ITEM 1A. RISK FACTORS.
Our business is challenged by a changing environment that involves many known and unknown risks and uncertainties. The risks described below discuss factors that have affected and/or could affect us in the future. There may be others. We may be affected by risks that are currently unknown to us or are immaterial at this time. If any such events did occur, our business, financial condition and results of operations could be adversely affected in a material manner. Our future results may also be impacted by other risk factors listed from time to time in our future filings with the SEC, including, but not limited to, our Annual Reports on Form 10-K and our Quarterly Reports on Form 10-Q. As the most significant portion of our consolidated entity is represented by the Power segment, the risk factor discussions included below are focused on that business. However, as many of these same risks exist for our other reportable segments, the Industrial segment and the Teledata segment, a review and assessment of the following risk factors should be performed with those similarities in mind.
Risks Related to Our Business
Demand for our services may decrease during economic downturns or unpredictable economic cycles, which could affect our businesses adversely.
Substantial portions of the revenues and profits earned by our reportable business segments are generated from construction-type projects, the awarding and/or funding of which we do not directly control. The engineering and construction industry is subject to cyclical fluctuations due to economic conditions, project owners’ business cycles, labor and materials constraints, subcontractor pricing, interest rate changes, and regulatory or political developments.
During periods of reduced economic activity, customers may delay, reduce, or cancel projects, including new construction, maintenance, repairs, and outage work. In addition, adverse industry conditions may reduce our customers’ ability or willingness to fund capital expenditures. These conditions could result in delays, reductions, or cancellations of projects that are important to our business and future results.
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Future revenues are dependent on the awards of utility-scale natural gas-fired and renewable energy EPC projects to us, the receipt of corresponding full notices-to-proceed, and our ability to successfully complete the projects that we start.
Most of our consolidated revenues are generated by the Power segment, which represented 80.1%, 79.3% and 72.6% of consolidated revenues for Fiscal 2026, Fiscal 2025 and Fiscal 2024, respectively. The Power segment earns most of its revenues from long-term natural gas-fired EPC services contracts. In addition, a significant portion of our consolidated revenues in any given year may be derived from a limited number of customers, and customer concentration may vary from year to year .
Contracts may be delayed or canceled after award, and project commencement is often subject to receipt of a notice to proceed. Failure to secure future EPC project awards, obtain notices to proceed, or successfully complete awarded projects could adversely affect our future revenues, profitability, and cash flows.
Our financial results may fluctuate due to the timing of large construction projects.
Our Power segment performs work on a limited number of large construction projects during any given fiscal reporting period. Revenue for these projects is generally recognized over time based on progress toward completion, which is often measured using costs incurred. The timing of equipment purchases, subcontractor services, and other project activities may vary over the life of a contract, which can result in fluctuations in quarterly or annual revenues and operating results. In addition, the timing of project commencements and completions may contribute to variability in reported results between periods. As a result, our consolidated revenues, cash flows from operations, net income and earnings per share may vary from period to period.
Actual results could differ from the assumptions and estimates used to prepare our consolidated financial statements.
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, assumptions, and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures.
For fixed-price customer contracts, we recognize revenues over time based on the proportion of costs incurred to date relative to total estimated costs. We review and update estimated costs monthly. Contract results may also be affected by estimates related to change orders and the resolution of contract disputes. Changes in contract values or estimated costs may result in cumulative catch-up adjustments to revenue and profit, which could be material. Actual contract values and costs may differ from estimates, which could reduce or reverse previously recognized revenues and profits.
Among the other areas that could require significant estimates by our management are the following:
the assessment of the value of goodwill and recoverability of other intangible assets;
the determination of provisions for income taxes, the accounting for uncertain income tax positions and the establishment of valuation allowances associated with deferred income tax assets;
the determination of the fair value of stock-based incentive awards;
the determination of the allowance for doubtful accounts; and
accruals for estimated liabilities, including any losses related to legal matters.
Our actual business and financial results could differ from our estimates, which may impact future profits.
Project backlog amounts may be uncertain indicators of future revenues as project realization may be subject to unexpected adjustments, delays and cancellations.
Project cancellations or scope modifications may occur that could reduce the amount of our project backlog and the associated revenues and profits that we earn. Our projects generally provide our customers with the right to terminate existing contracts unilaterally at their convenience as long as they compensate us for work already completed and compensate us for the additional costs incurred by us to terminate corresponding subcontracts, terminate equipment orders, and demobilize and vacate construction sites. These costs would most likely be meaningful. Should any unexpected delay, suspension or termination of the work under such projects occur, our results of operations may be materially and adversely affected. Although we believe that the customer commitments represented by project backlog are firm, we cannot guarantee that amounts in project backlog will be recognized as future revenues or will result in profitable operating results.
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Unsuccessful efforts to develop energy plant projects could result in write-offs and the loss of future business.
The development of a power plant construction project is expensive. The developers of power projects may form single purpose entities, such as limited liability companies, limited partnerships or joint ventures, to perform the development activities, which are typically funded by external sources. Periodically, we provide financial support to new projects during their development phase to improve their viability and enhance our likelihood of securing the EPC contract for power plant construction. While some of these initiatives have yielded positive results and success fees, others have not, resulting in the write-off of loan and interest balances and the loss of potential construction projects.
Future bonding requirements may adversely affect our ability to compete for certain projects.
Our construction contracts frequently require payment and/or performance bonds from surety companies as a condition of contract award. Although we have historically maintained sufficient bonding capacity, sureties typically issue bonds on a project-by-project basis and may require additional collateral or adjust bonding terms. Changes in market conditions, our financial position, project size, or a surety’s assessment of risk could affect the availability or cost of bonding. If bonding capacity were to become more limited, we could seek bonding from other surety providers, pursue joint ventures, increase work with clients that do not require bonds, or provide other forms of project security, such as letters of credit or cash. However, if adequate bonding or alternative arrangements were not available, our ability to compete for certain projects could be affected.
Our results could be adversely affected by natural disasters, human-made disasters or other catastrophic events.
Natural disasters, such as hurricanes, tornadoes, blizzards, floods and other adverse weather conditions; or other catastrophic events such as fires, public health crises, pandemics, geopolitical conflicts, terrorism and civil disturbances could disrupt our operations or the operations of one or more of our vendors or customers. These types of events could shut down our construction job sites or fabrication facility for indefinite periods of time, disrupt our product supply chain or could cause our customers to delay or cancel projects. To the extent any of these events occur, our operations and financial results could be adversely affected.
Geopolitical conflicts and related global disruptions may also adversely affect energy markets and supply chains. For example, the war in Ukraine and other international conflicts have contributed to volatility in global energy supply and pricing, increased transportation costs, shipping disruptions, and delays in the delivery of materials and equipment. In addition, escalation of military conflict involving Iran could disrupt global oil and liquefied natural gas (“LNG”) markets, including potential impacts to shipping through key transit routes. These conditions may increase project costs, delay schedules, or reduce demand for certain projects.
Although our contracts with certain customers include provisions intended to provide limited relief from some of these risks, the effectiveness of such protection may depend on factors outside our control, including the financial condition of our customers. The ultimate impact of natural disasters, human-made disasters, or other catastrophic events depends on the severity, duration, and geographic scope of the event, as well as its effects on customers, supply chains, labor availability, and broader economic conditions. Any of these factors could adversely affect our business, financial condition, and results of operations.
Disruptions or unfavorable changes in power market economics, including reductions in spark spreads or changes in capacity market pricing, could reduce demand for new power generation projects in certain regions.
Historically, a portion of our EPC business has been driven by the development of utility-scale power generation projects. In many regions, the economic viability of new generation projects depends on the expected margin between wholesale electricity prices and the cost of fuel and operations, commonly referred to as the spark spread. In certain wholesale markets, project economics may depend in part on revenues from capacity markets that compensate power generators for maintaining available capacity to support grid reliability. Declines in spark spreads resulting from lower power prices, higher fuel costs, or other market conditions, as well as decreases in capacity market prices or changes to capacity market rules that reduce expected revenues, could reduce the expected returns on new power generation projects and discourage or delay project development. If fewer projects are developed in regions important to our business, our revenues, profitability, and cash flows could be adversely affected.
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Artificial intelligence poses risks that could adversely affect our business, financial condition, and results of operations.
We may use artificial intelligence, machine learning, and similar technologies (“AI”), including AI-enabled features in third-party products, to support our business processes. Although our current use of AI is limited, we may expand our use of these technologies over time.
AI creates data security, confidentiality, and privacy risks. Unauthorized or improper use of AI tools by employees, vendors, or third parties could result in the disclosure of sensitive or proprietary information, including customer information, pricing, contract terms, and other confidential business data. In addition, we may have limited control over how third-party AI tools process, store, or protect data, even where contractual protections are in place. AI-related laws, regulations, and contractual requirements are evolving and may impose additional compliance costs, restrict our use of AI, or expose us to regulatory investigations, litigation, or liability. Any of these risks could adversely affect our business, financial condition, and results of operations.
Finally, our competitors may adopt and implement AI technologies more effectively or rapidly than we do, potentially giving them a competitive advantage. If we are unable to adopt and integrate AI tools in a cost-effective and timely manner, our business, financial condition, and results of operations could be materially and adversely affected.
Risks Related to Our Market
If the price of natural gas increases or becomes more volatile, the demand for our construction services could decline.
A significant portion of our power construction business has historically been supported by the development of combined-cycle natural gas-fired power plants. The economics of these projects, and the willingness of developers and lenders to finance them, are sensitive to natural gas prices and related market expectations. If natural gas prices increase or become more volatile, developers may delay, reduce, or cancel new natural gas-fired generation projects or may be unable to obtain construction or permanent financing on acceptable terms.
Natural gas prices may be affected by a variety of factors, including changes in domestic supply and demand dynamics, increased U.S. LNG exports, and regulatory developments affecting natural gas production. A significant portion of U.S. natural gas supply is produced using hydraulic fracturing and horizontal drilling, which remain subject to evolving federal, state, and local regulation and public opposition. If these or other factors limit natural gas production or increase price volatility, the economic attractiveness of natural gas-fired power plants could decline. Any reduction in the development of new natural gas-fired power plants could reduce demand for our EPC services and adversely affect our revenues, profitability, and cash flows.
Soft demand for electrical power may cause deterioration in our financial outlook.
Forecasts generally indicate a significant increase in electricity demand in the United States for the foreseeable future, driven largely by the expansion in the number of data centers, the increase in electric vehicle sales, and the onshoring of manufacturing facilities. We believe that these trends have resulted in increased demand for our EPC contract services. However, future softness in the demand for electrical power in the U.S. could result in the delay, curtailment or cancellation of future gas-fired power plant projects, thus decreasing the overall demand for our EPC services and adversely impacting the financial outlook for our Power business.
Intense global competition for engineering, procurement, and construction contracts could reduce our market share.
The EPC market for utility-scale power generation projects is highly competitive and subject to changes in participant strategies over time. While certain competitors have reduced their participation in this market or limited their willingness to enter fixed-price contracts, other competitors remain well-capitalized and have significant personnel, equipment, and operating scale. In addition, as utilities and developers pursue new generation capacity, additional firms may re-enter or expand their participation in the market.
Our ability to compete effectively depends on factors including financial strength, access to skilled labor and equipment, execution performance, and the effective use of technology. Competitive pressures may require us to accept lower margins, assume greater contractual risk, or offer more favorable terms to customers. If we are unable to compete successfully and win new projects on acceptable terms, we could lose market share, experience reduced revenues and profitability, or incur losses on individual projects.
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Changes in electricity generation resource mix could affect demand for new natural gas-fired power plant projects.
Electricity generation from utility-scale renewable resources, including solar and wind, continues to increase in the United States. This growth has been supported by regulatory and policy initiatives, tax incentives, declining technology and storage costs, and increasing energy storage capacity. As a result, utilities and developers may place greater emphasis on renewable and storage solutions when planning future generation capacity. If the development of renewable energy and energy storage accelerates faster than anticipated, or if power markets shift away from baseload generation toward alternative generation or peak-load solutions, the number or size of new natural gas-fired power plant projects could decline. Any such reduction in demand could adversely affect our future revenues, profitability, and cash flow.
Unexpected changes in the foreign countries in which we operate could result in project disruptions, increased costs and potential losses.
A portion of our business is conducted outside the United States, primarily in Ireland and the U.K. Our international operations are subject to economic, political, regulatory, and social conditions that may change rapidly and are outside our control. These risks include:
changes in government policies, laws, regulations, treaties, or leadership;
embargoes or other trade restrictions, including sanctions;
restrictions on the movement of currency or capital;
tax or tariff increases;
currency exchange rate fluctuations;
changes in labor conditions and difficulties in staffing and managing overseas operations; and
other social, political and economic instability.
Our level of exposure to these risks will vary for each significant project we perform overseas, depending on the location and the stage of the project. To the extent that our international business is affected by unexpected and adverse foreign economic changes, including trade retaliation from certain countries, we may experience project disruptions and losses which could significantly reduce our consolidated revenues and profits, or could cause losses reflected at the consolidated level.
Risks Related to the Regulatory Environment
We are required to comply with environmental laws and regulations that may add unforeseen costs to our businesses.
Our operations are subject to compliance with federal, state and local environmental laws and regulations, including those relating to discharges to air, water and land, the handling and disposal of solid and hazardous waste, and the cleanup of properties affected by hazardous substances. Certain environmental laws impose substantial penalties for non-compliance and others impose strict, retroactive, and joint and several liability upon persons responsible for releases of hazardous substances. Compliance obligations and enforcement priorities may change over time, and compliance costs could increase and adversely affect our results of operations.
In addition, regulations and stakeholder expectations relating to greenhouse gas emissions disclosures and sustainability reporting are evolving and vary by jurisdiction. In the jurisdictions we operate, governments and regulatory bodies vary in their support of or opposition to sustainability matters, leading to rapid shifts in reporting obligations. New or expanded reporting requirements, including those adopted or proposed in the U.S., the European Union, and certain states, may require us to collect additional data, enhance internal controls, obtain third-party assurance, and devote significant management time and resources. These requirements may also be subject to legal, regulatory, or political changes that create uncertainty and additional compliance burdens.
Compliance with and monitoring of these evolving requirements may increase our costs, require significant resource allocation, and divert management’s attention from other operational and financial priorities.
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Changes in U.S. trade policy, including the imposition of tariffs, could increase our costs, disrupt supply chains, and reduce demand for construction projects.
Changes in U.S. trade policy, including the imposition or expansion of tariffs, trade restrictions, export controls, or other regulatory measures affecting imports or international supply chains, could increase the cost or reduce the availability of materials, equipment, and components used in our projects. Such measures may also result in import delays, longer lead times, or supply chain disruptions. Responding to changes in trade policies and supply chain conditions may also require increased management attention and result in additional administrative costs.
Higher costs or supply constraints could increase project costs or affect project schedules. Although our contracts may include provisions that address certain changes in project costs or inputs, such provisions may not fully mitigate the effects of tariffs, supply disruptions, or other trade-related developments. In addition, uncertainty regarding trade policies or global supply conditions may cause customers to delay, reduce, or cancel planned construction projects. If these conditions occur, our business, financial condition, and results of operations could be adversely affected.
Delays or failures in obtaining required regulatory approvals, including permits, interconnection agreements, and pipeline approvals, could delay or prevent energy projects and adversely affect our results.
The commencement and execution of projects performed by our Power segment depend on obtaining numerous regulatory approvals, including environmental, construction, and operating permits. These approvals may be delayed, challenged, or denied due to regulatory review public opposition, litigation, or other factors outside our control. In addition, projects may be delayed or terminated if developers are unable to secure timely interconnection agreements with transmission organizations. The development of new natural gas-fired power plants may also depend on the availability of fuel supply, which in some cases requires the construction of new natural gas pipelines. Delays, opposition, or legal challenges affecting pipeline projects could further delay or prevent the development of power plants.
If required approvals are not obtained, or are delayed beyond expected timelines, construction projects may be postponed or canceled, which could adversely affect our revenues, profitability, and cash flows.
Risks Related to Our Operational Execution
We may experience reduced profits or incur losses under fixed-price contracts if costs increase above estimates.
A significant portion of our work is performed under long-term, fixed-price contracts. The prices for these contracts are based on our estimates of project costs, schedules, labor productivity, and other assumptions. If our estimates are inaccurate, or if we are unable to complete projects within agreed cost and schedule parameters, we may experience cost overruns that are not recoverable from customers, which could reduce profitability or result in losses. Cost overruns or delays could also harm our reputation and reduce future business opportunities.
Factors that may contribute to contract cost overruns, delays, or other execution issues include:
inflation, specifically increases in the cost of labor, materials, components, equipment, warranties, or subcontractor services;
labor availability and productivity;
supply chain disruptions and delivery delays;
technical, engineering, or design issues;
poor workmanship;
weather and other force majeure events;
project changes; and
the effectiveness of our project controls and forecasting tools.
If we are unable to accurately estimate, manage, and control costs and schedules on fixed-price contracts, our business, financial condition, and results of operations could be adversely affected.
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Our continued success depends on our ability to attract, hire and retain talented personnel.
Our future success depends in part on our ability to attract, develop, retain and motivate experienced management and other skilled personnel, particularly project leadership. Our operations require a highly skilled workforce with specialized experience. Competition for qualified personnel may be intense, and there can be no assurance that we will be successful in maintaining experienced management teams or an adequately skilled workforce to execute our long-term construction contracts successfully and to support our future growth strategy. The loss of key personnel, the inability to complete management transitions without significant loss of effectiveness, or the inability to hire and retain qualified employees in the future could negatively impact our ability to manage our business in the future.
The shortage of skilled craft labor may negatively impact our ability to execute on our long-term construction contracts.
Increased infrastructure spending and general economic expansion may increase the demand for employees with the types of skills needed for the completion of our projects. There is a risk that our construction project schedules become unachievable or that labor expenses will increase unexpectedly due to a shortage in the available supply of skilled personnel. Increased labor costs may influence our customers’ decisions regarding the feasibility or scheduling of specific projects, potentially leading to delays or cancellations that could materially affect our business adversely. Labor shortages, productivity decreases or increased labor costs could impair our ability to maintain our business or grow our revenues. In general, we have been effective in staffing our projects with the necessary resources and managing labor costs. However, the inability to hire and retain qualified skilled employees in the future, including workers in the construction crafts, could negatively impact our ability to complete our long-term construction contracts .
If we guarantee the timely completion or the performance of a project, we could incur additional costs to fulfill such obligations.
In certain of our fixed-price long-term contracts, we guarantee that we will complete a project by a scheduled date. Sometimes, we commit that the project, when completed, will also achieve certain performance standards. Subsequently, we may fail to complete the project on time or equipment that we install may not meet guaranteed performance standards. In those cases, we may be held responsible for costs incurred by the customer resulting from any delay or any modification to the plant made for the purpose of achieving the performance standards, generally in the form of contractually agreed-upon liquidated damages or obligations to re-perform substandard work. If we are required to pay such costs, the total costs of the project could exceed our original estimate, and we could experience reduced profits or a loss related to the applicable project.
We may be involved in litigation, liability claims, and contract disputes which could reduce our profits and cash flows.
We construct large and complex energy facilities, where design, construction, or systems failures could result in personal injury, property damage, or other losses. In addition, the nature of our business may result in contract disputes and claims by project owners, subcontractors, and vendors, including claims relating to costs, schedule delays, workmanship, change orders, withheld retention or contract payments, offsets, or contract termination. We have been, and may in the future be, named as a defendant in legal proceedings, including matters arising in the ordinary course of business (see Item 3, Legal Proceedings). In addition, from time to time, we and/or certain of our current or former directors, officers or employees could be named as parties to other types of lawsuits.
Litigation and dispute resolution can involve complex factual and legal issues, may continue for extended periods, and can be costly and time-consuming. Claims may result in significant damages, settlement payments, or other remedies, and even when we prevail, these matters may divert management attention and harm our reputation.
We maintain insurance coverage for certain risks; however, coverage may be unavailable for some exposures, may be subject to deductibles, exclusions, and self-insured retentions, and may be insufficient to cover all losses. In addition, certain risks, including environmental and pollution-related exposures, may not be fully insurable. Any material uninsured loss, or loss in excess of insurance limits or reserves, could adversely affect our business, financial condition, results of operations, and cash flows.
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Our failure to recover adequately on contract variations submitted to project owners could have a material effect on our financial results.
We may submit contract variations to project owners for additional amounts exceeding the contract price or for amounts not included in the original contract price. Variations occur due to matters such as owner-caused delays or changes from the initial project scope, both of which may result in additional costs. At times, contract variation submissions can be the subject of lengthy negotiation, arbitration, or litigation proceedings, and it is difficult to accurately predict when these differences will be fully resolved. When these types of events occur and unresolved matters are pending, we have used existing liquidity to cover cost overruns pending their resolution. A failure to promptly recover on these types of customer submissions could have a negative impact on our revenues, liquidity and profitability in the future.
Our dependence upon third parties to perform portions of our work and supply materials and equipment could adversely affect our project performance and profitability.
We rely on subcontractors to perform portions of our construction work and on third-party manufacturers and suppliers to provide significant equipment and materials necessary to complete our projects. Many of these inputs are specialized and may be available only from a limited number of qualified sources. If we are unable to obtain qualified subcontractors, equipment, or materials when needed, our ability to perform projects on schedule and within budget could be adversely affected.
In addition, if the costs of subcontractors, equipment, or materials exceed our estimates, our gross profit may be reduced and we could incur losses, particularly on fixed-price contracts. If a subcontractor, supplier, or manufacturer fails to perform, deliver, or meet contractual requirements, we may be required to self-perform work or obtain substitute labor, materials, or equipment on an expedited basis or at higher cost, which could adversely affect project schedules and profitability.
Disputes with subcontractors, manufacturers, or suppliers regarding scope, performance, or payment may result in arbitration or litigation and could increase costs. In addition, if subcontractors fail to pay their lower-tier subcontractors, suppliers, or employees, liens may be asserted against our projects, which could require us to incur additional costs to resolve the liens or pursue legal remedies.
Any of these events could adversely affect our business, results of operations, and cash flows.
Failure to maintain safe work sites could result in significant losses as we work on projects that are inherently dangerous.
Our project sites can place our employees and others near large and/or mechanized equipment, high voltage electrical equipment, moving vehicles, dangerous processes or highly regulated materials, and in challenging environments. Consequently, safety is a primary focus of our business and is critical to our reputation. Many of our customers require that we meet certain safety criteria to be eligible to bid on contracts. Further, regulatory changes implemented by OSHA or similar government agencies could impose additional costs on us. We maintain programs with the primary purpose of implementing effective health, safety and environmental procedures throughout our company. If we fail to implement appropriate safety procedures and/or if our procedures fail, our employees or others may suffer injuries or illness. The failure to comply with such procedures, client contracts or applicable regulations could subject us to losses and liability, and could adversely impact our ability to complete awarded projects as planned, obtain projects in the future, or recruit and retain qualified craft labor.
Work stoppages, union negotiations and other labor problems could adversely affect us.
The performance of certain large-scale construction contracts may result in our hiring of employees in the U.S. and overseas who are represented by labor unions. We make sincere efforts to maintain favorable relationships and conduct good-faith negotiations with union officials. However, there can be no assurances that such efforts will eliminate the possibilities of unfavorable conflicts in the future. A lengthy strike or the occurrence of other work disputes, slowdowns or stoppages at any of our current or future construction project sites could have an adverse effect on us, resulting in cost overruns, schedule delays or even lawsuits that could be significant. In addition, labor incidents could result in negative publicity for us thereby damaging our business reputation and perhaps our prospects for the receipt of future construction contract awards in certain locales.
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Future acquisitions or investments may not occur, and any acquisitions we complete may not be successfully integrated, which could limit our growth and adversely affect our results.
We may pursue opportunistic acquisitions or strategic investments to support growth, expand capabilities, or create synergies with our existing businesses. However, suitable acquisition targets may be difficult to identify, negotiations may be protracted or unsuccessful, and due diligence may identify issues that prevent us from completing transactions on acceptable terms, or at all. As a result, we may be unable to complete acquisitions or investments that support our growth strategy.
The timing, size, and financing of any future acquisitions are uncertain. Potential transactions may require the use of cash, equity, or a combination of both. The use of cash could reduce our financial flexibility, and our ability to raise additional capital may depend on market conditions, our operating results, and other factors outside our control. Our ability to use equity as consideration may be limited by the market price and liquidity of our common stock and the willingness of sellers to accept it. If adequate financing or acceptable consideration is not available, we may be unable to pursue attractive opportunities.
Even when acquisitions are completed, we may not achieve the anticipated benefits, including expected growth, margins, or synergies. Integrating acquired businesses may involve significant risks, including diversion of management attention, difficulty retaining key personnel, the discovery of previously unknown liabilities or project costs, challenges integrating systems and controls, and impairment of goodwill or other intangible assets.
In addition, we may determine that it is in our best interest to divest certain businesses. We may be unable to complete divestitures on acceptable terms or within desired timeframes, and any such transactions could result in losses.
Failure to successfully execute acquisitions, integrations, or divestitures could adversely affect our business, financial condition, results of operations, and reputation.
Our failure to protect our management information systems against security breaches could adversely affect our business and results of operations.
Our information systems are subject to the risk of unauthorized access, cyberattacks, phishing, malware, malicious code, system intrusions and other security incidents, including attempts to access or misuse our confidential and proprietary information and that of our customers, business partners and other third parties. Methods used to obtain unauthorized access evolve rapidly, and the increasing use of artificial intelligence has introduced additional cybersecurity risks that may be difficult to anticipate or mitigate. A successful security breach could result in the misappropriation of assets or information, manipulation of data, or damage to, or disruption of, our systems.
We rely heavily on computer, information, and communications technology and related systems, some of which are hosted or supported by third-party service providers. Disruptions in system availability, whether due to cybersecurity incidents, third-party failures or other causes, could delay or prevent the performance of critical business operations. While we maintain safeguards designed to protect the availability and security of our information technology systems, these measures may not be sufficient, and we may be required to expend significant additional resources to prevent, detect, respond to or remediate cybersecurity incidents.
We are subject to privacy and data protection laws and regulations in the United States and internationally, including the General Data Protection Regulation (“GDPR”) in the European Union, as well as contractual obligations requiring the protection of confidential and proprietary information. Although we have implemented security measures and technologies intended to protect sensitive information and support regulatory compliance, these measures may not prevent all security incidents. Any failure, or perceived failure, to comply with applicable laws, regulations or contractual obligations could result in litigation, regulatory investigations, fines, penalties or reputational harm.
While we do not operate in the high-technology sector and do not maintain large volumes of sensitive personal data, we maintain significant cash balances, which may make us a target for social engineering schemes, business email compromise, or other fraud. We maintain various insurance coverages intended to limit financial loss from these risks; however, such insurance may not cover all types of losses or may be insufficient to cover the full extent of any loss incurred.
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As previously disclosed, we were the target of a complex criminal scheme in Fiscal 2024 that resulted in fraudulently-induced outbound wire transfers to a third-party account (see Note 17 to the accompanying consolidated financial statements). Although we are not aware of any other material cybersecurity incidents, we may be subject to future attacks or security breaches. Any such incident could adversely affect our reputation, business relationships, financial condition, results of operations or cash flows.
Changes in tax laws or tax rates could increase our tax expense.
We are subject to income taxes in the U.S. and in foreign jurisdictions. Changes in tax laws, tax treaties or regulations, or in their interpretation or enforcement, in any jurisdiction where we operate could increase our effective tax rate, increase our tax liabilities, or increase our costs of tax compliance.
Certain of our tax positions may be successfully challenged by tax authorities which could result in additional income tax expense.
The determination of our worldwide provision for income taxes requires significant judgment and involves the application of complex tax laws and regulations. In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain. Our tax estimates and tax positions could be materially affected by many factors including the final outcome of tax audits and related appeals, the introduction of new tax accounting standards, legislation, regulations and related interpretations, our global mix of earnings, the realization of deferred tax assets, changes in uncertain tax positions, and changes in our tax strategies.
The examination of our income tax returns by tax authorities, or the resolution of any related appeals, could result in adjustments to income taxes previously recorded or paid. Any such adjustments could have a material adverse effect on our net earnings and cash flows from operations. See Note 12 to the accompanying consolidated financial statements for a discussion of our income tax examinations.
Violations of the Foreign Corrupt Practices Act or similar anti-bribery laws may harm our business.
The U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act of 2010 and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to officials or others for the purpose of obtaining or retaining business. We maintain policies, procedures and internal controls designed to promote compliance with these laws. However, we cannot provide assurance that our controls and procedures will prevent violations by our employees or by third parties acting on our behalf, including partners, subcontractors or suppliers.
If we are found to be liable for anti-bribery law violations (either due to our own acts or our inadvertence, or due to the acts or inadvertence of others including our partners, subcontractors or suppliers), we could suffer from criminal or civil penalties or other sanctions, including contract cancellations or debarment, and damage to our reputation, any of which could have a material adverse effect on our business. Litigation or investigations relating to alleged or suspected violations of anti-bribery laws, even if such litigation or investigations demonstrate ultimately that we did not anti- laws, could be , and could management’s attention away from other aspects of our business.
Risks Related to an Investment in Our Securities
Our acquisition strategy may result in dilution to our stockholders.
We may make future acquisitions of other businesses that require the use of cash, issuances of common stock, and/or debt financing. Stock issuances and financing, if obtained, may not be on terms favorable to us and could result in substantial dilution to our stockholders at the time(s) of these transactions.
Future restricted stock issuances and stock option exercises will dilute the ownership of the Company’s current stockholders.
We award restricted stock units and stock options to directors, executives, and other key employees. The number of shares of our common stock that will ultimately be issued in connection with the restricted stock unit awards is not known. Any issuance will result in the dilution of the stock ownership of current stockholders. Additionally, future exercises of options to purchase shares of common stock at prices below prevailing market prices will result in ownership dilution for current stockholders.
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Our officers, directors and certain unaffiliated stockholders may have meaningful control over the Company.
As of January 31, 2026, our executive officers and directors as a group directly owned approximately 2.7% of our voting shares. In addition, as of December 31, 2025, two other stockholders beneficially owned, in the aggregate, approximately 12.2% of our shares. As a result, these stockholders may be able to influence corporate actions such as the election of directors, amendments to our certificate of incorporation, the consummation of any merger, the sale of all or substantially all of our assets, or other actions requiring stockholder approval.
We may not pay cash dividends in the future.
Our board of directors evaluates our ongoing operational and financial performance in order to determine what role strategically aligned dividends should play in creating shareholder value. We have paid regular and special cash dividends in the past. Since Fiscal 2019, we have paid quarterly cash dividends. There can be no assurance that the evaluations of our board of directors will result in the payment of regular or special cash dividends, or a change in the amounts of such dividends, in the future.
We may discontinue the repurchase of our common stock in the future.
Under our share repurchase program, our board of directors has authorized us to repurchase shares of our common stock in the open market or through investment banking institutions, privately negotiated transactions, or direct purchases. We began to repurchase shares of our common stock in November 2021, and we have repurchased shares of our common stock during each fiscal year since then. The timing and amount of stock repurchase transactions depend on market and business conditions, applicable legal and credit requirements, and other corporate considerations. We have no obligation to repurchase any amount of our common stock under the share repurchase program. We could suspend, modify or discontinue our share repurchase program at any time, and we cannot guarantee that we will continue to make common stock repurchases up to the authorized amount.
Provisions of our certificate of incorporation and Delaware law could deter takeover attempts .
Provisions of our certificate of incorporation and Delaware law may delay, prevent, or complicate a merger, tender offer or proxy contest involving us. Among other things, our board of directors may issue up to 500,000 shares of our preferred stock and may determine the price, rights, preferences, privileges and restrictions, including voting and conversion rights, of these shares. The issuance of preferred stock by us could adversely affect the rights of holders of common stock by, among other factors, establishing dividend rights, liquidation rights and voting rights that are superior to the rights of the holders of the common stock. In addition, Delaware law limits transactions between us and other parties that acquire significant amounts of our stock without approval of our board of directors.
