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

The global economy has beenexperienced experiencingperiods of supply chain constraints and labor shortages. These conditions,conditions in addition to elevated inflation, have increasedincrease the costs for materials, other goods, and labor, and have caused delivery and project performance schedules to be extended. TheseWhen conditions,these combinedconditions withoccur, tighteningincreases labor markets resulting from elevated resignation rates among U.S. workers, could increasein the cost and difficulty of recruiting and retaining employees, or could result in project delays or cancellations which could negatively impact our operations and financial results.

In the ordinary course of business, we have been and may be in the future be targeted by malicious cyber-attacks. Cybersecurity attacks in particular are evolving, and we and the third parties with whom we work face the constant risk of cybersecurity threats, including, among other things, computer viruses, malicious code, social-engineering attacks by(including computerthrough hackers,deep organizedfakes, cyber-attacks,which may be increasingly more difficult to identify as fake, and phishing attacks), denial-of-service attacks, credential stuffing attacks, credential harvesting, personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software and hardware failures, attacks enhanced or facilitated by AI, and other electronic security breaches that could lead to disruptions in critical systems, unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, encryption, access to, release or other compromise of confidential or sensitive information. In particular, severe ransomware attacks are becoming increasingly prevalent and can lead to material adverse consequences. Such threats are prevalent and continue to rise, are increasingly difficult to detect, and come from a variety of sources, including traditional computer “hackers,” threat actors, “hacktivists,” organized criminal threat actors, personnel (such as through theft or misuse), sophisticated nation states, and nation-state-supported actors.

While we have implemented security measures designed to protect against cyber security breaches, there can be no assurance that these measures will be effective. Threat actors may also gain access to other networks and systems after a compromise of our networks and systems. For example, threat actors may use an initial compromise of one part of our environment to gain access to other parts of our environment, or leverage a compromise of our networks or systems to gain access to the networks or systems of third parties with whom we work, such as through phishing or supply chain attacks. We take steps designed to detect, mitigate, and remediate vulnerabilities in our information systems (such as our hardware and/or software, including that of third parties with whom we work). We may not, however, detect and remediate all such vulnerabilities including on a timely basis. Further, we may experience delays in developing and deploying remedial measures and patches designed to address identified vulnerabilities. Vulnerabilities could be exploited and result in a cyber security breach or other interruption.

Any of the previously identified or similar threats could cause a cyber security breach or other interruption that could result in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to our confidential or sensitive information or our information technology systems, or those of the third parties with whom we work. For example, we have been the target of unsuccessful phishing attempts in the past, and expect such attempts will continue in the future. Applicable data privacy and security obligations may require us, or we may voluntarily choose, to notify relevant stakeholders, including affected individuals, customers, regulators, and investors, of security incidents, or to take other actions, such as providing credit monitoring and identity theft protection services.

Laws,We regulationspublish privacy policies, marketing materials and other obligationsstatements (includingconcerning withoutdata limitation applicable guidance, industry standards, externalprivacy, and internalsecurity. privacyRegulators andin securitythe policiesUnited andStates are increasingly scrutinizing these statements, and contractualif requirements)these relatingpolicies, materials or statements are found to personalbe datadeficient, andlacking datain privacytransparency, aredeceptive, constantlyunfair, evolving,misleading, asor federal,misrepresentative state,of localour andpractices, foreignwe governmentsmay adoptbe new measures addressing data privacy. These laws impose stringent obligations. For example, the California Consumer Privacy Act, as amended (“CCPA”), which appliessubject to businessinvestigation, representativeenforcement andactions by regulators or other typesadverse of personal data of California residents, provides for fines of up to $7,500 per intentional violation and allows private litigants affected by certain data breaches to recover significant statutory damages.consequences. Our privacy obligations, including applicable laws and regulations, may be interpreted or applied in a manner that is inconsistent with each other and may complicate our existing data privacy practices. Evolving compliance and operational requirements under the privacy laws of the jurisdictions in which we operate, regulations, and other obligations have become increasingly burdensome and complex. Our failure to comply (or perceived failure to comply) with these obligations could result in costly enforcement actions (including regulatory proceedings, investigations, fines, penalties, audits, and inspections), litigation (including class action claims) or mass arbitration demands, penalties and fines, require us to change our business practices or cause business interruptions, and may lead to liabilities and other harms.

We are a provider of professional, technical and consulting services to utilities, private industry, and public agencies at all levels of government. As resource and infrastructure needs undergo continuous change, we help organizations and their communities evolve and thrive by providing a wide range of technical services for energy solutions, greenhouse gas reduction, and government infrastructure. Through engineering, program management, policy advisory, and software and data management,analytics, we plan, design and deliver trusted, comprehensive, innovative, cost-effective, and proven solutions to improve efficiency, resiliency, and sustainability in energy and infrastructure to our clients.

Our Energy segment provides specialized, innovative, comprehensive energy solutions to businesses, utilities, state agencies, municipalities, and non-profit organizations in the U.S.organizations. Our experienced engineers, consultants, and staff help our clients realize cost and energy savings by tailoring efficient and cost-effective solutions to assist in optimizing energy spend. Our energy efficiency services include comprehensive audit and surveys, program design, master planning, demand reduction, grid optimization, benchmarking analyses, design engineering, AI data center power solutions, construction management, performance contracting, installation, alternative financing, measurement and verification services, and advances in software and data analytics for long-term planning.

Our Engineering and Consulting segment provides civil engineering-relatedengineering and construction management, building and safety,safety services, city engineering officeand management,planning city planning,support, civil design, geotechnical,geotechnical services, and material testing and other engineering consulting services to our clients.testing. Our engineeringcapabilities services includespan traffic, bridges, rail, port, water,water miningsystems, and other civilmajor engineeringinfrastructure projects. WeIn alsoaddition to technical expertise, we provide economic and financial consulting to public agencies. Lastly, we supplement the engineering services that wehelps offeragencies ourplan, clients by offering expertisefund, and supportmaintain forboth the various financing techniques public agencies utilize to finance theirdaily operations and infrastructure.long-term capital programs. We also support the mandated reporting and other requirements associated with these financings. We provide financial advisory services for municipal securities but do not provide underwriting services.

Summary Comparisoncomparison of fiscal years 2025, 2024, 2023, and 20222023

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 revolvingRevolving creditCredit facilityFacility and Delayed Draw Term Loan under the Credit Agreement (the “Revolving Credit FacilityFacilities”). We believe that ourthese cash and cash equivalents, cash generated by operating activities, and available borrowings under our Revolving Credit Facilitysources will be sufficient to finance our operating activities for at least the next 12 months.

As of DecemberJanuary 27,2, 2024,2026, we had a fully drawn $100$50.0 million term loan with $90.0$48.8 million outstanding (the “Term Loan”, and collectively with the Revolving Credit Facility, the “Credit Facilities”), andoutstanding, a $50.0$100.0 million Revolving Credit Facility with no borrowed amounts and $1.6 million in letters of credit issued, and a $50.0 million Delayed Draw Term Loan which has not been drawn on. The Delayed Draw Term Loan must be drawn before May 2027. The Credit Facilities are each scheduled to mature on SeptemberMay 29,5, 2026.2030. In addition,addition to the Credit Facilities, as of DecemberJanuary 27,2, 2024,2026, we had $74.2$65.9 million of unrestricted cash and cash equivalents.

As of DecemberJanuary 27,2, 2024,2026, we were in compliance with the covenants contained in the Credit Agreement.Agreement As of December 27, 2024,and unhedged borrowings under our Credit Facilities, exclusive of the effects of upfront fees, undrawn fees and issuance cost amortization, bore interest at an annual rate of 6.4%.5.3%. See Part II, Item 8, Note 5, “Debt Obligations”, of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K, 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.

Cash flows provided by operating activities were $72.1$80.1 million, $39.2$72.1 million, and $9.4$39.2 million for fiscal years 2025, 2024, 2023, and 2022,2023, respectively. 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 fiscal year 2025 resulted primarily from the increase in earnings supplemented by lower working capital requirements to support the expansion and changing mix of revenue. Cash flows provided by operating activities for fiscal year 2024 resulted primarily from the increase in earnings, and lower working capital requirements resulting from more robust billing and payment terms and the timing of collections at the end of the fiscal year. Cash flows provided by operating activities for fiscal year 2023 resulted primarily from the increase in earnings, combined with lower working capital requirements. Cash flows provided by operating activities for fiscal year 2022 were unfavorably impacted by higher working capital requirements required to support the increase in contract revenues.

Cash flows used in investing activities were $15.7$45.6 million, $11.5$15.7 million, and $9.5$11.5 million for fiscal years 2025, 2024, and 2023, respectively. Cash flows used in investing activities for fiscal year 2025 were primarily due to cash paid for acquisitions, combined with cash paid for the internal development of proprietary software and 2022,the respectively.purchase of computers and equipment. Cash flows used in investing activities for fiscal year 2024 were primarily due to cash paid for an acquisition, combined with cash paid for the internal development of proprietary software and the purchase of computers and equipment. Cash flows used in investing activities for fiscal yearsyear 2023, and 20222023 were primarily due to cash paid for the development of proprietary software and the purchase of computers and other equipment.

Cash flows used in financing activities were $42.7 million, $5.6 million and $23.8 million for fiscal years 2025, 2024 and 2023, respectively,respectively. compared to cashCash flows providedused byin financing activities of $8.4 million for fiscal year 2022.2025 were primarily attributable to the $39.7 million cash used to pay down our Revolving Credit Facility, $5.5 million cash used to pay withholding taxes on stock grants, $1.5 million principal payments on finance leases, partially offset by $3.2 million of proceeds from sales of common stock under employee stock purchase plan and $2.8 million in proceeds from stock option exercises. Cash flows used in financing activities for fiscal year 2024 were primarily attributable to the repayments of $8.1 million under our Term Loan, $1.4 million principal payments on finance leases, and $1.4 million cash used to pay withholding taxes on stock grants, partially offset by $2.8 million of proceeds from sales of common stock under employee stock purchase plan and $2.8 million in proceeds from stock option exercises. Cash flows used in financing activities for fiscal year 2023 were primarily attributable to the disbursement of $10.7 million in restricted cash for utility rebate incentives, payments of $4.0 million for contingent consideration related to prior acquisitions, combined with repaymentsprincipal and borrowingsreductions of $112.9$7.9 million and $105.0 million, respectively, under our term loan facility and line of credit, which resulted primarily from refinancing our Prior Credit Facility. Cash flows provided by financing activities for fiscal year 2022 were primarily attributable to borrowings of $20.0 million under our Delayed Draw Term Loan, $10.7 million in receipt of restricted cash, $3.0 million in proceeds from sales of common stock under our employee stock purchase plan, and $1.7 million proceeds from notes payable, partially offset by repayments of $13.0 million under our Term A Loan, combined with payments of $10.2 million for contingent consideration related to prior acquisitions, $1.9 million payments on notes payable, and $1.1 million principal payments on finance leases.

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 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 cashcash.”.

The following table sets forth our known contractual obligations as of DecemberJanuary 27,2, 20242026:

We arehave obligatedcontingent obligations to paymake earnout payments in connection with our acquisitionacquisitions of Enica Engineering, PLLC. (“Enica”)., Alternative Power Generation, Inc. (“APG”) and Compass Municipal Advisors, LLC. (“Compass”), subject to their future financial performance. We are obligated to pay up to $6.0 million in cash if Enica exceeds certain financial targets during the two years after the Enica closing date of October 23, 20242024. (We are obligated to pay up to $18.0 million in cash if APG exceeds certain financial targets during the “Enicathree Closingyears Date”).after the APG closing date of March 3, 2025. We are obligated to pay up to $1.0 million in cash if Compass exceeds certain financial targets during the one year after the Compass closing date of January 2, 2026. As of DecemberJanuary 27,2, 2024,2026, we had contingent consideration payable of $4.2$20.4 million related to the Enicaacquisitions acquisition.of ForEnica, fiscalAPG, yearand 2024,Compass. Through the twelve months ended January 2, 2026, our statement of operations includes $0.2$3.2 million of interest accretion (excluding fair value adjustments) related to the contingent consideration.

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 DecemberJanuary 27,2, 2024,2026, 18% of our contracts are time-and-materials contracts, 40%35% are unit-based contracts, and 42%47% are fixed price contracts, compared to 19%18% for time-and-materials contracts, 42%40% for unit-based contracts, and 39%42% for fixed price contracts, as of December 29,27, 2023.2024.

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, stock-based compensation, 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.costs, including interest accretion on contingent consideration. We expense general and administrative costs when incurred.

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. Revenue on time-and-materials and unit-based contracts is recognized as the work is performed in accordance with the specific rates and terms of the contract. We recognize revenues for time-and-materials contracts based upon the actual hours incurred during a reporting period at contractually agreed upon rates per hour and also includes in revenue all reimbursable costs incurred during a reporting period. Certain of our time-and-materials contracts are subject to maximum contract values and, accordingly, when revenue is expected to exceed the maximum contract value, these contracts are generally recognized under the percentage-of-completion method, consistent with fixed price contracts. For unit-based contracts, we recognize the contract price of units of a basic production product as revenue when the production product is delivered during a period. Revenue for amounts that have been billed but not earned is deferred, and such deferred revenue is referred to as contract liabilities in the accompanying consolidated balance sheets. We also derive revenue from software licenses and professional services and maintenance fees. In accordance with ASC 606, we perform an assessment of each contract to identify the performance obligations, determine the overall transaction price for the contract, allocate the transaction price to the performance obligations, and recognize the revenue when the performance obligations are satisfied. WeIn cases where the standalone selling price of the software license is not present, we utilize the residual approach by which we estimate the standalone selling price by reference to the total transaction price less the sum of the observable standalone selling prices of other goods or services promised in the contract. The software license revenue is typically recognized at a point in time when control is transferred to the client, which is defined as the point in time when the client can use and benefit from the license. The software license is delivered before related services are provided and is functional without services, updates, or technical support. Related professional services include training and support services in which the standalone selling price is determined based on an input measure of hours incurred to total estimated hours and is recognized over time, usually which is the life of the contract.

During fiscal year 2024,2025, we acquired substantiallyall the equity of Compass Municipal Advisors, LLC. (“Compass”), acquired all of the assetscapital stock of Enica.Alternative Power Generation, Inc. (“APG”) and acquired all of the capital stock of Alpha Inspections, Inc. (“Alpha”). As of DecemberJanuary 27,2, 2024,2026, wehad completed our final estimate of fair value of the assets acquired relating to the acquisition of APG and Alpha but had not yet completed our final estimate of fair value of the assets acquired relating to the acquisitionsacquisition of EnicaCompass due to the timing of the transactions and lack of complete information necessary to finalize such estimates of fair value. Accordingly, we have preliminarily estimated the fair values of the Compass assets acquired and will finalize such fair value estimates within twelve months of the EnicaCompass Closing Date. During fiscal yearsyear 20232024, andwe 2022,acquired substantially all of the assets of Enica on October 23, 2024. During fiscal year 2023, we did not have any material acquisitions.

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 investorsretailers, pharmaceuticals, industrial concerns and hyperscalers, and state and local governments.governments, school districts and government agencies.

FirstSecond Quarter Overview

Three Months Ended AprilJuly 3, 2026 Compared to Three Months Ended AprilJuly 4, 2025

DirectContract costsrevenue. ofConsolidated contract revenue inincreased our Energy segment decreased $3.5$57.6 million, or 4.3%,33.2%, forin the three months ended AprilJuly 3, 2026, compared to the three months ended AprilJuly 4, 2025.2025, Directas costsa result of contractincreased revenuedemand for theour services in both our Energy segment and our Engineering and Consulting segment increased $0.8 million, or 6.3%, in the three months ended April 3, 2026, compared to the three months ended April 4, 2025.segment.

TotalContract otherrevenue expense,in net.our TotalEnergy othersegment expense,increased net, decreased $1.8$55.9 million, or 97.8%,38.1%, forin the three months ended AprilJuly 3, 2026, compared to the three months ended AprilJuly 4, 2025, primarily dueas toa theresult lowerof interesthigher expenserevenues resultingacross fromall the reduced interest rate spread derived from lower debt leverage levels underof our creditservice facilities,offerings, combined with theincremental absencerevenues from our acquisition of aBurton one-timeEnergy chargeGroup, relatedLLC. to a facility lease modification that we had(“Burton”) in theMay first quarter of fiscal year 2025.2026.

NetGross incomeProfit. (loss).Gross Ourprofit netincreased income28% wasto $8.5$87.5 millionmillion, or 37.9% gross margin, for the three months ended AprilJuly 3, 2026, as compared to agross net incomeprofit of $4.7$68.3 millionmillion, or 39.4% gross margin, for the three months ended AprilJuly 4, 2025. The increasedecrease in netour incomegross margin was primarily attributabledriven toby the increasechanges in incomethe frommix operationsof combinedrevenues withas adescribed reductionabove, inincluding Totalthe Otheraddition Expense,of net and a lower effective tax rate.Burton.

As of AprilJuly 3, 2026, we had a fully drawn $50.0 million term loan with $48.1$47.5 million outstanding, a $100.0$100 million Revolving Credit Facility with no$20.0 borrowed amountsmillion outstanding and $1.6 million in letters of credit issued. We also had aan undrawn $50.0 million Delayed Draw Term Loan. The Delayed Draw Term Loan must be drawn before May 2027. The Credit Facilities are each scheduled to mature on May 5, 2030. In addition to the Credit Facilities, we had $28.3$34.9 million of unrestricted cash and cash equivalents as of AprilJuly 3, 2026. Unhedged borrowings under our Credit Facilities, exclusive of the effects of upfront fees, undrawn fees and issuance cost amortization, bore interest at an annual rate of 5.3% as of AprilJuly 3, 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 Amended and Restated Credit Agreement and repayments, principal repayment terms, interest rates, covenants, and other key terms of our outstanding indebtedness.

Cash flows usedprovided inby operating activities were $24.4$19.5 million for the threesix months ended AprilJuly 3, 2026, as compared to cash flows provided by operating activities of $3.3$28.7 million for the threesix months ended AprilJuly 4, 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 usedprovided inby operating activities for the threesix months ended AprilJuly 3, 2026, resulted primarily from differenceshigher working capital requirements to support the growth in billingsrevenues, andpartially collectionsoffset ofby cashthe underhigher ourincome majorfrom projects.operations. Cash flows provided by operating activities for the threesix months ended AprilJuly 4, 2025, resulted primarily from the increase in earnings and lower working capital requirements.

Cash flows used in investing activities were $2.6$54.1 million for the threesix months ended AprilJuly 3, 2026, as compared to cash flows used in investing activities of $34.8$39.6 million for the threesix months ended AprilJuly 4, 2025. Cash flows used in investing activities for the threesix months ended AprilJuly 3, 2026 were primarily due to cash paidand for the development of proprietary software and the purchase of computers and equipment. Cash flows used in investing activities for the threesix months ended AprilJuly 4, 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 usedprovided inby financing activities were $5.4$7.9 million for the threesix months ended AprilJuly 3, 2026, as compared to cash flows used in financing activities of $4.3$30.9 million for the threesix months ended AprilJuly 4, 2025.

The following table sets forth our known contractual obligations as of AprilJuly 3, 2026:

We have contingent obligations to make earnout payments in connection with our acquisitions of Enica, APG, Compass, and Compass,Burton subject to their future financial performance. We are contingently obligated to pay up to $6.0 million in cash if Enica exceeds certain financial targets during the two years after the Enica closing date of October 23, 2024. We are contingently obligated to pay up to $18.0 million in cash if APG exceeds certain financial targets during the three years after the APG closing date of March 3, 2025. We are contingently obligated to pay up to $1.0 million in cash if Compass exceeds certain financial targets during the one year after the Compass closing date of January 2, 2026. AsWe are contingently obligated to pay up to $12.0 million in cash if Burton exceeds certain financial targets during the two years after the Burton closing date of AprilMay 3,4, 2026, we had contingent consideration payable of $18.5 million related to the acquisitions of Enica, APG and Compass. Through the three months ended April 3, 2026, our statement of operations includes $0.9 million of interest accretion (excluding fair value adjustments) related to the contingent consideration.2026.

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 AprilJuly 3, 2026, 20%16% of our contracts are time-and-materials contracts, 36%33% are unit-based contracts, and 44%51% are fixed price contracts, compared to 20%19% are time-and-materials contracts, 35%36% are unit-based contracts, and 45% are fixed price contracts, as of AprilJuly 4, 2025.