What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-03-07 compared with 2024-03-08 · 245 added, 147 removed, 1039 unchanged (27% of the section changed)

29 unchanged sentences

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

As permitted, the Company has excluded the operations of Enica Engineering, PLLC.

acquired during 2024, which is described in Note 13 of the consolidated financial statements, from the scope of management’s report on internal control over financial reporting.

As such, it has also been excluded from the scope of our audit of internal control over financial reporting.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

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A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles,

and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

A company’s internal control over financial reporting includes those policies

and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

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 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.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates 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 the critical audit matter 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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Estimated costs to complete on fixed price contracts

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● Performed a retrospective review procedures to assess management’s historical ability to accurately estimate the transaction price and cost to complete of fixed price contracts.

Estimated realization of deferred income tax assets for net operating losses

As described in Notes 1 and 11 to the consolidated financial statements, the Company’s consolidated net deferred tax assets includes the value of net operating losses that management expects to realize before the net operating losses expire.

In assessing the need for a valuation allowance, management estimates future taxable income by jurisdiction.

Significant estimates are required in estimating future taxable income, the reversal of income tax liabilities, leading to significant judgment from management.

The principal considerations for our determination that performing procedures relating to the income tax valuation allowances on deferred tax assets is a critical audit matter are there was significant judgment by management when estimating future taxable income and reversal of income tax liabilities.

This in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and in evaluating audit evidence relating to the realization of deferred income tax assets.

In addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained.

Our audit procedures related to the evaluation of management's estimates over the realization of deferred income tax assets included the following:

● Tested the design, implementation, and operating effectiveness of controls relating to the valuation allowances on deferred tax assets.

● Tested underlying historical data used in calculating the cumulative book income (loss) subject to tax.

● Assessed the reasonableness of management’s estimate of future book income, as adjusted for permanent income tax items, which included evaluating historical book income (loss) subject to tax, and the Company's sources of future taxable income, including verifiable signed contracts.

● Used professionals with specialized skill and knowledge to assist in evaluating management’s analysis, including cumulative book income (loss) subject to tax.

/s/ Crowe LLP

28 unchanged sentences

Total current liabilities

Notes payable

Contingent consideration payable

Notes payable, less current portion

Finance lease obligations, less current portion

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Additional paid-in capital

Accumulated other comprehensive loss

Accumulated other comprehensive income (loss)

Retained earnings

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Income (Loss)

Balance at January 1, 2021

Balance at December 31, 2021

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

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Net income (loss)

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Depreciation and amortization

Other non-cash items

Deferred income taxes, net

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Right-of-use assets

Net cash provided by operating activities

Net cash (used in) provided by operating activities

Cash flows from investing activities:

Purchase of equipment and leasehold improvements

Purchase of equipment, software, and leasehold improvements

Proceeds from sale of equipment

Cash paid for acquisitions, net of cash acquired

Net cash used in investing activities

Net cash (used in) provided by investing activities

Cash flows from financing activities:

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Cash used to pay taxes on stock grants

Restricted Stock Award and Units

Net cash provided by (used in) financing activities

Net cash (used in) provided by financing activities

Net increase (decrease) in cash, cash equivalents and restricted cash

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Supplemental disclosures of noncash investing and financing activities:

Contingent consideration related to business acquisitions

Equipment acquired under finance leases

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The carrying amounts of the derivative financial instrument is valued based on Level 2 inputs.

The fair value of the contingent consideration liability is valued on Level 3 inputs.

Variable Interest Entities

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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 obligated to absorb expected losses from Genesys.

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

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

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.

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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)

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

In addition, the percentage-of-completion method is a common method of revenue recognition in the Company’s industry.

Many of the Company’s 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.

Many of the Company’s fixed price contracts involve a high degree of subcontracted fixed price effort and, usually, are relatively short in duration, thereby lowering the risks of not properly estimating the percent complete.

Revenue on time-and-materials and unit-based contracts is recognized as the work is performed in accordance with the specific rates and terms of the contract.

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The software license is delivered before related services are provided and is functional without services, updates, or technical support.

Related professional services include training and support services in which the standalone selling price is determined based on an input measure of hours incurred to total estimated hours and is recognized over time, usually which is the life of the contract.

To determine the proper revenue recognition method for contracts, the Company evaluates whether two or more contracts should be combined and accounted for as one single contract and whether the combined contract should be accounted for as one performance obligation.

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

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

WILLDAN GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

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

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.

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.

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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)

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

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.

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.

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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)

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

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.

The Company expenses general and administrative costs when incurred.

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The Company records stock-based compensation expense based on the probability that the performance metrics will be achieved over the vesting period.

Restricted stock awards (“RSAs”) and restricted stock units (“RSUs”) are time-based equity awards that are granted to certain employees and vest based on time, subject to continued service by the employee.

Business Combinations

The acquisition method of accounting for business combinations requires the Company to use significant estimates and assumptions, including fair value estimates, as of the business combination date and to refine those estimates as necessary during the measurement period (defined as the period, not to exceed one year, in which the Company may adjust the provisional amounts recognized for a business combination based upon new information about facts that existed on the business combination date).

Under the acquisition method of accounting, the Company recognizes separately from goodwill the identifiable assets acquired, the liabilities assumed, and any non-controlling interests in an acquiree, at the acquisition date fair value.

WILLDAN GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The Company measures goodwill as of the acquisition date as the excess of consideration transferred over the net of the acquisition date amounts of the identifiable assets acquired and liabilities assumed.

Generally, the Company engages a third-party independent valuation specialist to assist in management’s determination of fair values of tangible and intangible assets acquired and liabilities assumed.

In circumstances where an acquisition involves a contingent consideration arrangement, the Company recognizes a liability equal to the fair value of the contingent payments it expects to make as of the acquisition date.

The contingent consideration fair value measurement is based on significant inputs not observable in the market and therefore constitute Level 3 inputs within the fair value hierarchy.

The Company determines the initial fair value of contingent consideration liabilities using a Monte Carlo (“Monte Carlo”) valuation model, which involves a simulation of future revenues during the earn out-period using management’s best estimates, or a probability-weighted discounted cash flow analysis.

Changes in the estimated fair value of contingent earn-out payments are included in general and administrative expenses.

In circumstances where an acquisition involves acquiring customer relationships, the fair value for customer relationships is determined as of the acquisition date using the excess earnings method.

Under this methodology, the fair value is determined based on the estimated future after-tax cash flows arising from the acquired customer relationships over their estimated useful lives after considering customer attrition and contributory asset charges.

The assumptions that have the most significant effect on the fair value calculations are the customer attrition rates, projected customer revenue growth rates, margins, contributory asset charges, and discount rates.

Costs that the Company incurs to complete the business combination such as investment banking, legal and other professional fees are not considered part of consideration.

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

On October 23, 2024, the Company acquired substantially all of the assets of Enica Engineering, PLLC.

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

For further information, see Note 13, “ Business Combinations ”, of the Notes to consolidated financial statements included in this Annual Report on Form 10-K.

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

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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 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.

At the end of fiscal year 2023, the Company had a total valuation allowance of $ 1.2 million.

During 2024, the Company released $ 0.1 million of the

WILLDAN GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

valuation allowance due to expected future utilization of deferred tax assets.

As of December 27, 2024, the Company had a total valuation allowance of $ 1.1 million related to its deferred tax assets.

8 unchanged sentences

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)

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.

Potentially dilutive common shares include dilutive outstanding employee stock options, RSAs, RSUs, and PBRSUs, and rights to purchase shares of common stock under the Company’s ESPP.

Other Comprehensive Income (loss), Net of Tax

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RECENT ACCOUNTING PRONOUNCEMENTS

Accounting Pronouncements Recently Adopted

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 adopted this standard effective for its fiscal year 2024, which began on December 30, 2023 .

For more information and related disclosures, see Note 9 , “ Segment Information ”, of the Notes to consolidated financial statements included in this Annual Report on Form 10-K.

Accounting Pronouncements Recently Issued

In November 2024, the FASB issued ASU No.

2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40)” (“ASU 2024-03”).

ASU 2024-03 requires entities to disclose, in the notes to consolidated financial statements, specified information about certain costs and expenses at each interim and annual reporting period.

Specific disclosures include the amounts of (a) purchases of inventory;

(b) employee compensation;

(d) intangible asset amortization;

and (e) depreciation, depletion, and amortization recognized as part of oil- and gas-producing activities (or other amounts of depletion expense) included in each relevant expense caption, as well as a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively.

Additionally, entities will need to disclose the total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses.

The amendments are effective for the annual reporting periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted.

The Company is currently evaluating the impact this update will have on its consolidated financial statements.

In December 2023, the FASB issued ASU No.

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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”).

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 amendments are effective for the annual reporting periods 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.

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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.

The Company does not believe the amendments in ASU 2023-06 will have a material impact in any of the Company’s current disclosures.

WILLDAN GROUP, INC.

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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.

As of December 27, 2024, the Company had no individual customers that accounted for more than 10% of the Company’s billed outstanding receivables.

As of December 29, 2023, two of the Company’s customers, Consolidated Edison of New York and Los Angeles Department of Water and Power (“LADWP”), accounted for 24.6 % of the Company’s billed outstanding receivables.

WILLDAN GROUP, INC.

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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.

All related cash flows are reported in the operating activities section of the consolidated statements of cash flows.

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 .

As of December 27, 2024, the effective portion of the Company’s interest rate swap agreement designated as a cash flow hedge before tax effects was $( 0.2 ) million, of which no amounts were reclassified from accumulated other comprehensive income (loss) to interest expense in fiscal 2024.

The Company expects to reclassify $ 0.2 million from accumulated other comprehensive income (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:

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Interest rate swap agreement

Accrued liabilities

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 impact of the effective portions of derivative instruments in cash flow hedging relationships and fair value relationships on other comprehensive income (loss) was $ 0.4 million for the year ended December 27, 2024.

The accumulated balances and reporting period activities for the year ended December 27, 2024 related to reclassifications out of accumulated other comprehensive income (loss) are summarized as follows:

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Balances at December 30, 2022

Other comprehensive loss before reclassifications

Amounts reclassified from accumulated other comprehensive income:

Other comprehensive income (loss) before reclassifications

Amounts reclassified from accumulated other comprehensive income (loss):

Income tax benefit (expense) related to derivative instruments

Net current-period other comprehensive loss

Net current-period other comprehensive income (loss)

Balances at December 29, 2023

Other comprehensive income (loss) before reclassifications

Amounts reclassified from accumulated other comprehensive income (loss):

Income tax benefit (expense) related to derivative instruments

Net current-period other comprehensive income (loss)

Balances at December 27, 2024

WILLDAN GROUP, INC.

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(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

Outstanding borrowings on Revolving Credit Facility

Outstanding borrowings on Delayed Draw Term Loan

Other debt agreements

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Long-term debt portion

New Credit Facilities

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 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.

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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.

The amounts 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 27, 2024, issuance costs of $ 0.7 million remained unamortized.

The Revolving Credit Facility issuance costs are included in assets in the accompanying Consolidated Balance Sheets, and as of December 27, 2024, issuance costs of $ 0.3 million remained unamortized.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

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.

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As of December 27, 2024 the Company’s composite annual interest rate, exclusive of the effects of upfront fees, undrawn fees and issuance cost amortization, was 6.4 % and $ 1.6 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 %,

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

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

The Company’s other debt agreements are related to financed insurance premiums, a financed software agreement, and a utility customer agreement and are immaterial to the Company’s Consolidated Financial Statements.

The Company’s other debt agreements generally are comprised of financed insurance premiums, a financed software agreement, and a utility customer agreement, and are immaterial to the Company’s Consolidated Financial Statements.

Future Debt Payments

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GOODWILL AND OTHER INTANGIBLE ASSETS

The Company’s goodwill primarily relates to the Energy segment and the acquisitions within this segment of E3, Inc., Lime Energy, NAM, Integral Analytics and Abacus Resource Management Company (“Abacus”) and substantially all of the assets of Onsite Energy, The Weidt Group, Genesys and 360 Energy Engineers, LLC (“360 Energy”).

The Company’s goodwill primarily relates to the Energy segment and the acquisitions within this segment of E3, Inc., Lime Energy, NAM, Integral Analytics and Abacus Resource Management Company (“Abacus”) and substantially all of the assets of Enica, Onsite Energy, The Weidt Group, Genesys and 360 Energy Engineers, LLC (“360 Energy”).

The remaining goodwill relates to the Engineering and Consulting reporting segment and the acquisition within this segment of Economists LLC.

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Variable Interest Entities

On March 4, 2016, the Company and the Company’s wholly-owned subsidiary, WES, acquired substantially all of the assets of Genesys and assumed certain specified liabilities of Genesys (collectively, the “Purchase”) pursuant to an Asset Purchase and Merger Agreement, dated as of February 26, 2016 (the “Agreement”), by and among Willdan Group, Inc., WES, WESGEN (as defined below), Genesys and Ronald W.

On March 4, 2016, the Company and the Company’s wholly-owned subsidiary, Willdan Energy Solutions, Inc.

(“WES”) , acquired substantially all of the assets of Genesys Engineering, P.C.

(“Genesys”) and assumed certain specified liabilities of Genesys (collectively, the “Purchase”) pursuant to an Asset Purchase and Merger Agreement, dated as of February 26, 2016 (the “Agreement”), by and among Willdan Group, Inc., WES, WESGEN (as defined below), Genesys and Ronald W.

Mineo (“Mineo”) and Robert J.

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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.

Accordingly, the Company is the primary beneficiary of Genesys and consolidates Genesys as a variable interest entity (“VIE”).

In addition, the Company concluded there is no noncontrolling interest related to the consolidation of Genesys because the Company 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.

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The Company’s two segments are Energy and Engineering and Consulting, and the Company’s chief operating decision maker, which continues to be its chief executive officer, receives and reviews financial information in this format.

As described in Note 2, “ Recent Accounting Pronouncements ”, in November 2023, the FASB issued ASU 2023-07.

The Company retroactively adopted ASU 2023-07, which requires, for fiscal years beginning after December 15, 2023, the disclosure of significant segment expenses that are regularly provided to the CODM, along with 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.

The Company’s CODM evaluates the performance of each segment based upon the information provided below.

There were no intersegment sales during the fiscal years 2024, 2023, or 2022.

The Company’s chief operating decision maker evaluates the performance of each segment based upon income or loss from operations before income taxes.

Certain segment asset information including expenditures for long-lived assets has not been presented as it is not reported to or reviewed by the chief operating decision maker.

In addition, enterprise-wide service line contract revenue is not included as it is impracticable to report this information for each group of similar services.

Financial information with respect to the reportable segments and reconciliation to the amounts reported in the Company’s consolidated financial statements follows:

(in thousands)

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Contract revenue

Depreciation and amortization

Direct subcontractor services and other direct costs

Direct salaries and wages

Other indirect costs

Interest expense

Depreciation and amortization

Segment profit (loss) before income tax expense

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Segment assets (2)

(in thousands)

Fiscal Year 2023

Contract revenue

Depreciation and amortization

Direct subcontractor services and other direct costs

Direct salaries and wages

Other indirect costs

Interest expense

Depreciation and amortization

Segment profit (loss) before income tax expense

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Segment assets (2)

WILLDAN GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(in thousands)

Fiscal Year 2022

Contract revenue

Depreciation and amortization

Direct subcontractor services and other direct costs

Direct salaries and wages

Other indirect costs

Interest expense

Depreciation and amortization

Segment profit (loss) before income tax expense

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Segment assets (2)

(1) “EBITDA”, defined as earnings before interest, taxes, depreciation and amortization, is a non-GAAP financial measure.

(2) Segment assets are presented net of intercompany receivables.

WILLDAN GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The following tables provide information about disaggregated revenue by contract type, client type and geographical region:

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Geography (3)

WILLDAN GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Engineering and

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(3) Revenue from the Company’s foreign operations were immaterial for fiscal years 2024, 2023, and 2022.

WILLDAN GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The following sets forth the assets that are included in Unallocated Corporate as of December 27, 2024 and December 29, 2023.

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For fiscal years 2024, 2023, and 2022, the Company’s top 10 customers accounted for 51.3 %, 52.7 %, and 54.6 %, 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.

For fiscal year 2022, the Company derived 12.0 % of its consolidated contract revenue from one customer, Los Angeles Department of Water and Power (“LADWP”).

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

For fiscal year 2024, the Company had no individual customers that accounted for more than 10% of its consolidated contract revenue.

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

WILLDAN GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

year 2022, the Company derived 12.0 % of its consolidated contract revenue from one customer, Los Angeles Department of Water and Power (“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 2024, the Company derived 10.7 % of its Energy segment revenues from one customer, Southern California Edison, and had no individual customers accounted for more than 10% of its Engineering and Consulting segment 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.

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

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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, a three-year, and a one-year extension at the 2019, 2022, and 2023 annual meetings of the stockholders, respectively.

The 2008 Plan was originally set to terminate on April 17, 2027 but received extensions at the 2019, 2022, 2023, and 2024 annual meetings of the stockholders.

The 2008 Plan is currently scheduled to expire on April 14, 2034.

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Options and other awards provide for accelerated vesting if there is a change in control (as defined in the 2008 Plan) and the outstanding awards are not substituted or assumed in connection with the transaction.

Through December 29, 2023, outstanding awards granted, net of forfeitures and exercises, under the 2008 Plan consisted of 38,000 shares of incentive stock options, 749,000 shares of nonqualified stock options, 171,000 shares of restricted stock awards and 130,000 shares of performance-based restricted stock units.

Through December 27, 2024, outstanding awards granted, net of forfeitures and exercises, under the 2008 Plan consisted of 24,000 shares of incentive stock options, 527,000 shares of nonqualified stock options, 146,000 shares of restricted stock awards, 70,000 shares of restricted stock units, and 168,000 shares of performance-based restricted stock units.

WILLDAN GROUP, INC.

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Stock-based Compensation Expense

The compensation expense that has been recognized for stock options, RSAs, performance-based restricted stock units (“PBRSU”), and ESPP issued under these plans was $ 5.3 million, $ 8.4 million, and $ 16.6 million for fiscal years 2023, 2022, and 2021, respectively.

The compensation expense that has been recognized for stock options, restricted stock awards (“RSA”), restricted stock units (“RSU”), performance-based restricted stock units (“PBRSU”), and ESPP issued under these plans was $ 7.4 million, $ 5.3 million, and $ 8.4 million for fiscal years 2024, 2023, and 2022, respectively.

The Company did no t have any unrecognized compensation expense related to nonvested stock options for fiscal years 2024, 2023, and 2022.

The total unrecognized compensation expense related to RSAs was $ 2.3 million, $ 2.5 million, and $ 1.7 million, for fiscal years 2024, 2023, and 2022, respectively.

That expense is expected to be recognized over a weighted-average period of 1.5 years.

The total unrecognized compensation expense related to RSUs was $ 1.4 million for fiscal year 2024.

The Company did no t have any unrecognized compensation related to RSUs for fiscal years 2023 and 2022.

That expense is expected to be recognized over a weighted-average period of 2.2 years.

The total unrecognized compensation expense related to PBRSUs was $ 7.0 million, $ 5.2 million, and $ 4.0 million for the fiscal years 2024, 2023, and 2022, respectively.

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A summary of option activity under the 2006 Plan and 2008 Plan as of December 27, 2024 and changes during the fiscal years ended December 27, 2024, December 29, 2023, and December 30, 2022 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.

The intrinsic value of the fully-vested options is $ 8.1 million based on the Company’s closing stock price of $ 38.41 and the weighted average exercise price of outstanding options on December 27, 2024.

(in thousands)

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(in thousands)

Outstanding at January 1, 2021

Outstanding at December 31, 2021

Forfeited or expired

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Exercisable at December 30, 2022

WILLDAN GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

A summary of the status of the Company’s nonvested options and changes in nonvested options is presented below:

(in thousands)

Nonvested at December 30, 2022

Nonvested at December 29, 2023

(in thousands)

Nonvested at December 31, 2021

Nonvested at December 30, 2022

(in thousands)

Nonvested at January 1, 2021

Nonvested at December 31, 2021

The Company did not have any unvested options, nor changes in nonvested options, during the fiscal years 2024, 2023, and 2022.

WILLDAN GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Summary of Restricted Stock Activity

A summary of restricted stock activity under the 2008 Plan as of December 29, 2023 is presented below:

Restricted Stock

Summary of Time-Based Restricted Stock Activity

The Company’s time-based restricted stock is comprised of RSAs and RSUs.

A summary of RSAs activity under the 2008 Plan as of December 27, 2024 is presented below:

Weighted-Average

Restricted Stock Award

Grant Date Fair Value

(in thousands)

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Outstanding at December 29, 2023

Outstanding at January 1, 2021

Outstanding at December 31, 2021

Outstanding at December 30, 2022

A summary of RSUs activity under the 2008 Plan as of December 27, 2024 is presented below.

The Company did not grant, nor have any RSU activity, prior to fiscal year 2024:

Weighted-Average

Restricted Stock Unit

Grant Date Fair Value

(in thousands)

Outstanding at December 29, 2023

Outstanding at December 27, 2024

WILLDAN GROUP, INC.

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Outstanding at December 29, 2023

Outstanding at January 1, 2021

Outstanding at December 31, 2021

Outstanding at December 30, 2022

Fair Value Valuation Assumptions

Stock Option Grants

The fair value of each option is calculated using the Black-Scholes option valuation model that uses the assumptions noted in the following table.

The fair value of each option is calculated using the Black-Scholes option valuation model that uses assumptions of expected volatility, expected dividends, expected term in years, and a risk-free rate.

Expected volatility is based upon historical volatility of “guideline companies” since the length of time the Company’s shares have been publicly traded is equal to the contractual term of the options.

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No options were granted during fiscal years 2024, 2023 or 2022.

RSA and PBRSU Grants

The Company’s restricted stock awards are valued on the closing price of the Company’s common stock on the date of grant and typically vest over a two to three-year period.

RSA, RSU and PBRSU Grants

The Company’s time-based RSAs and RSUs are valued on the closing price of the Company’s common stock on the date of grant and vest over a three-year period.

The Company’s performance-based restricted stock unit awards are valued on the closing price of the Company’s common stock on the date of grant and vest over a performance period.

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

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

Under the Company’s PBRSU design, 50 % of each award will vest based on 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.

At the end of the full three-year

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.

vesting period for the grant, the number of PBRSUs that are earned based on the achievement of Adjusted EBITDA and Adjusted Diluted EPS is then multiplied by a percentage based on the Company’s Relative Total Shareholder Return for the three-year 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.

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Research and development tax credit

Federal rate differential on NOL carryback

Change in valuation allowance

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Net deferred tax asset

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 carryovers, $ 13.2 million will carryforward indefinitely.

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

As of December 27, 2024, the Company had federal and state operating loss carryovers of $ 32.7 million and $ 66.5 million, respectively.

As of December 27, 2024, the Company had a federal tax credit carryforward of $ 2.4 million, and an immaterial amount of state tax credit carryforward.

The federal net operating losses begin to expire in 2027.

The majority of the state net operating loss carryovers will begin to expire in 2030.

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

During fiscal year 2024, $ 0.1 million of the valuation allowance was released due to expected future utilization of deferred tax assets.

As of December 27, 2024 and December 29, 2023, the Company’s liabilities related to uncertain tax positions were immaterial to the consolidated financial statements.

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Earnings (Loss) per share:

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.

For the fiscal year 2024 and fiscal year 2023, the Company excluded 71,000 and 363,000 common shares subject to outstanding equity awards, respectively, from the calculation of diluted shares because their impact would have been anti-dilutive.

For the fiscal year 2022, 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

BUSINESS COMBINATIONS

Acquisition of Enica Engineering, PLLC.

On October 23, 2024 , (the “Enica Closing Date”), the Company, through its wholly owned subsidiary, WES, acquired substantially all of the assets of Enica Engineering, PLLC .

(“Enica”), pursuant to the terms of the Asset Purchase Agreement, dated as of October 23, 2024 (the “Enica Agreement”), by and among the Company, WES, Genesys, Enica, and Reed Berinato (“Berinato”) and Mark Prewett (“Prewett” and, together with Berinato, the “Enica Members”).

Enica is an energy efficiency company that provides an array of services around energy projects, metering, and consulting services to help its customers drive energy efficiency, decarbonization, and energy reduction.

Enica’s financial information is included within the Company’s Energy segment beginning in the fourth quarter of fiscal year 2024.

The Company expects to finalize the purchase price allocation related to this transaction by the end of the second quarter of fiscal year 2025.

The Company agreed to pay (i) $ 12.0 million in cash on the Enica Closing Date (subject to holdbacks and adjustments) and (ii) up to $ 6.0 million in cash if Enica exceeds certain financial targets during the two years after the Enica Closing Date, as further described below (such potential payments of up to $ 6.0 million, being referred to as “Enica Earnout Payments” and $ 6.0 million in respect thereof, being referred to as the “Enica Maximum Earnout”);

for a potential maximum purchase price of $ 18.0 million.

The amount of the Enica Earnout Payments to be paid will be determined based on Enica’s earnings before interest, taxes, depreciation and amortization (“Enica’s EBITDA”).

The Enica Members will receive Enica Earnout Payments in each of the two years after the Enica Closing Date (the “Earnout Period”) based on the amount by which Enica’s EBITDA exceeds certain targets.

The amounts due to the Enica Members as Enica Earnout Payments will in no event, individually or in the aggregate, exceed the Enica Maximum Earnout.

Enica Earnout Payments will be made in annual installments for each of the two years of the Enica Earnout Period.

In addition, the Enica Earnout Payments will be subject to certain subordination provisions in favor of the lenders under the Company’s Credit Agreement.

The Enica Agreement contains customary representations and warranties regarding the Company, WES, Genesys, Enica, and the Enica Members, indemnification provisions and other provisions customary for transactions of this nature.

The Company used cash on hand to fund the initial purchase price on the Enica Closing Date.

The acquisition was accounted for as a business combination in accordance with ASC 805.

Under ASC 805, the Company recorded the acquired assets and assumed liabilities at their estimated fair value with the excess allocated to goodwill.

Goodwill represents the value the Company expects to achieve through the operational synergies, the expansion into new markets and the acquired company’s assembled work force.

The Company estimates that the entire $ 9.8 million of goodwill resulting from the acquisition will be tax deductible.

Preliminary consideration for the acquisition includes the following:

(in thousands)

Cash consideration

Other working capital adjustments and holdbacks (1)

Contingent consideration

Total consideration

(1) Of which $ 3.5 million is included within accrued liabilities in the Company’s consolidated balance sheet and the remainder is included within accounts payable in the Company’s consolidated balance sheet.

WILLDAN GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The following table summarizes the amounts for the acquired assets recorded at their estimated fair value as of the acquisition date:

(in thousands)

Current assets

Non-current assets (1)

Right-of-use assets

Lease liability

Customer relationships

Net assets acquired

(1) Excluded from non-current assets are right-of-use assets, backlog, customer relationships, tradename, and goodwill.

During the fiscal year 2024, the Company did not make any adjustments to the consideration paid for Enica, and as a result, there were no adjustments to the purchase price allocation for the fiscal year ended December 27, 2024.

Acquisition related costs associated with Enica are included in other general and administrative expenses in the consolidated statements of comprehensive income and were not material for the year ended December 27, 2024.

The following unaudited pro forma financial information for the fiscal years ended December 27, 2024 and December 29, 2023 assumes that the acquisitions of substantially all of the assets of Enica occurred on the first day of the year prior to the year of acquisition:

(in thousands, except per share data)

Pro forma revenue

Pro forma income (loss) from operations

Pro forma net income (loss) (1)

Income (Loss) per share:

Weighted average shares outstanding:

(1) Adjustments to pro forma net income include income from operations, amortization and interest expenses.

This pro forma supplemental information does not purport to be indicative of what the Company’s operating results would have been had the acquisitions of substantially all of the assets of Enica occurred on the first day of the year prior to the year of acquisition and may not be indicative of future operating results.

During fiscal year 2024, the acquisition of Enica contributed $ 1.8 million in revenue and $ 0.4 million of income from operations.

WILLDAN GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

CONTINGENCIES

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In accordance with ASC Topic 855, Subsequent Events, the Company evaluates subsequent events up until the date the consolidated financial statements are issued.

As of March 7, 2024, there were no subsequent events required to be reported.

Alpha Inspections, Inc.

On January 31, 2025 (the “Alpha Closing Date”), the Company, through its wholly owned subsidiary, Willdan Engineering, Inc., acquired all of the capital stock of Alpha Inspections, Inc.

(“Alpha”), pursuant to the terms of the Stock Purchase Agreement, dated as of January 31, 2025 (the “Alpha Stock Purchase Agreement”), by and among the Company, Willdan Engineering, Inc., and Jennifer Murphy as the sole shareholder of Alpha Inspections, Inc.

(the “Alpha Member”).

Pursuant to the terms of the Alpha Stock Purchase Agreement, the purchase price consisted of $ 12.0 million to be paid in cash on the Alpha Closing Date (subject to holdbacks and adjustments).

The Alpha Stock Purchase Agreement contains customary representations and warranties regarding the Company, Willdan Engineering, Alpha, and the Alpha Member, indemnification provisions and other provisions customary for transactions of this nature.

Pursuant to the terms of the Alpha Stock Purchase Agreement, the Company, and Willdan Engineering, provided guarantees to the Alpha Member which guarantee certain of Alpha’s obligations under the Alpha Stock Purchase Agreement.

The Company used cash on hand to fund the purchase price.

Alpha is a company that provides an array of municipal services including building inspections, and plan reviews.

Alpha’s financial information will be included within the Engineering and Consulting segment beginning in the first quarter of fiscal year 2025 and the Company expects to finalize the purchase price allocation related to this transaction by the end of the fourth quarter of fiscal year 2025.

Alternative Power Generation, Inc.

On March 3, 2025 (the “APG Closing Date”), the Company, through its wholly owned subsidiary, WES, acquired all of the capital stock of Alternative Power Generation, Inc.

(“APG”), pursuant to the terms of the Stock Purchase Agreement, dated as of March 3, 2025 (the “APG Stock Purchase Agreement”), by and among the Company, WES, and each of the stockholders of APG (the “APG Stockholders”).

Pursuant to the terms of the APG Stock Purchase Agreement, the Company agreed to pay up to $ 43.5 million for the purchase of all the capital stock of APG, which purchase price consists of (i) $ 19.5 million in cash paid on the APG Closing Date (subject to holdbacks and adjustments), (ii) $ 6.0 million in shares of the Company’s common stock, based on the closing average price per share of the Company’s common stock for the twenty trading days preceding the APG Closing Date, and (iii) up to $ 18.0 million in cash if APG exceeds certain financial targets during the three years after the APG Closing Date, as more fully described below (such potential payments of up to $ 18.0 million being referred to as “APG Earnout Payments” and $ 18.0 million in respect thereof, being referred to as the “APG Maximum Payout”).

The amount of the APG Earnout Payments to be paid will be determined based on APG’s earnings before interest, taxes, depreciation and amortization (“APG EBITDA”).

The APG Stockholders will receive APG Earnout Payments in each of the three years after the APG Closing Date (the “APG Earnout Period”) based on the amount by which APG EBITDA exceeds certain targets.

The amounts due to the APG Stockholders as APG Earnout Payments will in no event, individually or in the aggregate, exceed the APG Maximum Payout.

APG Earnout Payments will be made in annual installments for each of the three years of the APG Earnout Period.

In addition, the APG Earnout Payments will be subject to certain subordination provisions in favor of the lenders under the Company’s Credit Agreement.

WILLDAN GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The APG Stock Purchase Agreement contains customary representations and warranties regarding the Company, WES, APG, and the APG Stockholders, indemnification provisions, and other provisions customary for transactions of this nature.

The Company used cash on hand to fund the initial purchase price.

APG provides innovative, progressive, and customized electric power solutions for EV charging, solar, AI data centers, microgrids, battery energy storage systems (BESS), and substations.

APG offers consulting, design, engineering, procurement, and construction management.

APG’s financial information will be included within the Energy segment beginning in the first quarter of fiscal year 2025 and the Company expects to finalize the purchase price allocation related to this transaction by the end of the fourth quarter of fiscal year 2025.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data