RCMT 10-K & 10-Q changes, risk factors and insider trading

Adverse global economic conditions, when they occur, may create conditions such as increases in inflation, higher interest rates, a general tightening in the credit markets, lower levels of liquidity, increases in the rates of default and bankruptcy, and volatility in credit, equity and fixed income markets. Any or all of these developments can negatively affect the Company’s business, operating results or financial condition in a number ofseveral ways. For example, current or potential customers may be unable to fund capital spending programs, new product launches of other similar endeavors whereby they might procure services from the Company, and therefore delay, decrease or cancel purchases of services or not pay or delay paying for previously purchased services. In addition, these conditions may cause the Company to incur increased expenses or make it more difficult either to utilize existing debt capacity or otherwise obtain financing for operations, investing activities (including the financing of any future acquisitions), or financing activities, all of which could adversely affect the Company’s business, financial condition and results of operations.

As described in “Item 1. Business,” our operating results are subject to seasonal fluctuations, with reduced demand often occurring during the first quarter of the year when clients are finalizing their engineering and life sciences, data and solutions budgets, and also during periods in which there are a substantial amountnumber of holidays and seasonseasons vacations. In particular, oneour of the largestschool customers in our Specialty Health Care group, the New York City Department of Education, significantly reducesreduce activity during the third quarter, when schools are closed for summer recess. Our operating results for any given period may fluctuate as a resultbecause of the timing of holidays, vacations and other events, and if we were to experience unfavorable performance during periods in which we would otherwise expect to have high seasonal demand, we may have limited ability to make up for such performance during periods of seasonally lower demand.

As disclosed in “Item 1. Business,” during the fiscal year ended DecemberJanuary 28,3, 2024,2026, the Company had two customers exceedexceeding 10% of consolidated revenue, representing 19.5%20.8% and 14.1%13.6% of consolidated revenue. The Company’s five, ten and twenty largest customers accounted for approximately 48.5%,51.0%, 60.1%64.9% and 70.6%,75.0%, respectively, of the Company’s revenue for the fiscal year ended DecemberJanuary 28,3, 2024.2026. The Company’s customers may be affected by the current state of the economy or developments in the credit markets or may engage in mergers or similar transactions. In addition, customers may choose to reduce the business they do with the Company for other reasons or no reason. The Company could also be materially impacted by actions of prime contractors whereby the Company derives revenue through a subcontractor relationship. Should any significant customers experience a downturn in their business that weakens their financial condition or merge with another company or otherwise cease independent operation, or limit their relationship with us, it is possible that the business that the customer does with the Company would be reduced or eliminated, which could adversely affect the Company’s business, financial condition and results of operations.

The Company’s Engineering segment has entered into arrangements to provide construction management and engineering services to customers under which arrangements the Company then engages subcontractors to provide the construction services. Ultimately, as a primary contractor, the Company is responsible for the nonperformance or negligence of its subcontractors, whom the Company requires to be adequately insured and to issue performance bonds for their assignment. Should a subcontractor not perform or act negligently and should there be inadequate insurance or performance bonds in place, the Company might not be able to mitigate its primary liability to the customer, and the Company’s business, financial condition and results of operations could be materially adversely affected. In addition, while payments to subcontractors typically are due from the Company only after the Company receives payment from the ultimate customer, the Company faces the risk that, should a customer not pay the Company, or should a subcontractor demand payment from the Company prior to the Company’s receipt of payment from its customer, the Company’s business, financial condition and results of operations could be materially adversely affected.

The Company’s operations depend on the continued efforts of its officers and other executive management. The loss of key officers and members of the executive management team may cause a significant disruption to the Company’s business.

The Company also depends on the performance and productivity of its local managers and field personnel. The Company’s ability to attract and retain new business is significantly affected by local relationships and the quality of service rendered. The loss of key managers and field personnel may also jeopardize existing client relationships with businesses that continue to use the Company’s services based upon past relationships with local managers and field personnel. InTo order to fulfill the requirements ofmeet the Company’s customers,customers' requirements, the Company must be able to recruit and retain appropriate personnel for client assignments.

If the Company were unable to borrow under its Revolving Credit Facility (see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Financing Activities”), it may adversely affect the Company’s liquidity, results of operations and financial condition. The Company’s liquidity depends on its ability to generate sufficient cash flows from operations and, from time to time, borrowings under the Revolving Credit Facility with the Company’s agent lender Citizens Bank of Pennsylvania. The Company believes that Citizens Bank is liquid and is not aware of any current risk that they will become illiquid. However, should Citizens Bank experience limitations on its liquidity, our access to capital and thus our own liquidity could be adversely affected. At DecemberJanuary 28,3, 2024,2026, the Company had $35.0$24.7 million in borrowings under the Revolving Credit Facility outstanding and $7.4$13.2 million outstanding under letters of credit, with availability for additional borrowings under the Revolving Credit Facility of $22.6$27.1 million.

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 DecemberJanuary 28,3, 2024,2026, 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.

The Company is exposed to risks associated with foreign currency fluctuations and changes in exchange rates.rate changes. The Company’s exposure to foreign currency fluctuations relates to operations in Canada, GermanyGermany, and Serbia, principally conducted through its Canadian, GermanGerman, and Serbian subsidiaries. Exchange rate fluctuations affect the United States dollar value of reported earnings derived from the foreign operations as well as the carrying value of the Company’s investment in the net assets related to these operations. The Company does not engage in hedging activities withfor respect toits foreign operations.

At any time, United States federal tax laws or thetheir administrative interpretations of those laws may be changed.change. As a result, changes in United States federal tax laws could negatively impact our operating results, financial condition and business operations, and adversely impact the Company’s shareholders. At any time, tax laws in the Company’s other jurisdictions, Canada, Germany, the Philippines, Puerto RicoRico, and Serbia, may also change. These tax law changes may have a materialmaterially impact on the Company’s income tax expense.

The Company self-insures a portion of theits exposure for losses related to workers’ compensation and employees’ medical insurance.insurance losses. The Company has established reserves for workers’ compensation and employee medical insurance claims based on historical loss statistics and periodic independent actuarial valuations. Significant differences in actual experience or significant changes in assumptions may materially affect the Company’s future financial results.

Claims raised by clients stemming from the improper actions of temporary professionals, even if without merit, could cause the Company to incur significant expense associated with rework costs or other damages related to such claims.damages. Furthermore, such claims by clients could damage the Company’s business reputation and result in the discontinuation of client relationships.

The Company reviews prospective acquisitions as an element of its growth strategy. The failure of any acquisition to meet the Company’s expectations, whether due to a failure to successfully integrate any future acquisition or otherwise, may result in damage to the Company’s financial performance and/or divert management’s attention from its core operationsoperations, or could negatively affect the Company’s ability to meet the needs of its customers promptly.

The Company operates its business in Canada, Germany, the Philippines, Puerto RicoRico, and Serbia. For the fiscal year ended DecemberJanuary 28,3, 2024,2026, approximately 7.8%9.1% of the Company’s revenue werewas generated outside the United States. There are certain risks inherent in conducting business internationally including: the imposition of trade barriers, the enactment of tariffs, foreign exchange restrictions, longer payment cycles, greater difficulties in accounts receivablesreceivable collection, difficulties in complying with a variety of foreign laws (including without limitation the U.S. Foreign Corrupt Practices Act), changes in legal or regulatory requirements, including as to laws and regulations governing economic and trade sanctions, difficulties in staffing and managing foreign operations, complex and uncertain employment environments, political instability and potentially adverse tax consequences. Our operations in Serbia could be adversely affected by the current conflict between Ukraine and Russia, with which Serbia has substantial ties. Should sanctions against Russia affect Russia in a way that causes adverse economic consequences tofor Serbia, or if such sanctions were to be extended to countries that might be considered to be in alignmentaligned with Russia, this could have a negative impact on our employees or operations both within and outside Serbia. To the extent the Company experiences these risks, the business and results of operations could be adversely affected.

If significant tariffs or other restrictions are imposed or threatened on foreign businesses by the U.S.U.S., and affected countries take related countermeasures are taken by impacted foreign countries,countermeasures, our business and results of operations could be adversely affected. DuringFor theexample, first months of President Trump's second term, therecent U.S. announcedtariffs theimposed impositionor of additional substantial tariffsthreatened on importsgoods, materials, and products from variouscountries countries,where includingwe China,do Canadabusiness, and Mexico,any andretaliatory theactions subjecttaken countriesby indicatedsuch their intention to impose counter measures. Factors relating to these disputescountries, could reduce demand for our services, resultlead into thecustomer loss of customerslosses, and harm our competitive position in key markets. Additionally, ongoing trade tensions and uncertainty regarding future trade policies could negatively impact global economic conditions and consumer confidence, further affecting our business and results of operations.

As was the case with the COVID-19 pandemic and its endemic, and associated initiatives to reduce its spread, any otherfuture global pandemics or endemics that may occur in the future could adversely affect the Company’s business and financial position. For example, public and private sector policies and initiatives to reduce the transmission of a highly transmissible disease, such as closures of schools, businessesbusinesses, and manufacturing facilities, the promotion of social distancing, the adoption of working from home by companies and institutions, and travel restrictions could adversely affect demand for our services and present challenges to us in delivering these services. These impacts on our business could haveadversely an adverse effect onaffect our liquidity position and access to capital, including our ability to accessdraw on our line of credit.

These factors, inalong additionwith topayment delays in payment,delays, could continue to result in significant bad debts in the near future. Additionally, our operating results would be adversely affected if unexpected increases in the costs of labor and labor relatedlabor-related costs, materials, suppliessupplies, and equipment used into performingperform services couldwere not be passed on to our clients. In addition, we believe that to maintain or improve our financial performanceperformance, we must continue to obtain service agreements with new clients, retain and provide new services to existing clients, achieve modest price increases on current service agreements with existing clientsclients, and/or maintain internal cost reduction strategies at our various operational levels. Furthermore, we believe that our ability to sustain the internal development of managerial personnel is an important factor impacting future operating results and the successful execution of our projected growth strategies. A future pandemic could make these objectiveobjectives more difficult to attain.

Management believes the RCM Technologies, Inc.Inc.’s name is extremely valuable and important to its business. The Company endeavors to protect its intellectual property rights and to maintain certain trademarks, trade names, service marksmarks, and other intellectual property rights, including The Source of Smart Solutions® and Industries of Tomorrow, Today™, withfor which a trademark application submittedhas forbeen the use of the latter.submitted. The Company is not currently aware of any infringing uses or other conditions that would be reasonably likely to materially and adversely affect the Company’s use of its proprietary rights. The Company’s success depends on its ability to successfully obtain and maintain, and prevent misappropriation or infringement of,maintain its intellectual property, prevent its misappropriation or infringement, maintain trade secret protection, and conduct operations without violating or infringing on the intellectual property rights of third parties. Intellectual property litigation is expensive and time-consuming, and it is often difficult, if not impossible, to predict theits outcome of such litigation.outcome. If the Company is involved in intellectual property litigation, its business, financial conditioncondition, and results of operations could be materially adversely affected.

Uninterruptible Power Supply (UPS), card key access, fire suppression, and environmental control systems protect the Company’s datacenter.data center. All systems are monitored on a 24/7 basis7, with alertingalerts capabilitiessent via voice or email. The Company's telecommunications architecture at the Company utilizes managed private circuits from AT&T, which encompasses provisioninginclude redundancy and diversity.

The Company’s ability to protect its data center against damage from fire, power loss,outages, telecommunications failurefailures, and other disasters is critical to its business operations. In order toTo provide many of its services, the Company must be able to store, retrieve, processprocess, and manage large databases and periodically expand and upgrade its capabilities. Any damage to the Company’s data centers or any failure of the Company’s telecommunication links that interrupts its operations or results in an inadvertent loss of data could adversely affect the Company’s ability to meet its customers’ needs and their confidence in utilizing the Company for future services.

The Company’s ability to protect its data, provide servicesservices, and safeguard its installations,installations as it relatesrelated to theits IT infrastructure,infrastructure isis, in partpart, dependent on several outside vendors with whom the Company maintains service levelservice-level agreements.

We are highly dependent on information technology systems to operate our business. A breakdown, invasion, corruption, destructiondestruction, or interruption of critical information technology systems by employees, others with authorized access to our systemssystems, or unauthorized persons could negatively impact operations. In the ordinary course of business, we collect, storestore, and transmit confidential informationinformation, and it is critical that we do so in a secure manner to maintain the confidentiality and integrity of such information. Additionally, we outsource certain elements of our information technology systems to third parties. As a result of this outsourcing, our third partythird-party vendors may or could have access to our confidential informationinformation, making such systems vulnerable. Data breaches of our information technology systems,systems or those of our thirdthird-party party vendors,vendors may pose a risk thatexpose sensitive data may be exposed to unauthorized persons or to the public.

We have experienced cybersecurity eventsincidents and disruptionsdisruptions, such asincluding viruses and attacks targeting our information technology systems. Such prior events have not had a material impact on our financial condition, results of operationsoperations, or liquidity. However, future threats could have a materially adverse impact on our company by, among other things, causing harm to our business, financial condition, results of operationsoperations, or reputation; disrupting our operations; exposing us to potential liability, regulatory actionsactions, and loss of business; and challenging our eligibility for future work on sensitive systems. Due to the evolving nature of these security threats, the potential impact of any future incident cannot be predicted. Our insurance coverage may not be adequatesufficient to cover all the costs related to cybersecurity attacks or disruptions resulting from such events.them.

While we believe that we have taken appropriate security measures to protect our data and information technology systems and have been informed by our third partythird-party vendors that they have as well, there can be no assurance that our efforts will prevent breakdowns or breaches in our systems, or those of our third partythird-party vendors, that could adversely affect our business.

The Company and many of its customers are subject to regulation by federal, statestate, and international environmental laws, including those relating to climate change, that are subjectrapidly to rapid change,evolving, which could result in regulatory uncertainty as well as potentialand significant increases in compliance costs. There can be no assurance that the steps we take to abide by applicable requirements will meet all current and future regulatory.regulations. Any failures to do so could result in governmental enforcement actions, fines, and other penalties, or other liabilities,liabilities that could adversely affect our business.

We control, process, or have access to personal information regarding our own employees or employment candidates, as well as that of many of our customers or other third parties. Information concerning these individuals may also reside in systems controlled by third partythird-party vendors with whom we do business. The legal and regulatory environment concerningfor data privacy is becoming more complex and challenging, and the potential consequences of non-compliance haveare becomebecoming more severe. The European Union’s General Data Protection Regulation, the California Consumer Privacy Act, the Health Insurance Portability and Accountability Act of 19961996, and similar laws impose additional compliance requirements related to the collection, use, processing, transfer, disclosure, and retention of personal information, which can increase operating costs and resources to accomplish. Any failure to abide by these regulations or to protect such personal information from inappropriate access or disclosure, whether through social engineeringengineering, or by accidentaccident, or other cause, could have severe consequencesconsequences, including fines, litigation, regulatory sanctions, reputational damage, and loss of customers or employees. There can be no assurance that the steps we take to abide by applicable requirements and protect information will meet all current and future regulatory requirements, anticipate all potential methods of unauthorized access, or prevent all inappropriate disclosures. Any failures to do so could result in governmental enforcement actions, fines, and other penalties, or other liabilities,liabilities that could adversely affect our business.

A discussion of the recently issued accounting pronouncements is set forth in Note 12, New Accounting Standards and Updates,Updates from the Securities and Exchange Commission, in the unaudited condensed consolidated financial statements included in Part I, Item I1 of this Quarterly Report on Form 10-Q and is incorporated herein by reference.

Thirteen Weeks Ended AprilJuly 4, 2026 Compared to Thirteen Weeks Ended MarchJune 29,28, 2025

A summary of operating results for the thirteen weeks ended AprilJuly 4, 2026,2026 and MarchJune 29,28, 2025,2025 is as follows (in thousands):

The Company follows a 52/53 week fiscal reporting calendar ending on the Saturday closest to December 31. The fiscal quarters ended AprilJuly 4, 2026,2026 and MarchJune 29,28, 2025,2025 consisted of thirteen weeks each.

Revenue. Revenue decreasedincreased by $1.4$15.6 million for the thirteen weeks ended AprilJuly 4, 2026 as compared to the thirteen weeks ended MarchJune 29,28, 2025 (the “comparable prior-year period”). Revenue increased $4.8$1.9 million in the Specialty HealthcareHealth Care segment, decreased $6.0$13.0 million in the Engineering segmentsegment, and decreased $0.2$0.7 million in the Life Sciences, Data and Solutions segment. See more detailed disclosure by segment in our Segment Discussion.

Cost of Services and Gross Profit. Cost of services decreasedincreased by $1.5$13.8 million for the thirteen weeks ended AprilJuly 4, 2026 as compared to the comparable prior-year period, primarily due to the decreaseincrease in revenue. Cost of services as a percentage of revenue for the thirteen weeks ended AprilJuly 4, 2026 and MarchJune 29,28, 2025 was 73.5%74.3% and 74.0%,71.5%, respectively. 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 $15.5$15.6 million for the thirteen weeks ended AprilJuly 4, 2026 as compared to $15.0$15.3 million for the comparable prior-year period. As a percentage of revenue, SGA expenses were 18.7%16.6% for the thirteen weeks ended AprilJuly 4, 20262026, andas 17.7%compared to 19.6% for the comparable prior-year period. See Segment Discussion for further information on SGA expense changes.

Other Expense, Net. Other expense, net consists of interest expense, unused line fees and amortized loan costs on the Company’s revolving credit facility, net of interest income and gains and losses on foreign currency transactions. Other expense, net decreased by $0.1$0.2 million as compared to the comparable prior year period, due mainly to a $0.3 million decrease in loss on foreign currency transactions, offset by a $0.1 million increase in interest expense, net. Interest expense increased primarily due to differencesincreased inborrowing theand impactincreased fromletters foreignof currency transactions.credit.

Income Tax Expense. The Company recognized $1.5$2.3 million of income tax expense for the thirteen weeks ended AprilJuly 4, 2026 as compared to $1.7$1.9 million for the comparable prior-year period. The consolidated effective income tax rate for the current period was 28.5%32.1% as compared to 28.9%33.3% for the comparable prior-year period. The effective income tax rates for the thirteen weeks ended AprilJuly 4, 2026, were approximately 29.0%,32.5%, 23.4%,31.1%, 28.0%,20.1%, and 24.9%25.1% in the United States/Puerto Rico,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 comparable prior-year period estimated income tax rates were 29.3%,34.0%, 26.7%,23.7%, and 55.7%8.5% in the United States, Canada, and Europe, respectively. The primary reason for the decrease in the consolidated and United States effective rates in the current period was due to decreases in permanent tax differences in the United States. The low effective tax rate in Europe during the prior-year period was due to a fixed tax benefit relative to a small pretax loss.

Specialty HealthcareHealth Care

Specialty HealthcareHealth Care revenue of $48.1$92.8 million for the thirteentwenty-six weeks ended AprilJuly 4, 2026, increased 11.1%,7.8%, or $4.8$6.7 million, compared to the comparable prior-year period. The increase in revenue was driven by the Company’s school clients, offset by a decrease in revenue from the Company’s non-school clients. Revenue from school clients for the thirteentwenty-six weeks ended AprilJuly 4, 2026, was $42.9$82.1 million as compared to $37.3$74.5 million for the comparable prior-year period. The increase to revenue from school contracts was driven by both existing and new clients. Revenue from non-school clients for the thirteentwenty-six weeks ended AprilJuly 4, 2026, was $5.2$10.7 million as compared to $6.0$11.6 million for the comparable prior-year period. The decrease in non-school revenue was primarily driven by the reduction in revenue of $0.7 million from a lost contract with a corrections facility. Gross profit increased by 10.1%,8.7%, or $1.2$2.1 million, to $13.4$26.6 million for the thirteentwenty-six weeks ended AprilJuly 4, 2026 as compared to $12.2$24.5 million in the comparable prior-year period. Gross profit increased due to an increase in revenue, offsetaugmented by aan decreaseincrease in gross profit margin. Gross profit margin for the thirteentwenty-six weeks ended AprilJuly 4, 2026, decreasedincreased to 27.9%28.7% compared to 28.2%28.4% for the comparable prior-year period. The decreaseincrease in gross profit margin was primarily attributed to anormal greater mix shift to lower-margin services.fluctuations. Specialty HealthcareHealth Care experienced operating income of $6.6$13.1 million for the thirteentwenty-six weeks ended AprilJuly 4, 2026, as compared to $6.2$12.3 million for the comparable prior-year period. The primary reason for the increase in operating income was the increase toin gross profit, offset by an increase in SGA expense to $6.7$13.3 million for the thirteentwenty-six weeks ended AprilJuly 4, 2026 compared to $5.9$12.0 million for the comparable prior-year period. SGA expense increased primarily due to sales and recruiting infrastructure investments to support revenue growth.

ThirteenTwenty-Six Weeks Ended AprilJuly 4, 2026 Compared to ThirteenTwenty-Six Weeks Ended MarchJune 29,28, 2025 (Continued)

Engineering revenue of $26.1$65.7 million for the thirteentwenty-six weeks ended AprilJuly 4, 2026, decreasedincreased 18.7%,11.9%, or $6.0$7.0 million, compared to the comparable prior-year period. The decreaseincrease in revenue included decreasesincreases in Energy Services revenue of $2.2$12.5 million, offset by decreases in Aerospace revenue of $2.1$3.3 million,million and Industrial Processing revenue of $1.7$2.2 million. Energy Services revenue decreasedincreased primarily because of decreasedincreased activity from EPC (Engineering, Procurement and Construction Management) projects. Aerospace revenue decreased primarily due to curtailed spending from one client. The Company believes the decrease onin Industrial Processing revenue was mainly due to normal fluctuations. Gross profit decreased by 2.6%, or $0.3 million, compared to the comparable prior-year period. Gross profit decreased due to a decline in gross profit margin. Gross profit margin of 18.8% for the current period decreased from 21.6% for the comparable prior-year period. The decrease in gross profit margin was primarily due the Energy Services revenue was primarilygroup, due to gaps between the end dates and start dates of major projects. Aerospace revenue decreased primarily due to a decreaseprojects in spending from several clients. Gross profit decreased by 14.3%, or $0.9 million, compared to the comparablefirst prior-year period. Gross profit decreased becausequarter of the2026 decrease in revenue, enhanced by an increase in gross profit margin. The gross profit margin of 20.3% for the current period increased from 19.2% for the comparable prior-year period. The increase in gross profit margin was primarily due toand a change in mix associated with EPC project revenue fromin the Energysecond Servicesquarter groupof and Aerospace revenue.2026. The Engineering segment experienced operating income of $2.4$6.0 million for the thirteen weeks ended April 4, 2026, as compared to $2.9$6.2 million for the comparable prior-yearprior year period. The decrease in operatingOperating income wasdecreased due to the decrease in gross profit, offset by a decrease in SGA expense.expenses. The Engineering segment’s SGA expense of $2.7$5.8 million decreased from $3.1$6.1 million, primarily due to a concentrateddeliberate effort to aligngain certainefficiency costson withSGA gross profit.expense.

Life Sciences, Data and Solutions revenue of $8.8$18.4 million for the thirteentwenty-six weeks ended AprilJuly 4, 2026, decreasedincreased 2.8%,2.7%, or $0.2$0.5 million, compared to the comparable prior-year period. The Company primarily attributes the decreaseincrease in revenue to theincreases timingin ofmanaged largeservices projects,revenue offsetin byits aLife deemphasisSciences of the Company’s legacy staffing business.practice. Gross profit of $3.3$7.2 million for the thirteentwenty-six weeks ended AprilJuly 4, 2026, decreasedincreased 8.6%,0.8%, or $0.3$0.1 million, compared to $3.6$7.1 million for the comparable prior-year period. Gross profit decreasedincreased due to the decreaseincrease in revenuerevenue, andoffset by a decrease in gross profit margin. Gross profit margin for the thirteentwenty-six weeks ended AprilJuly 4, 2026, was 37.3%39.0% as compared to 39.7% for the comparable prior-year period. The Company attributes the gross profit margin decrease to normal fluctuations in project work.fluctuations. The Life Sciences, Data and Solutions segment experienced operating income of $2.0$4.7 million for the thirteentwenty-six weeks ended AprilJuly 4, 2026,2026 compared to $2.1$4.1 million for the comparable prior-year period. The decreaseincrease in operating income was primarily due a decrease in SGA expense to $2.4 million for the twenty-six weeks ended July 4, 2026 as compared to $2.9 million in the comparable prior year period, offset by the decrease in gross profit, offset by a decrease in SGA expense. The Life Sciences, Data and Solutions segment’s SGA expense of $1.2 million decreased from $1.4 million, primarily due to a deliberate effort to gain efficiency on SGA expense.profit.

The Company’s corporate SGA expense includes but is not limited to the following costs: public company-relatedcompany costs,related, executive compensation, board compensation, directors and officers insurance, SAP ERP infrastructure, professional fees, numerous centralized functions including accounting and financial management, information technology and cyber security infrastructure, payroll, billing, accounts receivable,receivables, 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 $4.9$9.6 million for the thirteentwenty-six weeks ended AprilJuly 4, 2026 as compared to $4.5$9.1 million for the comparable prior year period.period, increasing by $0.5 million. The increase was primarily caused by $0.6 million in excess professional fees over budget associated with the Company’s fiscal 2025 audit,audit partiallycompleted offsetin bythe reductionsfirst toquarter variousof other costs.2026.

The following unaudited tables present the Company's GAAP net income and GAAP operating incomeincome, and the corresponding adjustments used to calculate Adjusted operating income, EBITDA, Adjusted EBITDA, Adjusted net incomeincome, and Adjusted diluted net earnings per share for the thirteen and twenty-six weeks ended AprilJuly 4, 2026, and MarchJune 29,28, 2025.

Operating activities provided $2.7$13.5 million of cash for the thirteentwenty-six weeks ended AprilJuly 4, 20262026, as compared to providing $16.7$8.7 million in the comparable prior-year period. The major components of cash provided by operating activities in the thirteentwenty-six weeks ended AprilJuly 4, 20262026, and the comparable prior-year period are as follows: net income, and changes in accounts receivable, the net of transit accounts payable and transit accounts receivable, contract assets, prepaid expenses and other current assets, accounts payable, accrued expenses and accrued payroll and related costs, and deferred revenue.

For the thirteentwenty-six weeks ended AprilJuly 4, 2026, the Company reportedexperienced net income of $3.8$8.7 million,million compared withto $4.2$8.0 million infor the comparable prior-year period. An increase in accounts receivable and contract assets in the thirteentwenty-six weeks ended AprilJuly 4, 2026, used $3.9$0.3 million of cash compared to providingusing $9.6$5.8 million in the comparable prior-year period. The Company primarily attributes this increase in accounts receivable for the thirteentwenty-six weeks ended AprilJuly 4, 20262026, to normalincreased fluctuationsrevenue in itsthe Engineeringsecond segmentquarter clients,of mainly2026 dueas compared to the timingfourth quarter of milestones associated with its fixed price contracts.2025.

While highly variable, the Company’s transit accounts payable typically exceeds the Company’s transit accounts receivable, but absolute amounts and differences fluctuate significantly from quarter to quarter in the normal course of business. The net of transit accounts payable and transit accounts receivable was a net payable of $8.0$7.8 million as of AprilJuly 4, 2026 and a net payable of $8.2 million as of January 3, 2026, using $0.2$0.4 million of cash during the thirteentwenty-six weeks ended AprilJuly 4, 2026. The net of transit accounts payable and transit accounts receivable was a net payable of $12.2$14.9 million as of MarchJune 29,28, 2025 and a net payable of $16.6 million as of December 28, 2024, using $4.4$1.7 million of cash during the thirteentwenty-six weeks ended MarchJune 29,28, 2025. The decrease to net transit payable as of AprilJuly 4, 2026 was due to normal fluctuations associated with several large, multiyear EPC projects. In a typical EPC contract, the Company receives significant cash upfront to fund equipment procurement and construction subcontractors throughout the project.

Prepaid expenses and other current assets provided cash of $0.6$2.1 million for the thirteentwenty-six weeks ended AprilJuly 4, 2026 as compared to providing $1.8$3.0 million of cash for the comparable prior-year period. The Company typically attributes changes to prepaid expenses and other current assets, if any, to general timing of payments in the normal course of business. Since certain expenses are paid before a fiscal year concludes and are amortized over the next fiscal year, prepaid expenses and other current assets generally tend to increase at the end of a fiscal year and decrease during the first three quarters of the following fiscal year.

AnA increase in accounts payable and accrued expenses provided cash of $0.7$5.0 million for the thirteentwenty-six weeks ended AprilJuly 4, 20262026, as compared to providingusing $1.4$3.4 million for the comparable prior-year period. The Company attributes these changes to typical fluctuations in the normal course of business.

Changes in accrued payroll and related costs provided $1.5$2.1 million for the thirteentwenty-six weeks ended AprilJuly 4, 2026,2026 as compared to providing $2.7$0.4 million for the comparable prior-year period. There are four primary factors that generally impact accrued payroll and related costs: 1) there is a general correlation to operating expenses as payroll and related costs is the Company’s largest expense group, so as operating costs increase or decrease, absent all other factors, so will the accrued payroll and related costs; 2) the Company pays the majority of its payroll biweekly (every two weeks) and normally has thirteen weeks in a fiscal quarter, which means that the Company normally has a biweeklymajor 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 biweeklymajor payroll for the thirteentwenty-six weeks ended AprilJuly 4, 2026 was paid on AprilJune 3,26, 2026.

The Company’s deferred revenue balance as of AprilJuly 4, 2026 was $13.4$8.2 million, compared to $14.8 million as of January 3, 2026, using cash from operations of $1.4$6.6 million for the thirteentwenty-six weeks ended AprilJuly 4, 2026. The decrease was associated with upfront payments for future labor associated with the Company’s EPC contracts.

Financing activities used $2.5$9.3 million of cash for the thirteentwenty-six weeks ended AprilJuly 4, 2026, compared to using $15.6$7.1 million in the comparable prior-year period. The Company made net borrowingspayments under its revolving credit facility of $4.1$1.3 million during the thirteentwenty-six weeks ended AprilJuly 4, 2026, as compared withto making net payments of $11.6$1.0 million in the comparable prior-year period. The Company used $6.7 million to purchase shares of its common stock during the thirteentwenty-six weeks ended AprilJuly 4, 2026,2026 andas usedcompared $3.2to using $5.1 million to purchase shares of its common stock during in the comparabletwenty-six prior-yearweek period.period ended June 28, 2025. During the thirteentwenty-six weeks ended AprilJuly 4, 2026, the Company used negligible$1.2 cashmillion to retire shares of vested equity grants, as compared to using $0.9 million in the comparable prior year period, the proceeds of which were used to pay withholding taxes upon the vesting of equity grants.grants, as compared to using $0.9 million in the comparable prior year period. The Company generated cash of $0.3 million from sales of shares from its equityemployee plansstock purchase plan for both periods presented.

Borrowings under the Revolving Credit Facility bear interest at one of two alternative rates, as selected by the Company at each incremental borrowing. These alternatives are: (i) SOFR (Secured Overnight Financing Rate), plus applicable margin or (ii) the agent bank’s prime rate generally borrowed over shorter durations. The Company also pays unused line fees based on the amount of the Revolving Credit Facility that is not drawn. Unused line fees are recorded as interest expense. The effective weighted average interest rate, including unused line fees, for the thirteentwenty-six weeks ended AprilJuly 4, 2026 and MarchJune 29,28, 2025 were 5.7%5.6% and 6.0%,6.2%, respectively.

All borrowings under the amended Revolving Credit Facility 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 AprilJuly 4, 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 Revolvingrevolving Creditcredit Facilityfacility as of AprilJuly 4, 2026 and January 3, 2026 were $28.8$23.4 million and $24.7 million, respectively. There were letters of credit outstanding at AprilJuly 4, 2026 and January 3, 2026 for $12.9$18.9 million and $13.2 million, respectively. At AprilJuly 4, 2026 and January 3, 2026, the Company had availability for additional borrowings under the Revolving Credit Facility of $33.3$32.7 million and $27.1 million, respectively.

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 necessaryneeded to paycover our expenses, principally labor costs,costs and other related expenditures. We generally satisfy our liquidity needs through cash provided by operations and, when necessary, our Revolving Credit Facility. The Company believes it has a great deal ofconsiderable flexibility to reduce its costs if it becomes necessary. The Company believes that it can satisfymeet its liquidity needs for at least the next twelve12 months.

The Company’s liquidity and capital resources as of AprilJuly 4, 2026 included accounts receivable and total current asset balances of $85.2$81.5 million and $101.6$100.4 million, respectively. Current liabilities were $52.8$52.2 million as of AprilJuly 4, 20262026, and were exceeded by total current assets by $48.8$48.2 million.

The Company experiences volatility in its daily cash flow and, at times, relies on the Revolving Credit Facility to provide daily liquidity for the Company’s financial operations. As of AprilJuly 4, 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.

The Company is exposed to various asserted claims as of AprilJuly 4, 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 both AprilJuly 4, 2026, and January 3, 2026, the Company had accrued $0.3$0.4 million for asserted claims.

The Company leases office facilities and various equipment under non-cancelable leases expiring at various dates through OctoberNovember 2029.2037. Certain leases are subject to escalation clauses based upon changes in various factors.

Future Contingent Payments for Contingent Consideration