Tetra Tech Inc.

01/30/2026 | Press release | Distributed by Public on 01/30/2026 15:03

Quarterly Report for Quarter Ending December 28, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, including the "Management's Discussion and Analysis of Financial Condition and Results of Operations," contains forward-looking statements regarding future events and our future results that are subject to the safe harbor provisions created under the Securities Act of 1933 and the Securities Exchange Act of 1934. All statements other than statements of historical facts are statements that could be deemed forward-looking statements. These statements are based on current expectations, estimates, forecasts and projections about the industries in which we operate and the beliefs and assumptions of our management. Words such as "expects," "anticipates," "targets," "goals," "projects," "intends," "plans," "believes," "estimates," "seeks," "continues," "may," variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict, including those identified below under "Part II, Item 1A. Risk Factors," and elsewhere herein. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.
GENERAL OVERVIEW
Tetra Tech, Inc. is a leading global provider of high-end consulting and engineering services that focuses on water, environment and sustainable infrastructure. We are a global company that is Leading with Science®to provide innovative solutions for our public and private clients. We typically begin at the earliest stage of a project by identifying technical solutions and developing execution plans tailored to our clients' needs and resources.
Our reputation for high-end consulting and engineering services and our ability to develop solutions for water and environmental management has supported our growth for nearly 60 years. Our market leading climate mitigation and adaptation services are solving our clients' most complex challenges related to coastal flooding, water security, energy transition and biodiversity protection. Today, we are proud to be making a difference in people's lives worldwide through our high-end consulting, engineering and technology service offerings. We are working on over 100,000 projects, in more than 100 countries on all seven continents, with more than 25,000 associates. We are Leading with Science®throughout our operations, with domain experts across multiple disciplines supported by our advanced analytics, artificial intelligence, machine learning and digital technology solutions. Our ability to provide innovative and first-of-kind solutions is enhanced by partnerships with our forward-thinking clients. We embrace the breadth of experience across our talented workforce worldwide with a culture of innovation and entrepreneurship. We are disciplined in our business, and focused on delivering value to customers and high performance for our shareholders. In supporting our clients, we seek to add value and provide long-term sustainable consulting, engineering and technologysolutions.
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.
The following table presents the percentage of our revenue by client sector:
Three Months Ended
December 28,
2025 		December 29,
2024
Client Sector
U.S. federal government (1)
22.5 % 35.3 %
U.S. state and local government 14.2 14.3
U.S. commercial 18.6 16.5
International (2)
44.7 33.9
Total 100.0 % 100.0 %
(1) Includes revenue generated under U.S. federal government contracts performed outside the United States.
(2) Includes revenue generated from non-U.S. clients, primarily in Australia, Canada and the United Kingdom.
We manage our operations under two reportable segments: Government Services Group reportable segment and Commercial/International Services Group reportable segment.
Government Services Group ("GSG").GSG provides high-end consulting and engineering services primarily to U.S. government clients (federal, state and local). GSG supports U.S. government defense and civilian agencies with services in water, environment, sustainable infrastructure, information technology and disaster management. GSG also provides engineering design services for U.S. based federal and municipal clients, especially in water infrastructure, flood protection and solid waste.
Commercial/International Services Group ("CIG").CIG primarily provides high-end consulting and engineering services to U.S. commercial clients, and international clients inclusive of the commercial and government sectors. CIG supports commercial clients worldwide inenergy, industrial and high performance buildings markets. CIG also provides sustainable infrastructure and related environmental, engineering and project management services to commercial and local government clientsacross Canada, in Asia Pacific (primarily Australia and New Zealand), Europe, the United Kingdom and Brazil.
The following table presents the percentage of our revenue by reportable segment:
Three Months Ended
December 28,
2025 		December 29,
2024
Reportable Segment
GSG 43.4 % 55.7 %
CIG 58.2 45.4
Inter-segment elimination (1.6) (1.1)
Total 100.0 % 100.0 %
Our services are performed under three principal types of contracts with our clients: fixed-price, time-and-materials and cost-plus. The following table presents the percentage of our revenue by contract type:
Three Months Ended
December 28,
2025 		December 29,
2024
Contract Type
Fixed-price 47.2 % 36.6 %
Time-and-materials 44.9 42.2
Cost-plus 7.9 21.2
Total 100.0 % 100.0 %
Under fixed-price contracts, clients agree to pay a specified price for our performance of the entire contract or a specified portion of the contract. Under time-and-materials contracts, we are paid for labor at negotiated hourly billing rates and paid for other expenses. Under cost-plus contracts, some of which are subject to a contract ceiling amount, we are reimbursed for allowable costs plus fees,which may be fixed or performance-based. Profitability on these contracts is driven by billable headcount and our cost control. Revenue is recognized by measuring progress over time under Accounting Standards Codification Topic 606, "Revenue from Contracts with Customers". We estimate and measure progress on our contracts over
time whereby we compare our total costs incurred on each contract as a percentage of the total expected contract costs. Changes in those estimates could result in the recognition of cumulative catch-up adjustments to the contract's inception-to-date revenue, costs and profit in the period in which such changes are made. On a quarterly basis, we review and assess our revenue and cost estimates for each significant contract. Changes in revenue and cost estimates could also result in a projected loss that would be recorded immediately in earnings.
Other contract costs include professional compensation and related benefits, together with certain direct and indirect overhead costs such as rents, utilities and travel. Professional compensation represents a large portion of these costs. Our "Selling, general and administrative expenses" ("SG&A") are comprised primarily of marketing and bid and proposal costs, and our corporate headquarters' costs related to the executive offices, finance, accounting, administration and information technology. Our SG&A expenses also include a portion of stock-based compensation and depreciation of property and equipment related to our corporate headquarters, and the amortization of identifiable intangible assets. Most of these costs are unrelated to specific clients or projects, and can vary as expenses are incurred to support company-wide activities and initiatives.
We experience seasonal trends in our business. Our revenue and operating income are typically lower in the first half of our fiscal year, primarily due to the Thanksgiving (in the U.S. and Canada), Christmas and New Year's holidays. Many of our clients' employees, as well as our own employees, take vacations during these holiday periods. Further, seasonal inclement weather conditions occasionally cause some of our offices to close temporarily or may hamper our project field work in the northern hemisphere's temperate and arctic regions. These occurrences result in fewer billable hours worked on projects and, correspondingly, less revenue recognized.
ACQUISITIONS AND DIVESTITURES
Acquisitions.We continuously evaluate the marketplace for acquisition opportunities to further our strategic growth plans. Due to our reputation, size, financial resources, geographic presence and range of services, we have numerous opportunities to acquire privately and publicly held companies or selected portions of such companies. We evaluate an acquisition opportunity based on its ability to strengthen our leadership in the markets we serve, the technologies and solutions they provide and the additional new geographies and clients they bring. Also, during our evaluation, we examine an acquisition's ability to drive organic growth, its accretive effect on long-term earnings and its ability to generate return on investment. Generally, we proceed with an acquisition if we believe that it will strategically expand our service offerings, improve our long-term financial performance and increase shareholder returns.
We view acquisitions as a key component in the execution of our growth strategy, and we intend to use cash, debt or equity, as we deem appropriate, to fund acquisitions. We may acquire other businesses that we believe are synergistic and will ultimately increase our revenue and net income, strengthen our ability to achieve our strategic goals, provide critical mass with existing clients and further expand our lines of service. We typically pay a purchase price that results in the recognition of goodwill, generally representing the intangible value of a successful business with an assembled workforce specialized in our areas of interest. Acquisitions are inherently risky, and no assurance can be given that our previous or future acquisitions will be successful or will not have a material adverse effect on our financial position, results of operations or cash flows. All acquisitions require the approval of our Board of Directors.
In the second quarter of fiscal 2025, we acquired Carron + Walsh ("CAW"), based in the Republic of Ireland. CAW delivers project and cost management solutions for large-scale commercial, life science, residential and infrastructure programs across Europe. In the third quarter of fiscal 2025, we acquired SAGE Group Holdings ("SAGE"), an Australian consulting firm that provides innovative technology and high-quality automation services that optimize operational efficiency and drive digital transformation for commercial and government clients across the municipal water, energy, transportation, defense and manufacturing sectors. Both CAW and SAGE are included in ourCIG segment.
Subsequent Event. On January 16, 2026, we acquired Halvik Corp ("Halvik") headquartered in Vienna, Virginia. With 600 employees, Halvik provides high-end advisory consulting services focused on advanced data analytics, systems modernization and cybersecurity for U.S. federal defense and civilian agencies. Halvik will be included in our GSG segment.
Divestitures. We regularly review and evaluate our existing operations to determine whether our business model should change through the divestiture of certain businesses. Accordingly, from time to time, we may divest or wind down certain non-core businesses and reallocate our resources to businesses that better align with our long-term strategic direction. In the first quarter of fiscal 2026, we divested our operations in Norway, which were in our CIG segment. We received proceeds of $41.6 million and recognized a non-operating gain of $7.7 million in our consolidated statements of income.In the first quarter of fiscal 2025, we divested a subsidiary in South America and a line of business in Australia, both of which were immaterial.
For detailed information regarding acquisitions, see Note 4, "Acquisitions and Divestitures" of the "Notes to Consolidated Financial Statements".
OVERVIEW OF RESULTS AND BUSINESS TRENDS
General. For the first quarter of fiscal 2026, our revenue declined 14.8% compared to the prior-year quarter primarily due to fewer international development projects in our U.S. federal government client sector and lower disaster response activity in our U.S. state and local government client sector. Our revenue in the first quarter of fiscal 2026 includes approximately $40 million from our recent acquisitions, that did not have comparable revenue for the same quarter last year.
The table below presents our revenue by client sector (amounts in thousands):
Three Months Ended
December 28, 2025 December 29, 2024 Change
$ %
Client Sector
U.S. federal government (1)
$ 272,598 $ 501,848 $ (229,250) (45.7)%
U.S. state and local government 171,473 202,987 (31,514) (15.5)
U.S. commercial 225,352 233,591 (8,239) (3.5)
International (2)
541,240 482,135 59,105 12.3
Total $ 1,210,663 $ 1,420,561 $ (209,898) (14.8)%
(1) Includes revenue generated under U.S. federal government contracts performed outside the United States.
(2) Includes revenue generated from non-U.S. clients, primarily in Australia, Canada and the United Kingdom.
U.S. Federal Government.
Three Months Ended
December 28, 2025 December 29, 2024 Change
$ %
($ in thousands)
Revenue $ 272,598 $ 501,848 $ (229,250) (45.7)%
Our U.S. federal government revenue decline of 45.7% was primarily due to decreased international development activity in the first quarter of fiscal 2026 compared to the first quarter of fiscal 2025. On January 20, 2025, President Trump signed Executive Order 14169, titled "Reevaluating and Realigning United States Foreign Aid", which initiated a 90-day pause on all U.S. foreign development assistance programs to assess their alignment with U.S. foreign policy objectives with few exemptions. Following a six-week review, on February 27, 2025, U.S. Secretary of State Rubio announced the cancellation of 83% of United States Agency for International Development ("USAID") programs, totaling approximately 5,200 contracts. Subsequently, we were notified that virtually all of our contracts with USAID were terminated for convenience with immediate effect and that any remaining international development activity would be administered by the U.S. Department of State ("DOS"). In the first quarter of fiscal 2026, our U.S. federal government revenue included $56.4 million from USAID/DOS programs compared to $283.9 million in the first quarter of last year. We currently expect no significant USAID/DOS revenue in the remainder of fiscal 2026. However, we do expect our U.S. federal revenue to grow for the remainder of this fiscal year, excluding USAID/DOS activities.
U.S. State and Local Government.
Three Months Ended
December 28, 2025 December 29, 2024 Change
$ %
($ in thousands)
Revenue $ 171,473 $ 202,987 $ (31,514) (15.5)%
Our U.S. state and local government revenue declined 15.5% compared to the fiscal 2025 quarter due to decreased disaster response activity primarily related to Hurricanes Helene and Milton, which occurred in September and October of 2024, respectively. Excluding this disaster response work, our U.S. state and local government revenue increased 10.3% in the first quarter of fiscal 2026 compared to the first quarter of fiscal 2025. This growth was due to continued investment by our clients in municipal water infrastructure, including digital water automation. Most of our work for the U.S. state and local governments relates to critical water and environmental programs, which we expect to continue to grow in the remainder of fiscal 2026.
U.S. Commercial.
Three Months Ended
December 28, 2025 December 29, 2024 Change
$ %
($ in thousands)
Revenue $ 225,352 $ 233,591 $ (8,239) (3.5)%
Our U.S. commercial revenue declined 3.5% in the first quarter of fiscal 2026 primarily due to lower activity related to renewable energy, partially offset by increased power transmission services compared to the first quarter of fiscal 2025. We expect our U.S. commercial revenue, excluding renewable energy, to begin showing growth in the second half of fiscal 2026.
International.
Three Months Ended
December 28, 2025 December 29, 2024 Change
$ %
($ in thousands)
Revenue $ 541,240 $ 482,135 $ 59,105 12.3%
For the first quarter of fiscal 2026, our international revenue growth of 12.3% reflects increased activities for water utilities including digital water projects, partially offset by decreased infrastructure activities in Australia. Excluding the revenue from fiscal 2025 acquisitions, our international revenue increased 3.5% in the first quarter of fiscal 2026 compared to the fiscal 2025 quarter. We expect the growth in our international work to continue for the remainder of fiscal 2026.
RESULTS OF OPERATIONS
Consolidated Results of Operations
Three Months Ended
December 28,
2025 		December 29,
2024 		Change
$ %
($ in thousands, except per share data)
Revenue $ 1,210,663 $ 1,420,561 $ (209,898) (14.8)%
Subcontractor costs (173,487) (223,231) 49,744 22.3
Revenue, net of subcontractor costs (1)
1,037,176 1,197,330 (160,154) (13.4)
Other costs of revenue (816,805) (975,853) 159,048 16.3
Gross profit 220,371 221,477 (1,106) (0.5)
Selling, general and administrative expenses (86,824) (84,317) (2,507) (3.0)
Legal contingency costs - (115,000) 115,000 NM
Contingent consideration - fair value adjustments 7,447 366 7,081 NM
Income from operations 140,994 22,526 118,468 525.9
Interest expense (7,128) (7,218) 90 1.2
Other non-operating income 7,710 - 7,710 NM
Income before income tax expense 141,576 15,308 126,268 824.8
Income tax expense (36,354) (14,530) (21,824) (150.2)
Net income 105,222 778 104,444 NM
Net income attributable to noncontrolling interests (194) (31) (163) (525.8)
Net income attributable to Tetra Tech $ 105,028 $ 747 $ 104,281 NM
Diluted earnings per share $ 0.40 $ - $ 0.40 NM
(1) We believe that the presentation of "Revenue, net of subcontractor costs", which is a non-U.S. GAAP financial measure, enhances investors' ability to analyze our business trends and performance because it substantially measures the work performed by our employees. In the course of providing services, we routinely subcontract various services and, under certain international development programs, issue grants. Generally, these subcontractor costs and grants are passed through to our clients and, in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP") and industry practice, are included in our revenue when it is our contractual responsibility to procure or manage these activities. Because subcontractor services can vary significantly from project to project and period to period, changes in revenue may not necessarily be indicative of our business trends. Accordingly, we segregate subcontractor costs from revenue to promote a better understanding of our business by evaluating revenue exclusive of costs associated with external service providers.
NM = not meaningful
Our revenue decline in the first quarter of fiscal 2026 primarily reflects decreased revenue in our GSG reportable segment due to the aforementioned reduction in USAID/DOS international development activities. Our GSG segment's revenue and revenue, net of subcontractor costs, declined $265.8 million, or 33.6%, and $215.3 million, or 33.3%, respectively, compared to last year. Our CIG segment's revenue increased $59.3 million, or 9.2%, and revenue, net of subcontractor costs, increased $55.1 million, or 10.0% in the first quarter of fiscal 2026 compared to the first quarter of fiscal 2025. The results for GSG and CIG segments are described below under "Government Services Group" and "Commercial/International Group", respectively.
The following table reconciles our reported results to non-GAAP adjusted results. For the first quarter of fiscal 2026, our adjusted results exclude adjustments to contingent consideration liabilities and the earnings per share ("EPS") contribution from the aforementioned non-operating gain from the sale of our operations in Norway. Additionally, for the first quarter of fiscal 2025, our adjusted results exclude a non-recurring charge of $115.0 million related to legal contingencies as described in Note 16, "Commitments and Contingencies" of the "Notes to Consolidated Financial Statements". We determined that there were no income tax expense for the non-operating gain in the first quarter of fiscal 2026 and no tax benefit for $31.3 million of the legal contingency charge in the first quarter of fiscal 2025. The effective tax rates applied to the remaining adjustments to arrive at the adjusted EPS were27.5% and 25.0% for the first quarters of fiscal 2026 and 2025, respectively.We applied the relevant marginal statutory tax rate based on the nature of the adjustment and the tax jurisdiction in which it occurred. Both EPS and adjusted EPS were calculated using the diluted weighted-average common shares outstanding for the respective periods as reflected in our Consolidated Statements of Income.
Three Months Ended
December 28,
2025 		December 29,
2024 		Change
$ %
($ in thousands, except per share data)
Income from operations $ 140,994 $ 22,526 $ 118,468 525.9%
Legal contingency costs - 115,000 (115,000) NM
Earn-out adjustments (7,447) (366) (7,081) NM
Adjusted income from operations (1)
$ 133,547 $ 137,160 $ (3,613) (2.6)%
EPS $ 0.40 $ - $ 0.40 NM
Legal contingency costs - 0.35 (0.35) NM
Earn-out adjustments (0.02) - (0.02) NM
Other non-operating income (0.03) - (0.03) NM
Adjusted EPS (1)
$ 0.35 $ 0.35 $ - NM
NM = not meaningful
(1) Non-GAAP financial measure
Excluding the non-recurring charges and the earn-out gains, our operating income declined $3.6 million, or 2.6% in the first quarter of fiscal 2026 compared to last year's quarter. The decrease reflects lower results in our GSG reportable segment, partially offset by improved results in our CIG reportable segment, which are described below under "Government Services Group" and "Commercial/International Group", respectively.
Three Months Ended
December 28,
2025 		December 29,
2024 		Change
$ %
($ in thousands)
Net interest expense $ 7,128 $ 7,218 $ (90) (1.2)%
Net interest expense decreased in the first quarter of fiscal 2026 primarily due to lower average interest rates compared to the prior-year quarter.
Three Months Ended
December 28,
2025 		December 29,
2024 		Change
$ %
($ in thousands)
Income tax expense $ 36,354 $ 14,530 $ 21,824 150.2%
The effective tax rates for the first quarters of fiscal 2026 and 2025 were 25.7% and 94.9%, respectively. Income tax expense was increased by $0.1 million of excess tax expenses and reduced by $1.0 million of excess tax benefits on share-based payments in the first three months of fiscal 2026 and 2025, respectively. In addition, in the first quarter of fiscal 2026, we recognized a $7.7 million gain from the sale of our operations in Norway as described in Note 4, "Acquisitions and Divestitures" of the "Notes to Consolidated Financial Statements". The gain is not taxable for income tax purposes. In the first quarter of fiscal 2025, we also recognized a $115.0 million non-recurring charge related to legal contingencies as described in Note 16, "Commitments and Contingencies" of the "Notes to Consolidated Financial Statements". We determined that $31.3 million of this charge is not tax deductible. Excluding the impact of the excess tax expenses on share-based payments, the gain from sale in the first quarter of fiscal 2026 and the legal contingency charge in the first quarter of fiscal 2025, our effective tax rates in the first three months of fiscal 2026 and 2025 were 27.1% and 27.8%, respectively.
On January 5, 2026, the Organisation for Economic Cooperation and Development released additional Pillar Two administrative guidance on the Global Anti-Base Erosion "GloBE" Model Rules. This "Side-by-Side" package includes a permanent Simplified Effective Tax Rate (ETR) Safe Harbour, a one-year extension of the Transitional Country-by-Country Reporting (CbCR) Safe Harbour; a Substance-based tax incentive (SBTI) Safe Harbour; a Side-by-Side (SbS) Safe Harbour and an Ultimate Parent Entity (UPE) Safe Harbour for eligible countries. We are continually monitoring developments and evaluating the potential impacts. At this time, we do not anticipate a material tax charge in fiscal 2026.
Segment Results of Operations
Beginning in fiscal 2026, we transferred certain operating units between our two reportable segments and redefined our reporting units to better align our operations with the clients and markets that they serve. Prior year amounts for reportable segments have been revised to conform to the current year presentation.
Government Services Group
Three Months Ended
December 28,
2025 		December 29,
2024 		Change
$ %
($ in thousands)
Revenue $ 525,508 $ 791,352 $ (265,844) (33.6)%
Subcontractor costs (93,406) (143,978) 50,572 35.1
Revenue, net of subcontractor costs (1)
$ 432,102 $ 647,374 $ (215,272) (33.3)%
Income from operations $ 71,417 $ 91,920 $ (20,503) (22.3)%
(1) Non-GAAP financial measure
For the first quarter of fiscal 2026, the revenue decrease of 33.6% compared to the prior-year quarter primarily reflects a revenue decline of approximately $222 million related to the aforementioned cancellation of contracts with USAID.
Operating income decreased primarily due to the aforementioned revenue decline. However, our operating margin, based on revenue, net of subcontractor costs, increased to 16.5% in the first quarter of fiscal 2026 compared to 14.2% in the prior-year quarter. The increased operating margin reflects improved project execution and the elimination of the lower margin cost-reimbursable revenue with USAID.
Commercial/International Group
Three Months Ended
December 28,
2025 		December 29,
2024 		Change
$ %
($ in thousands)
Revenue $ 704,178 $ 644,902 $ 59,276 9.2%
Subcontractor costs (99,104) (94,946) (4,158) (4.4)
Revenue, net of subcontractor costs (1)
$ 605,074 $ 549,956 $ 55,118 10.0%
Income from operations $ 78,919 $ 69,039 $ 9,880 14.3%
(1) Non-GAAP financial measure
The revenue growth of 9.2% in first quarter of fiscal 2026 compared to last year's first quarter reflects increased activities for water utilities including digital water projects, primarily in the United Kingdom, partially offset by decreased infrastructure activities in Australia. The increase also includes the aforementioned revenue in the first quarter of fiscal 2026 from our fiscal 2025 acquisitions, that did not have comparable revenue for the same quarter last year. Excluding the revenue from acquisitions, our revenue increased to approximately 3% in the first quarter of fiscal 2026.
Our operating income increased due to the aforementioned revenue growth. Our operating margin, based on revenue, net of subcontractor costs, improved approximately 40 basis points to 13.0% in the first quarter of 2026 compared to 12.6% for the fiscal 2025 quarter. The improved operating margin was primarily due to our continued focus on high-end consulting services and improved project execution.
Backlog
Backlog generally represents the dollar amount of revenue we expect to realize in the future when we perform the work. The difference between our remaining unsatisfied performance obligation("RUPO") and backlog relates to contract terms. Specifically, our backlog does not consider the potential impact of termination for convenience clauses within the contracts. The contract term and thus remaining performance obligation on certain of our operations and maintenance contracts,
are limited to the notice period required for contract termination (usually 30, 60, or 90 days). The differences between our backlog and RUPO at December 28, 2025 and September 28, 2025 were immaterial (see the table below):
As of
December 28,
2025 		September 28,
2025
($ in millions)
RUPO $ 3,922 $ 4,101
Backlog 3,953 4,140
At December 28, 2025, our backlog was $4.0 billion. GSG and CIG reported $1.86 billion and $2.13 billion of backlog, respectively, at December 28, 2025.
Financial Condition, Liquidity and Capital Resources
Capital Requirements. At December 28, 2025, we had $269.4 million of cash and cash equivalents and access to an additional $929.3 million of borrowings available under our credit facility. During the first quarter of fiscal 2026, we generated $72.3 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 areto fund working capital, cash dividends, share repurchases, capital expenditures and repayment of debt, as well as to fund acquisitions and earn-out obligations from prior acquisitions. We believe that our existing cash and cash equivalents, operating cash flows and borrowing capacity under our credit agreement, as described below, will be sufficient to meet our capital requirements for at least the next 12 months.
Cash and Cash Equivalents. The following tables summarize information regarding our cash and cash equivalents (amounts in thousands):
As of
December 28,
2025 		September 28,
2025 		Change
$ %
Cash and cash equivalents $ 269,448 $ 167,459 $ 101,989 60.9 %
Three Months Ended
December 28,
2025 		December 29,
2024 		Change
$ %
Net cash provided by (used in):
Operating activities $ 72,267 $ 13,063 $ 59,204 453.2 %
Investing activities 37,460 (3,433) 40,893 NM
Financing activities (10,874) 19,394 (30,268) 156.1
Effect of exchange rate changes 2,223 (13,609) 15,832 (116.3)
Net increase in cash $ 101,076 $ 15,415 $ 85,661 555.7 %
Operating Activities. The $59.2 million increase in cash from operating activities in the first quarter of fiscal 2026 compared to last year's quarter was primarily due to cash collections for work on disaster response activities that were completed in the fourth quarter of fiscal 2025 and on terminated USAID programs.
Investing Activities.Our cash provided by investing activities for the first quarter of fiscal 2026 includes the aforementioned proceeds from the sale of our operations in Norway of $41.6 million.
Financing Activities.The $30.3 million change in financing activities primarily reflects share repurchases of $50 million in the first quarter of fiscal 2026 compared to $25 million in the first quarter of fiscal 2025.
Debt Financing. On February 18, 2022, we entered into Amendment No. 2 to the Second Amended and Restated Credit Agreement ("Second Amended Credit Agreement") with a total borrowing capacity of $1.05 billion that was scheduled to mature in February 2027. The Second Amended Credit Agreement consisted of a $750 million senior secured, five-year facility that provided for a $250 million term loan facility ("Second Term Loan Facility") and a $500 million revolving credit facility ("Second Revolving Credit Facility"). On October 26, 2022, we entered into a Third Amended and Restated Credit Agreement ("Third Amended Credit Agreement") that provided for an additional $500 million senior secured term loan facility ("Third Term Loan Facility") increasing our total borrowing capacity to $1.55 billion. On January 23, 2023, we drew the entire
amount of the $500 million term loan facility which was scheduled to mature in January 2026. On May 5, 2025 we repaid all facilities in full as detailed below.
On August 22, 2023, we issued $575.0 million in Convertible Notes that bear interest at 2.25% per annum payable semiannually in arrears on February 15 and August 15 of each year, beginning on February 15, 2024 with a maturity date of August 15, 2028. The net proceeds from the Convertible Notes were $560.5 million, $51.8 million of which were used to purchase related capped call transactions on the issue date. The remaining proceeds were used to prepay and terminate the $234.4 million outstanding under the Second Term Loan Facility, to prepay $89.4 million outstanding under the Third Term Loan Facility and to pay down borrowings of $185.0 million under the Second Revolving Credit Facility. See Note 13, "Long-Term Debt" of the "Notes to Consolidated Financial Statements" for further discussion.
On May 5, 2025, we entered into a Fourth Amended and Restated Credit Agreement ("Amended Credit Agreement") with a total borrowing capacity of $1.5 billion that will mature in May 2030. The Amended Credit Agreement is a $1.1 billion senior secured, five-year facility that provides for a $250 million 3-year term loan facility (the "3Y Term Loan Facility"), a $250 million 5-year term loan facility ("the 5Y Term Loan Facility"), and a $600 million revolving credit facility (the "Amended Revolving Credit Facility"). In addition, the Amended Credit Agreement includes a $400 million accordion feature that allows us to increase the Amended Credit Agreement to $1.5 billion subject to lender approval. The 5Y Term Loan Facility will be subject to quarterly amortization of principal, based upon the annual percentages of the original stated amount thereof (Year 1: 0.0%, Year 2: 0.0%, Year 3: 5.0%, Year 4: 10.0%, Year 5: 10.0%), with the first payment being due at the end of the first full fiscal quarter following the second anniversary of the Amendment Effective Date. The Amended Credit Agreement provides for, among other things, (i) refinance indebtedness under our Third Amended Credit Agreement; (ii) finance open market repurchases of common stock, acquisitions, and cash dividends and distributions; and (iii) utilize the proceeds for working capital, capital expenditures and other general corporate purposes. The Amended Credit Agreement provides for a reduction in the pricing levels of the Consolidated Leverage Ratio and the removal of the Secured Overnight Financing Rate ("SOFR") credit spread adjustment. The Amended Revolving Credit Facility includes a $100 million sublimit for the issuance of standby letters of credit, a $20 million sublimit for swingline loans, and a $400 million sublimit for multi-currency borrowings and letters of credit.
The entire 3Y Term Loan Facility and 5Y Term Loan Facility were drawn on May 5, 2025. The proceeds from these term loans were used to pay down our Third Term Loan Facility and the Second Revolving Credit Facility in full on May 5, 2025. On September 26, 2025, the 3Y Term Loan Facility was repaid in full. We may borrow on the Amended Revolving Credit Facility, at our option, at either (a) a benchmark rate plus a margin that ranges from 1.000% to 1.750% per annum, or (b) a base rate for loans in U.S. dollars (the highest of the U.S. federal funds rate plus 0.50% per annum, the bank's prime rate or the SOFR rate plus 1.00%, plus a margin that ranges from 0% to 0.75% per annum). In each case, the applicable margin is based on our Consolidated Leverage Ratio, calculated quarterly. The 5Y Term Loan Facility is subject to the same interest rate provisions. The Amended Credit Agreement expires on May 5, 2030, or earlier at our discretion upon payment in full of loans and other obligations.
At December 28, 2025, we had $270 million in outstanding borrowings under the Amended Credit Agreement, which consisted of $200 million under the 5Y Term Loan Facility and $70 million borrowings under the Amended Revolving Credit Facility. For the first quarter of fiscal 2026, the weighted-average interest rate of the outstanding borrowings under the credit facilities was 5.25%. In addition, we had $0.7 million in standby letters of credit under the Amended Credit Agreement. At December 28, 2025, we had $529.3 million of available credit under the Amended Revolving Credit Facility, all of which could be borrowed without a violation of our debt covenants.
The Amended Credit Agreement contains certain affirmative and restrictive covenants, and customary events of default. The financial covenants provide for a maximum Consolidated Leverage Ratio of 3.50 to 1.00 (total funded debt/EBITDA, as defined in the Amended Credit Agreement) and a minimum Consolidated Interest Coverage Ratio of 3.00 to 1.00 (EBITDA/Consolidated Interest Charges, as defined in the Amended Credit Agreement). Our obligations under the Amended Credit Agreement are guaranteed by certain of our domestic subsidiaries and are secured by first priority liens on (i) the equity interests of certain of our subsidiaries, including those subsidiaries that are guarantors or borrowers under the Amended Credit Agreement, and (ii) the accounts receivable, general intangibles and intercompany loans, and those of our subsidiaries that are guarantors or borrowers. At December 28, 2025, we were in compliance with these covenants with a consolidated leverage ratio of 1.24x and a consolidated interest coverage ratio of 17.31x.
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 December 28, 2025, there were no borrowings under these facilities, and the aggregate amount of standby letters of credit outstanding was $55.0 million. At December 28, 2025, we had no bank overdrafts related to our disbursement bank accounts.
Inflation. We believe our operations have not been, and, in the foreseeable future, are not expected to be, materially adversely affected by inflation or changing prices due to the average duration of our projects and our ability to negotiate prices as contracts end and new contracts begin.
Stock repurchases. On May 5, 2025, our Board of Directors authorized an additional $500 million stock repurchase program in addition to the previous $400 million stock repurchase program authorized on October 5, 2021. In the first quarter
of fiscal 2026, we repurchased and settled 1,482,116 shares with an average price of $33.74 per share for a total cost of $50.0 million in the open market. We repurchased and settled 600,007 shares with an average price of $41.67 per share for a total cost of $25.0 million in the open market in the first quarter of fiscal 2025. At December 28, 2025, we had a remaining balance of $547.8 million under our stock repurchase programs.
Dividends.Our Board of Directors has authorized the following dividends in fiscal 2026:
Dividend
Per Share 		Record Date Total Maximum
Payment
(in thousands) 		Payment Date
November 10, 2025 $ 0.065 December 1, 2025 $ 16,937 December 12, 2025
Subsequent Events. On January 26, 2026, our Board of Directors declared a quarterly cash dividend of $0.065 per share payable on February 27, 2026 to stockholders of record as of the close of business on February 12, 2026.
Income Taxes
We evaluate the realizability of our deferred tax assets by assessing the valuation allowance and adjusting the allowance, if necessary. The factors used to assess the likelihood of realization are our forecast of future taxable income and available tax planning strategies that could be implemented to realize the net deferred tax assets. The ability or failure to achieve the forecasted taxable income in the applicable taxing jurisdictions could affect the ultimate realization of deferred tax assets. Based on future operating results in certain jurisdictions, it is unlikely that the current valuation allowance positions of those jurisdictions could be adjusted in the next 12 months.
At December 28, 2025 and September 28, 2025, the liability for income taxes associated with uncertain tax positions was $53.8 million and $52.8 million, respectively.
It is reasonably possible thatthe 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 December 28, 2025, we had $0.7 million in standby letters of credit outstanding under our Amended Credit Agreement and $55.0 million in standby letters of credit outstanding under our additional letter of credit facilities.
•From time to time, we provide guarantees and indemnifications related to our services.If our services under a guaranteed or indemnified project are later determined to have resulted in a material defect or other material deficiency, then we may be responsible for monetary damages or other legal remedies. When sufficient information about claims on guaranteed or indemnified projects is available and monetary damages or other costs or losses are determined to be probable, we recognize such guaranteed losses.
•In the ordinary course of business, we enter into various agreements as part of certain unconsolidated subsidiaries, joint ventures and other jointly executed contracts where we are jointly and severally liable. We enter into these agreements primarily to support the project execution commitments of these entities. The potential payment amount of an outstanding performance guarantee is typically the remaining cost of work to be performed by or on behalf of third parties under engineering and construction contracts. However, we are not able to estimate other amounts that may be required to be paid in excess of estimated costs to complete contracts and, accordingly, the total potential payment amount under our outstanding performance guarantees cannot be estimated. For cost-plus contracts, amounts that may become payable pursuant to guarantee provisions are normally recoverable from the client for work performed under the contract. For lump sum or fixed-price
contracts, this amount is the cost to complete the contracted work less amounts remaining to be billed to the client under the contract. Remaining billable amounts could be greater or less than the cost to complete. In those cases where costs exceed the remaining amounts payable under the contract, we may have recourse to third parties, such as owners, co-venturers, subcontractors or vendors, for claims.
•In the ordinary course of business, our clients may request that we obtain surety bonds in connection with contract performance obligations that are not required to be recorded in our consolidated balance sheets. We are obligated to reimburse the issuer of our surety bonds for any payments made thereunder. Each of our commitments under performance bonds generally ends concurrently with the expiration of our related contractual obligation.
Critical Accounting Policies
Our critical accounting policies are disclosed in our Annual Report on Form 10-K for the fiscal year ended September 28, 2025. To date, there have been no material changes in our critical accounting policies as reported in our fiscal 2025 Annual Report on Form 10-K.
New Accounting Pronouncements
For information regarding recent accounting pronouncements, see "Notes to Consolidated Financial Statements" included in Part I, Item 1 of this Quarterly Report.
Financial Market Risks
We do not enter into derivative financial instruments for trading or speculation purposes. In the normal course of business, we have exposure to both interest rate risk and foreign currency transaction and translation risk, primarily related to the Canadian and Australian dollars, the Euro, and the British Pound.
We are exposed to interest rate risk under our Amended Credit Agreement. We can borrow, at our option, under the 5Y Term Loan Facility and Amended Revolving Credit Facility. We may borrow on the Amended Revolving Credit Facility, at our option, at either (a) a benchmark rate plus a margin that ranges from 1.000% to 1.750% per annum, or (b) a base rate for loans in U.S. dollars (the highest of the U.S. federal funds rate plus 0.50% per annum, the bank's prime rate or the SOFR rate plus 1.00%, plus a margin that ranges from 0% to 0.75% per annum). In each case, the applicable margin is based on our Consolidated Leverage Ratio, calculated quarterly. The 5Y Term Loan Facility is subject to the same interest rate provisions. The Amended Credit Agreement expires on May 5, 2030, or earlier at our discretion upon payment in full of loans and other obligations. At December 28, 2025, we had $270 million in outstanding borrowings under the Amended Credit Agreement, which consisted of $200 million under the 5Y Term Loan Facility and $70 million borrowings under the Amended Revolving Credit Facility. For the first quarter of fiscal 2026, the weighted-average interest rate of the outstanding borrowings under the Amended Credit Agreement was 5.25%.
The majority of our transactions are in U.S. dollars; however, some of our subsidiaries conduct business in foreign currencies, primarily the Canadian and Australian dollars, the Euro, and British Pound. Therefore, we are subject to currency exposure and volatility because of currency fluctuations. We attempt to minimize our exposure to these fluctuations by matching revenue and expenses in the same currency for our contracts. We report our foreign currency gains and losses in "Selling, general and administrative expenses" on our consolidated statements of income. For the first quarter of fiscal 2026, we reported $1.2 million of foreign currency loss compared to an immaterial amount in the prior year period.
We have foreign currency exchange rate exposure in our results of operations and equity primarily because of the currency translation related to our foreign subsidiaries where the local currency is the functional currency. To the extent the U.S. dollar strengthens against foreign currencies, the translation of these foreign currency denominated transactions will result in reduced revenue, operating expenses, assets and liabilities. Similarly, our revenue, operating expenses, assets and liabilities will increase if the U.S. dollar weakens against foreign currencies. For the first quarters of fiscal 2026 and 2025, 44.7% and 33.9% of our consolidated revenue, respectively, was generated by our international business. For the first quarter of fiscal 2026, the effect of foreign exchange rate translation on our consolidated balance sheet was an increase in equity of $19.7 million compared to a decrease of $108.8 million in the prior-year period. These amounts were recognized as adjustments to equity through other comprehensive income.
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