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What changed in RCM TECHNOLOGIES, INC.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of RCM TECHNOLOGIES, INC.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+284 added−288 removedSource: 10-K (2025-03-13) vs 10-K (2024-03-14)

Top changes in RCM TECHNOLOGIES, INC.'s 2025 10-K

284 paragraphs added · 288 removed · 172 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

43 edited+85 added−7 removed73 unchanged
Biggest changeIn recent years, many electric utilities have prioritized transitioning their power generation assets to cleaner sources of energy. Much of this transformation is being driven by investments in renewable energy. The Energy Information Administration (“EIA”) estimates that 38% of the United States’ electric generation capacity will be comprised of wind and solar assets by 2050.
Biggest changeThe Energy Information Administration (“EIA”) estimates that 38% of the United States’ electric generation capacity will be comprised of wind and solar assets by 2050. This expansion will require extensive investment in the nation’s transmission infrastructure to interconnect these renewable resources to the energy grid.
Our allied health care professionals and therapists work in schools, health systems, hospitals, nursing homes, and rehabilitation facilities. ● Correctional Healthcare Staffing : Staffing services for local, state and federal correctional facilities and provide screening, onboarding, and employee assessments as well as employee and inmate vaccination and treatment services. ● Health Information Management : Provide healthcare organizations with experienced medical coding professionals that manage staffing shortages, backlogs, vacation coverage and long-term coding support. ● Nursing Services : Provides nurse placement and staffing services in healthcare facilities, schools, hospitals and correctional facilities. ● Physicians and Advanced Practice : Our national locum tenens (temporary practitioner) practice specializes in placing physicians, physician assistants and nurse practitioners. ● School Staffing and Recruitment : Provides full-time and part-time nurse employment services for school districts across the country.
Our allied healthcare professionals and therapists work in schools, health systems, hospitals, nursing homes, and rehabilitation facilities. ● Correctional Healthcare Staffing : Staffing services for local, state and federal correctional facilities and provide screening, onboarding, and employee assessments as well as employee and inmate vaccination and treatment services. ● Health Information Management : Provide healthcare organizations with experienced medical coding professionals that manage staffing shortages, backlogs, vacation coverage and long-term coding support. ● Nursing Services : Provides nurse placement and staffing services in healthcare facilities, schools, hospitals and correctional facilities. ● Physicians and Advanced Practice : Our national locum tenens (temporary practitioner) practice specializes in placing physicians, physician assistants and nurse practitioners. ● School Staffing and Recruitment : Provides full-time and part-time nurse employment services for school districts across the country.
The Company also offers other health care professionals to perform school evaluations and treat students, including occupational and physical therapists, speech and language pathologists, as well as special education support services and registered behavioral technicians to support students’ individualized education plan and behavioral health needs. ● Telepractice : The Company’s teletherapy solution is an evidence-based service delivery option for students to receive Special Education services such as Speech-Language Therapy, Occupational Therapy, Physical Therapy, Behavioral and Mental Health services and other healthcare services through an online platform.
The Company also offers other healthcare professionals to perform school evaluations and treat students, including occupational and physical therapists, speech and language pathologists, as well as special education support services and registered behavioral technicians to support students’ individualized education plan and behavioral health needs. ● Telepractice : The Company’s teletherapy solution is an evidence-based service delivery option for students to receive Special Education services such as Speech-Language Therapy, Occupational Therapy, Physical Therapy, Behavioral and Mental Health services and other healthcare services through an online platform.
The Company encourages its employees to participate in and support national and regional trade associations, economic development agencies, local chambers of commerce and other civic associations. The Company seeks to develop strategic partnering relationships with its customers by providing comprehensive solutions for all aspects of a customer’s engineering, life sciences, information technology and other professional services needs.
The Company encourages its employees to participate in and support national and regional trade associations, economic development agencies, local chambers of commerce and other civic associations. The Company seeks to develop strategic partnering relationships with its customers by providing comprehensive solutions for all aspects of a customer’s operations, engineering, life sciences, information technology and other professional services needs.
Most of the expense for billable salaried employees are included in the Company's direct costs in its income statements. Billable hourly long-term employees have very high utilization, typically in the 90% to 100%. For most of these employees, our goal is near 100% utilization.
Most of the expense for billable salaried employees are included in the Company's direct costs in its income statements. Billable hourly long-term employees have very high utilization, typically in the 90% to 100% range. For most of these employees, our goal is near 100% utilization.
If the Company makes any amendments to either of these Codes (other than technical, administrative, or other non-substantive amendments), or waives (explicitly or implicitly) any provision of the Code of Ethics to the benefit of its Chief Executive Officer, Chief Financial Officer or Controller, it intends to disclose the nature of the amendment or waiver, its effective date and to whom it applies in the investor relations portion of the website, or in a report on Form 8-K filed with the SEC. 14
If the Company makes any amendments to either of these Codes (other than technical, administrative, or other non-substantive amendments), or waives (explicitly or implicitly) any provision of the Code of Ethics to the benefit of its Chief Executive Officer, Chief Financial Officer or Controller, it intends to disclose the nature of the amendment or waiver, its effective date and to whom it applies in the investor relations portion of the website, or in a report on Form 8-K filed with the SEC. 14 ITEM 1A.
The Company believes that its ability to deliver life sciences and information technology solutions across a wide range of technical platforms provides an important competitive advantage. RCM ensures that its consultants have the expertise and skills needed to keep pace with rapidly evolving information technologies.
The Company believes that its ability to deliver life sciences, data and solutions across a wide range of technical platforms provides an important competitive advantage. RCM ensures that its consultants have the expertise and skills needed to keep pace with rapidly evolving information technologies.
There are certain risks inherent in conducting business internationally including: the imposition of trade barriers, foreign exchange restrictions, longer payment cycles, greater difficulties in accounts receivables collection, difficulties in complying with a variety of foreign laws (including without limitation the U.S.
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 receivables collection, difficulties in complying with a variety of foreign laws (including without limitation the U.S.
The Company conducts business globally but is principally concentrated in North America and Europe.
The Company conducts business globally but is principally concentrated in North America, Europe and the Philippines.
The Company’s strategy is to maintain expertise and acquire knowledge in multiple technologies so it can offer its clients non-biased technology solutions best suited to their business needs. The Company provides its life sciences and information technology services through a number of flexible delivery methods.
The Company’s strategy is to maintain expertise and acquire knowledge in multiple technologies so it can offer its clients non-biased technology solutions best suited to their business needs. The Company provides its life sciences, data and solutions through a number of flexible delivery methods.
The Company believes its principal competitive advantages in the engineering and life sciences and information technology services market include: strong relationships with existing clients, a long-term track record with over 1,000 clients, a broad range of services, technical expertise, knowledge and experience in multiple industry sectors, quality and flexibility of service, responsiveness to client needs and speed in delivering life sciences and information technology solutions.
The Company believes its principal competitive advantages in the healthcare, engineering and life sciences, data and solutions market include: strong relationships with existing clients, a long-term track record with over 1,000 clients, a broad range of services, technical expertise, knowledge and experience in multiple industry sectors, quality and flexibility of service, responsiveness to client needs and speed in delivering life sciences, data and solutions.
The group has highly technical project experience that encompasses multi-disciplined engineering and design services as well as providing technical support during design, construction and plant operational phases.
The group has highly technical project experience that encompasses multi-disciplined engineering and design services as well as providing technical support during design, construction and substation operational phases.
ITEM 1. BUSINESS (CONTINUED) Industry Overview (Continued) In the health care services industry, a shortage of nurses and other medical personnel in the United States has led to increases in business activity for health care service companies, including the Company’s Specialty Health Care group.
BUSINESS (CONTINUED) Industry Overview (Continued) In the healthcare services industry, a shortage of nurses and other medical personnel in the United States has led to increases in business activity for healthcare service companies, including the Company’s Specialty Health Care group.
Expenditures in the Engineering, Life Sciences and Information Technology segments can be negatively impacted during the first quarter of the year when clients are finalizing their budgets. Quarterly results generally fluctuate depending on, among other things, the number of billing days in a quarter and the seasonality of clients’ businesses.
Expenditures in the Engineering and Life Sciences, Data and Solutions segments can be negatively impacted during the first quarter of the year when clients are finalizing their budgets. Quarterly results generally fluctuate depending on, among other things, the number of billing days in a quarter and the seasonality of clients’ businesses.
BUSINESS (CONTINUED) Branch Offices The Company’s organization consists of 29 branch offices located in the United States, Canada, Germany, Puerto Rico and Serbia. The locations and services of each of the branch offices are set forth in the table below.
BUSINESS (CONTINUED) Branch Offices The Company’s organization consists of 27 branch offices located in the United States, Canada, Germany, Philippines, Puerto Rico and Serbia. The locations and services of each of the branch offices are set forth in the table below.
The segment’s portfolio of services includes, but is not limited to, the following fields: ● Allied and Therapy Staffing : Specializes in recruiting outstanding professionals across the health care industry.
The segment’s portfolio of services includes, but is not limited to, the following fields: ● Allied and Therapy Staffing : Specializes in recruiting outstanding professionals across the healthcare industry.
In addition, the IDC provides 24x7 security staffing, closed-circuit monitors, secure-card key access, biometrics scanners, man traps, and alarmed doors. 11 ITEM 1. BUSINESS (CONTINUED) Competition The market for engineering and Life Sciences and IT services is highly competitive and is subject to rapid change.
In addition, the IDC provides 24x7 security staffing, closed-circuit monitors, secure-card key access, biometrics scanners, man traps, and alarmed doors. 11 ITEM 1. BUSINESS (CONTINUED) Competition The market for Healthcare, Engineering and Life Sciences, Data and Solutions is highly competitive and is subject to rapid change.
These employees are not billed to clients. As of December 30, 2023, the Company employed approximately 300 nonbillable employees. The expense for these employees is included in the Company's selling, general, and administrative expense in its income statements. 13 ITEM 1. BUSINESS (CONTINUED) Billable salaried employees primarily include senior-level employees whose time is often billed to clients.
These employees are not billed to clients. As of December 28, 2024, the Company employed approximately 370 nonbillable employees. The expense for these employees is included in the Company's selling, general, and administrative expense in its income statements. 13 ITEM 1. BUSINESS (CONTINUED) Billable salaried employees primarily include senior-level employees whose time is often billed to clients.
The following is a discussion of the key elements of its growth and operating strategies: Growth Strategy Promote Full Life Cycle Solution Capability The Company promotes a full life cycle solution capability to its customers.
The Company adapts operating strategies to achieve this objective. The following is a discussion of the key elements of its growth and operating strategies: Growth Strategy Promote Full Life Cycle Solution Capability The Company promotes a full life cycle solution capability to its customers.
These include management consulting engagements, project management of client efforts, project implementation of client initiatives, recruiting process outsourcing, both on and off site, and a full complement of human capital management solutions and resourcing alternatives. As of December 30, 2023, the Company assigned approximately 270 Life Sciences and Information Technology personnel to its customers. 8 ITEM 1.
These include management consulting engagements, project management of client efforts, business process outsourcing, project implementation of client initiatives, recruiting process outsourcing, both on and off site, and a full complement of human capital management solutions and resourcing alternatives. As of December 28, 2024, the Company assigned approximately 200 Life Sciences, Data and Solutions personnel to its customers. 8 ITEM 1.
Each of these dynamics have been exacerbated by COVID-19. Various factors, including the pandemic, technological advances and patient habits, have also altered patterns in health care delivery, with newer delivery models gaining traction, namely telemedicine. Given federal and state regulatory changes as well as private insurer reimbursement methods, utilization of telemedicine services increased significantly.
Various factors, including the COVID pandemic, technological advances and patient habits have also altered patterns in healthcare delivery, with newer delivery models gaining traction, namely telemedicine. Given federal and state regulatory changes as well as private insurer reimbursement methods, utilization of telemedicine services increased significantly.
These reports are available as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. The Company’s website is ht tp://www.rcmt.com . The information contained on the Company’s website, or on other websites linked to the Company’s website, is not part of this document.
These reports are available as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. The Company’s website is http://www.rcmt.com. The information contained on the Company’s website, or on other websites linked to the Company’s website, is not part of this document. Reference herein to the Company’s website is an inactive text reference only.
The Company provides its engineering services through a number of delivery methods. These include managed tasks and resources, complete project services, outsourcing, both on and off-site, and a full complement of resourcing alternatives. As of December 30, 2023, the Company assigned approximately 440 engineering and technical personnel to its customers. 7 ITEM 1.
The Company provides its engineering services through several multi-disciplinary delivery methods. These include managed tasks and resources, complete project services, outsourcing, both on and off-site, and a full complement of resourcing alternatives. As of December 28, 2024, the Company assigned approximately 510 engineering and technical personnel to its customers. 7 ITEM 1.
The Company’s School Services and Telepractice offerings are well positioned to provide solutions in these areas of priority as the market opportunity for these services is expected to continue to grow. As of December 30, 2023, the Company assigned approximately 2,780 specialty health care services personnel to its customers. 6 ITEM 1.
The Company’s School Services and Telepractice offerings are well positioned to provide solutions in these areas of priority as the market opportunity for these services is expected to continue to grow. As of December 28, 2024, the Company assigned approximately 3,140 specialty healthcare services personnel to its customers. 6 ITEM 1.
LOCATION NUMBER OF OFFICES SERVICES PROVIDED(1) UNITED STATES Arizona 1 HC California 3 HC Connecticut 1 E Florida 2 HC, E Hawaii 1 HC Illinois 1 HC Massachusetts 1 HC Michigan 1 HC New Jersey 2 E, LS&IT New York 4 E, HC, LS&IT North Carolina 1 HC Rhode Island 1 E Tennessee 1 HC Texas 1 HC 21 CANADA 1 E GERMANY 1 E PUERTO RICO 2 E, LS&IT SERBIA 4 E, LS&IT (1) Services provided are abbreviated as follows: E - Engineering HC - Specialty Health Care LS&IT - Life Sciences and Information Technology The Company is domiciled in the United States and its segments operate in the United States, Canada, Germany, Puerto Rico and Serbia. 9 ITEM 1.
LOCATION NUMBER OF OFFICES SERVICES PROVIDED(1) UNITED STATES Alabama 1 HC Arizona 1 HC California 3 HC Connecticut 1 E Florida 2 HC, E Hawaii 1 HC Illinois 1 HC Massachusetts 1 HC New Jersey 2 E, LS&D New York 3 E, HC Rhode Island 1 E Tennessee 1 HC Texas 1 HC 19 CANADA 1 E GERMANY 1 E PHILIPPINES 1 HC, E, LS&D PUERTO RICO 2 E, LS&D SERBIA 3 E, LS&D (1) Services provided are abbreviated as follows: E - Engineering HC - Specialty Health Care LS&D - Life Sciences, Data and Solutions The Company is headquartered in the United States and its segments operate in the United States, Canada, Germany, Philippines, Puerto Rico and Serbia. 9 ITEM 1.
The Company’s Engineering segment consists of three business units – Energy Services, Aerospace Services and Process & Industrial Services. ● Energy Services : Provides solutions to the utility industry, including power generation and transmission and distribution.
Engineering services are provided at the site of the client or at the Company’s own facilities. The Company’s Engineering segment consists of three business units – Energy Services, Aerospace Services and Process & Industrial Services. ● Energy Services : Provides solutions to the utility industry, including power generation and transmission and distribution.
Reference herein to the Company’s website is an inactive text reference only. The Company has adopted a Code of Conduct applicable to all of its directors, officers and employees. In addition, the Company has adopted a Code of Ethics, within the meaning of applicable SEC rules, applicable to its Chief Executive Officer, Chief Financial Officer and Controller.
The Company has adopted a Code of Conduct applicable to all of its directors, officers and employees. In addition, the Company has adopted a Code of Ethics, within the meaning of applicable SEC rules, applicable to its Chief Executive Officer, Chief Financial Officer and Controller.
As of December 30, 2023, our billable workforce comprised approximately 2,780 Specialty Health Care services personnel, 440 Engineering and Technical personnel, and 270 Life Sciences and Information Technology personnel assigned by the Company to work on client projects or assignments for various periods. None of the Company's employees are party to a collective bargaining agreement.
As of December 28, 2024, our billable workforce comprised approximately 3,140 Specialty Health Care services personnel, 510 Engineering and Technical personnel, and 200 Life Sciences, Data and Solutions personnel assigned by the Company to work on client projects or assignments for various periods. None of the Company's employees are party to a collective bargaining agreement.
BUSINESS (CONTINUED) Engineering RCM provides a full range of Engineering services including Project Management Engineering & Design, Engineering Analysis, Engineering-Procurement-Construction, Configuration Management, Hardware/Software Validation & Verification, Quality Assurance, Technical Writing & Publications, Manufacturing Process Planning & Improvement and 3D/BIM Integrated Design. Engineering services are provided at the site of the client or at the Company’s own facilities.
BUSINESS (CONTINUED) Engineering RCM provides a full range of Engineering services including Project Management Engineering, Integrated Design Engineering, Transmission & Distribution Power Delivery, Engineering Analysis, Engineering-Procurement-Construction, Configuration Management, Hardware/Software Validation & Verification, Quality Assurance, Technical Writing & Publications, Manufacturing Process Planning & Improvement and 3D/BIM Integrated Design.
As of December 30, 2023, the Company's workforce breaks out as follows: ● United States and Puerto Rico: approximately 235 nonbillable and 3,375 billable ● International (primarily Canada and Europe): approximately 45 nonbillable and 115 billable Access to Company Information The Company is a Nevada corporation organized in 1971.
As of December 28, 2024, the Company's workforce breaks out as follows: ● United States and Puerto Rico: approximately 250 nonbillable and 3,710 billable ● International (Canada, Europe and the Philippines): approximately 120 nonbillable and 140 billable Access to Company Information The Company is a Nevada corporation organized in 1971.
BUSINESS (CONTINUED) International Operations The Company operates its business in Canada and, to a less significant extent, in Germany, Puerto Rico and Serbia. For the fiscal year ended December 30, 2023, approximately 6.3% of the Company’s revenue were generated outside the United States.
International Operations The Company operates its business in Canada, Germany, Philippines, Puerto Rico and Serbia. For the fiscal year ended December 28, 2024, approximately 7.8% of the Company’s revenue were generated outside the United States.
Specialization in project solutions include, but are not limited to, the following areas: ● Life Sciences : Specializes in providing innovative options to pharmaceutical, medical device and biotechnology companies in need of guidance, support or remediation of quality, compliance or business challenges.
Specialized project solutions include, but are not limited to, the following areas: ● Life Sciences : Specializes in providing innovative solutions to pharmaceutical, medical device, and biotechnology companies in technology deployment, strategy, guidance, quality control, and compliance.
During the fiscal year ended December 30, 2023, the Company had two customers exceed 10% of consolidated revenue, representing 17.1% and 10.1% of consolidated revenue. The Company’s five, ten and twenty largest customers accounted for approximately 39.1%, 50.4% and 62.7%, respectively, of the Company’s revenue for the fiscal year ended December 30, 2023.
During the fiscal year ended December 28, 2024, the Company had two customers exceed 10% of consolidated revenue, representing 19.5% and 14.1% of consolidated revenue. The Company’s five, ten and twenty largest customers accounted for approximately 48.5%, 60.1% and 70.6%, respectively, of the Company’s revenue for the fiscal year ended December 28, 2024.
The Company offers scalable solutions that can provide emerging growth companies with a single qualified resource or an entire project team along with RCM’s project management oversight to Fortune 100 clients.
The Company has a 40-year history of providing qualified IT candidates to customers in a timely and cost-effective manner to address their specific business needs. The Company offers scalable solutions that can provide emerging growth companies with a single qualified resource or an entire project team along with RCM’s project management oversight to Fortune 100 clients.
The Company believes that the deregulation of the utilities industry and the aging of nuclear power plants offer the Company an opportunity to capture a greater share of professional services and project management requirements of the utilities industry. Electric utilities have prioritized transitioning their power generation assets to cleaner sources of energy and grid modernization initiatives.
The Company believes that the deregulation of the utilities industry, the aging of nuclear power plants, and increased demand for renewable energy offers the Company an opportunity to capture a greater share of professional services and project management requirements of the utilities industry.
As the world’s industrial output rebounds from pandemic-related weakness in 2020 and 2021, the Company believes its Process and Industrial group is positioned well to take advantage. Companies in the chemical industry are reprioritizing spending towards decarbonization technologies, with many U.S. chemical companies expecting to place an emphasis on renewable feedstocks and new carbon recycling technologies.
Companies in the chemical industry are reprioritizing spending towards decarbonization technologies, with many U.S. chemical companies expecting to place an emphasis on renewable feedstocks and new carbon recycling technologies. The Company believes its process engineering services can play a vital role across this multibillion-dollar opportunity.
This expansion requires large-scale investment in the nation’s transmission infrastructure to interconnect these renewable resources to the energy grid. ● Aerospace Services : Provides engineering and technical services to the aerospace & defense industry. According to the Congressional Budget Office (“CBO”), the Department of Defense plans to spend over $1 trillion in procurement-related aviation expenditures over the next three decades.
According to the Congressional Budget Office (“CBO”), the Department of Defense plans to spend over $1 trillion in procurement-related aviation expenditures over the next three decades.
The Company’s objective is to remain a recognized leader of specialized professional staffing, consulting services and solutions in major markets throughout North America. The Company adapts operating strategies to achieve this objective.
BUSINESS (CONTINUED) Business Strategy The Company is dedicated to providing solutions to meet its clients’ business needs by delivering specialty healthcare, engineering, life sciences, data and solutions. The Company’s objective is to remain a recognized leader of specialized professional staffing, consulting services and solutions in major markets throughout North America and select international markets.
The Company’s Engineering group remains focused on areas of growth, primarily within the utility/electric power, aerospace, marine and transportation, commercial and industrial, oil and gas, as well as biofuel industries. Given the current composition of its customer base, the Engineering group’s performance is well balanced between its three segments.
Increasing and maintaining access to proper care remains a top priority and the market opportunity for these services is expected to continue to grow. The Company’s Engineering group remains focused on areas of growth, primarily within the utility/electric power, aerospace, marine and transportation, commercial and industrial, oil and gas, as well as biofuel industries.
Foreign Corrupt Practices Act), changes in legal or regulatory requirements, 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.
Our operations in Serbia could be adversely affected by the current conflict between Ukraine and Russia, with which Serbia has substantial ties.
This expansion will require extensive investment in the nation’s transmission infrastructure to interconnect these renewable resources to the energy grid. Projects of this scale will require engineering and design expertise, as well as the utilization of integrated design and EPC services.
Projects of this scale will require engineering and design expertise, as well as the utilization of integrated design and EPC services. The Company believes its Process and Industrial group is positioned well to serve its market.
The group assists in staffing, solution planning and remediation needs in the areas of automation, compliance, data analytics, technical quality assurance and management, and validation and verification. ● IT Services & Solutions : Global provider of business and technology solutions designed to improve the operational performance of our clients.
The group assists in staffing, solution planning, and remediation needs in automation, compliance, data analytics, technical quality assurance and management, and validation and verification. LS&D is helping pharmaceutical and medical device companies integrate AI into their operations to drive innovation, improve efficiency, and enhance patient outcomes.
BUSINESS (CONTINUED) Life Sciences and Information Technology The Company’s Life Sciences and Information Technology segment is an integrated group of business units providing staff supplementation services and project solutions with physical locations in the United States, Canada and Puerto Rico primarily supporting Financial, Technical, Manufacturing, Life Sciences and Distribution applications.
BUSINESS (CONTINUED) Life Sciences, Data and Solutions The Company’s Life Sciences, Data and Solutions segment is an integrated group of business units providing comprehensive solutions through Managed Services, Project, and On-Demand Staffing Support delivery models.
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Increasing and maintaining access to proper care remains a top priority and the market opportunity for these services is expected to continue to grow. While the Company believes that the demand for Healthcare related services remains historically high, the Company also believes this demand subsided some as COVID-19 shifted from a pandemic to an endemic.
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ITEM 1. BUSINESS General RCM Technologies, Inc. is a premier provider of business and technology solutions designed to enhance and maximize the operational performance of its customers. The Company provides these services through the deployment of specialty healthcare, engineering, life sciences, information technology services, data management and solutions.
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The Company believes its process engineering services can play a vital role across this multibillion-dollar opportunity. Companies must integrate and manage computing environments consisting of multiple computing platforms, operating systems, databases and networking protocols and off-the-shelf software applications to support business objectives.
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For over 50 years, the Company has developed and assembled an extensive portfolio of capabilities, service offerings and delivery options with world class technical talent in key end markets and high-growth industries. This combination, paired with RCM’s efficient pricing structure and global reach, offers clients a compelling value proposition.
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Companies also need to keep pace with new technology developments, which often rapidly render existing equipment and internal skills obsolete. At the same time, varied factors have caused many organizations to focus on core competencies and trim workforces in the IT and data management area.
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RCM consists of three operating segments: Specialty Health Care, Engineering, and Life Sciences, Data and Solutions (LS&D). ● The Specialty Health Care segment provides staffing solutions including medical healthcare professionals, health information management professionals, nurses, paraprofessionals, physicians and therapists for many of the largest healthcare institutions and school districts across the United States.
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Accordingly, these organizations often lack the quantity, quality and variety of IT skills necessary to design and support IT and data solutions. IT managers are charged with supporting increasingly complex systems and applications of significant strategic value, while working under budgetary, personnel and expertise constraints within their own organizations.
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The segment also provides teletherapy services targeting the education sector with an emphasis on behavioral health. ● The Engineering segment provides a comprehensive portfolio of engineering and design services across three verticals: (1) Energy Services, (2) Process & Industrial and (3) Aerospace.
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The Company believes its target market for IT services and data solutions is among middle-market companies, which typically lack the time and technical resources to satisfy all of their IT needs internally. These companies commonly require sophisticated, experienced IT assistance to achieve their business objectives and often rely on IT service providers to help implement and manage their systems.
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The segment also offers a complementary suite of consulting solutions and services to augment its engineering portfolio, including design and supply of high-quality engineered process solutions and equipment, data management, technical writing and digital documentation across marine, locomotive, transportation and aerospace markets, integrated design and construction, and engineering, procurement and construction management (“EPC”), as well as demand side management/energy conservation services.
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RCM is structured to provide middle-market companies a single source for their IT and digitization needs. 3 ITEM 1. BUSINESS (CONTINUED) Business Strategy The Company is dedicated to providing solutions to meet its clients’ business needs by delivering specialty health care, engineering, life sciences and information technology services.
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The business segment staffs engineers to design and build critical infrastructure projects for clients with international coverage. ● The Life Sciences, Data and Solutions segment specializes in offering a wide range of services including enterprise business solutions, application development and support, IT infrastructure deployment and management, and technology and business solutions tailored for the Life Sciences industry and other specific verticals.
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Specialties include software development, infrastructure services, data management, and managed IT solutions. The Company has a 40-year history of providing qualified IT candidates to customers in a timely and cost-effective manner to address their specific business needs.
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Additionally, LS&D provides data solutions, digitization, human capital management solutions, and innovative uses of technology to optimize business operations, ranging from process automation to advanced techniques deploying artificial intelligence (“AI”). Our industry-leading Managed Service Offering demonstrates the value of collaborating with customers to foster quality improvements in a seamless integrated function.
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The Company services some of the largest national and international companies in North America as well as a lengthy roster of Fortune 1000 and mid-sized global businesses in such industries as Aerospace/Defense, Educational Institutions, the Energy Sector, Financial Services, Healthcare, Life Sciences, Manufacturing & Distribution, the Public Sector and Technology.
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RCM sells and delivers its services through a network of approximately 27 offices in selected regions throughout North America and Europe. The Company has staffed key personnel to design and build internationally recognized critical infrastructure projects and retained strategic partners and client accounts for decades.
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During the fiscal year ended December 28, 2024, approximately 51.2% of RCM’s total revenue was derived from Specialty Health Care services, 34.7% from Engineering services, and the remaining 14.1% from Life Sciences, Data and Solutions. Industry Overview Businesses today face intense competition, the challenge of constant technological change and the ongoing need for business process optimization.
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To address these issues and to compete more effectively, companies are continually evaluating the need for implementing innovative solutions to upgrade their systems, applications and processes. As a result, the ability of an organization to integrate and align advanced technologies with new business objectives is critical for operational excellence. 2 ITEM 1.
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Given the current composition of its customer base, the Engineering group’s performance is well balanced between its three segments. In recent years, many electric utilities have prioritized transitioning their power generation assets to cleaner sources of energy. Much of this transformation is being driven by investments in renewable energy.
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Companies increasingly leverage a mix of on-premise, cloud, and hybrid IT infrastructure to optimize operations and remain agile in a rapidly evolving technology landscape. Many organizations are transitioning to cloud-based solutions for scalability, cost-effectiveness, and flexibility while maintaining some on-premise infrastructure for critical or sensitive applications.
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LS&D’s hybrid approach allows companies to balance control and security with the benefits of cloud resources. To assist companies in managing their IT infrastructure effectively, RCM is helping companies adopt advanced automation and AI tools to monitor, manage, and optimize their systems.
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Automation reduces manual intervention, speeds up operations, and improves efficiency, while AI is used for predictive analytics, detecting anomalies, and improving decision-making.
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Ultimately, as technology evolves, businesses will continue to adapt by embracing more flexible, scalable, and intelligent IT infrastructures that can handle the complexities of a digital-first world while staying resilient against security threats and technological disruptions. 3 ITEM 1.
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Electric utilities have prioritized transitioning their power generation assets to cleaner sources of energy and grid modernization initiatives. This expansion requires large-scale investment in the nation’s transmission infrastructure to interconnect these renewable resources to the energy grid. ● Aerospace Services : Provides engineering and technical services to the aerospace & defense industry.
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With physical locations in the United States, Canada, Puerto Rico, and the Philippines, our LS&D segments provides solutions on a global scale in the areas of Financial, Human Capital Management, Technical, Manufacturing, Commercialization, Data Warehouse, and Distribution.
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Besides using AI to identify potential drug candidates, predict molecular interactions, and optimize clinical trial designs. RCM is using AI-powered tools to help streamline the regulatory approval process by analyzing patterns in regulatory data and improving submission accuracy. The role of AI in pharmaceutical and medical device industries is poised to grow even further.
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Using advanced machine learning algorithms, LS&D continues to refine how we can address treatments for complex diseases. ● Data & Solutions and IT Services : Global provider of business and technology solutions designed to improve the operational performance of our clients. Specialties include software development, infrastructure services, data management, human capital management, and managed IT solutions.
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RCM’s data solutions group is leading the way for pharmaceutical companies to transform how data is employed through AI tools. Through AI-driven predictive analytics, we have seen improved drug development timelines, eased regulatory hurdle achievement, and improved quality.
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BUSINESS (CONTINUED) International Operations The Company operates its international business in Canada, Germany, Philippines, Puerto Rico and Serbia. For the fiscal year ended December 28, 2024, approximately 7.8% of the Company’s revenue was generated outside the United States.
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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.
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RISK FACTORS The Company ’ s business involves a number of risks, some of which are beyond its control. The risk and uncertainties described below are not the only ones the Company faces. Set forth below is a discussion of the risks and uncertainties that management believes to be material to the Company.
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Economic Trends 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.
Added
Any or all of these developments can negatively affect the Company’s business, operating results or financial condition in a number of ways.
Added
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.
Added
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.
Added
Government Regulations Staffing firms and employment service providers are generally subject to one or more of the following types of government regulation: (1) regulation of the employer/employee relationship between a firm and its employees, including tax withholding or reporting, social security or retirement, benefits, workplace compliance, wage and hour, anti-discrimination, immigration and workers’ compensation; (2) registration, licensing, record keeping and reporting requirements; and (3) federal contractor compliance.
Added
Failure to comply with these regulations could result in the Company incurring penalties and other liabilities, monetary and otherwise. Highly Competitive Business The staffing services and outsourcing markets are highly competitive and have limited barriers to entry. The Company competes in global, national, regional, and local markets with numerous temporary staffing and permanent placement companies.

… 55 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

1 edited+3 added−58 removed11 unchanged
Biggest changeA breakdown, invasion, corruption, destruction or interruption of critical information technology systems by employees, others with authorized access to our systems or unauthorized persons could negatively impact operations.
Biggest changeITEM 1A. RISK FACTORS (CONTINUED) Cyber Security We are highly dependent on information technology systems to operate our business. A breakdown, invasion, corruption, destruction or interruption of critical information technology systems by employees, others with authorized access to our systems or unauthorized persons could negatively impact operations.
Removed
ITEM 1A. RISK FACTORS The Company ’ s business involves a number of risks, some of which are beyond its control. The risk and uncertainties described below are not the only ones the Company faces. Set forth below is a discussion of the risks and uncertainties that management believes to be material to the Company.
Added
We have experienced cybersecurity events and disruptions such as viruses and attacks targeting our information technology systems. Such prior events have not had a material impact on our financial condition, results of operations or liquidity.
Removed
Economic Trends 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.
Added
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 operations or reputation; disrupting our operations; exposing us to potential liability, regulatory actions and loss of business; and challenging our eligibility for future work on sensitive systems.
Removed
Any or all of these developments can negatively affect the Company’s business, operating results or financial condition in a number of ways.
Added
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 adequate to cover all the costs related to cybersecurity attacks or disruptions resulting from such events.
Removed
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.
Removed
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.
Removed
Government Regulations Staffing firms and employment service providers are generally subject to one or more of the following types of government regulation: (1) regulation of the employer/employee relationship between a firm and its employees, including tax withholding or reporting, social security or retirement, benefits, workplace compliance, wage and hour, anti-discrimination, immigration and workers’ compensation; (2) registration, licensing, record keeping and reporting requirements; and (3) federal contractor compliance.
Removed
Failure to comply with these regulations could result in the Company incurring penalties and other liabilities, monetary and otherwise. Highly Competitive Business The staffing services and outsourcing markets are highly competitive and have limited barriers to entry. The Company competes in global, national, regional, and local markets with numerous temporary staffing and permanent placement companies.
Removed
Price competition in the staffing industry is significant and pricing pressures from competitors and customers are increasing. In addition, there is increasing pressure on companies to outsource certain areas of their business to low cost offshore outsourcing firms.
Removed
The Company expects that the level of competition will remain high in the future, which could limit the Company’s ability to maintain or increase its market share or profitability. Our inability to compete successfully with our competitors could adversely affect the Company’s business, financial condition and results of operations. Seasonality of Business As described in “Item 1.
Removed
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 and IT budgets, and also during periods in which there are a substantial amount of holidays and season vacations.
Removed
In particular, one of the largest customers in our Specialty Health Care group, the New York City Department of Education, significantly reduces activity during the third quarter, when schools are closed for summer recess.
Removed
Our operating results for any given period may fluctuate as a result 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. 15 ITEM 1A.
Removed
RISK FACTORS (CONTINUED) Events Affecting Significant Customers As disclosed in “Item 1. Business,” during the fiscal year ended December 30, 2023, the Company had two customers exceed 10% of consolidated revenue, representing 17.1% and 10.1% of consolidated revenue.
Removed
The Company’s five, ten and twenty largest customers accounted for approximately 39.1%, 50.4% and 62.7%, respectively, of the Company’s revenue for the fiscal year ended December 30, 2023. 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.
Removed
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.
Removed
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.
Removed
Subcontractors, Transit Accounts Receivable and Transit Accounts Payables Related to Construction Management Contracts 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.
Removed
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.
Removed
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.
Removed
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.
Removed
Dependence Upon Personnel The Company’s operations depend on the continued efforts of its officers and other executive management. The loss of key officers and members of executive management 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.
Removed
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.
Removed
In order to fulfill the requirements of the Company’s customers, the Company must be able to recruit and retain appropriate personnel for client assignments. 16 ITEM 1A. RISK FACTORS (CONTINUED) Revolving Credit Facility and Liquidity If the Company were unable to borrow under its Revolving Credit Facility (see “Item 7.
Removed
Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Financing Activities”), it may adversely affect liquidity, results of operations and financial condition.
Removed
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.
Removed
At December 30, 2023, the Company had $30.9 million in borrowings under the Revolving Credit Facility outstanding and $2.0 million outstanding under letters of credit, with availability for additional borrowings under the Revolving Credit Facility of $12.1 million.
Removed
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.
Removed
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. All borrowings under the Fourth Amended and Restated Loan Agreement remain collateralized with substantially all of the Company’s assets, as well as the capital stock of its subsidiaries.
Removed
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 December 30, 2023, the Company was in compliance with all covenants contained in the Revolving Credit Facility.
Removed
The Company believes that it will maintain compliance with its financial covenants for the foreseeable future. Foreign Currency Fluctuations and Changes in Exchange Rates The Company is exposed to risks associated with foreign currency fluctuations and changes in exchange rates.
Removed
The Company’s exposure to foreign currency fluctuations relates to operations in Canada, Germany and Serbia, principally conducted through its Canadian, German 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.
Removed
The Company does not engage in hedging activities with respect to foreign operations. Changes in Tax Laws At any time, United States federal tax laws or the administrative interpretations of those laws may be changed.
Removed
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, Puerto Rico and Serbia, may also change.
Removed
These tax law changes may have a material impact on the Company’s income tax expense. Workers ’ Compensation and Employee Medical Insurance The Company self-insures a portion of the exposure for losses related to workers’ compensation and employees’ medical insurance.
Removed
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. 17 ITEM 1A.
Removed
RISK FACTORS (CONTINUED) Improper Activities of Temporary Professionals Could Result in Damage to Business Reputation, Discontinuation of Client Relationships and Exposure to Liability The Company may be subject to claims by clients related to errors and omissions, misuse of proprietary information, discrimination and harassment, theft and other criminal activity, malpractice, and other claims stemming from the improper activities or alleged activities of temporary professionals.
Removed
There can be no assurance that current liability insurance coverage will be adequate or will continue to be available in sufficient amounts to cover damages or other costs associated with such claims.
Removed
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. Furthermore, such claims by clients could damage the Company’s business reputation and result in the discontinuation of client relationships.
Removed
Acquisitions May Not Succeed The Company reviews prospective acquisitions as an element of its growth strategy.
Removed
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 operations or could negatively affect the Company’s ability to meet the needs of its customers promptly.
Removed
International Operations The Company operates its business in Canada and, to a less significant extent, in Germany, Puerto Rico and Serbia. For the fiscal year ended December 30, 2023, approximately 6.3% of the Company’s revenue were generated outside the United States.
Removed
There are certain risks inherent in conducting business internationally including: the imposition of trade barriers, foreign exchange restrictions, longer payment cycles, greater difficulties in accounts receivables collection, difficulties in complying with a variety of foreign laws (including without limitation the U.S.
Removed
Foreign Corrupt Practices Act), changes in legal or regulatory requirements, 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.
Removed
Should sanctions against Russia affect Russia in a way that causes adverse economic consequences to Serbia, or if such sanctions were to be extended to countries that might be considered to be in alignment with Russia, this could have a negative impact on our employees or operations both within and outside Serbia.
Removed
To the extent the Company experiences these risks, the business and results of operations could be adversely affected. Global Epidemics As was the case with the COVID-19 pandemic and endemic, and associated initiatives to reduce its spread, any other global pandemics or endemics that may occur in the future could adversely affect the Company’s business and financial position.
Removed
For example, public and private sector policies and initiatives to reduce the transmission of a highly transmissible disease, such as closures of schools, businesses 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.
Removed
These impacts on our business could have an adverse effect on our liquidity position and access to capital, including our ability to access our line of credit. 18 ITEM 1A. RISK FACTORS (CONTINUED) Global Epidemics (Continued) These factors, in addition to delays in payment, could continue result in significant bad debts in the near future.
Removed
Additionally, our operating results would be adversely affected if unexpected increases in the costs of labor and labor related costs, materials, supplies and equipment used in performing services could not be passed on to our clients.
Removed
In addition, we believe that to maintain or improve our financial performance 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 clients and/or maintain internal cost reduction strategies at our various operational levels.
Removed
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 objective more difficult to attain. Trademarks Management believes the RCM Technologies, Inc. name is extremely valuable and important to its business.
Removed
The Company endeavors to protect its intellectual property rights and maintain certain trademarks, trade names, service marks and other intellectual property rights, including The Source of Smart Solutions® and Industries of Tomorrow, Today™ with a trademark application submitted for the use of the latter.
Removed
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.
Removed
The Company’s success depends on its ability to successfully obtain and maintain, and prevent misappropriation or infringement of, its intellectual property, maintain trade secret protection, and conduct operations without violating or infringing on the intellectual property rights of third parties.
Removed
Intellectual property litigation is expensive and time-consuming, and it is often difficult, if not impossible, to predict the outcome of such litigation. If the Company is involved in intellectual property litigation, its business, financial condition and results of operations could be materially adversely affected.
Removed
Data Center Capacity and Telecommunication Links Uninterruptible Power Supply (UPS), card key access, fire suppression, and environmental control systems protect the Company’s datacenter. All systems are monitored on a 24/7 basis with alerting capabilities via voice or email. The telecommunications architecture at the Company utilizes managed private circuits from AT&T, which encompasses provisioning redundancy and diversity.
Removed
The Company’s ability to protect its data center against damage from fire, power loss, telecommunications failure and other disasters is critical to business operations. In order to provide many of its services, the Company must be able to store, retrieve, process and manage large databases and periodically expand and upgrade its capabilities.
Removed
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.
Removed
The Company’s ability to protect its data, provide services and safeguard its installations, as it relates to the IT infrastructure, is in part dependent on several outside vendors with whom the Company maintains service level agreements. 19 ITEM 1A. RISK FACTORS (CONTINUED) Cyber Security We are highly dependent on information technology systems to operate our business.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

0 edited+2 added−13 removed0 unchanged
Removed
ITEM 1C. CYBERSECURITY Cybersecurity Risk Management and Strategy The Company has developed and implemented a cybersecurity risk management program intended to protect the confidentiality, integrity, and availability of its critical systems and information.
Added
Item 1C. Cybersecurity 21 Item 2. Properties 22 Item 3. Legal Proceedings 23 Item 4. Mine Safety Disclosures 23 PART II 24 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 24 Item 6. [Reserved] 24 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 25 Item 7A.
Removed
The Company’s cybersecurity risk management program includes a cybersecurity incident response plan and is integrated with the Company’s overall enterprise risk management program, sharing common methodologies, reporting channels and governance processes that apply across the enterprise risk management program to other legal, compliance, strategic, operational and financial risk areas.
Added
Quantitative and Qualitative Disclosures about Market Risk 44 Item 8. Financial Statements and Supplementary Data 44 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 44 Item 9A. Controls and Procedures 45
Removed
While the Company may not meet any particular standard, specification or requirement of the Center for Internet Security Critical Security Controls, the Company utilizes such controls as a guide to help identify, assess and manage cybersecurity risks relevant to the business.
Removed
The Company has implemented cybersecurity policies and frameworks based on industry and governmental standards to align closely with requirements, instructions, and guidance from ISO27001, NIST, CMMC, GDPR, HIPAA, SOC and SOX Compliance.
Removed
Our cybersecurity risk management program includes, among other things: ● risk assessments designed to help identify material cybersecurity risks to critical systems and information services; ● a team comprising information technology (IT) security, IT infrastructure, and IT compliance personnel principally responsible for directing (i) cybersecurity risk assessment processes, (ii) security processes and (iii) planned responses to cybersecurity incidents; ● the use of external cybersecurity service providers, where appropriate, to assess, test or otherwise assist with aspects of security processes; ● cybersecurity awareness training of employees with access to IT systems; ● a cybersecurity incident response plan and Security Operations Center to respond to cybersecurity incidents; and ● a third-party risk management process for service providers.
Removed
During the year ended December 30, 2023, the Company has not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected operations, business strategy, results of operations or financial condition.
Removed
However, the Company expects to continue to face certain risks from ongoing cybersecurity threats that, if realized, are reasonably likely to materially affect the Company, including our operations, business strategy, results of operations or financial condition. See Risk Factors – Cyber Security, Data Privacy and Data Center Capacity and Telecommunication Links. 21 ITEM 1C.
Removed
CYBERSECURITY (CONTINUED) Cybersecurity Governance The Company’s Board considers cybersecurity risk as part of its risk oversight function and considers cybersecurity and IT risks as key strategic risks of the Company.
Removed
The Board oversees management’s implementation of the Company’s cybersecurity risk management program, receiving at least annual updates from management (including our Chief Information Officer) on cybersecurity risks, including briefings on the Company’s cyber risk management program and cybersecurity incidents, and reviewing cybersecurity topics impacting companies with management and external experts.
Removed
The Company’s Chief Information Officer leads the IT and cybersecurity functions and has primary responsibility for leading the Company’s overall cybersecurity risk management program, supervising both internal cybersecurity personnel and external cybersecurity service providers.
Removed
The Company’s cybersecurity function is responsible for assessing and managing material risks from cybersecurity threats, as well as informing management about and monitoring the prevention, detection, mitigation, and remediation of cybersecurity risks and incidents through various means, which include briefings with internal security personnel, threat intelligence and other information obtained from governmental, public or private sources, including external cybersecurity service providers and alerts and reports produced by security tools deployed in the IT environment.
Removed
The Company’s Chief Information Officer and Vice President of IT security and Compliance have significant experience in managing and leading information systems and deploying cybersecurity technologies and have extensive cybersecurity training and knowledge.
Removed
The Company’s Vice President of IT security and Compliance has several industry certifications, including CISSP (Certified Information Security System Professional), CCSP (Certified Cloud Security Professional) and CCSK (Certificate of Cloud Security Knowledge). The Company’s Chief Information Officer reports to the Chief Executive Officer, and the Company’s Vice President of IT Security and Compliance reports to the Company’s Chief Information Officer.

Item 2. Properties

Properties — owned and leased real estate

3 edited+0 added−1 removed1 unchanged
Biggest changeThese premises consist of approximately 9,200 square feet and are leased at a rate of approximately $25.50 per square foot per annum for a term ending on April 30, 2024. 22
Biggest changeThese premises consist of approximately 3,500 square feet and are leased at a rate of approximately $15.00 per square foot per annum for a term ending on November 30, 2025. 22
The Company does not expect that it will be difficult to maintain or find suitable lease space at reasonable rates in its markets or in areas where the Company contemplates expansion. The Company’s executive office is located at 2500 McClellan Avenue, Suite 350, Pennsauken, New Jersey 08109-4613.
The Company does not expect that it will be difficult to maintain or find suitable lease space at reasonable rates in its markets or in areas where the Company contemplates expansion. The Company’s corporate office is located at 2500 McClellan Avenue, Suite 350, Pennsauken, New Jersey 08109-4613.
ITEM 2. PROPERTIES The Company provides specialty professional consulting services, principally performed at various client locations, through 29 administrative and sales offices located in the United States, Puerto Rico, Canada, Germany and Serbia.
ITEM 2. PROPERTIES The Company provides specialty professional consulting services, principally performed at various client locations, through 27 administrative and sales offices located in the United States, Puerto Rico, Canada, Germany and Serbia.
Removed
These premises consist of approximately 3,500 square feet and are leased at a rate of approximately $15.00 per square foot per annum for a term ending on November 30, 2025. The Company’s operational office is located at 20 Waterview Boulevard, 4 th Floor, Parsippany, NJ 07054-1271.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

5 edited+0 added−0 removed9 unchanged
Biggest changeWhile the Company attempts to find a mutually agreeable solution, the Company has reserved $0.5 million for this project. The Company can give no assurance that its liability is limited to $3.3 million or that liability over $0.5 million, if any, will be covered by insurance.
Biggest changeWhile the clients estimated damages are not known, the client has either inferred or asserted during settlement discussions that it’s damages significantly exceed the Company’s insurance coverage of $5 million. While the Company attempts to find a mutually agreeable solution, the Company has reserved $0.5 million for this project.
The Company could increase or decrease its earnings in the period that the changes are made. The Company is exposed to various asserted claims as of December 30, 2023, where the Company believes it has a probability of loss.
The Company could increase or decrease its earnings in the period that the changes are made. The Company is exposed to various asserted claims as of December 28, 2024, where the Company believes it has a probability of loss.
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 December 30, 2023, the Company has accrued $2.9 million for asserted claims.
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 December 28, 2024, the Company has accrued $2.8 million for asserted claims.
In April 2022, a client of the Company’s Industrial Processing Group alleged that a system partially designed by the Company is not operating as intended and that the Company is responsible. The Company has not determined if it has any liability.
In April 2022, a client of the Company’s Engineering segment alleged that a system partially designed by the Company is not operating as intended and that the Company is responsible. The Company has not determined if it has any liability.
The Company is also subject to other pending legal proceedings and claims that arise from time to time in the ordinary course of its business, which may not be covered by insurance.
The Company can give no assurance that its liability is limited to $3.3 million or that liability over $0.5 million, if any, will be covered by insurance. The Company is also subject to other pending legal proceedings and claims that arise from time to time in the ordinary course of its business, which may not be covered by insurance.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+2 added−2 removed2 unchanged
Biggest changeThe Company may enter into a Rule 10b5-1 trading plan to effect a portion of the authorized purchases if the criteria set forth in the plan are met.
Biggest changeThe Company may enter into a Rule 10b5-1 trading plan to effect a portion of the authorized purchases if the criteria set forth in the plan are met. Such a plan would enable the Company to repurchase its shares during periods outside of its normal trading windows when the Company typically would not be active in the market.
The program is designed to provide the Company with enhanced flexibility over the long term to optimize its capital structure. Shares of the Common Stock may be repurchased in the open market or through negotiated transactions. The program may be terminated or suspended at any time at the discretion of the Company.
The program (the Treasury Stock Repurchase Plan) is designed to provide the Company with enhanced flexibility over the long term to optimize its capital structure. Shares of the common stock may be repurchased in the open market or through negotiated transactions. The program may be terminated or suspended at any time at the discretion of the Company.
Dividends No dividends were declared in fiscal 2022 or fiscal 2023. All restricted share awards contain a dividend equivalent provision entitling holders to dividends paid between the restricted stock award grant date and ultimate share distribution date. As of December 30, 2023, there were no accrued dividends.
All restricted share awards contain a dividend equivalent provision entitling holders to dividends paid between the restricted stock award grant date and ultimate share distribution date. As of December 28, 2024, there were no accrued dividends.
MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Shares of the Company’s common stock are traded on The NASDAQ Global Market under the Symbol “RCMT.” Holders As of February 20, 2024, the approximate number of holders of record of the Company’s Common Stock was 247 and the number of beneficial owners of its Common Stock was approximately 7,650.
ITEM 5. MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Shares of the Company’s common stock are traded on The NASDAQ Global Market under the Symbol “RCMT.” Holders As of February 20, 2025, the approximate number of holders of record of the Company’s Common Stock was 223.
Stock Repurchase by Issuer On April 25, 2023, the Company’s Board of Directors authorized a program to repurchase shares of its common stock up to an amount not to exceed $25.0 million. This program succeeds the Company’s prior repurchase program authorized in November 2021, which was substantially completed in April 2023.
Stock Repurchase by Issuer On March 29, 2024, the Board authorized a program to repurchase shares of its common stock up to an amount not to exceed $50.0 million, inclusive of amounts remaining under the existing repurchase authorization.
Removed
Such a plan would enable the Company to repurchase its shares during periods outside of its normal trading windows when the Company typically would not be active in the market. 24 ITEM 5.
Added
Since certain of our shares are held by brokers and other institutions on behalf of shareholders, the foregoing number is not representative of the number of beneficial owners. Dividends No dividends were declared in fiscal 2023 or fiscal 2024.
Removed
MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES (CONT ’ D) Stock Repurchase by Issuer (Continued) The following table provides information relating to the shares we purchased during the fourth quarter of the fiscal year ended December 30, 2023: Period Total Number of Shares Purchased Weighted Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Program Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program October 1, 2023 – October 31, 2023 53,837 $ 19.23 53,837 $ 13,905,000 November 1, 2023 – November 30, 2023 13,960 $ 19.29 13,960 $ 13,635,000 December 1, 2023 – December 30, 2023 - - - Total 67,797 $ 19.24 67,797
Added
There were no repurchased shares from September 29, 2024 through December 28, 2024.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

35 edited+6 added−1 removed39 unchanged
Biggest changeFrom time-to-time, amounts paid in excess of revenue earned and recognized are recorded as deferred revenue, included in accounts payable and accrued expenses on the accompanying consolidated balance sheets. Additionally, some contracts contain “Performance Fees” (bonuses) for completing a contract under budget. Performance Fees, if any, are recorded when earned.
Biggest changeIn certain instances, revenue is invoiced at the time certain milestones are reached, as defined in the contract. Revenue under these arrangements are recognized as the costs on these contracts are incurred. From time-to-time, amounts paid in excess of revenue earned and recognized are recorded as deferred revenue. Some contracts also limit revenue and billings to specified maximum amounts.
In addition, global events such as international conflicts or health pandemics and endemics also have a substantial impact on our operations and financial results. The Company believes that its fiscal discipline, strategic focus on targeted vertical markets and diversification of service offerings provides some insulation from adverse trends.
In addition, global events such as international conflicts, trade disputes, or health pandemics and endemics also have a substantial impact on our operations and financial results. The Company believes that its fiscal discipline, strategic focus on targeted vertical markets and diversification of service offerings provides some insulation from adverse trends.
ITEM 6. RESERVED 25 ITEM 7. MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) The following discussion and analysis contains forward-looking statements, including, without limitation, statements relating to our plans, strategies, objectives, expectations, intentions and resources. Such forward-looking statements should be read in conjunction with our disclosures under “ Item 1A.
ITEM 6. [RESERVED] 24 ITEM 7. MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) The following discussion and analysis contains forward-looking statements, including, without limitation, statements relating to our plans, strategies, objectives, expectations, intentions and resources. Such forward-looking statements should be read in conjunction with our disclosures under “ Item 1A.
Overview The Company participates in a market that is cyclical in nature and sensitive to economic changes. As a result, the impact of economic changes on revenue and operations can be substantial, resulting in significant volatility in the Company’s financial performance.
Overview RCM participates in a market that is cyclical in nature and sensitive to economic changes. As a result, the impact of economic changes on revenue and operations can be substantial, resulting in significant volatility in the Company’s financial performance.
These services are primarily provided to the client at hourly rates that are established for each of the Company’s consultants based upon their skill level, experience and the type of work performed. 26 ITEM 7.
These services are primarily provided to the client at hourly rates that are established for each of the Company’s consultants based upon their skill level, experience and the type of work performed. 25 ITEM 7.
Accounting for Restricted Stock Awards The Company uses restricted stock awards to attract, retain and reward employees for long-term service. The Company follows Financial Accounting Standards Board (FASB), Accounting Standards Codification (ASC) Topic 718 “Compensation – Stock Compensation” which requires that the compensation cost relating to stock-based payment transactions be recognized in the financial statements.
Accounting for Restricted Stock Awards The Company uses restricted stock awards to attract, retain and reward employees for long-term service. The Company follows Financial Accounting Standards Board (FASB), Accounting Standards Codification (ASC) Topic 718 “ Compensation – Stock Compensation ” which requires that the compensation cost relating to stock-based payment transactions be recognized in the financial statements.
Discussions of matters relating to the fiscal year ended January 1, 2022 and year-to-year comparison between that year and the year ended December 31, 2022 that are not included in this Form 10-K can be found in “ Management ’ s Discussion and Analysis of Financial Condition and Results of Operations ” in Part II, Item 7 of the Company ’ s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
Discussions of matters relating to the fiscal year ended December 31, 2022 and year-to-year comparison between that year and the year ended December 30, 2023 that are not included in this Form 10-K can be found in “ Management ’ s Discussion and Analysis of Financial Condition and Results of Operations ” in Part II, Item 7 of the Company ’ s Annual Report on Form 10-K for the fiscal year ended December 30, 2023.
Fixed Fee From time to time and predominantly in our Engineering segment, the Company will enter into contracts requiring the completion of specific deliverables. The Company has master services agreements with many of its customers that broadly define terms and conditions.
Fixed Fee From time to time and predominantly in our Engineering segment, the Company enters into contracts requiring the completion of specific deliverables. The Company has master services agreements with many of its customers that broadly define terms and conditions.
Insurance Liabilities The Company has risk participation arrangements with respect to workers compensation and health care insurance. The Company establishes loss provisions based on historical experience and in the case of expected losses from workers compensation, considers input from third parties.
Insurance Liabilities The Company has risk participation arrangements with respect to workers compensation and healthcare insurance. The Company establishes loss provisions based on historical experience and in the case of expected losses from workers compensation, considers input from third parties.
The amounts included in the Company’s costs related to this risk participation are estimated and can vary based on changes in assumptions, the Company’s claims experience or the providers included in the associated insurance programs.
The amounts included in the Company’s costs related to this risk participation are estimated and can vary based on changes in assumptions, the Company’s claims experience or the providers included in the associated insurance programs. 29 ITEM 7.
The Company derives its revenue from several sources. The Company’s Engineering Services and Life Sciences and Information Technology segments perform consulting and project solution services. The Healthcare segment specializes in long-term and short-term staffing and placement services to hospitals, schools and long-term care facilities amongst others.
The Company derives its revenue from several sources. The Company’s Engineering Services and Life Sciences, Data and Solutions segments perform consulting and project solution services. The Healthcare segment specializes in long-term and short-term staffing and placement services to hospitals, schools and long-term care facilities amongst others.
The pace of customer capital spending programs, new product launches and similar activities have a direct impact on the need for engineering, life sciences and information technology services. When the U.S., Canadian or global economies decline, the Company’s operating performance could be adversely impacted.
The pace of customer capital spending programs, new product launches and similar activities have a direct impact on the need for engineering, life sciences, data and solutions. When the U.S., Canadian or global economies decline, the Company’s operating performance could be adversely impacted.
Risk Factors ” of this Form 10-K. This section of the Form 10-K generally discusses matters relating to the fiscal years ended December 30, 2023 and December 31, 2022 and year-to-year comparisons between such fiscal years.
Risk Factors ” of this Form 10-K. This section of the Form 10-K generally discusses matters relating to the fiscal years ended December 28, 2024 and December 30, 2023 and year-to-year comparisons between such fiscal years.
Credit is extended based on evaluation of customers’ financial condition and, generally, collateral is not required. Accounts receivable payment terms vary and are stated in the financial statements at amounts due from customers net of an allowance for doubtful accounts. Accounts outstanding longer than the payment terms are considered past due.
Credit is extended based on evaluation of customers’ financial condition and, generally, collateral is not required. Accounts receivable payment terms vary and are stated in the financial statements at amounts due from customers net of a provision for credit losses. Accounts outstanding longer than the payment terms are considered past due.
The Company and its subsidiaries file a consolidated United States Federal income tax return and file in various states. The Company has no open Federal audits as of December 30, 2023. Except for limited exceptions, the Company is no longer subject to audits by state and local tax authorities for tax years prior to 2019.
The Company and its subsidiaries file a consolidated United States Federal income tax return and file in various states. The Company has no open Federal audits as of December 28, 2024. Except for limited exceptions, the Company is no longer subject to audits by state and local tax authorities for tax years prior to 2020.
Revenue is recognized when the service has been performed. Deferred revenue may be recognized over a period exceeding one year from the time it was recorded on the balance sheet, although this is an infrequent occurrence.
Deferred revenue may be recognized over a period exceeding one year from the time it was recorded on the balance sheet, although this is an infrequent occurrence.
As of December 30, 2023, the Company had both domestic and foreign net deferred tax liabilities of $1.7 million. The domestic long term net deferred tax liability of $1.6 million includes $4.3 million in deferred liabilities offset by $2.7 million in deferred tax assets.
As of December 28, 2024, the Company had both domestic and foreign net deferred tax liabilities of $4.4 million. The domestic long term net deferred tax liability of $4.5 million includes $7.6 million in deferred liabilities offset by $3.0 million in deferred tax assets.
As of December 30, 2023, the Company had $0.1 million in foreign net deferred tax liabilities associated with its Canadian operations and a small deferred tax asset associated with its German operations. The Company conducts its operations in multiple tax jurisdictions in the United States, Canada, Germany, Puerto Rico and Serbia.
As of December 28, 2024, the Company had no foreign deferred tax balances associated with its Canadian operations and a deferred tax asset of $0.1 million associated with its German operations. The Company conducts its operations in multiple tax jurisdictions in the United States, Canada, Germany, Philippines, Puerto Rico and Serbia.
MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Long-Lived and Intangible Assets The Company evaluates long-lived assets and intangible assets with definite lives for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Long-Lived and Intangible Assets The Company evaluates long-lived assets and intangible assets with definite lives for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Accounting for Income Taxes In establishing the provision for income taxes and deferred income tax assets and liabilities and valuation allowances against deferred tax assets, the Company makes judgments and interpretations based on enacted tax laws, published tax guidance and estimates of future earnings.
MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Accounting for Income Taxes In establishing the provision for income taxes and deferred income tax assets and liabilities and valuation allowances against deferred tax assets, the Company makes judgments and interpretations based on enacted tax laws, published tax guidance and estimates of future earnings.
The Company is no longer subject to audit in Canada for the tax years prior to tax year 2019. The Company is no longer subject to audit in Puerto Rico for the tax years prior to tax year 2018.
The Company is no longer subject to audit in Canada for the tax years prior to tax year 2020. The Company is under audit in Canada for tax years 2021 and 2022. The Company is no longer subject to audit in Puerto Rico for the tax years prior to tax year 2019.
In the fiscal years ended December 30, 2023 and December 31, 2022, the Company recognized revenue of $1.1 million and $3.4 million, respectively, that was included in deferred revenue at the beginning of the reporting period. Accounts Receivable and Allowance for Doubtful Accounts The Company’s accounts receivable are primarily due from trade customers.
In the fiscal years ended December 28, 2024 and December 30, 2023, the Company recognized revenue of $1.9 million and $1.1 million, respectively, that was included in deferred revenue at the beginning of the reporting period. Accounts Receivable and Provision for Credit Losses The Company’s accounts receivable are primarily due from trade customers.
The Company determines its allowance by considering a number of factors, including the length of time trade accounts receivable are past due, the Company’s previous loss history, the customer’s current ability to pay its obligation to the Company, and the condition of the general economy and the industry as a whole.
The Company determines its provision by considering a number of factors, including the Company’s previous loss history, the customer’s current ability to pay its obligation to the Company, and the condition of the general economy and the industry as a whole.
The deferred tax liabilities consist of acquisition amortization of $1.8 million, prepaid expenses of $1.0 million, advance depreciation deductions of $0.7 million and right of use assets of $0.7 million. The domestic deferred tax assets consist of lease liabilities of $0.8 million, reserves and accruals of $0.8 million, compensation of $0.7 million and allowance for doubtful accounts of $0.4 million.
The deferred tax liabilities consist of acquisition amortization of $4.3 million, prepaid expenses of $1.1 million, advance depreciation deductions of $0.9 million and right of use assets of $1.2 million. The domestic deferred tax assets consist of lease liabilities of $1.3 million, reserves and accruals of $0.5 million, compensation of $0.8 million and provision for credit losses of $0.4 million.
The Company adopted Accounting Standards Update (“ASU”) 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” effective December 29, 2018 which has eliminated Step 2 from the goodwill impairment test. Under this update, an entity should perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount.
The Company follows “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” which has eliminated Step 2 from the goodwill impairment test. Under this update, an entity should perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. 28 ITEM 7.
Some contracts also limit revenue and billings to specified maximum amounts. Provisions for contract losses, if any, are made in the period such losses are determined. For contracts where there is a specific deliverable and the work is not complete and the revenue is not recognized, the costs incurred are deferred as a prepaid asset.
Provisions for contract losses, if any, are made in the period such losses are determined. For contracts where there is a specific deliverable and the work is not complete and the revenue is not recognized, the costs incurred are deferred as a prepaid asset. The associated costs are expensed when the related revenue is recognized. 27 ITEM 7.
All of the Company’s segments perform staff augmentation services and derive revenue from permanent placement fees. The majority of the Company’s revenue is invoiced on a time and materials basis. 27 ITEM 7.
All of the Company’s segments perform staff augmentation services and derive revenue from permanent placement fees. 26 ITEM 7.
MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Revenue Recognition (Continued) The following table presents our revenue disaggregated by revenue source for the fiscal years ended December 30, 2023 and December 31, 2022: December 30, 2023 December 31, 2022 Specialty Health Care: Time and Material $ 134,941 $ 158,001 Permanent Placement Services 1,300 1,447 Total Specialty Health Care $ 136,241 $ 159,448 Engineering: Time and Material $ 42,443 $ 44,915 Fixed Fee 42,232 41,021 Permanent Placement Services - 1 Total Engineering $ 84,675 $ 85,937 Life Sciences and Information Technology: Time and Material $ 35,368 $ 35,473 Fixed Fee 6,551 3,022 Permanent Placement Services 402 800 Total Life Sciences and Information Technology $ 42,321 $ 39,295 $ 263,237 $ 284,680 Time and Material The Company’s Health Care segment predominantly recognizes revenue through time and material work while its Engineering and Life Sciences and Information Technology segments recognize revenue through both time and material and fixed fee work.
MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Revenue Recognition (Continued) The following table presents our revenue disaggregated by revenue source for the fiscal years ended December 28, 2024 and December 30, 2023: December 28, 2024 December 30, 2023 Specialty Health Care: Time and Material $ 141,185 $ 134,941 Permanent Placement Services 1,494 1,300 Total Specialty Health Care $ 142,679 $ 136,241 Engineering: Time and Material $ 47,157 $ 42,443 Fixed Fee 49,302 42,232 Permanent Placement Services - - Total Engineering $ 96,459 $ 84,675 Life Sciences, Data and Solutions: Time and Material $ 30,547 $ 35,368 Fixed Fee 8,452 6,551 Permanent Placement Services 243 402 Total Life Sciences, Data and Solutions $ 39,242 $ 42,321 $ 278,380 $ 263,237 Time and Material The Company’s Health Care segment predominantly recognizes revenue through time and material work while its Engineering and Life Sciences, Data and Solutions segments recognize revenue through both time and material and fixed fee work.
In our consolidated financial statements, estimates are used for, but not limited to, accounts receivable and allowance for doubtful accounts, goodwill, long-lived intangible assets, accounting for stock options and restricted stock awards, insurance liabilities, accounting for income taxes and accrued bonuses. Revenue Recognition The Company records revenue under Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers .
In our consolidated financial statements, estimates are used for, but not limited to, accounts receivable and provision for credit losses, goodwill, long-lived intangible assets, accounting for stock options and restricted stock awards, insurance liabilities, accounting for income taxes and accrued bonuses.
These fees are typically based on a percentage of the compensation paid to the person placed with the Company’s client. The Company guarantees its permanent placements on a prorated basis for 90 days. In the event a candidate is not retained for the 90-day period, the Company will provide a suitable replacement candidate.
The Company guarantees its permanent placements on a prorated basis for 90 days. In the event a candidate is not retained for the 90-day period, the Company will provide a suitable replacement candidate. In the event a replacement candidate cannot be located, the Company will provide a prorated refund to the client.
In instances where project services are provided on a fixed-price basis, revenue is recorded in accordance with the terms of each contract. In certain instances, revenue is invoiced at the time certain milestones are reached, as defined in the contract. Revenue under these arrangements are recognized as the costs on these contracts are incurred.
In instances where project services are provided on a fixed-price basis, revenue is recorded in accordance with the terms of each contract.
There can be no assurance that future indicators of impairment and tests of goodwill impairment will not result in impairment charges for both its Engineering and Specialty Healthcare segments. 29 ITEM 7.
Except for the aforementioned remeasurement of contingent consideration, the Company determined that the existing qualitative factors did not suggest that an impairment of goodwill exists. There can be no assurance that future indicators of impairment and tests of goodwill impairment will not result in impairment charges for both its Engineering and Specialty Healthcare segments.
Revenue is recognized when we satisfy a performance obligation by transferring services promised in a contract to a customer, in an amount that reflects the consideration that we expect to receive in exchange for those services. Performance obligations in our contracts represent distinct or separate service streams that we provide to our customers.
Revenue Recognition The Company records revenue under Financial Accounting Standard Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers . Revenue is recognized when we satisfy a performance obligation by transferring services promised in a contract to a customer, in an amount that reflects the consideration that we expect to receive in exchange for those services.
The associated costs are expensed when the related revenue is recognized. 28 ITEM 7. MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Revenue Recognition (Continued) Permanent Placement Services The Company earns permanent placement fees from providing permanent placement services.
MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Revenue Recognition (Continued) Permanent Placement Services The Company earns permanent placement fees from providing permanent placement services. These fees are typically based on a percentage of the compensation paid to the person placed with the Company’s client.
In the event a replacement candidate cannot be located, the Company will provide a prorated refund to the client. An allowance for refunds, based upon the Company’s historical experience, is recorded in the financial statements. Deferred Revenue There was $1.9 million of deferred revenue as of December 30, 2023. Deferred revenue was $1.1 million as of December 31, 2022.
An allowance for refunds, based upon the Company’s historical experience, is recorded in the financial statements. Deferred Revenue Deferred revenue was $4.2 million as of December 28, 2024 and $1.9 million as of December 30, 2023. Revenue is recognized when the service has been performed.
Removed
There was no goodwill impairment in fiscal 2023 or 2022. During all periods presented, the Company determined that the existing qualitative factors did not suggest that an impairment of goodwill exists.
Added
Performance obligations in our contracts represent distinct or separate service streams that we provide to our customers.
Added
For engineering contracts estimated costs are budgeted by project, the Company then recognizes revenue by applying the costs incurred to date against the total budgeted costs and applying the percentage of completed cost against the total contract value to recognize revenue for each period.
Added
MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Goodwill (Continued) There was no goodwill impairment in fiscal 2024 or 2023.
Added
The Company reviewed industry and market conditions, reporting unit specific events as well as overall financial performance and determined that no indicators of impairment of goodwill existed in its Engineering and Specialty Health Care segments during the fiscal year ended December 28, 2024 and for all segments during the year ended December 30, 2023.
Added
With respect to the fiscal year ended December 28, 2024, since the Company remeasured contingent consideration associated with its Life Sciences, Data and Solutions segment, the Company determined that further testing was necessary.
Added
After comparing the fair value of the Life Sciences, Data and Solutions segment to its carrying amount, the Company determined that no impairment loss occurred for the Company’s goodwill related to that segment during the fiscal years ended December 28, 2024 or December 30, 2023.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

78 edited+14 added−34 removed20 unchanged
Biggest changeMANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Supplemental Operating Results on a Non-GAAP Basis (Continued) Fiscal Years Ended December 30, 2023 December 31, 2022 GAAP net income $ 16,831 $ 20,889 Adjustments Gain on sale of assets (395 ) (219 ) Remeasurement of acquisition related contingent consideration - (88 ) Loss (gain) on foreign currency transactions 98 (52 ) Equity compensation 2,092 1,582 Tax impact from normalized rate (467 ) (356 ) Adjusted net income (non-GAAP) $ 18,159 $ 21,756 GAAP diluted net earnings per share $ 1.96 $ 2.00 Adjustments Gain on sale of assets $ (0.05 ) $ (0.02 ) Remeasurement of acquisition related contingent consideration - $ (0.01 ) Loss (gain) on foreign currency transactions $ 0.01 $ (0.01 ) Equity compensation $ 0.24 $ 0.15 Tax impact from normalized rate $ (0.05 ) $ (0.03 ) Adjusted diluted net earnings per share (non-GAAP) $ 2.11 $ 2.08 37 ITEM 7.
Biggest changeMANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Supplemental Operating Results on a Non-GAAP Basis (Continued) Fiscal Years Ended December 28, 2024 December 30, 2023 GAAP net income $ 13,327 $ 16,831 Adjustments Gain on sale of assets - (395 ) Remeasurement of contingent consideration (1,759 ) - (Gain) loss on foreign currency transactions (80 ) 98 Equity compensation 2,864 2,092 Potential stock issuance and financing transaction 323 - Impairment of intangible assets 547 - Tax impact from normalized rate 900 (1,113 ) Adjusted net income (non-GAAP) $ 16,122 $ 17,513 GAAP diluted net earnings per share $ 1.68 $ 1.96 Adjustments Gain on sale of assets - $ (0.04 ) Remeasurement of contingent consideration $ (0.22 ) - (Gain) loss on foreign currency transactions $ (0.01 ) $ 0.01 Equity compensation $ 0.36 $ 0.24 Potential stock issuance and financing transaction $ 0.04 - Impairment of intangible assets $ 0.07 - Tax impact from normalized rate (a) $ 0.11 $ (0.13 ) Adjusted diluted net earnings per share (non-GAAP) $ 2.03 $ 2.04 (a) Amount reflects an adjustment to income tax expense applied to non-GAAP adjusted consolidated taxable income.
ASU 2023-09 is effective for the Company’s annual reporting periods beginning after December 15, 2024, with early adoption permitted, and should be applied on a prospective basis, with a retrospective option. We are currently evaluating the effect that adoption of ASU 2023-09 will have on our disclosures. 45
ASU 2023-09 is effective for the Company’s annual reporting periods beginning after December 15, 2024, with early adoption permitted, and should be applied on a prospective basis, with a retrospective option. We are currently evaluating the effect that adoption of this ASU will have on our disclosures.
The Company is continuing to review its options to further control these costs, which the Company does not believe are representative of general inflationary trends. Otherwise, inflation has not been a meaningful factor in the Company’s operations. 44 ITEM 7.
The Company is continuing to review its options to further control these costs, which the Company does not believe are representative of general inflationary trends. Otherwise, inflation has not been a meaningful factor in the Company’s operations. 43 ITEM 7.
The ATM Program allows the Company to offer and sell shares of the common stock having an aggregate sales price of up to $25.0 million from time to time through the Agent. To date, the Company has not sold any shares under the ATM Program.
The ATM Program allows the Company to offer and sell shares of the common stock having an aggregate sales price of up to $50.0 million from time to time through the Agent. To date, the Company has not sold any shares under the ATM Program.
In addition to borrowings and sales of shares from its equity plans, the Company may raise capital through sales of shares of common stock under its at-the-market issuance program (the “ATM Program”) established under its May 2021 At Market Issuance Sales Agreement with B. Riley Securities, Inc., as the agent (the “Agent”).
In addition to borrowings and sales of shares from its equity plans, the Company may raise capital through sales of shares of common stock under its at the market issuance program (the “ATM Program”) established under its March 2024 At Market Issuance Sales Agreement with B. Riley Securities, Inc., as the agent (the “Agent”).
The Company attempts to compensate for these escalating costs in its business cost models and customer pricing by passing along some of these increased health care benefit costs to its customers and employees, however, the Company has not been able to pass on all increases.
The Company attempts to compensate for these escalating costs in its business cost models and customer pricing by passing along some of these increased healthcare benefit costs to its customers and employees, however, the Company has not been able to pass on all increases.
These alternatives are: (i) SOFR (Secured Overnight Financing Rate), plus applicable margin, typically borrowed in fixed 30-day increments, plus applicable margin, typically borrowed in fixed 30-day increments or (ii) the agent bank’s prime rate generally borrowed over shorter durations. The Company also pays unused line fees based on the amount of the Revolving Credit Facility that is not drawn.
These alternatives are: (i) SOFR (Secured Overnight Financing Rate), plus applicable margin, typically borrowed in fixed 30-day increments, or (ii) the agent bank’s prime rate generally borrowed over shorter durations. The Company also pays unused line fees based on the amount of the Revolving Credit Facility that is not drawn. Unused line fees are recorded as interest expense.
No assurance can be given as to the Company’s future acquisition and expansion opportunities or how such opportunities will be financed. The Company is exposed to various asserted claims as of December 30, 2023, where the Company believes it has a probability of loss.
No assurance can be given as to the Company’s future acquisition and expansion opportunities or how such opportunities will be financed. The Company is exposed to various asserted claims as of December 28, 2024, where the Company believes it has a probability of loss.
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 December 30, 2023, the Company was in compliance with all covenants contained in the Revolving Credit Facility .
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 December 28, 2024, the Company was in compliance with all covenants contained in the Revolving Credit Facility.
Dividends All restricted share awards contain a dividend equivalent provision entitling holders to dividends paid between the restricted stock award grant date and ultimate share distribution date. As of December 30, 2023, there were no accrued dividends.
Dividends All restricted share awards contain a dividend equivalent provision entitling holders to dividends paid between the restricted stock award grant date and ultimate share distribution date. As of December 28, 2024, there were no accrued dividends.
MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Liquidity and Capital Resources (Continued) Commitments and Contingencies (Continued) In April 2022, a client of the Company’s Industrial Processing Group alleged that a system partially designed by the Company is not operating as intended and that the Company is responsible.
MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Liquidity and Capital Resources (Continued) Commitments and Contingencies (Continued) In April 2022, a client of the Company’s Engineering segment alleged that a system partially designed by the Company is not operating as intended and that the Company is responsible.
The following unaudited tables present the Company's GAAP net income and GAAP operating income and the corresponding adjustments used to calculate Adjusted operating income, EBITDA, Adjusted EBITDA, Adjusted net income and Adjusted diluted net earnings per share for the fiscal years ended December 30, 2023 and December 31, 2022.
The following unaudited tables present the Company's GAAP net income and GAAP operating income and the corresponding adjustments used to calculate Adjusted operating income, EBITDA, Adjusted EBITDA, Adjusted net income and Adjusted diluted net earnings per share for the fiscal years ended December 28, 2024 and December 30, 2023.
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 December 30, 2023, the Company has accrued $2.9 million for asserted claims. 41 ITEM 7.
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 December 28, 2024, the Company has accrued $2.8 million for asserted claims. 41 ITEM 7.
The major components of cash used in or provided by operating activities in the fiscal year ended December 30, 2023 and the comparable prior year period are as follows: net income and changes in accounts receivable, the net of transit accounts payable and transit accounts receivable, prepaid expenses and other current assets, accounts payable, accrued expenses and accrued payroll and related costs, and deferred revenue.
The major components of cash provided by operating activities in the fiscal year ended December 28, 2024 and the comparable prior year period are as follows: net income and changes in accounts receivable, the net of transit accounts payable and transit accounts receivable, prepaid expenses and other current assets, accounts payable, accrued expenses and accrued payroll and related costs, and deferred revenue.
As of December 30, 2023, 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.
As of December 28, 2024, 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 actual effective tax rate may vary in future years depending on the actual operating income earned in various jurisdictions, the potential availability of tax credits, and the exercise of stock options and vesting of share-based awards. 33 ITEM 7.
The actual 2024 effective tax rate may vary from the estimate depending on the actual operating income earned in various jurisdictions, the potential availability of tax credits, and the exercise of stock options and vesting of share-based awards. 33 ITEM 7.
Differences between the effective tax rate and the applicable U.S. federal statutory rate may arise, primarily from the effect of state and local income taxes, and share-based compensation.
Differences between the effective tax rate and the applicable U.S. federal statutory rate may arise, primarily from the effect of state and local income taxes, share-based compensation, and potential tax credits available to the Company.
MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Liquidity and Capital Resources The following table summarizes the major captions from the Company’s Consolidated Statements of Cash Flows ($ in thousands): Fiscal Years Ended December 30, 2023 December 31, 2022 Cash provided by (used in): Operating activities $ 12,482 $ 28,283 Investing activities $ (2,536 ) $ (4,820 ) Financing activities $ (3,855 ) $ (23,127 ) Operating Activities Operating activities provided $12.5 million of cash for the fiscal year ended December 30, 2023 as compared to $28.3 million in the comparable prior year period.
MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Liquidity and Capital Resources The following table summarizes the major captions from the Company’s Consolidated Statements of Cash Flows ($ in thousands): Fiscal Years Ended December 28, 2024 December 30, 2023 Cash provided by (used in): Operating activities $ 6,170 $ 12,482 Investing activities $ (2,572 ) $ (2,536 ) Financing activities $ (4,828 ) $ (3,855 ) Operating Activities Operating activities provided $6.2 million of cash for the fiscal year ended December 28, 2024 as compared to providing $12.5 million in the comparable prior year period.
The Company believes that it will maintain compliance with its financial covenants for the foreseeable future. Borrowings under the line of credit as of December 30, 2023 and December 31, 2022 were $30.9 million and $8.8 million, respectively. At December 30, 2023 and December 31, 2022, there were letters of credit outstanding for $2.0 and $1.9 million, respectively.
The Company believes that it will maintain compliance with its financial covenants for the foreseeable future. Borrowings under the line of credit as of December 28, 2024 and December 30, 2023 were $35.0 million and $30.9 million, respectively. At December 28, 2024 and December 30, 2023, there were letters of credit outstanding for $7.4 and $2.0 million, respectively.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires the annual financial statements to include consistent categories and greater disaggregation of information in the rate reconciliation, and income taxes paid disaggregated by jurisdiction.
We adopted this ASU for the fiscal year ended December 28, 2024. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires the annual financial statements to include consistent categories and greater disaggregation of information in the rate reconciliation, and income taxes paid disaggregated by jurisdiction.
The Company estimates future contingent consideration payments based on forecasted performance and recorded the fair value of those expected payments as of December 30, 2023. Contingent consideration related to acquisitions is recorded at fair value (level 3) with changes in fair value recorded in other (expense) income, net.
The Company estimates future contingent consideration payments based on forecasted performance and recorded the fair value of those expected payments as of December 28, 2024. Contingent consideration related to acquisitions is recorded at fair value (level 3) with changes in fair value recorded in other (expense) income, net. Off-Balance Sheet Arrangements None.
MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Liquidity and Capital Resources (Continued) Future Contingent Payments As of December 30, 2023, the Company had two acquisition agreements whereby additional contingent consideration may be earned by the sellers: 1) effective September 30, 2018, the Company acquired certain assets of Thermal Kinetics Engineering, PLLC and Thermal Kinetics Systems, LLC, and 2) effective October 2, 2022, the Company acquired certain assets of TalentHerder LLC.
MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Liquidity and Capital Resources (Continued) Future Contingent Payments As of December 28, 2024, the Company had one acquisition agreement whereby additional contingent consideration may be earned by the sellers: effective September 30, 2018, the Company acquired certain assets of Thermal Kinetics Engineering, PLLC and Thermal Kinetics Systems, LLC.
The Company made net borrowings under its line of credit of $22.0 million during the fiscal year ended December 30, 2023 as compared to net payments of $5.4 million in the comparable prior year period.
The Company made net borrowings under its line of credit of $4.2 million during the fiscal year ended December 28, 2024 as compared to net borrowings of $22.0 million in the comparable prior year period.
Revenue from non-school clients for the fiscal year ended December 30, 2023 was $33.2 million as compared to $45.2 million for the comparable prior-year period.
Revenue from non-school clients for the fiscal year ended December 28, 2024, was $25.0 million as compared to $33.2 million for the comparable prior-year period.
The Company believes the decrease in Industrial Processing revenue was primarily due to the irregular timing of large contracts with its Industrial Processing clients. Gross profit decreased by 5.1%, or $1.1 million, as compared to the comparable prior-year period. Gross profit decreased because of the decrease in revenue and a decrease in gross profit margin.
The Company believes the decrease in Industrial Processing revenue was mainly due to the irregular timing of large contracts with its Industrial Processing clients. Gross profit increased by 9.4%, or $1.9 million, compared to the comparable prior-year period. Gross profit increased because of the increase in revenue, offset by a decrease in gross profit margin.
The Company believes that it can satisfy its liquidity needs for at least the next twelve months. The Company’s liquidity and capital resources as of December 30, 2023, included accounts receivable and total current asset balances of $70.7 million and $90.5 million, respectively.
The Company believes that it can satisfy its liquidity needs for at least the next twelve months. The Company’s liquidity and capital resources as of December 28, 2024, included accounts receivable and total current asset balances of $78.0 million and $97.0 million, respectively.
The net of transit accounts payable and transit accounts receivable was a net payable of $22.2 million as of December 30, 2023 as compared to a net payable of $6.5 million as of December 31, 2022, providing $15.7 million of cash during the fiscal year ended December 30, 2023.
The net of transit accounts payable and transit accounts receivable was a net payable of $16.6 million as of December 28, 2024 as compared to a net payable of $22.2 million as of December 30, 2023, using $5.6 million of cash during the fiscal year ended December 28, 2024.
Revenue decreased $23.2 million in the Specialty Health Care segment, decreased $1.2 million in the Engineering segment and increased $3.0 million in the Life Sciences and Information Technology segment. See Segment Discussion for further information on revenue changes. Cost of Services and Gross Profit.
Revenue increased $6.4 million in the Specialty Health Care segment, increased $11.8 million in the Engineering segment and decreased $3.1 million in the Life Sciences, Data and Solutions segment. See Segment Discussion for further information on revenue changes. Cost of Services and Gross Profit.
At December 30, 2023 and December 31, 2022, the Company had availability for additional borrowings under the Revolving Credit Facility of $12.1 million and $34.3 million, respectively.
At December 28, 2024 and December 30, 2023, the Company had availability for additional borrowings under the Revolving Credit Facility of $22.6 million and $12.1 million, respectively.
Prepaid expenses and other current assets provided negligible cash for the fiscal year ended December 30, 2023 as compared to using $2.4 million of cash for the comparable prior year period. The Company attributes changes to prepaid expenses and other current assets, if any, to general timing of payments in the normal course of business.
Prepaid expenses and other current assets used cash of $3.7 million for the fiscal year ended December 28, 2024 as compared to providing negligible 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.
Investing Activities Investing activities used $2.5 million of cash for the fiscal year ended December 30, 2023 and $4.8 million for the fiscal year ended December 31, 2022. Investing activities used $2.9 million for the purchase of property and equipment in the current period as compared to $0.9 million in the prior year comparable period.
Investing Activities Investing activities used $2.6 million of cash for the fiscal year ended December 28, 2024 as compared to using $2.5 million in the comparable prior year period. Investing activities used $2.6 million for the purchase of property and equipment in the current period as compared to using $2.9 million in the prior year comparable period.
The decrease in revenue comprised the following: decreases in Aerospace revenue of $4.9 million and Industrial Processing revenue of $4.8 million, offset by an increase to Energy Services revenue of $8.5 million. The decrease in Aerospace revenue was primarily due to a contract reduction for the Company’s major outsourcing client.
The increase in revenue comprised the following: an increase in Energy Services revenue of $15.1 million, offset by decreases in Aerospace revenue of $0.2 million and Industrial Processing revenue of $3.1 million. Aerospace revenue decreased primarily due to a contract reduction for the Company’s major outsourcing client.
For the fiscal year ended December 30, 2023, the Company experienced net income of $16.8 million as compared to $20.9 million for the comparable prior year period. An increase in accounts receivables in the fiscal year ended December 30, 2023, used $20.6 million of cash as compared to $1.5 million in the comparable prior year period.
For the fiscal year ended December 28, 2024, the Company experienced net income of $15.0 million as compared to $16.8 million for the comparable prior year period. An increase in accounts receivables in the fiscal year ended December 28, 2024, used $7.3 million of cash as compared to using $20.6 million in the comparable prior year period.
MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Fiscal Year Ended December 30, 2023 Compared to Fiscal Year Ended December 31, 2022 (Continued) Segment Discussion Specialty Health Care Specialty Health Care revenue of $136.2 million for the fiscal year ended December 30, 2023 decreased 14.6%, or $23.2 million, as compared to the comparable prior-year period.
MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Fiscal Year Ended December 28, 2024 Compared to Fiscal Year Ended December 30, 2023 (Continued) Segment Discussion Specialty Health Care Specialty Health Care revenue of $142.7 million for the fiscal year ended December 28, 2024, increased 4.7%, or $6.4 million, compared to the comparable prior-year period.
The Engineering segment experienced operating income of $3.5 million for the fiscal year ended December 30, 2023, as compared to $4.3 million for the comparable prior-year period. The decrease in operating income was primarily due to the decrease in gross profit, offset by a $0.3 million decrease in SGA expense.
The Engineering segment experienced operating income of $4.5 million for the fiscal year ended December 28, 2024, compared to $3.5 million for the comparable prior-year period. Operating income increased due to the increase in gross profit, offset by an increase in SGA expense.
The fiscal years ended December 30, 2023 (fiscal 2023) and December 31, 2022 (fiscal 2022) consisted of fifty-two weeks each. Revenue. Revenue decreased 7.5%, or $21.4 million, for the fiscal year ended December 30, 2023 as compared to December 31, 2022 (the “comparable prior year period”).
The fiscal years ended December 28, 2024 (fiscal 2024) and December 30, 2023 (fiscal 2023) consisted of fifty-two weeks each. Revenue. Revenue increased 5.8%, or $15.1 million, for the fiscal year ended December 28, 2024 as compared to December 30, 2023 (the “comparable prior year period”).
MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Fiscal Year Ended December 30, 2023 Compared to Fiscal Year Ended December 31, 2022 A summary of operating results for the fiscal years ended December 30, 2023 and December 31, 2022 is as follows (in thousands): Fiscal Years Ended December 30, 2023 December 31, 2022 Amount % of Revenue Amount % of Revenue Revenue $ 263,237 100.0 $ 284,680 100.0 Cost of services 186,541 70.9 201,753 70.9 Gross profit 76,696 29.1 82,927 29.1 Selling, general and administrative 52,185 19.8 53,395 18.8 Depreciation and amortization of property and equipment 1,032 0.4 995 0.3 Amortization of acquired intangible assets 182 0.1 46 0.0 Gain on sale of assets (395 ) (0.2 ) (219 ) (0.1 ) Remeasurement of acquisition-related contingent consideration - - (88 ) - Operating costs and expenses 53,004 20.1 54,129 19.0 Operating income 23,692 9.0 28,798 10.1 Other expense, net 1,497 0.6 318 0.1 Income before income taxes 22,195 8.4 28,480 10.0 Income tax expense 5,364 2.0 7,591 2.7 Net income $ 16,831 6.4 $ 20,889 7.3 The Company follows a 52/53 week fiscal reporting calendar ending on the Saturday closest to December 31.
MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Fiscal Year Ended December 28, 2024 Compared to Fiscal Year Ended December 30, 2023 A summary of operating results for the fiscal years ended December 28, 2024 and December 30, 2023 is as follows (in thousands): Fiscal Years Ended December 28, 2024 December 30, 2023 Amount % of Revenue Amount % of Revenue Revenue $ 278,380 100.0 $ 263,237 100.0 Cost of services 198,602 71.3 186,541 70.9 Gross profit 79,778 28.7 76,696 29.1 Selling, general and administrative 56,787 20.4 52,185 19.8 Depreciation and amortization of property and equipment 1,419 0.5 1,032 0.4 Amortization of acquired intangible assets 136 0.0 182 0.1 Impairment of intangible assets 547 0.3 - - Potential stock issuance and financing activities 323 0.1 - - Remeasurement of contingent consideration (1,759 ) (0.6 ) - - Gain on sale of assets - - (395 ) (0.2 ) Operating costs and expenses 57,453 20.6 53,004 20.1 Operating income 22,325 8.1 23,692 9.0 Other expense, net 2,135 0.8 1,497 0.6 Income before income taxes 20,190 7.3 22,195 8.4 Income tax expense 6,863 2.5 5,364 2.0 Net income $ 13,327 4.8 $ 16,831 6.4 The Company follows a 52/53 week fiscal reporting calendar ending on the Saturday closest to December 31.
A significant portion of these incentive plan accruals are typically paid at the beginning of one fiscal year, pertaining to the prior fiscal year. The Company’s last major payroll for the fiscal year ended December 30, 2023 was paid on December 29, 2023. Historically, the Company has experienced small deferred revenue balances.
A significant portion of these incentive plan accruals are typically paid at the beginning of one fiscal year, pertaining to the prior fiscal year. The Company’s last major payroll for the fiscal year ended December 28, 2024 was paid on December 27, 2024.
The decrease in revenue was driven by both the Company’s school and non-school clients. Revenue from school clients for the fiscal year ended December 30, 2023 was $103.0 million as compared to $114.2 million for 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 fiscal year ended December 28, 2024, was $117.7 million as compared to $103.0 million for the comparable prior-year period.
The increase to net transit payable as of December 30, 2023 was due to several large, multiyear EPC (Engineering, Procurement and Construction) projects starting in the Company’s second fiscal quarter. In a typical EPC contract, the Company receives significant cash upfront to fund equipment procurement and construction subcontractors throughout the project.
The decrease to net transit payable as of December 28, 2024 was due to normal fluctuations associated with several large, multiyear EPC projects. In a typical EPC contract, the Company receives significant cash upfront to fund equipment procurement and construction subcontractors throughout the project.
MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Fiscal Year Ended December 30, 2023 Compared to Fiscal Year Ended December 31, 2022 (Continued) Segment Discussion (Continued) Engineering Engineering revenue of $84.7 million for the fiscal year ended December 30, 2023 decreased by 1.5%, or $1.2 million, compared to the comparable prior-year period.
MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Fiscal Year Ended December 28, 2024 Compared to Fiscal Year Ended December 30, 2023 (Continued) Segment Discussion (Continued) Engineering Engineering revenue of $96.5 million for the fiscal year ended December 28, 2024, increased 13.9%, or $11.8 million, compared to the comparable prior-year period.
Gross profit of $16.2 million for the fiscal year ended December 30, 2023 increased 21.5%, or $2.9 million, as compared to $13.3 million for the comparable prior-year period. The increase in gross profit was due to the increase in revenue and an increase in gross profit margin.
Gross profit increased by 6.5%, or $2.6 million, to $42.5 million for the fiscal year ended December 28, 2024 as compared to $39.9 million in the comparable prior-year period. Gross profit increased due to an increase in revenue and gross profit margin.
The Company used $25.8 million to repurchase shares of its common stock in the current period as compared to $17.6 million in the comparable prior year period. The Company generated cash of $0.7 million and $0.4 million from sales of shares from its equity plans for the current period and the comparable prior year period, respectively.
The Company used $7.8 million to repurchase and retire shares of its common stock during the fiscal year ended December 28, 2024 as compared to using $25.8 million in the comparable prior year period. The Company generated cash of $0.7 million from sales of shares from its equity plans for both periods presented.
In November 2023, the Financial Accounting Standard Board (FASB) issued ASU 2023-07, “Segment reporting (Topic 280)”, which is intended to improve reportable segment disclosure requirements through enhanced disclosures about significant segment expenses.
MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) New Accounting Standards In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures , which is intended to improve reportable segment disclosure requirements through enhanced disclosures about significant segment expenses.
Cost of services decreased 7.5%, or $15.2 million, for the fiscal year ended December 30, 2023 as compared to the comparable prior year period. Cost of services decreased primarily due to the decrease in revenue. Cost of services as a percentage of revenue for the fiscal years ended December 30, 2023 and the comparable prior year period was 70.9%.
Cost of services increased 6.5%, or $12.1 million, for the fiscal year ended December 28, 2024 as compared to the comparable prior year period, primarily due to the increase in revenue. Cost of services as a percentage of revenue was 71.3% for the fiscal year ended December 28, 2024 and 70.9% for the comparable prior year period.
Fiscal Years Ended December 30, 2023 December 31, 2022 GAAP operating income $ 23,692 $ 28,798 Adjustments Gain on sale of assets (395 ) (219 ) Remeasurement of acquisition related contingent consideration - (88 ) Equity compensation 2,092 1,582 Adjusted operating income (non-GAAP) $ 25,389 $ 30,073 GAAP net income $ 16,831 $ 20,889 Income tax expense 5,364 7,591 Interest expense, net 1,399 370 Depreciation of property and equipment 1,032 995 Amortization of acquired intangible assets 182 46 EBITDA (non-GAAP) $ 24,808 $ 29,891 Adjustments Gain on sale of assets (395 ) (219 ) Remeasurement of acquisition related contingent consideration - (88 ) Loss (gain) on foreign currency transactions 98 (52 ) Equity compensation 2,092 1,582 Adjusted EBITDA (non-GAAP) $ 26,603 $ 31,114 36 ITEM 7.
Fiscal Years Ended December 28, 2024 December 30, 2023 GAAP operating income $ 22,325 $ 23,692 Adjustments Gain on sale of assets - (395 ) Remeasurement of contingent consideration (1,759 ) - Equity compensation 2,864 2,092 Potential stock issuance and financing transaction 323 - Impairment of intangible assets 547 - Adjusted operating income (non-GAAP) $ 24,300 $ 25,389 GAAP net income $ 13,327 $ 16,831 Income tax expense 6,863 5,364 Interest expense, net 2,215 1,399 Depreciation of property and equipment 1,419 1,032 Amortization of acquired intangible assets 136 182 EBITDA (non-GAAP) $ 23,960 $ 24,808 Adjustments Gain on sale of assets - (395 ) Remeasurement of contingent consideration (1,759 ) - (Gain) loss on foreign currency transactions (80 ) 98 Equity compensation 2,864 2,092 Potential stock issuance and financing transaction 323 - Impairment of intangible assets 547 - Adjusted EBITDA (non-GAAP) $ 25,855 $ 26,603 36 ITEM 7.
Other expense, net consists of interest expense, unused line fees and amortized loan costs on the Company’s line of credit, net of interest income and gains and losses on foreign currency transactions. Other expense, net increased by $1.1 million as compared to the comparable prior year period, primarily due to an increase in interest expense, net.
Other expense, net consists of interest expense, unused line fees and amortized loan costs on the Company’s line of credit, net of interest income and gains and losses on foreign currency transactions.
MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Liquidity and Capital Resources (Continued) Operating Activities (Continued) Changes in accrued payroll and related costs used $1.3 million for the fiscal year ended December 30, 2023 as compared to negligible cash for the fiscal year ended December 31, 2022.
MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Liquidity and Capital Resources (Continued) Financing Activities Financing activities used $4.8 million of cash for the fiscal year ended December 28, 2024 as compared to using $3.9 million in the comparable prior year period.
Gross profit margin of 24.3% for the current period decreased from 25.3% for the comparable prior-year period. The decrease in gross profit margin was primarily due to lower utilization resulting from an increase in staff associated with lower revenue as the Company absorbed fixed salaried costs over lower revenue.
The gross profit margin of 23.4% for the current period decreased from 24.3% for the comparable prior-year period. The decrease in gross profit margin was primarily due to lower utilization and mix-shift associated with fixed-price project revenue from the Energy Services group.
Current liabilities were $58.2 million as of December 30, 2023 and were exceeded by total current assets by $32.3 million. 40 ITEM 7.
Current liabilities were $53.6 million as of December 28, 2024 and were exceeded by total current assets by $43.4 million. 40 ITEM 7.
A decrease in accounts payable and accrued expenses used cash of $1.5 million for the fiscal year ended December 30, 2023 as compared to providing $4.9 million for the comparable prior year period. The Company attributes these changes to typical fluctuations in the normal course of business. 38 ITEM 7.
The Company attributes these changes to typical fluctuations in the normal course of business. Changes in accrued payroll and related costs used $1.3 million for the fiscal year ended December 28, 2024 as compared to using cash of $1.8 million for the fiscal year ended December 30, 2023.
See Segment Discussion for further information on SGA expense changes. Gain on sale of assets. On July 30, 2021, the Company sold the principal assets and certain liabilities of its Pickering and Kincardine offices, located in Ontario, Canada.
The Company incurred total expenses of $0.3 million related to these transactions. Gain on sale of assets. On July 30, 2021, the Company sold the principal assets and certain liabilities of its Pickering and Kincardine offices, located in Ontario, Canada.
The Company estimates future contingent payments at December 30, 2023 as follows: Fiscal Years Ending Total The four quarters following December 30, 2023 $ 300 Thereafter 1,671 Estimated future contingent consideration payments $ 1,971 Estimates of future contingent payments are subject to significant judgment and actual payments may materially differ from estimates.
The Company estimates future contingent payments at December 28, 2024 as follows: Total Payable in fiscal 2025 $ 212 Estimates of future contingent payments are subject to significant judgment and actual payments may materially differ from estimates.
Furthermore, the Company believes that if it were found liable, any damages would be covered by insurance, subject to a deductible of $0.5 million and maximum coverage of $5.0 million. While the Company attempts to find a mutually agreeable solution, the Company has reserved $0.5 million for this project.
Furthermore, the Company believes that if it were found liable, any damages would be covered by insurance, subject to a deductible of $0.5 million and maximum coverage of $5.0 million. While the clients estimated damages are not known, the client has either inferred or asserted during settlement discussions that it’s damages significantly exceed the Company’s insurance coverage of $5 million.
Miller), are covered by our Change in Control Plan for Selected Executive Management (the “CIC Plan”). Off-Balance Sheet Arrangements None. Impact of Inflation Consulting, staffing, and project services are generally priced based on mark-ups on prevailing rates of pay, and as a result are able to generally maintain their relationship to direct labor costs.
Impact of Inflation Consulting, staffing, and project services are generally priced based on mark-ups on prevailing rates of pay, and as a result are able to generally maintain their relationship to direct labor costs. Permanent placement services are priced as a function of salary levels of the job candidates.
Specialty Health Care experienced operating income of $13.5 million for the fiscal year ended December 30, 2023, as compared to $19.8 million for the comparable prior-year period. The primary reason for the decrease in operating income was the decrease in gross profit, offset by a decrease in SGA expense.
Specialty Health Care experienced operating income of $11.7 million for the fiscal year ended December 28, 2024, as compared to $13.5 million for the comparable prior-year period.
The Company believes that its capital resources are sufficient to meet its present obligations and those to be incurred in the normal course of business for at least the next 12 months. The Company leases office facilities and various equipment under non-cancelable leases expiring at various dates through October 2029.
The Company went live with its new SAP system in April 2024. The Company’s current commitments consist primarily of lease obligations for office space. The Company believes that its capital resources are sufficient to meet its present obligations and those to be incurred in the normal course of business for at least the next 12 months.
Permanent placement services are priced as a function of salary levels of the job candidates. The Company’s business is labor intensive; therefore, the Company has a high exposure to increasing health care benefit costs.
The Company’s business is labor intensive; therefore, the Company has a high exposure to increasing healthcare benefit costs.
As a result, the Company’s deferred revenue balance as of December 30, 2023 was $0.3 million, compared to $1.1 million as of December 31, 2022, using cash from operations of $0.8 million for the fiscal year ended December 30, 2023.
The Company’s deferred revenue balance as of December 28, 2024 was $4.2 million, compared to $1.9 million as of December 30, 2023, providing cash from operations of $2.3 million for the fiscal year ended December 28, 2024. The increase was associated with upfront payments for future labor associated with the Company’s EPC contracts.
The fiscal years ended December 30, 2023 and December 31, 2022 both included discrete gains associated with the Company’s sale of its Canada Power Systems business unit. The prior year period used $4.2 million for the acquisition of TalentHerder.
The fiscal year ended December 30, 2023 included a discrete gain associated with the Company’s sale of its Canada Power Systems business unit. 39 ITEM 7.
Selling, general and administrative (“SGA”) expenses were $52.2 million for the fiscal year ended December 30, 2023 as compared to $53.4 million for the comparable prior year period. As a percentage of revenue, SGA expenses were 19.8% for the fiscal year ended December 30, 2023 and 18.8% for the comparable prior year period.
See Segment Discussion for further information regarding changes in cost of services and gross profit. Selling, General and Administrative. Selling, general and administrative (“SGA”) expenses were $56.8 million for the fiscal year ended December 28, 2024 as compared to $52.2 million for the comparable prior year period.
Gross profit margin for the fiscal year ended December 30, 2023 decreased to 29.3% as compared to 30.0% for the comparable prior-year period. The decrease in gross profit margin was primarily due to a mix shift for certain lower margin services.
Gross profit margin for the fiscal year ended December 28, 2024, increased to 29.8% compared to 29.3% for the comparable prior-year period. The increase in gross profit margin was primarily attributed to a greater mix shift to school services as opposed to non-school services, offset by increased unemployment tax rates in New York.
Interest expense increased due to increased borrowing. Borrowings increased primarily to fund treasury stock purchases. Income Tax Expense . The Company recognized $5.4 million of income tax expense for the fiscal year ended December 30, 2023, as compared to $7.6 million for the comparable prior-year period.
Other expense, net increased by $0.6 million for the fiscal year ended December 28, 2024 as compared to the comparable prior year period, primarily due to an increase in interest expense, net. Interest expense increased due to increased borrowing and increased interest rates. Income Tax Expense .
The Company can give no assurance that its liability is limited to $3.3 million or that liability over $0.5 million, if any, will be covered by insurance. The Company is also subject to other pending legal proceedings and claims that arise from time to time in the ordinary course of its business, which may not be covered by insurance.
The Company is also subject to other pending legal proceedings and claims that arise from time to time in the ordinary course of its business, which may not be covered by insurance. The Company utilizes SAP software for its financial reporting and accounting system which was initially implemented in 1999 and was upgraded during fiscal years 2023 and 2024.
Certain leases are subject to escalation clauses based upon changes in various factors.
The Company leases office facilities and various equipment under non-cancelable leases expiring at various dates through October 2029. Certain leases are subject to escalation clauses based upon changes in various factors.
Maturities of lease liabilities are as follows: Fiscal Year Operating Leases Finance Leases 2024 $ 771 $ 233 2025 506 - 2026 409 - 2027 302 - 2028 144 - Thereafter 1,311 - Total lease payments $ 3,443 $ 233 Less: imputed interest (482 ) - Total $ 2,961 $ 233 42 ITEM 7.
Maturities of lease liabilities are as follows: Fiscal Year Operating Leases Finance Leases 2025 1,300 773 2026 1,213 773 2027 1,017 387 2028 966 - 2029 650 - Thereafter 1,168 - Total lease payments 6,314 1,933 Less: imputed interest (913 ) (123 ) Total $ 5,401 $ 1,810 42 ITEM 7.
The consolidated effective income tax rate for the current period was 24.2% as compared to 26.7% for the comparable prior-year period. The effective fiscal 2023 income tax rates as of December 30, 2023, were approximately 24.5%, 23.9% and 10.5% in the United States, Canada, and Europe, respectively.
The Company recognized $6.9 million of income tax expense for the fiscal year ended December 28, 2024, as compared to $5.4 million for the comparable prior-year period. The consolidated effective income tax rate for the current period was 34.0% as compared to 24.2% for the comparable prior-year period.
Life Sciences and Information Technology Life Sciences and Information Technology revenue of $42.3 million for the fiscal year ended December 30, 2023 increased by 7.7%, or $3.0 million, as compared to $39.3 million for the comparable prior-year period.
The Engineering segment’s SGA expense of $17.4 million increased from $17.0 million, primarily due to a higher allocation of corporate SGA expense. Life Sciences, Data and Solutions Life Sciences, Data and Solutions revenue of $39.2 million for the fiscal year ended December 28, 2024, decreased 7.3%, or $3.1 million, compared to the comparable prior-year period.
The primary reason for the decrease in the consolidated effective rate in the current period was due to a permanent tax difference associated with the tax deduction for equity grants in the United States that vested during the fiscal year ended December 30, 2023.
The effective income tax rate can also be impacted by discrete permanent differences affecting any period presented. The primary reason for the increase in the consolidated effective rate in the current period was due to permanent tax differences in the United States during the fiscal year ended December 28, 2024.
The Company primarily attributes this increase in accounts receivables for the fiscal year ended December 30, 2023 to normal fluctuations in accounts receivable relative to revenue. 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.
MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Liquidity and Capital Resources (Continued) Operating Activities (Continued) 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 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 effective fiscal 2023 income tax rates as of December 28, 2024, were approximately 29.4%, 21.1% and 10.8% in the United States, Canada, and Europe, respectively. The relative income or loss generated in each jurisdiction can materially impact the overall effective income tax rate of the Company, particularly the ratio of Canadian and Serbian pretax income versus U.S. pretax income.
The Life Sciences and Information Technology gross profit margin for the fiscal year ended December 30, 2023 was 38.2% as compared to 33.9% for the comparable prior-year period. The Company attributes the gross profit margin increase to a concerted effort to increase gross profit margin through its managed service offerings.
Gross profit decreased due to the decrease in revenue and a decrease in gross margin. Gross profit margin for the fiscal year ended December 28, 2024, was 37.5% as compared to 38.2% for the comparable prior-year period. The Company attributes the gross profit margin decrease to normal fluctuations in high margin project work.
The Life Sciences and Information Technology segment experienced operating income of $6.6 million as compared to $4.7 million for the comparable prior-year period. The increase in operating income was primarily due to an increase in gross profit, offset by an increase to SGA expense. SGA expense increased to $9.2 million as compared to $8.5 million in the comparable prior-year period.
The Life Sciences, Data and Solutions segment experienced operating income of $6.5 million for the fiscal year ended December 28, 2024 compared to $6.6 million for the comparable prior-year period.
See Segment Discussion for further information regarding changes in cost of services and gross profit. 32 ITEM 7. MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Fiscal Year Ended December 30, 2023 Compared to Fiscal Year Ended December 31, 2022 (Continued) Selling, General and Administrative.
MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Fiscal Year Ended December 28, 2024 Compared to Fiscal Year Ended December 30, 2023 (Continued) Costs Associated with Potential Stock Issuance and Financing Transactions.
Unused line fees are recorded as interest expense. The effective weighted average interest rate, including unused line fees, for the fiscal years ended December 30, 2023 and December 31, 2022 were 6.5% and 2.2%, respectively. However, during the Company’s fiscal fourth quarter of 2023, it experienced a weighted average interest rate of 6.8%, including unused line.
The effective weighted average interest rate, including unused line fees, for the fiscal years ended December 28, 2024 and December 30, 2023 was 6.6% and 6.5%, respectively. 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 Company paid contingent consideration of $0.3 million in the current period as compared to $0.1 million in the comparable prior year period. 39 ITEM 7.
The Company did not pay contingent consideration in the current period as compared to paying $0.3 million in the comparable prior year period. Borrowings under the Revolving Credit Facility bear interest at one of two alternative rates, as selected by the Company at each incremental borrowing.
For the fiscal years ended December 30, 2023 and December 31, 2022, the Company recorded a gain of $0.4 and $0.2 million, respectively, which was due to receiving escrow funds associated with the sale of Canada Power Systems in fiscal 2021. Remeasurement of acquisition related contingent consideration.
For the fiscal year ended December 30, 2023, the Company recorded a discrete gain on the sale of these assets and liabilities of $0.4 million due to the final collection of escrow funds from the transaction. Other Expense, Net.
The Specialty Health Care segment’s gross profit decreased by 16.6%, or $8.0 million, to $39.9 million for the fiscal year ended December 30, 2023, as compared to $47.9 million for the prior-year period. The decrease in gross profit was primarily driven by the decrease in revenue.
The Company primarily attributes the decrease in revenue to the timing of large projects and a deemphasis of the Company’s legacy staffing business. Gross profit of $14.7 million for the fiscal year ended December 28, 2024, decreased 9.0%, or $1.5 million, compared to $16.2 million for the comparable prior-year period.
Removed
The Company adjusted the forecasted contingent consideration for active acquisition agreements, which created a discreet gain of $0.1 million for the fiscal year ended December 31, 2022 . There was no remeasurement in the current fiscal year ended December 30, 2023. Other Expense, Net.
Added
As a percentage of revenue, SGA expenses were 20.4% for the fiscal year ended December 28, 2024 and 19.8% for the comparable prior year period. See Segment Discussion for further information on SGA expense changes. 32 ITEM 7.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

2 edited+0 added−0 removed3 unchanged
Biggest changeBased on the Company’s variable-rate line of credit balances during the fiscal year ended December 30, 2023, if the interest rate on the Company’s variable-rate line of credit (using an incremental borrowing rate) during the period had been 1.0% higher, the Company’s interest expense on an annualized basis would have increased by $0.2 million.
Biggest changeBased on the Company’s variable-rate line of credit balances during the fiscal year ended December 28, 2024, if the interest rate on the Company’s variable-rate line of credit (using an incremental borrowing rate) during the period had been 1.0% higher, the Company’s interest expense on an annualized basis would have increased by $0.3 million.
The Company places its investments in instruments that meet high credit quality standards. The Company is adverse to principal loss and ensures the safety and preservation of its invested funds by limiting default risk, market risk and reinvestment risk. As of December 30, 2023, the Company’s investments consisted of cash and money market funds.
The Company places its investments in instruments that meet high credit quality standards. The Company is adverse to principal loss and ensures the safety and preservation of its invested funds by limiting default risk, market risk and reinvestment risk. As of December 28, 2024, the Company’s investments consisted of cash and money market funds.

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