RCM TECHNOLOGIES INC

Previous wording

Revenue. Revenue increased by $2.1 million for the thirteen weeks ended June 29, 2024 as compared to the thirteen weeks ended July 1, 2023 (the “comparable prior-year period”). Revenue increased $1.4 million in the Specialty Health Care segment, increased $1.5 million in the Engineering segment and decreased $0.8 million in the Life Sciences and Information Technology segment. See more detailed disclosure by segment in our Segment Discussion.

Current wording

Revenue. Revenue increased by $2.3 million for the thirteen weeks ended September 28, 2024 as compared to the thirteen weeks ended September 30, 2023 (the “comparable prior-year period”). Revenue increased $1.6 million in the Specialty Health Care segment, increased $1.7 million in the Engineering segment and decreased $1.0 million in the Life Sciences and Information Technology segment. See more detailed disclosure by segment in our Segment Discussion.

Previous wording

Cost of Services and Gross Profit. Cost of services increased by $0.9 million for the thirteen weeks ended June 29, 2024 as compared to the comparable prior-year period, primarily due to the increase in revenue. Cost of services as a percentage of revenue for the thirteen weeks ended June 29, 2024 and July 1, 2023 was 71.1% and 72.0%, respectively. See Segment Discussion for further information regarding changes in cost of services and gross profit.

Current wording

Cost of Services and Gross Profit. Cost of services increased by $1.8 million for the thirteen weeks ended September 28, 2024 as compared to the comparable prior-year period, primarily due to the increase in revenue. Cost of services as a percentage of revenue for the thirteen weeks ended September 28, 2024 and September 30, 2023 was 70.4% and 70.2%, respectively. See Segment Discussion for further information regarding changes in cost of services and gross profit.

Previous wording

Selling, General and Administrative. Selling, general and administrative (“SGA”) expenses were $13.5 million for the thirteen weeks ended June 29, 2024 as compared to $12.7 million for the comparable prior-year period. As a percentage of revenue, SGA expenses were 19.6% for the thirteen weeks ended June 29, 2024 and 18.9% for the comparable prior-year period. See Segment Discussion for further information on SGA expense changes.

Current wording

Selling, General and Administrative. Selling, general and administrative (“SGA”) expenses were $13.0 million for the thirteen weeks ended September 28, 2024 as compared to $12.7 million for the comparable prior-year period. As a percentage of revenue, SGA expenses were 21.6% for the thirteen weeks ended September 28, 2024 and 21.8% for the comparable prior-year period. See Segment Discussion for further information on SGA expense changes.

Previous wording

Other Expense, Net. Other expense, net consists of interest expense, unused line fees and amortized loan costs on the Company’s line of credit, net of interest income and gains and losses on foreign currency transactions. Other expense, net increased by $0.2 million as compared to the comparable prior year period, primarily due to an increase in interest expense, net. Interest expense increased due to increased borrowing and increased interest rates.

Current wording

Other Expense, Net. Other expense, net consists of interest expense, unused line fees and amortized loan costs on the Company’s line of credit, net of interest income and gains and losses on foreign currency transactions. Other expense, net increased by $0.5 million as compared to the comparable prior year period, primarily due to an increase in interest expense, net. Interest expense increased due to increased borrowing and increased interest rates.

Previous wording

Income Tax Expense. The Company recognized $1.5 million of income tax expense for the thirteen weeks ended June 29, 2024 as compared to $1.3 million for the comparable prior-year period. The consolidated effective income tax rate for the current period was 28.3% as compared to 25.3% for the comparable prior-year period. The effective fiscal 2024 income tax rates as of June 29, 2024, were approximately 29.3%, 26.9% and 15.7% in the United States, Canada, and Serbia, respectively. The relative income or loss generated in each jurisdiction can materially impact the overall effective income tax rate of the Company, particularly the ratio of Canadian and Serbian pretax income versus U.S. pretax income. The effective income tax rate can also be impacted by discrete permanent differences affecting any period presented. The primary reason for the decrease in the consolidated effective rate in the current period was due to a permanent tax difference associated with the tax deduction for equity grants in the United States that vested during the thirteen weeks ended June 29, 2024.

Current wording

Income Tax Expense. The Company recognized $1.0 million of income tax expense for the thirteen weeks ended September 28, 2024 as compared to $0.4 million for the comparable prior-year period. The consolidated effective income tax rate for the current period was 27.1% as compared to 10.4% for the comparable prior-year period. The effective fiscal 2024 income tax rates as of September 28, 2024, were approximately 28.3%, 26.2 % and 13.1% in the United States, Canada, and Serbia, respectively. The relative income or loss generated in each jurisdiction can materially impact the overall effective income tax rate of the Company, particularly the ratio of Canadian and Serbian pretax income versus U.S. pretax income. The effective income tax rate can also be impacted by discrete permanent differences affecting any period presented. The primary reason for the increase in the consolidated effective rate in the current period was due to a permanent tax difference associated with the tax deduction for equity grants in the United States that vested during the thirteen weeks ended September 28, 2024.

Previous wording

Specialty Health Care revenue of $36.9 million for the thirteen weeks ended June 29, 2024, increased 4.0%, or $1.4 million, compared to the prior-year period. The increase in revenue was driven by the Company’s school clients, offset by a decrease in revenue from the Company’s non-school clients. Revenue from school clients for the thirteen weeks ended June 29, 2024, was $30.9 million as compared to $26.5 million for the comparable prior-year period. Revenue from non-school clients for the thirteen weeks ended June 29, 2024, was $6.0 million as compared to $9.0 million for the comparable prior-year period. The revenue increase for school clients was primarily due to new school clients, offset by no services associated with COVID-19. The decrease in non-school revenue was primarily driven by the reduction in revenue from a large New York City nursing home group. Gross profit increased by 8.6%, or $0.8 million, to $10.6 million as compared to $9.8 million in the prior-year period. Gross profit increased due to increases in revenue and gross profit margin. Gross profit margin for the thirteen weeks ended June 29, 2024, decreased to 28.8% compared to 27.6% for the prior-year period. The increase in gross profit margin was primarily attributed to a greater mix shift to school services as opposed to non-school services, offset by increased unemployment tax rates in New York. Specialty Health Care experienced operating income of $3.3 million for the thirteen weeks ended June 29, 2024, as compared to $3.7 million for the comparable prior-year period. The primary reason for the decrease in operating income was an increase in SGA expenses to $7.2 million compared to $6.0 million for the prior year. SGA expense increased primarily due to sales and recruiting infrastructure investments expected to generate higher growth rates for the 2024/2025 school year.

Current wording

Specialty Health Care revenue of $26.6 million for the thirteen weeks ended September 28, 2024, increased 6.7%, or $1.6 million, compared to the comparable prior-year period. The increase in revenue was driven by the Company’s school clients, offset by a decrease in revenue from the Company’s non-school clients. Revenue from school clients for the thirteen weeks ended September 28, 2024, was $20.2 million as compared to $17.3 million for the comparable prior-year period. Revenue from non-school clients for the thirteen weeks ended September 28, 2024, was $6.4 million as compared to $7.6 million for the comparable prior-year period. The decrease in non-school revenue was primarily driven by the reduction in revenue from a large long-term care group where the Company deliberately reduced services, which generated $0.7 million in the current period as compared to $1.9 million in the comparable prior-year period. Gross profit increased by 11.1%, or $0.8 million, to $8.3 million as compared to $7.5 million in the comparable prior-year period. Gross profit increased due to increases in revenue and gross profit margin. Gross profit margin for the thirteen weeks ended September 28, 2024, increased to 31.2% compared to 30.0% for the comparable prior-year period. The increase in gross profit margin was primarily attributed to a greater mix shift to school services as opposed to non-school services. Specialty Health Care experienced operating income of $1.6 million for the thirteen weeks ended September 28, 2024, as compared to $1.4 million for the comparable prior-year period. The primary reason for the increase in operating income was the increase in gross profit, offset by an increase to SGA expense to $6.5 million compared to $6.0 million for the comparable prior-year period. SGA expense increased primarily due to sales and recruiting infrastructure investments expected to generate higher growth rates for the 2024/2025 school year.

Previous wording

Engineering revenue of $22.5 million for the thirteen weeks ended June 29, 2024, increased 7.1%, or $1.5 million, compared to the comparable prior-year period. The increase in revenue comprised the following: an increase in Energy Services revenue of $2.6 million, offset by decreases in Aerospace revenue of $0.9 million and Industrial Processing revenue of $0.2 million. Aerospace revenue decreased primarily due to a contract reduction for the Company’s major outsourcing client. The Company believes the decrease in Industrial Processing revenue was mainly due to the irregular timing of large contracts with its Industrial Processing clients. Gross profit increased by 23.7%, or $1.1 million, compared to the prior-year period. Gross profit increased because of the increase in revenue, augmented by an increase in gross profit margin. The gross profit margin of 26.5% for the current period increased from 22.9% for the comparable prior-year period. The increase in gross profit margin was primarily due to better utilization, associated with higher revenue and favorable project revenue from the Energy Services group. The Engineering segment experienced operating income of $1.8 million for the thirteen weeks ended June 29, 2024, compared to $0.3 million for the comparable prior-year period. Operating income increased due to the increase in gross profit and a decrease in SGA expense. The Engineering segment’s SGA expense of $4.0 million decreased from $4.4 million, primarily due to deliberate reductions to gain better efficiency.

Current wording

Engineering revenue of $24.2 million for the thirteen weeks ended September 28, 2024, increased 7.6%, or $1.7 million, compared to the comparable prior-year period. The increase in revenue comprised the following: an increase in Energy Services revenue of $3.0 million, offset by decreases in Aerospace revenue of $0.1 million and Industrial Processing revenue of $1.2 million. Aerospace revenue decreased primarily due to a contract reduction for the Company’s major outsourcing client. The Company believes the decrease in Industrial Processing revenue was mainly due to the irregular timing of large contracts with its Industrial Processing clients. Gross profit increased by 5.1%, or $0.3 million, compared to the comparable prior-year period. Gross profit increased because of the increase in revenue, offset by a decrease in gross profit margin. The gross profit margin of 24.4% for the current period decreased from 25.0% for the comparable prior-year period. The decrease in gross profit margin was primarily due to lower utilization and mix shift associated with project revenue from the Energy Services group. The Engineering segment experienced operating income of $1.4 million for the thirteen weeks ended September 28, 2024, compared to $1.2 million for the comparable prior-year period. Operating income increased due to the increase in gross profit and a negligible decrease in SGA expense.

Previous wording

Life Sciences and Information Technology revenue of $9.7 million for the thirteen weeks ended June 29, 2024, decreased by 7.3%, or $0.8 million, compared to $10.5 million for the comparable prior-year period. The decrease in revenue was primarily derived from the Company’s legacy IT staffing business of $1.0 million in the current period versus $1.8 million in the comparable prior year period. Gross profit of $3.4 million for the thirteen weeks ended June 29, 2024, decreased 17.9%, or $0.7 million, compared to $4.1 million for the comparable prior-year period. The Life Sciences and Information Technology gross profit margin for the thirteen weeks ended June 29, 2024, was 34.9% as compared to 39.4% for the comparable prior-year period. The Company attributes the gross profit margin decrease to fluctuations in high margin project work. The Company also believes the gross margin for the current period is a more normalized rate. The Life Sciences and Information Technology segment experienced operating income of $1.1 million compared to $1.8 million for the prior-year period. The decrease in operating income was primarily due to a decrease in gross profit, offset by a decrease in SGA expense. SGA expense decreased to $2.2 million compared to $2.3 million in the prior-year period. The decrease in SGA expense was primarily due to normal fluctuations.

Current wording

Life Sciences and Information Technology revenue of $9.6 million for the thirteen weeks ended September 28, 2024, decreased by 9.9%, or $1.0 million, compared to $10.7 million for the comparable prior-year period. The decrease in revenue was derived from the Company’s legacy IT staffing business of $1.0 million in the current period versus $1.3 million in the comparable prior year period and normal fluctuations in other business lines. Gross profit of $3.7 million for the thirteen weeks ended September 28, 2024, decreased 13.1%, or $0.5 million, compared to $4.2 million for the comparable prior-year period. The Life Sciences and Information Technology gross profit margin for the thirteen weeks ended September 28, 2024, was 38.0% as compared to 39.4% for the comparable prior-year period. The Company attributes the gross profit margin decrease to fluctuations in high margin project work. The Company also believes the gross margin for the current period is a more normalized rate. The Life Sciences and Information Technology segment experienced operating income of $1.4 million compared to $1.8 million for the comparable prior-year period. The decrease in operating income was primarily due to a decrease in gross profit, offset by a decrease in SGA expense. SGA expense decreased to $2.2 million compared to $2.4 million in the comparable prior-year period. The decrease in SGA expense was primarily due to normal fluctuations.

Previous wording

A summary of operating results for the twenty-six weeks ended June 29, 2024 and July 1, 2023 is as follows (in thousands):

Current wording

A summary of operating results for the thirty-nine weeks ended September 28, 2024 and September 30, 2023 is as follows (in thousands):

Previous wording

The Company follows a 52/53 week fiscal reporting calendar ending on the Saturday closest to December 31. The fiscal quarters ended June 29, 2024 and July 1, 2023 consisted of twenty-six weeks each.

Current wording

The Company follows a 52/53 week fiscal reporting calendar ending on the Saturday closest to December 31. The fiscal quarters ended September 28, 2024 and September 30, 2023 consisted of thirty-nine weeks each.

Previous wording

Revenue. Revenue increased by $6.9 million for the twenty-six weeks ended June 29, 2024 as compared to the twenty-six weeks ended July 1, 2023 (the “comparable prior-year period”). Revenue increased $0.5 million in the Specialty Health Care segment, increased $6.5 million in the Engineering segment and was flat for the Life Sciences and Information Technology segment. See more detailed disclosure by segment in our Segment Discussion.

Current wording

Revenue. Revenue increased by $9.3 million for the thirty-nine weeks ended September 28, 2024 as compared to the thirty-nine weeks ended September 30, 2023 (the “comparable prior-year period”). Revenue increased $2.1 million in the Specialty Health Care segment, increased $8.2 million in the Engineering segment and decreased $1.0 million in the Life Sciences and Information Technology segment. See more detailed disclosure by segment in our Segment Discussion.

Previous wording

Cost of Services and Gross Profit. Cost of services increased by $4.4 million for the twenty-six weeks ended June 29, 2024 as compared to the comparable prior-year period, primarily due to the increase in revenue. Cost of services as a percentage of revenue for the twenty-six weeks ended June 29, 2024 and July 1, 2023 was 71.4% and 71.8%, respectively. See Segment Discussion for further information regarding changes in cost of services and gross profit.

Current wording

Cost of Services and Gross Profit. Cost of services increased by $6.1 million for the thirty-nine weeks ended September 28, 2024 as compared to the comparable prior-year period, primarily due to the increase in revenue. Cost of services as a percentage of revenue for the thirty-nine weeks ended September 28, 2024 and September 30, 2023 was 71.1% and 71.4%, respectively. See Segment Discussion for further information regarding changes in cost of services and gross profit.

Previous wording

Selling, General and Administrative. Selling, general and administrative (“SGA”) expenses were $27.7 million for the twenty-six weeks ended June 29, 2024 as compared to $26.1 million for the comparable prior-year period. As a percentage of revenue, SGA expenses were 19.8% for the twenty-six weeks ended June 29, 2024 and 19.4% for the comparable prior-year period. See Segment Discussion for further information on SGA expense changes.

Current wording

Selling, General and Administrative. Selling, general and administrative (“SGA”) expenses were $40.7 million for the thirty-nine weeks ended September 28, 2024 as compared to $38.8 million for the comparable prior-year period. As a percentage of revenue, SGA expenses were 20.3% for the thirty-nine weeks ended September 28, 2024 and 20.2% for the comparable prior-year period. See Segment Discussion for further information on SGA expense changes.

Previous wording

Costs Associated with Potential Stock Issuance. ** **In the thirteen weeks ended June 29, 2024, the Company filed a Registration Statement on Form S-3 (the Registration Statement) with the Securities and Exchange Commission for an offering of up to $100.0 million of various securities. The Company also entered an At Market Issuance Sales Agreement under which the Company may sell, under the Registration Statement, up to $50.0 million worth of shares of the Company’s common stock. The Company incurred total expenses of $259 related to these transactions.

Current wording

**Costs Associated with Potential Stock Issuance.**In the thirty-nine weeks ended September 28, 2024, the Company filed a Registration Statement on Form S-3 (the Registration Statement) with the Securities and Exchange Commission for an offering of up to $100.0 million of various securities. The Company also entered an At Market Issuance Sales Agreement under which the Company may sell, under the Registration Statement, up to $50.0 million worth of shares of the Company’s common stock. The Company incurred total expenses of $259 related to these transactions.

Previous wording

Gain on Sale of Assets. On July 30, 2021, the Company sold the principal assets and certain liabilities of its Pickering and Kincardine offices, located in Ontario, Canada. These two offices were often referred to as Canada Power Systems and principally provided engineering services to two major nuclear power providers in Canada. The two Canada Power Systems offices were part of a reporting unit within the Company’s Engineering segment. During the twenty-six weeks ended July 1, 2023, the Company recorded a discrete gain on the sale of these assets and liabilities of $0.4 million due to the final collection of escrow funds from the transaction.

Current wording

Gain on Sale of Assets. On July 30, 2021, the Company sold the principal assets and certain liabilities of its Pickering and Kincardine offices, located in Ontario, Canada. These two offices were often referred to as Canada Power Systems and principally provided engineering services to two major nuclear power providers in Canada. The two Canada Power Systems offices were part of a reporting unit within the Company’s Engineering segment. During the thirty-nine weeks ended September 30, 2023, the Company recorded a discrete gain on the sale of these assets and liabilities of $0.4 million due to the final collection of escrow funds from the transaction.

Previous wording

Other Expense, Net. Other expense, net consists of interest expense, unused line fees and amortized loan costs on the Company’s line of credit, net of interest income and gains and losses on foreign currency transactions. Other expense, net increased by a negligible amount as compared to the comparable prior year period, primarily due to an increase in interest expense, net. Interest expense increased due to increased borrowing and increased interest rates.

Current wording

Other Expense, Net. Other expense, net consists of interest expense, unused line fees and amortized loan costs on the Company’s line of credit, net of interest income and gains and losses on foreign currency transactions. Other expense, net increased by $0.7 million as compared to the comparable prior year period, primarily due to an increase in interest expense, net. Interest expense increased due to increased borrowing and increased interest rates.

Previous wording

Income Tax Expense. The Company recognized $2.9 million of income tax expense for the twenty-six weeks ended June 29, 2024 as compared to $2.8 million for the comparable prior-year period. The consolidated effective income tax rate for the current period was 27.6% as compared to 26.4% for the comparable prior-year period. The effective fiscal 2024 income tax rates as of June 29, 2024, were approximately 28.3%, 26.8% and 15.4% in the United States, Canada, and Serbia, respectively. The relative income or loss generated in each jurisdiction can materially impact the overall effective income tax rate of the Company, particularly the ratio of Canadian and Serbian pretax income versus U.S. pretax income. The effective income tax rate can also be impacted by discrete permanent differences affecting any period presented. The primary reason for the decrease in the consolidated effective rate in the current period was due to a permanent tax difference associated with the tax deduction for equity grants in the United States that vested during the twenty-six weeks ended June 29, 2024.

Current wording

Income Tax Expense. The Company recognized $4.0 million of income tax expense for the thirty-nine weeks ended September 28, 2024 as compared to $3.2 million for the comparable prior-year period. The consolidated effective income tax rate for the current period was 27.5% as compared to 21.9% for the comparable prior-year period. The effective fiscal 2024 income tax rates as of September 28, 2024, were approximately 28.3%, 26.2% and 13.1% in the United States, Canada, and Serbia, respectively. The relative income or loss generated in each jurisdiction can materially impact the overall effective income tax rate of the Company, particularly the ratio of Canadian and Serbian pretax income versus U.S. pretax income. The effective income tax rate can also be impacted by discrete permanent differences affecting any period presented. The primary reason for the increase in the consolidated effective rate in the current period was due to a permanent tax difference associated with the tax deduction for equity grants in the United States that vested during the thirty-nine weeks ended September 28, 2024.

Previous wording

Specialty Health Care revenue of $75.1 million for the twenty-six weeks ended June 29, 2024, increased 0.7%, or $0.5 million, compared to the prior-year period. The increase in revenue was driven by the Company’s school clients, offset by a decrease in revenue from the Company’s non-school clients. Revenue from school clients for the twenty-six weeks ended June 29, 2024, was $62.9 million as compared to $55.8 million for the comparable prior-year period. Revenue from non-school clients for the twenty-six weeks ended June 29, 2024, was $12.2 million as compared to $18.9 million for the comparable prior-year period. The revenue increase for school clients was primarily due to new school clients, offset by no services associated with COVID-19. The decrease in non-school revenue was primarily driven by the reduction in revenue from a large New York City nursing home group. Gross profit increased by 1.1%, or $0.2 million, to $21.7 million as compared to $21.5 million in the prior-year period. Gross profit increased due to an increase in revenue and gross profit margin. Gross profit margin for the twenty-six weeks ended June 29, 2024, increased to 28.9% compared to 28.8% for the prior-year period. The increase in gross profit margin was primarily attributed to a greater mix shift to school services as opposed to non-school services, offset by increased unemployment tax rates in New York. Specialty Health Care experienced operating income of $6.8 million for the twenty-six weeks ended June 29, 2024, as compared to $8.0 million for the comparable prior-year period. The primary reason for the decrease in operating income was an increase in SGA expenses to $14.7 million compared to $13.2 million for the prior year. SGA expense increased primarily due to sales and recruiting infrastructure investments expected to generate higher growth rates for the 2024/2025 school year.

Current wording

Specialty Health Care revenue of $101.7 million for the thirty-nine weeks ended September 28, 2024, increased 2.1%, or $2.1 million, compared to the comparable prior-year period. The increase in revenue was driven by the Company’s school clients, offset by a decrease in revenue from the Company’s non-school clients. Revenue from school clients for the thirty-nine weeks ended September 28, 2024, was $82.9 million as compared to $73.2 million for the comparable prior-year period. Revenue from non-school clients for the thirty-nine weeks ended September 28, 2024, was $18.8 million as compared to $26.4 million for the comparable prior-year period. The decrease in non-school revenue was primarily driven by the reduction in revenue from a large long-term care group where the Company deliberately reduced services, which generated $2.7 million in the current period as compared to $8.0 million in the comparable prior-year period. Gross profit increased by 3.7%, or $1.1 million, to $30.0 million as compared to $28.9 million in the comparable prior-year period. Gross profit increased due to an increase in revenue and gross profit margin. Gross profit margin for the thirty-nine weeks ended September 28, 2024, increased to 29.5% compared to 29.1% for the comparable prior-year period. The increase in gross profit margin was primarily attributed to a greater mix shift to school services as opposed to non-school services, offset by increased unemployment tax rates in New York. Specialty Health Care experienced operating income of $8.4 million for the thirty-nine weeks ended September 28, 2024, as compared to $9.4 million for the comparable prior-year period. The primary reason for the decrease in operating income was an increase in SGA expenses to $21.3 million compared to $19.2 million for the comparable prior-year period. SGA expense increased primarily due to sales and recruiting infrastructure investments expected to generate higher growth rates for the 2024/2025 school year.

Previous wording

Engineering revenue of $46.0 million for the twenty-six weeks ended June 29, 2024, increased 16.5%, or $6.5 million, compared to the comparable prior-year period. The increase in revenue comprised the following: an increase in Energy Services revenue of $8.6 million, offset by decreases in Aerospace revenue of $1.5 million and Industrial Processing revenue of $0.6 million. Aerospace revenue decreased primarily due to a contract reduction for the Company’s major outsourcing client. The Company believes the decrease in Industrial Processing revenue was mainly due to the irregular timing of large contracts with its Industrial Processing clients. Gross profit increased by 29.4%, or $2.6 million, compared to the prior-year period. Gross profit increased because of the increase in revenue, augmented by an increase in gross profit margin. The gross profit margin of 24.9% for the current period increased from 22.5% for the comparable prior-year period. The increase in gross profit margin was primarily due to better utilization, associated with higher revenue and favorable project revenue from the Energy Services group. The Engineering segment experienced operating income of $2.9 million for the twenty-six weeks ended June 29, 2024, compared to $0.7 million for the comparable prior-year period. Operating income increased due to the increase in gross profit and a small decrease of $0.1 million in SGA expense. The Engineering segment’s SGA expense of $8.2 million decreased from $8.3 million, primarily due to deliberate reductions to gain better efficiency.

Current wording

Engineering revenue of $70.2 million for the thirty-nine weeks ended September 28, 2024, increased 13.3%, or $8.2 million, compared to the comparable prior-year period. The increase in revenue comprised the following: an increase in Energy Services revenue of $11.6 million, offset by decreases in Aerospace revenue of $1.6 million and Industrial Processing revenue of $1.8 million. Aerospace revenue decreased primarily due to a contract reduction for the Company’s major outsourcing client. The Company believes the decrease in Industrial Processing revenue was mainly due to the irregular timing of large contracts with its Industrial Processing clients. Gross profit increased by 20.0%, or $2.9 million, compared to the comparable prior-year period. Gross profit increased because of the increase in revenue, augmented by an increase in gross profit margin. The gross profit margin of 24.7% for the current period increased from 23.4% for the comparable prior-year period. The increase in gross profit margin was primarily due to better utilization, associated with higher revenue and favorable project revenue from the Energy Services group. The Engineering segment experienced operating income of $4.3 million for the thirty-nine weeks ended September 28, 2024, compared to $1.9 million for the comparable prior-year period. Operating income increased due to the increase in gross profit and a small decrease of $0.1 million in SGA expense. The Engineering segment’s SGA expense of $12.5 million decreased from $12.6 million, primarily due to deliberate reductions to gain better efficiency.

Previous wording

Life Sciences and Information Technology revenue was $20.0 million for both the twenty-six weeks ended June 29, 2024, and the comparable prior-year period. Gross profit of $7.2 million for the twenty-six weeks ended June 29, 2024, decreased 3.4%, or $0.2 million, compared to $7.4 million for the comparable prior-year period. The Life Sciences and Information Technology gross profit margin for the twenty-six weeks ended June 29, 2024, was 36.0% as compared to 37.2% for the comparable prior-year period. The Company attributes the gross profit margin decrease to fluctuations in high margin project work. The Company also believes the gross margin for the current period is a more normalized rate. The Life Sciences and Information Technology segment experienced operating income of $2.2 million compared to $2.7 million for the prior-year period. The decrease in operating income was primarily due to a decrease in gross profit, and an increase in SGA expense. SGA expense increased to $4.8 million compared to $4.6 million in the prior-year period. The increase in SGA expense was primarily due to investments in sales infrastructure.

Current wording

Life Sciences and Information Technology revenue of $29.6 million for the thirty-nine weeks ended September 28, 2024, decreased 3.5%, or $1.1 million, compared to the comparable prior-year period. Gross profit of $10.9 million for the thirty-nine weeks ended September 28, 2024, decreased 7.0%, or $0.8 million, compared to $11.7 million for the comparable prior-year period. The Life Sciences and Information Technology gross profit margin for the thirty-nine weeks ended September 28, 2024, was 36.6% as compared to 38.0% for the comparable prior-year period. The Company attributes the gross profit margin decrease to fluctuations in high margin project work. The Company also believes the gross margin for the current period is a more normalized rate. The Life Sciences and Information Technology segment experienced operating income of $3.6 million compared to $4.5 million for the comparable prior-year period. The decrease in operating income was primarily due to a decrease in gross profit, and an increase in SGA expense. SGA expense increased to $7.0 million compared to $6.9 million in the comparable prior-year period. The increase in SGA expense was primarily due to normal fluctuations.

Previous wording

The following unaudited table presents the Company’s GAAP net income and the corresponding adjustments used to calculate Adjusted operating income, EBITDA and Adjusted EBITDA for the thirteen and twenty-six weeks ended June 29, 2024 and July 1, 2023.

Current wording

The following unaudited table presents the Company’s GAAP net income and the corresponding adjustments used to calculate Adjusted operating income, EBITDA and Adjusted EBITDA for the thirteen and thirty-nine weeks ended September 28, 2024 and September 30, 2023.

Previous wording

Operating activities provided $12.2 million of cash for the twenty-six weeks ended June 29, 2024 as compared to providing $16.5 million in the comparable prior-year period. The major components of cash provided by operating activities in the twenty-six weeks ended June 29, 2024 and the comparable prior-year period are as follows: net income, and changes in accounts receivable, the net of transit accounts payable and transit accounts receivable, prepaid expenses and other current assets, accounts payable, accrued expenses and accrued payroll and related costs, and deferred revenue.

Current wording

Operating activities provided $7.8 million of cash for the thirty-nine weeks ended September 28, 2024 as compared to providing $27.5 million in the comparable prior-year period. The major components of cash provided by operating activities in the thirty-nine weeks ended September 28, 2024 and the comparable prior-year period are as follows: net income, and changes in accounts receivable, the net of transit accounts payable and transit accounts receivable, prepaid expenses and other current assets, accounts payable, accrued expenses and accrued payroll and related costs, and deferred revenue.

Previous wording

While highly variable, the Company’s transit accounts payable typically exceeds the Company’s transit accounts receivable, but absolute amounts and differences fluctuate significantly from quarter to quarter in the normal course of business. The net of transit accounts payable and transit accounts receivable was a net payable of $21.5 million as of June 29, 2024 and a net payable of $22.2 million as of December 30, 2023, using $0.7 million of cash during the twenty-six weeks ended June 29, 2024. The net of transit accounts payable and transit accounts receivable was a net payable of $27.3 million as of July 1, 2023 and a net payable of $6.5 million as of December 31, 2022, providing $20.8 million of cash during the twenty-six weeks ended July 1, 2023. The decrease to net transit payable as of June 29, 2024 was due to normal fluctuations associated with several large, multiyear EPC (Engineering, Procurement and Construction) projects. In a typical EPC contract, the Company receives significant cash upfront to fund equipment procurement and construction subcontractors throughout the project.

Current wording

While highly variable, the Company’s transit accounts payable typically exceeds the Company’s transit accounts receivable, but absolute amounts and differences fluctuate significantly from quarter to quarter in the normal course of business. The net of transit accounts payable and transit accounts receivable was a net payable of $21.9 million as of September 28, 2024 and a net payable of $22.2 million as of December 30, 2023, using $0.3 million of cash during the thirty-nine weeks ended September 28, 2024. The net of transit accounts payable and transit accounts receivable was a net payable of $28.9 million as of September 30, 2023 and a net payable of $6.5 million as of December 31, 2022, providing $22.4 million of cash during the thirty-nine weeks ended September 30, 2023. The decrease to net transit payable as of September 28, 2024 was due to normal fluctuations associated with several large, multiyear EPC projects. In a typical EPC contract, the Company receives significant cash upfront to fund equipment procurement and construction subcontractors throughout the project.

Previous wording

Prepaid expenses and other current assets used cash of $0.8 million for the twenty-six weeks ended June 29, 2024 as compared to providing $0.3 million of cash for the comparable prior-year period. The Company attributes changes to prepaid expenses and other current assets, if any, to general timing of payments in the normal course of business. Since certain expenses are paid before a fiscal year concludes and are amortized over the next fiscal year, prepaid expenses and other current assets generally tend to increase at the end of a fiscal year and decrease during the first three quarters of the following fiscal year.

Current wording

Prepaid expenses and other current assets used cash of $0.5 million for the thirty-nine weeks ended September 28, 2024 as compared to using $0.7 million of cash for the comparable prior-year period. The Company attributes changes to prepaid expenses and other current assets, if any, to general timing of payments in the normal course of business. Since certain expenses are paid before a fiscal year concludes and are amortized over the next fiscal year, prepaid expenses and other current assets generally tend to increase at the end of a fiscal year and decrease during the first three quarters of the following fiscal year.

Previous wording

An increase in accounts payable and accrued expenses provided cash of $0.7 million for the twenty-six weeks ended June 29, 2024 as compared to using $1.0 million for the comparable prior-year period. The Company attributes these changes to typical fluctuations in the normal course of business.

Current wording

An decrease in accounts payable and accrued expenses used cash of $0.8 million for the thirty-nine weeks ended September 28, 2024 as compared to using $1.8 million for the comparable prior-year period. The Company attributes these changes to typical fluctuations in the normal course of business.

Previous wording

Changes in accrued payroll and related costs used $1.5 million for the twenty-six weeks ended June 29, 2024 as compared to using $1.2 million for the comparable prior-year period. There are four primary factors that generally impact accrued payroll and related costs: 1) there is a general correlation to operating expenses as payroll and related costs is the Company’s largest expense group, so as operating costs increase or decrease, absent all other factors, so will the accrued payroll and related costs; 2) the Company pays the majority of its payroll every two weeks and normally has twenty-six weeks in a fiscal quarter, which means that the Company normally has a major payroll on the last business day of every other quarter; 3) the timing of various payroll related payments varies in the normal course of business; and 4) most of the Company’s senior management participate in annual incentive plans and while progress advances are sometimes made during the fiscal year, these accrued bonus balances, to the extent they are projected to be achieved, generally accumulate throughout the year. A significant portion of these incentive plan accruals are typically paid at the beginning of one fiscal year, pertaining to the prior fiscal year. The Company’s last major payroll for the twenty-six weeks ended June 29, 2024 was paid on June 28, 2024.

Current wording

Changes in accrued payroll and related costs provided $0.4 million for the thirty-nine weeks ended September 28, 2024 as compared to providing $1.6 million for the comparable prior-year period. There are four primary factors that generally impact accrued payroll and related costs: 1) there is a general correlation to operating expenses as payroll and related costs is the Company’s largest expense group, so as operating costs increase or decrease, absent all other factors, so will the accrued payroll and related costs; 2) the Company pays the majority of its payroll every two weeks and normally has thirty-nine weeks in a fiscal quarter, which means that the Company normally has a major payroll on the last business day of every other quarter; 3) the timing of various payroll related payments varies in the normal course of business; and 4) most of the Company’s senior management participate in annual incentive plans and while progress advances are sometimes made during the fiscal year, these accrued bonus balances, to the extent they are projected to be achieved, generally accumulate throughout the year. A significant portion of these incentive plan accruals are typically paid at the beginning of one fiscal year, pertaining to the prior fiscal year. The Company’s last major payroll for the thirty-nine weeks ended September 28, 2024 was paid on September 27, 2024.

Previous wording

The Company’s deferred revenue balance as of June 29, 2024 was $2.7 million, compared to $1.9 million as of December 30, 2023, providing cash from operations of $0.8 million for the twenty-six weeks ended June 29, 2024. The increase was associated with upfront payments for future labor associated with the Company’s EPC contracts.

Current wording

The Company’s deferred revenue balance as of September 28, 2024 was $2.0 million, compared to $1.9 million as of December 30, 2023, providing cash from operations of $0.1 million for the thirty-nine weeks ended September 28, 2024. The increase was associated with upfront payments for future labor associated with the Company’s EPC contracts.

Previous wording

Investing activities used $1.1 million for the purchase of property and equipment in the current period as compared to using $0.6 million in the comparable prior-year period. The primary reason for the increase was the continued implementation of the Company’s new ERP software system.

Current wording

Investing activities used $1.6 million for the purchase of property and equipment in the current period as compared to using $0.9 million in the comparable prior-year period. The primary reason for the increase was the continued implementation of the Company’s new ERP software system.

Previous wording

Financing activities used $13.5 million of cash for the twenty-six weeks ended June 29, 2024, compared to using $15.2 million in the comparable prior-year period. The Company made net payments under its line of credit of $6.9 million during the twenty-six weeks ended June 29, 2024 as compared to making net borrowings of $6.1 million in the comparable prior-year period. During the twenty-six weeks ended June 29, 2024 the Company used $1.3 million to retire 44,567 shares associated with equity grants that vested for Brad Vizi, the Company’s Chairman and CEO. The Company used $5.4 million to repurchase shares of its common stock during the twenty-six weeks ended June 29, 2024 as compared to using $21.1 million to in the comparable prior-year period. The Company generated cash of $0.4 million from sales of shares from its equity plans for the current period and $0.3 million for the comparable prior-year period.

Current wording

Financing activities used $9.1 million of cash for the thirty-nine weeks ended September 28, 2024, compared to using $26.6 million in the comparable prior-year period. The Company made net payments under its line of credit of $0.3 million during the thirty-nine weeks ended September 28, 2024 as compared to making net payments of $2.1 million in the comparable prior-year period. During the thirty-nine weeks ended September 28, 2024 the Company used $1.3 million to retire 44,567 shares associated with equity grants that vested for Brad Vizi, the Company’s Chairman and CEO. The Company used $9.1 million to repurchase and retire shares of its common stock during the thirty-nine weeks ended September 28, 2024 as compared to using $24.4 million to in the comparable prior-year period. The Company generated cash of $0.7 million from sales of shares from its equity plans for the current period and $0.7 million for the comparable prior-year period.

Previous wording

Borrowings under the Revolving Credit Facility bear interest at one of two alternative rates, as selected by the Company at each incremental borrowing. These alternatives are: (i) SOFR (Secured Overnight Financing Rate) (which replaced LIBOR (London Interbank Offered Rate) upon the phasing out of LIBOR), plus applicable margin, typically borrowed in fixed 30-day increments, plus applicable margin, typically borrowed in fixed 30-day increments or (ii) the agent bank’s prime rate generally borrowed over shorter durations. The Company also pays unused line fees based on the amount of the Revolving Credit Facility that is not drawn. Unused line fees are recorded as interest expense. The effective weighted average interest rate, including unused line fees, for the twenty-six weeks ended June 29, 2024 and July 1, 2023 was 6.8% and 6.3%, respectively.

Current wording

Borrowings under the Revolving Credit Facility bear interest at one of two alternative rates, as selected by the Company at each incremental borrowing. These alternatives are: (i) SOFR (Secured Overnight Financing Rate) (which replaced LIBOR (London Interbank Offered Rate) upon the phasing out of LIBOR), plus applicable margin, typically borrowed in fixed 30-day increments, plus applicable margin, typically borrowed in fixed 30-day increments or (ii) the agent bank’s prime rate generally borrowed over shorter durations. The Company also pays unused line fees based on the amount of the Revolving Credit Facility that is not drawn. Unused line fees are recorded as interest expense. The effective weighted average interest rate, including unused line fees, for the thirty-nine weeks ended September 28, 2024 and September 30, 2023 was 6.8% and 6.4%, respectively.

Previous wording

Borrowings under the line of credit as of June 29, 2024 and December 30, 2023 were $23.9 million and $30.8 million, respectively. There were letters of credit outstanding at June 29, 2024 and December 30, 2023 for $5.0 million and $2.0 million, respectively. At June 29, 2024 and December 30, 2023, the Company had availability for additional borrowings under the Revolving Credit Facility of $16.1 million and $12.1 million, respectively.

Current wording

Borrowings under the line of credit as of September 28, 2024 and December 30, 2023 were $30.5 million and $30.8 million, respectively. There were letters of credit outstanding at September 28, 2024 and December 30, 2023 for $7.0 million and $2.0 million, respectively. At September 28, 2024 and December 30, 2023, the Company had availability for additional borrowings under the Revolving Credit Facility of $7.5 million and $12.1 million, respectively.

Previous wording

The Company’s liquidity and capital resources as of June 29, 2024, included accounts receivable and total current asset balances of $66.9 million and $85.3 million, respectively. Current liabilities were $57.6 million as of June 29, 2024 and were exceeded by total current assets by $27.7 million.

Current wording

The Company’s liquidity and capital resources as of September 28, 2024, included accounts receivable and total current asset balances of $75.9 million and $90.5 million, respectively. Current liabilities were $55.6 million as of September 28, 2024 and were exceeded by total current assets by $34.9 million.