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Financial report summary
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Jacobs Solutions • Leidos • Tetra Tech • AECOM • Stantec • Hill International • Leidos • Willdan • Intertek • Bureau VeritasRisks
- The loss of key personnel or our inability to attract and retain qualified personnel could significantly disrupt our business.
- A delay in the completion of the budget process of the U.S. government could delay procurement of our services and have an adverse effect on our future revenue.
- California state budgetary constraints may have a material adverse impact on us.
- We derive a majority of our gross revenues from public and quasi-public governmental agencies, and any disruption in government funding or in our relationship with those agencies could adversely affect our business.
- Our inability to win or renew government contracts during regulated procurement processes or preferences granted to certain bidders for which we would not qualify could harm our operations and significantly reduce or eliminate our profits.
- If we fail to complete a project in a timely manner, miss a required performance standard, or otherwise fail to adequately perform on a project, then we may incur a loss on that project, which may reduce or eliminate our overall profitability.
- We depend on a limited number of clients for a significant portion of our business.
- Our industry is highly competitive and we may not be able to compete effectively with competitors.
- If we extend a significant portion of our credit to clients in a specific geographic area or industry, we may experience disproportionately high levels of collection risk and nonpayment if those clients are adversely affected by factors particular to their geographic area or industry.
- 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.
- Our actual business and financial results could differ from the estimates and assumptions that we use to prepare our financial statements, which may significantly reduce or eliminate our profits.
- Our profitability could suffer if we are not able to maintain adequate utilization of our workforce.
- Legal proceedings, investigations, and disputes, including those assumed in acquisitions of other businesses for which we may not be indemnified, could result in substantial monetary penalties and damages.
- Unavailability or cancellation of third-party insurance coverage would increase our overall risk exposure as well as disrupt the management of 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 highly dependent on information and communications systems. System failures, security breaches of networks or systems could significantly disrupt our business and operations and negatively affect the market price of our common stock.
- Cybersecurity breaches of our systems and information technology could adversely impact our ability to operate.
- Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.
- We have made and expect to continue to make acquisitions that could disrupt our operations and adversely impact our business and operating results. Our inability to successfully integrate acquisitions could impede us from realizing all of the benefits of the acquisitions, which could weaken our results of operations.
- If we are not able to integrate acquired businesses successfully, our business could be harmed.
- As a government contractor, we must comply with various procurement laws and regulations and are subject to regular government audits. A violation of any of these laws and regulations or the failure to pass a government audit could result in sanctions, contract termination, forfeiture of profit, harm to our reputation or loss of our status as an eligible government contractor and could reduce our profits and revenue.
- 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.
- Current and potential changes in applicable tax laws could increase our tax rate and materially affect our results of operations.
- Our revenue and growth prospects may be harmed if we or our employees are unable to obtain government granted eligibility or other qualifications we and they need to perform services for our customers.
- Our failure to comply with export laws and regulations may adversely impact our operations.
- Our 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.
- Provisions in our charter documents and the Delaware General Corporation Law could make it more difficult for a third party to acquire us and could discourage a takeover and adversely affect existing stockholders.
- We currently do not pay dividends and do not intend to pay dividends on our shares of common stock in the foreseeable future and, consequently, your only current opportunity to achieve a return on your investment is if the price of our shares appreciates.
Management Discussion
- Our consolidated gross revenues increased by $74,961, or 10%, in 2023 compared to 2022. The increase in gross revenues was primarily due to incremental gross revenues of $100,489 from acquisitions completed since the beginning of 2022 and organic increases in our geospatial solution services of $9,981. These increases were partially offset by decreases in our real estate transactional services of $20,986 driven by market reactions to increases in interest rates, decreases in our construction quality assurance practices of $5,903, and decreases in our liquefied natural gas business ("LNG") of $5,338 driven by project cycles.
- As a percentage of gross revenues, our gross profit margin was 49.9% and 49.1% in 2023 and 2022, respectively. As a percentage of gross revenues, sub-consultant services and other direct costs decreased 2.0% and 0.1%, respectively. These decreases were partially offset by increases in direct salaries and wages as a percentage of gross revenues of 1.3%. The decrease in sub-consultant services as a percentage of gross revenues was primarily driven by the mix of business in our real estate transactional, civil program management services, and power delivery and utility services.
- Our operating expenses increased $49,390, or 15.4%, in 2023 compared to 2022. The increase in operating expenses primarily resulted from increased payroll costs of $32,649, amortization expenses of $11,336, and general and administrative expenses of $1,554. The increase in payroll costs was primarily driven by an increase in employees as compared to the prior year period as a result of our 2022 and 2023 acquisitions, partially offset by a decrease of $5,205 due to changes in our paid time off policy during 2023. The increase in amortization expense was driven by acquisitions. The increase in general and administrative expenses was primarily due to incremental expenses from acquisitions of $7,245, increases in information technology costs of $1,803, and increases in professional fees of $1,311, partially offset by earn-out fair value adjustments of $9,280 during 2023 that decreased the contingent consideration liability related to acquisitions compared to earn-out fair value adjustments of $2,972 during 2022 that increased the contingent consideration liability related to acquisitions.