What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-02 compared with 2024-05-03 · 131 added, 139 removed, 364 unchanged (43% of the section changed)

12 unchanged sentences

Tetra Tech, Inc.

is a leading global provider of high-end consulting and engineering services that focuses on water, environment, sustainable infrastructure, renewable energy and international development.

is a leading global provider of high-end consulting and engineering services that focuses on water, environment and sustainable infrastructure.

We are a global company that is Leading with Science ® to provide innovative solutions for our public and private clients.

17 unchanged sentences

The following table presents the percentage of our revenue by client sector:

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

29 unchanged sentences

The following table presents the percentage of our revenue by reportable segment:

Three Months Ended Six Months Ended

2024 April 2,

2023 March 31,

2024 April 2,

Three Months Ended Nine Months Ended

2023 June 30,

Reportable Segment

6 unchanged sentences

The following table presents the percentage of our revenue by contract type:

Three Months Ended Six Months Ended

2024 April 2,

2023 March 31,

2024 April 2,

Three Months Ended Nine Months Ended

2023 June 30,

Contract Type

39 unchanged sentences

government clients.

LST is included in our GSG segment.

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 GSG segment.

In the second quarter of fiscal 2023, we completed the acquisition of RPS Group plc ("RPS"), a publicly traded company on the London Stock Exchange in an all cash transaction totaling $784 million.

1 unchanged sentence

RPS employs approximately 5,000 associates in the United Kingdom, Europe, Asia Pacific and North America, delivering high-end solutions, especially in energy transformation, water and program management for government and commercial clients.

Substantially all of RPS is included in our CIG segment.

In the second quarter of fiscal 2023, we also acquired Amyx, Inc.

8 unchanged sentences

OVERVIEW OF RESULTS AND BUSINESS TRENDS

Our revenue increased 20.8% in the first half of fiscal 2024 compared to the same period last year primarily reflecting increased activity in our U.S.

For the first nine months of fiscal 2024, our revenue increased 17.2% compared to the fiscal 2023 period primarily reflecting increased activity in our U.S.

federal and international client sectors.

Our revenue in the first half of fiscal 2024 includes $266 million from our recent acquisitions, that did not have comparable revenue for the same period last year.

Excluding the impact of these acquisitions, our revenue increased 7.9% compared to the first half of fiscal 2023.

This revenue growth includes $299 million from our recent acquisitions, that did not have comparable revenue for the same period last year.

Excluding the impact of these acquisitions, our revenue increased 8.1% compared to the prior-year period.

The table below presents our revenue by client sector (amounts in thousands):

Six Months Ended

March 31, 2024 April 2, 2023 Change

Nine Months Ended

June 30, 2024 July 2, 2023 Change

Client Sector

11 unchanged sentences

Federal Government.

Six Months Ended

March 31, 2024 April 2, 2023 Change

Nine Months Ended

June 30, 2024 July 2, 2023 Change

($ in thousands)

3 unchanged sentences

Our 22.6% growth in U.S.

federal revenue in the first half of fiscal 2024 compared to the first half of last year primarily reflects increased international development activity and broad-based growth across civilian agencies.

For the first half of fiscal 2024, the growth in our international development activity primarily relates to activity in Ukraine to support energy security and other humanitarian needs.

This international development revenue was approximately $56 million higher in the first half of fiscal 2024 compared to the prior-year period.

Our growth in the first half of fiscal 2024 also includes approximately $51 million of revenue from our recent acquisitions, that did not have comparable revenue for the same period in fiscal 2023.

federal revenue in the first nine months of fiscal 2024 compared to the first nine months of last year primarily reflects increased international development activity and increased environmental activity for both civilian and defense agencies.

The growth in our international development activity primarily relates to activity in Ukraine to support energy security and other humanitarian needs.

For the first nine months of fiscal 2024, our international development revenue increased approximately $102 million compared to the prior-year period.

The overall revenue growth also includes approximately $83 million of revenue from our recent acquisitions, that did not have comparable revenue in the fiscal 2023 period.

We expect our U.S.

federal government revenue to continue to grow in the second half of fiscal 2024.

federal government revenue to continue to grow in the fourth quarter of fiscal 2024.

Approximately $1 trillion in new U.S.

2 unchanged sentences

State and Local Government.

Six Months Ended

March 31, 2024 April 2, 2023 Change

Nine Months Ended

June 30, 2024 July 2, 2023 Change

($ in thousands)

Revenue $ 444,877 $ 452,447 $ (7,570) (1.7)%

For the first half of fiscal 2024, our U.S.

For the first nine months of fiscal 2024, our U.S.

state and local government revenue declined year-over-year due to lower disaster response revenue of approximately $51 million primarily due to the wind-down of hurricane related projects in the southeastern U.S.

Excluding our disaster response activities, our U.S.

state and local government revenue increased 19.9% in the first half of fiscal 2024 compared to the year-ago period primarily reflecting continued increased revenue from advanced water treatment projects.

state and local government revenue increased 14.3% in the first nine months of fiscal 2024 compared to the year-ago period, primarily reflecting continued increased revenue from advanced water treatment projects.

Most of our work for the U.S.

state and local governments relates to critical water and environmental programs, which we expect to continue to grow in the second half of fiscal 2024.

Six Months Ended

March 31, 2024 April 2, 2023 Change

state and local governments relates to critical water and environmental programs, which we expect to continue to grow in the fourth quarter of fiscal 2024.

Nine Months Ended

June 30, 2024 July 2, 2023 Change

($ in thousands)

Revenue $ 665,675 $ 633,401 $ 32,274 5.1%

For the first half of fiscal 2024, our U.S.

For the first nine months of fiscal 2024, our U.S.

commercial revenue growth was due to increased planning and permitting projects related to renewable energy generation and transmission.

We expect revenue growth to continue in our U.S.

commercial business in the second half of fiscal 2024.

commercial business in the fourth quarter of fiscal 2024.

International.

Six Months Ended

March 31, 2024 April 2, 2023 Change

Nine Months Ended

June 30, 2024 July 2, 2023 Change

($ in thousands)

2 unchanged sentences

clien ts, primarily in Canada, Australia, Europe and the United Kingdom.

Our international revenue growth of 41.2% in the first half of fiscal 2024 compared to the first half of last year primarily reflects higher renewable energy revenue and commercial activities related to an increased focus on sustainability in addition to contributions from acquisitions.

For the first half of fiscal 2024, our international revenue growth includes approximately $182 million of revenue from our recent acquisitions, that did not have comparable revenue for the same period last year.

For the first nine months of fiscal 2024, our international revenue increased 26.5% compared to the prior-year period primarily due to higher renewable energy revenue and commercial activities related to an increased focus on sustainability in addition to contributions from acquisitions.

This revenue growth includes approximately $182 million of revenue from our recent acquisitions, that did not have comparable revenue for the same period last year.

Excluding the impact of these acquisitions, our revenue increased 11.1% compared to the fiscal 2023 period.

We expect growth in our international work to continue in the second half of fiscal 2024.

We expect growth in our international work to continue in the fourth quarter of fiscal 2024.

RESULTS OF OPERATIONS

Consolidated Results of Operations

Three Months Ended Six Months Ended

2024 April 2,

2023 Change March 31, 2024 April 2, 2023 Change

Three Months Ended Nine Months Ended

2023 Change June 30, 2024 July 2, 2023 Change

($ in thousands, except per share data)

25 unchanged sentences

NM = not meaningful

Our revenue growth in the second quarter and first half of fiscal 2024 reflects increases in both of our reportable segments.

Our GSG segment's revenue and revenue, net of subcontractor costs, increased $33.9 million, or 6.0%, and $30.9 million, or 7.1%, respectively, in the second quarter of fiscal 2024 compared to the prior-year quarter.

Our CIG segment's revenue increased $60.8 million, or 10.0%, and revenue, net of subcontractor costs, increased $52.1 million, or 9.8% in the second quarter of fiscal 2024 compared to the prior-year quarter.

In the first half of fiscal 2024, our GSG segment's revenue and revenue, net of subcontractor costs, increased $137.8 million, or 13.3%, and $120.6 million, or 15.3%, respectively, compared to the same period last year.

Our CIG segment's revenue increased $290.3 million, or 27.7%, and revenue, net of subcontractor costs, increased $241.1 million, or 26.3% in the first half of fiscal 2024 compared to fiscal 2023 period.

The second quarter and first half results for GSG and CIG segments are described below under "Government Services Group" and "Commercial/International Group", respectively.

Our revenue growth in the third quarter and first nine months of fiscal 2024 reflects increases in both of our reportable segments.

Our GSG segment's revenue and revenue, net of subcontractor costs, increased $109.5 million, or 20.6%, and $98.0 million, or 25.1%, respectively, in the third quarter of fiscal 2024 compared to the prior-year quarter.

Our CIG segment's revenue increased $32.2 million, or 4.7%, and revenue, net of subcontractor costs, increased $24.0 million, or 4.0% in the third quarter of fiscal 2024 compared to the year-ago quarter.

In the first nine months of fiscal 2024, our GSG segment's revenue and revenue, net of subcontractor costs, increased $247.4 million, or 15.8%, and $218.6 million, or 18.5%, respectively, compared to the same period last year.

Our CIG segment's revenue increased $322.6 million, or 18.5%, and revenue, net of subcontractor costs, increased $265.1 million, or 17.5% in the first nine months of fiscal 2024 compared to fiscal 2023 period.

The third quarter and first nine months results for GSG and CIG segments are described below under "Government Services Group" and "Commercial/International Group", respectively.

The following table reconciles our reported results to non-U.S.

GAAP adjusted results, which exclude acquisition expenses related to the RPS acquisition and adjustments to contingent consideration liabilities in the second quarter and first half of fiscal 2023.

Our adjusted earnings per share ("EPS") for these periods also excludes non-operating gains on a foreign exchange contract of $21.4 million and $89.4 million, respectively.

The gains are reported as "Other non-operating income" in our consolidated statements of inco me.

Further, our adjusted EPS excludes acquisition costs and the write-off of previously deferred debt origination fees reflected as additional interest expense, of $21.0 million in the second quarter and $27.5 million in the first half of fiscal 2023 related to the RPS acquisition.

The effective tax rate applied to the adjustments to EPS to arrive at adjusted EPS averaged 26% for the first half of fiscal 2023.

GAAP adjusted results, which exclude acquisition and integration costs related to the RPS acquisition in the third quarter and first nine months of fiscal 2023, and losses from adjustments to contingent consideration liabilities incurred in the first half of fiscal 2023.

Our adjusted earnings per share ("EPS") for the first nine months of fiscal 2023 also excludes non-operating gains on a foreign exchange contract of $89.4 million (all in the first half of fiscal 2023).

The gain is reported as "Other non-operating income" in our consolidated statements of income.

Further, our adjusted EPS excludes acquisition costs and the write-off of previously deferred debt origination fees reflected as additional interest expense, of $2.1 million in the third quarter and $29.6 million in the first nine months of fiscal 2023 related to the RPS acquisition.

The effective tax rate applied to the adjustments to EPS to arrive at adjusted EPS averaged 26% for the first nine months of fiscal 2023.

We applied the relevant marginal statutory tax rate based on the nature of the adjustments and the tax jurisdiction in which it occurred.

Both EPS and adjusted EPS were calculated using diluted weighted-average common shares outstanding for the respective periods as reflected in our consolidated statement of income.

Three Months Ended Six Months Ended

2024 April 2,

2023 Change March 31,

2024 April 2,

Three Months Ended Nine Months Ended

2023 Change June 30,

($ in thousands, except per share data)

12 unchanged sentences

(1) Non-GAAP financial measure

Operating income in the second quarter and first half of fiscal 2023 included $19.9 million and $23.7 million of acquisition and integration expenses (primarily legal and other professional fees), respectively, for the RPS acquisition.

Operating income for these periods also included a net loss of $7.5 million and $8.5 million, respectively, related to changes in the estimated fair value of contingent earn-out liabilities.

Excluding the acquisition expenses and earn-out losses, our adjusted operating income increased $29.2 million, or 33.0% in the second quarter and $43.5 million, or 23.5%, in the first half of fiscal 2024 compared to the same periods last year.

Operating income in the third quarter and first nine months of fiscal 2023 included $2.1 million and $25.8 million of acquisition and integration expenses (primarily legal and other professional fees), respectively, for the RPS acquisition.

The first nine months of fiscal 2023 results also include losses of $8.5 million (all in the first half of fiscal 2023), related to changes in the estimated fair value of contingent earn-out liabilities.

Excluding the acquisition expenses and earn-out losses, our adjusted operating income increased $28.8 million, or 28.9% in the third quarter and $72.4 million, or 25.4%, in the first nine months of fiscal 2024 compared to the same periods last year.

These increases reflect improved results in both of our operating segments, which are described below under "Government Services Group" and "Commercial/International Group", respectively.

Three Months Ended Six Months Ended

2024 April 2,

2023 Change March 31,

2024 April 2,

Three Months Ended Nine Months Ended

2023 Change June 30,

($ in thousands)

Net interest expense $ 9,912 $ 14,869 $ (4,957) (33.3)% $ 29,374 $ 33,563 $ (4,189) (12.5)%

For the first half of fiscal 2023 (all in the first quarter), net interest expense included $2.7 million of additional expense for the write-off of previously deferred debt origination fees due to the cancellation of the bridge loan facility that we entered to support our offer to acquire RPS, which was replaced with an amendment to our existing debt facility.

For the second quarter and first half of fiscal 2023, net interest expense included $1.1 million of additional expense for the write-off of previously deferred debt origination fees due to the repayment and cancellation of RPS' debt facilities.

Excluding these write-offs, our interest expense decreased $2.4 million in the second quarter of fiscal 2024 compared to fiscal 2023 quarter.

The decrease primarily reflects the lower borrowing costs from our convertible notes issued in the fourth quarter of fiscal 2023, which we used to refinance the existing higher-cost debt.

Also excluding the write-offs, our interest expense increased $4.6 million in the first half of fiscal 2024 compared to the same period last year primarily due to the lower average borrowings in the first half of fiscal 2023 as the first quarter of fiscal 2023 did not include any borrowings for the RPS acquisition.

Three Months Ended Six Months Ended

2024 April 2,

2023 Change March 31,

2024 April 2,

For the third quarter of fiscal 2024, net interest expense decreased primarily due to the lower borrowing costs from our convertible notes (the "Convertible Notes") issued in the fourth quarter of fiscal 2023, which we used to refinance the existing higher-cost debt.

For the first nine months of fiscal 2023 (all in the first quarter), net interest expense included $2.7 million of additional expense for the write-off of previously deferred debt origination fees due to the cancellation of the bridge loan facility that we entered to support our offer to acquire RPS, which was replaced with an amendment to our existing debt facility.

For the first nine months of fiscal 2023 (all in the second quarter), net interest expense also included $1.1 million of additional expense for the write-off of previously deferred debt origination fees due to the repayment and cancellation of RPS' debt facilities.

Excluding these write-offs, our interest expense decreased $0.4 million in the first nine months of fiscal 2024 compared to the same period last year.

Three Months Ended Nine Months Ended

2023 Change June 30,

($ in thousands)

Other non-operating income $ — $ — $ — NM $ — $ 89,402 $ (89,402) NM

Other non-operating income for the second quarter and first half of fiscal 2023 reflects gains on a foreign exchange forward contract integrated with the acquisition of RPS.

Other non-operating income for the first nine months of fiscal 2023 reflects gains on a foreign exchange forward contract integrated with the acquisition of RPS.

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

1 unchanged sentence

The forward contract was settled on January 23, 2023, together with the closing of the RPS acquisition, with a cumulative cash gain of approximately $109 million.

Three Months Ended Six Months Ended

2024 April 2,

2023 Change March 31,

2024 April 2,

Three Months Ended Nine Months Ended

2023 Change June 30,

($ in thousands)

Income tax expense $ 32,894 $ 22,568 $ 10,326 45.8% $ 90,758 $ 86,781 $ 3,977 4.6%

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.

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 ($2.8 million in the second quarter) 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.

Segment Results of Operations

Government Services Group

Three Months Ended Six Months Ended

2024 April 2,

2023 Change March 31, 2024 April 2, 2023 Change

Three Months Ended Nine Months Ended

2023 Change June 30, 2024 July 2,

($ in thousands)

5 unchanged sentences

(1) Non-GAAP financial measure

The revenue growth in the second quarter and first half of fiscal 2024 of 6.0% and 13.3%, respectively, compared to the same periods last year primarily reflects higher U.S.

state and local government activities related to advanced water treatment, U.S.

federal government activities related to international development and contributions from acquisitions.

For the third quarter and first nine months of fiscal 2024, the revenue growth of 20.6% and 15.8%, respectively, compared to the same periods last year primarily reflects higher U.S.

federal government activities related to international development, U.S.

state and local government activities related to advanced water treatment and contributions from our recent acquisitions.

This growth was partially offset by lower disaster response activity.

The revenue growth in the first half of fiscal 2024 includes a $56 million increase from the aforementioned international development activities in Ukraine compared to the same period last year.

Our revenue growth in the second quarter and first half of fiscal 2024 also includes approximately $24 million and $50 million, respectively, of revenue from our recent acquisitions, that did not have comparable revenu e for the same periods in fiscal 2023.

Conversely, our revenue growth also includes decreased revenue from disaster response activities, which was approximately $12 million and $39 million lower in the second quarter and first half of fiscal 2024, respectively, compared to the same periods in fiscal 2023.

Excluding the acquisitions, increased activity in Ukraine and the partially offsetting lower disaster response revenue, our revenue increased 7.4% and 8.7% in the second quarter and first half of fiscal 2024, respectively, compared to the same periods last year.

The revenue growth in the third quarter and first nine months of fiscal 2024 includes a $46 million increase and a $102 million increase, respectively, from the aforementioned international development activities in Ukraine compared to the fiscal 2023 periods.

For the third quarter and first nine months of fiscal 2024, our revenue growth also includes approximately $33 million and $94 million, respectively, of revenue from our recent acquisitions, that did not have comparable revenue for the same periods in fiscal 2023.

Conversely, our revenue growth also includes decreased revenue from disaster response activities, which was approximately $10 million and $51 million lower in the third quarter and first nine months of fiscal 2024, respectively, compared to the prior-year periods.

Excluding the acquisitions, increased activity in Ukraine and the partially offsetting lower disaster response revenue, our revenue increased 8.6% and 7.9% in the third quarter and first nine months of fiscal 2024, respectively, compared to the same periods last year.

Operating income increased primarily due to the aforementioned revenue growth.

Our operating margin, based on revenue, net of subcontractor costs, was 14.0% in the first half of fiscal 2024, compared to 14.3% in the first half of fiscal 2023.

The decrease was due to a change in contract mix, specifically the aforementioned increase in the Ukraine energy program, which has a lower margin compared to other GSG activities.

Our operating margin, based on revenue, net of subcontractor costs, was 14.2% for the first nine months of both fiscal 2024 and 2023.

Commercial/International Group

Three Months Ended Six Months Ended

2024 April 2,

2023 Change March 31, 2024 April 2, 2023 Change

Three Months Ended Nine Months Ended

2023 Change June 30, 2024 July 2,

($ in thousands)

5 unchanged sentences

(1) Non-GAAP financial measure

The revenue growth in the second quarter and first half of fiscal 2024 of 10.0% and 27.7%, respectively, compared to the same periods last year primarily reflects increased activities related to renewable energy and international infrastructure in addition to contributions from acquisitions.

The revenue growth in the first half of fiscal 2024 includes approximately $216 million from the RPS acquisition that did not have comparable revenue in the same period last year.

Excluding the impact of the RPS acquisition, our revenue increased 7.1% in the first half of fiscal 2024 compared to the same period last year.

For the second quarter and first half of fiscal 2024, our operating income increased due to the aforementioned revenue growth for both periods.

In addition, our operating margin improved in the first half of fiscal 2024 compared to the same period last year.

Our operating margin, based on revenue, net of subcontractor costs, improved approximately 150 basis points from 11.2% in the first half of fiscal 2023 to 12.7% in the first half of this year.

For the third quarter and first nine months of fiscal 2024, the revenue growth of 4.7% and 18.5%, respectively, compared to the same periods last year primarily reflects increased activities related to renewable energy and international sustainable infrastructure in addition to contributions from acquisitions.

The revenue growth in the first nine months of fiscal 2024 includes approximately $205 million from the RPS acquisition that did not have comparable revenue in the fiscal 2023 period.

Excluding the impact of the RPS acquisition, our revenue increased 6.8% in the first nine months of fiscal 2024 compared to the year-ago period.

For the third quarter and first nine months of fiscal 2024, our operating income increased due to the aforementioned revenue growth for both periods.

In addition, our operating margin improved in the first nine months of fiscal 2024 compared to the same period last year.

Our operating margin, based on revenue, net of subcontractor costs, improved approximately 170 basis points from 11.4% in the first nine months of fiscal 2023 to 13.1% in the first nine months of this fiscal year.

The improved operating margin was primarily due to our increased focus on high-end consulting services, and improved project execution, particularly in the RPS operations.

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The contract term and thus remaining performance obligation on certain of our operations and maintenance contracts, are limited to the notice period required for contract termination (usually 30, 60, or 90 day s).

The differences between our backlog and RUPO at March 31, 2024 and October 1, 2023 were immaterial (see the table below):

The differences between our backlog and RUPO at June 30, 2024 and October 1, 2023 were immaterial (see the table below):

2024 October 1,

4 unchanged sentences

Capital Requirements.

At March 31, 2024, we had $210.3 million of cash and cash equivalents and access to an additional $729.3 million of borrowings available under our credit facility.

During the first half of fiscal 2024, we generated $112.2 million of cash from operations.

At June 30, 2024, we had $212.3 million of cash and cash equivalents and access to an additional $800 million of borrowings available under our credit facility.

During the first nine months of fiscal 2024, we generated $253.1 million of cash from operations.

Our primary sources of liquidity are cash flows from operations and borrowings under our credit facilities.

5 unchanged sentences

Cash and cash equivalents $ 212,321 $ 168,831 $ 43,490 25.8 %

Six Months Ended

2024 April 2,

Nine Months Ended

Net cash provided by (used in):

3 unchanged sentences

Effect of exchange rate changes 2,146 12,410 (10,264) (82.7)

Net increase in cash and cash equivalents $ 41,463 $ 46,294 $ (4,831) (10.4) %

Net increase (decrease) in cash and cash equivalents $ 43,490 $ (9,038) $ 52,528 581.2 %

Operating Activities .

Cash from operations in the first half of fiscal 2023 included $27 million of payments related to the RPS acquisition, primarily the acquisition and integration costs.

Excluding these costs, our cash from operations decreased approximately 20% in the first half of fiscal 2024 compared to the same period last year.

This decrease primarily relates to $27 million in U.S.

federal income tax payments made in the first quarter of fiscal 2024 that typically would have been made in fiscal 2023, but for the IRS permitted 2023 federal tax payment deferrals for disaster zones that we elected.

In addition, we paid $5 million more in interest in the first half of fiscal 2024 than in the first half of last year primarily due to the additional debt incurred to fund the RPS acquisition.

Cash from operations in the first nine months of fiscal 2024 increased compared to fiscal 2023 period.

This positive change was a result of increased earnings in the first nine months of fiscal 2024 and a continuation of more efficient management of working capital through the collection of accounts receivable.

For the first nine months of fiscal 2024, we also paid $8 million less in interest compared to the prior-year period, primarily due the lower borrowing costs from our convertible notes issued in the fourth quarter of fiscal 2023, which we used to refinance the existing higher-cost debt incurred to fund the RPS acquisition in the second quarter of fiscal 2023.

The increase in operating cash was partially offset by an increased use of working capital to fund the 17.2% revenue growth for the first nine months of the fiscal 2024.

Additionally, we paid $27 million in U.S.

federal income tax in the first quarter of fiscal 2024 that typically would have been made in fiscal 2023, but for the IRS permitted 2023 federal tax payment deferrals for disaster zones that we elected.

Investing Activities .

For the first half of fiscal 2024, the cash used in investing activities includes net payments of $72 million for the LST acquisition completed in the second quarter of fiscal 2024.

The fiscal 2023 period reflects $854 million of net payments for RPS and Amyx acquisitions completed in the second quarter of fiscal 2023, net of the $109 million of related foreign exchange hedge proceeds in the second quarter of fiscal 2023.

For the first nine months of fiscal 2024, the cash used in investing activities includes net payments of $94 million for the acquisitions completed year-to-date.

The fiscal 2023 period reflects $854 million of net payments for the acquisitions completed in the second quarter of fiscal 2023, net of the $109 million of related foreign exchange hedge proceeds in the second quarter of fiscal 2023.

Financing Activities .

For the first half of fiscal 2024, net cash provided by financing activities declined due to $656 million higher in net borrowings in the prior-year period, which was used to primarily fund our fiscal 2023 acquisitions of RPS and Amyx.

For the first nine months of fiscal 2024, net cash provided by financing activities declined.

The decrease was due to a higher net borrowing of $588 million in the prior-year period, which was used to primarily fund our fiscal 2023 acquisitions.

To a lesser extent, the decline in our net cash provided by financing activities was due to $14 million more cash used for contingent earn-out payments in the current year's period compared to the same period last year.

19 unchanged sentences

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

On August 22, 2023, we issued $575.0 million in convertible notes that bear interest at 2.25% per annum payable semiannually in arrears on February 15 and August 15 of each year, beginning on February 15, 2024 with a maturity date of August 15, 2028 (the "Convertible Notes").

On August 22, 2023, we issued $575.0 million in the Convertible Notes that bear interest at 2.25% per annum payable semiannually in arrears on February 15 and August 15 of each year, beginning on February 15, 2024 with a maturity date of August 15, 2028.

As of October 1, 2023, $560.8 million of the Convertible Notes was included in long-term debt in our consolidated balance sheets, which is net of $14.2 million of unamortized debt issuance costs.

2 unchanged sentences

See Note 15 , " Long-Term Debt " of the "Notes to Consolidated Financial Statements" for further discussion.

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.

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

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

For the first nine months of fiscal 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 1.73x and a consolidated interest coverage ratio of 10.98x.

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

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 borrowings under these facilities, and the aggregate amount of standby letters of credit outstanding was $55.1 million.

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

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

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

We believe our operations have not been, and, in the foreseeable future, are not expected to be, materially adversely affected by inflation or changing prices due to the average duration of our projects and our ability to negotiate prices as contracts end and new contracts begin.

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In fiscal 2024 and 2023, we did not repurchase any shares of our common stock.

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

At June 30, 2024, we had a remaining balance of $347.8 million under our stock repurchase program.

Our Board of Directors has authorized the following dividends in fiscal 2024:

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

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.

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

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.

For detailed information regarding our stock split, see Note 20, “Subsequent Events” of the “Notes to Consolidated Financial Statements”.

We evaluate the realizability of our deferred tax assets by assessing the valuation allowance and adjust the allowance, if necessary.

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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.

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.

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.

Off-Balance Sheet Arrangements

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If we default on the Amended Credit Agreement or additional credit facilities, our inability to issue or renew standby letters of credit and bank guarantees would impair our ability to maintain normal operations.

At March 31, 2024, we had $0.7 million in standby letters of credit outstanding under our Amended Credit Agreement and $55.1 million in standby letters of credit outstanding under our additional letter of credit facilities.

At June 30, 2024, we had $0.7 million in standby letters of credit outstanding under our Amended Credit Agreement and $50.6 million in standby letters of credit outstanding under our additional letter of credit facilities.

• From time to time, we provide guarantees and indemnifications related to our services.

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Our critical accounting policies are disclosed in our Annual Report on Form 10-K for the fiscal year ended October 1, 2023.

To date, there have been no material changes in our critical accounting policies as reported in our 2023 Annual Report on Form 10-K.

To date, there have been no material changes in our critical accounting policies as reported in our fiscal 2023 Annual Report on Form 10-K.

New Accounting Pronouncements

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The Facility matures on February 18, 2027.

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

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.

For the first nine months of fiscal 2024, the weighted-average interest rate of the outstanding borrowings under the Amended Credit Agreement was 6.72%.

The majority of our transactions are in U.S.

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We attempt to minimize our exposure to these fluctuations by matching revenue and expenses in the same currency for our contracts.

We report our foreign currency gains and losses in “Selling, general and administrative expenses” on our consolidated statements of income.

The impact of the foreign currency gains and losses was immaterial for the first halves of fiscal 2024 and 2023.

For the first nine months of fiscal 2024, we reported $1.0 million of foreign currency losses in “Selling, general and administrative expenses” on our consolidated statements of income.

The impact of the foreign currency gains and losses was immaterial for the first nine months of fiscal 2023.

We have foreign currency exchange rate exposure in our results of operation s and equity primarily because of the currency translation related to our foreign subsidiaries where the local currency is the functional curre ncy.

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dollar weakens against foreign currencies.

For the first halves of fiscal 2024 and 2023, 39.1% and 33.4% of our consolidated revenue, respectively, was generated by our international business.

For the first half of fiscal 2024, the effect of foreign exchange rate translation on our consolidated balance sheet was an increase in equity by $38.8 million compared to an increase of $25.0 million in the prior-year quarter.

For the first nine months of fiscal 2024 and 2023, 39.0% and 36.2% of our consolidated revenue, respectively, was generated by our international business.

For the first nine months of fiscal 2024, the effect of foreign exchange rate translation on our consolidated balance sheet was an increase in equity of $40.6 million compared to an increase of $69.5 million in the prior-year period.

These amounts were recognized as adjustments to equity through other comprehensive income.

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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 2. Management’s Discussion and Analysis