Core Insights - Zacks Premium offers tools for investors to enhance their stock market strategies, including daily updates on Zacks Rank and Industry Rank, research reports, and stock screens [1][2] Zacks Style Scores - Zacks Style Scores are indicators that rate stocks based on value, growth, and momentum methodologies, helping investors identify stocks likely to outperform the market in the next 30 days [2][3] - Stocks are rated from A to F, with A indicating the highest potential for outperformance [3] Value Score - The Value Score focuses on identifying undervalued stocks using financial ratios such as P/E, PEG, and Price/Sales to find attractive investment opportunities [3] Growth Score - The Growth Score evaluates a company's future prospects by analyzing projected and historical earnings, sales, and cash flow to identify stocks with sustainable growth potential [4] Momentum Score - The Momentum Score identifies trends in stock prices and earnings outlooks, helping investors time their entry into positions based on recent price changes and earnings estimate revisions [5] VGM Score - The VGM Score combines the three Style Scores to provide a comprehensive rating, identifying stocks with the best value, growth forecasts, and momentum [6] Zacks Rank - The Zacks Rank is a proprietary model that uses earnings estimate revisions to guide investors in building successful portfolios, with 1 (Strong Buy) stocks achieving an average annual return of +23.64% since 1988, significantly outperforming the S&P 500 [7][8] Stock to Watch: Tetra Tech (TTEK) - Tetra Tech is a leading provider of consulting and technical services, focusing on water, environmental, and alternative energy solutions for a diverse client base [11] - TTEK holds a 3 (Hold) rating on the Zacks Rank, with a VGM Score of A and a Momentum Style Score of B, indicating potential for upward movement [12] - Recent earnings estimates for TTEK have been revised upwards, with the Zacks Consensus Estimate increasing by $0.04 to $1.51 per share, and an average earnings surprise of +7.1% [12][13]

Group 1: Company Performance - Tetra Tech, Inc. (TTEK) has shown solid momentum, particularly in its Government Services Group (GSG) segment, which saw net sales increase by 15.1% year over year in the first nine months of fiscal 2025 due to advanced water infrastructure projects and disaster response programs [1][9] - The Commercial / International Services Group (CIG) segment experienced a revenue increase of approximately 1% year over year, driven by higher planning and design activities in water programs in the UK and Ireland, as well as growth in the high-performance buildings market [1][9] Group 2: Acquisitions and Expansion - Tetra Tech has strengthened its product portfolio through strategic acquisitions, including SAGE Group Holdings and Carron + Walsh, enhancing its digital automation capabilities and expanding its presence in Europe [2] - The acquisition of Convergence Controls & Engineering allows Tetra Tech to offer integrated automation platform solutions across the water and energy sectors, further solidifying its GSG segment [3] Group 3: Shareholder Returns - The company is committed to rewarding shareholders, distributing dividends totaling $48 million (up 10.9% year over year) and repurchasing shares worth $200 million in the first nine months of fiscal 2025 [4] - Tetra Tech increased its dividend rate by 16.7% in May 2025, reflecting its strong financial position [4] Group 4: Financial Challenges - Despite positive revenue growth, Tetra Tech faces challenges from rising costs, with total cost of sales increasing by 6.9% in the first nine months of fiscal 2025 due to higher input costs [6] - The company reported high selling, general, and administrative expenses of $255 million during the same period, which could impact profitability [6] - Tetra Tech's long-term debt rose to $862.5 million, primarily due to the SAGE acquisition, raising concerns about financial obligations [7]

It doesn't matter your age or experience: taking full advantage of the stock market and investing with confidence are common goals for all investors. Luckily, Zacks Premium offers several different ways to do both.The research service features daily updates of the Zacks Rank and Zacks Industry Rank, full access to the Zacks #1 Rank List, Equity Research reports, and Premium stock screens, all of which will help you become a smarter, more confident investor.It also includes access to the Zacks Style Scores. ...

Industry Overview - The Zacks Pollution Control industry is experiencing strong demand for air pollution control products due to increasing greenhouse gas emissions and associated health risks [1] - Stringent regulations and emission standards globally are expected to continue driving demand for industry participants [1][5] Major Trends - Rapid urbanization and rising greenhouse gas emissions from the industrial sector are increasing the demand for air quality control systems [4] - Public awareness of health risks related to air pollution is fueling market growth [4] - The expansion of infrastructure projects in developing countries is boosting demand for pollution abatement equipment [4] - Strict emission standards and laws implemented globally are augmenting demand for pollution-control equipment [5] - The adoption of AI and IoT in industrial processes is enabling real-time monitoring of air pollution sources, driving demand for pollution abatement technologies [5] Challenges - The growing preference for renewable energy sources is restraining demand for industrial emission-abatement products [6] - Supportive government policies for renewable energy and the rapid adoption of electric vehicles are negatively impacting the industry's prospects [6] Industry Performance - The Zacks Pollution Control industry has underperformed the broader Industrial Products sector and the S&P 500 index over the past year, declining 7.3% compared to the sector's increase of 9.6% and the S&P 500's increase of 15.5% [9] Valuation - The industry is currently trading at a forward P/E ratio of 20.20X, compared to the S&P 500's 22.85X and the sector's 19.81X [12] Key Companies - **Atmus Filtration**: A leader in industrial filtration with a Zacks Rank 2 (Buy), has seen a 32.3% share price increase over the past year [17][18] - **Donaldson Company**: Engaged in manufacturing filtration systems, holds a Zacks Rank 2, and has gained 1% in the past year [21][22] - **Fuel Tech**: Develops air pollution control technology, with a Zacks Rank 2 and a 163.9% share price increase over the past year [25][26] - **Tetra Tech**: Provides consulting and engineering services, holds a Zacks Rank 3 (Hold), and has seen a 20.1% increase in shares over the past six months despite a 23.5% decline over the past year [29][30]

Core Viewpoint - Investors are seeking growth stocks that can deliver above-average growth and exceptional returns, but identifying such stocks can be challenging due to inherent volatility and risks [1] Group 1: Growth Stock Identification - The Zacks Growth Style Score system helps identify promising growth stocks by analyzing real growth prospects beyond traditional metrics [2] - Tetra Tech (TTEK) is currently recommended due to its favorable Growth Score and top Zacks Rank [2] Group 2: Earnings Growth - Earnings growth is a critical factor for attracting investor attention, with double-digit growth being particularly desirable [4] - Tetra Tech has a historical EPS growth rate of 18.8%, with projected EPS growth of 19.8% this year, significantly outperforming the industry average of 6.5% [5] Group 3: Cash Flow Growth - Higher-than-average cash flow growth is essential for growth-oriented companies, enabling them to expand without relying on external funding [6] - Tetra Tech's year-over-year cash flow growth is 14.7%, exceeding the industry average of 9% [6] - The company's annualized cash flow growth rate over the past 3-5 years is 14%, compared to the industry average of 12.5% [7] Group 4: Earnings Estimate Revisions - Positive trends in earnings estimate revisions correlate strongly with near-term stock price movements [8] - Tetra Tech's current-year earnings estimates have been revised upward, with the Zacks Consensus Estimate increasing by 3.1% over the past month [9] Group 5: Overall Assessment - Tetra Tech has achieved a Zacks Rank of 2 and a Growth Score of A, indicating its potential as an outperformer and a solid choice for growth investors [11]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Unaudited consolidated financial statements and notes detail accounting, revenue, acquisitions, goodwill, and debt for Q3 FY2025 [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets%20as%20of%20June%2029%2C%202025%20and%20September%2029%2C%202024) Total assets and liabilities increased due to current assets, goodwill, and debt; stockholders' equity slightly decreased Consolidated Balance Sheets | Metric | June 29, 2025 (in thousands) | September 29, 2024 (in thousands) | | :-------------------------- | :--------------------------- | :-------------------------------- | | Total Assets | $4,353,447 | $4,192,676 | | Total Liabilities | $2,631,151 | $2,352,263 | | Total Stockholders' Equity | $1,742,096 | $1,830,413 | | Goodwill | $2,084,872 | $2,046,569 | [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income%20for%20the%20Three%20and%20Nine%20Months%20Ended%20June%2029%2C%202025%20and%20June%2030%2C%202024) Revenue increased, but nine-month net income decreased significantly due to legal contingency and goodwill impairment charges Consolidated Statements of Income (Three Months Ended) | Metric | June 29, 2025 (in thousands) | June 30, 2024 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Revenue | $1,369,816 | $1,344,323 | $25,493 | 1.9% | | Gross profit | $251,539 | $223,172 | $28,367 | 12.7% | | Income from operations | $164,986 | $128,630 | $36,356 | 28.3% | | Net income attributable to Tetra Tech | $113,844 | $85,810 | $28,034 | 32.7% | | Diluted EPS | $0.43 | $0.32 | $0.11 | 34.4% | Consolidated Statements of Income (Nine Months Ended) | Metric | June 29, 2025 (in thousands) | June 30, 2024 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Revenue | $4,112,490 | $3,824,205 | $288,285 | 7.5% | | Gross profit | $687,197 | $621,165 | $66,032 | 10.6% | | Income from operations | $227,114 | $357,395 | $(130,281) | (36.5)% | | Net income attributable to Tetra Tech | $119,979 | $237,228 | $(117,249) | (49.4)% | | Diluted EPS | $0.45 | $0.88 | $(0.43) | (48.9)% | - The nine-month income from operations and net income were significantly impacted by **$115 million** in legal contingency costs and **$92.4 million** in goodwill impairment in fiscal **2025**[10](index=10&type=chunk) [Consolidated Statements of Comprehensive Income](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20for%20the%20Three%20and%20Nine%20Months%20Ended%20June%2029%2C%202025%20and%20June%2030%2C%202024) Comprehensive income adjusts net income for other items, mainly foreign currency translation, for the three and nine months Comprehensive Income (Three Months Ended) | Metric | June 29, 2025 (in thousands) | June 30, 2024 (in thousands) | | :----------------------------------- | :--------------------------- | :--------------------------- | | Net income | $113,883 | $85,824 | | Foreign currency translation adjustment, net of tax | $88,063 | $1,854 | | Comprehensive income attributable to Tetra Tech, net of tax | $201,907 | $87,667 | Comprehensive Income (Nine Months Ended) | Metric | June 29, 2025 (in thousands) | June 30, 2024 (in thousands) | | :----------------------------------- | :--------------------------- | :--------------------------- | | Net income | $120,073 | $237,263 | | Foreign currency translation adjustment, net of tax | $13,791 | $40,616 | | Comprehensive income attributable to Tetra Tech, net of tax | $133,737 | $277,834 | [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20Nine%20Months%20Ended%20June%2029%2C%202025%20and%20June%2030%2C%202024) Operating cash flow increased significantly; financing cash use rose substantially due to share repurchases Cash Flows (Nine Months Ended) | Metric | June 29, 2025 (in thousands) | June 30, 2024 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Net cash provided by operating activities | $356,838 | $253,110 | $103,728 | 41.0% | | Net cash used in investing activities | $(108,273) | $(104,308) | $(3,965) | (3.8)% | | Net cash used in financing activities | $(234,987) | $(107,458) | $(127,529) | (118.7)% | | Net increase in cash and cash equivalents | $10,144 | $43,490 | $(33,346) | (76.7)% | - The increase in operating cash flows was primarily due to higher operating earnings, increased cash collections on terminated USAID programs, and lower income tax payments, partially offset by a **$57 million** legal contingency payment[153](index=153&type=chunk) - The significant increase in cash used in financing activities was driven by **$200 million** in share repurchases in fiscal **2025**, which were not present in the prior-year period[155](index=155&type=chunk) [Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity%20for%20the%20Three%20and%20Nine%20Months%20Ended%20June%2029%2C%202025%20and%20June%2030%2C%202024) Stockholders' equity changes reflect net income, comprehensive income, dividends, stock compensation, and repurchases Total Stockholders' Equity | Date | Amount (in thousands) | | :---------------- | :-------------------- | | June 29, 2025 | $1,742,096 | | September 29, 2024 | $1,830,413 | - Key changes for the nine months ended June 29, 2025, include net income of **$119,979 thousand**, other comprehensive income of **$13,758 thousand**, cash dividends paid of **$(47,992) thousand**, and stock repurchases of **$(201,497) thousand**[20](index=20&type=chunk) [Notes to Unaudited Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) Detailed notes explain accounting policies, revenue, acquisitions, goodwill, debt, and legal contingencies for financial statements [1. Basis of Presentation](index=9&type=section&id=1.%20Basis%20of%20Presentation) Unaudited consolidated financial statements follow U.S. GAAP; a five-for-one stock split was retroactively applied - Unaudited consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information[23](index=23&type=chunk) - A **five-for-one** stock split, approved on July 29, 2024, and effective September 6, 2024, has been retroactively applied to all prior-period share or per share amounts[25](index=25&type=chunk) [2. Recent Accounting Pronouncements](index=9&type=section&id=2.%20Recent%20Accounting%20Pronouncements) Reviewed recent FASB ASUs on segment reporting, income taxes, and debt; most are not expected to have a material impact - ASU **2023-07** (Segment Reporting) is effective for fiscal years beginning after December 15, 2023 (fiscal **2025** year-end for the company), and is not expected to have a material impact[26](index=26&type=chunk) - ASU **2023-09** (Income Taxes) is effective for annual periods beginning after December 15, 2024 (fiscal **2026**), and is not expected to have a material impact[27](index=27&type=chunk) - ASU **2024-04** (Debt with Conversion and Other Options) is effective for annual periods beginning after December 15, 2025 (fiscal **2027**), and the company is currently evaluating its impact[29](index=29&type=chunk) [3. Revenue and Contract Balances](index=9&type=section&id=3.%20Revenue%20and%20Contract%20Balances) Revenue disaggregated by client sector and contract type shows growth in U.S. federal/state sectors; contract balances increased Revenue by Client Sector (Nine Months Ended) | Client Sector | June 29, 2025 (in thousands) | June 30, 2024 (in thousands) | Change ($) | Change (%) | | :-------------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | U.S. federal government | $1,367,899 | $1,221,320 | $146,579 | 12.0% | | U.S. state and local government | $599,606 | $444,877 | $154,729 | 34.8% | | U.S. commercial | $666,027 | $665,675 | $352 | 0.1% | | International | $1,478,958 | $1,492,333 | $(13,375) | (0.9)% | | **Total** | **$4,112,490** | **$3,824,205** | **$288,285** | **7.5%** | Net Contract Liabilities | Metric | June 29, 2025 (in thousands) | September 29, 2024 (in thousands) | | :-------------------- | :--------------------------- | :-------------------------------- | | Net contract liabilities | $(253,691) | $(222,060) | - Remaining Unsatisfied Performance Obligation (RUPO) was **$4.2 billion** at June 29, 2025, with **$3.0 billion** expected to be satisfied within **12 months**[39](index=39&type=chunk)[40](index=40&type=chunk) [4. Acquisitions](index=11&type=section&id=4.%20Acquisitions) Fiscal 2025 acquisitions (CAW, SAGE) for CIG totaled $147 million; fiscal 2024 acquisitions (LST, CCE) for GSG totaled $120 million - Fiscal **2025** acquisitions: Carron + Walsh (Ireland) and SAGE Group Holdings (Australia), both integrated into the Commercial/International Services Group (CIG) segment. Aggregate fair value of purchase price: **$147 million**[41](index=41&type=chunk)[42](index=42&type=chunk)[43](index=43&type=chunk) - Fiscal **2024** acquisitions: LS Technologies (U.S. federal enterprise technology) and Convergence Controls & Engineering (process automation), both integrated into the Government Services Group (GSG) segment. Aggregate fair value of purchase price: **$120 million**[44](index=44&type=chunk) Contingent Earn-Out Liabilities | Metric | June 29, 2025 (in thousands) | June 30, 2024 (in thousands) | | :----------------------------------- | :--------------------------- | :--------------------------- | | Ending balance | $69,731 | $70,283 | - Total potential maximum outstanding contingent consideration related to acquisitions was **$124 million** as of June 29, 2025[52](index=52&type=chunk) [5. Goodwill and Intangible Assets](index=13&type=section&id=5.%20Goodwill%20and%20Intangible%20Assets) Goodwill increased from acquisitions but was impaired by $92.4 million due to USAID program cancellations; intangibles decreased Goodwill Balance by Segment | Segment | June 29, 2025 (in thousands) | September 29, 2024 (in thousands) | | :------ | :--------------------------- | :-------------------------------- | | GSG | $660,131 | $750,817 | | CIG | $1,424,741 | $1,295,752 | | Total | $2,084,872 | $2,046,569 | - A non-cash goodwill impairment charge of **$92.4 million** was recorded in the second quarter of fiscal **2025** for the Global Development Services (GDS) reporting unit, primarily due to the cancellation of USAID programs[53](index=53&type=chunk)[60](index=60&type=chunk) Net Intangible Assets | Metric | June 29, 2025 (in thousands) | September 29, 2024 (in thousands) | | :-------------------- | :--------------------------- | :-------------------------------- | | Intangible assets, net | $157,752 | $160,585 | - Amortization expense for identifiable intangible assets for the first nine months of fiscal **2025** was **$27.6 million**, compared to **$38.4 million** for the prior-year period[61](index=61&type=chunk) [6. Property and Equipment](index=15&type=section&id=6.%20Property%20and%20Equipment) Net property and equipment slightly decreased; depreciation expense also declined for the nine-month period Property and Equipment, Net | Metric | June 29, 2025 (in thousands) | September 29, 2024 (in thousands) | | :-------------------------- | :--------------------------- | :-------------------------------- | | Property and equipment, net | $70,302 | $73,065 | - Depreciation expense related to property and equipment for the first nine months of fiscal **2025** was **$16.1 million**, compared to **$18.3 million** for the fiscal **2024** period[63](index=63&type=chunk) [7. Stock Repurchase and Dividends](index=15&type=section&id=7.%20Stock%20Repurchase%20and%20Dividends) Board authorized an additional $500 million stock repurchase program; $200 million in shares repurchased in Q3 FY2025 - An additional **$500 million** stock repurchase program was authorized on May 5, 2025, bringing the total remaining balance under repurchase programs to **$647.8 million** at June 29, 2025[64](index=64&type=chunk) - In the first nine months of fiscal **2025**, **5,933,085 shares** were repurchased for a total cost of **$200.0 million**, compared to no repurchases in the prior-year period[64](index=64&type=chunk) Dividends Paid (Nine Months Ended) | Fiscal Year | Total Dividend Paid (in thousands) | | :---------- | :------------------------------- | | 2025 | $47,992 | | 2024 | $43,303 | [8. Leases](index=16&type=section&id=8.%20Leases) Operating leases for office spaces increased ROU assets and liabilities; total lease costs slightly rose for the nine-month period Operating Lease Balances | Metric | June 29, 2025 (in thousands) | September 29, 2024 (in thousands) | | :-------------------- | :--------------------------- | :-------------------------------- | | Right-of-use assets | $186,145 | $177,950 | | Total operating lease liabilities | $209,154 | $203,514 | - Total lease cost for the first nine months of fiscal **2025** was **$75.4 million**, compared to **$73.2 million** for the fiscal **2024** period[69](index=69&type=chunk) - The weighted-average remaining lease term for operating leases was **4.2 years** at June 29, 2025[69](index=69&type=chunk) [9. Employee Benefits](index=17&type=section&id=9.%20Employee%20Benefits) Remaining Canadian Emergency Wage Subsidy benefits were distributed; no outstanding applications for further government assistance - Approximately **$10 million** of remaining Canadian Emergency Wage Subsidy (CEWS) cash benefits were distributed to Canadian employees in the first quarter of fiscal **2025**[71](index=71&type=chunk) - The company has no outstanding applications for further government assistance[71](index=71&type=chunk) [10. Stockholders' Equity and Stock Compensation Plans](index=17&type=section&id=10.%20Stockholders%27%20Equity%20and%20Stock%20Compensation%20Plans) Stock-based compensation expense increased; PSUs and RSUs were awarded to directors, officers, and employees Stock-Based Compensation Expense | Period | Fiscal 2025 (in thousands) | Fiscal 2024 (in thousands) | | :---------------- | :------------------------- | :------------------------- | | Three Months Ended | $8,800 | $8,100 | | Nine Months Ended | $25,800 | $23,700 | - In the first nine months of fiscal **2025**, **233,789 performance share units** (PSUs) were awarded (performance-based, **3-year** vesting) and **488,093 restricted stock units** (RSUs) were awarded (time-based, **1-4 year** vesting)[72](index=72&type=chunk) [11. Earnings per Share ("EPS")](index=17&type=section&id=11.%20Earnings%20per%20Share%20%28%22EPS%22%29) Basic and diluted EPS calculations provided; diluted EPS decreased due to non-recurring charges; Convertible Notes had varying impact Earnings Per Share Attributable to Tetra Tech (Nine Months Ended) | Metric | June 29, 2025 | June 30, 2024 | | :----- | :------------ | :------------ | | Basic | $0.45 | $0.89 | | Diluted | $0.45 | $0.88 | - The Convertible Notes had a dilution impact on dilutive potential common shares for the third quarter of fiscal **2024** and the first nine months of fiscal **2025** and **2024**, but no impact for the third quarter of fiscal **2025** as the common stock price did not exceed the conversion price[74](index=74&type=chunk) [12. Income Taxes](index=18&type=section&id=12.%20Income%20Taxes) Effective tax rate significantly higher due to non-deductible goodwill impairment and legal contingency charges; adjusted rates stable Effective Tax Rates (Nine Months Ended) | Period | Effective Tax Rate | | :----- | :----------------- | | FY2025 | 40.9% | | FY2024 | 27.7% | - The fiscal **2025** effective tax rate was impacted by **$58.3 million** of non-deductible goodwill impairment and **$31.3 million** of non-tax-deductible legal contingency charges[76](index=76&type=chunk) - Excluding these impacts, the adjusted effective tax rates were **27.6%** in fiscal **2025** and **27.2%** in fiscal **2024**[76](index=76&type=chunk) Liability for Uncertain Tax Positions | Date | Amount (in thousands) | | :---------------- | :-------------------- | | June 29, 2025 | $52,300 | | September 29, 2024 | $50,100 | [13. Reportable Segments](index=18&type=section&id=13.%20Reportable%20Segments) Operations managed under GSG and CIG; GSG grew significantly, CIG revenue flat but operating income increased; Corporate impacted by charges Revenue by Reportable Segment (Nine Months Ended) | Segment | June 29, 2025 (in thousands) | June 30, 2024 (in thousands) | Change ($) | Change (%) | | :------ | :--------------------------- | :--------------------------- | :--------- | :--------- | | GSG | $2,086,229 | $1,812,721 | $273,508 | 15.1% | | CIG | $2,082,818 | $2,063,879 | $18,939 | 0.9% | Income from Operations by Reportable Segment (Nine Months Ended) | Segment | June 29, 2025 (in thousands) | June 30, 2024 (in thousands) | Change ($) | Change (%) | | :-------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | GSG | $246,112 | $198,652 | $47,460 | 23.9% | | CIG | $250,550 | $233,821 | $16,729 | 7.2% | | Corporate | $(269,548) | $(75,078) | $(194,470) | (259.0)% | - The Corporate Segment's operating income for the first nine months of fiscal **2025** includes a **$115.0 million** non-recurring charge related to legal contingencies and a **$92.4 million** non-cash goodwill impairment charge[82](index=82&type=chunk) [14. Long-Term Debt](index=19&type=section&id=14.%20Long-Term%20Debt) Long-term debt increased; new $1.5 billion Amended Credit Agreement refinanced existing debt; company complies with covenants Long-Term Debt | Metric | June 29, 2025 (in thousands) | September 29, 2024 (in thousands) | | :----------- | :--------------------------- | :-------------------------------- | | Long-term debt | $862,483 | $812,634 | - The company has **$575.0 million** in Convertible Notes, issued in August **2023**, bearing interest at **2.25%** per annum and maturing in August **2028**[85](index=85&type=chunk) - A new **$1.5 billion** Fourth Amended and Restated Credit Agreement was entered into on May 5, 2025, maturing in May **2030**, comprising term loans and a revolving credit facility[93](index=93&type=chunk) - At June 29, 2025, outstanding borrowings under the Amended Credit Agreement totaled **$300 million**, and the company was in compliance with debt covenants (Consolidated Leverage Ratio of **1.31x** and Consolidated Interest Coverage Ratio of **16.67x**)[95](index=95&type=chunk)[96](index=96&type=chunk) [15. Fair Value Measurements](index=22&type=section&id=15.%20Fair%20Value%20Measurements) Assets and liabilities classified by fair value levels; contingent earn-out liabilities use Level 3 inputs; debt is Level 2 - Contingent earn-out liabilities are measured at fair value on a recurring basis using significant unobservable inputs classified within Level **3** of the fair value hierarchy[98](index=98&type=chunk) - The estimated fair value of the **$575 million** Convertible Notes was approximately **$644 million** at June 29, 2025, and is considered a Level **2** measurement[100](index=100&type=chunk) [16. Reclassifications Out of Accumulated Other Comprehensive Income](index=23&type=section&id=16.%20Reclassifications%20Out%20of%20Accumulated%20Other%20Comprehensive%20Income) Accumulated other comprehensive income improved, primarily from foreign currency translation adjustments Accumulated Other Comprehensive Income (Loss) | Date | Amount (in thousands) | | :---------------- | :-------------------- | | June 29, 2025 | $(65,117) | | September 29, 2024 | $(78,875) | - Net current-period other comprehensive income for the nine months ended June 29, 2025, was **$13.8 million**, primarily driven by foreign currency translation adjustments[102](index=102&type=chunk) [17. Commitments and Contingencies](index=23&type=section&id=17.%20Commitments%20and%20Contingencies) TtEC settled False Claims Act and CERCLA claims for $97 million, resulting in a $115 million charge; seeking insurance reimbursement - TtEC entered into a settlement agreement with the United States for **$97 million** (**$57 million** for FCA claims, **$40 million** for CERCLA claims) to resolve litigation related to environmental remediation services[106](index=106&type=chunk) - A **$115.0 million** charge to operating income was recorded in the first quarter of fiscal **2025**, comprising **$97.0 million** for the settlement and **$18.0 million** estimated for ancillary claims[110](index=110&type=chunk) - TtEC has initiated litigation with its insurance carrier regarding the potential payment or reimbursement of a significant portion of the settlement amounts[108](index=108&type=chunk) [18. Related Party Transactions](index=24&type=section&id=18.%20Related%20Party%20Transactions) Company provides services to unconsolidated joint ventures, generating revenue and incurring reimbursable costs; related balances reported Revenue and Reimbursable Costs from Unconsolidated Joint Ventures (Nine Months Ended) | Metric | June 29, 2025 (in thousands) | June 30, 2024 (in thousands) | | :---------------------- | :--------------------------- | :--------------------------- | | Revenue | $48,764 | $50,157 | | Related reimbursable costs | $43,578 | $46,025 | Related Party Balances | Metric | June 29, 2025 (in thousands) | September 29, 2024 (in thousands) | | :-------------------- | :--------------------------- | :-------------------------------- | | Accounts receivable, net | $13,368 | $15,612 | | Contract assets | $1,184 | $1,625 | | Contract liabilities | $(5,511) | $(4,237) | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Overview of business, acquisitions, financial performance, liquidity, and risks, highlighting non-recurring charges and growth initiatives [FORWARD-LOOKING STATEMENTS](index=25&type=section&id=FORWARD-LOOKING%20STATEMENTS) Cautionary statement on forward-looking statements, subject to risks and uncertainties that may cause actual results to differ materially - Forward-looking statements are based on current expectations, estimates, forecasts, and projections, and are subject to risks, uncertainties, and assumptions[112](index=112&type=chunk) - Readers are cautioned that actual results may differ materially and adversely from those expressed in any forward-looking statements[112](index=112&type=chunk) [GENERAL OVERVIEW](index=25&type=section&id=GENERAL%20OVERVIEW) Global leader in consulting and engineering for water, environment, and infrastructure, leveraging AI; serves diverse clients worldwide with seasonal trends - Tetra Tech is a leading global provider of high-end consulting and engineering services focused on water, environment, and sustainable infrastructure, utilizing advanced analytics, AI, machine learning, and digital technology[113](index=113&type=chunk) - The company operates in over **100** countries with **30,000 associates**, serving U.S. federal, U.S. state and local government, U.S. commercial, and international clients[113](index=113&type=chunk) Percentage of Revenue by Client Sector (Nine Months Ended) | Client Sector | June 29, 2025 | June 30, 2024 | | :-------------------------- | :------------ | :------------ | | U.S. federal government | 33.2% | 32.0% | | U.S. state and local government | 14.6% | 11.6% | | U.S. commercial | 16.2% | 17.4% | | International | 36.0% | 39.0% | - The business experiences seasonal trends, with revenue and operating income typically lower in the first half of the fiscal year due to holidays and inclement weather[120](index=120&type=chunk) [ACQUISITIONS AND DIVESTITURES](index=27&type=section&id=ACQUISITIONS%20AND%20DIVESTITURES) Acquisitions are key to growth, funded by cash/debt/equity; recent acquisitions for CIG and GSG segments; immaterial divestitures completed - Acquisitions are a key component of the growth strategy, aiming to strengthen market leadership, technology, and geographic presence[121](index=121&type=chunk)[122](index=122&type=chunk) - Fiscal **2025** acquisitions: Carron + Walsh (Ireland) and SAGE Group Holdings (Australia), both for the CIG segment[123](index=123&type=chunk) - Fiscal **2024** acquisitions: LS Technologies (U.S. federal enterprise technology) and Convergence Controls & Engineering (process automation), both for the GSG segment[124](index=124&type=chunk) - The company divested an immaterial subsidiary in South America and a line of business in Australia in the first quarter of fiscal **2025**[126](index=126&type=chunk) [OVERVIEW OF RESULTS AND BUSINESS TRENDS](index=28&type=section&id=OVERVIEW%20OF%20RESULTS%20AND%20BUSINESS%20TRENDS) Total revenue grew 7.5% driven by U.S. federal and state/local sectors; USAID cancellations expected to impact Q4 federal revenue - Total revenue growth for the first nine months of fiscal **2025** was **7.5%** (**6.6%** excluding recent acquisitions)[127](index=127&type=chunk) Revenue Growth by Client Sector (Nine Months Ended June 29, 2025 vs. June 30, 2024) | Client Sector | Change (%) | Primary Driver | | :-------------------------- | :--------- | :------------- | | U.S. federal government | 12.0% | Increased disaster response work and $35 million from recent acquisitions. | | U.S. state and local government | 34.8% | Increased disaster response activity and continued investment in clean drinking water. | | U.S. commercial | 0.1% | Increased environmental services, offset by reduced renewable energy revenue. | | International | (0.9)% | Lower infrastructure work in Australia, partially offset by increased water planning and design in the United Kingdom. | - The cancellation of **83%** of USAID programs due to Executive Order **14169** is expected to result in significantly lower USAID revenue in the fourth quarter of fiscal **2025**[130](index=130&type=chunk) [RESULTS OF OPERATIONS](index=30&type=section&id=RESULTS%20OF%20OPERATIONS) Consolidated revenue increased, but nine-month net income and diluted EPS decreased due to non-recurring charges; adjusted metrics show growth [Consolidated Results of Operations](index=30&type=section&id=Consolidated%20Results%20of%20Operations) Consolidated revenue grew 7.5%; reported income and net income decreased due to legal contingency and goodwill impairment; adjusted metrics grew strongly Consolidated Financial Performance (Nine Months Ended) | Metric | June 29, 2025 (in thousands) | June 30, 2024 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Revenue | $4,112,490 | $3,824,205 | $288,285 | 7.5% | | Revenue, net of subcontractor costs | $3,454,051 | $3,177,377 | $276,674 | 8.7% | | Income from operations | $227,114 | $357,395 | $(130,281) | (36.5)% | | Net income attributable to Tetra Tech | $119,979 | $237,228 | $(117,249) | (49.4)% | | Diluted EPS | $0.45 | $0.88 | $(0.43) | (48.9)% | Adjusted Financial Performance (Nine Months Ended) | Metric | June 29, 2025 (in thousands) | June 30, 2024 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Adjusted income from operations | $432,175 | $357,872 | $74,303 | 20.8% | | Adjusted EPS | $1.11 | $0.88 | $0.23 | 26.1% | - Net interest expense decreased by **18.3%** for the nine months ended June 29, 2025, due to lower average interest rates and borrowings[141](index=141&type=chunk) - The effective tax rate for the nine months ended June 29, 2025, was **40.9%**, significantly impacted by non-deductible goodwill impairment and legal contingency charges[142](index=142&type=chunk) [Segment Results of Operations](index=32&type=section&id=Segment%20Results%20of%20Operations) Details GSG and CIG performance; GSG saw significant growth, CIG maintained flat revenue but improved operating income [Government Services Group (GSG)](index=32&type=section&id=Government%20Services%20Group) GSG revenue and operating income increased significantly due to U.S. government disaster response, despite USAID cancellations; margin improved GSG Financial Performance (Nine Months Ended) | Metric | June 29, 2025 (in thousands) | June 30, 2024 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Revenue | $2,086,229 | $1,812,721 | $273,508 | 15.1% | | Revenue, net of subcontractor costs | $1,642,600 | $1,397,400 | $245,200 | 17.5% | | Income from operations | $246,112 | $198,652 | $47,460 | 23.9% | - Operating margin (based on revenue, net of subcontractor costs) for the first nine months of fiscal **2025** was **15.0%**, up from **14.2%** in fiscal **2024**, reflecting improved project execution and labor utilization[147](index=147&type=chunk) - Revenue growth was partially offset by a **$75.7 million** decline related to USAID contract cancellations in the third quarter of fiscal **2025**[146](index=146&type=chunk) [Commercial/International Group (CIG)](index=33&type=section&id=Commercial%2FInternational%20Group) CIG revenue flat, but revenue net of subcontractor costs and operating income grew, driven by UK activities; margin improved CIG Financial Performance (Nine Months Ended) | Metric | June 29, 2025 (in thousands) | June 30, 2024 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Revenue | $2,082,818 | $2,063,879 | $18,939 | 0.9% | | Revenue, net of subcontractor costs | $1,811,451 | $1,779,977 | $31,474 | 1.8% | | Income from operations | $250,550 | $233,821 | $16,729 | 7.2% | - Operating margin (based on revenue, net of subcontractor costs) for the first nine months of fiscal **2025** was **13.8%**, up from **13.1%** in fiscal **2024**, reflecting a focus on high-end consulting services and improved project execution[150](index=150&type=chunk) - Growth was primarily due to increased planning and design activities in the United Kingdom, partially offset by lower infrastructure activities in Australia[149](index=149&type=chunk) [Backlog](index=33&type=section&id=Backlog) Backlog decreased by $1.1 billion, or 20.4%, to $4.277 billion, primarily due to USAID contract cancellations Backlog | Metric | June 29, 2025 (in millions) | September 29, 2024 (in millions) | | :----- | :-------------------------- | :------------------------------- | | RUPO | $4,240 | $5,331 | | Backlog | $4,277 | $5,376 | - Backlog decreased by **$1.1 billion**, or **20.4%**, primarily due to the aforementioned cancellation of USAID contracts[151](index=151&type=chunk) [Financial Condition, Liquidity and Capital Resources](index=33&type=section&id=Financial%20Condition%2C%20Liquidity%20and%20Capital%20Resources) Strong liquidity with sufficient cash, operating cash flows, and borrowing capacity; debt restructured; stock repurchases and dividends continue [Capital Requirements](index=33&type=section&id=Capital%20Requirements) Existing cash, operating cash flows, and credit facility borrowing capacity are sufficient for at least the next 12 months - At June 29, 2025, the company had **$242.8 million** in cash and cash equivalents and access to an additional **$999.3 million** in borrowings under its credit facility[152](index=152&type=chunk) - Primary sources of liquidity are cash flows from operations and borrowings under credit facilities[152](index=152&type=chunk) [Cash and Cash Equivalents](index=34&type=section&id=Cash%20and%20Cash%20Equivalents) Cash and cash equivalents increased by 4.4% to $242.8 million at June 29, 2025 Cash and Cash Equivalents | Date | Amount (in thousands) | | :---------------- | :-------------------- | | June 29, 2025 | $242,833 | | September 29, 2024 | $232,689 | [Operating Activities](index=34&type=section&id=Operating%20Activities) Net cash from operating activities increased by 41.0% due to higher earnings, USAID collections, and lower taxes, offset by legal payment Net Cash Provided by Operating Activities (Nine Months Ended) | Period | Amount (in thousands) | | :----- | :-------------------- | | FY2025 | $356,838 | | FY2024 | $253,110 | - The increase was primarily due to higher operating earnings, increased cash collections on terminated USAID programs, and lower income tax payments, partially offset by a **$57 million** payment for legal contingency[153](index=153&type=chunk) [Investing Activities](index=34&type=section&id=Investing%20Activities) Net cash used in investing activities slightly increased, primarily due to net payments for CAW and SAGE acquisitions Net Cash Used in Investing Activities (Nine Months Ended) | Period | Amount (in thousands) | | :----- | :-------------------- | | FY2025 | $(108,273) | | FY2024 | $(104,308) | - Cash used in investing activities for fiscal **2025** includes net payments of **$97.7 million** for the CAW and SAGE acquisitions[154](index=154&type=chunk) [Financing Activities](index=34&type=section&id=Financing%20Activities) Net cash used in financing activities significantly increased, reflecting $200 million in share repurchases, partially offset by net borrowings Net Cash Used in Financing Activities (Nine Months Ended) | Period | Amount (in thousands) | | :----- | :-------------------- | | FY2025 | $(234,987) | | FY2024 | $(107,458) | - The increase in cash used in financing activities reflects **$200 million** in share repurchases in fiscal **2025**, which were largely funded by operating cash flows[155](index=155&type=chunk) [Debt Financing](index=34&type=section&id=Debt%20Financing) New $1.5 billion Amended Credit Agreement refinanced debt; $575 million Convertible Notes; company complies with debt covenants - A new **$1.5 billion** Fourth Amended and Restated Credit Agreement was entered into on May 5, 2025, maturing in May **2030**, which includes a **$250 million 3-year** term loan, a **$250 million 5-year** term loan, and a **$600 million** revolving credit facility[158](index=158&type=chunk) - At June 29, 2025, **$300 million** was outstanding under the Amended Credit Agreement, consisting of **$100 million** under the **3Y** Term Loan Facility and **$200 million** under the **5Y** Term Loan Facility[161](index=161&type=chunk) - The company has **$575.0 million** in Convertible Notes, issued in August **2023**, bearing interest at **2.25%** per annum and maturing in August **2028**[157](index=157&type=chunk) - At June 29, 2025, the company was in compliance with debt covenants, with a Consolidated Leverage Ratio of **1.31x** (maximum **3.50x**) and a Consolidated Interest Coverage Ratio of **16.67x** (minimum **3.00x**)[162](index=162&type=chunk) [Inflation](index=35&type=section&id=Inflation) Operations not materially affected by inflation due to project duration and ability to negotiate prices - Operations have not been materially adversely affected by inflation or changing prices due to the average duration of projects and the ability to negotiate prices[164](index=164&type=chunk) [Stock repurchases](index=35&type=section&id=Stock%20repurchases) Additional $500 million stock repurchase program authorized; $200 million in shares repurchased in Q3 FY2025; $647.8 million remaining - An additional **$500 million** stock repurchase program was authorized on May 5, 2025, supplementing a previous **$400 million** program[165](index=165&type=chunk) - In the first nine months of fiscal **2025**, **5,933,085 shares** were repurchased for a total cost of **$200.0 million**[165](index=165&type=chunk) - At June 29, 2025, the remaining balance under the stock repurchase programs was **$647.8 million**[165](index=165&type=chunk) [Dividends](index=35&type=section&id=Dividends) Quarterly cash dividends declared; $47.992 million paid in Q3 FY2025; subsequent dividend of $0.065 per share declared Total Dividends Paid (First Nine Months of Fiscal 2025) | Period | Total Dividend Paid (in thousands) | | :----- | :------------------------------- | | FY2025 | $47,992 | - On July 28, 2025, a quarterly cash dividend of **$0.065** per share was declared, payable on August 29, 2025[166](index=166&type=chunk) [Income Taxes](index=36&type=section&id=Income%20Taxes) Company evaluates deferred tax assets and maintains a liability for uncertain tax positions, which slightly increased Liability for Income Taxes Associated with Uncertain Tax Positions | Date | Amount (in thousands) | | :---------------- | :-------------------- | | June 29, 2025 | $52,300 | | September 29, 2024 | $50,100 | [Off-Balance Sheet Arrangements](index=36&type=section&id=Off-Balance%20Sheet%20Arrangements) Letters of credit, bank guarantees, and performance guarantees support projects and insurance; no material adverse effect expected - The company uses letters of credit and bank guarantees to support project performance and insurance programs, with **$0.7 million** outstanding under the Amended Credit Agreement and **$43.9 million** under additional facilities at June 29, 2025[171](index=171&type=chunk) - The company provides guarantees and indemnifications related to its services and is jointly and severally liable in certain unconsolidated subsidiaries, joint ventures, and jointly executed contracts[171](index=171&type=chunk) [Critical Accounting Policies](index=36&type=section&id=Critical%20Accounting%20Policies) No material changes to critical accounting policies as reported in the fiscal 2024 Annual Report on Form 10-K - There have been no material changes in the company's critical accounting policies as reported in its fiscal **2024** Annual Report on Form **10-K**[172](index=172&type=chunk) [New Accounting Pronouncements](index=37&type=section&id=New%20Accounting%20Pronouncements) Information on recent accounting pronouncements is provided in Note 2 to the Consolidated Financial Statements - Information regarding recent accounting pronouncements is provided in Note **2** to the Consolidated Financial Statements[172](index=172&type=chunk) [Financial Market Risks](index=37&type=section&id=Financial%20Market%20Risks) Exposed to interest rate risk from credit facilities and foreign currency risk (CAD, AUD, EUR, GBP); no derivative trading - The company is exposed to interest rate risk under its Amended Credit Agreement, with **$300 million** in outstanding borrowings at June 29, 2025, at a weighted-average interest rate of **5.66%** for the first nine months of fiscal **2025**[174](index=174&type=chunk) - The company is subject to foreign currency transaction and translation risk, primarily related to the Canadian and Australian dollars, the Euro, and the British Pound[175](index=175&type=chunk) - For the first nine months of fiscal **2025**, the company reported a foreign currency loss of **$2.3 million** (vs. **$1.0 million** in prior year) and an increase in equity of **$13.8 million** (vs. **$40.6 million** in prior year) due to foreign exchange rate translation[175](index=175&type=chunk)[176](index=176&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Incorporates by reference the 'Financial Market Risks' section from Item 2 for market risk disclosures - Refers to the 'Financial Market Risks' section in Item **2** for disclosures about market risk[177](index=177&type=chunk) [Item 4. Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective; no material changes in internal control over financial reporting during the quarter - Disclosure controls and procedures were effective as of June 29, 2025[178](index=178&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended June 29, 2025[179](index=179&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=37&type=section&id=Item%201.%20Legal%20Proceedings) Refers to Note 17, 'Commitments and Contingencies,' in the 'Notes to Consolidated Financial Statements' for detailed information regarding legal proceedings - Refers to Note **17**, 'Commitments and Contingencies,' for information regarding legal proceedings[180](index=180&type=chunk) [Item 1A. Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors from 2024 10-K; updated interest and exchange rate risk disclosures in Item 2 - No material changes in risk factors disclosed in the **2024** Annual Report on Form **10-K**[181](index=181&type=chunk) - Updated disclosures for interest and exchange rate risks are provided in the 'Financial Market Risks' section of Item **2**[181](index=181&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=38&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Additional $500 million stock repurchase program authorized; $200 million in shares repurchased; $647.8 million remaining - An additional **$500 million** stock repurchase program was authorized on May 5, 2025[182](index=182&type=chunk) - In the first nine months of fiscal **2025**, **5,933,085 shares** were repurchased for a total cost of **$200.0 million**[182](index=182&type=chunk) - At June 29, 2025, the remaining balance under the stock repurchase programs was **$647.8 million**[182](index=182&type=chunk) [Item 4. Mine Safety Disclosures](index=38&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Company may act as a mining operator; mine safety information is provided in Exhibit 95 - The company may act as a mining operator as defined under the Mine Act where it may be an independent contractor performing services or construction at such mine[184](index=184&type=chunk) - Information concerning mine safety violations or other regulatory matters is included in Exhibit **95**[184](index=184&type=chunk) [Item 5. Other Information](index=38&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted, modified, or terminated Rule 10b5-1 trading plans during Q3 FY2025 - None of the company's directors or officers adopted, modified, or terminated any Rule **10b5-1** trading plans or non-Rule **10b5-1** trading arrangements during the third quarter of fiscal **2025**[185](index=185&type=chunk) [Item 6. Exhibits](index=38&type=section&id=Item%206.%20Exhibits) Lists filed exhibits including CEO/CFO certifications, mine safety disclosure, and Inline XBRL financial information - Exhibits include Chief Executive Officer and Chief Financial Officer Certifications (**31.1**, **31.2**, **32.1**, **32.2**)[188](index=188&type=chunk) - Mine Safety Disclosure is filed as Exhibit **95**[188](index=188&type=chunk) - The Quarterly Report on Form **10-Q** financial information is formatted in Inline eXtensible Business Reporting Language (Exhibit **101** and **104**)[188](index=188&type=chunk) SIGNATURES [SIGNATURES](index=40&type=section&id=SIGNATURES) Report signed by principal executive, financial, and accounting officers, certifying its submission - The report is signed by Dan L. Batrack (Chairman, Chief Executive Officer and President), Steven M. Burdick (Executive Vice President, Chief Financial Officer), and Brian N. Carter (Senior Vice President, Corporate Controller)[191](index=191&type=chunk)[192](index=192&type=chunk)

Core Viewpoint - Tetra Tech, Inc. reported strong third-quarter fiscal 2025 results, with adjusted earnings per share of 43 cents, exceeding both the Zacks Consensus Estimate and management's guidance range, reflecting robust performance across all segments [1][2]. Revenue & Segmental Performance - Tetra Tech generated revenues of $1.37 billion, a year-over-year increase of 1.9%, surpassing management's guidance of $1.10-$1.20 billion [2] - Adjusted net revenues were $1.15 billion, up 3.9% year over year, exceeding the Zacks Consensus Estimate of $1.14 billion [2] - The backlog at the end of the fiscal third quarter was $4.28 billion, down 18.2% year over year [3] - Revenues from U.S. Federal customers increased by 46% year over year, while U.S. Commercial sales decreased by 4% due to lower renewable energy sales [4] - U.S. State and Local sales rose by 30% year over year, driven by disaster response, while international sales decreased by 1% due to softness in Australia's infrastructure [5] - Government Services Group segment revenues were $429 million, up 29% year over year, while Commercial/International Services Group revenues totaled $633 million, a 2% increase [5] Margin Profile - Subcontractor costs totaled $216.8 million, down 7.6% from the previous year, while other adjusted costs of revenues were $901.5 million, up 1.7% [6] - Adjusted operating income increased by 37.2% year over year to $159.4 million, with an adjusted margin increase of 300 basis points to 11.6% [7] Balance Sheet and Cash Flow - At the end of the fiscal third quarter, Tetra Tech had cash and cash equivalents of $242.8 million, up from $232.7 million at the end of the previous quarter [8] - Long-term debt increased to $862.5 million from $812.6 million [8] - In the first nine months of fiscal 2025, net cash generated from operating activities was $356.8 million, compared to $253.1 million in the prior year [9] - Capital expenditure was $13.4 million, an increase of 18.3% year over year [9] Shareholder-Friendly Policies - Tetra Tech distributed dividends totaling $48 million in the first nine months of fiscal 2025, compared to $43.3 million in the previous year [11] - The company repurchased shares worth $200 million during the same period [11] Fiscal 2025 Outlook - For fiscal 2025, Tetra Tech anticipates net revenues in the range of $4.454-$4.554 billion, compared to earlier expectations of $4.400-$4.765 billion [12] - Adjusted earnings are projected to be $1.49-$1.54 per share, an increase from the previous estimate of $1.42-$1.52 [12] - For the fiscal fourth quarter, management estimates net revenues of $1.04-$1.1 billion and adjusted earnings of 38-43 cents per share [13]

Financial Performance - The company reported a record high operating income and earnings per share (EPS) for Q3 2025, with operating income at $159 million, an increase of 37% year-over-year, and EPS at $0.41, up 46% from the previous year [4][8] - Net revenue for the quarter reached $1.06 billion, reflecting an 11% increase compared to the same quarter last year [7][8] - Cash flows generated from operations for the trailing twelve months were $462 million, representing a 23% improvement over the previous period [19] Business Segment Performance - The Government Services Group (GSG) segment saw a 29% increase in net revenue year-over-year, totaling $429 million, with a margin of 19.9%, up 230 basis points from the prior year [8][9] - The Commercial International Group (CIG) segment reported revenue of $633 million, slightly up from the same quarter last year, with a margin of 15.2%, an increase of 130 basis points [9][10] - U.S. Federal work increased by 46% year-over-year, now representing about 25% of total business [11] Market Performance - International work accounted for 42% of total revenues, down 1% year-over-year, with growth in the UK and EU offset by declines in Australia [12][13] - State and local revenue grew by 30% year-over-year, with ongoing water programs up 18% excluding episodic disaster contributions [12][13] Company Strategy and Industry Competition - The company is focusing on higher-margin consulting and design work for water and environmental projects, aiming to improve EBITDA margins by 50 basis points annually [18][21] - Recent legislation has shifted funding priorities, with increased defense spending and infrastructure upgrades presenting new opportunities for the company [25][26] Management Commentary on Operating Environment and Future Outlook - Management expressed caution regarding the impacts of the new administration on business operations, particularly in the renewable energy sector [5][24] - The company anticipates a continued focus on disaster response and digital automation markets, with significant growth projected in these areas [27][28] Other Important Information - The company has a backlog of $4.15 billion, which is stable and has grown slightly from the previous quarter [15] - A dividend of 6.5 cents was approved, marking a 12% increase year-over-year, and the company has initiated a stock buyback program [21][22] Q&A Session Summary Question: Can you provide more details on the backlog? - Management noted that while the backlog appears flat year-over-year, the actual issuance of contracts has not changed, but there has been a slowdown in the conversion of task orders due to changes in government contracting [37][39] Question: How do you see the margin profile of your backlog today? - The company is seeing an increase in margins due to a shift towards higher value services and an increase in fixed-price contracts, supporting their long-term margin expansion goals [49][53] Question: What is the outlook for disaster recovery revenue in the fourth quarter? - Management indicated that contributions from disaster recovery work would be minimal in the fourth quarter, as most recovery efforts have been completed [60][62] Question: How does water market growth compare to infrastructure demand? - The company reported strong growth in water infrastructure projects, with state and local work growing at rates above 10%, driven by upgrades and new water treatment facilities [69][70] Question: What is the outlook for the U.S. commercial segment? - The U.S. commercial segment is expected to face challenges in the coming quarters, particularly in renewable energy, while government work is anticipated to drive growth [82][88]

Financial Data and Key Metrics Changes - The company achieved record highs for operating income and earnings per share (EPS) in Q3 2025, with operating income at $159 million, up 37% year-over-year, and EPS at $0.41, up 46% from the prior year [5][9] - Net revenue for the quarter reached $1.06 billion, an 11% increase from the same quarter last year [8] - Cash flows generated from operations improved by 23% year-over-year, totaling $462 million for the trailing twelve months [24] Business Line Data and Key Metrics Changes - The Government Services Group (GSG) segment saw a 29% increase in net revenue to $429 million, with a margin of 19.9%, up 230 basis points from the prior year [10] - The Commercial International Group (CIG) segment's revenue was $633 million, showing slight growth year-over-year, with a margin of 15.2%, up 130 basis points [11][12] - U.S. Federal work increased by 46% year-over-year, now representing about 25% of total business [14] Market Data and Key Metrics Changes - State and local revenue grew by 30% year-over-year, with ongoing water programs up 18% excluding episodic disaster contributions [15][16] - International work, representing 42% of revenues, was essentially flat year-over-year, with growth in the UK and EU offset by declines in Australia [17] Company Strategy and Development Direction - The company is focusing on higher-margin consulting and design work for water and environmental projects, aiming to increase net revenue while improving EBITDA margins by 50 basis points annually [22][23] - Recent legislation has shifted funding priorities, with significant increases in defense spending and infrastructure upgrades, presenting new opportunities for the company [31][32] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the impacts of the new administration and its effects on the business environment, particularly in federal contracting [6][30] - Despite near-term uncertainties, the company remains optimistic about long-term demand for high-end water, environmental, and sustainable infrastructure [38] Other Important Information - The company has a backlog of $4.15 billion, which is stable and has grown slightly from the previous quarter [19] - A dividend of 6.5 cents was approved, marking a 12% increase year-over-year, and the company has initiated a stock buyback program with $200 million repurchased so far in 2025 [26][28] Q&A Session Summary Question: Can you provide more details on the backlog? - Management noted that while the backlog was flat year-over-year, the actual issuance of contracts has not changed, but there has been a slowdown in the conversion of task orders due to changes in government contracting personnel [43][44] Question: How do you see the backlog impacting 2026? - Management anticipates a continuation of the current book and burn situation, with less visibility on future task orders but no expected impact on revenue [65][66] Question: What is the outlook for disaster recovery revenue in Q4? - Management expects minimal contribution from disaster recovery activities in Q4, as most recovery work has been completed [68] Question: How does water market growth compare to infrastructure demand? - Management indicated that water infrastructure work is growing at rates above 10%, with state and local work driving much of this growth [76][80] Question: What are the opportunities for increasing front-end advisory consulting work? - Management sees opportunities in energy development and renewable energy sectors, focusing on technical evaluations and permitting for new projects [83][85]

Financial Performance (Q3-25) - Net revenue increased by 11% to $1.06 billion compared to $0.96 billion in Q3-24, excluding USAID and DOS [5] - Operating income increased by 37% to $159 million compared to $116 million in Q3-24, excluding USAID and DOS [5] - Earnings per share (EPS) increased by 46% to $0.41 compared to $0.28 in Q3-24, excluding USAID and DOS [5] Segment Performance (Q3-25) - CIG segment net revenue increased by 2% to $633 million [7] - GSG segment net revenue increased by 29% to $429 million [7] - CIG operating income margin increased by 230 basis points to 19.9% [7] - GSG operating income margin increased by 130 basis points to 15.2% [7] Customer Revenue (Q3-25) - U.S Federal net revenue increased by 46% [8] - U.S State & Local net revenue increased by 30% [8] - U.S Commercial net revenue decreased by 4% [8] - International net revenue decreased by 1% [8] Financial Overview (FY25 YTD) - Net revenue increased by 9% to $3.454 billion [14] - EBITDA increased by 15% to $476 million [15] - Operating income increased by 21% to $432 million [16] - Diluted EPS increased by 26% to $1.11 [16] Backlog - Q3-25 Backlog is $3.09B [10] Guidance - Q4-25 Net Revenue is expected to be between $1.0 billion and $1.1 billion [32] - Q4-25 Adjusted EPS is expected to be between $0.38 and $0.43 [32] - FY-25 Net Revenue is expected to be between $4.454 billion and $4.554 billion [32] - FY-25 Adjusted EPS is expected to be between $1.49 and $1.54 [32]