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What changed in Willdan Group, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Willdan Group, Inc.'s 2022 and 2023 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 2023 report.

+272 added−313 removedSource: 10-K (2023-03-10) vs 10-K (2022-03-11)

Top changes in Willdan Group, Inc.'s 2023 10-K

272 paragraphs added · 313 removed · 214 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

66 edited+13 added−9 removed92 unchanged
Biggest changeThe following table presents the approximate percentage of our consolidated contract revenue attributable to each financial reporting segment. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year ​ 2021 2020 2019 Energy ​ 81 % 83 % 84 % Engineering and Consulting 19 % 17 % 16 % During fiscal year 2021, we derived 34.5% of our Energy segment contract revenues from three customers; the Los Angeles Department of Water and Power (“LADWP”), Duke Energy, and Consolidated Edison of New York, and we derived 10.3% of our Engineering and Consulting segment contract revenues from one customer; the City of Elk Grove.
Biggest changeThe following table presents the approximate percentage of our consolidated contract revenue attributable to each financial reporting segment. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year ​ ​ 2022 2021 2020 Energy ​ 83 % 81 % 83 % Engineering and Consulting 17 % 19 % 17 % During fiscal year 2022, we derived 14.4% of our Energy segment contract revenues from one customer; the Los Angeles Department of Water and Power (“LADWP”), and had no individual customers that accounted for more than 10% of our Engineering and Consulting segment revenues. . 4 Table of Contents For further information related to our financial reporting segments, see Part II, Item 8, Note 9, Segment and Geographical Information , of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.
We believe the market for these services is, and will be, driven by a number of factors, including: ● Demand for services and solutions that provide energy efficiency, greenhouse gas reduction, sustainability, water conservation, infrastructure development and renewable energy in the public and private sectors; ● Changes in technology that affect the generation, distribution and consumption of energy; ● Ongoing efforts to upgrade aging energy infrastructure to meet power, transmission, and environmental goals and requirements; ● The increasing challenge to balance energy demand from electrification and trends toward electric vehicles with the changing sources of energy from wind, solar, and distributed energy resources; ● The need for small and medium sized communities to obtain highly specialized services without incurring the costs of hiring permanent staffing and the associated support structure; ● Financial assistance from utilities, government-funded programs and state legislation for local communities to provide services to constituents; and ● Changes in government policy.
We believe the market for these services is, and will be, driven by a number of factors, including: ● Demand for services and solutions that provide energy efficiency, greenhouse gas reduction, sustainability, electrification, water conservation, infrastructure development and renewable energy in the public and private sectors; ● Changes in technology that affect the generation, distribution and consumption of energy; ● Ongoing efforts to upgrade aging energy infrastructure to meet power, transmission, and environmental goals and requirements; ● The increasing challenge to balance energy demand from electrification and trends toward electric vehicles with the changing sources of energy from wind, solar, and distributed energy resources; ● The need for small and medium sized communities to obtain highly specialized services without incurring the costs of hiring permanent staffing and the associated support structure; ● Financial assistance from utilities, government-funded programs and state legislation for local communities to provide services to constituents; and ● Changes in government policy.
Our energy efficiency services include comprehensive audit and surveys, program design, master planning, demand reduction, grid optimization, benchmarking analyses, design engineering, construction management, performance contracting, installation, alternative financing, measurement and verification services, and advances in software and data analytics for long term planning. Our energy efficiency services include the following: Energy Efficiency.
Our energy services include comprehensive audit and surveys, program design, master planning, demand reduction, grid optimization, benchmarking analyses, design engineering, construction management, performance contracting, installation, alternative financing, measurement and verification services, and advances in software and data analytics for long term planning. Our energy services include the following: Energy Efficiency.
Services for DASNY under these contracts also include energy efficient design, utility cost evaluation, and various regulatory compliance services. Specific project descriptions are set out by DASNY in work authorizations, which are issued under the terms of the master contracts. 5 Table of Contents ● Marshak Science Building Rehabilitation, The City University of New York.
Services for 5 Table of Contents DASNY under these contracts also include energy efficient design, utility cost evaluation, and various regulatory compliance services. Specific project descriptions are set out by DASNY in work authorizations, which are issued under the terms of the master contracts. ● Marshak Science Building Rehabilitation, The City University of New York.
We face strong competition primarily from other regional, national, and international providers of energy efficiency and sustainability consulting services, local electrical and mechanical contractors and engineering firms, lighting and lighting fixture manufacturers and lighting fixture distributors. In addition to our existing competitors, new competitors such as large national or international engineering and/or construction companies could enter our markets.
We face strong competition primarily from other regional, national, and international providers of energy efficiency and sustainability consulting services, local electrical and mechanical contractors and engineering firms, lighting and lighting fixture manufacturers and distributors. In addition to our existing competitors, new competitors such as large national or international engineering and/or construction companies could enter our markets.
We serve the majority of the largest investor-owned electric utilities and over half of the largest municipal utilities in the United States (“U.S.”). Our business with public and private utilities has concentrations in California and New York, but includes numerous other utilities in the Midwest, Southeast and Mountain states and additional acquisitions may continue to expand our geographic footprint.
We serve a majority of the largest investor-owned electric utilities and over half of the largest municipal utilities in the United States (“U.S.”). Our business with public and private utilities has concentrations in California and New York, but includes numerous other utilities in the Midwest, Southeast and Mountain states and additional acquisitions may continue to expand our geographic footprint.
We collaborate with the LADWP through the Commercial Direct Install Program, which is a small business lighting energy efficiency program that serves all commercial customers in LADWP territory with demand up to 250kW. On average, this program typically implements approximately 8,000 energy efficiency projects a year and has implemented over 88,000 projects since program inception in 2008.
We collaborate with the LADWP through the Commercial Direct Install Program, which is a small business lighting energy efficiency program that serves all commercial customers in LADWP territory with demand up to 250kW. On average, this program typically implements approximately 8,000 energy efficiency projects a year and has implemented over 100,000 projects since program inception in 2008.
We often compete with many other firms ranging from small local firms to large international firms. Contract awards are based primarily on qualifications, relevant experience, staffing capabilities, geographic presence, financial stability and price.
We often compete with many other firms ranging from small local firms to large international firms. Contract awards are based primarily on qualifications, relevant experience, staffing capabilities, geographic presence, financial stability, customer service, and price.
Consolidated Edison has been a customer of ours since 2009. ​ In connection with our acquisition of substantially all of the assets of Genesys in March 2016, we entered into an administrative services agreement with Genesys pursuant to which our subsidiary, WES, provides Genesys with ongoing administrative, operational and other non-professional support services.
Consolidated Edison has been a customer of ours since 2009. 10 Table of Contents ​ In connection with our acquisition of substantially all of the assets of Genesys in March 2016, we entered into an administrative services agreement with Genesys pursuant to which our subsidiary, WES, provides Genesys with ongoing administrative, operational and other non-professional support services.
Geotechnical. Our geotechnical and earthquake engineering services include soil engineering, earthquake and seismic hazard studies, geology and hydrogeology engineering, and construction inspection. We operate a licensed, full-service geotechnical laboratory at our headquarters in Anaheim, California, which offers an array of testing services, including construction materials testing and inspection. Planning and Surveying.
Geotechnical. Our geotechnical and earthquake engineering services include soil engineering, earthquake and seismic hazard studies, geology and hydrogeology engineering, and construction inspection. We operate a licensed, full-service geotechnical laboratory at our headquarters in Anaheim, California, which offers an array of testing services, including construction materials testing and inspection. 7 Table of Contents Planning and Surveying.
In addition, during the term of a contract, public 11 Table of Contents agencies may request additional or revised services which may impact the economics of the transaction. Most of our contracts permit our clients, with prior notice, to terminate the contracts at any time without cause.
In addition, during the term of a contract, public agencies may request additional or revised services which may impact the economics of the transaction. Most of our contracts permit our clients, with prior notice, to terminate the contracts at any time without cause.
We believe that the ability to understand these requirements and to successfully conduct business with utilities, governmental entities and agencies is a barrier to entry for potential competitors. Unlike some of our competitors, we focus our services on utilities and public sector clients.
We believe that the ability to understand these requirements and to successfully conduct business with utilities, governmental entities and agencies is a barrier to entry for potential competitors. Unlike some of our competitors, we focus our services on utilities and public sector clients and generally exclude residential services.
Under such administrative services agreement, WES provides administrative services for a series of Genesys’s DASNY and other contracts. WES provides administrative services to Genesys in its performance of rehabilitation and construction work and architectural and 10 Table of Contents engineering services at various sites within New York State.
Under such administrative services agreement, WES provides administrative services for a series of Genesys’s DASNY and other contracts. WES provides administrative services to Genesys in its performance of rehabilitation and construction work and architectural and engineering services at various sites within New York State.
Our business with public agencies is concentrated in California, New York, and Arizona. We also serve special districts, school districts, and a large range of public agencies and private industry throughout the U.S. Our broad portfolio of services operates within two financial reporting segments: (1) Energy and (2) Engineering and Consulting.
Our business with public agencies is concentrated in California, New York, and Arizona. We also serve special districts, school districts, and a large range of public agencies and private industry throughout the U.S. Our broad portfolio of services operates within two financial reporting segments: (i) Energy and (ii) Engineering and Consulting.
Work authorized but not yet completed under this contract continues to be bound by the terms of the agreement beyond the termination date until completion of the projects. Genesys expects to receive an amendment from DASNY to the master contract extending the termination date under DASNY’s option to extend this contract term twice, one year at a time.
Work authorized but not yet completed under this contract continues to be bound by the terms of the agreement beyond the termination date until completion of the projects. Genesys expects to continue to receive amendments from DASNY to the master contract extending the termination date under DASNY’s option to extend this contract term twice, one year at a time.
Services for DASNY under these contracts also include energy efficient design, utility cost evaluation and review, and various regulatory compliance services. Specific project descriptions are set out by DASNY in work authorizations, which are issued under the terms of the contracts. The termination dates of the DASNY contracts vary; the latest of which is April 2024.
Services for DASNY under these contracts also include energy efficient design, utility cost evaluation and review, and various regulatory compliance services. Specific project descriptions are set out by DASNY in work authorizations, which are issued under the terms of the contracts. The termination dates of the DASNY contracts vary; the latest of which is November 2026.
We also provide services to private industry, hospitals, hotels, and a wide variety of other commercial enterprises. 9 Table of Contents We are organized to profitably manage numerous small and large contracts at the same time.
We also provide services to private industry, hospitals, hotels, and a wide variety of other commercial enterprises. We are organized to profitably manage numerous small and large contracts at the same time.
Our Services We offer services in two financial reporting segments: (1) Energy and (2) Engineering and Consulting. Management established these segments based upon the services provided, the different marketing strategies associated with these services, and the specialized needs of their respective clients.
Our Services We offer services in two financial reporting segments: (i) Energy and (ii) Engineering and Consulting. Management established these segments based upon the services provided, the different marketing strategies associated with these services, and the specialized needs of their respective clients.
The following table presents, for the periods indicated, the approximate percentage of our contract revenue subject to each type of pricing provision: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year ​ ​ ​ 2021 2020 2019 ​ Time-and-materials 24 % 26 % 16 % Unit-based 54 % 46 % 65 % Fixed price 22 % 28 % 19 % Total 100 % 100 % 100 % In relation to the pricing provisions, our service-related contracts, including operations and maintenance services and a variety of technical assistance services, are accounted for over the period of performance, in proportion to the cost of performance.
The following table presents, for the periods indicated, the approximate percentage of our contract revenue subject to each type of pricing provision: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year ​ ​ 2022 2021 2020 Time-and-materials 20 % 24 % 26 % Unit-based 45 % 54 % 46 % Fixed price 35 % 22 % 28 % Total 100 % 100 % 100 % In relation to the pricing provisions, our service-related contracts, including operations and maintenance services and a variety of technical assistance services, are accounted for over the period of performance, in proportion to the cost of performance.
We provide comprehensive program and construction management services to our public sector clients. These services include construction administration, inspection, observation, labor compliance, and community relations, depending on the client’s needs and the scope of the specific project. Our construction management experience encompasses projects such as streets, bridges, sewers and storm drains, water systems, parks, pools, public buildings, and utilities. Structures.
These services include construction administration, inspection, observation, labor compliance, and community relations, depending on the client’s needs and the scope of the specific project. Our construction management experience encompasses projects such as streets, bridges, sewers and storm drains, water systems, parks, pools, public buildings, and utilities. Structures.
In January 2017, we announced a new three-year contract with Consolidated Edison to implement Consolidated Edison’s Small and Medium Business Direct Install (“SMB”) program across the utility's New York City and Westchester County service area. It continues the process of diversifying the program offerings. After giving effect to renewals, the Consolidated Edison contract continues through the end of 2022.
In January 2017, we announced a new three-year contract with Consolidated Edison to implement Consolidated Edison’s Small and Medium Business Direct Install (“SMB”) program across the utility's New York City and Westchester County service area. It continues the process of diversifying the program offerings.
We are the implementer of the Comprehensive Multifamily, Commercial, and Industrial Programs, which are targeted to help SCE customers lower their energy bills and reduce demand and energy usage by providing technical services, connection to financing, and financial incentives to identify and install energy efficiency measures.
We are the implementer of the Commercial Program, which is targeted to help SCE customers lower their energy bills and reduce demand and energy usage by providing technical services, connection to financing, and financial incentives to identify and install energy efficiency measures.
For context, lost-time injuries are those occurring in the workplace and resulting in an employee’s inability to work the next full workday. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2021 2020 2019 RCR ​ 0.83 0.78 1.06 LTIR ​ 0.74 0.35 0.53 ​ A recordable case rate (RCR) describes the number of employees per 100 full-time employees that have been involved in an OSHA recordable injury or illness.
For context, lost-time injuries are those occurring in the workplace and resulting in an employee’s inability to work the next full workday. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year ​ ​ 2022 2021 2020 RCR ​ 0.69 0.83 0.78 LTIR ​ 0.26 0.74 0.35 ​ A recordable case rate (RCR) describes the number of employees per 100 full-time employees that have been involved in an OSHA recordable injury or illness.
An integral part of our ability to attract and retain qualified talent depends on our ability to maintain a culture reflective of the diverse communities we serve. Our Workforce As of December 31, 2021, we employed a total of 1,560 employees, excluding contractors.
An integral part of our ability to attract and retain qualified talent depends on our ability to maintain a culture reflective of the diverse communities that we serve. Our Workforce As of December 30, 2022, we employed a total of 1,491 employees, excluding contractors.
The academy supports a diverse workforce and collaborates with community-based organizations and Workforce centers to support career development. Workplace Safety Willdan is committed to maintaining a safe work environment for all of our employees, both inside our facilities and at project job sites.
The WCEA supports a diverse workforce and collaborates with community-based organizations and workforce centers to support energy efficiency workforce development. 14 Table of Contents Workplace Safety Willdan is committed to maintaining a safe work environment for all of our employees, both inside our facilities and at project job sites.
Typical assignments include land use studies, development of 7 Table of Contents specific plans or general plan elements, design guidelines, and zoning ordinances. We also provide surveying and mapping services, including major construction layout, design survey, topographic survey, aerial mapping, Geographic Information Systems, and right-of-way engineering. Program and Construction Management.
Typical assignments include land use studies, development of specific plans or general plan elements, design guidelines, and zoning ordinances. We also provide surveying and mapping services, including major construction layout, design survey, topographic survey, aerial mapping, Geographic Information Systems, and right-of-way engineering. Program and Construction Management. We provide comprehensive program and construction management services to our public sector clients.
Our culture is focused on hiring, empowering, and retaining highly talented employees and professionals with the diverse background and expertise required to develop solutions for the current and future energy and infrastructure challenges. To encourage more diverse and talented people to join our team, we partner with professional organizations that represent and support a diverse pool of applicants.
Our culture is focused on hiring, empowering, and retaining highly talented employees and professionals with the diverse background and expertise required to develop solutions for the current and future energy and infrastructure challenges and to help us consistently raise the bar and drive innovation forward. 13 Table of Contents To encourage more diverse and talented people to join our team, we partner with professional organizations that represent and support a diverse pool of applicants.
We continue to implement programs across these five states and have completed over 25,000 projects for Duke Energy resulting in over 780,000 MWh in savings to small businesses.
We continue to implement programs across these four states and have completed over 28,000 projects for Duke Energy resulting in over 840,000 MWh in savings to small businesses.
This has led to energy-efficient upgrades at over 280,000 commercial buildings, schools, hospitals, and other public buildings. Willdan’s program management activities for various utilities have yielded more than 7.8 billion kWh savings, 11 million therms reductions over the past 14 years. 14 Table of Contents We are committed to the relentless improvement and protection of our planet.
This has led to energy-efficient upgrades at over 320,000 commercial buildings, schools, hospitals, and other public buildings. Willdan’s program management activities for various utilities have yielded more than 8.2 billion kWh savings, and 97 million therms reductions over the past 15 years. We are committed to the continuous improvement and protection of our planet.
The measures articulate shared expectations for how the Board, its committees, and our management should perform their respective functions. Annually, the Board works with our senior management team on a detailed, multi-year strategic plan, reviewing goal progress each quarter.
These governance measures promote effective functioning of our Board and its committees, protecting our interests as a whole. The measures articulate shared expectations for how the Board, its committees, and our management should perform their respective functions. Annually, the Board works with our senior management team on a detailed, multi-year strategic plan, reviewing goal progress each quarter.
In connection with our acquisitions, we have obtained the trademark for our “LoadSEER” software, have obtained the patent for “Optimization of Microgrid Energy Use and Distribution”, have obtained the service marks for the Enerpath, Enerworks and Lime/Green Dial Design, and have obtained the registered copyright of Lime, Lime Energy, and Main Street Efficiency.
In connection with our acquisitions, we have obtained the trademark for our “LoadSEER” software, have obtained the patent for “Optimization of Microgrid Energy Use and Distribution”, have obtained the service marks for the Enerpath, Enerworks and Lime/Green Dial Design, and have obtained the registered copyright of Lime, Lime Energy, and Main Street Efficiency, NEO, Net Energy Optimizer, Collaboration Analysis Research, and several Weidt Group designs.
We provided finance review, financial analysis, and contract administration services for the Contra Costa County Public Works Department. Willdan provided municipal services in a variety of professional and technical administrative and finance measures. ● County of Los Angeles, California, Traffic Engineering Services. We provide professional traffic engineering services for the Lower Azusa Road/Los Angeles Street Traffic Signal Synchronization Project.
Willdan provided municipal services in a variety of professional and technical administrative and finance measures. ● County of Los Angeles, California, Traffic Engineering Services. We provide professional traffic engineering services for the Lower Azusa Road/Los Angeles Street Traffic Signal Synchronization Project.
For time-and-materials and fixed price contracts, we bill our clients periodically in accordance with the contract terms, based on costs incurred on either an hourly fee basis or on a percentage of completion basis or upon the achievement of certain prescribed milestones, as the project progresses.
Award and incentive fees are recorded when they are fixed and determinable and consider customer contract terms. 11 Table of Contents For time-and-materials and fixed price contracts, we bill our clients periodically in accordance with the contract terms, based on costs incurred on either an hourly fee basis or on a percentage of completion basis or upon the achievement of certain prescribed milestones, as the project progresses.
The following table sets forth the number of our employees in each of our business segments and our holding company: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2021 2020 2019 ​ Energy 860 748 900 ​ Engineering and Consulting 619 531 487 ​ Holding Company Employees (Willdan Group, Inc.) 81 74 64 ​ Total 1,560 1,353 1,451 ​ ​ Diversity, Equity and Inclusion ​ Our goal is to maintain a culture of acceptance and individuality, where all employees feel respected, included, and encouraged to bring their unique perspectives, ideas, and skills to work each day.
The following table sets forth the number of our employees in each of our business segments and our holding company: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year ​ ​ 2022 2021 2020 Energy 781 860 748 Engineering and Consulting 623 619 531 Holding Company Employees (Willdan Group, Inc.) 87 81 74 Total 1,491 1,560 1,353 ​ Diversity, Equity and Inclusion ​ Willdan has a culture of acceptance and individuality, where all employees feel respected, included, and encouraged to contribute their unique perspectives, develop innovative ideas, and bring their best skills to work each day.
Our largest clients are based in New York and California. In fiscal year 2021, services provided to clients in California accounted for 36.8% of our consolidated contract revenue and services provided to clients in New York accounted for 21.0% of our consolidated contract revenue.
Our largest clients are based in New York and California. In fiscal year 2022, services provided to clients in California accounted for 41.7% of our consolidated contract revenue and services provided to clients in New York accounted for 22.8% of our consolidated contract revenue.
As part of our community outreach, in the beginning of 2020 we established and financed the Willdan Clean Energy Academy (“WCEA”) which offers free training in energy efficiency skills to disadvantaged workers in the New York City area. In 2021, Willdan increased the funding for this outreach effort and the WCEA expanded to the Los Angeles City Area.
Community Training As part of our community outreach, in the beginning of 2020 we established and financed the Willdan Clean Energy Academy (“WCEA”) which offers free training in energy efficiency skills and career services to disadvantaged workers in the New York City area.
The SMB program, Consolidated Edison's largest energy efficiency program, helps customers save energy, lower their bills and protect the environment by providing financial incentives to identify and buy down the cost of energy efficiency measures.
After giving effect to renewals and extensions, the Consolidated Edison contract continues through the end of 2023. The SMB program, Consolidated Edison's largest energy efficiency program, helps customers save energy, lower their bills and protect the environment by providing financial incentives to identify and buy down the cost of energy efficiency measures.
As of December 31, 2021, we had approximately 2,000 open projects. During fiscal year 2021, we had one customer that accounted for more than 10% of our consolidated contract revenues. For fiscal year 2021, the LADWP accounted for 10.8% of our consolidated contract revenue. For fiscal year 2021, our top 10 customers accounted for 49.2% of our consolidated contract revenues.
As of December 30, 2022, we had approximately 2,200 open projects. During fiscal year 2022, we had one customer that accounted for more than 10% of our consolidated contract revenues. For fiscal year 2022, the LADWP accounted for 12.0% of our consolidated contract revenue. For fiscal year 2022, our top 10 customers accounted for 54.6% of our consolidated contract revenues.
In addition, many of our multi-year utility program management contracts exceed $10,000,000 and our largest single contract has the capacity to provide up to, and in excess, of $380,000,000 in revenue over a period of five years for the implementation of energy efficiency measures in commercial facilities.
In addition, many of our multi-year utility program management contracts exceed $10,000,000 and, two of our largest contracts provide contract limits in excess of $100,000,000 in revenue over a period of five years for the management of utility incentive programs for the implementation of energy efficiency measures.
With our commitment to corporate governance principles, we have adopted, among other measures, a Code of Ethical Conduct, as well charters for each of the four standing committees of our Board of Directors (“Board”). These governance measures promote effective functioning of our Board and its committees, protecting our interests as a whole.
We are committed to accountability for our actions and goals. With our commitment to corporate governance principles, we have adopted, among other measures, a Code of Ethical Conduct, as well charters for each of the four standing committees of our Board of Directors (“Board”).
We believe our coverage limits reasonably protect us from any material adverse impact that may arise from these insured risks. 12 Table of Contents Government Regulation, Licensing, and Enforcement A significant portion of our revenues is derived from services provided to public utilities which are generally overseen by state or local public utility commissions who provide and administer a regulatory framework governing the sourcing, distribution, pricing and general management of electricity and natural gas.
Government Regulation, Licensing, and Enforcement A significant portion of our revenues is derived from services provided to public utilities which are generally overseen by state or local public utility commissions who provide and administer a regulatory framework governing the sourcing, distribution, pricing and general management of electricity and natural gas.
Clients Our clients primarily consist of investor and municipal owned energy utilities, public and governmental agencies including cities, counties, redevelopment agencies, water districts, school districts and universities, state agencies, federal agencies and a variety of other special districts and agencies.
We have partnered with Ygrene Energy Fund to provide a national PACE program. 9 Table of Contents Clients Our clients primarily consist of investor and municipal owned energy utilities, public and governmental agencies including cities, counties, redevelopment agencies, water districts, school districts and universities, state agencies, federal agencies and a variety of other special districts and agencies.
Federal Compliance. We offer several services that support bonded debt compliance reporting for cities, counties, states, school districts, water districts, housing authorities, 501(c)(3) and other municipal entities. We provide federal compliance services to approximately 764 issuers in 43 states and the District of Columbia managing approximately $71 billion in municipal debt.
Federal Compliance. We offer several services that support bonded debt compliance reporting for cities, counties, states, school districts, water districts, housing authorities, 501(c)(3) and other municipal entities.
The Willdan, Willdan Group, Inc., Willdan Engineering, Willdan Energy Company, Willdan Financial Services, and Willdan Energy Solutions names are service marks of ours, and we have obtained a service mark for the Willdan and “W” logo.
Consequently, we believe it is important to protect our brand identity through trademark registrations. The Willdan, Willdan Group, Inc., Willdan Engineering, Willdan Energy Company, Willdan Financial Services, and Willdan Energy Solutions names are service marks of ours, and we have obtained a service mark for the Willdan and “W” logo.
The engineering and consulting market has grown as public agencies and utilities, as well as private utilities and commercial/industrial firms, find it more efficient to outsource design, construction oversight, advisory, and training 3 Table of Contents services to contract providers, rather than maintain the necessary staff and resources to provide such services themselves.
The use of energy services, including audits, program design, benchmark analysis, metering and incentivized sale and installation of energy efficiency measures provides public agencies, utilities, and commercial/industrial firms with the ability to realize long-term energy savings and greenhouse gas reductions. 3 Table of Contents The engineering and consulting market has grown as public agencies and utilities, as well as private utilities and commercial/industrial firms, find it more efficient to outsource design, construction oversight, advisory, and training services to contract providers, rather than maintain the necessary staff and resources to provide such services themselves.
We also installed new heating hot water control valves on all variable air volume boxes and new HVAC controls to ensure the achievement of specified energy cost savings for the school. ● Entergy Corporation, Louisiana.
We also installed new heating hot water control valves on all variable air volume boxes and new HVAC controls to ensure the achievement of specified energy cost savings for the school. ● Entergy Corporation, Louisiana. We supported Entergy’s investments in grid data and analytics capabilities across its electric distribution footprint through a software license for LoadSEER.
In addition, we developed human capital metrics, such as employee gender ratios and other demographic information, aimed at expanding our employee recruitment effort and have expanded the roster of universities in which we conduct recruiting activities.
Our team began collecting additional human capital metrics, such as employee gender ratios and other demographic information, and we have expanded the roster of universities at which we conduct recruiting activities. We also invested in our employee development strategy by expanding our employee training and professional development programs.
Our experienced engineers, consultants, and staff help our clients realize cost and energy savings by tailoring efficient and cost-effective solutions to assist in optimizing energy spend.
Energy Services Our Energy segment provides specialized, innovative, comprehensive energy solutions to businesses, utilities, state agencies, municipalities, and non-profit organizations. Our experienced engineers, consultants, and staff help our clients realize cost and energy savings by tailoring efficient and cost-effective solutions to assist in optimizing energy spend.
The Small Business Energy Saver Program offers eligible commercial customers the opportunity to retrofit a comprehensive list of existing inefficient equipment with more energy-efficient measures.
Since its launch in 2013, the program has grown to encompass all eligible Duke Energy customers in North Carolina, South Carolina, Indiana, and Kentucky. The Small Business Energy Saver Program offers eligible commercial customers the opportunity to retrofit a comprehensive list of existing inefficient equipment with more energy-efficient measures.
Insurance To address the hazards inherent in our business, we maintain insurance coverage through the following policies: commercial general liability, automobile liability, workers’ compensation and employer’s liability, cyber liability, professional liability and umbrella/excess liability. However, if any claims, settlements, or judgements, individually or in the aggregate, exceed our policy limits, we are liable to pay these claims from our assets.
Insurance To address the hazards inherent in our business, we maintain insurance coverage through the following policies: commercial general liability, automobile liability, workers’ compensation and employer’s liability, cyber liability, professional liability and umbrella/excess liability.
Our Health and Safety Council meets monthly and our Health and Safety program is designed to address the hazards associated with our business and to prescribe the policies and practices needed to prevent workplace injuries and illness. We track and report all safety incidents. Our safety incident metrics is provided below.
Our Health and Safety Council meets monthly and our Health and Safety program is designed to address the hazards associated with our business and to prescribe the policies and practices needed to prevent workplace injuries and illness. In 2022, we established and appointed a Director of Health and Safety, a key leadership role for Willdan.
This allows property owners to implement improvements without a large up-front cash payment. We have partnered with Ygrene Energy Fund to provide a national PACE program.
This allows property owners to implement improvements without a large up-front cash payment.
The project involved the remodeling of the training center, lobby, records area, detective bureau, and men’s and women’s locker rooms. We acted as Owner’s Representative and Construction Manager responsible for coordinating all aspects of the construction, including coordination with the City’s Building Inspection Staff. ● Contra Costa County, California, City Engineering Services.
We acted as Owner’s Representative and Construction Manager responsible for coordinating all aspects of the construction, including coordination with the City’s Building Inspection Staff. ● Contra Costa County, California, City Engineering Services. We provided finance review, financial analysis, and contract administration services for the Contra Costa County Public Works Department.
We are committed to conducting business in a legal, ethical, and trustworthy manner; strictly upholding our regulatory obligations everywhere we operate; and complying with both the letter and spirit of our business policies and values. We are committed to accountability for our actions and goals.
Our corporate governance practices set clear expectations and responsibilities for leaders, employees, and partners to create long-term, competitive returns for shareholders and lasting value for all stakeholders. 15 Table of Contents We are committed to conducting business in a legal, ethical, and trustworthy manner; strictly upholding our regulatory obligations everywhere we operate; and complying with both the letter and spirit of our business policies and values.
The Board also oversees efforts by Willdan’s senior management team in managing environmental and social risks and opportunities The Board is led by our Chairman and CEO. Our Board’s directors are independent under NASDAQ and Willdan independence standards, except for our CEO.
The Board also oversees efforts by Willdan’s senior management team in managing environmental and social risks and opportunities. The Board is led by our Chairman and Chief Executive Officer (“CEO”). We are managed under the direction of the Board, which is currently composed of seven directors.
Over that time, we have saved LADWP and its customers over 549,000 MWh per year and 108 MW of peak demand and also provided lead generation identifying roughly 10,000 water efficiency upgrades.
Over that time, we have saved the LADWP and its customers over half a million MWh per year and almost one hundred MW of peak demand and also provided lead generation identifying roughly 10,000 water efficiency upgrades. We also collaborate with Duke Energy - Progress to manage the small business direct install program in North Carolina and South Carolina.
We are managed under the direction of the Board, which is currently composed of ten directors. The Board has determined nine directors are independent under the rules of the listing standards for the Nasdaq Global Market and the Securities Exchange Act of 1934, as amended.
The Board has determined that our directors, except for our CEO, are independent under the rules of the listing standards for the Nasdaq Global Market and the Securities Exchange Act of 1934, as amended. As the director most familiar with our business and industry, we believe our CEO is best suited to serve as Chairman of our Board.
All work was accomplished through a task order process that defined the scope of work, time of performance, and cost of services. ● City of Palm Springs, California, Engineering and Construction Management Services. We provided construction management and public works inspection services related to the City’s Police Department Remodel Project.
Serving the two City departments was a team of full-time engineers, scientists, managers, observers/inspectors, project managers, administrative support staff, and a team of subconsultants. All work was accomplished through a task order process that defined the scope of work, time of performance, and cost of services. ● City of Palm Springs, California, Engineering and Construction Management Services.
The application is used in short- and long-term circuit-level planning and to proactively integrate renewables, energy storage, and efficiency investments. LoadSEER combines multi-layer risk, geospatial, and scenario modeling; utilities’ existing tools; engineering efforts; and multiple data sources in order to deliver dynamic, granular load profiles and perform valuation analyses. ● Multifamily, Commercial, and Industrial Energy Efficiency Programs.
LoadSEER combines multi-layer risk, geospatial, and scenario modeling; utilities’ existing tools; engineering efforts; and multiple data sources in order to deliver dynamic, granular load profiles and perform valuation analyses. ● Commercial Energy Efficiency Programs. Southern California Edison has contracted with us to develop, implement, and offer these programs to SCE customers.
Our Board is comprised of a diverse group of academics, financial advisors and industry practitioners with extensive experience in the governance and direction of publicly-traded enterprises. At any time, shareholders and other interested parties may communicate by writing with the Board of Directors generally, with the non-employee directors as a group, or with a specific director.
Our CEO works in collaboration with our Lead Independent Director, who is appointed biannually by the Board. Our Board is comprised of a diverse group of academics, financial advisors and industry practitioners with extensive experience in the governance and direction of publicly-traded enterprises.
In addition, we strive to reduce our own ecological footprint and our environmental impact, as we help our customers achieve their own sustainability goals.
We provide planning and policy analysis for governments, regulators, and utilities, as well as innovative financing programs that bring the benefit of clean energy to underserved neighborhoods and disadvantaged customers. In addition, we strive to reduce our own ecological footprint and our environmental impact, as we help our customers achieve their own sustainability goals.
The following are examples of typical projects we have performed in the Engineering and Consulting segment: ● City of Elk Grove, California, City Engineering, Capital Improvement, and Infrastructure Services. We provided comprehensive technical support to the Public Works and Development Services Departments for the over 170,000-resident community of Elk Grove, California.
We provided comprehensive technical support to the Public Works and Development Services Departments for the over 170,000-resident community of Elk Grove, California. Our services have included public counter service, drainage/stormwater/NPDES, traffic engineering, permitting, land development review and inspection, CIP design and construction support.
At Willdan, we believe that we can better serve all communities by utilizing qualified employees, suppliers, and subcontractors that mirror the culture and demographics of the communities where we live and work. 13 Table of Contents In 2020, we established Willdan’s Diversity, Equity, and Inclusion (“DE&I”) Working Group which identified initial goals and objectives focused on two key areas: 1) conducting a multi-pronged analysis of employee recruitment, development, engagement, and community outreach; and 2) developing and tracking key performance indicators and progress toward DE&I objectives.
At Willdan, we believe that we can better serve all communities by utilizing qualified employees, suppliers, and subcontractors that mirror the culture and demographics of the communities where we live and work. We take pride in, and celebrate, our employees. In 2020, we established Willdan’s Diversity, Equity, and Inclusion Working Group (“DEI Working Group”).
NEO, Net Energy Optimizer, Collaboration Analysis Research, and several Weidt Group designs. 15 Table of Contents Available Information ​ We maintain an Internet website at http://www.willdan.com.
Available Information ​ We maintain an Internet website at http://www.willdan.com.
We supported Entergy’s investments in grid data and analytics capabilities across its electric distribution footprint through a software license for LoadSEER, the modeling application of Integral Analytics. LoadSEER was developed to provide unique insights and modeling capability for distributed energy resources and the evolving distribution grid.
LoadSEER was developed to provide unique insights and modeling capability for distributed energy resources and the evolving distribution grid. The application is used in short- and long-term circuit-level planning and to proactively integrate renewables, energy storage, and efficiency investments.
Intellectual Property We believe we have strong name recognition and that this provides us with a competitive advantage in obtaining new business. Consequently, we believe it is important to protect our brand identity through trademark registrations.
At any time, shareholders and other interested parties may communicate by writing to the Board generally, with the non-employee directors as a group, or to a specific director. Intellectual Property We believe we have strong name recognition and that this provides us with a competitive advantage in obtaining new business.
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The use of energy efficiency services, including audits, program design, benchmark analysis, metering and incentivized sale and installation of energy efficiency measures provides public agencies, utilities, and commercial/industrial firms with the ability to realize long-term energy savings and greenhouse gas reductions.
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We provide federal compliance services to approximately 760 issuers in 43 states and the District of Columbia managing approximately $68 billion in municipal debt. 8 Table of Contents The following are examples of typical projects we have performed in the Engineering and Consulting segment: ● City of Elk Grove, California, City Engineering, Capital Improvement, and Infrastructure Services.
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For further information related to our financial reporting segments, see Part II, Item 8, Note 9, Segment Information and Geographical Information , of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K. 4 Table of Contents Energy Efficiency Services Our Energy segment provides specialized, innovative, comprehensive energy solutions to businesses, utilities, state agencies, municipalities, and non-profit organizations.
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We provided construction management and public works inspection services related to the City’s Police Department Remodel Project. The project involved the remodeling of the training center, lobby, records area, detective bureau, and men’s and women’s locker rooms.
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Southern California Edison has contracted with us to develop, implement, and offer these programs to SCE customers.
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However, if any claims, settlements, or judgements, individually or in 12 Table of Contents the aggregate, exceed our policy limits, we are liable to pay these claims from our assets. We believe our coverage limits reasonably protect us from any material adverse impact that may arise from these insured risks.
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Our services have included public counter 8 Table of Contents service, drainage/stormwater/NPDES, traffic engineering, permitting, land development review and inspection, CIP design and construction support. Serving the two City departments was a team of full-time engineers, scientists, managers, observers/inspectors, project managers, administrative support staff, and a team of subconsultants.
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We value the richness that diversity and inclusion bring to our workforce and are proud that our employees represent various races, genders, ages, national origins, and points of view.
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In 2013, Lime Energy, which we acquired in fiscal year 2018, collaborated with Duke Energy - Progress to launch the first ever small business direct install program in North Carolina and South Carolina. Since its launch, the program has grown to encompass all eligible Duke Energy customers in North Carolina, South Carolina, Ohio, Indiana, and Kentucky.
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The DEI Working Group is designed to increase overall employee engagement and collaboration. Among other things, the DEI Working Group focuses on recruiting, development and community outreach, and developing and tracking progress toward DE&I objectives. The DEI Working Group is comprised of four employee-led subgroups: (i) Business Partnerships, (ii) Community Outreach and Engagement, (iii) Inclusive Culture, and (iv) Recruitment.
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Award and incentive fees are recorded when they are fixed and determinable and consider customer contract terms.
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Each subgroup is led by a chair or co- chairpersons championing the needs and well-being of stakeholders, including employees. Collectively, the subgroups positively impact professional development, community outreach and business by creating and embracing cultural initiatives.
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During fiscal year 2021, as part of our ongoing effort within our DE&I Working Group, we conducted a company-wide employee engagement survey. We have analyzed the results from that survey and have begun instituting action committees aimed at implementing the feedback received.
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Willdan employees are highly engaged in the formation of Employee Resource Groups (“ERG”), fostering a greater sense of community while increasing employee engagement, inclusiveness, representation, and collaboration. All employees have the opportunity to initiate, join, and lead ERGs. Employee Engagement and Development Continuous growth requires continued investment in people, innovation, and new opportunities.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe Credit Agreement restricts our ability to dispose of assets and use the proceeds from those dispositions and also restricts our ability to raise debt or equity capital to be used to repay other indebtedness when it becomes due.
Biggest changeOur Amended and Restated Credit Agreement (as amended by the First Amendment, dated as of August 15, 2019, the Second Amendment, dated as of November 6, 2019, the Third Amendment, dated as of May 6, 2020, the Fourth Amendment, dated April 30, 2021, the Fifth Amendment, dated March 8, 2022, the Sixth Amendment, dated August 2, 2022, and the Seventh Amendment, dated November 1, 2022, the “Credit Agreement”) restricts our ability to dispose of assets and use the proceeds from those dispositions and also restricts our ability to raise debt or equity capital to be used to repay other indebtedness when it becomes due.
Our use of subcontractors has increased in recent years as a result of the increase in the percentage of our revenues derived from the direct installation of energy efficiency measures, including performance contracting and construction management services for more complex projects. Our Energy segment generally utilizes a higher percentage of subcontractors than Engineering and Consulting segment.
Our use of subcontractors has increased in recent years as a result of the increase in the percentage of our revenues derived from the direct installation of energy efficiency measures, including performance contracting and construction management services for more complex projects. Our Energy segment generally utilizes a higher percentage of subcontractors than the Engineering and Consulting segment.
From time to time, we assume liabilities as a result of indemnification provisions contained in our service contracts. We cannot predict the magnitude of these potential liabilities. We are liable to pay these such liabilities from our assets if and when the aggregate settlement or judgment amount exceeds our insurance policy limits.
From time to time, we assume liabilities as a result of indemnification provisions contained in our service contracts. We cannot predict the magnitude of these potential liabilities. ​ We are liable to pay such liabilities from our assets if and when the aggregate settlement or judgment amount exceeds our insurance policy limits.
We face exposure to product liability and personal injury claims in the event that our services cause bodily injury or property damage. Since the majority of our products use electricity, it is possible that the products we use could result in injury, whether due to product malfunctions, defects, improper installation or other causes.
We face exposure to product liability and personal injury claims in the event that our services cause bodily injury or property damage. Since the majority of our products use electricity, it is possible that the products we use could result in property damage or personal injury, whether due to product malfunctions, defects, improper installation or other causes.
If we are unable to maintain and expand our current utility relationships and develop new relationships, maintain and enhance our existing energy efficiency services, execute our business and marketing strategies successfully and achieve the energy savings that are specified in our contracts, we may not be able to supplement the loss of revenue from our other services and it may result in lower revenues and have an adverse impact on our business, results of operations and financial condition.
If we are unable to maintain and expand our current utility relationships and develop new relationships, maintain and enhance our existing energy services, execute our business and marketing strategies successfully and achieve the energy savings that are specified in our contracts, we may not be able to supplement the loss of revenue from our other services and it may result in lower revenues and have an adverse impact on our business, results of operations and financial condition.
Government departments and agencies and their representatives audit and review our contract performance, pricing practices, cost structure, financial capability and compliance with applicable laws, rules and regulations. Audits could raise issues that have significant adverse effects, including, among other things, substantial adjustments to our previously reported operating results and substantial effects on future operating results.
Government departments and agencies and their representatives may audit and review our contract performance, pricing practices, cost structure, financial capability and compliance with applicable laws, rules and regulations. Audits could raise issues that have significant adverse effects, including, among other things, substantial adjustments to our previously reported operating results and substantial effects on future operating results.
Failure to meet performance standards or complete performance on a timely basis could also adversely affect our reputation and client base. Our revenues are primarily derived from the energy efficiency services industry and, therefore, we are highly susceptible to risks relating to such industry.
Failure to meet performance standards or complete performance on a timely basis could also adversely affect our reputation and client base. ​ Our revenues are primarily derived from the energy services industry and, therefore, we are highly susceptible to risks relating to such industry.
These benefits may not be achieved within the anticipated time frame, or at all. ​ 27 Table of Contents Further, acquisitions may cause us to issue common stock that would dilute our current stockholders’ ownership percentage; use a substantial portion of our cash resources; increase our interest expense, leverage and debt service requirements (if we incur additional debt to pay for an acquisition); assume liabilities, including environmental liabilities, for which we do not have indemnification from the former owners. ​ If we are not able to successfully manage our growth strategy, our business, results of operations and financial condition may be adversely affected.
These benefits may not be achieved within the anticipated time frame, or at all. ​ Further, acquisitions may cause us to issue common stock that would dilute our current stockholders’ ownership percentage; use a substantial portion of our cash resources; increase our interest expense, leverage and debt service requirements (if we incur additional debt to pay for an acquisition); and assume liabilities, including environmental liabilities, for which we do not have indemnification from the former owners. ​ If we are not able to successfully manage our growth strategy, our business, results of operations and financial condition may be adversely affected.
In general, subject to some exceptions, Section 203 prohibits a Delaware corporation from engaging in any business combination with any “interested stockholder” (which is generally defined as an entity or person who, together with the person’s affiliates and associates, beneficially owns, or within three years prior to the time of determination of interested stockholder status did own, 15% or more of the outstanding voting stock of the corporation), for a three-year period following the date that the stockholder became an interested stockholder.
In general, subject to some exceptions, Section 203 prohibits a Delaware corporation from engaging in any business combination with any 29 Table of Contents “interested stockholder” (which is generally defined as an entity or person who, together with the person’s affiliates and associates, beneficially owns, or within three years prior to the time of determination of interested stockholder status did own, 15% or more of the outstanding voting stock of the corporation), for a three-year period following the date that the stockholder became an interested stockholder.
In any such event, we would have no right to seek lost fees or other damages. If a client were to terminate, decline to exercise options under, or curtail further performance under one or more of our major contracts, it could have a material adverse effect on our business, results of operations and financial condition.
In any such event, we would have no right to seek lost fees or other damages. If a client were to terminate, decline to exercise options under, or curtail further 24 Table of Contents performance under one or more of our major contracts, it could have a material adverse effect on our business, results of operations and financial condition.
In addition, investors, particularly institutional investors, use these scores to benchmark companies against their peers and if a company is 29 Table of Contents perceived as lagging, these investors may engage with such company to improve ESG disclosure or performance and may also make voting decisions, or take other actions, to hold these companies and their boards of directors accountable.
In addition, investors, particularly institutional investors, use these scores to benchmark companies against their peers and if a company is perceived as lagging, these investors may engage with such company to improve ESG disclosure or performance and may also make voting decisions, or take other actions, to hold these companies and their boards of directors accountable.
We must ensure that we are at all times compliant with various privacy laws, rules, and regulations. The 30 Table of Contents risk of failing to comply with these laws, rules, and regulations increases as we continue to expand. We also rely in part on third-party software and information technology vendors to run certain parts of our information technology systems.
We must ensure that we are at all times compliant with various privacy laws, rules, and regulations. The risk of failing to comply with these laws, rules, and regulations increases as we continue to expand. We also rely in part on third-party software and information technology vendors to run certain parts of our information technology systems.
If we are not able to react quickly to force majeure, our operations may be affected significantly, which would have a negative impact on our business, results of operations and financial condition. 21 Table of Contents We have only a limited ability to protect our intellectual property rights, and our failure to protect our intellectual property rights could adversely affect our competitive position.
If we are not able to react quickly to force majeure, our operations may be affected significantly, which would have a negative impact on our business, results of operations and financial condition. We have only a limited ability to protect our intellectual property rights, and our failure to protect our intellectual property rights could adversely affect our competitive position.
Demand for our services is cyclical and vulnerable to economic downturns. If economic growth slows, government fiscal conditions worsen, public and private construction/renovation activity slows, or client spending declines, it may have a material adverse effect on our business, results of operations and financial condition.
If economic growth slows, government fiscal conditions worsen, public and private construction/renovation activity slows, or client spending declines, it may have a material adverse effect on our business, results of operations and financial condition. Demand for our services is cyclical, and vulnerable to economic downturns and reductions in government and private industry spending.
Further, improper disclosure of confidential information of our employees, customers, contractors and vendors could harm our reputation and subject us to liability. ​ 31 Table of Contents ​ ​ ITEM 1B. UNRESOLVED STAFF COMMENTS None.
Further, improper disclosure of confidential information of our employees, customers, contractors and vendors could harm our reputation and subject us to liability. 30 Table of Contents ​ ITEM 1B. UNRESOLVED STAFF COMMENTS None.
In addition, if we fail to address actual or potential conflicts properly, or even if we simply fail to recognize a perceived conflict, we may be in violation of our existing contracts, may otherwise incur liability, and may 22 Table of Contents lose future business for not preventing the conflict from arising, and our reputation may suffer.
In addition, if we fail to address actual or potential conflicts properly, or even if we simply fail to recognize a perceived conflict, we may be in violation of our existing contracts, may otherwise incur liability, and may lose future business for not preventing the conflict from arising, and our reputation may suffer.
Legislation is proposed periodically, particularly in the states of New York and California, that attempts to limit the ability of governmental agencies to contract with private consultants to provide services. Should such changes occur and be upheld, demand for our services may be materially adversely affected.
Legislation is proposed periodically, particularly in the states of New York and California, that attempts to limit the ability of governmental agencies to contract with private consultants to provide services. Should such changes occur 28 Table of Contents and be upheld, demand for our services may be materially adversely affected.
Our failure to comply with applicable laws or regulations, or acts of misconduct could subject us to fines and penalties, loss of security clearances, and suspension or debarment from contracting, any or all of which could harm our reputation, reduce our revenue and profits, and subject us to criminal and civil enforcement actions.
Our 21 Table of Contents failure to comply with applicable laws or regulations, or acts of misconduct could subject us to fines and penalties, loss of security clearances, and suspension or debarment from contracting, any or all of which could harm our reputation, reduce our revenue and profits, and subject us to criminal and civil enforcement actions.
We cannot predict the timing or form of any current or future regulatory or law enforcement initiatives, and any such initiatives could have a material adverse effect on our business, results of operations and financial condition. Our acquired businesses may underperform relative to our expectations.
We cannot predict the timing or form of any current or future regulatory or law enforcement initiatives, and any such initiatives could have a material adverse effect on our business, results of operations and financial condition. 27 Table of Contents Our acquired businesses may underperform relative to our expectations.
Profitability on these contracts is driven by control over the number of hours required to execute the tasks, the mix of staff utilized and the percentage of staff time expended on directly billable activities. Many of our time-and-materials contracts are subject to maximum contract values.
Profitability on these contracts is driven by 19 Table of Contents control over the number of hours required to execute the tasks, the mix of staff utilized and the percentage of staff time expended on directly billable activities. Many of our time-and-materials contracts are subject to maximum contract values.
Even if we win a particular contract through competitive bidding, our profit margins may be depressed or we may even suffer losses as a result of the costs incurred through the bidding process and the need to lower our prices to overcome competition.
Even if we win a particular 25 Table of Contents contract through competitive bidding, our profit margins may be depressed or we may even suffer losses as a result of the costs incurred through the bidding process and the need to lower our prices to overcome competition.
The loss of the services of any of these key personnel could adversely affect our business, results of operations and financial condition. 20 Table of Contents Unavailability of third-party insurance coverage would increase our overall risk exposure as well as disrupt the management of our business operations.
The loss of the services of any of these key personnel could adversely affect our business, results of operations and financial condition. Unavailability of third-party insurance coverage would increase our overall risk exposure as well as disrupt the management of our business operations.
Legislatures may appropriate funds for a given project on a 25 Table of Contents year-by-year basis, even though the project may take more than one year to perform. In addition, public-supported financing such as state and local municipal bonds may be only partially raised to support existing projects.
Legislatures may appropriate funds for a given project on a year-by-year basis, even though the project may take more than one year to perform. In addition, public-supported financing such as state and local municipal bonds may be only partially raised to support existing projects.
We could experience cost overruns if these estimates were initially inaccurate as a result of errors or ambiguities in the contract specifications, or become inaccurate as a result of a change in circumstances following the submission of the estimate due to, among other things, unanticipated technical or equipment problems, difficulties in obtaining permits or approvals, changes in local laws or labor conditions, weather delays, changes in costs of raw materials, or the inability of our vendors or subcontractors to perform their obligations.
We could experience cost overruns if these estimates were initially inaccurate as a result of errors or ambiguities in the contract specifications, or become inaccurate as a result of a change in circumstances following the submission of the estimate due to, among other things, unanticipated technical or equipment problems, difficulties in obtaining permits or approvals, changes in local laws or labor conditions, weather delays, changes in costs of raw materials as a result of rising inflation, supply chain shortages or otherwise, or the inability of our vendors or subcontractors to perform their obligations.
If we cannot make scheduled payments on our debt, we will be in default and the lenders under our Credit Agreement could terminate their commitments to loan money and could foreclose against the assets securing their borrowings and we could be forced into bankruptcy or liquidation.
If we cannot make scheduled payments on our debt or comply with the other covenants under our Credit Agreement, we will be in default and the lenders under our Credit Agreement could terminate their commitments to loan money and could foreclose against the assets securing their borrowings and we could be forced into bankruptcy or liquidation.
We may not be able to effect any such alternative measures, if necessary, on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our scheduled debt service obligations.
We may not be able to effect any such 22 Table of Contents alternative measures, if necessary, on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our scheduled debt service obligations.
The impact of the Covid-19 pandemic on our business subjects us to various risks and uncertainties that could materially adversely affect our business, results of operations and financial condition including: the possibility that some of our clients will request deferral, modification or reduction in their contractual work orders with us or, in the case of those clients that we service under a purchase order model, if such clients reduce or cancel the amount of work requested relative to historical practices; fewer subcontractors being available to complete our work if our subcontractors must limit or cease operations or declare bankruptcy as a result of the Covid-19 pandemic; our clients becoming insolvent or initiating bankruptcy or similar proceedings, which would adversely affect our ability to collect contractual payments from such clients for work that may have already been completed and result in decreased revenues; the impact on our results of operations and financial condition resulting from a temporary suspension in capital expenditures from our government clients; and increased difficulty in executing our growth strategy, which could result in fewer acquisition opportunities for us compared to historical levels.
Resurgences of the Covid-19 pandemic could subject us to various risks and uncertainties that could materially adversely affect our business, results of operations and financial condition including: the possibility that some of our clients will request deferral, modification or reduction in their contractual work orders with us or, in the case of those clients that we service under a purchase order model, if such clients reduce or cancel the amount of work requested relative to historical practices; fewer subcontractors being available to complete our work if our subcontractors must limit or cease operations or declare bankruptcy as a result of a resurgence of the Covid-19 pandemic; our clients becoming insolvent or initiating bankruptcy or similar proceedings, which would adversely affect our ability to collect contractual payments from such clients for work that may have already been completed and result in decreased revenues; the impact on our results of operations and financial condition resulting from a temporary suspension in capital expenditures from our government clients; and increased difficulty in executing our growth strategy, which could result in fewer acquisition opportunities for us compared to historical levels. ​ Our profitability could suffer if we are not able to maintain adequate utilization of our workforce.
For example, a client may require us to provide a bond or letter of credit to protect the client should we fail to perform under 24 Table of Contents the terms of the contract.
For example, a client may require us to provide a bond or letter of credit to protect the client should we fail to perform under the terms of the contract.
A loss of customers, inability to procure or maintain contracts, or downturn in demand in the energy efficiency services industry could have a material adverse impact on our business, results of operations and financial condition.
A loss of customers, inability to procure or maintain contracts, a downturn in demand, or a change in the energy regulatory environment in the energy services industry could have a material adverse impact on our business, results of operations and financial condition.
Our engagements often involve large-scale, complex projects. The quality of our performance on such projects depends in large part upon our ability to manage the relationship with our clients and our ability to effectively manage the project and deploy appropriate resources, including third-party contractors and our own personnel, in a timely manner.
The quality of our performance on such projects depends in large part upon our ability to manage the relationship with our clients and our ability to effectively manage the project and deploy appropriate resources, including third-party contractors and our own personnel, in a timely manner.
If economic growth slows, government fiscal conditions worsen, or client spending declines, it may have a material adverse effect on our business, results of operations and financial condition. Our government clients may face budget deficits that prohibit them from funding new or existing projects.
If economic growth slows, including as a result of rising inflation and rising interest rates, government fiscal conditions worsen, or client spending declines, it may have a material adverse effect on our business, results of operations and financial condition. Our government clients may face budget deficits that prohibit them from funding new or existing projects.
In particular, our fixed-price contracts could increase the unpredictability of our earnings. Under fixed-price contracts, we receive a fixed price irrespective of the actual costs we incur (which protects clients) and, consequently, we are exposed to a number of risks than either time-and-materials and unit-based contracts.
In particular, our fixed-price contracts could increase the unpredictability of our earnings. Under fixed-price contracts, we receive a fixed price irrespective of the actual costs we incur (which protects clients) and, consequently, we are exposed to a number of risks that are generally not included under time-and-materials and unit-based contracts.
Generally, our use of this method results in recognition of revenue and profit ratably over the life of the contract, based on the proportion of costs incurred to date to total costs expected to be incurred for the entire project.
We account for our fixed price contracts on the percentage-of-completion method of revenue recognition. Generally, our use of this method results in recognition of revenue and profit ratably over the life of the contract, based on the proportion of costs incurred to date to total costs expected to be incurred for the entire project.
Our failure to conduct due diligence effectively, or our inability to successfully integrate acquisitions, could impede us from realizing all of the benefits of the acquisitions, which could weaken our results of operations. A key part of our growth strategy is to acquire other companies that complement our lines of business, broaden our technical capabilities and/or expand our geographic presence.
This could impede us from realizing all of the benefits of the acquisitions, which could weaken our results of operations. A key part of our growth strategy is to acquire other companies that complement our lines of business, broaden our technical capabilities and/or expand our geographic presence.
Any of these factors could adversely affect the demand for our services, which could have a material adverse effect on our business, results of operations and financial condition. 18 Table of Contents The quality of our service and our ability to perform under some of our contracts would be adversely affected if qualified subcontractors are unavailable for us to engage, if our subcontractors fail to satisfy their obligations to us or other parties, or if we are unable to maintain these relationships which, in each case, could adversely affect our business, results of operations and financial condition.
The quality of our service and our ability to perform under some of our contracts would be adversely affected if qualified subcontractors are unavailable for us to engage, if our subcontractors fail to satisfy their obligations to us or other parties, or if we are unable to maintain these relationships which, in each case, could adversely affect our business, results of operations and financial condition.
We had no goodwill impairment in fiscal 2021, 2020, or 2019. 28 Table of Contents Risks Related to Our Regulatory Environment We are subject to various routine and non­-routine governmental reviews, audits and investigations, and unfavorable government audit results could force us to adjust previously reported operating results, could affect future operating results, could subject us to a variety of penalties and sanctions, and could result in harm to our reputation.
Risks Related to Our Regulatory Environment We are subject to various routine and non­-routine governmental reviews, audits and investigations, and unfavorable government audit results could force us to adjust previously reported operating results, could affect future operating results, could subject us to a variety of penalties and sanctions, and could result in harm to our reputation.
If adequate funds are not available or are not available on acceptable terms, if and when needed, our ability to fund our operations, meet obligations in the normal course of business, take advantage of strategic business opportunities, or otherwise respond to competitive pressures would be significantly limited. 23 Table of Contents Restrictive covenants in our credit agreement may restrict our ability to pursue certain business strategies .
If adequate funds are not available or are not available on acceptable terms, if and when needed, our ability to fund our operations, meet obligations in the normal course of business, take advantage of strategic business opportunities, or otherwise respond to competitive pressures would be significantly limited.
Our future revenue and growth prospects could be adversely affected if other contractors eliminate or reduce their subcontracts or teaming arrangement relationships with us, or if a government agency terminates or reduces these other contractors’ programs, does not award them new contracts, or refuses to pay under a contract.
Our future revenue and growth prospects could be adversely affected if other contractors eliminate or reduce their subcontracts or teaming arrangement relationships with us, or if a government agency terminates or reduces these other contractors’ programs, does not award them new contracts, or refuses to pay under a contract. 18 Table of Contents Supply chain constraints and labor shortages could negatively impact our business, financial condition and results of operations.
A successful product liability or personal injury claim against us that is not covered by insurance or is in excess of our available insurance limits could require us to make significant payments of damages which could materially adversely affect our business, results of operations and financial condition.
A successful product liability or personal injury claim against us that is not covered by insurance or is in excess of our available insurance limits could require us to make significant payments of damages which could materially adversely affect our business, results of operations and financial condition. ​ Events outside our control, including natural and man-made disasters, could negatively impact the economies in which we operate or disrupt our operations, which may adversely affect our business, results of operations and financial condition.
Events outside our control, such as natural and man-made disasters, as well as terrorist actions, pandemics or other public health emergencies (such as the recent coronavirus outbreak), could negatively impact the economies in which we operate by causing the closure of offices, interrupting projects, and forcing the relocation of employees.
Events outside our control, such as natural and man-made disasters, as well as terrorist actions, war or armed hostilities between countries or non-state actors, pandemics or other public health emergencies (such as the Covid-19 pandemic or future resurgences of the Covid-19 pandemic), could negatively impact the economies in which we operate by causing the closure of offices, interrupting projects, and forcing the relocation of employees.
Demand for our services is cyclical, and vulnerable to economic downturns and reductions in government and private industry spending. Such downturns or reductions may result in clients delaying, curtailing or canceling proposed and existing projects. Our business traditionally lags the overall recovery in the economy; therefore, our business may not recover immediately when the economy improves.
Such downturns or reductions may result in clients delaying, curtailing or canceling proposed and existing projects. Our business traditionally lags the overall recovery in the economy; therefore, our business may not recover immediately when the economy improves.
If a client determines not to proceed with the completion of the project or if the client defaults on its payment obligations, we may face difficulties in collecting payment of amounts due to us for the costs previously incurred or for the amounts previously expended to purchase equipment or supplies.
If a client determines not to proceed with the completion of the project or if the client defaults on its payment obligations, we may face difficulties in collecting payment of amounts due to us for the costs previously incurred or for the amounts previously expended to purchase equipment or supplies. ​ Our use of the percentage-of-completion method of revenue recognition on our fixed price contracts could result in a reduction or reversal of previously recorded revenue and profits.
Most of our clients are not committed to purchase any minimum amount of our services, as our agreements with them are based on a “purchase order” model. As a result, they may discontinue utilizing some or all of our services with little or no notice.
Most of our clients are not committed to purchase any minimum amount of our services, as our agreements with them are based on a “purchase order” model.
If any of our third-party insurers fail, suddenly cancel our coverage, or otherwise are unable to provide us with adequate insurance coverage, then our overall risk exposure and our operational expenses would increase and the management of our business operations would be disrupted.
A partially or completely uninsured claim, if successful and of significant magnitude, could have a material adverse effect on our liquidity. 20 Table of Contents If any of our third-party insurers fail, suddenly cancel our coverage, or otherwise are unable to provide us with adequate insurance coverage, then our overall risk exposure and our operational expenses would increase and the management of our business operations would be disrupted.
Risks Related to Our Clients and Our Projects If we have a loss or reduction of business from a key customer or key utility programs, it could result in significant harm to our revenue, profitability and financial condition.
In the event the lenders accelerate the repayment of our borrowings, we and our subsidiaries may not have sufficient assets to repay that indebtedness. 23 Table of Contents Risks Related to Our Clients and Our Projects If we have a loss or reduction of business from a key customer or key utility programs, it could result in significant harm to our revenue, profitability and financial condition.
Our credit agreement also requires that we maintain a maximum total leverage ratio and a minimum fixed charge coverage ratio, tested on a quarterly basis, which we may not be able to achieve. The covenants may impair our ability to finance future operations or capital needs or to engage in other favorable business activities.
Our Credit Agreement also requires that we maintain a maximum total leverage ratio and a minimum fixed charge coverage ratio, tested on a quarterly basis, which we may not be able to achieve.
If a project is significant, or if there are one or more common issues that impact 19 Table of Contents multiple projects, costs overruns could increase the unpredictability of our earnings, as well as have a material adverse impact on our business, results of operations and financial condition.
If a project is significant, or if there are one or more common issues that impact multiple projects, costs overruns could increase the unpredictability of our earnings, as well as have a material adverse impact on our business, results of operations and financial condition. ​ Under our time-and-material contracts, we are generally paid for our efforts at negotiated hourly billing rates for our staff, plus reimbursement for subcontractors and other direct costs.
Our profitability could suffer if we are not able to maintain adequate utilization of our workforce. The cost of providing our services, including the extent to which we utilize our workforce, affects our profitability.
The cost of providing our services, including the extent to which we utilize our workforce, affects our profitability.
While we have historically made reasonably reliable estimates of the progress towards completion of long-term contract, the uncertainties inherent in the estimating process make it possible for actual costs to vary materially from estimates, including reductions or reversals of previously recorded revenue and profit.
While we have historically made reasonably reliable estimates of the progress towards completion of long-term contracts, the uncertainties inherent in the estimating process make it possible for actual costs to vary materially from initial estimates, which could result in reductions or reversals of previously recorded revenue and profit. ​ The loss of key personnel or our inability to attract and retain qualified personnel could impair our ability to provide services to our clients and otherwise conduct our business effectively.
These conditions, combined with tightening labor markets resulting from elevated resignation rates among U.S. workers, could increase the cost and difficulty of recruiting and retaining employees, which could negatively impact our operations and financial results.
These conditions, combined with tightening labor markets resulting from elevated resignation rates among U.S. workers, could increase the cost and difficulty of recruiting and retaining employees, or could result in project delays or cancellations which could negatively impact our operations and financial results. ​ Resurgences of the Covid-19 pandemic and health and safety measures intended to slow its spread could adversely affect our business, results of operations, and financial condition.
Particularly as we grow our commercial business, we anticipate that conflicts of interest and business conflicts will pose a greater risk. Risks Related to Indebtedness Our substantial leverage and significant debt service obligations due to debt incurred in connection with our acquisitions could adversely affect our business, results of operations and financial condition.
Risks Related to Indebtedness Our substantial leverage and significant debt service obligations due to debt incurred in connection with our acquisitions could adversely affect our business, results of operations and financial condition. Our financial performance could be adversely affected by our substantial debt leverage.
We issue reports and opinions to clients based on our professional engineering expertise, as well as our other professional credentials. Our reports and opinions may need to comply with professional standards, licensing requirements, securities regulations, and other laws and rules governing the performance of professional services in the jurisdiction in which the services are performed.
Our reports and opinions may need to comply with professional standards, licensing requirements, securities regulations, and other laws and rules governing the performance of professional services in the jurisdiction in which the services are performed. In addition, the reports and other work product we produce for clients sometimes include projections, forecasts and other forward-looking statements.
In addition, the reports and other work product we produce for clients sometimes include projections, forecasts and other forward-looking statements. Such information by its nature is subject to numerous risks and uncertainties, any of which could cause the information produced by us to ultimately prove inaccurate.
Such information by its nature is subject to numerous risks and uncertainties, any of which could cause the information produced by us to ultimately prove inaccurate.
As well, certain of our contracts are with other entities that are periodically funded by the applicable utility. Such funding is subject to periodic renewal and is outside our control or its contract counterparty and may, at times, be delayed or inhibited.
Such funding is subject to periodic renewal and is outside our control or its contract counterparty and may, at times, be delayed or inhibited.
In the event that we estimate the potential to exceed those maximum contract values at the contracted rates, revenue relating to these contracts is recognized as if these contracts were fixed-price contracts.
In the event that we estimate the potential to exceed those maximum contract values at the contracted rates, revenue relating to these contracts is recognized as if these contracts were fixed-price contracts. ​ If we are unable to accurately estimate and manage our costs, we may incur losses on our contracts, which could decrease our operating margins and significantly reduce or eliminate our profits.
Accordingly, these factors affect our ability to forecast our future revenue and earnings from business areas that may be adversely impacted by market conditions.
Accordingly, these factors affect our ability to forecast our future revenue and earnings from business areas that may be adversely impacted by market conditions. Any of these factors could adversely affect the demand for our services, which could have a material adverse effect on our business, results of operations and financial condition.
Furthermore, if we are unable to repay the amounts due and payable under the credit agreement, the lenders could proceed against the collateral granted to them to secure that indebtedness. In the event the lenders accelerate the repayment of our borrowings, we and our subsidiaries may not have sufficient assets to repay that indebtedness.
These prepayment obligations could have an adverse effect on our business, results of operations and financial condition. Furthermore, if we are unable to repay the amounts due and payable under the Credit Agreement, the lenders could proceed against the collateral granted to them to secure that indebtedness.
Failing to comply with these covenants could result in an event of default under the Credit Agreement, which could result in us being required to repay the amounts outstanding prior to maturity. These prepayment obligations could have an adverse effect on our business, results of operations and financial condition.
The covenants may additionally impair our ability to finance future operations or capital needs or to engage in other favorable business activities. Failing to comply with these covenants could result in an event of default under the Credit Agreement, which could result in us being required to repay the amounts outstanding prior to maturity.
Failure to meet any of the milestone requirements could result in additional costs, and the amount of such additional costs could exceed the projected profits on the project. These additional costs include liquidated damages paid under contractual penalty provisions, which can be substantial and can accrue on a regular basis.
Failure to meet any of the milestone requirements could result in additional costs, and the amount of such additional costs could exceed the projected profits on the project.
These additional obligations could result in reduced profits and revenues or, in some cases, significant losses for us with respect to the joint venture, which could also affect our reputation in the industries we serve. 26 Table of Contents If our reports and opinions are not in compliance with professional standards and other regulations or without the appropriate disclaimers or in a misleading or incomplete manner, we could be subject to monetary damages and penalties.
These additional obligations could result in reduced profits and revenues or, in some cases, significant losses for us with respect to the joint venture, which could also affect our reputation in the industries we serve.
The adverse impact of the Covid-19 pandemic on our business, results of operations and financial condition could be material. 17 Table of Contents If we fail to complete a project in a timely manner, miss a required performance standard, or otherwise fail to adequately perform on a project, then we may incur a loss on that project, which may reduce or eliminate our overall profitability.
Risks Related to Operations If we fail to complete a project in a timely manner, miss a required performance standard, or otherwise fail to adequately perform on a project, then we may incur a loss on that project, which may reduce or eliminate our overall profitability. Our engagements often involve large-scale, complex projects.
Supply chain constraints and labor shortages could negatively impact our business, financial condition and results of operations. The global economy has been experiencing supply chain constraints and labor shortages. These conditions have increased the costs for materials, other goods, and labor.
The global economy has been experiencing supply chain constraints and labor shortages. These conditions, in addition to rising inflation, have increased the costs for materials, other goods, and labor, and have caused delivery and project performance schedules to be extended.
Our financial performance could be adversely affected by our substantial leverage. We may also incur significant additional indebtedness in the future, subject to various conditions.
We may also incur significant additional indebtedness in the future, subject to various conditions including increased working capital requirements.
Removed
Risks Related to Operations The COVID-19 pandemic and health and safety measures intended to slow its spread have adversely affected, and may continue to adversely affect, our business, results of operations and financial condition.
Added
The demand and terms for Energy efficiency services and utility programs in general are highly regulated and driven by various state regulatory commissions. Changes in those regulations or the standards and goals imposed by the regulatory commissions could adversely affect the demand for or the terms under which those utility programs may be conducted and adversely affect the company’s profitability.
Removed
The Covid-19 pandemic and efforts to limit its spread negatively impacted our business during fiscal year 2020 and continued to impact us, albeit to a lesser extent, during fiscal year 2021. In California and New York, the states in which we have historically derived the majority of our revenue, mandatory shutdown orders were issued in March 2020.
Added
Most states have an independent energy regulatory commission or body to oversee the operations of the utilities providing electricity and gas to consumers. Those regulatory commissions often set the goals, standards, prices and other specific terms under which the utilities are required to operate.
Removed
In New York, phased re-openings began in June 2020, and all of our New York utility programs have restarted. In California, phased re-openings began in May 2020, followed by periods of curtailments as a result of resurgences of Covid-19 cases, and subsequent re-openings.
Added
Those regulatory mandates, including mandates for greenhouse gas reductions, the composition of energy generation sources, the amount of energy consumption reductions, 17 Table of Contents the cost effectiveness of those reductions and the various terms under which those mandates are to be delivered set firm boundaries within which the utilities may contract with third parties such as Willdan.
Removed
As a result, the most significant pandemic related impacts to our business occurred in California to our direct install business. During the last week of June 2021, our largest program for LADWP resumed, which was the last program suspended due to Covid-19.
Added
Changes in those regulatory mandates, goals and terms impact existing and future contracts under which we work with the utilities and can have a significant impact on the company’s ability to generate revenue or the level of effort and cost required to deliver required savings, or both.
Removed
Given the uncertainties associated with the duration of the pandemic, we cannot reasonably estimate the ultimate impacts of Covid-19 and efforts to limit its spread on our business, financial condition, results of operations or cash flows for the foreseeable future or whether our assumptions used to estimate our future liquidity requirements will be correct.
Added
Those changes could have the effect of making our utility contracts more or less profitable and increase or decrease the demand for our services. ​ Demand for our services is cyclical and vulnerable to economic downturns.
Removed
The extent of the impact of the Covid-19 pandemic on our business and financial results will depend on future developments, including the duration, severity and spread of the pandemic, health and safety actions taken to contain its spread, any possible resurgence of Covid-19 that may occur and how quickly and to what extent normal economic and operating conditions can resume within the markets in which we operate, each of which are highly uncertain at this time and outside of our control.
Added
In fiscal year 2020, and during part of the fiscal year 2021, the Covid-19 pandemic impacted the energy services industry and our results of operations.
Removed
Even after the Covid-19 pandemic has ultimately subsided, we may continue to experience adverse impacts to our business and financial results as a result of its global economic impact, including any economic downturn or recession that has occurred or may occur in the future.
Added
Restrictive covenants in our Credit Agreement may restrict our ability to pursue certain business strategies .
Removed
Under our time-and-material contracts, we are generally paid for our efforts at negotiated hourly billing rates for our staff, plus reimbursement for subcontractors and other direct costs.
Added
On one occasion, we secured waivers from our lenders in order to waive non-compliance with certain financial covenants under our Credit Agreement, and we cannot guarantee that in the future we will be able to secure waivers in the event of non-compliance.
Removed
If we are unable to accurately estimate and manage our costs, we may incur losses on our contracts, which could decrease our operating margins and significantly reduce or eliminate our profits.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES Our corporate headquarters is located at 2401 East Katella Avenue, Anaheim, California, where we lease approximately 18,000 square feet of office space. In addition, we lease office space in 47 other locations nationwide, principally in California and New York, and also have one office in Canada.
Biggest changeITEM 2. PROPERTIES Our corporate headquarters is located at 2401 East Katella Avenue, Anaheim, California, where we lease approximately 18,000 square feet of office space. In addition, we lease office space in 50 other locations nationwide, principally in California and New York, and also have one office in Canada.
In total, our facilities contain approximately 262,000 square feet of office space and are subject to leases that expire through 2027. We rent a small portion of this total space on a month-to-month basis.
In total, our facilities contain approximately 255,000 square feet of office space and are subject to leases that expire through 2027. We rent a small portion of this total space on a month-to-month basis.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeHowever, in the opinion of our management, after consulting with legal counsel, and taking into account insurance coverage, the ultimate liability related to current outstanding claims and lawsuits is not expected to have a material adverse effect on our financial statements. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. ​ 32 Table of Contents PART II
Biggest changeHowever, in the opinion of our management, after consulting with legal counsel, and taking into account insurance coverage, the ultimate liability related to current outstanding claims and lawsuits is not expected to have a material adverse effect on our financial statements. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. ​ 31 Table of Contents PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeFINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 55 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 105 ITEM 9A. CONTROLS AND PROCEDURES 105 ITEM 9B. OTHER INFORMATION 106 ITEM 9C . DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS 106 ​ PART III ​ ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 107 ITEM 11.
Biggest changeFINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 53 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 102 ITEM 9A. CONTROLS AND PROCEDURES 102
ITEM 4. MINE SAFETY DISCLOSURES 32 ​ PART II ​ ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 33 ITEM 6. RESERVED 35 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 36 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 53 ITEM 8.
ITEM 4. MINE SAFETY DISCLOSURES 31 ​ PART II ​ ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 32 ITEM 6. RESERVED 34 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 35 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 52 ITEM 8.
Removed
EXECUTIVE COMPENSATION 107 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS 107 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 107 ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES 107 ​ PART IV ​ ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES 108 ITEM 16.
Removed
FORM 10-K SUMMARY 110 ​ ​ ​ i Table of Contents CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION This Annual Report on Form 10-K (this “10-K”) contains statements that constitute forward-looking statements as that term is defined by the Private Securities Litigation Reform Act of 1995, as amended.
Removed
These statements concern our business, operations and financial performance and condition as well as our plans, objectives and expectations for our business operations and financial performance and condition, which are subject to risks and uncertainties. All statements other than statements of historical fact included in this 10-K are forward-looking statements.
Removed
These statements may include words such as “aim,” “anticipate,” “assume,” “believe,” “can have,” “could,” “due,” “estimate,” “expect,” “goal,” “intend,” “likely,” “may,” “objective,” “plan,” “potential,” “positioned,” “predict,” “should,” “target,” “will,” “would” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events or trends.
Removed
For example, all statements we make relating to our plans and objectives for future operations, growth or initiatives and strategies are forward-looking statements. These forward-looking statements are based on current expectations, estimates, forecasts and projections about our business and the industry in which we operate and our management’s beliefs and assumptions.
Removed
We derive many of our forward-looking statements from our own operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that predicting the impact of known factors is very difficult, and we cannot anticipate all factors that could affect our actual results.
Removed
All of our forward-looking statements are subject to risks and uncertainties that may cause our actual results to differ materially from our expectations.
Removed
Important factors that could cause actual results to differ materially from our expectations include, but are not limited to: ● the extent to which the coronavirus (“Covid-19”) pandemic and measures taken to contain its spread ultimately impact our business, results of operation and financial condition, including the speed with which our various direct install programs for small businesses are able to resume normal operations following government mandated shutdowns and phased re-openings; ● our ability to adequately complete projects in a timely manner; ● our ability to compete successfully in the highly competitive energy efficiency services market; ● our reliance on work from our top ten clients; ● changes in state, local and regional economies and government budgets; ● our ability to win new contracts, to renew existing contracts and to compete effectively for contracts awarded through bidding processes; ● our ability to successfully integrate our acquisitions and execute on our growth strategy; ● our ability to make principal and interest payments on our outstanding debt as they come due and to comply with the financial covenants contained in our debt agreements; ● our ability to obtain financing and to refinance our outstanding debt as it matures, and ● our ability to attract and retain managerial, technical, and administrative talent.
Removed
The above is not a complete list of factors or events that could cause actual results to differ from our expectations, and we cannot predict all of them.
Removed
All written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements disclosed under “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Annual Report on Form 10-K, as such disclosures may be amended, supplemented or superseded from time to time by other reports we file with the Securities and Exchange Commission, including subsequent Annual Reports on Form 1 Table of Contents 10-K and Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and public communications.
Removed
You should evaluate all forward-looking statements made in this Annual Report on Form 10-K and otherwise in the context of these risks and uncertainties. Potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on any forward-looking statements we make.
Removed
These forward-looking statements speak only as of the date of this Annual Report on Form 10-K and are not guarantees of future performance or developments and involve known and unknown risks, uncertainties and other factors that are in many cases beyond our control.
Removed
Except as required by law, we undertake no obligation to update or revise any forward-looking statements publicly, whether as a result of new information, future developments or otherwise. ​ ​ ​ 2 Table of Contents PART I

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePerformance Graph The following graph compares the 5-year cumulative total stockholder return of our common stock with the cumulative total return of the Nasdaq Composite and a customized peer group.
Biggest changePerformance Graph The following graph compares the 5-year cumulative total stockholder return of our common stock with the cumulative total return of the Nasdaq Composite and a customized peer group. The companies included in our customized peer group represent our definitive Proxy peer group which is reviewed annually and revised as necessary.
Stockholders As of March 9, 2022, there were 141 stockholders of record of our common stock. This number does not include persons who hold our common stock in nominee or “street name” accounts through brokers or banks. Dividends We did not declare or pay cash dividends on our common stock in fiscal years 2021, 2020 or 2019.
Stockholders As of March 8, 2023, there were 158 stockholders of record of our common stock. This number does not include persons who hold our common stock in nominee or “street name” accounts through brokers or banks. Dividends We did not declare or pay cash dividends on our common stock in fiscal years 2022, 2021, or 2020.
An investment of $100, with reinvestment of all dividends, is assumed to have been made in our common stock, in the peer group and in the Nasdaq Composite on December 31, 2016, and the relative performance of each is tracked through and including December 31, 2021.
An investment of $100, with reinvestment of all dividends, is assumed to have been made in our common stock, in the peer group, and in the Nasdaq Composite on December 29, 2017, and the relative performance of each is tracked through and including December 30, 2022.
The stock price performance shown in the graph is not necessarily indicative of future stock price performance. Recent Sales of Unregistered Securities None. Issuer Repurchases of Equity Securities None. ​ ​ ​ 34 Table of Contents
The stock price performance shown in the graph is not necessarily indicative of future stock price performance. 32 Table of Contents Recent Sales of Unregistered Securities None.
The customized peer group consists of: Ameresco, Inc., Charah Solutions, Inc., Cypress Environmental Partners, L.P., Exponent, Inc., Hill International, Inc., Limbach Holdings, Inc., NV5 Global, Inc., RCM Technologies, Inc., and Resources Connection, Inc. 33 Table of Contents The peer group investment is weighted by market capitalization as of December 31, 2016 and is adjusted monthly.
The old peer group consists of Ameresco, Inc., Charah Solutions, Inc., Cypress Environmental Partners LP, Exponent, Inc., Hill International, Inc., Limbach Holdings, Inc., NV5 Global, Inc., RCM Technologies, Inc., and Resources Connection, Inc. The peer group investment is weighted by market capitalization as of December 29, 2017 and is adjusted monthly.
Added
The customized peer group consists of American Superconductor Corporation, Atlas Technical Consultants, Inc., Bowman Consulting Group Ltd., C3.ai, Inc., Charah Solutions, Inc., Exponent, Inc., FTC Solar, Inc., ICF International, Inc., Limbach Holdings, Inc., Montrose Environmental Group, Inc., NV5 Global, Inc., Orion Energy Systems, Inc., RCM Technologies, Inc., Resource Connection, Inc., and Stem, Inc.
Added
Issuer Repurchases of Equity Securities During the fiscal quarter ended December 30, 2022, we made the following repurchases of shares of our common stock from employees to satisfy tax withholding obligations incurred in connection with the vesting of restricted stock: ​ ​ ​ ​ ​ ​ Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares That May Yet be Purchased Under the Plans or Programs October 1, 2022 – October 28, 2022 2,036 $14.26 — — October 29, 2022 – November 25, 2022 305 $16.70 — — November 26, 2022 – December 30, 2022 — — — — TOTAL 2,341 $14.58 — — ​ ​ ​ ​ 33 Table of Contents

Item 7. Management's Discussion & Analysis

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

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Biggest changeFor additional information, see Part II, Item 8, Note 15, “ Subsequent Events” of the Notes to Consolidated Financial Statements included in the Annual Report on Form 10-K. ​ Results of Operations Summary Comparison of 2021, 2020, and 2019 The following table sets forth, for the periods indicated, certain information derived from our consolidated statements of comprehensive income (1) : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year ​ ​ ​ 2021 ​ 2020 ​ 2019 ​ ​ (in thousands, except percentages) Contract revenue ​ $ 353,755 ​ 100.0 % ​ $ 390,980 ​ 100.0 % ​ $ 443,099 ​ 100.0 % Direct costs of contract revenue: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Salaries and wages ​ ​ 65,648 ​ 18.6 ​ ​ ​ 65,149 ​ 16.7 ​ ​ ​ 64,485 ​ 14.6 ​ Subcontractor services and other direct costs ​ ​ 152,233 ​ 43.0 ​ ​ ​ 196,438 ​ 50.2 ​ ​ ​ 243,641 ​ 55.0 ​ Total direct costs of contract revenue ​ ​ 217,881 ​ 61.6 ​ ​ ​ 261,587 ​ 66.9 ​ ​ ​ 308,126 ​ 69.5 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross profit ​ ​ 135,874 ​ 38.4 ​ ​ ​ 129,393 ​ 33.1 ​ ​ ​ 134,973 ​ 30.5 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ General and administrative expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Salaries and wages, payroll taxes and employee benefits ​ ​ 73,812 ​ 20.9 ​ ​ ​ 71,229 ​ 18.2 ​ ​ ​ 66,303 ​ 15.0 ​ Facilities and facilities related ​ ​ 9,896 ​ 2.8 ​ ​ ​ 10,481 ​ 2.7 ​ ​ ​ 8,568 ​ 1.9 ​ Stock-based compensation ​ ​ 16,563 ​ 4.7 ​ ​ ​ 16,113 ​ 4.1 ​ ​ ​ 12,112 ​ 2.7 ​ Depreciation and amortization ​ ​ 17,146 ​ 4.8 ​ ​ ​ 18,743 ​ 4.8 ​ ​ ​ 15,027 ​ 3.4 ​ Other ​ ​ 27,148 ​ 7.7 ​ ​ ​ 29,054 ​ 7.4 ​ ​ ​ 23,600 ​ 5.3 ​ Total general and administrative expenses ​ ​ 144,565 ​ 40.9 ​ ​ ​ 145,620 ​ 37.2 ​ ​ ​ 125,610 ​ 28.3 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income (loss) from operations ​ ​ (8,691) ​ (2.5) ​ ​ ​ (16,227) ​ (4.2) ​ ​ ​ 9,363 ​ 2.1 ​ Other income (expense): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest expense ​ ​ (3,869) ​ (1.1) ​ ​ ​ (5,068) ​ (1.3) ​ ​ ​ (4,900) ​ (1.1) ​ Other, net ​ ​ 156 ​ 0.0 ​ ​ ​ 1,626 ​ 0.4 ​ ​ ​ 193 ​ 0.0 ​ Total other income (expense) ​ ​ (3,713) ​ (1.0) ​ ​ ​ (3,442) ​ (0.9) ​ ​ ​ (4,707) ​ (1.1) ​ Income (Loss) before income tax expense ​ ​ (12,404) ​ (3.5) ​ ​ ​ (19,669) ​ (5.0) ​ ​ ​ 4,656 ​ 1.1 ​ Income tax expense (benefit) ​ ​ (3,987) ​ (1.1) ​ ​ ​ (5,173) ​ (1.3) ​ ​ ​ (185) ​ (0.0) ​ Net income (loss) ​ $ (8,417) ​ (2.4) ​ ​ $ (14,496) ​ (3.7) ​ ​ $ 4,841 ​ 1.1 ​ ​ (1) Percentages are expressed as a percentage of contract revenue and may not total due to rounding. ​ 38 Table of Contents The following tables provides information about disaggregated revenue of the Company’s two segments Energy and Engineering and Consulting by contract type, client type, and geographical region: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2021 ​ Energy Engineering and Consulting Total ​ (in thousands, except percentage) Contract Type ​ ​ ​ ​ ​ ​ ​ ​ ​ Time-and-materials ​ $ 34,004 ​ $ 52,209 ​ $ 86,213 Unit-based ​ ​ 180,311 ​ ​ 10,688 ​ ​ 190,999 Fixed price ​ ​ 72,069 ​ ​ 4,474 ​ ​ 76,543 Total ​ $ 286,384 ​ $ 67,371 ​ $ 353,755 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Client Type ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial ​ $ 24,541 ​ $ 5,323 ​ $ 29,864 Government ​ ​ 65,249 ​ ​ 61,899 ​ ​ 127,148 Utilities ​ ​ 196,594 ​ ​ 149 ​ ​ 196,743 Total ​ $ 286,384 ​ $ 67,371 ​ $ 353,755 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Geography (1) ​ ​ ​ ​ ​ ​ ​ ​ ​ Domestic ​ $ 286,384 ​ $ 67,371 ​ $ 353,755 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2020 ​ Energy Engineering and Consulting Total ​ (in thousands, except percentage) Contract Type ​ ​ ​ ​ ​ ​ ​ ​ ​ Time-and-materials ​ $ 47,912 ​ $ 53,840 ​ $ 101,752 Unit-based ​ ​ 170,991 ​ ​ 9,195 ​ ​ 180,186 Fixed price ​ ​ 105,275 ​ ​ 3,767 ​ ​ 109,042 Total ​ $ 324,178 ​ $ 66,802 ​ $ 390,980 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Client Type ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial ​ $ 36,212 ​ $ 5,155 ​ $ 41,367 Government ​ ​ 93,821 ​ ​ 61,412 ​ ​ 155,233 Utilities ​ ​ 194,145 ​ ​ 235 ​ ​ 194,380 Total (1) ​ $ 324,178 ​ $ 66,802 ​ $ 390,980 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Geography (1) ​ ​ ​ ​ ​ ​ ​ ​ ​ Domestic ​ $ 324,178 ​ $ 66,802 ​ $ 390,980 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2019 ​ Energy Engineering and Consulting Total ​ (in thousands, except percentage) Contract Type ​ ​ ​ ​ ​ ​ ​ ​ ​ Time-and-materials ​ $ 18,625 ​ $ 54,560 ​ $ 73,185 Unit-based ​ ​ 272,978 ​ ​ 14,391 ​ ​ 287,369 Fixed price ​ ​ 79,112 ​ ​ 3,433 ​ ​ 82,545 Total ​ $ 370,715 ​ $ 72,384 ​ $ 443,099 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Client Type ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial ​ $ 39,311 ​ $ 4,895 ​ $ 44,206 Government ​ ​ 57,020 ​ ​ 67,049 ​ ​ 124,069 Utilities ​ ​ 274,384 ​ ​ 440 ​ ​ 274,824 Total ​ $ 370,715 ​ $ 72,384 ​ $ 443,099 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Geography (1) ​ ​ ​ ​ ​ ​ ​ ​ ​ Domestic ​ $ 370,715 ​ $ 72,384 ​ $ 443,099 ​ ​ (1) Revenue from our Canadian operations were not material for fiscal years 2021, 2020, and 2019. ​ 39 Table of Contents Fiscal Year 2021 Compared to Fiscal Year 2020 Contract revenue.
Biggest changeWe provide financial advisory services for municipal securities but do not provide underwriting services. ​ 35 Table of Contents Results of Operations Summary Comparison of 2022, 2021, and 2020 The following table sets forth, for the periods indicated, certain information derived from our consolidated statements of comprehensive income (1) : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year ​ ​ 2022 ​ 2021 ​ 2020 ​ ​ (in thousands, except percentages) Contract revenue ​ $ 429,138 ​ 100.0 % ​ $ 353,755 ​ 100.0 % ​ $ 390,980 ​ 100.0 % Direct costs of contract revenue: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Salaries and wages ​ ​ 82,972 ​ 19.3 ​ ​ ​ 65,648 ​ 18.6 ​ ​ ​ 65,149 ​ 16.7 ​ Subcontractor services and other direct costs ​ ​ 202,587 ​ 47.2 ​ ​ ​ 152,233 ​ 43.0 ​ ​ ​ 196,438 ​ 50.2 ​ Total direct costs of contract revenue ​ ​ 285,559 ​ 66.5 ​ ​ ​ 217,881 ​ 61.6 ​ ​ ​ 261,587 ​ 66.9 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross profit ​ ​ 143,579 ​ 33.5 ​ ​ ​ 135,874 ​ 38.4 ​ ​ ​ 129,393 ​ 33.1 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ General and administrative expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Salaries and wages, payroll taxes and employee benefits ​ ​ 81,801 ​ 19.1 ​ ​ ​ 73,812 ​ 20.9 ​ ​ ​ 71,229 ​ 18.2 ​ Facilities and facilities related ​ ​ 9,287 ​ 2.2 ​ ​ ​ 9,896 ​ 2.8 ​ ​ ​ 10,481 ​ 2.7 ​ Stock-based compensation ​ ​ 8,373 ​ 2.0 ​ ​ ​ 16,563 ​ 4.7 ​ ​ ​ 16,113 ​ 4.1 ​ Depreciation and amortization ​ ​ 17,489 ​ 4.1 ​ ​ ​ 17,146 ​ 4.8 ​ ​ ​ 18,743 ​ 4.8 ​ Other ​ ​ 33,692 ​ 7.9 ​ ​ ​ 27,148 ​ 7.7 ​ ​ ​ 29,054 ​ 7.4 ​ Total general and administrative expenses ​ ​ 150,642 ​ 35.1 ​ ​ ​ 144,565 ​ 40.9 ​ ​ ​ 145,620 ​ 37.2 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income (loss) from operations ​ ​ (7,063) ​ (1.6) ​ ​ ​ (8,691) ​ (2.5) ​ ​ ​ (16,227) ​ (4.2) ​ Other income (expense): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest expense ​ ​ (5,328) ​ (1.2) ​ ​ ​ (3,869) ​ (1.1) ​ ​ ​ (5,068) ​ (1.3) ​ Other, net ​ ​ 939 ​ 0.2 ​ ​ ​ 156 ​ 0.0 ​ ​ ​ 1,626 ​ 0.4 ​ Total other income (expense) ​ ​ (4,389) ​ (1.0) ​ ​ ​ (3,713) ​ (1.0) ​ ​ ​ (3,442) ​ (0.9) ​ Income (Loss) before income tax expense ​ ​ (11,452) ​ (2.7) ​ ​ ​ (12,404) ​ (3.5) ​ ​ ​ (19,669) ​ (5.0) ​ Income tax expense (benefit) ​ ​ (3,004) ​ (0.7) ​ ​ ​ (3,987) ​ (1.1) ​ ​ ​ (5,173) ​ (1.3) ​ Net income (loss) ​ $ (8,448) ​ (2.0) ​ ​ $ (8,417) ​ (2.4) ​ ​ $ (14,496) ​ (3.7) ​ ​ (1) Percentages are expressed as a percentage of contract revenue and may not total due to rounding. ​ 36 Table of Contents The following tables provides information about disaggregated revenue of our two segments, Energy and Engineering and Consulting by contract type, client type, and geographical region: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 ​ Energy Engineering and Consulting Total ​ (in thousands, except percentage) Contract Type ​ ​ ​ ​ ​ ​ ​ ​ ​ Time-and-materials ​ $ 32,491 ​ $ 53,584 ​ $ 86,075 Unit-based ​ ​ 180,509 ​ ​ 14,296 ​ ​ 194,805 Fixed price ​ ​ 144,460 ​ ​ 3,798 ​ ​ 148,258 Total (1) ​ $ 357,460 ​ $ 71,678 ​ $ 429,138 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Client Type ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial ​ $ 29,782 ​ $ 5,566 ​ $ 35,348 Government ​ ​ 126,494 ​ ​ 65,969 ​ ​ 192,463 Utilities ​ ​ 201,184 ​ ​ 143 ​ ​ 201,327 Total (1) ​ $ 357,460 ​ $ 71,678 ​ $ 429,138 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Geography (1) ​ ​ ​ ​ ​ ​ ​ ​ ​ Domestic ​ $ 357,460 ​ $ 71,678 ​ $ 429,138 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2021 ​ Energy Engineering and Consulting Total ​ (in thousands, except percentage) Contract Type ​ ​ ​ ​ ​ ​ ​ ​ ​ Time-and-materials ​ $ 34,004 ​ $ 52,209 ​ $ 86,213 Unit-based ​ ​ 180,311 ​ ​ 10,688 ​ ​ 190,999 Fixed price ​ ​ 72,069 ​ ​ 4,474 ​ ​ 76,543 Total (1) ​ $ 286,384 ​ $ 67,371 ​ $ 353,755 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Client Type ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial ​ $ 24,541 ​ $ 5,323 ​ $ 29,864 Government ​ ​ 65,249 ​ ​ 61,899 ​ ​ 127,148 Utilities ​ ​ 196,594 ​ ​ 149 ​ ​ 196,743 Total (1) ​ $ 286,384 ​ $ 67,371 ​ $ 353,755 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Geography (1) ​ ​ ​ ​ ​ ​ ​ ​ ​ Domestic ​ $ 286,384 ​ $ 67,371 ​ $ 353,755 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2020 ​ Energy Engineering and Consulting Total ​ (in thousands, except percentage) Contract Type ​ ​ ​ ​ ​ ​ ​ ​ ​ Time-and-materials ​ $ 47,912 ​ $ 53,840 ​ $ 101,752 Unit-based ​ ​ 170,991 ​ ​ 9,195 ​ ​ 180,186 Fixed price ​ ​ 105,275 ​ ​ 3,767 ​ ​ 109,042 Total (1) ​ $ 324,178 ​ $ 66,802 ​ $ 390,980 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Client Type ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial ​ $ 36,212 ​ $ 5,155 ​ $ 41,367 Government ​ ​ 93,821 ​ ​ 61,412 ​ ​ 155,233 Utilities ​ ​ 194,145 ​ ​ 235 ​ ​ 194,380 Total (1) ​ $ 324,178 ​ $ 66,802 ​ $ 390,980 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Geography (1) ​ ​ ​ ​ ​ ​ ​ ​ ​ Domestic ​ $ 324,178 ​ $ 66,802 ​ $ 390,980 ​ ​ (1) Revenue from our Canadian operations were not material for fiscal years 2022, 2021, and 2020. ​ 37 Table of Contents Fiscal Year 2022 Compared to Fiscal Year 2021 Contract revenue.
Cash flows used in financing activities for fiscal year 2020 were primarily attributable to repayments of $42.0 million under our term loan facility and revolving line of credit, a payment of $2.9 million in employee payroll taxes related to the vesting of performance-based restricted stock units, and payments of $1.4 million for contingent consideration related to prior acquisitions, partially offset by $24.0 million of borrowings under our revolving line of credit.
Cash flows used in financing activities for fiscal year 2020 were primarily attributable to repayments of $42.0 million under our Term A Loan and revolving line of credit, a payment of $2.9 million in employee payroll taxes related to the vesting of performance-based restricted stock units, and payments of $1.4 million for contingent consideration related to prior acquisitions, partially offset by $24.0 million of borrowings under our Revolving Credit Facility.
See Part II, Item 8, Note 5, Debt Obligations , of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K, for information regarding our indebtedness, including information about new borrowings and repayments, principal repayment terms, interest rates, covenants, and other key terms of our outstanding indebtedness.
Outstanding Indebtedness See Part II, Item 8, Note 5, “ Debt Obligations ”, of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for information regarding our indebtedness, including information about new borrowings and repayments, principal repayment terms, interest rates, covenants, and other key terms of our outstanding indebtedness.
The interfaces and synergies between these segments are important elements of our strategy to design and deliver trusted, comprehensive, innovative, and proven solutions for our customers. Our Energy segment provides specialized, innovative, comprehensive energy solutions to businesses, utilities, state agencies, municipalities, and non-profit organizations in the U.S.
The interfaces and synergies between these segments are important elements of our strategy to design and deliver trusted, comprehensive, innovative, and proven solutions and services for our customers. Our Energy segment provides specialized, innovative, comprehensive energy solutions to businesses, utilities, state agencies, municipalities, and non-profit organizations in the U.S.
Recent Accounting Standards ​ For a description of recently issued and adopted accounting pronouncements, including adoption dates and expected effects on our results of operations and financial condition, see Part II, Item 8, Note 2, “ Recent Accounting Pronouncements ”, of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K. ​ 52 Table of Contents
Recent Accounting Standards ​ For a description of recently issued and adopted accounting pronouncements, including adoption dates and expected effects on our results of operations and financial condition, see Part II, Item 8, Note 2, “ Recent Accounting Pronouncements ”, of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K. ​ 51 Table of Contents
Cash flows used in financing activities for fiscal year 2021 were primarily attributable to repayments of $13.0 million under our term loan facility and revolving line of credit, increases of $6.6 million for contingent consideration related to prior acquisitions, payments of taxes on stock grants of $3.1 million, payments on notes payable of $1.9 million, partially offset by $2.7 million in proceeds from sales of common stock under our employee stock purchase plan and $1.9 million in proceeds from stock option exercise.
Cash flows used in financing activities for fiscal year 2021 were primarily attributable to principal repayments of $13.0 million under our Term A Loan and Revolving Credit Facility, increases of $6.6 million for contingent consideration related to prior acquisitions, payments of taxes on stock grants of $3.1 million, payments on notes payable of $1.9 million, partially offset by $2.7 million in proceeds from sales of common stock under our employee stock purchase plan and $1.9 million in proceeds from stock option exercise.
General and Administrative Expenses G&A expenses include the costs of the marketing and support staffs, other marketing expenses, management and administrative personnel costs, payroll taxes, bonuses and employee benefits for all of our employees and the portion of salaries and wages not allocated to direct costs of contract revenue for those employees who provide our services.
General and Administrative Expenses G&A expenses include the costs of the marketing and support staff, other marketing expenses, management and administrative personnel costs, payroll taxes, bonuses and employee benefits for all of our employees and the portion of salaries and wages not allocated to direct costs of contract revenue for those employees who provide our services.
We did not recognize any goodwill impairment charges in fiscal years 2021, 2020, or 2019. We test our goodwill for impairment at the level of our reporting units, which are components of our operating segments.
We did not recognize any goodwill impairment charges in fiscal years 2022, 2021, or 2020. We test our goodwill for impairment at the level of our reporting units, which are components of our operating segments.
Management must make assumptions and estimates regarding labor productivity and availability, the complexity of the work to be performed, the cost and availability of materials, the performance of subcontractors, and the availability and timing of funding from the customer, among other variables. 49 Table of Contents We recognize adjustments in estimated profit on contracts under the cumulative catch-up method.
Management must make assumptions and estimates regarding labor productivity and availability, the complexity of the work to be performed, the cost and availability of materials, the performance of subcontractors, and the availability and timing of funding from the customer, among other variables. We recognize adjustments in estimated profit on contracts under the cumulative catch-up method.
Any reduction in the estimated fair value of our Energy segment could result in an impairment charge of goodwill associated with this segment in future periods. Business Combinations The acquisition method of accounting for business combinations requires us to use significant estimates and assumptions, including fair value estimates, as of the business combination date.
Any reduction in the estimated fair value of our Energy segment could result in an impairment charge of goodwill associated with this segment in future periods. 49 Table of Contents Business Combinations The acquisition method of accounting for business combinations requires us to use significant estimates and assumptions, including fair value estimates, as of the business combination date.
We will continue to 50 Table of Contents perform our quantitative and qualitative goodwill impairment test by comparing the fair value of each reporting unit to its carrying amount, but if we are required to recognize a goodwill impairment charge, under the new standard the amount of the charge will be calculated by subtracting the reporting unit’s fair value from its carrying amount.
We will continue to perform our quantitative and qualitative goodwill impairment test by comparing the fair value of each reporting unit to its carrying amount, but if we are required to recognize a goodwill impairment charge, under the new standard the amount of the charge will be calculated by subtracting the reporting unit’s fair value from its carrying amount.
Subcontractor services and other direct costs decreased $44.2 million, or 22.5%, in fiscal year 2021 compared to fiscal year 2022, primarily due to the decrease in construction management activities. ​ As a percentage of contract revenue, salaries and wages increased to 18.6% of contract revenue for fiscal year 2021 from 16.7% for fiscal year 2020 and subcontractor services and other direct costs decreased to 43.0% of contract revenue for fiscal year 2021 from 50.2% of contract revenue for the fiscal year 2020, for the reasons noted above. ​ Gross Profit .
Subcontractor services and other direct costs decreased $44.2 million, or 22.5%, in fiscal year 2021 compared to fiscal year 2020, primarily due to the decrease in construction management activities. ​ As a percentage of contract revenue, salaries and wages increased to 18.6% of contract revenue for fiscal year 2021 from 16.7% for fiscal year 2020 and subcontractor services and other direct costs decreased to 43.0% of contract revenue for fiscal year 2021 from 50.2% of contract revenue for the fiscal year 2020, for the reasons noted above. 39 Table of Contents ​ Gross Profit .
In addition, the percentage-of-completion method is a common method of revenue recognition in our industry. Many of our fixed price contracts involve a high degree of subcontracted fixed price effort and are relatively short in duration, thereby lowering the risks of not properly estimating the percent complete.
In addition, the percentage-of-completion method is a common method of revenue recognition in our industry. 46 Table of Contents Many of our fixed price contracts involve a high degree of subcontracted fixed price effort and are relatively short in duration, thereby lowering the risks of not properly estimating the percent complete.
Our energy efficiency services include comprehensive audit and surveys, program design, master planning, demand reduction, grid optimization, benchmarking analyses, design engineering, construction management, performance contracting, installation, alternative financing, measurement and verification services, and advances in software and data analytics.
Our energy efficiency services include comprehensive audit and surveys, program design, master planning, demand reduction, grid optimization, benchmarking analyses, design engineering, construction management, performance contracting, installation, alternative financing, measurement and verification services, and advances in software and data analytics for long-term planning.
This evaluation requires significant judgment and the decision to combine a group of 48 Table of Contents contracts or separate a single contract into multiple performance obligations could change the amount of revenue and profit recorded in a given period.
This evaluation requires significant judgment and the decision to combine a group of contracts or separate a single contract into multiple performance obligations could change the amount of revenue and profit recorded in a given period.
Through engineering, program management, policy advisory, and software and data management, we design and deliver trusted, comprehensive, innovative, and proven solutions to improve efficiency, resiliency, and sustainability in energy and infrastructure to our customers. Our broad portfolio of services operates within two reporting segments: (1) Energy and (2) Engineering and Consulting.
Through engineering, program management, policy advisory, and software and data management, we plan, design and deliver trusted, comprehensive, innovative, and proven solutions to improve efficiency, resiliency, and sustainability in energy and infrastructure to our clients. Our broad portfolio of services operates within two financial reporting segments: (1) Energy and (2) Engineering and Consulting.
We have, however, an administrative services agreement with Genesys in which 44 Table of Contents we provide Genesys with ongoing administrative, operational and other non-professional support services. We manage Genesys and have the power to direct the activities that most significantly impact Genesys’ performance, in addition to being obligated to absorb expected losses from Genesys.
We have, however, an administrative services agreement with Genesys in which we provide Genesys with ongoing administrative, operational and other non-professional support services. We manage Genesys and have the power to direct the activities that most significantly impact Genesys’ performance, in addition to being obligated to absorb expected losses from Genesys.
See part II, Item 8, Note 5, “ Debt Obligations ”, and Note 15, “ Subsequent Events ”, of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for information regarding our indebtedness, including information about new borrowings and repayments, principal repayment terms, interest rates, covenants, and other key terms of our outstanding indebtedness.
See Part II, Item 8, Note 5, “ Debt Obligations” , of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K, for information regarding our indebtedness, including information about new borrowings and repayments, principal repayment terms, interest rates, covenants, and other key terms of our outstanding indebtedness.
We utilize the residual approach by which it estimates the standalone selling price by reference to the total transaction price less the sum of the observable standalone selling prices of other goods or services promised in the contract.
We utilize the residual approach by which we estimate the standalone selling price by reference to the total transaction price less the sum of the observable standalone selling prices of other goods or services promised in the contract.
Cash Flows from Operating Activities Cash flows provided by operating activities were $9.8 million, $47.0 million, and $11.6 million for fiscal years 2021, 2020, and 2019, respectively. Cash flow from operating activities primarily consists of net income, adjusted for non-cash charges, such as depreciation and amortization and stock-based compensation, plus or minus changes in operating assets and liabilities.
Cash Flows from Operating Activities Cash flows provided by operating activities were $9.4 million, $9.8 million, and $47.0 million for fiscal years 2022, 2021, and 2020, respectively. Cash flow from operating activities primarily consists of net income, adjusted for non-cash charges, such as depreciation and amortization and stock-based compensation, plus or minus changes in current operating assets and liabilities.
In addition, our policy is not to enter into futures or forward contracts. Finally, we do not have any majority-owned subsidiaries or any interests in, or relationships with, any special-purpose entities that are not included in the consolidated financial statements.
Off-Balance Sheet Arrangements We do not have any off-balance sheet financing arrangements or liabilities. In addition, our policy is not to enter into futures or forward contracts. Finally, we do not have any majority-owned subsidiaries or any interests in, or relationships with, any special-purpose entities that are not included in the consolidated financial statements.
G&A expenses also include facility costs, depreciation and amortization, professional services, legal and accounting fees and administrative operating costs. Within G&A expenses, “Other” includes expenses such as professional services, legal and accounting, computer costs, travel and entertainment, marketing costs and acquisition costs. We expense general and administrative costs when incurred.
G&A expenses also include facility costs, depreciation and amortization, professional services, legal and accounting fees and administrative operating costs. Within G&A expenses, “Other” includes expenses such as professional services, legal and accounting, computer costs, travel and entertainment, marketing costs and acquisition costs.
We provide quality of workmanship warranties to customers that are included in the sale and are not priced or sold separately or do not provide customers with a service in addition to assurance of compliance with agreed-upon specifications and industry standards. We do not consider these types of warranties to be separate performance obligations.
We provide quality of workmanship warranties to customers that are included in the sale and are not priced or sold separately or do not provide customers with a service in addition to assurance of compliance with agreed-upon specifications and industry standards.
Insurance Premiums 45 Table of Contents We have also financed, from time to time, insurance premiums by entering into unsecured notes payable with insurance companies.
Insurance Premiums We have also financed, from time to time, insurance premiums by entering into unsecured notes payable with insurance companies.
We recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined, including the effect on earnings of changes in depreciation, amortization or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. 51 Table of Contents During fiscal years 2021 and 2020, we did not have any acquisitions.
We recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined, including the effect on earnings of changes in depreciation, amortization or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date.
Costs related to un-priced change orders are expensed when incurred, and recognition of the related revenue is based on the assessment above of whether or not a contract modification has occurred. Estimated profit for un-priced change orders is recognized only if collection is probable.
Costs related to un-priced change orders are expensed when incurred, and recognition of the related revenue is based on the assessment above of whether or not a contract modification has occurred.
As resources and infrastructures undergo continuous change, we help organizations and their communities evolve and thrive by providing a wide range of technical services for energy solutions and government infrastructure.
As resource and infrastructure needs undergo continuous change, we help organizations and their communities evolve and thrive by providing a wide range of technical services for energy solutions, greenhouse gas reduction, and government infrastructure.
Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between the financial reporting basis and tax basis of our assets and liabilities, subject to a judgmental assessment of the recoverability of deferred tax assets.
Deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between the financial reporting basis and tax basis of our assets and liabilities, subject to a judgmental assessment of the recoverability of deferred tax assets.
Critical Accounting Policies This discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the U.S. (“GAAP”).
We expense general and administrative costs when incurred. 45 Table of Contents Critical Accounting Policies This discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the U.S. (“GAAP”).
While we have a large volume of contracts, the renewal, termination or modification of a contract, in particular contracts with Consolidated Edison, the City of Elk Grove, DASNY, and utility programs associated with Los Angeles Department of Water and Power and Duke Energy Corp., may have a material effect on our consolidated operations. 46 Table of Contents Some of our contracts include certain performance guarantees, such as a guaranteed energy saving quantity.
While we have a large volume of contracts, the renewal, termination or modification of a contract, in particular contracts with Consolidated Edison, DASNY, and utility programs associated with LADWP, Southern California Edison, and Duke Energy Corp., may have a material effect on our consolidated operations. Some of our contracts include certain performance guarantees, such as a guaranteed energy saving quantity.
Interest Rate Swap See Part II, Item 7A, “ Quantitative and Qualitative Disclosures About Market Risk ”, and Note 4, “ Derivative Financial Instruments ”, to the Notes of Consolidated Financial Statements included in this Annual Report on Form 10-K for information regarding our interest rate swap.
For more information, see Part I, Item 7A, “ Quantitative and Qualitative Disclosures About Market Risk ”, and Note 4, “ Derivatives ”, to the Notes of Consolidated Financial Statements included in this Annual Report on Form 10-K.
Contract assets also include retainage amounts withheld from billings to our clients pursuant to provisions in our contracts and other revenues earned but not billed in the current period.
Contract assets also include retainage amounts withheld from billings to our clients pursuant to provisions in our contracts and other revenues earned but not billed in the current period. Contract liabilities consist of advance payments and billings in excess of revenue recognized and deferred revenue.
Our Engineering and Consulting segment provides civil engineering-related construction management, building and safety, city engineering, city planning, civil design, geotechnical, material testing and other engineering consulting services to our clients. Our engineering services include rail, port, water, mining and other civil engineering projects.
Our Engineering and Consulting segment provides civil engineering-related construction management, building and safety, city engineering office management, city planning, civil design, geotechnical, material testing and other engineering consulting services to our clients. Our engineering services include traffic, bridges, rail, port, water, mining and other civil engineering projects. We also provide economic and financial consulting to public agencies.
Cash flows provided by operating activities for fiscal year 2020 resulted primarily as a result of improvements in cash collections, reductions in working capital requirements as a result of the reduction of revenues from the suspension of our small business energy programs, and incremental operating cash flow from our acquisitions of E3, Inc. and Onsite Energy.
Cash flows provided by operating activities for fiscal year 2020 resulted primarily as a result of improvements in cash collections, reductions in working capital requirements as a result of the reduction of revenues from the suspension of our small business energy programs, and incremental operating cash flow from our acquisitions of E3, Inc. and Onsite Energy. 41 Table of Contents Cash Flows from Investing Activities Cash flows used in investing activities were $9.5 million, $8.5 million and $5.1 million for fiscal years 2022, 2021, and 2020, respectively.
Cash flows used in investing activities for fiscal year 2020 were primarily due to cash paid for the purchase of equipment, the enhancement of internal operating software, and leasehold improvements. Cash flows used in investing activities for fiscal year 2019 were primarily due to cash paid for the acquisitions of The Weidt Group, Onsite Energy, and E3, Inc.
Cash flows used in investing activities for fiscal year 2020 were primarily due to cash paid for the purchase of computers and other equipment, the enhancement of internal operating software, and leasehold improvements.
The increase in G&A expenses consisted of an increase of $12.2 million in the Energy segment and an increase of $8.5 million in the unallocated corporate expenses, partially offset by a decrease of $0.7 million in the Engineering and Consulting segment.
The increase in G&A expenses consisted of an increase of $9.2 million in the Energy segment combined with an increase of $2.3 million in the Engineering and Consulting segment, partially offset by a decrease of $5.4 million in unallocated corporate expenses.
For further discussion of our income taxes, see Part II, Item 8, Note 11, “ Income Taxes ” of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.
We recognize interest and penalties related to unrecognized tax benefits in income tax expense. 50 Table of Contents For further discussion of our income taxes, see Part II, Item 8, Note 11, “ Income Taxes ” of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.
General and administrative (“G&A”) expenses decreased by $1.1 million, or 0.7%, in the fiscal year 2021 compared to the fiscal year 2020.
G&A expenses decreased by $1.1 million, or 0.7%, in the fiscal year 2021 compared to the fiscal year 2020.
Cash Flows from Financing Activities Cash flows used in financing activities were $18.5 million and $19.0 million for fiscal year 2021 and 2020, as compared to cash flows provided by financing activities of $56.9 million for fiscal 2019.
Cash Flows from Financing Activities Cash flows provided by financing activities was $8.4 million in fiscal year 2022 compared to cash flows used in financing activities of $18.5 million, and $19.0 million for fiscal years 2021, and 2020, respectively.
See part II, Item 8, Note 5, “ Debt Obligations ”, of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for information regarding our financing arrangements related to our insurance premiums.
See part II, Item 8, Note 5, “ Debt Obligations ”, of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for information regarding our financing arrangements related to our insurance premiums. 43 Table of Contents Interest Rate Swap From time to time, we enter into interest rate swap agreements to moderate our exposure to fluctuations in interest rates underlying our variable rate debt.
Accordingly, we are the primary beneficiary of Genesys and consolidate Genesys as a variable interest entity. Short and Long-term Uses of Cash General Our principal uses of cash are to fund operating expenses and pay down outstanding debt. From time to time, we also use cash to help fund business acquisitions.
Accordingly, we are the primary beneficiary of Genesys and consolidate Genesys as a variable interest entity. 42 Table of Contents Short and Long-term Uses of Cash General Our principal uses of cash are to fund operating expenses, support working capital requirements, finance capital expenditures, and pay down outstanding debt.
As a result of the above factors, our net loss was $14.5 million for the fiscal year ended 2020, as compared to a net income of $4.8 million for the fiscal year 2019.
Our net loss was $8.4 million for fiscal 2021, as compared to a net loss of $14.5 million for fiscal 2020.
Of the $20.0 million increase in G&A expenses, $4.9 million resulted from an increase in salaries and wages, payroll taxes and employee benefits, $4.0 million resulted from an increase in stock-based compensation, $3.7 million resulted from an increase in depreciation and amortization, $1.9 million resulted from an increase in facilities and facility related expenses, and $5.4 million resulted from an increase in other general and administrative expenses.
Within G&A expenses, the increase of $2.6 million for salaries and wages, payroll taxes and employee benefits, combined with the increase of $0.5 million in stock-based compensation was offset by the decrease of $0.6 million in facilities and facility related expenses, combined with the decrease of $1.6 million in depreciation and amortization and the decrease of $1.9 million in other general and administrative expenses.
The tax benefit is measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. We recognize interest and penalties related to unrecognized tax benefits in income tax expense.
The tax benefit is measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.
Billing practices are governed by the contract terms of each project based upon costs incurred, achievement of milestones or pre-agreed schedules. Billings do not necessarily correlate with revenue recognized using the percentage-of-completion method of revenue recognition.
Billing practices are governed by the contract terms of each project based upon costs incurred, achievement of milestones or pre-agreed schedules.
We also provide economic and financial consulting to public agencies along with national preparedness and interoperability services, communications, and technology solutions. Lastly, we supplement the engineering services that we offer our clients by offering expertise and support for the various financing techniques public agencies utilize to finance their operations and infrastructure.
Lastly, we supplement the engineering services that we offer our clients by offering expertise and support for the various financing techniques public agencies utilize to finance their operations and infrastructure. We also support the mandated reporting and other requirements associated with these financings.
Our cash and cash equivalents are impacted by the timing of when we pay expenses as reflected in the change in our outstanding accounts payable and accrued expenses.
From time to time, we also use cash to help fund business acquisitions. Our cash and cash equivalents are impacted by the timing of when we are paid by our customers for services rendered and when we pay expenses as reflected in the change in our outstanding accounts payable and accrued expenses.
We have assumed no future borrowings or repayments (other than at maturity) for purposes of this table. (2) Borrowings under our Delayed Draw Term Loan bear interest at a variable rate. Future interest payments on our Delayed Draw Term Loan Facility are estimated using floating rates in effect as of December 31, 2021.
We have assumed no future borrowings or repayments (other than at maturity) for purposes of this table. Our Credit Facilities are scheduled to mature on June 26, 2024. (2) Borrowings under our Delayed Draw Term Loan bear interest at a variable rate.
Revenue on our time-and-materials and unit-based contracts are recognized as the work is performed in accordance with specific terms of the contract.
The agreements we enter into with our clients typically incorporate one of three principal types of pricing provisions: time-and-materials, unit-based, and fixed price. Revenue on our time-and-materials and unit-based contracts are recognized as the work is performed in accordance with specific terms of the contract.
Accounts receivable are carried at original invoice amount less an estimate made for doubtful accounts based upon our review of all outstanding amounts on a quarterly basis.
Billings do not necessarily correlate with revenue recognized using the percentage-of-completion method of revenue recognition. 48 Table of Contents Accounts receivable are carried at original invoice amount less an estimate made for doubtful accounts based upon our review of all outstanding amounts on a quarterly basis.
Cash Flows from Investing Activities Cash flows used in investing activities were $8.5 million for fiscal year 2021, as compared to $5.0 million and $78.3 million for fiscal years 2020 and 2019, respectively. Cash flows used in investing activities for fiscal year 2021 were primarily due to cash paid for software development cost and the purchase of equipment.
Cash flows used in investing activities for fiscal year 2022 were primarily due to cash paid for the development of software and the purchase of computers and other equipment. Cash flows used in investing activities for fiscal year 2021 were primarily due to cash paid for software development cost and the purchase of computers and other equipment.
In some cases, we have a master service or blanket agreement with a customer under which each task order releases us to perform specific portions of the overall scope in the service contract. Each task order is typically accounted for as a separate contract because the task order establishes the enforceable rights and obligations, and payment terms.
We do not consider these types of warranties to be separate performance obligations. 47 Table of Contents In some cases, we have a master service or blanket agreement with a customer under which each task order releases us to perform specific portions of the overall scope in the service contract.
We recorded an income tax benefit of $5.2 million for the fiscal year 2020 compared to a tax benefit of $0.2 million for the fiscal year 2019. The effective tax rate for fiscal year 2020 was (26.3)% as compared to (4.0)% for fiscal year 2019.
Income tax expense (benefit) . We recorded an income tax benefit of $3.0 million for fiscal year 2022 compared to a tax benefit of $4.0 million for fiscal year 2021.
We recognize revenues in accordance with ASU 2014-09, Revenue from Contracts with Customer, codified as ASC Topic 606 and the related amendments (collectively, “ASC 606”).
Contract Accounting We enter into contracts with our clients that contain various types of pricing provisions, including fixed price, time-and-materials, and unit-based provisions. We recognize revenues in accordance with ASU 2014-09, Revenue from Contracts with Customer, codified as ASC Topic 606 and the related amendments (collectively, “ASC 606”).
As of December 31, 2021, approximately 24% of our contracts are time-and-materials contracts and approximately 54% of our contracts are unit-based contracts, compared to approximately 26% for time-and-materials contracts and approximately 46% for unit-based contracts as of January 1, 2021.
As of December 30, 2022, 20% of our contracts are time-and-materials contracts, 45% are unit-based contracts, and 35% are fixed price contracts, compared to 24% for time-and-materials contracts, 54% for unit-based contracts, and 22% for fixed price contract s, as of December 31, 2021.
As a percentage of contract revenue, operating loss was 4.2% for the fiscal year 2020 compared to an operating income of 2.1% for the fiscal year 2019.
Income (loss) from operations . Operating loss was $7.1 million for fiscal year 2022, compared to an operating loss of $8.7 million for fiscal year 2021, as a result of the factors noted above. As a percentage of contract revenue, the operating loss improved to 1.6% for fiscal year 2022 from an operating loss of 2.5% for fiscal year 2021.
Our contracts come up for renewal periodically and at the time of renewal may be subject to renegotiation, which could impact the profitability on that contract. In addition, during the term of a contract, public agencies may request additional or revised services which may impact the economics of the transaction.
In addition, during the term of a contract, public agencies may request additional or revised services which may impact the economics of the transaction. Most of our contracts permit our clients, with prior notice, to terminate the contracts at any time without cause.
The increase in wage and related benefit costs was primarily attributed to having restored wage reductions taken during our second quarter of fiscal 2020 aimed at preserving liquidity as a result of the Covid-19 pandemic. ​ 40 Table of Contents Within G&A expenses, the increase of $2.6 million for salaries and wages, payroll taxes and employee benefits, combined with the increase of $0.5 million in stock-based compensation was offset by the decrease of $0.6 million in facilities and facility related expenses, combined with the decrease of $1.6 million in depreciation and amortization and the decrease of $1.9 million in other general and administrative expenses.
Within G&A expenses, the increase of $8.0 million in salaries and wages, payroll taxes and employee benefits combined with the increase of $6.5 million in other general and administrative expenses was partially offset by a decrease of $8.2 million in stock-based compensation and a decrease of $0.6 million in facilities and facility related expenses.
In addition, as of December 31, 2021, we had a $100 million Term A Loan with $75.0 million outstanding, a $50.0 million Revolving Credit Facility with no borrowed amounts outstanding and $4.1 million in letters of credit issued.
As of December 30, 2022, we had fully drawn the $100 million secured term A loan with $65.0 million outstanding (the “Term A Loan” and, collectively with the Revolving Credit Facility and the Delayed Draw Term Loan, the “Credit Facilities”), a $50.0 million Revolving Credit Facility with no borrowed amounts outstanding and $4.1 million in letters of credit issued, and a fully drawn $50.0 million Delayed Draw Term Loan with $41.0 million outstanding, each scheduled to mature on June 26, 2024.
Liquidity and Capital Resources ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year ​ ​ ​ 2021 ​ ​ 2020 ​ ​ 2019 ​ ​ (in thousands) Net Cash Provided by (used in): ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating activities ​ $ 9,803 ​ $ 47,025 ​ $ 11,621 Investing activities ​ ​ (8,454) ​ ​ (5,059) ​ ​ (78,348) Financing activities ​ ​ (18,533) ​ ​ (19,013) ​ ​ 56,920 Net increase (decrease) in cash and cash equivalents ​ $ (17,184) ​ $ 22,953 ​ $ (9,807) ​ Sources of Cash We believe that our cash and cash equivalents on hand, cash generated by operating activities and available borrowings under our revolving credit facility and Delayed Draw Term Loan will be sufficient to finance our operating activities for at least the next 12 months.
The reduction in our net loss was primarily driven by increased gross profit margins combined with lower operating expenses. 40 Table of Contents Liquidity and Capital Resources ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year ​ ​ ​ 2022 ​ ​ 2021 ​ ​ 2020 ​ ​ (in thousands) Net cash provided by (used in): ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating activities ​ $ 9,433 ​ $ 9,803 ​ $ 47,025 Investing activities ​ ​ (9,527) ​ ​ (8,454) ​ ​ (5,059) Financing activities ​ ​ 8,358 ​ ​ (18,533) ​ ​ (19,013) Net increase (decrease) in cash and cash equivalents ​ $ 8,264 ​ $ (17,184) ​ $ 22,953 ​ Sources of Cash Our primary sources of liquidity for the next 12 months and beyond are our cash and cash equivalents and borrowings under our secured revolving facility under the Credit Agreement (the “Revolving Credit Facility”).
Direct costs of contract revenue for the Engineering and Consulting segment decreased $5.2 million, or 12.6%, for the fiscal year 2020 compared to fiscal year 2019, primarily due to the reduction of revenues described above.
Direct costs of contract revenue in our Energy segment increased $67.3 million, or 36.5%, in fiscal year 2022 compared to fiscal year 2021, primarily as a result of the reasons described above. Direct costs of contract revenue for the Engineering and Consulting segment increased $0.4 million, or 1.2%, for the fiscal year 2022 compared to fiscal year 2021.
Contractual Obligations The following table sets forth our known contractual obligations as of December 31, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Less than ​ ​ ​ ​ More than Contractual Obligations ​ Total ​ 1 Year ​ 1 - 3 Years ​ 3 - 5 Years ​ 5 Years ​ ​ ( in thousands) ​ Long term debt (1)(3) ​ $ 100,574 ​ $ 15,036 ​ $ 85,538 ​ $ — ​ $ — ​ Interest payments on debt outstanding (2)(3) ​ ​ 6,151 ​ ​ 2,756 ​ ​ 3,395 ​ ​ — ​ ​ — ​ Operating leases ​ 16,342 ​ 5,575 ​ 6,589 ​ 3,753 ​ 425 ​ Finance leases ​ 1,317 ​ 539 ​ 702 ​ 76 ​ — ​ Total contractual cash obligations ​ $ 124,384 ​ $ 23,906 ​ $ 96,224 ​ $ 3,829 ​ $ 425 ​ (1) Long-term debt includes $75.0 million outstanding on our Term A Loan, no amounts outstanding on our Revolving Credit Facility, and $24.0 million outstanding on our Delayed Draw Term Loan as of December 31, 2021.
Contractual Obligations The following table sets forth our known contractual obligations as of December 30, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Less than ​ ​ ​ ​ More than Contractual Obligations ​ Total ​ 1 Year ​ 1 - 3 Years ​ 3 - 5 Years ​ 5 Years ​ ​ ( in thousands) ​ Long term debt (1) ​ $ 107,447 ​ $ 16,903 ​ $ 90,544 ​ $ — ​ $ — ​ Interest payments on debt outstanding (2) ​ ​ 11,911 ​ ​ 8,213 ​ ​ 3,698 ​ ​ — ​ ​ — ​ Operating leases ​ 13,224 ​ 4,625 ​ 6,053 ​ 2,546 ​ — ​ Finance leases ​ 2,714 ​ 1,113 ​ 1,365 ​ 236 ​ — ​ Total contractual cash obligations ​ $ 135,296 ​ $ 30,854 ​ $ 101,660 ​ $ 2,782 ​ $ — ​ (1) Long-term debt includes $65.0 million outstanding on our Term A Loan, no amounts outstanding on our Revolving Credit Facility, and $41.0 million outstanding on our Delayed Draw Term Loan as of December 30, 2022.
Impact of Inflation Due to the average duration of our projects and our ability to negotiate prices as contracts end and new contracts begin, we believe our operations have not been, and, in the foreseeable future, are not expected to be, materially impacted by moderate inflation.
Impact of Inflation Due to the average duration of our projects and our ability to negotiate prices as contracts end and new contracts begin, historically, our operations have not been materially impacted by inflation. ​ While immaterial to our results of operations and financial condition, we have experienced higher cost of materials and delays in our supply chain for equipment during fiscal year 2022, and we expect these higher costs and delays in our supply chain to persist through fiscal year 2023.
As of December 31, 2021, we had contingent consideration payable of $11.0 million related to these acquisitions. For fiscal 2021, our statement of operations includes $2.3 million of accretion (excluding fair value adjustments) related to the contingent consideration. Outstanding Indebtedness Subsequent to December 31, 2021, we borrowed and repaid $5.0 million under our Revolving Credit Facility.
For fiscal year 2022, our statement of operations includes $3.2 million of accretion (excluding fair value adjustments) related to the liability for contingent consideration.
Total other expense, net was $3.4 million for fiscal year 2020 compared to $4.7 million for fiscal year 2019. The decrease in total other expense, net was primarily the result of the recognition of $0.6 million in income from an indemnification agreement and higher interest income. Interest expense was relatively flat year over year. Income tax expense (benefit).
Total other expense, net . Total other expense, net, was $4.4 million for fiscal year 2022 compared to $3.7 million for fiscal year 2021. The increase in total other expense, net is primarily due to higher interest expense as a result of higher variable interest rates under our credit facilities, partially offset by income from indemnification agreements.
Our primary 43 Table of Contents source of liquidity for the next 12 months and beyond is cash generated from operations and borrowings under our Revolving Credit Facility. As of December 31, 2021, borrowings under our Credit Facilities, exclusive of the effects of upfront fees, undrawn fees and issuance cost amortization, bore interest at 2.37%.
In addition, a s of December 30, 2022, we had $8.8 million of cash and cash equivalents. As of December 30, 2022, borrowings under our Credit Facilities, exclusive of the effects of upfront fees, undrawn fees and issuance cost amortization, bore interest at 8.3%.
Our net loss was $8.4 million for fiscal 2021, as compared to a net loss of $14.5 million for fiscal 2020. The reduction in our net loss was primarily driven by increased gross profit margins combined with lower operating expenses. Fiscal Year 2020 Compared to Fiscal Year 2019 Contract revenue.
Our net loss was relatively flat for fiscal year 2022, compared to fiscal year 2021, as a result of the factors described above. Fiscal Year 2021 Compared to Fiscal Year 2020 Contract revenue.
We are obligated to pay up to (i) $12.0 million in cash if E3, Inc. exceeds certain financial targets during the three years after the E3, Inc. closing date, and (ii) $12.0 million in cash based on future work obtained from the business of Integral Analytics during the four years after the closing of the acquisition, payable in installments, if certain financial targets are met during the four years.
(“E3, Inc.”) if E3, Inc. exceeds certain financial targets during the three years after the E3, Inc. closing date. As of December 30, 2022, we had remaining contingent consideration payable of $4.0 million related to this acquisition.
Removed
We also support the mandated reporting and other requirements associated with these financings. We provide financial advisory services for municipal securities but do not provide underwriting services.
Added
Consolidated contract revenue increased $75.4 million, or 21.3%, in fiscal year 2022 compared to fiscal year 2021, primarily due to incremental revenues in our Energy segment generated from new governmental construction-management and design-build projects, combined with incremental revenues from the resumption of projects that had been suspended in fiscal year 2021 due to the Covid-19 pandemic, and increased governmental revenues in our Engineering and Consulting segment, partially offset by lower software licensing revenue.
Removed
Impact of Covid-19 on Our Business The coronavirus (“Covid-19”) pandemic and efforts to limit its spread negatively impacted our operations during fiscal year 2020 and continued to impact us, albeit to a lesser extent, during fiscal year 2021.
Added
Contract revenue in our Energy segment increased $71.1 million, or 24.8%, in fiscal year 2022 compared to fiscal year 2021, primarily as a result of incremental revenues from new governmental construction-management and design-build projects, combined with incremental revenues from the resumption of projects that had been suspended in fiscal year 2021 due to the Covid-19 pandemic, partially offset by lower software licensing revenue.
Removed
In California and New York, the states in which we have historically derived a majority of our revenue, mandatory shutdown orders were issued in March 2020. In New York, phased re-openings began in June 2020, and all of our New York utility programs have restarted.
Added
Contract revenue in our Engineering and Consulting segment increased $4.3 million, or 6.4%, in fiscal year 2022 compared to fiscal year 2021, primarily due to increased demand for services provided to our governmental clients. Direct costs of contract revenue.
Removed
In California, phased re-openings began in May 2020, followed by periods of curtailments as a result of resurgences of Covid-19 cases, and subsequent re-openings. As a result, the most significant pandemic related impacts to our business occurred in California to our direct install business.
Added
Direct costs of consolidated contract revenue increased $67.7 million, or 31.1%, in fiscal year 2022 compared to fiscal year 2021, primarily due to increases in our contract revenues in our Energy segment as described above as well as the ramping up of new projects for which we saw higher project startup costs relative to the revenue recognized.
Removed
During the last week of June 2021, our largest program for the Los Angeles Department of Water and Power (“LADWP”) resumed, which was our last remaining program that was still suspended due to Covid-19. As of March 9, 2022, none of our contracts have been cancelled due to Covid-19.
Added
Subcontractor services and other direct costs increased by $50.4 million, or 33.1%, and salaries and wages increased by $17.3 million, or 26.4%, in fiscal year 2022 compared to fiscal year 2021, primarily due to the increases in contract revenues as described above combined with changes in the mix of those contract revenues to those which contain a higher percentage of material costs and installation subcontracting and lower percentage of labor costs, as well as the ramping up of new projects for which we saw higher project startup costs relative to the revenue recognized.
Removed
In the Energy segment, we experienced a negative impact on our direct install programs that serve small businesses as a result of restrictions put in place by governmental authorities that required temporary shutdowns of all “non-essential” businesses which resulted in a significant portion of our direct install work on these programs being suspended for varying periods of time during fiscal year 2020 and continuing in California through our first half of fiscal 2021.
Added
Gross Profit . Gross profit increased 5.7% to $143.6 million, or a 33.5% gross margin, for fiscal year 2022 compared to $135.9 million, or a 38.4% gross margin for fiscal year 2021.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+2 added−6 removed1 unchanged
Biggest changeEach of our Term A Loan, revolving credit facility and delayed draw term loan mature as of June 26, 2024 and are governed by our credit agreement, as amended. ​ Pursuant to the Fourth Amendment, (as described in Part II, Item 8, Note 5, “Debt Obligations,” of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K), borrowings under the credit agreement bear interest at all times other than during the initial covenant relief period granted by the Third Amendment, at either a Base Rate or LIBOR, each as defined in the credit agreement, at our option, and, in each case, plus an applicable margin, which applicable margin will range from 0.125% to 1.25% with respect to Base Rate borrowings and 1.125% to 2.25% with respect to LIBOR borrowings, depending on our consolidated leverage ratio; provided that LIBOR cannot be less than 0.00%.
Biggest changeEach of our Term A Loan, Revolving Credit Facility, and Delayed Draw Term Loan mature as of June 26, 2024 and are governed by our Credit Agreement. ​ Pursuant to the Credit Agreement, (as described in Part II, Item 8, Note 5, “Debt Obligations,” of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K), during the period from November 1, 2022 until the date on which the administrative agent receives the required financial statements under the Credit Agreement for the fiscal quarter ended March 31, 2023 (the “First Pricing Date”) , (A) borrowings under the Credit Agreement will bear interest at Secured Overnight Financing Rate (“SOFR”) plus 4.00%; provided, that SOFR cannot be less than 0.00%, and (B) we will pay a commitment fee of 0.50% per annum for the unused portion of the Revolving Credit Facility.
The value of a financial instrument may change as a result of changes in interest rates, exchange rates, commodity prices, equity prices and other market changes. Market risk is attributed to all market risk sensitive financial instruments, including long-term debt. As of December 31, 2021, we had cash and cash equivalents of $11.2 million.
The value of a financial instrument may change as a result of changes in interest rates, exchange rates, commodity prices, equity prices and other market changes. Market risk is attributed to all market risk sensitive financial instruments, including long-term debt. As of December 30, 2022, we had cash and cash equivalents of $8.8 million.
As of December 31, 2021, $75.0 million was outstanding under our Term A Loan, $24.0 million was outstanding under our delayed draw term loan, no borrowed amounts were outstanding and $4.1 million in letters of credit were issued under the revolving credit facility.
As of December 30, 2022, $65.0 million was outstanding under our Term A Loan, $41.0 million was outstanding under our Delayed Draw Term Loan, no borrowed amounts were outstanding and $4.1 million in letters of credit were issued under the Revolving Credit Facility.
Each borrowing under our delayed draw term loan will amortize quarterly in an amount equal to 2.5% of the aggregate outstanding borrowings under the delayed draw term loan, beginning with the first full fiscal quarter ending after the initial borrowing date, with a final payment of all then remaining principal and interest due on the maturity date of June 26, 2024, subject to certain prepayment obligations based on our excess cash flow. ​ On January 31, 2019, we entered into an interest swap agreement for $35.0 million notional amount.
Each borrowing under our Delayed Draw Term Loan will amortize quarterly in an amount equal to 2.5% of the aggregate outstanding borrowings under the Delayed Draw Term Loan, beginning with the first full fiscal quarter ending after the initial borrowing date, with a final payment of all then remaining principal and interest due on the maturity date of June 26, 2024, subject to certain prepayment obligations based on our excess cash flow. ​ ​ 52 Table of Contents
We do not engage in trading activities and do not participate in foreign currency transactions. ​ We are subject to interest rate risk in connection with our Term A Loan and borrowings, if any, under our revolving credit facility and delayed draw term loan, each of which bears interest at variable rates.
We are subject to interest rate risk in connection with our Term A Loan and borrowings, if any, under our Revolving Credit Facility and Delayed Draw Term Loan, each of which bears interest at variable rates.
This amount represents cash on hand in business checking accounts with BMO Harris Bank, N.A.
This amount represents cash on hand in business checking accounts with BMO Harris Bank, N.A. We do not engage in trading activities and do not participate in foreign currency transactions.
We will also pay a commitment fee for the unused portion of the revolving credit facility and the delayed draw term loan facility, which ranges from 0.15% to 0.40% per annum depending on our consolidated leverage ratio, and fees on the face amount of any letters of credit outstanding under the revolving credit facility, which range from 0.84% to 1.688% per annum, in each case, depending on whether such letter of credit is a performance or financial letter of credit and the Leverage Ratio. ​ The Term A Loan amortizes quarterly in installments of $2.5 million beginning with the fiscal quarter ending September 27, 2019, with a final payment of all then remaining principal and interest due on the maturity date of June 26, 2024, subject to certain prepayment obligations based on our excess cash flow.
We will also pay a commitment fee for the unused portion of the Revolving Credit Facility and the Delayed Draw Term Loan, which will range from 0.15% to 0.40% per annum depending on the Total Leverage Ratio, and fees on the face amount of any letters of credit outstanding under the Revolving Credit Facility, which will range from 0.84% to 1.688% per annum, in each case, depending on whether such letter of credit is a performance or financial letter of credit and the Total Leverage Ratio.
Removed
The interest swap agreement was designated as a cash flow hedge to fix the variable interest rate on a portion of the outstanding principal amount under our prior term loan facility. The interest swap fixed rate is 2.47% and the amortization is quarterly in an amount equal to 10% annually.
Added
After the First Pricing Date, borrowings under the Credit Agreement will bear interest at either a Base Rate (as defined in the Credit Agreement) or SOFR, at our option, and in each case, plus an applicable margin, which applicable margin will range from 0.125% to 1.25% with respect to Base Rate borrowings and 1.125% to 2.25% with respect to SOFR borrowings, depending on the Total Leverage Ratio (as defined in the Credit Agreement); provided, that SOFR cannot be less than 0.00%, with the specific pricing reset on each date on which the administrative agent receives the required financial statements under the Credit Agreement for the fiscal quarter then ended.
Removed
The interest swap agreement expired on January 31, 2022. ​ Based upon the amount of our outstanding indebtedness as of December 31, 2021, a one percentage point increase in the effective interest rate would change our annual interest expense by approximately $1.0 million in 2021. 53 Table of Contents Risk Related to LIBOR Transition As of December 31, 2021, all of our $99.0 million of debt outstanding under our credit agreement bore interest at a floating rate that uses LIBOR as the applicable reference rate to calculate the interest.
Added
Based upon the amount of our outstanding indebtedness as of December 30, 2022, a one percentage point increase in the effective interest rate would change our annual interest expense by approximately $1.1 million in fiscal year 2022. ​ The Term A Loan amortizes quarterly in installments of $2.5 million beginning with the fiscal quarter ending September 27, 2019, with a final payment of all then remaining principal and interest due on the maturity date of June 26, 2024, subject to certain prepayment obligations based on our excess cash flow.
Removed
On March 5, 2021, the Chief Executive of the U.K. Financial Conduct Authority, which regulates LIBOR, publicly announced that no new contracts using U.S. dollar LIBOR should be entered into after December 31, 2021, and that publication of certain tenors of U.S. dollar LIBOR (including overnight and one, three, six and 12 months) will permanently cease after June 30, 2023.
Removed
In the United States, efforts to identify a set of alternative U.S. dollar reference interest rates are ongoing, and the Alternative Reference Rate Committee (“ARRC”) has recommended the use of a Secured Overnight Funding Rate (“SOFR”). SOFR is different from LIBOR in that it is a backward-looking secured rate rather than a forward-looking unsecured rate.
Removed
For cash products and loans, the ARRC has also recommended Term SOFR, which is a forward-looking SOFR based on SOFR futures and may in part reduce differences between SOFR and LIBOR.
Removed
On March 8, 2022, we entered into the Fifth Amendment (as described in Part II, Item 8, Note 15, “Subsequent Events” of the Notes to Consolidated Financial Statements included in this Annual Report of Form 10-K) which, among other things, revises the pricing structure of borrowings under our Credit Agreement from utilizing as a reference rate LIBOR to utilizing SOFR. ​ ​ 54 Table of Contents

Other WLDN 10-K year-over-year comparisons