Tetra Tech(TTEK) - 2025 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements Unaudited consolidated financial statements and notes detail accounting, revenue, acquisitions, goodwill, and debt for Q3 FY2025 Consolidated Balance Sheets 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 | $2,046,569 | Consolidated Statements of Income Revenue increased, but nine-month net income decreased significantly due to legal contingency and goodwill impairment charges Consolidated Statements of Income (Three Months Ended) | Metric | June 29, 2025 (in thousands) | June 30, 2024 (in thousands) | Change ($) | 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] Consolidated Statements of Comprehensive Income 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 | $277,834 | Consolidated Statements of Cash Flows Operating cash flow increased significantly; financing cash use rose substantially due to share repurchases Cash Flows (Nine Months Ended) | Metric | June 29, 2025 (in thousands) | June 30, 2024 (in thousands) | Change ($) | 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] - 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] Consolidated Statements of Stockholders' Equity 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 $(201,497) thousand[20] Notes to Unaudited Consolidated Financial Statements Detailed notes explain accounting policies, revenue, acquisitions, goodwill, debt, and legal contingencies for financial statements 1. Basis of Presentation Unaudited consolidated financial statements follow U.S. GAAP; a five-for-one stock split was retroactively applied - Unaudited consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information[23] - A five-for-one stock split, approved on July 29, 2024, and effective September 6, 2024, has been retroactively applied to all prior-period share or per share amounts[25] 2. Recent Accounting Pronouncements Reviewed recent FASB ASUs on segment reporting, income taxes, and debt; most are not expected to have a material impact - ASU 2023-07 (Segment Reporting) is effective for fiscal years beginning after December 15, 2023 (fiscal 2025 year-end for the company), and is not expected to have a material impact[26] - ASU 2023-09 (Income Taxes) is effective for annual periods beginning after December 15, 2024 (fiscal 2026), and is not expected to have a material impact[27] - ASU 2024-04 (Debt with Conversion and Other Options) is effective for annual periods beginning after December 15, 2025 (fiscal 2027), and the company is currently evaluating its impact[29] 3. Revenue and Contract Balances Revenue disaggregated by client sector and contract type shows growth in U.S. federal/state sectors; contract balances increased Revenue by Client Sector (Nine Months Ended) | Client Sector | June 29, 2025 (in thousands) | June 30, 2024 (in thousands) | Change ($) | 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][40] 4. Acquisitions 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][42][43] - 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] 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] 5. Goodwill and Intangible Assets 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][60] 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] 6. Property and Equipment 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] 7. Stock Repurchase and Dividends 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] - 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] Dividends Paid (Nine Months Ended) | Fiscal Year | Total Dividend Paid (in thousands) | | :---------- | :------------------------------- | | 2025 | $47,992 | | 2024 | $43,303 | 8. Leases 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] - The weighted-average remaining lease term for operating leases was 4.2 years at June 29, 2025[69] 9. Employee Benefits 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] - The company has no outstanding applications for further government assistance[71] 10. Stockholders' Equity and Stock Compensation Plans 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] 11. Earnings per Share ("EPS") 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] 12. Income Taxes 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] - Excluding these impacts, the adjusted effective tax rates were 27.6% in fiscal 2025 and 27.2% in fiscal 2024[76] Liability for Uncertain Tax Positions | Date | Amount (in thousands) | | :---------------- | :-------------------- | | June 29, 2025 | $52,300 | | September 29, 2024 | $50,100 | 13. Reportable Segments Operations managed under GSG and CIG; GSG grew significantly, CIG revenue flat but operating income increased; Corporate impacted by charges Revenue by Reportable Segment (Nine Months Ended) | Segment | June 29, 2025 (in thousands) | June 30, 2024 (in thousands) | Change ($) | 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] 14. Long-Term Debt 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] - 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] - 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][96] 15. Fair Value Measurements 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] - 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] 16. Reclassifications Out of Accumulated Other Comprehensive Income 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] 17. Commitments and Contingencies 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] - 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] - TtEC has initiated litigation with its insurance carrier regarding the potential payment or reimbursement of a significant portion of the settlement amounts[108] 18. Related Party Transactions 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 Overview of business, acquisitions, financial performance, liquidity, and risks, highlighting non-recurring charges and growth initiatives FORWARD-LOOKING STATEMENTS 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] - Readers are cautioned that actual results may differ materially and adversely from those expressed in any forward-looking statements[112] GENERAL OVERVIEW 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] - 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] 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] ACQUISITIONS AND DIVESTITURES 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][122] - Fiscal 2025 acquisitions: Carron + Walsh (Ireland) and SAGE Group Holdings (Australia), both for the CIG segment[123] - Fiscal 2024 acquisitions: LS Technologies (U.S. federal enterprise technology) and Convergence Controls & Engineering (process automation), both for the GSG segment[124] - The company divested an immaterial subsidiary in South America and a line of business in Australia in the first quarter of fiscal 2025[126] OVERVIEW OF RESULTS AND BUSINESS TRENDS 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] 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 $35 million from recent acquisitions. | | U.S. state and local government | 34.8% | Increased disaster response activity and continued investment in clean drinking water. | | U.S. commercial | 0.1% | Increased environmental services, offset by reduced renewable energy revenue. | | International | (0.9)% | Lower infrastructure work in Australia, partially offset by increased water planning and design in the United Kingdom. | - The cancellation of 83% of USAID programs due to Executive Order 14169 is expected to result in significantly lower USAID revenue in the fourth quarter of fiscal 2025[130] RESULTS OF OPERATIONS Consolidated revenue increased, but nine-month net income and diluted EPS decreased due to non-recurring charges; adjusted metrics show growth Consolidated Results of Operations Consolidated revenue grew 7.5%; reported income and net income decreased due to legal contingency and goodwill impairment; adjusted metrics grew strongly Consolidated Financial Performance (Nine Months Ended) | Metric | June 29, 2025 (in thousands) | June 30, 2024 (in thousands) | Change ($) | 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 | $0.23 | 26.1% | - Net interest expense decreased by 18.3% for the nine months ended June 29, 2025, due to lower average interest rates and borrowings[141] - The effective tax rate for the nine months ended June 29, 2025, was 40.9%, significantly impacted by non-deductible goodwill impairment and legal contingency charges[142] Segment Results of Operations Details GSG and CIG performance; GSG saw significant growth, CIG maintained flat revenue but improved operating income Government Services Group (GSG) GSG revenue and operating income increased significantly due to U.S. government disaster response, despite USAID cancellations; margin improved GSG Financial Performance (Nine Months Ended) | Metric | June 29, 2025 (in thousands) | June 30, 2024 (in thousands) | Change ($) | 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] - Revenue growth was partially offset by a $75.7 million decline related to USAID contract cancellations in the third quarter of fiscal 2025[146] Commercial/International Group (CIG) CIG revenue flat, but revenue net of subcontractor costs and operating income grew, driven by UK activities; margin improved CIG Financial Performance (Nine Months Ended) | Metric | June 29, 2025 (in thousands) | June 30, 2024 (in thousands) | Change ($) | 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] - Growth was primarily due to increased planning and design activities in the United Kingdom, partially offset by lower infrastructure activities in Australia[149] 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] Financial Condition, Liquidity and Capital Resources Strong liquidity with sufficient cash, operating cash flows, and borrowing capacity; debt restructured; stock repurchases and dividends continue Capital Requirements 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] - Primary sources of liquidity are cash flows from operations and borrowings under credit facilities[152] Cash and Cash Equivalents 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 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] Investing Activities 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] Financing Activities 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] Debt Financing 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] - 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] - 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] - 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] 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] Stock repurchases 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] - In the first nine months of fiscal 2025, 5,933,085 shares were repurchased for a total cost of $200.0 million[165] - At June 29, 2025, the remaining balance under the stock repurchase programs was $647.8 million[165] 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] Income Taxes 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 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] - 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] Critical Accounting Policies 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] New Accounting Pronouncements 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] Financial Market Risks 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] - 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] - 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][176] Item 3. Quantitative and Qualitative Disclosures About Market Risk 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] Item 4. Controls and Procedures 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] - No material changes in internal control over financial reporting occurred during the quarter ended June 29, 2025[179] PART II. OTHER INFORMATION Item 1. Legal Proceedings 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] Item 1A. Risk Factors 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] - Updated disclosures for interest and exchange rate risks are provided in the 'Financial Market Risks' section of Item 2[181] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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] - In the first nine months of fiscal 2025, 5,933,085 shares were repurchased for a total cost of $200.0 million[182] - At June 29, 2025, the remaining balance under the stock repurchase programs was $647.8 million[182] Item 4. Mine Safety Disclosures 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] - Information concerning mine safety violations or other regulatory matters is included in Exhibit 95[184] Item 5. Other Information 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] Item 6. Exhibits 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] - Mine Safety Disclosure is filed as Exhibit 95[188] - The Quarterly Report on Form 10-Q financial information is formatted in Inline eXtensible Business Reporting Language (Exhibit 101 and 104)[188] SIGNATURES 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][192]