TETRA TECH INC 10-Q

Item 1. Financial Statements Tetra Tech, Inc. Consolidated Balance Sheets (unaudited - in thousands, except par value) As of ASSETS June 29, 2025 September 29, 2024 Current assets: Cash and cash equivalents $ 242,833 $ 232,689 Accounts receivable, net 1,127,519 1,051,461 Contract assets 142,852 129,678 Prepaid expenses and other current assets 106,592 113,555 Total current assets 1,619,796 1,527,383 Property and equipment, net 70,302 73,065 Right-of-use assets, operating leases 186,145 177,950 Goodwill 2,084,872 2,046,569 Intangible assets, net 157,752 160,585 Deferred tax assets 109,477 105,529 Other non-current assets 125,103 101,595 Total assets $ 4,353,447 $ 4,192,676 LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 234,591 $ 197,440 Accrued compensation 313,335 332,096 Contract liabilities 389,856 351,738 Short-term lease liabilities, operating leases 64,109 63,419 Current contingent earn-out liabilities 35,362 26,934 Other current liabilities 338,868 247,900 Total current liabilities 1,376,121 1,219,527 Deferred tax liabilities 30,673 30,162 Long-term debt 862,483 812,634 Long-term lease liabilities, operating leases 145,045 140,095 Non-current contingent earn-out liabilities 34,369 21,812 Other non-current liabilities 162,660 138,033 Commitments and contingencies (Note 17) Equity: Preferred stock - authorized, 2,000 shares of $ 0.01 par value; no shares issued and outstanding at June 29, 2025 and September 29, 2024 — — Common stock - authorized, 750,000 shares of $ 0.01 par value; issued and outstanding , 262,752 and 267,717 shares at June 29, 2025 and September 29, 2024, respectively 2,628 2,677 Additional paid-in capital — 35,900 Accumulated other comprehensive loss ( 65,117 ) ( 78,875 ) Retained earnings 1,804,429 1,870,620 Tetra Tech stockholders’ equity 1,741,940 1,830,322 Noncontrolling interests 156 91 Total stockholders' equity 1,742,096 1,830,413 Total liabilities and stockholders' equity $ 4,353,447 $ 4,192,676 See Notes to Consolidated Financial Statements. 3 Tetra Tech, Inc. Consolidated Statements of Income (unaudited – in thousands, except per share data) Three Months Ended Nine Months Ended June 29, 2025 June 30, 2024 June 29, 2025 June 30, 2024 Revenue $ 1,369,816 $ 1,344,323 $ 4,112,490 $ 3,824,205 Subcontractor costs ( 216,800 ) ( 234,742 ) ( 658,439 ) ( 646,828 ) Other costs of revenue ( 901,477 ) ( 886,409 ) ( 2,766,854 ) ( 2,556,212 ) Gross profit 251,539 223,172 687,197 621,165 Selling, general and administrative expenses ( 86,611 ) ( 94,042 ) ( 255,022 ) ( 263,293 ) Legal contingency costs — — ( 115,000 ) — Contingent consideration – fair value adjustments 58 ( 500 ) 2,355 ( 477 ) Impairment of goodwill — — ( 92,416 ) — Income from operations 164,986 128,630 227,114 357,395 Interest expense, net ( 8,288 ) ( 9,912 ) ( 23,996 ) ( 29,374 ) Income before income tax expense 156,698 118,718 203,118 328,021 Income tax expense ( 42,815 ) ( 32,894 ) ( 83,045 ) ( 90,758 ) Net income 113,883 85,824 120,073 237,263 Net income attributable to noncontrolling interests ( 39 ) ( 14 ) ( 94 ) ( 35 ) Net income attributable to Tetra Tech $ 113,844 $ 85,810 $ 119,979 $ 237,228 Earnings per share attributable to Tetra Tech: Basic $ 0.43 $ 0.32 $ 0.45 $ 0.89 Diluted $ 0.43 $ 0.32 $ 0.45 $ 0.88 Weighted-average common shares outstanding: Basic 263,026 267,575 265,589 267,255 Diluted 264,855 270,260 268,113 269,503 See Notes to Consolidated Financial Statements. 4 Tetra Tech, Inc. Consolidated Statements of Comprehensive Income (unaudited – in thousands) Three Months Ended Nine Months Ended June 29, 2025 June 30, 2024 June 29, 2025 June 30, 2024 Net income $ 113,883 $ 85,824 $ 120,073 $ 237,263 Other comprehensive income, net of tax Foreign currency translation adjustment, net of tax 88,063 1,854 13,791 40,616 Net pension adjustments — 3 ( 33 ) ( 10 ) Other comprehensive income, net of tax 88,063 1,857 13,758 40,606 Comprehensive income, net of tax 201,946 87,681 133,831 277,869 Less: Comprehensive income attributable to noncontrolling interests, net of tax 39 14 94 35 Comprehensive income attributable to Tetra Tech, net of tax $ 201,907 $ 87,667 $ 133,737 $ 277,834 See Notes to Consolidated Financial Statements. 5 Tetra Tech, Inc. Consolidated Statements of Cash Flows (unaudited – in thousands) Nine Months Ended June 29, 2025 June 30, 2024 Cash flows from operating activities: Net income $ 120,073 $ 237,263 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 43,636 56,718 Amortization of stock-based awards 25,789 23,713 Deferred income taxes ( 7,656 ) ( 9,736 ) Provision for losses on accounts receivables 3,406 — Impairment of goodwill 92,416 — Fair value adjustments to contingent consideration ( 2,355 ) 477 Gain on cash surrender value of life insurance policies ( 1,599 ) — Other non-cash items 3,781 3,769 Changes in operating assets and liabilities, net of effects of business acquisitions: Accounts receivable and contract assets ( 65,886 ) ( 54,286 ) Prepaid expenses and other assets ( 21,720 ) ( 18,437 ) Accounts payable 27,539 18,991 Accrued compensation ( 15,991 ) ( 7,982 ) Contract liabilities 44,486 33,011 Income taxes receivable/payable 32,818 ( 16,436 ) Cash settled on contingent earn-out liabilities ( 7,420 ) — Other liabilities 85,521 ( 13,955 ) Net cash provided by operating activities 356,838 253,110 Cash flows from investing activities: Payments for business acquisitions, net of cash acquired ( 97,693 ) ( 93,650 ) Capital expenditures ( 13,396 ) ( 11,324 ) Proceeds from sale of assets 882 666 Proceeds from company-owned life insurance policies 1,934 — Net cash used in investing activities ( 108,273 ) ( 104,308 ) Cash flows from financing activities: Proceeds from borrowings 715,000 180,000 Repayments on long-term debt ( 665,000 ) ( 200,000 ) Payment of debt issuance costs ( 2,738 ) — Repurchases of common stock ( 199,984 ) — Shares repurchased for tax withholdings on share-based awards ( 13,942 ) ( 12,906 ) Payments of contingent earn-out liabilities ( 14,805 ) ( 29,112 ) Stock options exercised 216 2,690 Dividends paid ( 47,992 ) ( 43,303 ) Principal payments on finance leases ( 5,742 ) ( 4,827 ) Net cash used in financing activities ( 234,987 ) ( 107,458 ) Effect of exchange rate changes on cash and cash equivalents ( 3,434 ) 2,146 Net increase in cash and cash equivalents 10,144 43,490 Cash and cash equivalents at beginning of period 232,689 168,831 Cash and cash equivalents at end of period $ 242,833 $ 212,321 Supplemental information: Cash paid during the period for: Interest $ 23,837 $ 26,867 Income taxes, net of refunds received of $ 13.6 million and $ 4.0 million $ 57,006 $ 115,933 Non-cash financing activities: Excise taxes accrued but not paid $ 1,513 $ — See Notes to Consolidated Financial Statements. 6 Tetra Tech, Inc. Consolidated Statements of Stockholders' Equity Three Months Ended June 30, 2024 and June 29, 2025 (unaudited – in thousands) Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Total Tetra Tech Equity Non-Controlling Interests Total Equity Shares Amount BALANCE AT MARCH 31, 2024 267,486 $ 2,674 $ 18,963 $ ( 156,546 ) $ 1,719,703 $ 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 in noncontrolling interests — — — — — — ( 5 ) ( 5 ) Cash dividends of $ 0.058 per common share — — — — ( 15,522 ) ( 15,522 ) — ( 15,522 ) Stock-based compensation — — 8,096 — — 8,096 — 8,096 Restricted & performance shares released 8 — ( 125 ) — — ( 125 ) — ( 125 ) Stock options exercised 168 2 1,226 — — 1,228 — 1,228 BALANCE AT JUNE 30, 2024 267,662 $ 2,676 $ 28,160 $ ( 154,689 ) $ 1,789,991 $ 1,666,138 $ 65 $ 1,666,203 BALANCE AT MARCH 30, 2025 263,503 $ 2,635 $ — $ ( 153,180 ) $ 1,724,203 $ 1,573,658 $ 123 $ 1,573,781 Net income — — — — 113,844 113,844 39 113,883 Other comprehensive income — — — 88,063 — 88,063 — 88,063 Distributions paid in noncontrolling interests — — — — — — ( 6 ) ( 6 ) Cash dividends of $ 0.065 per common share — — — — ( 17,092 ) ( 17,092 ) — ( 17,092 ) Stock-based compensation — — 8,762 — — 8,762 — 8,762 Restricted & performance shares released 8 1 ( 95 ) — — ( 94 ) — ( 94 ) Stock options exercised 8 — 45 — — 45 — 45 Stock repurchases ( 767 ) ( 8 ) ( 8,712 ) — ( 16,526 ) ( 25,246 ) — ( 25,246 ) BALANCE AT JUNE 29, 2025 262,752 $ 2,628 $ — $ ( 65,117 ) $ 1,804,429 $ 1,741,940 $ 156 $ 1,742,096 7 Tetra Tech, Inc. Consolidated Statements of Stockholders' Equity Nine months ended June 30, 2024 and June 29, 2025 (unaudited – in thousands) Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Total Tetra Tech Equity Non-Controlling Interests Total Equity Shares Amount BALANCE AT OCTOBER 1, 2023 266,238 $ 2,662 $ — $ ( 195,295 ) $ 1,596,066 $ 1,403,433 $ 73 $ 1,403,506 Net income — — — — 237,228 237,228 35 237,263 Other comprehensive income — — — 40,606 — 40,606 — 40,606 Distributions paid in noncontrolling interests — — — — — — ( 43 ) ( 43 ) Cash dividends of $ 0.162 per common share — — — — ( 43,303 ) ( 43,303 ) — ( 43,303 ) Stock-based compensation — — 23,713 — — 23,713 — 23,713 Restricted & performance shares released 542 5 ( 12,911 ) — — ( 12,906 ) — ( 12,906 ) Stock options exercised 360 4 2,686 — — 2,690 — 2,690 Shares issued for Employee Stock Purchase Plan 522 5 14,672 — — 14,677 — 14,677 BALANCE AT JUNE 30, 2024 267,662 $ 2,676 $ 28,160 $ ( 154,689 ) $ 1,789,991 $ 1,666,138 $ 65 $ 1,666,203 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 — — — — 119,979 119,979 94 120,073 Other comprehensive income — — — 13,758 — 13,758 — 13,758 Distributions paid in noncontrolling interests — — — — — — ( 29 ) ( 29 ) Cash dividends of $ 0.181 per common share — — — — ( 47,992 ) ( 47,992 ) — ( 47,992 ) Stock-based compensation — — 25,789 — — 25,789 — 25,789 Restricted & performance shares released 475 6 ( 13,948 ) — — ( 13,942 ) — ( 13,942 ) Stock options exercised 35 — 216 — — 216 — 216 Shares issued for Employee Stock Purchase Plan 458 4 15,303 — — 15,307 — 15,307 Stock repurchases ( 5,933 ) ( 59 ) ( 63,260 ) — ( 138,178 ) ( 201,497 ) — ( 201,497 ) BALANCE AT JUNE 29, 2025 262,752 $ 2,628 $ — $ ( 65,117 ) $ 1,804,429 $ 1,741,940 $ 156 $ 1,742,096 See Notes to Consolidated Financial Statements. 8 TETRA TECH, INC. Notes to Consolidated Financial Statements 1. Basis of Presentation The accompanying unaudited consolidated financial statements and related notes of Tetra Tech, Inc. (“we,” “us,” “our” or "Tetra Tech") have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. 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 September 29, 2024. 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. 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. 2. Recent Accounting Pronouncements In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures , which requires that an entity report segment information in accordance with Topic 280, Segment Reporting. 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 (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. The adoption of this ASU will not have a material impact on our consolidated financial statements. In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , which requires that an entity, on an annual basis, disclose additional income tax information, primarily related to the rate reconciliation and income taxes paid. The amendments in the ASU are intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in this ASU are effective for annual periods beginning after December 15, 2024 (fiscal 2026 for us). 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 this ASU before fiscal 2027. 3. Revenue and Contract Balances We disaggregate revenue by client sector and contract type, as we believe it best depicts how the nature, timing and uncertainty of our revenue and cash flows are affected by economic factors. The following tables present our revenue disaggregated by client sector and contract type (in thousands): 9 Three Months Ended Nine Months Ended June 29, 2025 June 30, 2024 June 29, 2025 June 30, 2024 Client Sector: U.S. federal government (1) $ 452,629 $ 432,242 $ 1,367,899 $ 1,221,320 U.S. state and local government 189,181 146,401 599,606 444,877 U.S. commercial 221,351 241,838 666,027 665,675 International (2) 506,655 523,842 1,478,958 1,492,333 Total $ 1,369,816 $ 1,344,323 $ 4,112,490 $ 3,824,205 Contract Type: Fixed-price $ 633,508 $ 548,452 $ 1,678,280 $ 1,478,915 Time-and-materials 595,082 589,301 1,799,288 1,730,796 Cost-plus 141,226 206,570 634,922 614,494 Total $ 1,369,816 $ 1,344,323 $ 4,112,490 $ 3,824,205 (1) Includes revenue generated under U.S. federal government contracts performed outside the United States. (2) Includes revenue generated from non-U.S. 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 29, 2025 and June 30, 2024. Contract Assets and Contract Liabilities We invoice customers based on the contractual terms of each contract. However, the timing of revenue recognition may differ from the timing of invoice issuance. Contract assets represent revenue recognized in excess of the amounts for which we have the contractual right to bill our customers. Such amounts are recoverable from customers based upon various measures of performance, including achievement of certain milestones or completion of a contract. In addition, many of our time-and-materials arrangements are billed in arrears pursuant to contract terms that are standard within the industry, resulting in contract assets and/or unbilled receivables being recorded, as revenue is recognized in advance of billings. Contract retentions, included in contract assets, represent amounts withheld by clients until certain conditions are met or the project is completed, which may extend beyond one year. Contract liabilities consist of billings in excess of revenue recognized. Contract liabilities decrease as we recognize revenue from the satisfaction of the related performance obligation and increase as billings in advance of revenue recognition occur. 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 for the periods presented. Net contract assets/liabilities consisted of the following (in thousands): As of June 29, 2025 September 29, 2024 Contract assets (1) $ 142,852 $ 129,678 Contract liabilities - current ( 389,856 ) ( 351,738 ) Contract liabilities - non-current (2) ( 6,687 ) — Net contract liabilities $ ( 253,691 ) $ ( 222,060 ) (1) Incl udes $ 11.7 million an d $ 7.9 million of contract retentions at June 29, 2025 and September 29, 2024, respectively. (2) Reported under "Other non-current liabilities" on our consolidated balance sheet as of June 29, 2025. Our contract assets and contract liabilities increased in the third 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 th e first nine months of fiscal 2025 and 2024, we recognized revenue of approximately $ 213 million a nd $ 214 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 10 our total costs incurred on each contract as a percentage of the total expected contract costs. Changes in those estimates could result in the recognition of cumulative catch-up adjustments to the contract’s inception-to-date revenue, costs and profit in the period in which such changes are made. As a result, for the third quarter and first nine months of fiscal 2025, we recognized net favorable revenue and operating income adjustments of $ 9.9 million and $ 16.5 million, respectively, compared to $ 6.5 million and $ 16.4 million, respectively, for the fiscal 2024 periods. 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 June 29, 2025 and September 29, 2024, our consolidated balance sheets included liabilities for anticipated losse s of $ 12.8 million and $ 15.1 million, respectively. The estimated cost to complete these related contracts was approximately $ 73 million and $ 101 million at June 29, 2025 and September 29, 2024, respectively. Accounts Receivable, Net Net accounts receivable consisted of the following (in thousands): As of June 29, 2025 September 29, 2024 Billed $ 795,947 $ 707,406 Unbilled 338,861 348,907 Total accounts receivable 1,134,808 1,056,313 Allowance for doubtful accounts ( 7,289 ) ( 4,852 ) Total accounts receivable, net $ 1,127,519 $ 1,051,461 Billed accounts receivable represent amounts billed to clients that have not yet been collected. 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 29, 2025 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. We estimate the allowance for uncollectible accounts based on management's consideration of trends in the actual and forecasted credit quality of our clients, including client delinquency and payment history; type of client, such as a government agency or a commerci al sector client; and general economic and industry conditions that may affect our clients' ability to pay. Other than the U.S. federal government, no single client accounted for more than 10% of our accounts receivable at June 29, 2025 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 h a d $ 4.2 billion of RUPO at June 29, 2025 . Our RUPO increases with awards from new contracts or additions on existing contracts, and decreases as work is performed and revenue is recognized on existing contracts. Our RUPO may also decrease when projects are canceled or modified in scope. We include a contract within our RUPO when the contract is awarded and an agreement on contract terms has been reached. We expect to satisfy our RUPO at June 29, 2025 over the following periods (in thousands): Amount Within 12 months $ 3,010,726 Beyond 1,229,046 Total $ 4,239,772 Although RUPO reflects business that is considered to be firm, cancellations, deferrals or scope adjustments may occur. Our RUPO is adjusted to reflect any known project cancellations, revisions to project scope and cost, foreign currency exchange fluctuations and project deferrals, as appropriate. Our operations and maintenance contracts can generally be terminated by the clients without a substantive financial penalty; therefore, the remaining performance obligations on such contracts are limited to the notice period required for the termination (usually 30 , 60 , or 90 days). 4. Acquisitions In the second quarter of fiscal 2025, we acquired Carron + Walsh ("CAW"), based in the Republic of Ireland. CAW delivers project and cost management solutions for large-scale commercial, life science, residential and infrastructure programs across Europe. CAW has valued relationships and framework agreements with life science clients, public sector bodies, housing 11 authorities, financial lenders and private development companies. In the third quarter of fiscal 2025, we also acquired SAGE Group Holdings ("SAGE"), an Australian consulting firm that provides innovative technology and high-quality automation services that optimize operational efficiency and drive digital transformation for commercial and government clients across the municipal water, energy, transportation, defense and manufacturing sectors. Both CAW and SAGE are included in our Commercial/International Services Group ("CIG") segment. The aggregate fair value of the purchase price of these two acquisitions was $ 147 million. This amount consisted of $ 104 million in initial cash payments and $ 43 million of the estimated fair value of contingent earn-out obligations, with a maximum of $ 60 million, based on the achievement of specified operating income targets in each of the three years following their respective acquisition dates. The $ 147 million purchase price was allocated $ 13 million to net tangible assets, $ 22 million to identifiable intangible assets, $ 6 million to deferred income tax liability, $ 3 million to purchase price receivable and $ 115 million to goodwill. The purchase price allocations for these acquisitions are 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. In the second quarter of fiscal 2024, we acquired LS Technologies ("LST"), an innovative U.S. federal enterprise technology services and management consulting firm based in Fairfax, Virginia. LST provides high-end consulting and engineering services including advanced data analytics, cybersecurity and digital transformation solutions to U.S. government clients. In the third quarter of fiscal 2024, we also acquired Convergence Controls & Engineering ("CCE"), an industry leader in process automation and systems integration solutions. Both LST and CCE are included in our Government Services Group ("GSG") segment. The aggregate fair value of the purchase price of these two acquisitions was $ 120 million. This amount consisted of $ 93 million in initial cash payments, $ 4 million of cash holdback related to a tax reserve, and $ 23 million for the estimated fair value of contingent earn-out obligations, with a maximum of $ 60 million, based upon the achievement of specified operating income targets in each of the three years following their respective acquisition dates. The $ 120 million purchase price was allocated $ 12 million to net tangible assets, $ 23 million to identifiable intangible assets, and $ 85 million to goodwill. All of the aforementioned acquisitions in fiscal 2025 and 2024 were not considered material, individually or in aggregate, to our consolidated financial statements. As a result, no pro forma information has been provided. The fiscal 2025 goodwill additions from CAW and SAGE acquisitions reflect the anticipated synergies related to proven systems and technology in project management, cost management, project controls and automation services which will provide superior project outcomes and drive digital transformation for defense, government and commercial customers, as delivered by a workforce with extensive technical expertise. Our fiscal 2024 goodwill additions from the LST and CCE acquisitions reflect the extensive technical knowledge of the acquired workforces, the anticipated syne rgies 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. Goodwill additions in fiscal 2024 are tax-deductible, whereas those in fiscal 2025 are not. 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. These consist of client relations, backlog and trade names. For detailed information regarding our intangible assets, see Note 5, “Goodwill and Intangible Assets”. Most of our acquisition agreements include contingent earn-out agreements, which are generally based on the achievement of future operating income thresholds. The contingent earn-out arrangements are based on our valuations of the acquired companies and reduce the risk of overpaying for acquisitions if the projected financial results are not achieved. The fair values of any earn-out arrangements are included as part of the purchase price of the acquired companies on their respective acquisition dates. For each transaction, we estimate the fair value of contingent earn-out payments as part of the initial purchase price and record the estimated fair value of contingent consideration as a liability in “Current contingent earn-out liabilities” and “Non-current contingent earn-out liabilities” on the consolidated balance sheets. We consider several factors when determining that contingent earn-out liabilities are part of the purchase price, including the following: (1) the valuation of our acquisitions is not supported solely by the initial consideration paid, and the contingent earn-out formula is a critical and material component of the valuation approach to determining the purchase price; and (2) the former owners of acquired companies that remain as key employees receive compensation other than contingent earn-out payments at a reasonable level compared with the compensation of our other key employees. The contingent earn-out payments are not affected by employment termination. 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. 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. 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. Ultimately, the liability will be equivalent to the amount paid, and the difference between the fair value estimate and amount paid will be recorded in earnings. The amount paid that is less than or equal to the contingent 12 earn-out liability on the acquisition date is reflected as cash used in financing activities in our consolidated statements of cash flows. Any amount paid in excess of the contingent earn-out liability on the acquisition date is reflected as cash used in operating activities in our consolidated statements of cash flows. 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 expen se. Adjustments to the estimated fair value related to changes in all other unobservable inputs are reported in operating income . In the third quarter of fiscal 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. The following table summarizes the changes in the fair value of estimated contingent consideration (in thousands): Three Months Ended Nine Months Ended June 29, 2025 June 30, 2024 June 29, 2025 June 30, 2024 Beginning balance $ 31,270 $ 74,579 $ 48,746 $ 73,422 Estimated earn-out liabilities for acquisitions 37,977 1,138 43,493 23,038 Payments of contingent consideration ( 360 ) ( 7,000 ) ( 22,225 ) ( 29,112 ) Adjustments to fair value recorded in earnings ( 58 ) 500 ( 2,355 ) 477 Interest accretion expense 478 1,038 1,641 1,953 Effect of foreign currency exchange rate changes 424 28 431 505 Ending balance $ 69,731 $ 70,283 $ 69,731 $ 70,283 As of June 29, 2025, the total potential maximum o utstanding contingent consideration related to acquisitions was $ 124 million . 5. Goodwill and Intangible Assets The following table summarizes the changes in the carrying value of goodwill by reportable segment (in thousands): GSG CIG Total Balance at September 29, 2024 $ 750,817 $ 1,295,752 $ 2,046,569 Acquisition activity — 115,145 115,145 Goodwill impairment ( 92,416 ) — ( 92,416 ) Translation adjustments 1,730 13,844 15,574 Balance at June 29, 2025 $ 660,131 $ 1,424,741 $ 2,084,872 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 we re $ 770.2 million and $ 768.5 million at June 29, 2025 and September 29, 2024, respectively, excluding accumulated impairment of $ 110.1 million and $ 17.7 million, respectively, at each date. The gross amounts of goodwill for CIG were $ 1,546.3 million and $ 1,417.3 million at June 29, 2025 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. Our most recent annual review at July 1, 2024 (i.e. the first day of our fourth quarter in fiscal 2024) indicated that we had no impairment of goodwill, and all of our reporting units had estimated fair values that were in excess of their carrying values, including goodwill. At July 1, 2024, we had no reporting units that had estimated fair values that exceeded their carrying val ues by less than 72 %. We also regularly evaluate whether events and circumstances have occurred that may indicate a potential change in the recoverability of goodwill. We perform interim goodwill impairment reviews between our annual reviews if certain events and circumstances have occurred, such as a deterioration in general economic conditions; an increase in the competitive environment; a change in management, key personnel, strategy or customers; negative or declining cash flows; or a decline in actual or planned revenue or earnings compared with actual and projected results of relevant prior periods. During the second quarter of fiscal 2025, events and circumstances occurred that indicated a potential change in the recoverability of the goodwill in our Global Development Services reporting unit ("GDS"). GDS provides consulting and engineering services for international development agencies supporting humanitarian programs worldwide. Although several 13 agencies are supported by this work (primarily for the U.S., Australia and United Kingdom governments), over eighty percent of the activity has historically been for the United States Agency for International Development ("USAID"). On January 20, 2025, President Trump signed Executive Order 14169, titled "Reevaluating and Realigning United States Foreign Aid", which initiated a 90-day pause on all U.S. foreign development assistance programs to assess their alignment with U.S. foreign policy objectives with few exemptions. Following a six-week review, on February 27, 2025, U.S. Secretary of State Rubio announced the cancellation of 83 % of USAID programs, totaling approximately 5,200 contracts. Subsequently, we were notified that virtually all of our contracts with USAID were terminated for convenience. As a result of these events and circumstances, we performed an interim impairment review of the goodwill in GDS at our fiscal period end for February 2025. We considered two methods to determine the fair value of the GDS reporting unit: (i) the Income Approach and (ii) the Market Approach. While each of these approaches is initially considered in the valuation of the business enterprise, the nature and characteristic of the reporting unit indicates which approach is most applicable. The Income Approach utilizes the discounted cash flow method, which focuses on the expected cash flow of the reporting unit. In applying this approach, the cash flow available for distribution is calculated for a finite period of years. Cash flow available for distribution is defined, for purposes of this analysis, as the amount of cash that could be distributed as a dividend without impairing the future profitability or operations of the reporting unit. The cash flow available for distribution and the terminal value (the value of the reporting unit at the end of the estimation period) are then discounted to present value to derive an indication of the value of the business enterprise. The Market Approach is comprised of the guideline public company method and guideline transactions method. The guideline company method focuses on comparing the reporting unit to select reasonably similar (or “guideline”) publicly traded companies. Under this method, valuation multiples are (i) derived from the operating data of selected guideline companies; (ii) evaluated and adjusted based on the strengths and weaknesses of the reporting units relative to the selected guideline companies; and (iii) applied to the operating data of the reporting unit to arrive at an indication of value. In the similar transactions method, consideration is given to prices paid in recent transactions that have occurred in the reporting unit’s industry or in related industries. For the interim impairment analysis of GDS, we utilized the Income Approach as it has the most direct correlation to the specific economics of the reporting unit. The estimated fair value of equity of GDS was made using Level 3 inputs including the estimated discount rate that reflects the level of risk associated with receiving future cash flows and the forecasted long-term growth rates of GDS's revenue and operating income. Based on our analysis, an impairment of $ 92.4 million was calculated as the deficit between the fair value of equity of the GDS reporting unit as compared to its carrying value, including goodwill of $ 130.5 million at our fiscal period end for February 2025. As a result, we recorded a non-cash goodwill impairment charge of $ 92.4 million included in operating income in the second quarter of fiscal 2025. The remaining $ 38.1 million of goodwill in GDS is primarily supported by our work for the United Kingdom and Australia foreign aid government agencies. A future reduction in these governments’ foreign aid budgets could result in additional impairment to the GDS reporting unit. Long-term assets other than goodwill in GDS are not material. 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): As of June 29, 2025 September 29, 2024 Weighted- Average Remaining Life (in Years) Gross Amount Accumulated Amortization Net Amount Gross Amount Accumulated Amortization Net Amount Client relations 7.6 $ 202,749 $ ( 55,916 ) $ 146,833 $ 198,726 $ ( 57,975 ) $ 140,751 Backlog 1.2 46,583 ( 43,039 ) 3,544 75,194 ( 71,101 ) 4,093 Trade names 0.7 38,376 ( 31,001 ) 7,375 40,926 ( 25,185 ) 15,741 Total $ 287,708 $ ( 129,956 ) $ 157,752 $ 314,846 $ ( 154,261 ) $ 160,585 Amortization expense for the identifiable intangible assets for the third quarter and first nine months of fi scal 2025 was $ 8.3 million and $ 27.6 million, compared to $ 13.8 million and $ 38.4 million, respectively, for the prior-year peri ods. Estimated amortization expense for the remainder of fiscal 2025 and succeeding years is as follows (in thousands): 14 Amount 2025 (remaining) $ 9,641 2026 30,114 2027 21,021 2028 20,253 2029 19,317 Beyond 57,406 Total $ 157,752 6. Property and Equipment Property and equipment consisted of the following (in thousands): As of June 29, 2025 September 29, 2024 Equipment, furniture and fixtures $ 145,213 $ 139,070 Leasehold improvements 47,327 44,883 Total property and equipment 192,540 183,953 Accumulated depreciation ( 122,238 ) ( 110,888 ) Property and equipment, net $ 70,302 $ 73,065 For the third quart er and first nine months of fiscal 2025 , o ur depreciation expense related to property and equipment wa s $ 5.4 million and $ 16.1 million, r espectively, compared to $ 5.7 million and $ 18.3 million, respectively, for the fiscal 2024 periods. 7. Stock Repurchase and Dividends On May 5, 2025, our Board of Directors authorized an additional $ 500 million stock repurchase program in addition to the previous $ 400 million stock repurchase program authorized on October 5, 2021. In the first nine months of fiscal 2025, we repurchased and settled 5,933,085 shares with an average price of $ 33.71 per share for a total cost of $ 200.0 million in the open market. We did not repurchase any shares of our common stock in the first nine months of fiscal 2024. At June 29, 2025, we had a remaining balance of $ 647.8 million under our stock repurchase programs. The following table presents dividends declared and paid in the first nine months of fisc al 2025 and 2024 : Declare Date Dividend Paid Per Share Record Date Payment Date Dividend Paid (in thousands) November 11, 2024 $ 0.058 November 27, 2024 December 13, 2024 $ 15,549 January 27, 2025 0.058 February 12, 2025 February 26, 2025 15,351 May 5, 2025 0.065 May 23, 2025 June 5, 2025 17,092 Total dividend paid as of June 29, 2025 $ 47,992 November 13, 2023 $ 0.052 November 30, 2023 December 13, 2023 $ 13,873 January 29, 2024 0.052 February 14, 2024 February 27, 2024 13,908 April 29, 2024 0.058 May 20, 2024 May 31, 2024 15,522 Total dividend paid as of June 30, 2024 $ 43,303 Subsequent Events. On July 28, 2025, our Board of Directors declared a quarterly cash dividend of $ 0.065 per share payable on August 29, 2025 to stockholders of record as of the close of business on August 15, 2025. 15 8. Leases Our operating leases are primarily for corporate and project office spaces. To a much lesser extent, we have operating leases for vehicles and equipment. Our operating leases have remaining lease terms of one month to ten years , some of which may include options to extend the leases for up to five years . We determine if an arrangement is a lease at inception. Operating leases are included in "Right-of-use assets, operating leases", "Short-term lease liabilities, operating leases" and "Long-term lease liabilities, operating leases" in the consolidated balance sheets. Our finance leases are primarily for certain IT equipment and are immaterial. Right-of-use ("ROU") assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, incremental borrowing rates are used based on the information available at commencement date in determining the present value of lease payments. The operating lease ROU asset at the commencement date also includes any lease payments made to the lessor at or before the commencement date and initial direct costs less lease incentives received. Lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term. The components of lease costs are as follows (in thousands): Three Months Ended Nine Months Ended June 29, 2025 June 30, 2024 June 29, 2025 June 30, 2024 Operating lease cost $ 25,408 $ 24,562 $ 76,147 $ 73,580 Sublease income ( 254 ) ( 184 ) ( 736 ) ( 347 ) Total lease cost $ 25,154 $ 24,378 $ 75,411 $ 73,233 Supplemental cash flow information related to leases is as follows (in thousands): Nine Months Ended June 29, 2025 June 30, 2024 Operating cash flows for operating leases $ 56,941 $ 56,379 Right-of-use assets obtained in exchange for new operating lease liabilities 55,817 38,160 Supplemental balance sheet and other information related to leases are as follows ($ in thousands): As of June 29, 2025 September 29, 2024 Operating leases: Right-of-use assets $ 186,145 $ 177,950 Lease liabilities: Current 64,109 63,419 Non-current 145,045 140,095 Total operating lease liabilities $ 209,154 $ 203,514 Weighted-average remaining lease term: Operating leases 4.2 years 4.5 years Weighted-average discount rate: Operating leases 4.0 % 3.6 % At June 29, 2025, we h a d $ 7.1 million of o p erating leases that have not yet commenced. 16 A maturity analysis of the future undiscounted cash flows associated with our lease liabilities at June 29, 2025 is as follows (in thousands): Operating Leases 2025 (remaining) $ 19,175 2026 66,606 2027 54,496 2028 33,058 2029 24,390 Beyond 30,287 Total lease payments 228,012 Less: imputed interest ( 18,858 ) Total present value of lease liabilities $ 209,154 9. Employee Benefits In fiscal 2020, the Canadian federal government implemented the Canadian Emergency Wage Subsidy ("CEWS") program in response to the negative impact of the coronavirus disease 2019 pandemic on businesses operating in Canada. Some of our Canadian legal entities qualified for and applied for these CEWS cash benefits to partially offset the impacts of revenue reductions and on-going staffing costs. The $ 21 million total received was initially recorded in "Other long-term liabilities" until all potential 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. 10. 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 29, 2025 was $ 8.8 million and $ 25.8 million, compared to $ 8.1 million and $ 23.7 million for the same periods last year. Most of these amounts were included in our selling, general and administrative expenses on our consolidated statements of income. In the first nine months of fiscal 2025, we awarded 233,789 performance share units (“PSUs”) to our non-employee directors and executive officers at an estimated fair value of $ 49.82 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 growth in our diluted earnings per share and 50 % on our relative total shareholder return over the vesting period. Additionally, we awarded 488,093 restricted stock units (“RSUs”) to our non-employee directors, executive officers and employees at a fair value of $ 40.24 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 . 11. Earnings per Share (“EPS”) 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 of fiscal 2024 and the first nine months of fiscal 2025 and 2024, our Convertible Notes, described in Note 14, "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. For the third quarter of fiscal 2025, 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 all of these periods 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 2025 and 2024, no options were excluded from the calculation of dilutive potential common shares. 17 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 June 29, 2025 June 30, 2024 June 29, 2025 June 30, 2024 Net income attributable to Tetra Tech $ 113,844 $ 85,810 $ 119,979 $ 237,228 Weighted-average common shares outstanding – basic 263,026 267,575 265,589 267,255 Effect of dilutive stock options and unvested restricted stock 1,829 2,165 1,900 2,073 Shares issuable assuming conversion of convertible notes — 520 624 175 Weighted-average common shares outstanding – diluted 264,855 270,260 268,113 269,503 Earnings per share attributable to Tetra Tech: Basic $ 0.43 $ 0.32 $ 0.45 $ 0.89 Diluted $ 0.43 $ 0.32 $ 0.45 $ 0.88 12. Income Taxes The effective tax rates for the first nine months of fiscal 2025 and 2024 we re 40.9 % and 27.7 %, respectively. Income tax expense was reduced by $ 1.0 million and $ 2.9 million of excess tax benefits on share-based payments in the first nine months of fiscal 2025 and 2024, respectively. In addition, in fiscal 2025, w e recognized a $ 92.4 million goodwill impairment as described in Note 5, “Goodwill and Intangible Assets”. We determined that $ 58.3 million of goodwill impairment is not deductible for income tax purposes. We also recognized a $ 115.0 million non-recurring charge related to legal contingencies as describe d in Note 17, "Commitments and Contingencies". We determined that $ 31.3 million of this charge is not tax deductible. Furthermore, 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. Excluding the impact of the excess tax benefits on share-based payments, the goodwill impairment and the legal contingency charge in th e first nine months of fiscal 2025 and the settlement amounts in the first nine months of 2024, our effective tax rates in the first nine months of fiscal 2025 and 2024 we re 27.6 % and 27.2 %, r espectively. At June 29, 2025 and September 29, 2024, the liability for income taxes associated with uncertain tax positions was $ 52.3 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 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 additional tax liabilities could be materially higher than the amounts currently recorded resulting in additional tax expense. 13. Reportable Segments We manage our operations under two reportable segments. Our GSG reportable segment primarily includes activities with U.S. government clients (federal, state and local) and all activities with development agencies worldwide. Our CIG reportable segment primarily includes activities with U.S. commercial clients and international clients other than development agencies. GSG provides high-end consulting and engineering services primarily to U.S. government clients (federal, state and local) and international development agencies worldwide. GSG supports U.S. government civilian and defense agencies with services in water, environment, sustainable infrastructure, information technology and disaster management. GSG also provides engineering design services for U.S. based federal and municipal clients, especially in water infrastructure, flood protection and solid waste. GSG also leads our support for development agencies worldwide, especially in the United States, United Kingdom and Australia. CIG primarily provides high-end consulting and engineering services to U.S. commercial clients, and international clients inclusive of the commercial and government sectors. CIG supports commercial clients worldwide in 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). 18 Management evaluates th e performance of these reportable segments based upon their respective segment operating income before the effect of amortization expense related to acquisitions, and other unallocated corporate expenses. We account for inter-segment revenues and transfers as if they were to third parties; that is, by applying a negotiated fee onto the costs of the services performed. All significant intercompany balances and transactions are eliminated in consolidation. In the first nine months of fiscal 2025, our Corporate Segment's operating income 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 nine months of fiscal 2025. Of this amount, we paid $ 57 million in the second quarter of fiscal 2025. Subsequent to the end of the third quarter of fiscal 2025, we paid an additional $ 40 million, and we expect to pay the remainder of these legal contingency costs within the next 12 months. In the first nine months of fiscal 2025, we also recorded a non-cash goodwill impairment charge of $ 92.4 million related to our GDS reporting unit, which resulted from the cancellation of USAID programs in the second quarter of fiscal 2025. The following tables summarize financial information regarding our reportable segments (in thousands): Three Months Ended Nine Months Ended June 29, 2025 June 30, 2024 June 29, 2025 June 30, 2024 Revenue GSG $ 673,022 $ 640,553 $ 2,086,229 $ 1,812,721 CIG 715,746 723,617 2,082,818 2,063,879 Elimination of inter-segment revenue ( 18,952 ) ( 19,847 ) ( 56,557 ) ( 52,395 ) Total revenue $ 1,369,816 $ 1,344,323 $ 4,112,490 $ 3,824,205 Income from operations GSG $ 90,726 $ 71,518 $ 246,112 $ 198,652 CIG 96,103 86,465 250,550 233,821 Corporate (1) ( 21,843 ) ( 29,353 ) ( 269,548 ) ( 75,078 ) Total income from operations $ 164,986 $ 128,630 $ 227,114 $ 357,395 (1) Includes amortization of intangibles, goodwill impairment charges, certain legal contingency costs, as well as other costs and other income not allocable to our reportable segments. As of June 29, 2025 September 29, 2024 Total Assets GSG $ 703,419 $ 658,493 CIG 1,109,686 1,059,915 Corporate (1) 2,540,342 2,474,268 Total assets $ 4,353,447 $ 4,192,676 (1) Corporate assets consist of intercompany eliminations and assets not allocated to our reportable segments including goo dwill, intangible assets, deferred income taxes and certain other assets. 14. Long-Term Debt Long-term debt consisted of the following (in thousands): 19 As of June 29, 2025 September 29, 2024 Credit facilities $ 300,000 $ 250,000 Convertible notes 575,000 575,000 Debt issuance costs and discount ( 12,517 ) ( 12,366 ) Long-term debt $ 862,483 $ 812,634 On August 22, 2023, we issued $ 575.0 million in Convertible Notes that bear interest at a rate of 2.25 % per annum payable in arrears on February 15 and August 15 of each year, beginning on February 15, 2024, and mature on August 15, 2028, unless converted, redeemed or repurchased. Prior to May 15, 2028, the Convertible Notes will be convertible at the option of the holders only upon the occurrence of certain events and during certain periods. 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 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 29, 2025, the applicable conversion rate was 25.4522 shares of common stock per $1,000 principal amount of the Convertible Notes (equivalent to an adjusted conversion price of approximately $ 39.29 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. If certain corporate events occur prior to the maturity date of the Convertible Notes or if we deliver a notice of redemption, we will, in certain circumstances, increase the conversion rate for a holder who elects to convert its Convertible Notes in connection with such event or notice of redemption. We will not be able to redeem the Convertible Notes prior to August 20, 2026. On or after August 20, 2026, we have the option to redeem for cash all or any portion of the Convertible Notes if the last reported sale price of our common stock is equal to or greater than 130 % of the conversion price for a specified period of time at a redemption price equal to 100 % of the principal amount of the Convertible Notes to be redeemed, plus any accrued but unpaid interest. In addition, as described in the indenture governing the Convertible Notes, certain events of default including, but not limited to, bankruptcy, insolvency or reorganization, may result in the Convertible Notes becoming due and payable immediately. 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 the remaining net proceeds to repay all $ 185.0 million principal amount outstanding under our revolving credit facility and the remaining $ 234.4 million principal amount outstanding under our senior secured term loan due 2027 under the Second Amended and Restated Credit Agreement, as well as approximately $ 89.4 million principal amount outstanding under our senior secured term loan due 2026 under the Third Amended and Restated Credit Agreement. The Convertible Notes were recorded as a single unit within "Long-term debt" in our consolidated balance sheets as the conversion option within the Convertible Notes was not a derivative that would require bifurcation, and the Convertible Notes did not involve a substantial premium. Transaction costs to issue the Convertible Notes were recorded as direct deductions from the related debt liabilities and are amortized to interest expense using the effective interest method over the terms of the Convertible Notes resulting in an effective annual interest rate of 2.79 %. The net carrying amount of the Convertible Notes was as follows (in thousands) : As of June 29, 2025 September 29, 2024 Principal $ 575,000 $ 575,000 Unamortized discount and issuance costs ( 9,329 ) ( 11,434 ) Net carrying amount $ 565,671 $ 563,566 20 The following table sets forth the interest expense recognized related to the Convertible Notes (in thousands) : Three Months Ended Nine Months Ended June 29, 2025 June 30, 2024 June 29, 2025 June 30, 2024 Interest expense $ 3,234 $ 3,234 $ 9,703 $ 9,631 Amortization of discount and issuance costs 699 680 2,105 2,040 Total interest expense $ 3,933 $ 3,914 $ 11,808 $ 11,671 Concurrent with the offering of the Convertible Notes, in August 2023, we entered into the Capped Call Transactions. The Capped Call Transactions are expected generally to reduce the potential dilution of our common stock upon conversion of the Convertible Notes and/or offset any cash payments we elect to make in excess of the principal amount of converted Convertible Notes, as the case may be. If, however, the market price per share of our common stock, as measured under the terms of the Capped Call Transactions, exceeds the cap price of the Capped Call Transactions, there would nevertheless be dilution and/or there would not be an offset of such cash payments, in each case, to the extent that such market price exceeds the cap price of the Capped Call Transactions. The cap price of the Capped Call Transactions 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 29, 2025, the adjusted cap price was approximately $ 51.86 per share. We recorded the Capped Call Transactions as separate transactions from the issuance of the Convertible Notes. The cost of $ 51.8 million incurred to purchase the Capped Call Transactions was recorded as a reduction to additional paid-in capital (net of $ 12.9 million in deferred taxes) on our consolidated balance sheet as of fiscal 2023 year-end. On February 18, 2022, we entered into Amendment No. 2 to the Second Amended and Restated Credit Agreement (“Second Amended Credit Agreement”) with a total borrowing capacity of $ 1.05 billion that was scheduled to mature in February 2027. The Second Amended Credit Agreement consisted of a $ 750 million senior secured, five-year facility that provided for a $ 250 million term loan facility ("Second Term Loan Facility") and a $ 500 million revolving credit facility ("Second Revolving Credit Facility"). On October 26, 2022, we entered into a Third Amended and Restated Credit Agreement (“Third Amended Credit Agreement”) that provided for an additional $ 500 million senior secured term loan facility (Third Term Loan Facility") increasing our total borrowing capacity to $ 1.55 billion. On January 23, 2023, we drew the entire amount of the $ 500 million term loan facility which was scheduled to mature in January 2026. On May 5, 2025 we repaid all facilities in full as detailed below. On May 5, 2025, we entered into a Fourth Amended and Restated Credit Agreement (“Amended Credit Agreement”) with a total borrowing capacity of $ 1.5 billion that will mature in May 2030. The Amended Credit Agreement is a $ 1.1 billion senior secured, five-year facility that provides for a $ 250 million 3-year term loan facility (the “3Y Term Loan Facility”), a $ 250 million 5-year term loan facility (“the 5Y Term Loan Facility”), and a $ 600 million revolving credit facility (the “Amended Revolving Credit Facility”). In addition, the Amended Credit Agreement includes a $ 400 million accordion feature that allows us to increase the Amended Credit Agreement to $ 1.5 billion subject to lender approval. The 3Y Term Loan Facility will not be subject to any scheduled amortization of principal. The 5Y Term Loan Facility will be subject to quarterly amortization of principal, based upon the annual percentages of the original stated amount thereof (Year 1: 0.0%, Year 2: 0.0%, Year 3: 5.0 %, Year 4: 10.0 %, Year 5: 10.0 %), with the first payment being due at the end of the first full fiscal quarter following the second anniversary of the Amendment Effective Date. The Amended Credit Agreement provides for, among other things, (i) refinance indebtedness under our Third Amended Credit Agreement; (ii) finance open market repurchases of common stock, acquisitions, and cash dividends and distributions; 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 pricing levels of the Consolidated Leverage Ratio and the removal of the Secured Overnight Financing Rate ("SOFR") credit spread adjustment. 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 $ 400 million sublimit for multicurrency borrowings and letters of credit. The entire 3Y Term Loan Facility and 5Y Term Loan Facility were drawn on May 5, 2025. The proceeds from these term loans were used to pay down our Third Term Loan Facility and the Second Revolving Credit Facility in full on May 5, 2025. We may borrow on the Amended Revolving Credit Facility, at our option, at either (a) a benchmark rate plus a margin that ranges from 1.000 % to 1.750 % per annum, or (b) a base rate for loans in U.S. dollars (the highest of the U.S. federal funds rate plus 0.50 % per annum, the bank’s prime rate or the SOFR rate plus 1.00 %, plus a margin that ranges from 0% to 0.75 % per annum). In each case, the applicable margin is based on our Consolidated Leverage Ratio, calculated quarterly. The 5Y Term Loan Facility is subject to the same interest rate provisions. The 3Y Term Loan Facility is subject to a benchmark rate plus a margin that ranges from 0.875 % to 1.625 % per annum. The Amended Credit Agreement expires on May 5, 2030, or earlier at our discretion upon payment in full of loans and other obligations. 21 At June 29, 2025, we had $ 300 million in outstanding borrowings under the Amended Credit Agreement, which consisted of $ 100 million under the 3Y Term Loan Facility, $ 200 million under the 5Y Term Loan Facility and no borrowings under the Amended Revolving Credit Facility. For the first nine months of fiscal 2025, the weighted-average interest rate of the outstanding borrowings under the credit facilities was 5.66 %. I n addition, we had $ 0.7 million in standby letters of credit under the Amended Credit Agreement. At June 29, 2025, we had $ 599.3 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 3.50 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 29, 2025, we were in compliance with these covenants with a consolidated leverage ratio of 1.31 x and a consolidated interest coverage ratio of 16.67 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 29, 2025, there were no outstanding borrowings under these facilities and the aggregate amount of standby letters of credit outstanding was $ 43.9 million. As of June 29, 2025, we had no bank overdrafts related to our disbursement bank accounts. 15. Fair Value Measurements We classified our assets and liabilities that were carried at fair value in one of the following categories: • Level 1: Quoted market prices in active markets for identical assets or liabilities. • Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data. • Level 3: Unobservable inputs that are not corroborated by market data. Contingent Consideration. 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). Debt. 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 September 29, 2024). The carrying value of our long-term debt under our credit facility approximated fair value at June 29, 2025 and September 29, 2024. At June 29, 2025, we had $ 300 million in outstanding borrowings under the Amended Credit Agreement, which consisted of $ 100 million under our 3Y Term Loan Facility, $ 200 million under our 5Y Term Loan Facility and no borrowings under our 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 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 $ 566 million and $ 644 million, respectively, at June 29, 2025, and $ 564 million and $ 743 million , respectively, at September 29, 2024 (see Note 14 , " Long-Term Debt " for further information). 22 16. Reclassifications Out of Accumulated Other Comprehensive Income The accumulated balances and activities for the three and nine months ended June 29, 2025 and June 30, 2024 related to reclassifications out of accumulated other comprehensive income are summarized as follows (in thousands): Three Months Ended Foreign Currency Translation Adjustments Net Pension Adjustments Accumulated Other Comprehensive Income (Loss) 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 loss 1,854 3 1,857 Balance at June 30, 2024 $ ( 157,317 ) $ 2,628 $ ( 154,689 ) Balance at March 30, 2025 $ ( 157,085 ) $ 3,905 $ ( 153,180 ) Other comprehensive income before reclassifications 88,063 — 88,063 Net current-period other comprehensive income 88,063 — 88,063 Balance at June 29, 2025 $ ( 69,022 ) $ 3,905 $ ( 65,117 ) Nine Months Ended Foreign Currency Translation Adjustments Net Pension Adjustments Accumulated Other Comprehensive Income (Loss) Balance at October 1, 2023 $ ( 197,933 ) 2,638 $ ( 195,295 ) Other comprehensive income (loss) before reclassifications 40,616 ( 10 ) 40,606 Net current-period other comprehensive income (loss) 40,616 ( 10 ) 40,606 Balance at June 30, 2024 $ ( 157,317 ) $ 2,628 $ ( 154,689 ) Balance at September 29, 2024 $ ( 82,813 ) $ 3,938 $ ( 78,875 ) Other comprehensive income (loss) be fore reclassifications 13,791 ( 33 ) 13,758 Net current-period other comprehens ive income (loss) 13,791 ( 33 ) 13,758 Balance at June 29, 2025 $ ( 69,022 ) $ 3,905 $ ( 65,117 ) 17. Commitments and Contingencies We are subject to certain claims and lawsuits typically filed against the consulting and engineering profession, alleging primarily professional errors or omissions. We carry professional liability insurance, subject to certain deductibles and policy limits, against such claims. 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 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 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. 23 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 agreed to pay the United States $ 57 million and $ 40 million for FCA and CERCLA claims, respectively (the "Settlement Amounts") . In the second quarter of fiscal 2025, we paid the $ 57 million settlement related to the FCA claim. The $ 40 million CERCLA settlement was paid at the beginning of the fourth quarter of fiscal 2025. U pon entry of the consent decree by the Court and the United States' receipt of the Settlement Amounts, the United States released 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. 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. 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. 18. Related Party Transactions We often provide services to unconsolidated joint ventures. 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 June 29, 2025 June 30, 2024 June 29, 2025 June 30, 2024 Revenue $ 16,267 $ 16,753 $ 48,764 $ 50,157 Related reimbursable costs 14,222 15,287 43,578 46,025 Our consolidated balance sheets also included the following amounts related to these services (in thousands): As of June 29, 2025 September 29, 2024 Accounts receivable, net $ 13,368 $ 15,612 Contract assets 1,184 1,625 Contract liabilities ( 5,511 ) ( 4,237 ) 24