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.
