What changed in this filing

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Item 1. Financial Statements

2024-08-02 compared with 2024-05-03 · 172 added, 158 removed, 642 unchanged (34% of the section changed)

3 unchanged sentences

(unaudited - in thousands, except par value)

ASSETS March 31,

ASSETS June 30,

2024 October 1,

28 unchanged sentences

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

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

no shares issued and outstanding at June 30, 2024 and October 1, 2023

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

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

issued and outstanding, 53,532 and 53,248 shares at June 30, 2024 and October 1, 2023, respectively

Additional paid-in capital 28,171 —

9 unchanged sentences

(unaudited – in thousands, except per share data)

Three Months Ended Six Months Ended

2024 April 2,

2023 March 31,

2024 April 2,

Three Months Ended Nine Months Ended

2023 June 30,

Revenue $ 1,344,323 $ 1,208,947 $ 3,824,205 $ 3,261,938

23 unchanged sentences

(unaudited – in thousands)

Three Months Ended Six Months Ended

2024 April 2,

2023 March 31,

2024 April 2,

Three Months Ended Nine Months Ended

2023 June 30,

Net income $ 85,824 $ 60,238 $ 237,263 $ 219,794

4 unchanged sentences

Net pension adjustments 3 — ( 10 ) 2,794

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

Other comprehensive income, net of tax 1,857 43,456 40,606 70,218

Comprehensive income, net of tax $ 87,681 $ 103,694 $ 277,869 $ 290,012

5 unchanged sentences

(unaudited – in thousands)

Six Months Ended

2024 April 2,

Nine Months Ended

Cash flows from operating activities:

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Principal payments on finance leases ( 4,827 ) ( 4,082 )

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

Net cash (used in) provided by financing activities ( 107,458 ) 494,395

Effect of exchange rate changes on cash and cash equivalents 2,146 12,410

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

Net increase (decrease) in cash and cash equivalents 43,490 ( 9,038 )

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

8 unchanged sentences

Consolidated Statements of Stockholders' Equity

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

Three Months Ended July 2, 2023 and June 30, 2024

(unaudited – in thousands)

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Shares Amount

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

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

Net income — — — — 60,235 60,235 3 60,238

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

Other comprehensive income — — — 43,455 — 43,455 1 43,456

Cash dividends of $ 0.26 per common share

3 unchanged sentences

Stock options exercised 12 — 334 — — 334 — 334

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

BALANCE AT JULY 2, 2023 53,243 $ 532 $ 17,906 $ ( 137,926 ) $ 1,572,204 $ 1,452,716 $ 73 $ 1,452,789

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

Net income — — — — 85,810 85,810 14 85,824

6 unchanged sentences

Stock options exercised 34 — 1,228 — — 1,228 — 1,228

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

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

BALANCE AT JUNE 30, 2024 53,532 $ 535 $ 28,171 $ ( 154,689 ) $ 1,792,121 $ 1,666,138 $ 65 $ 1,666,203

Tetra Tech, Inc.

Consolidated Statements of Stockholders' Equity

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

Nine Months Ended July 2, 2023 and June 30, 2024

(unaudited – in thousands)

9 unchanged sentences

Net income — — — — 219,771 219,771 23 219,794

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

Other comprehensive income — — — 70,218 — 70,218 — 70,218

Cash dividends of 0.72 per common share

4 unchanged sentences

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 JULY 2, 2023 53,243 $ 532 $ 17,906 $ ( 137,926 ) $ 1,572,204 $ 1,452,716 $ 73 $ 1,452,789

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

8 unchanged sentences

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

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

BALANCE AT JUNE 30, 2024 53,532 $ 535 $ 28,171 $ ( 154,689 ) $ 1,792,121 $ 1,666,138 $ 65 $ 1,666,203

See Notes to Consolidated Financial Statements.

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Recent Accounting Pronouncements

In November 2023, the FASB issued ASU No.

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) No.

2023-07, Segment Reporting (Topic 280):

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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,

Three Months Ended Nine Months Ended

2023 June 30,

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 three and six months ended March 31, 2024 and April 2, 2023.

federal government, no single client accounted for more than 10% of our revenue for the three and nine months ended June 30, 2024 and July 2, 2023.

Contract Assets and Contract Liabilities

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Net contract liabilities $ ( 253,727 ) $ ( 221,105 )

(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.

(1) Inclu des $ 6.2 million and $ 6.8 million of contract retentions at June 30, 2024 and October 1, 2023, respectively.

Both our contract assets and contract liabilities increased in the third 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.

For the first nine months of fiscal 2024 and 2023, we recognized revenue of approximately $ 214 million and $ 143 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".

1 unchanged sentence

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.

As a resu lt, for the third quarter and first nine months of fiscal 2024, we recognized net favorable revenue and operating income adjustmen ts of $ 6.5 million and $ 16.4 million, respectively.

For the first nine months of fiscal 2023, we recognized net favorable revenue and operating income adjustments of $ 4.0 million (substantially all in the first quarter).

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.

At June 30, 2024 and October 1, 2023, our consolidated balance sheets included liabilities for anticipated losses of $ 15.0 million and $ 8.5 million, respectively.

The estimated cost to complete these related contracts was approximately $ 95 million and $ 68 million at June 30, 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 March 31, 2024 are expected to be billed and collecte d within 12 months.

Substantially all of our unbilled receivables at June 30, 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.

3 unchanged sentences

Other than the U.S.

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

federal government, no single client accounted for more than 10% of our accounts receivable at June 30, 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 March 31, 2024.

We had $ 5.2 billion of RUPO at June 30, 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.

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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 March 31, 2024 over the following periods (in thousands):

We expect to satisfy our RUPO at June 30, 2024 over the following periods (in thousands):

Within 12 months $ 3,508,571

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

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;

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).

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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.

In the third quarter of fiscal 2024, we also acquired Convergence Controls & Engineering ("CCE"), an industry leader in process automation and systems integration solutions.

CCE’s expertise includes customized digital controls and software solutions, advanced data analytics, cloud data integration, and cybersecurity applications.

Both LST and CCE are included in our Government Services Group ("GSG") segment.

The aggregate fair value of the purchase price of these two acquisitions was $ 120 million.

This amount consisted of $ 93 million in initial cash payments, $ 4 million of cash holdback related to a tax reserve, and $ 23 million for the estimated fair value of contingent earn-out obligations, with a maximum of $ 60 million, based upon the achievement of specified operating income targets in each of the three years following the acquisition dates.

The $ 120 million purchase price was allocated $ 12 million to net tangible assets, $ 23 million to identifiable intangible assets, and $ 85 million to goodwill.

The purchase price 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.

These acquisitions were not considered material, individually or in aggregate, 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.

On September 23, 2022, we made an all cash offer to acquire all 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.

On November 3, 2022, RPS' shareholders approved the scheme of arrangement.

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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.

In the third quarter and first nine months of fiscal 2023, we incurred $ 2.1 million and $ 25.8 million, respectively, of acquisition and integration costs primarily for professional fees, substantially all of which were paid as of the end of the third 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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Supplemental Pro Forma Information (Unaudited)

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,

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

Three Months Ended Nine Months Ended

Revenue $ 1,208,947 $ 3,519,792

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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.

Amyx was not considered significant to our consolidated financial statements.

The total fair value of the purchase price of Amyx was $ 120.9 million, consisted 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.

Amyx was not considered material to our consolidated financial statements.

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

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 fiscal 2024 goodwill addition from LST and CCE are 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.

Our fiscal 2024 goodwill additions from the LST and CCE acquisitions reflect the extensive technical knowledge of the acquired workforces, the anticipated synergies in data analytics, cybersecurity and digital transformation services, and collective reputations of these acquisitions 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;

These acquisitions further expand and complement our market-leading positions in water and environment;

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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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).

In the first nine months 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 third quarter and first nine months 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 nine months 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,

The following table summarizes the changes in the fair value of estimated contingent consideration (in thousands):

Three Months Ended Nine Months Ended

2023 June 30,

Beginning balance $ 74,579 $ 88,082 $ 73,422 $ 65,566

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Acquisition activity 84,865 — 84,865

Translation adjustments 2,155 24,189 26,344

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.

Translation and other adjustments 2,282 24,719 27,001

Balance at June 30, 2024 $ 747,089 $ 1,245,021 $ 1,992,110

The goodwill addition in GSG resulted from the purchase price allocations for our fiscal 2024 acquisitions which are preliminary and subject to adjustment based upon the final determinations of the net assets acquired and information to perform the final valuation.

Goodwill adjustments primarily related to t he foreign currency translation adjustments which 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 $ 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.

The gross amounts for GSG were $ 764.8 million and $ 677.6 million at June 30, 2024 and October 1, 2023, respectively, excluding accumulated impairment of $ 17.7 million at each

The gross amounts of goodwill for CIG were $ 1,366.5 million and $ 1,341.8 million at June 30, 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 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):

March 31, 2024 October 1, 2023

June 30, 2024 October 1, 2023

Remaining Life

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Total $ 301,681 $ ( 137,222 ) $ 164,459 $ 270,453 $ ( 96,517 ) $ 173,936

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.

Amortization expense for the third quarter and first nine months of fiscal 2024 w as $ 13.8 million and $ 38.4 million, compared to $ 14.1 million and $ 29.6 million, respectively, for the prior-year periods.

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

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Property and equipment, net $ 70,694 $ 74,832

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.

For the third quarter and first nine months of fiscal 2024, our depreciation expense related to property and equipment was $ 5.7 million and $ 18.3 million, respectively, compared to $ 5.6 million and $ 13.7 million for third quarter and first nine months of fiscal 2023, respectively.

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 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:

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 nine months of fiscal 2024 and 2023.

At June 30, 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 nine months of fisc al 2024 and 2023:

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

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

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

April 29, 2024 0.29 May 20, 2024 May 31, 2024 15,522

Total dividend paid as of June 30, 2024 $ 43,303

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 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.

May 8, 2023 0.26 May 24, 2023 June 6, 2023 13,840

Total dividend paid as of July 2, 2023 $ 38,268

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

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

Three Months Ended Six Months Ended

2024 April 2,

2023 March 31,

2024 April 2,

Three Months Ended Nine Months Ended

2023 June 30,

Operating lease cost $ 24,562 $ 24,775 $ 73,580 $ 70,155

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

Six Months Ended

2024 April 2,

Nine Months Ended

Operating cash flows for operating leases $ 56,379 $ 57,871

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Operating leases 3.4 % 3.0 %

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):

At June 30, 2024, we had $ 13.9 million of operating leases that have not yet commenced.

A maturity analysis of the future undiscounted cash flows associated with our lease liabilities at June 30, 2024 is as follows (in thousands):

2024 (remaining) $ 20,124

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

In the first nine months 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.

We do not expect there will be any relate d 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 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.

Stock-based compensation expense for the three and nine months ended June 30, 2024 was $ 8.1 million and $ 23.7 million, compared to $ 7.0 million and $ 21.6 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 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.

In the first nine months 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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Diluted EPS is computed by dividing net income by the weighted-average number of common shares outstanding and dilutive potential common shares for the period.

Potential common shares include the weighted-average dilutive effects of outstanding stock options and unvested restricted stock using the treasury stock method.

Potential common shares include the weighted-average dilutive effects of stock-based awards and shares underlying our Convertible Senior Notes (the "Convertible Notes").

For the third quarter and first nine months of fiscal 2024, our Convertible Notes, described in Note 15, "Long-Term Debt", had a dilution impact on the dilutive potential common shares, which was calculated using the if-converted method.

The dilution impact was due to the price of our common stock exceeding the conversion price.

The related capped call transactions (the "Capped Call Transactions") were excluded from the calculation of dilutive potential common shares as their effect is anti-dilutive.

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

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 Six Months Ended

2024 April 2,

2023 March 31,

2024 April 2,

Three Months Ended Nine Months Ended

2023 June 30,

Net income attributable to Tetra Tech $ 85,810 $ 60,235 $ 237,228 $ 219,771

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Effect of dilutive stock options and unvested restricted stock 433 422 415 427

Shares issuable assuming conversion of convertible notes 104 — 35 —

Weighted-average common shares outstanding – diluted 54,052 53,653 53,901 53,615

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Diluted $ 1.59 $ 1.12 $ 4.40 $ 4.10

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.

The effective tax rates for the first nine months of fiscal 2024 and 2023 were 27.7 % and 28.3 %, respectively.

Income tax expense was reduced by $ 2.9 million and $ 2.2 million of excess tax benefits on share-based payments in the first nine months of fiscal 2024 and 2023, respectively.

In addition, income tax expense in the first nine months of fiscal 2024 included $ 4.3 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 nine months of fiscal 2023 included non-operating income tax expenses of $ 7.2 million ($ 6.9 million in the second quarter) to recognize the tax liability for foreign earnings, primarily in the United Kingdom 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 nine months of fiscal 2024 and the additional $ 7.2 million in the first nine months of fiscal 2023, our effective tax rates in the first nine months of fiscal 2024 and 2023 were 27.2 % and 26.7 %, respectively.

At June 30, 2024 and October 1, 2023, the liability for income taxes associated with uncertain tax positions was $ 64.0 million and $ 62.0 million, respectively.

It is reasonably possible that the liabilities with respect to certain of our unrecognized tax positions may significantly decrease in the next 12 months.

These changes would be the result of ongoing examinations.

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

If these audits are resolved in a manner more unfavorable than our current expectations, our additional tax liabilities could be materially higher than the amounts currently recorded resulting in additional tax expense.

If these audits are resolved in a manner more unfavorable than our current expectations, our tax liabilities could be materially higher than the amounts currently recorded resulting in additional tax expense.

Reportable Segments

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commercial clients, and international clients inclusive of the commercial and government sectors.

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

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).

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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”.

In the third quarter and first nine months of fiscal 2023, our Corporate segment operating losses included $ 2.1 million and $ 25.8 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 Six Months Ended

2024 April 2,

2023 March 31,

2024 April 2,

Three Months Ended Nine Months Ended

2023 June 30,

GSG $ 640,553 $ 531,050 $ 1,812,721 $ 1,565,371

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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.

The carrying value of our long-term debt under our Credit Facility approximated fair value at June 30, 2024 and October 1, 2023.

At June 30, 2024, we had $ 300 million in outstanding borrowings under the Amended Credit Agreement, which was consisted of $ 300 million under the New Term Loan Facility and no borrowings 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 third 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 $ 631 million, respectively, at March 31, 2024, and $ 561 million and $ 566 million, respectively, at October 1, 2023.

The carrying amounts and estimated fair values of the Convertible Notes were approximately $ 563 million and $ 674 million, respectively, at June 30, 2024, and $ 561 million and $ 566 million, respectively, at October 1, 2023.

Long-Term Debt

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Thereafter, the Convertible Notes will be convertible at the option of the holders at any time until the close of business on the second scheduled trading day immediately preceding the maturity date.

The initial conversion rate applicable to the Convertible Notes is 5.0855 shares of our common stock per $1,000 principal amount of the Convertible Notes, which is equivalent to an initial price of approximately $ 196.64 per share of our common stock, subject to adjustment if certain events occur.

The initial conversion rate applicable to the Convertible Notes was 5.0855 shares of our common stock per $1,000 principal amount of the Convertible Notes, which was equivalent to an initial price of approximately $ 196.64 per share of our common stock.

The conversion rate is subject to adjustment for certain events, including stock splits and issuance of certain stock dividends on our common stock.

At June 30, 2024, the applicable conversion rate was 5.0862 shares of common stock per $1,000 principal amount of the Convertible Notes (equivalent to an adjusted conversion price of approximately $ 196.61 per share of common stock).

Upon conversion, we will pay cash up to the aggregate principal amount of the Convertible Notes to be converted and pay or deliver, as the case may be, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election, in respect of the remainder, if any, of our conversion obligation in excess of the aggregate principal amount of the Convertible Notes being converted.

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We will not be able to redeem the Convertible Notes prior to August 20, 2026.

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.

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.

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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Net carrying amount $ 562,882 $ 560,842

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,

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

Three Months Ended Nine Months Ended

2024 June 30,

Interest expense $ 3,234 $ 9,631

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Total interest expense $ 3,914 $ 11,671

Concurrent with the offering of the Convertible Notes, in August 2023, we entered into capped call transactions (the "Capped Call Transactions").

Concurrent with the offering of the Convertible Notes, in August 2023, we entered into the Capped Call Transactions.

The Capped Call Transactions are expected generally to reduce the potential dilution of our common stock upon conversion of the Convertible Notes and/or offset any cash payments we elect to make in excess of the principal amount of converted Convertible Notes, as the case may be.

If, however, the market price per share of our common stock, as measured under the terms of the Capped Call Transactions, exceeds the cap price of the Capped Call Transactions, there would nevertheless be dilution and/or there would not be an offset of such cash payments, in each case, to the extent that such market price exceeds the cap price of the Capped Call Transactions.

The cap price of the Capped Call Transactions is initially $ 259.56 per share, which represents a premium of 65 % over the last reported sale price of our common stock of $ 157.31 per share on the NASDAQ Global Select Market on August 17, 2023, and is subject to certain adjustments under the terms of the Capped Call Transactions.

The cap price of the Capped Call Transactions was initially $ 259.56 per share, which represented a premium of 65 % over the last reported sale price of our common stock of $ 157.31 per share on the NASDAQ Global Select Market on August 17, 2023.

The cap price is subject to adjustment for certain events, including stock splits and issuance of certain stock dividends on our common stock.

At June 30, 2024, the adjusted cap price was approximately $ 259.53 per share.

We recorded the Capped Call Transactions as separate transactions from the issuance of the Convertible Notes.

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On October 26, 2022, we entered into a Third Amended and Restated Credit Agreement that provides for an additional $ 500 million senior secured term loan facility (the "New Term Loan Facility") increasing our total borrowing capacity to $ 1.55 billion.

On January 23, 2023, we drew the entire amount of the New Term Loan Facility to partially finance the RPS acquisition.

On January 23, 2023, we drew the entire amount of the New Term Loan Facility to partially finance the RPS

The New Term Loan Facility is not subject to any amortization payments of principal and matures on the third anniversary of the RPS acquisition closing date in January 2026.

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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.

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 %.

At June 30, 2024 , we h ad $ 300 million in outstanding borrowings under the Amended Credit Agreement, which was consisted of $ 300 million under the New Term Loan Facility and no borrowings under the Amended Revolving Credit Facility.

During the nine months ended June 30, 2024, the weighted-average interest rate of the outstanding borrowings under the Amended Credit Agreement was 6.72 %.

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

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.

At June 30, 2024, we had $ 499.3 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 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.

At June 30, 2024, we were in compliance with these covenants with a consolidated leverage ratio of 1.51 x and a consolidated interest coverage ratio of 12.47 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 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.

At June 30, 2024, there were no outstanding borrowings under these facilities and the aggregate amount of standby letters of credit outstanding was $ 50.6 million.

As of June 30, 2024, we had no bank overdrafts related to our disbursement bank accounts.

Derivative Financial Instruments

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The five swaps expired on July 31, 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.

The related loss of $ 1.0 million and $ 2.0 million were recognized and reported on our consolidated statement of comprehensive income for the three and nine months ended July 2, 2023.

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

Reclassifications Out of Accumulated Other Comprehensive Income

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):

The accumulated balances and activities for the three and nine months ended June 30, 2024 and July 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 )

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

Other comprehensive income (loss) before reclassifications 44,499 ( 2,137 ) — 42,362

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 )

— 1,093 — 1,093

Net current-period other comprehensive income (loss) 44,499 ( 1,044 ) — 43,455

Balance at July 2, 2023 $ ( 141,103 ) $ 383 $ 2,794 $ ( 137,926 )

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

Six Months Ended

Other comprehensive income before reclassifications 1,854 — 3 1,857

Net current-period other comprehensive income 1,854 — 3 1,857

Balance at June 30, 2024 $ ( 157,317 ) $ — $ 2,628 $ ( 154,689 )

Nine Months Ended

Adjustments Gain (Loss)

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Net current-period other comprehensive income (loss) 69,453 ( 2,029 ) 2,794 70,218

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

Balance at July 2, 2023 $ ( 141,103 ) $ 383 $ 2,794 $ ( 137,926 )

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

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Net current-period other comprehensive income (loss) 40,616 — ( 10 ) 40,606

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

Balance at June 30, 2024 $ ( 157,317 ) $ — $ 2,628 $ ( 154,689 )

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

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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,

Three Months Ended Nine Months Ended

2023 June 30,

Revenue $ 16,753 $ 22,373 $ 50,157 $ 65,249

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Contract liabilities ( 3,708 ) ( 3,158 )

Subsequent Events

On July 29, 2024, our Board of Directors declared a quarterly cash dividend of $ 0.29 per share payable on August 30, 2024 to stockholders of record as of the close of business on August 15, 2024.

On July 29, 2024, our Board of Directors also approved a five -for-one stock split of our common stock.

The split will be effected through an amendment to our Restated Certificate of Incorporation, which will result in a proportionate increase in the number of shares of authorized common stock.

The stock split is intended to make shares more accessible to a broader base of investors and enhance liquidity in the trading of Tetra Tech’s shares.

Each record holder of common stock as of the close of market on September 5, 2024, will receive four additional shares of common stock.

The stock split is expected to be effective after close of trading on September 6, 2024.

Trading is expected to commence on a split-adjusted basis at market open on September 9, 2024.

The following table reflects basic and diluted weighted average shares and net income per share on an unaudited pro forma basis giving effect to the stock split as if it had been effective for all periods presented:

Pro Forma (Unaudited)

Three Months Ended Nine Months Ended

2023 June 30,

Net income attributable to Tetra Tech $ 85,810 $ 60,235 $ 237,228 $ 219,771

Weighted-average common shares outstanding - basic 267,575 266,155 267,255 265,940

Effect of dilutive stock options and unvested restricted stock 2,165 2,110 2,075 2,135

Shares issuable assuming conversion of convertible notes 520 — 175 —

Weighted-average common shares outstanding - diluted 270,260 268,265 269,505 268,075

Earnings per share attributable to Tetra Tech:

Basic $ 0.32 $ 0.23 $ 0.89 $ 0.83

Diluted $ 0.32 $ 0.22 $ 0.88 $ 0.82

This forward stock split will trigger adjustments to the share-based ratios related to our Convertible Notes and Capped Call Transactions, se e Note 15, “Long-Term Debt ” of the “Notes to Consolidated Financial Statements”.

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