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Item 7. Management’s Discussion and Analysis

2023-03-02 compared with 2022-03-03 · 79 added, 68 removed, 219 unchanged (40% of the section changed)

Item 7 —Management's Discussion and Analysis of Financial Condition and Results of Operations

This section of the Form 10-K does not address certain items regarding the year ended December 28, 2019.

This section of the Form 10-K does not address certain items regarding the year ended January 2, 2021.

Discussion and analysis of year-to-year comparisons between fiscal 2021 and fiscal 2020 not included in this Form 10-K can be found in "Item 7.

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Revenues outside of the U.S.

accounted for approximately 20%, 20%, and 21% of our total revenues in fiscal 2021, fiscal 2020, and fiscal 2019, respectively.

accounted for approximately 20% of our total revenues in each of fiscal 2022, fiscal 2021, and fiscal 2020, respectively.

Revenue by country is detailed in Note 3 to our Notes to Consolidated Financial Statements.

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Changes in estimates are recorded in the period in which they become known.

estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances.

We base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances.

Actual results may differ from our estimates if our assumptions based on past experience or our other assumptions do not turn out to be substantially accurate.

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If actual results in the future vary from our estimates, we adjust these estimates in the period such variances become known.

We usually issue invoices to our customers on a monthly basis, and payment is due upon receipt of the invoice.

We usually issue invoices to our customers on a monthly basis, and payment is usually due upon receipt of the invoice unless contract terms state otherwise.

When determining the transaction price of a contract, an adjustment is made if payment from a customer occurs either significantly before or significantly after performance, resulting in a significant financing component.

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We account for performance-based and service-based cash awards using an accrual method where changes in estimates are accounted for prospectively over the remaining service period.

To the extent the terms of an award attribute all or a portion of the expected future benefits to a period of service greater than one year, the cost of those benefits is accrued over the employee's or non-employee's requisite service period in a systematic and rational manner, usually on a straight-line basis.

The requisite service period typically ranges from two to seven years starting with the employee's employment date or non-employee's affiliation date.

For an employee or non-employee consultant currently affiliated with us, the requisite service period generally begins at the start of the award's measurement period.

A recipient of such an award is expected to be employed by or affiliated with us for the entire measurement period.

A recipient of such an award is expected to be employed

by or affiliated with us for the entire measurement period.

If the recipient's employment or affiliation with us terminates during the measurement period, the amount paid will be determined in accordance with the recipient's specific contract provisions.

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There can be no assurance that the estimates and assumptions used in preparing these projections will prove to be accurate.

Valuation of the Contingent Consideration Liability.

In prior periods, we had accounted for our contingent consideration liability by remeasuring the obligation to fair value each reporting period, estimated based on a Monte Carlo simulation.

The fair value measurement of these liabilities was based on significant inputs not observed in the market.

The significant unobservable inputs used in the fair value measurements of these contingent consideration liabilities were our measures of the estimated payouts based on internally generated revenue projections, expected volatility of the revenue projections, and discount rates.

The process of developing financial projections is highly subjective and requires significant judgment and estimates.

We reassessed the fair value of these contingent consideration liabilities on a quarterly basis using additional information as it became available.

Any change in the fair value estimates were recorded in the earnings of that period.

The measurement period for the contingent consideration liability ended in January 2021, and the contingent consideration liability was paid in February 2021.

Business Combinations .

We account for business acquisitions using the acquisition method of accounting, which requires assets acquired and liabilities assumed to be measured and recorded at their estimated fair values as of the acquisition date, with certain exceptions.

Right-of-use assets and lease liabilities are recorded on the date of acquisition in accordance with ASC Topic 842, Leases .

In addition, contract assets and contract liabilities are recorded in accordance with ASC 606, as we adopted Accounting Standards Update No.

2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers on the first day of fiscal 2022.

All other tangible assets and identifiable intangible assets acquired and liabilities assumed are recorded at their fair value as of the date of acquisition.

The purchase price is determined as the fair value of consideration transferred.

Goodwill is recognized for the excess of consideration transferred over the net value of assets acquired and liabilities assumed.

Intangible assets that are separate from goodwill and have determinable useful lives are valued separately.

Fair value measurements require extensive use of estimates and assumptions, including estimates of future cash flows to be generated by the acquired assets, discount rates that we believe reflect the risk factors associated with the related cash flows, and estimates of useful lives.

The useful lives of identifiable intangible assets acquired in a business acquisition are estimated based on the expected period that we will receive substantially all of the projected future benefits from the intangible asset.

Accounting for Income Taxes.

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Our fiscal years periodically contain 53 weeks rather than 52 weeks.

Fiscal 2021 was a 52-week year, and fiscal 2020 was a 53-week year.

Fiscal 2022 and fiscal 2021 were both 52-week years.

Revenues increased by $25.0 million, or 4.4%, to $590.9 million for fiscal 2022 from $565.9 million for fiscal 2021.

The increase in net revenue was a result of an increase in gross revenues of $57.2 million as compared to fiscal 2020, coupled with a decrease in write-offs and reserves of $0.3 million as compared to fiscal 2020.

Utilization increased to 75% for fiscal 2022 from 74% for fiscal 2021, while consultant headcount increased by 78 consultants during fiscal 2022.

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represented approximately 20% of net revenues in each of fiscal 2022 and fiscal 2021.

Revenues derived from fixed-price engagements remained flat at 24% of net revenues for fiscal 2021 and fiscal 2020.

Revenues derived from time-and-materials engagements also remained flat at 76% of net revenues for fiscal 2021 and fiscal 2020.

Revenues derived from fixed-price engagements decreased to 19% of net revenues for fiscal 2022 from 24% for fiscal 2021.

Revenues derived from time-and-materials engagements increased to 81% of net revenues for fiscal 2022 from 76% for fiscal 2021.

The percentages of revenue derived from fixed-price engagements depends largely on the proportion of our revenues derived from our management consulting business, which typically has a higher concentration of fixed-price service engagements.

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Costs of services (exclusive of depreciation and amortization) increased by $10.0 million, or 2.5%, to $410.1 million for fiscal 2022 from $400.1 million for fiscal 2021.

The increase in costs of services was due primarily to an increase of $10.9 million in employee compensation and fringe benefit costs attributable to salaries and benefits associated with our increased consulting headcount, an increase in forgivable loan amortization of $2.1 million, and an increase in incentive and retention compensation costs of $16.1 million.

Additionally, client reimbursable expenses increased by $2.9 million in fiscal 2021 compared to fiscal 2020.

These increases were partially offset by a decrease in expense related to contingent consideration of $2.6 million, as the measurement period ended and the contingent consideration was paid in the first quarter of fiscal 2021.

The increase in costs of services was due primarily to an increase of $8.5 million in employee compensation and fringe benefit costs attributable to salaries and benefits associated with our increased consulting headcount, an increase in forgivable loan amortization of $2.1 million in fiscal 2022 compared to fiscal 2021.

These increases were partially offset by a decrease of $1.2 million of client reimbursable expenses and a decrease of $0.4 million in accretion related to contingent consideration in fiscal 2022 compared to fiscal 2021.

As a percentage of net revenue, costs of services decreased to 69.4% for fiscal 2022 as compared to 70.7% for fiscal 2021.

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Selling, general and administrative expenses increased by $12.7 million, or 13.1%, to $110.1 million for fiscal 2022 from $97.4 million for fiscal 2021.

This increase was due primarily to a $3.1 million increase to employee and incentive compensation, a $0.5 million increase in travel and entertainment expenses, a $0.9 million increase in software subscription and data services, a $0.7 million increase in training and marketing expenses, and a $0.1 million increase in other operating expenses.

These increases were partially offset by a $1.3 million decrease in rent expense, a $0.6 million decrease in legal and professional services, and a $0.2 million decrease in bad debt expense.

This increase was due primarily to a $2.0 million increase to employee and incentive compensation, a $3.5 million increase in travel and entertainment expenses, a $1.5 million increase in software subscription and data services, a $1.1 million increase in training and marketing expenses, a $1.0 million increase in rent expense, a $1.6 million increase in legal and professional services, and a $0.8 million increase in other operating expenses.

These increases were partially offset by a $0.3 million decrease in bad debt expense.

Commissions to our non-employee experts experienced an increase of $1.5 million.

As a percentage of revenues, selling, general and administrative expenses decreased to 17.2% for fiscal 2021 from 17.7% for fiscal 2020.

Commissions to non-employee experts increased to 3.0% of revenue in fiscal 2021 compared to 2.5% of revenue in fiscal 2020.

As a percentage of revenues, selling, general and administrative expenses increased to 18.6% for fiscal 2022 from 17.2% for fiscal 2021.

Commissions to non-employee experts increased to 3.1% of revenue in fiscal 2022 compared to 3.0% of revenues in fiscal 2021.

Provision for Income Taxes.

For fiscal 2022, our income tax provision was $15.2 million and the effective tax rate ("ETR") was 25.8%, as compared to a provision of $12.6 million and an effective tax rate of 23.2% for fiscal 2021.

The effective tax rate for fiscal 2021 was lower than the prior year due to an increase in the tax benefit related to share-based compensation.

The ETR for fiscal 2021 was lower than our combined federal and state statutory rate due to the tax benefit on shared-based compensation, partially offset by non-deductible items resulting primarily from limitations of compensation paid to executive officers.

The ETR for fiscal 2020 was comparable to our combined federal and state statutory rate but included offsets of non-deductible compensation paid to executive officers and the tax benefit related to share-based compensation.

effective tax rate for fiscal 2022 was higher than the prior year primarily due to a decrease in the tax benefit related to share-based compensation.

The ETR for both fiscal 2022 and 2021 were lower than our combined federal and state statutory rate primarily due to the tax benefit related to shared-based compensation, partially offset by non-deductible compensation paid to executive officers.

Net income increased by $1.9 million to $43.6 million for fiscal 2022 from $41.7 million for fiscal 2021.

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Diluted weighted average shares outstanding decreased by approximately 266,000 shares to approximately 7,355,000 shares for fiscal 2022 from approximately 7,621,000 shares for fiscal 2021.

The decrease in diluted weighted average shares outstanding was primarily due to the repurchase of shares of our common stock since January 2, 2021, offset in part by the issuance or vesting of shares of restricted stock and time-vesting restricted stock units, the issuance of common stock for contingent consideration, and the exercise of stock options.

The decrease in diluted weighted average shares outstanding was primarily due to the repurchase of shares of our common stock since January 1, 2022, offset in part by the issuance or vesting of shares of restricted stock and time-vesting restricted stock units and the exercise of stock options.

Liquidity and Capital Resources

We believe that current cash, cash equivalents, cash generated from operations, and amounts available under our revolving credit facility through maturity will be sufficient to meet our anticipated working capital and capital expenditure requirements for at least the next 12 months.

As of January 1, 2022, we have $66.1 million of cash and cash equivalents and $170.8 million of borrowing capacity under our revolving credit facility.

In fiscal 2021, our cash and cash equivalents increased by $20.5 million, completing the year with cash and cash equivalents of $66.1 million.

The principal drivers of the increase of cash were growth in sales and strong collections of accounts receivable.

During fiscal 2021, working capital (defined as current assets less current liabilities) increased by $16.4 million to end fiscal 2021 at $36.3 million.

The increase in working capital was principally due to an increase in cash and cash equivalents of $20.5 million, an increase in accounts receivable and unbilled services of $9.6 million, and a decrease in the current portion of deferred compensation of $14.8 million, which was primarily related to the payment of contingent consideration.

Partially offsetting these increases to working capital was a decrease in the current portion of forgivable loans of $4.2 million, an increase in accounts payable of $4.1 million, an increase in accrued expenses of $19.9 million, and an increase in deferred revenue and other liabilities of $3.0 million.

At January 1, 2022, $36.8 million of our cash and cash equivalents were held within the U.S.

We believe that current cash, cash equivalents, cash generated from operations, and amounts available under our revolving credit facility will be sufficient to meet our anticipated working capital and capital expenditure requirements for at least the next 12 months.

As of December 31, 2022, we have $31.4 million of cash and cash equivalents and $195.6 million of borrowing capacity under our revolving credit facility.

In fiscal 2022, our cash and cash equivalents decreased by $34.7 million, completing the year with cash and cash equivalents of $31.4 million.

The principal drivers of the reduction of cash were the repurchase and retirement of shares of our common stock throughout the year under our share repurchase program, consideration paid for business acquisitions, payments of dividends, and payments made in respect of forgivable loans.

During fiscal 2022, working capital (defined as current assets less current liabilities) decreased by $4.5 million to end fiscal 2022 at $31.7 million.

The decrease in working capital was principally due to a decrease in cash and cash equivalents of $34.7 million, a decrease in the current portion of forgivable loans of $0.9 million, an increase in accounts payable of $4.1 million, and an increase of $1.6 million in the current portion of lease liabilities.

Partially offsetting these decreases to working capital were an increase in accounts receivable and unbilled services of $32.9 million, an increase of $2.2 million in prepaid expenses and other current assets, a decrease in accrued expenses of $0.5 million, a decrease in deferred revenue and other liabilities of $0.8 million and a decrease in the current portion of deferred compensation of $0.4 million, which was primarily related to the payment of contingent consideration.

At December 31, 2022, $12.9 million of our cash and cash equivalents were held within the U.S.

We have sufficient sources of liquidity in the U.S., including cash flow from operations and availability on our revolving credit facility, to fund U.S.

operations over the next 12 months without the need to repatriate funds from our foreign subsidiaries.

As of January 1, 2022, our cash accounts were concentrated at two financial institutions, which potentially exposes us to credit risks.

The financial institutions both have short-term credit ratings of A-1 by Standard & Poor's ratings services.

As of December 31, 2022, our cash accounts were concentrated at two financial institutions, which potentially exposes us to credit risks.

The financial institutions have short-term credit ratings of A-1 and A-2 by Standard & Poor's ratings services.

We have not experienced any losses related to such accounts.

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Net income was $43.6 million for fiscal 2022.

Sources of cash for operating activities included a $14.9 million increase in accounts payable, accrued expenses, and other liabilities and a $10.7 million decrease in forgivable loans, which was comprised of $14.5 million of forgivable loan issuances, net of repayments, offset by $25.2 million of forgivable loan amortization and related foreign currency translation.

Offsetting these sources of cash for operating activities included a $10.4 million increase in accounts receivable and unbilled receivables, a $15.5 million decrease in lease liabilities, and a $2.4 million increase in prepaid expenses and other current assets.

Cash provided by operating activities included non-cash depreciation and amortization expense of $12.8 million, share-based compensation expenses of $4.1 million, incentive cash awards of $6.7 million, right-of-use asset amortization of $13.0 million, and other non-cash deductions of $0.1 million.

During fiscal 2021, net cash used in investing activities was $2.6 million for capital expenditures, which were primarily used to support computer equipment and software needs.

We used $52.0 million of net cash in financing activities during fiscal 2021, primarily as a result of $45.0 million of repurchases of our common stock, payment of $8.3 million of cash dividends and dividend equivalents, tax withholding payments reimbursed by restricted shares of $1.5 million, and a portion of the payment of the contingent consideration classified as a financing activity in the amount of $2.4 million.

Sources of cash for operating activities included a $2.2 million increase in accounts payable, accrued expenses, and other liabilities.

Offsetting these sources of cash for operating activities included a $30.3 million increase in accounts receivable and unbilled receivables, a $16.5 million decrease in lease liabilities, a $0.5 million increase in prepaid expenses and other current assets, a $10.6 million increase in forgivable loans, (comprised of $35.0 million of forgivable loan issuances, net of repayments, offset by $24.4 million of forgivable loan amortization) and $0.5 million related foreign currency translation.

Cash provided by operating activities included non-cash depreciation and amortization expense of $12.0 million, share-based compensation expenses of $4.8 million, incentive cash awards of $6.6 million, right-of-use asset amortization of $13.7 million.

During fiscal 2022, net cash used in investing activities was $18.2 million, which included $14.4 million of net consideration paid for the acquisition of Welch Consulting, Ltd.

(“Welch Consulting”) and bioStrategies Group, Inc.

(“bSG”), and $3.8 million for capital expenditures.

We used $38.9 million of net cash in financing activities during fiscal 2022, primarily as a result of $27.6 million of repurchases of our common stock, payment of $9.6 million of cash dividends and dividend equivalents, and tax withholding payments reimbursed by restricted shares of $2.1 million.

Offsetting these uses in cash for financing activities was $1.4 million received upon the issuance of shares of common stock related to the exercise of stock options.

Lease Commitments

We are a lessee under certain operating leases for office space and equipment, which have remaining lease terms between one and approximately ten years, many of which include one or more options to extend the term for periods of up to five years for each option.

The maturities of lease liabilities, as of January 1, 2022, related to office space and equipment are discussed in Note 4 in our Notes to Consolidated Financial Statements.

We are a lessee under certain operating leases for office space and equipment, which have remaining lease terms between one and approximately nine years, many of which include one or more options to extend the term for periods of up to five years for each option.

The maturities of lease liabilities, as of December 31, 2022, related to office space and equipment are discussed in Note 5 in our Notes to Consolidated Financial Statements.

We have no additional operating leases we have committed to that have not yet commenced.

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We expect to satisfy these lease and related obligations, as they become due, from cash generated from operations.

We are party to a $175.0 million revolving credit facility, which reflects an increase on January 12, 2021 to the capacity of the revolving credit facility by $50.0 million and includes a $15.0 million sublimit for the issuance of letters of credit.

We may use the proceeds of the revolving credit facility for working capital and other general corporate purposes.

Generally, we may repay borrowings under the revolving credit facility at any time but must repay all borrowings no later than October 24, 2022.

There were no borrowings outstanding under this revolving credit facility as of January 1, 2022.

The amount available under this revolving credit facility was reduced by $4.2 million of letters of credit outstanding as of January 1, 2022.

Borrowings under the revolving credit facility bear interest at a rate per annum, at our election, of either (i) the Base Rate, as defined in the credit agreement, plus an applicable margin, which varies between 0.25% and 1.25% depending on our total leverage ratio as determined under the credit agreement, or (ii) the Adjusted Eurocurrency Rate, as defined in the credit agreement, plus an applicable margin, which varies between 1.25% and 2.25% depending on our total leverage ratio.

We are required to pay a fee on the unused portion of the revolving credit facility at a rate per annum that varies between 0.20% and 0.35% depending on our total leverage ratio.

Borrowings under the revolving credit facility are secured by 100% of the stock of certain of our U.S.

subsidiaries and 65% of the stock of certain of our foreign subsidiaries, which represent approximately $33.8 million in net assets as of January 1, 2022.

We were a party to an amended and restated credit agreement (the "Initial Credit Agreement") that provided us with a $175.0 million revolving credit facility and included a $15.0 million sublimit for the issuance of letters of credit.

On August 19, 2022, we refinanced our revolving credit facility under the Initial Credit Agreement by entering into a Credit Agreement (the "Credit Agreement") with Bank of America, N.A., as swingline lender, a letter of credit issuing bank and administrative agent, and with Citizens Bank, N.A., as a letter of credit issuing bank.

The Credit Agreement provides us a $250.0 million revolving credit facility, which may be decreased at our option to $200.0 million during the period from July 16th in a year through January 15th in the next year.

Additionally, for the period from January 16th to July 15th of each calendar year, we may elect to not increase the revolving credit facility to $250.0 million.

The revolving credit facility includes a $25.0 million sublimit for the issuance of letters of credit.

Concurrent with our entry into the Credit Agreement, we terminated the Initial Credit Agreement and repaid in full all outstanding indebtedness under the Initial Credit Agreement of approximately $50.0 million.

Also, letters of credit in the aggregate amount of approximately $4.4 million that had been issued under the Initial Credit Agreement were deemed to be issued and outstanding under the revolving credit facility under the Credit Agreement.

In connection with the Credit Agreement, we incurred debt issuance costs from the lenders and third-parties of $1.0 million.

We may use the proceeds of the revolving credit loans under the Credit Agreement for general corporate purposes and may repay any borrowings under the revolving credit facility at any time, but any borrowings must be repaid no later than August 19, 2027.

Borrowings under the revolving credit facility bear interest at a rate per annum equal to one of the following rates, at our election, plus an applicable margin as described below:

(i) in the case of borrowings in U.S.

dollars by us, the Base Rate (as defined in the Credit Agreement), (ii) in the case of borrowings in U.S.

dollars, a rate based on Term SOFR (as defined in the Credit Agreement) for the applicable interest period, (iii) in the case of borrowings in Euros, EURIBOR (as defined in the Credit Agreement) for the applicable interest period, (iv) in the case of borrowings in Pounds Sterling, a daily rate based on SONIA (as defined in the Credit Agreement), (v) in the case of borrowings in Canadian Dollars, CDOR (as defined in the Credit Agreement) for the applicable interest period, (vi) in the case of borrowings in Swiss Francs, a daily rate based on SARON (as defined in the Credit Agreement), or (vii) in the case of borrowings in any other Alternate Currency (as defined in the Credit Agreement), the relevant daily or term rate determined as provided in the Credit Agreement.

The applicable margin on borrowings based on the Base Rate varies within a range of 0.25% to 1.00% depending on our consolidated net leverage ratio, and the applicable margin on borrowings based on any of the other rates described above varies within a range of 1.25% to 2.00% depending on our consolidated net leverage ratio.

We are required to pay a fee on the amount available to be drawn under any letter of credit issued under the revolving credit facility at a rate per annum that varies between 1.25% and 2.00% depending on our consolidated net leverage ratio.

In addition, we are required to pay a fee on the unused portion of the revolving credit facility at a rate per annum that varies between 0.175% and 0.250% depending on our consolidated net leverage ratio.

Under the Credit Agreement, we must comply with various financial and non-financial covenants.

Compliance with these financial covenants is tested on a fiscal quarterly basis.

Any indebtedness outstanding under the revolving credit facility may become immediately due and payable upon the occurrence of stated events of default, including our failure to pay principal, interest or fees or a violation of any financial covenant.

The financial covenants require us to maintain an Adjusted Consolidated EBITDA, as defined in the credit agreement, to consolidated interest expense ratio of more than 2.5:1.0 and to comply with a consolidated debt to Adjusted Consolidated EBITDA ratio of not more than 3.0:1.0.

The non-financial covenant restrictions of the senior credit agreement include, but are not limited to, our ability to incur additional indebtedness, engage in acquisitions or dispositions, and enter into business combinations.

At January 1, 2022 and currently, we are in compliance with all such tests under the credit agreement.

The primary financial covenants consist of a maximum consolidated net leverage ratio and a minimum consolidated interest coverage ratio.

The primary non-financial covenants include, but are not limited to, restrictions on our ability to incur future indebtedness, engage in acquisitions or dispositions, pay dividends or repurchase capital stock, and enter into business combinations.

Any indebtedness outstanding under the revolving credit facility may become immediately due upon the occurrence of stated events of default, including our failure to pay principal, interest or fees, or upon the breach of any covenant.

As of December 31, 2022, we were in compliance with the covenants of the Credit Agreement.

There were no borrowings outstanding under the revolving credit facility as of December 31, 2022.

As of December 31, 2022, the amount available under the revolving credit facility was reduced by certain letters of credit outstanding, which amounted to $4.4 million.

Forgivable Loans

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We expect to fund any cash payments from existing cash resources, cash generated from operations, or borrowings on our revolving credit facility.

Business Acquisition

Business and Talent Acquisitions

As part of our business, we regularly evaluate opportunities to acquire other consulting firms, practices or groups, or other businesses.

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Share Repurchases

In February 2022 and February 2021, our Board of Directors authorized an expansion to our existing share repurchase program, authorizing the purchase of an additional $20.0 million and $40.0 million, respectively, of our common stock.

In March 2023 and February 2022, our Board of Directors authorized an expansion to our existing share repurchase program, authorizing the purchase of an additional $20.0 million and $20.0 million, respectively, of our common stock.

We may repurchase shares under this program in open market purchases (including through any Rule 10b5-1 plan adopted by us) or in privately negotiated transactions in accordance with applicable insider trading and other securities laws and regulations.

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During fiscal 2022, fiscal 2021, and fiscal 2020, we repurchased and retired 319,534 shares, 270,908 shares, and 283,842 shares, respectively, under our share repurchase program at an average price per share of $86.47, $72.53, and $47.14, respectively.

We had approximately $30.5 million and $50.5 million available for future repurchases under our share repurchase program as of January 1, 2022 and February 25, 2022, respectively.

We had approximately $22.9 million and $42.9 million available for future repurchases under our share repurchase program as of December 31, 2022 and February 24, 2023, respectively.

We plan to finance future repurchases with available cash, cash from future operations and funds from our revolving credit facility.

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The self-tender offer expired on April 5, 2021.

On April 8, 2021, we paid $25.3 million, including transaction costs, to repurchase 337,837

shares at a purchase price of $74.00 per share.

On April 8, 2021, we paid $25.3 million, including transaction costs, to repurchase 337,837 shares at a purchase price of $74.00 per share.

The purchase price and transaction costs were funded from the revolving credit facility and cash on hand.

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Although we anticipate paying regular quarterly dividends on our common stock for the foreseeable future, the declaration, timing and amounts of any such dividends remain subject to the discretion of our Board of Directors.

During the fiscal years ended January 1, 2022, January 2, 2021, and December 28, 2019, we paid dividends of $8.3 million, $7.5 million, and $6.8 million, respectively.

During the fiscal years ended December 31, 2022, January 1, 2022, and January 2, 2021, we paid dividends of $9.6 million, $8.3 million, and $7.5 million, respectively.

Impact of Inflation

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• potential acquisitions of businesses that would allow us to diversify or expand our service offerings;

• potential contingent obligations related to our acquisitions;

• contingent obligations related to our acquisitions;

• other known future contractual obligations.

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Many of the other above activities are discretionary in nature.

For example, capital expenditures can be deferred, acquisitions can be forgone, and share repurchase programs and regular dividends can be suspended.

example, capital expenditures can be deferred, acquisitions can be forgone, and share repurchase programs and regular dividends can be suspended.

As such, our operating model provides flexibility with respect to the deployment of cash flow from operations.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis