UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ____________________________________________________________________________ FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended October 1, 2023 ☐ 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. (NASDAQ:TTEK) Q4 2023 Earnings Conference Call November 16, 2023 11:00 AM ET Company Participants Dan Batrack - Chairman and CEO Steve Burdick - Chief Financial Officer Jill Hudkins - President Conference Call Participants Tate Sullivan - Maxim Group Andrew Wittmann - Baird Ryan Connors - Northcoast Research Michael Dudas - Vertical Research Partners Operator Good morning. And thank you for joining the Tetra Tech Earnings Call. As a reminder, Tetra Tech is also simulcasting this presentatio ...

EARNINGS CALL Q4-23November 16, 2023 Dan Batrack, Chairman & CEO Steve Burdick, Executive VP & CFO Jill Hudkins, President WATER ENVIRONMENT SUSTAINABLE INFRASTRUCTURE Leading with Science® Forward Looking Statements & Non-GAAP Financial Measures All statements in this communication other than statements of historical fact are "forward-looking statements" for purposes of federal and state securities laws, including any statements of the plans, strategies and objectives for future operations, profitability, ...

Financial Data and Key Metrics Changes - Revenue increased by 36% year-over-year, from $890 million to $1.21 billion [6] - EBITDA income rose by 33% year-over-year, reaching a record high of $119 million [6] - Backlog increased to a new high of $4.39 billion, up 25% from last year [6][9] - Legacy Tetra Tech's revenue without RPS was $989 million, up 11% year-over-year [6] - Earnings per share increased by 19% from the prior year [6] Business Line Data and Key Metrics Changes - Government Services Group (GSG) segment grew by 16% year-over-year, with margins increasing to 14% [8] - Commercial/International Group (CIG) segment grew by 55% year-over-year, primarily due to the addition of RPS [8] - U.S. federal client work increased by 30%, driven by growth in water and environmental programs [6] - State and local revenues were up 16% year-over-year, excluding extraordinary disaster response programs [7] - U.S. commercial net revenues increased by 22% year-over-year, driven by renewable energy and environmental assessments [7] Market Data and Key Metrics Changes - International revenue, primarily driven by RPS, increased by 68% year-over-year [7] - Significant new contract capacity awarded in the U.S. and the U.K. for water programs [9][10] Company Strategy and Development Direction - The company is focused on leveraging revenue synergies from the RPS Group and increasing funding from U.S. federal stimulus programs [3][15] - Tetra Tech Delta technologies are being utilized to enhance profit margins without increasing headcount [4][5] - The company aims to increase EBITDA margins from RPS from under 5% in fiscal 2022 to over 13% by fiscal 2025 [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing strong demand for services in water, environment, and sustainable infrastructure [22] - The integration of RPS is exceeding expectations, contributing to a robust pipeline of opportunities [22][23] - The company anticipates continued growth driven by federal funding and climate change commitments [23] Other Important Information - Cash flows from operations totaled $133 million, up 35% year-over-year [10] - The company paid out $14 million in dividends, marking the 37th consecutive quarterly dividend [11] - The net leverage multiple was approximately 1.6, with expectations to reduce it to about 1.4 by year-end [14] Q&A Session Summary Question: What is driving the momentum in the quarter? - Management noted broad-based performance across all end markets, with no single unusual contributor driving the results [24][26] Question: Can the current pace of growth be sustained? - Management indicated strong backlog growth and mid-teens organic growth, suggesting sustainability in growth [30][31] Question: What is driving better-than-expected results from RPS? - The strong workforce and cultural alignment between RPS and Tetra Tech were highlighted as key factors [32][33] Question: Can you elaborate on Tetra Tech Delta? - Tetra Tech Delta encompasses various tools that enhance project efficiency and margins, with significant growth potential [38][40] Question: Are margins in the backlog improving? - Management confirmed that embedded operating margins in the backlog are tending higher due to pricing power and a shift to higher-end work [46][47]

PART I. FINANCIAL INFORMATION This section presents Tetra Tech's unaudited consolidated financial statements and management's discussion and analysis [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents Tetra Tech's unaudited consolidated financial statements and related notes for the specified periods [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) This section details the company's financial position, including assets, liabilities, and equity at specific dates | ASSETS (in thousands) | July 2, 2023 | October 2, 2022 | | :---------------------- | :----------- | :-------------- | | Cash and cash equivalents | $176,056 | $185,094 | | Accounts receivable, net | $1,002,087 | $755,112 | | Contract assets | $125,360 | $92,405 | | Total current assets | $1,417,943 | $1,158,216 | | Property and equipment, net | $81,321 | $32,316 | | Goodwill | $1,886,854 | $1,110,412 | | Intangible assets, net | $225,032 | $29,163 | | Total assets | $3,973,578 | $2,622,776 | | **LIABILITIES AND EQUITY** | | | | Accounts payable | $188,807 | $147,436 | | Accrued compensation | $270,924 | $237,669 | | Contract liabilities | $351,048 | $241,340 | | Total current liabilities | $1,212,159 | $916,017 | | Long-term debt | $906,875 | $246,250 | | Total liabilities and stockholders' equity | $3,973,578 | $2,622,776 | - **Total assets** increased significantly from **$2,622,776 thousand** at October 2, 2022, to **$3,973,578 thousand** at July 2, 2023, primarily driven by increases in **goodwill** and **intangible assets** due to acquisitions[7](index=7&type=chunk) - **Long-term debt** saw a substantial increase from **$246,250 thousand** to **$906,875 thousand**, reflecting financing activities for acquisitions[7](index=7&type=chunk) [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) This section presents the company's financial performance over specific periods, detailing revenues, expenses, and net income | (in thousands, except per share data) | Three Months Ended July 2, 2023 | Three Months Ended July 3, 2022 | Nine Months Ended July 2, 2023 | Nine Months Ended July 3, 2022 | | :------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Revenue | $1,208,947 | $890,231 | $3,261,938 | $2,601,485 | | Gross profit | $188,846 | $144,584 | $512,937 | $419,524 | | Income from operations | $97,675 | $83,905 | $250,736 | $245,645 | | Net income attributable to Tetra Tech | $60,235 | $58,650 | $219,771 | $180,179 | | Diluted EPS | $1.12 | $1.09 | $4.10 | $3.32 | - **Revenue** for the nine months ended July 2, 2023, increased by **25.4%** to **$3,261,938 thousand** from **$2,601,485 thousand** in the prior-year period[9](index=9&type=chunk) - **Diluted EPS** for the nine months ended July 2, 2023, rose to **$4.10**, up from **$3.32** in the same period last year, representing a **23.5%** increase[9](index=9&type=chunk) [Consolidated Statements of Comprehensive Income](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) This section presents the company's comprehensive income, including net income and other comprehensive income items | (in thousands) | Three Months Ended July 2, 2023 | Three Months Ended July 3, 2022 | Nine Months Ended July 2, 2023 | Nine Months Ended July 3, 2022 | | :------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income | $60,238 | $58,657 | $219,794 | $180,205 | | Foreign currency translation adjustment, net of tax | $44,500 | $(44,884) | $69,453 | $(42,763) | | Comprehensive income attributable to Tetra Tech, net of tax | $103,690 | $16,147 | $289,989 | $147,401 | - **Comprehensive income attributable to Tetra Tech** significantly increased for the nine months ended July 2, 2023, reaching **$289,989 thousand**, compared to **$147,401 thousand** in the prior-year period, largely due to a positive **foreign currency translation adjustment**[12](index=12&type=chunk) [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section details the cash inflows and outflows from operating, investing, and financing activities | (in thousands) | Nine Months Ended July 2, 2023 | Nine Months Ended July 3, 2022 | | :------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $246,053 | $275,976 | | Net cash used in investing activities | $(761,896) | $(38,271) | | Net cash provided by (used in) financing activities | $494,395 | $(182,486) | | Net (decrease) increase in cash and cash equivalents | $(9,038) | $50,816 | | Cash and cash equivalents at end of period | $176,056 | $217,384 | - **Net cash used in investing activities** dramatically increased to **$761,896 thousand** for the nine months ended July 2, 2023, from **$38,271 thousand** in the prior-year period, primarily due to business acquisitions[15](index=15&type=chunk) - **Net cash provided by financing activities** shifted from a use of **$182,486 thousand** in the prior year to a provision of **$494,395 thousand**, driven by proceeds from borrowings to fund acquisitions[15](index=15&type=chunk) [Consolidated Statements of Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Equity) This section outlines changes in stockholders' equity, including common stock, retained earnings, and comprehensive loss | (in thousands) | Balance at October 2, 2022 | Balance at July 2, 2023 | | :------------- | :------------------------- | :---------------------- | | Common Stock | $530 | $532 | | Additional Paid-in Capital | $0 | $17,906 |\n| Accumulated Other Comprehensive Loss | $(208,144) | $(137,926) | | Retained Earnings | $1,390,701 | $1,572,204 | | Total Tetra Tech Stockholders' Equity | $1,183,087 | $1,452,716 | - **Total Tetra Tech stockholders' equity** increased from **$1,183,087 thousand** at October 2, 2022, to **$1,452,716 thousand** at July 2, 2023, primarily due to **net income** and a reduction in **accumulated other comprehensive loss**[19](index=19&type=chunk) - **Accumulated other comprehensive loss** improved from **$(208,144) thousand** to **$(137,926) thousand**, reflecting positive **foreign currency translation adjustments**[19](index=19&type=chunk) [Notes to Unaudited Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) This section provides detailed explanations and breakdowns for various financial accounts and activities presented in the statements [1. Basis of Presentation](index=9&type=section&id=1.%20Basis%20of%20Presentation) This note describes the basis for preparing the unaudited interim consolidated financial statements in accordance with GAAP - The unaudited consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information and Form 10-Q instructions, and should be read with the Annual Report on Form 10-K for the fiscal year ended October 2, 2022[21](index=21&type=chunk) [2. Recent Accounting Pronouncements](index=9&type=section&id=2.%20Recent%20Accounting%20Pronouncements) This note discusses the impact and adoption of recent accounting standards updates on the company's financial reporting - ASU 2021-10, Government Assistance (Topic 832), became effective in fiscal 2023, requiring annual disclosures for government assistance transactions[23](index=23&type=chunk) - The **$26.0 million** Canadian Emergency Wage Subsidy (CEWS) received in fiscal 2020 was reclassified from 'Other current liabilities' to 'Accrued compensation' (**$9 million**) and 'Other non-current liabilities' (**$17 million**) in fiscal 2023, with no expected impact on operating income[24](index=24&type=chunk) [3. Revenue and Contract Balances](index=9&type=section&id=3.%20Revenue%20and%20Contract%20Balances) This note provides a breakdown of revenue by client sector and contract type, along with details on contract assets and liabilities | Client Sector (in thousands) | Three Months Ended July 2, 2023 | Three Months Ended July 3, 2022 | Nine Months Ended July 2, 2023 | Nine Months Ended July 3, 2022 | | :--------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | U.S. federal government | $338,022 | $261,434 | $996,471 | $781,503 | | International | $493,556 | $289,811 | $1,179,619 | $817,311 | | Total Revenue | $1,208,947 | $890,231 | $3,261,938 | $2,601,485 | | Contract Type (in thousands) | | | | | | Fixed-price | $452,605 | $335,014 | $1,194,266 | $982,565 | | Time-and-materials | $596,904 | $417,898 | $1,550,970 | $1,221,598 | | Cost-plus | $159,438 | $137,319 | $516,702 | $397,322 | - **International client sector revenue** significantly increased by **70.3%** for the three months ended July 2, 2023, and by **44.3%** for the nine months ended July 2, 2023, compared to the prior-year periods[26](index=26&type=chunk) | Net Contract Balances (in thousands) | July 2, 2023 | October 2, 2022 | | :----------------------------------- | :----------- | :-------------- | | Contract assets | $125,360 | $92,405 | | Contract liabilities | $351,048 | $241,340 |\n| Net contract liabilities | $(225,688) | $(148,935) | - **Remaining Unsatisfied Performance Obligations (RUPO)** totaled **$4.4 billion** at July 2, 2023, with **$2.8 billion** expected to be satisfied within 12 months[34](index=34&type=chunk)[35](index=35&type=chunk) [4. Acquisitions](index=12&type=section&id=4.%20Acquisitions) This note details significant business acquisitions, including purchase prices, financing, and their impact on financial results - Tetra Tech completed the acquisition of RPS Group plc on January 23, 2023, for approximately **£633 million** (**$784 million**), primarily financed by debt and a **foreign exchange forward contract gain** of **$109.3 million**[37](index=37&type=chunk)[38](index=38&type=chunk) - RPS contributed **$220.4 million** in revenue and **$0.7 million** in **net income** (before intangible amortization) for the third quarter of fiscal 2023[42](index=42&type=chunk) - The company also acquired Amyx, Inc. in the second quarter of fiscal 2023 for **$120.9 million**, enhancing its Government Services Group (GSG) segment with enterprise technology and cybersecurity services[43](index=43&type=chunk) - **Goodwill** from fiscal 2023 acquisitions, primarily RPS and Amyx, is attributed to technical expertise, expected synergies in energy transformation, water, program management, and data analytics, and expanded market positions[46](index=46&type=chunk) - Contingent earn-out liabilities totaled **$76.6 million** (estimated fair value) at July 2, 2023, with a maximum potential of **$120.3 million**, and adjustments resulted in an **$8.5 million** net charge to operating income in the first nine months of fiscal 2023[52](index=52&type=chunk)[53](index=53&type=chunk) [5. Goodwill and Intangible Assets](index=15&type=section&id=5.%20Goodwill%20and%20Intangible%20Assets) This note provides a breakdown of goodwill and intangible assets by segment, including changes due to acquisitions and amortization | Goodwill (in thousands) | GSG | CIG | Total | | :---------------------- | :--------- | :----------- | :----------- | | Balance at October 2, 2022 | $519,102 | $591,310 | $1,110,412 | | Acquisition activity | $104,100 | $619,832 | $723,932 | | Translation adjustments | $5,459 | $47,051 | $52,510 | | Balance at July 2, 2023 | $628,661 | $1,258,193 | $1,886,854 | - **Goodwill** increased by **$776.4 million** from October 2, 2022, to July 2, 2023, primarily due to acquisition activity, with the Commercial/International Services Group (CIG) segment seeing the largest increase[54](index=54&type=chunk) | Intangible Assets, Net (in thousands) | July 2, 2023 Net Amount | October 2, 2022 Net Amount | | :------------------------------------ | :---------------------- | :------------------------- | | Client relations | $189,072 | $20,584 | | Backlog | $15,726 | $3,296 | | Trade names | $20,234 | $5,283 | | Total | $225,032 | $29,163 | - **Amortization expense** for **intangible assets** increased to **$29.6 million** for the nine months ended July 2, 2023, from **$9.6 million** in the prior-year period, reflecting recent acquisitions[57](index=57&type=chunk) [6. Property and Equipment](index=16&type=section&id=6.%20Property%20and%20Equipment) This note details the company's property and equipment, net of accumulated depreciation, and changes over the period | Property and Equipment, Net (in thousands) | July 2, 2023 | October 2, 2022 | | :--------------------------------------- | :----------- | :-------------- | | Equipment, furniture and fixtures | $141,619 | $96,710 | | Leasehold improvements | $47,949 | $32,428 | | Total property and equipment | $189,568 | $129,138 | | Accumulated depreciation | $(108,247) | $(96,822) | | Property and equipment, net | $81,321 | $32,316 | - **Net property and equipment** increased by **$49.0 million** from October 2, 2022, to July 2, 2023, primarily due to the RPS acquisition[59](index=59&type=chunk) [7. Stock Repurchase and Dividends](index=17&type=section&id=7.%20Stock%20Repurchase%20and%20Dividends) This note outlines the company's stock repurchase activities and declared cash dividends per share - Tetra Tech did not repurchase any common stock in the first nine months of fiscal 2023, leaving **$347.8 million** remaining under its **$400 million** **stock repurchase program**[60](index=60&type=chunk) | Dividend Paid Per Share | Total Dividend Paid (in thousands) | | :---------------------- | :--------------------------------- | | FY23 Q1: $0.23 | $12,186 | | FY23 Q2: $0.23 | $12,242 | | FY23 Q3: $0.26 | $13,840 | | Total FY23 YTD | $38,268 | | FY22 YTD Total | $33,873 | - The Board of Directors declared a quarterly cash **dividend** of **$0.26** per share payable on September 6, 2023[61](index=61&type=chunk) [8. Leases](index=17&type=section&id=8.%20Leases) This note provides information on operating lease costs, right-of-use assets, and lease liabilities | Lease Costs (in thousands) | Three Months Ended July 2, 2023 | Three Months Ended July 3, 2022 | Nine Months Ended July 2, 2023 | Nine Months Ended July 3, 2022 | | :------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Operating lease cost | $24,775 | $21,004 | $70,155 | $64,015 | | Total lease cost | $24,729 | $21,144 | $70,030 | $63,899 | | Operating Lease Balances (in thousands) | July 2, 2023 | October 2, 2022 | | :-------------------------------------- | :----------- | :-------------- | | Right-of-use assets | $207,218 | $182,319 | | Total operating lease liabilities | $232,474 | $204,150 | | Weighted-average remaining lease term | 5 years | 5 years | | Weighted-average discount rate | 3.0 % | 2.2 % | - **Operating lease costs** for the nine months ended July 2, 2023, increased to **$70,155 thousand** from **$64,015 thousand** in the prior-year period[65](index=65&type=chunk) [9. Stockholders' Equity and Stock Compensation Plans](index=19&type=section&id=9.%20Stockholders%27%20Equity%20and%20Stock%20Compensation%20Plans) This note details stock-based compensation expense and the issuance of performance share units and restricted stock units - **Stock-based compensation expense** for the nine months ended July 2, 2023, was **$21.6 million**, up from **$19.1 million** in the prior-year period[68](index=68&type=chunk) - In the first nine months of fiscal 2023, Tetra Tech awarded **56,214 performance share units (PSUs)** and **103,016 restricted stock units (RSUs)** to directors, executive officers, and employees[68](index=68&type=chunk) [10. Earnings per Share ("EPS")](index=19&type=section&id=10.%20Earnings%20per%20Share%20(%22EPS%22)) This note presents the calculation of basic and diluted earnings per share, including weighted-average shares outstanding | (in thousands, except per share data) | Three Months Ended July 2, 2023 | Three Months Ended July 3, 2022 | Nine Months Ended July 2, 2023 | Nine Months Ended July 3, 2022 | | :------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income attributable to Tetra Tech | $60,235 | $58,650 | $219,771 | $180,179 | | Weighted-average common shares outstanding – diluted | 53,653 | 54,006 | 53,615 | 54,328 | | Diluted EPS | $1.12 | $1.09 | $4.10 | $3.32 | - **Diluted EPS** increased to **$4.10** for the nine months ended July 2, 2023, from **$3.32** in the prior-year period, reflecting higher **net income attributable to Tetra Tech**[71](index=71&type=chunk) [11. Income Taxes](index=20&type=section&id=11.%20Income%20Taxes) This note details the effective tax rate and changes in the liability for uncertain tax positions - The **effective tax rate** for the first nine months of fiscal 2023 was **28.3%**, up from **23.9%** in the prior-year period[72](index=72&type=chunk) - Excluding excess tax benefits on share-based payments and non-operating tax expenses, the **effective tax rate** for the first nine months of fiscal 2023 was **26.7%**, compared to **25.9%** in fiscal 2022[72](index=72&type=chunk) - The **liability for income taxes** associated with uncertain tax positions increased significantly to **$48.8 million** at July 2, 2023, from **$10.6 million** at October 2, 2022[73](index=73&type=chunk) [12. Reportable Segments](index=20&type=section&id=12.%20Reportable%20Segments) This note provides financial information for the company's Government Services Group (GSG) and Commercial/International Group (CIG) segments - Tetra Tech operates under two reportable segments: Government Services Group (GSG) and Commercial/International Group (CIG)[74](index=74&type=chunk) | Segment Financials (in thousands) | Three Months Ended July 2, 2023 | Three Months Ended July 3, 2022 | Nine Months Ended July 2, 2023 | Nine Months Ended July 3, 2022 | | :-------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | GSG Revenue | $531,050 | $459,987 | $1,565,371 | $1,365,041 | | CIG Revenue | $691,386 | $444,238 | $1,741,300 | $1,277,469 | | GSG Income from operations | $54,496 | $45,580 | $167,053 | $147,104 | | CIG Income from operations | $69,572 | $53,535 | $172,199 | $139,328 | - **CIG revenue** for the nine months ended July 2, 2023, increased by **36.3%** to **$1,741,300 thousand**, significantly outpacing GSG's **14.7%** growth, largely due to the RPS acquisition[78](index=78&type=chunk) [13. Fair Value Measurements](index=21&type=section&id=13.%20Fair%20Value%20Measurements) This note discusses the fair value of financial instruments, including long-term debt and borrowings under the credit facility - The fair value of **long-term debt** approximated its carrying value at July 2, 2023, and October 2, 2022, determined using Level 2 measurements[79](index=79&type=chunk) - **Borrowings** of **$919.4 million** were outstanding under the Amended Credit Agreement at July 2, 2023, primarily funding business acquisitions and working capital[79](index=79&type=chunk) [14. Credit Facility](index=21&type=section&id=14.%20Credit%20Facility) This note details the company's credit agreement, borrowing capacity, and compliance with financial covenants - Tetra Tech entered into a Third Amended and Restated Credit Agreement on October 26, 2022, adding a **$500 million** New Term Loan Facility, increasing total borrowing capacity to **$1.55 billion**[80](index=80&type=chunk) - The New Term Loan Facility was fully drawn on January 23, 2023, to partially finance the RPS acquisition[81](index=81&type=chunk) - The Amended Credit Agreement includes financial covenants for a maximum **Consolidated Leverage Ratio** of **3.25 to 1.00** and a minimum **Consolidated Interest Coverage Ratio** of **3.00 to 1.00**[84](index=84&type=chunk) [15. Derivative Financial Instruments](index=22&type=section&id=15.%20Derivative%20Financial%20Instruments) This note describes the company's use of foreign currency forward contracts and interest rate swap agreements for hedging - A **foreign currency forward contract**, integral to the RPS acquisition financing, resulted in a cumulative gain of approximately **$109 million**, recognized as non-operating income, as it did not qualify for hedge accounting[87](index=87&type=chunk)[88](index=88&type=chunk) - Tetra Tech uses **interest rate swap agreements** to hedge variable rate debt, with **$190.6 million** notional principal outstanding at July 2, 2023, at a fixed rate of **2.79%**[89](index=89&type=chunk) [16. Reclassifications Out of Accumulated Other Comprehensive Income](index=23&type=section&id=16.%20Reclassifications%20Out%20of%20Accumulated%20Other%20Comprehensive%20Income) This note details reclassifications from accumulated other comprehensive income, primarily foreign currency translation adjustments | (in thousands) | Balance at October 2, 2022 | Balance at July 2, 2023 | | :------------- | :------------------------- | :---------------------- | | Foreign Currency Translation Adjustments | $(210,556) | $(141,103) | | Gain (Loss) on Derivative Instruments | $2,412 | $383 | | Net Pension Adjustments | $0 | $2,794 | | Accumulated Other Comprehensive Income (Loss) | $(208,144) | $(137,926) | - **Accumulated other comprehensive loss** improved by **$70.2 million** for the nine months ended July 2, 2023, primarily due to positive **foreign currency translation adjustments**[91](index=91&type=chunk) [17. Commitments and Contingencies](index=25&type=section&id=17.%20Commitments%20and%20Contingencies) This note outlines the company's legal proceedings, professional claims, and other commitments and contingencies - Tetra Tech is subject to professional errors or omissions claims, carrying professional liability insurance, but some actions seek damages exceeding coverage[92](index=92&type=chunk) - A False Claims Act lawsuit against subsidiary Tetra Tech EC, Inc. (TtEC) related to environmental remediation services at Hunters Point Naval Shipyard is ongoing, with the outcome and potential loss currently undeterminable[93](index=93&type=chunk) [18. Related Party Transactions](index=25&type=section&id=18.%20Related%20Party%20Transactions) This note describes transactions and balances with unconsolidated joint ventures and other related parties - **Revenue** from services provided to unconsolidated joint ventures was **$65 million** for the first nine months of fiscal 2023, down from **$74 million** in the prior-year period[94](index=94&type=chunk) | Related Party Balances (in thousands) | July 2, 2023 | October 2, 2022 | | :------------------------------------ | :----------- | :-------------- | | Accounts receivable, net | $22,234 | $16,818 | | Contract assets | $1,800 | $2,935 | | Contract liabilities | $2,768 | $3,464 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on Tetra Tech's financial condition, results of operations, and strategic direction [FORWARD-LOOKING STATEMENTS](index=26&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section cautions that the report contains forward-looking statements subject to risks and uncertainties - The report contains forward-looking statements subject to risks and uncertainties, and actual results may differ materially from predictions[95](index=95&type=chunk) [GENERAL OVERVIEW](index=26&type=section&id=GENERAL%20OVERVIEW) This section provides an overview of Tetra Tech's global consulting and engineering services and key revenue drivers - Tetra Tech is a global provider of high-end consulting and engineering services focused on water, environment, sustainable infrastructure, renewable energy, and international development, operating in over 100 countries[96](index=96&type=chunk) - **Revenue** is driven by attracting and retaining qualified employees, identifying business opportunities, securing contracts, and successful project execution[97](index=97&type=chunk) | Client Sector Revenue Percentage | Three Months Ended July 2, 2023 | Three Months Ended July 3, 2022 | Nine Months Ended July 2, 2023 | Nine Months Ended July 3, 2022 | | :------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | U.S. federal government | 28.0 % | 29.4 % | 30.5 % | 30.0 % | | U.S. state and local government | 12.5 % | 16.9 % | 13.9 % | 17.9 % | | U.S. commercial | 18.7 % | 21.1 % | 19.4 % | 20.7 % | | International | 40.8 % | 32.6 % | 36.2 % | 31.4 % | | Reportable Segment Revenue Percentage | Three Months Ended July 2, 2023 | Three Months Ended July 3, 2022 | Nine Months Ended July 2, 2023 | Nine Months Ended July 3, 2022 | | :------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | GSG | 43.9 % | 51.7 % | 48.0 % | 52.5 % | | CIG | 57.2 % | 49.9 % | 53.4 % | 49.1 % | - The company experiences seasonal trends, with lower **revenue** and **operating income** in the first half of the fiscal year due to holidays and inclement weather[105](index=105&type=chunk) [ACQUISITIONS AND DIVESTITURES](index=28&type=section&id=ACQUISITIONS%20AND%20DIVESTITURES) This section discusses Tetra Tech's growth strategy through acquisitions, detailing recent significant transactions - Acquisitions are a key component of Tetra Tech's growth strategy, funded by cash, debt, or equity, aiming to strengthen market leadership, expand service offerings, and improve financial performance[106](index=106&type=chunk)[107](index=107&type=chunk) - The acquisition of RPS Group plc for **$784 million** on January 23, 2023, significantly expanded the CIG segment, contributing **$389.9 million** in **revenue** for the first nine months of fiscal 2023[108](index=108&type=chunk)[109](index=109&type=chunk) - Amyx, Inc. was acquired in the second quarter of fiscal 2023, adding enterprise technology services, cybersecurity, and management consulting to the GSG segment[110](index=110&type=chunk) [OVERVIEW OF RESULTS AND BUSINESS TRENDS](index=29&type=section&id=OVERVIEW%20OF%20RESULTS%20AND%20BUSINESS%20TRENDS) This section highlights overall financial performance, revenue growth by client sector, and key business trends - **Total revenue** increased by **25.4%** in the first nine months of fiscal 2023 compared to the prior-year period, with a **10.4%** increase excluding the RPS acquisition[112](index=112&type=chunk) - **U.S. federal government revenue** grew **27.5%** in the first nine months of fiscal 2023, driven by international development and civilian agency activities, with continued growth expected from federal funding programs[113](index=113&type=chunk) - **U.S. state and local government revenue** decreased **2.9%** due to lower disaster response, but increased **21.5%** excluding disaster response, reflecting growth in municipal water infrastructure and digital water projects[114](index=114&type=chunk) - **U.S. commercial revenue** increased **18.0%** (**11.4%** excluding RPS) in the first nine months of fiscal 2023, primarily from clean energy and environmental programs[115](index=115&type=chunk) - **International revenue** surged **44.3%** (**10%** on a constant currency basis, excluding RPS) in the first nine months of fiscal 2023, supported by government stimulus and sustainability-focused commercial activities[116](index=116&type=chunk) [RESULTS OF OPERATIONS](index=30&type=section&id=RESULTS%20OF%20OPERATIONS) This section analyzes the company's consolidated and segment-specific financial performance, including revenue and income from operations [Consolidated Results of Operations](index=30&type=section&id=Consolidated%20Results%20of%20Operations) This section provides a detailed analysis of Tetra Tech's overall financial performance, including revenue, gross profit, and net income | (in thousands, except per share data) | Three Months Ended July 2, 2023 | Three Months Ended July 3, 2022 | Nine Months Ended July 2, 2023 | Nine Months Ended July 3, 2022 | | :------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Revenue | $1,208,947 | $890,231 | $3,261,938 | $2,601,485 | | Revenue, net of subcontractor costs | $987,560 | $720,486 | $2,693,686 | $2,099,461 | | Gross profit | $188,846 | $144,584 | $512,937 | $419,524 | | Income from operations | $97,675 | $83,905 | $250,736 | $245,645 | | Net income attributable to Tetra Tech | $60,235 | $58,650 | $219,771 | $180,179 | | Diluted earnings per share | $1.12 | $1.09 | $4.10 | $3.32 | - **Revenue, net of subcontractor costs**, increased by **37.1%** in Q3 FY23 and **28.3%** in the first nine months of FY23, reflecting strong organic growth and the RPS acquisition[117](index=117&type=chunk)[118](index=118&type=chunk) - **Adjusted operating income** increased by **20.4%** in Q3 FY23 and **18.7%** in the first nine months of FY23, excluding acquisition/integration costs, earn-out adjustments, and COVID-19 credits[123](index=123&type=chunk) - **Net interest expense** significantly increased to **$33.6 million** for the first nine months of fiscal 2023, up from **$9.0 million** in the prior-year period, primarily due to additional borrowings for the RPS acquisition[124](index=124&type=chunk) - **Other non-operating income** of **$89.4 million** in the first nine months of fiscal 2023 resulted from gains on a **foreign exchange forward contract** related to the RPS acquisition[125](index=125&type=chunk) - **Adjusted EPS** for the first nine months of fiscal 2023 was **$3.55**, an increase of **9.2%** year-over-year, and **$3.81** excluding RPS, representing a **17.2%** increase[127](index=127&type=chunk) [Segment Results of Operations](index=33&type=section&id=Segment%20Results%20of%20Operations) This section analyzes the financial performance of the Government Services Group (GSG) and Commercial/International Group (CIG) segments | GSG (in thousands) | Three Months Ended July 2, 2023 | Three Months Ended July 3, 2022 | Nine Months Ended July 2, 2023 | Nine Months Ended July 3, 2022 | | :----------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Revenue | $531,050 | $459,987 | $1,565,371 | $1,365,041 | | Income from operations | $54,496 | $45,580 | $167,053 | $147,104 | - **GSG revenue, net of subcontractor costs**, increased by **16.3%** in Q3 FY23 and **17.9%** in the first nine months of FY23, including **$70 million** from international development energy programs in Ukraine[129](index=129&type=chunk) | CIG (in thousands) | Three Months Ended July 2, 2023 | Three Months Ended July 3, 2022 | Nine Months Ended July 2, 2023 | Nine Months Ended July 3, 2022 | | :----------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Revenue | $691,386 | $444,238 | $1,741,300 | $1,277,469 | | Income from operations | $69,572 | $53,535 | $172,199 | $139,328 | - **CIG revenue, net of subcontractor costs**, increased by **55.2%** in Q3 FY23 and **37.8%** in the first nine months of FY23, with RPS acquisition contributing approximately **$370 million** to **revenue** growth[131](index=131&type=chunk) - CIG's **operating margin** (excluding RPS and ERCs) improved to **12.8%** in the first nine months of fiscal 2023, up from **12.5%** in the prior-year period, due to focus on high-end consulting, project execution, and higher labor utilization[132](index=132&type=chunk) [Backlog](index=34&type=section&id=Backlog) This section reports on the company's backlog, representing the total dollar value of work yet to be performed - **Backlog**, representing the total dollar value of work to be performed, was **$4.4 billion** at July 2, 2023, consistent with **Remaining Unsatisfied Performance Obligations (RUPO)**[133](index=133&type=chunk) [Financial Condition, Liquidity and Capital Resources](index=34&type=section&id=Financial%20Condition%2C%20Liquidity%20and%20Capital%20Resources) This section assesses Tetra Tech's financial health, cash position, credit facility, and cash flow activities - At July 2, 2023, Tetra Tech had **$176.1 million** in **cash and cash equivalents** and **$614.3 million** available under its **credit facility**, deemed sufficient for capital requirements for the next 12 months[134](index=134&type=chunk) - **Net cash provided by operating activities** decreased by **$29.9 million** to **$246.1 million** for the first nine months of fiscal 2023, primarily due to **$25.8 million** in acquisition and integration expenses[140](index=140&type=chunk) - **Net cash used in investing activities** increased significantly by **$723.6 million** to **$761.9 million**, mainly due to the RPS acquisition[141](index=141&type=chunk) - **Net cash provided by financing activities** was **$494.4 million**, a substantial increase from a net use of **$182.5 million** in the prior-year period, driven by borrowings for the RPS acquisition[142](index=142&type=chunk) - At July 2, 2023, **outstanding borrowings** under the Amended Credit Agreement totaled **$919.4 million**, with a weighted-average interest rate of **5.88%** for the first nine months of fiscal 2023[146](index=146&type=chunk) - Tetra Tech was in compliance with debt covenants at July 2, 2023, with a **consolidated leverage ratio** of **2.01x** and an **interest coverage ratio** of **10.95x**[147](index=147&type=chunk) [Inflation](index=36&type=section&id=Inflation) This section discusses the perceived impact of inflation on Tetra Tech's operations and pricing strategies - Tetra Tech believes its operations have not been materially affected by inflation due to project duration and ability to negotiate prices[150](index=150&type=chunk) [Dividends](index=36&type=section&id=Dividends) This section provides details on the company's declared quarterly cash dividends, including amounts and payment dates | Dividend Declaration Date | Dividend Per Share | Payment Date | | :------------------------ | :----------------- | :--------------- | | November 7, 2022 | $0.23 | December 9, 2022 |\n| January 30, 2023 | $0.23 | February 24, 2023|\n| May 8, 2023 | $0.26 | June 6, 2023 |\n| August 7, 2023 | $0.26 | September 6, 2023| [Income Taxes](index=36&type=section&id=Income%20Taxes) This section discusses the company's effective tax rate and the liability for uncertain tax positions - The **liability for income taxes** associated with uncertain tax positions increased to **$48.8 million** at July 2, 2023, from **$10.6 million** at October 2, 2022[153](index=153&type=chunk) [Off-Balance Sheet Arrangements](index=36&type=section&id=Off-Balance%20Sheet%20Arrangements) This section describes the company's off-balance sheet arrangements, such as letters of credit and guarantees - Off-balance sheet arrangements, including letters of credit and bank guarantees (**$57.3 million** outstanding at July 2, 2023), are used to support project performance and insurance programs[156](index=156&type=chunk) - The company provides guarantees and indemnifications related to services and is jointly and severally liable in certain unconsolidated subsidiaries and joint ventures[156](index=156&type=chunk)[157](index=157&type=chunk) [Critical Accounting Policies](index=37&type=section&id=Critical%20Accounting%20Policies) This section confirms no material changes to the company's critical accounting policies from the prior annual report - There have been no material changes to critical accounting policies as reported in the 2022 Annual Report on Form 10-K[158](index=158&type=chunk) [New Accounting Pronouncements](index=37&type=section&id=New%20Accounting%20Pronouncements) This section refers to the notes to financial statements for information on recent accounting pronouncements - Information regarding recent accounting pronouncements is provided in the 'Notes to Consolidated Financial Statements' (Part I, Item 1)[159](index=159&type=chunk) [Financial Market Risks](index=37&type=section&id=Financial%20Market%20Risks) This section details Tetra Tech's exposure to interest rate risk and foreign currency transaction and translation risks - Tetra Tech is exposed to **interest rate risk** on its variable rate debt under the Amended Credit Agreement, with **$919.4 million** outstanding at July 2, 2023, and a weighted-average interest rate of **5.88%** for fiscal 2023[161](index=161&type=chunk) - The company uses **interest rate swap agreements** to hedge **$190.6 million** of its term loan facility, resulting in a year-to-date average effective interest rate of **5.46%** on borrowings[162](index=162&type=chunk) - **Foreign currency transaction and translation risks** exist due to operations in Canadian and Australian dollars and British Pounds, with **36.2%** of consolidated revenue from international business in the first nine months of fiscal 2023[163](index=163&type=chunk)[165](index=165&type=chunk) - **Foreign exchange rate translation** positively impacted equity by **$69.5 million** in the first nine months of fiscal 2023, compared to a **$42.8 million** decrease in the prior-year period[165](index=165&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section refers to the 'Financial Market Risks' discussion in Item 2 for detailed market risk disclosures - Disclosures regarding market risk are incorporated by reference from the 'Financial Market Risks' section in Item 2 of this Form 10-Q[166](index=166&type=chunk) [Item 4. Controls and Procedures](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures) This section evaluates disclosure controls and procedures, confirming effectiveness and reporting no material changes to internal controls - Management concluded that disclosure controls and procedures were effective as of July 2, 2023, excluding the recently acquired Amyx and RPS[167](index=167&type=chunk) - There were no material changes in internal control over financial reporting during the quarter ended July 2, 2023[168](index=168&type=chunk) PART II. OTHER INFORMATION This section includes legal proceedings, risk factors, equity sales, mine safety disclosures, and other relevant information [Item 1. Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 17, 'Commitments and Contingencies,' for information on legal proceedings - Information on legal proceedings is incorporated by reference from Note 17, 'Commitments and Contingencies,' in the financial statements[169](index=169&type=chunk) [Item 1A. Risk Factors](index=39&type=page&id=Item%201A.%20Risk%20Factors) This section reports no material changes to risk factors from the 2022 Annual Report, with updated disclosures in Item 2 - No material changes to risk factors from the 2022 Annual Report on Form 10-K[171](index=171&type=chunk) - Updated disclosures for interest and exchange rate risks are provided in the 'Financial Market Risks' section of Item 2[171](index=171&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=39&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports no common stock repurchases in the first nine months of fiscal 2023 and the remaining repurchase program balance - Tetra Tech did not repurchase any common stock in the first nine months of fiscal 2023[172](index=172&type=chunk) - A balance of **$347.8 million** remained under the **$400 million** **stock repurchase program** as of July 2, 2023[172](index=172&type=chunk) [Item 4. Mine Safety Disclosures](index=39&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section addresses Dodd-Frank Act disclosures for mine safety violations, referencing Exhibit 95 for detailed information - Tetra Tech may act as a mining operator (independent contractor) under the Mine Act, requiring disclosures under Section 1503 of the Dodd-Frank Act[173](index=173&type=chunk) - Information concerning mine safety violations is included in Exhibit 95[173](index=173&type=chunk) [Item 5. Other Information](index=39&type=section&id=Item%205.%20Other%20Information) This section confirms no directors or officers adopted, modified, or terminated Rule 10b5-1 trading plans in Q3 FY23 - No directors or officers adopted, modified, or terminated Rule 10b5-1 trading plans during the third quarter of fiscal 2023[174](index=174&type=chunk) [Item 6. Exhibits](index=39&type=section&id=Item%206.%20Exhibits) This section lists documents filed as exhibits to the Form 10-Q, including certifications, mine safety, and XBRL financial data - Exhibits include Chief Executive Officer and Chief Financial Officer Certifications (31.2, 32.1, 32.2), Mine Safety Disclosure (95), and financial information in Inline XBRL format (101, 104)[176](index=176&type=chunk) SIGNATURES This section contains the official signatures of Tetra Tech, Inc.'s authorized officers, certifying the filing of the Form 10-Q [SIGNATURES](index=40&type=section&id=SIGNATURES) This section contains the official signatures of Tetra Tech, Inc.'s authorized officers, certifying the filing of the Form 10-Q - The report is duly signed by Dan L. Batrack (Chairman and CEO), Steven M. Burdick (EVP, CFO), and Brian N. Carter (SVP, Corporate Controller) on August 10, 2023[179](index=179&type=chunk)[180](index=180&type=chunk)

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 April 2, 2023 OR ☐ 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) (State or other jurisdiction of incorporation or orga ...

Financial Data and Key Metrics Changes - Revenue for Q2 2023 exceeded $1 billion for the first time, reaching $970 million, a 39% increase year-over-year from $700 million [5][6] - EBITDA income increased by 30% year-over-year, reaching a record $105 million for the second quarter [5] - Earnings per share (EPS) rose to $1.17, up 19% from the previous year [5][6] - Without the contribution of RPS, revenue was $989 million, a 16% increase year-over-year, with EPS of $1.20, up 22% [6] Performance by Business Lines - U.S. federal client work increased by 59%, driven by growth in water and environmental programs, including support for Ukraine [7] - State and local revenues grew by 12%, supported by digital water and municipal infrastructure projects [7] - International revenues increased by 55%, with a growth of 11% excluding RPS, driven by high-performance buildings work in Canada, Australia, and the UK [7] - Government Services Group (GSG) segment grew by 29%, with a significant contribution from Ukraine-related work [8] - Commercial/International Group (CIG) segment grew by 47%, with a 13% increase excluding RPS, driven by renewable energy programs [9] Market Data and Key Metrics Changes - Backlog increased by 18% year-over-year, reaching an all-time high of $4.275 billion [9] - New contracts included a $105 million U.S. Watershed Assessment Contract and a $54 million disaster planning contract in Puerto Rico [10] Company Strategy and Industry Competition - The company is focused on integrating RPS to improve profit margins and align them with Tetra Tech's margins [12][13] - Tetra Tech aims to leverage its expertise in sustainable infrastructure and renewable energy to drive future growth [27] - The company has been recognized as a leader in water and environmental management, ranking number one in various categories by Engineering News Record [20][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the underlying business performance, with growth rates exceeding expectations across all end markets [29] - The company anticipates continued strong demand for its services, particularly in light of upcoming federal funding initiatives [31][62] - Management noted that the integration of RPS is exceeding expectations and creating new opportunities [27] Other Important Information - Cash flows from operations totaled $108 million, up 13% year-over-year, with a Days Sales Outstanding (DSO) of 59 days [11] - The quarterly dividend was increased to $0.26 per share, marking the ninth consecutive year of double-digit increases [11] Q&A Session Summary Question: Insights on RPS accretion targets and underlying Tetra Tech earnings growth - Management highlighted strong underlying performance with revenue growth in the 20% range, driven by federal funding initiatives [29][30] Question: Margin expectations and cash conversion trends - Management expects margin expansion in both Commercial/International and Government Services segments, with cash from operations exceeding net income [35][36] Question: RPS EBITDA margin targets and backlog contributions - RPS is expected to align its EBITDA margins with Tetra Tech's by 2025, with a stable backlog performance noted [37][53] Question: Impact of interest rates on commercial business - Management indicated that about half of commercial work is driven by regulatory requirements, which are less sensitive to interest rate fluctuations [44][46] Question: Future growth prospects and backlog contributions - Management sees potential for significant contributions from federal government funding, particularly in decarbonization and clean water initiatives [61][62]

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 January 1, 2023 OR ☐ 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 ...

Tetra Tech, Inc. (NASDAQ:TTEK) Q1 2023 Earnings Conference Call February 2, 2023 11:00 AM ET Company Participants Dan Batrack - Chairman & Chief Executive Officer Steve Burdick - Chief Financial Officer Jill Hudkins - President Conference Call Participants Noelle Dilts - Stifel Andy Wittmann - Baird Alex Dwyer - KeyBanc Tate Sullivan - Maxim Group Michael Dudas - Vertical Research Operator Good morning and thank you for joining the Tetra Tech Earnings Call. As a reminder, Tetra Tech is also simulcasting thi ...

EARNINGS CALL Q1-23February 2, 2023 Dan Batrack, Chairman & CEO Steve Burdick, Executive VP & CFO Jill Hudkins, President WATER ENVIRONMENT SUSTAINABLE INFRASTRUCTURE Leading with Science® Forward Looking Statements & Non-GAAP Financial Measures All statements in this communication other than statements of historical fact are "forward-looking statements" for purposes of federal and state securities laws, including any statements of the plans, strategies and objectives for future operations, profitability, s ...