TETRA TECH INC

Previous wording

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.

Current wording

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.

Previous wording

In the second quarter of fiscal 2024, we acquired LS Technologies ("LST"), an innovative U.S. federal enterprise technology services and management consulting firm based in Fairfax, Virginia. LST provides high-end consulting and engineering services including advanced data analytics, cybersecurity and digital transformation solutions to U.S. government clients. LST is included in our GSG segment.

Current wording

In the second quarter of fiscal 2024, we acquired LS Technologies ("LST"), an innovative U.S. federal enterprise technology services and management consulting firm based in Fairfax, Virginia. LST provides high-end consulting and engineering services including advanced data analytics, cybersecurity and digital transformation solutions to U.S. government clients. In the third quarter of fiscal 2024, we also acquired Convergence Controls & Engineering ("CCE"), an industry leader in process automation and systems integration solutions. CCE’s expertise includes customized digital controls and software solutions, advanced data analytics, cloud data integration and cybersecurity applications. Both LST and CCE are included in our GSG segment.

Previous wording

In the second quarter of fiscal 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.

Current wording

In the second quarter of fiscal 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. Substantially all of RPS is included in our CIG segment.

Previous wording

General. Our revenue increased 20.8% in the first half of fiscal 2024 compared to the same period last year primarily reflecting increased activity in our U.S. federal and international client sectors. Our revenue in the first half of fiscal 2024 includes $266 million from our recent acquisitions, that did not have comparable revenue for the same period last year. Excluding the impact of these acquisitions, our revenue increased 7.9% compared to the first half of fiscal 2023.

Current wording

General. For the first nine months of fiscal 2024, our revenue increased 17.2%compared to the fiscal 2023 period primarily reflecting increased activity in our U.S. federal and international client sectors. This revenue growth includes $299 million from our recent acquisitions, that did not have comparable revenue for the same period last year. Excluding the impact of these acquisitions, our revenue increased 8.1% compared to the prior-year period.

Previous wording

Our 19.8% growth in U.S. federal revenue in the first half of fiscal 2024 compared to the first half of last year primarily reflects increased international development activity and broad-based growth across civilian agencies. For the first half of fiscal 2024, the growth in our international development activity primarily relates to activity in Ukraine to support energy security and other humanitarian needs. This international development revenue was approximately $56 million higher in the first half of fiscal 2024 compared to the prior-year period. Our growth in the first half of fiscal 2024 also includes approximately $51 million of revenue from our recent acquisitions, that did not have comparable revenue for the same period in fiscal 2023. We expect our U.S. federal government revenue to continue to grow in the second half of fiscal 2024. 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 includes substantial planned investments in our key end markets including water, environment and sustainable infrastructure over the next five to ten years.

Current wording

Our 22.6% growth in U.S. federal revenue in the first nine months of fiscal 2024 compared to the first nine months of last year primarily reflects increased international development activity and increased environmental activity for both civilian and defense agencies. The growth in our international development activity primarily relates to activity in Ukraine to support energy security and other humanitarian needs. For the first nine months of fiscal 2024, our international development revenue increased approximately $102 million compared to the prior-year period. The overall revenue growth also includes approximately $83 million of revenue from our recent acquisitions, that did not have comparable revenue in the fiscal 2023 period. We expect our U.S. federal government revenue to continue to grow in the fourth quarter of fiscal 2024. 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 includes substantial planned investments in our key end markets including water, environment and sustainable infrastructure over the next five to ten years.

Previous wording

For the first half of fiscal 2024, our U.S. state and local government revenue declined year-over-year due to lower disaster response revenue of approximately $41 million primarily due to the wind-down of hurricane related projects in the southeastern U.S. last year. Excluding our disaster response activities, our U.S. state and local government revenue increased 19.9% in the first half of fiscal 2024 compared to the year-ago period primarily reflecting continued increased revenue from advanced water treatment 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 second half of fiscal 2024.

Current wording

For the first nine months of fiscal 2024, our U.S. state and local government revenue declined year-over-year due to lower disaster response revenue of approximately $51 million primarily due to the wind-down of hurricane related projects in the southeastern U.S. last year. Excluding our disaster response activities, our U.S. state and local government revenue increased 14.3% in the first nine months of fiscal 2024 compared to the year-ago period, primarily reflecting continued increased revenue from advanced water treatment 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 fourth quarter of fiscal 2024.

Previous wording

For the first half of fiscal 2024, our U.S. commercial revenue growth was due to increased planning and permitting projects related to renewable energy generation and transmission. We expect revenue growth to continue in our U.S. commercial business in the second half of fiscal 2024.

Current wording

For the first nine months of fiscal 2024, our U.S. commercial revenue growth was due to increased planning and permitting projects related to renewable energy generation and transmission. We expect revenue growth to continue in our U.S. commercial business in the fourth quarter of fiscal 2024.

Previous wording

Our international revenue growth of 41.2% in the first half of fiscal 2024 compared to the first half of last year primarily reflects higher renewable energy revenue and commercial activities related to an increased focus on sustainability in addition to contributions from acquisitions. For the first half of fiscal 2024, our international revenue growth includes approximately $182 million of revenue from our recent acquisitions, that did not have comparable revenue for the same period last year. Excluding the impact of these acquisitions, our revenue increased 14.7% compared to the fiscal 2023 period. We expect growth in our international work to continue in the second half of fiscal 2024.

Current wording

For the first nine months of fiscal 2024, our international revenue increased 26.5% compared to the prior-year period primarily due to higher renewable energy revenue and commercial activities related to an increased focus on sustainability in addition to contributions from acquisitions. This revenue growth includes approximately $182 million of revenue from our recent acquisitions, that did not have comparable revenue for the same period last year. Excluding the impact of these acquisitions, our revenue increased 11.1% compared to the fiscal 2023 period. We expect growth in our international work to continue in the fourth quarter of fiscal 2024.

Previous wording

Our revenue growth in the second quarter and first half of fiscal 2024 reflects increases in both of our reportable segments. Our GSG segment's revenue and revenue, net of subcontractor costs, increased $33.9 million, or 6.0%, and $30.9 million, or 7.1%, respectively, in the second quarter of fiscal 2024 compared to the prior-year quarter. Our CIG segment's revenue increased $60.8 million, or 10.0%, and revenue, net of subcontractor costs, increased $52.1 million, or 9.8% in the second quarter of fiscal 2024 compared to the prior-year quarter.

Current wording

Our revenue growth in the third quarter and first nine months of fiscal 2024 reflects increases in both of our reportable segments. Our GSG segment's revenue and revenue, net of subcontractor costs, increased $109.5 million, or 20.6%, and $98.0 million, or 25.1%, respectively, in the third quarter of fiscal 2024 compared to the prior-year quarter. Our CIG segment's revenue increased $32.2 million, or 4.7%, and revenue, net of subcontractor costs, increased $24.0 million, or 4.0% in the third quarter of fiscal 2024 compared to the year-ago quarter.

Previous wording

In the first half of fiscal 2024, our GSG segment's revenue and revenue, net of subcontractor costs, increased $137.8 million, or 13.3%, and $120.6 million, or 15.3%, respectively, compared to the same period last year. Our CIG segment's revenue increased $290.3 million, or 27.7%, and revenue, net of subcontractor costs, increased $241.1 million, or 26.3% in the first half of fiscal 2024 compared to fiscal 2023 period. The second quarter and first half results for GSG and CIG segments are described below under "Government Services Group" and "Commercial/International Group", respectively.

Current wording

In the first nine months of fiscal 2024, our GSG segment's revenue and revenue, net of subcontractor costs, increased $247.4 million, or 15.8%, and $218.6 million, or 18.5%, respectively, compared to the same period last year. Our CIG segment's revenue increased $322.6 million, or 18.5%, and revenue, net of subcontractor costs, increased $265.1 million, or 17.5% in the first nine months of fiscal 2024 compared to fiscal 2023 period. The third quarter and first nine months results for GSG and CIG segments are described below under "Government Services Group" and "Commercial/International Group", respectively.

Previous wording

The following table reconciles our reported results to non-U.S. GAAP adjusted results, which exclude acquisition expenses related to the RPS acquisition and adjustments to contingent consideration liabilities in the second quarter and first half of fiscal 2023. Our adjusted earnings per share ("EPS") for these periods also excludes non-operating gains on a foreign exchange contract of $21.4 million and $89.4 million, respectively. The gains are reported as "Other non-operating income" in our consolidated statements of income. Further, our adjusted EPS excludes acquisition costs and the write-off of previously deferred debt origination fees reflected as additional interest expense, of $21.0 million in the second quarter and $27.5 million in the first half of fiscal 2023 related to the RPS acquisition. The effective tax rate applied to the adjustments to EPS to arrive at adjusted EPS averaged 26% for the first half of fiscal 2023. We applied therelevant 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 statement of income.

Current wording

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, and losses from adjustments to contingent consideration liabilities incurred in the first half of fiscal 2023. 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 excludes acquisition costs and the write-off of previously deferred debt origination fees reflected as additional interest expense, of $2.1 million in the third quarter and $29.6 million in the first nine months of fiscal 2023 related to the RPS acquisition. The effective tax rate applied to the adjustments to EPS to arrive at adjusted EPS averaged 26% for the first nine months of fiscal 2023. 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 statement of income.

Previous wording

Operating income in the second quarter and first half of fiscal 2023 included $19.9 million and $23.7 million of acquisition and integration expenses (primarily legal and other professional fees), respectively, for the RPS acquisition. Operating income for these periods also included a net loss of $7.5 million and $8.5 million, respectively, related to changes in the estimated fair value of contingent earn-out liabilities. Excluding the acquisition expenses and earn-out losses, our adjusted operating income increased $29.2 million, or 33.0% in the second quarter and $43.5 million, or 23.5%, in the first half of fiscal 2024 compared to the same periods last year. These increases reflect improved results in both of our operating segments, which are described below under "Government Services Group" and "Commercial/International Group", respectively.

Current wording

Operating income in the third quarter and first nine months of fiscal 2023 included $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. Excluding the acquisition expenses and earn-out losses, our adjusted operating income increased $28.8 million, or 28.9% in the third quarter and $72.4 million, or 25.4%, in the first nine months of fiscal 2024 compared to the same periods last year. These increases reflect improved results in both of our operating segments, which are described below under "Government Services Group" and "Commercial/International Group", respectively.

Previous wording

For the first half of fiscal 2023 (all in the first quarter), net interest expense 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. For the second quarter and first half of fiscal 2023, net interest expense 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 decreased $2.4 million in the second quarter of fiscal 2024 compared to fiscal 2023 quarter. The decrease primarily reflects the lower borrowing costs from our convertible notes issued in the fourth quarter of fiscal 2023, which we used to refinance the existing higher-cost debt. Also excluding the write-offs, our interest expense increased $4.6 million in the first half of fiscal 2024 compared to the same period last year primarily due to the lower average borrowings in the first half of fiscal 2023 as the first quarter of fiscal 2023 did not include any borrowings for the RPS acquisition.

Current wording

For the third quarter of fiscal 2024, net interest expense decreased primarily due to the lower borrowing costs from our convertible notes(the "Convertible Notes") issued in the fourth quarter of fiscal 2023, which we used to refinance the existing higher-cost debt. For the first nine months of fiscal 2023 (all in the first quarter), net interest expense 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. For the first nine months of fiscal 2023 (all in the second quarter), net interest expense also 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 decreased $0.4 million in the first nine months of fiscal 2024 compared to the same period last year.

Previous wording

Other non-operating income for the second quarter and first half of fiscal 2023 reflects gains on a foreign exchange forward contract integrated with the acquisition of RPS. 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 cash gain of approximately $109 million.

Current wording

Other non-operating income for the first nine months of fiscal 2023 reflects gains on a foreign exchange forward contract integrated with the acquisition of RPS. 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 cash gain of approximately $109 million.

Previous wording

The effective tax rates for the first halves of fiscal 2024 and 2023 were 27.6% and 28.7%, respectively. Income tax expense was reduced by $1.9 million and $1.8 million of excess tax benefits on share-based payments in the first halves of fiscal 2024 and 2023, respectively. In addition, income tax expense in the first half of fiscal 2024 (all in the second quarter) included $2.8 million of expense for the settlement of various tax positions that were under audit for fiscal years 2018 through 2021. Furthermore, income tax expense in the first half of fiscal 2023 (all in the second quarter) included non-operating income tax expenses of $6.7 million 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, the settlement amounts in the first half of fiscal 2024 and the additional $6.7 million in the first half of fiscal 2023, our effective tax rates in the first halves of fiscal 2024 and 2023 were 27.1% and 26.5%, respectively.

Current wording

The effective tax rates for the first nine months of fiscal 2024 and 2023 were 27.7% and 28.3%, respectively. Income tax expense was reduced by $2.9 million and $2.2 million of excess tax benefits on share-based payments in the first nine months of fiscal 2024 and 2023, respectively. In addition, income tax expense in the first nine months of fiscal 2024 included $4.3 million ($2.8 million in the second quarter) of expense for the settlement of various tax positions that were under audit for fiscal years 2018 through 2021. Furthermore, 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 United Kingdom 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, the settlement amounts in the first nine months of fiscal 2024 and the additional $7.2 million in the first nine months of fiscal 2023, our effective tax rates in the first nine months of fiscal 2024 and 2023 were 27.2% and 26.7%, respectively.

Previous wording

The revenue growth in the second quarter and first half of fiscal 2024 of 6.0% and 13.3%, respectively, compared to the same periods last year primarily reflects higher U.S. state and local government activities related to advanced water treatment, U.S. federal government activities related to international development and contributions from acquisitions. This growth was partially offset by lower disaster response activity. The revenue growth in the first half of fiscal 2024 includes a $56 million increase from the aforementioned international development activities in Ukraine compared to the same period last year. Our revenue growth in the second quarter and first half of fiscal 2024 also includes approximately $24 million and $50 million, respectively, of revenue from our recent acquisitions, that did not have comparable revenue for the same periods in fiscal 2023. Conversely, our revenue growth also includes decreased revenue from disaster response activities, which was approximately $12 million and $39 million lower in the second quarter and first half of fiscal 2024, respectively, compared to the same periods in fiscal 2023. Excluding the acquisitions, increased activity in Ukraine and the partially offsetting lower disaster response revenue, our revenue increased 7.4% and 8.7% in the second quarter and first half of fiscal 2024, respectively, compared to the same periods last year.

Current wording

For the third quarter and first nine months of fiscal 2024, the revenue growth of 20.6% and 15.8%, respectively, compared to the same periods last year primarily reflects higher U.S. federal government activities related to international development, U.S. state and local government activities related to advanced water treatment and contributions from our recent acquisitions. This growth was partially offset by lower disaster response activity. The revenue growth in the third quarter and first nine months of fiscal 2024 includes a $46 million increase and a $102 million increase, respectively, from the aforementioned international development activities in Ukraine compared to the fiscal 2023 periods. For the third quarter and first nine months of fiscal 2024, our revenue growth also includes approximately $33 million and $94 million, respectively, of revenue from our recent acquisitions, that did not have comparable revenue for the same periods in fiscal 2023. Conversely, our revenue growth also includes decreased revenue from disaster response activities, which was approximately $10 million and $51 million lower in the third quarter and first nine months of fiscal 2024, respectively, compared to the prior-year periods. Excluding the acquisitions, increased activity in Ukraine and the partially offsetting lower disaster response revenue, our revenue increased 8.6% and 7.9% in the third quarter and first nine months of fiscal 2024, respectively, compared to the same periods last year.

Previous wording

Operating income increased primarily due to the aforementioned revenue growth. Our operating margin, based on revenue, net of subcontractor costs, was 14.0% in the first half of fiscal 2024, compared to 14.3% in the first half of fiscal 2023. The decrease was due to a change in contract mix, specifically the aforementioned increase in the Ukraine energy program, which has a lower margin compared to other GSG activities.

Current wording

Operating income increased primarily due to the aforementioned revenue growth. Our operating margin, based on revenue, net of subcontractor costs, was 14.2% for the first nine months of both fiscal 2024 and 2023.

Previous wording

The revenue growth in the second quarter and first half of fiscal 2024 of 10.0% and 27.7%, respectively, compared to the same periods last year primarily reflects increased activities related to renewable energy and international infrastructure in addition to contributions from acquisitions. The revenue growth in the first half of fiscal 2024 includes approximately $216 million from the RPS acquisition that did not have comparable revenue in the same period last year. Excluding the impact of the RPS acquisition, our revenue increased 7.1% in the first half of fiscal 2024 compared to the same period last year.

Current wording

For the third quarter and first nine months of fiscal 2024, the revenue growth of 4.7% and 18.5%, respectively, compared to the same periods last year primarily reflects increased activities related to renewable energy and international sustainable infrastructure in addition to contributions from acquisitions. The revenue growth in the first nine months of fiscal 2024 includes approximately $205 million from the RPS acquisition that did not have comparable revenue in the fiscal 2023 period. Excluding the impact of the RPS acquisition, our revenue increased 6.8% in the first nine months of fiscal 2024 compared to the year-ago period.

Previous wording

For the second quarter and first half of fiscal 2024, our operating income increased due to the aforementioned revenue growth for both periods. In addition, our operating margin improved in the first half of fiscal 2024 compared to the same period last year. Our operating margin, based on revenue, net of subcontractor costs, improved approximately 150 basis points from 11.2% in the first half of fiscal 2023 to 12.7% in the first half of this year. The improved operating margin was primarily due to our increased focus on high-end consulting services, and improved project execution, particularly in the RPS operations.

Current wording

For the third quarter and first nine months of fiscal 2024, our operating income increased due to the aforementioned revenue growth for both periods. In addition, our operating margin improved in the first nine months of fiscal 2024 compared to the same period last year. Our operating margin, based on revenue, net of subcontractor costs, improved approximately 170 basis points from 11.4% in the first nine months of fiscal 2023 to 13.1% in the first nine months of this fiscal year. The improved operating margin was primarily due to our increased focus on high-end consulting services, and improved project execution, particularly in the RPS operations.

Previous wording

Capital Requirements. At March 31, 2024, we had $210.3 million of cash and cash equivalents and access to an additional $729.3 million of borrowings available under our credit facility. During the first half of fiscal 2024, we generated $112.2 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 described below, will be sufficient to meet our capital requirements for at least the next 12 months.

Current wording

Capital Requirements. At June 30, 2024, we had $212.3 million of cash and cash equivalents and access to an additional $800 million of borrowings available under our credit facility. During the first nine months of fiscal 2024, we generated $253.1 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 described below, will be sufficient to meet our capital requirements for at least the next 12 months.

Previous wording

Operating Activities. Cash from operations in the first half of fiscal 2023 included $27 million of payments related to the RPS acquisition, primarily the acquisition and integration costs. Excluding these costs, our cash from operations decreased approximately 20% in the first half of fiscal 2024 compared to the same period last year. This decrease primarily relates to $27 million in U.S. federal income tax payments made in the first quarter of fiscal 2024 that typically would have been made in fiscal 2023, but for the IRS permitted 2023 federal tax payment deferrals for disaster zones that we elected. In addition, we paid $5 million more in interest in the first half of fiscal 2024 than in the first half of last year primarily due to the additional debt incurred to fund the RPS acquisition.

Current wording

Operating Activities. Cash from operations in the first nine months of fiscal 2024 increased compared to fiscal 2023 period. This positive change was a result of increased earnings in the first nine months of fiscal 2024 and a continuation of more efficient management of working capital through the collection of accounts receivable. For the first nine months of fiscal 2024, we also paid $8 million less in interest compared to the prior-year period, primarily due the lower borrowing costs from our convertible notes issued in the fourth quarter of fiscal 2023, which we used to refinance the existing higher-cost debt incurred to fund the RPS acquisition in the second quarter of fiscal 2023. The increase in operating cash was partially offset by an increased use of working capital to fund the 17.2% revenue growth for the first nine months of the fiscal 2024. Additionally, we paid $27 million in U.S. federal income tax in the first quarter of fiscal 2024 that typically would have been made in fiscal 2023, but for the IRS permitted 2023 federal tax payment deferrals for disaster zones that we elected.

Previous wording

Investing Activities. For the first half of fiscal 2024, the cash used in investing activities includes net payments of $72 million for the LST acquisition completed in the second quarter of fiscal 2024. The fiscal 2023 period reflects $854 million of net payments for RPS and Amyx acquisitions completed in the second quarter of fiscal 2023, net of the $109 million of related foreign exchange hedge proceeds in the second quarter of fiscal 2023.

Current wording

Investing Activities. For the first nine months of fiscal 2024, the cash used in investing activities includes net payments of $94 million for the acquisitions completed year-to-date. The fiscal 2023 period reflects $854 million of net payments for the acquisitions completed in the second quarter of fiscal 2023, net of the $109 million of related foreign exchange hedge proceeds in the second quarter of fiscal 2023.

Previous wording

Financing Activities. For the first half of fiscal 2024, net cash provided by financing activities declined due to $656 million higher in net borrowings in the prior-year period, which was used to primarily fund our fiscal 2023 acquisitions of RPS and Amyx. To a lesser extent, the decline in our net cash provided by financing activities was due to $20 million more cash used for contingent earn-out payments in the current year's period compared to the same period last year.

Current wording

Financing Activities. For the first nine months of fiscal 2024, net cash provided by financing activities declined. The decrease was due to a higher net borrowing of $588 million in the prior-year period, which was used to primarily fund our fiscal 2023 acquisitions. To a lesser extent, the decline in our net cash provided by financing activities was due to $14 million more cash used for contingent earn-out payments in the current year's period compared to the same period last year.

Previous wording

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 "Convertible Notes"). As of October 1, 2023, $560.8 million of the Convertible Notes was included in long-term debt in our consolidated balance sheets, which is net of $14.2 million of unamortized debt issuance costs. 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 Amended Term Loan Facility, to prepay $89.4 million outstanding under the New Term Loan Facility and to pay down borrowings of $185.0 million under the Amended Revolving Credit Facility. See Note 15, "Long-term debt" of the "Notes to Consolidated Financial Statements" for further discussion.

Current wording

On August 22, 2023, we issued $575.0 million in the 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. As of October 1, 2023, $560.8 million of the Convertible Notes was included in long-term debt in our consolidated balance sheets, which is net of $14.2 million of unamortized debt issuance costs. 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 Amended Term Loan Facility, to prepay $89.4 million outstanding under the New Term Loan Facility and to pay down borrowings of $185.0 million under the Amended Revolving Credit Facility. See Note 15, "Long-Term Debt" of the "Notes to Consolidated Financial Statements" for further discussion.

Previous wording

At March 31, 2024, we had $390 million in outstanding borrowings under the Amended Credit Agreement, which was comprised of $320 million under the New Term Loan Facility and $70 million under the Amended Revolving Credit Facility. For the first half of fiscal 2024, the weighted-average interest rate of the outstanding borrowings under the Amended Credit Agreement was 6.75%. In addition, we had $0.7 million in standby letters of credit under the Amended Credit Agreement. At March 31, 2024, we had $429.3 million of available credit under the Amended Revolving Credit Facility, all of which could be borrowed without a violation of our debt covenants.

Current wording

At June 30, 2024, we had $300 million in outstanding borrowings under the Amended Credit Agreement, which consisted of $300 million under the New Term Loan Facility and no borrowings under the Amended Revolving Credit Facility. For the first nine months of fiscal 2024, the weighted-average interest rate of the outstanding borrowings under the Amended Credit Agreement was 6.72%. In addition, we had $0.7 million in standby letters of credit under the Amended Credit Agreement. At June 30, 2024, we had $499.3 million of available credit under the Amended Revolving Credit Facility, all of which could be borrowed without a violation of our debt covenants.

Previous wording

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 March 31, 2024, we were in compliance with these covenants with a consolidated leverage ratio of 1.73x and a consolidated interest coverage ratio of 10.98x.

Current wording

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 June 30, 2024, we were in compliance with these covenants with a consolidated leverage ratio of 1.51x and a consolidated interest coverage ratio of 12.47x.

Previous wording

In addition to the Amended Credit Agreement, we maintain other credit facilities, which may be used for short-term cash advances and bank guarantees. At March 31, 2024, there were no borrowings under these facilities, and the aggregate amount of standby letters of credit outstanding was $55.1 million. At March 31, 2024, we had no bank overdrafts related to our disbursement bank accounts.

Current wording

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 June 30, 2024, there were no borrowings under these facilities, and the aggregate amount of standby letters of credit outstanding was $50.6 million. At June 30, 2024, we had no bank overdrafts related to our disbursement bank accounts.

Previous wording

Subsequent Event. On April 29, 2024, our Board of Directors declared a quarterly cash dividend of $0.29 per share payable on May 31, 2024 to stockholders of record as of the close of business on May 20, 2024.

Current wording

Subsequent Events. On July 29, 2024, our Board of Directors declared a quarterly cash dividend of $0.29 per share payable on August 30, 2024 to stockholders of record as of the close of business on August 15, 2024.

Previous wording

It is reasonably possible that the amount of the unrecognized benefit with respect to certain of our unrecognized tax positions may not 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. At March 31, 2024 and October 1, 2023, the liability for income taxes associated with uncertain tax positions was $62.3 million and $62.0 million, respectively.

Current wording

It is reasonably possible that the amount of the unrecognized benefit with respect to certain of our unrecognized tax positions may not 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. At June 30, 2024 and October 1, 2023, the liability for income taxes associated with uncertain tax positions was $64.0 million and $62.0 million, respectively.

Previous wording

•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 issu ance of our standby letters of credit and bank guarantees and are critical for our normal operations. If we default on the Amended Credit Agreement or additional credit facilities, our inability to issue or renew standby letters of credit and bank guarantees would impair our ability to maintain normal operations. At March 31, 2024, we had $0.7 million in standby letters of credit outstanding under our Amended Credit Agreement and $55.1 million in standby letters of credit outstanding under our additional letter of credit facilities.

Current wording

•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 issu ance 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 June 30, 2024, we had $0.7 million in standby letters of credit outstanding under our Amended Credit Agreement and $50.6 million in standby letters of credit outstanding under our additional letter of credit facilities.

Previous wording

Our critical accounting policies are disclosed in our Annual Report on Form 10-K for the fiscal year ended October 1, 2023. To date, there have been no material changes in our critical accounting policies as reported in our 2023 Annual Report on Form 10-K.

Current wording

Our critical accounting policies are disclosed in our Annual Report on Form 10-K for the fiscal year ended October 1, 2023. To date, there have been no material changes in our critical accounting policies as reported in our fiscal 2023 Annual Report on Form 10-K.

Previous wording

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 design ated 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 March 31, 2024, we had $390 million in outstanding borrowings under the Amended Credit Agreement, which was comprised of $320 million under the New Term Loan Facility and $70 million under the Amended Revolving Credit Facility. For the first half of fiscal 2024, the weighted-average interest rate of the outstanding borrowings under the Amended Credit Agreement was 6.75%.

Current wording

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 design ated 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 June 30, 2024, we had $300 million in outstanding borrowings under the Amended Credit Agreement, which was consisted of $300 million under the New Term Loan Facility and no borrowings under the Amended Revolving Credit Facility. For the first nine months of fiscal 2024, the weighted-average interest rate of the outstanding borrowings under the Amended Credit Agreement was 6.72%.

Previous wording

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 the 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. The impact of the foreign currency gains and losses was immaterial for the first halves of fiscal 2024 and 2023.

Current wording

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 the 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. For the first nine months of fiscal 2024, we reported $1.0 million of foreign currency 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.

Previous wording

We have foreign currency exchange rate exposure in our results of operations and equity primarily because of the currency translation related to our foreign subsidiaries where the local currency is the functional currency. To the extent the U.S. dollar strengthens against foreign currencies, the translation of these foreign currency denominated transactions will result in reduced revenue, operating expenses, assets and liabilities. Similarly, our revenue, operating expenses, assets and liabilities will increase if the U.S. dollar weakens against foreign currencies. For the first halves of fiscal 2024 and 2023, 39.1% and 33.4% of our consolidated revenue, respectively, was generated by our international business. For the first half of fiscal 2024, the effect of foreign exchange rate translation on our consolidated balance sheet was an increase in equity by $38.8 million compared to an increase of $25.0 million in the prior-year quarter. These amounts were recognized as adjustments to equity through other comprehensive income.

Current wording

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 2024 and 2023, 39.0% and 36.2% of our consolidated revenue, respectively, was generated by our international business. For the first nine months of fiscal 2024, the effect of foreign exchange rate translation on our consolidated balance sheet was an increase in equity of $40.6 million compared to an increase of $69.5 million in the prior-year period. These amounts were recognized as adjustments to equity through other comprehensive income.