What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2026-01-30 compared with 2025-08-01 · 162 added, 194 removed, 306 unchanged (54% of the section changed)

15 unchanged sentences

We typically begin at the earliest stage of a project by identifying technical solutions and developing execution plans tailored to our clients' needs and resources.

Our reputation for high-end consulting and engineering services and our ability to develop solutions for water and environmental management has supported our growth for more than 50 years.

Our reputation for high-end consulting and engineering services and our ability to develop solutions for water and environmental management has supported our growth for nearly 60 years.

Our market leading climate mitigation and adaptation services are solving our clients' most complex challenges related to coastal flooding, water security, energy transition and biodiversity protection.

Today, we are proud to be making a difference in people’s lives worldwide through our high-end consulting, engineering and technology service offerings.

We are working on over 100,000 projects, in more than 100 countries on all seven continents, with a talent force of 30,000 associates.

We are working on over 100,000 projects, in more than 100 countries on all seven continents, with more than 25,000 associates.

We are Leading with Science ® throughout our operations, with domain experts across multiple disciplines supported by our advanced analytics, artificial intelligence, machine learning and digital technology solutions.

11 unchanged sentences

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

Three Months Ended Nine Months Ended

2025 June 30,

2024 June 29,

2025 June 30,

Three Months Ended

2025 December 29,

Client Sector

4 unchanged sentences

International (2)

37.0 39.0 36.0 39.0

Total 100.0 % 100.0 %

2 unchanged sentences

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

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

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

We manage our operations under two reportable segments:

2 unchanged sentences

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

government clients (federal, state and local) and international development agencies worldwide.

government clients (federal, state and local).

GSG supports U.S.

government civilian and defense agencies with services in water, environment, sustainable infrastructure, information technology and disaster management.

government defense and civilian 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.

Commercial/International Services Group ( “ CIG ” ).

1 unchanged sentence

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).

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

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

Three Months Ended Nine Months Ended

2025 June 30,

2024 June 29,

2025 June 30,

Three Months Ended

2025 December 29,

Reportable Segment

6 unchanged sentences

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

Three Months Ended Nine Months Ended

2025 June 30,

2024 June 29,

2025 June 30,

Three Months Ended

2025 December 29,

Contract Type

5 unchanged sentences

Under time-and-materials contracts, we are paid for labor at negotiated hourly billing rates and paid for other expenses.

Under cost-plus contracts, some of which are subject to a contract ceiling amount, we are reimbursed

for allowable cost s plus fees, which may be fixed or performance-based.

Under cost-plus contracts, some of which are subject to a contract ceiling amount, we are reimbursed for allowable cost s plus fees, which may be fixed or performance-based.

Profitability on these contracts is driven by billable headcount and our cost control.

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

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

We estimate and measure progress on our contracts over

time whereby we compare our total costs incurred on each contract as a percentage of the total expected contract costs.

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

28 unchanged sentences

Both CAW and SAGE are included in our CIG segment.

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.

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

Both LST and CCE are included in our GSG segment.

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

Subsequent Event.

O n January 16, 2026, we acquired Halvik Corp (“Halvik”) headquartered in Vienna, Virginia.

With 600 employees, Halvik provides high-end advisory consulting services focused on advanced data analytics, systems modernization and cybersecurity for U.S.

federal defense and civilian agencies.

Halvik will be included in our GSG segmen t.

Divestitures.

1 unchanged sentence

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.

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

In the first quarter of fiscal 2026, we divested our operations in Norway, which were in our CIG segment.

We received proceeds of $41.6 million and recognized a non-operating gain of $7.7 million in our consolidated statements of income.

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

For detailed information regarding acquisitions, see Note 4, “Acquisition s and Divestitures ” of the “Notes to Consolidated Financial Statements”.

OVERVIEW OF RESULTS AND BUSINESS TRENDS

For the first nine months of fiscal 2025, our 7.5% revenue growth was primarily due to increased activity in the U.S.

state and local and U.S.

federal government client sectors.

The overall growth includes $39 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 6.6% compared to the first nine months of fiscal 2024.

For the first quarter of fiscal 2026, our revenue declined 14.8% compared to the prior-year quarter primarily due to fewer international development projects in our U.S.

federal government client sector and lower disaster response activity in our U.S.

state and local government client sector.

Our revenue in the first quarter of fiscal 2026 includes approximately $40 million from our recent acquisitions, that did not have comparable revenue for the same quarter last year.

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

Nine Months Ended

June 29, 2025 June 30, 2024 Change

Three Months Ended

December 28, 2025 December 29, 2024 Change

Client Sector

9 unchanged sentences

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

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

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

Federal Government.

Nine Months Ended

June 29, 2025 June 30, 2024 Change

Three Months Ended

December 28, 2025 December 29, 2024 Change

($ in thousands)

Revenue $ 272,598 $ 501,848 $ (229,250) (45.7)%

The 12.0% revenue growth in the U.S.

federal government sector primarily reflects increased disaster response work related to the Palisades and Eaton fires in Southern California, which occurred in early January 2025.

The revenue growth also includes approximately $35 million of revenue from recent acquisitions that did not have comparable revenue for the prior-year period.

federal government revenue decline of 45.7% was primarily due to decreased international development activity in the first quarter of fiscal 2026 compared to the first quarter of fiscal 2025.

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.

3 unchanged sentences

Secretary of State Rubio announced the cancellation of 83% of United States Agency for International Development ("USAID") programs, totaling approximately 5,200 contracts.

Subsequently, we were notified that virtually all of our contracts with USAID were terminated for convenience with immediate effect.

For the first nine months of fiscal 2025, our U.S.

federal government revenue included $499.1 million from USAID programs compared to $499.8 million for the same period last year.

Although our USAID revenue was flat for the first nine months year-over-year, essentially all of our revenue in the third quarter, which totaled $89.9 million, was for wind-down activities that are nearing completion.

As a result, we expect our USAID revenue to be significantly lower in the fourth quarter of fiscal 2025, both sequentially and compared to the prior-year fourth quarter.

Excluding USAID, we expect our U.S.

federal revenue to grow for the remainder of fiscal 2025.

Subsequently, we were notified that virtually all of our contracts with USAID were terminated for convenience with immediate effect and that any remaining international development activity would be administered by the U.S.

Department of State ("DOS").

In the first quarter of fiscal 2026, our U.S.

federal government revenue included $56.4 million from USAID/DOS programs compared to $283.9 million in the first quarter of last year.

We currently expect no significant USAID/DOS revenue in the remainder of fiscal 2026.

However, we do expect our U.S.

federal revenue to grow for the remainder of this fiscal year, excluding USAID/DOS activities.

State and Local Government.

Nine Months Ended

June 29, 2025 June 30, 2024 Change

Three Months Ended

December 28, 2025 December 29, 2024 Change

($ in thousands)

Revenue $ 171,473 $ 202,987 $ (31,514) (15.5)%

state and local government revenue grew 34.8% compared to the first nine months of fiscal 2024 due to increased disaster response activity primarily related to Hurricanes Helene and Milton.

Excluding this disaster response work,

state and local government revenue increased 15.3% in the first nine months of fiscal 2025 compared to fiscal 2024 first nine months;

the growth was due to continued investment by our clients in clean drinking water.

state and local government revenue declined 15.5 % compared to the fiscal 2025 quarter due to decreased disaster response activity primarily related to Hurricanes Helene and Milton, which occurred in September and October of 2024, respectively.

Excluding this disaster response work, our U.S.

state and local government revenue increased 10.3% in the first quarter of fiscal 2026 compared to the first quarter of fiscal 2025.

This growth was due to continued investment by our clients in municipal water infrastructure, including digital water automation.

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 for the remainder of fiscal 2025.

Nine Months Ended

June 29, 2025 June 30, 2024 Change

state and local governments relates to critical water and environmental programs, which we expect to continue to grow in the remainder of fiscal 2026.

Three Months Ended

December 28, 2025 December 29, 2024 Change

($ in thousands)

Revenue $ 225,352 $ 233,591 $ (8,239) (3.5)%

commercial revenue growth of 0.1% in the first nine months of fiscal 2025 was primarily due to increased activity for environmental services, offset by reduced revenue related to renewable energy.

commercial revenue declined 3.5% in the first quarter of fiscal 2026 primarily due to lower activity related to renewable energy, partially offset by increased power transmission services compared to the first quarter of fiscal 2025.

We expect our U.S.

commercial business revenue, excluding renewable energy, to be relatively stable for the remainder of fiscal 2025.

commercial revenue, excluding renewable energy, to begin showing growth in the second half of fiscal 2026.

International.

Nine Months Ended

June 29, 2025 June 30, 2024 Change

Three Months Ended

December 28, 2025 December 29, 2024 Change

($ in thousands)

Revenue $ 541,240 $ 482,135 $ 59,105 12.3%

For the first nine months of fiscal 2025, our international revenue decreased 0.9% primarily due to lower infrastructure work in Australia, partially offset by increased water planning and design activities in the United Kingdom.

We expect the growth in our international work, excluding Australia, to continue for the remainder of fiscal 2025.

For the first quarter of fiscal 2026, our international revenue growth of 12.3% reflects increased activities for water utilities including digital water projects, partially offset by decreased infrastructure activities in Australia.

Excluding the revenue from fiscal 2025 acquisitions, our international revenue increased 3.5% in the first quarter of fiscal 2026 compared to the fiscal 2025 quarter.

We expect the growth in our international work to continue for the remainder of fiscal 2026.

RESULTS OF OPERATIONS

Consolidated Results of Operations

Three Months Ended Nine Months Ended

2025 June 30,

2024 Change June 29, 2025 June 30, 2024 Change

Three Months Ended

2025 December 29,

($ in thousands, except per share data)

6 unchanged sentences

Selling, general and administrative expenses (86,824) (84,317) (2,507) (3.0)

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

Contingent consideration - fair value adjustments 58 (500) 558 NM 2,355 (477) 2,832 NM

Impairment of goodwill — — — NM (92,416) — (92,416) NM

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

Contingent consideration - fair value adjustments 7,447 366 7,081 NM

Income from operations 140,994 22,526 118,468 525.9

Interest expense (7,128) (7,218) 90 1.2

Other non-operating income 7,710 — 7,710 NM

Income before income tax expense 141,576 15,308 126,268 824.8

Income tax expense (36,354) (14,530) (21,824) (150.2)

Net income 113,883 85,824 28,059 32.7 120,073 237,263 (117,190) (49.4)

Net income 105,222 778 104,444 NM

Net income attributable to noncontrolling interests (194) (31) (163) (525.8)

Net income attributable to Tetra Tech $ 113,844 $ 85,810 $ 28,034 32.7 $ 119,979 $ 237,228 $ (117,249) (49.4)

Diluted earnings per share $ 0.43 $ 0.32 $ 0.11 34.4% $ 0.45 $ 0.88 $ (0.43) (48.9)%

Net income attributable to Tetra Tech $ 105,028 $ 747 $ 104,281 NM

Diluted earnings per share $ 0.40 $ — $ 0.40 NM

(1) We believe that the presentation of "Revenue, net of subcontractor costs", which is a non-U.S.

6 unchanged sentences

NM = not meaningful

Our revenue growth in the third quarter and first nine months of fiscal 2025 reflects increases primarily in our GSG reportable segment.

For the third quarter of fiscal 2025, our GSG segment's revenue and revenue, net of subcontractor costs, increased $32.5 million, or 5.1%, and $32.3 million, or 6.6%, respectively, compared to the same quarter last year.

Our CIG segment's revenue decreased $7.9 million, or 1.1%, and revenue, net of subcontractor costs, increased $11.2 million, or 1.8% in the third quarter of fiscal 2025 compared to the prior-year quarter.

For the first nine months of fiscal 2025, our GSG segment's revenue and revenue, net of subcontractor costs, increased $273.5 million, or 15.1%, and $245.2 million, or 17.5%, respectively, compared to the same period last year.

Our CIG segment's revenue and revenue, net of subcontractor costs, increased $18.9 million, or 0.9%, and $31.5 million, or 1.8%, respectively, compared to the fiscal 2024 period.

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

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

GAAP adjusted results.

For the first nine months of fiscal 2025, our adjusted results exclude a non-cash goodwill impairment charge of $92.4 million related to our GDS reporting unit, which resulted from the aforementioned cancellation of USAID programs in the second quarter of fiscal 2025.

This charge is further described in Note 5 , " Goodwill and Intangible Assets " of the “Notes to Consolidated Financial Statements” .

Our adjusted results also exclude adjustments to contingent consideration liabilities for the first nine months of fiscal 2025.

Additionally, for the first nine months 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 Statem ents”.

We determined that there is no tax benefit for $31.3 million of the legal contingency charge and $58.3 million of the goodwill impairment charge.

The effective tax rate applied to the remaining adjustments to arrive at the adjusted earnings per share ("EPS") was 25.0%.

Our revenue decline in the first quarter of fiscal 2026 primarily reflects decreased revenue in our GSG reportable segment due to the aforementioned reduction in USAID/DOS international development activities.

Our GSG segment's revenue and revenue, net of subcontractor costs, declined $265.8 million, or 33.6%, and $215.3 million, or 33.3%, respectively, compared to last year.

Our CIG segment's revenue increased $59.3 million, or 9.2%, and revenue, net of subcontractor costs, increased $55.1 million, or 10.0% in the first quarter of fiscal 2026 compared to the first quarter of fiscal 2025.

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-GAAP adjusted results.

For the first quarter of fiscal 2026, our adjusted results exclude adjustments to contingent consideration liabilities and the earnings per share ("EPS") contribution from the aforementioned non-operating gain from the sale of our operations in Norway.

Additionally, 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 16, "Commitments and Contingencies" of the “Notes to Consolidated Financial Statem ents”.

We determined that there were no income tax expense for the non-operating gain in the first quarter of fiscal 2026 and no tax benefit for $31.3 million of the legal contingency charge in the first quarter of fiscal 2025.

The effective tax rates applied to the remaining adjustments to arrive at the adjusted EPS were 27.5% and 25.0% for the first quarters of fiscal 2026 and 2025, respectively.

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 respe ctive periods as reflected in our Consolidated Statements of Income.

Three Months Ended Nine Months Ended

2025 June 30,

2024 Change June 29, 2025 June 30, 2024 Change

Three Months Ended

2025 December 29,

($ in thousands, except per share data)

Income from operations $ 140,994 $ 22,526 $ 118,468 525.9%

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

Earn-out adjustments (58) 500 (558) NM (2,355) 477 (2,832) NM

Impairment of goodwill — — — NM 92,416 — 92,416 NM

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

Earn-out adjustments (7,447) (366) (7,081) NM

Adjusted income from operations (1)

$ 133,547 $ 137,160 $ (3,613) (2.6)%

EPS $ 0.43 $ 0.32 $ 0.11 34.4% $ 0.45 $ 0.88 $ (0.43) (48.9)%

Legal contingency costs — — — NM 0.35 — 0.35 NM

Impairment of goodwill — — — NM 0.31 — 0.31 NM

EPS $ 0.40 $ — $ 0.40 NM

Legal contingency costs — 0.35 (0.35) NM

Earn-out adjustments (0.02) — (0.02) NM

Other non-operating income (0.03) — (0.03) NM

Adjusted EPS (1)

$ 0.43 $ 0.32 $ 0.11 34.4% $ 1.11 $ 0.88 $ 0.23 26.1%

$ 0.35 $ 0.35 $ — NM

NM = not meaningful

(1) Non-GAAP financial measure

Excluding the non-recurring charges and the earn-out gains, our operating income increased $35.8 million, or 27.7% in the third quarter of fiscal 2025 and $74.3 million, or 20.8%, in the first nine months of fiscal 2025 compared to the same periods last year.

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

Three Months Ended Nine Months Ended

2025 June 30,

2024 Change June 29,

2025 June 30,

Excluding the non-recurring charges and the earn-out gains, our operating income declined $3.6 million, or 2.6% in the first quarter of fiscal 2026 compared to last year's quarter.

The decrease reflects lower results in our GSG reportable segment, partially offset by improved results in our CIG reportable segment, which are described below under "Government Services Group" and "Commercial/International Group", respectively.

Three Months Ended

2025 December 29,

($ in thousands)

Net interest expense $ 7,128 $ 7,218 $ (90) (1.2)%

Net interest expense decreased in the third quarter of fiscal 2025 due to higher interest income and lower contingent earn-out interest expense compared to the prior-year period.

For the first nine months of fiscal 2025, net interest expense decreased due to lower average interest rates and borrowings compared to the fiscal 2024 period.

Three Months Ended Nine Months Ended

2025 June 30,

2024 Change June 29,

2025 June 30,

Net interest expense decreased in the first quarter of fiscal 2026 primarily due to lower average interest rates compared to the prior-year quarter.

Three Months Ended

2025 December 29,

($ in thousands)

Income tax expense $ 36,354 $ 14,530 $ 21,824 150.2%

The effective tax rates for the first nine months of fiscal 2025 and 2024 were 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 the first nine months of fiscal 2025, we recognized a $92.4 million goodwill impairment as described in Note 5, “Goodwill and Intangible Assets” of the “Notes to Consolidated Financial Statements”.

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 described in Note 17, "Commitments and Contingencies" of the “Notes to Consolidated Financial Statements”.

The effective tax rates for the first quarters of fiscal 2026 and 2025 were 25.7% and 94.9%, respectively.

Income tax expense was increased by $0.1 million of excess tax expenses and reduced by $1.0 million of excess tax benefits on share-based payments in the first three months of fiscal 2026 and 2025, respectively.

In addition, in the first quarter of fiscal 2026, we recognized a $7.7 million gain from the sale of our operations in Norway as described in Note 4, “Acquisitions and Divestitures” of the “Notes to Consolidated Financial Statements”.

The gain is not taxable for income tax purposes.

In the first quarter of fiscal 2025, we also recognized a $115.0 million non-recurring charge related to legal contingencies as described in Note 16, "Commitments and Contingencies" of the “Notes to Consolidated Financial Statements”.

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 (all in the second quarter) 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 the 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 were 27.6% and 27.2%, respectively.

In December 2021, the Organisation for Economic Cooperation and Development 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% 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 from the first quarter of fiscal 2025.

Excluding the impact of the excess tax expenses on share-based payments, the gain from sale in the first quarter of fiscal 2026 and the legal contingency charge in the first quarter of fiscal 2025, our effective tax rates in the first three months of fiscal 2026 and 2025 were 27.1% and 27.8%, respectively.

On January 5, 2026, the Organisation for Economic Cooperation and Development released additional Pillar Two administrative guidance on the Global Anti-Base Erosion “GloBE” Model Rules.

This “Side-by-Side” package includes a permanent Simplified Effective Tax Rate (ETR) Safe Harbour, a one-year extension of the Transitional Country-by-Country Reporting (CbCR) Safe Harbour;

a Substance-based tax incentive (SBTI) Safe Harbour;

a Side-by-Side (SbS) Safe Harbour and an Ultimate Parent Entity (UPE) Safe Harbour for eligible countries.

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.

On June 28, 2025, the G7 released a statement confirming that agreement has been reached concerning the operation of a side-by-side solution to the application of Pillar Two to US parented groups.

The statement notes that this side-by-side system will fully exclude US parented groups from the under taxed profits rule (UTPR) and the income inclusion rule (IIR) in respect of both their domestic and foreign profits.

On July 4, 2025, the U.S.

government enacted a comprehensive tax and spending bill which includes, among other provisions, changes to the U.S.

corporate income tax system including the allowance of immediate expensing of qualifying research and development expenses, restoring 100% bonus depreciation, and permanent extensions of certain provisions within the Tax Cuts and Jobs Act.

Certain provisions that apply to Tetra Tech are effective beginning in fiscal 2025 and through fiscal 2027.

We are evaluating the future impact of these tax law changes on our financial statements.

At this time, we do not anticipate a material tax charge in fiscal 2026.

Segment Results of Operations

Beginning in fiscal 2026, we transferred certain operating units between our two reportable segments and redefined our reporting units to better align our operations with the clients and markets that they serve.

Prior year amounts for reportable segments have been revised to conform to the current year presentation.

Government Services Group

Three Months Ended Nine Months Ended

2025 June 30,

2024 Change June 29, 2025 June 30,

Three Months Ended

2025 December 29,

($ in thousands)

5 unchanged sentences

(1) Non-GAAP financial measure

The revenue growth in the third quarter and first nine months of fiscal 2025 of 5.1% and of 15.1%, respectively, compared to the same periods last year primarily reflects increases in the previously described U.S.

government activities related to disaster response.

The revenue growth for the third quarter of fiscal 2025 was partially offset by a revenue decline of $75.7 million related to the aforementioned cancellation of contracts with USAID.

Operating income increased primarily due to the aforementioned revenue growth.

Our operating margin, based on revenue, net of subcontractor costs, for the first nine months of fiscal 2025 was 15.0% compared to 14.2% in the first nine months of fiscal 2024.

The improved operating margin reflects better project execution including higher labor utilization.

For the first quarter of fiscal 2026, the revenue decrease of 33.6% compared to the prior-year quarter primarily reflects a revenue decline of approximately $222 million related to the aforementioned cancellation of contracts with USAID.

Operating income decreased primarily due to the aforementioned revenue decline.

However, our operating margin, based on revenue, net of subcontractor costs, increased to 16.5% in the first quarter of fiscal 2026 compared to 14.2% in the prior-year quarter.

The increased operating margin reflects improved project execution and the elimination of the lower margin cost-reimbursable revenue with USAID.

Commercial/International Group

Three Months Ended Nine Months Ended

2025 June 30,

2024 Change June 29, 2025 June 30,

Three Months Ended

2025 December 29,

($ in thousands)

5 unchanged sentences

(1) Non-GAAP financial measure

For the third quarter and the first nine months of fiscal 2025, our revenue was relatively flat compared to the fiscal 2024 periods.

The 1.8% growth in revenue, net of subcontractor costs, for each period compared to the third quarter and the first nine months of fiscal 2024, primarily reflects increased planning and design activities in the United Kingdom, partially offset by lower infrastructure activities in Australia.

The revenue growth of 9.2% in first quarter of fiscal 2026 compared to last year's first quarter reflects increased activities for water utilities including digital water projects, primarily in the United Kingdom, partially offset by decreased infrastructure activities in Australia.

The increase also includes the aforementioned revenue in the first quarter of fiscal 2026 from our fiscal 2025 acquisitions, that did not have comparable revenue for the same quarter last year.

Excluding the revenue from acquisitions, our revenue increased to approximately 3% in the first quarter of fiscal 2026.

Our operating income increased due to the aforementioned revenue growth.

Our operating margin, based on revenue, net of subcontractor costs, for the first nine months of fiscal 2025 was 13.8% compared to 13.1% for the fiscal 2024 period.

Our operating margin, based on revenue, net of subcontractor costs, improved approximately 40 basis points to 13.0% in the first quarter of 2026 compared to 12.6% for the fiscal 2025 quarter.

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.

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

The difference between our remaining unsatisfied performance obligation (" RUPO") and backlog relates to contract terms.

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 29, 2025 and September 29, 2024 were immaterial (see the table below):

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 28, 2025 and September 28, 2025 were immaterial (see the table below):

2025 September 28,

2 unchanged sentences

Backlog 3,953 4,140

At June 29, 2025, our backlog decreased $1.1 billion, or 20.4%, compared to fiscal 2024 year-end primarily due to the aforementioned cancellation of USAID contracts.

At December 28, 2025, our backlog was $4.0 billion.

GSG and CIG reported $1.86 billion and $2.13 billion of backlog, respectively, at December 28, 2025.

Financial Condition, Liquidity and Capital Resources

Capital Requirements.

At June 29, 2025, we h a d $242.8 million of ca sh and cash equivalents and access to an addition al $999.3 million of borro wings available under our credit facility.

During the first nine months of fiscal 2025, we generate d $356.8 million of cash from operations.

At December 28, 2025, we h a d $269.4 million of cash and cash equivalents and access to an additional $929.3 million of borrowings available under our credit facility.

During the first quarter of fiscal 2026, we generated $72.3 million of cash from operations.

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

5 unchanged sentences

Cash and cash equivalents $ 269,448 $ 167,459 $ 101,989 60.9 %

Nine Months Ended

2025 June 30,

Three Months Ended

2025 December 29,

Net cash provided by (used in):

Operating activities $ 72,267 $ 13,063 $ 59,204 453.2 %

Investing activities (108,273) (104,308) (3,965) (3.8)

Investing activities 37,460 (3,433) 40,893 NM

Financing activities (10,874) 19,394 (30,268) 156.1

2 unchanged sentences

Operating Activities .

For the first nine months of fiscal 2025, our cash flows from operating activities increased primarily due to higher operating earnings, increased cash collections on terminated USAID programs and lower income tax payments compared to the prior-year period.

The overall increase was partially offset by a $57 million payment for the aforementioned legal contingency in the second quarter of fiscal 2025.

The $59.2 million increase in cash from operating activities in the first quarter of fiscal 2026 compared to last year's quarter was primarily due to cash collections for work on disaster response activities that were completed in the fourth quarter of fiscal 2025 and on terminated USAID programs.

Investing Activities .

Our cash used in investing activities for the first nine months of fiscal 2025 includes net payments of $97.7 million for the CAW and SAGE acquisitions, compared to $93.7 million for the LST and CCE acquisitions completed in the first nine months of fiscal 2024.

Our cash provided by investing activities for the first quarter of fiscal 2026 includes the aforementioned proceeds from the sale of our operations in Norway of $41.6 million.

Financing Activities .

In the first nine months of fiscal 2025, our cash used in financing activities reflects the $200 million share repurchases as our share repurchase program was reactivated this fiscal year.

These share repurchases were largely funded by our cash generated from operating activities.

The overall increase in cash used in financing activities was partially offset by a $70 million increase in our net borrowings in the first nine months of fiscal 2025 compared to the fiscal 2024 period.

The $30.3 million change in financing activities primarily reflects share repurchases of $50 million in the first quarter of fiscal 2026 compared to $25 million in the first quarter of fiscal 2025.

Debt Financing.

3 unchanged sentences

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 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.

6 unchanged sentences

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:

3 unchanged sentences

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.

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;

2 unchanged sentences

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.

On September 26, 2025, the 3Y Term Loan Facility was repaid in full.

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.

3 unchanged sentences

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.

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%.

At December 28, 2025, we had $270 million in outstanding borrowings under the Amended Credit Agreement, which consisted of $200 million under the 5Y Term Loan Facility and $70 million borrowings under the Amended Revolving Credit Facility.

For the first quarter of fiscal 2026, the weighted-average interest rate of the outstanding borrowings under the credit facilities was 5.25%.

In 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.

At December 28, 2025, we had $529.3 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.

1 unchanged sentence

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 1.31x and a consolidated interest coverage ratio of 16.67x.

At December 28, 2025, we were in compliance with these covenants with a consolidated leverage ratio of 1.24x and a consolidated interest coverage ratio of 17.31x.

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 borrowings under these facilities, and the aggregate amount of standby letters of credit outstanding was $43.9 million.

At June 29, 2025, we had no bank overdrafts related to our disbursement bank accounts.

At December 28, 2025, there were no borrowings under these facilities, and the aggregate amount of standby letters of credit outstanding was $55.0 million.

At December 28, 2025, 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.

1 unchanged sentence

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.

In the first quarter

of fiscal 2026, we repurchased and settled 1,482,116 shares with an average price of $33.74 per share for a total cost of $50.0 million in the open market.

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 in the first quarter of fiscal 2025.

At December 28, 2025, we had a remaining balance of $547.8 million under our stock repurchase programs.

Our Board of Directors has authorized the following dividends in fiscal 2026:

1 unchanged sentence

(in thousands) Payment Date

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

January 27, 2025 0.058 February 12, 2025 15,351 February 26, 2025

May 5, 2025 0.065 May 23, 2025 17,092 June 5, 2025

November 10, 2025 $ 0.065 December 1, 2025 $ 16,937 December 12, 2025

Subsequent E vents.

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.

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

On January 26, 2026, our Board of Directors declared a quarterly cash dividend of $0.065 per share payable on February 27, 2026 to stockholders of record as of the close of business on February 12, 2026.

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

The factors used to assess the likelihood of realization are our forecast of future taxable income and available tax planning strategies that could be implemented to realize the net deferred tax assets.

1 unchanged sentence

Based on future operating 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 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 not significantly decrease within the next 12 months.

At December 28, 2025 and September 28, 2025, the liability for income taxes associated with uncertain tax positions was $53.8 million and $52.8 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.

8 unchanged sentences

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 29, 2025, we had $0.7 million in standby letters of credit outstanding under our Amended Credit Agreement and $43.9 million in standby letters of credit outstanding under our additional letter of credit facilities.

At December 28, 2025, we had $0.7 million in standby letters of credit outstanding under our Amended Credit Agreement and $55.0 million in standby letters of credit outstanding under our additional letter of credit facilities.

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

6 unchanged sentences

For cost-plus contracts, amounts that may become payable pursuant to guarantee provisions are normally recoverable from the client for work performed under the contract.

For lump sum or fixed-price contracts, this amount is the cost to complete the contracted work less amounts remaining to be billed to the client under the contract.

For lump sum or fixed-price

contracts, this amount is the cost to complete the contracted work less amounts remaining to be billed to the client under the contract.

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

5 unchanged sentences

Our critical accounting policies are disclosed in our Annual Report on Form 10-K for the fiscal year ended September 28, 2025.

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.

To date, there have been no material changes in our critical accounting policies as reported in our fiscal 2025 Annual Report on Form 10-K.

New Accounting Pronouncements

4 unchanged sentences

We are exposed to interest rate risk under our Amended Credit Agreement.

We can borrow, at our option, under the 3Y Term Loan Facility, 5Y Term Loan Facility and Amended Revolving Credit Facility.

We can borrow, at our option, under the 5Y Term Loan Facility and Amended Revolving Credit Facility.

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.

3 unchanged sentences

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.

For the first nine months of fiscal 2025, the weighted-average interest rate of the outstanding borrowings under the Amended Credit Agreement was 5.66%.

For the first quarter of fiscal 2026, the weighted-average interest rate of the outstanding borrowings under the Amended Credit Agreement was 5.25%.

The majority of our transactions are in U.S.

3 unchanged sentences

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

For the first nine months of fiscal 2025, we reported $2.3 million of foreign currency loss compared to a loss of $1.0 million in the prior year period.

We have foreign currency exchange rate exposure in our results of operations and equity primarily because of the currency translation related to our foreign subsidiaries where the lo cal currency is the functional currency.

For the first quarter of fiscal 2026, we reported $1.2 million of foreign currency loss compared to an immaterial amount in the prior year period.

To the extent the U.S.

2 unchanged sentences

dollar weakens against foreign currencies.

For the first nine months of fiscal 2025 and 2024, 36.0% and 39.0% of our consolidated revenue, respectively, was generated by our international business.

For the first nine months of fiscal 2025, the effect of foreign exchange rate translation on our consolidated balance sheet was an increase in equity of $13.8 million compared to an increase of $40.6 million in the prior-year period.

For the first quarters of fiscal 2026 and 2025, 44.7% and 33.9% of our consolidated revenue, respectively, was generated by our international business.

For the first quarter of fiscal 2026, the effect of foreign exchange rate translation on our consolidated balance sheet was an increase in equity of $19.7 million compared to a decrease of $108.8 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