What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-19 compared with 2024-02-21 · 192 added, 167 removed, 267 unchanged (57% of the section changed)

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Similarly, companies turn to hybrid or fully outsourced recruiting models during periods of rapid re-hiring and high employee turnover.

Our business strategy is focused on growth in each of our business segments by investing in innovative technology and initiatives that drive organic growth and improve the client and candidate experience.

Our business strategy is focused on growth in each of our business segments by accelerating our digital transformation, expanding in attractive end markets and simplifying our organizational structure, which will enable us to capture market share, deliver more sustainable growth, and enhance our long-term profitability.

We have implemented these core strategies for each of our business segments:

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Fiscal 2024 highlights

Our 2023 fiscal year contained 53 weeks, with the 53rd week falling in the fiscal fourth quarter, while our 2022 and 2021 fiscal years contained 52 weeks.

Our 2024 and 2022 fiscal years contained 52 weeks, while our 2023 fiscal year contained 53 weeks, with the 53rd week falling in the fiscal fourth quarter.

Total company revenue declined 17.8% to $1.6 billion for the fiscal year ended December 29, 2024, compared to the prior year.

The 53rd week contributed an additional $20.3 million in revenue.

The decline was primarily driven by continued economic uncertainty impacting demand trends across all three segments.

Our contingent staffing clients are focused on employee retention and cost reduction, causing them to become increasingly selective in the positions they fill using outsourced labor providers.

The decline in demand has impacted most industries and markets, especially retail, hospitality and services.

Total company gross profit as a percentage of revenue for the fiscal year ended December 31, 2023 declined 20 basis points to 26.5%, compared to 26.7% for the prior year.

This decrease was primarily driven by changes in revenue mix favoring our lower margin staffing businesses.

Demand for temporary labor and permanent hiring continues to be suppressed, as clients remained hesitant to make staffing decisions due to uncertainty around future workforce needs and utilized their existing workforce to reduce operating costs.

The additional week in fiscal 2023 contributed $20.3 million in revenue.

Total company gross profit as a percentage of revenue for the fiscal year ended December 29, 2024 contracted 60 basis points to 25.9%, compared to the prior year.

Changes in revenue mix towards our lower margin staffing businesses and pricing pressures were partially offset by lower workers’ compensation costs and recognition of certain COVID-19 government subsidies.

Total company selling, general and administrative (“SG&A”) expense decreased 16.9% to $410.9 million for the fiscal year ended December 29, 2024, compared to the prior year.

The 53rd week added an additional $6.6 million of expense.

During the year, cost management actions were taken to adjust our operating cost structure to better align with reduced client demand.

The resulting cost savings exceeded both the cost to execute these actions and inflation of certain employee costs, most notably medical benefits.

We remain focused on managing costs to enhance profitability, while maintaining our operational strengths to prepare for demand recovery.

We recorded a goodwill and intangible asset impairment charge of $9.5 million ($9.3 million net of tax), for the fiscal year ended December 31, 2023, primarily within our PeopleScout MSP reporting unit.

The items described above contributed to our net loss of $14.2 million for the fiscal year ended December 31, 2023, compared to net income of $62.3 million in the prior year.

As of December 31, 2023, we had cash and cash equivalents of $61.9 million, no outstanding debt, and $85.9 million available under the most restrictive covenant of our revolving credit agreement (“Revolving Credit Facility”), for total liquidity of $147.8 million.

SG&A expense decreased as a result of continued operational cost management actions in response to the decline in demand for our services, and simplification of our organizational structure in line with our strategic plan.

The additional week in fiscal 2023 contributed $6.6 million of expense.

We recorded a goodwill and intangible asset impairment charge of $59.7 million during the fiscal year ended December 29, 2024, primarily related to our PeopleReady reporting unit.

This significant non-cash impairment charge, combined with U.S.

and foreign pre-tax losses beginning in 2023 and continuing into 2024, resulted in our conclusion to record a valuation allowance against our U.S.

federal, state, and certain foreign deferred tax assets, which increased our income tax expense by $63.7 million.

The items described above contributed to our net loss of $125.7 million for the fiscal year ended December 29, 2024, compared to net loss of $14.2 million in the prior year.

As of December 29, 2024, we had cash and cash equivalents of $22.5 million and $118.5 million available under the most restrictive covenant of our revolving credit agreement (“Revolving Credit Facility”), for total liquidity of $141.1 million.

As of December 29, 2024, $7.6 million was drawn on the Revolving Credit Facility as a Swingline loan.

MANAGEMENT’S DISCUSSION AND ANALYSIS

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Total company revenue declined 17.8% to $1.6 billion for the fiscal year ended December 29, 2024, compared to the prior year.

The 53rd week contributed an additional $20.3 million in revenue.

The decline was primarily driven by continued economic uncertainty impacting demand trends across all three segments.

Our contingent staffing clients are focused on employee retention and cost reduction, causing them to become increasingly selective in the positions they fill using outsourced labor providers.

Our PeopleScout clients continue to face uncertain future workforce needs, and have reduced volumes in an attempt to manage costs.

The additional week in fiscal 2023 contributed $20.3 million in revenue.

PeopleReady revenue declined 20.8% to $0.9 billion for the fiscal year ended December 29, 2024, compared to the prior year.

The 53rd week contributed an additional $11.9 million in revenue.

Revenue declined as a result of continued economic uncertainty, leading our clients to reduce their dependence on variable labor in order to manage their costs.

Our clients are focused on employee retention, causing them to become increasingly selective in the positions they fill using outsourced labor providers.

The decline in demand has impacted clients across most industries, especially within retail, hospitality and services, partially offset by growth in the renewable energy industry which continues to gain momentum.

Revenue declined as a result of continued labor market uncertainty, leading our clients to reduce their dependence on contingent labor to supplement their core workforce.

The decline in demand has impacted clients across most industries and geographies.

The additional week in fiscal 2023 contributed $11.9 million in revenue.

PeopleScout revenue declined 31.7% to $156.6 million for the fiscal year ended December 29, 2024, compared to the prior year.

The 53rd week contributed an additional $0.8 million in revenue.

Revenue declined as clients continued to respond to economic uncertainty and unknown future workforce needs by reducing hiring volumes, sourcing candidates with internal resources, and initiating hiring freezes to control costs.

Revenue declined as clients are experiencing less employee turnover, and labor market conditions are leading to uncertainty around future workforce needs.

This has resulted in clients reducing hiring volumes, sourcing candidates with internal resources, and initiating hiring freezes to control costs.

Revenue was also negatively impacted by the loss of a large hospitality client during the year, due to their decision to insource hiring for high-volume roles.

The additional week in fiscal 2023 contributed $0.8 million in revenue.

Despite the challenging market dynamics, new business wins during fiscal 2024 outperformed fiscal 2023, which we expect to contribute to future revenue growth.

MANAGEMENT’S DISCUSSION AND ANALYSIS

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PeopleManagement revenue declined 6.6% to $542.2 million for the fiscal year ended December 29, 2024, compared to the prior year.

The 53rd week contributed an additional $7.6 million in revenue.

Revenue declined as clients in our on-site business continued to respond to economic uncertainty by reducing dependence on variable labor to supplement their core workforce.

The decline in demand has impacted clients across most industries, especially within retail and transportation.

Revenue declined as clients in our on-site businesses continued to be hesitant to make significant changes to their workforce strategies after taking steps to reduce their dependence on variable labor, primarily within the retail industry.

These declines were partially offset by growth within our commercial driving business.

The additional week in fiscal 2023 contributed $7.6 million in revenue.

Despite the challenging market dynamics, new business wins during fiscal 2024 outperformed fiscal 2023, which we expect to contribute to future revenue growth.

(in thousands, except percentages) 2024 2023

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Gross profit as a percentage of revenue contracted 60 basis points to 25.9% for the fiscal year ended December 29, 2024, compared to 26.5% for the prior year.

Unfavorable revenue shifts towards our lower margin staffing businesses caused a contraction of 100 basis points;

specifically revenue growth in the renewable energy industry within PeopleReady, which has lower margins than average PeopleReady margins, and revenue declines in PeopleScout.

The contraction was partially offset by an expansion of 40 basis points from lower workers’ compensation costs and 40 basis points from higher bill rates in our staffing businesses, which have increased ahead of pay rates.

Changes in revenue mix resulted in a contraction of 90 basis points, driven in part by revenue shifts toward our lower margin staffing businesses.

Our staffing businesses contributed an additional 10 basis points of contraction as a result of pricing pressure typical of a low demand environment.

These contractions were partially offset by 20 basis points of expansion from lower workers’ compensation costs driven by favorable development of prior year reserves, as well as 20 basis points of expansion from recognition of certain COVID-19 government subsidies in the current year.

Selling, general and administrative expense

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Total company SG&A expense decreased by $83.7 million or 16.9% for the fiscal year ended December 29, 2024, compared to the prior year.

Cost reduction efforts were taken in fiscal 2023 to promote a return to profitability, while maintaining our operational strengths and readiness to increase market share when demand rebounds.

These efforts resulted in savings of approximately $31 million during the fiscal year ended December 31, 2023, partially offset by $3.2 million in workforce reduction costs.

Operating cost savings were also offset by inflation of certain employee costs, most notably for employee medical benefits, which have been rising nation-wide, and $5.8 million of accelerated compensation costs related to transitions in our executive leadership.

The 53rd week added an additional $6.6 million of expense.

SG&A expense in the prior year included a benefit of $3.3 million for the reversal of accrued compensation related to the resignation of a former Chief Executive Officer.

We have continued to execute operational cost management actions in response to the decline in demand for our services, and simplify our organizational structure in line with our strategic plan.

SG&A expense in the current year included a benefit, net of related fees, of $6.8 million for recognition of certain COVID-19 government subsidies, offset by $6.4 million of accelerated third-party licensing fees associated with the previous version of our JobStack app.

SG&A expense in the prior year included $5.8 million of accelerated compensation costs related to transitions in our executive leadership, as well as an additional week which added $6.6 million of expense.

Depreciation and amortization

(in thousands, except percentages) 2024 2023

Depreciation and amortization $ 25,821 $ 29,273

Depreciation and amortization (exclusive of depreciation included in cost of services)

$ 28,624 $ 25,821

Percentage of revenue 1.8 % 1.4 %

Depreciation and amortization decreased primarily due to certain assets becoming fully depreciated and amortized during fiscal 2022.

Depreciation and amortization increased due to assets placed into service at the end of fiscal 2023, primarily related to PeopleReady technology.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Goodwill and intangible asset impairment charge

A summary of the goodwill and intangible asset impairment charge for the fiscal year ended December 31, 2023, by reportable segment, is as follows:

(in thousands) PeopleScout PeopleManagement Total company

A summary of the goodwill and intangible asset impairment charges for the fiscal year ended December 29, 2024, by reportable segment, is as follows:

(in thousands) PeopleReady PeopleScout PeopleManagement Total company

Goodwill $ 59,074 $ — $ — $ 59,074

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Total $ 59,074 $ — $ 600 $ 59,674

We performed our annual impairment test as of the first day of our fiscal second quarter of 2023.

As a result of this impairment test, we concluded that the carrying amount of our PeopleScout MSP reporting unit exceeded its fair value and we recorded a non-cash goodwill impairment charge of $8.9 million, which was included in goodwill and intangible asset impairment charge on our Consolidated Statements of Operations and Comprehensive Income (Loss) for the fiscal year ended December 31, 2023.

The PeopleScout MSP goodwill impairment was related to our revised internal revenue projections, which anticipated the current year declining trends would continue into future periods.

These projections were updated based on our then-current outlook and recent industry analysis, which indicated that our business would underperform due to a strategic lack of investment in technology within an increasingly competitive market.

No further impairment loss was recognized during the fiscal year ended December 31, 2023.

The remaining goodwill balance for PeopleScout MSP was $0.8 million as of December 31, 2023.

We performed an interim impairment test as of the last day of fiscal May 2024 following the determination by management that a triggering event had occurred.

As a result of this impairment test, we concluded that the carrying amount of our PeopleReady reporting unit exceeded its fair value and we recorded a non-cash goodwill impairment charge of $59.1 million, which was included in goodwill and intangible asset impairment charge on our Consolidated Statements of Operations and Comprehensive Income (Loss) for the fiscal year ended December 29, 2024.

As a result of this impairment charge, the goodwill carrying value of $59.1 million for PeopleReady was fully impaired.

The goodwill impairment was primarily driven by recent performance of the PeopleReady reporting unit and the temporary industrial staffing industry since our annual impairment testing date, as well as a delay in the projected timing of recovery.

No further impairment charges were recognized during the fiscal year ended December 29, 2024.

Goodwill and Intangible Assets , to our consolidated financial statements found in Item 8 of this Annual Report on Form 10-K, for additional details.

Indefinite-lived intangible assets

We performed our annual impairment test as of the first day of our fiscal second quarter of 2023.

We performed an impairment test during our fiscal second quarter of 2024.

As a result of this impairment test, we concluded that a trade name/trademark related to our PeopleManagement segment exceeded its estimated fair value and we recorded a non-cash impairment charge of $0.6 million, which was included in goodwill and intangible asset impairment charge on our Consolidated Statements of Operations and Comprehensive Income (Loss) for the fiscal year ended December 29, 2024.

The charge was primarily the result of an increase in the discount rate, as well as lower projected revenues given our then-current outlook.

No further impairment loss was recognized during the fiscal year ended December 31, 2023.

The charge was primarily driven by recent revenue performance of the related business given a decline in demand and overall economic uncertainty.

No further impairment charges were recognized during the fiscal year ended December 29, 2024.

The remaining balance for this trade name/trademark was $2.7 million as of December 29, 2024.

The income tax expense (benefit) and the effective income tax rate were as follows:

(in thousands, except percentages) 2023 2022

Income tax expense (benefit)

$ (6,472) $ 11,143

Effective income tax rate 31.3 % 15.2 %

Our tax provision and our effective tax rate are subject to variation due to several factors, including variability in our pre-tax and taxable income and loss by jurisdiction, tax credits, government audit developments, changes in laws, regulations and administrative practices, and relative changes of expenses or losses for which tax benefits are not recognized.

Additionally, our effective tax rate can be more or less volatile based on the amount of our pre-tax income.

For example, the impact of tax credits and non-deductible expenses on our effective tax rate is greater when our pre-tax income is lower.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Our tax provision and our effective tax rate are subject to variation due to several factors, including variability in our pre-tax and taxable income or loss by jurisdiction, tax credits, government audit developments, changes in laws, regulations and administrative practices, valuation allowances recorded on deferred tax assets, and relative changes in expenses or losses for which tax benefits are not recognized.

Additionally, our effective tax rate can be more or less volatile based on the amount of pre-tax income or loss.

For example, the impact of discrete items, tax credits, and non-deductible expenses on our effective tax rate is greater when our pre-tax income or loss is lower.

The items creating differences between income taxes computed at the statutory federal income tax rate and income taxes reported on the Consolidated Statements of Operations and Comprehensive Income (Loss) are as follows:

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Hiring tax credits, net (4,123) 4.7 (4,997) 24.2

Valuation allowance

56,792 (64.1) — —

Uncertain tax positions (99) 0.1 (206) 1.0

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$ 37,224 (42.0) % $ (6,472) 31.3 %

Our effective tax rate for the fiscal year ended December 31, 2023 was 31.3% compared to 15.2% for the prior year.

The higher effective tax rate in the current year was primarily due to benefits of hiring tax credits, partially offset by certain non-deductible and non-taxable items and foreign income taxes.

Because of the loss before tax benefit for the fiscal year ended December 31, 2023, hiring tax credits add to the income tax benefit and rate and non-deductible items subtract from the income tax benefit and rate.

Significant fluctuations in our effective tax rate for the fiscal year ended December 29, 2024 were primarily due to changes in the valuation allowance against our U.S.

federal, state and certain foreign deferred tax assets, as well as tax benefits from hiring credits.

Based on our deferred tax asset realizability assessments performed during the fiscal year ended December 29, 2024, we recorded additional valuation allowances against U.S.

federal, state and certain foreign deferred tax assets.

Our conclusion was driven by U.S.

and foreign pre-tax losses beginning in 2023 and continuing into 2024, combined with the significant non-cash goodwill impairment charge of $59.1 million recorded during the fiscal year ended December 29, 2024.

The federal Work Opportunity Tax Credit (“WOTC”), our primary hiring tax credit, is designed to encourage employers to hire workers from certain targeted groups with higher than average unemployment rates.

WOTC is generally calculated as a percentage of wages over a twelve-month period up to worker maximums by targeted groups.

Based on historical results and business trends, we estimate the amount of WOTC we expect to earn related to wages of the current year.

However, the estimate is subject to variation because 1) a small percentage of our workers qualify for one or more of the many targeted groups;

2) the targeted groups are subject to different incentive credit rates and limitations;

3) credits fluctuate depending on economic conditions and qualified worker retention periods;

and 4) state and federal offices can delay their credit certification processing and have inconsistent certification rates.

We recognize an adjustment to prior year hiring tax credits if credits certified by government offices differ from original estimates.

Congress has approved the WOTC program through the end of 2025.

Summary of Significant Accounting Policies and Note 13:

Income Taxes , to our consolidated financial statements found in Item 8 of this Annual Report on Form 10-K, for additional information.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Segment performance

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Segment profit includes revenue, related cost of services, and ongoing operating expenses directly attributable to the reportable segment.

Segment profit excludes goodwill and intangible asset impairment charges, depreciation and amortization expense, unallocated corporate general and administrative expense, interest expense, other income and expense, income taxes, and other costs and benefits not considered to be ongoing.

Segment Information , to our consolidated financial statements found in Item 8 of this Annual Report on Form 10-K, for additional details on our reportable segments, as well as a reconciliation of segment profit to income (loss) before tax expense (benefit).

Segment profit excludes goodwill and intangible asset impairment charges, depreciation and amortization expense, unallocated corporate general and administrative expense, interest and other income (expense), income taxes, and other costs and benefits not considered to be ongoing.

Segment Information , to our consolidated financial statements found in Item 8 of this Annual Report on Form 10-K, for additional details on our reportable segments, including a reconciliation of segment profit to income (loss) before tax expense (benefit).

Segment profit should not be considered a measure of financial performance in isolation or as an alternative to net income (loss) in the Consolidated Statements of Operations and Comprehensive Income (Loss) in accordance with accounting principles generally accepted in the United States of America (“U.S.

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PeopleReady segment performance was as follows:

(in thousands, except percentages) 2023 2022

(in thousands, except percentages) 2024 % of revenue 2023 % of revenue

Revenue from services $ 868,549 $ 1,096,318

Cost of services

614,860 70.8 % 772,058 70.4 %

Selling, general and administrative expense

247,906 28.5 % 297,654 27.2 %

Segment profit $ 5,783 0.7 % $ 26,606 2.4 %

Percentage of revenue 2.4 % 6.9 %

PeopleReady segment profit declined 69.7% or $61.1 million and declined as a percentage of revenue for the fiscal year ended December 31, 2023, compared to the prior year.

The decline was primarily due to the decline in revenue and the relatively high ratio of fixed to variable costs within SG&A expense, as well as changes in revenue mix towards lower margin renewable energy projects.

The decline was partially mitigated through disciplined pricing, with bill rates increasing ahead of pay rates.

MANAGEMENT’S DISCUSSION AND ANALYSIS

PeopleReady segment profit declined $20.8 million and declined as a percentage of revenue for the fiscal year ended December 29, 2024, compared to the prior year.

The decline in segment profit was driven by the decline in revenue, as well as the increase in cost of services as a percentage of revenue from pricing pressures typical of a low demand environment, partially offset by lower workers’ compensation costs.

While SG&A expense declined overall due to operational cost management actions and simplification of our organizational structure, it increased slightly as a percentage of revenue due to the relatively high ratio of fixed to variable costs.

PeopleScout segment performance was as follows:

(in thousands, except percentages) 2023 2022

(in thousands, except percentages) 2024 % of revenue 2023 % of revenue

Revenue from services $ 156,643 $ 229,334

Cost of services

91,484 58.4 % 137,551 60.0 %

Selling, general and administrative expense

53,007 33.8 % 64,861 28.3 %

Segment profit $ 12,152 7.8 % $ 26,922 11.7 %

Percentage of revenue 11.7 % 14.1 %

PeopleScout segment profit declined 39.9% or $17.8 million and declined as a percentage of revenue for the fiscal year ended December 31, 2023, compared to the prior year.

The decline was a result of the decline in revenue, the effects of which were softened by workforce reductions during each quarter of 2023 to manage our operating cost structure.

PeopleScout segment profit declined $14.8 million and declined as a percentage of revenue for the fiscal year ended December 29, 2024, compared to the prior year.

The decline in segment profit was driven by the decline in revenue, partially offset by a decrease in cost of services as a percentage of revenue due to swift cost actions in response to lower revenue levels.

While SG&A expense declined overall due to operational cost management actions and simplification of our organizational structure, it increased as a percentage of revenue due to the relatively high ratio of fixed to variable costs.

PeopleManagement segment performance was as follows:

(in thousands, except percentages) 2023 2022

(in thousands, except percentages) 2024 % of revenue 2023 % of revenue

Revenue from services $ 542,201 $ 580,591

Cost of services

456,096 84.1 % 488,692 84.2 %

Selling, general and administrative expense

70,986 13.1 % 84,936 14.6 %

Segment profit $ 15,119 2.8 % $ 6,963 1.2 %

Percentage of revenue 1.2 % 2.4 %

PeopleManagement segment profit declined 56.0% or $8.8 million and declined as a percentage of revenue for the fiscal year ended December 31, 2023, compared to the prior year.

The decline was primarily due to the decline in revenue and the associated impact from lower operating leverage.

We took actions during each quarter of 2023 to reduce operating costs to better align with demand.

PeopleManagement segment profit grew $8.2 million and grew as a percentage of revenue for the fiscal year ended December 29, 2024, compared to the prior year.

This growth was primarily due to the decrease in SG&A expense, which was the result of disciplined cost management actions to simplify and streamline our organizational structure to improve efficiency.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FISCAL 2023 AS COMPARED TO FISCAL 2022

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Operating outlook

• We expect revenue for the fiscal first quarter of 2024 to decline between 16% and 10% as compared to the same period in the prior year, primarily due to our clients’ continued response to macroeconomic uncertainty.

• We anticipate gross profit as a percentage of revenue to decline between 210 and 170 basis points for the fiscal first quarter of 2024, compared to the same period in the prior year, primarily due to the change in business mix and higher workers’ compensation expense.

• For the fiscal first quarter of 2024, we anticipate SG&A expense to be between $109 million and $113 million.

• We expect basic weighted average shares outstanding to be approximately 31 million for the fiscal first quarter of 2024.

• For the fiscal first quarter of 2025, we expect revenue to decline between 13% and 7% as compared to the same period in the prior year.

The decline assumes current market conditions continue, and includes approximately 1% headwind due to the sale of Labour Ready Temporary Services, Ltd.

(“PeopleReady Canada”) in early 2024, partially offset by approximately 3% inorganic growth from the acquisition of Healthcare Staffing Professionals, Inc.

(“HSP”) in late January 2025.

• For the fiscal first quarter of 2025 we anticipate gross profit as a percentage of revenue to decline between 70 and 30 basis points as compared to the same period in the prior year, primarily due to continued changes in business mix.

• For the fiscal first quarter of 2025, we anticipate SG&A expense to be between $93 million and $97 million, representing improvement compared to the same period in the prior year, and the result of our ongoing cost management efforts.

• For the fiscal first quarter of 2025 we expect basic weighted average shares outstanding to be approximately 30 million.

This expectation does not include the impact of potential share repurchases.

• We expect our statutory income tax rate for fiscal 2024 to be between 24% and 28%.

For fiscal 2024, we also expect an income tax benefit related to our hiring tax credits of between $5 million and $9 million.

• For fiscal 2025, we expect income tax expense between $2 million and $6 million, which is lower than historical levels due to the valuation allowance against our U.S.

federal, state and certain foreign deferred tax assets.

Liquidity outlook

• Capital expenditures and spending for software as a service assets are expected to be between $23 million and $27 million for fiscal 2024, with approximately $4 million of this amount relating to spending for software as a service assets for fiscal 2024.

• For fiscal 2025, capital expenditures and spending for software as a service assets are expected to be between $19 million and $23 million, with approximately $3 million of this amount relating to spending for software as a service assets.

• To help fund the acquisition of HSP in late January, we borrowed $35.0 million under the Revolving Credit Facility as a Term Secured Overnight Financing Rate (“SOFR’) loan.

MANAGEMENT’S DISCUSSION AND ANALYSIS

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We believe we have a strong financial position and sufficient sources of funding to meet our short- and long-term obligations.

As of December 31, 2023, we had $61.9 million in cash and cash equivalents and no debt outstanding.

Under the Revolving Credit Facility, $6.2 million was utilized by outstanding standby letters of credit, leaving $293.8 million unused , which is constrained by our most restrictive covenant making $85.9 million available for additional borrowing.

Long-Term Debt , to our consolidated financial statements found in Item 8 of this Annual Report on Form 10-K, for details on our revolving credit facility.

On February 9, 2024, we entered into an amended and restated revolving credit agreement (the “2024 Revolving Credit Facility”), which matures on February 9, 2029.

The 2024 Revolving Credit Facility provides for a revolving line of credit of up to $255.0 million, with an option to increase the amount to $405.0 million, subject to lender approval.

The following financial covenants, as defined in the 2024 Revolving Credit Facility, will be in effect beginning the fiscal first quarter of 2024:

• Consolidated fixed charge coverage ratio greater than 1.25, defined as the trailing twelve months bank-adjusted cash flow divided by cash interest expense.

• Asset coverage ratio of greater than 1.00, defined as the ratio of (a) 60% of accounts receivable to (b) total debt outstanding less unrestricted cash in excess of $50.0 million, subject to certain minimums.

Under this covenant we are limited to $25.0 million in aggregate share repurchases in any 12 month period.

The following financial covenant, as defined in the 2024 Revolving Credit Facility, will replace the asset coverage ratio beginning the fiscal first quarter of 2026, or earlier at our discretion, subject to the terms of the agreement:

• Consolidated leverage ratio less than 3.00, defined as our funded indebtedness divided by trailing twelve months consolidated EBITDA, as defined in the 2024 Revolving Credit Facility.

Cash generated through our core operations is our primary source of liquidity.

As of December 29, 2024, we had $22.5 million in cash and cash equivalents and $7.6 million debt outstanding as a Swingline loan under the Revolving Credit Facility.

An additional $2.7 million of the Revolving Credit Facility was utilized by outstanding standby letters of credit, leaving $244.7 million unused, of which $118.5 million is available for additional borrowing after considering our most restrictive covenant.

We have an option to increase the total line of credit amount under the Revolving Credit Facility from $255.0 million to $405.0 million, subject to lender approval.

Cash generated through our core operations is generally our primary source of liquidity.

Our principal ongoing cash needs are to finance working capital, fund capital expenditures, repay outstanding Revolving Credit Facility balances, and execute share repurchases.

We may also need cash to fund future acquisitions.

We manage working capital through timely collection of accounts receivable, which we achieve through focused collection efforts and tightly monitoring trends in days sales outstanding.

While client payment terms are generally 90 days or less, we pay our associates weekly, so additional financing through the use of our Revolving Credit Facility is sometimes necessary to support revenue growth.

While client payment terms are generally 90 days or less, we pay our associates daily and weekly, so additional financing through the use of our Revolving Credit Facility is sometimes necessary to support working capital needs in times of revenue growth.

We also manage working capital through efficient cost management and strategically timing payments of accounts payable.

We continue to make investments in online and mobile apps to increase the competitive differentiation of our services over the long term and improve the efficiency of our service delivery model.

In addition, we continue to transition our back-office technology from on-premise software platforms to cloud-based software solutions, to increase automation and the efficiency of running our business.

We continue to make investments in online and mobile apps to increase the competitive differentiation of our services long-term and improve the efficiency of our service delivery model.

In addition, we continue to transition our technology from on-premise software platforms to cloud-based software solutions, to increase automation and the efficiency of running our business.

Outside of ongoing cash needed to support core operations, our insurance carriers and certain state workers’ compensation programs require us to collateralize a portion of our workers’ compensation obligation, for which they become responsible should we become insolvent.

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We continue to have risk that these collateral requirements may be increased by our insurers due to our loss history and market dynamics.

We generally anticipate that our collateral commitments will continue to grow as we grow our business.

We pay our premiums and deposit our collateral in installments.

We generally anticipate that our collateral commitments will grow as our business grows.

We pay our premiums and deposit our collateral, if required, in installments.

The collateral typically takes the form of cash and cash-backed instruments, highly rated investment grade securities, letters of credit, and surety bonds.

Restricted cash and investments supporting our self-insured workers’ compensation obligation are held in a trust at the Bank of New York Mellon (“Trust”), and are used to pay workers’ compensation claims as they are filed.

Restricted cash, cash equivalents and investments supporting our self-insured workers’ compensation obligation are held in a trust at the Bank of New York Mellon (“Trust”) and are used to pay workers’ compensation claims as they are filed.

Workers' Compensation Insurance and Reserves , and Note 4:

Restricted Cash and Investments , to our consolidated financial statements found in Item 8 of this Annual Report on Form 10-K, for details on our workers’ compensation program as well as the restricted cash and investments held in Trust.

Restricted Cash, Cash Equivalents and Investments , to our consolidated financial statements found in Item 8 of this Annual Report on Form 10-K, for details on our workers’ compensation program as well as the restricted cash, cash equivalents and investments held in Trust.

We have established investment policy directives for the Trust with the first priority to preserve capital, second to ensure sufficient liquidity to pay workers’ compensation claims, third to diversify the investment portfolio and fourth to maximize after-tax returns.

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For those investments rated by nationally recognized statistical rating organizations the minimum ratings at time of purchase are:

MANAGEMENT’S DISCUSSION AND ANALYSIS

S&P Moody’s Fitch

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Commitments and Contingencies , to our consolidated financial statements found in Item 8 of this Annual Report on Form 10-K, for additional details on our workers’ compensation commitments.

We continue to actively manage workers’ compensation cost by focusing on improving our associates’ safety programs, and actively control costs with our network of service providers.

These actions have had a positive impact creating favorable adjustments to workers’ compensation liabilities recorded in the prior periods.

We continue to actively manage workers’ compensation costs by focusing on improving our associate safety programs, and actively control costs with our network of service providers.

These actions have had a positive impact creating favorable adjustments to workers’ compensation liabilities recorded in the prior periods, as well as lowering our required collateral levels.

Continued favorable adjustments to our prior year workers’ compensation liabilities are dependent on our ability to continue to aggressively lower accident rates and costs of our claims.

We expect diminishing favorable adjustments to our workers’ compensation liabilities as the opportunity for significant reduction to the frequency and severity of accident rates has diminished.

Restricted cash and investments also includes collateral to support our non-qualified deferred compensation plan in the form of company-owned life insurance policies.

Due to our progress in worker safety improvements and the resulting reduction in the frequency and severity of accident rates, we expect diminishing favorable adjustments to our workers’ compensation liabilities going forward.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Restricted cash, cash equivalents and investments also includes collateral to support our non-qualified deferred compensation plan in the form of company-owned life insurance policies.

Our non-qualified deferred compensation plan is managed by a third-party service provider, and the investments backing the company-owned life insurance policies align with the amount and timing of payments based on employee elections.

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(in thousands) Dec 29, 2024 Dec 31, 2023

Net cash provided by operating activities $ 34,754 $ 120,503

Net cash (used in) provided by operating activities

$ (17,058) $ 34,754

Net cash used in investing activities (2,453) (32,322)

Net cash used in financing activities (17,087) (37,583)

Change in cash, cash equivalents and restricted cash reclassified to assets held-for-sale

Effect of exchange rate changes on cash, cash equivalents and restricted cash (874) (2,420)

Net change in cash, cash equivalents and restricted cash $ (36,325) $ 32,446

Change in cash, cash equivalents and restricted cash and cash equivalents reclassified to assets held-for-sale — (300)

Effect of exchange rate changes on cash, cash equivalents and restricted cash and cash equivalents (1,608) (874)

Net change in cash, cash equivalents and restricted cash and cash equivalents $ (38,206) $ (36,325)

Cash flows from operating activities

Cash provided by operating activities consists of net income (loss) adjusted for non-cash benefits and expenses, and changes in operating assets and liabilities.

As client demand for our services declines, the result is a deleveraging of accounts receivable and accounts payable.

Operating cash flows consist of net income (loss) adjusted for non-cash benefits and expenses, and changes in operating assets and liabilities.

As client demand declines, the result is a deleveraging of accounts receivable and accounts payable.

Accrued wages and benefits can fluctuate based on whether the period end requires the accrual of one or two weeks of payroll, the amount and timing of bonus payments, and timing of payroll tax payments.

Net cash provided by accounts receivable collections through deleveraging during the fiscal year ended December 31, 2023 was partially offset by net cash used for payments on accounts payable and accrued expenses.

Net cash used for payments on accrued wages and benefits was primarily due to lower annual employee bonuses.

In addition, our workers’ compensation claims reserve for estimated claims decreases as contingent labor services decline, as was the case in fiscal 2023.

Net cash provided by accounts receivable collections through deleveraging during the fiscal year ended December 29, 2024 was partially offset by an increase in days sales outstanding of approximately three days compared to 2023, primarily due to a shift in business mix towards clients with longer payment terms.

Net cash used for payments on accounts payable and other accrued expenses was primarily related to timing of payments to vendors as well as a decrease in certain accrued expenses that fluctuate with revenue.

Net cash used for payments on accrued wages and benefits was primarily due to the release of certain COVID-19 government subsidy reserves.

Cash flows from investing activities

Investing cash flows consist of capital expenditures, and purchases, sales and maturities of restricted investments, which are managed in line with our workers’ compensation collateral funding requirements and timing of claim payments.

Capital expenditures for the fiscal year ended December 31, 2023 were higher compared to the fiscal year ended December 25, 2022, due in part to the continued investments we are making to upgrade our PeopleReady technology platform.

For the fiscal year ended December 31, 2023, maturities of restricted investments were reinvested by the Trust resulting in only a small impact to cash used in investing activities.

In the prior period, cash provided by maturities of restricted investments was not immediately reinvested by the Trust, and partially offset capital expenditures.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Capital expenditures for the fiscal year ended December 29, 2024 included continued investments to upgrade our PeopleReady technology platform.

Our capital expenditures were partially offset by cash provided by maturities of restricted investments to pay workers’ compensation claims exceeding purchases of new restricted investments.

Cash flows from financing activities

Financing cash flows consist primarily of repurchases of common stock as part of our publicly announced share repurchase program, amounts to satisfy employee tax withholding obligations upon the vesting of restricted stock, the net change in our Revolving Credit Facility, and proceeds from the sale of common stock through our employee stock purchase plans.

Financing cash flows consist primarily of repurchases of common stock as part of our publicly announced share repurchase program, amounts to satisfy employee tax withholding obligations upon the vesting of restricted stock, and the net change in our Revolving Credit Facility.

Net cash used in financing activities during the fiscal year ended December 29, 2024 was primarily due to use of $21.3 million to repurchase our common stock in the open market.

During the fiscal year ended December 25, 2022, we used $60.9 million to repurchase our common stock in the open market.

As of December 31, 2023, $55.1 million remains available for repurchase under existing authorization.

As of December 29, 2024, $33.5 million remains available for repurchase under existing authorization, though we are limited to $25.0 million in aggregate share repurchases in any twelve-month period by our financial covenants.

Common stock repurchases were partially offset by a net increase in debt outstanding under our Revolving Credit Facility.

FISCAL 2023 AS COMPARED TO FISCAL 2022

Management’s Discussion and Analysis of Financial Condition and Results of Operations , found in Part II of the Annual Report on Form 10-K for the fiscal year ended December 31, 2023 for discussion of fiscal 2023 compared to fiscal 2022.

MANAGEMENT’S DISCUSSION AND ANALYSIS

SUMMARY OF CRITICAL ACCOUNTING ESTIMATES

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For fiscal 2024 claims, a 5% change in one or more of the above factors would result in a change to workers’ compensation cost of approximately $2 million.

Our reserve balances have been positively impacted primarily by the success of our accident prevention programs.

In the event that we are not able to further reduce our accident rates, the positive impacts to our reserve balance will diminish.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Our reserve balances have been positively impacted primarily by the success of our accident prevention programs and our focus on resolving open claims in a timely manner.

In the event that we are not able to further reduce our accident rates or resolve open claims in a timely manner, the positive impacts to our reserve balance will diminish.

Management evaluates the adequacy of the workers’ compensation reserves in conjunction with an independent quarterly actuarial assessment.

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• positive or adverse development of claims.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Accounts receivable allowance for credit losses

Accounts receivable are recorded at the invoiced amount.

We establish an estimate for the allowance for credit losses resulting from the failure of our clients to make required payments by applying an aging schedule to pools of assets with similar risk characteristics.

Based on an analysis of the risk characteristics of our clients and associated receivables, we have concluded our pools are as follows:

• PeopleReady and Centerline Drivers (“Centerline”) have a large, diverse set of clients, generally with frequent, low dollar invoices due to the daily nature of the work we perform.

• PeopleReady has a large, diverse set of clients, generally with frequent, low dollar invoices due to the daily nature of the work we perform.

This results in high turnover in accounts receivable.

• PeopleManagement On-Site has a smaller number of clients and follows a contractual billing schedule.

The invoice amounts are higher than that of PeopleReady and Centerline, with longer payment terms.

• PeopleScout has a smaller number of clients, and generally sends invoices on a consolidated basis for a client.

Invoice amounts are generally higher for PeopleScout than for PeopleManagement On-Site, with similar payment terms.

• Centerline Drivers (“Centerline”) has a mix of client sizes, many with low dollar weekly invoices, but other clients that are invoiced on a consolidated basis, resulting in a high concentration of revenue related to its top 10 clients.

Payment terms are slightly longer than PeopleReady.

• PeopleScout has a smaller number of clients, and generally sends monthly invoices on a consolidated basis for a client.

Invoice amounts are generally higher for PeopleScout than our other businesses, with longer payment terms than PeopleReady and Centerline.

• Staff Management | SMX and SIMOS Insourcing Solutions have a smaller number of clients, and follow a contractual billing schedule.

These clients have longer payment terms than our other businesses.

When specific clients are identified as no longer sharing the same risk profile as their current pool, they are removed from the pool and evaluated separately.

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Acquisition-related costs are expensed as incurred.

Our acquisitions may include contingent consideration, which require us to recognize the fair value of the estimated liability at the time of the acquisition.

Our acquisitions may include contingent consideration, which requires us to recognize the fair value of the estimated liability at the time of the acquisition.

Subsequent changes in the estimate of the amount to be paid under the contingent consideration arrangement are recognized on the Consolidated Statements of Operations and Comprehensive Income (Loss).

Cash payments for contingent or deferred consideration are classified within cash flows from investing activities for the purchase price fair value of the contingent consideration while amounts paid in excess are classified within cash flows from operating activities on the Consolidated Statements of Cash Flows.

Alternatively, our acquisitions may include contingent payments to employees that are selling shareholders, which are separate from the business combination and are accounted for as compensation expense.

MANAGEMENT’S DISCUSSION AND ANALYSIS

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We evaluate goodwill and indefinite-lived intangible assets for impairment on an annual basis as of the first day of our fiscal second quarter, or whenever events or circumstances make it more likely than not that an impairment may have occurred.

These events or circumstances could include a significant change in general economic conditions, deterioration in industry environment, changes in cost factors, declining operating performance indicators, legal factors, competition, client engagement, changes in the carrying amount of net assets, sale or disposition of a significant portion of a reporting unit, or a sustained decrease in share price.

We monitor the existence of potential impairment indicators throughout the fiscal year.

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We consider our operating segments to be our reporting units for goodwill impairment testing.

Our operating segments with remaining goodwill are PeopleReady, PeopleManagement Centerline, PeopleScout RPO and PeopleScout MSP.

Our reporting units with remaining goodwill as of the first day of our fiscal second quarter of 2024 were PeopleReady, Centerline, PeopleScout RPO and PeopleScout MSP.

When evaluating goodwill for impairment, we may first assess qualitative factors to determine whether it is more likely than not the fair value of a reporting unit is less than its carrying amount.

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If the fair value exceeds the carrying value, we conclude that no goodwill impairment has occurred.

If the carrying value of the reporting unit exceeds its fair value, we recognize an impairment loss in an amount equal to the excess, not to exceed the carrying value of the goodwill.

If the carrying value exceeds the fair value, we recognize an impairment charge in an amount equal to the excess, not to exceed the carrying value of the goodwill.

We consider a reporting unit’s fair value to be substantially in excess of its carrying value at a 20% premium or greater.

Determining the fair value of a reporting unit when performing a quantitative impairment test involves the use of significant estimates and assumptions to evaluate the impact of operational and macroeconomic changes on each reporting unit.

We estimate the fair value of each reporting unit using a weighting of the income and market valuation approaches.

We estimate the fair value using a weighting of the income and market valuation approaches.

The income approach applies a fair value methodology to each reporting unit based on discounted cash flows.

This analysis requires significant estimates and judgments, including estimation of future cash flows, which is dependent on internally-developed forecasts of revenue and profitability, estimation of the long-term rate of growth for our business, estimation of the useful life over which cash flows will occur, and determination of our weighted average cost of capital, which is risk-adjusted to reflect the specific risk profile of the reporting unit being tested.

This analysis requires significant estimates and judgments, including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for our business, estimation of the useful life over which cash flows will occur, and determination of our weighted average cost of capital, which is risk-adjusted to reflect the specific risk profile of the reporting unit being tested.

We also apply a market approach, which develops a value correlation based on the market capitalization of similar publicly traded companies, referred to as a multiple, to apply to the operating results of the reporting units.

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We confirm the reasonableness of the valuation conclusions by comparing the indicated values of all the reporting units to the overall company value indicated by the stock price and outstanding shares as of the valuation date, or market capitalization.

Annual impairment test

We performed our annual goodwill impairment test as of the first day of our fiscal second quarter of 2023.

Impairment test

During the fiscal second quarter of 2024, management determined that a triggering event had occurred as a result of additional decline in demand for our services, prolonged economic uncertainty, and a further decrease in our stock price.

Therefore, we performed an interim impairment test as of the last day of fiscal May 2024.

The weighted average cost of capital used in our most recent impairment test was risk-adjusted to reflect the specific risk profile of the reporting units and ranged from 13.5% to 14.5%.

The combined fair values for all reporting units were then reconciled to our aggregate market value of our shares of common stock on the date of valuation, resulting in a control premium of 27.9%.

We also applied a market approach, which develops a value correlation based on the market capitalization of similar publicly traded companies, referred to as a multiple, to apply to the forecasted future operating results of the reporting units.

The primary market multiples considered for the market approach are revenue and earnings before interest, taxes, depreciation, and amortization.

In our most recent impairment test, the market multiples were based on earnings before interest, taxes, depreciation, and amortization for Centerline and PeopleScout RPO, while market multiples based on revenue were used for PeopleReady.

The income and market approaches for each reporting unit were equally weighted in our most recent annual impairment test, except for PeopleScout MSP which relied only on the income approach.

The combined fair values for all reporting units were then reconciled to the aggregate market value of our shares of common stock on the date of valuation.

MANAGEMENT’S DISCUSSION AND ANALYSIS

As a result of our annual impairment test, we concluded that the carrying amount of the PeopleScout MSP reporting unit exceeded its fair value and we recorded a non-cash goodwill impairment charge of $8.9 million, which was included in goodwill and intangible asset impairment charge on our Consolidated Statements of Operations and Comprehensive Income (Loss) for the fiscal year ended December 31, 2023.

The PeopleScout MSP goodwill impairment was related to our revised internal revenue projections, which anticipated the current year declining trends would continue into future periods.

The remaining goodwill balance for PeopleScout MSP was $0.8 million as of December 31, 2023.

Any further declines in PeopleScout MSP revenue, in excess of our projections used in the annual impairment test, could give rise to an additional impairment.

Based on our annual impairment test, we concluded the fair value of all other reporting units were substantially in excess of their carrying value, and the goodwill associated with those reporting units was not impaired.

Operating results have declined compared to our expectations as of the date of the annual impairment test;

however, we did not identify any events or conditions that make it more likely than not that an additional impairment may have occurred during the fiscal year ended December 31, 2023.

Further declines in our projected operating performance, or a sustained decrease in our stock price, could give rise to a future impairment.

Goodwill and Intangible Assets , to our consolidated financial statements found in Item 8 of this Annual Report on Form 10-K, for additional details on the 2023 goodwill impairment.

There were no goodwill impairment charges recorded during fiscal 2022 or 2021.

Based on the results of our interim impairment test, we concluded that the carrying amount of goodwill for the PeopleReady reporting unit exceeded the estimated fair value and we recorded a non-cash impairment charge of $59.1 million, which was included in goodwill and intangible asset impairment charge on our Consolidated Statements of Operations and Comprehensive Income (Loss) for the fiscal year ended December 29, 2024.

As a result of this impairment charge, the total goodwill carrying value of $59.1 million for PeopleReady was fully impaired.

Based on our interim impairment test, we concluded the fair value of all other reporting units were substantially in excess of their carrying value, and the goodwill associated with those reporting units was not impaired.

Additionally, following performance of the interim impairment test, we did not identify any events or conditions that make it more likely than not that an additional impairment may have occurred during the fiscal year ended December 29, 2024.

Goodwill and Intangible Assets , to our consolidated financial statements found in Item 8 of this Annual Report on Form 10-K, for additional details on the 2024 and 2023 goodwill impairment.

There were no goodwill impairment charges recorded during fiscal 2022.

Indefinite-lived intangible assets

We have indefinite-lived intangible assets related to our Staff Management and PeopleScout trade names.

We have indefinite-lived intangible assets for trade names/trademarks related to businesses within our PeopleScout and PeopleManagement segments.

We evaluate our indefinite-lived intangible assets for impairment on an annual basis as of the first day of our fiscal second quarter, or whenever events or circumstances make it more likely than not that an impairment may have occurred.

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If, after assessing the totality of events and circumstances, we determine that it is more likely than not the fair value of the indefinite-lived intangible asset is greater than its carrying amount, the quantitative impairment test is unnecessary.

The quantitative impairment test, if necessary, utilizes the relief from royalty method to determine the fair value of each of our trade names.

If the carrying value exceeds the fair value, we recognize an impairment loss in an amount equal to the excess, not to exceed the carrying value.

Management uses considerable judgment to determine key assumptions, including projected revenue, royalty rates and appropriate discount rates.

Annual impairment test

We performed our annual indefinite-lived intangible asset impairment test as of the first day of our fiscal second quarter of 2023.

The quantitative impairment test, if necessary, utilizes the relief from royalty method to determine the fair value of each of our trade names/trademarks.

If the carrying value exceeds the fair value, we recognize an impairment charge in an amount equal to the excess, not to exceed the carrying value.

Management uses considerable judgment to determine key assumptions, including forecasted future revenue, royalty rates and appropriate discount rates.

Impairment test

We performed an indefinite-lived intangible asset impairment test during our fiscal second quarter of 2024.

As a result of this impairment test, we concluded that a trade name/trademark related to the PeopleManagement segment exceeded its estimated fair value and we recorded a non-cash impairment charge of $0.6 million, which was included in goodwill and intangible asset impairment charge on our Consolidated Statements of Operations and Comprehensive Income (Loss) for the fiscal year ended December 29, 2024.

The charge was primarily the result of an increase in the discount rate, as well as lower projected revenues given our then-current outlook.

The charge was primarily driven by recent revenue performance of the related business given a decline in demand and overall economic uncertainty.

The remaining balance for this trade name/trademark was $2.7 million as of December 29, 2024.

Goodwill and Intangible Assets , to our consolidated financial statements found in Item 8 of this Annual Report on Form 10-K, for additional details on the 2023 indefinite-lived intangible asset impairment.

The fair value of the trade name/trademark related to the PeopleScout segment was substantially in excess of its carrying value of $2.1 million, and therefore did not result in an impairment.

Additionally, following performance of the annual impairment test, we did not identify any events or conditions that make it more likely than not that an additional impairment may have occurred during the fiscal year ended December 31, 2023.

No impairment charge was recorded during fiscal 2022 nor 2021.

As of our impairment testing date, the fair value of the trade name/trademark related to the PeopleScout segment was substantially in excess of its carrying amount of $2.1 million, and therefore did not result in an impairment.

Additionally, following performance of the impairment test, we did not identify any events or conditions that make it more likely than not that an additional impairment may have occurred during the fiscal year ended December 29, 2024.

Goodwill and Intangible Assets , to our consolidated financial statements found in Item 8 of this Annual Report on Form 10-K, for additional details on the 2024 and 2023 indefinite-lived intangible asset impairment.

There were no indefinite-lived intangible asset impairment charges recorded during fiscal 2022.

MANAGEMENT’S DISCUSSION AND ANALYSIS

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When an impairment charge is recognized, the carrying amount of the asset is reduced to its estimated fair value based on discounted cash flow analysis or other valuation techniques.

No impairment charge was recorded during fiscal 2023, 2022 or 2021.

No impairment charges were recorded during fiscal 2024, 2023 or 2022.

Estimated contingent legal and regulatory liabilities

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We recognize deferred tax assets to the extent we believe it is more likely than not the asset will be realized.

We consider available positive and negative evidence when making such determination, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, carryback potential if permitted, and results of recent operations.

We consider available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit the use of existing deferred tax assets when making such determination, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, carryback potential if permitted, and results of recent operations.

A significant piece of objective negative evidence is the existence of a three-year cumulative loss.

Such objective negative evidence limits the ability of management to consider other subjective evidence, such as projected taxable income.

When appropriate, we record a valuation allowance against deferred tax assets to reduce deferred tax assets to the amount that is more likely than not to be realized.

Based on our deferred tax asset realizability analysis, we have determined that a valuation allowance is appropriate for certain tax credits and net operating losses that we expect will not be utilized within the permitted carryforward periods as of December 31, 2023 and December 25, 2022.

Based on our deferred tax asset realizability assessments during the year ended December 29, 2024, we determined that a valuation allowance was appropriate against our U.S.

federal, state and certain foreign deferred tax assets that we expect will not be utilized within the permitted carryforward periods.

Our conclusion was driven by U.S.

Income Taxes , to our consolidated financial statements found in Item 8 of this Annual Report on Form 10-K, for details on our current valuation allowance.

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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