RCM TECHNOLOGIES, INC.

Previous wording

The Company’s growth prospects are influenced by broad economic trends. The pace of customer capital spending programs, new product launches and similar activities have a direct impact on the need for engineering, life sciences and information technology services. When the U.S., Canadian or global economies decline, the Company’s operating performance could be adversely impacted. In addition, global events such as the COVID-19 pandemic and endemic can have a substantial impact on our operations and financial results. The Company believes that its fiscal discipline, strategic focus on targeted vertical markets and diversification of service offerings provides some insulation from adverse trends. However, general economic declines could result in the need for future cost reductions or changes in strategy.

Current wording

The Company’s growth prospects are influenced by broad economic trends. The pace of customer capital spending programs, new product launches and similar activities have a direct impact on the need for engineering, life sciences, data and solutions. When the U.S., Canadian or global economies decline, the Company’s operating performance could be adversely impacted. In addition, global events such as international conflicts, trade disputes, or health pandemics and endemics also have a substantial impact on our operations and financial results. The Company believes that its fiscal discipline, strategic focus on targeted vertical markets and diversification of service offerings provides some insulation from adverse trends. However, general economic declines could result in the need for future cost reductions or changes in strategy.

Previous 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.

Current wording

Revenue. Revenue increased by $12.5 million for the thirteen weeks ended March 29, 2025 as compared to the thirteen weeks ended March 30, 2024 (the “comparable prior-year period”). Revenue increased $5.1 million in the Specialty Health Care segment, increased $8.6 million in the Engineering segment and decreased $1.2 million in the Life Sciences, Data and Solutions segment. See more detailed disclosure by segment in our Segment Discussion.

Previous 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.

Current wording

Cost of Services and Gross Profit. Cost of services increased by $10.9 million for the thirteen weeks ended March 29, 2025 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 March 29, 2025 and March 30, 2024 was 74.0% and 71.7%, 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 $13.0 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.

Current wording

Selling, General and Administrative. Selling, general and administrative (“SGA”) expenses were $15.0 million for the thirteen weeks ended March 29, 2025 as compared to $14.2 million for the comparable prior-year period. As a percentage of revenue, SGA expenses were 17.7% for the thirteen weeks ended March 29, 2025 and 19.7% 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 $0.5 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.

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 $0.3 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 $1.0 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.

Current wording

Income Tax Expense. The Company recognized $1.7 million of income tax expense for the thirteen weeks ended March 29, 2025 as compared to $1.5 million for the comparable prior-year period. The consolidated effective income tax rate for the current period was 28.9% as compared to 26.9% for the comparable prior-year period. The effective income tax rates for the thirteen weeks ended March 29, 2025, were approximately 29.3%, 26.7%, and 55.7% in the United States, Canada, and Europe, 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 European 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 comparable prior-year period estimated income tax rates were 27.4%, 26.6%, and 14.7% in the United States, Canada, and Europe, respectively. The primary reason for the increase in the consolidated and United States effective rates in the current period is due to increases to permanent tax differences in the United States. The high effective tax rate in Europe during the current period is due to a fixed tax benefit relative to a small pretax loss.

Previous wording

Differences between the effective tax rate and the applicable U.S. federal statutory rate may arise, primarily from the effect of state and local income taxes, share-based compensation, and potential tax credits available to the Company. The actual 2024 effective tax rate may vary from the estimate depending on the actual operating income earned in various jurisdictions, the potential availability of tax credits, and the exercise of stock options and vesting of share-based awards.

Current wording

Differences between the effective tax rate and the applicable U.S. federal statutory rate may arise, primarily from the effect of state and local income taxes, share-based compensation, and potential tax credits available to the Company. The actual 2025 effective tax rate may vary from the estimate depending on the actual operating income earned in various jurisdictions, the potential availability of tax credits, the vesting of share-based awards, and the amount of any permanent book to tax differences.

Previous 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.

Current wording

Specialty Health Care revenue of $43.3 million for the thirteen weeks ended March 29, 2025, increased 13.4%, or $5.1 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 thirteen weeks ended March 29, 2025, was $37.3 million as compared to $31.9 million for the comparable prior-year period. Revenue from non-school clients for the thirteen weeks ended March 29, 2025, was $6.0 million as compared to $6.3 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 $0.5 million in the current period as compared to $1.1 million in the comparable prior-year period. Gross profit increased by 10.2%, or $1.1 million, to $12.2 million for the thirteen weeks ended March 29, 2025 as compared to $11.1 million in the comparable prior-year period. Gross profit increased due to an increase in revenue, offset by a decrease in gross profit margin. Gross profit margin for the thirteen weeks ended March 29, 2025, decreased to 28.2% compared to 29.0% for the comparable prior-year period. The decrease in gross profit margin was primarily attributed to a greater mix shift to lower-margin services. Specialty Health Care experienced operating income of $3.7 million for the thirteen weeks ended March 29, 2025, as compared to $3.5 million for the comparable prior-year period. The primary reason for the increase in operating income was the increase to gross profit, offset by an increase in SGA expense to $8.3 million for the thirteen weeks ended March 29, 2025 compared to $7.5 million for the comparable prior-year period. SGA expense increased primarily due to sales and recruiting infrastructure investments to support revenue growth.

Previous 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.

Current wording

Engineering revenue of $32.1 million for the thirteen weeks ended March 29, 2025, increased 36.7%, or $8.6 million, compared to the comparable prior-year period. The increase in revenue included increases in Energy Services revenue of $3.2 million, Aerospace revenue of $4.0 million, and Industrial Processing revenue of $1.4 million. Energy Services revenue increased primarily because of increased activity from EPC projects. Aerospace revenue increased primarily due to expansion with new clients. The Company believes the increase in Industrial Processing revenue was mainly due to the Company’s NEXT initiative. Gross profit increased by 12.4%, or $0.7 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 19.2% for the current period decreased from 23.4% for the comparable prior-year period. The decrease in gross profit margin was primarily due to a change in mix associated with EPC project revenue from the Energy Services group and Aerospace revenue. The Engineering segment experienced operating income of $1.2 million for both periods presented. The Engineering segment’s SGA expense of $4.7 million increased from $4.2 million, primarily due to a greater allocation of corporate SGA expense.

Previous wording

The following non-GAAP measures, which adjust for the categories of expenses described below, are non-GAAP financial measures. Our management believes that these non-GAAP financial measures (“Adjusted operating income,” “EBITDA” and “Adjusted EBITDA”) are useful information for investors, shareholders, and other stakeholders of our Company in gauging our results of operations on an ongoing basis and to enhance investors’ overall understanding of our current financial performance and period-to-period comparisons. Adjusted operating income, EBITDA and Adjusted EBITDA should not be considered alternatives to net income as an indicator of performance. In addition, Adjusted operating income, EBITDA and Adjusted EBITDA do not take into account changes in certain assets and liabilities and interest and income taxes that can affect cash flows. We do not intend the presentation of these non-GAAP measures to be considered in isolation or as a substitute for results prepared in accordance with GAAP. These non-GAAP measures should be read-only in conjunction with our consolidated financial statements prepared in accordance with GAAP.

Current wording

The following non-GAAP measures, which adjust for the categories of expenses described below, are non-GAAP financial measures. Our management believes that these non-GAAP financial measures (“Adjusted operating income”, “EBITDA”, “Adjusted EBITDA”, “Adjusted net income”, and “Adjusted diluted net earnings per share”) are useful information for investors, shareholders and other stakeholders of our company in gauging our results of operations on an ongoing basis and to enhance investors’ overall understanding of our current financial performance and period-to-period comparisons. We believe these non-GAAP financial measures are performance measures and not liquidity measures. These non-GAAP financial measures should not be considered as an alternative to net income or operating income as indicators of performance. In addition, neither EBITDA nor Adjusted EBITDA takes into account changes in certain assets and liabilities as well as interest and income taxes that can affect cash flows. We do not intend the presentation of these non-GAAP measures to be considered in isolation or as a substitute for results prepared in accordance with GAAP. These non-GAAP measures should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP.

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 thirty-nine weeks ended September 28, 2024 and September 30, 2023.

Current wording

The following unaudited tables present the Company's GAAP net income and GAAP operating income and the corresponding adjustments used to calculate Adjusted operating income, EBITDA, Adjusted EBITDA, Adjusted net income and Adjusted diluted net earnings per share for the thirteen weeks ended March 29, 2025 and March 30, 2024.

Previous 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.

Current wording

Operating activities provided $16.7 million of cash for the thirteen weeks ended March 29, 2025 as compared to providing $6.4 million in the comparable prior-year period. The major components of cash provided by operating activities in the thirteen weeks ended March 29, 2025 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 $21.9 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.

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 $12.2 million as of March 29, 2025 and a net payable of $16.6 million as of December 28, 2024, using $4.4 million of cash during the thirteen weeks ended March 29, 2025. The net of transit accounts payable and transit accounts receivable was a net payable of $22.0 million as of March 30, 2024 and a net payable of $22.2 million as of December 30, 2023, using $0.2 million of cash during the thirteen weeks ended March 30, 2024. The decrease to net transit payable as of March 29, 2025 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 $0.5 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.

Current wording

Prepaid expenses and other current assets provided cash of $1.8 million for the thirteen weeks ended March 29, 2025 as compared to providing $0.1 million of cash for the comparable prior-year period. The Company typically 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 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.

Current wording

An increase in accounts payable and accrued expenses provided cash of $1.4 million for the thirteen weeks ended March 29, 2025 as compared to using $1.3 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 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.

Current wording

Changes in accrued payroll and related costs provided $2.7 million for the thirteen weeks ended March 29, 2025 as compared to providing $1.0 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 thirteen weeks ended March 29, 2025 was paid on March 21, 2025.

Previous 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.

Current wording

The Company’s deferred revenue balance as of March 29, 2025 was $4.5 million, compared to $4.2 million as of December 28, 2024, providing cash from operations of $0.3 million for the thirteen weeks ended March 29, 2025. The increase was associated with upfront payments for future labor associated with the Company’s EPC contracts.

Previous 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.

Current wording

Investing activities used $0.4 million for the purchase of property and equipment in the current period as compared to using $0.7 million in the comparable prior-year period. The primary reason for the decrease was the nearly completed implementation of the Company’s new ERP software system.

Previous 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.

Current wording

Financing activities used $15.6 million of cash for the thirteen weeks ended March 29, 2025, compared to using $9.7 million in the comparable prior-year period. The Company made net payments under its line of credit of $11.6 million during the thirteen weeks ended March 29, 2025 as compared to making net payments of $8.6 million in the comparable prior-year period. The Company used $3.2 million to purchase shares of its common stock during the thirteen weeks ended March 29, 2025. The Company did not purchase shares during the thirteen week period ended March 30, 2024. During the thirteen weeks ended March 29, 2025, the Company used $0.9 million to retire shares of vested equity grants, the proceeds of which were used to pay withholding taxes upon the vesting of equity grants, as compared to using $1.3 million in the comparable prior year period. The Company generated cash of $0.3 million from sales of shares from its equity plans for both periods presented.

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 thirty-nine weeks ended September 28, 2024 and September 30, 2023 was 6.8% and 6.4%, 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), plus applicable margin 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 thirteen weeks ended March 29, 2025 and March 30, 2024 were 6.0% and 6.8%, respectively.

Previous wording

All borrowings under the Revolving Credit Facility are collateralized by all of the assets of the Company and its subsidiaries and a pledge of the stock of its subsidiaries. The Revolving Credit Facility also contains various financial and non-financial covenants, such as a covenant that restricts the Company’s ability to borrow in order to pay dividends. As of September 28, 2024, the Company was in compliance with all covenants contained in the Revolving Credit Facility.** **The Company believes that it will maintain compliance with its financial covenants for the foreseeable future.

Current wording

All borrowings under the Fifth Amended and Restated Loan Agreement remain collateralized with substantially all of the Company’s assets, as well as the capital stock of its subsidiaries. The Revolving Credit Facility also contains various financial and non-financial covenants, such as a covenant that restricts the Company’s ability to borrow in order to pay dividends. As of March 29, 2025, the Company was in compliance with all covenants contained in the Revolving Credit Facility. The Company believes that it will maintain compliance with its financial covenants for the foreseeable future.

Previous 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.

Current wording

Borrowings under the line of credit as of March 29, 2025 and December 28, 2024 were $23.4 million and $35.0 million, respectively. There were letters of credit outstanding at March 29, 2025 and December 28, 2024 for $7.3 million and $7.4 million, respectively. At March 29, 2025 and December 28, 2024, the Company had availability for additional borrowings under the Revolving Credit Facility of $34.3 million and $22.6 million, respectively.

Previous wording

Liquidity is a measure of our ability to meet potential cash requirements, maintain our assets, fund our operations, and meet the other general cash needs of our business. Our liquidity is impacted by general economic, financial, competitive, and other factors beyond our control. Our liquidity requirements consist primarily of funds necessary to pay our expenses, principally labor-costs, and other related expenditures. We generally satisfy our liquidity needs through cash provided by operations and, when necessary, our revolving line of credit from Citizens Bank. The Company believes it has a great deal of flexibility to reduce its costs if it becomes necessary. The Company believes that it can satisfy its liquidity needs for at least the next 12 months.

Current wording

Liquidity is a measure of our ability to meet potential cash requirements, maintain our assets, fund our operations, and meet the other general cash needs of our business. Our liquidity is impacted by general economic, financial, competitive, and other factors beyond our control. Our liquidity requirements consist primarily of funds necessary to pay our expenses, principally labor costs, and other related expenditures. We generally satisfy our liquidity needs through cash provided by operations and, when necessary, our revolving line of credit from Citizens Bank. The Company believes it has a great deal of flexibility to reduce its costs if it becomes necessary. The Company believes that it can satisfy its liquidity needs for at least the next twelve months.

Previous 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.

Current wording

The Company’s liquidity and capital resources as of March 29, 2025, included accounts receivable and total current asset balances of $68.4 million and $86.0 million, respectively. Current liabilities were $53.2 million as of March 29, 2025 and were exceeded by total current assets by $32.8 million.

Previous wording

The Company is exposed to various asserted claims as of September 28, 2024, where the Company believes it has a probability of loss. Additionally, the Company is exposed to other asserted claims whereby an amount of loss has not been declared, and the Company cannot determine the potential loss. Any of these various claims could result in an unfavorable outcome or settlement that exceeds the accrued amounts. However, the Company believes that such matters will not, either individually or in the aggregate, have a material adverse effect on its business, consolidated financial position, results of operations, or cash flows. As of September 28, 2024, the Company has accrued $2.5 million for asserted claims.

Current wording

The Company is exposed to various asserted claims as of December 28, 2024, where the Company believes it has a probability of loss. Additionally, the Company is exposed to other asserted claims whereby an amount of loss has not been declared, and the Company cannot determine the potential loss. Any of these various claims could result in an unfavorable outcome or settlement that exceeds the accrued amounts. However, the Company believes that such matters will not, either individually or in the aggregate, have a material adverse effect on its business, consolidated financial position, results of operations, or cash flows. As of both December 28, 2024 and March 29, 2025, the Company had accrued $2.8 million for asserted claims.

Previous wording

In April 2022, a client of the Company’s Industrial Processing Group alleged that a system partially designed by the Company is not operating as intended and that the Company is responsible. The Company has not determined if it has any liability. In the event of liability, the Company believes its damages are contractually limited to an amount no higher than $3.3 million. Furthermore, the Company believes that if it were found liable, any damages would be covered by insurance, subject to a deductible of $0.5 million and maximum coverage of $5.0 million. While the Company attempts to find a mutually agreeable solution, the Company has reserved $0.5 million for this project. The Company can give no assurance that its liability is limited to $3.3 million or that liability over $0.5 million, if any, will be covered by insurance.

Current wording

In April 2022, a client of the Company’s Industrial Processing Group alleged that a system partially designed by the Company is not operating as intended and that the Company is responsible. The Company has not determined if it has any liability. In the event of liability, the Company believes its damages are contractually limited to an amount no higher than $3.3 million. Furthermore, the Company believes that if it were found liable, any damages would be covered by insurance, subject to a deductible of $0.5 million and maximum coverage of $5.0 million. While the client’s estimated damages are not known, the client has either inferred or asserted during settlement discussions that its damages significantly exceed the Company’s insurance coverage of $5 million. While the Company attempts to find a mutually agreeable solution, the Company has reserved $0.5 million for this project. The Company can give no assurance that its liability is limited to $3.3 million or that liability over $0.5 million, if any, will be covered by insurance.

Previous wording

The Company utilizes SAP software for its financial reporting and accounting system which was implemented in 1999 and has not previously undergone significant upgrades since its initial implementation. The Company is currently implementing an upgrade of its current system, which went live in April 2024.

Current wording

The Company utilizes SAP software for its financial reporting and accounting system which was initially implemented in 1999 and was upgraded during fiscal years 2023 and 2024. The Company went live with its new SAP system in April 2024.

Previous wording

As of September 28, 2024, the Company had two acquisition agreements whereby additional contingent consideration may be earned by the sellers: 1) effective September 30, 2018, the Company acquired certain assets of Thermal Kinetics Engineering, PLLC and Thermal Kinetics Systems, LLC, and 2) effective October 2, 2022, the Company acquired certain assets of TalentHerder LLC. The Company estimates future contingent payments at September 28, 2024 as follows:

Current wording

As of March 29, 2025, the Company had one acquisition agreement whereby additional contingent consideration may be earned by the sellers: effective September 30, 2018, the Company acquired certain assets of Thermal Kinetics Engineering, PLLC and Thermal Kinetics Systems, LLC. The Company estimates future contingent payments at December 28, 2024 as follows: