What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-01-31 compared with 2024-08-02 · 140 added, 193 removed, 302 unchanged (52% of the section changed)

20 unchanged sentences

Our ability to provide innovative and first-of-kind solutions is enhanced by partnerships with our forward-thinking clients.

We are diverse, equitable and inclusive, embracing the breadth of experience across our talented workforce worldwide with a culture of innovation and entrepreneurship.

We embrace the breadth of experience across our talented workforce worldwide with a culture of innovation and entrepreneurship.

We are disciplined in our business, and focused on delivering value to customers and high performance for our shareholders.

In supporting our clients, we seek to add value and provide long-term sustainable consulting, engineering and technology solutions.

By combining ingenuity and practical experience, we have helped to advance sustainability by managing water, protecting the environment, providing renewable energy, restoring ecosystems and creating green solutions for our cities and communities.

We derive income from fees for professional, technical, program management and construction management services.

6 unchanged sentences

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

Three Months Ended Nine Months Ended

2023 June 30,

Three Months Ended

2024 December 31,

Client Sector

4 unchanged sentences

International (2)

39.0 40.8 39.0 36.2

Total 100.0 % 100.0 %

2 unchanged sentences

(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.

We manage our operations under two reportable segments.

1 unchanged sentence

government clients (federal, state and local) and all activities with development agencies worldwide.

Our Commercial/International Group reportable segment primarily includes activities with U.S.

Our Commercial/International Services Group reportable segment primarily includes activities with U.S.

commercial clients and international clients other than development agencies.

7 unchanged sentences

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

Commercial/International Group ( “ CIG ” ).

Commercial/International Services Group ( “ CIG ” ).

CIG primarily provides high-end consulting and engineering services to U.S.

3 unchanged sentences

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

Three Months Ended Nine Months Ended

2023 June 30,

Three Months Ended

2024 December 31,

Reportable Segment

6 unchanged sentences

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

Three Months Ended Nine Months Ended

2023 June 30,

Three Months Ended

2024 December 31,

Contract Type

42 unchanged sentences

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.

We funded the RPS acquisition with debt, net of $109 million in proceeds from a foreign exchange forward contract that we entered into at the same time we made the formal offer to acquire RPS on September 23, 2022.

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.

(“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 U.S.

federal government programs.

Amyx is included in our GSG segment.

For detailed information regarding acquisitions, see Note 4, “Acquisitions” of the “Notes to Consolidated Financial Statements”.

2 unchanged sentences

Accordingly, from time to time, we may divest or wind-down certain non-core businesses and reallocate our resources to businesses that better align with our long-term strategic direction.

In the first quarter of fiscal 2025, we divested a financially immaterial subsidiary in South America and a line of business in Australia.

OVERVIEW OF RESULTS AND BUSINESS TRENDS

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.

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.

In the first quarter of fiscal 2025, our revenue increased 15.7% com pared to the prior-year quarter reflecting increased activity across all of our client sectors, particularly the U.S.

federal and state and local government client sectors.

This revenue growth includes $31 million from our recent acquisitions, that did not have comparable revenue for the year-ago quarter.

Excluding the impact of these acquisitions, our revenue increased 13.1% compared to the first quarter of fiscal 2024.

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

Nine Months Ended

June 30, 2024 July 2, 2023 Change

Three Months Ended

December 29, 2024 December 31, 2023 Change

Client Sector

9 unchanged sentences

(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.

Federal Government.

Nine Months Ended

June 30, 2024 July 2, 2023 Change

Three Months Ended

December 29, 2024 December 31, 2023 Change

($ in thousands)

$ 1,221,320 $ 996,471 $ 224,849 22.6%

(1) Includes revenue generated under U.S.

federal government contracts performed outside the United States.

Our 22.6% growth in U.S.

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 fourth quarter of fiscal 2024.

Approximately $1 trillion in new U.S.

federal funding passed in 2021 through the Infrastructure Investment and Jobs Act, the Inflation Reduction Act and the CHIPS and Science Act.

Each of these programs includes substantial planned investments in our key end markets including water, environment and sustainable infrastructure over the next five to ten years.

Revenue $ 501,848 $ 382,076 $ 119,772 31.3%

The 31.3% growth in U.S.

federal revenue primarily reflects increased international development and federal information technology system modernization activity.

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

Our international development revenue increased approximately $95 million in the first quarter of fiscal 2025 compared to the same period last year.

The overall revenue growth also includes approximately $29 million of revenue from a recent acquisition that did not have comparable revenue for the prior-year quarter.

federal government revenue for the remainder of fiscal 2025 is dependent upon the ultimate direction of the new U.S.

administration.

State and Local Government.

Nine Months Ended

June 30, 2024 July 2, 2023 Change

Three Months Ended

December 29, 2024 December 31, 2023 Change

($ in thousands)

Revenue $ 202,987 $ 150,925 $ 52,062 34.5%

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 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.

state and local government revenue grew 34.5% compared to the fiscal 2024 quarter largely due to increased disaster response activity primarily related to Hurricanes Helene and Milton.

Excluding our disaster response work for the hurricanes, our U.S.

state and local government revenue increased 10.8% in the first quarter of fiscal 2025 compared to last year's first quarter.

Excluding the hurricane response activity, the growth was due to continued investment by our clients in clean drinking water.

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 fourth quarter of fiscal 2024.

Nine Months Ended

June 30, 2024 July 2, 2023 Change

state and local governments relates to critical water and environmental programs, which we expect to continue to grow for the remainder of fiscal 2025.

Three Months Ended

December 29, 2024 December 31, 2023 Change

($ in thousands)

Revenue $ 233,591 $ 222,430 $ 11,161 5.0%

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 fourth quarter of fiscal 2024.

commercial revenue growth of 5.0% in the first quarter of fiscal 2025 was primarily due to increased activity for environmental services and high performance buildings.

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

commercial business for the remainder of fiscal 2025.

International.

Nine Months Ended

June 30, 2024 July 2, 2023 Change

Three Months Ended

December 29, 2024 December 31, 2023 Change

($ in thousands)

$ 1,492,333 $ 1,179,619 $ 312,714 26.5%

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

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

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 fourth quarter of fiscal 2024.

Revenue $ 482,135 $ 472,836 $ 9,299 2.0%

Our international revenue increased 2.0% compared to last year's first quarter primarily due to increased water consulting in the United Kingdom, partially offset by lower infrastructure work in Australia.

We expect the growth in our international work to continue for the remainder of fiscal 2025, on a constant currency basis.

RESULTS OF OPERATIONS

Consolidated Results of Operations

Three Months Ended Nine Months Ended

2023 Change June 30, 2024 July 2, 2023 Change

Three Months Ended

2024 December 31,

($ in thousands, except per share data)

6 unchanged sentences

Selling, general and administrative expenses (83,951) (79,417) (4,534) (5.7)

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

Contingent consideration - fair value adjustments (500) — (500) NM (477) (8,477) 8,000 NM

Legal contingency costs (115,000) — (115,000) NM

Income from operations 22,526 111,081 (88,555) (79.7)

Interest expense (7,218) (9,577) 2,359 24.6

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

Income before income tax expense 15,308 101,504 (86,196) (84.9)

6 unchanged sentences

GAAP financial measure, enhances investors' ability to analyze our business trends and performance because it substantially measures the work performed by our employees.

While providing services, we routinely subcontract various services and, under certain international development programs, issue grants.

Generally, these subcontractor costs and grants are passed through to our clients and, in accordance with U.S.

In the course of providing services, we routinely subcontract various services and, under certain international development programs, issue grants.

Generally, these subcontractor costs and grants are passed through to our clients and, in accordance with generally accepted accounting principles in the United States of America ("U.S.

GAAP") and industry practice, are included in our revenue when it is our contractual responsibility to procure or manage these activities.

2 unchanged sentences

NM = not meaningful

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.

Our 15.7% revenue growth reflects increases in both of our reportable segments.

Our GSG segment's revenue and revenue, net of subcontractor costs, increased $176.7 million, or 30.7%, and $158.5 million, or 35.8%, respectively, in the first quarter of fiscal 2025 compared to the same quarter in fiscal 2024.

Our CIG segment's revenue increased $19.1 million, or 2.9%, and revenue, net of subcontractor costs, increased $23.7 million, or 4.1% in the first quarter of fiscal 2025 compared to the year-ago quarter.

The 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 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 Nine Months Ended

2023 Change June 30,

GAAP adjusted results.

For the first quarter of fiscal 2025, our adjusted results exclude a non-recurring charge of $115.0 million related to legal contingencies as described in Note 17, " Commitments and Contingencies " of the “Notes to Consolidated Financial Statements”.

We determined that there is no tax benefit for $31.3 million of the legal contingency charge.

The effective tax rate applied to the remaining $83.7 million adjustment to arrive at the adjusted EPS w as 25.0%.

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

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

Three Months Ended

2024 December 31,

($ in thousands, except per share data)

Income from operations $ 22,526 $ 111,081 $ (88,555) (79.7)%

Acquisition & integration expenses — 2,107 (2,107) NM — 25,812 (25,812) NM

Earn-out adjustments — — — NM — 8,477 (8,477) NM

Legal contingency costs 115,000 — 115,000 NM

Adjusted income from operations (1)

1 unchanged sentence

EPS $ — $ 0.28 $ (0.28) (100.0)%

Acquisition & integration expenses — 0.03 (0.03) NM — 0.55 (0.55) NM

Earn-out adjustments — — — NM — 0.13 (0.13) NM

Foreign exchange forward contract gain — — — NM — (1.23) 1.23 NM

Legal contingency costs 0.35 — 0.35 NM

Adjusted EPS (1)

2 unchanged sentences

(1) Non-GAAP financial measure

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 Nine Months Ended

2023 Change June 30,

Our operating income for the first quarter of fiscal 2025 includes a non-recurring charge of $115.0 million related to legal contingencies .

Excluding this non-recurring charge , our adjusted operating income increased $26.4 million, or 23.8% in the first quarter of fiscal 2025 compared to the prior-year quarter.

The increase reflects improved results in both of our reportable segments, which are described below under "Government Services Group" and "Commercial/International Group", respectively.

Three Months Ended

2024 December 31,

($ in thousands)

Net interest expense $ 7,218 $ 9,577 $ (2,359) (24.6)%

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 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.

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

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 Nine Months Ended

2023 Change June 30,

Net interest expense decreased due to lower average borrowings and interest rates compared to the first quarter of fiscal 2024.

Three Months Ended

2024 December 31,

($ in thousands)

Income tax expense $ 14,530 $ 26,524 $ (11,994) (45.2)%

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.

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" of the “Notes to Consolidated Financial Statements”.

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% for the first quarter of fiscal 2025.

In December 2021, the Organisation for Economic Cooperation and Development ("OECD") released Pillar Two Model Rules (also referred to as the global minimum tax or Global Anti-Base Erosion "GloBE" rules), which were designed to ensure large multinational enterprises pay a minimum 15 percent level of tax on the income arising in each jurisdiction in which they operate.

Several jurisdictions in which we operate have enacted these rules, which are effective for the first quarter of fiscal 2025.

We are continually monitoring developments and evaluating the potential impacts.

At this time, we do not anticipate a material tax charge as a result of implementation of these rules.

Segment Results of Operations

Government Services Group

Three Months Ended Nine Months Ended

2023 Change June 30, 2024 July 2,

Three Months Ended

2024 December 31,

($ in thousands)

5 unchanged sentences

(1) Non-GAAP financial measure

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 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.

The revenue growth of 30.7% primarily reflects higher U.S.

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

state and local government activities related to disaster response.

The revenue growth in the first quarter of fiscal 2025 includes $87 million and $37 million increases in revenue from the aforementioned international development activities in Ukraine and hurricane disaster response activities, respectively, compared to the first quarter of fiscal 2024.

Operating income increased 31.9% primarily due to the aforementioned revenue growth.

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

Our operating margin, based on revenue, net of subcontractor costs, for the first quarter of fiscal 2025 was 13.9% compared to 14.3% for the same quarter last year.

The lower operating margin reflects the mix of revenue as this fiscal year's first quarter included a higher amount of international development activity, which operates at a lower margin compared to the other activities in the GSG segment.

Commercial/International Group

Three Months Ended Nine Months Ended

2023 Change June 30, 2024 July 2,

Three Months Ended

2024 December 31,

($ in thousands)

5 unchanged sentences

(1) Non-GAAP financial measure

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.

The revenue growth of 2.9% primarily reflects increased activities for water consulting services in the United Kingdom and for high performance buildings.

These revenue increases were partially offset by a revenue decrease due to completion of a large infrastructure project for an international government client.

Our operating income increased due to the aforementioned revenue growth.

Our operating margin, based on revenue, net of subcontractor costs, for the first quarter of fiscal 2025 was 13.0% compared to 12.5% for the fiscal 2024 q uarter.

The improved operating margin was primarily due to our continued focus on high-end consulting services and improved project execution.

Backlog generally represents the dollar amount of revenues we expect to realize in the future when we perform the work.

1 unchanged sentence

Specifically, our backlog does not consider the potential impact of termination for convenience clauses within the contracts.

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 June 30, 2024 and October 1, 2023 were immaterial (see the table below):

2024 October 1,

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 December 29, 2024 and September 29, 2024 were immaterial (see the table below):

2024 September 29,

($ in millions)

3 unchanged sentences

Capital Requirements.

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.

At December 29, 2024, we h ad $248.1 million of cash and cash equivalents and access to an additional $724.3 million of borrowings available under our credit facility.

During the first quarter of fiscal 2025, we generated $13.1 million of cash from operations.

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

Our primary uses of cash are to fund working capital, cash dividends, capital expenditures and repayment of debt, as well as to fund acquisitions and earn-out obligations from prior acquisitions.

Our primary uses of cash are to fund working capital, cash dividends, share repurchases, capital expenditures and repayment of debt, as well as to fund acquisitions and earn-out obligations from prior acquisitions.

We believe that our existing cash and cash equivalents, operating cash flows and borrowing capacity under our credit agreement, as described below, will be sufficient to meet our capital requirements for at least the next 12 months.

1 unchanged sentence

The following tables summarize information regarding our cash and cash equivalents (amounts in thousands):

2024 October 1,

2024 September 29,

Cash and cash equivalents $ 248,104 $ 232,689 $ 15,415 6.6 %

Nine Months Ended

Three Months Ended

2024 December 31,

Net cash provided by (used in):

3 unchanged sentences

Effect of exchange rate changes (13,609) 5,655 (19,264) (340.7)

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

Net increase in cash and cash equivalents $ 15,415 $ 29,858 $ (14,443) (48.4) %

Operating Activities .

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.

Our cash from operations increased $3.8 million compared to the prior-year quarter primarily due to higher earnings, excluding the aforementioned legal contingency charge that was accrued (non-cash) in the current quarter.

Investing Activities .

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.

Our cash flows from investing activities for the first quarters of fiscal year 2025 and 2024 reflect capital expenditures of $3.4 million for each period.

Financing Activities .

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.

Net cash provided by financing activities of approximately $19 million in the first quarter of fiscal 2025 was substantially the same as the prior-year first quarter.

However, our net borrowings increased $10 million in this year's first quarter to partially fund the $25 million share repurchases as our share repurchase program was reactivated this quarter.

Our financing activities in the fiscal 2024 first quarter included contingent earn-out payments of $18.9 million compared to essentially none this quarter.

Debt Financing.

1 unchanged sentence

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 on the third anniversary of the RPS acquisition closing date.

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.

14 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 .

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

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.

The net proceeds from the Convertible Notes were $560.5 million, $51.8 million of which were used to purchase related capped call transactions on the issue date.

1 unchanged sentence

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

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%.

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

For the first quarter of fiscal 2025, 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.

The financial covenants provide for a maximum Consolidated Leverage Ratio of 3.25 to 1.00 (total funded debt/EBITDA, as defined in the Amended Credit Agreement) and a minimum Consolidated Interest Coverage Ratio of 3.00 to 1.00 (EBITDA/Consolidated Interest Charges, as defined in the Amended Credit Agreement).

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 1.51x and a consolidated interest coverage ratio of 12.47x.

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 t hose subsidiaries that are guarantors or borrowers under the Amended Credit Agreement, and (ii) the accounts receivable, general intangibles and intercompany loans, and those of our subsidiaries that are guarantors or borrowers.

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

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 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.

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

At December 29, 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.

Stock repurchases.

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.

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

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

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.

Our Board of Directors has authorized the following dividends in fiscal 2025:

2 unchanged sentences

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

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

January 27, 2025 0.058 February 12, 2025 NA February 26, 2025

Subsequent E vents.

On 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, 2 025.

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

2 unchanged sentences

Based on future oper ating results in certain jurisdictions, it is unlikely that the current valuation allowance positions of those jurisdictions could be adjusted in the next 12 months.

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

It 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.

1 unchanged sentence

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 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

5 unchanged sentences

Our Amended Credit Agreement and additional letter of credit facilities cover the issu ance of our standby letters of credit and bank guarantees and are critical for our normal operations.

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 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.

If we default on the A mended 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 December 29, 2024, we had $0.7 million in standby letters of credit outstanding under our Amended Credit Agreement and $40.2 million in standby lett ers of credit outstanding under our additional letter of credit facilities.

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

8 unchanged sentences

Remaining billable amounts could be greater or less than the cost to complete.

In those cases where costs exceed the remaining amounts payable under the contract, we may have recourse to third parties, such as owners, co-venturers, subcontractors or vendors, for claims.

cases where costs exceed the remaining amounts payable under the contract, we may have recourse to third parties, such as owners, co-venturers, subcontractors or vendors, for claims.

• In the ordinary course of business, our clients may request that we obtain surety bonds in connection with contract performance obligations that are not required to be recorded in our consolidated balance sheets.

2 unchanged sentences

Critical Accounting Policies

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

Our critical accounting policies are disclosed in our Annual Report on Form 10-K for the fiscal year ended September 29, 2024.

To date, there have been no material changes in our critical accounting policies as reported in our fiscal 2024 Annual Report on Form 10-K.

12 unchanged sentences

Borrowings at the base rate have no design ated term and may be repaid without penalty any time prior to the Facility’s maturity date.

Borrowings at a SOFR rate have a term no less than 30 days and no greater than 180 days and may be prepaid without penalty.

Borrowings at a SOFR rate have a term no le ss than 30 days and no greater than 180 days and may be prepaid without penalty.

Typically, at the end of such term, such borrowings may be rolled over at our discretion into either a borrowing at the base rate or a borrowing at a SOFR rate with similar terms, not to exceed the maturity date of the Facility.

The Facility matures on February 18, 2027.

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%.

At December 29, 2024, we had $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.

For the first quarter of fiscal 2025, the weighted-average interest rate of the outstanding borrowings under the Amended Credit Agreement was 5.98%.

The majority of our transactions are in U.S.

however, some of our subsidiaries conduct business in foreign currencies, primarily the Canadian and Australian dollars, the Euro, and the British Pound.

however, some of our subsidiaries conduct business in foreign currencies, primarily the Canadian and Australian dollars, the Euro, and British Pound.

Therefore, we are subject to currency exposure and volatility because of currency fluctuations.

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

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 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 quarters of fiscal 2025 and 2024.

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.

3 unchanged sentences

dollar weakens against foreign currencies.

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.

For the first quarters of fiscal 2025 and 2024, 33.9% and 38.5% of our consolidated revenue, respectively, was generated by our international business.

For the first quarter of fiscal 2025, the effect of foreign exchange rate translation on our consolidated balance sheet was a decrease in equity of $108.8 million compared to an increase of $63.1 million in the prior-year period.

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

2 unchanged sentences

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