CRA International Inc.

11/05/2026 | Press release | Distributed by Public on 11/05/2026 07:16

Quarterly Report for Quarter Ending October 3, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
Except for historical facts, the statements in this quarterly report are forward-looking statements. Forward-looking statements are merely our current predictions of future events. These statements are inherently uncertain, and actual events could differ materially from our predictions. Important factors that could cause actual events to vary from our predictions include those discussed below under the heading "Risk Factors." We assume no obligation to update our forward-looking statements to reflect new information or developments. We urge readers to review carefully the risk factors described in the other documents that we file with the SEC. The SEC maintains a website that contains these documents, reports, proxy statements, information statements, and other information regarding issuers, such as us, that file electronically with the SEC at https://www.sec.gov.
Additional Available Information
Our principal Internet address is www.crai.com. Our website provides a link to a third-party website through which our annual, quarterly, and current reports, and amendments to those reports, are available free of charge. We do not maintain or provide any information directly to the third-party website, and we do not check its accuracy.
Critical Accounting Policies and Estimates
Our critical accounting policies involving the more significant estimates and judgments used in the preparation of our financial statements as of October 3, 2026 remain unchanged from January 3, 2026. Please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the fiscal year ended January 3, 2026, filed with the SEC on February 26, 2026 for details on these critical accounting policies.
Recent Accounting Standards
There are no recent accounting standards that impact the unaudited condensed consolidated financial statements.
Results of Operations-For the Fiscal Quarter and Fiscal Year-to-Date Period Ended October 3, 2026, Compared to the Fiscal Quarter and Fiscal Year-to-Date Period Ended September 27, 2025
The following table provides operating information as a percentage of revenues for the periods indicated:
Fiscal Quarter
Ended 		Fiscal Year-to-Date
Period Ended
October 3,
2026 		September 27,
2025 		October 3,
2026 		September 27,
2025
Revenues 100.0 % 100.0 % 100.0 % 100.0 %
Costs of services (exclusive of depreciation and amortization) 70.9 70.7 71.2 68.6
Selling, general and administrative expenses 16.5 18.1 16.8 18.3
Depreciation and amortization 1.5 1.9 1.6 1.9
Income from operations(1)
11.1 9.3 10.4 11.3
Interest expense, net (1.2) (0.9) (1.0) (0.7)
Foreign currency gains (losses), net - 0.4 - (0.1)
Income before provision for income taxes 9.9 8.7 9.4 10.5
Provision for income taxes 3.5 2.6 3.2 3.0
Net income(1)
6.5 % 6.2 % 6.2 % 7.5 %
(1)The tables and information provided in this section were derived from exact numbers and may have immaterial rounding differences.
Fiscal Quarter Ended October 3, 2026, Compared to the Fiscal Quarter Ended September 27, 2025
Revenues. Revenues increased by $29.0 million, or 15.6%, to $214.9 million for the third quarter of fiscal 2026 from $185.9 million for the third quarter of fiscal 2025. Utilization increased to 78% for the third quarter of fiscal 2026 from 77% for the third quarter of fiscal 2025, while consultant headcount increased to 1,028 at the end of the third quarter of fiscal 2026 from 968 at the end of the third quarter of fiscal 2025.
Overall, revenues outside of the U.S. represented approximately 20% and 21% of net revenues for the third quarter of fiscal 2026 and fiscal 2025, respectively. Revenues derived from fixed-price projects increased to 21% of net revenues for the third quarter of fiscal 2026 compared to 17% of net revenues for the third quarter of fiscal 2025. The percentage of revenue derived from fixed-price projects depends largely on the proportion of our revenues derived from our management consulting business, which typically has a higher concentration of fixed-price service contracts.
Costs of Services (exclusive of depreciation and amortization). Costs of services (exclusive of depreciation and amortization) increased by $20.9 million, or 15.9%, to $152.4 million for the third quarter of fiscal 2026 from $131.5 million for the third quarter of fiscal 2025. The increase in costs of services was due to an increase in employee and incentive compensation of $14.2 million, an increase in forgivable loan amortization, including performance award amortization of $3.6 million, and an increase in client reimbursable expenses of $3.4 million, partially offset by a decrease of $0.1 million in stock compensation and a decrease of $0.2 million in indirect project expenses. As a percentage of revenues, costs of services (exclusive of depreciation and amortization) increased to 70.9% for the third quarter of fiscal 2026 from 70.7% for the third quarter of fiscal 2025.
Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by $1.7 million, or 5.0%, to $35.4 million for the third quarter of fiscal 2026 from $33.7 million for the third quarter of fiscal 2025. Within this category of expenses, there was a $0.8 million increase in employee and incentive compensation, a $0.7 million increase in software subscriptions and data services, a $0.5 million increase in travel and entertainment, a $0.1 million increase in rent expense, and a $0.1 million increase in legal and professional services, partially offset by a $0.1 million decrease in bad debt expense, a $0.2 million decrease in training and marketing expenses and a $0.2 million decrease in miscellaneous and other fees for the third quarter of fiscal 2026 as compared to the third quarter of fiscal 2025.
As a percentage of revenues, selling, general and administrative expenses decreased to 16.5% for the third quarter of fiscal 2026 from 18.1% for the third quarter of fiscal 2025. Commissions to our non-employee experts decreased to 1.6% of revenues for the third quarter of fiscal 2026 compared to 1.8% of revenues for the third quarter of fiscal 2025.
Provision for Income Taxes. The income tax provision was $7.4 million and the ETR was 34.8% for the third quarter of fiscal 2026 compared to $4.8 million and 29.3% for the third quarter of fiscal 2025. The ETR for the fiscal quarter ended October 3, 2026 was higher than the fiscal quarter ended September 27, 2025 primarily due to an increase in nondeductible executive compensation partially offset by a remeasurement of deferred tax assets related to changes in current-year state apportionment. The ETR for the third quarters of fiscal 2026 and 2025 were both higher than the combined federal and state statutory tax rate primarily due to nondeductible executive compensation and nondeductible meals and entertainment expenses, and the remeasurement of deferred tax assets related to changes in current-year state apportionment, partially offset by the tax benefit related to share-based compensation and the Foreign-Derived Deduction Eligible Income deduction.
Net Income. Net income increased to $13.9 million for the third quarter of fiscal 2026 from $11.5 million for the third quarter of fiscal 2025. The net income per diluted share was $2.20 per share for the third quarter of fiscal 2026, compared to $1.73 for the third quarter of fiscal 2025. Weighted average diluted shares outstanding decreased by approximately 294,000 shares to approximately 6,327,000 shares for the third quarter of fiscal 2026 from approximately 6,621,000 shares for the third quarter of fiscal 2025. The decrease in weighted average diluted shares outstanding was primarily due to the repurchase of shares of our common stock since September 27, 2025, offset in part by the vesting of shares of restricted stock and time-vesting restricted stock units since September 27, 2025.
Fiscal Year-to-Date Period Ended October 3, 2026, Compared to the Fiscal Year-to-Date Period Ended September 27, 2025
Revenues. Revenues increased by $72.1 million, or 13.0%, to $626.7 million for the fiscal year-to-date period ended October 3, 2026 from $554.6 million for the fiscal year-to-date period ended September 27, 2025. Utilization increased to 78% for the fiscal year-to-date period ended October 3, 2026 from 76% for the fiscal year-to-date period ended September 27, 2025,
while consultant headcount increased from 968 at the end of the third quarter of fiscal 2025 to 1,028 at the end of the third quarter of fiscal 2026.
Overall, revenues outside of the U.S. represented approximately 21% and 19% of net revenues for the fiscal year-to-date period ended October 3, 2026 and September 27, 2025, respectively. Revenues derived from fixed-price projects increased to 21% of net revenues for the fiscal year-to-date period ended October 3, 2026 compared to 16% of net revenues for the fiscal year-to-date period ended September 27, 2025. The percentage of revenue derived from fixed-price projects depends largely on the proportion of our revenues derived from our management consulting business, which typically has a higher concentration of fixed-price service contracts.
Costs of Services (exclusive of depreciation and amortization). Costs of services (exclusive of depreciation and amortization) increased by $65.7 million, or 17.3%, to $446.1 million for the fiscal year-to-date period ended October 3, 2026 from $380.4 million for the fiscal year-to-date period ended September 27, 2025. The increase in costs of services was due to an increase of $40.9 million in employee compensation and fringe benefit costs, an increase in forgivable loan amortization of $18.4 million, and an increase of $6.5 million in client reimbursable expenses. As a percentage of revenues, costs of services (exclusive of depreciation and amortization) increased to 71.2% for the fiscal year-to-date period ended October 3, 2026 from 68.6% for the fiscal year-to-date period ended September 27, 2025.
Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by $3.9 million, or 3.8%, to $105.2 million for the fiscal year-to-date period ended October 3, 2026 from $101.3 million for the fiscal year-to-date period ended September 27, 2025. Within this category of expenses, there was a $3.9 million increase in employee compensation and fringe benefit costs, a $2.5 million increase in software subscriptions and data services, a $1.0 million increase in legal and professional service fees, a $0.8 million increase in travel and entertainment expense, and a $0.2 million increase in rent expense, partially offset by a $0.4 million decrease in training and marketing expenses, a $0.7 million decrease in miscellaneous and other fees, a $0.8 million decrease in bad debt expense, and a $2.6 million decrease in commissions to non-employee experts for the fiscal year-to-date period ended October 3, 2026 as compared to the fiscal year-to-date period ended September 27, 2025.
As a percentage of revenues, selling, general and administrative expenses decreased to 16.8% for the fiscal year-to-date period ended October 3, 2026 from 18.3% for the fiscal year-to-date period ended September 27, 2025. Commissions to our non-employee experts decreased to 1.4% of revenues for the fiscal year-to-date period ended October 3, 2026 compared to 2.1% of revenues for the fiscal year-to-date period ended September 27, 2025.
Provision for Income Taxes. The income tax provision was $20.3 million and the ETR was 34.5% for the fiscal year-to-date period ended October 3, 2026, compared to $16.4 million and 28.3% for the fiscal year-to-date period ended September 27, 2025. The ETR for the fiscal year-to-date period ended October 3, 2026 was higher than the fiscal year-to-date period ended September 27, 2025 primarily due to an increase in nondeductible executive compensation, the recording of a valuation allowance in a foreign jurisdiction, and a decrease in the tax benefit related to share-based compensation. The increase was partially offset by a remeasurement of deferred tax assets related to changes in current-year state apportionment and a decrease to a prior year tax reserve. The ETR for the current and prior fiscal year-to-date periods were both higher than the combined federal and state statutory tax rate primarily due to nondeductible executive compensation and nondeductible meals and entertainment expenses, partially offset by the tax benefit related to share-based compensation and the Foreign-Derived Deduction Eligible Income deduction. Specific to the current fiscal year-to-date period, the ETR was also higher due to the recording of a valuation allowance in a foreign jurisdiction, partially offset by a remeasurement of deferred tax assets related to changes in current-year state apportionment and a decrease to a prior year tax reserve.
Net Income. Net income decreased by $3.1 million to $38.5 million for the fiscal year-to-date period ended October 3, 2026 from $41.6 million for the fiscal year-to-date period ended September 27, 2025. The diluted net income per share was $5.98 for the fiscal year-to-date period ended October 3, 2026, compared to diluted net income per share of $6.16 for the fiscal year-to-date period ended September 27, 2025. Weighted average diluted shares outstanding decreased by approximately 304,000 shares to approximately 6,441,000 shares for the fiscal year-to-date period ended October 3, 2026 from approximately 6,745,000 shares for the fiscal year-to-date period ended September 27, 2025. The decrease in weighted average diluted shares outstanding was primarily due to the repurchase of shares of our common stock since September 27, 2025, offset in part by the vesting of shares of restricted stock and time-vesting restricted stock units since September 27, 2025.
Liquidity and Capital Resources
Fiscal Year-to-Date Period Ended October 3, 2026
We believe that our current cash, cash equivalents, cash generated from operations, and amounts available under our revolving credit facility will be sufficient to meet our anticipated working capital and capital expenditure requirements for at least the next 12 months. As of October 3, 2026, we had $20.4 million of cash and cash equivalents and $171.9 million of borrowing capacity under our revolving credit facility.
General. During the fiscal year-to-date period ended October 3, 2026, cash and cash equivalents increased by $2.2 million. We completed the period with cash and cash equivalents of $20.4 million. The principal drivers of the increase in cash and cash equivalents were net borrowings of $116.0 million, offset by the payment of a significant portion of our fiscal 2025 performance bonuses in the first quarter of fiscal 2026, forgivable loan advances, repurchase of shares, and the payment of dividends.
At October 3, 2026, $5.7 million of our cash and cash equivalents was held within the U.S. We have sufficient sources of liquidity in the U.S., including cash flow from operations and availability on our revolving credit facility to fund U.S. operations for the next 12 months without the need to repatriate funds from our foreign subsidiaries.
Sources and Uses of Cash. During the fiscal year-to-date period ended October 3, 2026, net cash used in operating activities was $43.9 million. Net income was $38.5 million for the fiscal year-to-date period ended October 3, 2026. Uses of cash for operating activities included an increase in forgivable loans for the period of $46.7 million which was primarily driven by $80.9 million of forgivable loan issuances, net of repayments, offset by $34.2 million of forgivable loan amortization, increase of $49.3 million in unbilled receivables, a decrease in accounts payable, accrued expenses, and other liabilities of $14.8 million, primarily due to the payment of a significant portion of our fiscal 2025 performance bonuses, a $14.0 million decrease in lease liabilities, and a $4.7 million increase in prepaid expenses and other current assets, and other assets. Partially offsetting these uses of cash was an increase of $9.8 million in incentive cash awards payable and a decrease of $6.8 million in accounts receivable.
Non-cash items included right-of-use amortization of $11.2 million, depreciation and amortization expense of $9.9 million, share-based compensation expenses of $5.2 million, and deferred income taxes of $4.4 million.
During the fiscal year-to-date period ended October 3, 2026, net cash used in investing activities was $5.5 million, which consisted of capital expenditures, primarily related to computer equipment, software and furniture.
During the fiscal year-to-date period ended October 3, 2026, net cash provided by financing activities was $52.1 million, primarily as a result of net borrowings under the revolving credit facility of $116.0 million. Offsetting this increase in cash provided by financing activities were repurchases of common stock of $49.3 million, payment of cash dividends and dividend equivalents of $11.0 million, tax withholding payments reimbursed by restricted shares on vesting of $2.2 million, and payments for debt issuance costs of $1.4 million.
Lease Commitments
We are a lessee under certain operating leases for office space and equipment. Certain of our operating leases have terms that impose asset retirement obligations due to office modifications or the periodic redecoration of the premises, which are included in deferred compensation and other non-current liabilities on our condensed consolidated balance sheets and are recorded at a value based on their estimated discounted cash flows. At October 3, 2026, we do not expect to incur asset retirement obligation or redecoration obligation costs over the next twelve months. The remainder of our asset retirement obligations and redecoration obligations are approximately $3.0 million and are expected to be paid between fiscal year 2029 and fiscal year 2035 when the underlying leases terminate or when the respective lease agreement requires redecoration. We expect to satisfy these lease and related obligations as they become due from cash generated from operations.
Indebtedness
On July 31, 2026, CRA and its subsidiaries, the UK Borrower and the Canadian Borrower entered into an Amended and Restated Credit Agreement (the "Credit Agreement") with Bank of America, N.A., as swingline lender, a letter of credit issuing bank and administrative agent, and other lenders party thereto. The Credit Agreement provides us with aggregate credit facilities of $400.0 million, consisting of a $325.0 million revolving credit facility and a $75.0 million term loan facility. The revolving credit facility may be decreased at CRA's option to $250.0 million during the period from July 16 in a year through January 15 in the next year. Additionally, we may elect not to increase the revolving credit facility to $325.0 million during the
period from January 16 through July 15 of each year. The revolving credit facility includes a $70.0 million sublimit for borrowings by the Designated Borrowers, a $150.0 million sublimit for borrowings in alternative currencies, a $50.0 million sublimit for letters of credit and a $30.0 million sublimit for swingline loans.
The proceeds of the Credit Facilities were used to refinance indebtedness outstanding under the Existing Credit Agreement and may be used for general corporate purposes. The revolving credit facility and term loan facility mature on July 31, 2031. The term loan facility requires quarterly principal repayments equal to 2.5% per annum of the original principal amount, with the remaining balance due at maturity. Borrowings under the Credit Facilities may be voluntarily prepaid without premium or penalty, other than customary breakage costs. Borrowings bear interest at a rate per annum equal to the applicable Base Rate, Term SOFR, Daily SOFR, EURIBOR, SONIA, Term CORRA, SARON or other applicable alternative currency rate, plus an applicable margin. The applicable margin varies between 0.25% and 1.00% for Base Rate borrowings and between 1.25% and 2.00% for other borrowings, depending on our consolidated net leverage ratio.
We are required to pay a fee on the amount available to be drawn under letters of credit at a rate per annum between 1.25% and 2.00%, and a fee on the unused portion of the revolving credit facility at a rate per annum between 0.175% and 0.250%, depending on our consolidated net leverage ratio. Subject to certain conditions, we may request additional revolving credit or term loan commitments in an aggregate principal amount not exceeding the greater of $150.0 million and 100% of consolidated EBITDA for the applicable trailing four-fiscal-quarter period. The obligations under the Credit Agreement are unsecured, and the obligations of the Designated Borrowers are guaranteed by CRA.
Under the Credit Agreement, we must comply with various financial and non-financial covenants. The primary financial covenants consist of a maximum consolidated net leverage ratio of 3.0 to 1.0, which can be increased to 3.5 to 1.0 for a period of four consecutive quarters in the event of a Permitted Acquisition (as defined in the Credit Agreement) exceeding $25.0 million (subject to a maximum of three permitted increases), and a minimum consolidated interest coverage ratio of 2.5 to 1.0. The primary non-financial covenants include, but are not limited to, restrictions on our ability to incur future indebtedness, engage in acquisitions or dispositions, pay dividends or repurchase capital stock, and enter into business combinations. Any indebtedness outstanding under the Credit Agreement may become immediately due upon the occurrence of certain events of default, including our failure to pay principal, interest or fees, or upon the breach of certain covenants. As of October 3, 2026, we were in compliance with the covenants of the Credit Agreement.
There were $75.0 million and $34.0 million in borrowings outstanding under the revolving credit facility as of October 3, 2026 and January 3, 2026, respectively. In addition, there were $74.7 million in borrowings outstanding under the term loan facility, net of $0.3 million of unamortized debt issuance costs, as of October 3, 2026, and no such borrowings outstanding as of January 3, 2026. Of the $74.7 million, $1.8 million was classified as a current liability within deferred revenue and other liabilities in the condensed consolidated balance sheets as of October 3, 2026. The amounts available under the revolving credit facility were reduced by certain letters of credit outstanding, which amounted to $3.1 million and $3.8 million, as of October 3, 2026 and January 3, 2026, respectively. As of October 3, 2026, our total available borrowing capacity under the revolving facility was $171.9 million. We have chosen to classify the revolver as a current liability in its condensed consolidated balance sheet, as we intend to repay the amount within 12 months after the balance sheet date. For further information refer to Note 8. Credit Agreement in our condensed consolidated financial statements.
Forgivable Loans
In order to attract and retain highly skilled professionals, we may issue forgivable loans or term loans to employees and non-employee experts. A portion of these loans is collateralized by key person life insurance. The forgivable loans have terms that are generally between two and eight years. The principal amount of forgivable loans and accrued interest is forgiven by us over the term of the loans, so long as the employee or non-employee expert continues employment or affiliation with us and complies with certain contractual requirements. The forgiveness of the principal amount of the loans is recorded as compensation over the service period, which is consistent with the term of the loans.
Compensation Arrangements
We have entered into compensation arrangements for the payment of performance awards to certain of our employees and non-employee experts that are payable if specific performance targets are met. The financial targets may include a measure of revenue generation, profitability, or both. The amounts of the awards to be paid under these compensation arrangements could fluctuate depending on future performance during the applicable measurement periods. Changes in the estimated awards are expensed prospectively over the remaining service period. We believe that we will have sufficient funds to satisfy any cash obligations related to the performance awards. We expect to fund any cash payments from existing cash resources, cash generated from operations, or borrowings available on our revolving credit facility.
Our Amended and Restated 2006 Equity Incentive Plan, as amended (the "2006 Equity Plan"), authorizes the grant of a variety of incentive and performance equity awards to our directors, employees and non-employee experts, including stock options, shares of restricted stock, restricted stock units, and other equity awards.
Our long-term incentive program, (the "LTIP") is used as a framework for equity grants made under our 2006 Equity Plan to our senior corporate leaders, practice leaders, and key revenue generators. The equity awards granted under the LTIP include stock options, time-vesting restricted stock units, and performance-vesting restricted stock units.
Our LTIP allows us to grant service and performance-based cash awards in lieu of, or in addition to, equity awards to our senior corporate leaders, practice leaders, and key revenue generators. The compensation committee of our Board of Directors is responsible for approving all cash and equity awards under the LTIP. We expect to fund any cash payments from existing cash resources, cash generated from operations, or borrowings available under our revolving credit facility.
Business and Talent Acquisitions
As part of our business, we regularly evaluate opportunities to acquire other consulting firms, practices or groups, or other businesses. In recent years, we have typically paid for acquisitions with cash, or a combination of cash and our common stock, and we may continue to do so in the future. To pay for an acquisition, we may use cash on hand, cash generated from our operations, borrowings available under our revolving credit facility, or we may pursue other forms of financing. Our ability to secure short-term and long-term debt or equity financing in the future, including our ability to refinance our credit agreement, will depend on several factors, including our future profitability, the levels of our debt and equity, restrictions under our existing revolving credit facility with our bank, and the overall credit and equity market environments.
Share Repurchases
In February 2026, we announced that our Board of Directors authorized an expansion to our existing share repurchase program by an additional $55.0 million of our common stock, in addition to the $10.9 million then remaining under the program. The program has no expiration date. We may repurchase shares under this program in open market purchases (including through any Rule 10b5-1 plan adopted by us) or in privately negotiated transactions in accordance with applicable insider trading and other securities laws and regulations.
During the fiscal quarter ended October 3, 2026, we did not repurchase any shares under this share repurchase program. During the fiscal year-to-date period ended October 3, 2026, we repurchased and retired 308,985 shares under our share repurchase program at an average price per share of $159.56. During the fiscal quarter and the fiscal year-to-date period ended September 27, 2025, we repurchased and retired 21,532 and 252,205 shares, respectively, under our share repurchase program at an average price per share of $185.74 and $186.95, respectively. We had approximately $16.6 million available for future repurchases under our share repurchase program as of October 3, 2026. We plan to finance future repurchases with available cash, cash from future operations, and borrowings available under our revolving credit facility. We expect to continue to repurchase shares under our share repurchase program.
Dividends to Shareholders
We anticipate paying regular quarterly dividends each year. These dividends are anticipated to be funded through cash flow from operations, available cash on hand, and/or borrowings available under our revolving credit facility. Although we anticipate paying regular quarterly dividends on our common stock for the foreseeable future, the declaration, timing and amounts of any such dividends remain subject to the discretion of our Board of Directors. During the fiscal quarter and fiscal year-to-date period ended October 3, 2026 we paid dividends and dividend equivalents of $3.6 million and $11.0 million, respectively. During the fiscal quarter and fiscal year-to-date period ended September 27, 2025, we paid dividends and dividend equivalents of $3.2 million and $10.1 million, respectively.
Impact of Inflation
To date, inflation has not had a material impact on our financial results. There can be no assurance, however, that inflation will not adversely affect our financial results in the future.
Future Capital and Liquidity Needs
We anticipate that our future capital and liquidity needs will principally consist of funds required for:
•operating and general corporate expenses relating to the operation of our business, including the compensation of our employees under various annual bonus or long-term incentive compensation programs;
•the hiring of individuals to replenish and expand our employee base;
•capital expenditures, primarily for information technology equipment, office furniture and leasehold improvements;
•debt service and repayments, including interest payments on borrowings from our revolving credit facility;
•share repurchases under programs that we may have in effect from time to time;
•dividends to shareholders;
•potential acquisitions of businesses that would allow us to diversify or expand our service offerings;
•contingent obligations related to our acquisitions; and
•other known future contractual obligations.
The hiring of individuals to replenish and expand our employee base is an essential part of our business operations and has historically been funded principally from operations. Many of the other above activities are discretionary in nature. For example, capital expenditures can be deferred, acquisitions can be forgone, and share repurchases and regular dividends can be suspended. As such, our operating model provides flexibility with respect to the deployment of cash flow from operations. Given this flexibility, we believe that our cash flows from operations, supplemented by cash on hand and borrowings under our revolving credit facility (as necessary), will provide adequate cash to fund our long-term cash needs from normal operations for at least the next twelve months.
Our conclusion that we will be able to fund our cash requirements by using existing capital resources and cash generated from operations does not take into account the impact of any future acquisition transactions or any unexpected significant changes in the number of employees or other expenditures that are currently not contemplated. The anticipated cash needs of our business could change significantly if we pursue and complete additional business acquisitions, if our business plans change, if economic conditions change from those currently prevailing or from those now anticipated, or if other unexpected circumstances arise that have a material effect on the cash flow or profitability of our business. Any of these events or circumstances, including any new business opportunities, could involve significant additional funding needs in excess of the identified currently available sources and could require us to raise additional debt or equity funding to meet those needs on terms that may be less favorable compared to our current sources of capital. Our ability to raise additional capital, if necessary, is subject to a variety of factors that we cannot predict with certainty, including:
•our future profitability;
•the quality of our accounts receivable;
•our relative levels of debt and equity;
•the volatility and overall condition of the capital markets; and
•the market prices of our securities.
Factors Affecting Future Performance
Important factors that could cause our actual results to differ materially from the forward-looking statements we make in this report, as well as a description of material risks we face, are set forth below under the heading "Risk Factors" and included in Part I, Item 1A, "Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended January 3, 2026. If any of these risks, or any risks not presently known to us or that we currently believe are not significant, develops into an actual event, then our business, financial condition, and results of operations could be adversely affected.
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