What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-03-08 compared with 2023-03-10 · 199 added, 178 removed, 987 unchanged (28% of the section changed)

12 unchanged sentences

We have audited the accompanying consolidated balance sheets of Willdan Group, Inc.

(the "Company") as of December 30, 2022 and December 31, 2021, the related consolidated statements of comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 30, 2022, and the related notes (collectively referred to as the "financial statements").

(the "Company") as of December 29, 2023 and December 30, 2022, the related consolidated statements of comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended December 29, 2023, and the related notes (collectively referred to as the "financial statements").

We also have audited the Company’s internal control over financial reporting as of December 29, 2023, based on criteria established in Internal Control – Integrated Framework:

6 unchanged sentences

Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

17 unchanged sentences

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved especially challenging, subjective, or complex judgments.

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

1 unchanged sentence

As discussed in Note 1 to the consolidated financial statements, revenues from fixed price contracts are recognized over time since control of the services is transferred continuously to the client.

Generally, revenue is recognized using costs incurred to date relative to total estimated costs at completion to measure progress toward satisfying the Company’s performance obligations, which typically occurs over time periods ranging from six months to one year.

Generally, revenue is recognized using costs incurred to date relative to total estimated costs at completion to measure progress toward satisfying the Company’s performance obligations.

We identified auditing management’s estimates of costs to complete on select fixed price contracts to be a critical audit matter.

51 unchanged sentences

Total current liabilities

Contingent consideration payable

Notes payable

16 unchanged sentences

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands, except per share amounts)

18 unchanged sentences

Other comprehensive income (loss):

Net unrealized income (loss) on derivative contracts

Unrealized gain (loss) on derivative contracts, net of tax

Comprehensive income (loss)

8 unchanged sentences

Income (Loss)

Balance at December 27, 2019

Balance at January 1, 2021

Shares of common stock issued in connection with employee stock purchase plan

5 unchanged sentences

Net unrealized gain (loss) on derivative contracts

Balance at January 1, 2021

Balance at December 31, 2021

Shares of common stock issued in connection with employee stock purchase plan

10 unchanged sentences

Issuance of restricted stock award and units

Unregistered sales of stock

Stock issued to acquire businesses

Stock-based compensation expense

29 unchanged sentences

Proceeds from sale of equipment

Cash paid for acquisitions, net of cash acquired

Net cash used in investing activities

2 unchanged sentences

Receipt of restricted cash

Payment on restricted cash

Payments on notes payable

15 unchanged sentences

Supplemental disclosures of noncash investing and financing activities:

Other working capital adjustment

Equipment acquired under finance leases

12 unchanged sentences

The Company operates and reports its quarterly financial results based on the 13 -week period ending on the Friday closest to June 30, September 30, and December 31 and the 13 or 14 -week period ending on the Friday closest to March 31, as applicable.

Fiscal year 2022 and fiscal year 2021, which ended on December 30, 2022, and December 31, 2021, respectively, were both comprised of 52 weeks, with all quarters presented consisting of 13 weeks.

Fiscal year 2020, which ended on January 1, 2021, was comprised of 53 weeks, with the first quarter consisting of 14 weeks and the remaining quarters consisting of 13 weeks each.

Fiscal year 2023 , fiscal year 2022, and fiscal year 2021, which ended on December 29, 2023, December 30, 2022, and December 31, 2021, respectively, were all comprised of 52 weeks, with all quarters presented consisting of 13 weeks.

Principles of Consolidation

11 unchanged sentences

All highly liquid investments purchased with a remaining maturity of three months or less are considered to be cash equivalents.

The Company from time to time may be exposed to credit risk with its bank deposits in excess of the

The Company from time to time may be exposed to credit risk with its bank deposits in excess of the FDIC insurance limits and with uninsured money market investments.

The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents.

WILLDAN GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

FDIC insurance limits and with uninsured money market investments.

The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents.

Restricted Cash

21 unchanged sentences

The Company, however, has entered into an administrative services agreement with Genesys pursuant to which WES, the Company’s wholly-owned subsidiary, will provide Genesys with ongoing administrative, operational and other non-professional support services.

The Company manages Genesys and has the power to direct the activities that most significantly impact Genesys’s performance, in addition to being

The Company manages Genesys and has the power to direct the activities that most significantly impact Genesys’s performance, in addition to being obligated to absorb expected losses from Genesys.

Accordingly, the Company is the primary beneficiary of Genesys and consolidates Genesys as a VIE.

WILLDAN GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

obligated to absorb expected losses from Genesys.

Accordingly, the Company is the primary beneficiary of Genesys and consolidates Genesys as a VIE.

Management also concluded there is no noncontrolling interest related to the consolidation of Genesys because management determined that (i) the shareholder of Genesys does not have more than a nominal amount of equity investment at risk, (ii) WES absorbs the expected losses of Genesys through its deferral of Genesys’s service fees owed to WES and the Company has, since entering into the administrative services agreement, had to continuously defer service fees for Genesys, and (iii) the Company believes Genesys will continue to have a shortfall on payment of its service fees for the foreseeable future, leaving no expected residual returns for the shareholder.

27 unchanged sentences

Percentage-of-completion

Revenue on the vast majority of the Company’s contracts is recognized over time because of the continuous transfer of control to the customer.

Revenue on fixed price contracts is recognized on the percentage-of-completion

WILLDAN GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Revenue on the vast majority of the Company’s contracts is recognized over time because of the continuous transfer of control to the customer.

Revenue on fixed price contracts is recognized on the percentage-of-completion method based generally on the ratio of direct costs incurred-to-date to estimated total direct costs at completion.

method based generally on the ratio of direct costs incurred-to-date to estimated total direct costs at completion.

The Company uses the percentage-of-completion method to better match the level of work performed at a certain point in time in relation to the effort that will be required to complete a project.

22 unchanged sentences

For contracts with multiple performance obligations, the Company allocates the transaction price to each performance obligation using the best estimate of the standalone selling price of each distinct good or service in the contract.

For the periods presented, the value of the separate performance obligations under contracts with multiple

For the periods presented, the value of the separate performance obligations under contracts with multiple performance obligations (generally measurement and verification tasks under certain energy performance contracts) were not material.

WILLDAN GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

performance obligations (generally measurement and verification tasks under certain energy performance contracts) were not material.

In cases where the Company does not provide the distinct good or service on a standalone basis, the primary method used to estimate standalone selling price is the expected cost plus a margin approach, under which the Company forecasts the Company’s expected costs of satisfying a performance obligation and then adds an appropriate margin for the distinct good or service.

Company forecasts the Company’s expected costs of satisfying a performance obligation and then adds an appropriate margin for the distinct good or service.

The Company provides quality of workmanship warranties to customers that are included in the sale and are not priced or sold separately or do not provide customers with a service in addition to assurance of compliance with agreed-upon specifications and industry standards.

18 unchanged sentences

The effect of a contract modification that is not distinct from the existing contract on the transaction price and the Company’s measure of progress for the performance obligation to which it relates is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis.

WILLDAN GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

For contract modifications that result in the promise to deliver goods or services that are distinct from the existing contract and the increase in price of the contract is for the same amount as the standalone selling price of the additional goods or services included in the modification, the Company accounts for such contract modifications as a separate contract.

additional goods or services included in the modification, the Company accounts for such contract modifications as a separate contract.

The Company includes claims to vendors, subcontractors and others as a receivable and a reduction in recognized costs when enforceability of the claim is established by the contract and the amounts are reasonably estimable and probable of being recovered.

22 unchanged sentences

General and administrative expenses also include facility costs, depreciation and amortization, professional services, legal and accounting fees and administrative operating costs.

Within general and administrative expenses, “Other” includes expenses such as provision for billed or unbilled

WILLDAN GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Within general and administrative expenses, “Other” includes expenses such as provision for billed or unbilled receivables, professional services, legal and accounting, computer costs, travel and entertainment, marketing costs and acquisition costs.

receivables, professional services, legal and accounting, computer costs, travel and entertainment, marketing costs and acquisition costs.

The Company expenses general and administrative costs when incurred.

18 unchanged sentences

Equipment and leasehold improvements are stated at cost less accumulated depreciation and amortization.

Equipment under capital leases is stated at the present value of the minimum lease payments as of the acquisition date.

Equipment under finance leases is stated at the present value of the minimum lease payments as of the acquisition date.

Depreciation and amortization on equipment are calculated using the straight-line method over estimated useful lives of two to five years .

41 unchanged sentences

The Company charges these acquisition costs to general and administrative expense as they are incurred.

During fiscal years 2022, 2021 and 2020, the Company did not have any acquisitions.

During fiscal years 2023, 2022, and 2021, the Company did not have any material acquisitions.

Income taxes are accounted for under the asset and liability method.

7 unchanged sentences

During each fiscal year, management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize existing deferred tax assets.

During fiscal year 2022, the Company had no change in its valuation allowance on its deferred tax assets.

During fiscal year 2021, the Company determined that it was more-likely-than-not that a portion of the New Jersey net operating losses will not be utilized prior to expiration and, accordingly, recorded an additional valuation allowance of $ 1.1 million.

During fiscal year 2023 and fiscal year 2022, the Company had no change in its valuation allowance on its deferred tax assets.

During fiscal year 2021, the Company determined that it was more-likely-than-not that a portion of the New Jersey net operating losses would not be utilized prior to expiration and, accordingly, recorded a valuation allowance of $ 1.1 million.

Significant pieces of objective evidence evaluated included the Company’s proportional increase of revenue in other states, which resulted in a dilution of New Jersey sourced income, as well as the Company’s forecasted amount of net operating loss utilization in New Jersey for certain members of the combined group.

During fiscal year 2020, the Company had a valuation allowance of $ 86,000 which was related to the California net operating losses that was recorded in previous years and remained unchanged as the available positive and negative evidence did not warrant a revision.

As of December 30, 2022, the Company had a total valuation allowance of $ 1.2 million.

As of December 29, 2023, the Company had a total valuation allowance of $ 1.2 million related to its deferred tax assets.

For acquired business entities, if the Company identifies changes to acquired deferred tax asset valuation allowances or liabilities related to uncertain tax positions during the measurement period and they relate to new information obtained about facts and circumstances that existed as of the acquisition date, those changes are considered a measurement period adjustment and the Company records the offset to goodwill.

4 unchanged sentences

For further information, see Note 11, “Income Taxes”, of the Notes to consolidated financial statements included in this Annual Report on Form 10-K.

Earnings per Share

Earnings (loss) per Share

The Company computes basic income per common share using net income and the weighted average number of common shares outstanding during the period.

Diluted income per common share is computed using net income and the

Diluted income per common share is computed using net income and the weighted average number of common shares and potentially dilutive common shares outstanding during the period.

WILLDAN GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

weighted average number of common shares and potentially dilutive common shares outstanding during the period.

Potentially dilutive common shares include dilutive outstanding employee stock options, restricted stock awards (“RSA”), PBRSUs, and rights to purchase shares of common stock under the Company’s ESPP.

Other Comprehensive Income (loss), Net of Tax

Other comprehensive income (loss), net of tax refers to revenue, expenses, gains and losses that are recorded as an element of shareholders’ equity but are excluded from net income.

Other comprehensive income (loss), net of tax refers to revenue, expenses, gains and losses that are recorded as an element of shareholders’ equity but are excluded from net income (loss).

The Company’s other comprehensive income (loss), net of tax is comprised of unrealized gains or losses on its interest rate swap agreement designated as cash flow hedges.

4 unchanged sentences

In accordance with industry practice, amounts realizable and payable under contracts that extend beyond one year are included in current assets (included in contract assets) and current liabilities.

Asset and Liability Valuation and Other Estimates Used in Preparation of Financial Statements

As of December 30, 2022, the Company did not have any impairment with respect to goodwill or long-lived assets , including intangible assets .

Changes to the estimated future profitability of the business may require that the Company establish an additional valuation allowance against all or some portion of its net deferred tax assets.

WILLDAN GROUP, INC.

1 unchanged sentence

RECENT ACCOUNTING PRONOUNCEMENTS

Accounting Pronouncements Recently Adopted

In March 2020, the FASB issued ASU No.

2020-04, “Reference Rate Reform (Topic 848):

facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”).

ASU 2020-04 provides optional expedients and exceptions for applying U.S.

GAAP to contract modifications and hedging relationships that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform.

ASU 2020-04 provides, among other things, guidance that modifications of contracts within the scope of Topic 470, Debt, should be accounted for by prospectively adjusting the effective interest rate;

modifications of contracts within the scope of Topic 840, Leases, should be accounted for as a continuation of the existing contract;

and, changes in the critical terms of hedging relationships, caused by reference rate reform, should not result in the de-designation of the instrument, provided certain criteria are met.

In January 2021, the FASB issued ASU No.

2021-01, “Reference Rate Reform (Topic 848) - Scope” (“ASU 2021-01”).

ASU 2021-01 clarifies the scope and application of ASU 2020-04 and permits entities, among other things, to elect certain optional expedients and exceptions when accounting for derivative contracts and certain hedging relationships affected by changes in the interest rates used for discounting cash flows.

The Company adopted this standard effective March 8, 2022 .

The Company’s previous exposure to LIBOR rates included its credit facilities and swap agreement.

The adoption of this standard did not have a material impact to the Company’s Consolidated Financial Statements.

Accounting Pronouncements Recently Issued

In December 2023, the FASB issued ASU No.

2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures” (“ASU 2023-09”).

ASU 2023-09 amends the rules on income tax disclosures to require entities to disclose specific categories in the rate reconciliation, the income or loss from continuing operations before income tax expense or benefit (separated between domestic and foreign) and income tax expense or benefit from continuing operations (separated by federal, state, and foreign).

In addition, ASU 2023-09 requires entities to disclose their income tax payments to international, federal, state, and local jurisdictions, among other changes.

The amendments can be applied on a prospective basis although retrospective application is permitted.

The amendments are effective for the fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating the impact this update will have on its Consolidated Financial Statements.

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures” (“ASU 2023-07”).

ASU 2023-07 expands segment disclosure requirements through enhanced disclosures related to significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), a description of other segment items by reportable segment, and any additional measures of a segment's profit or loss used by the CODM when deciding how to allocate resources.

All disclosure requirements under ASU 2023-07 are also required for public entities with a single reportable segment.

The amendments are effective for the fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

The Company is currently evaluating the impact this update will have on its Consolidated Financial Statements.

In October 2023, the FASB issued ASU No.

2023-06, “Disclosure Improvements:

Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative” (“ASU 2023-06”).

ASU 2023-06 amends U.S.

GAAP to reflect updates and simplifications to certain disclosure and presentation requirements referred to FASB by the Securities and Exchange Commission (“SEC”).

The targeted amendments incorporate 14 of the 27 disclosures referred by the SEC into Codification.

Each amendment in ASU 2023-06 is effective on either the date on which the SEC’s removal of the related disclosure requirement from Regulation S-X or Regulation S-K becomes effective, or on June 30, 2027, if the SEC has not removed the requirements by that date.

No amendments were effective at December 29, 2023.

The Company is currently evaluating the impact this update will have on its Consolidated Financial Statements.

WILLDAN GROUP, INC.

13 unchanged sentences

(in thousands)

Contract retentions

Other assets (2)

Allowance for doubtful accounts

(1) Unbilled portion represents contract assets which is presented separately from accounts receivable on the consolidated balance sheets.

(2) Other assets represents a portion of receivables greater than one year from the normal course of business presented separately from current assets on the consolidated balance sheets.

Accounts receivable, net

The movements in the allowance for doubtful accounts consisted of the following:

5 unchanged sentences

Balance as of the end of the year

Allowances for doubtful accounts have been determined through specific identification of amounts considered to be uncollectible and potential write-offs, plus a non-specific allowance for other amounts for which some potential loss has been determined to be probable based on current and past experience.

As of December 29, 2023, two of the Company’s customers, Consolidated Edison of New York and LADWP, accounted for 24.6 % of the Company’s billed outstanding receivables.

As of December 30, 2022, one customer, Consolidated Edison of New York, accounted for 10.3 % of the Company’s billed outstanding receivables.

WILLDAN GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Billed accounts receivable represent amounts billed to clients that have yet to be collected.

Contract Assets

Contract assets consisted of the following:

(in thousands)

Unbilled short-term

Contract retentions

Contract assets

Unbilled long-term (1)

Total contract assets

(1) Included in Other assets in the consolidated financial statements.

Unbilled accounts receivable represent revenue recognized, but not yet billed, pursuant to contract terms or accounts billed after the period end.

Substantially all unbilled receivables as of December 30, 2022 are, or were expected to be, billed and collected within twelve months of such date.

Contract retentions represent amounts invoiced to clients where payments have been withheld pending the completion of certain milestones, other contractual conditions or upon the completion of the project.

These retention agreements vary from project to project and could be outstanding for several months.

Consolidated Edison of New York accounted for 10.3 % and 19.8 % of the Company’s billed outstanding receivables as of December 30, 2022 and December 31, 2021, respectively.

From time to time, in connection with factoring agreements, the Company sells trade accounts receivable without recourse to third party purchasers in exchange for cash.

During 2022, the Company did not sell any trade accounts receivable.

During 2021, the Company sold trade accounts receivable and received cash proceeds of $ 8.0 million.

The discounts on the trade accounts receivable sold during 2021 were $ 0.8 million and were recorded within “Other, net” in other income (expense) in the consolidated financial statements.

Equipment and Leasehold Improvements

16 unchanged sentences

Accrued subcontractor costs

Rebate and other

Accrued bonuses

Accrued accounting and taxes

Employee withholdings

Compensation and payroll taxes

Rebate and other

Accrued accounting costs and taxes

Total accrued liabilities

2 unchanged sentences

DERIVATIVE FINANCIAL INSTRUMENTS

On January 31, 2019, the Company entered into an interest rate swap agreement that the Company designated as cash flow hedge to fix the variable interest rate on a portion of the Company’s Term A Loan (as defined below in Note 5.

“Debt Obligations” ).

The interest rate swap agreement had a total notional amount of $ 35.0 million and had a fixed annual interest rate of 2.47 %.

The interest rate swap expired on January 31, 2022.

At its expiration, fiscal year 2022 changes in the fair value of the Company’s interest rate swap agreement were immaterial to the Company’s consolidated financial statements and were included in accrued liabilities in the Company’s consolidated balance sheet.

At its expiration, the effective portion of the Company’s interest rate swap agreement designated as a cash flow hedge for fiscal year 2022 was immaterial to the Company’s consolidated financial statements, and all amounts were reclassified from accumulated other comprehensive income to interest expense.

As of December 30, 2022, the Company had no derivative financial instruments in place.

The Company uses certain interest rate derivative contracts to hedge interest rate exposures on its variable rate debt.

The Company’s hedging program is not designated for trading or speculative purposes.

The Company recognizes derivative instruments as either assets or liabilities on the accompanying consolidated balance sheets at fair value.

The Company records changes in the fair value (i.e., gains or losses) of the derivatives that have been designated as cash flow hedges in its consolidated balance sheets as accumulated other comprehensive income (loss) and in its consolidated statements of comprehensive income (loss) as a loss or gain on cash flow hedge valuation.

On November 30, 2023 , the Company entered into an interest rate swap agreement that the Company designated as cash flow hedge to fix the variable interest rate on a portion of the Company’s Term Loan (as defined in Note 5, “Debt Obligations” ).

The interest rate swap agreement has a total notional amount of $ 50.0 million, has a fixed annual interest rate of 4.77 %, and expires on September 29, 2026 .

As of December 29, 2023, the effective portion of the Company’s interest rate swap agreement designated as a cash flow hedge before tax effects was $ 0.8 million, of which no amounts were reclassified from accumulated other comprehensive loss to interest expense in fiscal 2023.

The Company expects to reclassify $ 0.1 million from accumulated other comprehensive loss to interest expense within the next twelve months .

The fair values of the Company’s outstanding derivatives designated as hedging instruments were as follows:

Fair Value of Derivative

Instruments as of

Balance Sheet Location

December 29, 2023

December 30, 2022

(in thousands)

Interest rate swap agreement

Current assets

Interest rate swap agreement

Other noncurrent liabilities

The impact of the effective portions of derivative instruments in cash flow hedging relationships and fair value relationships on other comprehensive loss was $ 0.8 million for the year ended December 29, 2023.

The accumulated balances and reporting period activities for the year ended December 29, 2023 related to reclassifications out of accumulated other comprehensive income (loss) are summarized as follows:

Gain (Loss) on

Accumulated Other

Derivative Instruments

Comprehensive Loss

(in thousands)

Balances at December 30, 2022

Other comprehensive loss before reclassifications

Amounts reclassified from accumulated other comprehensive income:

Income tax benefit (expense) related to derivative instruments

Net current-period other comprehensive loss

Balances at December 29, 2023

WILLDAN GROUP, INC.

3 unchanged sentences

(in thousands)

New Credit Facilities

Outstanding borrowings on Term Loan

Outstanding borrowings on Revolving Credit Facility

Prior Credit Facilities

Outstanding borrowings on Term A Loan

5 unchanged sentences

Long-term debt portion

Credit Facilities

On June 26, 2019, the Company and certain of its subsidiaries entered into an Amended and Restated Credit Agreement (as amended by the First Amendment, dated as of August 15, 2019, the Second Amendment, dated as of November 6, 2019, the Third Amendment, dated as of May 6, 2020, the Fourth Amendment, dated April 30, 2021, the Fifth Amendment, dated March 8, 2022, the Sixth Amendment, dated August 2, 2022, and the Seventh Amendment, dated November 1, 2022, the “Credit Agreement”) with a syndicate of financial institutions as lenders and BMO Harris Bank, N.A.

New Credit Facilities

On September 29, 2023 (the “Closing Date”), the Company and certain of its subsidiaries entered into a credit agreement (the “Credit Agreement”) with a syndicate of financial institutions as lenders and BMO Bank, N.A.

(“BMO”), as administrative agent.

The Credit Agreement provides for (i) a $ 100.0 million secured term loan (the “Term A Loan”), (ii) up to $ 50.0 million in delayed draw secured term loans (the “Delayed Draw Term Loan”), and (iii) a $ 50.0 million secured revolving credit facility (the “Revolving Credit Facility” and, collectively with the Term A Loan and the Delayed Draw Term Loan, the “Credit Facilities”), each maturing on June 26, 2024 .

The Company’s obligations under the Credit Agreement are guaranteed by its present and future domestic subsidiaries, with limited exceptions.

Prior to the Fourth Amendment to the Credit Agreement, dated as of April 30, 2021 (the “Fourth Amendment”), the Credit Agreement required the Company to comply with certain financial covenants, including requiring that the Company maintain a (i) total leverage ratio (the “Leverage Ratio”), defined as the ratio of total funded debt to Adjusted EBITDA (as defined in the Credit Agreement), of 6.00 to 1.00 through June 26, 2020, 7.75 to 1.00 through September 25, 2020, 7.50 to 1.00 through January 1, 2021, 6.25 to 1.00 through April 2, 2021, 4.00 to 1.00 through July 2, 2021, and 3.25 to 1.00 through October 1, 2021 and thereafter and (ii) fixed charge coverage ratio (“FCCR Ratio”), defined as the ratio of Adjusted EBITDA less Unfinanced Capital Expenditures (as defined in the Credit Agreement) to Fixed Charges (as defined in the Credit Agreement), of not less than 1.20 to 1.00, in each case tested quarterly, except during the period from May 6, 2020 until July 2, 2021 (the “Initial Covenant Relief Period”), when the maximum Leverage Ratio was increased and the covenant to maintain a minimum FCCR Ratio was replaced with a covenant to maintain a minimum Adjusted EBITDA (as defined in the Third Amendment).

In addition, during the Initial Covenant Relief Period, no delayed draw term loans could be borrowed under the Credit Facilities and the Company was prohibited from engaging in share repurchases or making any Permitted Acquisitions (as defined in the Credit Agreement).

Additionally, during the Initial Covenant Relief Period, the aggregate amount of all capital expenditures made by the Company could not exceed $ 7.0 million, and the Company was prohibited from making any earn-out payments if, after giving effect to such earn-out payment, the Company’s liquidity would be less than $ 5.0 million or the aggregate amount of all earn-out payments made by the Company during the Initial Covenant Relief Period would exceed $ 7.0 million.

The Credit Agreement replaced the Company’s Amended and Restated Credit Agreement, dated as of June 26, 2019, (as amended, the “Prior Credit Agreement”), by and among the Company, the guarantors party thereto, BMO as administrative agent and lender and the lenders party thereto.

The Credit Agreement provides for (i) a $ 100.0 million term loan (the “Term Loan”) and (ii) a $ 50.0 million revolving credit facility (the “Revolving Credit Facility”, and collectively with the Term Loan, the “Credit Facilities”), each maturing on September 29, 2026.

The Company may also request lenders to add incremental term loans or increase the aggregate commitment under the Revolving Credit Facility by an aggregate amount of up to $ 75.0 million, subject to meeting certain conditions, and only if the lenders agree to provide such additional term loans or revolving commitments.

Borrowings under the Credit Facilities bear interest at either a Base Rate (as defined in the Credit Agreement) or the adjusted Secured Overnight Financing Rate (“SOFR”), at the Company’s option, and in each case, plus an applicable margin, which applicable margin ranges from 0.75 % to 2.00 % with respect to Base Rate borrowings and 1.75 % to 3.00 % with respect to SOFR borrowings, depending on the Company’s Total Net Leverage Ratio (as defined in the Credit Agreement);

provided, that SOFR and the Base Rate can no t be less than 0.00 %, with the specific pricing reset on each date on which the Administrative Agent receives the required financial statements under the Credit Agreement for the fiscal quarter then ended.

The Company must also pay a commitment fee for the unused portion of the Revolving Credit Facility, which ranges from 0.20 % to 0.40 % per annum depending on the Company’s Total Net Leverage Ratio, and fees on the face amount of any letters of credit outstanding under the Revolving Credit Facility, which range from 1.3125 % to 2.25 % per annum, in each case, depending on the Company’s Total Net Leverage Ratio, as well as customary fronting fees payable to BMO as letter of credit issuer.

In connection with the closing of the Credit Facilities, the Company paid certain other fees and expenses.

The Term Loan will amortize quarterly in an amount equal to (i) 7.5 % per annum for the first year ending after the Closing Date and (ii) 10.0 % per annum for the second and third years ending after the Closing Date, with a final payment of all then remaining principal and interest due on the maturity date of September 29, 2026.

WILLDAN GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Pursuant to the Fourth Amendment, the Initial Covenant Relief Period was extended from July 2, 2021 to and including the earlier of (i) April 1, 2022 and (ii) the last day of the fiscal quarter in which the Company delivers an irrevocable election to terminate the covenant relief granted by the Fourth Amendment (the “Second Covenant Relief Period,” and together with the Initial Covenant Relief Period, the “Amended Covenant Relief Period”).

The Fourth Amendment also (A) increased the maximum Leverage Ratio the Company is permitted to maintain to 4.50 to 1.00 through June 30, 2021, 5.25 to 1.00 through September 30, 2021, 4.50 to 1.00 through December 31, 2021, 4.25 to 1.00 through March 31, 2022, and 3.25 to 1.00 through June 30, 2022 and thereafter, (B) established the minimum Adjusted EBITDA thresholds (as defined in the Third Amendment) for the remainder of the Amended Covenant Relief Period, (C) removed the previous prohibition during the Initial Covenant Relief Period on the Company’s ability to make Delayed Draw Term Loan borrowings, (D) removed the previous prohibition during the Initial Covenant Relief Period on the Company’s ability to make Permitted Acquisitions (as defined in the Credit Agreement) and to purchase, redeem or otherwise acquire the Company’s common stock, in each case, subject to certain conditions, and (E) increased the maximum amount of earn-out payments the Company was permitted to make during the Amended Covenant Relief Period from $ 7.0 million to $ 17.0 million, provided that the Company’s liquidity would not be less than $ 10.0 million after giving effect to such earn-out payment.

Additionally, during the remainder of the Amended Covenant Relief Period, the aggregate amount of all capital expenditures made by the Company could not exceed $ 15.0 million.

Fifth Amendment to the Credit Agreement

On March 8, 2022, the Company entered into the Fifth Amendment to the Credit Agreement (the “Fifth Amendment”).

The Fifth Amendment extended the Amended Covenant Relief Period from March 31, 2022 to and including the earlier of (i) December 30, 2022 and (ii) the last day of the fiscal quarter in which the Company delivers an irrevocable election to terminate the covenant relief granted by the Fifth Amendment (the “Third Covenant Relief Period,” and together with the Amended Covenant Relief Period, the “Extended Covenant Relief Period”).

The Fifth Amendment also (A) amended the minimum Adjusted EBITDA (as defined in the Fifth Amendment) thresholds for the remainder of the Extended Covenant Relief Period, (B) increased the maximum Total Leverage Ratio (as defined in the Credit Agreement) the Company is permitted to maintain through the fiscal quarter ending on December 30, 2022, (C) funded to the Company, on the date of closing, the remaining $ 20.0 million in available funds from the Delayed Draw Term Loan, and (D) amended the pricing structure of borrowings under the Credit Agreement from utilizing as a reference rate the LIBOR to utilizing the Secured Overnight Financing Rate (“SOFR”).

Additionally, during the remainder of the Extended Covenant Relief Period, the aggregate amount of all capital expenditures made by the Company could not exceed $ 20.0 million.

Pursuant to the Fifth Amendment, during the Extended Covenant Relief Period, borrowings under the Credit Agreement bore interest at either a Base Rate or SOFR (plus 0.10 % or 0.15 % depending on the interest period), each as defined in the Credit Agreement, at the Company’s option, and in each case, plus an applicable margin, which applicable margin ranged from 0.125 % to 1.50 % with respect to Base Rate borrowings and 1.125 % to 2.50 % with respect to SOFR borrowings, depending on the Total Leverage Ratio;

provided, that SOFR could not be less than 0.00 %.

The Company was also required to pay a commitment fee for the unused portion of the Revolving Credit Facility and the Delayed Draw Term Loan, which ranged from 0.15 % to 0.45 % per annum depending on the Total Leverage Ratio, and fees on the face amount of any letters of credit outstanding under the Revolving Credit Facility, which ranged from 0.84 % to 1.875 % per annum, in each case, depending on whether such letter of credit was a performance or financial letter of credit and the Total Leverage Ratio.

Sixth Amendment to the Credit Agreement

On August 2, 2022, the Company entered into the Sixth Amendment to the Credit Agreement (the “Sixth Amendment”).

The Sixth Amendment increased the purchase money indebtedness and Capitalized Lease Obligations (as defined in the Credit Agreement) permissible limit from $ 1.5 million to $ 4.0 million, with no other changes to the Credit Agreement.

outstanding under the Credit Facilities may be prepaid in whole or in part at any time without penalty (other than customary breakage costs).

The Term Loan issuance costs are amortized to interest expense over the term of the loan, and as of December 29, 2023, issuance costs of $ 1.0 million remained unamortized.

The Revolving Credit Facility issuance costs are included in assets in the accompanying Condensed Consolidated Balance Sheets, and as of December 29, 2023, issuance costs of $ 0.5 million remained unamortized.

Willdan Group, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Seventh Amendment to the Credit Agreement

On November 1, 2022 , the Company entered into the Seventh Amendment to the Credit Agreement (the “Seventh Amendment”).

The Seventh Amendment, (A) waived the minimum Adjusted EBITDA (as defined in the Fifth Amendment) threshold and any related Default or Event of Default (each as defined in the Fifth Amendment) for the fiscal quarter ending September 30, 2022, (B) amended the maximum Total Leverage Ratio (as defined in the Fifth Amendment) thresholds and the minimum Adjusted EBITDA thresholds, (C) amended the pricing structure of borrowings under the Credit Agreement for periods after November 1, 2022, (D) restricted aggregate borrowings under the Revolving Credit Facility to no more than $ 10.0 million at any time during the period from November 1, 2022 through the date on which financial statements and compliance documents have been received by the Administrative Agent (as defined in the Credit Agreement) for the fiscal quarter ending March 31, 2023, (E) conditioned access to the accordion feature of the Credit Agreement to periods when the Company’s Total Leverage ratio is less than 3.0 , (F) amended the Total Leverage Ratio requirement contained in the conditions precedent required upon any Credit Event (as defined in the Credit Agreement) occurring prior to the delivery to the Administrative Agent of the financial statements and compliance documents required for the fiscal quarter ending March 31, 2023, (G) included a general release of all Claims (as defined in the Seventh Amendment) against the Administrative Agent, the L/C Issuer and the Lenders (each as defined in the Credit Agreement) and (H) amended the timing requirement of certain financial reports.

Additionally, during the remainder of the Extended Covenant Relief Period, the Company could not make Share Repurchases (as defined in the Seventh Amendment).

Pursuant to the Seventh Amendment, during the period from November 1, 2022 until the date on which the Administrative Agent receives the required financial statements under the Credit Agreement for the fiscal quarter ended March 31, 2023 (the “First Pricing Date”), (A) borrowings under the Credit Agreement will bear interest at SOFR plus 4.00 %;

provided, that SOFR cannot be less than 0.00 %, and (B) the Company will pay a commitment fee of 0.50 % per annum for the unused portion of the revolving credit facility under the Credit Agreement.

After the First Pricing Date, borrowings under the Credit Agreement will bear interest at either a Base Rate (as defined in the Credit Agreement) or SOFR, at the Company’s option, and in each case, plus an applicable margin, which applicable margin will range from 0.125 % to 1.25 % with respect to Base Rate borrowings and 1.125 % to 2.25 % with respect to SOFR borrowings, depending on the Total Leverage Ratio;

provided, that SOFR cannot be less than 0.00 %, with the specific pricing reset on each date on which the Administrative Agent receives the required financial statements under the Credit Agreement for the fiscal quarter then ended.

The Company will also pay a commitment fee for the unused portion of the revolving credit facility and the delayed draft term loan facility under the Credit Agreement, which will range from 0.15 % to 0.40 % per annum depending on the Total Leverage Ratio, and fees on the face amount of any letters of credit outstanding under the Revolving Credit Facility, which will range from 0.84 % to 1.688 % per annum, in each case, depending on whether such letter of credit is a performance or financial letter of credit and the Total Leverage Ratio.

The Credit Agreement includes customary events of default and also contains other customary restrictive covenants including (i) restrictions on the incurrence of additional indebtedness and additional liens on property, (ii) restrictions on permitted acquisitions and other investments and (iii) limitations on asset sales, mergers and acquisitions.

is the borrower under the Credit Agreement and its obligations under the Credit Agreement are guaranteed by its present and future domestic subsidiaries (other than inactive subsidiaries).

In addition, subject to certain exceptions, all such obligations are secured by substantially all of the assets of Willdan Group, Inc.

and the subsidiary guarantors (other than inactive subsidiaries).

The Credit Agreement requires compliance with financial covenants, including a maximum Net Leverage Ratio and a minimum Fixed Charge Coverage Ratio (as defined in the Credit Agreement).

The Credit Agreement also contains customary restrictive covenants, including (i) restrictions on the incurrence of additional indebtedness and additional liens on property, (ii) restrictions on permitted acquisitions and other investments and (iii) limitations on asset sales, mergers and acquisitions.

Further, the Credit Agreement limits the Company’s payment of future dividends and distributions and share repurchases by the Company.

Subject to certain exceptions, borrowings under the Credit Agreement are also subject to mandatory prepayment from (a) any issuances of debt or equity securities, (b) any sale or disposition of assets, (c) insurance and condemnation proceeds (d) representation and warranty insurance proceeds related to insurance policies issued in connection with acquisitions and (e) excess cash flow.

The Term A Loan issuance costs are amortized to interest expense over the term of the loan, and as of December 30, 2022, issuance costs of $ 0.5 million remained unamortized.

The Delayed Draw Term Loan and Revolving Credit Facility issuance cost of $ 0.3 million are included in assets in the accompanying consolidated balance sheets.

Subject to certain exceptions, the borrowings under the Credit Agreement are also subject to mandatory prepayment from (a) any issuances of debt or equity securities, (b) any sale or disposition of assets, (c) insurance and condemnation proceeds, and (d) a percentage of excess cash flow.

The Credit Agreement includes customary events of default.

The Company believes that, as of December 29, 2023, it was in compliance with all covenants contained in the Credit Agreement.

As of December 29, 2023, the Company’s composite annual interest rate, exclusive of the effects of upfront fees, undrawn fees and issuance cost amortization, was 8.5 % and $ 4.1 million in letters of credit were issued.

Prior Credit Facilities

On June 26, 2019, the Company and certain of its subsidiaries entered into the Prior Credit Agreement with a syndicate of financial institutions as lenders and BMO Harris Bank, N.A., as administrative agent (the “Administrative Agent”).

The Prior Credit Agreement provided for (i) a $ 100.0 million secured term loan (the “Term A Loan”), (ii) up to $ 50.0 million in delayed draw secured term loans (the “Delayed Draw Term Loan”), and (iii) a $ 50.0 million secured revolving credit facility (the “Revolving Credit Facility” and, collectively with the Term A Loan and the Delayed Draw Term Loan, the “Prior Credit Facilities”), each maturing on June 26, 2024 .

The Company’s obligations under the Prior Credit Agreement were guaranteed by its present and future domestic subsidiaries, with limited exceptions.

Pursuant to the terms of the Seventh Amendment to the Prior Credit Agreement (the “Seventh Amendment”), among other things, (A) aggregate borrowings under the Revolving Credit Facility were restricted to no more than $ 10.0 million at any time during the period from November 1, 2022 through the date on which financial statements and compliance documents were received by the Administrative Agent for the fiscal quarter ending March 31, 2023, and (B) access to the accordion feature of the Prior Credit Agreement was limited to periods when the Company’s Total Leverage Ratio (as defined in the Prior Credit Agreement) was less than 3.0 .

On April 28, 2023, the Company delivered to the Administrative Agent the required financial statements and compliance documents for the fiscal quarter ending March 31, 2023, reflecting full compliance with the restrictive covenants under the Prior Credit Agreement, and thus effectively terminating the limitations on borrowing capacity and other restrictions imposed under the terms set by the Seventh Amendment.

Effective April 28, 2023, borrowings under the Prior Credit Agreement bore interest at either a Base Rate (as defined in the Prior Credit Agreement) or SOFR, at the Company’s option, and in each case, plus an applicable margin, which applicable margin ranged from 0.125 % to 1.25 % with respect to Base Rate borrowings and 1.125 % to 2.25 % with respect to SOFR borrowings, depending on the Total Leverage Ratio;

provided, that SOFR could not be less than 0.00 %,

WILLDAN GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The Term A Loan amortizes quarterly in installments of $ 2.5 million beginning with the fiscal quarter ending September 27, 2019, with a final payment of all then remaining principal and interest due on the maturity date of June 26, 2024.

Each borrowing under the Delayed Draw Term Loan will amortize quarterly in an amount equal to 2.5 % of the aggregate outstanding borrowings under the Delayed Draw Term Loan, beginning with the first full fiscal quarter ending after the initial borrowing date, with a final payment of all then remaining principal and interest due on the maturity date of June 26, 2024.

The amounts outstanding under the Credit Facilities may be prepaid in whole or in part at any time without penalty.

Willdan is the borrower under the Credit Agreement and its obligations under the Credit Agreement are guaranteed by its present and future domestic subsidiaries (other than any inactive subsidiaries and Factoring SPV (as defined in the Credit Agreement)).

In addition, subject to certain exceptions, all such obligations are secured by substantially all of the assets of Willdan and the subsidiary guarantors.

The Company believes that, as of December 30, 2022, it was in compliance with all covenants contained in the Credit Agreement.

As of December 30, 2022, the Company’s composite interest rate, exclusive of the effects of upfront fees, undrawn fees and issuance cost amortization, was 8.3 % and $ 4.1 million in letters of credit were issued.

with the specific pricing reset on each date on which the Administrative Agent received the required financial statements under the Prior Credit Agreement for the fiscal quarter then ended.

The Company was obligated to also pay a commitment fee for the unused portion of the Revolving Credit Facility and the Delayed Draw Term Loan under the Prior Credit Agreement, which ranged from 0.15 % to 0.40 % per annum depending on the Total Leverage Ratio, and fees on the face amount of any letters of credit outstanding under the Revolving Credit Facility, which ranged from 0.84 % to 1.688 % per annum, in each case, depending on whether such letter of credit is a performance or financial letter of credit and the Total Leverage Ratio.

The Prior Credit Agreement required the Company to comply with certain financial covenants, including requiring that the Company maintain a (i) Total Leverage Ratio of at least 3.25 to 1.00, and (ii) Fixed Charge Coverage Ratio (as defined in the Prior Credit Agreement) of not less than 1.20 to 1.00, in each case tested quarterly.

The Prior Credit Agreement also contained customary events of default and contains other customary restrictive covenants.

Other Debt Agreements

1 unchanged sentence

Future Debt Payments

The following table summarizes the combined principal installments for the Company’s debt obligations, excluding capital leases, over the next five years and beyond, as of December 30, 2022:

The following table summarizes the combined principal installments for the Company’s debt obligations, excluding capital leases, over the next five years and beyond, as of December 29, 2023 ( in thousands ):

Total debt maturities

Issuance costs and debt discounts

Net carrying value

WILLDAN GROUP, INC.

15 unchanged sentences

In addition to the Company’s annual test, it regularly evaluates whether events and circumstances have occurred that may indicate a potential impairment of goodwill.

During a brief period in the fiscal quarter ended December 30, 2022, the Company’s market capitalization based upon its stock price temporarily fluctuated below book value.

The fair value of the Company using a market capitalization approach based on the Company’s share price would also include a control premium not reflected in the share price based on recent transactions that have occurred in the Company’s industry.

This indicative fair value exceeded the Company’s book value;

therefore, the Company does not believe it is more likely than not that goodwill was impaired.

No impairment was recorded in any year during the three-year period ended December 29, 2023.

6 unchanged sentences

Customer relationships

Total finite intangible assets

In-process research and technology (1)

Total intangible assets

(1) In-process research and technology is not amortized until put into use.

WILLDAN GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

During the twelve months ended December 30, 2022, the Company reclassified $ 0.3 million of in-process research and technology to developed technology and commenced amortization over its estimated useful life.

At the time of acquisition, the Company estimates the fair value of the acquired identifiable intangible assets based upon the facts and circumstances related to the particular intangible asset.

Inherent in such estimates are judgments and estimates of future revenue, profitability, cash flows and appropriate discount rates for any present value calculations.

The Company preliminarily estimates the value of the acquired identifiable intangible assets and then finalizes the estimated fair values during the purchase allocation period, which does not extend beyond 12 months from the date of acquisition.

The Company preliminarily estimates the value of the acquired identifiable intangible assets and then finalizes the

WILLDAN GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

estimated fair values during the purchase allocation period, which does not extend beyond 12 months from the date of acquisition.

The Company’s amortization expense for acquired identifiable intangible assets with finite useful lives was $ 10.1 million, $ 11.2 million, and $ 11.5 million for the fiscal years 2023, 2022 and 2021, respectively.

42 unchanged sentences

Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

The following is a summary of the lease expense:

The following is a summary of the Company’s lease expense:

(in thousands)

Operating lease cost

Sublease Income

Finance lease cost:

3 unchanged sentences

The following is a summary of lease information presented on the Company’s consolidated balance sheet:

(in thousands)

(in thousands, except years and percentages)

Operating leases:

27 unchanged sentences

Operating leases

The following is a summary of the maturities of lease liabilities as of December 30, 2022:

The following is a summary of the Company’s maturities of lease liabilities as of December 29, 2023:

(in thousands)

14 unchanged sentences

Company contributions are made solely at the discretion of the Company’s board of directors.

The Company also had a defined contribution plan (the “Plan”) covering employees who have completed three months of service and who have attained 21 years of age.

The Company elected to make matching contributions equal to 50 % of the participants’ contributions to the Plan up to 6 % of the individual participant’s compensation, subject to a set maximum.

Under the defined contribution plan, the Company may make discretionary matching contributions to employee accounts.

The Company’s defined contribution plan (the “Plan”) covers employees who have completed three months of service and who have attained 21 years of age.

The Company elects to make matching contributions equal to 50 % of the participants’ contributions to the Plan up to 6 % of the individual participant’s compensation, and subject to a maximum of $ 3,000 per employee.

Under the defined Plan, the Company may make discretionary contributions to employee accounts.

The Company made matching contributions of $ 2.2 million, $ 2.3 million, and $ 2.0 million during fiscal years 2023, 2022 and 2021, respectively.

56 unchanged sentences

Engineering and

(in thousands, except percentage)

(in thousands)

Contract Type

Time-and-materials

Utilities (2)

Geography (3)

Engineering and

(in thousands, except percentage)

(in thousands)

Contract Type

Time-and-materials

Utilities (2)

Geography (3)

Engineering and

(in thousands, except percentage)

(in thousands)

Contract Type

Time-and-materials

Utilities (2)

Geography (3)

(1) Revenue from our foreign operations were immaterial for fiscal years 2022, 2021, and 2020.

(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 the Company’s foreign operations were immaterial for fiscal years 2023, 2022, and 2021.

WILLDAN GROUP, INC.

13 unchanged sentences

Substantially all of the Company’s consolidated revenue was derived from its operations in the U.S.

In connection with the Company’s acquisition of E3, Inc.

in October 28, 2019, the Company expanded its operations into Canada.

Revenues from the Company’s Canadian operations were not material for fiscal years 2022, 2021, and 2020.

The Company operates through a network of offices spread across 22 U.S.

states, the District of Columbia, the Commonwealth of Puerto Rico, and Canada.

Revenues from the Company’s Puerto Rican and Canadian operations were not material for fiscal years 2023, 2022, and 2021.

Customer Concentration

For fiscal years 2023, 2022, and 2021, the Company’s top 10 customers accounted for 52.7 %, 54.6 %, and 49.2 %, respectively, of the Company’s consolidated contract revenue.

During fiscal year 2023, the Company had no individual customers that accounted for more than 10% of its consolidated contract revenue.

During fiscal years 2022 and 2021, the Company had individual customers that accounted for more than 10% of its consolidated contract revenues.

1 unchanged sentence

For fiscal year 2021, the Company derived 10.8 % of its consolidated contract revenue from one customer, LADWP.

For fiscal year 2020, the Company derived 10.2 % of its consolidated contract revenue from one customer, LADWP.

On a segment basis, the Company also had individual customers that accounted for more than 10% of its segment contract revenues.

For fiscal year 2023, the Company derived 22.7 % of its Energy segment revenues from two customers, LADWP and the Dormitory Authority State of New York (“DASNY”), and had no individual customers accounted for more than 10% of its Engineering and Consulting segment revenues.

For fiscal year 2022, the Company derived 14.4 % of its Energy segment revenues from one customer, LADWP, and had no individual customers that accounted for more than 10% of its Engineering and Consulting segment revenues.

For fiscal year 2021, the Company derived 34.5 % of its Energy segment revenues from three customers, LADWP, Duke Energy and Consolidated Edison of New York, and it derived 10.3 % of its Engineering and Consulting segment revenues from one customer, the City of Elk Grove.

For fiscal year 2020, the Company derived 22.5 % of its Energy segment revenues from two customers, LADWP and The Dormitory Authority State of New York (“DASNY”), and it derived 18.2 % of its Engineering and Consulting segment revenues from one customer, the City of Elk Grove.

The Company’s largest clients are based in California and New York.

In fiscal years 2022, 2021, and 2020, services provided to clients in California accounted for 41.7 %, 36.8 %, and 37.0 %, respectively, of the Company’s contract revenue, and services provided to clients in New York accounted for 22.8 %, 21.0 %, and 19.2 %, respectively, of the Company’s contract revenue.

In fiscal years 2023, 2022, and 2021, services provided to clients in California accounted for 45.1 %, 41.7 %, and 36.8 %, respectively, of the Company’s consolidated contract revenue, and services provided to clients in New York accounted for 24.7 %, 22.8 %, and 21.0 %, respectively, of the Company’s consolidated contract revenue.

WILLDAN GROUP, INC.

14 unchanged sentences

In March 2008, the Company’s board of directors adopted the 2008 Performance Incentive Plan (“2008 Plan”), and it received stockholder approval at the 2008 annual meeting of the stockholders in June 2008.

The 2008 Plan was originally set to terminate on April 17, 2027 but received a ten-year extension at the 2019 annual meeting of the stockholders and a three-year extension at the 2022 annual meeting of the stockholders.

The 2008 Plan was originally set to terminate on April 17, 2027 but received a ten-year, a three-year, and a one-year extension at the 2019, 2022, and 2023 annual meetings of the stockholders, respectively.

The 2008 Plan is currently scheduled to expire on April 16, 2033.

20 unchanged sentences

The ESPP initially had 300,000 shares of common stock reserved for issuance.

At the 2017 annual meeting of the stockholders, the stockholders approved an 825,000 share increase to the ESPP.

At the 2017 and 2023 annual meeting of the stockholders, the stockholders approved an 825,000 and 800,000 share increase to the ESPP, respectively.

A total of 1,925,000 shares of the Company’s common stock have been reserved for issuance under the ESPP.

11 unchanged sentences

The Company did no t have any unrecognized compensation expense related to nonvested stock options for fiscal years 2023, 2022 and 2021.

The total unrecognized compensation expense related to nonvested stock options was $ 0.4 million for fiscal year 2020.

The total unrecognized compensation expense related to RSAs was $ 2.5 million, $ 1.7 million, and $ 3.3 million, for fiscal years 2023, 2022, and 2021, respectively.

5 unchanged sentences

Summary of Stock Option Activity

A summary of option activity under the 2006 Plan and 2008 Plan as of December 30, 2022 and changes during the fiscal years ended December 30, 2022, December 31, 2021 and January 1, 2021 is presented below.

A summary of option activity under the 2006 Plan and 2008 Plan as of December 29, 2023 and changes during the fiscal years ended December 29, 2023, December 30, 2022 and December 31, 2021 is presented below.

The intrinsic value of the fully-vested options is $ 3.7 million based on the Company’s closing stock price of $ 21.50 and the average exercise price of outstanding options on December 29, 2023.

6 unchanged sentences

(in thousands)

Outstanding at January 1, 2021

Outstanding at December 31, 2021

Forfeited or expired

3 unchanged sentences

(in thousands)

Outstanding at December 27, 2019

Forfeited or expired

Outstanding at January 1, 2021

Vested and expected to vest at January 1, 2021

Exercisable at January 1, 2021

Forfeited or expired

Outstanding at December 31, 2021

Vested and expected to vest at December 31, 2021

Exercisable at December 31, 2021

WILLDAN GROUP, INC.

5 unchanged sentences

(in thousands)

Nonvested at January 1, 2021

Nonvested at December 31, 2021

(in thousands)

Nonvested at December 30, 2022

(in thousands)

Nonvested at January 1, 2021

Nonvested at December 31, 2021

WILLDAN GROUP, INC.

6 unchanged sentences

Outstanding at December 29, 2023

Outstanding at January 1, 2021

Outstanding at December 31, 2021

1 unchanged sentence

Outstanding at January 1, 2021

Outstanding at December 31, 2021

WILLDAN GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Summary of Performance-Based Restricted Stock Unit Activity

7 unchanged sentences

Outstanding at December 29, 2023

Outstanding at January 1, 2021

Outstanding at December 31, 2021

1 unchanged sentence

Outstanding at January 1, 2021

WILLDAN GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Outstanding at December 31, 2021

Fair Value Valuation Assumptions

11 unchanged sentences

Under the Company’s PBRSU design, awards vest based on two performance metrics.

For the PBRSU awards granted in fiscal year 2022, 50 % of each award will vest based upon the Company’s Adjusted EBITDA performance over a three-year performance period, and the remaining 50 % of each award will vest based upon the Company’s adjusted diluted earnings per share performance over a three-year performance period, respectively.

For the PBRSU awards granted in fiscal year 2021, 50 % of the award will vest based upon the Company’s Adjusted EBITDA performance over a one-year performance period, and the remaining 50 % of the award will vest based upon the Company’s Net Revenue performance over a one-year performance period.

For the PBRSU awards granted in fiscal year 2020, 50 % of each award will vest based upon the Company’s Adjusted EBITDA performance over a two-year performance period, and the remaining 50 % of each award will vest based upon the Company’s adjusted diluted earnings per share performance over a two-year performance period, respectively.

For the PBRSU awards granted in fiscal years 2023 and 2022, 50 % of each award will vest based upon the Company’s Adjusted EBITDA performance over a three-year performance period, and the remaining 50 % of each award will vest based upon the Company’s adjusted diluted earnings per share performance over a three-year performance period, respectively.

For the PBRSU awards granted in fiscal year 2021, 50 % of the award will vest based upon the Company’s Adjusted EBITDA performance over a one-year performance

WILLDAN GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

period, and the remaining 50 % of the award will vest based upon the Company’s Net Revenue performance over a one-year performance period.

The fair value of ESPP purchase rights issued is calculated using the Black-Scholes valuation model that uses the assumptions noted in the following table.

24 unchanged sentences

Current and deferred state income tax expense, net of federal benefit

Adjustment for uncertain tax positions

Research and development tax credit

23 unchanged sentences

As of December 29, 2023, the Company had federal and state operating loss carryovers of $ 52.8 million and $ 77.2 million, respectively, and federal and state tax credit carryforwards of $ 2.6 million and $ 0.3 million, respectively.

Out of the federal operating loss, $ 13.2 million will carryforward indefinitely.

Out of the federal operating loss carryovers, $ 13.2 million will carryforward indefinitely.

The remaining carryovers will begin to expire in 2026 through 2042.

During each fiscal year, management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize existing deferred tax assets.

During fiscal year 2022, no changes were made to tax valuation allowance as the available positive and negative evidence did not warrant a revision.

Significant pieces of objective evidence evaluated included the Company’s proportional increase of revenue to other states resulting in a dilution of New Jersey sourced income as well as the Company’s forecasted amount of net operating loss utilization in New Jersey for certain members of the combined group.

As of December 30, 2022, the Company’s liabilities related to uncertain tax positions were immaterial to the consolidated financial statements.

As of December 31, 2021, the Company did not have any liabilities related to uncertain tax positions.

During fiscal year 2023 and 2022, no changes were made to tax valuation allowance as the available positive and negative evidence did not warrant a revision.

As of December 29, 2023 and December 30, 2022, the Company’s liabilities related to uncertain tax positions were immaterial to the consolidated financial statements.

The Company may be subject to examination by the Internal Revenue Service (“IRS”) for calendar years 2020 through 2023 .

1 unchanged sentence

The Company's policy is to recognize interest and penalties related to unrecognized tax benefits in income tax expense.

As of December 30, 2022 and December 31, 2021, the Company did not have any unrecognized tax benefits.

In addition, during the fiscal year 2022, the Company did not have any additions or reductions of unrecognized tax benefits.

WILLDAN GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

On June 10, 2021, the Company received notice from the State of New York indicating that the Company’s 2017 , 2018 , and 2019 state tax returns were under examination.

The examination was finalized during the Company’s first quarter of fiscal year 2022 and there were no changes made by the State of New York to the state tax returns filed.

As of December 29, 2023 and December 30, 2022, the Company did no t have any unrecognized tax benefits.

In addition, during the fiscal year 2023, the Company did no t have any additions or reductions of unrecognized tax benefits.

WILLDAN GROUP, INC.

11 unchanged sentences

Earnings (Loss) per share:

For the fiscal years 2022, 2021 and 2020, the Company reported a net loss, and accordingly, all outstanding equity awards have been excluded because including them would have been anti-dilutive.

For the fiscal year 2023, the Company excluded 363,000 common shares, subject to outstanding equity awards from the calculation of diluted shares because their impact would have been anti-dilutive.

For the fiscal years 2022 and 2021, the Company reported a net loss, and accordingly, all outstanding equity awards have been excluded from such periods because including them would have been anti-dilutive.

WILLDAN GROUP, INC.

24 unchanged sentences

Fiscal Three Months Ended

September 30,

(in thousands except per share amounts )

13 unchanged sentences

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 8. Financial Statements and Supplementary Data