10-Q

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 July 2, 2023

OR

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

For the transition period from                      to                     

Commission File Number 0-19655

TETRA TECH, INC.

(Exact name of registrant as specified in its charter)

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

3475 East Foothill Boulevard, Pasadena, California 91107

(Address of principal executive offices)  (Zip Code)

(626) 351-4664

(Registrant’s telephone number, including area code) 

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	TTEK	The NASDAQ Stock Market LLC

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

Yes  ☒   No  ☐

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

Yes  ☒   No  ☐

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

Large accelerated filer	☒	Accelerated filer	☐	Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

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

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

Yes ☐   No  ☒

At July 31, 2023, 53,245,603 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 July 2, 2023 and October 2, 2022	3
	Consolidated Statements of Income for the Three and Nine Months Ended July 2, 2023 and July 3, 2022	4
	Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended July 2, 2023 and July 3, 2022	5
	Consolidated Statements of Cash Flows for the Nine Months Ended July 2, 2023 and July 3, 2022	6
	Consolidated Statements of Equity for the Three and Nine Months Ended July 2, 2023 and July 3, 2022	6
	Notes to Unaudited Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	38
PART II.	OTHER INFORMATION	38
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 4.	Mine Safety Disclosures	39
Item 5.	Other Information	39
Item 6.	Exhibits	39
SIGNATURES		40

2

PART I.                                                  FINANCIAL INFORMATION

    Item 1.                                 Financial Statements

 Tetra Tech, Inc.

Consolidated Balance Sheets

(unaudited - in thousands, except par value)

ASSETS	July 2, 2023		October 2, 2022
Current assets:
Cash and cash equivalents	$	176,056	$	185,094
Accounts receivable, net	1,002,087		755,112
Contract assets	125,360		92,405
Prepaid expenses and other current assets	114,440		125,605
Total current assets	1,417,943		1,158,216
Property and equipment, net	81,321		32,316
Right-of-use assets, operating leases	207,218		182,319
Goodwill	1,886,854		1,110,412
Intangible assets, net	225,032		29,163
Deferred tax assets	81,732		47,804
Other non-current assets	73,478		62,546
Total assets	$	3,973,578	$	2,622,776
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	188,807	$	147,436
Accrued compensation	270,924		237,669
Contract liabilities	351,048		241,340
Short-term lease liabilities, operating leases	68,555		57,865
Current portion of long-term debt	12,505		12,504
Current contingent earn-out liabilities	35,902		28,797
Other current liabilities	284,418		190,406
Total current liabilities	1,212,159		916,017
Deferred tax liabilities	71,425		15,161
Long-term debt	906,875		246,250
Long-term lease liabilities, operating leases	163,919		146,285
Non-current contingent earn-out liabilities	40,697		36,769
Other non-current liabilities	125,714		79,157
Commitments and contingencies (Note 17)
Equity:
Preferred stock - authorized, 2,000 shares of $0.01 par value; no shares issued and outstanding at July 2, 2023 and October 2, 2022	—		—
Common stock - authorized, 150,000 shares of $0.01 par value; issued and outstanding, 53,243 and 52,981 shares at July 2, 2023 and October 2, 2022, respectively	532		530
Additional paid-in capital	17,906		—
Accumulated other comprehensive loss	(137,926)		(208,144)
Retained earnings	1,572,204		1,390,701
Tetra Tech stockholders’ equity	1,452,716		1,183,087
Noncontrolling interests	73		50
Total stockholders' equity	1,452,789		1,183,137
Total liabilities and stockholders' equity	$	3,973,578	$	2,622,776

See Notes to Consolidated Financial Statements.

3

Tetra Tech, Inc.

Consolidated Statements of Income

(unaudited – in thousands, except per share data)

 

	Three Months Ended				Nine Months Ended
	July 2, 2023		July 3, 2022		July 2, 2023		July 3, 2022
Revenue	$	1,208,947	$	890,231	$	3,261,938	$	2,601,485
Subcontractor costs	(221,387)		(169,745)		(568,252)		(502,024)
Other costs of revenue	(798,714)		(575,902)		(2,180,749)		(1,679,937)
Gross profit	188,846		144,584		512,937		419,524
Selling, general and administrative expenses	(89,064)		(60,942)		(227,912)		(173,943)
Acquisition and integration expenses	(2,107)		—		(25,812)		—
Contingent consideration – fair value adjustments	—		263		(8,477)		64
Income from operations	97,675		83,905		250,736		245,645
Interest expense, net	(14,869)		(2,919)		(33,563)		(8,967)
Other non-operating income	—		—		89,402		—
Income before income tax expense	82,806		80,986		306,575		236,678
Income tax expense	(22,568)		(22,329)		(86,781)		(56,473)
Net income	60,238		58,657		219,794		180,205
Net income attributable to noncontrolling interests	(3)		(7)		(23)		(26)
Net income attributable to Tetra Tech	$	60,235	$	58,650	$	219,771	$	180,179
Earnings per share attributable to Tetra Tech:
Basic	$	1.13	$	1.10	$	4.13	$	3.35
Diluted	$	1.12	$	1.09	$	4.10	$	3.32
Weighted-average common shares outstanding:
Basic	53,231		53,507		53,188		53,777
Diluted	53,653		54,006		53,615		54,328

See Notes to Consolidated Financial Statements.

4

Tetra Tech, Inc.

Consolidated Statements of Comprehensive Income

(unaudited – in thousands)

	Three Months Ended				Nine Months Ended
	July 2, 2023		July 3, 2022		July 2, 2023		July 3, 2022
Net income	$	60,238	$	58,657	$	219,794	$	180,205
Other comprehensive income, net of tax
Foreign currency translation adjustment, net of tax	44,500		(44,884)		69,453		(42,763)
Gain (loss) on cash flow hedge valuations, net of tax	(1,044)		2,380		(2,029)		9,984
Net pension adjustments	—		—		2,794		—
Other comprehensive income (loss), net of tax	43,456		(42,504)		70,218		(32,779)
Comprehensive income, net of tax	$	103,694	$	16,153	$	290,012	$	147,426
Comprehensive income attributable to noncontrolling interests, net of tax	4		6		23		25
Comprehensive income attributable to Tetra Tech, net of tax	$	103,690	$	16,147	$	289,989	$	147,401

See Notes to Consolidated Financial Statements.

5

Tetra Tech, Inc.

Consolidated Statements of Cash Flows

(unaudited – in thousands)

	Nine Months Ended
	July 2, 2023		July 3, 2022
Cash flows from operating activities:
Net income	$	219,794	$	180,205
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	43,221		19,545
Equity in income of unconsolidated joint ventures	(4,831)		(5,233)
Distributions of earnings from unconsolidated joint ventures	4,345		4,532
Amortization of stock-based awards	21,640		19,104
Deferred income taxes	21,475		750
Fair value adjustments to contingent consideration	8,477		(64)
(Gain) loss on sale of assets	(310)		93
Fair value adjustments to foreign currency forward contract	(89,402)		—
Changes in operating assets and liabilities, net of effects of business acquisitions:
Accounts receivable and contract assets	(41,824)		(54,874)
Prepaid expenses and other assets	1,970		33,254
Accounts payable	(3,678)		8,845
Accrued compensation	5,263		15,349
Contract liabilities	56,189		59,025
Other liabilities	(6,921)		(12,702)
Income taxes receivable/payable	10,645		8,147
Net cash provided by operating activities	246,053		275,976
Cash flows from investing activities:
Payments for business acquisitions, net of cash acquired	(854,319)		(33,624)
Capital expenditures	(17,322)		(8,401)
Proceeds from sale of assets	439		3,754
Settlement of foreign currency forward contract	109,306		—
Net cash used in investing activities	(761,896)		(38,271)
Cash flows from financing activities:
Proceeds from borrowings	979,859		141,456
Repayments on long-term debt	(411,676)		(108,949)
Repurchases of common stock	—		(150,000)
Taxes paid on vested restricted stock	(16,785)		(25,193)
Stock options exercised	425		1,205
Dividends paid	(38,268)		(33,873)
Payments of contingent earn-out liabilities	(15,078)		(4,035)
Principal payments on finance leases	(4,082)		(3,097)
Net cash provided by (used in) financing activities	494,395		(182,486)
Effect of exchange rate changes on cash and cash equivalents	12,410		(4,403)
Net (decrease) increase in cash and cash equivalents	(9,038)		50,816
Cash and cash equivalents at beginning of period	185,094		166,568
Cash and cash equivalents at end of period	$	176,056	$	217,384
Supplemental information:
Cash paid during the period for:
Interest	$	34,839	$	7,556
Income taxes, net of refunds received of $1.5 million and $4.2 million	$	54,967	$	49,131
Supplemental disclosures on non-cash investing activities:
Issuance of promissory note for business acquisition	$	—	$	14,578

See Notes to Consolidated Financial Statements.

6

Tetra Tech, Inc.

Consolidated Statements of Stockholders' Equity

Three Months Ended July 3, 2022 and July 02, 2023

(unaudited – in thousands)

	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total Tetra Tech Equity		Non-Controlling Interests		Total Equity
	Shares	Amount
BALANCE AT APRIL 3, 2022	53,683	$	537	$	—	$	(115,303)	$	1,359,367	$	1,244,601	$	41	$	1,244,642
Net income								58,650		58,650		7		58,657
Other comprehensive loss						(42,503)				(42,503)		(1)		(42,504)
Cash dividends of $0.23 per common share								(12,311)		(12,311)				(12,311)
Stock-based compensation				12,747				(6,035)		6,712				6,712
Restricted & performance shares released	4	—		(6,172)				6,034		(138)				(138)
Stock repurchases	(368)	(4)		(6,575)				(43,421)		(50,000)				(50,000)
BALANCE AT JULY 3, 2022	53,319	$	533	$	—	$	(157,806)	$	1,362,284	$	1,205,011	$	47	$	1,205,058
BALANCE AT APRIL 2, 2023	53,228	$	532	$	10,639	$	(181,381)	$	1,525,809	$	1,355,599	$	69	$	1,355,668
Net income								60,235		60,235		3		60,238
Other comprehensive income						43,455				43,455		1		43,456
Cash dividends of $0.26 per common share								(13,840)		(13,840)				(13,840)
Stock-based compensation				7,038						7,038				7,038
Restricted & performance shares released	3	—		(105)						(105)				(105)
Stock options exercised	12	—		334						334				334
BALANCE AT JULY 2, 2023	53,243	$	532	$	17,906	$	(137,926)	$	1,572,204	$	1,452,716	$	73	$	1,452,789

7

Tetra Tech, Inc.

Consolidated Statements of Stockholders' Equity

Nine Months Ended July 3, 2022 and July 02, 2023

(unaudited – in thousands)

	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total Tetra Tech Equity		Non-Controlling Interests		Total Equity
	Shares	Amount
BALANCE AT OCTOBER 3, 2021	53,981	$	540	$	—	$	(125,028)	$	1,358,726	$	1,234,238	$	53	$	1,234,291
Net income								180,179		180,179		26		180,205
Other comprehensive loss						(32,778)				(32,778)		(1)		(32,779)
Distributions paid to noncontrolling interests										—		(31)		(31)
Cash dividends of $0.63 per common share								(33,873)		(33,873)				(33,873)
Stock-based compensation				19,104				—		19,104				19,104
Restricted & performance shares released	189	2		(25,195)				—		(25,193)				(25,193)
Stock options exercised	29	—		1,205						1,205				1,205
Shares issued for Employee Stock Purchase Plan	106	1		12,128						12,129				12,129
Stock repurchases	(986)	(10)		(7,242)				(142,748)		(150,000)				(150,000)
BALANCE AT JULY 3, 2022	53,319	$	533	$	—	$	(157,806)	$	1,362,284	$	1,205,011	$	47	$	1,205,058
BALANCE AT OCTOBER 2, 2022	52,981	$	530	$	—	$	(208,144)	$	1,390,701	$	1,183,087	$	50	$	1,183,137
Net income								219,771		219,771		23		219,794
Other comprehensive income						70,218				70,218		—		70,218
Cash dividends of $0.72 per common share								(38,268)		(38,268)				(38,268)
Stock-based compensation				21,640						21,640				21,640
Restricted & performance shares released	149	1		(16,786)						(16,785)				(16,785)
Stock options exercised	15	—		425						425				425
Shares issued for Employee Stock Purchase Plan	98	1		12,627						12,628				12,628
BALANCE AT JULY 2, 2023	53,243	$	532	$	17,906	$	(137,926)	$	1,572,204	$	1,452,716	$	73	$	1,452,789

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 October 2, 2022.

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.

2.                                   Recent Accounting Pronouncements

In November 2021, the Financial Accounting Standards Board issued ASU 2021-10, Government Assistance (Topic 832), which requires annual disclosures for transactions with a government authority that are accounted for by applying a grant or contribution model by analogy, including (1) the types of transactions, (2) the accounting for those transactions, and (3) the effect of those transactions on an entity's financial statements. ASU 2021-10 was effective for us beginning in the first quarter of fiscal 2023.

In fiscal 2020, the Canadian federal government implemented the Canadian Emergency Wage Subsidy ("CEWS") program in response to the negative impact of the coronavirus disease 2019 pandemic on businesses operating in Canada. Our Canadian legal entities qualified for and applied for these CEWS cash benefits to partially offset the impacts of revenue reductions and on-going staffing costs. The $26.0 million total received was initially recorded in "Other current liabilities" until all potential amendments to the qualification criteria, including some that were proposed with retroactive application, were finalized in fiscal 2022. As there are no further contingencies, beginning in fiscal 2023, the amounts received will be distributed to all Canadian employees. We expect to distribute approximately $9 million in the next twelve months. Accordingly, this amount was reclassified from "Other current liabilities" to "Accrued compensation" on our consolidated balance sheet at October 2, 2022. The remaining $17.0 million, which we expect to distribute beyond one year, was reclassified to "Other non-current liabilities". We do not expect there will be any related impact to our operating income, and we have no outstanding applications for further government assistance.

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 revenue and cash flows are affected by economic factors. The following tables present revenue disaggregated by client sector and contract type (in thousands):

9

	Three Months Ended				Nine Months Ended
	July 2, 2023		July 3, 2022		July 2, 2023		July 3, 2022
Client Sector:
U.S. federal government (1)	$	338,022	$	261,434	$	996,471	$	781,503
U.S. state and local government	151,462		150,731		$	452,447	$	465,770
U.S. commercial	225,907		188,255		633,401		536,901
International (2)	493,556		289,811		1,179,619		817,311
Total	$	1,208,947	$	890,231	$	3,261,938	$	2,601,485
Contract Type:
Fixed-price	$	452,605	$	335,014	$	1,194,266	$	982,565
Time-and-materials	596,904		417,898		1,550,970		1,221,598
Cost-plus	159,438		137,319		516,702		397,322
Total	$	1,208,947	$	890,231	$	3,261,938	$	2,601,485

(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 Canada, Australia 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 nine months ended July 2, 2023 and July 3, 2022.

Contract Assets and Contract Liabilities

We invoice customers based on the contractual terms of each contract. However, the timing of revenue recognition may differ from the timing of invoice issuance.

Contract assets represent revenue recognized in excess of the amounts for which we have the contractual right to bill our customers. Such amounts are recoverable from customers based upon various measures of performance, including achievement of certain milestones or completion of a contract. In addition, many of our time and materials arrangements are billed in arrears pursuant to contract terms that are standard within the industry, resulting in contract assets and/or unbilled receivables being recorded, as revenue is recognized in advance of billings. Contract retentions, included in contract assets, represent amounts withheld by clients until certain conditions are met or the project is completed, which may extend beyond one year.

Contract liabilities consist of billings in excess of revenue recognized. Contract liabilities decrease as we recognize revenue from the satisfaction of the related performance obligation and increase as billings in advance of revenue recognition occur. Contract assets and liabilities are reported in a net position on a contract-by-contract basis at the end of each reporting period. There were no substantial non-current contract assets or liabilities for the periods presented. Net contract assets/liabilities consisted of the following (in thousands):

	Balance at
	July 2, 2023		October 2, 2022
Contract assets (1)	$	125,360	$	92,405
Contract liabilities	351,048		241,340
Net contract liabilities	$	(225,688)	$	(148,935)

(1)    Includes $8.1 million and $23.3 million of contract retentions at July 2, 2023 and October 2, 2022, respectively.

In the first nine months of fiscal 2023 and 2022, we recognized revenue of approximately $143 million and $111 million, respectively, from the amounts included in the contract liability balances at the end of fiscal 2022 and 2021, respectively.

10

We recognize revenue primarily using the cost-to-cost measure of progress method to estimate progress towards completion. Changes in those estimates could result in the recognition of cumulative catch-up adjustments to the contract’s inception-to-date revenue, costs and profit in the period in which such changes are made. As a result, in the first nine months of fiscal 2023, we recognized net favorable revenue and operating income adjustments of $4.0 million (substantially all in the first quarter). In the third quarter and first nine months of fiscal 2022, we recognized net unfavorable revenue and operating income adjustments of $2.8 million and net favorable revenue and operating income adjustments of $2.2 million, respectively.

Changes in revenue and cost estimates could also result in a projected loss, determined at the contract level, which would be recorded immediately in earnings. At July 2, 2023 and October 2, 2022, our consolidated balance sheets included liabilities for anticipated losses of $9.7 million and $10.0 million, respectively. The estimated cost to complete these related contracts at July 2, 2023 and October 2, 2022 was approximately $69 million and $80 million, respectively.

Accounts Receivable, Net

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

	Balance at
	July 2, 2023		October 2, 2022
Billed	$	677,915	$	491,700
Unbilled	331,381		267,161
Total accounts receivable	1,009,296		758,861
Allowance for doubtful accounts	(7,209)		(3,749)
Total accounts receivable, net	$	1,002,087	$	755,112

Billed accounts receivable represent amounts billed to clients that have not been collected. Unbilled accounts receivable, which represent an unconditional right to payment subject only to the passage of time, include unbilled amounts typically resulting from revenue recognized but not yet billed pursuant to contract terms or billed after the period end date. Substantially all of our unbilled receivables at July 2, 2023 are expected to be billed and collected within 12 months. The allowance for doubtful accounts represents amounts that are expected to become uncollectible or unrealizable in the future. We determine an estimated allowance for uncollectible accounts based on management's consideration of trends in the actual and forecasted credit quality of our clients, including delinquency and payment history; type of client, such as a government agency or a commercial sector client; and general economic and industry conditions.

Other than the U.S. federal government, no single client accounted for more than 10% of our accounts receivable at July 2, 2023 and October 2, 2022.

Remaining Unsatisfied Performance Obligations (“RUPO”)

Our RUPO represents a measure of the total dollar value of work to be performed on contracts awarded and in progress. We had $4.4 billion of RUPO at July 2, 2023. 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. 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 July 2, 2023 over the following periods (in thousands):

	Amount
Within 12 months	$	2,815,736
Beyond	1,537,602
Total	$	4,353,338

Although RUPO reflects business that is considered to be firm, cancellations, deferrals or scope adjustments may occur. 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

11

terminated by the clients without a substantive financial penalty. Therefore, the remaining performance obligations on such contracts are limited to the notice period required for the termination (usually 30, 60, or 90 days).

4.            Acquisitions

On September 23, 2022, we made an all cash offer to acquire all of the outstanding shares of RPS Group plc ("RPS"), a publicly traded company on the London Stock Exchange for 222 pence per share, through a scheme of arrangement, which was unanimously recommended by RPS' Board of Directors. On November 3, 2022, RPS' shareholders approved the scheme of arrangement. On January 19, 2023, the court-sanctioned scheme of arrangement to purchase RPS was approved, and we completed the acquisition on January 23, 2023. RPS employs approximately 5,000 associates in the United Kingdom, Europe, Asia Pacific and North America, delivering high-end solutions, especially in energy transformation, water and program management for government and commercial clients. Substantially all of RPS is included in our Commercial/International Services Group ("CIG") segment.

The total purchase price of RPS was approximately £633 million ($784 million). In the third quarter and first nine months of fiscal 2023, we incurred acquisition and integration costs of $2.1 million and $25.8 million, respectively, primarily for professional fees, substantially all of which were paid as of the end of the third quarter of fiscal 2023. On January 23, 2023, we also settled a foreign exchange forward contract that was integral to our plan to finance the RPS acquisition. The cash gain of $109.3 million did not qualify for hedge accounting. As a result, the gain was recognized as non-operating income over the life of the contract and not included in the purchase price allocation below. However, the cash proceeds of $109.3 million economically reduced the purchase price for the shares of RPS to approximately $675 million. This forward contract is explained further in Note 15, "Derivative Financial Instruments".

The table below represents the preliminary purchase price allocation for RPS based on estimates, assumptions, valuations and other analyses as of January 23, 2023, that has not been finalized in order to make a definitive allocation. The purchase consideration, excluding the aforementioned forward contract gain, is allocated to the tangible and intangible assets, and liabilities of RPS based on their estimated fair values, with any excess purchase consideration allocated to goodwill as follows (in thousands):

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	Amount
Cash and cash equivalents	$	32,093
Accounts receivable and contract assets	202,634
Prepaid expenses and other current assets	49,216
Income taxes receivables	1,999
Property and equipment	43,276
Right-of-use assets, operating leases	40,179
Intangible assets	206,186
Deferred income taxes	29,347
Other long-term assets	1,061
Total assets acquired	605,991
Accounts payable	$	(44,376)
Accrued compensation	(22,290)
Contract liabilities	(46,287)
Income tax payable	(7,083)
Short-term lease liabilities, operating leases	(13,477)
Other current liabilities	(126,023)
Long-term debt	(91,973)
Long-term lease liabilities, operating leases	(26,702)
Other long-term liabilities	(7,423)
Deferred tax liabilities	(55,965)
Total liabilities assumed	(441,599)
Fair value of net assets acquired	164,392
Goodwill	619,817
Total purchase consideration	$	784,209

The following table summarizes the estimated fair values that were assigned to intangible assets at the acquisition date:

	Fair Value		Weighted-Average Estimated Useful Life
	(in thousands)		(in years)
Backlog	$	19,702	1.5
Trade names	17,843		3.0
Client relations	168,641		8.0
Total intangible assets acquired	$	206,186	6.9

Supplemental Pro Forma Information (Unaudited)

Following are the supplemental consolidated financial results of Tetra Tech and RPS on an unaudited pro forma basis, as if the RPS acquisition had been consummated as of the beginning of fiscal 2022 (in thousands):

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	Three Months Ended				Nine Months Ended
	July 2, 2023		July 3, 2022		July 2, 2023		July 3, 2022
Revenue	$	1,208,947	$	1,085,799	$	3,519,792	$	3,160,341
Net Income including noncontrolling interests	$	61,770	$	45,456	$	104,564	$	101,519

RPS contributed revenue of $220.4 million and $389.9 million for the third quarter and first nine months of fiscal 2023, respectively, to our consolidated results. For the third quarter of fiscal 2023, RPS' net income, including interest expense, was $0.7 million, or $0.01 per share, before the related intangible amortization of $10.4 million. For the first nine months of fiscal 2023, RPS' net loss, including interest expense, was $1.0 million, or $0.02 per share, before the related intangible amortization of $18.1 million.

In the second quarter of fiscal 2023, we also acquired Amyx, Inc. (“Amyx”), an enterprise technology services, cybersecurity and management consulting firm. Based in Reston, Virginia, Amyx, with over 500 employees, provides application modernization, cybersecurity, systems engineering, financial management and program management support on over 30 Federal Government programs. Amyx is included in our Government Services Group ("GSG") segment. The total fair value of the purchase price of Amyx was $120.9 million, comprised of a $100.0 million payable in a promissory note issued to the sellers (paid subsequent to closing), $8.7 million of payables related to estimated post-closing adjustments, and $12.2 million for the estimated fair value of contingent earn-out obligations, with a maximum of $25.0 million, based upon the achievement of specified operating income targets in each of the three years following the acquisition date. Amyx was not considered significant to our consolidated financial statements. As a result, no pro forma information has been provided.

In fiscal 2022, we acquired The Integration Group of America ("TIGA"), Piteau Associates (“PAE”) and two other financially immaterial acquisitions. TIGA is based in Spring, Texas and is an industry leader in process automation and system integration solutions, including customized software and platform (SaaS/PaaS) applications, advanced data analytics, cloud data integration and platform virtualization. PAE is based in Vancouver, British Columbia and is a global leader in sustainable natural resource analytics including hydrologic numerical modeling and dewatering system design. PAE is part of our CIG segment, and TIGA and the other financially immaterial acquisitions are part of our GSG segment. The total fair value of the purchase price for all four acquisitions was $88.3 million. This amount is comprised of $44.0 million in initial cash payments made to the sellers, $2.5 million of receivables (net) related to estimated post-closing adjustments for the net assets acquired, $15.5 million payable in a promissory note issued to the sellers along with related transaction expenses of the sellers (which were subsequently paid in July 2022), and $31.3 million for the estimated fair value of contingent earn-out obligations, with a maximum of $47.0 million, based upon the achievement of specified operating income targets in each of the three to five years following the acquisitions. These acquisitions were not considered significant, individually or in the aggregate, to our consolidated financial statements. As a result, no pro forma information has been provided.

The majority of the goodwill from the fiscal 2023 acquisitions is not deductible for tax purposes, while the majority of the goodwill from the fiscal 2022 acquisitions is deductible for tax purposes. The results of fiscal 2022 and 2023 acquisitions were included in our consolidated financial statements beginning on the respective closing dates.

Goodwill additions resulting from the fiscal 2023 business combinations are primarily attributable to the significant technical expertise residing in embedded workforces that are sought out by clients, synergies expected to arise after the acquisitions in the areas of enterprise technology services, data management, energy transformation, water, program management, and data analytics and the long-standing reputations of RPS and Amyx. These acquisitions further expand and complement our market-leading positions in water, renewable energy and sustainable infrastructure; enhanced by a combined suite of differentiated data analytics and digital technologies, and expansion into existing and new geographies. Our fiscal 2022 goodwill additions are primarily attributable to the significant technical expertise residing in embedded workforces that are sought out by clients, long-term management experience, the industry reputations and the synergies expected to arise after the acquisitions in the areas of data management, digitization, modeling, water and natural resources. These acquired capabilities, when combined with our existing global consulting and engineering business, result in opportunities that allow us to provide services under contracts that could not have been pursued individually by either us or the acquired companies.

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 or on a straight-line basis over the useful lives of the underlying assets, ranging from one to eight 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

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fair values of any earn-out arrangements are included as part of the purchase price of the acquired companies on their respective acquisition dates. For each transaction, we estimate the fair value of contingent earn-out payments as part of the initial purchase price and record the estimated fair value of contingent consideration as a liability in “Current contingent earn-out liabilities” and “Non-current contingent earn-out liabilities” on the consolidated balance sheets. We consider several factors when determining that contingent earn-out liabilities are part of the purchase price, including the following: (1) the valuation of our acquisitions is not supported solely by the initial consideration paid, and the contingent earn-out formula is a critical and material component of the valuation approach to determining the purchase price; and (2) the former owners of acquired companies that remain as key employees receive compensation other than contingent earn-out payments at a reasonable level compared with the compensation of our other key employees. The contingent earn-out payments are not affected by employment termination.

We measure our contingent earn-out liabilities at fair value on a recurring basis using significant unobservable inputs classified within Level 3 of the fair value hierarchy. We use a probability-weighted discounted income approach as a valuation technique to convert future estimated cash flows to a single present value amount. The significant unobservable inputs used in the fair value measurements are operating income projections over the earn-out period (generally three to five years), and the probability outcome percentages we assign to each scenario. Significant increases or decreases to either of these inputs in isolation would result in a significantly higher or lower liability, with a higher liability capped by the contractual maximum of the contingent earn-out obligation. Ultimately, the liability will be equivalent to the amount paid, and the difference between the fair value estimate and amount paid will be recorded in earnings. The amount paid that is less than or equal to the contingent earn-out liability on the acquisition date is reflected as cash used in financing activities in our consolidated statements of cash flows. Any amount paid in excess of the contingent earn-out liability on the acquisition date is reflected as cash used in operating activities in our consolidated statements of cash flows.

We review and re-assess 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. For the first nine months of fiscal 2023, 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.

During the first nine months of fiscal 2023, we recorded adjustments to our contingent earn-out liabilities and reported a related net charge to operating income of $8.5 million (all the in first half of fiscal 2023). The net charge primarily resulted from increased valuations of the contingent consideration liabilities for our prior acquisitions of Segue Technologies, Inc., Hoare Lea, LLP and TIGA reflecting financial performance that exceeded our previous expectations.

For the third quarter and first nine months of fiscal 2022, we had no material adjustments to our contingent earn-out liabilities in operating income.

At July 2, 2023, there was a total potential maximum of $120.3 million of outstanding contingent consideration related to acquisitions. Of this amount, $76.6 million was estimated as the fair value and accrued on our consolidated balance sheet at July 2, 2023.

5.            Goodwill and Intangible Assets

The following table summarizes the changes in the carrying value of goodwill by reportable segment (in thousands):

	GSG		CIG		Total
Balance at October 2, 2022	$	519,102	$	591,310	$	1,110,412
Acquisition activity	104,100		619,832		723,932
Translation adjustments	5,459		47,051		52,510
Balance at July 2, 2023	$	628,661	$	1,258,193	$	1,886,854

The foreign currency translation adjustments resulted from our foreign subsidiaries with functional currencies that are different than our reporting currency. These goodwill amounts are presented net of reductions from historical impairment adjustments. The gross amounts for GSG were $646.4 million and $536.8 million at July 2, 2023 and October 2, 2022, respectively, excluding accumulated impairment of $17.7 million at each date. The gross amounts of goodwill for CIG were $1,379.7 million and $712.8 million at July 2, 2023 and October 2, 2022, respectively, excluding accumulated impairment of $121.5 million at each date.

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We perform our annual goodwill impairment review at the beginning of our fiscal fourth quarter. Our most recent annual review at July 4, 2022 (i.e. the first day of our fourth quarter in fiscal 2022) indicated that we had no impairment of goodwill, and all of our reporting units had estimated fair values that were in excess of their carrying values, including goodwill. At July 4, 2022, and after the reallocation of goodwill on the first day of fiscal 2022, we had no reporting units that had estimated fair values that exceeded their carrying values by less than 165%.

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. Although we believe that our estimates of fair value for these reporting units are reasonable, if financial performance for these reporting units falls significantly below our expectations or market prices for similar business decline, the goodwill for these reporting units could become impaired.    

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):

	Period Ended
	July 2, 2023							October 2, 2022
	Weighted- Average Remaining Life (in Years)	Gross Amount		Accumulated Amortization		Net Amount		Gross Amount		Accumulated Amortization		Net Amount
Client relations	7.2	$	226,024	$	(36,952)	$	189,072	$	41,676	$	(21,092)	$	20,584
Backlog	0.9	57,342		(41,616)		15,726		33,286		(29,990)		3,296
Trade names	2.7	29,262		(9,028)		20,234		12,711		(7,428)		5,283
Total		$	312,628	$	(87,596)	$	225,032	$	87,673	$	(58,510)	$	29,163

Amortization expense for the three and nine months ended July 2, 2023 was $14.1 million and $29.6 million, compared to $3.7 million and $9.6 million for the prior-year periods. Estimated amortization expense for the remainder of fiscal 2023 and succeeding years is as follows (in thousands):

	Amount
2023 (remaining)	$	13,541
2024	46,669
2025	34,702
2026	29,585
2027	24,577
Beyond	75,958
Total	$	225,032

6.                                     Property and Equipment

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

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	Balance at
	July 2, 2023		October 2, 2022
Equipment, furniture and fixtures	$	141,619	$	96,710
Leasehold improvements	47,949		32,428
Total property and equipment	189,568		129,138
Accumulated depreciation	(108,247)		(96,822)
Property and equipment, net	$	81,321	$	32,316

The depreciation expense related to property and equipment was $5.6 million and $13.7 million for the three and nine months ended July 2, 2023, compared to $3.2 million and $9.9 million for the prior-year periods. The increases in property equipment from October 2, 2022 to July 2, 2023 are primarily due to the RPS acquisition.

7.                                     Stock Repurchase and Dividends

On October 5, 2021, our Board of Directors authorized a new stock repurchase program under which we could repurchase up to $400 million of our common stock. We did not repurchase any shares of our common stock in the first nine months of fiscal 2023. At July 2, 2023, we had a remaining balance of $347.8 million under our stock repurchase program.

The following table presents dividends declared and paid in the first nine months of fiscal 2023 and 2022:

Declare Date	Dividend Paid Per Share		Record Date	Payment Date	Dividend Paid (in thousands)
November 7, 2022	$	0.23	November 21, 2022	December 9, 2022	$	12,186
January 30, 2023	$	0.23	February 13, 2023	February 24, 2023	12,242
May 8, 2023	$	0.26	May 24, 2023	June 6, 2023	13,840
Total dividend paid as of July 2, 2023					$	38,268
November 15, 2021	$	0.20	December 2, 2021	December 20, 2021	$	10,793
January 31, 2022	$	0.20	February 11, 2022	February 25, 2022	10,769
May 2, 2022	$	0.23	May 13, 2022	May 27, 2022	12,311
Total dividend paid as of July 3, 2022					$	33,873

Subsequent Event.  On August 7, 2023, our Board of Directors declared a quarterly cash dividend of $0.26 per share payable on September 6, 2023 to stockholders of record as of the close of business on August 23, 2023.

8.                                     Leases

Our operating leases are primarily for corporate and project office spaces. To a much lesser extent, we have operating leases for vehicles and equipment. Our operating leases have remaining lease terms of one month to ten years, some of which may include options to extend the leases for up to five years.

We determine if an arrangement is a lease at inception. Operating leases are included in "Right-of-use assets, operating leases", "Short-term lease liabilities, operating leases" and "Long-term lease liabilities, operating leases" in the consolidated balance sheets. Our finance leases are 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.

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The components of lease costs are as follows (in thousands):

	Three Months Ended				Nine Months Ended
	July 2, 2023		July 3, 2022		July 2, 2023		July 3, 2022
Operating lease cost	$	24,775	$	21,004	$	70,155	$	64,015
Sublease (income) cost	(46)		140		(125)		(116)
Total lease cost	$	24,729	$	21,144	$	70,030	$	63,899

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

	Nine Months Ended
	July 2, 2023		July 3, 2022
Operating cash flows for operating leases	$	57,871	$	50,965
Right-of-use assets obtained in exchange for new operating lease liabilities	72,294		32,175

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

	Balance at
	July 2, 2023			October 2, 2022
Operating leases:
Right-of-use assets	$	207,218		$	182,319
Lease liabilities:
Current	68,555			57,865
Non-current	163,919			146,285
Total operating lease liabilities	$	232,474		$	204,150
Weighted-average remaining lease term:
Operating leases	5 years			5 years
Weighted-average discount rate:
Operating leases	3.0		%	2.2		%

At July 2, 2023, we have no material operating leases that have not yet commenced.

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A maturity analysis of the future undiscounted cash flows associated with our lease liabilities at July 2, 2023 is as follows (in thousands):

	Operating Leases
2023 (remaining)	$	20,727
2024	69,302
2025	53,634
2026	36,291
2027	25,689
Beyond	45,624
Total lease payments	251,267
Less: imputed interest	(18,793)
Total present value of lease liabilities	$	232,474

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 nine months ended July 2, 2023 was $7.0 million and $21.6 million, respectively, compared to $6.7 million and $19.1 million for the same periods last year. Most of these amounts were included in selling, general and administrative expenses on our consolidated statements of income. In the first nine months of fiscal 2023, we awarded 56,214 performance share units (“PSUs”) to our non-employee directors and executive officers at a fair value of $195.50 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 the growth in our diluted earnings per share and 50% on our relative total shareholder return over the vesting period. Additionally, we awarded 103,016 restricted stock units (“RSUs”) to our non-employee directors, executive officers and employees at a fair value of $156.10 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 number of common shares outstanding, less unvested restricted stock 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 outstanding stock options and unvested restricted stock using the treasury stock method.

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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				Nine Months Ended
	July 2, 2023		July 3, 2022		July 2, 2023		July 3, 2022
Net income attributable to Tetra Tech	$	60,235	$	58,650	$	219,771	$	180,179
Weighted-average common shares outstanding – basic	53,231		53,507		53,188		53,777
Effect of dilutive stock options and unvested restricted stock	422		499		427		551
Weighted-average common shares outstanding – diluted	53,653		54,006		53,615		54,328
Earnings per share attributable to Tetra Tech:
Basic	$	1.13	$	1.10	$	4.13	$	3.35
Diluted	$	1.12	$	1.09	$	4.10	$	3.32

11.                                  Income Taxes

The effective tax rates for the first nine months of fiscal 2023 and 2022 were 28.3% and 23.9%, respectively. Income tax expense was reduced by $2.2 million and $4.9 million of excess tax benefits on share-based payments in the first nine months of fiscal 2023 and 2022, respectively. In addition, income tax expense in the first nine months of fiscal 2023 included non-operating income tax expenses of $7.2 million ($6.9 million in the second quarter) to recognize the tax liability for foreign earnings, primarily in the U.K. and Australia, that are no longer indefinitely reinvested and to increase the liability for an uncertain tax position. Excluding the impact of the excess tax benefits on share-based payments and the non-operating tax expenses in the second and third quarter of fiscal 2023, our effective tax rates in the first nine months of fiscal 2023 and 2022 were 26.7% and 25.9%, respectively.

At July 2, 2023 and October 2, 2022, the liability for income taxes associated with uncertain tax positions was $48.8 million and $10.6 million, respectively. These liabilities could materially decrease within the next 12 months as some related examinations have commenced. 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. Our GSG reportable segment primarily includes activities with U.S. government clients (federal, state and local) and all activities with development agencies worldwide. Our CIG reportable segment primarily includes activities with U.S. commercial clients and international clients other than development agencies.

GSG provides high-end consulting and engineering services primarily to U.S. government clients (federal, state and local) and development agencies worldwide. GSG supports U.S. government civilian and defense agencies with services in water, environment, sustainable infrastructure, information technology and disaster management. GSG also provides engineering design services for U.S. based federal and municipal clients, especially in water infrastructure, flood protection and solid waste. GSG also leads our support for development agencies worldwide, especially in the United States, United Kingdom and Australia.

CIG primarily provides high-end consulting and engineering services to U.S. commercial clients, and international clients inclusive of the commercial and government sectors. CIG supports commercial clients across the Fortune 500, renewable energy, industrial, high performance buildings and aerospace markets. CIG also provides sustainable infrastructure and related environmental, engineering and project management services to commercial and local government clients across Canada, in Asia Pacific (primarily Australia and New Zealand), the United Kingdom, as well as Brazil and Chile.

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Management evaluates the performance of these reportable segments based upon their respective segment operating income before the effect of amortization expense related to acquisitions, and other unallocated corporate expenses. We account for inter-segment revenues and transfers as if they were to third parties; that is, by applying a negotiated fee onto the costs of the services performed. All significant intercompany balances and transactions are eliminated in consolidation. In the third quarter and first nine months of fiscal 2023, our Corporate segment operating losses included $2.1 million and $25.8 million of acquisition and integration expenses, respectively, as described in Note 4, “Acquisitions”.

The following tables summarize financial information regarding our reportable segments (in thousands):

	Three Months Ended				Nine Months Ended
	July 2, 2023		July 3, 2022		July 2, 2023		July 3, 2022
Revenue
GSG	$	531,050	$	459,987	$	1,565,371	$	1,365,041
CIG	691,386		444,238		1,741,300		1,277,469
Elimination of inter-segment revenue	(13,489)		(13,994)		(44,733)		(41,025)
Total revenue	$	1,208,947	$	890,231	$	3,261,938	$	2,601,485
Income from operations
GSG	$	54,496	$	45,580	$	167,053	$	147,104
CIG	69,572		53,535		172,199		139,328
Corporate (1)	(26,393)		(15,210)		(88,516)		(40,787)
Total income from operations	$	97,675	$	83,905	$	250,736	$	245,645

(1)     Includes amortization of intangibles, acquisition and integration expenses, as well as other costs and other income not allocable to our reportable segments.

	Balance at
	July 2, 2023		October 2, 2022
Total Assets
GSG	$	588,469	$	558,764
CIG	1,058,974		688,640
Corporate (1)	2,326,135		1,375,372
Total assets	$	3,973,578	$	2,622,776

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

13.                               Fair Value Measurements

The fair value of long-term debt was determined using the present value of future cash flows based on the borrowing rates currently available for debt with similar terms and maturities (Level 2 measurement, as described in “Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the fiscal year ended October 2, 2022). The carrying value of our long-term debt approximated fair value at July 2, 2023 and October 2, 2022. At July 2, 2023, we had borrowings of $919.4 million outstanding under our Amended Credit Agreement, which were primarily used to fund business acquisitions, working capital needs, and capital expenditures.

14.    Credit Facility

On October 26, 2022, we entered into a Third Amended and Restated Credit Agreement that provides for an additional $500 million senior secured term loan facility (the "New Term Loan Facility") increasing our total borrowing capacity to $1.55 billion.

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On January 23, 2023, we drew the entire amount of the New Term Loan Facility to partially finance the RPS acquisition. The remaining purchase price was financed with existing cash on hand and borrowings under the existing Amended Revolving Credit Facility. The New Term Loan Facility is not subject to any amortization payments of principal and matures on the third anniversary of the RPS acquisition closing date.

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

The entire Amended Term Loan Facility was drawn on February 18, 2022. The Amended Term Loan Facility is subject to quarterly amortization of principal at 5% annually commencing June 30, 2022. We may borrow on the Amended Revolving Credit Facility, at our option, at either (a) a benchmark rate plus a margin that ranges from 1.000% to 1.875% per annum, or (b) a base rate for loans in U.S. dollars (the highest of the U.S. federal funds rate plus 0.50% per annum, the bank’s prime rate or the Secured Overnight Financing Rate ("SOFR") rate plus 1.00%, plus a margin that ranges from 0% to 0.875% per annum. In each case, the applicable margin is based on our Consolidated Leverage Ratio, calculated quarterly. The Amended Term Loan Facility is subject to the same interest rate provisions. The Amended Credit Agreement expires on February 18, 2027, or earlier at our discretion upon payment in full of loans and other obligations.

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 3.25 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.

15.                               Derivative Financial Instruments

We use certain interest rate derivative contracts to hedge interest rate exposures on our variable rate debt. We also enter into foreign currency derivative contracts with financial institutions to reduce the risk that cash flows and earnings could adversely be affected by foreign currency exchange rate fluctuations. Our hedging program is not designated for trading or speculative purposes.

We recognize derivative instruments as either assets or liabilities on the accompanying consolidated balance sheets at fair value. We record changes in the fair value (i.e., gains or losses) of the derivatives that have been designated as cash flow hedges in our consolidated balance sheets as accumulated other comprehensive income, and in our consolidated statements of income for those derivatives designated as fair value hedges. Our derivative contracts are categorized within Level 2 of the fair value hierarchy.

In the fourth quarter of fiscal 2022, we entered into a forward contract to acquire GBP 714.0 million at a rate of 1.0852 for a total of USD 774.8 million that was integrated with our plan to acquire RPS. This contract matured on December 30, 2022. On December 28, 2022, we entered into an extension of the integrated forward contract to acquire GBP 714.0 million at a rate of 1.086 for a total of USD 775.4 million, extending the maturity date to January 23, 2023, the closing date of the RPS acquisition. Although an effective economic hedge of our foreign exchange risk related to this transaction, the forward contract did not qualify for hedge accounting. As a result, the forward contract was marked-to-market with changes in fair value recognized in earnings each period. The intrinsic value of the forward contract was immaterial at inception as the GBP/USD spot and forward exchange rates were essentially the same. The fair value of the forward contract at October 2, 2022 was

22

$19.9 million, and an unrealized gain of the same amount was recognized in our fourth quarter of fiscal 2022 results. On January 23, 2023, the forward contract was settled at the fair value of $109.3 million. We recognized additional gains of $68.0 million and $21.4 million in the first and second quarters of fiscal 2023, respectively. All gains related to this transaction were reported in “Other non-operating income" on our consolidated income statements for the respective periods.

In fiscal 2018, we entered into five interest rate swap agreements that we designated as cash flow hedges to fix the interest rate on the borrowings under our term loan facility. At July 2, 2023, the notional principal of our outstanding interest swap agreements was $190.6 million ($38.1 million each.) The interest rate swaps have a fixed interest rate of 2.79% and expire in July 2023 for all five agreements. At July 2, 2023 and October 2, 2022, the fair values of the effective portion of our interest rate swap agreements designated as cash flow hedges before tax effect were unrealized gains of $0.4 million and $2.4 million, respectively, which were reported in "Other non-current assets" on our consolidated balance sheets. Additionally, the related loss of $1.0 million and $2.0 million for the three and nine months ended July 2, 2023, compared to the related gain of $2.4 million and $10.0 million for the prior-year periods, were recognized and reported on our consolidated statements of comprehensive income. We expect to reclassify a credit of $0.4 million from accumulated other comprehensive loss to interest expense during the fourth quarter of fiscal 2023, up to the expiration date in July 2023. There were no other derivative instruments designated as hedging instruments for the first nine months of fiscal 2023.

16.                               Reclassifications Out of Accumulated Other Comprehensive Income

The accumulated balances and activities for the three and nine months ended July 2, 2023 and July 3, 2022 related to reclassifications out of accumulated other comprehensive income are summarized as follows (in thousands):

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	Three Months Ended
	Foreign Currency Translation Adjustments		Gain (Loss) on Derivative Instruments		Net Pension Adjustments		Accumulated Other Comprehensive Income (Loss)
Balance at April 3, 2022	$	(113,513)	$	(1,790)	—		$	(115,303)
Other comprehensive (loss) income before reclassifications	(44,883)		3,413		—		(41,470)
Amounts reclassified from accumulated other comprehensive loss:
Interest rate contracts, net of tax (1)	—		(1,033)		—		(1,033)
Net current-period other comprehensive (loss) income	(44,883)		2,380		—		(42,503)
Balance at July 3, 2022	$	(158,396)	$	590	$	—	$	(157,806)
Balance at April 2, 2023	$	(185,602)	$	1,427	2,794		$	(181,381)
Other comprehensive income (loss) before reclassifications	44,499		(2,137)		—		42,362
Amounts reclassified from accumulated other comprehensive loss:
Interest rate contracts, net of tax (1)	—		1,093		—		1,093
Net current-period other comprehensive income (loss)	44,499		(1,044)		—		43,455
Balance at July 2, 2023	$	(141,103)	$	383	$	2,794	$	(137,926)
	Nine Months Ended
	Foreign Currency Translation Adjustments		Gain (Loss) on Derivative Instruments		Net Pension Adjustments		Accumulated Other Comprehensive Income (Loss)
Balance at October 3, 2021	$	(115,634)	$	(9,394)	—		$	(125,028)
Other comprehensive (loss) income before reclassifications	(42,762)		13,833		—		(28,929)
Amounts reclassified from accumulated other comprehensive loss:
Interest rate contracts, net of tax (1)	—		(3,849)				(3,849)
Net current-period other comprehensive (loss) income	(42,762)		9,984		—		(32,778)
Balance at July 3, 2022	$	(158,396)	$	590	$	—	$	(157,806)
Balance at October 2, 2022	$	(210,556)	$	2,412	—		$	(208,144)
Other comprehensive income (loss) before reclassifications	69,453		(4,439)		2,794		67,808
Amounts reclassified from accumulated other comprehensive loss:
Interest rate contracts, net of tax (1)	—		2,410		—		2,410
Net current-period other comprehensive income (loss)	69,453		(2,029)		2,794		70,218
Balance at July 2, 2023	$	(141,103)	$	383	$	2,794	$	(137,926)

(1)    This accumulated other comprehensive component is reclassified to “Interest expense” in our consolidated statements of income. See Note 15 “Derivative Financial Instruments”, for more information.

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17.                               Commitments and Contingencies

We are subject to certain claims and lawsuits typically filed against the consulting and engineering profession, alleging primarily professional errors or omissions. We carry professional liability insurance, subject to certain deductibles and policy limits, against such claims. However, in some actions, parties are seeking damages that exceed our insurance coverage or for which we are not insured. While management does not believe that the resolution of these claims will have a material adverse effect, individually or in aggregate, on our financial position, results of operations or cash flows, management acknowledges the uncertainty surrounding the ultimate resolution of these matters.

On July 15, 2019, following an initial January 14, 2019 filing, the Civil Division of the United States Attorney's Office filed an amended complaint in intervention in three qui tam actions filed against our subsidiary, Tetra Tech EC, Inc. ("TtEC"), in the U.S. District Court for the Northern District of California. The complaint alleges False Claims Act 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. TtEC disputes the claims and will defend this matter vigorously. We are currently unable to determine the probability of the outcome of this matter or the range of reasonably possible loss, if any.

18.                               Related Party Transactions

We often provide services to unconsolidated joint ventures. Our revenue related to services we provided to unconsolidated joint ventures for the third quarter and first nine months of fiscal 2023 was approximately $22 million and $65 million, respectively, compared to $24 million and $74 million for the same periods last year. Our related reimbursable costs for the third quarter and nine months of fiscal 2023 were approximately $21 million and $61 million, respectively. Our related reimbursable costs for the third quarter and nine months of fiscal 2022 were approximately $23 million and $70 million, respectively. Our consolidated balance sheets also included the following amounts related to these services (in thousands):

	Balance at
	July 2, 2023		October 2, 2022
Accounts receivable, net	$	22,234	$	16,818
Contract assets	1,800		2,935
Contract liabilities	2,768		3,464

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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, sustainable infrastructure, renewable energy and international development. We are a global company that is Leading with Science® to provide innovative solutions for our public and private clients. We typically begin at the earliest stage of a project by identifying technical solutions and developing execution plans tailored to our clients' needs and resources.

Our reputation for high-end consulting and engineering services and our ability to develop solutions for water and environmental management has supported our growth for more than 50 years. Today, we are proud to be making a difference in people’s lives worldwide through our high-end consulting, engineering and technology service offerings. In fiscal 2022, we worked on over 80,000 projects in more than 100 countries on all seven continents. 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 are diverse, equitable and inclusive, embracing 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.

By combining ingenuity and practical experience, we have helped to advance sustainability by managing water, protecting the environment, providing clean energy, restoring ecosystems and engineering green solutions for our cities and communities.

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				Nine Months Ended
	July 2, 2023		July 3, 2022		July 2, 2023		July 3, 2022
Client Sector
U.S. federal government (1)	28.0	%	29.4	%	30.5	%	30.0	%
U.S. state and local government	12.5		16.9		13.9		17.9
U.S. commercial	18.7		21.1		19.4		20.7
International (2)	40.8		32.6		36.2		31.4
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 Canada, Australia and the United Kingdom.

We manage our operations under two reportable segments. Our Government Services Group ("GSG") reportable segment primarily includes activities with U.S. government clients (federal, state and local) and all activities with development agencies worldwide. Our Commercial/International Group ("CIG") reportable segment primarily includes activities with U.S. commercial clients and international clients other than development agencies.

Government Services Group (“GSG”).  GSG provides high-end consulting and engineering services primarily to U.S. government clients (federal, state and local) and development agencies worldwide. GSG supports U.S. government civilian and defense agencies with services in water, environment, sustainable infrastructure, information technology and disaster management. GSG also provides engineering design services for U.S. based federal and municipal clients, especially in water infrastructure, flood protection and solid waste. GSG also leads our support for development agencies worldwide, especially in the United States, United Kingdom and Australia.

Commercial/International 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 across the Fortune 500, renewable energy, industrial, high performance buildings and aerospace markets. CIG also provides sustainable infrastructure and related environmental, engineering and project management services to commercial and local government clients across Canada, in Asia Pacific (primarily Australia and New Zealand), the United Kingdom, as well as Brazil and Chile.

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

	Three Months Ended				Nine Months Ended
	July 2, 2023		July 3, 2022		July 2, 2023		July 3, 2022
Reportable Segment
GSG	43.9	%	51.7	%	48.0	%	52.5	%
CIG	57.2		49.9		53.4		49.1
Inter-segment elimination	(1.1)		(1.6)		(1.4)		(1.6)
Total	100.0	%	100.0	%	100.0	%	100.0	%

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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				Nine Months Ended
	July 2, 2023		July 3, 2022		July 2, 2023		July 3, 2022
Contract Type
Fixed-price	37.4	%	37.6	%	36.6	%	37.7	%
Time-and-materials	49.4		47.0		47.6		47.0
Cost-plus	13.2		15.4		15.8		15.3
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. We recognize revenue from contracts using the cost-to-cost measure of progress method to estimate the progress towards completion to determine the amount of revenue and profit to recognize. 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.

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On January 23, 2023, we completed the acquisition of RPS Group plc ("RPS"), a publicly traded company on the London Stock Exchange in an all cash transaction totaling $784 million. We funded the RPS acquisition with debt, net of $109 million in proceeds from a foreign exchange forward contract that we entered into at the same time we made the formal offer to acquire RPS on September 23, 2022.

RPS employs approximately 5,000 associates in the United Kingdom, Europe, Asia Pacific and North America, delivering high-end solutions, especially in energy transformation, water and program management for government and commercial clients. In the third quarter and first nine months of fiscal 2023, RPS contributed revenue of $220.4 million and $389.9 million, respectively, to our consolidated results. RPS contributed $2.5 million and $2.1 million to our consolidated operating income in the third quarter and first nine months of fiscal 2023, respectively, which reflect $10.4 million and $18.1 million of intangible amortization, respectively. Substantially all of RPS is included in our CIG segment.

In the second quarter of fiscal 2023, we also acquired Amyx, Inc. (“Amyx”), an enterprise technology services, cybersecurity and management consulting firm. Based in Reston, Virginia, Amyx, with over 500 employees, provides application modernization, cybersecurity, systems engineering, financial management and program management support on over 30 Federal Government programs. Amyx is included in our GSG segment.

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

Divestitures.  We regularly review and evaluate our existing operations to determine whether our business model should change through the divestiture of certain businesses. Accordingly, from time to time, we may divest or wind-down certain non-core businesses and reallocate our resources to businesses that better align with our long-term strategic direction.

OVERVIEW OF RESULTS AND BUSINESS TRENDS

General. In the first nine months of fiscal 2023, revenue increased 25.4% compared to the prior-year period. This year-over-year growth reflects increased activity in our U.S. Federal, U.S. Commercial and International client sectors including the aforementioned RPS acquisition. Excluding RPS, our revenue increased 10.4% in the first nine months of fiscal 2023 compared to the year-ago period.

U.S. Federal Government.  Our U.S. federal government revenue increased 27.5% in the first nine months of fiscal 2023 compared to the same period last year. This increase was primarily due to more international development and broad-based increases across civilian agencies. During periods of economic volatility, our U.S. federal government business has historically been the most stable and predictable. We expect our U.S. federal government revenue to continue to grow in the remainder of fiscal 2023. Approximately $1 trillion in new U.S. federal funding passed in 2021 through the Infrastructure Investment and Jobs Act, the Inflation Reduction Act and the CHIPS and Science Act. Each of these programs include substantial planned investments in our key end markets including water, environment and sustainable infrastructure over the next five to ten years.

U.S. State and Local Government.  Our U.S. state and local government revenue decreased 2.9% in the first nine months of fiscal 2023 compared to the prior-year period due to lower disaster response activity. Excluding disaster response, our state and local government revenue increased 21.5% for the first nine months of fiscal 2023 compared to the same period last year. The increase reflects continued broad-based growth in our U.S. state and local government infrastructure business, particularly with increased revenue from municipal water infrastructure work, including digital water projects. 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 in the remainder of fiscal 2023.

U.S. Commercial.  Our U.S. commercial revenue increased 18.0% in the first nine months of fiscal 2023 compared to the year-ago period. Excluding the contribution from RPS, our U.S. commercial revenue increased 11.4% in the first nine months of fiscal 2023 compared to the first nine months of fiscal 2022. This increase was primarily due to more activity on clean energy and environmental programs, including meeting net zero carbon goals and designing high performance buildings. We expect growth in our U.S. commercial work to continue in the remainder of fiscal 2023.

International.  Our international revenue increased 44.3% in the first nine months of fiscal 2023 compared to the same quarter last year. Excluding the contribution from RPS, our international revenue increased 2.6% despite a stronger U.S. dollar and the adverse impact on our foreign currency translation year-over-year. On a constant currency basis, our international revenue, excluding RPS, increased approximately 10% for the first nine months of fiscal 2023 compared to the same period last year. This revenue growth reflects government stimulus spending on infrastructure and commercial activities related to an increased focus on sustainability. We expect growth in our international work to continue in the remainder of fiscal 2023.

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RESULTS OF OPERATIONS

Consolidated Results of Operations

	Three Months Ended							Nine Months Ended
	July 2, 2023		July 3, 2022		Change			July 2, 2023		July 3, 2022		Change
					$		%					$		%
	($ in thousands, except per share data)
Revenue	$	1,208,947	$	890,231	$	318,716	35.8%	$	3,261,938	$	2,601,485	$	660,453	25.4%
Subcontractor costs	(221,387)		(169,745)		(51,642)		(30.4)	(568,252)		(502,024)		(66,228)		(13.2)
Revenue, net of subcontractor costs (1)	987,560		720,486		267,074		37.1	2,693,686		2,099,461		594,225		28.3
Other costs of revenue	(798,714)		(575,902)		(222,812)		(38.7)	(2,180,749)		(1,679,937)		(500,812)		(29.8)
Gross profit	188,846		144,584		44,262		30.6	512,937		419,524		93,413		22.3
Selling, general and administrative expenses	(89,064)		(60,942)		(28,122)		(46.1)	(227,912)		(173,943)		(53,969)		(31.0)
Acquisition and integration expenses	(2,107)		—		(2,107)		NM	(25,812)		—		(25,812)		NM
Contingent consideration - fair value adjustments	—		263		(263)		NM	(8,477)		64		(8,541)		NM
Income from operations	97,675		83,905		13,770		16.4	250,736		245,645		5,091		2.1
Interest expense	(14,869)		(2,919)		(11,950)		(409.4)	(33,563)		(8,967)		(24,596)		(274.3)
Other non-operating income	—		—		—		NM	89,402		—		89,402		NM
Income before income tax expense	82,806		80,986		1,820		2.2	306,575		236,678		69,897		29.5
Income tax expense	(22,568)		(22,329)		(239)		(1.1)	(86,781)		(56,473)		(30,308)		(53.7)
Net income	60,238		58,657		1,581		2.7	219,794		180,205		39,589		22.0
Net income attributable to noncontrolling interests	(3)		(7)		4		57.1	(23)		(26)		3		11.5
Net income attributable to Tetra Tech	$	60,235	$	58,650	$	1,585	2.7	$	219,771	$	180,179	$	39,592	22.0
Diluted earnings per share	$	1.12	$	1.09	$	0.03	2.8%	$	4.10	$	3.32	$	0.78	23.5%

(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. While providing services, we routinely subcontract various services and, under certain U.S. Agency for International Development programs, issue grants. Generally, these subcontractor costs and grants are passed through to our clients and, in accordance with U.S. GAAP and industry practice, are included in our revenue when it is our contractual responsibility to procure or manage these activities. The grants are included as part of our subcontractor costs. 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.

In the third quarter of fiscal 2023, revenue and revenue, net of subcontractor costs, increased $318.8 million, or 35.8%, and $267.1 million, or 37.1%, respectively, compared to the third quarter of fiscal 2022. Excluding the contribution from RPS, our revenue increased 11.0% in the third quarter of fiscal 2023 compared to the year-ago quarter. Our GSG segment's revenue and revenue, net of subcontractor costs, increased $71.1 million, or 15.4%, and $54.7 million, or 16.3%, respectively, in the third quarter of fiscal 2023 compared to the same quarter last year. Our CIG segment's revenue increased $247.1 million, or 55.6%, and revenue, net of subcontractor costs, increased $212.4 million, or 55.2% in the third quarter of fiscal 2023 compared to the year-ago quarter. Excluding the contribution from RPS, our CIG segment's revenue increased approximately 8% in the third quarter of fiscal 2023 compared to the same period in fiscal 2022 (10% on a constant currency basis).

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In the first nine months of fiscal 2023, revenue and revenue, net of subcontractor costs, increased $660.5 million, or 25.4%, and $594.2 million, or 28.3%, respectively, compared to the same period in fiscal 2022. Excluding the contribution from RPS, our revenue increased 10.4% in the first nine months of fiscal 2023 compared to the same period in fiscal 2022. Our GSG segment's revenue and revenue, net of subcontractor costs, increased $200.3 million, or 14.7%, and $178.7 million, or 17.9%, respectively, in the first nine months of fiscal 2023 compared to the same period last year. Our CIG segment's revenue increased $463.8 million, or 36.3%, and revenue, net of subcontractor costs, increased $415.5 million, or 37.8% in the first nine months of fiscal 2023 compared to the same period last year. Excluding the contribution from RPS, our CIG segment's revenue increased approximately 7% in the first nine months of this fiscal year compared to the same period last year (11% on a constant currency basis). Our quarterly and first nine months results for our GSG and CIG segments are described below under "Government Services Group" and "Commercial/International Group", respectively.

The following table reconciles our reported results to non-U.S. GAAP adjusted results, which exclude acquisition and integration costs related to the RPS acquisition in the third quarter and first nine months of fiscal 2023, losses from adjustments to contingent consideration liabilities in the first half of fiscal 2023, and a non-operating benefit from Employee Retention Credits ("ERC's") received in fiscal 2022. Our adjusted earnings per share ("EPS") for the first nine months of fiscal 2023 also excludes non-operating gains on a foreign exchange contract of $89.4 million (all in the first half of fiscal 2023). The gain is reported as "Other non-operating income" in our consolidated statements of income. Further, our adjusted EPS for the third quarter and first nine months of fiscal 2023 excludes acquisition and integration costs, and the write-off of previously deferred debt origination fees reflected as additional interest expense, of $2.1 million and $29.6 million, respectively, related to the RPS acquisition. The effective tax rates applied to the adjustments to EPS to arrive at adjusted EPS average 26% for both fiscal 2023 and 2022. We applied the relevant marginal statutory tax rate based on the nature of the adjustments and the tax jurisdiction in which it occurred. Both EPS and adjusted EPS were calculated using diluted weighted-average common shares outstanding for the respective periods as reflected in our consolidated statements of income.

	Three Months Ended							Nine Months Ended
	July 2, 2023		July 3, 2022		Change			July 2, 2023		July 3, 2022		Change
					$		%					$		%
	($ in thousands, except per share data)
Income from operations	$	97,675	$	83,905	$	13,770	16.4%	$	250,736	$	245,645	$	5,091	2.1%
COVID-19 credits	—		(1,040)		1,040		NM	—		(5,491)		5,491		NM
Acquisition & integration expenses	2,107		—		2,107		NM	25,812		—		25,812		NM
Earn-Out adjustments	—		—		—		NM	8,477		—		8,477		NM
Adjusted income from operations (1)	$	99,782	$	82,865	$	16,917	20.4%	$	285,025	$	240,154	$	44,871	18.7%
EPS	$	1.12	$	1.09	$	0.03	2.8%	$	4.10	$	3.32	$	0.78	23.5%
COVID-19 credits	—		(0.01)		0.01		NM	—		(0.07)		0.07		NM
Acquisition & integration expenses	0.03		—		0.03		NM	0.55		—		0.55		NM
Earn-out adjustments	—		—		—		NM	0.13		—		0.13		NM
Foreign exchange forward contract gain	—		—		—		NM	(1.23)		—		(1.23)		NM
Adjusted EPS (1)	$	1.15	$	1.08	$	0.07	6.5%	$	3.55	$	3.25	$	0.30	9.2%

NM = not meaningful

(1)     Non-GAAP financial measure

Operating income increased $13.8 million, or 16.4%, in the third quarter of fiscal 2023 compared to the third quarter of last year. In the first nine months of fiscal 2023, operating income increased $5.1 million, or 2.1%, compared to the same period of fiscal 2022. The third quarter and first nine months of fiscal 2023 results include $2.1 million and $25.8 million of acquisition and integration expenses (primarily legal and other professional fees), respectively, for the RPS acquisition. The first nine months of fiscal 2023 results also include losses of $8.5 million (all in the first half of fiscal 2023), related to changes in the estimated fair value of contingent earn-out liabilities. The third quarter and first nine months of fiscal 2022 results include the benefit of ERC's totaling $1.0 million and $5.5 million, respectively, which represents reimbursement from the U.S. federal government under the Coronavirus Aid, Relief and Economic Security Act for the costs that we incurred during the second

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quarter of fiscal 2020 to address the coronavirus disease 2019 ("COVID-19") pandemic. These amounts were recognized in fiscal 2022 when the funds were received due to the uncertainty related to the computation of qualifying amounts and delayed processing times for our application. These amounts were primarily reflected as a reduction to "Other costs of revenue" in our consolidated statement of income and an increase to "Net cash provided by operating activities" in our consolidated statement of cash flows for fiscal 2022, consistent with the presentation of the related costs recognized in the second quarter of fiscal 2020.

We expect to incur additional integration expenses related to the RPS acquisition, primarily for information technology systems integration and real estate consolidation, in the fourth quarter of fiscal 2023. These costs may be material to our consolidated financial results.

Excluding the acquisition and integration expenses, earn-out losses and the ERC's, our adjusted operating income increased $16.9 million, or 20.4% in the third quarter and $44.9 million, or 18.7%, in the first nine months of fiscal 2023 compared to the same periods last year. These increases reflect improved results in both GSG and CIG segments, which are described below under "Government Services Group" and "Commercial/International Group", respectively.

Our net interest expense was $14.9 million in the third quarter and $33.6 million in the first nine months of fiscal 2023 compared to $2.9 million and $9.0 million, respectively, in the same periods of last year. Net interest expense in the first quarter of fiscal 2023 included $2.7 million of additional expense for the write-off of previously deferred debt origination fees due to the cancellation of the bridge loan facility that we entered to support our offer to acquire RPS, which was replaced with an amendment to our existing debt facility. Net interest expense in the second quarter of fiscal 2023 included $1.1 million of additional expense for the write-off of previously deferred debt origination fees due to the repayment and cancellation of RPS' debt facilities. Excluding these write-offs, our interest expense increased $12.0 million in the third quarter and $20.8 million in the first nine months of fiscal 2023 compared to the same periods last year primarily due to the additional borrowings to fund the RPS acquisition.

Other non-operating income of $89.4 million in first nine months of fiscal 2023, reflect gains on a foreign exchange forward contract integrated with the RPS acquisition. Although an effective economic hedge of our foreign exchange risk related to this transaction, the forward contract did not qualify for hedge accounting. As a result, the forward contract was marked-to-market with changes in fair value recognized in earnings each period. The forward contract was settled on January 23, 2023, together with the closing of the RPS acquisition, with a cumulative gain of approximately $109 million.

The effective tax rates for the first nine months of fiscal 2023 and 2022 were 28.3% and 23.9%, respectively. Income tax expense was reduced by $2.2 million and $4.9 million of excess tax benefits on share-based payments in the first nine months of fiscal 2023 and 2022, respectively. In addition, income tax expense in the first nine months of fiscal 2023 included non-operating income tax expenses of $7.2 million ($6.9 million in the second quarter) to recognize the tax liability for foreign earnings, primarily in the U.K. and Australia, that are no longer indefinitely reinvested and to increase the liability for an uncertain tax position. Excluding the impact of the excess tax benefits on share-based payments and the non-operating tax expenses in the second and third quarter of fiscal 2023, our effective tax rates in the first nine months of fiscal 2023 and 2022 were 26.7% and 25.9%, respectively.

Our EPS was $1.12 and $4.10 in the third quarter and first nine months of fiscal 2023 compared to $1.09 and $3.32 in the prior-year periods. Excluding the aforementioned non-operating and non-recurring items, our adjusted EPS was $1.15 in the third quarter of fiscal 2023 compared to $1.08 in the year-ago quarter, an increase of 6.5%. On the same basis, our adjusted EPS for the first nine months of fiscal 2023, was $3.55 compared to $3.25 for the same period last year, an increase of 9.2%. For the third quarter, we estimated that RPS contributed $0.01 to our adjusted EPS before intangible amortization, which reduced our EPS by $0.14. For the first nine months of fiscal 2023, we estimated that RPS reduced our adjusted EPS by $0.02 before intangible amortization, which reduced our EPS by an additional $0.24. Excluding RPS, our adjusted EPS was $1.28 in the third quarter and $3.81 in the first nine months of fiscal 2023 representing increases of 18.5% and 17.2%, respectively, compared to the same periods in fiscal 2022.

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Segment Results of Operations

Government Services Group

	Three Months Ended							Nine Months Ended
	July 2, 2023		July 3, 2022		Change			July 2, 2023		July 3, 2022		Change
					$		%					$		%
	($ in thousands)
Revenue	$	531,050	$	459,987	$	71,063	15.4%	$	1,565,371	$	1,365,041	$	200,330	14.7%
Subcontractor costs	(140,834)		(124,487)		(16,347)		(13.1)	(386,559)		(364,970)		(21,589)		(5.9)
Revenue, net of subcontractor costs	$	390,216	$	335,500	$	54,716	16.3	$	1,178,812	$	1,000,071	$	178,741	17.9
Income from operations	$	54,496	$	45,580	$	8,916	19.6%	$	167,053	$	147,104	$	19,949	13.6%

Revenue increased $71.1 million, or 15.4%, and revenue, net of subcontractor costs, increased $54.7 million, or 16.3%, in the third quarter of fiscal 2023 compared to the year-ago quarter. For the first nine months of fiscal 2023, revenue increased $200.3 million. or 14.7%, and revenue, net of subcontractor costs, increased $178.7 million, or 17.9%, compared to the first nine months of last year. These increases include approximately $70 million in revenue in the second quarter of fiscal 2023 related to international development funded energy programs in Ukraine. In addition, the increases reflect higher U.S. state and local government activities related to digital water and federal programs for civilian agencies, partially offset by lower disaster response revenue.

Operating income increased $8.9 million and $19.9 million in the third quarter and first nine months of fiscal 2023, respectively, compared to the prior-year periods. Operating income for the third quarter and first nine months of fiscal 2022 included $0.7 million and $3.7 million of the aforementioned ERC's. Our operating margin, based on revenue, net of subcontractor costs, declined to 14.2% in the first nine months of fiscal 2023 compared to 14.7% in the same period last year primarily due to the ERC's. Excluding last year's ERC's, our operating margin was 14.3% in the first nine months of fiscal 2022.

Commercial/International Group

	Three Months Ended							Nine Months Ended
	July 2, 2023		July 3, 2022		Change			July 2, 2023		July 3, 2022		Change
					$		%					$		%
	($ in thousands)
Revenue	$	691,386	$	444,238	$	247,148	55.6%	$	1,741,300	$	1,277,469	$	463,831	36.3	%
Subcontractor costs	(94,042)		(59,252)		(34,790)		(58.7)	(226,426)		(178,079)		(48,347)		(27.1)
Revenue, net of subcontractor costs	$	597,344	$	384,986	$	212,358	55.2	$	1,514,874	$	1,099,390	$	415,484	37.8
Income from operations	$	69,572	$	53,535	$	16,037	30.0%	$	172,199	$	139,328	$	32,871	23.6	%

Revenue increased $247.1 million, or 55.6%, and revenue, net of subcontractor costs, increased $212.4 million, or 55.2%, in the third quarter of fiscal 2023 compared to last year's second quarter. For the first nine months of fiscal 2023, revenue increased $463.8 million, or 36.3%, and revenue, net of subcontractor costs, increased $415.5 million, or 37.8%, compared to the first nine months of fiscal 2022. The RPS acquisition contributed approximately $370 million to revenue growth in the first nine months of fiscal 2023. The remaining revenue growth in fiscal 2023 primarily reflects increased activity on high performance buildings, clean energy and international infrastructure.

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Operating income increased $16.0 million and $32.9 million, in the third quarter and first nine months of fiscal 2023, respectively, compared to the same periods last year. The RPS acquisition contributed approximately $18 million to operating income in the first nine months of fiscal 2023. Operating income in the third quarter and first nine months of fiscal 2022 included $0.3 million and $1.6 million of the aforementioned ERC's, respectively. Our operating margin, based on revenue, net of subcontractor costs, was 11.4% in the first nine months of fiscal 2023 compared to 12.7% in the prior-year period. Excluding RPS and the ERC's, our operating margin was 12.8% in the first nine months fiscal 2023 compared to 12.5% in the same period of fiscal 2022. The improved operating margin was primarily due to our increased focus on high-end consulting services, project execution and higher labor utilization.

Backlog

Backlog generally represents the dollar amount of revenues we expect to realize in the future when we perform the work. The difference between remaining unsatisfied performance obligations ("RUPO") and backlog relates to contract terms. Specifically, our backlog does not consider the 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). At July 2, 2023 and October 2, 2022, the differences between our backlog and RUPO of $4.4 billion for each period were immaterial.

Financial Condition, Liquidity and Capital Resources

Capital Requirements.  At July 2, 2023, we had $176.1 million of cash and cash equivalents and access to an additional $614.3 million of borrowings available under our amended credit facility described below. During the first nine months of fiscal 2023, we generated $246.1 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, 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 amended for the RPS acquisition in the second quarter of fiscal 2023, as described below, will be sufficient to meet our capital requirements for at least the next 12 months.

We use a variety of tax planning and financing strategies to manage our worldwide cash and deploy funds to locations where they are needed. We plan to repatriate undistributed foreign earnings as they become available to supplement our liquidity in the United States including to pay down the borrowings used to fund the RPS acquisition.

On October 5, 2021, our Board of Directors authorized a new stock repurchase program under which we could repurchase up to $400 million of our common stock. In the first nine months of fiscal 2023, we did not repurchase any shares of our common stock. At July 2, 2023, we had a remaining balance of $347.8 million under our stock repurchase program.

On November 7, 2022, our Board of Directors declared a quarterly cash dividend of $0.23 per share payable on December 9, 2022 to stockholders of record as of the close of business on November 21, 2022. On January 30, 2023, our Board of Directors declared a quarterly cash dividend of $0.23 per share payable on February 24, 2023 to stockholders of record as of the close of business on February 13, 2023. On May 8, 2023, our Board of Directors declared a quarterly cash dividend of $0.26 per share payable on June 6, 2023 to stockholders of record as of the close of business on May 24, 2023.

Subsequent Event.  On August 7, 2023, our Board of Directors declared a quarterly cash dividend of $0.26 per share payable on September 6, 2023 to stockholders of record as of the close of business on August 23, 2023.

Cash and Cash Equivalents.  At July 2, 2023, our cash and cash equivalents were $176.1 million, a decrease of $9.0 million compared to the fiscal 2022 year-end. The decrease was primarily due to payments for the RPS acquisition, partially offset by net borrowings and cash provided by operating activities.

Operating Activities.  For the first nine months of fiscal 2023, net cash provided by operating activities was $246.1 million, a decrease of $29.9 million compared to the prior-year period. The decrease was primarily due to acquisition and integration expenses of $25.8 million for the RPS acquisition paid in fiscal 2023.

Investing Activities.  For the first nine months of fiscal 2023, net cash used in investing activities was $761.9 million, an increase of $723.6 million compared to the year-ago period. The increase was primarily due to the RPS acquisition in the second quarter of fiscal 2023.

Financing Activities.  For the first nine months of fiscal 2023, net cash provided by financing activities was $494.4 million, compared to net cash used in financing activities of $182.5 million in the prior-year period. The financing activities in the first nine months of fiscal 2023 primarily consisted of additional borrowings to fund the RPS acquisition.

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

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

The entire Amended Term Loan Facility was drawn on February 18, 2022. The Amended Term Loan Facility is subject to quarterly amortization of principal at 5% annually commencing June 30, 2022. We may borrow on the Amended Revolving Credit Facility, at our option, at either (a) a benchmark rate plus a margin that ranges from 1.000% to 1.875% per annum, or (b) a base rate for loans in U.S. dollars (the highest of the U.S. federal funds rate plus 0.50% per annum, the bank’s prime rate or the Secured Overnight Financing Rate ("SOFR") rate plus 1.00%, plus a margin that ranges from 0% to 0.875% per annum. In each case, the applicable margin is based on our Consolidated Leverage Ratio, calculated quarterly. The Amended Term Loan Facility is subject to the same interest rate provisions. The Amended Credit Agreement expires on February 18, 2027, or earlier at our discretion upon payment in full of loans and other obligations.

At July 2, 2023, we had $919.4 million in outstanding borrowings under the Amended Credit Agreement, which was comprised of $234.4 million under the Amended Term Loan Facility, $500 million under the New Term Loan Facility, and $185 million under the Amended Revolving Credit Facility. The weighted-average interest rate of the outstanding borrowings for the first nine months of fiscal 2023 is 5.88%. In addition, we had $0.7 million in standby letters of credit under the Amended Credit Agreement. Our year-to-date weighted-average interest rate on borrowings outstanding under the Amended Credit Agreement, including the effects of interest rate swap agreements described in Note 15, “Derivative Financial Instruments” of the “Notes to Consolidated Financial Statements”, was 5.46%. At July 2, 2023, we had $314.3 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 3.25 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 July 2, 2023, we were in compliance with these covenants with a consolidated leverage ratio of 2.01x and a consolidated interest coverage ratio of 10.95x.

We are currently evaluating various capital structure and interest rate hedging strategies to lower our future borrowing costs that could be executed as early as the fourth quarter of fiscal 2023.

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 July 2, 2023, there were no borrowings under these facilities, and the aggregate amount of standby letters of credit outstanding was $56.6 million. At July 2, 2023, we had no bank overdrafts related to our disbursement bank accounts.

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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.

Dividends.  Our Board of Directors has authorized the following dividends in fiscal 2023:

	Dividend  Per Share		Record Date	Total Maximum Payment (in thousands)		Payment Date
November 7, 2022	$	0.23	November 21, 2022	$	12,186	December 9, 2022
January 30, 2023	$	0.23	February 13, 2023	$	12,242	February 24, 2023
May 8, 2023	$	0.26	May 24, 2023	$	13,840	June 6, 2023
August 7, 2023	$	0.26	August 23, 2023	N/A		September 6, 2023

Income Taxes

We evaluate the realizability of our deferred tax assets by assessing the valuation allowance and adjust the allowance, if necessary. The factors used to assess the likelihood of realization are our forecast of future taxable income and available tax planning strategies that could be implemented to realize the net deferred tax assets. The ability or failure to achieve the forecasted taxable income in the applicable taxing jurisdictions could affect the ultimate realization of deferred tax assets. Based on projected 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 July 2, 2023 and October 2, 2022, the liability for income taxes associated with uncertain tax positions was $48.8 million and $10.6 million, respectively. 

It is reasonably possible that the amount of the unrecognized benefit with respect to certain of our unrecognized tax positions may significantly decrease within the next 12 months. These liabilities represent our current estimates of the additional tax liabilities that we may be assessed when the related audits are concluded. If these audits are resolved in a manner more unfavorable than our current expectations, our additional tax liabilities could be materially higher than the amounts currently recorded resulting in additional tax expense.

Off-Balance Sheet Arrangements

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

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

•Letters of credit and bank guarantees are used primarily to support project performance and insurance programs. We are required to reimburse the issuers of letters of credit and bank guarantees for any payments they make under the outstanding letters of credit or bank guarantees. Our 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 July 2, 2023, we had $0.7 million in standby letters of credit outstanding under our Amended Credit Agreement and $56.6 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

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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 October 2, 2022. To date, there have been no material changes in our critical accounting policies as reported in our 2022 Annual Report on Form 10-K.

New Accounting Pronouncements

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

Financial Market Risks

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

We are exposed to interest rate risk under our Amended Credit Agreement. We can borrow, at our option, under both the Amended Term Loan Facility and Amended Revolving Credit Facility. We may borrow on the Amended Revolving Credit Facility, at our option, at either (a) a Eurocurrency rate plus a margin that ranges from 1.000% to 1.875% per annum, or (b) a base rate for loans in U.S. dollars (the highest of the U.S. federal funds rate plus 0.50% per annum, the bank’s prime rate or the SOFR rate plus 1.00%) plus a margin that ranges from 0% to 0.875% per annum. In each case, the applicable margin is based on our Consolidated Leverage Ratio, calculated quarterly. The Amended Term Loan Facility is subject to the same interest rate provisions. Borrowings at the base rate have no designated term and may be repaid without penalty any time prior to the Facility’s maturity date. Borrowings at a SOFR rate have a term no less than 30 days and no greater than 180 days and may be prepaid without penalty. Typically, at the end of such term, such borrowings may be rolled over at our discretion into either a borrowing at the base rate or a borrowing at a SOFR rate with similar terms, not to exceed the maturity date of the Facility. The Facility matures on February 18, 2027. At July 2, 2023, we had $919.4 million in outstanding borrowings under the Amended Credit Agreement, which was comprised of $234.4 million under the Amended Term Loan Facility, $500 million under the New Term Loan Facility, and $185 million under the Amended Revolving Credit Facility. The year-to-date weighted-average interest rate of the outstanding borrowings during fiscal 2023 was 5.88%.

In August 2018, we entered into five interest rate swap agreements with five banks to fix the variable interest rate on $250 million of our Amended Term Loan Facility. The objective of these interest rate swaps was to eliminate the variability of our cash flows on the amount of interest expense we pay under our Credit Agreement. At July 2, 2023, the notional principal of our outstanding interest swap agreements was $190.6 million ($38.1 million each.) Our year-to-date average effective interest rate on borrowings outstanding under the Credit Agreement, including the effects of interest rate swap agreements, at July 2, 2023, was 5.46%. For more information, see Note 15, “Derivative Financial Instruments” of the “Notes to Consolidated Financial Statements”.

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 dollar, 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

37

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. The impact of the foreign currency gains and losses was immaterial for the first nine months of fiscal 2023 and 2022.

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 nine months of fiscal 2023 and 2022, 36.2% and 31.4% of our consolidated revenue, respectively, was generated by our international business. For the first nine months of fiscal 2023, the effect of foreign exchange rate translation on the consolidated balance sheets was an increase in our equity by $69.5 million compared to a decrease in equity of $42.8 million in the first nine months of fiscal 2022. 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 July 2, 2023, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Consistent with the guidance issued by the Securities and Exchange Commission Staff, the evaluation excluded Amyx, which we acquired on January 3, 2023, and RPS, which we acquired on January 23, 2023. 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 July 2, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II.               OTHER INFORMATION

Item 1.           Legal Proceedings

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

38

Item 1A.                Risk Factors

There have been no material changes in our risk factors disclosed in Part I, Item 1A in our 2022 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 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 October 5, 2021, our Board of Directors authorized a new stock repurchase program under which we could repurchase up to $400 million of our common stock. In the first nine months of fiscal 2023, we did not repurchase any shares of our common stock. At July 2, 2023, we had a remaining balance of $347.8 million under our stock repurchase program.

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 third quarter of fiscal 2023, none of our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted, modified or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act or any "non-Rule 10b5-1 trading arrangement" as defined in Item 408(c) of Regulation S-K.

Item 6.                                                         Exhibits

The following documents are filed as Exhibits to this Report:

31.1	Chief Executive Officer Certification pursuant to Rule 13a-14(a)/15d-14(a).
31.2	Chief Financial Officer Certification pursuant to Rule 13a-14(a)/15d-14(a).
32.1	Certification of Chief Executive Officer pursuant to Section 1350.
32.2	Certification of Chief Financial Officer pursuant to Section 1350.
95	Mine Safety Disclosure.
101	The following financial information from our Company’s Quarterly Report on Form 10-Q, for the period ended July 2, 2023, 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 Equity, (vi) Notes to Consolidated Financial Statements.
104	Cover Page Interactive Date File (formatted as Inline XBRL and contained in Exhibit 101).

39

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: August 10, 2023	TETRA TECH, INC.
	By:	/s/ DAN L. BATRACK
		Dan L. Batrack
		Chairman and Chief Executive Officer
		(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)

40

EX-31.1

Exhibit 31.1

Chief Executive Officer Certification Pursuant to

Rule 13a-14(a)/15d-14(a)

I, Dan L. Batrack, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Tetra Tech, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 10, 2023   

/s/ Dan L. Batrack

Dan L. Batrack

Chairman, Chief Executive Officer and President

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

Chief Financial Officer Certification Pursuant to

Rule 13a-14(a)/15d-14(a)

I, Steven M. Burdick, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Tetra Tech, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 10, 2023 

/s/ Steven M. Burdick

Steven M. Burdick

Chief Financial Officer

(Principal Financial Officer)

EX-32.1

Exhibit 32.1

Certification of Chief Executive Officer Pursuant to

Section 1350

In connection with the Quarterly Report of Tetra Tech, Inc. (the “Company”) on Form 10-Q for the quarterly period ended July 2, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Dan L. Batrack, Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1.The Report fully complies with requirements of Section 13(a) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Dan L. Batrack

Dan L. Batrack

Chairman, Chief Executive Officer and President

August 10, 2023

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Tetra Tech, Inc. and will be retained by Tetra Tech, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

The foregoing certification is being furnished to the Securities and Exchange Commission as an exhibit to the Form 10-Q and shall not be considered filed as part of the Form 10-Q.

EX-32.2

Exhibit 32.2

Certification of Chief Financial Officer Pursuant to

Section 1350

In connection with the Quarterly Report of Tetra Tech, Inc. (the “Company”) on Form 10-Q for the quarterly period ended July 2, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Steven M. Burdick, Chief Financial Officer and Treasurer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1.The Report fully complies with requirements of Section 13(a) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Steven M. Burdick

Steven M. Burdick

Chief Financial Officer

August 10, 2023

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Tetra Tech, Inc. and will be retained by Tetra Tech, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

The foregoing certification is being furnished to the Securities and Exchange Commission as an exhibit to the Form 10-Q and shall not be considered filed as part of the Form 10-Q.

EX-95

Exhibit 95

MINE SAFETY DISCLOSURES

The following table shows, for each project performed at U.S. mines that is subject to the Federal Mine Safety and Health Act of 1977 (“MSHA”), the information required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K. Section references are to sections of MSHA.

3 Month Period Ending July 2, 2023	Tetra Tech, Inc.
Alleged violations of mandatory health or safety standards that could significantly and substantially contribute to the cause and effect of a mine safety or health hazard (#)	0
Section 104(b) orders (#)	0
Section 104(d) citations and orders (#)	0
Section 110(b)(2) violations (#)	0
Section 107(a) orders (#)	0
Proposed assessments under MSHA ($) whole dollars	0
Mining-related fatalities (#)	0
Section 104(e) notice	0
Notice of the potential for a pattern of violations under Section 104(e)	0
Legal actions before the Federal Mine Safety and Health Review Commission (“FMSHRC”) initiated (#)	0
Legal actions before the FMSHRC resolved	0
Legal actions pending before the FMSHRC, end of period	-
Contests of citations and orders reference in Subpart B of 29 CFR Part 2700	0
Contests of proposed penalties referenced in Subpart C of 29 CFR Part 2700 (#)	0
Complaints for compensation referenced in Subpart D of 29 CFR Part 2700 (#)	0
Complaints of discharge, discrimination or interference reference in Subpart E of 29 CFR Part 2700 (#)	0
Applications for temporary relief referenced in Subpart F of 29 CFR Part 2700 (#)	0
Appeals of judges’ decisions or orders reference in Subpart H of 29 CFR Part 2700 (#)	0
Total pending legal actions (#)	0

XML

Cover - shares	9 Months Ended
	Jul. 02, 2023	Jul. 31, 2023
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jul. 02, 2023
Document Transition Report	false
Entity File Number	0-19655
Entity Registrant Name	TETRA TECH, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	95-4148514
Entity Address, Address Line One	3475 East Foothill Boulevard
Entity Address, City or Town	Pasadena
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	91107
City Area Code	626
Local Phone Number	351-4664
Title of 12(b) Security	Common Stock, $0.01 par value
Trading Symbol	TTEK
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		53,245,603
Entity Central Index Key	0000831641
Amendment Flag	false
Current Fiscal Year End Date	--10-01
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q3

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Jul. 02, 2023	Oct. 02, 2022
Current assets:
Cash and cash equivalents	$ 176,056	$ 185,094
Accounts receivable, net	1,002,087	755,112
Contract assets	125,360	92,405
Prepaid expenses and other current assets	114,440	125,605
Total current assets	1,417,943	1,158,216
Property and equipment, net	81,321	32,316
Right-of-use assets, operating leases	207,218	182,319
Goodwill	1,886,854	1,110,412
Intangible assets, net	225,032	29,163
Deferred tax assets	81,732	47,804
Other non-current assets	73,478	62,546
Total assets	3,973,578	2,622,776
Current liabilities:
Accounts payable	188,807	147,436
Accrued compensation	270,924	237,669
Contract liabilities	351,048	241,340
Short-term lease liabilities, operating leases	68,555	57,865
Current portion of long-term debt	12,505	12,504
Current contingent earn-out liabilities	35,902	28,797
Other current liabilities	284,418	190,406
Total current liabilities	1,212,159	916,017
Deferred tax liabilities	71,425	15,161
Long-term debt	906,875	246,250
Long-term lease liabilities, operating leases	163,919	146,285
Non-current contingent earn-out liabilities	40,697	36,769
Other non-current liabilities	125,714	79,157
Commitments and contingencies (Note 17)
Equity:
Preferred stock - authorized, 2,000 shares of $0.01 par value; no shares issued and outstanding at July 2, 2023 and October 2, 2022	0	0
Common stock - authorized, 150,000 shares of $0.01 par value; issued and outstanding, 53,243 and 52,981 shares at July 2, 2023 and October 2, 2022, respectively	532	530
Additional paid-in capital	17,906	0
Accumulated other comprehensive loss	(137,926)	(208,144)
Retained earnings	1,572,204	1,390,701
Tetra Tech stockholders’ equity	1,452,716	1,183,087
Noncontrolling interests	73	50
Total stockholders' equity	1,452,789	1,183,137
Total liabilities and stockholders' equity	$ 3,973,578	$ 2,622,776

XML

Consolidated Balance Sheets (Parenthetical) - $ / shares	Jul. 02, 2023	Oct. 02, 2022
Statement of Financial Position [Abstract]
Preferred stock, authorized shares (in shares)	2,000,000	2,000,000
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, authorized shares (in shares)	150,000,000	150,000,000
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares issued (in shares)	53,243,000	52,981,000
Common stock, shares outstanding (in shares)	53,243,000	52,981,000

XML

Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Jul. 02, 2023	Jul. 03, 2022	Jul. 02, 2023	Jul. 03, 2022
Revenue	$ 1,208,947	$ 890,231	$ 3,261,938	$ 2,601,485
Gross profit	188,846	144,584	512,937	419,524
Selling, general and administrative expenses	(89,064)	(60,942)	(227,912)	(173,943)
Acquisition and integration expenses	(2,107)	0	(25,812)	0
Contingent consideration – fair value adjustments	0	263	(8,477)	64
Income from operations	97,675	83,905	250,736	245,645
Interest expense, net	(14,869)	(2,919)	(33,563)	(8,967)
Other non-operating income	0	0	89,402	0
Income before income tax expense	82,806	80,986	306,575	236,678
Income tax expense	(22,568)	(22,329)	(86,781)	(56,473)
Net income	60,238	58,657	219,794	180,205
Net income attributable to noncontrolling interests	(3)	(7)	(23)	(26)
Net income attributable to Tetra Tech, basic	60,235	58,650	219,771	180,179
Net income attributable to Tetra Tech, diluted	$ 60,235	$ 58,650	$ 219,771	$ 180,179
Earnings per share attributable to Tetra Tech:
Basic (in dollars per share)	$ 1.13	$ 1.10	$ 4.13	$ 3.35
Diluted (in dollars per share)	$ 1.12	$ 1.09	$ 4.10	$ 3.32
Weighted-average common shares outstanding:
Basic (in shares)	53,231	53,507	53,188	53,777
Diluted (in shares)	53,653	54,006	53,615	54,328
Subcontractor costs
Cost of revenue	$ (221,387)	$ (169,745)	$ (568,252)	$ (502,024)
Other costs of revenue
Cost of revenue	$ (798,714)	$ (575,902)	$ (2,180,749)	$ (1,679,937)

XML

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jul. 02, 2023	Jul. 03, 2022	Jul. 02, 2023	Jul. 03, 2022
Statement of Comprehensive Income [Abstract]
Net income	$ 60,238	$ 58,657	$ 219,794	$ 180,205
Other comprehensive income, net of tax
Foreign currency translation adjustment, net of tax	44,500	(44,884)	69,453	(42,763)
Gain (loss) on cash flow hedge valuations, net of tax	(1,044)	2,380	(2,029)	9,984
Net pension adjustments	0	0	2,794	0
Other comprehensive income (loss), net of tax	43,456	(42,504)	70,218	(32,779)
Comprehensive income, net of tax	103,694	16,153	290,012	147,426
Comprehensive income attributable to noncontrolling interests, net of tax	4	6	23	25
Comprehensive income attributable to Tetra Tech, net of tax	$ 103,690	$ 16,147	$ 289,989	$ 147,401

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Jul. 02, 2023	Jul. 03, 2022	Jul. 02, 2023	Jul. 03, 2022	Oct. 02, 2022
Cash flows from operating activities:
Net income	$ 60,238	$ 58,657	$ 219,794	$ 180,205
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			43,221	19,545
Equity in income of unconsolidated joint ventures			(4,831)	(5,233)
Distributions of earnings from unconsolidated joint ventures			4,345	4,532
Amortization of stock-based awards			21,640	19,104
Deferred income taxes			21,475	750
Fair value adjustments to contingent consideration	0	(263)	8,477	(64)
(Gain) loss on sale of assets			(310)	93
Fair value adjustments to foreign currency forward contract			(89,402)	0
Changes in operating assets and liabilities, net of effects of business acquisitions:
Accounts receivable and contract assets			(41,824)	(54,874)
Prepaid expenses and other assets			1,970	33,254
Accounts payable			(3,678)	8,845
Accrued compensation			5,263	15,349
Contract liabilities			56,189	59,025
Other liabilities			(6,921)	(12,702)
Income taxes receivable/payable			10,645	8,147
Net cash provided by operating activities			246,053	275,976
Cash flows from investing activities:
Payments for business acquisitions, net of cash acquired			(854,319)	(33,624)
Capital expenditures			(17,322)	(8,401)
Proceeds from sale of property and equipment			439	3,754
Settlement of foreign currency forward contract			109,306	0
Net cash used in investing activities			(761,896)	(38,271)
Cash flows from financing activities:
Proceeds from borrowings			979,859	141,456
Repayments on long-term debt			(411,676)	(108,949)
Repurchases of common stock			0	(150,000)
Taxes paid on vested restricted stock			(16,785)	(25,193)
Stock options exercised			425	1,205
Dividends paid			(38,268)	(33,873)
Payments of contingent earn-out liabilities			(15,078)	(4,035)
Principal payments on finance leases			(4,082)	(3,097)
Net cash provided by (used in) financing activities			494,395	(182,486)
Effect of exchange rate changes on cash and cash equivalents			12,410	(4,403)
Net (decrease) increase in cash and cash equivalents			(9,038)	50,816
Cash and cash equivalents at beginning of period			185,094	166,568	$ 166,568
Cash and cash equivalents at end of period	$ 176,056	$ 217,384	176,056	217,384	$ 185,094
Cash paid during the period for:
Interest			34,839	7,556
Income taxes, net of refunds received of $1.5 million and $4.2 million			54,967	49,131
Supplemental disclosures on non-cash investing activities:
Issuance of promissory note for business acquisition			$ 0	$ 14,578

XML

Consolidated Statements of Cash Flows (Parenthetical) - USD ($) $ in Millions	9 Months Ended
	Jul. 02, 2023	Jul. 03, 2022
Statement of Cash Flows [Abstract]
Income tax refunds	$ 1.5	$ 4.2

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Consolidated Statements of Stockholders' Equity - USD ($) shares in Thousands, $ in Thousands	Total	Total Tetra Tech Equity	Common Stock	Additional Paid-in Capital	Accumulated Other Comprehensive Loss	Retained Earnings	Non-Controlling Interests
Beginning balance (in shares) at Oct. 03, 2021			53,981
Beginning balance at Oct. 03, 2021	$ 1,234,291	$ 1,234,238	$ 540	$ 0	$ (125,028)	$ 1,358,726	$ 53
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	180,205	180,179				180,179	26
Other comprehensive income (loss)	(32,779)	(32,778)			(32,778)		(1)
Distributions paid to noncontrolling interests	(31)	0					(31)
Cash dividends per common share	(33,873)	(33,873)				(33,873)
Stock-based compensation	19,104	19,104		19,104		0
Restricted & performance shares released (in shares)			189
Restricted & performance shares released	(25,193)	(25,193)	$ 2	(25,195)		0
Stock options exercised (in shares)			29
Stock options exercised	1,205	1,205	$ 0	1,205
Shares issued for Employee Stock Purchase Plan (in shares)			106
Shares issued for Employee Stock Purchase Plan	12,129	12,129	$ 1	12,128
Stock repurchases (in shares)			(986)
Stock repurchases	(150,000)	(150,000)	$ (10)	(7,242)		(142,748)
Ending balance (in shares) at Jul. 03, 2022			53,319
Ending balance at Jul. 03, 2022	1,205,058	1,205,011	$ 533	0	(157,806)	1,362,284	47
Beginning balance (in shares) at Apr. 03, 2022			53,683
Beginning balance at Apr. 03, 2022	1,244,642	1,244,601	$ 537	0	(115,303)	1,359,367	41
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	58,657	58,650				58,650	7
Other comprehensive income (loss)	(42,504)	(42,503)			(42,503)		(1)
Cash dividends per common share	(12,311)	(12,311)				(12,311)
Stock-based compensation	6,712	6,712		12,747		(6,035)
Restricted & performance shares released (in shares)			4
Restricted & performance shares released	(138)	(138)	$ 0	(6,172)		6,034
Stock repurchases (in shares)			(368)
Stock repurchases	(50,000)	(50,000)	$ (4)	(6,575)		(43,421)
Ending balance (in shares) at Jul. 03, 2022			53,319
Ending balance at Jul. 03, 2022	1,205,058	1,205,011	$ 533	0	(157,806)	1,362,284	47
Beginning balance (in shares) at Oct. 02, 2022			52,981
Beginning balance at Oct. 02, 2022	1,183,137	1,183,087	$ 530	0	(208,144)	1,390,701	50
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	219,794	219,771				219,771	23
Other comprehensive income (loss)	70,218	70,218			70,218		0
Cash dividends per common share	(38,268)	(38,268)				(38,268)
Stock-based compensation	21,640	21,640		21,640
Restricted & performance shares released (in shares)			149
Restricted & performance shares released	(16,785)	(16,785)	$ 1	(16,786)
Stock options exercised (in shares)			15
Stock options exercised	425	425	$ 0	425
Shares issued for Employee Stock Purchase Plan (in shares)			98
Shares issued for Employee Stock Purchase Plan	12,628	12,628	$ 1	12,627
Ending balance (in shares) at Jul. 02, 2023			53,243
Ending balance at Jul. 02, 2023	1,452,789	1,452,716	$ 532	17,906	(137,926)	1,572,204	73
Beginning balance (in shares) at Apr. 02, 2023			53,228
Beginning balance at Apr. 02, 2023	1,355,668	1,355,599	$ 532	10,639	(181,381)	1,525,809	69
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	60,238	60,235				60,235	3
Other comprehensive income (loss)	43,456	43,455			43,455		1
Cash dividends per common share	(13,840)	(13,840)				(13,840)
Stock-based compensation	7,038	7,038		7,038
Restricted & performance shares released (in shares)			3
Restricted & performance shares released	(105)	(105)	$ 0	(105)
Stock options exercised (in shares)			12
Stock options exercised	334	334	$ 0	334
Ending balance (in shares) at Jul. 02, 2023			53,243
Ending balance at Jul. 02, 2023	$ 1,452,789	$ 1,452,716	$ 532	$ 17,906	$ (137,926)	$ 1,572,204	$ 73

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Consolidated Statements of Stockholders' Equity (Parenthetical) - $ / shares							3 Months Ended		9 Months Ended
	Jun. 06, 2023	Feb. 24, 2023	Dec. 09, 2022	May 27, 2022	Feb. 25, 2022	Dec. 20, 2021	Jul. 02, 2023	Jul. 03, 2022	Jul. 02, 2023	Jul. 03, 2022
Statement of Stockholders' Equity [Abstract]
Dividend paid per share (in dollars per share)	$ 0.26	$ 0.23	$ 0.23	$ 0.23	$ 0.20	$ 0.20	$ 0.26	$ 0.23	$ 0.72	$ 0.63

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Basis of Presentation

9 Months Ended

Jul. 02, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

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 October 2, 2022.

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.

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Recent Accounting Pronouncements

9 Months Ended

Jul. 02, 2023

Accounting Changes and Error Corrections [Abstract]

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In November 2021, the Financial Accounting Standards Board issued ASU 2021-10, Government Assistance (Topic 832), which requires annual disclosures for transactions with a government authority that are accounted for by applying a grant or contribution model by analogy, including (1) the types of transactions, (2) the accounting for those transactions, and (3) the effect of those transactions on an entity's financial statements. ASU 2021-10 was effective for us beginning in the first quarter of fiscal 2023.

In fiscal 2020, the Canadian federal government implemented the Canadian Emergency Wage Subsidy ("CEWS") program in response to the negative impact of the coronavirus disease 2019 pandemic on businesses operating in Canada. Our Canadian legal entities qualified for and applied for these CEWS cash benefits to partially offset the impacts of revenue reductions and on-going staffing costs. The $26.0 million total received was initially recorded in "Other current liabilities" until all potential amendments to the qualification criteria, including some that were proposed with retroactive application, were finalized in fiscal 2022. As there are no further contingencies, beginning in fiscal 2023, the amounts received will be distributed to all Canadian employees. We expect to distribute approximately $9 million in the next twelve months. Accordingly, this amount was reclassified from "Other current liabilities" to "Accrued compensation" on our consolidated balance sheet at October 2, 2022. The remaining $17.0 million, which we expect to distribute beyond one year, was reclassified to "Other non-current liabilities". We do not expect there will be any related impact to our operating income, and we have no outstanding applications for further government assistance.

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Revenue and Contract Balances

9 Months Ended

Jul. 02, 2023

Revenue from Contract with Customer [Abstract]

Revenue and Contract Balances

Revenue and Contract BalancesWe disaggregate revenue by client sector and contract type, as we believe it best depicts how the nature, timing and uncertainty of revenue and cash flows are affected by economic factors. The following tables present revenue disaggregated by client sector and contract type (in thousands):

	Three Months Ended				Nine Months Ended
	July 2, 2023		July 3, 2022		July 2, 2023		July 3, 2022
Client Sector:
U.S. federal government (1)	$	338,022	$	261,434	$	996,471	$	781,503
U.S. state and local government	151,462		150,731		$	452,447	$	465,770
U.S. commercial	225,907		188,255		633,401		536,901
International (2)	493,556		289,811		1,179,619		817,311
Total	$	1,208,947	$	890,231	$	3,261,938	$	2,601,485
Contract Type:
Fixed-price	$	452,605	$	335,014	$	1,194,266	$	982,565
Time-and-materials	596,904		417,898		1,550,970		1,221,598
Cost-plus	159,438		137,319		516,702		397,322
Total	$	1,208,947	$	890,231	$	3,261,938	$	2,601,485

(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 Canada, Australia 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 nine months ended July 2, 2023 and July 3, 2022.

Contract Assets and Contract Liabilities

We invoice customers based on the contractual terms of each contract. However, the timing of revenue recognition may differ from the timing of invoice issuance.

Contract assets represent revenue recognized in excess of the amounts for which we have the contractual right to bill our customers. Such amounts are recoverable from customers based upon various measures of performance, including achievement of certain milestones or completion of a contract. In addition, many of our time and materials arrangements are billed in arrears pursuant to contract terms that are standard within the industry, resulting in contract assets and/or unbilled receivables being recorded, as revenue is recognized in advance of billings. Contract retentions, included in contract assets, represent amounts withheld by clients until certain conditions are met or the project is completed, which may extend beyond one year.

Contract liabilities consist of billings in excess of revenue recognized. Contract liabilities decrease as we recognize revenue from the satisfaction of the related performance obligation and increase as billings in advance of revenue recognition occur. Contract assets and liabilities are reported in a net position on a contract-by-contract basis at the end of each reporting period. There were no substantial non-current contract assets or liabilities for the periods presented. Net contract assets/liabilities consisted of the following (in thousands):

	Balance at
	July 2, 2023		October 2, 2022
Contract assets (1)	$	125,360	$	92,405
Contract liabilities	351,048		241,340
Net contract liabilities	$	(225,688)	$	(148,935)

(1)    Includes $8.1 million and $23.3 million of contract retentions at July 2, 2023 and October 2, 2022, respectively.

In the first nine months of fiscal 2023 and 2022, we recognized revenue of approximately $143 million and $111 million, respectively, from the amounts included in the contract liability balances at the end of fiscal 2022 and 2021, respectively.

We recognize revenue primarily using the cost-to-cost measure of progress method to estimate progress towards completion. Changes in those estimates could result in the recognition of cumulative catch-up adjustments to the contract’s inception-to-date revenue, costs and profit in the period in which such changes are made. As a result, in the first nine months of fiscal 2023, we recognized net favorable revenue and operating income adjustments of $4.0 million (substantially all in the first quarter). In the third quarter and first nine months of fiscal 2022, we recognized net unfavorable revenue and operating income adjustments of $2.8 million and net favorable revenue and operating income adjustments of $2.2 million, respectively.

Changes in revenue and cost estimates could also result in a projected loss, determined at the contract level, which would be recorded immediately in earnings. At July 2, 2023 and October 2, 2022, our consolidated balance sheets included liabilities for anticipated losses of $9.7 million and $10.0 million, respectively. The estimated cost to complete these related contracts at July 2, 2023 and October 2, 2022 was approximately $69 million and $80 million, respectively.

Accounts Receivable, Net

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

	Balance at
	July 2, 2023		October 2, 2022
Billed	$	677,915	$	491,700
Unbilled	331,381		267,161
Total accounts receivable	1,009,296		758,861
Allowance for doubtful accounts	(7,209)		(3,749)
Total accounts receivable, net	$	1,002,087	$	755,112

Billed accounts receivable represent amounts billed to clients that have not been collected. Unbilled accounts receivable, which represent an unconditional right to payment subject only to the passage of time, include unbilled amounts typically resulting from revenue recognized but not yet billed pursuant to contract terms or billed after the period end date. Substantially all of our unbilled receivables at July 2, 2023 are expected to be billed and collected within 12 months. The allowance for doubtful accounts represents amounts that are expected to become uncollectible or unrealizable in the future. We determine an estimated allowance for uncollectible accounts based on management's consideration of trends in the actual and forecasted credit quality of our clients, including delinquency and payment history; type of client, such as a government agency or a commercial sector client; and general economic and industry conditions.

Other than the U.S. federal government, no single client accounted for more than 10% of our accounts receivable at July 2, 2023 and October 2, 2022.

Remaining Unsatisfied Performance Obligations (“RUPO”)

Our RUPO represents a measure of the total dollar value of work to be performed on contracts awarded and in progress. We had $4.4 billion of RUPO at July 2, 2023. 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. 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 July 2, 2023 over the following periods (in thousands):

	Amount
Within 12 months	$	2,815,736
Beyond	1,537,602
Total	$	4,353,338

Although RUPO reflects business that is considered to be firm, cancellations, deferrals or scope adjustments may occur. 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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Acquisitions

9 Months Ended

Jul. 02, 2023

Business Combination and Asset Acquisition [Abstract]

Acquisitions

Acquisitions

On September 23, 2022, we made an all cash offer to acquire all of the outstanding shares of RPS Group plc ("RPS"), a publicly traded company on the London Stock Exchange for 222 pence per share, through a scheme of arrangement, which was unanimously recommended by RPS' Board of Directors. On November 3, 2022, RPS' shareholders approved the scheme of arrangement. On January 19, 2023, the court-sanctioned scheme of arrangement to purchase RPS was approved, and we completed the acquisition on January 23, 2023. RPS employs approximately 5,000 associates in the United Kingdom, Europe, Asia Pacific and North America, delivering high-end solutions, especially in energy transformation, water and program management for government and commercial clients. Substantially all of RPS is included in our Commercial/International Services Group ("CIG") segment.

The total purchase price of RPS was approximately £633 million ($784 million). In the third quarter and first nine months of fiscal 2023, we incurred acquisition and integration costs of $2.1 million and $25.8 million, respectively, primarily for professional fees, substantially all of which were paid as of the end of the third quarter of fiscal 2023. On January 23, 2023, we also settled a foreign exchange forward contract that was integral to our plan to finance the RPS acquisition. The cash gain of $109.3 million did not qualify for hedge accounting. As a result, the gain was recognized as non-operating income over the life of the contract and not included in the purchase price allocation below. However, the cash proceeds of $109.3 million economically reduced the purchase price for the shares of RPS to approximately $675 million. This forward contract is explained further in Note 15, "Derivative Financial Instruments".

The table below represents the preliminary purchase price allocation for RPS based on estimates, assumptions, valuations and other analyses as of January 23, 2023, that has not been finalized in order to make a definitive allocation. The purchase consideration, excluding the aforementioned forward contract gain, is allocated to the tangible and intangible assets, and liabilities of RPS based on their estimated fair values, with any excess purchase consideration allocated to goodwill as follows (in thousands):

	Amount
Cash and cash equivalents	$	32,093
Accounts receivable and contract assets	202,634
Prepaid expenses and other current assets	49,216
Income taxes receivables	1,999
Property and equipment	43,276
Right-of-use assets, operating leases	40,179
Intangible assets	206,186
Deferred income taxes	29,347
Other long-term assets	1,061
Total assets acquired	605,991
Accounts payable	$	(44,376)
Accrued compensation	(22,290)
Contract liabilities	(46,287)
Income tax payable	(7,083)
Short-term lease liabilities, operating leases	(13,477)
Other current liabilities	(126,023)
Long-term debt	(91,973)
Long-term lease liabilities, operating leases	(26,702)
Other long-term liabilities	(7,423)
Deferred tax liabilities	(55,965)
Total liabilities assumed	(441,599)
Fair value of net assets acquired	164,392
Goodwill	619,817
Total purchase consideration	$	784,209

The following table summarizes the estimated fair values that were assigned to intangible assets at the acquisition date:

	Fair Value		Weighted-Average Estimated Useful Life
	(in thousands)		(in years)
Backlog	$	19,702	1.5
Trade names	17,843		3.0
Client relations	168,641		8.0
Total intangible assets acquired	$	206,186	6.9

Supplemental Pro Forma Information (Unaudited)

Following are the supplemental consolidated financial results of Tetra Tech and RPS on an unaudited pro forma basis, as if the RPS acquisition had been consummated as of the beginning of fiscal 2022 (in thousands):

	Three Months Ended				Nine Months Ended
	July 2, 2023		July 3, 2022		July 2, 2023		July 3, 2022
Revenue	$	1,208,947	$	1,085,799	$	3,519,792	$	3,160,341
Net Income including noncontrolling interests	$	61,770	$	45,456	$	104,564	$	101,519

RPS contributed revenue of $220.4 million and $389.9 million for the third quarter and first nine months of fiscal 2023, respectively, to our consolidated results. For the third quarter of fiscal 2023, RPS' net income, including interest expense, was $0.7 million, or $0.01 per share, before the related intangible amortization of $10.4 million. For the first nine months of fiscal 2023, RPS' net loss, including interest expense, was $1.0 million, or $0.02 per share, before the related intangible amortization of $18.1 million.

In the second quarter of fiscal 2023, we also acquired Amyx, Inc. (“Amyx”), an enterprise technology services, cybersecurity and management consulting firm. Based in Reston, Virginia, Amyx, with over 500 employees, provides application modernization, cybersecurity, systems engineering, financial management and program management support on over 30 Federal Government programs. Amyx is included in our Government Services Group ("GSG") segment. The total fair value of the purchase price of Amyx was $120.9 million, comprised of a $100.0 million payable in a promissory note issued to the sellers (paid subsequent to closing), $8.7 million of payables related to estimated post-closing adjustments, and $12.2 million for the estimated fair value of contingent earn-out obligations, with a maximum of $25.0 million, based upon the achievement of specified operating income targets in each of the three years following the acquisition date. Amyx was not considered significant to our consolidated financial statements. As a result, no pro forma information has been provided.

In fiscal 2022, we acquired The Integration Group of America ("TIGA"), Piteau Associates (“PAE”) and two other financially immaterial acquisitions. TIGA is based in Spring, Texas and is an industry leader in process automation and system integration solutions, including customized software and platform (SaaS/PaaS) applications, advanced data analytics, cloud data integration and platform virtualization. PAE is based in Vancouver, British Columbia and is a global leader in sustainable natural resource analytics including hydrologic numerical modeling and dewatering system design. PAE is part of our CIG segment, and TIGA and the other financially immaterial acquisitions are part of our GSG segment. The total fair value of the purchase price for all four acquisitions was $88.3 million. This amount is comprised of $44.0 million in initial cash payments made to the sellers, $2.5 million of receivables (net) related to estimated post-closing adjustments for the net assets acquired, $15.5 million payable in a promissory note issued to the sellers along with related transaction expenses of the sellers (which were subsequently paid in July 2022), and $31.3 million for the estimated fair value of contingent earn-out obligations, with a maximum of $47.0 million, based upon the achievement of specified operating income targets in each of the three to five years following the acquisitions. These acquisitions were not considered significant, individually or in the aggregate, to our consolidated financial statements. As a result, no pro forma information has been provided.

The majority of the goodwill from the fiscal 2023 acquisitions is not deductible for tax purposes, while the majority of the goodwill from the fiscal 2022 acquisitions is deductible for tax purposes. The results of fiscal 2022 and 2023 acquisitions were included in our consolidated financial statements beginning on the respective closing dates.

Goodwill additions resulting from the fiscal 2023 business combinations are primarily attributable to the significant technical expertise residing in embedded workforces that are sought out by clients, synergies expected to arise after the acquisitions in the areas of enterprise technology services, data management, energy transformation, water, program management, and data analytics and the long-standing reputations of RPS and Amyx. These acquisitions further expand and complement our market-leading positions in water, renewable energy and sustainable infrastructure; enhanced by a combined suite of differentiated data analytics and digital technologies, and expansion into existing and new geographies. Our fiscal 2022 goodwill additions are primarily attributable to the significant technical expertise residing in embedded workforces that are sought out by clients, long-term management experience, the industry reputations and the synergies expected to arise after the acquisitions in the areas of data management, digitization, modeling, water and natural resources. These acquired capabilities, when combined with our existing global consulting and engineering business, result in opportunities that allow us to provide services under contracts that could not have been pursued individually by either us or the acquired companies.

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 or on a straight-line basis over the useful lives of the underlying assets, ranging from one to eight years. These consist of client relations, backlog and trade names. For detailed information regarding our intangible assets, see Note 5, “Goodwill and Intangible Assets”.

Most of our acquisition agreements include contingent earn-out agreements, which are generally based on the achievement of future operating income thresholds. The contingent earn-out arrangements are based on our valuations of the acquired companies and reduce the risk of overpaying for acquisitions if the projected financial results are not achieved. The

fair values of any earn-out arrangements are included as part of the purchase price of the acquired companies on their respective acquisition dates. For each transaction, we estimate the fair value of contingent earn-out payments as part of the initial purchase price and record the estimated fair value of contingent consideration as a liability in “Current contingent earn-out liabilities” and “Non-current contingent earn-out liabilities” on the consolidated balance sheets. We consider several factors when determining that contingent earn-out liabilities are part of the purchase price, including the following: (1) the valuation of our acquisitions is not supported solely by the initial consideration paid, and the contingent earn-out formula is a critical and material component of the valuation approach to determining the purchase price; and (2) the former owners of acquired companies that remain as key employees receive compensation other than contingent earn-out payments at a reasonable level compared with the compensation of our other key employees. The contingent earn-out payments are not affected by employment termination.

We measure our contingent earn-out liabilities at fair value on a recurring basis using significant unobservable inputs classified within Level 3 of the fair value hierarchy. We use a probability-weighted discounted income approach as a valuation technique to convert future estimated cash flows to a single present value amount. The significant unobservable inputs used in the fair value measurements are operating income projections over the earn-out period (generally three to five years), and the probability outcome percentages we assign to each scenario. Significant increases or decreases to either of these inputs in isolation would result in a significantly higher or lower liability, with a higher liability capped by the contractual maximum of the contingent earn-out obligation. Ultimately, the liability will be equivalent to the amount paid, and the difference between the fair value estimate and amount paid will be recorded in earnings. The amount paid that is less than or equal to the contingent earn-out liability on the acquisition date is reflected as cash used in financing activities in our consolidated statements of cash flows. Any amount paid in excess of the contingent earn-out liability on the acquisition date is reflected as cash used in operating activities in our consolidated statements of cash flows.

We review and re-assess 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. For the first nine months of fiscal 2023, 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.

During the first nine months of fiscal 2023, we recorded adjustments to our contingent earn-out liabilities and reported a related net charge to operating income of $8.5 million (all the in first half of fiscal 2023). The net charge primarily resulted from increased valuations of the contingent consideration liabilities for our prior acquisitions of Segue Technologies, Inc., Hoare Lea, LLP and TIGA reflecting financial performance that exceeded our previous expectations.

For the third quarter and first nine months of fiscal 2022, we had no material adjustments to our contingent earn-out liabilities in operating income.

At July 2, 2023, there was a total potential maximum of $120.3 million of outstanding contingent consideration related to acquisitions. Of this amount, $76.6 million was estimated as the fair value and accrued on our consolidated balance sheet at July 2, 2023.

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Goodwill and Intangible Assets

9 Months Ended

Jul. 02, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

Goodwill and Intangible Assets

The following table summarizes the changes in the carrying value of goodwill by reportable segment (in thousands):

	GSG		CIG		Total
Balance at October 2, 2022	$	519,102	$	591,310	$	1,110,412
Acquisition activity	104,100		619,832		723,932
Translation adjustments	5,459		47,051		52,510
Balance at July 2, 2023	$	628,661	$	1,258,193	$	1,886,854

The foreign currency translation adjustments resulted from our foreign subsidiaries with functional currencies that are different than our reporting currency. These goodwill amounts are presented net of reductions from historical impairment adjustments. The gross amounts for GSG were $646.4 million and $536.8 million at July 2, 2023 and October 2, 2022, respectively, excluding accumulated impairment of $17.7 million at each date. The gross amounts of goodwill for CIG were $1,379.7 million and $712.8 million at July 2, 2023 and October 2, 2022, respectively, excluding accumulated impairment of $121.5 million at each date.

We perform our annual goodwill impairment review at the beginning of our fiscal fourth quarter. Our most recent annual review at July 4, 2022 (i.e. the first day of our fourth quarter in fiscal 2022) indicated that we had no impairment of goodwill, and all of our reporting units had estimated fair values that were in excess of their carrying values, including goodwill. At July 4, 2022, and after the reallocation of goodwill on the first day of fiscal 2022, we had no reporting units that had estimated fair values that exceeded their carrying values by less than 165%.

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. Although we believe that our estimates of fair value for these reporting units are reasonable, if financial performance for these reporting units falls significantly below our expectations or market prices for similar business decline, the goodwill for these reporting units could become impaired.    

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):

	Period Ended
	July 2, 2023							October 2, 2022
	Weighted- Average Remaining Life (in Years)	Gross Amount		Accumulated Amortization		Net Amount		Gross Amount		Accumulated Amortization		Net Amount
Client relations	7.2	$	226,024	$	(36,952)	$	189,072	$	41,676	$	(21,092)	$	20,584
Backlog	0.9	57,342		(41,616)		15,726		33,286		(29,990)		3,296
Trade names	2.7	29,262		(9,028)		20,234		12,711		(7,428)		5,283
Total		$	312,628	$	(87,596)	$	225,032	$	87,673	$	(58,510)	$	29,163

Amortization expense for the three and nine months ended July 2, 2023 was $14.1 million and $29.6 million, compared to $3.7 million and $9.6 million for the prior-year periods. Estimated amortization expense for the remainder of fiscal 2023 and succeeding years is as follows (in thousands):

	Amount
2023 (remaining)	$	13,541
2024	46,669
2025	34,702
2026	29,585
2027	24,577
Beyond	75,958
Total	$	225,032

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Property and Equipment

9 Months Ended

Jul. 02, 2023

Property, Plant and Equipment [Abstract]

Property and Equipment

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

	Balance at
	July 2, 2023		October 2, 2022
Equipment, furniture and fixtures	$	141,619	$	96,710
Leasehold improvements	47,949		32,428
Total property and equipment	189,568		129,138
Accumulated depreciation	(108,247)		(96,822)
Property and equipment, net	$	81,321	$	32,316

The depreciation expense related to property and equipment was $5.6 million and $13.7 million for the three and nine months ended July 2, 2023, compared to $3.2 million and $9.9 million for the prior-year periods. The increases in property equipment from October 2, 2022 to July 2, 2023 are primarily due to the RPS acquisition.

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Stock Repurchase and Dividends

9 Months Ended

Jul. 02, 2023

Stock Repurchase And Dividends [Abstract]

Stock Repurchase and Dividends

Stock Repurchase and Dividends

On October 5, 2021, our Board of Directors authorized a new stock repurchase program under which we could repurchase up to $400 million of our common stock. We did not repurchase any shares of our common stock in the first nine months of fiscal 2023. At July 2, 2023, we had a remaining balance of $347.8 million under our stock repurchase program.

The following table presents dividends declared and paid in the first nine months of fiscal 2023 and 2022:

Declare Date	Dividend Paid Per Share		Record Date	Payment Date	Dividend Paid (in thousands)
November 7, 2022	$	0.23	November 21, 2022	December 9, 2022	$	12,186
January 30, 2023	$	0.23	February 13, 2023	February 24, 2023	12,242
May 8, 2023	$	0.26	May 24, 2023	June 6, 2023	13,840
Total dividend paid as of July 2, 2023					$	38,268
November 15, 2021	$	0.20	December 2, 2021	December 20, 2021	$	10,793
January 31, 2022	$	0.20	February 11, 2022	February 25, 2022	10,769
May 2, 2022	$	0.23	May 13, 2022	May 27, 2022	12,311
Total dividend paid as of July 3, 2022					$	33,873

Subsequent Event.  On August 7, 2023, our Board of Directors declared a quarterly cash dividend of $0.26 per share payable on September 6, 2023 to stockholders of record as of the close of business on August 23, 2023.

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Leases

9 Months Ended

Jul. 02, 2023

Leases [Abstract]

Leases

Leases

Our operating leases are primarily for corporate and project office spaces. To a much lesser extent, we have operating leases for vehicles and equipment. Our operating leases have remaining lease terms of one month to ten years, some of which may include options to extend the leases for up to five years.

We determine if an arrangement is a lease at inception. Operating leases are included in "Right-of-use assets, operating leases", "Short-term lease liabilities, operating leases" and "Long-term lease liabilities, operating leases" in the consolidated balance sheets. Our finance leases are 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				Nine Months Ended
	July 2, 2023		July 3, 2022		July 2, 2023		July 3, 2022
Operating lease cost	$	24,775	$	21,004	$	70,155	$	64,015
Sublease (income) cost	(46)		140		(125)		(116)
Total lease cost	$	24,729	$	21,144	$	70,030	$	63,899

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

	Nine Months Ended
	July 2, 2023		July 3, 2022
Operating cash flows for operating leases	$	57,871	$	50,965
Right-of-use assets obtained in exchange for new operating lease liabilities	72,294		32,175

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

	Balance at
	July 2, 2023			October 2, 2022
Operating leases:
Right-of-use assets	$	207,218		$	182,319
Lease liabilities:
Current	68,555			57,865
Non-current	163,919			146,285
Total operating lease liabilities	$	232,474		$	204,150
Weighted-average remaining lease term:
Operating leases	5 years			5 years
Weighted-average discount rate:
Operating leases	3.0		%	2.2		%

At July 2, 2023, we have no material operating leases that have not yet commenced.

A maturity analysis of the future undiscounted cash flows associated with our lease liabilities at July 2, 2023 is as follows (in thousands):

	Operating Leases
2023 (remaining)	$	20,727
2024	69,302
2025	53,634
2026	36,291
2027	25,689
Beyond	45,624
Total lease payments	251,267
Less: imputed interest	(18,793)
Total present value of lease liabilities	$	232,474

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Stockholders' Equity and Stock Compensation Plans	9 Months Ended
	Jul. 02, 2023
Stockholders' Equity Note [Abstract]
Stockholders' Equity and Stock Compensation Plans	Stockholders’ Equity and Stock Compensation PlansWe 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 nine months ended July 2, 2023 was $7.0 million and $21.6 million, respectively, compared to $6.7 million and $19.1 million for the same periods last year. Most of these amounts were included in selling, general and administrative expenses on our consolidated statements of income. In the first nine months of fiscal 2023, we awarded 56,214 performance share units (“PSUs”) to our non-employee directors and executive officers at a fair value of $195.50 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 the growth in our diluted earnings per share and 50% on our relative total shareholder return over the vesting period. Additionally, we awarded 103,016 restricted stock units (“RSUs”) to our non-employee directors, executive officers and employees at a fair value of $156.10 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.

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Earnings per Share ("EPS")

9 Months Ended

Jul. 02, 2023

Earnings Per Share [Abstract]

Earnings per Share ("EPS")

Earnings per Share (“EPS”)Basic EPS is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding, less unvested restricted stock 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 outstanding stock options and unvested restricted stock using the treasury stock method.

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				Nine Months Ended
	July 2, 2023		July 3, 2022		July 2, 2023		July 3, 2022
Net income attributable to Tetra Tech	$	60,235	$	58,650	$	219,771	$	180,179
Weighted-average common shares outstanding – basic	53,231		53,507		53,188		53,777
Effect of dilutive stock options and unvested restricted stock	422		499		427		551
Weighted-average common shares outstanding – diluted	53,653		54,006		53,615		54,328
Earnings per share attributable to Tetra Tech:
Basic	$	1.13	$	1.10	$	4.13	$	3.35
Diluted	$	1.12	$	1.09	$	4.10	$	3.32

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Income Taxes

9 Months Ended

Jul. 02, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The effective tax rates for the first nine months of fiscal 2023 and 2022 were 28.3% and 23.9%, respectively. Income tax expense was reduced by $2.2 million and $4.9 million of excess tax benefits on share-based payments in the first nine months of fiscal 2023 and 2022, respectively. In addition, income tax expense in the first nine months of fiscal 2023 included non-operating income tax expenses of $7.2 million ($6.9 million in the second quarter) to recognize the tax liability for foreign earnings, primarily in the U.K. and Australia, that are no longer indefinitely reinvested and to increase the liability for an uncertain tax position. Excluding the impact of the excess tax benefits on share-based payments and the non-operating tax expenses in the second and third quarter of fiscal 2023, our effective tax rates in the first nine months of fiscal 2023 and 2022 were 26.7% and 25.9%, respectively.

At July 2, 2023 and October 2, 2022, the liability for income taxes associated with uncertain tax positions was $48.8 million and $10.6 million, respectively. These liabilities could materially decrease within the next 12 months as some related examinations have commenced. 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.

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Reportable Segments

9 Months Ended

Jul. 02, 2023

Segment Reporting [Abstract]

Reportable Segments

Reportable Segments

We manage our operations under two reportable segments. Our GSG reportable segment primarily includes activities with U.S. government clients (federal, state and local) and all activities with development agencies worldwide. Our CIG reportable segment primarily includes activities with U.S. commercial clients and international clients other than development agencies.

GSG provides high-end consulting and engineering services primarily to U.S. government clients (federal, state and local) and development agencies worldwide. GSG supports U.S. government civilian and defense agencies with services in water, environment, sustainable infrastructure, information technology and disaster management. GSG also provides engineering design services for U.S. based federal and municipal clients, especially in water infrastructure, flood protection and solid waste. GSG also leads our support for development agencies worldwide, especially in the United States, United Kingdom and Australia.

CIG primarily provides high-end consulting and engineering services to U.S. commercial clients, and international clients inclusive of the commercial and government sectors. CIG supports commercial clients across the Fortune 500, renewable energy, industrial, high performance buildings and aerospace markets. CIG also provides sustainable infrastructure and related environmental, engineering and project management services to commercial and local government clients across Canada, in Asia Pacific (primarily Australia and New Zealand), the United Kingdom, as well as Brazil and Chile.

Management evaluates the performance of these reportable segments based upon their respective segment operating income before the effect of amortization expense related to acquisitions, and other unallocated corporate expenses. We account for inter-segment revenues and transfers as if they were to third parties; that is, by applying a negotiated fee onto the costs of the services performed. All significant intercompany balances and transactions are eliminated in consolidation. In the third quarter and first nine months of fiscal 2023, our Corporate segment operating losses included $2.1 million and $25.8 million of acquisition and integration expenses, respectively, as described in Note 4, “Acquisitions”.

The following tables summarize financial information regarding our reportable segments (in thousands):

	Three Months Ended				Nine Months Ended
	July 2, 2023		July 3, 2022		July 2, 2023		July 3, 2022
Revenue
GSG	$	531,050	$	459,987	$	1,565,371	$	1,365,041
CIG	691,386		444,238		1,741,300		1,277,469
Elimination of inter-segment revenue	(13,489)		(13,994)		(44,733)		(41,025)
Total revenue	$	1,208,947	$	890,231	$	3,261,938	$	2,601,485
Income from operations
GSG	$	54,496	$	45,580	$	167,053	$	147,104
CIG	69,572		53,535		172,199		139,328
Corporate (1)	(26,393)		(15,210)		(88,516)		(40,787)
Total income from operations	$	97,675	$	83,905	$	250,736	$	245,645

(1)     Includes amortization of intangibles, acquisition and integration expenses, as well as other costs and other income not allocable to our reportable segments.

	Balance at
	July 2, 2023		October 2, 2022
Total Assets
GSG	$	588,469	$	558,764
CIG	1,058,974		688,640
Corporate (1)	2,326,135		1,375,372
Total assets	$	3,973,578	$	2,622,776

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

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Fair Value Measurements	9 Months Ended
	Jul. 02, 2023
Fair Value Disclosures [Abstract]
Fair Value Measurements	Fair Value MeasurementsThe fair value of long-term debt was determined using the present value of future cash flows based on the borrowing rates currently available for debt with similar terms and maturities (Level 2 measurement, as described in “Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the fiscal year ended October 2, 2022). The carrying value of our long-term debt approximated fair value at July 2, 2023 and October 2, 2022. At July 2, 2023, we had borrowings of $919.4 million outstanding under our Amended Credit Agreement, which were primarily used to fund business acquisitions, working capital needs, and capital expenditures.

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Credit Facility

9 Months Ended

Jul. 02, 2023

Debt Disclosure [Abstract]

Credit Facility

Credit FacilityOn October 26, 2022, we entered into a Third Amended and Restated Credit Agreement that provides for an additional $500 million senior secured term loan facility (the "New Term Loan Facility") increasing our total borrowing capacity to $1.55 billion.

On January 23, 2023, we drew the entire amount of the New Term Loan Facility to partially finance the RPS acquisition. The remaining purchase price was financed with existing cash on hand and borrowings under the existing Amended Revolving Credit Facility. The New Term Loan Facility is not subject to any amortization payments of principal and matures on the third anniversary of the RPS acquisition closing date.

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

The entire Amended Term Loan Facility was drawn on February 18, 2022. The Amended Term Loan Facility is subject to quarterly amortization of principal at 5% annually commencing June 30, 2022. We may borrow on the Amended Revolving Credit Facility, at our option, at either (a) a benchmark rate plus a margin that ranges from 1.000% to 1.875% per annum, or (b) a base rate for loans in U.S. dollars (the highest of the U.S. federal funds rate plus 0.50% per annum, the bank’s prime rate or the Secured Overnight Financing Rate ("SOFR") rate plus 1.00%, plus a margin that ranges from 0% to 0.875% per annum. In each case, the applicable margin is based on our Consolidated Leverage Ratio, calculated quarterly. The Amended Term Loan Facility is subject to the same interest rate provisions. The Amended Credit Agreement expires on February 18, 2027, or earlier at our discretion upon payment in full of loans and other obligations.

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 3.25 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.

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Derivative Financial Instruments

9 Months Ended

Jul. 02, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

Derivative Financial Instruments

We use certain interest rate derivative contracts to hedge interest rate exposures on our variable rate debt. We also enter into foreign currency derivative contracts with financial institutions to reduce the risk that cash flows and earnings could adversely be affected by foreign currency exchange rate fluctuations. Our hedging program is not designated for trading or speculative purposes.

We recognize derivative instruments as either assets or liabilities on the accompanying consolidated balance sheets at fair value. We record changes in the fair value (i.e., gains or losses) of the derivatives that have been designated as cash flow hedges in our consolidated balance sheets as accumulated other comprehensive income, and in our consolidated statements of income for those derivatives designated as fair value hedges. Our derivative contracts are categorized within Level 2 of the fair value hierarchy.

In the fourth quarter of fiscal 2022, we entered into a forward contract to acquire GBP 714.0 million at a rate of 1.0852 for a total of USD 774.8 million that was integrated with our plan to acquire RPS. This contract matured on December 30, 2022. On December 28, 2022, we entered into an extension of the integrated forward contract to acquire GBP 714.0 million at a rate of 1.086 for a total of USD 775.4 million, extending the maturity date to January 23, 2023, the closing date of the RPS acquisition. Although an effective economic hedge of our foreign exchange risk related to this transaction, the forward contract did not qualify for hedge accounting. As a result, the forward contract was marked-to-market with changes in fair value recognized in earnings each period. The intrinsic value of the forward contract was immaterial at inception as the GBP/USD spot and forward exchange rates were essentially the same. The fair value of the forward contract at October 2, 2022 was

$19.9 million, and an unrealized gain of the same amount was recognized in our fourth quarter of fiscal 2022 results. On January 23, 2023, the forward contract was settled at the fair value of $109.3 million. We recognized additional gains of $68.0 million and $21.4 million in the first and second quarters of fiscal 2023, respectively. All gains related to this transaction were reported in “Other non-operating income" on our consolidated income statements for the respective periods.

In fiscal 2018, we entered into five interest rate swap agreements that we designated as cash flow hedges to fix the interest rate on the borrowings under our term loan facility. At July 2, 2023, the notional principal of our outstanding interest swap agreements was $190.6 million ($38.1 million each.) The interest rate swaps have a fixed interest rate of 2.79% and expire in July 2023 for all five agreements. At July 2, 2023 and October 2, 2022, the fair values of the effective portion of our interest rate swap agreements designated as cash flow hedges before tax effect were unrealized gains of $0.4 million and $2.4 million, respectively, which were reported in "Other non-current assets" on our consolidated balance sheets. Additionally, the related loss of $1.0 million and $2.0 million for the three and nine months ended July 2, 2023, compared to the related gain of $2.4 million and $10.0 million for the prior-year periods, were recognized and reported on our consolidated statements of comprehensive income. We expect to reclassify a credit of $0.4 million from accumulated other comprehensive loss to interest expense during the fourth quarter of fiscal 2023, up to the expiration date in July 2023. There were no other derivative instruments designated as hedging instruments for the first nine months of fiscal 2023.

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Reclassifications Out of Accumulated Other Comprehensive Income

9 Months Ended

Jul. 02, 2023

Equity [Abstract]

Reclassifications Out of Accumulated Other Comprehensive Income

Reclassifications Out of Accumulated Other Comprehensive IncomeThe accumulated balances and activities for the three and nine months ended July 2, 2023 and July 3, 2022 related to reclassifications out of accumulated other comprehensive income are summarized as follows (in thousands):

	Three Months Ended
	Foreign Currency Translation Adjustments		Gain (Loss) on Derivative Instruments		Net Pension Adjustments		Accumulated Other Comprehensive Income (Loss)
Balance at April 3, 2022	$	(113,513)	$	(1,790)	—		$	(115,303)
Other comprehensive (loss) income before reclassifications	(44,883)		3,413		—		(41,470)
Amounts reclassified from accumulated other comprehensive loss:
Interest rate contracts, net of tax (1)	—		(1,033)		—		(1,033)
Net current-period other comprehensive (loss) income	(44,883)		2,380		—		(42,503)
Balance at July 3, 2022	$	(158,396)	$	590	$	—	$	(157,806)
Balance at April 2, 2023	$	(185,602)	$	1,427	2,794		$	(181,381)
Other comprehensive income (loss) before reclassifications	44,499		(2,137)		—		42,362
Amounts reclassified from accumulated other comprehensive loss:
Interest rate contracts, net of tax (1)	—		1,093		—		1,093
Net current-period other comprehensive income (loss)	44,499		(1,044)		—		43,455
Balance at July 2, 2023	$	(141,103)	$	383	$	2,794	$	(137,926)
	Nine Months Ended
	Foreign Currency Translation Adjustments		Gain (Loss) on Derivative Instruments		Net Pension Adjustments		Accumulated Other Comprehensive Income (Loss)
Balance at October 3, 2021	$	(115,634)	$	(9,394)	—		$	(125,028)
Other comprehensive (loss) income before reclassifications	(42,762)		13,833		—		(28,929)
Amounts reclassified from accumulated other comprehensive loss:
Interest rate contracts, net of tax (1)	—		(3,849)				(3,849)
Net current-period other comprehensive (loss) income	(42,762)		9,984		—		(32,778)
Balance at July 3, 2022	$	(158,396)	$	590	$	—	$	(157,806)
Balance at October 2, 2022	$	(210,556)	$	2,412	—		$	(208,144)
Other comprehensive income (loss) before reclassifications	69,453		(4,439)		2,794		67,808
Amounts reclassified from accumulated other comprehensive loss:
Interest rate contracts, net of tax (1)	—		2,410		—		2,410
Net current-period other comprehensive income (loss)	69,453		(2,029)		2,794		70,218
Balance at July 2, 2023	$	(141,103)	$	383	$	2,794	$	(137,926)

(1)    This accumulated other comprehensive component is reclassified to “Interest expense” in our consolidated statements of income. See Note 15 “Derivative Financial Instruments”, for more information.

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Commitments and Contingencies	9 Months Ended
	Jul. 02, 2023
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies	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 filed an amended complaint in intervention in three qui tam actions filed against our subsidiary, Tetra Tech EC, Inc. ("TtEC"), in the U.S. District Court for the Northern District of California. The complaint alleges False Claims Act 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. TtEC disputes the claims and will defend this matter vigorously. We are currently unable to determine the probability of the outcome of this matter or the range of reasonably possible loss, if any.

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Related Party Transactions

9 Months Ended

Jul. 02, 2023

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

We often provide services to unconsolidated joint ventures. Our revenue related to services we provided to unconsolidated joint ventures for the third quarter and first nine months of fiscal 2023 was approximately $22 million and $65 million, respectively, compared to $24 million and $74 million for the same periods last year. Our related reimbursable costs for the third quarter and nine months of fiscal 2023 were approximately $21 million and $61 million, respectively. Our related reimbursable costs for the third quarter and nine months of fiscal 2022 were approximately $23 million and $70 million, respectively. Our consolidated balance sheets also included the following amounts related to these services (in thousands):

	Balance at
	July 2, 2023		October 2, 2022
Accounts receivable, net	$	22,234	$	16,818
Contract assets	1,800		2,935
Contract liabilities	2,768		3,464

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Insider Trading Arrangements	3 Months Ended
	Jul. 02, 2023
Trading Arrangements, by Individual
Rule 10b5-1 Arrangement Adopted	false
Non-Rule 10b5-1 Arrangement Adopted	false
Rule 10b5-1 Arrangement Terminated	false
Non-Rule 10b5-1 Arrangement Terminated	false

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Recent Accounting Pronouncements (Policies)

9 Months Ended

Jul. 02, 2023

Accounting Changes and Error Corrections [Abstract]

Recent Accounting Pronouncements

In November 2021, the Financial Accounting Standards Board issued ASU 2021-10, Government Assistance (Topic 832), which requires annual disclosures for transactions with a government authority that are accounted for by applying a grant or contribution model by analogy, including (1) the types of transactions, (2) the accounting for those transactions, and (3) the effect of those transactions on an entity's financial statements. ASU 2021-10 was effective for us beginning in the first quarter of fiscal 2023.

In fiscal 2020, the Canadian federal government implemented the Canadian Emergency Wage Subsidy ("CEWS") program in response to the negative impact of the coronavirus disease 2019 pandemic on businesses operating in Canada. Our Canadian legal entities qualified for and applied for these CEWS cash benefits to partially offset the impacts of revenue reductions and on-going staffing costs. The $26.0 million total received was initially recorded in "Other current liabilities" until all potential amendments to the qualification criteria, including some that were proposed with retroactive application, were finalized in fiscal 2022. As there are no further contingencies, beginning in fiscal 2023, the amounts received will be distributed to all Canadian employees. We expect to distribute approximately $9 million in the next twelve months. Accordingly, this amount was reclassified from "Other current liabilities" to "Accrued compensation" on our consolidated balance sheet at October 2, 2022. The remaining $17.0 million, which we expect to distribute beyond one year, was reclassified to "Other non-current liabilities". We do not expect there will be any related impact to our operating income, and we have no outstanding applications for further government assistance.

Revenue and Contract Assets and Contract Liabilities

We invoice customers based on the contractual terms of each contract. However, the timing of revenue recognition may differ from the timing of invoice issuance.

Contract assets represent revenue recognized in excess of the amounts for which we have the contractual right to bill our customers. Such amounts are recoverable from customers based upon various measures of performance, including achievement of certain milestones or completion of a contract. In addition, many of our time and materials arrangements are billed in arrears pursuant to contract terms that are standard within the industry, resulting in contract assets and/or unbilled receivables being recorded, as revenue is recognized in advance of billings. Contract retentions, included in contract assets, represent amounts withheld by clients until certain conditions are met or the project is completed, which may extend beyond one year.

Contract liabilities consist of billings in excess of revenue recognized. Contract liabilities decrease as we recognize revenue from the satisfaction of the related performance obligation and increase as billings in advance of revenue recognition occur. Contract assets and liabilities are reported in a net position on a contract-by-contract basis at the end of each reporting period. There were no substantial non-current contract assets or liabilities for the periods presented.We recognize revenue primarily using the cost-to-cost measure of progress method to estimate progress towards completion. 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.Our RUPO represents a measure of the total dollar value of work to be performed on contracts awarded and in progress. We had $4.4 billion of RUPO at July 2, 2023. 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. 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.Although RUPO reflects business that is considered to be firm, cancellations, deferrals or scope adjustments may occur. 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).

Accounts Receivable, Net

Billed accounts receivable represent amounts billed to clients that have not been collected. Unbilled accounts receivable, which represent an unconditional right to payment subject only to the passage of time, include unbilled amounts typically resulting from revenue recognized but not yet billed pursuant to contract terms or billed after the period end date. Substantially all of our unbilled receivables at July 2, 2023 are expected to be billed and collected within 12 months. The allowance for doubtful accounts represents amounts that are expected to become uncollectible or unrealizable in the future. We determine an estimated allowance for uncollectible accounts based on management's consideration of trends in the actual and forecasted credit quality of our clients, including delinquency and payment history; type of client, such as a government agency or a commercial sector client; and general economic and industry conditions.

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Revenue and Contract Balances (Tables)

9 Months Ended

Jul. 02, 2023

Revenue from Contract with Customer [Abstract]

Summary of revenue disaggregated by client sector and contract type

The following tables present revenue disaggregated by client sector and contract type (in thousands):

	Three Months Ended				Nine Months Ended
	July 2, 2023		July 3, 2022		July 2, 2023		July 3, 2022
Client Sector:
U.S. federal government (1)	$	338,022	$	261,434	$	996,471	$	781,503
U.S. state and local government	151,462		150,731		$	452,447	$	465,770
U.S. commercial	225,907		188,255		633,401		536,901
International (2)	493,556		289,811		1,179,619		817,311
Total	$	1,208,947	$	890,231	$	3,261,938	$	2,601,485
Contract Type:
Fixed-price	$	452,605	$	335,014	$	1,194,266	$	982,565
Time-and-materials	596,904		417,898		1,550,970		1,221,598
Cost-plus	159,438		137,319		516,702		397,322
Total	$	1,208,947	$	890,231	$	3,261,938	$	2,601,485

(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 Canada, Australia and the United Kingdom.

Summary of net contract assets/liabilities

Net contract assets/liabilities consisted of the following (in thousands):

	Balance at
	July 2, 2023		October 2, 2022
Contract assets (1)	$	125,360	$	92,405
Contract liabilities	351,048		241,340
Net contract liabilities	$	(225,688)	$	(148,935)

(1)    Includes $8.1 million and $23.3 million of contract retentions at July 2, 2023 and October 2, 2022, respectively.

Components of net accounts receivable

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

	Balance at
	July 2, 2023		October 2, 2022
Billed	$	677,915	$	491,700
Unbilled	331,381		267,161
Total accounts receivable	1,009,296		758,861
Allowance for doubtful accounts	(7,209)		(3,749)
Total accounts receivable, net	$	1,002,087	$	755,112

Remaining performance obligation, expected timing

We expect to satisfy our RUPO at July 2, 2023 over the following periods (in thousands):

	Amount
Within 12 months	$	2,815,736
Beyond	1,537,602
Total	$	4,353,338

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Acquisitions (Tables)

9 Months Ended

Jul. 02, 2023

Business Combination and Asset Acquisition [Abstract]

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed

The table below represents the preliminary purchase price allocation for RPS based on estimates, assumptions, valuations and other analyses as of January 23, 2023, that has not been finalized in order to make a definitive allocation. The purchase consideration, excluding the aforementioned forward contract gain, is allocated to the tangible and intangible assets, and liabilities of RPS based on their estimated fair values, with any excess purchase consideration allocated to goodwill as follows (in thousands):

	Amount
Cash and cash equivalents	$	32,093
Accounts receivable and contract assets	202,634
Prepaid expenses and other current assets	49,216
Income taxes receivables	1,999
Property and equipment	43,276
Right-of-use assets, operating leases	40,179
Intangible assets	206,186
Deferred income taxes	29,347
Other long-term assets	1,061
Total assets acquired	605,991
Accounts payable	$	(44,376)
Accrued compensation	(22,290)
Contract liabilities	(46,287)
Income tax payable	(7,083)
Short-term lease liabilities, operating leases	(13,477)
Other current liabilities	(126,023)
Long-term debt	(91,973)
Long-term lease liabilities, operating leases	(26,702)
Other long-term liabilities	(7,423)
Deferred tax liabilities	(55,965)
Total liabilities assumed	(441,599)
Fair value of net assets acquired	164,392
Goodwill	619,817
Total purchase consideration	$	784,209

Schedule of Acquired Finite-Lived Intangible Assets by Major Class

The following table summarizes the estimated fair values that were assigned to intangible assets at the acquisition date:

	Fair Value		Weighted-Average Estimated Useful Life
	(in thousands)		(in years)
Backlog	$	19,702	1.5
Trade names	17,843		3.0
Client relations	168,641		8.0
Total intangible assets acquired	$	206,186	6.9

Business Acquisition, Pro Forma Information

Following are the supplemental consolidated financial results of Tetra Tech and RPS on an unaudited pro forma basis, as if the RPS acquisition had been consummated as of the beginning of fiscal 2022 (in thousands):

	Three Months Ended				Nine Months Ended
	July 2, 2023		July 3, 2022		July 2, 2023		July 3, 2022
Revenue	$	1,208,947	$	1,085,799	$	3,519,792	$	3,160,341
Net Income including noncontrolling interests	$	61,770	$	45,456	$	104,564	$	101,519

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Goodwill and Intangible Assets (Tables)

9 Months Ended

Jul. 02, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Summary of changes in the carrying value of goodwill

The following table summarizes the changes in the carrying value of goodwill by reportable segment (in thousands):

	GSG		CIG		Total
Balance at October 2, 2022	$	519,102	$	591,310	$	1,110,412
Acquisition activity	104,100		619,832		723,932
Translation adjustments	5,459		47,051		52,510
Balance at July 2, 2023	$	628,661	$	1,258,193	$	1,886,854

Summary of acquired identifiable intangible assets with finite useful lives

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):

	Period Ended
	July 2, 2023							October 2, 2022
	Weighted- Average Remaining Life (in Years)	Gross Amount		Accumulated Amortization		Net Amount		Gross Amount		Accumulated Amortization		Net Amount
Client relations	7.2	$	226,024	$	(36,952)	$	189,072	$	41,676	$	(21,092)	$	20,584
Backlog	0.9	57,342		(41,616)		15,726		33,286		(29,990)		3,296
Trade names	2.7	29,262		(9,028)		20,234		12,711		(7,428)		5,283
Total		$	312,628	$	(87,596)	$	225,032	$	87,673	$	(58,510)	$	29,163

Estimated amortization expense for the remainder of the fiscal year and the succeeding years

Estimated amortization expense for the remainder of fiscal 2023 and succeeding years is as follows (in thousands):

	Amount
2023 (remaining)	$	13,541
2024	46,669
2025	34,702
2026	29,585
2027	24,577
Beyond	75,958
Total	$	225,032

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Property and Equipment (Tables)

9 Months Ended

Jul. 02, 2023

Property, Plant and Equipment [Abstract]

Schedule of components of property and equipment

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

	Balance at
	July 2, 2023		October 2, 2022
Equipment, furniture and fixtures	$	141,619	$	96,710
Leasehold improvements	47,949		32,428
Total property and equipment	189,568		129,138
Accumulated depreciation	(108,247)		(96,822)
Property and equipment, net	$	81,321	$	32,316

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Stock Repurchase and Dividends (Tables)

9 Months Ended

Jul. 02, 2023

Stock Repurchase And Dividends [Abstract]

Summary of dividends declared and paid

The following table presents dividends declared and paid in the first nine months of fiscal 2023 and 2022:

Declare Date	Dividend Paid Per Share		Record Date	Payment Date	Dividend Paid (in thousands)
November 7, 2022	$	0.23	November 21, 2022	December 9, 2022	$	12,186
January 30, 2023	$	0.23	February 13, 2023	February 24, 2023	12,242
May 8, 2023	$	0.26	May 24, 2023	June 6, 2023	13,840
Total dividend paid as of July 2, 2023					$	38,268
November 15, 2021	$	0.20	December 2, 2021	December 20, 2021	$	10,793
January 31, 2022	$	0.20	February 11, 2022	February 25, 2022	10,769
May 2, 2022	$	0.23	May 13, 2022	May 27, 2022	12,311
Total dividend paid as of July 3, 2022					$	33,873

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Leases (Tables)

9 Months Ended

Jul. 02, 2023

Leases [Abstract]

Summary of components of lease cost

The components of lease costs are as follows (in thousands):

	Three Months Ended				Nine Months Ended
	July 2, 2023		July 3, 2022		July 2, 2023		July 3, 2022
Operating lease cost	$	24,775	$	21,004	$	70,155	$	64,015
Sublease (income) cost	(46)		140		(125)		(116)
Total lease cost	$	24,729	$	21,144	$	70,030	$	63,899

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

	Nine Months Ended
	July 2, 2023		July 3, 2022
Operating cash flows for operating leases	$	57,871	$	50,965
Right-of-use assets obtained in exchange for new operating lease liabilities	72,294		32,175

Summary of supplemental balance sheet and other information

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

	Balance at
	July 2, 2023			October 2, 2022
Operating leases:
Right-of-use assets	$	207,218		$	182,319
Lease liabilities:
Current	68,555			57,865
Non-current	163,919			146,285
Total operating lease liabilities	$	232,474		$	204,150
Weighted-average remaining lease term:
Operating leases	5 years			5 years
Weighted-average discount rate:
Operating leases	3.0		%	2.2		%

Summary of maturity of future undiscounted cash flows associated with operating lease liabilities

A maturity analysis of the future undiscounted cash flows associated with our lease liabilities at July 2, 2023 is as follows (in thousands):

	Operating Leases
2023 (remaining)	$	20,727
2024	69,302
2025	53,634
2026	36,291
2027	25,689
Beyond	45,624
Total lease payments	251,267
Less: imputed interest	(18,793)
Total present value of lease liabilities	$	232,474

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Earnings per Share ("EPS") (Tables)

9 Months Ended

Jul. 02, 2023

Earnings Per Share [Abstract]

Schedule of number of weighted-average shares used to compute basic and diluted EPS

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				Nine Months Ended
	July 2, 2023		July 3, 2022		July 2, 2023		July 3, 2022
Net income attributable to Tetra Tech	$	60,235	$	58,650	$	219,771	$	180,179
Weighted-average common shares outstanding – basic	53,231		53,507		53,188		53,777
Effect of dilutive stock options and unvested restricted stock	422		499		427		551
Weighted-average common shares outstanding – diluted	53,653		54,006		53,615		54,328
Earnings per share attributable to Tetra Tech:
Basic	$	1.13	$	1.10	$	4.13	$	3.35
Diluted	$	1.12	$	1.09	$	4.10	$	3.32

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Reportable Segments (Tables)

9 Months Ended

Jul. 02, 2023

Segment Reporting [Abstract]

Summarized financial information of reportable segments

The following tables summarize financial information regarding our reportable segments (in thousands):

	Three Months Ended				Nine Months Ended
	July 2, 2023		July 3, 2022		July 2, 2023		July 3, 2022
Revenue
GSG	$	531,050	$	459,987	$	1,565,371	$	1,365,041
CIG	691,386		444,238		1,741,300		1,277,469
Elimination of inter-segment revenue	(13,489)		(13,994)		(44,733)		(41,025)
Total revenue	$	1,208,947	$	890,231	$	3,261,938	$	2,601,485
Income from operations
GSG	$	54,496	$	45,580	$	167,053	$	147,104
CIG	69,572		53,535		172,199		139,328
Corporate (1)	(26,393)		(15,210)		(88,516)		(40,787)
Total income from operations	$	97,675	$	83,905	$	250,736	$	245,645

(1)     Includes amortization of intangibles, acquisition and integration expenses, as well as other costs and other income not allocable to our reportable segments.

	Balance at
	July 2, 2023		October 2, 2022
Total Assets
GSG	$	588,469	$	558,764
CIG	1,058,974		688,640
Corporate (1)	2,326,135		1,375,372
Total assets	$	3,973,578	$	2,622,776

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

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Reclassifications Out of Accumulated Other Comprehensive Income (Tables)

9 Months Ended

Jul. 02, 2023

Equity [Abstract]

Summary of reclassifications out of accumulated other comprehensive income

The accumulated balances and activities for the three and nine months ended July 2, 2023 and July 3, 2022 related to reclassifications out of accumulated other comprehensive income are summarized as follows (in thousands):

	Three Months Ended
	Foreign Currency Translation Adjustments		Gain (Loss) on Derivative Instruments		Net Pension Adjustments		Accumulated Other Comprehensive Income (Loss)
Balance at April 3, 2022	$	(113,513)	$	(1,790)	—		$	(115,303)
Other comprehensive (loss) income before reclassifications	(44,883)		3,413		—		(41,470)
Amounts reclassified from accumulated other comprehensive loss:
Interest rate contracts, net of tax (1)	—		(1,033)		—		(1,033)
Net current-period other comprehensive (loss) income	(44,883)		2,380		—		(42,503)
Balance at July 3, 2022	$	(158,396)	$	590	$	—	$	(157,806)
Balance at April 2, 2023	$	(185,602)	$	1,427	2,794		$	(181,381)
Other comprehensive income (loss) before reclassifications	44,499		(2,137)		—		42,362
Amounts reclassified from accumulated other comprehensive loss:
Interest rate contracts, net of tax (1)	—		1,093		—		1,093
Net current-period other comprehensive income (loss)	44,499		(1,044)		—		43,455
Balance at July 2, 2023	$	(141,103)	$	383	$	2,794	$	(137,926)
	Nine Months Ended
	Foreign Currency Translation Adjustments		Gain (Loss) on Derivative Instruments		Net Pension Adjustments		Accumulated Other Comprehensive Income (Loss)
Balance at October 3, 2021	$	(115,634)	$	(9,394)	—		$	(125,028)
Other comprehensive (loss) income before reclassifications	(42,762)		13,833		—		(28,929)
Amounts reclassified from accumulated other comprehensive loss:
Interest rate contracts, net of tax (1)	—		(3,849)				(3,849)
Net current-period other comprehensive (loss) income	(42,762)		9,984		—		(32,778)
Balance at July 3, 2022	$	(158,396)	$	590	$	—	$	(157,806)
Balance at October 2, 2022	$	(210,556)	$	2,412	—		$	(208,144)
Other comprehensive income (loss) before reclassifications	69,453		(4,439)		2,794		67,808
Amounts reclassified from accumulated other comprehensive loss:
Interest rate contracts, net of tax (1)	—		2,410		—		2,410
Net current-period other comprehensive income (loss)	69,453		(2,029)		2,794		70,218
Balance at July 2, 2023	$	(141,103)	$	383	$	2,794	$	(137,926)

(1)    This accumulated other comprehensive component is reclassified to “Interest expense” in our consolidated statements of income. See Note 15 “Derivative Financial Instruments”, for more information.

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Related Party Transactions (Tables)

9 Months Ended

Jul. 02, 2023

Related Party Transactions [Abstract]

Schedule of related party transactions

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

	Balance at
	July 2, 2023		October 2, 2022
Accounts receivable, net	$	22,234	$	16,818
Contract assets	1,800		2,935
Contract liabilities	2,768		3,464

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Recent Accounting Pronouncements (Details) $ in Millions	Oct. 02, 2022 USD ($)
Accounting Changes and Error Corrections [Abstract]
Government assistance, amount, cumulative, current	$ 26.0
Government Assistance, Current, Statement of Financial Position [Extensible Enumeration]	Other current liabilities
Government assistance, amount expected to be recognized in next twelve months	$ 9.0
Government assistance, amount, cumulative, noncurrent	$ 17.0
Government Assistance, Noncurrent, Statement of Financial Position [Extensible Enumeration]	Other non-current liabilities

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Revenue and Contract Balances - Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jul. 02, 2023	Jul. 03, 2022	Jul. 02, 2023	Jul. 03, 2022
Disaggregation of Revenue [Line Items]
Revenue	$ 1,208,947	$ 890,231	$ 3,261,938	$ 2,601,485
Fixed-price
Disaggregation of Revenue [Line Items]
Revenue	452,605	335,014	1,194,266	982,565
Time-and-materials
Disaggregation of Revenue [Line Items]
Revenue	596,904	417,898	1,550,970	1,221,598
Cost-plus
Disaggregation of Revenue [Line Items]
Revenue	159,438	137,319	516,702	397,322
U.S. federal government
Disaggregation of Revenue [Line Items]
Revenue	338,022	261,434	996,471	781,503
U.S. state and local government
Disaggregation of Revenue [Line Items]
Revenue	151,462	150,731	452,447	465,770
U.S. commercial
Disaggregation of Revenue [Line Items]
Revenue	225,907	188,255	633,401	536,901
International
Disaggregation of Revenue [Line Items]
Revenue	$ 493,556	$ 289,811	$ 1,179,619	$ 817,311

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Revenue and Contract Balances - Summary of Contract Liabilities/Assets (Details) - USD ($) $ in Thousands	Jul. 02, 2023	Oct. 02, 2022
Disaggregation of Revenue [Line Items]
Contract assets	$ 125,360	$ 92,405
Contract liabilities	351,048	241,340
Net contract liabilities	(225,688)	(148,935)
Contract Retentions
Disaggregation of Revenue [Line Items]
Contract assets	$ 8,100	$ 23,300

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Revenue and Contract Balances - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Jul. 03, 2022	Jul. 02, 2023	Jul. 03, 2022	Oct. 02, 2022
Revenue from Contract with Customer [Abstract]
Contract liability revenue recognized during the period		$ 143,000	$ 111,000
Net favorable (unfavorable) revenue and operating income adjustments	$ (2,800)	4,000	$ 2,200
Liabilities for anticipated losses		9,700		$ 10,000
Estimated cost to complete the related contracts		$ 69,000		$ 80,000
Period for billing and collecting unbilled receivables		12 months
Remaining unsatisfied performance obligation		$ 4,353,338
Remaining performance obligation, termination notice period one		30 days
Remaining performance obligation, termination notice period two		60 days
Remaining performance obligation, termination notice period three		90 days

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Revenue and Contract Balances - Accounts Receivable, Net (Details) - USD ($) $ in Thousands	Jul. 02, 2023	Oct. 02, 2022
Revenue from Contract with Customer [Abstract]
Billed	$ 677,915	$ 491,700
Unbilled	331,381	267,161
Total accounts receivable	1,009,296	758,861
Allowance for doubtful accounts	(7,209)	(3,749)
Total accounts receivable, net	$ 1,002,087	$ 755,112

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Revenue and Contract Balances - Remaining Unsatisfied Performance Obligations (Details) $ in Thousands	Jul. 02, 2023 USD ($)
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining unsatisfied performance obligation	$ 4,353,338
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-07-02
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining unsatisfied performance obligation	$ 2,815,736
Remaining unsatisfied performance obligation, expected timing of satisfaction	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-07-02
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining unsatisfied performance obligation	$ 1,537,602
Remaining unsatisfied performance obligation, expected timing of satisfaction

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Acquisitions - Narrative (Details) £ / shares in Units, $ / shares in Units, $ in Thousands, £ in Millions			3 Months Ended			5 Months Ended	9 Months Ended		12 Months Ended
	Jan. 23, 2023 USD ($) employee	Jan. 23, 2023 GBP (£) employee	Jul. 02, 2023 USD ($) $ / shares	Apr. 02, 2023 USD ($) program employee	Jul. 03, 2022 USD ($)	Jul. 02, 2023 USD ($) $ / shares	Jul. 02, 2023 USD ($)	Jul. 03, 2022 USD ($)	Oct. 02, 2022 USD ($) acquisition	Sep. 23, 2022 £ / shares
Business Acquisition [Line Items]
Pence per share expected to be acquired | £ / shares										£ 2.22
Acquisition and integration expenses			$ 2,107		$ 0		$ 25,812	$ 0
Payables related to promissory note							$ 0	$ 14,578
Number of acquisitions | acquisition									4
Minimum
Business Acquisition [Line Items]
Significant unobservable input, earn-out period							3 years
Minimum | Existing customer contracts
Business Acquisition [Line Items]
Useful life of intangible assets			1 year			1 year	1 year
Maximum
Business Acquisition [Line Items]
Significant unobservable input, earn-out period							5 years
Maximum | Existing customer contracts
Business Acquisition [Line Items]
Useful life of intangible assets			8 years			8 years	8 years
RPS Group PLC
Business Acquisition [Line Items]
Number of employees | employee	5,000	5,000
Total purchase price	$ 784,000	£ 633
Acquisition and integration expenses			$ 2,100				$ 25,800
Net purchase price	675,000
Revenue			220,400			$ 389,900
Net income (loss)			$ 700			$ (1,000)
Diluted earnings per share (in dollars per share) | $ / shares			$ 0.01			$ 0.02
Intangible amortization			$ 10,400			$ 18,100
RPS Group PLC | Foreign Exchange Forward
Business Acquisition [Line Items]
Foreign currency forward contract, asset fair value	$ 109,300								$ 19,900
Amyx, Inc.
Business Acquisition [Line Items]
Number of employees | employee				500
Total purchase price				$ 120,900
Number of government programs acquired | program				30
Payables related to promissory note				$ 100,000
Contingent earn-out liability				12,200
Aggregate maximum of contingent consideration				25,000
Receivables (payables) related to estimated post-closing adjustments				$ (8,700)
Business acquisitions
Business Acquisition [Line Items]
Total purchase price									88,300
Payables related to promissory note									15,500
Contingent earn-out liability									31,300
Aggregate maximum of contingent consideration									47,000
Initial cash payments									44,000
Receivables (payables) related to estimated post-closing adjustments									$ 2,500
Business acquisitions | Minimum
Business Acquisition [Line Items]
Earn-out period									3 years
Business acquisitions | Maximum
Business Acquisition [Line Items]
Earn-out period									5 years
All acquisitions
Business Acquisition [Line Items]
Contingent earn-out liability			76,600			76,600	76,600
Aggregate maximum of contingent consideration			$ 120,300			$ 120,300	120,300
Reduction in contingent earn-out liabilities							$ 8,500

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Acquisitions - Schedule of Purchase Price Allocation (Details) - USD ($) $ in Thousands	Jul. 02, 2023	Jan. 23, 2023	Oct. 02, 2022
Business Acquisition [Line Items]
Goodwill	$ 1,886,854		$ 1,110,412
RPS Group PLC
Business Acquisition [Line Items]
Cash and cash equivalents		$ 32,093
Accounts receivable and contract assets		202,634
Prepaid expenses and other current assets		49,216
Income taxes receivables		1,999
Property and equipment		43,276
Right-of-use assets, operating leases		40,179
Intangible assets		206,186
Deferred income taxes		29,347
Other long-term assets		1,061
Total assets acquired		605,991
Accounts payable		(44,376)
Accrued compensation		(22,290)
Contract liabilities		(46,287)
Income tax payable		(7,083)
Short-term lease liabilities, operating leases		(13,477)
Other current liabilities		(126,023)
Long-term debt		(91,973)
Long-term lease liabilities, operating leases		(26,702)
Other long-term liabilities		(7,423)
Deferred tax liabilities		(55,965)
Total liabilities assumed		(441,599)
Fair value of net assets acquired		164,392
Goodwill		619,817
Total purchase consideration		$ 784,209

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Acquisitions - Schedule of Intangible Assets Assumed (Details) - USD ($) $ in Thousands		9 Months Ended
	Jan. 23, 2023	Jul. 02, 2023
Backlog
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted-average Amortization Period (in years)		10 months 24 days
Trade names
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted-average Amortization Period (in years)		2 years 8 months 12 days
Client relations
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted-average Amortization Period (in years)		7 years 2 months 12 days
RPS Group PLC
Acquired Finite-Lived Intangible Assets [Line Items]
Fair Value	$ 206,186
Weighted-average Amortization Period (in years)	6 years 10 months 24 days
RPS Group PLC | Backlog
Acquired Finite-Lived Intangible Assets [Line Items]
Fair Value	$ 19,702
Weighted-average Amortization Period (in years)	1 year 6 months
RPS Group PLC | Trade names
Acquired Finite-Lived Intangible Assets [Line Items]
Fair Value	$ 17,843
Weighted-average Amortization Period (in years)	3 years
RPS Group PLC | Client relations
Acquired Finite-Lived Intangible Assets [Line Items]
Fair Value	$ 168,641
Weighted-average Amortization Period (in years)	8 years

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Acquisitions - Supplemental Pro Forma Information (Details) - RPS Group PLC - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jul. 02, 2023	Jul. 03, 2022	Jul. 02, 2023	Jul. 03, 2022
Business Acquisition, Pro Forma Information, Nonrecurring Adjustment [Line Items]
Revenue	$ 1,208,947	$ 1,085,799	$ 3,519,792	$ 3,160,341
Net Income including noncontrolling interests	$ 61,770	$ 45,456	$ 104,564	$ 101,519

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Goodwill and Intangible Assets - Goodwill (Details) $ in Thousands	9 Months Ended
	Jul. 02, 2023 USD ($)
Goodwill
Balance at beginning of the period	$ 1,110,412
Acquisition activity	723,932
Translation adjustments	52,510
Balance at end of the period	1,886,854
GSG
Goodwill
Balance at beginning of the period	519,102
Acquisition activity	104,100
Translation adjustments	5,459
Balance at end of the period	628,661
CIG
Goodwill
Balance at beginning of the period	591,310
Acquisition activity	619,832
Translation adjustments	47,051
Balance at end of the period	$ 1,258,193

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Goodwill and Intangible Assets - Narrative (Details) - USD ($)		3 Months Ended		9 Months Ended
	Jul. 04, 2022	Jul. 02, 2023	Jul. 03, 2022	Jul. 02, 2023	Jul. 03, 2022	Oct. 02, 2022
Goodwill [Line Items]
Impairment of goodwill	$ 0
Percentage of excess of fair value over carrying value (less than)	165.00%
Amortization expense		$ 14,100,000	$ 3,700,000	$ 29,600,000	$ 9,600,000
GSG
Goodwill [Line Items]
Gross amounts of goodwill		646,400,000		646,400,000		$ 536,800,000
Accumulated impairment		17,700,000		17,700,000		17,700,000
CIG
Goodwill [Line Items]
Gross amounts of goodwill		1,379,700,000		1,379,700,000		712,800,000
Accumulated impairment		$ 121,500,000		$ 121,500,000		$ 121,500,000

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Goodwill and Intangible Assets - Gross Amount and Accumulated Amortization of Acquired Finite-lived Intangibles (Details) - USD ($) $ in Thousands	9 Months Ended
	Jul. 02, 2023	Oct. 02, 2022
Finite-Lived Intangible Assets [Line Items]
Gross Amount	$ 312,628	$ 87,673
Accumulated Amortization	(87,596)	(58,510)
Net Amount	$ 225,032	29,163
Client relations
Finite-Lived Intangible Assets [Line Items]
Weighted- Average Remaining Life (in Years)	7 years 2 months 12 days
Gross Amount	$ 226,024	41,676
Accumulated Amortization	(36,952)	(21,092)
Net Amount	$ 189,072	20,584
Backlog
Finite-Lived Intangible Assets [Line Items]
Weighted- Average Remaining Life (in Years)	10 months 24 days
Gross Amount	$ 57,342	33,286
Accumulated Amortization	(41,616)	(29,990)
Net Amount	$ 15,726	3,296
Trade names
Finite-Lived Intangible Assets [Line Items]
Weighted- Average Remaining Life (in Years)	2 years 8 months 12 days
Gross Amount	$ 29,262	12,711
Accumulated Amortization	(9,028)	(7,428)
Net Amount	$ 20,234	$ 5,283

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Goodwill and Intangible Assets - Estimated Amortization Expense (Details) - USD ($) $ in Thousands	Jul. 02, 2023	Oct. 02, 2022
Goodwill and Intangible Assets Disclosure [Abstract]
2023 (remaining)	$ 13,541
2024	46,669
2025	34,702
2026	29,585
2027	24,577
Beyond	75,958
Net Amount	$ 225,032	$ 29,163

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Property and Equipment (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jul. 02, 2023	Jul. 03, 2022	Jul. 02, 2023	Jul. 03, 2022	Oct. 02, 2022
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 189,568		$ 189,568		$ 129,138
Accumulated depreciation	(108,247)		(108,247)		(96,822)
Property and equipment, net	81,321		81,321		32,316
Depreciation expense related to property and equipment	5,600	$ 3,200	13,700	$ 9,900
Equipment, furniture and fixtures
Property, Plant and Equipment [Line Items]
Property and equipment, gross	141,619		141,619		96,710
Leasehold improvements
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 47,949		$ 47,949		$ 32,428

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Stock Repurchase and Dividends - Narrative (Details) - USD ($) $ / shares in Units, $ in Millions									3 Months Ended		9 Months Ended
	Sep. 06, 2023	Aug. 07, 2023	Jun. 06, 2023	Feb. 24, 2023	Dec. 09, 2022	May 27, 2022	Feb. 25, 2022	Dec. 20, 2021	Jul. 02, 2023	Jul. 03, 2022	Jul. 02, 2023	Jul. 03, 2022	Oct. 05, 2021
Subsequent Event [Line Items]
Remaining authorized amount under share repurchase program									$ 347.8		$ 347.8
Dividend paid per share (in dollars per share)			$ 0.26	$ 0.23	$ 0.23	$ 0.23	$ 0.20	$ 0.20	$ 0.26	$ 0.23	$ 0.72	$ 0.63
Subsequent Event
Subsequent Event [Line Items]
Quarterly cash dividend declared (in dollars per share)		$ 0.26
Forecast
Subsequent Event [Line Items]
Dividend paid per share (in dollars per share)	$ 0.26
October 2021 Stock Repurchase Program
Subsequent Event [Line Items]
Maximum repurchase amount under stock repurchase program													$ 400.0

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Stock Repurchase and Dividends - Schedule of Dividends Declared and Paid (Details) - USD ($) $ / shares in Units, $ in Thousands							3 Months Ended		9 Months Ended
	Jun. 06, 2023	Feb. 24, 2023	Dec. 09, 2022	May 27, 2022	Feb. 25, 2022	Dec. 20, 2021	Jul. 02, 2023	Jul. 03, 2022	Jul. 02, 2023	Jul. 03, 2022
Stock Repurchase And Dividends [Abstract]
Dividend paid per share (in dollars per share)	$ 0.26	$ 0.23	$ 0.23	$ 0.23	$ 0.20	$ 0.20	$ 0.26	$ 0.23	$ 0.72	$ 0.63
Dividend Paid	$ 13,840	$ 12,242	$ 12,186	$ 12,311	$ 10,769	$ 10,793			$ 38,268	$ 33,873

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Leases - Narrative (Details)	Jul. 02, 2023
Lessee, Lease, Description [Line Items]
Renewal term (up to)	5 years
Minimum
Lessee, Lease, Description [Line Items]
Remaining lease term	1 month
Maximum
Lessee, Lease, Description [Line Items]
Remaining lease term	10 years

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Leases - Components of Lease Costs (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jul. 02, 2023	Jul. 03, 2022	Jul. 02, 2023	Jul. 03, 2022
Leases [Abstract]
Operating lease cost	$ 24,775	$ 21,004	$ 70,155	$ 64,015
Sublease (income) cost	(46)	140	(125)	(116)
Total lease cost	$ 24,729	$ 21,144	$ 70,030	$ 63,899

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Leases - Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands	9 Months Ended
	Jul. 02, 2023	Jul. 03, 2022
Leases [Abstract]
Operating cash flows for operating leases	$ 57,871	$ 50,965
Right-of-use assets obtained in exchange for new operating lease liabilities	$ 72,294	$ 32,175

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Leases - Supplemental Balance Sheet and Other Information (Details) - USD ($) $ in Thousands	Jul. 02, 2023	Oct. 02, 2022
Operating leases:
Right-of-use assets	$ 207,218	$ 182,319
Lease liabilities:
Current	68,555	57,865
Non-current	163,919	146,285
Total operating lease liabilities	$ 232,474	$ 204,150
Weighted-average remaining lease term:
Operating leases	5 years	5 years
Weighted-average discount rate:
Operating leases	3.00%	2.20%

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Leases - Maturity Analysis of the Future Undiscounted Cash Flows of Operating and Finance Lease Liabilities (Details) - USD ($) $ in Thousands	Jul. 02, 2023	Oct. 02, 2022
Operating Leases
2023 (remaining)	$ 20,727
2024	69,302
2025	53,634
2026	36,291
2027	25,689
Beyond	45,624
Total lease payments	251,267
Less: imputed interest	(18,793)
Total present value of lease liabilities	$ 232,474	$ 204,150

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Stockholders' Equity and Stock Compensation Plans (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended		9 Months Ended
	Jul. 02, 2023	Jul. 03, 2022	Jul. 02, 2023	Jul. 03, 2022
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	$ 7.0	$ 6.7	$ 21.6	$ 19.1
PSU's
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards granted (in shares)			56,214
Fair value of awards granted (in dollars per share)			$ 195.50
Vesting period			3 years
Percentage of shares that ultimately vest depending on growth in diluted earnings per share			50.00%
Percentage of shares that ultimately vest depending on the shareholder return relative to peer group of companies over vesting period			50.00%
RSU's
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards granted (in shares)			103,016
Fair value of awards granted (in dollars per share)			$ 156.10
RSU's | Executive officers and employees
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			4 years
RSU's | Non-employee director
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			1 year

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Earnings per Share ("EPS") (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Jul. 02, 2023	Jul. 03, 2022	Jul. 02, 2023	Jul. 03, 2022
Earnings Per Share [Abstract]
Net income attributable to Tetra Tech, basic	$ 60,235	$ 58,650	$ 219,771	$ 180,179
Net income attributable to Tetra Tech, diluted	$ 60,235	$ 58,650	$ 219,771	$ 180,179
Weighted-average common shares outstanding – basic (in shares)	53,231	53,507	53,188	53,777
Effect of dilutive stock options and unvested restricted stock (in shares)	422	499	427	551
Weighted-average common stock outstanding – diluted (in shares)	53,653	54,006	53,615	54,328
Earnings per share attributable to Tetra Tech:
Basic (in dollars per share)	$ 1.13	$ 1.10	$ 4.13	$ 3.35
Diluted (in dollars per share)	$ 1.12	$ 1.09	$ 4.10	$ 3.32

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Income Taxes (Details) - USD ($) $ in Millions	3 Months Ended	9 Months Ended
	Apr. 02, 2023	Jul. 02, 2023	Jul. 03, 2022	Oct. 02, 2022
Income Tax Disclosure [Abstract]
Effective tax rate		28.30%	23.90%
Reduction in income tax expense due to excess tax benefits on share-based payments		$ 2.2	$ 4.9
Non-recurring income tax expense	$ 6.9	$ 7.2
Effective tax rate, excluding excess tax benefits on share-based payments		26.70%	25.90%
Liability for uncertain tax positions		$ 48.8		$ 10.6

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Reportable Segments - Narrative (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Jul. 02, 2023 USD ($)	Jul. 03, 2022 USD ($)	Jul. 02, 2023 USD ($) segment	Jul. 03, 2022 USD ($)
Segment Reporting Information [Line Items]
Number of reportable segments | segment			2
Acquisition and integration expenses	$ 2,107	$ 0	$ 25,812	$ 0
RPS Group PLC
Segment Reporting Information [Line Items]
Acquisition and integration expenses	$ 2,100		$ 25,800

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Reportable Segments (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jul. 02, 2023	Jul. 03, 2022	Jul. 02, 2023	Jul. 03, 2022	Oct. 02, 2022
Segment Reporting Information [Line Items]
Revenue	$ 1,208,947	$ 890,231	$ 3,261,938	$ 2,601,485
Income from operations	97,675	83,905	250,736	245,645
Total Assets	3,973,578		3,973,578		$ 2,622,776
Operating segments | GSG
Segment Reporting Information [Line Items]
Revenue	531,050	459,987	1,565,371	1,365,041
Income from operations	54,496	45,580	167,053	147,104
Total Assets	588,469		588,469		558,764
Operating segments | CIG
Segment Reporting Information [Line Items]
Revenue	691,386	444,238	1,741,300	1,277,469
Income from operations	69,572	53,535	172,199	139,328
Total Assets	1,058,974		1,058,974		688,640
Elimination of inter-segment revenue
Segment Reporting Information [Line Items]
Revenue	(13,489)	(13,994)	(44,733)	(41,025)
Corporate
Segment Reporting Information [Line Items]
Income from operations	(26,393)	$ (15,210)	(88,516)	$ (40,787)
Total Assets	$ 2,326,135		$ 2,326,135		$ 1,375,372

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Fair Value Measurements (Details) $ in Millions	Jul. 02, 2023 USD ($)
Amended Credit Agreement
Debt Instrument [Line Items]
Amount outstanding under credit facility	$ 919.4

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Credit Facility (Details) - Amended Credit Agreement - USD ($)	Feb. 18, 2022	Oct. 26, 2022
Line of Credit Facility [Line Items]
Maximum borrowing capacity	$ 750,000,000
Accordion feature, higher borrowing capacity option	$ 1,050,000,000.00	$ 1,550,000,000
Debt instrument term	5 years
Accordion feature, increase limit	$ 300,000,000
Annual principal payment, amortization percentage	5.00%
Debt covenant, maximum consolidated leverage ratio	3.25
Debt covenant, maximum consolidated leverage ratio	3.00
New Term Loan Facility
Line of Credit Facility [Line Items]
Maximum borrowing capacity		$ 500,000,000
Term Loan Facility
Line of Credit Facility [Line Items]
Maximum borrowing capacity	$ 250,000,000
Revolving Credit Facility
Line of Credit Facility [Line Items]
Maximum borrowing capacity	$ 500,000,000
Revolving Credit Facility | Base Rate | Secured Overnight Financing Rate (SOFR)
Line of Credit Facility [Line Items]
Basis spread on variable rate	1.00%
Revolving Credit Facility | Base Rate | Fed Funds Rate
Line of Credit Facility [Line Items]
Basis spread on variable rate	0.50%
Revolving Credit Facility | Minimum | Secured Overnight Financing Rate (SOFR)
Line of Credit Facility [Line Items]
Basis spread on variable rate	1.00%
Revolving Credit Facility | Minimum | Base Rate
Line of Credit Facility [Line Items]
Basis spread on variable rate	0.00%
Revolving Credit Facility | Maximum | Secured Overnight Financing Rate (SOFR)
Line of Credit Facility [Line Items]
Basis spread on variable rate	1.875%
Revolving Credit Facility | Maximum | Base Rate
Line of Credit Facility [Line Items]
Basis spread on variable rate	0.875%
Standby Letters of Credit
Line of Credit Facility [Line Items]
Maximum borrowing capacity	$ 100,000,000
Swingline Loan
Line of Credit Facility [Line Items]
Maximum borrowing capacity	20,000,000
Multicurrency Borrowings and Letters of Credit
Line of Credit Facility [Line Items]
Maximum borrowing capacity	$ 300,000,000

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Derivative Financial Instruments - Narrative (Details) $ in Thousands, £ in Millions	3 Months Ended			9 Months Ended		12 Months Ended
	Jul. 02, 2023 USD ($)	Apr. 02, 2023 USD ($)	Jul. 03, 2022 USD ($)	Jul. 02, 2023 USD ($)	Jul. 03, 2022 USD ($)	Sep. 30, 2018 agreement	Jan. 23, 2023 USD ($)	Dec. 28, 2022 USD ($)	Dec. 28, 2022 GBP (£)	Oct. 02, 2022 USD ($)	Oct. 02, 2022 GBP (£)
Derivative [Line Items]
Gain on foreign currency forward contract	$ 0		$ 0	$ 89,402	$ 0
Gains (losses) on cash flow hedges recognized in comprehensive income	(1,044)		$ 2,380	(2,029)	$ 9,984
RPS Group PLC
Derivative [Line Items]
Derivative, forward exchange rate								1.086	1.086	1.0852	1.0852
Foreign Exchange Forward | RPS Group PLC
Derivative [Line Items]
Notional amount								$ 775,400	£ 714.0	$ 774,800	£ 714.0
Foreign currency forward contract, asset fair value							$ 109,300			19,900
Gain on foreign currency forward contract	21,400	$ 68,000
Interest Rate Swap | Designated as cash flow hedges | Derivatives designated as hedging instruments
Derivative [Line Items]
Notional amount	$ 190,600			$ 190,600
Number of derivative agreements | agreement						5
Fixed rate	2.79%			2.79%
Credit to be reclassified during next twelve months	$ 400			$ 400
Interest Rate Swap | Designated as cash flow hedges | Derivatives designated as hedging instruments | Other Noncurrent Assets
Derivative [Line Items]
Fair value gain of interest rate swap agreements	400			400						$ 2,400
Interest Rate Swap 1 | Designated as cash flow hedges | Derivatives designated as hedging instruments
Derivative [Line Items]
Notional amount	38,100			38,100
Interest Rate Swap 2 | Designated as cash flow hedges | Derivatives designated as hedging instruments
Derivative [Line Items]
Notional amount	38,100			38,100
Interest Rate Swap 3 | Designated as cash flow hedges | Derivatives designated as hedging instruments
Derivative [Line Items]
Notional amount	38,100			38,100
Interest Rate Swap 4 | Designated as cash flow hedges | Derivatives designated as hedging instruments
Derivative [Line Items]
Notional amount	38,100			38,100
Interest Rate Swap 5 | Designated as cash flow hedges | Derivatives designated as hedging instruments
Derivative [Line Items]
Notional amount	$ 38,100			$ 38,100

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Reclassifications Out of Accumulated Other Comprehensive Income (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jul. 02, 2023	Jul. 03, 2022	Jul. 02, 2023	Jul. 03, 2022
Reclassifications out of accumulated other comprehensive income (loss)
Beginning balance	$ 1,355,668	$ 1,244,642	$ 1,183,137	$ 1,234,291
Amounts reclassified from accumulated other comprehensive loss:
Other comprehensive income (loss), net of tax	43,456	(42,504)	70,218	(32,779)
Ending balance	1,452,789	1,205,058	1,452,789	1,205,058
Accumulated Other Comprehensive Income (Loss)
Reclassifications out of accumulated other comprehensive income (loss)
Beginning balance	(181,381)	(115,303)	(208,144)	(125,028)
Other comprehensive income (loss) before reclassifications	42,362	(41,470)	67,808	(28,929)
Amounts reclassified from accumulated other comprehensive loss:
Interest rate contracts, net of tax	1,093	(1,033)	2,410	(3,849)
Other comprehensive income (loss), net of tax	43,455	(42,503)	70,218	(32,778)
Ending balance	(137,926)	(157,806)	(137,926)	(157,806)
Foreign Currency Translation Adjustments
Reclassifications out of accumulated other comprehensive income (loss)
Beginning balance	(185,602)	(113,513)	(210,556)	(115,634)
Other comprehensive income (loss) before reclassifications	44,499	(44,883)	69,453	(42,762)
Amounts reclassified from accumulated other comprehensive loss:
Other comprehensive income (loss), net of tax	44,499	(44,883)	69,453	(42,762)
Ending balance	(141,103)	(158,396)	(141,103)	(158,396)
Gain (Loss) on Derivative Instruments
Reclassifications out of accumulated other comprehensive income (loss)
Beginning balance	1,427	(1,790)	2,412	(9,394)
Other comprehensive income (loss) before reclassifications	(2,137)	3,413	(4,439)	13,833
Amounts reclassified from accumulated other comprehensive loss:
Interest rate contracts, net of tax	1,093	(1,033)	2,410	(3,849)
Other comprehensive income (loss), net of tax	(1,044)	2,380	(2,029)	9,984
Ending balance	383	590	383	590
Net Pension Adjustments
Reclassifications out of accumulated other comprehensive income (loss)
Beginning balance	2,794	0	0	0
Other comprehensive income (loss) before reclassifications	0	0	2,794	0
Amounts reclassified from accumulated other comprehensive loss:
Interest rate contracts, net of tax	0	0	0
Other comprehensive income (loss), net of tax	0	0	2,794	0
Ending balance	$ 2,794	$ 0	$ 2,794	$ 0

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Commitments and Contingencies (Details)	Jul. 15, 2019 action
Commitments and Contingencies Disclosure [Abstract]
Number of qui tam actions	3

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Related Party Transactions (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jul. 02, 2023	Jul. 03, 2022	Jul. 02, 2023	Jul. 03, 2022	Oct. 02, 2022
Related Party Transaction [Line Items]
Revenue	$ 1,208,947	$ 890,231	$ 3,261,938	$ 2,601,485
Reimbursable costs	21,000	23,000	61,000	70,000
Accounts receivable, net	1,002,087		1,002,087		$ 755,112
Contract assets	125,360		125,360		92,405
Contract liabilities	351,048		351,048		241,340
Related Party
Related Party Transaction [Line Items]
Revenue	22,000	$ 24,000	65,000	$ 74,000
Accounts receivable, net	22,234		22,234		16,818
Contract assets	1,800		1,800		2,935
Contract liabilities	$ 2,768		$ 2,768		$ 3,464