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Professional and Business Services

Willdan Group Inc.

11/06/2026 | Press release | Distributed by Public on 11/06/2026 05:03

Quarterly Report for Quarter Ending October 2, 2026 (Form 10-Q)

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

Our Company

We are a technical services company focused on energy and infrastructure solutions. Our solutions include energy planning and analytics, consulting, software, public finance, engineering, and program implementation. We serve utilities, state and local governments, and commercial customers in the United States and Canada.

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

Our Energy segment addresses power grid resiliency, efficiency, and reliability. Services include in-depth energy planning studies, economic analysis, modeling and forecasting software, decarbonization, program design and implementation, energy efficiency, turnkey energy and infrastructure projects, grid modernization, and utility-scale electrical engineering and construction management. Clients in this segment are investor-owned and municipal utilities, commercial clients including retailers, pharmaceuticals, industrial concerns and hyperscalers, and state and local governments, school districts and government agencies.

Our Engineering & Consulting segment addresses sustainability and growth in civil infrastructure. We often serve as a municipality's engineering department. Services include municipal and civil engineering, building and safety, code enforcement, fire plan and inspection, city engineering, construction management, design engineering, planning, and financial and municipal advisory services. Clients in this segment are state and local governments, school districts, and utility districts.

We were founded in 1964 and are headquartered in Anaheim, California.

Results of Operations

Third Quarter Overview

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


	Three Months Ended
	October 2,				October 3,
	2026				2025					$ Change	% Change

	(in thousands, except percentages)

Contract revenue	$	214,527	100.0	%	$	182,006	100.0	%	$	32,521	17.9	%
Direct costs of contract revenue:
Salaries and wages		29,702	13.8			27,878	15.3			1,824	6.5
Subcontractor services and other direct costs		102,372	47.7			87,039	47.8			15,333	17.6
Total direct costs of contract revenue		132,074	61.6			114,917	63.1			17,157	14.9

Gross profit		82,453	38.4			67,089	36.9			15,364	22.9

General and administrative expenses:
Salaries and wages, payroll taxes and employee benefits		39,476	18.4			31,720	17.4			7,756	24.5
Facilities and facility related		2,499	1.2			2,369	1.3			130	5.5
Stock-based compensation		4,972	2.3			3,147	1.7			1,825	58.0
Depreciation and amortization		5,780	2.7			3,913	2.1			1,867	47.7
Other		13,422	6.3			11,078	6.1			2,344	21.2
Total general and administrative expenses		66,149	30.8			52,227	28.7			13,922	26.7

Income (loss) from operations		16,304	7.6			14,862	8.2			1,442	9.7

Other income (expense):
Interest expense, net		(1,071)	(0.5)			(902)	(0.5)			(169)	18.7
Other, net		166	0.1			330	0.2			(164)	(49.7)
Total other income (expense)		(905)	(0.4)			(572)	(0.3)			(333)	58.2

Income (Loss) before income tax expense		15,399	7.2			14,290	7.9			1,109	7.8
Income tax expense (benefit)		3,538	1.6			569	0.3			2,969	521.8
Net income (loss)	$	11,861	5.5		$	13,721	7.5		$	(1,860)	(13.6)

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


	Nine Months Ended
	October 2,				October 3,
	2026				2025					$ Change	% Change

	(in thousands, except percentages)

Contract revenue	$	600,669	100.0	%	$	507,865	100.0	%	$	92,804	18.3	%
Direct costs of contract revenue:
Salaries and wages		88,766	14.8			82,198	16.2			6,568	8.0
Subcontractor services and other direct costs		278,840	46.4			232,592	45.8			46,248	19.9
Total direct costs of contract revenue		367,606	61.2			314,790	62.0			52,816	16.8

Gross profit		233,063	38.8			193,075	38.0			39,988	20.7

General and administrative expenses:
Salaries and wages, payroll taxes and employee benefits		112,944	18.8			95,404	18.8			17,540	18.4
Facilities and facility related		7,392	1.2			7,362	1.4			30	0.4
Stock-based compensation		13,475	2.2			8,755	1.7			4,720	53.9
Depreciation and amortization		18,197	3.0			13,857	2.7			4,340	31.3
Other		37,725	6.3			33,983	6.7			3,742	11.0
Total general and administrative expenses		189,733	31.6			159,361	31.4			30,372	19.1

Income (loss) from operations		43,330	7.2			33,714	6.6			9,616	28.5

Other income (expense):
Interest expense, net		(2,992)	(0.5)			(4,890)	(1.0)			1,898	(38.8)
Other, net		1,400	0.2			840	0.2			560	66.7
Total other income (expense)		(1,592)	(0.3)			(4,050)	(0.8)			2,458	(60.7)

Income (Loss) before income tax expense		41,738	6.9			29,664	5.8			12,074	40.7
Income tax expense (benefit)		(2,998)	(0.5)			(4,180)	(0.8)			1,182	(28.3)
Net income (loss)	$	44,736	7.4		$	33,844	6.7		$	10,892	32.2

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

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


		Three months ended October 2, 2026
		Energy			Engineering and Consulting			Total
		(in thousands)
Contract Type
Time-and-materials		$	27,296		$	19,199		$	46,495
Unit-based			60,213			9,180			69,393
Fixed price			97,299			1,340			98,639
Total ⁽¹⁾		$	184,808		$	29,719		$	214,527

Client Type
Commercial		$	44,580		$	3,300		$	47,880
Government			77,569			26,284			103,853
Utilities ⁽²⁾			62,659			135			62,794
Total ⁽¹⁾		$	184,808		$	29,719		$	214,527

Geography ⁽³⁾
Domestic		$	184,808		$	29,719		$	214,527

		Nine months ended October 2, 2026
		Energy			Engineering and Consulting			Total
		(in thousands)
Contract Type
Time-and-materials		$	54,537		$	56,046		$	110,583
Unit-based			171,544			24,465			196,009
Fixed price			289,284			4,793			294,077
Total ⁽¹⁾		$	515,365		$	85,304		$	600,669

Client Type
Commercial		$	122,818		$	7,117		$	129,935
Government			191,249			77,871			269,120
Utilities ⁽²⁾			201,298			316			201,614
Total ⁽¹⁾		$	515,365		$	85,304		$	600,669

Geography ⁽³⁾
Domestic		$	515,365		$	85,304		$	600,669


		Three months ended October 3, 2025
		Energy			Engineering and Consulting			Total
		(in thousands)
Contract Type
Time-and-materials		$	12,866		$	18,382		$	31,248
Unit-based			58,252			6,965			65,217
Fixed price			83,632			1,909			85,541
Total ⁽¹⁾		$	154,750		$	27,256		$	182,006

Client Type
Commercial		$	15,942		$	1,945		$	17,887
Government			64,587			25,256			89,843
Utilities ⁽²⁾			74,221			55			74,276
Total ⁽¹⁾		$	154,750		$	27,256		$	182,006

Geography ⁽³⁾
Domestic		$	154,750		$	27,256		$	182,006

		Nine months ended October 3, 2025
		Energy			Engineering and Consulting			Total
		(in thousands)
Contract Type
Time-and-materials		$	36,201		$	55,341		$	91,542
Unit-based			164,209			19,707			183,916
Fixed price			227,337			5,070			232,407
Total ⁽¹⁾		$	427,747		$	80,118		$	507,865

Client Type
Commercial		$	47,550		$	5,511		$	53,061
Government			168,750			74,452			243,202
Utilities ⁽²⁾			211,447			155			211,602
Total ⁽¹⁾		$	427,747		$	80,118		$	507,865

Geography ⁽³⁾
Domestic		$	427,747		$	80,118		$	507,865

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

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

(3)	Revenue from our foreign operations was not material for the three and nine months ended October 2, 2026 and October 3, 2025.

Three Months Ended October 2, 2026 Compared to Three Months Ended October 3, 2025

Contract revenue. Consolidated contract revenue increased $32.5 million, or 17.9%, in the three months ended October 2, 2026, compared to the three months ended October 3, 2025, as a result of increased demand for our services in both our Energy segment and our Engineering and Consulting segment.

Contract revenue in our Energy segment increased $30.1 million, or 19.4%, in the three months ended October 2, 2026, compared to the three months ended October 3, 2025, primarily as a result of higher revenues across all of our service offerings, combined with incremental revenues from our acquisition of Burton Energy Group, LLC. ("Burton") in May 2026.

Contract revenue in our Engineering and Consulting segment increased $2.4 million, or 9.0%, in the three months ended October 2, 2026, compared to the three months ended October 3, 2025, primarily due to increased demand for services provided to our clients, combined with the incremental revenues from our acquisition of Compass Municipal Advisors, LLC. ("Compass") in January 2026.

Direct costs of contract revenue. Direct costs of consolidated contract revenue increased $17.2 million, or 14.9%, for the three months ended October 2, 2026, compared to the three months ended October 3, 2025, primarily as a result of the increased volume in contract revenues as described above. As a percentage of contract revenue, subcontractor services and other direct costs were relatively flat for the three months ended October 2, 2026 compared to the three months ended October 3, 2025. Direct salaries and wages declined, as a percentage of contract revenues, to 13.8% in the three months ended October 2, 2026, from 15.3% in the three months ended October 3, 2025, reflecting the increased mix of revenues from commercial projects and higher incentive revenue under utility programs in the current period.

Direct costs of contract revenue in our Energy segment increased $16.4 million, or 16.0%, for the three months ended October 2, 2026, compared to the three months ended October 3, 2025. Direct costs of contract revenue for the Engineering and Consulting segment increased $0.8 million, or 6.3%, in the three months ended October 2, 2026, compared to the three months ended October 3, 2025.

Gross Profit. Gross profit increased 22.9% to $82.5 million, or a 38.4% gross margin, for the three months ended October 2, 2026, compared to gross profit of $67.1 million, or a 36.9% gross margin, for the three months ended October 3, 2025. The increase in our gross margin was primarily driven by the changes in the mix of revenues as described above.

General and administrative expenses. General and administrative ("G&A") expenses increased $13.9 million, or 26.7%, to $66.1 million in the three months ended October 2, 2026, compared to $52.2 million for the three months ended October 3, 2025. As a percentage of contract revenues, G&A increased to 30.8% in the three months ended October 2, 2026 from 28.7% in the three months ended October 3, 2025. G&A expenses consisted of an increase of $10.8 million, or 27.4%, in the Energy segment combined with an increase of $1.4 million, or 13.2%, in the Engineering and Consulting segment, and the remaining increase of $1.7 million, or 67.9%, in unallocated corporate expenses.

The overall increase in G&A expenses consisted of an increase of $7.8 million in salaries and wages, payroll taxes and employee benefits, an increase of $2.3 million in other general and administrative expenses, an increase of $1.9 million in depreciation and amortization, and an increase of $1.8 million in stock-based compensation. The increase in salaries and wages, payroll taxes and employee benefits was primarily due to increased staffing from acquisitions, an increase in incentive compensation consistent with the increase in operating profit, and higher fringe benefit costs consistent with the growth in direct and indirect labor costs. The increase in other general and administrative expenses was primarily due to increased professional service fees, software and other computer-related expenses. The increase in stock-based compensation expenses was primarily related to new stock grants to current employees, and members of the Board of Directors at a higher stock price. The increase in depreciation and amortization was driven by higher amortization of intangible assets from recent acquisitions.

Income (loss) from operations. Operating income increased 9.7% to $16.3 million for the three months ended October 2, 2026, compared to an operating income of $14.9 million for the three months ended October 3, 2025, as a result of the factors noted above.

Total other expense, net. Total other expense, net, increased $0.3 million, or 58.2%, for the three months ended, October 2, 2026, compared to the three months ended October 3, 2025, primarily due to the higher interest expense resulting from the increased borrowing under our Existing Revolving Credit Facility (as defined below) to partially finance the acquisition of Burton.

Income tax expense (benefit). We recorded an income tax expense of $3.5 million for the three months ended October 2, 2026, an effective tax expense rate of 23.0% on income before income tax expense, compared to an income tax expense of $0.6 million for the three months ended October 3, 2025, an effective tax rate of 4.0% on income before tax expense. The increase in the effective tax rate primarily resulted from decreases in discrete items related to stock compensation deductions and certain energy-efficiency building deductions.

Net income (loss). Our net income decreased 13.6% to $11.9 million for the three months ended October 2, 2026, as compared to a net income of $13.7 million for the three months ended October 3, 2025. The decrease in net income was primarily attributable to a higher effective tax rate combined with an increase in Total other expense, net.

Nine Months Ended October 2, 2026 Compared to Nine Months Ended October 3, 2025

Contract revenue. Consolidated contract revenue increased $92.8 million, or 18.3%, in the nine months ended October 2, 2026, compared to the nine months ended October 3, 2025, as a result of increased demand for our services in both our Energy segment and our Engineering and Consulting segment, combined with incremental revenues from Burton. The rate of growth was impacted by the effect of having one fewer week in the nine months ended of fiscal year 2026 when compared to our nine months ended of fiscal year 2025. When removing the impact of the additional week in the nine months ended of fiscal year 2025, contract revenue increased 21.3% in the nine months ended October 2, 2026, compared to the adjusted nine months ended October 3, 2025.

Contract revenue in our Energy segment increased $87.6 million, or 20.5%, in the nine months ended October 2, 2026, compared to the nine months ended October 3, 2025, primarily as a result of higher revenues across our service offerings, combined with incremental revenues from our acquisition of Burton.

Contract revenue in our Engineering and Consulting segment increased $5.2 million, or 6.5%, in the nine months ended October 2, 2026, compared to the nine months ended October 3, 2025, primarily due to increased demand for services provided to our clients, combined with the incremental revenues from our acquisition of Compass.

Direct costs of contract revenue. Direct costs of consolidated contract revenue increased $52.8 million, or 16.8%, for the nine months ended October 2, 2026, compared to the nine months ended October 3, 2025, primarily as a result of the increased volume of contract revenues as described above. As a percentage of contract revenue, subcontractor services and other direct costs increased modestly to 46.4% in the nine months ended October 2, 2026 from 45.8% in the nine months ended October 3, 2025, reflecting the higher mix of construction management revenues. Direct salaries and wages increased $6.6 million, or 8.0%, to support the increased volume of projects in the nine months ended October 2, 2026, compared to the nine months ended October 3, 2025, and declined, as a percentage of contract revenue, to 14.8% in the nine months ended October 2, 2026, from 16.2% in the nine months ended October 3, 2025.

Direct costs of contract revenue in our Energy segment increased $50.2 million, or 18.0%, for the nine months ended October 2, 2026, compared to the nine months ended October 3, 2025. Direct costs of contract revenue for the Engineering and Consulting segment increased $2.6 million, or 7.1%, in the nine months ended October 2, 2026, compared to the nine months ended October 3, 2025.

Gross Profit. Gross profit increased 20.7% to $233.1 million, or a 38.8% gross margin, for the nine months ended October 2, 2026, compared to gross profit of $193.1 million, or a 38.0% gross margin, for the nine months ended October 3, 2025. The increase in our gross margin was primarily driven by the changes in the mix of project revenues.

General and administrative expenses. G&A expenses increased $30.4 million, or 19.1%, to $189.7 million in the nine months ended October 2, 2026, compared to $159.4 million for the nine months ended October 3, 2025. As a percentage of contract revenue, G&A expenses were 31.6% of contract revenues in the nine months ended October 2, 2026, compared to 31.4% for the nine months ended October 3, 2025. G&A expenses consisted of an increase of $24.0 million, or 20.3%, in the Energy segment combined with an increase of $4.1 million, or 13.0%, in the Engineering and Consulting segment, and the remaining increase of $2.3 million, or 23.7%, in unallocated corporate expenses.

The overall increase in G&A expenses consisted of an increase of $17.5 million in salaries and wages, payroll taxes and employee benefits, an increase of $4.7 million in stock-based compensation, an increase of $4.3 million in depreciation and amortization, and an increase of $3.7 million in other general and administrative expenses. The increase in salaries and wages, payroll taxes and employee benefits was primarily due to increased staffing from acquisitions, an increase in incentive compensation, consistent with the improvement in operating profit, and higher fringe benefit costs consistent with the growth in direct and indirect labor costs. The increase in stock-based compensation expenses was primarily related to new stock grants to current employees and members of the Board of Directors at a higher stock

price. The increase in depreciation and amortization was driven by higher amortization of intangible assets from recent acquisitions. The increase in other general and administrative expenses was primarily due to increased professional service fees, software and other computer-related expenses.

Income (loss) from operations. Operating income increased 28.5% to $43.3 million for the nine months ended October 2, 2026, compared to an operating income of $33.7 million for the nine months ended October 3, 2025, as a result of the factors noted above.

Total other expense, net. Total other expense, net, decreased $2.5 million, or 60.7%, for the nine months ended October 2, 2026, compared to the nine months ended October 3, 2025, primarily due to the absence of a one-time charge for unamortized debt issuance costs related to our prior credit facilities that we had in the second quarter of fiscal 2025 and the absence of a one-time charge related to a facility lease modification that we had in the first fiscal quarter of fiscal 2025, combined with by the higher interest expense resulting from the higher debt levels under our credit facilities in the first half of fiscal 2025.

Income tax expense (benefit). We recorded an income tax benefit of $3.0 million for the nine months ended October 2, 2026, an effective tax benefit rate of 7.2% on income before income tax expense, compared to an income tax benefit of $4.2 million for the nine months ended October 3, 2025, an effective tax rate of 14.1% on income before tax expense. The increase in the effective tax rate resulted from the increase in income before income tax, combined with the decreases in discrete items related to stock compensation deductions and energy-efficiency building deductions.

Net income (loss). Our net income was $44.7 million for the nine months ended October 2, 2026, as compared to a net income of $33.8 million for the nine months ended October 3, 2025. The increase in net income was primarily attributable to the increase in income from operations a result of increasing revenue, combined with a reduction in Total other expense, net and higher effective tax rate.

Liquidity and Capital Resources


	Nine Months Ended
	October 2,		October 3,
	2026		2025
	(in thousands)
Net cash provided by (used in):
Operating activities	$	32,946	$	40,904
Investing activities		(60,958)		(40,327)
Financing activities		4,304		(41,626)
Net increase (decrease) in cash and cash equivalents	$	(23,708)	$	(41,049)

Sources of Cash

Our primary sources of liquidity for the next 12 months and beyond are cash generated from operations, cash and cash equivalents, and available borrowings under our revolving credit facility(the "Existing Revolving Credit Facility") and delayed draw term loan facility (the "Existing Delayed Draw Term Loan Facility") under the Credit Agreement (as defined below). We believe that these sources will be sufficient to finance our operating activities for at least the next 12 months.

As of October 2, 2026, we had a fully drawn $50.0 million term loan facility (the "Existing Term Loan Facility") with $46.9 million outstanding, a $100.0 million Existing Revolving Credit Facility with $15.0 million outstanding and $1.6 million in letters of credit issued. We also had an undrawn $50.0 million Existing Delayed Draw Term Loan Facility. The Existing Delayed Draw Term Loan Facility must be drawn before May 2027. The Existing Term Loan Facility, the Existing Revolving Credit Facility, and the Existing Delayed Draw Term Loan Facility (collectively, the "Existing Credit Facilities") are each scheduled to mature on May 5, 2030. In addition to the Existing Credit Facilities, we had $39.2 million of unrestricted cash and cash equivalents as of October 2, 2026. Unhedged borrowings under our Existing Credit Facilities, exclusive of the effects of upfront fees, undrawn fees and issuance cost

amortization, bore interest at an annual rate of 5.5% as of October 2, 2026. See Part I, Item 1, Note 6, "Debt Obligations", of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q, and Part II, Item 8, Note 5, "Debt Obligations", of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended January 2, 2026, for information regarding our indebtedness, including information about the Credit Agreement and repayments, principal repayment terms, interest rates, covenants, and other key terms of our outstanding indebtedness.

On October 30, 2026, we entered into an Increase Request and Second Amendment to Amended and Restated Credit Agreement (the "Amendment"), which amends our Amended and Restated Credit Agreement, dated as of May 5, 2025 (as amended, supplemented, or otherwise modified prior to the date of the Amendment, the "Existing Credit Agreement"; the Existing Credit Agreement as amended by the Amendment, the "Credit Agreement"). The Amendment amended the Existing Credit Agreement to, among other things, add an additional up to $250.0 million term loan facility (the "New Term Loan Facility") to finance the acquisition of Mantis Intermediate Holdings, LLC ("Mantis"). As of October 30, 2026, we had a fully drawn $50.0 million Existing Term Loan Facility with $46.9 million outstanding, a $100.0 million Existing Revolving Credit Facility with $35.0 million outstanding and $1.6 million in letters of credit issued, and a fully drawn $250.0 million New Term Loan Facility. We also had an undrawn $50.0 million Existing Delayed Draw Term Loan Facility. For more information, see Part I, Item 1, Note 14, "Subsequent Events", of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.

Cash Flows from Operating Activities

Cash flows provided by operating activities were $32.9 million for the nine months ended October 2, 2026, as compared to $40.9 million for the nine months ended October 3, 2025. Cash flows from operating activities primarily consists of net income, adjusted for non-cash charges, such as depreciation and amortization and stock-based compensation, plus or minus changes in current operating assets and liabilities. Cash flows provided by operating activities for the nine months ended October 2, 2026, resulted primarily from the higher net income supplemented by non-cash expenses from stock compensation and intangible amortization, partially offset by higher working capital requirements to support the growth in revenue. Cash flows provided by operating activities for the nine months ended October 3, 2025, resulted primarily from the increase in earnings partially offset by higher working capital requirements to support the expansion of revenue.

Cash Flows from Investing Activities

Cash flows used in investing activities were $61.0 million for the nine months ended October 2, 2026, as compared to cash flows used in investing activities of $40.3 million for the nine months ended October 3, 2025. Cash flows used in investing activities for the nine months ended October 2, 2026 and for the nine months ended October 3, 2025 were primarily due to cash paid for acquisitions, combined with cash paid for the development of proprietary software and the purchase of computers and equipment.

Cash Flows from Financing Activities

Cash flows provided by financing activities were $4.3 million for the nine months ended October 2, 2026, as compared to cash flows used in financing activities of $41.6 million for the nine months ended October 3, 2025.

For the nine months ended October 2, 2026, cash flows provided by financing activities were primarily attributable to borrowings, and repayments, of $30.0 million and $15.0 million, respectively, under the Existing Revolving Credit Facility combined with $4.3 million of proceeds from sales of common stock under the employee stock purchase plan, and $3.1 million of proceeds from stock option exercises. In addition, the receipt, and disbursement, of $7.2 million and $4.2 million, respectively, related to utility rebates impacted Restricted Cash. Cash flows provided by financing activities were partially offset by $9.1 million cash used to fund the repurchase of vesting stock grants to support the payments of withholding taxes, $8.8 million in payments for contingent consideration, and $1.9 million cash used for principal payments on our Existing Term Loan Facility. For the nine months ended October 3, 2025, cash flows used in financing activities were primarily attributable to the $39.0 million cash used to pay down our Existing Revolving Credit Facility, $5.1 million cash used to fund the repurchase of vesting stock grants to support the payments

of withholding taxes, $1.1 million principal payments on finance leases combined with repayments and borrowings of $90.0 million and $88.4 million, respectively, related to our Existing Credit Agreement. Cash flows used in financing activities were partially offset by $3.2 million of proceeds from sales of common stock under the employee stock purchase plan, and $2.5 million in proceeds from stock option exercise.

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

Off-Balance Sheet Arrangements

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

Short and Long-term Uses of Cash

General

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

Contractual Obligations

The following table sets forth our known contractual obligations as of October 2, 2026:


					Less than									More than
Contractual Obligations		Total			1 Year			1 - 3 Years			3 - 5 Years			5 Years
		(in thousands)
Debt ⁽¹⁾		$	61,637		$	2,500		$	4,868		$	54,269		$	-
Interest payments on debt outstanding ⁽²⁾			11,992			3,377			6,360			2,255			-
Operating leases			18,686			4,768			7,270			2,364			4,284
Finance leases			1,981			1,076			865			38			2
Total contractual cash obligations		$	94,296		$	11,721		$	19,363		$	58,926		$	4,286

(1)

Debt includes $46.6 million outstanding on our Existing Term Loan Facility, net of issuance costs, $15.0 million outstanding on our Existing Revolving Credit Facility, and no borrowed amounts outstanding on our Existing Delayed Draw Term Loan Facility as of October 2, 2026. We have assumed no future borrowings or repayments after October 2, 2026 (other than at maturity) for purposes of this table. Our Existing Term Loan Facility and Existing and Revolving Credit Facility are scheduled to mature on May 5, 2030.

(2)	Borrowings under our Existing Term Loan Facility and Existing Revolving Credit Facility bear interest at a variable rate. Future interest payments on our Existing Credit Facilities are estimated using floating rates in effect as of October 2, 2026.

We have contingent obligations to make earnout payments in connection with our acquisitions of Enica Engineering, PLLC. ("Enica"), Alternative Power Generation, Inc. ("APG"), Compass, Burton, and KCS Corporation ("KCS"), subject to their future financial performance.

As of October 2, 2026, we are contingently obligated to pay up to $3.0 million in cash if Enica exceeds certain financial targets during the second year after the Enica closing date of October 23, 2024, contingently obligated to pay up to $12.0 million if APG exceeds certain financial targets during the second and third year after the APG closing date of March 3, 2025, contingently obligated to pay up to $1.0 million in cash if Compass exceeds certain financial targets during the first year after the Compass closing date of January 2, 2026, contingently obligated to pay up to $12.0 million in cash if Burton exceeds certain financial targets during the first and second year after the Burton closing date of May 4, 2026, and contingently obligated to pay up to $1.5 million in cash if KCS exceeds certain financial targets during the first and second year after the KCS closing date of August 17, 2026.

As of October 2, 2026, we had contingent consideration payable of $25.9 million related to the acquisitions of Enica, APG, Compass, Burton, and KCS. Through the nine months ended October 2, 2026, our statement of operations includes $2.4 million of interest accretion (excluding fair value adjustments) related to the contingent consideration.

Outstanding Indebtedness

See Part I, Item 1, Note 6, "Debt Obligations", and Note 14 "Subsequent Events", of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q, and Part II, Item 8, Note 5, "Debt Obligations", of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended January 2, 2026, for information regarding our indebtedness, including information about new borrowings and repayments, principal repayment terms, interest rates, covenants, and other key terms of our outstanding indebtedness.

Interest Rate Swap

From time to time, we enter into interest rate hedging agreements to moderate our exposure to fluctuations in interest rates underlying our variable rate debt. For more information, see Part I, Item 3, "Quantitative and Qualitative Disclosures About Market Risk", and Note 5, "Derivative Financial Instruments", to the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q. We currently do not have any interest rate hedges in place.

Impact of Inflation

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

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

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

delayed or deferred decisions regarding expenditures to improve energy efficiency, and therefore potentially impact our future revenues.

Impact of Certain Federal Policies

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

Components of Revenue and Expense

Contract Revenue

We generally provide our services under contracts, purchase orders or retainer letters. The agreements we enter into with our clients typically incorporate one of three principal types of pricing provisions: time-and-materials, unit-based, and fixed price. Revenue on our time-and-materials and unit-based contracts are recognized as the work is performed in accordance with specific terms of the contract. As of October 2, 2026, 18% of our contracts are time-and-materials contracts, 33% are unit-based contracts, and 49% are fixed price contracts, compared to 18% are time-and-materials contracts, 36% are unit-based contracts, and 46% are fixed price contracts, as of October 3, 2025.

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

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

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

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

Direct Costs of Contract Revenue

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

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

General and Administrative Expenses

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

Critical Accounting Policies

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

There have been no material changes in our critical accounting policies and estimates from those disclosed in our Annual Report on Form 10-K for our fiscal year ended January 2, 2026. Please refer to Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended January 2, 2026 for a discussion of our critical accounting policies and estimates.

Recent Accounting Standards

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

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