SEC Form 10-Q filed by Tetra Tech Inc.

5/8/25 4:36:09 PM ET

Military/Government/Technical

Consumer Discretionary

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ttek-20250330

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 30, 2025


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 0-19655

TETRA TECH, INC.

(Exact name of registrant as specified in its charter)


Delaware						95-4148514
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)

3475 East Foothill Boulevard, Pasadena, California 91107

(Address of principal executive offices) (Zip Code)

(626) 351-4664

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value

TTEK

The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

At April 24, 2025, 263,502,619 shares of the registrant’s common stock were outstanding.

TETRA TECH, INC.

INDEX


PART I.	FINANCIAL INFORMATION	PAGE NO.

Item 1.	Financial Statements (Unaudited)	3

	Consolidated Balance Sheets as of March 30 , 202 5 and September 29, 2024	3

	Consolidated Statements of Income for the Three and Six Months Ended March 30, 2025 and March 31, 2024	4

	Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended March 30, 2025 and March 31, 2024	5

	Consolidated Statements of Cash Flows for the Six Months Ended March 30 , 202 5 and March 31, 202 4	6

	Consolidated Statements of Stockholders' Equity for the Three and Six Months Ended March 30, 2025 and March 31, 2024	7

	Notes to Unaudited Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37

Item 4.	Controls and Procedures	38

PART II.	OTHER INFORMATION	38

Item 1.	Legal Proceedings	38

Item 1A.	Risk Factors	39

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39

Item 4.	Mine Safety Disclosures	39

Item 5.	Other Information	39
Item 6.	Exhibits	39

SIGNATURES		41

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Tetra Tech, Inc.

Consolidated Balance Sheets

(unaudited - in thousands, except par value)


	As of
ASSETS	March 30, 2025		September 29, 2024
Current assets:
Cash and cash equivalents	$	179,433	$	232,689
Accounts receivable, net	1,223,214		1,051,461
Contract assets	134,106		129,678
Prepaid expenses and other current assets	129,425		113,555

Total current assets	1,666,178		1,527,383

Property and equipment, net	66,048		73,065
Right-of-use assets, operating leases	185,499		177,950
Goodwill	1,913,134		2,046,569
Intangible assets, net	136,784		160,585
Deferred tax assets	106,137		105,529
Other non-current assets	110,524		101,595
Total assets	$	4,184,304	$	4,192,676

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	262,300	$	197,440
Accrued compensation	242,017		332,096
Contract liabilities	373,591		351,738
Short-term lease liabilities, operating leases	65,870		63,419
Current portion of long-term debt	250,000		—
Current contingent earn-out liabilities	20,497		26,934
Other current liabilities	302,240		247,900
Total current liabilities	1,516,515		1,219,527

Deferred tax liabilities	27,193		30,162
Long-term debt	764,189		812,634
Long-term lease liabilities, operating leases	143,242		140,095
Non-current contingent earn-out liabilities	10,773		21,812
Other non-current liabilities	148,611		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 March 30, 2025 and September 29, 2024	—		—
Common stock - authorized, 750,000 shares of $0.01 par value; issued and outstanding, 263,503 and 267,717 shares at March 30, 2025 and September 29, 2024, respectively	2,635		2,677
Additional paid-in capital	—		35,900
Accumulated other comprehensive loss	(153,180)		(78,875)
Retained earnings	1,724,203		1,870,620
Tetra Tech stockholders’ equity	1,573,658		1,830,322
Noncontrolling interests	123		91
Total stockholders' equity	1,573,781		1,830,413
Total liabilities and stockholders' equity	$	4,184,304	$	4,192,676

See Notes to Consolidated Financial Statements.

Tetra Tech, Inc.

Consolidated Statements of Income

(unaudited – in thousands, except per share data)


	Three Months Ended				Six Months Ended
	March 30, 2025		March 31, 2024		March 30, 2025		March 31, 2024
Revenue	$	1,322,113	$	1,251,616	$	2,742,674	$	2,479,883
Subcontractor costs	(218,408)		(198,989)		(441,639)		(412,087)
Other costs of revenue	(889,523)		(845,132)		(1,865,376)		(1,669,803)
Gross profit	214,182		207,495		435,659		397,993
Selling, general and administrative expenses	(84,094)		(89,798)		(168,411)		(169,251)
Legal contingency costs	—		—		(115,000)		—
Contingent consideration – fair value adjustments	1,931		(14)		2,297		22
Impairment of goodwill	(92,416)		—		(92,416)		—
Income from operations	39,603		117,683		62,129		228,764
Interest expense, net	(8,491)		(9,883)		(15,709)		(19,461)
Income before income tax expense	31,112		107,800		46,420		209,303
Income tax expense	(25,700)		(31,341)		(40,230)		(57,864)
Net income	5,412		76,459		6,190		151,439
Net income attributable to noncontrolling interests	(24)		(13)		(55)		(21)
Net income attributable to Tetra Tech	$	5,388	$	76,446	$	6,135	$	151,418
Earnings per share attributable to Tetra Tech:
Basic	$	0.02	$	0.29	$	0.02	$	0.57
Diluted	$	0.02	$	0.28	$	0.02	$	0.56
Weighted-average common shares outstanding:
Basic	265,728		267,420		266,819		267,095
Diluted	267,439		269,375		269,691		269,125

See Notes to Consolidated Financial Statements.

Tetra Tech, Inc.

Consolidated Statements of Comprehensive Income (Loss)

(unaudited – in thousands)


	Three Months Ended				Six Months Ended
	March 30, 2025		March 31, 2024		March 30, 2025		March 31, 2024
Net income	$	5,412	$	76,459	$	6,190	$	151,439

Other comprehensive income (loss), net of tax
Foreign currency translation adjustment, net of tax	34,574		(24,344)		(74,272)		38,762

Net pension adjustments	—		—		(33)		(13)
Other comprehensive income (loss), net of tax	34,574		(24,344)		(74,305)		38,749

Comprehensive income (loss), net of tax	39,986		52,115		(68,115)		190,188
Less: Comprehensive income attributable to noncontrolling interests, net of tax	24		13		55		21
Comprehensive income (loss) attributable to Tetra Tech, net of tax	$	39,962	$	52,102	$	(68,170)	$	190,167

See Notes to Consolidated Financial Statements.

Tetra Tech, Inc.

Consolidated Statements of Cash Flows

(unaudited – in thousands)


	Six Months Ended
	March 30, 2025		March 31, 2024
Cash flows from operating activities:
Net income	$	6,190	$	151,439
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	29,939		37,215
Amortization of stock-based awards	17,027		15,617
Deferred income taxes	(6,164)		(8,049)
Provision for losses on accounts receivables	3,331		—
Impairment of goodwill	92,416		—
Fair value adjustments to contingent consideration	(2,297)		(22)
Gain on cash surrender value of life insurance policies	(1,599)		—
Other non-cash items	4,267		1,054
Changes in operating assets and liabilities, net of effects of business acquisitions:
Accounts receivable and contract assets	(203,055)		(23,195)
Prepaid expenses and other assets	(28,322)		(33,412)
Accounts payable	66,917		36,406
Accrued compensation	(83,088)		(74,291)
Contract liabilities	37,354		34,801
Income taxes receivable/payable	(3,253)		(18,556)
Cash settled on contingent earn-out liabilities	(7,420)		—
Other liabilities	84,997		(6,826)
Net cash provided by operating activities	7,240		112,181
Cash flows from investing activities:
Payments for business acquisitions, net of cash acquired	(5,680)		(71,796)
Capital expenditures	(9,372)		(7,463)
Proceeds from sale of assets	350		98
Proceeds from company-owned life insurance policies	1,934		—
Net cash used in investing activities	(12,768)		(79,161)
Cash flows from financing activities:
Proceeds from borrowings	215,000		180,000
Repayments on long-term debt	(15,000)		(110,000)
Repurchases of common stock	(174,984)		—
Shares repurchased for tax withholdings on share-based awards	(13,848)		(12,781)
Payments of contingent earn-out liabilities	(14,445)		(22,112)
Stock options exercised	171		1,462
Dividends paid	(30,900)		(27,781)
Principal payments on finance leases	(3,431)		(3,155)
Net cash provided by (used in) financing activities	(37,437)		5,633

Effect of exchange rate changes on cash and cash equivalents	(10,291)		2,810

Net increase (decrease) in cash and cash equivalents	(53,256)		41,463
Cash and cash equivalents at beginning of period	232,689		168,831
Cash and cash equivalents at end of period	$	179,433	$	210,294
Supplemental information:
Cash paid during the period for:
Interest	$	16,180	$	20,093
Income taxes, net of refunds received of $4.6 million and $2.4 million	$	47,987	$	84,916
Non-cash financing activities:
Excise taxes accrued but not paid	$	1,267	$	—

See Notes to Consolidated Financial Statements.

Tetra Tech, Inc.

Consolidated Statements of Stockholders' Equity

Three Months Ended March 31, 2024 and March 30, 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 DECEMBER 31, 2023	267,329	$	2,672	$	9,971	$	(132,202)	$	1,657,165	$	1,537,606	$	81	$	1,537,687
Net income	—	—		—		—		76,446		76,446		13		76,459
Other comprehensive loss	—	—		—		(24,344)		—		(24,344)		—		(24,344)
Distributions paid in noncontrolling interests	—	—		—		—		—		—		(38)		(38)
Cash dividends of $0.052 per common share	—	—		—		—		(13,908)		(13,908)		—		(13,908)
Stock-based compensation	—	—		7,976		—		—		7,976		—		7,976
Restricted & performance shares released	10	—		(111)		—		—		(111)		—		(111)
Stock options exercised	147	2		1,125		—		—		1,127		—		1,127
Shares issued for Employee Stock Purchase Plan	—	—		2		—		—		2		—		2
BALANCE AT MARCH 31, 2024	267,486	$	2,674	$	18,963	$	(156,546)	$	1,719,703	$	1,584,794	$	56	$	1,584,850

BALANCE AT DECEMBER 29, 2024	268,028	$	2,680	$	21,153	$	(187,754)	$	1,855,818	$	1,691,897	$	122	$	1,692,019
Net income	—	—		—		—		5,388		5,388		24		5,412
Other comprehensive income	—	—		—		34,574		—		34,574		—		34,574
Distributions paid in noncontrolling interests	—	—		—		—		—		—		(23)		(23)
Cash dividends of $0.058 per common share	—	—		—		—		(15,351)		(15,351)		—		(15,351)
Stock-based compensation	—	—		8,885		—		—		8,885		—		8,885
Restricted & performance shares released	35	—		(541)		—		—		(541)		—		(541)
Stock options exercised	6	—		57		—		—		57		—		57

Stock repurchases	(4,566)	(45)		(29,554)		—		(121,652)		(151,251)		—		(151,251)

BALANCE AT MARCH 30, 2025	263,503	$	2,635	$	—	$	(153,180)	$	1,724,203	$	1,573,658	$	123	$	1,573,781

Tetra Tech, Inc.

Consolidated Statements of Stockholders' Equity

Six Months Ended March 31, 2024 and March 30, 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	—	—		—		—		151,418		151,418		21		151,439
Other comprehensive income	—	—		—		38,749		—		38,749		—		38,749
Distributions paid in noncontrolling interests	—	—		—		—		—		—		(38)		(38)
Cash dividends of $0.104 per common share	—	—		—		—		(27,781)		(27,781)		—		(27,781)
Stock-based compensation	—	—		15,617		—		—		15,617		—		15,617
Restricted & performance shares released	534	5		(12,786)		—		—		(12,781)		—		(12,781)
Stock options exercised	192	2		1,460		—		—		1,462		—		1,462
Shares issued for Employee Stock Purchase Plan	522	5		14,672		—		—		14,677		—		14,677
BALANCE AT MARCH 31, 2024	267,486	$	2,674	$	18,963	$	(156,546)	$	1,719,703	$	1,584,794	$	56	$	1,584,850

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	—	—		—		—		6,135		6,135		55		6,190
Other comprehensive loss	—	—		—		(74,305)		—		(74,305)		—		(74,305)

Distributions paid in noncontrolling interests	—	—		—		—		—		—		(23)		(23)
Cash dividends of $0.116 per common share	—	—		—		—		(30,900)		(30,900)		—		(30,900)
Stock-based compensation	—	—		17,027		—		—		17,027		—		17,027
Restricted & performance shares released	467	5		(13,853)		—		—		(13,848)		—		(13,848)
Stock options exercised	27	—		171		—		—		171		—		171
Shares issued for Employee Stock Purchase Plan	458	4		15,303		—		—		15,307		—		15,307
Stock repurchases	(5,166)	(51)		(54,548)		—		(121,652)		(176,251)		—		(176,251)

BALANCE AT MARCH 30, 2025	263,503	$	2,635	$	—	$	(153,180)	$	1,724,203	$	1,573,658	$	123	$	1,573,781

See Notes to Consolidated Financial Statements.

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 years. 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 this 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):


	Three Months Ended				Six Months Ended
	March 30, 2025		March 31, 2024		March 30, 2025		March 31, 2024

Client Sector:
U.S. federal government (1)	$	413,422	$	407,002	$	915,270	$	789,078
U.S. state and local government	207,438		147,551		410,425		298,476
U.S. commercial	211,085		201,407		444,676		423,837
International (2)	490,168		495,656		972,303		968,492
Total	$	1,322,113	$	1,251,616	$	2,742,674	$	2,479,883

Contract Type:
Fixed-price	$	524,950	$	459,022	$	1,044,772	$	930,464
Time-and-materials	605,258		591,844		1,204,206		1,141,495
Cost-plus	191,905		200,750		493,696		407,924
Total	$	1,322,113	$	1,251,616	$	2,742,674	$	2,479,883

(1) Includes revenue generated under U.S. federal government contracts performed outside the United States.

(2) Includes revenue generated from non-U.S. clients, primarily in Australia, Canada, and the United Kingdom

Other than the U.S. federal government, no single client accounted for more than 10% of our revenue for the three and six months ended March 30, 2025 and March 31, 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
	March 30, 2025		September 29, 2024

Contract assets (1)	$	134,106	$	129,678
Contract liabilities - current	(373,591)		(351,738)
Contract liabilities - non-current (2)	(7,772)		—
Net contract liabilities	$	(247,257)	$	(222,060)

(1) Includes $9.5 million and $7.9 million of contract retentions at March 30, 2025 and September 29, 2024, respectively.

(2) Reported under "Other non-current liabilities" on our consolidated balance sheet as of March 30, 2025.

Our contract assets and contract liabilities increased in the first half of fiscal 2025 compared to fiscal 2024 year-end, due to the timing of our milestone billings on fixed-price contracts which were different from the timing of revenue recognition on those contracts. For the first halves of fiscal 2025 and 2024, we recognized revenue of approximately $175 million and $177 million, respectively, from the amounts included in the contract liability balances at the end of fiscal 2024 and 2023, respectively.

Revenue is recognized by measuring progress over time under Accounting Standards Codification Topic 606, "Revenue from Contracts with Customers". We estimate and measure progress on our contracts over time whereby we compare

our total costs incurred on each contract as a percentage of the total expected contract costs. 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 second quarters and first halves of fiscal 2025 and 2024, we recognized net favorable revenue and operating income adjustments of $3.9 million and $4.1 million, respectively, and $6.6 million and $9.9 million, respectively.

Changes in revenue and cost estimates could also result in a projected loss, determined at the contract level, which would be recorded immediately in earnings. At March 30, 2025 and September 29, 2024, our consolidated balance sheets included liabilities for anticipated losses of $12.6 million and $15.1 million, respectively. The estimated cost to complete these related contracts was approximately $82 million and $101 million at March 30, 2025 and September 29, 2024, respectively.

Accounts Receivable, Net

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


	As of
	March 30, 2025		September 29, 2024

Billed	$	874,780	$	707,406
Unbilled	355,725		348,907
Total accounts receivable	1,230,505		1,056,313
Allowance for doubtful accounts	(7,291)		(4,852)
Total accounts receivable, net	$	1,223,214	$	1,051,461

Billed accounts receivable represent amounts billed to clients that have not 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 March 30, 2025 are expected to be billed and collected within 12 months. The allowance for doubtful accounts represents amounts that are expected to become uncollectible or unrealizable in the future. We determine an estimated allowance for uncollectible accounts based on management's consideration of trends in the actual and forecasted credit quality of our clients, including delinquency and payment history; type of client, such as a government agency or a commercial sector client; and general economic and industry conditions, which 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 March 30, 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 had $4.3 billion of RUPO at March 30, 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 March 30, 2025 over the following periods (in thousands):


	Amount

Within 12 months	$	3,141,737
Beyond	1,121,142
Total	$	4,262,879

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

authorities, financial lenders and private development companies. CAW is a financially immaterial acquisition with an initial purchase price of €5.3 million ($5.7 million) and is included in our Commercial/International Services Group ("CIG") segment. As a result, no additional disclosures have been provided.

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 the 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 these acquisitions were not considered material, individually or in aggregate, to our consolidated financial statements. As a result, no pro forma information has been provided.

The fiscal 2025 goodwill addition from the CAW acquisition relates to anticipated synergies related to proven systems and technology in program management, cost management and project controls which will provide superior project outcomes to 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 synergies in data analytics, cybersecurity and digital transformation services, and collective reputations of these acquisitions in providing mission critical solutions to both commercial and government customers. The fiscal 2024 goodwill additions are deductible for tax purposes, and the fiscal 2025 goodwill addition is 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 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 expense. Adjustments to the estimated fair value related to changes in all other unobservable inputs are reported in operating income. In the first half 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				Six Months Ended
	March 30, 2025		March 31, 2024		March 30, 2025		March 31, 2024

Beginning balance	$	46,160	$	55,604	$	48,746	$	73,422
Estimated earn-out liabilities for acquisitions	5,516		21,900		5,516		21,900
Payments of contingent consideration	(19,000)		(3,250)		(21,865)		(22,112)
Adjustments to fair value recorded in earnings	(1,931)		14		(2,297)		(22)
Interest accretion expense	519		444		1,164		915
Effect of foreign currency exchange rate changes	6		(133)		6		476
Ending balance	$	31,270	$	74,579	$	31,270	$	74,579

At March 30, 2025, there was a total potential maximum of $90.6 million of outstanding contingent consideration related to acquisitions.

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	—		10,114		10,114
Goodwill impairment	(92,416)		—		(92,416)
Translation adjustments	(2,271)		(48,862)		(51,133)
Balance at March 30, 2025	$	656,130	$	1,257,004	$	1,913,134

Translation adjustments resulted from our goodwill amounts in foreign subsidiaries with functional currencies that are different than our reporting currency. The goodwill amounts presented in the table above are net of reductions from historical impairment adjustments. The gross amounts for GSG were $766.2 million and $768.5 million at March 30, 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 $1,378.5 million and $1,417.3 million at March 30, 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 values 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 agencies are supported by this work (primarily for the U.S., Australia and United Kingdom governments), over eighty percent of the activity is 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
	March 30, 2025							September 29, 2024
	Weighted- Average Remaining Life (in Years)	Gross Amount		Accumulated Amortization		Net Amount		Gross Amount		Accumulated Amortization		Net Amount

Client relations	7.9	$	193,216	$	(66,387)	$	126,829	$	198,726	$	(57,975)	$	140,751
Backlog	0.1	72,881		(72,639)		242		75,194		(71,101)		4,093
Trade names	0.9	39,398		(29,685)		9,713		40,926		(25,185)		15,741
Total		$	305,495	$	(168,711)	$	136,784	$	314,846	$	(154,261)	$	160,585

Amortization expense for the identifiable intangible assets for the second quarter and first half of fiscal 2025 was $8.6 million and $19.3 million, compared to $12.1 million and $24.6 million, respectively, for the prior-year periods. Estimated amortization expense for the remainder of fiscal 2025 and succeeding years is as follows (in thousands):


	Amount

2025 (remaining)	$	15,810
2026	23,879
2027	17,151
2028	16,642
2029	15,759
Beyond	47,543
Total	$	136,784

6. Property and Equipment

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


	As of
	March 30, 2025		September 29, 2024

Equipment, furniture and fixtures	$	138,296	$	139,070
Leasehold improvements	44,824		44,883
Total property and equipment	183,120		183,953
Accumulated depreciation	(117,072)		(110,888)
Property and equipment, net	$	66,048	$	73,065

For the second quarter and first half of fiscal 2025, our depreciation expense related to property and equipment was $5.2 million and $10.6 million, respectively, compared to $5.6 million and $12.6 million, respectively, for the fiscal 2024 periods.

7. Stock Repurchase and Dividends

On October 5, 2021, our Board of Directors authorized a stock repurchase program under which we could repurchase up to $400 million of our common stock. In the first half of fiscal 2025, we repurchased and settled 5,165,715 shares with an average price of $33.87 per share for a total cost of $175.0 million in the open market. We did not repurchase any shares of our common stock in the first half of fiscal 2024. At March 30, 2025, we had a remaining balance of $172.8 million under our stock repurchase program.

The following table presents dividends declared and paid in the first halves of fiscal 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

Total dividend paid as of March 30, 2025					$	30,900


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

Total dividend paid as of March 31, 2024					$	27,781

Subsequent Events. On May 5, 2025, our Board of Directors declared a quarterly cash dividend of $0.065 per share payable on June 5, 2025 to stockholders of record as of the close of business on May 23, 2025. On May 5, 2025, our Board of Directors also authorized an additional $500 million stock repurchase program.

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				Six Months Ended
	March 30, 2025		March 31, 2024		March 30, 2025		March 31, 2024

Operating lease cost	$	24,824	$	24,785	$	50,742	$	49,018
Sublease income	(263)		(106)		(482)		(163)

Total lease cost	$	24,561	$	24,679	$	50,260	$	48,855

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


	Six Months Ended
	March 30, 2025		March 31, 2024

Operating cash flows for operating leases	$	36,278	$	38,738
Right-of-use assets obtained in exchange for new operating lease liabilities	39,401		32,637

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


	As of
	March 30, 2025			September 29, 2024

Operating leases:
Right-of-use assets	$	185,499		$	177,950

Lease liabilities:
Current	65,870			63,419
Non-current	143,242			140,095
Total operating lease liabilities	$	209,112		$	203,514

Weighted-average remaining lease term:
Operating leases	4.3 years			4.5 years
Weighted-average discount rate:
Operating leases	3.8		%	3.6		%

At March 30, 2025, we had $12.7 million of operating leases that have not yet commenced.

A maturity analysis of the future undiscounted cash flows associated with our lease liabilities at March 30, 2025 is as follows (in thousands):


	Operating Leases

2025 (remaining)	$	38,183
2026	62,972
2027	49,185
2028	28,920
2029	21,482
Beyond	26,802
Total lease payments	227,544
Less: imputed interest	(18,432)
Total present value of lease liabilities	$	209,112

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 amendments to the qualification criteria, including some that were proposed with retroactive application, were finalized in fiscal 2022. In 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 recognize 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 six months ended March 30, 2025 was $8.9 million and $17.0 million, compared to $8.0 million and $15.6 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 half of fiscal 2025, we awarded 236,928 performance share units (“PSUs”) to our non-employee directors and executive officers at an estimated fair value of $49.85 per share on the award date. All PSUs are performance-based and vest, if at all, after the conclusion of the three-year performance period. The number of PSUs that ultimately vest is based 50% on growth in our diluted earnings per share and 50% on our relative total shareholder return over the vesting period. Additionally, we awarded 486,307 restricted stock units (“RSUs”) to our non-employee directors, executive officers and employees at a fair value of $40.27 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 first half of fiscal 2025, our Convertible Notes, described in Note 15, "Long-Term Debt", had a dilution impact on the dilutive potential common shares, which was calculated using the if-converted method. The dilution impact was due to the price of our common stock exceeding the conversion price. For the second quarter and first half of fiscal 2024, and the second 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 second quarters and first halves of fiscal 2025 and 2024, no options were excluded from the calculation of dilutive potential common shares.

The following table presents the number of weighted-average shares used to compute basic and diluted EPS (in thousands, except per share data):


	Three Months Ended				Six Months Ended
	March 30, 2025		March 31, 2024		March 30, 2025		March 31, 2024

Net income attributable to Tetra Tech	$	5,388	$	76,446	$	6,135	$	151,418

Weighted-average common shares outstanding – basic	265,728		267,420		266,819		267,095
Effect of dilutive stock options and unvested restricted stock	1,711		1,955		1,936		2,030
Shares issuable assuming conversion of convertible notes	—		—		936		$	—
Weighted-average common shares outstanding – diluted	267,439		269,375		269,691		269,125

Earnings per share attributable to Tetra Tech:
Basic	$	0.02	$	0.29	$	0.02	$	0.57
Diluted	$	0.02	$	0.28	$	0.02	$	0.56

12. Income Taxes

The effective tax rates for the first halves of fiscal 2025 and 2024 were 86.7% and 27.6%, respectively. Income tax expense was reduced by $1.0 million and $1.9 million of excess tax benefits on share-based payments in the first halves of fiscal 2025 and 2024, respectively. In addition, in the first half of fiscal 2025, we 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 described 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 half of fiscal 2024 (all in the second quarter) included $2.8 million of expense for the settlement of various tax positions that were under audit for fiscal years 2018 through 2021. Excluding the impact of the excess tax benefits on share-based payments, the goodwill impairment and the legal contingency charge in the first half of fiscal 2025 and the settlement amounts in the first half of 2024, our effective tax rates in the first halves of fiscal 2025 and 2024 were 27.8% and 27.1%, respectively.

At March 30, 2025 and September 29, 2024, the liability for income taxes associated with uncertain tax positions was $52.2 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. 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).

Management evaluates the 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.

Our Corporate Segment's operating income in the first half of fiscal 2025, includes a non-recurring charge of $115.0 million related to legal contingencies as described in Note 17, "Commitments and Contingencies". This charge is reported separately as "Legal contingency costs" in our consolidated statement of income for the first half of fiscal 2025. We paid $57 million in the second quarter of fiscal 2025, and we expect to pay the remainder within the next 12 months with our cash on hand and by drawing on our credit facility. For the second quarter and first half of fiscal 2025, we 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				Six Months Ended
	March 30, 2025		March 31, 2024		March 30, 2025		March 31, 2024

Revenue
GSG	$	661,424	$	597,127	$	1,413,206	$	1,172,168
CIG	678,838		671,155		1,367,073		1,340,262
Elimination of inter-segment revenue	(18,149)		(16,666)		(37,605)		(32,547)
Total revenue	$	1,322,113	$	1,251,616	$	2,742,674	$	2,479,883


Income from operations
GSG	$	72,104	$	64,007	$	155,386	$	127,134
CIG	76,770		75,955		154,447		147,356
Corporate (1)	(109,271)		(22,279)		(247,704)		(45,726)
Total income from operations	$	39,603	$	117,683	$	62,129	$	228,764

(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
	March 30, 2025		September 29, 2024

Total Assets
GSG	$	866,729	$	658,493
CIG	990,914		1,059,915
Corporate (1)	2,326,661		2,474,268
Total assets	$	4,184,304	$	4,192,676

(1) Corporate assets consist of intercompany eliminations and assets not allocated to our reportable segments including goodwill, intangible assets, deferred income taxes and certain other assets.

14. 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 using 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 March 30, 2025 and September 29, 2024. At March 30, 2025, we had $450 million in outstanding borrowings under the Third Amended and Restated Credit Agreement, which consisted of $250 million under our term loan facility and $200 million under our revolving credit facility.

The estimated fair value of our $575 million Convertible Notes, which were used to fund our business acquisitions, working capital needs, dividends, capital expenditures and contingent earn-outs, was determined based on the trading price of the Convertible Notes as of the last trading day of our second 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 $565 million and $592 million, respectively, at March 30, 2025, and $564 million and $743 million, respectively, at September 29, 2024 (see Note 15, "Long-Term Debt" for further information).

15. Long-Term Debt

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


	As of
	March 30, 2025		September 29, 2024

Credit facilities	$	450,000	$	250,000
Convertible notes	575,000		575,000
Debt issuance costs and discount	(10,811)		(12,366)
Total	1,014,189		812,634
Less: Current portion of long-term debt	(250,000)		—
Long-term debt	$	764,189	$	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 March 30, 2025, the applicable conversion rate was 25.4382 shares of common stock per $1,000 principal amount of the Convertible Notes (equivalent to an adjusted conversion price of approximately $39.31 per share of common stock). Upon conversion, we will pay cash up to the aggregate principal amount of the Convertible Notes to be converted and pay or deliver, as the case may be, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election, in respect of the remainder, if any, of our conversion obligation in excess of the aggregate principal amount of the Convertible Notes being converted. 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, the remaining $234.4 million principal amount outstanding under our senior secured term loan due 2027 and approximately $89.4 million principal amount outstanding under our senior secured term loan due 2026.

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
	March 30, 2025		September 29, 2024

Principal	$	575,000	$	575,000
Unamortized discount and issuance costs	(10,028)		(11,434)
Net carrying amount	$	564,972	$	563,566

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


	Three Months Ended				Six Months Ended
	March 30, 2025		March 31, 2024		March 30, 2025		March 31, 2024

Interest expense	$	3,235	$	3,127	$	6,469	$	6,397
Amortization of discount and issuance costs	709		683		1,406		1,360
Total interest expense	$	3,944	$	3,810	$	7,875	$	7,757

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 March 30, 2025, the adjusted cap price was approximately $51.89 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 Second Amended and Restated Credit Agreement (“Second Amended Credit Agreement”) with a total borrowing capacity of $1.05 billion that will mature in February 2027. The Second Amended Credit Agreement is a $750 million senior secured, five-year facility that provides for a $250 million term loan facility (the “Amended Term Loan Facility”) and a $500 million revolving credit facility (the “Amended Revolving Credit Facility”). In addition, the Second Amended Credit Agreement includes a $300 million accordion feature that allows us to increase the Second Amended Credit Agreement to $1.05 billion subject to lender approval. The Second Amended Credit Agreement provides for, among other things, (i) refinance indebtedness under our Credit Agreement dated at July 30, 2018; (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 Second Amended Credit Agreement provides for a reduction in the interest grid for meeting certain sustainability targets related to the (i) reduction of greenhouse gas emissions through the Company’s projects and operational sustainability initiatives and (ii) improvement of peoples’ lives as a result of the Company’s projects that provide environmental, social and governance benefits. The Amended Revolving Credit Facility includes a $100 million sublimit for the issuance of standby letters of credit, a $20 million sublimit for swingline loans and a $300 million sublimit for multicurrency borrowings and letters of credit.

The entire Amended Term Loan Facility was drawn on February 18, 2022. 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 1.875% 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 Secured Overnight Financing Rate ("SOFR") rate plus 1.00%, plus a margin that ranges from 0% to 0.875% per annum. In each case, the applicable margin is based on our Consolidated Leverage Ratio, calculated quarterly. The Amended Term Loan Facility is subject to the same interest rate provisions. The Second Amended Credit Agreement expires on February 18, 2027, or earlier at our discretion upon payment in full of loans and other obligations. In fiscal 2023, we repaid the Amended Term Loan Facility in full from the Convertible Notes proceeds.

On 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 (the "New Term Loan Facility") increasing our total borrowing capacity to $1.55 billion. On January 23, 2023, we drew the entire amount of the New Term Loan Facility to partially finance the RPS acquisition. The New Term Loan Facility is not subject to any amortization payments of principal and matures in January 2026.

At March 30, 2025, we had $450 million in outstanding borrowings under the Third Amended Credit Agreement, which consisted of $250 million under the New Term Loan Facility and $200 million under the Amended Revolving Credit Facility. During the three months ended March 30, 2025, the weighted-average interest rate of the outstanding borrowings under the Third Amended Credit Agreement was 5.78%. In addition, we had $0.7 million in standby letters of credit under the Third Amended Credit Agreement. At March 30, 2025, we had $299.3 million of available credit under the Amended Revolving Credit Facility, all of which could be borrowed without a violation of our debt covenants.

The Third Amended Credit Agreement contains certain affirmative and restrictive covenants, and customary events of default. The financial covenants provide for a maximum Consolidated Leverage Ratio of 3.25 to 1.00 (total funded debt/EBITDA, as defined in the Third Amended Credit Agreement) and a minimum Consolidated Interest Coverage Ratio of 3.00 to 1.00 (EBITDA/Consolidated Interest Charges, as defined in the Third Amended Credit Agreement). Our obligations under the Third 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 Third Amended Credit Agreement, and (ii) the accounts receivable, general intangibles and intercompany loans and those of our subsidiaries that are guarantors or borrowers. At March 30, 2025, we were in compliance with these covenants with a consolidated leverage ratio of 1.63x and a consolidated interest coverage ratio of 15.81x.

In addition to the Third Amended Credit Agreement, we maintain other credit facilities, which may be used for short-term cash advances and bank guarantees. At March 30, 2025, there were no outstanding borrowings under these facilities and the aggregate amount of standby letters of credit outstanding was $39.9 million. As of March 30, 2025, we had no bank overdrafts related to our disbursement bank accounts.

Subsequent Event. 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 “New 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 SOFR credit spread adjustment. The New 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 New Term Loan Facility and the Amended Revolving Credit Facility in full on May 5, 2025. We may borrow on the New 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.

16. Reclassifications Out of Accumulated Other Comprehensive Income

The accumulated balances and activities for the three and six months ended March 30, 2025 and March 31, 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 December 31, 2023	$	(134,827)	$	2,625	$	(132,202)
Other comprehensive loss before reclassifications	(24,344)		—		(24,344)
Net current-period other comprehensive loss	(24,344)		—		(24,344)


Balance at March 31, 2024	$	(159,171)	$	2,625	$	(156,546)

Balance at December 29, 2024	$	(191,659)	$	3,905	$	(187,754)
Other comprehensive income before reclassifications	34,574		—		34,574
Net current-period other comprehensive income	34,574		—		34,574


Balance at March 30, 2025	$	(157,085)	$	3,905	$	(153,180)

	Six 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	38,762		(13)		38,749
Net current-period other comprehensive income (loss)	38,762		(13)		38,749


Balance at March 31, 2024	$	(159,171)	$	2,625	$	(156,546)

Balance at September 29, 2024	$	(82,813)	$	3,938	$	(78,875)
Other comprehensive loss before reclassifications	(74,272)		(33)		(74,305)
Net current-period other comprehensive loss	(74,272)		(33)		(74,305)


Balance at March 30, 2025	$	(157,085)	$	3,905	$	(153,180)

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.

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") and also filed 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 claims and CERCLA claims, respectively (the "Settlement Amounts"). In the second quarter of fiscal 2025, we paid the $57 million settlement, and we expect to pay the remaining $40 million with cash on hand and by drawing on our credit facility within the next 12 months. Upon entry of the consent decree by the Court and the United States' receipt of the Settlement Amounts, the United States will release TtEC from any, and all civil or administrative monetary claims for the Covered Conduct under the civil FCA, the CERCLA, and other specified civil statutes and common law theories of liability.

The consent decree is subject to a number of contingencies that could prevent it from being finalized with its current terms. In particular, and without limitation, (i) the consent decree is required to be lodged with the Court for a period of 30 days for public notice and comment, and the United States has reserved the right to withdraw or withhold its consent if the comments regarding the consent decree disclose facts or considerations that indicate the consent decree is inappropriate, improper or inadequate; and (ii) the Court might determine not to enter the consent decree as currently written or as approved by the United States. There can be no assurance that the contingencies will not preclude entry of the consent decree.

TtEC entered into the settlement agreement and consent decree to avoid delay, uncertainty and expense of protracted litigation. The settlement agreement and consent decree contain no admission of liability by TtEC.

TtEC has initiated litigation with the insurance carrier with which TtEC maintained liability policies regarding the reasonably possible payment or reimbursement of a significant portion of the Settlement Amounts. TtEC can give no assurances as to what portion, if any, of the Settlement Amounts will be recovered from the insurance carrier.

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 to services we provided to our unconsolidated joint ventures (in thousands):


	Three Months Ended				Six Months Ended
	March 30, 2025		March 31, 2024		March 30, 2025		March 31, 2024

Revenue	$	16,017	$	14,436	$	32,497	$	33,404
Related reimbursable costs	14,575		13,115		29,356		30,738

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


	As of
	March 30, 2025		September 29, 2024

Accounts receivable, net	$	13,677	$	15,612
Contract assets	939		1,625
Contract liabilities	(6,138)		(4,237)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, including the “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements regarding future events and our future results that are subject to the safe harbor provisions created under the Securities Act of 1933 and the Securities Exchange Act of 1934. All statements other than statements of historical facts are statements that could be deemed forward-looking statements. These statements are based on current expectations, estimates, forecasts and projections about the industries in which we operate and the beliefs and assumptions of our management. Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “estimates,” “seeks,” “continues,” “may,” variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict, including those identified below under “Part II, Item 1A. Risk Factors,” and elsewhere herein. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

GENERAL OVERVIEW

Tetra Tech, Inc. is a leading global provider of high-end consulting and engineering services that focuses on water, environment and sustainable infrastructure. We are a global company that is Leading with Science® to provide innovative solutions for our public and private clients. 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. 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 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. Our ability to provide innovative and first-of-kind solutions is enhanced by partnerships with our forward-thinking clients. We embrace the breadth of experience across our talented workforce worldwide with a culture of innovation and entrepreneurship. We are disciplined in our business, and focused on delivering value to customers and high performance for our shareholders. In supporting our clients, we seek to add value and provide long-term sustainable consulting, engineering and technology solutions.

We derive income from fees for professional, technical, program management and construction management services. As primarily a professional services company, we are labor-intensive rather than capital-intensive. Our revenue is driven by our ability to attract and retain qualified and productive employees, identify business opportunities, secure new and renew existing client contracts, provide outstanding services to our clients and execute projects successfully. We provide services to a diverse base of U.S. federal government, U.S. state and local government, U.S. commercial and international clients.

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


	Three Months Ended				Six Months Ended
	March 30, 2025		March 31, 2024		March 30, 2025		March 31, 2024

Client Sector
U.S. federal government (1)	31.2	%	32.5	%	33.4	%	31.8	%
U.S. state and local government	15.7		11.8		15.0		12.0
U.S. commercial	16.0		16.1		16.2		17.1
International (2)	37.1		39.6		35.4		39.1
Total	100.0	%	100.0	%	100.0	%	100.0	%

(1) Includes revenue generated under U.S. federal government contracts performed outside the United States.

(2) Includes revenue generated from non-U.S. clients, primarily in Australia, Canada, and the United Kingdom.

We manage our operations under two reportable segments: Government Services Group reportable segment and Commercial/International Services Group reportable segment.

Government Services Group (“GSG”). 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.

Commercial/International Services Group (“CIG”). 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).

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


	Three Months Ended				Six Months Ended
	March 30, 2025		March 31, 2024		March 30, 2025		March 31, 2024

Reportable Segment
GSG	50.0	%	47.7	%	51.5	%	47.3	%
CIG	51.3		53.6		49.8		54.0
Inter-segment elimination	(1.3)		(1.3)		(1.3)		(1.3)
Total	100.0	%	100.0	%	100.0	%	100.0	%

Our services are performed under three principal types of contracts with our clients: fixed-price, time-and-materials and cost-plus. The following table presents the percentage of our revenue by contract type:


	Three Months Ended				Six Months Ended
	March 30, 2025		March 31, 2024		March 30, 2025		March 31, 2024

Contract Type
Fixed-price	39.7	%	36.7	%	38.1	%	37.5	%
Time-and-materials	45.8		47.3		43.9		46.0
Cost-plus	14.5		16.0		18.0		16.5
Total	100.0	%	100.0	%	100.0	%	100.0	%

Under fixed-price contracts, clients agree to pay a specified price for our performance of the entire contract or a specified portion of the contract. 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 costs 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. 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. On a quarterly basis, we review and assess our revenue and cost estimates for each significant contract. Changes in revenue and cost estimates could also result in a projected loss that would be recorded immediately in earnings.

Other contract costs include professional compensation and related benefits, together with certain direct and indirect overhead costs such as rents, utilities and travel. Professional compensation represents a large portion of these costs. Our "Selling, general and administrative expenses" ("SG&A") are comprised primarily of marketing and bid and proposal costs, and our corporate headquarters’ costs related to the executive offices, finance, accounting, administration and information technology. Our SG&A expenses also include a portion of stock-based compensation and depreciation of property and equipment related to our corporate headquarters, and the amortization of identifiable intangible assets. Most of these costs are unrelated to specific clients or projects, and can vary as expenses are incurred to support company-wide activities and initiatives.

We experience seasonal trends in our business. Our revenue and operating income are typically lower in the first half of our fiscal year, primarily due to the Thanksgiving (in the U.S. and Canada), Christmas and New Year’s holidays. Many of our clients’ employees, as well as our own employees, take vacations during these holiday periods. Further, seasonal inclement weather conditions occasionally cause some of our offices to close temporarily or may hamper our project field work in the northern hemisphere's temperate and arctic regions. These occurrences result in fewer billable hours worked on projects and, correspondingly, less revenue recognized.

ACQUISITIONS AND DIVESTITURES

Acquisitions. We continuously evaluate the marketplace for acquisition opportunities to further our strategic growth plans. Due to our reputation, size, financial resources, geographic presence and range of services, we have numerous opportunities to acquire privately and publicly held companies or selected portions of such companies. We evaluate an acquisition opportunity based on its ability to strengthen our leadership in the markets we serve, the technologies and solutions they provide and the additional new geographies and clients they bring. Also, during our evaluation, we examine an acquisition's ability to drive organic growth, its accretive effect on long-term earnings and its ability to generate return on investment. Generally, we proceed with an acquisition if we believe that it will strategically expand our service offerings, improve our long-term financial performance and increase shareholder returns.

We view acquisitions as a key component in the execution of our growth strategy, and we intend to use cash, debt or equity, as we deem appropriate, to fund acquisitions. We may acquire other businesses that we believe are synergistic and will ultimately increase our revenue and net income, strengthen our ability to achieve our strategic goals, provide critical mass with existing clients and further expand our lines of service. We typically pay a purchase price that results in the recognition of goodwill, generally representing the intangible value of a successful business with an assembled workforce specialized in our areas of interest. Acquisitions are inherently risky, and no assurance can be given that our previous or future acquisitions will be successful or will not have a material adverse effect on our financial position, results of operations or cash flows. All acquisitions require the approval of our Board of Directors.

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 is a financially immaterial acquisition and is included in our CIG segment.

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

Divestitures. We regularly review and evaluate our existing operations to determine whether our business model should change through the divestiture of certain businesses. Accordingly, from time to time, we may divest or wind down certain non-core businesses and reallocate our resources to businesses that better align with our long-term strategic direction. In the first quarter of fiscal 2025, we divested a financially immaterial subsidiary in South America and a line of business in Australia.

OVERVIEW OF RESULTS AND BUSINESS TRENDS

General. For the first half of fiscal 2025, our 10.6% revenue growth was primarily due to increased activity in the U.S. state and local and federal government client sectors. The 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 9.1% compared to the first half of fiscal 2024.

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


	Six Months Ended
	March 30, 2025		March 31, 2024		Change
					$		%

Client Sector
U.S. federal government (1)	$	915,270	$	789,078	$	126,192	16.0%
U.S. state and local government	410,425		298,476		111,949		37.5
U.S. commercial	444,676		423,837		20,839		4.9
International (2)	972,303		968,492		3,811		0.4
Total	$	2,742,674	$	2,479,883	$	262,791	10.6%

(1) Includes revenue generated under U.S. federal government contracts performed outside the United States.

(2) Includes revenue generated from non-U.S. clients, primarily in United Kingdom, Australia and Canada.

U.S. Federal Government.


	Six Months Ended
	March 30, 2025		March 31, 2024		Change
					$		%
	($ in thousands)
Revenue	$	915,270	$	789,078	$	126,192	16.0%

The 16.0% revenue growth in the U.S. federal government sector primarily reflects increased international development, disaster response and federal information technology system modernization activity. The growth in our international development activity primarily relates to activity in Ukraine to support energy security and other humanitarian needs. Our international development revenue increased approximately $75 million in the first half of fiscal 2025 compared to the same period last year. Additionally, our overall growth includes activities related to our disaster response programs for 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 a recent acquisition that did not have comparable revenue for the prior-year period.

On the day of his inauguration, 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 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. Our U.S. federal government revenue included $409.3 million for USAID in the first half of fiscal 2025 compared to $334.1 million in the same period last year. Our U.S. federal government revenue for the remainder of fiscal 2025 is dependent upon the ultimate direction of the current U.S. administration; however, excluding USAID, we expect our U.S. federal revenue to grow in the second half of fiscal 2025 compared to the same period of fiscal 2024.

U.S. State and Local Government.


	Six Months Ended
	March 30, 2025		March 31, 2024		Change
					$		%
	($ in thousands)
Revenue	$	410,425	$	298,476	$	111,949	37.5%

Our U.S. state and local government revenue grew 37.5% compared to the first half of fiscal 2024 due to increased disaster response activity primarily related to Hurricanes Helene and Milton. Excluding this disaster response work, our U.S. state and local government revenue increased 15.6% in the first half of fiscal 2025 compared to fiscal 2024 first half; the growth

was due to continued investment by our clients in clean drinking water. Most of our work for the U.S. state and local governments relates to critical water and environmental programs, which we expect to continue to grow for the remainder of fiscal 2025.

U.S. Commercial.


	Six Months Ended
	March 30, 2025		March 31, 2024		Change
					$		%
	($ in thousands)
Revenue	$	444,676	$	423,837	$	20,839	4.9%

Our U.S. commercial revenue growth of 4.9% in the first half of fiscal 2025 was primarily due to increased activity for environmental services. We expect our revenue growth to continue in our U.S. commercial business for the remainder of fiscal 2025.

International.


	Six Months Ended
	March 30, 2025		March 31, 2024		Change
					$		%
	($ in thousands)
Revenue	$	972,303	$	968,492	$	3,811	0.4%

Our international revenue increased 0.4% compared to the first half of fiscal 2024. On a constant currency basis, our international revenue increased 2.1% primarily due to increased planning and design activities in the United Kingdom, partially offset by lower infrastructure work in Australia. We expect the growth in our international work to continue for the remainder of fiscal 2025, on a constant currency basis.

RESULTS OF OPERATIONS

Consolidated Results of Operations


	Three Months Ended							Six Months Ended
	March 30, 2025		March 31, 2024		Change			March 30, 2025		March 31, 2024		Change
					$		%					$		%
	($ in thousands, except per share data)
Revenue	$	1,322,113	$	1,251,616	$	70,497	5.6%	$	2,742,674	$	2,479,883	$	262,791	10.6%
Subcontractor costs	(218,408)		(198,989)		(19,419)		(9.8)	(441,639)		(412,087)		(29,552)		(7.2)
Revenue, net of subcontractor costs (1)	1,103,705		1,052,627		51,078		4.9	2,301,035		2,067,796		233,239		11.3
Other costs of revenue	(889,523)		(845,132)		(44,391)		(5.3)	(1,865,376)		(1,669,803)		(195,573)		(11.7)
Gross profit	214,182		207,495		6,687		3.2	435,659		397,993		37,666		9.5
Selling, general and administrative expenses	(84,094)		(89,798)		5,704		6.4	(168,411)		(169,251)		840		0.5
Legal contingency costs	—		—		—		NM	(115,000)		—		(115,000)		NM
Contingent consideration - fair value adjustments	1,931		(14)		1,945		NM	2,297		22		2,275		NM
Impairment of goodwill	(92,416)		—		(92,416)		NM	(92,416)		—		(92,416)		NM
Income from operations	39,603		117,683		(78,080)		(66.3)	62,129		228,764		(166,635)		(72.8)
Interest expense	(8,491)		(9,883)		1,392		14.1	(15,709)		(19,461)		3,752		19.3
Income before income tax expense	31,112		107,800		(76,688)		(71.1)	46,420		209,303		(162,883)		(77.8)
Income tax expense	(25,700)		(31,341)		5,641		18.0	(40,230)		(57,864)		17,634		30.5
Net income	5,412		76,459		(71,047)		(92.9)	6,190		151,439		(145,249)		(95.9)
Net income attributable to noncontrolling interests	(24)		(13)		(11)		(84.6)	(55)		(21)		(34)		(161.9)
Net income attributable to Tetra Tech	$	5,388	$	76,446	$	(71,058)	(93.0)	$	6,135	$	151,418	$	(145,283)	(95.9)
Diluted earnings per share	$	0.02	$	0.28	$	(0.26)	(92.9)%	$	0.02	$	0.56	$	(0.54)	(96.4)%

(1) We believe that the presentation of "Revenue, net of subcontractor costs", which is a non-U.S. GAAP financial measure, enhances investors' ability to analyze our business trends and performance because it substantially measures the work performed by our employees. In the course of providing services, we routinely subcontract various services and, under certain international development programs, issue grants. Generally, these subcontractor costs and grants are passed through to our clients and, in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP") and industry practice, are included in our revenue when it is our contractual responsibility to procure or manage these activities. Because subcontractor services can vary significantly from project to project and period to period, changes in revenue may not necessarily be indicative of our business trends. Accordingly, we segregate subcontractor costs from revenue to promote a better understanding of our business by evaluating revenue exclusive of costs associated with external service providers.

NM = not meaningful

Our revenue growth in the second quarter and first half of fiscal 2025 reflects increases in both of our reportable segments. For the second quarter of fiscal 2025, our GSG segment's revenue and revenue, net of subcontractor costs, increased $64.3 million, or 10.8%, and $54.5 million, or 11.7%, respectively, compared to the same quarter last year. Our CIG segment's revenue increased $7.7 million, or 1.1%, and revenue, net of subcontractor costs, decreased $3.4 million, or 0.6% in the second quarter of fiscal 2025 compared to the prior-year quarter.

For the first half of fiscal 2025, our GSG segment's revenue and revenue, net of subcontractor costs, increased $241.0 million, or 20.6%, and $212.9 million, or 23.4%, respectively, compared to the same period last year. Our CIG segment's revenue and revenue, net of subcontractor costs, increased $26.8 million, or 2.0%, and $20.3 million, or 1.8%, respectively, compared to the fiscal 2024 period. The second quarter and first half results for GSG and CIG segments are described below under "Government Services Group" and "Commercial/International Group", respectively.

The following table reconciles our reported results to non-U.S. GAAP adjusted results. For the second quarter and first half 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 second quarter and first half of fiscal 2025. Additionally, for the first half of fiscal 2025, our adjusted results exclude a non-recurring charge of $115.0 million related to legal contingencies as described in Note 17, "Commitments and Contingencies" of the “Notes to Consolidated Financial Statements”. We determined that there is no tax benefit for $31.3 million of the legal contingency charge 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%. We applied the relevant marginal statutory tax rate based on the nature of the adjustment and the tax jurisdiction in which it occurred. Both EPS and adjusted EPS were calculated using the diluted weighted-average common shares outstanding for the respective periods as reflected in our Consolidated Statements of Income.


	Three Months Ended							Six Months Ended
	March 30, 2025		March 31, 2024		Change			March 30, 2025		March 31, 2024		Change
					$		%					$		%
	($ in thousands, except per share data)
Income from operations	$	39,603	$	117,683	$	(78,080)	(66.3)%	$	62,129	$	228,764	$	(166,635)	(72.8)%
Legal contingency costs	—		—		—		NM	115,000		—		115,000		NM
Earn-out adjustments	(1,931)		14		(1,945)		NM	(2,297)		(22)		(2,275)		NM
Impairment of goodwill	92,416		—		92,416		NM	92,416		—		92,416		NM
Adjusted income from operations (1)	$	130,088	$	117,697	$	12,391	10.5%	$	267,248	$	228,742	$	38,506	16.8%

EPS	$	0.02	$	0.28	$	(0.26)	(92.9)%	$	0.02	$	0.56	$	(0.54)	(96.4)%
Legal contingency costs	—		—		—		NM	0.35		—		0.35		NM

Impairment of goodwill	0.31		—		0.31		NM	0.31		—		0.31		NM
Adjusted EPS (1)	$	0.33	$	0.28	$	0.05	17.9%	$	0.68	$	0.56	$	0.12	21.4%

NM = not meaningful

(1) Non-GAAP financial measure

Excluding the non-recurring charges and the earn-out gains, our adjusted operating income increased $12.4 million, or 10.5% in the second quarter of fiscal 2025 and $38.5 million, or 16.8%, in the first half of fiscal 2025 compared to the same periods last year. The increase reflects improved results in both of our reportable segments, which are described below under "Government Services Group" and "Commercial/International Group", respectively.


	Three Months Ended							Six Months Ended
	March 30, 2025		March 31, 2024		Change			March 30, 2025		March 31, 2024		Change
					$		%					$		%
	($ in thousands)
Net interest expense	$	8,491	$	9,883	$	(1,392)	(14.1)%	$	15,709	$	19,461	$	(3,752)	(19.3)%

Net interest expense decreased in the second quarter and first half of fiscal 2025, due to lower average borrowings and interest rates compared to the same periods in fiscal 2024.


	Three Months Ended							Six Months Ended
	March 30, 2025		March 31, 2024		Change			March 30, 2025		March 31, 2024		Change
					$		%					$		%
	($ in thousands)
Income tax expense	$	25,700	$	31,341	$	(5,641)	(18.0)%	$	40,230	$	57,864	$	(17,634)	(30.5)%

The effective tax rates for the first halves of fiscal 2025 and 2024 were 86.7% and 27.6%, respectively. Income tax expense was reduced by $1.0 million and $1.9 million of excess tax benefits on share-based payments in the first halves of fiscal 2025 and 2024, respectively. In addition, in the first half 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”. We determined that $31.3 million of this charge is not tax deductible. Furthermore, income tax expense in the first half of fiscal 2024 (all in the second quarter) included $2.8 million of expense for the settlement of various tax positions that were under audit for fiscal years 2018 through 2021. Excluding the impact of the excess tax benefits on share-based payments, the goodwill impairment and the legal contingency charge in the first half of fiscal 2025 and the settlement amounts in the first half of 2024, our effective tax rates in the first halves of fiscal 2025 and 2024 were 27.8% and 27.1%, 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 for the first quarter of fiscal 2025. We are continually monitoring developments and evaluating the potential impacts. At this time, we do not anticipate a material tax charge as a result of implementation of these rules.

Segment Results of Operations

Government Services Group


	Three Months Ended							Six Months Ended
	March 30, 2025		March 31, 2024		Change			March 30, 2025		March 31, 2024		Change
					$		%					$		%
	($ in thousands)
Revenue	$	661,424	$	597,127	$	64,297	10.8%	$	1,413,206	$	1,172,168	$	241,038	20.6%
Subcontractor costs	(140,472)		(130,630)		(9,842)		(7.5)	(291,077)		(262,971)		(28,106)		(10.7)
Revenue, net of subcontractor costs (1)	$	520,952	$	466,497	$	54,455	11.7%	$	1,122,129	$	909,197	$	212,932	23.4%

Income from operations	$	72,104	$	64,007	$	8,097	12.7%	$	155,386	$	127,134	$	28,252	22.2%

(1) Non-GAAP financial measure

The revenue growth in the second quarter and first half of fiscal 2025 of 10.8% and of 20.6%, respectively, compared to the same periods last year primarily reflects higher U.S. federal government activities related to international development and the previously described U.S. state and local government activities related to disaster response. The revenue growth slowed in the second quarter of fiscal 2025 compared to the first quarter of this year due 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 half of fiscal 2025 was 13.8% compared to 14.0% in the first half of fiscal 2024. The lower operating margin reflects the mix of revenue as this fiscal year's first half included a higher amount of international development activity, which operates at a lower margin compared to the other activities in the GSG segment.

Commercial/International Group


	Three Months Ended							Six Months Ended
	March 30, 2025		March 31, 2024		Change			March 30, 2025		March 31, 2024		Change
					$		%					$		%
	($ in thousands)
Revenue	$	678,838	$	671,155	$	7,683	1.1%	$	1,367,073	$	1,340,262	$	26,811	2.0	%
Subcontractor costs	(96,085)		(85,025)		(11,060)		(13.0)	(188,167)		(181,663)		(6,504)		(3.6)
Revenue, net of subcontractor costs (1)	$	582,753	$	586,130	$	(3,377)	(0.6)%	$	1,178,906	$	1,158,599	$	20,307	1.8	%

Income from operations	$	76,770	$	75,955	$	815	1.1%	$	154,447	$	147,356	$	7,091	4.8	%

(1) Non-GAAP financial measure

The revenue growth in the second quarter and first half of fiscal 2025 of 1.1% and 2.0%, respectively, compared to the same periods last year primarily reflects increased planning and design activities in the United Kingdom, partially offset by lower infrastructure activities in Australia and foreign currency exchange rates. On a constant currency basis, our revenue growth in the second quarter and first half of fiscal 2025 was 3.6% and 3.2%, respectively, compared to the same periods of fiscal 2024.

Our operating income increased due to the aforementioned revenue growth. Our operating margin, based on revenue, net of subcontractor costs, for the first half of fiscal 2025 was 13.1% compared to 12.7% for the fiscal 2024 period. The improved operating margin was primarily due to our continued focus on high-end consulting services and improved project execution.

Backlog

Backlog generally represents the dollar amount of revenues 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 days). The differences between our backlog and RUPO at March 30, 2025 and September 29, 2024 were immaterial (see the table below):


	As of
	March 30, 2025		September 29, 2024
	($ in millions)

RUPO	$	4,263	$	5,331
Backlog	4,306		5,376

At March 30, 2025, our backlog decreased $1.07 billion, or 19.9%, compared to fiscal 2024 year-end primarily due to the aforementioned cancellation of USAID contracts.

Financial Condition, Liquidity and Capital Resources

Capital Requirements. At March 30, 2025, we had $179.4 million of cash and cash equivalents and access to an additional $599.3 million of borrowings available under our credit facility. During the first half of fiscal 2025, we generated $7.2 million of cash from operations. Our primary sources of liquidity are cash flows from operations and borrowings under our credit facilities. Our primary uses of cash are to fund working capital, cash dividends, share repurchases, capital expenditures and repayment of debt, as well as to fund acquisitions and earn-out obligations from prior acquisitions. We believe that our existing cash and cash equivalents, operating cash flows and borrowing capacity under our credit agreement, as described below, will be sufficient to meet our capital requirements for at least the next 12 months.

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


	As of
	March 30, 2025		September 29, 2024		Change
					$		%

Cash and cash equivalents	$	179,433	$	232,689	$	(53,256)	(22.9)	%


	Six Months Ended
	March 30, 2025		March 31, 2024		Change
					$		%

Net cash provided by (used in):
Operating activities	$	7,240	$	112,181	$	(104,941)	(93.5)	%
Investing activities	(12,768)		(79,161)		66,393		83.9
Financing activities	(37,437)		5,633		(43,070)		(764.6)
Effect of exchange rate changes	(10,291)		2,810		(13,101)		(466.2)
Net increase (decrease) in cash	$	(53,256)	$	41,463	$	(94,719)	(228.4)	%

Operating Activities. For the first half of fiscal 2025, our cash flows from operating activities decreased due to the timing on cash collections on USAID programs and additional working capital required to support our business growth. This decrease also reflects a $57 million payment for the aforementioned legal contingency in the second quarter of fiscal 2025.

Investing Activities. Our cash used in investing activities for the first half of fiscal 2025 includes net payments of $6 million for the CAW acquisition, compared to $72 million for the LST acquisition completed in the second quarter of fiscal 2024.

Financing Activities. In the first half of fiscal 2025, our cash used from financing activities reflects the $175 million share repurchases as our share repurchase program was reactivated this fiscal year. These share repurchases were partially funded by our net borrowings, which increased $130 million in the first half of fiscal 2025 compared to the same period in the prior year.

Debt Financing. On February 18, 2022, we entered into Amendment No. 2 to our Second Amended and Restated Credit Agreement (“Second Amended Credit Agreement”) with a total borrowing capacity of $1.05 billion that will mature in February 2027. The Second Amended Credit Agreement is a $750 million senior secured, five-year facility that provides for a $250 million term loan facility (the “Amended Term Loan Facility”) and a $500 million revolving credit facility (the “Amended Revolving Credit Facility”). In addition, the Second Amended Credit Agreement includes a $300 million accordion feature that allows us to increase the Second Amended Credit Agreement to $1.05 billion subject to lender approval. The Second Amended Credit Agreement provides for, among other things, (i) refinance indebtedness under our Credit Agreement dated as of July 30, 2018; (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 Second Amended Credit Agreement provides for a reduction in the interest grid for meeting certain sustainability targets related to the (i) reduction of greenhouse gas emissions through the Company’s projects and operational sustainability initiatives and (ii) improvement of peoples’ lives as a result of the Company’s projects that provide environmental, social and governance benefits. The Amended Revolving Credit Facility includes a $100 million sublimit for the issuance of standby letters of credit, a $20 million sublimit for swingline loans and a $300 million sublimit for multicurrency borrowings and letters of credit.

On October 26, 2022, we entered into a Third Amended and Restated Credit Agreement (“Third Amended Credit Agreement”) that provides for an additional $500 million senior secured term loan facility (the "New Term Loan Facility") increasing our total borrowing capacity to $1.55 billion. On January 23, 2023, we drew the entire amount of the New Term Loan Facility to partially finance the RPS acquisition. The New Term Loan Facility is not subject to any amortization payments of principal and matures in January 2026.

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

August 15, 2028. The net proceeds from the Convertible Notes were $560.5 million, $51.8 million of which were used to purchase related capped call transactions on the issue date. The remaining proceeds were used to prepay and terminate the $234.4 million outstanding under the Amended Term Loan Facility, to prepay $89.4 million outstanding under the New Term Loan Facility and to pay down borrowings of $185.0 million under the Amended Revolving Credit Facility. See Note 15, "Long-Term Debt" of the "Notes to Consolidated Financial Statements" for further discussion.

At March 30, 2025, we had $450 million in outstanding borrowings under the Third Amended Credit Agreement, which consisted of $250 million under the New Term Loan Facility and $200 million under the Amended Revolving Credit Facility. For the first half of fiscal 2025, the weighted-average interest rate of the outstanding borrowings under the Third Amended Credit Agreement was 5.78%. In addition, we had $0.7 million in standby letters of credit under the Third Amended Credit Agreement. At March 30, 2025, we had $299.3 million of available credit under the Amended Revolving Credit Facility, all of which could be borrowed without a violation of our debt covenants.

The Third Amended Credit Agreement contains certain affirmative and restrictive covenants, and customary events of default. The financial covenants provide for a maximum Consolidated Leverage Ratio of 3.25 to 1.00 (total funded debt/EBITDA, as defined in the Third Amended Credit Agreement) and a minimum Consolidated Interest Coverage Ratio of 3.00 to 1.00 (EBITDA/Consolidated Interest Charges, as defined in the Third Amended Credit Agreement). Our obligations under the Third 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 Third Amended Credit Agreement, and (ii) the accounts receivable, general intangibles and intercompany loans, and those of our subsidiaries that are guarantors or borrowers. At March 30, 2025, we were in compliance with these covenants with a consolidated leverage ratio of 1.63x and a consolidated interest coverage ratio of 15.81x.

In addition to the Third Amended Credit Agreement, we maintain other credit facilities, which may be used for short-term cash advances and bank guarantees. At March 30, 2025, there were no borrowings under these facilities, and the aggregate amount of standby letters of credit outstanding was $39.9 million. At March 30, 2025, we had no bank overdrafts related to our disbursement bank accounts.

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

Stock repurchases. On October 5, 2021, our Board of Directors authorized a stock repurchase program under which we could repurchase up to $400 million of our common stock. In the first half of fiscal 2025, we repurchased and settled 5,165,715 shares with an average price of $33.87 per share for a total cost of $175.0 million in the open market. We did not repurchase any shares of our common stock in the first half of fiscal 2024. At March 30, 2025, we had a remaining balance of $172.8 million under our stock repurchase program.

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

Dividend
Per Share

Record Date

Total Maximum
Payment
(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

Income Taxes

We evaluate the realizability of our deferred tax assets by assessing the valuation allowance and adjust 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. The ability or failure to achieve the forecasted taxable income in the applicable taxing jurisdictions could affect the ultimate realization of deferred tax assets. 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 March 30, 2025 and September 29, 2024, the liability for income taxes associated with uncertain tax positions was $52.2 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. 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.

Off-Balance Sheet Arrangements

In the ordinary course of business, we may use off-balance sheet arrangements if we believe that such arrangements would be an efficient way to lower our cost of capital or help us manage the overall risks of our business operations. We do not believe that such arrangements have had a material adverse effect on our financial position or our results of operations.

The following is a summary of our off-balance sheet arrangements:

•Letters of credit and bank guarantees are used primarily to support project performance and insurance programs. We are required to reimburse the issuers of letters of credit and bank guarantees for any payments they make under the outstanding letters of credit or bank guarantees. Our Third Amended Credit Agreement and additional letter of credit facilities cover the issuance of our standby letters of credit and bank guarantees and are critical for our normal operations. If we default on the Third Amended Credit Agreement or additional credit facilities, our inability to issue or renew standby letters of credit and bank guarantees would impair our ability to maintain normal operations. At March 30, 2025, we had $0.7 million in standby letters of credit outstanding under our Third Amended Credit Agreement and $39.9 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. If our services under a guaranteed or indemnified project are later determined to have resulted in a material defect or other material deficiency, then we may be responsible for monetary damages or other legal remedies. When sufficient information about claims on guaranteed or indemnified projects is available and monetary damages or other costs or losses are determined to be probable, we recognize such guaranteed losses.

•In the ordinary course of business, we enter into various agreements as part of certain unconsolidated subsidiaries, joint ventures and other jointly executed contracts where we are jointly and severally liable. We enter into these agreements primarily to support the project execution commitments of these entities. The potential payment amount of an outstanding performance guarantee is typically the remaining cost of work to be performed by or on behalf of third parties under engineering and construction contracts. However, we are not able to estimate other amounts that may be required to be paid in excess of estimated costs to complete contracts and, accordingly, the total potential payment amount under our outstanding performance guarantees cannot be estimated. 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. Remaining billable amounts could be greater or less than the cost to complete. In those

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

•In the ordinary course of business, our clients may request that we obtain surety bonds in connection with contract performance obligations that are not required to be recorded in our consolidated balance sheets. We are obligated to reimburse the issuer of our surety bonds for any payments made thereunder. Each of our commitments under performance bonds generally ends concurrently with the expiration of our related contractual obligation.

Critical Accounting Policies

Our critical accounting policies are disclosed in our Annual Report on Form 10-K for the fiscal year ended September 29, 2024. To date, there have been no material changes in our critical accounting policies as reported in our fiscal 2024 Annual Report on Form 10-K.

New Accounting Pronouncements

For information regarding recent accounting pronouncements, see “Notes to Consolidated Financial Statements” included in Part I, Item 1 of this Quarterly Report.

Financial Market Risks

We do not enter into derivative financial instruments for trading or speculation purposes. In the normal course of business, we have exposure to both interest rate risk and foreign currency transaction and translation risk, primarily related to the Canadian and Australian dollars, the Euro, and the British Pound.

We are exposed to interest rate risk under our Third Amended Credit Agreement. We can borrow, at our option, under both the Amended Term Loan Facility and Amended Revolving Credit Facility. We may borrow on the Amended Revolving Credit Facility, at our option, at either (a) a Eurocurrency rate plus a margin that ranges from 1.000% to 1.875% 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 0.875% per annum. In each case, the applicable margin is based on our Consolidated Leverage Ratio, calculated quarterly. The Amended Term Loan Facility is subject to the same interest rate provisions. Borrowings at the base rate have no designated term and may be repaid without penalty any time prior to the Facility’s maturity date. Borrowings at a SOFR rate have a term no less than 30 days and no greater than 180 days and may be prepaid without penalty. Typically, at the end of such term, such borrowings may be rolled over at our discretion into either a borrowing at the base rate or a borrowing at a SOFR rate with similar terms, not to exceed the maturity date of the Facility. The Facility matures on February 18, 2027. At March 30, 2025, we had $450 million in outstanding borrowings under the Third Amended Credit Agreement, which consisted of $250 million under the New Term Loan Facility and $200 million under the Amended Revolving Credit Facility. For the first half of fiscal 2025, the weighted-average interest rate of the outstanding borrowings under the Third Amended Credit Agreement was 5.78%.

The majority of our transactions are in U.S. dollars; however, some of our subsidiaries conduct business in foreign currencies, primarily the Canadian and Australian dollars, the Euro, and British Pound. Therefore, we are subject to currency exposure and volatility because of currency fluctuations. We attempt to minimize our exposure to these fluctuations by matching revenue and expenses in the same currency for our contracts. We report our foreign currency gains and losses in “Selling, general and administrative expenses” on our consolidated statements of income. For the first half of fiscal 2025, we reported $0.7 million of foreign currency loss. The impact of the foreign currency gain and loss was immaterial for the first half of fiscal 2024.

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 local currency is the functional currency. To the extent the U.S. dollar strengthens against foreign currencies, the translation of these foreign currency denominated transactions will result in reduced revenue, operating expenses, assets and liabilities. Similarly, our revenue, operating expenses, assets and liabilities will increase if the U.S. dollar weakens against foreign currencies. For the first halves of fiscal 2025 and 2024, 35.4% and 39.1% of our consolidated revenue, respectively, was generated by our international business. For the first half of fiscal 2025, the effect of foreign exchange rate translation on our consolidated balance sheet was a decrease in equity of $74.3 million compared to an increase of $38.8 million in the prior-year period. These amounts were recognized as adjustments to equity through other comprehensive income.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Please refer to the information we have included under the heading “Financial Market Risks” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 2 of this Form 10-Q which is incorporated herein by reference.

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures and changes in internal control over financial reporting. At March 30, 2025, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Based on our management’s evaluation (with the participation of our principal executive officer and principal financial officer), our principal executive officer and principal financial officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act), were effective.

Changes in internal control over financial reporting. There were no changes in our internal control over financial reporting that occurred during the quarter ended March 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

For information regarding legal proceedings, see Note 17, "Commitments and Contingencies" included in the "Notes to Consolidated Financial Statements" included in Part I, Item 1 of this Form 10-Q which is incorporated herein by reference.

Item 1A. Risk Factors

There have been no material changes in our risk factors disclosed in Part I, Item 1A in our 2024 Annual Report on Form 10-K. For updated disclosures related to interest and exchange rate risks, see “Financial Market Risks” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Part I, Item 2 of this Form 10-Q which is incorporated herein by reference.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Below is a summary of the stock repurchases that were traded and settled during the first half of fiscal 2025:


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Dollar Value that May Yet be Purchased Under the Plans or Programs (in thousands)
September 30, 2024 - October 27, 2024	—	$	—	—	$	347,813
October 28, 2024 - November 24, 2024	80,973	40.75		80,973	344,513
November 25, 2024 - December 29, 2024	519,034	41.81		519,034	322,813
December 30, 2024 - January 26, 2025	153,591	41.02		153,591	316,513
January 27, 2025 - February 23, 2025	3,203,776	33.88		3,203,776	207,963
February 24, 2025 - March 30, 2025	1,208,341	29.08		1,208,341	172,828

Item 4. Mine Safety Disclosures

Section 1503 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") requires domestic mine operators to disclose violations and orders issued under the Mine Act by Mine Safety and Health Administration. We do not act as the owner of any mines, but we may act as a mining operator as defined under the Mine Act where we may be an independent contractor performing services or construction at such mine. Information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Act and Item 104 of Regulation S-K is included in Exhibit 95.

Item 5. Other Information

Rule 10b5-1 Trading Plans

During the second quarter of fiscal 2025, none of our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted, modified or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act or any "non-Rule 10b5-1 trading arrangement" as defined in Item 408(c) of Regulation S-K.

Item 6. Exhibits

The following documents are filed as Exhibits to this Report:



31.1			Chief Executive Officer Certification pursuant to Rule 13a-14(a)/15d-14(a).

31.2			Chief Financial Officer Certification pursuant to Rule 13a-14(a)/15d-14(a).

32.1			Certification of Chief Executive Officer pursuant to Section 1350.

32.2			Certification of Chief Financial Officer pursuant to Section 1350.

95			Mine Safety Disclosure.

101			The following financial information from our Company’s Quarterly Report on Form 10-Q, for the period ended March 30, 2025, formatted in Inline eXtensible Business Reporting Language: (i) Consolidated Balance Sheets (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Statements of Cash Flows, (v) Consolidated Statements of Stockholders' Equity, (vi) Notes to Consolidated Financial Statements.

104			Cover Page Interactive Date File (formatted as Inline XBRL and contained in Exhibit 101).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Dated: May 8, 2025	TETRA TECH, INC.



	By:	/s/ DAN L. BATRACK
		Dan L. Batrack
		Chairman, Chief Executive Officer and President
		(Principal Executive Officer)


	By:	/s/ STEVEN M. BURDICK
		Steven M. Burdick
		Executive Vice President, Chief Financial Officer
		(Principal Financial Officer)


	By:	/s/ BRIAN N. CARTER
		Brian N. Carter
		Senior Vice President, Corporate Controller
		(Principal Accounting Officer)

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SEC Form 10-Q filed by Tetra Tech Inc.

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