IES Holdings, Inc 10-Q for FY2020 Q2

IES Holdings, Inc. (IESC)

10-Q 2020-05-05 For: 2020-03-31

Added on April 11, 2026

About this 10-Q

IES Holdings, Inc filed this 10-Q on May 5, 2020, covering the quarter ended March 31, 2020 (FY2020 Q2).

Headline figures

Quarter ended March 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $291.28M; up 13.4% from $256.91M a year earlier
Net income: $6.23M; up 13.5% from net income of $5.49M a year earlier
Diluted EPS: $0.29; up 11.5% from $0.26 a year earlier

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Delaware			76-0542208
(State or other jurisdiction of			(I.R.S. Employer
incorporation or organization)			Identification No.)



			Page
PART I. FINANCIAL INFORMATION
	Item 1. Financial Statements
		Condensed Consolidated Balance Sheets as of March 31, 2020 and September 30, 2019	6
		Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended March 31, 20 20 and 2 019	7
		Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended March 31, 20 20 and 2019	9
		Condensed Consolidated Statements of Cash Flows for the Six Months Ended March 31, 20 20 and 20 19	10
		Notes to Condensed Consolidated Financial Statements	11
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			27
	Item 3. Quantitative and Qualitative Disclosures About Market Risk			38
	Item 4. Controls and Procedures			38
PART II. OTHER INFORMATION
	Item 1. Legal Proceedings			38
	Item 1A. Risk Factors			39
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			40
	Item 3. Defaults Upon Senior Securities			41
	Item 4. Mine Safety Disclosures			41
	Item 5. Other Information			42
	Item 6. Exhibits			42
	Signatures			43


			March 31,			September 30,
			2020			2019
			(Unaudited)
ASSETS
CURRENT ASSETS:
	Cash and cash equivalents			$	43,799		$	18,934
	Accounts receivable:
		Trade, net of allowance of $1,154 and $1,184, respectively	180,593			186,279
		Retainage	37,015			29,214
	Inventories			22,288			21,543
	Costs and estimated earnings in excess of billings			27,478			29,860
	Prepaid expenses and other current assets			12,651			10,625
Total current assets							323,824		296,455
Property and equipment, net							26,064		25,746
Goodwill							60,542		50,622
Intangible assets, net							43,810		26,623
Deferred tax assets							33,877		40,874
Operating right of use assets							34,804		—
Other non-current assets							3,423		4,938
Total assets							$	526,344	$	445,258
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
	Accounts payable and accrued expenses			164,919			152,909
	Billings in excess of costs and estimated earnings			45,886			40,563
Total current liabilities							210,805		193,472
Long-term debt							28,986		299
Operating long-term lease liabilities							23,457		—
Other non-current liabilities							2,445		1,945
Total liabilities							265,693		195,716
Noncontrolling interest							2,846		3,294
STOCKHOLDERS’ EQUITY:
	Preferred stock, $0.01 par value, 10,000,000 shares authorized, none issued
		and outstanding	—			—
	Common stock, $0.01 par value, 100,000,000 shares authorized; 22,049,529
		issued and 21,071,666 and 21,165,011 outstanding, respectively	220			220
	Treasury stock, at cost, 977,863 and 884,518 shares, respectively			(15,643)			(12,483)
	Additional paid-in capital			192,895			192,911
	Retained earnings			80,333			65,600
Total stockholders’ equity							257,805		246,248
Total liabilities and stockholders’ equity							$	526,344	$	445,258


		Three Months Ended March 31,
		2020				2019
Revenues				$	291,277		$	256,914
Cost of services					240,013			213,679
	Gross profit			51,264			43,235
Selling, general and administrative expenses					42,036			35,070
Contingent consideration					—			(149)
Loss (gain) on sale of assets					(1)			98
	Operating income			9,229			8,216
Interest and other (income) expense:
Interest expense					320			535
Other (income) expense, net					268			(112)
Income from operations before income taxes					8,641			7,793
Provision for income taxes					2,428			2,336
Net income					6,213			5,457
Net loss attributable to noncontrolling interest					18			32
Comprehensive income attributable to IES Holdings, Inc.				$	6,231		$	5,489

Earnings per share attributable to IES Holdings, Inc.:
	Basic		$	0.30		$	0.26
	Diluted		$	0.29		$	0.26

Shares used in the computation of earnings per share:
	Basic			20,847,245			21,139,096
	Diluted			21,122,310			21,379,746


		Six Months Ended March 31,
		2020				2019
Revenues				$	567,320		$	500,756
Cost of services					465,841			415,920
	Gross profit			101,479			84,836
Selling, general and administrative expenses					79,908			67,156
Contingent consideration					—			(115)
Loss (gain) on sale of assets					(37)			95
	Operating income			21,608			17,700
Interest and other (income) expense:
Interest expense					559			1,082
Other (income) expense, net					409			(65)
Income from operations before income taxes					20,640			16,683
Provision for income taxes					5,897			4,243
Net income					14,743			12,440
Net income attributable to noncontrolling interest					(10)			(67)
Comprehensive income attributable to IES Holdings, Inc.				$	14,733		$	12,373

Earnings per share attributable to IES Holdings, Inc.:
	Basic		$	0.70		$	0.58
	Diluted		$	0.69		$	0.58

Shares used in the computation of earnings (loss) per share:
	Basic			20,865,460			21,187,834
	Diluted			21,132,519			21,424,522


		Three Months Ended March 31, 2020
		Common Stock							Treasury Stock								Retained Earnings	Total Stockholders' Equity
		Shares		Amount				Shares	Amount			APIC
BALANCE, December 31, 2019			22,049,529		$	220		(826,353)	$	(11,998)	$	192,499	$	74,057	$	254,778
	Issuances under compensation plans	—			—		21,171		308		(308)		—		—
	Acquisition of treasury stock	—			—		(178,431)		(4,037)		—		—		(4,037)
	Options exercised	—			—		5,750		84		(50)		—		34
	Non-cash compensation	—			—		—		—		754		—		754
	Decrease in noncontrolling interest	—			—		—		—		—		45		45
	Net income attributable to IES Holdings, Inc.	—			—		—		—		—		6,231		6,231
BALANCE, March 31, 2020			22,049,529		$	220		(977,863)	$	(15,643)	$	192,895	$	80,333	$	257,805


		Three Months Ended March 31, 2019
		Common Stock							Treasury Stock								Retained Earnings	Total Stockholders' Equity
		Shares		Amount				Shares	Amount			APIC
BALANCE, December 31, 2018			22,049,529		$	220		(763,426)	$	(8,896)	$	194,607	$	39,300	$	225,231
	Issuances under compensation plans	—			—		287,186		3,653		(3,653)		—		—
	Acquisition of treasury stock	—			—		(191,442)		(3,200)		—		—		(3,200)
	Non-cash compensation	—			—		—		—		625		—		625
	Net income attributable to IES Holdings, Inc.	—			—		—		—		—		5,489		5,489
BALANCE, March 31, 2019			22,049,529		$	220		(667,682)	$	(8,443)	$	191,579	$	44,789	$	228,145


		Six Months Ended March 31, 2020
		Common Stock							Treasury Stock								Retained Earnings	Total Stockholders' Equity
		Shares		Amount				Shares	Amount			APIC
BALANCE, September 30, 2019			22,049,529		$	220		(884,518)	$	(12,483)	$	192,911	$	65,600	$	246,248
	Issuances under compensation plans	—			—		116,580		1,650		(1,650)		—		—
	Acquisition of treasury stock	—			—		(215,675)		(4,894)		—		—		(4,894)
	Options exercised	—			—		5,750		84		(50)		—		34
	Non-cash compensation	—			—				—		1,684		—		1,684
	Net income attributable to IES Holdings, Inc.	—			—		—		—		—		14,733		14,733
BALANCE, March 31, 2020			22,049,529		$	220		(977,863)	$	(15,643)	$	192,895	$	80,333	$	257,805


		Six Months Ended March 31, 2019
		Common Stock							Treasury Stock								Retained Earnings	Total Stockholders' Equity
		Shares		Amount				Shares	Amount			APIC
BALANCE, September 30, 2018			22,049,529		$	220		(843,993)	$	(8,937)	$	196,810	$	32,314	$	220,407
	Issuances under compensation plans	—			—		499,874		5,905		(5,905)		—		—
	Acquisition of treasury stock	—			—		(323,563)		(5,411)		—				(5,411)
	Cumulative effect adjustment from adoption of new accounting standard	—			—		—		—		—		102		102
	Non-cash compensation	—			—		—		—		674		—		674
	Net loss attributable to IES Holdings, Inc.	—			—		—		—		—		12,373		12,373
BALANCE, March 31, 2019			22,049,529		$	220		(667,682)	$	(8,443)	$	191,579	$	44,789	$	228,145


	Three Months Ended March 31, 2020
		Commercial & Industrial			Communications			Infrastructure Solutions			Residential			Total
Fixed-price			$	62,779	$	71,377	$	27,484	$	100,027		$	261,667
Time-and-material				3,181		24,613		1,816		—			29,610
Total revenue			$	65,960	$	95,990	$	29,300	$	100,027		$	291,277

	Three Months Ended March 31, 2019
		Commercial & Industrial			Communications			Infrastructure Solutions			Residential			Total
Fixed-price			$	76,467	$	48,602	$	32,097	$	72,052		$	229,218
Time-and-material				3,508		21,835		2,353		—			27,696
Total revenue			$	79,975	$	70,437	$	34,450	$	72,052		$	256,914

	Six Months Ended March 31, 2020
		Commercial & Industrial			Communications			Infrastructure Solutions			Residential			Total
Fixed-price			$	126,614	$	133,404	$	56,975	$	192,755		$	509,748
Time-and-material				7,089		46,875		3,608		—			57,572
Total revenue			$	133,703	$	180,279	$	60,583	$	192,755		$	567,320

	Six Months Ended March 31, 2019
		Commercial & Industrial			Communications			Infrastructure Solutions			Residential			Total
Fixed-price			$	142,297	$	97,431	$	59,609	$	144,507		$	443,844
Time-and-material				10,261		42,331		4,320		—			56,912
Total revenue			$	152,558	$	139,762	$	63,929	$	144,507		$	500,756


	March 31, 2020
			Total Fair Value		Quoted Prices (Level 1)		Significant Unobservable Inputs (Level 3)
Executive savings plan assets		$	673	$	673	$	—
Executive savings plan liabilities			(559)		(559)		—
Contingent consideration			(11)		—		(11)
Total		$	103	$	114	$	(11)


	September 30, 2019
			Total Fair Value		Quoted Prices (Level 1)		Significant Unobservable Inputs (Level 3)
Executive savings plan assets		$	763	$	763	$	—
Executive savings plan liabilities			(646)		(646)		—
Contingent consideration			(11)		—		(11)
Total		$	106	$	117	$	(11)


		Contingent Consideration Agreements
Fair value at September 30, 2019	$	11
Settlements		—
Net adjustments to fair value		—
Fair value at March 31, 2020	$	11


	Estimated Useful Lives (in Years)		March 31, 2020
					Gross Carrying Amount		Accumulated Amortization	Net
Trademarks/trade names		5-20		$	7,854	$	(1,446)	$	6,408
Technical library		20			400		(131)		269
Customer relationships		6-15			46,189		(12,779)		33,410
Non-competition arrangements		5			1,300		(34)		1,266
Backlog and construction contracts		1			3,274		(817)		2,457
Total intangible assets				$	59,017	$	(15,207)	$	43,810


	Operating Leases		Finance Leases		Total
Remainder of 2020	$	6,058	$	116	$	6,174
2021	10,148		234		10,382
2022	8,045		208		8,253
2023	5,442		206		5,648
2024	3,308		173		3,481
Thereafter	5,224		29		5,253
Total undiscounted lease payments	$	38,225	$	966	$	39,191
Less: imputed interest	3,581		110		3,691
Present value of lease liabilities	$	34,644	$	856	$	35,500


FORM			10-Q


Commission file number			001-13783


			Six Months Ended March 31,
			2020				2019
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income			$	14,743		$	12,440
	Adjustments to reconcile net income to net cash provided by operating activities:
		Bad debt expense		281			248
		Deferred financing cost amortization		204			156
		Depreciation and amortization		5,597			4,846
		Loss (gain) on sale of assets		(37)			95
		Non-cash compensation expense		1,684			674
		Deferred income taxes		4,543			4,243
	Changes in operating assets and liabilities:
		Accounts receivable		8,595			(9,616)
		Inventories		(220)			(2,873)
		Costs and estimated earnings in excess of billings		2,847			3,152
		Prepaid expenses and other current assets		(8,942)			(764)
		Other non-current assets		1,543			(1,370)
		Accounts payable and accrued expenses		(2,035)			(144)
		Billings in excess of costs and estimated earnings		4,113			(948)
		Other non-current liabilities		(195)			(736)
Net cash provided by operating activities						32,721			9,403
CASH FLOWS FROM INVESTING ACTIVITIES:
	Purchases of property and equipment				(2,898)			(3,929)
	Proceeds from sale of assets				53			7
	Cash paid in conjunction with business combinations				(28,952)			—
Net cash used in investing activities						(31,797)			(3,922)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Borrowings of debt				592,422			122
	Repayments of debt				(563,093)			(10,144)
	Cash paid for finance leases				(71)			—
	Distribution to noncontrolling interest				(457)			(137)
	Purchase of treasury stock				(4,894)			(5,411)
	Options exercised				34			—
Net cash provided by (used in) financing activities						23,941			(15,570)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS						24,865			(10,089)
CASH, CASH EQUIVALENTS, beginning of period						18,934			26,247
CASH, CASH EQUIVALENTS, end of period					$	43,799		$	16,158

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:


	March 31,			September 30,
	2020			2019
Raw materials		$	3,662	$	4,104
Work in process			5,704		6,301
Finished goods			1,384		1,861
Parts and supplies			11,538		9,277
Total inventories		$	22,288	$	21,543


	Three Months Ended		Six Months Ended
	March 31, 2020
Operating lease cost	$	2,917	$	5,940
Finance lease cost
Amortization of lease assets	60		60
Interest on lease liabilities	15		15
Finance lease cost	75		75
Short-term lease cost	279		475
Variable lease cost	251		428
Total lease cost	$	3,522	$	6,918


	March 31, 2020
Weighted-average remaining lease term - operating leases	4.6 years
Weighted-average remaining lease term - finance leases	4.5 years
Weighted-average discount rate - operating leases	4.0	%
Weighted-average discount rate - finance leases	5.6	%



Current assets	$	6,127
Property and equipment		489
Intangible assets		19,743
Goodwill		9,920
Current liabilities		(4,873)

Deferred tax liability		(2,454)
Net assets acquired	$	28,952


		Unaudited
		Three Months Ended March 31,
		2020		2019
Revenues	$	298,777	$	266,093
Net income attributable to IES Holdings, Inc.		$	6,982	$	5,600

		Unaudited
		Six Months Ended March 31,
		2020		2019
Revenues	$	584,484	$	518,386
Net income attributable to IES Holdings, Inc.		$	16,133	$	12,704


	March 31,			December 31,			September 30,			June 30,
	2020			2019			2019			2019
Remaining performance obligations	$	469	$	430	$	452		$	487
Agreements without an enforceable obligation⁽¹⁾		118		79		85			59
Backlog	$	587	$	509	$	537		$	546
(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.


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 Number of Shares That May Yet Be Purchased Under the Publicly Announced Plan as of March 31, 2020 (2)
January 1, 2020 – January 31, 2020	7,399	$25.00	7,399	1,229,769
February 1, 2020 – February 29, 2020	28,963	$24.76	28,963	1,200,806
March 1, 2020 – March 31, 2020	142,069	$22.04	142,069	1,058,737
Total	178,431	$22.60	178,431	1,058,737


Exhibit No.			Description
3.1 —			Second Amended and Restated Certificate of Incorporation of IES Holdings, Inc., as amended by the Certificate of Amendment thereto, effective May 24, 2016 (composite). (Incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q filed on August 8, 2016)
3.2 —			Certificate of Designation of Series A Junior Participating Preferred Stock (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on January 28, 2013)
3.3 —			Amended and Restated Bylaws of IES Holdings, Inc., effective November 6, 2019 (Incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on November 8, 2019)
4.1 —			Specimen common stock certificate. (Incorporated by reference to Exhibit 4.1 to the Company’s Annual Report on Form 10-K filed on December 9, 2016)
4.2 —			Tax Benefit Protection Plan Agreement by and between IES Holdings, Inc. and American Stock Transfer & Trust Company, LLC, as Rights Agent, dated as of November 8, 2016, including the form of Rights Certificate and Summary of Stockholder Rights Plan attached thereto as Exhibits A and B, respectively. (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on November 9, 2016)
10.1 —			Form of IES Holdings, Inc. Amended and Restated 2006 Equity Incentive Plan Restricted Stock Award Agreement^(1)*
10.2 —			Form of IES Holdings, Inc. Amended and Restated 2006 Equity Incentive Plan Phantom Stock Unit Award Agreement^(1)*
31.1 —			Rule 13a-14(a)/15d-14(a) Certification of Gary S. Matthews, Chief Executive Officer ⁽¹⁾
31.2 —			Rule 13a-14(a)/15d-14(a) Certification of Tracy A. McLauchlin, Senior Vice President, Chief Financial Officer and Treasurer ⁽¹⁾
32.1 —			Section 1350 Certification of Gary S. Matthews, Chief Executive Officer ⁽²⁾
32.2 —			Section 1350 Certification of Tracy A. McLauchlin, Senior Vice President, Chief Financial Officer and Treasurer ⁽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.
*			Management contract or compensatory plan or arrangement.


			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)




			/s/ GARY S. MATTHEWS
			Gary S. Matthews
			Chief Executive Officer as Principal Executive Officer