IES Holdings, Inc 10-Q for FY2024 Q3
IES Holdings, Inc. (IESC)
10-Q
2024-08-02
For: 2024-06-30
View Original
Added on
April 11, 2026
About this 10-Q
IES Holdings, Inc filed this 10-Q on August 2, 2024, covering the quarter ended June 30, 2024 (FY2024 Q3).
Headline figures
Quarter ended June 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $768.42M
- up 31.5% from $584.45M a year earlier
- Net income
- $66.64M
- up 157.8% from net income of $25.85M a year earlier
- Diluted EPS
- $2.67
- up 229.6% from $0.81 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM | |||||
(Mark One) | ||||||||
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||||||
| For the quarterly period ended | ||||||||
| OR | ||||||||
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||||||
For the transition period from to | ||||||||
Commission file number | |||||
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of | (I.R.S. Employer | ||||
| incorporation or organization) | Identification No.) | ||||
(Address of principal executive offices and zip code)
Registrant’s telephone number, including area code: (713 ) 860-1500
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | ☑ | ||||||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | ||||||||||||
| Emerging growth company | ||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
On July 31, 2024, there were 19,978,209 shares of common stock outstanding.
1
IES HOLDINGS, INC. AND SUBSIDIARIES
INDEX
| Page | |||||||||||
2
PART I. FINANCIAL INFORMATION
DEFINITIONS
In this Quarterly Report on Form 10-Q, the words “IES”, the “Company”, the “Registrant”, “we”, “our”, “ours” and “us” refer to IES Holdings, Inc. and, except as otherwise specified herein, to our subsidiaries.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes certain statements that may be deemed “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, all of which are based upon various estimates and assumptions that the Company believes to be reasonable as of the date hereof. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “could,” “should,” “expect,” “plan,” “project,” “intend,” “anticipate,” “believe,” “seek,” “estimate,” “predict,” “potential,” “pursue,” “target,” “continue,” the negative of such terms or other comparable terminology. These statements involve risks and uncertainties that could cause the Company’s actual future outcomes to differ materially from those set forth in such statements. Such risks and uncertainties include, but are not limited to:
•a general reduction in the demand for our products or services;
•changes in general economic conditions, including market and macro-economic disruptions resulting from the ongoing Ukraine and Israel conflicts, trade tensions between the U.S. and China, or other geo-political events;
•competition in the industries in which we operate, both from third parties and former employees, which could result in the loss of one or more customers or lead to lower margins on new projects;
•our ability to successfully manage projects, the cost and availability of qualified labor and the ability to maintain positive labor relations, and our ability to pass along increases in the cost of commodities used in our business, in particular, copper, aluminum, steel, fuel, electronic components and certain plastics;
•supply chain disruptions due to our suppliers' access to materials and labor, their ability to ship products timely, or credit or liquidity problems they may face;
•the impact of future epidemics or pandemics on our business, including the potential for new or continued job site closures or work stoppages, supply chain disruptions, delays in awarding new project bids, construction delays, reduced demand for our services, delays in our ability to collect from our customers, or illness of management or other employees;
•credit and capital market conditions, including changes in interest rates that affect the cost of construction financing and mortgages, and the inability of some of our customers to retain sufficient financing at acceptable rates, which could lead to project delays or cancellations;
•inaccurate estimates used when entering into fixed-price contracts, the possibility of errors when estimating revenue and progress to date on percentage-of-completion contracts, and complications associated with the incorporation of new accounting, control and operating procedures;
•our ability to enter into, and the terms of, future contracts;
•the inability to carry out plans and strategies as expected, including the inability to identify and complete acquisitions that meet our investment criteria in furtherance of our corporate strategy, or the subsequent underperformance of those acquisitions;
•challenges integrating new businesses into the Company or new types of work, products or processes into our segments;
•backlog that may not be realized or may not result in profits;
•failure to adequately recover on contract change orders or claims against customers;
•closures or sales of our facilities resulting in significant future charges, including potential warranty losses or other unexpected liabilities, or a significant disruption of our operations;
•the impact of seasonality, adverse weather conditions, and climate change;
3
•an increased cost of surety bonds affecting margins on work and the potential for our surety providers to refuse bonding or require additional collateral at their discretion;
•fluctuations in operating activity due to downturns in levels of construction or the housing market, seasonality and differing regional economic conditions;
•increases in bad debt expense and days sales outstanding due to liquidity problems faced by our customers;
•accidents resulting from the physical hazards associated with our work and the potential for accidents;
•the possibility that our current insurance coverage may not be adequate or that we may not be able to obtain policies at acceptable rates;
•the effect of litigation, claims and contingencies, including warranty losses, damages or other latent defect claims in excess of our existing reserves and accruals;
•interruptions to our information systems and cyber security or data breaches;
•liabilities under existing or potential future laws and regulations, including those laws and regulations related to the environment and climate change;
•expenditures to comply with future changes in laws and regulations, including environmental laws and regulations and those relating to climate change;
•loss of key personnel, ineffective transition of new management, or inability to transfer, renew and obtain electrical and other professional licenses;
•the possibility that the value of certain tax benefits may be reduced by a decrease in the federal tax rate;
•the recognition of tax benefits related to uncertain tax positions and the potential for disagreements with taxing authorities with regard to tax positions we have adopted;
•the potential recognition of valuation allowances or write-downs on deferred tax assets;
•limitations on the availability of sufficient credit or cash flow to fund our working capital needs and capital expenditures, to complete acquisitions, and for debt service;
•difficulty in fulfilling the covenant terms of our revolving credit facility, including liquidity, and other financial requirements, which could result in a default and acceleration of any indebtedness under such revolving credit facility;
•uncertainties inherent in estimating future operating results, including revenues, operating income or cash flow;
•the recognition of potential goodwill, long-lived assets and other investment impairments;
•the existence of a controlling shareholder, who has the ability to take action not aligned with other shareholders or to dispose of all or any portion of the shares of our common stock it holds, which could trigger certain change of control provisions in a number of our material agreements, including our financing and surety arrangements and our executive severance plan;
•the relatively low trading volume of our common stock, which may make it more difficult for shareholders to sell a substantial number of shares for the same price at which shareholders could sell a smaller number of shares;
•the possibility that we issue additional shares of common stock, preferred stock or convertible securities that will dilute the percentage ownership interest of existing stockholders and may dilute the value per share of our common stock;
•the potential for substantial sales of our common stock, which could adversely affect our stock price;
•the impact of increasing scrutiny and changing expectations from investors and customers, or new or changing regulations, with respect to environmental, social and governance practices;
•the cost or effort required for our shareholders to bring certain claims or actions against us, resulting from our designation of the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings;
4
•the possibility that our internal controls over financial reporting and our disclosure controls and procedures may not prevent all possible errors that could occur; and
•other factors discussed elsewhere in this Quarterly Report on Form 10-Q.
You should understand that the foregoing, as well as other risk factors discussed in this document, including those listed in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended September 30, 2023, could cause future outcomes to differ materially from those experienced previously or those expressed in such forward-looking statements. We undertake no obligation to publicly update or revise any information, including information concerning our controlling shareholder, net operating losses, borrowing availability or cash position, or any forward-looking statements to reflect events or circumstances that may arise after the date of this report. Forward-looking statements are provided in this Quarterly Report on Form 10-Q pursuant to the safe harbor established under the Private Securities Litigation Reform Act of 1995 and should be evaluated in the context of the estimates, assumptions, uncertainties and risks described herein.
5
Item 1. Financial Statements
IES HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In Thousands, Except Share Information)
| June 30, | September 30, | ||||||||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||||||||
| ASSETS | |||||||||||||||||||||||||||||
| CURRENT ASSETS: | |||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | $ | |||||||||||||||||||||||||||
| Accounts receivable: | |||||||||||||||||||||||||||||
Trade, net of allowance of $ | |||||||||||||||||||||||||||||
| Retainage | |||||||||||||||||||||||||||||
| Inventories | |||||||||||||||||||||||||||||
| Costs and estimated earnings in excess of billings | |||||||||||||||||||||||||||||
| Prepaid expenses and other current assets | |||||||||||||||||||||||||||||
| Total current assets | |||||||||||||||||||||||||||||
| Property and equipment, net | |||||||||||||||||||||||||||||
| Goodwill | |||||||||||||||||||||||||||||
| Intangible assets, net | |||||||||||||||||||||||||||||
| Deferred tax assets | |||||||||||||||||||||||||||||
| Operating right of use assets | |||||||||||||||||||||||||||||
| Other non-current assets | |||||||||||||||||||||||||||||
| Total assets | $ | $ | |||||||||||||||||||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||||||||||||||||||||
| CURRENT LIABILITIES: | |||||||||||||||||||||||||||||
| Accounts payable and accrued expenses | |||||||||||||||||||||||||||||
| Billings in excess of costs and estimated earnings | |||||||||||||||||||||||||||||
| Total current liabilities | |||||||||||||||||||||||||||||
| Long-term debt | |||||||||||||||||||||||||||||
| Operating long-term lease liabilities | |||||||||||||||||||||||||||||
| Other tax liabilities | |||||||||||||||||||||||||||||
| Other non-current liabilities | |||||||||||||||||||||||||||||
| Total liabilities | |||||||||||||||||||||||||||||
| Noncontrolling interest | |||||||||||||||||||||||||||||
| STOCKHOLDERS’ EQUITY: | |||||||||||||||||||||||||||||
Preferred stock, $ | |||||||||||||||||||||||||||||
| and outstanding | |||||||||||||||||||||||||||||
Common stock, $ | |||||||||||||||||||||||||||||
issued and | |||||||||||||||||||||||||||||
Treasury stock, at cost, | ( | ( | |||||||||||||||||||||||||||
| Additional paid-in capital | |||||||||||||||||||||||||||||
| Retained earnings | |||||||||||||||||||||||||||||
| Total stockholders’ equity | |||||||||||||||||||||||||||||
| Total liabilities and stockholders’ equity | $ | $ | |||||||||||||||||||||||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
6
IES HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income
(In Thousands, Except Share Information)
(Unaudited)
| Three Months Ended June 30, | ||||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||
| Revenues | $ | $ | ||||||||||||||||||||||||
| Cost of services | ||||||||||||||||||||||||||
| Gross profit | ||||||||||||||||||||||||||
| Selling, general and administrative expenses | ||||||||||||||||||||||||||
| Contingent consideration | ||||||||||||||||||||||||||
| Gain on sale of assets | ( | ( | ||||||||||||||||||||||||
| Operating income | ||||||||||||||||||||||||||
| Interest and other (income) expense: | ||||||||||||||||||||||||||
| Interest expense | ||||||||||||||||||||||||||
| Other (income) expense, net | ( | |||||||||||||||||||||||||
| Income from operations before income taxes | ||||||||||||||||||||||||||
| Provision for income taxes | ||||||||||||||||||||||||||
| Net income | ||||||||||||||||||||||||||
| Net income attributable to noncontrolling interest | ( | ( | ||||||||||||||||||||||||
| Comprehensive income attributable to IES Holdings, Inc. | $ | $ | ||||||||||||||||||||||||
| Earnings per share attributable to common stockholders of IES Holdings, Inc.: | ||||||||||||||||||||||||||
| Basic | $ | $ | ||||||||||||||||||||||||
| Diluted | $ | $ | ||||||||||||||||||||||||
| Shares used in the computation of earnings per share: | ||||||||||||||||||||||||||
| Basic | ||||||||||||||||||||||||||
| Diluted | ||||||||||||||||||||||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
7
IES HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income
(In Thousands, Except Share Information)
(Unaudited)
| Nine Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenues | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cost of services | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gross profit | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Selling, general and administrative expenses | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Contingent consideration | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gain on sale of assets | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating income | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest and other (income) expense: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest expense | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other (income) expense, net | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income from operations before income taxes | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Provision for income taxes | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income attributable to noncontrolling interest | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Comprehensive income attributable to IES Holdings, Inc. | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings per share attributable to common stockholders of IES Holdings, Inc.: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basic | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Diluted | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares used in the computation of earnings per share: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basic | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
8
IES HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholders’ Equity (unaudited)
(In Thousands, Except Share Information)
| Three Months Ended June 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Treasury Stock | Additional Paid-In Capital | Retained Earnings | Total Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| BALANCE, March 31, 2024 | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| ties | Issuances under compensation plans | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Acquisition of treasury stock | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-cash compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Change in IES Holdings, Inc.'s ownership interest in consolidated subsidiaries | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Increase in noncontrolling interest | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income attributable to IES Holdings, Inc. | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| BALANCE, June 30, 2024 | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended June 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Treasury Stock | Additional Paid -In Capital | Retained Earnings | Total Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| BALANCE, March 31, 2023 | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuances under compensation plans | — | — | ( | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Acquisition of treasury stock | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-cash compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Increase in noncontrolling interest | — | — | — | — | — | (5,916) | (5,916) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income attributable to IES Holdings, Inc. | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| BALANCE, June 30, 2023 | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Nine Months Ended June 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Treasury Stock | Additional Paid -In Capital | Retained Earnings | Total Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| BALANCE, September 30, 2023 | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuances under compensation plans | — | — | ( | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Acquisition of treasury stock | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Options exercised | — | — | ( | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-cash compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Change in IES Holdings, Inc.'s ownership interest in consolidated subsidiaries | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Increase in noncontrolling interest | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income attributable to IES Holdings, Inc. | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| BALANCE, June 30, 2024 | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Nine Months Ended June 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Treasury Stock | Additional Paid -In Capital | Retained Earnings | Total Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| BALANCE, September 30, 2022 | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuances under compensation plans | — | — | ( | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Acquisition of treasury stock | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Options exercised | — | — | ( | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-cash compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Increase in noncontrolling interest | — | — | — | — | — | (11,742) | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income attributable to IES Holdings, Inc. | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| BALANCE, June 30, 2023 | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
9
IES HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
| Nine Months Ended June 30, | ||||||||||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||||||||||||||||||
| Net income | $ | $ | ||||||||||||||||||||||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||||||||||||||||||
| Bad debt expense | ||||||||||||||||||||||||||||||||
| Deferred financing cost amortization | ||||||||||||||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||||||||||||||
| Gain on sale of assets | ( | ( | ||||||||||||||||||||||||||||||
| Non-cash compensation expense | ||||||||||||||||||||||||||||||||
| Deferred income tax expense | ||||||||||||||||||||||||||||||||
| Unrealized loss on trading securities | ||||||||||||||||||||||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||||||||||||||||||||||
| Accounts receivable | ( | |||||||||||||||||||||||||||||||
| Inventories | ( | ( | ||||||||||||||||||||||||||||||
| Costs and estimated earnings in excess of billings | ( | |||||||||||||||||||||||||||||||
| Prepaid expenses and other current assets | ( | ( | ||||||||||||||||||||||||||||||
| Other non-current assets | ||||||||||||||||||||||||||||||||
| Accounts payable and accrued expenses | ( | |||||||||||||||||||||||||||||||
| Billings in excess of costs and estimated earnings | ||||||||||||||||||||||||||||||||
| Other non-current liabilities | ||||||||||||||||||||||||||||||||
| Net cash provided by operating activities | ||||||||||||||||||||||||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||||||||||||||||||
| Purchases of property and equipment | ( | ( | ||||||||||||||||||||||||||||||
| Proceeds from sale of assets | ||||||||||||||||||||||||||||||||
| Cash paid in conjunction with equity investments | ( | ( | ||||||||||||||||||||||||||||||
| Cash paid in conjunction with business combinations | ( | |||||||||||||||||||||||||||||||
| Net cash provided by (used in) investing activities | ( | |||||||||||||||||||||||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||||||||||||||||||
| Borrowings of debt | ||||||||||||||||||||||||||||||||
| Repayments of debt | ( | ( | ||||||||||||||||||||||||||||||
| Cash paid for finance leases | ( | ( | ||||||||||||||||||||||||||||||
| Settlement of contingent consideration liability | ( | |||||||||||||||||||||||||||||||
| Purchase of noncontrolling interest | ( | |||||||||||||||||||||||||||||||
| Distribution to noncontrolling interest | ( | ( | ||||||||||||||||||||||||||||||
| Purchase of treasury stock | ( | ( | ||||||||||||||||||||||||||||||
| Options exercised | ||||||||||||||||||||||||||||||||
| Net cash used in financing activities | ( | ( | ||||||||||||||||||||||||||||||
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | ( | |||||||||||||||||||||||||||||||
| CASH AND CASH EQUIVALENTS, beginning of period | ||||||||||||||||||||||||||||||||
| CASH AND CASH EQUIVALENTS, end of period | $ | $ | ||||||||||||||||||||||||||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||||||||||||||||||||||||||
| Cash paid for interest | $ | $ | ||||||||||||||||||||||||||||||
| Cash paid for income taxes, net | $ | $ | ||||||||||||||||||||||||||||||
| SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES: | ||||||||||||||||||||||||||||||||
| Contingent consideration liability assumed in conjunction with business combinations | $ | $ | ||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
10
IES HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(All Amounts in Thousands Except Share Amounts)
(Unaudited)
1. BUSINESS AND ACCOUNTING POLICIES
Description of the Business
IES Holdings, Inc. designs and installs integrated electrical and technology systems and provides infrastructure products and services to a variety of end markets, including data centers, residential housing and commercial and industrial facilities. Our operations are organized into four business segments, based upon the nature of our services:
•Communications – Nationwide provider of technology infrastructure services, including the design, build, and maintenance of the communications infrastructure within data centers for co-location and managed hosting customers, for both large corporations and independent businesses.
•Residential – Regional provider of electrical installation services for single-family housing and multi-family apartment complexes, as well as heating, ventilation and air conditioning (HVAC) and plumbing installation services in certain markets.
•Infrastructure Solutions – Provider of electro-mechanical solutions for industrial operations, including apparatus repair and custom-engineered products such as generator enclosures used in data centers and other industrial applications.
•Commercial & Industrial – Provider of electrical and mechanical design, construction, and maintenance services to the commercial and industrial markets in various regional markets and nationwide in certain areas of expertise, such as the power infrastructure market and data centers.
The words “IES”, the “Company”, “we”, “our”, and “us” refer to IES Holdings, Inc. and, except as otherwise specified herein, to our consolidated subsidiaries.
Seasonality and Quarterly Fluctuations
Results of operations from our Residential segment can be seasonal, depending on weather trends, with typically higher revenues generated during spring and summer and lower revenues generated during fall and winter. The Commercial & Industrial, Communications and Infrastructure Solutions segments of our business are less subject to seasonal trends, as work in these segments generally is performed inside structures protected from the weather, although weather can still impact these businesses, especially in the early stages of projects. From quarter to quarter, results for our Communications, Residential, and Commercial & Industrial segments may be materially affected by the timing of new construction projects, and our volume of business may be adversely affected by declines in construction projects resulting from adverse regional or national economic conditions. Quarterly results for our Infrastructure Solutions segment may be affected by the timing of outages or capital projects at our customers’ facilities. Accordingly, operating results for any fiscal period are not necessarily indicative of results that may be achieved for any subsequent fiscal period.
Basis of Financial Statement Preparation
The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of IES, our wholly-owned subsidiaries, and entities that we control due to ownership of a majority of voting interest and have been prepared in accordance with the instructions to interim financial reporting as prescribed by the United States Securities and Exchange Commission (the “SEC”). The results for the interim periods are not necessarily indicative of results for the entire year. These interim financial statements do not include all disclosures required by U.S. generally accepted accounting principles (“GAAP”) and should be read in conjunction with the consolidated financial statements and notes thereto filed with the SEC in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023. In the opinion of management, the unaudited Condensed Consolidated Financial Statements contained in this report include all known accruals and adjustments necessary for a fair presentation of the financial position, results of operations, and cash flows for the periods reported herein. Any such adjustments are of a normal recurring nature.
Noncontrolling Interest
In connection with our acquisitions of Edmonson Electric, LLC and Bayonet Plumbing, Heating & Air-Conditioning, LLC (“Bayonet”) in fiscal 2021, and NEXT Electric, LLC in fiscal 2017, we acquired an 80 percent interest in each of the entities, with the remaining 20 percent interest in each such entity being retained by the respective third-party seller. The interests retained by those third-party sellers are identified on our Condensed Consolidated Balance Sheets as noncontrolling interest, classified outside of permanent equity. Under the terms of each entity’s operating agreement, after five years from the date of the acquisition, we may elect to purchase, or the third-party seller may require us to purchase, part or all of the remaining 20 percent interest in the applicable entity. In each case, the purchase price is variable, based on a multiple of earnings as defined in the applicable operating agreement. Therefore, each noncontrolling interest is carried at the greater of the balance determined under Accounting Standards Codification
11
(“ASC”) 810 and the redemption amounts assuming the noncontrolling interest was redeemable at the balance sheet date. On June 28, 2024, we acquired the 20 percent noncontrolling interest in Bayonet for $31,200 . If all of the noncontrolling interests remaining outstanding at June 30, 2024 had been redeemable at that date, the aggregate redemption amount would have been $38,919 .
Use of Estimates
The preparation of financial statements in conformity with GAAP requires the use of estimates and assumptions by management in determining the reported amounts of assets and liabilities, disclosures of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates are primarily used in our revenue recognition of construction in progress, fair value assumptions in accounting for business combinations, stock-based compensation, reserves for legal matters, and realizability of deferred tax assets and unrecognized tax benefits.
Accounting Standards Recently Adopted
In October 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”). This standard amends the existing guidance under ASC 805 to add contract assets and contract liabilities to the list of exceptions to the recognition and measurement principles that apply to business combinations. Under this standard, the acquirer of a business is expected to recognize and measure acquired contract assets and contract liabilities as if the acquirer entered into the original contract on the same date with the same terms in accordance with ASC 606 rather than at fair value on the date of acquisition. This update is effective for fiscal years beginning after December 15, 2022 and for interim periods within that year. We adopted this standard on October 1, 2023 using the prospective method. ASU 2021-08 impacts how we account for business combinations completed after its adoption.
Recent Accounting Pronouncements and Disclosure Rules Not Yet Adopted
In December 2023, the FASB issued Accounting Standard Update No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). This standard requires more detailed disclosure within the tax rate reconciliation table, as well as additional information about cash taxes paid. This update is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. We are evaluating the impact this update will have on our annual disclosures; however, it will not impact our financial condition, results of operations, or cash flows.
In November 2023, the FASB issued Accounting Standard Update No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). This standard requires disclosure of significant segment expenses, other segment items, and additional information about the chief operating decision maker (“CODM”). This update is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted, and retrospective application is required. We are evaluating the impact this update will have on our annual disclosures; however, it will not impact our financial condition, results of operations, or cash flows.
2. CONTROLLING STOCKHOLDER
Tontine Associates, L.L.C. (“Tontine Associates”), together with its affiliates (collectively, “Tontine”), is the Company’s controlling stockholder, owning approximately 56 percent of the Company’s outstanding common stock based on Amendment No. 30 to the Schedule 13D filed by Tontine with the SEC on June 13, 2024 and the Company's shares outstanding as of July 31, 2024. Accordingly, Tontine has the ability to exercise significant control over our affairs, including the election of directors and most actions requiring the approval of stockholders.
While Tontine is subject to certain restrictions under federal securities laws on sales of its shares as an affiliate, the Company has filed a shelf registration statement to register all of the shares of IES common stock owned by Tontine at the time of registration. As long as the shelf registration statement remains effective and the Company remains eligible to use it, Tontine has the ability to resell any or all of its registered shares from time to time in one or more offerings, as described in the shelf registration statement and in any prospectus supplement filed in connection with an offering pursuant to the shelf registration statement.
Should Tontine sell or otherwise dispose of all or a portion of its position in IES, a change in control of IES could occur. A change of control would trigger the change of control provisions in a number of our material agreements, including our credit agreement, bonding agreements with our sureties and our executive severance plan.
Jeffrey L. Gendell was appointed as Chief Executive Officer of the Company effective October 1, 2020, having served as the Company's Interim Chief Executive Officer since July 31, 2020. Mr. Gendell also serves as Chairman of the Board of Directors, a position he has held since November 2016. He is the managing member and founder of Tontine, and the brother of David B. Gendell, who has served as a member of our Board of Directors since February 2012, and who previously served as Interim Director of
12
Operations from November 2017 to January 2019, as Vice Chairman of the Board from November 2016 to November 2017 and as Chairman of the Board from January 2015 to November 2016. David B. Gendell was an employee of Tontine from 2004 until January 2018.
The Company is party to a sublease agreement with Tontine Associates for corporate office space in Greenwich, Connecticut, with monthly payments due in the amount of approximately $9 . On August 1, 2024, the Company entered into an amendment of the sublease agreement, which was set to terminate on August 31, 2024, to extend the term of the agreement through September 30, 2025 effective September 1, 2024. Payments by the Company are at a rate consistent with that paid by Tontine Associates to its landlord.
On December 6, 2018, the Company entered into a Board Observer Letter Agreement (the "Observer Agreement") with Tontine Associates in order to assist Tontine in managing its investment in the Company. Subject to the terms and conditions set forth in the Observer Agreement, the Company granted Tontine the right, at any time that Tontine holds at least 20% of the outstanding common stock of the Company, to appoint a representative to serve as an observer to the Board (the “Board Observer”). The Board Observer, who must be reasonably acceptable to those members of the Board who are not affiliates of Tontine, shall have no voting rights or other decision making authority. Subject to the terms and conditions set forth in the Observer Agreement, so long as Tontine has the right to appoint a Board Observer, the Board Observer will have the right to attend and participate in meetings of the Board and the committees thereof, subject to confidentiality requirements, and to receive reimbursement for reasonable out-of-pocket expenses incurred in his or her capacity as a Board Observer and such rights to coverage under the Company’s directors’ and officers’ liability insurance policy as are available to the Company’s directors.
3. REVENUE RECOGNITION
Contracts
Our revenue is derived from contracts with customers, and we determine the appropriate accounting treatment for each contract at its inception. Our contracts primarily relate to electrical and mechanical contracting services, technology infrastructure products and services, and electro-mechanical solutions for industrial operations. Revenue is earned based upon an agreed fixed price or actual costs incurred plus an agreed upon percentage.
We account for a contract when: (i) it has approval and commitment from both parties, (ii) the rights of the parties are identified, (iii) payment terms are identified, (iv) the contract has commercial substance, and (v) collectability of consideration is probable. We consider the start of a project to be when the above criteria have been met and we have written authorization from the customer to proceed.
Performance Obligations
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.
We recognize revenue over time for the majority of the services we perform, other than the Residential Single-family and Infrastructure Solutions Industrial Services businesses, as (i) control continuously transfers to the customer as work progresses at a project location controlled by the customer and (ii) we have the right to bill the customer as costs are incurred. Within our Infrastructure Solutions Custom Power Solutions business, we often perform work inside our own facilities, where control does not continuously transfer to the customer as work progresses. In such cases, we evaluate whether the work performed creates an asset with alternative use to the Company and whether we have the right to bill the customer as costs are incurred. Such assessment involves an evaluation of contractual termination clauses. Where we are creating an asset with no alternative use and we have a contractual right to payment for work performed to date, we recognize revenue over time. If we do not have such a right, we recognize revenue upon completion of the contract, when control of the work transfers to the customer.
For arrangements where we recognize revenue over time, we use the percentage of completion method of accounting under which revenue recognized is measured principally by the costs incurred and accrued to date for each contract as a percentage of the estimated total cost for each contract at completion. Contract costs include all direct material, labor and indirect costs related to contract performance. Changes in job performance, job conditions, estimated contract costs and profitability and final contract settlements may result in revisions to costs and income, and the effects of these revisions are recognized in the period in which the revisions are determined. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. This measurement and comparison process requires updates to the estimate of total costs to complete the contract, and these updates may include subjective assessments and judgments.
Certain divisions in the Residential and Infrastructure Solutions segments recognize revenue at the completion of the contract ("completed contract") under the right to invoice practical expedient because the duration of their contracts is short in nature. We recognize revenue on completed contracts when the project is complete and billable to the customer.
13
Variable Consideration
The transaction price for our contracts may include variable consideration, which includes changes to transaction price for approved and unapproved change orders, claims and incentives. Change orders, claims, and incentives are generally not distinct from the existing contract due to the significant integration service provided in the context of the contract and are accounted for as a modification of the existing contract. We estimate variable consideration at the probability weighted value we expect to receive (or the most probable amount we expect to incur in the case of liquidated damages, if any), utilizing estimation methods that best predict the amount of consideration to which we will be entitled (or which will be incurred in the case of liquidated damages, if any). We include variable consideration in the estimated transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur or when the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and determination of whether to include estimated amounts in transaction price are based largely on an assessment of our anticipated performance and all information (historical, current and forecasted) that is reasonably available to us. The effect of variable consideration on the transaction price of a performance obligation is recognized as an adjustment to revenue on a cumulative catch-up basis. To the extent unapproved change orders and claims reflected in transaction price (or accounted for as a reduction of the transaction price in the case of liquidated damages) are not resolved in our favor, or to the extent incentives reflected in transaction price are not earned, there could be reductions in, or reversals of, previously recognized revenue.
Disaggregation of Revenue
We disaggregate our revenue from contracts with customers by activity and contract type, as these categories reflect how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. Our consolidated revenue for the three and nine months ended June 30, 2024 and 2023 was derived from the following activities. Certain prior period amounts have been reclassified to conform with the current period presentation, where applicable. See details in the following tables:
| Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||||||||||||||
| Communications | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
| Residential | ||||||||||||||||||||||||||||||||||||||
| Single-family | ||||||||||||||||||||||||||||||||||||||
| Multi-family and Other | ||||||||||||||||||||||||||||||||||||||
| Total Residential | ||||||||||||||||||||||||||||||||||||||
| Infrastructure Solutions | ||||||||||||||||||||||||||||||||||||||
| Industrial Services | ||||||||||||||||||||||||||||||||||||||
| Custom Power Solutions | ||||||||||||||||||||||||||||||||||||||
| Total Infrastructure Solutions | ||||||||||||||||||||||||||||||||||||||
| Commercial & Industrial | $ | |||||||||||||||||||||||||||||||||||||
| Total Revenue | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
| Three Months Ended June 30, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Communications | Residential | Infrastructure Solutions | Commercial & Industrial | Total | ||||||||||||||||||||||||||||||||||||||||||||||
| Fixed-price | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Time-and-material | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total revenue | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended June 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Communications | Residential | Infrastructure Solutions | Commercial & Industrial | Total | ||||||||||||||||||||||||||||||||||||||||||||||
| Fixed-price | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Time-and-material | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total revenue | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
14
| Nine Months Ended June 30, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Communications | Residential | Infrastructure Solutions | Commercial & Industrial | Total | ||||||||||||||||||||||||||||||||||||||||||||||
| Fixed-price | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Time-and-material | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total revenue | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Nine Months Ended June 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Communications | Residential | Infrastructure Solutions | Commercial & Industrial | Total | ||||||||||||||||||||||||||||||||||||||||||||||
| Fixed-price | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Time-and-material | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total revenue | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
Accounts Receivable and Allowance for Credit Losses
Accounts receivable include amounts that we have billed or have an unconditional right to bill our customers. As of June 30, 2024, Accounts receivable included $13,677 of unbilled receivables for which we have an unconditional right to bill.
Contract Assets and Liabilities
Project contracts typically provide for a schedule of billings on percentage of completion of specific tasks inherent in the fulfillment of our performance obligation(s). The schedules for such billings usually do not precisely match the schedule on which costs are incurred. As a result, contract revenue recognized in the statement of operations can and usually does differ from amounts that can be billed to the customer at any point during the contract. Amounts by which cumulative contract revenue recognized on a contract as of a given date exceeds cumulative billings and unbilled receivables to the customer under the contract are reflected as a current asset in our Condensed Consolidated Balance Sheets under the caption “Costs and estimated earnings in excess of billings”. Amounts by which cumulative billings to the customer under a contract as of a given date exceed cumulative contract revenue recognized are reflected as a current liability in our Condensed Consolidated Balance Sheets under the caption “Billings in excess of costs and estimated earnings”.
During the nine months ended June 30, 2024 and 2023, we recognized revenue of $96,889 and $78,263 related to our contract liabilities at October 1, 2023 and 2022, respectively.
Remaining Performance Obligations
Remaining performance obligations represent the unrecognized revenue value of our contract commitments. New awards represent the total expected revenue value of new contract commitments undertaken during a given period, as well as additions to the scope of existing contract commitments. Our new performance obligations vary significantly each reporting period based on the timing of our major new contract commitments. At June 30, 2024, we had remaining performance obligations of $1,177,184 . The Company expects to recognize revenue on approximately $1,002,742 of the remaining performance obligations over the next 12 months, with the remainder recognized thereafter.
For the three and nine months ended June 30, 2024, net revenue recognized from our performance obligations satisfied in previous periods was not material.
4. DEBT
We are a party to the Third Amended and Restated Credit and Security Agreement (the “Amended Credit Agreement”), which provides for a maximum borrowing amount of $150,000 under our revolving credit facility. The Amended Credit Agreement, which matures on September 30, 2026, contains customary affirmative, negative and financial covenants as disclosed in Item 7 of our Annual Report on Form 10-K for the fiscal year ended September 30, 2023. As of June 30, 2024, the Company was in compliance with the financial covenants under the Amended Credit Agreement.
At June 30, 2024 and September 30, 2023, we had no outstanding borrowings under our revolving credit facility. At June 30, 2024, we had $5,606 in outstanding letters of credit and total availability of $143,049 under our revolving credit facility without triggering the financial covenants under the Amended Credit Agreement.
15
5. PER SHARE INFORMATION
The following tables reconcile the components of basic and diluted earnings per share for the three and nine months ended June 30, 2024 and 2023:
| Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||
| Numerator: | ||||||||||||||||||||||||||
| Net income attributable to IES Holdings, Inc. | $ | $ | $ | $ | ||||||||||||||||||||||
| Increase in noncontrolling interest | ( | ( | ( | ( | ||||||||||||||||||||||
| Net income attributable to restricted stockholders of IES Holdings, Inc. | ( | |||||||||||||||||||||||||
| Net income attributable to common stockholders of IES Holdings, Inc. | $ | $ | $ | $ | ||||||||||||||||||||||
| Denominator: | ||||||||||||||||||||||||||
| Weighted average common shares outstanding — basic | ||||||||||||||||||||||||||
| Effect of dilutive stock options and non-vested securities | ||||||||||||||||||||||||||
Weighted average common and common equivalent shares outstanding — diluted | ||||||||||||||||||||||||||
| Earnings per share attributable to common stockholders of IES Holdings, Inc.: | ||||||||||||||||||||||||||
| Basic | $ | $ | $ | $ | ||||||||||||||||||||||
| Diluted | $ | $ | $ | $ | ||||||||||||||||||||||
| Potentially dilutive securities excluded from the computation of diluted earnings per share as the effect of their inclusion would have been anti-dilutive: | ||||||||||||||||||||||||||
| Employee PSUs | ||||||||||||||||||||||||||
6. OPERATING SEGMENTS
We manage and measure performance of our business in four distinct operating segments: Communications, Residential, Infrastructure Solutions, and Commercial & Industrial. These segments are reflective of how the CODM reviews operating results for the purpose of allocating resources and assessing performance. The Company’s CODM is its Chief Executive Officer.
Transactions between segments, if any, are eliminated in consolidation. Our corporate organization provides general and administrative services, as well as support services, to each of our four operating segments. Management allocates certain shared costs among segments for selling, general and administrative expenses and depreciation expense.
16
Segment information for the three and nine months ended June 30, 2024 and 2023 is as follows:
| Three Months Ended June 30, 2024 | ||||||||||||||||||||||||||||||||||||||
| Communications | Residential | Infrastructure Solutions | Commercial & Industrial | Corporate | Total | |||||||||||||||||||||||||||||||||
| Revenues | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Cost of services | ||||||||||||||||||||||||||||||||||||||
| Gross profit | ||||||||||||||||||||||||||||||||||||||
| Selling, general and administrative | ||||||||||||||||||||||||||||||||||||||
| Contingent consideration | — | 43 | — | — | ||||||||||||||||||||||||||||||||||
| Gain on sale of assets | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||
| Operating income (loss) | $ | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||
| Other data: | ||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization expense | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Capital expenditures | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Total assets | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Three Months Ended June 30, 2023 | ||||||||||||||||||||||||||||||||||||||
| Communications | Residential | Infrastructure Solutions | Commercial & Industrial | Corporate | Total | |||||||||||||||||||||||||||||||||
| Revenues | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Cost of services | ||||||||||||||||||||||||||||||||||||||
| Gross profit | ||||||||||||||||||||||||||||||||||||||
| Selling, general and administrative | ||||||||||||||||||||||||||||||||||||||
| Contingent consideration | — | — | ||||||||||||||||||||||||||||||||||||
| Gain on sale of assets | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||
| Operating income (loss) | $ | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||
| Other data: | ||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization expense | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Capital expenditures | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Total assets | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Nine Months Ended June 30, 2024 | |||||||||||||||||||||||||||||||||||||||||
| Communications | Residential | Infrastructure Solutions | Commercial & Industrial | Corporate | Total | ||||||||||||||||||||||||||||||||||||
| Revenues | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||
| Cost of services | |||||||||||||||||||||||||||||||||||||||||
| Gross profit | |||||||||||||||||||||||||||||||||||||||||
| Selling, general and administrative | |||||||||||||||||||||||||||||||||||||||||
| Contingent consideration | — | 43 | — | — | |||||||||||||||||||||||||||||||||||||
| Gain on sale of assets | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||
| Operating income (loss) | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||
| Other data: | |||||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization expense | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||
| Capital expenditures | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||
| Total assets | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||
17
| Nine Months Ended June 30, 2023 | ||||||||||||||||||||||||||||||||||||||
| Communications | Residential | Infrastructure Solutions | Commercial & Industrial | Corporate | Total | |||||||||||||||||||||||||||||||||
| Revenues | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Cost of services | ||||||||||||||||||||||||||||||||||||||
| Gross profit | ||||||||||||||||||||||||||||||||||||||
| Selling, general and administrative | ||||||||||||||||||||||||||||||||||||||
| Contingent consideration | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Gain on sale of assets | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||
| Operating income (loss) | $ | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||
| Other data: | ||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization expense | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Capital expenditures | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Total assets | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
7. STOCKHOLDERS’ EQUITY
Equity Incentive Plan
The Company’s 2006 Equity Incentive Plan, as amended and restated (the “Equity Incentive Plan”), provides for grants of stock options as well as grants of stock, including restricted stock. Approximately 3.0 million shares of common stock are authorized for issuance under the Equity Incentive Plan, of which approximately 568,992 shares were available for issuance at June 30, 2024.
Stock Repurchase Program
In December 2022, our Board authorized a stock repurchase program for the purchase from time to time of up to $40,000 of the Company’s common stock, replacing the Company's previous repurchase program. Share purchases are made for cash in open market transactions at prevailing market prices or in privately negotiated transactions or otherwise. The timing and amount of purchases under the program are determined based upon prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. All or part of the repurchases may be implemented under a Rule 10b5-1 trading plan, which allows repurchases under predetermined terms at times when the Company might otherwise be prevented from purchasing under insider trading laws or because of self-imposed blackout periods. The program does not require the Company to purchase any specific number of shares and may be modified, suspended, reinstated, or terminated at any time at the Company’s discretion and without notice. We repurchased 234 and 224,013 shares, respectively, of our common stock during the three and nine months ended June 30, 2023 in open market transactions at an average price of $40.00 and $31.06 per share, respectively. We repurchased 157,505 132.92 119,041 shares in open market transactions at an average price of $139.84 , which fully utilized the amount remaining under the previous $40,000 authorization. On July 31, 2024, the Board authorized a new $200,000 stock repurchase program.
Treasury Stock
During the nine months ended June 30, 2024, we issued 82,180 shares of common stock from treasury stock to employees and repurchased 33,940 shares of common stock from our employees to satisfy statutory tax withholding requirements upon the vesting of certain performance phantom stock units under the Equity Incentive Plan. During the nine months ended June 30, 2024, we issued 1,000 unrestricted shares to satisfy the exercise of certain outstanding option awards under the Equity Incentive Plan.
During the nine months ended June 30, 2023, we issued 103,053 shares of common stock from treasury stock to employees and repurchased 31,095 shares of common stock from our employees to satisfy statutory tax withholding requirements upon the vesting of certain performance phantom stock units under the Equity Incentive Plan. In addition, 266 restricted shares were forfeited and returned to treasury stock. During the nine months ended June 30, 2023, we issued 2,000 unrestricted shares to satisfy the exercise of certain outstanding option awards under the Equity Incentive Plan.
Director Phantom Stock Units
Director phantom stock units (“Director PSUs”) are granted to the members of the Board of Directors as part of their overall compensation. The Director PSUs are contractual rights to receive one share of the Company's common stock and are paid via unrestricted stock grants to each director upon their departure from the Board of Directors, or upon a change in control. We record compensation expense for the full value of the grant on the date of grant.
18
Employee Phantom Stock Units
An employee phantom stock unit (an “Employee PSU”) is a contractual right to receive one share of the Company’s common stock. Depending on the terms of each grant, Employee PSUs may vest upon the achievement of certain specified performance objectives and continued performance of services, or may vest based on continued performance of services through the vesting date.
As of June 30, 2024, the Company had outstanding Employee PSUs, which, subject to the achievement of certain performance metrics, could result in the issuance of 324,537 shares of common stock. During the nine months ended June 30, 2024, we granted 86,512 Employee PSUs, 5,608 were forfeited, and 82,180 vested.
A summary of the compensation expense related to our stock awards recognized during the three and nine months ended June 30, 2024 and 2023 is provided in the table below:
| Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2023 | |||||||||||||||||||||
| Restricted stock awards | $ | $ | $ | $ | |||||||||||||||||||
| Director PSUs | $ | $ | $ | 364 | $ | ||||||||||||||||||
| Employee PSUs | $ | $ | $ | $ | |||||||||||||||||||
8. FAIR VALUE MEASUREMENTS
Fair Value Measurement Accounting
Fair value is considered the price to sell an asset, or transfer a liability, between market participants on the measurement date. Fair value measurements assume that (1) the asset or liability is exchanged in an orderly manner, (2) the exchange is in the principal market for that asset or liability, and (3) the market participants are independent, knowledgeable, and able and willing to transact an exchange. Fair value accounting and reporting establishes a framework for measuring fair value by creating a hierarchy for observable independent market inputs and unobservable market assumptions and expands disclosures about fair value measurements. Judgment is required to interpret the market data used to develop fair value estimates. As such, the estimates presented herein are not necessarily indicative of the amounts that could be realized in a current exchange. The use of different market assumptions and/or estimation methods could have a material effect on the estimated fair value.
At June 30, 2024 and September 30, 2023, financial assets and liabilities measured at fair value on a recurring basis were limited to investments in equity securities and debt securities classified as trading securities, our Executive Deferred Compensation Plan, under which certain employees are permitted to defer a portion of their base salary and/or bonus for a Plan Year (as defined in the plan), and contingent consideration liabilities related to certain of our acquisitions.
Financial assets (liabilities) measured at fair value on a recurring basis as of June 30, 2024 and September 30, 2023, are summarized in the following tables by the type of inputs applicable to the fair value measurements:
| June 30, 2024 | |||||||||||||||||||||||||||||
| Total Fair Value | Quoted Prices (Level 1) | Significant Unobservable Inputs (Level 3) | |||||||||||||||||||||||||||
| Equity securities | $ | $ | $ | — | |||||||||||||||||||||||||
| Debt securities classified as trading securities | — | ||||||||||||||||||||||||||||
| Executive savings plan assets | — | ||||||||||||||||||||||||||||
| Executive savings plan liabilities | ( | ( | — | ||||||||||||||||||||||||||
| Contingent consideration liability | ( | — | ( | ||||||||||||||||||||||||||
| Total | $ | $ | $ | ( | |||||||||||||||||||||||||
19
| September 30, 2023 | |||||||||||||||||||||||||||||
| Total Fair Value | Quoted Prices (Level 1) | Significant Unobservable Inputs (Level 3) | |||||||||||||||||||||||||||
| Executive savings plan assets | $ | $ | $ | — | |||||||||||||||||||||||||
| Executive savings plan liabilities | ( | ( | — | ||||||||||||||||||||||||||
| Contingent consideration liability | ( | — | (4,465) | ||||||||||||||||||||||||||
| Total | $ | ( | $ | $ | ( | ||||||||||||||||||||||||
Investments in equity securities and debt securities, all of which are classified as trading securities and mature after one year and before five years at June 30, 2024, were included in “Prepaid expenses and other current assets” in our Condensed Consolidated Balance Sheets. Gains and losses to measure our investments in equity and debt securities at fair value were included in Other (income) expense, net in our Condensed Consolidated Statements of Comprehensive Income. Our unrealized net gains (losses), which are calculated as total net gains (losses) recognized during the period less net gains (losses) recognized on securities sold during the period, were as follows:
| Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Unrealized loss on equity securities | $ | ( | $ | $ | ( | $ | |||||||||||||||||
| Unrealized gain (loss) on debt securities | ( | ||||||||||||||||||||||
| Total unrealized loss on trading securities | $ | ( | $ | $ | ( | $ | |||||||||||||||||
On April 1, 2024, we entered into a contingent consideration arrangement valued at $2,790 in connection with the acquisition of Greiner Industries, Inc. For more information, refer to Note 13, “Business Combinations and Divestitures” in the Notes to our Condensed Consolidated Financial Statements. The contingent consideration obligation related to Bayonet, which was acquired in fiscal year 2021, was settled in cash in December 2023. The table below presents the change in fair value of these obligations, which used significant unobservable inputs (Level 3).
| Contingent Consideration Agreements | |||||||||||||||||
| Fair value at September 30, 2023 | $ | ( | |||||||||||||||
| Acquisitions | ( | ||||||||||||||||
| ( | |||||||||||||||||
| Settlements | |||||||||||||||||
| Fair value at June 30, 2024 | $ | ( | |||||||||||||||
9. INVENTORY
Inventories consist of the following components:
| June 30, | September 30, | |||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||
| Raw materials | $ | $ | ||||||||||||||||||
| Work in process | ||||||||||||||||||||
| Finished goods | ||||||||||||||||||||
| Parts and supplies | ||||||||||||||||||||
| Total inventories | $ | $ | ||||||||||||||||||
20
10. GOODWILL AND INTANGIBLE ASSETS
Goodwill
The following summarizes changes in the carrying value of goodwill by segment during the nine months ended June 30, 2024:
| Communications | Residential | Infrastructure Solutions | Commercial & Industrial | Total | ||||||||||||||||||||||||||||
| Goodwill at September 30, 2023 | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Acquisitions | — | — | ||||||||||||||||||||||||||||||
| Goodwill at June 30, 2024 | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Intangible Assets
Intangible assets consist of the following:
| Estimated Useful Lives (in Years) | June 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net | ||||||||||||||||||||||||||||||||||||||||||
| Trademarks/trade names | - | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||
| Technical library | ( | |||||||||||||||||||||||||||||||||||||||||||
| Customer relationships | - | ( | ||||||||||||||||||||||||||||||||||||||||||
| Non-competition arrangements | ( | |||||||||||||||||||||||||||||||||||||||||||
| Backlog and construction contracts | ( | |||||||||||||||||||||||||||||||||||||||||||
| Total intangible assets | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||
| Estimated Useful Lives (in Years) | September 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net | ||||||||||||||||||||||||||||||||||||||||||
| Trademarks/trade names | - | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||
| Technical library | ( | |||||||||||||||||||||||||||||||||||||||||||
| Customer relationships | - | ( | ||||||||||||||||||||||||||||||||||||||||||
| Non-competition arrangements | ( | |||||||||||||||||||||||||||||||||||||||||||
| Backlog and construction contracts | ( | |||||||||||||||||||||||||||||||||||||||||||
| Total intangible assets | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||
11. COMMITMENTS AND CONTINGENCIES
Legal Matters
From time to time, we are a party to various claims, lawsuits and other legal proceedings that arise in the ordinary course of business. We maintain various insurance coverages to minimize financial risk associated with these proceedings. None of these proceedings, separately or in the aggregate, are expected to have a material adverse effect on our financial position, results of operations or cash flows. With respect to all such proceedings, we record reserves when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. We expense routine legal costs related to these proceedings as they are incurred.
In the course of performing work as a subcontractor, from time to time we may be involved in projects which are the subject of contractual disputes between the general contractor and project owner, or between us and the general contractor. In such cases, payment of amounts owed to us by the general contractor may be delayed as contractual disputes are resolved through mediation, arbitration, or litigation. Such disputes may cause us to incur legal fees and other expenses to enforce our contractual rights, and we may not prevail in recovering all amounts to which we believe we are contractually entitled.
Risk Management
We retain the risk for workers’ compensation, employer’s liability, automobile liability, construction defects, general liability and employee group health claims, as well as pollution coverage, resulting from uninsured deductibles per accident or occurrence which are generally subject to annual aggregate limits. Our general liability program provides coverage for bodily injury and property damage. In many cases, we insure third parties, including general contractors, as additional insured parties under our insurance
21
policies. Losses are accrued based upon our known claims incurred and an estimate of claims incurred but not reported. As a result, many of our claims are effectively self-insured. Many claims against our insurance are in the form of litigation. At June 30, 2024 and September 30, 2023, we had $11,122 and $7,726 , respectively, accrued for self-insurance liabilities. Because the reserves are based on judgment and estimates and involve variables that are inherently uncertain, such as the outcome of litigation and an assessment of insurance coverage, there can be no assurance that the ultimate liability will not be higher or lower than such estimates.
Some of the underwriters of our casualty insurance program require us to post letters of credit as collateral. This is common in the insurance industry. To date, we have not had a situation where an underwriter has had reasonable cause to effect payment under a letter of credit. At June 30, 2024 and September 30, 2023, $5,606 and $4,166 , respectively, of our outstanding letters of credit was utilized to collateralize our insurance program.
Surety
As of June 30, 2024, the estimated cost to complete our bonded projects was approximately $141,933 . We evaluate our bonding requirements on a regular basis, including the terms offered by our sureties. We believe the bonding capacity presently provided by our current sureties is adequate for our current operations and will be adequate for our operations for the foreseeable future.
Other Commitments and Contingencies
Some of our customers and vendors require us to post letters of credit, or provide intercompany guarantees, as a means of guaranteeing performance under our contracts and ensuring payment by us to subcontractors and vendors. If our customer has reasonable cause to effect payment under a letter of credit, we would be required to reimburse our creditor for the letter of credit.
From time to time, we may enter into firm purchase commitments for materials, such as copper or aluminum wire, which we expect to use in the ordinary course of business. These commitments are typically for terms of less than one year and require us to buy minimum quantities of materials at specific intervals at a fixed price over the term. As of June 30, 2024, we did not have any such firm commitments to purchase materials outstanding.
12. LEASES
We enter into various contractual arrangements for the right to use facilities, vehicles and equipment. The lease terms generally range from two to ten years for facilities and three to five years for vehicles and equipment. Our lease terms may include the exercise of renewal or termination options when it is reasonably certain these options will be exercised. Our lease agreements do not contain any material residual value guarantees or restrictive covenants.
Current operating and finance lease liabilities of $20,488 and $4,646 , respectively, as of June 30, 2024, and $19,496 and $4,301 , respectively, as of September 30, 2023, were included in “” in the Condensed Consolidated Balance Sheets. Non-current finance lease liabilities and finance lease right-of-use assets were included in the “” and “”, respectively, in the Condensed Consolidated Balance Sheets.
The maturities of our lease liabilities as of June 30, 2024 are as follows:
| Operating Leases | Finance Leases | Total | |||||||||||||||
Remainder of 2024 | $ | $ | $ | ||||||||||||||
| 2025 | |||||||||||||||||
| 2026 | |||||||||||||||||
| 2027 | |||||||||||||||||
| 2028 | |||||||||||||||||
| Thereafter | |||||||||||||||||
| Total undiscounted lease payments | $ | $ | $ | ||||||||||||||
| Less: imputed interest | |||||||||||||||||
| Present value of lease liabilities | $ | $ | $ | ||||||||||||||
The total future undiscounted cash flows related to lease agreements committed to but not yet commenced as of June 30, 2024 is $8,704 .
22
Lease cost recognized in our Condensed Consolidated Statements of Comprehensive Income is summarized as follows:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| June 30, 2024 | June 30, 2023 | June 30, 2024 | June 30, 2023 | ||||||||||||||||||||
| Operating lease cost | $ | $ | $ | 0 | $ | $ | |||||||||||||||||
| Finance lease cost | |||||||||||||||||||||||
| Amortization of lease assets | |||||||||||||||||||||||
| Interest on lease liabilities | |||||||||||||||||||||||
| Finance lease cost | |||||||||||||||||||||||
| Short-term lease cost | |||||||||||||||||||||||
| Variable lease cost | $ | $ | $ | $ | |||||||||||||||||||
| Total lease cost | $ | $ | $ | $ | |||||||||||||||||||
Other information about lease amounts recognized in our Condensed Consolidated Financial Statements is summarized as follows:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| June 30, 2024 | June 30, 2023 | June 30, 2024 | June 30, 2023 | ||||||||||||||||||||
| Operating cash flows used for operating leases | $ | $ | $ | $ | |||||||||||||||||||
| Operating cash flows used for finance leases | |||||||||||||||||||||||
| Right-of-use assets obtained in exchange for new operating lease liabilities | |||||||||||||||||||||||
| Right-of-use assets obtained in exchange for new finance lease liabilities | |||||||||||||||||||||||
| June 30, 2024 | September 30, 2023 | ||||||||||
| Weighted-average remaining lease term - operating leases | |||||||||||
| Weighted-average remaining lease term - finance leases | |||||||||||
| Weighted-average discount rate - operating leases | % | % | |||||||||
| Weighted-average discount rate - finance leases | % | % | |||||||||
13. BUSINESS COMBINATIONS AND DIVESTITURES
Business combinations
On April 1, 2024, the Company acquired all of the equity interests of Greiner Industries, Inc. ("Greiner"), a Mount Joy, Pennsylvania-based structural steel fabrication and services company for a purchase price of $70,488 . Greiner is part of our Infrastructure Solutions segment and continues to operate under the Greiner name. The acquisition of Greiner will expand our geographic footprint, add custom structural steel fabrication to our product offerings, and provide additional capacity for our existing custom engineered product offerings. In addition to cash consideration of $67,698 , the purchase price also includes contingent consideration of up to $5,000 upon achievement of certain future earnings targets, which was valued at $2,790 as of the date of the acquisition. The fair value of the total consideration for this transaction remains subject to post-closing adjustments as of the date of this report.
The Company accounted for the transaction under the acquisition method of accounting, which requires recording assets and liabilities at fair value (Level 3). The preliminary purchase price allocation is subject to valuation activities that are currently underway; therefore, the allocation of purchase price is subject to change, and is expected to result in adjustments to the preliminary amounts recorded. The preliminary valuation of the assets acquired and liabilities assumed is as follows:
| Current assets | $ | |||||||
| Property and equipment | ||||||||
| Intangible assets | ||||||||
| Goodwill | ||||||||
| Current liabilities | ( | |||||||
| Net assets acquired | $ | |||||||
23
In connection with this acquisition, we acquired goodwill of $2,148 3.4 years.
Greiner contributed $15,286 701
We completed no
Divestitures
On October 7, 2022, we sold 100 % of the membership interests of STR Mechanical, LLC and its subsidiary Technical Services II, LLC (collectively, “STR”). As a result, we recognized a pre-tax gain of $13,045 , which was included in “Gain on sale of assets” within our Condensed Consolidated Statements of Comprehensive Income for the nine months ended June 30, 2023.
24
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and the notes thereto, set forth in Part II, Item 8. “Financial Statements and Supplementary Data” as set forth in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023, and the Condensed Consolidated Financial Statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q. The following discussion may contain forward looking statements. For additional information, see “Disclosure Regarding Forward Looking Statements” in Part I of this Quarterly Report on Form 10-Q.
OVERVIEW
Executive Overview
Please refer to Part I, Item 1. “Business” of our Annual Report on Form 10-K for the fiscal year ended September 30, 2023, for a discussion of the Company’s services and corporate strategy. IES Holdings, Inc., a Delaware corporation, designs and installs integrated electrical and technology systems and provides infrastructure products and services to a variety of end markets, including data centers, residential housing, and commercial and industrial facilities. Our operations are organized into four business segments: Communications, Residential, Infrastructure Solutions and Commercial & Industrial.
Current Market and Operating Conditions
Increases in the target federal funds rate throughout calendar years 2022 and 2023 have resulted in higher mortgage rates, which when combined with elevated materials and labor costs, have had a substantial impact on the affordability of housing. We continue to monitor market conditions for signs of slowing activity in the residential markets as decreased housing affordability has led to uncertainty around near-term demand for our services in the single-family housing market. However, demand in the primary single-family markets we serve has remained firm in the current fiscal year, and there continue to be several trends, such as rising household formation and population growth in our key markets, that we expect will drive long-term demand for our services. In the multi-family residential market, a large supply of new units coming to completion in 2024, as well as tighter lending conditions for project owners, is expected to have a negative impact on demand for 2025 and 2026. Within the various other end markets we serve, such as data centers and manufacturing, our customers' capital budgets for new construction projects may be impacted by broader economic, technological or other factors. Demand in these markets has remained firm in the current fiscal year.
While the COVID-19 pandemic's impact on markets, the supply chain and the labor force had less of an impact on our business thus far in fiscal 2024 compared with prior fiscal years, COVID-19 and any future pandemic or other public health emergency could impact our workforce, customers and suppliers in the future. An inability to procure materials in a timely manner, to complete work on schedule, and to reflect higher materials or labor costs in our pricing to customers has had, and could have in the future, a significant impact on our operating results.
Please refer to Part I. Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended September 30, 2023 for further information.
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RESULTS OF OPERATIONS
We report our operating results across our four operating segments: Communications, Residential, Infrastructure Solutions, and Commercial & Industrial. Expenses associated with our corporate office are classified separately. The following table presents selected historical results of operations of IES Holdings, Inc., including the results of acquired businesses from the dates acquired.
| Three Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||||||||||||||
| $ | % | $ | % | |||||||||||||||||||||||||||||||||||
| (Dollars in thousands, Percentage of revenues) | ||||||||||||||||||||||||||||||||||||||
| Revenues | $ | 768,415 | 100.0 | % | $ | 584,451 | 100.0 | % | ||||||||||||||||||||||||||||||
| Cost of services | 573,634 | 74.7 | 476,842 | 81.6 | ||||||||||||||||||||||||||||||||||
| Gross profit | 194,781 | 25.3 | 107,609 | 18.4 | ||||||||||||||||||||||||||||||||||
| Selling, general and administrative expenses | 104,694 | 13.6 | 74,300 | 12.7 | ||||||||||||||||||||||||||||||||||
| Contingent consideration | 43 | — | 70 | — | ||||||||||||||||||||||||||||||||||
| Gain on sale of assets | (132) | — | (1,080) | (0.2) | ||||||||||||||||||||||||||||||||||
| Operating income | 90,176 | 11.7 | 34,319 | 5.9 | ||||||||||||||||||||||||||||||||||
| Interest and other expense, net | 965 | 0.1 | 202 | — | ||||||||||||||||||||||||||||||||||
| Income from operations before income taxes | 89,211 | 11.6 | 34,117 | 5.8 | ||||||||||||||||||||||||||||||||||
| Provision for income taxes | 22,572 | 2.9 | 8,263 | 1.4 | ||||||||||||||||||||||||||||||||||
| Net income | 66,639 | 8.7 | 25,854 | 4.4 | ||||||||||||||||||||||||||||||||||
| Net income attributable to noncontrolling interest | (4,539) | (0.6) | (3,308) | (0.6) | ||||||||||||||||||||||||||||||||||
| Net income attributable to IES Holdings, Inc. | $ | 62,100 | 8.1 | % | $ | 22,546 | 3.9 | % | ||||||||||||||||||||||||||||||
Consolidated revenues for the three months ended June 30, 2024, were $184.0 million higher than for the three months ended June 30, 2023, an increase of 31.5%, with increases at all four of our operating segments. See further discussion below of changes in revenues for our individual segments.
Consolidated gross profit for the three months ended June 30, 2024 increased $87.2 million compared to the three months ended June 30, 2023. Our overall gross profit percentage was 25.3% during the three months ended June 30, 2024, as compared to 18.4% during the three months ended June 30, 2023. Gross profit as a percentage of revenue increased at all four of our operating segments. See further discussion below of changes in gross margin for our individual segments.
Selling, general and administrative expenses include costs not directly associated with performing work for our customers. These costs consist primarily of compensation and benefits related to corporate, segment and branch management (including incentive-based compensation), occupancy and utilities, training, professional services, information technology costs, consulting fees, travel and certain types of depreciation and amortization. We allocate certain corporate selling, general and administrative costs across our segments as we believe this more accurately reflects the costs associated with operating each segment.
During the three months ended June 30, 2024, our selling, general and administrative expenses were $104.7 million, an increase of $30.4 million, or 40.9%, over the three months ended June 30, 2023, primarily driven by increased personnel costs, particularly at our Residential operating segment, and higher incentive compensation across our business as a result of higher earnings. Increases in selling, general and administrative expenses at our other operating segments were generally consistent with each segment's respective revenue growth. Selling, general and administrative expenses as a percentage of revenue increased from 12.7% for the three months ended June 30, 2023 to 13.6% for the three months ended June 30, 2024.
26
| Nine Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||||||||||||||
| $ | % | $ | % | |||||||||||||||||||||||||||||||||||
| (Dollars in thousands, Percentage of revenues) | ||||||||||||||||||||||||||||||||||||||
| Revenues | $ | 2,108,592 | 100.0 | % | $ | 1,728,206 | 100.0 | % | ||||||||||||||||||||||||||||||
| Cost of services | 1,598,394 | 75.8 | 1,424,233 | 82.4 | ||||||||||||||||||||||||||||||||||
| Gross profit | 510,198 | 24.2 | 303,973 | 17.6 | ||||||||||||||||||||||||||||||||||
| Selling, general and administrative expenses | 285,816 | 13.6 | 211,417 | 12.2 | ||||||||||||||||||||||||||||||||||
| Contingent consideration | 78 | — | 208 | — | ||||||||||||||||||||||||||||||||||
| Gain on sale of assets | (1,576) | (0.1) | (14,242) | (0.8) | ||||||||||||||||||||||||||||||||||
| Operating income | 225,880 | 10.7 | 106,590 | 6.2 | ||||||||||||||||||||||||||||||||||
| Interest and other expense, net | 1,511 | 0.1 | 1,362 | 0.1 | ||||||||||||||||||||||||||||||||||
| Income from operations before income taxes | 224,369 | 10.6 | 105,228 | 6.1 | ||||||||||||||||||||||||||||||||||
| Provision for income taxes | 57,342 | 2.7 | 26,448 | 1.5 | ||||||||||||||||||||||||||||||||||
| Net income | 167,027 | 7.9 | 78,780 | 4.6 | ||||||||||||||||||||||||||||||||||
| Net income attributable to noncontrolling interest | (11,062) | (0.5) | (8,281) | (0.5) | ||||||||||||||||||||||||||||||||||
| Net income attributable to IES Holdings, Inc. | $ | 155,965 | 7.4 | % | $ | 70,499 | 4.1 | % | ||||||||||||||||||||||||||||||
Consolidated revenues for the nine months ended June 30, 2024, were $380.4 million higher than for the nine months ended June 30, 2023, an increase of 22.0%, with increases at all four of our operating segments. See further discussion below of changes in revenues for our individual segments.
Our overall gross profit percentage increased to 24.2% during the nine months ended June 30, 2024, as compared to 17.6% during the nine months ended June 30, 2023. Gross profit as a percentage of revenue increased at all four of our operating segments. See further discussion below of changes in gross margin for our individual segments.
During the nine months ended June 30, 2024, our selling, general and administrative expenses were $285.8 million, an increase of $74.4 million, or 35.2%, over the nine months ended June 30, 2023, primarily driven by increased personnel costs, particularly at our Residential operating segment in connection with a reorganization of the segment's management structure in fiscal 2023, and higher incentive compensation across our businesses as a result of higher earnings. Increases in selling, general and administrative expenses at our other operating segments were generally consistent with each segment's respective revenue growth. Selling, general and administrative expenses as a percentage of revenue increased from 12.2% for the nine months ended June 30, 2023 to 13.6% for the nine months ended June 30, 2024.
Gain on Sale of Assets. Our results for the nine months ended June 30, 2023 included a pretax gain on sale of $13.0 million from the sale of STR Mechanical, LLC (“STR”) on October 7, 2022. STR previously operated as part of our Commercial & Industrial segment.
Communications
| Three Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||||||||||||||
| $ | % | $ | % | |||||||||||||||||||||||||||||||||||
| (Dollars in thousands, Percentage of revenues) | ||||||||||||||||||||||||||||||||||||||
| Revenues | $ | 192,303 | 100.0 | % | $ | 141,615 | 100.0 | % | ||||||||||||||||||||||||||||||
| Cost of services | 155,184 | 80.7 | 114,440 | 80.8 | ||||||||||||||||||||||||||||||||||
| Gross profit | 37,119 | 19.3 | 27,175 | 19.2 | ||||||||||||||||||||||||||||||||||
| Selling, general and administrative expenses | 16,122 | 8.4 | 13,680 | 9.7 | ||||||||||||||||||||||||||||||||||
| Gain on sale of assets | (7) | — | (1) | — | ||||||||||||||||||||||||||||||||||
| Operating income | $ | 21,004 | 10.9 | % | $ | 13,496 | 9.5 | % | ||||||||||||||||||||||||||||||
Revenues. Our Communications segment’s revenues increased by $50.7 million during the three months ended June 30, 2024, or 35.8%, compared to the three months ended June 30, 2023. The increase primarily resulted from an increase in demand from data center customers.
Gross Profit. Our Communications segment’s gross profit during the three months ended June 30, 2024 increased by $9.9 million compared to the three months ended June 30, 2023. Gross profit as a percentage of revenue was 19.3% in the three months ended June
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30, 2024 compared to 19.2% in the three months ended June 30, 2023 as we continued to benefit from increased volume and favorable contract pricing.
Selling, General and Administrative Expenses. Our Communications segment’s selling, general and administrative expenses increased by $2.4 million, or 17.9%, during the three months ended June 30, 2024, compared to the three months ended June 30, 2023. The increase primarily reflects higher personnel cost including higher incentive compensation as a result of higher earnings, investment in an organizational structure that will enhance the scalability of our business, and higher wages in an increasingly competitive labor market. Selling, general and administrative expenses as a percentage of revenue in the Communications segment decreased from 9.7% for the three months ended June 30, 2023 to 8.4% during the three months ended June 30, 2024 as we benefited from the scale of our operations.
| Nine Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||||||||||||||
| $ | % | $ | % | |||||||||||||||||||||||||||||||||||
| (Dollars in thousands, Percentage of revenues) | ||||||||||||||||||||||||||||||||||||||
| Revenues | $ | 556,554 | 100.0 | % | $ | 429,980 | 100.0 | % | ||||||||||||||||||||||||||||||
| Cost of services | 444,225 | 79.8 | 355,904 | 82.8 | ||||||||||||||||||||||||||||||||||
| Gross profit | 112,329 | 20.2 | 74,076 | 17.2 | ||||||||||||||||||||||||||||||||||
| Selling, general and administrative expenses | 48,011 | 8.6 | 39,363 | 9.2 | ||||||||||||||||||||||||||||||||||
| Gain on sale of assets | (27) | — | (4) | — | ||||||||||||||||||||||||||||||||||
| Operating income | $ | 64,345 | 11.6 | % | $ | 34,717 | 8.1 | % | ||||||||||||||||||||||||||||||
Revenues. Our Communications segment's revenues increased by $126.6 million, or 29.4%, during the nine months ended June 30, 2024, compared to the nine months ended June 30, 2023. The increase primarily resulted from an increase in demand from data center, high-tech manufacturing and e-commerce distribution center customers.
Gross Profit. Our Communications segment’s gross profit during the nine months ended June 30, 2024 increased by $38.3 million, or 51.6%, as compared to the nine months ended June 30, 2023. Gross profit as a percentage of revenue increased from 17.2% to 20.2%. The increase in gross profit and gross profit as a percentage of revenue primarily reflects increased volume, successful project execution, favorable contract pricing and the impact of a more disciplined bidding process.
Selling, General and Administrative Expenses. Our Communications segment’s selling, general and administrative expenses increased by $8.6 million, or 22.0%, during the nine months ended June 30, 2024, compared to the nine months ended June 30, 2023. The increase primarily reflects higher personnel cost including higher incentive compensation as a result of higher earnings, investment in an organizational structure that will enhance the scalability of our business, and higher wages in an increasingly competitive labor market. Selling, general and administrative expenses as a percentage of revenues in the Communications segment was 8.6% during the nine months ended June 30, 2024 compared to 9.2% during the nine months ended June 30, 2023 as we benefited from the scale of our operations.
Residential
| Three Months Ended June 30, | ||||||||||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||||||||
| $ | % | $ | % | |||||||||||||||||||||||||||||
| (Dollars in thousands, Percentage of revenues) | ||||||||||||||||||||||||||||||||
| Revenues | $ | 377,536 | 100.0 | % | $ | 318,011 | 100.0 | % | ||||||||||||||||||||||||
| Cost of services | 272,224 | 72.1 | 260,679 | 82.0 | ||||||||||||||||||||||||||||
| Gross profit | 105,312 | 27.9 | 57,332 | 18.0 | ||||||||||||||||||||||||||||
| Selling, general and administrative expenses | 61,662 | 16.3 | 41,939 | 13.2 | ||||||||||||||||||||||||||||
| Contingent consideration | — | — | 70 | — | ||||||||||||||||||||||||||||
| Gain on sale of assets | (70) | — | (56) | — | ||||||||||||||||||||||||||||
| Operating income | $ | 43,720 | 11.6 | % | $ | 15,379 | 4.8 | % | ||||||||||||||||||||||||
Revenues. Our Residential segment’s revenues increased by $59.5 million, or 18.7%, during the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The increase was primarily driven by an expansion of our plumbing and HVAC offerings and continued strong demand in our single-family business, where revenues increased by $44.4 million, or 18.4%. In addition, in our multi-family business, successful execution of its backlog contributed to an increase in revenues of $15.1 million, or 19.6%.
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Gross Profit. During the three months ended June 30, 2024, our Residential segment's gross profit increased by $48.0 million, or 83.7%, compared to the three months ended June 30, 2023. Gross profit as a percentage of revenue increased to 27.9% during the three months ended June 30, 2024, compared to 18.0% for the three months ended June 30, 2023. The increase in profitability was driven primarily by improved project execution in our multi-family business, reduced material costs resulting from improved procurement, and other processes implemented as part of the reorganization of the segment in fiscal 2023.
Selling, General and Administrative Expenses. Our Residential segment's selling, general and administrative expenses increased by $19.7 million, or 47.0%, during the three months ended June 30, 2024, compared to the three months ended June 30, 2023. The increase was driven by higher personnel costs to support the growth of our business and incentive profit sharing for division management resulting from higher earnings. Selling, general and administrative expenses as a percentage of revenue in the Residential segment increased to 16.3% during the three months ended June 30, 2024, compared to 13.2% in the three months ended June 30, 2023.
| Nine Months Ended June 30, | ||||||||||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||||||||
| $ | % | $ | % | |||||||||||||||||||||||||||||
| (Dollars in thousands, Percentage of revenues) | ||||||||||||||||||||||||||||||||
| Revenues | $ | 1,032,764 | 100.0 | % | $ | 942,201 | 100.0 | % | ||||||||||||||||||||||||
| Cost of services | 763,351 | 73.9 | 770,419 | 81.8 | ||||||||||||||||||||||||||||
| Gross profit | 269,413 | 26.1 | 171,782 | 18.2 | ||||||||||||||||||||||||||||
| Selling, general and administrative expenses | 168,298 | 16.3 | 118,989 | 12.6 | ||||||||||||||||||||||||||||
| Contingent consideration | 35 | — | 208 | — | ||||||||||||||||||||||||||||
| Gain on sale of assets | (1,427) | (0.1) | (62) | — | ||||||||||||||||||||||||||||
| Operating income | $ | 102,507 | 9.9 | % | $ | 52,647 | 5.6 | % | ||||||||||||||||||||||||
Revenues. Our Residential segment's revenues increased by $90.6 million, or 9.6%, during the nine months ended June 30, 2024, compared to the nine months ended June 30, 2023. The increase was primarily driven by an expansion of our plumbing and HVAC offerings and continued strong demand in our single-family business, where revenues increased by $72.3 million, or 10.2%, compared to the prior year period. In addition, multi-family and other revenue increased by $18.2 million, or 7.9%, for the nine months ended June 30, 2024 compared to the prior year period driven by continued strong demand and successful execution of existing backlog, partially offset by a reduction in activity in certain areas as we became more selective in our bidding process.
Gross Profit. During the nine months ended June 30, 2024, our Residential segment's gross profit increased by $97.6 million, or 56.8%, compared to the nine months ended June 30, 2023. Gross margin as a percentage of revenue increased to 26.1% during the nine months ended June 30, 2024, compared to 18.2% during the nine months ended June 30, 2023. The increase in profitability was driven primarily by improved project execution in our multi-family business, as well as the benefit of improved procurement and other processes implemented as part of the reorganization of the segment in fiscal 2023.
Selling, General and Administrative Expenses. Our Residential segment's selling, general and administrative expenses increased by $49.3 million, or 41.4%, during the nine months ended June 30, 2024, compared to the nine months ended June 30, 2023. The increase was driven by higher personnel costs in connection with a reorganization of the segment's management structure in fiscal 2023 and increased incentive profit sharing for division management resulting from higher earnings. Selling, general and administrative expenses as a percentage of revenue in the Residential segment increased to 16.3% during the nine months ended June 30, 2024, compared to 12.6% during the nine months ended June 30, 2023.
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Infrastructure Solutions
| Three Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||||||||||||||
| $ | % | $ | % | |||||||||||||||||||||||||||||||||||
| (Dollars in thousands, Percentage of revenues) | ||||||||||||||||||||||||||||||||||||||
| Revenues | $ | 102,022 | 100.0 | % | $ | 57,057 | 100.0 | % | ||||||||||||||||||||||||||||||
| Cost of services | 71,366 | 70.0 | 42,851 | 75.1 | ||||||||||||||||||||||||||||||||||
| Gross profit | 30,656 | 30.0 | 14,206 | 24.9 | ||||||||||||||||||||||||||||||||||
| Selling, general and administrative expenses | 10,886 | 10.7 | 7,066 | 12.4 | ||||||||||||||||||||||||||||||||||
| Contingent consideration | 43 | — | — | — | ||||||||||||||||||||||||||||||||||
| Gain on sale of assets | (3) | — | (1,010) | (1.8) | ||||||||||||||||||||||||||||||||||
| Operating income | $ | 19,730 | 19.3 | % | $ | 8,150 | 14.3 | % | ||||||||||||||||||||||||||||||
Revenues. Revenues in our Infrastructure Solutions segment increased by $45.0 million during the three months ended June 30, 2024, an increase of 78.8% compared to the three months ended June 30, 2023, driven primarily by continued strong demand in our custom power solutions manufacturing businesses, including generator enclosures. Greiner Industries, Inc. ("Greiner"), which was acquired on April 1, 2024, contributed $15.3 million in revenue in the three months ended June 30, 2024.
Gross Profit. Our Infrastructure Solutions segment’s gross profit during the three months ended June 30, 2024 increased $16.5 million, compared to the three months ended June 30, 2023, primarily resulting from higher volumes, improved pricing and operating efficiencies at our facilities as well as the impact of investments to increase capacity we have made over the last several years. Gross profit as a percentage of revenue increased from 24.9% to 30.0%.
Selling, General and Administrative Expenses. Our Infrastructure Solutions segment’s selling, general and administrative expenses during the three months ended June 30, 2024 increased by $3.8 million, compared to the three months ended June 30, 2023, primarily as a result of increased employee compensation cost to support growth in the business. Selling, general and administrative expenses as a percentage of revenue decreased from 12.4% for the three months ended June 30, 2023 to 10.7% for the three months ended June 30, 2024 as we benefited from the scale of our operations.
| Nine Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||||||||||||||
| $ | % | $ | % | |||||||||||||||||||||||||||||||||||
| (Dollars in thousands, Percentage of revenues) | ||||||||||||||||||||||||||||||||||||||
| Revenues | $ | 240,699 | 100.0 | % | $ | 158,957 | 100.0 | % | ||||||||||||||||||||||||||||||
| Cost of services | 168,107 | 69.8 | 120,089 | 75.5 | ||||||||||||||||||||||||||||||||||
| Gross profit | 72,592 | 30.2 | 38,868 | 24.5 | ||||||||||||||||||||||||||||||||||
| Selling, general and administrative expenses | 25,798 | 10.7 | 18,817 | 11.8 | ||||||||||||||||||||||||||||||||||
| Contingent consideration | 43 | — | — | — | ||||||||||||||||||||||||||||||||||
| Gain on sale of assets | (3) | — | (1,029) | (0.6) | ||||||||||||||||||||||||||||||||||
| Operating income | $ | 46,754 | 19.4 | % | $ | 21,080 | 13.3 | % | ||||||||||||||||||||||||||||||
Revenues. Revenues in our Infrastructure Solutions segment increased by $81.7 million, or 51.4%, during the nine months ended June 30, 2024 compared to the nine months ended June 30, 2023. The increase in revenue was driven primarily by continued strong demand in our custom power solutions manufacturing businesses, including generator enclosures. Greiner, which was acquired on April 1, 2024, contributed $15.3 million in revenue in the nine months ended June 30, 2024.
Gross Profit. Our Infrastructure Solutions segment’s gross profit during the nine months ended June 30, 2024 increased by $33.7 million, compared to the nine months ended June 30, 2023, primarily resulting from higher volumes, improved pricing and operating efficiencies at our facilities as well as the impact of investments to increase capacity we have made over the last several years. Gross profit as a percentage of revenues increased to 30.2% for the nine months ended June 30, 2024 compared to 24.5% for the nine months ended June 30, 2023.
Selling, General and Administrative Expenses. Our Infrastructure Solutions segment’s selling, general and administrative expenses during the nine months ended June 30, 2024 increased by $7.0 million, compared to the nine months ended June 30, 2023, primarily as a result of increased employee compensation cost to support growth in the business. Selling, general and administrative expenses as a
30
percentage of revenue decreased from 11.8% for the nine months ended June 30, 2023 to 10.7% for the nine months ended June 30, 2024 as we benefited from the scale of our operations.
Commercial & Industrial
| Three Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||||||||||||||
| $ | % | $ | % | |||||||||||||||||||||||||||||||||||
| (Dollars in thousands, Percentage of revenues) | ||||||||||||||||||||||||||||||||||||||
| Revenues | $ | 96,554 | 100.0 | % | $ | 67,768 | 100.0 | % | ||||||||||||||||||||||||||||||
| Cost of services | 74,860 | 77.5 | 58,872 | 86.9 | ||||||||||||||||||||||||||||||||||
| Gross profit | 21,694 | 22.5 | 8,896 | 13.1 | ||||||||||||||||||||||||||||||||||
| Selling, general and administrative expenses | 8,717 | 9.0 | 6,284 | 9.3 | ||||||||||||||||||||||||||||||||||
| Gain on sale of assets | (52) | (0.1) | (13) | — | ||||||||||||||||||||||||||||||||||
| Operating income | $ | 13,029 | 13.5 | % | $ | 2,625 | 3.9 | % | ||||||||||||||||||||||||||||||
Revenues. Revenues in our Commercial & Industrial segment increased by $28.8 million, or 42.5%, during the three months ended June 30, 2024, compared to the three months ended June 30, 2023. The increase primarily relates to a large data center project.
Gross Profit. Our Commercial & Industrial segment’s gross profit during the three months ended June 30, 2024, increased by $12.8 million, compared to the three months ended June 30, 2023. Gross profit as a percentage of revenue increased from 13.1% for the quarter ended June 30, 2023 to 22.5% for the quarter ended June 30, 2024. In the three months ended June 30, 2024, segment results benefited from favorable project execution and additions to the original scope of work at favorable margins on the large data center project. We also benefited from improved project execution and bid margins across the business.
Selling, General and Administrative Expenses. Our Commercial & Industrial segment’s selling, general and administrative expenses during the three months ended June 30, 2024 increased by $2.4 million, or 38.7%, compared to the three months ended June 30, 2023 primarily as a result of increased employee compensation cost, including higher incentive compensation as a result of higher earnings. Selling, general and administrative expenses as a percentage of revenue decreased from 9.3% for the three months ended June 30, 2023, to 9.0% for the three months ended June 30, 2024, as we benefited from the scale of our operations.
| Nine Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||||||||||||||
| $ | % | $ | % | |||||||||||||||||||||||||||||||||||
| (Dollars in thousands, Percentage of revenues) | ||||||||||||||||||||||||||||||||||||||
| Revenues | $ | 278,575 | 100.0 | % | $ | 197,068 | 100.0 | % | ||||||||||||||||||||||||||||||
| Cost of services | 222,711 | 79.9 | 177,821 | 90.2 | ||||||||||||||||||||||||||||||||||
| Gross profit | 55,864 | 20.1 | 19,247 | 9.8 | ||||||||||||||||||||||||||||||||||
| Selling, general and administrative expenses | 24,271 | 8.7 | 18,373 | 9.3 | ||||||||||||||||||||||||||||||||||
| Gain on sale of assets | (105) | — | (13,147) | (6.7) | ||||||||||||||||||||||||||||||||||
| Operating income | $ | 31,698 | 11.4 | % | $ | 14,021 | 7.1 | % | ||||||||||||||||||||||||||||||
Revenues. Revenues in our Commercial & Industrial segment increased by $81.5 million, or 41.4%, during the nine months ended June 30, 2024, compared to the nine months ended June 30, 2023. The increase primarily relates to a large data center project.
Gross Profit. Our Commercial & Industrial segment’s gross profit during the nine months ended June 30, 2024 increased by $36.6 million, or 190.2%, compared to the nine months ended June 30, 2023. Gross profit as a percentage of revenue increased from 9.8% for the nine months ended June 30, 2023 to 20.1% for the nine months ended June 30, 2024. In the nine months ended June 30, 2024, segment results benefited from favorable project execution and additions to the original scope of work at favorable margins on the large data center project, improved project execution across the business, improving bid margins in certain markets, and a more selective bidding strategy implemented in the prior year.
Selling, General and Administrative Expenses. Our Commercial & Industrial segment’s selling, general and administrative expenses during the nine months ended June 30, 2024 increased by $5.9 million, or 32.1%, compared to the nine months ended June 30, 2023 primarily as a result of increased employee compensation cost, including higher incentive compensation as a result of higher earnings. Selling, general and administrative expenses as a percentage of revenue decreased from 9.3% for the nine months ended June 30, 2023 to 8.7% for the nine months ended June 30, 2024 as we benefited from the scale of our operations.
31
Gain on Sale of Assets. As discussed above, our results for the nine months ended June 30, 2023 include a pretax gain on sale of $13.0 million from the sale of STR in October 2022.
INTEREST AND OTHER EXPENSE, NET
| Three Months Ended June 30, | ||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||
| (In thousands) | ||||||||||||||||||||
| Interest expense | $ | 323 | $ | 324 | ||||||||||||||||
| Deferred financing charges | 72 | 67 | ||||||||||||||||||
| Total interest expense | 395 | 391 | ||||||||||||||||||
Interest income | (1,044) | (11) | ||||||||||||||||||
| Other (income) expense, net | 1,614 | (178) | ||||||||||||||||||
| Total other (income) expense, net | 570 | (189) | ||||||||||||||||||
| Total interest and other expense, net | $ | 965 | $ | 202 | ||||||||||||||||
During the three months ended June 30, 2024, we incurred interest expense of $0.4 million primarily comprised of interest on our finance lease agreements and fees on an average letter of credit balance of $5.6 million under our revolving credit facility and an average unused line of credit balance of $142.9 million. This compares to interest expense of $0.4 million for the three months ended June 30, 2023, primarily comprising interest on our finance lease agreements and interest expense from our revolving credit facility, which had an average outstanding balance of $2.5 million, in addition to fees on an average letter of credit balance of $4.3 million under our revolving credit facility and an average unused line of credit balance of $142.9 million.
The change in total other (income) expense, net for the three months ended June 30, 2024, compared to the three months ended June 30, 2023 is primarily the result of unrealized losses on investments in trading securities of $1.6 million in the three months ended June 30, 2024 with no comparable gains or losses on investments in the three months ended June 30, 2023, partially offset by interest income of $1.0 million earned during the three months ended June 30, 2024 with no such interest income earned in the three months ended June 30, 2023.
| Nine Months Ended June 30, | ||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||
| (In thousands) | ||||||||||||||||||||
| Interest expense | $ | 986 | $ | 2,425 | ||||||||||||||||
| Deferred financing charges | 212 | 199 | ||||||||||||||||||
| Total interest expense | 1,198 | 2,624 | ||||||||||||||||||
Interest income | (3,311) | (11) | ||||||||||||||||||
| Other (income) expense, net | 3,624 | (1,251) | ||||||||||||||||||
| Total other (income) expense, net | 313 | (1,262) | ||||||||||||||||||
| Total interest and other expense, net | $ | 1,511 | $ | 1,362 | ||||||||||||||||
During the nine months ended June 30, 2024, we incurred interest expense of $1.2 million primarily comprised of interest on our finance lease agreements and fees on an average letter of credit balance of $5.5 million under our revolving credit facility and an average unused line of credit balance of $142.7 million. This compares to interest expense of $2.6 million for the nine months ended June 30, 2023, primarily comprised of interest expense from our revolving credit facility, which had an average outstanding balance of $35.5 million, in addition to interest on our finance lease agreements and fees on an average letter of credit balance of $4.9 million under our revolving credit facility and an average unused line of credit balance of $108.9 million. The reduction in interest expense in the nine months ended June 30, 2024 compared to the nine months ended June 30, 2023 was a result of a decrease in average outstanding borrowings under our revolving credit facility, which had no outstanding balance during the nine months ended June 30, 2024.
The change in total other (income) expense, net for the nine months ended June 30, 2024, compared with June 30, 2023 is primarily the result of unrealized losses on investments in trading securities of $3.3 million in the nine months ended June 30, 2024 compared to realized gains on investments in trading securities of $1.0 million in the nine months ended June 30, 2023, offset by interest income of $3.3 million earned during the nine months ended June 30, 2024 with no such interest income in the nine months ended June 30, 2023.
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PROVISION FOR INCOME TAXES
We recorded income tax expense of $22.6 million for the three months ended June 30, 2024, compared to $8.3 million for the three months ended June 30, 2023, driven by increased pretax income.
We recorded income tax expense of $57.3 million for the nine months ended June 30, 2024, compared to $26.4 million for the nine months ended June 30, 2023, driven by increased pretax income.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Management’s discussion and analysis of financial condition and results of operations is based on our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q, which have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). The preparation of our Condensed Consolidated Financial Statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities known to exist as of the date of the Condensed Consolidated Financial Statements, and the reported amounts of revenues and expenses recognized during the periods presented. We review all significant estimates affecting our Condensed Consolidated Financial Statements on a recurring basis and record the effect of any necessary adjustments prior to their publication. Judgments and estimates are based on our beliefs and assumptions derived from information available at the time such judgments and estimates are made. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of financial statements. There can be no assurance that actual results will not differ from those estimates. For a discussion of our significant accounting policies, please see our Annual Report on Form 10-K for the fiscal year ended September 30, 2023. Some of the more significant estimates include revenue recognition, business combinations, valuation allowance for deferred tax assets and income taxes.
There have been no significant changes to our accounting policies as disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023.
REMAINING PERFORMANCE OBLIGATIONS AND BACKLOG
Remaining performance obligations represent the unrecognized revenue value of our contractual commitments. While backlog is not a defined term under GAAP, it is a common measurement used in our industry, and we believe it improves our ability to forecast future results and identify operating trends that may not otherwise be apparent. Backlog is a measure of revenue that we expect to recognize from work that has yet to be performed on uncompleted contracts and from work that has been contracted but has not started, exclusive of short-term projects. While all of our backlog is supported by documentation from customers, backlog is not a guarantee of future revenues, as contractual commitments may change and our performance may vary. Not all of our work is performed under contracts included in backlog; for example, most of the apparatus repair work that is completed by our Infrastructure Solutions segment is performed under master service agreements on an as-needed basis. Additionally, electrical installation services for single-family housing at our Residential segment are completed on a short-term basis and are therefore excluded from backlog. The table below summarizes our remaining performance obligations and backlog (in thousands):
| June 30, | March 31, | December 31, | September 30, | |||||||||||||||||||||||||||||||||||
| 2024 | 2024 | 2023 | 2023 | |||||||||||||||||||||||||||||||||||
| Remaining performance obligations | $ | 1,177,184 | $ | 1,065,444 | $ | 1,072,593 | $ | 1,143,423 | ||||||||||||||||||||||||||||||
Agreements without an enforceable obligation (1) | 519,973 | 297,451 | 379,463 | 414,589 | ||||||||||||||||||||||||||||||||||
| Backlog | $ | 1,697,157 | $ | 1,362,895 | $ | 1,452,056 | $ | 1,558,012 | ||||||||||||||||||||||||||||||
| (1) Our backlog contains signed agreements and letters of intent, which we do not have a legal right to enforce prior to work starting. These arrangements are excluded from remaining performance obligations until work begins. | ||||||||||||||||||||||||||||||||||||||
WORKING CAPITAL
During the nine months ended June 30, 2024, working capital exclusive of cash increased by $74.6 million from September 30, 2023, reflecting a $148.2 million increase in current assets excluding cash partially offset by a $73.6 million increase in current liabilities during the period.
During the nine months ended June 30, 2024, our current assets exclusive of cash increased to $743.7 million, as compared to $595.5 million as of September 30, 2023. An increase in activity and the timing of billings at our Communications and Infrastructure Solutions businesses, along with trade receivables acquired as part of the Greiner acquisition, drove a $93.7 million increase in trade accounts receivable. While the rate of collections may vary, our typically secured position, resulting from our ability in general to secure liens against our customers’ overdue receivables, offers some protection that collection will occur eventually to the extent that our security retains value. We also had a $20.1 million increase in prepaid expenses and other current assets as we invested in equity and debt securities in fiscal 2024, a $13.9 million increase in retainage driven by the timing of large projects approaching completion, a $11.2 million increase in inventories from bulk material purchases in our Residential business as we benefited from favorable
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pricing, and a $9.3 million increase in costs and estimated earnings in excess of contract billings primarily from contract assets acquired as part of the Greiner acquisition.
During the nine months ended June 30, 2024, our total current liabilities increased by $73.6 million to $474.2 million, compared to $400.6 million as of September 30, 2023, driven by a $35.5 million increase in billings in excess of costs and estimated earnings driven by the timing of contract billings on projects on which revenue is recognized using the percentage of completion method, and a $38.1 million increase in accounts payable and accrued expenses primarily as a result of increased activity and the timing of payments across all of our operating segments.
Surety
We believe the bonding capacity provided by our sureties is adequate for our current operations and will be adequate for our operations for the foreseeable future. As of June 30, 2024, the estimated cost to complete our bonded projects was approximately $141.9 million.
LIQUIDITY AND CAPITAL RESOURCES
The Revolving Credit Facility
We are a party to the Third Amended and Restated Credit and Security Agreement (the “Amended Credit Agreement”), which provides for a maximum borrowing amount of $150 million. The Amended Credit Agreement contains customary affirmative, negative and financial covenants and events of default.
Borrowings under the Amended Credit Agreement may not exceed a Borrowing Base, as defined in the Amended Credit Agreement, that is determined monthly based on available collateral, primarily certain accounts receivables, inventories, and equipment. Amounts outstanding bear interest at a per annum rate equal to the Daily Three Month Secured Overnight Financing Rate (“SOFR”), plus an interest rate margin, which is determined quarterly, based on the following thresholds:
| Level | Thresholds | Interest Rate Margin | ||||||||||||
I | If Liquidity is less than 35% of the Maximum Revolver Amount (each as defined in the Amended Credit Agreement) at any time during the period | 2.00 percentage points | ||||||||||||
II | If Liquidity is greater than or equal to 35% of the Maximum Revolver Amount at all times during the period and less than 50% of the Maximum Revolver Amount at any time during the period | 1.75 percentage points | ||||||||||||
III | If Liquidity is greater than or equal to 50% of the Maximum Revolver Amount at all times during the period | 1.50 percentage points | ||||||||||||
In addition, we are charged monthly in arrears for (1) an unused commitment fee of 0.25% per annum, (2) a collateral monitoring fee of $5 thousand per quarter, (3) a letter of credit fee based on the then-applicable interest rate margin (4) appraisal fees, costs and expenses and (5) certain other fees and charges as specified in the Amended Credit Agreement.
As of June 30, 2024, we were in compliance with the financial covenants under the Amended Credit Agreement, requiring that we maintain:
•a Fixed Charge Coverage Ratio (as defined in the Amended Credit Agreement), measured quarterly on a trailing four-quarter basis at the end of each quarter, of at least 1.1 to 1.0; and
•minimum Liquidity of at least 10% of the Maximum Revolver Amount, or $15.0 million; with, for purposes of this covenant, at least 50% of our Liquidity comprised of Excess Availability (as defined in the Amended Credit Agreement).
At June 30, 2024, our Liquidity was $187.9 million, our Excess Availability was $143.0 million (or greater than 50% of minimum Liquidity), and our Fixed Charge Coverage Ratio was 4.5:1.0.
If in the future our Liquidity falls below $15.0 million (or Excess Availability falls below 50% of our minimum Liquidity), our Fixed Charge Coverage Ratio is less than 1.1:1.0, or if we otherwise fail to perform or otherwise comply with certain of our covenants or other agreements under the Amended Credit Agreement, it would result in an event of default under the Amended Credit Agreement, which could result in some or all of our then-outstanding indebtedness becoming immediately due and payable.
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At June 30, 2024, we had $5.6 million in outstanding letters of credit and no outstanding borrowings under our revolving credit facility.
Operating Activities
Our cash flow from operations is not only influenced by cyclicality, demand for our services, operating margins and the type of services we provide, but can also be influenced by working capital needs such as the timing of our receivable collections. Working capital needs are generally lower during our fiscal first and second quarters due to the seasonality that we experience in many regions of the country; however, a seasonal decline in working capital may be offset by needs associated with higher growth or acquisitions. Currently, our working capital needs are higher than they have been historically, as a result of growth of our business and elevated commodity prices.
Net cash provided by operating activities was $141.6 million during the nine months ended June 30, 2024, as compared to $96.6 million in the nine months ended June 30, 2023. The increase in operating cash flow resulted from increased earnings in the nine months ended June 30, 2024, partially offset by an increase in cash used in working capital during the nine months ended June 30, 2024 as compared with the nine months ended June 30, 2023.
Investing Activities
Net cash used in investing activities was $96.4 million for the nine months ended June 30, 2024, compared to $9.0 million provided by investing activities in the nine months ended June 30, 2023. During the nine months ended June 30, 2024, we completed the acquisition of Greiner for $67.7 million. We also had capital expenditures of $30.9 million as we acquired new facilities to increase the manufacturing capacity of our Infrastructure Solutions segment's operations, strategically purchased new assets instead of entering into new lease agreements at our Residential and Communications segments, and made other capital expenditures to support the growth of our business. These investing outflows were partially offset by cash provided by the sale of assets of $2.6 million. During the nine months ended June 30, 2023, the sale of assets, including the sale of STR, provided cash of $20.4 million, which was partially offset by $11.3 million used for capital expenditures.
Financing Activities
Net cash used in financing activities for the nine months ended June 30, 2024 was $76.1 million, compared to $101.9 million for the nine months ended June 30, 2023. Net cash used in financing activities for the nine months ended June 30, 2024 included $31.2 million paid to acquire the noncontrolling interest in Bayonet, $24.3 million used to repurchase our common stock, including repurchases to satisfy statutory withholding requirements upon the vesting of employee stock compensation, $13.5 million in distributions to noncontrolling interests under operating agreements in connection with certain acquisitions, and $4.1 million to settle our contingent consideration liability related to prior year acquisitions. Net cash used in financing activities for the nine months ended June 30, 2023 included net repayments on our credit facility of $82.7 million, $8.2 million used to repurchase our common stock, including repurchases to satisfy statutory withholding requirements upon the vesting of employee stock compensation, and distributions of $8.5 million to noncontrolling interests under operating agreements in connection with certain acquisitions.
Stock Repurchase Program
In December 2022, our Board authorized a stock repurchase program for the purchase from time to time of up to $40.0 million of the Company’s common stock, replacing the Company's previous repurchase program. Share purchases are made for cash in open market transactions at prevailing market prices or in privately negotiated transactions or otherwise. The timing and amount of purchases under the program are determined based upon prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. All or part of the repurchases may be implemented under a Rule 10b5-1 trading plan, which allows repurchases under pre-set terms at times when the Company might otherwise be prevented from purchasing under insider trading laws or because of self-imposed blackout periods. The program does not require the Company to purchase any specific number of shares and may be modified, suspended, reinstated, or terminated at any time at the Company’s discretion and without notice. We repurchased 157,505 shares pursuant to our repurchase programs during the nine months ended June 30, 2024. Subsequent to June 30, 2024, we repurchased an additional 119,041 shares in open market transactions, which fully utilized the amount remaining under the previous $40.0 million authorization. On July 31, 2024, the Board authorized a new $200.0 million stock repurchase program.
MATERIAL CASH REQUIREMENTS
From time to time, we may enter into firm purchase commitments for materials, such as copper or aluminum wire, which we expect to use in the ordinary course of business. These commitments are typically for terms of less than one year and require us to buy minimum quantities of materials at specific intervals at a fixed price over the term. As of June 30, 2024, we did not have any such firm commitments to purchase materials outstanding. In connection with expected growth in our business, we are planning to expand
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capacity in certain areas. Further, based on increased availability of vehicles and other equipment needed in the business and the relative costs and benefits of purchasing compared with leasing, we expect to satisfy a larger proportion of our vehicle and other equipment needs through purchasing and to reduce our reliance on leasing. As a result, we have updated our capital expenditure expectations for the current fiscal year, and now expect our capital spending for the year ending September 30, 2024 will range from $35 million to $45 million, compared to $17.7 million for the year ended September 30, 2023. There have been no other material changes in our material cash requirements from those disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023. We expect that cash and cash equivalents, cash flow from operations and availability under our revolving credit facility will be sufficient to satisfy cash requirements during at least the next 12 months.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
Management is actively involved in monitoring exposure to market risk and continues to develop and utilize appropriate risk management techniques. Our exposure to significant market risks includes fluctuations in labor costs and commodity prices. We are also exposed to interest rate risk with respect to our outstanding borrowings under our revolving credit facility. For additional information see “Disclosure Regarding Forward-Looking Statements” in Part I of this Quarterly Report on Form 10-Q and our risk factors in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023.
Commodity Risk
Our exposure to significant market risks includes fluctuations in commodity prices for copper, aluminum, steel, electronic components, certain plastics, and fuel. Commodity price risks may have an impact on our results of operations due to the fixed-price nature of many of our contracts. Over the long term, we expect to be able to pass along a portion of these costs to our customers, as market conditions in the industries we serve will allow.
Interest Rate Risk
Floating rate debt, where the interest rate fluctuates periodically, exposes us to short-term changes in market interest rates. Any long-term debt that may be outstanding from time to time under our revolving credit facility is structured on floating rate terms. We currently do not maintain any hedging contracts that would limit our exposure to variable rates of interest when we have outstanding borrowings under our revolving credit facility. The Amended Credit Agreement uses SOFR as the benchmark for establishing the interest rate charged on our borrowings. If SOFR were to increase, our interest payment obligations on any then-outstanding borrowings would increase, having a negative effect on our cash flow and financial condition. We had no borrowings outstanding under our revolving credit facility as of June 30, 2024.
Item 4. Controls and Procedures
Changes in Internal Control Over Financial Reporting
There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Disclosure Controls and Procedures
In accordance with Rules 13a-15 and 15d-15 of the Exchange Act, we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2024, to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Our disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
For information regarding legal proceedings, see Note 11, “Commitments and Contingencies – Legal Matters” in the Notes to our Condensed Consolidated Financial Statements set forth in Part I, Item 1 of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.
Item 1A. Risk Factors
There have been no material changes to the risk factors disclosed under Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
| Date | Total Number of Shares Purchased (1) | Average Price Paid Per Share | Total Number of Shares Purchased as Part of a Publicly Announced Plan | Maximum Dollar Value of Shares That May Yet Be Purchased Under the Publicly Announced Plan (2) | |||||||||||||
| April 1, 2024 – April 30, 2024 | — | $ | — | — | $ | 37,588,964 | |||||||||||
| May 1, 2024 – May 31, 2024 | — | $ | — | — | $ | 37,588,964 | |||||||||||
| June 1, 2024 – June 30, 2024 | 157,505 | $ | 132.92 | 157,505 | $ | 16,653,456 | |||||||||||
| Total | 157,505 | $ | 132.92 | 157,505 | $ | 16,653,456 | |||||||||||
(1) The total number of shares purchased includes shares purchased pursuant to the program described in footnote (2) below.
(2) In December 2022, our Board authorized a stock repurchase program for the purchase of up to $40 million of the Company’s common stock from time to time. Subsequent to June 30, 2024, we repurchased an additional 119,041 shares in open market transactions at an average price of $139.84, which fully utilized the amount remaining under the previous $40 million authorization. On July 31, 2024, the Board authorized a new $200 million stock repurchase program.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
Rule 10b5-1 Trading Arrangements
From time to time, members of the Company's Board of Directors and officers of the Company may enter into Rule 10b5-1 trading plans, which allow for the purchase or sale of common stock under pre-established terms at times when directors and officers might otherwise be prevented from trading under insider trading laws or because of self-imposed blackout periods. Such trading plans are intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act and comply with the Company's Insider Trading Policy. During the three months ended June 30, 2024, none of the Company's directors or officers adopted terminated
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Item 6. Exhibits
Exhibit No. | Description | ||||
| 3.1 — | |||||
| 3.2 — | |||||
| 4.1 — | |||||
| 31.1 — | |||||
| 31.2 — | |||||
| 32.1 — | |||||
| 32.2 — | |||||
| 101.INS | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document (1) | ||||
| 101.SCH | XBRL Schema Document (1) | ||||
| 101.LAB | XBRL Label Linkbase Document (1) | ||||
| 101.PRE | XBRL Presentation Linkbase Document (1) | ||||
| 101.DEF | XBRL Definition Linkbase Document (1) | ||||
| 101.CAL | XBRL Calculation Linkbase Document (1) | ||||
| 104 | Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | ||||
| (1) | Filed herewith. | ||||
| (2) | Furnished herewith. | ||||
39
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on August 2, 2024.
| IES HOLDINGS, INC. | ||||||||
| By: | /s/ TRACY A. MCLAUCHLIN | |||||||
| Tracy A. McLauchlin | ||||||||
| Senior Vice President, Chief Financial Officer and Treasurer | ||||||||
| (Principal Financial Officer and Authorized Signatory) | ||||||||
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Exhibit 31.1
CERTIFICATION
I, Jeffrey L. Gendell, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of IES Holdings, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
Date: August 2, 2024
/s/ JEFFREY L. GENDELL | |||||
| Jeffrey L. Gendell | |||||
Chief Executive Officer as Principal Executive Officer | |||||
Exhibit 31.2
CERTIFICATION
I, Tracy A. McLauchlin, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of IES Holdings, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
Date: August 2, 2024
| /s/ TRACY A. MCLAUCHLIN | |||||
| Tracy A. McLauchlin | |||||
Senior Vice President, Chief Financial Officer and Treasurer as Principal Financial Officer | |||||
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with this Quarterly Report of IES Holdings, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2024 (the “Report”), I, Jeffrey L. Gendell, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Date: August 2, 2024 | By: | /s/ JEFFREY L. GENDELL | ||||||||||||
| Jeffrey L. Gendell | ||||||||||||||
Chief Executive Officer as Principal Executive Officer | ||||||||||||||
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with this Quarterly Report of IES Holdings, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2024 (the “Report”), I, Tracy A. McLauchlin, Senior Vice President, Chief Financial Officer and Treasurer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Date: August 2, 2024 | By: | /s/ TRACY A. MCLAUCHLIN | ||||||||||||||||||
| Tracy A. McLauchlin | ||||||||||||||||||||
Senior Vice President, Chief Financial Officer and Treasurer as Principal Financial Officer | ||||||||||||||||||||