Willdan Group, Inc.: Form 10-Q for the period ended Oct 3, 2025

Our Company

We are a provider of professional, technical and consulting services to utilities, private industry, and public agencies at all levels of government. As resource and infrastructure needs undergo continuous change, we help organizations and their communities evolve and thrive by providing a wide range of technical services for energy solutions, greenhouse gas reduction, and government infrastructure. Through engineering, program management, policy advisory, and software and data management, we plan, design and deliver trusted, comprehensive, innovative, and proven solutions to improve efficiency, resiliency, and sustainability in energy and infrastructure to our clients.

Our broad portfolio of services operates within two financial reporting segments: (1) Energy and (2) Engineering and Consulting. The interfaces and synergies between these segments are important elements of our strategy to design and deliver trusted, comprehensive, innovative, and proven solutions and services for our customers.

Our Energy segment provides specialized, innovative, comprehensive energy solutions to businesses, utilities, state agencies, municipalities, and non-profit organizations in the U.S. Our experienced engineers, consultants, and staff help our clients realize cost and energy savings by tailoring efficient and cost-effective solutions to assist in optimizing energy spend. Our energy efficiency services include comprehensive audit and surveys, program design, master planning, demand reduction, grid optimization, benchmarking analyses, design engineering, construction management, performance contracting, installation, alternative financing, measurement and verification services, and advances in software and data analytics for long-term planning.

Our Engineering and Consulting segment provides civil engineering-related construction management, building and safety, city engineering office management, city planning, civil design, geotechnical, material testing and other engineering consulting services to our clients. Our engineering services include traffic, bridges, rail, port, water, mining and other civil engineering projects. We also provide economic and financial consulting to public agencies. Lastly, we supplement the engineering services that we offer our clients by offering expertise and support for the various financing techniques public agencies utilize to finance their operations and infrastructure. We also support the mandated reporting and other requirements associated with these financings. We provide financial advisory services for municipal securities but do not provide underwriting services.

Results of Operations

Third Quarter and Nine Months Overview

The following table sets forth, for the periods indicated, certain information derived from our condensed consolidated statements of comprehensive income(1):

(in thousands, except percentages)

(1) Percentages are expressed as a percentage of contract revenue and may not total due to rounding.

(2) N/M = Not meaningful.

44

(in thousands, except percentages)

(1) Percentages are expressed as a percentage of contract revenue and may not total due to rounding.

(2) N/M = Not meaningful.

The following tables provide information about disaggregated revenue of our two segments, Energy and Engineering and Consulting, by contract type, client type and geographical region:

(in thousands)

(in thousands)

(1) Amounts may not add to the totals due to rounding.

(2) Includes the portion of revenue related to small business programs paid by the end user/customer.

(3) Revenue from our foreign operations was not material for the three and nine months ended October 3, 2025 and September 27, 2024.

Three Months Ended October 3, 2025 Compared to Three Months Ended September 27, 2024

Contract revenue. Consolidated contract revenue increased $23.8 million, or 15.0%, in the three months ended October 3, 2025, compared to the three months ended September 27, 2024, reflecting increased demand for our services in both our Energy segment and our Engineering and Consulting segment.

Contract revenue in our Energy segment increased $20.7 million, or 15.5%, in the three months ended October 3, 2025, compared to the three months ended September 27, 2024, primarily as a result of increased demand for energy efficiency and electrification services under utility programs, higher construction management revenues, higher planning and advisory consulting revenues, and the incremental revenues from our acquisitions of Enica Engineering, PLCC. (“Enica”) and Alternative Power Generation, Inc. (“APG”).

Contract revenue in our Engineering and Consulting segment increased $3.1 million, or 12.5%, in the three months ended October 3, 2025, compared to the three months ended September 27, 2024, primarily due to increased demand for services provided to our clients, combined with the incremental revenues from our acquisition of Alpha Inspections, Inc. (“Alpha”).

Direct costs of contract revenue. Direct costs of consolidated contract revenue increased $8.3 million, or 7.8%, for the three months ended October 3, 2025, compared to the three months ended September 27, 2024, primarily as a result of the increase and change of mix in contract revenues as described above. As a percentage of contract revenue, subcontractor services and other direct costs decreased to 47.8% in the three months ended October 3, 2025 from 52.2% in the three months ended September 27, 2024. Direct salaries and wages increased $3.8 million, or 15.7%, to support the increased volume of projects in the three months ended October 3, 2025, compared to the three months ended September 27, 2024.

Direct costs of contract revenue in our Energy segment increased $6.7 million, or 7.0%, for the three months ended October 3, 2025, compared to the three months ended September 27, 2024. Direct costs of contract revenue for the Engineering and Consulting segment increased $1.6 million, or 14.9%, in the three months ended October 3, 2025, compared to the three months ended September 27, 2024.

Subcontractor services and other direct costs increased by $4.5 million, or 5.4%, in the three months ended October 3, 2025, compared to the three months ended September 27, 2024, primarily due to the increase in utility program revenues and construction management revenues, which utilize a higher percentage of material cost and installation subcontracting. Salaries and wages increased by $3.8 million, or 15.7%, in the three months ended October 3, 2025, compared to the three months ended September 27, 2024, primarily as a result of the increases in contract revenue as described above.

Gross Profit. Gross profit increased 30.0% to $67.1 million, or 36.9% gross margin, for the three months ended October 3, 2025, compared to gross profit of $51.6 million, or 32.6% gross margin, for the three months ended September 27, 2024. The increase in our gross margin was primarily driven by changes in the mix of revenues as described above.

General and administrative expenses. General and administrative (“G&A”) expenses increased $9.3 million, or 21.7%, to $52.2 million in the three months ended October 3, 2025, compared to $42.9 million for the three months ended September 27, 2024. G&A expenses consisted of an increase of $7.4 million, or 23.1%, in the Energy segment combined with an increase of $1.0 million, or 11.1%, in the Engineering and Consulting segment, and an increase of $0.9 million in unallocated corporate expenses.

The overall increase in G&A expenses consisted of an increase of $5.8 million in salaries and wages, payroll taxes and employee benefits, an increase of $2.1 million in other general and administrative expenses, and an increase of $1.1 million in stock-based compensation. The increase in salaries and wages, payroll taxes and employee benefits was primarily due to increased staffing from acquisitions, an increase in incentive compensation to support revenue growth, consistent with the improvement in operating profit, and higher fringe benefit costs consistent with the growth in direct and indirect labor costs. The increase in other general and administrative expenses was primarily due to increased professional service fees and computer-related expenses. The increase in stock-based compensation expenses was primarily related to new stock grants to current employees, executives, and Board of directors at a higher stock price.

Income (loss) from operations. Operating income increased 71.3% to $14.9 million for the three months ended October 3, 2025, compared to an operating income of $8.7 million for the three months ended September 27, 2024, as a result of the factors noted above.

Total other expense, net. Total other expense, net, decreased $0.6 million, or 51.2%, for the three months ended October 3, 2025, compared to the three months ended September 27, 2024, primarily due to the lower interest expense resulting from the reduced interest rate spread derived from lower debt leverage levels under our credit facilities.

Income tax expense (benefit). Income tax expense was $0.6 million for the three months ended October 3, 2025, an effective tax expense rate of 4.0% on income before income tax expense, compared to an income tax expense of $0.2 million for the three months ended September 27, 2024, an effective tax expense rate of 2.1% on income before tax expense. The increase in the effective tax rate resulted from the higher income before income tax combined with decreases in discrete items related lower energy-efficiency building deductions, partially offset by increases in discrete items related to stock compensation deductions.

Net income (loss). Our net income was $13.7 million for the three months ended October 3, 2025, as compared to a net income of $7.3 million for the three months ended September 27, 2024. The increase in net income was primarily attributable to the increase in income from operations combined with the decrease in total other expense, net, partially offset by the higher effective tax rate.

Nine Months Ended October 3, 2025 Compared to Nine Months Ended September 27, 2024

Contract revenue. Consolidated contract revenue increased $86.1 million, or 20.4%, in the nine months ended October 3, 2025, compared to the nine months ended September 27, 2024, reflecting increased demand for our services in both our Energy segment and our Engineering and Consulting segment.

Contract revenue in our Energy segment increased $75.1 million, or 21.3%, in the nine months ended October 3, 2025, compared to the nine months ended September 27, 2024, primarily as a result of increased demand for energy efficiency and electrification services under utility programs, higher construction management revenues, higher planning and advisory consulting revenues, and the incremental revenues from our acquisitions of Enica and APG.

Contract revenue in our Engineering and Consulting segment increased $11.0 million, or 15.9%, in the nine months ended October 3, 2025, compared to the nine months ended September 27, 2024, primarily due to increased demand for services provided to our clients, combined with the incremental revenues from our acquisition of Alpha.

Direct costs of contract revenue. Direct costs of consolidated contract revenue increased $40.9 million, or 14.9%, for the nine months ended October 3, 2025, compared to the nine months ended September 27, 2024, primarily as a result of the increase and change of mix in contract revenues as described above. As a percentage of contract revenue, subcontractor services and other direct costs decreased to 45.8% in the nine months ended October 3, 2025 from 48.5% in the nine months ended September 27, 2024. Direct salaries and wages increased $13.0 million, or 18.7%, to support the increased volume of projects in the nine months ended October 3, 2025, compared to the nine months ended September 27, 2024.

Direct costs of contract revenue in our Energy segment increased $35.9 million, or 14.8%, for the nine months ended October 3, 2025, compared to the nine months ended September 27, 2024. Direct costs of contract revenue for the Engineering and Consulting segment increased $5.0 million, or 16.0%, in the nine months ended October 3, 2025, compared to the nine months ended September 27, 2024.

Subcontractor services and other direct costs increased by $27.9 million, or 13.6%, in the nine months ended October 3, 2025, compared to the nine months ended September 27, 2024, primarily due to the increase in utility program revenues and construction management revenues, which utilize a higher percentage of material cost and installation subcontracting. Salaries and wages increased by $13.0 million, or 18.7%, in the nine months ended October 3, 2025, compared to the nine months ended September 27, 2024, primarily as a result of the increases in contract revenue as described above.

Gross Profit. Gross profit increased 30.6% to $193.1 million, or 38.0% gross margin, for the nine months ended October 3, 2025, compared to gross profit of $147.8 million, or 35.1% gross margin, for the nine months ended September 27, 2024. The increase in our gross margin was primarily driven by changes in the mix of revenues as described above.

General and administrative expenses. G&A expenses increased $32.0 million, or 25.1%, to $159.4 million in the nine months ended October 3, 2025, compared to $127.3 million for the nine months ended September 27, 2024. G&A expenses consisted of an increase of $23.9 million, or 25.2%, in the Energy segment combined with an increase of $3.0 million, or 10.7%, in the Engineering and Consulting segment, and an increase of $5.1 million in unallocated corporate expenses.

The overall increase in G&A expenses consisted of an increase of $17.0 million in salaries and wages, payroll taxes and employee benefits, an increase of $8.6 million in other general and administrative expenses, an increase of $3.4 million in stock-based compensation, and an increase of $2.9 million in depreciation and amortization. The increase in salaries and wages, payroll taxes and employee benefits was primarily due to increased staffing from acquisitions, an increase in incentive compensation to support revenue growth, consistent with the improvement in operating profit, and higher fringe benefit costs consistent with the growth in direct and indirect labor costs. The increase in other general and administrative expenses was primarily due to increased professional service fees and computer-related expenses. The increase in stock-based compensation expenses was primarily related to new stock grants to current employees, executives and Board of directors at a higher stock price. The increase in depreciation and amortization was primarily related to higher amortization of intangible assets from recent acquisitions.

Income (loss) from operations. Operating income increased 64.6% to $33.7 million for the nine months ended October 3, 2025, compared to an operating income of $20.5 million for the nine months ended September 27, 2024, as a result of the factors noted above.

Total other expense, net. Total other expense, net, increased $0.3 million, or 8.3%, for the nine months ended October 3, 2025, compared to the nine months ended September 27, 2024, primarily due to a one-time charge for unamortized debt issuance costs related to our prior credit facilities combined with a one-time charge related to a facility lease modification, partially offset by lower interest expense resulting from the reduced interest rate spread derived from lower debt leverage levels under our credit facilities.

Income tax expense (benefit). We recorded an income tax benefit of $4.2 million for the nine months ended October 3, 2025, an effective tax benefit rate of 14.1% on income before income tax expense, compared to an income tax expense of $1.9 million for the nine months ended September 27, 2024, an effective tax rate of 11.1% on income before tax expense. The reduction in the effective tax rate resulted from increases in discrete items related to stock compensation deductions and additional energy-efficiency building deductions.

Net income (loss). Our net income was $33.8 million for the nine months ended October 3, 2025, as compared to a net income of $14.9 million for the nine months ended September 27, 2024. The increase in net income was primarily attributable to the increase in income from operations combined with the tax benefit.

Liquidity and Capital Resources

(in thousands)

Sources of Cash

Our primary sources of liquidity for the next 12 months and beyond are cash generated from operations, cash and cash equivalents, and available borrowings under our Revolving Credit Facility and Delayed Draw Term Loan under the Credit Agreement (the “Credit Facilities”). We believe these sources will be sufficient to finance our operating activities for at least the next 12 months.

As of October 3, 2025, we had a fully drawn $50.0 million term loan with $49.4 million outstanding, a $100.0 million Revolving Credit Facility with no borrowed amounts outstanding and $1.6 million in letters of credit issued, and a $50.0 million Delayed Draw Term Loan which has not been drawn on. The Delayed Draw Term Loan must be drawn before May 2027. The Credit Facilities are each scheduled to mature on May 5, 2030. In addition to the Credit Facilities, we had $33.1 million of unrestricted cash and cash equivalents as of October 3, 2025. Unhedged borrowings under our Credit Facilities, exclusive of the effects of upfront fees, undrawn fees and issuance cost amortization, bore interest at an annual rate of 5.7% as of October 3, 2025. See Part I, Item 1, Note 6, “Debt Obligations”, of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for information regarding our indebtedness, including information about Amended and Restated Credit Agreement (the “Amended and Restated Credit Agreement”) and repayments, principal repayment terms, interest rates, covenants, and other key terms of our outstanding indebtedness.

Cash Flows from Operating Activities

Cash flows provided by operating activities were $40.9 million for the nine months ended October 3, 2025, as compared to cash flows provided by operating activities of $38.6 million for the nine months ended September 27, 2024. Cash flows from operating activities primarily consists of net income, adjusted for non-cash charges, such as depreciation and amortization and stock-based compensation, plus or minus changes in current operating assets and liabilities. Cash flows provided by operating activities for the nine months ended October 3, 2025, resulted primarily from the increase in earnings partially offset by higher working capital requirements to support the expansion of revenue. Cash flows provided by operating activities for the nine months ended September 27, 2024, resulted primarily from the increase in earnings and reduced working capital requirements resulting from faster billing and improved collections.

Cash Flows from Investing Activities

Cash flows used in investing activities were $40.3 million for the nine months ended October 3, 2025, as compared to cash flows used in investing activities of $6.0 million for the nine months ended September 27, 2024. Cash flows used in investing activities for the nine months ended October 3, 2025 and September 27, 2024, were primarily due to cash paid for acquisitions, combined with cash paid for the development of proprietary software and the purchase of computers and equipment.

Cash Flows from Financing Activities

Cash flows used in financing activities were $41.6 million for the nine months ended October 3, 2025, as compared to cash flows used in financing activities of $2.9 million for the nine months ended September 27, 2024.

For the nine months ended October 3, 2025, cash flows used in financing activities were primarily attributable to the $39.0 million cash used to pay down our Revolving Credit Facility, $5.1 million cash used to pay withholding taxes on stock grants, $1.1 million principal payments on finance leases combined with repayments and borrowings of $90.0 million and $88.4 million, respectively, related to our Amended and Restated Credit Agreement. Cash flows used in financing activities were partially offset by $3.2 million of proceeds from sales of common stock under the employee stock purchase plan, and $2.5 million in proceeds from stock option exercise. Cash flows used in financing activities for the nine months ended September 27, 2024 were primarily attributable to the repayments of $5.6 million under our Term Loan, $1.2 million cash used to pay withholding taxes on stock grants, and $1.0 million principal payments on finance leases, partially offset by $2.8 million of proceeds from sales of common stock under employee stock purchase plan and $2.4 million in proceeds from stock option exercises.

Under certain utility contracts, we periodically receive cash deposits to be held in trust for the payment of energy incentive rebates to be sent directly to the utility’s end-customer on behalf of the utility. We act solely as the utility’s agent to distribute these funds to the end-customer and, accordingly, we classify these contractually restricted funds as restricted cash. Because these funds are held in trust for pass through to the utility’s customers and have no impact on our working capital or operating cash flows, these cash receipts are presented in the condensed consolidated statement of cash flows as financing cash inflows, “Receipt of restricted cash”, with the subsequent payments classified as financing cash outflows, “Payment of restricted cash.”

Off-Balance Sheet Arrangements

We do not have any off-balance sheet financing arrangements or liabilities. In addition, our policy is not to enter into futures or forward contracts. Finally, we do not have any majority-owned subsidiaries or any interests in, or relationships with, any special-purpose entities that are not included in the consolidated financial statements. We have, however, an administrative services agreement with Genesys in which we provide Genesys with ongoing administrative, operational and other non-professional support services. We manage Genesys and have the power to direct the activities that most significantly impact Genesys’ performance, in addition to being obligated to absorb expected losses from Genesys. Accordingly, we are the primary beneficiary of Genesys and consolidate Genesys as a variable interest entity.

Short and Long-term Uses of Cash

General

Our principal uses of cash are to fund operating expenses, support working capital requirements, finance capital expenditures, and pay down outstanding debt. From time to time, we also use cash to help fund business acquisitions. Our cash and cash equivalents are impacted by the timing of when we invoice and are paid by our customers for services rendered and when we pay expenses as reflected in the change in our outstanding accounts payable and accrued expenses.

Contractual Obligations

The following table sets forth our known contractual obligations as of October 3, 2025:

(in thousands)

(1) Debt includes $49.1 million outstanding on our Term Loan A (“TLA”), net of issuance costs, no borrowed amounts outstanding on our Revolving Credit Facility, and no borrowed amounts outstanding on our Delayed Draw Term Loan as of October 3, 2025. We have assumed no future borrowings or repayments after October 3, 2025 (other than at maturity) for purposes of this table. Our TLA and Revolving Credit Facility are scheduled to mature on May 5, 2030.

(2) Borrowings under our TLA and Revolving Credit Facility bear interest at a variable rate. Future interest payments on our Credit Facility are estimated using floating rates in effect as of October 3, 2025.

We have contingent obligations to make earnout payments in connection with our acquisitions of Enica and APG, subject to their future financial performance. We are obligated to pay up to $6.0 million in cash if Enica exceeds certain financial targets during the two years after the Enica closing date of October 23, 2024, and are obligated to pay up to $18.0 million in cash if APG exceeds certain financial targets during the three years after the APG closing date of March 3, 2025. As of October 3, 2025, we had contingent consideration payable of $18.5 million related to the acquisitions of Enica and APG and, through the nine months ended October 3, 2025, our statement of operations includes $2.3 million of interest accretion (excluding fair value adjustments) related to the contingent consideration.

Outstanding Indebtedness

See Part I, Item 1, Note 6, “Debt Obligations”, of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q, and Part II, Item 8, Note 5, “Debt Obligations”, of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 27, 2024, for information regarding our indebtedness, including information about new borrowings and repayments, principal repayment terms, interest rates, covenants, and other key terms of our outstanding indebtedness.

Interest Rate Swap

From time to time, we enter into interest rate swap agreements to moderate our exposure to fluctuations in interest rates underlying our variable rate debt. For more information, see Part I, Item 3, “Quantitative and Qualitative Disclosures About Market Risk”, and Note 5, “Derivative Financial Instruments”, to the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.

Impact of Inflation

Due to the average duration of our projects and our ability to negotiate prices as contracts end and new contracts begin, historically, our operations have not been materially impacted by inflation.

While not material to our results of operations and financial condition, we have experienced higher cost of materials and delays in our supply chain for equipment. The prices of finished products from manufacturers are subject to fluctuation and increases. It is difficult to accurately measure the impact of inflation, tariffs, price escalation, raw material costs, and other factors that impact the cost of finished goods due to the imprecise nature of the estimates required.

We are often able to mitigate the impact of future price increases by entering into fixed price purchase orders for materials and equipment, and subcontracts on our projects, as well as, when appropriate, including cost escalation factors into our proposals. Despite our best mitigation efforts, significant price increases in equipment and disruptions to our supply chain could materially impact our results of operations and financial condition. In addition, inflationary pressures, including expectations of future inflation, may impact the customers of our utility clients, which may lead to delayed or deferred decisions regarding expenditures to improve energy efficiency, and therefore potentially impact our future revenues.

Impact of Certain Federal Policies

Federal policies related to tariffs and renewable energy incentives have been subject to frequent and significant changes from executive orders issued by the new federal administration. While we have not experienced a material impact to our operating results or our outlook for future business, there can be no assurance that these measures will not impact our ability to procure cost-effective pricing of materials used in our projects at various building sites, or result in a reduction in demand for our services as a result of inflation, lead times, or other impacts that may derive from changes in the current administration’s executive orders.

Components of Revenue and Expense

Contract Revenue

We generally provide our services under contracts, purchase orders or retainer letters. The agreements we enter into with our clients typically incorporate one of three principal types of pricing provisions: time-and-materials, unit-based, and fixed price. Revenue on our time-and-materials and unit-based contracts are recognized as the work is performed in accordance with specific terms of the contract. As of October 3, 2025, 18% of our contracts are time-and-materials contracts, 36% are unit-based contracts, and 46% are fixed price contracts, compared to 18% are time-and-materials contracts, 38% are unit-based contracts, and 44% are fixed price contracts, as of September 27, 2024.

Some of these contracts include maximum contract prices, but contract maximums are often adjusted to reflect the level of effort to achieve client objectives and thus the majority of these contracts are not expected to exceed the maximum. Contract revenue on our fixed price contracts is determined on the percentage of completion method based generally on the ratio of direct costs incurred to date to estimated total direct costs at completion. Many of our fixed price contracts involve a high degree of subcontracted fixed price effort and are relatively short in duration, thereby lowering the risks of not properly estimating the percent complete.

Adjustments to contract cost estimates are made in the periods in which the facts requiring such revisions become known. When the revised estimate indicates a loss, such loss is recognized in the current period in its entirety. Claims and change orders that have not been finalized are evaluated to determine whether or not a change has occurred in the enforceable rights and obligations of the original contract. If these non-finalized changes qualify as a contract modification, a determination is made whether to account for the change in contract value as a modification to the existing contract, or a separate contract and revenue under the claims or change orders is recognized accordingly. Costs related to un-priced change orders are expensed when incurred, and recognition of the related revenue is based on the assessment above of whether or not a contract modification has occurred. Estimated profit for un-priced change orders is recognized only if collection is probable.

Our contracts come up for renewal periodically and at the time of renewal may be subject to renegotiation, which could impact the profitability of that contract. In addition, during the term of a contract, public agencies may request additional or revised services which may impact the economics of the transaction. Most of our contracts permit our clients, with prior notice, to terminate the contracts at any time without cause. While we have a large volume of contracts, the renewal, termination or modification of a contract, in particular contracts with Consolidated Edison, the Dormitory Authority-State of New York, the New York City Housing Authority, and utility programs associated with Los Angeles Department of Water and Power and Southern California Edison, may have a material effect on our consolidated operations.

Some of our contracts include certain performance guarantees, such as a guaranteed energy saving quantity. Such guarantees are generally measured upon completion of a project. In the event that the measured performance level is less than the guaranteed level, any resulting financial penalty, including any additional work that may be required to fulfill the guarantee, is estimated and charged to direct expenses in the current period. We have not experienced any significant costs under such guarantees.

Direct Costs of Contract Revenue

Direct costs of contract revenue consist primarily of that portion of salaries and wages that have been incurred in connection with revenue producing projects. Direct costs of contract revenue also include material costs, subcontractor services, equipment and other expenses that are incurred in connection with revenue producing projects. Direct costs of contract revenue exclude that portion of salaries and wages related to marketing efforts, vacations, holidays and other time not spent directly generating revenue under existing contracts. Such costs are included in general and administrative expenses. Additionally, payroll taxes, bonuses and employee benefit costs for all of our personnel are included in general and administrative expenses since no allocation of these costs is made to direct costs of contract revenue.

Other companies may classify as direct costs of contract revenue some of the costs that we classify as general and administrative costs. We expense direct costs of contract revenue when incurred.

General and Administrative Expenses

G&A expenses include the costs of the marketing and support staff, other marketing expenses, management and administrative personnel costs, payroll taxes, bonuses and employee benefits for all of our employees and the portion of salaries and wages not allocated to direct costs of contract revenue for those employees who provide our services. G&A expenses also include facility costs, depreciation and amortization, professional services, legal and accounting fees and administrative operating costs. Within G&A expenses, “Other” includes expenses such as professional services, legal and accounting, computer costs, travel and entertainment, marketing costs and acquisition costs. We expense general and administrative costs when incurred.

Critical Accounting Policies

We have prepared the accompanying unaudited Condensed Consolidated Financial Statements in accordance with generally accepted accounting principles in the U.S. (“GAAP”). To prepare these financial statements in conformity with GAAP, we must make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amount of revenue and expenses in the reporting period. Our actual results may differ from these estimates. We have adopted accounting policies and practices that are generally accepted in the industry in which we operate.

There have been no material changes in our critical accounting policies and estimates from those disclosed in our Annual Report on Form 10-K for our fiscal year ended December 27, 2024. Please refer to Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 27, 2024 for a discussion of our critical accounting policies and estimates.

Recent Accounting Standards

For a description of recently issued and adopted accounting pronouncements, including adoption dates and expected effects on our results of operations and financial condition, see Part I, Item 1, Note 2, “Recent Accounting Pronouncements”, of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.

Interest Rate Risk

Market risk is the risk of loss to future earnings, to fair values or to future cash flows that may result from changes in the price of a financial instrument. The value of a financial instrument may change as a result of changes in interest rates, exchange rates, commodity prices, equity prices and other market changes. Market risk is attributed to all market risk sensitive financial instruments, including long-term debt.

As of October 3, 2025, we had cash and cash equivalents of $33.1 million. This amount represents cash on hand in business checking accounts with our banks. We do not engage in trading activities and do not participate in foreign currency transactions.

We are subject to interest rate risk in connection with our Term Loan A (“TLA”) and borrowings, if any, under our Revolving Credit Facility, each of which bears interest at variable rates. As of October 3, 2025, the Company had a fully drawn $50.0 million TLA with $49.4 million outstanding, a $100.0 million Revolving Credit Facility with no borrowed amounts, and $1.6 million in letters of credit issued, and a $50.0 million Delayed Draw Term Loan with no borrowed amounts. Each of our TLA, Revolving Credit Facility and Delayed Draw Term Loan mature on May 5, 2030 and are governed by our Credit Agreement.

Based upon the amount of our outstanding indebtedness as of October 3, 2025, a one percentage point increase in the effective interest rate would change our annual interest expense by approximately $0.5 million in fiscal year 2025.

We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) and Rule 15-d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as controls and other procedures that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act is accumulated and communicated to our management, including our including our President and Chief Executive Officer, Michael A. Bieber, and our Chief Financial Officer and Executive Vice President, Creighton K. Early, as appropriate to allow timely decisions regarding required disclosure.

In connection with the preparation of this Quarterly Report, an evaluation was performed under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures as of October 3, 2025. Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective, at a reasonable assurance level, as of October 3, 2025.

On January 31, 2025, and March 3, 2025, we completed the acquisition of Alpha, and APG, respectively. Prior to the acquisition, Alpha, and APG were privately-held companies and were not subject to the Sarbanes-Oxley Act of 2002, the rules and regulations of the SEC, or other corporate governance requirements applicable to public reporting companies. As part of our ongoing integration activities, we are continuing to incorporate our controls and procedures into Alpha, and APG, and, if needed, to augment our company-wide controls to reflect the risks that may be inherent in the acquisition of these privately-held companies.

Other than our integration of Alpha, and APG, there have been no changes in our internal control over financial reporting during the quarter ended October 3, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There are no material changes to the risk factors set forth in Part I, Item 1A, Risk Factors in our Annual Report on Form 10-K for the year ended December 27, 2024.