Construction Partners (ROAD) risk factors, FY2024 10-K

Risks Related to our Business

1. 01A significant slowdown or decline in economic conditions, particularly in the southern United States, could adversely impact our results of operations
2. 02Our business depends on federal, state and local government spending for public infrastructure construction, and reductions in government funding could adversely affect our results of operations
3. 03We derive a significant portion of our revenues from state DOTs. The loss of our ability to competitively bid for certain projects or successfully contract with state DOTs could have a material adverse effect on our business
4. 04Government contracts generally are subject to a variety of regulations, requirements and statutes, the violation or alleged violation of which could have a material adverse effect on our business
5. 05The cancellation of a significant number of contracts, our disqualification from bidding on new contracts and the unpredictable timing of new project opportunities could have a material adverse effect on our business
6. 06If we are unable to accurately estimate the overall risks, revenues or costs on our projects, we may incur contract losses or achieve lower profits than anticipated
7. 07Inflation and supply chain disruptions have resulted, and may continue to result, in increased costs, some of which we may not be able to recoup
8. 08Because our industry is capital-intensive and we have significant fixed and semi-fixed costs, our profitability is sensitive to changes in volume
9. 09The success of our business depends, in part, on our ability to execute on our acquisition strategy, to successfully integrate acquired businesses and to retain key employees of acquired businesses
10. 10We may lose business to competitors that underbid us and may be unable to compete favorably in our highly competitive industry
11. 11We may be unable to obtain or maintain sufficient bonding capacity, which could preclude us from bidding on certain projects
12. 12Our business is seasonal and subject to adverse weather and climate conditions, which can adversely impact our business
13. 13We depend on our information technology systems and processes, which are subject to cybersecurity and data leakage risks
14. 14Design-build contracts subject us to the risk of design errors and omissions
15. 15From time to time, we enter into joint venture contracts to perform certain projects, and these arrangements expose us to certain risks and uncertainties that are outside of our control
16. 16Our continued success requires us to hire, train and retain qualified personnel and subcontractors in a competitive industry
17. 17Our results of operations can be adversely affected by labor shortages, turnover and labor cost increases
18. 18We depend on third parties for equipment and supplies essential to operate our business
19. 19Supply chain issues, including shortages of raw materials needed for HMA production, equipment, vehicles and construction supplies, could increase our costs or cause delays in our ability to complete our projects, which could have an adverse impact on our business and our relationships with customers
20. 20We consume natural gas, electricity, diesel fuel, liquid asphalt and other petroleum-based resources that are subject to potential reliability issues, supply constraints and significant price fluctuations
21. 21Our contract backlog is subject to reductions in scope and cancellations and therefore could be an unreliable indicator of our future earnings
22. 22Failure of our subcontractors to perform as expected could have a negative impact on our results
23. 23The construction services industry is highly schedule-driven, and our failure to meet the schedule requirements of our contracts could adversely affect our reputation and/or expose us to financial liability
24. 24An inability to secure sufficient aggregates reserves could have a negative impact on our future results of operations
25. 25A failure to obtain or maintain adequate insurance coverage could adversely affect our results of operations
26. 26We may be unable to identify and contract with qualified “disadvantaged business enterprises” to perform as subcontractors, which could cause us to breach certain contracts with governmental customers
27. 27Failure to maintain safe work sites could result in significant losses, which could materially affect our business and reputation

Legal and Regulatory Risks

1. 28We could incur material costs and losses as a result of claims that our products do not meet regulatory requirements or contractual specifications
2. 29We are, and may continue to be, involved in routine litigation and government inquiries in the ordinary course of business
3. 30Environmental laws and regulations and any changes to, or liabilities arising under, such laws and regulations could have a material adverse effect on our financial condition, results of operations and liquidity
4. 31Climate change and related laws and regulations could adversely affect us
5. 32Increasing focus by stakeholders on environmental, social and governance (“ESG”) policies and practices could result in additional costs and could adversely impact our reputation, investor perception, employee retention and willingness of third parties to do business with us
6. 33Our operations are subject to special hazards that may cause personal injury or property damage, subjecting us to liabilities and possible losses that may not be covered by insurance
7. 34Our failure to comply with immigration laws could result in significant liabilities, harm our reputation with our customers and disrupt our operations
8. 35Federal, state and local employment-related laws and regulations could increase our cost of doing business and subject us to fines and lawsuits

Financial Risks

1. 36Our substantial indebtedness could adversely affect our financial condition and prevent us from fulfilling our obligations
2. 37The Credit Agreements restrict our ability to engage in some business and financial transactions
3. 38We may need to raise additional capital in the future, and we may not be able to do so on favorable terms or at all, which could impair our ability to operate our business or achieve our growth objectives
4. 39We may be required to record an impairment charge if we determine that goodwill recorded in connection with prior acquisitions has become impaired, and this determination requires us to make significant judgments and assumptions about the future that are inherently subject to risks and uncertainties
5. 40Our earnings are affected by the application of accounting standards and our critical accounting policies, which involve subjective judgments and estimates by our management. Our actual results could differ from the estimates and assumptions used to prepare our consolidated financial statements
6. 41Unfavorable developments affecting the banking and financial services industry could adversely affect our business, liquidity and financial condition and overall results of operations

General Risks

1. 42Force majeure events, such as natural disasters, pandemics and terrorist attacks, and unexpected equipment failures could negatively impact our business, which may affect our financial condition, results of operations or cash flows
2. 43We have incurred, and expect to continue to incur, substantial costs as a result of being a public company, which may significantly affect our financial condition
3. 44If we are unable to maintain effective internal control over financial reporting, investors could lose confidence in our consolidated financial statements and our Company, which could have a material adverse effect on our stock price

Risks Relating to Ownership of Our Class A Common Stock

1. 45The dual class structure of our common stock has the effect of concentrating voting control with holders of our Class B common stock, which limits the ability of holders of our Class A common stock to influence corporate matters
2. 46Future sales, or the perception of future sales, of Class A common stock by us or our existing stockholders in the public market could cause the market price for Class A common stock to decline
3. 47SunTx, together with its principals and their respective affiliates and family members (collectively, the “SunTx Group”), controls us, and their interests may conflict with ours or yours in the future
4. 48We may issue preferred stock with terms that could adversely affect the voting power or value of our Class A common stock
5. 49Provisions in our governing documents and Delaware corporate law make it more difficult to effect a change in control of our Company, which could adversely affect the price of our Class A common stock
6. 50Our governing documents designate certain courts as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees
7. 51Because we are a “controlled company” under the listing standards of The Nasdaq Stock Market LLC and the rules of the SEC, our stockholders do not have, and may never have, certain corporate governance protections that are available to stockholders of companies that are not controlled companies
8. 52We do not intend to pay cash dividends on our Class A common stock in the foreseeable future, and therefore only appreciation, if any, of the price of our Class A common stock will provide a return to our stockholders