RCM TECHNOLOGIES, INC. (RCMT)

CIK: 0000700841. SIC: 7363 Services-Help Supply Services. Latest 10-K as of: 2026-04-03.

SIC breadcrumb: Services > Business Services > SIC 7363 Services-Help Supply Services

SEC company page: https://www.sec.gov/edgar/browse/?CIK=700841. Latest filing source: 0001437749-26-011236.

Selected Fundamentals

Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-04-03. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000700841.json. Derived margins, ratios, and free cash flow are computed from the extracted annual SEC facts.

Flow metrics use full-year FY periods from 10-K/10-K/A filings; balance-sheet metrics use FY-end instants. Free cash flow = operating cash flow - capital expenditures. Missing metrics are omitted rather than fabricated.

Ratios

ROE and ROA use period-end equity/assets. Liabilities / equity uses total liabilities divided by stockholders' equity. Current ratio uses current assets divided by current liabilities when both are reported.

Financial Charts

Quarterly

Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-05-14. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000700841.json.

Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived.

Quarterly Charts

Macro Cross-References

• CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
• UNRATE - Unemployment Rate
• FEDFUNDS - Federal Funds Effective Rate
• CES0500000003 - Average Hourly Earnings of All Employees, Total Private
• DFEDTARU - Federal Funds Target Range - Upper Limit
• DFEDTARL - Federal Funds Target Range - Lower Limit
• DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
• DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
• DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
• DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
• T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
• CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
• CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
• CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
• CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
• PCEPI - Personal Consumption Expenditures: Chain-type Price Index
• PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
• PPIACO - Producer Price Index by Commodity: All Commodities
• T10YIE - 10-Year Breakeven Inflation Rate
• U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
• PAYEMS - All Employees, Total Nonfarm
• CIVPART - Labor Force Participation Rate
• EMRATIO - Employment-Population Ratio
• UNEMPLOY - Unemployed
• CE16OV - Employment Level
• ICSA - Initial Claims
• JTSJOL - Job Openings: Total Nonfarm
• JTSQUR - Quits: Total Nonfarm
• GDPC1 - Real Gross Domestic Product
• A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
• INDPRO - Industrial Production: Total Index
• TCU - Capacity Utilization: Total Index
• HOUST - New Privately-Owned Housing Units Started: Total Units
• PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
• RSAFS - Advance Retail Sales: Retail Trade
• PCE - Personal Consumption Expenditures
• DSPIC96 - Real Disposable Personal Income
• PSAVERT - Personal Saving Rate
• M2SL - M2
• BOPGSTB - U.S. International Trade in Goods and Services: Balance
• MSPUS - Median Sales Price of Houses Sold for the United States
• HSN1F - New One Family Houses Sold: United States
• RHORUSQ156N - Homeownership Rate in the United States
• TTLCONS - Total Construction Spending: Total Construction in the United States
• RRVRUSQ156N - Rental Vacancy Rate in the United States
• TOTALSL - Total Consumer Credit Owned and Securitized
• REVOLSL - Revolving Consumer Credit Owned and Securitized
• DRCCLACBS - Delinquency Rate on Credit Card Loans, All Commercial Banks
• GDP - Gross Domestic Product
• GPDI - Gross Private Domestic Investment
• GCE - Government Consumption Expenditures and Gross Investment
• PCEC - Personal Consumption Expenditures
• NETEXP - Net Exports of Goods and Services
• GFDEBTN - Federal Debt: Total Public Debt
• GFDEGDQ188S - Federal Debt: Total Public Debt as Percent of Gross Domestic Product
• FYFSD - Federal Surplus or Deficit
• FGRECPT - Federal Government Current Receipts
• FGEXPND - Federal Government: Current Expenditures
• MANEMP - All Employees, Manufacturing
• USCONS - All Employees, Construction
• USTRADE - All Employees, Retail Trade
• USFIRE - All Employees, Financial Activities
• USGOVT - All Employees, Government
• AWHAETP - Average Weekly Hours of All Employees, Total Private
• DGORDER - Manufacturers' New Orders: Durable Goods
• NEWORDER - Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
• BUSINV - Total Business Inventories
• EXPGS - Exports of Goods and Services
• IMPGS - Imports of Goods and Services
• IR - Import Price Index (End Use): All Commodities
• PPIFIS - Producer Price Index by Commodity: Final Demand

Latest quarter (10-Q)

Latest 10-Q source: 0001437749-26-017057.

Extracted structurally from real Item 2 body heading to real Item 3/4 boundary. Confidence: high. Filing date: 2026-05-14. Report date: 2026-04-04.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Private Securities Litigation Reform Act Safe Harbor Statement

Certain statements included herein and in other reports and public filings made by RCM Technologies, Inc. (“RCM” or the “Company”) are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, without limitation, statements regarding the adoption by businesses of new technology solutions; the use by businesses of outsourced solutions, such as those offered by the Company, in connection with such adoption; the Company’s strategic and business initiatives and growth strategies; and the outcome of litigation (at both the trial and appellate levels) and arbitrations, or other business disputes, involving the Company. Readers are cautioned that such forward-looking statements, as well as others made by the Company, which may be identified by words such as “may,” “will,” “expect,” “anticipate,” “continue,” “estimate,” “project,” “intend,” “believe,” and similar expressions, are only predictions and are subject to risks and uncertainties that could cause the Company’s actual results and financial position to differ materially from such statements. Such risks and uncertainties include, without limitation: (i) unemployment and general economic conditions affecting the provision of life sciences, information technology and engineering services and solutions and the placement of temporary staffing personnel; (ii) the Company’s ability to continue to attract, train and retain personnel qualified to meet the requirements of its clients; (iii) the Company’s ability to identify appropriate acquisition candidates, complete such acquisitions and successfully integrate acquired businesses; (iv) the Company’s relationships with and reliance upon significant customers, and ability to collect accounts receivable from such customers; (v) risks associated with foreign currency fluctuations and changes in exchange rates, particularly with respect to the Canadian dollar; (vi) uncertainties regarding amounts of deferred consideration and earnout payments to become payable to former stockholders of acquired businesses; (vii) the adverse effect a potential decrease in the trading price of the Company’s common stock would have upon the Company’s ability to acquire businesses through the issuance of its securities; (viii) the Company’s ability to obtain financing on satisfactory terms; (ix) the reliance of the Company upon the continued service of its executive officers; (x) the Company’s ability to remain competitive in the markets that it serves; (xi) the Company’s ability to maintain its unemployment insurance premiums and workers compensation premiums; (xii) the risk of claims being made against the Company associated with providing temporary staffing services; (xiii) the Company’s ability to manage significant amounts of information and periodically expand and upgrade its information processing capabilities; (xiv) the risk of cyber attacks on our information technology systems or those of our third party vendors; (xv) the Company’s ability to remain in compliance with federal and state wage and hour laws and regulations; (xvi) uncertainties in predictions as to the future need for the Company’s services; (xvii) uncertainties relating to the allocation of costs and expenses to each of the Company’s operating segments; (xviii) the costs of conducting and the outcome of litigation, arbitrations and other business disputes involving the Company, and the applicability of insurance coverage with respect to any such litigation; (ixx) the results of, and costs relating to, any interactions with stockholders of the Company who may pursue specific initiatives with respect to the Company’s governance and strategic direction, including without limitation a contested proxy solicitation initiated by such stockholders, or any similar such interactions; and (xx) other geopolitical, economic, competitive, health and governmental factors affecting the Company’s operations, markets, products and services. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date made. Except as required by law, the Company undertakes no obligation to publicly release the results of any revision of these forward-looking statements to reflect these trends or circumstances after the date they are made or to reflect the occurrence of unanticipated events.

28

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Overview

RCM participates in a market that is cyclical in nature and sensitive to economic changes. As a result, the impact of economic changes on revenue and operations can be substantial, resulting in significant volatility in the Company’s financial performance.

The Company believes it has developed and assembled an attractive portfolio of capabilities, established a proven record of performance and credibility and built an efficient pricing structure. The Company is committed to optimizing its business model as a single-source premier provider of business and technology solutions with a strong vertical focus, offering an integrated suite of services through a global delivery platform.

The Company believes that most companies recognize the importance of advanced technologies and business processes to compete in today’s business climate. However, the process of designing, developing and implementing business and technology solutions is becoming increasingly complex. The Company believes that many businesses today are focused on return on investment analysis in prioritizing their initiatives. This has had an adverse impact on spending by current and prospective clients for many emerging new solutions.

Nonetheless, the Company continues to believe that businesses must implement more advanced life sciences, information technology, and engineering solutions—including AI and specifically Agentic AI, Quality by Design (QbD), and process automation—to upgrade their systems, applications, and processes. By leveraging AI, organizations can enhance data-driven decision-making and predictive analytics, while QbD principles ensure that quality is built into every stage of development and operations. Process automation further streamlines workflows, reduces manual intervention, and increases operational efficiency. These integrated approaches enable companies to maximize productivity and optimize performance, maintaining a competitive advantage even when operating under budgetary, personnel, and expertise constraints. As companies are driven to support increasingly complex systems, applications, and processes of significant strategic value, the demand for outsourcing—especially in areas involving AI, QbD, and automation—continues to rise. The Company believes that its current and prospective clients are actively evaluating the potential for outsourcing business-critical systems, applications, and processes that incorporate these advanced methodologies.

The Company provides project management and consulting services, which are billed based on either agreed-upon fixed fees or hourly rates, or a combination of both. The billing rates and profit margins for project management and solutions services are generally higher than those for professional consulting services. The Company generally endeavors to expand its sales of higher margin solutions and project management services. The Company also realizes revenue from client engagements that range from the placement of contract and temporary technical consultants to project assignments that entail the delivery of end-to-end solutions. These services are primarily provided to the client at hourly rates that are established for each of the Company’s consultants based upon their skill level, experience and the type of work performed.

The majority of the Company’s services are provided under purchase orders. Contracts are used for certain more complex assignments, where engagements are for longer terms or precise documentation of the nature and scope of the assignment is necessary. Although contracts normally relate to longer-term, more complex engagements, they do not oblige the customer to purchase a minimum level of services and are generally terminable by the customer with 60 to 90 days’ notice. The Company, from time to time, enters contracts requiring the completion of specific deliverables. Typically, these contracts are for less than one year. The Company recognizes revenue from these deliverables when the client accepts and approves them.

Costs of services consist primarily of salaries and compensation-related expenses for billable consultants and employees, including payroll taxes, employee benefits, and insurance. Selling, general, and administrative expenses consist primarily of personnel salaries and benefits for business development, recruiting, operating activities, and training, as well as corporate overhead expenses. Corporate overhead expenses relate to the salaries and benefits of personnel responsible for corporate activities, including the Company’s corporate marketing, administrative, and financial reporting responsibilities, as well as its acquisition program. The Company records these expenses when incurred.

29

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Critical Accounting Policies and Use of Estimates

This Management's Discussion and Analysis of Financial Condition and Results of Operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenue and expenses during the reporting period. In our consolidated financial statements, estimates are used for, but not limited to, accounts receivable, contract assets, provision for credit losses, goodwill, long-lived intangible assets, accounting for stock options and restricted stock and stock unit awards, litigation or other contingent accruals, accounting for income taxes, and accrued bonuses. The various estimates and assumptions taken into account include, but are not limited to:

●

The Company enters into contracts or purchase orders that require the completion of specific deliverables or other fixed-fee elements. For fixed-price arrangements, revenue is recognized over time as performance obligations are satisfied. The Company measures progress toward completion using either an input method or an output method, depending on which method best depicts the transfer of control of services to the customer. The Company primarily applies an input method based on costs incurred relative to total estimated costs (cost-to-cost method). In certain arrangements, an output method, such as achieving contractual milestones or delivering specified units, is used when it more directly reflects the Company’s performance. Total estimated costs are developed at contract inception and updated throughout the contract. This approach requires significant judgment, particularly with respect to estimated total costs, project margins, and progress toward completion, all of which may change over the life of a contract and affect the timing and amount of revenue recognized. When determining whether an impairment of goodwill or of an intangible asset is indicated, we consider the financial condition of our three segments to which the acquired business relates.

●

The market price of the Company’s stock at each gran

[Excerpt truncated for page length; source filing is linked above.]

Latest 10-K MD&A

Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Confidence: high. Filing date: 2026-04-03. Report date: 2026-01-03.

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

The following discussion and analysis contains forward-looking statements, including, without limitation, statements relating to our plans, strategies, objectives, expectations, intentions and resources. Such forward-looking statements should be read in conjunction with our disclosures under “Item 1A. Risk Factors” of this Form 10-K.

This section of the Form 10-K generally discusses matters relating to the fiscal years ended January 3, 2026 and December 28, 2024 and year-to-year comparisons between such fiscal years. Discussions of matters relating to the fiscal year ended December 30, 2023 and year-to-year comparison between that year and the year ended December 28, 2024 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 28, 2024.

Overview

RCM participates in a market that is cyclical in nature and sensitive to economic changes. As a result, the impact of economic changes on revenue and operations can be substantial, resulting in significant volatility in the Company’s financial performance.

The Company believes it has developed and assembled an attractive portfolio of capabilities, established a proven record of performance and credibility and built an efficient pricing structure. The Company is committed to optimizing its business model as a single-source premier provider of business and technology solutions with a strong vertical focus, offering an integrated suite of services through a global delivery platform.

The Company believes that most companies recognize the importance of advanced technologies and business processes to compete in today’s business climate. However, the process of designing, developing and implementing business and technology solutions is becoming increasingly complex. The Company believes that many businesses today are focused on return on investment analysis in prioritizing their initiatives. This has had an adverse impact on spending by current and prospective clients for many emerging new solutions.

Nonetheless, the Company continues to believe that businesses must implement more advanced life sciences, information technology, and engineering solutions—including AI and specifically Agentic AI, Quality by Design (QbD), and process automation—to upgrade their systems, applications, and processes. By leveraging AI, organizations can enhance data-driven decision-making and predictive analytics, while QbD principles ensure that quality is built into every stage of development and operations. Process automation further streamlines workflows, reduces manual intervention, and increases operational efficiency. These integrated approaches enable companies to maximize productivity and optimize performance, maintaining a competitive advantage even when operating under budgetary, personnel, and expertise constraints. As companies are driven to support increasingly complex systems, applications, and processes of significant strategic value, the demand for outsourcing—especially in areas involving AI, QbD, and automation—continues to rise. The Company believes that its current and prospective clients are actively evaluating the potential for outsourcing business-critical systems, applications, and processes that incorporate these advanced methodologies. 

The Company provides project management and consulting services, which are billed based on either agreed-upon fixed fees or hourly rates, or a combination of both. The billing rates and profit margins for project management and solutions services are generally higher than those for professional consulting services. The Company generally endeavors to expand its sales of higher margin solutions and project management services. The Company also realizes revenue from client engagements that range from the placement of contract and temporary technical consultants to project assignments that entail the delivery of end-to-end solutions. These services are primarily provided to the client at hourly rates that are established for each of the Company’s consultants based upon their skill level, experience and the type of work performed.

25

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Overview (Continued)

The majority of the Company’s services are provided under purchase orders. Contracts are used for certain more complex assignments, where engagements are for longer terms or precise documentation of the nature and scope of the assignment is necessary. Although contracts normally relate to longer-term, more complex engagements, they do not oblige the customer to purchase a minimum level of services and are generally terminable by the customer with 60 to 90 days’ notice. The Company, from time to time, enters contracts requiring the completion of specific deliverables. Typically, these contracts are for less than one year. The Company recognizes revenue from these deliverables when the client accepts and approves them.

Costs of services consist primarily of salaries and compensation-related expenses for billable consultants and employees, including payroll taxes, employee benefits, and insurance. Selling, general, and administrative expenses consist primarily of personnel salaries and benefits for business development, recruiting, operating activities, and training, as well as corporate overhead expenses. Corporate overhead expenses relate to the salaries and benefits of personnel responsible for corporate activities, including the Company’s corporate marketing, administrative, and financial reporting responsibilities, as well as its acquisition program. The Company records these expenses when incurred.

Critical Accounting Policies and Use of Estimates

This Management's Discussion and Analysis of Financial Condition and Results of Operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenue and expenses during the reporting period. In our consolidated financial statements, estimates are used for, but not limited to, accounts receivable, contract assets, provision for credit losses, goodwill, long-lived intangible assets, accounting for stock options and restricted stock and stock unit awards, litigation or other contingent accruals, accounting for income taxes, and accrued bonuses. The various estimates and assumptions taken into account include, but are not limited to:

●

The Company enters into contracts or purchase orders that require the completion of specific deliverables or other fixed-fee elements. For fixed-price arrangements, revenue is recognized over time as performance obligations are satisfied. The Company measures progress toward completion using either an input method or an output method, depending on which method best depicts the transfer of control of services to the customer. The Company primarily applies an input method based on costs incurred relative to total estimated costs (cost-to-cost method). In certain arrangements, an output method, such as achieving contractual milestones or delivering specified units, is used when it more directly reflects the Company’s performance. Total estimated costs are developed at contract inception and updated throughout the contract. This approach requires significant judgment, particularly with respect to estimated total costs, project margins, and progress toward completion, all of which may change over the life of a contract and affect the timing and amount of revenue recognized.When determining whether an impairment of goodwill or of an intangible asset is indicated, we consider the financial condition of our three segments to which the acquired business relates.

●

The market price of the Company’s stock at each grant date is used to determine the expense associated with the Company’s equity awards. The market price can fluctuate on different grant dates, and the disclosures are updated to reflect changes in the expense associated with equity awards. The Company issues performance-based restricted stock and stock unit awards to its employees, which typically vest based on certain performance metrics. The Company assesses at each reporting date whether the achievement of any performance condition has become probable and recognizes the expense when that achievement becomes probable. If the Company later determines that achieving such a performance metric is unlikely, the expense recognized will be reversed.

●

The Company is exposed to various asserted claims for which it believes a loss is probable. Additionally, the Company is exposed to other asserted claims for which a loss amount 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.

26

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Critical Accounting Policies and Use of Estimates (Continued)

●

The Company maintains a self-funded health and welfare plan. Claims history is reviewed to estimate claims incurred but not yet paid to determine the adequacy of the health and welfare accrual.

●

The Company maintains a self-funded workers’ compensation plan. Claims history is reviewed to estimate claims incurred but not yet paid to determine the adequacy of the workers’ compensation accrual.

●

Bonus accruals are reviewed and adjusted on a regular basis depending on the profitability of the Company and individual bonus agreements.

Revenue Recognition

The Company records revenue under Financial Accounting Standard Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers. Revenue is recognized when we satisfy a performance obligation by transferring services promised in a contract to a customer, in an amount that reflects the consideration that we expect to receive in exchange for those services. Performance obligations in our contracts represent distinct or separate service streams that we provide to our customers.

We evaluate our revenue contracts with customers based on the five-step model under ASC 606: (1) Identify the contract with the customer; (2) Identify the performance obligations in the contract; (3) Determine the transaction price; (4) Allocate the transaction price to separate performance obligations; and (5) Recognize revenue when (or as) each performance obligation is satisfied.

The Company derives its revenue from several sources. The Company’s Engineering Services and Life Sciences, Data and Solutions segments perform consulting and project solution services. The Healthcare segment specializes in long- and short-term staffing and placement services for hospitals, schools, and long-term care facilities, among others. All of the Company’s segments perform staff augmentation services and derive revenue from permanent placement fees.

The following table presents our revenue disaggregated by revenue source for the fiscal years ended January 3, 2026 and December 28, 2024:

January 3,

2026

December 28,

2024

Specialty Health Care:

Time and Material

$

162,602

$

141,185

Permanent Placement Services

1,502

1,494

Total Specialty Health Care

$

164,104

$

142,679

Engineering:

Time and Material

$

58,743

$

47,157

Fixed Fee

61,743

49,302

Permanent Placement Services

-

-

Total Engineering

$

120,486

$

96,459

Life Sciences, Data and Solutions:

Time and Material

$

23,172

$

30,547

Fixed Fee

11,450

8,452

Permanent Placement Services

192

243

Total Life Sciences, Data and Solutions

$

34,814

$

39,242

$

319,404

$

278,380

27

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Revenue Recognition (Continued)

Time and Material

The Company’s Health Care segment predominantly generates revenue from time-and-materials arrangements. In contrast, its Engineering and Life Sciences, Data and Solutions segments generate revenue from both time-and-materials and fixed-fee arrangements. Revenue from time and materials contracts is recognized over time as performance obligations are satisfied, as the customer simultaneously receives and consumes the benefits of the services performed. These contracts are typically based on the number of hours worked at contractually agreed-upon rates. Accordingly, revenue is recognized based on hours worked at contracted rates, which represents an output method that directly reflects the value of services transferred to the customer. 

Fixed Fee

From time to time, primarily within the Engineering segment, the Company enters into fixed-fee contracts requiring the delivery of specified services or project-based deliverables. The Company operates under master services agreements that establish general terms and conditions, with project-specific purchase orders defining the scope, pricing, and duration of individual engagements, which are typically performed over 6 to 9 months.

Revenue from fixed-fee arrangements is recognized over time as performance obligations are satisfied, as the customer simultaneously receives and consumes the benefits of the services performed. The Company measures progress toward completion using either an input method (e.g., costs incurred relative to total estimated costs) or an output method (e.g., achievement of contractual milestones or delivery of specified units), depending on which method best depicts the transfer of control of services to the customer. The Company primarily applies an input method based on costs incurred relative to total estimated costs (cost-to-cost method). In contrast, output methods are used in arrangements in which milestones or deliverables correspond directly to the transfer of control to the customer.

Billings in excess of revenue recognized are recorded as contract liabilities (deferred revenue), while revenue recognized in excess of billings is recorded as contract assets. Certain contracts may include provisions that limit total billings or the timing of revenue recognition. The Company evaluates contracts for potential losses and records provisions for estimated losses in the period such losses become probable and can be reasonably estimated. Costs incurred in fulfilling contracts are expensed as incurred unless they qualify for capitalization under applicable accounting guidance.

Permanent Placement Services

The Company earns permanent placement fees from providing permanent placement services. These fees are typically based on a percentage of the compensation paid to the person placed with the Company’s client. The Company guarantees its permanent placements on a prorated basis for 90 days. In the event a candidate is not retained for the 90-day period, the Company will provide a suitable replacement candidate. In the event a replacement candidate cannot be located, the Company will provide a prorated refund to the client. An allowance for refunds, based upon the Company’s historical experience, is recorded in the financial statements.

Deferred Revenue

Deferred revenue was $14.8 million as of January 3, 2026, and $4.2 million as of December 28, 2024.  Revenue is recognized when the service has been performed. Deferred revenue may be recognized over a period exceeding one year from the time it was recorded on the balance sheet, although this is an infrequent occurrence. In the fiscal years ended January 3, 2026, and December 28, 2024, the Company recognized revenue of $4.2 million and $1.9 million, respectively, that was included in deferred revenue at the beginning of the reporting period.

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ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Accounts Receivable and Provision for Credit Losses

The Company’s accounts receivable are primarily due from trade customers. Credit is extended based on evaluation of customers’ financial condition and, generally, collateral is not required. Accounts receivable payment terms vary and are stated in the financial statements at amounts due from customers net of a provision for credit losses. Accounts outstanding longer than the payment terms are considered past due. The Company determines its provision by considering a number of factors, including the Company’s previous loss history, the customer’s current ability to pay its obligation to the Company, and the condition of the general economy and the industry as a whole. The Company writes off accounts receivable when they become uncollectible, and payments subsequently received on such receivables previously written off are credited to bad debt expense.

Goodwill

Goodwill is not amortized but is subject to periodic testing for impairment in accordance with ASC Topic 350 “Intangibles - Goodwill and Other - Testing Indefinite-Lived Intangible Assets for Impairment” (“ASC Topic 350”). The Company tests goodwill for impairment on an annual basis as of the last day of the Company’s fiscal December each year or more frequently if events occur or circumstances change indicating that the fair value of the goodwill may be below its carrying amount. The Company has three reporting units. The Company uses a market-based approach to determine the fair value of the reporting units. This approach uses earnings/revenue multiples of similar companies recently completing acquisitions and the ability of our reporting units to generate cash flows as measures of fair value of our reporting units. The Company follows “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” which has eliminated Step 2 from the goodwill impairment test. Under this update, an entity should perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount.

There was no goodwill impairment in fiscal 2025 or 2024.  The Company tests goodwill for impairment on an annual basis as of the last day of the Company's fiscal year, or more frequently if events or circumstances indicate that the fair value of goodwill may be below its carrying amount. The Company reviewed industry and market conditions, reported unit-specific events, and overall financial performance, and determined that no indicators of impairment of goodwill existed during the fiscal year ended January 3, 2026. As a result of such review, no impairment loss was recorded for the Company’s intangible assets during the fiscal year ended January 3, 2026. With respect to the fiscal year ended December 28, 2024, since the Company remeasured contingent consideration associated with its Life Sciences, Data, and Solutions segment in fiscal 2024, the Company determined that further testing was necessary. After comparing the fair value of the Life Sciences, Data and Solutions segment to its carrying amount, the Company determined that no impairment loss occurred for the Company’s goodwill related to that segment during the fiscal year ended December 28, 2024. There can be no assurance that future indicators of impairment and tests of goodwill impairment will not result in impairment charges for both its Engineering and Specialty Healthcare segments.

Long-Lived and Intangible Assets

The Company evaluates long-lived assets and intangible assets with definite lives for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When the Company determines that it is probable that undiscounted future cash flows will not be sufficient to recover an asset’s carrying amount, the asset is written down to its fair value. Assets to be disposed of by sale, if any, are reported at the lower of the carrying amount or fair value less cost to sell.

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ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Accounting for Stock Awards and Stock Compensation

The Company uses restricted stock awards to attract, retain and reward employees for long-term service. The Company follows Financial Accounting Standards Board (FASB), Accounting Standards Codification (ASC) Topic 718 “Compensation – Stock Compensation” which requires that the compensation cost relating to stock-based payment transactions be recognized in the financial statements. This compensation cost is measured based on the fair value of the equity or liability instruments issued. The Company measures stock-based compensation cost using the Black-Scholes option pricing model for stock options and the fair value of the underlying common stock at the date of grant for restricted stock awards.

The Company issues performance-based restricted stock awards to its employees, which typically vest based on certain performance metrics. The Company assesses at each reporting date whether the achievement of any performance condition has become probable and recognizes the expense when that achievement becomes probable. If the Company later determines that achieving such a performance metric is unlikely, the expense recognized will be reversed.

Performance-Based Restricted Stock and Stock Unit Awards

From time to time the Company issues performance-based restricted stock and stock unit awards to its executives.  Performance-based restricted stock and stock unit awards are typically vested based on certain multi-year performance metrics as determined by the Board of Directors Compensation Committee. The Company will reassess at each reporting date whether achievement of any performance condition is probable and recognizes additional compensation cost if the achievement of the performance condition becomes probable.  The Company will then recognize the appropriate expense cumulatively in the year performance becomes probable and recognize the remaining compensation cost over the remaining requisite service period. If at a later measurement date, the Company determines that performance-based restricted stock or stock unit awards deemed as likely to vest are deemed as unlikely to vest, the expense recognized will be reversed.  These performance-based restricted stock and stock unit awards typically include dividend accrual equivalents, which means that any dividends paid by the Company during the vesting period become due and payable after the vesting period on any stock and stock unit awards that actually vest, if any.  Dividends for these grants are accrued on the dividend payment dates and included in accounts payable and accrued expenses on the accompanying consolidated balance sheet.  Dividends for performance-based restricted stock and stock unit awards that ultimately do not vest are forfeited.  

Insurance Liabilities

The Company has risk participation arrangements for workers' compensation and healthcare insurance. The Company establishes loss provisions based on historical experience and, for expected losses from workers' compensation, considers input from third parties. The amounts included in the Company’s costs related to this risk participation are estimated and can vary based on changes in assumptions, the Company’s claims experience or the providers included in the associated insurance programs.

30

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Accounting for Income Taxes

In establishing the provision for income taxes and deferred income tax assets and liabilities and valuation allowances against deferred tax assets, the Company makes judgments and interpretations based on enacted tax laws, published tax guidance and estimates of future earnings. As of January 3, 2026, the Company had domestic net deferred tax liabilities of $5.7 million. The domestic long term net deferred tax liability of $5.7 million includes $8.2 million in deferred liabilities offset by $2.5 million in deferred tax assets. The deferred tax liabilities consist of acquisition amortization of $4.6 million, prepaid expenses of $1.3 million, advance depreciation deductions of $1.2 million and right of use assets of $1.1 million. The domestic deferred tax assets consist of lease liabilities of $1.2 million, compensation of $1.0 million, and provision for credit losses of $0.3 million. The realization of deferred tax assets is dependent upon the likelihood that future taxable income will be sufficient to realize these benefits over time, and the effectiveness of tax planning strategies in the relevant tax jurisdictions. If actual results differ from these estimates and assessments, valuation allowances may be required. As of January 3, 2026, the Company had a negligible deferred tax asset, net balance associated with its Canadian operations.

The Company conducts its operations in multiple tax jurisdictions in the United States, Canada, Germany, Philippines, Puerto Rico and Serbia. The Company and its subsidiaries file a consolidated United States Federal income tax return and file in various states. The Company had no open Federal audits as of January 3, 2026. Except for limited exceptions, the Company is no longer subject to audits by state and local tax authorities for tax years prior to 2021. The Company is no longer subject to audit in Canada for the tax years prior to tax year 2021. The Company is no longer subject to audit in Puerto Rico for the tax years prior to tax year 2020.

The Company’s future effective tax rates could be adversely affected by changes in the valuation of its deferred tax assets or liabilities or changes in tax laws or interpretations thereof. In addition, the Company is subject to the examination of its income tax returns by the Internal Revenue Service and other tax authorities. The Company regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of its provision for income taxes.

Accrued Bonuses

The Company pays bonuses to certain executive management, field management and corporate employees based on, or after considering, a variety of financial performance measures. Bonuses for executive management, field management and certain corporate employees are accrued throughout the year for payment during the first quarter of the following year, based in part upon anticipated annual results compared to annual budgets.  In addition, the Company pays discretionary bonuses to certain employees, which are not related to budget performance. Variances in actual results versus budgeted amounts can have a significant impact on the calculations and therefore on the estimates of the required accruals.  Accordingly, the actual bonuses earned may be materially different from the estimates used to determine the quarterly accruals.

31

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Forward-looking Information

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. 

Additionally, changes in government regulations could result in prohibition or restriction of certain types of employment services or the imposition of new or additional employee benefits, licensing or tax requirements with respect to the provision of employment services that may reduce the Company’s future earnings.  There can be no assurance that the Company will be able to increase the fees charged to its clients in a timely manner and in a sufficient amount to cover increased costs because of any of the foregoing.

The consulting and employment services market is highly competitive with limited barriers to entry.  The Company competes in global, national, regional and local markets with numerous competitors in all the Company’s service lines.  Price competition in the industries the Company serves is significant, and pricing pressures from competitors and customers are increasing.  The Company expects that the level of competition will remain high in the future, which could limit the Company’s ability to maintain or increase its market share or profitability.

32

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Fiscal Year Ended January 3, 2026, Compared to Fiscal Year Ended December 28, 2024

A summary of operating results for the fiscal years ended January 3, 2026, and December 28, 2024, is as follows (in thousands):

Fiscal Years Ended

January 3, 2026

December 28, 2024

Amount

% of

Revenue

Amount

% of

Revenue

Revenue

$

319,404

100.0

$

278,380

100.0

Cost of services

231,461

72.5

198,602

71.3

Gross profit

87,943

27.5

79,778

28.7

Selling, general and administrative

60,932

19.1

56,787

20.4

Depreciation and amortization of property and equipment

1,918

0.6

1,419

0.5

Amortization of acquired intangible assets

-

0.0

136

0.0

Impairment of intangible assets

-

0.0

547

0.3

Potential stock issuance and financing activities

-

0.0

323

0.1

Remeasurement of contingent consideration

-

0.0

(1,759

)

(0.6

)

Operating costs and expenses

62,850

19.7

57,453

20.6

Operating income

25,093

7.8

22,325

8.1

Other expense, net

3,021

0.9

2,135

0.8

Income before income taxes

22,072

6.9

20,190

7.3

Income tax expense

5,738

1.8

6,863

2.5

Net income

$

16,334

5.1

$

13,327

4.8

The Company follows a 52/53 week fiscal reporting calendar ending on the Saturday closest to December 31. The fiscal years ended January 3, 2026 (fiscal 2025) and December 28, 2024 (fiscal 2024) consisted of fifty-three and fifty-two weeks, respectively.

Revenue. Revenue increased 14.7%, or $41.0 million, for the fiscal year ended January 3, 2026, as compared to December 28, 2024 (the “comparable prior-year period”). Revenue increased $21.4 million in the Specialty Health Care segment, increased $24.0 million in the Engineering segment, and decreased $4.4 million in the Life Sciences, Data and Solutions segment. See Segment Discussion for further information on revenue changes.

Cost of Services and Gross Profit. Cost of services increased 16.5%, or $32.9 million, for the fiscal year ended January 3, 2026, as compared to the comparable prior-year period, primarily due to the increase in revenue. Cost of services as a percentage of revenue was 72.5% for the fiscal year ended January 3, 2026, and 71.3% for the comparable prior-year period. See Segment Discussion for further information regarding changes in cost of services and gross profit.

Selling, General and Administrative. Selling, general and administrative (“SGA”) expenses were $60.9 million for the fiscal year ended January 3, 2026, as compared to $56.8 million for the comparable prior-year period. As a percentage of revenue, SGA expenses were 19.1% for the fiscal year ended January 3, 2026, and 20.4% for the comparable prior-year period. See Segment Discussion for further information on SGA expense changes.

33

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Fiscal Year Ended January 3, 2026, Compared to Fiscal Year Ended December 28, 2024 (Continued)

Costs Associated with Potential Stock Issuance and Financing Transactions. In the fiscal year ended December 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 amended and extended its letter of credit facility with Citizens Bank through December 3, 2029. The Company incurred total expenses of $0.3 million related to these transactions.

No such costs were incurred for the fiscal year ended January 3, 2026.

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 $0.9 million for the fiscal year ended January 3, 2026, as compared to the comparable prior-year period, primarily due to an increase in interest expense, net.  Interest expense increased due to increased average borrowing.   

Income Tax Expense. The Company recognized $5.7 million of income tax expense for the fiscal year ended January 3, 2026, as compared to $6.9 million for the comparable prior-year period. The consolidated effective income tax rate for the current period was 26.0% as compared to 34.0% for the comparable prior-year period. The effective fiscal 2025 income tax rates were 25.8%, 26.0%, 28.2% and 25.2% in the United States, Canada, Europe, and the Philippines, 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 primary reason for the decrease in the consolidated effective rate in the current period was due to a change in unrecognized tax benefit in the United States during the fiscal year ended January 3, 2026.

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.

34

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Fiscal Year Ended January 3, 2026, Compared to Fiscal Year Ended December 28, 2024 (Continued)

Segment Discussion

Specialty Health Care

Specialty Health Care revenue of $164.1 million for the fiscal year ended January 3, 2026, increased 15.0%, or $21.4 million, compared to the comparable prior-year period. The increase in revenue was driven by the Company’s school clients, while a decrease in revenue from the Company’s non-school clients offset it. Revenue from school clients for the fiscal year ended January 3, 2026, was $141.4 million as compared to $117.7 million for the comparable prior-year period. Revenue from non-school clients for the fiscal year ended January 3, 2026, was $22.7 million as compared to $25.0 million for the comparable prior-year period. The decrease in non-school revenue was primarily driven by the reduction in revenue of $1.6 million from a lost contract with a corrections facility and from a large long-term care group where the Company deliberately reduced services, which generated $1.8 million in the current period as compared to $3.2 million in the comparable prior-year period, offset by miscellaneous increases to other non-school clients. Gross profit increased by 11.4%, or $4.9 million, to $47.4 million for the fiscal year ended January 3, 2026, as compared to $42.5 million in the comparable prior-year period. Gross profit increased due to an increase in revenue, offset by a decrease to gross profit margin. Gross profit margin for the fiscal year ended January 3, 2026, decreased to 28.9% compared to 29.8% for the comparable prior-year period. The decrease in gross profit margin was primarily attributed to normal fluctuations. Specialty Health Care experienced operating income of $22.8 million for the fiscal year ended January 3, 2026, as compared to $19.9 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 in SGA expense to $24.2 million for the fiscal year ended January 3, 2026, compared to $22.2 million for the comparable prior-year period. SGA expense increased primarily due to investments in sales and recruiting infrastructure to support revenue growth.

35

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Fiscal Year Ended January 3, 2026, Compared to Fiscal Year Ended December 28, 2024 (Continued)

Segment Discussion (Continued)

Engineering

Engineering revenue of $120.5 million for the fiscal year ended January 3, 2026, increased 24.9%, or $24.0 million, compared to the comparable prior-year period.  The increase in revenue included increases in Energy Services revenue of $12.3 million, and Aerospace revenue of $11.9 million, offset by a decrease in Industrial Processing revenue of $0.2 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 decrease in Industrial Processing revenue was mainly due to the irregular timing of large contracts with its Industrial Processing clients. Gross profit increased by 21.5%, or $4.8 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 22.7% 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 $14.6 million in the current period as compared to $10.1 million for the comparable prior-year period. Operating income increased due to the increase in gross profit, offset by an increase in SGA expense. The Engineering segment’s SGA expense of $12.0 million increased from $11.9 million, primarily due to expenses associated with efforts to grow revenue and gross profit.

Life Sciences, Data and Solutions

Life Sciences, Data and Solutions revenue of $34.8 million for the fiscal year ended January 3, 2026, decreased 11.3%, or $4.4 million, compared to the comparable prior-year period. The Company primarily attributes the decrease in revenue to the timing of large projects and a deemphasis on the Company’s legacy staffing business.  Gross profit of $13.2 million for the fiscal year ended January 3, 2026, decreased 10.5%, or $1.5 million, compared to $14.7 million for the comparable prior-year period. Gross profit decreased due to the decrease in revenue.  Gross profit margin for the fiscal year ended January 3, 2026, was 37.8% as compared to 37.5% for the comparable prior-year period. The Company attributes the gross profit margin increase to normal fluctuations in high margin project work. The Life Sciences, Data and Solutions segment experienced operating income of $6.3 million for the fiscal year ended January 3, 2026, compared to $8.8 million for the comparable prior-year period. The decrease in operating income was primarily due to the decrease in gross profit of $1.5 million and a discrete benefit of $1.8 from the remeasurement of contingent consideration in the comparable prior-year period, offset by a small decrease in SGA expense of $0.2 million and amortization of intangible assets on $0.7 million in the comparable prior-year period.

Corporate

The Company’s corporate SGA expense includes but is not limited to the following costs: public company-related, executive compensation, board compensation, directors and officers insurance, SAP ERP infrastructure, numerous centralized functions including accounting and financial management, information technology and cyber security infrastructure, payroll, billing, accounts receivable, and marketing. The corporate segment team primarily operates out of the United States, with limited operations in Serbia and the Philippines. Corporate SGA expense was $18.0 million for the fiscal year ended January 3, 2026, as compared to $15.8 million for the comparable prior-year period. The increase was primarily driven by increases of $0.7 million in executive equity compensation, $0.4 million in software technology, $0.4 million in cash compensation, $0.2 million in increased medical costs, and other general inflationary pressures.

36

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Supplemental Operating Results on a Non-GAAP Basis

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 accounts for changes in certain assets and liabilities, as well as interest and income taxes, which 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.

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 fiscal years ended January 3, 2026, and December 28, 2024. 

Fiscal Years Ended

January 3,

2026

December 28,

2024

GAAP operating income

$

25,093

$

22,325

Adjustments

Remeasurement of contingent consideration

-

(1,759

)

Equity compensation

3,732

2,864

Potential stock issuance and financing transaction

-

323

Impairment of intangible assets

-

547

Adjusted operating income (non-GAAP)

$

28,825

$

24,300

GAAP net income

$

16,334

$

13,327

Income tax expense

5,738

6,863

Interest expense, net

2,669

2,215

Depreciation of property and equipment

1,918

1,419

Amortization of acquired intangible assets

-

136

EBITDA (non-GAAP)

$

26,659

$

23,960

Adjustments

Remeasurement of contingent consideration

-

(1,759

)

Loss (gain) on foreign currency transactions

352

(80

)

Equity compensation

3,732

2,864

Potential stock issuance and financing transaction

-

323

Impairment of intangible assets

547

Adjusted EBITDA (non-GAAP)

$

30,743

$

25,855

37

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Supplemental Operating Results on a Non-GAAP Basis (Continued)

Fiscal Years Ended

January 3,

2026

December 28,

2024

GAAP net income

$

16,334

$

13,327

Adjustments

Remeasurement of contingent consideration

-

(1,759

)

Loss (gain) on foreign currency transactions

352

(80

)

Equity compensation

3,732

2,864

Potential stock issuance and financing transaction

-

323

Impairment of intangible assets

-

547

Tax impact from normalized rate

(1,324

)

900

Adjusted net income (non-GAAP)

$

19,094

$

16,122

GAAP diluted net earnings per share

$

2.14

$

1.68

Adjustments

Remeasurement of contingent consideration

-

$

(0.22

)

Loss (gain) on foreign currency transactions

$

0.04

$

(0.01

)

Equity compensation

$

0.49

$

0.36

Potential stock issuance and financing transaction

-

$

0.04

Impairment of intangible assets

-

$

0.07

Tax impact from normalized rate(a)

$

(0.17

)

$

0.11

Adjusted diluted net earnings per share (non-GAAP)

$

2.50

$

2.03

(a)

Amount reflects an adjustment to income tax expense applied to non-GAAP adjusted consolidated taxable income. The Company used an estimated effective income tax rate of 27.0% for both periods presented, approximating the Company’s federal USA income tax rate plus the tax-affected rate for states and Puerto Rico.

38

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Liquidity and Capital Resources

The following table summarizes the major captions from the Company’s Consolidated Statements of Cash Flows ($ in thousands):

Fiscal Years Ended

January 3,

2026

December 28,

2024

Cash provided by (used in):

Operating activities

$

18,965

$

6,170

Investing activities

$

(1,595

)

$

(2,572

)

Financing activities

$

(19,038

)

$

(4,828

)

Operating Activities

Operating activities provided $19.0 million of cash for the fiscal year ended January 3, 2026, as compared to providing $6.2 million in the comparable prior-year period. The major components of cash provided by operating activities in the fiscal year ended January 3, 2026 and the comparable prior-year period are as follows: net income, and changes in accounts receivable and contract assets, net of provision for credit losses, 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.

For the fiscal year ended January 3, 2026, the Company reported net income of $16.3 million, compared with $13.3 million in the comparable prior-year period. An increase in accounts receivable and contract assets, net of provision for credit losses in the fiscal year ended January 3, 2026, used $4.2 million of cash as compared to using $7.3 million in the comparable prior-year period. The Company primarily attributes the increase in accounts receivable and contract assets, net of provision for credit losses, to an increase in revenue of $86.5 million for the Company’s fiscal fourth quarter of 2025 as compared to revenue of $76.9 million in the fourth quarter of fiscal 2024, offset by more efficient collection results in the current period.

While highly variable, the Company’s transit accounts payable typically exceed 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 $8.2 million as of January 3, 2026, compared with a net payable of $16.6 million as of December 28, 2024, with $8.3 million of cash used during the fiscal year ended January 3, 2026. The decrease in net transit payable as of January 3, 2026, was due to normal fluctuations associated with several large, multiyear EPC projects. Under a typical EPC contract or its subsequent amendments, the Company receives significant upfront cash to fund equipment procurement and construction subcontractors throughout the project.

Prepaid expenses and other current assets used cash of $0.7 million for the fiscal year ended January 3, 2026 as compared to using $2.4 million for the comparable prior-year period. The Company typically attributes changes to prepaid expenses and other current assets, if any, to the general timing of payments in the normal course of business. Since certain expenses are paid before a fiscal year ends and are amortized over the following fiscal year, prepaid expenses and other current assets generally increase at the end of a fiscal year and decrease during the first three quarters of the following fiscal year.

A decrease in accounts payable and accrued expenses used cash of $3.5 million for the fiscal year ended January 3, 2026, as compared to providing $1.1 million for the comparable prior-year period. The Company attributes these changes to typical fluctuations in the normal course of business.

39

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Liquidity and Capital Resources (Continued)

Operating Activities (Continued)

Changes in accrued payroll and related costs provided $0.8 million for the fiscal year ended January 3, 2026, as compared to using cash of $1.3 million for the fiscal year ended December 28, 2024.  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 fiscal year ended January 3, 2026, was paid on December 26, 2025. 

The Company’s deferred revenue balance as of January 3, 2026, was $14.8 million, compared to $4.2 million as of December 28, 2024, providing cash from operations of $10.6 million for the fiscal year ended January 3, 2026. The increase was primarily associated with upfront payments for future labor and associated with the Company’s EPC contracts.

Investing Activities

Investing activities used $1.6 million of cash for the fiscal year ended January 3, 2026 as compared to using $2.6 million in the comparable prior-year period. Investing activities used $1.6 million for the purchase of property and equipment in the current period, as compared to using $2.6 million in the prior-year's comparable period.

Financing Activities

Financing activities used $19.0 million of cash for the fiscal year ended January 3, 2026 as compared to using $4.8 million in the comparable prior-year period.  The Company made net payments under its line of credit of $10.3 million during the fiscal year ended January 3, 2026 as compared to net borrowings of $4.2 million in the comparable prior-year period.  The Company used $7.4 million to repurchase and retire shares of its common stock during the fiscal year ended January 3, 2026 as compared to using $7.8 million in the comparable prior-year period. During the fiscal year ended January 3, 2026, the Company used $0.9 million to pay withholding taxes upon the vesting of equity grants, in connection with which a commensurate number of vesting shares were retired. During the fiscal year ended December 28, 2024 , the Company used $1.3 million to pay withholding taxes upon the vesting of equity grants. From the sale of shares from its employee stock purchase plan, the Company generated cash of $0.6 million and $0.7 million for the current year and comparable prior-year period, respectively. The Company paid $0.2 million in contingent consideration in the current period as compared to no payments in the comparable prior-year period.

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, 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 fiscal years ended January 3, 2026 and December 28, 2024 was 6.3% and 6.6%, respectively.

40

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Liquidity and Capital Resources (Continued)

Financing Activities (Continued)

On February 20, 2026, the Company amended (Amendment 1) the Fifth Amended and Restated Loan Agreement, dated as of December 3, 2024, with Citizens Bank. Under Amendment 1, the total commitment is increased from a maximum limit of $65.0 million to a maximum limit of $75.0 million. The increased limit shall apply from February 20, 2026 through August 31, 2026. From and after September 1, 2026 through the Maturity Date of the Fifth Amended and Restated Loan Agreement, the total commitment shall revert to $65.0 million. All other material terms remain unchanged. The Company increased its credit limit capacity to obtain more flexibility to issue letters of credit in Germany required for potential contracts in its pipeline.

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 January 3, 2026 , 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.

Borrowings under the line of credit as of January 3, 2026 and December 28, 2024 were $24.7 million and $35.0 million, respectively. At January 3, 2026 and December 28, 2024, there were letters of credit outstanding for $13.2 and $7.4 million, respectively. At January 3, 2026 and December 28, 2024, the Company had availability for additional borrowings under the Revolving Credit Facility of $27.1 million and $22.6 million, respectively.

In addition to borrowings and sales of shares from its equity plans, the Company may raise capital through sales of shares of common stock under its at the market issuance program (the “ATM Program”) established under its March 2024 At Market Issuance Sales Agreement with B. Riley Securities, Inc., as the agent (the “Agent”). The ATM Program allows the Company to offer and sell shares of the common stock having an aggregate sales price of up to $50.0 million from time to time through the Agent. To date, the Company has not sold any shares under the ATM Program.

Current Liquidity and Revolving Credit Facility

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.

The Company’s liquidity and capital resources as of January 3, 2026, included accounts receivable and contract assets, net of provision for credit losses and total current asset balances of $81.2 million and $99.9 million, respectively. Current liabilities were $53.9 million as of January 3, 2026 and were exceeded by total current assets by $46.0 million.

The Company experiences volatility in its daily cash flow and, at times, relies on the revolving line of credit to provide daily liquidity for the Company’s financial operations. As of January 3, 2026, the Company was in compliance with all financial covenants contained in the Revolving Credit Facility. The Company believes that it will maintain compliance with its financial covenants for the foreseeable future.

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ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Liquidity and Capital Resources (Continued)

Dividends

All restricted stock and stock unit awards contain a dividend equivalent provision entitling holders to dividends paid between the restricted stock award grant date and the ultimate share distribution date. As of January 3, 2026, there were no accrued dividends.

While the Company, at this time, has no plans to issue any future dividends, any future payment of dividends will depend upon, among other things, the Company’s earnings, financial condition, capital requirements, level of indebtedness, contractual restrictions, and other factors that the Board of Directors deems relevant. The Revolving Credit Facility (as discussed above) prohibits the payment of any dividends or distributions on account of the Company’s capital stock without the prior consent of the majority of the Company’s lenders. 

Commitments and Contingencies

The Company anticipates that its primary uses of capital in future periods will be for working capital purposes. Funding for any long-term and short-term capital requirements as well as future acquisitions will be derived from one or more of the Revolving Credit Facility (or a replacement thereof), funds generated through operations or future financing transactions. The Company is subject to legal proceedings and claims that arise from time to time in the ordinary course of its business, which may or may not be covered by insurance. Were an unfavorable final outcome to occur, there exists the possibility of a material adverse impact on the Company's financial position, liquidity, and results of operations.

The Company’s business strategy is to achieve growth both internally through operations and externally through strategic acquisitions. The Company from time to time engages in discussions with potential acquisition candidates. The Company has acquired numerous companies throughout its history and those acquisitions have generally included significant future contingent consideration. As the size of the Company and its financial resources increase however, acquisition opportunities requiring significant commitments of capital may arise. In order to pursue such opportunities, the Company may be required to incur debt or issue potentially dilutive securities in the future. No assurance can be given as to the Company’s future acquisition and expansion opportunities or how such opportunities will be financed.

The Company is exposed to various asserted claims as of January 3, 2026, 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 January 3, 2026, the Company has accrued $0.3 million for asserted claims. 

The Company is also subject to other pending legal proceedings and claims that arise from time to time in the ordinary course of its business, which may not be covered by insurance.

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ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Liquidity and Capital Resources (Continued)

Commitments and Contingencies (Continued)

The Company’s current commitments consist primarily of lease obligations for office space. The Company believes that its capital resources are sufficient to meet its present obligations and those to be incurred in the normal course of business for at least the next 12 months.

The Company leases office facilities and various equipment under non-cancelable leases expiring at various dates through September 2030. Certain leases are subject to escalation clauses based upon changes in various factors.

Maturities of lease liabilities are as follows:

Fiscal Year

Operating

Leases

Finance

Leases

2026

$

1,447

$

886

2027

1,254

387

2028

1,124

-

2029

726

-

2030

181

-

Thereafter

1,022

-

Total lease payments

5,754

1,273

Less: imputed interest

(732

)

(50

)

Total

$

5,022

$

1,223

Future Contingent Payments

As of January 3, 2026, the Company had no acquisition agreement whereby additional contingent consideration may be earned by the sellers.

Off-Balance Sheet Arrangements

None.

Impact of Inflation

Consulting, staffing, and project services are generally priced based on mark-ups on prevailing rates of pay, and as a result are able to generally maintain their relationship to direct labor costs. Permanent placement services are priced as a function of salary levels of the job candidates.

The Company’s business is labor intensive; therefore, the Company has a high exposure to increasing healthcare benefit costs. The Company attempts to compensate for these escalating costs in its business cost models and customer pricing by passing along some of these increased healthcare benefit costs to its customers and employees, however, the Company has not been able to pass on all increases. The Company is continuing to review its options to further control these costs, which the Company does not believe are representative of general inflationary trends. Otherwise, inflation has not been a meaningful factor in the Company’s operations.

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ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

New Accounting Standards

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires the annual financial statements to include consistent categories and greater disaggregation of information in the rate reconciliation, and income taxes paid disaggregated by jurisdiction. ASU 2023-09 was effective for the Company’s annual reporting periods beginning after December 15, 2024, with early adoption permitted, and should be applied on a prospective basis, with a retrospective option. The Company adopted ASU 2023-09, on a prospective basis, for the fifty-three weeks ended January 3, 2026.

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses (Subtopic 220-40). The ASU requires the disaggregated disclosure of specific expense categories, including purchases of inventory, employee compensation, depreciation, and amortization, within relevant income statement captions. This ASU also requires disclosure of the total amount of selling expenses along with the definition of selling expenses. The ASU is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Adoption of this ASU can either be applied prospectively to consolidated financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all periods presented in the consolidated financial statements. Early adoption is also permitted. This ASU will likely result in the required additional disclosures being included in our consolidated financial statements, once adopted. We are currently evaluating the provisions of this ASU.

In July 2025, the FASB issued ASU 2025-05, Measurement of Credit Losses for Accounts Receivable and Contract Assets (Financial Instruments – Credit Losses (Topic 326) This amendment allows entities to elect a practical expedient that all entities can use when estimating receivable and contract assets arising from transactions accounted for under ASC 606, revenue from contracts with customers. The amendment adds a practical expedient and an accounting policy election. The ASU is effective for annual reporting periods beginning after December 15, 2025. We are currently evaluating the provisions of this ASU.

In August 2025, the FASB issued ASU 2025-06, Intangibles -Goodwill and Other – Internal-Use Software (Subtopic 350-40). The narrowly drawn changes primarily focus on how companies decide when to count software development costs as an asset (capitalize them). Under the new guidance, a company can capitalize software costs once two conditions are met: the company’s leadership has approved and committed to funding the project and, and it is likely the project will be finished, and the software will work as intended. The ASU is effective for annual reporting periods beginning after December 15, 2027. We are currently evaluating the provisions of this ASU.

In December 2025, the FASB issued ASU No. 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements. The ASU clarifies interim disclosure requirements and the applicability of Topic 270. The objective of the amendments is to provide further clarity about the current interim disclosure requirements. The ASU is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027. Adoption of this ASU can be applied on either a prospective or a retrospective approach. Early adoption is permitted. We are currently evaluating the provisions of this ASU.

In December 2025, the FASB issued ASU No. 2025-12, Codification Improvements. The ASU addresses thirty-three items, representing the changes to the Codification that (1) clarify, (2) correct errors, or (3) make minor improvements. Generally, the amendments in this Update are not intended to result in significant changes for most entities. The ASU is effective for interim reporting periods within annual reporting periods beginning after December 15, 2026. The adoption method of this ASU may vary, on an issue-by-issue basis. Early adoption is permitted. We are currently evaluating the provisions of this ASU.

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