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Financial report summary
?Risks
- Risks Relating to Our Business and Industry
- We engage in a highly competitive business. If we are unable to compete effectively, we could lose market share and our business and results of operations could be negatively impacted.
- Our continued success is dependent upon our ability to hire, retain and utilize qualified personnel.
- Our profitability could suffer if we are not able to maintain adequate utilization of our workforce due to slowdowns in the economy, or reduced demand for our services.
- If we are unable to integrate acquired businesses successfully, our business could be harmed
- There is no assurance that we will achieve synergies and cost savings in connection with prior or future acquisitions.
- Our results of operations depend on the award of new contracts and the renewal of existing contracts and the timing of the performance of these contracts.
- Continuing worldwide political, social and economic uncertainties may adversely affect our revenue and profitability.
- Outbreaks of communicable diseases, including the global pandemic related to COVID-19 and its variants may have, directly or indirectly, a material and adverse effect on our business, financial condition, and results of operations. The duration and extent to which this will impact our future financial condition and results of operations remains uncertain.
- Inflation could adversely affect our business and results of operations.
- A significant decline in new home construction, and/or a deterioration in expectations regarding the homebuilding market, could have a material adverse impact on our business, financial condition and results of operations.
- Construction, roadway, mining and maintenance sites are inherently dangerous workplaces. If we, the owner, or others working at such sites fail to maintain safe work conditions, we can be exposed to significant financial losses and reputational harm, as well as civil and criminal liabilities.
- Failure to maintain an adequate safety record could impair our ability to perform contracts for existing customers or our ability to obtain new contracts.
- Our services expose us to significant risks of liability, and our insurance policies may not provide adequate coverage.
- Unavailability or cancellation of third-party insurance coverage would increase our overall risk exposure as well as disrupt the management of our business operations.
- Our use of the percentage of completion method of revenue recognition requires that we estimate costs to be incurred under long-term contracts. Incorrect estimates could result in a reduction or reversal of previously recorded revenue and profits.
- We are dependent on third parties to complete certain elements of our contracts.
- Failure of our sub-consultants to satisfy their obligations to us or other parties, or the inability to maintain these relationships, may adversely impact our business operations and financial results.
- Weather conditions and seasonal revenue fluctuations may adversely impact our financial results.
- Catastrophic events may adversely impact our business operations.
- We rely on third-party internal and outsourced software to run our critical accounting, project management and financial information systems. As a result, any sudden loss, disruption or unexpected costs to maintain these systems could significantly increase our operational expense and disrupt the management of our business operations.
- We are subject to cybersecurity risks and breaches of our systems and information technology could adversely impact our ability to operate.
- Negative conditions in the credit and financial markets and delays in receiving customer payments could result in liquidity problems, adversely affecting our cost of borrowing and our business.
- Our quarterly results may fluctuate significantly, which could have a material negative effect on the price of our common stock.
- An impairment charge on our goodwill could have a material adverse impact on our financial position and results of operations.
- Increases in inflation, interest rates, and/or construction costs could reduce the demand for our services as well as decrease our profit on existing contracts, particularly our fixed price contracts.
- We are subject to professional standards, duties and statutory obligations on professional reports and opinions we issue, which could subject us to monetary damages.
- Our credit agreement contains several restrictive covenants, which could limit our ability to finance future operations, acquisitions or capital needs or engage in other business activities that may be in our interest.
- Variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.
- Risks Relating to Government Contracts, Regulation and Litigation
- Governmental agencies may modify, curtail, or terminate our contracts at any time prior to their completion and, if we do not replace them, we may suffer a decline in revenue.
- Because we provide services to municipalities and other public agencies, we are more susceptible to the unique risks associated with government contracts.
- Legislation, policy, rules, or regulations may be enacted that limit or change the ability of state, regional or local agencies to contract for our privatized services. Such changes would affect our ability to obtain new contracts and may decrease the demand for our services.
- State and other public employee unions may bring litigation that seeks to limit the ability of public agencies to contract with private firms to perform government employee functions relating to public improvements. Judicial determinations in favor of these unions could affect our ability to compete for contracts and may have an adverse effect on our financial results.
- Our failure to comply with a variety of complex procurement rules and regulations could damage our reputation and result in our being liable for penalties, including termination of our government contracts, disqualification from bidding on future government contracts and suspension or debarment from government contracting.
- The outcome of pending and future claims and litigation could have a material adverse impact on our business, financial condition, and results of operations.
- Employee, agent or partner misconduct or our overall failure to comply with laws or regulations may adversely impact our reputation and financial results as well as subject us to criminal and civil enforcement actions.
- Changes in resource management or infrastructure industry laws, regulations, and programs could directly or indirectly reduce the demand for our services which could in turn negatively impact our revenue.
- We may be subject to liabilities under environmental laws and regulations, including liabilities assumed in acquisitions for which we may not be indemnified.
- Changes in tax laws could increase our tax rate and tax payments and materially affect our results of operations.
- Risks Relating to Our Common Stock
- If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud. As a result, current and potential stockholders could lose confidence in our financial reporting, which would harm our business and the trading price of our common stock.
- Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
- The price of our common stock has been, and may continue to be, volatile and the value of our common stock could decline.
- An active trading market for our common stock may not be sustained.
- There can be no assurance that we will be able to comply with the continued listing standards of Nasdaq.
- If securities analysts do not publish research or reports about our business or if they publish negative evaluations of our stock, the price of our stock could decline.
- Our President, Chairman and Chief Executive Officer owns a large percentage of our voting stock, which may allow him to have a significant influence on all matters requiring stockholder approval.
- Future issuances or sales of a substantial number of shares of our common stock, or the perception that such issuances or sales may occur, could cause our stock price to decline.
- We cannot guarantee that our share repurchase program will be fully implemented or that it will enhance long-term stockholder value.
- Anti-takeover provisions under our charter documents and Delaware law could delay or prevent a change of control, which could limit the market price of our common stock and may prevent or frustrate attempts by our stockholders to replace or remove our current management.
- Our amended and restated bylaws designate specific courts as the exclusive forum for certain litigation that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.
- We are an emerging growth company, and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our common stock less attractive to investors.
- Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain.
Management Discussion
- 1 Represents non-GAAP financial measures. See Other Financial Information and Non-GAAP key performance indicators below in results of operations.
- Gross contract revenue for the year ended December 31, 2023 increased $84.6 million or 32.3% to $346.3 million as compared to $261.7 million for the year ended December 31, 2022. For the year ended December 31, 2023, gross contract revenue attributable to work performed by our workforce increased $68.8 million, or 29.3% to $304.0 million or 87.8% of gross contract revenue as compared to $235.2 million or 89.9% for year ended December 31, 2022 (see Net service billing – non-GAAP). Of the $84.6 million increase in gross contract revenue during the year ended December 31, 2023, acquisitions completed in 2023 represented $30.5 million or 36.5% of the increase.
- For the year ended December 31, 2023, gross contract revenue from our building infrastructure market increased $24.4 million or 14.3% as compared to the year ended December 31, 2022. Building Infrastructure includes commercial, municipal and residential infrastructure. The increase in building infrastructure revenue is the result of organic growth and acquisitions. Within the building infrastructure market, 35.7% of gross contract revenue was derived from residential assignments including single family, multi-family and mixed-use housing stock, 48.3% from commercial assignments including retail, hospitality and quick-serve restaurants (QSR), office and industrial, data centers and healthcare, and 16.0% from municipal assignments. Within residential, 43.9% of gross contract revenue was derived from for-sale homebuilding assignments, 47.0% from residential multi-family and 9.1% from mixed use projects. While the homebuilding market shows signs of rebounding from prior year interest rate impacts, for-sale residential services represented just 8.8% of our total gross contract revenue for year ended December 31, 2023. Within commercial, 42.1% of revenue was derived from office and industrial assignments, 39.1% from retail, hospitality, and quick serve restaurants, 11.6% from data centers, 5.1% from healthcare and 2.1% was from other projects. We continue to experience strong demand for our building infrastructure services and maintain a positive outlook on this market as we continue to experience strength in markets including data centers, quick serve restaurants, industrial distribution facilities, schools, and build-for-rent communities.