LMB Limbach Holdings, Inc. - 10-K

Item 1A.    Risk Factors

You should carefully consider the following risk factors, together with all of the other information included in this Annual Report on Form 10-K. The risks described below are those which we believe are the material risks that we face. Additional risks not presently known to us or which we currently consider immaterial may also have an adverse effect on us. Any risk described below may have a material adverse impact on our business or financial condition. Some statements in this Annual Report on Form 10-K, including such statements in the following risk factors, constitute forward-looking statements. These forward-looking statements are based on our management's current expectations, forecasts and assumptions, and involve a number of risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

Risks Related to Our Business and Industry

Intense competition in our industry could reduce our market share and profitability.

The MEPC systems services industry is highly competitive and fragmented, with numerous regional and national providers offering similar services in the geographic markets in which we operate. We compete based on price, technical expertise, experience, reputation, and operational capabilities. Price is often a primary factor in contract awards, particularly for smaller or less complex projects, which may enable smaller competitors with lower cost structures to win work based on price alone.

We also expect competition from the in-house service organizations of our customers who have employees who perform service and maintenance work similar to the services we provide as part of our ODR segment. Vertical consolidation is also expected to intensify competition in the industry. We can offer no assurance that our existing or prospective customers will continue to outsource specialty contracting services in the future. In addition, new and emerging technologies and service models may further alter competitive dynamics in the industry.

If we are unable to compete effectively, including maintaining competitive pricing without adversely affecting our margins, we could experience reduced market share, lower profitability, and/or slower growth. Our results of operations could also be adversely affected if we are required to reduce prices to remain competitive.

If we do not effectively manage the size and cost of our operations, our infrastructure may become strained or overly-burdened, and we may be unable to increase revenue growth.

The growth we have experienced in the past, and that we may experience in the future, may provide challenges to our organization, requiring us to expand our personnel and operations. Future growth, whether organic or through acquisitions, may strain our infrastructure, operations and other managerial and operating resources. We have also experienced severe constriction in the markets in which we operated in the past and, as a result, in our operating requirements. Failing to maintain the appropriate cost structure for a particular economic cycle may result in us incurring costs that affect our profitability. If our business resources become strained or overly-burdensome, our earnings may be adversely affected and we may be unable to increase revenue growth. Further, we may undertake contractual commitments that exceed our labor resources, which could also adversely affect our earnings and ability to increase revenue growth.

Failure to maintain high quality building systems solutions in our ODR segment could damage our reputation with customers and negatively impact our results.

As our ODR business continues to expand, our ability to provide building systems solutions at a very high level is very important to the continued success of our business. Additionally, quality issues could harm customer confidence in our company and our brands. If our building systems solutions offerings do not meet applicable safety standards or our customers’ expectations regarding quality, safety or performance, we could experience lost sales and increased costs and we could be exposed to legal, financial and reputational risks. In addition, when our building systems solutions fail to perform as expected, we could be exposed to warranty, product liability, personal injury and other claims.

Our contract backlog is subject to adjustments, delays and cancellations and could be an uncertain indicator of our future earnings.

We cannot guarantee that the revenue projected in our contract backlog will be realized or, if realized, will be profitable. Projects included in backlog are subject to cancellations, scope changes, pricing adjustments, schedule delays, and other modifications, any of which could materially and adversely affect the amount and timing of revenue and profit ultimately recognized.

A U.S. government shutdown or delays in federal appropriations could adversely affect our business and results of operations.

Our business is affected by macroeconomic, political, and regulatory conditions that influence the markets in which we operate. While the majority of our revenue is derived from private sector customers, we also perform work under contracts with U.S. federal, state, and local government agencies. Any partial or full shutdown of the U.S. government, delays in appropriations, uncertainty regarding the availability of government funds, or interruptions in government operations could result in the suspension, delay, or termination of government contracts, postponement of payments under existing contracts, or delays in the award of new contracts.

In addition, our customers, suppliers, and partners may rely on government funding, approvals, or regulatory actions that may be suspended, delayed, or limited during a shutdown. These disruptions could postpone the start of projects, extend permitting timelines, or impact demand for our services. A prolonged or repeated government shutdown could also contribute to broader economic uncertainty, reduce public and private investment activity, and slow decision-making by our customers. There can be no assurance that government operations will continue without interruption, and any such disruptions could materially and adversely affect our financial condition, results of operations, liquidity, and overall business prospects.

Because we bear the risk of cost overruns on many of our contracts, we may experience reduced profitability or incur losses if actual costs exceed our estimates.

Many of our contracts are priced based on estimates and assumptions regarding future costs, including labor availability and wage rates; material, equipment, energy, and transportation costs; productivity levels; site conditions; permitting requirements; weather conditions; and other factors that are outside of our control. Inflationary pressures, including increases in labor, material, and equipment costs, as well as the imposition of tariffs or changes in trade policies, could increase our actual costs above those assumed at the time a contract is bid or negotiated. If our estimates or assumptions prove inaccurate, or if we are unable to effectively manage project execution, we may experience cost overruns that reduce project profitability or result in losses.

Actual costs and gross profit on our contracts may differ, sometimes materially, from original projections due to factors such as unanticipated site conditions; changes in labor availability, skill levels, or productivity; supply chain disruptions; increases in commodity prices; delays in obtaining permits or approvals; adverse weather conditions; failures by subcontractors, suppliers,

or other third parties to perform as expected; or delays in identifying and addressing execution issues. Inflationary cost increases or tariffs that are not recoverable through contractual price adjustments or change orders could further compress margins, particularly on longer-duration projects.

Certain contracts also require us to meet specified completion dates or performance standards, and in some cases we guarantee project completion or acceptance by a defined schedule. Failure to meet these requirements may result in additional costs, reduced margins, or liability for liquidated or consequential damages. Performance issues on individual projects may also harm our reputation with customers and adversely affect our ability to secure future work.

Many of our contracts contain provisions that allocate or shift these risks to us, including in circumstances where the customer may be partially responsible. We are not always able to pass such risks through to subcontractors or suppliers. While customers may agree to equitable contract adjustments under certain circumstances, there can be no assurance that such relief will be granted. Increased use or stricter enforcement of risk-shifting contractual provisions, combined with sustained inflation or changes in tariff regimes, could materially and adversely affect our financial position, results of operations, and cash flows.

Our failure to obtain new customer agreements or renew existing agreements at current or more favorable terms could adversely affect our business, financial condition and results of operations.

Our business depends on our ability to secure new customer agreements and to renew existing agreements in order to maintain and grow revenue. The process for obtaining new work or renewing existing arrangements is often competitive, complex, and subject to lengthy sales and selection cycles. These processes are influenced by market conditions, customer budget constraints, timing of contract expirations, pricing pressures, and other factors that are outside of our control.

If we are unable to successfully compete for new agreements or renew existing agreements on acceptable terms, or if renewals are delayed, reduced in scope, or repriced at lower margins, our backlog, revenue, and operating results could be adversely affected. In addition, a reduction in awarded or renewed work could lead to lower utilization of our workforce and resources, which could further pressure margins and profitability.

The timing of the award, commencement and performance of contracts may cause variability in our operating results and cash flows.

The timing of contract awards is inherently unpredictable and largely outside of our control. Project awards often involve competitive bidding processes and complex, lengthy negotiations, and may be affected by factors such as customer decisions to delay or cancel projects, financing conditions, governmental approvals, commodity price fluctuations, environmental conditions, and overall economic and market conditions. We may not win contracts that we pursue for a variety of reasons, including pricing, customer perceptions of our capabilities, competitive dynamics, or our unwillingness to accept certain contractual risks that is requested by the customer.

Although a significant portion of our revenue is derived from smaller, lower-risk projects, our results of operations may fluctuate from period to period depending on the timing and size of contract awards, the commencement of work on newly awarded projects, and the progress of work on larger contracts. Delays in the start or execution of awarded projects may result in revenue and cash flows being realized later than anticipated.

Uncertainty in the timing of project awards and execution may also make it difficult to efficiently align our workforce and resources with project demand. In anticipation of expected project activity, we may incur labor and overhead costs before revenue is realized. If anticipated projects are delayed or not awarded, these costs could adversely affect our profitability.

In addition, the timing of revenue recognition, earnings, and cash flows from contracts included in backlog may be affected by factors such as adverse weather conditions; delays caused by other contractors or subcontractors; supply chain disruptions affecting the availability of materials or equipment; or changes in project scope. Any such delays could have a material adverse effect on our operating results and cash flows for the periods affected.

We may incur significant costs in performing our work in excess of the original project scope and contract amount without having an approved change order.

After the award of a contract, we may perform additional work that was not contemplated in the original contract price, at the request or direction of the customer, without the benefit of an approved change order. Our contracts generally afford the customer the right to order such changed or additional work, and typically require the customer to compensate us for the additional work. If we are unable to successfully negotiate a change order, or fail to obtain adequate compensation for these matters, we could be required to record in the current period an adjustment to revenue and profit recognized in prior periods.

Such adjustments, if substantial, could have a material adverse effect on our financial position, results of operations and cash flows.

We may be unable to recover additional claimed costs on projects, which could adversely affect our profitability and liquidity.

In certain circumstances, we assert claims against project owners, contractors, subcontractors, engineers, consultants, or other parties involved in a project for additional costs incurred beyond the original contract price. These claims may arise from delays, inefficiencies, errors, or changes in project scope caused by other parties. The resolution of such claims is often subject to lengthy negotiations, arbitration, or litigation, and the timing and ultimate amount of recovery, if any, are inherently uncertain.

Recoveries related to claims may be material in the periods in which they are resolved or become probable and estimable. If actual recoveries are less than amounts previously estimated, we may be required to reduce or reverse previously recognized revenue or profit, which could result in significant volatility in our operating results and, in some cases, cause us to report losses in a given period. Conversely, settlements in excess of recorded estimates could increase revenue and profit in the period of resolution.

In addition, we may be required to use working capital to fund cost overruns while claims remain unresolved and may incur additional costs in pursuing such recoveries. Delays or failures in recovering claimed amounts could adversely affect our cash flows and liquidity. To the extent that working capital usage increases or profitability declines as a result of unresolved claims, our ability to comply with financial covenants under our credit facilities or to access available borrowing capacity could be adversely affected. Any default under our credit agreements could result in, among other things, restrictions on borrowing, acceleration of indebtedness, foreclosure on collateral, or the need to obtain amendments or waivers on unfavorable terms.

We place significant decision-making powers with our business units’ management, which presents certain risks that may cause the operating results of individual branches to vary.

We operate from various locations across the Eastern and Midwestern regions of the United States, supported by corporate executives and services, with local business unit management retaining responsibility for day-to-day operations and adherence to applicable laws. We believe that our practice of placing significant decision-making powers with local management is important to our successful growth and allows us to be responsive to opportunities and to our customers’ needs. However, this practice can make it difficult to coordinate procedures across our operations and presents certain risks, including the risk that we may be slower or less effective in our attempts to identify or react to problems affecting an important business issue than we would under a more centralized structure, or that we would be slower to identify a misalignment between a subsidiary’s and our overall business strategy. If a subsidiary location fails to follow our compliance policies, we could be made party to a contract, arrangement or situation with exposure to large liabilities or that has less advantageous terms than is typically found across the markets in which we operate. Likewise, inconsistent implementation of corporate strategy and policies at the local level could materially and adversely affect our financial position, results of operations, cash flows and prospects.

The operating results of an individual location may differ from those of another location for a variety of reasons, including market size, local customer base, regional construction practices, competitive landscape, regulatory requirements, state and local laws and local economic conditions. As a result, certain of our locations may experience higher or lower levels of profitability and growth than our other locations.

Acquisitions, divestitures, and other strategic transactions may fail to achieve anticipated financial or strategic benefits and could disrupt our business, and adversely affect our results of operations.

We have pursued and may continue to pursue acquisitions and other strategic transactions as part of our growth strategy. We cannot assure that we will be able to identify suitable acquisition targets, complete transactions on acceptable or favorable terms, or successfully integrate acquired businesses. Acquisitions may expose us to operational, financial, legal, and regulatory risks that differ from those associated with our existing operations.

The success of any acquisition depends on our ability to effectively integrate the acquired business, including its operations, personnel, systems, controls, and culture, while maintaining customer relationships and operational performance. Difficulties in integration, unexpected costs, failure to achieve anticipated synergies, or the diversion of management attention could adversely affect our business and operating results.

Acquisitions may also result in the assumption of liabilities that were not fully anticipated at the time of the transaction, including environmental, labor, pension, tax, or other contingent liabilities. In addition, acquiring businesses with unionized

workforces or participation in multiemployer pension plans (“MEPP”) could increase our exposure to labor-related risks or pension obligations.

We may finance acquisitions through the use of cash, debt, equity, or a combination thereof. Additional indebtedness could increase leverage and interest expense, while equity issuances could be dilutive to existing stockholders. Furthermore, the costs associated with unsuccessful or abandoned acquisition efforts, including transaction, advisory, and integration-related expenses, could adversely affect our financial position, results of operations, and cash flows.

Our failure to successfully integrate acquired businesses could adversely affect our operating results and financial condition.

The realization of anticipated benefits from acquisitions depends on our ability to successfully integrate acquired businesses into our existing operations. Integration efforts involve significant operational, financial, and managerial challenges and require substantial management attention and resources.

Difficulties in integration may include the diversion of management focus from existing operations; challenges in aligning business strategies, cultures, and operating practices; the loss of key employees or customers of the acquired business; and complications in integrating accounting, information technology, human resources, and other administrative systems. We may also experience increased complexity in areas such as financial reporting, internal controls, tax planning, and treasury management as a result of integrating acquired businesses.

If integration efforts take longer or cost more than anticipated or are unsuccessful, we may fail to achieve expected operational efficiencies or revenue growth, incur unanticipated costs, or experience disruptions to our existing operations. These outcomes could adversely affect our results of operations and financial position. In addition, a failure to successfully integrate acquisitions could result in impairment charges related to goodwill or other intangible assets, which could materially and adversely affect our earnings in the period recognized.

Design/Build and Design/Assist contracts subject us to the risks of design errors and omissions.

Design/Build projects provide the customer with a single point of responsibility for both design and construction. When we are awarded these projects, we typically perform the design and engineering work in-house. On other projects, we are not the designer, but provide assistance directly to the project design team. In the event that a design error or omission by us causes damage, there is risk that we, our subcontractors or the respective professional liability or errors and omissions insurance would not be able to absorb the liability. Any liability resulting from an asserted design defect with respect to our projects may have a material adverse effect on our financial position, results of operations and cash flows.

Delays in, disputes over, or defaults on customer payments could adversely affect our liquidity, results of operations, and financial condition.

Due to the nature of our contracts, we often incur project-related costs and commit labor, materials, and other resources before receiving corresponding payments from customers. As a result, we are exposed to the risk of delayed payments, disputed billings, retainage, or customer defaults, which may require us to fund project costs through working capital or external financing.

If customers delay payments, dispute amounts billed, experience financial difficulties, or default on their payment obligations, we may be unable to recover all costs incurred on affected projects, may be required to increase allowances for credit losses, or may experience reduced cash flows. Any such developments could materially and adversely affect our liquidity, financial position, results of operations, and cash flows.

Unsatisfactory safety performance could subject us to penalties and/or litigation, restrict our ability to pursue certain projects, increase operating costs, and adversely affect our employees’ morale and retention.

Our operations are conducted at both leased and owned office locations and at a variety of customer sites, including construction sites and industrial facilities, and involve activities that present inherent health and safety risks. These risks include accidents, equipment failures, exposure to hazardous conditions or materials, and transportation-related incidents involving Company-owned or employee-operated vehicles. Safety incidents could result in personal injury or loss of life, damage to property or equipment, operational disruptions, and significant legal, regulatory, and financial exposure.

Serious safety incidents may subject us to regulatory penalties, civil litigation, or, in more serious cases, criminal liability, and could result in increased insurance costs and other operating expenses. In addition, our safety performance is evaluated by

customers using metrics such as Experience Modification Rates (“EMRs”). If the EMR for one or more of our operating units exceeds customer-established thresholds, we may be restricted from bidding on or performing certain projects.

Poor safety performance could also damage our reputation, strain customer relationships, negatively impact our employees’ morale, and contribute to higher employee turnover. Any of these outcomes could materially and adversely affect our financial position, results of operations, cash flows, and long-term growth prospects.

Our inability to effectively plan for and utilize our workforce could adversely affect our customer relationships, profitability and operating results.

The effective utilization of our workforce is critical to our profitability and ability to execute projects efficiently. Underutilization of labor resources may result in higher overhead absorption, lower gross margins, and reduced short-term profitability. Conversely, overutilization of our workforce may negatively impact employee safety, morale, and retention, and could impair project execution and quality, which may reduce our ability to secure future work.

Workforce utilization is influenced by a number of factors, including the accuracy of our headcount planning, our ability to attract and retain skilled labor, productivity levels, project scheduling efficiency, labor disputes, and the timing of project awards and completions. If we are unable to effectively balance workforce capacity with project demand, we may experience increased costs, execution challenges, or reduced margins, any of which could materially and adversely affect our results of operations and profitability.

Our union and open shop operations subject us to labor relations risks, including potential disputes, work stoppages, and challenges to our corporate structure, which could adversely affect our business and results of operations.

We operate through subsidiaries that employ both union and non-union workforces. This operating model exposes us to the risk that one or more labor unions could challenge the structure of our union and open shop operations or allege violations of labor laws or collective bargaining obligations. An adverse outcome resulting from such a challenge could require changes to our operating structure or practices and could materially and adversely affect our financial position, results of operations, and cash flows.

In addition, a significant portion of our craft workforce is covered by collective bargaining agreements. Although we have not experienced material disruptions from strikes, work stoppages, or other labor disputes in recent periods, there can be no assurance that such actions will not occur in the future. Any strike, work stoppage, slowdown, or failure to renew collective bargaining agreements on acceptable terms could disrupt our operations, delay project execution, increase labor costs, or reduce our ability to perform work, which could materially and adversely affect our financial position, results of operations, and cash flows.

Our failure to effectively execute our business strategy, including our increased focus on owner-direct relationships, could adversely affect our business and results of operations.

Our long-term performance depends on our ability to make appropriate strategic decisions and to effectively execute our business strategy. In recent years, we have increasingly focused on expanding our owner-direct relationships and growing our operations, maintenance, and other service-oriented offerings, while limiting the scope of general contractor relationship work. This strategy requires significant investments in personnel, systems, training, and sales capabilities, as well as the successful development and retention of customer relationships.

The success of this strategy depends on a number of assumptions and judgments, including our ability to accurately assess market demand, identify and target appropriate customers, attract and retain experienced employees, scale operations efficiently, and deliver services at acceptable margins. If we are unable to execute this strategy effectively, or if market conditions, customer preferences, or competitive dynamics differ from our expectations, we may fail to achieve anticipated growth, profitability, or returns on investment.

In addition, a continued shift in resources away from certain areas of our business may limit our ability to respond to changes in market conditions or customer demand. Any failure to successfully execute our business strategy could materially and adversely affect our financial position, results of operations, cash flows, and long-term growth prospects.

Our success depends on the continued contributions of key members of our management team, and the loss of one or more of these individuals could adversely affect our business and results of operations.

Our future performance depends, in part, on the leadership, experience, and expertise of our senior management and other key personnel. These individuals possess significant industry knowledge, institutional experience and a comprehensive understanding of the Company’s operations, and replacing them could be difficult and time-consuming.

We cannot assure that we will be able to retain all members of our management team or that suitable successors would be available if one or more key individuals were to depart or was unable to continue working. The loss of key personnel, or an extended transition period required to replace them, could disrupt our operations, impede or delay the execution of our business strategy, negatively affect customer relationships, and adversely impact our financial position, results of operations, and cash flows.

If we are unable to attract and retain qualified personnel, subcontractors, joint venture partners, and suppliers, our ability to operate efficiently and profitably could be adversely affected.

Our business is labor intensive and depends on the availability of qualified management, technical, and field personnel, as well as reliable subcontractors, joint venture partners, and suppliers. Competition for skilled labor in our industry is intense, and in certain geographic markets it can be difficult to attract and retain qualified individuals. Labor availability may also be affected by general or local economic conditions, demographic trends, and conditions specific to the construction and building services industry.

If we are unable to attract or retain a sufficient number of qualified personnel, or if turnover rates increase, we may experience reduced productivity, project execution challenges, or delays in completing work in backlog. In addition, labor shortages may result in higher wage rates, increased overtime, or reliance on less experienced personnel, all of which could disrupt our operations, increase costs and reduce profitability.

Our operations also depend on the performance and availability of subcontractors, joint venture partners, and suppliers. If these parties experience labor shortages, financial difficulties, or other disruptions, our ability to execute projects efficiently could be adversely affected. Furthermore, our relationships with certain customers could be negatively impacted if we are unable to maintain continuity of personnel with whom those customers have established working relationships. Any of these factors could materially and adversely affect our business, results of operations, and cash flows.

Misconduct by our employees, subcontractors or partners, or our overall failure to comply with laws or regulations could harm our reputation, damage our relationships with customers, reduce our revenue and profits, and subject us to criminal and civil enforcement actions.

Misconduct, fraud, non-compliance with applicable laws and regulations, or other improper activities by one or more of our employees, subcontractors, suppliers or partners could have a significant negative impact on our business and reputation. Examples of such misconduct include employee or subcontractor theft, the failure to comply with safety standards, state-specific laws related to automobile operations (including mobile phone usage), customer requirements, environmental laws, DBE regulatory compliance, and any other applicable laws or regulations. The precautions we take may not be effective and are subject to inherent limitations, including human error and fraud. Our failure to comply with applicable laws or regulations or acts of misconduct could subject us to fines and penalties, harm our reputation, damage relationships with customers, reduce our revenue and profits, and subject us to criminal and civil enforcement actions.

Failure to perform our services in accordance with professional standards or contractual requirements could expose us to significant liability and adversely affect our business and results of operations.

Our services frequently involve professional judgment in the planning, design, construction, operation, and maintenance of complex facilities. If our services fail to meet applicable professional standards or contractual requirements, or if a catastrophic event occurs at a project site or a completed project that is alleged to be related to our work, we could be subject to significant professional liability, product liability, warranty, or other claims, as well as reputational harm.

Although we maintain insurance coverage and risk management programs intended to mitigate potential liabilities, such coverage is subject to policy limits, exclusions, deductibles, and self-insured retentions, and may not be sufficient to cover all claims or losses. In addition, claims may exceed available insurance limits, or insurance coverage may not be available on acceptable terms in the future.

We may also rely on indemnification obligations from customers, subcontractors, or other third parties; however, such parties may dispute their obligations or be unable to satisfy them. Any uninsured or underinsured liability, or failure of a third party to fulfill indemnification obligations, could materially and adversely affect our business, financial position, results of operations, and cash flows.

Our dependence on subcontractors and suppliers could increase costs, disrupt project execution, and adversely affect our profitability and cash flows.

We rely extensively on third-party subcontractors to perform a significant portion of the work on many of our contracts and on third-party suppliers to provide equipment and materials required for project execution. If we are unable to retain qualified subcontractors or suppliers, or if they fail to perform as expected, our ability to execute projects efficiently and profitably could be adversely affected. Although subcontractors and suppliers perform portions of the work, we generally remain contractually responsible to our customers for their performance.

Our ability to bid on and perform contracts depends, in part, on obtaining commitments from subcontractors and suppliers for labor, materials, and equipment at prices and on terms consistent with our bids. If we are unable to obtain such commitments, or if commitments are withdrawn, delayed, or provided on unfavorable terms, we may be unable to pursue certain projects or may experience reduced margins or losses on awarded contracts. In addition, if subcontractors or suppliers fail to deliver materials, equipment, or services in accordance with agreed terms, we may be required to obtain alternative sources at higher cost or incur delays and other unanticipated expenses.

Labor shortages, wage inflation, and increased costs for subcontracted services may further increase project costs and reduce profitability. Sustained increases in subcontractor or supplier costs, disruptions in availability, or failures in performance could materially and adversely affect our results of operations, financial position, and cash flows.

Increases in the cost or reduced availability of materials, equipment, commodities, or energy due to inflation, tariffs, trade policies, or geopolitical events could adversely affect our profitability and operating results.

Our operations require significant quantities of materials, equipment, commodities, and energy, and we are exposed to market risks that may increase costs or limit availability. We have experienced, and may continue to experience, cost volatility and supply disruptions resulting from inflationary pressures, changes in tariffs or trade policies, supply chain disruptions, regulatory actions, geopolitical conflicts, sanctions, or other international trade restrictions. Increases in fuel and energy prices, including fuel costs associated with our vehicle fleet and equipment operation, may further increase operating expenses.

Changes in trade policies, retaliatory tariffs, sanctions, or other governmental actions may increase the cost of imported materials or restrict the availability of certain products used in our operations. In addition, geopolitical conflicts or global economic instability could negatively impact supply chains, reduce global trade, or increase competition for limited resources.

Rising input costs may also affect customer budgets, which could reduce demand for our services, delay project starts, or increase competition for available work. Although we may attempt to pass certain cost increases through to customers, contractual limitations, competitive pressures, or timing delays may prevent us from recovering all such increases. If we are unable to mitigate or recover higher input costs, our margins, results of operations, and cash flows could be materially and adversely affected.

Our inability to identify, contract with, or properly utilize qualified disadvantaged business enterprise (“DBE”) subcontractors could adversely affect our business and results of operations.

Certain of our projects include contractual requirements for participation by DBEs, which may be structured as participation goals or minimum subcontracting thresholds. If we are unable to meet applicable DBE participation requirements, we may be deemed in breach of contract, which could result in monetary damages, increased project costs, reduced profitability, or restrictions on our ability to bid on or be awarded future projects.

In addition, if we engage a DBE subcontractor that is not properly qualified or does not perform a commercially useful function, we could be subject to claims of non-compliance with federal, state, or local DBE regulations. Any failure to comply with DBE requirements, whether due to the unavailability of qualified DBE subcontractors or improper utilization, could result in regulatory enforcement actions, reputational harm, and material adverse effects on our financial position, results of operations, cash flows, and liquidity.

Our participation in construction joint ventures exposes us to liability and/or harm to our reputation for failures of our partners.

As part of our business, we are a party to special purpose, project specific joint venture arrangements, pursuant to which we typically jointly bid on and execute particular projects with other companies in the construction industry. Success on these joint projects depends upon the various risks discussed elsewhere in this section and on whether our joint venture partners satisfy their contractual obligations.

We and our joint venture partners are generally jointly and severally liable for all liabilities and obligations of the joint ventures. If a joint venture partner fails to perform or is financially unable to bear its portion of required capital contributions or other obligations, including liabilities stemming from lawsuits, we could be required to make additional investments, provide additional services or pay more than our proportionate share of a liability to make up for our joint venture partner’s shortfall. Furthermore, if we are unable to adequately address our joint venture partner’s performance issues, the customer may terminate the project, which could result in legal liability to us, harm to our reputation and reduction to our profit on a project. From time to time, we may be the controlling member of a joint venture; however, to the extent we are not controlling, we may have limited control over certain of the decisions made by the controlling member with respect to the work being performed by the joint venture. The other member(s) may not be subject to the same compliance and regulatory requirements. While we have processes and controls intended to mitigate risks associated with our joint ventures, to the extent the controlling member makes decisions that negatively impact the joint venture it could have a material adverse effect on our financial position, results of operations, cash flow and profits.

Our ability to obtain sufficient surety bonding is critical to our business, and any reduction in bonding capacity or availability could adversely affect our operations and results of operations.

Certain of our projects require the issuance of bid, performance, and payment bonds. Our ability to secure these bonds depends on the availability and terms of surety capacity, which may be affected by conditions in the financial and surety markets, macroeconomic factors, and the underwriting criteria of surety providers. Periods of reduced surety capacity may result in higher costs, more restrictive terms, or reduced availability of bonding.

Our surety providers are not obligated to issue bonds on our behalf and may limit, reduce, or withdraw bonding capacity at their discretion. If we are unable to maintain sufficient bonding capacity, we may be unable to bid on or perform certain projects or may be required to post collateral, such as letters of credit or cash, to secure bonds. Any such collateral requirements could reduce our liquidity and limit the capital available for other business purposes.

While we may seek alternative bonding arrangements or pursue projects that do not require surety bonds, there can be no assurance that such alternatives would be available on acceptable terms or at all. Any interruption or reduction in bonding capacity could materially and adversely affect our ability to compete for work, execute projects, and achieve our business objectives, and could negatively impact our financial position, results of operations, and cash flows.

Our insurance coverage may be insufficient to cover all potential liabilities, and adverse conditions in the insurance markets could increase our costs or limit our ability to obtain required coverage.

We maintain insurance coverage for certain risks inherent in our operations; however, many of our insurance policies are subject to high deductibles or self-insured retentions. As a result, we are responsible for a significant portion of losses associated with claims, and actual losses may exceed amounts accrued due to the inherent uncertainty in estimating claim frequency, severity, and ultimate settlement costs.

Our insurance coverage may also be insufficient to fully protect us against all potential liabilities, including claims that exceed policy limits, are excluded from coverage, or involve punitive or other damages not covered by insurance. If our risk management strategies or insurance coverage are not effective in mitigating these exposures, we could incur significant uninsured or underinsured losses, which could adversely affect our financial position, results of operations, and cash flows.

In addition, insurance markets have become more costly and restrictive in recent years, and insurers may increase premiums, impose higher deductibles or retentions, restrict coverage terms, or decline to renew coverage. Our insurers are not obligated to renew existing policies. If we are unable to obtain required insurance coverage on commercially reasonable terms, or at all, we may be unable to bid on or perform certain projects, which could materially and adversely affect our business, results of operations, and cash flows.

Our use of the cost-to-cost method of accounting requires significant estimates and judgments and may result in reductions or reversals of previously recognized revenue or profit.

A significant portion of our revenue is recognized over time using the cost-to-cost method of accounting, which requires us to estimate total contract revenue, costs, and expected profitability. These estimates are inherently subjective and depend on assumptions regarding project performance, labor productivity, material and subcontractor costs, change orders, claims, customer collectability, and other factors that may change over the life of a contract.

We review and revise these estimates on an ongoing basis as projects progress. If our estimates prove inaccurate, or if project conditions change, we may be required to adjust previously recognized revenue or profit. In certain circumstances, such

adjustments may result in the reversal of profits recognized in prior periods or the recognition of contract losses in the period identified.

Because adjustments under the cost-to-cost method are recognized in the period in which they are determined, revisions to estimates may cause significant volatility in our reported results of operations and could materially and adversely affect our financial position, results of operations, and cash flows.

We may be required to record impairment charges related to goodwill or other intangible assets, which could adversely affect our results of operations.

We carry significant amounts of goodwill and identifiable intangible assets on our consolidated balance sheets, primarily as a result of acquisitions. These assets are subject to periodic impairment assessments and may be written down if their carrying values are determined not to be recoverable.

Impairment charges may be triggered by a variety of factors, including adverse changes in economic or market conditions, deterioration in the performance of acquired businesses, lower-than-expected cash flows, changes in our business strategy, increased competitive pressures, or declines in our market capitalization. If we determine that an impairment has occurred, we would be required to record a non-cash charge that could be material and could adversely affect our reported results of operations in the period recognized.

Any such impairment charges could reduce our earnings and equity and may increase volatility in our financial results.

Contractual warranty obligations could adversely affect our profits and cash flow.

We often warrant the services provided, typically as a function of contract, guaranteeing the work performed against defects in workmanship and the material we supply. If warranty claims occur, we could be required to repair or replace warrantied work in place at our cost. In addition, our customers may elect to repair or replace the warrantied item by using the services of another provider and require us to pay for the cost of the repair or replacement. Costs incurred as a result of warranty claims could adversely affect our financial position, results of operations and cash flows.

Adverse economic conditions, geopolitical instability, or volatility in financial markets could reduce demand for our services and adversely affect our business and results of operations.

Our business is influenced by general economic and geopolitical conditions, including inflationary pressures, interest rate levels, recessionary conditions, geopolitical conflicts, pandemics, volatile energy prices, and broader economic uncertainty. Deterioration in economic or geopolitical conditions could reduce customer spending, delay or cancel projects, extend business development cycles, increase pricing pressure, or adversely affect the collectability of accounts receivable, which could negatively impact our revenue, backlog, and operating results.

Higher interest rates, tighter credit conditions, or volatility in capital markets may limit our customers’ ability to obtain financing for projects and could increase our borrowing costs, reduce our access to capital or adversely affect our market capitalization. In addition, economic or market instability could impair our ability to pursue acquisitions or respond effectively to changing business conditions.

Any sustained economic downturn, prolonged geopolitical instability, or disruption in financial markets could materially and adversely affect our financial position, results of operations, cash flows, and liquidity.

Our indebtedness, including variable-rate borrowings and related covenant restrictions, could increase our interest expense, limit our liquidity and financial flexibility, and adversely affect our business and results of operations.

We have incurred, and may continue to incur, indebtedness in connection with our operations, acquisitions, and other business activities. A portion of our indebtedness bears interest at variable rates, which exposes us to interest rate risk. Increases in interest rates could significantly increase our interest expense and debt service obligations, even if the principal amount of our borrowings remains unchanged, and could reduce our net income and cash flows. While we have previously used interest rate swaps to manage a portion of our interest rate exposure, we may not maintain such hedging arrangements in the future, and any hedging activities may not fully mitigate interest rate risk.

Our debt and credit agreements contain financial and other covenants that may restrict our operating and financial flexibility. Failure to comply with these covenants, or to make required principal or interest payments, could result in an event of default. An event of default could allow lenders to restrict our access to additional borrowings, accelerate the maturity of outstanding

indebtedness, enforce remedies against collateral, or trigger cross-defaults under other debt or surety arrangements. Any such actions could materially and adversely affect our liquidity, operations, and financial condition.

Our ability to service our existing and future indebtedness, comply with covenant requirements, refinance borrowings as they mature, and fund working capital, capital expenditures, acquisitions, and other business needs depends on our ability to generate sufficient cash flow from operations and access capital on acceptable terms. Our future cash flows are subject to general economic conditions, interest rate environments, project execution risks, customer payment timing, and other factors beyond our control. If we are unable to generate sufficient cash flow or obtain additional financing or refinancing when needed, we may be required to take actions such as reducing or delaying capital expenditures, raising equity, restructuring indebtedness, or divesting assets, any of which could have a material adverse effect on our business, financial position, results of operations, and cash flows.

In addition, higher levels of indebtedness could increase our vulnerability to adverse economic or industry conditions, limit our ability to pursue strategic opportunities, and require a substantial portion of our cash flow to be dedicated to debt service, thereby reducing funds available for operations and future growth.

Our obligation to contribute to multiemployer pension plans could give rise to significant expenses and liabilities in the future.

We contribute to approximately 70 multiemployer pension plans in the United States under collective bargaining agreements that generally provide pension benefits to employees covered by these agreements. Approximately 46% of our current employees are members of collective bargaining units. Our contributions to these plans were approximately $14.3 million for the year ended December 31, 2025 and $10.3 million and $11.6 million for the years ended December 31, 2024 and 2023, respectively. The costs of providing benefits through such plans have increased in recent years. The amount of any increase or decrease in our required contributions to these multiemployer pension plans will depend upon many factors, including the outcome of collective bargaining, actions taken by trustees who manage the plans, government regulations, the actual return on assets held in the plans and the potential payment of a withdrawal liability. Based upon the information available to us from the multiemployer pension plans’ administrators, we believe that some of these multiemployer pension plans are underfunded. The unfunded liabilities of these plans may result in required increased future payments by us and the other participating employers. Underfunded multiemployer pension plans may impose a surcharge requiring additional pension contributions. Our risk of such increased payments may be greater if any of the participating employers in these underfunded plans withdraws from the plan and is not able to contribute an amount sufficient to fund the unfunded liabilities associated with its participants in the plan.

With limited exception, an employer who is obligated under a collective bargaining agreement to contribute to a multiemployer pension plan is liable, upon termination of such contribution obligation to the plan or withdrawal from a plan, for its proportionate share of the plan’s unfunded vested pension liabilities. In the event that we withdraw from participation in a plan, applicable law could require us to make withdrawal liability contributions to such plan, and we would have to reflect that liability and the related expense in our consolidated financial statements. Our withdrawal liability payable to an individual multiemployer pension plan would depend on the extent of the plan’s funding of vested benefits. While we currently have no intention of withdrawing from a plan, and underfunded plan obligations have not affected our operations in the past, there can be no assurance that we will not be required to make material cash contributions to one or more of these plans in the future. If the multiemployer pension plans in which we participate have significant underfunded liabilities, such underfunding could increase the size of our potential withdrawal liability. No liability for underfunding of multiemployer pension plans was recorded in our consolidated financial statements for the years ended December 31, 2025 or 2024.

Increases in healthcare costs or changes in healthcare laws could increase our operating expenses and adversely affect our results of operations.

We provide healthcare and related benefits to our employees, and the cost of providing these benefits has increased over time due to rising healthcare costs and changes in healthcare laws and regulations. Future legislative or regulatory actions at the federal, state, or local level could further increase the cost or complexity of providing employee healthcare benefits.

If healthcare costs continue to rise, or if changes in healthcare laws result in additional compliance or benefit-related expenses, our operating costs could increase and our profitability could be adversely affected. Any such increases could materially and adversely affect our results of operations and financial position.

Our business may be affected by the work environment in which we operate.

We perform our work under a variety of conditions, including but not limited to, difficult terrain, difficult site conditions, and busy urban centers where delivery of materials and availability of labor may be impacted, clean-room environments where strict

procedures must be followed, and sites which contain harsh or hazardous conditions, refineries and other process facilities. Performing work under these conditions can increase the cost of such work or negatively affect efficiency and, therefore, our profitability.

A pandemic, epidemic or outbreak of an infectious disease in the markets in which we operate or that otherwise impacts our facilities or suppliers could adversely impact our business.

If a pandemic, epidemic, or outbreak of an infectious disease, or other public health crisis were to affect our markets or facilities or those of our suppliers, or customers, our business could be adversely affected. Consequences of a pandemic, epidemic or other infectious disease may include disruptions in or restrictions on our ability to travel. If such an infectious disease broke out at one or more of our offices, facilities or work sites, our operations may be adversely and materially affected, our productivity may be affected, our ability to complete projects in accordance with our contractual obligations may be affected, and we may incur increased labor and materials costs. If the customers with which we contract are affected by an outbreak of infectious disease, ODR and GCR work may be delayed or cancelled, and we may incur increased labor and materials costs. If our subcontractors with whom we work were affected by an outbreak of infectious disease, our labor supply may be affected and we may incur increased labor costs. In addition, we may experience difficulties with certain suppliers or with vendors in their supply chains, and our business could be affected if we become unable to procure essential equipment, supplies or services in adequate quantities and at acceptable prices. Further, pandemics, epidemics, infectious outbreaks or other public health crisis’ have and could in the future cause disruption to the U.S. economy, or the local economies of the markets in which we operate, and may cause shortages of building materials, increased costs associated with obtaining building materials, affect job growth and consumer confidence, or cause economic changes, including the possibility of an economic recession or inflation, that we cannot anticipate. Overall, the potential impact of a pandemic, epidemic, outbreak of an infectious disease or other public health crisis with respect to our markets or our facilities is difficult to predict and could adversely impact our business.

Climate change, including physical risks and the transition to lower-emission building practices, could increase our costs, disrupt operations, and adversely affect our financial results.

Climate change presents physical, transition, and adaptation risks that may adversely affect our operations, customers, suppliers, and financial results. Physical risks associated with climate change include the increasing frequency and severity of extreme weather events such as hurricanes, floods, wildfires, extreme heat, extreme cold, and other natural disasters. These events may disrupt our operations or those of our customers, subcontractors, or suppliers, delay or suspend projects, reduce productivity, damage facilities or equipment, increase insurance costs, or result in injuries, fatalities, or reputational harm.

In addition, efforts to address climate change, whether driven by regulatory requirements, building codes, supply chain constraints, market dynamics, or customer preferences, may increase our operating and project execution costs. These efforts may require the use of alternative materials, upgraded equipment, new technologies, revised construction methods, or specially trained or certified personnel, which may be more expensive or less readily available. During transition periods, changes in construction practices or materials may also reduce efficiency, disrupt operations, or negatively affect customer satisfaction.

While we may seek to recover some increased costs through pricing or contractual mechanisms, we may not be able to do so fully or on a timely basis due to competitive pressures, contractual limitations, or market conditions. If we are required to absorb higher costs or experience operational disruptions related to climate-related physical or transition risks, our profitability, results of operations, and cash flows could be materially and adversely affected.

Changing climate-related regulations, disclosure requirements, and environmental, social and governance expectations may increase compliance costs, create regulatory complexity, or adversely affect customer and investor perceptions.

Regulatory, market, and stakeholder expectations related to climate change, greenhouse gas emissions, sustainability, and environmental, social, and governance practices continue to evolve at the federal, state, local, and international levels. These developments may include new or changing climate-related regulations, emissions reporting or disclosure requirements, building standards, procurement requirements, or other compliance obligations that apply directly to us, our customers, or our supply chain.

The regulatory environment for climate-related matters is subject to significant uncertainty, including potential differences among federal, state, and local requirements. A fragmented or evolving regulatory landscape may increase compliance costs, complicate operations, or require additional resources to monitor and respond to differing obligations. In addition, changes in climate-related policy or uncertainty regarding regulatory direction may affect customer decision-making, including the timing, scope, or demand for certain projects or services.

Certain investors, customers, and other stakeholders may consider environmental, social, and governance factors as part of their overall evaluation of companies. Expectations and standards in this area are not uniform and may evolve over time. To the

extent stakeholders view our practices or disclosures as not meeting their expectations, whether due to our actions, industry practices, or changing market norms, our reputation, investor interest, or access to capital could be adversely affected. In addition, responding to evolving expectations may result in increased costs related to data collection, reporting, or compliance.

Information technology system failures, cybersecurity incidents, or data privacy breaches could disrupt our operations and adversely affect our business, results of operations, and reputation.

We rely on information technology systems, networks, and infrastructure to support our operations and to provide services to our customers, including systems used for project design, scheduling, modeling, financial reporting, and data management. Disruptions to these systems, whether due to system failures, cyber-attacks, human error, or failures of third-party service providers, could impair our ability to operate efficiently, result in data loss or corruption, disrupt project execution, or adversely affect customer relationships.

Our systems and data, as well as those of our customers, employees, subcontractors, and suppliers, are subject to cybersecurity risks, including unauthorized access, malware, ransomware, phishing, social engineering, and other cyber-attacks. The increasing sophistication of cyber threats, growing reliance on cloud-based and third-party platforms, greater system interconnectivity, and the expanding use of artificial intelligence technologies may further increase our exposure to cybersecurity vulnerabilities. A successful cyber incident could result in the disclosure, modification, or destruction of proprietary or confidential information, including personally identifiable information, cause operational disruptions or downtime, result in financial losses, expose us to legal or regulatory liability, and harm our reputation.

We also rely on third-party software providers and infrastructure vendors to support critical accounting, financial reporting, project management, and operational systems. If these vendors discontinue products or support, experience outages, security breaches, data loss, or other disruptions, or if we are required to transition to alternative systems on an accelerated basis, we could experience increased costs, operational disruptions, delays in financial or project reporting, and management inefficiencies. Any such events could adversely affect our ability to operate effectively and could materially and adversely affect our business, financial position, results of operations, cash flows, and liquidity.

In addition, we periodically implement new information systems and technology upgrades. These implementations may require significant capital investment, divert management attention, or create operational disruptions during transition periods, particularly when legacy and new systems operate concurrently. System implementations may take longer than expected, fail to achieve anticipated efficiencies, or increase the risk of control or reporting issues.

We are also subject to evolving data privacy and cybersecurity laws and regulations, including enhanced cybersecurity risk management, disclosure, and incident reporting requirements. Compliance with these requirements may increase costs and operational complexity. Any failure to comply with applicable laws or to effectively manage cybersecurity and information technology risks could materially and adversely affect our business, financial position, results of operations, cash flows, and reputation.

The use of artificial intelligence technologies by us or by our third-party vendors may create operational, legal, regulatory, or reputational risks.

Artificial intelligence (“AI”) technologies, including generative AI, the type of artificial intelligence that creates new content by learning patterns from existing data, are rapidly evolving and remain subject to technological, operational, ethical, and regulatory uncertainties. We rely, in part, on third-party vendors that may incorporate AI technologies into the products or services they provide, and we may have limited control over or visibility into the design, training data, performance, security, or regulatory compliance of such technologies.

AI systems may produce inaccurate, incomplete, or biased outputs or otherwise fail to operate as intended, which could result in operational disruptions, errors in decision-making, reputational harm, or legal exposure. In addition, the development, deployment, and governance of AI technologies may require additional investment in controls, oversight, training, and compliance processes, which could increase our costs.

The regulatory environment governing AI technologies is evolving and may result in new or modified laws, regulations, or standards that impose additional compliance obligations or restrict the use of AI in certain applications. Any failure by us or by our third-party vendors to effectively manage AI-related risks or comply with applicable requirements could materially and adversely affect our business, results of operations, financial condition, or reputation.

We have subsidiary operations throughout the United States and are exposed to multiple state and local regulations, as well as federal laws and requirements applicable to government contractors. Changes in laws, regulations or requirements, or a

material failure of any of our subsidiaries or us to comply with any of them, could increase our costs and have other negative impacts on our business.

As of December 31, 2025, our business units operate primarily in the Eastern and Midwestern regions of the United States, which exposes us to a variety of state and local laws and regulations, including those related to contractor licensing requirements. These laws and regulations govern many aspects of our business, and standards and requirements may vary by jurisdiction. In addition, our subsidiaries that perform work for federal government entities are subject to additional federal statutory, regulatory and contractual requirements. Changes in any of these laws, or any subsidiary’s material failure to comply with them, can adversely impact our operations by, among other things, increasing costs, and harming our reputation.

As federal government contractors, our subsidiaries are subject to a number of rules and regulations, and our contracts with government entities are subject to audit. Noncompliance with applicable requirements could limit a subsidiary’s ability to obtain or perform government contracts.

Federal government contractors must comply with many regulations and other requirements that relate to the award, administration and performance of government contracts. A violation of these laws and regulations could result fines or penalties, the termination of a government contract, or restrictions on government contracts in the future. Further, a violation at one of our locations could impact the ability of the other locations to bid on and perform government contracts. Because of our decentralized nature, we face risk in maintaining compliance with all local, state and federal government contracting requirements. Prohibition against bidding on future government contracts could have an adverse effect on our financial position, results of operations and cash flows.

Changes in environmental, safety, and health regulations or licensing requirements could increase our compliance costs or limit our ability to perform certain work.

Our operations are subject to a wide range of environmental, safety, health, and licensing laws and regulations at the local, state, and federal levels, including requirements applicable to the installation and servicing of MEPC and related building systems. Compliance with these requirements may require additional training, certifications, licensing, monitoring, documentation, or changes to operating practices, all of which may increase our costs.

The regulatory environment applicable to our business may continue to evolve, particularly with respect to environmental protection, workplace safety, and technician licensing standards. New or more stringent laws, regulations, or standards, whether applicable broadly or in connection with publicly funded projects, could increase compliance costs, delay project execution, restrict the scope of services we are able to provide, or require additional capital investment.

Failure to comply with applicable environmental, safety, health, or licensing requirements could result in fines, penalties, loss or suspension of licenses, or restrictions on our ability to perform certain work, including publicly funded projects. Any of these outcomes could materially and adversely affect our profitability, results of operations, and cash flows.

Our failure to comply with immigration laws and labor regulations could affect our business.

In certain markets, we rely heavily on our immigrant labor force. We have taken steps that we believe are sufficient and appropriate to ensure compliance with immigration laws. However, we cannot provide assurance that our management has identified, or will identify in the future, all undocumented immigrants who work for us. Additionally, immigration laws and labor regulations are complex, subject to change, and vary across jurisdictions, which could create challenges for maintaining compliance.

The failure to identify such illegal immigrants may result in fines or other penalties being imposed upon us, which could have a material adverse effect on our financial position, results of operations and cash flows. Furthermore, changes to immigration policies, as well as the changes in the interpretation, application, or enforcement of immigration laws, changes to employment verification requirements, or new legislation or regulations that impact immigration practices could further heighten these risks and lead to additional compliance costs, operational disruptions, or reputational harm.

Tax matters, including changes in corporate tax laws and disagreements with taxing authorities, could impact our results of operations and financial condition.

We conduct business across the United States and file income taxes in the federal and various state jurisdictions. Significant judgment is required in our accounting for income taxes. In the ordinary course of our business, there are transactions and calculations in which the ultimate tax determination is uncertain. Changes in tax laws and regulations, in addition to changes and conflicts in related interpretations and other tax guidance, could materially impact our provision for income taxes, deferred tax assets and liabilities, and liabilities for uncertain tax positions.

Issues relating to tax audits or examinations and any related interest or penalties and uncertainty in obtaining deductions or credits claimed in various jurisdictions could also impact the accounting for income taxes. Our results of operations are reported based on our determination of the amount of taxes we owe in various tax jurisdictions, and our provision for income taxes and tax liabilities are subject to review or examination by taxing authorities in applicable tax jurisdictions. An adverse outcome of such a review or examination could adversely affect our operating results and financial condition. Further, the results of tax examinations and audits could have a negative impact on our financial results and cash flows where the results differ from the liabilities recorded in our financial statements.

Risks Related to Ownership of Our Common Stock

The price of our common stock may be volatile.

The market price of our common stock has been volatile and may be volatile in the future, and could be subject to wide fluctuations in price in response to various factors, some of which are beyond our control. These factors include, among other things:

• actual or anticipated variations in our quarterly results of operations;

• recommendations by securities analysts;

• reports, publications or commentary by securities analysts or other market participants that may be critical of us, our business, our management our industry;

• operating and stock price performance of other companies that investors deem comparable to us;

• political and economic conditions;

• news reports relating to trends, concerns and other issues in the financial services industry generally;

• perceptions in the marketplace regarding us and/or our competitors;

• the addition or departure of key personnel;

• new technology used, or services offered, by competitors; and

• changes in government regulations.

In addition, if the market for stocks in our industry, or the stock market in general, experiences a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, financial condition or results of operations. If any of the foregoing occurs, it could cause our stock price to fall and may expose us to lawsuits that, even if unsuccessful, could be costly to defend and a distraction to management.

Future sales of our common stock may cause our common stock price to decline.

Any transfer or sales of substantial amounts of our common stock in the public market or the perception that such transfer or sales might occur may cause the market price of our common stock to decline. As of February 27, 2026, we had an aggregate of 11,679,391 shares of our outstanding common stock, of which 767,223 shares were held by our current directors and officers. There were no holders of greater than 10% of our common stock as of February 27, 2026. If a substantial number of these shares are sold in the public market, the trading price of our common stock may decline.

In addition, our Board of Directors has the power, without stockholder approval, to set the terms of any series of preferred stock that may be issued, including voting rights, dividend rights, and preferences over our common stock with respect to dividends or in the event of a dissolution, liquidation or winding up and other terms. In the event that we issue preferred stock in the future that has preference over our common stock with respect to payment of dividends or upon our liquidation, dissolution or winding up, or if we issue preferred stock with voting rights that dilute the voting power of our common stock, the rights of the holders of our common stock or the market price of our common stock could be adversely affected.

Future equity issuances could result in dilution, which could cause our common stock price to decline.

We are generally not restricted from issuing additional shares of our common stock, up to the 100,000,000 shares of voting common stock authorized by our second amended and restated certificate of incorporation, which could be increased by a vote of the holders of a majority of our shares of common stock. In addition, we may issue additional shares of our common stock in the future pursuant to current or future equity compensation plans, upon conversions of preferred stock or debt, upon exercise

of warrants or in connection with future acquisitions or financings. If we choose to raise capital by selling shares of our common stock for any reason, the issuance would have a dilutive effect on the holders of our common stock and could have a material negative effect on the market price of our common stock.

Unfavorable analyst coverage or a reduction in analyst coverage could adversely affect the market price and liquidity of our common stock.

The trading market for our common stock may be influenced by research reports, ratings, or commentary published by equity research analysts who cover our company or our industry. If one or more analysts issue unfavorable research, downgrade our common stock, or provide negative commentary about our business or prospects, the market price of our common stock could decline.

In addition, if analysts cease or reduce coverage of our Company, our visibility in the capital markets may decrease, which could result in reduced trading volume, decreased liquidity, and increased volatility in the market price of our common stock. Any of these developments could adversely affect the market value of our common stock.

We have not declared any dividends on our common stock to date and have no expectation of doing so in the foreseeable future.

The payment of cash dividends on our common stock rests within the discretion of our Board of Directors and will depend, among other things, upon our earnings, unencumbered cash, capital requirements and our financial condition, as well as other relevant factors. To date, we have not paid dividends on our common stock nor do we anticipate that we will pay dividends in the foreseeable future. As of December 31, 2025, we do not have any preferred stock outstanding that has any preferential dividends.

Provisions in our organizational documents and Delaware or certain other state laws could delay or prevent a change in control of our company, which could adversely affect the price of our common stock.

The provisions of our Certificate of Incorporation and our bylaws could have the effect of delaying, deferring or discouraging another person from acquiring control of our company. These provisions, which are summarized below, may have the effect of discouraging takeover bids. They are also designed in part to encourage persons seeking to acquire control of us to negotiate first with our Board of Directors. We believe that the benefits of increased protection of our potential ability to negotiate with an unfriendly or unsolicited acquirer outweigh the disadvantages of discouraging a proposal to acquire us because negotiation of these proposals could result in an improvement of their terms.

Our certificate of incorporation and our bylaws include a number of provisions that could deter hostile takeovers or delay or prevent changes in control of our company, including the following:

• Board of Directors’ vacancies. Our Certificate of Incorporation authorizes our Board of Directors to fill vacant directorships, including newly created seats. In addition, the number of directors constituting our Board of Directors is permitted to be set only by a resolution adopted by a majority vote of our Board of Directors, provided the number of directors may not be fewer than one and not more than nine. These provisions prevent a stockholder from increasing the size of our Board of Directors and then gaining control of our Board of Directors by filling the resulting vacancies with its own nominees. This makes it more difficult to change the composition of our Board of Directors but promotes continuity of management.

• Classified board. Our Certificate of Incorporation provides that our Board of Directors is classified into three classes of directors, each with staggered three-year terms. A third party may be discouraged from making a tender offer or otherwise attempting to obtain control of us as it is more difficult and time-consuming for stockholders to replace a majority of the directors on a classified board of directors.

• Stockholder action: special meetings of stockholders. Our Certificate of Incorporation provides that our stockholders may not take action by written consent, but may only take action at annual or special meetings of our stockholders. As a result, a holder controlling a majority of our capital stock would not be able to amend our bylaws or remove directors without holding a meeting of our stockholders called in accordance with our bylaws. Further, our bylaws provide that special meetings of our stockholders may be called only by the chairperson of our Board of Directors, our President and Chief Executive Officer or our Board of Directors pursuant to a resolution of a majority of our Board of Directors, thus prohibiting a stockholder from calling a special meeting. These provisions might delay the ability of our stockholders to force consideration of a proposal or for stockholders controlling a majority of our capital stock to take any action, including the removal of directors.

• Advance notice requirements for stockholder proposals and director nominations. Our bylaws provide advance notice procedures for stockholders seeking to bring business before our annual meeting of stockholders or to nominate candidates for election as directors at our annual meeting of stockholders. Our bylaws also specify certain requirements regarding the form and content of a stockholder's notice. In addition, any stockholder nomination must meet the requirements of Rule 14a-19(b) under the Exchange Act. These provisions might preclude our stockholders from bringing matters before our annual meeting of stockholders or from making nominations for directors at our annual meeting of stockholders if the proper procedures are not followed. We expect that these provisions might also discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer's own slate of directors or otherwise attempting to obtain control of our company.

• Directors removed only for cause. Our Certificate of Incorporation provides that stockholders may remove directors only for cause, which may delay the ability of our stockholders to remove directors from our Board of Directors.

• Issuance of undesignated preferred stock. Following the repurchase of all of our previously issued shares of Class A Preferred Stock, our Board of Directors has the authority, without further action by the stockholders, to issue up to 600,000 shares of undesignated preferred stock with rights and preferences, including voting rights, designated time to time by our Board of Directors. The existence of authorized but unissued shares of preferred stock enables our Board of Directors to render more difficult or to discourage an attempt to obtain control of us by merger, tender offer, proxy contest or other means.

• Amendment of charter provisions. Any amendment of the above provisions in our Certificate of Incorporation requires approval by holders of at least 66.67% of our outstanding common stock.

• No cumulative voting. The Delaware General Corporation Law provides that stockholders are not entitled to the right to cumulate votes in the election of directors unless a corporation's certificate of incorporation provides otherwise. Our Certificate of Incorporation does not provide for cumulative voting.

• Choice of forum. Our Certificate of Incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for any derivative action or proceeding brought on our behalf any action asserting a breach of fiduciary duty, any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our Certificate of Incorporation or our bylaws; any action asserting a claim against us that is governed by the internal affairs doctrine. This provision is not intended to apply to claims arising under the Securities Act and the Exchange Act. To the extent the provision could be construed to apply to such claims, there is uncertainty as to whether a court would enforce the provision in such respect, and our stockholders will not be deemed to have waived our compliance with federal securities laws and the rules and regulations thereunder.

General Risk Factors

Failure or circumvention of our disclosure controls and procedures or internal controls over financial reporting could adversely affect our financial reporting and business.

We rely on disclosure controls and procedures and internal controls over financial reporting to provide reasonable assurance that information required to be disclosed is recorded, processed, summarized, and reported accurately and on a timely basis. However, any system of controls is subject to inherent limitations and may not prevent or detect all errors, misstatements, or fraud.

If our disclosure controls and procedures or internal controls over financial reporting fail, are circumvented, or are found to be ineffective, we could be required to restate our financial statements, experience delays in filing periodic reports, or be subject to regulatory scrutiny or enforcement actions. Any such events could harm our reputation, reduce investor confidence, adversely affect the market price of our common stock, and materially and adversely affect our financial condition, results of operations, and business.

Our management has concluded that our disclosure controls and procedures and internal control over financial reporting are effective. However, if we are unable to establish and maintain effective disclosure controls and internal control over financial reporting or have material weaknesses in our internal control over financial reporting, our ability to produce accurate financial statements on a timely basis could be impaired, and the market price of our securities may be negatively affected.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. However, if we were unable to maintain effective internal control over financial reporting, or if we

identify material weaknesses in our internal control over financial reporting, our management would be unable to assert in future reports that our disclosure controls and procedures and our internal control over financial reporting are effective. This could cause investors, counterparties and customers to lose confidence in the accuracy and completeness of our financial statements and reports and have a material adverse effect on our liquidity, access to capital markets and perceptions of our creditworthiness and/or a decline in the market price of our common stock. In addition, we could become subject to investigations by Nasdaq, the SEC or other regulatory authorities, which could require additional financial and management resources. These events could have a material adverse effect on our business, financial condition and results of operations.

Actual and potential claims, lawsuits and proceedings could ultimately reduce our profitability and liquidity and weaken our financial condition.

We have been and will continue to be named as a defendant in legal proceedings claiming damages in connection with the operation of our business. These actions and proceedings may involve claims for, among other things, compensation for alleged personal injury, workers’ compensation, employment law violations and/or discrimination, breach of contract, or property damage. In addition, we may be subject to lawsuits involving allegations of violations of the Fair Labor Standards Act and state wage and hour laws. We may also face allegations of violations of applicable securities laws, including the possibility of class action lawsuits. Due to the inherent uncertainties of litigation, we cannot accurately predict the ultimate outcome of any such actions or proceedings. We also are, and will likely continue to be from time to time, a plaintiff in legal proceedings against customers, or will pursue claims against our customers prior to litigation in which we seek to recover payment of contractual amounts we are owed, as well as claims for increased costs we incur. When appropriate, we will establish provisions against possible exposures, and adjust these provisions from time to time according to ongoing exposure. If the assumptions and estimates related to these exposures prove to be inadequate or inaccurate, we could experience a reduction in our profitability and liquidity and a weakening of our financial condition. In addition, claims, lawsuits and proceedings may harm our reputation or divert management resources away from operating the business. See Note 13 — Commitments and Contingencies in the accompanying notes to the Company’s consolidated financial statements for further information regarding the Company’s legal proceedings.

Force majeure events, including natural disasters, malicious acts, or other extraordinary events, could disrupt our operations and adversely affect our business and results of operations.

Our operations may be adversely affected by force majeure or other extraordinary events beyond our control, including natural disasters, extreme weather events, terrorist actions, sabotage, vandalism, theft, public health emergencies, or governmental actions such as shutdowns or emergency restrictions. These events could disrupt our operations, damage or destroy facilities, equipment, or work in progress, delay or suspend projects, restrict access to worksites, or impair our ability to perform services in accordance with contractual requirements.

Although we seek to negotiate contractual provisions to address force majeure events, we may remain obligated to resume or continue performance following such events, and relief available under applicable contracts may be limited or delayed. If we are unable to respond effectively to extraordinary events, we may incur increased costs, experience reduced productivity, or face contractual disputes, penalties, or liability.

Deliberate or malicious acts, including terrorism, sabotage, vandalism, or theft, could result in damage to facilities, equipment, or installed work, injury to employees, contractors, customers, or the public, or increased security requirements imposed by governmental authorities. Any such events could increase operating costs, reduce production capacity, expose us to legal liability, and materially and adversely affect our financial position, results of operations, and cash flows.

A change in tax laws or regulations of any federal or state jurisdiction in which we operate could increase our tax burden and otherwise adversely affect our financial position, results of operations, cash flows and liquidity.

We continue to assess the impact of various U.S. federal or state legislative proposals that could result in a material increase to our U.S. federal or state taxes. We cannot predict whether any specific legislation will be enacted or the terms of any such legislation. However, if such proposals were to be enacted, or if modifications were to be made to certain existing regulations, the consequences could have a material adverse impact on us, including increasing our tax burden, increasing the cost of tax compliance or otherwise adversely affecting our financial position, results of operations and cash flows.

Changes in accounting rules and regulations could adversely affect our financial results.

Accounting rules and regulations are subject to review and interpretation by the Financial Accounting Standards Board (the “FASB”), the SEC and various other governing bodies. A change in U.S. generally accepted accounting principles (“GAAP”) could have a significant effect on our reported financial results. Additionally, the adoption of new or revised accounting principles could require that we make significant changes to our systems, processes and controls. We cannot predict the effect

of future changes to accounting principles, which could have a significant effect on our reported financial results and/or our results of operations, cash flows and liquidity.

Actions by activist investors could disrupt our operations and adversely affect our business and strategic execution.

Public companies, including companies in our industry, may be subject to proposals or actions by activist investors seeking changes to corporate governance practices, board composition, management, strategic direction, or capital allocation policies. Responding to such actions or proposals could require significant time and attention from our management and Board of Directors and divert resources away from the execution of our business strategy.

Activist activity may also create uncertainty regarding our strategic priorities, business operations, or future direction, which could adversely affect employee morale, our ability to attract and retain key personnel, relationships with customers or other stakeholders, and our overall operating focus. In addition, responding to activist campaigns may result in increased legal, advisory, and other costs. Any such disruptions or uncertainties could materially and adversely affect our business, financial position, results of operations, and cash flows.

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the consolidated financial statements and related notes thereto included elsewhere in this Annual Report on Form 10-K. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from its management’s expectations. Factors that could cause such differences are discussed in “Forward-Looking Statements”, “Risk Factor Summary” and “Risk Factors” in this Annual Report on Form 10-K. The Company assumes no obligation to update any of these forward-looking statements, unless required to do so by applicable law.

The discussion that follows includes a comparison of the Company’s results of operations and liquidity and capital resources for the fiscal years ended December 31, 2025 and 2024. In accordance with Item 303(b) of Regulation S-K, the Company has elected to omit discussion of the earliest of the three years covered by the consolidated financial statements presented. For a discussion and analysis of fiscal year ended December 31, 2023 and of changes from the fiscal year ended December 31, 2024 to the fiscal year ended December 31, 2023, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 (filed with the SEC on March 10, 2025).

Overview

The Company is a building systems solutions firm that designs, delivers, and maintains mechanical (heating, ventilation, and air conditioning), electrical, plumbing, and controls (“MEPC”) systems. The Company partners with building owners and operators of mission-critical facilities across healthcare, industrial and manufacturing, data centers, life sciences, higher education, and cultural and entertainment markets. With approximately 1,500 team members across 21 offices throughout the Eastern and Midwestern regions of the United States, the Company strives to be an indispensable partner by combining its national capabilities with strong local execution and talent to deliver proactive, safe, and reliable solutions for complex facilities. Operating on a connected platform, the Company integrates engineering expertise with field execution to provide customized MEPC infrastructure solutions that address both operational and capital project needs, optimizing performance, enhancing reliability, and ensuring long-term safety.

The Company’s core market sectors consist of the following customer base with mission-critical systems:

• Healthcare , including research, acute care and inpatient hospitals for regional and national hospital groups;

• Industrial and manufacturing , including automotive, energy and general manufacturing plants;

• Data centers, including facilities composed of networked computers, storage systems and computing infrastructure that organizations use to assemble, process, store and disseminate large amounts of data;

• Life sciences, including organizations and companies whose work is centered around research and development focused on living organisms and biological systems;

• Higher education, including both public and private colleges, universities and research centers; and

• Cultural and entertainment, including entertainment facilities (including casinos) and amusement rides and parks.

The Company operates in two segments, (i) ODR, in which the Company performs owner direct projects and/or provides maintenance or service primarily on MEPC systems, and specialty contracting projects to existing buildings direct to, or assigned by, building owners or operators, and (ii) GCR, in which the Company generally manages new construction or renovation projects that involve primarily MEPC systems awarded to the Company by general contractors or construction managers. The Company's work is primarily performed under fixed-price, modified fixed-price, and time and materials contracts over periods of typically less than two years.

Key Components of Consolidated Statements of Operations

Revenue

The Company’s revenue is primarily derived from construction-type and services contracts to deliver MEPC systems services to its customers. Such work is primarily performed under fixed-price, modified fixed-price, and time and materials contracts over periods of typically less than two years.

Construction-type contract revenue is primarily derived from fixed-price and modified fixed-price contracts. For the majority of these contracts, the Company’s performance obligations are satisfied over time because the customer controls the asset as it is created or enhanced or because the Company’s performance does not create an asset with an alternative use and the Company has an enforceable right to payment for performance completed to date. For contracts satisfied over time, the Company

recognizes revenue using an input method based on costs incurred relative to total estimated costs at completion (the cost-to-cost method), which management believes depicts the transfer of control of services to the customer. The Company believes its extensive experience with MEPC systems projects, together with its internal cost estimation and review processes, enables it to reasonably estimate contract costs and mitigate the risk of cost overruns.

With respect to service contracts, the Company’s service arrangements generally include (i) fixed-price service contracts, typically for maintenance, repair and retrofit work over a period, commonly one year, and (ii) time and materials or similar service work performed on an as-needed basis. Revenue from fixed-price service contracts is generally recognized over time on a systematic basis that depicts performance over the contract term, which is typically on a straight-line basis when services are provided evenly over the contract period. Revenue derived from time and materials and other service work is recognized when the services are performed.

The Company generally invoices customers on a monthly basis based on a schedule of values that breaks down the contract amount into discrete billing items. Costs and estimated earnings in excess of billings on uncompleted contracts are recorded as a contract asset until billable under the contract terms. Billings in excess of costs and estimated earnings on uncompleted contracts are recorded as a contract liability until the related revenue is recognizable.

Cost of Revenue

Cost of revenue primarily consists of labor, equipment, material, subcontract and other job costs in connection with fulfilling the terms of the Company’s contracts. Labor costs consist of wages plus taxes, fringe benefits and insurance. Equipment costs consist of the ownership and operating costs of company-owned assets, in addition to outside-rented equipment. If applicable, job costs include estimated contract losses to be incurred in future periods. Due to the varied nature of the Company's services, and the risks associated therewith, contract costs as a percentage of contract revenue have historically fluctuated, and this fluctuation is expected to continue in future periods as well.

Selling, General and Administrative

Selling, general and administrative (“SG&A”) expenses consist primarily of personnel costs for the Company’s administrative, estimating, human resources, safety, information technology, legal, finance and accounting team members and executives. Also included in SG&A expenses are non-personnel costs, such as travel-related expenses, legal and other professional fees and other corporate expenses to support the growth of the Company's business and to meet the compliance requirements associated with operating as a public company. Those costs include additional consulting, legal and audit fees, insurance costs, Board of Directors’ compensation and the costs of achieving and maintaining compliance with Section 404 of the Sarbanes-Oxley Act of 2002.

Acquisition-related Retention Expense and Contingent Consideration

As part of the acquisition of Pioneer Power, the Company implemented retention arrangements for certain key employees of the acquired business. Retention-related compensation is recognized as expense ratably over the service period, which runs through December 2027, and is contingent on continued employment.

Certain of the Company's prior acquisitions include contingent earnout arrangements in which the Company may be required to make additional payments contingent upon the acquired businesses achieving specified performance targets over specified periods. The change in fair value of contingent consideration relates to the remeasurement of the contingent consideration arrangements resulting from the acquisitions of each ACME Industrial Piping, LLC (“ACME”), Industrial Air, LLC (“Industrial Air”), Kent Island and Consolidated Mechanical. The carrying values of the ACME, Industrial Air, Kent Island and Consolidated Mechanical Earnout Payments are subject to remeasurement at fair value at each reporting date through the end of the respective earnout periods with any changes in the fair value reported as a separate component of operating income in the consolidated statements of operations. See Note 9 – Fair Value Measurements in the accompanying notes to the Company’s consolidated financial statements for further information on the Company’s contingent earnout arrangements.

Amortization of Intangibles

Amortization expense represents periodic non-cash charges that consist of amortization of various intangible assets primarily including favorable leasehold interests and certain customer relationships. Each of the Jake Marshall, LLC (“Jake Marshall”), ACME, Industrial Air, Kent Island, Consolidated Mechanical and Pioneer Power-related intangible assets were recorded under the acquisition method of accounting at their estimated fair values at the acquisition date. See Note 3 – Acquisitions in the accompanying notes to the Company’s consolidated financial statements for further discussion of the Company’s acquired intangible assets as a result of the Pioneer Power Transaction. In addition, see Note 5 – Goodwill and Intangible Assets in the

accompanying notes to the Company’s consolidated financial statements for further information on the Company’s intangible assets.

Other (Expenses) Income

Other (expenses) income consists primarily of interest expense incurred in connection with the Company’s indebtedness, gains and losses on dispositions of property and equipment, changes in the fair value of the Company’s interest rate swap, and interest income earned on overnight repurchase agreements, money market investments, and U.S. Treasury bills. Deferred financing costs are amortized to interest expense using the effective interest method.

Provision for Income Taxes

The Company is taxed as a C corporation, and its financial results include the effects of federal income taxes, which are paid at the parent level.

The Company’s provision for income taxes (including federal, state and local income taxes) is calculated based on the estimated annual effective tax rate. The Company accounts for income taxes in accordance with Accounting Standards Update (“ASC”) Topic 740 — Income Taxes , which requires an asset and liability approach. Under this approach, deferred tax assets and liabilities and income or expense are recognized for the expected future tax consequences of temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, using enacted tax rates expected to apply in the periods in which those temporary differences are expected to reverse. Changes in deferred tax assets and liabilities are included in the provision for income taxes.

Impact of Acquisitions

In order to provide a more meaningful discussion of period-over-period changes in the Company’s operating results, the Company may discuss the impact of acquisitions on revenue, gross profit, selling, general and administrative expenses, and operating income. Because acquired businesses are included in the Company’s results only from their respective acquisition dates, the size and timing of acquisitions may affect the comparability of period-over-period results. Accordingly, such comparisons may not be fully indicative of ongoing trends in the Company’s operating performance.

On July 1, 2025, the Company completed an acquisition of Woodbury, Minnesota-based mechanical contractor, Pioneer Power, for a purchase price at closing of $66.1 million. Pioneer Power is a provider of industrial and institutional mechanical solutions serving healthcare, food, power/utility, oil refining and other select markets in the greater Twin Cities region of Minnesota and upper Midwestern region. The acquisition further expands the Company’s footprint and extends its reach into new geographic markets in the upper Midwestern region.

On December 2, 2024, the Company completed an acquisition of Owensboro, Kentucky-based specialty mechanical contractor, Consolidated Mechanical, for a purchase price at closing of $23.0 million. The transaction also provided for an earnout of up to $2.0 million potentially being paid out over 2026 and 2027. Consolidated Mechanical serves the heavy industrial, power and commercial markets. Consolidated Mechanical is a premier provider of mechanical, millwright, steel fabrication, plumbing construction, maintenance, and outage services to owners of complex process systems in the industrial sector. The acquisition extends the Company’s reach into the industrial sector, with new exposure to the power generation, food processing, manufacturing, and metal markets in Kentucky, Illinois and Michigan.

On September 3, 2024, the Company completed an acquisition of Laurel, Maryland-based specialty mechanical contractor, Kent Island, for a purchase price at closing of $15.0 million. The transaction also provided for an earnout of up to $5.0 million potentially being paid out over 2026 and 2027. Kent Island is a leading provider of building systems solutions in the Greater Washington, DC metro area, including suburban Maryland and Northern Virginia. Kent Island excels in designing, engineering, installing, servicing, and maintaining mechanical and plumbing systems for complex facilities. The acquisition expands the Company’s market share within its existing operating footprint, provides further exposure to an attractive customer base and supports the Company's continued ODR growth strategy.

Operating Segments

The Company manages and measures the performance of its business in two operating segments: ODR and GCR. Segment information is prepared on the same basis that the Company’s Chief Operating Decision Maker (“CODM”) reviews operating results for the purposes of allocating resources and assessing performance. The Company’s CODM is comprised of its President and Chief Executive Officer and Executive Vice President and Chief Financial Officer.

In accordance with ASC Topic 280 – Segment Reporting , the Company has elected to aggregate all of the ODR work performed at its branches into one ODR reportable segment and all of the GCR work performed at its branches into one GCR reportable segment. All transactions between segments are eliminated in consolidation.

Comparison of Results of Operations For the Years Ended December 31, 2025 and 2024

The following table presents operating results for the years ended December 31, 2025 and 2024 in dollars and expressed as a percentage of total revenue (except as indicated below):

For the Years Ended December 31,

(in thousands except for percentages)

Statement of Operations Data:

Revenue:

ODR

GCR

Total revenue

Gross profit:

ODR

GCR

Total gross profit

Selling, general and administrative (3)

Acquisition-related retention expense and contingent consideration

Amortization of intangibles

Total operating income

Other (expenses) income

Total consolidated income before income taxes

Income tax provision

Net income

(1) As a percentage of ODR revenue.

(2) As a percentage of GCR revenue.

(3) Included within selling, general and administrative expenses was $7.0 million and $5.8 million of stock-based compensation expense for the year ended December 31, 2025 and 2024, respectively.

Revenue

For the Years Ended December 31,

Increase/(Decrease)

(in thousands except for percentages)

Revenue:

ODR

GCR

Total revenue

Total revenue for the year ended December 31, 2025 increased by $128.0 million, or 24.7%, to $646.8 million, compared to $518.8 million for the year ended December 31, 2024. The increase in revenue was primarily attributable to the impact of recent acquisitions completed in the second half of 2024 and July 2025. The Company’s organic operations increased $18.9 million and the incremental increase from acquisition-related revenue for 2025 was $109.1 million. Acquisition-related revenue represents incremental revenue generated in 2025 by acquired businesses only for the twelve-month period subsequent to their

respective acquisition dates. After such period, the results of acquired businesses are included within the Company’s organic operations, and period-over-period changes are discussed on a combined basis.

ODR revenue for the year ended December 31, 2025 increased by $140.2 million, or 40.6%, to $485.7 million, compared to $345.5 million for the year ended December 31, 2024. This increase was driven by the Company’s continued focus on accelerating growth within its ODR business, as well as incremental revenue contributions from the Pioneer Power, Consolidated Mechanical and Kent Island acquisitions. These acquisitions contributed approximately $81.4 million of the ODR revenue increase during 2025. The remaining increase of $58.8 million reflects organic growth driven by higher project volume within the Company’s ODR segment.

GCR revenue for the year ended December 31, 2025 decreased by $12.2 million, or 7.0%, to $161.1 million, compared to $173.3 million for the year ended December 31, 2024. The decrease in year-over-year GCR revenue was primarily attributable to the Company’s continued execution of its strategic mix-shift toward ODR work, which resulted in lower GCR organic revenue of $39.9 million. This decline was partially offset by an incremental increase in GCR acquisition-related revenue of approximately $27.7 million from the Pioneer Power, Consolidated Mechanical and Kent Island acquisitions during 2025.

Gross Profit

For the Years Ended December 31,

Increase/(Decrease)

(in thousands except for percentages)

Gross profit:

ODR

GCR

Total gross profit

Total gross profit as a percentage of total revenue

The Company's gross profit for the year ended December 31, 2025 increased by $25.0 million, or 17.4%, to $169.3 million, compared to $144.3 million for the year ended December 31, 2024. The increase was primarily driven by higher gross profit in the ODR segment, partially offset by lower total gross margins.

ODR gross profit increased $22.1 million, or 20.5%, primarily due to an increase in revenue, despite lower segment gross margins of 26.7% versus 31.2% year-over-year. The decrease in ODR gross margin was primarily attributable to the impact of certain acquisitions, which operate at lower gross margin profiles relative to the Company’s organic ODR operations, as well as ODR-related project write-ups recognized in 2024 that did not recur in the current year. Management continues to integrate these acquired operations into the Company’s broader operating model with the objective of improving profitability over time.

GCR gross profit increased $2.9 million, or 8.0%, driven by higher segment gross margins of 24.5% compared to 21.1% year-over-year, despite lower GCR segment revenue. The increase in GCR gross margin reflects the Company’s continued selectivity in pursuing GCR projects.

As a result, total gross profit margin decreased to 26.2% for the year ended December 31, 2025 from 27.8% for the year ended December 31, 2024, primarily due to lower ODR segment margins associated with the inclusion of acquired entities, partially offset by improved GCR segment margins.

The Company also recorded revisions in its contract estimates for certain ODR and GCR projects. During the year ended December 31, 2025, the Company recorded material gross profit write-downs on two ODR segment projects for a total of $1.1 million that had a net gross profit impact of $0.5 million or more. During the year ended December 31, 2025, the Company recorded material gross profit write-ups on two GCR projects for a total of $2.2 million.

During the year ended December 31, 2024, the Company recorded material gross profit write-ups on four ODR segment projects for a total of $3.9 million that had a net gross profit impact of $0.5 million or more. During the year ended December 31, 2024, the Company recorded material gross profit write-ups of $3.3 million on three GCR projects and material gross profit write-downs on two GCR projects for a total of $1.4 million.

Selling, General and Administrative

For the Years Ended December 31,

Increase/(Decrease)

(in thousands except for percentages)

Selling, general and administrative

Total selling, general and administrative expenses as a percentage of total revenue

The Company's total SG&A expense for the year ended December 31, 2025 increased by approximately $12.3 million, or 12.7% compared to the year ended December 31, 2024. The increase in total SG&A was primarily driven by $9.3 million of SG&A expenses associated with the acquired entities. Acquisition-related SG&A represents SG&A expenses incurred in 2025 by acquired businesses only for the twelve-month period subsequent to their respective acquisition dates. After such period, the results of acquired businesses are included within the Company’s organic operations, and period-over-period changes are discussed on a combined basis. Organic SG&A increased $3.0 million primarily due to a $1.2 million increase in non-cash stock-based compensation expenses and a $1.1 million increase in bad debt expense associated with the write-off of certain customer receivables that were deemed uncollectible. Although total SG&A expense increased period-over-period, total SG&A expense as a percentage of revenue decreased to 16.9% for the year ended December 31, 2025 as compared to 18.7% for the year ended December 31, 2024 primarily due to the increased revenue in 2025 as a result of the Pioneer Power acquisition.

Acquisition-related Retention Expense and Contingent Consideration

Acquisition-related retention and contingent consideration expenses were $2.0 million and $3.8 million for the years ended December 31, 2025 and 2024, respectively. For the year ended December 31, 2025, these expenses included approximately $0.2 million of acquisition-related retention expense associated with the Pioneer Power transaction, which was not incurred in the prior year. As part of the Pioneer Power acquisition, the Company entered into retention agreements with certain key employees of the acquired business. Retention-related compensation is recognized as expense ratably over the requisite service period, which extends through December 2027, and is contingent upon continued employment.

In addition, the Company recognized a $1.8 million increase in the fair value of contingent consideration during the year ended December 31, 2025, compared to a $3.8 million increase during the year ended December 31, 2024. The change in the fair value of contingent consideration represents a non-cash expense and was primarily attributable to updated estimates regarding the probability of achieving the gross profit targets underlying the earnout arrangements as of December 31, 2025 and 2024.

See Note 9 – Fair Value Measurements in the accompanying notes to the Company’s consolidated financial statements for further information on the Company's earnout arrangements.

Amortization of Intangibles

For the Years Ended December 31,

Increase/(Decrease)

(in thousands except for percentages)

Amortization of intangibles

Total amortization expense for the year ended December 31, 2025 increased by approximately $3.7 million compared to the year ended December 31, 2024. The year-over-year increase in amortization expense was a result of the Pioneer Power, Consolidated Mechanical and Kent Island acquisitions, which resulted in higher amortization expense in the current year period as the related intangible assets from the acquisitions were not included in, or were included for only a portion of, the prior-year comparative period.

See Note 5 – Goodwill and Intangible Assets in the accompanying notes to the Company’s consolidated financial statements for further information on the Company's intangible assets.

Other (Expenses) Income

For the Years Ended December 31,

Increase/(Decrease)

(in thousands except for percentages)

Other (expenses) income:

Interest expense

Interest income

(Loss) gain on change in fair value of interest rate swap

Gain on disposition of property and equipment

Total other (expenses) income

Total other expenses for the year ended December 31, 2025 was approximately $0.8 million as compared to total other income of $1.3 million for the year ended December 31, 2024. The change period-over-period was primarily driven by a $1.3 million increase in interest expense related to greater borrowings under the Company’s revolving credit facility to partially finance the Pioneer Power Transaction, and higher financing costs associated with a larger vehicle fleet period-over-period, as well as a $1.4 million decrease in interest income due to reduced cash and cash equivalent balances period-over-period and lower yields on invested balances. Partially offsetting these changes was a $0.7 million increase in gains associated with the disposition of certain property and equipment as part of the Company’s ongoing asset management and fleet optimization efforts.

Income Taxes

The Company’s income tax provision was $9.6 million and $9.1 million for the years ended December 31, 2025 and 2024, respectively, and it had a 19.7% and 22.7% effective tax rate over those same periods, respectively. The difference between the U.S. federal statutory tax rate and the Company’s effective tax rate period-over-period was primarily due to state income taxes, tax credits, other permanent adjustments and discrete tax items. In particular, the Company’s effective rate for the years ended December 31, 2025 and 2024 were materially impacted by “excess tax benefits on stock-based compensation” recognized discretely during the first quarter of each year as a result of the Company’s stock price at the RSU vesting dates resulting in increased tax deductions for the Company. See also Note 11 – Income Taxes in the accompanying notes to the Company’s consolidated financial statements.

ODR and GCR Backlog Information

The Company refers to its estimated revenue on uncompleted contracts, including the amount of revenue on contracts for which work has not begun, less the revenue it had recognized under such contracts, as “backlog.” Backlog includes unexercised contract options. The Company’s backlog includes projects that have a written award, a letter of intent, a notice to proceed or an agreed-upon work order to perform work on mutually accepted terms and conditions. Additionally, the difference between the Company’s backlog and remaining performance obligations is due to the portion of unexercised contract options that are excluded, under certain contract types, from the Company’s remaining performance obligations as these contracts can be canceled for convenience at any time by the Company or the customer without considerable cost incurred by the customer. While backlog provides a measure of work expected to be performed in future periods, it is not necessarily a reliable indicator of future revenue or overall performance of the Company. A substantial portion of the Company’s contracts, particularly within its ODR operations, are short-cycle in nature and may be awarded and substantially completed within a short period following award. These projects typically have short lead times and rapid burn rates and, as a result, are generally not included in reported backlog. Consequently, fluctuations in reported backlog may not correlate with changes in overall market demand, revenue generation, or operational performance. Additional information related to the Company’s remaining performance obligations is provided in Note 4 — Revenue from Contracts with Customers in the accompanying notes to its consolidated financial statements. See also “Item 1A. Risk Factors —  Our contract backlog is subject to adjustments, delays and cancellations and could be an uncertain indicator of our future earnings. ”

The Company’s ODR backlog was $255.8 million and $225.3 million as of December 31, 2025 and 2024, respectively. These amounts reflect unrecognized revenue expected to be recognized over the remaining terms of its construction-type and service contracts. Based on historical trends, the Company currently estimates that 84% of its ODR backlog as of December 31, 2025 will be recognized as revenue during 2026. The Company's ODR backlog increased due to its continued focus on the accelerated growth of its ODR business and as a result of backlog contributions resulting from the Pioneer Power Transaction.

The Company’s GCR backlog was $141.8 million and $140.0 million as of December 31, 2025 and 2024, respectively. Projects are brought into backlog once the Company has been provided a written confirmation of award and the contract value has been established. At any point in time, the Company has a substantial volume of projects that are specifically identified and advanced in negotiations and/or documentation, however those projects are not booked as backlog until the Company has received written

confirmation from the owner or the general contractor / construction manager of their intention to award the contract and they have directed the Company to begin engineering, designing, incurring construction labor costs or procuring needed equipment and material. The Company’s GCR projects tend to be built over a 12- to 24-month schedule depending upon scope and complexity. Most major projects have a preconstruction planning phase, which may require months of planning before actual construction commences. The Company is occasionally employed to deliver a “fast-track” project, where construction commences as the preconstruction planning work continues. As work on the Company’s projects progress, it increases or decreases backlog to take into account its estimate of the effects of changes in estimated quantities, changes in conditions, change orders and other variations from initially anticipated contract revenue, and the percentage of completion of the Company’s work on the projects. Based on historical trends, the Company currently estimates that 77% of its GCR backlog as of December 31, 2025 will be recognized as revenue during 2026. Additionally, the reduction in GCR backlog has been intentional as the Company looks to focus on higher margin projects than it has done historically, as well as its focus on smaller, higher margin owner direct projects.

Market Update

The Company is closely monitoring evolving macroeconomic conditions and heightened geopolitical risks. During 2025, economic and trade policy uncertainty increased globally. Rising trade tensions and changes to trade policy (including tariffs), global conflicts, labor disruptions, and evolving regulations can contribute to inflationary pressures, supply chain disruptions, and pricing and lead-time volatility for certain materials and equipment. The Company continues to collaborate with suppliers and subcontractors to mitigate potential shortages and reduce supply and price volatility. The Company anticipates an elevated level of uncertainty with respect to inflation and other macroeconomic trends for the foreseeable future.

The Company continues to evaluate the extent to which these conditions may impact its business, financial condition, and results of operations. In periods of economic uncertainty, customers may delay or cancel large capital projects, such as new construction or major mechanical system upgrades. At the same time, the Company’s service, maintenance, and repair work may remain stable or increase as customers prioritize maintaining existing systems over capital-intensive replacements. Economic uncertainty may also lead to increased competition and pricing pressure, which could adversely affect revenue and margins. The Company believes that its diversified services and customer base help reduce exposure to market volatility. While the Company believes its remaining performance obligations generally represent firm commitments, project timing may shift due to customer scheduling decisions and the availability and timing of critical equipment, prolonged delays could result in customers seeking to defer, modify, or terminate existing or pending agreements. Any of these events could have a material adverse effect on the Company’s business, financial condition and/or results of operations.

In addition, the U.S. federal government experienced a lapse in appropriations that resulted in a partial shutdown from October 1, 2025 through November 12, 2025. This government shutdown included delays in the approval and funding of federally sponsored projects, interruptions in the issuance of new contracts, and deferred decision-making by government agencies. The Company experienced impacts to its operations as a result of the shutdown; however, those impacts were not material to its financial position or results of operations for 2025. The Company continues to monitor for any potential near-term effects on project timing, awards, or customer procurement activity.

Strategy

The Company focuses on creating value for building owners by developing long-term relationships and becoming an indispensable partner to building owners with mission-critical systems. The Company employs a three-pillar approach to scale its business: (i) improve profitability and drive quality organic revenue growth; (ii) expand margins through enhanced and expanded customer solutions; and (iii) scale through acquisitions. To accomplish these objectives, the Company currently is executing the following initiatives:

Pillar I

Organic ODR Growth . In focusing on improved profitability and sustainable, quality growth, the Company has dedicated its resources toward the organic growth of its ODR segment, as the scope of services provided within this segment typically yields higher margins compared to its GCR segment. For fiscal year 2025, the Company further expanded its growth within the ODR segment where it generated 75.1% of its total consolidated revenue, achieving its 2025 ODR segment revenue target of 70% - 80%. Going forward, the Company believes its disciplined, owner-focused operating model, supported by a full life cycle of engineered solutions and craft expertise, positions it as a long-term partner to building owners with mission-critical systems.

Improved GCR Segment Margins. In the Company’s GCR segment, the Company has been able to improve GCR segment margins by focusing on improving project execution and profitability by pursuing opportunities that are smaller in size and shorter in duration and where it can leverage its captive design and engineering services. The Company believes that it is appropriate to reduce risk and exposure to large, complex, non-owner direct projects where such projects have historically

presented risks that can be difficult to mitigate and it does not align with the Company’s risk-adjusted return expectations. Going forward, the Company believes it has reached a level in which the GCR segment stabilizes as a result of its disciplined focus on smaller, shorter-duration projects that are expected to contribute more consistent gross margins.

National Customer Solutions . The Company continues to advance its national customer strategy through a dedicated professional services team that provides owner advisory, construction program management and related support services for customers with complex, mission-critical building systems and infrastructure needs. These services include capital planning to assist customers in planning, prioritizing and executing both the design and construction of capital initiatives and infrastructure projects, while enabling coordinated delivery, standardized workflows and consistent execution across the Company’s operating footprint. The National Customer Solutions team is focused on enhancing alignment between local and national teams, allowing the Company to deliver a more integrated and consistent customer experience across geographies. Through this approach, the Company seeks to deepen customer relationships and increase the value delivered to its customers. The Company expects to continue driving revenue and margin expansion through its national healthcare customer relationships, while further expanding dedicated national teams to grow its presence in its data center and industrial and manufacturing market verticals.

Sales Enablement . To support organic revenue growth, the Company continues to invest in sales enablement initiatives. These efforts include the continued development of centralized functions, tools and processes intended to support sellers across operating locations, enhance coordination between local and national sales efforts, and improve visibility into customer opportunities and pipeline activity. By equipping sales teams with shared resources, training and standardized workflows, the Company seeks to drive more disciplined opportunity management, support cross-selling of services and solutions, and enable a more seamless customer experience across its geographic footprint. Management believes these sales enablement initiatives strengthen execution, enhance productivity and support scalable, margin-accretive growth over the long term as the business continues to expand.

Pillar II

Margin Expansion Through Evolved Solutions . The Company continues to focus on expanding its margins by enhancing and expanding its solutions to building owners. This initiative reflects the Company’s commitment to driving sustainable growth, increasing operational efficiency and delivering greater value to its stakeholders. This evolution is intended to align more closely with current market demands, emerging customer preferences and operational efficiencies, which together contribute to margin expansion. The Company aims to differentiate itself from its competitors by being a single-source provider for building owners, capable of providing a full life cycle of engineered solutions and craft expertise. By meeting diverse customer needs under one roof, the Company deepens customer loyalty. The Company believes that building owners value the convenience and reliability of a single point of contact, which fosters long-term partnerships, reoccurring business and may open doors to larger capital projects and being able to capture a greater share of the overall value chain. The Company continues to expand its owner-direct offerings which include integrated facility planning, service and maintenance, equipment replacement and retrofits, rental equipment, MEPC infrastructure upgrades, and energy efficiency and decarbonization analysis and projects. These capabilities enable the Company to leverage its professional services platform to support multi-location regional and national customers. Additionally, the Company continues to evaluate opportunities to broaden and enhance its customer solutions to address evolving customer needs.

Pillar III

Growth Through Acquisitions . As the Company’s business generates increasing cash flow and earnings, management believes it is well-positioned to pursue targeted acquisitions as a strategic capital investment. The Company continues to build the internal capabilities, processes and leadership capacity necessary to evaluate, execute and integrate acquisitions on a disciplined and repeatable basis, while seeking to leverage existing systems, national and geographic presence and operational investments to their maximum potential over time. The Company remains focused on disciplined capital deployment and cultural alignment to ensure acquisitions contribute to long-term value creation. See Note 3 – Acquisitions in the accompanying notes to the Company’s consolidated financial statements for further information on the Company’s most recent acquisition activity.

Seasonality, Cyclicality and Quarterly Trends

Severe weather can impact the Company’s operations. In the northern climates where it operates, and to a lesser extent the southern climates as well, severe winters can slow the Company’s productivity on projects, which shifts revenue and gross profit recognition to a later period. The Company’s maintenance operations may also be impacted by mild or severe weather. Mild weather tends to reduce demand for its maintenance services, whereas severe weather may increase the demand for its maintenance and time and materials services. The Company’s operations also experience cyclicality, as the Company tends to see customer budgets being allocated in the first quarter of the year and an increased level of maintenance and capital project execution during the third and fourth calendar quarters of each year.

Effect of Inflation and Tariffs

The prices of key inputs used in the Company’s projects and service operations; such as steel, pipe, copper, and certain equipment and components, are subject to volatility, including increases driven by inflation, tariffs, supply constraints and price escalation. These factors can, at times, be material to its results of operations and financial condition, particularly on fixed-price projects and where equipment lead times extend beyond its procurement window. The Company has at times experienced higher material and equipment costs on specific projects and delays in the supply chain for certain equipment and service vehicles.

Where appropriate, the Company seeks to mitigate these impacts by (i) incorporating cost escalation assumptions and/or escalation provisions into bids and proposals, (ii) limiting the acceptance period of bids, (iii) procuring materials and equipment earlier in the project lifecycle, including through fixed-price purchase orders where feasible, and (iv) negotiating with suppliers and subcontractors to manage pricing and delivery terms. Despite these efforts, sustained inflationary pressures, supply chain disruptions, or rapid changes in tariff regimes could increase its costs, reduce margins, and/or require us to defer or re-sequence projects, which could adversely affect the pace at which backlog converts to revenue.

The Company continues to monitor developments in U.S. trade policy, including tariffs imposed under Section 232 of the Trade Expansion Act of 1962 on imported steel and aluminum and certain derivative products. In June 2025, the United States increased the Section 232 tariff rate on steel and aluminum to 50% for covered products, and during 2025 the scope of covered derivative products was expanded. These actions, and any additional duties or trade restrictions that may be enacted by the United States or other countries, could increase costs, impact the availability and lead times of certain materials and components, and alter competitive dynamics. In the Company’s ODR segment, which generally operates on shorter sales cycles, it can often adjust pricing to reflect cost increases; however, the Company may be unable to recover all cost increases in a timely manner, particularly for fixed-price contracts and for long-lead equipment orders. While retaliatory measures by other countries have not materially impacted the Company to date, future developments remain uncertain. Accordingly, the Company cannot predict the ultimate impact of tariffs or other trade restrictions on our business, results of operations or financial condition.

Liquidity and Capital Resources

Cash Flows

The Company’s liquidity needs relate primarily to the provision of working capital (defined as current assets less current liabilities) to support operations, funding of capital expenditures, and investment in strategic opportunities. Historically, liquidity has been provided by operating activities and borrowings from commercial banks and institutional lenders.

The following table presents summary cash flow information for the periods indicated:

For the Years Ended December 31,

(in thousands)

Net cash provided by (used in):

Operating activities

Investing activities

Financing activities

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

Noncash investing and financing transactions:

Earnout liability associated with the Kent Island Transaction

Earnout liability associated with the Consolidated Mechanical Transaction

Kent Island Transaction, measurement period adjustment

Right of use assets obtained in exchange for new operating lease liabilities

Right of use assets obtained in exchange for new finance lease liabilities

Right of use assets disposed or adjusted modifying operating lease liabilities

Right of use assets disposed or adjusted modifying finance lease liabilities

Interest paid

Cash paid for income taxes

The Company's cash flows are primarily impacted period to period by fluctuations in working capital. Factors such as the Company’s contract mix, commercial terms, days sales outstanding (“DSO”) and delays in the start of projects may impact its working capital. In line with industry practice, the Company accumulates costs during a given month and then bills those costs in the current month for many of its contracts. While labor costs associated with these contracts are paid weekly and salary costs associated with the contracts are paid bi-monthly, certain subcontractor costs are generally not paid until the Company receives payment from its customers (contractual “pay-if-paid” terms). The Company has not historically experienced a large volume of write-offs related to its receivables and contract assets. The Company regularly assesses its receivables for collectability and provides allowances for credit losses where appropriate. The Company believes that its reserves for its expected credit losses are appropriate as of December 31, 2025, but adverse changes in the economic environment may impact certain of its customers’ ability to access capital and compensate the Company for its services, as well as impact project activity for the foreseeable future.

The Company’s existing current backlog is projected to support a portion of forecasted revenue for one year from the date of the financial statement issuance. In addition to the Company's backlog, the Company has a substantial amount of contracts with short lead times that book-and-bill within the same reporting period and are not included in backlog. The Company's current cash balance, together with the cash it expects to generate from future operations along with borrowings available under its credit facility, are expected to be sufficient to finance its short- and long-term capital requirements (or meet working capital requirements) for at least the next twelve months. In addition to the future operating cash flows of the Company, along with its existing borrowing availability and access to financial markets, the Company currently believes it will be able to meet any working capital and future operating requirements, and capital investment forecast opportunities for at least the next twelve months.

The following table represents the Company’s summarized working capital information:

As of December 31,

(in thousands, except ratios)

Current assets

Current liabilities

Net working capital

Current ratio (1)

(1)     Current ratio is calculated by dividing current assets by current liabilities.

As discussed above and in Note 7 – Debt in the accompanying notes to the Company’s consolidated financial statements, as of December 31, 2025, the Company was in compliance with all financial maintenance covenants as required by its credit facility.

Cash Flows Provided by Operating Activities

The following is a summary of the significant sources (uses) of cash from operating activities:

For the Years Ended December 31,

( in thousands )

Cash Inflow (Outflow)

Cash flows from operating activities:

Net income

Non-cash operating activities (1)

Changes in operating assets and liabilities:

Accounts receivable

Contract assets and contract liabilities, net (2)

Other current assets

Accounts payable, including retainage

Accrued taxes payable

Accrued expenses and other current liabilities

Operating lease liabilities

Payment of contingent consideration liability in excess of acquisition-date fair value

Other long-term liabilities

Cash used in working capital

Net cash provided by operating activities

(1) Represents non-cash activity associated with depreciation and amortization, provision for credit losses, non-cash stock-based compensation expense, operating lease expense, amortization of debt issuance costs, deferred income tax provision, gain or loss on sale of property and equipment, acquisition-related retention expense and contingent consideration and changes in the fair value of the Company's interest rate swap.

(2) During the year ended December 31, 2025, the Company refined the presentation of contract-related balances within operating activities of the consolidated statements of cash flows. Changes in contract assets and contract liabilities are now presented on a net basis, rather than as separate line items, to align with the Company’s presentation of net contract positions. Prior-period amounts have been conformed for comparability, where applicable. This presentation change did not impact net cash provided by operating activities.

During the year ended December 31, 2025, the Company generated $45.7 million in cash in its operating activities, which consisted of net income of $39.1 million and certain non-cash adjustments of $32.8 million, partly offset by cash used in working capital of $26.2 million. During the year ended December 31, 2024, the Company generated $36.8 million from its operating activities, which consisted of net income of $30.9 million and certain non-cash adjustments of $24.5 million, partly offset by cash used in working capital of $18.5 million.

The year-over-year increase in operating cash flows was primarily attributable to an $8.2 million increase in net income, a $15.6 million increase related to accounts payable (including retainage) and a $15.7 million increase related to accounts receivable, each due to the timing of cash payments and collections. Operating cash flows also benefited from higher non-cash adjustments during the year. These increases were partially offset by a $30.3 million net cash outflow related to changes in contract assets and liabilities, primarily reflecting the timing of billings relative to revenue recognition, and an $12.0 million decrease related to accrued expenses and other current liabilities.

Cash Flows Used in Investing Activities

Cash flows used in investing activities were $67.6 million for the year ended December 31, 2025, compared to $42.6 million for the year ended December 31, 2024. The increase was driven primarily by $65.7 million of cash outflows related to the Pioneer Power Transaction in 2025, net of cash acquired and inclusive of certain measurement period adjustments. In addition, cash used in investing activities for the year ended December 31, 2025 included $3.8 million of capital expenditures, primarily related to the purchase of rental equipment to expand customer offerings, partially offset by $1.9 million of proceeds from sales of property and equipment.

For the year ended December 31, 2024, investing activities included cash outflows of $13.4 million and $23.2 million related to the Kent Island and Consolidated Mechanical transactions, respectively, net of cash acquired and inclusive of certain measurement period adjustments. In addition, capital expenditures totaled $7.5 million, largely reflecting initial investments in rental equipment as the Company launched its direct rental equipment offering, and were partially offset by $1.5 million of proceeds from sales of property and equipment.

Excluding rental equipment investments, capital expenditures in both periods primarily related to tools and equipment, software and hardware, office furniture, and leasehold improvements.

Cash Flows Used in Financing Activities

Cash flows used in financing activities were $11.7 million for the year ended December 31, 2025 as compared to $9.1 million for the year ended December 31, 2024.

During the year ended December 31, 2025, financing cash outflows were driven primarily by $10.7 million of tax payments related to the net share settlement of equity awards, $4.4 million of payments on finance leases, and $3.5 million of contingent earnout-related payments classified as financing activities. Revolving credit facility borrowings and repayments totaled $73.8 million each during the year, resulting in a net neutral cash impact. These outflows were partially offset by $6.3 million of proceeds from the issuance of shares to satisfy employee tax withholding requirements and $0.7 million associated with proceeds from employee contributions to the ESPP.

For the year ended December 31, 2024, the Company paid approximately $5.2 million in taxes related to the net share settlement of equity awards, $3.0 million of payments on finance leases, and $1.3 million of contingent earnout-related payments classified as financing activities, partially offset by $0.4 million associated with proceeds from employee contributions to the Company’s ESPP.

The following table reflects the Company’s available funding capacity as of December 31, 2025:

(in thousands)

Cash & cash equivalents (1)

Credit agreement:

Wintrust Revolving Loans (2)

Outstanding borrowings on the Wintrust Revolving Loans

Outstanding letters of credit

Net credit agreement capacity available

Total available funding capacity

(1)     The Company considers all highly liquid investments purchased with a maturity of 90 days or less on the date of purchase to be cash equivalents. Cash equivalents as of December 31, 2025 consisted of certain overnight repurchase agreements.

(2)     On June 27, 2025, LFS, LHLLC, and other designated parties entered into the Second Amendment to the Second A&R Wintrust Credit Agreement with Wintrust, as administrative agent, and the other lenders party thereto. The Second Amendment to the Second A&R Wintrust Credit Agreement provides for, among other things, an upsize of the aggregate principal amount of the senior secured revolving credit facility from $50.0 million to $100.0 million. See 7 – Debt in the accompanying notes to the Company’s consolidated financial statements for further discussion.

Debt and Related Obligations

Long-term debt consists of the following obligations as of:

( in thousand s)

December 31, 2025

December 31, 2024

Wintrust Revolving Loans

Finance leases – collateralized by vehicles, payable in monthly installments of principal, plus interest ranging from 4.40% to 8.60% through 2031

Financing liability

Total debt

Less – Current portion of long-term debt

Less – Unamortized discount and debt issuance costs

Long-term debt

See Note 7 – Debt in the accompanying notes to the Company’s consolidated financial statements for further discussion.

Material Cash Requirements from Contractual and Other Obligations

As of December 31, 2025, the Company’s short-term and long-term material cash requirements for known contractual and other obligations were as follows:

Outstanding Debt and Interest Payments: As of December 31, 2025, the Company had $10.0 million of direct borrowings outstanding under its Wintrust Revolving Loan. The Wintrust Revolving Loan bears interest, at LFS’s option, at either the Term SOFR (with a 0.15% floor) plus 2.50% or the Prime Rate (with a 3.0% floor), subject to a 95 basis point step-down based on the ratio between the senior debt of the Company and its subsidiaries to the EBITDA of LFS and its subsidiaries for the most recently ended four fiscal quarters. Interest payments on any future borrowings will be determined based on prevailing rates at that time. The Company is party to an interest rate swap arrangement to manage the risk associated with a portion of it variable-rate long-term debt. The Wintrust Revolving Loan will mature on July 1, 2030.

See Note 7 – Debt in the accompanying notes to the Company’s consolidated financial statements for further detail of the Company’s debt obligations, including the Company’s revolving credit facility.

Sale-Leaseback Financing Transaction: In fiscal year ended December 31, 2022, the Company executed a sale-leaseback financing transaction with respect to its branch facility in Pontiac, Michigan to provide additional liquidity. Future payments associated with the sale-leaseback financing transaction were $15.4 million at December 31, 2025, with $0.5 million payable within the next 12 months. See Note 7 – Debt in the accompanying notes to the Company’s consolidated financial statements for further detail surrounding the Company’s sale-leaseback financing transaction.

Operating and Finance Leases: In the normal course of business, the Company leases real estate, vehicles and other equipment under various arrangements which are classified as either operating or finance leases. Future payments for such leases, excluding leases with initial terms of one year or less, were $46.8 million at December 31, 2025, with $11.4 million payable within the next 12 months. See Note 14 – Leases in the accompanying notes to the Company’s consolidated financial statements for further detail surrounding the Company’s lease obligations and the timing of expected future payments.

Contingent Consideration Liabilities: The Company has incurred liabilities related to contingent consideration arrangements associated with certain acquisitions, payable in the event discrete performance objectives are achieved by the acquired businesses during designated post-acquisition periods. The aggregate amount of these liabilities can change due to additional business acquisitions, settlement of outstanding liabilities, changes in the fair value of amounts owed based on performance during such post-acquisition periods, and accretion in present value. As of December 31, 2025, the present value of expected future payments relating to these contingent consideration arrangements was $10.0 million. Of this amount, approximately $7.0 million is estimated as being payable during 2026, with the remainder due in 2027. See Note 9 – Fair Value Measurements in the accompanying notes to the Company’s consolidated financial statements for more information regarding the Company’s contingent consideration liabilities.

Open Purchase Obligations : As of December 31, 2025, the Company had $69.1 million of open purchase obligations, of which approximately $55.4 million are expected to become due within the next 12 months. These obligations represent open purchase orders to suppliers and subcontractors related to the Company’s projects and services contracts. These purchase orders are not reflected in the consolidated balance sheets and are not expected to impact future liquidity as amounts should be recovered through customer billings.

In addition, material cash requirements for other potential obligations, for which we cannot reasonably estimate future payments, include the following:

Legal Proceedings : The Company is continually engaged in administrative proceedings, arbitrations, and litigation with owners, general contractors, suppliers, team members, former team members and other unrelated parties, all arising in the ordinary courses of business. The ultimate resolution of these contingencies could, individually or in the aggregate, be material to the consolidated financial statements. In the opinion of the Company’s management, the results of these actions will not have a material adverse effect on the financial position, results of operations, or cash flows of the Company. See Note 13 – Commitments and Contingencies in the accompanying notes to the Company’s consolidated financial statements for more information regarding legal proceedings.

Multiemployer Pension Plans : In addition to the Company’s sponsored benefit plans, the Company participates in certain multiemployer pension and other post-retirement plans. The cost of these plans is equal to the annual required contributions determined in accordance with the provisions of negotiated collective bargaining agreements. During 2025 and 2024, contributions made to these plans were $14.3 million and $10.3 million, respectively; however, the Company’s future contributions to the multiemployer plans are dependent upon a number of factors. Amounts of future contributions that the Company would be contractually obligated to make pursuant to these plans cannot be reasonably estimated. See Note 16 – Multiemployer Pension Plans in the accompanying notes to the Company’s consolidated financial statements for more information regarding these multiemployer pension plans.

Surety Bonding

In connection with its business, the Company is occasionally required to provide various types of surety bonds that provide an additional measure of security to its customers for its performance under certain government and private sector contracts. The Company’s ability to obtain surety bonds depends upon its capitalization, working capital, past performance, management expertise and external factors, including the capacity of the overall surety market. Surety companies consider such factors in light of the amount of the Company’s backlog that it has currently bonded and their current underwriting standards, which may change from time-to-time. The bonds the Company provides, if any, typically reflect the contract value. As of December 31, 2025 and 2024, the Company has approximately $156.6 million and $109.3 million, respectively, in surety bonds outstanding. The Company believes that its $1 billion bonding capacity provides it with a significant competitive advantage relative to many of its competitors which have limited bonding capacity. See Note 13 – Commitments and Contingencies in the accompanying notes to the Company’s consolidated financial statements for further discussion.

Insurance and Self-Insurance

The Company purchases workers’ compensation and general liability insurance under policies with per-incident deductibles of $250,000 per occurrence. Losses incurred over primary policy limits are covered by umbrella and excess policies up to specified limits with multiple excess insurers. The Company accrues for the unfunded portion of costs for both reported claims and incurred but not reported claims. The liability for unfunded reported claims and future claims is reflected on the consolidated balance sheets as current and non-current liabilities. The liability is computed by determining a reserve for each reported claim on a case-by-case basis based on the nature of the claim and historical loss experience for similar claims plus an allowance for the cost of incurred but not reported claims. The current portion of the liability is included in accrued expenses and other current liabilities on the consolidated balance sheets. The non-current portion of the liability is included in other long-term liabilities on the consolidated balance sheets.

The Company is self-insured related to medical and dental claims under policies with annual per-claimant and annual aggregate stop-loss limits. The Company accrues for the unfunded portion of costs for both reported claims and incurred but not reported claims. The liability for unfunded reported claims and future claims is reflected on the consolidated balance sheets as a current liability in accrued expenses and other current liabilities. See Note 13 – Commitments and Contingencies in the accompanying notes to the Company’s consolidated financial statements for further discussion.

Multiemployer Plans

The Company participates in approximately 70 MEPPs that provide retirement benefits to certain union team members in accordance with various collective bargaining agreements (“CBAs”). As one of many participating employers in these MEPPs, the Company is responsible with the other participating employers for any plan underfunding. The Company’s contributions to a particular MEPP are established by the applicable CBAs; however, required contributions may increase based on the funded status of an MEPP and legal requirements of the Pension Protection Act of 2006 (the “PPA”), which requires substantially underfunded MEPPs to implement a funding improvement plan (“FIP”) or a rehabilitation plan (“RP”) to improve its funded status. Factors that could impact funded status of an MEPP include, without limitation, investment performance, changes in the participant demographics, decline in the number of contributing employers, changes in actuarial assumptions and the utilization of extended amortization provisions. Assets contributed to the MEPPs by the Company may be used to provide benefits to team members of other participating employers. If a participating employer stops contributing to an MEPP, the unfunded obligations of the MEPP may be borne by the remaining participating employers.

An FIP or RP requires a particular MEPP to adopt measures to correct its underfunding status. These measures may include, but are not limited to an increase in a company’s contribution rate as a signatory to the applicable CBA, or changes to the benefits paid to retirees. In addition, the PPA requires that a 5.0% surcharge be levied on employer contributions for the first year commencing shortly after the date the employer receives notice that the MEPP is in critical status and a 10.0% surcharge on each succeeding year until a CBA is in place with terms and conditions consistent with the RP.

The Company could also be obligated to make payments to MEPPs if it either ceases to have an obligation to contribute to the MEPP or significantly reduces its contributions to the MEPP because it reduces the number of team members who are covered by the relevant MEPP for various reasons, including, but not limited to, layoffs or closure of a subsidiary assuming the MEPP has unfunded vested benefits. The amount of such payments (known as a complete or partial withdrawal liability) would equal the Company’s proportionate share of the MEPPs’ unfunded vested benefits. The Company believes that certain of the MEPPs in which it participates may have unfunded vested benefits. Due to uncertainty regarding future factors that could trigger withdrawal liability, the Company is unable to determine (a) the amount and timing of any future withdrawal liability, if any, and (b) whether its participation in these MEPPs could have a material adverse impact on its financial condition, results of operations or liquidity. See Note 16 – Multiemployer Pension Plans in the accompanying notes to the Company’s consolidated financial statements for further discussion.

Recent Accounting Pronouncements

The Company reviews new accounting standards to determine the expected financial impact, if any, that the adoption of such standards will have on its financial position and/or results of operations. See Note 2 – Significant Accounting Policies in the accompanying notes to the Company’s consolidated financial statements for further information regarding new accounting standards, including the anticipated dates of adoption and the effects on its consolidated financial position, results of operations, or liquidity.

Critical Accounting Policies and Estimates

The Company’s consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of these financial statements requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Management believes the estimates and judgments described below are critical because they involve a high degree of subjectivity and complexity and, in certain cases, because changes in these estimates and judgments could have a material impact on the Company’s results of operations, financial condition and cash flows. During the year, management also evaluated the presentation of certain balance sheet items in light of clarified accounting guidance, including the classification of contract retainage within contract balances. Actual results could differ from these estimates.

The Company’s most critical accounting estimate relates to revenue recognition derived from construction-type contracts, which requires significant judgment in estimating total costs to complete performance obligations, assessing variable consideration (including change orders and claims), and evaluating the timing and amount of revenue recognized over time. In addition, management believes the more significant judgment areas in the application of accounting policies that affect the Company’s financial condition and results of operations include estimates related to: (a) collectability and the allowance for credit losses on accounts receivable; (b) the recording of self-insurance liabilities; (c) the realization of deferred tax assets and related valuation allowances; and (d) the recoverability of goodwill and identifiable intangible assets. These accounting policies, as well as others, are described in Note 2 – Significant Accounting Policies in the accompanying notes to the Company’s consolidated financial statements.

Revenue and Cost Recognition

The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers . The Company operates in two segments, (i) ODR and (ii) GCR. The Company's work is primarily performed under fixed-price, modified fixed-price, and time and materials contracts over periods of typically less than two years. The Company’s construction-type contract revenue is primarily derived from fixed-price and modified fixed-price contracts. For the majority of these contracts, the Company’s performance obligations are satisfied over time because the customer controls the asset as it is created or enhanced or because the Company’s performance does not create an asset with an alternative use and the Company has an enforceable right to payment for performance completed to date. For contracts satisfied over time, the Company recognizes revenue using an input method based on costs incurred relative to total estimated costs at completion (the cost-to-cost method), which management believes depicts the transfer of control of services to the customer.

Under the cost-to-cost method, contract revenue recognizable at any time during the life of a contract is determined by multiplying the total expected contract revenue by the percentage of contract costs incurred to total estimated contract costs. Contract costs include direct labor, material and subcontractor costs, and indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs, depreciation and insurance. These contract costs are included in the Company’s results of operations under the caption “Cost of Revenue.” As the Company performs under these contracts, it measures costs incurred, compares them to total estimated costs to complete the contract, and recognizes a corresponding proportion of contract revenue. This process requires management to continuously update estimates of total costs to complete a contract and, accordingly, requires judgment and subjective assessments, including evaluations of productivity, scheduling, availability and performance of subcontractors, materials pricing and availability, contract scope and execution risks.

The Company generally does not incur significant incremental costs to obtain contracts. Accordingly, such costs are expensed as incurred. Selling, general, and administrative costs are charged to expense as incurred. Bidding and proposal costs are also recognized as expenses in the period in which such amounts are incurred.

Total estimated contract costs are based on management’s current estimate of total costs at completion. As changes in estimates of contract costs at completion and/or estimated total losses on projects are identified, earnings adjustments are recorded in the period in which the change or loss is identified. Contract revenue is based on management’s estimate of contract prices at completion, including approved change orders and other forms of variable consideration, as applicable. Changes in job performance, job conditions and estimated profitability, including those arising from contract penalty provisions and final

contract settlements, may result in revisions to estimated costs and revenue and are recognized in the period in which the revisions are determined. Provisions for estimated losses on uncompleted contracts are recognized in the period in which such losses are determined, regardless of the percentage of completion of the contract.

With respect to service contracts, the Company’s service arrangements generally include (i) fixed-price service contracts, typically for maintenance, repair and retrofit work over a period, commonly one year, and (ii) time and materials or similar service work performed on an as-needed basis. Revenue from fixed-price service contracts is generally recognized over time on a systematic basis that depicts performance over the contract term, which is typically on a straight-line basis when services are provided evenly over the contract period. Revenue derived from other service work is recognized when the services are performed. Expenses related to service contracts are recognized as services are provided.

Project contracts typically provide for a schedule of billings or invoices to the customer based on reaching agreed-upon milestones or as the Company incurs costs. These billing schedules usually do not precisely match the schedule on which costs are incurred. As a result, revenue recognized can differ from amounts that can be billed or invoiced to the customer at any point during the contract. Amounts by which cumulative contract revenue recognized exceeds cumulative billings are reflected as “contract assets” in the Company’s balance sheet. Contract assets include costs and estimated earnings in excess of billings on uncompleted contracts and amounts related to retainage that represent a conditional right to consideration subject to contractual release provisions. Amounts by which cumulative billings exceed cumulative contract revenue recognized are reflected as “contract liabilities” in the Company’s balance sheet. Contract assets are subject to collection risk and may be impacted by project performance, customer approvals, dispute resolution and other factors affecting the Company’s right to payment. Further information regarding costs and estimated earnings in excess of billings on uncompleted contracts is included in the notes to the consolidated financial statements. The presentation of contract assets and contract liabilities, including amounts related to retainage, requires judgment in evaluating the Company’s rights and obligations under individual contract terms and may be affected by changes in interpretive guidance.

Contract modifications, including change orders, may provide for additional consideration and may affect contract scope and/or contract price. The Company includes variable consideration in the transaction price only to the extent that it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Variable consideration may include claims and unapproved change orders, which are generally recorded when the Company has a basis to conclude that the amount is estimable and realization is probable under the Company’s contractual rights and relevant facts and circumstances. The Company’s estimate of variable consideration is subject to the constraint described above and requires judgment, including assessments of customer acceptance, historical experience with similar matters, correspondence and other documentation supporting entitlement, and the expected outcome of negotiations or dispute resolution. See Note 4 – Revenue from Contracts with Customers in the accompanying notes to the Company’s consolidated financial statements for information related to unresolved change orders and claims.

Variations from estimated project costs, as well as changes in estimated variable consideration, can have a significant impact on the Company’s operating results, depending on project size and the timing and amount of any related adjustments.

In accordance with industry practice, the Company classifies as current all assets and liabilities relating to the performance of long-term contracts. The term of the Company’s contracts generally ranges from three months to two years and, accordingly, collection or payment of amounts relating to these contracts may extend beyond one year.

Accounts Receivable and Allowance for Credit Losses

The Company records an allowance for credit losses, representing an estimate of expected credit losses over the remaining contractual life of its receivables. The Company develops its allowance using an aging methodology and evaluates expected losses based on historical loss experience adjusted for current conditions and, when appropriate, reasonable and supportable forecasts.

The determination of the allowance requires judgment and estimates involving, among others, the creditworthiness of customers, historical collection experience, the aging of past due balances, the consideration of a customer’s financial condition, ongoing relationships with customers, lien rights (if any), the availability of payment bonds or other security, and broader market and economic conditions. The Company evaluates and updates these estimates as additional information becomes available. Accounts receivable exclude amounts related to contract retainage, which are presented within contract assets or contract liabilities, as applicable.

Self-Insurance Liabilities

The Company is substantially self-insured for workers’ compensation, employer’s liability, auto liability, general liability and employee group health claims in view of the relatively high per-incident deductibles it absorbs under its insurance arrangements

for these risks. Losses are estimated and accrued based upon known facts, historical trends and industry averages. Estimated losses in excess of the Company’s deductible, which have not already been paid, are included in the Company’s accrued liabilities with a corresponding receivable from its insurance carrier, as applicable.

In addition, the Company is self-insured related to medical and dental claims under policies with annual per-claimant and annual aggregate stop-loss limits. The Company accrues for the unfunded portion of costs for both reported claims and claims incurred but not reported.

The Company believes the liabilities recognized in the Company’s consolidated balance sheet for these obligations are adequate; however, such liabilities are difficult to estimate due to factors that are uncertain, including the severity and duration claims, the determination of the Company’s liability relative to other parties, the timing of claim reporting, ongoing treatment or loss mitigation, general trends in litigation outcomes and the effectiveness of safety and risk management programs. If actual experience differs from the assumptions and estimates used in determining these liabilities, adjustments may be required and would be recorded in the period in which such experience becomes known.

Deferred Tax Assets

The Company regularly evaluates the need for valuation allowances related to deferred tax assets for which future realization is uncertain. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. Management considers all available evidence, both positive and negative, in determining whether a valuation allowance is required. Such evidence includes the scheduled reversal of deferred tax liabilities, projected future taxable income, taxable income in prior periods (including carryback availability, if applicable), and feasible tax planning strategies. Judgment is required in evaluating the relative weight of positive and negative evidence and in developing projections of future taxable income. Changes in the Company’s operating results, tax law, or other relevant factors could affect the Company’s conclusions regarding the recoverability of deferred tax assets and the amount of any related valuation allowance.

Goodwill and Identifiable Intangible Assets

Goodwill represents the excess of purchase price over the fair value of the net assets of acquired businesses. The Company assesses goodwill for impairment at least annually and more frequently if events or changes in circumstances indicate that goodwill may be impaired. The Company performs its annual impairment testing as of October 1 each year, and any impairment charges resulting from this process are reported in the fourth quarter.

The Company segregates its operations into reporting units based on the degree of operating and financial independence of each unit and the manner in which management reviews operating results. The Company performs its annual goodwill impairment analysis at the reporting unit level. Each of the Company’s operating segments is a reporting unit.

The assessment of goodwill impairment requires management to estimate the fair value of each reporting unit and compare it to its carrying value. Determining fair value involves the use of valuation techniques that incorporate assumptions and estimates, which may include projected cash flows, discount rates, long-term growth rates, market multiples and other assumptions that are inherently subjective. Changes in these assumptions, including those driven by changes in macroeconomic conditions, customer demand, competitive dynamics, profitability, or the Company’s market capitalization, could materially affect the Company’s fair value estimates and impairment conclusions.

The Company also reviews identifiable intangible assets with definite lives for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Events or circumstances that might require impairment testing include the identification of other impaired assets within a reporting unit, loss of key personnel, the disposition of a significant portion of a reporting unit, a significant decline in stock price, or a significant adverse change in business climate or regulations. Changes in strategy and/or market conditions may also result in adjustments to recorded intangible asset balances, their useful lives, or impairment conclusions.

Off-Balance Sheet and Other Arrangements

Aside from the $5.1 million and $4.2 million in irrevocable letters of credit outstanding in connection with the Company’s self-insurance program, at December 31, 2025 and 2024, respectively, the Company did not have any relationships with any entities or financial partnerships, such as structured finance or special purpose entities established for the purpose of facilitating off-balance sheet arrangements or other purposes.