Profit surge at Tetra Tech (NASDAQ: TTEK) as charges fade and cash flows rise
Filing Impact
Filing Sentiment
Form Type
10-Q
Tetra Tech, Inc. reported lower revenue but sharply higher profitability for the quarter and first half ended March 29, 2026. Revenue was $1.22 billion for the quarter and $2.43 billion for six months, down from $1.32 billion and $2.74 billion a year earlier, mainly due to reduced U.S. federal government work and a mix shift toward international clients.
Despite this, net income attributable to Tetra Tech jumped to $93.6 million for the quarter and $198.7 million for six months, versus $5.4 million and $6.1 million in the prior-year periods. The comparison benefits from last year’s $92.4 million goodwill impairment and $115.0 million legal contingency charge, as well as a $12.4 million gain on the sale of Norwegian operations in 2026. Diluted EPS reached $0.36 for the quarter and $0.76 year-to-date.
Operating cash flow improved to $237.6 million from $7.2 million, helped by strong collections and lower working capital. The company acquired Halvik Corp for an estimated $210 million to expand U.S. federal consulting capabilities and continued portfolio reshaping with the Norway divestiture. It repurchased about 2.9 million shares for $100.0 million, paid $33.9 million in dividends, and ended with $223.6 million in cash and $880.2 million of long-term debt. Remaining unsatisfied performance obligations totaled approximately $4.22 billion, providing multi-year revenue visibility.
Positive
- None.
Negative
- None.
Insights
Profit rebounds on cleaner comparables and strong cash flow, while revenue softens and mix shifts toward international and fixed-price work.
Tetra Tech generated six-month revenue of $2.43 billion, down from $2.74 billion, as U.S. federal government revenue declined and the mix shifted toward international clients (43.9% of revenue versus 35.4% a year earlier). Fixed‑price contracts rose to 47.7% of revenue, increasing execution focus on cost control and project performance.
Net income attributable to Tetra Tech surged to $198.7 million from $6.1 million, largely because prior‑year results included a $92.4 million goodwill impairment and a $115.0 million legal contingency charge. Current‑period results also benefit from a non‑taxable $12.4 million gain on the Norway divestiture and favorable contract estimate adjustments. Underlying tax rates excluding these items were similar at about 27.5%–27.8%.
Cash generation was strong: operating cash flow reached $237.6 million, enabling $100.0 million of buybacks, $33.9 million in dividends and a $210 million acquisition of Halvik. Long‑term debt increased to $880.2 million, including $575.0 million of 2.25% Convertible Notes, but leverage remained moderate with a disclosed consolidated leverage ratio of 1.32x and interest coverage of 18.08x. A $4.22 billion remaining performance obligation at March 29 2026 underpins multi‑year revenue, though actual realization will depend on contract execution and potential scope changes.
Key Figures
Quarterly revenue: $1,220,157,000
Six-month revenue: $2,430,820,000
Six-month net income: $199,020,000
+5 more
8 metrics
Quarterly revenue
$1,220,157,000
Three months ended March 29, 2026
Six-month revenue
$2,430,820,000
Six months ended March 29, 2026
Six-month net income
$199,020,000
Net income for six months ended March 29, 2026
Operating cash flow
$237,611,000
Net cash provided by operating activities, six months 2026
Halvik acquisition price
$210,000,000
Fair value of purchase price in Q2 2026
Stock repurchases
$100,000,000
Cost to repurchase 2,894,539 shares in first half 2026
Remaining performance obligation
$4,224,753,000
RUPO balance at March 29, 2026
Long-term debt
$880,162,000
Total long-term debt at March 29, 2026
Key Terms
Remaining Unsatisfied Performance Obligation, contingent earn-out liabilities, Convertible Notes, Capped Call Transactions, +2 more
6 terms
Remaining Unsatisfied Performance Obligation financial
"Our RUPO represents a measure of the total dollar value of work to be performed on contracts awarded and in progress."
contingent earn-out liabilities financial
"We record the estimated fair value of contingent consideration as a liability in “Current contingent earn-out liabilities” and “Non-current contingent earn-out liabilities”."
Convertible Notes financial
"we issued $575.0 million in Convertible Notes that bear interest at a rate of 2.25% per annum"
Convertible notes are a type of short-term loan that a company receives from investors, which can later be turned into company shares instead of being paid back in cash. They matter to investors because they offer a way to support a company early on while giving the potential to own a stake in its success if the company grows and later raises more funding.
Capped Call Transactions financial
"we entered into the Capped Call Transactions…expected generally to reduce the potential dilution of our common stock upon conversion of the Convertible Notes"
Capped call transactions are agreements where investors buy options that give them the chance to benefit if a stock's price goes up, but with a limit on how much they can gain. This helps protect them from paying too much if the stock's price rises a lot, similar to having a maximum limit on a reward. They matter because they help investors manage risk while still allowing some upside potential.
goodwill impairment financial
"we recorded a non-cash goodwill impairment charge of $92.4 million included in operating income in the second quarter of fiscal 2025"
Goodwill impairment occurs when a company’s valued reputation or brand strength, known as goodwill, is found to be worth less than previously recorded on its financial statements. This usually happens when the company's performance declines or market conditions change, signaling that the expected benefits from acquisitions or brand value are no longer as strong. It matters to investors because it can indicate that a company's assets are less valuable than initially thought, potentially affecting its overall financial health.
False Claims Act regulatory
"The complaint alleges False Claims Act ("FCA") violations and breach of contract related to TtEC's contracts"
A False Claims Act is a law that lets the government and private whistleblowers sue companies that knowingly submit false bills or statements to obtain government money or benefits. For investors it matters because such lawsuits can trigger large fines, settlements or reputational damage—similar to a leak in a ship that can force expensive repairs and slow operations—potentially reducing cash flow, increasing legal costs, and harming stock value.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended March 29, 2026
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
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | |||||||
(Address of principal executive offices) (Zip Code)
(626 ) 351-4664
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☒ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | Smaller reporting company | ||||||||||||||||||
Emerging growth company | |||||||||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
At April 20, 2026, 259,524,699 shares of the registrant’s common stock were outstanding.
TETRA TECH, INC.
INDEX
PART I. | FINANCIAL INFORMATION | PAGE NO. | ||||||
Item 1. | Financial Statements (Unaudited) | 3 | ||||||
Consolidated Balance Sheets as of March 29, 2026 and September 28, 2025 | 3 | |||||||
Consolidated Statements of Income for the Three and Six Months Ended March 29, 2026 and March 30, 2025 | 4 | |||||||
Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended March 29, 2026 and March 30, 2025 | 5 | |||||||
Consolidated Statements of Cash Flows for the Six Months Ended March 29, 2026 and March 30, 2025 | 6 | |||||||
Consolidated Statements of Stockholders' Equity for the Three and Six Months Ended March 29, 2026 and March 30, 2025 | 7 | |||||||
Notes to Unaudited Consolidated Financial Statements | 9 | |||||||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 27 | ||||||
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 39 | ||||||
Item 4. | Controls and Procedures | 39 | ||||||
PART II. | OTHER INFORMATION | 39 | ||||||
Item 1. | Legal Proceedings | 39 | ||||||
Item 1A. | Risk Factors | 40 | ||||||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 40 | ||||||
Item 4. | Mine Safety Disclosures | 40 | ||||||
Item 5. | Other Information | 40 | ||||||
Item 6. | Exhibits | 40 | ||||||
SIGNATURES | 42 | |||||||
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Tetra Tech, Inc.
Consolidated Balance Sheets
(unaudited - in thousands, except par value)
| As of | |||||||||||
| ASSETS | March 29, 2026 | September 28, 2025 | |||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Accounts receivable, net | |||||||||||
| Contract assets | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Assets held-for-sale | |||||||||||
| Total current assets | |||||||||||
| Property and equipment, net | |||||||||||
| Right-of-use assets, operating leases | |||||||||||
| Goodwill | |||||||||||
| Intangible assets, net | |||||||||||
| Deferred tax assets | |||||||||||
| Other non-current assets | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued compensation | |||||||||||
| Contract liabilities | |||||||||||
| Short-term lease liabilities, operating leases | |||||||||||
| Current contingent earn-out liabilities | |||||||||||
| Liabilities held-for-sale | |||||||||||
| Other current liabilities | |||||||||||
| Total current liabilities | |||||||||||
| Deferred tax liabilities | |||||||||||
| Long-term debt | |||||||||||
| Long-term lease liabilities, operating leases | |||||||||||
| Non-current contingent earn-out liabilities | |||||||||||
| Other non-current liabilities | |||||||||||
Commitments and contingencies (Note 16) | |||||||||||
| Equity: | |||||||||||
Preferred stock - authorized, | |||||||||||
Common stock - authorized, | |||||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Retained earnings | |||||||||||
| Tetra Tech stockholders’ equity | |||||||||||
| Noncontrolling interests | |||||||||||
| Total stockholders' equity | |||||||||||
| Total liabilities and stockholders' equity | $ | $ | |||||||||
See Notes to Consolidated Financial Statements.
3
Tetra Tech, Inc.
Consolidated Statements of Income
(unaudited – in thousands, except per share data)
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| March 29, 2026 | March 30, 2025 | March 29, 2026 | March 30, 2025 | ||||||||||||||||||||
| Revenue | $ | $ | $ | $ | |||||||||||||||||||
| Subcontractor costs | ( | ( | ( | ( | |||||||||||||||||||
| Other costs of revenue | ( | ( | ( | ( | |||||||||||||||||||
| Gross profit | |||||||||||||||||||||||
| Selling, general and administrative expenses | ( | ( | ( | ( | |||||||||||||||||||
| Legal contingency costs | ( | ||||||||||||||||||||||
| Contingent consideration – fair value adjustments | |||||||||||||||||||||||
| Impairment of goodwill | ( | ( | |||||||||||||||||||||
| Income from operations | |||||||||||||||||||||||
| Interest expense, net | ( | ( | ( | ( | |||||||||||||||||||
| Other non-operating income | |||||||||||||||||||||||
| Income before income tax expense | |||||||||||||||||||||||
| Income tax expense | ( | ( | ( | ( | |||||||||||||||||||
| Net income | |||||||||||||||||||||||
| Net income attributable to noncontrolling interests | ( | ( | ( | ( | |||||||||||||||||||
| Net income attributable to Tetra Tech | $ | $ | $ | $ | |||||||||||||||||||
| Earnings per share attributable to Tetra Tech: | |||||||||||||||||||||||
| Basic | $ | $ | $ | $ | |||||||||||||||||||
| Diluted | $ | $ | $ | $ | |||||||||||||||||||
| Weighted-average common shares outstanding: | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
See Notes to Consolidated Financial Statements.
4
Tetra Tech, Inc.
Consolidated Statements of Comprehensive Income (Loss)
(unaudited – in thousands)
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| March 29, 2026 | March 30, 2025 | March 29, 2026 | March 30, 2025 | ||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Other comprehensive income (loss), net of tax | |||||||||||||||||||||||
Foreign currency translation adjustment, net of tax | ( | ( | |||||||||||||||||||||
| Net pension adjustments | ( | ( | |||||||||||||||||||||
| Other comprehensive income (loss), net of tax | ( | ( | |||||||||||||||||||||
| Comprehensive income (loss), net of tax | ( | ||||||||||||||||||||||
| Less: Comprehensive income attributable to noncontrolling interests, net of tax | |||||||||||||||||||||||
| Comprehensive income (loss) attributable to Tetra Tech, net of tax | $ | $ | $ | $ | ( | ||||||||||||||||||
See Notes to Consolidated Financial Statements.
5
Tetra Tech, Inc.
Consolidated Statements of Cash Flows
(unaudited – in thousands)
| Six Months Ended | |||||||||||
| March 29, 2026 | March 30, 2025 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | $ | |||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Amortization of stock-based awards | |||||||||||
| Deferred income taxes | ( | ||||||||||
| Provision for losses on accounts receivables | |||||||||||
| Gain on sale of divested business | ( | ||||||||||
| Impairment of goodwill | |||||||||||
| Fair value adjustments to contingent consideration | ( | ( | |||||||||
| Gain on cash surrender value of life insurance policies | ( | ||||||||||
| Other non-cash items | |||||||||||
| Changes in operating assets and liabilities, net of effects of business acquisitions and divestiture: | |||||||||||
| Accounts receivable and contract assets | ( | ||||||||||
| Prepaid expenses and other assets | ( | ||||||||||
| Accounts payable | ( | ||||||||||
| Accrued compensation | ( | ( | |||||||||
| Contract liabilities | ( | ||||||||||
| Income taxes receivable/payable | ( | ( | |||||||||
| Cash settled on contingent earn-out liabilities | ( | ||||||||||
| Other liabilities | ( | ||||||||||
| Net cash provided by operating activities | |||||||||||
| Cash flows from investing activities: | |||||||||||
| Payments for business acquisitions, net of cash acquired | ( | ( | |||||||||
| Capital expenditures | ( | ( | |||||||||
| Proceeds from divested business, net | |||||||||||
| Proceeds from company-owned life insurance policies | |||||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from borrowings | |||||||||||
| Repayments on long-term debt | ( | ( | |||||||||
| Repurchases of common stock | ( | ( | |||||||||
| Shares repurchased for tax withholdings on share-based awards | ( | ( | |||||||||
| Payments of contingent earn-out liabilities | ( | ( | |||||||||
| Stock options exercised | |||||||||||
| Dividends paid | ( | ( | |||||||||
| Principal payments on finance leases | ( | ( | |||||||||
| Net cash used in financing activities | ( | ( | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | ( | ||||||||||
| Net increase (decrease) in cash and cash equivalents | ( | ||||||||||
| Cash and cash equivalents at beginning of period | |||||||||||
| Cash and cash equivalents at end of period | $ | $ | |||||||||
| Supplemental information: | |||||||||||
| Cash paid during the period for: | |||||||||||
| Interest | $ | $ | |||||||||
Income taxes, net of refunds received of $ | $ | $ | |||||||||
| Non-cash financing activities: | |||||||||||
| Excise taxes accrued but not paid | $ | $ | |||||||||
| Reconciliation of cash and cash equivalents at beginning of period: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Cash and cash equivalents included in assets held-for-sale | |||||||||||
| Total | $ | $ | |||||||||
See Notes to Consolidated Financial Statements.
6
Tetra Tech, Inc.
Consolidated Statements of Stockholders' Equity
Three Months Ended March 30, 2025 and March 29, 2026
(unaudited – in thousands)
| Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Total Tetra Tech Equity | Non-Controlling Interests | Total Equity | |||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||
| BALANCE AT DECEMBER 29, 2024 | $ | $ | $ | ( | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Distributions paid in noncontrolling interests | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
Cash dividends of $ | — | — | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Restricted & performance shares released | — | ( | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||
| Stock options exercised | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Stock repurchases | ( | ( | ( | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| BALANCE AT MARCH 30, 2025 | $ | $ | $ | ( | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| BALANCE AT DECEMBER 28, 2025 | $ | $ | $ | ( | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | — | — | — | ( | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Distributions paid in noncontrolling interests | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
Cash dividends of $ | — | — | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Restricted & performance shares released | ( | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||
| Stock options exercised | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Stock repurchases | ( | ( | ( | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| BALANCE AT MARCH 29, 2026 | $ | $ | $ | ( | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
7
Tetra Tech, Inc.
Consolidated Statements of Stockholders' Equity
Six Months Ended March 30, 2025 and March 29, 2026
(unaudited – in thousands)
| Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Total Tetra Tech Equity | Non-Controlling Interests | Total Equity | |||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||
| BALANCE AT SEPTEMBER 29, 2024 | $ | $ | $ | ( | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | — | — | — | ( | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Net pension adjustments | — | — | — | ( | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Distributions paid in noncontrolling interests | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
Cash dividends of $ | — | — | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Restricted & performance shares released | ( | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||
| Stock options exercised | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Shares issued for Employee Stock Purchase Plan | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Stock repurchases | ( | ( | ( | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| BALANCE AT MARCH 30, 2025 | $ | $ | $ | ( | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| BALANCE AT SEPTEMBER 28, 2025 | $ | $ | $ | ( | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Net pension adjustments | — | — | — | ( | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Distributions paid in noncontrolling interests | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
Cash dividends of $ | — | — | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Restricted & performance shares released | ( | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||
| Stock options exercised | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Shares issued for Employee Stock Purchase Plan | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Stock repurchases | ( | ( | ( | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| BALANCE AT MARCH 29, 2026 | $ | $ | $ | ( | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
See Notes to Consolidated Financial Statements.
8
TETRA TECH, INC.
Notes to Consolidated Financial Statements
1. Basis of Presentation
The accompanying unaudited consolidated financial statements and related notes of Tetra Tech, Inc. (“we,” “us,” “our” or "Tetra Tech") have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. They do not include all of the information and footnotes required by U.S. GAAP for complete financial statements and, therefore, should be read in conjunction with the audited consolidated financial statements and the notes contained in our Annual Report on Form 10-K for the fiscal year ended September 28, 2025.
These financial statements reflect all normal recurring adjustments that are considered necessary for a fair statement of our financial position, results of operations and cash flows for the interim periods presented. The results of operations and cash flows for any interim period are not necessarily indicative of results for the full fiscal year or for future fiscal years. Certain prior year amounts have been reclassified to conform to the current year presentation in the accompanying notes.
Beginning in fiscal 2026, we transferred certain operating units between our two reportable segments and redefined our reporting units to better align our operations with the clients, markets and geographies that they serve. Prior year amounts for reportable segments have been revised to conform to the current year presentation.
2. Recent Accounting Pronouncements
In September 2025, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) No. 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which clarifies and modernizes the accounting for costs related to internal-use software guidance in subtopic 350-40. The guidance removes all references to project stages throughout Accounting Standards Codification ("ASC") 350-40 and clarifies the threshold entities apply to begin capitalizing costs. The amendments in this ASU are effective for annual periods beginning after December 15, 2027 (fiscal 2029 for us). Early adoption is permitted. We are currently evaluating the impact of this guidance on our consolidated financial statements; however, we do not plan to adopt it before fiscal 2029.
In July 2025, the FASB issued ASU No. 2025-05, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Loss for Accounts Receivable and Contract Assets, which provides a practical expedient (for all entities) and an accounting policy election (for all entities, other than public business entities, that elect the practical expedient) related to the estimation of expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under ASC Topic 606, "Revenue from Contracts with Customers". The amendments in this ASU are effective for annual periods beginning after December 15, 2025 (fiscal 2027 for us). Early adoption is permitted. We are currently evaluating the impact of this guidance on our consolidated financial statements; however, we do not plan to adopt it before fiscal 2027.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires entities to disclose additional income tax information on an annual basis, primarily related to the rate reconciliation and income taxes paid. The amendments in the ASU are intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in this ASU are effective for annual periods beginning after December 15, 2024 (fiscal 2026 for us). The adoption of this ASU will not have a material impact on our consolidated financial statements.
In November 2024, the FASB issued ASU No. 2024-03, Income Statement (Topic 220): Reporting Comprehensive Income. ASU 2024-03 does not change or remove current expense presentation requirements within the consolidated statements of income. However, the amendments require disclosure, on an annual and interim basis, of disaggregated information about certain income statement expense line items within the notes to the consolidated financial statements. The amendments in this update are effective for annual reporting periods beginning after December 15, 2026 (fiscal 2028 for us), and interim reporting periods beginning after December 15, 2027 (first quarter of fiscal 2029 for us). Early adoption is permitted. The adoption of this ASU will not have a material impact on our consolidated financial statements.
In November 2024, the FASB issued ASU No. 2024-04, Debt—Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments, which clarifies the requirements related to accounting for the settlement of a debt instrument as an induced conversion. The amendments in this update are effective for annual reporting periods beginning after December 15, 2025, including interim periods within those fiscal years (first quarter of fiscal 2027 for us). Early adoption is permitted. We are currently evaluating the impact of this guidance on our consolidated financial statements; however, we do not plan to adopt this ASU before fiscal 2027.
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3. Revenue and Contract Balances
We disaggregate revenue by client sector and contract type, as we believe it best depicts how the nature, timing and uncertainty of our revenue and cash flows are affected by economic factors. The following tables present our revenue disaggregated by client sector and contract type (in thousands):
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| March 29, 2026 | March 30, 2025 | March 29, 2026 | March 30, 2025 | ||||||||||||||||||||
| Client Sector: | |||||||||||||||||||||||
U.S. federal government (1) | $ | $ | $ | $ | |||||||||||||||||||
| U.S. state and local government | |||||||||||||||||||||||
| U.S. commercial | |||||||||||||||||||||||
International (2) | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
| Contract Type: | |||||||||||||||||||||||
| Fixed-price | $ | $ | $ | $ | |||||||||||||||||||
| Time-and-materials | |||||||||||||||||||||||
| Cost-plus | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
(1) Includes revenue generated under U.S. federal government contracts performed outside the United States.
(2) Includes revenue generated from non-U.S. clients, primarily in Australia, Canada and the United Kingdom.
Other than the U.S. federal government, no single client accounted for more than 10% of our revenue for the three and six months ended March 29, 2026 and March 30, 2025.
Contract Assets and Contract Liabilities
We invoice customers based on the contractual terms of each contract. However, the timing of revenue recognition may differ from the timing of invoice issuance. Contract assets represent revenue recognized in excess of the amounts for which we have the contractual right to bill our customers. Such amounts are recoverable from customers based upon various measures of performance, including achievement of certain milestones or completion of a contract. In addition, many of our time-and-materials arrangements are billed in arrears pursuant to contract terms that are standard within the industry, resulting in contract assets and/or unbilled receivables being recorded, as revenue is recognized in advance of billings. Contract retentions, included in contract assets, represent amounts withheld by clients until certain conditions are met or the project is completed, which may extend beyond one year.
| As of | |||||||||||
| March 29, 2026 | September 28, 2025 | ||||||||||
Contract assets (1) | $ | $ | |||||||||
Contract liabilities - current | ( | ( | |||||||||
Contract liabilities - non-current (2) | ( | ( | |||||||||
| Net contract liabilities | $ | ( | $ | ( | |||||||
(1) Includes $10.7 million and $12.8 million of contract retentions at March 29, 2026 and September 28, 2025, respectively.
(2) Reported under "Other non-current liabilities" on our consolidated balance sheet as of March 29, 2026 and September 28, 2025.
For the first halves of fiscal 2026 and 2025, we recognized revenue of approximately $230 million and $175 million, respectively, from the amounts included in the contract liability balances at the end of fiscal 2025 and 2024, respectively.
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Accounts Receivable, Net
Net accounts receivable consisted of the following (in thousands):
| As of | |||||||||||
| March 29, 2026 | September 28, 2025 | ||||||||||
| Billed | $ | $ | |||||||||
| Unbilled | |||||||||||
| Total accounts receivable | |||||||||||
| Allowance for doubtful accounts | ( | ( | |||||||||
| Total accounts receivable, net | $ | $ | |||||||||
Billed accounts receivable represent amounts billed to clients that have not yet been collected. Unbilled accounts receivable, which represent an unconditional right to payment subject only to the passage of time, include unbilled amounts typically resulting from revenue recognized but not yet billed pursuant to contract terms or billed after the period end date. Substantially all of our unbilled receivables at March 29, 2026 are expected to be billed and collected within 12 months. The allowance for doubtful accounts represents amounts that are expected to become uncollectible or unrealizable in the future. We estimate the allowance for uncollectible accounts based on management's consideration of trends in the actual and forecasted credit quality of our clients, including client delinquency and payment history; type of client, such as a government agency or a commercial sector client; and general economic and industry conditions that may affect our clients' ability to pay.
Other than the U.S. federal government, no single client accounted for more than 10% of our accounts receivable at March 29, 2026 and September 28, 2025.
Remaining Unsatisfied Performance Obligation (“RUPO”)
Our RUPO represents a measure of the total dollar value of work to be performed on contracts awarded and in progress. We had $4.2 billion of RUPO at March 29, 2026. Our RUPO increases with awards from new contracts or additions on existing contracts and decreases as work is performed and revenue is recognized on existing contracts. Our RUPO may also decrease when projects are canceled or modified in scope. We include a contract within our RUPO when the contract is awarded and an agreement on contract terms has been reached.
We expect to satisfy our RUPO at March 29, 2026 over the following periods (in thousands):
| Amount | |||||
| Within 12 months | $ | ||||
Beyond (1) | |||||
| Total | $ | ||||
Although RUPO reflects business that is considered to be firm, cancellations, deferrals or scope adjustments may occur. Our RUPO is adjusted to reflect any known project cancellations, revisions to project scope and cost, foreign currency exchange fluctuations and project deferrals, as appropriate. Our operations and maintenance contracts can generally be terminated by the clients without a substantive financial penalty; therefore, the remaining performance obligations on such contracts are limited to the notice period required for the termination (usually 30 , 60 , or 90 days).
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4. Acquisitions and Divestitures
Acquisitions
In the second quarter of fiscal 2026, we acquired Halvik Corp (“Halvik”) headquartered in Vienna, Virginia. With 600 employees, Halvik provides high-end advisory consulting services focused on advanced data analytics, systems modernization and cybersecurity for U.S. federal defense and civilian agencies. Halvik is included in our Government Services Group (“GSG”) segment. The fair value of the purchase price was approximately $210 million. This amount consisted of $150 million in initial cash payments made to the sellers, as well as $25 million of cash held in escrow and $35 million of the estimated fair value of contingent earn-out obligations, with a total maximum of $97 million based on the achievement of specified operating income targets in each of the three years following the acquisition date. The purchase price allocation consists of $24 million to net tangible assets, $26 million to identifiable intangible assets and $160 million to goodwill. The purchase price allocation is preliminary and subject to adjustment as the estimates, assumptions, valuations and other analyses have not yet been finalized in order to make a definitive allocation.
In the second quarter of fiscal 2025, we acquired Carron + Walsh ("CAW"), based in the Republic of Ireland. CAW delivers project and cost management solutions for large-scale commercial, life science, residential and infrastructure programs across Europe. In the third quarter of fiscal 2025, we also acquired SAGE Group Holdings ("SAGE"), an Australian consulting firm that provides innovative technology and high-quality automation services that optimize operational efficiency and drive digital transformation for commercial and government clients across the municipal water, energy, transportation, defense and manufacturing sectors.
Both CAW and SAGE are included in our Commercial/International Services Group ("CIG") segment. The aggregate fair value of the purchase price of these two acquisitions was $147 million. This amount consisted of $104 million in initial cash payments and $43 million of the estimated fair value of contingent earn-out obligations, with a maximum of approximately $60 million, based on the achievement of specified operating income targets in each of the three years following their respective acquisition dates. The allocation of the $147 million purchase price consists of $13 million to net tangible assets, $14 million to identifiable intangible assets, $4 million to deferred income tax liability and $124 million to goodwill. The purchase price allocations for these acquisitions are preliminary and subject to adjustment as the estimates, assumptions, valuations and other analyses have not yet been finalized in order to make a definitive allocation.
The aforementioned acquisitions in fiscal 2026 and 2025 were not considered material, individually or in aggregate, to our consolidated financial statements. As a result, no pro forma information has been provided.
The fiscal 2026 goodwill addition from the Halvik acquisition reflects the extensive technical knowledge of the acquired workforce and the anticipated synergies in data analytics, system modernization and cybersecurity services. The fiscal 2025 goodwill additions from the CAW and SAGE acquisitions reflect the anticipated synergies related to proven systems and technology in project management, cost management, project controls and automation services which will provide superior project outcomes and drive digital transformation for defense, government and commercial customers, as delivered by a workforce with extensive technical expertise. The fiscal 2026 goodwill addition is deductible for tax purposes, and the fiscal 2025 goodwill additions are not.
Intangible assets with finite lives arise from business acquisitions and are amortized based on the period over which the contractual or economic benefit of the intangible assets are expected to be realized on a straight-line basis over the useful lives of the underlying assets, ranging from one to 12 years. These consist of client relations, backlog and trade names. For detailed information regarding our intangible assets, see Note 5, “Goodwill and Intangible Assets”.
Most of our acquisition agreements include contingent earn-out agreements, which are generally based on the achievement of future operating income thresholds. The contingent earn-out arrangements are based on our valuations of the acquired companies and reduce the risk of overpaying for acquisitions if the projected financial results are not achieved. The fair values of any earn-out arrangements are included as part of the purchase price of the acquired companies on their respective acquisition dates. For each transaction, we estimate the fair value of contingent earn-out payments as part of the initial purchase price and record the estimated fair value of contingent consideration as a liability in “Current contingent earn-out liabilities” and “Non-current contingent earn-out liabilities” on the consolidated balance sheets. We consider several factors when determining that contingent earn-out liabilities are part of the purchase price, including the following: (1) the valuation of our acquisitions is not supported solely by the initial consideration paid, and the contingent earn-out formula is a critical and material component of the valuation approach to determining the purchase price; and (2) the former owners of acquired companies that remain as key employees receive compensation other than contingent earn-out payments at a reasonable level compared with the compensation of our other key employees. The contingent earn-out payments are not affected by employment termination.
We measure our contingent earn-out liabilities at fair value on a recurring basis using significant unobservable inputs classified within Level 3 of the fair value hierarchy. We use a probability-weighted discounted income approach as a valuation technique to convert future estimated cash flows to a single present value amount. The significant unobservable inputs used in the fair value measurements are operating income projections over the earn-out period (generally three to five years ) and the probability outcome percentages we assign to each scenario. Significant increases or decreases to either of these inputs in isolation would result in a significantly higher or lower liability, with a higher liability capped by the contractual maximum of
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the contingent earn-out obligation. Ultimately, the liability will be equivalent to the amount paid, and the difference between the fair value estimate and amount paid will be recorded in earnings. The amount paid that is less than or equal to the contingent earn-out liability on the acquisition date is reflected as cash used in financing activities in our consolidated statements of cash flows. Any amount paid in excess of the contingent earn-out liability on the acquisition date is reflected as cash used in operating activities in our consolidated statements of cash flows.
We review and reassess the estimated fair value of contingent consideration on a quarterly basis, and the updated fair value could differ materially from the initial estimates. Changes in the estimated fair value of our contingent earn-out liabilities related to the time component of the present value calculation are reported in interest expense. Adjustments to the estimated fair value related to changes in all other unobservable inputs are reported in operating income. In the first half of fiscal 2026, we evaluated our estimates for contingent consideration liabilities for the remaining earn-out periods for each individual acquisition, which included a review of their financial results to-date, the status of ongoing projects in their RUPO and the inventory of prospective new contract awards.
The following table summarizes the changes in the fair value of estimated contingent consideration (in thousands):
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| March 29, 2026 | March 30, 2025 | March 29, 2026 | March 30, 2025 | ||||||||||||||||||||
| Beginning balance | $ | $ | $ | $ | |||||||||||||||||||
Estimated earn-out liabilities for acquisitions (1) | |||||||||||||||||||||||
| Payments of contingent consideration | ( | ( | ( | ( | |||||||||||||||||||
| Adjustments to fair value recorded in earnings | ( | ( | ( | ( | |||||||||||||||||||
| Interest accretion expense | |||||||||||||||||||||||
| Effect of foreign currency exchange rate changes | |||||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | |||||||||||||||||||
Total potential maximum outstanding (1) | $ | ||||||||||||||||||||||
(1) For the second quarter and first six months of fiscal 2026, the estimated earn-out liabilities and the potential maximum outstanding amounts include the fair values of the holdback amounts held in escrow related to the acquisition of Halvik.
Subsequent Event. On April 17, 2026, we acquired Providence Consulting Group Pty Ltd ("Providence"), an advisory and project management consultancy based in Australia. Providence will be included in our CIG segment. This acquisition is not material to our consolidated financial statements.
Divestiture
5. Goodwill and Intangible Assets
At the beginning of fiscal 2026, we transferred certain operating units between our two reportable segments and redefined our reporting units to better align our operations with the clients and markets that they serve. As a result, we reallocated goodwill between our GSG and CIG reportable segments on a relative fair value basis.
The following table summarizes the changes in the carrying value of goodwill by reportable segment (in thousands):
| GSG | CIG | Total | ||||||||||||||||||
| Balance at September 28, 2025 | $ | $ | $ | |||||||||||||||||
| Goodwill reallocation | ( | — | ||||||||||||||||||
| Acquisition activity | ||||||||||||||||||||
| Translation adjustments | ( | ( | ||||||||||||||||||
| Balance at March 29, 2026 | $ | $ | $ | |||||||||||||||||
Translation adjustments resulted from our goodwill amounts in foreign subsidiaries with functional currencies that are different than our reporting currency. The goodwill amounts presented in the table above are net of reductions from historical impairment adjustments.
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The following table summarizes the gross and accumulated impairment amounts of goodwill by reportable segment (in thousands):
| GSG | CIG | Total | ||||||||||||||||||
| Balance at September 28, 2025 | $ | $ | $ | |||||||||||||||||
| Accumulated impairment | ||||||||||||||||||||
| Gross amount at September 28, 2025 | $ | $ | $ | |||||||||||||||||
| Balance at March 29, 2026 | $ | $ | $ | |||||||||||||||||
| Accumulated impairment | ||||||||||||||||||||
| Gross amount at March 29, 2026 | $ | $ | $ | |||||||||||||||||
We perform our annual goodwill impairment review at the beginning of our fiscal fourth quarter. Our most recent annual review at June 30, 2025 (i.e. the first day of our fourth quarter in fiscal 2025) indicated that we had no impairment of goodwill, and all of our reporting units had estimated fair values that were in excess of their carrying values, including goodwill. At June 30, 2025, we had no reporting units that had estimated fair values that exceeded their carrying values by less than 38 %, except for our Global Development Services reporting unit ("GDS") as described below.
We also regularly evaluate whether events and circumstances have occurred that may indicate a potential change in the recoverability of goodwill. We perform interim goodwill impairment reviews between our annual reviews if certain events and circumstances have occurred, such as a deterioration in general economic conditions; an increase in the competitive environment; a change in management, key personnel, strategy or customers; negative or declining cash flows; or a decline in actual or planned revenue or earnings compared with actual and projected results of relevant prior periods.
During the second quarter of fiscal 2025, events and circumstances occurred that indicated a potential change in the recoverability of goodwill in GDS. GDS provided consulting and engineering services for international development agencies supporting humanitarian programs worldwide. Although several agencies were supported by this work (primarily for the U.S., Australia and United Kingdom governments), over eighty percent of the activity was historically for the United States Agency for International Development ("USAID").
On January 20, 2025, President Trump signed Executive Order 14169, titled "Reevaluating and Realigning United States Foreign Aid", which initiated a 90-day pause on all U.S. foreign development assistance programs to assess their alignment with U.S. foreign policy objectives with few exemptions. Following a six-week review, on February 27, 2025, U.S. Secretary of State Rubio announced the cancellation of 83 % of USAID programs, totaling approximately 5,200 contracts. Subsequently, we were notified that virtually all of our contracts with USAID were terminated for convenience. As a result of these events and circumstances, we performed an interim impairment review of the goodwill in GDS in the second quarter of 2025.
We considered two methods to determine the fair value of the GDS reporting unit: (i) the Income Approach and (ii) the Market Approach. While each of these approaches were initially considered in the valuation of the business enterprise, the nature and characteristic of the reporting unit indicated which approach was most applicable. The Income Approach utilizes the discounted cash flow method, which focuses on the expected cash flow of the reporting unit. In applying this approach, the cash flow available for distribution is calculated for a finite period of years. Cash flow available for distribution is defined, for purposes of this analysis, as the amount of cash that could be distributed as a dividend without impairing the future profitability or operations of the reporting unit. The cash flow available for distribution and the terminal value (the value of the reporting unit at the end of the estimation period) are then discounted to present value to derive an indication of the value of the business enterprise. The Market Approach is comprised of the guideline public company method and guideline transactions method. The guideline company method focuses on comparing the reporting unit to select reasonably similar (or “guideline”) publicly traded companies. Under this method, valuation multiples are (i) derived from the operating data of selected guideline companies; (ii) evaluated and adjusted based on the strengths and weaknesses of the reporting units relative to the selected guideline companies; and (iii) applied to the operating data of the reporting unit to arrive at an indication of value. In the similar transactions method, consideration is given to prices paid in recent transactions that have occurred in the reporting unit’s industry or in related industries.
For the interim impairment analysis of GDS, we utilized the Income Approach as it had the most direct correlation to the specific economics of the reporting unit. The estimated fair value of equity of GDS was made using Level 3 inputs including the estimated discount rate that reflected the level of risk associated with receiving future cash flows and the forecasted long-term growth rates of GDS's revenue and operating income. Based on our analysis, an impairment of $92.4 million was calculated as the deficit between the fair value of equity of the GDS reporting unit as compared to its carrying value, including goodwill of $130.5 million at our fiscal period end for February 2025. As a result, we recorded a non-cash goodwill impairment charge of $92.4 million included in operating income in the second quarter of fiscal 2025. The
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remaining $38.1 million of goodwill in GDS was primarily supported by our work for the Australia and United Kingdom foreign aid government agencies.
As of the annual impairment review date, the estimated fair value of the GDS reporting unit continued to approximate its carrying value. Effective the first day of fiscal 2026, we eliminated GDS and realigned its remaining operations with other existing reporting units based on their common geographic markets.
The following table presents the gross amount and accumulated amortization of our acquired identifiable intangible assets with finite useful lives included in “Intangible assets, net” on the consolidated balance sheets ($ in thousands):
| As of | |||||||||||||||||||||||||||||||||||||||||
| March 29, 2026 | September 28, 2025 | ||||||||||||||||||||||||||||||||||||||||
| Weighted- Average Remaining Life (in Years) | Gross Amount | Accumulated Amortization | Net Amount | Gross Amount | Accumulated Amortization | Net Amount | |||||||||||||||||||||||||||||||||||
| Client relations | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||
| Backlog | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Trade names | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||
Amortization expense for the identifiable intangible assets for the second quarter and first half of fiscal 2026 was $8.8 million and $17.2 million, compared to $8.6 million and $19.3 million, respectively, for the prior-year periods. Estimated amortization expense for the remainder of fiscal 2026 and succeeding years is as follows (in thousands):
| Amount | |||||
| 2026 (remaining) | $ | ||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| 2030 | |||||
| Beyond | |||||
| Total | $ | ||||
6. Property and Equipment
Property and equipment consisted of the following (in thousands):
| As of | |||||||||||
| March 29, 2026 | September 28, 2025 | ||||||||||
| Equipment, furniture and fixtures | $ | $ | |||||||||
| Leasehold improvements | |||||||||||
| Total property and equipment | |||||||||||
| Accumulated depreciation | ( | ( | |||||||||
| Property and equipment, net | $ | $ | |||||||||
For the second quarter and first half of fiscal 2026, our depreciation expense related to property and equipment was $5.6 million and $11.2 million, compared to $5.2 million and $10.6 million, respectively, for the fiscal 2025 periods.
7. Stock Repurchase and Dividends
On May 5, 2025, our Board of Directors authorized an additional $500 million stock repurchase program in addition to the previous $400 million stock repurchase program authorized on October 5, 2021. In the first half of fiscal 2026, we repurchased and settled 2,894,539 shares with an average price of $34.55 per share for a total cost of $100.0 million in the open market. We repurchased and settled 5,165,715 shares with an average price of $33.87 per share for a total cost of $175.0 million in the open market in the first half of fiscal 2025. In the first half of fiscal 2026, we also paid $2.0 million of excise tax on stock
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repurchases imposed by the Inflation Reduction Act of 2022. At March 29, 2026, we had a remaining balance of $497.8 million under our stock repurchase programs.
The following table presents dividends declared and paid in the first halves of fiscal 2026 and 2025:
| Declare Date | Dividend Paid Per Share | Record Date | Payment Date | Dividend Paid (in thousands) | ||||||||||||||||||||||
| November 10, 2025 | $ | December 1, 2025 | December 12, 2025 | $ | ||||||||||||||||||||||
| January 26, 2026 | February 12, 2026 | February 27, 2026 | ||||||||||||||||||||||||
Total dividend paid as of March 29, 2026 | $ | |||||||||||||||||||||||||
| November 11, 2024 | $ | November 27, 2024 | December 13, 2024 | $ | ||||||||||||||||||||||
| January 27, 2025 | February 12, 2025 | February 26, 2025 | ||||||||||||||||||||||||
Total dividend paid as of March 30, 2025 | $ | |||||||||||||||||||||||||
8. Leases
Our operating leases are primarily for corporate and project office spaces. To a much lesser extent, we have operating leases for vehicles and equipment. Our operating leases have remaining lease terms of one month to ten years , some of which may include options to extend the leases for up to seven years .
We determine if an arrangement is a lease at inception. Operating leases are included in "Right-of-use assets, operating leases", "Short-term lease liabilities, operating leases" and "Long-term lease liabilities, operating leases" in the consolidated balance sheets. Our finance leases are primarily for certain IT equipment and are immaterial.
Right-of-use ("ROU") assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, incremental borrowing rates are used based on the information available at commencement date in determining the present value of lease payments. The operating lease ROU asset at the commencement date also includes any lease payments made to the lessor at or before the commencement date and initial direct costs less lease incentives received. Lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term.
The components of lease costs are as follows (in thousands):
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| March 29, 2026 | March 30, 2025 | March 29, 2026 | March 30, 2025 | ||||||||||||||||||||
| Operating lease cost | $ | $ | $ | $ | |||||||||||||||||||
| Sublease income | ( | ( | ( | ( | |||||||||||||||||||
| Total lease cost | $ | $ | $ | $ | |||||||||||||||||||
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Supplemental cash flow information related to leases is as follows (in thousands):
| Six Months Ended | ||||||||||||||
| March 29, 2026 | March 30, 2025 | |||||||||||||
| Operating cash flows for operating leases | $ | $ | ||||||||||||
| Right-of-use assets obtained in exchange for new operating lease liabilities | ||||||||||||||
Supplemental balance sheet and other information related to leases are as follows ($ in thousands):
| As of | |||||||||||
| March 29, 2026 | September 28, 2025 | ||||||||||
| Operating leases: | |||||||||||
| Right-of-use assets | $ | $ | |||||||||
| Lease liabilities: | |||||||||||
| Current | |||||||||||
| Non-current | |||||||||||
| Total operating lease liabilities | $ | $ | |||||||||
| Weighted-average remaining lease term: | |||||||||||
| Operating leases | |||||||||||
| Weighted-average discount rate: | |||||||||||
| Operating leases | % | % | |||||||||
At March 29, 2026, we had $5.9 million of operating leases that have not yet commenced.
A maturity analysis of the future undiscounted cash flows associated with our lease liabilities at March 29, 2026 is as follows (in thousands):
| Operating Leases | |||||
| 2026 (remaining) | $ | ||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| 2030 | |||||
| Beyond | |||||
| Total lease payments | |||||
| Less: imputed interest | ( | ||||
| Total present value of lease liabilities | $ | ||||
9. Stockholders’ Equity and Stock Compensation Plans
We recognize the fair value of our stock-based awards as compensation expense on a straight-line basis over the requisite service period in which the award vests. Stock-based compensation expense for the three and six months ended March 29, 2026 was $9.5 million and $17.7 million, compared to $8.9 million and $17.0 million for the same periods last year. Most of these amounts were included in our selling, general and administrative expenses on our consolidated statements of income. In the first half of fiscal 2026, we awarded 358,548 performance share units (“PSUs”) to our non-employee directors and executive officers at an estimated fair value of $43.72 per share on the award date. All PSUs are performance-based and vest, if at all, after the conclusion of the three-year performance period. The number of PSUs that ultimately vest is based 50 % on growth in our diluted earnings per share and 50 % on our relative total shareholder return over the vesting period. Additionally, we awarded 600,835 restricted stock units (“RSUs”) to our non-employee directors, executive officers and
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employees at a fair value of $35.42 per share on the award date. All executive officer and employee RSUs have time-based vesting over a four-year period, and the non-employee director RSUs vest after one year .
10. Earnings per Share (“EPS”)
Basic EPS is computed by dividing net income available to common stockholders by the weighted-average common shares outstanding for the period. Diluted EPS is computed by dividing net income by the weighted-average number of common shares outstanding and dilutive potential common shares for the period. Potential common shares include the weighted-average dilutive effects of stock-based awards and shares underlying our Convertible Senior Notes (the "Convertible Notes").
For the first half of fiscal 2026, our Convertible Notes, described in Note 13, "Long-Term Debt", had no impact on the calculation of dilutive potential common shares, as the price of our common stock did not exceed the conversion price. For the first half of fiscal 2025, the Convertible Notes had a dilution impact on the dilutive potential common shares, which was calculated using the if-converted method. The dilution impact was due to the price of our common stock exceeding the conversion price. The related capped call transactions (the "Capped Call Transactions") for all of these periods were excluded from the calculation of dilutive potential common shares as their effect is anti-dilutive. For the second quarters and first halves of fiscal 2026 and 2025, no
The following table presents the number of weighted-average shares used to compute basic and diluted EPS (in thousands, except per share data):
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| March 29, 2026 | March 30, 2025 | March 29, 2026 | March 30, 2025 | ||||||||||||||||||||
| Net income attributable to Tetra Tech | $ | $ | $ | $ | |||||||||||||||||||
| Weighted-average common shares outstanding – basic | |||||||||||||||||||||||
| Effect of dilutive stock options and unvested restricted stock | |||||||||||||||||||||||
| Shares issuable assuming conversion of convertible notes | |||||||||||||||||||||||
| Weighted-average common shares outstanding – diluted | |||||||||||||||||||||||
| Earnings per share attributable to Tetra Tech: | |||||||||||||||||||||||
| Basic | $ | $ | $ | $ | |||||||||||||||||||
| Diluted | $ | $ | $ | $ | |||||||||||||||||||
11. Income Taxes
The effective tax rates for the first halves of fiscal 2026 and 2025 were 26.0 % and 86.7 %, respectively. Income tax expense was reduced by $0.6 million and $1.0 million of excess tax benefits on share-based payments in the first halves of fiscal 2026 and 2025, respectively. In addition, in the first half of fiscal 2026, we recognized a $12.4 million gain from the sale of our operations in Norway as described in Note 4, “Acquisitions and Divestitures”. The gain is not taxable for income tax purposes. In the first half of fiscal 2025, we recognized a $92.4 million goodwill impairment charge as described in Note 5, "Goodwill and Intangible Assets" and determined that $58.3 million of the impairment is not deductible for tax purposes. We also recognized a $115.0 million non-recurring charge in the first half of fiscal 2025 related to legal contingencies as described in Note 16, "Commitments and Contingencies". We determined that $31.3 million of this charge is not tax deductible. Excluding the impact of the excess tax benefits on share-based payments, the gain from sale in the first half of fiscal 2026 and the goodwill impairment and legal contingency charge in the first half of fiscal 2025, our effective tax rates in the first halves of fiscal 2026 and 2025 were 27.5 % and 27.8 %, respectively.
At March 29, 2026 and September 28, 2025, the liability for income taxes associated with uncertain tax positions was $54.9 million and $52.8 million, respectively. These liabilities represent our current estimates of the additional tax liabilities that we may be assessed when the related audits are concluded. If these audits are resolved in a manner more unfavorable than our current expectations, our additional tax liabilities could be materially higher than the amounts currently recorded resulting in additional tax expense.
12. Reportable Segments
We manage our operations under two reportable segments, GSG and CIG.
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At the beginning of fiscal 2026, we transferred certain operating units between our two reportable segments and redefined our reporting units to better align our operations with the clients, markets and geographies that they serve. Prior year amounts for reportable segments have been revised to conform to the current year presentation.
GSG provides high-end consulting and engineering services primarily to U.S. government clients (federal, state and local). GSG supports U.S. government defense and civilian agencies with services in water, environment, sustainable infrastructure, information technology and disaster management. GSG also provides engineering design services for U.S. based federal and municipal clients, especially in water infrastructure, flood protection and solid waste.
CIG primarily provides high-end consulting and engineering services to U.S. commercial clients, and international clients inclusive of the commercial and government sectors. CIG supports commercial clients worldwide in energy, industrial and high performance buildings markets. CIG also provides sustainable infrastructure and related environmental, engineering and project management services to commercial and local government clients across Canada, in Asia Pacific (primarily Australia and New Zealand), Europe, the United Kingdom and Brazil.
Our Chief Executive Officer serves as the chief operating decision maker (“CODM”) and is responsible for evaluating segment performance and allocating resources to our segments. The CODM assesses segment revenue and segment operating income on a monthly basis by comparing actual results against the annual plan. This evaluation supports strategic decisions related to segment profitability, resource allocation, pricing strategies, and cost optimization. The segment operating income is presented before amortization expense associated with acquisitions and other unallocated corporate costs. It is calculated as revenue less subcontractor costs, and other segment items including other costs of revenue and segment selling, general, and administrative expenses.
Certain expenses are not allocated to GSG and CIG segments for purposes of making operating decisions or evaluating financial performance and are reported under corporate expenses. These expenses include amortization of intangibles, goodwill impairment charges, contingent consideration gains and losses, acquisition and integration expenses, certain legal contingency costs, as well as other costs and benefits that our CODM deems to be enterprise in nature. Corporate expenses also include stock-based compensation expense related to corporate employees.
We account for inter-segment revenue and transfers as if they were to third parties; that is, by applying a negotiated fee onto the costs of the services performed. All significant intercompany balances and transactions are eliminated in consolidation.
Our CODM does not use assets by segment to evaluate performance or allocate resources; therefore, we do not provide disclosure of assets by segment. The accounting policies for segment reporting are the same as for our consolidated financial statements. The tables below present financial information of our reportable segments (in thousands):
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| Three Months Ended | Three Months Ended | ||||||||||||||||||||||||||||||||||
| March 29, 2026 | March 30, 2025 | ||||||||||||||||||||||||||||||||||
| GSG | CIG | Total | GSG | CIG | Total | ||||||||||||||||||||||||||||||
| Revenue from external customers | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Inter-segment revenue | |||||||||||||||||||||||||||||||||||
| Segment revenue | |||||||||||||||||||||||||||||||||||
| Elimination of inter-segment revenue | ( | ( | |||||||||||||||||||||||||||||||||
| Total consolidated revenue | |||||||||||||||||||||||||||||||||||
| Subcontractor costs - external | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||
| Subcontractor costs - inter-segment | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||
| Segment subcontractor costs | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||
| Elimination of inter-segment subcontractor costs | |||||||||||||||||||||||||||||||||||
| Total consolidated subcontractor costs | ( | ( | |||||||||||||||||||||||||||||||||
Other segment items (1) | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||
| Segment operating income | |||||||||||||||||||||||||||||||||||
| Reconciliation of profit (segment operating income): | |||||||||||||||||||||||||||||||||||
| Other non-operating income | |||||||||||||||||||||||||||||||||||
| Impairment of goodwill | ( | ||||||||||||||||||||||||||||||||||
| Contingent consideration - fair value adjustments | |||||||||||||||||||||||||||||||||||
| Interest expense, net | ( | ( | |||||||||||||||||||||||||||||||||
Other corporate expenses (2) | ( | ( | |||||||||||||||||||||||||||||||||
| Income before income tax expense | $ | $ | |||||||||||||||||||||||||||||||||
(2) Other corporate expenses include the amortization expense of intangible assets of $8.8 million and $8.6 million for the second quarters of fiscal 2026 and 2025, respectively. These amounts also include $5.8 million and $5.0 million of stock-based compensation expense for the second quarters of fiscal 2026 and 2025, respectively.
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| Six Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||
| March 29, 2026 | March 30, 2025 | ||||||||||||||||||||||||||||||||||
| GSG | CIG | Total | GSG | CIG | Total | ||||||||||||||||||||||||||||||
| Revenue from external customers | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Inter-segment revenue | |||||||||||||||||||||||||||||||||||
| Segment revenue | |||||||||||||||||||||||||||||||||||
| Elimination of inter-segment revenue | ( | ( | |||||||||||||||||||||||||||||||||
| Total consolidated revenue | |||||||||||||||||||||||||||||||||||
| Subcontractor costs - external | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||
| Subcontractor costs - inter-segment | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||
| Segment subcontractor costs | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||
| Elimination of inter-segment subcontractor costs | |||||||||||||||||||||||||||||||||||
| Total consolidated subcontractor costs | ( | ( | |||||||||||||||||||||||||||||||||
Other segment items (1) | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||
| Segment operating income | |||||||||||||||||||||||||||||||||||
| Reconciliation of profit (segment operating income): | |||||||||||||||||||||||||||||||||||
| Other non-operating income | |||||||||||||||||||||||||||||||||||
| Legal contingency costs | ( | ||||||||||||||||||||||||||||||||||
| Impairment of goodwill | ( | ||||||||||||||||||||||||||||||||||
| Contingent consideration - fair value adjustments | |||||||||||||||||||||||||||||||||||
| Interest expense, net | ( | ( | |||||||||||||||||||||||||||||||||
Other corporate expenses (2) | ( | ( | |||||||||||||||||||||||||||||||||
| Income before income tax expense | $ | $ | |||||||||||||||||||||||||||||||||
(2) For the first halves of fiscal 2026 and 2025 other corporate expenses include the amortization expense of intangible assets of $17.2 million and $19.3 million, respectively. These amounts also include $10.8 million and $9.8 million of stock-based compensation expense for the first halves of fiscal 2026 and 2025, respectively.
13. Long-Term Debt
Long-term debt consisted of the following (in thousands):
| As of | |||||||||||
| March 29, 2026 | September 28, 2025 | ||||||||||
| Credit facilities | $ | $ | |||||||||
| Convertible notes | |||||||||||
| Debt issuance costs and discount | ( | ( | |||||||||
| Long-term debt | $ | $ | |||||||||
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On August 22, 2023, we issued $575.0 million in Convertible Notes that bear interest at a rate of 2.25 % per annum payable in arrears on February 15 and August 15 of each year, beginning on February 15, 2024, and mature on August 15, 2028, unless converted, redeemed or repurchased. Prior to May 15, 2028, the Convertible Notes will be convertible at the option of the holders only upon the occurrence of certain events and during certain periods. Thereafter, the Convertible Notes will be convertible at the option of the holders at any time until the close of business on the second scheduled trading day immediately preceding the maturity date.
The initial conversion rate applicable to the Convertible Notes was 25.4275 shares (5.0855 pre-stock split) of our common stock per $1,000 principal amount of the Convertible Notes, which was equivalent to an initial price of approximately $39.33 per share ($196.64 pre-stock split) of our common stock. The conversion rate is subject to adjustment for certain events, including stock splits and issuance of certain stock dividends on our common stock. At March 29, 2026, the applicable conversion rate was 25.4791 shares of common stock per $1,000 principal amount of the Convertible Notes (equivalent to an adjusted conversion price of approximately $39.25 per share of common stock). Upon conversion, we will pay cash up to the aggregate principal amount of the Convertible Notes to be converted and pay or deliver, as the case may be, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election, in respect of the remainder, if any, of our conversion obligation in excess of the aggregate principal amount of the Convertible Notes being converted. In addition, upon the occurrence of a "fundamental change" as defined in the indenture governing the Convertible Notes, holders may require us to repurchase for cash all or any portion of their Convertible Notes at a fundamental change repurchase price equal to 100 % of the principal amount of the Convertible Notes to be repurchased plus any accrued and unpaid interest. If certain corporate events occur prior to the maturity date of the Convertible Notes or if we deliver a notice of redemption, we will, in certain circumstances, increase the conversion rate for a holder who elects to convert its Convertible Notes in connection with such event or notice of redemption.
We will not be able to redeem the Convertible Notes prior to August 20, 2026. On or after August 20, 2026, we have the option to redeem for cash all or any portion of the Convertible Notes if the last reported sale price of our common stock is equal to or greater than 130 % of the conversion price for a specified period of time at a redemption price equal to 100 % of the principal amount of the Convertible Notes to be redeemed, plus any accrued but unpaid interest. In addition, as described in the indenture governing the Convertible Notes, certain events of default including, but not limited to, bankruptcy, insolvency or reorganization, may result in the Convertible Notes becoming due and payable immediately.
Our net proceeds from the offering were approximately $560.5 million after deducting the initial purchasers’ discounts and commissions and offering expenses. We used approximately $51.8 million of the net proceeds to pay the cost of the Capped Call Transactions described below. We used the remaining net proceeds to repay all $185.0 million principal amount outstanding under our revolving credit facility and the remaining $234.4 million principal amount outstanding under our senior secured term loan due 2027 under the Second Amended and Restated Credit Agreement, as well as approximately $89.4 million principal amount outstanding under our senior secured term loan due 2026 under the Third Amended and Restated Credit Agreement.
The Convertible Notes were recorded as a single unit within "Long-term debt" in our consolidated balance sheets as the conversion option within the Convertible Notes was not a derivative that would require bifurcation, and the Convertible Notes did not involve a substantial premium. Transaction costs to issue the Convertible Notes were recorded as direct deductions from the related debt liabilities and are amortized to interest expense using the effective interest method over the terms of the Convertible Notes resulting in an effective annual interest rate of 2.79 %.
The net carrying amount of the Convertible Notes was as follows (in thousands):
| As of | |||||||||||
| March 29, 2026 | September 28, 2025 | ||||||||||
| Principal | $ | $ | |||||||||
| Unamortized discount and issuance costs | ( | ( | |||||||||
| Net carrying amount | $ | $ | |||||||||
The following table sets forth the interest expense recognized related to the Convertible Notes (in thousands):
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| March 29, 2026 | March 30, 2025 | March 29, 2026 | March 30, 2025 | ||||||||||||||||||||
| Interest expense | $ | $ | $ | $ | |||||||||||||||||||
| Amortization of discount and issuance costs | |||||||||||||||||||||||
| Total interest expense | $ | $ | $ | $ | |||||||||||||||||||
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Concurrent with the offering of the Convertible Notes, in August 2023, we entered into the Capped Call Transactions. The Capped Call Transactions are expected generally to reduce the potential dilution of our common stock upon conversion of the Convertible Notes and/or offset any cash payments we elect to make in excess of the principal amount of converted Convertible Notes, as the case may be. If, however, the market price per share of our common stock, as measured under the terms of the Capped Call Transactions, exceeds the cap price of the Capped Call Transactions, there would nevertheless be dilution and/or there would not be an offset of such cash payments, in each case, to the extent that such market price exceeds the cap price of the Capped Call Transactions. The cap price of the Capped Call Transactions was initially $51.91 per share ($259.56 pre-stock split), which represented a premium of 65 % over the last reported sale price of our common stock of $31.46 per share ($157.31 pre-stock split) on the NASDAQ Global Select Market on August 17, 2023. The cap price is subject to adjustment for certain events, including stock splits and issuance of certain stock dividends on our common stock. At March 29, 2026, the adjusted cap price was approximately $51.81 per share. We recorded the Capped Call Transactions as separate transactions from the issuance of the Convertible Notes. The cost of $51.8 million incurred to purchase the Capped Call Transactions was recorded as a reduction to additional paid-in capital (net of $12.9 million in deferred taxes) on our consolidated balance sheet as of fiscal 2023 year-end.
On February 18, 2022, we entered into Amendment No. 2 to the Second Amended and Restated Credit Agreement (“Second Amended Credit Agreement”) with a total borrowing capacity of $1.05 billion that was scheduled to mature in February 2027. The Second Amended Credit Agreement consisted of a $750 million senior secured, five-year facility that provided for a $250 million term loan facility ("Second Term Loan Facility") and a $500 million revolving credit facility ("Second Revolving Credit Facility"). On October 26, 2022, we entered into a Third Amended and Restated Credit Agreement (“Third Amended Credit Agreement”) that provided for an additional $500 million senior secured term loan facility (Third Term Loan Facility") increasing our total borrowing capacity to $1.55 billion. On January 23, 2023, we drew the entire amount of the $500 million term loan facility which was scheduled to mature in January 2026. On May 5, 2025 we repaid all facilities in full as detailed below.
On May 5, 2025, we entered into a Fourth Amended and Restated Credit Agreement (“Amended Credit Agreement”) with a total borrowing capacity of $1.5 billion that will mature in May 2030. The Amended Credit Agreement is a $1.1 billion senior secured, five-year facility that provides for a $250 million 3-year term loan facility (the “3Y Term Loan Facility”), a $250 million 5-year term loan facility (“the 5Y Term Loan Facility”), and a $600 million revolving credit facility (the “Amended Revolving Credit Facility”). In addition, the Amended Credit Agreement includes a $400 million accordion feature that allows us to increase the Amended Credit Agreement to $1.5 billion subject to lender approval. The 5Y Term Loan Facility will be subject to quarterly amortization of principal, based upon the annual percentages of the original stated amount thereof (Year 1: 0.0%, Year 2: 0.0%, Year 3: 5.0 %, Year 4: 10.0 %, Year 5: 10.0 %), with the first payment being due at the end of the first full fiscal quarter following the second anniversary of the Amendment Effective Date. The Amended Credit Agreement provides for, among other things, (i) refinance indebtedness under our Third Amended Credit Agreement; (ii) finance open market repurchases of common stock, acquisitions, and cash dividends and distributions; and (iii) utilize the proceeds for working capital, capital expenditures and other general corporate purposes. The Amended Credit Agreement provides for a reduction in the pricing levels of the Consolidated Leverage Ratio and the removal of the Secured Overnight Financing Rate ("SOFR") credit spread adjustment. The Amended Revolving Credit Facility includes a $100 million sublimit for the issuance of standby letters of credit, a $20 million sublimit for swingline loans, and a $400 million sublimit for multicurrency borrowings and letters of credit.
The entire 3Y Term Loan Facility and 5Y Term Loan Facility were drawn on May 5, 2025. The proceeds from these term loans were used to pay down our Third Term Loan Facility and the Second Revolving Credit Facility in full on May 5, 2025. We may borrow on the Amended Revolving Credit Facility, at our option, at either (a) a benchmark rate plus a margin that ranges from 1.000 % to 1.750 % per annum, or (b) a base rate for loans in U.S. dollars (the highest of the U.S. federal funds rate plus 0.50 % per annum, the bank’s prime rate or the SOFR rate plus 1.00 %, plus a margin that ranges from 0% to 0.75 % per annum). In each case, the applicable margin is based on our Consolidated Leverage Ratio, calculated quarterly. The 5Y Term Loan Facility is subject to the same interest rate provisions. The 3Y Term Loan Facility was repaid on September 26, 2025. The Amended Credit Agreement expires on May 5, 2030, or earlier at our discretion upon payment in full of loans and other obligations.
At March 29, 2026, we had $315 million in outstanding borrowings under the Amended Credit Agreement, which consisted of $200 million under the 5Y Term Loan Facility and $115 million borrowings under the Amended Revolving Credit Facility. During the six months ended March 29, 2026, the weighted-average interest rate of the outstanding borrowings under the credit facilities was 5.05 %. In addition, we had $0.7 million in standby letters of credit under the Amended Credit Agreement. At March 29, 2026, we had $484.3 million of available credit under the Amended Revolving Credit Facility, all of which could be borrowed without a violation of our debt covenants.
The Amended Credit Agreement contains certain affirmative and restrictive covenants, and customary events of default. The financial covenants provide for a maximum Consolidated Leverage Ratio of 3.50 to 1.00 (total funded debt/EBITDA, as defined in the Amended Credit Agreement) and a minimum Consolidated Interest Coverage Ratio of 3.00 to 1.00 (EBITDA/Consolidated Interest Charges, as defined in the Amended Credit Agreement). Our obligations under the Amended Credit Agreement are guaranteed by certain of our domestic subsidiaries and are secured by first priority liens on (i) the equity interests of certain of our subsidiaries, including those subsidiaries that are guarantors or borrowers under the Amended Credit
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Agreement, and (ii) the accounts receivable, general intangibles and intercompany loans and those of our subsidiaries that are guarantors or borrowers. At March 29, 2026, we were in compliance with these covenants with a consolidated leverage ratio of 1.32 x and a consolidated interest coverage ratio of 18.08 x.
In addition to the Amended Credit Agreement, we maintain other credit facilities, which may be used for short-term cash advances and bank guarantees. At March 29, 2026, there were no outstanding borrowings under these facilities and the aggregate amount of standby letters of credit outstanding was $51.1 million. As of March 29, 2026, we had no bank overdrafts related to our disbursement bank accounts.
14. Fair Value Measurements
We classified our assets and liabilities that were carried at fair value in one of the following categories:
•Level 1: Quoted market prices in active markets for identical assets or liabilities.
•Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.
•Level 3: Unobservable inputs that are not corroborated by market data.
Contingent Consideration. We measure our contingent earn-out liabilities at fair value on a recurring basis using significant unobservable inputs classified within Level 3 of the fair value hierarchy (see Note 4, "Acquisitions and Divestitures" for further information).
The estimated fair value of our $575 million Convertible Notes was determined based on the trading price of the Convertible Notes as of the last trading day of our second quarter of fiscal 2026. We consider the fair value of the Convertible Notes to be a Level 2 measurement as they are not actively traded in markets.
The carrying values and estimated fair values of our financial instruments that are not recorded at fair value in our consolidated balance sheets, were as follows (in thousands):
| As of March 29, 2026 | As of September 28, 2025 | ||||||||||||||||||||||
| Carrying Value | Fair Value | Carrying Value | Fair Value | ||||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Credit facilities | $ | $ | $ | $ | |||||||||||||||||||
| Convertible notes | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
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15. Reclassifications Out of Accumulated Other Comprehensive Income
The accumulated balances and activities for the three and six months ended March 29, 2026 and March 30, 2025 related to reclassifications out of accumulated other comprehensive income are summarized as follows (in thousands):
| Three Months Ended | |||||||||||||||||||||||
| Foreign Currency Translation Adjustments | Net Pension Adjustments | Accumulated Other Comprehensive Income (Loss) | |||||||||||||||||||||
| Balance at December 29, 2024 | $ | ( | $ | $ | ( | ||||||||||||||||||
Other comprehensive income | |||||||||||||||||||||||
| Net current-period other comprehensive income | |||||||||||||||||||||||
| Balance at March 30, 2025 | $ | ( | $ | $ | ( | ||||||||||||||||||
| Balance at December 28, 2025 | $ | ( | $ | $ | ( | ||||||||||||||||||
| Other comprehensive loss | ( | ( | |||||||||||||||||||||
| Net current-period other comprehensive loss | ( | ( | |||||||||||||||||||||
| Balance at March 29, 2026 | $ | ( | $ | $ | ( | ||||||||||||||||||
| Six Months Ended | |||||||||||||||||||||||
| Foreign Currency Translation Adjustments | Net Pension Adjustments | Accumulated Other Comprehensive Income (Loss) | |||||||||||||||||||||
| Balance at September 29, 2024 | $ | ( | $ | $ | ( | ||||||||||||||||||
Other comprehensive loss | ( | ( | ( | ||||||||||||||||||||
| Net current-period other comprehensive loss | ( | ( | ( | ||||||||||||||||||||
| Balance at March 30, 2025 | $ | ( | $ | $ | ( | ||||||||||||||||||
| Balance at September 28, 2025 | $ | ( | $ | $ | ( | ||||||||||||||||||
| Other comprehensive income (loss) before reclassifications | ( | ||||||||||||||||||||||
| Reclassification to earnings from sale of divested business | ( | ( | ( | ||||||||||||||||||||
| Net current-period other comprehensive income (loss) | ( | ||||||||||||||||||||||
| Balance at March 29, 2026 | $ | ( | $ | $ | ( | ||||||||||||||||||
16. Commitments and Contingencies
We are subject to certain claims and lawsuits typically filed against the consulting and engineering profession, alleging primarily professional errors or omissions. We carry professional liability insurance, subject to certain deductibles and policy limits, against such claims. However, in some actions, parties are seeking damages that exceed our insurance coverage or for which we are not insured. While management does not believe that the resolution of these claims will have a material adverse effect, individually or in aggregate, on our financial position, results of operations or cash flows, management acknowledges the uncertainty surrounding the ultimate resolution of these matters.
On July 15, 2019, following an initial January 14, 2019 filing, the Civil Division of the United States Attorney's Office of the United States Department of Justice ("the USAO") filed an amended complaint in the intervention of three qui tam actions filed against our wholly-owned subsidiary, Tetra Tech EC, Inc. ("TtEC"), in the U.S. District Court for the Northern District of California ("the Court"). The complaint alleges False Claims Act ("FCA") violations and breach of contract related to TtEC's contracts to perform environmental remediation services at the former Hunters Point Naval Shipyard in San Francisco, California (the "Covered Conduct"). On March 5, 2024, the Court granted the USAO's motion to amend the filing to
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include additional claims against TtEC under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") and common law.
To explore whether a negotiated resolution was possible, TtEC began engaging in discussions with the USAO during the first quarter of fiscal 2025 regarding a potential resolution of all claims. On January 17, 2025, TtEC entered into a settlement agreement with the United States of America, acting through the USAO and on behalf of the Department of the Navy (collectively, the "United States") and also filed a proposed consent decree with the Court, to resolve this litigation.
TtEC entered into the settlement agreement and consent decree to avoid delay, uncertainty and expense of protracted litigation. The settlement agreement and consent decree contain no admission of liability by TtEC. Under the terms of the settlement agreement and consent decree, TtEC agreed to pay the United States $57 million and $40 million for FCA and CERCLA claims, respectively (the "Settlement Amounts"). In the second quarter of fiscal 2025, we paid the $57 million settlement related to the FCA claim. The $40 million CERCLA settlement payment was made in the fourth quarter of fiscal 2025. Upon entry of the consent decree by the Court and the United States' receipt of the Settlement Amounts, the United States released TtEC from any, and all civil or administrative monetary claims for the Covered Conduct under the civil FCA, the CERCLA, and other specified civil statutes and common law theories of liability.
Several ancillary claims brought by third-party private plaintiffs arising from the same services provided by TtEC at Hunters Point are also ongoing. The settlement agreement and consent decree do not resolve these ancillary claims. TtEC has initiated litigation with the insurance carrier with which TtEC maintained liability policies regarding the reasonably possible payment or reimbursement of a significant portion of the Settlement Amounts. TtEC can give no assurances as to what portion, if any, of the Settlement Amounts will be recovered from the insurance carrier.
17. Related Party Transactions
We often provide services to unconsolidated joint ventures. The table below presents revenue and reimbursable costs related to services we provided to our unconsolidated joint ventures (in thousands):
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| March 29, 2026 | March 30, 2025 | March 29, 2026 | March 30, 2025 | ||||||||||||||||||||
| Revenue | $ | $ | $ | $ | |||||||||||||||||||
| Related reimbursable costs | |||||||||||||||||||||||
Our consolidated balance sheets also included the following amounts related to these services (in thousands):
| As of | |||||||||||
| March 29, 2026 | September 28, 2025 | ||||||||||
| Accounts receivable, net | $ | $ | |||||||||
| Contract assets | |||||||||||
| Contract liabilities | ( | ( | |||||||||
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, including the “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements regarding future events and our future results that are subject to the safe harbor provisions created under the Securities Act of 1933 and the Securities Exchange Act of 1934. All statements other than statements of historical facts are statements that could be deemed forward-looking statements. These statements are based on current expectations, estimates, forecasts and projections about the industries in which we operate and the beliefs and assumptions of our management. Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “estimates,” “seeks,” “continues,” “may,” variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict, including those identified below under “Part II, Item 1A. Risk Factors,” and elsewhere herein. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.
GENERAL OVERVIEW
Tetra Tech, Inc. is a leading global provider of high-end consulting and engineering services that focuses on water, environment and sustainable infrastructure. We are a global company that is Leading with Science® to provide innovative solutions for our public and private clients. We typically begin at the earliest stage of a project by identifying technical solutions and developing execution plans tailored to our clients' needs and resources.
Our reputation for high-end consulting and engineering services and our ability to develop solutions for water and environmental management has supported our growth for 60 years. Our market leading climate mitigation and adaptation services are solving our clients' most complex challenges related to coastal flooding, water security, energy transition and biodiversity protection. Today, we are proud to be making a difference in people’s lives worldwide through our high-end consulting, engineering and technology service offerings. We are working on over 100,000 projects, in more than 100 countries on all seven continents, with more than 25,000 associates. We are Leading with Science® throughout our operations, with domain experts across multiple disciplines supported by our advanced analytics, artificial intelligence, machine learning and digital technology solutions. Our ability to provide innovative and first-of-kind solutions is enhanced by partnerships with our forward-thinking clients. We embrace the breadth of experience across our talented workforce worldwide with a culture of innovation and entrepreneurship. We are disciplined in our business, and focused on delivering value to customers and high performance for our shareholders. In supporting our clients, we seek to add value and provide long-term sustainable consulting, engineering and technology solutions.
We derive income from fees for professional, technical, program management and construction management services. As primarily a professional services company, we are labor-intensive rather than capital-intensive. Our revenue is driven by our ability to attract and retain qualified and productive employees, identify business opportunities, secure new and renew existing client contracts, provide outstanding services to our clients and execute projects successfully. We provide services to a diverse base of U.S. federal government, U.S. state and local government, U.S. commercial and international clients.
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The following table presents the percentage of our revenue by client sector:
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| March 29, 2026 | March 30, 2025 | March 29, 2026 | March 30, 2025 | ||||||||||||||||||||
| Client Sector | |||||||||||||||||||||||
U.S. federal government (1) | 25.6 | % | 31.2 | % | 24.0 | % | 33.4 | % | |||||||||||||||
| U.S. state and local government | 14.4 | 15.7 | 14.3 | 15.0 | |||||||||||||||||||
| U.S. commercial | 17.0 | 16.0 | 17.8 | 16.2 | |||||||||||||||||||
International (2) | 43.0 | 37.1 | 43.9 | 35.4 | |||||||||||||||||||
| Total | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||||||||
(1) Includes revenue generated under U.S. federal government contracts performed outside the United States.
(2) Includes revenue generated from non-U.S. clients, primarily in Australia, Canada and the United Kingdom.
We manage our operations under two reportable segments: Government Services Group reportable segment and Commercial/International Services Group reportable segment.
Government Services Group (“GSG”). GSG provides high-end consulting and engineering services primarily to U.S. government clients (federal, state and local). GSG supports U.S. government defense and civilian agencies with services in water, environment, sustainable infrastructure, information technology and disaster management. GSG also provides engineering design services for U.S. based federal and municipal clients, especially in water infrastructure, flood protection and solid waste.
Commercial/International Services Group (“CIG”). CIG primarily provides high-end consulting and engineering services to U.S. commercial clients, and international clients inclusive of the commercial and government sectors. CIG supports commercial clients worldwide in energy, industrial and high performance buildings markets. CIG also provides sustainable infrastructure and related environmental, engineering and project management services to commercial and local government clients across Canada, in Asia Pacific (primarily Australia and New Zealand), Europe, the United Kingdom and Brazil.
The following table presents the percentage of our revenue by reportable segment:
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| March 29, 2026 | March 30, 2025 | March 29, 2026 | March 30, 2025 | ||||||||||||||||||||
| Reportable Segment | |||||||||||||||||||||||
| GSG | 45.8 | % | 52.9 | % | 44.6 | % | 54.3 | % | |||||||||||||||
| CIG | 55.4 | 48.2 | 56.8 | 46.8 | |||||||||||||||||||
| Inter-segment elimination | (1.2) | (1.1) | (1.4) | (1.1) | |||||||||||||||||||
| Total | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||||||||
Our services are performed under three principal types of contracts with our clients: fixed-price, time-and-materials and cost-plus. The following table presents the percentage of our revenue by contract type:
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| March 29, 2026 | March 30, 2025 | March 29, 2026 | March 30, 2025 | ||||||||||||||||||||
| Contract Type | |||||||||||||||||||||||
| Fixed-price | 48.1 | % | 39.7 | % | 47.7 | % | 38.1 | % | |||||||||||||||
| Time-and-materials | 42.8 | 45.8 | 43.8 | 43.9 | |||||||||||||||||||
| Cost-plus | 9.1 | 14.5 | 8.5 | 18.0 | |||||||||||||||||||
| Total | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||||||||
Under fixed-price contracts, clients agree to pay a specified price for our performance of the entire contract or a specified portion of the contract. Under time-and-materials contracts, we are paid for labor at negotiated hourly billing rates and paid for other expenses. Under cost-plus contracts, some of which are subject to a contract ceiling amount, we are reimbursed for allowable costs plus fees, which may be fixed or performance-based. Profitability on these contracts is driven by billable headcount and our cost control. Revenue is recognized by measuring progress over time under Accounting Standards Codification Topic 606, "Revenue from Contracts with Customers". We estimate and measure progress on our contracts over
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time whereby we compare our total costs incurred on each contract as a percentage of the total expected contract costs. Changes in those estimates could result in the recognition of cumulative catch-up adjustments to the contract’s inception-to-date revenue, costs and profit in the period in which such changes are made. On a quarterly basis, we review and assess our revenue and cost estimates for each significant contract. Changes in revenue and cost estimates could also result in a projected loss that would be recorded immediately in earnings.
Other contract costs include professional compensation and related benefits, together with certain direct and indirect overhead costs such as rents, utilities and travel. Professional compensation represents a large portion of these costs. Our "Selling, general and administrative expenses" ("SG&A") are comprised primarily of marketing and bid and proposal costs, and our corporate headquarters’ costs related to the executive offices, finance, accounting, administration and information technology. Our SG&A expenses also include a portion of stock-based compensation and depreciation of property and equipment related to our corporate headquarters, and the amortization of identifiable intangible assets. Most of these costs are unrelated to specific clients or projects, and can vary as expenses are incurred to support company-wide activities and initiatives.
We experience seasonal trends in our business. Our revenue and operating income are typically lower in the first half of our fiscal year, primarily due to the Thanksgiving (in the U.S. and Canada), Christmas and New Year’s holidays. Many of our clients’ employees, as well as our own employees, take vacations during these holiday periods. Further, seasonal inclement weather conditions occasionally cause some of our offices to close temporarily or may hamper our project field work in the northern hemisphere's temperate and arctic regions. These occurrences result in fewer billable hours worked on projects and, correspondingly, less revenue recognized.
ACQUISITIONS AND DIVESTITURES
Acquisitions. We continuously evaluate the marketplace for acquisition opportunities to further our strategic growth plans. Due to our reputation, size, financial resources, geographic presence and range of services, we have numerous opportunities to acquire privately and publicly held companies or selected portions of such companies. We evaluate an acquisition opportunity based on its ability to strengthen our leadership in the markets we serve, the technologies and solutions they provide and the additional new geographies and clients they bring. Also, during our evaluation, we examine an acquisition's ability to drive organic growth, its accretive effect on long-term earnings and its ability to generate return on investment. Generally, we proceed with an acquisition if we believe that it will strategically expand our service offerings, improve our long-term financial performance and increase shareholder returns.
We view acquisitions as a key component in the execution of our growth strategy, and we intend to use cash, debt or equity, as we deem appropriate, to fund acquisitions. We may acquire other businesses that we believe are synergistic and will ultimately increase our revenue and net income, strengthen our ability to achieve our strategic goals, provide critical mass with existing clients and further expand our lines of service. We typically pay a purchase price that results in the recognition of goodwill, generally representing the intangible value of a successful business with an assembled workforce specialized in our areas of interest. Acquisitions are inherently risky, and no assurance can be given that our previous or future acquisitions will be successful or will not have a material adverse effect on our financial position, results of operations or cash flows. All acquisitions require the approval of our Board of Directors.
In the second quarter of fiscal 2026, we acquired Halvik Corp (“Halvik”) headquartered in Vienna, Virginia. Halvik provides high-end advisory consulting services focused on advanced data analytics, systems modernization and cybersecurity for U.S. federal defense and civilian agencies. Halvik is included in our GSG segment.
In the second quarter of fiscal 2025, we acquired Carron + Walsh ("CAW"), based in the Republic of Ireland. CAW delivers project and cost management solutions for large-scale commercial, life science, residential and infrastructure programs across Europe. In the third quarter of fiscal 2025, we acquired SAGE Group Holdings ("SAGE"), an Australian consulting firm that provides innovative technology and high-quality automation services that optimize operational efficiency and drive digital transformation for commercial and government clients across the municipal water, energy, transportation, defense and manufacturing sectors. Both CAW and SAGE are included in our CIG segment.
Subsequent Event. On April 17, 2026, we acquired Providence Consulting Group Pty Ltd ("Providence"), an advisory and project management consultancy based in Australia. Providence will be included in our CIG segment.
Divestitures. We regularly review and evaluate our existing operations to determine whether our business model should change through the divestiture of certain businesses. Accordingly, from time to time, we may divest or wind down certain non-core businesses and reallocate our resources to businesses that better align with our long-term strategic direction. In the first quarter of fiscal 2026, we divested our operations in Norway, which were in our CIG segment. In the first quarter of fiscal 2025, we divested a subsidiary in South America and a line of business in Australia, both of which were immaterial.
For detailed information regarding acquisitions, see Note 4, “Acquisitions and Divestitures” of the “Notes to Consolidated Financial Statements”.
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OVERVIEW OF RESULTS AND BUSINESS TRENDS
General. For the first half of fiscal 2026, our revenue declined 11.4% compared to the prior-year period primarily due to fewer international development projects in our U.S. federal government client sector. On January 20, 2025, President Trump signed Executive Order 14169, titled "Reevaluating and Realigning United States Foreign Aid", which initiated a 90-day pause on all U.S. foreign development assistance programs to assess their alignment with U.S. foreign policy objectives with few exemptions. Following a six-week review, on February 27, 2025, U.S. Secretary of State Rubio announced the cancellation of 83% of United States Agency for International Development ("USAID") programs, totaling approximately 5,200 contracts. Subsequently, we were notified that virtually all of our contracts with USAID were terminated for convenience with immediate effect and that any remaining international development activity would be administered by the U.S. Department of State ("DOS").
In addition, our year-over-year revenue comparisons include lower disaster response activity in both of our U.S. government client sectors. Our revenue in the first half of fiscal 2026 includes approximately $105 million from our recent acquisitions (net of the aforementioned Norway disposition), that did not have comparable revenue for the same period last year.
The table below presents our revenue by client sector (amounts in thousands):
| Six Months Ended | |||||||||||||||||||||||
| March 29, 2026 | March 30, 2025 | Change | |||||||||||||||||||||
| $ | % | ||||||||||||||||||||||
| Client Sector | |||||||||||||||||||||||
U.S. federal government (1) | $ | 584,718 | $ | 915,270 | $ | (330,552) | (36.1)% | ||||||||||||||||
| U.S. state and local government | 347,968 | 410,425 | (62,457) | (15.2) | |||||||||||||||||||
| U.S. commercial | 432,195 | 444,676 | (12,481) | (2.8) | |||||||||||||||||||
International (2) | 1,065,939 | 972,303 | 93,636 | 9.6 | |||||||||||||||||||
| Total | $ | 2,430,820 | $ | 2,742,674 | $ | (311,854) | (11.4)% | ||||||||||||||||
(1) Includes revenue generated under U.S. federal government contracts performed outside the United States.
(2) Includes revenue generated from non-U.S. clients, primarily in Australia, Canada and the United Kingdom.
U.S. Federal Government.
| Six Months Ended | |||||||||||||||||||||||
| March 29, 2026 | March 30, 2025 | Change | |||||||||||||||||||||
| $ | % | ||||||||||||||||||||||
| ($ in thousands) | |||||||||||||||||||||||
| Revenue | $ | 584,718 | $ | 915,270 | $ | (330,552) | (36.1)% | ||||||||||||||||
Our U.S. federal government revenue declined 36.1% primarily due to the aforementioned decreased international development and disaster response activity in the first half of fiscal 2026 compared to the same period last year. In the first half of fiscal 2026, our U.S. federal government revenue included $122.2 million from USAID/DOS programs compared to $446.5 million in the fiscal 2025 period. Additionally, the first half of fiscal 2025 included revenue related to our disaster response programs for the Palisades and Eaton fires in Southern California. Our revenue in the first half of fiscal 2026 includes approximately $35 million from a recent acquisition, that did not have comparable revenue for the prior-year period. We expect our U.S. federal revenue to grow for the remainder of this fiscal year, excluding USAID/DOS and disaster response activities.
U.S. State and Local Government.
| Six Months Ended | |||||||||||||||||||||||
| March 29, 2026 | March 30, 2025 | Change | |||||||||||||||||||||
| $ | % | ||||||||||||||||||||||
| ($ in thousands) | |||||||||||||||||||||||
| Revenue | $ | 347,968 | $ | 410,425 | $ | (62,457) | (15.2)% | ||||||||||||||||
Our U.S. state and local government revenue declined 15.2% compared to the fiscal 2025 period due to decreased disaster response activity primarily related to Hurricanes Helene and Milton, which occurred in September and October of 2024, respectively. Excluding this disaster response work, our U.S. state and local government, revenue increased approximately 10% in the first half of fiscal 2026 compared to the fiscal 2025 first half. This growth was due to continued
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investment by our clients in municipal water infrastructure, including digital water automation. Most of our work for the U.S. state and local governments relates to critical water and environmental programs, which we expect to continue to grow for the remainder of fiscal 2026.
U.S. Commercial.
| Six Months Ended | |||||||||||||||||||||||
| March 29, 2026 | March 30, 2025 | Change | |||||||||||||||||||||
| $ | % | ||||||||||||||||||||||
| ($ in thousands) | |||||||||||||||||||||||
| Revenue | $ | 432,195 | $ | 444,676 | $ | (12,481) | (2.8)% | ||||||||||||||||
Our U.S. commercial revenue declined 2.8% in the first half of fiscal 2026 primarily due to lower activity related to renewable energy, partially offset by increased power transmission services compared to the same period last year. We expect our U.S. commercial revenue, excluding renewable energy, to begin showing growth in the second half of fiscal 2026.
International.
| Six Months Ended | |||||||||||||||||||||||
| March 29, 2026 | March 30, 2025 | Change | |||||||||||||||||||||
| $ | % | ||||||||||||||||||||||
| ($ in thousands) | |||||||||||||||||||||||
| Revenue | $ | 1,065,939 | $ | 972,303 | $ | 93,636 | 9.6% | ||||||||||||||||
For the first half of fiscal 2026, our international revenue growth of 9.6% reflects increased activities for water utilities including digital water projects, partially offset by decreased infrastructure activities in Australia. Excluding the revenue from our fiscal 2025 acquisition and the aforementioned Norway disposition, our international revenue increased approximately 3% in the first half of fiscal 2026 compared to the fiscal 2025 period. We expect the growth in our international work to continue for the remainder of fiscal 2026.
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RESULTS OF OPERATIONS
Consolidated Results of Operations
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||
| March 29, 2026 | March 30, 2025 | Change | March 29, 2026 | March 30, 2025 | Change | ||||||||||||||||||||||||||||||||||||||||||
| $ | % | $ | % | ||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands, except per share data) | |||||||||||||||||||||||||||||||||||||||||||||||
| Revenue | $ | 1,220,157 | $ | 1,322,113 | $ | (101,956) | (7.7)% | $ | 2,430,820 | $ | 2,742,674 | $ | (311,854) | (11.4)% | |||||||||||||||||||||||||||||||||
| Subcontractor costs | (170,524) | (218,408) | 47,884 | 21.9 | (344,011) | (441,639) | 97,628 | 22.1 | |||||||||||||||||||||||||||||||||||||||
Revenue, net of subcontractor costs (1) | 1,049,633 | 1,103,705 | (54,072) | (4.9) | 2,086,809 | 2,301,035 | (214,226) | (9.3) | |||||||||||||||||||||||||||||||||||||||
| Other costs of revenue | (835,542) | (889,523) | 53,981 | 6.1 | (1,652,347) | (1,865,376) | 213,029 | 11.4 | |||||||||||||||||||||||||||||||||||||||
| Gross profit | 214,091 | 214,182 | (91) | — | 434,462 | 435,659 | (1,197) | (0.3) | |||||||||||||||||||||||||||||||||||||||
| Selling, general and administrative expenses | (82,626) | (84,094) | 1,468 | 1.7 | (169,451) | (168,411) | (1,040) | (0.6) | |||||||||||||||||||||||||||||||||||||||
| Legal contingency costs | — | — | — | NM | — | (115,000) | 115,000 | NM | |||||||||||||||||||||||||||||||||||||||
| Contingent consideration - fair value adjustments | 58 | 1,931 | (1,873) | NM | 7,506 | 2,297 | 5,209 | NM | |||||||||||||||||||||||||||||||||||||||
| Impairment of goodwill | — | (92,416) | 92,416 | NM | — | (92,416) | 92,416 | NM | |||||||||||||||||||||||||||||||||||||||
| Income from operations | 131,523 | 39,603 | 91,920 | 232.1 | 272,517 | 62,129 | 210,388 | 338.6 | |||||||||||||||||||||||||||||||||||||||
| Interest expense | (8,838) | (8,491) | (347) | (4.1) | (15,966) | (15,709) | (257) | (1.6) | |||||||||||||||||||||||||||||||||||||||
| Other non-operating income | 4,651 | — | 4,651 | NM | 12,361 | — | 12,361 | NM | |||||||||||||||||||||||||||||||||||||||
| Income before income tax expense | 127,336 | 31,112 | 96,224 | 309.3 | 268,912 | 46,420 | 222,492 | 479.3 | |||||||||||||||||||||||||||||||||||||||
| Income tax expense | (33,538) | (25,700) | (7,838) | (30.5) | (69,892) | (40,230) | (29,662) | (73.7) | |||||||||||||||||||||||||||||||||||||||
| Net income | 93,798 | 5,412 | 88,386 | NM | 199,020 | 6,190 | 192,830 | NM | |||||||||||||||||||||||||||||||||||||||
| Net income attributable to noncontrolling interests | (175) | (24) | (151) | NM | (369) | (55) | (314) | NM | |||||||||||||||||||||||||||||||||||||||
| Net income attributable to Tetra Tech | $ | 93,623 | $ | 5,388 | $ | 88,235 | NM | $ | 198,651 | $ | 6,135 | $ | 192,516 | NM | |||||||||||||||||||||||||||||||||
| Diluted earnings per share | $ | 0.36 | $ | 0.02 | $ | 0.34 | NM | $ | 0.76 | $ | 0.02 | $ | 0.74 | NM | |||||||||||||||||||||||||||||||||
(1) We believe that the presentation of "Revenue, net of subcontractor costs", which is a non-U.S. GAAP financial measure, enhances investors' ability to analyze our business trends and performance because it substantially measures the work performed by our employees. In the course of providing services, we routinely subcontract various services and, under certain international development programs, issue grants. Generally, these subcontractor costs and grants are passed through to our clients and, in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP") and industry practice, are included in our revenue when it is our contractual responsibility to procure or manage these activities. Because subcontractor services can vary significantly from project to project and period to period, changes in revenue may not necessarily be indicative of our business trends. Accordingly, we segregate subcontractor costs from revenue to promote a better understanding of our business by evaluating revenue exclusive of costs associated with external service providers.
NM = not meaningful
The revenue in the second quarter and first half of fiscal 2026 compared to the same periods last year primarily reflect decreased revenue in our GSG reportable segment due to the aforementioned reductions in USAID/DOS and disaster response activities. For the second quarter of fiscal 2026, our GSG segment's revenue and revenue, net of subcontractor costs, declined $139.5 million, or 20.0%, and $105.8 million, or 18.8%, respectively, compared to the same quarter last year. Our CIG segment's revenue increased $38.4 million, or 6.0%, and revenue, net of subcontractor costs, increased $51.8 million, or 9.6% in the second quarter of fiscal 2026 compared to the fiscal 2025 second quarter.
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For the first half of fiscal 2026, our GSG segment's revenue and revenue, net of subcontractor costs, declined $405.4 million, or 27.2%, and $321.1 million, or 26.5%, respectively, compared to the year-ago period. Our CIG segment's revenue increased $97.7 million, or 7.6%, and revenue, net of subcontractor costs, increased $106.9 million, or 9.8% in the first half of fiscal 2026 compared to the fiscal 2025 period. The second quarter and first half results for GSG and CIG segments are described below under "Government Services Group" and "Commercial/International Group", respectively.
The following table reconciles our reported results to non-GAAP adjusted results. For the second quarter and first half of fiscal 2026 and 2025, our adjusted results exclude adjustments to contingent consideration liabilities. Additionally, the second quarter and first half of fiscal 2026 exclude the earnings per share ("EPS") contribution from the aforementioned non-operating gain from the sale of our operations in Norway. For the second quarter and first half of fiscal 2025, our adjusted results exclude a non-cash goodwill impairment charge of $92.4 million that resulted from the aforementioned cancellation of USAID programs. The first half of fiscal 2025 also excludes a non-recurring charge of $115.0 million related to legal contingencies as described in Note 16, "Commitments and Contingencies" of the “Notes to Consolidated Financial Statements”. We determined that there was no income tax expense for the non-operating gain in fiscal 2026, and no tax benefit recognized for the $31.3 million legal contingency charge or the $58.3 million goodwill impairment charge in fiscal 2025. The effective tax rates applied to the remaining adjustments to arrive at the adjusted EPS were 27.5% and 25.0% for the first halves of fiscal 2026 and 2025, respectively. We applied the relevant marginal statutory tax rate based on the nature of the adjustment and the tax jurisdiction in which it occurred. Both EPS and adjusted EPS were calculated using the diluted weighted-average common shares outstanding for the respective periods as reflected in our Consolidated Statements of Income.
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||
| March 29, 2026 | March 30, 2025 | Change | March 29, 2026 | March 30, 2025 | Change | ||||||||||||||||||||||||||||||||||||||||||
| $ | % | $ | % | ||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands, except per share data) | |||||||||||||||||||||||||||||||||||||||||||||||
| Income from operations | $ | 131,523 | $ | 39,603 | $ | 91,920 | 232.1% | $ | 272,517 | $ | 62,129 | $ | 210,388 | 338.6% | |||||||||||||||||||||||||||||||||
| Legal contingency costs | — | — | — | — | — | 115,000 | (115,000) | NM | |||||||||||||||||||||||||||||||||||||||
| Impairment of goodwill | — | 92,416 | $ | (92,416) | NM | — | 92,416 | $ | (92,416) | NM | |||||||||||||||||||||||||||||||||||||
| Earn-out adjustments | (58) | (1,931) | 1,873 | NM | (7,506) | (2,297) | (5,209) | NM | |||||||||||||||||||||||||||||||||||||||
Adjusted income from operations (1) | $ | 131,465 | $ | 130,088 | $ | 1,377 | 1.1% | $ | 265,011 | $ | 267,248 | $ | (2,237) | (0.8)% | |||||||||||||||||||||||||||||||||
| EPS | $ | 0.36 | $ | 0.02 | $ | 0.34 | NM | $ | 0.76 | $ | 0.02 | $ | 0.74 | NM | |||||||||||||||||||||||||||||||||
| Legal contingency costs | — | — | — | — | — | 0.35 | (0.35) | NM | |||||||||||||||||||||||||||||||||||||||
| Impairment of goodwill | — | 0.31 | (0.31) | NM | — | 0.31 | (0.31) | NM | |||||||||||||||||||||||||||||||||||||||
| Earn-out adjustments | — | — | — | — | (0.02) | — | (0.02) | NM | |||||||||||||||||||||||||||||||||||||||
| Other non-operating income | (0.02) | — | (0.02) | NM | (0.05) | — | (0.05) | NM | |||||||||||||||||||||||||||||||||||||||
Adjusted EPS (1) | $ | 0.34 | $ | 0.33 | $ | 0.01 | 3.0% | $ | 0.69 | $ | 0.68 | $ | 0.01 | 1.5% | |||||||||||||||||||||||||||||||||
NM = not meaningful
(1) Non-GAAP financial measure
Excluding the non-recurring charges and the earn-out gains, our operating income increased $1.4 million, or 1.1%, in the second quarter of fiscal 2026 and declined $2.2 million, or 0.8%, in the first half of fiscal 2026 compared to the same periods last year. The changes reflect lower results in our GSG reportable segment and improved results in our CIG reportable segment, which are described below under "Government Services Group" and "Commercial/International Group", respectively.
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||
| March 29, 2026 | March 30, 2025 | Change | March 29, 2026 | March 30, 2025 | Change | ||||||||||||||||||||||||||||||||||||||||||
| $ | % | $ | % | ||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands) | |||||||||||||||||||||||||||||||||||||||||||||||
| Net interest expense | $ | 8,838 | $ | 8,491 | $ | 347 | 4.1% | $ | 15,966 | $ | 15,709 | $ | 257 | 1.6% | |||||||||||||||||||||||||||||||||
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Net interest expense increased in the second quarter and first half of fiscal 2026 compared to the fiscal 2025 periods primarily due to higher interest expense related to contingent earn-out liabilities for Halvik and SAGE acquisitions, partially offset by lower borrowings and average debt interest rates.
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||
| March 29, 2026 | March 30, 2025 | Change | March 29, 2026 | March 30, 2025 | Change | ||||||||||||||||||||||||||||||||||||||||||
| $ | % | $ | % | ||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands) | |||||||||||||||||||||||||||||||||||||||||||||||
| Income tax expense | $ | 33,538 | $ | 25,700 | $ | 7,838 | 30.5% | $ | 69,892 | $ | 40,230 | $ | 29,662 | 73.7% | |||||||||||||||||||||||||||||||||
The effective tax rates for the first halves of fiscal 2026 and 2025 were 26.0% and 86.7%, respectively. Income tax expense was reduced by $0.6 million and $1.0 million of excess tax benefits on share-based payments in the first halves of fiscal 2026 and 2025, respectively. In addition, in the first half of fiscal 2026, we recognized a $12.4 million gain from the sale of our operations in Norway as described in Note 4, “Acquisitions and Divestitures” of the “Notes to Consolidated Financial Statements”. The gain is not taxable for income tax purposes. In the first half of fiscal 2025, we recognized a $92.4 million goodwill impairment charge as described in Note 5, Goodwill and Intangible Assets and determined that $58.3 million of the impairment is not deductible for tax purposes. We also recognized a $115.0 million non-recurring charge in the first half of fiscal 2025 related to legal contingencies as described in Note 16, "Commitments and Contingencies" of the “Notes to Consolidated Financial Statements”. We determined that $31.3 million of this charge is not tax deductible. Excluding the impact of the excess tax benefits on share-based payments, the gain from sale in the first half of fiscal 2026 and the goodwill impairment and legal contingency charge in the first half of fiscal 2025, our effective tax rates in the first halves of fiscal 2026 and 2025 were 27.5% and 27.8%, respectively.
On January 5, 2026, the Organisation for Economic Cooperation and Development released additional Pillar Two administrative guidance on the Global Anti-Base Erosion “GloBE” Model Rules. This “Side-by-Side” package includes a permanent Simplified Effective Tax Rate (ETR) Safe Harbour, a one-year extension of the Transitional Country-by-Country Reporting (CbCR) Safe Harbour; a Substance-based tax incentive (SBTI) Safe Harbour; a Side-by-Side (SbS) Safe Harbour and an Ultimate Parent Entity (UPE) Safe Harbour for eligible countries. We are continually monitoring developments and evaluating the potential impacts. At this time, we do not anticipate a material tax charge in fiscal 2026.
Segment Results of Operations
Beginning in fiscal 2026, we transferred certain operating units between our two reportable segments and redefined our reporting units to better align our operations with the clients and markets that they serve. Prior year amounts for reportable segments have been revised to conform to the current year presentation.
Government Services Group
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||
| March 29, 2026 | March 30, 2025 | Change | March 29, 2026 | March 30, 2025 | Change | ||||||||||||||||||||||||||||||||||||||||||
| $ | % | $ | % | ||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands) | |||||||||||||||||||||||||||||||||||||||||||||||
| Revenue | $ | 559,351 | $ | 698,873 | $ | (139,522) | (20.0)% | $ | 1,084,859 | $ | 1,490,225 | $ | (405,366) | (27.2)% | |||||||||||||||||||||||||||||||||
| Subcontractor costs | (100,888) | (134,568) | 33,680 | 25.0 | (194,293) | (278,546) | 84,253 | 30.2 | |||||||||||||||||||||||||||||||||||||||
Revenue, net of subcontractor costs (1) | $ | 458,463 | $ | 564,305 | $ | (105,842) | (18.8)% | $ | 890,566 | $ | 1,211,679 | $ | (321,113) | (26.5)% | |||||||||||||||||||||||||||||||||
| Income from operations | $ | 74,853 | $ | 79,776 | $ | (4,923) | (6.2)% | $ | 146,270 | $ | 171,696 | $ | (25,426) | (14.8)% | |||||||||||||||||||||||||||||||||
(1) Non-GAAP financial measure
For the second quarter and first half of fiscal 2026, the revenue decreases of 20.0% and 27.2%, respectively, compared to the prior-year periods primarily reflect the aforementioned cancellation of contracts with USAID and lower disaster response activities. Excluding revenue from USAID/DOS and the disaster response revenue, GSG segment revenue increased approximately 2% in the first half of fiscal 2026 compared to the same period last year. GSG revenue in the first half of fiscal 2026 includes approximately $35 million from a recent acquisition, that did not have comparable revenue for the same period last year.
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Operating income decreased primarily due to the aforementioned revenue decline. However, our operating margin, based on revenue, net of subcontractor costs, increased to 16.4% in the first half of fiscal 2026 compared to 14.2% in the prior-year period. The increased operating margin reflects improved project execution and the elimination of the lower margin cost-reimbursable revenue with USAID.
Commercial/International Group
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||
| March 29, 2026 | March 30, 2025 | Change | March 29, 2026 | March 30, 2025 | Change | ||||||||||||||||||||||||||||||||||||||||||
| $ | % | $ | % | ||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands) | |||||||||||||||||||||||||||||||||||||||||||||||
| Revenue | $ | 676,123 | $ | 637,686 | $ | 38,437 | 6.0% | $ | 1,380,300 | $ | 1,282,588 | $ | 97,712 | 7.6 | % | ||||||||||||||||||||||||||||||||
| Subcontractor costs | (84,953) | (98,286) | 13,333 | 13.6 | (184,057) | (193,232) | 9,175 | 4.7 | |||||||||||||||||||||||||||||||||||||||
Revenue, net of subcontractor costs (1) | $ | 591,170 | $ | 539,400 | $ | 51,770 | 9.6% | $ | 1,196,243 | $ | 1,089,356 | $ | 106,887 | 9.8 | % | ||||||||||||||||||||||||||||||||
| Income from operations | $ | 72,053 | $ | 69,098 | $ | 2,955 | 4.3% | $ | 150,971 | $ | 138,137 | $ | 12,834 | 9.3 | % | ||||||||||||||||||||||||||||||||
(1) Non-GAAP financial measure
The revenue growth in second quarter and first half of fiscal 2026 compared to the same periods last year reflects increased activities for water utilities including digital water projects, primarily in the United Kingdom, partially offset by decreased infrastructure activities in Australia. The increases also include the aforementioned international revenue in the first half of fiscal 2026 from our fiscal 2025 acquisition, that did not have comparable revenue for the fiscal 2025 period. Excluding the revenue from the acquisition, net of the aforementioned Norway disposition, our revenue increased approximately 2% in the first half of fiscal 2026 compared to fiscal 2025 first half.
Our operating income increased due to the aforementioned revenue growth. Our operating margin, based on revenue, net of subcontractor costs, was substantially the same in the first half of fiscal 2026 compared to same period last year.
Backlog
Backlog generally represents the dollar amount of revenue we expect to realize in the future when we perform the work. The difference between our remaining unsatisfied performance obligation ("RUPO") and backlog relates to contract terms. Specifically, our backlog does not consider the potential impact of termination for convenience clauses within the contracts. The contract term and thus remaining performance obligation on certain of our operations and maintenance contracts, are limited to the notice period required for contract termination (usually 30, 60, or 90 days). The differences between our backlog and RUPO at March 29, 2026 and September 28, 2025 were immaterial (see the table below):
| As of | |||||||||||
| March 29, 2026 | September 28, 2025 | ||||||||||
| ($ in millions) | |||||||||||
| RUPO | $ | 4,225 | $ | 4,101 | |||||||
| Backlog | 4,282 | 4,140 | |||||||||
At March 29, 2026, our backlog was $4.3 billion. GSG and CIG reported $2.1 billion and $2.2 billion of backlog, respectively, at March 29, 2026.
Financial Condition, Liquidity and Capital Resources
Capital Requirements. At March 29, 2026, we had $223.6 million of cash and cash equivalents and access to an additional $884.3 million of borrowings available under our credit facility. During the first half of fiscal 2026, we generated $237.6 million of cash from operations. Our primary sources of liquidity are cash flows from operations and borrowings under our credit facilities. Our primary uses of cash are to fund working capital, cash dividends, share repurchases, capital expenditures and repayment of debt, as well as to fund acquisitions and earn-out obligations from prior acquisitions. We believe that our existing cash and cash equivalents, operating cash flows and borrowing capacity under our credit agreement, as described below, will be sufficient to meet our capital requirements for at least the next 12 months.
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Cash and Cash Equivalents. The following tables summarize information regarding our cash and cash equivalents (amounts in thousands):
| As of | |||||||||||||||||||||||
| March 29, 2026 | September 28, 2025 | Change | |||||||||||||||||||||
| $ | % | ||||||||||||||||||||||
| Cash and cash equivalents | $ | 223,612 | $ | 167,459 | $ | 56,153 | 33.5 | % | |||||||||||||||
| Six Months Ended | |||||||||||||||||||||||
| March 29, 2026 | March 30, 2025 | Change | |||||||||||||||||||||
| $ | % | ||||||||||||||||||||||
| Net cash provided by (used in): | |||||||||||||||||||||||
| Operating activities | $ | 237,611 | $ | 7,240 | $ | 230,371 | NM | ||||||||||||||||
| Investing activities | (144,881) | (12,768) | (132,113) | NM | |||||||||||||||||||
| Financing activities | (39,517) | (37,437) | (2,080) | (5.6) | |||||||||||||||||||
| Effect of exchange rate changes | 2,027 | (10,291) | 12,318 | (119.7) | |||||||||||||||||||
| Net increase (decrease) in cash | $ | 55,240 | $ | (53,256) | $ | 108,496 | 203.7 | % | |||||||||||||||
Operating Activities. For the first half of fiscal 2026, cash from operating activities increased $230.4 million compared to fiscal 2025 first half, primarily due to cash collections related to disaster response activities completed in the fourth quarter of fiscal 2025 and on terminated USAID programs. The increase also reflects a $57 million payment for the aforementioned legal contingency in the second quarter of fiscal 2025.
Investing Activities. Our cash used in investing activities for the first half of fiscal 2026 includes initial cash payments of $175.0 million for the Halvik acquisition, partially offset by the net proceeds of $40.3 million from the sale of our operations in Norway.
Financing Activities. Our cash used in financing activities includes share repurchases of $100 million in the first half of fiscal 2026 compared to $175 million in the year-ago period. In both periods, these repurchases were partially funded by our net borrowings, which decreased $85 million in the first half of fiscal 2026 compared to the same period last year.
Debt Financing. On February 18, 2022, we entered into Amendment No. 2 to the Second Amended and Restated Credit Agreement (“Second Amended Credit Agreement”) with a total borrowing capacity of $1.05 billion that was scheduled to mature in February 2027. The Second Amended Credit Agreement consisted of a $750 million senior secured, five-year facility that provided for a $250 million term loan facility ("Second Term Loan Facility") and a $500 million revolving credit facility ("Second Revolving Credit Facility"). On October 26, 2022, we entered into a Third Amended and Restated Credit Agreement (“Third Amended Credit Agreement”) that provided for an additional $500 million senior secured term loan facility ("Third Term Loan Facility") increasing our total borrowing capacity to $1.55 billion. On January 23, 2023, we drew the entire amount of the $500 million term loan facility which was scheduled to mature in January 2026. On May 5, 2025 we repaid all facilities in full as detailed below.
On August 22, 2023, we issued $575.0 million in Convertible Notes that bear interest at 2.25% per annum payable semiannually in arrears on February 15 and August 15 of each year, beginning on February 15, 2024 with a maturity date of August 15, 2028. The net proceeds from the Convertible Notes were $560.5 million, $51.8 million of which were used to purchase related capped call transactions on the issue date. The remaining proceeds were used to prepay and terminate the $234.4 million outstanding under the Second Term Loan Facility, to prepay $89.4 million outstanding under the Third Term Loan Facility and to pay down borrowings of $185.0 million under the Second Revolving Credit Facility. See Note 13, "Long-Term Debt" of the "Notes to Consolidated Financial Statements" for further discussion.
On May 5, 2025, we entered into a Fourth Amended and Restated Credit Agreement (“Amended Credit Agreement”) with a total borrowing capacity of $1.5 billion that will mature in May 2030. The Amended Credit Agreement is a $1.1 billion senior secured, five-year facility that provides for a $250 million 3-year term loan facility (the “3Y Term Loan Facility”), a $250 million 5-year term loan facility (“the 5Y Term Loan Facility”), and a $600 million revolving credit facility (the “Amended Revolving Credit Facility”). In addition, the Amended Credit Agreement includes a $400 million accordion feature that allows us to increase the Amended Credit Agreement to $1.5 billion subject to lender approval. The 5Y Term Loan Facility will be subject to quarterly amortization of principal, based upon the annual percentages of the original stated amount thereof (Year 1: 0.0%, Year 2: 0.0%, Year 3: 5.0%, Year 4: 10.0%, Year 5: 10.0%), with the first payment being due at the end of the first full fiscal quarter following the second anniversary of the Amendment Effective Date. The Amended Credit Agreement provides for, among other things, (i) refinance indebtedness under our Third Amended Credit Agreement; (ii) finance open market repurchases of common stock, acquisitions, and cash dividends and distributions; and (iii) utilize the proceeds for
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working capital, capital expenditures and other general corporate purposes. The Amended Credit Agreement provides for a reduction in the pricing levels of the Consolidated Leverage Ratio and the removal of the Secured Overnight Financing Rate ("SOFR") credit spread adjustment. The Amended Revolving Credit Facility includes a $100 million sublimit for the issuance of standby letters of credit, a $20 million sublimit for swingline loans, and a $400 million sublimit for multi-currency borrowings and letters of credit.
The entire 3Y Term Loan Facility and 5Y Term Loan Facility were drawn on May 5, 2025. The proceeds from these term loans were used to pay down our Third Term Loan Facility and the Second Revolving Credit Facility in full on May 5, 2025. On September 26, 2025, the 3Y Term Loan Facility was repaid in full. We may borrow on the Amended Revolving Credit Facility, at our option, at either (a) a benchmark rate plus a margin that ranges from 1.000% to 1.750% per annum, or (b) a base rate for loans in U.S. dollars (the highest of the U.S. federal funds rate plus 0.50% per annum, the bank’s prime rate or the SOFR rate plus 1.00%, plus a margin that ranges from 0% to 0.75% per annum). In each case, the applicable margin is based on our Consolidated Leverage Ratio, calculated quarterly. The 5Y Term Loan Facility is subject to the same interest rate provisions. The Amended Credit Agreement expires on May 5, 2030, or earlier at our discretion upon payment in full of loans and other obligations.
At March 29, 2026, we had $315 million in outstanding borrowings under the Amended Credit Agreement, which consisted of $200 million under the 5Y Term Loan Facility and $115 million borrowings under the Amended Revolving Credit Facility. For the first half of fiscal 2026, the weighted-average interest rate of the outstanding borrowings under the credit facilities was 5.05%. In addition, we had $0.7 million in standby letters of credit under the Amended Credit Agreement. At March 29, 2026, we had $484.3 million of available credit under the Amended Revolving Credit Facility, all of which could be borrowed without a violation of our debt covenants.
The Amended Credit Agreement contains certain affirmative and restrictive covenants, and customary events of default. The financial covenants provide for a maximum Consolidated Leverage Ratio of 3.50 to 1.00 (total funded debt/EBITDA, as defined in the Amended Credit Agreement) and a minimum Consolidated Interest Coverage Ratio of 3.00 to 1.00 (EBITDA/Consolidated Interest Charges, as defined in the Amended Credit Agreement). Our obligations under the Amended Credit Agreement are guaranteed by certain of our domestic subsidiaries and are secured by first priority liens on (i) the equity interests of certain of our subsidiaries, including those subsidiaries that are guarantors or borrowers under the Amended Credit Agreement, and (ii) the accounts receivable, general intangibles and intercompany loans, and those of our subsidiaries that are guarantors or borrowers. At March 29, 2026, we were in compliance with these covenants with a consolidated leverage ratio of 1.32x and a consolidated interest coverage ratio of 18.08x.
In addition to the Amended Credit Agreement, we maintain other credit facilities, which may be used for short-term cash advances and bank guarantees. At March 29, 2026, there were no borrowings under these facilities, and the aggregate amount of standby letters of credit outstanding was $51.1 million. At March 29, 2026, we had no bank overdrafts related to our disbursement bank accounts.
Inflation. We believe our operations have not been, and, in the foreseeable future, are not expected to be, materially adversely affected by inflation or changing prices due to the average duration of our projects and our ability to negotiate prices as contracts end and new contracts begin.
Stock repurchases. On May 5, 2025, our Board of Directors authorized an additional $500 million stock repurchase program in addition to the previous $400 million stock repurchase program authorized on October 5, 2021. In the first half of fiscal 2026, we repurchased and settled 2,894,539 shares with an average price of $34.55 per share for a total cost of $100.0 million in the open market. We repurchased and settled 5,165,715 shares with an average price of $33.87 per share for a total cost of $175.0 million in the open market in the first half of fiscal 2025. In the first half of fiscal 2026, we also paid $2.0 million of excise tax on stock repurchases imposed by the Inflation Reduction Act of 2022. At March 29, 2026, we had a remaining balance of $497.8 million under our stock repurchase programs.
Dividends. Our Board of Directors has authorized the following dividends in fiscal 2026:
| Dividend Per Share | Record Date | Total Maximum Payment (in thousands) | Payment Date | ||||||||||||||||||||
| November 10, 2025 | $ | 0.065 | December 1, 2025 | $ | 16,937 | December 12, 2025 | |||||||||||||||||
| January 26, 2026 | 0.065 | February 12, 2026 | 16,915 | February 27, 2026 | |||||||||||||||||||
Subsequent Event. On April 27, 2026, our Board of Directors declared a quarterly cash dividend of $0.072 per share payable on June 2, 2026 to stockholders of record as of the close of business on May 14, 2026.
Income Taxes
We evaluate the realizability of our deferred tax assets by assessing the valuation allowance and adjusting the allowance, if necessary. The factors used to assess the likelihood of realization are our forecast of future taxable income and available tax planning strategies that could be implemented to realize the net deferred tax assets. The ability or failure to
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achieve the forecasted taxable income in the applicable taxing jurisdictions could affect the ultimate realization of deferred tax assets. Based on future operating results in certain jurisdictions, it is unlikely that the current valuation allowance positions of those jurisdictions could be adjusted in the next 12 months.
At March 29, 2026 and September 28, 2025, the liability for income taxes associated with uncertain tax positions was $54.9 million and $52.8 million, respectively. These liabilities represent our current estimates of the additional tax liabilities that we may be assessed when the related audits are concluded. If these audits are resolved in a manner more unfavorable than our current expectations, our additional tax liabilities could be materially higher than the amounts currently recorded resulting in additional tax expense.
Off-Balance Sheet Arrangements
In the ordinary course of business, we may use off-balance sheet arrangements if we believe that such arrangements would be an efficient way to lower our cost of capital or help us manage the overall risks of our business operations. We do not believe that such arrangements have had a material adverse effect on our financial position or our results of operations.
The following is a summary of our off-balance sheet arrangements:
•Letters of credit and bank guarantees are used primarily to support project performance and insurance programs. We are required to reimburse the issuers of letters of credit and bank guarantees for any payments they make under the outstanding letters of credit or bank guarantees. Our Amended Credit Agreement and additional letter of credit facilities cover the issuance of our standby letters of credit and bank guarantees and are critical for our normal operations. If we default on the Amended Credit Agreement or additional credit facilities, our inability to issue or renew standby letters of credit and bank guarantees would impair our ability to maintain normal operations. At March 29, 2026, we had $0.7 million in standby letters of credit outstanding under our Amended Credit Agreement and $51.1 million in standby letters of credit outstanding under our additional letter of credit facilities.
•From time to time, we provide guarantees and indemnifications related to our services. If our services under a guaranteed or indemnified project are later determined to have resulted in a material defect or other material deficiency, then we may be responsible for monetary damages or other legal remedies. When sufficient information about claims on guaranteed or indemnified projects is available and monetary damages or other costs or losses are determined to be probable, we recognize such guaranteed losses.
•In the ordinary course of business, we enter into various agreements as part of certain unconsolidated subsidiaries, joint ventures and other jointly executed contracts where we are jointly and severally liable. We enter into these agreements primarily to support the project execution commitments of these entities. The potential payment amount of an outstanding performance guarantee is typically the remaining cost of work to be performed by or on behalf of third parties under engineering and construction contracts. However, we are not able to estimate other amounts that may be required to be paid in excess of estimated costs to complete contracts and, accordingly, the total potential payment amount under our outstanding performance guarantees cannot be estimated. For cost-plus contracts, amounts that may become payable pursuant to guarantee provisions are normally recoverable from the client for work performed under the contract. For lump sum or fixed-price contracts, this amount is the cost to complete the contracted work less amounts remaining to be billed to the client under the contract. Remaining billable amounts could be greater or less than the cost to complete. In those cases where costs exceed the remaining amounts payable under the contract, we may have recourse to third parties, such as owners, co-venturers, subcontractors or vendors, for claims.
•In the ordinary course of business, our clients may request that we obtain surety bonds in connection with contract performance obligations that are not required to be recorded in our consolidated balance sheets. We are obligated to reimburse the issuer of our surety bonds for any payments made thereunder. Each of our commitments under performance bonds generally ends concurrently with the expiration of our related contractual obligation.
Critical Accounting Policies
Our critical accounting policies are disclosed in our Annual Report on Form 10-K for the fiscal year ended September 28, 2025. To date, there have been no material changes in our critical accounting policies as reported in our fiscal 2025 Annual Report on Form 10-K.
New Accounting Pronouncements
For information regarding recent accounting pronouncements, see “Notes to Consolidated Financial Statements” included in Part I, Item 1 of this Quarterly Report.
Financial Market Risks
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We do not enter into derivative financial instruments for trading or speculation purposes. In the normal course of business, we have exposure to both interest rate risk and foreign currency transaction and translation risk, primarily related to the Canadian and Australian dollars, the Euro, and the British Pound.
We are exposed to interest rate risk under our Amended Credit Agreement. We can borrow, at our option, under the 5Y Term Loan Facility and Amended Revolving Credit Facility. We may borrow on the Amended Revolving Credit Facility, at our option, at either (a) a benchmark rate plus a margin that ranges from 1.000% to 1.750% per annum, or (b) a base rate for loans in U.S. dollars (the highest of the U.S. federal funds rate plus 0.50% per annum, the bank’s prime rate or the SOFR rate plus 1.00%, plus a margin that ranges from 0% to 0.75% per annum). In each case, the applicable margin is based on our Consolidated Leverage Ratio, calculated quarterly. The 5Y Term Loan Facility is subject to the same interest rate provisions. The Amended Credit Agreement expires on May 5, 2030, or earlier at our discretion upon payment in full of loans and other obligations. At March 29, 2026, we had $315 million in outstanding borrowings under the Amended Credit Agreement, which consisted of $200 million under the 5Y Term Loan Facility and $115 million borrowings under the Amended Revolving Credit Facility. For the first half of fiscal 2026, the weighted-average interest rate of the outstanding borrowings under the Amended Credit Agreement was 5.05%.
The majority of our transactions are in U.S. dollars; however, some of our subsidiaries conduct business in foreign currencies, primarily the Canadian and Australian dollars, the Euro, and British Pound. Therefore, we are subject to currency exposure and volatility because of currency fluctuations. We attempt to minimize our exposure to these fluctuations by matching revenue and expenses in the same currency for our contracts. We report our foreign currency gains and losses in “Selling, general and administrative expenses” on our consolidated statements of income. For the first half of fiscal 2026, we reported $1.2 million of foreign currency loss compared to a loss of $0.7 million in the prior year period.
We have foreign currency exchange rate exposure in our results of operations and equity primarily because of the currency translation related to our foreign subsidiaries where the local currency is the functional currency. To the extent the U.S. dollar strengthens against foreign currencies, the translation of these foreign currency denominated transactions will result in reduced revenue, operating expenses, assets and liabilities. Similarly, our revenue, operating expenses, assets and liabilities will increase if the U.S. dollar weakens against foreign currencies. For the first halves of fiscal 2026 and 2025, 43.9% and 35.4% of our consolidated revenue, respectively, was generated by our international business. For the first half of fiscal 2026, the effect of foreign exchange rate translation on our consolidated balance sheet was an increase in equity of $1.4 million compared to a decrease of $74.3 million in the prior-year period. These amounts were recognized as adjustments to equity through other comprehensive income.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Please refer to the information we have included under the heading “Financial Market Risks” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 2 of this Form 10-Q which is incorporated herein by reference.
Item 4. Controls and Procedures
Evaluation of disclosure controls and procedures and changes in internal control over financial reporting. At March 29, 2026, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Based on our management’s evaluation (with the participation of our principal executive officer and principal financial officer), our principal executive officer and principal financial officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act), were effective.
Changes in internal control over financial reporting. There were no changes in our internal control over financial reporting that occurred during the quarter ended March 29, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
For information regarding legal proceedings, see Note 16, "Commitments and Contingencies" included in the "Notes to Consolidated Financial Statements" included in Part I, Item 1 of this Form 10-Q which is incorporated herein by reference.
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Item 1A. Risk Factors
There have been no material changes in our risk factors disclosed in Part I, Item 1A in our 2025 Annual Report on Form 10-K. For updated disclosures related to interest and exchange rate risks, see “Financial Market Risks” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Part I, Item 2 of this Form 10-Q which is incorporated herein by reference.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On May 5, 2025, our Board of Directors authorized an additional $500 million stock repurchase program in addition to the previous $400 million stock repurchase program authorized on October 5, 2021. In the first half of fiscal 2026, we repurchased and settled 2,894,539 shares with an average price of $34.55 per share for a total cost of $100.0 million in the open market. We repurchased and settled 5,165,715 shares with an average price of $33.87 per share for a total cost of $175.0 million in the open market in the first half of fiscal 2025. In the first half of fiscal 2026, we also paid $2.0 million of excise tax on stock repurchases imposed by the Inflation Reduction Act of 2022. At March 29, 2026, we had a remaining balance of $497.8 million under our stock repurchase programs.
Below is a summary of the stock repurchases that were traded and settled during the first half of fiscal 2026:
| Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Dollar Value that May Yet be Purchased Under the Plans or Programs (in thousands) | |||||||||||||||||||
| September 29, 2025 - October 26, 2025 | 488,381 | $ | 33.57 | 488,381 | $ | 581,432 | |||||||||||||||||
| October 27, 2025 - November 23, 2025 | 517,534 | 33.35 | 517,534 | 564,172 | |||||||||||||||||||
| November 24, 2025 - December 28, 2025 | 476,201 | 34.32 | 476,201 | 547,828 | |||||||||||||||||||
| December 29, 2025 - January 25, 2026 | 390,022 | 35.45 | 390,022 | 534,003 | |||||||||||||||||||
| January 26, 2026 - February 22, 2026 | 442,691 | 38.30 | 442,691 | 517,049 | |||||||||||||||||||
| February 23, 2026 - March 29, 2026 | 579,710 | 33.16 | 579,710 | 497,828 | |||||||||||||||||||
Item 4. Mine Safety Disclosures
Section 1503 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") requires domestic mine operators to disclose violations and orders issued under the Mine Act by Mine Safety and Health Administration. We do not act as the owner of any mines, but we may act as a mining operator as defined under the Mine Act where we may be an independent contractor performing services or construction at such mine. Information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Act and Item 104 of Regulation S-K is included in Exhibit 95.
Item 5. Other Information
Rule 10b5-1 Trading Plans
During the second quarter of fiscal 2026, none of our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted t erminated
Item 6. Exhibits
The following documents are filed as Exhibits to this Report:
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31.1 | Chief Executive Officer Certification pursuant to Rule 13a-14(a)/15d-14(a). | ||||
31.2 | Chief Financial Officer Certification pursuant to Rule 13a-14(a)/15d-14(a). | ||||
32.1 | Certification of Chief Executive Officer pursuant to Section 1350. | ||||
32.2 | Certification of Chief Financial Officer pursuant to Section 1350. | ||||
95 | Mine Safety Disclosure. | ||||
| 101 | The following financial information from our Company’s Quarterly Report on Form 10-Q, for the period ended March 29, 2026, formatted in Inline eXtensible Business Reporting Language: (i) Consolidated Balance Sheets (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Cash Flows, (v) Consolidated Statements of Stockholders' Equity, (vi) Notes to Consolidated Financial Statements. | ||||
| 104 | Cover Page Interactive Date File (formatted as Inline XBRL and contained in Exhibit 101). | ||||
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Dated: May 1, 2026 | TETRA TECH, INC. | ||||||||||
| By: | /s/ ROGER R. ARGUS | ||||||||||
| Roger R. Argus | |||||||||||
| Chief Executive Officer and President | |||||||||||
| (Principal Executive Officer) | |||||||||||
| By: | /s/ STEVEN M. BURDICK | ||||||||||
| Steven M. Burdick | |||||||||||
| Executive Vice President, Chief Financial Officer | |||||||||||
| (Principal Financial Officer) | |||||||||||
| By: | /s/ BRIAN N. CARTER | ||||||||||
| Brian N. Carter | |||||||||||
| Senior Vice President, Corporate Controller | |||||||||||
| (Principal Accounting Officer) | |||||||||||
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FAQ
How did Tetra Tech (TTEK) perform financially in the first half of fiscal 2026?
Tetra Tech reported much higher profits despite lower sales. Six‑month revenue was $2.43 billion versus $2.74 billion a year earlier, while net income attributable to Tetra Tech jumped to $198.7 million from $6.1 million, reflecting the absence of large prior‑year charges and a gain on a divestiture.
What were Tetra Tech (TTEK)’s earnings per share for the quarter and year-to-date?
Diluted earnings per share were $0.36 for the quarter and $0.76 for the first half of fiscal 2026. These compare to $0.02 in both periods last year, when results were depressed by a goodwill impairment and a sizable legal contingency charge that did not recur in 2026.
How strong was Tetra Tech (TTEK)’s cash flow in the first half of 2026?
Operating cash flow improved significantly to $237.6 million from $7.2 million a year earlier. The increase was driven by much higher net income, favorable contract estimate adjustments, and working capital improvements, particularly in accounts receivable and contract assets, strengthening liquidity for acquisitions, buybacks and dividends.
What major acquisition and divestiture did Tetra Tech (TTEK) complete in fiscal 2026?
Tetra Tech acquired Halvik Corp in the second quarter for an estimated $210 million, adding U.S. federal consulting capabilities in data analytics, systems modernization and cybersecurity. It also divested its Norway operations, receiving $40.3 million in proceeds and recognizing a $12.4 million non‑operating gain on the sale.
How much stock did Tetra Tech (TTEK) repurchase and what dividends did it pay?
In the first half of fiscal 2026, Tetra Tech repurchased about 2.89 million shares for $100.0 million and accrued $2.0 million of excise tax on repurchases. It also paid $33.9 million in cash dividends, reflecting two quarterly dividends of $0.065 per share, and later declared a $0.072 quarterly dividend.
What is Tetra Tech (TTEK)’s remaining unsatisfied performance obligation (RUPO)?
RUPO was $4.22 billion at March 29, 2026, representing contracted work not yet recognized as revenue. About $3.05 billion is expected to be realized within 12 months, with most of the remaining $1.18 billion anticipated over the following two years, subject to cancellations or scope changes.
What is the status of Tetra Tech (TTEK)’s debt and leverage after the quarter?
Total long‑term debt was $880.2 million, including $575.0 million of 2.25% Convertible Notes and $315.0 million under its credit facilities. The company reported a consolidated leverage ratio of 1.32x and an interest coverage ratio of 18.08x, indicating moderate leverage with strong ability to service interest obligations.