# Willdan Group, Inc.: Form 10-Q for the period ended Jun 30, 2023

- Company: [Willdan Group, Inc.](/companies/wldn.md) (CIK 1370450)
- Form: 10-Q
- Filed: 2023-08-04
- Accepted by EDGAR: Aug 3, 2023, 18:47 ET
- Period: 2023-06-30
- Accession: 0001558370-23-013281
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1370450/000155837023013281/wldn-20230630x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1370450/000155837023013281/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-04-01 to 2023-06-30 | $119.1m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months, 2022-12-31 to 2023-06-30 | $221.7m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-04-01 to 2023-06-30 | $78.4m | us-gaap:CostOfRevenue |
| Cost of revenue | 6 months, 2022-12-31 to 2023-06-30 | $139.8m | us-gaap:CostOfRevenue |
| Operating income | 3 months, 2023-04-01 to 2023-06-30 | $2.5m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2022-12-31 to 2023-06-30 | $6.5m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2023-04-01 to 2023-06-30 | $243.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2022-12-31 to 2023-06-30 | $999.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-04-01 to 2023-06-30 | $397.0k | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2022-12-31 to 2023-06-30 | $1.3m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-04-01 to 2023-06-30 | $0.03 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2022-12-31 to 2023-06-30 | $0.10 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-04-01 to 2023-06-30 | $0.03 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2022-12-31 to 2023-06-30 | $0.10 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-04-01 to 2023-06-30 | 13,487,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2022-12-31 to 2023-06-30 | 13,481,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2022-12-31 to 2023-06-30 | $18.9m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2022-12-31 to 2023-06-30 | $5.8m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2023-06-30 | $13.6m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-06-30 | $155.8m | us-gaap:AssetsCurrent |
| Total assets | at 2023-06-30 | $394.8m | us-gaap:Assets |
| Current liabilities | at 2023-06-30 | $195.7m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-06-30 | $208.0m | us-gaap:Liabilities |
| Long-term debt | at 2023-06-30 | $19.0k | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2023-06-30 | $102.6m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2023-06-30 | $186.9m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 45,118 characters.

### 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.

### Key Developments

#### Credit Agreement Refinancing

As described in Part I, Item 1, Note 5, “*Debt Obligations”*, and Part I, Item 3, “*Quantitative and Qualitative Disclosures About Market Risk”*, our current Credit Agreement (as defined below) matures on June 26, 2024. Pursuant to the terms of the Credit Agreement, our Term A Loan (as defined below) amortizes quarterly in installments of $2.5 million beginning with the fiscal quarter ending September 27, 2019, with a final payment of all then remaining principal and interest due on the maturity date of June 26, 2024. In addition, each borrowing under our Delayed Draw Term Loan (as defined below) amortizes quarterly in an amount equal to 2.5% of the aggregate outstanding borrowings under the Delayed Draw Term Loan, beginning with the first full fiscal quarter ending after the initial borrowing date, with a final payment of all then remaining principal and interest due on the maturity date of June 26, 2024.

In accordance with ASC Topic 205, when preparing financial statements for each reporting period, we evaluate whether there are conditions or events that, when considered in the aggregate, raise substantial doubt about our ability to continue as a going concern within one year after the date that the financial statements are issued. We considered our Credit Agreement’s principal and interest payment due on June 26, 2024 and assessed our current financial condition and liquidity sources, including current funds available, forecasted future cash flows, and conditional and unconditional obligations due over the next twelve months. Based on this analysis, only as a result of our obligation under the Credit Agreement to make final payment of all then remaining principal and interest on June 26, 2024, does an event arise which raises substantial doubt with respect to our ability to continue as a going concern within one year after the date that the condensed consolidated financial statements are issued.

We intend to refinance our Credit Agreement and have entered into an engagement to secure a new three-year financing facility with a syndicate of financial institutions as lenders, which, among other things, will repay 100% of the obligations under the existing Credit Agreement and extend the due date of the maturity payment by more than two years from the current maturity date. We expect to finalize our refinancing efforts and enter into a new credit agreement during the second half of fiscal year 2023. Accordingly, we believe that our refinancing plan alleviates any substantial doubt about our ability to continue as a going concern within one year after the date that the consolidated financial statements are issued because we expect to fully refinance the Credit Agreement with a new credit facility prior to June 26, 2024, the date on which final payment of all then remaining principal and interest under the current Credit Agreement is due.

### Results of Operations

#### Second Quarter and First Half Overview

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

*(in thousands, except percentages)*

| ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ Three Months Ended June 30, 2023 ​ ​ | ​ ​ | ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ July 1, 2022 ​ ​ | ​ ​ | ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ ​ ​ ​ $ Change ​ ​ | ​ ​ ​ ​ | ​ ​ ​ ​ ​ % Change ​ ​ ​ ​ |
| --- | --- | --- | --- | ---: | --- | --- | --- | ---: | --- | --- | --- | ---: |
| Contract revenue | ​ | $119,077 |  | 100.0% |  | $102,645 |  | 100.0% |  | $16,432 |  | 16.0% |
| Direct costs of contract revenue: | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Salaries and wages | ​ | ​ 21,302 | ​ | 17.9 ​ | ​ | ​ 21,284 | ​ | 20.7 ​ | ​ | ​ 18 | ​ | 0.1 ​ |
| Subcontractor services and other direct costs | ​ | ​ 57,142 | ​ | 48.0 ​ | ​ | ​ 49,771 | ​ | 48.5 ​ | ​ | ​ 7,371 | ​ | 14.8 ​ |
| Total direct costs of contract revenue | ​ | ​ 78,444 | ​ | 65.9 ​ | ​ | ​ 71,055 | ​ | 69.2 ​ | ​ | ​ 7,389 | ​ | 10.4 ​ |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Gross profit | ​ | ​ 40,633 | ​ | 34.1 ​ | ​ | ​ 31,590 | ​ | 30.8 ​ | ​ | ​ 9,043 | ​ | 28.6 ​ |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| General and administrative expenses: | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Salaries and wages, payroll taxes and employee benefits | ​ | ​ 22,416 | ​ | 18.8 ​ | ​ | ​ 20,439 | ​ | 19.9 ​ | ​ | ​ 1,977 | ​ | 9.7 ​ |
| Facilities and facilities related | ​ | ​ 2,619 | ​ | 2.2 ​ | ​ | ​ 2,373 | ​ | 2.3 ​ | ​ | ​ 246 | ​ | 10.4 ​ |
| Stock-based compensation | ​ | ​ 1,287 | ​ | 1.1 ​ | ​ | ​ 1,714 | ​ | 1.7 ​ | ​ | ​ (427) | ​ | (24.9) ​ |
| Depreciation and amortization | ​ | ​ 4,128 | ​ | 3.5 ​ | ​ | ​ 4,426 | ​ | 4.3 ​ | ​ | ​ (298) | ​ | (6.7) ​ |
| Other | ​ | ​ 7,709 | ​ | 6.5 ​ | ​ | ​ 7,936 | ​ | 7.7 ​ | ​ | ​ (227) | ​ | (2.9) ​ |
| Total general and administrative expenses | ​ | ​ 38,159 | ​ | 32.0 ​ | ​ | ​ 36,888 | ​ | 35.9 ​ | ​ | ​ 1,271 | ​ | 3.4 ​ |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Income (loss) from operations | ​ | ​ 2,474 | ​ | 2.1 ​ | ​ | ​ (5,298) | ​ | (5.2) ​ | ​ | ​ 7,772 | ​ | 146.7 ​ |
| Other income (expense): | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Interest expense | ​ | ​ (2,207) | ​ | (1.9) ​ | ​ | ​ (1,030) | ​ | (1.0) ​ | ​ | ​ (1,177) | ​ | 114.3 ​ |
| Other, net | ​ | ​ 373 | ​ | 0.3 ​ | ​ | ​ 329 | ​ | 0.3 ​ | ​ | ​ 44 | ​ | 13.4 ​ |
| Total other income (expense) | ​ | ​ (1,834) | ​ | (1.5) ​ | ​ | ​ (701) | ​ | (0.7) ​ | ​ | ​ (1,133) | ​ | 161.6 ​ |
| Income (Loss) before income tax expense | ​ | ​ 640 | ​ | 0.5 ​ | ​ | ​ (5,999) | ​ | (5.8) ​ | ​ | ​ 6,639 | ​ | 110.7 ​ |
| Income tax expense (benefit) | ​ | ​ 243 | ​ | 0.2 ​ | ​ | ​ (1,673) | ​ | (1.6) ​ | ​ | ​ 1,916 | ​ | (114.5) ​ |
| Net income (loss) | ​ | $397 | ​ | 0.3 ​ | ​ | $(4,326) | ​ | (4.2) ​ | ​ | $4,723 | ​ | 109.2 ​ |

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

*(in thousands, except percentages)*

| ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ Six Months Ended June 30, 2023 ​ ​ | ​ ​ | ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ July 1, 2022 ​ ​ | ​ ​ | ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ ​ ​ ​ $ Change ​ ​ | ​ ​ ​ ​ | ​ ​ ​ ​ ​ % Change ​ ​ ​ ​ |
| --- | --- | --- | --- | ---: | --- | --- | --- | ---: | --- | --- | --- | ---: |
| Contract revenue |  | $221,680 |  | 100.0% |  | $194,483 |  | 100.0% |  | $27,197 |  | 14.0% |
| Direct costs of contract revenue: | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Salaries and wages | ​ | ​ 41,712 | ​ | 18.8 ​ | ​ | ​ 40,094 | ​ | 20.6 ​ | ​ | ​ 1,618 | ​ | 4.0 ​ |
| Subcontractor services and other direct costs | ​ | ​ 98,054 | ​ | 44.2 ​ | ​ | ​ 91,439 | ​ | 47.0 ​ | ​ | ​ 6,615 | ​ | 7.2 ​ |
| Total direct costs of contract revenue | ​ | ​ 139,766 | ​ | 63.0 ​ | ​ | ​ 131,533 | ​ | 67.6 ​ | ​ | ​ 8,233 | ​ | 6.3 ​ |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Gross profit | ​ | ​ 81,914 | ​ | 37.0 ​ | ​ | ​ 62,950 | ​ | 32.4 ​ | ​ | ​ 18,964 | ​ | 30.1 ​ |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| General and administrative expenses: | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Salaries and wages, payroll taxes and employee benefits | ​ | ​ 44,801 | ​ | 20.2 ​ | ​ | ​ 39,796 | ​ | 20.5 ​ | ​ | ​ 5,005 | ​ | 12.6 ​ |
| Facilities and facilities related | ​ | ​ 4,897 | ​ | 2.2 ​ | ​ | ​ 4,771 | ​ | 2.5 ​ | ​ | ​ 126 | ​ | 2.6 ​ |
| Stock-based compensation | ​ | ​ 2,820 | ​ | 1.3 ​ | ​ | ​ 5,019 | ​ | 2.6 ​ | ​ | ​ (2,199) | ​ | (43.8) ​ |
| Depreciation and amortization | ​ | ​ 8,328 | ​ | 3.8 ​ | ​ | ​ 8,835 | ​ | 4.5 ​ | ​ | ​ (507) | ​ | (5.7) ​ |
| Other | ​ | ​ 14,580 | ​ | 6.6 ​ | ​ | ​ 15,435 | ​ | 7.9 ​ | ​ | ​ (855) | ​ | (5.5) ​ |
| Total general and administrative expenses | ​ | ​ 75,426 | ​ | 34.0 ​ | ​ | ​ 73,856 | ​ | 38.0 ​ | ​ | ​ 1,570 | ​ | 2.1 ​ |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Income (loss) from operations | ​ | ​ 6,488 | ​ | 2.9 ​ | ​ | ​ (10,906) | ​ | (5.6) ​ | ​ | ​ 17,394 | ​ | 159.5 ​ |
| Other income (expense): | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Interest expense | ​ | ​ (4,673) | ​ | (2.1) ​ | ​ | ​ (1,781) | ​ | (0.9) ​ | ​ | ​ (2,892) | ​ | 162.4 ​ |
| Other, net | ​ | ​ 513 | ​ | 0.2 ​ | ​ | ​ 526 | ​ | 0.3 ​ | ​ | ​ (13) | ​ | (2.5) ​ |
| Total other income (expense) | ​ | ​ (4,160) | ​ | (1.9) ​ | ​ | ​ (1,255) | ​ | (0.6) ​ | ​ | ​ (2,905) | ​ | 231.5 ​ |
| Income (Loss) before income tax expense | ​ | ​ 2,328 | ​ | 1.1 ​ | ​ | ​ (12,161) | ​ | (6.3) ​ | ​ | ​ 14,489 | ​ | 119.1 ​ |
| Income tax expense (benefit) | ​ | ​ 999 | ​ | 0.5 ​ | ​ | ​ (4,062) | ​ | (2.1) ​ | ​ | ​ 5,061 | ​ | (124.6) ​ |
| Net income (loss) | ​ | $1,329 | ​ | 0.6 ​ | ​ | $(8,099) | ​ | (4.2) ​ | ​ | $9,428 | ​ | 116.4 ​ |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |

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

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

*(in thousands)*

| ​ ​ ​ ​ Contract Type | ​ ​ | ​ ​ ​ ​ ​ ​ ​ ​ Three months ended June 30, 2023 Energy Engineering and Consulting Total ​ ​ ​ ​ ​ ​ ​ ​ |
| --- | --- | --- |
| Time-and-materials | ​ | $8,947 ​ $16,443 ​ $25,390 |
| Unit-based | ​ | ​ 39,900 ​ ​ 3,818 ​ ​ 43,718 |
| Fixed price | ​ | ​ 49,168 ​ ​ 801 ​ ​ 49,969 |
| Total (1) | ​ | $98,015 ​ $21,062 ​ $119,077 |
| ​ | ​ | ​ ​ ​ ​ ​ ​ ​ ​ |
| **Client Type** | **​** | ​ ​ ​ ​ ​ ​ ​ ​ |
| Commercial | ​ | $7,440 ​ $1,376 ​ $8,816 |
| Government | ​ | ​ 40,543 ​ ​ 19,610 ​ ​ 60,153 |
| Utilities (2) | ​ | ​ 50,032 ​ ​ 76 ​ ​ 50,108 |
| Total (1) | ​ | $98,015 ​ $21,062 ​ $119,077 |
| ​ | ​ | ​ ​ ​ ​ ​ ​ ​ ​ |
| Geography (3) | **​** | ​ ​ ​ ​ ​ ​ ​ ​ |
| Domestic | ​ | $98,015 ​ $21,062 ​ $119,077 |
| ​ | ​ | ​ ​ ​ ​ ​ ​ ​ ​ |
| **​** |  | **Six months ended June 30, 2023** |
| **​** |  | **Energy** **Engineering and Consulting** **Total** |
| **​** |  | (in thousands) |
| **Contract Type** | **​** | ​ ​ ​ ​ ​ ​ ​ ​ |
| Time-and-materials | ​ | $16,656 ​ $30,997 ​ $47,653 |
| Unit-based | ​ | ​ 84,827 ​ ​ 7,434 ​ ​ 92,261 |
| Fixed price | ​ | ​ 79,817 ​ ​ 1,949 ​ ​ 81,766 |
| Total (1) | ​ | $181,300 ​ $40,380 ​ $221,680 |
| ​ | ​ | ​ ​ ​ ​ ​ ​ ​ ​ |
| **Client Type** | **​** | ​ ​ ​ ​ ​ ​ ​ ​ |
| Commercial | ​ | $14,159 ​ $2,540 ​ $16,699 |
| Government | ​ | ​ 66,618 ​ ​ 37,705 ​ ​ 104,323 |
| Utilities (2) | ​ | ​ 100,523 ​ ​ 135 ​ ​ 100,658 |
| Total (1) | ​ | $181,300 ​ $40,380 ​ $221,680 |
| ​ | ​ | ​ ​ ​ ​ ​ ​ ​ ​ |
| Geography (3) | **​** | ​ ​ ​ ​ ​ ​ ​ ​ |
| Domestic | ​ | $181,300 ​ $40,380 ​ $221,680 |

*(in thousands)*

| ​ ​ ​ ​ Contract Type | ​ ​ | ​ ​ ​ ​ ​ ​ ​ ​ Three months ended July 1, 2022 Energy Engineering and Consulting Total ​ ​ ​ ​ ​ ​ ​ ​ |
| --- | --- | --- |
| Time-and-materials | ​ | $7,587 ​ $13,340 ​ $20,927 |
| Unit-based | ​ | ​ 42,544 ​ ​ 3,755 ​ ​ 46,299 |
| Fixed price | ​ | ​ 34,545 ​ ​ 874 ​ ​ 35,419 |
| Total (1) | ​ | $84,675 ​ $17,970 ​ $102,645 |
| ​ | ​ | ​ ​ ​ ​ ​ ​ ​ ​ |
| **Client Type** | **​** | ​ ​ ​ ​ ​ ​ ​ ​ |
| Commercial | ​ | $6,701 ​ $1,476 ​ $8,177 |
| Government | ​ | ​ 29,861 ​ ​ 16,338 ​ ​ 46,199 |
| Utilities (2) | ​ | ​ 48,114 ​ ​ 156 ​ ​ 48,270 |
| Total (1) | ​ | $84,675 ​ $17,970 ​ $102,645 |
| ​ | ​ | ​ ​ ​ ​ ​ ​ ​ ​ |
| Geography (3) | **​** | ​ ​ ​ ​ ​ ​ ​ ​ |
| Domestic | ​ | $84,675 ​ $17,970 ​ $102,645 |
| ​ | ​ | ​ ​ ​ ​ ​ ​ ​ ​ |
| ​ | ​ | ​ ​ ​ ​ ​ ​ ​ ​ |
| **​** |  | **Six months ended July 1, 2022** |
| **​** |  | **Energy** **Engineering and Consulting** **Total** |
| **​** |  | (in thousands) |
| **Contract Type** | **​** | ​ ​ ​ ​ ​ ​ ​ ​ |
| Time-and-materials | ​ | $16,405 ​ $26,341 ​ $42,746 |
| Unit-based | ​ | ​ 85,501 ​ ​ 6,739 ​ ​ 92,240 |
| Fixed price | ​ | ​ 57,655 ​ ​ 1,842 ​ ​ 59,497 |
| Total (1) | ​ | $159,561 ​ $34,922 ​ $194,483 |
| ​ | ​ | ​ ​ ​ ​ ​ ​ ​ ​ |
| **Client Type** | **​** | ​ ​ ​ ​ ​ ​ ​ ​ |
| Commercial | ​ | $14,790 ​ $2,954 ​ $17,744 |
| Government | ​ | ​ 48,220 ​ ​ 31,791 ​ ​ 80,011 |
| Utilities (2) | ​ | ​ 96,551 ​ ​ 177 ​ ​ 96,728 |
| Total (1) | ​ | $159,561 ​ $34,922 ​ $194,483 |
| ​ | ​ | ​ ​ ​ ​ ​ ​ ​ ​ |
| Geography (3) | **​** | ​ ​ ​ ​ ​ ​ ​ ​ |
| Domestic | ​ | $159,561 ​ $34,922 ​ $194,483 |

#### (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 were immaterial for the three and six months ended June 30, 2023 and July 1, 2022.*

#### Three Months Ended June 30, 2023 Compared to Three Months Ended July 1, 2022

*Contract revenue.* Consolidated contract revenue increased $16.4 million, or 16.0%, in the three months ended June 30, 2023, compared to the three months ended July 1, 2022, primarily due to incremental revenues in both our Energy segment and our Engineering and Consulting segment.

Contract revenue in our Energy segment increased $13.3 million, or 15.8%, in the three months ended June 30, 2023, compared to the three months ended July 1, 2022, primarily as a result of increases in construction management revenues, software licensing, and planning and advisory consulting revenues. Contract revenue in our Engineering and Consulting segment increased $3.1 million, or 17.2%, in the three months ended June 30, 2023, compared to the three months ended July 1, 2022, primarily due to increased demand for services provided to our clients.

*Direct costs of contract revenue.* Direct costs of consolidated contract revenue increased $7.4 million, or 10.4% for the three months ended June 30, 2023, compared to the three months ended July 1, 2022, as a result of the increase, and change of mix, in contract revenues as described above. As a percentage of contract revenue, direct salaries and wages decreased from 20.7% in the three months ended July 1, 2022 to 17.9% in the three months ended June 30, 2023, while subcontractor services and other direct costs decreased from 48.5% in the three months ended July 1, 2022 to 48.0% in the three months ended June 30, 2023.

Direct costs of contract revenue in our Energy segment increased $5.9 million, or 9.2% for the three months ended June 30, 2023, compared to the three months ended July 1, 2022. Direct costs of contract revenue for the Engineering and Consulting segment increased $1.5 million, or 18.2%, in the three months ended June 30, 2023, compared to the three months ended July 1, 2022.

Subcontractor services and other direct costs increased by $7.4 million, or 14.8%, while salaries and wages remained relatively flat in the three months ended June 30, 2023, compared to the three months ended July 1, 2022. The increase in subcontractor services and other direct costs was primarily due to the increase in construction management revenue.

*Gross Profit*. Gross profit increased 28.6% to $40.6 million, or 34.1% gross margin, for the three months ended June 30, 2023, compared to gross profit of $31.6 million, or 30.8% gross margin, for the three months ended July 1, 2022. The increase in our gross margin was primarily driven by changes in the mix of revenues as described above combined with the absence of project startup costs for new utility programs that were incurred during the second quarter of fiscal year 2022 but did not recur in the second quarter of fiscal year 2023.

*General and administrative expenses.* General and administrative (“G&A”) expenses increased $1.3 million, or 3.4%, in the three months ended June 30, 2023, compared to the three months ended July 1, 2022. G&A expenses consisted of an increase of $0.5 million in the Energy segment combined with an increase of $0.9 million in the Engineering and Consulting segment, partially offset by a decrease of $0.1 million in unallocated corporate expenses.

Within G&A expenses, the increase of $2.0 million in salaries and wages, payroll taxes and employee benefits was partially offset by a decrease of $0.4 million in stock-based compensation combined with a decrease of $0.3 million in depreciation and amortization. The increase in salaries and wages, payroll taxes and employee benefits was primarily due to an increase in incentive compensation, consistent with the improvement in gross profit. The decrease in stock-based compensation expenses was primarily related to previously awarded stock grants reaching the end of their corresponding vesting periods, partially offset by new equity awards being issued at lower stock prices. The decrease in depreciation and amortization was primarily related to lower amortization of intangible assets from prior acquisitions.

*Income (loss) from operations.* Operating income was $2.5 million for the three months ended June 30, 2023, compared to an operating loss of $5.3 million for the three months ended July 1, 2022, as a result of the factors noted above.

*Total other expense, net.* Total other expense, net, increased $1.1 million, or 161.6%, for the three months ended June 30, 2023, compared to the three months ended July 1, 2022, primarily due to higher interest expense as a result of the increase in market interest rates which directly affected our variable interest rates under our Credit Facilities.

*Income tax expense (benefit).* We recorded an income tax expense of $0.2 million for the three months ended June 30, 2023, compared to a tax benefit of $1.7 million for the three months ended July 1, 2022. The tax expense is primarily attributable to the income before income tax combined with various tax deductions and credits.

*Net income (loss).* Our net income was $0.4 million for the three months ended June 30, 2023, as compared to a net loss of $4.3 million for the three months ended July 1, 2022. The increase in net income was primarily attributable to the increase in revenue and gross profit, partially offset by higher interest expense and income tax expense.

#### Six Months Ended June 30, 2023 Compared to Six Months Ended July 1, 2022

*Contract revenue.* Consolidated contract revenue increased $27.2 million, or 14.0%, in the six months ended June 30, 2023, compared to the six months ended July 1, 2022, primarily due to incremental revenues in both our Energy segment and in our Engineering and Consulting segment.

Contract revenue in our Energy segment increased $21.7 million, or 11.9%, in the six months ended June 30, 2023, compared to the six months ended July 1, 2022, primarily as a result of increases in construction management revenues, software licensing, and planning and advisory consulting revenues. Contract revenue in our Engineering and Consulting segment increased $5.5 million, or 13.5%, in the six months ended June 30, 2023, compared to the six months ended July 1, 2022, primarily due to increased demand for services provided to our clients.

*Direct costs of contract revenue.* Direct costs of consolidated contract revenue increased $8.2 million, or 6.3% for the six months ended June 30, 2023, compared to the six months ended July 1, 2022, as a result of the increase, and change of mix, in contract revenues as described above. As a percentage of contract revenue, direct salaries and wages decreased from 20.6% in the six months ended July 1, 2022 to 18.8% in the six months ended June 30, 2023, while subcontractors services and other direct costs decreased from 47.0% in the six months ended July 1, 2022 to 44.2% in the six months ended June 30, 2023.

Direct costs of contract revenue in our Energy segment increased $5.8 million, or 4.8% for the six months ended June 30, 2023, compared to the six months ended July 1, 2022. Direct costs of contract revenue for the Engineering and Consulting segment increased $2.4 million, or 12.8%, in the six months ended June 30, 2023, compared to the six months ended July 1, 2022.

Subcontractor services and other direct costs increased by $6.6 million, or 7.2%, while salaries and wages increased by $1.6 million, or 4.0%, in the six months ended June 30, 2023, compared to the six months ended July 1, 2022, primarily as a result of the increases in contract revenue.

*Gross Profit*. Gross profit increased 30.1% to $81.9 million, or 37.0% gross margin, for the six months ended June 30, 2023, compared to gross profit of $63.0 million, or 32.4% gross margin, for the six months ended July 1, 2022. The increase in our gross margin was primarily driven by changes in the mix of revenues as described above combined with the absence of project startup costs for new utility programs that were incurred during the first half of fiscal year 2022 but did not recur in the first half of fiscal year 2023.

*General and administrative expenses.* G&A expenses increased $1.6 million, or 2.1%, in the six months ended June 30, 2023, compared to the six months ended July 1, 2022. G&A expenses consisted of an increase of $1.7 million in the Energy segment combined with an increase of $1.9 million in the Engineering and Consulting segment, partially offset by a decrease of $2.0 million in unallocated corporate expenses.

Within G&A expenses, the increase of $5.0 million in salaries and wages, payroll taxes and employee benefits was partially offset by a decrease of $2.2 million in stock-based compensation, a decrease of $0.9 million in other general and administrative expenses, and a decrease of $0.5 million in depreciation and amortization. The increase in salaries and wages, payroll taxes and employee benefits was primarily due to an increase in incentive compensation, consistent with the improvement in gross profit. The decrease in stock-based compensation expenses was primarily related to previously awarded stock grants reaching the end of their corresponding vesting periods, partially offset by new equity awards being issued at lower stock prices. The decrease in depreciation and amortization was primarily related to lower amortization of intangible assets from prior acquisitions.

*Income (loss) from operations.* Operating income was $6.5 million for the six months ended June 30, 2023, compared to an operating loss of $10.9 million for the six months ended July 1, 2022, as a result of the factors noted above.

*Total other expense, net.* Total other expense, net, increased $2.9 million, or 231.5%, for the six months ended June 30, 2023, compared to the six months ended July 1, 2022, primarily due to higher interest expense as a result of the increase in market interest rates which directly affected our variable interest rates under our Credit Facility.

*Income tax expense (benefit).* We recorded an income tax expense of $1.0 million for the six months ended June 30, 2023, compared to a tax benefit of $4.1 million for the six months ended July 1, 2022. The tax expense is primarily attributable to the income before income tax combined with various tax deductions and credits, and the non-recurrence of a one-time tax benefit recognized during the same period last year related to additional energy efficiency building deductions.

*Net income (loss).* Our net income was $1.3 million for the six months ended June 30, 2023, as compared to a net loss of $8.1 million for the six months ended July 1, 2022. The increase in net income was primarily attributable to the increase in revenue and gross profit, partially offset by higher interest expense and income tax expense.

### Liquidity and Capital Resources

*(in thousands)*

| ​ ​ ​ ​ ​ Net cash provided by (used in): | ​ ​ ​ ​ ​ | ​ ​ Six Months Ended June 30, 2023 ​ ​ | ​ ​ ​ ​ | ​ ​ July 1, 2022 ​ ​ |
| --- | --- | ---: | --- | ---: |
| Operating activities |  | $18,909 |  | $(3,569) |
| Investing activities | ​ | ​ (5,707) | ​ | ​ (4,271) |
| Financing activities | ​ | ​ (19,038) | ​ | ​ 2,430 |
| Net increase (decrease) in cash and cash equivalents | ​ | $(5,836) | ​ | $(5,410) |

#### 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 borrowings under our revolving credit facility under the Credit Agreement (the “Revolving Credit Facility”). As described in Part I, Item 1, Note 1 “*Organization and Operations of the Company”*, of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q, our Credit Agreement matures on June 26, 2024, and in accordance with the terms of the Credit Agreement, we have an obligation to make a final payment of all then remaining principal and interest due on June 26, 2024. Only as a result of the remaining principal and interest payment due on June 26, 2024, are our cash and cash equivalents, cash generated by operating activities, and future available borrowings not sufficient to finance our operating activities for at least the next 12 months. However, we intend to refinance our Credit Agreement and have entered into a refinancing engagement to secure a new three-year financing facility with a syndicate of financial institutions as lenders, which, among other things, will replace 100% of the existing Credit Agreement and extend the due date of the maturity payment by more than two years from its current due date. For more information on our current Credit Agreement, see Part I, Item 1, Note 5, “*Debt Obligations”,* of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.

As of June 30, 2023, we had a fully drawn $100 million Term A Loan with $60.0 million outstanding (the “Term A Loan”), a $50.0 million Revolving Credit Facility with $5.0 million outstanding and $4.1 million in letters of credit issued, and a fully drawn $50.0 million Delayed Draw Term Loan with $37.0 million outstanding (the “Delayed Draw Term Loan” and, collectively with the Term A Loan and the Revolving Credit Facility, the “Credit Facilities”), each scheduled to mature on June 26, 2024. In addition, as of June 30, 2023, we had $13.6 million of unrestricted cash and cash equivalents.

As of June 30, 2023, 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 7.25%. See Part I, Item 1, Note 5, “*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 the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 30, 2022, for information regarding our indebtedness, including information about borrowings 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 $18.9 million for the six months ended June 30, 2023, as compared to cash flows used in operating activities of $3.6 million for the six months ended July 1, 2022. 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 six months ended June 30, 2023, resulted primarily from the increase in earnings, combined with lower working capital requirements. Cash flows used in operating activities for the six months ended July 1, 2022, resulted primarily from the changing mix of revenues, combined with the increased demand for working capital related to the resumption of our utility programs that were suspended in 2021 and start-up costs associated with certain new contract awards.

#### Cash Flows from Investing Activities

Cash flows used in investing activities were $5.7 million for the six months ended June 30, 2023, as compared to cash flows used in investing activities of $4.3 million for the six months ended July 1, 2022. Cash flows used in investing activities for the six months ended June 30, 2023 and for the six months ended July 1, 2022, were primarily due to cash paid for the development of software and the purchase of computers and equipment.

#### Cash Flows from Financing Activities

Cash flows used in financing activities were $19.0 million for the six months ended June 30, 2023, as compared to cash flows provided by financing activities of $2.4 million for the six months ended July 1, 2022. Cash flows used in financing activities for the six months ended June 30, 2023 were primarily attributable to the disbursement of $10.7 million in restricted cash for utility rebate incentives, repayments of $9.0 million under our term loan facility and revolving line of credit, and payments of $4.0 million for contingent consideration related to prior acquisitions, partially offset by borrowings of $5.0 million under our revolving line of credit. Cash flows provided by financing activities for the six months ended July 1, 2022, were primarily attributable to borrowings of $20.0 million under our Delayed Draw Term Loan, partially offset by payments of $10.2 million for contingent consideration related to prior acquisitions combined with repayments of $6.5 million under our term loan facility and revolving line of credit.

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 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, 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 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 June 30, 2023:

*( in thousands)*

| ​ ​ Contractual Obligations ​ | ​ ​ ​ | ​ ​ ​ ​ Total | ​ ​ | ​ ​ Less than 1 Year | ​ ​ | ​ ​ ​ ​ 1 - 3 Years | ​ ​ | ​ ​ ​ ​ 3 - 5 Years | ​ ​ | ​ ​ More than 5 Years | ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- |
| Debt (1) | ​ | $102,638 | ​ | $102,619 | ​ | $19 | ​ | $— | ​ | $— | ​ |
| Interest payments on debt outstanding (2) | ​ | ​ 7,114 | ​ | ​ 7,114 | ​ | ​ — | ​ | ​ — | ​ | ​ — | ​ |
| Operating leases | ​ | 15,608 | ​ | 4,877 | ​ | 7,190 | ​ | 2,823 | ​ | 718 | ​ |
| Finance leases | ​ | 2,394 | ​ | 1,143 | ​ | 1,066 | ​ | 178 | ​ | 7 | ​ |
| Total contractual cash obligations | ​ | $127,754 | ​ | $115,753 | ​ | $8,275 | ​ | $3,001 | ​ | $725 | ​ |

(1) Debt includes $60.0 million outstanding on our Term A Loan, $5.0 million outstanding on our Revolving Credit Facility, and $37.0 million outstanding on our Delayed Draw Term Loan as of June 30, 2023. We have assumed no future borrowings or repayments (other than at maturity) for purposes of this table. Our term loans are scheduled to mature on June 26, 2024.

(2) Borrowings under our Term A Loan and Delayed Draw Term Loan bear interest at a variable rate. Future interest payments on our Credit Facilities are estimated using floating rates in effect as of June 30, 2023.

As of June 30, 2023, we did not have any remaining contingent consideration payable related to any prior acquisitions. In addition, as of June 30, 2023, we did not have any arrangements involving the potential incurrence of future contingent consideration.

#### Outstanding Indebtedness

See Part I, Item 1, Note 5, “*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 the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 30, 2022, 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.

### 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 immaterial to our results of operations and financial condition, we experienced higher cost of materials and delays in our supply chain for equipment during fiscal year 2022, and we expect these higher costs and delays in our supply chain to persist through fiscal year 2023. 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.

### 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 June 30, 2023, 21% of our contracts are time-and-materials contracts 42% are unit-based contracts, and 37% are fixed price contracts, compared to 22% for time-and-materials contracts, 47% for unit-based contracts, and 31% for fixed price contracts, as of July 1, 2022.

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 on 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 Duke Energy Corp., 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 30, 2022. Please refer to Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 30, 2022 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.

## Market risk

As filed, 3,635 characters.

#### 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 June 30, 2023, we had cash and cash equivalents of $13.6 million. This amount represents cash on hand in business checking accounts with BMO Harris Bank, N.A. 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 A Loan and borrowings, if any, under our Revolving Credit Facility and Delayed Draw Term Loan, each of which bears interest at variable rates. As of June 30, 2023, $60.0 million was outstanding under our Term A Loan, $37.0 million was outstanding under our Delayed Draw Term Loan, $5.0 million was outstanding and $4.1 million in letters of credit were issued under the Revolving Credit Facility. Each of our Term A Loan, Revolving Credit Facility and Delayed Draw Term Loan mature as of June 26, 2024 and are governed by our Credit Agreement.

Pursuant to the Credit Agreement, (as described in Part I, Item 1, Note 5, “Debt Obligations”, of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q), borrowings under the Credit Agreement bear interest at either a Base Rate (as defined in the Credit Agreement) or SOFR, at the Company’s option, and in each case, plus an applicable margin, which applicable margin will range from 0.125% to 1.25% with respect to Base Rate borrowings and 1.125% to 2.25% with respect to SOFR borrowings, depending on the Total Leverage Ratio; provided, that SOFR cannot be less than 0.00%, with the specific pricing reset on each date on which the Administrative Agent receives the required financial statements under the Credit Agreement for the fiscal quarter then ended. The Company must also pay a commitment fee for the unused portion of the Revolving Credit Facility and the Delayed Draw Term Loan under the Credit Agreement, which ranges from 0.15% to 0.40% per annum depending on the Total Leverage Ratio, and fees on the face amount of any letters of credit outstanding under the Revolving Credit Facility, which range from 0.84% to 1.688% per annum, in each case, depending on whether such letter of credit is a performance or financial letter of credit and the Total Leverage Ratio. Based upon the amount of our outstanding indebtedness as of June 30, 2023, a one percentage point increase in the effective interest rate would change our annual interest expense by approximately $1.0 million in fiscal year 2023.

The Term A Loan amortizes quarterly in installments of $2.5 million beginning with the fiscal quarter ending September 27, 2019, with a final payment of all then remaining principal and interest due on the maturity date of June 26, 2024, subject to certain prepayment obligations based on our excess cash flow. Each borrowing under our Delayed Draw Term Loan will amortize quarterly in an amount equal to 2.5% of the aggregate outstanding borrowings under the Delayed Draw Term Loan, beginning with the first full fiscal quarter ending after the initial borrowing date, with a final payment of all then remaining principal and interest due on the maturity date of June 26, 2024, subject to certain prepayment obligations based on our excess cash flow.

## Controls and procedures

As filed, 1,668 characters.

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 Chief Executive Officer, Thomas D. Brisbin, and our Chief Financial Officer, 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 Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of June 30, 2023. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective, at a reasonable assurance level, as of June 30, 2023.

No change in our internal control over financial reporting occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 166 characters.

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 30, 2022.

Filed Aug 4, 2023.
Source: SEC EDGAR, the filing index for accession 0001558370-23-013281. Last ingested by Listed: Oct 24, 2026, 15:12 ET. No prices; not investment advice.