allocated $ 10 million to net tangible assets, $ 21 million to identifiable intangible assets, and $ 71 million to goodwill.

This allocation is preliminary and subject to adjustment as the estimates, assumptions, valuations and other analyses have not yet been finalized in order to make a definitive allocation.

LST was not considered significant to our consolidated financial statements.

As a result, no pro forma information has been provided.

On September 23, 2022, we made an all cash offer to acquire all of the outstanding shares of RPS Group plc ("RPS"), a publicly traded company on the London Stock Exchange for 222 pence per share, through a scheme of arrangement, which was unanimously recommended by RPS' Board of Directors.

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Substantially all of RPS is included in our Commercial/International Services Group ("CIG") segment.

The total purchase price of RPS was approximately £ 633 million ($ 784 million).

In connection with the transaction, we incurred acquisition and integration costs of $ 33.2 million, primarily for professional fees, substantially all of which were paid as of fiscal 2023 year-end.

The total purchase price for RPS was approximately £ 633 million ($ 784 million).

In the second quarter and first half of fiscal 2023, we incurred $ 19.9 million and $ 23.7 million, respectively, related to acquisition and integration costs primarily for professional fees, substantially all of which were paid as of the end of the second quarter of fiscal 2023.

On January 23, 2023, we also settled a foreign exchange forward contract that was integral to our plan to finance the RPS acquisition.

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The table below represents the purchase price allocation for RPS based on estimates, assumptions, valuations and other analyses as of January 23, 2023.

The purchase consideration, excluding the aforementioned forward contract gain, was allocated to the tangible and intangible assets, and liabilities of RPS based on their estimated fair values, with any excess purchase consideration allocated to goodwill as follows (in thousands):

The all cash purchase consideration, excluding the aforementioned forward contract gain, was allocated to the tangible and intangible assets, and liabilities of RPS based on their estimated fair values, with any excess purchase consideration allocated to goodwill as follows (in thousands):

Cash and cash equivalents $ 32,093

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Supplemental Pro Forma Information (Unaudited)

Following are the supplemental consolidated financial results of Tetra Tech and RPS for the first quarter of fiscal 2023 on an unaudited pro forma basis, as if the RPS acquisition had been consummated as of the beginning of fiscal 2022 (in thousands):

Three Months Ended

Following are the supplemental consolidated financial results of Tetra Tech and RPS for the second quarter and first half of fiscal 2023 on an unaudited pro forma basis, as if the RPS acquisition had been consummated at the beginning of fiscal 2022 (in thousands):

Three Months Ended Six Months Ended

2023 April 2,

Revenue $ 1,203,538 $ 2,310,839

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With over 500 employees, Amyx provides application modernization, cybersecurity, systems engineering, financial management and program management support on over 30 Federal Government programs.

Amyx is included in our Government Services Group (" GSG") segment.

Amyx is included in our GSG segment.

The total fair value of the purchase price of Amyx was $ 120.9 million, comprised of a $ 100.0 million payable in a promissory note issued to the sellers (paid subsequent to closing), $ 8.7 million of payables related to estimated post-closing adjustments, and $ 12.2 million for the estimated fair value of contingent earn-out obligations, with a maximum of $ 25.0 million, based upon the achievement of specified operating income targets in each of the three years following the acquisition date.

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As a result, no pro forma information has been provided.

The majority of the goodwill from the fiscal 2023 acquisitions is not deductible for tax purposes.

The results of fiscal 2023 acquisitions were included in our consolidated financial statements beginning on the respective closing dates.

Goodwill additions resulting from the fiscal 2023 business combinations are primarily attributable to the significant technical expertise residing in embedded workforces that are sought out by clients, synergies expected to arise after the acquisitions in the areas of enterprise technology services, data management, energy transformation, water, program management, and data analytics and the long-standing reputations of RPS and Amyx.

The fiscal 2024 goodwill addition from LST is deductible for tax purposes, while the majority of the goodwill from the fiscal 2023 acquisitions is not deductible for tax purposes.

The results of fiscal 2024 and 2023 acquisitions were included in our consolidated financial statements beginning on their respective closing dates.

Our fiscal 2024 goodwill addition from the LST acquisition reflects the extensive technical knowledge of LST's workforce, the anticipated synergies in data analytics, cybersecurity and digital transformation services, and LST’s reputation in providing mission critical solutions to both commercial and government customers.

The goodwill additions from fiscal 2023 business combinations are primarily attributable to the significant technical expertise residing in embedded workforces that are sought out by clients, synergies expected to arise after the acquisitions in the areas of enterprise technology services, data management, energy transformation, water, program management, and data analytics and the long-standing reputations of RPS and Amyx.

These acquisitions further expand and complement our market-leading positions in water, renewable energy and sustainable infrastructure;

enhanced by a combined suite of differentiated data analytics and digital technologies, and expansion into existing and new geographies.

Intangible assets with finite lives arise from business acquisitions and are amortized based on the period over which the contractual or economic benefit of the intangible assets are expected to be realized on a straight-line basis over the useful

lives of the underlying assets, ranging from one to twelve years .

These consist of client relations, backlog and trade names.

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We use a probability-weighted discounted income approach as a valuation technique to convert future estimated cash flows to a single present value amount.

The significant unobservable inputs used in the fair value measurements are operating income projections over the earn-out period (generally three to five years ), and the probability outcome percentages we assign to each scenario.

The significant unobservable inputs used in

the fair value measurements are operating income projections over the earn-out period (generally three to five years ), and the probability outcome percentages we assign to each scenario.

Significant increases or decreases to either of these inputs in isolation would result in a significantly higher or lower liability, with a higher liability capped by the contractual maximum of the contingent earn-out obligation.

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Changes in the estimated fair value of our contingent earn-out liabilities related to the time component of the present value calculation are reported in interest expense.

Adjustments to the estimated fair value related to changes in all other unobservable inputs are reported in operating incom e.

In the first quarter of fiscal 2024, we evaluated our estimates for contingent consideration liabilities for the remaining earn-out periods for each individual acquisition, which included a review of their financial results to-date, the status of ongoing projects in their RUPO, and the inventory of prospective new contract awards.

For the first quarters of fiscal 2024 and 2023, we had no material adjustments to our contingent earn-out liabilities in operating income.

The following table summarizes the changes in the fair value of estimated contingent consideration for the first quarters of fiscal 2024 and 2023 (in thousands):

Three Months Ended

2023 January 1,

A djustments to the estimated fair value related to changes in all other unobservable inputs are reported in operating income.

In the first half of fiscal 2024, we evaluated our estimates for contingent consideration liabilities for the remaining earn-out periods for each individual acquisition, which included a review of their financial results to-date, the status of ongoing projects in their RUPO, and the inventory of prospective new contract awards.

During the second quarter and first half of fiscal 2024, we recorded immaterial adjustments, individually and in aggregate, to our contingent earn-out liabilities and included the corresponding amount in our operating income.

During the first half of fiscal 2023, we recorded adjustments to our contingent earn-out liabilities and reported a related net loss in operating income of $ 8.5 million (largely in the second quarter).

The net loss primarily resulted from increased valuation of the contingent consideration liabilities for our prior acquisitions of Segue Technologies, Inc., Hoare Lea, LLP and The Integration Group of Americas, Inc., reflecting financial performance that exceeded our previous expectations.

The following table summarizes the changes in the fair value of estimated contingent consideration for the second quarters and first halves of fiscal 2024 and 2023 (in thousands):

Three Months Ended Six Months Ended

2024 April 2,

2023 March 31,

2024 April 2,

Beginning balance $ 55,604 $ 69,029 $ 73,422 $ 65,566

Estimated earn-out liabilities for acquisitions 21,900 12,248 21,900 12,248

Payments of contingent consideration ( 3,250 ) ( 2,000 ) ( 22,112 ) ( 2,000 )

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Balance at October 1, 2023 $ 659,942 $ 1,220,302 $ 1,880,244

Acquisition activity 71,100 — 71,100

Translation adjustments 2,155 24,189 26,344

Balance at December 31, 2023 $ 662,673 $ 1,260,473 $ 1,923,146

Balance at March 31, 2024 $ 733,197 $ 1,244,491 $ 1,977,688

The foreign currency translation adjustments resulted from our foreign subsidiaries with functional currencies that are different than our reporting currency.

These goodwill amounts are presented net of reductions from historical impairment adjustments.

The gross amounts for GSG were $ 680.4 million and $ 677.6 million at December 31, 2023 and October 1, 2023, respectively, excluding accumulated impairment of $ 17.7 million at each date.

The gross amounts of goodwill for CIG were $ 1,381.9 million and $ 1,341.8 million at December 31, 2023 and October 1, 2023, respectively, excluding accumulated impairment of $ 121.5 million at each date.

The gross amounts for GSG were $ 750.9 million and $ 677.6 million at March 31, 2024 and October 1, 2023, respectively, excluding accumulated impairment of $ 17.7 million at each date.

The gross amounts of goodwill for CIG were $ 1,366.0 million and $ 1,341.8 million at March 31, 2024 and October 1, 2023, respectively, excluding accumulated impairment of $ 121.5 million at each date.

We perform our annual goodwill impairment review at the beginning of our fiscal fourth quarter.

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the first day of our fourth quarter in fiscal 2023) indicated that we had no impairment of goodwill, and all of our reporting units had estimated fair values that were in excess of their carrying values, including goodwill.

At July 3, 2023, and after the reallocation of goodwill on the first day of fiscal 2023, we had no reporting units that had estimated fair values that exceeded their carrying val ues by less than 45 %.

At July 3, 2023, we had no reporting units that had estimated fair values that exceeded their carrying val ues by less than 45 %.

We also regularly evaluate whether events and circumstances have occurred that may indicate a potential change in the recoverability of goodwill.

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The following table presents the gross amount and accumulated amortization of our acquired identifiable intangible assets with finite useful lives included in “Intangible assets, net” on the consolidated balance sheets ($ in thousands):

December 31, 2023 October 1, 2023

March 31, 2024 October 1, 2023

Remaining Life

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Total $ 298,734 $ ( 123,123 ) $ 175,611 $ 270,453 $ ( 96,517 ) $ 173,936

Amortization expense for the three months e nded December 31, 2023 w as $ 12.5 million, compared to $ 3.4 million for the prior-year periods.

Estimated amortization expense for the remainder of fiscal 2024 and succeeding years is as follows (in

Amortization expense for the second quarter and first half of fiscal 2024 w as $ 12.1 million and $ 24.6 million, compared to $ 12.1 million and $ 15.5 million, respectively, for the prior-year periods.

Estimated amortization expense for the remainder of fiscal 2024 and succeeding years is as follows (in thousands):

2024 (remaining) $ 24,255

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Property and equipment, net $ 72,897 $ 74,832

The depreciation expense related to property and equipment was $ 7.0 million and $ 3.2 million for the first quarters of fiscal 2024 and 2023, respectively.

For the second and first half of fiscal 2024, our depreciation expense related to property and equipment was $ 5.6 million and $ 12.6 million, respectively, compared to $ 4.8 million and $ 8.0 million for the fiscal 2023 periods.

Stock Repurchase and Dividends

On October 5, 2021, our Board of Directors authorized a new stock repurchase program under which we could repurchase up to $ 400 million of our common stock .

We did not repurchase any shares of our common stock in the first quarters of fiscal 2024 and 2023.

At December 31, 2023, we had a remaining balance of $ 347.8 million under our stock repurchase program.

The following table presents dividends declared and paid in the first quarters of fis cal 2024 and 2023:

On October 5, 2021, our Board of Directors authorized a new stock repurchase program under which we could repurchase up to $ 400 million of our common stoc k.

We did not repurchase any shares of our common stock in the first halves of fiscal 2024 and 2023.

At March 31, 2024, we had a remaining balance of $ 347.8 million under our stock repurchase program.

The following table presents dividends declared and paid in the first halves of fisc al 2024 and 2023:

Declare Date Dividend Paid Per Share Record Date Payment Date Dividend Paid

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November 13, 2023 $ 0.26 November 30, 2023 December 13, 2023 $ 13,873

January 29, 2024 $ 0.26 February 14, 2024 February 27, 2024 $ 13,908

Total dividend paid as of March 31, 2024 $ 27,781

November 7, 2022 $ 0.23 November 21, 2022 December 9, 2022 $ 12,186

January 30, 2023 $ 0.23 February 13, 2023 February 24, 2023 $ 12,242

Total dividend paid as of April 2, 2023 $ 24,428

Subsequent Event.

On January 29, 2024, our Board of Directors declared a quarterly cash dividend of $ 0.26 per share payable on February 27, 2024 to stockholders of record as of the close of business on February 14, 2024.

On April 29, 2024, our Board of Directors declared a quarterly cash dividend of $ 0.29 per share payable on May 31, 2024 to stockholders of record as of the close of business on May 20, 2024.

Our operating leases are primarily for corporate and project office spaces.

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Operating leases are included in "Right-of-use assets, operating leases", "Short-term lease liabilities, operating leases" and "Long-term lease liabilities, operating leases" in the consolidated balance sheets.

Our finance leases are primarily for certain IT equipment.

Our finance leases are immaterial.

Our finance leases are primarily for certain IT equipment and are immaterial.

Right-of-use ("ROU") assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

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The components of lease costs are as follows (in thousands):

Three Months Ended

2023 January 1,

Three Months Ended Six Months Ended

2024 April 2,

2023 March 31,

2024 April 2,

Operating lease cost $ 24,785 $ 24,419 $ 49,018 $ 45,380

Sublease (income) cost ( 57 ) ( 32 )

Sublease income ( 106 ) ( 48 ) ( 163 ) ( 79 )

Total lease cost $ 24,679 $ 24,371 $ 48,855 $ 45,301

Supplemental cash flow information related to leases is as follows (in thousands):

Three Months Ended

2023 January 1,

Six Months Ended

2024 April 2,

Operating cash flows for operating leases $ 38,738 $ 36,439

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Operating leases 3.3 % 3.0 %

At December 31, 2023, we had $ 8.5 million of operating leases that have not yet commenced.

A maturity analysis of the future undiscounted cash flows associated with our lease liabilities at December 31, 2023 is as follows (in thousands):

At March 31, 2024, we had $ 1.0 million of operating leases that have not yet commenced.

A maturity analysis of the future undiscounted cash flows associated with our lease liabilities at March 31, 2024 is as follows (in thousands):

2024 (remaining) $ 41,362

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Total present value of lease liabilities $ 210,157

Employee Benefits

Some of our Canadian legal entities qualified for and applied for these CEWS cash benefits to partially offset the impacts of revenue reductions and on-going staffing costs.

In the first half of fiscal 2024 (all in the first quarter of fiscal 2024), we distributed approximately $ 10 million to our Canadian employees.

The remaining $ 11 million, which we expect to distribute within one year, is reported in "Accrued compensation".

We do not e xpect there will be any related impact on our operating income, and we have no outstanding applications for further government assistance.

Stockholders’ Equity and Stock Compensation Plans

We recogniz e the fair value of our stock-based awards as compensation expense on a straight-line basis over the requisite service period in which the award vests.

Stock-based compensation expense for the three months ended December 31, 2023 was $ 7.6 million, compared to $ 7.2 million for the same periods last year.

Stock-based compensation expense for the three and six months ended March 31, 2024 was $ 8.0 million and $ 15.6 million, compared to $ 7.4 million and $ 14.6 million for the same periods last year.

Most of these amounts were included in selling, general and administrative expenses on our consolidated statements of income.

In the first quarter of fiscal 2024, we awarded 55,836 performance share units (“PSUs”) to our non-employee directors and executive officers at an estimated fair value of $ 205.39 per share on the award date.

In the first half of fiscal 2024, we awarded 55,836 performance share units (“PSUs”) to our non-employee directors and executive officers at an estimated fair value of $ 203.53 per share on the award date.

All PSUs are performance-based and vest, if at all, after the conclusion of the three-year performance period.

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The following table presents the number of weighted-average shares used to compute basic and diluted EPS (in thousands, except per share data):

Three Months Ended

2023 January 1,

Three Months Ended Six Months Ended

2024 April 2,

2023 March 31,

2024 April 2,

Net income attributable to Tetra Tech $ 76,446 $ 42,830 $ 151,418 $ 159,536

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Diluted $ 1.42 $ 0.80 $ 2.81 $ 2.98

For the first quarters of fiscal 2024 and 2023, no options were excluded from the calculation of dilutive potential common shares.

The Convertible Notes described in Note 14 "Long-Term Debt", had no impact on the calculation of dilutive potential common shares in the first quarter of fiscal 2024, as the price of our common stock did not exceed the conversion price.

The Capped Call Transactions were excluded from the calculation of dilutive potential common shares as their effect is anti-dilutive.

The effective tax rates for the first three months of fiscal 2024 and 2023 were 26.1 % and 24.5 %, respectively.

Income tax expense was reduced by $ 1.0 million and $ 1.7 million of excess tax benefits on share-based payments in the first quarters of fiscal 2024 and 2023, respectively.

Excluding the impact of the excess tax benefits on share-based payments, our effective tax rates in the first quarters of fiscal 2024 and 2023 were 27.1 % and 25.7 %, respectively.

At December 31, 2023 and October 1, 2023, the liability for income taxes associated with uncertain tax positions was $ 61.7 million and $ 62.0 million, respectively.

For t he second quarters and first halves of fiscal 2024 and 2023, no options were excluded from the calculation of dilutive potential common shares.

The Convertible Senior Notes (the "Convertible Notes") described in Note 15, "Long-Term Debt", had no impact on the calculation of dilutive potential common shares in the second quarter and first half of fiscal 2024, as the price of our common stock did not exceed the conversion price.

The Capped Call Transactions were excluded from th e calculation of dilutive potential common shares as their effect is anti-dilutive.

The effective tax rates for the first halves of fiscal 2024 and 2023 were 27.6 % and 28.7 %, respectively.

Income tax expense was reduced by $ 1.9 million and $ 1.8 million of excess tax benefits on share-based payments in the first halves of fiscal 2024 and 2023, respectively.

In addition, income tax expense in the first half of fiscal 2024 (all in the second quarter) included $ 2.8 million of expense for the settlement of various tax positions that were under audit for fiscal years 2018 through 2021.

Furthermore, income tax expense in the first half of fiscal 2023 (all in the second quarter) included non-operating income tax expenses of $ 6.7 million to recognize the tax liability for foreign earnings, primarily in the U.K.

and Australia, that are no longer indefinitely reinvested and to increase the liability for an uncertain tax position.

Excluding the impact of the excess tax benefits on share-based payments, the settlement amounts in the first half of fiscal 2024 and the additional $ 6.7 million in the first half of fiscal 2023, our effective tax rates in the first halves of fiscal 2024 and 2023 were 27.1 % and 26.5 %, respectively.

At March 31, 2024 and October 1, 2023, the liability for income taxes associated with uncertain tax positions was $ 62.3 million and $ 62.0 million, respectively.

These liabilities represent our current estimates of the additional tax liabilities that we may be assessed when the related audits are concluded.

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CIG supports commercial clients worldwide in renewable energy, industrial, high performance buildings and aerospace markets.

CIG also provides sustainable infrastructure and related environmental, engineering and project management services to commercial and local government clients across Canada, in Asia Pacific (primarily Australia and New Zealand), Europe, the United Kingdom and South America (primarily Brazil and Chile).

Management evaluates th e performance of these reportable segments based upon their respective segment operating income before the effect of amortization expense related to acquisitions, and other unallocated corporate expenses.

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All significant intercompany balances and transactions are eliminated in consolidation.

In the second quarter and first half of fiscal 2023, our Corporate segment operating losses included $ 19.9 million and $ 23.7 million of acquisition and integration expenses, respectively, as described in Note 4, “Acquisitions”.

The following tables summarize financial information regarding our reportable segments (in thousands):

Three Months Ended

2023 January 1,

Three Months Ended Six Months Ended

2024 April 2,

2023 March 31,

2024 April 2,

GSG $ 597,127 $ 563,254 $ 1,172,168 $ 1,034,322

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(see Note 4 , " Acquisitions " for further information).

The fair value of long-term debt was determined using the present value of future cash flows based on the borrowing rates currently available for debt with similar terms and maturities (Level 2 measurement, as described in “Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the fiscal year ended October 1, 2023).

The carrying value of our long-term debt under our Credit Facility approximated fair value at December 31, 2023 and October 1, 2023.

At December 31, 2023, we had $ 385 million in outstanding borrowings under the Amended Credit Agreement, which was comprised of $ 320 million under the New Term Loan Facility and $ 65 million under the Amended Revolving Credit Facility.

The estimated fair value of our $ 575 million Convertible Senior Notes (the "Convertible Notes") was determined based on the trading price of the Convertible Notes as of the last trading day of our first quarter of fiscal 2024.

The fair value of long-term debt under our Credit Facility was determined using the present value of future cash flows based on the borrowing rates currently available for debt with similar terms and maturities (Level 2 measurement, as described in “Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the fiscal year ended October 1, 2023).

The carrying value of our long-term debt under our Credit Facility approximated fair value at March 31, 2024 and October 1, 2023.

At March 31, 2024, we had $ 390 million in outstanding borrowings under the Amended Credit Agreement, which was comprised of $ 320 million under the New Term Loan Facility and $ 70 million under the Amended Revolving Credit Facility.

The estimated fair value of our $ 575 million Convertible Notes was determined based on the trading price of the Convertible Notes as of the last trading day of our second quarter of fiscal 2024.

We consider the fair value of the Convertible Notes to be a Level 2 measurement as they are not actively traded in markets.

The carrying amounts and estimated fair values of the Convertible notes were approximately $ 562 million and $ 603 million, respectively, at December 31, 2023, and $ 561 million and $ 566 million, respectively, at October 1, 2023.

The Credit Facility and Convertible Notes were used to fund our business acquisitions, working capital needs, dividends, capital expenditures and contingent earn-outs.

The carrying amounts and estimated fair values of the Convertible Notes were approximately $ 562 million and $ 631 million, respectively, at March 31, 2024, and $ 561 million and $ 566 million, respectively, at October 1, 2023.

Long-Term Debt

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On or after August 20, 2026, we have the option to redeem for cash all or any portion of the Convertible Notes if the last reported sale price of our common stock is equal to or greater than 130 % of the conversion price for a specified period of time at a redemption price equal to 100 % of the principal amount of the Convertible Notes to be redeemed, plus any accrued but unpaid interest.

In addition, as described in the indenture governing the Convertible Notes, certain events of default including, but not limited to, bankruptcy, insolvency or reorganization, may result in the Convertible Notes becoming due and payable immediately.

In addition, as described in the

indenture governing the Convertible Notes, certain events of default including, but not limited to, bankruptcy, insolvency or reorganization, may result in the Convertible Notes becoming due and payable immediately.

Our net proceeds from the offering were approximately $ 560.5 million after deducting the initial purchasers’ discounts and commissions and offering expenses.

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The Convertible Notes were recorded as a single unit within "Long-term debt" in our consolidated balance sheets as the conversion option within the Convertible Notes was not a derivative that would require bifurcation and the Convertible Notes did not involve a substantial premium.

Transaction costs to issue the Convertible Notes were recorded as direct deductions from the related debt liabilities and amortized to interest expense using the effective interest method over the terms of the Convertible Notes.

Debt issuance costs for the Convertible Notes have been amortized to interest expense over the terms of the Convertible Notes at an effective annual interest rate of 2.79 %.

Transaction costs to issue the Convertible Notes were recorded as direct deductions from the related debt liabilities and are amortized to interest expense using the effective interest method over the terms of the Convertible Notes resulting in an effective annual interest rate of 2.79 %.

The net carrying amount of the Convertible Notes was as follows (in thousands) :

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Net carrying amount $ 562,202 $ 560,842

The following table sets forth the interest expense recognized related to the Convertible Notes for the first quarter of fiscal 2024 (in thousands) :

The following table sets forth the interest expense recognized related to the Convertible Notes for the second quarter and first half of fiscal 2024 (in thousands) :

Three Months Ended Six Months Ended

2024 March 31,

Interest expense $ 3,127 $ 6,397

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2 to Second Amended and Restated Credit Agreement (“Amended Credit Agreement”) with a total borrowing capacity of $ 1.05 billion that will mature in February 2027.

The Amended Credit Agreement is a $ 750 million senior secured, five-year facility that provides for a $ 250 million term loan facility (the “Amended Term Loan Facility”) and a $ 500 million revolving credit facility (the “Amended Revolving Credit

In addition, the Amended Credit Agreement includes a $ 300 million accordion feature that allows us to increase the Amended Credit Agreement to $ 1.05 billion subject to lender approval.

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The Amended Credit Agreement expires on February 18, 2027, or earlier at our discretion upon payment in full of loans and other obligations.

For the first quarter of fiscal 2024, the weighted-average interest rate of the outstanding borrowings under the Amended Credit Agreement was 6.75 %.

During the six months ended March 31, 2024, the weighted-average interest rate of the outstanding borrowings under the Amended Credit Agreement was 6.75 %.

In addition, we had $ 0.7 million in standby letters of credit under the Amended Credit Agreement.

At December 31, 2023, we had $ 434.3 million of available credit under the Amended Revolving Credit Facility, all of which could be borrowed without a violation of our debt covenants.

At March 31, 2024, we had $ 429.3 million of available credit under the Amended Revolving Credit Facility, all of which could be borrowed without a violation of our debt covenants.

The Amended Credit Agreement contains certain affirmative and restrictive covenants, and customary events of default.

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Our obligations under the Amended Credit Agreement are guaranteed by certain of our domestic subsidiaries and are secured by first priority liens on (i) the equity interests of certain of our subsidiaries, including those subsidiaries that are guarantors or borrowers under the Amended Credit Agreement, and (ii) the accounts receivable, general intangibles and intercompany loans and those of our subsidiaries that are guarantors or borrowers.

At December 31, 2023, we were in compliance with these covenants with a consolidated leverage ratio of 1.84 x and a consolidated interest coverage ratio of 9.49 x.

At March 31, 2024, we were in compliance with these covenants with a consolidated leverage ratio of 1.73 x and a consolidated interest coverage ratio of 10.98 x.

In addition to the Amended Credit Agreement, we maintain other credit facilities, which may be used for short-term cash advances and bank guarantees.

At December 31, 2023, there were no outstanding borrowings under these facilities and the aggregate amount of standby letters of credit outstanding was $ 57.4 million.

As of December 31, 2023, we had no bank overdrafts related to our disbursement bank accounts.

At March 31, 2024, there were no outstanding borrowings under these facilities and the aggregate amount of standby letters of credit outstanding was $ 55.1 million.

As of March 31, 2024, we had no bank overdrafts related to our disbursement bank accounts.

Derivative Financial Instruments

We use certain interest rate derivative contracts to hedge interest rate exposures on our variable rate debt.

We periodically use certain interest rate derivative contracts to hedge interest rate exposures on our variable rate debt.

We also enter into foreign currency derivative contracts with financial institutions to reduce the risk that cash flows and earnings could adversely be affected by foreign currency exchange rate fluctuations.

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Although an effective economic hedge of our foreign exchange risk related to this transaction, the forward contract did not qualify for hedge accounting.

As a result, the forward contract was marked-to-market with changes in fair value

recognized in earnings each period.

As a result, the forward contract was marked-to-market with changes in fair value recognized in earnings each period.

The intrinsic value of the forward contract was immaterial at inception as the GBP/USD spot and forward exchange rates were essentially the same.

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The five swaps expired on July 31, 2023.

The related loss of $ 0.1 million was recognized and reported on our consolidated statement of comprehensive income for the first quarter of fiscal 2023.

There were no derivative instruments that were not designated as hedging instruments for the first quarters of fiscal 2024 and 2023.

The related loss of $ 0.9 million and $ 1.0 million were recognized and reported on our consolidated statement of comprehensive income for the three and six months ended April 2, 2023.

There were no derivative instruments that were not designated as hedging instruments for the first halves of fiscal 2024 and 2023.

Reclassifications Out of Accumulated Other Comprehensive Income

The accumulated balances and activities for the three months ended December 31, 2023 and January 1, 2023 related to reclassifications out of accumulated other comprehensive income are summarized as follows (in thousands):

The accumulated balances and activities for the three and six months ended March 31, 2024 and April 2, 2023 related to reclassifications out of accumulated other comprehensive income are summarized as follows (in thousands):

Three Months Ended

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Instruments Net Pension Adjustments Accumulated Other Comprehensive Income (Loss)

Balance at January 1, 2023 $ ( 177,449 ) $ 2,323 — $ ( 175,126 )

Other comprehensive (loss) income before reclassifications ( 8,153 ) ( 1,767 ) 2,794 ( 7,126 )

Amounts reclassified from accumulated other comprehensive loss:

Interest rate contracts, net of tax (1)

Net current-period other comprehensive (loss) income ( 8,153 ) ( 896 ) 2,794 ( 6,255 )

Balance at April 2, 2023 $ ( 185,602 ) $ 1,427 $ 2,794 $ ( 181,381 )

Balance at December 31, 2023 $ ( 134,827 ) $ — 2,625 $ ( 132,202 )

Other comprehensive loss before reclassifications ( 24,344 ) — — ( 24,344 )

Net current-period other comprehensive loss ( 24,344 ) — — ( 24,344 )

Balance at March 31, 2024 $ ( 159,171 ) $ — $ 2,625 $ ( 156,546 )

Six Months Ended

Adjustments Gain (Loss)

on Derivative

Instruments Net Pension Adjustments Accumulated Other Comprehensive Income (Loss)

Balance at October 2, 2022 $ ( 210,556 ) $ 2,412 — $ ( 208,144 )

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Interest rate contracts, net of tax (1)

— 1,317 — 1,317

Net current-period other comprehensive income (loss) 24,954 ( 985 ) 2,794 26,763

Balance at January 1, 2023 $ ( 177,449 ) $ 2,323 $ — $ ( 175,126 )

Balance at April 2, 2023 $ ( 185,602 ) $ 1,427 $ 2,794 $ ( 181,381 )

Balance at October 1, 2023 $ ( 197,933 ) $ — 2,638 $ ( 195,295 )

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Net current-period other comprehensive income (loss) 38,762 — ( 13 ) 38,749

Balance at December 31, 2023 $ ( 134,827 ) $ — $ 2,625 $ ( 132,202 )

Balance at March 31, 2024 $ ( 159,171 ) $ — $ 2,625 $ ( 156,546 )

(1) This accumulated other comprehensive component is reclassified to “Interest expense” in our consolidated statements of income.

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District Court for the Northern District of California.

The complaint alleges False Claims Act violations and breach of contract related to TtEC's contracts to perform environmental remediation services at the former Hunters Point Naval

Shipyard in San Francisco, California.

The complaint alleges False Claims Act violations and breach of contract related to TtEC's contracts to perform environmental remediation services at the former Hunters Point Naval Shipyard in San Francisco, California.

TtEC disputes the claims and will defend this matter vigorously.

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We often provide services to unconsolidated joint ventures.

Our revenue related t o services we provided to unconsolidated joint ventures for the first quarters of fiscal 2024 and 2023 was approxima tely $ 19 million and $ 23 million, respectively.

Our related reimbursable costs for the first quarters of fiscal 2024 and 2023 were approximately $ 18 million a nd $ 22 million, respectively.

The table below presents revenue and reimbursable costs related t o services we provided to our unconsolidated joint ventures (in thousands):

Three Months Ended Six Months Ended

2024 April 2,

2023 March 31,

2024 April 2,

Revenue $ 14,436 $ 19,888 $ 33,404 $ 42,876

Related reimbursable costs 13,115 18,952 30,738 40,627

Our consolidated balance sheets also included the following amounts related to these services (in thousands):

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements