INCOME TAXES

12 Months Ended

Dec. 28, 2025

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

U.S. and foreign components of loss before tax expense (benefit) was as follows:

(in thousands)	2025		2024		2023
U.S.	$	(51,101)	$	(97,733)	$	(27,773)
Foreign	5,470		9,209		7,128
Loss before tax expense (benefit)	$	(45,631)	$	(88,524)	$	(20,645)

The provision for income taxes is comprised of the following:

(in thousands)	2025		2024		2023
Current taxes:
Federal	$	(87)	$	150	$	329
State	550		1,241		582
Foreign	2,515		1,771		2,817
Total current taxes	2,978		3,162		3,728
Deferred taxes:
Federal	35		28,484		(8,109)
State	(172)		5,295		(1,383)
Foreign	(512)		283		(708)
Total deferred taxes	(649)		34,062		(10,200)
Income tax expense (benefit):
Federal	(52)		28,634		(7,780)
State	378		6,536		(801)
Foreign	2,003		2,054		2,109
Total income tax expense (benefit)	$	2,329	$	37,224	$	(6,472)

Our tax provision and our effective tax rate are subject to variation due to several factors, including variability in our pre-tax and taxable income or loss by jurisdiction, tax credits, government audit developments, changes in laws, regulations and administrative practices, valuation allowances recorded on deferred tax assets, and relative changes in expenses or losses for which tax benefits are not recognized. Additionally, our effective tax rate can be more or less volatile based on the amount of pre-tax income or loss. For example, the impact of discrete items, tax credits, non-deductible expenses and valuation allowance on our effective tax rate can be greater when our pre-tax income or loss is lower.

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

(in thousands, except percentages)	2025		%		2024		%		2023		%
Income tax expense (benefit) based on U.S. federal statutory rate	$	(9,583)	21.0	%	$	(18,590)	21.0	%	$	(4,335)	21.0	%
Increase (decrease) resulting from:
State and local tax effects
State and local income taxes, net of federal income tax effect (1)	550		(1.2)		1,341		(1.5)		(1,258)		6.1
Foreign tax effects
Canada
Foreign withholdings	81		(0.2)		87		(0.1)		257		(1.2)
Other	155		(0.3)		(200)		0.2		(71)		0.4
India
Statutory tax rate difference between India and U.S.	356		(0.8)		384		(0.4)		579		(2.8)
India tax holiday	(324)		0.7		(406)		0.5		(423)		2.0
Other	123		(0.3)		1		—		4		—
Other foreign jurisdictions	463		(0.9)		254		(0.2)		249		(1.2)
Tax credits
Hiring tax credits	(2,700)		5.9		(5,376)		6.1		(6,325)		30.6
Foreign tax credits	(478)		1.0		—		—		—		—
Change in valuation allowance	12,704		(27.8)		57,626		(65.1)		(58)		0.3
Nontaxable or non-deductible items
Executive compensation	206		(0.5)		865		(1.0)		2,036		(9.9)
Goodwill and intangible asset impairment charge	—		—		—		—		2,287		(11.1)
Wages on hiring tax credits	567		(1.2)		1,129		(1.3)		1,328		(6.4)
Company-owned life insurance	(1,035)		2.3		(1,037)		1.2		(1,205)		5.8
Meals & entertainment	131		(0.3)		133		(0.2)		219		(1.1)
Stock-based compensation	1,038		(2.3)		899		(1.0)		724		(3.5)
Other	109		(0.3)		95		(0.1)		97		(0.5)
Change in unrecognized tax benefits	(136)		0.3		(99)		0.1		(206)		1.0
Other adjustments	102		(0.2)		118		(0.2)		(371)		1.8
Total income tax expense (benefit) and effective tax rate	$	2,329	(5.1)	%	$	37,224	(42.0)	%	$	(6,472)	31.3	%

(1)State taxes in the following states make up the majority (greater than 50%) of the tax expense (benefit) for the years presented:

a.2025 - Georgia, Maryland, Oregon, Tennessee and Texas

b.2024 - Georgia, Maryland, Oregon, Tennessee and Texas

c.2023 - California, Georgia, Indiana, Louisiana, Maryland, Mississippi, New York, Pennsylvania, South Carolina, Tennessee and Texas

Our effective tax rate for fiscal 2025 was (5.1)%. The difference between the statutory federal income tax rate of 21.0% and our effective income tax rate was primarily due to the valuation allowance against our U.S. federal and state and certain foreign deferred tax assets.

Of the total goodwill and intangible asset impairment charge of $9.5 million recorded during fiscal 2023, $8.9 million (tax effect of $2.3 million) related to goodwill from a stock acquisition, and accordingly was not deductible for tax purposes.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. We have completed our evaluation of the impact of the OBBBA on our financial statements and the impact was immaterial.

The Organization for Economic Co-operation and Development (the ”OECD”) has introduced a framework to implement a global minimum corporate tax of 15%, referred to as “Pillar Two.” In January 2026, the OECD issued additional guidance, including a safe harbor framework for certain U.S.-parented groups. We have determined that “Pillar Two” did not have a material impact on our financial statements.

The federal Work Opportunity Tax Credit (“WOTC”), our primary hiring tax credit, is designed to encourage employers to hire workers from certain targeted groups with higher than average unemployment rates. WOTC is generally calculated as a percentage of wages over a twelve-month period up to worker maximums by targeted groups. Based on historical results and business trends, we estimate the amount of WOTC we expect to earn related to wages of the current year. However, the estimate is subject to variation because 1) a small percentage of our workers qualify for one or more of the many targeted groups; 2) the targeted groups are subject to different incentive credit rates and limitations; 3) credits fluctuate depending on economic conditions and qualified worker retention periods; and 4) state and federal offices can delay their credit certification processing and have inconsistent certification rates. We recognize an adjustment to prior year hiring tax credits if credits certified by government offices differ from original estimates. The U.S. Congress has approved the WOTC program through the end of 2025.

The components of deferred tax assets and liabilities were as follows:

(in thousands)	December 28, 2025		December 29, 2024
Deferred tax assets:
Allowance for credit losses	$	573	$	264
Accounts payable and other accrued expenses	3,731		8,630
Net operating loss carryforwards	29,490		17,971
Tax credit carryforwards	24,832		21,478
Accrued wages and benefits	6,117		5,702
Deferred compensation	11,719		11,411
Lease liabilities	14,207		15,242
Other	515		504
Total	91,184		81,202
Valuation allowance	(80,316)		(64,488)
Total deferred tax asset, net of valuation allowance	10,868		16,714
Deferred tax liabilities:
Prepaid expenses, deposits and other current assets	(820)		(526)
Lease right-of-use assets	(8,056)		(12,295)
Depreciation and amortization	(49)		(2,853)
Workers’ compensation	(934)		(503)
Total deferred tax liabilities	(9,859)		(16,177)
Deferred income taxes, net	$	1,009	$	537

Since deferred tax assets and liabilities attributable to different jurisdictions cannot be offset, deferred tax liabilities of $0.3 million and $0.3 million were included in other long-term liabilities on our Consolidated Balance Sheets as of December 28, 2025 and December 29, 2024, respectively.

Our valuation allowance relates to certain deferred tax balances that we expect will not be utilized within the permitted carryforward periods as of December 28, 2025 and December 29, 2024. Based on our deferred tax asset realizability assessments performed during the fiscal year ended December 28, 2025, we maintained a valuation allowance against U.S. federal, state and certain foreign deferred tax assets. Our conclusion was driven by U.S. and certain foreign pre-tax losses beginning in 2023 and continuing into 2025, combined with the non-cash goodwill impairment charge of $59.1 million recorded during the fiscal year ended December 29, 2024. Changes to deferred taxes related to foreign currency translation were immaterial for fiscal 2025, 2024 and 2023.

The following table summarizes our credit carryforwards and net operating losses (“NOLs”) along with their respective valuation allowance as of December 28, 2025:

(in thousands)	Carryover tax benefit		Valuation allowance		Expected benefit		Year expiration begins
Year-end tax attributes:
Federal WOTCs	$	24,355	$	(24,355)	$	—	2042
Federal NOLs	22,034		(22,034)		—		Indefinite
State NOLs	7,343		(7,343)		—		Various
Foreign Tax Credits	478		(478)		—		2031
Foreign NOLs	112		(112)		—		Indefinite
Foreign alternative minimum tax credits	305		—		305		2034
Total	$	54,627	$	(54,322)	$	305

The activity related to the income tax valuation allowance was as follows:

(in thousands)	2025		2024		2023
Beginning balance	$	64,488	$	834	$	2,152
Charged to expense	15,912		63,654		(58)
Release of allowance	—		—		(1,260)
Other	(84)		—		—
Ending balance	$	80,316	$	64,488	$	834

As of December 28, 2025, our liability for unrecognized tax benefits was $0.3 million. If recognized, $0.2 million could impact our effective tax rate. In general, the tax years 2022 through 2024 remain open to examination by the major taxing jurisdictions where we conduct business. Interest and penalties accrued related to unrecognized tax benefits were immaterial as of December 28, 2025.

Income taxes paid, net of refunds received, disaggregated by jurisdiction were as follows:

(in thousands)	2025		2024		2023
Federal	$	(6,617)	$	(25)	$	—
State	(204)		139		1,181
Foreign	1,974		97		3,990
Total taxes paid, net of refunds received	$	(4,847)	$	211	$	5,171

Income taxes paid, net of refunds received, exceeded 5% of total income taxes paid, net of refunds received, for the following individual jurisdictions:

(in thousands)	2025		2024		2023
State
California	$	(574)	$	(287)	$	328
Foreign
Canada	*		$	(561)	$	1,376
India	$	361	$	(946)	$	1,074
United Kingdom	$	1,275	$	1,736	$	1,561
Australia	*		$	(653)	*
Netherlands	*		$	306	*

*Indicates the jurisdiction is immaterial for the period presented.