What changed in this filing

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Item 1. Financial Statements

2025-01-31 compared with 2024-08-02 · 203 added, 344 removed, 470 unchanged (54% of the section changed)

3 unchanged sentences

(unaudited - in thousands, except par value)

ASSETS June 30,

2024 October 1,

ASSETS December 29,

2024 September 29,

Current assets:

27 unchanged sentences

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

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

no shares issued and outstanding at December 29, 2024 and September 29, 2024

Common stock - authorized, 750,000 shares of $ 0.01 par value;

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

issued and outstanding, 268,028 and 267,717 shares at December 29, 2024 and September 29, 2024, respectively

Additional paid-in capital 21,153 35,900

9 unchanged sentences

(unaudited – in thousands, except per share data)

Three Months Ended Nine Months Ended

2023 June 30,

Three Months Ended

2024 December 31,

Revenue $ 1,420,561 $ 1,228,267

3 unchanged sentences

Selling, general and administrative expenses ( 83,951 ) ( 79,417 )

Acquisition and integration expenses — ( 2,107 ) — ( 25,812 )

Contingent consideration – fair value adjustments ( 500 ) — ( 477 ) ( 8,477 )

Legal contingency costs ( 115,000 ) —

Income from operations 22,526 111,081

Interest expense, net ( 7,218 ) ( 9,577 )

Other non-operating income — — — 89,402

Income before income tax expense 15,308 101,504

11 unchanged sentences

Tetra Tech, Inc.

Consolidated Statements of Comprehensive Income

Consolidated Statements of Comprehensive Income (Loss)

(unaudited – in thousands)

Three Months Ended Nine Months Ended

2023 June 30,

Three Months Ended

2024 December 31,

Net income $ 778 $ 74,980

Other comprehensive income, net of tax

Other comprehensive (loss) income, net of tax

Foreign currency translation adjustment, net of tax

( 108,846 ) 63,106

Loss on cash flow hedge valuations, net of tax — ( 1,044 ) — ( 2,029 )

Net pension adjustments ( 33 ) ( 13 )

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

Other comprehensive (loss) income, net of tax ( 108,879 ) 63,093

Comprehensive (loss) income, net of tax ( 108,101 ) 138,073

Comprehensive income attributable to noncontrolling interests, net of tax 31 8

Comprehensive income attributable to Tetra Tech, net of tax $ 87,667 $ 103,690 $ 277,834 $ 289,989

Comprehensive (loss) income attributable to Tetra Tech, net of tax $ ( 108,132 ) $ 138,065

See Notes to Consolidated Financial Statements.

2 unchanged sentences

(unaudited – in thousands)

Nine Months Ended

Three Months Ended

2024 December 31,

Cash flows from operating activities:

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Deferred income taxes 767 ( 1,624 )

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

Fair value adjustments to contingent consideration 477 8,477

Other non-cash items 775 123

6 unchanged sentences

Income taxes receivable/payable ( 1,538 ) ( 15,941 )

Cash settled on contingent earn-out liabilities ( 2,720 ) —

Other liabilities 138,627 ( 20,097 )

1 unchanged sentence

Cash flows from investing activities:

Payments for business acquisitions, net of cash acquired ( 93,650 ) ( 854,319 )

Settlement of foreign currency forward contract — 109,306

Capital expenditures ( 3,433 ) ( 3,434 )

Proceeds from sale of assets 666 439

Net cash used in investing activities ( 3,433 ) ( 3,434 )

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Repayments on long-term debt ( 15,000 ) ( 60,000 )

Repurchases of common stock ( 25,000 ) —

Shares repurchased for tax withholdings on share-based awards ( 13,307 ) ( 12,670 )

3 unchanged sentences

Principal payments on finance leases ( 1,719 ) ( 1,539 )

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

Net cash provided by financing activities 19,394 18,391

Effect of exchange rate changes on cash and cash equivalents ( 13,609 ) 5,655

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

Net increase in cash and cash equivalents 15,415 29,858

Cash and cash equivalents at beginning of period 232,689 168,831

3 unchanged sentences

Interest $ 4,295 $ 6,369

Income taxes, net of refunds received o f $ 4.0 million and $ 1.5 million

Income taxes, net of refunds received of $ 1.7 million and $ 0.9 million

$ 14,489 $ 43,297

2 unchanged sentences

Consolidated Statements of Stockholders' Equity

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

(unaudited – in thousands)

Common Stock Additional

Capital Accumulated

Comprehensive

Loss Retained

Earnings Total

Equity Non-Controlling

Interests Total

Shares Amount

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 income — — — 43,455 — 43,455 1 43,456

Cash dividends of $ 0.26 per common share

— — — — ( 13,840 ) ( 13,840 ) — ( 13,840 )

Stock-based compensation — — 7,038 — — 7,038 — 7,038

Restricted & performance shares released 3 — ( 105 ) — — ( 105 ) — ( 105 )

Stock options exercised 12 — 334 — — 334 — 334

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

Other comprehensive income — — — 1,857 — 1,857 — 1,857

Distributions paid to noncontrolling interests — — — — — — ( 5 ) ( 5 )

Cash dividends of $ 0.29 per common share

— — — — ( 15,522 ) ( 15,522 ) — ( 15,522 )

Stock-based compensation — — 8,096 — — 8,096 — 8,096

Restricted & performance shares released 1 — ( 125 ) — — ( 125 ) — ( 125 )

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

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

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

Three Months Ended December 31, 2023 and December 29, 2024

(unaudited – in thousands)

16 unchanged sentences

Shares issued for Employee Stock Purchase Plan 522 5 14,670 — — 14,675 — 14,675

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

BALANCE AT DECEMBER 31, 2023 267,329 $ 2,672 $ 9,971 $ ( 132,202 ) $ 1,657,165 $ 1,537,606 $ 81 $ 1,537,687

BALANCE AT SEPTEMBER 29, 2024 267,717 $ 2,677 $ 35,900 $ ( 78,875 ) $ 1,870,620 $ 1,830,322 $ 91 $ 1,830,413

Net income — — — — 747 747 31 778

Other comprehensive income — — — 40,606 — 40,606 — 40,606

Distributions paid to noncontrolling interests — — — — — — ( 43 ) ( 43 )

Other comprehensive loss — — — ( 108,879 ) — ( 108,879 ) — ( 108,879 )

Cash dividends of $ 0.058 per common share

4 unchanged sentences

Shares issued for Employee Stock Purchase Plan 458 4 15,303 — — 15,307 — 15,307

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

Stock repurchase ( 600 ) ( 6 ) ( 24,994 ) — — ( 25,000 ) — ( 25,000 )

BALANCE AT DECEMBER 29, 2024 268,028 $ 2,680 $ 21,153 $ ( 187,754 ) $ 1,855,818 $ 1,691,897 $ 122 $ 1,692,019

See Notes to Consolidated Financial Statements.

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They do not include all of the information and footnotes required by U.S.

GAAP for complete financial statements and, therefore, should be read in conjunction with the audited consolidated financial statements and the notes contained in our Annual Report on Form 10-K for the fiscal year ended October 1, 2023.

These financial statements reflect all normal recurring adjustments that are considered necessary for a fair statement of our financial position, results of operations and cash flows for the interim periods presented.

The results of operations and cash flows for any interim period are not necessarily indicative of results for the full fiscal year or for future fiscal yea rs.

The results of operations and cash flows for any interim period are not necessarily indicative of results for the full fiscal year or for future fiscal yea r s.

Certain prior year amounts have been reclassified to conform to the current year presentation in the accompanying notes.

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

The stock split had a record date of September 5, 2024 and an effective date of September 6, 2024.

The par value per share of our common stock remains unchanged at $ 0.01 per share after the stock split.

All prior-period share or per share amounts presented herein have been retroactively adjusted to reflect the stock split.

Recent Accounting Pronouncements

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The amendments in the ASU are intended to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses.

The amendments in this ASU are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 (fiscal 2025 for us).

The amendments in this ASU are effective for fiscal years beginning after December 15, 2023 (fiscal 2025 year-end for us), and interim periods within fiscal years beginning after December 15, 2024 (first quarter of fiscal 2026 for us).

Early adoption is permitted.

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

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

The adoption of this ASU will not have a material impact on our consolidated financial statements.

In December 2023, the FASB issued ASU No.

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Early adoption is permitted.

The adoption of this ASU will not have a material impact on our consolidated financial statements.

In November 2024, the FASB issued ASU No.

2024-03, Income Statement (Topic 220):

Reporting Comprehensive Income.

ASU 2024-03 does not change or remove current expense presentation requirements within the consolidated statements of income.

However, the amendments require disclosure, on an annual and interim basis, of disaggregated information about certain income statement expense line items within the notes to the consolidated financial statements.

The amendments in this update are effective for annual reporting periods beginning after December 15, 2026 (fiscal 2028 for us), and interim reporting periods beginning after December 15, 2027 (first quarter of fiscal 2029 for us).

Early adoption is permitted.

The adoption of t his ASU will not have a material impact on our consolidated financial statements.

In November 2024, the FASB issued ASU No.

2024-04, Debt—Debt with Conversion and Other Options (Subtopic 470-20):

Induced Conversions of Convertible Debt Instruments, which clarifies the requirements related to accounting for the settlement of a debt instrument as an induced conversion.

The amendments in this update are effective for annual reporting periods beginning after December 15, 2025, including interim periods within those fiscal years (first quarter of fiscal 2027 for us).

Early adoption is permitted.

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

however, we do not plan to adopt Topic 740 before fiscal 2026.

however, we do not plan to adopt this ASU before fiscal 2027.

Revenue and Contract Balances

1 unchanged sentence

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

Three Months Ended Nine Months Ended

2023 June 30,

Three Months Ended

2024 December 31,

Client Sector:

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(2) Includes revenue generated from non-U.S.

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

clien ts, primarily in United Kingdom, Australia and Canada

Other than the U.S.

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.

federal government, no single client accounted for more than 10% of our revenue for the first quarters of fiscal 2025 and 2024.

Contract Assets and Contract Liabilities

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Contract assets and liabilities are reported in a net position on a contract-by-contract basis at the end of each reporting period.

There were no substantial non-current contract assets or liabilities for the periods presented.

There were no substantial non-current contract assets for the periods presented.

Net contract assets/liabilities consisted of the following (in thousands):

2024 October 1, 2023

2024 September 29, 2024

Contract assets (1)

$ 122,310 $ 129,678

Contract liabilities ( 372,283 ) ( 335,044 )

Contract liabilities - current

( 359,957 ) ( 351,738 )

Contract liabilities - non-current (2)

Net contract liabilities $ ( 245,682 ) $ ( 222,060 )

(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.

(1) Includes $ 8.4 million and $ 7.9 million of contract retentions at December 29, 2024 and September 29, 2024, respectively.

(2) Reported under "Other non-current liabilities" on our consolidated balance sheet as of December 29,2024.

Our contract assets decreased, and contract liabilities increased in the first quarter of fiscal 2025 compared to fiscal 2024 year-end, due to the timing of our milestone billings on fixed-price contracts which were different from the timing of revenue recognition on those contracts.

For the first three months of fiscal 2025 and 2024, we recognized revenue of approximately $ 116 million and $ 130 million, respect ively, from the amounts included in the contract liability balances at the end of fiscal 2024 and 2023, respectively.

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

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

We estimate and measure progress on our contracts over time whereby we compare

our total costs incurred on each contract as a percentage of the total expected contract costs.

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

As a 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 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.

As a result, in the first quarters of fiscal 2025 and 2024, we recognized net favorable revenue and operating income adjustments of $ 2.7 million and $ 5.7 million, respectively.

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

At December 29, 2024 and September 29, 2024, our consolidated balance sheets included liabilities for anticipated losses of $ 13.2 million and $ 15.1 million, respectively.

The estimated cost to complete these related contracts was approximately $ 96 million and $ 101 million at December 29, 2024 and September 29, 2024, respectively.

Accounts Receivable, Net

Net accounts receivable consisted of the following (in thousands):

2024 October 1,

2024 September 29,

Billed $ 707,357 $ 707,406

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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 June 30, 2024 are expected to be billed and collecte d within 12 months.

Substantially all of our unbilled receivables at December 29, 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 June 30, 2024 and October 1, 2023.

federal government, no single client accounted for more than 10% of our accounts receivable at December 29, 2024 and September 29, 2024.

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 $ 5.2 billion of RUPO at June 30, 2024.

We had $ 5.4 billion of RUPO at December 29, 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 June 30, 2024 over the following periods (in thousands):

We expect to satisfy our RUPO at December 29, 2024 over the following periods (in thousands):

Within 12 months $ 3,673,959

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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 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;

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

government clients.

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

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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.

The results of LST and CCE have been included in our consolidated financial statements since the beginning of their respective closing dates.

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 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.

On January 19, 2023, the court-sanctioned scheme of arrangement to purchase RPS was approved, and we completed the acquisition on January 23, 2023.

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 Commercial/International Services Group ("CIG") segment.

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

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 .

The cash gain of $ 109.3 million did not qualify for hedge accounting.

As a result, the gain was recognized as non-operating income over the life of the contract and not included in the purchase price allocation below.

However, the cash proceeds of $ 109.3 million economically reduced the purchase price for the shares of RPS to approximately $ 675 million.

This forward contract is explained further in Note 16, "Derivative Financial Instruments".

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

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

Cash and cash equivalents $ 32,093

Accounts receivable and contract assets 202,303

Prepaid expenses and other current assets 45,999

Income taxes receivables 1,999

Property and equipment 38,435

Right-of-use assets, operating leases 40,179

Intangible assets 174,094

Deferred income taxes 35,084

Other long-term assets 1,061

Total assets acquired 571,247

Accounts payable $ ( 44,376 )

Accrued compensation ( 19,073 )

Contract liabilities ( 46,287 )

Income tax payable ( 7,083 )

Short-term lease liabilities, operating leases ( 13,477 )

Other current liabilities ( 135,474 )

Current portion of long-term debt ( 91,973 )

Long-term lease liabilities, operating leases ( 26,702 )

Other long-term liabilities ( 13,742 )

Deferred tax liabilities ( 41,613 )

Total liabilities assumed ( 439,800 )

Fair value of net assets acquired 131,447

Goodwill 652,762

Total purchase consideration $ 784,209

The following table summarizes the estimated fair values that were assigned to intangible assets at the acquisition date:

Fair Value Weighted-Average Estimated Useful Life

(in thousands) (in years)

Backlog $ 27,880 1.6

Trade names 27,260 3.0

Client relations 118,954 11.1

Total intangible assets acquired $ 174,094 8.3

Estimated fair value measurements for the intangible assets related to the RPS acquisition were made using Level 3 inputs including discounted cash flow techniques.

Fair value was estimated using a multi-period excess earnings method for backlog and client relations and a relief from royalty method for trade names.

The significant assumptions used in estimating fair value of backlog and client relations include (i) the estimated life the asset will contribute to cash flows, such as remaining contractual terms, (ii) revenue growth rates and EBITDA margins, (iii) attrition rate of customers, and (iv) the estimated discount rates that reflect the level of risk associated with receiving future cash flows.

The significant assumptions used in estimating fair value of trade names include the royalty rates and discount rates.

Supplemental Pro Forma Information (Unaudited)

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

Net income including noncontrolling interests 61,770 104,564

In fiscal 2023, we also acquired Amyx, Inc.

(“Amyx”), an enterprise technology services, cybersecurity and management consulting firm based in Reston, Virginia.

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

Amyx is included in our GSG segment.

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 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 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 and environment;

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

These goodwill additions are deductible for tax purposes.

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 12 years.

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

The significant unobservable inputs used in

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

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

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

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We review and reassess the estimated fair value of contingent consideration on a quarterly basis, and the updated fair value could differ materially from the initial estimates.

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

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

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.

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

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

In the first quarter of fis cal 2025, 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.

In the first quarters of fiscal 2025 and 2024, we recorded immaterial adjustments, individually and in aggregate, to our contingent earn-out liabilities and included the corresponding amount in our operating income.

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,

Three Months Ended

2024 December 31,

Beginning balance $ 48,746 $ 73,422

Estimated earn-out liabilities for acquisitions 1,138 — 23,038 12,248

Payments of contingent consideration ( 2,865 ) ( 18,862 )

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GSG CIG Total

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

Acquisition activity 84,865 — 84,865

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 $ 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.

Balance at September 29, 2024 $ 750,817 $ 1,295,752 $ 2,046,569

Translation adjustments ( 4,124 ) ( 73,761 ) ( 77,885 )

Balance at December 29, 2024 $ 746,693 $ 1,221,991 $ 1,968,684

Translation adjustments resulted from our goodwill amounts in foreign subsidiaries with functional currencies that are different than our reporting currency.

Th e goodwill amoun ts presented in the table above are net of reductions from historical impairment adjustments.

The gross amounts for GSG were $ 764.4 million and $ 768.5 million at December 29, 2024 and September 29, 2024, respectively, excluding accumulated impairment of $ 17.7 million at each date.

The gross amounts of goodwill for Commercial/International Services Group ("CIG") were $ 1,343.5 million and $ 1,417.3 million at December 29, 2024 and September 29, 2024, respectively, excluding accumulated impairment of $ 121.5 million at each period end.

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):

June 30, 2024 October 1, 2023

December 29, 2024 September 29, 2024

Remaining Life

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Total $ 299,023 $ ( 156,926 ) $ 142,097 $ 314,846 $ ( 154,261 ) $ 160,585

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.

Amortization expense for the identifiable intangible assets for the first quarter of fiscal 2025 w as $ 10.7 million, compared to $ 12.5 million for the prior-year quarter.

Estimated amortization expense for the remainder of fiscal 2025 and succeeding years is as follows (in thousands):

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Property and equipment consisted of the following (in thousands):

2024 October 1,

2024 September 29,

Equipment, furniture and fixtures $ 137,639 $ 139,070

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Property and equipment, net $ 67,102 $ 73,065

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.

For the first quart ers of fiscal 2025 and 2024, o ur depreciation expense related to property and equipment was $ 5.4 million and $ 7.0 million, 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 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:

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

In the first quarter of fiscal 2025, we repurchased and settled 600,007 shares with an average price of $ 41.67 per share for a total cost of $ 25.0 million in the open market.

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

At December 29, 2024, we had a remaining balance of $ 322.8 million under our stock repurchase program.

The following table presents dividends declared and paid in the first quarters of fisc al 2025 and 2024 :

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

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November 11, 2024 $ 0.058 November 27, 2024 December 13, 2024 $ 15,549

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

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

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

November 13, 2023 $ 0.052 November 30, 2023 December 13, 2023 $ 13,873

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

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

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

Subsequent Event.

O n January 27, 2025, our Board of Directors declared a quarterly cash dividend of $ 0.058 per share payable on February 26, 2025 to stockholders of record as of the close of business on February 12, 2025.

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 Nine Months Ended

2023 June 30,

Three Months Ended

2024 December 31,

Operating lease cost $ 25,916 $ 24,232

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

Nine Months Ended

Three Months Ended

2024 December 31,

Operating cash flows for operating leases $ 18,523 $ 19,682

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Supplemental balance sheet and other information related to leases are as follows ($ in thousands):

2024 October 1, 2023

2024 September 29, 2024

Operating leases:

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Operating leases 3.7 % 3.6 %

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):

At December 29, 2024, we had $ 12.7 million of operating leases that have not yet commenced.

A maturity analysis of the future undiscounted cash flows associated with our lease liabilities at December 29, 2024 is as follows (in thousands):

2025 (remaining) $ 51,634

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

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

In the first 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 expect there will be any relate d impact on our operating income, and we have no outstanding applications for further government assistance.

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

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

The remainder was distributed in the first quarter of fiscal 2025.

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 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 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.

Stock-based compensation expense wa s $ 8.1 million and $ 7.6 million for the first quarters of fiscal 2025 and 2024, respectively.

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

In the first quarter of fiscal 2025, we awa rded 236,928 performance share units (“PSUs”) to our non-employee directors and executive officers at an estimated fair value of $ 49.85 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.

The number of PSUs that ultimately vest is based 50 % on the growth in our diluted earnings per share and 50 % on our relative total shareholder return over the vesting period.

Additionally, we awarded 141,880 restricted stock units (“RSUs”) to our non-employee directors, executive officers and employees at a fair value of $ 164.78 per share on the award date.

All executive officer and employee RSUs have time-based vesting over a four-year period, and the non-employee director RSUs vest after one year .

The number of PSUs that ultimately vest is based 50 % on growth in our diluted earnings per share and 50 % on our relative total shareholder return over the vesting period.

Additionally, we awarded 481,247 restricted stock units (“RSUs”) to our non-employee directors, executive officers and employees at a fair value of $ 40.29 per share on the award da te.

executive officer and employee RSUs have time-based vesting over a four-year period, and the non-employee director RSUs vest after one year .

Earnings per Share (“EPS”)

Basic EPS is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding, less unvested restricted stock for the period.

Basic EPS is computed by dividing net income available to common stockholders by the weighted-average common shares outstanding for the period.

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 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.

For the first quarter of fiscal 2025, 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.

For the first quarter of fiscal 2024, the Convertible Notes had no impact on the calculation of dilutive potential common shares, as the price of our common stock did not exceed the conversion price.

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

For the first quarters of fiscal 2025 and 2024, 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 Nine Months Ended

2023 June 30,

Three Months Ended

2024 December 31,

Net income attributable to Tetra Tech $ 747 $ 74,972

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Diluted $ — $ 0.28

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.

The effective tax rates for the first quarters of fiscal 2025 and 2024 were 94.9 % and 26.1 %, respectively.

In the first quarter of fiscal 2025, we recognized a $ 115 million non-recurring charge related to legal contingencies as described in Note 17, " Commitments and Contingencies ".

We also determined that $ 31.3 million of this charge is not tax deductible, which increased our effective tax rate this quarter.

Excluding the impact of the legal contingency charge, our effective tax rate was 27.2 % in the first quarter of fiscal 2025.

At December 29, 2024 and September 29, 2024, the liability for income taxes associated with uncertain tax positions was $ 51.1 million and $ 50.1 million, respectively.

I t is reasonably possible that the amount of the unrecognized benefit with respect to certain of our unrecognized tax positions may not significantly decrease within the next 12 months.

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 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 additional tax liabilities could be materially higher than the amounts currently recorded resulting in additional tax expense.

Reportable Segments

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GSG also provides engineering design services for U.S.

based federal and municipal clients, especially in water infrastructure, flood protection and solid waste.

based federal and municipal clients, especially in water infrastructure, flood protection and

GSG also leads our support for development agencies worldwide, especially in the United States, United Kingdom and Australia.

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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 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”.

Our Corporate Segment's operating income in the first quarter of fiscal 2025, includes a non-recurring charge of $ 115.0 million related to legal contingencies as described in Note 17, " Commitments and Contingencies ".

This charge is reported separately as "Legal contingency costs" in our consolidated statement of income for the first quarter of fiscal 2025.

We expect to pay this amount within the next 12 months with our cash on hand and by drawing on our credit facility.

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

Three Months Ended Nine Months Ended

2023 June 30,

Three Months Ended

2024 December 31,

GSG $ 751,782 $ 575,041

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Total income from operations $ 22,526 $ 111,081

(1) Includes amortization of intangibles, acquisition and integration expenses, as well as other costs and other income not allocable to our reportable segments.

2024 October 1,

(1) Includes amortization of intangibles, acquisition and integration expenses, certain legal contingency costs as well as other costs and other income not allocable to our reportable segments.

2024 September 29,

GSG $ 756,176 $ 658,493

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Unobservable inputs that are not corroborated by market data.

Derivative Instruments.

Our derivative instruments are categorized within Level 2 of the fair value hierarchy.

For additional information about our derivative financial instruments (see Note 16 , " Derivative Financial Instruments ").

Contingent Consideration.

We measure our contingent earn-out liabilities at fair value on a recurring basis using significant unobservable inputs classified within Level 3 of the fair value hierarchy.

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

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 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 measure our contingent earn-out liabilities at fair value on a recurring basis usin g significant unobservable inputs classified within Level 3 of the fair value hierarchy (see Note 4 , " Acquisitions " for further information).

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 Estim ates” in our Annual Report on Form 10-K for the fiscal year ended September 29, 2024).

The carrying value of our long-term debt under our Credit Facility approximated fair value at December 29, 2024 and September 29, 2024.

At December 29, 2024, we had $ 325 million in outstanding borrowings under our Amended Credit Agreement, which consisted of $ 250 million under the New Term Loan Facility and $ 75 million und er the Amended Revolving Credit Facility.

The estimated fair value of our $ 575 million Convertible Notes, which were used to fund our business acquisitions, working capital needs, dividends, capital expenditures and contingent earn-outs, was determined based on the trading price of the Convertible Notes as of the last trading day of our first quarter of fiscal 2025.

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 $ 563 million and $ 674 million, respectively, at June 30, 2024, and $ 561 million and $ 566 million, respectively, at October 1, 2023.

The carrying amounts and estimated fair values of the Convertible Notes were approximate ly $ 564 million and $ 673 million, respectively, at December 29, 2024, and $ 564 million and $ 743 million, respectively, at September 29, 2024 (see Note 15 , " Long-Term Debt " for further information).

Long-Term Debt

Long-term debt consisted of the following (in thousands):

2024 October 1,

2024 September 29,

Credit facilities $ 325,000 $ 250,000

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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 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 initial conversion rate applicable to the Convertible Notes was 25.4275 shares (5.0855 pre-stock split) of our common stock per $1,000 principal amount of the Convertible Notes, which was equivalent to an initial price of approximately $ 39.33 per share ($ 196.64 pre-stock split) 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.

At December 29, 2024, the applicable conversion rate was 25.4345 shares of common stock per $1,000 principal amount of the Convertible Notes (equivalent to an adjusted conversion price of approximately $ 39.32 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 de liver, 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.

In addition, upon the occurrence of a "fundamental change" as defined in the indenture governing the Convertible Notes, holders may require us to repurchase for cash all or any portion of their Convertible Notes at a fundamental change repurchase price equal to 100 % of the principal amount of the Convertible Notes to be repurchased plus any accrued and unpaid interest.

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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.

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.

We used approximately $ 51.8 million of the net proceeds to pay the cost of the Capped Call Transactions described below.

We used approximately $ 51.8 million of the net proceeds to pay the cost of the Capped

Call Transactions described below.

We used the remaining net proceeds to repay all $ 185.0 million principal amount outstanding under our revolving credit facility, the remaining $ 234.4 million principal amount outstanding under our senior secured term loan due 2027 and approximately $ 89.4 million principal amount outstanding under our senior secured term loan due 2026.

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

2024 October 1,

2024 September 29,

Principal $ 575,000 $ 575,000

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Net carrying amount $ 564,263 $ 563,566

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,

The following table sets forth the interest expense recognized related to the Convertible Notes (in thousands) :

Three Months Ended

2024 December 31,

Interest expense $ 3,234 $ 3,270

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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 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 of the Capped Call Transactions was initially $ 51.91 per share ($ 259.56 pre-stock split), which represented a premium of 65 % over the last reported sale price of our common stock of $ 31.46 per share ($ 157.31 pre-stock split) 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.

At December 29, 2024, the adjusted cap price was approximately $ 51.90 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

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.

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

The New Term Loan Facility is not subject to any amortization payments of principal and matures in January 2026.

On February 18, 2022, we entered into Amendment No.

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and (iii) utilize the proceeds for working capital, capital expenditures and other general corporate purposes.

The Amended Credit Agreement provides for a reduction in the interest grid for meeting certain sustainability targets related to the (i) reduction of greenhouse gas emissions through the Company’s projects and operational sustainability initiatives and (ii) improvement of peoples’ lives as a result of the Company’s projects that provide environmental, social and governance benefits.

that provide environmental, social and governance benefits.

The Amended Revolving Credit Facility includes a $ 100 million sublimit for the issuance of standby letters of credit, a $ 20 million sublimit for swingline loans and a $ 300 million sublimit for multicurrency borrowings and letters of credit.

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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.

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 fiscal 2023, we repaid the Amended Term Loan Facility in full from the Convertible Notes proceeds.

At December 29, 2024 , we h a d $ 325 million in outstanding borrowings under the Amended Credit Agreement, which was consisted of $ 250 million under the New Term Loan Facility and $ 75 million under the Amended Revolving Credit Facility.

During the three months ended December 29, 2024, the weighted-average interest rate of the outstanding borrowings under the Amended Credit Agreement was 5.98 %.

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

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.

At December 29, 2024, we had $ 424.3 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 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.

At December 29, 2024, we were in compliance with these covenants with a consolidated leverage ratio of 1.77 x and a consolidated interest coverage ratio of 12.33 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 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

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

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

Our hedging program is not designated for trading or speculative purposes.

We recognize derivative instruments as either assets or liabilities on the accompanying consolidated balance sheets at fair value.

We record changes in the fair value (i.e., gains or losses) of the derivatives that have been designated as cash flow hedges in our consolidated balance sheets as accumulated other comprehensive income, and in our consolidated statements of income for those derivatives designated as fair value hedges.

Our derivative contracts are categorized within Level 2 of the fair value hierarchy.

In the fourth quarter of fiscal 2022, we entered into a forward contract to acquire GBP 714.0 million at a rate of 1.0852 for a total of USD 774.8 million that was integrated with our plan to acquire RPS.

This contract matured on December 30, 2022.

On December 28, 2022, we entered into an extension of the integrated forward contract to acquire GBP 714.0 million at a rate of 1.086 for a total of USD 775.4 million, extending the maturity date to January 23, 2023, the closing date of the RPS acquisition.

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

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

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

The fair value of the forward contract at October 2, 2022 was $ 19.9 million, and an unrealized gain of the same amount was recognized in our fourth quarter of fiscal 2022 results.

On January 23, 2023, the forward contract was settled at the fair value of $ 109.3 million.

We recognized additional gains of $ 68.0 million and $ 21.4 million in the first and second quarters of fiscal 2023, respectively.

All gains related to this transaction were reported in “Other non-operating income" on our consolidated income statements for the respective periods.

In fiscal 2018, we entered into five interest rate swap agreements that we designated as cash flow hedges to fix the interest rate on the borrowings under our term loan facility.

The five swaps expired on July 31, 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.

At December 29, 2024, there were no outstanding borrowings under these facilities and the aggregate amount of standby letters of credit outstanding was $ 40.2 million.

As of December 29, 2024, we had no bank overdrafts related to our disbursement bank accounts.

Reclassifications Out of Accumulated Other Comprehensive Income

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):

The accumulated balances and activities for the three months ended December 29, 2024 and December 31, 2023 related to reclassifications out of accumulated other comprehensive income are summarized as follows (in thousands):

Three Months Ended

Adjustments Gain (Loss)

on Derivative

Instruments Net Pension Adjustments Accumulated Other Comprehensive Income (Loss)

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)

— 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 )

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)

on Derivative

Instruments Net Pension Adjustments Accumulated Other Comprehensive Income (Loss)

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

Other comprehensive income (loss) before reclassifications 69,453 ( 4,439 ) 2,794 67,808

Amounts reclassified from accumulated other comprehensive loss:

Interest rate contracts, net of tax (1)

— 2,410 — 2,410

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

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

Adjustments Net Pension Adjustments Accumulated Other Comprehensive (Loss) Income

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

1 unchanged sentence

Net current-period other comprehensive income (loss) 63,106 ( 13 ) 63,093

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.

See Note 16 “Derivative Financial Instruments”, for more information.

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

Balance at September 29, 2024 $ ( 82,813 ) $ 3,938 $ ( 78,875 )

Other comprehensive loss before reclassifications ( 108,846 ) ( 33 ) ( 108,879 )

Net current-period other comprehensive loss ( 108,846 ) ( 33 ) ( 108,879 )

Balance at December 29, 2024 $ ( 191,659 ) $ 3,905 $ ( 187,754 )

Commitments and Contingencies

2 unchanged sentences

However, in some actions, parties are seeking damages that exceed our insurance coverage or for which we are not insured.

While management does not believe that the resolution of these claims will have a material adverse effect, individually or in aggregate, on our financial position, results of operations or cash flows, management acknowledges the uncertainty surrounding the ultimate resolution of these matters.

On July 15, 2019, following an initial January 14, 2019 filing, the Civil Division of the United States Attorney's Office filed an amended complaint in intervention in three qui tam actions filed against our subsidiary, Tetra Tech EC, Inc.

While management does not believe that the resolution of these claims will have a material adverse

effect, individually or in aggregate, on our financial position, results of operations or cash flows, management acknowledges the uncertainty surrounding the ultimate resolution of these matters.

On July 15, 2019, following an initial January 14, 2019 filing, the Civil Division of the United States Attorney's Office of the United States Department of Justice ("the USAO") filed an amended complaint in the intervention of three qui tam actions filed against our wholly-owned subsidiary, Tetra Tech EC, Inc.

("TtEC"), in the U.S.

District Court for the Northern District of California.

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

TtEC disputes the claims and will defend this matter vigorously.

We are currently unable to determine the probability of the outcome of this matter or the range of reasonably possible loss, if any.

District Court for the Northern District of California ("the Court").

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

On March 5, 2024, the Court granted the USAO's motion to amend the filing to include additional claims against TtEC under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") and common law.

As we previously disclosed, to explore whether a negotiated resolution was possible, TtEC began engaging in discussions with the USAO during the first quarter of fiscal 2025 regarding a potential resolution of all claims.

On January 17, 2025, TtEC entered into a settlement agreement with the United States of America, acting through the USAO and on behalf of the Department of the Navy (collectively, the "United States") an d also fil ed a proposed consent decree with the Court, to resolve this litigation.

Under the terms of the settlement agreement and consent decree, TtEC has agreed to pay the United States $ 57 million and $ 40 million for FCA claims and CERCLA claims, respectively (the "Settlement Amounts"), which we expect to pay with cash on hand and by drawing on our credit facility.

Upon entry of the consent decree by the Court and the United States' receipt of the Settlement Amounts, the United States will release TtEC from any, and all civil or administrative monetary claims for the Covered Conduct under the civil FCA, the CERCLA, and other specified civil statutes and common law theories of liability.

The consent decree is subject to a number of contingencies that could prevent it from being finalized with its current terms.

In particular, and without limitation, (i) the consent decree is required to be lodged with the Court for a period of 30 days for public notice and comment, and the United States has reserved the right to withdraw or withhold its consent if the comments regarding the consent decree disclose facts or considerations that indicate the consent decree is inappropriate, improper or inadequate;

and (ii) the Court might determine not to enter the consent decree as currently written or as approved by the United States.

There can be no assurance that the contingencies will not preclude entry of the consent decree.

TtEC entered into the settlement agreement and consent decree to avoid delay, uncertainty and expense of protracted litigation.

The settlement agreement and consent decree contain no admission of liability by TtEC.

TtEC has initiated litigation with the insurance carrier with which TtEC maintained liability policies regarding the reasonably possible payment or reimbursement of a significant portion of the Settlement Amounts.

TtEC can give no assurances as to what portion, if any, of the Settlement Amounts will be recovered from the insurance carrier.

As also previously disclosed, several ancillary claims brought by third-party private plaintiffs arising from the same services provided by TtEC at Hunters Point are also ongoing.

The settlement agreement and consent decree do not resolve these ancillary claims.

As a result of the settlement agreement and consent decree with the United States and in connection with discussions regarding the ancillary claims, we recorded a $ 115.0 million charge to operating income ($ 97.0 million for the settlement and $ 18.0 million estimated for the ancillary claims, respectively) in the first quarter of fiscal 2025.

Related Party Transactions

1 unchanged sentence

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

Three Months Ended Nine Months Ended

2023 June 30,

Three Months Ended

2024 December 31,

Revenue $ 16,479 $ 18,968

1 unchanged sentence

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

2024 October 1, 2023

2024 September 29, 2024

Accounts receivable, net $ 13,932 $ 15,612

1 unchanged sentence

Contract liabilities ( 5,693 ) ( 4,237 )

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