Item 2. Management’s Discussion and Analysis
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Our Company
We are a technical services company focused on energy and infrastructure solutions. Our solutions include energy planning and analytics, consulting, software, public finance, engineering, and program implementation. We serve utilities, state and local governments, and commercial customers in the United States and Canada.
Our broad portfolio of services operates within two financial reporting segments: (1) Energy and (2) Engineering and Consulting. The interfaces and synergies between these segments are important elements of our strategy to design and deliver trusted, comprehensive, innovative, and proven solutions and services for our customers.
Our Energy segment addresses power grid resiliency, efficiency, and reliability. Services include in-depth energy planning studies, economic analysis, modeling and forecasting software, decarbonization, program design and implementation, energy efficiency, turnkey energy and infrastructure projects, grid modernization, and utility-scale electrical engineering and construction management. Clients in this segment are investor-owned and municipal utilities, commercial clients including investors and hyperscalers, and state and local governments.
Our Engineering & Consulting segment addresses sustainability and growth in civil infrastructure. We often serve as a municipality’s engineering department. Services include municipal and civil engineering, building and safety, code enforcement, fire plan and inspection, city engineering, construction management, design engineering, planning, and financial and municipal advisory services. Clients in this segment are state and local governments, school districts, and utility districts.
We were founded in 1964 and are headquartered in Anaheim, California.
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Results of Operations
First Quarter Overview
The following table sets forth, for the periods indicated, certain information derived from our condensed consolidated statements of comprehensive income (1) :
Three Months Ended
April 3,
April 4,
2026
2025
$ Change
% Change
(in thousands, except percentages)
Contract revenue
$
155,114
100.0
%
$
152,386
100.0
%
$
2,728
1.8
%
Direct costs of contract revenue:
Salaries and wages
29,276
18.9
27,677
18.2
1,599
5.8
Subcontractor services and other direct costs
62,682
40.4
67,048
44.0
(4,366)
(6.5)
Total direct costs of contract revenue
91,958
59.3
94,725
62.2
(2,767)
(2.9)
Gross profit
63,156
40.7
57,661
37.8
5,495
9.5
General and administrative expenses:
Salaries and wages, payroll taxes and employee benefits
33,001
21.3
31,108
20.4
1,893
6.1
Facilities and facilities related
2,358
1.5
2,624
1.7
(266)
(10.1)
Stock-based compensation
3,692
2.4
2,426
1.6
1,266
52.2
Depreciation and amortization
5,446
3.5
4,440
2.9
1,006
22.7
Other
11,367
7.3
10,027
6.6
1,340
13.4
Total general and administrative expenses
55,864
36.0
50,625
33.2
5,239
10.3
Income (loss) from operations
7,292
4.7
7,036
4.6
256
3.6
Other income (expense):
Interest expense
(835)
(0.5)
(1,802)
(1.2)
967
(53.7)
Other, net
795
0.5
(41)
(0.0)
836
N/M
Total other income (expense)
(40)
(0.0)
(1,843)
(1.2)
1,803
(97.8)
Income (Loss) before income tax expense
7,252
4.7
5,193
3.4
2,059
39.6
Income tax expense (benefit)
(1,278)
(0.8)
506
0.3
(1,784)
N/M
Net income (loss)
$
8,530
5.5
$
4,687
3.1
$
3,843
82.0
(1) Percentages are expressed as a percentage of contract revenue and may not total due to rounding .
N/M = Not meaningful .
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The following tables provide information about disaggregated revenue of our two segments, Energy and Engineering and Consulting, by contract type, client type and geographical region:
Three months ended April 3, 2026
Energy
Engineering and
Consulting
Total
(in thousands)
Contract Type
Time-and-materials
$
12,700
$
18,200
$
30,900
Unit-based
49,617
7,053
56,670
Fixed price
65,651
1,893
67,544
Total (1)
$
127,968
$
27,146
$
155,114
Client Type
Commercial
$
19,389
$
1,846
$
21,235
Government
43,846
25,190
69,036
Utilities (2)
64,733
110
64,843
Total (1)
$
127,968
$
27,146
$
155,114
Geography (3)
Domestic
$
127,968
$
27,146
$
155,114
Three months ended April 4, 2025
Energy
Engineering and
Consulting
Total
(in thousands)
Contract Type
Time-and-materials
$
11,602
$
18,060
$
29,662
Unit-based
47,707
6,255
53,962
Fixed price
66,939
1,823
68,762
Total (1)
$
126,248
$
26,138
$
152,386
Client Type
Commercial
$
13,515
$
1,811
$
15,326
Government
48,324
24,272
72,596
Utilities (2)
64,409
55
64,464
Total (1)
$
126,248
$
26,138
$
152,386
Geography (3)
Domestic
$
126,248
$
26,138
$
152,386
(1) Amounts may not add to the totals due to rounding.
(2) Includes the portion of revenue related to small business programs paid by the end user/customer.
(3) Revenue from our foreign operations was not material for the three months ended April 3, 2026 and April 4, 2025 .
Three Months Ended April 3, 2026 Compared to Three Months Ended April 4, 2025
Contract revenue. Consolidated contract revenue increased $2.7 million, or 1.8%, in the three months ended April 3, 2026, compared to the three months ended April 4, 2025, as a result of increased demand for our services in both our Energy segment and our Engineering and Consulting segment while being partially offset by the impact of having one fewer week in our first fiscal quarter of fiscal year 2026 as compared to our first fiscal quarter of fiscal year 2025. When removing the impact of the additional week in the first quarter of fiscal year 2025, contract revenue increased 9.6% in the three months ended April 3, 2026, compared to the adjusted three months ended April 4, 2025.
Contract revenue in our Energy segment increased $1.7 million, or 1.4%, in the three months ended April 3, 2026, compared to the three months ended April 4, 2025, primarily as a result of increased productivity under our energy efficiency and electrification utility programs, combined with increased revenues from our acquisition of Alternative Power Generation, Inc. (“APG”), partially offset by the impact of having one fewer week in our first fiscal quarter of fiscal year 2026 as compared to our first fiscal quarter of fiscal year 2025.
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Contract revenue in our Engineering and Consulting segment increased $1.0 million, or 3.9%, in the three months ended April 3, 2026, compared to the three months ended April 4, 2025, primarily due to increased demand for services provided to our clients, combined with the incremental revenues from our acquisition of Alpha Inspections, Inc. (“Alpha”) and Compass Municipal Advisors, LLC. (“Compass”), while being partially offset by the impact of having one fewer week in our first fiscal quarter of fiscal year 2026 as compared to our first fiscal quarter of fiscal year 2025.
Direct costs of contract revenue. Direct costs of consolidated contract revenue decreased $2.8 million, or 2.9%, for the three months ended April 3, 2026, compared to the three months ended April 4, 2025, primarily as a result of the change of mix in contract revenues as described above, while being partially offset by the impact of having one fewer week in our first fiscal quarter of fiscal year 2026 as compared to our first fiscal quarter of fiscal year 2025. As a percentage of contract revenue, subcontractor services and other direct costs decreased to 40.4% in the three months ended April 3, 2026 from 44.0% in the three months ended April 4, 2025. Direct salaries and wages increased $1.6 million, or 5.8%, to support the increased volume of projects in the three months ended April 3, 2026, compared to the three months ended April 4, 2025.
Direct costs of contract revenue in our Energy segment decreased $3.5 million, or 4.3%, for the three months ended April 3, 2026, compared to the three months ended April 4, 2025. Direct costs of contract revenue for the Engineering and Consulting segment increased $0.8 million, or 6.3%, in the three months ended April 3, 2026, compared to the three months ended April 4, 2025.
Gross Profit . Gross profit increased 9.5% to $63.2 million, or 40.7% gross margin, for the three months ended April 3, 2026, compared to gross profit of $57.7 million, or 37.8% gross margin, for the three months ended April 4, 2025. The increase in our gross margin was primarily driven by the improved productivity under our energy efficiency and electrification utility programs and the mix of revenues as described above.
General and administrative expenses. General and administrative (“G&A”) expenses increased $5.2 million, or 10.3%, to $55.9 million in the three months ended April 3, 2026, compared to $50.6 million for the three months ended April 4, 2025. G&A expenses consisted of an increase of $2.9 million, or 7.7%, in the Energy segment combined with an increase of $0.4 million, or 3.5%, in the Engineering and Consulting segment, and the remaining increase in unallocated corporate expenses.
The overall increase in G&A expenses consisted of an increase of $1.9 million in salaries and wages, payroll taxes and employee benefits, an increase of $1.3 million in stock-based compensation, an increase of $1.0 million in depreciation and amortization , and an increase of $1.3 million in other general and administrative expenses. The increase in salaries and wages, payroll taxes and employee benefits was primarily due to increased staffing from acquisitions, an increase in incentive compensation to support revenue growth, consistent with the improvement in operating profit, and higher fringe benefit costs consistent with the growth in direct and indirect labor costs. The increase in stock-based compensation expenses was primarily related to new stock grants to current employees, executives, and Board of directors at a higher stock price. The increase in depreciation and amortization was primarily related to higher amortization of intangible assets from recent acquisitions. The increase in other general and administrative expenses was primarily due to increases in interest accretion related to our prior acquisitions, combined with increased professional service fees and computer-related expenses.
Income (loss) from operations. Operating income increased 3.6% to $7.3 million for the three months ended April 3, 2026, compared to an operating income of $7.0 million for the three months ended April 4, 2025, as a result of the factors noted above, including being partially offset by the impact of having one fewer week in our first fiscal quarter of fiscal year 2026 as compared to our first fiscal quarter of fiscal year 2025. When removing the impact of the additional week in the first quarter of fiscal year 2025, operating income increased 11.6% in the three months ended April 3, 2026, compared to the adjusted three months ended April 4, 2025.
Total other expense, net. Total other expense, net, decreased $1.8 million, or 97.8%, for the three months ended April 3, 2026, compared to the three months ended April 4, 2025, primarily due to the lower interest expense resulting from the reduced interest rate spread derived from lower debt leverage levels under our credit facilities, combined with
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the absence of a one-time charge related to a facility lease modification that we had in the first quarter of fiscal year 2025.
Income tax expense (benefit). We recorded an income tax benefit of $1.3 million for the three months ended April 3, 2026, an effective tax benefit rate of 17.6% on income before income tax expense, compared to an income tax expense of $0.5 million for the three months ended April 4, 2025, an effective tax expense rate of 9.7% on income before tax expense. The reduction in the effective tax rate resulted from increases in discrete items related to stock compensation deductions.
Net income (loss). Our net income was $8.5 million for the three months ended April 3, 2026, as compared to a net income of $4.7 million for the three months ended April 4, 2025. The increase in net income was primarily attributable to the increase in income from operations combined with a reduction in Total Other Expense, net and a lower effective tax rate.
Liquidity and Capital Resources
Three Months Ended
April 3,
April 4,
2026
2025
(in thousands)
Net cash provided by (used in):
Operating activities
$
(24,365)
$
3,311
Investing activities
(2,580)
(34,764)
Financing activities
(5,408)
(4,341)
Net increase (decrease) in cash and cash equivalents
$
(32,353)
$
(35,794)
Sources of Cash
Our primary sources of liquidity for the next 12 months and beyond are cash generated from operations, cash and cash equivalents, and available borrowings under our Revolving Credit Facility and Delayed Draw Term Loan under the Amended and Restated Credit Agreement (the “Credit Facilities”, such agreement, the “Amended and Restated Credit Agreement”). We believe that these sources will be sufficient to finance our operating activities for at least the next 12 months.
As of April 3, 2026 , we had a fully drawn $50.0 million term loan with $48.1 million outstanding, a $100.0 million Revolving Credit Facility with no borrowed amounts outstanding and $1.6 million in letters of credit issued. We also had a $50.0 million Delayed Draw Term Loan. The Delayed Draw Term Loan must be drawn before May 2027. The Credit Facilities are each scheduled to mature on May 5, 2030. In addition to the Credit Facilities, we had $28.3 million of unrestricted cash and cash equivalents as of April 3, 2026. Unhedged borrowings under our Credit Facilities, exclusive of the effects of upfront fees, undrawn fees and issuance cost amortization, bore interest at an annual rate of 5.3% as of April 3, 2026. See Part I, Item 1, Note 6, “Debt Obligations”, of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q, and Part II, Item 8, Note 5, “Debt Obligations”, of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended January 2, 2026 , for information regarding our indebtedness, including information about the Amended and Restated Credit Agreement and repayments, principal repayment terms, interest rates, covenants, and other key terms of our outstanding indebtedness.
On April 29, 2026, we borrowed $30.0 million under our revolving credit facility to fund a portion of the purchase price of the equity of Burton Energy Group, LLC. (“Burton”).
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Cash Flows from Operating Activities
Cash flows used in operating activities were $24.4 million for the three months ended April 3, 2026, as compared to cash flows provided by operating activities of $3.3 million for the three months ended April 4, 2025. Cash flows from operating activities primarily consists of net income, adjusted for non-cash charges, such as depreciation and amortization and stock-based compensation, plus or minus changes in current operating assets and liabilities. Cash flows used in operating activities for the three months ended April 3, 2026, resulted primarily from differences in billings and collections of cash under our major projects. Cash flows provided by operating activities for the three months ended April 4, 2025, resulted primarily from the increase in earnings and working capital requirements.
Cash Flows from Investing Activities
Ca sh flows used in investing activities were $2.6 million for the three months ended April 3, 2026, as compared to cash flows used in investing activities of $34.8 million for the three months ended April 4, 2025. Cash flows used in investing activities for the three months ended April 3, 2026 were primarily due to cash paid for the development of proprietary software and the purchase of computers and equipment. Cash flows used in investing activities for the three months ended April 4, 2025 were primarily due to cash paid for acquisitions, combined with cash paid for the development of proprietary software and the purchase of computers and equipment.
Cash Flows from Financing Activities
Cash flows used in financing activities were $5.4 million for the three months ended April 3, 2026, as compared to cash flows used in financing activities of $4.3 million for the three months ended April 4, 2025.
For the three months ended April 3, 2026, cash flows used in financing activities were primarily attributable to the $8.8 million cash used to pay withholding taxes on stock grants, $2.8 million payment on contingent consideration, and $0.6 million cash used to pay down our Revolving Credit Facility. Cash flows used in financing activities were partially offset by the receipt of $5.3 million of restricted cash for the distribution of utility incentives to their customers, and $1.9 million of proceeds from sales of common stock under the employee stock purchase plan. Cash flows used in financing activities for the three months ended April 4, 2025 were primarily attributable to the $2.9 million cash used to pay withholding taxes on stock grants, the repayments of $2.5 million under our Term Loan, partially offset by $1.5 million of proceeds from sales of common stock under employee stock purchase plan.
Under certain utility contracts, we periodically receive cash deposits to be held in trust for the payment of energy incentive rebates to be sent directly to the utility’s end-customer on behalf of the utility. We act solely as the utility’s agent to distribute these funds to the end-customer and, accordingly, we classify these contractually restricted funds as restricted cash. Because these funds are held in trust for pass through to the utility’s customers and have no impact on our working capital or operating cash flows, these cash receipts are presented in the condensed consolidated statement of cash flows as financing cash inflows, “Receipt of restricted cash”, with the subsequent payments classified as financing cash outflows, “Payment of restricted cash.”
Off-Balance Sheet Arrangements
We do not have any off-balance sheet financing arrangements or liabilities. In addition, our policy is not to enter into futures or forward contracts. Finally, we do not have any majority-owned subsidiaries or any interests in, or relationships with, any special-purpose entities that are not included in the consolidated financial statements. We have, however, an administrative services agreement with Genesys in which we provide Genesys with ongoing administrative, operational and other non-professional support services. We manage Genesys and have the power to direct the activities that most significantly impact Genesys’ performance, in addition to being obligated to absorb expected losses from Genesys. Accordingly, we are the primary beneficiary of Genesys and consolidate Genesys as a variable interest entity.
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Short and Long-term Uses of Cash
General
Our principal uses of cash are to fund operating expenses, support working capital requirements, finance capital expenditures, and pay down outstanding debt. From time to time, we also use cash to help fund business acquisitions. Our cash and cash equivalents are impacted by the timing of when we invoice and are paid by our customers for services rendered and when we pay expenses as reflected in the change in our outstanding accounts payable and accrued expenses.
Contractual Obligations
The following table sets forth our known contractual obligations as of April 3, 2026:
Less than
More than
Contractual Obligations
Total
1 Year
1 - 3 Years
3 - 5 Years
5 Years
(in thousands)
Debt (1)
$
47,854
$
2,500
$
4,857
$
40,497
$
—
Interest payments on debt outstanding (2)
9,766
2,502
4,629
2,635
—
Operating leases
19,129
4,734
6,895
3,436
4,064
Finance leases
2,463
1,275
1,149
39
—
Total contractual cash obligations
$
79,212
$
11,011
$
17,530
$
46,607
$
4,064
(1) Debt includes $47.9 million outstanding on our Term Loan A (“TLA”), net of issuance costs, no borrowed amounts outstanding on our Revolving Credit Facility , and no borrowed amounts outstanding on our Delayed Draw Term Loan as of April 3, 2026. We have assumed no future borrowings or repayments after April 3, 2026 (other than at maturity) for purposes of this table. Our TLA and Revolving Credit Facility are scheduled to mature on May 5, 2030.
(2) Borrowings under our TLA and Revolving Credit Facility bear interest at a variable rate. Future interest payments on our Credit Facility are estimated using floating rates in effect as of April 3, 2026.
We have contingent obligations to make earnout payments in connection with our acquisitions of Enica, APG, and Compass, subject to their future financial performance. We are contingently obligated to pay up to $6.0 million in cash if Enica exceeds certain financial targets during the two years after the Enica closing date of October 23, 2024. We are contingently obligated to pay up to $18.0 million in cash if APG exceeds certain financial targets during the three years after the APG closing date of March 3, 2025. We are contingently obligated to pay up to $1.0 million in cash if Compass exceeds certain financial targets during the one year after the Compass closing date of January 2, 2026. As of April 3, 2026, we had contingent consideration payable of $18.5 million related to the acquisitions of Enica, APG and Compass. Through the three months ended April 3, 2026, our statement of operations includes $0.9 million of interest accretion (excluding fair value adjustments) related to the contingent consideration.
Additionally, on May 4, 2026, we completed the acquisition of Burton. Pursuant to the terms of the Burton Equity Purchase Agreement, we are contingently obligated to pay up to $12.0 million in cash if Burton exceeds certain financial targets during the two years after May 4, 2026.
Outstanding Indebtedness
See Part I, Item 1, Note 6, “ Debt Obligations ”, of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q, and Part II, Item 8, Note 5, “ Debt Obligations ”, of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended January 2, 2026, for information regarding our indebtedness, including information about new borrowings and repayments, principal repayment terms, interest rates, covenants, and other key terms of our outstanding indebtedness.
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Interest Rate Swap
From time to time, we enter into interest rate swap agreements to moderate our exposure to fluctuations in interest rates underlying our variable rate debt. For more information, see Part I, Item 3, “ Quantitative and Qualitative Disclosures About Market Risk ”, and Note 5, “ Derivative Financial Instruments ”, to the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.
Impact of Inflation
Due to the average duration of our projects and our ability to negotiate prices as contracts end and new contracts begin, historically, our operations have not been materially impacted by inflation.
While not material to our results of operations and financial condition, we have experienced higher cost of materials and delays in our supply chain for equipment. The prices of finished products from manufacturers are subject to fluctuation and increases. It is difficult to accurately measure the impact of inflation, tariffs, price escalation, raw material costs, and other factors that impact the cost of finished goods due to the imprecise nature of the estimates required.
We are often able to mitigate the impact of future price increases by entering into fixed price purchase orders for materials and equipment, and subcontracts on our projects, as well as, when appropriate, including cost escalation factors into our proposals. Despite our best mitigation efforts, significant price increases in equipment and disruptions to our supply chain could materially impact our results of operations and financial condition. In addition, inflationary pressures, including expectations of future inflation, may impact the customers of our utility clients, which may lead to delayed or deferred decisions regarding expenditures to improve energy efficiency, and therefore potentially impact our future revenues.
Impact of Certain Federal Policies
Federal policies related to tariffs and renewable energy incentives have been subject to frequent and significant changes from executive orders issued by the new federal administration. While we have not experienced a material impact to our operating results or our outlook for future business, there can be no assurance that these measures will not impact our ability to procure cost-effective pricing of materials used in our projects at various building sites, or result in a reduction in demand for our services as a result of inflation, lead times, or other impacts that may derive from changes in the current administration’s executive orders.
Components of Revenue and Expense
Contract Revenue
We generally provide our services under contracts, purchase orders or retainer letters. The agreements we enter into with our clients typically incorporate one of three principal types of pricing provisions: time-and-materials, unit-based, and fixed price. Revenue on our time-and-materials and unit-based contracts are recognized as the work is performed in accordance with specific terms of the contract. As of April 3, 2026, 20% of our contracts are time-and-materials contracts, 36% are unit-based contracts, and 44% are fixed price contracts, compared to 20% are time-and-materials contracts, 35% are unit-based contracts, and 45% are fixed price contracts, as of April 4, 2025.
Some of these contracts include maximum contract prices, but contract maximums are often adjusted to reflect the level of effort to achieve client objectives and thus the majority of these contracts are not expected to exceed the maximum. Contract revenue on our fixed price contracts is determined on the percentage of completion method based generally on the ratio of direct costs incurred to date to estimated total direct costs at completion. Many of our fixed price contracts involve a high degree of subcontracted fixed price effort and are relatively short in duration, thereby lowering the risks of not properly estimating the percent complete.
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Adjustments to contract cost estimates are made in the periods in which the facts requiring such revisions become known. When the revised estimate indicates a loss, such loss is recognized in the current period in its entirety. Claims and change orders that have not been finalized are evaluated to determine whether or not a change has occurred in the enforceable rights and obligations of the original contract. If these non-finalized changes qualify as a contract modification, a determination is made whether to account for the change in contract value as a modification to the existing contract, or a separate contract and revenue under the claims or change orders is recognized accordingly. Costs related to un-priced change orders are expensed when incurred, and recognition of the related revenue is based on the assessment above of whether or not a contract modification has occurred. Estimated profit for un-priced change orders is recognized only if collection is probable.
Our contracts come up for renewal periodically and at the time of renewal may be subject to renegotiation, which could impact the profitability of that contract. In addition, during the term of a contract, public agencies may request additional or revised services which may impact the economics of the transaction. Most of our contracts permit our clients, with prior notice, to terminate the contracts at any time without cause. While we have a large volume of contracts, the renewal, termination or modification of a contract, in particular contracts with Consolidated Edison, the Dormitory Authority-State of New York, the New York City Housing Authority, and utility programs associated with Los Angeles Department of Water and Power and Southern California Edison, may have a material effect on our consolidated operations.
Some of our contracts include certain performance guarantees, such as a guaranteed energy saving quantity. Such guarantees are generally measured upon completion of a project. In the event that the measured performance level is less than the guaranteed level, any resulting financial penalty, including any additional work that may be required to fulfill the guarantee, is estimated and charged to direct expenses in the current period. We have not experienced any significant costs under such guarantees.
Direct Costs of Contract Revenue
Direct costs of contract revenue consist primarily of that portion of salaries and wages that have been incurred in connection with revenue producing projects. Direct costs of contract revenue also include material costs, subcontractor services, equipment and other expenses that are incurred in connection with revenue producing projects. Direct costs of contract revenue exclude that portion of salaries and wages related to marketing efforts, vacations, holidays and other time not spent directly generating revenue under existing contracts. Such costs are included in general and administrative expenses. Additionally, payroll taxes, bonuses and employee benefit costs for all of our personnel are included in general and administrative expenses since no allocation of these costs is made to direct costs of contract revenue.
Other companies may classify as direct costs of contract revenue some of the costs that we classify as general and administrative costs. We expense direct costs of contract revenue when incurred.
General and Administrative Expenses
G&A expenses include the costs of the marketing and support staff, other marketing expenses, management and administrative personnel costs, payroll taxes, bonuses and employee benefits for all of our employees and the portion of salaries and wages not allocated to direct costs of contract revenue for those employees who provide our services. G&A expenses also include facility costs, depreciation and amortization, professional services, legal and accounting fees and administrative operating costs. Within G&A expenses, “Other” includes expenses such as professional services, legal and accounting, computer costs, travel and entertainment, marketing costs and acquisition costs. We expense general and administrative costs when incurred.
Critical Accounting Policies
We have prepared the accompanying unaudited Condensed Consolidated Financial Statements in accordance with generally accepted accounting principles in the U.S. (“GAAP”). To prepare these financial statements in conformity with GAAP, we must make estimates and assumptions that affect the reported amounts of assets and liabilities at the
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date of the financial statements and the reported amount of revenue and expenses in the reporting period. Our actual results may differ from these estimates. We have adopted accounting policies and practices that are generally accepted in the industry in which we operate.
There have been no material changes in our critical accounting policies and estimates from those disclosed in our Annual Report on Form 10-K for our fiscal year ended January 2, 2026. Please refer to Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended January 2, 2026 for a discussion of our critical accounting policies and estimates.
Recent Accounting Standards
For a description of recently issued and adopted accounting pronouncements, including adoption dates and expected effects on our results of operations and financial condition, see Part I, Item 1, Note 2, “ Recent Accounting Pronouncements ”, of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.
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